Document:

Tully's 2004 Stock Option Plan

 Exhibit 10.3 
 TULLY’S COFFEE CORPORATION 
 2004 STOCK OPTION PLAN 
 Effective as of November 1, 2004 
  

	1.	INTRODUCTION  

 This Plan establishes the
right of and procedures for TULLY’S COFFEE CORPORATION (the “Company”) to grant stock options to its key employees and directors. The Plan provides for the granting of two types of options, namely (1) Non-Qualified Stock Options
to employees and directors and (2) Incentive Stock Options to employees only as the latter are defined and governed by Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). This Plan sets forth provisions
applicable to both types of options, to Non-Qualified Options only, to Incentive Stock Options only, and to the procedures allowed for the conversion of Non-Qualified Stock Options into Incentive Stock Options. 
  

	2.	PROVISIONS APPLICABLE TO BOTH NON-QUALIFIED OPTIONS AND INCENTIVE STOCK OPTIONS  

 The provisions of this Section 2 apply to both Non-Qualified Options and Incentive Stock Options granted by the Company. 
  

	 	2.1	Objectives of the Plan  

 The purpose of this
Plan is to encourage ownership of shares of common stock of the Company by key employees and directors of the Company and any current or future subsidiary. This Plan is intended to provide an incentive for maximum effort in the successful operation
and management of the Company and is expected to benefit the shareholders by enabling the Company to attract and retain individuals of the best available talent through the opportunity to share, by the proprietary interests created by this Plan, in
the increased value of the Company’s shares to which such individuals have contributed. 
  

	 	2.2	Stock Reserved for This Plan  

 The number of
shares of common stock of the Company reserved for issue upon the exercise of options granted under this Plan shall not exceed two million five hundred thousand (2,500,000) of the issued and outstanding shares of the Company (the
“Shares”), provided that, a portion of the shares so authorized may be allocated to the 1999 Employee Stock Option Plan. The number of shares allocated to each plan 

  

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shall be determined by the Board of Directors of the Company (the “Board”), but shall not exceed two million five hundred thousand
(2,500,000) Shares for both plans. Shares allocated to this Plan which are subject to any option under this Plan which are not exercised in full or Shares as to which the right to purchase is forfeited through default or otherwise, shall remain
available for other options under this Plan. 
  

	 	2.3	Administration of This Plan  

 This Plan will
be administered by the Board, provided that at all times during which the Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 as amended from time to time (the “Exchange Act”) each member of the
Board who participates in the administration of the Plan must be a non-employee director” as that term is defined in Section 16b(3) of the Exchange Act (“Non-employee Directors”). A committee of not less than three members of the
Board who are Non-employee Directors shall be appointed by the Board to carry out the administrative duties of the Board hereunder. 
 A
majority of the Board shall constitute a quorum, and acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by a majority of the Board, shall be deemed the acts of the Board. 
 The Non-employee directors of the Board on consideration of recommendations of the President and of other officers, if the Board shall deem the same
appropriate, shall: 
 (a) Determine the number of Shares subject to each option, the terms thereof, and the type of options to be granted and
direct the President, or other officer in his absence, to issue each such option; 
 (b) Prescribe rules and regulations from time to time
for administration of this Plan; and 
 (c) Decide any questions arising as to the interpretation or application of any provision of this
Plan. 
 Any action, decision, interpretation, or determination by the Board with respect to this Plan shall be final and binding upon any
and all employees or directors. 
  

	 	2.4	Eligibility; Facts to Be Considered in Granting Options  

 An option may be granted to any officer, key employee or director who, at the time the option is granted, is an employee or director of the Company or of any subsidiary. In its determination of an employee or director
to whom an option shall be granted and the number of Shares to be covered by such option, the Board shall take 

  

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into account the duties of the employee or director, the present and potential contributions of the employee or director to the success of the Company, and
other factors deemed relevant by the Board in connection with accomplishing the purpose of this Plan. An employee or director who has been granted an option to purchase Shares of the Company, whether under this Plan or otherwise, may, if the Board
shall so determine, be granted additional options. 
  

	 	2.5	Vesting of Options  

 The Board shall have
the authority to establish the time of times at which the optioned Shares may be purchased and whether all of the options may be exercised at one time or in increments. 
  

	 	2.6	Rights of Optionee in Event of Merger, Consolidation, Tender Offer, Takeover Bid, Sale of Assets or Dissolution  

 (a) Notwithstanding anything in this Plan to the contrary, the Optionee may purchase the full amount of optioned Shares for which options have been
granted to the Optionee and for which the options have not been exercised under the following conditions: 
 (1) The Optionee may
conditionally purchase any or all optioned Shares during the period commencing twenty-seven (27) days and ending (7) days prior to the scheduled effective date of a merger or consolidation (as such effective date may be delayed from time
to time) wherein the Company is not to be the surviving corporation, which merger or consolidation is not between or among the Company and other corporations related to or affiliated with the Company; 
 (2) The Optionee may conditionally purchase any or all optioned Shares during the period commencing on the initial date of a tender offer or takeover
bid for the Shares (other than a tender offer by the Company) subject to the Exchange Act and the rules promulgated thereunder and ending on the day preceding the scheduled termination date of acceptance of tenders of Shares by the offeror under any
such tender offer or takeover bid (as such termination date may be extended by such offeror); 
 (3) The Optionee may conditionally purchase
any or all optioned Shares during the period commencing on the date the shareholders of the Company approve a sale of substantially all the assets of the Company and ending seven (7) days prior to the scheduled closing date of such sale (as
such closing date may be delayed from time to time); and 
 (4) The Optionee may conditionally purchase any or all optioned Shares during
the period commencing on the date the shareholders of the 

