Document:

<PAGE>

                                                                   EXHIBIT 10.14

                                                                        No. CW-1

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.

THIS WARRANT AND CERTAIN OF THE SHARES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT
TO A REPURCHASE RIGHT IN FAVOR OF THE COMPANY AS SET FORTH HEREIN.

                      WARRANT TO PURCHASE 100,000 SHARES
                              OF COMMON STOCK OF
                            PEET'S COMPANIES, INC.
                        (Void after December 31, 2001)

     This certifies that HWJesse&Co or its assigns (the "Holder"), for value
received, is entitled to purchase from Peet's Companies, Inc., a Washington
corporation (the "Company"), having a place of business at 1400 Park Avenue,
Emeryville, California 94608, a maximum of 100,000 fully paid and nonassessable
shares (the "Warrant Shares") of the Company's Common Stock ("Common Stock") for
cash at a price of $15.00 per share (the "Stock Purchase Price") at any time or
from time to time up to and including 5:00 p.m. (Pacific time) on December 31,
2001 (the "Expiration Date"), upon surrender to the Company at its principal
office (or at such other location as the Company may advise the Holder in
writing) of this Warrant properly endorsed with the Subscription Form attached
hereto duly completed and signed and, if applicable, upon payment in cash or by
check of the aggregate Stock Purchase Price for the number of shares for which
this Warrant is being exercised determined in accordance with the provisions
hereof.  The Stock Purchase Price and the number of shares purchasable hereunder
are subject to adjustment and repurchase by the Company as provided in Sections
3 and 4, respectively, of this Warrant.

     This Warrant is subject to the following terms and conditions:

     1.  Exercise; Issuance of Certificates; Payment for Shares.

         1.1  General.  This Warrant is exercisable at the option of the holder
of record hereof, at any time or from time to time, up to the Expiration Date
for all or any part of the shares of Common Stock (but not for a fraction of a
share) which may be purchased hereunder. The Company agrees that the shares of
Common Stock purchased under this Warrant shall be and are deemed to be issued
to the Holder hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered, properly
endorsed, the completed, executed Subscription Form delivered and payment made
for such shares. Certificates for the shares of Common Stock so purchased,
together with any other securities or property to which the Holder hereof is
entitled upon such exercise, shall be delivered to the Holder hereof by the
Company at the Company's expense within a reasonable

                                       1.
<PAGE>

time after the rights represented by this Warrant have been so exercised. In
case of a purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder hereof and shall
be registered in the name of such Holder.

         1.2  Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Common Stock is
greater than the Stock Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly completed Subscription Form and
notice of such election, in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:

               X = Y (A-B)
                   -------
                      A

          Where     X =  the number of shares of Common Stock to be issued to
                         the Holder

                    Y =  the number of shares of Common Stock purchasable under
                         the Warrant or, if only a portion of the Warrant is
                         being exercised, the portion of the Warrant being
                         canceled (at the date of such calculation)

                    A =  the fair market value of one share of the Company's
                         Common Stock (at the date of such calculation)

                    B =  Stock Purchase Price (as adjusted to the date of such
                         calculation)

For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value per share shall be the per
share offering price to the public of the Company's initial public offering.

     2.  Shares to Be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of

                                       2.
<PAGE>

authorized but unissued Common Stock, or other securities and property, when and
as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares of Common Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
domestic securities exchange upon which the Common Stock may be listed;
provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) if the
total number of shares of Common Stock issuable after such action upon exercise
of all outstanding warrants, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding,
would exceed the total number of shares of Common Stock then authorized by the
Company's Amended and Restated Certificate of Incorporation.

     3.  Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.

         3.1  Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.

         3.2  Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

              (a)  Common Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution,

              (b)  any cash paid or payable otherwise than as a cash dividend,
or

              (c)  Common Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement, (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 3.1 above), then and in

                                       3.
<PAGE>

each such case, the Holder hereof shall, upon the exercise of this Warrant, be
entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of stock and other securities and property (including cash
in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had he been the holder of record
of such Common Stock as of the date on which holders of Common Stock received or
became entitled to receive such shares or all other additional stock and other
securities and property.

         3.3  Reorganization, Reclassification, Consolidation, Merger or Sale.
If any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, or other assets or property (an
"Organic Change"), then, as a condition of such Organic Change, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the value of the stock, securities or other assets or
property (determined in good faith by the Board of Directors of the Company)
issuable or payable with respect to one share of the Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Organic Change. In the event of any Organic
Change, appropriate provision shall be made by the Company with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation, merger or
sale unless, prior to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument reasonably
satisfactory in form and substance to the Holder, executed and mailed or
delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.

