FARMER BROS. CO.
CHANGE IN CONTROL SEVERANCE AGREEMENT
EXECUTIVE OFFICERS
___________________________________________________________________________
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), effective
as of this ______day of _________, 2005 (the "Effective Date"), is made by and
between FARMER BROS. CO., a Delaware corporation (the "Company"), and
_____________________ (the "Executive").
WHEREAS, the Company considers it essential to ▇▇▇▇▇▇ the continued
employment of well qualified, senior executive management personnel; and
WHEREAS, the Company has determined that appropriate steps should be
taken to ▇▇▇▇▇▇ such continued employment by setting forth the benefits and
compensation to be awarded to such personnel in the event of a voluntary or
involuntary termination within the meaning of this Agreement; and
WHEREAS, the Company further recognizes that the possibility of a Change
in Control of the Company exists and that such possibility, and the uncertainty
and questions that it may raise among executive management, may result in the
departure or distraction of executive personnel to the detriment of the
Company; and
WHEREAS, the Company has further determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's executive management, including the
Executive, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a Change
in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Term of Agreement. The term of this Agreement shall commence as of the
date hereof and expire on the close of business on December 31, 2005; provided,
however, that (i) commencing on January 1, 2006 and each January 1 thereafter,
the term of this Agreement will automatically be extended for an additional
year unless, not later than September 30 of the immediately preceding year, the
Company (provided no Change in Control has occurred and no Threatened Change in
Control is pending) or the Executive shall have given notice that it or the
Executive, as the case may be, does not wish to have the Term extended; (ii)
if, prior to a Change in Control, the Executive ceases for any reason to be an
employee of the Company, thereupon without further action the Term shall be
deemed to have expired and this Agreement will immediately terminate and be of
no further effect.
2. Definitions.
(a) Base Salary shall mean the Executive's salary, which excludes
Bonuses, at the rate in effect when an event triggering benefits under Section
3 of this Agreement occurs.
(b) Beneficial Owner or Beneficial Ownership shall have the meaning
ascribed to such term in Rule 13d-3 of the Exchange Act.
(c) Board or Board of Directors shall mean the Board of Directors of
Farmer Bros. Co., or its successor.
(d) Bonus(es) shall mean current cash compensation over and above Base
Salary whether awarded under the Company's Incentive Compensation Plan or
otherwise awarded.
(e) Cause shall mean:
(i) the Executive's material fraud, malfeasance, or gross negligence,
willful and material neglect of Executive's employment duties or Executive's
willful and material misconduct with respect to business affairs of the Company
or any subsidiary of the Company or
(ii) Executive's conviction of or failure to contest prosecution for a
felony or a crime involving moral turpitude.
A termination of Executive for "Cause" based on clause (i) of the preceding
sentence can be made only by delivery to Executive of a resolution duly adopted
by the affirmative vote of not less than three quarters of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in the
good faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars thereof
in detail. Nothing herein will limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such determination.
A termination for Cause based on clause (ii) above shall take effect
immediately upon giving of the termination notice. No act or omission shall be
deemed "willful" if it was due primarily to an error in judgment or ordinary
negligence.
(f) Change in Control shall mean:
(1) An acquisition by any Person (as such term is defined in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof) of Beneficial
Ownership of the Shares then outstanding (the "Company Shares Outstanding") or
the voting securities of the Company then outstanding entitled to vote
generally in the election of directors (the "Company Voting Securities
Outstanding"), if such acquisition of Beneficial Ownership results in the
Person beneficially owning (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) fifty percent (50%) or more of the Company Shares Outstanding
or fifty percent (50%) or more of the combined voting power of the Company
Voting Securities Outstanding; excluding, however, any such acquisition by a
trustee or other fiduciary holding such Shares under one or more employee
benefit plans maintained by the Company or any of its subsidiaries; or
(2) The approval of the stockholders of the Company of a reorganization,
merger, consolidation, complete liquidation, or dissolution of the Company, the
sale or disposition of all or substantially all of the assets of the Company or
any similar corporate transaction (in each case referred to in this Section
3(e) as a "Corporate Transaction"), other than a Corporate Transaction that
would result in the outstanding common stock of the Company immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into common stock of the surviving entity or a parent or affiliate
thereof) at least fifty percent (50%) of the outstanding common stock of the
Company or such surviving entity or parent or affiliate thereof immediately
after such Corporate Transaction; provided, however, if the consummation of
such Corporate Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency, the
Change in Control shall not occur until the obtaining of such consent (either
explicitly or implicitly); or
(3) A change in the composition of the Board such that the individuals
who, as of the Effective Date, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, for purposes of
this Section 3(e) that any individual who becomes a member of the Board
subsequent to the Effective Date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board; but,
provided, further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, including any successor to such Rule), or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board, shall not be so considered as a member of the Incumbent Board.
