PEETS COFFEE & TEA INC
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>5
<FILENAME>doc9.txt
<TEXT>


                               PEET'S COFFEE & TEA
                             KEY EMPLOYEE AGREEMENT
                                       FOR
                      VICE PRESIDENT OF INFORMATION SYSTEMS

     This  Key  Employee  Agreement ("Agreement") is entered into as of the 17th
day  of  December,  1999,  by and between Mike Cloutier ("Executive") and PEET'S
COFFEE  &  TEA,  (the  "Company"),  a  Washington corporation and a wholly-owned
subsidiary  of  Peet's  Companies,  Inc.  (the  "Parent").

WHEREAS, the Company desires to continue 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
Companies,  Inc.  Change  of  Control  Option  Acceleration  Plan  (the  "Option
Acceleration  Plan");  and

WHEREAS,  Executive wishes to continue 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 continue to employ Executive in the position of vice president
of  information  systems  and  Executive  hereby  accepts  continued  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  continue to 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").


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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.

2.     COMPENSATION.

2.1     SALARY.  Executive  shall  continue  to  receive for services to be
rendered  hereunder  an  annualized  base salary of 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  to participate in the Company's
executive  level  bonus  plan  throughout the duration of Executive's employment
with  the  Company.
     (A)     EXECUTIVE'S  PERFORMANCE.  The  amount  of  Executive's  bonus will
depend  upon  Executive's  performance  with respect to certain measurable goals
established  by  the  Company.
     (B) COMPANY PROFITABILITY. The amount of Executive's bonus will also depend
on  attainment  by the Company of its planned financial objectives for the bonus
year.
     (C)  DETERMINATION  OF  BONUS.  The  amount  of  Executive's  bonus will be
determined  after  the  close of the Company's fiscal year and after the Company
has  received  its  audited  financial  statement  for  such  fiscal year. To be
eligible  to  receive  a  bonus,  Executive  must  remain in employment with the
Company  throughout  the  entire  fiscal  year,  except  as  provided in the Key
Employee  Plan.  For  the  Company's  1999 fiscal year, the amount of such bonus
shall  not  exceed  thirty  percent  (30%)  of  Executive's then current salary.
     (D)  NO  GUARANTEED  BONUS.  Notwithstanding  the  foregoing,  no  bonus 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  and  the Company each acknowledge that
Executive's  outstanding  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  Cause  or  by  resignation  in  the  absence  of  a  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


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Options  and  the  Parent's  applicable  stock  option  plans,  unless otherwise
provided  in  the  Key  Employee  Plan  or  the  Option Acceleration Plan.  Upon
involuntary  termination  of Executive's employment by the Company without Cause
or  voluntary  termination by the Executive due to Constructive 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  Peet's  Companies,  Inc.  1997  Equity  Incentive  Plan, a copy of which is
available  upon  Executive's  request.

2.4     STANDARD  COMPANY  BENEFITS.  Executive shall continue to 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.

2.5     SEVERANCE  AND  CHANGE  OF  CONTROL  PLANS.  Executive  is  eligible for
participation in, and benefits pursuant to, the Key Employee Plan and 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


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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.
     (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


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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
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


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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.

5.3     SEVERANCE  BENEFITS.
     (A)     PLAN  BENEFITS.  In  the  event  the Company terminates Executive's
employment  without  Cause  or  if  Executive terminates his employment due to a
Constructive Termination, Executive shall be eligible for the severance benefits
provided  pursuant  to  a Covered Termination under the Key Employee Plan.  This
Section  5.3(a)  shall  not  apply  if Executive's employment is terminated in a
Change  of  Control Termination or due to death or Disability (as such terms are
defined  in  the  Key  Employee  Plan).
     (B)  STOCK  OPTIONS.  In  the  event  the  Company  terminates  Executive's
employment  without  Cause  or  if  Executive terminates his employment due to a
Constructive  Termination,  Executive's  outstanding  Options  shall  have their
vesting  accelerated  in  full so as to become one hundred percent (100%) vested
and  fully  exercisable as of the date of termination. This Section 5.3(b) shall
not  apply  if Executive employment is terminated due to death or Disability (as
such  term  is  defined  in  the  Key  Employee  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


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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,  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


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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
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.     INTENTIONALLY  DELETED.

8.     NONINTERFERENCE.
While  employed  by the Company, and for two (2) years immediately following the
Termination  Date,  Executive  agrees  not to interfere with the business of the
Company.

8.1     EMPLOYEES.  Executive  shall  not  solicit,  attempt  to  solicit,
induce,  or  otherwise cause any employee of the Company to terminate his or her
employment  in order to become an employee, consultant or independent contractor
to  or  for  any  competitor  of  the  Company.

8.2     CUSTOMERS.  Executive  shall  not  directly  or  indirectly  solicit the
business  of any customer of the Company which at the time of termination or one
(1)  year  immediately  prior thereto was listed on the Company's customer list.

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")


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<PAGE>


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 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 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.


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<PAGE>


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
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.

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

PEET'S  COFFEE  &  TEA           EXECUTIVE
By: /s/ Christopher P. Mottern   /s/  Michael  Cloutier
                                 Name:  Michael  Cloutier
                                 Title:  Vice  President,  Information  Systems
Date:  January  20,  2000        Accepted  and  agreed  this
                                 20th  day  of  January  ,  2000


                                       10
<PAGE>


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  Coffee  &  Tea  (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 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  COFFEE  &  TEA


                                       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
<PAGE>



</TEXT>
</DOCUMENT>
