<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 8, 1999
DIEDRICH COFFEE, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 000-21203 33-0086628
- ------------------------------- ----------------- ---------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2144 Michelson Drive, Irvine, California 92612
- -------------------------------------------------- ---------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 260-1600
--------------
N/A
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
- -------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS.
ACQUISITION OF COFFEE PEOPLE, INC.
On February 8, 1999, Diedrich Coffee, Inc. (the "Registrant" or
"Diedrich"), signed a letter of intent to acquire all of the outstanding
shares of common stock of Coffee People, Inc. (NASDAQ-MOKA) ("Coffee
People"). Under the terms of the letter of intent, the stockholders of
Coffee People will receive $10.75 million in cash, 1,667,000 shares of
Diedrich common stock and $14.25 million in cash or a combination of cash and
stock based on the net proceeds of a public equity offering planned by
Diedrich prior to the closing of the acquisition. The proposed acquisition
is subject to certain conditions, including the execution of a definitive
agreement, securing financing, completion of the public equity offering by
Diedrich upon certain specified terms, receipt of regulatory approvals, due
diligence and approval by the shareholders of Diedrich and Coffee People.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are filed with this report on Form 8-K:
<TABLE>
<CAPTION>
Exhibit
Number Description
--------- -------------------------------------------------------------------
<C> <S>
99.1 Press Release: "Diedrich Coffee to Acquire Coffee People," dated
February 9, 1999.
99.2 Letter of Intent dated February 8, 1999.
</TABLE>
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this current report to be signed on its behalf by
the undersigned hereunto duly authorized.
DIEDRICH COFFEE, INC.
a Delaware corporation
Date: February 9, 1999 By: /s/ Ann Wride
----------------------------------
Ann Wride
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
--------- ------------------------------------------------- -------------
<C> <S> <C>
99.1 Press Release: "Diedrich Coffee to Acquire Coffee
People," dated February 9, 1999. 5
99.2 Letter of Intent dated February 8, 1999. 7
</TABLE>
4
<PAGE>
EXHIBIT 99.1
[Diedrich Logo]
FOR IMMEDIATE RELEASE
Diedrich Coffee to Acquire Coffee People
COMBINATION CREATES SECOND LARGEST OPERATOR IN SPECIALTY COFFEE MARKET
Irvine, California - February 9, 1999 - Diedrich Coffee, Inc. (NASDAQ:
DDRX), a leading retailer, wholesaler and custom roaster of specialty coffee,
announced today that it has signed a letter of intent to acquire Coffee
People, Inc. (NASDAQ: MOKA).
This acquisition positions Diedrich Coffee as the second largest company
in the specialty coffee market and as an industry leader in mall-based retail
coffee stores. The combined company will have annual system-wide sales of
more than $150 million through 363 outlets in 38 states and seven countries.
The company's brands will include Diedrich Coffee, Coffee People and Coffee
Plantation coffeehouses and Gloria Jean's mall-based retail coffee stores.
"Profitability, synergies, access to capital and infrastructure are the
four big gains from this transaction," said John E. Martin, Chairman of
Diedrich Coffee, Inc. "The transaction is immediately accretive to earnings
and provides the management, distribution and roasting infrastructures that
are necessary to drive future growth. Diedrich Coffee has always stood out
in terms of product quality and the unique neighborhood environment we offer
our customers. This transaction makes us stand out in terms of size as well."
Under the terms of the letter of intent, Coffee People shareholders will
receive $10.75 million in cash, 1,667,000 shares of Diedrich Coffee common
stock, and $14.25 million in cash or a combination of cash and stock based on
the successful completion of a public equity offering by Diedrich Coffee. As
of February 8, there were approximately 10,760,000 shares of Coffee People
common stock outstanding. This transaction is expected to close in early
summer and is subject to a number of conditions including the execution of a
definitive agreement, securing financing and shareholder and regulatory
approval.
"Our companies have a shared vision of expanding nationally through
franchising," said Alton W. McEwen, President and Chief Executive Officer of
Coffee People, Inc. "The strength and experience that John Martin and Tim
Ryan offer will help us realize that vision. Their leadership at Taco Bell
in growing the concept from 1,500 to 25,000 outlets in a thirteen year period
is a case study in capitalizing on a rapidly expanding segment with
aggressive growth."
