<PAGE>
As filed with the Securities and Exchange Commission on November 21, 1996
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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JAVA CENTRALE, INC.
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(Exact name of registrant as specified in its charter)
California 68-0268780
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1610 Arden Way, Suite 145
Sacramento, CA 95815
(916) 568-2310
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(Address, including zip code, and telephone number,including
area code, of registrant's principal executive office)
STEVEN J. ORLANDO
Vice President and Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
(916) 568-2310
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(Address, including zip code, and telephone number, including
area code, of agent for service of process)
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The Commission is requested to send copies
of all communications to:
Philip S. Boone, Jr., Esq.
Rosenblum, Parish & Isaacs, PC
555 Montgomery Street, 15th Floor
San Francisco, CA 94111
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
<PAGE>
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be Offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered per Share(1) Price(1) Fee
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Common
Stock(2) 437,284 $0.71875 $314,298 $95
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(1) Estimated solely for the purpose of determining the registration fee,
based, in accordance with Rule 457(h), on the average of high and low
prices at which the Registrant's Common Stock was sold on November 18,
1996.
(2) Pursuant to Rule 416, there are also being registered such additional
shares as may be required for issuance pursuant to the anti-dilution
provisions of the Warrants described herein.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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JAVA CENTRALE, INC.
CROSS-REFERENCE SHEET PURSUANT TO
ITEM 501(b) OF REGULATION S-K
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ITEM CAPTION IN FORM S-3 LOCATION IN
PROSPECTUS BY CAPTION
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1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus. . . Facing Page; Cross-Reference Sheet; and
Outside Front Cover Page
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2. Inside Front and
Outside Back Cover
Pages of Prospectus . . . . . Cover Page; Available Information;
Incorporation of Certain Documents by
Reference
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3. Summary Information, Risk
Factors, and Ratio of Earnings
to Fixed Charges . . . . . . Risk Factors
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4. Use of Proceeds . . . . . . . Use of Proceeds
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5. Determination of Offering
Price . . . . . . . . . . . . Not Applicable
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6. Dilution . . . . . . . . . . Not Applicable
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7. Selling Security Holders . . Selling Stockholders
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8. Plan of Distribution . . . . Plan of Distribution
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9. Description of Securities to
be Registered . . . . . . . . Description of the Common Stock
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10. Interests of Named Experts
and Counsel . . . . . . . . . Not Applicable
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11. Material Changes . . . . . . Not Applicable
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12. Incorporation of Certain
Documents by Reference . . . Incorporation of Certain Information by
Reference
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13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities. Indemnification of Directors and
Officers
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<PAGE>
PROSPECTUS DATED NOVEMBER 21, 1996
JAVA CENTRALE, INC.
437,284 Shares of Common Stock
--------------------
Up to a total of 437,284 shares of the no par value common stock (the
"Common Stock") of Java Centrale, Inc., a California corporation (the "Company")
are being offered on a continuous basis in the future by two of the Company's
warrant holders and certain of the Company's current shareholders (collectively,
the Selling Stockholders"). For purposes of this prospectus (the "Prospectus"),
the stock purchase warrant issued to Artistic License, Inc., a California
corporation ("Artistic"), is referred to as the (the "Artistic Warrant") and the
stock purchase warrant issued to Alta Petroleum, Inc., a California corporation
("Alta"), is referred to as (the "Alta Warrant" and together with the Artistic
Warrant, the "Warrants".) All of the shares of Common Stock offered hereby (the
"Shares") have been or will be issued by the Company in private transactions,
and were originally issued as, or will be upon issuance, "restricted securities"
under Rule 144 under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus has been prepared, and the Shares have been registered,
so that future sales of the Shares by the Selling Shareholders will not be
restricted under the Securities Act. (See "Selling Shareholders" and "Plan of
Distribution".)
The Company's Common Stock is listed on The NASDAQ Stock Market SmallCap
List under the symbol "JAVC." On November 18, 1996, the last reported sale
price for the Common Stock on the NASDAQ SmallCap Market List was $0.75 per
share.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
ANY OFFER OR SALE OF THE SHARES DESCRIBED HEREIN, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN MADE OR AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
The date of this Prospectus is November 21, 1996
<PAGE>
TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION........................................................ 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................. 3
RISK FACTORS................................................................. 5
SELLING STOCKHOLDERS......................................................... 13
INTRODUCTION................................................................. 14
Graham and Gem Shares................................................... 14
Artistic Warrant Shares................................................. 14
Alta Warrant Shares..................................................... 15
DESCRIPTION OF THE COMMON STOCK.............................................. 15
GENERAL DESCRIPTION OF THE WARRANTS.......................................... 15
Securities Available Upon Exercise of the Warrants...................... 16
Manner of Exercise...................................................... 16
Rights as a Shareholder, Employee, or Consultant........................ 16
Transfer of the Warrants................................................ 16
Redemption Rights....................................................... 16
TERMS OF THE ARTISTIC WARRANT................................................ 17
Adjustments to the Number of Artistic Shares............................ 17
Adjustments to the Artistic Warrant Exercise Price...................... 17
TERMS OF THE ALTA WARRANT.................................................... 18
Adjustments to the Number of Alta Shares................................ 18
Adjustments to the Alta Warrant Exercise Price.......................... 18
RESALES OF COMPANY SECURITIES BY INSIDERS.................................... 19
FEDERAL INCOME TAX CONSEQUENCES.............................................. 20
Tax Consequences of Grant or Exercise of a Warrant...................... 20
Taxation Upon Sale of the Shares........................................ 20
Tax Treatment of Section 16 Insiders.................................... 21
Tax Benefits to The Company............................................. 21
PLAN OF DISTRIBUTION......................................................... 21
USE OF PROCEEDS.............................................................. 22
INDEMNIFICATION OF OFFICERS AND DIRECTORS.................................... 22
LEGAL MATTERS................................................................ 22
EXPERTS...................................................................... 22
EXHIBIT A--Artistic Warrants.................................................A-1
EXHIBIT B--Alta Warrants ....................................................B-1
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois and 75 Park Place, 14th Floor, New York, New York 10007. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is listed on the National Association of Securities
Dealers' NASDAQ Small Cap Market List, and such reports and other information
concerning the Company can also be inspected at the offices of the NASD at 1735
K Street, N.W., Washington, D.C. 20006-1500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Attached hereto, the Company has filed with the Commission a registration
statement on Form S-3 under the Securities Act of 1933 (the "Registration
Statement"), with respect to the Company's Common Stock offered pursuant to this
Prospectus. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement,
including the exhibits thereto, for further information with respect to the
Company and the securities offered hereby. Statements made in this Prospectus
concerning the contents or provisions of any agreement or other document
referred to herein are not necessarily complete; and each such statement is
qualified in its entirety by, and reference is made to, the copy of such
agreement or other document filed as an exhibit or schedule to the Registration
Statement or incorporated therein by reference. For further information,
reference is made to the Registration Statement and to the exhibits and
schedules filed therewith, which are available for inspection without charge at
the principal office of the Commission in Washington, D.C. Copies of the
material containing this information may be obtained from the Commission upon
payment of the prescribed fee.
The following documents, all of which were previously filed with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus: The Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996 and the Company's Quarterly Report on Form 10-Q for the
quarters ended June 30 and September 30, 1996. All documents subsequently filed
by the Company pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange
Act, prior the period in which the Warrants may be exercised, which ever is
later, shall also be deemed to be incorporated by reference herein. In
addition, the description of the Company's Common Stock contained in its
Registration Statement on Form S-1 (Registration No. 33-76528) filed on March
17, 1994, including any amendment or report filed for the purpose of updating
such description, is also incorporated herein by reference.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that such statement
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<PAGE>
is modified or superseded by a statement contained in this Prospectus or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference into this Prospectus. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
has been delivered, upon the written request of any such person, a copy of any
or all of the documents that have been or may be incorporated in this Prospectus
by reference, other than exhibits to such documents. Written requests for such
copies should be directed to: Steven J. Orlando, Vice President and Chief
Financial Officer, Java Centrale, Inc., 1610 Arden Way, Suite 145, Sacramento,
California 95815, or by telephone at (916) 568-2310.
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RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN EVALUATING AN INVESTMENT IN
THE COMPANY'S COMMON STOCK, THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER
INFORMATION AND FINANCIAL DATA INCLUDED HEREIN AND INCORPORATED HEREIN BY
REFERENCE.
HISTORICAL LOSSES
The Company has never earned a profit in any fiscal year. Since its
incorporation in 1992, the Company's operations have required (rather than
provided) cash every year. In order to meet these cash requirements, the
Company has from time to time sold Common Shares and Preferred Stock or borrowed
money from Baycor Ventures. The Company recorded a loss in the development
stage during its first fiscal year of operation and, since principal operations
commenced, has recorded a loss for the fiscal years ended March 31, 1993, 1994,
1995, and 1996. There is no assurance that losses will not continue or that the
Company will become profitable in the future.
