REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"),  dated as of December 20,
2002, by and among  Peabodys  Coffee,  Inc., a Nevada  corporation  (d/b/a Black
Rhino Coffee),  with its  headquarters  located at 3845 Atherton Road,  Suite 9,
Rocklin,  CA 95765 (the "COMPANY"),  and each of the undersigned  (together with
their  respective  affiliates  and any  assignee or  transferee  of all of their
respective rights hereunder, the "INITIAL INVESTORS").

     WHEREAS:

     A. In connection  with the Securities  Purchase  Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"),  the
Company  has  agreed,  upon the terms and  subject to the  conditions  contained
therein,  to issue and sell to the Initial Investors (i) convertible  debentures
in the aggregate  principal amount of up to Seven Hundred Fifty Thousand Dollars
($750,000) (the  "Debentures") that are convertible into shares of the Company's
common stock (the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in such  Debentures and (ii) warrants (the  "Warrants")
to acquire an aggregate of 1,875,000 shares of Common Stock,  upon the terms and
conditions  and  subject  to the  limitations  and  conditions  set forth in the
Warrants dated December 20, 2002; and

     B. To induce the Initial  Investors  to execute and deliver the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"1933 ACT"), and applicable state securities laws;

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency  of which  are  hereby  acknowledged,  the  Company  and each of the
Initial Investors hereby agree as follows:

     1.   DEFINITIONS.

          A. As used in this  Agreement,  the  following  terms  shall  have the
following meanings:

               (i) "INVESTORS" means the Initial Investors and any transferee or
assignee  who agrees to become  bound by the  provisions  of this  Agreement  in
accordance with Section 9 hereof.

               (ii)  "REGISTER,"  "REGISTERED,"  and  "REGISTRATION"  refer to a
registration  effected  by  preparing  and filing a  Registration  Statement  or
Statements  in  compliance  with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"),  and the  declaration or ordering of  effectiveness  of such
Registration  Statement by the United States Securities and Exchange  Commission
(the "SEC").

               (iii) "REGISTRABLE SECURITIES" means the Conversion Shares issued
or  issuable  upon  conversion  or  otherwise  pursuant  to the  Debentures  and
Additional

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Debentures (as defined in the Securities Purchase Agreement) including,  without
limitation,  Damages  Shares (as defined in the  Debentures)  issued or issuable
pursuant to the Debentures, shares of Common Stock issued or issuable in payment
of the Standard Liquidated Damages Amount (as defined in the Securities Purchase
Agreement), shares issued or issuable in respect of interest or in redemption of
the  Debentures  in  accordance  with the  terms  thereof)  and  Warrant  Shares
issuable,  upon  exercise or otherwise  pursuant to the Warrants and  Additional
Warrants (as defined in the Securities  Purchase  Agreement),  and any shares of
capital  stock  issued  or  issuable  as a  dividend  on or in  exchange  for or
otherwise with respect to any of the foregoing.

               (iv) "REGISTRATION  STATEMENT" means a registration  statement of
the Company under the 1933 Act.

          B.  Capitalized  terms used herein and not  otherwise  defined  herein
shall  have  the  respective  meanings  set  forth  in the  Securities  Purchase
Agreement or the Convertible Debenture.

     2.   REGISTRATION.

          A. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to twenty  (20) days from the date of  Closing  (as  defined  in the  Securities
Purchase  Agreement)  (the  "FILING  DATE"),  file  with the SEC a  Registration
Statement  on Form S-3 (or, if Form S-3 is not then  available,  on such form of
Registration  Statement  as is then  available to effect a  registration  of the
Registrable Securities,  subject to the consent of the Initial Investors,  which
consent  will  not  be  unreasonably   withheld)  covering  the  resale  of  the
Registrable Securities underlying the Debentures and Warrants issued or issuable
pursuant to the Securities Purchase Agreement,  which Registration Statement, to
the  extent  allowable  under  the  1933  Act  and  the  rules  and  regulations
promulgated  thereunder (including Rule 416), shall state that such Registration
Statement also covers such  indeterminate  number of additional shares of Common
Stock as may become  issuable upon  conversion  of or otherwise  pursuant to the
Debentures and exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions.  The number of shares of Common
Stock initially included in such Registration Statement shall be no less than an
amount  equal to two (2) times the sum of the number of  Conversion  Shares that
are then issuable upon  conversion of the Debentures  and Additional  Debentures
(based on the Variable  Conversion Price as would then be in effect and assuming
the Variable  Conversion  Price is the Conversion  Price at such time),  and the
number of Warrant  Shares that are then  issuable upon exercise of the Warrants,
without  regard to any  limitation  on the  Investor's  ability to  convert  the
Debentures or exercise the Warrants. The Company acknowledges that the number of
shares initially included in the Registration  Statement represents a good faith
estimate  of the  maximum  number  of shares  issuable  upon  conversion  of the
Debentures and upon exercise of the Warrants.

          B. UNDERWRITTEN  OFFERING.  If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable  Securities subject
to such underwritten offering, with the consent of a majority-in-interest of the
Initial  Investors,  shall  have the right to select  one legal  counsel  and an
investment banker or bankers and manager or managers to administer the

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offering,  which  investment  banker or bankers or manager or managers  shall be
reasonably satisfactory to the Company.

