**Exhibit10.26**

 

 

February 3, 2000

 

Michael Zorehkey

17  Tanzanite

Rancho Santa Margarita,CA  92688

 

Dear Mike:

 

We are pleased to offer you the position of Directorof Mall Development for Diedrich Coffee. This is a critical position with our Company that will take totalresponsibility for the maintenance and expansion of the Company in malls. Asyou know, we are currently the second largest specialty coffee company in theUnited States with plans to expand significantly in the near future.  We view this as a growth position and aunique opportunity to help create something really special.

 

Our offer is as follows:

 

| • |   | Base salary - $2,211.54  per week (paid on a bi-weekly basis) which equates to $115,000 annually at  the completion of one full year of employment.  Wages are reviewed annually as anniversary dates are reached.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Incentive/Bonus plan -  For traditional full line stores, a bonus of $1,000 will be paid for each new  opening you complete and paid upon store opening. Non-traditional locations  (e.g. kiosks, carts, airports, colleges, hospitals) are paid at .15% of first  year sales and is paid on the 13th month anniversary of the  location opening.  A bonus of $250  will be paid for each lease renewal you complete and will be paid on the  execution of the lease by both parties (excludes extensions of less than 3  years or exercise of options).  For  each sublease you complete during the fiscal year, a payment of $500 will be  paid upon full execution of the sublease. For each occupancy cost reduction  or early termination of a lease you negotiate, you will receive a payment  equal to 5% of the net savings realized by the Company up to a maximum of  $5,000.  This award will be paid upon  full execution of the appropriate document.   This plan is for the time period of February 21, 2000 through the end  of the Company fiscal year and is intended to reward personal  performance.  It is not intended to  pay for work completed by others (e.g. you do the deal - you receive the  reward).  In order to be eligible for  payment you must be employed when the payment is due. |
| • |   | Stock Options - The  Company will issue you options to purchase 7,500 shares of Diedrich  Coffee.  The strike price of the  shares will be the trailing 5 day average of the price of the shares from the  day you begin employment.  These  options vest over 3 years at a rate of 33% per year.  The Board reviews issuance of additional  stock options annually.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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| • |   | Signing bonus - a lump  sum payment of $10,000, less applicable withholdings, will be made within  your initial 30 days of employment. Should you voluntarily leave the Company  within 12 months from the effective date of employment, for any reason, you  will be responsible for repaying the Company this bonus on a prorated basis. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • |   | Car allowance - In this  position you will receive a car allowance of $400 per month (paid on a  bi-weekly basis).                                                                                                                                                                                                                         |
| • |   | Vacation - Based on  your experience, you will be entitled to earn 2 weeks of vacation during your  first year of employment.  You will  retain this benefit until the vacation earning potential increases based on  Company vacation policy.                                                                                        |
| • |   | Benefits - You will  participate in the Company’s benefits plan.   A copy is attached.  The  benefit program may be modified from time to time.                                                                                                                                                                             |
| • |   | 401(k) participation  based on current eligibility criteria.                                                                                                                                                                                                                                                                               |
| • |   | Employment at will -  you may resign at any time and Diedrich Coffee may terminate your employment  at any time, with or without cause or notice.                                                                                                                                                                                          |
| • |   | Termination not for  cause - Should your employment be terminated for reasons other than cause  (cause meaning willful misconduct, repeated failure to perform duties, fraud  or dishonesty, felonious, or criminal acts), you will be entitled to a  one-time payment equal to six month’s salary.                                   |
| • |   | Position reports  directly to Tony Bonwell - Vice President, Real Estate & Construction for  Diedrich Coffee.                                                                                                                                                                                                                          |
| • |   | Start date on or before  March 6, 2000.                                                                                                                                                                                                                                                                                                    |

 

 

We look forward to yourearly response in becoming part of our team. Please confirm your acceptance of this offer by signing and returning anexecuted copy to Matt Kimble.

 
| Very truly yours,       |
|-------------------------|
|                    |
|                    |   |
| Tim Ryan                |
| Chief Executive Officer |

 

 

I accept the position ofDirector of Mall Development, Diedrich Coffee on the above terms andconditions.

 

 
|             |   |   |   |
|------------------|--------|--------|--------|
| Michael Zorehkey | Date   |

 

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