CHARTER OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF PEET'S COFFEE & TEA, INC.

PURPOSE AND POLICY

The purpose of the Compensation Committee of the Board of Directors of Peet's Coffee & Tea, Inc., a Washington corporation (the "Company"), shall be to provide assistance and guidance to the Board of Directors in fulfilling its oversight responsibilities to the Company's shareholders with respect to the Company's compensation program for officers, directors and other employees, as well as to review and discuss with management the Company's disclosures contained under the caption "Compensation Discussion and Analysis" ("CD&A") for use in any of the Company's annual reports on Form 10-K, registration statements, proxy statements or information statements and to prepare and review the Committee report on executive compensation included in the Company's annual proxy statement in accordance with applicable rules and regulations of the Securities and Exchange Commission (the "SEC") in effect from time to time. The term "compensation" shall include salary, long-term incentives, bonuses, perquisites, equity incentives, severance arrangements, retirement benefits and other related benefits and benefit plans. The policy of the Compensation Committee, in discharging these obligations, shall be to maintain and foster an open avenue of communication between the Compensation Committee and the Company's management.

COMPOSITION AND ORGANIZATION
The Compensation Committee shall consist of at least 2 members. All members of the Committee shall satisfy the independence requirements of the Nasdaq National Market ("Nasdaq") applicable to compensation committee members, as in effect from time to time, when and as required by Nasdaq, including any exceptions permitted by these requirements. At least two of the members of the Committee shall satisfy the "non-employee director" standard within the meaning of Section 16b-3 of the Securities Exchange Act of 1934, as amended from time to time (the "Exchange Act") and the "outside director" standard within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). The members of the Committee shall be appointed by and serve at the discretion of the Board. Vacancies occurring on the Committee shall be filled by the Board. The Committee's chairperson shall be designated by the Board or, if it does not do so, the Committee members shall elect a chairperson by vote of a majority of the full Committee. The operation of the Compensation Committee shall be subject to the Bylaws of the Company as in effect from time to time and Section 23B.08.250 of the Revised Code of Washington.

AUTHORITY
The Committee shall have full access to all books, records, facilities and personnel of the Company as deemed necessary or appropriate by any member of the Committee to discharge his or her responsibilities hereunder, including human resources personnel preparing the CD&A for the Company's reports to be filed with the SEC. The Committee shall have the authority to obtain, at the expense of the Company, advice and assistance from internal or external legal, accounting or other advisors and consultants. In addition, the Committee shall have sole authority to retain and terminate any compensation consultant to assist in the evaluation of director, chief executive officer or senior executive compensation, including sole authority to approve such consultant's reasonable fees and other retention terms, all at the Company's expense. Other reasonable expenditures for external resources that the Committee deems necessary or appropriate in the performance of its duties are permitted. Expenditures for external resources (other than for a compensation consultant retained by the Committee) that are expected to be material and outside the ordinary course of the Committee's practices shall be recommended by the Committee for the approval of the Board. The Committee may form and delegate authority to subcommittees as appropriate, including, but not limited to, a subcommittee composed of one or more members of the Board to grant stock awards under the Company's equity incentive plans to persons who are not (a) "Covered Employees" under Section 162(m) of the Code; (b) individuals with respect to whom the Company wishes to comply with Section 162(m) of the Code or (c) then subject to Section 16 of the Exchange Act. The approval of this Compensation Committee Charter shall be construed as a delegation of authority to the Committee with respect to the responsibilities set forth herein.

RESPONSIBILITIES
To implement the Committee's purpose and policies, the Committee shall be charged with the following duties and responsibilities. The Committee may supplement and, except as otherwise required by applicable law, the Washington Business Corporation Act or the requirements of Nasdaq, deviate from these activities as appropriate under the circumstances:

Overall Compensation Strategy. The Committee shall review, modify (as needed) and approve the overall compensation strategy and policies for the Company, including: reviewing and approving corporate performance goals and objectives relevant to the compensation of the Company’s Section 16 officers and evaluating performance in light of those goals; evaluating and recommending to the Board the compensation plans and programs proposed by management, as well as modifications or termination of existing plans and programs; establishing policies with respect to equity compensation arrangements; and reviewing and approving the terms of any employment agreements, bonuses, severance arrangements, change-of-control protections and any other compensatory arrangements (including, without limitation, perquisites and any other form of compensation) for the Company’s Section 16 officers. Section 16 Officer Compensation. The Committee shall review at least annually the individual elements and amount of total compensation of all of the Company’s Section 16 Officers and shall determine, in its sole discretion, the compensation and terms of employment of all such Section 16 officers. Compensation of Directors. The Committee shall recommend to the Board the type and amount of compensation to be paid or awarded to Board members, including consulting, retainer, Board meeting, committee and committee chair fees and stock option grants or awards. Other Compensation. The Committee shall review and approve such other compensation matters as the Board of Directors or the Chief Executive Officer of the Company wishes to have the Committee approve. Administration of Benefit Plans. The Committee shall review with management the adoption, amendment and termination of the Company’s stock option plans, stock appreciation rights plans, pension and profit sharing plans, incentive plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans and similar programs. The Committee shall recommend to the Board adoption of equity or other plans in which the Company’s Section 16 officers participate or material amendments thereto. “Material amendments” means those for which stockholder approval is required and/or involve material cash or other consideration. The Committee shall approve grants and awards, and exercise such other power and authority as may be permitted or required under such plans. Compensation Risk. The Committee shall periodically assess the relationship between the Company’s compensation programs and risk management. Compensation Discussion and Analysis. The Committee shall review and discuss with management the Company’s disclosures contained under the caption “Compensation Discussion and Analysis” for use in any of the Company’s annual reports on Form 10-K, registration statements, proxy statements or information statements and make recommendations to the Board that the CD&A be approved for inclusion in the Company’s annual reports on Form 10-K, registration statements, proxy statements or information statements. Committee Report. The Committee shall prepare and review the Committee report on executive compensation to be included in the Company’s annual proxy statement in accordance with applicable SEC rules and regulations. Committee Self-Assessment. The Committee shall review, discuss and assess its own performance annually. The Committee shall also periodically review and assess the adequacy of this charter, including the Committee’s role and responsibilities as outlined in this Charter, and shall recommend any proposed changes to the Board for its consideration. Other Powers. The Committee is to perform such other functions and have such other powers as may be necessary or convenient in the efficient discharge of the foregoing. Report to the Board. The Committee is to report to the Board of Directors of Directors from time to time, or whenever it shall be called upon to do so.

MEETINGS
The Compensation Committee will hold at least one regular meeting per year and additional regular or special meetings as its members deem necessary or appropriate. Officers of the Company may attend these meetings at the invitation of the Compensation Committee.

MINUTES AND REPORTS
Minutes of each meeting of the Compensation Committee shall be kept and distributed to each member of the Compensation Committee, members of the Board of Directors who are not members of the Compensation Committee and the Secretary of the Company. The Chairperson of the Compensation Committee shall report to the Board of Directors from time to time, or whenever so requested by the Board of Directors.