ACCUMULATED DEFICIT AND FUTURE LOSSES
As of September 30, 1996, the Company had an accumulated deficit of
$9,623,486. The Company anticipates that the size of its losses will decrease
due to anticipated development and acquisition of new Company-owned and
franchised locations in the United States and Canada. However, if such
developments are delayed and the Company does not realize such increased sales,
its losses are likely to remain at or near previous levels. The Company cannot
predict when a material improvement in profitability will be achieved. Until
the Company's network of Company-owned and franchised cafes, carts, and kiosks
is more fully developed, the Company will be dependent upon other sources of
income, such as franchisee fees, which cannot be predicted as to timing or
dollar amount. Delays in the development of the Company's network of
distribution centers for its products, as well as any potential future
acquisitions or strategic mergers, could extend continuing losses and result in
the need for additional financing.
RELIANCE ON GROWTH FOR PROFITABILITY
As of September 30, 1996, the Company had a total of 102 Company-owned and
franchised cafes, along with 7 licensed sites, open and operating. The Company
currently intends to open, either on its own or through franchisees, up to 35
cafes during fiscal 1997, and approximately 100 cafes during fiscal 1998. By
March 31, 1998 (the end of the Company's 1998 fiscal year), the Company's plans
call for the Company to have a total of 286 cafes opened and operating. If the
foregoing timetable is maintained, and the Company's cost structure remains
comparatively stable, the Company should achieve profitability on or before
March 31, 1997. There can be no assurance, however, that the Company or its
franchisees will be able to open the planned new cafes, carts and kiosks or that
they can be operated profitably. The Company's ability to expand will depend
upon a number or factors, including selection and availability of suitable
locations and franchisees; negotiation of acceptable lease terms; the securing
of required state and local permits and approvals; adequate supervision of
construction;
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<PAGE>
hiring, training and retention of skilled management and other personnel;
availability of adequate financing; and other factors, many of which are beyond
the Company's control.
SUBSTANTIAL COMPETITION
Java Centrale's whole bean coffee products compete directly against
specialty coffees sold at retail outlets through supermarkets, specialty
retailers and a growing number of specialty coffee stores. The Company's
coffee beverages compete directly against all restaurant and beverage outlets
that serve coffee and a growing number of espresso stands, carts and stores
in the North American metropolitan markets. Both the Company's whole bean
coffees and coffee beverages compete indirectly against all other coffees on
the market. The specialty coffee segment of the market is becoming
increasingly competitive. The coffee industry is dominated by several large
companies such as Kraft, General Foods, Procter & Gamble and Nestle. Many of
the Company's competitors have greater financial and marketing resources and
brand name recognition and a larger customer base than the Company.
Competitors with significant economic resources in both existing nonspecialty
and specialty coffee businesses and companies in other retail food service
businesses could at any time enter the specialty coffee market with
substantially equivalent 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 at acceptable costs.
Java Centrale stores compete with fast food chains, major restaurant
chains, and other food service related franchisors for franchisees of its cafes,
carts and kiosks. Many franchisors have greater market recognition and greater
financial, marketing, and human resources than the Company does.
Paradise Bakery competes with a variety of restaurant concepts, many of
which are located in covered malls. Some competition comes from similar
concepts, such as, Au Bon Pain, which is a bakery/cafe concept, or
sandwich/salad concepts, such as Wall Street Deli, that are closely located to a
particular Paradise Bakery. Other types of competitors are strictly bakery
product driven, such as, Cinnabon and Mrs. Fields. What sets Paradise apart
from most competitors is menu mix, positioning, and pricing.
FRANCHISE OPERATIONS
The Company believes that its acquisition and operation of Paradise
bakery/cafes will allow the Company to enhance the Company's expansion strategy
by franchising and developing Paradise Bakery. The Company plans to expand the
franchisee-owned system by late 1996 by allowing existing franchisees to expand
and by developing new franchises.
To facilitate expansion, the Company began renewing the Paradise Bakery
Uniform Franchise Offering Circular with various state agencies. Renewing the
circular was necessitated by the fact that registrations were not kept current
prior to the acquisition. In June of 1996, the Company completed filings in
Texas, Arizona, and Colorado to allow the sale of two company-owned bakery/cafes
and for existing franchisees in Arizona and Colorado to develop additional
locations. The Company completed other filings needed to execute Paradise
Bakery's expansion plans during August of 1996.
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UNPREDICTABLE FRANCHISEE REVENUES
Historically, revenues from the Company's franchisees have been an
important part of the Company's revenues, profits and financing. The Company is
actively pursuing efforts to develop additional franchisee operations, as well
as to extend its network of Company-owned cafes. However, the development of
the Company's franchisee system is unpredictable as to timing and the amount of
income which may be produced by individual franchisees.
LIQUIDITY; LIMITED CAPITAL RESOURCES
At the Company's current level of development, the Company does not
generate net cash from operations. To fund its operations, the Company requires
either additional financing, sales of additional franchise licenses, or a
substantial increase in its network of Company-owned cafes and carts. Based on
the Company's current cost structure and other expense calculations, the Company
estimates that it will break even on cash flow at approximately March 31, 1997
(the end of its 1997 fiscal year), assuming it succeeds in maintaining its
schedule for the opening of new Company and franchisee-owned cafes (see "--
Reliance on Growth for Profitability" above). However, there can be no
assurance that such a goal will be reached in the immediate future, if ever.
The Company's initial capitalization was obtained through the issuance of
2,500,000 shares of no par common stock for $10,000 on March 5, 1992. In
addition, the Company issued 2,950,000 shares of Series A cumulative preferred
stock, in exchange for 2,950,000 shares of no par cumulative preferred stock,
which were subscribed for on March 5, 1992 for proceeds of $590,000, on March
12, 1993. On March 30, 1993, the Company sold 5,000,000 shares of no par value
redeemable Series B cumulative preferred stock for $1,000,000. The proceeds
from the issuance of all such stock were used for capital acquisitions and
operating costs of the Company during its development stage. On May 19, 1994,
the Company raised $7,288,000 in net proceeds from an initial public offering of
1,500,000 shares of common stock. Of the 4,291,820 shares outstanding after the
offering, 855,300 were placed in escrow and are subject to an Escrow Agreement
which provides for the release of such shares on or before March 31, 1999, with
earlier release based upon the financial performance of the Company.
The Company used a portion of the proceeds from the initial public offering
to repay long term debt, purchase equipment and furniture, support the operating
losses in developing the Company's operating system, and pay $500,000 as part of
the purchase price to acquire the operating assets of Oh-La-La!, Inc.
As part of the purchase price for the assets of Oh-La-La! acquired by the
Company on March 31, 1995, the Company issued to Oh-La-La!, Inc. a note payable
of $745,874, and assumed liabilities for tenant improvement loans related to the
properties acquired of $113,306.
In the 1996 fiscal year the Company issued 1,604,692 common shares for
$3,540,722 in proceeds in a series of private placements. The Company also
issued convertible debt in three separate private transactions totaling
$3,500,000.
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The Company used $5,375,000 of the cash raised through the private
transactions to acquire 100% of the common stock in Paradise Bakery, Inc., on
December 31, 1995. Additionally, as part of the acquisition of Paradise Bakery,
Inc., the Company issued notes to the seller in the amount of $1,350,000. The
Company also issued notes in the amount of $46,071 to the sellers and assumed
$97,950 in debt obligation associated with the asset purchase of the three
Paradise Bakery locations. The Company assumed bank debt in the amount of
$1,085,000 and $24,535 in lease obligations associated with the merger of
founders Venture, Inc., into Paradise Bakery, Inc.
The Company incurred a net loss of $3,966,000 and used net cash of
$2,391,000 in operating activities for the year ended March 31, 1996. The
Company has developed a specific operating plan to meet the ongoing liquidity
needs of the Company's operations both for the year ended March 31, 1997, and
thereafter. Management believes that this plan, which is currently being
implemented, is sufficient to meet the Company's liquidity needs for the year
ended March 31, 1997 and thereafter.
In addition to the operating plan, the Company will benefit from 12 months
of Paradise Bakery operating income during the year ended March 31, 1997, as
compared to three months in the year ended March 31, 1996. During the quarter
ended June 30, 1996, the Company reduced administrative salaries, certain
employee benefit costs and marketing expenses, and sold two Company owned cafes.
During the six months ended September 30, 1996, the Company sold two
Company-owned cafes and is actively pursuing the sale of assets associated with
the Company's cafe operations. Additionally, since the beginning of its 1997
fiscal year the Company has sold a total of 4,368,656 shares of its Common Stock
in 2 private placements, for an aggregate of $1,000,000.
DEPENDENCE ON TWO PRODUCT-LINES
Prior to the Paradise Bakery acquisition, the Company's operations have
been, to a significant extent, limited to the sale of whole bean coffees, coffee
beverages and related products. These products are principally sold through
its Company-owned and franchised Java Centrale cafes, carts and kiosks. They
presently comprise about 45% of the Company's total revenue. Although retail
sales of specialty coffee increased from approximately $1.0 billion in 1990 to
$1.2 billion in 1992, during the period between 1962 and 1992, per capita coffee
consumption in the United States decreased significantly. Any significant
health concerns with respect to coffee could have an adverse effect on coffee
consumption and the Company's profitability. The Company is not presently aware
of any such significant health concerns.
