DIEDRICH COFFEE INC
EXHIBIT 10.31
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="kk1531_exhibit_10.31"> </A>
<A NAME="toc_kk1531_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 10.31    <BR>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kk1531_form_of_guaranty"> </A>
<A NAME="toc_kk1531_2"> </A>
<BR></FONT><FONT SIZE=2><B>FORM OF<BR>  GUARANTY    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS GUARANTY (the "Guaranty") is made and dated as of the 3rd day of September, 2002
by&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
a&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;("Guarantor"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kk1531_recitals"> </A>
<A NAME="toc_kk1531_3"> </A>
<BR></FONT><FONT SIZE=2><B>RECITALS    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;This
Guaranty is being executed and delivered to BANK OF THE WEST, doing business as UNITED CALIFORNIA BANK (the "Lender") pursuant to that certain Credit Agreement dated
concurrently herewith by and among DIEDRICH COFFEE,&nbsp;INC., a California corporation (the "Company") and the Lender (as amended, extended and replaced from time to time, the "Credit Agreement,"
and with capitalized terms not otherwise defined herein used with the meanings given such terms in the Credit Agreement). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Credit Agreement the Lender has agreed to extend credit to the Company on the terms and subject to the conditions set forth therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;As
a condition precedent to the Lender's obligation to extend credit under the Credit Agreement, Guarantor is required, among other things, to execute and deliver this
Guaranty to the Lender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Guarantor hereby agrees
as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kk1531_agreement"> </A>
<A NAME="toc_kk1531_4"> </A>
<BR></FONT><FONT SIZE=2><B>AGREEMENT    <BR>  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
hereby absolutely and unconditionally guarantees the payment when due, upon maturity, acceleration or otherwise, of all Obligations of the Company to the Lender
under the Credit Agreement, including in all cases, whether heretofore, now, or hereafter made, incurred or created, whether voluntary or involuntary and however arising, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether or not such Obligations are from time to time reduced, or extinguished and thereafter increased or incurred, whether the Company may be
liable individually or jointly with others, whether or not recovery upon such Obligations may be or hereafter become barred by any statute of limitations, and whether or not such Obligations may be or
hereafter become otherwise unenforceable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
hereby absolutely and unconditionally guarantees the payment of the Obligations, whether or not due or payable by the Company, upon: (a)&nbsp;the dissolution,
insolvency or business failure of, or any assignment for benefit of creditors by, or commencement of any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceedings by or
against, either the Company or Guarantor, as applicable, or (b)&nbsp;the appointment of a receiver for, or the attachment, restraint of or making or levying of any order of court or legal process
affecting, the property of either the Company or Guarantor, and unconditionally promises to pay such Obligations to the Lender, or order, on demand, in lawful money of the United States. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;The
liability of Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Obligations, whether executed by Guarantor or by any other
party, and the liability of Guarantor hereunder is not affected or impaired by (a)&nbsp;any direction of application of payment by the Company or by any other party, or (b)&nbsp;any other
guaranty, undertaking or maximum liability of Guarantor or of any other party as to the Obligations, or (c)&nbsp;any payment on or in reduction of any such other guaranty or undertaking, or
(d)&nbsp;any revocation or release of any obligations of any other guarantor of the Obligations, or (e)&nbsp;any dissolution, termination or increase, decrease or change in personnel of Guarantor,
or (f)&nbsp;any payment made to the Lender on the Obligations which the Lender </FONT></P>

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<P><FONT SIZE=2>
repays to the Company pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Guarantor waives any right to the deferral or
modification of Guarantor's obligations hereunder by reason of any such proceeding. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of Guarantor hereunder are independent of the obligations of the Company with respect to the Obligations, and a separate action or
actions may be brought and prosecuted against Guarantor whether or not action is brought against the Company and whether or not the Company be joined in any such action or actions. Guarantor waives,
to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Company or other circumstance which
operates to toll any statute of limitations as to the Company shall operate to toll the statute of limitations as to Guarantor. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp;All
payments made by Guarantor under this Guaranty shall be made without set-off or counterclaim and free and clear of and without deductions
for any present or future taxes, fees, withholdings or conditions of any nature ("Taxes"). Guarantor shall pay any such Taxes, including Taxes on any amounts so paid, and will promptly furnish the
Lender copies of any tax receipts or such other evidence of payment as the Lender may require. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
authorizes the Lender (whether or not after termination of this Guaranty), without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder, from time to time to (a)&nbsp;renew, compromise, extend, increase, accelerate or otherwise change the time for payment
of, or otherwise change the terms of Obligations or any part thereof, including increase or decrease of the rate of interest thereon; (b)&nbsp;take and hold security for the payment of this Guaranty
or the Obligations and exchange, enforce, waive and release any such security; (c)&nbsp;apply such security and direct the order or manner of sale thereof as the Lender in its reasonable discretion
may determine (for the avoidance of doubt, it shall not be reasonable for the Lender to apply sums received by it in such way as to trigger an Event of Default under the Credit Agreement if such Event
of Default could have been avoided through a different application of such sums reasonably acceptable to the Lender); and (d)&nbsp;release or substitute any one or more endorsers, guarantors, the
Company or other obligors. The Lender may, without notice to or the further consent of the Company or Guarantor, assign this Guaranty in whole or in part to any person acquiring an interest in the
Obligations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;It
is not necessary for the Lender to inquire into the capacity or power of the Company or the officers acting or reasonably believed to be acting on their behalf, and
Obligations made or created in reasonable reliance upon the professed exercise of such powers shall be guaranteed hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
waives any right to require the Lender to (a)&nbsp;proceed against the Company or any other party; (b)&nbsp;proceed against or exhaust any security held
from the Company; or (c)&nbsp;pursue any other remedy whatsoever. Guarantor waives any personal defense based on or arising out of any personal defense of the Company other than payment in full of
