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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) November 17, 1997
DIEDRICH COFFEE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-21203 33-0086628
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State or Other Jurisdiction Commission IRS Employer
of Incorporation File Number Identification No.
2144 Michelson Drive, Irvine, California 92612
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 260-1600
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
ANNOUNCEMENT OF NEW CHAIRMAN OF THE BOARD
On November 18, 1997, Diedrich Coffee, Inc., a Delaware corporation
(the "Company"), announced that former Taco Bell Worldwide Chairman and CEO Mr.
John E. Martin had agreed to join the Company's Board of Directors as Chairman,
replacing Lawrence Goelman. On November 17, 1997, Mr. Martin entered into a
letter agreement with the Company appointing him Chairman of the Board of the
Company. The agreement provides for a base salary of $8,333.33 per month, for so
long as Mr. Martin continues as Chairman of the Board. This agreement is
attached hereto as Exhibit 10.21. Subject to stockholder approval, the Company
entered into a performance-based Stock Option Plan and Agreement under which Mr.
Martin will be granted the option to purchase up to 850,000 shares of the Common
Stock of the Company. Mr. Martin and the Company also agreed to terms under
which Mr. Martin will purchase 333,333 shares of the Company's Common Stock at
$3.00 per share.
The Stock Option Plan and Agreement grants Mr. Martin the option to
purchase up to 850,000 shares of the Common Stock of the Company subject to
stockholder approval. The options granted to Mr. Martin become exercisable at
the following exercise prices: 450,000 shares of Common Stock at an exercise
price of $4.00 per share; 100,000 shares of Common Stock at an exercise price of
$5.00; 150,000 shares of Common Stock at an exercise price of $8.00 and 150,000
shares of Common Stock at an exercise price of $10.00. All of the options
granted to Mr. Martin become exercisable on the earlier of May 15, 2002 or as
soon as the Closing Price of the Company's common stock exceeds the respective
exercise price for at least seven (7) trading days in any period of ten (10)
consecutive trading days. All options are to terminate if unexercised on
November 17, 2002. The Stock Option Plan and Agreement with Mr. Martin is
attached hereto as Exhibit 10.22.
The Company also entered into a Common Stock Purchase Agreement with
Mr. Martin under which it has agreed to issue and sell 333,333 restricted
shares of Common Stock of the Company to Mr. Martin at $3.00 per share, such
price representing the fair market value of the Common Stock as of November 17,
1997. The Common Stock Purchase Agreement is attached hereto as Exhibit 10.23.
Lawrence Goelman will continue to serve as a Director. The authorized
number of directors was increased, in accordance with the Bylaws, from four to
six.
ANNOUNCEMENT OF NEW CHIEF EXECUTIVE OFFICER
On November 18, 1997, the Company announced that it named experienced
restaurant industry executive Timothy J. Ryan, former president of Sizzler USA,
and a former colleague of Mr. Martin's at Taco Bell Worldwide, as Diedrich
Coffee's President and Chief Executive Officer to replace Lawrence Goelman,
Interim CEO. Subject to stockholder approval, the Company entered into a
performance based Stock Option Plan and Agreement under which Mr. Ryan will be
granted the option to purchase up to 600,000 shares of the common stock of the
Company. Mr. Ryan will also invest $50,000 in the Company pursuant to a private
sale of restricted stock.
On November 17, 1997, Mr. Ryan entered into an employment agreement
with the Company to serve as Chief Executive Officer. The term of Mr. Ryan's
agreement is two years. The agreement provides for an annual salary of $200,000
per year and a discretionary performance bonus. The employment agreement with
Mr. Ryan is attached hereto as Exhibit 10.24.
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The Stock Option Plan and Agreement with Mr. Ryan grants Mr. Ryan the
option to purchase an aggregate of 600,000 shares of the Common Stock of the
Company, contingent upon the approval of the stockholders. The options granted
to Mr. Ryan become exercisable at the following exercise prices: 50,000 shares
of Common Stock at an exercise price of $3.50 per share; 75,000 shares of Common
Stock at an exercise price of $4.50 per share; 125,000 shares of Common Stock at
an exercise price of $5.00 per share; 175,000 shares of Common Stock at an
exercise price of $8.00 per share and 175,000 shares of Common Stock at an
exercise price of $10.00 per share. The shares become exercisable on the earlier
of (i) May 15, 2002 or (ii) upon the satisfaction of two conditions: (x) the
options having vested pursuant to a vesting schedule set forth in the agreement,
and (y) after the date of the agreement, the Closing Price of the Common Stock
shall have exceeded the option price per share for at least seven (7) trading
days in any period of ten (10) consecutive trading days. All options are to
terminate if unexercised on November 17, 2002. The agreement is attached hereto
as Exhibit 10.25.
The Company entered into a Common Stock Purchase Agreement with Mr.
Ryan under which it has agreed to issue and sell 16,667 restricted shares of the
Common Stock of the Company at $3.00 per share, such price representing the fair
market value of the Common Stock as of November 17, 1997. The Common Stock
Purchase Agreement with Mr. Ryan is attached hereto as Exhibit 10.26.
Mr. Kerry Coin, formerly President and Chief Operating Officer,
continues as Chief Operating Officer.
VOTING AGREEMENT
Two significant stockholders of the Company, D.C.H., L.P., ("DCH") and
Martin R. Diedrich ("MRD"), have entered into a Voting Agreement and Irrevocable
Proxy with Mr. Martin dated as of November 17, 1997. Under the agreement Mr.
Martin received the irrevocable proxy of these stockholders to vote in favor of
his Stock Option Plan and Agreement to be voted on at a Special Meeting of the
stockholders of the Company. Pursuant to this agreement, shares representing
approximately 39% of the voting stock of the Company are committed to vote in
favor of Mr. Martin's Stock Option Plan and Agreement. The Voting Agreement and
Irrevocable Proxy is attached hereto as Exhibit 9.1.
PRESS RELEASE
The press release announcing the new Chairman and Chief Executive
Officer is attached hereto as Exhibit 99.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Diedrich Coffee, Inc.
Date: November 25, 1997 By: /s/ JONATHAN B. EDDISON
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Jonathan B. Eddison,
Vice President and General Counsel
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
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<S> <C> <C>
9.1 Voting Agreement and Irrevocable Proxy agreement by and among
D.C.H., L.P., a California limited partnership ("DCH"), Martin
R. Diedrich, an individual ("MRD") and John E. Martin, an
individual, under which Mr. Martin is given an irrevocable
proxy to vote in favor of the Stock Option Plan and Agreement
between the Company and Mr. Martin.
10.21 Letter agreement by and between the Company and John E. Martin
appointing Mr. Martin Chairman of the Board, dated as of
November 17, 1997.
10.22 Stock Option Plan and Agreement by and between the Company and
John E. Martin granting Mr. Martin the option to purchase up to
850,000 shares of the Common Stock of the Company, dated as of
November 17, 1997.
10.23 Common Stock Purchase Agreement by and between the Company and
John E. Martin under which Mr. Martin agrees to purchase
333,333 shares of the Company, dated as of November 17, 1997.
10.24 Employment Agreement by and between the Company and Timothy J.
Ryan retaining Mr. Ryan as Chief Executive Officer, dated as of
November 17, 1997.
10.25 Stock Option Plan and Agreement by and between the Company and
Timothy J. Ryan granting Mr. Ryan the option to purchase up to
600,000 shares of the Common Stock of the Company, dated as of
November 17, 1997.
10.26 Common Stock Purchase Agreement by and between the Company and
Timothy J. Ryan under which Mr. Ryan agrees to purchase 16,667
shares of the Company, dated as of November 17, 1997.
99.1 Press Release: "John Martin to Join Diedrich Coffee as Board
Chairman", dated as of November 18, 1997.
</TABLE>
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EXHIBIT 9.1
VOTING AGREEMENT AND IRREVOCABLE PROXY
This Voting Agreement And Irrevocable Proxy (the "Agreement") is made
and entered into as of the 17th day of November, 1997 by and among D.C.H., L.P.,
a California limited partnership ("DCH"), Martin R. Diedrich, an individual
("MRD") and John E. Martin, an individual ("JEM").
WHEREAS, concurrently herewith, JEM is entering into a Stock Option Plan
and Agreement (the "Option Agreement") with Diedrich Coffee, Inc., a Delaware
corporation (the "Company") pursuant to which the Company agrees to grant JEM
options to purchase 850,000 shares of the Company's common stock upon the terms
and subject to the conditions set forth in the Option Agreement;
WHEREAS, the exercisability of the options granted pursuant to the
Option Agreement are conditioned upon stockholders of the Company approving the
terms of the Option Agreement and the grant of options thereunder;
WHEREAS, DCH and MRD are stockholders of the Company (individually
referred to herein as a "Stockholder" and collectively as the "Stockholders");
and
WHEREAS, each of the Stockholders owns, of record and beneficially, the
number of shares of the Company's common stock indicated next to such
Stockholder's name on Exhibit A attached hereto (all such shares being referred
to herein as the "Shares").
