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EXHIBIT 10.22
STOCK OPTION PLAN AND AGREEMENT WITH JOHN E. MARTIN
Stock Option Plan and Agreement, dated as of November 17, 1997 (this
"AGREEMENT"), by and between Diedrich Coffee, Inc., a Delaware corporation (the
"COMPANY") and John E. Martin (the "GRANTEE").
RECITALS
A. The Company has agreed to employ Grantee under terms and conditions
set forth in that certain agreement dated November 17, 1997 (the "EMPLOYMENT
AGREEMENT"), by and between the Company and Grantee.
B. Under the Employment Agreement, the Company has agreed to grant to
Grantee options to purchase 850,000 shares of common stock, $0.01 par value per
share (the "COMMON STOCK"), of the Company for the purpose of encouraging and
rewarding Grantee's contributions to the performance of the Company and aligning
Grantee's interests with the interests of the Company's stockholders.
AGREEMENT
NOW, THEREFORE, to evidence the grant of options by the Company and to
set forth the terms and conditions of the grant of options, the Company and
Grantee hereby agree as follows:
1. DEFINITIONS. The following terms, as used in this Agreement, have the
meanings ascribed to them in this Section 1.
(a) "BOARD" means the Board of Directors of the Company.
(b) "CLOSING PRICE" means the closing price on any given trading day
of the Common Stock on the Nasdaq National Market (or any subsequent exchange or
market system upon which the Company's Common Stock is principally traded) as
reported in the Transaction Index of the Wall Street Journal.
(c) "COMPENSATION COMMITTEE" means the Compensation Committee of the
Board.
(d) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(e) "EXERCISE DATE" means any date on which Grantee exercises
Options.
(f) "EXERCISE DATE VALUE" means the product of: (i) the number of
shares of Common Stock delivered to the Company and (ii) the Closing Price of
the Common Stock on the Exercise Date.
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(g) "EXERCISE SHARES" means those shares of Common Stock with respect
to which Options are being exercised.
(h) "FOR CAUSE" means: (i) the willful failure by Grantee to follow
the instructions of the Board or to perform substantially any of Grantee's
obligations to the Company or a breach by Grantee of any of his duties to the
Company and the continuance of such failure or breach for more than twenty (20)
days after written notice of such failure or breach by the Board; (ii) the
engaging by Grantee in serious misconduct that is injurious to the Company or
any subsidiary of the Company; (iii) the conviction of Grantee of, or the
entering by Grantee of a plea of nolo contendere to, a crime that constitutes a
felony; and (iv) the failure, prior to the second anniversary of the date
hereof, of the Common Stock, for a period of seven trading days in any ten
consecutive trading days, to have a Closing Price in excess of $5.00.
(i) "OPTIONS" means options to purchase shares of Common Stock
granted under this Agreement.
(j) "SECURITIES ACT" means the Securities Act of 1933, as amended.
2. GRANT OF OPTIONS. The Company hereby grants to Grantee, effective as
of the date hereof, Options to purchase up to 850,000 shares of Common Stock on
the terms and subject to the conditions set forth herein.
3. EXERCISABILITY AND EXERCISE PRICES. The Options will become
exercisable as follows:
(a) The Company shall promptly call a special meeting of the
Company's stockholders for the purpose of requesting that the stockholders
approve the terms of this Agreement and the grant of the Options hereunder.
Notwithstanding any provision contained in this Agreement or the Employment
Agreement to the contrary, none of the Options granted hereunder will become
exercisable until stockholders of the Company approve the terms of this
Agreement and the grant of the Options hereunder.
(b) Options to purchase up to 450,000 shares of Common Stock will
become exercisable at an option exercise price of $4.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $4.00;
(c) Options to purchase up to 100,000 shares of Common Stock will
become exercisable at an option exercise price of $5.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $5.00;
(d) Options to purchase up to 150,000 shares of Common Stock will
become exercisable at an option exercise price of $8.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten
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consecutive trading days in which the Closing Price of the Common Stock for at
least seven trading days in that period exceeded $8.00; and
(e) Options to purchase up to 150,000 shares of Common Stock will
become exercisable at an option exercise price of $10.00 per share of Common
Stock on the earlier of (i) May 15, 2002 or (ii) the day immediately following
the first period after the date hereof of ten consecutive trading days in which
the Closing Price of the Common Stock for at least seven trading days in that
period exceeded $10.00.
For purposes of this Section 3, a "trading day" shall be any day on which the
Nasdaq Stock Market (or any subsequent exchange or market system where the
Company's shares are principally traded) is reporting sale prices for the
Company's Common Stock.
4. TERMINATION OF OPTIONS.
(a) Unless an earlier termination date occurs as specified in Section
4(b), the Options will expire and become unexercisable (whether or not then
exercisable) on the fifth (5th) anniversary of the date hereof ("EXPIRATION
DATE").
(b) If Grantee's employment with the Company is terminated by the
Company For Cause prior to the Expiration Date or by the Grantee for any reason
prior to the Expiration Date: (i) all Options that have not otherwise become
exercisable, as of the date of Grantee's termination of employment, will
immediately terminate and become unexercisable; and (ii) all Options that have
become exercisable will terminate and become unexercisable on and after the date
sixty (60) days following the date of Grantee's termination of employment.
