Company Name: Farmer Bros. Co.
Public Availability Date: October 4, 2004Document Sections:
INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
August 25, 2004 VIA HAND DELIVERY Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Farmer Bros. Co. Stockholder Proposal of Lime Fund LLC Securities Exchange
Act of 1934Rule 14a-8 Ladies and Gentlemen:
We are counsel to Farmer Bros. Co., a California corporation (the "Company").
The Company has received a stockholder proposal (the "Proposal") concerning
governance of its Employee Stock Ownership Plan (the "ESOP") and a supporting
statement (the "Supporting Statement") from Lime Fund LLC (the "Proponent") in
connection with the Company's 2004 Annual Meeting of Stockholders (the "2004
Stockholders Meeting"). On behalf of the Company, we hereby notify the Division
of Corporation Finance of the Company's intention to exclude the Proposal and
Supporting Statement from its proxy statement and form of proxy for the 2004
Stockholders Meeting (collectively, the "2004 Proxy Materials") on the bases set
forth below, and we respectfully request that the Staff of the Division (the
"Staff") concur in our view that the Proposal and Supporting Statement are
excludable on the bases set forth below. Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and its
attachments. As required by Rule 14a-8(j), a copy of this letter and its
attachments is being mailed on this date to the Proponent informing them of the
Company's intention to omit the Proposal and Supporting Statement from the 2004
Proxy Materials. The Company intends to begin distribution of its definitive
2004 Proxy Materials in the third week of November, 2004, and therefore this
letter is being submitted more than eighty (80) days prior to the date the
Company will file its definitive 2004 Proxy Materials with the Commission.
The Proposal relates to amending the Company's bylaws (the "Bylaws") with
respect to governance of the ESOP. The Proposal reads in its entirety as
follows: "Resolved, that it is in the interests of shareholders to assure the integrity
of employee pension plans, and that Article VII of the Bylaws is therefore
amended to add the following: ESOP Governance. To assure the independent management of any Employee Stock
Ownership Plan ("ESOP") established for the benefit of the Corporation's
employees, the Board of Directors shall take such actions as permitted by
applicable laws to provide for the ESOP's management by an independent trustee
and a governing committee elected by the ESOP's employee participants, voting
confidentially. No director of the Corporation may serve simultaneously as a
trustee or member of the ESOP's governing committee, other than for a brief
transition period approved by the Board of Directors, unless such simultaneous
service is specifically required by law. The Board of Directors may not act, or
permit the Corporation to act, to replace the ESOP trustee, amend the ESOP or
otherwise change the ESOP's governance provisions without the consent of the
ESOP governing committee elected by employees or a direct vote of the ESOP's
employee participants. This section is not intended, however, to restrict
actions by the Corporation to support the processes by which the ESOP's employee
participants elect members of the ESOP's governing committee and determine the
voting or disposition of stock held by the ESOP. This section may be amended
only by the stockholders." A copy of the Proposal and Supporting Statement is attached hereto as Exhibit 1.
We believe that the Proposal and Supporting Statement may properly be excluded
from the Company's 2004 Proxy Materials pursuant to the following rules:
1. Rule 14a-8(i)(7) because the Proposal deals with a matter relating to the
conduct of the ordinary business operations of the Company.
2. Rule 14a-8(i)(1), because the Proposal is not a proper subject for
stockholder action under the laws of the State of Delaware.