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements herein contained and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
hereto hereby agree as follows:
1. Agreement to Vote and Irrevocable Proxy.
1.1 Agreement to Vote. Each Stockholder hereby agrees that at any
meeting of the stockholders of the Company, however called, such Stockholder
shall vote all such Stockholder's Shares in favor of the Option Agreement and
the grant of options thereunder.
1.2 Irrevocably Proxy. Each Stockholder hereby constitutes and appoints
JEM its true and lawful proxy and attorney-in-fact to vote at any and all
meetings of the stockholders of the Company, whether annual or special, and at
any adjournment or adjournments or postponements of any such meetings, all
Shares which such Stockholder beneficially owns as of the date hereof, in favor
of the Option Agreement and the grant of options thereunder. Such proxy shall be
limited strictly to the power to vote such Shares in the manner set forth in the
preceding sentence and shall not extend to any other matters.
The proxy and power of attorney granted herein shall be irrevocable
during the term of this Agreement, shall be deemed to be coupled with an
interest sufficient in law to support an irrevocable proxy and shall revoke all
prior proxies granted by each Stockholder.
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Each Stockholder shall not grant any proxy to any person which conflicts
with the proxy granted herein, and any attempt to do so shall be void. The power
of attorney granted herein is a durable power of attorney and shall survive the
disability or incompetence of each Stockholder.
In the event that any Stockholder fails for any reason to vote his or
its Shares in accordance with the requirements of Section 1.1 hereof, then JEM
shall have the right to vote such shares at any meeting of the Company's
stockholders in accordance with the provisions of this Section 1.2.
2. Representations and Warranties of Each Stockholder. Each Stockholder
represents and warrants, severally and not jointly, to JEM as follows:
2.1 Ownership of Shares. The Shares are owned of record and beneficially
by such Stockholder as set forth on Exhibit A and constitute all the shares of
common stock of the Company owned of record and beneficially by such
Stockholder.
2.2 Power; Binding Agreement. Such Stockholder has full legal right,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution and delivery of this Agreement by such Stockholder, and
the consummation of the transactions contemplated hereby will not violate any
other agreement to which such Stockholder is a party including, without
limitation, any voting agreement, stockholders' agreement or voting trust. This
Agreement has been duly executed and delivered by such Stockholder and
constitutes a legal, valid and binding agreement of such Stockholder,
enforceable in accordance with its terms to the fullest extent permitted by law,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally or by general
principles of equity.
2.3 Shares. Such Stockholder's Shares are fully paid. On the date hereof
such Stockholder is, and on the date of any meeting of the stockholders of the
Company the Stockholder will be, the lawful owner of the his or its Shares, free
and clear of all liens or encumbrances.
3. Covenant of the Stockholders. Except in accordance with the
provisions of this Agreement, each Stockholder agrees, while this Agreement is
in effect, not to sell, exchange, transfer, pledge, encumber, assign or
otherwise dispose of any of his or its Shares.
4. Termination. This Agreement shall terminate on the earliest of (i)
the approval of the Option Agreement and the grant of options thereunder by the
Company's stockholders in accordance with Section 3(a) of the Option Agreement,
(ii) the termination of the Option Agreement pursuant to its terms or (iii) the
first anniversary of the date hereof.
5. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
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6. Severability. The provisions set forth in this Agreement are
severable. If any provision of this Agreement is held invalid or unenforceable
in any jurisdiction, the remainder of this Agreement, and the application of
such provision to other persons or circumstances, shall not be affected thereby,
and shall remain valid and enforceable in such jurisdiction, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7. Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer upon any person other than the parties hereto any
rights or remedies under or by reason of this Agreement or any provision
contained herein.
8. Injunctive Relief. The parties agree that in the event of a breach
of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By seeking
or obtaining any such relief, the aggrieved party will not be precluded from
seeking or obtaining other relief to which it may be entitled.
9. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Delaware.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed and delivered on the day and year first above written.
JOHN E. MARTIN MARTIN R. DIEDRICH
_____________________________ _____________________________
John E. Martin Martin R. Diedrich
D.C.H., L.P.
By:___________________________
Paul C. Heeschen
General Partner
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EXHIBIT A
LIST OF STOCKHOLDERS AND NUMBER OF SHARES OWNED
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares of Common Stock
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<S> <C>
D.C.H., L.P. 1,442,197
Martin R. Diedrich 655,107
</TABLE>
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EXHIBIT 10.21
November 17, 1997
Mr. John E. Martin
The Martin Group
567 San Nicolas Drive, Suite #400
Newport Beach, CA 92660
Dear John:
This letter sets forth the understanding between you and Diedrich
Coffee, Inc., a Delaware corporation (the "Company"), regarding your role in the
management of the Company (the "Agreement"). Subject to the terms and conditions
set forth herein, we agree as follows:
1. You are hereby appointed and agree to serve as a director of the
Company and as Chairman of the Board of the Company. Upon your acceptance of
this Agreement, I will resign as Chairman and remain a member of the Company's
Board of Directors (the "Board"). You will be compensated for serving as
Chairman of the Board of the Company with a base salary of $8,333.33 per month
(less all amounts required by law to be withheld or deducted), payable on the
last day of each month (or any pro rata portion thereof for any month of partial
service), for so long as you continue in the role of Chairman of the Board. You
will not be entitled to any other employee benefits and this compensation shall
be in lieu of any other compensation to which you would otherwise be entitled as
a member of the Board, including but not limited to the grant of options under
the Company's Non-Employee Directors Stock Option Plan. You will serve in this
role at the discretion of the Board and your service and compensation may be
terminated by the Board at any time for any reason or no reason, without penalty
or further obligation to you by the Company except as set forth in your Stock
Option Plan and Agreement.
2. In light of your significant time commitment to the Company and the
fact that you will not have an office at the Company's principal executive
offices, the Company agrees to employ a full-time executive assistant for you at
an annual salary not to exceed $72,000 (less all amounts required by law to be
withheld or deducted). In addition, your executive assistant shall be eligible
for benefits commensurate with other employees in similar positions with the
Company.
3. Timothy J. Ryan, whom you have introduced to the Board, will be
offered employment as Chief Executive Officer of the Company (the "CEO"),
replacing me as interim Chief Executive Officer. The CEO will enter into a
mutually agreeable employment agreement with the Company which will provide for
compensation of $200,000 per year with an annual incentive program.
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4. The Company shall pay or reimburse you for all reasonable and
necessary travel and other business expenses incurred or paid by you in
connection with the performance of services under this Agreement, consistent
with the Company's policies for other senior executives of the Company.
5. You and the Company will enter into a Stock Option Plan and
Agreement, in substantially the form attached as Exhibit A hereto, pursuant to
which the Company will grant to you, upon the terms and subject to approval by
the stockholders of the Company and the other conditions set forth therein,
options to purchase 850,000 shares of the Company's Common Stock.
6. Pursuant to a stock purchase agreement in form satisfactory to you
and the Company, the Company will issue and sell to you and you will purchase
333,333 shares of Common Stock of the Company at $3.00 per share.
7. In connection with the consummation of the transactions described
above, you and the CEO will be nominated to the Board. The Company will enter
into indemnification agreements with each of you in the form provided to each of
the other directors and executive officers of the Company and you will be
entitled to coverage by the Company's directors and officers insurance policy to
the same extent as other directors and officers of the Company.
8. The Company shall reimburse you for your reasonable legal and
accounting fees incurred in connection with the negotiation and execution of
this Agreement in an amount not to exceed $10,000.
9. The Company recognizes that you are presently involved in substantial
other business activities and anticipate becoming involved in additional
business activities while serving as Chairman of the Board of the Company.
Notwithstanding that these other business activities may compete for your time,
the Company agrees that you may in your discretion devote as much of your time
as you determine in business activities other than that of serving as an officer
of the Company. You have, however, indicated to the Company that while serving
as Chairman of the Board of the Company, you anticipate taking an active role in
developing recommendations for Company policies and strategies, communicating
regularly with the executive officers of the Company and supervising the
implementation of such policies and strategies. The Company further recognizes
that your other business interests may involve or relate to restaurants
(although not restaurants whose principal business activity is the sale and
serving of coffee drinks) and that while other business opportunities involving
the restaurant business (other than the coffeehouse business or other businesses
in which the principal activity involves the sale of coffee and coffee
beverages) may become available to you, you will not have any obligation to make
such opportunities available to the Company. The Company hereby waives any and
all rights and claims which it may otherwise have to such business
opportunities.
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If the provisions of this letter are consistent with your understanding
of our Agreement, please sign and return the enclosed counterpart copy of this
letter to me at your earliest convenience. Welcome aboard.
