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January 12, 2004
By telecopier:
310/320-2436
Mr. John E. Simmons
Secretary of the Corporation
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
Re: Demand to inspect records
Dear Mr. Simmons:
Acting as a
shareholder delegate according to the accompanying power of attorney, I note
that more than fifteen days has passed without public reports by Farmer
Bros. Co. (the “Company”) of documents or other detailed information
relating to several important matters announced by the Company in a December
24, 2003 press release. These matters included settlement agreements and
transactions with affiliates involving more than 20% of the Company’s
outstanding stock, changes in the control of the ESOP which may reportedly
own 18.7% of the Company’s stock, a proposed stock split, and the engagement
of an investment banker.
I therefore demand,
pursuant to Section 1601 of the California Corporations Code, that the
Company produce, for inspection and copying during normal business hours,
the following accounting books and records and minutes of proceedings of the
shareholders and the board and committees of the board ("Records") of the
Company and its subsidiaries:
1.
All Records, including any agreements, contracts, reports, analyses,
valuations, opinions or other information presented or submitted in relation
to proceedings, concerning the following matters addressed in the Company’s
December 24, 2003 announcement:
A.
The settlement agreement with the Crowe family.
B.
The Company’s offer to sell the ESOP approximately 125,000 shares of
stock acquired from Crowe interests.
C.
Company agreement to loan funds to ESOP.
D.
Changes in the governance provisions of the ESOP.
E.
Replacement of the ESOP’s committee members.
F.
A split of the Company’s stock, and any other actions or policies to
enhance the marketability or liquidity of the Company’s stock.
G.
The engagement of Credit Suisse First Boston, and of any other
advisers addressing the Company’s strategic options.
2.
To the extent not produced in response to the previous items, all
Records, including any agreements, contracts, reports, analyses, valuations,
opinions or other information presented or submitted in relation to
proceedings, concerning the consideration of matters relating to the items
listed above during the period from January 1, 2000 until the present,
including but not limited to the following examples:
A.
Determination of the amount and form of contributions to the ESOP,
including reports by Valuemetrics Advisors or others engaged to advise the
Company on its compensation practices or on competitive industry
compensation practices.
B.
Need for changes in the management of the ESOP.
C.
ESOP’s purchases of stock in advance of pension accruals with funding
by loans from the Company, and any consideration of conventional
alternatives.
3.
Records of all loans and other securities transactions between the
Company and the ESOP.
The purposes of this demand are
(a) to evaluate the benefits investors may realize from the actions
announced by the Company on December 24, 2003, (b) to evaluate the
performance of the Company's current directors, (c) to determine whether the
Company’s assets are being used properly for the benefit of shareholders,
and (d) to consider voting decisions on matters to be presented at the
annual meeting now scheduled for January 21, 2004.
In addition to this demand, I
reiterate the demand for Records made initially in my letter to you of March
13, 2003. The Company has not yet provided those Records, and should do so
now.
To the extent that any of the
demanded Records may include trade secrets or other information that should
be treated as confidential, you should identify the particular material. I
will welcome your proposal of a standard form of a confidentiality agreement
applicable to that information. It should be understood, however, that I
may communicate any non-confidential information to others.
Under any circumstances, neither
your response to these demands nor any of my communications will relieve the
Company's management of its responsibility for providing information to
public investors in compliance with applicable SEC regulations.
Please let me know if you have
any questions about these demands.
Very truly
yours,
Peter F.
Brennan,
as
Delegate
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