Document:

Exhibit 10.2  

GENERAL SECURITY AGREEMENT  

This
General Security Agreement made as of the 1st day of November, 2002, 

	Between:	 	TULLY'S COFFEE CORPORATION
3100 AIRPORT WAY SOUTH
SEATTLE, WA 98134

	 	 	(the "Debtor")
	

And:	
 	

 
	

 	
 	

KENT CENTRAL, L.L.C.
1001 FOURTH AVENUE, SUITE 4700
SEATTLE, WA 98154

	 	 	(the "Lender")

	I.	 	Security
	

1.1	
 	

For value received, the Debtor grants and creates the security constituted by this General Security Agreement and agrees to the terms, covenants, agreements, conditions, provisos and other matters set out in this General Security
Agreement.
	

1.2	
 	

As general and continuing security for the Obligations (defined in clause 2.1 hereof), the Debtor hereby grants to the Lender a security interest in all presently owned and hereafter acquired personal property of the Debtor of whatsoever nature
and kind and wheresoever situate and all proceeds thereof and therefrom, including Cash Proceeds and Proceeds, renewals thereof, Accessions thereto and substitutions therefor (all of which are herein collectively called the "Collateral"), including,
without limiting the generality of the foregoing, all the presently owned or held and hereafter acquired right, title and interest of the Debtor in and to all Accounts, Goods (including all accessories, attachments, additions and Accessions thereto)
Chattel Paper, Deposit accounts, Documents (whether negotiable or not), Instruments, Intangibles and General Intangibles, Investment Property, Money, Securities and Software, and all:
	

 	
 	

 	
 	

(a)	
 	

Inventory of whatsoever nature and kind and wheresoever situate;
	

 	
 	

 	
 	

(b)	
 	

Equipment (other than Inventory) of whatsoever nature and kind and wheresoever situate, including, without limitation, all machinery, too1s, apparatus, plant, furniture, fixtures and vehicles of whatsoever nature and kind;
	

 	
 	

 	
 	

(c)	
 	

book accounts and book debts and generally all Accounts, debts, dues, claims, choses in action and demands of every nature and kind howsoever arising or secured, including letters of guarantee and advices of credit which are now due, owing or
accruing or growing due to or owned by or which may hereafter become due, owing or accruing or growing due to or owned by the Debtor (all of which are herein collectively called the "Debts");
	

 	
 	

 	
 	

(d)	
 	

deeds, documents, writings, papers, books of account and other books relating to or being records of Debts, Chattel Paper or Documents or by which such are or may hereafter be secured, evidenced, acknowledged or made payable;
	

 	
 	

 	
 	

(e)	
 	

contractua1 rights and insurance claims and all goodwill, patents, trademarks, copyrights and other intellectual or industrial property;
	

 	
 	

 	
 	

(f)	
 	

monies other than trust monies lawfully belonging to others;
	
 	
 	

 	
 	

 	
 	

 

 

	

 	
 	

 	
 	

(g)	
 	

personal property described in any schedule now or hereafter annexed hereto;
	

 	
 	

 	
 	

(h)	
 	

right, title and interest of the Debtor in and to leasehold property; and
	

 	
 	

 	
 	

(i)	
 	

goodwill of the Debtor;
	

1.3	
 	

In this General Security Agreement:
	

 	
 	

1.3.1	
 	

any reference to "Authorized Officer" shall mean, with respect to Debtor, Anthony J. Gioia, Kris Galvin or any other person designated in writing by the President or Chief Financial Officer of Debtor to serve as an Authorized Officer for the purposes
of this Agreement.
	

 	
 	

1.3.2	
 	

any reference to "Business Premises" shall mean real property which the Debtor uses in its business, if any, excluding the real property leased by Lender to Debtor with a primary street address of 3100 Airport Way South, Seattle,
Washington;
	

 	
 	

1.3.3	
 	

any reference to "Debtor" and the personal pronoun "it" or "its" and any verb relating thereto and used therewith shall be read and construed ass required by and in accordance with the context in which such words are used depending upon whether the
Debtor is one or more corporations and, if more than one Debtor executes this General Security Agreement, this General Security Agreement shall apply and be binding upon each of them jointly and severally and all obligations hereunder shall be joint
and several;
	

 	
 	

1.3.4	
 	

any reference to "Environmental Laws" shall mean any laws, regulations, orders, by-laws, permits or lawful requirements of any governmental authority with respect to environmental protection or regulating hazardous materials;
	

 	
 	

1.3.5	
 	

any reference to "General Security Agreement" shall, unless the context otherwise requires, be deemed a reference to this General Security Agreement as amended from time to time by written agreement together with the schedules hereto and any
schedules added hereto pursuant to the provisions hereof;
	

 	
 	

1.3.6	
 	

any reference to "Hazardous Materials" shall mean any asbestos material, urea formaldehyde, explosives, radioactive materials, pollutants, contaminants, hazardous substances, and corrosive substances, toxic substances, special waste or waste of any
kind including, without limitation, compounds known as chlorobiphenyls and any substance the storage, manufacture, disposal, treatment, generation, use, transport, remediation or release of which into the environment is prohibited, controlled or
licensed under Environmental Laws:
	

 	
 	

1.3.7	
 	

any reference to the "Loan Documents" shall mean, collectively, that certain Promissory Note of even date herewith in the principal amount of up to $2,890,037.09 (the "Note"); this General Security Agreement and any other instruments or documents
evidencing or relating to the foregoing, but expressly excluding the Lease Agreement date August 16, 1999 entered into between Lender and Debtor (the "Lease").
	
 	
 	

 	
 	

 	
 	

 

2

 

	

 	
 	

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 any lender to Debtor under the "Asset Based Financing Facility" described in Section 22.2 below.
	

 	
 	

1.3.9	
 	

any reference to "UCC" shall mean the Uniform Commercial Code of the State as amended from time to time, including any amendments thereto and any Act substituted therefor and amendments thereto;
	

 	
 	

1.3.10	
 	

any reference to the "State" shall mean the State of Washington; and
	

 	
 	

1.3.11	
 	

the terms "Goods", "Chattel Paper", "Documents", "Equipment", "Accounts" "Consumer Goods", "Instruments", "Intangibles", "General Intangibles", "Investment Property", "Securities", "Proceeds", "Inventory", "Software", "Deposit accounts" and
"Accessions" and other words and expressions which have been defined in the UCC shall be interpreted in accordance with their respective meanings given in the UCC (either in the singular or plural thereof), as the context requires unless otherwise
defined herein or unless the context otherwise requires.
	
II.	
 	

Obligations Secured
	

2.1	
 	

The security constituted by this General Security Agreement is general and continuing security for payment, performance and satisfaction of each and every obligation, indebtedness and liability of the Debtor to the Lender under the Loan Documents
(including interest thereon), present or future, direct or indirect, absolute or contingent, matured or not, extended or renewed, wheresoever and howsoever incurred, and any ultimate unpaid balance thereof, including all future advances and
re-advances, and whether the same is from time to time reduced and thereafter increased or entirely extinguished and thereafter incurred again and whether the Debtor be bound alone or with another or others and whether as principal or surety (all of
which obligations, indebtedness and liabilities are herein collectively called the "Obligations").
	

2.2	
 	

This General Security Agreement and the security constituted hereby are in addition to and not in substitution for any other security or securities which the Lender may now or from time to time hold or take from the Debtor or from any other person
whosoever.
	
III.	
 	

Representations and Warranties of Debtor
	

3.1	
 	

The Debtor represents and warrants that:
	

 	
 	

3.1.1	
 	

this General Security Agreement has been authorized, executed and delivered in accordance with resolutions of the directors of the Debtor and all other matters and things have been done and performed so as to authorize and make the execution and
delivery of this General Security Agreement, the creation of the security constituted hereby and the performance of the Debtor's obligations hereunder legal, valid and binding;
	
 	
 	

 	
 	

 	
 	

 

3

 

	

 	
 	

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;
	

 	
 	

3.1.3	
 	

the Debtor has good and lawful authority to create the security in the Collateral constituted by this General Security Agreement;
	

 	
 	

3.1.4	
 	

with respect to Goods (including Inventory) comprised in the Collateral, the locations specified in the Location Schedule are accurate and complete (save for Goods in transit to such locations and Inventory on lease or consignment) and all fixtures
or Goods about to become fixtures which form part of the Collateral will be situate at one of the locations specified in the Location Schedule attached hereto;
	

 	
 	

3.1.5	
 	

except as set forth in the attached Schedule 3.1.5, there are no existing or, to Debtor's knowledge threatened claims, actions, orders or investigations under any Environmental Laws against the Debtor or against the Business
Premises.
	

 	
 	

3.1.6	
 	

the obligations (the "Paid-Off Obligations") which are or were secured by security agreements perfected by and/or related to those certain UCC-1 Financing Statements filed in the State under File Nos. 94-213-0426, 99-152-0016, 2001-102-0088,
98-014-0246, 98-279-0155, 2001-172-0049, 2001-1720-0050, 2001-172-0051, and 2001-172-0052 (the "To Be Terminated Financing Statements") have been satisfied in full. All of the To Be Terminated Financing Statements, except the one filed under
2001-1720052 (the "Colburne Financing Statement"), shall be terminated no later than November 7, 2002, the failure to do so being an Event of Default hereunder and under the Note. In addition thereto, Debtor shall have either (a) terminated
the Colbourne Financing Statement by November 7, 2002, or (b) provided Lender with evidence of the satisfaction of all obligations related to the Colbourne Financing Statement by November 7, 2002 and thereafter diligently and
continuously be pursuing the filing of a termination statement for the Colbourne Financing Statement, the failure to do either being an Event of Default hereunder and under the Note.
	
IV.	
 	