Sincerely,
Lawrence Goelman
Chairman of the Board and
Interim Chief Executive Officer
Accepted and agreed to:
____________________________________
John E. Martin
Date: ______________________________
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EXHIBIT 10.22
STOCK OPTION PLAN AND AGREEMENT WITH JOHN E. MARTIN
Stock Option Plan and Agreement, dated as of November 17, 1997 (this
"AGREEMENT"), by and between Diedrich Coffee, Inc., a Delaware corporation (the
"COMPANY") and John E. Martin (the "GRANTEE").
RECITALS
A. The Company has agreed to employ Grantee under terms and conditions
set forth in that certain agreement dated November 17, 1997 (the "EMPLOYMENT
AGREEMENT"), by and between the Company and Grantee.
B. Under the Employment Agreement, the Company has agreed to grant to
Grantee options to purchase 850,000 shares of common stock, $0.01 par value per
share (the "COMMON STOCK"), of the Company for the purpose of encouraging and
rewarding Grantee's contributions to the performance of the Company and aligning
Grantee's interests with the interests of the Company's stockholders.
AGREEMENT
NOW, THEREFORE, to evidence the grant of options by the Company and to
set forth the terms and conditions of the grant of options, the Company and
Grantee hereby agree as follows:
1. DEFINITIONS. The following terms, as used in this Agreement, have the
meanings ascribed to them in this Section 1.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CLOSING PRICE" means the closing price on any given trading day
of the Common Stock on the Nasdaq National Market (or any subsequent exchange or
market system upon which the Company's Common Stock is principally traded) as
reported in the Transaction Index of the Wall Street Journal.
(c) "COMPENSATION COMMITTEE" means the Compensation Committee of the
Board.
(d) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(e) "EXERCISE DATE" means any date on which Grantee exercises
Options.
(f) "EXERCISE DATE VALUE" means the product of: (i) the number of
shares of Common Stock delivered to the Company and (ii) the Closing Price of
the Common Stock on the Exercise Date.
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(g) "EXERCISE SHARES" means those shares of Common Stock with respect
to which Options are being exercised.
(h) "FOR CAUSE" means: (i) the willful failure by Grantee to follow
the instructions of the Board or to perform substantially any of Grantee's
obligations to the Company or a breach by Grantee of any of his duties to the
Company and the continuance of such failure or breach for more than twenty (20)
days after written notice of such failure or breach by the Board; (ii) the
engaging by Grantee in serious misconduct that is injurious to the Company or
any subsidiary of the Company; (iii) the conviction of Grantee of, or the
entering by Grantee of a plea of nolo contendere to, a crime that constitutes a
felony; and (iv) the failure, prior to the second anniversary of the date
hereof, of the Common Stock, for a period of seven trading days in any ten
consecutive trading days, to have a Closing Price in excess of $5.00.
(i) "OPTIONS" means options to purchase shares of Common Stock
granted under this Agreement.
(j) "SECURITIES ACT" means the Securities Act of 1933, as amended.
2. GRANT OF OPTIONS. The Company hereby grants to Grantee, effective as
of the date hereof, Options to purchase up to 850,000 shares of Common Stock on
the terms and subject to the conditions set forth herein.
3. EXERCISABILITY AND EXERCISE PRICES. The Options will become
exercisable as follows:
(a) The Company shall promptly call a special meeting of the
Company's stockholders for the purpose of requesting that the stockholders
approve the terms of this Agreement and the grant of the Options hereunder.
Notwithstanding any provision contained in this Agreement or the Employment
Agreement to the contrary, none of the Options granted hereunder will become
exercisable until stockholders of the Company approve the terms of this
Agreement and the grant of the Options hereunder.
(b) Options to purchase up to 450,000 shares of Common Stock will
become exercisable at an option exercise price of $4.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $4.00;
(c) Options to purchase up to 100,000 shares of Common Stock will
become exercisable at an option exercise price of $5.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $5.00;
(d) Options to purchase up to 150,000 shares of Common Stock will
become exercisable at an option exercise price of $8.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten
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consecutive trading days in which the Closing Price of the Common Stock for at
least seven trading days in that period exceeded $8.00; and
(e) Options to purchase up to 150,000 shares of Common Stock will
become exercisable at an option exercise price of $10.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $10.00.
For purposes of this Section 3, a "trading day" shall be any day on which the
Nasdaq Stock Market (or any subsequent exchange or market system where the
Company's shares are principally traded) is reporting sale prices for the
Company's Common Stock.
4. TERMINATION OF OPTIONS.
(a) Unless an earlier termination date occurs as specified in Section
4(b), the Options will expire and become unexercisable (whether or not then
exercisable) on the fifth (5th) anniversary of the date hereof ("EXPIRATION
DATE").
(b) If Grantee's employment with the Company is terminated by the
Company For Cause prior to the Expiration Date or by the Grantee for any reason
prior to the Expiration Date: (i) all Options that have not otherwise become
exercisable, as of the date of Grantee's termination of employment, will
immediately terminate and become unexercisable; and (ii) all Options that have
become exercisable will terminate and become unexercisable on and after the date
sixty (60) days following the date of Grantee's termination of employment.
(c) If Grantee's active employment with the Company is terminated for
any reason other than as set forth in Section 4(b): (i) all Options that have
not otherwise become exercisable, as of the date of Grantee's termination of
employment, will continue to become exercisable pursuant to Section 3 until such
Options are terminated on the earlier of (x) the Expiration Date or (y) the
latter of the first (1st) anniversary of the date of Grantee's termination of
employment or the third (3rd) anniversary of the date hereof; and (ii) all
Options that have become exercisable, as of the date of Grantee's termination of
employment, will terminate and become unexercisable on the earlier of (x) the
Expiration Date or (y) the latter of the first (1st) anniversary of the date of
Grantee's termination of employment or the third (3rd) anniversary of the date
hereof.
5. REGISTRATION OF OPTIONS. Promptly after execution of this Agreement,
the Company, at its expense, shall file a registration statement on Form S-8 to
register the issuance and exercise of the Options.
6. RESTRICTIONS ON EXERCISE. Notwithstanding anything to the contrary in
this Agreement, the Options may not be exercised, and no Exercise Shares shall
be issued: (a) unless all requisite approvals and consents of any governmental
authority of any kind having jurisdiction over the exercise of options shall
have been secured and (b) unless all applicable federal, state and local tax
withholding requirements shall have been satisfied. The Company shall use
commercially
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reasonable efforts to obtain the consents and approvals referred to in Section
6(a) so as to permit the Options to be exercised.
7. NON-TRANSFERABILITY OF OPTIONS. None of the Options are assignable or
transferable, in whole or in part, and may not, directly or indirectly, be
offered, transferred, sold, pledged, assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation by gift,
operation of law or otherwise) other than by will or by the laws of descent and
distribution to the estate of Grantee upon his death, provided that the deceased
Grantee's beneficiary or the representative of his estate acknowledge and agree
in writing, in a form reasonably acceptable to the Compensation Committee to be
bound by this Agreement as if such beneficiary or the estate were Grantee.
8. WITHHOLDING. Whenever shares of Common Stock are to be issued
pursuant to the exercise of Options, the Compensation Committee may require the
recipient of the shares of Common Stock to remit to the Company an amount
sufficient to satisfy any applicable federal, state and local tax withholding
requirements. Upon request by Grantee, the Company may also withhold shares of
Common Stock to satisfy applicable withholding requirements, subject to any
rules adopted by the Compensation Committee regarding compliance with applicable
law, including, but not limited to, Section 16(b) of the Exchange Act.
9. MANNER OF EXERCISE.
(a) To the extent that the Options have become and remain exercisable
as provided in Sections 3 and 4, and subject to such reasonable administrative
regulations as the Compensation Committee may adopt, the Options may be
exercised, by written notice to the Compensation Committee, specifying the
number of Exercise Shares and the Exercise Date. On or before the Exercise Date,
Grantee shall deliver to the Company full payment for the Options being
exercised in cash, or cash equivalent satisfactory to the Compensation
Committee, and in an amount equal to the aggregate purchase price for the
Exercise Shares.
(b) Subject to the discretion of the Compensation Committee, Grantee
may, in lieu of cash, either: (i) deliver shares of Common Stock having an
Exercise Date Value equal to the purchase price of the Exercise Shares; or (ii)
deliver a combination of cash and shares of Common Stock with an aggregate value
and Exercise Date Value equal to the purchase price of the Exercise Shares,
subject to such rules and regulations as may be adopted by the Compensation
Committee to provide for the compliance of such payment procedure with
applicable law, including Section 16(b) of the Exchange Act.
(c) The Compensation Committee may require Grantee to furnish or
execute such other documents as the Compensation Committee reasonably deems
necessary: (i) to evidence such exercise and (ii) to comply with or satisfy the
requirements of the Securities Act, applicable state securities laws or any
other law.
