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Forum Report: Company Files Proxy Statement, Excluding Shareholder Proposal with SEC Approval

(October 26, 2006)



Sent: Thursday, October 26, 2006 8:18 PM
Subject: Farmer Bros files proxy statement, excluding shareholder proposal with SEC approval

Farmer Bros. filed its proxy statement this afternoon for the annual meeting of shareholders scheduled to be held on November 27, 2006.
The shareholder proposal for voting on director indemnification was not presented in the proxy statement.  The SEC staff accepted the argument presented by management's lawyer, based only on the law firm's "view" without supporting Delaware court rulings, that the proposal would conflict with state law.  The SEC's response to the company's request for a "no action" letter provided only the following explanation:

                There appears to be some basis for your view that Farmer Bros. may exclude the proposal under rule 14a-8(i)(2). We note that, in the opinion of your counsel, implementation of the proposal would cause Farmer Bros. to violate state law. Accordingly, we will not recommend enforcement action to the Commission if Farmer Bros. omits the proposal from its proxy materials in reliance on rule 14a-8(i)(2). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which Farmer Bros. relies.

The SEC has not yet responded to Professor Rosenthalís August 14, 2006 request for advice of policy concerning SEC staff reliance on theories of state law which are untested by the state's court.
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.

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