8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

December 8, 2004
Date of Report (Date of earliest event reported)

STARBUCKS CORPORATION

(Exact name of registrant as specified in its charter)

Washington
(State or other jurisdiction of
incorporation) 0-20322
(Commission File Number) 91-1325671
(IRS Employer Identification No.)

2401 Utah Avenue South
Seattle, Washington 98134

(Address of principal executive offices) (Zip Code)

(206) 447-1575

(Registrant’s telephone number, including area code)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 10.1

Item 1.01. Entry into a Material Definitive Agreement.

     On December 8, 2004, Starbucks Corporation (the “Company”) entered into an employment agreement (the “Agreement”) with Orin C. Smith, president and chief executive officer and a member of the Board of Directors of the Company. The Agreement is filed with this report as Exhibit 10.1, and the material terms and conditions of the Agreement are described below.

Duties

     Under the Agreement, Mr. Smith will continue to serve as president and chief executive officer of the Company through March 31, 2005. From April 1, 2005 through June 30, 2007, Mr. Smith will have the title of former ceo and will be asked to provide reasonable advisory services from time to time on an “as needed” basis through the chairman and chief global strategist or through the president and chief executive officer of the Company, or any of their respective designees.

Base Salary

     Through March 31, 2005, Mr. Smith will continue to receive his current base salary, which annualizes to $1,190,000. From April 1, 2005 through June 30, 2007, Mr. Smith will be paid a salary that annualizes to $25,000. In the event that Mr. Smith dies before July 1, 2007, the Company will pay his estate a single sum equal to the unpaid salary he would have received through the full term of the Agreement.

Bonus

     As determined in accordance with the terms of the Company’s Executive Management Bonus Plan (the “EMB Plan”), Mr. Smith will receive a bonus in December 2004 based on the performance goals established for him by the independent members of the Company’s Board of Directors (the “Independent Directors”) for the fiscal year ended October 3, 2004 (“Fiscal 2004”). Depending upon the Company’s performance and in accordance with the terms of the EMB Plan, Mr. Smith will be eligible for a pro rated bonus for the Company’s fiscal year ending October 2, 2005 (“Fiscal 2005”) based on the approximately six months during Fiscal 2005 during which Mr. Smith will have served as the Company’s president and chief executive officer. Any bonus paid to Mr. Smith for Fiscal 2005 under the EMB Plan will be subject to the approval of the Compensation and Management Development Committee (the “Compensation Committee”) and of the Independent Directors. Mr. Smith’s Fiscal 2004 bonus of $2.38 million was approved by the Compensation Committee and the Independent Directors in November 2004. Earlier in Fiscal 2004, Mr. Smith received a discretionary bonus of $110,000 paid to him in recognition of the Company’s extraordinary performance in the first quarter of Fiscal 2004.

Stock Options

     Upon the approval of the Compensation Committee and of the Independent Directors, in November 2004 Mr. Smith was granted an option to purchase 500,000 shares of the Company’s common stock, which represents a full grant for his service in fiscal 2004 as president and chief executive officer of the Company. The options were granted pursuant to the terms of the Starbucks Corporation Amended and Restated Key Employee Stock Option Plan – 1994, as amended (the “Key Employee Plan”). These stock options and all other stock options held by Mr. Smith will vest in accordance with the terms under which they were originally granted.

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Benefits

     Through March 31, 2005, Mr. Smith will continue to enjoy all current benefits as the Company’s president and chief executive officer. From April 1, 2005 through June 30, 2007, Mr. Smith will opt out of all benefit programs the Company makes available to its employees, and will have no access to any Company airplane unless he is traveling with the president and chief executive officer or the chairman and chief global strategist or if he is invited to travel with a group of Company employees on a specific business trip.

Termination

     The Company may terminate the Agreement if Mr. Smith is unable to perform his duties because of physical or mental disability. The Agreement may also be terminated “for cause” to include, but not be limited to, Mr. Smith’s unreasonable refusal to perform his duties or any material violation of the Company’s Standards of Business Conduct. Mr. Smith may terminate the Agreement before July 1, 2007 by providing the Company with written notice of his resignation.

Expenses and Administrative Support

     The Company will reimburse Mr. Smith for all reasonable and customary expenses incurred by him in performing his duties under the Agreement, including, but not limited to, reasonable travel expenses. To assist Mr. Smith in his advisory role, the Company will continue to provide an office, computer, cell phone and administrative and secretarial assistance as needed to perform his Starbucks duties. In addition, Mr. Smith will continue to have access to the Company’s corporate offices and parking garage, subject to Mr. Smith paying the regular parking fee.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

Exhibit No.	Description
10.1	Employment Agreement dated December 8, 2004 between Starbucks Corporation and Orin C. Smith.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	STARBUCKS CORPORATION
Dated: December 10, 2004	By:	/s/ Michael Casey
		Michael Casey
		executive vice president and chief financial officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Employment Agreement dated December 8, 2004 between Starbucks Corporation and Orin C. Smith.

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EX-10.1

Exhibit 10.1

December 8, 2004

Mr. Orin C. Smith
Starbucks Corporation
2401 Utah Avenue South
Seattle, WA 98134

Dear Orin:

This letter confirms the terms and conditions of your employment agreement (“Agreement”) from November 29, 2004 through June 30, 2007.

Employment Term

From November 29, 2004 through March 31, 2005 you will serve as Starbucks president and chief executive officer. From April 1, 2005 through June 30, 2007 (the “Term”) you agree to provide advisory services to Starbucks; provided, however, that if this Agreement is terminated earlier as provided below, the Term shall end on the date of such earlier termination. From April 1, 2005 on, your title will be former ceo.

