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Exhibit 10.37  

OFFICE SPACE LEASE  

 BETWEEN  

 THE IRVINE COMPANY  

 AND  

 DIEDRICH COFFEE, INC.  

  

 
 

OFFICE SPACE LEASE    
    

        THIS LEASE is made as of the 1st day of August, 2003, by and between THE IRVINE COMPANY, hereafter
called "Landlord," and DIEDRICH COFFEE, INC., a Delaware corporation, hereafter called "Tenant." 

 
 

ARTICLE I. BASIC LEASE PROVISIONS    
    

        Each reference in this Lease to the "Basic Lease Provisions" shall mean and refer to the following collective terms, the application of which shall be governed by
the provisions in the remaining Articles of this Lease. 

	1.
	Tenant's Trade Name: N/A

	2.
	Premises: Suite No, 200 (the Premises are more particularly described in Section 2.1).

Address of Building: 28 Executive Park, Irvine, CA 92614 

Project Description: Executive Park 

	3.
	Use of Premises: General office and for no other use.

	4.
	Commencement Date: See Section 3.1

	5.
	Lease Term: Eighty-four (84) months, plus such additional days as may be required to cause the Lease to terminate on
the final day of a calendar month.

	6.
	Basic Rent: Twenty-Five Thousand Nine Hundred One Dollars ($25,901.00) per month. 

Rental Adjustments:  

Commencing twelve (12) months following the Commencement Date, the Basic Rent shall be Twenty-Six Thousand Nine Hundred Fifty-Nine Dollars ($26,959.00) per month. 

Commencing
twenty-four (24) months following the Commencement Date, the Basic Rent shall be Twenty-Eight Thousand Sixteen Dollars ($28,016.00) per month. 

Commencing
thirty-six (36) months following the Commencement Date, the Basic Rent shall be Twenty-Nine Thousand Two Hundred Forty-Nine Dollars ($29,249.00)
per month. 

Commencing
forty-eight (48) months following the Commencement Date, the Basic Rent shall be Thirty Thousand Four Hundred Eighty-Three Dollars ($30,483.00) per month. 

Commencing
Sixty (60) months following the Commencement Date, the Basic Rent shall be Thirty-One Thousand Seven Hundred Sixteen Dollars ($31,716.00) per month. 

Commencing
seventy-two (72) months following the Commencement Date, the Basic Rent shall be Thirty-Two Thousand Nine Hundred Forty-Nine Dollars ($32,949.00)
per month. 

	7.
	Property Tax Base: The Property Taxes per rentable square foot incurred by Landlord and attributable to the twelve month period ending
June 30, 2004 (the "Base Year"). 

Building Cost Base: The Building Costs per rentable square foot incurred by Landlord and attributable to the Base Year. 

Expense Recovery Period: Every twelve month period during the Term (or portion thereof during the first and last Lease years) ending June 30. 

	8.
	Floor Area of Premises: approximately 17,620 rentable square feet

	9.
	Security Deposit: $36,244.00 

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	10.
	Broker(s): CB Richard Ellis, Inc.

	11.
	Plan Approval Date: N/A

	12.
	Parking: Fourteen (14) reserved and fifty (50) unreserved vehicle parking spaces.

	13.
	Address for Payments and Notices:

	LANDLORD	 	TENANT
	
The Irvine Company

20 Executive Park, Suite 140

Irvine, CA 92614

Attn: Property Manager	
 	

Diedrich Coffee, Inc.

28 Executive Park, Suite 200

Irvine, CA 92614
	

with a copy of notices to:	
 	

 
	

THE IRVINE COMPANY

P. O. Box 6370

Newport Beach, CA 92658-6370

Attn: Vice President, Operations—Office Properties	
 	

 

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ARTICLE II. PREMISES    
    

        SECTION 2.1.    LEASED PREMISES.    Landlord leases to Tenant and
Tenant rents from Landlord the premises shown in Exhibit A (the "Premises"), containing approximately the floor area set forth in Item 8 of the Basic Lease Provisions and known by the suite
number identified in Item 2 of the Basic Lease Provisions. The Premises are located in the building identified in Item 2 of the Basic Lease Provisions (the "Building"), which is a portion of the
project described in Item 2 (the "Project"). 

        SECTION 2.2.    ACCEPTANCE OF PREMISES.    Landlord represents and
warrants that it has not received any written notice of, and has no knowledge of, the violation of any laws, codes or regulations applicable to the Premises from any city, county, state or
governmental agency. Landlord further represents and warrants that all plumbing, mechanical, HVAC, electrical and fire/life safety systems serving the Premises shall be in good working order as of the
Commencement Date of the Lease. Tenant acknowledges that neither Landlord nor any representative of Landlord has made any representation or warranty with respect to the Premises or the Building or the
suitability or fitness of either for any purpose, except as set forth in this Lease. The taking of possession or use of the Premises by Tenant for any purpose other than construction shall
conclusively establish that the Premises and the Building were in satisfactory condition and in conformity with the provisions of this Lease in all respects, except for those matters which Tenant
shall have brought to Landlord's attention on a written punch list. The list shall be limited to any items required to be accomplished by Landlord under the Work Letter (if any) attached as
Exhibit X, and shall be delivered to Landlord within thirty (30) days after the term ("Term") of this Lease commences as provided in Article III below. If there is no Work Letter,
or if no items are required of Landlord under the Work Letter, by taking possession of the Premises Tenant accepts the improvements in their existing condition, and waives any right or claim against
Landlord arising out of the condition of the Premises. Nothing contained in this Section shall affect the commencement of the Term or the obligation of Tenant to pay rent unless the Premises are not
substantially complete. Landlord shall diligently complete all punch list items of which it is notified as provided above. 

        SECTION 2.3.    BUILDING NAME, ADDRESS AND DEPICTION.    Tenant shall
not utilize any name selected by Landlord from time to time for the Building and/or the Project as any part of Tenant's corporate or trade name. Landlord shall have the right to change the name,
number or designation of the Building or Project without liability to Tenant. Tenant shall not use any picture of the Building in its advertising, stationery or in any other manner. 

 
 

ARTICLE III. TERM    
    

        SECTION 3.1.    GENERAL.    The Term shall be for the period shown in
Item 5 of the Basic Lease Provisions. The Term shall commence ("Commencement Date") sixty (60) days following the Delivery Date (as defined in Section 3.2) and shall end upon the
expiration of the period set forth in Item 5 of the Basic Lease Provisions ("Expiration Date"). 

        SECTION 3.2.    EARLY OCCUPANCY.    Following the full execution of
this Lease, payment of all deposits due hereunder and delivery of proper evidence of insurance pursuant to Exhibit D hereof, Tenant shall be permitted to enter the Premises at any time on or
after the date (the "Delivery Date") that the tenant improvements described in the Work Letter attached as Exhibit X have been substantially completed and a Certificate of Occupancy issued, if
applicable, in order that it may install its furniture, telephone systems and data cabling equipment and commence its normal business operations therein. Tenant's access to the Premises prior to the
Commencement Date shall be subject to all of the terms and obligations of this Lease, including the indemnity provisions herein, except that Tenant shall not be required to pay Basic Rent during that
period. 

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        SECTION 3.3.    RIGHT TO EXTEND THIS LEASE.    Provided that Tenant is
not in default under any provision of this Lease at the time of exercise of the extension right granted herein, and provided further that Tenant is occupying the entire Premises and has not assigned
or sublet any of its interest in this Lease, Tenant may extend the Term of this Lease for one (1) period of sixty (60) months. Tenant shall exercise its right to extend the Term by and
only by delivering to Landlord, not less than nine (9) months or more than twelve (12) months prior to the expiration date of the Term, Tenant's written notice of its commitment to
extend (the "Exercise Notice"). Should Tenant fall timely to deliver the Exercise Notice, then this extension right shall thereupon lapse and be of no further force or effect. The Basic Rent payable
under the Lease during the extension of the Term shall be at the prevailing market rental rate (including periodic adjustments) for comparable and similarly improved space within the Project as of the
commencement of the extension period, as determined by Landlord based on a reasonable extrapolation of its then-current leasing rates. Promptly following receipt of the Exercise Notice,
Landlord shall notify Tenant in writing of the rental rate for the extension period. Within ten (10) days following delivery of Landlord's notice, Tenant may, by written notice to Landlord,
elect to rescind the Exercise Notice, in which event this Section 3.3 shall be null and void. Should Tenant fail timely to rescind the Exercise Notice, the Exercise Notice shall be irrevocable
and binding; in such event, Landlord shall prepare an appropriate amendment to the Lease memorializing the extension of the Term in accordance with the foregoing, and Tenant shall duly execute and
return same to Landlord within fifteen (15) business days. Should Tenant fail timely to execute and deliver the amendment, then Landlord may, at its sole written election, either specifically
enforce the Exercise Notice or extinguish Tenant's right to extend the Term. Should Landlord elect the latter, then this Lease shall terminate upon the scheduled date of expiration and Tenant's rights
under this paragraph shall be of no further force or effect. Any attempt to assign or transfer any right or interest created by this paragraph shall be void from its inception. Tenant shall have no
other right to extend the Term beyond the single sixty (60) month extension created by this paragraph. Unless agreed to in a writing signed by Landlord and Tenant, any extension of the Term,
whether created by an amendment to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be deemed a part of, and not in addition to, any duly exercised extension period permitted
by this paragraph. Time is specifically made of the essence of this paragraph. 

 
 

ARTICLE IV. RENT AND OPERATING EXPENSES    
    

        SECTION 4.1.    BASIC RENT.    From and after the Commencement Date,
Tenant shall pay to Landlord without deduction or offset a Basic Rent for the Premises in the total amount shown in Item 6 of the Basic Lease Provisions. Any rental adjustment shown in Item 6 shall be
deemed to occur on the specified monthly anniversary of the Commencement Date, whether or not that date occurs at the end of a calendar month. The rent shall be due and payable in advance commencing
on the Commencement Date and continuing thereafter on the first day of each successive calendar month of the Term, as prorated for any partial month. No demand, notice or invoice shall be required. An
installment of rent, in the amount of one (1) full month's Basic Rent at the initial rate specified in Item 6 of the Basic Lease Provisions shall be delivered to Landlord concurrently with
Tenant's execution of this Lease and shall be applied against the Basic Rent first due hereunder; the next installment of Basic Rent shall be due on the first day of the second calendar month of the
Term, which installment shall, if applicable, be appropriately prorated to reflect the amount prepaid for that calendar month. 

        SECTION 4.2.    OPERATING EXPENSE INCREASE.    

        (a)   Commencing
twelve (12) months following the Commencement Date, Tenant shall compensate Landlord, as additional rent, for Tenant's proportionate shares of
increases in "Building Costs" and "Property Taxes," as those terms are defined below, incurred by Landlord in the operation of the Building and Project. Property Taxes and Building Costs are mutually
exclusive and may be billed 

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separately
or in combination as determined by Landlord. Tenant's proportionate share of Property Taxes shall equal the product of the rentable floor area of the Premises multiplied by the difference
of (i) Property Taxes per rentable square foot less (ii) the Property Tax Base set forth in Item 7 of the Basic Lease Provisions. Tenant's proportionate share of Building Costs shall
equal the product of the rentable floor area of the Premises multiplied by the difference of (i) Building Costs per rentable square foot less (ii) the Building Cost Base set forth in
Item 7 of the Basic Lease Provisions. Tenant acknowledges Landlord's rights to make changes or additions to the Building and/or Project from time to time pursuant to Section 6.5 below, in which
event the total rentable square footage within the Building and/or Project may be adjusted. For convenience of reference, Property Taxes and Building Costs may sometimes be collectively referred to as
"Operating Expenses." 

        (b)   Commencing
prior to the start of the first full "Expense Recovery Period" of the Lease (as defined in Item 7 of the Basic Lease Provisions), and prior to the start of
each full or partial Expense Recovery Period thereafter, Landlord shall give Tenant a written estimate of the amount of Tenant's proportionate shares of Building Costs and Property Taxes for the
Expense Recovery Period or portion thereof. Commencing twelve (12) months following the Commencement Date, Tenant shall pay the estimated amounts to Landlord in equal monthly installments, in
advance, with Basic Rent. If Landlord has not furnished its written estimate for any Expense Recovery Period by the time set forth above, Tenant shall continue to pay cost reimbursements at the rates
established for the prior Expense Recovery Period, if any; provided that when the new estimate is delivered to Tenant, Tenant shall, at the next monthly payment date, pay any accrued cost
reimbursements based upon the new estimate. Landlord may from time to time change the Expense Recovery Period to reflect a calendar year or a new fiscal year of Landlord, as applicable, in which event
Tenant's share of Operating Expenses shall be equitably prorated for any partial year. 

        (c)   Within
one hundred twenty (120) days after the end of each Expense Recovery Period, Landlord shall furnish to Tenant a statement setting forth the actual or
prorated Property Taxes and Building Costs attributable to that period, and the parties shall within thirty (30) days thereafter make any payment or allowance necessary to adjust Tenant's
estimated payments, if any, to Tenant's actual proportionate shares as shown by the annual statement. If Tenant has not made estimated payments during the Expense Recovery Period, any amount owing by
Tenant pursuant to subsection (a) above shall be paid to Landlord in accordance with Article XVI. If actual Property Taxes or Building Costs allocable to Tenant during any Expense
Recovery Period are less than the Property Tax Base or the Building Cost Base, respectively, Landlord shall not be required to pay that differential to Tenant, although Landlord shall refund any
applicable estimated payments collected from Tenant. Should Tenant fail to object in writing to Landlord's determination of actual Operating Expenses within one hundred twenty (120) days
following delivery of Landlord's expense statement, Landlord's determination of actual Operating Expenses for the applicable Expense Recovery Period shall be conclusive and binding on Tenant, subject
to Tenant's audit rights as set forth below. 

        (d)   Even
though the Lease has terminated and the Tenant has vacated the Premises, when the final determination is made of Tenant's share of Property Taxes and Building Costs
for the Expense Recovery Period in which the Lease terminates. Tenant shall upon notice pay the entire increase due over the estimated expenses paid; conversely, any overpayment made in the event
expenses decrease shall be rebated by Landlord to Tenant. However, in lieu thereof, Landlord may deliver a reasonable estimate of the anticipated reconciliation amount to Tenant prior to the
expiration of the Term, in which event the appropriate party shall fund that amount by the termination date. 

        (e)   If,
at any time during any Expense Recovery Period, any one or more of the Operating Expenses are increased to a rate(s) or amount(s) in excess of the rate(s) or
amount(s) used in calculating the estimated expenses for the year, then Tenant's estimated share of Property Taxes or Building Costs, as applicable, shall be increased for the month in which the
increase becomes effective and for all succeeding months by an amount equal to Tenant's proportionate share of the increase. 

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Landlord
shall give Tenant written notice of the amount or estimated amount of the increase, the month in which the increase will become effective, Tenant's monthly share thereof and the months for
which the payments are due. Tenant shall pay the increase to Landlord as a part of Tenant's monthly payments of estimated expenses as provided in paragraph (b) above, commencing with the month
in which effective. 

        (f)    The
term "Building Costs" shall include all expenses of operation and maintenance of the Building and the Project, together with all appurtenant Common Areas (as defined
in Section 6.2), and shall include the following charges by way of illustration but not limitation: water and sewer charges; insurance premiums or reasonable premium equivalents should Landlord
elect to self- insure any risk or deductible that Landlord is authorized to insure hereunder; license, permit, and inspection fees; heat; light; power; janitorial services; access
control/security costs, inclusive of the reasonable cost of improvements made to enhance access control systems and procedures; repairs; air conditioning; supplies; materials; equipment; tools; tenant
services; programs instituted to comply with transportation management requirements; amortization of capital investments reasonably intended to produce a reduction in operating charges or energy
conservation; amortization of capital investments necessary to bring the Building into compliance with applicable laws and building codes; labor; reasonably allocated wages and salaries, fringe
benefits, and payroll taxes for administrative and other personnel directly applicable to the Building and/or Project, including both Landlord's personnel and outside personnel; any expense incurred
pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2 and Exhibits B and C below; and a reasonable overhead/management fee consistent with that charged by landlords of comparable office projects in the
area. It is understood that Building Costs shall include competitive charges for direct services provided by any subsidiary or division of Landlord. In no event shall access control/security cost,
insurance costs, or utility charges allocable to Tenant on a per square foot basis during any Expense Recovery Period be less than the corresponding amount for such component in the Building Cost
Base. The term "Property Taxes" as used herein shall include the following: (i) all real estate taxes or personal property taxes, as such property taxes may be reassessed from time to time; and
(ii) other taxes, charges and assessments which are levied with respect to this Lease or to the Building and/or the Project, and any improvements, fixtures and equipment and other property of
Landlord located in the Building and/or the Project, except that general net income and franchise taxes imposed against Landlord shall be excluded; and (iii) any tax, surcharge or assessment
which shall be levied in addition to or in lieu of real estate or personal property taxes, other than taxes covered by Article VIII; and (iv) costs and expenses incurred in contesting
the amount or validity of any Property Tax by appropriate proceedings. A copy of Landlord's unaudited statement of expenses shall be made available to Tenant upon request. The Building Costs,
inclusive of those for the Base Year, shall be extrapolated by Landlord to reflect at least ninety-five percent (95%) occupancy of the rentable area of the Building. 