3. Rule 14a-8(i)(3), because the Proposal and Supporting Statement contain false
and misleading statements in violation of Rule 14a-9. I. BACKGROUND
The Company established the ESOP effective January 1, 2000. The ESOP provides
that it is administered by a committee (the "Committee") whose members are
appointed by the board of directors of the Company (the "Board"). The ESOP also
provides for the appointment of a trustee by the Board (the "Trustee"). In
December 2003, the Board caused the ESOP to be amended to provide (a) that the
Committee would consist of not more than three members, at least two of whom are
"independent directors" of the Company within the meaning of NASDAQ Proposed
Rule 4350(c)(1), and all of whom shall be appointed by the Board, and (b) that
unallocated shares of Company stock would be voted in the same proportion as
allocated shares of Company stock, which is commonly referred to as
"pass-through voting." Prior to December 2003, the Committee only included
members of senior management of the Company. The Board adopted these amendments
to the ESOP because it believed that the Committee, like the Board, should be
controlled by independent directors to deal with any conflicts that may arise
among the interests of management, the other employees who participate in the
ESOP and stockholders. The Board also believed that "pass-through voting" was
the best way for the employees to exercise their rights as current and future
stockholders of the Company as a result of their beneficial ownership of shares
held by the ESOP. The Committee currently consists of two independent members of the Board and one
senior member of management. Wells Fargo Bank, N.A. ("Wells Fargo") was
appointed by the Board as of January 1, 2000 to act as Trustee and continues to
act in such capacity. The ESOP currently provides that the Committee shall be responsible for the
general administration of the ESOP and shall have discretionary authority to
construe and interpret the ESOP including, but not limited to, the determination
of an individual's eligibility for participation in the ESOP, the right and
amount of any benefit payable under the ESOP and the date such individual ceases
to be a Member of the ESOP. The ESOP provides that the funds of the ESOP shall be held by the Trustee
pursuant to an Employee Benefit Trust Agreement, dated as of January 1, 2000,
between the Company and Wells Fargo (the "Trust Agreement"). The Trust Agreement
provides that the Committee may at any time on thirty (30) days notice remove
Wells Fargo as Trustee. The ESOP further provides that the Board reserves the right at any time to amend
any or all of the provisions of the ESOP. The Board also has the power to
terminate the ESOP or completely discontinue contributions under the ESOP for
any reason at any time. The ESOP currently holds 3,000,500 shares of the Company's common stock or
approximately 18.66% of the outstanding shares. II. DISCUSSION
A. The Proposal Deals with a Matter Relating to the Conduct of the Ordinary
Business Operations of the Company in Violation of Rule 14a-8(i)(7).
The Proposal, if implemented, would require the Committee and the Trustee to be
elected by the employee participants (the "Members") voting confidentially. No
Board member would be permitted to serve as a member of the Committee, other
than on a temporary basis. Thus, the Proposal would remove the power of the
Board to select members of the Committee and the Trustee. The Proposal also
would, if implemented, prohibit the Board from amending the ESOP or otherwise
changing the ESOP's governing provisions without the consent of the Committee,
which would be elected by the Members, or the consent of the Members.
The Proposal concerns the operation of an employee benefit plan, and accordingly
relates to matters of employee compensation. Consequently, the Proposal clearly
deals with a matter within the scope of the ordinary business operations of the
Company, and may properly be omitted from the 2004 Proxy Materials pursuant to
Rule 14a-8(i)(7). The Staff has repeatedly recognized that proposals concerning the establishment,
operation and termination of ESOPs deal with matters relating to the ordinary
business operations of the corporation and, therefore, may be omitted from a
corporation's proxy materials under Rule 14a-8(i)(7). See, e.g., Sears, Roebuck
and Co. (March 1, 1993two letters) (proposed selection of trustees and
administrators of benefit plans including an ESOP by a committee of
stockholders, a matter relating to the corporation's ordinary business
operationsi.e. general compensation issues); Walt Disney Co. (October 26, 1999)
(establishment of an ESOP, a matter relating to the corporation's ordinary
business operationsi.e. general employee compensation matters); Builders
Transport, Inc. (March 15, 1990) (rescission of issuance of shares of ESOP and
request that ESOP only be funded with allocated shares, a matter relating to the
corporation's ordinary business operationsi.e. the operation and funding of an
employee compensation plan); CF&I Steel Corp. (February 2, 1990) (repurchase of
shares and contribution of shares to ESOP which constitute modifications to the
ESOP, a matter relating to the corporation's ordinary business operationsi.e.