  

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Company approve the dissolution of the Company and ending seven (7) days prior to the scheduled effective date of such dissolution. 
 (b) If the merger, consolidation, tender offer, takeover bid, sale of assets, or dissolution, as the case may be and as described in Subsections
(1) through (4) of Section 2.6(a), once commenced, is canceled or revoked, the conditional purchase of Shares for which the option to purchase would not have otherwise been exercisable at the time of said cancellation or revocation,
but for the operation of this Section 2.6, shall be rescinded. With respect to all other Shares conditionally purchased, the Optionee may rescind such purchase at his option. 
 (c) If the merger, consolidation, tender offer, takeover bid, or sale of assets does occur or one hundred twenty (120) days passes after the
effective date of the dissolution of the Company, as the case may be and as described in Subsections (1) through (4) of Section 2.6(a), and the Optionee has not conditionally purchased all optioned Shares, all unexercised options
shall terminate on the effective, termination, or closing date, or one hundred twenty (120) days after the effective date of said dissolution, as the case may be. 
 (d) If the Company shall be the surviving corporation in any merger or is a party to a merger or consolidation which is between or among the Company and other corporations related to or affiliated with the Company,
any option granted hereunder shall pertain and apply to the securities to which a holder of the number of Shares of common stock subject to the option would have been entitled. 
 (e) Nothing herein shall allow the Optionee to purchase optioned Shares, the options for which have expired. 
  

	 	2.7	Terms and Expiration of Options  

 Each
option granted under this Plan shall be in writing, shall be subject to such amendment or modification from time to time as the Board shall deem necessary or appropriate to comply with or take advantage of applicable laws or regulations and shall
contain provisions to the following effect, together with such other provisions as the Board shall from time to time approve: 
 (a) That,
subject to the provisions of Section 2.7(b) below, the option, as to the whole or any part thereof, may be exercised only by the Optionee or his personal representative; 
 (b) That neither the whole nor any part of the option shall be transferable by the Optionee or by operation of law otherwise than by the will of, or by
the laws of descent and distribution applicable to, a deceased Optionee and that the option and any and all rights granted to the Optionee thereunder and not theretofore 

  

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effectively and completely exercised shall automatically terminate and expire upon any sale, transfer, or hypothecation of or any attempted sale, transfer,
or hypothecation of such rights or upon the bankruptcy or insolvency of the Optionee or his or her estate; 
 (c) That subject to the
foregoing provisions, an option may be exercised at different times for portions of the total number of option Shares for which the right to purchase shall have vested provided that such portions are in multiples of one hundred (100) shares;

 (d) That the Optionee shall have no right to receive any dividend on or to vote or exercise any right in respect to any Shares the
certificate for which has not been issued to him; 
 (e) That each vested option shall expire at the earliest of the following: 
 (1) The earlier of the date specified in the option or ten (10) years from the date of grant for the option; 
 (2) If the option is an Incentive Stock Option as described in Section 4.1, then no later than three (3) months after voluntary or involuntary
termination of Optionee’s employment other than termination as described in paragraphs (4) or (5) below. 
 (3) If the option
is not an Incentive Stock Option and the Optionee is, or becomes an employee or a director of the Company, then no later than three (3) years after: (i) voluntary or involuntary termination of Optionee’s employment if Optionee is a
non-director employee or (ii) termination of membership on the Board if Optionee is a non-employee director, or (iii) termination of both employment and membership on the Board if Optionee is both a director and employee, in all instances
other than termination as described in paragraphs (4) or (5) below, provided that in the event a public market is established for the Company’s stock through an initial public offering or other action, then the exercise period will be
reduced from three (3) years to three (3) months effective with the establishment of the public market (or expiration of any lock-up period associated with the establishment of the public market, if applicable); 
 (4) If the Optionee is, or becomes an employee or a director, upon the discharge of Optionee from employment or resignation or removal from the Board
for or related to misconduct, willfully or wantonly harmful to the Company; 
 (5) One (1) year after Optionee’s death; or

  

