Exhibit 10.31

CONFIDENTIAL TREATMENT

[***] Indicates that text has been omitted which is the subject of a
confidential treatment request. This text has been separately filed with the
SEC.

 

SUPPLY AGREEMENT

THIS SUPPLY AGREEMENT (this “Agreement”) dated as of March 27, 2009, (the
“Effective Date”) by and among Green Mountain Coffee Roasters, Inc., a Delaware
corporation, with its head office located at 33 Coffee Lane, Waterbury, Vermont
05676-1529 (“GMCR”) and TC Global, Inc., f/k/a Tully’s Coffee Corporation, a
Washington corporation with its head offices located at 3100 Airport Way South,
Seattle, Washington 98134 ( “Tully’s”). Capitalized terms used in this Agreement
without separate definition are defined or otherwise referenced in Section
XII(l).

WHEREAS, GMCR and Tully’s have previously entered into an Asset Purchase
Agreement, dated as of September 15, 2008 as amended by Amendment No. 1 thereto
dated November 12, 2008 and Amendment No. 2 thereto dated February 6, 2009 (the
“Transaction Agreement”), whereby GMCR is purchasing the assets associated with
the wholesale business of Tully’s, including the “Tully’s” world-wide brand
(excluding Japan) and other trade names, trademarks and service marks;

WHEREAS, simultaneously with the execution hereof, GMCR and Tully’s have entered
into a License Agreement, dated as of September 15, 2008 (the “License
Agreement”), whereby GMCR has agreed to grant Tully’s a license to use the
“Tully’s” brand and other trade names, trademarks and service marks in
connection with (i) certain retail operations worldwide (excluding Japan), and
(ii) certain wholesale operations outside of North America;

WHEREAS, conditional upon the successful completion of the transactions
contemplated in the Transaction Agreement and License Agreement, GMCR has agreed
to enter into exclusive supply arrangements on the terms and in such manner as
is set forth below;

WHEREAS, agreement of Tully’s and GMCR, respectively, to enter into this Supply
Agreement is a condition precedent to each party’s obligations to close the
transactions contemplated by the Transaction Agreement;

WHEREAS, upon the closing of the transactions contemplated by the Transaction
Agreement, GMCR as the new owner of the “Tully’s” brand wants to ensure the
quality of the product sold as Tully’s coffee at “Tully’s” branded retail,
franchised and licensed locations;

NOW THEREFORE in consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto covenant and agree as follows:

I. PRODUCTS AND OTHER COFFEE PRODUCTS

(a) “Products” shall mean certain 5-lb bulk, Retail Coffee Bags and fractional
pack coffee for use at Licensed Retail Stores (as defined in the License
Agreement) listed in Schedule A

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CONFIDENTIAL TREATMENT

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confidential treatment request. This text has been separately filed with the
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attached hereto. Schedule A may be amended from time to time by a written
agreement signed by the authorized representatives of both parties, at their
sole discretion; provided, however, GMCR may delete any item from Schedule A
without the prior consent of Tully’s, upon ninety (90) days prior written notice
to Tully’s, if Tully’s does not purchase at least [***] pounds of such item per
month. To the extent GMCR develops or Tully’s requests amendments to Schedule A
involving new products not offered as of the Effective Date but of the same
general kind or nature as those listed on Schedule A, the parties agree that any
amendment of Schedule A to add such new products shall be contingent upon the
mutual agreement of the parties to price, quantity, delivery, and other terms
which may vary from the terms stated herein based on the nature of the new
product and associated circumstances. Notwithstanding the foregoing, GMCR agrees
not to remove any Retail Coffee Bag from Schedule A (“Schedule A Retail Coffee
Bag”) during the term of this Agreement without the prior written approval of
Tully’s.

(b) “Other Coffee Products” shall mean grocery bagged coffees, K-Cup portion
packs and other coffee products as listed in Schedule B attached hereto.
Schedule B may be amended from time to time by a written agreement signed by the
authorized representatives of both parties, at their sole discretion; provided,
however, GMCR may delete any item from Schedule B without the prior consent of
Tully’s, upon ninety (90) days prior written notice to Tully’s, if Tully’s does
not purchase at least [***] pounds of such item per month. To the extent GMCR
develops or Tully’s requests amendments to Schedule B involving new products not
offered as of the Effective Date but of the same general kind or nature as those
listed on Schedule B, the parties agree that any amendment of Schedule B to add
such new products shall be contingent upon the mutual agreement of the parties
to price, quantity, delivery, and other terms which may vary from the terms
stated herein based on the nature of the new product and associated
circumstances.

