-----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, Fr5U5FAJIDg41UokZuMc969JZ9snwnz+f0LjpLAsUgpDVCNvBDkoYSaZiO7SfTS+ TvO7Z1T+apsFQrgnj3IoRA== 0001095811-01-502365.txt : 20010517 0001095811-01-502365.hdr.sgml : 20010517 ACCESSION NUMBER: 0001095811-01-502365 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010508 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010516 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: 0127 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21203 FILM NUMBER: 1641703 BUSINESS ADDRESS: STREET 1: 2144 MICHELSON DRIVE STREET 2: STE A CITY: IRVINE STATE: CA ZIP: 9262682612 BUSINESS PHONE: 9492601600 MAIL ADDRESS: STREET 1: 2144 MICHELSON DRIVE CITY: IRVINE STATE: CA ZIP: 92612 8-K 1 a72616e8-k.txt FORM 8-K DATE OF REPORT MAY 8, 2001 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): May 8, 2001 DIEDRICH COFFEE, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 000-21203 33-0086628 - ---------------------------- ------------ ------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 2144 Michelson Drive, Irvine California 92612 - --------------------------------------- ------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (949) 260-1600 N/A - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ================================================================================ 2 ITEM 5. OTHER EVENTS. On May 8, 2001, Diedrich Coffee, Inc. completed the sale of 8,000,000 shares of its common stock, at a price of $0.75 per share, and the issuance of warrants to purchase 2,000,000 shares of its common stock, at an initial exercise price of $1.20 per share, to a series of investors. The gross proceeds to the company from the equity investment was $6 million. After the payment of approximately $400,000 in transaction expenses, Diedrich Coffee anticipates paying approximately $3.6 million of the proceeds to its lender to reduce outstanding indebtedness. The remainder of the proceeds will be used for current obligations and other general corporate expenses. In connection with the equity investment transaction, Sequoia Enterprises, L.P., of which Diedrich Coffee's chairman, Paul C. Heeschen, is the general partner, purchased 4,000,000 shares of common stock and was issued a warrant to purchase an additional 1,000,000 shares of common stock. As a result, when combined with shares previously held, Mr. Heeschen beneficially owned approximately 32% of the company's outstanding common stock immediately after the completion of the equity investment transaction. In addition, a number of entities of which Westcliff Capital Management, LLC is the general partner or investment advisor purchased an aggregate of 3,333,334 shares of common stock and were issued warrants to purchase an additional 833,333 shares of common stock. As a result, when combined with shares previously held, Westcliff Capital Management, LLC beneficially owned approximately 19.9% of the outstanding common stock of Diedrich Coffee immediately after the completion of the equity investment transaction. While the investors have not expressed any intent to act in concert, if they did, they would control approximately 51.9% of the company's outstanding common stock. On May 9, 2001, following the closing of the equity investment transaction, Diedrich Coffee effected a one-for-four reverse stock split by filing an amendment to its certificate of incorporation. The reverse stock split resulted in every four shares of the company's outstanding common stock being converted automatically into one share of common stock. As part of the reverse stock split, the number of authorized shares of Diedrich Coffee common stock was decreased proportionately from 35,000,000 shares to 8,750,000 shares. Diedrich Coffee's stock began trading on The Nasdaq National Market on a post-reverse stock split basis on May 11, 2001. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits. The following exhibits are filed with this report of Form 8-K: EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 Restated Certificate of Incorporation, dated May 11, 2001 4.1 Registration Rights Agreement, dated May 8, 2001 4.2 Form of Warrant, dated May 8, 2001 99.1 Press Release, dated May 9, 2001 2 3 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. Dated: May 16, 2001 DIEDRICH COFFEE, INC., a Delaware corporation By: /s/ J. MICHAEL JENKINS --------------------------- J. Michael Jenkins President and Chief Executive Officer 3 4 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 Restated Certificate of Incorporation, dated May 11, 2001 4.1 Registration Rights Agreement, dated May 8, 2001 4.2 Form of Warrant, dated May 8, 2001 99.1 Press Release, dated May 9, 2001 EX-3.1 2 a72616ex3-1.txt EXHIBIT 3.1 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF DIEDRICH COFFEE, INC. Diedrich Coffee, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Diedrich Coffee, Inc. Diedrich Coffee, Inc. was originally incorporated under the same name, and the original Certificate of Incorporation of this Corporation was filed with the Secretary of State of the State of Delaware on August 29, 1996. Certificates of Amendment to the Certificate of Incorporation of this Corporation were filed with the Secretary of State of the State of Delaware on May 8, 2001, and May 9, 2001. 2. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this Corporation as heretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. 3. The text of the Certificate of Incorporation is heretofore restated to read in its entirety as follows: RESTATED CERTIFICATE OF INCORPORATION OF DIEDRICH COFFEE, INC. ARTICLE I NAME OF CORPORATION The name of this corporation is: DIEDRICH COFFEE, INC. ARTICLE II REGISTERED OFFICE The address of the registered office of the corporation in the State of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent, and the name of its registered agent at that address is National Registered Agents, Inc. 2 ARTICLE III PURPOSE The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV AUTHORIZED CAPITAL STOCK The corporation is authorized to issue two classes of shares of stock to be designated, respectively, "Common" and "Preferred"; the total number of such shares shall be eleven million seven hundred and fifty thousand (11,750,000); the total number of Common shares shall be eight million seven hundred fifty thousand (8,750,000), each having a par value of one cent ($.01); and the total number of Preferred shares shall be three million (3,000,000), each having a par value of one cent ($.01). The Preferred shares may be issued from time to time in one or more series. The Board of Directors is hereby vested with authority to fix by resolution or resolutions the designations and the powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation, the dividend rate, conversion rights, redemption price and liquidation preference, of any series of Preferred shares, and to fix the number of shares constituting any such series, and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding). In case the number of shares of any such series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution or resolutions originally fixing the number of shares of such series. ARTICLE V BOARD POWER REGARDING BYLAWS In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the bylaws of the corporation. ARTICLE VI ELECTION OF DIRECTORS Elections of directors need not be by written ballot unless the bylaws of the corporation shall so provide. 2 3 ARTICLE VII LIMITATION OF DIRECTOR LIABILITY To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended after the date of the filing of this Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time. No repeal or modification of this Article VII by the stockholders shall adversely affect any right or protection of a director of the corporation existing by virtue of this Article VII at the time of such repeal or modification. ARTICLE VIII CORPORATE POWER The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. ARTICLE IX CREDITOR COMPROMISE OR ARRANGEMENT Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. 3 4 4. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of Delaware. 