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Sample Business Contracts

Key Employee Agreement - Peet's Coffee & Tea Inc. and Bruce Schroder

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                         PEET'S OPERATING COMPANY, INC.
                             KEY EMPLOYEE AGREEMENT
                                       FOR
                            VICE PRESIDENT, SPECIALTY

     This Key Employee Agreement ("Agreement") is entered into as of the 9th day
of  June, 2003, by and between Bruce Schroder ("Executive") and PEET'S OPERATING
COMPANY,  INC.  (the  "Company"),  a  Washington  corporation and a wholly-owned
subsidiary  of  Peet's  Coffee  &  Tea,  Inc.  (successor  in interest to PEET'S
COMPANIES,  INC.)  (the  "Parent").

WHEREAS, the Company desires to employ Executive to provide personal services to
the  Company,  and  wishes  to  provide  Executive with certain compensation and
benefits  in  return  for  his  services;

WHEREAS,  the Company has adopted the Peet's Coffee & Tea Key Employee Severance
Benefit  Plan  (the  "Key  Employee Plan") and the Parent has adopted the Peet's
Coffee  &  Tea, Inc. (as successor in interest to Peet's Companies, Inc.) Change
of  Control  Option  Acceleration  Plan  (the  "Option  Acceleration Plan"); and

WHEREAS,  Executive  wishes  to  be employed by the Company and provide personal
services  to  the  Company  in  return  for  certain  compensation and benefits,
including  the  benefits  provided  under  the  Key Employee Plan and the Option
Acceleration  Plan;

NOW,  THEREFORE, in consideration of the mutual promises and covenants contained
herein,  it  is  hereby  agreed  by  and  between the parties hereto as follows:

1.     EMPLOYMENT  BY  THE  COMPANY.

     1.1     TITLE AND RESPONSIBILITIES.  Subject to terms set forth herein, the
Company  agrees to employ Executive in the position of vice president, specialty
and Executive hereby accepts employment effective as of the date set forth above
(the "Effective Date").   During his employment with the Company, Executive will
devote his best efforts and substantially all of his business time and attention
(except  for  vacation  periods  as  set  forth herein and reasonable periods of
illness  or  other  incapacity  permitted  by  the  Company's general employment
policies)  to  the  business  of  the  Company.

1.2     EXECUTIVE  POSITION.  Executive  will serve in an executive capacity and
shall  perform  such  duties as are customarily associated with his then current
title,  consistent  with  the  Bylaws  of  the  Company  and  as required by the
Company's  or the Parent's Board of Directors, as the case may be (the "Board").

1.3     COMPANY  EMPLOYMENT  POLICIES.  The  employment relationship between the
parties  shall also be governed by the general employment policies and practices
of  the  Company,  including  those  relating  to  protection  of  confidential
information  and  assignment  of  inventions, except that when the terms of this

Agreement  differ  from or are in conflict with the Company's general employment
policies  or  practices,  this  Agreement  shall  control.

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2.     COMPENSATION.

     2.1     SALARY.  Executive  shall  receive  for  services  to  be  rendered
hereunder  the base salary specified in that certain employment letter dated May
29,  2003  (the  "Employment  Letter"),  a  copy of which is attached hereto and
incorporated  by  this  reference  herein.  Such  salary  shall  be payable on a
biweekly  basis.  Executive  will  be  considered  for  annual increases in base
salary  in  accordance with Company policy and subject to review and approval by
the  Compensation  Committee  of  the  Board  (the  "Compensation  Committee").

2.2     BONUS.  Executive  shall  be  eligible for a bonus for the calendar year
2003,  in  the  form of a grant of options to purchase stock of the Parent, on a
pro  rata  basis in an amount to be determined by the Chief Executive Officer of
the  Company  pursuant  to  the  executive  level  bonus  plan in effect for the
calendar  year  2003.  Executive may be eligible to participate in the Company's
executive  level  bonus  plan,  if  any,  throughout the duration of Executive's
employment  with  the Company, solely upon the discretion of the Chief Executive
Officer  and  the  Board.  No  bonus  other  than as specified in the Employment
Letter  is guaranteed to Executive.  Any bonus is subject to the approval of the
Board, which retains the authority to review, grant, deny or revise any bonus in
its  sole  discretion.