II. COVENANTS TO SUPPLY AND PURCHASE

(a) Subject to the terms and conditions of this Agreement, GMCR covenants and
agrees to use commercially reasonable efforts to supply, or cause to supply, to
Tully’s all of Tully’s requirements of Products and Other Coffee Products during
the Term of this Agreement. Notwithstanding the foregoing, GMCR covenants and
agrees that it will supply, or cause to supply, to Tully’s all of Tully’s
Non-Free Standing Licensed Store Requirements for Schedule A Retail Coffee Bags.

(b) Subject to the terms and conditions of this Agreement, Tully’s covenants and
agrees to purchase, or cause to be purchased, all of its requirements of
Products and Other Coffee Products from GMCR during the Term of this Agreement,
solely for use consistent with the parties’ License Agreement.

(c) GMCR shall not be obligated to supply, or cause to supply, to Tully’s and
Tully’s shall not be obligated to purchase, or cause to be purchased, from GMCR
any products other than the Products and Other Coffee Products.

 

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(d) Notwithstanding anything to the contrary hereinabove, but subject to the
limitation set forth in Section II(e) below, during the term of this Agreement,
Tully’s shall have the option to purchase Products and Other Coffee Products,
except K-Cup portion packs, from a Secondary Vendor in the following situations,
but in all cases subject to the requirements and limitations applicable to a
Secondary Vendor set forth in the License Agreement:

(i) if any product listed on Schedule A is moved to Schedule B without Tully’s
prior written approval, Tully’s may purchase such product from a Secondary
Vendor;

(ii) if GMCR is unable to fill all or any part of a purchase order for any
Product or Other Coffee Product within 30 days after the delivery date set forth
in such order, Tully’s may purchase that portion of the order for such product
from a Secondary Vendor;

(iii) if GMCR elects to discontinue producing any Product or Other Coffee
Product (each a “Discontinued Product”), Tully’s may purchase such Discontinued
Product from a Secondary Vendor;

(iv) if GMCR elects not to produce any new Product or Other Coffee Product
desired by Tully’s, Tully’s may purchase such new Product or Other Coffee
Product from a Secondary Vendor;

(v) if after reaching the first [***] aggregate pounds of Products supplied by
GMCR each Contract Year, GMCR elects not to continue with Schedule A pricing for
one or more Products that were subject to Schedule A pricing, Tully’s may
purchase from a Secondary Vendor those Products for which GMCR has made such
election;

(vi) if at the end of the initial or any follow-on term of this Agreement, GMCR
elects not to continue with the Schedule A and Schedule B pricing for Products
and Other Coffee Products, Tully’s may purchase some or all of its requirements
for Products and Other Coffee Products from a Secondary Vendor subject to
Section II(e) below; and

(vii) if GMCR elects not to supply Special Coffee Products, Tully’s may purchase
such products from a Secondary Vendor; provided, however, before doing so
(a) Tully’s shall provide ninety (90) days written notice to GMCR prior to the
date upon which Tully’s desires to offer Special Coffee Products for sale
(“Special Coffee Product Notice”) (b) the Special Coffee Products per such
notice shall be limited in number and shall only be sold for a limited seasonal,
promotional or special-event related period and (c) GMCR elects not to supply
such products after having fifteen (15) days to consider the Special Coffee
Product Notice. Tully’s shall only sell Special Coffee Products in its
stand-alone Licensed Retail Stores. Tully’s may make up to three (3) Special
Coffee Product Notices each Contract Year. GMCR’s election not to supply
products per a Special Coffee Product Notice shall not waive GMCR’s right under
this Agreement to be the exclusive supplier, subject to this subsection, of
Special Coffee Products in the future.

 

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(e) Tully’s shall not have any right to use a Secondary Vendor to supply
Schedule A Retail Coffee Bags to Non-Freestanding Licensed Retail Stores, unless
GMCR has consistently failed to supply to Tully’s the volume of Retail Coffee
Bags required to supply all of Tully’s Non-Freestanding Licensed Retail Store
Requirements.

III. FORECASTS, ORDERS AND DELIVERY

(a) On or before the Effective Date, and thereafter on or before the last day of
each calendar quarter during the Term, Tully’s shall provide to GMCR a written
forecast (“Forecast”) of Tully’s anticipated demand for all Products and Other
Coffee Products to be supplied by GMCR to Tully’s under this Agreement during
the four calendar quarters next following the calendar quarter in which the
Forecast is scheduled to be delivered hereunder. For each of the Products, the
Forecasts shall be binding on Tully’s (i) to purchase during the first calendar
quarter included in each Forecast at least [***]% of the quantity of such
Product listed therein as the anticipated quantity demand for such Product
during such calendar quarter or (ii) to pay to GMCR a surcharge equal to [***]%
of the aggregate invoice price for the quantity of such Product purchased during
such calendar quarter which is between the actual amount of Product purchased
and [***]% of the quantity forecasted in such calendar quarter, notwithstanding
the pricing limitations set forth in Section III(a). In addition, if during the
first calendar quarter included in each Forecast Tully’s purchases in excess of
[***]% of the quantity of such Product listed therein as the anticipated
quantity demand for such Product during such calendar quarter, Tully’s shall be
required to pay to GMCR a surcharge equal to [***]% of the aggregate invoice
price for the quantity of such Product purchased during such calendar quarter in
excess of such [***]% quantity, notwithstanding the pricing limitations set
forth in Section III(a).

