Exhibit
10.1

     

    Peet’s
Coffee & Tea, Inc.

     

    2010
Equity Incentive Plan

     

    Adopted
by the Board of Directors:  March 16, 2010

    Approved
by the Shareholders:  May 18,  2010

    Termination
Date:  March 15, 2020

     

    1.           General.

     

    (a)           Successor to and Continuation of
Prior Plan.  The Plan is intended as the successor to and
continuation of the Peet’s Coffee & Tea, Inc. 2000 Equity Incentive Plan, as
amended and restated (the “Prior
Plan”).  Following the Effective Date, no additional stock
awards shall be granted under the Prior Plan.  All outstanding stock
awards granted under the Prior Plan shall remain subject to the terms of the
Prior Plan; provided, however, that after January 3, 2010, any shares underlying
outstanding stock awards granted under the Prior Plan that expire or terminate
for any reason prior to exercise or settlement or are forfeited because of the
failure to meet a contingency or condition required to vest such shares or are
reacquired, withheld (or not issued) to satisfy a tax withholding obligation in
connection with an award other than a stock option or stock appreciation right
(the “Returning
Shares”) shall become available for issuance pursuant to Awards granted
hereunder.  All Awards granted on or after the Effective Date of this
Plan shall be subject to the terms of this Plan.

     

    (b)           Eligible Award
Recipients.  The persons eligible to receive Awards are
Employees, Directors and Consultants.

     

    (c)           Available
Awards.  The Plan provides for the grant of the following
Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii)
Stock Appreciation Rights (iv) Restricted Stock Awards, (v) Restricted Stock
Unit Awards, (vi) Performance Stock Awards, (vii) Performance Cash Awards, and
(viii) Other Stock Awards.

     

    (d)           Purpose.  The
Company, by means of the Plan, seeks to secure and retain the services of the
group of persons eligible to receive Awards as set forth in Section 1(b), to
provide incentives for such persons to exert maximum efforts for the success of
the Company and any Affiliate and to provide a means by which such eligible
recipients may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of Awards.

     

    2.           Administration.

     

    (a)           Administration by
Board.  The Board shall administer the Plan unless and until
the Board delegates administration of the Plan to a Committee or Committees, as
provided in Section 2(c).

     

    (b)           Powers of
Board.  The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

     

    
      
        
        

      

      
        1.

        
          

        

      

      
        
        

      

    

     

    (i)          To
determine from time to time (A) which of the persons eligible under the Plan
shall be granted Awards; (B) when and how each Award shall be granted; (C) what
type or combination of types of Award shall be granted; (D) the provisions of
each Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive cash or Common Stock pursuant to a
Stock Award; (E) the number of shares of Common Stock with respect to which a
Stock Award shall be granted to each such person; and (F) the Fair Market Value
applicable to a Stock Award.

     

    (ii)         To
construe and interpret the Plan and Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration.  The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement or in the written
terms of a Performance Cash Award, in a manner and to the extent it shall deem
necessary or expedient to make the Plan or Award fully effective.

     

    (iii)        To
settle all controversies regarding the Plan and Awards granted under
it.

     

    (iv)         To
accelerate the time at which an Award may first be exercised or the time during
which an Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest.

     

    (v)          To
suspend or terminate the Plan at any time.  Suspension or termination
of the Plan shall not impair rights and obligations under any Award granted
while the Plan is in effect except with the written consent of the affected
Participant.

     

    (vi)         To
amend the Plan in any respect the Board deems necessary or advisable. However,
except as provided in Section 9(a) relating to Capitalization Adjustments, to
the extent required by applicable law or listing requirements, shareholder
approval shall be required for any amendment of the Plan that either (A)
materially increases the number of shares of Common Stock available for issuance
under the Plan, (B) materially expands the class of individuals eligible to
receive Awards under the Plan, (C) materially increases the benefits accruing to
Participants under the Plan or materially reduces the price at which shares of
Common Stock may be issued or purchased under the Plan, (D) materially extends
the term of the Plan, or (E) expands the types of Awards available for issuance
under the Plan. Except as provided above, rights under any Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(1) the Company requests the consent of the affected Participant, and (2) such
Participant consents in writing.

     

    (vii)       To
submit any amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of (A)
Section 162(m) of the Code regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
Covered Employees, (B) Section 422 of the Code regarding incentive stock options
or (C) Rule 16b-3.

     

    
      
         


      

      
        2.

        
          

        

      

      
         


      

    


    (viii)      To
approve forms of Award Agreements for use under the Plan and to amend the terms
of any one or more Awards, including, but not limited to, amendments to provide
terms more favorable to the Participant than previously provided in the Award
Agreement, subject to any specified limits in the Plan that are not subject to
Board discretion; provided
however, that except with respect to amendments that disqualify or impair
the status of an Incentive Stock Option, a Participant’s rights under any Award
shall not be impaired by any such amendment unless (A) the Company requests the
consent of the affected Participant, and (B) such Participant consents in
writing.  Notwithstanding the foregoing, subject to the limitations of
applicable law, if any, the Board may amend the terms of any one or more Awards
without the affected Participant’s consent if necessary to maintain the
qualified status of the Award as an Incentive Stock Option or to bring the Award
into compliance with Section 409A of the Code.

     

    (ix)        Generally,
to exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in
conflict with the provisions of the Plan or Awards.

     

    (x)         To
adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees, Directors or Consultants who are foreign
nationals or employed outside the United States.

     

    (c)         Delegation
to Committee.

     

    (i)        
General.  The
Board may delegate some or all of the administration of the Plan to a Committee
or Committees.  If administration of the Plan is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that have been delegated
to the Committee, including the power to delegate to a subcommittee of the
Committee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board.  The Board may retain the authority to concurrently
administer the Plan with the Committee and may, at any time, revest in the Board
some or all of the powers previously delegated.

     

    (ii)        Section 162(m) and Rule 16b-3
Compliance.  The Committee may consist solely of two or more
Outside Directors, in accordance with Section 162(m) of the Code, or solely of
two or more Non-Employee Directors, in accordance with Rule 16b-3.

     

    (d)        
Effect of Board’s
Decision. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall
be final, binding and conclusive on all persons.

     

    (e)         Repricing; Cancellation and Re-Grant
of Stock Awards.  Neither the Board nor any Committee shall
have the authority to: (i) reduce the exercise price of any outstanding Options
or Stock Appreciation Rights under the Plan, or (ii) cancel any outstanding
Options or Stock Appreciation Rights that have an exercise price or strike price
greater than the current Fair Market Value of the Common Stock in exchange for
cash or other Stock Awards under the Plan, unless the shareholders of the
Company have approved such an action within 12 months prior to such an event.


     


    
      
         


      

      
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    3.           Shares
Subject to the Plan.

     

    (a)         Share
Reserve.  Subject to Section 9(a) relating to Capitalization
Adjustments, the aggregate number of shares of Common Stock that may be issued
pursuant to Stock Awards from and after the Effective Date shall not exceed
700,000 shares plus the
Returning Shares, if any, as such shares become available from time to time
less one share for each
share of stock issued pursuant to an option or stock appreciation right granted
after January 3, 2010 under the Prior Plan with respect to which the strike
price is at least 100% of the Fair Market Value of the underlying Common Stock
on the date of grant and 1.8 shares for each share of stock issued pursuant to
an award other than an option or stock appreciation right granted after January
3, 2010 under the Prior Plan (the “Share
Reserve”).  For clarity, the Share Reserve in this Section 3(a)
is a limitation on the number of shares of the Common Stock that may be issued
pursuant to the Plan and does not limit the granting of Stock Awards except as
provided in Section 7(a).  Shares may be issued in connection with a
merger or acquisition as permitted by NASDAQ Listing Rule 5635(c) or, if
applicable, NYSE Listed Company Manual Section 303A.08, AMEX Company Guide
Section 711 or other applicable rule, and such issuance shall not reduce the
number of shares available for issuance under the Plan.  Furthermore,
if a Stock Award or any portion thereof (i) expires or otherwise terminates
without all of the shares covered by such Stock Award having been issued or (ii)
is settled in cash (i.e., the Participant
receives cash rather than stock), such expiration, termination or settlement
shall not reduce (or otherwise offset) the number of shares of Common Stock that
may be available for issuance under the Plan.