Covenants of the Debtor
	

4.1	
 	

The Debtor covenants and agrees that at all times while this General Security Agreement remains in effect the Debtor will:
	

 	
 	

4.1.1	
 	

defend the Collateral for the benefit of the Lender against the claims and demands of all other persons;
	

 	
 	

4.1.2	
 	

not, without the prior written consent of the Lender:
	

 	
 	

 	
 	

(a)	
 	

create or permit to exist any Encumbrance against any of the Collateral which ranks or could in any event rank in priority to or pari passu with the security constituted by this General Security
Agreement, save for Encumbrances approved in writing by the Lender prior to creation or assumption; or
	
 	
 	

 	
 	

 	
 	

 

4

 

	

 	
 	

 	
 	

(b)	
 	

grant, sell, exchange, transfer, assign, lease or otherwise dispose (collectively, a "Disposition") of the Collateral unless (i) after such Disposition the aggregate net book value of the remaining Collateral, excluding goodwill, is equal to or
greater than the aggregate net book value of the Collateral, excluding goodwill, on the date of this General Security Agreement, or (ii) the net sales proceeds from the Disposition of such Collateral, after payment of ordinary, necessary and
reasonable sales' costs and commissions, is paid to Lender to reduce the Obligations (and the permitted outstanding principal balance of the Note shall be correspondingly reduced);
	

 	
 	

 	
 	

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 the Asset Based Financing Facility referred to,
and subject to the limitations contained, in Section 22.2 below;
	

 	
 	

4.1.3	
 	

fully and effectively maintain and keep maintained valid and effective the security constituted by this General Security Agreement;
	

 	
 	

4.1.4	
 	

notify the Lender promptly of:
	

 	
 	

 	
 	

(a)	
 	

any change in the information contained in the Schedules hereto relating to the Debtor, or any change in the Debtor's name;
	

 	
 	

 	
 	

(b)	
 	

the details of any significant acquisition of Collateral outside the ordinary course of business;
	

 	
 	

 	
 	

(c)	
 	

the details of any material claims or litigation affecting Debtor or the Collateral; and
	

 	
 	

 	
 	

(d)	
 	

any material loss or damage to the Collateral not covered by insurance;
	

 	
 	

4.1.5	
 	

keep the Collateral in good order, condition and repair (in the locations specified in the Location Schedule or such other locations as the Lender may approve in writing) and not use the Collateral in violation of the provisions of this General
Security Agreement or any other agreement relating to the Collateral or any policy insuring the Collateral or any applicable statute, law, by-law, rule, regulation or ordinance;
	

 	
 	

4.1.6	
 	

carry on and conduct the business of the Debtor in a commercially reasonable manner and so as to protect and preserve the Collateral and to keep, in accordance with generally accepted accounting principles, consistently applied, proper books of
account for the Debtor's business as well as accurate and complete records concerning the Collateral and, at the Lender's request, mark any and all such records and the Collateral so as to indicate the security constituted by this General Security
Agreement;
	

 	
 	

4.1.7	
 	

forthwith pay when due:
	

 	
 	

 	
 	

(a)	
 	

all obligations to its employees and all obligations to others which relate to its employees when due, including, without limitation, all taxes, duties, levies, government fees, claims and dues related to its employees;
	

 	
 	

 	
 	

(b)	
 	

all taxes, assessments, rates, duties, levies, government fees, claims and dues lawfully levied, assessed or imposed upon it or the Collateral when due, unless the Debtor shall in good faith contest its obligations so to pay and shall furnish such
security as the Lender may require; and
	

 	
 	

 	
 	

(c)	
 	

all Encumbrances which rank or could in any event rank in priority to or pari passu with the security constituted by this General Security Agreement, including the Permitted Senior
Encumbrances;

5

  

	 	 	4.1.8	 	insure the Collateral for such periods, in such amounts, on such terms and against loss or damage by fire and such other risks as the Lender shall reasonably direct (but in any event in accordance with prudent business
practice) with loss payable to the Lender and the Debtor, as insureds, as their respective interests may appear, and to pay when due all premiums for such insurance, provided that Lender agrees that Debtor may, at its option, finance the payment of
any such premiums;
	

 	
 	

4.1.9	
 	

make available to the Lender from time to time during normal business hours promptly upon request:
	

 	
 	

 	
 	

(a)	
 	

any Documents, Instruments, Securities and Chattel Paper comprised in or relating to the Collateral;
	

 	
 	

 	
 	

(b)	
 	

all books of account and all records, ledgers, reports, correspondence, schedules, documents, statements, lists and other writings relating to the Collateral for the purpose of inspecting, auditing or copying the same;
	

 	
 	

 	
 	

(c)	
 	

all financial statements prepared by or for the Debtor regarding the Debtor's business to the extent such disclosure is not in violation of any applicable laws or regulations;
	

 	
 	

 	
 	

(d)	
 	

all policies and certificates of insurance relating to the Collateral; and
	

 	
 	

 	
 	

(e)	
 	

such information concerning the Collateral, the Debtor and Debtor's business and affairs as the Lender may reasonably require;
	

 	
 	

4.1.10	
 	

forthwith pay when due all reasonable costs, charges, expenses and legal fees and disbursements which may be incurred by the Lender in:
	

 	
 	

 	
 	

(a)	
 	

inspecting the Collateral upon or after the occurrence of an Event of Default;
	

 	
 	

 	
 	

(b)	
 	

negotiating, preparing, perfecting and registering this General Security Agreement and other documents, whether or not relating to this General Security Agreement, including the Loan Documents;
	

 	
 	

 	
 	

(c)	
 	

investigating title to the Collateral;
	

 	
 	

 	
 	

(d)	
 	

taking, recovering, keeping possession of and insuring the Collateral upon or after the occurrence of an Event of Default; and
	

 	
 	

 	
 	

(f)	
 	

all other actions and proceedings taken in connection with the preservation of the Collateral under the terms of this General Security Agreement and the confirmation, perfection and enforcement of this General Security Agreement and of any other
security held by the Lender as security for the Obligations;
	

 	
 	

4.1.11	
 	

at the Lender's request at any time and from time to time execute and deliver such further and other documents and instruments and do all other acts and things as the Lender reasonably requires in order to give effect to this General Security
Agreement or to confirm and perfect, and maintain perfection of, the security constituted by this General Security Agreement in favor of the Lender;
	

 	
 	

4.1.12	
 	

permit the Lender and its representatives, at all reasonable times, access to all the Debtor's property, assets and undertakings and to all its books of account and records for the purpose of inspection and render all assistance necessary for such
inspection;
	

 	
 	

4.1.13	
 	

not store, manufacture, dispose, treat, generate, use, transport, remediate or release Hazardous Materials on or from the Business Premises except in compliance with all Environmental Laws;
	
 	
 	

 	
 	

 	
 	

 

6

 

	

 	
 	

4.1.14	
 	

notify the Lender in writing of any of the following matters of which Debtor has actual notice of and which could have a material adverse affect upon Debtor's business or the Collateral:
	

 	
 	

 	
 	

(a)	
 	

any enforcement, clean-up, removal, litigation or other governmental, regulatory, judicial or administrative action instituted, contemplated or threatened against the Debtor or the Business Premises pursuant to any Environmental Laws;
	

 	
 	

 	
 	

(b)	
 	

all claims, actions, orders or investigations, made or threatened by any third party against the Debtor or the Business Premises relating to damage, contribution, cost recovery, compensation, loss or injuries resulting from any Hazardous Materials or
any breach of the Environmental Laws; and
	

 	
 	

 	
 	

(c)	
 	

the discovery of any Hazardous Materials or any occurrence or condition on the Business Premises or any real property adjoining or in the vicinity of the Business Premises which could subject the Debtor or the Business Premises to any fines,
penalties, orders or proceedings under any Environmental Laws.
	
V.	
 	

Payments and Proceeds
	

5.1	
 	

Subject to the rights of the holders of any Permitted Senior Encumbrances, after default under this General Security Agreement, the Lender may notify all or any Account Debtors of the security constituted by this General Security Agreement and may
also direct such Account Debtors to make all payments on the Collateral to the Lender.
	
VI.	
 	

Lender Actions
	

6.1	
 	

The Debtor hereby authorizes the Lender to:
	

 	
 	

 	
 	

(a)	
 	

file such financing statements and other documents and do such acts, matters and things (including completing and adding schedules hereto identifying the Collateral or any permitted Encumbrances affecting collateral or identifying the locations at
which the Debtor's business is carried on and the Collateral and records relating thereto are situate), consistent with the terms and conditions of this General Security Agreement, as the Lender may deem appropriate to perfect and continue the
security constituted hereby, to protect and preserve the Collateral and to realize upon the security constituted hereby and the Debtor hereby irrevocably constitutes and appoints the Lender the true and lawful attorney of the Debtor, with full power
of substitution to do any of the foregoing in the name of the Debtor whenever and wherever it may be deemed necessary or expedient by the Lender; and
	

 	
 	

 	
 	

(b)	
 	

make enquiries from time to time of any governmental authority with respect to the Debtor's compliance with Environmenta1 Laws and the Debtor agrees that the Debtor will from time to time provide to the Lender with such written authorization as the
Lender may reasonably require in order to facilitate the obtaining of such information.
	

6.3	
 	

If the Debtor fails to perform any of its Obligations hereunder, the Lender may, after written notice to Debtor, but shall not be obliged to, perform any or all of such Obligations without prejudice to any other rights and remedies of the Lender
hereunder, and any payments made and any reasonable costs, charges, expenses and legal fees and disbursements incurred in connection therewith shall be payable by the Debtor to the Lender forthwith with interest until paid at the highest rate borne
by any of the Obligations and such amounts shall form part of the Obligations and constitute a charge upon the Collateral in favor of the Lender prior to all claims subsequent to this General Security Agreement.
	
 	
 	

 	
 	

 	
 	

 

7

 

	
VII.	
 	