By acquiring Paradise Bakery, the Company diversified its revenue base by
adding a new product line of convenience-based food products. Paradise Bakery's
quick service restaurant concept generates approximately 65% of the Company's
revenues. Paradise Bakery features menu items that include, depending upon the
type of location, specialty soups, salads and sandwiches, as well as an
assortment of bakery products, including cookies, muffins, croissants and
desserts that are freshly prepared and baked daily at each location.
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FLUCTUATIONS IN AVAILABILITY AND COST OF GREEN COFFEE
The Company's revenues generated by sales at Java Centrale locations are
vulnerable to fluctuations in the cost and availability of green coffee. Java
Centrale locations currently obtain their coffees pursuant to a Producer
Agreement (the "Producer Agreement") between the Company and Coffee Bean
International ("CBI"), an independent roaster. Pursuant to the Producer
Agreement, the Company utilizes CBI, which, in turn, uses numerous outside
brokers, to source its primary raw material, green coffee. Coffee is the
world's second largest traded commodity and its supply and price are subject to
volatility. Although most coffee trades in the commodity market, coffee of the
quality sought by the Company tends to trade on a negotiated basis at a
substantial premium above commodity coffee pricing. Prices negotiated are
dependant on the market forces create the aggregate supply and demand for
premium coffee beans at the time of purchase. Supply and price can be affected
by multiple factors, such as weather, politics and economics in the producing
countries.
GEOGRAPHIC CONCENTRATION
A significant amount of the currently operating Company-owned or franchised
cafes are located in the States of California, Texas, and Nevada. Accordingly,
the Company is susceptible to fluctuations in its business caused by adverse
economic conditions in those regions. Although California's economy has been in
a long recession over the past several years, there recently have been
indications that it may be in the early stages of a recovery. California's
economy exerts significant influence on the Nevada economy, and as a result,
although other sectors of the Nevada economy have been strong, the gaming
industry results in Nevada have been depressed by the poor California economic
performance. Difficult economic conditions in other geographic regions into
which the Company may expand may also adversely affect the Company's results of
operations. In addition, consumer preferences and tastes vary from region to
region, and there can be no assurance that consumers located in the regions in
which the Company intends to expand will be as receptive to specialty coffees as
consumers in existing markets.
DEPENDENCE ON KEY PERSONNEL
Management of the Company is dependent to a large degree on the services of
Richard D. Shannon, Gary C. Nelson, Bradley B. Landin, Thomas A. Craig, and
Steven J. Orlando. Loss of the services of Mr. Shannon, Mr. Nelson, Mr. Craig
or Mr. Orlando could have a material adverse effect on the Company's business.
In addition, the Company believes that in order to succeed in the future it will
be required to continue to attract, retain and motivate additional highly
skilled executive, sales and other employees.
NO PROPRIETARY PROCESS
Because Java Centrale stores and kiosks do not have any patents for their
roasting specifications or the processes for preparing several of its coffee
related beverages, competitors may be able to copy such specifications or
processes. Moreover, there can be no assurance that competitors will not be
able to develop processes more advanced than those of the Company.
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LIMITED REGISTRATION PERIOD
The Company does not intend to maintain indefinitely the effectiveness of
the Registration Statement of which this Prospectus forms a part. From and
after December 31, 1997, the Registration Statement will no longer be effective
(unless the Company has elected to extend its effectiveness), and once the
Registration Statement has been allowed to lapse the shares described herein may
no longer be sold in reliance upon this Prospectus or the Registration
Statement.
SUBSTANTIAL AMOUNT OF SHARES AVAILABLE FOR FUTURE SALE
Sale of a substantial number of Common Shares in the public market
following this Offering could adversely affect the market price of the Common
Shares. The Company's Articles of Incorporation authorize the issuance of 25
million shares of Common Stock, of which only 12,902,243 shares were
outstanding as of September 30, 1996, and 25 million shares of preferred
Stock, of which no shares were outstanding as of the date of this Prospectus.
As a matter of corporate policy, the Company intends to issue shares of its
Common Stock as part of the consideration for future acquisitions and other
transactions, where the use of such shares appears to be appropriate and
cost-effective. The Company may, in the discretion of the Company's board of
directors (the "Board of Directors"), also issue shares in public or private
offerings as a means of raising capital, or as a means of compensating and
providing incentives to the Company's officers, directors, and consultants.
The Board of Directors is not normally required to obtain shareholder
approval for any such issuances.
POSSIBLE FUTURE ISSUANCES OF COMMON STOCK AND OTHER SECURITIES
Additional Common Shares of the Company may be issued at any time by the
Board of Directors, without shareholder approval. The issuance of any such
additional Common Shares may have an adverse effect on the market price of the
Common Shares offered hereby. As a matter of corporate policy, the Company
intends to issue shares of its Common Stock as part of the consideration for
future acquisitions and other transactions, where the use of such shares appears
to be appropriate and cost-effective, or as a means of compensating and
providing incentives to the Company's officers, directors, and consultants. As
of September 30, 1996, the Company had outstanding a total of 5,826,230 options
or warrants to issue shares of its Common Stock, at prices ranging from $0.25 to
$9.90 per share. Additionally, as of September 30, 1996, there were then
outstanding three Convertible notes, which provided, in the aggregate, for the
potential issuance of a total of 2,700,000 new shares of Common Stock upon
conversion of such notes.
Shares of preferred stock or other securities of the Company may also be
issued by the Board of Directors, without shareholder approval, on such terms as
the Board may determine. The rights of the holders of Common Shares will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. Moreover, although the
ability to issue preferred stock may provide flexibility in connection with
possible acquisitions and other corporate purposes, such issuance may make it
more difficult for a third party to acquire, or may discourage a third party
from acquiring a majority of the voting stock of the Company. The Company has
no current plans to issue any shares of preferred stock.
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NO CASH DIVIDENDS
The Company has never paid any cash dividends on its Common Shares and does
not anticipate paying any such dividends in the foreseeable future. For
information about the Company's recently announced warrant dividend, see "--
Possible Future Issuances of Common Stock and Other Securities," above.
STOCK PRICE VOLATILITY
The price of the Company's Common Stock is subject to significant
volatility due to fluctuations in revenues, earnings, capitalization, liquidity,
press coverage, and financial market interest. Some of these factors may be
exacerbated because the Company operates solely in the coffee beverage and
related products industry, which is highly competitive and is dominated by a few
exceptionally strong companies.
CONCENTRATION OF STOCK OWNERSHIP
As of September 30, 1996, the three Company stockholders of record which
held the largest numbers of common shares were Baycor Ventures, Inc. ("Baycor"),
which owned of record approximately 14.5%, PSSS, Inc., which owned of record
approximately 6.5%, and Gary C. Nelson, who owned of record approximately 5.5%.
In the aggregate, Baycor, Mr. Nelson, and the other officers and directors of
the Company currently own of record approximately 22.4% of the currently
outstanding Common Shares. Accordingly, if Baycor, PSSS, Inc., Mr. Nelson, and
the Company's other officers and directors were to vote in the same manner on
any matter requiring approval of a majority of the outstanding Common Shares,
such matter would most likely be approved or defeated, as the case may be,
although the outcome would not be certain. Baycor is a wholly-owned subsidiary
of Baycor Capital, Inc.. Richard D. Shannon, the Chairman of the Company, and
Kevin R. Baker, a director of the Company, each own 50% of the outstanding
capital stock of Baycor Capital, Inc.. PSSS, Inc. is not affiliated with the
Company or with Baycor or Baycor Capital, Inc.
As of September 30, 1996, $1,750,454 of the convertible debt held by
Santina Holding, Inc., Gross Foundation, Inc. and Legong Investment Investments,
N.V. had been converted into 2,580,194 shares of Common Stock.
GENERAL LIABILITY AND COMMERCIAL INSURANCE; PRODUCT LIABILITY INSURANCE
Although the Company carries general liability and commercial insurance
with coverage up to $1,000,000 and product liability insurance with coverage up
to $1,000,000, there can be no assurance that this insurance will be adequate to
protect the Company against any general, commercial and/or product liability
claims. Any general, commercial and/or product liability claim which is not
covered by such policy, or is in excess of the limits of liability of such
policy, could have a material adverse effect on the financial condition of the
Company. There is no assurance that the Company will be able to maintain this
insurance on reasonable financial terms.
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GOVERNMENTAL REGULATION
The food service industry is subject to extensive federal, state and local
government regulations relating to the development and operation of food service
outlets, including laws and regulations relating to building and seating
requirements, the preparation and sale of food, cleanliness, safety in the work
place, accommodations for the disabled, and the Company's relationship with its
employees, such as minimum wage requirements, discriminatory practices, overtime
and working conditions and citizenship requirements. The Company-owned and
franchised cafes and carts are subject to various federal laws and regulations,
including without limitation, the Fair Labor Standards Act, the Americans With
Disabilities Act, the Department of Agriculture, the Food & Drug Administration,
and numerous State and local laws and regulatory agencies. The failure to
obtain or retain necessary food licenses or substantial increases in the minimum
wage could adversely affect the operation of the Company. Furthermore, federal
government proposals relating to health care may result in higher costs for the
Company. The Company is also subject to federal regulations and certain state
laws which regulate the offer and sale of franchises to its franchisees.
