<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO Section 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[___] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NO. 0-23936 (CA)
JAVA CENTRALE, INC.
------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 68-0268780
------------------------------------- -----------------------
(STATE OF OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1610 ARDEN WAY, SUITE 145
SACRAMENTO, CALIFORNIA 95815
------------------------------------- -----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (916) 568-2310
----------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X. NO. .
---- ----
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF THE LATEST PRACTICABLE DATE. AS OF NOVEMBER 8, 1996,
12,902,243 SHARES OF COMMON STOCK (NO PAR VALUE) WERE OUTSTANDING.
1
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, March 31,
1996 1996
(Unaudited)
-------------- -------------
CURRENT ASSETS:
Cash $1,497,920 $1,182,078
Notes receivable - current 898,732 485,751
Accounts receivable 590,630 405,574
Inventories 381,905 417,780
Notes receivable - officer 229,983 235,201
Prepaid expenses and other 763,316 595,285
-------------- -------------
Total current assets 4,362,486 3,321,669
NOTES RECEIVABLE 887,687 1,298,574
PROPERTY AND EQUIPMENT, NET 4,725,341 5,737,980
INTANGIBLE ASSETS 5,352,204 5,526,203
DEFERRED CHARGES AND OTHER 677,059 670,658
INVESTMENT IN JOINT VENTURE 176,983 176,983
-------------- -------------
$16,181,760 $16,732,067
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,880,293 $1,807,136
Current maturities of long-term debt 1,121,000 711,745
Short term debt 761,253 35,040
Current capital lease obligations 57,250 96,267
Accrued liabilities 689,003 726,244
Due to related parties 89,451 22,637
-------------- -------------
Total current liabilities 4,598,250 3,399,069
DEFERRED REVENUES 833,500 1,003,500
LONG-TERM DEBT 339,990 1,171,161
CONVERTIBLE DEBT 1,749,546 3,500,000
CAPITAL LEASES 137,124 129,054
OTHER LIABILITIES 129,740 148,376
STOCKHOLDERS' EQUITY
Series B Redeemable Preferred Stock, $.01 Per
share per annum cumulative, convertible, no
par 25,000,000 shares authorized - none
outstanding - -
Common Stock, no par, 25,000,000 shares
authorized, issued and outstanding shares;
12,902,243 at September 30,1996, and 8,533,587
at March 31, 1996 18,017,091 15,493,137
Accumulative deficit (9,623,481) (8,112,230)
-------------- -------------
8,393,610 7,380,907
-------------- -------------
$16,181,760 $16,732,067
-------------- -------------
-------------- -------------
The accompanying notes are an integral part of these statements.
2
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six month ended
September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Company cafe sales $3,541,892 $1,192,669 $7,556,496 $2,199,092
Franchise operations 123,000 79,500 203,000 85,000
Royalties 316,699 73,352 613,975 130,219
Sales of equipment and supplies 9,895 103,881 107,842 130,973
------------ ------------ ------------ ------------
Total revenue 3,991,486 1,449,402 8,481,313 2,545,284
------------ ------------ ------------ ------------
Cost of company sales:
Food and beverage 1,230,338 386,269 2,652,232 712,980
Labor 1,258,534 451,312 2,744,596 767,917
Direct and occupancy 701,433 287,046 1,564,288 502,478
Cost of equipment and supplies 804 91,992 102,249 104,380
Depreciation 161,793 26,352 320,925 35,838
Other 41,470 38,925 90,233 52,493
------------ ------------ ------------ ------------
Total cost of company sales 3,394,372 1,281,896 7,474,523 2,176,086
------------ ------------ ------------ ------------
General and administrative expenses 1,009,170 1,339,592 2,112,360 2,184,308
Depreciation and amortization 159,465 69,965 318,930 139,430
Loss associated with cafe closures 128,580 96,498 128,580 96,498
------------ ------------ ------------ ------------
Operating loss (700,101) (1,338,549) (1,553,080) (2,051,038)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (90,262) (15,752) (178,203) (29,749)
Interest income 25,292 22,987 47,554 60,876
Gain (loss) on sale of assets (30,414) - 35,984 -
Other income 47,884 - 136,494 23,655
------------ ------------ ------------ ------------
Net loss $ (747,601) $(1,331,314) $(1,511,251) $(1,996,256)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per weighted average
equivalent common share
outstanding $ ( .07) $ (.23) $ (.15) $ (0.36)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Equivalent common shares outstanding 10,946,633 5,761,582 9,985,470 5,539,698
</TABLE>
The accompanying notes are an integral part of these statements.
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
September 30,
1996 1995
------------- -------------
Increase (decrease) in cash
Net cash flows from operating activities: $(1,158,823) $(1,406,878)
------------- -------------
Cash flows from investing activities:
Purchase of furniture and equipment (199,812) (410,859)
Acquisition of cafes - (45,000)
Increase (decrease) in other 20,997 (80,445)
------------- -------------
Net cash used in investing activities (178,815) (536,304)
------------- -------------
Cash flows from financing activities:
Proceeds from the issuance of common stock 962,500 3,561,837
Proceeds from the sale of assets 351,100 -
Proceeds from capital lease obligations 64,455 -
Proceeds from short term borrowing 750,000 -
Payment of notes payable and capital leases (474,575) (9,628)
------------- -------------
Net cash provided by financing activities 1,653,480 3,552,209
------------- -------------
Net increase (decrease) in cash 315,842 1,609,027
Cash and cash equivalents, beginning of period 1,182,078 3,764,278
------------- -------------
Cash and cash equivalents, end of period $ 1,497,920 $ 5,373,305
------------- -------------
------------- -------------
Cash paid for:
Income tax $ - $ -
Interest $ 205,086 $ 15,769
The accompanying notes are an integral part of these statements.
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JAVA CENTRALE, INC., AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Unaudited)
NON-CASH TRANSACTIONS:
During the six months ended September 30, 1996, and 1995, the Company
increased (decreased) its notes receivable derived from deferred revenue
by $290,000 and $196,500 respectively.
During the six months ended September 30, 1996, the Company terminated
8 franchise agreements and refunded $27,500 and canceled $45,000 in
notes associated with franchise fees.
During the six months ended September 30, 1996, holders of the convertible
debt converted $1,750,454 of the notes into 2,580,194 shares of common
stock pursuant to the terms of their notes.
During the six months ended June 30, 1995 the Company completed the initial
phase of a joint venture for the development of the Florida market and
issued 89,428 shares of common stock in exchange for 18.3% of the joint
venture's outstanding shares.
During the six months ended September 30, 1995 the Company issued 203,000
common shares valued at $452,944 pursuant to a consulting agreement to
develop strategic acquisitions, identify Java Centrale franchise
development opportunities and consult regarding investor relations matters
for the Company. The Company recognized a one-time non recurring expense
of $452,944 as a result of issuance of these shares.
During the six months ended September 30, 1995 the Company acquired four
Java franchise cafes. In connection with these purchases, the Company
issued 239,567 shares of restricted common stock valued at $436,169,
assumed $133,968 in long term debt and canceled franchisee receivables of
$106,303.
During the six months ended September 30, 1996 and September 30, 1995 the
Company expensed $639,855 and $191,923 respectively for deprecation and
amortization.
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Sale of certain assets of Java Centrale, Inc., and Subsidiary for the six
months ended September 30, 1996.
Cash received $ 351,100
Note receivable 603,656
Liabilities assumed 69,433
Net book value of assets sold (988,205)
-----------
Gain (Loss) on sale of assets $ 35,984
-----------
-----------
The accompanying notes are an integral part of these statements.
5
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JAVA CENTRALE, INC., AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared without audit and do not
include certain notes and certain financial presentations normally required
under generally accepted accounting principles and, therefore, should be
read in conjunction with the Company's financial statements included with
the Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended March 31, 1996. It should be
understood that accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The results of operations
for the three months and six months ended September 30, 1996 are not
necessarily indicative of results that can be expected for the full year.
The September 30, 1996 financial statements included herein are unaudited.
They contain, however, all adjustments which, in the opinion of management
are necessary to present fairly the financial position of the Company at
three and six months ended September 30, 1996 and September 30, 1995, and
March 31, 1996; and the results of its operations and its cash flows for
the six months ended September 30, 1996 and 1995, respectively.
Certain reclassifications have been made to the 1995 financial statements
to conform to the 1996 presentation.
NOTE 2 - STOCKHOLDERS' EQUITY
a. JOINT VENTURE FORMATION AGREEMENT
During the six months ended September 30, 1995 the Company completed the
initial phase of the joint venture agreement for the development of the
Florida market and issued 89,428 shares of common stock in exchange for
18.3% of the joint venture's outstanding shares.
b. ISSUANCE OF ADDITIONAL COMMON SHARES
During the six months ended September 30, 1995 the Company completed
certain private placements of restricted common shares resulting in the
issuance 876,000 common shares for net proceeds of $3,561,837.
c. CONSULTING AND DEVELOPMENT AGREEMENT
During the six months ended September 30, 1995 the Company issued 203,000
common shares valued at $452,944 or ($.08) per share pursuant to a
consulting agreement to develop strategic acquisitions, identify Java
Centrale franchise opportunities and consult regarding investor relation
matters for the Company.
NOTE 2 - STOCKHOLDERS' EQUITY - CONTINUED
6
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d. ACQUISITIONS OF JAVA CENTRALE FRANCHISES
During the six ended September 30, 1995 the Company completed the
acquisition of four Java Centrale franchised cafes. The Company acquired
all of the operating assets (excluding cash) held at the various locations.
In connection with these purchases, the company issued 239,567 shares of
restricted common stock valued at $436,169, assumed $133,968 in long term
debt and canceled franchisee receivables of $106,303. The tangible assets
acquired consist of tenant improvements, equipment and loans payable.
e. CONVERSION OF NOTES PAYABLE
On September 28, 1995 the Company exercised its right to convert a note
payable of $932,342, related to the acquisition of substantially all the
assets of Oh La La, Inc., into common shares at a price of $4.00 per share.
f. WARRANTS EXERCISED
On September 9, 1996 warrants were exercised for 250,000 shares of common
stock for proceeds of $62,500. The warrants were initially granted to
Growth Science Ventures.
g. ISSUANCE OF ADDITIONAL COMMON SHARES
On September 20, 1996 the Company completed certain private placements of
restricted common shares resulting in the issuance 1,538,462 common
shares for net proceeds of $900,000.
h. CONVERSION OF CONVERTIBLE DEBT
During the six months ended September 30, 1996, holders of the convertible
debt converted $1,750,454 of the notes into 2,580,194 common shares
pursuant to the terms of the notes.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company began operations on March 5, 1992, and operated as a
development stage enterprise through the end of its fiscal year ended March 31,
1993. As a development stage enterprise, the Company focused its efforts on
financial planning, raising capital, research and development, establishing
sources of supply, developing markets, organizing the corporation, acquiring
assets, and developing its business plan. During this time, the Company
completed the filing of its Uniform Franchise Offering Circulars. The Company
also completed its training facility in Folsom, California, which is now being
used to provide training to franchisees and their key employees in the
operations of franchisee-owned Java Centrale cafes.
As of September 30, 1996, the Company had operating 27 Company-owned
locations and 68 franchisee-owned locations, as compared to 23 Company-owned
locations and 16 franchisee-owned locations as of September 30, 1995.