Default
	

7.1	
 	

The Debtor shall be in default under this General Security Agreement, unless otherwise agreed in writing by the Lender, upon the occurrence of any of the following events:
	

 	
 	

7.1.1	
 	

the Debtor makes default in payment when due, after the expiration of any applicable grace periods, of any of the Obligations which are indebtedness or liabilities or the Debtor fails to perform or satisfy any other of the Obligations; or
	

 	
 	

7.1.2	
 	

the Debtor is in breach of any written term, condition, proviso, agreement or covenant to the Lender contained in any of the Loan Documents, or any representation or warranty given by an Authorized Officer of the Debtor to the Lender in connection
with the Loan Documents is untrue; or
	

 	
 	

7.1.3	
 	

the Debtor makes an assignment for the benefit of its creditors, is declared bankrupt, makes a proposal or otherwise takes advantage of provisions for relief under the Bankruptcy Act or similar legislation in any jurisdiction, or makes an authorized
assignment; or
	

 	
 	

7.1.4	
 	

there is instituted by or against the Debtor, and not dismissed within 90 days thereof, any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Debtor;
or
	

 	
 	

7.1.5	
 	

the Debtor ceases or an officer of Debtor with apparent authority to bind Debtor threatens to Lender or any holder of a Permitted Senior Encumbrance to cease to carry on business or makes or agrees to make a bulk sale of assets or commits or an
officer of Debtor with apparent authority to bind Debtor threatens to Lender or any holder of a Permitted Senior Encumbrance to commit an act of bankruptcy; or
	

 	
 	

7.1.6	
 	

a receiver, receiver and manager or receiver-manager of all or any material part of the Collateral or of any other material property, assets or undertakings of the Debtor is appointed; or
	

 	
 	

7.1.7	
 	

any execution, sequestration, extent or other process of any court materially adversely affecting the Collateral becomes enforceable against the Debtor or a distress or ana1ogous process is levied upon the Collateral or any material part thereof;
or
	

 	
 	

7.1.8	
 	

an order is made or an effective resolution is passed for winding-up the Debtor; or
	

 	
 	

7.1.9	
 	

without the prior written consent of the Lender, the Debtor creates or permits to exist any Encumbrance against any of the Collateral (other than any of the Permitted Senior Encumbrances) which ranks or could in any event rank in priority to or
pari passu with the security constituted by this General Security Agreement; or
	

 	
 	

7.1.10	
 	

the holder of any Encumbrance against any of the Collateral (other than the holder of any Permitted Senior Encumbrance) does anything to enforce or realize on such Encumbrance; or
	

 	
 	

7.1.12	
 	

the Lender in good faith believes that a material adverse change has occurred in the financial condition of Debtor; or
	

 	
 	

7.1.13	
 	

any certificate, statement, representation, warranty or audit report herewith, heretofore or hereafter furnished by an Authorized Officer of the Debtor to the Lender, whether in connection with any of the Loan Documents or otherwise (excluding the
Lease):
	

 	
 	

 	
 	

(a)	
 	

proves to have been false in any material respect at the time as of which the facts therein set forth were stated or certified; or
	
 	
 	

 	
 	

 	
 	

 

8

 

	

 	
 	

 	
 	

(b)	
 	

proves to have knowingly omitted any substantial contingent or unliquidated liability or claim against the Debtor when such disclosure was called for in such certificate, etc.;
	

 	
 	

 	
 	

or upon the date of execution of this General Security Agreement, there shall have been any material adverse change in any of the facts disclosed by any such certificate, statement, representation, warranty or audit report, which change shall not
have been disclosed to the Lender at or prior to the time of such execution.
	
VIII.	
 	

Enforcement
	

8.1	
 	

Upon any default under this General Security Agreement, the Lender may declare any or all of the Obligations to become immediately due and payable.
	

8.2	
 	

Upon default under this General Security Agreement, the security hereby constituted will immediately become enforceable.
	

8.3	
 	

To enforce and realize on the security constituted by this General Security Agreement, the Lender may take any action permitted by law or in equity, as it may deem expedient, and in particular, without limiting the generality of the foregoing, the
Lender may do anyone or more of the following:
	

 	
 	

8.3.1	
 	

appoint by instrument a receiver, receiver and manager or receiver-manager (the person so appointed is herein called the "Receiver") of the Collateral, with or without bond as the Lender may determine, and from time to time in its sole discretion
remove such Receiver and appoint another in its stead;
	

 	
 	

8.3.2	
 	

enter upon any premises of the Debtor and take possession of the Collateral with power to exclude the Debtor, its agents and its servants therefrom, without becoming liable as a mortgagee in possession;
	

 	
 	

8.3.3	
 	

preserve, protect and maintain the Collateral and make such replacements thereof and repairs and additions thereto as the Lender may deem advisable;
	

 	
 	

8.3.4	
 	

sell, lease or otherwise dispose of or concur in selling, leasing or otherwise disposing of all or any part of the Collateral, whether by public or private sale or lease or otherwise, in such manner, at such price as can be reasonably obtained
therefor and on such terms as to credit and with such conditions of sale and stipulations as to title or conveyance or evidence of title or otherwise as to the Lender may seem reasonable, provided that the Debtor will not be entitled to be credited
with the proceeds of any such sale, lease or other disposition until the monies therefor are actually received; and
	

 	
 	

8.3.5	
 	

exercise all of the rights and remedies of a secured party under the UCC.
	

8.4	
 	

A Receiver appointed pursuant to this General Security Agreement shall be the agent of the Debtor and not of the Lender and, to the extent permitted by law or to such lesser extent permitted by its appointment, shall have all the powers oft the
Lender hereunder, and in addition shall have power to carry on the business of the Debtor and for such purpose from time to time to borrow money either secured or unsecured, and if secured by a security on any of the Collateral, any such security may
rank in priority to or pari passu with or behind the security constituted by this General Security Agreement, and if it does not so specify such security shall rank in priority to the security
constituted by this General Security Agreement.
	
 	
 	

 	
 	

 	
 	

 

9

 

	

8.5	
 	

Subject to applicable law and the claims, if any, of the holders of any Permitted Senior Encumbrances, all amounts realized from the disposition of the Collateral pursuant to this General Security Agreement will be applied as the Lender, in its sole
discretion, may direct as follows:
	

 	
 	

Firstly:	
 	

in or toward payment of all costs, charges and expenses, including legal fees and disbursements incurred by the Lender in connection with or incidental to:
	

 	
 	

 	
 	

(a)	
 	

the exercise by the Lender of all or any of the powers granted to it pursuant to this General Security Agreement; and
	

 	
 	

 	
 	

(b)	
 	

the appointment of the Receiver and the exercise by the Receiver of all or any of the powers granted to the Receiver pursuant to this General Security Agreement, including the Receiver's reasonable remuneration and all outgoings properly payable by
the Receiver;
	

 	
 	

Secondly:	
 	

in or toward payment to the Lender of all principal and other monies (except interest) due in respect of the Obligations;
	

 	
 	

Thirdly:	
 	

in or toward payment to the Lender of all interest remaining unpaid in respect of the Obligations; and
	

 	
 	

Fourthly:	
 	

any surplus will be paid to the Debtor.
	
IX.	
 	

Deficiency
	

9.1	
 	

If the amounts realized from the disposition of the Collateral are not sufficient to pay the Obligations in full to the Lender, the Debtor will immediately pay to the Lender the amount of such deficiency.
	
X.	
 	

Rights Cumulative
	

10.1	
 	

All rights and remedies of the Lender set out in this General Security Agreement are cumulative and no right or remedy contained herein is intended to be exclusive but each will be in addition to every other right or remedy contained herein or in any
existing or future general security agreement or now or hereafter existing at law or in equity or pursuant to any other agreement between the Debtor and the Lender that may be in effect from time to time.
	
XI.	
 	

Appointment of Attorney
	

11.1	
 	

The Debtor hereby irrevocably appoints the Lender or the Receiver, as the case may be, with full power of substitution, to be the attorney of the Debtor for and in tile name of the Debtor to sign, endorse or execute under seal or otherwise any deeds,
documents, transfers, checks, instruments, demands, assignments, assurances or consents that the Debtor is obliged to sign, endorse or execute under the terms and conditions of this General Security Agreement and generally to use the name of the
Debtor and to do all things as may be necessary or incidental to the exercise of all or any of the powers conferred on the Lender or the Receiver, as the case may be, pursuant to this General Security Agreement.
	
XII.	
 	

Liability of Lender
	

12.1	
 	

The Lender shall not be responsible or liable for any debts contracted by it, for damages to persons or property or for salaries or non-fulfillment of contracts during any period when the Lender shall manage the Collateral upon entry of the business
of the Debtor, as herein provided, nor shall the Lender be liable to account as mortgagee in possession or for anything except actual receipts or be liable for any loss or realization or for any default or omission for which a mortgagee in possession
may be liable.

10

  

	12.2	 	The Lender shall not be bound to do, observe or perform or to see to the observance or performance by the Debtor of any obligations or covenants imposed upon the Debtor nor shall the Lender, in the case of Securities
Instruments or Chattel Paper, be obliged to reserve rights against other persons, nor shall the Lender be obliged to keep any of the Collateral identifiable.
	

12.3	
 	

The Lender shall not be obliged to inquire into the right of any person purporting to be entitled under the UCC to information and materials from the Lender by making a demand upon the Lender for such information and materials and the Lender shall be
entitled to comply with such demand and shall not be liable for having complied with such demand notwithstanding that such person may in fact not be entitled to make such demand.
	

12.4	
 	

The Debtor will indemnify the Lender and hold the Lender harmless from and against any and all claims, costs, losses, demands, actions, causes of action, lawsuits, damages, penalties, judgments and liabilities of whatsoever nature and kind in
connection with or arising out of any representation or warranty given by an Authorized Officer of the Debtor, being untrue, the breach of any term, condition, proviso, agreement or covenant to the Lender, or the exercise of any of the rights and or
remedies of the Lender, or any transaction contemplated in this General Security Agreement.
	

12.5	
 	

The Debtor hereby waives any applicable provision of law permitted to be waived by it which imposes higher or greater obligations upon the Lender than provided in this General Security Agreement.
	

12.6	
 	

Any amount owing by the Debtor hereunder shall, from the date of disbursement until the date the recipient receives reimbursement, be deemed advanced to the Debtor by the Lender, shall be deemed to be Obligations and shall bear interest at the
highest rate per annum from time to time charged by the Lender on any of the other Obligations until paid.
	
XIII.	
 	

Appropriation of Payments and Offset
	

13.1	
 	

Subject to any applicable provisions of the UCC, any and all payments made in respect of the Obligations from time to time and monies realized from any security held therefor (including monies collected in accordance with or rca1ized on any
enforcement of this General Security Agreement) may be applied to such part or parts of the Obligations as the Lender may see fit, and the Lender may at all times and from time to time change any appropriation as the Lender may fit or, at the option
of the Lender, such payments and monies may be held unappropriated in a collateral account or released to the Debtor, all without prejudice to the liability of the Debtor or to the rights of the Lender hereunder.
	