     

    (b)         Subject
to Section 3(c), the number of shares available for issuance under the Plan
shall be reduced by: (i) one share for each share of stock issued pursuant to
(A) an Option with respect to which the exercise price is at least 100% of the
Fair Market Value of the underlying Common Stock on the date of grant, or (B) a
Stock Appreciation Right with respect to which the strike price is at least 100%
of the Fair Market Value of the underlying Common Stock on the date of grant;
and (ii) 1.8 shares for each share of Common Stock issued pursuant to a
Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award or
Other Stock Award.

     

    (c)         Reversion
of Shares to the Share Reserve.

     

    (i)          Shares Available For Subsequent
Issuance.  If any shares of common stock issued pursuant to a
Stock Award are forfeited back to the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant, then
the shares that are forfeited shall revert to and again become available for
issuance under the Plan.  To the extent (A) there is issued a share of
Common Stock pursuant to a Stock Award that counted as 1.8 shares against the
number of shares available for issuance under the Plan pursuant to Section 3(b)
or (B) any Returning Shares granted under the Prior Plan pursuant to an award
other than an option or stock appreciation right, and such share of Common Stock
becomes available for issuance under the Plan pursuant to Section 1(a), Section
3(a) or this Section 3(c), then the number of shares of Common Stock available
for issuance under the Plan shall increase by 1.8 shares.  Also, each
share reacquired by the Company pursuant to Section 8(g) in connection with a
Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award or
Other Stock Award shall again become available for issuance under the Plan and
shall increase the number of shares of Common Stock available for issuance under
the Plan by 1.8 shares.

     

    
      
         


      

      
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    (ii)       
 Shares Not Available For
Subsequent Issuance.  If any shares subject to a Stock Award
are not delivered to a Participant because the Stock Award is exercised through
a reduction of shares subject to the Stock Award (i.e., “net exercised”), the
number of shares that are not delivered to the Participant shall no longer be
available for issuance under the Plan.  Also, any shares reacquired by
the Company pursuant to Section 8(g) upon the exercise of an Option or Stock
Appreciation Right or as consideration for the exercise of an Option or Stock
Appreciation Right shall no longer be available for issuance under the
Plan.

     

    (d)         Incentive Stock Option
Limit.  Notwithstanding anything to the contrary in this
Section 3 and, subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be 7,000,000 shares of Common Stock.

     

    (e)         Section 162(m) Limitation on Annual
Grants.  Subject to the provisions of Section 9(a) relating to
Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, a maximum of 1,000,000 shares of Common Stock
subject to Options, Stock Appreciation Rights and Other Stock Awards whose value
is determined by reference to an increase over an exercise or strike price of at
least 100% of the Fair Market Value on the date the Stock Award is granted may
be granted to any Participant during any calendar
year.  Notwithstanding the foregoing, if any additional Options, Stock
Appreciation Rights or Other Stock Awards whose value is determined by reference
to an increase over an exercise or strike price of at least 100% of the Fair
Market Value on the date the Stock Award are granted to any Participant during
any calendar year, compensation attributable to the exercise of such additional
Stock Awards shall not satisfy the requirements to be considered “qualified
performance-based compensation” under Section 162(m) of the Code unless such
additional Stock Awards are approved by the Company’s stockholders.

     

    (f)         Source of
Shares.  The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Company on the open market or otherwise.

     

    4.           Eligibility.

     

    (a)         Eligibility for Specific Stock
Awards.  Incentive Stock Options may be granted only to
employees of the Company or a “parent corporation” or “subsidiary corporation”
thereof (as such terms are defined in Sections 424(e) and (f) of the
Code).  Stock Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants; provided, however, Nonstatutory Stock
Options and SARs may not be granted to Employees, Directors and Consultants who
are providing Continuous Service only to any “parent” of the Company, as such
term is defined in Rule 405 promulgated under the Securities Act, unless the
stock underlying such Stock Awards is treated as “service recipient stock” under
Section 409A of the Code because the Stock Awards are granted pursuant to a
corporate transaction (such as a spin off transaction) or unless such Stock
Awards comply with the distribution requirements of Section 409A of the
Code.

     

    (b)         Ten Percent
Shareholders.  A Ten Percent Shareholder shall not be granted
an Incentive Stock Option unless the exercise price of such Option is at least
110% of the Fair Market Value on the date of grant and the Option is not
exercisable after the expiration of five years from the date of
grant.


    
      
         


      

      
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    5.           Provisions
Relating to Options and Stock Appreciation Rights.

     

    Each
Option or SAR shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate.  All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
shall be issued for shares of Common Stock purchased on exercise of each type of
Option. If an Option is not specifically designated as an Incentive Stock
Option, then the Option shall be a Nonstatutory Stock Option. The provisions of
separate Options or SARs need not be identical; provided, however, that each
Option Agreement or Stock Appreciation Right Agreement shall conform to (through
incorporation of provisions hereof by reference in the applicable Award
Agreement or otherwise) the substance of each of the following
provisions:

     

    (a)         Term.  Subject to
the provisions of Section 4(b) regarding Ten Percent Shareholders, no Option or
SAR shall be exercisable after the expiration of 10 years from the date of its
grant or such shorter period specified in the Award Agreement.

     

    (b)         Exercise
Price.  Subject to the provisions of Section 4(b) regarding Ten
Percent Shareholders, the exercise price (or strike price) of each Option or SAR
shall be not less than 100% of the Fair Market Value of the Common Stock subject
to the Option or SAR on the date the Option or SAR is
granted.  Notwithstanding the foregoing, an Option or SAR may be
granted with an exercise price (or strike price) lower than 100% of the Fair
Market Value of the Common Stock subject to the Option or SAR if such Option or
SAR is granted pursuant to an assumption of or substitution for another option
or stock appreciation right pursuant to a Corporate Transaction and in a manner
consistent with the provisions of Sections 409A and, if applicable, 424(a) of
the Code.  Each SAR will be denominated in shares of Common Stock
equivalents.

     

    (c)         Purchase Price for
Options.  The purchase price of Common Stock acquired pursuant
to the exercise of an Option shall be paid, to the extent permitted by
applicable law and as determined by the Board in its sole discretion, by any
combination of the methods of payment set forth below.  The Board
shall have the authority to grant Options that do not permit all of the
following methods of payment (or otherwise restrict the ability to use certain
methods) and to grant Options that require the consent of the Company to utilize
a particular method of payment.  The permitted methods of payment are
as follows:

     

    (i)          by
cash, check, bank draft or money order payable to the Company;

     

    (ii)         pursuant
to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of the stock subject to the Option, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from
the sales proceeds;

     

    (iii)     
  by delivery to the Company (either by actual delivery or
attestation) of shares of Common Stock;

     

    
      
         


      

      
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    (iv)         if
the option is a Nonstatutory Stock Option, by a “net exercise” arrangement
pursuant to which the Company will reduce the number of shares of Common Stock
issuable upon exercise by the largest whole number of shares with a Fair Market
Value that does not exceed the aggregate exercise price; provided, however, that the
Company shall accept a cash or other payment from the Participant to the extent
of any remaining balance of the aggregate exercise price not satisfied by such
reduction in the number of whole shares to be issued; provided, further, that
shares of Common Stock will no longer be subject to an Option and will not be
exercisable thereafter to the extent that (A) shares issuable upon exercise are
reduced to pay the exercise price pursuant to the “net exercise,” (B) shares are
delivered to the Participant as a result of such exercise, and (C) shares are
withheld to satisfy tax withholding obligations;  or

     

    (v)          in
any other form of legal consideration that may be acceptable to the
Board.