10. NO RIGHTS AS STOCKHOLDER. Grantee will have no voting or other
rights as a stockholder of the Company with respect to any shares of Common
Stock covered by the Options until the exercise of such Options and the issuance
of a certificate or certificates to him for such
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shares of Common Stock. No adjustment will be made for dividends or other rights
for which the record date is prior to the issuance of such certificate or
certificates.
11. CAPITAL ADJUSTMENTS. The number and any applicable option price of
the shares of Common Stock covered by the Options will be proportionately and
appropriately adjusted by the Compensation Committee to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. Subject to any required action by the
stockholders of the Company, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options will pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified or express mail, return
receipt requested, postage prepaid, or by any recognized international
equivalent of such delivery, to the Company, or Grantee, as the case may be, at
the address of the Company's principal executive office. All such notices and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof.
13. BINDING EFFECT; BENEFITS. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
14. AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written instrument executed by Grantee and the Company.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, regardless of the law that
might be applied under principles of conflict of laws.
16. SECTION AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement
as of the date first above written.
DIEDRICH COFFEE, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
THE GRANTEE
_________________________________________
JOHN E. MARTIN
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EXHIBIT 10.23
DIEDRICH COFFEE, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
the 17th day of November, 1997, by and between Diedrich Coffee, Inc., a Delaware
corporation (the "Company") and John E. Martin (the "Purchaser"). Pursuant to
the terms and subject to the conditions hereinafter set forth, the parties agree
as follows:
1. PURCHASE AND SALE OF STOCK
1.1 SALE AND ISSUANCE OF COMMON STOCK.
Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing, and the Company agrees to issue and
sell to the Purchaser at the Closing, 333,333 shares of the Company's Common
Stock (the "Shares") at an aggregate purchase price of Nine Hundred Ninety-Nine
Thousand Nine Hundred Ninety-Nine Dollars ($999,999.00) or Three Dollars ($3.00)
per share.
1.2 CLOSING.
(a) The purchase and sale of the Shares shall take place at the
offices of the Company in Irvine, California, at 2:00 p.m., on the fifth (5th)
business day following the satisfaction of the conditions set forth in Sections
4 and 5 hereof, or at such other time and place as the Company and Purchaser
shall mutually agree, either orally or in writing (which time and place are
designated as the "Closing").
(b) At the Closing, the Company shall deliver to the Purchaser a
certificate representing the Shares that such Purchaser is purchasing against
payment of the purchase price therefor by check, wire transfer or such other
form of payment as shall be mutually agreed upon by the Purchaser and the
Company.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company that:
2.1 RELIANCE UPON PURCHASERS' REPRESENTATIONS.
The Purchaser understands that the Shares are not registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on the Purchasers'
representations set forth herein. The Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Purchaser has in mind merely acquiring the Shares for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise. The Purchaser has no such intention. The Shares to be acquired by the
Purchaser hereunder will be acquired for Purchaser's own account and not with a
view to or for sale in connection with any distribution of the Shares.
<PAGE> 2
2.2 RECEIPT OF INFORMATION.
The Purchaser believes such Purchaser has received all the
information such Purchaser considers necessary or appropriate for deciding
whether to purchase the Shares. The Purchaser further represents that such
Purchaser has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects, and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Purchaser
or to which such Purchaser had access.
2.3 INVESTMENT EXPERIENCE.
The Purchaser represents that such Purchaser is experienced in
evaluating and investing in private placement transactions of securities of
companies and acknowledges that such Purchaser is able to fend for himself, can
bear the economic risk of such Purchaser's investment, and has such knowledge
and experience in financial and business matters that such Purchaser is capable
of evaluating the merits and risks of the investment in the Shares.
2.4 ACCREDITED PURCHASER.
(a) The term "Accredited Purchaser" as used herein refers to:
(i) A person or entity who is a director or executive
officer of the Company;
(ii) Any natural person who had an individual net worth,
or joint net worth with that person's spouse, at the time of the
purchase exceeds $1,000,000;
(iii) Any natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level in
the current year; or
(iv) Any entity in which all of the equity owners are
accredited Purchasers.
As used in this Paragraph 2.5(a), the term "net worth" means the
excess of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Paragraph 2.5(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, the Purchaser should consider whether such Purchaser should add any
or all of the following items to such Purchaser's adjusted gross income for
income tax purposes in order to reflect more accurately such Purchaser's actual
economic income: any amounts attributable to tax-exempt income received, losses
claimed as a limited partner in any partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, and alimony
payments.
(b) The Purchaser represents to the Company that such
Purchaser is an Accredited Purchaser.
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2.5 RESTRICTED SECURITIES.
The Purchaser understands that the Shares may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act, the Shares must be held indefinitely. In
particular, the Purchaser is aware that the Shares may not be sold pursuant to
Rule 144 promulgated under the Securities Act unless all of the conditions of
that Rule are met.
2.6 LEGEND.
Each certificate or other document evidencing any of the Shares
shall be endorsed with the legend substantially in the form set forth below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that:
3.1 VALID ISSUANCE OF SHARES.
The Shares being purchased by the Purchaser hereunder, when
issued, sold, and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.
3.2 AUTHORIZATION; NO CONFLICT.
All corporate action on the part of the Company necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Company hereunder has been taken or will be taken prior
to the Closing. The execution, delivery, and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation or default in any material respect of any provision of
its organizational documents or in any material respect of any provision of any
material mortgage, indenture, agreement, instrument, or contract to which it is
a party.
3.3 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of,
or filing with, any (a) state or federal governmental authority or (b) stock
exchange or market system is required on the part of the Company in connection
with the Company's valid execution, delivery, or performance of
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this Agreement, the offer, sale or issuance of the Shares by the Company, except
certain post-Closing filings which the Company agrees to make on a timely basis.
3.4 CAPITALIZATION.
As of September 10, 1997, there were 5,391,650 shares of the
Company's common stock outstanding. From such date to the date hereof, there has
not been any issuance by the Company of a material number of shares of the
Company's common stock.
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING
The obligations of Purchaser under Section 1.1 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective unless the Purchaser
consents in writing thereto.
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 STOCKHOLDER APPROVAL.
Prior to February 28, 1997, the stockholders of the Company shall
have approved (a) the terms of the Stock Option Plan and Agreement dated
November 17, 1997 between the Company and Purchaser and (b) the grant of options
thereunder.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective unless the Company consents in
writing thereto.
5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser contained in
Section 2 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
6. MISCELLANEOUS
6.1 ENTIRE AGREEMENT.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties with respect to the subject matter hereof
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
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6.2 SURVIVAL OF WARRANTIES.
The representations and warranties of the Purchaser contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing.
6.3 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.4 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.5 TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.6 SEVERABILITY.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, this Agreement has been executed by
each of the parties on the date first set forth above.
DIEDRICH COFFEE, INC.
By:___________________________________
Lawrence Goelman
Chairman of the Board and
Interim Chief Executive Officer
PURCHASER
______________________________________
John E. Martin
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EXHIBIT 10.24
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of November 17, 1997, by and between DIEDRICH COFFEE, INC., a Delaware
corporation (the "Company") and TIMOTHY J. RYAN ("the Employee").
R E C I T A L S:
The Company and the Employee desire to enter into this Agreement to
establish the terms and conditions of the Employee's employment by the Company
during the term hereof.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing recital, and subject
to the conditions and covenants set forth herein, the parties agree as follows:
1. Employment and Term.
(a) The Company hereby employs the Employee as its President and
Chief Executive Officer and the Employee hereby accepts such employment upon the
terms and subject to the conditions set forth in this Agreement. Unless earlier
terminated as provided in this Agreement, the term of the Employee's employment
under this Agreement shall commence on the date hereof and shall continue for a
period of two (2) years from the date hereof (the "Term").
(b) The Employee shall perform such duties and functions consistent
with his role as Chief Executive Officer as may from time to time be assigned to
him by the Board of Directors of the Company (the "Board"). The Employee agrees
that during the course of the Company's business hours throughout the Term, he
will devote the whole of his time, attention and efforts to the performance of
his duties and obligations hereunder. The Employee shall not, during the Term,
without the written approval of the Board first had and obtained in each
instance, directly or indirectly (i) accept employment or receive any
compensation for the performance of services from any business enterprise other
than the Company or (ii) enter into or be concerned or interested in any trade
or business or public or private work (whether for profit or otherwise and
whether as partner, principal, shareholder or otherwise), which may, in the
absolute discretion of the Board, hinder or otherwise interfere with the
performance by the Employee of his duties and obligations hereunder, except as a
holder of not more than five percent (5%) of any class of stock or other
securities in any company which is listed and/or traded on any securities
market.