13.2	
 	

Without limiting any other right of the Lender, whenever any of the Obligations is immediately due and payable or the Lender has the right to declare any of the Obligations to be immediately due and payable (whether or not it has so declared), the
Lender may, in its sole discretion, set off against any of the Obligations any and all monies then owed to the Debtor by the Lender in any capacity, whether or not due and to do so even though any charge therefor is made or entered on the Lender's
records subsequent thereto, and the Lender shall be deemed to have exercised such right to set off immediately at the time of making its decision.
	
XIV.	
 	

Liability to Advance, Etc.
	

14.1	
 	

None of the preparation, execution, perfection and registration of this General Security Agreement or the advance of any monies shall bind the Lender to make any advance or loan or further advance or loan, or renew any note or extend any time for
payment of any indebtedness or liability of the Debtor to the Lender or extend any term for performance or satisfaction of any obligation of the Debtor to the Lender.
	
 	
 	

 	
 	

 	
 	

 

11

 

	

14.2	
 	

Nothing herein contained shall in any way oblige the Lender to continue, renew, extend time for payment of or accept anything which constitutes or would constitute Obligations or any of them.
	
XV.	
 	

Waiver
	

15.1	
 	

No delay or omission by the Lender in exercising any right or remedy hereunder or with respect to any of the Obligations shall operate as a waiver thereof or of any other right or remedy, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
	

15.2	
 	

The Lender may from time to time and at any time waive in whole or in part any right, benefit or default under any clause of this General Security Agreement but any such waiver or any right, benefit or default thereafter, or of any other right,
benefit of default, as the case may be.
	
XVI.	
 	

Assignment
	

16.1	
 	

The Lender may, without further notice to the Debtor, at any time mortgage, charge, assign, transfer or grant a security interest in this General Security Agreement and the security constituted hereby.
	

16.2	
 	

The Debtor expressly agrees that the assignee, transferee or secured party of the Lender, as the case may be, shall have all of the Lender's rights and remedies under this General Security Agreement.
	
XVII.	
 	

Satisfaction and Discharge
	

17.1	
 	

Any partial payment or satisfaction of the Obligations, or any ceasing by the Debtor to be indebted to the Lender, shall be deemed not to be redemption or discharge of the security constituted by this General Security Agreement.
	

17.2	
 	

The Debtor shall be entitled to a release and discharge of the security constituted by this General Security Agreement upon full payment, by the Debtor and payment to the Lender of all costs, charges, expenses and legal fees and disbursements
incurred by the Lender in connection with the Obligations and such release and discharge.
	
XVIII.	
 	

No Merger
	

18.1	
 	

This General Security Agreement shall not operate so as to create any merger or discharge of any of the Obligations, or any assignment, transfer, guarantee, lien, contract, promissory note, bill of exchange or security in any form held or which may
hereafter be held by the Lender from the Debtor or from any other person whomsoever.
	

18.2	
 	

The taking of a judgment with respect to any of the Obligations will not operate as a merger of any of the terms, conditions, covenants, agreements or provisos contained in this General Security Agreement.
	

18.3	
 	

The release and discharge of the security constituted by this General Security Agreement by the Lender shall not operate as a release or discharge of any right of the Lender to be indemnified and held harmless by the Debtor pursuant to
clause 12.4 hereof or of any other right of the Lender against the Debtor arising under this General Security Agreement prior to such release and discharge.
	
XIX.	
 	

Interpretation
	

19.1	
 	

In this General Security Agreement:
	

 	
 	

19.1.1	
 	

the invalidity or unenforceability of the whole or any part of any clause shall not affect the validity or enforceability of any other clause or the remainder of such clause;
	
 	
 	

 	
 	

 	
 	

 

12

 

	

 	
 	

19.1.2	
 	

the headings have been inserted for reference only and shall not define, limit, alter or enlarge the meaning of any provision of this General Security Agreement; and
	

 	
 	

19.1.3	
 	

when the context so requires, the singular shall be read as if the plural were expressed and the provisions hereof shall be read with all grammatical changes necessary dependent upon the person referred to being a male, female, firm or
corporation.
	
XX.	
 	

Notice
	

20.1	
 	

Whenever either the Lender or the Debtor is required or entitled to notify or direct the other or to make a demand upon or request of the other relating to the Collateral, this General Security Agreement or the UCC, such notice, direction, demand or
request shall be sufficiently given if given in writing and delivered to the party for whom it is intended at the address of such party herein or as changed pursuant hereto or if sent by prepaid certified or registered mail, addressed to the party
for whom it is intended at the address of such party herein set forth or as changed pursuant hereto.
	

20.2	
 	

Either the Lender or the Debtor may notify the other in accordance herewith of any change in its principal address to be used for the purposes hereof.
	
XXI.	
 	

Variation
	

21.1	
 	

Save for any schedules which may be added hereto pursuant to the provisions hereof, no modification, variation or amendment of any provision of this General Security Agreement shall be made except by written agreement, executed by the parties hereto
and no waiver of any provision hereof shall be effective unless in writing.
	
XXII.	
 	

Enurement and Subordination
	

22.1	
 	

This General Security Agreement shall enure to the benefit of the Lender and its successors and assigns and shall be binding upon the respective heirs, executors, personal representatives, successors and permitted assigns of the Debtor.
	
 	
 	

 	
 	

 	
 	

 

13

 

	

22.2	
 	

Subject to Lender's approval of the terms and conditions of the "Asset Based Financing Facility" (defined below), which approval shall not be unreasonably withheld, Lender shall subordinate all of its right, title and interest in the Collateral to
the security interest of a new lender ("New Lender") so long as (a) the obligations secured by the Collateral in favor of the New Lender (the "New Obligations") do not exceed $1,000,000, (b) the New Lender agrees to subordinate any guaranty
of the New Obligations to the guaranty of the Obligations by the present guarantors thereof, and (c) the collateral for the New Obligations is given as security only and is not unconditionally sold to the New Lender. The loan relating to the New
Obligations is herein called the "Asset Based Financing Facility". Any disapproval of the Asset Based Financing Facility by Lender will be based on Lender's reasonable determination that the terms and conditions of such Asset Based Financing Facility
(other than the subordination) adversely affects Lender's security interest in the Collateral. Lender agrees to sign such subordination agreements or intercreditor agreements as such New Lender may reasonably require in connection with such
subordination. Subject to clause (a) above, the terms of the Asset Based Financing Facility shall state, as one of its terms, the maximum amount which Debtor is entitled to borrow against eligible Accounts under the Asset Based Financing
Facility, which shall be expressed as a percentage of Debtor's eligible Accounts (such percentage is herein called "Debtor's Account Borrowing Percentage"). Notwithstanding the foregoing limitation on the amount of the New Obligations in
clause (a) above, in the event that after the original closing of the Asset Based Financing Facility, the eligible Accounts of Debtor increase in total dollar amount, Debtor may increase its borrowings under the Asset Based Financing Facility
above the $1,000,000 limitation by up to the Debtor's Account Borrowing Percentage times the increased eligible Accounts so long as one-half (1/2) of such borrowings is paid to Lender to reduce the Obligations (and the
permitted outstanding principal balance of the Note shall be correspondingly reduced). To illustrate the foregoing, if at the original closing of the Asset Based Financing Facility Debtor's Account Borrowing Percentage was 70% of then eligible
Accounts, then, if the amount of Debtor's eligible Accounts has grown by $1,000,000 since the original closing, Debtor may borrow an additional $700,000 under the Asset Based Financing Facility so long as $350,000 of such borrowing is paid to Lender
to be applied against the Note.
	
XXIII.	
 	

Copy of Agreement and Financing Statement
	

23.1	
 	

The Debtor hereby acknowledges receiving a copy of this General Security Agreement.
	
XXIV.	
 	

Governing Law
	

24.1	
 	

This General Security Agreement shall be governed by and construed in accordance with the laws of the State.
	

24.2	
 	

For the purpose of legal proceedings this General Security Agreement shall be deemed to have been made in the State and to be performed there and the courts of the State shall have jurisdiction over all disputes which may arise under this General
Security Agreement and the Debtor hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of such courts, provided always that nothing herein contained shall prevent the Lender from proceeding at its election against the
Debtor in the courts of any other State, country or jurisdiction.
	
XXV.	
 	

Confidentiality and Nondisclosure.
	

25.1	
 	

The parties agree that the terms and conditions of that certain Confidentiality and Nondisclosure Agreement dated October 8, 2002, are incorporated herein by reference and, except in connection with any enforcement action by Lender under this
General Security Agreement, shall apply during the entire term of this General Security Agreement and thereafter regardless of any earlier termination of such agreement under its terms.
	
 	
 	

 	
 	

 	
 	

 

14

 

	
XXVI.	
 	

Additional Borrowings; Leases.
	

26.1	
 	

Lender agrees that Debtor may (i) borrow additional funds from third parties and grant additional security interest in the Collateral all provided that any such borrowings and collateralizations are junior and subordinate to Lender (with the
exception of the New Lender provided for above), and (ii) enter into leases of equipment and real or personal property.
	
XXV.	
 	

Cure of Any Applicable Defaults Under Guaranties.
	

27.	
 	

Lender agrees that, upon the occurrence of any default under the terms of any guaranty given in connection with the Loan Documents, that Lender shall give Debtor written notice of any such default and a thirty (30) day period to cure any such
default thereunder, including the right to replace such guaranty or pay down the indebtedness evidenced by the Loan Documents by the amount of any such guaranty and, concurrently with such pay down, the maximum permitted outstanding balance under the
Note shall correspondingly be reduced. Upon the death of a guarantor under guaranty given in connection with the Loan Documents, Debtor shall give Lender written notice of such death and Debtor shall replace such guaranty with a substituted guaranty
subject to Lender's reasonable approval or pay down the indebtedness evidenced by the Loan Documents by the amount of any such guaranty within thirty (30) days of such notice and, concurrently with such pay down, the maximum permitted
outstanding balance under the Note shall correspondingly be reduced.