POSSIBLE VOLATILITY OF STOCK
The Company's Common Stock is currently traded on the NASDAQ SmallCap
Market. The stock market has, from time to time, experienced extreme price and
volume fluctuations which often have been unrelated to the operating performance
of particular companies. Regulatory developments and economic and other
external factors, as well as period-to-period fluctuations in financial results
of the Company, may have a significant impact on the market price of the Common
Shares. The continued trading of the Common Shares on NASDAQ is conditioned
upon the Company meeting certain tests. If the Company fails to meet any of
these tests, the Common Shares could be delisted from trading on the NASDAQ,
which could materially affect the trading market for the Common Shares.
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SELLING STOCKHOLDERS
The Shares registered hereunder are being offered for the accounts of the
stockholders of the Company listed below (the "Selling Stockholders").
Shares
Owned
Prior to Shares To Be Shares Owned
Stockholder Offering Offered After Offering
----------- -------- ------------ --------------
Number(1) Percent(2)
----------- ------------
James E. Elliott 25,934 12,967 12,967 *
Lillian P. Elliott 4,000 2,000 2,000 *
Dennis R. Golden 13,948 6,974 6,974 *
Richard W. Harris 6,118 3,059 3,059 *
Graham Pacific, Inc. 62,284 62,284 -0- -0-
Artistic License, Inc.(3) 300,000 300,000 -0- -0-
Alta Petroleum, Inc.(4) 50,000 50,000 -0- -0-
TOTALS 462,284 437,284 25,000 -0-
- -------------------------
(*) Indicates less than 1%
(1) Assumes all shares to be offered will be sold.
(2) Percentage of Common Stock outstanding estimated to be owned after
completion of the offering, based upon 12,902,239 shares of Common Stock
outstanding as of October 22, 1996.
(3) Represents shares which may be acquired upon the exercise of certain Stock
Purchase Warrants held by Artistic License, Inc. See "TERMS OF THE
ARTISTIC WARRANT" below for more information on these shares.
(4) Represents shares which may be acquired upon the exercise of certain Stock
Purchase Warrants held by Alta Petroleum, Inc. See "TERMS OF THE ALTA
WARRANT" below for more information on these shares.
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INTRODUCTION
This Prospectus relates to the following securities which have been or may
be issued by the Company:
(a) A total of 25,000 shares of the Company's Common Stock (the "Gem
Shares") which are held as described above by James E. Elliott,
Lillian P. Elliott, Dennis R. Golden, and Richard W. Golden, four
individuals who were investors and/or principals in a former Company
franchisee, Gem Ventures, Inc., a Nevada corporation ("Gem"). These
individuals received the Gem Shares as a result of a transaction
between the Company and Gem in August of 1995.
(b) A total of 62,284 shares of the Company's Common Stock which are held
by Graham Pacific, Inc., a Washington corporation ("Graham"). Graham
received these shares (the "Graham Shares") as a result of a
transaction between the Company and Graham in October of 1995.
(c) Up to 300,000 shares of Company's Stock which may be issued to
Artistic upon the exercise of certain stock purchase warrants held by
Artistic (the "Artistic Warrant Shares"), and
(d) Up to 50,000 shares of the Company's Stock which may be issued to Alta
upon the exercise of certain stock purchase warrants held by Alta (the
"Alta Warrant Shares").
GRAHAM AND GEM SHARES
The Shares being offered hereby include 87,284 shares of Common Stock which
were originally issued as a result of two privately negotiated transactions with
former Company franchisees during August and October of 1995. The agreements
pursuant to which the Gem Shares and the Graham Shares were issued each included
a Company undertaking to register the Shares in question. These initial
issuances were themselves exempt from registration under the Securities Act
pursuant to Section 4(2) of the Securities Act.
ARTISTIC WARRANT SHARES
The Shares being offered hereby include 300,000 shares of Common Stock
which Artistic has the right to purchase by exercising Common Stock purchase
warrants that were issued to it by the Company, on July 11, 1996 (the
"Artistic Warrants"). The Artistic Warrants are exercisable at any time
prior to 5:00 PM, California time, on April 30, 1997 (the "Artistic
Expiration Time"), at a price equal to the lowest closing sale price recorded
on the National Association of Securities Dealers, Inc. Automated Quotation
System, SmallCap Market List, for the Company's Common Stock on any trading
day which falls (i) at least one day prior to the date on which notice of
exercise of the Artistic Warrants is sent to the Company, and (ii) between
July 11, 1996 and April 30, 1997.
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ALTA WARRANT SHARES
The Shares being offered hereby include 50,000 shares of Common Stock
which Alta has the right to purchase by exercising Common Stock purchase
warrants that were issued to it by the Company, effective as of October 21,
1996 (the "Alta Warrants"). The Alta Warrants are exercisable at any time
prior to 5:00 PM, California time, on June 30, 2000, at a price equal to the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, SmallCap Market, for the Company's
Common Stock on any trading day which falls (i) at least one day prior to the
date on which notice of exercise of the Alta Warrants is sent to the Company
and (ii) between July 10, 1996 and April 30, 1997.
DESCRIPTION OF THE COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of no par value
Common Stock, and 25,000,000 shares of preferred stock. As of October 22, 1996,
12,902,239 shares of the Company's Common Stock were issued and outstanding, and
no shares of the preferred stock, were issued and outstanding. The Company's
Common Stock has been registered, as a class, under Section 12 of the Exchange
Act.
Subject to preferential rights of the holders of preferred stock and senior
debt securities (if any) and the applicable provisions of the California General
Corporation Law, the holders of the Company's Common Stock will be entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and on liquidation, dissolution, or winding up of
the Company such holders will be entitled to receive pro rata its net assets
remaining after the payment of all creditors.
The holders of the Common Stock are entitled to one vote for each share on
all matters submitted to a vote of the shareholders. In any election of
directors each shareholder has the right to cumulate votes. Shareholders have
no preemptive rights or other rights to subscribe for additional shares. There
are no conversion rights, redemption rights, or sinking fund provisions with
respect to shares of the Common Stock. The outstanding shares of Common Stock
are fully-paid and nonassessable.
GENERAL DESCRIPTION OF THE WARRANTS
All questions about the issuance, exercise, and terms of the Warrants
and the rights of the Warrant Holders will be decided by the Company's Board
of Directors. For a full description of the Warrants, please refer to the
Warrants themselves, copies of which are attached hereto as Exhibits A and B,
respectively, and are by this reference incorporated herein. The descriptions
of the Warrants contained in this Prospectus are qualified in their entirety
by reference to the complete text of such documents. Any conflict between
the summary provided in this Prospectus and the actual terms of such
documents must be resolved in favor of the terms as expressed in the
documents themselves. Copies of the Warrants may also be obtained from the
Company by persons entitled thereto upon request, free of charge.
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SECURITIES AVAILABLE UPON EXERCISE OF THE WARRANTS
Each of the Warrants provides for the issuance, upon exercise and payment
of the exercise price, as described below (see "TERMS OF THE ARTISTIC WARRANT"
and "TERMS OF THE ALTA WARRANT" below), of that number of shares of the
Company's Common Stock which is specified therein; however both the number of
Shares which may be obtained upon exercise of the Warrants and the exercise
price for the Warrants are subject to adjustment in certain circumstances, as
more fully described below.
MANNER OF EXERCISE
The holder of each of the Warrants may exercise them to purchase all or any
whole number of the Shares covered by the respective Warrants by (a) completing
in the manner indicated, and executing, a subscription form (which is attached
to each of the Warrants) for that number of Shares to which it is entitled and
desires to purchase; (b) surrendering its current Warrant to the Company at the
Company's principal place of business in Sacramento, California; and (c) paying
the appropriate purchase price for the Shares, by cash, money order, bank draft,
or certified check, payable to the Company at its principal place of business in
Sacramento, California.
RIGHTS AS A SHAREHOLDER, EMPLOYEE, OR CONSULTANT
No person who holds a Warrant will have any rights as a Company shareholder
with respect to the Shares represented thereby until such Warrant is exercised
and the Shares are actually issued. The grant of a Warrant does not impose any
obligation whatsoever on the Company to employ or continue to employ the
recipient of the Warrant, and does not interfere with the Company's right to
terminate any position he or she may have with the Company, as a consultant or
otherwise, at any time.
TRANSFER OF THE WARRANTS
The Warrants are nontransferable, and any attempt to sell, assign,
transfer, hypothecate, or otherwise convey or encumber any interest in any
Warrant, or any Shares which may be (but have not yet been) obtained upon
exercise of a Warrant, is invalid. The Company has no obligation to recognize
any such sale, assignment, transfer, hypothecation, or other conveyance or
encumbrance; or to reflect any such purported transaction on the official
records of the Company; or to issue Warrants or shares of its Common Stock to
any party in violation of this restriction. Consequently there is not, and there
will not be, any market for the Warrants themselves.
REDEMPTION RIGHTS
The Warrants do not provide the Company with any redemption rights with
respect to either the Warrants themselves or the underlying shares of Common
Stock.