2. Compensation.
2.1 Salary. For all services to be rendered by the Employee under
this Agreement, the Company agrees to pay the Employee a salary (the "Base
Salary") equal to Two Hundred Thousand Dollars ($200,000) per year, payable in
bi-weekly installments, less all amounts required by law to be withheld or
deducted. During the Term of this Agreement, the
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<PAGE> 2
Compensation Committee of the Board (the "Compensation Committee") shall review
the Employee's Base Salary on or about each anniversary date of the date of this
Agreement. The Compensation Committee, in its sole and absolute discretion from
time to time, may increase (but not decrease without the Employee's written
consent) the Employee's Base Salary.
2.2 Performance Bonus. If the Employee remains in the employ of the
Company under this Agreement for twelve months from the date of this Agreement,
the Compensation Committee, in its sole and absolute discretion, also may pay
the Employee discretionary performance bonuses (the "Performance Bonuses"), that
initially shall not exceed twenty-five percent (25%) of the Employee's Base
Salary. Payment of the Performance Bonuses shall be based on the Employee
achieving reasonable performance objectives designated by the Compensation
Committee and communicated to the Employee. The Performance Bonuses shall be
made in such amounts and at such times as the Compensation Committee may
determine in its discretion.
2.3 Stock Options. Contemporaneously with the execution of this
Agreement, the Company and Employee shall enter into a Stock Option Plan and
Agreement, in substantially the form attached hereto as Exhibit A (the "Option
Agreement"), pursuant to which the Company will grant Employee, upon the terms
and subject to approval of the Company's stockholders and other conditions set
forth therein, options to purchase 600,000 shares of the Company's Common Stock.
3. Employee Benefits. During the Term of the Employee's employment
hereunder:
(a) The Employee shall be entitled to three weeks annual vacation
leave.
(b) The Company shall pay or reimburse the Employee for all
reasonable and necessary travel and other business expenses incurred or paid by
the Employee in connection with the performance of his services under this
Agreement consistent with the Company's policies for other senior executives of
the Company, except that for automobile expenses, the Company shall pay the
Employee a monthly car allowance of Six Hundred Dollars ($600.00) less all
amounts required by law to be withheld or deducted.
(c) Notwithstanding any other provision of this Agreement, the
Company shall not provide or pay for the cost of premiums for health, dental,
medical, life or disability insurance coverage for the Employee or the
Employee's dependents. The Employee acknowledges that he has been offered such
insurance coverage and declined it in favor of alternative compensation.
(d) Subject to Section 3(c) above, the Employee is entitled to and
has been offered benefits which are equivalent to or better than the benefits
that the Company presently makes available to its other senior executives.
4. Termination of Employment.
(a) Notwithstanding any other provision of this Agreement, the
Employee's employment under this Agreement may be terminated as follows:
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(i) Upon the death of the Employee, this Agreement and the
Employee's employment hereunder shall terminate immediately and without
notice by the Company; or
(ii) In the event of the inability of the Employee to perform his
duties or responsibilities hereunder, as a result of mental or physical
ailment or incapacity, for a period of ninety (90) consecutive calendar
days or an aggregate of one hundred twenty (120) calendar days during
any calendar year (whether or not consecutive) (a "Disability") during
which period of Disability the Employee shall be entitled to his
compensation pursuant to this Agreement, this Agreement and the
Employee's employment hereunder shall terminate upon delivery of written
notice to the Employee; or
(iii) By the Company for Cause (as defined below) in accordance
with the provisions of Section 4(b) hereof
(b) The parties agree that for purposes of this Agreement, the term
"Cause" shall mean the following:
(i) The Employee's willful and repeated failure to substantially
perform his job duties under this Agreement;
(ii) Failure by the Employee to comply with all material
applicable laws in performing his job duties or in directing the conduct
of the Company's business, or
(iii) Commission by the Employee of any felony or intentionally
fraudulent act against the Company, or its employees, agents or
customers.
(c) With respect to events described in subparagraph 4(b)(i) and (ii)
above, The Company shall give written notice to the Employee of any such event
and the Employee shall have thirty (30) days beginning on the date of delivery
of such written notice to cure same, or if such event cannot be cured within
said thirty (30) day period, the Employee shall commence his efforts to cure the
event within the thirty (30) day period and diligently work to cure such event
within a reasonable time period. If the Employee within said thirty (30) day
period or within a reasonable time period, as applicable, does not cure the
event for which notice has been provided under subparagraphs 4(b)(i) or (ii)
above, then the Employee's employment under this Agreement may be terminated by
the Company by delivery to the Employee of written notice of termination and
such termination will be effective as of the date of delivery of such written
notice. With respect to events described in subparagraph 4(b)(iii) above, the
Employee's employment under this Agreement may be terminated by the Company by
delivery to the Employee of written notice of termination and such termination
will be effective as of the date of delivery of such written notice. Upon the
effectiveness of termination pursuant to subparagraph 4(a), the Employee shall
not be entitled to receive any further compensation or benefits pursuant to this
Agreement except (i) for payment within ten days after his termination date of
all accrued but unpaid Base Salary or (ii) as set forth in the Option Agreement.
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(d) In addition to its rights to terminate the Employee's employment
under this Agreement pursuant to subparagraph 4(a), the Company may also
terminate the Employee's employment under this Agreement for any other reason,
provided that, in such event, the Employee shall be entitled to receive an
amount equal to fifty percent of the Employee's Base Salary on the termination
date and the Employee shall not be entitled to receive any other compensation or
benefits hereunder except as set forth in the Option Agreement. The Employee
acknowledges and agrees that the provisions of this paragraph 4 state his entire
and exclusive rights, entitlements, and remedies against the Company, its
successors, assigns, affiliates, officers, directors, employees and
representatives for termination without any cause shown by the Company.
(e) The Employee may terminate his employment for good cause or
without any cause. In the event the Employee terminates his employment for "good
cause" (as defined below), he shall be entitled to receive the severance
benefits described in subparagraph 4(d) above. If he terminates his employment
for any other reason, he shall not be entitled to receive any compensation
except for payment within ten days after his termination date of all accrued but
unpaid Base Salary. For purposes of this Agreement, "good cause" for termination
of employment by the Employee shall mean failure to maintain the Employee in the
position of President or Chief Executive Officer of the Company or a material
breach of the provisions of this Agreement by the Company. The Employee
acknowledges and agrees that the provisions of this subparagraph 4(e) state his
entire and exclusive rights and remedies under this Agreement against the
Company, its successors, assigns, affiliates, officers, directors, employees and
representatives if he terminates this Agreement.
5. Assignment of Rights and Duties.
(a) Neither the Employee nor the Company may assign their rights or
duties under this Agreement without prior written consent of both parties, which
consent may be withheld for any reason. Any attempted assignment, transfer,
conveyance, or other disposition of any interest of either party in this
Agreement shall be void. Notwithstanding the foregoing, the Company may make
such assignment to any affiliated company, but its assignment of this Agreement
to an affiliate does not relieve it of its obligations under this Agreement if
that affiliate fails to perform the Company's obligations under this Agreement.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Employee to compensation from the Company in the same amount and on the same
terms as he would be entitled to hereunder if he terminated his employment for
"good cause," except that for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the termination
date.
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6. Confidential Information and Nonsolicitation.
(a) The Employee acknowledges and agrees that the Company has
developed and uses certain proprietary and confidential information, data,
processes, business methods, computer software, data bases, customer lists and
know-how ("Confidential Information"). The Employee agrees that the Confidential
Information is a trade secret of the Company which shall remain the sole
property of the Company notwithstanding that the Employee, as an employee of the
Company, may participate in the development of the Confidential Information.
During the term of this Agreement and at all times thereafter the Employee shall
not disclose any Confidential Information to any person or entity for any reason
or purpose whatsoever, nor shall the Employee make use of any Confidential
Information for the Employee's own benefit or for the benefit of any other
person or entity. Upon termination of this Agreement for any reason, the
Employee will promptly surrender to the Company all Confidential Information in
the Employee's possession or under the Employee's control, whether prepared by
the Employee or by others.
(b) The Employee agrees that for a period of three (3) years
following the termination of the Employee's employment hereunder, the Employee
will not directly or indirectly solicit or attempt to solicit any of the
employees of or consultants to the Company to leave the Company or to become
employees of or consultants to any other person or entity.
7. Miscellaneous.
7.1 Modification and Waiver of Breach. No waiver or modification of
this Agreement or any term hereof shall be binding unless it is in writing
signed by the parties hereto. No failure to insist upon compliance with any
term, provision or condition to this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or construed as a waiver of
any such term, provision or condition or as a waiver of any other term,
provision or condition of this Agreement.
7.2 Notices. All notices, requests, demands and other communications
under this Agreement must be in writing and shall be deemed given upon personal
delivery, facsimile transmission (with confirmation of receipt), delivery by a
reputable overnight courier service or five (5) days following deposit in the
United States mail (if sent by certified or registered mail, postage prepaid,
return receipt requested), in each case duly addressed to the party to whom such
notice or communication is to be given as follows:
To the Company: Diedrich Coffee, Inc.