     

    (d)         Exercise and Payment of a
SAR.  To exercise any outstanding Stock Appreciation Right, the
Participant must provide written notice of exercise to the Company in compliance
with the provisions of the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right.  The appreciation distribution payable on
the exercise of a Stock Appreciation Right will be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Stock Appreciation Right) of a number of shares of Common Stock
equal to the number of Common Stock equivalents in which the Participant is
vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (B)
the strike price that will be determined by the Board at the time of grant of
the Stock Appreciation Right.  The appreciation distribution in
respect to a Stock Appreciation Right may be paid in Common Stock, in cash, in
any combination of the two or in any other form of consideration, as determined
by the Board and contained in the Stock Appreciation Right Agreement evidencing
such Stock Appreciation Right.

     

    (e)         Transferability of Options and
SARs.  The Board may, in its sole discretion, impose such
limitations on the transferability of Options and SARs as the Board shall
determine.  In the absence of such a determination by the Board to the
contrary, the following restrictions on the transferability of Options and SARs
shall apply:

     

    (i)          Restrictions on
Transfer.  An Option or SAR shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable during
the lifetime of the Participant only by the Participant; provided, however, that the
Board may, in its sole discretion, permit transfer of the Option or SAR in a
manner that is not prohibited by applicable tax and securities laws upon the
Participant’s request.  Except as explicitly provided herein, neither
an Option nor a SAR may be transferred for consideration.

     

    (ii)         Domestic Relations
Orders.  Notwithstanding the foregoing, an Option or SAR may be
transferred pursuant to a domestic relations order; provided, however, that if an
Option is an Incentive Stock Option, such Option may be deemed to be a
Nonstatutory Stock Option as a result of such transfer.

     

    
      
         


      

      
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    (iii)       Beneficiary
Designation.  Notwithstanding the foregoing, the Participant
may, by delivering written notice to the Company, in a form provided by or
otherwise satisfactory to the Company and any broker designated by the Company
to effect Option exercises, designate a third party who, in the event of the
death of the Participant, shall thereafter be entitled to exercise the Option or
SAR and receive the Common Stock or other consideration resulting from such
exercise.  In the absence of such a designation, the executor or
administrator of the Participant’s estate shall be entitled to exercise the
Option or SAR and receive the Common Stock or other consideration resulting from
such exercise.

     

    (f)         Vesting
Generally.  The total number of shares of Common Stock subject
to an Option or SAR may vest and therefore become exercisable in periodic
installments that may or may not be equal.  The Option or SAR may be
subject to such other terms and conditions on the time or times when it may or
may not be exercised (which may be based on the satisfaction of Performance
Goals or other criteria) as the Board may deem appropriate.  The
vesting provisions of individual Options or SARs may vary.  The
provisions of this Section 5(f) are subject to any Option or SAR provisions
governing the minimum number of shares of Common Stock as to which an Option or
SAR may be exercised.

     

    (g)        Termination of Continuous
Service.  Except as otherwise provided in the applicable Award
Agreement or other agreement between the Participant and the Company, if a
Participant’s Continuous Service terminates (other than for Cause, upon the
Participant’s death or Disability or at any time on or after the Participant’s
Retirement Date), the Participant may exercise his or her Option or SAR (to the
extent that the Participant was entitled to exercise such Award as of the date
of termination of Continuous Service) but only within such period of time ending
on the earlier of (i) the date three months following the termination of the
Participant’s Continuous Service (or such longer or shorter period specified in
the applicable Award Agreement), or (ii) the expiration of the term of the
Option or SAR as set forth in the Award Agreement.  If, after
termination of Continuous Service, the Participant does not exercise his or her
Option or SAR within the time specified herein or in the Award Agreement (as
applicable), the Option or SAR shall terminate.

     

    (h)        Extension of Termination
Date.  If the exercise of an Option or SAR following the
termination of the Participant’s Continuous Service (other than for Cause or
upon the Participant’s death or Disability) would be prohibited at any time
solely because the issuance of shares of Common Stock would violate the
registration requirements under the Securities Act, then the Option or SAR shall
terminate on the earlier of (i) the expiration of a total period of three months
(that need not be consecutive) after the termination of the Participant’s
Continuous Service during which the exercise of the Option or SAR would not be
in violation of such registration requirements, or (ii) the expiration of the
term of the Option or SAR as set forth in the applicable Award
Agreement.  In addition, unless otherwise provided in a Participant’s
Award Agreement, if the sale of any Common Stock received upon exercise of an
Option or SAR following the termination of the Participant’s Continuous Service
(other than for Cause) would violate the Company’s insider trading policy, then
the Option or SAR shall terminate on the earlier of (i) the expiration of a
period equal to the applicable post-termination exercise period after the
termination of the Participant’s Continuous Service during which the sale of the
Common Stock received upon exercise of the Option or SAR would not be in
violation of the Company’s insider trading policy, or (ii) the expiration of the
term of the Option or SAR as set forth in the applicable Award
Agreement.


    
      
         


      

      
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    (i)         Disability of
Participant.  Except as otherwise provided in the applicable
Award Agreement or other agreement between the Participant and the Company, if a
Participant’s Continuous Service terminates as a result of the Participant’s
Disability, the Participant may exercise his or her Option or SAR (to the extent
that the Participant was entitled to exercise such Option or SAR as of the date
of termination of Continuous Service), but only within such period of time
ending on the earlier of (i) the date 12 months following such termination of
Continuous Service (or such longer or shorter period specified in the Award
Agreement), or (ii) the expiration of the term of the Option or SAR as set forth
in the Award Agreement.  If, after termination of Continuous Service,
the Participant does not exercise his or her Option or SAR within the time
specified herein or in the Award Agreement (as applicable), the Option or SAR
(as applicable) shall terminate.

     

    (j)         Death of
Participant.  Except as otherwise provided in the applicable
Award Agreement or other agreement between the Participant and the Company, if
(i) a Participant’s Continuous Service terminates as a result of the
Participant’s death, or (ii) the Participant dies within the period (if any)
specified in the Award Agreement after the termination of the Participant’s
Continuous Service for a reason other than death, then the Option or SAR may be
exercised (to the extent the Participant was entitled to exercise such Option or
SAR as of the date of death) by the Participant’s estate, by a person who
acquired the right to exercise the Option or SAR by bequest or inheritance or by
a person designated to exercise the Option or SAR upon the Participant’s death,
but only within the period ending on the earlier of (i) the date 18 months
following the date of death (or such longer or shorter period specified in the
Award Agreement), or (ii) the expiration of the term of such Option or SAR as
set forth in the Award Agreement.  If, after the Participant’s death,
the Option or SAR is not exercised within the time specified herein or in the
Award Agreement (as applicable), the Option or SAR shall terminate.