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 (6) Upon the occurrence of a merger, consolidation, tender offer, takeover bid, sale of assets, or
filing of Articles of Dissolution, as the case may be and as described in Subsections (1) through (4) of Section 2.6(a) (collectively, a “Change of Control Event”), on the date specified in Section 2.6(c). However, if
the merger, consolidation, tender offer, takeover bid, or sale of assets does not occur or if Articles of Dissolution are revoked, as the case may be and as described in Subsections (1) through (4) of Section 2.6(a), all options which
are terminated pursuant to this Subsection (e)(5) shall be reinstated as if no action with respect to any of said events had been contemplated or taken by any party thereto and all Optionees shall be returned to their position on the date of
termination; 
 (f) That, to the extent an option provides for the vesting thereof in increments, such vesting shall cease as of the date of
the Optionee’s death or (i) voluntary or involuntary termination of Optionee’s employment with the Company if Optionee is an non-director employee or, (i) termination or removal of membership on the Board if Optionee is a
non-employee director, or (ii) termination of both employment and membership on the Board if Optionee is both a director and employee, in all instances regardless whether such termination, resignation or removal is voluntary or involuntary; and

 (g) That the terms of the option shall not be affected by any change of duties or position so long as the Optionee shall continue to be
employed by the Company or a subsidiary. 
 (h) Each unvested option shall expire upon: (i) any termination of Optionee’s
employment with the Company if Optionee is an non-director employee, or (ii) upon Optionee’s resignation or removal from the Board if Optionee is a non-employee director, or (iii) upon termination of both employment and membership on
the Board if Optionee is both a director and employee, in all instances regardless whether such termination, resignation or removal is voluntary or involuntary, or upon the death of Optionee, or (iv) upon the death of Optionee. 
  

	 	2.8	Notice of Intent to Exercise Option  

 The
Optionee (or other person or persons, if any, entitled thereto hereunder) desiring to exercise an option granted hereunder as to all or part of the Shares covered thereby shall in writing notify the Company at its principal office in Seattle,
Washington, to the effect specifying the number of option Shares to be purchased and, if required by the Company, representing in form satisfactory to the Company that the Shares are being purchased for investment and not with a view to resale or
distribution. With respect to any Shares conditionally purchased pursuant to Section 2.6(a) above and for which such purchase has not been voluntarily or otherwise rescinded pursuant to Section 2.6(b), the Optionee shall be deemed to have
given to the Company the notice of exercise required by this Section 2.8 as of ten (10) days prior to the closing or 

  

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effective date of the merger, consolidation, tender offer, takeover bid, or sale of assets or as of the tenth (10th) day before the filing of Articles
of Dissolution, as the case may be and as described in Subsections (1) through (4) of Section 2.6(a). 
  

	 	2.9	Method of Exercise of Option  

 Within ten
(10) days after receipt by the Company of the notice provided in the foregoing Section 2.8, but not later than the expiration date specified in Section 2.7(e), the option shall be exercised as to the number of Shares specified in the
notice by payment to the Company of the amount specified in either Section 3.2 or Section 4.5, as may be applicable. Payment of the purchase price provided in the option shall be made in cash, in shares of the Company’s common stock
owned by the Optionee (for a period of not less than six months at the time of exercise), or in any combination of cash and shares of the Company’s common stock (owned by Optionee for a period of not less than six months at the time of
exercise). Payment in shares of the Company’s common stock shall be deemed to be the equivalent of payment in cash of the fair market value of those shares. For purposes of the preceding sentence, “fair market value” shall be
determined by the Board in the same manner as utilized in determining the fair market value at the time other options are granted. 
  

	 	2.10	Recapitalization  

 The aggregate number of
Shares for which options may be granted hereunder, the number of Shares covered by each outstanding option and the price per Share thereof in each such option shall be proportionally adjusted for an increase or decrease in the number of outstanding
shares of common stock of the Company resulting from a division or consolidation of shares or any other increase or decrease in such shares effected without receipt of consideration by the Company excluding any decrease resulting from the purchase
of shares for the treasury. If the adjustment would result in a fractional share, the Optionee shall be entitled to one (1) additional share, provided that the total number of shares to be granted under this Plan shall not be increased above
the equivalent number of Shares initially allocated or later increased by approved amendment to this Plan. 
  

	 	2.11	Substitutions and Assumptions  

 The Board
shall have the right to substitute or assume options in connection with mergers, reorganizations, separations, or other “corporate transactions” as that term is defined in and said substitutions and assumptions are permitted by
Section 424 of the Code and the regulations promulgated thereunder. The number of Shares reserved pursuant to Section 2.2 may be increased by the corresponding number of options assumed and, in the case of a substitution, by the net
increase in the number of Shares subject to options before and after the substitution. 
  

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	 	2.12	Termination  

 The Board may at any time
terminate this Plan provided, however, that no termination of the Plan may adversely affect options granted prior to such action. 
  

	 	2.13	Granting of Options  

 The granting of any
option pursuant to this Plan shall be entirely in the discretion of the Board and nothing herein contained shall be construed to give any officer, employee or director any right to participate under this Plan or to receive any option under it.

 The granting of an option pursuant to this Plan shall not constitute any agreement or an understanding, express or implied, on the part of
the Company or a subsidiary to employ the Optionee for any specified period. 
  

	 	2.14	Government Regulations  

 This Plan and the
granting and exercise of any option hereunder and the obligations of the Company to sell and deliver Shares under any such option shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies as
may be required. 
  

	 	2.15	Proceeds From Sale of Stock  

 Proceeds of
the purchase of optioned Shares by an Optionee shall be for the general business purposes of the Company. 
  