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<PAGE>
TERMS OF THE ARTISTIC WARRANT
The Artistic Warrant may be exercised, at any time prior June 30, 2000 (the
"Artistic Expiration Time"), to purchase up to Three Hundred Thousand (300,000)
Shares at the lowest closing sale price recorded on the National Association of
Securities Dealers, Inc. Automated Quotation System, SmallCap Market, for the
Company's Common Stock on any trading day which falls (i) at least one day prior
to the date on which notice of exercise of such Warrants is sent to the Company,
and (ii) between July 11, 1996 and April 30, 1997.
The total number of shares for which the Artistic Warrant may be
exercised, and Artistic's Exercise Price, may be adjusted and re-adjusted
from time to time as described below, (see "Adjustments to the Artistic
Warrant's Exercise Price" and "Adjustments to the Number of Artistic
Shares"). No portion of the Artistic Warrant has been exercised as of the
date of this Prospectus.
ADJUSTMENTS TO THE NUMBER OF ARTISTIC SHARES.
The Artistic Warrant provides that if, prior to the Artistic Warrant
Expiration Time, the number of outstanding shares of the Company's Common Stock
are increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment must be made in the number and kind of
shares as to which the Artistic Warrant may be exercised. By way of example
only, if the Company should make a two-for-one stock split of its outstanding
shares of Common Stock, the number of Shares for which the Artistic Warrant may
be exercised would thereupon increase from 300,000 to 600,000 Shares, with a
corresponding change in the exercise prices applicable to the Artistic Warrant
as described below (see "Adjustments to the Artistic Warrant's Exercise Price"
below).
ADJUSTMENTS TO THE ARTISTIC WARRANT EXERCISE PRICE
In the event of a change in the number of shares of Common Stock which may
be caused by any event described above (see "Adjustments to the Number of
Artistic Shares"), a corresponding adjustment changing Artistic's Exercise Price
per share of Common Stock attributable to any unexercised portion of the
Artistic Warrant must also be made. By way of example only, if the Company
should make a two-for-one stock split of its Common Stock then, in addition to
the change in number of shares for which the Artistic Warrant may be exercised
as described above, the otherwise applicable exercise price for the Artistic
warrants would be divided by one-half.
A complete copy of the Artistic Warrant, including the Artistic Warrant
Subscription Form, is attached to this Prospectus as Exhibit A.
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<PAGE>
TERMS OF THE ALTA WARRANT
The Alta Warrant may be exercised, at any time prior June 30, 2000 (the
"Alta Expiration Time"), to purchase up to Fifty Thousand (50,000) Shares at the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, SmallCap Market, for the Company's
Common Stock on any trading day which falls (i) at least one day prior to the
date on which notice of exercise of such Warrants is sent to the Company, and
(ii) between July 10, 1996 and April 30, 1997.
The total number of shares for which the Alta Warrant may be exercised, and
Alta's Exercise Price, may be adjusted and re-adjusted from time to time as
described below, (see "Adjustments to the Alta Warrant's Exercise Price" and
"Adjustments to the Number of Alta Shares"). No portion of the Alta Warrant has
been exercised as of the date of this Prospectus.
ADJUSTMENTS TO THE NUMBER OF ALTA SHARES.
The Alta Warrant provides that if, prior to the Alta Warrant Expiration
Time, the number of outstanding shares of the Company's Common Stock are
increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment must be made in the number and kind of
shares as to which the Alta Warrant may be exercised. By way of example (only),
if the Company should make a two-for-one stock split of its outstanding shares
of Common Stock, the number of Shares for which the Alta Warrant may be
exercised would thereupon increase from 50,000 to 100,000 Shares, with a
corresponding change in the exercise prices applicable to the Alta Warrant as
described below (see "Adjustments to the Alta Warrant's Exercise Price").
ADJUSTMENTS TO THE ALTA WARRANT EXERCISE PRICE
In the event of a change in the number of shares of Common Stock which may
be caused by any event described above (see "Adjustments to the Number of Alta
Shares"), a corresponding adjustment changing Alta's Exercise Price per share of
Common Stock attributable to any unexercised portion of the Alta Warrant must
also be made. By way of example, only, if the Company should make a two-for-one
stock split of its Common Stock as described above then, in addition to the
change in number of shares for which the Alta Warrant may be exercised as
described above, the otherwise applicable exercise price for each share of
Common Stock for which the Alta Warrant may thereafter be exercised would be
divided by one-half.
A complete copy of the Alta Warrant, including the Alta Warrant
Subscription Form, is attached to this Prospectus as Exhibit B.
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<PAGE>
RESALES OF COMPANY SECURITIES BY INSIDERS
The Warrants are by their terms nontransferable, and consequently, except
for the Section 16 issues outlined in this section, the following discussion
does not apply to them. There are no contractual restrictions applicable to the
Shares which may be obtained upon exercise of the Warrants.
Persons who are not deemed to be "affiliates" of the Company, as that term
is defined in the rules under the Securities Act, may as a general rule freely
resell, from time to time, any Shares they acquire under the Warrants. Persons
who are "affiliates" of the Company, however, may as a general rule only resell
Shares (i) in accordance with the provisions of Rule 144 under the Securities
Act, or (ii) pursuant to an effective registration statement filed with the SEC
OTHER THAN the Registration Statement of which this Prospectus forms a part.
This Prospectus may not be used in connection with any resales of the Shares by
affiliates of the Company. Certain officers of the Company and its
subsidiaries, and all directors and 10% or greater shareholders of the Company,
will normally be deemed to be "affiliates" of the Company for purposes of the
Securities Act and Rule 144. ANY HOLDER OF SHARES WHO IS ALSO AN OFFICER,
DIRECTOR, OR 10% SHAREHOLDER OF THE COMPANY OR ANY OF ITS AFFILIATES IS
CAUTIONED TO CONSULT WITH COUNSEL REGARDING HIS OR HER POTENTIAL STATUS AS AN
"AFFILIATE" BEFORE EFFECTING ANY TRANSACTIONS IN SHARES.
Section 16 of the Exchange Act applies to Company stock transactions by
members of its Board of Directors, certain corporate officers of the Company and
its subsidiaries, and all holders of more than 10% of its the Company's common
or preferred stock ("Section 16 Insiders"). Under this law, Section 16 insiders
must report these transactions to the SEC.
In addition, if any Section 16 Insider realizes a profit from either:
(i) the grant or acquisition of warrants, convertible preferred stock,
options, stock appreciation rights or other similar rights with an exercise
or conversion privilege at a price related to Company stock, or similar
securities with a value derived from the value of an equity security,
("Derivative Securities Contracts") by the Company; followed within six
months by the sale of those Derivative Securities Contracts, Company stock
or other Derivative Securities Contracts (a "purchase and sale");
(ii) a purchase of Company stock, followed within six months by a sale of
those or other Company shares (a "purchase and sale");
(iii) the sale of Company stock or Derivative Securities Contracts,
followed within six months by the grant or acquisition of Warrants, or
other Derivative Securities Contracts or the purchase of Company stock; (a
"sale and purchase"); or
(iv) a sale of Company stock, followed within six months by a purchase of
those or other Company shares (a "sale and purchase");
then the Section 16 Insider could be forced to repay this "short-swing profit"
to the Company.
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All officers, directors, and employees of the Company and its affiliates
(whether or not they are Section 16 Insiders), and all other shareholders who or
which may be in possession of material non-public information about the Company,
should also keep in mind the rules against "insider trading" when considering
whether to buy or sell Company stock. Federal and California law, and the
Company's own corporate policies, prohibit the purchase or sale of Company stock
while the buyer or seller is in possession of material information about the
company or its prospects which have not yet been made public.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences
associated with the granting and exercise of the Artistic Warrants and the Alta
Warrants, as well as the sale of the shares of the Common Stock underlying the
aforementioned Warrants, the Artistic Shares and the Alta Shares. This summary
is based on existing federal income tax laws and regulations, and does not
discuss the provisions of the income tax laws of any State or foreign country.
This summary is applicable only as of the date of this Prospectus, and Warrant
holder should be aware that federal tax laws and regulations are subject to
change at any time. It is not intended to be, or offered as, a complete
description of the tax consequences which may be associated with any individual
grant or exercise of a Warrant, or as tax, investment, or legal advice. EVERY
PERSON OR ENTITY HOLDING ARTISTIC WARRANTS, ALTA WARRANTS, OR SHARES OF COMMON
STOCK OBTAINED UPON THE EXERCISE OF THE AFOREMENTIONED WARRANTS SHOULD CONSULT
HIS, HER, OR ITS OWN TAX ADVISOR CONCERNING HIS, HER, OR ITS INDIVIDUAL
SITUATION.
TAX CONSEQUENCES OF GRANT OR EXERCISE OF A WARRANT
Holders of the Warrants do not recognize taxable income on the date of the
grant of the Warrants themselves, which are in effect non-statutory options.
Normally, however, they will recognize ordinary income on the date of exercise
of the Warrants, in the amount of the difference between the Warrant exercise
price and the fair market value of the Company's Common Stock on the date of the
exercise. However, if the holder of a Warrant is subject to the restrictions on
resale imposed by Section 16 of the Exchange Act, as described above (see
"RESALES OF COMPANY SECURITIES TO INSIDERS," above), he or she will normally
recognize ordinary income under a slightly modified set of rules (see "TAX
TREATMENT OF SECTION 16 INSIDERS," below).