     

    (k)        Termination on or after Retirement
Date.  Except as otherwise provided in the applicable Award
Agreement or other agreement between the Participant and the Company, if a
Participant’s Continuous Service terminates for any reason (including a
termination due to death or Disability, but excluding a termination for Cause)
on or after the Participant’s Retirement Date, the Participant may exercise his
or her Option or SAR (to the extent that the Participant was entitled to
exercise such Option or SAR as of the date of termination of Continuous
Service), but only within such period of time ending on the earlier of (i) the
date four years following such termination of Continuous Service (or such longer
or shorter period specified in the applicable Award Agreement), or (ii) the
expiration of the term of the Option or SAR as set forth in the Award
Agreement.  If, after termination of Continuous Service, the Option or
SAR is not exercised within the time specified herein or in the Award Agreement
(as applicable), the Option or SAR shall terminate.

     

    (l)          Termination for
Cause.  Except as explicitly provided otherwise in a
Participant’s Award Agreement or other individual written agreement between the
Company or any Affiliate and the Participant, if a Participant’s Continuous
Service is terminated for Cause, the Option or SAR shall terminate upon the date
of such Participant’s termination of Continuous Service, and the Participant
shall be prohibited from exercising his or her Option or SAR from and after the
time of such termination of Continuous Service.


    
      
         


      

      
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    (m)       Non-Exempt
Employees.  No Option or SAR, whether or not vested, granted to
an Employee who is a non-exempt employee for purposes of the Fair Labor
Standards Act of 1938, as amended, shall be first exercisable for any shares of
Common Stock until at least six months following the date of grant of the Option
or SAR. Notwithstanding the foregoing, consistent with the provisions of the
Worker Economic Opportunity Act, (i) in the event of the Participant’s death or
Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not
assumed, continued, or substituted, (iii) upon a Change in Control, or (iv) upon
the Participant’s retirement (as such term may be defined in the Participant’s
Award Agreement or in another applicable agreement or in accordance with the
Company’s then current employment policies and guidelines), any such vested
Options and SARs may be exercised earlier than six months following the date of
grant.  The foregoing provision is intended to operate so that any
income derived by a non-exempt employee in connection with the exercise or
vesting of an Option or SAR will be exempt from his or her regular rate of
pay.

     

    6.           Provisions
of Stock Awards other than Options and SARs.

     

    (a)         Restricted Stock
Awards.  Each Restricted Stock Award Agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate.  To the extent consistent with the Company’s Bylaws, at
the Board’s election, shares of Common Stock may be (x) held in book entry form
subject to the Company’s instructions until any restrictions relating to the
Restricted Stock Award lapse; or (y) evidenced by a certificate, which
certificate shall be held in such form and manner as determined by the
Board.  The terms and conditions of Restricted Stock Award Agreements
may change from time to time, and the terms and conditions of separate
Restricted Stock Award Agreements need not be identical; provided, however, that each
Restricted Stock Award Agreement shall conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

     

    (i)          Consideration.  A
Restricted Stock Award may be awarded in consideration for (A) cash, check, bank
draft or money order payable to the Company, (B) past services to the Company or
an Affiliate, or (C) any other form of legal consideration (including future
services) that may be acceptable to the Board, in its sole discretion, and
permissible under applicable law.

     

    (ii)         Vesting.  Shares of
Common Stock awarded under the Restricted Stock Award Agreement may be subject
to forfeiture to the Company in accordance with a vesting schedule to be
determined by the Board.

     

    (iii)        Termination of Participant’s
Continuous Service.  If a Participant’s Continuous Service
terminates, the Company may receive through a forfeiture condition or a
repurchase right any or all of the shares of Common Stock held by the
Participant that have not vested as of the date of termination of Continuous
Service under the terms of the Restricted Stock Award Agreement.

     

    
      
         


      

      
        10.

        
          

        

      

      
         


      

    


    (iv)        Transferability.  Rights
to acquire shares of Common Stock under the Restricted Stock Award Agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Restricted Stock Award Agreement, as the Board shall
determine in its sole discretion, so long as Common Stock awarded under the
Restricted Stock Award Agreement remains subject to the terms of the Restricted
Stock Award Agreement.

     

    (v)          Dividends.  A
Restricted Stock Award Agreement may provide that any dividends paid on
Restricted Stock will be subject to the same vesting and forfeiture restrictions
as apply to the shares subject to the Restricted Stock Award to which they
relate.

     

    (b)         Restricted Stock Unit
Awards.  Each Restricted Stock Unit Award Agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate.  The terms and conditions of Restricted Stock Unit Award
Agreements may change from time to time, and the terms and conditions of
separate Restricted Stock Unit Award Agreements need not be identical; provided, however, that each Restricted
Stock Unit Award Agreement shall conform to (through incorporation of the
provisions hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:

     

    (i)          Consideration.  At
the time of grant of a Restricted Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share
of Common Stock subject to the Restricted Stock Unit Award. The consideration to
be paid (if any) by the Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal consideration that
may be acceptable to the Board, in its sole discretion, and permissible under
applicable law.

     

    (ii)        Vesting.  At the
time of the grant of a Restricted Stock Unit Award, the Board may impose such
restrictions on or conditions to the vesting of the Restricted Stock Unit Award
as it, in its sole discretion, deems appropriate.

     

    (iii)       Payment.  A
Restricted Stock Unit Award may be settled by the delivery of shares of Common
Stock, their cash equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the Restricted Stock
Unit Award Agreement.

     

    (iv)        Additional
Restrictions.  At the time of the grant of a Restricted Stock
Unit Award, the Board, as it deems appropriate, may impose such restrictions or
conditions that delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a Restricted Stock Unit Award to a time after the vesting
of such Restricted Stock Unit Award.

     

    (v)          Dividend
Equivalents.  Dividend equivalents may be credited in respect
of shares of Common Stock covered by a Restricted Stock Unit Award, as
determined by the Board and contained in the Restricted Stock Unit Award
Agreement.  At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by
the Restricted Stock Unit Award in such manner as determined by the
Board.  Any additional shares covered by the Restricted Stock Unit
Award credited by reason of such dividend equivalents will be subject to all of
the same terms and conditions of the underlying Restricted Stock Unit Award
Agreement to which they relate.


    
      
         


      

      
        11.

        
          

        

      

      
         


      

    

     

    (vi)        Termination of Participant’s
Continuous Service.  Except as otherwise provided in the
applicable Restricted Stock Unit Award Agreement, such portion of the Restricted
Stock Unit Award that has not vested will be forfeited upon the Participant’s
termination of Continuous Service.

     

    (c)  
      Performance Awards.

     

    (i)          Performance Stock
Awards.  A Performance Stock Award is a Stock Award that may
vest or be exercised contingent upon the attainment during a Performance Period
of certain Performance Goals.  A Performance Stock Award may, but need
not, require the completion of a specified period of Continuous Service. The
length of any Performance Period, the Performance Goals to be achieved during
the Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained shall be conclusively determined by the
Committee, in its sole discretion.  The maximum number of shares
covered by an Award that may be granted to any Participant in a calendar year
attributable to Stock Awards described in this Section 6(c)(i) (whether the
grant, vesting or exercise is contingent upon the attainment during a
Performance Period of the Performance Goals) shall not exceed
100,000 shares of Common Stock. The Board may provide
for or, subject to such terms and conditions as the Board may specify, may
permit a Participant to elect for, the payment of any Performance Stock Award to
be deferred to a specified date or event.  In addition, to the extent
permitted by applicable law and the applicable Award Agreement, the Board may
determine that cash may be used in payment of Performance Stock
Awards.