	 	2.16	Shareholder Approval  

 This Plan shall be
submitted to the shareholders for their approval within twelve (12) months from the date hereof. The Company may grant options prior to such approval which shall be conditioned upon subsequent shareholder approval. 
  

	 	2.17	Compliance With Securities Laws  

 The Board
shall have the right to: 
 (a) require an Optionee to execute, as a condition of the exercise of an option, a letter evidencing
Optionee’s intent to acquire the Shares for investment and not with a view to the resale or distribution thereof, 
 (b) place
appropriate legends upon the certificate or certificates for the Shares; and 
  

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 (c) take such other acts as it deems necessary in order to cause the issuance of optioned Shares to
comply with applicable provisions of State and Federal Securities Laws. 
 In furtherance of the foregoing, and not by way of limitation
thereof, no option shall be exercisable unless such option and the Shares to be issued pursuant thereto shall be registered under appropriate Federal and State Securities Laws, or shall be exempt therefrom, in the opinion of the Board upon advice of
counsel to the Company. Each option agreement shall contain adequate provisions to assure that there will be no violation of such laws. This provision shall in no way obligate the Company to undertake registration of options or Shares hereunder.
Issue, transfer or delivery of certificates for Shares pursuant to the exercise of options may be delayed, at the discretion of the Board, until the Board is satisfied that the applicable requirements of the Federal and State Securities Laws have
been met. 
  

	 	2.18	Termination Date of Plan  

 This Plan shall
not extend beyond October 31, 2014. 
  

	3.	PROVISIONS APPLICABLE SOLELY TO NON-QUALIFIED STOCK OPTIONS  

 In addition to the provisions of Section 2 above, the following paragraphs shall apply to any options granted under this Plan which are not Incentive Stock Options. 
  

	 	3.1	Option Price  

 The option or purchase price
of each Share optioned under this Plan shall be determined by the Board at the time of the action for the granting of the option. 
  

	 	3.2	Method of Exercise of Option  

 The amount to
be paid by the Optionee upon exercise of a Non-Qualified Option shall be the full purchase price thereof provided in the option, together with the amount of federal, state, and local income and FICA taxes required to be withheld by the Company. An
Optionee may elect to pay his federal, state, or local income and FICA withholding tax by having the Company withhold shares of common stock of the Company having a value equal to the amount required to be withheld. The value of the shares to be
withheld is deemed to equal the fair market value of the Shares on the day the option is exercised. An election by an Optionee to have shares withheld for this purpose will be subject to the following restrictions: 
  

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 (a) If an Optionee has received multiple option grants, a separate election must be made for each grant;

 (b) The election must be made prior to the day the option is exercised; 
 (c) The election will be irrevocable; 
 (d)
The election will be subject to the disapproval of the Board; 
 (e) If the Optionee is an officer of the Company within the meaning of
Section 16 of the Exchange Act (“Section 16”), the election may not be made within six (6) months following the grant of the option; and 
 (f) If the Optionee is an officer of the Company within the meaning of Section 16, the election must be made either six (6) months prior to the day the option is exercised or the ten (10) day
“window” beginning on the third day following the release of the Company’s quarterly or annual summary statement of sales and earnings. 
  

	 	3.3	Eligibility  

 A Non-Qualified Option under
this Plan may be granted to either employees or directors of the Company as determined by the Board in accordance with Section 2, above. 
  

	4.	PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS  

 In addition to the provisions of Section 2 above, the following paragraphs shall apply to any options granted under this Plan which are Incentive Stock Options. 
  

	 	4.1	Conformance With Internal Revenue Code  

 Options granted under this Plan which are “Incentive Stock Options” shall conform to, be governed by and interpreted in accordance with Sections 422 and 424 of the Code and any regulations (“Regulations”) promulgated
thereunder and amendments to the Code and Regulations. 
  

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	 	4.2	Option Price  

 The option or purchase price
of each Share optioned under the Incentive Stock Option provisions of this Plan shall be determined by the Board at the time of the action for the granting of the option but shall not, in any event, be less than the fair market value of the
Company’s common stock on the date of grant. 
  

	 	4.3	Limitation on Amount of Incentive Stock Option  

 The aggregate fair market value of the option Shares (determined as of the date of grant) with respect to which an Optionee’s right to exercise vest in any one calendar year (under this Plan or any other plan of the Company which
authorized Incentive Stock Options) shall not exceed One Hundred Thousand Dollars ($100,000). 
  

	 	4.4	Limitation on Grants to Substantial Shareholders  

 An employee may not, immediately prior to the grant of an Incentive Stock Option hereunder, own stock in the Company representing more than ten percent (10%) of the voting power of all classes of stock of the Company unless the per
share option price specified by the Board for the Incentive Stock Options granted such an employee is at least one hundred ten percent (110%) of the fair market value of the Company’s common stock on the date of grant and such option, by
its terms, is not exercisable after the expiration of five (5) years from the date such option is granted. 
  

	 	4.5	Method of Exercise of Option  

 The amount to
be paid by the Optionee upon exercise of an Incentive Stock Option shall be the full purchase price thereof provided in the option. 
  