employee compensation); and Lincoln National Co. (January 26, 1981) (termination
of an ESOP, a matter relating to the corporation's ordinary business
operationsi.e. the continuing existence of a compensation plan for the
corporation). As the authority cited above indicates, the establishment, operation and
termination of an ESOP involves employee compensation, a central part of the
ordinary business operations of a corporation. The factors that determine
employee compensation including the operation of an ESOP are highly complex and,
accordingly, are appropriately the province of the board of directors of a
corporation and its management. The activities of the Committee are directly
related to employee compensation and, therefore, the Proposal, if implemented,
would remove the Board from the ultimate control of compensation related
decisions and would place control of such decisions in the hands of the
employees. Furthermore, the Proposal, if implemented, would prevent the Board
from amending or terminating the ESOP. The ability to amend or terminate the
ESOP would also remove the Board from the ultimate control of compensation
related decisions and would also place control of such decisions in the hands of
the employees. Therefore, the Company may properly omit the Proposal form the
2004 Proxy Materials under Rule 14a-8(i)(7) because it is related to the
ordinary business operations of the Company. B. The Proposal is not a Proper Subject for Stockholder Action under the laws of
the State of Delaware in Violation of Rule 14a-8(i)(1). As explained above, the Proposal, if implemented, would remove the Board from
the ultimate control of compensation related decisions and would place control
of such decisions in the hands of the employees. Under Delaware law, as
confirmed in our legal opinion to the Company (the "Opinion"), a copy of which
is attached as Exhibit 2, the subject of the Proposal, namely employee
compensation, is the responsibility of the Board not the employees of the
Company. Consequently, as confirmed in the Opinion, the Proposal is not a proper
subject for stockholder action and the Company may properly excluded it from the
2004 Proxy Materials under Rule 14a-8(i)(1). When the Board decided in December 2003 that the control of the Committee should
be in the hands of the independent directors of the Company, the Board, in the
exercise of its business judgment, determined that such independent directors
were the most qualified persons to deal with any conflicts that may arise
between the interests of management, the other employees and the stockholders.
The Board properly determined that the principal obligation of the Committee
would be to maximize the value of assets of the ESOP. Under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Board is
required to act for the sole purpose of providing retirement benefits to the
participants and beneficiaries of the ESOP and, for this reason the Board, in
exercising its business judgment, has determined that control of the Committee
by the independent directors is the most appropriate way for the Committee to
carry out this duty. Since the Proposal, which is mandatory, demands that the
Company take action that would invade the province of the Board and interfere
with its judgment and discretion, the Proposal may be properly omitted from the
2004 Proxy materials under Rule 14a-8(i)(1). C. The Proposal and Supporting Statement Contain False and Misleading Statements
in Violation of Rule 14a-9 and is, Therefore, in Violation of Rule 14a-8(i)(3).
The Proposal contains the following misstatement:
"To assure the independent management of any Employee Stock Ownership Plan
("ESOP") established for the benefit of the Corporation's employees, the Board
of Directors shall take such actions as permitted by applicable laws to provide
for the ESOP's management by an independent trustee and a governing committee
selected by the ESOP's employee participants, voting confidentially."
As explained above, the Proposal will not "assure independent management" of the
ESOP but will place compensation related decisions in the hands of employees who
are not independent and may not act in the best interests of the stockholders of
the Company. The independent directors are much more capable of assuring
independent management of the ESOP than the Members. Consequently, such
statement is false and misleading and it should be excluded under Rule
14a-8(i)(3) as false and misleading in violation of Rule 14a-9.
The misstatements in the Supporting Statement include:
(1) "Therefore, we propose making independent employee control of their ESOP a
provision of the corporate bylaws, so employees will know that their retirement
rights cannot be withdrawn or changed without their consent." For the reasons
explained in the paragraph above, employees cannot be expected to act
independently with respect to compensation related decisions. The ability of the
Company to change or withdraw retirement rights, subject to compliance with all
applicable laws, relates to the Board's right and obligation to make
compensation related decisions and it is false and misleading to suggest that
this right and obligation properly belongs with the employees.
(2) "If the proposal is adopted, the company's management would no longer be
able to act on its own, as it did during the past year, to modify employees'
ESOP rights and replace members of the ESOP's governing committee." This
statement is misleading in that it suggests that the employees rights were
somehow diminished in December 2003 when the ESOP was amended to provide for
passthrough voting and the composition of the Committee was changed to require a
majority of independent directors. The December 2003 amendments clearly enhanced
the rights of employees and the independence of the Committee.
(3) "The proposed prohibition of a corporate director's service on the ESOP
committee, for example, should prevent conflicts of interest that could arise if
an individual is acting as a fiduciary simultaneously for the employee
beneficiaries of an ESOP and for the shareholders of a corporation that loaned
over $60 million to the ESOP." As explained above, the independent directors who
sit on the Committee must act solely in the interests of providing retirement
benefits to the participants and beneficiaries of the ESOP. Having independent
directors on the Committee reduces conflicts of interest. If the employees
select members of the Committee many more conflicts will arise. Consequently,
this statement is false and misleading. As a result of the above false and misleading statements, the Supporting
Statement must be substantially revised before it complies with Rule
14a-8(i)(3). Please take note that the Proponent is a large institutional investor with ample
resources to have researched applicable law and drafted a proper proposal.
