8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 10, 2008

DIEDRICH COFFEE, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-21203	33-0086628
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

28 Executive Park, Suite 200

Irvine, California 92614

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (949) 260-1600

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry Into A Material Definitive Agreement

Waiver Agreement

On November 10, 2008, Diedrich Coffee, Inc. (the “Company”) entered into a Waiver, Agreement, Amendment No. 1 to 2008 Warrant and Amendment No. 2 to 2001 Warrant (the “Waiver Agreement”) with Sequoia Enterprises, L.P. (“Sequoia”), a limited partnership whose sole general partner also serves as the Chairman of the Board of Directors of the Company.

Pursuant to the Waiver Agreement, Sequoia has waived the requirement set forth in the Contingent Convertible Note Purchase Agreement and the Loan Agreement with Sequoia (collectively, the “Loan Agreements”) that the Company shall not permit, as of the end of any Fiscal Quarter, the ratio of Indebtedness of the Company on a consolidated basis to Effective Tangible Net Worth to be more than 1.75:1.00 (as such terms are defined in the Loan Agreements). Such waiver will be effective until the earlier of (a) October 31, 2009 and (b) the end of any Fiscal Quarter at which the foregoing ratio is greater than 2.10:1.00.

In consideration of such waiver, (a) the exercise prices of the warrant to purchase 250,000 shares of the Company’s common stock issued to Sequoia on May 8, 2001 and the warrant to purchase 1,667,000 shares of the Company’s common stock issued to Sequoia on August 26, 2008 were decreased from $2.00 to $1.65, and (b) the per annum interest rates under the Loan Agreements were increased from the LIBOR Rate (as defined in the Loan Agreements) plus 5.30% to (i) the LIBOR Rate plus 9.30% for any period during which the ratio of Indebtedness of the Company on a consolidated basis to Effective Tangible Net Worth is greater than 1.75:1.00 or (ii) the LIBOR Rate plus 6.30% for any other period, in each case reset on a periodic basis as provided in the Loan Agreements.

Consistent with the Company’s procedures for approving related party transactions, the Audit Committee of the Board of Directors, comprised of Timothy J. Ryan and Greg D. Palmer, authorized and approved the Waiver Agreement and the transactions contemplated thereby.

Amended and Restated Commitment Letter

On November 10, 2008, the Company obtained an amended and restated commitment letter (the “Amended Commitment Letter”) from Sequoia and Vessel Partners, L.P., which is a limited partnership whose general partner also serves as the chairman of the Board of Directors of the Company (collectively, the “Lenders”). The Amended Commitment Letter amends the commitment letter obtained from the Lenders on October 8, 2008 to extend the date by which the Lenders are required to enter into a $5,000,000 commitment letter or note agreement with the Company, from October 23, 2008 to November 30, 2008.

The foregoing descriptions of the Waiver Agreement and Amended Commitment Letter are qualified in their entirety by reference to the full text of such documents, which are included herewith as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.

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Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
10.1	Waiver, Agreement, Amendment No. 1 to 2008 Warrant and Amendment No. 2 to 2001 Warrant, dated as of November 10, 2008, by and between Diedrich Coffee, Inc. and Sequoia Enterprises, L.P.
10.2	Amended and Restated Commitment Letter, dated as of November 10, 2008, by Sequoia Enterprises, L.P. and Vessel Partners, L.P.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 17, 2008	DIEDRICH COFFEE, INC.
	By:	/s/ Sean McCarthy
		Sean McCarthy
		Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Waiver, Agreement, Amendment No. 1 to 2008 Warrant and Amendment No. 2 to 2001 Warrant, dated as of November 10, 2008, by and between Diedrich Coffee, Inc. and Sequoia Enterprises, L.P.
10.2	Amended and Restated Commitment Letter, dated as of November 10, 2008, by Sequoia Enterprises, L.P. and Vessel Partners, L.P.

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EX-10.1

Exhibit 10.1

WAIVER, AGREEMENT,

AMENDMENT NO. 1 TO 2008 WARRANT &

AMENDMENT NO. 2 TO 2001 WARRANT

THIS WAIVER, AGREEMENT, AMENDMENT NO. 1 TO 2008 WARRANT AND AMENDMENT NO. 2 TO 2001 WARRANT (this “Agreement”) is made as of November 10, 2008 by and between Sequoia Enterprises, L.P., a California limited partnership (“Lender”), and Diedrich Coffee, Inc., a Delaware corporation (the “Company”).

Reference is made to (i) that certain Contingent Convertible Note Purchase Agreement, dated as of May 10, 2004, by and between Lender and the Company (as amended, the “Note Purchase Agreement”), (ii) that certain Loan Agreement, dated as of August 26, 2008, by and between Lender and the Company (the “Loan Agreement” and, together with the Note Purchase Agreement, the “Loan Documents”), (iii) that certain Warrant to purchase 1,667,000 shares of Company common stock issued by the Company to Lender on August 26, 2008 (the “2008 Warrant”) and (iv) that certain Warrant to purchase 250,000 shares of Company common stock issued by the Company to Lender on May 8, 2001 (the “2001 Warrant” and, together with the 2008 Warrant, the “Warrants”). Capitalized terms but not defined herein have the respective meanings ascribed to them in the Note Purchase Agreement, the Loan Agreement, the 2008 Warrant or the 2001 Warrant, as applicable.

NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and the Company agree as follows:

1. Waiver. Lender hereby waives the requirement set forth in Section 9.4 of the Note Purchase Agreement and Section 8.4 of the Loan Agreement that the Company shall not permit, as of the end of any Fiscal Quarter, the ratio of Indebtedness of the Company on a consolidated basis to Effective Tangible Net Worth to be more than 1.75:1.00; provided that the foregoing waiver shall automatically be revoked and cease to be effective as of the earlier of (a) October 31, 2009 and (b) the end of any Fiscal Quarter at which the foregoing ratio is greater than 2.10:1.00.

2. Amendment of Exercise Price of Warrants. In consideration of the foregoing waiver, (a) the definition of Exercise Price contained in the 2008 Warrant is hereby amended and restated to read “at a price per share of $1.65” and (b) the definition of Warrant Price contained in Section 1.11 of the 2001 Warrant is hereby amended and restated as follows:

1.11 “Warrant Price” means $1.65 per share of Warrant Stock, which takes into account all adjustments pursuant to Section 4 hereof and Section 1.7 of the Registration Rights Agreement due to any applicable event that occurred prior to November 10, 2008, but as may be adjusted pursuant to Section 4 hereof and/or Section 1.7 of the Registration Rights Agreement due to any applicable event occurring after such date.

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3. Increase in Interest Rate. In consideration of the foregoing waiver, (a) the interest rates under the Loan Documents shall be equal to the LIBOR Rate (as defined in each of the Loan Documents) + 9.30% per annum (reset on a periodic basis as provided in the Loan Documents) for any period during which the ratio of Indebtedness of the Company on a consolidated basis to Effective Tangible Net Worth is greater than 1.75:1.00 and (b) the interest rates under the Loan Documents shall be equal to the LIBOR Rate (as defined in each of the Loan Documents) + 6.30% per annum (reset on a periodic basis as provided in the Loan Documents) for any other period.

4. No Further Waiver; Amendment. Other than as specifically and expressly set forth above, nothing herein shall be construed as a waiver or amendment of any of the terms or conditions of the Loan Documents or the Warrants. This Agreement may not be amended except by an instrument in writing duly signed on behalf of Lender and the Company.

5. Governing Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of California, regardless of the laws or rules that might otherwise govern under applicable principles of conflicts of laws thereof.

6. Counterparts. This Agreement may be executed by facsimile or similar electronic transmission in one or more counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement.

[Signature page follows.]

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IN WITNESS WHEREOF, Lender and the Company has duly executed this Agreement as of the date first above written.

SEQUOIA ENTERPRISES, L.P.
By:	/s/    Paul Heeschen
Name:	Paul Heeschen
Title:	General Partner
DIEDRICH COFFEE, INC.
By:	/s/    J. Russell Phillips
Name:	J. Russell Phillips
Title:	Chief Executive Officer

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EX-10.2

Exhibit 10.2

SEQUOIA ENTERPRISES, L.P.

VESSEL PARTNERS, L.P.

November 10, 2008

BDO Seidman, LLP

Ladies and gentlemen:

In connection with BDO Seidman, LLP’s audit of the consolidated financial statements of Diedrich Coffee, Inc. (the “Company”) as of and for the year ended June 25, 2008, Sequoia Enterprises, L.P. (“Sequoia”) and Vessel Partners, L.P. (“Vessel” and collectively with Sequoia, the “Lenders”) make the following commitments. This letter amends, restates and supersedes the Lenders’ letter to you dated as of October 8, 2008.

1. The Lenders commit to provide additional financial support to the Company on commercially acceptable terms not to exceed $5 million over the course of 18 months from the date of this letter. Such amount will provide cash flow sufficient to operate the Company on a going concern basis during that period.

2. To evidence the commitment in the paragraph above, the Lenders will enter into a $5 million commitment letter or note agreement with the Company as soon as possible and no later than November 30, 2008.

3. In addition to the above, Sequoia will also extend the maturity date on commercially acceptable terms on the $2 million note purchase agreement with the Company that is set to expire on March 31, 2009. The maturity of the note will be extended to at least March 31, 2010.

4. The Lenders will not require that the Company agree to any covenants more onerous than those presently existing in the agreements between the Company and Sequoia.

5. The Lenders have the intent and the ability to fully fund the financial commitments that are outlined in this letter.

6. I have the authority as the General Partner of each of Sequoia Enterprises, L.P. and Vessel Partners, L.P. to make investment decisions and financial commitments outlined in this letter.

7. The Lenders’ commitments set forth in this letter shall immediately cease and terminate if the Company receives gross proceeds from any transaction of $5 million or more or enters into a credit or loan agreement with a party other than the Lenders for at least $5 million.

Sincerely,

/s/    Paul Heeschen

Paul Heeschen

General Partner, Sequoia Enterprises, L.P.

General Partner, Vessel Partners, L.P.