     

    (ii)         Performance Cash
Awards.  A Performance Cash Award is a cash award that may be
paid contingent upon the attainment during a Performance Period of certain
Performance Goals.  A Performance Cash Award may also require the
completion of a specified period of Continuous Service.  At the time
of grant of a Performance Cash Award, the length of any Performance Period, the
Performance Goals to be achieved during the Performance Period, and the measure
of whether and to what degree such Performance Goals have been attained shall be
conclusively determined by the Committee, in its sole discretion.  In
any calendar year, the Committee may not grant a Performance Cash Award
that  has a maximum value that may be paid to any Participant in
excess of $2,000,000.  The Board may provide
for or, subject to such terms and conditions as the Board may specify, may
permit a Participant to elect for, the payment of any Performance Cash Award to
be deferred to a specified date or event.  The Committee may specify
the form of payment of Performance Cash Awards, which may be cash or other
property, or may provide for a Participant to have the option for his or her
Performance Cash Award, or such portion thereof as the Board may specify, to be
paid in whole or in part in cash or other property.

     

    (iii)       Board
Discretion.  The Board retains the discretion to reduce or
eliminate the compensation or economic benefit due upon attainment of
Performance Goals and to define the manner of calculating the Performance
Criteria it selects to use for a Performance Period.


    
      
         


      

      
        12.

        
          

        

      

      
         


      

    


    (iv)        Section 162(m)
Compliance.  Unless otherwise permitted in compliance with the
requirements of Section 162(m) of the Code with respect to an Award intended to
qualify as “performance-based compensation” thereunder, the Committee shall
establish the Performance Goals applicable to, and the formula for calculating
the amount payable under, the Award no later than the earlier of (a) the date 90
days after the commencement of the applicable Performance Period, or (b) the
date on which 25% of the Performance Period has elapsed, and in any event at a
time when the achievement of the applicable Performance Goals remains
substantially uncertain.  Prior to the payment of any compensation
under an Award intended to qualify as “performance-based compensation” under
Section 162(m) of the Code, the Committee shall certify the extent to which
any Performance Goals and any other material terms under such Award have been
satisfied (other than in cases where such relate solely to the increase in the
value of the Common Stock). Notwithstanding satisfaction of any completion of
any Performance Goals, to the extent specified at the time of grant of an Award
to “covered employees” within the meaning of Section 162(m) of the Code, the
number of Shares, Options, cash or other benefits granted, issued, retainable
and/or vested under an Award on account of satisfaction of such Performance
Goals may be reduced by the Committee on the basis of such further
considerations as the Committee, in its sole discretion, shall
determine.

     

    (d)         Other Stock
Awards.  Other forms of Stock Awards valued in whole or in part
by reference to, or otherwise based on, Common Stock, including the appreciation
in value thereof (e.g., options or stock rights with an exercise price or strike
price less than 100% of the Fair Market Value of the Common Stock at the time of
grant) may be granted either alone or in addition to Stock Awards provided for
under Section 5 and the preceding provisions of this Section
6.  Subject to the provisions of the Plan, the Board shall have sole
and complete authority to determine the persons to whom and the time or times at
which such Other Stock Awards will be granted, the number of shares of Common
Stock (or the cash equivalent thereof) to be granted pursuant to such Other
Stock Awards and all other terms and conditions of such Other Stock
Awards.

     

    7.           Covenants
of the Company.

     

    (a)         Availability of
Shares.  During the terms of the Stock Awards, the Company
shall keep available at all times the number of shares of Common Stock
reasonably required to satisfy such Stock Awards.

     

    (b)         Securities Law
Compliance.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award.  If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority that
counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company shall be relieved from any liability
for failure to issue and sell Common Stock upon exercise of such Stock Awards
unless and until such authority is obtained. A Participant shall not be eligible
for the grant of a Stock Award or the subsequent issuance of Common Stock
pursuant to the Stock Award if such grant or issuance would be in violation of
any applicable securities law.

     


    
      
         


      

      
        13.

        
          

        

      

      
         


      

    


    (c)         No Obligation to Notify or Minimize
Taxes.  The Company shall have no duty or obligation to any
Participant to advise such holder as to the time or manner of exercising such
Stock Award.  Furthermore, the Company shall have no duty or
obligation to warn or otherwise advise such holder of a pending termination or
expiration of a Stock Award or a possible period in which the Stock Award may
not be exercised.  The Company has no duty or obligation to minimize
the tax consequences of a Stock Award to the holder of such Stock
Award.

     

    8.           Miscellaneous.

     

    (a)         Use of Proceeds from Sales of Common
Stock.  Proceeds from the sale of shares of Common Stock
pursuant to Stock Awards shall constitute general funds of the
Company.

     

    (b)         Corporate Action Constituting Grant
of Stock Awards.  Corporate action constituting a grant by the
Company of a Stock Award to any Participant shall be deemed completed as of the
date of such corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter evidencing the Stock
Award is communicated to, or actually received or accepted by, the
Participant.

     

    (c)         Shareholder
Rights.  No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common
Stock subject to such Stock Award unless and until (i) such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms, if applicable, and (ii) the issuance of the Common Stock subject to such
Stock Award has been entered into the books and records of the
Company.

     

    (d)         No Employment or Other Service
Rights.  Nothing in the Plan, any Stock Award Agreement or any
other instrument executed thereunder or in connection with any Award granted
pursuant thereto shall confer upon any Participant any right to continue to
serve the Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or shall affect the right of the Company or an Affiliate
to terminate (i) the employment of an Employee with or without notice and with
or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant’s agreement with the Company or an Affiliate, or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

     

    (e)         Incentive Stock Option $100,000
Limitation.  To the extent that the aggregate Fair Market Value
(determined at the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company and any Affiliates)
exceeds one hundred thousand dollars ($100,000), the Options or portions thereof
that exceed such limit (according to the order in which they were granted) shall
be treated as Nonstatutory Stock Options, notwithstanding any contrary provision
of the applicable Option Agreement(s).

     

    
      
        
           


        

        
          14.

          
            

          

        

        
           


        

      

    

    


    (f)         Investment
Assurances.  The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing
the Common Stock.  The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (A) the issuance of
the shares upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act, or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities
laws.  The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.

     

    (g)        Withholding
Obligations.  Unless prohibited by the terms of a Stock Award
Agreement, the Company may, in its sole discretion, satisfy any federal, state
or local tax withholding obligation relating to an Award by any of the following
means or by a combination of such means: (i) causing the Participant to tender a
cash payment; (ii)  withholding shares of Common Stock from the shares
of Common Stock issued or otherwise issuable to the Participant in connection
with the Award; provided,
however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law (or such
lesser amount as may be necessary to avoid classification of the Stock Award as
a liability for financial accounting purposes); (iii) withholding cash from an
Award settled in cash; (iv) withholding payment from any amounts otherwise
payable to the Participant; or (v) by such other method as may be set forth in
the Award Agreement.

     

    (h)        Electronic
Delivery.  Any reference herein to a “written” agreement or
document shall include any agreement or document delivered electronically or
posted on the Company’s intranet.

     

    (i)         Deferrals.  To the
extent permitted by applicable law, the Board, in its sole discretion, may
determine that the delivery of Common Stock or the payment of cash, upon the
exercise, vesting or settlement of all or a portion of any Award may be deferred
and may establish programs and procedures for deferral elections to be made by
Participants.  Deferrals by Participants will be made in accordance
with Section 409A of the Code. Consistent with Section 409A of the Code, the
Board may provide for distributions while a Participant is still an employee or
otherwise providing services to the Company.  The Board is authorized
to make deferrals of Awards and determine when, and in what annual percentages,
Participants may receive payments, including lump sum payments, following the
Participant’s termination of Continuous Service, and implement such other terms
and conditions consistent with the provisions of the Plan and in accordance with
applicable law.