2144 Michelson Drive
Irvine, California 92612
Attention: Chairman of the Board
Telecopy Number: (714) 260-1610
To the Employee: Timothy J. Ryan
2144 Michelson Drive
Irvine, California 92612
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Any party may change its address for the purpose of this subparagraph
7.2 by giving the other party written notice of the new address in the manner
set forth above.
7.3. Enforceability. If any of the covenants contained in this
Agreement, for any reason and to any extent, are construed to be invalid or
unenforceable, the remainder of this Agreement, and the application of the
remaining covenants to other persons or circumstances shall not be affected
hereby, but rather shall be enforced to the greatest extent permitted by law.
7.4. Entire Agreement. This Agreement contains the entire agreement
between the Company and the Employee with respect to the subject matters hereof
and supersedes all prior or contemporaneous agreements, arrangements or
understandings, written or oral, with respect to the subject matters hereof.
7.5. Legal Fees; Arbitration. The parties hereto expressly agree that
in the event of any dispute, controversy or claim by any party regarding this
Agreement, the prevailing party shall be entitled to reimbursement by the other
party to the proceeding of reasonable attorney's fees, expenses and costs
incurred by the prevailing party. Any controversy, dispute or claim arising out
of, in connection with, or in relation to the interpretation, performance or
breach of this Agreement or otherwise arising out of the execution hereof,
including any claim based on contract, tort or statute, shall be resolved, at
the request of any party, by submission to binding arbitration at the Orange
County, California offices of Judicial Arbitration & Mediation Services, Inc.
("JAMS"), and any judgment or award rendered by JAMS shall be final, binding and
unappealable, and judgment may be entered by any state or federal court having
jurisdiction thereof. Any party can initiate arbitration by sending written
notice of intention to arbitrate (the "Demand") by registered or certified mail
to all parties and to JAMS. The Demand shall contain a description of the
dispute, the amount involved, and the remedy sought. The arbitrator shall be a
retired or former judge agreed to between the parties from the JAMS' panel. If
the parties are unable to agree, JAMS shall provide a list of three available
judges and each party may strike one. The remaining judge shall serve as the
arbitrator. Each party hereto intends that the provisions to arbitrate set forth
herein be valid, enforceable and irrevocable. In his award, the arbitrator shall
allocate, in his discretion, among the parties to the arbitration all costs of
the arbitration, including the fees of the arbitrator and reasonable attorneys'
fees, costs and expert witness expenses of the parties. The parties hereto agree
to comply with any award made in any such arbitration proceedings that has
become final and agree to the entry of a judgment in any jurisdiction upon any
award rendered in such proceeding becoming final.
7.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.
7.7. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"THE COMPANY" DIEDRICH COFFEE, INC., a California
corporation
By:_________________________________
Lawrence Goelman,
Chairman of the Board and
Interim Chief Executive Officer
"THE EMPLOYEE" _________________________________
TIMOTHY J. RYAN
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EXHIBIT 10.25
STOCK OPTION PLAN AND AGREEMENT WITH TIMOTHY J. RYAN
Stock Option Plan and Agreement, dated as of November 17, 1997 (this
"AGREEMENT"), by and between Diedrich Coffee, Inc., a Delaware corporation (the
"COMPANY") and Timothy J. Ryan (the "GRANTEE").
RECITALS
A. The Company has agreed to employ Grantee under terms and conditions
set forth in that certain agreement dated November 17, 1997 (the "EMPLOYMENT
AGREEMENT"), by and between the Company and Grantee.
B. Under the Employment Agreement, the Company has agreed to grant to
Grantee options to purchase 600,000 shares of common stock, $0.01 par value per
share (the "COMMON STOCK"), of the Company for the purpose of encouraging and
rewarding Grantee's contributions to the performance of the Company and aligning
Grantee's interests with the interests of the Company's stockholders.
AGREEMENT
NOW, THEREFORE, to evidence the grant of options by the Company and to
set forth the terms and conditions of the grant of options, the Company and
Grantee hereby agree as follows:
1. DEFINITIONS. The following terms, as used in this Agreement, have the
meanings ascribed to them in this Section 1.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CLOSING PRICE" means the closing price on any given trading day
of the Common Stock on the Nasdaq National Market (or any subsequent exchange or
market system upon which the Company's Common Stock is principally traded) as
reported in the Transaction Index of the Wall Street Journal.
(c) "COMPENSATION COMMITTEE" means the Compensation Committee of the
Board.
(d) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(e) "EXERCISE DATE" means any date on which Grantee exercises
Options.
(f) "EXERCISE DATE VALUE" means the product of: (i) the number of
shares of Common Stock delivered to the Company and (ii) the Closing Price of
the Common Stock on the Exercise Date.
(g) "EXERCISE SHARES" means those shares of Common Stock with respect
to which Options are being exercised.
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(h) "OPTIONS" means options to purchase shares of Common Stock
granted under this Agreement.
(i) "SECURITIES ACT" means the Securities Act of 1933, as amended.
2. GRANT OF OPTIONS. The Company hereby grants to Grantee, effective as
of the date hereof, Options to purchase up to 600,000 shares of Common Stock on
the terms and subject to the conditions set forth herein.
3. EXERCISABILITY AND EXERCISE PRICES. The Options will become
exercisable as follows:
(a) The Company shall promptly call a special meeting of the
Company's stockholders for the purpose of requesting that the stockholders
approve the terms of this Agreement and the grant of the Options hereunder.
Notwithstanding any provision contained in this Agreement or the Employment
Agreement to the contrary, none of the Options granted hereunder will become
exercisable until stockholders of the Company approve the terms of this
Agreement and the grant of the Options hereunder.
(b) Options to purchase up to 50,000 shares of Common Stock will
become exercisable at an option exercise price of $3.50 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) upon the satisfaction of both
of the following conditions: (x) such Options shall have vested in accordance
with Section 3(g) hereof and (y) after the date hereof, the Closing Price of the
Common Stock shall have exceeded $3.50 per share for at least seven trading days
in any period of ten consecutive trading days.
(c) Options to purchase up to 75,000 shares of Common Stock will
become exercisable at an option exercise price of $4.50 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) upon the satisfaction of both
of the following conditions: (x) such Options shall have vested in accordance
with Section 3(g) hereof and (y) after the date hereof, the Closing Price of the
Common Stock shall have exceeded $4.50 per share for at least seven trading days
in any period of ten consecutive trading days.
(d) Options to purchase up to 125,000 shares of Common Stock will
become exercisable at an option exercise price of $5.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) upon the satisfaction of both
of the following conditions: (x) such Options shall have vested in accordance
with Section 3(g) hereof and (y) after the date hereof, the Closing Price of the
Common Stock shall have exceeded $5.00 per share for at least seven trading days
in any period of ten consecutive trading days.
(e) Options to purchase up to 175,000 shares of Common Stock will
become exercisable at an option exercise price of $8.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) upon the satisfaction of both
of the following conditions: (x) such Options shall have vested in accordance
with Section 3(g) hereof and (y) after the date hereof, the Closing Price of the
Common Stock shall have exceeded $8.00 per share for at least seven trading days
in any period of ten consecutive trading days.
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(f) Options to purchase up to 175,000 shares of Common Stock will
become exercisable at an option exercise price of $10.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) upon the satisfaction of both
of the following conditions: (x) such Options shall have vested in accordance
with Section 3(g) hereof and (y) after the date hereof, the Closing Price of the
Common Stock shall have exceeded $10.00 per share for at least seven trading
days in any period of ten consecutive trading days.
(g) The Options described in Sections 3(b) - (f) shall vest and
become exercisable upon satisfaction of the conditions specified in such
Sections in eight equal installments over a two year period as described in the
next sentence. On each of March 1, 1998, June 1, 1998, September 1, 1998,
December 1, 1998, March 1, 1999, June 1, 1999, September 1, 1999 and December 1,
1999, Options to purchase the following number of shares at the following option
exercise prices shall vest:
o 6,250 shares of Common Stock at $3.50 per share;
o 9,375 shares of Common Stock at $4.50 per share;
o 15,625 shares of Common Stock at $5.00 per share;
o 21,875 shares of Common Stock at $8.00 per share; and
o 21,875 shares of Common Stock at $10.00 per share.
For purposes of this Section 3, a "trading day" shall be any day on which the
Nasdaq Stock Market (or any subsequent exchange or market system where the
Company's shares are principally traded) is reporting sale prices for the
Company's Common Stock.
4. TERMINATION OF OPTIONS.
(a) Unless an earlier termination date occurs as specified in Section
4(b), the Options will expire and become unexercisable (whether or not then
exercisable) on the fifth (5th) anniversary of the date hereof ("EXPIRATION
DATE").
