<PAGE>

                                                                   EXHIBIT 10.20

                              PEET'S COFFEE & TEA

                            KEY EMPLOYEE AGREEMENT
                                      for
                           VICE PRESIDENT MARKETING

          This Key Employee Agreement ("Agreement") is entered into as of the
4th day of January, 1999, by and between William Lilla ("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, marketing 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").

              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.

                                       1.
<PAGE>

          2.  Compensation.

              2.1  Salary. Executive shall continue to receive for services to
be rendered hereunder an annualized base salary of $155,000 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
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.
<PAGE>

              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
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.

                                       3.
<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
results in or is intended to result in personal enrichment at the expense of the
Company; (ii) material breach

                                       4.
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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.

              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

                                       5.
<PAGE>

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 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

                                       6.
<PAGE>

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
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.  (Section deleted from original)

          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.

                                       7.
<PAGE>

              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  (Section deleted from original)

          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 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.

                                       8.
<PAGE>

              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 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.

                                       9.
<PAGE>

          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/ William Lilla
    --------------------------        -----------------
    Name
    Title
Date: March 5, 1999                   Accepted and agreed this
      -------------
                                      5th day of March, 2000.
                                      -          -----  ----

                                      10.
<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

                                      11.
<PAGE>

by a writing signed by both me and a duly authorized officer of the Company.

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


_________________________             ________________________________
     Date                             [Employee]

March 5, 2000                         /s/ Christopher P. Mottern
-------------------------             --------------------------------
     Date                             Peet's Coffee & Tea

                                      12.