The Company entered into agreements with franchisees to open five cafes
during the quarter ended September 30, 1996, as compared to entering into
agreements with franchisees to open ten cafes during the quarter ended September
30, 1995. The Company entered into agreements with franchisees to open ten
cafes during the six months ended September 30, 1996, as compared to entering
into agreements with franchisees to open 12 cafes during the six months
ended September 30, 1995. The Company canceled agreements for eight locations
during the quarter ended September 30, 1996 as compared to 53 of which 45
were with one franchisee during the quarter ended September 30, 1995. For the
six months ended September 30, 1996 the Company canceled agreements for eight
locations as compared to 54 during the six months ended September 30, 1995.
The Company opened two franchisee-owned cafes during the quarter ended
September 30, 1996, as compared to opening one franchisee-owned cafe during the
quarter ended September 30, 1995. During the quarter ended September 30, 1996
the Company sold two Company-owned cafes to a franchisee, acquired no
franchisee-owned cafes and closed one Company-owned cafe as compared to not
selling any Company-owned cafes, acquiring four franchisee-owned cafes and
closing no Company-owned cafes during the quarter ended September 30, 1995.
The Company closed two Company-owned cafes, sold five Company-owned cafes to
franchisees, opened three franchisee-owned cafes and closed one
franchisee-owned cafe during the six months ended September 30, 1996, as
compared to opening one franchisee-owned cafe during the six months ended
September 30, 1995. The Company closed two Company-owned cafes, sold five
Company-owned cafes to franchisees, and sold three Company-owned carts to a
licensee during the six months ended September 30, 1996, as compared to
acquiring four franchisee-owned cafes during the six months ended September
30, 1995.
On November 14, 1994 the Company entered into a Joint Venture Formation
Agreement with Banyan Capital, Limited Partnership for the development of fifty
cafes in the State of Florida over a five-year period, and for rights to other
markets on the Eastern Seaboard. The Joint Venture Formation Agreement and
related transactions was completed in July, 1995 and as of September 30, 1996,
there were three cafes operating under this agreement.
On March 30, 1995, with bankruptcy court approval, the Company acquired
substantially all the operating assets of Oh-La-La!, Inc. held at the locations
being purchased and certain other operating assets. The tangible assets and
liabilities acquired consist mainly of tenant improvements, equipment, and loans
payable. The purchased locations represented a significant portion of the
Company's revenues and operations during the quarter ended September 30, 1995.
On December 31, 1995, the Company acquired 100% of the outstanding stock of
Paradise Bakery, Inc. At the time of the acquisition, Paradise Bakery had seven
Company-owned and 44 franchisee-owned bakery/cafes operating in nine states. On
January 1, 1996, the Company acquired through a merger with Founders Venture,
Inc., seven franchisee-owned bakery/cafes operating in Texas. On January 1,
1996, the Company acquired through an asset purchase agreement three
franchisee-owned bakery/cafes operating in Northern California. Immediately
following these three acquisitions, the Company was operating 17 Company-owned
and 34 franchisee-owned bakery/cafes. The Company opened one Company-owned
8
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bakery/cafe in the year ended March 31, 1996. These acquisitions of Paradise
bakery/cafe locations will represent a significant portion of the Company's
revenues and operations.
RESULTS OF OPERATIONS
The Company's revenues are currently derived primarily from Company-owned
locations, initial franchise fees, resulting from cafe openings, franchise
royalties, equipment sales, and product overrides on sales to its franchisees.
Franchise fees range from $15,000 to $25,000 per cafe. The Company is entitled
to 4%-6% of the gross receipts from each franchised cafe, and 2%-10% of the
gross receipts from each franchised cart. Product overrides range from 3% to
10% of the total purchase of coffee from the Company's contract roaster.
QUARTER 1996 AS COMPARED TO QUARTER 1995
Total Company revenues for the quarter ended September 30, 1996 totaled
$3,991,000, as compared to $1,449,000 for the quarter ended September 30, 1995,
an increase of $2,542,000, or 175%. This increase resulted primarily from the
revenues amounting to $2,547,000 from the acquisition of the Paradise Bakery
operations as of December 31, 1995.
The Company's revenues from Company-owned retail operations increased by
$2,349,000, to $3,542,000 for the quarter ended September 30, 1996, from
$1,193,000 for the quarter ended September 30, 1995. This increase resulted
primarily from $2,323,000 in revenues recognized from the acquired operations of
the Paradise Bakery Company-owned locations.
Revenues from the Company's franchising operations increased to $123,000
for the quarter ended September 30, 1996, from $79,500 for the quarter ended
September 30, 1995. This increase resulted from franchise fees of $15,000
recognized from opening one franchisee-owned Paradise Bakery and the
recognition of $108,000 in fees associated with the opening of one Java
Centrale franchisee-owned cafe and the sale of two Company-owned cafes to a
franchisee and forfeited franchise fees of $53,000, as compared to one Java
Centrale franchisee-owned cafe opening and forfeited franchise fees of $14,000
during the quarter ended September 30, 1995.
Revenues from the Company's royalties increased $244,000, or 334%, to
$317,000 for the quarter ended September 30, 1996, from $73,000 for the quarter
ended September 30, 1995. This increase resulted primarily from the royalties
associated with the acquisition of the Paradise Bakery franchise operations
amounting to $209,000 and the opening of 15 new Java Centrale franchisee-owned
locations during the 1996 fiscal year as compared to 1995.
Revenues from the Company's equipment and supplies sales decreased
$94,000, or 90%, to $9,900 for the quarter ended September 30, 1996 from
$104,000 for the quarter ended September 30, 1995. This decrease resulted
from discontinuing the sale of equipment directly to the franchisees in May
of 1996.
Total expenses for the quarter ended September 30, 1996 were $4,692,000, an
increase of $1,904,000, or 68%, over expenses of $2,788,000 for the quarter
ended September 30, 1995. The principal components of the increase in expenses
resulted from $2,575,000 in expenses associated with operating the acquired
Paradise Bakery locations. Additionally, there was an increase in depreciation
and amortization expenses, other operating costs from the addition of the
Paradise Bakery operations, the addition of five Company-owned cafes during
the 1996 fiscal year and a decrease in general, administrative and other
expenses totaling $671,000.
The cost of food and beverage, labor, and operating costs for the Company's
retail operations increased $2,065,000, for the quarter ended September 30,
1996, to $3,190,000 as compared to $1,125,000 for the quarter ended September
30, 1995. The increase resulted from $2,074,000 in
9
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operating costs associated with the acquisition of the Paradise Bakery locations
and a decrease in operating costs associated with the sale of two Company-owned
Java Centrale cafes.
The Company's cost of equipment decreased by $91,200 in the quarter ended
September 30, 1996, to $800, as compared to $92,000 for the quarter ended
September 30, 1995. This decrease results from discontinuing the sale of
equipment directly to the franchisees in May of 1996.
Selling, general, and administrative expenses decreased $331,000, or 25%,
during the quarter ended September 30, 1996, to $1,009,000 from $1,340,000
during the quarter ended September 30, 1995. This decrease primarily is a
result of lower consulting fees amounting to $427,000, Additionally marketing
expenses decreased, investor relations expenses decreased, merger expenses
decreased, legal and accounting expenses increased, personnel costs
associated with the Java Centrale administration decreased, and the Paradise
Bakery general and administrative expenses increased.
For the quarter ended September 30, 1996, the Company had an operating loss
of $700,000, a net loss of $748,000, and a loss per share of $.07, as compared
to an operating loss of $1,339,000, a net loss of $1,331,000, and a loss per
share of $.23 for the quarter ended September 30, 1995. The decreased operating
and net loss is primarily due to lower consulting fees amounting to $427,000,
and decreased general and administrative expenses associated with the Java
Centrale operations and as a result of those revenues and expenses described
above. Additionally the net loss for the quarter ended September 30, 1996
reflects higher interest expenses associated with the acquisition of Paradise
Bakery.
SIX MONTHS ENDED 1996 AS COMPARED TO SIX MONTHS ENDED 1995
Total Company revenues for the six months ended September 30, 1996 totaled
$8,481,000, as compared to $2,545,000 for the six months ended September 30,
1995, an increase of $5,936,000 or 233%. The principal component was increase
revenues amounting to $5,334,000 from the acquisition of Paradise Bakery
operations as of December 31, additionally revenues increased from the
operation of six Company-owned Java Centrale cafes.
The Company's revenues from Company-owned retail operations increased by
$5,358,000, to $7,557,000 for the six months ended September 30, 1996, from
$2,199,000 for the six months ended September 30, 1995. This increase resulted
primarily from $4,838,000 in revenues recognized from the operations of the
Paradise Bakery Company-owned locations and the operation of six Company-owned
Java Centrale cafes.
Revenues from the Company's royalties increased $484,000, or 372%, to
$614,000 for the six months ended September 30, 1996, from $130,000 for the six
months ended September 30, 1995. This increase resulted primarily from the
royalties associated with the acquisition of the Paradise Bakery franchise
operations amounting to $400,000 and $$84,000 resulting from the opening of 15
new Java Centrale franchisee-owned locations during the 1996 fiscal year as
compared to 1995
Revenues from the Company's franchising operations increased to $203,000
for the six months ended September 30, 1996, as compared to $85,000 for the six
months ended September 30, 1995, resulting from franchise fees of $55,000
recognized from the sale of two Company-owned Paradise Bakeries to a franchisee
and one fee associated with the opening of Paradise Bakery franchise cafe and
the sale of two Company-owned Java Centrale cafes to a single franchisee and
one fee associated with the opening of a Java Centrale franchise cafe and
forfeited fees of $55,000 as compared to recognizing the opening of one Java
Centrale franchisee-owned cafe and forfeited franchise fees amounting to
$60,000 during the six months ended September 30, 1995.
Revenues from the Company's equipment and supplies sales decreased by
$23,000 or 18%, to $108,000 for the six months ended September 30, 1996 as
compared to $131,000 for the six months
10
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ended September 30, 1995. This decrease resulted primarily from the Company
discontinuing the sale of equipment to franchisees in May of 1996.
Total expenses for the six months ended September 30, 1996 were
$10,035,000, an increase of $5,439,000 or 118%, over expenses of $4,595,000 for
the six months ended September 30, 1995. The principal components of the
increase in expenses resulted from $5,326,000 in expenses associated with
operating the acquired Paradise Bakery locations. Additionally, there was an
increase in depreciation and amortization and other operating costs from
the addition of Paradise Bakery and the addition of five Company-owned cafes
during the 1996 fiscal year and a decrease in general and administrative
expenses totaling $654,000.
The cost of food and beverage, labor, and operating costs for the Company's
retail operations increased $4,977,000, for the six months ended September 30,
1996, to $6,961,000 as compared to $1,984,000 for the six months ended September
30, 1995. The increase resulted primarily from $4,324,000 in operating costs
associated with the acquisition of the Paradise Bakery locations. Additionally,
there was an increase of $653,000 in operating costs associated with the
addition of five Company-owned Java Centrale cafes during the fiscal year 1996.
The Company's cost of equipment decreased by $2,000 in the six months ended
September 30, 1996, to $102,000, as compared to $104,000 for the six months
ended September 30, 1995. This decrease resulted primarily from discontinuing
the sale of equipment directly to the franchisees in May of 1996.
