2004 STOCK OPTION PLAN

Exhibit 10.3

TULLY’S COFFEE CORPORATION

2004 STOCK OPTION PLAN

Effective as of November 1, 2004

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.

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

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.

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.

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.

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.

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.

(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.

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)&n