Exhibit 10.2

 

AMENDMENT NO. 3

TO

GENERAL SECURITY AGREEMENT

 

THIS AMENDMENT NO. 3 TO GENERAL SECURITY AGREEMENT (this “Amendment No. 3”) is
dated for reference purposes June 1, 2005, and is made and entered into by and
between TULLY’S COFFEE CORPORATION, a Washington corporation (“Debtor”) and KENT
CENTRAL, L.L.C., a Washington limited liability company (“Lender”).

 

RECITALS

 

A. Debtor and Lender have entered into a General Security Agreement (the
“Agreement”) dated November 1, 2002, as amended by Amendment No. 1 to General
Security Agreement dated June 26, 2003 (“Amendment No. 1”), and Amendment No. 2
to General Security Agreement dated June 7, 2004 (“Amendment No. 2”; the
Agreement, Amendment No. 1 and Amendment No. 2 are herein collectively called
the “Security Agreement”) in order to secure Debtor’s repayment of, and
performance under, that certain Promissory Note dated November 1, 2002, in the
amount of $2,890,037.09, and all amendments thereto (collectively the “Note”) in
favor of Lender.

 

B. Debtor and Lender desire to amend the terms of such Security Agreement in
certain respects.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual terms, covenants and conditions,
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the Debtor and Lender hereby agree as follows:

 

1. Section 1.3.7 of the Security Agreement is deleted in its entirety and the
following is substituted in its place:

 

  1.3.7 any reference to the “Loan Documents” shall mean, collectively, that
certain Promissory Note dated November 1, 2002, in favor of Holder in the
original principal amount of up to TWO MILLION EIGHT HUNDRED NINETY THOUSAND
THIRTY SEVEN AND 09/100 DOLLARS ($2,890,037.09) (the “Original Note”), as
amended by Amendment to Promissory Note dated March 3, 2003 (“Amendment No. 1”),
Amendment No. 2 to Promissory Note dated June 26, 2003 (“Amendment No. 2),
Amendment No. 3 to Promissory Note dated June 7, 2004 (“Amendment No. 3”) and
Amendment No. 4 to Promissory Note dated June 1, 2005 (“Amendment No. 4”; the
Original Note, Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment
No. 4 are collectively herein called the “Note”); this General Security
Agreement and any other instruments or documents evidencing or relating to the
foregoing, and all amendments to any of the foregoing, but expressly excluding
the Lease Agreement date August 16, 1999 entered into between Lender and Debtor
(the “Lease”).

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2. Section 1.3.8 of the Security Agreement is deleted in its entirety and the
following is substituted in its place:

 

  1.3.8 any reference to “Permitted Senior Encumbrances” shall mean any one or
more of (i) those certain security interest filings made by UCC Ueshima Coffee
Company Ltd. (“UCC Coffee”) pursuant to that certain Tully’s Coffee Exclusive
License Agreement dated April 11, 2001, between UCC Coffee and Debtor and
evidenced by those certain UCC-1 Financing Statements filed in the State under
File Nos. 2001-101-0027 and 2001-102-0089 and certain filings made with the
United States Trademark Office; (ii) that certain UCC-1 Financing Statement
filed by Fres-Co System USA, Inc. in the State under filing no. 2000-278-0261;
(iii) that certain UCC-1 Financing Statement filed by Tri-Brands, Inc. in the
State under filing no. 2001-031-0234 (together with any related filing in the
state of Oregon); and (iv) all UCC filings made by Northrim Funding Services, a
division of Northrim Bank (“Northrim”) in connection with Northrim’s security
interest in Debtor’s accounts receivable and inventory.

 

3. Section 3.1.2 of the Security Agreement is deleted in its entirety and the
following is substituted in its place:

 

3.1.2 the Collateral is genuine and is owned by the Debtor free of all security
interests, mortgages, liens, claims, charges and other encumbrances (herein
collectively called “Encumbrances”), save for the security constituted by this
General Security Agreement and the Permitted Senior Encumbrances and Debtor
shall not increase, expand or add to the obligations which are presently secured
by the Permitted Senior Encumbrances (this Section 3.1.2 shall not be construed
to restrict Debtor’s ability to borrow under its secured lending agreement with
Northrim);

 

4. The final paragraph of Section 4.1.2 of the Security Agreement is deleted in
its entirety and the following is substituted in its place:

 

provided always, that until default, the Debtor may: (y) in the ordinary course
of the Debtor’s business, sell or lease Inventory, and (z) make a disposition of
Collateral in connection with Debtor’s secured lending agreement with Northrim;

 

5. Section 22.2 of the Security Agreement is deleted in its entirety.

 

6. Except as specifically set forth above, the terms and provisions of the
Security Agreement shall remain as originally executed by the Debtor and the
Lender.

 

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IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 3 as of the
day and year first above written.

 

DEBTOR:

 

TULLY’S COFFEE CORPORATION, a Washington

corporation

 

By:  

/s/ Kristopher S. Galvin

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Name:   Kristopher S. Galvin Title:   Executive Vice President and CFO

 

LENDER:

 

KENT CENTRAL, L.L.C., a Washington

limited liability company

 

By:  

/s/ Larry R. Benaroya

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Name:   Larry R. Benaroya Title:   Manager

 

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