<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
-------
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FARR COMPANY
________________________________________________________________________________
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
________________________________________________________________________________
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee:
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
(3) Filing Party:
________________________________________________________________________________
(4) Date Filed:
________________________________________________________________________________
<PAGE>
FARR COMPANY
2221 PARK PLACE
EL SEGUNDO, CALIFORNIA 90245
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1997
The Annual Meeting of the Stockholders of Farr Company, a Delaware
corporation, will be held in the Company's offices located at 2221 Park Place,
El Segundo, California, on Tuesday, April 29, 1997, at 11:00 a.m. for the
following purposes:
1. To elect three directors to serve for three years and until their
successors are elected and qualified. The Board of Directors'
nominees are named in the accompanying Proxy Statement which is part
of this Notice.
2. To transact such other business as may properly come before the
meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on March 7, 1997 as
the record date for determination of stockholders entitled to vote at this
meeting.
All stockholders are cordially invited to attend the meeting.
Kenneth W. Gerstner
Secretary
El Segundo, California
March 26, 1997
________________________________________________________________________________
In order to ensure your representation at the meeting, you are requested to
sign and date the enclosed proxy as promptly as possible and return it in the
enclosed envelope (to which no postage need be affixed if mailed in the United
States). If you attend the meeting and file with the Secretary of the Company
an instrument revoking your proxy or a duly executed proxy bearing a later
date, your proxy will not be used.
________________________________________________________________________________
<PAGE>
FARR COMPANY
____________
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders of Farr Company (the
"Company") to be held at 11:00 a.m. on Tuesday, April 29, 1997. This
solicitation is made by the Board of Directors of the Company, and the costs
thereof, which will be borne by the Company, are expected to be nominal.
Brokerage houses, custodians, nominees and others who hold stock in their names
will be reimbursed for expenses in sending proxy materials to their principals.
The Company intends to send this Proxy Statement and form of proxy to its
stockholders on or about March 26, 1997. The principal executive offices of the
Company are located at 2221 Park Place, El Segundo, California 90245, and its
telephone number is (310) 536-6300.
The stockholders of record at the close of business on March 7, 1997 are
entitled to one vote for each share of stock held by them. At the close of
business on March 7, 1997, after giving effect to the three-for-two stock split
to be effected in the form of a 50% stock dividend (the "Stock Dividend")
payable March 28, 1997 to holders of record of the Common Stock on March 7,
1997, there were outstanding 5,470,410 shares of the Company's common stock, par
value $.10 per share (the "Common Stock") (not including 251,056 shares held in
treasury). All share figures contained herein give effect to the Stock Dividend.
A majority of the outstanding shares of Common Stock will constitute a quorum
for the transaction of business. Any proxy may be revoked at any time before it
is exercised by filing with the Secretary of the Company an instrument revoking
it or a duly executed proxy bearing a later date. Proxies will be voted as
directed.
Shares represented by proxies that reflect abstentions or "broker non-
votes" (i.e., shares held by a broker or nominee which are represented at the
meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal or proposals) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. In voting for the election of directors, each share has one vote for
each position to be filled, and there is no cumulative voting. Directors will
be elected by a plurality of the shares voting, which means that abstentions or
broker non-votes will not affect the election of the candidates receiving the
plurality of votes. All other proposals to come before the Annual Meeting
require the approval of a majority of the shares of Common Stock present and
entitled to vote at the meeting. Therefore, as to any such particular proposal,
abstentions will have the same effect as a vote against that proposal and broker
non-votes will not be counted as votes for or against the proposal, and will not
be included in counting the number of votes necessary for approval of the
proposal.
