Document:

June 24, 2004 Amendment No. 3 to Promissory Note

 EXHIBIT 10.34 
  
 AMENDMENT NO. 3 TO PROMISSORY NOTE 
  
 This Amendment No. 3 to Promissory Note (this “Amendment No. 3”) is dated for reference purposes June 24, 2004,
and is by and between TULLY’S COFFEE CORPORATION, a Washington corporation (“Maker”), and KENT CENTRAL, L.L.C., a Washington limited liability company (“Holder”). 
  
 R E C I T A L S 
  
 A. Maker has previously executed 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”). The Original Note was amended by Amendment to Promissory Note dated March 3, 2003 (“Amendment No. 1”), and Amendment No.
2 to Promissory Note dated June 26, 2003 (“Amendment No. 2). Amendment No. 1, among other changes, increased the maximum amount of the Note to THREE MILLION EIGHT HUNDRED NINETY THOUSAND THIRTY SEVEN AND 09/100 DOLLARS ($3,890,037.09). The
Original Note, Amendment No. 1 and Amendment No. 2 are collectively referred to herein as the “Note.” 
  
 B. Maker has requested that Holder amend certain principal repayment dates and amend the maturity dates of the Note and Holder has, in response to
Maker’s request, agreed to amend the Note in certain respects, all as more fully set forth below. 
  
 NOW, THEREFORE, the parties hereto, in consideration of their mutual promises contained herein and for other good and valuable consideration, hereby agree
to amend the Note as follows: 
  
 AGREEMENT 
  
 1. The portion of paragraph (a) on the first page of the Original Note that
begins with “Notwithstanding anything to the contrary contained herein” through the balance of said paragraph (a) of the Original Note, as previously amended by Amendment No. 2, is hereby deleted and the following shall be substituted in
its place: 
  
 Notwithstanding anything to the contrary contained
herein, in addition to the foregoing monthly interest payments: (i) commencing July 1, 2003, through June 1, 2004, Maker shall pay the monthly installments of principal as more fully set forth under the Schedule of Principal Installments shown in
Column B of the Schedule of Principal Installments in Exhibit C to Amendment No. 2; (ii) commencing July 1, 2004, and on the first (1st) day of each calendar month thereafter until this Note has been fully repaid, Maker shall make monthly installment payments of principal in the amount of Seventy Thousand and 00/100 Dollars ($70,000.00) each month (also
herein called “Principal Installments”); and (iii) if Maker obtains any equity after the date hereof by way of (A) the sale of stock, common or preferred, in Maker or any affiliate of Maker, or (B) the sale of any rights to acquire stock,
common or preferred, in Maker or any affiliate of Maker, Maker shall pay all of the gross cash proceeds from such sale(s) (i.e., there shall be no deduction of any costs of such sale(s)) 
  

 1 

 to Holder. The entire unpaid Principal Balance (including any principal outstanding under the Original
Note Amount [as defined in Amendment No. 1] or the Increased Note Amount [as defined in Amendment No. 1]), plus any accrued interest which remains unpaid under the Original Note, Amendment No. 1 and Amendment No. 2, shall be paid in full in the form
of a final balloon payment on August 1, 2005 (the “Maturity Date”). So long as Maker is not in default under the terms of the Note, all scheduled payments under clauses (i) and (ii) above shall be applied in reduction of principal and all
scheduled payments under clause (iii) above shall, in the absence of a default by Maker under this Note, be applied first to interest due, and any balance shall be applied in reduction of principal. The failure to pay a Principal Installment by not
later than the particular date on which such Principal Installment is due shall be a default under the Note. Maker shall have the right, upon not less than ten (10) days prior written notice to Holder, to pay all principal, and accrued but unpaid
interest under the Original Note, Amendment No. 1 and Amendment No. 2 without penalty. 
  
 2. Paragraph (b) on page 2 of the Original Note is hereby deleted in its entirety and the following shall be substituted in its place: 
  
 (b) From and after the date hereof through September 30, 2004, Maker shall pay interest on the outstanding
Original Note Amount at a rate (herein called the “Note Rate”) equal to the per annum rate of interest from time to time publicly announced by Bank of America as its Prime Rate minus one-half ( 1/2) of one percent per
annum. The term “Prime Rate” as used herein means the rate of interest announced by Bank of America from time to time as its Prime Rate; provided, however, that Bank of America may lend to its customers at interest rates that are at, above
or below its Prime Rate. The Note Rate shall adjust on each date any change in the Prime Rate of Bank of America is announced. In the event Bank of America ceases announcing a Prime Rate, Holder shall have the right to substitute a similar index
using Holder’s commercially reasonable business judgment. Commencing on October 1, 2004, and continuing until the date on which this Note is paid in full, Maker shall pay interest on the outstanding Original Note Amount and the outstanding
Increased Note Amount at a rate (also herein called the “Note Rate”) equal to twelve percent (12%) per annum. All interest on this Note shall be computed on a 360-day year comprised of twelve 30 day months, but shall be charged for the
actual number of days principal is unpaid. The principal and interest hereto shall be payable in lawful money of the United States of America which shall be legal tender for public and private debts at the time of payment. In no event shall the
interest rate exceed the legal rate of interest provided for under the laws of the State of Washington. 
  

