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Shareholder Proposal for Independent
Board and Cumulative Voting
(June
25, 2002)
Mitchell Partners, L.P.,
submitted a
proposal and supporting statement to Farmer Bros. Co. on June 25, 2002, pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, for
inclusion in the company's proxy statement for the next meeting of stockholders.
If adopted by shareholder vote, the proposal would amend the
company's Bylaws to
provide for the restoration of cumulative voting for directors, the requirement
of a majority of independent directors, and the delegation of responsibilities
to independent board committees for Audit,
Compensation and Stock Incentives, Nominating, and Strategic Issues. The
new amendment would reverse a recent management amendment which had eliminated
cumulative voting, and would require a supermajority 75% of outstanding shares
for any future elimination of shareholder rights to cumulate votes or to call
special meetings. The provisions for an independent board are generally
consistent with standards proposed recently by the
New York Stock Exchange and
other authorities.
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PROPOSAL: EFFECTIVE CORPORATE GOVERNANCE STANDARDS
To assure effective, independent monitoring and reporting of
the corporation's management by directors representing the interests of all
shareholders, it is proposed that the Bylaws be amended to delete that
portion of Article II, Section 9 which had eliminated shareholder rights to
cumulate votes in the election of directors and to add the following new
sections:
Article III, Section 15. INDEPENDENT DIRECTORS. A majority of the directors
serving shall be qualified as independent. An "independent" director is one
who has not had any relationship with the corporation or its affiliates
during the past five years other than as a director or shareholder of the
corporation, except those past relationships which are (a) fully disclosed
in the corporation's proxy statements and (b) deemed insignificant and
non-conflicting by a majority of the other independent directors. If at any
time a majority of directors serving are not independent directors elected
by shareholders, then any director may call a special meeting of
shareholders for the purpose of electing directors.
Article IV, Section 3. INDEPENDENT COMMITTEES. The board shall designate the
committees specified in this section, each consisting of only independent
directors as defined in Section 2 of this article, and each with at least
three directors. These committees shall have authority to engage such
advisers, experts, agents or others as may be appropriate to perform their
duties. The specified committees, and the authority delegated to the extent
permitted by applicable laws, are
(a) an Audit Committee, for matters concerning the auditing of financial
statements, including but not limited to exclusive responsibility for the
engagement of auditors, and the reporting of information to investors;
(b) a Compensation and Stock Incentive Committee, for matters concerning the
compensation of officers and directors and the management of incentive and
pension plans, including any employee stock trusts;
(c) a Nominating Committee, for the review and nomination of director
candidates; and
(d) a Strategic Issues Committee, for matters concerning the recommendation
of strategic alternatives, including the development of management resources
and succession planning.
Article IX, Section 3. SHAREHOLDER REPRESENTATION. Notwithstanding any other
provisions of the bylaws, shareholder rights to cumulate votes for the
election of directors and to call special meetings as permitted by the
California Corporations Code may be eliminated only if approved by at least
75% of outstanding shares. Section 15 of Article III relating to Independent
Directors and Section 2 of Article IV relating to Independent Committees may
by amended only by a majority of outstanding shares.
SUPPORTING STATEMENT
Farmer Bros. is a public company and should be run like one,
for the benefit of all its shareholders, according to currently accepted
standards. This proposal will establish the kind of independent board that
virtually all recognized authorities consider essential to effective
corporate governance. It will also establish processes, including the
restoration of cumulative voting, for representation of shareholder
interests.
It is up to shareholders to vote for or against corporate governance
standards designed to make the Company responsive to its shareholders.
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