        (g)   Notwithstanding
the foregoing, Operating Expenses shall exclude the following: 

          (i)  Any
ground lease rental; 

         (ii)  Costs
incurred by Landlord with respect to goods and services other than parking (including utilities sold and supplied to tenants and occupants of the Building) to the
extent that Landlord is entitled to reimbursement for such costs other than through the Operating Expense pass-through provisions of such tenants' lease; 

        (iii)  Costs
incurred by Landlord for repairs, replacements and/or restoration to or of the Building to the extent that Landlord is reimbursed by insurance or condemnation
proceeds or by tenants (other than through Operating Expense pass-throughs), warrantors or other third persons; 

        (iv)  Costs,
including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for other tenants in the Building or
incurred in 

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renovating
or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building; 

         (v)  Costs
arising from Landlord's charitable or political contributions; 

        (vi)  Attorneys'
fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the
Building, except those attorneys' fees and other costs and expenses incurred in connection with negotiations, disputes or claims relating to items of Operating Expenses, enforcement of rules and
regulations of the Building and such other matters relating to the maintenance of standards required of Landlord under this Lease; 

       (vii)  Capital
expenditures as determined in accordance with generally accepted accounting principles, consistently applied; provided, however, that the following costs
(amortized with interest at a reasonable rate on the unamortized balance) of the following capital improvements shall be included in the definition of Operating Expenses: (i) capital
improvements made to comply with any law or governmental regulation enacted after the date of this Lease; and (ii) any other capital improvements which reduce Operating Expenses, but limited to
the amount of Operating Expenses reasonably anticipated to be reduced thereby; 

      (viii)  Brokers
commissions, finders' fees, attorneys' fees, entertainment and travel expenses and other costs incurred by Landlord in leasing or attempting to lease space in
the Building; 

        (ix)  Expenses
in connection with services or other benefits which are not offered to Tenant or for which Tenant is charged for directly but which are provided to another
tenant or occupant of the Building; 

         (x)  Costs,
fines or penalties incurred by Landlord due to the violation by Landlord of (i) any governmental rule or regulation (provided that costs of complying with
such governmental requirements may be included unless otherwise provided herein) or (ii) the terms and conditions of any lease of space in the Building; 

        (xi)  Overhead
and profit increments paid to subsidiaries or affiliates of Landlord for services provided to the Building to the extent the same exceeds the costs that would
generally be charged for such services if rendered on a competitive basis (based upon a standard of similar office buildings in the general market area of the Premises) by unaffiliated third parties
capable of providing such service; 

       (xii)  Interest
on debt or amortization on any mortgage or mortgages encumbering the Building; 

      (xiii)  Landlord's
general corporate overhead, except as it relates to the specific management of the Building; 

      (xiv)  Costs
of installing the initial landscaping and the initial sculpture, paintings and objects of art for the Building and Project; and 

       (xv)  Advertising
and promotional expenditures. 

        (h)   Provided
Tenant is not then in default hereunder, Tenant shall have the right to cause a certified public accountant, engaged on a non-contingency fee basis,
to audit Operating Expenses by inspecting Landlord's general ledger of expenses not more than once during any Expense Recovery Period. However, to the extent that insurance premiums or any other
component of Operating Expenses is determined by Landlord on the basis of an internal allocation of costs utilizing information Landlord in good faith deems proprietary, such expense component shall
not be subject to audit so long as it does not exceed the amount per square foot typically imposed by landlords of other first class office projects in Orange County, California. Tenant shall give
notice to Landlord of Tenant's intent to 

7

 

audit
within one hundred twenty (120) days after Tenant's receipt of Landlord's expense statement which sets forth Landlord's actual Operating Expenses. Such audit shall be conducted at a
mutually agreeable time during normal business hours at the office of Landlord or its management agent where such accounts are maintained. If Tenant's audit determines that actual Operating Expenses
have been overstated by more than five percent (5%), then subject to Landlord's right to review and/or contest the audit results, Landlord shall reimburse Tenant for the reasonable
out-of-pocket costs of such audit. Tenant's rent shall be appropriately adjusted to reflect any overstatement in Operating Expenses. In addition, if any component of Operating
Expenses is determined to be either inappropriate or excessive during an Expense Recovery Period, and if the Building Cost Base or Property Tax Base also included such component, then the appropriate
Base shall concurrently be adjusted if and to the extent appropriate. In the event of a dispute between Landlord and Tenant regarding such audit, either party may elect to submit the matter for
binding arbitration pursuant to Section 14.7(b) below. All of the information obtained by Tenant and/or its auditor in connection with such audit, as well as any compromise, settlement, or
adjustment reached between Landlord and Tenant as a result thereof, shall be held in strict confidence and, except as may be required pursuant to litigation, shall not be disclosed to any third party,
directly or indirectly, by Tenant or its auditor or any of their officers, agents or employees. Landlord may require Tenant's auditor to execute a separate confidentiality agreement affirming the
foregoing as a condition precedent to any audit. In the event of a violation of this confidentiality covenant in connection with any audit, then in addition to any other legal or equitable remedy
available to Landlord, Tenant shall forfeit its right to any reconciliation or cost reimbursement payment from Landlord due to said audit (and any such payment theretofore made by Landlord shall be
promptly returned by Tenant), and Tenant shall have no further audit rights under this Lease. Notwithstanding the foregoing, Tenant shall have no right of audit with respect to any Expense Recovery
Period unless the total Operating Expenses per square foot for such Expense Recovery Period, as set forth in Landlord's annual expense reconciliation, exceed the total Operating Expenses per square
foot during the Base Year, as increased by the percentage change in the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for all Urban Consumers, Los
Angeles—Riverside—Orange County Area Average, all items (1982-84 = 100) (the "Index"), which change in the index shall be measured by comparing the index
published for January of the Base Year with the index published for January of the applicable Expense Recovery Period. 

        SECTION 4.3.    SECURITY DEPOSIT.    Concurrently with Tenant's
delivery of this Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of the Basic Lease Provisions (the "Security Deposit"), to be held by Landlord as security for the full and
faithful performance of Tenant's obligations under this Lease to pay any rent as and when due, including without limitation such additional rent as may be owing under any provision hereof, and to
maintain the Premises as required
by Sections 7.1 and 15.3 or any other provision of this Lease. Upon any breach of those obligations by Tenant, Landlord may apply all or part of the Security Deposit as full or partial compensation.
If any portion of the Security Deposit is so applied, Tenant shall within five (5) days after written demand by Landlord deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on the Security
Deposit. In no event may Tenant utilize all or any portion of the Security Deposit as a payment toward any rental sum due under this Lease. If Tenant fully performs its obligations under this Lease,
the Security Deposit or any balance thereof shall be returned to Tenant or, at Landlord's option, to the last assignee of Tenant's interest in this Lease within thirty (30) days following the
termination of the Lease and Tenant's vacation of the Premises. 

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ARTICLE V. USES    
    

        SECTION 5.1.    USE.    Tenant shall use the Premises only for the
purposes stated in Item 3 of the Basic Lease Provisions. The parties agree that any contrary use shall be deemed to cause material and irreparable harm to Landlord and shall entitle Landlord to
injunctive relief in addition to any other available remedy. The uses prohibited under this Lease shall include, without limitation, use of the Premises or a portion thereof for (i) offices of
any agency or bureau of the United States or any state or political subdivision thereof; (ii) offices or agencies of any foreign governmental or political subdivision thereof;
(iii) offices of any health care professionals or service organization; (iv) schools, temporary employment agencies or other training facilities which are not ancillary to corporate,
executive or professional office use; (v) retail or restaurant uses; or (vi) communications firms such as radio and/or television stations. Tenant shall not do or permit anything to be
done in or about the Premises which will in any way interfere with the rights or quiet enjoyment of other occupants of the Building or the Project, or use or allow the Premises to be used for any
unlawful purpose, nor shall Tenant permit any nuisance or commit any waste in the Premises or the Project. Tenant shall not do or permit to be done anything which will invalidate or increase the cost
of any insurance policy(ies) covering the Building, the Project and/or their contents, and shall comply with all applicable insurance underwriters rules. Tenant shall comply at its expense with all
present and future laws, ordinances and requirements of all governmental authorities that pertain to Tenant or its use of the Premises, including without limitation all federal and state occupational
health and safety and handicap access requirements, whether or not Tenant's compliance will necessitate expenditures or interfere with its use and enjoyment of the Premises. Tenant shall not generate,
handle, store or dispose of hazardous or toxic materials (as such materials may be identified in any federal, state or local law or regulation) in the Premises or Project without the prior written
consent of Landlord; provided that the foregoing shall not be deemed to proscribe the use by Tenant of customary office supplies in normal quantities so long as such use comports with all applicable
laws. Tenant agrees that it shall promptly complete and deliver to Landlord any disclosure form regarding hazardous or toxic materials that may be required by any governmental agency. Tenant shall
also, from time to time upon request by Landlord, execute such affidavits concerning Tenant's best knowledge and belief regarding the presence of hazardous or toxic materials in the Premises. Landlord
shall have the right at any time to perform an assessment of the environmental condition of the Premises and of Tenant's compliance with this Section. As part of any such assessment, Landlord shall
have the right, upon reasonable prior notice to Tenant, to enter and inspect the Premises and to perform tests, provided those tests are performed in a manner that minimizes disruption to Tenant.
Tenant will cooperate with Landlord in connection with any assessment by, among other things, promptly responding to inquiries and providing relevant documentation and records. The reasonable cost of
the assessment/testing shall be reimbursed by Tenant to Landlord if such assessment/testing determines that Tenant failed to comply with the requirements of this Section. In all events Tenant shall
indemnify Landlord in the manner elsewhere provided in this Lease from any
release of hazardous or toxic materials caused by Tenant, its agents, employees, contractors, subtenants or licensees. The foregoing covenants shall survive the expiration or earlier termination of
this Lease. 

        SECTION 5.2.    SIGNS.    Landlord shall affix and maintain a sign
(restricted solely to Tenant's name as set forth herein or such other name as Landlord may consent to in writing) adjacent to the entry door of the Premises, together with a directory strip listing
Tenant's name as set forth herein in the lobby directory of the Building. Any subsequent changes to that initial signage shall be at Tenant's sole expense. All signage shall conform to the criteria
for signs established by Landlord and shall be ordered through Landlord. Except as provided in Section 5.3, Tenant shall not place or allow to be placed any other sign, decoration or
advertising matter of any kind that is visible from the exterior of the Premises. Any violating sign or decoration may be immediately removed by Landlord at Tenant's expense without notice and without
the removal constituting a breach of this Lease or entitling Tenant to claim damages. 

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        SECTION 5.3.    EXTERIOR SIGNAGE.    Tenant shall have the right to
install an exterior sign at the top of the Building and facing Main Street, which signage shall consist only of the name "Diedrich Coffee" or "Gloria Jean's Coffee". The type and design of such
signage shall be subject to the prior written approval of Landlord and the City of Irvine, and shall be consistent with Landlord's signage criteria for the Project. Fabrication, Installation,
insurance, and maintenance of such signage shall be at Tenant's sole cost and expense. Tenant understands and agrees that it shall use Landlord's designated contractor for installing the exterior
signage. Should Tenant fail to have the exterior signage installed within six (6) months of the Commencement Date, then Tenant's right to install same thereafter shall be deemed null and void.
Except for the foregoing, no sign, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by Tenant on any part of the Premises without the prior
consent of Landlord. Tenant's signage right shall belong solely to the initial Tenant named herein, and may not be transferred or assigned (except in connection with an assignment of this Lease to a
Tenant Affiliate as defined below) without Landlord's prior written consent which may be withheld by Landlord in Landlord's sole discretion. In the event Tenant, exclusive of any subtenant(s), fails
to occupy the entire Premises, then Tenant shall, within thirty (30) days following notice from Landlord, remove the exterior signage at Tenant's expense. Tenant shall also remove such signage
promptly following the expiration or earlier termination of the Lease. Any such removal shall be at Tenant's sole expense, and Tenant shall bear the cost of any resulting repairs to the Building that
are reasonably necessary due to the removal. 

 
 

ARTICLE VI. LANDLORD SERVICES    
    

        SECTION 6.1.    UTILITIES AND SERVICES.    Landlord shall furnish to
the Premises the utilities and services described in Exhibit B, subject to the conditions and payment obligations and standards set forth in this Lease. Landlord shall not be liable for any
failure to furnish any services or utilities when the failure is the result of any accident or other cause beyond Landlord's reasonable control, nor shall Landlord be liable for damages resulting from
power surges or any breakdown in telecommunications facilities or services. Landlord's temporary inability to furnish any services or utilities shall not entitle Tenant to any damages, relieve Tenant
of the obligation to pay rent or constitute a constructive or other eviction of Tenant, except that Landlord shall diligently attempt to restore the service or utility promptly. Notwithstanding the
foregoing, in the event Tenant is unable to use the Premises for more than five (5) consecutive business days due to any interruption to Landlord's services or any repair or construction work
performed by Landlord, then all of Tenant's rental obligations shall abate from and after the sixth (6th) business day for so long as Tenant is unable to use the Premises. Tenant shall
comply with all rules and regulations which Landlord may reasonably establish for the provision of services and utilities, and shall cooperate with all reasonable conservation practices established by
Landlord. Landlord shall at all reasonable times have free access to all electrical and mechanical installations of Landlord. 

        SECTION 6.2.    OPERATION AND MAINTENANCE OF COMMON AREAS.    During
the Term, Landlord shall operate all Common Areas within the Building and the Project. The term "Common Areas" shall mean all areas within the Building and other buildings in the Project which are not
held for exclusive use by persons entitled to occupy space, and all other appurtenant areas and improvements provided by Landlord for the common use of Landlord and tenants and their respective
employees and invitees, including without limitation parking areas and structures, driveways, sidewalks, landscaped and planted areas, hallways and interior stairwells not located within the premises
of any tenant, common entrances and lobbies, elevators, and restrooms not located within the premises of any tenant. 

        SECTION 6.3.    USE OF COMMON AREAS.    The occupancy by Tenant of the
Premises shall include the use of the Common Areas in common with Landlord and with all others for whose convenience and use the Common Areas may be provided by Landlord, subject, however, to 

10

 

compliance
with all rules and regulations as are prescribed from time to time by Landlord. Landlord shall at all times during the Term have exclusive control of the Common Areas, and may restrain or
permit any use or occupancy, except as otherwise provided in this Lease or in Landlord's rules and regulations. Tenant shall keep the Common Areas clear of any obstruction or unauthorized use related
to Tenant's operations. Landlord may temporarily close any portion of the Common Areas for repairs, remodeling and/or alterations, to prevent a public dedication or the accrual of prescriptive rights,
or for any other reasonable purpose. 

        SECTION 6.4.    PARKING.    Parking shall be provided in accordance
with the provisions set forth in Exhibit C to this Lease. 

        SECTION 6.5.    CHANGES AND ADDITIONS BY LANDLORD.    Landlord
reserves the right to make alterations or additions to the Building or the Project, or to the attendant fixtures, equipment and Common Areas. No change shall entitle Tenant to any abatement of rent or
other claim against Landlord, provided that the change does not deprive Tenant of reasonable access to or use of the Premises. 

 
 

ARTICLE VII. MAINTAINING THE PREMISES    
    

        SECTION 7.1.    TENANT'S MAINTENANCE AND REPAIR.    Subject to
Article XI, Tenant at its sole expense shall make all repairs necessary to keep the Premises and all improvements and fixtures therein in the condition as existed on the Commencement Date (or
on any later date that the applicable improvements may have been installed), excepting ordinary wear and tear. Notwithstanding Section 7.2 below, Tenant's maintenance obligation shall include
without limitation all appliances, non-building standard lighting/electrical systems, and plumbing fixtures and installations located within or servicing only the Premises. All repairs
shall be at least equal in quality to the original work, shall be made only by a licensed, bonded contractor approved in writing in advance by Landlord and shall be made only at the time or times
approved by Landlord. Any contractor utilized by Tenant shall be subject to Landlord's standard requirements for contractors, as modified from time to time. Landlord may impose reasonable restrictions
and requirements with respect to repairs, as provided in Section 7.3, and the provisions of Section 7.4 shall apply to all repairs. Alternatively, should Landlord or its management agent
agree to make a repair on behalf of Tenant and at Tenant's request, Tenant shall promptly reimburse Landlord as additional rent for all costs incurred (including the standard coordination fee of
Landlord's management agent) upon submission of an invoice. 

