<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 8, 1999
COFFEE PEOPLE, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-21397 93-1073218
- -------------------------- ----------------------- ------------------
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
</TABLE>
11480 Commercial Parkway, Castroville, California 95012
- ---------------------------------------------------- --------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (831) 633-4001
--------------
N/A
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
================================================================================
<PAGE> 2
ITEM 5. OTHER EVENTS.
DIEDRICH COFFEE, INC.
On February 8, 1999, Coffee People, Inc. (the "Registrant" or "Coffee
People"), signed a letter of intent with Diedrich Coffee, Inc. (NASDAQ-DDRX)
("Diedrich"), with respect to the acquisition by Diedrich of all of the
outstanding shares of common stock of Coffee People. Under the terms of the
letter of intent, the stockholders of Coffee People will receive $10.75 million
in cash, 1,667,000 shares of Diedrich common stock and $14.25 million in cash or
a combination of cash and stock based on the net proceeds of a public equity
offering planned by Diedrich prior to the closing of the acquisition. The
proposed acquisition is subject to certain conditions, including the execution
of a definitive agreement, securing financing, completion of the public equity
offering by Diedrich upon certain specified terms, receipt of regulatory
approvals, due diligence and approval by the shareholders of Coffee People and
Diedrich.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit
Number Description
--------- -----------------------------------------------------------
<S> <C>
99.1 Press Release: "Diedrich Coffee to Acquire Coffee People,"
dated February 9, 1999.
99.2 Letter of Intent dated February 8, 1999.
</TABLE>
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this current report to be signed on its behalf by the
undersigned hereunto duly authorized.
COFFEE PEOPLE, INC.
an Oregon corporation
Date: February 11, 1999 By: /s/ Mark J. Archer
-------------------------
Mark J. Archer
Executive Vice President,
Chief Financial Officer
and Secretary
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Description #
--------- ------------------------------------------------- -----
<S> <C> <C>
99.1 Press Release: "Diedrich Coffee to Acquire Coffee 5
People," dated February 9, 1999.
99.2 Letter of Intent dated February 8, 1999. 7
</TABLE>
4
<PAGE> 1
EXHIBIT 99.1
[Diedrich Logo]
FOR IMMEDIATE RELEASE
Diedrich Coffee to Acquire Coffee People
COMBINATION CREATES SECOND LARGEST OPERATOR IN SPECIALTY COFFEE MARKET
Irvine, California - February 9, 1999 - Diedrich Coffee, Inc. (NASDAQ:
DDRX), a leading retailer, wholesaler and custom roaster of specialty coffee,
announced today that it has signed a letter of intent to acquire Coffee People,
Inc. (NASDAQ: MOKA).
This acquisition positions Diedrich Coffee as the second largest company in
the specialty coffee market and as an industry leader in mall-based retail
coffee stores. The combined company will have annual system-wide sales of more
than $150 million through 363 outlets in 38 states and seven countries. The
company's brands will include Diedrich Coffee, Coffee People and Coffee
Plantation coffeehouses and Gloria Jean's mall-based retail coffee stores.
"Profitability, synergies, access to capital and infrastructure are the
four big gains from this transaction," said John E. Martin, Chairman of Diedrich
Coffee, Inc. "The transaction is immediately accretive to earnings and provides
the management, distribution and roasting infrastructures that are necessary to
drive future growth. Diedrich Coffee has always stood out in terms of product
quality and the unique neighborhood environment we offer our customers. This
transaction makes us stand out in terms of size as well."
Under the terms of the letter of intent, Coffee People shareholders will
receive $10.75 million in cash, 1,667,000 shares of Diedrich Coffee common
stock, and $14.25 million in cash or a combination of cash and stock based on
the successful completion of a public equity offering by Diedrich Coffee. As of
February 8, there were approximately 10,760,000 shares of Coffee People common
stock outstanding. This transaction is expected to close in early summer and is
subject to a number of conditions including the execution of a definitive
agreement, securing financing and shareholder and regulatory approval.
"Our companies have a shared vision of expanding nationally through
franchising," said Alton W. McEwen, President and Chief Executive Officer of
Coffee People, Inc. "The strength and experience that John Martin and Tim Ryan
offer will help us realize that vision. Their leadership at Taco Bell in growing
the concept from 1,500 to 25,000 outlets in a thirteen year period is a case
study in capitalizing on a rapidly expanding segment with aggressive growth."