(Remainder
of this Page Left Intentionally Blank) 

15

 

In
Witness Whereof the Debtor has executed this General Security Agreement as of the day and year first above written. 

	 	 	TULLY'S COFFEE CORPORATION, a Washington corporation
	

 	
 	

By:	

/s/ ANTHONY J. GIOIA

	 	 	Name:	Anthony J. Gioia

	 	 	Title:	President, CEO

16

 
Location Schedule 

Address(es)
of Location of the Collateral 

(Listing
Attached) 

17

SCHEDULE 3.1.5  

Claims, Actions, Orders or Investigations under Environmental Laws

against Debtor or against Business Premises 

None.Exhibit 10.3  

GUARANTY AGREEMENT  

        This Guaranty Agreement (this "Guaranty") is made as of October 30, 2002, by [Name of guarantor and spouse if applicable]
("Guarantor"), in favor of KENT CENTRAL, L.L.C., a Washington limited liability company (together with its universal successors, participants and assigns "Lender"). 

PRELIMINARY STATEMENTS  

        A.    Lender
has agreed to make a loan (the "Loan") to Tully's Coffee Corporation, a Washington corporation ("Borrower"), in the maximum principal amount of Two Million Eight
Hundred Ninety Thousand Thirty Seven and 09/100 Dollars ($2,890,037.09). Guarantor acknowledges that Lender would not make the Loan to Borrower without Guarantor's execution and delivery to Lender of
this Guaranty. 

        B.    The
Loan is, or will be, evidenced by that certain Promissory Note of even date, executed by Borrower and payable to the order of Lender in the principal face amount of
Two Million Eight Hundred Ninety Thousand Thirty Seven and 09/100 Dollars ($2,890,037.09) (such note, as it may hereafter be renewed, extended, supplemented, increased or modified and in effect from
time to time, and all other notes given in substitution therefor, or in modification, renewal, or extension thereof, in whole or in part, is herein called the "Note"). 

        C.    In
connection with the Loan, Borrower has executed that certain Security Agreement of even date herewith (the "Security Agreement") and other guarantors have executed
guaranties similar to this Guaranty (the "Other Guaranties"). The Note, this Guaranty, the Other Guaranties and the Security Agreement, and all other documents now or hereafter securing, guaranteeing
or executed in connection with the Loan, are, as the same have been or may be amended, restated, modified or supplemented from time to time, herein sometimes called individually a "Loan Document" and
together the "Loan Documents". As used herein, the term "Loan Documents" shall expressly exclude that certain Lease
Agreement dated August 16, 1999, entered into between Borrower and Lender, including any and all amendments thereto. 

STATEMENT OF AGREEMENTS  

        For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and as a material inducement to Lender to extend credit to
Borrower, Guarantor hereby guarantees to Lender the prompt and full payment and performance of the indebtedness and obligations described below in this Guaranty (collectively called the "Guaranteed
Obligations"), this Guaranty being upon the following terms and conditions: 

        1.    Guaranty of Payment.    Guarantor hereby unconditionally and irrevocably guarantees to
Lender the payment when due and before the occurrence of an Event of Default, whether by lapse of time, by acceleration of maturity, or otherwise, of all principal, interest (including, but not
limited to, interest accruing after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, whether or not allowed in such proceeding), fees, late charges, prepayment fees,
costs, expenses, and other sums of money now or hereafter due and owing, or which Borrower is obligated to pay, pursuant to (a) the terms of the Note or any other Loan Documents, including any
indemnifications contained in the Loan Documents, now or hereafter existing, and (b) all renewals, extensions, refinancings, modifications, supplements or amendments of such indebtedness, or
any of the Loan Documents, or any part thereof (the indebtedness described in clauses (a) and (b) above in this Section 1 is herein collectively called the "Indebtedness"). This
Guaranty covers the Indebtedness, whether presently outstanding or arising subsequent to the date hereof, including all amounts advanced by Lender in stages or installments. The guaranty of Guarantor
as set forth in this Section 1 is a continuing guaranty of payment and not a guaranty of collection. Lender may loan money and provide business and financial accommodations to or for the
benefit of Borrower in excess of the Indebtedness without affecting Guarantor's obligations to Lender under this Guaranty. 

 

        2.    Primary Liability of Guarantor.    

        (a)  This
Guaranty is an absolute, irrevocable and unconditional guaranty of payment and performance. Guarantor shall be liable for the payment and performance of the
Guaranteed Obligations as a primary obligor. This Guaranty shall be effective as a waiver of, and Guarantor hereby expressly waives, any and all rights to which Guarantor may otherwise have been
entitled under any suretyship laws in effect
from time to time, including any right or privilege, whether existing under statute, at law or in equity, to require Lender to take prior recourse or proceedings against any collateral, security or
other party whatsoever. 

        (b)  As
used herein, the term "Event of Default" means the occurrence of one or more of the following events, individually or collectively: (i) default by Borrower in
payment or performance of the Guaranteed Obligations, or any part thereof, when such indebtedness or performance becomes due, either by its terms or as the result of the exercise of any power to
accelerate; (ii) the failure of Guarantor to perform completely and satisfactorily the covenants, terms and conditions of any of the Guaranteed Obligations; (iii) the dissolution or insolvency
of Guarantor, or the appointment of a conservator for Guarantor, and such Guarantor is not replaced by another Guarantor satisfactory to Lender within thirty (30) days after the occurrence of
such event; (iv) the inability of Guarantor to pay debts as they mature; (v) an assignment by Guarantor for the benefit of creditors; (vi) the institution of any proceeding by or
against Guarantor in bankruptcy or for a reorganization or an arrangement with creditors, or for the appointment of a receiver, trustee or custodian for any of them or for any of their respective
properties; (vii) the determination by Lender in good faith that a material adverse change has occurred in the financial condition of Guarantor; (viii) the issuance of a writ or order of
attachment, levy or garnishment is issued against Guarantor; (ix) the falsity in any material respect of, or any material omission in, any representation made to Lender by Guarantor; or
(x) any transfer of substantially all of the assets of Guarantor, without the Lender's prior consent. 

        (c)  Upon
the occurrence of any Event of Default, the Guaranteed Obligations, for purposes of this Guaranty, shall be deemed immediately due and payable at the election of
Lender, and Guarantor shall, on demand and without presentment, protest, notice of protest, further notice of nonpayment or of dishonor, default or nonperformance, or notice of acceleration or of
intent to accelerate, or any other notice whatsoever, without any notice having been given to Guarantor prior to such demand of the acceptance by Lender of this Guaranty, and without any notice having
been given to Guarantor prior to such demand of the creating or incurring of such indebtedness, all such notices being hereby waived by Guarantor, pay the amount due to Lender, and pay all damages and
all costs and expenses that may arise in consequence of such Event of Default (including all attorneys' fees and expenses, investigation costs, court costs, and any and all other costs and expenses
incurred by Lender in connection with the collection and enforcement of the Note or any other Loan Document), whether or not suit is filed thereon, or whether at maturity or by acceleration, or
whether before or after maturity, or whether in connection with bankruptcy, insolvency or appeal. It shall not be necessary for Lender, in order to enforce such payment by Guarantor, first to
institute judicial or non-judicial foreclosure or pursue or exhaust any rights or remedies against Borrower or others liable on such indebtedness, or to enforce any rights against any
security that shall ever have been given to secure such indebtedness, or to join Borrower or any others liable for the payment of the Guaranteed Obligations or any part thereof in any action or
proceeding to enforce this Guaranty, or to resort to any other means of obtaining payment or performance of the Guaranteed Obligations; provided, however, that nothing herein contained shall prevent
Lender from foreclosing any security agreement (a "Security Agreement") now or hereafter securing all or any part of the Guaranteed Obligations, or from exercising any other rights or remedies under
the Loan Documents, and if such foreclosure or other right or remedy is availed of, only the net proceeds therefrom, after deduction of all charges and expenses of every 

2

 

kind and nature whatsoever, shall be applied in reduction of the amount due on the Note, and Lender shall not be required to institute or prosecute proceedings to recover any deficiency as a
condition of
payment hereunder or enforcement hereof. At any sale of any property encumbered by a Security Agreement or other collateral given for the Indebtedness or any part thereof, whether by foreclosure or
otherwise, Lender may at its discretion purchase all or any part of any property encumbered by a Security Agreement or collateral so sold or offered for sale for its own account and may, in payment of
the amount bid therefor, deduct such amount from the balance due it pursuant to the terms of the Note and the other Loan Documents. Collection action may be taken or demand may be made against
Borrower or against all parties who have signed this Guaranty or any other guaranty covering all or any part of the Guaranteed Obligations, or against any one or more of them, separately or together,
without impairing the rights of Lender against any other party hereto. 

