Exhibit 10.1


 


EMPLOYMENT AGREEMENT


(Farmer Bros. Co. / Webb)


 






 


This
Employment Agreement (“Agreement”) is made and entered into as of March 3,
2008 between FARMER BROS. CO., a Delaware corporation (the “Company”), and Drew
H. Webb (“Webb”) who agree as follows:


 


1.             Employment:  The Company hereby employs Webb, and Webb
accepts employment from the Company, on the terms and conditions herein stated.


 


2.             Term
of Employment:  The term of
Webb’s employment under this Agreement will commence on March 3, 2008 or
on such other date as Webb and the Company’s Chief Executive Officer (“CEO”)
may mutually agree (the “Commencement Date”) and shall end when terminated
under Section 7 below.


 


3.             Duties:  Webb shall serve as Executive Vice-President
and Chief Operating Officer of the Company, reporting to the CEO.  As such his general responsibilities shall
include oversight responsibility for those day-to-day operations of the Company
as agreed upon.  In addition to his
general responsibilities, Webb shall also perform such other duties as are
consistent with his position and as are directed by the Company’s CEO or Board
of Directors (“Board”).  Webb shall
devote to the Company’s business substantially all of his working time.  The foregoing notwithstanding, Webb may continue
to serve as a Director of Oakville Grocery or its successors so long as such
service does not, in the reasonable judgment of the Board, adversely affect the
Company.  Service as a director or
equivalent of other for-profit organizations shall require approval of the
Board.


 


4.             Base
Salary: Webb shall receive an annual base salary of $310,000 payable
in accordance with the Company’s normal payroll practice.  The annual base salary amount shall be
reviewed annually by the Company and can be adjusted upward or downward by the
Company from time to time but shall not be reduced below $310,000 per annum.


 


5.             Bonuses:  Webb shall be entitled to participate in the
Company’s 2005 Incentive Compensation Plan or any successor plan (“Plan”) each
year so long as the Plan remains in effect and one or more of the Company’s
other executive officers who are full-time Company employees (“Senior
Executives”) also participate.  Under the
terms of the Plan, the Compensation Committee will, in its discretion, and
after consultation with Webb, determine the Performance Criteria and all other
variables by which Webb’s bonus for such year will be measured.  The Target Award, as defined in the Plan,
shall be an amount equal to fifty percent (50%) of Webb’s base annual salary.
Except as provided otherwise in this Section 5, Webb’s participation in
the Plan is subject to all Plan terms and conditions. Under the terms of the
Plan, no bonus is earned until awarded by the Compensation Committee after
completion of the fiscal year, and the Compensation Committee may, in its
discretion, reduce, entirely eliminate or increase the bonus indicated by the
Performance Criteria and other Plan factors. 
Webb acknowledges receipt of a copy of the Plan.


 


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6.             Benefits:
The Company will provide to Webb all benefits and perquisites provided by the
Company from time to time to its executive officers, subject to the eligibility
requirements and the terms and conditions of the benefit plans and perquisite policies.  For the avoidance of doubt, Webb’s benefit
package includes use of a Company car, and 4 weeks of paid vacation per year in
accordance with the terms of the Company’s vacation policy.  Other included benefits and perquisites
presently consist of group health insurance (PPO or HMO), life insurance,  business travel insurance, qualified
retirement plan, 401(k) plan, employee stock ownership plan, cell phone,
company credit card, and expense reimbursement. 
Not all of the foregoing benefits are 100% Company paid.


 


Subject
to the second paragraph of Section 7(B), the Company reserves the right to
alter or discontinue any or all such benefits and perquisites, provided they
are so altered or discontinued as to all Senior Executives (including the CEO).


 


Webb
shall be entitled to participate in the Company’s Long Term Incentive Plan as
it is administered by the Board of Directors. 
On the date hereof, Webb will be granted 9,000 stock options and 1,500
shares of restricted stock under the terms and conditions of that Plan as they
apply to all participants. Webb will be entitled to future grants under this
Plan as they are awarded by the Compensation Committee and the Board of
Directors from time to time.


 


7.             Termination:


 


A.            Webb’s employment is terminable by
the Company for good and sufficient cause (“Cause”) which shall consist only of
(i) a repeated refusal to follow reasonable directions from the CEO or
Board after a warning; (ii) a material breach of any of Webb’s fiduciary
duties to the Company (a breach involving dishonesty or personal gain shall be
deemed material regardless of the amount involved); (iii) conviction of a
felony; (iv) commission of a willful violation of any law, rule or
regulation involving moral turpitude; (v) commission of a willful or
grossly negligent act or omission which has a material adverse effect on the
Company; or (vi) commission of a material breach by Webb of this Agreement
which breach, if curable, is not cured within a reasonable time after written
notice from the CEO describing the nature of the breach in reasonable detail.