          C. PAYMENTS BY THE COMPANY.  The Company shall use its best efforts to
obtain  effectiveness of the Registration  Statement as soon as practicable.  If
(i) the Registration  Statement(s) covering the Registrable  Securities required
to be filed by the Company  pursuant to Section  2(a) hereof is not filed by the
Filing Date or  declared  effective  by the SEC on or prior to one hundred  five
(105) days from the date of Closing,  or (ii) after the  Registration  Statement
has  been  declared  effective  by the  SEC,  sales  of  all of the  Registrable
Securities cannot be made pursuant to the Registration  Statement,  or (iii) the
Common  Stock is not listed or included  for  quotation  on the Nasdaq  National
Market ("NASDAQ"),  the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New York
Stock  Exchange (the "NYSE") or the American  Stock  Exchange (the "AMEX") after
being so listed or included for quotation, or (iv) the Common Stock ceases to be
traded on the  Over-the-Counter  Bulletin  Board (the "OTCBB") or any equivalent
replacement  exchange  prior to being listed or included for quotation on one of
the aforementioned markets, then the Company will make payments to the Investors
in such  amounts  and at such  times  as shall be  determined  pursuant  to this
Section 2(c) as partial relief for the damages to the Investors by reason of any
such delay in or reduction of their ability to sell the  Registrable  Securities
(which remedy shall not be exclusive of any other  remedies  available at law or
in  equity).  The  Company  shall  pay  to  each  holder  of the  Debentures  or
Registrable  Securities an amount equal to the then outstanding principal amount
of the Debentures  (and, in the case of holders of Registrable  Securities,  the
principal  amount of  Debentures  from which such  Registrable  Securities  were
converted)  ("OUTSTANDING  PRINCIPAL  AMOUNT"),  multiplied  by  the  Applicable
Percentage  (as  defined  below)  times  the sum of:  (i) the  number  of months
(prorated  for  partial  months)  after  the  Filing  Date  or  the  end  of the
aforementioned  one  hundred  five  (105) day  period  and prior to the date the
Registration Statement is declared effective by the SEC, provided, however, that
there  shall  be  excluded   from  such  period  any  delays  which  are  solely
attributable to changes required by the Investors in the Registration  Statement
with  respect to  information  relating  to the  Investors,  including,  without
limitation,  changes  to the  plan of  distribution,  or to the  failure  of the
Investors to conduct  their  review of the  Registration  Statement  pursuant to
Section  3(h) below in a  reasonably  prompt  manner;  (ii) the number of months
(prorated for partial  months) that sales of all of the  Registrable  Securities
cannot be made pursuant to the  Registration  Statement  after the  Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the  Company's  failure to  properly  supplement  or
amend the  prospectus  included  therein  in  accordance  with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in Section
3(f));  and (iii) the number of months  (prorated  for partial  months) that the
Common  Stock is not listed or  included  for  quotation  on the OTCBB,  Nasdaq,
Nasdaq  SmallCap,  NYSE or AMEX or that  trading  thereon  is  halted  after the
Registration  Statement  has  been  declared  effective.  The  term  "APPLICABLE
PERCENTAGE"  means two  hundredths  (.02).  (For  example,  if the  Registration
Statement  becomes  effective  one (1) month  after  the end of such  thirty-day
period, the Company would pay $5,000 for each $250,000 of Outstanding  Principal
Amount.  If  thereafter,  sales could not be made  pursuant to the  Registration
Statement  for an additional  period of one (1) month,  the Company would pay an
additional  $5,000 for each  $250,000 of  Outstanding  Principal  Amount.)  Such
amounts shall be paid in cash or, at the Company's  option,  in shares of Common
Stock  priced at the  Conversion  Price (as defined in the  Debentures)  on such
payment date.

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<PAGE>

          D.  PIGGY-BACK  REGISTRATIONS.  Subject to the last  sentence  of this
Section 2(d), if at any time prior to the expiration of the Registration  Period
(as  hereinafter  defined)  the Company  shall  determine to file with the SEC a
Registration  Statement  relating  to an  offering  for its own  account  or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents  relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity  securities  issuable in  connection  with stock  option or other BONA
FIDE,  employee  benefit plans),  the Company shall send to each Investor who is
entitled to  registration  rights under this Section 2(d) written notice of such
determination  and, if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing,  the Company shall include in
such Registration  Statement all or any part of the Registrable  Securities such
Investor  requests  to be  registered,  except that if, in  connection  with any
underwritten  public  offering  for the  account  of the  Company  the  managing
underwriter(s)  thereof  shall  impose a  limitation  on the number of shares of
Common Stock which may be included in the  Registration  Statement  because,  in
such  underwriter(s)'   judgment,   marketing  or  other  factors  dictate  such
limitation  is necessary to  facilitate  public  distribution,  then the Company
shall be obligated to include in such  Registration  Statement only such limited
portion of the  Registrable  Securities  with respect to which such Investor has
requested  inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable  Securities  shall be made pro rata among the  Investors  seeking to
include  Registrable  Securities  in  proportion  to the  number of  Registrable
Securities sought to be included by such Investors;  PROVIDED, HOWEVER, that the
Company  shall not exclude  any  Registrable  Securities  unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to  inclusion  of such  securities  in such  Registration  Statement  or are not
entitled to pro rata inclusion with the  Registrable  Securities;  and PROVIDED,
FURTHER,  HOWEVER,  that,  after  giving  effect  to the  immediately  preceding
proviso,  any exclusion of  Registrable  Securities  shall be made pro rata with
holders of other  securities  having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights.  No right to registration of Registrable  Securities  under this Section
2(d) shall be construed to limit any  registration  required  under Section 2(a)
hereof.  If an  offering  in  connection  with which an  Investor is entitled to
registration  under this Section  2(d) is an  underwritten  offering,  then each
Investor  whose  Registrable   Securities  are  included  in  such  Registration
Statement shall,  unless  otherwise  agreed by the Company,  offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and  conditions  as other shares of Common Stock  included in such  underwritten
offering.  Notwithstanding  anything  to the  contrary  set  forth  herein,  the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain  effectiveness  of any  Registration  Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.