         3.4  Certain Events. If any change in the outstanding Common Stock of
the Company or any other event occurs as to which the other provisions of this
Section 3 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant

                                       4.
<PAGE>

upon exercise for the same aggregate Stock Purchase Price the total number,
class and kind of shares as he would have owned had the Warrant been exercised
prior to the event and had he continued to hold such shares until after the
event requiring adjustment.

         3.5  Notices of Change.

              (a)  Immediately upon any adjustment in the number or class of
shares subject to this Warrant and of the Stock Purchase Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying  the calculation of such adjustment.

              (b)  The Company shall give written notice to the Holder at least
10 business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or
distributions.

              (c)  The Company shall also give written notice to the Holder at
least 30 business days prior to the date on which an Organic Change shall take
place.

     4.  Repurchase Rights. The shares of Common Stock to be purchased pursuant
to this Warrant shall be subject to the repurchase rights of the Company set
forth in subparagraphs (a) and (b) below (the "Repurchase Right"):

              (a)  In the event the Company's engagement of HWJesse&Co pursuant
to the Advisory Engagement Letter between them dated December 9, 1996 (the
"Commencement Date") is terminated by either party, then the Company shall have
the right, exercisable at any time within ninety (90) days after the effective
date of such termination (the "Termination Date"), to repurchase from the
Holder, at the price of (i) $.01 per share in the case of unexercised Warrant
Shares or (ii) the Stock Purchase Price in the case of exercised Warrant Shares,
up to but not exceeding the number of Warrant Shares that remain subject to the
Repurchase Right as of the Termination Date pursuant to the provisions of
paragraph (b) below.

              (b)  Twenty-Five Thousand (25,000) Warrant Shares shall be exempt
from the Repurchase Right immediately upon issuance of this Warrant. The Company
may exercise its Repurchase Right as to the remaining Seventy-Five Thousand
(75,000) Warrant Shares as follows:

                   (i)  The Company may exercise its Repurchase Right with
respect to a portion of Twenty-Five Thousand (25,000) Warrant Shares determined
in accordance with the following formula:

                                    (12-N)
                                    ------
                                      12

When N equals the number of full months from the Commencement Date to the
Termination Date.

                                       5.
<PAGE>

                   (ii) In addition, the Company may exercise its Repurchase
Right with respect to a portion of Fifty Thousand (50,000) Warrant Shares
determined in accordance with the following formula:

                                    (50-N)
                                    ------
                                      50

Where N equals the number of full months from the Commencement Date to the
Termination Date.

              (c)  In the event the Holder effects a partial exercise of the
Warrant prior to the exercise of the Company's Repurchase Right, then the
Company shall exercise such Repurchase Right with respect to unexercised Warrant
Shares prior to exercised Warrant Shares.

              (d)  The Company shall be entitled to pay for any shares purchased
pursuant to its Repurchase Right at the Company's option in cash or by offset
against any indebtedness owing to the Company by Holder (including without
limitation any Note given in payment for the Warrant Shares).

              (e)  The Holder understands that any certificates representing
Warrant Shares issued prior to the expiration of the Company's Repurchase Right
will not be transferable until such expiration, will be held in escrow by the
Company and will bear a restrictive legend describing such restriction on
transfer and the Company's Repurchase Right.

     5.  Issue Tax. The issuance of certificates for shares of Common Stock upon
the exercise of the Warrant shall be made without charge to the Holder of the
Warrant for any issue tax (other than any applicable income taxes) in respect
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the then Holder of the
Warrant being exercised.

     6.  Closing of Books. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Common Stock issued or
issuable upon the exercise of any warrant in any manner which interferes with
the timely exercise of this Warrant.

     7.  No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.

                                       6.
<PAGE>

     8.  Warrants Transferable. Subject to compliance with applicable federal
and state securities laws and compliance by any transferee with all of the
provisions of this Warrant, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company, at the Company's option, and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.

     9.  Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.

     10.  Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

     11.  Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.

     12.  Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant. All of the covenants
and agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.

     13.  Descriptive Headings and Governing Law. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.

     14.  Lost Warrants. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.

                                       7.
<PAGE>

     15.  Fractional Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.

                     [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       8.
<PAGE>

     In Witness Whereof, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized, as of May 23, 1997.