	 	4.6	Eligibility  

 An Incentive Stock Option
under this Plan may be granted to employees (but not directors) of the Company as determined by the Board in accordance with Section 2, above. 
  

	5.	EXCHANGE OF NON-QUALIFIED OPTIONS FOR INCENTIVE STOCK OPTIONS  

 At the Optionee’s election and in accordance with the procedures described below, an Optionee may exchange a Non-Qualified Option granted pursuant to this Plan for an Incentive Stock Option for the identical
number of Shares. 
  

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	 	5.1	Notice of Intent to Exchange  

 Not less than
seven (7) days prior to the desired date of exchange, the Optionee shall notify the Company in writing to that effect specifying the number of option Shares granted under Non-Qualified Options which are to be exchanged for option Shares granted
under Incentive Stock Options and the desired date of exchange. 
  

	 	5.2	Limitations on Amount of Options Exchanged  

 Notwithstanding the number of option Shares specified by the Optionee as desired to be exchanged pursuant to this Section 5, the Company will allow exchanges for only so many options as will not violate the aggregate dollar limitations
specified in Section 4.3 above with that limit being based on a calculation of the fair market value on the date of exchange. If an Optionee requests to exchange more option Shares than would be allowed by the preceding sentence, the Company
shall deem the request to apply only to the maximum number of option Shares which would be allowed and shall disregard the request as to the excess. 
  

	 	5.3	Effect of Exchange  

 If an exchange does
occur, the Optionee shall surrender the Non-Qualified Option for cancellation and shall execute a new Incentive Stock Option for the number of option Shares exchanged and, if all of the Non-Qualified Options have not been exchanged, shall execute a
new Non-Qualified Option (or an amendment to the existing option) to specify the remainder of Shares under the Non-Qualified Option. The new Incentive Stock Option shall be deemed a new option granted on the date of exchange. 
  

	6.	AMENDMENT OF PLAN 

 This Plan may be modified
or amended by the affirmative vote of a majority of the whole Board of Directors at any meeting of the Board, if notice of the proposed amendment is contained in the notice of the meeting, provided that no such action shall adversely affect any
material rights of Optionees granted Stock Options under this Plan prior to such action. The Board may modify or amend the terms and conditions of outstanding Stock Options, provided, however, that (i) no such amendment would be adverse to the
holders of such Stock Options, (ii) no such amendment shall extend the period for exercise of an Incentive Stock Option, and (iii) the amended terms of a Stock Option would be permitted under this Plan. In addition, the Board of Directors
may not modify the Plan with respect to any provision applicable to an option which constitutes an Incentive Stock Option under Section 422(b) of the Internal Revenue Code in a manner that would constitute the adoption of a new plan without
obtaining the consent of the Shareholders of the Company within twelve (12) months of the adoption of the modification. 
  

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 DATE Plan adopted by Board of Directors: September 23, 2004 
 DATE Plan becomes effective: November 1, 2004 
 DATE Plan
adopted by Shareholders: Approved at 2004 Annual Meeting on December 9, 2004 
 DATE Plan shall terminate: October 31, 2014

  

 - 13 -Form of Non-Qualified Stock Option Agreement

 Exhibit 10.4 
 August 11, 2005 
 {Optionee Name} 
 {Optionee
Address} 
 {Optionee City, State and Zip} 
 Re: Stock Option
Grant 
 Dear {Name} 
 A few weeks ago we gave
you some good news- on May 16, 2005 the Board of Directors approved a grant of stock options to you under the Tully’s Coffee Corporation 2004 Stock Option Plan (the “Plan”). As you may recall, we advised you that we would be
sending you the actual stock option agreement and some related documents at a later time. I am pleased that we are now doing so with this letter. 
 We enclose the following documents with this letter: 
  

	 	1.	Two copies of the stock option agreement for these stock options; 

  

	 	2.	A copy of the prospectus, dated December 17, 2004, relating to the common stock issuable upon exercise of options granted under the Plan; 

  

	 	3.	A copy of the Plan, which is Exhibit A to the prospectus; 

  

	 	4.	A copy of our Fiscal 2005 Annual Report on Form 10-K. 

 Please execute one copy of the stock option agreement and return the executed agreement to Mark Dringenberg in our Accounting Dept. (telephone: 206-233-2070) within 30 days after you receive these materials. You should retain the
other documents for your records. Stock option grants are effective only upon the execution of a stock option agreement between Tully’s and you, and are subject to cancellation if the stock option agreement enclosed herein is not executed and
returned to Tully’s. 
 If you have any questions regarding these materials or your stock options, please contact Kris Galvin, our CFO,
or Kathy Hasegawa, our controller. 
 On behalf of the Board of Directors, I am pleased to provide you this opportunity to become a
shareholder of Tully’s Coffee Corporation. 
 Sincerely, 
 John D. Dresel 
 President and Chief Operating Officer 

 TULLY’S COFFEE CORPORATION 
 (the “Company”) 
 NON-QUALIFIED STOCK OPTION AGREEMENT FOR PURCHASE OF
STOCK 
 We are pleased to inform you that the Company has granted to you (the “Optionee”) an option to purchase shares of the
Company’s common stock (“Option”) under the 2004 Stock Option Plan (the “Plan”) on the terms and subject to the conditions set forth in this Stock Option Agreement. 
 This Stock Option Agreement is made and entered into pursuant to a specific grant of options approved by the Company’s Board of Directors or the
Compensation Committee thereof as of the Date of Option Grant set forth below. This Stock Option Agreement cancels, supercedes, and replaces any other oral or written agreement, letter or other document between the parties related to this Option.