    
      
         


      

      
        15.

        
          

        

      

      
         


      

    


    (j)         Compliance with Section
409A.  To the extent that the Board determines that any Award
granted hereunder is subject to Section 409A of the Code, the Award Agreement
evidencing such Award shall incorporate the terms and conditions necessary to
avoid the consequences specified in Section 409A(a)(1) of the
Code.  To the extent applicable, the Plan and Award Agreements shall
be interpreted in accordance with Section 409A of the
Code.  Notwithstanding anything to the contrary in this Plan (and
unless the Award Agreement specifically provides otherwise), if the Shares are
publicly traded and a Participant holding an Award that constitutes “deferred
compensation” under Section 409A of the Code is a “specified employee” for
purposes of Section 409A of the Code, no distribution or payment of any amount
shall be made upon a “separation from service” before a date that is six months
following the date of such Participant’s “separation from service” (as defined
in Section 409A of the Code without regard to alternative definitions
thereunder) or, if earlier, the date of the Participant’s death.

     

    9.           Adjustments
upon Changes in Common Stock; Other Corporate Events.

     

    (a)        Capitalization
Adjustments.  In the event of a Capitalization Adjustment, the
Board shall appropriately and proportionately adjust: (i) the class(es) and
maximum number of securities subject to the Plan pursuant to Section 3(a), (ii)
the class(es) and maximum number of securities that may be issued pursuant to
the exercise of Incentive Stock Options pursuant to Section 3(d), (iii) the
class(es) and maximum number of securities that may be awarded to any person
pursuant to Sections 3(e) and 6(c)(i) , and (iv) the class(es) and number of
securities and price per share of stock subject to outstanding Stock
Awards.  The Board shall make such adjustments, and its determination
shall be final, binding and conclusive.

     

    (b)        Dissolution or
Liquidation.  Except as otherwise provided in the Stock Award
Agreement, in the event of a dissolution or liquidation of the Company, all
outstanding Stock Awards (other than Stock Awards consisting of vested and
outstanding shares of Common Stock not subject to a forfeiture condition or the
Company’s right of repurchase) shall terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock
subject to the Company’s repurchase rights or subject to a forfeiture condition
may be repurchased or reacquired by the Company notwithstanding the fact that
the holder of such Stock Award is providing Continuous Service, provided, however, that the
Board may, in its sole discretion, cause some or all Stock Awards to become
fully vested, exercisable and/or no longer subject to repurchase or forfeiture
(to the extent such Stock Awards have not previously expired or terminated)
before the dissolution or liquidation is completed but contingent on its
completion.

     

    (c)        Corporate
Transaction.  The following provisions shall apply to Stock
Awards in the event of a Corporate Transaction unless otherwise provided in the
instrument evidencing the Stock Award or any other written agreement between the
Company or any Affiliate and the Participant or unless otherwise expressly
provided by the Board at the time of grant of a Stock Award.  In the
event of a Corporate Transaction, then, notwithstanding any other provision of
the Plan, the Board shall take one or more of the following actions with respect
to Stock Awards, contingent upon the closing or completion of the Corporate
Transaction:

     

    (i)          arrange
for the surviving corporation or acquiring corporation (or the surviving or
acquiring corporation’s parent company) to assume or continue the Stock Award or
to substitute a similar stock award for the Stock Award (including, but not
limited to, an award to acquire the same consideration paid to the shareholders
of the Company pursuant to the Corporate Transaction);

     

    
      
         


      

      
        16.

        
          

        

      

      
         


      

    

     

    (ii)         arrange
for the assignment of any reacquisition or repurchase rights held by the Company
in respect of Common Stock issued pursuant to the Stock Award to the surviving
corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company);

     

    (iii)       accelerate
the vesting of the Stock Award (and, if applicable, the time at which the Stock
Award may be exercised) to a date prior to the effective time of such Corporate
Transaction as the Board shall determine (or, if the Board shall not determine
such a date, to the date that is 15 days prior to the effective date of the
Corporate Transaction), with such Stock Award terminating if not exercised (if
applicable) at or prior to the effective time of the Corporate
Transaction;

     

    (iv)        arrange
for the lapse of any reacquisition or repurchase rights held by the Company with
respect to the Stock Award;

     

    (v)         cancel
or arrange for the cancellation of the Stock Award, to the extent not vested or
not exercised prior to the effective time of the Corporate Transaction, in
exchange for such cash consideration, if any, as the Board, in its sole
discretion, may consider appropriate; and

     

    (vi)        make
a payment, in such form as may be determined by the Board equal to the excess,
if any, of (A) the value of the property the Participant would have received
upon the exercise of the Stock Award, over (B) any exercise price payable by
such holder in connection with such exercise.

     

    The Board
need not take the same action or actions with respect to all Stock Awards
or  portions thereof or with respect to all Participants.

     

    (d)         Change in
Control.  A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as
may be provided in the Stock Award Agreement for such Stock Award or as may be
provided in any other written agreement between the Company or any Affiliate and
the Participant, but in the absence of such provision, no such acceleration
shall occur.

     

    10.     
   Termination
or Suspension of the Plan.

     

    (a)         Plan Term.  The
Board may suspend or terminate the Plan at any time.  Unless
terminated sooner by the Board, the Plan shall automatically terminate on the
day before the 10th anniversary of the earlier of (i) the date the Plan is
adopted by the Board, or (ii) the date the Plan is approved by the shareholders
of the Company.  No Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.

     

    (b)         No Impairment of
Rights.  Suspension or termination of the Plan shall not impair
rights and obligations under any Award granted while the Plan is in effect
except with the written consent of the affected Participant.

     

    11.         Effective
Date of Plan.

     

    This Plan
shall become effective on the Effective Date.


    
      
         


      

      
        17.

        
          

        

      

      
         


      

    


    12.         Choice
of Law.

     

    The law
of the State of Washington shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to that
state’s conflict of laws rules.

     

    13.         Definitions.  As
used in the Plan, the following definitions shall apply to the capitalized terms
indicated below:

     

    (a)         “Affiliate”
means, at the time of determination, any “parent” or “subsidiary” of the Company
as such terms are defined in Rule 405 of the Securities Act.  The
Board shall have the authority to determine the time or times at which “parent”
or “subsidiary” status is determined within the foregoing
definition.

     

    (b)         “Award”
means a Stock Award or a Performance Cash Award.

     

    (c)         “Award
Agreement” means a written agreement between the Company and a
Participant evidencing the terms and conditions of an Award.

     

    (d)         “Board”
means the Board of Directors of the Company.

     

    (e)         “Capitalization
Adjustment” means any change that is made in, or other events that occur
with respect to, the Common Stock subject to the Plan or subject to any Stock
Award after the Effective Date without the receipt of consideration by the
Company through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, large
nonrecurring cash dividend, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or any similar equity
restructuring transaction, as that term is used in Statement of Financial
Accounting Standards No. 123 (revised).  Notwithstanding the
foregoing, the conversion of any convertible securities of the Company shall not
be treated as a Capitalization Adjustment.

     

    (f)         “Cause”
shall have the meaning ascribed to such term in any written agreement between
the Participant and the Company defining such term and, in the absence of such
agreement, such term shall include, but not be limited to, the commission of any
act of fraud, embezzlement or dishonesty, any unauthorized use or disclosure of
confidential information or trade secrets of the Company, or any other
intentional misconduct adversely affecting the business or affairs of the
Company in a material manner.  The determination that a termination of
the Participant’s Continuous Service is either for Cause or without Cause shall
be made by the Company in its sole discretion.  Any determination by
the Company that the Continuous Service of a Participant was terminated by
reason of dismissal without Cause for the purposes of outstanding Awards held by
such Participant shall have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other
purpose.