2.3     STOCK  OPTIONS.   Executive  will receive an initial grant of options to
purchase  stock  of the Parent in the amount specified in the Employment Letter,
the  terms  of  such  options  to be governed by the terms and conditions of the
Parent's  applicable  stock  option  plan  pursuant  to  which  such options are
granted.  Executive and the Company each acknowledge that Executive's options(s)
to  purchase  stock  of  the  Parent  (the "Options") shall remain in effect and
continue  to  vest  during the period of Executive's employment with the Company
pursuant  to  the terms of the Options; provided, however, that upon termination
of  Executive's  employment  with  the  Company for any reason (except Change of
Control  Termination),  including but not limited to a termination for Cause, by
resignation  in  the  absence  of  a  Constructive  Termination,  involuntary
termination of Executive's employment by the Company without Cause, or voluntary
termination  by the Executive due to Constructive Termination, the Options shall
cease  vesting  as  of  the  termination  or resignation date and be exercisable
thereafter only pursuant to the terms of the Options and the Parent's applicable
stock  option  plans,  unless otherwise provided in the Key Employee Plan or the
Option  Acceleration  Plan.  Upon  a  Change of Control Termination, all Options
held  by  Executive shall have their vesting accelerated in full so as to become
one  hundred percent (100%) vested and immediately exercisable in full as of the
date  of  such  termination.  Subject  to the Compensation Committee's approval,
Executive will be considered for additional grants of options to purchase shares
of  the  Parent,  pursuant to the terms and conditions set forth in the Parent's
2000  Equity  Incentive  Plan,  a  copy  of  which is available upon Executive's
request  or  any  successor  plan.

2.4     STANDARD  COMPANY  BENEFITS.  Executive  shall be entitled to all rights
and  benefits  for  which  he  is eligible under the terms and conditions of the
standard Company benefits and compensation practices which may be in effect from
time  to  time  and  provided  by  the  Company  to  its  employees  generally.

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<PAGE>


2.5     SEVERANCE  AND  CHANGE  OF  CONTROL  PLANS.  Executive  is  eligible for
participation  in,  and  benefits  pursuant  to, (i) the Key Employee Plan after
Executive  has  been  employed by the Company for a period of one hundred eighty
(180)  consecutive  days,  and  (ii)  the  Option  Acceleration Plan.  Executive
acknowledges  receipt  of  a  copy  of  the  Key  Employee  Plan  and the Option
Acceleration  Plan.  Pursuant  to  the  Key  Employee  Plan,  Executive shall be
eligible  to participate in an outplacement program for up to six (6) months, at
a  cost not exceeding ten thousand dollars ($10,000.00), provided, however, that
the  provider  of such outplacement program must be reasonably acceptable to the
Company  and  Executive  provides  to the Company adequate proof of the expenses
incurred.

3.     CONFIDENTIAL  INFORMATION,  RIGHTS  AND  DUTIES.

     3.1     AGREEMENT.

     (A)     CONFIDENTIAL  INFORMATION.  Executive  specifically  agrees that he
shall not at any time, either during or subsequent to the term of the Employee's
employment  with the Company, in any fashion, form or manner, either directly or
indirectly,  unless  expressly  consented  to  in  writing  by the Company, use,
divulge,  disclose  or  communicate  to  any  person  or entity any confidential
information  of any kind, nature or description concerning any matters affecting
or  relating  to the business of the Company, including, but not limited to, the
Company's  sales  and  marketing  methods,  programs  and related data, or other
written  records  used  in  the  Company's  business;  the  Company's  computer
processes,  programs and codes; the names, addresses, buying habits or practices
of  any  of  its  clients or customers; compensation paid to other employees and
independent  contractors  and  other  terms  of  this  employment or contractual
relationships; or any other confidential information of, about or concerning the
business  of  the  Company, its manner of operations, or other data of any kind,
nature  or description.  The parties to this Agreement hereby stipulate that, as
between  them,  the  above  information  and  items  are important, material and
confidential  trade  secrets that affect the successful conduct of the Company's
business and its good will, and that any breach of any term of this section is a
material  breach  of  this  Agreement.  All  equipment,  notebooks,  documents,
memoranda,  reports,  files,  samples,  books,  correspondence,  lists  or other
written  and  graphic  records,  and  the like, including tangible or intangible
computer  programs,  records  and data, affecting or relating to the business of
the Company, which the Employee might prepare, use construct, observe, posses or
control,  shall  be  and  shall  remain  the  Company's  sole  property.