Although the Company does not believe this Proposal and Supporting Statement can
be salvaged by revisions, the Company submits that affording this Proponent any
further opportunity to make a proper proposal would be inappropriate and
deleterious to the efficient operation of the stockholder proposal process. See
Pacific Enterprises, March 9, 1990, in which the Staff, without comment,
declined to permit a sophisticated investor represented by counsel to cure
defects in his proposal. The request for a no-action letter in Pacific
Enterprises contains citations to a number of other no-action letters on this
point. Would you kindly advise us by fax at 213-687-5600 of your response.
Thank you for your consideration.
Respectfully submitted, /s/
Joseph J. Giunta [INQUIRY LETTER]
August 11, 2004 Via Fax and DHL Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, CA 90502
Attention: Corporate Secretary Dear Sir:
Lime Fund LLC, a fund managed by Lime Capital Management LLC, has owned shares
of Farmer Bros. Co. (the "Company") having a market value of more than $2,000
continuously for more than a year. We intend to continue ownership of such
shares through the date of the next annual meeting of stockholders. We are
submitting the accompanying proposal and supporting statement pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended, for inclusion in
the Company's proxy statement for the next meeting of stockholders. We intend to
present the proposal at the meeting, personally or through a qualified
representative. We are the beneficial owner of shares in street name. A statement from the
record holder of street name shares will be furnished to you upon your request.
Please let us know, at the mailing address shown on this letterhead, if you
require any additional information. Very truly yours,
LIME FUND LLC By: Lime Capital Management LLC
/s/ Gregory E. Bylinsky, Managing Director
Attachment: Proposal and Supporting Statement [APPENDIX]
PROPOSAL: PROTECTING EMPLOYEE PENSION RIGHTS Resolved, that it is in the interests of shareholders to assure the integrity of
employee pension plans, and that Article VII of the Bylaws is therefore amended
to add the following: ESOP Governance. To assure the independent management of any Employee Stock
Ownership Plan ("ESOP") established for the benefit of the Corporation's
employees, the Board of Directors shall take such actions as permitted by
applicable laws to provide for the ESOP's management by an independent trustee
and a governing committee elected by the ESOP's employee participants, voting
confidentially. No director of the Corporation may serve simultaneously as a
trustee or member of the ESOP's governing committee, other than for a brief
transition period approved by the Board of Directors, unless such simultaneous
service is specifically required by law. The Board of Directors may not act, or
permit the Corporation to act, to replace the ESOP trustee, amend the ESOP or
otherwise change the ESOP's governance provisions without the consent of the
ESOP governing committee elected by employees or a direct vote of the ESOP's
employee participants. This section is not intended, however, to restrict
actions by the Corporation to support the processes by which the ESOP's employee
participants elect members of the ESOP's governing committee and determine the
voting or disposition of stock held by the ESOP. This section may be amended
only by the stockholders. SUPPORTING STATEMENT
Although we questioned the motives and propriety of management's actions to
establish an ESOP with what is now 19% of the company's stock, we believe that
it is in the interests of all shareholders to assure the integrity of what has
been promised to the company's employees. Therefore, we propose making independent employee control of their ESOP a
provision of the corporate bylaws, so employees will know that their retirement
rights cannot be withdrawn or changed without their consent. If the proposal is
adopted, the company's management would no longer be able to act on its own, as
it did during the past year, to modify employees' ESOP rights and replace
members of the ESOP's governing committee. Instead, employees' ESOP rights will
be protected by their own elected representatives, and will not be subject to
the whims of a future board of directors. Protecting the employees' ESOP rights should also protect the integrity of the
company's governance. The proposed prohibition of a corporate director's service
on the ESOP committee, for example, should prevent conflicts of interest that
could arise if an individual is acting as a fiduciary simultaneously for the
employee beneficiaries of an ESOP and for the shareholders of a corporation that
loaned over $60 million to the ESOP. We hope you will agree that this proposal is fair to the company's employees and
good for all its shareholders, and that you will vote for it to establish the
kind of sound corporate governance demanded by employees who can make a business
grow. [INQUIRY LETTER]
September 24, 2004 Grace K. Lee, Esquire
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Email: leeg@sec.gov
Re: Farmer Bros. Co. Dear Ms. Lee:
The August 25, 2004 letter from Skadden Arps Slate Meagher & Flom on behalf of
the management of Farmer Bros. Co. ("Company"), seeking SEC Staff concurrence
with their arguments to exclude from the Company proxy statement the shareholder
proposal ("Proposal") submitted by Lime Fund LLC, raises troubling questions.