(b) If Grantee's employment with the Company is terminated by the
Company for Cause (as such term is defined in Section 4(b) of the Employment
Agreement) prior to the Expiration Date or by the Grantee without good cause
prior to the Expiration Date: (i) all Options that have not otherwise become
exercisable, as of the date of Grantee's termination of employment, will
immediately terminate and become unexercisable; and (ii) all Options that have
become exercisable will terminate and become unexercisable on and after the date
sixty (60) days following the date of Grantee's termination of employment.
(c) If Grantee's active employment with the Company is terminated for
any reason other than as set forth in Section 4(b) hereof: (i) all Options that
have not otherwise become exercisable, as of the date of Grantee's termination
of employment, will continue to become exercisable pursuant to Section 3 until
such Options are terminated on the earlier of (x) the Expiration Date or (y) the
latter of the first (1st) anniversary of the date of Grantee's termination of
employment or the second (2nd) anniversary of the date hereof; and (ii) all
Options that have become exercisable, as of the date of Grantee's termination of
employment, will terminate and become
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unexercisable on the earlier of (x) the Expiration Date or (y) the latter of the
first (1st) anniversary of the date of Grantee's termination of employment or
the second (2nd) anniversary of the date hereof.
5. REGISTRATION OF OPTIONS. Promptly after execution of this Agreement,
the Company, at its expense, shall file a registration statement on Form S-8 to
register the issuance and exercise of the Options.
6. RESTRICTIONS ON EXERCISE. Notwithstanding anything to the contrary in
this Agreement, the Options may not be exercised, and no Exercise Shares shall
be issued: (a) unless all requisite approvals and consents of any governmental
authority of any kind having jurisdiction over the exercise of options shall
have been secured and (b) unless all applicable federal, state and local tax
withholding requirements shall have been satisfied. The Company shall use
commercially reasonable efforts to obtain the consents and approvals referred to
in Section 6(a) so as to permit the Options to be exercised.
7. NON-TRANSFERABILITY OF OPTIONS. None of the Options are assignable or
transferable, in whole or in part, and may not, directly or indirectly, be
offered, transferred, sold, pledged, assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation by gift,
operation of law or otherwise) other than by will or by the laws of descent and
distribution to the estate of Grantee upon his death, provided that the deceased
Grantee's beneficiary or the representative of his estate acknowledge and agree
in writing, in a form reasonably acceptable to the Compensation Committee to be
bound by this Agreement as if such beneficiary or the estate were Grantee.
8. WITHHOLDING. Whenever shares of Common Stock are to be issued
pursuant to the exercise of Options, the Compensation Committee may require the
recipient of the shares of Common Stock to remit to the Company an amount
sufficient to satisfy any applicable federal, state and local tax withholding
requirements. Upon request by Grantee, the Company may also withhold shares of
Common Stock to satisfy applicable withholding requirements, subject to any
rules adopted by the Compensation Committee regarding compliance with applicable
law, including, but not limited to, Section 16(b) of the Exchange Act.
9. MANNER OF EXERCISE.
(a) To the extent that the Options have become and remain exercisable
as provided in Sections 3 and 4, and subject to such reasonable administrative
regulations as the Compensation Committee may adopt, the Options may be
exercised, by written notice to the Compensation Committee, specifying the
number of Exercise Shares and the Exercise Date. On or before the Exercise Date,
Grantee shall deliver to the Company full payment for the Options being
exercised in cash, or cash equivalent satisfactory to the Compensation
Committee, and in an amount equal to the aggregate purchase price for the
Exercise Shares.
(b) Subject to the discretion of the Compensation Committee, Grantee
may, in lieu of cash, either: (i) deliver shares of Common Stock having an
Exercise Date Value equal to the purchase price of the Exercise Shares; or (ii)
deliver a combination of cash and shares of Common Stock with an aggregate value
and Exercise Date Value equal to the purchase price of the Exercise Shares,
subject to such rules and regulations as may be adopted by the Compensation
Committee to
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<PAGE> 5
provide for the compliance of such payment procedure with applicable law,
including Section 16(b) of the Exchange Act.
(c) The Compensation Committee may require Grantee to furnish or
execute such other documents as the Compensation Committee reasonably deems
necessary: (i) to evidence such exercise and (ii) to comply with or satisfy the
requirements of the Securities Act, applicable state securities laws or any
other law.
10. NO RIGHTS AS STOCKHOLDER. Grantee will have no voting or other
rights as a stockholder of the Company with respect to any shares of Common
Stock covered by the Options until the exercise of such Options and the issuance
of a certificate or certificates to him for such shares of Common Stock. No
adjustment will be made for dividends or other rights for which the record date
is prior to the issuance of such certificate or certificates.
11. CAPITAL ADJUSTMENTS. The number and any applicable option price of
the shares of Common Stock covered by the Options will be proportionately and
appropriately adjusted by the Compensation Committee to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. Subject to any required action by the
stockholders of the Company, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options will pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified or express mail, return
receipt requested, postage prepaid, or by any recognized international
equivalent of such delivery, to the Company, or Grantee, as the case may be, at
the address of the Company's principal executive office. All such notices and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof.
13. BINDING EFFECT; BENEFITS. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
14. AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written instrument executed by Grantee and the Company.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, regardless of the law that
might be applied under principles of conflict of laws.
16. SECTION AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
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17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement
as of the date first above written.
DIEDRICH COFFEE, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
THE GRANTEE
_________________________________________
TIMOTHY J. RYAN
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EXHIBIT 10.26
DIEDRICH COFFEE, INC.
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
the 17th day of November, 1997, by and between Diedrich Coffee, Inc., a Delaware
corporation (the "Company") and Timothy J. Ryan (the "Purchaser"). Pursuant to
the terms and subject to the conditions hereinafter set forth, the parties agree
as follows:
1. PURCHASE AND SALE OF STOCK
1.1 SALE AND ISSUANCE OF COMMON STOCK.
Subject to the terms and conditions of this Agreement, the
Purchaser agrees to purchase at the Closing, and the Company agrees to issue and
sell to the Purchaser at the Closing, 16,667 shares of the Company's Common
Stock (the "Shares") at an aggregate purchase price of Fifty Thousand and One
Dollars ($50,001.00) or Three Dollars ($3.00) per share.
1.2 CLOSING.
(a) The purchase and sale of the Shares shall take place at the
offices of the Company in Irvine, California, at 2:00 p.m., on the fifth (5th)
business day following the satisfaction of the conditions set forth in Sections
4 and 5 hereof, or at such other time and place as the Company and Purchaser
shall mutually agree, either orally or in writing (which time and place are
designated as the "Closing").
(b) At the Closing, the Company shall deliver to the Purchaser a
certificate representing the Shares that such Purchaser is purchasing against
payment of the purchase price therefor by check, wire transfer or such other
form of payment as shall be mutually agreed upon by the Purchaser and the
Company.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company that:
2.1 RELIANCE UPON PURCHASERS' REPRESENTATIONS.
The Purchaser understands that the Shares are not registered
under the Securities Act on the ground that the sale provided for in this
Agreement and the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, and that the
Company's reliance on such exemption is predicated on the Purchasers'
representations set forth herein. The Purchaser realizes that the basis for the
exemption may not be present if, notwithstanding such representations, the
Purchaser has in mind merely acquiring the Shares for a fixed or determinable
period in the future, or for a market rise, or for sale if the market does not
rise. The Purchaser has no such intention. The Shares to be acquired by the
Purchaser hereunder will be acquired for Purchaser's own account and not with a
view to or for sale in connection with any distribution of the Shares.
<PAGE> 2
2.2 RECEIPT OF INFORMATION.
The Purchaser believes such Purchaser has received all the
information such Purchaser considers necessary or appropriate for deciding
whether to purchase the Shares. The Purchaser further represents that such
Purchaser has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects, and financial condition of the Company and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Purchaser
or to which such Purchaser had access.
2.3 INVESTMENT EXPERIENCE.
The Purchaser represents that such Purchaser is experienced in
evaluating and investing in private placement transactions of securities of
companies and acknowledges that such Purchaser is able to fend for himself, can
bear the economic risk of such Purchaser's investment, and has such knowledge
and experience in financial and business matters that such Purchaser is capable
of evaluating the merits and risks of the investment in the Shares.
2.4 ACCREDITED PURCHASER.
(a) The term "Accredited Purchaser" as used herein refers to:
(i) A person or entity who is a director or executive
officer of the Company;
(ii) Any natural person who had an individual net worth,
or joint net worth with that person's spouse, at the time of the
purchase exceeds $1,000,000;
(iii) Any natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level in
the current year; or
(iv) Any entity in which all of the equity owners are
accredited Purchasers.