          E. ELIGIBILITY FOR FORM S-3, SB-2 OR S-1;  CONVERSION TO FORM S-3. The
Company  represents and warrants that it meets the  requirements  for the use of
Form S-3, SB-2 or S-1 for registration of the sale by the Initial  Investors and
any other  Investors of the Registrable  Securities.  The Company agrees to file
all reports  required to be filed by the Company with the SEC in a timely manner
so as to remain eligible or become eligible,  as the case may be, and thereafter
to  maintain  its  eligibility,  for the use of Form S-3.  If the Company is not
currently  eligible to use Form S-3, not later than five (5) business days after
the Company

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<PAGE>

first meets the  registration  eligibility and transaction  requirements for the
use of Form S-3 (or any successor  form) for  registration of the offer and sale
by the Initial Investors and any other Investors of Registrable Securities,  the
Company shall file a Registration Statement on Form S-3 (or such successor form)
with respect to the Registrable Securities covered by the Registration Statement
on Form SB-2 or Form S-1,  whichever is  applicable,  filed  pursuant to Section
2(a) (and include in such  Registration  Statement  on Form S-3 the  information
required by Rule 429 under the 1933 Act) or convert the  Registration  Statement
on Form SB-2 or Form S-1,  whichever is  applicable,  filed  pursuant to Section
2(a) to a Form S-3  pursuant  to Rule 429  under  the  1933 Act and  cause  such
Registration  Statement (or such  amendment)  to be declared  effective no later
than forty-five (45) days after filing.  In the event of a breach by the Company
of the  provisions  of this Section  2(e),  the Company will be required to make
payments pursuant to Section 2(c) hereof.

     3.   OBLIGATIONS OF THE COMPANY.

     In connection  with the  registration of the  Registrable  Securities,  the
Company shall have the following obligations:

          A. The Company shall prepare promptly, and file with the SEC not later
than the Filing Date,  a  Registration  Statement  with respect to the number of
Registrable  Securities  provided in Section 2(a),  and  thereafter use its best
efforts to cause such Registration  Statement relating to Registrable Securities
to become  effective as soon as possible after such filing but in no event later
than one  hundred  five  (105)  days  from the  date of  Closing),  and keep the
Registration  Statement  effective  pursuant to Rule 415 at all times until such
date  as is  the  earlier  of (i)  the  date  on  which  all of the  Registrable
Securities have been sold and (ii) the date on which the Registrable  Securities
(in the opinion of counsel to the Initial  Investors) may be immediately sold to
the public without registration or restriction  (including without limitation as
to  volume  by each  holder  thereof)  under  the 1933  Act  (the  "REGISTRATION
PERIOD"),  which Registration Statement (including any amendments or supplements
thereto  and  prospectuses  contained  therein)  shall not  contain  any  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein, or necessary to make the statements therein not misleading.

          B. The Company  shall  prepare  and file with the SEC such  amendments
(including  post-effective  amendments)  and  supplements  to  the  Registration
Statements  and  the  prospectus  used  in  connection  with  the   Registration
Statements as may be necessary to keep the Registration  Statements effective at
all times during the Registration  Period, and, during such period,  comply with
the  provisions  of  the  1933  Act  with  respect  to  the  disposition  of all
Registrable  Securities of the Company  covered by the  Registration  Statements
until such time as all of such  Registrable  Securities have been disposed of in
accordance  with the intended  methods of  disposition  by the seller or sellers
thereof as set forth in the Registration Statements.  In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the  Registrable  Securities  issued or issuable
upon  conversion of the  Debentures  and exercise of the  Warrants,  the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor,  if applicable),  or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable,  but in any
event within fifteen (15) days after the necessity therefor

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arises (based on the market price of the Common Stock and other relevant factors
on which the Company  reasonably elects to rely). The Company shall use its best
efforts to cause such  amendment  and/or new  Registration  Statement  to become
effective as soon as practicable  following the filing thereof, but in any event
within  thirty  (30) days after the date on which the Company  reasonably  first
determines  (or  reasonably  should  have  determined)  the need  therefor.  The
provisions  of  Section  2(c) above  shall be  applicable  with  respect to such
obligation,  with the one  hundred  five  (105)  days  running  from the day the
Company  reasonably first determines (or reasonably  should have determined) the
need therefor.

          C. The  Company  shall  furnish  to each  Investor  whose  Registrable
Securities  are included in a  Registration  Statement and its legal counsel (i)
promptly  (but in no event more than two (2)  business  days)  after the same is
prepared  and  publicly  distributed,  filed with the SEC,  or  received  by the
Company, one copy of each Registration Statement and any amendment thereto, each
preliminary  prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in Section 2(a), each
letter  written  by or on behalf of the  Company  to the SEC or the staff of the
SEC,  and each item of  correspondence  from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment),  and (ii) promptly (but in no event more than two (2) business days)
after the Registration  Statement is declared  effective by the SEC, such number
of  copies  of  a  prospectus,  including  a  preliminary  prospectus,  and  all
amendments and supplements thereto and such other documents as such Investor may
reasonably  request in order to facilitate the  disposition  of the  Registrable
Securities  owned by such  Investor.  The Company will  immediately  notify each
Investor by facsimile of the effectiveness of each Registration Statement or any
post-effective  amendment.  The Company will promptly (but in no event more than
ten (10) days)  respond  to any and all  comments  received  from the SEC (which
comments shall promptly be made available to the Investors upon request), with a
view towards causing each Registration  Statement or any amendment thereto to be
declared  effective by the SEC as soon as  practicable,  shall  promptly file an
acceleration  request as soon as practicable  (but in no event more than two (2)
business days)  following the resolution or clearance of all SEC comments or, if
applicable,  following  notification  by the  SEC  that  any  such  Registration
Statement  or any  amendment  thereto  will not be  subject  to review and shall
promptly file with the SEC a final  prospectus as soon as practicable (but in no
event more than two (2) business days) following receipt by the Company from the
SEC of an order declaring the Registration Statement effective.  In the event of
a breach by the Company of the provisions of this Section 3(c), the Company will
be required to make payments pursuant to Section 2(c) hereof.