The Company's representative bases all his arguments on an assertion that
control of the ESOP "relates to matters of employee compensation." In fact, the
Proposal provides for participating employee elections of members of the ESOP
governing committeea conventional practice presented in the "Model ESOP"
published by the National Center for Employee Ownership (NCEO)for an ESOP
which, according to the Company's representations, had been established in
January 2000. The committee, whether elected by employees or appointed by the
Company's management, would not control the establishment of the ESOP, or its
termination.1 What the committee and employees would control is only the
administration of a trust, subject to its established conditions that cannot be
modified without both grantor and beneficiary approval. And that administration
of a pension trust would clearly have nothing to do with management decisions
relating to employee compensation. The statements made by the Company's attorney in support of his argument suggest
a need to examine the Company's past representations of the ESOP and its
transactions. The Company's management seems to view the ESOP pension assets as
being under their control, rather than as assets which have been conveyed to a
trust for the benefit of others. Especially in the context of concerns that have
been expressed by the Company's shareholders, about violations of the Investment
Company Act and about the use of the ESOP to secure votes for management's
entrenchment, we must ask whether the reported ESOP transactions were genuine.
Under these circumstances, it is suggested that the Company be asked to clarify
its position. If they confirm the August 25, 2004 letter's apparent position
that management effectively controls the assets which the Company had reported
as having been transferred to an ESOP trust, we would ask the SEC to take
appropriate actions to protect the interests of the Company's public
shareholders as well as the employees who had been misled to believe they were
shareholders. If, alternatively, they state that the Company has genuinely
conveyed assets to the ESOP trust as reported, we would ask the SEC to require
inclusion of the Proposal in the Company's proxy statement for voting at the
annual meeting of shareholders. Please let me know by email (gl@shareholderforum.com) or telephone
(212-605-0335) what additional information you may find useful.
Sincerely, Gary Lutin
cc: Mr. Gregory E. Bylinsky (greg.bylinsky@limecapital.com)
Joseph J. Giunta, Esquire (igiunta@skadden.com) -----FOOTNOTES-----
1 The Company's representative failed to note that termination of the ESOP is
specifically reserved for management authority in the existing plan agreement,
which would not be changed by the Proposal. [INQUIRY LETTER]
September 29, 2004 VIA FACSIMILE AND EMAIL
Grace K. Lee, Esq.
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Farmer Bros. Co. (the "Company") Stockholder Proposal of Lime Fund LLC (the
"Proposal") Response to Lutin & Company September 24, 2004 Letter
Dear Ms. Lee: On September 24, 2004, we received by electronic mail a copy of a letter from
Lutin & Company on behalf of Lime Fund LLC (collectively, the "Proponent") to
the Staff dated September 24, 2004 (the "Stockholder Response"). The Stockholder
Response was in response to the Company's letter to the Division of Corporation
Finance, dated August 25, 2004 (the "Company Letter"). This letter is in
response to the Stockholder Response. Terms not otherwise defined herein shall
have the meanings ascribed to them in the Company Letter. Pursuant to Rule 14a-8(j), we will hand deliver an original and six (6) copies
of this letter on September 30, 2004. As required by Rule 14a-8(j), a copy of
this letter is being mailed on this date to the Proponent.