Selling, general, and administrative expenses decreased $72,000, or 3%,
during the six months ended September 30, 1996, to $2,112,000 from $2,184,000
during the six months ended September 30, 1995. This results from lower
consulting fees of $450,000 and increased general and administrative expenses
associated with the acquisition of Paradise Bakery operations of $582,000.
Additionally, marketing expenses decreased, investor relations expenses
decreased, merger expenses decreased, legal and accounting expenses
increased, and other costs associated with the Java Centrale operations
decreased.
For the six months ended September 30, 1996, the Company had an operating
loss of $1,553,000, a net loss of $1,511,000, and a loss per share of $.15, as
compared to an operating loss of $2,051,000, a net loss of $1,996,000, and a
loss per share of $.36 for the six months ended September 30, 1995. The
decreased operating and net loss is primarily due to lowered consulting
fees totaling $450,000, decreased general and administrative expenses
associated with the Java Centrale operations and as a result of those
revenues and expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
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.
11
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On July 15, 1994, the Company paid a 25% stock dividend on its Common Stock
to shareholders of records on June 30, 1994. Prior to the issuance of the
dividend, employees and officers of the Company holding securities, including
warrants and options, waived their rights to receive the stock dividend and also
waived the impact such stock dividend would have on any options or warrants held
by the security holders, including, but not limited to, any anti-dilution
provisions relating to such options and warrants.
In the 1996 fiscal year the Company issued 1,604,692 common shares for
$3,540,722 in net proceeds in a series of private placements. The Company also
issued convertible debt in three separate private transactions totaling
$3,500,000. As of September 30, 1996, $1,750,454 of the convertible debt has
been converted into 2,580,194 shares of the Company's common stock. The Company
during the six months ended September 30, 1996 issued 1,538,462 common shares
for 900,000 in net proceeds in a private placement and issued 250,000 common
shares for proceeds of $62,500 as a result of certain warrants being
exercised.
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.
As of September 30, 1996, the Company had received $213,000 in funding of
leases associated with Company-owned cafes and received $750,000 in a
short-term notes payable.
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 January of 1996, the Company converted a
note payable of $745,874 into 234,000 shares of common stock pursuant to the
terms of the note associated with the acquisition of Oh La La!.
As of September 30, 1996, the Company had $575,000 in credit available
under two separate lines of credit.
During the six months ended September 30, 1996, the Company sold five cafes
for proceeds of $351,100 in cash, $603,656 in notes receivables, and
liabilities of $69,433 assumed by buyer.
The Company incurred a net loss of $1,511,000 and used net cash of
$1,158,823 in operating activities for the six months ended September 30, 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.
During the six months ended September 30, 1996, the Company reduced
administrative salaries, certain employee benefit costs and marketing expenses.
The Company has sold eight Company-owned cafes and carts and is actively
pursuing the sale of additional assets associated with the Company's cafe
operations. In February of 1996, the Company completed the expansion and
remodeling of key Oh La La! locations which management believes will increase
the operating margins of this division. As of July 11, 1996, the Company has
obtained three separate lines of credit amounting to $925,000, of which senior
management has committed to $175,000. As of November 8, 1996, the Company has
borrowed $350,000 under one line of credit. These lines secure all the
Company's assets. In addition to the operating plan, the Company will benefit
from 12 months of Paradise Bakery operating income during the
12
<PAGE>
year ended March 31, 1997, as compared to three months in the year ended March
31, 1996.
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.
13
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Item 3 of Part I of the Company's Annual Report or Form 10-K for the fiscal year
ended March 31, 1996, is hereby incorporated by reference.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's October 17, 1996, annual shareholders meeting, three
directors were reelected and one new director was elected, a proposal to amend
the Company's Articles of Incorporation failed and Grant Thornton, L.L.P. was
ratified as the Company's independent accountants. The vote was as follows:
Issue For Against Abstain
----- --- ------- -------
1. Election of Directors
a. Richard D. Shannon 8,998,392 - 86,670
b. Gary C. Nelson 8,997,392 - 86,670
c. Kevin Baker 8,997,392 - 86,670
d. Lyle Edwards 8,997,392 - 87,770
2. Amendment to the Company's
Articles of Incorporation - Failed 4,787,757 301,893 20,000
3. Accountant Ratification - Passed 8,981,392 61,295 13,025
14
<PAGE>
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS; REPORTS ON FORM 8-K
(a) EXHIBITS
The Company is filing herewith the Exhibits listed on Schedule I attached
hereto.
(b) REPORTS ON FORM 8-K
During the quarter ended September 30, 1996 the Company filed a Form 8-K dated
August 28, 1996 in regards to an amendment approved by the Board of Directors to
the Company's Bylaws, Article II, section 2, to require the annual meeting to be
held within seven months after the fiscal year end.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JAVA CENTRALE, INC.
(Registrant)
Date: November 13, 1996
By: /s/
------------------------------------------
Gary C. Nelson
President and Chief Executive Officer
By: /s/
------------------------------------------
Steven J. Orlando
Vice President and Chief Financia Officer
(Principal Financial and
Accounting Officer)
16
<PAGE>
INDEX TO EXHIBITS
Exhibits marked with an asterisk (*) represent management contracts or
compensatory plans or arrangements.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.29 Stock purchase agreements dated September 20, 1996 for the
issuance of 1,538,462 common shares.
4.30* Stock purchase warrant dated September 30, 1996 between the
Registrant and Richard D. Shannon for 400,000 common shares at
$.75 per share.
4.31* Stock purchase warrant dated September 30, 1996 between the
Registrant and Steven J. Orlando for 400,000 common shares.
Agreement is omitted as they are the identical in form to exhibit
4.30 above.
4.32* Stock purchase warrant dated September 30, 1996 between the
Registrant and Gary C. Nelson for 400,000 common shares.
Agreement is omitted as they are the identical in form to exhibit
4.30 above.
4.33 Stock purchase warrant dated July 11, 1996 for 300,000 common
shares between the Registrant and Artistic License.
4.34 Stock purchase warrant dated October 21, 1996 for 50,000 common
shares between the Registrant and Alta Petroleum, Inc.
4.35 Stock purchase warrant dated September 24, 1996 for 384,615
common shares between the Registrant and H.I.G. Securities
Investments, LTD.
4.36 Stock purchase warrant dated September 24, 1996 for 384,615
common shares between the Registrant and Alana Group, LTD.
10.21 Loan agreement dated July 11, 1996 between Registrant and
Artistic License.
10.22 Credit agreement dated July 11, 1996 between Registrant and Alta
Petroleum, Inc.
11 Statement Regarding Computation of Per Share Earnings (Loss)
17
<PAGE>
27 Financial Data Schedule
18
<PAGE>
EXHIBIT 4.29
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
FOR COMMON SHARES AND WARRANTS
This Offshore Securities Subscription Agreement (the "Agreement") is
executed in reliance upon the transaction exemption afforded by Regulation S
("Regulation S") under the Securities Act of 1933, as amended (the "Securities
Act"), as promulgated by the Securities and Exchange Commission (the "SEC").
This Agreement has been executed by the undesigned in connection with the
private placement of shares of common stock ("Common Stock") of
JAVA CENTRALE, INC.
1610 ARDEN WAY, SUITE 145
SACRAMENTO, CALIFORNIA 95815
National Association of Securities Dealers Inc. Automated Quotation
System Symbol ("JAVC"), a corporation organized under the laws of California,
United States of America (the "Issuer").
The shares of Common Stock and Warrants of Issuer subscribed for hereunder
are sometimes referred to herein as the "Shares." Capitalized terms as used
herein shall have the meanings assigned thereto.
The undersigned:
NAME: THE ALANA GROUP, LTD.
a British Virgin Island Corporation
ADDRESS: P.O. Box 146
Road Town
Tortolla, BVI
a non "U.S. person" (the "Subscriber"), hereby represents and warrants to, and
agrees with, the Issuer as follows:
1. THE OFFERING.
a. THE SHARES. The undersigned hereby subscribes for 769,231 shares
of Common Stock (the "Shares") at the per Share subscription price of $0.65
per Share payable in the United States Dollars, which amount represents a
35% discount from the average closing bid price of the Issuer's Common
Stock as listed on NASDAQ on September 20, 1996, and 384,615 Warrants
exercisable at $1.25 representing one-half
<PAGE>
warrant per share of common stock, for a total consideration of Five
Hundred Thousand Dollars ($500,000) (the "Subscription Proceeds").
b. FORM OF PAYMENT. Subscriber shall pay the Subscription Proceeds
due hereunder by delivering good funds by wire transfer in the United
States Dollars on or before September 23, 1996 into the escrow account as
follows:
Imperial Bank
9220 S. Lacienega Boulevard
Inglewood, CA 90301
Attention: San Jose Office
Bank Routing #122201444
For further Credit to A/C #17-080-318
for Credit to the Account of
Rosenblum, Parish & Isaacs, PC
Legal Services Trust Account
Reference: Java Centrale, Inc.
2. SUBSCRIBER REPRESENTATIONS; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
a. OFFSHORE TRANSACTION. Subscriber represents and warrants to Issuer as
follows:
(i) Neither Subscriber nor any person or entity for whom Subscriber
is acting as fiduciary is a U.S. person. A U.S. person means any
one of the following:
(1) any natural person, resident in the United States of
America;
(2) any partnership or corporation organized or incorporated
under the laws of the United States;
(3) any estate of which any executor or administrator is a U.S.
person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located in the
United States;
(6) any non-discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary for
the benefit or account of a U.S. person;
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<PAGE>
(7) any discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident in
the United States; and
(8) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign
jurisdiction, and
(B) formed by a U.S. person principally for the purpose of
investing in securities not registered under the Securities
Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a) under the
Securities Act) who are not natural persons, estates or
trusts.
(ii) At the time the buy order was originated, Subscriber was outside
the United States and is outside of the United States as of the
date of the execution and delivery of this Agreement. No offer
to purchase Shares was made in the United States.
(iii) Subscriber is purchasing the Shares for its own account or
for the account of beneficiaries for whom Subscriber has
full investment direction with respect to the Shares and
whom Subscriber has full authority to bind so that each such
beneficiary is bound hereby as if such beneficiary were a
direct Subscriber hereunder and all representations,
warranties and agreements herein were made directly by such
beneficiary. Subscriber on behalf of itself and any person
or entity it represents in connection with the purchaser of
the Shares, represents that it is purchasing the Shares for
its own account, and not with a view to, or for sale in
connection with, any distribution of the Shares or the
warrants. Subscriber is not purchasing the Shares on behalf
of any U.S. person and the sale has not been prearranged
with a purchaser in the United States.
(iv) Each entity participating in the offering of the Shares, if any,
has agreed in writing that all offers and sales of the Shares
prior to the expiration of a period commencing on the date of the
Closing of the purchase and sale of the Shares subscribed for
hereunder and ending 40 days thereafter shall only be made (A) in
compliance with the safe harbor contained in Regulation S; (B)
pursuant to registration of the Shares under the Securities Act;
or (C) pursuant to an exemption from registration.
(v) Subscriber represents, warrants and hereby agrees that all offers
and sales of the Shares shall only be made (A) in compliance with
the safe harbor contained in Regulation S; (B) pursuant to a
registration of securities
-3-
<PAGE>
under the Securities Act; or (C) pursuant to an exemption from
such registration.