 


B.            Webb’s employment shall terminate
upon Webb’s resignation, with or without “Good Reason,” as defined below, death
or permanent mental or physical incapacity. 
Permanent incapacity shall be deemed to have occurred if an independent
physician reasonably acceptable to Webb determines in writing that Webb has
been unable to perform substantially all of his employment duties under Section 3
on a substantially full time basis by reason of a mental or physical condition
for a period of ninety (90) consecutive days or for more than one hundred
eighty days (180) in any period of three hundred sixty-five (365) consecutive
days.


 


“Good
Reason” shall consist only of (i) the Company’s material breach of this
Agreement which breach, if curable, is not cured within a reasonable time after
written notice of the breach describing the nature of the breach in reasonable
detail, (ii) downgrading of Webb’s title or a material reduction in Webb’s
responsibilities, (iii) a material reduction in, or elimination of,  the health care benefits provided to Webb or 


 


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discontinuance
of the qualified retirement plan or ESOP, (iv) relocation of the Company’s
executive offices more than fifty (50) miles from their present location or (iv) the
failure of the Company to include Webb as a participant in the Company’s Long
Term Incentive Plan on substantially the same terms and conditions as are
applicable to other Senior Executives.


 


C.            Webb’s employment shall terminate at
the election of the Company at any time without Cause.


 


8.             Payments
upon Termination:  The
following amounts are payable upon termination of Webb’s employment, as
applicable:


 


A.            In the event of a termination for
any reason, base salary at the then existing rate, shall be prorated and paid
through the effective termination date, along with accrued and untaken vacation
(subject to the Company’s vacation policy). 
If termination is due to Webb’s death or permanent incapacity, the
Company shall also pay to Webb upon termination an additional lump sum
severance amount equal to the Target Award under the Company’s 2005 Incentive
Compensation Plan which is applicable to Webb for the fiscal year in which
termination is effective or, if termination takes place before a Target Award
for the then current fiscal year has been assigned to Webb, the Applicable
Percentage of Webb’s then annual base salary, in either case prorated for the
partial fiscal year ending on the effective termination date.


 


B.            If termination occurs at the
election of the Company without Cause or by Webb’s resignation with Good
Reason: Webb will (i) continue to receive base salary at the then existing
rate as if he were still employed by the Company for a period of one (1) year
from the effective termination date, prorated for any partial payroll period at
the expiration of the one (1) year salary continuation period, (ii) receive
partially Company-paid COBRA coverage under the Company’s health care plan for
himself and his spouse for one (1) year after the effective termination
date (the Company will pay the same percentage of the coverage cost that it
would have paid had Webb’s employment not terminated) and (iii) receive on
the effective termination date, an additional lump sum severance amount equal
to the Target Award under the Company’s 2005 Incentive Compensation Plan which
is applicable to Webb for the fiscal year in which termination is effective or,
if termination takes place before a Target Award for the then current fiscal
year has been assigned to Webb, the Applicable Percentage of Webb’s then annual
base salary, in either case prorated for the partial fiscal year ending on the
effective termination date.  Webb is not
obligated to seek other employment as a condition to receipt of the payments
called for by this Section 8B, and Webb’s earnings, income or profits from
other employment or business activities after termination of his employment
shall not reduce the Company’s payment obligations under this Section 8B.  Salary continuation payments shall commence,
and the additional severance amount shall be paid, only when the release
required by Section 8C below has become effective.


 


C.            As a condition to receiving the
applicable payments under Section 8B above, Webb must execute and deliver
to the Company a general release of claims against the Company other than
claims to the payments called for by this Agreement, such release to be in form
and content substantially as attached hereto as Exhibit A, and said
release shall have 


 


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become
effective under applicable laws, including the Age Discrimination in Employment
Act of 1967, as amended.


 


D.            All benefits other than the
entitlement to payments under Section 8B shall terminate automatically
upon termination of Webb’s employment except to the extent otherwise provided
in the Company benefit plans or by law.


 


E.             Except as provided in this Section 8
or by applicable Company benefit plans or laws, Webb shall not be entitled to
any payments of any kind in connection with the termination of his employment
by the Company.


 


9.             Employee
Handbook and Company Policies: So long as he is employed by the
Company, Webb shall comply with, and shall be entitled to rights as set forth
in the Company’s Employee Handbook which may be revised from time to time and
other Company policies as in effect and communicated to Webb from time to
time.  In the event that there is a
conflict or contradiction between the contents of the Employee Handbook or
other such Company policies and the provisions of this Agreement, then the
provisions of this Agreement will prevail.


