Exhibit 10.3

FORM OF AWARD LETTER
UNDER FARMER BROS. CO.
2005 INCENTIVE COMPENSATION PLAN

Dear                      :

The Compensation Committee (“Committee”) chose you to be a participant in fiscal
2007 in the Farmer Bros. Co. 2005 Incentive Compensation Plan.  Your target
award for fiscal 2007 was $                 , which the Committee determined by
taking into consideration past total annual compensation, current base salary,
job responsibilities and past and expected job performance.

In general, your bonus for fiscal 2007 was determined primarily by measuring the
Company’s financial performance and your achievement of individual goals which
the Committee assigned to you.

The Company’s financial performance was gauged by the level of achievement of
operating cash flow and net sales as determined from the Company’s audited
financial statements.  “Operating cash flow” is defined as income from
operations plus depreciation and ESOP compensation expense.  A matrix is
attached which shows various percentages between 25% and 150% depending on the
combined level of achievement of these two criteria.  For fiscal 2007, the
Company’s operating cash flow was approximately $                 , disregarding
a charge related to the retiree benefit plan modification, and net sales were
approximately $                 .  Both numbers exclude Coffee Bean
International revenues and most CBI acquisition expenses.  Based on the
Company’s achievement of these two criteria during fiscal 2007, the percentage
derived from the matrix for fiscal 2007 is                  %.

The Committee also assigned certain individual goals to you for fiscal 2007
which were communicated to you by the Committee at the beginning of the last
fiscal year.  The Committee has determined your level of achievement of each
assigned goal within a range of 60% to 120% and multiplied such percentage by
the weight originally assigned to each such goal.  Your assigned individual
goals for fiscal 2007, the weight given to each expressed as a percentage, and
your level of achievement as determined by the Committee are as follows:

Goal

 

% Weight

 

% Achievement

 

Weighted Result

 

  

 

 

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

%

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

%

 

%

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

100%

 

 

 

 

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The level of achievement of each goal on a weighted basis were aggregated and
multiplied by                  %, the financial performance percentage derived
from the matrix as described above.  The resulting product was then multiplied
by your fiscal 2007 target award to determine your preliminary bonus award for
fiscal 2007.  Based on the foregoing, the Committee has determined your fiscal
2007 preliminary bonus award is $                 .

Under the Plan, the preliminary award is subject to adjustment, upward or
downward, by the Committee in its discretion.  The committee also has the
discretion to alter the financial performance criteria and individual goals
during the year and to decline to award any bonus should the committee determine
such actions to be warranted by a change in circumstances.  For fiscal 2007 the
Committee has determined to exercise its discretion to adjust your preliminary
bonus award principally in light of the efforts of the management team in making
the CBI acquisition and the post-acquisition integration of CBI into Farmer
Bros. in which you played a [substantial] part.  As a result, your fiscal 2007
final bonus award will be $                 .

You are advised that the Committee may or may not choose to exercise its
discretion with respect to awards in the future.  Further, you are reminded to
promptly contact the Committee in the event circumstances dictate reexamination
of originally assigned goals by the Committee.

The Committee has determined that the award will be paid on a current basis
under the Plan.  All awards are governed by the Plan provisions which control
any inconsistency with this letter.

Please let me know if you have any questions.

 

Very truly yours,

 

 

 

 

 

Thomas A. Maloof

 

Compensation Committee Chairman

 

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