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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.
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(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.
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(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
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(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
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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
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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;
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(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
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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
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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,
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(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
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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;
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(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.
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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.
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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.]
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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
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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
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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
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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.
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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. --