Diedrich Coffee's national expansion objective is to add 1,500
coffeehouses over the next six years through franchise area development
agreements with large multi-unit franchise operators. The company has already
signed two major franchise agreements with contracts for the opening of up to
145 Diedrich Coffee coffeehouses and plans to expand the Gloria Jean's brand.
With this transaction, Diedrich Coffee hopes to aggressively exploit the
emerging segmentation of the specialty coffee market. "We believe that, as
the market evolves, three
5
<PAGE>
distinct segments are emerging. These are neighborhood coffeehouses,
mall-based coffee stores and espresso/coffee bars. Now we have a leg up in
the first two," said Tim Ryan, President and Chief Executive Officer of
Diedrich Coffee, Inc.
Statements in this news release that relate to future plans, financial
results or projections, events or performance are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as amended, and
fall under the safe harbor. Actual results and financial position could
differ materially from those anticipated in the forward-looking statements as
a result of a number of factors, including but not limited to, the successful
closing of this transaction, impact of competition, the availability of
working capital and other risks and uncertainties described in detail under
"Certain Factors and Trends Affecting Diedrich Coffee and its Business" in
the Company's annual report on form 10-K for the fiscal year ended January
28, 1998, and in the Company's subsequent reports on form 10-Q, as well as in
Coffee People's Form 10-K filed with the Securities and Exchange Commission
on September 25, 1998 and Registration Statement on Form S-4 as filed with
the Securities and Exchange Commission on April 23, 1998.
Media Contact: Dan Cahill
Diedrich Coffee, Inc.
(310) 966-5513
Dolores Chenoweth
Coffee People, Inc.
(503) 469-0338
Investor Contact: Ann Wride, Chief Financial Officer
Diedrich Coffee, Inc.
(949) 260-6713
Mark Archer, Chief Financial Officer
Coffee People, Inc.
(831) 633-4001
6
<PAGE>
EXHIBIT 99.2
DIEDRICH COFFEE, INC.
2144 MICHELSON DRIVE
IRVINE, CALIFORNIA 92612
February 8, 1999
Alton W. McEwen
President and Chief Executive Officer
Coffee People, Inc.
11480 Commercial Parkway
Castroville, CA 95012
Re: Acquisition of Coffee People, Inc. by Diedrich Coffee, Inc.
Dear Mr. McEwen:
This letter sets forth the terms of our agreement in principle with
respect to the negotiation of a definitive agreement (the "Definitive
Agreement") under which all of the issued and outstanding shares of Common
Stock of Coffee People, Inc., an Oregon corporation ("CP") would be acquired
by Diedrich Coffee, Inc., a Delaware corporation ("Diedrich"). Each of
Diedrich and CP represent that this letter of intent has been approved by its
respective Board of Directors.
1. STRUCTURE. It is presently anticipated that the acquisition of all
of the issued and outstanding shares of Common Stock of CP by Diedrich (the
"Acquisition") would be structured as a merger of CP into a subsidiary of
Diedrich in a transaction accounted for as a purchase. The consideration to
be paid in the merger to the holders of the outstanding stock of CP would
consist of cash and shares of Diedrich Common Stock in the aggregate amount
set forth below. The consideration set forth below is based on an assumed
capitalization of CP consisting of 10.75 million shares of CP common stock
outstanding.
The aggregate purchase price for all of the outstanding shares of
capital stock of CP will be $35 million (the "Aggregate Consideration") and
would be payable in cash and common stock of Diedrich as follows:
(a) CASH. The cash portion of the Aggregate Consideration (the
"Cash Consideration") would be $10.75 million plus the net proceeds of a
public equity offering (up to $14.25 million) conducted by Diedrich after the
execution of the Definitive Agreement and prior to the consummation of the
Acquisition (the "Public Offering"); provided that in no event shall the Cash
Consideration exceed $25 million. Diedrich agrees to use its reasonable best
efforts to complete the Public Offering and further agrees that all of the
net proceeds of the Public Offering (up to $14.25 million) will be paid to CP
as part of the Cash Consideration.
7
<PAGE>
(b) ISSUANCE OF DIEDRICH COMMON STOCK AS PARTIAL CONSIDERATION. A
portion of the Aggregate Consideration will be paid through the issuance of
1,667,000 shares of Diedrich Common Stock.
(c) ISSUANCE OF DIEDRICH COMMON STOCK IN THE EVENT OF A PARTIAL
PUBLIC OFFERING. In the event that Diedrich is unable to raise net proceeds
of $14.25 million from the Public Offering at a price per share of $6.00 or
more, a portion of the Aggregate Consideration may be paid with a number of
shares of Diedrich Common Stock equal to the quotient of (i) $25 million less
the Cash Consideration as set forth in subsection (a) above divided by (ii)
the price per share to the public in the Public Offering (provided that such
price per share shall not be less than $6.00).
