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Forum activities relating to Farmer Bros. Co. were suspended in 2007, following the second year of new management.

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Shareholder Proposal to Determine Indemnification of Directors

(July 31, 2003)

Copied below is a proposal and supporting statement which Franklin Mutual Advisers, LLC, submitted to Farmer Bros. Co. on July 31, 2003, for presentation to shareholders at the company's next annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended.   As a 9.6% shareholder, FMA also filed an SEC Form 13D/A on August 1, 2003 to disclose its submission of the proposal.

The proposed resolution would allow shareholders to determine that, in the absence of a court decision establishing that a director deserves indemnification, the company will not pay the expenses of directors connected with any shareholder or regulatory proceedings concerning their performance of fiduciary duties since July 2002 in relation to information disclosures, compliance with the Investment Company Act of 1940 ("ICA"), or actions to benefit controlling persons rather than all shareholders.  The supporting statement refers to the relevant sections of the California Corporations Code and the company's Bylaws on which a shareholder decision would be based.

Director responsibilities for information disclosures and ICA compliance have been addressed in several letters listed in the "Forum Reports" section of this web site's index page, and some of the key issues are summarized in a June 24, 2003 request for SEC determination of the company's obligations.





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.





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.



The Forum is open to all Farmer Bros. shareholders, whether institutional or individual, and to professionals concerned with their investment decisions.  Its purpose is to provide shareholders with access to information and a free exchange of views on issues relating to their evaluations of alternatives.  As stated in the Forum's Conditions of Participation, participants are expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

There is no charge for participation.  Franklin Mutual Advisers, LLC, the manager of funds owning approximately 12.6% of Farmer Bros. shares, provided initial sponsorship for the Forum and arranged for it to be chaired by Gary Lutin.  Continuing support and guidance of the Forum is provided by an Advisory Panel of actively interested shareholders.

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