(g) Code shall mean the Internal Revenue Code of 1986, as amended from time
to time.
(h) Disability shall mean the Executive's inability as a result of physical
or mental incapacity to substantially perform his duties for the Company on a
full-time basis for a period of six (6) months.
(i) Exchange Act shall mean the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
(j) Involuntary Termination shall mean termination of employment that is
involuntary on the part of the Executive and that occurs for reasons other than
for Cause, Disability or death.
(k) Threatened Change in Control shall mean any bona fide pending tender
offer for any class of the Company's outstanding Shares, or any pending bona
fide offer to acquire the Company by merger or consolidation, or any other
pending action or plan to effect, or which would lead to, a Change in Control
of the Company as determined by the Incumbent Board. A Threatened Change in
Control Period shall commence on the first day the actions described in the
preceding sentence become manifest and shall end when such actions are
abandoned or the Change in Control occurs.
(l) Shares shall mean the shares of common stock of the Company.
(m) Resignation for Good Reason shall mean termination of employment that
is voluntary on the part of the Executive but is due to:
(i) a significant reduction of the Executive's responsibilities, title
or status resulting from a formal change in such title or status, or from the
assignment to the Executive of any duties inconsistent with his title, duties,
or responsibilities;
(ii) a reduction in the Executive's Base Salary or benefits;
(iii) the failure to award Executive a Bonus for any fiscal year which
is at least fifty percent (50%) of the average Bonus awarded to Executive for
the three (3) fiscal years prior to the occurrence of the Change in Control,
provided that such reduction in Bonuses shall not constitute grounds for
Resignation for Good Reason if the Bonus, or lack of Bonus, is determined in
accordance with a written plan adopted by the Company prior to the occurrence
of a Change in Control; or
(iv) a Company-required involuntary relocation of Executive's place of
residence or a significant increase in the Executive's travel requirements.
3. Events That Trigger Benefits Under This Agreement. The Executive shall be
eligible for the compensation and benefits described in Section 4 of this
Agreement as follows:
(a) A Change in Control occurs and Executive's employment is
Involuntarily Terminated or terminated by Resignation for Good Reason within
twenty-four (24) months following the occurrence of the Change in Control; or
(b) A Threatened Change in Control occurs and the Executive's employment
is Involuntarily Terminated during a Threatened Change in Control Period or
Executive demonstrates of the Incumbent Board, excluding Executive and any
other Company executives who are parties to Change in Control Agreements for
Executive Officers, that grounds for a Resignation for Good Reason likely will
occur if a Change in Control occurs. The determination of the Incumbent Board
in that regard shall be conclusive.
4. Benefits Upon Termination. If the Executive becomes eligible for benefits
under Section 3 above, the Company shall pay or provide to the Executive the
following compensation and benefits:
(a) Salary. The Executive will continue to receive his Base Salary for
the twenty-four (24) month period following the Executive's date of termination
payable semi-monthly. The Executive shall also receive two (2) consecutive
annual payments of fifty percent (50%) of Executive's average Bonus as reported
in the Company's proxy statement for the last three (3) completed fiscal years
prior to the occurrence of the event triggering benefits under this Agreement
payable within thirty (30) days after the end of the Company's fiscal year
commencing with the first fiscal year-end after Executive's date of
termination.
(b) Qualified and Non-Qualified Plan Coverage. Subject to the
eligibility provisions of the plans, the Executive shall continue to
participate in the tax-qualified and non-qualified retirement, savings and
employee stock ownership plans of the Company during the twenty four (24) month
period following the Executive's date of termination unless the Executive
commences Employment prior to the end of the twenty four (24) month period, in
which case, such participation shall end on the date of his new employment. The
Executive shall inform the Company promptly upon commencing new employment.