(b) Tully’s shall submit purchase orders for the Products and Other Coffee
Products either by email, facsimile or first class mail, which, at a minimum,
set forth the product numbers, quantities and requested delivery dates. The
purchase orders shall only become binding on the parties upon GMCR’s acceptance
of such purchase orders, either by email, facsimile or first mail.

(c) GMCR shall make commercially reasonable efforts to supply all Products and
Other Coffee Products ordered in conformity with this Agreement, but GMCR does
not guarantee the availability of any Products or Other Coffee Products. If
shortages of any Products or Other Coffee Products ordered arise, whether due to
manufacturing, transportation, regulatory, economic, supply chain, or other
conditions, GMCR may allocate any of its products among its customers, including
Tully’s on any commercially reasonable basis. In the event that GMCR is unable
to fill all or any part of a purchase order for any Product or Other Coffee
Product within 30 days after the delivery date set forth in such order, then
Tully’s shall be entitled to use a Secondary Vendor as provided for in
Section II(d) above to supply the Product or Other Coffee Product, except K-Cup
portion packs, until such time as GMCR is able to supply the quantity of the
ordered Product or Other Coffee Product to Tully’s, at which time Tully’s shall
once again be obligated to purchase its requirements of the Product or Other
Coffee Product from GMCR.

 

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(d) GMCR agrees to deliver, and shall only be obligated to deliver, all Products
and Other Coffee Products supplied under this Agreement to a single facility in
the United States selected by Tully’s (the “Central Facility”). Tully’s shall
provide GMCR with written notice of the specific delivery address of the Central
Facility before the Effective Date. At its sole discretion, Tully’s may change
the location of the Central Facility at any time during the Term of the
Agreement, so long as such changes are made upon thirty (30) days prior written
notice to GMCR. GMCR shall deliver the Products and Other Coffee Products no
more than two (2) days after the agreed delivery date as set forth in the
respective purchase order.

(e) In GMCR’s sole discretion, GMCR shall replace, at its own expense, all
Products and Other Coffee Products that do not conform in all material respects
to GMCR’s warranties, as set forth in Section VI, upon delivery of such products
to Tully’s (“Non-Conforming Products”), including transportation costs of
getting replacement Products or Other Coffee Products to Tully’s, or shall
credit to Tully’s account for the delivered price of such Products or Other
Coffee Products plus transportation expenses; provided, however, Tully’s shall
notify GMCR without undue delay after Tully’s becomes aware of such
Non-Conforming Products.

IV. PRICE AND PAYMENT

(a) [***] The initial prices for all Products are set forth in Schedule A and
Schedule B, and all such prices during the Term will be FOB GMCR’s designated
shipping point, with freight costs to the Central Facility borne equally by GMCR
and Tully’s. GMCR shall update the weighted average cost and the corresponding
price applicable to the Products each calendar quarter during the Term and
deliver each such update to Tully’s, in each case no sooner than twenty
(20) days prior to the end of each calendar quarter and no later than fifteen
(15) days prior to the end of each calendar quarter. In each case, the weighted
average cost of a Product shall be calculated and equal the weighted average
cost of green coffee, including differentials, plus the weighted average cost of
packaging materials, freight in, labor and allocated overhead incurred by GMCR
with respect to such Product over the ninety (90) day period immediately
preceding the date, which is fifteen (15) days prior to the date on which such
weighted average cost calculation is delivered by GMCR to Tully’s.

(b) In the event Tully’s requires a higher aggregate volume of Products than
[***] pounds in a given Contract Year and GMCR does not elect to continue
Schedule A pricing for one or more Products after such aggregate [***] pound
volume is exceeded, all Products for which GMCR has not made such Schedule A
pricing continuation election shall be priced at GMCR’s best list price offered
to like customers based on volume, services, single order and single point of
distribution on the date on which the order therefor is accepted by GMCR,
provided that Tully’s shall have the option to use a Secondary Vendor to supply
such Products as set forth in Section II(d) above.

(c) Other Coffee Products supplied by GMCR under this Agreement shall be priced
at GMCR’s list price offered to like customers for such Other Coffee Products on
the date on which the order therefor is accepted by GMCR, and all such prices
are FOB GMCR’s designated shipping point, with freight costs to the Central
Facility borne equally by GMCR and Tully’s.