Duties

From November 29, 2004 through March 31, 2005, you will continue to perform the duties of Starbucks president and chief executive officer. From April 1, 2005 through June 30, 2007, you will be asked to provide reasonable advisory services from time to time on an “as needed” basis through the chairman and chief global strategist or through the president and chief executive officer of Starbucks, or any of their respective designees. You will not be required to provide services for which you are not qualified. You may perform services for others on a paid consulting basis and you may serve on the boards of directors of other companies so long as such activities do not conflict with Starbucks Standards of Business Conduct.

Base Salary

From November 29, 2004 through March 31, 2005, you will be paid bi-weekly your full base salary as president and chief executive officer of Starbucks, which currently annualizes to One Million One Hundred and Ninety Thousand Dollars ($1,190,000). From April 1, 2005 through June 30, 2007, you will be paid bi-weekly at a base salary that annualizes to Twenty Five Thousand Dollars ($25,000) per year for your role as an advisor to Starbucks during the employment Term.

In the event that you die before June 30, 2007, Starbucks will pay your estate a single sum equal to the unpaid salary you would have received through June 30, 2007.

Bonus

As determined in accordance with the terms of the Executive Management Bonus Plan (the “EMB Plan”), your FY04 bonus payout will be paid to you in December 2004.

Depending upon Starbucks performance and in accordance with the terms of the EMB Plan, you will be paid a pro rated bonus for your six months performance in FY05 as Starbucks president and chief executive officer. The FY05 bonus will be paid to you in December 2005.

Both your FY04 and FY05 bonuses are subject to the approval of Starbucks Compensation and Management Development Committee (the “Compensation Committee”) and of the independent members of the Starbucks Board of Directors.

Stock Options

Subject to the approval of the Compensation Committee and of the independent members of the Starbucks Board of Directors, you will receive in November 2004 your full stock option grant as Starbucks president and chief executive officer of 500,000 shares. The options will be granted pursuant to the terms of the Starbucks Corporation Amended and Restated Key Employee Stock Option Plan – 1994, as amended (the “Key Employee Plan”). Your options will continue vesting during the Term in accordance with the schedules set forth in your various option agreements. Any options that are not exercisable on June 30, 2007 will automatically vest on that date. For your convenience, Schedule 1 is attached hereto showing when your options will vest.

Benefits

From November 29, 2004 through March 31, 2005, you will enjoy all of your current benefits as Starbucks president and chief executive officer. From April 1, 2005 through June 30, 2007, you will opt out of all Starbucks benefit programs (including, but not limited to, medical, life insurance, 401(k), etc.) and have no access to the Company airplane unless you are traveling with the president and chief executive officer or the chairman and chief global strategist or if you are invited to travel with a group of Starbucks partners on a specific business trip.

Termination

Starbucks may terminate this Agreement if you are unable to perform your duties because of physical or mental disability. This Agreement may also be terminated “for cause” to include, but not be limited to, your unreasonable refusal to perform your duties or any material violation of Starbucks Standards of Business Conduct. You may also terminate this Agreement before June 30, 2007 by providing Starbucks with written notice of your resignation. In the event you resign, then Starbucks will pay you through the end of the workweek in which Starbucks receives notice of your resignation.

Expenses and Administrative Support

Starbucks shall reimburse you for all reasonable and customary expenses incurred by you in performing your duties, including, but not limited to, reasonable travel expenses. To assist you in your advisory role, Starbucks will continue to provide an office, computer, cell phone and administrative and secretarial assistance as you reasonably require in performance of your

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Starbucks duties. In addition, you will continue to have access to the building and parking garage. The monthly parking garage fee will be deducted from your paychecks.

Assignment

Your rights and duties under this Agreement are personal to you and are not assignable to others. Starbucks may assign its rights under this Agreement in connection with any merger or consolidation of Starbucks or any sale of all or any portion of Starbucks assets, provided that any such successor or assignee expressly assumes in writing Starbucks obligations under this Agreement.

Governing Law

This Agreement will be governed by the laws of the State of Washington.

Entire Agreement

This Agreement contains the sole employment agreement between you and Starbucks and supersedes any prior arrangements or understandings regarding your Starbucks employment.

To confirm your agreement to the terms and conditions of your employment, please countersign both copies of this letter below and return one copy to each of us. Thank you for your continued contributions to the Company’s success.

Warm regards,

/s/ Howard Schultz	/s/ Barbara Bass
Howard Schultz	Barbara Bass
chairman & chief global strategist	Chair, Compensation & Management Development Committee

     I agree to the terms and conditions of my employment agreement as set forth in the foregoing letter.

/s/ Orin C. Smith

Orin C. Smith

December 8, 2004

Dated

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Schedule 1
To Orin C. Smith
Employment Agreement

ORIN C. SMITH
STOCK OPTION VESTING

Options Granted Prior to November 20, 2003

• No retirement provision applies

• Your options continue to vest according to the terms of your agreements (i.e., over 3 years), and will all be vested by October 2005 according to the terms of those agreements

• You will have 3 months from your separation/retirement date (i.e., September 30, 2007) to exercise your vested options — - this also applies to all of the options that you have previously gifted

• Nothing in this Employment Agreement extends your right to exercise your options beyond the 10-year term limitation set forth in your option agreements

Options Granted on or after November 20, 2003

• Until June 30, 2007, your stock options continue to vest according to the terms of your various option agreements

• The retirement provision applies when your employment ends on June 30, 2007 (i.e., any options that are not exercisable on that date will automatically vest)

• You have 36 months from June 30, 2007 (i.e., June 30, 2010) to exercise these options

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