<PAGE>
OWNERSHIP OF THE COMPANY'S SECURITIES
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 7, 1997 with respect
to shares of the Common Stock which are held by persons known to the Company to
be beneficial owners of more than 5% of the Common Stock. For purposes of this
Proxy Statement, beneficial ownership of securities is defined in accordance
with the rules of the Securities and Exchange Commission and means generally the
power to vote or dispose of securities, regardless of any economic interest
therein.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
------------------------------------ ----------------------- -----------------
<S> <C> <C>
Trust for M.S. Farr Family............. 450,000(2) 8.2%
26161 Marguerite Parkway
Mission Viejo, California 92692
Wellington Management Company.......... 363,150(3) 6.6%
75 State Street
Boston, Massachusetts 02109
FMR Corp............................... 294,148(4) 5.4%
82 Devonshire Street
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc.......... 287,925(5) 5.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Wilen Management Corporation........... 285,000(6) 5.2%
Greenspring Station, Suite 226
2360 West Joppa Road
Lutherville, Missouri 21093
</TABLE>
- ------------
(1) Based on 5,470,410 shares of the Company's Common Stock outstanding (not
including 251,056 shares held in treasury) after giving effect to the
three-for-two stock split to be effected in the form of a 50% stock
dividend payable March 28, 1997 to holders of record of the Common Stock
on March 7, 1997.
(2) In March 1996, David J. Farr was appointed trustee, and as such has sole
power to vote and dispose of all of such shares.
(3) Based on the information contained in a Schedule 13G filed with the
Securities and Exchange Commission reflecting beneficial ownership as of
January 24, 1997.
(4) Based on the information contained in a Schedule 13G filed with the
Securities and Exchange Commission reflecting beneficial ownership as of
February 11, 1997.
(5) Based on the information contained in a Schedule 13G filed with the
Securities and Exchange Commission reflecting beneficial ownership as of
February 12, 1997.
(6) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission reflecting beneficial ownership as of February 5,
1997.
2
<PAGE>
OWNERSHIP BY MANAGEMENT
The following table sets forth as of March 7, 1997 information with respect
to the beneficial ownership of the Common Stock by each director of the Company,
each Named Officer (as defined below) of the Company, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER POSITION OWNED(1)(2)(3) CLASS(2)(3)
- ----------------------------- ------------- ---------------- -----------
<S> <C> <C> <C>
Robert Batinovich.................... Director.................................. 159,000 2.9%
Richard P. Bermingham................ Director.................................. 21,750 *
Denis R. Brown....................... Director.................................. 3,000 *
David J. Farr........................ Director.................................. 14,257(4) *
Richard L. Farr...................... Vice President............................ 150,744 2.7%
Kenneth W. Gerstner.................. Senior Vice President and................. 46,809 *
Chief Financial Officer
John C. Johnston..................... President and Chief Operating
Officer, Director........................ 1,466 *
John J. Kimes........................ Director.................................. 6,000 *
H. Jack Meany........................ Chairman of the Board and
Chief Executive Officer.................. 136,800 2.5%
Myron G. Rasmussen................... Vice President............................ 31,355 *
John A. Sullivan..................... Director.................................. 3,000 *
Directors and Executive Officers as a group (11 persons).......................... 574,181(3) 10.2%
</TABLE>
- -----------------
* Less than 1%.
(1) Based on 5,470,410 shares of the Company's Common Stock outstanding (not
including 251,056 shares held in treasury) after giving effect to the
three-for-two stock split to be effected in the form of a 50% stock
dividend payable March 28, 1997 to holders of record of the Common Stock on
March 7, 1997. Shares shown as beneficially owned are those as to which the
named persons possess sole voting and investment power. However, under
California law, personal property owned by a married person may be
community property that either spouse may manage and control. The Company
has no information as to whether any shares shown in this table are subject
to California community property law.
(2) For purposes of computing the percentages, the number of shares of Common
Stock outstanding includes shares purchasable by such individual or group
within 60 days upon exercise of outstanding stock options.