 

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CONFIDENTIAL TREATMENT

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(d) Payments made by Tully’s for Products and Other Coffee Products purchased
hereunder and for any other charges due hereunder shall be due and payable in
full in U.S. dollars within thirty (30) days after the date of shipment by GMCR
or the date on which such other charge accrues, as applicable. Any payment owed
to GMCR under this Agreement that is not paid before the due date for such
payment may, in GMCR’s sole discretion, bear interest, to the extent permitted
by applicable law, at one and one-half percent (1 1 /2%) per month calculated on
the number of days such payment is delinquent.

V. TERM AND TERMINATION

(a) This Agreement shall be for a term of five (5) years starting on the
Effective Date and shall be renewed thereafter for separate additional terms of
one (1) year each unless either party provides written notice of non-renewal to
the other party at least one hundred twenty (120) days in advance of the end of
the initial five (5) year term or an additional term, as the case may be. For
the purposes of this Agreement, the five (5) year initial term referred to above
shall be the “Initial Term” and the Initial Term combined with any extensions or
renewals thereof shall be the “Term” or the “Full Term.” Subject to the term and
conditions of this Agreement including without limitation Section II(d) above,
Tully’s stipulates and agrees that its agreement to source all of its
requirements for Products from GMCR for a period of years, no less than five
(5), is a material inducement and consideration to GMCR to enter into this
Agreement and to the Transaction Agreement and License Agreement.

(b) Either party may terminate this Agreement immediately upon written notice to
the other party in the event of any breach by the other party of a material
obligation under this Agreement, which the receiving party fails to cure within
thirty (30) days after receiving such notice, or in the event the other party
(i) discontinues its business operations; (ii) makes an assignment for the
benefit of its creditors or an admission of its inability to pay its obligations
as they become due; or (iii) files or has filed against it, a petition in
bankruptcy or any similar proceeding or files any pleading seeking any
reorganization, liquidation, or dissolution under any law, or admits or fails to
contest the material allegations of any such pleading filed against it, or is
adjudicated as bankrupt or insolvent, or a receiver is appointed for a
substantial part of such party’s assets, or the claims of creditors of such
party are abated or subject to a moratorium under any law.

(c) Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior to the
effective date of such termination, including obligations under binding orders
for purchase and delivery of Products or Other Coffee Products at the time of
such termination shall remain in effect.

(d) Upon the termination of this Agreement (except for termination by GMCR
pursuant to Section V(b), Tully’s shall immediately be permitted to source the
Products and Other Coffee Products, except K-Cup portion packs, from a Secondary
Vendor as set forth in Section II(d).

 

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(e) The provisions of Sections IX and XI of the Agreement and all terms,
conditions or definitions contained within this Agreement that are imported into
or cross-referenced in the parties’ other agreements, including the Transaction
Agreement, License Agreement and Noncompetition Agreement, shall survive
termination.

(f) The parties agree that, absent the written agreement of both Tully’s and
GMCR, the provisions in this Agreement relating to GMCR’s obligation to supply
and Tully’s obligation to purchase, on the terms and conditions contained in
this Agreement, all Schedule A Retail Coffee Bag requirements for Tully’s
Non-Free Standing Licensed Retail Stores shall survive indefinitely the
termination of this Agreement. For the avoidance of doubt the Secondary Vendor
provisions contained in Section II(e), the limitations on sales to Tully’s
Non-Free Standing Licensed Retail Stores contained in Section VI(c) and each
other term of this Agreement as it relates to the continuing obligations of the
Parties under this Section (V)(f) shall continue to apply for so long as GMCR
has continuing obligations pursuant to this Section V(f).

VI. CERTAIN REPRESENTATIONS AND WARRANTIES

(a) Each party represents and warrants to the other party that the execution and
delivery of this Agreement and the performance by the party of obligations
hereunder have been duly authorized by all requisite corporate action and shall
not violate any provision of law, any order of any court or other agency of
government, the certificate of incorporation or bylaws of such party, or any
provision of any indenture, agreement or other instrument to which such party or
any of its properties or assets is bound, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
such indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of GMCR. This Agreement has been
duly executed and delivered by each party and constitutes the legal, valid and
binding obligation of such party, enforceable in accordance with its terms,
subject, as to the enforcement of remedies, to the discretion of the courts in
awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally.

(b) GMCR hereby represents, warrants and agrees that all Products and Other
Coffee Products shall at the time and place of delivery to Tully’s (i) be fit
for the purpose intended, merchantable, and free from all defects; (ii) shall in
all instances comply with all federal, state or local laws and regulations
relating to quality, labeling, identity, quantity, packaging or any other matter
applicable to Products or Other Coffee Products sold hereunder, including
returnable container or deposit laws; (iii) shall not be adulterated or
misbranded within the meaning of those terms under the Federal Food, Drug and
Cosmetic Act, as amended, or any other applicable federal law or regulation; and
(iv) shall not be adulterated or misbranded within the meaning of any applicable
state law or regulation.