5. This Restated Certificate of Incorporation shall become effective upon filing. IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been signed by Matthew C. McGuinness, its authorized officer this 11th day of May, 2001. DIEDRICH COFFEE, INC. /s/ Matthew C. McGuinness -------------------------------- Matthew C. McGuinness Chief Financial Officer 4 EX-4.1 3 a72616ex4-1.txt EXHIBIT 4.1 1 EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT is made as of May 8, 2001, by and among Diedrich Coffee, Inc., a Delaware corporation (the "Company"), and the Investors listed on Schedule A hereto (each of whom is herein called individually, a "Investor" and all of whom are herein called, collectively, the "Investors"), with reference to the following facts: The Investors are parties to the Common Stock and Warrant Purchase Agreement, dated as of March 14, 2001 (the "Purchase Agreement"), among the Company and the Investors, which provides that as a condition to the closing of the transactions contemplated therein this Agreement must be executed and delivered by the Investors and the Company. NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and for other consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto further agree as follows: 1. Registration Rights. The Company covenants and agrees as follows: 1.1 Definitions. For purposes of this section 1: (a) "Form S-3" means such form under the 1933 Act as in effect on the date hereof or any registration form under the 1933 Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. (b) "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with section 1.11 hereof. (c) "1933 Act" means the Securities Act of 1933, as amended. (d) "1934 Act" means the Securities Exchange Act of 1934, as amended. (e) "Register", "registered", and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such registration statement or document. (f) "Registrable Securities" means (i) the shares of the Company's Common Stock issued pursuant to the Purchase Agreement, (ii) shares of the Company's Common Stock previously acquired by the Investors and listed on Schedule B hereto, (iii) shares of the Company's Common Stock issuable on exercise of the Warrants (as defined in the Purchase Agreement) issued pursuant to the Purchase Agreement, and (iv) any Common Stock of the Company issued as (or issuable on the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in clauses (i) - (iii) above; provided that there shall be excluded any Registrable Securities sold by a person in a transaction in which that person's rights under this section 1 are not assigned. 2 (g) The number of shares of "Registrable Securities" outstanding shall be determined by the number of shares of Common Stock outstanding, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities, that are Registrable Securities. (h) "SEC" means the Securities and Exchange Commission. 1.2 Mandatory Registration. The Company shall prepare and file with the SEC on or before the date that is 120 days after the date hereof (the "Filing Deadline") a registration statement on Form S-3 (or, if Form S-3 is not then available, on such form of registration statement that is then available to effect a registration of all Registrable Securities, subject to consent of the Investors holding at least a majority of the Registrable Securities) for the purpose of registering under the 1933 Act all of the Registrable Securities for resale by, and for the account of, the Holders as selling stockholders thereunder (the "Registration Statement"). The Company shall use its best efforts to cause the Registration Statement to become effective as soon as possible after filing. The Company shall keep such registration statement effective at all times until the earlier of the date (the "Registration Withdrawal Date") on which all the Registrable Securities (i) are sold or (ii) can be sold by all the Holders (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) in any three-month period without volume limitation and without registration in compliance with Rule 144 under the 1933 Act. Notwithstanding anything to the contrary in this Agreement, in the event of a breach by the Company of any of its obligations under this section 1.2, the Investors' sole and exclusive remedy and recourse for such breach, until such time that the Warrant Price (as defined in the Warrants) shall have been reduced to $0.00, shall be the adjustment of the Warrant Price set forth in section 4.4 of the Warrants. 1.3 Company Registration. (a) If (but without any obligation to do so) the Company proposes to register any of its stock (including a registration effected by the Company for stockholders other than the Holders) or other equity securities under the 1933 Act in connection with the public offering of such securities, the Company shall, at such time, promptly give each Holder notice of such registration. On the request of each Holder given within ten days after such notice by the Company, the Company shall, subject to the provisions of section 1.3(c) and (d), cause to be registered under the 1933 Act all of the Registrable Securities that each such Holder has requested to be registered. (b) The Company shall have the right to terminate or withdraw any registration initiated by it under this section 1.3 prior to the effectiveness of such registration, whether or not any Holder shall have elected to include securities in such registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with section 1.8 hereof. 2 3 (c) In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under this section 1.3 to include any requesting Holder's Registrable Securities in such underwriting, unless such Holder accepts the terms of the underwriting as agreed between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters) and enters into an underwriting agreement in customary form with the underwriter or underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by the Holders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such Registrable Securities that the underwriters determine in their sole discretion will not jeopardize the success of the offering (the Registrable Securities so included to be apportioned pro rata among the selling Holders according to the total amount of Registrable Securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such selling Holders); provided, that in no event shall the amount of Registrable Securities of the selling Holders included in the offering be reduced below twenty percent of the total amount of securities included in such offering. For purposes of such apportionment among Holders, for any selling stockholder that is a Holder of Registrable Securities and that is a partnership or corporation, the partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling Holder," and any pro rata reduction with respect to such "selling Holder" shall be based on the aggregate amount of Registrable Securities owned by all such related entities and individuals. (d) The Company shall not be required, under this section 1.3, to include any requesting Holder's Registrable Securities in any registration: (i) to be filed on a registration form which is unavailable for the registration of the Registrable Securities; (ii) relating to securities to be offered pursuant to (A) an employee benefit plan or otherwise eligible to be registered on Form S-8 or (B) a dividend or interest reinvestment plan (including such a plan that has an open enrollment or cash investment feature); (iii) relating to securities to be issued in the acquisition of another business, through a merger, consolidation, exchange of securities or otherwise; (iv) relating to Company securities to be issued for consideration other than solely cash; (v) relating to Company securities to be offered to all existing security holders of the Company through a "rights offering" or otherwise; or (vi) relating to debt securities of the Company, including debt securities that are convertible or exchangeable for equity securities of the Company. 1.4 Form S-3 Registration. If, at any time after the Registration Withdrawal Date, the Company shall receive from one or more Holders a request or requests that the Company effect a registration on Form S-3 and any related blue sky or similar qualification or compliance with respect to the Registrable Securities owned by such Holder or Holders, the Company shall: (a) Within five days of the receipt thereof, give notice of the proposed registration, and any related blue sky or similar qualification or compliance, to all other Holders; and 3 4 (b) Use commercially reasonable efforts to cause, as soon as practicable, such Registrable Securities to be registered for offering and sale on Form S-3 and cause such Registrable Securities to be qualified in such jurisdictions as such Holders may reasonable request, together with all of the Registrable Securities of any other Holders joining in such request as are specified in a request given within twenty days after receipt of such notice from the Company; provided that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 1.4: (i) If the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities at an aggregate price to the public of less than $1,000,000; (ii) If the Company has, within the twelve month period preceding the date of such request, already effected two registrations for the Holders pursuant to section 1.3 or this section 1.4; (iii) If the Company furnishes to the Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 120 days after receipt of the request of the Holder or Holders under this section 1.4 and the Company shall not be obligated to effect another registration under this section 1.4 during such 120-day period; provided, that the Company shall not utilize this right more than once in any twelve month period; provided, further, that the Company shall not register shares for its own account during such 120-day period; (iv) In any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance; or (v) If Form S-3 (or any successor or similar form) is not available for such offering by the Holders. (c) Subject to the foregoing, the Company shall use commercially reasonable efforts to file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. 