(B)     EXCLUSIVE  PROPERTY.  Executive agrees that all business procured by the
Executive  while  employed  by the Company is and shall remain the permanent and
exclusive  property  of  the  Company.  Executive  further  agrees  that  the
relationship  with  the  Company  of  each  of  the  employees  and  independent
contractors  of  the  Company is a significant and valuable asset of the Company
and all such relationships shall at all times, both during and subsequent to the
termination  of  Executive's  employment,  be  treated as the sole and exclusive
property  of  the  Company.

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<PAGE>


(C)     NON-INTERFERENCE.  Any  interference  with  the  Company's  business,
property, confidential information, trade secrets, clients, customers, employees
or  independent contractors by the Executive or any of Executive's agents during
or after the term of Executive's employment shall be treated and acknowledged by
the  parties  as  a  material  breach  of  this  Agreement.

     3.2     REMEDIES.  Executive's  duties  under  this Section 3 shall survive
termination  of Executive's employment with the Company.  Executive acknowledges
that  a  remedy  at  law for any breach or threatened breach by Executive of the
provisions  of  the  Proprietary  Information  and Inventions Agreement would be
inadequate, and Executive therefore agrees that the Company shall be entitled to
injunctive  relief  in  case  of  any  such  breach  or  threatened  breach.

4.     OUTSIDE  ACTIVITIES.

     4.1     ACTIVITIES.  Except  with  the  prior written consent of the Board,
Executive will not during his employment with the Company undertake or engage in
any  other  employment,  occupation  or  business enterprise, other than ones in
which  Executive  is  a  passive  investor.  Executive  may  engage in civic and
not-for-profit activities so long as such activities do not materially interfere
with  the  performance  of  his  duties  hereunder.

4.2     INVESTMENTS  AND  INTERESTS.  Executive agrees not to acquire, assume or
participate  in,  directly  or  indirectly, any position, investment or interest
known  by  him  to  be  adverse  or antagonistic to the Company, its business or
prospects,  financial  or  otherwise.

4.3     NON-COMPETITION.  During his employment by the Company, except on behalf
of  the  Company,  Executive  will  not  directly  or  indirectly, whether as an
officer,  director, stockholder, partner, proprietor, associate, representative,
consultant,  or  in  any  capacity  whatsoever  engage  in,  become  financially
interested  in,  be  employed  by or have any business connection with any other
person,  corporation,  firm,  partnership  or other entity whatsoever which were
known  by him to compete directly with the Company, throughout the world, in any
line  of  business  engaged  in  (or  planned  to be engaged in) by the Company.

5.     TERMINATION  OF  EMPLOYMENT.

     5.1     TERMINATION  WITH  OR  WITHOUT  CAUSE.

     (A)     AT-WILL  EMPLOYMENT.  Executive's  relationship with the Company is
at-will.  The  Company  shall have the right to terminate Executive's employment
with  the  Company at any time with or without Cause and with or without notice.

(B)     DEFINITION.  For  purposes of this Agreement, "Cause" will be determined
in  the  sole  discretion  of  the  Company, based upon its objective reasonable
belief  that  Executive  has  committed or there has occurred one or more of the
following:  (i)  conviction of, a guilty plea with respect to, or a plea of nolo
contendere  to a charge that the Executive has committed a felony under the laws
of  the  United  States  or  of  any state or a crime involving moral turpitude,
including,  but  not  limited  to,  fraud, theft, embezzlement or any crime that

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<PAGE>


results in or is intended to result in personal enrichment at the expense of the
Company;  (ii)  material  breach  of  any  agreement  entered  into  between the
Executive  and  the  Company  that impairs the Company's interest therein; (iii)
willful  misconduct,  significant  failure  of  the  Executive  to  perform  the
Executive's duties, or gross neglect by the Executive of the Executive's duties;
or  (iv)  engagement  in  any  activity  that constitutes a material conflict of
interest  with  the  Company.

