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PROPOSAL: INDEMNIFICATION OF DIRECTORS
RESOLVED, that it is not proper for Farmer
Bros. Co. (the “Company”) to indemnify the current and former directors
named below against expenses, judgments, fines, settlements and other
amounts incurred in connection with any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or
investigative, concerning violations of law or breaches of duty during the
period from July 2002 until the date of this resolution relating to (a)
disclosures of information to investors, (b) compliance with the Investment
Company Act of 1940, or (c) actions to benefit the Company’s controlling
persons which are not in the best interests of all of the
Company’s shareholders, because these
directors did not meet the applicable standards of conduct established by
the California Corporations Code
and the Company’s Bylaws:
John M. Anglin,
Guenter W. Berger,
Lewis A. Coffman,
Roy E. Farmer,
Roy F. Farmer,
Thomas A. Maloof,
John H. Merrell, and
John Samore, Jr.
SUPPORTING STATEMENT
As shareholders, we have the right under
Section 317(e)(3) of the California Corporations Code
(“CCC”) to decide, in the absence of
a court decision, whether our Company’s funds should be used to indemnify
directors for their litigation expenses. (Shares owned by the directors to
be indemnified are not entitled to vote on this resolution.)
This resolution gives you, the shareholders,
the ability to exercise that right. Without this resolution, the directors
themselves could choose lawyers (and pay them with your Company’s funds) to
determine whether the Company should indemnify the directors.
Adopting this resolution will not be unfair
to any director who can establish that he actually deserves indemnification.
The directors will still have the right to be fully indemnified under
CCC§317(d) if they succeed on the merits in defense of any claim, or under
CCC§317(e)(4) if a court determines that the director met the applicable
standards of conduct.
The CCC defines the standards of conduct as
requiring directors to act in good faith and, under CCC§317(b), in the best
interests of the Company, or under CCC§317(c), in the best interests of the
Company and its shareholders. And both CCC§204 and Article VI, Section 2(b)
of the Company’s Bylaws specifically prohibit indemnification of directors
for “acts or omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of duty to the Company or its shareholders.”
You can decide for yourself, based on the
information available to you, whether or not you believe these directors –
who accepted a fiduciary duty to protect the interests of ALL shareholders –
have always acted in the best interests of those of us who have a right to
rely upon them. If you believe they haven’t, you should vote for this
resolution and prevent them from being able to use your money to pay their
costs of claims unless a court decides they have a right to it.
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