1.5 Request for Registration Upon Unavailability of Form S-3. (a) If, at any time after the Registration Withdrawal Date, the Company is not eligible to effect a registration on Form S-3 and the Company receives, during such period that it is not so eligible, a written request from the Holders that the Company file a 4 5 registration statement under the 1933 Act covering the registration of all or a portion of the Registrable Securities then outstanding, then the Company shall: (i) Within five days of the receipt thereof, give notice of the proposed registration, and any related blue sky or similar qualification or compliance, to all other Holders; and (ii) Use commercially reasonable efforts to cause, as soon as practicable, such Registrable Securities to be registered for offering and sale and use commercially reasonable efforts to cause such Registrable Securities to be qualified in such jurisdictions as such Holders may reasonable request, together with all of the Registrable Securities of any other Holders joining in such request as are specified in a request given within twenty days after receipt of such notice from the Company; provided that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 1.5: (A) If the Holders propose to sell Registrable Securities at an aggregate price to the public of less than $1,000,000; (B) If the Company has, within the twelve month period preceding the date of such request, already effected two registrations for the Holders pursuant to this section 1.5 or section 1.4; (C) If the Company furnishes to the Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration to be effected at such time, in which event the Company shall have the right to defer the filing of the registration statement for a period of not more than 120 days after receipt of the request of the Holder or Holders under this section 1.5 and the Company shall not be obligated to effect another registration under this section 1.5 during such 120-day period; provided, that the Company shall not utilize this right more than once in any twelve-month period; provided, further, that the Company shall not register shares for its own account during such 120-day period; or (D) In any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to section 1.5(a) and the Company shall include such information in the written notice referred to in section 1.5(a). The underwriter will be selected by a majority in interest (as determined by the number of Registrable Securities held) of the Initiating Holders and shall be reasonably acceptable to the Company. In such event, the right of any Holder to include his, her or its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in 5 6 the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in section 1.6(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this section 1.5, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. 1.6 Obligations of the Company. Whenever required under this section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Except as otherwise provided in section 1.2, on the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to ninety days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided that (i) any such ninety-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, such ninety-day period shall be extended, if necessary and as permitted by law, to keep the registration statement effective until all such Registrable Securities are sold, except to the extent that the Holders (and any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) of such Registrable Securities may sell those Registrable Securities in any three-month period without regard to the volume limitation and without registration in compliance with Rule 144 under the 1933 Act; (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the 1933 Act with respect to the disposition of all securities covered by such registration statement during the period of time such registration statement remains effective; (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request to facilitate the disposition of Registrable Securities owned by them; 6 7 (d) Use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions; (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering; (f) During the period of time such registration statement remains effective, notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the 1933 Act or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) Use commercially reasonable efforts to cause all such Registrable Securities registered hereunder to be listed on each securities exchange on which securities of the same class issued by the Company are then listed; (h) Provide a transfer agent and registrar for all Registrable Securities registered hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and (i) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this section 1, if such securities are being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, and (ii) a "comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in the registration statement, covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and with respect to events subsequent to the date of the financial statements, as are customarily covered in accountants' letters delivered to the underwriters in underwritten public offerings of securities addressed to the underwriters. 1.7 Limitations on Registration Rights. Notwithstanding anything in this Agreement to the contrary: (a) The Company may, by written notice to the Holders, (i) delay the filing or effectiveness of any registration statement or (ii) suspend any registration statement after effectiveness and require that the selling Holders immediately cease sales of securities thereunder, in the event that (A) the Company determines that information required to be included in the financial statements comprising a portion of any registration statement is not yet available after commercially reasonable efforts to prepare such information; or (B) the Company 7 8 is engaged in any activity or transaction, or preparations or negotiations for any activity or transaction, that the Company desires in good faith to keep confidential for business reasons, if the Company determines that the public disclosure requirements imposed on the Company under the 1933 Act in connection with any registration statement that would require disclosure of such activity, transaction, preparations or negotiations. (b) If the Company delays or suspends a registration statement or requires the selling Holders to cease sales of shares pursuant to section 1.7(a) above, the Company shall, as promptly as practicable following the termination of the circumstances which entitled the Company to do so but in no event more than ten days thereafter, take such actions as may be necessary to file or reinstate the effectiveness of the registration statement and/or give written notice to the selling Holders authorizing them to resume sales pursuant to the registration statement. If, as a result thereof, the prospectus included in the registration statement has been amended to comply with the requirements of the 1933 Act, the Company shall enclose such revised prospectus with the notice to the selling Holders given pursuant to this section 1.7(b), and the selling Holders shall make no offers or sales of securities pursuant to the registration statement other than by means of such revised prospectus. (c) Anything herein to the contrary notwithstanding, any delay by the Company in the filing or effectiveness of a registration statement (as required pursuant to section 1.2 of this Agreement) pursuant to this section 1.7 shall not be deemed to be a waiver of, or modification to, section 4.4 of the Warrants and the Warrant Price shall continue to be subject to adjustment during the period of such delay as described in section 4.4 of Warrants. (d) If, pursuant to section 1.7(a) above, the Company suspends the registration statement filed pursuant to section 1.2 or requires the Holders to cease sales of shares under the registration statement filed pursuant to section 1.2 (such suspension or requirement to cease sales is referred to herein as the "Transfer Prohibition"), then: (i) in the case of the first such Transfer Prohibition during any twelve-month period, if such Transfer Prohibition is not terminated by the Company before the eleventh trading day after the Company shall have commenced such Transfer Prohibition, on such eleventh trading day the Warrant Price shall be reduced by $0.05 (as appropriately adjusted for any stock splits, stock combinations or the like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3 of the Warrant); and (ii) in the case of any additional Transfer Prohibition after the first such Transfer Prohibition during any twelve-month period, on the day that such Transfer Prohibition commences the Warrant Price shall be reduced by $0.05 (as appropriately adjusted for any stock splits, stock combinations or the like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3 of the Warrant). Such eleventh trading day in the case of clause (i) above or such day in the case of clause (ii) above is referred to herein as a "Warrant Price Adjustment Date". At the end of each ten trading-day period (or a portion thereof ending on the date that the such Transfer Prohibition is terminated by the Company) after the Warrant Price Adjustment Date, the Warrant Price shall be reduced by an amount (rounded to the nearest one one-hundredth of a cent) equal to $0.05 (as 8 9 appropriately adjusted for any stock splits, stock combinations or like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3 of the Warrant) multiplied by a fraction, the numerator of which is the number of trading days during such ten trading-day period before the date on which the Transfer Prohibition is terminated by the Company and the denominator of which is ten. 1.8 Information from Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this section 1 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding such Holder, the Registrable Securities held by such Holder, and the intended method of disposition of such securities as shall be required to effect the registration of such Registrable Securities. 