 2 

 3. Paragraph (c) on page 2 of the Original Note is hereby deleted in its entirety and the following shall
be substituted in its place: 
  
 (c) On November
1, 2002, and November 1, 2003, Maker shall pay Holder a fee equal to three percent (3%) of the maximum permitted outstanding balance which Maker may borrow hereunder for the period commencing on said dates, disregarding the fact that Maker may not
have delivered fully executed guaranties from all “Guarantors” (described below). 
  
 4. The paragraph on page 3 of the Original Note which begins with the sentence “This Note evidences a revolving line of credit” is hereby deleted in its entirety and the following shall be substituted in its
place: 
  
 This Note evidences a revolving line
of credit. Advances under this Note may be requested by Maker no more frequently than once per week and may be requested only in writing by a person whom Borrower has authorized in writing to request advances from Holder. Once an advance under the
Original Note Amount has been repaid, it may be borrowed again under this Note so long as such advance, together with the then outstanding Principal Balance of the Original Note Amount does not, on the date of the advance, exceed the amount set
forth in Column F (“Maximum Borrowings Permitted Under Original Note Under Amendment No. 3”) of the Schedule of Principal Installments attached to this Amendment No. 3 as Exhibit 1 and by this reference incorporated herein for the month in
which the advance is made. Once an advance under the Increased Note Amount has been repaid, it may be borrowed again under this Note so long as such advance, together with the then outstanding Principal Balance of the Increased Note Amount does not,
on the date of the advance, exceed Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00). Notwithstanding anything to the contrary contained in the Note, the outstanding Principal Balance of the Original Note Amount and the Increased Note
Amount, combined, shall not, at any time, exceed the amount set forth in Column H (“Maximum Permitted Borrowings - Combined Original Note and Increased Note (Asset Based Loan)”) of the Schedule of Principal Installments attached to this
Amendment No. 3 as Exhibit 1. The following parties are presently authorized to request advances under this Note until the Holder receives from Borrower at the Holder’s address shown above written notice of revocation of their authority: Kris
Galvin or such other representative of Maker as shall be designated in writing by Maker from time to time. The unpaid Principal Balance owing on this Note at any time may be evidenced by Holder’s internal records. The Holder shall have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of this Note or any of the Loan Documents; (b) Borrower ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor’s guarantee of this Note; or (d) the Holder in good faith deems that a material adverse change has occurred in Maker’s financial condition. 
  
 5. Section 1 of Amendment No. 1 is hereby revised to add the following:
“Notwithstanding anything to the contrary contained herein, on and after June 1, 2004, the Increased Note Amount shall not exceed Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00). 
  

 3 

 6. Section 9 of Amendment No. 1 is hereby deleted in its entirety and the following is substituted in its
place: 
  
 9. All funds advanced by Holder to
Maker under the Increased Note Amount shall bear interest through September 30, 2004, equal to the “Prime Rate” (as defined in the Note), plus four percent (4%) per annum, computed on a 360-day year comprised of twelve 30 day months (but
interest shall be charged for the actual number of days principal is unpaid). All funds advanced by Holder to Maker under the Increased Note Amount from October 1, 2004, until the Increased Note Amount has been paid in full, shall bear interest at
the rate of twelve percent (12%) per annum, computed on a 360-day year comprised of twelve 30 day months (but interest shall be charged for the actual number of days principal is unpaid). Interest on the Increased Note Amount shall be payable
monthly and shall be included in the “Interest Statement” described in the Note. The Increased Note Amount and any accrued but unpaid interest on the Increased Note Amount shall be due and payable in full on October 1, 2005, if not sooner
depending on the amount of the Acceptable/Eligible Accounts outstanding at any time, i.e., the amount outstanding on the Increased Note Amount shall never be greater than the amount of Acceptable/Eligible Accounts then in existence. 
  
