Employment Agreement - Diedrich Coffee Inc. and Kerry W. Coin
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of August 26, 1996, by and between DIEDRICH COFFEE, a California corporation
(the "Company"), and KERRY W. COIN (the "Employee").
R E C I T A L S :
The Company and the Employee desire to enter into this Agreement to
establish the terms and conditions of the Employee's employment by the Company
during the term hereof.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recital, and subject
to the conditions and covenants set forth herein, the parties agree as follows:
1. Employment and Term.
(a) The Company hereby employs the Employee as its Chief
Operating Officer and the Employee hereby accepts such employment upon the terms
and subject to the conditions set forth in this Agreement. Unless earlier
terminated as provided in this Agreement, the term of the Employee's employment
under this Agreement shall commence on the date hereof and shall continue for a
period of three (3) years from the date hereof (the "Term").
(b) The Employee shall perform such duties and functions
consistent with his role as Chief Operating Officer as assigned to him by the
Board of Directors of the Company (the "Board").
2. Compensation.
2.1 Salary. For all services to be rendered by the
Employee under this Agreement, the Company agrees to pay the Employee a salary
(the "Base Salary") equal to One Hundred Twenty Thousand Dollars ($120,000) per
year, payable in semi-monthly installments, less all amounts required by law to
be withheld or deducted. During the Term of this Agreement, the Board shall
review the Employee's Base Salary on or about each anniversary date of the date
of this Agreement. The Board, in its sole and absolute discretion from time to
time, may increase (but not decrease without Employee's written consent)
Employee's Base Salary. The Board, in its sole and absolute discretion, also
may pay Employee performance bonuses based on the Company's performance and
Employee's contribution thereto in such amounts and at such times as the Board
may determine.
2.2 Stock Options. The Company shall grant options to the
Employee pursuant to the Company's 1996 Stock Incentive Plan in accordance with
the following terms and conditions:
(a) The Company shall grant to the Employee an
option to purchase Twenty Thousand (20,000) shares of the Company's common stock
as a signing bonus. Five Thousand (5,000) of these Twenty Thousand (20,000)
option shares shall become exercisable immediately upon grant, Ten Thousand
(10,000) of these Twenty Thousand (20,000) option shares shall become
exercisable sixty-five (65) days after the commencement of the Employee's
employment and the remaining Five Thousand (5,000) option shares shall become
exercisable ratably on the last day of each of the six months following the
Employee's
<PAGE> 2
commencement of employment. The option exercise price with respect to these
option shares shall be the per share offering price of the Company's common
stock in its initial public offering (the "IPO price").
(b) The Company shall grant to the Employee an
option to purchase an additional One Hundred Thousand (100,000) shares of the
Company's common stock, such option shares to become exercisable in accordance
with the following schedule: Sixty Thousand (60,000) option shares shall become
exercisable ratably on the last day of each of the twenty-four months following
the Employee's commencement of employment and Forty Thousand (40,000) option
shares shall become exercisable ratably on the last day of each of the
twenty-fifth through thirty-sixth months following the Employee's commencement
of employment. The option exercise price with respect to these option shares
shall also be the IPO price.
(c) Notwithstanding the foregoing, the option
shares referred to in subparagraphs 2.2(a) and (b) shall become exercisable
immediately upon the occurrence of a "Change in Control." For purposes hereof,
a "Change in Control" shall be deemed to mean (i) the acquisition, in a
transaction other than the initial public offering of the Company's common
stock, by any person, entity or "group" (within the meaning of section 13(d)(3)
of the Securities Exchange Act of 1934, as amended), of securities of the
Company representing 60% or more of the combined voting power of the then
outstanding securities of the Company, (ii) the merger or other business
combination of the Company with or into another corporation, a majority of the
directors of which were not directors of the Company immediately prior to the
merger and in which stockholders of the Company immediately prior to the
effective date of such merger directly or indirectly own less than 60% of the
voting power in such corporation, or (iii) the sale or other disposition of all
or substantially all of the assets of the Company.
(d) Unless terminated earlier pursuant to this
subparagraph 2.2(d), the option shares shall terminate on the tenth anniversary
of the date hereof. If the Employee's employment with the Company is terminated
prior to the expiration of the Term for any reason other than a reason set forth
in subparagraph 4(a), any option shares that have not yet become exercisable
shall not become exercisable after the effective date of Employee's termination
of employment and such option shares shall terminate on such date and any option
shares exercisable as of the effective date of Employee's termination of
employment shall terminate and not be exercisable on the date two years
following the effective date of such termination of employment. If the
Employee's employment is terminated by the Company for a reason set forth in
subparagraph 4(a), any option shares that are not yet exercisable shall not
become exercisable after the effective date of Employee's termination of
employment and such option shares shall terminate on such date and any option
shares exercisable as of the effective date of Employee's termination of
employment shall terminate and not be exercisable on the date sixty (60) days
following the effective date of such termination of employment.