As used in this Paragraph 2.5(a), the term "net worth" means the
excess of total assets over total liabilities. For the purpose of determining a
person's net worth, the principal residence owned by an individual should be
valued at fair market value, including the cost of improvements, net of current
encumbrances. As used in this Paragraph 2.5(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, the Purchaser should consider whether such Purchaser should add any
or all of the following items to such Purchaser's adjusted gross income for
income tax purposes in order to reflect more accurately such Purchaser's actual
economic income: any amounts attributable to tax-exempt income received, losses
claimed as a limited partner in any partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, and alimony
payments.
(b) The Purchaser represents to the Company that such
Purchaser is an Accredited Purchaser.
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2.5 RESTRICTED SECURITIES.
The Purchaser understands that the Shares may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Securities Act, the Shares must be held indefinitely. In
particular, the Purchaser is aware that the Shares may not be sold pursuant to
Rule 144 promulgated under the Securities Act unless all of the conditions of
that Rule are met.
2.6 LEGEND.
Each certificate or other document evidencing any of the Shares
shall be endorsed with the legend substantially in the form set forth below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that:
3.1 VALID ISSUANCE OF SHARES.
The Shares being purchased by the Purchaser hereunder, when
issued, sold, and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid,
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and under applicable state and
federal securities laws.
3.2 AUTHORIZATION; NO CONFLICT.
All corporate action on the part of the Company necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations of the Company hereunder has been taken or will be taken prior
to the Closing. The execution, delivery, and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation or default in any material respect of any provision of
its organizational documents or in any material respect of any provision of any
material mortgage, indenture, agreement, instrument, or contract to which it is
a party.
3.3 GOVERNMENTAL CONSENTS.
No consent, approval, qualification, order or authorization of,
or filing with, any (a) state or federal governmental authority or (b) stock
exchange or market system is required on the part of the Company in connection
with the Company's valid execution, delivery, or performance of
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this Agreement, the offer, sale or issuance of the Shares by the Company, except
certain post-Closing filings which the Company agrees to make on a timely basis.
3.4 CAPITALIZATION.
As of September 10, 1997, there were 5,391,650 shares of the
Company's common stock outstanding. From such date to the date hereof, there has
not been any issuance by the Company of a material number of shares of the
Company's common stock.
4. CONDITIONS OF PURCHASER'S OBLIGATIONS AT CLOSING
The obligations of Purchaser under Section 1.1 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective unless the Purchaser
consents in writing thereto.
4.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 STOCKHOLDER APPROVAL.
Prior to February 28, 1997, the stockholders of the Company shall
have approved (a) the terms of the Stock Option Plan and Agreement dated
November 17, 1997 between the Company and Purchaser and (b) the grant of options
thereunder.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective unless the Company consents in
writing thereto.
5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser contained in
Section 2 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
6. MISCELLANEOUS
6.1 ENTIRE AGREEMENT.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties with respect to the subject matter hereof
and no party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
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6.2 SURVIVAL OF WARRANTIES.
The representations and warranties of the Purchaser contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing.
6.3 GOVERNING LAW.
This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.4 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.5 TITLES AND SUBTITLES.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.6 SEVERABILITY.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, this Agreement has been executed by
each of the parties on the date first set forth above.
DIEDRICH COFFEE, INC.
By: __________________________________
Lawrence Goelman
Chairman of the Board and
Interim Chief Executive Officer
PURCHASER
______________________________________
Timothy J. Ryan
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
JOHN MARTIN TO JOIN
DIEDRICH COFFEE AS BOARD CHAIRMAN
TIM RYAN, FORMER MARTIN COLLEAGUE AT TACO BELL,
TO BECOME PRESIDENT AND CHIEF EXECUTIVE OFFICER
IRVINE, Calif., November 18 -- Diedrich Coffee Inc. (NASDAQ: DDRX),
operator of 37 specialty coffee houses in California, Texas, and Colorado,
announced today that former Taco Bell Worldwide Chairman and CEO John Martin has
agreed to join the company's Board of Directors as chairman.
Subject to shareholder approval, John Martin and the company's existing
board agreed to terms under which John Martin will invest $1,000,000 in Diedrich
Coffee. The transaction, pursuant to a private sale of restricted stock, will
make Martin one of the company's largest shareholders with approximately seven
percent of Diedrich Coffee's common stock; factoring in 50,000 shares of
Diedrich Coffee stock previously held by Martin.
The company also announced that it has named experienced restaurant
industry executive Tim Ryan, former president of Sizzler USA, and a former
colleague of Martin's at Taco Bell Worldwide, as Diedrich Coffee's president and
chief executive officer. Ryan will also join Diedrich Coffee's Board of
Directors and invest directly in the company.
AN EYE TO THE FUTURE
"During the past six months, the Board of Diedrich Coffee conducted an
intensive search to identify a permanent chairman, as well as a CEO, who
together could work with the new management team we've assembled to help take
Diedrich Coffee to the next level," said Larry Goelman, out-going chairman and
CEO of the company. Goelman, who has served in those capacities on an interim
basis since March of this year, added that: "Both John and Tim possess the kind
of in-depth experience Diedrich Coffee needs in managing and growing large scale
operations. That wealth of experience, combined with the excellent quality,
character and heritage of our coffee products, positions us extremely well to
expand once again, and do so very successfully."
<PAGE> 2
Goelman, who will remain an active member of the board, said that he
expects to quickly transition his responsibilities over to Martin, widely
regarded as a visionary senior executive in the restaurant industry and retail
field.
During his 13 year tenure at Taco Bell, from 1982 to 1996, John Martin
grew the Mexican-style quick service restaurant company from $600 million in
sales, and 1,500 locations, to more than $4.5 billion in sales with in excess of
25,000 outlets worldwide. After leaving Taco Bell Worldwide at the end of 1996,
Martin became president of PepsiCo's Casual Dining Division.
Besides his new position as chairman of Diedrich Coffee, Martin is
chairman of publicly-traded Newriders Inc., which owns and operates Easyriders
Cafes, and chairman of privately-held Pacific Restaurant Ventures, an upscale
dining entity based in Newport Beach, California.
RYAN TO OVERSEE DAY-TO-DAY OPERATIONS AS CEO
Martin said that in his position as chairman of Diedrich Coffee, he
intends to provide "overall strategy, vision and support." Tim Ryan, as CEO,
will manage the company on a day-to-day basis.
"I've been interested in Diedrich Coffee since I moved to Orange County
years ago," said Martin. "It's an absolute gem from a brand standpoint, and like
those who've helped found and build the company, Tim Ryan and I see tremendous
potential to grow the Diedrich Coffee name to a national level."
Tim Ryan, like Martin, brings a wealth of experience managing larger
operations. Ryan, who was senior vice president of marketing at Taco Bell
Worldwide while John Martin was president, guided Taco Bell's marketing efforts
during a time of record sales growth. Later, he was named senior vice president
of Taco Bell's Casual Dining Division and was responsible for overseeing
operations for, and consulting with, both well known and new concepts like
California Pizza Kitchen, Chimayo Grill and Chevy's. In his most recent capacity
as president of Sizzler USA, Ryan helped guide the company through its recent
turn-around efforts. During his 23 year career, Tim also served as executive
vice president of Olive Garden restaurants and president of Magic Pan
Restaurants.
"Both John and Tim share the same enthusiasm that we all have for
Diedrich Coffee," Goelman said. "They see what we see - an absolutely wonderful,
high quality product that can be, and deserves to be, enjoyed in many more
places than it is today."
Goelman said that Martin Diedrich, the company's current vice chairman
and chief coffee officer, will continue in those capacities.
"Martin Diedrich will play an even larger role in setting and monitoring
Diedrich Coffee's strict quality standards," said Goelman. Goelman also said
that Kerry Coin will continue as the company's chief operating officer. "Kerry
has done well in helping to stabilize operations and execute the Board's
turn-around strategies.
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"I can say without reservation that Diedrich Coffee in the hands of a
superb management team, one that combines all of the most important attributes
for success in our business - experience growing brand-based food concepts,
proven concept development experience, specific knowledge of the food service
and coffee industries, vision and creativity in operations, and vast franchising
experience and contacts," Goelman said.
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 Exchange Act of 1934, as amended, and fall under
the safe harbor. The company's 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 price and
availability of coffee and other raw materials, successful execution of the
company's expansion plans, impact of competition, the availability of additional
financing 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 29, 1997, and in
the company's 10-Q. Copies of this annual report are available from Diedrich
Coffee's investor relations representatives.
# # #
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CONFERENCE CALL INVITATION
NOVEMBER 18, 1997
Diedrich Coffee will host a conference call for interested investors and
analysts at 1 p.m. Pacific Standard Time, Tuesday, November 18, 1997. The call
will discuss events related to this media announcement. To participate in the
call, please dial:
1-800-263-9153
Host: Larry Goelman
Chairman, Diedrich Coffee
For more information, contact:
David Paine
Paine & Associates
714-755-0400
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