(vi) The Offering Documents (as defined herein) received by Subscriber
include statements to the effect that the Shares have not been
registered under the Securities Act and may not be offered or
sold in the United States, to U.S. persons or for the account or
benefit of a U.S. person (other than distributors as defined in
Regulation S) unless the Shares are registered under the
Securities Act or an exemption from the registration requirements
is available.
(vii) Subscriber acknowledges that the purchase of the Shares
involves a high degree of risk and acknowledges further that
it can bear the economic risk of the purchase of such
Shares, including the total loss of its investment.
Subscriber acknowledges that it has obtained the advice of
competent legal counsel in its domicile jurisdiction that it
is qualified under the laws of its domicile to purchase the
Shares and that the offer and sale of such Shares will not
violate the laws of its domicile jurisdiction.
(viii) Subscriber understands that the Shares are being offered and
sold to it in reliance on a specific exemption from the
registration requirements of federal and state securities
laws and that Issuer is relying upon the truth and accuracy
of the representations, warranties, agreements,
acknowledgements and understandings of Subscriber set forth
herein to determine the applicability of such exemptions and
the suitability of Subscriber to acquire the Shares.
(ix) Subscriber is sufficiently experienced in financial and business
matters as to be capable of evaluating the merits and risks of
its investments and to make an informed decision relating
thereto.
(x) In evaluating its investment, Subscriber has consulted its own
investment and/or legal and/or tax advisors.
(xi) Subscriber understands that, in the view of the SEC, the
statutory basis for the exemption claimed for this transaction
would not be present if the offering of the Shares, although in
technical compliance with Regulation S, is part of a plan or
scheme to evade the registration provision of the Securities Act.
Subscriber is acquiring the Shares for investment purposes and
has no present intention to sell such Shares in the United
States, to a U.S. person, or for the account or benefit of a U.S.
person. Subscriber hereby confirms that the purpose of including
the Subscriber Representation Letter (Appendix "A" hereto) to
facilitate the transfer of the certificates representing the
Shares into street name is to
-4-
<PAGE>
enable Subscriber to comply with the requirements of certain
offshore portfolio management regulations and the security
requirements of offshore lenders for margin loans.
(xii) Subscriber is not an underwriter of, or dealer in, the
Shares. Subscriber is not participating, pursuant to a
contractual agreement, in the distribution of the Shares.
(xiii) Subscriber represents and warrants that neither it nor any
of its affiliates will directly or indirectly maintain any
short position in Shares of Issuer during the forty day (40)
transaction restriction period.
If Subscriber is purchasing the Shares subscribed for hereby in
representative or fiduciary capacity, the representations and warranties in
this Agreement shall be deemed to have been made on behalf of the person or
persons for whom Subscriber is so purchasing.
The foregoing representations and warranties are true and accurate as
of the date hereof, shall be true and accurate as of the date of the
acceptance by Issuer of Subscriber's subscription and shall survive
thereafter. If Subscriber has knowledge, prior to the acceptance of this
Agreement by Issuer, that any such representation and warranty shall not be
true and accurate in any respect then Subscriber, prior to such acceptance,
will give written notice of such fact to Issuer specifying which
representation and warranty is not true and accurate and the reasons
therefor.
b. CURRENT PUBLIC INFORMATION. Subscriber acknowledges that he, she
or it has been furnished with or has acquired copies of Issuer's most
recent Annual Report on Form 10-K and any form 10-Q filed thereafter
(collectively, the "SEC Filings") and other publicly available documents,
together with attachments thereto, as same may be supplemented (together
with the SEC Filings, the "Offering Documents"). Subscriber has reviewed
the Offering Documents.
c. INDEPENDENT INVESTIGATION; ACCESS. Subscriber acknowledges that,
in making the decision to purchase the Shares subscribed for, Subscriber
has relied upon independent investigations made by it and its purchase
representatives, if any, and Subscriber and such representatives, if any,
have, prior to any sale to Subscriber, been given access and the
opportunity to examine all material books and records of the Issuer, all
material contracts and documents relating to this offering of Shares and an
opportunity to ask questions of, and to receive answers from, Issuer or any
person acting on its behalf concerning the terms and conditions of this
offering of Shares. Subscriber and its advisors, if any, have been
furnished with access to all publicly available materials relating to the
business, finances and operation of the Issuers and materials relating to
the offer and sale of the Shares which have been requested. Subscriber and
its advisors, if any, have received complete satisfactory answers to any
such inquiries.
-5-
<PAGE>
d. NO GOVERNMENT RECOMMENDATION OR APPROVAL. Subscriber understands
that no federal or state agency has made or will make any finding or
determination relating to the fairness for public investment in the Shares
or has passed or made, or will pass on or make, any recommendation or
endorsement of the Shares.
e. ENTITY PURCHASES. If Subscriber is a partnership, corporation or
trust, the person executing this Agreement on its behalf represents and
warrants that:
(i) He or she has made due inquiry to determine the truthfulness
of the representations and warranties made pursuant to this
Agreement.
(ii) He or she is duly authorized (if the undersigned is a trust,
by the trust agreement) to make this investment and to enter
into and execute this Agreement on behalf of such entity.
3. ISSUER REPRESENTATIONS.
Issuer represents and warrants to the Subscriber as follows:
a. REPORTING COMPANY STATUS. Issuer is a reporting issuer as
defined by Rule 902 of Regulations S. Issuer is in full compliance with
all reporting obligations under Sections 13 or 15(d) of the Securities
Exchange Act of 1934, as amended.
b. OFFSHORE TRANSACTION. Issuer has not offered these Shares to any
person in the United States or to any U.S. person or for the account or
benefit of any U.S. person. At the time the buy order was originated,
Issuer and/or its agent reasonably believed that Subscriber was outside of
the United States and was not a U.S. person. Issuer and/or its agent
reasonably believe that the transaction has not been prearranged with a
Subscriber in the United States.
c. NO DIRECTED SELLING EFFORTS. In regard to this transaction,
Issuer has not conducted nay "direct selling efforts" as that term is
defined in Rule 902 of Regulation S nor has Issuer conducted any general
solicitation relating to the offer and sale of the within securities to
U.S. persons residing within the United States or elsewhere.
d. THE SHARES. The Shares, when issued and delivered, will be duly
and validly authorized and issued, fully paid and non-assessable and will
not subject the holders thereof to any liability solely by reason of being
such holders.
e. SUBSCRIPTION AGREEMENT. This Agreement, when acknowledged by the
signature of an officer of Issuer, has been duly authorized, validly
executed and delivered on behalf of Issuer and is a valid and binding
agreement in accordance with its terms.
-6-
<PAGE>
f. NON-CONTRAVENTION. Except as otherwise disclosed by the Issuer,
the execution and delivery of this Agreement, the consummation of the
issuance of the Shares and the transactions contemplated hereunder do not
and will not conflict with or result in a breach by Issuer of any of the
terms or provisions of, or constitute a default under, the certificate of
incorporation or bylaws of Issuer (or any equivalent documents thereto) or
any indenture, mortgage, deed of trust or other material agreement or
instrument to which Issuer is a party or by which it or any of its
properties or assets are bound or any existing applicable law, rule or
regulation or any applicable decrees, judgments or orders of any court,
federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over Issuer or any of its properties
or assets.
g. PRIOR ISSUANCE UNDER REGULATION S. Issuer has not issued any
shares (of any class) of its stock under Regulation S subsequent to the SEC
filings, except for any Shares which may be issued in connection with
Issuer's current financing activities.
h. SUBSEQUENT ISSUANCES UNDER REGULATION S. Except for any Shares
which may be issued in connection with Issuer's current financing
activities, Issuer will not issue any shares (of any class) of its stock
under Regulation S for 45 days from the date of the Closing of this
transaction, unless Subscriber has been previously offered such Shares on
the same terms and has refused to take up the offer.
i. SECURITIES LAW COMPLIANCE. With respect to the Company's
actions, the offer and the sale of the Shares shall conform in all respects
with the requirement of Regulation S and with the requirements of all other
published rules and regulations of the SEC currently in effect relating to
"private offerings" to non-residents of the United States of the type
contemplated herein. Neither the offer, sale or delivery of the Shares in
conformity with the terms hereof will to the knowledge of the Company
violate Section 5 of the Securities Act, as presently in effect.
4. EXPIRATION OF RESTRICTED PERIOD.
The transaction restriction in connection with this offshore offer and
sale restricts the Subscriber from offering and selling to U.S. persons or
for the account or benefit of a U.S. person for a forty (40) day period.
Rule 903(c)(2) governs the forty (40) day transaction restriction. In the
event that multiple subscriptions are accepted by Issuer, each separate
subscription agreement shall be deemed to be a separate offering under
Regulation S and the forty (40) day restriction period shall begin for each
transaction separately on the date payment is made to Issuer for that
specific transaction. Title to the Shares may be transferred by Subscriber
to other non-United States person or entities in accordance with
Regulation S.
-7-
<PAGE>
5. EXEMPTION; RELIANCE ON REPRESENTATION.
Subscriber understands that the offer and sale of the Shares is not
being registered under the Securities Act. Issuer is relying on the rules
governing offers and sales made outside the United States pursuant to
Regulation S. Rules 901 through 903 of Regulation S govern this
transaction.
6. TRANSFER AGENT INSTRUCTIONS.
a. LEGENDS ON CERTIFICATES. The transaction restriction in
connection whit this offshore offer and sale restricts Subscriber from
offering and selling to U.S. persons, or for the account or benefit of a
U.S. person, for a forty (40) day period. The rules do not require the
placement of such a restrictive legend on the share certificate and the
transfer agent is hereby instructed to see that such legend is attached to
the share certificate by means of stapling. Such legend shall be in the
precise form of Appendix "B" hereto. Rule 903(c)(2) governs the forty-day
transaction restriction.
b. SUBSCRIBER REPRESENTATION LETTER. Issuer agrees to accept a
Subscriber Representation letter from the Subscriber in the form of
Appendix "A" hereto as sole and sufficient evidence that Subscriber has
complied with applicable securities laws and upon receipt of such a letter
shall promptly instruct its transfer agent to transfer the Shares into
"Street Name," if so requested by Subscriber, as expeditiously as practical
after receipt of the certificates and the Subscriber Representation Letter;
provided, Issuer shall not be required to deliver such instructions if it
knows, or reasonably believes, any of the representations made in the
Subscriber Representation Letter are false.
7. TRANSFER AGENT INSTRUCTIONS.
Issuer's transfer agent will be instructed to issue one or more share
certificates representing Shares in the names of qualified purchasers to be
specified prior to Closing. All of the Shares so issued by the transfer
agent will be issued pursuant to Regulation S. Issuer warrants further
that no instruction have been given to the transfer agent and that these
Shares shall be freely transferable on the books and records of Issuer
subject to compliance with applicable securities laws and the terms of this
Agreement.