(C)     TERMINATION  FOR CAUSE. If the Company terminates Executive's employment
at  any  time  for  Cause,  Executive's  salary  shall  cease  on  the  date  of
termination, and Executive will not be entitled to severance pay, pay in lieu of
notice  or  any  other  such  compensation.

     5.2     VOLUNTARY  OR  MUTUAL  TERMINATION.

     (A)     VOLUNTARY  TERMINATION.  Executive  may  voluntarily  terminate his
employment  with  the  Company  at any time, after which no further compensation
will  be  paid to Executive, except as specifically set forth herein, in the Key
Employee  Plan  or  in  the  Option  Acceleration  Plan.

(B)     NO  SEVERANCE  PAY.  In  the  event Executive voluntarily terminates his
employment other than due to a Constructive Termination, he will not be entitled
to  severance  pay, pay in lieu of notice or any other such compensation, except
as  provided  in  the  Key  Employee  Plan  or  the  Option  Acceleration  Plan.

(C)     DEFINITION.  For  purposes of this Agreement, "Constructive Termination"
shall  mean  any  one  of  the  following  events  which  occurs on or after the
Effective  Date  of this Agreement: (i) reduction of the Executive's annual base
salary  by  greater than ten percent (10%), except to the extent the annual base
salary of all other executive officers of the Company is similarly reduced; (ii)
material  reduction  in  the package of welfare benefit plans, taken as a whole,
provided  to  the Executive (except that employee contributions may be raised to
the  extent of any cost increases imposed by third parties) or any action by the
Company which would materially adversely affect the Executive's participation or
reduce  the  Executive's  benefits  under  any  such  plans; (iii) change in the
Executive's  responsibilities,  authority,  title,  reporting  relationship  or
offices  that  results  in  a  significant  diminution  of  position  under  the
circumstances,  excluding  for  this  purpose  an  isolated,  insubstantial  and
inadvertent  action  not  taken  in  bad  faith which is remedied by the Company
promptly  after  notice thereof is given by the Executive; (iv) request that the
Executive  relocate to a work site that is more than thirty-five (35) miles from
his  prior  work site, unless the Executive accepts such relocation opportunity;
(v)  any material breach by the Company of its obligations under this Agreement;
or (vi) any failure by the Company to obtain the assumption of this Agreement by
any  successor  or  assign  of  the  Company.

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<PAGE>


     5.3     SEVERANCE  BENEFITS.  In  the  event  (i)  the  Company  terminates
Executive's  employment  after  the  date  that is one hundred eighty (180) days
after the Effective Date (the "Severance Plan Effective Date") without Cause, or
if  Executive  terminates his employment after the Severance Plan Effective Date
due  to a Constructive Termination, or (ii) Executive's employment is terminated
in  a  Change  of  Control  Termination  (as  defined in the Key Employee Plan),
Executive  shall  be  eligible for the severance benefits provided pursuant to a
Covered  Termination (if (i)) or pursuant to a Change of Control Termination (if
(ii)),  as  applicable,  under  the  Key Employee Plan (as identified in the Key
Employee Plan's Schedule of Benefits for the Company's Vice Presidents), subject
to  Executive's signing and making effective a Release Agreement as set forth in
Section  9 below.  This Section 5.3 shall not apply if Executive's employment is
terminated  (i)  prior to the Severance Plan Effective Date or (ii) due to death
or  Disability  (as  such  terms are defined in the Key Employee Plan), in which
event  Executive  shall  not  be  entitled  to any severance benefits under this
Agreement  or  the  Key  Employee  Plan.

     Notwithstanding anything to the contrary set forth in this Agreement or the
Key Employee Plan, in the event Executive is eligible for the severance benefits
provided  pursuant to a Covered Termination, Executive shall only be entitled to
receipt  of a Pro Rata Bonus if the Company's executive level bonus plan for the
year  in  which  such  termination occurs is a cash bonus plan (as distinguished
from  a  stock  option  plan).

     5.4     CESSATION.  If Executive violates any provision of Sections 3, 7 or
8  of this Agreement, any severance payments or other benefits being provided to
Executive  will  cease  immediately,  and  Executive will not be entitled to any
further  compensation  from  the  Company.

