Document:

Amendment No. 3 to General Security Agreement

 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”). 

 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. 
  

 2 

 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

	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

	Name:	 	Larry R. Benaroya
	Title:	 	Manager

  

 3First Amendment to Agreement between Tully's Coffee and Guarantors

 Exhibit 10.3 
  
 FIRST AMENDMENT TO 
 AGREEMENT BETWEEN TULLY’S COFFEE AND GUARANTORS 
 RE KENT CENTRAL FINANCING 
  
 THIS FIRST AMENDMENT TO AGREEMENT is entered into this 13th day of May, 2005,
between TULLY’S COFFEE CORPORATION, a Washington corporation (the “Company”) and MARC EVANGER (“Evanger”); RON NEUBAUER (“Neubauer”); KEVIN FORTUN (“Fortun”); TOM T. O’KEEFE
(“O’Keefe”); RICHARD PADDEN (“Padden”); GEORGE HUBMAN (“Hubman”) and LARRY HOOD (“Hood”) (individually, a “Guarantor,” and collectively, the “Guarantors”). 
  
 RECITALS 
  
 A. The Company has entered into a loan facility (the “Loan Facility”) with Kent Central, LLC (“Lender”).
In connection with the Loan Facility, the Guarantors executed and deliver certain Guaranty Agreements (individually, a “Guaranty,” and collectively, the “Guaranties”) pursuant to which each Guarantor, to some extent, guarantees
the payment of the Company’s obligations with respect to the Loan Facility. In connection with the Guaranties, the Guarantors and the Company entered into an agreement dated as of October 30, 2002 (the “Agreement”) which provides for
the Company to compensate the Guarantors through the issuance of warrants to purchase common stock. 
  
 B. The parties desire to enter into this First Amendment to the Agreement to modify the provisions for determining the number of Warrants issued to the
Guarantors as Compensation under the Agreement. 
  
 AGREEMENT

  
 NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and premises herein contained, the parties hereto agree as follows: 
  
 1. Guaranty Compensation. Exhibit A to the Agreement is amended and restated in its entirety with respect to Loan Facility debt guaranteed by the Guarantors after March 31, 2005, as shown in Exhibit A to
this First Amendment. 
  
 2. No Other Amendment.
Except as specifically set forth in this First Amendment, the remaining terms and conditions of the Agreement shall remain unchanged and shall remain in full force and effect. In the event of a conflict between the provisions of this First Amendment
and the Agreement, the provisions of this First Amendment shall prevail. 
  

			
	 Amendment 04-01-05 to Agreement between Tully's and Guarantors
	  	1

 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment. 
  

	
	 GUARANTORS:

	
	 /s/ Marc Evanger

	 Marc Evanger

	  
 /s/ Ron Neubauer

	 Ron Neubauer

	  
 /s/ Richard
Padden

	 Richard Padden

	  
 /s/ Larry Hood

	 Larry Hood

	  
 /s/ George Hubman

	 George Hubman

	  
 /s/ Tom T.
O’Keefe

	 Tom T. O’Keefe

	  
 /s/ Kevin Fortun

	 Kevin Fortun

	
	 TULLY’S COFFEE CORPORATION:

	
	 /s/ John D. Dresel

	 John D. Dresel, Its President and COO

  

			
	 Amendment 04-01-05 to Agreement between Tully's and Guarantors
	  	2

 Exhibit A to Agreement between Tully’s Coffee and Guarantors re Kent Central Financing

 Amended Effective as of April 1, 2005 
  

			
	 Description

	  	 Compensation for the personal guarantee of debt of the Company under the Kent Central LLC credit facility
(the
“Loan Facility”).
  

	Compensation for the Personal Guarantee	  	 As consideration for the personal guarantee of debt outstanding under the Loan Facility after March 31, 2005, each guarantor will be issued
Warrants to purchase the Company’s Common Stock as follows:
  
 1. Each
month, the Company will compute the average balance of the actual outstanding Loan Facility debt guaranteed by each guarantor (the “Guaranteed Amount”). If the amount of outstanding guaranteed debt is less than the total amount of the
guarantees, the Guaranteed Amount shall be determined based on the proportion of the total guarantees for each guarantor. For example, if a particular guarantor had an individual guarantee limit of $200,000 out of total guarantees of $2,000,000, and
the actual amount of outstanding guaranteed debt was $1,450,000, then the Guaranteed Amount for that particular guarantor would be 10% of the $1,450,000, i.e. $145,000.
  
 2. Warrants will be issued to purchase the number of shares of Common Stock based on this formula:

	 	  	  
 Compute: A = 0.833% multiplied by the Guaranteed
Amount for each particular guarantor for the month.

	 	  	  
 Compute: B = Average value of Common Stock share
during the month (based upon actual trading in public stock markets, if available, or amount established by the Company’s Board of Directors for purposes of stock option accounting, if no public stock market trading) minus the Warrant exercise
price per share.

	 	  	  
 Number of Warrant shares for the month for each
guarantor is computed as follows: A divided by B

	 	  	  
 For example, assuming that a guarantor had a
Guaranteed Amount of $100,000 during a month, and assuming that the value of a share of Common Stock was determined to be $1.50 per share, the number of shares for the Warrant would be: (0.833% x $100,000) / ($1.50 - $0.05) = Warrant to purchase 574
shares.
  
 3. If the result of the Warrant calculation is not an even number of
shares, it will be rounded up or down to the nearest whole number of shares. Warrants will be computed monthly, but will be issued quarterly, in arrears, on the 15th of January, April, July and October.
  
 Warrants have an exercise price of $0.05 per share.
  
 Warrants will be exercisable one year after issuance (subject to immediate acceleration for
mergers and acquisition, public offering of the Company’s stock, or conversion of more than 25% of the Company’s outstanding Series A preferred shares in any twelve month period).
  
 Each Warrant will have a ten year term after it becomes exercisable, and be subject to
proportional adjustments for splits, stock dividends, recapitalizations, and the like.
  
 This amendment does not affect Warrants issued as compensation for months prior to April 1, 2005, even though such Warrants may actually be issued after March 31, 2005.

	No shareholder rights	  	  
 Guarantors will not have voting or dividend rights with respect to
unexercised Warrants.

  

			
	 Amendment 04-01-05 to Agreement between Tully's and Guarantors
	  	3

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