Exhibit 10.27
[FORM OF EXECUTIVE
OFFICER]
CHANGE IN CONTROL SEVERANCE
AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE
AGREEMENT (this “ Agreement ”), effective as
of
,
(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 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
,
20 ; provided, however, that
(i) commencing on January 1,
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.
1
(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/her]
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:
(i)
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
(ii)
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 2(f) 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
(iii)
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 2(f) that any individual who
becomes a member of the Board
2
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/her] 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 a termination of the
Executive’s employment by the Company 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 a termination of the
Executive’s employment by the Executive due to:
(i)
a significant reduction of the
Executive’s responsibilities, duties or authority;
(ii)
a material reduction in the
Executive’s Base Salary; or
(iii)
a Company-required material
relocation of the Executive’s principal place of
employment;
provided, however, that any such
condition shall not constitute “Good Reason” unless
both (x) the Executive provides written notice to the Company
describing the condition claimed to constitute Good Reason in
reasonable detail within ninety (90) days of the initial existence
of such condition, and (y) the Company fails to remedy such
condition within thirty (30) days of receiving such written notice
thereof; and provided, further, that in all events the termination
of the Executive’s employment with the Company shall not be
treated as a termination for “Good Reason” unless such
termination occurs not more than one (1) year following the
initial existence of the condition claimed to constitute
“Good Reason.
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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 or terminated by Resignation for Good Reason during the
Threatened Change in Control Period.
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 receive as severance
an amount equal to [his/her] Base Salary at the rate in effect on
the date of termination for a period of twenty-four (24) months,
such payment to be made in installments in accordance with the
Company’s standard payroll practices, such installments to
commence, subject to Section 9(j)(ii), in the month following
the month in which the Executive’s Separation from Service
occurs. The Executive shall also receive a payment equal to
one hundred percent (100%) of the Executive’s target Bonus
for the fiscal year in which the date of termination occurs (or, if
no target Bonus has been assigned to the Executive as of the date
of termination, the average Bonus paid by the Company to the
Executive for the last three (3) completed fiscal years or for
the number of completed