Diedrich Coffee's national expansion objective is to add 1,500 coffeehouses
over the next six years through franchise area development agreements with large
multi-unit franchise operators. The company has already signed two major
franchise agreements with contracts for the opening of up to 145 Diedrich Coffee
coffeehouses and plans to expand the Gloria Jean's brand.
With this transaction, Diedrich Coffee hopes to aggressively exploit the
emerging segmentation of the specialty coffee market. "We believe that, as the
market evolves, three
1
<PAGE> 2
distinct segments are emerging. These are neighborhood coffeehouses, mall-based
coffee stores and espresso/coffee bars. Now we have a leg up in the first two,"
said Tim Ryan, President and Chief Executive Officer of Diedrich Coffee, Inc.
Statements in this news release that relate to future plans, financial
results or projections, events or performance are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities and Exchange Act of 1934, as amended, and fall
under the safe harbor. Actual results and financial position could differ
materially from those anticipated in the forward-looking statements as a result
of a number of factors, including but not limited to, the successful closing of
this transaction, impact of competition, the availability of working capital and
other risks and uncertainties described in detail under "Certain Factors and
Trends Affecting Diedrich Coffee and its Business" in the Company's annual
report on form 10-K for the fiscal year ended January 28, 1998, and in the
Company's subsequent reports on form 10-Q, as well as in Coffee People's Form
10-K filed with the Securities and Exchange Commission on September 25, 1998 and
Registration Statement on Form S-4 as filed with the Securities and Exchange
Commission on April 23, 1998.
Media Contact: Dan Cahill
Diedrich Coffee, Inc.
(310) 966-5513
Dolores Chenoweth
Coffee People, Inc.
(503) 469-0338
Investor Contact: Ann Wride, Chief Financial Officer
Diedrich Coffee, Inc.
(949) 260-6713
Mark Archer, Chief Financial Officer
Coffee People, Inc.
(831) 633-4001
2
<PAGE> 1
EXHIBIT 99.2
DIEDRICH COFFEE, INC.
2144 MICHELSON DRIVE
IRVINE, CALIFORNIA 92612
February 8, 1999
Alton W. McEwen
President and Chief Executive Officer
Coffee People, Inc.
11480 Commercial Parkway
Castroville, CA 95012
Re: Acquisition of Coffee People, Inc. by Diedrich Coffee, Inc.
Dear Mr. McEwen:
This letter sets forth the terms of our agreement in principle with respect
to the negotiation of a definitive agreement (the "Definitive Agreement") under
which all of the issued and outstanding shares of Common Stock of Coffee People,
Inc., an Oregon corporation ("CP") would be acquired by Diedrich Coffee, Inc., a
Delaware corporation ("Diedrich"). Each of Diedrich and CP represent that this
letter of intent has been approved by its respective Board of Directors.
1. STRUCTURE. It is presently anticipated that the acquisition of all of
the issued and outstanding shares of Common Stock of CP by Diedrich (the
"Acquisition") would be structured as a merger of CP into a subsidiary of
Diedrich in a transaction accounted for as a purchase. The consideration to be
paid in the merger to the holders of the outstanding stock of CP would consist
of cash and shares of Diedrich Common Stock in the aggregate amount set forth
below. The consideration set forth below is based on an assumed capitalization
of CP consisting of 10.75 million shares of CP common stock outstanding.
The aggregate purchase price for all of the outstanding shares of capital
stock of CP will be $35 million (the "Aggregate Consideration") and would be
payable in cash and common stock of Diedrich as follows:
(a) CASH. The cash portion of the Aggregate Consideration (the "Cash
Consideration") would be $10.75 million plus the net proceeds of a public equity
offering (up to $14.25 million) conducted by Diedrich after the execution of the
Definitive Agreement and prior to the consummation of the Acquisition (the
"Public Offering"); provided that in no event shall the Cash Consideration
exceed $25 million. Diedrich agrees to use its reasonable best efforts to
complete the Public Offering and further agrees that all of the net proceeds of
the Public Offering (up to $14.25 million) will be paid to CP as part of the
Cash Consideration.
1
<PAGE> 2
(b) ISSUANCE OF DIEDRICH COMMON STOCK AS PARTIAL CONSIDERATION. A
portion of the Aggregate Consideration will be paid through the issuance of
1,667,000 shares of Diedrich Common Stock.