        SECTION 7.2.    LANDLORD'S MAINTENANCE AND REPAIR.    Subject to
Article XI, Landlord shall provide service, maintenance and repair with respect to the heating, ventilating and air conditioning ("HVAC") equipment of the Building (exclusive of any
supplemental HVAC equipment servicing only the Premises) and shall maintain in good repair the Common Areas, roof, foundations, footings, the exterior surfaces of the exterior walls of the Building,
and the structural, electrical, mechanical and plumbing systems of the Building except as provided in Section 7.1 above. Landlord shall have the right to employ or designate any reputable
person or firm, including any employee or agent of Landlord or any of Landlord's affiliates or divisions, to perform any service, repair or maintenance function. Landlord need not make any other
improvements or repairs except as specifically required under this Lease, and nothing contained in this Section shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs
and replacement costs as provided elsewhere in this Lease. Tenant understands that it shall not make repairs at Landlord's expense or by rental offset. Except as provided in Sections 11.1 and 12.1
below, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or
improvements to any portion of the Building, including repairs to the Premises, nor shall any related activity by Landlord constitute an actual or constructive eviction; provided, however, that in
making repairs, alterations or improvements, Landlord shall interfere as little as reasonably practicable with the conduct of Tenant's business in the Premises. 

11

 

        SECTION 7.3.    ALTERATIONS.    Except for projects costing less than
Twenty-Five Thousand Dollars ($25,000.00) and satisfying the criteria in the next following sentence, Tenant shall make no alterations, additions or improvements to the Premises without
the prior written consent of Landlord. Landlord's consent shall not be unreasonably withheld as long as the proposed changes do not affect the structural, electrical or mechanical components or
systems of the Building, are not visible from the exterior of the Premises, and utilize only building standard materials. Landlord may impose, as a condition to its consent, any requirements that
Landlord in its discretion may deem reasonable or desirable, including but not limited to a requirement that all work be covered by a lien and completion bond satisfactory to Landlord and requirements
as to the manner, time, and contractor for performance of the work. Without limiting the generality of the foregoing, Tenant shall use Landlord's designated mechanical and electrical contractors for
all work affecting the mechanical or electrical systems of the Building. Should Tenant perform any work that would necessitate any ancillary Building modification or other expenditure by Landlord,
then Tenant shall promptly fund the cost thereof to Landlord. Tenant shall obtain all required permits for the work and shall perform the work in compliance with all applicable laws, regulations and
ordinances. Except for cosmetic work that does not require a permit, Landlord shall be entitled to a supervision fee in the amount of five percent (5%) of the cost of the work. Under no circumstances
shall Tenant make any improvement which incorporates asbestos-containing construction materials into the Premises. Any request for Landlord's consent shall be made in writing and shall contain
architectural plans describing the work in detail reasonably satisfactory to Landlord. Landlord may elect to cause its architect to review Tenant's architectural plans, and the reasonable cost of that
review shall be reimbursed by Tenant. Should the work proposed by Tenant modify the internal configuration of the Premises, then Tenant shall, at its expense, furnish Landlord with
as-built drawings and CAD disks compatible with Landlord's systems. Unless Landlord otherwise agrees in writing, all alterations, additions or improvements affixed to the Premises
(excluding moveable trade fixtures and furniture) shall become the property of Landlord and shall be surrendered with the Premises at the end of the Term, except that Landlord may, by notice to Tenant
given at the time of Landlord's consent to the alteration or improvement, require Tenant to remove by the Expiration Date, or sooner termination date of this Lease, all or any alterations,
decorations,
fixtures, additions, improvements and the like installed either by Tenant or by Landlord at Tenant's request. Tenant shall repair any damage to the Premises arising from that removal and restore the
affected area to its pre-existing condition, reasonable wear and tear excepted. Landlord may require Tenant to remove an improvement provided as part of the initial build-out
pursuant to Exhibit X, if any, if and only if the improvement is a non-building standard item and Tenant is notified of the requirement prior to the build-out. Except as
otherwise provided in this Lease or in any Exhibit to this Lease, should Landlord make any alteration or improvement to the Premises at the request of Tenant, Landlord shall be entitled to prompt
payment from Tenant of the cost thereof, inclusive of the standard coordination fee of Landlord's management agent. 

        SECTION 7.4.    MECHANIC'S LIENS.    Tenant shall keep the Premises
free from any liens arising out of any work performed, materials furnished, or obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall promptly cause any such lien to be released
by posting a bond in accordance with California Civil Code Section 3143 or any successor statute. In the event that Tenant shall not, within thirty (30) days following the imposition of
any lien, cause the lien to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other available remedies, the right to cause the lien to be released
by any means it deems proper, including payment of or defense against the claim giving rise to the lien. All expenses so incurred by Landlord, including Landlord's attorneys' fees, shall be reimbursed
by Tenant promptly following Landlord's demand, together with interest from the date of payment by Landlord at the maximum rate permitted by law until paid. Tenant shall give Landlord no less than
twenty (20) days' prior notice in writing before commencing construction of any kind on the Premises so that Landlord may post and maintain notices of nonresponsibility on the Premises. 

12

 

        SECTION 7.5.    ENTRY AND INSPECTION.    Landlord shall, upon
24 hours prior written or oral notice (except in emergencies), have the right to enter the Premises to inspect them, to supply services in accordance with this Lease, to protect the interests
of Landlord in the Premises, to make repairs and renovations as reasonably deemed necessary by Landlord, and to submit the Premises to prospective or actual purchasers or encumbrance holders (or,
during the final twelve months of the Term or when an uncured Tenant default exists, to prospective tenants), all without being deemed to have caused an eviction of Tenant and without abatement of
rent except as provided elsewhere in this Lease. Landlord shall at all times have and retain a key which unlocks all of the doors in the Premises, excluding Tenant's vaults and safes, and Landlord
shall have the right to use any and all means which Landlord may deem proper to open the doors in an emergency in order to obtain entry to the Premises, and any entry to the Premises obtained by
Landlord shall not under any circumstances be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or any eviction of Tenant from the Premises. 

 
 

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY    
    

        Tenant shall be liable for and shall pay before delinquency, all taxes and assessments levied against all personal property of Tenant located in the Premises.
When possible Tenant shall cause its personal property to be assessed and billed separately from the real property of which the Premises form a part. If any taxes on Tenant's personal property
are levied against Landlord or Landlord's property and if Landlord pays the same, or if the assessed value of Landlord's property is increased by the inclusion of a value placed upon the personal
property of Tenant and if Landlord pays the taxes based upon the increased assessment, Tenant shall pay to Landlord the taxes so levied against Landlord or the proportion of the taxes resulting from
the increase in the assessment. 

 
 

ARTICLE IX. ASSIGNMENT AND SUBLETTING    
    

        SECTION 9.1.    RIGHTS OF PARTIES.    

        (a)   Tenant
may not, either voluntarily or by operation of law, assign, sublet, encumber, or otherwise transfer all or any part of Tenant's interest in this Lease, or permit
the Premises to be occupied by anyone other than Tenant, without Landlord's prior written consent, which consent shall not unreasonably be withheld in accordance with the provisions of
Section 9.1.(c). For purposes of this Lease, references to any subletting, sublease or variation thereof shall be deemed to apply not only to a sublease effected directly by Tenant, but also to
a sub-subletting or an assignment of subtenancy by a subtenant at any level. No assignment (whether voluntary, involuntary or by operation of law) and no subletting shall be valid or
effective without Landlord's prior written consent and, at Landlord's election, shall constitute a material default of this Lease. Landlord shall not be deemed to have given its consent to any
assignment or subletting by any other course of action, including its acceptance of any name for listing in the Building directory. To the extent not prohibited by provisions of the Bankruptcy Code,
11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), including Section 365(f)(1), Tenant on behalf of itself and its creditors, administrators and assigns waives the applicability of
Section 365(e) of the Bankruptcy Code unless the proposed assignee of the Trustee for the estate of the bankrupt meets Landlord's standard for consent as set forth in Section 9.1(c) of
this Lease. If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations to be delivered in connection with the
assignment shall be delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the estate of Tenant within the meaning of the
Bankruptcy Code. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to have assumed all of the obligations arising under this Lease
on and after the date of the assignment, and shall upon demand execute and deliver to Landlord an instrument confirming that assumption. 

        (b)   [Intentionally
omitted] 

13

 

        (c)   If
Tenant or any subtenant hereunder desires to transfer an interest in this Lease, Tenant shall first notify Landlord and request in writing Landlord's consent to the
transfer. Tenant shall also submit in writing to Landlord: (i) the name and address of the proposed transferee; (ii) the nature of any proposed subtenant's or assignee's business to be
carried on in the Premises; (iii) the terms and provisions of any proposed sublease or assignment (including without limitation the rent and other economic provisions, term, improvement
obligations and commencement date); (iv) evidence that the proposed assignee or subtenant will comply with the requirements of Exhibit D to this Lease; and (v) any other
information requested by Landlord and reasonably related to the transfer. Except as provided in Subsection (d) of this Section, Landlord shall not unreasonably withhold its consent, provided:
(1) the use of the Premises will be consistent with the provisions of this Lease and with Landlord's commitment to other tenants of the Building and Project; (2) any proposed subtenant
or assignee demonstrates that it is financially responsible by submission to Landlord of all reasonable information as Landlord may request concerning the proposed subtenant or assignee, including,
but not limited to, a balance sheet of the proposed subtenant or assignee as of a date within ninety (90) days of the request for Landlord's consent and statements of income or profit and loss
of the proposed subtenant or assignee for the two-year period preceding the request for Landlord's consent; (3) the proposed subtenant or assignee is, in Landlord's good faith
determination, appropriate for tenancy in the Project; (4) the proposed assignee or subtenant is neither an existing tenant or occupant of the Building or Project nor a prospective tenant with
whom Landlord is then actively negotiating (except that Landlord shall not enforce this restriction if it does not have sufficient available space to accommodate the proposed transferee); and
(5) the proposed transfer will not impose additional burdens or security risks on Landlord. If Landlord consents to the proposed transfer, then the transfer may be effected within thirty
(30) days after the date of the consent upon the terms described in the information furnished to Landlord; provided that any material change in the terms shall be subject to Landlord's consent
as set forth in this Section. Landlord shall approve or disapprove any requested transfer within thirty (30) days following receipt of Tenant's written notice and the information set forth
above. Tenant shall pay to Landlord a transfer fee of Five Hundred Dollars ($500.00) if and when any transfer request submitted by Tenant is approved. 

        (d)   Notwithstanding
the provisions of Subsection (c) above, but subject to Subsection (f) below, in lieu of consenting to a proposed assignment of the Lease or
a subletting of the entire Premises for substantially all of the remaining Lease Term, Landlord may elect to (i) sublease the Premises or take an assignment of Tenant's interest in this Lease,
upon the same terms as offered to the proposed subtenant or assignee (excluding terms relating to the purchase of personal property, the use of Tenant's name or the continuation of Tenant's business),
or (ii) terminate this Lease as to the portion of the Premises proposed to be subleased or assigned with a proportionate abatement in the rent payable under this Lease, effective on the date
that the proposed sublease or assignment would have commenced. Landlord may thereafter, at its option, assign or re-let any space so recaptured to any third party, including without
limitation the proposed transferee identified by Tenant. 

        (e)   Should
any assignment or subletting occur except pursuant to Subsection (f) below, Tenant shall promptly pay or cause to be paid to Landlord, as additional rent,
fifty percent (50%) of any amounts paid by the assignee or subtenant, however described and whether funded during or after the Lease Term, to the extent such amounts are in excess of the sum of
(i) the scheduled rental sums payable by Tenant hereunder (or, in the event of a subletting of only a portion of the Premises, the rent allocable to such portion as reasonably determined by
Landlord) and (ii) the direct out-of-pocket costs (including without limitation brokerage commissions, marketing costs and tenant improvement costs incurred in
connection with the transfer), as evidenced by third party invoices provided to Landlord, incurred by Tenant to effect the transfer, which costs shall be amortized over the remaining Term of this
Lease or, if shorter, over the term of the sublease. Upon request by Landlord, Tenant and all other parties to the transfer shall memorialize in writing the amounts to be paid pursuant to this
paragraph. 

14

 

        (f)    Notwithstanding
the foregoing, provided Tenant is not then in default hereunder, Tenant may, without Landlord's prior consent but with prior written notice to Landlord
and subject to the provisions of Section 9.2, assign or transfer its right, title and interest in this Lease or sublease the Premises to any of the following: (i) any entity resulting
from a merger or consolidation with Tenant; (ii) any entity succeeding to the business and assets of Tenant; or (iii) any entity controlling, controlled by, or under common control with,
Tenant (collectively, "Tenant Affiliate"). 

        SECTION 9.2.    EFFECT OF TRANSFER.    No subletting or assignment,
even with the consent of Landlord, shall relieve Tenant, or any successor-in-interest to Tenant hereunder, of its obligation to pay rent and to perform all its other
obligations under this Lease. Moreover, Tenant shall indemnify and hold Landlord harmless, as provided in Section 10.3, for any act or omission by an assignee or subtenant. Each assignee, other
than Landlord, shall be deemed to assume all obligations of Tenant under this Lease and shall be liable jointly and severally with Tenant for the payment of all rent, and for the due performance of
all of Tenant's obligations, under this Lease. Such joint and several liability shall not be discharged or impaired by any subsequent modification or extension of this Lease. No transfer shall be
binding on Landlord unless any document memorializing the transfer is delivered to Landlord, both the assignee/subtenant and Tenant deliver to Landlord an executed consent to transfer instrument
prepared by Landlord and consistent with the requirements of this Article, and the assignee/subtenant Independently complies with all of the Insurance requirements of Tenant as set forth in
Exhibit D and evidence thereof is delivered to Landlord. The acceptance by Landlord of any payment due under this Lease from any other person shall not be deemed to be a waiver by Landlord of
any provision of this Lease or to be a consent to any transfer. Consent by Landlord to one or more transfers shall not operate as a waiver or estoppel to the future enforcement by Landlord of its
rights under this Lease. In addition to the foregoing, no change in the status of Tenant or any party jointly and severally liable with Tenant as aforesaid (e.g., by conversion to a limited liability
company or partnership) shall serve to abrogate the liability of any person or entity for the obligations of Tenant, including any obligations that may be incurred by Tenant after the status change by
exercise of a pre-existing right in this Lease. 

        SECTION 9.3.    SUBLEASE REQUIREMENTS.    The following terms and
conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be included in each sublease: 

        (a)   Tenant
hereby irrevocably assigns to Landlord all of Tenant's interest in all rentals and income arising from any sublease of the Premises, and Landlord may collect such
rent and income and apply same toward Tenant's obligations under this Lease; provided, however, that until a default occurs in the performance of Tenant's obligations under this Lease, Tenant shall
have the right to receive and collect the sublease rentals. Landlord shall not, by reason of this assignment or the collection of sublease rentals, be deemed liable to the subtenant for the
performance of any of Tenant's obligations under the sublease. Tenant hereby irrevocably authorizes and directs any subtenant, upon receipt of a written notice from Landlord stating that an uncured
default exists in the performance of Tenant's obligations under this Lease, to pay to Landlord all sums then and thereafter due under the sublease. Tenant agrees that the subtenant may rely on that
notice without any duty of further inquiry and notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have no right or claim against the subtenant or Landlord for any rentals so
paid to Landlord. In the event Landlord collects amounts from subtenants that exceed the total amount then due from Tenant hereunder, Landlord shall promptly remit the excess to Tenant. 

        (b)   In
the event of the termination of this Lease, Landlord may, at its sole option, take over Tenant's entire interest in any sublease and, upon notice from Landlord, the
subtenant shall attorn to Landlord. In no event, however, shall Landlord be liable for any previous act or omission by Tenant under the sublease or for the return of any advance rental payments or
deposits under the sublease that have not been actually delivered to Landlord, nor shall Landlord be bound by any sublease modification executed without Landlord's consent or for any advance rental
payment by 

15

 

the
subtenant in excess of one month's rent. The general provisions of this Lease, including without limitation those pertaining to Insurance and indemnification, shall be deemed incorporated by
reference into the sublease despite the termination of this Lease. 

        (c)   Tenant
agrees that Landlord may, at its sole option, authorize a subtenant of the Premises to cure a default by Tenant under this Lease. Should Landlord accept such
cure, the subtenant shall have a right of reimbursement and offset from and against Tenant under the applicable sublease. 

 
 

ARTICLE X. INSURANCE AND INDEMNITY    
    

        SECTION 10.1.    TENANT'S INSURANCE.    Tenant, at its sole cost and
expense, shall provide and maintain in effect the Insurance described in Exhibit D. Evidence of that Insurance must be delivered to Landlord prior to the Commencement Date. 

        SECTION 10.2.    LANDLORD'S INSURANCE.    Landlord shall maintain
property insurance, subject to standard exclusions, covering the Building or Project, and such other risks as Landlord or its mortgagees may from time to time deem appropriate, and commercial general
liability coverage. Landlord shall not be required to carry insurance of any kind on any tenant improvements or alterations in the Premises Installed by Tenant or its contractors or otherwise
removable by Tenant (collectively, "Tenant Installations"), as well as any trade fixtures, furnishings, equipment, interior plate glass, signs and all items of personal property in the Premises, and
Landlord shall not be obligated to repair or replace any of the foregoing items should damage occur. All proceeds of insurance maintained by Landlord upon the Building and Project shall be the
property of Landlord, whether or not Landlord is obligated to or elects to make any repairs. 