          D. The  Company  shall use  reasonable  efforts  to (i)  register  and
qualify the Registrable Securities covered by the Registration  Statements under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as the  Investors  who hold a majority  in  interest  of the  Registrable
Securities  being  offered  reasonably  request,  (ii) prepare and file in those
jurisdictions  such  amendments   (including   post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  PROVIDED,  HOWEVER, that
the Company

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shall not be required in connection  therewith or as a condition  thereto to (a)
qualify to do  business  in any  jurisdiction  where it would not  otherwise  be
required to qualify but for this  Section  3(d),  (b) subject  itself to general
taxation  in any such  jurisdiction,  (c) file a general  consent  to service of
process in any such  jurisdiction,  (d) provide any undertakings  that cause the
Company  undue  expense  or  burden,  or (e) make any  change in its  charter or
bylaws,  which in each case the Board of Directors of the Company  determines to
be contrary to the best interests of the Company and its shareholders.

          E. In the  event  Investors  who  hold a  majority-in-interest  of the
Registrable  Securities  being  offered in the offering  (with the approval of a
majority-in-interest  of the  Initial  Investors)  select  underwriters  for the
offering,  the Company  shall enter into and  perform its  obligations  under an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,  customary  indemnification and contribution  obligations,  with the
underwriters of such offering.

          F. As promptly as practicable  after becoming aware of such event, the
Company shall notify each  Investor of the happening of any event,  of which the
Company  has  knowledge,  as a result of which the  prospectus  included  in any
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  and use its best
efforts  promptly  to prepare a  supplement  or  amendment  to any  Registration
Statement to correct such untrue statement or omission,  and deliver such number
of copies of such  supplement or amendment to each Investor as such Investor may
reasonably  request;  provided  that,  for not more  than  ten (10)  consecutive
trading days (or a total of not more than twenty (20) trading days in any twelve
(12) month period),  the Company may delay the disclosure of material non-public
information  concerning  the  Company  (as well as  prospectus  or  Registration
Statement  updating)  the  disclosure  of which at the time is not,  in the good
faith opinion of the Company,  in the best interests of the Company (an "ALLOWED
DELAY");  provided,  further,  that the Company  shall  promptly  (i) notify the
Investors  in writing of the  existence  of (but in no event,  without the prior
written consent of an Investor,  shall the Company disclose to such investor any
of the facts or circumstances  regarding) material non-public information giving
rise to an Allowed  Delay and (ii) advise the  Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed  Delay,  the Company shall again be bound by the first
sentence  of this  Section  3(f) with  respect to the  information  giving  rise
thereto.

          G. The Company  shall use its best  efforts to prevent the issuance of
any  stop  order  or  other  suspension  of  effectiveness  of any  Registration
Statement,  and, if such an order is issued,  to obtain the  withdrawal  of such
order at the  earliest  possible  moment and to notify each  Investor  who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the  managing  underwriters)  of the  issuance of such order and the  resolution
thereof.

          H. The Company shall permit a single firm of counsel designated by the
Initial Investors to review such  Registration  Statement and all amendments and
supplements  thereto (as well as all requests for  acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any  document in a form to which such counsel  reasonably  objects and will
not request acceleration of such Registration Statement

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<PAGE>

without  prior  notice  to such  counsel.  The  sections  of  such  Registration
Statement  covering  information  with respect to the Investors,  the Investor's
beneficial  ownership of  securities  of the Company or the  Investors  intended
method of disposition of Registrable Securities shall conform to the information
provided to the Company by each of the Investors.

          I. The Company shall make generally  available to its security holders
as soon as  practicable,  but not later than ninety (90) days after the close of
the period covered  thereby,  an earnings  statement (in form complying with the
provisions  of Rule 158 under  the 1933  Act)  covering  a  twelve-month  period
beginning  not later than the first day of the  Company's  fiscal  quarter  next
following the effective date of the Registration Statement.

          J. At the request of any Investor,  the Company shall furnish,  on the
date that  Registrable  Securities are delivered to an underwriter,  if any, for
sale in connection  with any  Registration  Statement or, if such securities are
not being sold by an underwriter,  on the date of  effectiveness  thereof (i) an
opinion,  dated as of such date,  from  counsel  representing  the  Company  for
purposes of such  Registration  Statement,  in form,  scope and  substance as is
customarily  given  in  an  underwritten  public  offering,   addressed  to  the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's  independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering,  addressed to the underwriters,  if any, and
the Investors.

