AMENDMENT NO. 2
                                       TO
                            ASSET PURCHASE AGREEMENT

     PEABODYS  COFFEE,  INC.,  a Nevada  corporation  ("Peabodys"),  and ARROSTO
COFFEE  COMPANY,  LLC,  a  California  limited  liability  Company  ("Arrosto"),
effective as of September 30, 2000, agree as follows:

1.   BACKGROUND  AND PURPOSE.  The parties  have entered into an Asset  Purchase
Agreement,  dated June 19, 2000 ("Asset Purchase  Agreement").  The parties have
amended  the Asset  Purchase  Agreement  pursuant  to  Amendment  No. 1 to Asset
Purchase  Agreement dated September 1, 2000. The parties now desire to amend the
Asset Purchase  Agreement further,  as set forth below.  Except as otherwise set
forth or as  otherwise  required  by context,  capitalized  terms shall have the
meanings set forth in the Asset Purchase Agreement.

2.   AMENDMENT.  The  following  sections  are amended as set forth  below.  Any
provision  of the Asset  Purchase  Agreement  which is not amended  hereby shall
remain in full force and effect as set forth in the Asset Purchase Agreement.

     (a)  Section 3.1 shall be amended to read as follows:

          3.1. ALLOCATION OF PURCHASE PRICE.  The parties  acknowledge  that the
          valuation  of  the  Shares,  as  restricted   securities   serving  as
          consideration for the Assets,  has been arbitrarily  determined by the
          parties.  In valuing the Shares the parties have  considered the value
          of the  Assets set forth on  Schedule  1. The Shares are valued by the
          parties at Twenty Cents ($0.20) per share, for an aggregate  valuation
          of Sixty-Four Thousand Dollars  ($64,000.00)  ("Purchase Price").  The
          Purchase  Price  shall be  allocated  among the Assets as set forth on
          Schedule 1. Each of the parties  shall  report  this  transaction  for
          federal  tax  purposes  in  accordance  with  this  allocation  of the
          Purchase Price.

     (b)  Section 4 shall be amended to read as follows:

          4.   PAYMENT OF  PURCHASE  PRICE.  As payment of the  Purchase  Price,
          Peabodys shall issue the Three Hundred and Twenty  Thousand  (320,000)
          Shares and deliver to Arrosto a share  certificate  representing  such
          issuance ("Share  Certificate") under the following terms, and subject
          to the following conditions:

          (a)  The parties  acknowledge  that, as of the Closing date all of the
          Assets are encumbered by a security interest in favor of G. E. Capital
          Small Business Finance Corporation ("Security Interest").  A condition
          precedent  to the  obligation  of  Peabodys  to issue the  Shares  and
          deliver  the Share  Certificate  to  Arrosto is the  removal  from the
          Assets of the  Security  Interest.  Upon  presentation  of evidence to
          Peabodys which establishes, to Peabodys' reasonable satisfaction, that
          the Security Interest has been

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          removed from the Assets, subject to other conditions set forth in this
          Section 4, Peabodys will issue the Shares, evidencing such issuance by
          delivery of the Share Certificate to Arrosto. If the Security Interest
          is not  removed on or before  December  31,  2000,  then the number of
          Shares  serving as  consideration  for the Assets  shall be reduced by
          Forty Thousand  (40,000) Shares.  Thereafter,  on the last day of each
          following  calendar  month,  until and including July 31, 2001, if the
          Security Interest has not been removed from the Assets,  the number of
          Shares  will be  reduced  by an  additional  Forty  Thousand  (40,000)
          Shares.

     (c)  Section 5 shall be amended to read as follows:

          5.   ASSUMPTION OF NO LIABILITIES.  In connection with the purchase of
          the Assets,  Peabodys will assume no liabilities or obligations except
          as expressly set forth in this Agreement.  It is expressly  understood
          and agreed that Peabodys will not be liable for any of the obligations
          or  liabilities  of Arrosto of any kind,  whether  accrued,  absolute,
          contingent or otherwise.

     (d)  Section 10.3 is deleted in its entirety.

     (e)  Schedule 1 is amended in its  entirety  to read as Schedule 1 attached
          hereto and incorporated herein.

3.   ACTIONS TO EFFECT  AMENDMENT.  The parties shall take all actions necessary
and proper to effect the amendments set forth in this Amendment No. 2 including,
without  limitation,  the return and  transfer  of title and  possession  to any
property which is no longer subject to the Asset Purchase Agreement, as amended.

                          Signatures on following page

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                                        ARROSTO COFFEE COMPANY, LLC,
                                        A California Limited Liability Company

                                        By:_____________________________________
                                                (Joe Konis, Member/Manager)

                                        PEABODYS COFFEE, INC.
                                        a Nevada Corporation

                                        By:_____________________________________
                                                (Todd N.Tkachuk, President)

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