8. CLOSING DATE AND ESCROW AGENT.
The date of the issuance of the Shares in the name of Subscriber (the
"Closing") shall be September 24, 1996 or such mutually agreed date
thereafter as the parties shall determine. Closing shall be effectuated
following delivery of funds to Sandy Boone, escrow agent (the "Escrow
Agent"), to the account designated in Section 1b hereof. Subscriber
instructs the Escrow Agent and gives the Escrow Agent its good and
sufficient authority to release funds from the Offering Escrow Account to
Issuer and all other necessary parties including, without limitation, the
payment of all placement agent fees
-8-
<PAGE>
and commissions, facilitation fees in connection with the purchase of
Shares and expenses and the offering of Shares contemplated by the
Offering Documents. Subscriber agrees that the Escrow Agent, in its
capacity as Escrow Agent, has no liability as a result of any fraudulent
or unlawful conduct of any other party and agrees to hold the Escrow
Agent harmless.
9. CONDITIONS TO ISSUER'S OBLIGATIONS TO SELL.
Issuer reserves the right, in its complete discretion, to reject this
Agreement. Subscriber understands that Issuer's obligation to sell the
shares subscribed for hereunder is conditioned upon:
a. the receipt and acceptance by Issuer of this Agreement for all of
the Shares as evidenced by execution of this Agreement by the President,
any Vice President or any Director of Issuer. The acceptance of funds by
Issuer shall be deemed to be constructive acceptance of this Agreement.
Subscriber understands that this Agreement is irrevocable; and
b. delivery to the Escrow Agent by Subscriber of good funds, at a
minimum investment of $50,000 (the "Minimum Investment"), as payment in
full for the purchase of the Shares subscribed for, all fees and
commissions. The Company and the placement agent may agree, in their
discretion, to sell less than the Minimum Investment to investors who
otherwise meet the suitability standards set forth in this Agreement and/or
the Offering Documents.
10. CONDITIONS TO SUBSCRIBER'S OBLIGATION TO PURCHASE.
Issuer understands that Subscriber's obligation to purchase the Shares
subscribed for hereunder is conditioned upon:
a. execution and delivery of this Agreement; and
b. delivery of Shares with restrictive legend stapled on the share
certificates.
11. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
THE STATE OF CALIFORNIA WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES.
12. ENTIRE AGREEMENT.
This Agreement, along with the Escrow Agreement among the Escrow
Agent, the Company and the Subscriber, constitutes the entire agreement
among the parties hereof
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<PAGE>
with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous representations, warranties, agreements and
understandings in connection therewith. This Agreement may be amended
only by a writing executed by all parties hereto.
13. FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES.
Name: H.I.G. Securities Investment, Ltd.
Address: P.O. Box 146
Road Town
Tortolla, BVI
Tel. No.:
Fax No.:
Contact Name:
14. DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME).
Name:
Address:
Tel. No.:
Fax No.:
Contact Name:
Special Instructions:
15. ISSUER'S ACCEPTANCE BASED UPON SUBSCRIBER REPRESENTATIONS.
Issuer is accepting this subscription based upon and in reliance upon
the representations and warranties of Subscriber contained herein,
including, without limitation, those contained in Sections 2(a)(v), (vi),
(xi) and (xii) of this Agreement would not be accepted by Issuer in the
absence of such representations and warranties.
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<PAGE>
IN WITNESS WHEREOF the undersigned has executed this Offshore Securities
Subscription Agreement as of the ____ day of ________________, 1996.
Amount Subscribed for:
$_____________________
__________________________________________
(Signature of Subscriber)
__________________________________________
(Name Typed or Printed)
__________________________________________
(Title)
THE ALANA GROUP, LTD.
Type of Ownership (check one):
Natural Persons:
_____________ Individual
_____________ Joint tenants with rights of survivorship
_____________ Tenants in common
Entities:
_____________ Corporation
_____________ Partnership
_____________ Trust
_____________ Estate
_____________ Other (specify)
Accepted as of the ___ day of _________________, 1996
By: ___________________________________
Gary Nelson, President
JAVA CENTRALE, INC.
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<PAGE>
APPENDIX "A"
SUBSCRIBER REPRESENTATION LETTER
Dear Sirs:
The undersigned _______________________, has purchased on _____________,
1996, _______________________ shares of Common Stock of JAVA CENTRALE, INC. (the
"Company") at a per share subscription price of $_________ per share ("Common
Stock") (the Common Stock referred to herein as the "Shares"). In connection
with such purchase, the undersigned has executed and delivered a subscription
agreement ("Subscription Agreement") of your design. As the forty (40) day
transaction restriction period has expired, the undersigned hereby requests
that the Shares be transferred into "Street Name" of _________________________.
The undersigned represents and warrants as follows:
1. The offer to purchase the Shares was made to it outside of the United
States and the undersigned was, at the time the Subscription Agreement was
executed and delivered, and is now, outside the United States;
2. It is not a U.S. person (as such term is defined in Section 902(a) of
Regulation S ("Regulation S") promulgated under the United States Securities Act
of 1933 (the "Securities Act"), and it has purchased the Shares for its own
account and not for the account or benefit of any U.S. person;
3. All offers and sales by the undersigned of the Shares shall be made
pursuant to an effective registration statement under the Securities Act, or
pursuant to an exemption from, or in a transaction not subject to the
registration requirements of, the Securities Act;
4. It is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S. persons contained
in Regulation S;
5. The undersigned has not engaged in any "directed selling efforts" (as
such term is defined in Regulation S) with respect to the Shares; and
6. The undersigned purchased its Shares with investment intent and
presently has no interest to sell, dispose of or otherwise transfer the Shares.
The purpose of this request is to facilitate the management of the undersigned's
investment accounts.
7. The representations and warranties of the undersigned contained in the
Subscription Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof.
-12-
<PAGE>
Dated this ______ day of the month of _________________, 1996.
- -------------------------------- ------------------ --------------------
Official Signature of Subscriber Title Country of Execution
-13-
<PAGE>
APPENDIX "B"
"The Securities covered hereby have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be offered or sold
within the United States or to or for the account or the benefit of U.S.
persons (i) as part of a distribution at any time or (ii) otherwise until
________________, 1996 except, in either case, in accordance with Regulation S
under the Act. Terms used above have the meaning given to them by
Regulation S."
-14-
<PAGE>
STOCK PURCHASE WARRANT
FOUR HUNDRED THOUSAND (400,000) 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 June 12, 1996, authorized the
issuance to RICHARD D. SHANNON, an individual resident of the State of
California ("Mr. Shannon"), of rights to purchase (the "Warrants") an
aggregate of Four Hundred Thousand (400,000) 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 September 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 Mr. Shannon 400,000 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 September 30, 1996.
JAVA CENTRALE, INC.
By: _____________________
Gary C. Nelson
Its President
<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) Mr. Shannon shall be initially entitled to receive, upon exercise
hereof, up to Four Hundred Thousand (400,000) 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 the Warrants may be exercised. By way of example only, if
the Company should undergo a two-for-one stock split of its outstanding shares
of Common Stock, the number of shares for which the Warrants may be exercised
would thereupon increase to 800,000 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; ADJUSTMENT IN CERTAIN EVENTS.
(a) The Warrants shall be initially exercisable for the purchase
price of Seventy-Five Cents ($0.75) per Share, subject to the adjustments set
forth below (the "Exercise Price"). The Exercise Price shall remain unchanged
until the occurrence of one of the events described in Section 1(b), above.
(b) In the event of a change in the number of shares of Common Stock
which may be caused by any event described in Section 1(b), above, a
corresponding adjustment changing the exercise price per share of Common Stock
attributable to any unexercised Warrants shall likewise be made. By way of
example, only, if the Company should undergo a two-for-one stock split of its
outstanding shares of Common Stock as described in Section 1(b), above, then in
addition to the change in number of shares for which the Warrants may be
exercised as
-2-
<PAGE>
described in Section 1(b), the Exercise Price for each share of Common Stock
for which a Warrant may thereafter be exercised would be reduced to
Thirty-Seven and One-Half Cents ($0.375).
3. METHOD OF EXERCISE. Mr. Shannon 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 Mr. Shannon 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 Mr. Shannon the number of
shares of Common Stock subscribed for, and Mr. Shannon 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. Mr. Shannon shall not 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 shall not be transferrable, and any
attempt to sell, assign, transfer, hypothecate, or otherwise convey or encumber
any interest herein or therein shall be void. The Company shall have no
obligation to recognize any such sale, assignment, transfer, hypothecation, or
other conveyance or encumbrance, to reflect such 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 provision.
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
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<PAGE>
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.
-4-
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of September 30, 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
September 30, 1996 (the "Warrant"), which Warrant is attached to this
Subscription Form, the undersigned hereby subscribes for _____ whole shares of
the Company's no par value Common Stock, at a price of $______ per share or at
such other price 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: _______________________________
Full Address: ___________________________________________
___________________________________________
___________________________________________
Number of Shares for Which Subscribed: ________________________
DATED: _____________
_____________________________
RICHARD D. SHANNON
SEE REVERSE FOR IMPORTANT INFORMATION
-5-
<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 September 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 such persons or
entities will thereupon become shareholders 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.
-6-
<PAGE>
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: _____________________
Gary C. Nelson
Its President
<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 subsequent fluctuation in the closing sales
prices of the Company's Common Stock shall not affect any prior sale or sales.
-2-
<PAGE>
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.
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
-3-
<PAGE>
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.
-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)
<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.
<PAGE>
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: _____________________
Gary C. Nelson
Its President
<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 subsequent fluctuation in the closing
sales prices of the Company's Common Stock shall not affect any prior sale or
sales.
-2-
<PAGE>
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.
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
-3-
<PAGE>
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.
-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)
<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.
<PAGE>
STOCK PURCHASE WARRANT
WARRANTS TO PURCHASE 384,615 SHARES
OF JAVA CENTRALE, INC. COMMON STOCK
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of September 24, 1996,
authorized the issuance to H.I.G. Securities Investment, Ltd., a British
Virgin Islands Corporation (the "Purchaser"), of rights to purchase (the
"Warrants") an aggregate of Three Hundred Eighty-Four Thousand, Six Hundred
Fifteen (384,615) 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 September 23, 1998 (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 Purchaser 384,615 fully-paid and nonassessable Warrants.
Except as set forth herein, 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 September 24, 1996.
JAVA CENTRALE, INC.
By: _____________________
Gary C. Nelson
Its President
<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) The Purchaser shall be initially entitled to receive, upon
exercise hereof, up to an aggregate of Three Hundred Eighty-Four Thousand, Six
Hundred Fifteen (384,615) shares of the Company's no par value Common Stock,
subject, however, to adjustment as provided below. All shares of Common Stock
issued upon exercise of the Warrant will, upon issuance, be duly authorized,
validly issued, fully paid, non-assessable and free of any preemptive rights.
(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 the Warrants may be exercised. By way of example only,
if the Company should undergo a two-for-one stock split of its outstanding
shares of Common Stock, the number of shares for which the Warrants may be
exercised would thereupon increase to 769,230 shares.
(c) If, prior to the exercise of the Warrants, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
same or another class or classes of stock or securities of the Company or
another entity, then the Purchaser of the Warrants shall, thereafter, have the
right to purchase and receive upon exercise of Warrants, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately therefore issuable upon conversion, such shares of
stock and/or securities as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of the Warrants held by such
Purchaser had such merger, consolidation, exchange of shares, recapitalization
or reorganization not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Purchaser of the
Warrants to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
issuable upon exercise of Warrants) shall thereafter be applicable, as nearly
as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof.