(c) Health, Dental, and Life Insurance Coverage. The health, dental, and
life insurance benefits coverage provided to the Executive at his date of
termination shall be continued by the Company during the twenty-four (24) month
period following the Executive's date of termination unless the Executive
commences employment prior to the end of the twenty four (24) month period and
qualifies for substantially equivalent insurance benefits with the Executive's
new employer , in which case, such insurance coverages shall end on the date of
qualification. The Executive shall inform the Company promptly of his
qualification for any of such insurance coverages. . The Company shall provide
for such insurance coverages at its expense at the same level and in the same
manner as if the Executive's employment had not terminated (subject to the
customary changes in such coverages if the Executive retires under a Company
retirement plan, reaches age 65, or similar events and subject to Executive's
right to make any changes in such coverages that an active employee is
permitted to make). Any additional coverages the Executive had at termination,
including dependent coverage, will also be continued for such period on the
same terms, to the extent permitted by the applicable policies or contracts.
Any costs the Executive was paying for such coverages at the time of
termination shall be paid by the Executive by separate check payable to the
Company each month in advance. If the terms of any benefit plan referred to in
this Section do not permit continued participation by the Executive, the
Company will arrange for other coverage at its expense providing substantially
similar benefits. If the Executive is covered by a split-dollar or similar life
insurance program at the date of termination, he shall have the option in his
sole discretion to have such policy transferred to him upon termination,
provided that the Company is paid for its interest m the policy upon such
transfer.
(d) Outplacement Services. The Company shall provide the Executive with
outplacement services by a firm selected by the Executive, at the expense of
the Company, in an amount up to $25,000.
(e) No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult and may be impossible for the Executive to find reasonably
comparable employment following termination of Executive's employment by the
Company and that the non-solicitation covenant contained in Section 6 may
further limit the employment opportunities for the Executive. Accordingly, the
payment of the compensation and benefits by the Company to the Executive in
accordance with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and the Executive will not be required to mitigate
the amount of any payment provided for this Agreement by seeking other
employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise,
except as expressly provided in the first sentence of Section 4(c).
5. Parachute Payments.
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the compensation and benefits provided for in this Agreement to
Executive together with all other payments and the value of any benefit
received or to be received by Executive:
(a) constitute "parachute payments" within the meaning of Section 280G
of the Code, and
(b) but for this Section, would be subject to the excise tax imposed by
Section 4999 of the Code, the Executive's compensation and benefits pursuant to
the terms of this Agreement shall be payable either:
(i) in full, or
(ii) in such lesser amount which would result in no portion of such
compensation and benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by Executive on an after-tax basis, of the
greatest amount of compensation and benefits under this Agreement,
notwithstanding that all or some portion of such compensation and benefits may
be subject to the excise tax imposed under Section 4999 of the Code. Unless
the Company and Executive otherwise agree in writing, any determination
required under this Section 5 shall be made in writing by the Company's
independent public accountants serving immediately before the Change in Control
(the "Accountants"), whose determination shall be conclusive and binding upon
Executive and the Company for all purposes. For purposes of making the
calculations required by this Section 5, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable good faith interpretations concerning the applications of Section
280G and 4999 of the Code. The Company shall cause the Accountants to provide
detailed supporting calculations of its determination to Executive and the
Company. Executive and the Company shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.
6. Obligation Not to Solicit.
(a) Executive hereby agrees that while Executive is receiving
compensation and benefits under this Agreement, Executive shall not in any
manner attempt to induce or assist others to attempt to induce any officer,
employee, customer or client of the Company to terminate its association with
the Company, nor do anything directly or indirectly to interfere with the
relationship between the Company and any such persons or concerns.
(b) In the event that the Executive engages in any activity in violation
of Section 6(a), all compensation and benefits described in Section 4 shall
immediately cease.
7. Confidentiality. The terms of this Agreement are to be of the highest
confidentiality. In order to insure and maintain such confidentiality, it is
agreed that neither party, including all persons and entities under a party's
control, shall, directly or indirectly, publicize or disclose to third persons
the terms of this Agreement or the substance of negotiations with respect to
it; provided, however, that nothing herein shall be construed to prevent
disclosures which are reasonably necessary to enforce the terms of this
Agreement or which are otherwise required by law to be made to governmental
agencies or others; moreover, nothing herein shall be construed to prevent the
parties hereto, or their attorneys, from making such disclosures for legitimate
business purposes to their respective insurers, financial institutions,
accountants and attorneys or, in the case of a corporation, limited liability
company or partnership, to its respective officers, directors, employees,
managers, members and agents or any of its respective subsidiaries, group or
divisions, provided that each such recipient of such disclosures agrees to be
bound by the requirements concerning disclosure of confidential information as
set forth in this Paragraph 7.