6.     CHANGE  OF  CONTROL.

     6.1     DEFINITION.  For purpose of this Agreement, Change of Control means
the  occurrence  of  any of the following:  (i) a sale of sixty percent (60%) or
more  of the assets of the Company or the Parent; (ii) a merger or consolidation
involving  the  Company  or the Parent in which the Company or the Parent is not
the  surviving  corporation and the shareholders of the Parent immediately prior
to  the  completion  of such transaction hold, directly or indirectly, less than
fifty  percent  (50%)  of  the  beneficial ownership (within the meaning of Rule
13d-3  promulgated  under  the  Securities Exchange Act of 1934, as amended (the
"Exchange  Act"),  or  comparable  successor  rules)  of  the  securities of the
surviving  corporation  (excluding  any  shareholders who possessed a beneficial
ownership  interest in the surviving corporation prior to the completion of such
transaction);  (iii)  a  reverse  merger  involving the Company or the Parent in
which  the  Company  or  the  Parent,  as  the  case  may  be,  is the surviving
corporation  but  the shares of  common stock of the Company or the Parent  (the
"Common  Stock")  outstanding  immediately preceding the merger are converted by
virtue  of  the  merger  into other property, whether in the form of securities,
cash  or otherwise, and the shareholders of the Parent, immediately prior to the
completion  of  such  transaction  hold, directly or indirectly, less than fifty
percent  (50%)  of  the  beneficial  ownership (within the meaning of Rule 13d-3
promulgated  under  the  Exchange  Act,  or  comparable  successor rules) of the
surviving  entity  or,  if  more  than  one entity survives the transaction, the
controlling  entity;  (iv)  an acquisition by any person, entity or group within
the  meaning  of  Section  13(d)  or 14(d) of the Exchange Act or any comparable
successor  provisions  (excluding  any  employee benefit plan, or related trust,

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sponsored  or  maintained  by the Company or an Affiliate of the Company) of the
beneficial  ownership  (within  the  meaning of Rule 13d-3 promulgated under the
Exchange  Act, or comparable successor rules) of securities of the Company or of
the  Parent  representing  at  least  fifty percent (50%) of the combined voting
power  entitled  to vote in the election of directors; or, (v) in the event that
the individuals who, as of the Effective Date, are members of the Parent's Board
of  Directors  (the  "Incumbent  Board"),  cease for any reason to constitute at
least fifty percent (50%) of the Parent's Board of Directors.  (If the election,
or  nomination  for  election by the Parent's shareholders, of any new member of
the  Parent's Board of Directors is approved by a vote of at least fifty percent
(50%) of the Incumbent Board, such new member of the Parent's Board of Directors
shall  be  considered  as a member of the Incumbent Board.)  Notwithstanding the
foregoing,  for  the  purposes of this Agreement and with respect to any and all
clauses  of  this  Section  of this Agreement, an initial public offering of the
securities  of the Company (an "IPO") or any transactions or events constituting
part  of  an IPO shall not be deemed to constitute or in any way effect a Change
of  Control.

6.2     CHANGE OF CONTROL TERMINATION.  In the event Executive's employment with
the  Company  terminates due to a Change of Control Termination (as such term is
defined  in  the  Key  Employee  Plan), then Executive shall be eligible for the
benefits  provided  under  a  Change  of Control Termination pursuant to the Key
Employee  Plan.

6.3     STOCK  OPTIONS.  In  the  event  of  a  Change  of  Control, Executive's
outstanding  Options shall have their vesting accelerated to the extent provided
in  the  Option  Acceleration Plan or in applicable option agreements evidencing
such  outstanding  Options.

6.4     PARACHUTE  PAYMENTS.  In  the  event that the severance, acceleration of
stock  options  and  other  benefits provided for in this Agreement or otherwise
payable  to  Executive (i) constitute "parachute payments" within the meaning of
Section  280G (as it may be amended or replaced) of the Internal Revenue Code of
1986,  as  amended  or  replaced (the "Code") and (ii) but for this Section 6.4,
would be subject to the excise tax imposed by Section 4999 (as it may be amended
or replaced) of the Code (the "Excise Tax"), then Executive's benefits hereunder
shall  be  either