(c) Tully’s hereby represents, warrants and agrees that all Products and Other
Coffee Products delivered by GMCR to Tully’s shall be utilized by Tully’s only
for the purpose intended under this Agreement and that the manner of sale of
Products and Other Coffee

 

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Products shall in all instances comply with all federal, state or local laws.
Tully’s further represents, warrants and agrees that Tully’s shall not sell to
any Tully’s Non-Free Standing Licensed Retail Store more than [***] lbs of
Schedule A Retail Coffee Bags per month without the express written prior
consent of GMCR.

VII. ADHERENCE TO STANDARDS

(a) GMCR covenants and agrees that the Products and Other Coffee Products
supplied to Tully’s under this Agreement shall be supplied in the same general
manner and of the same general quality with Tully’s current practice and product
specifications including, but not limited to, roast date guarantees and
packaging; provided, however, that GMCR may substitute ingredients or components
of similar or better quality for specified ingredients at its reasonable
discretion so long as such substitution does not materially alter the quality of
the Product into which the ingredient or component is incorporated. GMCR shall
not be liable for any defects or impurities caused after delivery of the
Products to Tully’s under this Agreement, or for any variation not caused by or
beyond the control of GMCR. Tully’s stipulates and agrees that all Products
supplied pursuant to this Agreement are subject to expiration and spoilage if
not maintained under proper environmental conditions.

(b) Tully’s covenants and agrees not to resell or use any Products or Other
Coffee Products supplied under this Agreement (i) inconsistent with applicable
laws or commercially reasonable guidelines affecting the safety and quality of
the such products or (ii) in a manner or in environmental conditions that are
inconsistent with any reasonable instructions provided by GMCR for maintaining
the quality and safety of supplied products, which GMCR may provide from time to
time.

VIII. INSPECTION

(a) Tully’s may, on reasonable advance written notice, no more than twice during
a twelve (12) month period, and with the consent of GMCR (such consent not to be
unreasonably withheld), inspect that portion of GMCR’s facility engaged in the
manufacture of the Products at such time during normal business hours when
production for Tully’s is taking place. Any costs associated with such
inspection shall be solely to the account of Tully’s. During such inspection
Tully’s shall be permitted to view and audit the production logs for the
Products.

(b) GMCR agrees to conduct regular quality control checks to ensure that quality
standards are upheld. GMCR shall also provide commercially reasonable reports
based on these checks to Tully’s upon request, but no more than four (4) times a
year.

(c) GMCR may, from time to time, on reasonable advance written notice and during
normal business hours, inspect Tully’s Non-Free Standing Licensed Retail Stores
for compliance with the terms and conditions of this Agreement, provided,
however, that absent evidence of a breach of this Agreement, such inspections
shall be limited to no more than two such inspections in any given 12 month
period. GMCR shall be permitted to view and audit all relevant shipping,
consumption, and other records and reports related to the Non-Free Standing
Licensed Retail

 

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Stores and the distribution of the Non-Free Standing Licensed Retail Store
Requirements, provided, however, that absent evidence of a breach of this
Agreement, such audit shall be limited to no more than one in any given 12 month
period. On a quarterly basis, Tully’s shall provide GMCR with a written report
stating the total volume of Schedule A Retail Coffee Bags shipped to, and
consumed or sold by, each Non-Free Standing Licensed Retail Store during the
preceding calendar quarter and shall include a statement that, to the best of
Tully’s’ knowledge, Tully’s is in compliance with all terms and conditions of
this Agreement, including without limitation Section VI(c).

IX. INDEMNIFICATION

(a) Subject to the terms and conditions of this Agreement, each party shall
indemnify, defend, and hold harmless the other party, and each of its
subsidiaries, officers, directors, employees, agents and representatives from
and against any liability, losses, damages, claims, costs and expenses
(including reasonable fees of attorneys and other professionals and court costs)
(collectively, the “Liabilities”) arising out of or connected with any third
party claim: (i) resulting from any breach of any warranty, representation,
covenant or other obligation under the Agreement by the indemnifying party, and
(ii) the negligence or willful misconduct by the indemnifying party, or its
subsidiaries, officers, directors, employees, agents or representatives.

(b) Tully’s shall further indemnify, defend and hold harmless GMCR, and each of
its subsidiaries, officers, directors, employees, agents and representatives
from and against any Liability arising out of the operation of Tully’s Stores,
except to the extent any such claims arise out of or related to GMCR’s
negligence or willful acts.

