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Exhibit
10.2
STOCK OPTION
AGREEMENT
This Stock Option Agreement
(the “ Agreement ”) is made on this
February 7, 2008 (the “ Grant Date ”) by
and between Diedrich Coffee, Inc., a Delaware corporation (the
“ Company ”) and J. Russell Phillips (“
Grantee ”).
WHEREAS, the Company has
agreed to employ Grantee under the terms and conditions set forth
in that certain Employment Agreement dated even date herewith (the
“ Employment Agreement ”) by and between the
Company and Grantee; and
WHEREAS, 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, and as
inducement material to Grantee entering into the Employment
Agreement with the Company, the Company, in the Employment
Agreement, has agreed to grant to Grantee options to purchase
275,000 shares of common stock of the Company, $0.01 par value
per share (“ Common Stock ”), on
February 7, 2008 (the “ Effective Date ”),
provided that Grantee commences employment with the Company
on or before the Effective Date.
NOW, THEREFORE, to evidence
the grant of options by the Company and to set forth the terms and
conditions of such grant, the Company and Grantee hereby agree as
follows:
1. Grant of Options .
The Company hereby grants to Grantee, effective as of the Effective
Date, non-qualified options to purchase up to 275,000 shares
of Common Stock on the terms and subject to the conditions set
forth herein (the “ Options ”). The Options are
not granted under the terms of any compensatory stock plan of the
Company.
2. Exercisability and
Exercise Price . The Options shall become exercisable as
follows:
(a) The Company shall seek
approval of the terms of this Agreement from the stockholders of
the Company at the next annual meeting of stockholders or such
other time as shall be determined by the Board of Directors of the
Company (the “ Board ”). No portion of the
Options shall vest and become exercisable unless and until the
stockholders approve the terms of this Agreement.
(b) Subject to
Section 2(a) above, the Options shall vest and become
exercisable in three (3) equal installments on each of the
first three (3) anniversary dates of the Effective Date at an
option exercise price equal to $3.23 per share of Common Stock, as
long as Grantee continuously performs services for the Company from
the Effective Date to the relevant vesting date.
(c) Notwithstanding
Section 2(b) but subject to Section 2(a) ,
all outstanding Options shall fully vest and become immediately
exercisable upon a Change of Control (as such term is defined in
the Employment Agreement); provided , however , that
all such Options shall terminate and become unexercisable on the
earlier of (i) the Expiration Date (as defined below in
Section 3(a) ) or (ii) the first
(1st) anniversary of the date of the Change of
Control.
3. Termination of
Options .
(a) Unless an earlier
termination date occurs as specified elsewhere in this
Section 3 , the Options shall expire and become
unexercisable (whether or not then exercisable) on the tenth
(10th) anniversary of the Effective Date (the “
Expiration Date ”).
(b) If Grantee’s
employment with the Company is terminated due to death, Permanent
Disability (as such term is defined in the Employment Agreement) or
retirement: (i) all Options that have not otherwise vested and
become exercisable as of the Termination Date (as such term is
defined in the Employment Agreement) shall terminate and become
unexercisable; and (ii) all Options that have vested and
become exercisable as of the Termination Date shall terminate and
become unexercisable on the earlier of (A) the Expiration Date
or (B) the date that is 180 days after the Termination
Date.
(c) If Grantee’s
employment with the Company is terminated by the Company for Cause
(as such term is defined in the Employment Agreement) prior to the
Expiration Date, all Options, whether or not vested, shall
immediately terminate and become unexercisable as of the
Termination Date.
(d) If Grantee’s
employment with the Company is terminated for any reason other than
as set forth in Section 3(b) or 3(c) :
(i) all Options that have not otherwise vested and become
exercisable as of the Termination Date shall terminate and become
unexercisable; and (ii) all Options that have vested and
become exercisable as of the Termination Date shall terminate and
become unexercisable on the earlier of (A) the Expiration Date
or (B) the date that is 30 days after the Termination
Date.
(e) Notwithstanding any other
provision of this Agreement, if the stockholders of the Company do
not approve the terms of this Agreement on or before
December 31, 2008, the Options shall automatically terminate
at the close of business on December 31, 2008.
4. Registration of
Options . The Company, at its expense, shall file a
registration statement on Form S-8 to register the shares of
Common Stock subject to the Options.
5. Restrictions on
Exercise . Notwithstanding anything to the contrary in this
Agreement, the Options may not be exercised, and no shares of
Common Stock issuable upon exercise (“ Exercise Shares
”) shall be issued, unless: (a) all requisite approvals
and consents of any governmental authority of any kind having
jurisdiction over the exercise of options shall have been secured;
(b) all applicable federal, state and local tax withholding
requirements shall have been satisfied; and (c) approval of
the stockholders of the Company is obtained as described further in
Section 2(a) . The Company shall use commercially
reasonable efforts to obtain the approvals and consents referred to
in this Section 5 so as to permit the Options to be
exercised.
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6. Manner of Exercise
.
(a) To the extent that the
Options have become and remain exercisable as provided in
Sections 2 and 3 , and subject to such
reasonable administrative regulations as the Compensation Committee
of the Board (“ Compensation Committee ”) may
adopt, the Options may be exercised, by written notice to the
Compensation Committee, specifying the number of Exercise Shares
and the date on which the Grantee intends to exercise the Options
(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 check, shares of Common
Stock which have been held for six (6) months or which would
not trigger any adverse financial accounting consequences
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