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.
1
(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
2
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