(c) GMCR shall further indemnify, defend and hold harmless Tully’s, and each of
it subsidiaries, franchisees, licensees, officers, directors, employees, agents
and representatives from and against any Liability arising out any defects or
irregularities with regard to any of the Products or Other Coffee Products sold
pursuant to this Agreement that exist upon delivery to Tully’s, except to the
extent any such claims arise out of or are related to Tully’s negligence or
willful acts.

(d) As a condition to a party’s obligation to indemnify, defend and hold
harmless hereunder against a claim arising out of a third party claim, the other
party shall (i) provide prompt written notice of any claim giving rise to any
Liability; (ii) tender control of the defense and settlement of any such claim
to the indemnifying party (such other party being able to participate in the
defense of any such claim at such other party’s own expense), but provided that
the indemnifying party may not agree to a settlement of a claim without the
prior consent of the indemnified party, which shall not be unreasonably or
untimely withheld; and (iii) provide such reasonable cooperation as the
indemnifying party requests.

X. FORCE MAJEURE

Neither party hereto shall be considered in default of this Agreement or be
liable for damages therefor, for any failure or delay in performance hereunder
(other than obligations to

 

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pay money, which shall be excluded from this Section) occasioned by an act of
god, force of nature, accident, war or warlike activity, insurrection or civil
commotion, labor dispute, transportation delay, governmental regulatory action
(whether or not with proper authority) or other circumstances beyond the control
of the party so affected for that period commencing at the time notice of such
circumstances is given by the affected party and terminating at such time as the
impairment caused by such circumstances ends or would have ended had the
affected party taken reasonable steps to remedy such circumstances beyond the
control of the affected party.

XI. CONFIDENTIALITY

(a) The parties acknowledge that each may provide to the other, or that in the
course of its dealings with the other, may learn of or discover certain
confidential proprietary and/or trade secret information and material, or other
information which is deemed by the other to be confidential, including, without
limitation, the price for the Products and other confidential financial
information, confidential market research, confidential plans for future
products, confidential information regarding the sourcing of coffee and supply
chain management, proprietary packaging design or know how, product recipes and
formulations and other confidential information or materials (collectively the
“Confidential Information”). For clarity, the parties agree that all
Confidential Information pertaining to Products, including, without limitation,
supply chain information and recipes, formulas, and production know-how
pertaining to Products, acquired or to be acquired by GMCR in connection with
the transactions contemplated under the Transaction Agreement or otherwise in
the possession, custody or control of GMCR is and shall be Confidential
Information owned by GMCR subject to the terms of this Agreement. With regard to
Confidential Information, the parties acknowledge and agree that unauthorized
disclosure or use, whether intentional or unintentional, of any of the
Confidential Information may be detrimental to the other. Accordingly, the
parties agree as follows, subject to the limitations and exceptions set forth
below:

(i) Not to use any of the Confidential Information of the other party for any
purpose other than in connection with this Agreement without the other party’s
prior written consent.

(ii) To maintain all of the Confidential Information of the other party in
confidence and not to disclose any portion of such Confidential Information to
any person or entity other than its representatives (which term shall include
its’ directors, officers, employees, attorneys, agents and advisors) who are
authorized to use the information for permitted purposes and who are bound to
maintain the confidentiality of such Confidential Information consistent with
this Agreement, without the other party’s prior written consent. The disclosing
party shall remain responsible for the actions and disclosures of its
representatives.

(b) The obligations pursuant to this Section shall not apply to:

(i) Confidential Information already known to the other party or to others not
bound by a duty of confidentiality or such Confidential Information is or
becomes publicly

 

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available, in each case, through no fault of the other party from a person who
is not otherwise bound by an obligation of confidentiality with respect to such
Confidential Information; or

(ii) Confidential Information that the party is required by law or regulatory
authority to produce or to disclose, provided that the party provides notice to
the other party before making such disclosure and, at the other party’s request
and expense, cooperates in any effort by the other party to obtain a secrecy
agreement or protective relating to such disclosure.

XII. MISCELLANEOUS

(a) Tully’s shall not assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of GMCR,
which consent may not be unreasonably withheld or delayed. The parties agree
that it shall be reasonable for GMCR to withhold its consent to a proposed
assignment of this Agreement by Tully’s to a third party if (i) the proposed
assignee does not meet GMCR’s commercially reasonable standards as to general
creditworthinesss or (ii) the proposed assignee is a direct competitor of GMCR
in the Coffee Business. In addition, it shall be a condition of GMCR’s
obligation to consent to any such proposed assignment that the proposed assignee
agree to assume the obligations of Tully’s under the Noncompetition Agreement
with respect to the Wholesale Business. Notwithstanding the foregoing, GMCR
agrees that any assignment by Tully’s of this Agreement to an entity owned by
persons set forth on Schedule C, without participation (which shall include, for
the avoidance of doubt, any ownership interest) by any competitor of GMCR in the
Coffee Business, and so long as such persons agree to assume the obligations of
Tully’s under the Noncompetition Agreement, shall not require the consent of
GMCR. GMCR, without the consent of Tully’s, may freely assign its rights under
this Agreement and delegate its obligations under this Agreement, in whole or in
part, to any Affiliate if such Affiliate shall assume GMCR’s obligations under
this Agreement in writing. GMCR may also assign this Agreement to any purchaser
or other successor in title upon a Change of Control in or to all or
substantially all of it business or of any discretely operated subsidiary or
line of business, provided that such right to assign shall be conditioned on the
third party acquiring control pursuant to such transaction providing
commercially reasonable written assurances to Tully’s acknowledging that it is
bound by and obligated to fulfill the obligations of GMCR hereunder as though
such third party were an original party hereto. Any attempt to assign or
transfer this Agreement or any portion thereof in violation of this section
shall be void and shall give rise to a right of termination under Section V(b).

