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Plans for Initial Forum Activities

(May 17, 2002)

 

May 17, 2002 Distribution to Participants:

 
Sent: Friday, May 17, 2002 7:13 AM
Subject: Plans for initial Forum activities

 
Based on discussions with several Forum participants, it is suggested that initial activities be focused on two subjects which must be addressed by mid-June:
 
  • Define 3-5 strategic alternatives to realize more than $400 per share - Nearly all of the participants who've talked with me have suggested a preferred strategy to enhance shareholder value.  These could be classified into categories such as buyback programs, spin-offs, auction sales, buyouts, etc., but even within the same categories there were significant variations for liquidity, tax or other considerations.  It will be important to have a manageable number of specific scenarios that can be professionally evaluated, so that we can use them as standards for comparison with current conditions or any other alternatives.  We will also want to refer to these defined scenarios as an indication of directions and ranges of what might be relevant in considering any governance proposals.  We can always consider different scenarios or variations later, and refine the list as we proceed, but we need something to start.
  • Review proposals for shareholder submission at annual meeting - A few of the participants have expressed an interest in submitting shareholder proposals or nominating directors for this year's annual meeting.  The process for shareholder proposals is relatively simple, if submitted by the June 27, 2002 deadline for presentation in the company's proxy statement, and can provide shareholders with an opportunity to decide whether the company should be regulated by the SEC as an investment company, establish requirements for independent board members, or make other changes in its governance policies or practices.  Proposing candidates for election to the board could be done by presenting a recommendation to the existing board for its consideration as a management nominee, or by the more ambitious process of independent nomination and proxy solicitation.  The Forum will support shareholder interests in any of these undertakings by providing procedural guidance and, more importantly, an effective exchange of participant views about what is relevant to shareholder interests.
 
A "Workshop" will be established for the purpose of defining and evaluating the strategic alternatives.  This will be open to all investment professionals, including advisers to Forum participants as well as qualified analysts and financial journalists who are not Farmer Brothers shareholders.  It should be assumed that the Workshop will operate very informally, the same as those in past forum programs I've conducted, with the understanding that each person who joins in the communication with other Workshop participants agrees to consider it private unless given explicit permission to identify or quote, just as I respect the privacy of each Forum participant who communicates separately with me.  This allows Workshop participants to collaborate freely on professional issues, and to present questions to management or shareholders through a Workshop representative if they prefer not to be identified.  People can join at any time or engage selectively in relation to specific issues, but it would be very helpful if those of you who are interested would let me know now, while efforts are being organized.
 
For those of you interested in shareholder proposals or director nominations, I will respond personally to at least determine your requirements.  We will also provide for informal participant comments on contemplated proposals, and, depending on the number and nature of initiatives, we will probably conduct some form of shareholder survey to determine the relevance of issues and guide proponents in their refinement of final proposals.  If you're thinking about a shareholder proposal, or interested in commenting on what others propose, please call me.
 
I thank those of you who offered advice during the past couple of weeks, and will of course continue to welcome questions or suggestions from all Forum participants.
 
                GL - 5/17/02

Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
(Tel: 212/605-0335)
(Fax: 212/605-0325)

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.

For additional information or to be included in an email distribution list, send an inquiry to farm@shareholderforum.com.