PEET LIMITED — Remuneration Information 2004

Aug 1, 2004

17 June 2004

Mr Warwick Hemsley C/Peet & Co Ltd

Dear Warwick

Peet & Company Limited Employee Share Option Plan

In recognition of the Initial Public Offering of Peet & Company Limited ("Peet"), and the importance of your contribution to the ongoing success of the Company, the Board is inviting you to apply for Options under the Peet Employee Share Option Plan ("the Plan").

The Plan enables you to participate in the growth of Peet and align your interests more closely with those of other shareholders.

The Options you are invited to apply for will be issued at no cost. Each Option will allow you to subscribe for one ordinary share in Peet at a fixed price, once the Vesting Conditions and Performance Conditions are met (also known as Exercise Conditions in the Plan). The options will vest and become exercisable subject to Peet meeting the prescribed levels of performance in terms of Earnings Per Share ("EPS") and Total Shareholder Return ("TSR") over a 3 year performance period, calculated from the date of grant. Attached are the Details and Terms and Conditions of your invitation. You are under no obligation to apply for these Options.

Your potential financial reward from participating in the Plan depends on the market value of Peet shares. Upon meeting the Vesting Conditions and Performance Conditions, your Options will become valuable if the market value of Peet shares exceeds the exercise price. Movements in the market value of Peet shares reflects Peet's performance and the impact of various external factors such as general economic conditions.

More details are contained in the enclosed Information Booklet and it is important that you read this carefully, It is also recommended that you consult your tax or financial adviser prior to making any decisions about the options.

If you would like to participate in the plan, please complete and sign the enclosed Application Form and return it to the address indicated by 18 June 2004.

Options are not transferable and may only be granted to you personally.

The terms of your invitation are confidential and must not be disclosed to anyone except for the purposes of obtaining financial, taxation or legal advice in respect of the invitation.

We welcome you to the Plan and invite you to share with us in the future of Peet.

Yours faithfully

TONY LENNON CHAIRMAN

DETAILS OF INVITATION
Numbers of Options you may acquire		600,000
Exercise Price 1		\$1.20
Expected date of grant	18 June 2004 (Exact date will be the date in your Option Certificate)
Exercise Conditions	The options will vest and become exercisable on meeting the EPS and TSR performance conditions. If the proposed initial public offer of shares in Peet does not proceed, such that Peet is not admitted to the official list of the Australian Stock Exchange by 1 October 2004, the options will lapse unless the Board determines otherwise.
Performance Hurdles	Internal performance measure - Earnings Per Share ("EPS")
	50% of your option allocation, ie 300,000 options, will vest subject to the achievement of the EPS hurdle as follows:
	Average compound growth in	Proportion of

Average compound growth in EPS over a three-year performance period	Proportion of Options that may be eligible to vest
Less than 7% p.a.	None
7% p.a.	50%
9% p.a.	75%
11% p.a.	1በበ%

The EPS performance will be calculated over a 3 year performance period, calculated from the date of the option grant. The EPS performance and number of options which will become vested will be advised to participants within 1 month after the 2007 financial year results have been finalised.

External performance measure - Total Shareholder Return ("TSR")

50% of your option allocation, ie 300,000 options, will vest subject to the achievement of the TSR hurdle below.

The Company's TSR ranking will be compared with the S&P/ASX Small Ordinaries index. Options will vest and become exercisable in accordance with the following vesting scale:

Company performance (TSR percentile ranking)	Percentage of options vesting
At or below the 50 th percentile	0%
At the 51 st percentile	50%
75 th percentile or above	100%

$1$ Note the Exercise Price is subject to adjustment in the event of a rights issue or, in certain circumstances, reorganisation of capital in accordance with Rule 8 of the Plan Rules.

The TSR performance will be assessed over a 3 year performance period, calculated from the date of grant. The TSR performance and the number of options which will vest will be advised to participants within one month of the third anniversary of the option grant date.

Date of expiry of Options

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Options will expire at the 5 year anniversary of the date of grant of the options.

TERMS AND CONDITIONS OF OPTION GRANT

This invitation is made to you on the terms and conditions set out in this letter and the Rules of the Peet Employee Share Option Plan. This letter sets out the terms of issue of the Options in addition to the Rules of the Plan.