The clear implication from Mr. Lutin's statements and allegations in the
Stockholder Response is that the ESOP is a sham and not in the employees' best
interests. Such statements and allegations of Mr. Lutin are clearly false and
misleading and potentially defamatory. The ESOP was established for the benefit of the employees. The ESOP was formed
in compliance with ERISA and has always been maintained in compliance with
ERISA. The ESOP is not controlled by management but is in fact governed by a
committee, the majority of which are independent directors of the Company, and
an independent trustee selected by the board of directors of the Company. Such
governance is proper under ERISA, and to suggest otherwise is false and
misleading. The Stockholder Response failed to address in any meaningful way the principal
legal reasons stated in the Company Letter for omitting the Proposal from the
2004 Proxy Materials, namely that the Committee is involved in employee
compensation related decisions that are matters relating to the ordinary
business operations of the Company. Moreover, Mr. Lutin states in the
Stockholder Response that the Committee elected by employees: "... would not
control the establishment of the ESOP, or its termination. What the [C]ommittee
and employees would control is only the administration of a trust, subject to
its established conditions that cannot be modified without both grantor and
beneficiary approval." In fact the Proposal says the following: "The Board of
Directors may not act, or permit the Corporation to act, to ... amend the
ESOP...." The Supporting Statement says: "Therefore, we propose making
independent employee control of their ESOP a provision of the corporate bylaws,
so employees will know that their retirement rights cannot be withdrawn or
changed without their consent." It is clear from the Proposal and the Supporting
Statement that the Proposal is intended to put compensation based decisions in
the hands of the employees. We also note that the Stockholder Response is not timely having been delivered
one month after the Company Letter. On behalf of the Company, we respectfully
request that the Staff concur in our view that the Proposal and Supporting
Statement submitted by Lime Capital LLC are excludable on the bases set forth in
the Company Letter. If you have any questions or require any other information, please do not
hesitate to contact me by telephone at (213) 687-5040 or by email at
jgiunta@skadden.com. Thank you for your consideration. Respectfully submitted,
/s/ Joseph J. Giunta
JJG:C [INQUIRY LETTER]
September 30, 2004 Grace K. Lee, Esquire
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Email: leeg@sec.gov Re: Farmer Bros. Co.
Dear Ms. Lee: The September 29, 2004 letter from Skadden Arps Slate Meagher & Flom on behalf
of the management of Farmer Bros. Co. ("Company") states that it responds to my
September 24thletter, but does not directly answer the essential question I
had raised: whether the Company's management continues to exercise effective
control of the assets which they had reported as having been transferred to an
ESOP trust for the benefit of employees. In an apparent effort to divert attention from this question, the letter makes
unsupported assertions about "false and misleading" implications and presents
new arguments which suggest that the author is unfamiliar with both the
Company's ESOP and with the general concept of an ESOPor that he assumes the
reader will be unfamiliar. These assertions and arguments, even if there were
some basis for them, are irrelevant, since it has been established that the
Proposal's provisions for employee elections of an ESOP governing "committee"
are actually an accepted practice. The Company's representative does, however, provide an indirect indication of
management's position relating to their control of the assets reportedly
transferred to the ESOP. His letter makes it clear that management's purpose in
blocking the Proposal is to retain control of those assets.
This apparent management position reinforces my September 24thletter's
suggestion of a need for SEC investigation of the possible securities law
violations. As you may know, a December 23, 2003 federal court opinion in a
Farmer Bros. shareholder action stated that investors do not have standing to
enforce the potentially applicable laws themselves and must instead rely on the
SEC to protect their rights. I am therefore sending a copy of this letter to Mr.
Petillon, the Branch Chief of Enforcement for the SEC Pacific Regional Office,
to inform him of this new development relating to the Farmer Bros. issues with
which he is familiar. Regarding the right of shareholders to vote on the Proposal, it is hoped that
you will require its inclusion in the Company's proxy statement. Whether a trust
has been genuinely established or will be established by corrective action, the
promised employee benefits of an ESOP are viewed as important to the Company's
value by many of its shareholders who have expressed support of the Proposal.
There is no real reason why they should not be allowed to vote on conventional
provisions to secure those benefits. Again, I encourage you to let me know by email (gl@shareholderforum.com) or
telephone (212-605-0335) if you want any additional information, and I thank you
for your continuing attention to the interests of Farmer Bros. shareholders.
Sincerely, Gary Lutin
cc: Mr. Gregory E. Bylinsky (greg.bylinsky@limecapital.com)
Joseph J. Giunta, Esquire (jgiunta@skadden.com)
Andrew Petillon, Esquire (petillona@sec.gov) [STAFF REPLY LETTER]
October 4, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: Farmer Bros. Co. Incoming letter dated August 25, 2004
The proposal would amend Farmer Bros.' bylaws to provide for the management of
its Employee Stock Ownership Plan by an independent trustee and a governing
committee elected by the ESOP's employee participants. There appears to be some basis for your view that Farmer Bros. may exclude the
proposal under rule 14a-8(i)(7), as relating to Farmer Bros.' ordinary business
operations (i.e., general compensation matters). 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)(7). In reaching
this position, we have not found it necessary to address the alternative bases
for omission upon which Farmer Bros. relies. Sincerely,
/s/ Mark F. Vilardo
Special Counsel
|