(3) Includes shares purchasable within 60 days upon exercise of outstanding
stock options as follows: R. Batinovich, 9,000; R.P. Bermingham, 18,000;
D.J. Farr, 9,000; R.L. Farr, 45,187; K.W. Gerstner, 42,750; J.J. Kimes,
6,000; H.J. Meany, 12,000; M.G. Rasmussen, 20,812; all Directors and
Executives Officers as a group, 162,749.
(4) Does not include 450,000 shares held by the M.S. Farr Family Trust as to
which David J. Farr was appointed trustee in March 1996. As trustee, Mr.
Farr has sole power to vote and dispose of shares held by such trust but
has no economic interest in such shares.
3
<PAGE>
PROPOSAL
ELECTION OF DIRECTORS
Pursuant to the Company's Bylaws, the Company has eight directors divided
into three classes (two classes consisting of three directors, and one class
consisting of two directors). Three directors are to be elected at the Annual
Meeting, each of whom will serve until the 2000 Annual Meeting and until their
respective successors shall have been elected or appointed.
In the absence of instructions to the contrary, votes will be cast for the
election of the following as directors pursuant to the proxies solicited hereby.
Although the Board of Directors expects that each of the nominees will be
available to serve as a director, in the event any of them should become
unavailable prior to the Annual Meeting, the proxy will be voted for a nominee
or nominees designated by the Board of Directors, or the number of directors may
be reduced accordingly. However, the proxy cannot be voted for a greater number
of persons than the number of nominees designated by the Board of Directors.
1997 NOMINEES
-------------
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE DURING PAST DIRECTOR
NAME AGE 5 YEARS AND CERTAIN OTHER DIRECTORSHIPS SINCE
___________________________ ________ ______________________________________________________ ____________
<S> <C> <C> <C>
John J. Kimes 54 President and Chief Executive Officer of Computerized 1995
Security Systems (since 1988), a manufacturer of
electronic and mechanical lock hardware and systems;
Vice President Administration and Controller (from
1981 to 1988) of NI Industries, Inc., a manufacturer
of building, industrial and defense products.
H. Jack Meany 74 Chairman and Chief Executive Office of the Company 1976
(since February 1996); Chairman, President and Chief
Executive Officer of the Company (from April 1994
to February 1996); Director of the Company (from June
1976 to March 1994); Retired, Chairman of the Board
and Chief Executive Officer of NI Industries, Inc.
(from October 1975 to March 1988), a manufacturer of
building, industrial and defense products; Director,
APS Inc. since 1990; Director, BWIP, Inc. since 1987;
Director, ESI, Inc. since 1980.
Denis R. Brown 57 President and Chief Executive Officer and a Director 1997
of Pinkerton, Inc. (since April 1994), a leading
supplier of global security solutions; President and
Chief Executive of Concurrent Computer Corporation,
from 1990 to 1993; Director, CalMat since
January 1997.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR DIRECTOR NAMED ABOVE.
Unless otherwise instructed, proxies will be voted FOR the election of
management's three nominees for directors.
4
<PAGE>
CONTINUING DIRECTORS
--------------------
<TABLE>
<CAPTION>
PRINCIPAL BUSINESS EXPERIENCE DURING PAST DIRECTOR TERM
NAME AGE 5 YEARS AND CERTAIN OTHER DIRECTORSHIPS SINCE EXPIRES
- --------------------------- ------ ----------------------------------------------- -------- -------
<S> <C> <C> <C> <C>
Robert Batinovich 60 Chairman and Chief Executive Officer of 1994 1998
Glenborough Realty Trust Incorporated (since
1996), a real estate investment company;
President and majority owner of Glenborough
Corporation (since 1978); Commissioner and
past President (from 1975 to 1980) of the
California Public Utilities Commission.
David J. Farr 59 Owner (since 1965) of David J. Farr Insurance 1994 1998
Services, a financial consultant and life
insurance underwriter; first cousin of Richard
L. Farr.
John C. Johnston 53 President and Chief Operating Officer of the 1996 1999
Company since February 1996; Senior Vice
President of the Company from January 1995 to
February 1996; President of Easton Aluminum,
Inc., an athletic equipment manufacturer,
from 1986 to December 1994.
