-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TpixVU8skqL9wya5W/PWgJEy8+BSArpjfqSBeB+B1ez/xyAnw3jxd8KGxS/ySbZ4 28i/fNvG7QHWMazXkVqptA== 0000892569-97-003340.txt : 19971126 0000892569-97-003340.hdr.sgml : 19971126 ACCESSION NUMBER: 0000892569-97-003340 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971117 ITEM INFORMATION: FILED AS OF DATE: 19971125 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIEDRICH COFFEE INC CENTRAL INDEX KEY: 0000947661 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FOOD STORES [5400] IRS NUMBER: 330086628 STATE OF INCORPORATION: CA FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21203 FILM NUMBER: 97728370 BUSINESS ADDRESS: STREET 1: 2144 MICHELSON DRIVE STREET 2: STE A CITY: IRVINE STATE: CA ZIP: 9262682612 BUSINESS PHONE: 7142601600 MAIL ADDRESS: STREET 1: 2144 MICHELSON DRIVE CITY: IRVINE STATE: CA ZIP: 92612 8-K 1 FORM 8-K FOR THE DATE OF REPORT ON 11-17-97 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) November 17, 1997 DIEDRICH COFFEE, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 0-21203 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 (714) 260-1600 N/A - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ================================================================================ 2 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. 2 3 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 ---------------------------------- Jonathan B. Eddison, Vice President and General Counsel 3 4 EXHIBIT INDEX
Exhibit Sequentially Number Description Numbered Page ------- ----------- ------------- 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.
4 EX-9.1 2 VOTING AGREEMENT AND IRREVOCABLE PROXY AGREEMENT 1 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. 2 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. 2 3 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 3 4 EXHIBIT A LIST OF STOCKHOLDERS AND NUMBER OF SHARES OWNED
Name of Stockholder Number of Shares of Common Stock - ------------------- -------------------------------- D.C.H., L.P. 1,442,197 Martin R. Diedrich 655,107
4 EX-10.21 3 LETTER AGREEMENT BETWEEN THE COMPANY AND J. MARTIN 1 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. 1 2 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. 2 3 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: ______________________________ 3 EX-10.22 4 STOCK OPTION PLAN AGREEMENT WITH JOHN E. MARTIN 1 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. 2 (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 2 3 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 3 4 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 4 5 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. 5 6 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 6 EX-10.23 5 COMMON STOCK PURCHASE AGREEMENT WITH J. MARTIN 1 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. 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. 2 3 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 3 4 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. 4 5 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 5 EX-10.24 6 EMPLOYMENT AGREEMENT WITH TIMOTHY RYAN 1 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 1 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: 2 3 (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. 3 4 (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. 4 5 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 5 6 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. 6 7 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 7 EX-10.25 7 STOCK OPTION PLAN AND AGREEMENT WITH TIMOTHY RYAN 1 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. 1 2 (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. 2 3 (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 3 4 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 4 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. 5 6 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 6 EX-10.26 8 COMMON STOCK PURCHASE AGREEMENT WITH TIMOTHY RYAN 1 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. 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. 2 3 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 3 4 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. 4 5 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 5 EX-99.1 9 PRESS RELEASE 1 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." 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. 2 3 "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. # # # 3 4 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 4 -----END PRIVACY-ENHANCED MESSAGE-----