8. Settlement of Disputes; Arbitration. (a) All disputes arising under or in
connection with this Agreement, shall be submitted to binding arbitration in
Los Angeles County before an arbitrator selected by mutual agreement of the
parties. If the parties are unable to agree mutually on an arbitrator within
thirty (30) days after a written demand for arbitration is made, the matter
shall be submitted to JAMS/ENDISPUTE ("JAMS") or successor organization for
binding arbitration in Los Angeles County by a single arbitrator who shall be a
former California Superior Court judge. The arbitrator shall be selected by
JAMS in an impartial manner determined by it. Except as may be otherwise
provided herein, the arbitration shall be conducted under the California
Arbitration Act, Code of Civil Procedure 1280 et seq. The parties shall have
the discovery rights provided in Code of Civil Procedure 1283.05 and 1283.1.
The arbitration hearing shall be commenced within ninety (90) days of the
appointment of the arbitrator, and a decision shall be rendered by the
arbitrator within thirty (30) days of the conclusion of the hearing. The
arbitrator shall have complete authority to render any and all relief, legal
and equitable, appropriate under California law, including the award of
punitive damages where legally available and warranted. The arbitrator shall
award costs of the proceeding, including reasonable attorneys' fees, to the
party or parties determined to have substantially prevailed, but such award for
attorneys' fees shall not exceed One Hundred Thousand Dollars ($100,000).
Judgment on the award can be entered in a court of competent jurisdiction.
(b) The foregoing notwithstanding, if the amount in controversy exceeds
$200,000, exclusive of attorneys' fees and costs, the matter shall be litigated
in the Los Angeles County Superior Court as a regular civil action except that
a former California Superior Court Judge selected by JAMS in an impartial
manner shall be appointed as referee to determine, sitting without a jury (a
jury being waived by all parties hereto), all issues pursuant to California
Code of Civil Procedure 638(1). Judgment entered on the decision of the
referee shall be appealable as a judgment of the Superior Court. The
prevailing party shall be entitled to receive its reasonable attorneys' fees
and costs from the other party, but such award for attorneys' fees shall not
exceed One Hundred Thousand Dollars ($100,000).
9. Miscellaneous.
(a) Notices. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and shall be
deemed to have been duly given when delivered personally or seven days after
mailing if mailed first class by registered or certified mail, postage prepaid,
addressed as follows:
If to the Company: Farmer Bros. Co
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
with a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Anglin, Flewelling, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
If to the Executive: __________________________
or to such other address as any party may designate by notice to the
others.
(b) Assignment. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective executors,
administrators, heirs, personal representatives, and successors, but, except as
hereinafter provided, neither this Agreement nor any right hereunder may be
assigned or transferred by either party thereto, or by any beneficiary or any
other person, nor be subject to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal process of any kind against the
Executive, his beneficiary or any other person. Notwithstanding the foregoing,
any person or business entity succeeding to substantially all of the business
of the Company by purchase, merger, consolidation, sale of assets, or
otherwise, shall be bound by and shall adopt and assume this Agreement and the
Company shall cause the assumption of this Agreement by such successor. If
Executive shall die while any amount would still be payable to Executive
hereunder (other than amounts that, by their terms, terminate upon the death of
Executive) if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of
Executive's estate.
(c) No Obligation to Fund. The agreement of the Company (or its
successor) to make payments to the Executive hereunder shall represent solely
the unsecured obligation of the Company (and its successor), except to the
extent the Company (or its successors) in its sole discretion elects in whole
or in part to fund its obligations under this Agreement pursuant to a trust
arrangement or otherwise.
(d) Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California.
(e) Amendment. This Agreement may only be amended by a written
instrument signed by the parties hereto, which makes specific reference to this
Agreement.
(f) Severability. If any provision of this Agreement shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof.
(g) Withholding. The Company shall have the right to withhold any and
all local, state and federal taxes which may be withheld in accordance with
applicable law.
(h) Other Benefits. Nothing in this Agreement shall limit or replace the
compensation or benefits payable to Executive, or otherwise adversely affect
Executive's rights, under any other benefit plan, program, or agreement to
which Executive is a party.
(i) Employment Rights. Nothing expressed or implied in this Agreement
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any Subsidiary
prior to or following any Change in Control. Executive agrees that he is
strictly an at will employee of the Company.
[Signatures Follow]
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by its duly authorized officers and the Executive has hereunder
set his hand, as of the date first above written.
"COMPANY"
Farmer Bros. Co., a Delaware corporation
By: _____________________
Name: _____________________
Title: _____________________
By: _____________________
Name: _____________________
Title:_____________________
"EXECUTIVE"
__________________________