     (A)     provided  to  Executive  in  full,  or

(B)     provided  to  Executive only as to such lesser extent which would result
in  no  portion  of  such  benefits  being  subject  to  the  Excise  Tax,
whichever  of the foregoing amounts, taking into account the applicable federal,
state  and  local  income  taxes  and  the Excise Tax, results in the receipt by
Executive  on  an  after-tax  basis,  of  the  greatest  amount  of  benefits,
notwithstanding  that  all or some portion of such benefits may be taxable under
the Excise Tax. Unless the Company and Executive otherwise agree in writing, any
determination  required  under this Section 6.4 shall be made in writing in good

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faith  by the Company's independent public accountants  (the "Accountants").  In
the  event  of  a  reduction in benefits hereunder, Executive shall be given the
choice  of  which  benefits  to  reduce. For purposes of making the calculations
required  by  this  Section 6.4, the Accountants may make reasonable assumptions
and  approximations concerning applicable taxes and may rely on reasonable, good
faith  interpretations  concerning  the application of the Code. The Company and
Executive shall furnish to the Accountants such information and documents as the
Accountants  may  reasonably request in order to make a determination under this
Section  6.4.  The  Company  shall bear all costs the Accountants may reasonably
incur  in  connection  with  any  calculations contemplated by this Section 6.4.

     7.     RESTRICTIVE  COVENANT.

     In the event Executive's employment with the Company is terminated due to a
Change  in  Control  Termination  (as  such  term is defined in the Key Employee
Plan),  then  for  two  (2)  years  immediately  following the termination date,
Executive  shall  not, without first obtaining the prior written approval of the
Company,  directly  or  indirectly  engage  or  prepare  to engage in the coffee
business in any way or in any place, or directly or indirectly engage or prepare
to  engage  in  any  other activities in competition with the Company, or accept
employment  or  establish  a business relationship with a business engaged in or
preparing  to  engage  in  competition  with  the  Company,  in any geographical
location  in  which  the  Company  as of the termination date either conducts or
plans  to  conduct business.  If Executive violates this Section 7, it is agreed
that any severance benefits otherwise due to be received by Executive after such
violation  will immediately cease, and further that (a) despite the cessation of
such  benefits,  the  release  provided  by  Executive  in  connection with such
benefits  will  remain  in full force and effect and (b) the Company's remedy of
cessation  of  payment  of  severance  benefits  to  Executive is non-exclusive.

     8.     NONINTERFERENCE.

     While  employed by the Company, and for two (2) years immediately following
the  termination  of  Executive's employment, Executive shall not to directly or
through  others  solicit,  attempt  to  solicit,  induce, or otherwise cause any
employee  or  independent  contractor  or  consultant  to  terminate  his or her
relationship  with  the  Company  in  order to become an employee, consultant or
independent  contractor to or for any other person or entity.  For two (2) years
immediately following the termination of Executive's employment, Executive shall
not directly or indirectly solicit (for a business competitive with the Company)
the  business of any customer of the Company that at the time of the termination
of  Executive's  employment or one (1) year immediately prior thereto was listed
on  the  Company's  customer  list.  If Executive violates this Section 8, it is
agreed  that  any  severance  benefits otherwise due to be received by Executive
after  such  violation  will immediately cease, and further that (a) despite the
cessation of such benefits, the release provided by Executive in connection with
such  benefits will remain in full force and effect and (b) the Company's remedy
of  cessation  of  payment  of severance benefits to Executive is non-exclusive.

9.     RELEASE.   In  exchange  for  the  benefits and other consideration under
this  Agreement  to  which  Executive would not otherwise be entitled, Executive
shall enter into and execute a release substantially in the form attached hereto
as  Exhibit  A  (the  "Release") upon his termination of employment.  Unless the
Release  is executed by Executive and delivered to the Company within twenty-one
(21)  days  after  the  termination  of Executive's employment with the Company,
Executive shall not receive any severance benefits provided under this Agreement

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or under the Key Employee Plan.  Additionally, unless the Release is executed by
Executive  and  delivered  to  the Company within twenty-one (21) days after the
termination  of  Executive's  employment  with  the Company, the acceleration of
Executive's  Options  upon  a  Change of Control Termination as provided in this
Agreement shall not apply and Executive's Options in such event may be exercised
following  the date of Executive's termination only to the extent provided under
their  original  terms in accordance with the Peet's Companies, Inc. 1997 Equity
Incentive  Plan  (or  other applicable stock option plan), the applicable option
agreements  and  the  Option  Acceleration  Plan.