TAXATION UPON SALE OF THE SHARES
When the Shares obtained through the exercise of the Warrants are sold, any
difference between the sale price and the Warrant holder's tax basis in the
shares (normally, the basis will be equal to the exercise price plus any income
recognized by the Warrant holder on exercise of the Warrant) will be treated as
capital gain or loss. This gain or loss will be treated as a long-term capital
gain or loss unless the Shares have been held for less than one year, in which
case it will be treated as a short-term capital gain or loss.
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TAX TREATMENT OF SECTION 16 INSIDERS
Warrant Holders will normally recognize income for federal income tax
purposes at the time a Warrant is exercised. However, a Warrant Holder who is a
Section 16 Insider, and who exercises a Warrant less than six months after the
date it was granted, will not recognize income for federal income tax purposes
until the earlier of (i) the expiration of such six-month period or (ii) the
first day on which a sale of the Shares received upon such exercise, at a
profit, will not subject the Warrant Holder to liability under Section 16,
unless he or she elects to be taxed at the time of exercise by filing an
election with the Internal Revenue Service under Section 83(b) of the Code. The
election under 83(b) must be filed within 30 days of the date of exercise. The
Internal Revenue Service has taken the position that there will be no such
deferred taxation in the situation where a Section 16 Insider has purchased the
Company Shares (in a transaction unrelated to the Warrants) within six months
prior to the date of exercise in a transaction which is not exempt from the
short-swing profit provisions of Section 16. See "RESALES OF COMMON STOCK BY
INSIDERS," above.
TAX BENEFITS TO THE COMPANY
The Company will be entitled to a deduction for federal tax purposes at the
time that any optionee recognizes ordinary income and in the amount of such
included income with respect to the exercise of a Warrant.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Shares may be offered from time to time
by or for the account of the Selling Stockholders through dealers, brokers or
other agents, or directly to one or more purchasers, at market prices prevailing
at the time of sale or prices otherwise negotiated.
The Registration Statement covering the Shares offered hereby will be
maintained in effect, and the Shares may be sold thereunder by the Selling
Stockholders, until December 31, 1997 (the "Offering Period"). At the end of
the Offering Period, Shares not sold by the Selling Stockholders during the
Offering Period will return to the status of restricted stock which may be sold
pursuant to the provisions of Rule 144 under the Securities Act of 1933 (the
"Act").
Several of the Selling Stockholders have advised the Company that they may
sell the Shares, directly or through brokers or dealers, from time to time
during the Offering Period. Such sales may be made at the market price in one
or more transactions on the NASD Automated Quotation System, SmallCap Market,
on any other local or national exchange or quotation system on which the
Company's Common Stock may then be listed; or at privately negotiated prices in
negotiated transactions; or otherwise at prices and terms prevailing at the time
of sale.
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USE OF PROCEEDS
The Company will not receive any proceeds from any sale or other transfer
of any of the Shares. All proceeds from such transactions will go to the
holders of the Shares. All proceeds derived from the exercise of the Warrants
has been or will be used for general corporate purposes.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation and By-Laws provide for
indemnification of directors and officers to the full extent permitted or
authorized under California Law, for expenses, liabilities and losses actually
and reasonably incurred as a result of any such director's or officer's status
as such, provided that the indemnitee acted in good faith and in a manner he or
she believed to be in or not to be opposed to the best interest of the
corporation. In addition, the Company has entered into an Indemnification
Agreement with each of its directors and executive officers, which agreement
provides, among other things, for contractual rights of the indemnitee to
advancement of expenses prior to final disposition of an action provided that,
if required by California law, the indemnitee agrees to repay such advance upon
the Company's request if it is ultimately determined that the indemnitee is not
entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Rosenblum, Parish & Isaacs, PC, of San Francisco and San Jose,
California.
EXPERTS
The audited consolidated financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in this Registration Statement have
been audited by Grant Thornton LLP, independent certified public accountants, as
indicated in their reports with respect thereto; and are included therein and
incorporated herein by reference in reliance upon the authority of such firm as
experts in providing such reports.
No person has been authorized in connection with this offering to give any
information, or to make any representation not contained in this Prospectus, and
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer of any securities other than those to which it relates or an offer to any
person in any jurisdiction where such an offer would be unlawful, or in which
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the person making such offer or solicitation is not qualified to do so. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information herein is correct as
of any time subsequent to its date.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
-------------------------------------------
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the Shares being registered, other than underwriting
discounts and commissions, if any, incurred by the Selling Stockholders in sales
of Shares effected through intermediaries. All of the amounts shown are
estimates except the Securities and Exchange Commission registration fee.
Securities and Exchange Commission
Registration Fee .........................................95.00
Accounting Fees............................................. 1,500.00*
Legal Fees...................................................4,000.00*
Miscellaneous................................................1,000.00*
--------
TOTAL.............................................$6,595.00*
---------
---------
----------------
* Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Registrant's Amended and Restated Articles of
Incorporation (the "Articles") provides that the liability of directors of the
Registrant for monetary damages is eliminated to the fullest extent permissible
under California law.
Article VI of the Articles provides that the Registrant is authorized to
indemnify its directors and officers to the fullest extend permissible under
California law.
Article VI of the Registrant's Amended and Restated Bylaws (the "Bylaws")
provides, with certain qualifications, that the Registrant shall have the power
to indemnify any person, who is or is threatened to be made a party to
proceeding by reason of the fact that he or she is or was an officer, director,
employee, or agent of the Registrant, for all costs, expenses and other amounts
actually and reasonably incurred in connection with such proceeding. The
foregoing indemnification is conditioned upon a finding, by either (i) the
uninterested members of the Registrant's Board of Directors, (ii) its
shareholders, (iii) independent legal counsel in a written opinion, or (iv) the
court in which the proceeding is or was pending, that the person seeking
indemnification was acting in good faith and in a manner reasonably believed to
be in the best interests of the Registrant, or in the
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<PAGE>
case of a criminal proceeding that he or she had no reasonable cause to believe
that his or her conduct was unlawful.
As authorized by the foregoing Article and Bylaw provisions, the Registrant
and each of its Directors and executive officers individually have entered into
indemnification agreements whereby the Registrant agreed to indemnify such
individuals against any claims or expenses they may incur as a result of serving
the Registrant in those or other capacities, provided that the person seeking
indemnification was acting in good faith and in a manner reasonably believed to
be in or not opposed to the best interests of the Registrant, or in the case of
a criminal proceeding that he or she had no reasonable cause to believe that his
or her conduct was unlawful. Additionally, the Registrant has entered into
separate Indemnification Agreements, with the Registrant's principal corporate
shareholder and the corporation which holds all of that company's stock, which
provide similar indemnification against claims and expenses arising out of those
relationships and certain consulting arrangements between those entities and the
Registrant.
Item 16. EXHIBITS.
4.1 Stock Purchase Warrant, dated July 11, 1996, issued by the
Company to Artistic License, Inc.
4.2 Stock Purchase Warrant, dated October 21, 1996, issued by the
Company to Alta Petroleum, Inc.
5. Opinion of Rosenblum, Parish & Isaacs, PC
23.1 Consent of Rosenblum, Parish & Isaacs, PC
(See Exhibit 5)
23.2 Consent of Grant Thornton LLP
24. Power of Attorney
Item 17. UNDERTAKINGS.
(a) The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at
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<PAGE>
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sacramento, California, this 21st
day of November 1996.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
---------------------------
Gary C. Nelson
Its President
(Principal Executive Officer)
By: /S/ STEVEN J. ORLANDO
---------------------------
Steven J. Orlando
Its Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose name appears
below constitutes Richard D. Shannon and Steven J. Orlando, and each of them
individually, as his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities to sign any and all amendments (including without
limitation post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, thereby ratifying and confirming all that said attorney-in-fact
and agent, or either of them, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ KEVIN R. BAKER Director November 21, 1996
- ------------------------
Kevin R. Baker
/S/ LYLE P. EDWARDS Director November 21, 1996
- ------------------------
Lyle P. Edwards
/S/ GARY C. NELSON Director and November 21, 1996
- ------------------------ President
Gary C. Nelson
/S/ RICHARD D. SHANNON Director and November 21, 1996
- ------------------------ Chairman of
Richard D. Shannon the Board
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<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
4.1 Stock Purchase Warrant, dated July 11, 1996, issued by the
Company to Artistic License, Inc.
4.2 Stock Purchase Warrant, dated October 21, 1996, issued by the
Company to Alta Petroleum, Inc.
5. Opinion of Rosenblum, Parish & Isaacs, PC
23.1 Consent of Rosenblum, Parish & Isaacs, PC
(See Exhibit 5)
23.2 Consent of Grant Thornton, LLP
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<PAGE>
EXHIBIT 4.1
STOCK PURCHASE WARRANT
THREE HUNDRED THOUSAND (300,000) WARRANTS
TO PURCHASE COMMON STOCK OF
JAVA CENTRALE, INC.