        3.    Certain Agreements and Waivers by Guarantor.    

        (a)  Guarantor
hereby agrees that neither Lender's rights or remedies nor Guarantor's obligations under the terms of this Guaranty shall be released, diminished, impaired,
reduced or affected by any one or more of the following events, actions, facts, or circumstances, and the liability of Guarantor under this Guaranty shall be absolute and unconditional irrespective
of: (i) any limitation of liability or recourse in any other Loan Document or arising under any law; (ii) any claim or defense that this Guaranty was made without consideration or is not
supported by adequate consideration; (iii) the taking or accepting of any other security or guaranty for, or right of recourse with respect to, any or all of the Guaranteed Obligations;
(iv) any homestead exemption or any other exemption under applicable law; (v) any release, surrender, abandonment, exchange, alteration, sale or other disposition, subordination,
deterioration, waste, failure to protect or preserve, impairment, or loss of, or any failure to create or perfect any lien or security interest with respect to, or any other dealings with, any
collateral or security at any time existing or purported, believed or expected to exist in connection with any or all of the Guaranteed Obligations, including any impairment of Guarantor's recourse
against any person or entity or collateral; (vi) whether express or by operation of law, any partial release of the liability of Guarantor hereunder, or if one or more other guaranties are now or
hereafter obtained by Lender covering all or any part of the Guaranteed Obligations, any complete or partial release of any one or more of such guarantors under any such other guaranty, or any
complete or partial release of Borrower or any other party liable, directly or indirectly, for the payment or performance of any or all of the Guaranteed Obligations; (vii) the death of
Borrower or the appointment of a conservator or guardian for Borrower; (viii) the insolvency, bankruptcy, dissolution, liquidation, termination, receivership, reorganization, merger,
consolidation, change of form, structure or ownership, sale of all assets, or lack of corporate, partnership or other power of Borrower or any other party at any time liable for the payment of any or
all of the Guaranteed Obligations; (ix) either with or without notice to or consent of Guarantor: any renewal, extension, modification, supplement, subordination or rearrangement of the terms
of any or all of the Guaranteed Obligations and/or any of the Loan Documents, including material alterations of the terms of payment (including changes in maturity date(s) and interest rate(s)) or
performance or any other terms thereof, or any waiver, termination, or release of, or consent to depart from, any of the Loan Documents or any other guaranty of any or all of the Guaranteed
Obligations, or any adjustment, indulgence, forbearance, or compromise that may be granted from time to time by Lender to Borrower, Guarantor, and/or any other person or entity at any time liable for
the payment or performance of any or all of the Guaranteed Obligations; (x) any neglect, lack of diligence, delay, omission, failure, or refusal of Lender to take or prosecute (or in taking or
prosecuting) any action for the collection or enforcement of any of the Guaranteed Obligations, or to foreclose or take or prosecute any action to foreclose (or in foreclosing or taking or prosecuting
any action to foreclose) upon any security therefor, or to exercise (or in exercising) any other right or power with respect to any security therefor, or to take 

3

 

or prosecute (or in taking or prosecuting) any action in connection with any Loan Document, or any failure to sell or otherwise dispose of in a commercially reasonable manner any collateral securing
any or all of the Guaranteed Obligations; (xi) any failure of Lender to notify Guarantor of any creation, renewal, extension, rearrangement, modification, supplement, subordination, or
assignment of the Guaranteed Obligations or any part thereof, or of any Loan Document, or of any release of or change in any security, or of any other action taken or refrained from being taken by
Lender against Borrower or any security or other recourse, or of any new agreement between Lender and Borrower, it being understood that Lender shall not be required to give Guarantor any notice of
any kind under any circumstances with respect to or in connection with the Guaranteed Obligations, any and all rights to notice Guarantor may have otherwise had being hereby waived by Guarantor, and
the Guarantor shall be responsible for obtaining for itself information regarding the Borrower, including, any changes in the business or financial condition of the Borrower, and the Guarantor
acknowledges and agrees that the Lender shall have no duty to notify the Guarantor of any information which the Lender may have concerning the Borrower; (xii) whether for any reason Lender is
required to refund any payment by Borrower to any other party liable for the payment or performance of any or all of the Guaranteed Obligations, or to pay the amount thereof to someone else;
(xiii) the making of advances by Lender to protect its interest in any property encumbered by a Security Agreement, to preserve the value of any property encumbered by a Security Agreement or
to facilitate performance of any term or covenant contained in any of the Loan Documents; (xiv) the existence of any claim, counterclaim, set-off or other right that Guarantor may
at any time have against Borrower, Lender, or any other person or entity, whether or not arising in connection with this Guaranty, the Note or any other Loan Document; (xv) the unenforceability
of all or any part of the Guaranteed Obligations against Borrower, whether because the Guaranteed Obligations exceed the amount permitted by law or violate any usury law, or because the act of
creating the Guaranteed Obligations, or any part thereof, is ultra vires, or because the officers or persons creating the Guaranteed Obligations acted outside the scope of their authority, or because
of a lack of validity or enforceability of or defect or deficiency in any of the Loan Documents, or because Borrower has any valid defense, claim or offset with respect thereto, or because Borrower's
obligation ceases to exist by operation of law, or because of any other reason or circumstance, it being agreed that Guarantor shall remain liable on this Guaranty regardless of whether Borrower or
any other person or entity be found not liable for the Guaranteed Obligations, or any part thereof, for any reason (and regardless of any joinder of Borrower or any other party in any action to obtain
payment or performance of any or all of the Guaranteed Obligations); (xvi) any order, ruling or plan of reorganization emanating from proceedings under Title 11 of the United States Code with
respect to Borrower or any other person or entity, including any extension, reduction, composition, or other alteration of the Guaranteed Obligations, whether or not consented to by Lender;
(xvii) any action which Lender may take under the Lease, including any amendment or modification thereof or enforcement of remedies thereunder, or (xviii) any other condition, event,
omission, action or inaction that would in the absence of this Section 3(a) result in the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or
agreement contained in this Guaranty or any other agreement. 

        (b)  In
the event any payment by Borrower or any other person or entity to Lender is held to constitute a preference, fraudulent transfer or other voidable payment under any
bankruptcy, insolvency or similar law, or if for any other reason Lender is required to refund such payment or pay the amount thereof to any other party, such payment by Borrower or any other party to
Lender shall not constitute a release of Guarantor from any liability hereunder, and this Guaranty shall continue to be effective or shall be reinstated (notwithstanding any prior release, surrender
or discharge by Lender of this Guaranty or of Guarantor), as the case may be, with respect to, and this Guaranty shall apply to, any and all amounts so refunded by Lender or paid by Lender to 

4

 

another person or entity (which amounts shall constitute part of the Guaranteed Obligations), and any interest paid by Lender and any attorneys' fees, costs and expenses paid or incurred by Lender in
connection with any such event. It is the intent of Guarantor and Lender that the obligations and liabilities of Guarantor hereunder are absolute and unconditional under any and all circumstances and
that until the Guaranteed Obligations are fully and finally paid, and not subject to refund or disgorgement, the obligations and liabilities of Guarantor hereunder shall not be discharged or released,
in whole or in part, by any act or occurrence that might, but for the provisions of this Guaranty, be deemed a legal or equitable discharge or release of a guarantor. Lender shall be entitled to
continue to hold this Guaranty in its possession for a period of one year from the date the Guaranteed Obligations are paid in full and for so long thereafter as may be necessary to enforce any
obligation of Guarantor hereunder and/or to exercise any right or remedy of Lender hereunder. 

        (c)  If
acceleration of the time for payment of any amount payable by Borrower under the Note or any other Loan Document is stayed or delayed by any law or tribunal, all such
amounts shall nonetheless be payable by Guarantor on demand by Lender. 

        (d)  Lender,
at its option and in its sole discretion, may proceed against any collateral securing any of the Guaranteed Obligations by way of judicial or
non-judicial foreclosure or any other lawful remedy for the enforcement of its rights, and the obligations of Guarantor under this Guaranty shall survive Lender's exercise of any such
right or remedy. Guarantor understands that Lender's exercise of its rights and remedies including a non-judicial foreclosure of any Security Agreement could impair, eliminate or destroy
subrogation, reimbursement, contribution, indemnification and other rights Guarantor may have against Borrower or others for amounts paid by Guarantor under this Guaranty. Nevertheless, Guarantor
hereby waives and relinquishes any claim or defense based upon the loss of any such rights, election of remedies, discharge and satisfaction of the Guaranteed Obligations and, to the fullest extent
permitted by law following a non-judicial foreclosure of any Security Agreement, any other claim or defense which may arise under applicable law. If any collateral securing the Guaranteed
Obligations is foreclosed or realized upon whether judicially or non-judicially before Lender proceeds against Guarantor under this Guaranty, then Guarantor's liability for the Guaranteed
Obligations shall be the deficiency resulting from the judicial or non-judicial sale or other disposition; i.e., the difference between the amount of the Guaranteed Obligations on the day
of the foreclosure sale or other disposition (including principal, accrued interest, attorneys' fees including on appeal or otherwise), late charges and costs and expenses of foreclosure or other
disposition) and the amount realized at the foreclosure sale or other disposition. To the fullest extent permitted by law, Guarantor waives the right to object to the amount that may be bid by Lender
at any foreclosure sale. If not paid in full within thirty (30) days following Lender's demand, Guarantor's liability for any deficiency following a non-judicial foreclosure of any
Security Agreement securing any of the Guaranteed Obligations shall bear interest from the date of the foreclosure sale, compounded monthly, at the default interest rate in the Note 

        (e)  Guarantor
acknowledges that Lender has no obligation to Guarantor to make loans or advances to Borrower except where the obligation is evidenced by Lender's written
agreement, or to see to the proper use and application of the funds so advanced. Guarantor understands that the Guaranteed Obligations and this Guaranty can involve substantial risks for Guarantor and
agrees that Lender is not a trustee or fiduciary for Guarantor and undertakes no duty, obligation, responsibility or special
relationship to Guarantor or to see to proper use and application of any loan or advance or otherwise to protect and not act adversely to Guarantor's interests. Any application or use of Loan proceeds
or advances for purposes other than those provided for in the Loan Documents shall not defeat, limit or impair this Guaranty in whole or in part. 

5

 

        (f)    Guarantor
represents, warrants and covenants with Lender that Guarantor has not presently guaranteed any other indebtedness of Borrower and shall not guarantee any other
indebtedness of Borrower unless such other lender shall enter into a written agreement with Lender that this Guaranty shall be superior to Guarantor's guarantee of the other lender's indebtedness, the
form and substance of such written agreement to be subject to Lender's prior approval. 