                                    Peet's Companies, Inc.
                                    a Washington corporation

                                    By: /s/ Gerald Baldwin
                                        ---------------------------
                                            Gerald Baldwin
                                            Chairman

Accepted And Agreed To:

HWJesse&Co

/s/ H. William Jesse, Jr.
------------------------------
H. William Jesse, Jr.
President

                                       9.<PAGE>

                                                                   EXHIBIT 10.15

                  [LETTERHEAD OF HWJESSE & CO. APPEARS HERE]

09 December 1996

Mr. Gerald Baldwin, Chairman
Peet's Coffee & Tea
1310 - 65th Street
Emeryville, California 94608

Dear Jerry:

     This letter (the "Advisory Engagement Letter") will confirm that Peet's
Coffee & Tea ("PCT" or the "Company") has engaged HWJesse&Co ("HWJ&C") to be the
Company's on-going financial advisor.  We look forward to working with you to
develop and execute financial and business strategies to enhance shareholder
value at Peet's Coffee & Tea.

HWJ&C Activities

     In this Engagement, HWJ&C win, on an on-going basis:

     .    Act as the exclusive long-term financial advisor to the Company;

     .    Periodically meet with the Company's management and board to discuss
              the Company's operating strategy, competitive position, business
              and financial prospects and growth opportunities;

     .    Assist the Company in formulating strategic and financial plans
              designed to create long-term shareholder value and liquefying such
              value when appropriate;

     .    Assist in the development of capitalization plans which provide the
              capital resources necessary to accomplish the operating and
              strategic plans; and

     .    Assist the Company in developing appropriate marketing strategies and
              tactics to achieve the Company's objectives.

HWJ&C Compensation

     In return for the services contemplated herein for the period commencing 09
December 1996, HWJ&C's compensation (the "Advisory Fees") from the Company will
include:

     .    A monthly retainer of $5,000 beginning 09 December 1996, and payable
              on the 1st day of each month thereafter; and

     .    100,000 warrants (the "Warrants"), each with the right to purchase 1
              share of Company common stock (with standard antidilution
              adjustments for stock splits
<PAGE>

                                                                          Page 2

              and stock dividends) at an exercise price of $15.00 and an
              expiration date of 31 December 2001; all Warrants will have a net
              exercise provision and will be exercisable upon execution of this
              Engagement Letter, subject to two repurchase rights (the
              "Rights"): i) the right to repurchase 25,000 Warrants, which
              amount will decline ratably over the 12 months beginning 09
              December 1996, and ii) the right to repurchase 50,000 Warrants,
              which amount will decline ratably over the 50 months beginning 09
              December 1996. The Rights will have a repurchase price of $0.01
              per Warrant, and will be exercisable in the event of a Termination
              of this Engagement.

     .    The Company will reimburse HWJ&C for its reasonable out-of-pocket
              expenses (including reasonable fees and expenses of its legal
              counsel, if any) incurred in connection with this engagement. Such
              expenses shall not exceed $5,000 without prior approval from the
              Company. HWJ&-C will invoice the Company monthly for out-of-pocket
              expenses incurred.

Confidentiality

     In connection with this engagement HWJ&-C recognizes that certain
nonpublic, confidential, proprietary information (the "Confidential
Information") may be furnished to HWJ&C.

     HWJ&C agrees not to disclose any Confidential Information to any person who
is not a partner, officer or employee of HWJ&-C or counsel to HWJ&-C, or, except
for performance of services hereunder, use such Confidential Information, except
with the consent of PCT or pursuant to a subpoena or order issued by a court of
competent jurisdiction or by a judicial or administrative or legislative body or
committee.  HWJ&C represents that each of its partners, officers and employees
is formally apprised of his or her obligations concerning the confidentiality of
all client affairs and information.  In the event of any breach of
confidentiality by any partner, officer or employee of HWJ&-C, HWJ&C will assume
responsibility for such breach (indemnify and hold PCT harmless from any loss
(including the loss of the Proposed Transaction), damages, or claim related to
or resulting from such breach of confidentiality).

     In the event that HWJ&C receives a request to disclose any Confidential
Information under such subpoena or order we will (a) promptly notify PCT
thereof, (b) consult with PCT on its willingness and the advisability of taking
steps to resist or narrow such request, and (c) if disclosure is required or
deemed advisable by PCT, cooperate with PCT in any attempt that it may make to
obtain an order or other reliable assurance that confidential treatment win be
accorded to designated portions of the Confidential Information.  HWJ&C shall be
entitled to reimbursement for its expenses, including the fees and expenses of
its counsel, in connection with action taken pursuant to this paragraph.

