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Management Attorney's Response to Shareholder Delegate's Demand for Records

(December 27, 2005 - January 13, 2006)

In a letter dated December 27, 2005, an attorney representing Farmer Bros. management proposed a form of "Confidentiality Agreement" as a condition of compliance with the company's acknowledged obligations to produce records in response to the shareholder Delegate's December 9, 2005 demand letter.  A scanned copy of the letter with its proposed confidentiality form can be downloaded from the following link:

The Delegate's January 13, 2006 reply, the text of which is copied below, reminded the attorney that the original demand letter had invited "conventionally established" arrangements to deal with any specifically identified "trade secrets or other information that should be treated as confidential," and noted that the attorney's proposed form of "Confidentiality Agreement" was clearly "inconsistent with the essential purpose of a demand seeking information needed for investment decisions."  Reference was made to an example of a conventional confidentiality agreement for records demands in another Forum program.

In a subsequent January 26 - February 8, 2006 exchange of letters, the attorney offered revisions of his confidentiality form and reported management's willingness to prepare summaries of information, to which the Delegate responded by accepting the invitation to suggest summaries and by presenting issues to be addressed in further revisions of the confidentiality form.

 

 

Peter F. Brennan

c/o Palmer Brennan LLC

237 Park Avenue, 9th Floor

New York, New York 10017

Telephone: 212/692‑7648; Facsimile: 212/692‑7657

 

 

January 13, 2006

 

 

By telecopier: 213-621-5040

 

Joseph J. Giunta, Esquire

Skadden Arps Slate Meagher & Flom LLP

300 South Grand Avenue

Los Angeles, California 90071

 

 

                                        Re: Farmer Bros. Co. demand for records

 

Dear Mr. Giunta:

 

            Responding to your letter dated December 27, 2005, it should be noted that my December 9, 2005 demand letter invited Farmer Bros. to identify, particularly, “any of the records to be produced [that] may include trade secrets or other information that should be treated as confidential,” and stated my willingness to consider “arrangements for any such material to be reviewed by counsel subject to confidentiality restrictions which are conventionally established for these purposes.”

 

            The “Confidentiality Agreement” you proposed does not appear to provide for a conventional arrangement.  For example, it defines “Confidential Information” as any information that has not been publicly disclosed “by the Company,” whether or not it has been disclosed by others – most of the requested real estate information, after all, could be found in various municipal records – and whether or not the information is really a trade secret or needs to be considered confidential for any other reason.  The proposed agreement also seems to restrict the shareholders’ ability to make use of information reports that have excluded any confidential material, which would be inconsistent with the essential purpose of a demand seeking information needed for investment decisions.

 

            I will appreciate your suggestion of a more conventional form of confidentiality agreement, such as the one used recently in similar circumstances which has been posted on the following “Forum” web site:

 

http://www.shareholderforum.com/CA/Process/20050802_Agreement.pdf

 

May I also ask that you transmit your response to me by fax (212-692-7657) or email (midcap@email.msn.com) to avoid further postal service delays?

 

                                                            Very truly yours,

 

 

 

                                                            Peter F. Brennan,

                                                                        as Delegate

 

 

 

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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