EXHIBIT 10.35


 


STOCK OPTION PLAN AND AGREEMENT


WITH ROGER M. LAVERTY


 


This Stock
Option Plan and Agreement (this “Agreement”), is made effective as of April 24,
2003 (the “Effective Date”), by and between Diedrich Coffee, Inc., a Delaware
corporation (the “Company”) and
Roger M. Laverty (“Grantee”).


 


RECITALS


 


WHEREAS, the Company has agreed to employ Grantee under
terms and conditions set forth in that certain employment agreement dated of
even date herewith (the “Employment
Agreement”), by and between the Company and Grantee.


 


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 200,000 shares of Company common stock, $0.01 par
value per share (the “Common Stock”),
as of the Effective Date.


 


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.                                       Grant of Options. 
The Company hereby grants to Grantee, effective as of the Effective
Date, non-qualified options to purchase up to 200,000 shares of Common Stock on
the terms and subject to the conditions set forth herein (the “Options”).


 


2.                                       Exercisability and Exercise Price. 
The Options will become exercisable as follows:


 


(a)                                  The
Company shall seek approval of the terms of this Agreement and the grant of the
Options hereunder from the stockholders of the Company at the next annual
meeting of stockholders. 
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)                                 The
Options will become exercisable in four equal installments on each of the first
four anniversary dates of the Effective Date at an option exercise price equal
to $3.44 per share of Common Stock.


 


(c)                                  Notwithstanding
the foregoing, the Options will fully vest and become immediately exercisable
if Grantee is terminated by the Company other than for Cause (as such term is
defined in the Employment Agreement) within (i) sixty (60) days prior to a
Change in


 

















 


Control (as such term is
defined in the Employment Agreement) or (ii) twelve (12) months following a
Change in Control; provided, however, that
all such Options will terminate and become unexercisable on the earlier of the
Expiration Date or 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 in this Section 3,
the Options will 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 by the Company for Cause
(as such term is defined in the Employment Agreement) prior to the Expiration
Date or by the Grantee for any reason other than a Constructive Termination (as
such term is defined in the Employment Agreement) prior to the Expiration
Date:  (i) all Options that have
not otherwise become exercisable as of the date of the termination of Grantee’s
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 the
termination of Grantee’s employment.


 


(c)                                  Subject
to Section 2(c) above, if Grantee’s employment with the Company is
terminated for any reason other than as set forth in Section 3(b) hereof
(including if due to death or disability (as such term is defined in the
Employment Agreement)):  (i) all Options
that have not otherwise become exercisable as of the date of the termination of
Grantee’s employment will continue to become exercisable pursuant to Section
2; provided, however, that
such Options will terminate and become unexercisable on the earlier of the
Expiration Date or the first (1st) anniversary of the date of the termination
of Grantee’s employment; and (ii) all Options that have become exercisable as
of the date of the termination of Grantee’s employment will terminate and
become unexercisable on the earlier of the Expiration Date or the first (1st)
anniversary of the date of the termination of Grantee’s employment.


 


4.                                       Registration of Options.  Promptly
after the stockholders of the Company approve this Agreement, 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 (the “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 reasonable efforts to obtain the
consents and approvals referred to in this Section 5(a) so as to
permit the Options to be exercised.


 


6.                                       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


 


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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 of the Company’s Board of Directors (the “Compensation Committee”) to
be bound by this Agreement as if such beneficiary or the estate were Grantee.


 


7.                                       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 Securities Exchange Act of
1934, as amended (the “Exchange Act”).


 


8.                                       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 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 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 (defined as the product of: (x) the
number of shares of Common Stock delivered to the Company multiplied by (y) the
closing price on the Nasdaq National Market (or any subsequent exchange or
market system upon which the Company’s Common Stock is principally traded) of
the Common Stock on the Exercise Date) 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 of
1933, as amended, applicable state securities laws or any other law.


 


9.                                       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


 


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for such 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.


 


10.                                 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.


 


11.                                 General Provisions. 
This Agreement shall be governed by Section 9 of the Employment
Agreement with the same force and effect as though Section were set forth in
its entirety herein.


 


IN WITNESS
WHEREOF, the Company and Grantee have executed this Agreement as of the date
first above written.


 


	
   

  	
  DIEDRICH COFFEE, INC.:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Paul C. Heeschen

  	
   

  
	
   

  	
  Paul C. Heeschen

  
	
   

  	
  Chairman of the Board of Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRANTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Roger M. Laverty

  	
   

  
	
   

  	
  Roger M. Laverty

  



 


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