1.9 Expenses of Registration. All expenses incurred in connection with registrations, filings or qualifications pursuant to sections 1.2, 1.3, 1.4 and 1.5, including (without limitation) all registration, filing and qualification fees, printing fees and expenses, accounting fees and expenses, fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel for the selling Holders selected by the Holders, shall be borne by the Company. Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to section 1.4 or 1.5 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based on the number of Registrable Securities that were requested to be included in the withdrawn registration); provided that, if at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition (financial or otherwise), business, or prospects of the Company from that known to the Holders at the time of their request and shall have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to section 1.3 or 1.5. Anything herein to the contrary notwithstanding, all underwriting discounts and commissions incurred in connection with a sale of Registrable Securities shall be borne and paid by the Holders thereof, and the Company shall have no responsibility therefor. 1.10 Indemnification. If any Registrable Securities are included in a registration statement under this section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers, directors, stockholders, members and managers of such Holder, legal counsel and accountants for such Holder, any underwriter (as defined in the 1933 Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or any other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, 9 10 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any state securities law; and the Company will reimburse such Holder, underwriter or controlling person for any legal or other expenses incurred, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement in this section 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based on a Violation that occurs in reliance on and in conformity with written information furnished expressly for use in connection with such registration by such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who shall have signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act or any other federal or state securities law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based on any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance on and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this section 1.10(b), for any legal or other expenses reasonably incurred, as incurred, by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided that the indemnity agreement in this section 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld or delayed); and provided further that in no event shall any indemnity by such Holder under this section 1.10(b), when aggregated with amounts contributed, if any, pursuant to section 1.10(d), exceed the net proceeds from the sale of Registrable Securities hereunder received by such Holder. (c) Promptly after receipt by an indemnified party under this section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this section 1.10, deliver to the indemnifying party notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent that the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential 10 11 differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to notify the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this section 1.10, but the omission so to notify the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this section 1.10. (d) If the indemnification provided in this section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that shall have resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided that in no event shall any contribution by a Holder under this section 1.10(d), when aggregate with amounts paid, if any, pursuant to section 1.10(b), exceed the net proceeds from the sale of Registrable Securities hereunder received by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this section 1, and otherwise. 1.11 Reports under 1934 Act. With a view to making available to the Holders the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) Make and keep public information available, as those terms are used in SEC Rule 144, at all times; (b) Take such action, including voluntary registration of its common stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities; (c) File with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; 11 12 (d) Furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith on request, (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the 1933 Act and the 1934 Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form; and (e) Undertake any additional actions reasonably necessary to maintain the availability of the Registration Statement or the use of Rule 144. 1.12 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such Registrable Securities that (i) is a subsidiary, parent, current or former partner, current or former limited partner, current or former member, current or former manager or stockholder of a Holder, (ii) is an entity controlling, controlled by or under common control, or under common investment management, with a Holder, including without limitation a corporation, partnership or limited liability company that is a direct or indirect parent or subsidiary of the Holder, (iii) is a transferee or assignee of at least 300,000 (as adjusted for stock split, combinations, dividends and the like) shares of such Registrable Securities if immediately prior to such transfer such assignee shall have been an affiliate of, or under common investment management with, the Holder, or (iv) is a transferee or assignee of at least 1,000,000 (as adjusted for stock split, combinations, dividends and the like) shares of such Registrable Securities; provided that: (a) the Company is, within a reasonable time after such transfer, notified of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act. 1.13 Termination of Registration Rights. A Holder's registration rights described in sections 1.3, 1.4 and 1.5 shall terminate if and when such Holder holds less than 100,000 shares of Registrable Securities (as adjusted for stock split, combinations, dividends and the like). 1.14 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration filed under sections 1.2, 1.3, 1.4 and 1.5 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included. 12 13 2. Covenants. 2.1 Conflicts of Interest. The Company shall use commercially reasonable efforts to ensure that the Company's employees, during the term of their employment with the Company, do not engage in activities which would result in a conflict of interest with the Company. The Company's obligations hereunder include, but are not limited to, requiring that the Company's employees devote their primary productive time, ability and attention to the business of the Company, requiring that the Company's employees enter into reasonable and customary agreements regarding proprietary information and confidentiality and inventions, and preventing the Company's employees from engaging or participating in any business that is in competition with the business of the Company. 2.2 Reserve for Exercise Shares. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock (the "Exercise Shares") as shall be sufficient to enable it to comply with its exercise obligations under the Warrants (as defined in the Purchase Agreement). If at any time the number of Exercise Shares shall not be sufficient to effect the exercise of the Warrants, the Company will forthwith take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number as will be sufficient for such purposes. The Company will obtain authorization, consent, approval or other action by, or make any filing with, any administrative body that may be required under applicable state securities laws in connection with the issuance of Exercise Shares. 2.3 Termination of Covenants. The covenants set forth in sections 2.1 through 2.2 shall terminate as to each Investor and be of no further force and effect at the time the Investors no longer hold any Registrable Securities. 