Re: Stock Option Grant

Exhibit 10.5

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:

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”)

INCENTIVE 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 Company’s 2004 Stock Option Plan (the “Plan”) on the terms and subject to the conditions set forth in this Stock Option Agreement. The Option is intended to be an Incentive Stock Option as defined in Section 422 of the Internal Revenue Code of 1986, as amended.

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:

EXECUTED as of August 11, 2005.

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.

TERMS AND CONDITIONS OF INCENTIVE 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 the Company, and shall have been so employed continuously since the Date of Option Grant. For purposes of this Agreement, the Optionee is considered to be employed by the Company if the Optionee is employed by the Company or any subsidiary of the Company (each, an “Employer”).

2.2 Termination Generally . If the Optionee’s employment by 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 months 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; or (vi) the Optionee’s performing services for any other company or person that competes with the Company while he or she is employed by the Company, without the written approval of the president or chief executive officer of the Company.

(c) “Resignation in lieu of dismissal” shall mean a resignation by the Optionee as an employee if (i) the Company has given prior notice to the Optionee of its intent to dismiss 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 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 months after the date on which the suspension of the right to exercise ended, 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 Te