Exhibit 10.4


 


FARMER BROS. CO.


 


2005 INCENTIVE COMPENSATION PLAN


 


(Amended and Restated as of December 31,
2008)


 


1.             Purpose.
 The purpose of this Plan is to further
the Company’s profitability by providing an incentive and reward to key
management employees of the Company who through industry, ability, teamwork
with other key management employees and exceptional service contribute
materially to the success of the Company, and by enhancing the Company’s
ability to attract and retain in its employ key personnel upon whose efforts
the success of the Company is dependent.  The Company desires to adopt this Plan to:
provide awards based on the achievement of corporate goals and specifically
measured individual goals that are consistent with and support the Company’s
overall business strategies and objectives; provide Participants with an
incentive for excellence in individual performance; and promote teamwork.  This Plan entirely supersedes the Company’s
1982 Incentive Compensation Plan (“1982 Plan”).


 


2.             Definitions.
 As used in this Plan, the following
terms shall have the following meanings:


 


(a)           “Plan” means
this Farmer Bros. Co. 2005 Incentive Compensation Plan, as it may be amended
from time to time.


 


(b)           “Company” means
Farmer Bros. Co., a Delaware corporation, and includes the Company’s
subsidiaries and divisions.


 


(c)           “Board of Directors”
or “Board” means the Board of Directors of Farmer Bros. Co.


 


(d)           “Committee”
means the Compensation Committee of the Board, or such other committee as may
be appointed by the Board to administer the Plan pursuant to section 9.


 


(e)           “Fiscal Year”
means the year selected by the Company for income taxation and financial
reporting purposes.


 


(f)            “Employee” or “Eligible
Employee” means any officer or other key management employee of the Company
(including subsidiaries) who is in the employ of the Company. No member of the
Committee shall be an Eligible Employee while serving on the Committee or for a
period of one year thereafter.


 


(g)           “Participant”
means an Eligible Employee to whom an award is made under this Plan.


 


(h)           “Award” means a
Current Award or Deferred Award made by the Committee pursuant to section 6
of the Plan.


 


(i)            “Current Award”
means an Award payable pursuant to section 7(a) of the Plan.


 


(j)            “Deferred Award”
means an Award payable pursuant to section 7(b) of the Plan.


 


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(k)           “Base Salary”
means a Participant’s annual pay rate at the end of the Fiscal Year, without
taking into account the following:  (i) any
deferrals of income; (ii) any incentive compensation; or (iii) any
other benefits paid or provided under any of the Company’s other employee
benefit plans.


 


(l)            “Performance
Criteria” means the attainment of specified levels of (or percentage
changes in) financial performance and other corporate and/or individual
objectives as determined by the Committee in its discretion.


 


(i)            Performance Criteria
may measure, without limitation, such financial performance indicators as the
following: adjusted net income, net sales; total shareholder return;
profitability; stock price; economic value added; profit margin (gross or net);
asset turnover; sales growth (whether measured in pounds of coffee, number of
accounts or otherwise); asset growth; return on investment; earnings per share;
return on equity; return on assets; return on capital; operating cash flow;
cost of capital; net income; market share; working capital; cost reduction; and
such other financial metrics measured solely in terms of the attainment of
quantitative targets related to the Company’s business.


 


(ii)           Performance Criteria
may also assess, without limitation, attainment of corporate and/or individual
objectives such as customer satisfaction, maintenance of good employee
relations, safety enhancement, improved product quality, systems improvement
and implementation, acquisitions, expansion of product lines, creation of
operating efficiencies, market share increase, geographic expansion,
enhancement of management depth, succession planning, financial risk management,
and such other objectives important to the achievement of the Company’s overall
business strategies and objectives.


 


(iii)          Performance Criteria may
but need not be susceptible to objective measurement.


 


Performance Criteria may be applied by the Committee as a measure of
the performance of any, all, or any combination of the following: the Company;
a subsidiary, division, department, region, function or business unit of the
Company or any subsidiary; a particular product category or categories of the
Company or any subsidiary; or an individual Participant.


 


(m)          “Target Award” is
defined in Section 5.


 


3.             Amount
Subject to Awards.  The amount
available for Awards under this Plan each Fiscal Year shall be within the
discretion of the Committee.


 


4.             Participants.
 Based on its evaluation of an Employee’s
performance, contribution to the Company, compensation, and other criteria it
deems relevant, the Committee shall determine within ninety (90) days after the
beginning of each Fiscal Year, in its sole discretion, the Employees, if any,
who shall be Participants in the Plan for that year.