(b) All notices and other communications shall be in writing and shall be deemed
duly given (i) the date of delivery to the address for notice by a widely
recognized express delivery service with established tracking capability (such
as DHL, UPS, or FedEx); or (ii) the date of transmission by telecopy, email or
other electronic transmission service to the address for notice, provided that
confirmation of delivery is received by the sender and a copy is also sent the
same business day by postage paid, first-class mail. The address for notice for
each party is set forth below: Either party may change its address for service
of notices hereunder by written notice to the other party in accordance with
this Section.

 

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Notices to “GMCR”:

Green Mountain Coffee Roasters, Inc.

33 Coffee Lane

Waterbury, Vermont 05676

Attention: Fran Rathke

Telephone: 802-244-5621 x1300

Facsimile: 802-244-6566

Notices to “Tully’s”

TC Global, Inc.

3100 Airport Way South

Seattle, WA 98134

Attention: Andy Wynne

Telephone: 206-292-5059

Facsimile: 206-233-2077

(c) GMCR is an independent contractor engaged by Tully’s to supply Products
under this Agreement. Nothing in this Agreement shall make either party the
legal representative, agent, employee, owner or partner of the other nor shall
either party have the right or authority to assume, create or incur any
liability or obligation of any kind, express or implied, against, in the name of
or on behalf of, the other party.

(d) This Agreement, the Transaction Agreement and the License Agreement
constitute the entire agreement and understanding between the parties regarding
the subject matter hereof, and supersedes and merges all prior discussions and
agreements between them relating thereto. No waiver, modification or amendment
to this Agreement shall be valid unless in writing, signed by the parties
hereto.

(e) If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible, or, in
the event a party seeks to enforce this Agreement in the absence of such a
negotiated modification, the court shall construe and enforce this Agreement as
though the illegal or unenforceable provision were excluded from the contract,
and interpreting the remaining and enforceable provisions in such manner as to
give effect to the original intentions of the parties consistent with
requirements of law.

 

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(f) This Agreement may be executed by facsimile and in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.

(g) The parties agree that there are no third party beneficiaries to this
Agreement or any part or specific provision of this Agreement unless
specifically stated herein. This Agreement is solely for the benefit of GMCR and
Tully’s and is not intended to confer any rights or benefits to any third party.

(h) The parties agree that the provisions of this agreement, with the exception
of Section XI hereof, which shall only be effective and binding upon execution,
are expressly conditional upon the successful closing and completion of the
transactions contemplated by the Transaction Agreement and the failure of such
transactions to be successfully completed and closed pursuant to the terms of
the Transaction Agreement shall rescind this Agreement in all respects and
render this Agreement and its terms null and void.

(i) This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of Delaware, of the United States of America
without regard to any applicable conflict of law or choice of law rules. The
parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to apply to a court of competent jurisdiction for an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any New York court in the event any dispute arises out of this
Agreement, (b) agrees that it shall not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court,
(c) agrees that it shall not bring any action relating to this Agreement in any
court other than any New York court and (d) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement.

(j) Notwithstanding Section XII(i), all disputes and claims relating to the
determination of the appropriate mark-up after the initial Term pursuant to
Section II(d) and Schedule A shall be settled by arbitration in New York, under
the Commercial Arbitration Rules of the American Arbitration Association or the
successor to such rules in effect at the time of the dispute, subject to the
following. During the pendency of such arbitration, the pricing in effect
immediately prior to such dispute for Products to which such dispute applies
shall apply to all orders for such Products until the final decision of the
arbitrator or arbitration panel, as applicable, is delivered to the parties.
Where such a dispute or claim exists, either party (the “Initiating Party”) may
submit the dispute or claim to arbitration by giving notice to the other party
(the “Responding Party”) specifying the matter in dispute and designating an
arbitrator. The Responding Party shall, within fifteen (15) days thereafter, be
entitled to appoint an arbitrator by written notice to the first party. If the
Responding Party fails to appoint an arbitrator within the fifteen (15) day
period, then the arbitration shall proceed before the