          K.  The  Company  shall  make  available  for  inspection  by (i)  any
Investor,  (ii) any underwriter  participating in any disposition  pursuant to a
Registration Statement,  (iii) one firm of attorneys and one firm of accountants
or other agents  retained by the Initial  Investors,  (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters  (collectively,  the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company,  including without limitation,  records
of conversions by other holders of convertible  securities issued by the Company
and  the  issuance  of  stock  to  such  holders  pursuant  to  the  conversions
(collectively,  the "RECORDS"),  as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause  the  Company's  officers,  directors  and  employees  to  supply  all
information which any Inspector may reasonably  request for purposes of such due
diligence;  PROVIDED,  HOWEVER, that each Inspector shall hold in confidence and
shall not make any  disclosure  (except to an  Investor)  of any Record or other
information which the Company  determines in good faith to be confidential,  and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a  misstatement  or omission in
any Registration Statement,  (b) the release of such Records is ordered pursuant
to a  subpoena  or other  order  from a court or  government  body of  competent
jurisdiction,  or (c) the  information  in such Records has been made  generally
available  to the public  other than by  disclosure  in violation of this or any
other agreement.  The Company shall not be required to disclose any confidential
information  in such Records to any  Inspector  until and unless such  Inspector
shall  have  entered  into  confidentiality  agreements  (in form and  substance
satisfactory   to  the  Company)   with  the  Company   with  respect   thereto,
substantially  in the form of this Section 3(k).  Each  Investor  agrees that it
shall,  upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give

                                       8
<PAGE>

prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for,  the  Records  deemed  confidential.   Nothing  herein  (or  in  any  other
confidentiality  agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

          L. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such  information  is necessary  to comply with  federal or state  securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement  or omission in any  Registration  Statement,  (iii) the release of
such  information is ordered  pursuant to a subpoena or other order from a court
or governmental  body of competent  jurisdiction,  or (iv) such  information has
been  made  generally  available  to the  public  other  than by  disclosure  in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or  governmental  body of competent  jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure,  and
allow the Investor,  at its expense, to undertake  appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

          M. The Company shall (i) cause all the Registrable  Securities covered
by the Registration  Statement to be listed on each national securities exchange
on which  securities  of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable  Securities is then permitted
under the rules of such  exchange,  or (ii) to the extent the  securities of the
same class or series  are not then  listed on a  national  securities  exchange,
secure the designation and quotation,  of all the Registrable Securities covered
by the  Registration  Statement  on Nasdaq or, if not  eligible  for Nasdaq,  on
Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap,  on the OTCBB
or the BBX (or an equivalent  exchange) and,  without limiting the generality of
the  foregoing,  to arrange for at least two market  makers to register with the
National  Association of Securities Dealers,  Inc. ("NASD") as such with respect
to such Registrable Securities.

          N. The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable  Securities not later than the effective
date of the Registration Statement.

          O. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing  underwriter or underwriters,  if any,
to facilitate the timely  preparation and delivery of certificates  (not bearing
any  restrictive  legends)  representing  Registrable  Securities  to be offered
pursuant to a Registration  Statement and enable such certificates to be in such
denominations  or amounts,  as the case may be, as the managing  underwriter  or
underwriters,  if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration  Statement
which  includes  Registrable  Securities  is ordered  effective  by the SEC, the
Company shall deliver,  and shall cause legal counsel selected by the Company to
deliver,  to the transfer agent for the Registrable  Securities  (with copies to
the Investors whose Registrable Securities are included in such Registration

                                       9
<PAGE>

Statement)  an  instruction  in the form  attached  hereto  as  EXHIBIT 1 and an
opinion of such counsel in the form attached hereto as EXHIBIT 2.

          P. At the  request  of the  holders of a  majority-in-interest  of the
Registrable  Securities,  the Company  shall  prepare and file with the SEC such
amendments   (including   post-effective   amendments)   and  supplements  to  a
Registration   Statement  and  any  prospectus   used  in  connection  with  the
Registration  Statement  as may be  necessary  in  order to  change  the plan of
distribution set forth in such Registration Statement.

          Q. From and after the date of this  Agreement,  the Company shall not,
and shall not agree to,  allow the holders of any  securities  of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement  thereto under Section 3(b) hereof without
the  consent  of  the  holders  of a  majority-in-interest  of  the  Registrable
Securities.

          R. The Company shall take all other  reasonable  actions  necessary to
expedite and facilitate  disposition by the Investors of Registrable  Securities
pursuant to a Registration Statement.

     4.   OBLIGATIONS OF THE INVESTORS.

     In connection  with the  registration of the  Registrable  Securities,  the
Investors shall have the following obligations:

          A. It shall be a condition precedent to the obligations of the Company
to complete  the  registration  pursuant to this  Agreement  with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information  regarding  itself,  the Registrable  Securities
held by it and the intended method of disposition of the Registrable  Securities
held by it as shall be reasonably  required to effect the  registration  of such
Registrable  Securities and shall execute such documents in connection with such
registration as the Company may reasonably  request. At least three (3) business
days prior to the first anticipated  filing date of the Registration  Statement,
the Company shall notify each Investor of the information  the Company  requires
from each such Investor.

          B. Each Investor,  by such  Investor's  acceptance of the  Registrable
Securities,  agrees to cooperate with the Company as reasonably requested by the
Company  in  connection  with the  preparation  and  filing of the  Registration
Statements  hereunder,  unless such Investor has notified the Company in writing
of such  Investor's  election  to  exclude  all of such  Investor's  Registrable
Securities from the Registration Statements.

          C.  In the  event  Investors  holding  a  majority-in-interest  of the
Registrable  Securities  being  registered  (with the  approval  of the  Initial
Investors)  determine to engage the services of an  underwriter,  each  Investor
agrees  to  enter  into  and  perform  such  Investor's   obligations  under  an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,  customary  indemnification and contribution  obligations,  with the
managing  underwriter  of such  offering  and take  such  other  actions  as are
reasonably  required in order to expedite or facilitate  the  disposition of the
Registrable Securities, unless such Investor has

                                       10
<PAGE>

notified  the Company in writing of such  Investor's  election to exclude all of
such Investor's Registrable Securities from such Registration Statement.