 FOR VALUABLE CONSIDERATION, the Company does hereby grant to the Optionee, in accordance with the terms and conditions hereof, as of the
Date of Option Grant, the right and option to purchase the number of shares of common stock of the Company (the “Option Shares”) for the Exercise Price Per Share as set forth below, which right and option shall vest and become exercisable
according to the Vesting Schedule set forth below: 
  

							
	Name of Optionee:	  		  		  	
	Number of Option Shares:	  		  		  	
	Exercise Price Per Share:	  		  		  	
	Date of Option Grant:	  	May 16, 2005	  		  	
	Expiration Date:	  		  		  	
	Vesting Schedule:	  		  		  	

 EXECUTED as of August 11, 2005. 
  

			
	 TULLY’S COFFEE CORPORATION

		
	By	 	  

		 	Kristopher S. Galvin
		 	Executive Vice President and CFO

 By signing below and entering into this Stock Option Agreement, Optionee agrees to the terms hereof, and all
obligations and responsibilities as described in the Plan and the attached Terms and Conditions, which shall constitute part of this Stock Option Agreement. 
  

			
	OPTIONEE
	
	  

	 Address:
	 	  

	  

 TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION AGREEMENT 
 THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS 
 COVERING SECURITIES THAT HAVE BEEN REGISTERED 
 UNDER THE SECURITIES ACT OF 1933. 
 Capitalized Terms used in this Stock Option Agreement (the “Agreement”), if not otherwise 
 defined, have the meanings given them in the Plan. 
 1.
Time of Exercise of Option. Until it expires or is terminated as provided in Section 2 hereof, the Option may be exercised from time to time to purchase the number of whole shares of common stock as to which it has become exercisable.
Section 2.6 of the Plan sets forth provisions affecting the exercise and termination of the Option in connection with certain circumstances, including Merger, Consolidation, Tender Offer, Takeover Bid, Sale of Assets or Dissolution as set forth
therein. 
 2. Termination of Employment or Service. 
 2.1 General Rule. Except as provided in this Section 2, the Option may not be exercised unless at the time of exercise the Optionee is employed by or is serving as a director of the Company, and shall have
been so employed or provided such service continuously since the Date of Option Grant. For purposes of this Agreement, the Optionee is considered to be employed by or in the service of the Company if the Optionee is employed by or serving as a
director of the Company or any subsidiary of the Company (each, an “Employer”). 
 2.2 Termination Generally. If the
Optionee’s employment by or service with the Company terminates for any reason other than for cause, resignation in lieu of dismissal, total disability, death or due to a Change of Control Event, as provided in Sections 2.3, 2.4, 2.5, 2.6 or
2.7 hereof, then the Option may be exercised at any time before the earliest of (a) the Expiration Date, (b) the date that is three years after the date of termination, and (c) ten years after the Date of Option Grant, but only if and
to the extent the Optionee was entitled to exercise the Option at the date of termination (provided that all other conditions to exercise set forth herein shall have been met at the date of exercise of the Option). 
 2.3 Termination for Cause or Resignation in Lieu of Dismissal. 
 (a) If the Optionee is terminated for cause or resigns in lieu of dismissal, the Option shall be deemed to have terminated as of the time of the first act that led or would have led to the termination for cause or
resignation in lieu of dismissal, and the Optionee shall thereupon have no right to purchase any shares of common stock pursuant to the exercise of the Option, and any such exercise shall be null and void. 
 (b) Termination for “cause” shall include (i) the violation by the Optionee of any reasonable rule or policy of the Company; (ii) any
willful misconduct or gross negligence by the Optionee in the responsibilities assigned to him or her; (iii) any willful failure to perform his or her job as required to meet the objectives of the Company; (iv) any wrongful conduct of