        SECTION 10.3.    INDEMNITY.    To the fullest extent permitted by law,
but subject to Section 10.5 below, Tenant shall defend, indemnify and hold harmless Landlord, its agents, lenders, and any and all affiliates of Landlord, from and against any and all claims,
liabilities, costs or expenses arising either before or after the Commencement Date from Tenant's use or occupancy of the Premises, the Building or the Common Areas, or from the conduct of its
business, or from any activity, work, or thing done, permitted or suffered by Tenant or its agents, employees, subtenants, vendors, contractors, invitees or licensees in or about the Premises, the
Building or the Common Areas, or from any default in the performance of any obligation on Tenant's part to be performed under this Lease, or from any act or negligence of Tenant or its agents,
employees, subtenants, vendors, contractors, invitees or licensees. Landlord may, at its option, require Tenant to assume Landlord's defense in any action covered by this Section through counsel
reasonably satisfactory to Landlord. Conversely, to the fullest extent permitted by law, but subject to Section 10.5 below, Landlord shall indemnify and hold harmless Tenant from and against
any liability, cost or expense in connection with this Lease to the extent the same is ultimately determined to have resulted from the negligence or willful misconduct of Landlord, its employees,
agents or contractors. 

        SECTION 10.4.    LANDLORD'S NONLIABILITY.    Landlord shall not be
liable to Tenant, its employees, agents and invitees, and Tenant hereby waives all claims against Landlord, its employees and agents for loss of or damage to any property, or any injury to any person,
or loss or interruption of business or income, resulting from any condition including, but not limited to, fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak or
flow from or into any part of the Premises or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, electrical works or
other fixtures in the Building, whether the damage or injury results from conditions arising in the Premises or in other portions of the Building, unless due to the negligence or willful misconduct of
Landlord and not covered by Tenant's insurance. It is understood that any such condition may require the temporary evacuation or closure of all or a portion of the Building. Should Tenant elect to
receive any service from a concessionaire, licensee or 

16

 

third
party tenant of Landlord, Tenant shall not seek recourse against Landlord for any breach or liability of that service provider. Neither Landlord nor its agents shall be liable for interference
with light or other similar intangible interests. Tenant shall immediately notify Landlord in case of fire or accident in the Premises, the Building or the Project and of defects in any improvements
or equipment. 

        SECTION 10.5.    WAIVER OF SUBROGATION.    Landlord and Tenant each
hereby waives all rights of recovery against the other on account of loss and damage occasioned to the property of such waiving party to the extent that the waiving party is entitled to proceeds for
such loss and damage under any property insurance policies carried or otherwise required to be carried by this Lease. By this waiver it is the intent of the parties that neither Landlord nor Tenant
shall be liable to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage insured against under any property insurance policies, even though such
loss or damage might be occasioned by the negligence of such party, its agents, employees, contractors or invitees. The foregoing waiver by Tenant shall also inure to the benefit of Landlord's
management agent for the Building. 

 
 

ARTICLE XI. DAMAGE OR DESTRUCTION    
    

        SECTION 11.1.    RESTORATION.    

        (a)   If
the Building of which the Premises are a part is damaged as the result of an event of casualty, then subject to the provisions below, Landlord shall repair that
damage as soon as reasonably possible unless: (i) Landlord reasonably determines that the cost of repair would exceed ten percent (10%) of the full replacement cost of the Building
("Replacement Cost") and the damage is not covered by Landlord's fire and extended coverage insurance (or by a normal extended coverage policy should Landlord fail to carry that insurance); or
(ii) Landlord reasonably determines that the cost of repair would exceed twenty-five percent (25%) of the Replacement Cost; or (iii) Landlord reasonably determines that the
cost of repair would exceed ten percent (10%) of the Replacement Cost and the damage occurs during the final twelve (12) months of the Term. Should Landlord elect not to repair the damage for
one of the preceding reasons, Landlord shall so notify Tenant in the "Casualty Notice" (as defined below), and this Lease shall terminate as of the date of delivery of that notice. 

        (b)   As
soon as reasonably practicable following the casualty event but not later than sixty (60) days thereafter, Landlord shall notify Tenant in writing ("Casualty
Notice") of Landlord's election, if applicable, to terminate this Lease. If this Lease is not so terminated, the Casualty Notice shall set forth the anticipated period for repairing the casualty
damage. If the anticipated repair period exceeds two hundred seventy (270) days and if the damage is so extensive as to reasonably prevent Tenant's substantial use and enjoyment of the
Premises, then Tenant may elect to terminate this Lease by written notice to Landlord within ten (10) days following delivery of the Casualty Notice. 

        (c)   From
and after the sixth (6th) business day following the casualty event, the rental to be paid under this Lease shall be abated in the same proportion
that the floor area of the Premises that is rendered unusable by the damage from time to time bears to the total floor area of the Premises. 

        (d)   Notwithstanding
the provisions of subsections (a), (b) and (c) of this Section, but subject to Section 10.5, the cost of any repairs shall be borne
by Tenant, and Tenant shall not be entitled to rental abatement or termination rights, if the damage is due to the fault or neglect of Tenant or its employees, subtenants, contractors, invitees or
representatives. In addition, the provisions of this Section shall not be deemed to require Landlord to repair any Tenant Installations, fixtures and other items that Tenant is obligated to insure
pursuant to Exhibit D or any other provision of this Lease. 

        SECTION 11.2.    LEASE GOVERNS.    Tenant agrees that the provisions
of this Lease, including without limitation Section 11.1, shall govern any damage or destruction and shall accordingly supersede any contrary statute or rule of law. 

17

  

 
 

ARTICLE XII. EMINENT DOMAIN    
    

        SECTION 12.1.    TOTAL OR PARTIAL TAKING.    If all or a material
portion of the Premises is taken by any lawful authority by exercise of the right of eminent domain, or sold to prevent a taking, either Tenant or Landlord may terminate this Lease effective as of the
date possession is required to be surrendered to the authority. In the event title to a portion of the Building or Project, other than the Premises, is taken or sold in lieu of taking, and if Landlord
elects to restore the Building in such a way as to alter the Premises materially, either party may terminate this Lease, by written notice to the other party, effective on the date of vesting of
title. In the event neither party has elected to terminate this Lease as provided above, then Landlord shall promptly, after receipt of a sufficient condemnation award, proceed to restore the Premises
to substantially their condition prior to the taking, and a proportionate allowance shall be made to Tenant for the rent corresponding to the time during which, and to the part of the Premises of
which, Tenant is deprived on account of the taking and restoration. In the event of a taking, Landlord shall be entitled to the entire amount of the condemnation award without deduction for any estate
or interest of Tenant; provided that nothing in this Section shall be deemed to give Landlord any interest in, or prevent Tenant from seeking any award against the taking authority for, the taking of
personal property and fixtures belonging to Tenant or for relocation or business interruption expenses recoverable from the taking authority. 

        SECTION 12.2.    TEMPORARY TAKING.    No temporary taking of the
Premises shall terminate this Lease or give Tenant any right to abatement of rent, and any award specifically attributable to a temporary taking of the Premises shall belong entirely to Tenant. A
temporary taking shall be deemed to be a taking of the use or occupancy of the Premises for a period of not to exceed ninety (90) days. 

        SECTION 12.3.    TAKING OF PARKING AREA.    In the event there shall
be a taking of the parking area such that Landlord can no longer provide sufficient parking to comply with this Lease, Landlord may substitute reasonably equivalent parking in a location reasonably
close to the Building; provided that if Landlord fails to make that substitution within ninety (90) days following the taking and if the taking materially impairs Tenant's use and enjoyment of
the Premises, Tenant may, at its option, terminate this Lease by written notice to Landlord. If this Lease is not so terminated by Tenant, there shall be no abatement of rent and this Lease shall
continue in effect. 

 
 

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE    
    

        SECTION 13.1.    SUBORDINATION.    At the option of Landlord or any of
its mortgagees/deed of trust beneficiaries, this Lease shall be either superior or subordinate to all ground or underlying leases, mortgages and deeds of trust, if any, which may hereafter affect the
Building, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, that so long as Tenant is not in default under this Lease, this Lease shall not be
terminated or Tenant's quiet enjoyment of the Premises disturbed in the event of termination of any such ground or underlying lease, or the foreclosure of any such mortgage or deed of trust, to which
this Lease has been subordinated pursuant to this Section. In the event of a termination or foreclosure, Tenant shall become a tenant of and attorn to the successor-in-interest
to Landlord upon the same terms and conditions as are contained in this Lease, and shall promptly execute any instrument reasonably required by Landlord's successor for that purpose. Tenant shall
also, within ten (10) days following written request of Landlord (or the beneficiary under any deed of trust encumbering the Building), execute and deliver all instruments as may be required
from time to time by Landlord or such beneficiary (including without limitation any subordination, nondisturbance and attornment agreement in the form customarily required by such beneficiary) to
subordinate this Lease and the rights of Tenant under this Lease to any ground or underlying lease or to the lien of any mortgage or deed of trust; provided, however, that any such beneficiary may, by
written notice to Tenant given at any time, subordinate the lien of its deed of trust to this Lease. Tenant shall agree that any purchaser at a foreclosure sale or lender taking title under a deed in
lieu of foreclosure shall not be responsible for any act or omission of a prior landlord, shall not 

18

 

be
subject to any offsets or defenses Tenant may have against a prior landlord, and shall not be liable for the return of any security deposit not actually recovered by such purchaser or bound by any
rent paid in advance of the calendar month in which the transfer of title occurred; provided that the foregoing shall not release the applicable prior landlord from any liability for those
obligations. Tenant acknowledges that Landlord's mortgagees and successors-in-interest and all beneficiaries under deeds of trust encumbering the Building are intended third
party beneficiaries of this Section. 

        SECTION 13.2.    ESTOPPEL CERTIFICATE.    Tenant shall, within fifteen
(15) days following written notice from Landlord, execute, acknowledge and deliver to Landlord, in any form that Landlord may reasonably require, a statement in writing in favor of Landlord
and/or any prospective purchaser or encumbrancer of the Building (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of the
modification and certifying that this Lease, as modified, is in full force and effect) and the dates to which the rental, additional rent and other charges have been paid in advance, if any, and
(ii) acknowledging that, to Tenant's knowledge, there are no uncured defaults on the part of Landlord, or specifying each default if any are claimed, and (iii) setting forth all further
information that Landlord may reasonably require. Tenant's statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Building or Project. In addition to
Landlord's other rights and remedies, Tenant's failure to deliver any estoppel statement within the provided time shall be conclusive upon Tenant that (i) this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii) there are no uncured defaults in Landlord's performance, and (iii) not more than one month's rental has been
paid in advance. Such estoppel shall not increase any of Tenant's obligations or decrease any of Tenant's rights under the Lease. 

 
 

ARTICLE XIV. DEFAULTS AND REMEDIES    
    

        SECTION
14.1.    TENANT'S DEFAULTS.    In addition to any other event of default set forth in
this Lease, the occurrence of any one or more of the following events shall constitute a default by Tenant: 

        (a)   The
failure by Tenant to make any payment of rent required to be made by Tenant, as and when due, where the failure continues for a period of three (3) days after
written notice from Landlord to Tenant; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended. For purposes of these default and remedies provisions, the term "additional rent" shall be deemed to include all amounts of any type whatsoever other than
Basic Rent to be paid by Tenant pursuant to the terms of this Lease. 

        (b)   The
assignment, sublease, encumbrance or other transfer of the Lease by Tenant, either voluntarily or by operation of law, whether by judgment, execution, transfer by
intestacy or testacy, or other means, without the prior written consent of Landlord unless otherwise authorized herein. 

        (c)   The
discovery by Landlord that any financial statement provided by Tenant, or by any affiliate, successor or guarantor of Tenant, was materially false. 

        (d)   The
failure or inability by Tenant to observe or perform any of the covenants or provisions of this Lease to be observed or performed by Tenant, other than as specified
in any other subsection of this Section, where the failure continues for a period of thirty (30) days after written notice from Landlord to Tenant; provided, however, that any such notice shall
be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 and 1161(a) as amended. However, if the nature of the failure is such that more
than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences the cure within thirty (30) days, and thereafter
diligently pursues the cure to completion. 

19

 

        (e)   (i) The
making by Tenant of any general assignment for the benefit of creditors; (ii) the filing by or against Tenant of a petition to have Tenant
adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts discharged or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, if possession is not restored to Tenant within thirty (30) days; (iv) the attachment, execution or other judicial seizure
of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where the seizure is not discharged within thirty (30) days; or (v) Tenant's
convening of a meeting of its creditors for the purpose of effecting a moratorium upon or composition of its debts. Landlord shall not be deemed to have knowledge of any event described in this
subsection unless notification in writing is received by Landlord, nor shall there be any presumption attributable to Landlord of Tenant's insolvency. In the event that any provision of this
subsection is contrary to applicable law, the provision shall be of no force or effect. 

        SECTION 14.2.    LANDLORD'S REMEDIES.    

        (a)   In
the event of any default by Tenant, then in addition to any other remedies available to Landlord, Landlord may exercise the following remedies: 

	(i)
	Landlord
may terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Premises to Landlord. Such termination shall not affect any accrued obligations of Tenant under this Lease. Upon termination, Landlord shall have the right to reenter the Premises
and remove all persons and property. Landlord shall also be entitled to recover from Tenant: 

        (1)   The
worth at the time of award of the unpaid rent and additional rent which had been earned at the time of termination; 

        (2)   The
worth at the time of award of the amount by which the unpaid rent and additional rent which would have been earned after termination until the time of award exceeds
the amount of such loss that Tenant proves could have been reasonably avoided; 

        (3)   The
worth at the time of award of the amount by which the unpaid rent and additional rent for the balance of the Term after the time of award exceeds the amount of such
loss that Tenant proves could be reasonably avoided; 

        (4)   Any
other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result from Tenant's default, including, but not limited to, the cost of recovering possession of the Premises, commissions and other expenses of
reletting, including necessary repair, renovation, improvement and alteration of the Premises for a new tenant, reasonable attorneys' fees, and any other reasonable costs; and 

        (5)   At
Landlord's election, all other amounts in addition to or in lieu of the foregoing as may be permitted by law. The term "rent" as used in this Lease shall be deemed to
mean the Basic Rent and all other sums required to be paid by Tenant to Landlord pursuant to the terms of this Lease, including without limitation any sums that may be owing from Tenant pursuant to
Section 4.3 of this Lease. Any sum, other than Basic Rent, shall be computed on the basis of the average monthly amount accruing during the twenty-four (24) month period
immediately prior to default, except that if it becomes necessary to compute such rental before the twenty-four (24) month period has occurred, then the computation shall be on the
basis of the average monthly amount during the shorter period. As used in subparagraphs (1) and (2) above, the "worth at the time of award" shall be computed by allowing interest at the
rate of ten percent (10%) per annum. As used in subparagraph (3) above, the "worth at 

20

 

the
time of award" shall be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 

         (ii)  Landlord
may elect not to terminate Tenant's right to possession of the Premises, in which event Landlord may continue to enforce all of its rights and remedies under
this Lease, including the right to collect all rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet the Premises, or the appointment of a receiver to protect the Landlord's
interests under this Lease, shall not constitute a termination of the Tenant's right to possession of the Premises. In the event that Landlord elects to avail itself of the remedy provided by this
subsection (ii), Landlord shall not unreasonably withhold its consent to an assignment or subletting of the Premises subject to the reasonable standards for Landlord's consent as are contained in this
Lease. 

        (b)   The
various rights and remedies reserved to Landlord in this Lease or otherwise shall be cumulative and, except as otherwise provided by California law, Landlord may
pursue any or all of its rights and remedies at the same time. No delay or omission of Landlord to exercise any right or remedy shall be construed as a waiver of the right or remedy or of any breach
or default by Tenant. The acceptance by Landlord of rent shall not be a (i) waiver of any preceding breach or default by Tenant of any provision of this Lease, other than the failure of Tenant
to pay the particular rent accepted, regardless of Landlord's knowledge of the preceding breach or default at the time of acceptance of rent, or (ii) a waiver of Landlord's right to exercise
any remedy available to Landlord by virtue of the breach or default. The acceptance of any payment from a debtor in possession, a trustee, a receiver or any other person acting on behalf of Tenant or
Tenant's estate shall not waive or cure a default under Section 14.1. No payment by Tenant or receipt by Landlord of a lesser amount than the rent required by this Lease shall be deemed to be
other than a partial payment on account of the earliest due stipulated rent, nor shall any endorsement or statement on any check or letter be deemed an accord and satisfaction and Landlord shall
accept the check or payment without prejudice to Landlord's right to recover the balance of the rent or pursue any other remedy available to it. Tenant hereby waives any right of redemption or relief
from forfeiture under California Code of Civil Procedure Section 1174 or 1179, or under any other present or future law, in the event this Lease is terminated by reason of any default by
Tenant. No act or thing done by Landlord or Landlord's agents during the Term shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a surrender shall be valid unless
in writing and signed by Landlord. No employee of Landlord or of Landlord's agents shall have any power to accept the keys to the Premises prior to the termination of this Lease, and the delivery of
the keys to any employee shall not operate as a termination of the Lease or a surrender of the Premises. 