        4.    Subordination.    If, for any reason whatsoever, Borrower is now or hereafter becomes
indebted to Guarantor: 

        (a)  such
indebtedness and all interest thereon and all liens, security interests and rights now or hereafter existing with respect to property of Borrower securing such
indebtedness shall, at all times, be subordinate in all respects to the Guaranteed Obligations and to all liens, security interests and rights now or hereafter existing to secure the Guaranteed
Obligations; 

        (b)  Guarantor
shall not be entitled to enforce or receive payment, directly or indirectly, of any such indebtedness of Borrower to Guarantor until the Guaranteed Obligations
have been fully and finally paid; provided, however, that notwithstanding the foregoing, Guarantor is not prohibited from receiving (i) such reasonable management fees or reasonable salary from
Borrower as Lender may find acceptable from time to time, and (ii) distributions from Borrower in an amount equal to any income taxes imposed on Guarantor which are attributable to Borrower's
income from any property encumbered by a Security Agreement; 

        (c)  Guarantor
hereby assigns and grants to Lender a security interest in all such indebtedness and security therefor, if any, of Borrower to Guarantor now existing or
hereafter arising, including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or
other debtor relief or insolvency proceedings involving Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and shall have
the right to receive directly from the receiver, trustee or other custodian (whether or not an Event of Default shall have occurred or be continuing under any of the Loan Documents), dividends and
payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Guaranteed Obligations have been
fully and finally paid. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section 4,
Guarantor shall pay the same to Lender immediately, Guarantor
hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender; and 

        (d)  Guarantor
shall promptly upon request of Lender from time to time execute such documents and perform such acts as Lender may require to evidence and perfect its interest
and to permit or facilitate exercise of its rights under this Section 4, including execution and delivery of financing statements, proofs of claim, further assignments and security agreements,
and delivery to Lender of any promissory notes or other instruments evidencing indebtedness of Borrower to Guarantor. All promissory notes, accounts receivable ledgers or other evidences, now or
hereafter held by Guarantor, of obligations of Borrower to Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under and is subject to the
terms of this Guaranty. 

6

   
        5.    Other Liability of Guarantor or Borrower.    If Guarantor is or becomes liable, by
endorsement or otherwise, for any indebtedness owing by Borrower to Lender other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of
Lender hereunder shall be cumulative of any and all other rights that Lender may have against Guarantor. If Borrower is or becomes indebted to Lender for any indebtedness other than or in excess of
the Indebtedness for which Guarantor is liable under this Guaranty, any payment received or recovery realized upon such other indebtedness of Borrower to Lender may, except to the extent paid by
Guarantor on the Indebtedness or specifically required by law or agreement of Lender to be applied to the Indebtedness, in Lender's sole discretion, be applied upon indebtedness of Borrower to Lender
other than the Indebtedness. This Guaranty is independent of (and shall not be limited by) any other guaranty now existing or hereafter given. Further, Guarantor's liability under this Guaranty is in
addition to any and all other liability Guarantor may have in any other capacity. 

        6.    Lender Assigns.    This Guaranty is for the benefit of Lender and Lender's universal
successors, participants and assigns. Lender may, at any time, sell, transfer, or assign the Guaranteed Obligations and the Loan Documents, and any or all servicing rights with respect thereto, or
grant participations herein or issue mortgage pass-through certificates or other securities evidencing a beneficial interest in a rated or unrated public offering or private placement. In
the event of any such sale, transfer or assignment of the Guaranteed Obligations, or any part thereof, the rights and benefits under this Guaranty, to the extent applicable to the Guaranteed
Obligations so sold, transferred or assigned, may be transferred with such Guaranteed Obligations. Guarantor waives notice of any sale, transfer or assignment of the Guaranteed Obligations or any part
thereof, and agrees that failure to give notice of any such sale, transfer or assignment will not affect the liabilities of Guarantor hereunder. Lender is hereby authorized to disseminate any
information it now has or hereafter obtains pertaining to the Guaranteed Obligations or this Guaranty, including credit or other information on Borrower, Guarantor and/or any party liable, directly or
indirectly, for any part of the Guaranteed Obligations, to any actual or prospective assignee or participant with respect to the Guaranteed Obligations, to any of Lender's affiliates, including Banc
of America Securities LLC, to any regulatory body having jurisdiction over Lender, and to other parties as necessary or appropriate in Lender's reasonable judgment. 

        7.    Binding Effect.    This Guaranty is binding not only on Guarantor, but also on
Guarantor's heirs, personal representatives, successors and assigns; provided, however, that Guarantor may not assign this Guaranty, or assign or delegate any of its right or obligations under this
Guaranty, without the prior written consent of Lender in each instance. Upon the death of Guarantor, if Guarantor is a natural person or entity, this Guaranty shall continue against Guarantor's estate
as to all of the Guaranteed Obligations, including that portion incurred or arising after the death of Guarantor and shall be provable in full against Guarantor's estate, whether or not the Guaranteed
Obligations are then due and payable. 

        8.    Governing Law; Forum; Consent to Jurisdiction.    The validity, enforcement, and
interpretation of this Guaranty, shall for all purposes be governed by and construed in accordance with the laws of the State of Washington and applicable United States federal law, and is intended to
be performed in accordance with, and only to the extent permitted by, such laws. All obligations of Guarantor hereunder are payable and performable at the place or places where the Guaranteed
Obligations are payable and performable. Guarantor hereby irrevocably submits generally and unconditionally for Guarantor and in respect of Guarantor's property to the nonexclusive jurisdiction of any
state court, or any United States federal court, sitting or having jurisdiction in the state specified in the first sentence of this Section and to the jurisdiction of any state or United States
federal court sitting or having jurisdiction in the state of Washington, over any suit, action or proceeding arising out of or relating to this Guaranty or the Guaranteed Obligations. Guarantor hereby
irrevocably waives, to the fullest extent permitted by law, any objection that Guarantor may now or hereafter have to the laying of venue in 

7

 

any such court and any claim that any such court is an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon
Guarantor and may be enforced in any court in which Guarantor is subject to jurisdiction. Guarantor hereby agrees and consents that, in addition to any methods of service of process provided for under
applicable law, all service of process in any such suit, action or proceeding in any state court, or any United States federal court, sitting or having jurisdiction in the state specified in the first
sentence of this Section may be made by certified or registered mail, return receipt requested, directed to Guarantor at the address set forth at the end of this Guaranty, or at a subsequent address
of which Lender receives actual notice from Guarantor in accordance with the notice provisions hereof, and service so made shall be complete five (5) days after the same shall have been so
mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by law or limit the right of Lender to bring proceedings against Guarantor in any other court or
jurisdiction. Guarantor hereby releases, to the extent permitted by applicable law, all errors and all rights of exemption, appeal, stay of execution, inquisition, and other rights to which the
Guarantor may otherwise be entitled under the laws of the United States of America or any State or possession of the United States of America now in force or which may hereinafter be enacted. The
authority and power to appear for and enter judgment against the Guarantor shall not be exhausted by one or more exercises thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one or more occasions or from time to time in the same or different jurisdiction as often as the Lender shall deem necessary
and desirable. 

        9.    Invalidity of Certain Provisions.    If any provision of this Guaranty or the
application thereof to any person or entity or circumstance shall, for any reason and to any extent, be declared to be invalid or unenforceable, neither the remaining provisions of this Guaranty nor
the application of such provision to any other person or entity or circumstance shall be affected thereby, and the remaining provisions of this Guaranty, or the applicability of such provision to
other persons or entities, or circumstances, as applicable, shall remain in effect and be enforceable to the maximum extent permitted by applicable law. 

        10.    Attorneys' Fees and Costs of Collection.    Guarantor shall pay on demand all
attorneys' fees and all other costs and expenses incurred by Lender in the enforcement of or preservation of Lender's rights under this Guaranty including all attorneys' fees and expenses,
investigation costs, and all court costs, whether or not suit is filed hereon, or whether at maturity or by acceleration, or whether before or after
maturity, or whether in connection with bankruptcy, insolvency or appeal, or whether in connection with the collection and enforcement of this Guaranty against any other Guarantor, if there be more
than one. Guarantor agrees to pay interest on any expenses or other sums due to Lender under this Section 10 that are not paid when due, at a rate per annum equal to the default interest rate
provided for in the Note. Guarantor's obligations and liabilities under this Section 10 shall survive any payment or discharge in full of the Guaranteed Obligations. 

        11.    Payments.    All sums payable under this Guaranty shall be paid in lawful money of the
United States of America that at the time of payment is legal tender for the payment of public and private debts. 

        12.    Controlling Agreement.    It is not the intention of Lender or Guarantor to obligate
Guarantor to pay interest in excess of that lawfully permitted to be paid by Guarantor under applicable law. Should it be determined that any portion of the Guaranteed Obligations or any other amount
payable by Guarantor under this Guaranty constitutes interest in excess of the maximum amount of interest that Guarantor, in Guarantor's capacity as guarantor, may lawfully be required to pay under
applicable law, the obligation of Guarantor to pay such interest shall automatically be limited to the payment thereof in the maximum amount so permitted under applicable law. The provisions of this
Section 12 shall override and control all other provisions of this Guaranty and of any other agreement between Guarantor and Lender. 

8

 

        13.    Representations, Warranties, and Covenants of Guarantor.    Guarantor hereby
represents, warrants, and covenants that: 

        (a)  Guarantor
has a financial interest in the Borrower and will derive a material and substantial benefit, directly or indirectly, from the making of the Loan to Borrower
and from the making of this Guaranty by Guarantor; 

        (b)  this
Guaranty is duly authorized and valid, and is binding upon and enforceable against Guarantor; 

        (c)  Guarantor
is not, and the execution, delivery and performance by Guarantor of this Guaranty will not cause Guarantor to be, in violation of or in default with respect to
any law or in default (or at risk of acceleration of indebtedness) under any agreement or restriction by which Guarantor is bound or affected; 

        (d)  Guarantor
will indemnify Lender from any loss, cost or expense as a result of any representation or warranty of the Guarantor being false, incorrect, incomplete or
misleading in any material respect; 

        (e)  there
is no litigation pending or, to the knowledge of Guarantor, threatened before or by any tribunal against or affecting Guarantor which would have a material adverse
impact on Guarantor's ability to pay and perform its obligations under this Guaranty; 

        (f)    all
financial statements and information heretofore furnished to Lender by Guarantor do, and all financial statements and information hereafter furnished to Lender by
Guarantor will, fully and accurately present the condition (financial or otherwise) of Guarantor as of their dates and the results of Guarantor's operations for the periods therein specified, and,
since the date of the most recent financial statements of Guarantor heretofore furnished to Lender, no material adverse change has occurred in the financial condition of Guarantor, nor, except as
heretofore disclosed in writing to Lender, has Guarantor incurred any material liability, direct or indirect, fixed or contingent; 

        (g)  after
giving effect to this Guaranty, Guarantor is solvent, is not engaged or about to engage in business or a transaction for which the property of Guarantor is an
unreasonably small capital, and does not intend to incur or believe that it will incur debts that will be beyond its ability to pay as such debts mature; 

        (h)  Lender
has no duty at any time to investigate or inform Guarantor of the financial or business condition or affairs of Borrower or any change therein, and Guarantor will
keep fully apprised of Borrower's financial and business condition; 

        (i)    Guarantor
acknowledges and agrees that Guarantor may be required to pay and perform the Guaranteed Obligations in full without assistance or support from Borrower or any
other person or entity; and 

        (j)    Guarantor
has read and fully understands the provisions contained in the Note and the other Loan Documents and is satisfied with the same in all respects. 