          D. Each  Investor  agrees  that,  upon  receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(f) or
3(g),  such Investor will  immediately  discontinue  disposition  of Registrable
Securities  pursuant to the  Registration  Statement  covering such  Registrable
Securities  until such Investor's  receipt of the copies of the  supplemented or
amended  prospectus  contemplated by Section 3(f) or 3(g) and, if so directed by
the Company,  such Investor  shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a  certificate  of  destruction)
all  copies in such  Investor's  possession,  of the  prospectus  covering  such
Registrable Securities current at the time of receipt of such notice.

          E.  No  Investor  may  participate  in any  underwritten  registration
hereunder  unless such Investor (i) agrees to sell such  Investor's  Registrable
Securities on the basis provided in any  underwriting  arrangements in usual and
customary  form  entered into by the Company,  (ii)  completes  and executes all
questionnaires,  powers of attorney,  indemnities,  underwriting  agreements and
other  documents  reasonably  required  under  the  terms  of such  underwriting
arrangements,  and (iii)  agrees to pay its pro rata  share of all  underwriting
discounts  and  commissions  and any expenses in excess of those  payable by the
Company pursuant to Section 5 below.

     5.   EXPENSES OF REGISTRATION.

     All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including,  without limitation, all registration,  listing and
qualification  fees, printers and accounting fees, the fees and disbursements of
counsel  for the  Company,  and the  reasonable  fees and  disbursements  of one
counsel  selected by the Initial  Investors  pursuant to Sections  2(b) and 3(h)
hereof shall be borne by the Company.

     6.   INDEMNIFICATION.

     In the event any  Registrable  Securities  are  included in a  Registration
Statement under this Agreement:

          A. To the extent  permitted by law, the Company will  indemnify,  hold
harmless  and defend (i) each  Investor who holds such  Registrable  Securities,
(ii) the directors,  officers,  partners,  employees, agents and each person who
controls  any  Investor  within the  meaning  of the 1933 Act or the  Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any underwriter
(as  defined  in the 1933  Act)  for the  Investors,  and  (iv)  the  directors,
officers,  partners, employees and each person who controls any such underwriter
within  the  meaning  of the  1933  Act or  the  1934  Act,  if  any  (each,  an
"INDEMNIFIED  PERSON"),  against any joint or several losses,  claims,  damages,
liabilities  or expenses  (collectively,  together with actions,  proceedings or
inquiries by any regulatory or self-regulatory  organization,  whether commenced
or  threatened,  in respect  thereof,  "CLAIMS") to which any of them may become
subject  insofar as such Claims  arise out of or are based upon:  (i) any untrue
statement or alleged

                                       11
<PAGE>

untrue statement of a material fact in a Registration  Statement or the omission
or alleged  omission to state  therein a material  fact required to be stated or
necessary  to make the  statements  therein  not  misleading;  (ii)  any  untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
preliminary  prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,  if
the Company files any amendment  thereof or supplement  thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,  in light of the circumstances under which the
statements therein were made, not misleading;  or (iii) any violation or alleged
violation  by the  Company  of the  1933  Act,  the 1934  Act,  any  other  law,
including,  without  limitation,  any  state  securities  law,  or any  rule  or
regulation  thereunder  relating  to  the  offer  or  sale  of  the  Registrable
Securities  (the  matters in the  foregoing  clauses  (i) through  (iii)  being,
collectively,  "Violations").  Subject to the  restrictions set forth in Section
6(c) with respect to the number of legal  counsel,  the Company shall  reimburse
the Indemnified  Person,  promptly as such expenses are incurred and are due and
payable,  for any reasonable legal fees or other reasonable expenses incurred by
them  in   connection   with   investigating   or  defending   any  such  Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by any Indemnified  Person
or underwriter for such Indemnified  Person expressly for use in connection with
the preparation of such Registration  Statement or any such amendment thereof or
supplement  thereto, if such prospectus was timely made available by the Company
pursuant  to  Section  3(c)  hereof;  (ii)  shall not apply to  amounts  paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company,  which consent shall not be unreasonably  withheld;  and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified  Person if the untrue  statement or omission of material fact
contained in the  preliminary  prospectus was corrected on a timely basis in the
prospectus,  as then amended or  supplemented,  such  corrected  prospectus  was
timely made  available by the Company  pursuant to Section 3(c) hereof,  and the
Indemnified  Person was  promptly  advised in writing  not to use the  incorrect
prospectus  prior to the use giving  rise to a  Violation  and such  Indemnified
Person,  notwithstanding  such advice,  used it. Such indemnity  shall remain in
full force and effect  regardless of any  investigation  made by or on behalf of
the  Indemnified  Person  and shall  survive  the  transfer  of the  Registrable
Securities by the Investors pursuant to Section 9.