 

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arbitrator appointed by the Initiating Party who shall act as a sole arbitrator.
If the Responding Party appoints an arbitrator within the fifteen (15) day
period, the two (2) arbitrators so appointed shall meet and select a third
arbitrator acceptable to both of them. The resulting arbitration panel or sole
arbitrator, as the case may be, shall thereupon proceed to set out the procedure
for the arbitration, shall hear the submissions of the parties and shall attempt
to render a decision within thirty (30) days after the appointment of the final
arbitrator or such longer period thereafter as may be required, provided that
said arbitration panel or arbitrator shall award, or include in the award, the
specific performance of this Agreement unless the arbitration panel or the
arbitrator determines that performance is impossible. In the case of an
arbitration panel, the decision of a majority of the arbitration panel shall be
deemed to be the decision of the arbitration panel. The decision of the
arbitration panel or the sole arbitrator, as the case may be, shall be final and
binding upon the parties and not subject to appeal. The arbitration panel or the
sole arbitrator, as the case may be, shall have the authority to assess the
costs of the arbitration panel against either or both of the parties. In
addition, the prevailing party in any such proceeding shall be entitled to
recover its reasonable attorneys fees and costs incurred in such proceeding.
Judgment upon the award of the arbitrator may be entered in any court having
jurisdiction thereof or over the parties hereto.

(k) UNDER NO CIRCUMSTANCES SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY THE FOR
ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR
ANTICIPATED INCOME, LOST REVENUES OR LOST PROFITS), ARISING FROM ANY CLAIM
RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON WARRANTY, CONTRACT,
TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF AN
AUTHORIZED REPRESENTATIVE OF THE PARTY IS ADVISED OF THE POSSIBILITY OR
LIKELIHOOD OF SUCH INJURY, DAMAGE OR EVENT.

(l) Defined terms, indicated by the use of initial capitalization, shall have
the meaning ascribed to them below:

“Affiliate” shall mean, with respect to a party, all employees, family or other
relatives, officers, directors, and equity holders of such person, as well as
any other Person controlling, controlled by or under common control with such
party, where “control” means the ownership, directly or indirectly, of a
controlling share of the equity interests of the party or the possession by
other means, whether directly or indirectly, of the power to direct the
management and policies of a party.

“Change of Control” shall mean (i) any sale, transfer, assignment or other
disposition, whether by operation of law or otherwise, of the voting or other
securities, which results in any single third party owning more than a majority
of such party’s voting stock, (ii) the sale of substantially all of such party’s
assets in one or a series of transactions to a single third party buyer, (iii) a
merger or consolidation of such party with any other third party entity, or
(iv) the acquisition by a third party of the right to nominate a controlling
majority of members of the board of directors of such party.

 

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“Coffee Business” shall mean the business of roasting, packaging, brewing,
selling, distributing or otherwise providing whole bean and ground coffees, hot
or cold coffee beverages or related products including brewers in North America.

“Contract Year” shall mean the twelve (12) month period beginning on March 27
and ending March 26 each year of the Term.

“Licensed Retail Store” shall have the meaning set forth in the License
Agreement.

“Noncompetition Agreement” means the Noncompetition Agreement dated as of
March 27, 2009 by and between Tully’s and GMCR.

“Non-Free Standing Licensed Retail Store” shall mean a Licensed Retail Store
which is located within the premises of a third party such as a grocery or
retail store, business or university campus or other similar locations.

“Non-Free Standing Licensed Retail Store Requirements” shall mean no greater
than [***] ([***]) lbs of Schedule A Retail Coffee Bags per Non-Free Standing
Licensed Retail Store per month.

“North America” shall mean the United States of America, Canada, Mexico and the
Islands of the Caribbean.

“Retail Coffee Bag” shall mean whole bean and ground coffee specifically
packaged for retail sale.

“Secondary Vendor” has the meaning set forth in the License Agreement.

“Special Coffee Product” shall mean any seasonal, promotional or special event
related coffee product not listed on Schedules A or B.

“Tully’s Stores” shall mean Licensed Retail Stores operated by Tully’s or by
Tully’s sublicensees (either its franchisees and licensees) where Products
supplied by GMCR are sold pursuant to the License Agreement.

[Remainder of page intentionally left blank. Signature page follows.]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
hereinabove written.

 

GREEN MOUNTAIN COFFEE ROASTERS, INC. By:  

 

Name:   Title:   TC GLOBAL, INC. F/K/A TULLY’S COFFEE CORPORATION By:  

 

Name:   Title:  

[Signature Page to Supply Agreement]

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Schedule A

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Schedule B

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Schedule C

Tully’s Senior Management

Carl Pennington

Andy Wynne