 


10.           Confidential
Information, Intellectual Property:


 


A.            Webb
acknowledges that during the course of his employment with the Company, he will
be given or will have access to non-public and confidential business
information of the Company which will include information concerning pending or
potential transactions, financial information concerning the Company,
information concerning the Company’s product formulas and processes,
information concerning the Company’s business plans and strategies, information
concerning Company personnel and vendors, and other non-public proprietary
information of the Company (all collectively called “Confidential Information”).  All of the Confidential Information
constitutes “trade secrets” under the Uniform Trade Secrets Act.  Webb covenants and agrees that during and
after the term of his employment by the Company he will not disclose such
information or any part thereof to anyone outside the Company or use such
information for any purpose other than the furtherance of the Company’s
interests without the prior written consent of the CEO or Board; provided, that
the restrictions of this Section 10 shall not apply to any such information
that (i) is or becomes generally available to the public other than as a result
of a disclosure by Webb, or (ii) becomes available to Webb from a third party
who is not, as a result of such a disclosure, in breach of any confidentiality
obligation to the Company, or (iii) was in Webb’s possession at the time of
disclosure and was not acquired from the Company on a confidential basis.


 


B.            Webb further covenants that for a
period of two (2) years after his employment by the Company terminates, he
will not, directly or indirectly, overtly or tacitly, induce, attempt to
induce, solicit or encourage (i) any customer or prospective customer of
the Company to cease doing business with, or not to do business with, the
Company or (ii) any employee of the Company to leave the Company.


 


C.            The Company and Webb agree that the
covenants set forth in this Section 10 are reasonably necessary for the
protection of the Company’s Confidential Information and that a breach of the
foregoing covenants will cause the Company irreparable damage not compensable
by monetary damages, and that in the event of such breach or threatened breach,
at the Company’s election, an action may be brought in a court of competent
jurisdiction seeking a temporary restraining order and a preliminary injunction
against such breach or threatened breach notwithstanding the arbitration
provision of Section 12F below.  


 


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Upon
the court’s decision on the application for a preliminary injunction, the court
action shall be stayed and the remainder of the dispute submitted to
arbitration under Section 12F.  The
prevailing party in such legal action shall be entitled to recover its costs of
suit including reasonable attorneys’ fees.


 


D.            The Company shall own all rights in
and to the results, proceeds and products of Webb’s services hereunder,
including without limitation, all ideas and intellectual property created or
developed by Webb and which is related to Webb’s employment.


 


11.           Integration with Change in
Control Severance Agreement: 
If Webb becomes eligible for benefits under Section 3 of the Change
in Control Severance Agreement executed concurrently herewith, the benefits
provided by Section 4 of that Agreement shall be in lieu of, and not in
addition to, the benefits provided by Section 8B of this Agreement.


 


12.           Miscellaneous:


 


A.            This Agreement and the Change in
Control Severance Agreement and Indemnification Agreement entered into
concurrently herewith contain the entire agreement of the parties on the
subject of Webb’s employment by the Company, all prior and contemporaneous
agreements, promises or understandings being merged herein. This Agreement can
be modified only by a writing signed by both parties hereto.


 


B.            Webb cannot assign this Agreement or
delegate his duties hereunder. Subject to the preceding sentence, this
Agreement shall bind and inure to the benefit of the parties hereto, their
heirs, personal representatives, successors and assigns.


 


C.            No waiver of any provision or
consent to any exception to the terms of this Agreement shall be effective
unless in writing and signed by the party to be bound and then only to this
specific purpose, extent and instance so provided.  This Agreement may be executed in counterparts
(and by facsimile signature), each of which shall be deemed an original but all
of which together shall constitute one and the same agreement.


 


D.            Each party shall execute and deliver
such further instruments and take such other action as may be necessary or
appropriate to consummate the transactions herein contemplated and to carry out
the intent of the parties hereto.


 


E.             This Agreement shall be construed
in a fair and reasonable manner and not pursuant to any principle requiring
that ambiguities be strictly construed against the party who caused same to
exist.


 


F.             (i)            All
disputes arising under or in connection with this Agreement, shall be submitted
to a mutually agreeable arbitrator, or if the parties are unable to agree on an
arbitrator within fifteen (15) days after a written demand for arbitration is
made by either party, 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. 
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 


 


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1283.1.  The arbitration hearing shall be commenced
within ninety (90) days after the selection of an arbitrator by mutual
agreement or, absent such mutual agreement, the filing of the application with
JAMS by either party hereto, and a decision shall be rendered by the arbitrator
within thirty (30) days after 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 and the arbitrator’s
fee and costs, to the party determined to have substantially prevailed.  Judgment on the award can be entered in a
court of competent jurisdiction.


