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April 5, 2004
By telecopier:
310/320-2436
Mr. John E. Simmons
Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, California 90502
Re: Demand for records
Dear Mr. Simmons:
Acting as a
shareholder delegate according to the accompanying powers of attorney and
affidavit, I ask Farmer Bros. Co. (the “Company”) to provide the information
specified below. You are encouraged to publicly report the information to
make it available simultaneously to all investors. But concerning any
requested information which you do not publish, I demand that you produce
all relevant books and records for inspection and copying pursuant to
Section 1601 of the California Corporations Code and Section 220 of the
Delaware General Corporation Law.
Following is the
information to be produced:
1.
Terms and conditions of the Company’s reported engagement of Credit
Suisse First Boston, and of any other advisers addressing the Company’s
strategic options. (Note that this information was previously demanded in
my January 12, 2004 letter, and has not yet been published or otherwise
produced by the Company.)
2.
All information demanded originally in my March 13, 2003 letter, a
copy of which is attached for reference.
3.
Financial reports of the Company’s affiliated Employee Stock
Ownership Plan (“ESOP”), including accounting of all related party
transactions, since the ESOP’s initial organization in 2000.
4.
Reports, opinions, analyses or other information on which the Company
relied for each of the following:
A.
Attribution of the deteriorating performance of the Company’s coffee
business to general economic conditions rather than to a loss of competitive
position or other factors, as reported in a February 24, 2004 Form 8K
filing.
B.
Lack of interest in certain strategic alternatives, as reported in a
February 24, 2004 Form 8K filing.
C.
Consideration of any strategies to separate the management of the
company’s coffee and investment businesses.
D.
Failure to secure the regulatory and tax benefits of registration
under the Investment Company Act of 1940.
E.
Agreement to sell 124,939 shares of the Company’s stock to the
affiliated ESOP for only $250 per share, when the stock’s public market
prices were more than 20% higher, in a $31 million transaction concluded in
January 2004.
F.
Investment of over $60 million of Company funds in the ESOP,
including the $31 million provided in January 2004.
G.
Determination that Company employees will benefit from the ESOP’s
assumption of over $60 million debt to acquire Company stock which will not
be allocated to employees for up to 15 years, as an alternative to
conventional provisions for commitments to acquire stock in the future as
funds become available for employee allocations.
5.
The size (in square feet or other meaningful measure), date of
acquisition, book value costs and depreciation, insurance value, and
estimated market value of each real property asset owned by the Company.
The purposes of this demand are
(a) to analyze the investment value of the Company’s business operations and
assets, (b) to evaluate the performance of the Company's directors, (c) to
determine whether the Company’s assets are being used properly for the
benefit of shareholders, and (d) to consider possible actions to protect the
rights and interests of shareholders.
To the extent that any of the
records to be produced may include trade secrets or other information that
should be treated as confidential, you should identify the particular
material. If appropriate, I will consider arrangements for any such
material to be reviewed by counsel subject to reasonable confidentiality
restrictions.
It should of course be understood
that neither your communications with me nor any of my communications with
others 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 within five
business days what information you intend to report publicly and what
arrangements you propose for producing the other information.
Very truly
yours,
Peter F. Brennan,
as
Delegate
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