 7. By their execution of counterparts to this Amendment No. 3, Guarantors
hereby: (a) approve the foregoing, (b) agree that nothing contained herein shall in any way terminate or reduce their guaranties, (c) subordinate their security interest in the Collateral to the security interest of Holder which secures repayment of
the Note, as amended by Amendment No. 1, Amendment No. 2 and this Amendment No. 3, and (d) agree that each of their guaranties is hereby amended so that the “Indebtedness” (as defined in each of their guaranties) includes all amounts owed
Lender under the Note, Amendment No. 1, Amendment No. 2 and this Amendment No. 3, i.e., Guarantors are now also guaranteeing Maker’s repayment of the Increased Note Amount and any interest earned thereon. 
  
 8. Except as set forth in this Amendment No. 3, the Original Note, Amendment
No. 1 and Amendment No. 2 shall remain in full force and effect as originally executed by Maker and Lender. 
  
 9. This Amendment may be executed in any number of original counterparts, each of which shall be deemed an original, but all of which when taken together
shall constitute one and the same instrument. 
  
 (Signatures
Appear on Pages 5, 6 and 7) 
  

 4 

			
	 MAKER:

	
	 TULLY’S COFFEE CORPORATION

		
	 By:
	 	

		
	 Name:
	 	

		
	 Title:
	 	

	
	 LENDER:

	
	 KENT CENTRAL, L.L.C.

		
	 By:
	 	 /s/ Larry R. Benaroya

		
	 Name:
	 	 Larry R. Benaroya

		
	 Title:
	 	 Manager

	
	 GUARANTORS:

	
	 /s/ Richard Padden

	 Richard Padden

	
	 /s/ Laurie Padden

	 Laurie Padden

  

 5 

	
	 /s/ Tom T. O’Keefe

	 Tom T. O’Keefe

	
	 /s/ Cathy O’Keefe

	 Cathy O’Keefe

	
	 /s/ Ron Neubauer

	 Ron Neubauer

	
	 /s/ Linda Neubauer

	 Linda Neubauer

	
	 /s/ George Hubman

	 George Hubman

	
	 /s/ Carolyn Hubman

	 Carolyn Hubman

	
	 /s/ Larry Hood

	 Larry Hood

	
	 /s/ Ritchie Hood

	 Ritchie Hood

  

 6 

	
	 /s/ Marc Evanger

	 Marc Evanger

	
	 /s/ Heidi Evanger

	 Heidi Evanger

	
	 /s/ Kevin Fortun

	 Kevin Fortun

  

 7 

																								
	Tully’s Coffee Corporation	  	 	 	  	 	Exhibit 1 to 3rd Amendment to Promissory Note
	Schedule of Principal Installments	  	 	 	  	 	 	  	 	 	  	 	 	  	 	 
	 	  	A

	  	B

	  	C

	  	D

	  	E

	  	F

	  	G

	  	H

	 	  	 	  	 	  	 	  	 	  	 	  	 	  	 	  	(F + G)

	 	  	Due Date

	  	Minimum Principal
Installments for the
Original Note

	  	 Cumulative
Principal
Repayment (after
June 1, 2004) on the
 Original Note
*

	  	Outstanding
Principal under the
Original Note (after
these Minimum
Principal
Installments are
Paid)

	  	Re-Borrowing
Amount
Permitted Under
Original Note
Under
Amendment #3
(After
Repayments in
“B”)

	  	Maximum
Borrowings
Permitted Under
Original Note
Under
Amendment #3

	  	 Maximum
 Amount
 Available for
Borrowing-
 Increased Note
(Asset Based
Loan)

	  	 Maximum
 Permitted
Borrowings-
 Combined
Original Note
 and Increased
 Note
(Asset
 Based Loan)