     10.     GENERAL  PROVISIONS.

     10.1     NOTICES.  Any  notices  provided  hereunder must be in writing and
shall  be  deemed  effective  upon  the  earlier of personal delivery (including
personal  delivery  by  facsimile transmission or the third day after mailing by
first class mail, to the Company at its primary office location and to Executive
at  his  address  as  listed  on  the  Company  payroll.

10.2     SEVERABILITY.  Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but  if  any  provision  of  this  Agreement  is  held to be invalid, illegal or
unenforceable  in  any  respect  under  any  applicable  law  or  rule  in  any
jurisdiction,  such  invalidity,  illegality or unenforceability will not affect
any  other  provision  or  any  other  jurisdiction,  but this Agreement will be
reformed,  construed  and  enforced  in  such  jurisdiction  as if such invalid,
illegal  or  unenforceable  provisions  had  never  been  contained  herein.

10.3     WAIVER.  If  either  party should waive any breach of any provisions of
this  Agreement,  he  or  it  shall  not  thereby  be  deemed to have waived any
preceding  or  succeeding  breach  of  the  same  or any other provision of this
Agreement.

10.4     COMPLETE  AGREEMENT.  This  Agreement,  together with Key Employee Plan
and  the  Option  Acceleration  Plan,  constitutes  the entire agreement between
Executive  and  the  Company  and  it  is  the  complete,  final,  and exclusive
embodiment  of  their  agreement  and  supersedes any prior agreement written or
otherwise  between Executive and the Company with regard to this subject matter.
It  is entered into without reliance on any promise or representation other than
those expressly contained herein, and it cannot be modified or amended except in
a  writing  signed  by  an  officer  of  the  Company.

10.5     COUNTERPARTS.  This Agreement may be executed in separate counterparts,
any  one of which need not contain signatures of more than one party, but all of
which  taken  together  will  constitute  one  and  the  same  Agreement.

10.6     HEADINGS.  The  headings  of  the  sections  hereof  are  inserted  for
convenience  only  and  shall  not  be deemed to constitute a part hereof nor to
affect  the  meaning  thereof.

10.7     SUCCESSORS  AND  ASSIGNS.  This Agreement is intended to bind and inure
to  the  benefit  of and be enforceable by Executive, the Company and the Parent

                                        9
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and  their  respective successors, assigns, heirs, executors and administrators,
except  that Executive may not assign any of his duties hereunder and he may not
assign  any  of his rights hereunder without the written consent of the Company,
which  shall  not  be  withheld  unreasonably.

10.8     ATTORNEY FEES.  If either party hereto brings any action to enforce his
or  its  rights  hereunder,  the  prevailing  party  in any such action shall be
entitled  to recover his or its reasonable attorneys' fees and costs incurred in
connection  with  such  action.

10.9     ARBITRATION.  To  provide  a mechanism for rapid and economical dispute
resolution,  you  and  the  Company  agree that any and all disputes, claims, or
causes  of  action, in law or equity, arising from or relating to this Agreement
(including  the  Release)  or  its  enforcement,  performance,  breach,  or
interpretation,  will  be  resolved,  to the fullest extent permitted by law, by
final,  binding,  and confidential arbitration held in San Francisco, California
and  conducted  by Judicial Arbitration & Mediation Services/Endispute ("JAMS"),
under its then-existing Rules and Procedures. Nothing in this Section 10.9 or in
this  Agreement  is intended to prevent either you or the Company from obtaining
injunctive relief in court to prevent irreparable harm pending the conclusion of
any  such  arbitration.

10.10     GOVERNING  LAW.  All  questions  concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California  as  applied  to  contracts  made and to be performed entirely within
California.

                                       10
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year  first  above  written.