 


5.             Performance
Criteria and Target Award.  With
respect to each Participant, the Committee shall establish in writing the
specific Performance Criteria for such Fiscal Year to be achieved by the
Company and/or such Participant in order for such Participant to earn an Award
under this Plan.  The Committee shall
also establish a target Award amount (“Target Award”) for each


 


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Participant based upon the Participant’s past annual
compensation, current salary, job responsibilities and past and expected future
job performance.  The Committee may
consult with senior management executives of the Company and the Plan
Participants in establishing such Performance Criteria and Target Awards to the
extent deemed appropriate by the Committee.  Performance Criteria may vary from Participant
to Participant and between groups of Participants.  The Committee shall for each Fiscal Year establish
a formula or matrix for each Participant pursuant to which his or her Award
shall be determined based upon the degree of achievement of such Performance
Criteria.  This formula or matrix may
take into account Performance Criteria achieved in prior Fiscal Years.  In addition, the relative weight among
specific Performance Criteria shall be determined by the Committee in its
discretion.  The Committee shall inform
each Participant of the Performance Criteria, Target Award and formula or
matrix for determining achievement of the Performance Criteria and calculation
of the Award which are applicable to the Participant’s Award.  The Committee shall have the discretion at any
time to add additional Performance Criteria and to modify any objectives or
performance levels designated in relation to previously established Performance
Criteria.  The Performance Criteria for
each Participant, once established, shall continue for subsequent Fiscal Years
unless modified by the Committee.  Depending on the level of achievement of
applicable Performance Criteria, a Participant’s actual Award can exceed his or
her Target Award.


 


6.             Determination of
Awards.


 


After
the end of each Fiscal Year and promptly upon availability of the Company’s
audited financial statements, the Committee shall review and evaluate the
Performance Criteria applicable to the Fiscal Year for each Participant in
light of the Company’s and/or such Participant’s performance measured in
accordance with such criteria, and shall determine whether and to what extent
the Performance Criteria have been satisfied and the amount of the Award, if
any, to be made to the Plan Participant.  The executive officers of the Company shall
provide all information necessary to enable the Committee to make the
determination promptly following fiscal year-end.  The Committee may in its discretion consult
with such Participant’s immediate supervisor (i.e., responsible Vice President
and/or the President and CEO) with respect to whether any Performance Criteria
measured by such Participant’s individual performance have been achieved.  Achievement of financial Performance Criteria
shall be determined by adding back any past or current Award made under the
Plan or any award under the 1982 Plan which otherwise would affect the result
unless the Committee determines otherwise.  If a Performance Criterion is not susceptible
to objective measurement, the Committee shall determine the level of attainment
in good faith on a subjective basis.  Payment
of Awards, less withholding taxes, shall be made to Participants as provided in
section 7, but only upon the Committee’s certification that the applicable
Performance Criteria have been satisfied and upon determination of the amount
of each Award.  No Award shall be deemed
to be earned under the Plan prior to the Committee’s certification and Award
determination.


 


Notwithstanding
anything contained in this Plan to the contrary and regardless of whether any
or all of the Performance Criteria have been achieved, whether in whole or in
part, the Committee may in its discretion eliminate entirely, reduce, or
increase any Award to a Participant in order to reflect additional
considerations relating to the Company and/or such Participant’s individual
performance.  In determining whether an
Award will be, eliminated, reduced or increased, the Committee shall consider
any changes in circumstances which may


 


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have occurred during the Fiscal Year, including,
without limitation, changes in accounting practices or applicable law,
extraordinary items of gain or loss, discontinued operations, restructuring
costs, sales or dispositions of assets and acquisitions, and such Participant’s
individual performance.  Any action by
the Committee under this paragraph shall be conclusive and binding on the
Company and the Participant.


 


7.             Payment of Awards.


 


(a)           Current Awards.  Current Awards for a Fiscal Year shall be paid
in a lump sum as soon as practicable after the Committee’s determination
pursuant to Section 6 and in all events not later than the December 31
that follows the end of such Fiscal Year.


 


(b)           Deferred Awards.
 Prior to the beginning of any Fiscal
Year, the Committee may, in its sole discretion, allow Participants to elect to
defer payment of any Award they may receive with respect to that Fiscal Year
beyond the date such Award would be paid pursuant to Section 7(a) but
for such deferral election.  Any such
deferral election shall be made in a form and manner prescribed by the
Committee, shall be filed with the Committee no later than the last day of the
Fiscal Year that proceeds the Fiscal Year to which the Award relates (or such
earlier deadline as may be prescribed by the Committee).  Any such deferral of payment must comply with
any applicable requirements of Section 409A of the U.S. Internal Revenue
Code.


 


8.             Designation of
Beneficiaries.


 


Each
Participant shall file with the Committee a written designation of the person
or persons who shall be entitled to receive any amounts payable under this Plan
after the Participant’s death.  The
Participant may designate natural persons, charitable institutions, trusts, or
the Participant’s estate as beneficiaries.  A Participant may name one or more contingent
beneficiaries.  Unless otherwise
designated by a Participant, payments shall be divided equally among
co-beneficiaries.  A Participant may from
time to time revoke or change a beneficiary designation without the consent of
any prior beneficiary by filing a new designation with the Committee.  The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Participant’s death, and in no event shall it be
effective as of a date prior to such receipt.