 
an Optionee that has an adverse impact on the Company or that constitutes a misappropriation of the assets of the Company; (v) unauthorized disclosure
of confidential information; (vi) the Optionee’s performing services for any other company or person that competes with the Company while he or she is employed by or provides services to the Company, without the written approval of the
president or chief executive officer of the Company; or (vii) removal as a director of the Company. 
 (c) “Resignation in lieu of
dismissal” shall mean a resignation by the Optionee as an employee or director, or both, if (i) the Company has given prior notice to the Optionee of its intent to dismiss (or seek removal of) the Optionee for circumstances that constitute
cause, or (ii) within two months of the Optionee’s resignation, the Board of Directors of the Company or the president or chief executive officer of the Company determines that such resignation was related to an act that would have led to
a termination for cause. 
 2.4 Resignation. If the Optionee resigns as an employee or director of the Company, the Optionee’s
right to exercise his or her option shall be suspended for a period of two months from the date of resignation, unless the president or chief executive officer of the Company or the Board of Directors determines otherwise in writing. Thereafter,
unless there is a determination that the Optionee resigned in lieu of dismissal, the option may be exercised at any time before the earlier of (a) the Expiration Date (which shall have been extended for the period during which the Option has
been suspended) or (b) the date that is three years after the date of resignation, to the extent the Optionee was entitled to exercise the Option at the date of resignation (provided all other conditions to exercise set forth herein shall have
been met at the date of exercise of the Option). 
 2.5 Termination Because of Total Disability. If the Optionee’s employment or
service to the Company terminates because of a permanent and total disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended), the Option may be exercised at any time before the earlier of (a) the
Expiration Date or (b) the date that is three years after the date of such termination, but only if and to the extent the Optionee was entitled to exercise the Option at the date of termination (provided that all other conditions to exercise
set forth herein shall have been met at the date of exercise of the Option). 
 2.6 Termination Because of Death. If the Optionee dies
while employed by or in the service of the Company, the Option may be exercised at any time before the earlier of (a) the Expiration Date or (b) the date that is 12 months after the date of death, but only if and to the extent the Optionee
was entitled to exercise the Option at the date of termination. The Option may be exercised only by the person or persons to whom the Optionee’s rights under the Option shall pass by the Optionee’s will or by the applicable laws of descent
and distribution (provided all other conditions to exercise set forth herein shall have been met at the date of exercise of the Option). 
 2.7 Termination Because of a “Change of Control Event.” The Option shall terminate upon the occurrence of a Change of Control Event, as defined in Section 2.7(e) (6) of the Plan and subject to the terms set forth
therein.  

 2.8 Effect of Leave of Absence; Transfer of Employment. Absence on leave approved by the Employer
or on account of illness or disability shall not be deemed a termination or interruption of employment or service. Vesting of the Option shall continue during any medical, family, or military leave of absence taken in accordance with the policies of
the Company. Vesting of the Option and the Expiration Date therefor shall be suspended during any other leave of absence, whether paid or unpaid, except as otherwise determined by the Board of Directors or appropriate committee thereof. A transfer
of employment or other relationship between or among the Company and any subsidiaries of the parent or the Company shall not be deemed to constitute a termination of employment or other cessation of relationship with the Employer. 
 2.9 Effect of Listing or Quotation of Common Stock. Effective as of the later of (a) the date on which the Company’s common stock is
listed or quoted on a national securities exchange or market or (b) the expiration of any restrictive period applicable to the Option under the requirements of Section 9 below, the three year exercise period referenced in Sections 2.2 and
2.4 above will be reduced to three months and in Section 2.5 to twelve months. 
 2.10 Failure to Exercise Option. To the extent
that the Option of any deceased Optionee or any Optionee whose employment or service terminates is not exercised within the applicable exercise period, all further rights to purchase shares pursuant to the Option shall cease and terminate.

 3. Recapitalizations. The Option shall be adjusted for recapitalizations, stock splits, stock dividends, and the like as described in
Section 2.10 of the Plan. 
 4. Method of Exercise of Option. Subject to the provisions of Section 1 above, the Option may be exercised in
whole or in part; provided, however, that no fewer than 100 shares (or the remaining shares then purchasable under the Option, if less than 100 shares) may be purchased on any exercise of the Option. The Option shall be exercised by delivery to the
Secretary of the Company or his or her designated agent of notice, substantially in the form attached hereto as Annex 1, of the number of Option Shares with respect to which the Option is being exercised, together with payment in full
of the exercise price and any applicable withholding taxes. Payment of the option exercise price shall be made in cash or bank certified or cashier’s check for the number of Option Shares being purchased. Before the issuance of shares of common
stock upon the exercise of the Option, the Optionee shall pay to the Company the amount of any applicable federal, state or local tax withholding obligations. The Company may withhold any distribution in whole or in part until the Company is so
paid. The Company shall have the right to withhold such amount from any other amounts due or to become due from the Company to the Optionee, including salary (subject to applicable law) or to retain and withhold a number of shares having a market
value not less than the amount of such taxes required to be withheld by the Company to reimburse it for any such taxes and cancel (in whole or in part) any such shares so withheld. 
 5. Nonassignability of Option by Optionee. The Option is nonassignable and may not be transferred, pledged or hypothecated in any manner by the Optionee, either voluntarily or by operation of law, except by
will or the applicable laws of descent and distribution; shall not be subject to execution, attachment or similar process; and shall be exercisable during the 