(d) 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
-2-
<PAGE>
required by a stock dividend, shall become effective as of the payment or
distribution date of such dividend.
(e) 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.
(f) The Company will at all times reserve and keep available for
issuance out of its authorized but unissued shares, such number of shares as
shall, from time to time, be sufficient to effect the full exercise of the
Warrant.
2. EXERCISE PRICE; ADJUSTMENT IN CERTAIN EVENTS.
(a) The Warrants shall be initially exercisable for the purchase
price of One Dollar and Twenty-Five Cents ($1.25) per Share, subject to the
adjustments set forth below (the "Exercise Price"). The Exercise Prices shall
remain unchanged until the occurrence of one of the events described in
Section 1(b), above.
(b) In the event of a change in the number of shares of Common
Stock which may be caused by any event described in Section 1(b), above, a
corresponding adjustment changing the exercise price per share of Common Stock
attributable to any unexercised Warrants shall likewise be made. By way of
example, only, if the Company should undergo a two-for-one stock split of its
outstanding shares of Common Stock, then in addition to the change in number
of shares for which the Warrants may be exercised as described in Section
1(b), the Exercise Prices for each share of Common Stock for which a Warrant
may thereafter be exercised would be reduced to Sixty-Two and One-Half Cents
($0.625).
3. METHOD OF EXERCISE. Purchaser may exercise its right to purchase
Warrant Shares pursuant to this Warrant at any time prior to the Expiration
Time, by (i) 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; (ii) surrendering the Warrant to the Company at its
principal place of business in Sacramento, California; and (iii) 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 Purchaser the
number of Warrant Shares so subscribed for or
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to the Purchaser the number of
shares of Common Stock subscribed for, and the Purchaser 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
-3-
<PAGE>
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 shall not be transferrable, and
any attempt to sell, assign, transfer, hypothecate, or otherwise convey or
encumber any interest herein or therein shall be void. The Company shall have
no obligation to recognize any such sale, assignment, transfer, hypothecation,
or other conveyance or encumbrance, to reflect such 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 provision.
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. NOTICES. Any notice required by the provisions of this Warrant will
be in writing and will be deemed effectively given; (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day; (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices will be
addressed to the Purchaser at the address of the Purchaser appearing on the
books of the Company.
10. LOST WARRANTS. The Company represents and warrants to the Purchaser
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
11. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant. If the Conversion would result in any fractional
share, the Company will, in lieu of issuing such fractional share, pay cash
equal to the product of such fraction multiplied by the closing bid price of
the Company's Common Stock on the date of conversion.
-4-
<PAGE>
12. MODIFICATION AND WAIVER. This Warrant and any provision thereof may
be changed, waived, discharged, or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. 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.
-5-
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of September 24, 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
September 24, 1996 (the "Warrant"), which Warrant is attached to this
Subscription Form, the undersigned hereby subscribes for _____ whole shares of
the Company's no par value Common Stock, at a price of $______ per share or at
such other price 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: ________________________________
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
[ ]
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
-6-
<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 September 23, 1999 (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 such persons or
entities will thereupon become shareholders 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.
-7-
<PAGE>
STOCK PURCHASE WARRANT
WARRANTS TO PURCHASE 384,615 SHARES
OF JAVA CENTRALE, INC. COMMON STOCK
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of September 24, 1996,
authorized the issuance to Alana Group, Ltd., a British Virgin Islands
Corporation (the "Purchaser"), of rights to purchase (the "Warrants") an
aggregate of Three Hundred Eighty-Four Thousand, Six Hundred Fifteen (384,615)
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 September 23,
1998 (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 Purchaser 384,615 fully-paid and nonassessable Warrants.
Except as set forth herein, 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 September 24, 1996.
JAVA CENTRALE, INC.
By: _____________________
Gary C. Nelson
Its President
<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) The Purchaser shall be initially entitled to receive, upon
exercise hereof, up to an aggregate of Three Hundred Eighty-Four Thousand, Six
Hundred Fifteen (384,615) shares of the Company's no par value Common Stock,
subject, however, to adjustment as provided below. All shares of Common Stock
issued upon exercise of the Warrant will, upon issuance, be duly authorized,
validly issued, fully paid, non-assessable and free of any preemptive rights.
(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 the Warrants may be exercised. By way of example only,
if the Company should undergo a two-for-one stock split of its outstanding
shares of Common Stock, the number of shares for which the Warrants may be
exercised would thereupon increase to 769,230 shares.
(c) If, prior to the exercise of the Warrants, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock of the
Company shall be changed into the same or a different number of shares of the
same or another class or classes of stock or securities of the Company or
another entity, then the Purchaser of the Warrants shall, thereafter, have the
right to purchase and receive upon exercise of Warrants, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately therefore issuable upon conversion, such shares of
stock and/or securities as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
purchasable and receivable upon the conversion of the Warrants held by such
Purchaser had such merger, consolidation, exchange of shares, recapitalization
or reorganization not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Purchaser of the
Warrants to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
issuable upon exercise of Warrants) shall thereafter be applicable, as nearly
as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof.
(d) 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
-2-
<PAGE>
required by a stock dividend, shall become effective as of the payment or
distribution date of such dividend.
(e) 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.
(f) The Company will at all times reserve and keep available for
issuance out of its authorized but unissued shares, such number of shares as
shall, from time to time, be sufficient to effect the full exercise of the
Warrant.
2. EXERCISE PRICE; ADJUSTMENT IN CERTAIN EVENTS.
(a) The Warrants shall be initially exercisable for the purchase
price of One Dollar and Twenty-Five Cents ($1.25) per Share, subject to the
adjustments set forth below (the "Exercise Price"). The Exercise Prices shall
remain unchanged until the occurrence of one of the events described in
Section 1(b), above.
(b) In the event of a change in the number of shares of Common
Stock which may be caused by any event described in Section 1(b), above, a
corresponding adjustment changing the exercise price per share of Common Stock
attributable to any unexercised Warrants shall likewise be made. By way of
example, only, if the Company should undergo a two-for-one stock split of its
outstanding shares of Common Stock, then in addition to the change in number
of shares for which the Warrants may be exercised as described in Section
1(b), the Exercise Prices for each share of Common Stock for which a Warrant
may thereafter be exercised would be reduced to Sixty-Two and One-Half Cents
($0.625).
3. METHOD OF EXERCISE. Purchaser may exercise its right to purchase
Warrant Shares pursuant to this Warrant at any time prior to the Expiration
Time, by (i) 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; (ii) surrendering the Warrant to the Company at its
principal place of business in Sacramento, California; and (iii) 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 Purchaser the
number of Warrant Shares so subscribed for or
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to the Purchaser the number of
shares of Common Stock subscribed for, and the Purchaser 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
-3-
<PAGE>
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 shall not be transferrable, and
any attempt to sell, assign, transfer, hypothecate, or otherwise convey or
encumber any interest herein or therein shall be void. The Company shall have
no obligation to recognize any such sale, assignment, transfer, hypothecation,
or other conveyance or encumbrance, to reflect such 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 provision.
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. NOTICES. Any notice required by the provisions of this Warrant will
be in writing and will be deemed effectively given; (a) upon personal delivery
to the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day; (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices will be
addressed to the Purchaser at the address of the Purchaser appearing on the
books of the Company.
10. LOST WARRANTS. The Company represents and warrants to the Purchaser
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
11. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant. If the Conversion would result in any fractional
share, the Company will, in lieu of issuing such fractional share, pay cash
equal to the product of such fraction multiplied by the closing bid price of
the Company's Common Stock on the date of conversion.
-4-
<PAGE>
12. MODIFICATION AND WAIVER. This Warrant and any provision thereof may
be changed, waived, discharged, or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. 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.
-5-
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of September 24, 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
September 24, 1996 (the "Warrant"), which Warrant is attached to this
Subscription Form, the undersigned hereby subscribes for _____ whole shares of
the Company's no par value Common Stock, at a price of $______ per share or at
such other price 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: ________________________________
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
[ ]
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
-6-
<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 September 23, 1999 (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 such persons or
entities will thereupon become shareholders 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.
-7-
<PAGE>
LOAN AGREEMENT
This Agreement is dated as of July 11, 1996, and is being entered into by
and among ARTISTIC LICENSE, INC., a California corporation ("Lender"); JAVA
CENTRALE, INC., a California corporation ("Java"); and PARADISE BAKERY, INC.,
a Delaware corporation ("Borrower") which is a wholly-owned subsidiary of
Java. Borrower has requested a loan from Lender (the "Loan"), in the total
amount of Three Hundred Fifty Thousand Dollars ($350,000) (the "Loan Amount"),
and Lender has agreed to make the Loan, to be secured by certain assets of
Borrower and Java (collectively, the "Collateral"), subject to the terms,
conditions, and provisions set forth in this Agreement and all other documents
entered into in connection with the Loan (collectively, together with this
Agreement, the "Loan Documents").
NOW THEREFORE, Lender, Borrower, and Java hereby agree as follows:
1. LOAN CLOSING. Lender shall make the Loan to Borrower and Borrower
agrees to accept the Loan at a closing (the "Closing") which shall be held at
the offices of Java in Sacramento, California on a date mutually agreeable to
the parties hereto (the "Closing Date"). Lender shall disburse the proceeds
of the Loan (collectively, the "Loan Proceeds") to Borrower at the Closing,
subject to all of the terms of this Agreement.
2. NOTE. The Loan shall be evidenced by a single promissory note of
Borrower, payable to the order of Lender, in an original principal amount
equal to the Loan Amount, dated as of the Closing Date, which shall be
delivered to Lender by Borrower at the Closing, in the form attached hereto as
EXHIBIT "A" (the "Note"), bearing interest at the rate indicated in the note,
and otherwise payable as indicated in the Note. Although the scheduled
payments under the Note shall be interest only until maturity, in the event of
any sale of assets by Java or Borrower outside of the ordinary course of
business, Lender shall be entitled to require, at its option, that the net
proceeds of such sale be applied against the outstanding balance of principal
and any accrued but unpaid interest due under the Note.
3. LOAN TERM. The term of the Loan (the "Loan Term") shall commence on
the Closing Date, and shall end when the entire outstanding balance of
principal and accrued but unpaid interest under the Note has been paid in
full, which the Note requires to be done on or before April 30, 1997.
4. BORROWER SECURITY AGREEMENT. As security for the payment of all
amounts which are due under the Note, Borrower shall grant Lender at the
Closing a security interest in the personal property of Borrower, by means of
a security agreement in the form attached hereto as EXHIBIT "B" (the "Borrower
Security Agreement"), which shall be perfected by the filing with the
California Secretary of State, promptly after the Closing, of a UCC-1
financing statement which shall also be executed by Borrower and Lender at the
Closing, in the form attached hereto as EXHIBIT "C" (the "Borrower UCC-1").
5. JAVA SECURITY AGREEMENT. As further security for the payment of all
amounts which are due under the Note, Java shall grant Lender at the Closing a
security interest in the personal property of Java, including (but not limited
to) all of the stock of Borrower held by Java (the "Pledged Shares"), all by
means of a security agreement in the form attached hereto as EXHIBIT "D" (the
"Java Security Agreement"), which shall be perfected by the filing with the
California Secretary of State, promptly after the Closing, of a UCC-1
financing statement which shall be executed by Java and Lender at the Closing,
in the form attached hereto as EXHIBIT "E" (the "Java UCC-1"), as well as by
the delivery of the Pledged Shares to Lender by Java at the Closing.
