Exhibit 10.4


 


FARMER
BROS. CO.


 


CHANGE IN
CONTROL SEVERANCE AGREEMENT


 


EXECUTIVE
OFFICERS


 


THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”),
effective as of March 3, 2008 (the “Effective Date”), is made by and
between FARMER BROS. CO., a Delaware corporation (the “Company”), and Drew H.
Webb (the “Executive”).


 


WHEREAS, the Company considers it
essential to foster the continued employment of well qualified, senior
executive management personnel; and


 


WHEREAS, the Company has determined
that appropriate steps should be taken to foster 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, 2008;
provided, however, that (i) commencing on January 1, 2009 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.


 


1

















 


(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


 


2

















 


(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


 


3

















 


(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 to 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 or for the number of completed of
fiscal years that Executive has been in the employ of the Company if fewer than
three, prior to the occurrence of the event triggering benefits under this
Agreement.  If a triggering event occurs
before a bonus for fiscal 2008 is awarded to Executive under the Company’s 2005
Incentive Compensation Plan, the Bonus amount shall be $100,000, payable in two
annual installments of $50,000.  The
Bonus amount is payable annually 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


 


4

















 


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


 


5

















 


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


 


6

















 


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

  
	
   

  	
   

  	
  20333
  South Normandie Avenue

  
	
   

  	
   

  	
  Torrance,
  CA 90502

  
	
   

  	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  John
  M. Anglin, Esq.

  
	
   

  	
   

  	
  Anglin,
  Flewelling, Rasmussen, Campbell & Trytten LLP

  
	
   

  	
   

  	
  199
  South Los Robles Avenue, Suite 600

  
	
   

  	
   

  	
  Pasadena,
  CA 91101-2459

  
	
   

  	
   

  	
   

  
	
  If
  to the Executive:

  	
   

  	
  Drew
  H. Webb

  
	
   

  	
   

  	
  10310
  E. Sierra Pinta Drive

  
	
   

  	
   

  	
  Scottsdale,
  AZ 85255

  






 


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.


 


7

















 


(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.  The Company and Executive are
parties to an Employment Agreement executed concurrently herewith.  Except as provided in Section 11 of the
Employment Agreement, the provisions of the Employment Agreement and this
Agreement are cumulative.


 


 


 


[Signatures
Follow]


 


 


8

















 


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:

  	
  /S/
  ROGER M. LAVERTY III

  
	
   

  	
  Name:

  	
  ROGER
  M. LAVERTY III

  
	
   

  	
  Title:

  	
  PRESIDENT
  AND CHIEF EXECUTIVE OFFICER

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  JOHN E. SIMMONS

  
	
   

  	
  Name:

  	
  JOHN
  E. SIMMONS

  
	
   

  	
  Title:

  	
  TREASURER
  AND CHIEF FINANCIAL OFFICER

  
	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  
	
   

  	
   

  	
  /S/
  DREW. H. WEBB

  
	
   

  	
   

  	
  DREW
  H. WEBB

  



9