     

    (g)        “Change in
Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

     

    
      
         


      

      
        18.

        
          

        

      

      
         


      

    


    (i)       
  any Exchange Act Person becomes the Owner, directly or indirectly,
of securities of the Company representing at least 50% of the combined voting
power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction.  Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company directly from the Company, (B) on
account of the acquisition of securities of the Company by an investor, any
affiliate thereof or any other Exchange Act Person that acquires the Company’s
securities in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of
equity securities, or (C) solely because the level of Ownership held by any
Exchange Act Person (the “Subject Person”) exceeds the
designated percentage threshold of the outstanding voting securities as a result
of a repurchase or other acquisition of voting securities by the Company
reducing the number of shares outstanding, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred,
increases the percentage of the then outstanding voting securities Owned by the
Subject Person over the designated percentage threshold, then a Change in
Control shall be deemed to occur;

     

    (ii)        there
is consummated a merger, consolidation or similar transaction involving
(directly or indirectly) the Company and, immediately after the consummation of
such merger, consolidation or similar transaction, the shareholders of the
Company immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than 50% of the combined
outstanding voting power of the surviving Entity in such merger, consolidation
or similar transaction or (B) more than 50% of the combined outstanding voting
power of the parent of the surviving Entity in such merger, consolidation or
similar transaction, in each case in substantially the same proportions as their
Ownership of the outstanding voting securities of the Company immediately prior
to such transaction;

     

    (iii)       there
is consummated a sale, lease, exclusive license or other disposition of 60% or
more of the consolidated assets of the Company and its Subsidiaries, other than
a sale, lease, license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an Entity, more than
50% of the combined voting power of the voting securities of which are Owned by
shareholders of the Company in substantially the same proportions as their
Ownership of the outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or

     

    (iv)        individuals
who, on the date the Plan is adopted by the Board, are members of the Board (the
“Incumbent
Board”) cease for any reason to constitute at least a majority of the
members of the Board; provided, however, that if
the appointment or election (or nomination for election) of any new Board member
was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be
considered as a member of the Incumbent Board.

     

    Notwithstanding
the foregoing or any other provision of this Plan, the term Change in Control
shall not include a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of the
Company.

     

    
      
         


      

      
        19.

        
          

        

      

      
         


      

    

     

    (h)        “Code”
means the Internal Revenue Code of 1986, as amended, including any applicable
regulations and guidance thereunder.

     

    (i)         “Committee”
means a committee of one or more Directors to whom authority has been delegated
by the Board in accordance with Section 2(c).

     

    (j)         “Common
Stock” means the common stock of the Company.

     

    (k)        “Company”
means Peet’s Coffee & Tea, Inc., a Washington corporation.

     

    (l)          “Consultant”
means any person, including an advisor, who is (i) engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such
services, or (ii) serving as a member of the board of directors of an Affiliate
and is compensated for such services.  However, service solely as a
Director, or payment of a fee for such service, shall not cause a Director to be
considered a “Consultant” for purposes of the Plan. Notwithstanding
the foregoing, a person is treated as a Consultant under this Plan only if a
Form S-8 Registration Statement under the Securities Act is available to
register the sale of the Company’s securities to such person.

     

    (m)       “Continuous
Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or
terminated.  A change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee, Consultant or Director or
a change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service with
the Company or an Affiliate, shall not terminate a Participant’s Continuous
Service; provided, however,
if the Entity for which a Participant is rendering services ceases to
qualify as an Affiliate, as determined by the Board, in its sole discretion,
such Participant’s Continuous Service shall be considered to have terminated on
the date such Entity ceases to qualify as an Affiliate.  To the extent
permitted by law, the Board or the chief executive officer of the Company, in
that party’s sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of (i) any leave of absence approved by the
Board or Chief Executive Officer, including sick leave, military leave or any
other personal leave, or (ii) transfers between the Company, an Affiliate, or
their successors.  Notwithstanding the foregoing, a leave of absence
shall be treated as Continuous Service for purposes of vesting in a Stock Award
only to such extent as may be provided in the Company’s leave of absence policy,
in the written terms of any leave of absence agreement or policy applicable to
the Participant, or as otherwise required by law.

     

    (n)        “Corporate
Transaction” means the consummation, in a single transaction or in a
series of related transactions, of any one or more of the following
events:

     

    (i)         
a sale or
other disposition of all or substantially all, as determined by the Board, in
its sole discretion, of the consolidated assets of the Company and its
Subsidiaries;

     

    (ii)       
a sale or other disposition of at least 90% of the outstanding
securities of the Company;

     

    
      
         


      

      
        20.

        
          

        

      

      
         


      

    

     

    (iii)       a
merger, consolidation or similar transaction following which the Company is not
the surviving corporation; or

     

    (iv)        a
merger, consolidation or similar transaction following which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or
exchanged by virtue of the merger, consolidation or similar transaction into
other property, whether in the form of securities, cash or
otherwise.

     

    (o)          “Covered
Employee” shall have the meaning provided in Section 162(m)(3) of the
Code.

     

    (p)          “Director”
means a member of the Board.

     

    (q)          “Disability”
means, with respect to a Participant,  the inability of such
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months, as provided in Sections 22(e)(3) and
409A(a)(2)(c)(i) of the Code, and shall be determined by the Board on the basis
of such medical evidence as the Board deems warranted under the
circumstances.

     

    (r)          “Effective
Date” means the effective date of this Plan document, which is the date
of the annual meeting of shareholders of the Company held in 2010 provided this
Plan is approved by the Company’s shareholders at such meeting.

     

    (s)          “Employee”
means any person employed by the Company or an Affiliate.  However,
service solely as a Director, or payment of a fee for such services, shall not
cause a Director to be considered an “Employee” for purposes of the
Plan.

     

    (t)          “Entity”
means a corporation, partnership, limited liability company or other
entity.

     

    (u)         “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     

    (v)          “Exchange Act
Person” means
any natural person, Entity or “group” (within the meaning of Section 13(d) or
14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan
of the Company or any Subsidiary of the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any Subsidiary of the Company, (iii) an underwriter temporarily holding
securities pursuant to a registered public offering of such securities, (iv) an
Entity Owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their Ownership of stock of the Company;
or (v) any natural person, Entity or “group” (within the meaning of Section
13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the
Owner, directly or indirectly, of securities of the Company representing more
than 50% of the combined voting power of the Company’s then outstanding
securities.


    
      
         


      

      
        21.

        
          

        

      

      
         


      

    

     

    (w)          “Fair Market
Value” means, as of any date, the value of the Common Stock determined as
follows:

     

    (i)          If
the Common Stock is listed on any established stock exchange or traded on any
established market, the Fair Market Value of a share of Common Stock shall be
the closing sales price for such stock as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock)
on the date of determination, as reported in a source the Board deems
reliable.

     

    (ii)         Unless
otherwise provided by the Board, if there is no closing sales price for the
Common Stock on the date of determination, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.

     

    (iii)        In
the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith and in a manner that complies with
Sections 409A and 422 of the Code.

     

    (x)          “Incentive Stock
Option” means an option granted pursuant to Section 5 of the Plan that is intended to be, and qualifies as,
an “incentive stock option” within the meaning of Section 422 of the
Code.

     

    (y)          “Non-Employee
Director” means a Director who
either (i) is not a current employee or officer of the Company or an Affiliate,
does not receive compensation, either directly or indirectly, from the Company
or an Affiliate for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act (“Regulation
S-K”)), does not possess an interest in any other transaction for which
disclosure would be required under Item 404(a) of Regulation S-K, and is not
engaged in a business relationship for which disclosure would be required
pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered
a “non-employee director” for purposes of Rule 16b-3.