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of the execution date indicated
below, authorized the issuance to ARTISTIC LICENSE, INC., a California
corporation, ("ALI"), of rights to purchase (the "Warrants") an aggregate of
Three Hundred Thousand (300,000) fully-paid and non-assessable shares of the no
par value Common Stock of the Company (the "Warrant Shares"), on the basis of
one Share for each Warrant, exercisable at any time prior to 5:00 PM, California
time, on June 30, 2000 (the "Expiration Time"), at the principal office of the
Company, on payment of the price per Share specified in Section 2 of this
Warrant and subject to the terms and conditions governing this Warrant
hereinafter expressed.
THIS IS TO CERTIFY ALSO THAT, for value received, the Company agrees,
subject to the terms and conditions hereinafter expressed, to sell and deliver
to ALI 300,000 fully-paid and nonassessable Warrants.
This Warrant is nontransferable, shall be subject to all of the terms
hereof as set forth below, and shall become void, and terminate and lapse, at
the Expiration Time, after which this Warrant shall be of no further force nor
effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the undersigned, duly authorized thereunto.
DATED as of July 11, 1996.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
----------------------
Gary C. Nelson
Its President
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<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
The terms and conditions with respect to the holding and exercise of these
Stock Purchase Warrants are as follows.
1. NUMBER OF SHARES ACQUIRABLE UPON EXERCISE; CERTAIN ADJUSTMENTS.
(a) ALI shall be initially entitled to receive, upon exercise hereof,
up to Three Hundred Thousand (300,000) shares of the Company's Common Stock,
subject, however, to adjustment as provided below.
(b) If, following the date hereof and prior to the Expiration Time
(as defined below), the outstanding shares of the Company's Common Stock shall
be increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares as to which any remaining unexercised Warrants may be exercised. By way
of example only, if the Company should undergo a one-for-two reverse stock split
of its outstanding shares of Common Stock prior to the exercise of any such
warrants, the number of shares for which the Warrants may be exercised would
thereupon decrease to 150,000 shares.
(c) Any increase or decrease in the number of shares obtainable
through the exercise of the Warrants shall become effective immediately
following the effective time of the stock split or consolidation causing such
increase or decrease, or in the case of an increase required by a stock
dividend, shall become effective as of the payment or distribution date of such
dividend.
(d) No fractional shares of stock shall be issued or made available
under the this Warrant on account of any such adjustment, and fractional share
interests shall be disregarded.
2. EXERCISE PRICE.
(a) The Exercise Price for the Warrant Shares shall be equal to the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, Small-Cap Market, for the Company's
Common Stock on any trading day which falls (i) at least one (1) day prior to
the date on which notice of exercise of such Warrants is sent to the Company as
provided in Section 3, below, and (ii) between the date hereof and April 30,
1997.
(b) Subject to all of the other terms of this Warrant, ALI may
purchase any or all of the Warrant Shares at any time during the term of this
Warrant; PROVIDED, HOWEVER, that any
A-2
<PAGE>
subsequent fluctuation in the closing sales prices of the Company's Common Stock
shall not affect any prior sale or sales.
3. METHOD OF EXERCISE. ALI may exercise its right to purchase Warrant
Shares pursuant to this Warrant at any time prior to the Expiration Time, by (a)
completing in the manner indicated, and executing, the attached Subscription
Form for that number of Warrant Shares which it is entitled, and desires, to
purchase; (b) surrendering the Warrant to the Company at its principal place of
business in Sacramento, California; and (c) paying the appropriate purchase
price for the Warrant Shares (rounded to the nearest whole cent), by cash, money
order, bank draft, or certified check, payable to the Company at its principal
place of business in Sacramento, California. Upon such surrender and payment,
the Company will issue to ALI the number of Warrant Shares so subscribed for.
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to ALI the number of shares of
Common Stock subscribed for, and ALI will be a shareholder of the Company in
respect of such Common Stock as of the date on which the shares representing
such Common Stock are issued by the Company's Transfer Agent and Registrar.
5. NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE. No person or entity shall
be considered to be a shareholder of the Company for any purpose until the
exercise of the Warrant as provided herein and the due and formal issuance of
Warrant Shares by the Company's Transfer Agent and Registrar thereupon.
6. NO RIGHTS AFTER THE EXPIRATION TIME. Nothing contained in this
Warrant, or in any instrument evidencing the Warrant, shall confer on any person
or entity any right to subscribe for or purchase, after the Expiration Time, any
security of or issued by the Company. From and after the Expiration Time, this
Warrant and all rights hereunder shall be valueless, unexercisable, void, and of
no further force or effect.
7. NONTRANSFERABILITY. This Warrant is not and shall not be
transferrable, and any attempt to sell, assign, transfer, hypothecate, or
otherwise convey or encumber any interest herein shall be void. The Company
shall have no obligation to recognize, give effect to, or cause to be reflected
on the official records of the Company any sale, assignment, transfer,
hypothecation, or other conveyance or encumbrance of this Warrant, or any
interest herein, or any attempted exercise, division, or subdivision of this
Warrant, in violation of any provision hereof.
A-3
<PAGE>
8. SUBDIVISION. This Warrant may be divided and subdivided into two or
more certificates, evidencing the total number of Warrants provided herein, upon
written demand therefor delivered to the Company. This Warrant may be exercised
for all or any part of the Warrant Shares, and in such event the Company shall
issue a new Warrant Certificate, evidencing the balance of the Warrant Shares
not previously subscribed for. Notwithstanding the foregoing sentences,
however, no Warrant Certificate shall be issued, and no exercise of a Warrant
shall be permitted, involving any fraction of one Share.
9. MISCELLANEOUS.
(a) This Warrant shall be governed by and construed in accordance
with the internal laws of the State of California, without reference to the
choice of laws provisions thereof.
(b) The captions set forth in this Warrant are for convenience only,
and shall not be used in the construction hereof.
(c) If this Warrant, or any paragraph, sentence, term, or provision
hereof, is invalidated on any ground by any court of competent jurisdiction, the
remainder hereof shall, notwithstanding such invalidation, remain in full force
in effect, and each other provision of this Warrant shall thereafter be
construed and enforced in such a manner as to give the fullest possible effect
to the intention and purposes expressed herein.
A-4
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of July 11, 1996
TO: Java Centrale, Inc.
ATTENTION: Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
RE: Exercise of Stock Purchase Warrants
Pursuant to the terms of that certain Stock Purchase Warrant, dated as of
July 11, 1996 (the "Warrant"), which Warrant is attached to this Subscription
Form, the undersigned Artistic License, Inc. hereby subscribes for _____ whole
shares of the Company's no par value Common Stock, at a price of $______ per
share as may be applicable in accordance with the terms of the Warrant.
TOTAL SUBSCRIPTION PRICE: $_______________
The undersigned hereby directs and requires that the shares of Common Stock
being subscribed for hereby be issued and delivered as follows:
Full Name of Shareholder: Artistic License, Inc.
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
ARTISTIC LICENSE, INC.
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
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<PAGE>
NOTE: This Subscription Form must be signed and accompanied by payment to
Java Centrale, Inc., in full, of the appropriate subscription price, in cash or
by money order, bank draft, or certified check, payable to the Company at its
principal place of business in Sacramento, California, and must be received by
the Company prior to 5:00 PM, California time, on June 30, 2000 (the
"Expiration Time"), after which time all rights represented by the attached
Stock Purchase Warrant will expire.
JAVA CENTRALE, INC. ACCEPTS NO RESPONSIBILITY FOR THE DELIVERY TO IT OF
THIS SUBSCRIPTION FORM OR THE ACCOMPANYING STOCK PURCHASE AGREEMENT. SUFFICIENT
TIME SHOULD BE ALLOWED FOR THE DELIVERY OF THESE DOCUMENTS PRIOR TO THE
EXPIRATION TIME.
Upon surrender of this Subscription Form and the Stock Purchase Warrant,
and payment of the subscription price as provided therein, the Company will
issue the number of shares of Common Stock subscribed for, and Artistic License,
Inc. will thereupon become a shareholder of the Company. If a lesser number of
shares is subscribed for than the number of shares described in the Stock
Purchase Warrant, the Company shall issue a further Stock Purchase Warrant in
respect of the unsubscribed shares of Common Stock not subscribed for hereby.
A-6
<PAGE>
EXHIBIT 4.2
STOCK PURCHASE WARRANT
FIFTY THOUSAND (50,000) WARRANTS
TO PURCHASE COMMON STOCK OF
JAVA CENTRALE, INC.
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of the execution date indicated
below, authorized the issuance to ALTA PETROLEUM, INC., a California
corporation, ("API"), of rights to purchase (the "Warrants") an aggregate of
Fifty Thousand (50,000) fully-paid and non-assessable shares of the no par value
Common Stock of the Company (the "Warrant Shares"), on the basis of one Share
for each Warrant, exercisable at any time prior to 5:00 PM, California time, on
June 30, 2000 (the "Expiration Time"), at the principal office of the Company,
on payment of the price per Share specified in Section 2 of this Warrant and
subject to the terms and conditions governing this Warrant hereinafter
expressed.