        Guarantor's
representations, warranties and covenants are a material inducement to Lender to enter into the other Loan Documents and shall survive the execution hereof and any
bankruptcy, foreclosure, transfer of security or other event affecting Borrower, Guarantor, any other party, or any security for all or any part of the Guaranteed Obligations. 

        14.    Notices.    All notices, requests, consents, demands and other communications required
or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently
given or furnished if delivered by personal delivery, by courier, or by registered or certified United States 

9

 

mail, return receipt requested, postage prepaid, addressed to the party to whom directed at the addresses specified in this Guaranty (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or communication shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of
the date of first attempted delivery at the address and in the manner provided herein; provided that, service of a notice required by any applicable statute shall be considered complete when the
requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt. This Section shall not be construed in any way to
affect or impair any waiver of notice or demand provided in this Guaranty or in any Loan Document or to require giving of notice or demand to or upon any person or entity in any situation or for any
reason. 

        15.    Cumulative Rights.    The exercise by Lender of any right or remedy hereunder or under
any other Loan Document, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. Lender shall have all rights, remedies and recourses afforded to
Lender by reason of this Guaranty or any other Loan Document or by law or equity or otherwise, and the same (a) shall be cumulative and concurrent, (b) may be pursued separately,
successively or concurrently against Guarantor or others obligated for the Guaranteed Obligations, or any part thereof, or against any one or more of them, or against any security or otherwise, at the
sole and absolute discretion of Lender, (c) may be exercised as often as occasion therefor shall arise, it being agreed by Guarantor that the exercise of, discontinuance of the exercise of or
failure to exercise any of such rights, remedies, or recourses shall in no event be construed as a waiver or release thereof or of any other right, remedy, or recourse, and (d) are intended to
be, and shall be, nonexclusive. No waiver of any default on the part of Guarantor or of any breach of any of the provisions of this Guaranty or of any other document shall be considered a waiver of
any other or subsequent default or breach, and no delay or omission in exercising or enforcing the rights and powers granted herein or in any other document shall be construed as a waiver of such
rights and powers, and no exercise or enforcement of any rights or powers hereunder or under any other document shall be held to exhaust such rights and powers, and every such right and power may be
exercised from time to time. The granting of any consent, approval or waiver by Lender shall be limited to the specific instance and purpose therefor and shall not constitute consent or approval in
any other instance or for any other purpose. No notice to or demand on Guarantor in any case shall of itself entitle Guarantor to any other or further notice or demand in similar or other
circumstances. No provision of this Guaranty or any right, remedy or recourse of Lender with respect hereto, or any default or breach, can be waived, nor can this Guaranty or Guarantor be released or
discharged in any way or to any extent, except specifically in each case by a writing intended for that purpose (and which refers specifically to this Guaranty) executed, and delivered to Guarantor,
by Lender. 

        16.    Term of Guaranty.    This Guaranty shall continue in effect until all the Guaranteed
Obligations are fully and finally paid, performed and discharged, except that, and notwithstanding any return of this Guaranty to Guarantor, this Guaranty shall continue in effect (a) with
respect to any of the Guaranteed Obligations that survive the full and final payment of the indebtedness evidenced by the Note, (b) with respect to all obligations and liabilities of Guarantor
under Section 10 and (c) as provided in Section 3(b). 

        17.    Limitation on Guarantee.    Notwithstanding anything to the contrary contained herein,
Guarantor's obligations under this Guaranty shall be limited to $[Amount of guarantor's personal obligation], plus all costs and expenses incurred by Lender in connection with
its exercise of any rights or remedies under the Note, the Security Agreement and this Guaranty. 

        18.    Subrogation.    Notwithstanding anything to the contrary contained herein, Guarantor
shall not have any right of subrogation in or under any of the Loan Documents or to participate in any way therein, or in any right, title or interest in and to any security or right of recourse for
the Indebtedness or any right to reimbursement, exoneration, contribution, indemnification or any similar rights, until the 

10

 

Indebtedness has been fully and finally paid. This waiver is given to induce Lender to make the Loan to Borrower. 

        19.    Further Assurances.    Guarantor at Guarantor's expense will promptly execute and
deliver to Lender upon Lender's request all such other and further documents, agreements, and instruments in compliance with or accomplishment of the agreements of Guarantor under this Guaranty. 

        20.    No Fiduciary Relationship.    The relationship between Lender and Guarantor is solely
that of lender and guarantor. Lender has no fiduciary or other special relationship with or duty to Guarantor and none is created hereby or may be inferred from any course of dealing or act or
omission of Lender. 

        21.    Interpretation.    Lender may pursue Guarantor hereunder without being required
(a) to pursue Borrower or any other person or entity, or (b) pursue rights and remedies under any Security Agreement and/or applicable law with respect to any property encumbered by a
Security Agreement, or any other Loan Documents. Each married individual who executes this Guaranty represents to Lender that (a) the Guaranteed Obligations are of substantial and material
benefit to his or her marital community, (b) this Guaranty is a community purpose guaranty, and (c) he or she intends to bind both his or her separate estate and his or her marital
community for payment of the Guaranteed Obligations. The term "Lender" shall be deemed to include any subsequent holder(s) of the Note. Whenever the context of any provisions hereof shall require it,
words in the singular shall include the plural, words in the plural shall include the singular, and pronouns of any gender shall include the other gender. Captions and headings in the Loan Documents
are for convenience only and shall not affect the construction of the Loan Documents. All references in this Guaranty to Schedules, Articles, Sections, Subsections, paragraphs and subparagraphs refer
to the respective subdivisions of this Guaranty, unless such reference specifically identifies another document. The terms "herein", "hereof", "hereto", "hereunder" and similar terms refer to this
Guaranty and not to any particular Section or subsection of this Guaranty. The terms "include" and "including" shall be interpreted as if followed by the words "without limitation". All references in
this Guaranty to sums denominated in dollars or with the symbol "$" refer to the lawful currency of the United States of America, unless such reference specifically identifies another currency. 

        22.    Time of Essence.    Time shall be of the essence in this Guaranty with respect to all
of Guarantor's obligations hereunder. 

        23.    Counterparts.    This Guaranty may be executed in multiple counterparts, each of which,
for all purposes, shall be deemed an original, and all of which taken together shall constitute but one and the same agreement. 

        24.    Entire Agreement.    This Guaranty embodies the entire agreement between Lender and
Guarantor with respect to the guaranty by Guarantor of the Guaranteed Obligations. This Guaranty supersedes all prior agreements and understandings, if any, with respect to the guaranty by Guarantor
of the Guaranteed Obligations. No condition or conditions precedent to the effectiveness of this Guaranty exist. This Guaranty shall be effective upon execution by Guarantor and delivery to Lender.
This Guaranty may not be modified, amended or superseded except in a writing signed by Lender and Guarantor referencing this Guaranty by its date and specifically identifying the portions hereof that
are to be modified, amended or superseded. 

        25.    Waiver of Jury Trial.    BORROWER AND LENDER WAIVE TRIAL BY
JURY IN RESPECT OF ANY CONTROVERSIES OR CLAIMS BETWEEN GUARANTOR AND LENDER, WHETHER ARISING IN CONTRACT, OR TORT OR BY STATUTE, THAT ARISE OUT OF OR RELATE TO (I) THIS GUARANTY (INCLUDING ANY
RENEWALS, EXTENSIONS OR MODIFICATIONS), OR (II) ANY OF THE OTHER LOAN DOCUMENTS (COLLECTIVELY A "CLAIM"). THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND LENDER, AND  

11

 

 GUARANTOR AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS GUARANTY AND THE LOAN DOCUMENTS. GUARANTOR AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION 26 IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. GUARANTOR FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF GUARANTOR'S OWN FREE WILL, AND THAT GUARANTOR HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.

        THIS GUARANTY AND THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

        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.

        THIS GUARANTY RESULTS IN YOUR WAIVER OF CERTAIN LEGAL RIGHTS AND DEFENSES, INCLUDING SUBROGATION RIGHTS AND ANY DEFENSE BASED ON THE LENDER'S ELECTION OF
REMEDIES. IT IS RECOMMENDED YOU CONSULT WITH YOUR OWN ATTORNEY BEFORE ENTERING INTO THIS AGREEMENT.

        I CLEARLY UNDERSTAND THAT LENDER DOES NOT HAVE TO PURSUE THE BORROWER OR ANY OTHER OBLIGATED PARTY OR FORECLOSE OR REALIZE UPON ANY COLLATERAL BEFORE DEMANDING
AND ENFORCING PAYMENT FROM ME. I FURTHER UNDERSTAND THAT I WILL HAVE TO PAY THE AMOUNTS THEN DUE EVEN IF BORROWER OR ANY OTHER GUARANTOR OR OBLIGATED PARTY DOES NOT MAKE PAYMENT OR IS OTHERWISE
RELIEVED OF THE OBLIGATION OF MAKING PAYMENT.

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        IN
WITNESS WHEREOF, Guarantor duly executed this Guaranty as of the date first written above. 

	GUARANTOR:	 	 
	 	 	 
	

 [guarantor name]	
 	

 
	 	 	 
	

 [guarantor spouse name, if applicable]	
 	

 
	

Address of Guarantor:	
 	

 
	 	 	 
	

	
 	

 
	 	 	 
	
	 	 
	 	 	 
	
	 	 

Lender's
address for notices: 

1001
Fourth Avenue, Suite 4700

Seattle, WA 98154

Attention: Larry R. Benaroya 

With
a copy to: 

David
N. Lombard, Esq.

Jameson, Babbitt, Stites & Lombard, P.L.L.C.

999 Third Avenue, Suite 1900

Seattle, WA 98104 

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