 
Optionee’s lifetime only by the Optionee. Any purported transfer or assignment in violation of this provision shall be void. The Option and any and all
rights granted to the Optionee hereunder and not theretofore duly exercised shall automatically terminate and expire upon any purported assignment or transfer or upon the bankruptcy or insolvency of Optionee or Optionee’s estate. 
 6. Conditions on Company’s Obligations. 
 6.1
No Violations of Law. The Company shall not be obligated to issue any Option Shares upon exercise of the Option if the Company is advised by its legal counsel that such issuance would violate applicable state or federal laws, including
securities laws and the requirements of any stock exchange or market on which the common stock may then be listed. The Company will use its reasonable best efforts to take steps required by state or federal law and applicable regulations in
connection with issuance of the Option Shares. The inability of the Company to obtain, from any regulatory body having jurisdiction, the authority deemed by the Company’s counsel to be necessary for the lawful issuance and sale of any Option
Shares hereunder, or to qualify for an exemption from registration for the issuance and sale of any shares hereunder, shall relieve the Company of any liability with respect to the nonissuance or sale of such shares as to which such requisite
authority or qualification shall not have been obtained or satisfied. 
 6.2 Compliance with Securities Laws. As a condition to the
exercise of the Option, the Company may require the Optionee to represent and warrant at the time of exercise that the Option Shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in
the opinion of counsel for the Company, such a representation is required by any relevant provision of the aforementioned laws. The Company may place a stop-transfer order against any shares of common stock on the stock records of the Company, and a
legend may be stamped on stock certificates to the effect that the shares of common stock may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation. The Board of Directors (or a committee thereof) also may require such other action or agreement by the Optionee as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE OPTION. 
 7.
No Rights as a Shareholder. The Optionee shall have no rights as a shareholder with respect to any shares of common stock until the date on which the Optionee becomes the holder of record of those shares. No adjustment shall be made for
dividends or other rights for which the record date occurs before the date the Optionee becomes the holder of record. 
 8. No Right to Employment or
Service. Nothing in the Plan or this Agreement shall confer upon the Optionee any right to be continued in the employment of the Company or interfere in any way with the Company’s right to terminate the Optionee’s employment at will at
any time, for any reason, with or without cause, without any pre- or post-termination warning, discipline or procedure, or to decrease the Optionee’s compensation or benefits, or 

 
confer upon the Optionee any right to be retained or employed by the Company or to the continuation, extension, renewal or modification of any compensation,
contract or arrangement with or by the Company. Neither Optionee nor any other person shall have any claim or right to be granted additional options under the Plan. Optionee shall have no rights to or interest in any option except as set forth
herein. 
 9. Market Stand-off. The Optionee agrees, in connection with any public equity offering by the Company, (a) not to sell or otherwise
dispose of any securities of the Company in compliance with terms of the lock-up or similar agreement proposed by the underwriters for such offering and (b) to execute an agreement in the form proposed; provided that (x) substantially all
of the Company’s officers and directors enter into identical agreements, (y) the restrictive period does not exceed 180 days following the offering, and (z) the failure to execute a form of agreement shall not affect the
enforceability of this covenant. To enforce this covenant, the Company may impose stop-transfer instructions with respect to the securities of the Optionee until the end of the restrictive period. 
 10. Successors of Company. Subject to Section 2.7 hereof, this Agreement shall be binding upon and shall inure to the benefit of any successor of the Company
but, except as provided herein, the Option may not be assigned or otherwise transferred by the Optionee. 
 11. Notices. Any notices under this
Agreement must be in writing and will be effective when actually delivered or, if mailed, three days after deposit into the United States mail by registered or certified mail, postage prepaid. Mail shall be directed to the Company at its principal
executive offices, Attention: Secretary, and to Optionee at the address stated on the facing page of this Agreement, or to such address as a party may certify by notice to the other party. 
 12. Amendments. The Company may at any time amend this Agreement if the amendment does not adversely affect the Optionee. Otherwise, this Agreement may not be
amended without the written consent of the Optionee and the Company. 
 13. Governing Law. This Agreement shall be governed by the laws of the State
of Washington. 
 14. Complete Agreement. This Agreement constitutes the entire agreement between the Optionee and the Company, both oral and written
concerning the matters addressed herein, and all prior agreements or representations concerning the matters addressed herein, whether written or oral, express or implied, are terminated and of no further effect. This Agreement and the Option
represented hereby is granted pursuant to and is governed by the Plan, amended from time to time. In the event of any inconsistency or ambiguity between this Agreement and the Plan, the provisions of the Plan, as interpreted by the Board of
Directors or designated committee thereof, shall control. 

 Annex 1 
 Form of Notice of Exercise of Stock Option 
 Date:
                             
 To: Tully’s Coffee Corporation 
 I hereby exercise the non-statutory stock option granted to me by
Tully’s Coffee Corporation (the “Company”) on May 16, 2005, subject to all the terms and provisions thereof and of the 2004 Stock Option Plan referred to therein, and notify the Company of my desire to purchase
                     shares of common stock of the Company at the exercise price of
$             per share, or an aggregate exercise price of $            . 
 I hereby deliver the full exercise price and all applicable withholding taxes with respect to this exercise as follows: 
                                      cash, or

                                      bank certified
or cashier’s check. 
 I further agree to execute such other documents as the Company may request in connection with the exercise of
this stock option. 
  

							
		 	By:
                                        
                                    	 	
			
		 	Print Name:
                                        
                       	 	
			
		 	Address:
                                        
                            	 	
			
		 	                                      
                                        
                     	 	
			
		 	SSN:

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