          B. In connection with any Registration  Statement in which an Investor
is  participating,  each such  Investor  agrees  severally  and not  jointly  to
indemnify,  hold harmless and defend,  to the same extent and in the same manner
set forth in Section  6(a),  the  Company,  each of its  directors,  each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any  underwriter
and any  other  shareholder  selling  securities  pursuant  to the  Registration
Statement or any of its  directors  or officers or any person who controls  such
shareholder  or  underwriter  within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED  PARTY"),
against any Claim to which any of them may become  subject,  under the 1933 Act,
the 1934 Act or otherwise,  insofar as such Claim arises out of or is based upon
any  Violation  by such  Investor,  in each case to the extent  (and only to the
extent)  that such  Violation  occurs in reliance  upon and in  conformity  with
written information  furnished to the Company by such Investor expressly for use
in connection with such

                                       12
<PAGE>

Registration Statement; and subject to Section 6(c) such Investor will reimburse
any legal or other expenses  (promptly as such expenses are incurred and are due
and payable)  reasonably  incurred by them in connection with  investigating  or
defending  any such  Claim;  PROVIDED,  HOWEVER,  that the  indemnity  agreement
contained in this Section 6(b) shall not apply to amounts paid in  settlement of
any Claim if such  settlement is effected  without the prior written  consent of
such  Investor,  which consent  shall not be  unreasonably  withheld;  PROVIDED,
FURTHER,  HOWEVER,  that the  Investor  shall be  liable  under  this  Agreement
(including  this  Section  6(b) and  Section 7) for only that amount as does not
exceed the net proceeds to such Investor as a result of the sale of  Registrable
Securities pursuant to such Registration Statement.  Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such  Indemnified  Party and  shall  survive  the  transfer  of the  Registrable
Securities by the Investors pursuant to Section 9.  Notwithstanding  anything to
the contrary contained herein, the  indemnification  agreement contained in this
Section 6(b) with respect to any preliminary  prospectus  shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary  prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.

          C. Promptly  after  receipt by an  Indemnified  Person or  Indemnified
Party  under  this  Section  6 of  notice  of the  commencement  of  any  action
(including any  governmental  action),  such  Indemnified  Person or Indemnified
Party  shall,  if a  Claim  in  respect  thereof  is  to  be  made  against  any
indemnifying  party under this  Section 6, deliver to the  indemnifying  party a
written notice of the commencement  thereof,  and the  indemnifying  party shall
have the right to participate in, and, to the extent the  indemnifying  party so
desires,  jointly with any other indemnifying party similarly noticed, to assume
control  of the  defense  thereof  with  counsel  mutually  satisfactory  to the
indemnifying  party and the Indemnified  Person or the Indemnified Party, as the
case may be; PROVIDED,  HOWEVER, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel  with the fees and expenses to be
paid by the  indemnifying  party,  if,  in the  reasonable  opinion  of  counsel
retained by the indemnifying  party, the  representation  by such counsel of the
Indemnified  Person or  Indemnified  Party and the  indemnifying  party would be
inappropriate  due to actual  or  potential  differing  interests  between  such
Indemnified  Person or Indemnified Party and any other party represented by such
counsel  in such  proceeding.  The  indemnifying  party  shall  pay for only one
separate legal counsel for the Indemnified  Persons or the Indemnified  Parties,
as applicable,  and such legal counsel shall be selected by Investors  holding a
majority-in-interest  of the Registrable Securities included in the Registration
Statement   to   which   the   Claim   relates   (with   the   approval   of   a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification  hereunder,  or the  Company,  if the  Company  is  entitled  to
indemnification  hereunder, as applicable. The failure to deliver written notice
to the  indemnifying  party within a reasonable time of the  commencement of any
such action shall not relieve such  indemnifying  party of any  liability to the
Indemnified  Person or  Indemnified  Party  under this  Section 6, except to the
extent  that the  indemnifying  party is actually  prejudiced  in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by  periodic   payments  of  the  amount   thereof  during  the  course  of  the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

                                       13
<PAGE>

     7.   CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying  party agrees to make the maximum  contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the  fullest  extent  permitted  by law;  PROVIDED,  HOWEVER,  that  (i) no
contribution  shall be made under  circumstances  where the maker would not have
been liable for  indemnification  under the fault standards set forth in Section
6,  (ii)  no   seller   of   Registrable   Securities   guilty   of   fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution  from any seller of Registrable  Securities who was not
guilty of such fraudulent  misrepresentation,  and (iii) contribution  (together
with any  indemnification  or other  obligations  under this  Agreement)  by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

     8.   REPORTS UNDER THE 1934 ACT.

     With a view to making  available to the  Investors the benefits of Rule 144
promulgated  under the 1933 Act or any other  similar rule or  regulation of the
SEC that may at any time permit the investors to sell  securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:

          A. make and keep  public  information  available,  as those  terms are
understood and defined in Rule 144;

          B.  file  with  the SEC in a  timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company  remains  subject to such  requirements  (it being  understood  that
nothing herein shall limit the Company's  obligations  under Section 4(c) of the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents is required for the applicable provisions of Rule 144; and

          C. furnish to each Investor so long as such Investor owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company that
it has complied  with the reporting  requirements  of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent  annual or quarterly  report of the
Company and such other reports and documents so filed by the Company,  and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.

     9.   ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights under this Agreement  shall be  automatically  assignable by the
Investors to any transferee of all or any portion of Registrable  Securities if:
(i) the  Investor  agrees in writing with the  transferee  or assignee to assign
such rights,  and a copy of such  agreement is furnished to the Company within a
reasonable time after such assignment,  (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such  transferee or assignee,  and (b) the  securities  with
respect to which such  registration  rights are being  transferred  or assigned,
(iii)  following  such transfer or assignment,  the further  disposition of such
securities by the transferee or assignee is restricted under the 1933

                                       14
<PAGE>

Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice  contemplated  by clause (ii) of this sentence,  the
transferee or assignee  agrees in writing with the Company to be bound by all of
the  provisions  contained  herein,  (v) such  transfer  shall have been made in
accordance  with  the  applicable   requirements  of  the  Securities   Purchase
Agreement,  and (vi) such transferee  shall be an "ACCREDITED  INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

     10.  AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance  thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the Initial
Investors  (to  the  extent  such  Initial   Investor  still  owns   Registrable
Securities)  and  Investors  who hold a  majority  interest  of the  Registrable
Securities.  Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.