     

    (z)          “Nonstatutory
Stock Option” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive
Stock Option.

     

    (aa)        “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act.

     

    (bb)        “Option”
means an Incentive Stock Option or a Nonstatutory Stock Option to purchase
shares of Common Stock granted pursuant to the Plan.

     

    (cc)        “Option
Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an Option
grant.  Each Option Agreement shall be subject to the terms and
conditions of the Plan.

     

    (dd)        “Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     

    
      
         


      

      
        22.

        
          

        

      

      
         


      

    

     

    (ee)        “Other Stock
Award” means an award based in whole or in part by reference to the
Common Stock which is granted pursuant to the terms and conditions of Section
6(d).

     

    (ff)         “Other Stock Award
Agreement” means
a written agreement between the Company and a holder of an Other Stock Award
evidencing the terms and conditions of an Other Stock Award
grant.  Each Other Stock Award Agreement shall be subject to the terms
and conditions of the Plan.

     

    (gg)       “Outside
Director” means a Director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year, has not been an officer of the Company or an
“affiliated corporation,” and does not receive remuneration from the Company or
an “affiliated corporation,” either directly or indirectly, in any capacity
other than as a Director, or (ii) is otherwise considered an “outside director”
for purposes of Section 162(m) of the Code.

     

    (hh)       “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall
be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has
or shares voting power, which includes the power to vote or to direct the
voting, with respect to such securities.

     

    (ii)         “Participant”
means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     

    (jj)         “Performance Cash
Award” means an award of cash granted pursuant to the terms and
conditions of Section 6(c)(ii).

     

    (kk)      “Performance
Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance
Period.  The Performance Criteria that shall be used to establish such
Performance Goals may be based on any one of, or combination of, the following
as determined by the Board: (i) earnings (including earnings per share and net
earnings); (ii) earnings before interest, taxes and depreciation; (iii) earnings
before interest, taxes, depreciation and amortization; (iv) total shareholder
return; (v) return on equity or average shareholder’s equity; (vi) return on
assets, investment, or capital employed; (vii) stock price; (viii) margin
(including gross margin); (ix) income (before or after taxes); (x) operating
income; (xi) operating income after taxes; (xii) pre-tax profit; (xiii)
operating cash flow; (xiv) sales or revenue targets; (xv) increases in revenue
or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement
in or attainment of working capital levels; (xiii) economic value added (or an
equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash flow per
share; (xxii) share price performance; (xxiii) debt reduction; (xxiv)
implementation or completion of projects or processes; (xxv) customer
satisfaction; (xxvi) shareholders’ equity; (xxvii) capital expenditures; (xxiii)
debt levels; (xxix) operating profit or net operating profit; (xxx) workforce
diversity; (xxxi) growth of net income or operating income; (xxxii) billings;
(xxxiii) operating margin as a percentage of sales; (xxxiv) operating expense as
a percentage of sales; (xxxv) gross margin as a percentage of sales; (xxxvi)
general and administrative expense as a percentage of sales; (xxxvii) operating
income as a percentage of sales; and (xxxviii) to the extent that an Award is
not intended to comply with Section 162(m) of the Code, other measures of
performance selected by the Board.

     

    
      
         


      

      
        23.

        
          

        

      

      
         


      

    

     

    (ll)         “Performance
Goals” means, for a Performance Period, the one or more goals established
by the Board for the Performance Period based upon the Performance
Criteria.  Performance Goals may be based on a Company-wide basis,
with respect to one or more business units, divisions, Affiliates, or business
segments, and in either absolute terms or relative to the performance of one or
more comparable companies or the performance of one or more relevant
indices.  Unless specified otherwise by the Board (i) in the Award
Agreement at the time the Award is granted or (ii) in such other document
setting forth the Performance Goals at the time the Performance Goals are
established, the Board shall appropriately make adjustments in the method of
calculating the attainment of Performance Goals for a Performance Period as
follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to
exclude exchange rate effects, as applicable, for non-U.S. dollar denominated
Performance Goals; (3) to exclude the effects of changes to generally accepted
accounting principles; (4) to exclude the effects of any statutory adjustments
to corporate tax rates; and (5) to exclude the effects of any “extraordinary
items” as determined under generally accepted accounting
principles.

     

    (mm)     “Performance
Period” means the period of time selected by the Board over which the
attainment of one or more Performance Goals will be measured for the purpose of
determining a Participant’s right to and the payment of a Stock Award or a
Performance Cash Award.  Performance Periods may be of varying and
overlapping duration, at the sole discretion of the Board.

     

    (nn)       “Performance Stock
Award” means a Stock Award granted under the terms and conditions of
Section 6(c)(i).

     

    (oo)
       “Plan”
means this Peet’s Coffee & Tea, Inc. 2010 Equity Incentive
Plan.

     

    (pp)        “Restricted Stock
Award” means an award of shares of Common Stock which is granted pursuant
to the terms and conditions of Section 6(a).

     

    (qq)        “Restricted Stock
Award Agreement” means a written agreement between the Company and a
holder of a Restricted Stock Award evidencing the terms and conditions of a
Restricted Stock Award grant.  Each Restricted Stock Award Agreement
shall be subject to the terms and conditions of the Plan.

     

    (rr)        “Restricted Stock
Unit Award” means
a right to receive shares of Common Stock which is granted pursuant to the terms
and conditions of Section 6(b).

     

    (ss)        “Restricted Stock
Unit Award Agreement” means
a written agreement between the Company and a holder of a Restricted Stock Unit
Award evidencing the terms and conditions of a Restricted Stock Unit Award
grant.  Each Restricted Stock Unit Award Agreement shall be subject to
the terms and conditions of the Plan.

     

    
      
         


      

      
        24.

        
          

        

      

      
         


      

    


    (tt)         “Retirement
Date” means
the date a Participant has attained a combined age plus Continuous Service equal
to 60, with at least five years of Continuous Service.  For purposes
of the foregoing, (i) Continuous Service shall be measured in completed
calendar months, with 12 completed calendar months of Continuous Service equal
to one completed year of Continuous Service, and (ii) years of Continuous
Service prior to a break in Continuous Service shall continue to be counted
together with any completed years of Continuous Service after such
break.

     

    (uu)       “Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

     

    (vv)        “Securities
Act” means the Securities Act of 1933, as amended.

     

    (ww)      “Stock
Appreciation Right” or “SAR” means
a right to receive the appreciation on Common Stock that is granted pursuant to
the terms and conditions of Section 5.

     

    (xx)        “Stock
Appreciation Right Agreement” means a written agreement between the
Company and a holder of a Stock Appreciation Right evidencing the terms and
conditions of a Stock Appreciation Right grant.  Each Stock
Appreciation Right Agreement shall be subject to the terms and conditions of the
Plan.

     

    (yy)        “Stock
Award” means any right to receive Common Stock granted under the Plan,
including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted
Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a
Performance Stock Award or any Other Stock Award.

     

    (zz)        “Stock Award
Agreement” means a written agreement between the Company and a
Participant evidencing the terms and conditions of a Stock Award
grant.  Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.

     

    (aaa)      “Subsidiary”
means, with respect to the Company, (i) any corporation of which more than 50%
of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, Owned by the Company, and (ii) any
partnership, limited liability company or other entity in which the Company has
a direct or indirect interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50%.

     

    (bbb)      “Ten Percent
Shareholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any
Affiliate.


    
      
         


      

      
        25.