2.3 Employee Benefits. During the Term of the Employee's
employment hereunder:
(a) The Employee shall be entitled to vacation
leave consistent with the Company's policies for other senior executives of the
Company.
(b) The Company shall pay or reimburse the
Employee for all reasonable and necessary travel and other business expenses
incurred or paid by the Employee in connection with the performance of his
services under this Agreement consistent with the Company's policies for other
senior executives of the Company.
2
<PAGE> 3
(c) The Company shall provide and pay for the
annual cost of premiums for health, dental and medical insurance coverage for
the Employee and the Employee's dependents consistent with the coverage
generally made available by the Company to senior executives of the Company and
providing benefits at least as favorable to the Employee as the coverage that is
in effect at the date of this Agreement.
(d) In addition to the benefits set forth above,
the Employee shall be entitled to participate in any other policies, programs
and benefits which the Company may, in its sole and absolute discretion, make
generally available to its other senior executives from time to time including,
but not limited to, life insurance, disability insurance, pension and retirement
plans, stock plans and other similar programs.
3. Confidential Information and Nonsolicitation.
(a) The Employee acknowledges and agrees that the Company
has developed and uses certain proprietary and confidential information, data,
processes, business methods, computer software, data bases, customer lists and
know-how ("Confidential Information"). The Employee agrees that the
Confidential Information is a trade secret of the Company which shall remain the
sole property of the Company notwithstanding that the Employee, as an employee
of the Company, may participate in the development of the Confidential
Information. During the term of this Agreement and at all times thereafter the
Employee shall not disclose any Confidential Information to any person or entity
for any reason or purpose whatsoever, nor shall the Employee make use of any
Confidential Information for the Employee's own benefit or for the benefit of
any other person or entity. Upon termination of this Agreement for any reason,
the Employee will promptly surrender to the Company all Confidential Information
in the Employee's possession or under the Employee's control, whether prepared
by the Employee or by others.
(b) The Employee agrees that for a period of three (3)
years following the termination of the Employee's employment hereunder, the
Employee will not directly or indirectly solicit or attempt to solicit any of
the employees of or consultants to the Company to leave the Company or to become
employees of or consultants to any other person or entity.
4. Termination of Employment.
(a) Notwithstanding any other provision of this Agreement,
the Employee's employment under this Agreement may be terminated as follows:
(i) Upon the death of the Employee, this
Agreement and the Employee's employment hereunder shall terminate immediately
and without notice by the Company; or
(ii) In the event of the inability of the Employee
to perform his duties or responsibilities hereunder, as a result of mental or
physical ailment or incapacity, for an aggregate of ninety (90) calendar days
during any calendar year (whether or not consecutive) (a "Disability") during
which period of Disability the Employee shall be entitled to his compensation
pursuant to this Agreement, this Agreement and the Employee's employment
hereunder shall terminate upon delivery of written notice to the Employee; or
(iii) By the Company for Cause (as defined below)
in accordance with the provisions of Section 4(b) hereof.
3
<PAGE> 4
(b) The parties agree that for purposes of this Agreement,
the term "Cause" shall mean the following:
(i) The Employee's willful and repeated failure
to satisfactorily perform his job duties under this Agreement;
(ii) Failure by the Employee to comply with all
material applicable laws in performing his job duties or in directing the
conduct of the Company's business; and
(iii) Commission by the Employee of any felony or
intentionally fraudulent act against the Company, or its employees, agents or
customers.
(c) With respect to events described in subparagraph
4(b)(i) and (ii) above, the Company shall give written notice to the Employee of
any such event and the Employee shall have thirty (30) days beginning on the
date of delivery of such written notice to cure same, or if such event cannot be
cured within said thirty (30) day period, the Employee shall commence his
efforts to cure the event within the thirty (30) day period and diligently work
to cure such event within a reasonable time period. If the Employee within said
thirty (30) day period or within a reasonable time period, as applicable, does
not cure the event for which notice has been provided under subparagraphs
4(b)(i) or (ii) above, then the Employee's employment under this Agreement may
be terminated by the Company by delivery to the Employee of written notice of
termination and such termination will be effective as of the date of delivery of
such written notice. With respect to events described in subparagraph 4(b)(iii)
above, the Employee's employment under this Agreement may be terminated by the
Company by delivery to the Employee of written notice of termination and such
termination will be effective as of the date of delivery of such written notice.
Upon the effectiveness of termination as set forth in this subparagraph 4(c),
the Employee shall not be entitled to receive any further compensation or
benefits pursuant to this Agreement except for payment within ten days after his
termination date of all accrued but unpaid Base Salary.
(d) In addition to its rights to terminate the Employee's
employment under this Agreement pursuant to subparagraph 4(a), the Company may
also terminate the Employee's employment under this Agreement for any other
reason, provided that, in such event, the Employee shall be entitled to receive
an amount equal to seventy-five percent of the Employee's Base Salary on the
termination date and the Employee shall not be entitled to receive any other
compensation or benefits hereunder. The Employee acknowledges and agrees that
the provisions of this paragraph 4 state his entire and exclusive rights,
entitlements, and remedies against the Company, its successors, assigns,
affiliates, officers, directors, employees and representatives for termination
without any cause shown by the Company.