6. UCC LIEN STATUS. Lender acknowledges its understanding that the
liens which it will hold under the Borrower Security Agreement, the Java
Security Agreement, the Borrower UCC-1, and the Java UCC-1 (collectively, the
"Security Documents") shall be junior to the liens on the personal property of
Borrower and Java which are listed in EXHIBIT "F" hereto.
1
<PAGE>
7. STOCK WARRANTS. Java shall also grant Lender at the Closing
warrants to purchase 300,000 shares of common stock of Java, in the form
attached hereto as EXHIBIT "G" (the "Stock Warrants"), the expiration date of
which shall be June 30, 2000. The exercise price for each share of stock
covered by the Stock Warrants (the "Exercise Price") shall be the lowest
closing price of Java stock between June 24, 1996 and April 30, 1997 (the
"Valuation Period"), but shall not exceed $1.00 per share, and the other terms
of the exercise of the Stock warrants shall be as set out in EXHIBIT "G". In
the event of any sale or public offering of stock in Borrower, Lender shall be
entitled to require that the Stock warrants be replaced with warrants for the
purchase of stock in Borrower, for a pro-rata interest in Borrower equal to
the approximate three percent (3%) interest in Java which it is anticipated
will be provided under the Stock warrants as initially issued, with the
exercise price under such replacement warrants to be based on the lower of:
(a) the book value of Borrower; or (b) the valuation of Java during the
Valuation Period.
8. POSSIBLE LOAN CONVERSION. At the option of Lender, the outstanding
principal balance of the Loan may be converted into common stock of Java at
any time during the Loan Term prior to repayment of all amounts due under the
Note, at price per share which is equal to the Exercise Price that is set with
respect to the Stock warrants, and Java shall use its best efforts to have
such shares registered for trading within 120 days after the date on which
such conversion is requested.
9. REPAYMENT FEE. Under the terms of the Note, in addition to the
principal and interest amounts due under the Note, Borrower is required to pay
Lender a repayment fee, in the amount of Thirty Five Thousand Dollars
($35,000), at the time of payment of the final principal amount due under the
Note. Lender shall have the right, at its option, to convert such fee into
shares of the common stock of Java, based on the Exercise Price which is set
pursuant to the provisions above dealing with the Stock Warrants.
10. COSTS AND FEES. Borrower shall reimburse Lender at the Closing for
Lender's expenses in preparing for the Closing and doing due diligence with
respect to the Collateral, in an amount which Lender and Borrower have agreed
to set at Fifteen Thousand Dollars ($15,000). Borrower shall also pay the
costs of filing the Borrower UCC-1 and the Java UCC-1.
11. CONDITIONS TO CLOSING. Lender agrees to close the Loan and disburse
the Loan Proceeds at the Closing subject to the terms and conditions of this
Agreement. Lender shall not, however, be obligated to close the Loan or
disburse any Loan Proceeds, until each of the following conditions has been
satisfied:
(a) The Note, the Stock Warrants, and all of the Security Documents
shall have been executed and delivered by Borrower and Java, respectively, all
as called for above.
(b) Java shall have delivered to Lender signed agreements, in the forms
attached hereto as composite EXHIBIT "H", by the following employees of Java:
Steven J. Orlando, Bradley D. Landon, Thomas A. Craig, Gary C. Nelson, and
Richard D. Shannon.
(c) The senior management of Java shall have committed to provide Java
an additional back-up line of credit, in the minimum amount of $175,000; a
further back-up line of credit for java and/or Borrower shall also have been
obtained; and the documentation of the foregoing shall have been provided to
and approved by Lender, such approval not to be withheld or delayed
unreasonably.
(d) The documentation of the acquisition of Borrower by Java shall have
been provided to and approved by Lender, such approval not to be withheld or
delayed unreasonably.
2
<PAGE>
(e) Borrower's store revenue and cash flow statements for April 1996 and
May 1996 shall have been provided to and approved by Lender, such approval not
to be withheld or delayed unreasonably.
(f) An unqualified audit opinion as to Java and Borrower shall have been
obtained from Java's accountants, and shall have been provided to Lender.
(g) This Agreement and the other Loan Documents shall have been ratified
by the Boards of Directors of Java and Borrower.
(h) A list of all pending litigation involving Borrower and/or Java
shall have been provided to Lender.
12. DEFAULT. Lender shall have the right to declare a default under
this Agreement (an "Event of Default"), by means of written notice to both
Borrower and Java, at any time after the occurrence of any of the events
listed below:
(a) failure by Borrower to make any given payment of principal or
interest due under the Note, or any other amount due under any of the other
Loan Documents, prior to default thereunder;
(b) failure by Borrower or Java to comply with any agreement or covenant
contained in this Agreement or any of the other Loan Documents;
(c) the revelation that any warranty or representation by Borrower or
any of the Guarantors in this Agreement, or in any other Loan Document, was or
has become untrue (except for changes due to the passage of time and matters
that result in changes in warranties that do not affect Lender's security);
(d) the making by Borrower or Java of any assignment for the benefit of
creditors;
(e) any filing by or against Borrower or Java of: (1) a petition
seeking an entry of any order for relief as a debtor in any proceeding under
the United States Bankruptcy Code, for reorganization or rearrangement under
such code, or to take advantage of any other federal or state statutes or laws
for relief of debtors; or (2) an answer admitting the material obligations of
a petition filed against it in any bankruptcy, reorganization, insolvency,
conservatorship, or similar proceeding; or any admission in writing of an
inability to pay its or their debts as they become due;
(f) the entry of any order: for relief of Borrower or Java as debtor in
a proceeding under the United States Bankruptcy Code; approving any petition
seeking reorganization of Borrower or Java, or arrangement of the debts of any
of those parties; or appointing a receiver, trustee, conservator, or
liquidator of Borrower or Java, or any property of Java;
13. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default,
Lender may exercise any right or remedy which it has under the Note, the
Security Documents, or otherwise under applicable law. Without placing any
limitation on the foregoing remedies, upon the occurrence of any Event of
Default, Lender may: (a) declare the entire outstanding principal balance of,
and all accrued but unpaid interest on, the Loan immediately due and payable;
and/or (b) exercise any and all of the rights of Lender under the California
Uniform Commercial Code with respect to the security provided under the
Security Documents.
14. MUTUAL REPRESENTATIONS AND WARRANTIES. Each party hereto hereby
represents and warrants to the other that the representing party is a
corporation duly organized and existing under the
3
<PAGE>
laws of the State of California; that the execution, delivery, and performance
of this Agreement are all within its powers, have been duly authorized, and
are not in conflict with the terms of its articles of incorporation or bylaws;
and that the execution, delivery, and performance of this Agreement are not in
conflict with any law or any indenture, agreement, or undertaking to which it
is a party or by which it is bound or affected.
15. LENDER'S REPRESENTATIONS AND WARRANTIES. Lender hereby represents
and warrants to Borrower that lender is a licensed finance lender under
California law, such that the Loan is not subject to any usury limitations
under California law.
16. REPRESENTATIONS, WARRANTIES, COVENANTS, AND AGREEMENTS BY JAVA AND
BORROWER. Borrower and Java (as applicable) hereby represent, warrant,
covenant, and agree to and with Lender as follows:
(a) Java shall use its best efforts to have the stock covered by the
Stock Warrants registered for trading within 120 days of issuance, and shall
thereafter keep such registration statement current.
(b) Throughout the Loan Term, the following provisions shall be binding
upon Java and Borrower, unless Lender otherwise agrees in any given case:
(1) Steve Orlando shall remain as CFO of both Java and Borrower, and
shall be responsible for the financial management and policies of Java and
all of its subsidiaries.
(2) Java shall not take any action to consolidate the management of
Borrower, or to terminate Ty Peabody as President of Borrower.
(3) Kevin Baker shall be made a member of the board of directors of
both Java and Borrower, and the Java board shall thereafter consist solely
of Richard D. Shannon, Gary Nelson, and Kevin Baker.
(4) No management positions shall be added, and no management
salaries shall be increased or bonuses paid.
(5) No capital expenditures shall be made by Java or Borrower in
excess of $25,000.00 shall be made, other than as specified in Java's
Confidential Private Offering Memorandum, dated March 15, 1996, as amended
in July 1996.
(6) There shall be no incurring of any debt by Java or Borrower,
unless such debt is either unsecured, or would be secured only by liens
junior to those held by Lender under the Security Documents.
(7) There shall be no development of new business sites by Java or
Borrower.
17. MISCELLANEOUS PROVISIONS.
(a) ATTORNEYS' FEES. If there is any litigation involving the parties
hereto in connection with the interpretation of this Agreement or any of the
other Loan Documents, or the enforcement of any right or obligation under this
Agreement or any of the other Loan Documents, the prevailing party shall be
entitled to payment by the other party or parties of all court costs and
attorneys' fees incurred by the prevailing party in connection with such
litigation (whether incurred at the trial, appellate, or
4
<PAGE>
administrative levels), in such amount as the court or administrative body may
judge reasonable, all of which may be incorporated into and be a part of any
judgment or decision rendered in such litigation.
(b) NOTICES. All notices and demands of any kind which the parties
hereto may be required or may desire to give to or make on one another in
connection with this Agreement or any of the other Loan Documents shall be
given or made as follows:
(1) Each such notice or demand shall be given or made in writing, and
shall either be served personally or by registered or certified mail,
return receipt requested.
(2) Any such notice or demand so served by registered or certified
mail shall be deposited in the United States mail with postage thereon
fully prepaid, addressed to the party to be served as follows:
If to Lender: Artistic License, Inc.
1416 45th Street
Sacramento, CA 95819
If to Borrower: Paradise Bakery, Inc.
1610 Arden Way, Suite 299
Sacramento, CA 95815
If to Java: Java Centrale, Inc.
1610 Arden Way, Suite 299
Sacramento, CA 95815
(3) Any party hereto may from time to time, by notice in writing
given in the aforesaid manner, designate one (1) substitute mailing address
or person to which or to whom such notices or demands are thereafter to be
addressed.
(c) HEADINGS. The headings of the various paragraphs of this Agreement
are intended solely for reference purposes, and are not intended for any
purpose whatsoever to modify, explain, or place any construction on any of the
provisions of this Agreement.
(d) RECITALS AND EXHIBITS. The Recitals at the beginning this Agreement
are accurate and shall constitute an integral part of this Agreement, and this
Agreement shall be construed in light of those Recitals. The exhibits,
schedules, and addenda (if any) attached to and referred to in this Agreement
are hereby incorporated into this Agreement as fully as if set out in their
entirety herein.
(e) INVALIDITY. If any provision of this Agreement or the application
thereof to any person(s) or circumstance(s) shall to any extent be held to be
invalid or unenforceable, neither the remainder of this Agreement nor the
application of such provision to any person(s) or circumstance(s) other than
those as to whom or which it is held to be invalid or unenforceable shall be
affected thereby, and every provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
(f) ENTIRE AGREEMENT. The terms of this Agreement are intended by the
parties hereto as a final expression of their agreement with respect to the
subject matter hereof, and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement,
which may be executed in multiple counterparts (each of which shall be an
original, and all of which shall constitute one Agreement), constitute the
complete and exclusive statement of its terms, and that no extrinsic evidence
of any kind which contradicts the terms of this Agreement may
5
<PAGE>
be introduced in any proceedings (judicial or otherwise) involving this
Agreement, except for evidence of a subsequent written amendment to this
Agreement.