3. Miscellaneous. 3.1 Successors and Assigns. Except as otherwise provided herein, this Agreement shall inure to the benefit of and bind the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer on any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of California, without giving effect to its conflicts of law principles. 3.3 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. 3.4 Headings. The headings of sections and subsections in this Agreement are used for convenience of reference only and are not to be considered in construing or interpreting this Agreement. 13 14 3.5 Notices. Any request, consent, notice or other communication required or permitted under this Agreement shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Service, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the applicable signature page hereof, or at such other address as such party may designate by ten days' advance written notice to the other parties. 3.6 Expenses. If any action at law or in equity is necessary to enforce or interpret any of the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.7 Entire Agreement: Amendments and Waivers. This Agreement (including the Schedule hereto), the Purchase Agreement and the Warrants constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the consent of the Company and the holders of two-thirds of the Registrable Securities then outstanding; provided that no amendment shall be effective unless approved by the holder or holders of Registrable Securities that shall be affected adversely, or affected differently from the Holders generally, by such amendment unless all Holders are affected in the same manner by such amendment. Any amendment or waiver effected in accordance with this paragraph shall be binding on the Company, each holder of any Registrable Securities and each future holder of all such Registrable Securities. 3.8 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, such provision shall be replaced with a provision that accomplishes, to the extent possible, the original business purpose of such provision in a valid and enforceable manner, and the balance of the Agreement shall be interpreted as if such provision were so modified and shall be enforceable in accordance with its terms. 3.9 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons, or entities or persons under common investment management, shall be aggregated together for the purpose of determining the availability or termination of any rights under this Agreement (including, without limitation, section 1.13). [Remainder of page intentionally left blank; signature page follows.] 14 15 IN WITNESS WHEREOF, this Registration Rights Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written. DIEDRICH COFFEE, INC. By: /s/ MATTHEW C. MCGUINNESS -------------------------------- Name: Matthew C. McGuinness Title: Senior Vice President and Chief Financial Officer Address: 2144 Michelson Drive Irvine, CA 92612 Fax: (949) 756-1144 THE INVESTORS: SEQUOIA ENTERPRISES, L.P. WESTCLIFF FOUNDATION By: Westcliff Capital Management, LLC Its: Investment Advisor and Attorney-In-Fact By: /s/ PAUL C. HEESCHEN By: /s/ RICHARD S. SPENCER ------------------------------------- -------------------------------- Paul C. Heeschen, General Partner Richard S. Spencer III, Manager 450 Newport Center Drive, Suite 450 200 Seventh Avenue, Suite 105 Newport Beach, CA 92660 Santa Cruz, CA 95062 Fax: (831) 479-3642 WESTCLIFF PARTNERS, L.P. WESTCLIFF MASTER FUND, L.P. By: Westcliff Capital Management, LLC By: Westcliff Capital Management, Its: General Partner LLC Its: Investment Advisor and Attorney-In-Fact By: /s/ RICHARD S. SPENCER By: /s/ RICHARD S. SPENCER ------------------------------------- ------------------------------- Richard S. Spencer III, Manager Richard S. Spencer III, Manager 200 Seventh Avenue, Suite 105 200 Seventh Avenue, Suite 105 Santa Cruz, CA 95062 Santa Cruz, CA 95062 Fax: (831) 479-3642 Fax: (831) 479-3642 15 16 WESTCLIFF AGGRESSIVE GROWTH, L.P. WESTCLIFF LONG/SHORT, L.P. By: Westcliff Capital Management, LLC By: Westcliff Capital Management, Its: General Partner LLC Its: General Partner By: /s/ RICHARD S. SPENCER By: /s/ RICHARD S. SPENCER -------------------------------------- ------------------------------- Richard S. Spencer III, Manager Richard S. Spencer III, Manager 200 Seventh Avenue, Suite 105 200 Seventh Avenue, Suite 105 Santa Cruz, CA 95062 Santa Cruz, CA 95062 Fax: (831) 479-3642 Fax: (831) 479-3642 WESTCLIFF PROFIT SHARING PLAN WESTCLIFF SMALL CAP FUND, L.P. By: Westcliff Capital Management, LLC By: Westcliff Capital Management, Its: General Partner LLC Its: General Partner By: /s/ RICHARD S. SPENCER By: /s/ RICHARD S. SPENCER -------------------------------------- ------------------------------- Richard S. Spencer III, Manager Richard S. Spencer III, Manager 200 Seventh Avenue, Suite 105 200 Seventh Avenue, Suite 105 Santa Cruz, CA 95062 Santa Cruz, CA 95062 Fax: (831) 479-3642 Fax: (831) 479-3642 16 17 PENINSULA FUND, L.P. COMMON SENSE PARTNERS, L.P. By: Peninsula Capital Management, Inc. By: Peninsula Capital Management, Its: General Partner Inc., an Investment Advisor By: /s/ SCOTT A. BEDFORD By: /s/ SCOTT A. BEDFORD -------------------------------------- -------------------------------- Name: Scott A. Bedford Name: Scott A. Bedford Title: President Title: President -------------------------------- ------------------------- By: Common Sense Investment Management, LLC, a General Partner By: /s/ SCOTT A. THOMPSON ----------------------------- Name: Scott A. Thompson Title: Director and Senior Vice President Finance 17 18 SCHEDULE A Schedule of Investors Name ---- Sequoia Enterprises, L.P. Westcliff Partners, L.P. Westcliff Long/Short, L.P. Westcliff Small Cap Fund, L.P. Westcliff Aggressive Growth, L.P. Westcliff Master Fund, L.P. Westcliff Profit Sharing Plan Westcliff Foundation Peninsula Fund, L.P. Common Sense Partners, L.P. 19 SCHEDULE B Investors' Common Stock Number of Shares Investor Name of Common Stock - ------------- ---------------- Sequoia Enterprises, L.P. 193,500 Westcliff Aggressive Growth, L.P. 8,800 Westcliff Partners, L.P. 22,700 Westcliff Long/Short, L.P. 4,700 Westcliff Master Fund, L.P. 27,250 Westcliff Small Cap Fund, L.P. 4,900 Westcliff Profit Sharing Plan -- Westcliff Foundation -- Peninsula Fund, L.P. -- Common Sense Partners, L.P. -- EX-4.2 4 a72616ex4-2.txt EXHIBIT 4.2 1 EXHIBIT 4.2 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH OFFER, SALE OR TRANSFER OR (II) THERE IS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS FOR SUCH OFFER, SALE OR TRANSFER IS AVAILABLE. WARRANT TO PURCHASE COMMON STOCK OF DIEDRICH COFFEE, INC. VOID AFTER MAY 8, 2011 May 8, 2001 No. [Warrant No.] This certifies that [Name of Investor] (the "Holder") is entitled, subject to the terms and conditions of this Warrant, to purchase from Diedrich Coffee, Inc. a Delaware corporation (the "Company"), all or any part of an aggregate of [Number of Shares] shares of the Company's authorized and unissued Common Stock, par value $0.01 per share (the "Warrant Stock"), at the Warrant Price (as defined herein), upon surrender of this Warrant at the principal offices of the Company, together with a duly executed subscription form in the form attached hereto as Exhibit A and simultaneous payment of the Warrant Price for each share of Warrant Stock so purchased in lawful money of the United States, unless exercised in accordance with the provisions of section 2.6 of this Warrant. The Holder may exercise the Warrant at any time after the date of this Warrant and prior to May 8, 2011 (the "Expiration Date"). The Warrant is one of a series of warrants issued pursuant to that certain Common Stock and Warrant Purchase Agreement, dated as of March 14, 2001 (the "Purchase Agreement"), by and among the Company, the Holder and certain of the other investors listed on the Schedule of Investors attached to the Purchase Agreement. 1. Definitions. The following definitions shall apply for purposes of this Warrant: 1.1 "Acquisition" means any consolidation, merger or reorganization of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, own less than fifty percent of the Company's voting power immediately after such consolidation, merger or reorganization, or any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent of the Company's voting power is transferred, excluding any consolidation, merger, reorganization or the like effected exclusively to change the domicile of the Company. 2 1.2 "Asset Transfer" means a sale, lease or other disposition of all or substantially all of the assets of the Company. 1.3 "Company" means the "Company" as defined above and includes any corporation or other entity that succeeds to or assumes the obligations of the Company under this Warrant. 1.4 "Fair Market Value" of a share of Warrant Stock means (i) the Common Stock is traded on a securities exchange, the average of the closing price each day over the thirty consecutive day period ending three days before the date on which the fair market value of the securities is being determined, (ii) if the Common Stock is actively traded over-the counter, the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) each day over the thirty consecutive day period ending three days before the date on which the fair market value of the securities is being determined, or (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, then as determined by the board of directors of the Company in good faith. 