(c) ISSUANCE OF DIEDRICH COMMON STOCK IN THE EVENT OF A PARTIAL PUBLIC
OFFERING. In the event that Diedrich is unable to raise net proceeds of $14.25
million from the Public Offering at a price per share of $6.00 or more, a
portion of the Aggregate Consideration may be paid with a number of shares of
Diedrich Common Stock equal to the quotient of (i) $25 million less the Cash
Consideration as set forth in subsection (a) above divided by (ii) the price per
share to the public in the Public Offering (provided that such price per share
shall not be less than $6.00).
2. TERMS AND CONDITIONS. The transactions contemplated in this letter of
intent would be subject to customary terms and conditions and such other terms
and conditions as may be agreed upon by the parties, including, but not limited
to:
(a) the satisfaction by each party, in its sole discretion, with its
due diligence review;
(b) approval of the merger by the shareholders of Diedrich and CP;
(c) receipt of fairness opinions by Diedrich and CP from their
respective investment bankers;
(d) execution of definitive documentation with respect to the merger;
(e) if the Public Offering will not reasonably be consummated at a
price per share to the public of at least $6.00 with net proceeds
of at least $7 million, then either party may terminate the
definitive agreement upon written notice to the other party;
(f) receipt of a lock-up agreement from Second Cup Ltd. providing that
the shares of Diedrich Common Stock issued to Second Cup will not
be sold until the earlier of (i) the first anniversary of the
closing date of the Acquisition or (ii) the sale by Diedrich's
officers or directors of shares of Diedrich Common Stock in the
aggregate equal to 5% of the outstanding shares and option shares
of Diedrich's Common Stock held by all of them in the aggregate;
(g) compliance with all applicable legal and regulatory requirements
and receipt of all applicable regulatory approvals, including
approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976;
(h) receipt of any requisite consents by all lessors, lenders,
suppliers, vendors, customers and other third parties having
material agreements with CP that
2
<PAGE> 3
may be breached or terminated as a result of, or materially
altered by the consummation of, the Acquisition;
(i) agreement by the parties with respect to the treatment of CP's
outstanding stock options or other equity incentives in connection
with the Acquisition;
(j) no event shall have occurred prior to the consummation of the
Acquisition which has had or will have a material adverse effect
on the business, financial condition or results of operations of
either CP or Diedrich; and
(k) delivery to CP by Diedrich, prior to the execution of the
Definitive Agreement, of one or more written financing commitments
or evidence reasonably satisfactory to CP evidencing Diedrich's
ability to fund the minimum Cash Consideration of $10.75 million
described in Section 1(a).
3. DEFINITIVE AGREEMENT. The parties will use their best efforts to prepare
and execute as promptly as possible upon completion of their due diligence, but
in any event not later than March 5, 1999, a Definitive Agreement embodying the
terms of this letter and containing such other provisions as they and their
respective counsel may deem appropriate. The Definitive Agreement shall contain
representations and warranties customary in transactions of this nature. The
Definitive Agreement will contain closing conditions customary in transactions
of this nature including, but not limited to the conditions set forth above,
fulfillment of covenants and agreements of each of the parties, receipt of
required regulatory approvals and legal opinions. In addition, the Definitive
Agreement will provide that each of the parties will use their reasonable
efforts to consummate the Public Offering at a price per share to the public of
at least $6.00 and that Second Cup, as the majority shareholder of CP, will be
entitled to elect one of the seven members of the board of directors for so long
as Second Cup owns at least 10% of the outstanding shares of Diedrich Common
Stock.
4. DUE DILIGENCE. Each party will permit the other, and its financial and
legal representatives, to conduct a full and complete investigation and
evaluation of the other party's businesses, will provide such assistance as is
reasonably requested and will give access at reasonable times to all employees,
officers, assets, records, documents, and properties related to the other
party's business, assets and liabilities. Information obtained in such legal,
financial and business due diligence will be subject to the Non-Disclosure
Agreement, dated August 18, 1998, previously entered into by the parties. If
either CP or Diedrich determines, in its sole discretion, not to proceed with
the transactions contemplated herein, it shall notify the other party in
writing, and upon delivery of such notice, this letter of intent shall terminate
(except as set forth in Section 10 hereof) and all documentation and other
information obtained by either party (other than publicly available information)
shall be returned promptly.
5. CONDUCT OF BUSINESS. From and after the date hereof until the
termination of this letter of intent or until execution of a Definitive
Agreement, each party will conduct its business only in the normal and ordinary
course, in material compliance with all applicable contractual
3
<PAGE> 4
obligations, laws, rules and regulations, and in a manner consistent with past
practice, custom and business operating strategy; provided that in no event
shall either Diedrich or CP transfer or sell any material amount of their
respective assets (other than the sale or franchise of stores in the Gloria
Jeans' division).