the Obligations, including, without limitation, any defense based on or arising out of the disability of either the Company, or the unenforceability of the Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of the Company other than payment in full of the Obligations. The Lender may, at its election, foreclose
on any security held for the Obligations by one or more judicial or nonjudicial sales, or exercise any other right or remedy they may have against the Company, or any security, without affecting or
impairing in any way the liability of Guarantor hereunder except to the extent the Obligations have been paid. Guarantor waives all rights and defenses arising out of an election of remedies, even
though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of subrogation and reimbursement against the
principal by operation of Section&nbsp;580d of the California Code of Civil Procedure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
hereby waives any claim or other rights which Guarantor may now have or may hereafter acquire against the Company or any other guarantor of all or any of the
Obligations that </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>
arise from the existence or performance of Guarantor's obligations under this Guaranty or any other of the Loan Documents (all such claims and rights being referred to as the "Guarantor's Conditional
Rights"), including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, or indemnification, any right to participate in any claim or remedy which the Lender has
against the Company or any collateral which the Lender now has or hereafter acquires for the Obligations, whether or not such claim, remedy or right arises in equity or under contract, statute or
common law, by any payment made hereunder or otherwise, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by setoff or
in any other manner, payment or security on account of such claim or other rights. If, notwithstanding the foregoing provisions, any amount shall be paid to Guarantor on account of Guarantor's
Conditional Rights and either (a)&nbsp;such amount is paid to Guarantor at any time when the Obligations shall not have been paid or performed in full, or (b)&nbsp;regardless of when such amount
is paid to Guarantor any payment made by the Company to the Lender is at any time determined to be a preferential payment, then such amount paid to Guarantor shall be deemed to be held in trust for
the benefit of Lender and shall forthwith be paid to the Lender to be credited and applied upon the Obligations, whether matured or unmatured, in such order and manner as Lender, in its reasonable
discretion, shall determine (for the avoidance of doubt, it shall not be reasonable for the Lender to apply sums received by it in such way as to trigger an Event of Default under the Credit Agreement
if such Event of Default could have been avoided through a different application of such sums reasonably acceptable to the Lender). To the extent that any of the provisions of this Paragraph&nbsp;8
shall not be enforceable, Guarantor agrees that until such time as the Obligations have been paid and performed in full and the period of time has expired during which any payment made by the Company
or Guarantor may be determined to be a preferential payment, Guarantor's Conditional Rights to the extent not validly waived shall be subordinate to the Lender's right to full payment and performance
of the Obligations and Guarantor shall not seek to enforce Guarantor's Conditional Rights during such period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;Guarantor
waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of
dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Obligations. Guarantor assumes all responsibility for being and keeping
itself informed of either the Company's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the
risks which Guarantor assumes and incurs hereunder, and agrees that the Lender shall have no duty to advise Guarantor of information known to it regarding such circumstances or risks. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;In
addition to the Obligations, Guarantor agrees to pay reasonable attorneys' fees and all other reasonable costs and expenses incurred by the Lender in enforcing this
Guaranty in any action or proceeding arising out of or relating to this Guaranty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;Guarantor
hereby represents and warrants to the Lender that: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;Guarantor:
(1)&nbsp;has the power and authority and the legal right to own and operate Guarantor's property and to conduct business in the manner in which Guarantor
does and proposes so to do, (2)&nbsp;is in compliance with all Requirements of Law binding upon or applicable to Guarantor, and (3)&nbsp;has reviewed and approved the Credit Agreement and the
other Loan Documents; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;Guarantor
has the corporate power and authority and the legal right to execute, deliver and perform this Guaranty. This Guaranty has been duly executed and delivered by
Guarantor and constitute the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, except as such enforceability may be affected by the effect
of bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights or remedies of creditors generally; </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<A NAME="page_kk1531_1_4"> </A>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;The
execution, delivery and performance of this Guaranty by Guarantor will not violate any Requirement of Law or Contractual Obligation binding upon or applicable to
Guarantor; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;All
representations and warranties relating to Guarantor set forth in the Credit Agreement are accurate and complete in all respects. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;&nbsp;Guarantor
hereby covenants and agrees with the Lender that it will cooperate with the Company to facilitate the Company's compliance with all the covenants set forth in
the Credit Agreement. Guarantor further agrees to execute any and all further documents, instruments and agreements as the Lender from time to time reasonably requests to evidence Guarantor's
obligations hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;&nbsp;This
Guaranty shall be governed by and construed in accordance with the laws of the State of California without giving effect to its choice of law rules. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;&nbsp;ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES
FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, GUARANTOR CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF </FONT><FONT SIZE=2><I>FORUM NON
CONVENIENS</I></FONT><FONT SIZE=2>, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS GUARANTY. GUARANTOR WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;&nbsp;GUARANTOR,
AND BY ACCEPTING THIS GUARANTY THE LENDER, WAIVES ITS RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. GUARANTOR AND THE LENDER AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, GUARANTOR FURTHER
AGREES THAT ITS RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS GUARANTY OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed as of the day and year first written above. </FONT></P>

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<FONT SIZE=2><A HREF="#toc_kk1531_1">EXHIBIT 10.31</A></FONT><BR>
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<FONT SIZE=2><A HREF="#toc_kk1531_2">FORM OF GUARANTY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_kk1531_3">RECITALS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_kk1531_4">AGREEMENT</A></FONT><BR>
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