1.5 "Holder" means the "Holder" as defined above and includes any transferee who shall at the time be the registered holder of this Warrant. 1.6 "Registration Rights Agreement" means that certain Registration Rights Agreement, dated as of the date hereof, by and among the Company, the Holder and certain other investors listed on the Schedule of Investors attached to the Registration Rights Agreement. 1.7 "Registration Statement" shall have the meaning ascribed to the term, "registration statement," as it is used in the Registration Rights Agreement. 1.8 "SEC" means the Securities and Exchange Commission. 1.9 "Securities Act" means the Securities Act of 1933, as amended. 1.10 "Warrant" means this Warrant and any warrant(s) delivered in substitution or exchange therefor, as provided herein. 1.11 "Warrant Price" means $1.20 per share of Warrant Stock, as the same may be adjusted pursuant to the terms of section 4 hereof and/or section 1.7 of the Registration Rights Agreement. 1.12 "Warrant Stock" means the Common Stock of the Company. The number and character of shares of Warrant Stock are subject to adjustment as provided in section 4 hereof and the term "Warrant Stock" shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant in accordance with its terms. 2. Exercise. 2.1 Method of Exercise. Subject to the terms and conditions of this Warrant, the Holder may exercise the purchase rights represented by this Warrant in whole or in part, at any time or from time to time, on or after the date hereof and before the Expiration Date, by surrendering this Warrant at the principal offices of the Company, together with the subscription form attached hereto, duly completed and executed by the Holder, and payment of an amount equal to the product obtained by multiplying (a) the number of shares of Warrant Stock so purchased by (b) the Warrant Price. 2 3 2.2 Form of Payment. Except as provided in section 2.6, payment may be made by (a) a check payable to the Company's order, (b) wire transfer of funds to the Company, (c) cancellation of indebtedness of the Company to the Holder, or (d) any combination of the foregoing. 2.3 Partial Exercise. Upon a partial exercise of this Warrant, this Warrant shall be surrendered by the Holder and replaced with a new Warrant or Warrants of like tenor for the balance of the shares of Warrant Stock purchasable under the Warrant surrendered upon such purchase. The Warrant or Warrants will be delivered to the Holder thereof within a reasonable time. 2.4 No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant, and any fractions shall be rounded down to the nearest whole number of shares. If upon any exercise of this Warrant a fraction of a share results, the Company will pay to the Holder an amount equal to the such fraction multiplied by the Fair Market Value of a share of Warrant Stock. 2.5 Automatic Exercise. Anything herein to the contrary notwithstanding, this Warrant shall be deemed to be automatically exercised, with no notice required by the Holder and, in lieu of payment as provided for in section 2.2 of this Warrant, on a Net Issue Exercise basis as described in section 2.6, immediately prior to the closing of an Acquisition or an Asset Transfer if the value of the cash, stock or other property that the Holder would receive for each share of Warrant Stock if the Holder shall have exercised this Warrant immediately prior to the closing of an Acquisition or an Asset Transfer exceeds the Warrant Price. For purposes of this section 2.5, the value of stock or other property described in the previous sentence will be deemed its fair market value as determined by the board of directors of the Company in good faith. 2.6 Net Issue Exercise Election. The Holder may elect to convert all or a portion of this Warrant, without the payment by the Holder of any additional consideration, by the surrender of this Warrant or such portion to the Company, with the net issue exercise election selected in the subscription form attached hereto as Exhibit A, duly completed and executed by the Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula: X = Y (A-B) ------- A where X = the number of shares of Warrant Stock to be issued to the Holder pursuant to this section 2.6. Y = the number of shares of Warrant Stock purchasable under this Warrant, or if only a portion of the Warrant is being exercised, the number of shares of Warrant Stock represented by the portion of the Warrant being exercised. A = the Fair Market Value of one share of Warrant Stock as at the time the net issue exercise election is made pursuant to this section 2.6. B = the Warrant Price. 3 4 3. Issuance of Stock 3.1 This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date; provided, that in the event this Warrant is automatically exercised in connection with an Acquisition or Asset Transfer pursuant to section 2.5, then the shares of Warrant Stock purchased pursuant to this Warrant shall be and are deemed to be issued to the Holder as the record owner of such shares immediately prior to such Acquisition or Asset Transfer. As soon as practicable, but in any event no later than three days after such date, the Company shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of whole shares of Warrant Stock issuable upon such exercise. 3.2 The Company covenants and agrees that: (a) all Warrant Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, free from all preemptive rights, free from all taxes, liens and charges with respect to the issue thereof and free and clear of any restrictions on transfer (other than under the Securities Act and applicable state securities laws); and (b) that during the period within which the rights represented by this Warrant may be exercised, the Company will, at all times, have authorized, and reserved for the purpose of the issue upon exercise of the rights evidenced by this Warrant, a sufficient number of shares of Warrant Stock to provide for the exercise of the rights represented by this Warrant. Subject to the truth, accuracy and completeness of the representations and warranties made by the Holder in connection with the subscription form and investment representations attached thereto, the offer, sale and issuance of the Warrant Stock issued upon the exercise of this Warrant shall be exempt from the registration requirements of the Securities Act, and neither the Company nor any authorized agent acting on its behalf has taken or will take any action hereafter that would cause the loss of such exemption. 4. Adjustment Provisions. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities or property at the time receivable or issuable upon exercise of this Warrant) and the Warrant Price therefor, are subject to adjustment upon the occurrence of the following events between the date this Warrant is issued and the date it is exercised: 4.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or other securities at the time issuable upon exercise of this Warrant) shall each be appropriately and proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization or other similar event affecting the number of outstanding shares of Warrant Stock (or such other stock or securities). 4 5 4.2 Adjustment for Other Dividends and Distributions. In case the Company shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the Warrant Stock that is payable in (a) securities of the Company (other than issuances with respect to which adjustment is made under section 4.1), or (b) assets, then, and in each such case, the Holder, upon exercise of this Warrant at any time after the consummation, effective date or record date of such event, shall receive, in addition to the shares of Warrant Stock issuable upon such exercise prior to such date, the securities or such other assets of the Company to which the Holder would have been entitled upon such date if the Holder had exercised this Warrant immediately prior thereto (all subject to further adjustment as provided in this Warrant). Notwithstanding the foregoing, no adjustment in respect of any cash dividends paid by the Company will be made during the term of this Warrant or upon the exercise of this Warrant. 