2. TERMS AND CONDITIONS. The transactions contemplated in this letter
of intent would be subject to customary terms and conditions and such other
terms and conditions as may be agreed upon by the parties, including, but not
limited to:
(a) the satisfaction by each party, in its sole discretion, with its
due diligence review;
(b) approval of the merger by the shareholders of Diedrich and CP;
(c) receipt of fairness opinions by Diedrich and CP from their
respective investment bankers;
(d) execution of definitive documentation with respect to the merger;
(e) if the Public Offering will not reasonably be consummated at a
price per share to the public of at least $6.00 with net proceeds
of at least $7 million, then either party may terminate the
definitive agreement upon written notice to the other party;
(f) receipt of a lock-up agreement from Second Cup Ltd. providing
that the shares of Diedrich Common Stock issued to Second Cup
will not be sold until the earlier of (i) the first anniversary
of the closing date of the Acquisition or (ii) the sale by
Diedrich's officers or directors of shares of Diedrich Common
Stock in the aggregate equal to 5% of the outstanding shares and
option shares of Diedrich's Common Stock held by all of them in
the aggregate;
(g) compliance with all applicable legal and regulatory requirements
and receipt of all applicable regulatory approvals, including
approval under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976;
(h) receipt of any requisite consents by all lessors, lenders,
suppliers, vendors, customers and other third parties having
material agreements with CP that
8
<PAGE>
may be breached or terminated as a result of, or materially
altered by the consummation of, the Acquisition;
(i) agreement by the parties with respect to the treatment of CP's
outstanding stock options or other equity incentives in
connection with the Acquisition;
(j) no event shall have occurred prior to the consummation of the
Acquisition which has had or will have a material adverse effect
on the business, financial condition or results of operations of
either CP or Diedrich; and
(k) delivery to CP by Diedrich, prior to the execution of the
Definitive Agreement, of one or more written financing
commitments or evidence reasonably satisfactory to CP evidencing
Diedrich's ability to fund the minimum Cash Consideration of
$10.75 million described in Section 1(a).
3. DEFINITIVE AGREEMENT. The parties will use their best efforts to
prepare and execute as promptly as possible upon completion of their due
diligence, but in any event not later than March 5, 1999, a Definitive
Agreement embodying the terms of this letter and containing such other
provisions as they and their respective counsel may deem appropriate. The
Definitive Agreement shall contain representations and warranties customary
in transactions of this nature. The Definitive Agreement will contain
closing conditions customary in transactions of this nature including, but
not limited to the conditions set forth above, fulfillment of covenants and
agreements of each of the parties, receipt of required regulatory approvals
and legal opinions. In addition, the Definitive Agreement will provide that
each of the parties will use their reasonable efforts to consummate the
Public Offering at a price per share to the public of at least $6.00 and that
Second Cup, as the majority shareholder of CP, will be entitled to elect one
of the seven members of the board of directors for so long as Second Cup owns
at least 10% of the outstanding shares of Diedrich Common Stock.
4. DUE DILIGENCE. Each party will permit the other, and its financial
and legal representatives, to conduct a full and complete investigation and
evaluation of the other party's businesses, will provide such assistance as
is reasonably requested and will give access at reasonable times to all
employees, officers, assets, records, documents, and properties related to
the other party's business, assets and liabilities. Information obtained in
such legal, financial and business due diligence will be subject to the
Non-Disclosure Agreement, dated August 18, 1998, previously entered into by
the parties. If either CP or Diedrich determines, in its sole discretion,
not to proceed with the transactions contemplated herein, it shall notify the
other party in writing, and upon delivery of such notice, this letter of
intent shall terminate (except as set forth in Section 10 hereof) and all
documentation and other information obtained by either party (other than
publicly available information) shall be returned promptly.
5. CONDUCT OF BUSINESS. From and after the date hereof until the
termination of this letter of intent or until execution of a Definitive
Agreement, each party will conduct its business only in the normal and
ordinary course, in material compliance with all applicable contractual
9
<PAGE>
obligations, laws, rules and regulations, and in a manner consistent with
past practice, custom and business operating strategy; provided that in no
event shall either Diedrich or CP transfer or sell any material amount of
their respective assets (other than the sale or franchise of stores in the
Gloria Jeans' division).