     Information will not be deemed Confidential Information that (i) is
information in the possession of HWJ&C prior to 01 September 1996, (ii) becomes
available in the public domain other than as a result of disclosure by HWJ&C or
its partners, officers, employees or advisors, or (iii) is not acquired from PCT
or persons known by HWJ&C to be in breach of an obligation of
<PAGE>

secrecy to PCT. Any and all information related to PCT, whenever disclosed,
shall be Confidential Information unless such information falls within either
clause (ii) or (iii) above.

     All written information supplied by PCT to HWJ&C in connection with this
engagement and designated by PCT as confidential, and all copies or translations
thereof, or documents incorporating any such information, made by HWJ&C, shall
upon request be returned by HWJ&C to PCT or to independent counsel for PCT at
the election of HWJ&C.

     PCT agrees not to disclose any nonpublic, confidential, or proprietary
information furnished to it by HNVJ&C, including, but not limited to, the terms
and conditions of this and any other agreements between PCT and HWJ&C, to any
person who is not an officer or director of PCT or counsel to PCT except with
the consent of HWJ&C or as required by law.  PCT represents that it has
exercised all reasonable measures to ensure that each of its officers and
directors is formally apprised of his or her obligations concerning the
confidentiality of all HWJ&C affairs and information.

Indemnification

     Since HWJ&C will be acting on behalf of PCT, PCT agrees to indemnify HWJ&C
and other related persons and entities according to the form of agreement
attached hereto as Exhibit A which is hereby incorporated into and made part of
this agreement.

Termination

     HWJ&C's engagement hereunder may be terminated at any time with or without
cause, by either PCT upon 30 days written notice to HWJ&C, or by HWJ&C, upon 30
days written notice to PCT; provided, however, that in the event of any
termination by PCT, HWJ&C will be entitled to the fees provided for herein prior
to effective date of termination and, provided further, any termination of HWJ&-
C's engagement hereunder shall not affect Pct's obligation to indemnify HWJ&C
and certain related persons and entities as provided in the paragraph above.

No Agency Relationship

     It is understood that HWJ&-C, in performing its services, is not the agent
for the Company and does not have the actual or implied authority to enter into
any contracts which bind the Company, without the prior written consent of the
Company.

Disagreements

     PCT and HWJ&-C shall negotiate in good faith to resolve any disputes
between themselves in connection with this engagement.  In the event of a
failure to resolve the dispute, the dispute shall be resolved through binding
arbitration conducted by the American Arbitration Association.

     If a dispute arises between HWJ&C and PCT, HWJ&C agrees to use a law firm
other than Cooley Godward.
<PAGE>

                                                                          Page 4
Conclusion

     We look forward to the opportunity to advise Peet's Coffee & Tea in
connection with this engagement.

     Please confirm that the foregoing is in accordance with your understanding
by signing and returning the enclosed duplicate of this letter.

Very truly yours,

HWJesse&Co, by
         -

/s/ H. William Jesse Jr.
------------------------
H. William Jesse Jr., its
President

Accepted and agreed to as of the date first written above:

Peet's Coffee & Tea, by

/s/ Gerald Baldwin
------------------
Gerald Baldwin, its
Chairman
<PAGE>

                                                                          Page 5
                                   EXHIBIT A
                           Indemnification Agreement

     In connection with HWJesse&Co's ("`HWJ&C") engagement to provide advisory
services as described in the Advisory Engagement Letter attached hereto dated 09
December 1996, Peet's Coffee & Tea ("PCT" or the "Company") hereby agrees to
indemnify and hold harmless HWJ&C and its affiliates, the respective directors,
officers, partners, agents and employees of HWJ&C and its affiliates and each
other person, if any, controlling HWJ&C or any of its affiliates, to the full
extent lawful, from and against all losses, claims, damages, liabilities and
expenses incurred by them (including reasonable fees and disbursements of
counsel) which (A) are related to or arise out of (i) actions taken or omitted
to be taken (including any untrue statements made or any statements omitted to
be made) by the Company or (ii) actions taken or omitted to be taken by an
indemnified person with PCT's prior consent or in conformity with PCT's actions
or omissions or (B) are otherwise related to or arise out of HWJ&-C's activities
on PCT's behalf under HWJ&C's engagement, and PCT will reimburse HWJ&C and any
other person indemnified hereunder for all reasonable expenses (including
reasonable fees and disbursements of counsel) incurred by HWJ&C or such other
indemnified person in connection with investigating, preparing or defending any
such action or claim, whether such action or claim is in connection with pending
or threatened litigation or any investigation, proceeding or hearing conducted
by a governmental or quasi-governmental agency or any regulatory entity.  PCT
will not be responsible, however, for any losses, claims, damages, liabilities
or expenses pursuant to clause (B) of the preceding sentence to the extent that
such loss, claim, damage, liability or expense is the result of the bad faith or
negligence of the person seeking indemnification hereunder.  PCT also agrees
that neither HWJ&-C, nor any affiliates, nor any director, officer, partner,
agent or employee of HWJ&-C or any of its affiliates, nor any person controlling
HWJ&C or any of its affiliates (hereinafter collectively referred to as "HWJ&C's
Related Parties"), shall have any liability to PCT for or in connection with
such engagement except for such liability for losses, claims, damages,
liabilities or expenses incurred by PCT to the extent that they result from the
bad faith or negligence of HWJ&C or HWJ&C's Related Parties.  PCT further agrees
that PCT will not, without the prior written consent of HWJ&C, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not HWJ&C or any indemnified person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of HWJ&C and
each other indemnified person hereunder from all liability arising out of such
claim, action, suit or proceeding.