	As of effective date of 3rd Amendment	  	 	  	 	 	  	$	2,426,965.09	  	 	 	  	$	2,426,965.09	  	$	750,000.00	  	$	3,176,965.09	  	 	 
	 	  	7/1/2004	  	$	70,000.00	  	$	70,000.00	  	$	2,356,965.09	  	$	—  	  	$	2,356,965.09	  	$	750,000.00	  	$	3,106,965.09
	 	  	8/1/2004	  	$	70,000.00	  	$	140,000.00	  	$	2,286,965.09	  	$	—  	  	$	2,286,965.09	  	$	750,000.00	  	$	3,036,965.09
	 	  	9/1/2004	  	$	70,000.00	  	$	210,000.00	  	$	2,216,965.09	  	$	—  	  	$	2,216,965.09	  	$	750,000.00	  	$	2,966,965.09
	 	  	10/1/2004	  	$	70,000.00	  	$	280,000.00	  	$	2,146,965.09	  	$	—  	  	$	2,146,965.09	  	$	750,000.00	  	$	2,896,965.09
	 	  	11/1/2004	  	$	70,000.00	  	$	350,000.00	  	$	2,076,965.09	  	$	—  	  	$	2,076,965.09	  	$	750,000.00	  	$	2,826,965.09
	 	  	12/1/2004	  	$	70,000.00	  	$	420,000.00	  	$	2,006,965.09	  	$	—  	  	$	2,006,965.09	  	$	750,000.00	  	$	2,756,965.09
	 	  	1/1/2005	  	$	70,000.00	  	$	490,000.00	  	$	1,936,965.09	  	$	—  	  	$	1,936,965.09	  	$	750,000.00	  	$	2,686,965.09
	 	  	2/1/2005	  	$	70,000.00	  	$	560,000.00	  	$	1,866,965.09	  	$	—  	  	$	1,866,965.09	  	$	750,000.00	  	$	2,616,965.09
	 	  	3/1/2005	  	$	70,000.00	  	$	630,000.00	  	$	1,796,965.09	  	$	—  	  	$	1,796,965.09	  	$	750,000.00	  	$	2,546,965.09
	 	  	4/1/2005	  	$	70,000.00	  	$	700,000.00	  	$	1,726,965.09	  	$	—  	  	$	1,726,965.09	  	$	750,000.00	  	$	2,476,965.09
	 	  	5/1/2005	  	$	70,000.00	  	$	770,000.00	  	$	1,656,965.09	  	$	—  	  	$	1,656,965.09	  	$	750,000.00	  	$	2,406,965.09
	 	  	6/1/2005	  	$	70,000.00	  	$	840,000.00	  	$	1,586,965.09	  	$	—  	  	$	1,586,965.09	  	$	750,000.00	  	$	2,336,965.09
	 	  	7/1/2005	  	$	70,000.00	  	$	910,000.00	  	$	1,516,965.09	  	$	—  	  	$	1,516,965.09	  	$	750,000.00	  	$	2,266,965.09
	Line Matures (after Amendment 3)	  	8/1/2005	  	$	1,516,965.09	  	$	2,426,965.09	  	$	—  	  	$	—  	  	$	—  	  	$	—  	  	$	—  

  
 See Notes on following page.

  

 8 

 Notes to Exhibit 1-  
  
 Any proceeds from sale of property and equipment (not replaced) would result in principal payments to the Original Note incremental to those
in Column B and would Reduce allowable borrowings in columns F and H by the same amount. 
  
 Any proceeds from sale of equity (gross amounts, before any issue costs) would result in principal payments to the Original Note incremental to those in Column B and would Reduce allowable borrowings in columns F and
H by the same amount. 
  

 9June 22, 2004 First Amendment to Convertible Promissory Note

 Exhibit 10.35 
  
 FIRST AMENDMENT TO CONVERTIBLE PROMISSORY NOTE 
  
 This First Amendment to Convertible Promissory Note (the “First Amendment”) is entered into as of June 22, 2004,
between TULLY’S COFFEE CORPORATION (“Borrower”) and KWM INVESTMENTS, LLC, a Washington limited liability company (“Lender”). 
  
 RECITALS 
  
 A. Borrower has previously executed and delivered to Lender that certain Convertible Promissory Note dated December 14, 2000, in the original face amount
of $3,000,000.00 (the “Note”). Capitalized terms used in this First Amendment that are not defined herein have the meanings assigned to such terms in the Note. 
  
 B. Borrower and Lender have agreed to modify the terms of the Note, as more particularly set forth below. 
  
 NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which hereby are acknowledged, the parties to this First Amendment agree as follows: 
  
 1. Maturity Date. The Note hereby is modified and amended to extend the Maturity Date from January 2, 2005 until August 1, 2005. Accordingly, the term “Maturity Date” as defined in Section 1 of the
Note is hereby modified and amended to refer to August 1, 2005. The entire principal balance of the Loan together with all accrued interest as provided for in Section 2 of this First Amendment shall be paid by Borrower to Lender in a single payment
on or before August 1, 2005. 
  
 2. Warrants; Interest
Rate. Effective as of January 1, 2005, (i) Borrower shall discontinue issuing Warrants to Lender in lieu of interest as provided for in the Note, and (ii) the Loan shall accrue interest on the outstanding principal balance of the Loan at a rate
of twelve percent (12%) per annum. 
  
 3. Other Terms
Unchanged. Except as expressly modified or amended by this First Amendment, all of the terms and conditions of the Note remain in full force and effect. 
  
 ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW. 
  

							
	 BORROWER
	 	 LENDER

		
	 TULLY’S COFFEE CORPORATION
	 	 KWM INVESTMENTS, LLC

				
	 By
	 	 /s/ Kristopher S. Galvin

	 	By	 	 /s/ Dennis Weibling

	 	 	 Kristopher S. Galvin, its Executive VP
	 	 	 	 Dennis Weibling, its President

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