 


(ii)           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 non-jury civil action except that a former California Superior Court
Judge selected by the parties or by JAMS, as hereinabove provided, shall be
appointed as referee to try all issues of fact and law, without a jury,
pursuant to California Code of Civil Procedure §638 et seq.  The parties hereto expressly waive a trial by
jury. 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.


 


G.            Payments to Webb are subject to
payroll deductions and withholdings if and to the extent required by law.  Salary payments will be reduced on a
dollar-for-dollar basis by payments received by Webb for disability under
governmental or Company paid disability insurance programs.


 


H.            All provisions of this Agreement
which must survive the termination of this Agreement to give them their
intended effect shall so survive.


 


I.              If any provision of this Agreement
is determined to be unenforceable as illegal or contrary to public policy, it
shall be deemed automatically amended to the extent necessary to render it
enforceable provided the intent of the parties as expressed herein will not
thereby be frustrated.  Otherwise the
unenforceable provision shall be severed from the remaining provisions which
shall remain in effect.


 


J.             The Company will reimburse Webb for
up to $2,500 for legal fees incurred in connection with the negotiation and
preparation of this Agreement.


 


IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first above written.


 


	
   

  	
   

  	
   

  	
  FARMER
  BROS. CO.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /S/
  ROGER M. LAVERTY

  
	
   

  	
   

  	
   

  	
   

  	
  Roger
  M. Laverty, Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /S/
  DREW H. WEBB

  
	
   

  	
   

  	
   

  	
   

  	
  Drew
  H. Webb

  



 


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EXHIBIT A


 


RELEASE
AGREEMENT


 






 


I
understand that my position with Farmer Bros. Co. (the “Company”) terminated
effective                     ,
20     (the “Separation Date”).  The Company has agreed that if I choose to
sign this Agreement, the Company will pay me severance benefits (minus the
standard withholdings and deductions) pursuant to the terms of the Employment
Agreement entered into as of March 3, 2008 between myself
and the Company.  I understand that I am
not entitled to this severance payment unless I sign this Agreement.  I understand that in addition to this
severance, the Company will pay me all of my accrued salary and vacation, to
which I am entitled by law regardless of whether I sign this release.


 


In
consideration for the severance payment I am receiving under this Agreement, I
acknowledge and agree that I am bound by the provisions of Sections 10A and 10B
of my Employment Agreement and hereby release the Company and its current and
former officers, directors, agents, attorneys, employees, shareholders, and
affiliates from any and all claims, liabilities, demands, causes of action,
attorneys’ fees, damages, or obligations of every kind and nature, whether they
are known or unknown, arising at any time prior to the date I sign this
Agreement.  This general release
includes, but is not limited to: all federal and state statutory and common law
claims, claims related to my employment or the termination of my employment or
related to breach of contract, tort, wrongful termination, discrimination,
wages or benefits, or claims for any form of compensation.  This release is not intended to release any
claims I have or may have against any of the released parties for (a) indemnification
as a director, officer, agent or employee under applicable law, charter
document or agreement, (b) severance and other termination benefits
specifically provided for in my Employment Agreement which constitutes a part
of the consideration for this release, (c) health or other insurance
benefits based on claims already submitted or which are covered claims properly
submitted in the future, (d) vested rights under pension, retirement or
other benefit plans, or (e) in respect of events, acts or omissions
occurring after the date of this Release Agreement.  In releasing claims unknown to me at present,
I am waiving all rights and benefits under Section 1542 of the California
Civil Code, and any law or legal principle of similar effect in any jurisdiction:  “A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially affected
his settlement with the debtor.”


 


I
acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the federal Age Discrimination in Employment Act of
1967, as amended (“ADEA”).  I also
acknowledge that the consideration given for the waiver in the above paragraph
is in addition to anything of value to which I was already entitled.  I have been advised by this writing, as
required by the ADEA that: (a) my waiver and release do not apply to any
claims that may arise after my signing of this Agreement; (b) I should
consult with an attorney prior to executing this release; (c) I have
twenty-one (21) days within which to consider this release (although I may
choose to voluntarily execute this release earlier); (d) I have seven (7) days
following the execution of this release to revoke the Agreement; and (e) this
Agreement will not be effective until the eighth day after this Agreement has
been signed both by me and by the Company.


 


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I
accept and agree to the terms and conditions stated above:


 


 


 


	
   

  	
   

  
	
   

  	
  Drew
  H. Webb

  



 


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