     11.  MISCELLANEOUS.

          A. A  person  or  entity  is  deemed  to be a  holder  of  Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

          B. Any  notices  required  or  permitted  to be given  under the terms
hereof shall be sent by certified or registered mail (return receipt  requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective  five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized  overnight delivery service) or
by  facsimile,  in each  case  addressed  to a  party.  The  addresses  for such
communications shall be:

                    If to the Company:

                    Peabodys Coffee, Inc.
                    3845 Atherton Road
                    Suite 9
                    Rocklin, CA 95765
                    Attention:  Todd Tkachuk
                    Telephone:  916-632-6090
                    Facsimile:   916-632-6099

                                       15
<PAGE>

                    With copies to:

                    Sichenzia Ross Friedman Ference LLP
                    1065 Avenue of the Americas, 21st Floor
                    New York, New York 10018
                    Attention:  Gregory Sichenzia, Esq.
                    Telephone:  212-930-9700
                    Facsimile:   212-930-9725
                    Email:  GSichenzia@srfllp.net


If to an Investor:  to the address set forth  immediately  below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                    With a copy to:

                    Ballard Spahr Andrews & Ingersoll, LLP
                    1735 Market Street
                    51st Floor
                    Philadelphia, Pennsylvania  19103
                    Attention:  Gerald J. Guarcini, Esq.
                    Telephone:  215-865-8625
                    Facsimile:  215-864-8999
                    Email:  guarcini@ballardspahr.com

          C.  Failure of any party to  exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

          D. THIS  AGREEMENT  SHALL BE  ENFORCED,  GOVERNED BY AND  CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF  CONFLICT  OF  LAWS.  THE  PARTIES  HERETO  HEREBY  SUBMIT  TO THE  EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS  CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES   IRREVOCABLY  WAIVE  THE  DEFENSE  OF  AN  INCONVENIENT  FORUM  TO  THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE
OF  PROCESS  UPON A PARTY  MAILED BY FIRST  CLASS  MAIL SHALL BE DEEMED IN EVERY
RESPECT  EFFECTIVE  SERVICE  OF  PROCESS  UPON THE  PARTY  IN ANY  SUCH  SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR

                                       16
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IN ANY OTHER  LAWFUL  MANNER.  THE PARTY  WHICH DOES NOT  PREVAIL IN ANY DISPUTE
ARISING UNDER THIS  AGREEMENT  SHALL BE  RESPONSIBLE  FOR ALL FEES AND EXPENSES,
INCLUDING  ATTORNEYS' FEES,  INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH
SUCH DISPUTE.

          E. In the event that any  provision  of this  Agreement  is invalid or
unenforceable  under any applicable  statute or rule of law, then such provision
shall be deemed  inoperative  to the extent that it may conflict  therewith  and
shall be deemed  modified  to  conform  with such  statute  or rule of law.  Any
provision  hereof which may prove invalid or  unenforceable  under any law shall
not affect the validity or enforceability of any other provision hereof.

          F. This Agreement,  the Warrants and the Securities Purchase Agreement
(including all schedules and exhibits  thereto)  constitute the entire agreement
among the parties  hereto with respect to the subject matter hereof and thereof.
There are no  restrictions,  promises,  warranties or  undertakings,  other than
those set forth or  referred  to herein  and  therein.  This  Agreement  and the
Securities  Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

          G. Subject to the  requirements  of Section 9 hereof,  this  Agreement
shall be  binding  upon and  inure  to the  benefit  of the  parties  and  their
successors and assigns.

          H. The headings in this  Agreement  are for  convenience  of reference
only and  shall  not  form  part of,  or  affect  the  interpretation  of,  this
Agreement.

          I. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement and shall become effective when  counterparts have been signed by
each party and delivered to the other party. This Agreement,  once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this  Agreement  bearing the signature of the party so  delivering  this
Agreement.

          J. Each party shall do and perform, or cause to be done and performed,
all such further acts and things,  and shall  execute and deliver all such other
agreements,  certificates,  instruments  and  documents,  as the other party may
reasonably  request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

          K.  Except  as  otherwise  provided  herein,  all  consents  and other
determinations  to be made by the Investors  pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable  Securities,  determined
as if the all of the Debentures  then  outstanding  have been converted into for
Registrable Securities.

          L. The  Company  acknowledges  that a breach by it of its  obligations
hereunder will cause  irreparable  harm to each Investor by vitiating the intent
and purpose of the transactions  contemplated hereby.  Accordingly,  the Company
acknowledges  that the  remedy at law for breach of its  obligations  under this
Agreement will be inadequate and agrees,  in the event of a breach or threatened
breach by the Company of any of the provisions  under this Agreement,  that each
Investor shall be entitled,  in addition to all other available  remedies in law
or in equity,

                                       17
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and  in  addition  to the  penalties  assessable  herein,  to an
injunction or injunctions  restraining,  preventing or curing any breach of this
Agreement and to enforce  specifically the terms and provisions hereof,  without
the necessity of showing  economic  loss and without any bond or other  security
being required.

          M.  The  language  used in this  Agreement  will be  deemed  to be the
language  chosen by the parties to express their mutual intent,  and no rules of
strict construction will be applied against any party.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF,  the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.


PEABODYS COFFEE, INC.

______________________________________
Todd N. Tkachuk
President


AJW PARTNERS, LLC
By:  SMS Group, LLC

______________________________________
Corey S. Ribotsky
Manager


AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

______________________________________
Corey S. Ribotsky
Manager


AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

____________________________________
Corey S. Ribotsky
Manager

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