1. Options may be exercised in accordance with Rule 5 of the Peet Employee Share Option Plan Rules ("Plan Rules"). These Options are subject to exercise conditions which include an EPS and TSR performance condition, which determines the timing and number of options which will vest and become exercisable. If the proposed initial public offer of shares in Peet does not proceed, such that Peet is not admitted to the official list of the Australian Stock Exchange by 1 October 2004, the options will lapse unless the Board determines otherwise.

Performance Hurdles:

Internal performance measure - Earnings Per Share ("EPS")

50% of your option allocation, ie 300,000 options, will vest subject to the achievement of the EPS hurdle as follows:

Average compound growth in EPS over a three-vear performance period	Proportion of Options that may be eligible to vest
Less than 7% p.a.	None
7% p.a.	50%
9% p.a.	75%
11% p.a.	1በበ%

The EPS performance will be calculated over a 3 year performance period, calculated from the date of the option grant. The EPS performance and number of options which will become vested will be advised to participants within 1 month after the 2007 financial year results have been finalised.

External performance measure - Total Shareholder Return ("TSR")

50% of your option allocation, ie 300,000 options, will vest subject to the achievement of the TSR hurdle below. The Company's TSR ranking will be compared with the S&P/ASX Small Ordinaries index. Options will vest and become exercisable in accordance with the following vesting scale:

Company performance (TSR percentile ranking)	Percentage of options vesting
At or below the 50 th percentile	0%
At the 51 st percentile	50%
75 th percentile or above	100%
Between the 51 st percentile and 75 th percentiles, an additional 2% of options will vest for every percentile increase in TSR ranking.

The TSR performance will be assessed over a 3 year performance period, calculated from the date of grant. The TSR performance and the number of options which will vest will be advised to participants within one month of the third anniversary of the option grant date.

1. Lapse of Options:

2.1 An unexercised Option will lapse in accordance with Rule 5.6 of the Plan Rules upon the earliest of:

• a) the Option lapsing in accordance with the transfer of Options Rule 4.2(b) of the Plan Rules:
• b) the Option lapsing in accordance with the exercise of the Option Rule 5 of the Plan Rules (which addresses matters such as the Option lapsing on cessation of employment where the exercise condition has not been met or in the event of fraudulent or dishonest behaviour by the Option Holder refer to 2.2 below):
• c) the option lapsing in accordance with Rule 7 of the Plan Rules regarding takeovers, scheme of arrangement, winding up etc:
• d) failure to meet the Option's exercise conditions in the prescribed period:
• e) the 5 year anniversary of the grant date; or
• f) if the proposed initial public offer of shares in Peet (IPO) does not proceed, such that Peet is not admitted to the official list of the Australian Stock Exchange by 1 October 2004, the options will lapse unless the Board determines otherwise.
• 2.2 Where, in the opinion of the Board, the Option holder acts fraudulently or dishonestly or breaches his or her obligations to any Peet group company, the Board can deem any unexercised Options held by the Option holder to have lapsed. This condition is detailed in Rule 5 "Fraudulent or dishonest actions" of the Plan Rules
• 1. Cessation of employment:
• a) Where an Option holder ceases employment with Peet when his/her Options have vested (ie: after vesting conditions and performance hurdles have been met), but before they have been exercised. these Options can be exercised during any period determined by the Board until they lapse in accordance with the Rule 5.6 of the Plan Rules.
• h) Where the Options are unvested (ie: if vesting conditions and performance hurdles have not been met) at the date when employment ceases, the Options will automatically lapse one month after the date the Option holder ceased employment, unless the Board determines otherwise.

These conditions are detailed in Rule 5 "Exercise of Options" of the Plan Rules.

• 1. Options are granted subject to:
• a) The Plan Rules (as amended from time to time) approved by Peet in general meeting on 7 April 2004.
• b) The exercise conditions outlined above and the terms and conditions set out in this letter from Peet dated 18 June 2004:
• $\mathbf{C}$ The terms and conditions set out in the Option Certificate; and
• d) The Australian Corporations Act requirements.
• 1. The exercise price of each Option shall be as set out in your Option Certificate from Peet.