        SECTION 14.3.    LATE PAYMENTS.    Any rent due under this Lease that
is not paid to Landlord within five (5) business days of the date when due shall bear interest at the maximum rate permitted by law from the date due until fully paid. The payment of interest
shall not cure any default by Tenant under this Lease. In addition, Tenant acknowledges that the late payment by Tenant to Landlord of rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Those costs may include, but are not limited to, administrative, processing and accounting charges, and
late charges which may be imposed on Landlord by the terms of any ground lease, mortgage or trust deed covering the Premises. Accordingly, if any rent due from Tenant shall not be received by Landlord
or Landlord's designee within five (5) business days after the date due, then Tenant shall pay to Landlord, in addition to the interest provided above, a late charge for each delinquent payment
equal to the greater of (i) four percent (4%) of that delinquent payment or (ii) two hundred and fifty dollars ($250.00). Acceptance of a late charge by Landlord shall not constitute a
waiver of Tenant's default with respect to the overdue amount, nor shall it prevent Landlord from exercising any of its other rights and remedies. 

        SECTION 14.4.    RIGHT OF LANDLORD TO PERFORM.    All covenants and
agreements to be performed by Tenant under this Lease shall be performed at Tenant's sole cost and expense and 

21

 

without
any abatement of rent or right of set-off. If Tenant fails to pay any sum of money, or fails to perform any other act on its part to be performed under this Lease, and the failure
continues beyond any applicable grace period set forth in Section 14.1, then in addition to any other available remedies, Landlord may, at its election, make the payment or perform the other
act on Tenant's part. Landlord's election to make the payment or perform the act on Tenant's part shall not give rise to any responsibility of Landlord to continue making the same or similar payments
or performing the same or similar acts. Tenant shall, promptly upon demand by Landlord, reimburse Landlord for all sums paid by Landlord and all necessary incidental costs, together with interest at
the maximum rate permitted by law from the date of the payment by Landlord. 

        SECTION 14.5.    DEFAULT BY LANDLORD.    Landlord shall not be deemed
to be in default in the performance of any obligation under this Lease unless and until it has failed to perform the obligation within thirty (30) days after written notice by Tenant to
Landlord specifying in reasonable detail the nature and extent of the failure; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be deemed to be in default if it commences performance within the thirty (30) day period and thereafter diligently pursues the cure to
completion. 

        SECTION 14.6.    EXPENSES AND LEGAL FEES.    Should either Landlord or
Tenant bring any action in connection with this Lease, the prevailing party shall be entitled to recover as a part of the action its reasonable attorneys' fees, and all other costs. The prevailing
party for the purpose of this paragraph shall be determined by the trier of the facts. 

        SECTION 14.7.    WAIVER OF JURY TRIAL/RIGHT TO ARBITRATE.    

        (a)   LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHT TO TRIAL BY
JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER
(AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT'S USE OR
OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.  

         (b)   SHOULD A DISPUTE ARISE BETWEEN THE PARTIES REGARDING ANY MATTER DESCRIBED ABOVE, THEN EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER EITHER
PARTY MAY
CAUSE THE DISPUTE TO BE SUBMITTED TO EITHER JAMS/ENDISPUTE ("JAMS") OR THE AMERICAN ARBITRATION ASSOCIATION ("AAA"), OR THEIR SUCCESSORS, IN THE COUNTY IN WHICH THE BUILDING IS SITUATED FOR BINDING
ARBITRATION BEFORE A SINGLE ARBITRATOR. HOWEVER, EACH PARTY RESERVES THE RIGHT TO SEEK A PROVISIONAL REMEDY BY JUDICIAL ACTION. NO ARBITRATION ELECTION BY EITHER PARTY PURSUANT TO THIS SUBSECTION
SHALL BE EFFECTIVE IF MADE LATER THAN THIRTY (30) DAYS FOLLOWING SERVICE OF A JUDICIAL SUMMONS AND COMPLAINT BY OR UPON SUCH PARTY CONCERNING THE DISPUTE. THE ARBITRATION ELECTION SHALL
DESIGNATE WHETHER THE ARBITRATION WILL BE CONDUCTED WITH JAMS OR AAA. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE RULES OF PRACTICE AND PROCEDURE OF JAMS OR THE COMMERCIAL ARBITRATION
RULES OF THE AAA, AS APPLICABLE, AND OTHERWISE PURSUANT TO THE CALIFORNIA ARBITRATION ACT (CODE OF CIVIL PROCEDURE SECTIONS 1280 ET SEQ.). NOTWITHSTANDING THE FOREGOING, THE ARBITRATOR IS SPECIFICALLY
DIRECTED TO LIMIT DISCOVERY TO THAT WHICH IS ESSENTIAL TO THE EFFECTIVE PROSECUTION OR DEFENSE OF THE ACTION, AND IN NO EVENT SHALL SUCH  

22

 

 DISCOVERY BY EITHER PARTY INCLUDE MORE THAN ONE NON-EXPERT WITNESS DEPOSITION UNLESS BOTH PARTIES OTHERWISE AGREE. THE ARBITRATOR SHALL, TO THE EXTENT APPLICABLE, FOLLOW THE SUBSTANTIVE
LAW OF CALIFORNIA AND SHALL RENDER A REASONED WRITTEN DECISION WITHIN TWENTY DAYS FOLLOWING THE HEARING. THE ARBITRATOR SHALL, APPORTION THE COSTS OF THE ARBITRATION, TOGETHER WITH THE ATTORNEYS' FEES
OF THE PARTIES, IN THE MANNER DEEMED EQUITABLE BY THE ARBITRATOR, IT BEING THE INTENTION OF THE PARTIES THAT THE PREVAILING PARTY ORDINARILY BE ENTITLED TO RECOVER ITS REASONABLE COSTS AND FEES.
JUDGMENT UPON ANY AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED BY ANY COURT HAVING JURISDICTION.

 
 

ARTICLE XV. END OF TERM    
    

        SECTION 15.1.    HOLDING OVER.    This Lease shall terminate without
further notice upon the expiration of the Term, and any holding over by Tenant after the expiration shall not constitute a renewal or extension of this Lease, or give Tenant any rights under this
Lease, except when in writing signed by both parties. If Tenant holds over for any period after the expiration (or earlier termination) of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, commencing on the first (1st) day following the termination of this Lease. However, should Landlord accept the payment of monthly hold-over rent by
Tenant, then a month-to-month tenancy shall be deemed effected and neither party shall terminate this Lease without thirty (30) days prior written notice to the other
party. Any hold-over by Tenant shall be subject to all of
the terms of this Lease, except that the monthly rental shall be one hundred fifty percent (150%) of the total monthly rental for the month immediately preceding the date of termination, subject to
Landlord's right to modify same upon thirty (30) days notice to Tenant. The acceptance by Landlord of monthly hold-over rental in a lesser amount shall not constitute a waiver of
Landlord's right to recover the full amount due unless otherwise agreed in writing by Landlord. If Tenant fails to surrender the Premises upon the expiration of this Lease despite demand to do so by
Landlord, Tenant shall indemnify and hold Landlord harmless from all loss or liability, including without limitation, any claims made by any succeeding tenant relating to such failure to surrender.
The foregoing provisions of this Section are in addition to and do not affect Landlord's right of re-entry or any other rights of Landlord under this Lease or at law. 

        SECTION 15.2.    MERGER ON TERMINATION.    The voluntary or other
surrender of this Lease by Tenant, or a mutual termination of this Lease, shall terminate any or all existing subleases unless Landlord, at its option, elects in writing to treat the surrender or
termination as an assignment to it of any or all subleases affecting the Premises. 

        SECTION 15.3.    SURRENDER OF PREMISES; REMOVAL OF PROPERTY.    Upon
the Expiration Date or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order, condition and repair as when received or as
hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord's obligation excepted, and shall remove or fund to Landlord the cost of removing all
wallpapering installed by or for Tenant, together with all personal property and debris, except for any items that Landlord may by written authorization allow to remain. Tenant shall repair all damage
to the Premises resulting from the removal and restore the affected area to its pre-existing condition, reasonable wear and tear excepted, provided that Landlord may instead elect to
repair any structural damage at Tenant's expense. If Tenant shall fail to comply with the provisions of this Section, Landlord may effect the removal and/or make any repairs, and the cost to Landlord
shall be additional rent payable by Tenant upon demand. If requested by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and quitclaiming to
Landlord all right, title and interest of Tenant in the Premises. 

23

 

 
 

ARTICLE XVI. PAYMENTS AND NOTICES    
    

        All sums payable by Tenant to Landlord shall be paid, without deduction or offset, in lawful money of the United States to Landlord at its address set forth in
Item 13 of the Basic Lease Provisions, or at any other place as Landlord may designate in writing. Unless this Lease expressly provides otherwise, as for example in the payment of rent pursuant to
Section 4.1, all payments shall be due and payable within five (5) days after demand. All payments requiring proration shall be prorated on the basis of the number of days in the
pertinent calendar month or year, as applicable. Any notice, election, demand, consent, approval or other communication to be given or other document to be delivered by either
party to the other may be delivered to the other party, at the address set forth in Item 13 of the Basic Lease Provisions, by personal service or electronic facsimile transmission, or by any courier
or "overnight" express mailing service, or may be deposited in the United States mail, postage prepaid. Either party may, by written notice to the other, served in the manner provided in this Article,
designate a different address. If any notice or other document is sent by mail, it shall be deemed served or delivered three (3) business days after mailing or, if sooner, upon actual receipt.
The refusal to accept delivery of a notice, or the inability to deliver the notice (whether due to a change of address for which notice was not duly given or other good reason), shall be deemed
delivery and receipt of the notice as of the date of attempted delivery. If more than one person or entity is named as Tenant under this Lease, service of any notice upon any one of them shall be
deemed as service upon all of them. 

 
 

ARTICLE XVII. RULES AND REGULATIONS    
    

        Tenant agrees to comply with the Rules and Regulations attached as Exhibit E, and any reasonable and nondiscriminatory amendments, modifications and/or
additions as may be adopted and published by written notice to tenants by Landlord for the safety, care, security, good order, or cleanliness of the Premises, Building, Project and/or Common Areas.
Landlord shall not be liable to Tenant for any violation of the Rules and Regulations or the breach of any covenant or condition in any lease or any other act or conduct by any other tenant, and the
same shall not constitute a constructive eviction hereunder. One or more waivers by Landlord of any breach of the Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of any
subsequent breach of that rule or any other. Tenant's failure to keep and observe the Rules and Regulations shall constitute a default under this Lease. In the case of any conflict between the Rules
and Regulations and this Lease, this Lease shall be controlling. 

 
 

ARTICLE XVIII. BROKER'S COMMISSION    
    

        The parties recognize as the broker(s) who negotiated this Lease the firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease Provisions, and
agree that Landlord shall be responsible for the payment of brokerage commissions to those broker(s) unless otherwise provided in this Lease. Each party warrants that it has had no dealings with any
other real estate broker or agent in connection with the negotiation of this Lease, and agrees to indemnify and hold the other party harmless from any cost, expense or liability (including reasonable
attorneys' fees) for any compensation, commissions or charges claimed by any other real estate broker or agent employed or claiming to represent or to have been employed by the indemnifying party in
connection with the negotiation of this Lease. The foregoing agreement shall survive the termination of this Lease. 

 
 

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST    
    

        In the event of any transfer of Landlord's interest in the Premises, the transferor shall be automatically relieved of all obligations on the part of Landlord
accruing under this Lease from and after the date of the transfer, provided that Tenant is duly notified of the transfer. Any funds held by the transferor in which Tenant has an interest shall be
turned over, subject to that interest, to the 

24

 

transferee.
No holder of a mortgage and/or deed of trust to which this Lease is or may be subordinate shall be responsible in connection with the Security Deposit unless the mortgagee or holder of the
deed of trust actually receives the Security Deposit. It is intended that the covenants and obligations contained in this Lease on the part of Landlord shall, subject to the foregoing, be binding on
Landlord, its successors and assigns, only during and in respect to their respective successive periods of ownership. 

 
 

ARTICLE XX. INTERPRETATION    
    

        SECTION 20.1.    GENDER AND NUMBER.    Whenever the context of this
Lease requires, the words "Landlord" and "Tenant" shall include the plural as well as the singular, and words used in neuter, masculine or feminine genders shall include the others. 

        SECTION 20.2.    HEADINGS.    The captions and headings of the
articles and sections of this Lease are for convenience only, are not a part of this Lease and shall have no effect upon its construction or interpretation. 

        SECTION 20.3.    JOINT AND SEVERAL LIABILITY.    If more than one
person or entity is named as Tenant, the obligations imposed upon each shall be joint and several and the act of or notice from, or notice or refund to, or the signature of, any one or more of them
shall be binding on all of them with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, termination or modification of this Lease. 

        SECTION 20.4.    SUCCESSORS.    Subject to Articles IX and XIX, all
rights and liabilities given to or imposed upon Landlord and Tenant shall extend to and bind their respective heirs, executors,
administrators, successors and assigns. Nothing contained in this Section is intended, or shall be construed, to grant to any person other than Landlord and Tenant and their successors and assigns any
rights or remedies under this Lease. 

        SECTION 20.5.    TIME OF ESSENCE.    Time is of the essence with
respect to the performance of every provision of this Lease in which time of performance is a factor. 

        SECTION 20.6.    CONTROLLING LAW/VENUE.    This Lease shall be
governed by and interpreted in accordance with the laws of the State of California. Should any litigation be commenced between the parties in connection with this Lease, such action shall be
prosecuted in the applicable State Court of California in the county in which the Building is located. 

        SECTION 20.7.    SEVERABILITY.    If any term or provision of this
Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party or the deletion of which is consented to by the party adversely affected, shall be held
invalid or unenforceable to any extent, the remainder of this Lease shall not be affected and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by
law. 

        SECTION 20.8.    WAIVER.    One or more waivers by Landlord or Tenant
of any breach of any term, covenant or condition contained in this Lease shall not be a waiver of any subsequent breach of the same or any other term, covenant or condition. Consent to any act by one
of the parties shall not be deemed to render unnecessary the obtaining of that party's consent to any subsequent act. No breach of this Lease shall be deemed to have been waived unless the waiver is
in a writing signed by the waiving party. 

        SECTION 20.9.    INABILITY TO PERFORM.    In the event that either
party shall be delayed or hindered in or prevented from the performance of any work or in performing any act required under this Lease by reason of any cause beyond the reasonable control of that
party, then the performance of the work or the doing of the act shall be excused for the period of the delay and the time for 

25

 

performance
shall be extended for a period equivalent to the period of the delay. The provisions of this Section shall not operate to excuse Tenant from the prompt payment of rent. 

        SECTION 20.10.    ENTIRE AGREEMENT.    This Lease and its exhibits and
other attachments cover in full each and every agreement of every kind between the parties concerning the Premises, the Building, and the Project, and all preliminary negotiations, oral agreements,
understandings and/or practices, except those contained in this Lease, are superseded and of no further effect. Tenant waives its rights to rely on any representations or promises made by Landlord or
others which are not contained in this Lease.
No verbal agreement or implied covenant shall be held to modify the provisions of this Lease, any statute, law, or custom to the contrary notwithstanding. 

        SECTION 20.11.    QUIET ENJOYMENT.    Upon the observance and
performance of all the covenants, terms and conditions on Tenant's part to be observed and performed, and subject to the other provisions of this Lease, Tenant shall have the right of quiet enjoyment
and use of the Premises for the Term without hindrance or interruption by Landlord or any other person claiming by or through Landlord. 

        SECTION 20.12.    SURVIVAL.    All covenants of Landlord or Tenant
which reasonably would be intended to survive the expiration or sooner termination of this Lease, including without limitation any warranty or indemnity hereunder, shall so survive and continue to be
binding upon and inure to the benefit of the respective parties and their successors and assigns. 

 
 

ARTICLE XXI. EXECUTION AND RECORDING    
    

        SECTION 21.1.    COUNTERPARTS.    This Lease may be executed in one or
more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement. 

        SECTION 21.2.    CORPORATE AND PARTNERSHIP AUTHORITY.    If Tenant is
a corporation, limited liability company or partnership, each individual executing this Lease on behalf of the entity represents and warrants that he is duly authorized to execute and deliver this
Lease and that this Lease is binding upon the corporation, limited liability company or partnership in accordance with its terms. Tenant shall, at Landlord's request, deliver a certified copy of its
organizational documents or an appropriate certificate authorizing or evidencing the execution of this Lease. 