     Promptly after receipt by an indemnified person of notice of any complaint
or the commencement of any action or proceeding with respect to which
indemnification is being sought hereunder, such person will notify PCT in
writing of such complaint or of the commencement of such action or proceeding,
but failure to so notify PCT will not relieve PCT from any liability which PCT
may have hereunder or otherwise, except to the extent that such failure
prejudices PCT's rights.  If PCT so elects or is requested by such indemnified
person, PCT will assume the defense of such action or proceeding, including the
employment of counsel reasonably satisfactory to HWJ&C and the payment of the
fees and disbursements of such counsel.  In the event, however, such indemnified
person reasonably determines in its judgment that having common counsel would
present such counsel with a conflict of interest or if PCT
<PAGE>

                                                                          Page 6

fails to assume the defense of the action or proceeding in a timely manner, then
such indemnified person may employ separate counsel to represent or defend it in
any such action or proceeding and PCT will pay the reasonable fees and
disbursements of such counsel, provided, however, that PCT will not be required
to pay the fees and disbursements of more than one separate counsel for all
indemnified persons in any jurisdiction in any single action or proceeding. In
any action or proceeding the defense of which PCT assumes, the indemnified
person will have the right to participate in such litigation and to retain its
own counsel at such indemnified person's own expense.

     PCT agrees that if any indemnification sought by an indemnified person
pursuant to this letter agreement is held by a court to be unavailable for any
reason other than as specified in the second sentence of the first paragraph of
this indemnification agreement, then (whether or not - HWJ&C is the indemnified
person), PCT and HWJ&C will contribute to the losses, claims, damages,
liabilities and expenses for which such indemnification is held unavailable in
such proportion as is appropriate to reflect the relative benefits to PCT, on
the one hand, and HWJ&C, on the other hand, in connection with HWJ&C's
engagement referred to above, subject to the limitation that in any event
HWJ&C's aggregate contribution to all losses, claims, damages, liabilities and
expenses with respect to which contribution is available hereunder will not
exceed the amount of fees actually received by HWJ&C from PCT pursuant to
HWJ&C's engagement referred to above.  It is hereby agreed that the relative
benefits to PCT, on the one hand, and HWJ&C, on the other hand, with respect to
HWJ&C's engagement shall be deemed to be in the same proportion as (i) the total
value paid or proposed to be paid or received by PCT, as the case may be,
pursuant to the transaction, whether or not consummated, for which HWJ&C is
engaged to render financial advisory services bears to (ii) the fee paid or
proposed to be paid to HWJ&C in connection with such engagement PCT's indemnity,
reimbursement and contribution obligations under this letter agreement shall be
in addition to any rights that HWJ&C or any indemnified person may have at
common law or otherwise.

     PCT hereby consents to personal jurisdiction and service and venue in any
court in which any claim which is subject to this letter agreement is brought
against HWJ&-C or any other indemnified person, provided that HWJ&C or the
indemnified person is subject to personal jurisdiction and service and venue in
such court.

     It is understood that, in connection with HWJ&-C's above-mentioned
engagement, HWJ&C may also be engaged to act in one or more additional
capacities, and that the terms of the original engagement or any such additional
engagement may be embodied in one or more separate written agreements.  The
provisions of this letter agreement shall apply to the original engagement, and
any such additional engagement and any modification of the original engagement
or such additional engagement, if so stated in such additional engagement, and
shall remain in full force and effect following the completion or termination of
HWJ&C's engagement(s), but only to the extent such provisions relate to the
engagement which is subject to this letter agreement or any modification
thereof.

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