 


If no
such beneficiary designation is in effect at the time of a Participant’s death,
or if no designated beneficiary survives the Participant, or if such
designation conflicts with law, the payment of the amount, if any, payable
under the Plan after his death shall be made to the Participant’s estate.  If the Committee is in doubt as to the right
of any person to receive such amount, the Committee may retain such amount,
without liability for any interest thereon, until the rights thereon are
determined, or the Committee may pay such amount into any court of appropriate
jurisdiction and such payment shall be a complete discharge of the liability of
the Plan, the Company and the Committee therefor.


 


9.             Administration.


 


The
Plan shall be administered by the Compensation Committee of the Board of
Directors or such other committee as may be appointed by the Board of
Directors.  The


 


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Committee shall have full power and authority to
construe, interpret and administer the Plan.  All decisions, actions or interpretations of
the Committee shall be final, conclusive and binding upon all parties unless
overruled by the Board of Directors.


 


The
Committee shall consist of two or more members, each of whom shall be appointed
by, shall remain in office at the will of, and may be removed, with or with
cause by the Board of Directors.  Any
member of the Committee may resign at any time.  No member of the Committee shall be entitled
to act on or decide any matter relating solely to himself or any of his rights
or benefits under the Plan.  No member of
the Committee shall be entitled to receive an Award under this Plan while
serving on the Committee or within one year thereafter.  The members of the Committee shall not receive
any special compensation for serving in their capacities as members of the
Committee.  No bond or other security
need be required of the Committee or any member thereof in any jurisdiction.


 


The
procedures for the proceedings of the Committee shall be established by
resolution of the Board of Directors, absent which resolution the procedures
applicable under the Company’s Bylaws to proceedings of the Board of Directors
shall apply to the proceedings of the Committee.


 


No member
of the Committee shall be personally liable by reason of any contract or other
instrument executed by him or his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
officer, employee or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan has been delegated, to the
fullest extent permissible under the California General Corporation Law.


 


10.           Amendment
or Termination.  The Board of
Directors reserves the right at any time to amend, suspend, or terminate the
Plan in whole or in part and for any reason without the consent of any
Participant or beneficiary; provided that no such action shall adversely affect
the rights of Participants or beneficiaries with respect to Awards made prior
to such action.  Subject to the foregoing
provision, any amendment, modification, suspension, or termination of any
provisions of the Plan may be retroactively applied.


 


11.           General Provisions.


 


Nothing
contained in the Plan shall give any Employee the right to be retained in the
employ of the Company or affect the right of the Company to dismiss any
Employee.  The adoption of the Plan or
designation of an Eligible Employee as a Plan Participant shall not create a
right in any Employee to receive an Award under the Plan.  No Award under the Plan shall be considered as
compensation under any employee benefit plan of the Company except as otherwise
determined by the Committee.


 


If the
Committee shall find that any person to whom any amount is payable under the
Plan is unable to care for his affairs because of illness or accident, or is a
minor, or is under any other disability, then any payment due him (unless a
prior claim therefore has been made by a duly appointed legal representative),
may, if the Committee so directs the Company, be paid to


 


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his spouse, a child, a relative, an institution
maintaining or having custody of such person, or any other person deemed by the
Committee to be a proper recipient on behalf of such person otherwise entitled
to payment.  Any such payment shall be a
complete discharge of the liability of the Plan, the Company, and the Committee
therefor.


 


Except
insofar as may otherwise be required by law, no amount payable at any time
under the Plan shall be subject in any manner to alienation by anticipation,
sale, transfer, assignment, bankruptcy, pledge, attachment, charge, or
encumbrance of any kind nor in any manner be subject to the debts or
liabilities of any person and any attempt to so alienate or subject any such
amount, whether presently or thereafter payable, shall be void.  If any person shall attempt to, or shall,
alienate, sell, transfer, assign, pledge, attach, charge, or otherwise encumber
any amount payable under the Plan, or any part thereof, or if by reason of his
bankruptcy or other event happening at any such time such amount would be made
subject to his debts or liabilities or would otherwise not be enjoyed by him,
then the Committee, if it so elects, may direct that such amount be withheld
and that the same or any part thereof be paid or applied to or for the benefit
of such person, his spouse, children or other dependents, or any of them, in
such manner and proportion as the Committee may deem proper.


 


The
Participant shall have no right, title or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
hereunder.  Nothing contained in the
Plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship, joint
venture or partnership between the Company and the Employee or any other
person.  To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of an unsecured general creditor of
the Company.  All payments to be made
hereunder shall be paid in cash from the general funds of the Company and no
special or separate fund shall be established and no segregation of assets
shall be made to assure payments of such amounts.


 


All
Deferred Awards under the Plan constitute unfunded deferred compensation
arrangements for a select group of key management personnel and all rights
thereunder shall be governed by and construed in accordance with the laws of
California.


 


The
Committee shall make such adjustments as it deems equitable in the event the Company
changes its fiscal year.


 


12.           Effective
Date of the Plan.  This Plan shall be
effective for Awards made for the Fiscal Year ending June 30, 2006.  Awards made for any prior Fiscal Year shall be
governed by the 1982 Plan.


 


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