        SECTION 21.3.    EXECUTION OF LEASE; NO OPTION OR OFFER.    The
submission of this Lease to Tenant shall be for examination purposes only, and shall not constitute an offer to or option for Tenant to lease the Premises. Execution of this Lease by Tenant and its
return to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact executed and delivered this Lease to Tenant, it being intended that this Lease
shall only become effective upon execution by Landlord and delivery of a fully executed counterpart to Tenant. 

        SECTION 21.4.    RECORDING.    Tenant shall not record this Lease
without the prior written consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a "short form" memorandum of this Lease for recording purposes. 

        SECTION 21.5.    AMENDMENTS.    No amendment or mutual termination of
this Lease shall be effective unless in writing signed by authorized signatories of Tenant and Landlord, or by their respective successors in interest. No actions, policies, oral or informal
arrangements, business dealings or other course of conduct by or between the parties shall be deemed to modify this Lease in any respect. 

 
 

ARTICLE XXII. MISCELLANEOUS    
    

        SECTION 22.1.    NONDISCLOSURE OF LEASE TERMS.    Tenant acknowledges
and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure 

26

 

of
the terms could adversely affect the ability of Landlord to negotiate other leases and impair Landlord's relationship with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees and attorneys, shall not intentionally and voluntarily disclose the terms and conditions of this Lease to any other tenant or apparent prospective tenant of the Building
or Project, either directly or indirectly, without the prior written consent of Landlord, provided, however, that Tenant may disclose the terms to prospective subtenants or assignees under this Lease
or pursuant to any legal requirement. 

        SECTION 22.2.    REPRESENTATIONS BY TENANT.    The application,
financial statements and tax returns, if any, submitted and certified to by Tenant as an accurate representation of its financial condition have been prepared, certified and submitted to Landlord as
an inducement and consideration to Landlord to enter into this Lease. The application and statements are represented and warranted by Tenant to be correct and to accurately and fully reflect Tenant's
true financial condition as of the date of execution of this Lease by Tenant. Tenant shall during the Term, but not more often than once each calendar year, promptly furnish Landlord with current
annual financial statements accurately reflecting Tenant's financial condition upon written request from Landlord. 

        SECTION 22.3.    CHANGES REQUESTED BY LENDER.    If, in connection
with obtaining financing for the Building, the lender shall request reasonable modifications in this Lease as a condition to the financing, Tenant will not unreasonably withhold or delay its consent,
provided that the modifications do not materially increase the obligations of Tenant or materially and adversely affect the leasehold interest created by this Lease. 

        SECTION 22.4.    MORTGAGEE PROTECTION.    No act or failure to act on
the part of Landlord which would otherwise entitle Tenant to be relieved of its obligations hereunder or to terminate this Lease shall result in such a release or termination unless (a) Tenant
has given notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Building whose address has been furnished to Tenant and (b) such beneficiary is
afforded a reasonable opportunity to cure the default by Landlord, including, if necessary to effect the cure, time to obtain possession of the Building by power of sale or judicial foreclosure
provided that such foreclosure remedy is diligently pursued. 

        SECTION 22.5.    DISCLOSURE STATEMENT.    Tenant acknowledges that it
has read, understands and, if applicable, shall comply with the provisions of Exhibit F to this Lease, if that Exhibit is attached. 

        SECTION 22.6.    MOVING ALLOWANCE.    In consideration of the
execution of this Lease by Tenant, Landlord shall reimburse to Tenant the actual out-of-pocket expenses incurred by Tenant in connection with Tenant's move to the Premises,
which expenses shall include all moving and telephone relocation charges, purchase and installation of furniture systems, and ancillary expenditures such as stationery revisions. Tenant agrees that
all such expenses shall be supported by paid invoices, and the total thereof shall not exceed Fifty Thousand Dollars ($50,000.00). The reimbursement shall be paid by Landlord in a single installment
within fifteen (15) days following receipt of all such invoices, but in no event sooner than the Commencement Date of the Lease. Landlord agrees that any portion of the moving allowance not
utilized by Tenant, as evidenced in third party invoices submitted to Landlord, as 

27

 

of
the Commencement Date of this Lease shall inure to the benefit of Landlord and Tenant shall not be entitled to any credit or payment for such savings. 

	LANDLORD:	 	TENANT:
	
 THE IRVINE COMPANY	
 	

 	

 	

 	

 
	 	 	 	 	 	DIEDRICH COFFEE, INC.
	

By	

/s/  CLARENCE W. BARKER      
	
 	

By	

/s/  ROGER M. LAVERTY      

	 	Clarence W. Barker

Executive Vice President	 	Printed Name	Roger M. Laverty

	 	 	 	 	 	Title	PRESIDENT/CEO

	

By	

/s/  WILLIAM R. HALFORD      
	
 	

By	

/s/  MATTHEW C. MCGUINNESS      

	 	William R. Halford

President, Office Properties	 	Printed Name	Matthew C. McGuinness

	 	 	 	 	 	Title	EVP, CFO

[SEAL]

28

[LOGO]

The Irvine Company  

28 Executive Park

Suite 200  

FLOOR PLAN  

Exhibit A  

  

 
 

EXHIBIT B    
    
    UTILITIES AND SERVICES    
    

        The following standards for utilities and services shall be in effect at the Building. Landlord reserves the right to adopt nondiscriminatory modifications and
additions to these standards. In the case of any conflict between these standards and the Lease, the Lease shall be controlling. Subject to all of the provisions of the Lease, including but not
limited to the restrictions contained in Section 6.1, the following shall apply: 

        1.     Landlord
shall make available to the Premises during the hours of 8:00 a.m. to 6:00 p.m., Monday through Friday, and upon weekly request by Tenant, from
8:00 a.m. to 1:00 p.m. on Saturday ("Building Hours"), generally recognized national holidays excepted, reasonable HVAC services. Subject to the provisions set forth below, Landlord
shall also furnish the Building with elevator service (if applicable), reasonable amounts of electric current for normal lighting by Landlord's standard overhead fluorescent and incandescent fixtures
and for the operation of office equipment consistent in type and quantity with that utilized by typical office tenants of the Building and Project, and water for lavatory purposes. Tenant will not,
without the prior written consent of Landlord, connect any apparatus, machine or device with water pipes or electric current (except through existing electrical outlets in the Premises) for the
purpose of using electric current or water. Because the Building systems have been designed for normal occupancy of approximately four persons per one thousand usable square feet, Tenant understands
that excess occupancy of the Premises may result in excessive use of power and other services and may inhibit the efficient cooling of the Premises. This paragraph shall at all times be subject to
applicable governmental regulations. 

        2.     Upon
written request from Tenant delivered to Landlord at least 24 hours prior to the period for which service is requested, but during normal business hours,
Landlord will provide any of the foregoing building services to Tenant at such times when such services are not otherwise available. Tenant agrees to pay Landlord for those after-hour
services at rates that Landlord may establish from time to time, which rates shall be consistent with those charged by landlords of comparable office projects in the area. If Tenant requires electric
current in excess of that which Landlord is obligated to furnish under this Exhibit B, Tenant shall first obtain the consent of Landlord, and Landlord may cause an electric current meter to be
installed in the Premises to measure the amount of electric current consumed. The cost of installation, maintenance and repair of the meter shall be paid for by Tenant, and Tenant shall reimburse
Landlord promptly upon demand for all electric current consumed for any special power use as shown by the meter. The reimbursement shall be at the rates charged for electrical power by the local
public utility furnishing the current, plus any additional expense incurred in keeping account of the electric current consumed. 

        3.     Landlord
shall furnish water for drinking, personal hygiene and lavatory purposes only. If Tenant requires or uses water for any purposes in addition to ordinary
drinking, cleaning and lavatory purposes, Landlord may, in its discretion, Install a water meter to measure Tenant's water consumption. Tenant shall pay Landlord for the cost of the meter and the cost
of its installation, and for consumption throughout the duration of Tenant's occupancy. Tenant shall keep the meter and installed equipment in good working order and repair at Tenant's own cost and
expense, in default of which Landlord may cause the meter to be replaced or repaired at Tenant's expense. Tenant agrees to pay for water consumed, as shown on the meter and when bills are rendered,
and on Tenant's default in making that payment Landlord may pay the charges on behalf of Tenant. Any costs or expenses or payments made by Landlord for any of the reasons or purposes stated above
shall be deemed to be additional rent payable by Tenant to Landlord upon demand. 

        4.     In
the event that any utility service to the Premises is separately metered or billed to Tenant, Tenant shall pay all charges for that utility service to the Premises and
the cost of furnishing the utility to tenant suites shall be excluded from the Operating Expenses as to which reimbursement from Tenant 

1

 

is
required in the Lease. If any utility charges are not paid when due Landlord may pay them, and any amounts paid by Landlord shall immediately become due to Landlord from Tenant as additional rent.
If Landlord elects to furnish any utility service to the Premises. Tenant shall purchase its requirements of that utility from Landlord as long as the rates charged by Landlord do not exceed those
which Tenant would be required to pay if the utility service were furnished it directly by a public utility. 

        5.     Landlord
shall provide janitorial services five days per week, equivalent to that furnished in comparable buildings, and window washing as reasonably required; provided,
however, that Tenant shall pay for any additional or unusual janitorial services required by reason of any nonstandard improvements in the Premises, including without limitation wall coverings and
floor coverings installed by or for Tenant, or by reason of any use of Premises other than exclusively as offices. The cleaning services provided by Landlord shall also exclude refrigerators, eating
utensils (plates, drinking containers and silverware), and interior glass partitions. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish, to the extent that they
exceed the refuse and rubbish usually attendant with general office usage. 

        6.     Tenant
shall have access to the Building 24 hours per day, 7 days per week, 52 weeks per year; provided that Landlord may install access control systems as
it deems advisable for the Building. Such systems may, but need not, include full or part-time lobby supervision, the use of a sign-in sign-out log, a card
identification access system, building parking and access pass system, closing hours procedures, access control stations, fire stairwell exit door alarm system, electronic guard system, mobile paging
system, elevator control system or any other access controls. In the event that Landlord elects to provide any or all of those services, Landlord may discontinue providing them at any time with or
without notice. Landlord may impose a reasonable charge for access control cards and/or keys issued to Tenant. Landlord shall have no liability to Tenant for the provision by Landlord of improper
access control services, for any breakdown in service, or for the failure by Landlord to provide access control services. Tenant further acknowledges that Landlord's access systems may be temporarily
inoperative during building emergency and system repair periods. Tenant agrees to assume responsibility for compliance by its employees with any regulations established by Landlord with respect to any
card key access or any other system of building access as Landlord may establish. Tenant shall be liable to Landlord for any loss or damage resulting from its or its employees use of any access
system. 

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EXHIBIT C    
    
    PARKING    
    

        The following parking regulations shall be in effect at the Building. Landlord reserves the right to adopt reasonable, nondiscriminatory modifications and
additions to the regulations by written notice to Tenant. In the case of any conflict between these regulations and the Lease, the Lease shall be controlling. 

        1.     Landlord
agrees to maintain, or cause to be maintained, an automobile parking area ("Parking Area") in reasonable proximity to the Building for the benefit and use of the
visitors and patrons and, except as otherwise provided, employees of Tenant, and other tenants and occupants of the Building. The Parking Area shall include, whether in a surface parking area or a
parking structure, the automobile parking stalls, driveways, entrances, exits, sidewalks and attendant pedestrian passageways and other areas designated for parking. Landlord shall have the right and
privilege of determining the nature and extent of the automobile Parking Area, whether it shall be surface, underground or other structure, and of making such changes to the Parking Area from time to
time which in its opinion are desirable and for the best interests of all persons using the Parking Area. Landlord shall keep the Parking Area in a neat, clean and orderly condition, and shall repair
any damage to its facilities. Landlord shall not be liable for any damage to motor vehicles of visitors or employees, for any loss of property from within those motor vehicles, or for any injury to
Tenant, its visitors or employees, unless ultimately determined to be caused by the sole active negligence or willful misconduct of Landlord. Unless otherwise instructed by Landlord, every parker
shall park and lock his or her own motor vehicle. Landlord shall also have the right to establish, and from time to time amend, and to enforce against all users of the Parking Area all reasonable
rules and regulations (including the designation of areas for employee parking) as Landlord may deem necessary and advisable for the proper and efficient operation and maintenance of the Parking Area.
Garage managers or attendants are not authorized to make or allow any exceptions to these regulations. 

        2.     Subject
to paragraph 7 below, Landlord may, if it deems advisable in its sole discretion, charge for parking and may establish for the Parking Area a system or
systems of permit parking for Tenant, its employees and its visitors, which may include, but not be limited to, a system of charges against nonvalidated parking, verification of users, a set of
regulations governing different parking locations, and an allotment of reserved or nonreserved parking spaces based upon the charges paid and the identity of users. In no event shall Tenant or its
employees park in reserved stalls leased to other tenants or in stalls within designated visitor parking zones, nor shall Tenant or its employees utilize more than the number of parking stalls
allotted in this Lease to Tenant. It is understood that Landlord shall not have any obligation to cite improperly parked vehicles or otherwise attempt to enforce reserved parking rules during hours
when parking attendants are not present at the Parking Area. Tenant shall comply with such system in its use (and in the use of its visitors, patrons and employees) of the Parking Area, provided,
however, that the system and rules and regulations shall apply to all persons entitled to the use of the Parking Area, and all charges to Tenant for use of the Parking Area shall be no greater than
Landlord's then current scheduled charge for parking. 

        3.     Tenant
shall, upon request of Landlord from time to time, furnish Landlord with a list of its employees' names and of Tenant's and its employees' vehicle license numbers.
Tenant agrees to acquaint its employees with these regulations and assumes responsibility for compliance by its employees with these parking provisions, and shall be liable to Landlord for all unpaid
parking charges incurred by its employees. Any amount due from Tenant shall be deemed additional rent. Tenant authorizes Landlord to tow away from the Building any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions, and/or to attach violation stickers or notices to those vehicles. In the event Landlord elects or is required to limit or control parking by
tenants, employees, visitors or invitees of the Building, whether by validation of parking tickets, parking meters or any other 

1

 

method
of assessment, Tenant agrees to participate in the validation or assessment program under reasonable rules and regulations as are established by Landlord and/or any applicable governmental
agency. 

        4.     Landlord
may establish an identification system for vehicles of Tenant and its employees which may consist of stickers, magnetic parking cards or other identification
devices supplied by Landlord. All identification devices shall remain the property of Landlord, shall be displayed as required by Landlord or upon request and may not be mutilated or obliterated in
any manner. Those devices shall not be transferable and any such device in the possession of an unauthorized holder shall be void and may be confiscated. Landlord may impose a reasonable fee for
identification devices and a replacement charge for devices which are lost or stolen. Each identification device shall be returned to Landlord promptly following the Expiration Date or sooner
termination of this Lease. Loss or theft of parking identification devices shall be reported to Landlord or its Parking Area operator immediately and a written report of the loss filed if requested by
Landlord or its Parking Area operator. 

        5.     Persons
using the Parking Area shall observe all directional signs and arrows and any posted speed limits. Unless otherwise posted, in no event shall the speed limit of 5
miles per hour be exceeded. All vehicles shall be parked entirely within painted stalls, and no vehicles shall be parked in areas which are posted or marked as "no parking" or on or in ramps,
driveways and aisles. Only one vehicle may be parked in a parking space. In no event shall Tenant interfere with the use and enjoyment of the Parking Area by other tenants of the Building or their
employees or invitees. 

        6.     Parking
Areas shall be used only for parking vehicles. Washing, waxing, cleaning or servicing of vehicles, or the parking of any vehicle on an overnight basis, in the
Parking Area (other than emergency services) by any parker or his or her agents or employees is prohibited unless otherwise authorized by Landlord. Tenant shall have no right to install any fixtures,
equipment or personal property (other than vehicles) in the Parking Area, nor shall Tenant make any alteration to the Parking Area. 

        7.     It
is understood that the employees of Tenant and the other tenants of Landlord within the Building and Project shall not be permitted to park their automobiles in the
portions of the Parking Area which may from time to time be designated for patrons of the Building and/or Project and that Landlord shall at all times have the right to establish rules and regulations
for employee parking. Landlord shall lease to Tenant, and Tenant shall be obligated to lease from Landlord for the Term of this Lease, the total number of vehicle parking spaces set forth in Item 12
of the Basic Lease Provisions (the "Allotted Stalls"), the fourteen (14) reserved spaces of which shall be located in the covered parking area beneath the Premises. Tenant shall pay to Landlord
for the lease of the Allotted Stalls the amounts as Landlord shall from time to time determine. Should any monthly parking charge installment not be paid within five (5) days following the date
due, then a late charge shall be payable by Tenant equal to the greater of (i) four percent (4%) of the delinquent installment or (ii) two hundred and fifty dollars ($250.00), which late
charge shall be separate and in addition to any late charge that may be assessed pursuant to Section 14.3 of the Lease for other than delinquent monthly parking charges. Landlord may authorize
persons other than those described above, including occupants of other buildings, to utilize the Parking Area. In the event of the use of the Parking Area by other persons, those persons shall pay for
that use in accordance with the terms established above; provided, however, Landlord may allow those persons to use the Parking Area on weekends, holidays, and at other non-office hours
without payment. Notwithstanding the foregoing, provided Tenant is not in default under the Lease, the monthly stall charge for the Allotted Stalls shall be waived through the end of the initial Lease
Term. 