THIS IS TO CERTIFY ALSO THAT, for value received, the Company agrees,
subject to the terms and conditions hereinafter expressed, to sell and deliver
to API 50,000 fully-paid and nonassessable Warrants.
This Warrant is nontransferable, shall be subject to all of the terms
hereof as set forth below, and shall become void, and terminate and lapse, at
the Expiration Time, after which this Warrant shall be of no further force nor
effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the undersigned, duly authorized thereunto.
DATED as of October 21, 1996.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
----------------------
Gary C. Nelson
Its President
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<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
The terms and conditions with respect to the holding and exercise of these
Stock Purchase Warrants are as follows.
1. NUMBER OF SHARES ACQUIRABLE UPON EXERCISE; CERTAIN ADJUSTMENTS.
(a) API shall be initially entitled to receive, upon exercise hereof,
up to Fifty Thousand (50,000) shares of the Company's Common Stock, subject,
however, to adjustment as provided below.
(b) If, following the date hereof and prior to the Expiration Time
(as defined below), the outstanding shares of the Company's Common Stock shall
be increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares as to which any remaining unexercised Warrants may be exercised. By way
of example only, if the Company should undergo a one-for-two reverse stock split
of its outstanding shares of Common Stock prior to the exercise of any such
warrants, the number of shares for which the Warrants may be exercised would
thereupon decrease to 25,000 shares.
(c) Any increase or decrease in the number of shares obtainable
through the exercise of the Warrants shall become effective immediately
following the effective time of the stock split or consolidation causing such
increase or decrease, or in the case of an increase required by a stock
dividend, shall become effective as of the payment or distribution date of such
dividend.
(d) No fractional shares of stock shall be issued or made available
under the this Warrant on account of any such adjustment, and fractional share
interests shall be disregarded.
2. EXERCISE PRICE.
(a) The Exercise Price for the Warrant Shares shall be equal to the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, Small-Cap Market, for the Company's
Common Stock on any trading day which falls (i) at least one (1) business day,
prior to the date on which notice of exercise of such Warrants is sent to the
Company as provided in Section 3, below, and (ii) between July 10, 1996 and
April 30, 1997.
(b) Subject to all of the other terms of this Warrant, API may
purchase any or all of the Warrant Shares at any time during the term of this
Warrant; PROVIDED, HOWEVER, that any
B-2
<PAGE>
subsequent fluctuation in the closing sales prices of the Company's Common Stock
shall not affect any prior sale or sales.
3. METHOD OF EXERCISE. API may exercise its right to purchase Warrant
Shares pursuant to this Warrant at any time prior to the Expiration Time, by (a)
completing in the manner indicated, and executing, the attached Subscription
Form for that number of Warrant Shares which it is entitled, and desires, to
purchase; (b) surrendering the Warrant to the Company at its principal place of
business in Sacramento, California; and (c) paying the appropriate purchase
price for the Warrant Shares (rounded to the nearest whole cent), by cash, money
order, bank draft, or certified check, payable to the Company at its principal
place of business in Sacramento, California. Upon such surrender and payment,
the Company will issue to API the number of Warrant Shares so subscribed for.
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to API the number of shares of
Common Stock subscribed for, and API will be a shareholder of the Company in
respect of such Common Stock as of the date on which the shares representing
such Common Stock are issued by the Company's Transfer Agent and Registrar.
5. NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE. No person or entity shall
be considered to be a shareholder of the Company for any purpose until the
exercise of the Warrant as provided herein and the due and formal issuance of
Warrant Shares by the Company's Transfer Agent and Registrar thereupon.
6. NO RIGHTS AFTER THE EXPIRATION TIME. Nothing contained in this
Warrant, or in any instrument evidencing the Warrant, shall confer on any person
or entity any right to subscribe for or purchase, after the Expiration Time, any
security of or issued by the Company. From and after the Expiration Time, this
Warrant and all rights hereunder shall be valueless, unexercisable, void, and of
no further force or effect.
7. NONTRANSFERABILITY. This Warrant is not and shall not be
transferrable, and any attempt to sell, assign, transfer, hypothecate, or
otherwise convey or encumber any interest herein shall be void. The Company
shall have no obligation to recognize, give effect to, or cause to be reflected
on the official records of the Company any sale, assignment, transfer,
hypothecation, or other conveyance or encumbrance of this Warrant, or any
interest herein, or any attempted exercise, division, or subdivision of this
Warrant, in violation of any provision hereof.
B-3
<PAGE>
8. SUBDIVISION. This Warrant may be divided and subdivided into two or
more certificates, evidencing the total number of Warrants provided herein, upon
written demand therefor delivered to the Company. This Warrant may be exercised
for all or any part of the Warrant Shares, and in such event the Company shall
issue a new Warrant Certificate, evidencing the balance of the Warrant Shares
not previously subscribed for. Notwithstanding the foregoing sentences,
however, no Warrant Certificate shall be issued, and no exercise of a Warrant
shall be permitted, involving any fraction of one Share.
9. MISCELLANEOUS.
(a) This Warrant shall be governed by and construed in accordance
with the internal laws of the State of California, without reference to the
choice of laws provisions thereof.
(b) The captions set forth in this Warrant are for convenience only,
and shall not be used in the construction hereof.
(c) If this Warrant, or any paragraph, sentence, term, or provision
hereof, is invalidated on any ground by any court of competent jurisdiction, the
remainder hereof shall, notwithstanding such invalidation, remain in full force
in effect, and each other provision of this Warrant shall thereafter be
construed and enforced in such a manner as to give the fullest possible effect
to the intention and purposes expressed herein.
B-4
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of October 21, 1996
TO: Java Centrale, Inc.
ATTENTION: Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
RE: Exercise of Stock Purchase Warrants
Pursuant to the terms of that certain Stock Purchase Warrant, dated as of
October 21, 1996 (the "Warrant"), which Warrant is attached to this Subscription
Form, the undersigned Artistic License, Inc. hereby subscribes for _____ whole
shares of the Company's no par value Common Stock, at a price of $______ per
share as may be applicable in accordance with the terms of the Warrant.
TOTAL SUBSCRIPTION PRICE: $_______________
The undersigned hereby directs and requires that the shares of Common Stock
being subscribed for hereby be issued and delivered as follows:
Full Name of Shareholder: Artistic License, Inc.
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
ARTISTIC LICENSE, INC.
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
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<PAGE>
NOTE: This Subscription Form must be signed and accompanied by payment to
Java Centrale, Inc., in full, of the appropriate subscription price, in cash or
by money order, bank draft, or certified check, payable to the Company at its
principal place of business in Sacramento, California, and must be received by
the Company prior to 5:00 PM, California time, on June 30, 2000 (the
"Expiration Time"), after which time all rights represented by the attached
Stock Purchase Warrant will expire.
JAVA CENTRALE, INC. ACCEPTS NO RESPONSIBILITY FOR THE DELIVERY TO IT OF
THIS SUBSCRIPTION FORM OR THE ACCOMPANYING STOCK PURCHASE AGREEMENT. SUFFICIENT
TIME SHOULD BE ALLOWED FOR THE DELIVERY OF THESE DOCUMENTS PRIOR TO THE
EXPIRATION TIME.
Upon surrender of this Subscription Form and the Stock Purchase Warrant,
and payment of the subscription price as provided therein, the Company will
issue the number of shares of Common Stock subscribed for, and Artistic License,
Inc. will thereupon become a shareholder of the Company. If a lesser number of
shares is subscribed for than the number of shares described in the Stock
Purchase Warrant, the Company shall issue a further Stock Purchase Warrant in
respect of the unsubscribed shares of Common Stock not subscribed for hereby.
B-6
<PAGE>
EXHIBIT 5
November 21, 1996
Board of Directors
Java Centrale, Inc.
1610 Arden Way, Suite 299
Sacramento, CA 95815
Dear Sirs:
We refer to Form S-3 Registration Statement and Prospectus to be filed by
Java Centrale, Inc. (the "Company") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, relating to 437,284 shares of the
Company's no par value Common Stock (the "Common Stock").
As counsel to the Company, we have examined such corporate records, other
documents, and such questions of law as we have considered necessary or
appropriate for purposes of rendering this opinion and, on the basis of such
examination, advise you that in our opinion the shares of Common Stock have been
duly and validly authorized, and, when issued and sold in the manner
contemplated in the Registration Statement, will be validly issued, fully paid,
and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to this firm under the caption "Legal Matters"
in the Prospectus contained therein. This consent is not to be construed as an
admission that we are a person whose consent is required to be filed with the
Registration Statement under the provisions of Section 7 of the Securities Act
of 1933, as amended.
Very truly yours,
ROSENBLUM, PARISH & ISAACS, PC
By: /S/ PHILIP S. BOONE, JR.
---------------------------
A Member of the Firm
<PAGE>
[LOGO]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We have issued our report dated June 18, 1996 (except for note W, to which the
date is July 11, 1996) accompanying the financial statements of Java Centrale,
Inc. appearing in the Company's Annual Report on Form 10-K for the year ended
March 31, 1996 which are incorporated by reference in this Registration
Statement and Prospectus. We consent to the incorporation by reference in this
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts".
/s/ Grant Thornton LLP
Sacramento, California
November 14, 1996