(e) The Employee may terminate his employment for good
cause or without any cause. In the event the Employee terminates his employment
for "good cause" (as defined below), he shall be entitled to receive the
severance benefits described in subparagraph 4(d) above. If he terminates his
employment for any other reason, he shall not be entitled to receive any
compensation except for payment within ten days after his termination date of
all accrued but unpaid Base Salary. For purposes of this Agreement, "good
cause" for termination of employment by the Employee shall mean: failure to
maintain the Employee in the position of an officer of the Company or a material
breach of the provisions of this Agreement by the Company. The Employee
acknowledges and agrees that the provisions of this subparagraph 4(e) state his
entire and exclusive rights and remedies under this Agreement against the
Company, its successors, assigns, affiliates, officers, directors, employees and
representatives if he terminates this Agreement.
4
<PAGE> 5
5. Assignment of Rights and Duties. Neither the Employee nor the
Company may assign their rights or duties under this Agreement without prior
written consent of both parties, which consent may be withheld for any reason.
Any attempted assignment, transfer, conveyance, or other disposition of any
interest of either party in this Agreement shall be void. Notwithstanding the
foregoing, the Company may make such assignment to any affiliated company, but
its assignment of this Agreement to an affiliate does not relieve it of its
obligations under this Agreement if that affiliate fails to perform the
Company's obligations under this Agreement.
6. Miscellaneous.
6.1 Modification and Waiver of Breach. No waiver or
modification of this Agreement or any term hereof shall be binding unless it is
in writing signed by the parties hereto. No failure to insist upon compliance
with any term, provision or condition to this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.
6.2 Notices. All notices and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed given upon personal delivery, facsimile transmission (with confirmation
of receipt), delivery by a reputable overnight courier service or five (5) days
following deposit in the United States mail (if sent by certified or registered
mail, postage prepaid, return receipt requested), in each case duly addressed to
the party to whom such notice or communication is to be given as follows:
(a) If to the Company:
Diedrich Coffee
2144 Michelson Drive
Irvine, CA 92612
Attn: President
Telecopy Number: (714) 260-1610
(b) If to the Employee:
Kerry W. Coin
--------------------------
--------------------------
--------------------------
Either the Employee or the Company may change the address for purposes of this
Paragraph by giving to the other intended to be bound thereby, in the manner
provided herein, a written notice of such change.
6.3 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
6.4 Complete Agreement. This Agreement contains the
entire agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersedes all previous and all
contemporaneous negotiations, commitments, writings, and understandings.
5
<PAGE> 6
6.5 Legal Fees; Arbitration. The parties hereto expressly
agree that in the event of any dispute, controversy or claim by any party
regarding this Agreement, the prevailing party shall be entitled to
reimbursement by the other party to the proceeding of reasonable attorneys'
fees, expenses and costs incurred by the prevailing party. Any controversy,
dispute or claim arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement or otherwise arising out
of the execution hereof, including any claim based on contract, tort or statute,
shall be resolved, at the request of any party, by submission to binding
arbitration at the Orange County, California offices of Judicial Arbitration &
Mediation Services, Inc. ("JAMS"), and any judgment or award rendered by JAMS
shall be final, binding and unappealable, and judgment may be entered by any
state or federal court having jurisdiction thereof. Any party can initiate
arbitration by sending written notice of intention to arbitrate (the "Demand) by
registered or certified mail to all parties and to JAMS. The Demand shall
contain a description of the dispute, the amount involved, and the remedy
sought. The arbitrator shall be a retired or former judge agreed to between the
parties from the JAMS' panel. If the parties are unable to agree, JAMS shall
provide a list of three available judges and each party may strike one. The
remaining judge shall serve as the arbitrator. Each party hereto intends that
the provisions to arbitrate set forth herein be valid, enforceable and
irrevocable. In his award, the arbitrator shall allocate, in his discretion,
among the parties to the arbitration all costs of the arbitration, including the
fees of the arbitrator and reasonable attorneys' fees, expenses, costs and
expert witness expenses of the parties. The parties hereto agree to comply with
any award made in any such arbitration proceedings that has become final and
agree to the entry of a judgment in any jurisdiction upon any award rendered in
such proceeding becoming final.
6.6 Severability. In the event any provision or
provisions of this Agreement is or are to be held invalid, the remaining
provisions of this Agreement shall not be affected thereby.
6.7 Governing Law. This Agreement shall be governed by
the laws of the State of California.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
THE EMPLOYEE
------------------------------
Kerry W. Coin
DIEDRICH COFFEE
By:
---------------------------
Steven A. Lupinacci
President and Chief
Executive Officer
6