        8.     Notwithstanding
the foregoing paragraphs 1 through 7, Landlord shall be entitled to pass on to Tenant its proportionate share of any charges or parking surcharge or
transportation management costs levied by any governmental agency. The foregoing parking provisions are further subject to any 

2

 

governmental
regulations which limit parking or otherwise seek to encourage the use of carpools, public transit or other alternative transportation forms or traffic reduction programs. Tenant agrees
that it will use its best efforts to cooperate, including registration and attendance, in programs which may be undertaken to reduce traffic. Tenant acknowledges that as a part of those programs, it
may be required to distribute employee transportation information, participate in employee transportation surveys, allow employees to participate in commuter activities, designate a liaison for
commuter transportation activities, distribute commuter information to all employees, and otherwise participate in other programs or services initiated under a transportation management program. 

        9.     Should
any parking spaces be allotted by Landlord to Tenant, either on a reserved or nonreserved basis, Tenant shall not assign or sublet any of those spaces, either
voluntarily or by operation of law, without the prior written consent of Landlord, except in connection with an authorized assignment of this Lease or subletting of the Premises. 

3

  

 
 

EXHIBIT D    
    
    TENANT'S INSURANCE    
    

        The following standards for Tenant's insurance shall be in effect at the Building, and Tenant shall also cause any of its subtenants to comply with the
requirements below. Landlord reserves the right to adopt reasonable nondiscriminatory modifications and additions to those standards. Tenant agrees to obtain and present evidence to Landlord that it
has fully complied with the insurance requirements. 

        1.     Tenant
shall, at its sole cost and expense, commencing on the date Tenant is given access to the Premises for any purpose and during the entire Term, procure, pay for and
keep in full force and effect: (i) commercial general liability insurance with respect to the Premises and the operations of or on behalf of Tenant in, on or about the Premises, including but
not limited to coverage for personal injury, independent contractors, broad form property damage, fire legal liability, products liability (if a product is sold from the Premises), and liquor law
liability (if alcoholic beverages are sold, served or consumed within the Premises), which policy(ies) shall be written on an "occurrence" basis and for not less than $2,000,000 combined single limit
(with a $50,000 minimum limit on fire legal liability) per occurrence for bodily injury, death, and property damage liability, or the current limit of liability carried by Tenant, whichever is
greater, and subject to such increases in amounts as Landlord may determine from time to time; (ii) workers' compensation insurance coverage as required by law, together with employers'
liability insurance coverage of at least $1,000,000; (iii) with respect to improvements, alterations, and the like required or permitted to be made by Tenant under this Lease, builder's risk
insurance, in amounts satisfactory to Landlord; (iv) insurance against fire, vandalism, malicious mischief and such other additional perils as may be included in a standard "special form"
policy, insuring all Tenant Installations, trade fixtures, furnishings, equipment and items of personal property in the Premises, in an amount equal to not less than ninety percent (90%) of their
actual replacement cost (with replacement cost endorsement), which policy shall also include loss of income/business interruption/extra expense coverage in an amount not less than nine months loss of
income from Tenant's business in the Premises. In no event shall the limits of any policy be considered as limiting the liability of Tenant under this Lease. 

        2.     All
policies of insurance required to be carried by Tenant pursuant to this Exhibit shall be written by responsible insurance companies authorized to do business in the
State of California and with a general policyholder rating of not less than "A-" and financial rating of not less than "VIII" in the most current Best's Insurance Report. Any insurance
required of Tenant may be furnished by Tenant under any blanket policy carried by it or under a separate policy. A certificate of insurance, certifying that the policy has been issued, provides the
coverage required by this Exhibit and contains the required provisions, together with endorsements acceptable to Landlord evidencing the waiver of subrogation and additional insured provisions
required under Paragraph 3 below, shall be delivered to Landlord prior to the date Tenant is given the right of possession of the Premises. Proper evidence of the renewal of any insurance
coverage shall also be delivered to Landlord not less than thirty (30) days prior to the expiration of the coverage. Landlord may at any time, and from time to time, inspect and/or copy any and
all insurance policies required by this Lease. 

        3.     Unless
otherwise provided below, each policy evidencing insurance required to be carried by Tenant pursuant to this Exhibit shall contain the following provisions and/or
clauses satisfactory to Landlord: (i) with respect to Tenant's commercial general liability insurance, a provision that the policy and the coverage provided shall be primary and that any
coverage carried by Landlord shall be excess and noncontributory, together with a provision including Landlord and any other parties in interest designated by Landlord as additional insureds;
(ii) except with respect to Tenant's commercial general liability Insurance, a waiver by the insurer of any right to subrogation against Landlord, its agents, employees, contractors and
representatives which arises or might arise by reason of any payment under the policy or by reason of any act or omission of Landlord, its agents, employees, contractors or 

1

 

representatives;
and (iii) a provision that the insurer will not cancel or change the coverage provided by the policy without first giving Landlord thirty (30) days prior written notice. 

        4.     In
the event that Tenant fails to procure, maintain and/or pay for, at the times and for the durations specified in this Exhibit, any insurance required by this Exhibit,
or falls to carry insurance required by any governmental authority, Landlord may at its election procure that insurance and pay the premiums, in which event Tenant shall repay Landlord all sums paid
by Landlord, together with interest at the maximum rate permitted by law and any related costs or expenses incurred by Landlord, within ten (10) days following Landlord's written demand to
Tenant. 

NOTICE TO TENANT: IN ACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST PROVIDE EVIDENCE OF THE REQUIRED INSURANCE TO LANDLORD'S MANAGEMENT AGENT PRIOR TO BEING AFFORDED
ACCESS TO THE PREMISES.

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EXHIBIT E    
    
    RULES AND REGULATIONS    
    

        The following Rules and Regulations shall be in effect at the Building. Landlord reserves the right to adopt reasonable nondiscriminatory modifications and
additions at any time. In the case of any conflict between these regulations and the Lease, the Lease shall be controlling. 

        1.     Except
with the prior written consent of Landlord, or unless otherwise specifically authorized in this Lease, Tenant shall not sell or permit the retail sale of goods or
services in or from the Premises, nor shall Tenant allow the Premises to be utilized for any manufacturing or medical practice. 

        2.     The
sidewalks, halls, passages, elevators, stairways, and other common areas shall not be obstructed by Tenant or used by it for storage, for depositing items, or for any
purpose other than for ingress to and egress from the Premises. The halls, passages, entrances, elevators, stairways, balconies and roof are not for the use of the general public, and Landlord shall
in all cases retain the right to control and prevent access to those areas of all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and
interests of the Building and its tenants. Should Tenant have access to any balcony or patio area, Tenant shall not place any furniture or other personal property in such area without the prior
written approval of Landlord. Nothing contained in this Lease shall be construed to prevent access to persons with whom Tenant normally deals only for the purpose of conducting its business on the
Premises (such as clients, customers, office suppliers and equipment vendors and the like) unless those persons are engaged in illegal activities. Neither Tenant nor any employee or contractor of
Tenant shall go upon the roof of the Building without the prior written consent of Landlord. 

        3.     The
sashes, sash doors, windows, glass lights, solar film and/or screen, and any lights or skylights that reflect or admit light into the halls or other places of the
Building shall not be covered or obstructed. The toilet rooms, water and wash closets and other water apparatus shall not be used for any purpose other than that for which they were constructed, and
no foreign substance of any kind shall be thrown in those facilities, and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by Tenant. 

        4.     No
sign, advertisement or notice visible from the exterior of the Premises shall be inscribed, painted or affixed by Tenant on any part of the Building or the Premises
without the prior written consent of Landlord. If Landlord shall have given its consent at any time, whether before or after the execution of this Lease, that consent shall in no way operate as a
waiver or release of any of the provisions of this Lease, and shall be deemed to relate only to the particular sign, advertisement or notice so consented to by Landlord and shall not be construed as
dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any subsequent sign, advertisement or notice. If Landlord, by a notice in writing to Tenant, shall
object to any curtain, blind, tinting, shade or screen attached to, or hung in, or used in connection with, any window or door of the Premises, the use of that curtain, blind, tinting, shade or screen
shall be immediately discontinued and removed by Tenant. No awnings shall be permitted on any part of the Premises. No antenna or satellite dish shall be installed by Tenant that is either located or
visible from outside the Premises without the prior written agreement of Landlord. 

        5.     Tenant
shall not do or permit anything to be done in the Premises, or bring or keep anything in the Premises, which shall in any way increase the rate of fire insurance
on the Building, or on the property kept in the Building, or obstruct or interfere with the rights of other tenants, or in any way injure or annoy them, or conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy upon the Building, or any portion of the Building or its contents, or with any rules and ordinances established by the Board of Health or
other governmental authority. 

1

 

        6.     The
installation and location of any unusually heavy equipment in the Premises, including without limitation file storage units, safes and electronic data processing
equipment, shall require the prior written approval of Landlord. Landlord may restrict the weight and position of any equipment that may exceed the weight load limits for the structure of the
Building, and may further require, at Tenant's expense, the reinforcement of any flooring on which such equipment may be placed and/or an engineering study to be performed to determine whether the
equipment may safely be installed in the Building and the necessity of any reinforcement. The moving of large or heavy objects shall occur only between those hours as may be designated by, and only
upon previous written notice to, Landlord, and the persons employed to move those objects in or out of the Building must be reasonably acceptable to Landlord. Without limiting the generality of the
foregoing, no freight, furniture or bulky matter of any description shall be received into or moved out of the lobby of the Building or carried in any elevator other than the freight elevator
designated by Landlord unless approved in writing by Landlord. 

        7.     Landlord
shall clean the Premises as provided in the Lease, and except with the written consent of Landlord, no person or persons other than those approved by Landlord
will be permitted to enter the Building for that purpose. Tenant shall not cause unnecessary labor by reason of Tenant's carelessness and indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant or its employees for loss or damage to property in connection with the provision of janitorial services by third party contractors. 

        8.     Tenant
shall not sweep or throw, or permit to be swept or thrown, from the Premises any dirt or other substance into any of the corridors or halls or elevators, or out of
the doors or windows or stairways of the Building, and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to
be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or
those having business with other tenants, nor shall any animals or birds be kept by Tenant in or about the Building. Smoking or carrying of lighted cigars, cigarettes, pipes or similar products
anywhere within the Premises or Building is strictly prohibited, and Landlord may enforce such prohibition pursuant to Landlord's leasehold remedies. Smoking is permitted outside the Building and
within the project only in areas designated by Landlord. 

        9.     No
cooking shall be done or permitted by Tenant on the Premises, except pursuant to the normal use of a U.L. approved microwave oven and coffee maker for the benefit of
Tenant's employees and invitees, nor shall the Premises be used for the storage of merchandise or for lodging. 

        10.   Tenant
shall not use or keep in the Building any kerosene, gasoline, or inflammable fluid or any other illuminating material, or use any method of heating other than
that supplied by Landlord. 

        11.   If
Tenant desires telephone, telegraph, burglar alarm or similar connections, Landlord will direct electricians as to where and how the wires are to be introduced. No
boring or cutting for wires or otherwise shall be made without directions from Landlord. 

        12.   Upon
the termination of its tenancy, Tenant shall deliver to Landlord all the keys to offices, rooms and toilet rooms and all access cards which shall have been
furnished to Tenant or which Tenant shall have had made. 

        13.   Tenant
shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises, except to install normal wall hangings.
Tenant shall not affix any floor covering to the floor of the Premises in any manner except by a paste, or other material which may easily be removed with water, the use of cement or other similar
adhesive materials being expressly prohibited. The method of affixing any floor covering shall be subject to approval by Landlord. The expense of repairing any damage resulting from a violation of
this rule shall be borne by Tenant. 

2

 

        14.   On
Saturdays, Sundays and legal holidays, and on other days between the hours of 6:00 p.m. and 8:00 a.m., access to the Building, or to the halls,
corridors, elevators or stairways in the Building, or to the Premises, may be refused unless the person seeking access complies with any access control system that Landlord may establish. Landlord
shall in no case be liable for damages for the admission to or exclusion from the Building of any person whom Landlord has the right to exclude under Rules 2 or 18 of this Exhibit. In case of
invasion, mob, riot, public excitement, or other commotion, or in the event of any other situation reasonably requiring the evacuation of the Building, Landlord reserves the right at its election and
without liability to Tenant to prevent access to the Building by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. 

        15.   Tenant
shall be responsible for protecting the Premises from theft, which includes keeping doors and other means of entry closed and securely locked. Tenant shall cause
all water faucets or water apparatus to be shut off before Tenant or Tenant's employees leave the Building, and that all electricity, gas or air shall likewise be shut off, so as to prevent waste or
damage, and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. 

        16.   Tenant
shall not alter any lock or install a new or additional lock or any bolt on any door of the Premises without the prior written consent of Landlord. If Landlord
gives its consent, Tenant shall in each case promptly furnish Landlord with a key for any new or altered lock. 

        17.   Tenant
shall not install equipment, such as but not limited to electronic tabulating or computer equipment, requiring electrical or air conditioning service in excess of
that to be provided by Landlord under the Lease except in accordance with Exhibit B. 

        18.   Landlord
shall have full and absolute authority to regulate or prohibit the entrance to the Premises of any vendor, supplier, purveyor, petitioner, proselytizer or other
similar person if, in the good faith judgment of Landlord, such person will be involved in general solicitation activities, or the proselytizing, petitioning, or disturbance of other tenants or their
customers or invitees, or engaged or likely to engage in conduct which may in Landlord's opinion distract from the use of the Premises for its intended purpose. Notwithstanding the foregoing, Landlord
reserves the absolute right and discretion to limit or prevent access to the Buildings by any food or beverage vendor, whether or not invited by Tenant, and Landlord may condition such access upon the
vendor's execution of an entry permit agreement which may contain provisions for insurance coverage and/or the payment of a fee to Landlord. 

        19.   Tenant
shall, at its expense, be required to utilize the third party contractor designated by Landlord for the Building to provide any telephone wiring services from the
minimum point of entry of the telephone cable in the Building to the Premises. 

        20.   Tenant
shall, upon request by Landlord, supply Landlord with the names and telephone numbers of personnel designated by Tenant to be contacted on an after-hours basis
should circumstances warrant. 

        21.   Tenant
shall cause its employees and agents, and shall endeavor to instruct its invitees, to wear attire suitable for a first class office project while such persons are
in the Building or Project. 

        22.   Landlord
may from time to time grant tenants individual and temporary variances from these Rules, provided that any variance does not have a material adverse effect on
the use and enjoyment of the Premises by Tenant. 

3

 
 

EXHIBIT X    
    
    WORK LETTER/BUILD TO SUIT    
    

        Landlord shall, at its expense, cause its contractor to construct the tenant improvements for the Premises as shown in the space plan (the "Plan") prepared by H.
Hendy & Associates dated June 18, 2003, with Addendum A dated July 1, 2003 and Addendum B dated July 30, 2003 as long as Landlord's total contribution does not exceed Four
Hundred Twenty-Three Thousand Three Hundred Thirty-Five Dollars ($423,335.00). Any additional cost shall be borne solely by Tenant and paid to Landlord prior to the commencement of
construction. Unless otherwise specified in the Plan or hereafter agreed in writing by Landlord, all materials and finishes utilized in constructing the tenant improvements shall be Landlord's
building standard. Should Landlord submit any additional plans, equipment specification sheets, or other matters to Tenant for approval or completion, Tenant shall respond in writing, as appropriate,
within five (5) business days unless a shorter period is provided herein. Tenant shall not unreasonably withhold its approval of any matter, and any disapproval shall be limited to items not
previously approved by Tenant in the Plan or otherwise. 

        In
the event that Tenant requests in writing a revision in the Plan or in any other plans hereafter approved by Tenant, then provided such change request is acceptable to Landlord,
Landlord shall advise Tenant by written change order of any additional cost and/or Tenant Delay (as defined below) such change would cause. Tenant shall approve or disapprove such change order in
writing within two (2) business days following its receipt. Tenant's approval of a change order shall not be effective unless accompanied by payment in full of the additional cost of the tenant
improvement work resulting from the change order. It is understood that Landlord shall have no obligation to interrupt or modify the tenant improvement work pending Tenant's approval of a change
order. 