4.3 Adjustment for Reorganization, Consolidation, Merger. In case of any reorganization of the Company (or of any other corporation or entity, the stock or other securities of which are at the time receivable upon the exercise of this Warrant) after the date of this Warrant, or in case, after such date, the Company (or any such corporation or entity) shall consolidate with or merge into another corporation or entity or convey all or substantially all of its assets to another corporation or entity, then, and in each such case, the Holder, upon the exercise of this Warrant (as provided in section 2), at any time after the consummation of such reorganization, consolidation, merger or conveyance, shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise of this Warrant prior to such consummation, the stock or other securities or property to which the Holder would have been entitled upon the consummation of such reorganization, consolidation, merger or conveyance if the Holder had exercised this Warrant immediately prior thereto, all subject to further adjustment as provided in this Warrant. The successor or purchasing corporation or entity in such reorganization, consolidation, merger or conveyance (if other than the Company) shall duly execute and deliver to the Holder a supplement hereto acknowledging such corporation's or entity's obligations under this Warrant. In each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such reorganization, consolidation, merger or conveyance. 4.4 Adjustment for Filing and Effectiveness of the Registration Statement. (a) If the Company shall not have filed the Registration Statement with the SEC on or before the date that is 120 days after the date hereof (the "Filing Deadline"), the Warrant Price shall be reduced by $0.05 (as appropriately adjusted for any stock splits, stock combinations or like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3) immediately on the close of business on the Filing Deadline. 5 6 (b) If the Registration Statement is not declared effective by the SEC on or before the date that is 150 days after the date hereof (the "Effectiveness Deadline"), the Warrant Price shall be reduced by $0.05 (as appropriately adjusted for any stock splits, stock combinations or like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3) immediately on the close of business on the Effectiveness Deadline. At the end of each thirty-day period (or a portion thereof ending on the date that the Registration Statement shall have been declared effective by the SEC) after the Effectiveness Deadline that the Registration Statement has not been declared effective by the SEC, the Warrant Price shall be reduced by an amount (rounded to the nearest one one-hundredth of a cent) equal to $0.05 (as appropriately adjusted for any stock splits, stock combinations or like that affect the Warrant Price pursuant to sections 4.1 and/or 4.3) multiplied by a fraction, the numerator of which is the number of days during such thirty-day period before the date on which the Registration Statement shall have been declared effective by the SEC and the denominator of which is thirty. 4.5 Notice of Adjustments. Whenever the Warrant Price or number of shares of Warrant Stock issuable upon exercise hereof shall be adjusted pursuant to section 4 hereof, the Company shall issue a written notice setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Warrant Price and number of shares of Warrant Stock purchasable hereunder after giving effect to such adjustment, and shall cause a copy of such notice to be delivered to the Holder. 4.6 No Change Necessary. The form of this Warrant need not be changed because of any adjustment in the Warrant Price or in the number of shares of Warrant Stock issuable upon its exercise. 5. No Rights or Liabilities as Stockholder. This Warrant does not by itself entitle the Holder to any voting rights or other rights as a stockholder of the Company. In the absence of affirmative action by the Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of the Holder, shall cause the Holder to be a stockholder of the Company for any purpose. 6. Attorneys' Fees. In the event any party is required to engage the services of any attorneys for the purpose of enforcing this Warrant, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Warrant, including attorneys' fees. 7. Transfer. This Warrant may be transferred or assigned by the Holder, in whole or in part, if the Holder (i) provides written notice to the Company prior to such transfer or assignment, in the form attached hereto as Exhibit B, and (ii) delivers to the Company, on the Company's reasonable request, a written opinion of such Holder's counsel reasonably satisfactory to the Company (or other evidence reasonably satisfactory to the Company) that such transfer does not require registration or qualification under the Securities Act and any applicable state securities law; provided, however, that the Holder shall not be required to comply with clause (ii) of this sentence if the transfer shall have been made by (a) a Holder which is a partnership or limited liability company to a partner, former partner, member, former member, or other affiliate of such partnership or limited liability company, as the case may be, or (b) a Holder to any corporation, partnership or limited liability company controlling, controlled 6 7 by, or under common investment management with such Holder. At the time of transfer, the Holder and transferee shall make such representations and take such actions, and such legends will be placed on this Warrant, as may be reasonably required in the opinion of counsel to the Company to permit a transfer of this Warrant without registration or qualification under the Securities Act and any applicable state securities law. Notwithstanding the foregoing, this Warrant may not be transferred in whole or in part without compliance with all applicable federal and state securities laws by the Holder and the transferee. The rights and obligations of the Company and the Holder under this Warrant shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees. 8. Loss or Mutilation. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership and the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of like tenor. 9. Governing Law. This Warrant shall be governed by and construed and interpreted in accordance with the laws of the State of California, without giving effect to its conflicts of law principles. 10. Headings. The headings and captions used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant. All references in this Warrant to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference. 11. Notices. Any request, consent, notice or other communication required or permitted under this Warrant shall be in writing and shall be deemed duly given and received when delivered personally or transmitted by facsimile, or one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three days after being deposited as first class mail with the United States Postal Services, all charges or postage prepaid, and properly addressed to the party to receive the same at the address indicated for such party on the signature pages of the Purchase Agreement. Any party may, at any time, by providing ten days' advance written notice to the other party hereto, designate any other address in substitution of the an address established pursuant to the foregoing. All correspondence to the Company shall be addressed as follows: Diedrich Coffee, Inc. 2144 Michelson Drive Irvine, California 92612 Fax: (949) 756-1144 12. Amendment; Waiver. Any term of this Warrant may be amended, and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder. 7 8 13. Severability. If one or more provisions of this Warrant are held to be unenforceable under applicable law, such provision(s) shall be replaced with a provision that accomplishes, to the extent possible, the original business purpose of such provision in a valid and enforceable manner, and the balance of the Warrant shall be interpreted as if such provision were so modified and shall be enforceable in accordance with its terms. 14. Terms Binding. By acceptance of this Warrant, the Holder accepts and agrees to be bound by all the terms and conditions of this Warrant. 15. Taxes. The Company shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery of any Warrant Stock. The Company's obligation pursuant to the foregoing sentence does not relate to any tax benefit or obligation that may arise as a result of any gain or loss on the disposition of the Warrant Stock by the holder of the Warrant Stock. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Stock in any name other than that of the Holder of this Warrant. 16. Registration Rights. All shares of Warrant Stock issuable upon exercise of this Warrant shall be deemed to be "Registrable Securities" or such other definition of securities entitled to registration rights pursuant to the Registration Rights Agreement, and are entitled, subject to the terms and conditions of that agreement, to all registration rights granted to holders of Registrable Securities thereunder. 17. No Impairment. The Company will not, by amendment of its certificate of incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant against impairment. Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any shares of stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise, and (b) will take all such action as may be necessary or appropriate in order that the Company may validly issue fully paid and non-assessable shares of Warrant Stock upon exercise of this Warrant. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.] 