6. EXPENSES AND FEES. Diedrich and CP shall pay their respective
transaction expenses (including fees and expenses of legal counsel,
investment bankers and any other representatives or consultants) in
connection with the transactions contemplated herein, whether such
transactions are consummated or not.
7. EXCLUSIVITY AND NO SOLICITATION.
(a) CP and Diedrich shall negotiate exclusively with each other for a
period from the date of execution of this Letter of Intent through March 5,
1999 (the "Exclusive Period"). During the Exclusive Period, neither party
shall, directly or indirectly, through any officer, director, agent or
representative (including without limitation investment bankers, attorneys,
accountants and consultants), or otherwise:
(i) solicit, initiate or further the submission of proposals or
offers from, or enter into any agreement with, any firm, corporation,
partnership, association, group (as defined in Section 13(d)(3) of the
Exchange Act) or other person or entity, individually or collectively
(including without limitation any managers or other employees of the
parties or any of their affiliates), other than Diedrich or CP, as
applicable (a "Third Party"), relating to any acquisition or purchase of
all or a material portion of the assets of, or any equity interest in, CP
or any merger, consolidation or business combination with CP or relating to
any acquisition or purchase of all or a material portion of the assets of,
or any equity interest in, Diedrich or any merger, consolidation or
business combination with Diedrich;
(ii) participate in any discussions or negotiations regarding, or
furnish to any Third Party any confidential information with respect
thereto; or
(iii) otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any Third Party to do
or seek to do any of the foregoing.
(b) During the Exclusive Period, each of CP and Diedrich shall notify
the other in writing within three days of receipt thereof if any such written
proposal or offer, or any written inquiry or contact relating to a proposed
offer or proposal with any Third Party, is made, and shall in any such
notice, set forth in reasonable detail the identity of the Third Party and
the terms and conditions of any proposal; provided, however, that neither CP
nor Diedrich shall be required to provide any of the information required to
be set forth in the notice as described in this Section 7(b) if, in the
reasonable judgment of such company's board of directors, providing such
information would result in a breach of or default under a confidentiality
agreement to which such company is a party provided that, in such event, CP
or Diedrich, as the case may be,
10
<PAGE>
shall still be required to provide a notice to the other with any information
that is permitted, even if such information is limited to the fact that a
written proposal or offer, or a written inquiry or contact relating to a
proposed offer or proposal, has been received from an unidentified source.
(c) Each of CP and Diedrich shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Third Party conducted prior to the date of this Agreement with respect to any
of the foregoing.
8. ANNOUNCEMENTS.
Except as may be required to comply with applicable securities laws,
Diedrich and CP agree that neither shall issue any press release regarding
the transactions contemplated hereby without the prior written consent of the
other party, which shall not be unreasonably withheld or delayed.
Notwithstanding the previous sentence, the parties acknowledge that each will
make appropriate filings with the Securities and Exchange Commission
following execution of this letter of intent.
9. CHOICE OF LAW.
This letter of intent and the Definitive Agreement shall be governed by
and construed and enforced in accordance with, the internal laws (excluding
conflict of laws principles) of the State of California.
10. BINDING AND NON-BINDING EFFECT.
This letter of intent is intended as a milestone in the negotiations and
discussions between the parties and contains a record of their understanding
to date of the scope and key elements of future relations between them.
Nothing contained herein, however, shall create any legal right or obligation
between Diedrich, CP or any other party, except as may be expressly set forth
in this Section 10. Notwithstanding the foregoing, the Confidentiality
Agreement and the provisions of Sections 6, 7, 8 and 10 and the last sentence
of Section 4 of this letter of intent are intended to be binding and
enforceable obligations of the parties. The Confidentiality Agreement and
the provisions of Sections 6, 7, 8 and 10 and the last sentence of Section 4
of this letter of intent shall continue in full force and effect following
the termination or expiration of this letter of intent.
11
<PAGE>
Please indicate CP's acceptance of the foregoing by signing, dating and
returning the enclosed copy of this letter to the undersigned.
Very truly yours,
DIEDRICH COFFEE, INC.
By: /s/ Timothy J. Ryan
---------------------------
Timothy J. Ryan
President and Chief Executive Officer
Agreed and accepted this 8th day of February, 1999.
COFFEE PEOPLE, INC.
By: /s/ Alton W. McEwen
--------------------------
Alton W. McEwen
President and Chief Executive Officer
12