        Notwithstanding
any provision in the Lease to the contrary, if Tenant fails to comply with any of the time periods specified in this Work Letter, requests any changes to the work, fails
to make timely payment of any sum due hereunder, furnishes inaccurate or erroneous specifications or other information, or otherwise delays in any manner the completion of the tenant improvements or
the issuance of an occupancy certificate (any of the foregoing being referred to in this Lease as a "Tenant Delay"), then Tenant shall bear any resulting additional construction cost or other expenses
and the Delivery Date shall be deemed to have occurred for all purposes as of the date Landlord reasonably determines that it would have been able to deliver the Premises to Tenant but for the
collective Tenant Delays. 

        Tenant
hereby designates Matt McGuinness, Telephone No. (949) 260-6737, as its representative, agent and attorney-in-fact for the purpose of
receiving notices, approving submittals and issuing requests for changes, and Landlord shall be entitled to rely upon authorizations and directives of such person(s) as if given by Tenant. Tenant may
amend the designation of its construction representative(s) at any time upon delivery of written notice to Landlord. 

QuickLinks

OFFICE SPACE LEASE

ARTICLE I. BASIC LEASE PROVISIONS

ARTICLE II. PREMISES

ARTICLE III. TERM

ARTICLE IV. RENT AND OPERATING EXPENSES

ARTICLE V. USES

ARTICLE VI. LANDLORD SERVICES

ARTICLE VII. MAINTAINING THE PREMISES

ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

ARTICLE IX. ASSIGNMENT AND SUBLETTING

ARTICLE X. INSURANCE AND INDEMNITY

ARTICLE XI. DAMAGE OR DESTRUCTION

ARTICLE XII. EMINENT DOMAIN

ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE

ARTICLE XIV. DEFAULTS AND REMEDIES

ARTICLE XV. END OF TERM

ARTICLE XVI. PAYMENTS AND NOTICES

ARTICLE XVII. RULES AND REGULATIONS

ARTICLE XVIII. BROKER'S COMMISSION

ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

ARTICLE XX. INTERPRETATION

ARTICLE XXI. EXECUTION AND RECORDING

ARTICLE XXII. MISCELLANEOUS

EXHIBIT B UTILITIES AND SERVICES

EXHIBIT C PARKING

EXHIBIT D TENANT'S INSURANCE

EXHIBIT E RULES AND REGULATIONS

EXHIBIT X WORK LETTER/BUILD TO SUITQuickLinks
 -- Click here to rapidly navigate through this document
  

EXHIBIT 10.38  

 
 

THIRD AMENDMENT
  TO CREDIT AGREEMENT    
    

        THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made and dated as of the 1st day of July, 2003 by and between DIEDRICH COFFEE, INC., a
Delaware corporation (the "Company"), and BANK OF THE WEST (the "Lender"). 

 
 

RECITALS    
    

        A.    Pursuant
to that certain Credit Agreement dated as of September 3, 2002 by and between the Company and the Lender (as amended, extended and replaced from time to
time, the "Credit Agreement," and with capitalized terms used herein and not otherwise defined used with the meanings given such terms in the Credit Agreement), the Lender agreed to extend credit to
the Company on the terms and subject to the conditions set forth therein. 

        B.    The
Company has requested the Lender to amend the Credit Agreement in certain respects and the Lender has agreed to do so on the terms and subject to the conditions set
forth herein. 

        NOW,
THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows: 

 
 

AGREEMENT    
    

        1.     Applicable Interest Rates. To reflect the agreement of the parties hereto to modify the interest rates applicable to the
Loans, as of the Effective Date (as defined in Paragraph 7 below): 

        (a)   Paragraph 7(a) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "7(a) Applicable Interest Rates. The Company shall pay interest on Loans outstanding (other than the Equipment Acquisition
Line Term-Out Loan) from the date disbursed to but not including the date of payment, at a rate per annum equal to, at the option of and as selected by the Company from time to time and
subject to provisions set forth in this Paragraph 7: 

        (1)   The
floating Reference Rate during the applicable computation period plus one percent (1.00%); or 

        (2)   The
LIBOR Rate for the selected Interest Period plus three and one-quarter percent (3.25%). 

The
Company shall pay interest on portions of the Equipment Acquisition Line Term-Out Loan outstanding at a fixed rate of interest of 5.77% per annum and the Equipment Acquisition Line
Term-Out Loan (or portions thereof) may not be converted into Reference Rate Loans or LIBOR Rate Loans." 

        2.     Modification to Equipment Acquisition Line Term-Out Loan. To reflect the agreement of the parties hereto to
modify the date of the final payment of principal with respect to the Equipment Acquisition Line Term-Out Loan, Paragraph 1(b) is
hereby amended by deleting the date "August 31, 2006" set forth therein and replacing the same with the date "August 28, 2006." 

1

 

        3.     Modifications to Working Capital Facility. To reflect the agreement of the parties hereto to make certain modifications to
the credit facility provided for in Paragraph 4 of the Credit Agreement, as of the Effective Date: 

        (a)   The
definition of the term "Working Capital Facility Maturity Date" set forth in Paragraph 16 of the Credit
Agreement is hereby amended by deleting the date "August 31, 2003" set forth therein and replacing the same with the date "April 15, 2004." 

        (b)   The
last sentence of Paragraph 4(a) of the Credit Agreement is hereby deleted in its entirety. 

        (c)   Paragraph 8(c)(4) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "(4) Following
the payment in full of the Equipment Acquisition Line Term-Out Loan, if at any time the Company shall fail to maintain Liquid Assets in an
aggregate dollar amount equal to or greater than $800,000.00 in accounts maintained with the Lender, upon notice from the Lender (which notice may be telephonic), the Company shall immediately prepay
the principal amount and all accrued but unpaid interest with respect to all Loans outstanding as of such date, together with all amounts, if any, required pursuant to  Paragraph 7(h) above."

        (d)   Paragraph 12(l) of the Credit Agreement is hereby deleted in its entirety. 

        4.     Modifications to Letter of Credit Facility. To reflect the agreement of the parties hereto to make certain modifications
to the letter of credit facility provided for in Paragraph 5 of the Credit Agreement, as of the Effective Date: 

        (a)   Paragraph 5(b) of the Credit Agreement is hereby amended in its entirety to read as follows: 

        "5(b) Issuance of Letters of Credit. Each Letter of Credit, and any amendment, renewal or extension thereof, shall be
requested by the Company at least thirty (30) Business Days prior to the proposed issuance, amendment, renewal or extension date by delivery to the Lender of a duly executed Letter of Credit
Application, accompanied by all other L/C Documents which the Lender may require as a condition to the requested action. No Letter of Credit shall have a stated expiration date (or provide for the
extension of such stated expiration date or the issuance of any replacement therefor) later than October 15, 2004." 

        (b)   The
phrase "one percent (1.00%) per annum" set forth in Paragraph 7(k)(1) of the Credit Agreement is hereby
deleted and replaced with the phrase "two percent (2.00%) per annum." 

        5.     Fiscal Year 2004 Expansion Line. The parties hereto hereby acknowledge and agree that notwithstanding anything else
contained in the Credit Agreement, as of the Effective Date, the credit facility provided under Paragraph 3 of the Credit Agreement is hereby
terminated and the principal amount of any and all FY 2004 Expansion Line Loans outstanding as of the Effective Date is immediately due and payable without amortization. 

        6.     Modification of Covenants. To reflect the agreement of the parties hereto to modify certain of the covenants applicable to
the Company under the Credit Agreement, as of the Effective Date: 

        (a)   Paragraph 13(f) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(f) Sale of Assets. Nor permit any of its Subsidiaries to sell, lease, assign, transfer or otherwise dispose of any of its
assets, whether now owned or hereafter acquired, other than: (1) dispositions of inventory in the ordinary course of business (which dispositions may be made free from the Liens of the Loan
Documents), the disposition in the ordinary course of 

2

 

business,
without replacement, of equipment which is obsolete or no longer needed in the conduct of its business and the disposition and replacement in the ordinary course of business of equipment
with other equipment of at least equal utility and value (provided that, except for purchase money security interests and rights of lessors of equipment if permitted hereunder, the Lender's Lien upon
such newly-acquired equipment shall have the same priority as the Lender's Lien upon the replaced equipment), (2) the liquidation of assets of retail stores which have been closed,
(3) the sale of retail stores in accordance with Paragraph 13(p) below, and (4) the Approved Bulk Sale." 

        (b)   Paragraph 13(i) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(i) Capital Expenditures. Nor permit any of its Subsidiaries to make or commit to make Capital Expenditures (including
Expansion Expenditures) in excess of $3,000,000.00 in the aggregate during any Fiscal Year." 

        (c)   Paragraph 13(k) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(k) Leverage Ratio. Permit as of the end of any fiscal quarter, the ratio of Indebtedness of the Company and its
Subsidiaries on a consolidated basis to the Effective Tangible Net Worth of the Company and its Subsidiaries on a consolidated basis to be less than 2.00:1.00." 

        (d)   Paragraph 13(l) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(l) Minimum Effective Tangible Net Worth. Permit the Effective Tangible Net Worth of the Company and its Subsidiaries on a
consolidated basis: (1) as of the end of any fiscal quarter ending on or before the last day of the First Quarter of the Company's 2004 Fiscal Year, to be less than $5,800,000.00, and
(2) as of the end of any fiscal quarter thereafter, $6,300,000.00." 

        (e)   Paragraph 13(m) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(m) Minimum EBITDA. Permit as of the end of any fiscal quarter, calculated for such fiscal quarter and the immediately
preceding three fiscal quarters, EBITDA of the Company and its Subsidiaries on a consolidated basis to be less than: (1) prior to the consummation of the Approved Bulk Sale, $2,500,000.00, and
(2) following the consummation of the Approved Bulk Sale, $1,700,000.00." 

        (f)    Paragraph 13(n) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(n) Profitability. 

        (1)   Commencing
with the First Quarter of the 2004 Fiscal Year, permit the combined net income of the Company and its Subsidiaries, determined in accordance with GAAP to be
less than $1.00 as of the end of any two consecutive fiscal quarters; and 

        (2)   Commencing
with the 2004 Fiscal Year, permit the combined net income of the Company and its Subsidiaries, determined in accordance with GAAP to be less than $1.00 as of
end of the Second Quarter, Third Quarter, and Fourth Quarter of any Fiscal Year on a year to date basis." 

3

 

        (g)   Paragraph 13(o) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(o) Cash Collateral; Minimum Liquid Assets

        (1)   At
any time after October 1, 2003 during which any portion of the Equipment Acquisition Line Term-Out Loan is outstanding, permit the aggregate dollar
amount of cash held by the Company in a no-access deposit account maintained with the Lender as collateral security for the Obligations to be less than the lesser of:
(i) $800,000.00 and (ii) the outstanding principal balance of the Equipment Acquisition Line Term-Out Loan; and 

        (2)   After
the Equipment Acquisition Line Term-Out Loan has been paid in full, permit for more than ten (10) Business Days during any Fiscal Year the
aggregate dollar amount of Liquid Assets held by the Company in accounts maintained with the Lender to be less than $800,000.00." 

        (h)   Paragraph 13(p) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(p) Retail Stores Permit, during any fiscal year of the Company, the number of stores directly operated by the Company or
its Subsidiaries which have been sold during such fiscal year (other than retail stores sold in connection with the Approved Bulk Sale) to exceed fifteen percent (15%) of the total number of retail
stores directly operated by the Company or its Subsidiaries as of the first day of such fiscal year." 

        (i)    Paragraph 13(q) of the Credit Agreement is hereby amended to read in its entirety as follows: 

        "13(q) Cash Flow Coverage Ratio. Permit as of the end of any fiscal quarter the ratio of Cash Flow, calculated for such
fiscal quarter and the immediately preceding three fiscal quarters, to CPLTD, calculated for such fiscal quarter and the immediately preceding three fiscal quarters, in each case for the Company and
its Subsidiaries on a consolidated basis, to be less than: (1) prior to the consummation of the Approved Bulk Sale, 1.50 to 1.00, and (2) following the consummation of the Approved Bulk
Sale, 1.25 to 1.00." 

        (j)    The
following definitions set forth in Paragraph 16 of the Credit Agreement are hereby amended to read in their
entirety as follows: 

        "Cash Flow' shall mean, with respect to any Person for any fiscal period: (1) net income after tax (exclusive of any extraordinary
gains), plus (2) interest expense, amortization expense, and depreciation
expense, and minus (3) dividends and distributions, all as determined in accordance with GAAP; provided, however, that in no event shall any calculation of Cash Flow for the Company and its
Subsidiaries include any non-cash asset impairment charges incurred during the 2003 Fiscal Year." 

        "EBITDA' shall mean, with respect to any Person for any fiscal period, earnings (exclusive of extraordinary gains) and before deductions
for interest and income taxes plus depreciation and amortization; provided, however, that in no event shall EBITDA for the Company and its Subsidiaries include any non-cash asset
impairment charges incurred during the 2003 Fiscal Year." 

        (k)   The
following new definition is hereby added to Paragraph 16 of the Credit Agreement in correct alphabetical
order: 

        "Approved Bulk Sale' shall mean the sale of no less than fifteen and no more than twenty five retail stores directly operated by the
Company or its Subsidiaries and other assets 

4

 

associated
therewith in a single transaction for which the Lender has reviewed the terms of such sale and consented in writing to such terms, including, without limitation, the assets being sold, the
consideration to be received by the Company and its Subsidiaries, and the structure of such transaction, with such consent to be at the Lender's sole and absolute discretion. The Lender agrees that if
the Approved Bulk Sale occurs, the Lender will take such actions (at no cost or expense to the Lender) as may be necessary to release the Lien in favor of the Lender on the assets being transferred by
the Company and its Subsidiaries in connection with the Approved Bulk Sale." 

        7.     Effective Date. This Amendment shall be effective as of the date first written above upon the date that the Lender shall
have received: 

        (a)   This
Amendment, duly executed by all parties signatory hereto; 

        (b)   Such
corporate resolutions, incumbency certificates and other authorizing documentation for the Company and the Guarantors as the Lender may request; and 

        (c)   An
amendment fee in an amount equal to $20,000.00. 

        8.     Reaffirmation of the Loan Documents. The Company and each of the Guarantors, by executing this Amendment as provided
below, hereby affirms and agrees that: (a) the execution and delivery by it of and the performance of its obligations under this Amendment shall not in any way amend, impair, invalidate or
otherwise affect any of its obligations under the Loan Documents to which it is party except to the extent expressly amended hereby, (b) the term "Obligations" as used in the Loan Documents
include, without limitation, the Obligations of the Company under the Credit Agreement as amended by this Amendment, and (c) except as expressly amended hereby, the Loan Documents remain in
full force and effect as written. 

        9.     Representations and Warranties. The Company and each of the Guarantors by executing this Amendment as provided below,
hereby represents and warrants to the Lender that: 

        (a)   It
has the requisite power and authority and the legal right to execute, deliver and perform this Amendment and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Amendment. 

        (b)   This
Amendment has been duly executed and delivered on its behalf and constitutes its legal, valid and binding obligation enforceable against it in accordance with its
terms. 

        (c)   There
does not exist an Event of Default or Potential Default. 

        (d)   None
of such Persons has any existing claims, counterclaims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to any of the Loan Documents,
and the Loan Documents, as amended hereby, constitute valid, legal, binding and enforceable obligations of such Persons, as appropriate. 

        10.   No Other Amendment. Except as expressly amended hereby, the Credit Agreement and other Loan Documents shall remain in
full force and effect as written. 

        11.   Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute one and the same agreement. 

[Signatures
Page Following] 

5

 

        IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written. 

	 	 	DIEDRICH COFFEE, INC.,

a Delaware corporation
	

 	
 	

By:	

/s/  ROGER LAVERTY      

	 	 	Name:	Roger Laverty, President and Chief Executive Officer
	

 	
 	

By:	

/s/  MATTHEW C. MCGUINNESS      

	 	 	Name:	Matthew C. McGuinness, Executive Vice President and Chief Financial Officer
	

 	
 	

BANK OF THE WEST
	

 	
 	

By:	

/s/  BRUCE YOUNG      
 Bruce Young, Vice President

	ACKNOWLEDGED AND AGREED TO:
	

COFFEE PEOPLE WORLDWIDE, INC.,

a Delaware corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 

6

 

	

COFFEE PEOPLE, INC.,

an Oregon corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 
	

GLORIA JEAN'S, INC.,

a Delaware corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 
	

EDGLO ENTERPRISES, INC.,

an Illinois corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 

7

 

	GLORIA JEAN'S GOURMET COFFEES CORP.,

an Illinois corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 
	

GLORIA JEAN'S GOURMET COFFEES FRANCHISING CORP.,

an Illinois corporation
	

By:	
 	

/s/  MATTHEW C. MCGUINNESS      
	
 	

 
	Name:	 	Matthew C. McGuinness, President	 	 
	

By:	
 	

/s/  PAMELA J. BRITTON      
	
 	

 
	Name:	 	Pamela J. Britton, Secretary	 	 

8

QuickLinks

THIRD AMENDMENT TO CREDIT AGREEMENT

RECITALS

AGREEMENT

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