6. EXPENSES AND FEES. Diedrich and CP shall pay their respective
transaction expenses (including fees and expenses of legal counsel, investment
bankers and any other representatives or consultants) in connection with the
transactions contemplated herein, whether such transactions are consummated or
not.
7. EXCLUSIVITY AND NO SOLICITATION.
(a) CP and Diedrich shall negotiate exclusively with each other for a
period from the date of execution of this Letter of Intent through March 5, 1999
(the "Exclusive Period"). During the Exclusive Period, neither party shall,
directly or indirectly, through any officer, director, agent or representative
(including without limitation investment bankers, attorneys, accountants and
consultants), or otherwise:
(i) solicit, initiate or further the submission of proposals or offers
from, or enter into any agreement with, any firm, corporation, partnership,
association, group (as defined in Section 13(d)(3) of the Exchange Act) or
other person or entity, individually or collectively (including without
limitation any managers or other employees of the parties or any of their
affiliates), other than Diedrich or CP, as applicable (a "Third Party"),
relating to any acquisition or purchase of all or a material portion of the
assets of, or any equity interest in, CP or any merger, consolidation or
business combination with CP or relating to any acquisition or purchase of
all or a material portion of the assets of, or any equity interest in,
Diedrich or any merger, consolidation or business combination with
Diedrich;
(ii) participate in any discussions or negotiations regarding, or
furnish to any Third Party any confidential information with respect
thereto; or
(iii) otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any Third Party to do
or seek to do any of the foregoing.
(b) During the Exclusive Period, each of CP and Diedrich shall notify the
other in writing within three days of receipt thereof if any such written
proposal or offer, or any written inquiry or contact relating to a proposed
offer or proposal with any Third Party, is made, and shall in any such notice,
set forth in reasonable detail the identity of the Third Party and the terms and
conditions of any proposal; provided, however, that neither CP nor Diedrich
shall be required to provide any of the information required to be set forth in
the notice as described in this Section 7(b) if, in the reasonable judgment of
such company's board of directors, providing such information would result in a
breach of or default under a confidentiality agreement to which such company is
a party provided that, in such event, CP or Diedrich, as the case may be,
4
<PAGE> 5
shall still be required to provide a notice to the other with any information
that is permitted, even if such information is limited to the fact that a
written proposal or offer, or a written inquiry or contact relating to a
proposed offer or proposal, has been received from an unidentified source.
(c) Each of CP and Diedrich shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Third
Party conducted prior to the date of this Agreement with respect to any of the
foregoing.
8. ANNOUNCEMENTS.
Except as may be required to comply with applicable securities laws,
Diedrich and CP agree that neither shall issue any press release regarding the
transactions contemplated hereby without the prior written consent of the other
party, which shall not be unreasonably withheld or delayed. Notwithstanding the
previous sentence, the parties acknowledge that each will make appropriate
filings with the Securities and Exchange Commission following execution of this
letter of intent.
9. CHOICE OF LAW.
This letter of intent and the Definitive Agreement shall be governed by and
construed and enforced in accordance with, the internal laws (excluding conflict
of laws principles) of the State of California.
10. BINDING AND NON-BINDING EFFECT.
This letter of intent is intended as a milestone in the negotiations and
discussions between the parties and contains a record of their understanding to
date of the scope and key elements of future relations between them. Nothing
contained herein, however, shall create any legal right or obligation between
Diedrich, CP or any other party, except as may be expressly set forth in this
Section 10. Notwithstanding the foregoing, the Confidentiality Agreement and the
provisions of Sections 6, 7, 8 and 10 and the last sentence of Section 4 of this
letter of intent are intended to be binding and enforceable obligations of the
parties. The Confidentiality Agreement and the provisions of Sections 6, 7, 8
and 10 and the last sentence of Section 4 of this letter of intent shall
continue in full force and effect following the termination or expiration of
this letter of intent.
5
<PAGE> 6
Please indicate CP's acceptance of the foregoing by signing, dating and
returning the enclosed copy of this letter to the undersigned.
Very truly yours,
DIEDRICH COFFEE, INC.
By: /s/ Timothy J. Ryan
---------------------------
Timothy J. Ryan
President and Chief Executive Officer
Agreed and accepted this 8th day of February, 1999.
COFFEE PEOPLE, INC.
By: /s/ Alton W. McEwen
--------------------------
Alton W. McEwen
President and Chief Executive Officer
6