8 9 IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the date and year set forth below. Dated: May 8, 2001 DIEDRICH COFFEE, INC. By: ----------------------------- Name: Matthew C. McGuinness Title: Senior Vice President and Chief Financial Officer [SIGNATURE PAGE TO WARRANT] 9 10 EXHIBIT A FORM OF SUBSCRIPTION (To be signed only on exercise of Warrant) To: Diedrich Coffee, Inc. (1) Check the box that applies and then provide the necessary information: [ ] Exercise. The undersigned Holder hereby elects to purchase _________ shares of Common Stock of Diedrich Coffee, Inc. (the "Warrant Stock"), pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price for such shares in full. [ ] Net Issue Exercise Election. The undersigned Holder elects to convert the Warrant into shares of Warrant Stock by net issue exercise election pursuant to section 2.6 of the Warrant. This conversion is exercised with respect to __________ shares of Common Stock of Diedrich Coffee, Inc. (the "Warrant Stock") covered by the Warrant. (2) In exercising the Warrant, the undersigned Holder hereby makes the representations and warranties set forth on Appendix I hereto as of the date hereof. (3) Please issue a certificate or certificates representing such shares of Warrant Stock in the name or names specified below: - ---------------------------------- ----------------------------------- (Name) (Name) - ---------------------------------- ----------------------------------- (Address) (Address) - ---------------------------------- ----------------------------------- (City, State, Zip Code) (City, State, Zip Code) - ---------------------------------- ----------------------------------- (Federal Tax Identification Number) (Federal Tax Identification Number) - ---------------------------------- ----------------------------------- (Date) (Signature of Holder) 11 APPENDIX I INVESTMENT REPRESENTATION The undersigned, _____________________ (the "Holder"), intends to acquire shares of Common Stock (the "Common Stock") of Diedrich Coffee, Inc. (the "Company") from the Company pursuant to the exercise or conversion of a Warrant to Purchase Common Stock held by the Holder. The Company intends to issue the Common Stock to the Holder in a transaction not involving a public offering and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws. In connection with such purchase and in order to comply with the exemptions from registration relied upon by the Company, the Holder represents, warrants and agrees as follows: (a) The Holder is acquiring the Common Stock for its own account, to hold for investment and not with a view toward distribution or resale. The Holder shall not make any sale, transfer or other disposition of the Common Stock in violation of the Securities Act or the rules promulgated thereunder or in violation of any applicable state securities law. (b) The Holder has been advised that the Common Stock has not been registered under the Securities Act or applicable state securities laws. The Company intends to effect this transaction pursuant to applicable exemptions from registration under the Securities Act and applicable state securities laws; reliance by the Company on such exemptions is predicated in part on the Holder's representations set forth herein. In addition, the Holder shall take, or refrain from taking, any additional action, as may be reasonably required in the opinion of counsel to the Company, to permit the issuance of the Common Stock to the Holder hereby without registration or qualification under the Securities Act and applicable state securities laws. (c) The Holder has been informed that, under the Securities Act, the Common Stock must be held indefinitely unless it is subsequently registered under the Securities Act or unless an exemption from such registration (such as Rule 144) is available with respect to any proposed transfer or disposition by the Holder of the Common Stock. The Holder further agrees that the Company may refuse to permit the Holder to sell, transfer or dispose of the Common Stock (except as permitted under Rule 144) unless there is in effect a registration statement under the Securities Act and any applicable state securities laws covering such transfer, or unless the Holder furnishes an opinion of counsel reasonably satisfactory to counsel for the Company to the effect that such registration is not required. The Holder also understands and agrees that there will be placed on the certificate(s) for the Common Stock or any substitutions therefor, a legend stating in substance: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws and may not be offered, sold, pledged or transferred unless (i) there is an effective registration statement covering such offer, sale or transfer or (ii) there is an exemption from the registration requirements of the Securities Act and any applicable state securities laws for such offer, sale or transfer is available." 12 EXHIBIT B ASSIGNMENT FORM (To assign the foregoing Warrant to Purchase Common Stock, execute this form and supply required information. Do not use this form to purchase shares.) FOR VALUE RECEIVED, the foregoing Warrant to Purchase Common Stock and all rights evidenced thereby are hereby assigned to - -------------------------------------------------------------------------------- (Please Print) whose address is -------------------------------------------------------------- (Please Print) Dated: _________, ____ Holder's Signature: ---------------------------- Holder's Address: ---------------------------- ---------------------------- EX-99.1 5 a72616ex99-1.txt EXHIBIT 99.1 1 EXHIBIT 99.1 [DIEDRICH COFFEE LOGO] FOR IMMEDIATE RELEASE MAY 9, 2001 DIEDRICH COFFEE ANNOUNCES COMPLETION OF EQUITY INVESTMENT AND REVERSE STOCK SPLIT IRVINE, CA. MAY 9, 2001 - DIEDRICH COFFEE, INC. (NASDAQ: DDRX), announced today that it had completed the previously announced equity investment transaction and reverse stock split approved by its stockholders earlier in the week. At a special meeting of Diedrich Coffee's stockholders held on May 7, 2001, the stockholders approved an increase in the company's authorized shares of common stock, the equity investment transaction and a one-for-four reverse stock split. The increase in the authorized shares of common stock was effected via an amendment to the company's Certificate of Incorporation filed in Delaware on Tuesday, May 8, 2001. The equity investment transaction was completed later that same day resulting in the sale of eight million shares of common stock at $0.75 per share and the issuance of warrants to purchase an additional two million shares of common stock at an initial exercise price of $1.20. The gross proceeds to the company from the equity investment were $6 million. After the payment of approximately $400,000 in transaction expenses, the company anticipates paying approximately $3.6 million of the proceeds to the company's lender to reduce outstanding indebtedness. The remainder of the proceeds will be used for current obligations and other general corporate expenses. "The improved financial stability resulting from this transaction will allow us to focus on what we do best: sourcing, roasting and selling specialty grade coffees through wholesale and retail points of distribution," commented Mike Jenkins, Diedrich Coffee's CEO. "We believe that we are positioned to play a significant role in the growth of specialty coffee's importance to the American consumer," Jenkins added. Following the closing of the equity investment transaction, the one-for-four reverse stock split was effected resulting in every four shares of the company's outstanding common stock being converted automatically into one share of common stock. Effective upon the opening of the market on May 11, 2001, Diedrich Coffee's shares of common stock will trade on a post-reverse split basis on The Nasdaq National Market. As part of the reverse stock split, the authorized shares of the company's common stock were decreased proportionately from 35,000,000 shares to 8,750,000 shares. ABOUT DIEDRICH COFFEE Diedrich Coffee, Inc. is one of the nation's largest producers of specialty grade coffee, with annual revenues in excess of $75 million. The company sources and roasts the world's highest quality coffees, and sells them through a variety of wholesale distribution channels as well as through 376 retail locations in 37 states and eleven foreign countries. The company's primary brands are Diedrich Coffee and Gloria Jean's Coffee. Gloria Jean's is the nation's leading chain of mall-based coffee stores. The company is headquartered in Irvine, Calif. For more information about Diedrich Coffee or Gloria Jean's Coffee call (800) 354-5282, or visit the company's websites at www.diedrich.com, or www.gloriajeans.com. Forward Looking Statements 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. Actual results and financial position could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including but not limited to, the successful management of Diedrich Coffee's growth strategy, impact of competition, the availability of working capital and other risks and uncertainties described in detail under "Risk Factors and Trends Affecting Diedrich Coffee and its Business" in the Company's annual report on form 10-K for the fiscal year ended June 28, 2000. Investor Contact: Matt McGuinness, Chief Financial Officer Diedrich Coffee, Inc. (949) 260-6734 -----END PRIVACY-ENHANCED MESSAGE-----