(c) If Grantee's active employment with the Company is terminated for
any reason other than as set forth in Section 4(b): (i) all Options that have
not otherwise become exercisable, as of the date of Grantee's termination of
employment, will continue to become exercisable pursuant to Section 3 until such
Options are terminated on the earlier of (x) the Expiration Date or (y) the
latter of the first (1st) anniversary of the date of Grantee's termination of
employment or the third (3rd) anniversary of the date hereof; and (ii) all
Options that have become exercisable, as of the date of Grantee's termination of
employment, will terminate and become unexercisable on the earlier of (x) the
Expiration Date or (y) the latter of the first (1st) anniversary of the date of
Grantee's termination of employment or the third (3rd) anniversary of the date
hereof.
5. REGISTRATION OF OPTIONS. Promptly after execution of this Agreement,
the Company, at its expense, shall file a registration statement on Form S-8 to
register the issuance and exercise of the Options.
6. RESTRICTIONS ON EXERCISE. Notwithstanding anything to the contrary in
this Agreement, the Options may not be exercised, and no Exercise Shares shall
be issued: (a) unless all requisite approvals and consents of any governmental
authority of any kind having jurisdiction over the exercise of options shall
have been secured and (b) unless all applicable federal, state and local tax
withholding requirements shall have been satisfied. The Company shall use
commercially
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reasonable efforts to obtain the consents and approvals referred to in Section
6(a) so as to permit the Options to be exercised.
7. NON-TRANSFERABILITY OF OPTIONS. None of the Options are assignable or
transferable, in whole or in part, and may not, directly or indirectly, be
offered, transferred, sold, pledged, assigned, alienated, hypothecated or
otherwise disposed of or encumbered (including without limitation by gift,
operation of law or otherwise) other than by will or by the laws of descent and
distribution to the estate of Grantee upon his death, provided that the deceased
Grantee's beneficiary or the representative of his estate acknowledge and agree
in writing, in a form reasonably acceptable to the Compensation Committee to be
bound by this Agreement as if such beneficiary or the estate were Grantee.
8. WITHHOLDING. Whenever shares of Common Stock are to be issued
pursuant to the exercise of Options, the Compensation Committee may require the
recipient of the shares of Common Stock to remit to the Company an amount
sufficient to satisfy any applicable federal, state and local tax withholding
requirements. Upon request by Grantee, the Company may also withhold shares of
Common Stock to satisfy applicable withholding requirements, subject to any
rules adopted by the Compensation Committee regarding compliance with applicable
law, including, but not limited to, Section 16(b) of the Exchange Act.
9. MANNER OF EXERCISE.
(a) To the extent that the Options have become and remain exercisable
as provided in Sections 3 and 4, and subject to such reasonable administrative
regulations as the Compensation Committee may adopt, the Options may be
exercised, by written notice to the Compensation Committee, specifying the
number of Exercise Shares and the Exercise Date. On or before the Exercise Date,
Grantee shall deliver to the Company full payment for the Options being
exercised in cash, or cash equivalent satisfactory to the Compensation
Committee, and in an amount equal to the aggregate purchase price for the
Exercise Shares.
(b) Subject to the discretion of the Compensation Committee, Grantee
may, in lieu of cash, either: (i) deliver shares of Common Stock having an
Exercise Date Value equal to the purchase price of the Exercise Shares; or (ii)
deliver a combination of cash and shares of Common Stock with an aggregate value
and Exercise Date Value equal to the purchase price of the Exercise Shares,
subject to such rules and regulations as may be adopted by the Compensation
Committee to provide for the compliance of such payment procedure with
applicable law, including Section 16(b) of the Exchange Act.
(c) The Compensation Committee may require Grantee to furnish or
execute such other documents as the Compensation Committee reasonably deems
necessary: (i) to evidence such exercise and (ii) to comply with or satisfy the
requirements of the Securities Act, applicable state securities laws or any
other law.
10. NO RIGHTS AS STOCKHOLDER. Grantee will have no voting or other
rights as a stockholder of the Company with respect to any shares of Common
Stock covered by the Options until the exercise of such Options and the issuance
of a certificate or certificates to him for such
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shares of Common Stock. No adjustment will be made for dividends or other rights
for which the record date is prior to the issuance of such certificate or
certificates.
11. CAPITAL ADJUSTMENTS. The number and any applicable option price of
the shares of Common Stock covered by the Options will be proportionately and
appropriately adjusted by the Compensation Committee to reflect any stock
dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. Subject to any required action by the
stockholders of the Company, in any merger, consolidation, reorganization,
exchange of shares, liquidation or dissolution, the Options will pertain to the
securities and other property, if any, that a holder of the number of shares of
Common Stock covered by the Options would have been entitled to receive in
connection with such event.
12. NOTICES. All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by certified or express mail, return
receipt requested, postage prepaid, or by any recognized international
equivalent of such delivery, to the Company, or Grantee, as the case may be, at
the address of the Company's principal executive office. All such notices and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof.
13. BINDING EFFECT; BENEFITS. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
14. AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written instrument executed by Grantee and the Company.
15. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, regardless of the law that
might be applied under principles of conflict of laws.
16. SECTION AND OTHER HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement
as of the date first above written.
DIEDRICH COFFEE, INC.,
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
THE GRANTEE
_________________________________________
JOHN E. MARTIN
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