(g) SUCCESSORS. All of the terms, covenants, and conditions hereof
shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of the parties hereto.
(h) PRONOUNS AND CONJUNCTIONS. In this Agreement, personal pronouns
shall be construed as though of the gender and number required by the context,
the singular including the plural, the plural including the singular, and each
gender including other genders, all as may be required by the context.
Wherever in this Agreement the term "and/or" is used, it shall mean: "one or
the other, both, any one or more, or all" of the things, events, persons or
parties in connection with which the term is used.
(i) GOVERNING LAW. This Agreement shall be governed by, construed in
accordance with, and interpreted under, the internal law of the State of
California.
(j) MODIFICATION OF AGREEMENT. This Agreement may not be modified,
amended, or otherwise changed in any manner, except by a written amendment
executed by all of the parties hereto, or their respective successors or
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ARTISTIC LICENSE, INC.,
a California corporation
By: _________________________
Thomas Naygrow,
President
PARADISE BAKERY, INC.,
a Delaware corporation
By: _________________________
Steve Orlando,
Chief Financial Officer
JAVA CENTRALE, INC.,
a California corporation
By: _________________________
Steve Orlando,
Chief Financial Officer
6
<PAGE>
ALTA PETROLEUM, INC.
240 Saint Paul Street, Suite 310
Denver, Colorado
80206-5115
July 10, 1996
PERSONAL AND CONFIDENTIAL
- -------------------------
Java Centrale, Inc.
1610 Arden Way, Suite 145
Sacramento, CA
95815
Attention: Mr. Steven J. Orlando
Chief Financial Officer
Dear Mr. Orlando
Re: PROPOSED STAND-BY LINE OF CREDIT (THE "FACILITY")
JAVA CENTRALE, INC. (THE "COMPANY")
- -------------------------------------------------------
We confirm our discussions regarding the Company's financial requirements for
the next ten months. We understand that you have received a commitment from
Mr. Naygrow dated June 24, 1996 as amended July 10, 1996 to fund $350,000
secured by a lien on certain assets (the "Primary Line") which includes a
commitment from Senior Management of the Company to fund $175,000 (the
"Management Line"). Alta Petroleum Inc. ("Alta") is prepared to provide the
Facility on the terms and conditions set out below, which will become
effective upon execution of this letter and payment of the Set Up Fee.
AMOUNT: FOUR HUNDRED THOUSAND ($400,000) DOLLARS U.S.
TERM: April 30, 1997
INTEREST RATE: All amounts outstanding shall bear interest at an annual
rate equal to 15% per annum until repaid in full. Interest
shall be payable monthly.
REPAYMENT: Principal shall be repaid in full, at our election, out of
the proceeds of any sale of assets or financing completed
by the Company exceeding $1,000,000 during the Term, and
in any event not later than April 30, 1997.
ADVANCES: Funds will be advanced and may be repaid only in minimum
$100,000 increments.
<PAGE>
JAVA CENTRALE, INC.
July 10, 1996
Page 2
CONDITIONS: Advances will be conditional upon the full amount having
been advanced under the Primary Line and the Management Line
and the Company being in compliance with all terms and
conditions of the loan and security documents comprising the
Primary Line and the Management Line. All advances will be
subject to the Company continuing to make satisfactory
progress in the execution of its business plan as outlined
in the Confidential Private Offering Memorandum dated
March 15, 1996 as amended.
SECURITY: The Company will grant in favour of Alta, a lien on the
assets described in Exhibit A hereto subject only to the
other liens also set forth in Exhibit A.
WARRANTS: Upon execution of this commitment, Alta will be granted
warrants to purchase 50,000 common shares of the Company
to expire June 30, 1997 at a price (the "Warrant Exercise
Price") equal to the lowest closing price of the Company
stock between the date of this letter and June 30, 1997,
not to exceed $1.00 per share. The Company shall use its
best efforts to have the stock underlying the warrants
registered for trading within 120 days of issuance and
shall keep such registration statement current. In
addition, Alta shall be granted warrants to purchase that
number of shares of common stock of the Company as is
determined by dividing the total amount advanced under
the Facility by the Warrant Exercise Price, which
warrants shall have an expiration date of June 30, 2000.
The warrants shall be in form satisfactory to Alta and
shall include anti-dilution provision, net-exercise
provisions, registration rights and such other provisions
as are requested by Alta.
CONVERSION: At the option of Alta the outstanding balance of the
Facility shall be convertible into common stock of the
Company at any time during the term of the Facility and
prior to repayment, at a conversion rate equal to the
price per share determined as the Warrant Exercise Price
state above. The Company shall use its best efforts to
have such shares registered for trading within 120 days
from the date conversion is requested.
NOTES: Each of the Advances will be evidenced by a Promissory Note
having a due date of April 30, 1997.
FEES: Set Up Fee: The sum of $5,000 to be paid on acceptance
and return of an executed copy of this letter.
<PAGE>
JAVA CENTRALE, INC.
July 10, 1996
Page 3
Stand-by Fees: One half of one percent ($2,000) per
month, payable monthly in arrears during the Term.
Repayment Fee: When the Facility is paid in full Alta
shall be paid a repayment fee equal to 10% of the
principal amount repaid and Alta shall have the option to
convert that fee into common shares of the Company at a
conversion price equal to the "Warrant Exercise Price"
stated above.
LEGAL: All reasonable legal and other agreed third party costs
incurred in securing and operating the Facility shall be
for the account of the Company.
We trust that the foregoing is in accord with our discussions and if so you
should sign and return one copy of this letter together with your cheque for
the Set Up Fee.
Yours truly,
ALTA PETROLEUM, INC.
/s/ LYLE P. EDWARDS
- ----------------------------------
Lyle P. Edwards
Vice President
encl.
ACKNOWLEDGED AND AGREED TO THIS
ELEVENTH DAY OF JULY, 1996
JAVA CENTRALE, INC.
Per /s/ STEVEN J. ORLANDO
---------------------------------
Steven J. Orlando
Chief Financial Officer
<PAGE>
EXHIBIT A
---------
Liens to be granted to Alta Petroleum, Inc.:
- --------------------------------------------
- - UCC-1 filing on all assets of Paradise Bakery and Cafe Inc. and Java
Centrale, Inc.
- - A pledge of the income and royalty payments accruing due to Paradise
Bakery and Cafe Inc. and Java Centrale, Inc.
- - A pledge of 100% of the issued common stock of Paradise Bakery and
Cafe Inc.
Subject only to the following liens:
- ------------------------------------
Java Centrale, Inc. $400,000 Note and filing for the Oh La La assets in San
Francisco (Bridge Loan).
Paradise Bakery Inc. $330,000 Note and filing for the Paradise stores in
Texas and two northern California Paradise stores (resulting from the Chart
House/Founders acquisition).
Java Centrale, Inc. $965,000 Note and filing for the Paradise Franchisee
receivables amounting to approximately $865,000 (results from the Chart House
purchase).
Java Centrale, Inc. $146,000 Note and filing for the assets located at the
Palo Alto Java location (results from lease financing after build out).
Java Centrale, Inc. $93,000 Note and filing for the assets located at the
Palmdale Java location (results from the lease financing).
Java Centrale, Inc. $80,000 Note and filing for the assets located at the
Plano location (results from the acquisition of the Plano franchisee).
Java Centrale, Inc. $20,000 Note and filing for the assets located at the
Boston location (results from the acquisition of the Boston franchisee).
Paradise Baker, Inc. $45,000 Note and filing for the assets located at the
Pleasanton location (results from the Founders acquisition).
Miscellaneous leases not in excess of $75,000.
All liens and charges granted pursuant to the Primary Line.
All liens and charges granted pursuant to the Management Line.
<PAGE>
COMPUTATION OF NET LOSS PER COMMON SHARE
EXHIBIT 11
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
September 30, September 30,
1996 1995 1996 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding 10,946,633 5,761,582 9,985,470 5,539,698
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net Loss ($747,601) ($1,331,314) ($1,511,251) ($1,996,256)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Net loss per weighted average equivalent common
shares outstanding ($0.07) ($0.23) ($0.15) ($0.36)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Share Months Outstanding
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ -----------
Calculation of weighted average
shares outstanding
Balance at beginning of period
April 1, 1995 - 5,316,820 shares 15,950,460 31,900,920
June 30, 1995 - 83,594 shares 253,555 256,537
August 28, 1995 - 403,000 shares 468,000 468,000
August 30, 1995 - 100,000 shares 108,133 108,133
September 8, 1995 - 124,567 shares 116,263 116,263
September 12, 1995 - 250,000 shares 200,000 200,000
September 20, 1995 - 326,000 shares 163,000 163,000
September 27, 1995 - 95,000 shares 25,333 25,333
April 1, 1996 - 8,533,587 shares 25,600,761 51,201,522
April 24, 1996 - 83,723 shares 251,169 443,732
May 20, 1996 - 442,142 shares 1,326,426 1,960,163
May 28, 1996 - 124,378 shares 373,134 518,242
May 31, 1996 - 2,105 shares 6,315 8,560
June 5, 1996 - 271,001 shares 813,003 1,056,904
June 7, 1996 - 68,376 shares 205,128 262,108
June 14, 1996 - 67,919 shares 203,757 244,508
June 18, 1996 - 133,200 shares 399,600 461,760
June 19, 1996 - 132,334 shares 397,002 454,347
June 27, 1996 - 224,215 shares 672,645 710,014
August 2, 1996 - 659,335 shares 1,274,714 1,274,714
August 5, 1996 - 213,675 shares 391,738 391,738
August 15, 1996 - 157,791 shares 236,687 236,687
September 9, 1996 - 250,000 shares 175,000 175,000
September 20, 1996 - 1,538,462 shares 512,821 512,821
Options outstanding (1) (1) (1) (1)
Warrants outstanding (1) (1) (1) (1)
------------ ------------ ------------ -----------
Total 32,839,899 17,284,745 59,912,819 33,238,186
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
Weighted average number
of common shares outstanding 10,946,633 5,761,582 9,985,470 5,539,698
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
(1) Not calculated as anti-dilutive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET, CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000920528
<NAME> JAVA CENTRALE, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,497,920
<SECURITIES> 0
<RECEIVABLES> 2,688,112
<ALLOWANCES> 81,080
<INVENTORY> 381,905
<CURRENT-ASSETS> 4,362,486
<PP&E> 5,626,783
<DEPRECIATION> 901,442
<TOTAL-ASSETS> 16,181,760
<CURRENT-LIABILITIES> 4,598,250
<BONDS> 2,356,400
0
0
<COMMON> 18,017,091
<OTHER-SE> (9,623,481)
<TOTAL-LIABILITY-AND-EQUITY> 16,181,760
<SALES> 7,664,338
<TOTAL-REVENUES> 8,481,313
<CGS> 7,474,523
<TOTAL-COSTS> 10,034,393
<OTHER-EXPENSES> (172,478)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,649
<INCOME-PRETAX> (1,511,251)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,511,251)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,511,251)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