PEET'S  OPERATING  COMPANY,  INC.          EXECUTIVE
By:  /s/  Patrick  J.  O'Dea               /s/  Bruce  Schoder
   -------------------------               -------------------
     Patrick  J.  O'Dea                    Bruce  Schroder
     President  and  CEO                   vice  president,  specialty


Date:  June  9,  2003                    Accepted  and  agreed  this
       --------------                    9th  day  of  June,  2003
                                         -------------------------


Exhibit  A  -  Release  Agreement
Exhibit  B  -  Peet's  Coffee  &  Tea  Key  Employee  Severance  Benefit  Plan
Exhibit  C  -  Peet's Companies, Inc. Change of Control Option Acceleration Plan


                                       11
<PAGE>

                                    EXHIBIT A

                                RELEASE AGREEMENT

I  understand  that  my  position  with  Peet's  Operating  Company,  Inc.  (the
"Company") terminated effective ___________, _____ (the "Separation Date").  The
Company has agreed that if I choose to sign this Agreement, the Company will pay
me  severance benefits (minus the standard withholdings and deductions) pursuant
to  the  terms of the Key Employee Agreement entered into as of the _____ day of
________,  ____  between  myself and the Company and the Peet's Coffee & Tea Key
Employee  Severance Benefit Plan and the Peet's Coffee & Tea, Inc. (as successor
in  interest  to  Peet's  Companies,  Inc.)  Change  of  Control  Stock  Option
Acceleration  Plan.  I  understand  that  I  am  not  entitled to this severance
payment  unless  I  sign  this Agreement.  I understand that in addition to this
severance,  the  Company  will  pay me all of my accrued salary and vacation, to
which  I  am  entitled  by  law.

In  consideration for the severance payment I am receiving under this Agreement,
I  agree  not  to  use  or disclose any of the Company's proprietary information
without  written  authorization  from  the  Company,  to  immediately return all
Company  property  and  documents  (including  all  embodiments  of  proprietary
information)  and all copies thereof in my possession or control, and to release
the  Company  and  its  officers,  directors,  agents,  attorneys,  employees,
shareholders,  and  affiliates  from  any  and all claims, liabilities, demands,
causes  of  action,  attorneys'  fees, damages, or obligations of every kind and
nature, whether they are known or unknown, arising at any time prior to the date
I  sign  this  Agreement.  This general release includes, but is not limited to:
all  federal  and  state  statutory  and common law claims, claims related to my
employment or the termination of my employment or related to breach of contract,
tort, wrongful termination, discrimination, wages or benefits, or claims for any
form  of  compensation.  In  releasing  claims  unknown  to  me at present, I am
waiving all rights and benefits under Section 1542 of the California Civil Code,
and  any  law  or  legal  principle  of  similar effect in any jurisdiction:  "A
GENERAL  RELEASE  DOES  NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT  TO  EXIST  IN  HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN  BY  HIM  MUST  HAVE  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

I  acknowledge  that  I  am  knowingly and voluntarily waiving and releasing any
rights  I  may  have  under  the federal Age Discrimination in Employment Act of
1967,  as amended ("ADEA").  I also acknowledge that the consideration given for
the waiver in the above paragraph is in addition to anything of value to which I
was  already  entitled.  I have been advised by this writing, as required by the
ADEA  that:  (a) my waiver and release do not apply to any claims that may arise
after  my signing of this Agreement; (b) I should consult with an attorney prior
to  executing  this  release;  (c)  I  have twenty-one (21) days within which to
consider this release (although I may choose to voluntarily execute this release
earlier);  (d)  I have seven (7) days following the execution of this release to
revoke  the  Agreement;  and  (e) this Agreement will not be effective until the
eighth  day  after  this Agreement has been signed both by me and by the Company
("Effective  Date").

This  Agreement  constitutes the complete, final and exclusive embodiment of the
entire  agreement  between  the Company and me with regard to the subject matter
hereof.  I  am  not relying on any promise or representation by the Company that
is  not  expressly  stated  herein.  This  Agreement  may  only be modified by a
writing  signed  by  both  me  and  a  duly  authorized  officer of the Company.

                                       12
<PAGE>


I  accept  and  agree  to  the  terms  and  conditions  stated  above:

     Date          [EMPLOYEE]

     Date          PEET'S  OPERATING  COMPANY,  INC.



                                       13
<PAGE>
                                    EXHIBIT B
                               PEET'S COFFEE & TEA
                       KEY EMPLOYEE SEVERANCE BENEFIT PLAN

                                       14
<PAGE>


                                    EXHIBIT C

   PEET'S COFFEE & TEA, INC. (SUCCESSOR IN INTEREST TO PEET'S COMPANIES, INC.)
                   CHANGE OF CONTROL OPTION ACCELERATION PLAN

                                       15