Richard P. Bermingham 57 Vice Chairman of American Golf Corporation 1990 1999
(since July 1994), a golf course management
company; President and Chief Executive
Officer (from May 1987 to June 1994) of Sizzler
International, Inc., an operator and franchisor
of restaurants.
John A. Sullivan 42 Financial Consultant with Batchelder & Partners, 1996 1999
Inc., since May 1996; Senior Vice President of
The Seidler Companies Incorporated from August
1993 to April 1996, and Vice President from
October 1990 to August 1993; Director, American
Coin Merchandising, since October 1995.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings during 1996. During 1996, no
director attended fewer than 75% of the meetings of the Board of Directors and
committees on which he served and which were held while such director was a
director.
Directors who are not employees of the Company are paid an annual retainer
of $9,000 and $600 for each Board and committee meeting attended. Committee
chairmen are paid $800 for each committee meeting attended. Directors who are
employees of the Company are not paid for attending Board of Directors meetings.
On January 22, 1991, the Board of Directors adopted the 1991 Stock Option
Plan for Non-Employee Directors (the "Director Plan"). On September 12, 1995,
the Board of Directors adopted the Second Amendment to the Director Plan, which
amendment was approved by the stockholders at the 1996 Annual Meeting of
Stockholders. The Second Amendment to the Director Plan increased the number of
shares subject to the plan from 72,000 to 150,000 and extended the duration of
the Director Plan from 1995 to 2001, among other things.
5
<PAGE>
Pursuant to the Director Plan, each non-employee director of the Company is
automatically granted, on an annual basis, an option to purchase 3,000 shares of
Common Stock. The price for each option granted under the Director Plan is the
greater of (a) the fair market value of the Common Stock on the date of grant
and (b) the minimum legal consideration necessary for the issuance of such
shares. Under the Director Plan, as of March 1, 1997, (i) options to purchase
18,000 shares of Common Stock have been granted to Mr. Bermingham, (ii) options
to purchase 12,000 shares of Common Stock have been granted to Mr. Meany, (iii)
options to purchase 9,000 shares of Common Stock have been granted to each of
Messrs. Batinovich, D.J. Farr and Kimes and (iv) options to purchase 3,000
shares of Common Stock have been granted to each of Messrs. Sullivan and Brown.
In 1980, the Board of Directors adopted a deferred compensation plan
pursuant to which directors may elect to defer all or a portion of their
directors' fees.
Among the committees of the Board of Directors are an Executive Committee,
an Audit Committee and a Compensation Committee. The Board of Directors does
not have a standing Nominating Committee.
The Executive Committee is comprised of Messrs. Meany (Chairman), Johnston
and Bermingham. The purpose of the Executive Committee is to expedite the
decision making process of the Board of Directors. The Executive Committee did
not meet in 1996.
The Audit Committee, which is comprised of Messrs. Bermingham (Chairman),
Sullivan and Kimes, held two meetings in 1996. The functions performed by the
Audit Committee include: recommending to the Board independent accountants to
serve the Company for the ensuing year; reviewing with the independent
accountants and management the scope and results of audits; assuring that the
independent accountants act independently; reviewing and approving any
substantial change in the Company's accounting policies and practices; reviewing
with management and the independent accountants the adequacy of the Company's
system of internal controls; reviewing the Company's annual proxy statement; and
reviewing non-audit professional services provided by the independent
accountants and the range of audit and non-audit fees. To help ensure the
independence of the audit, the Audit Committee consults separately and jointly
with the independent accountants and management.
The Compensation Committee, which in 1996 was comprised of Messrs.
Batinovich (Chairman) and D.J. Farr, held two meetings in 1996. Mr. Brown has
joined the Compensation Committee for fiscal year 1997. The functions performed
by the Compensation Committee include reviewing and approving management's
recommendations as to executive compensation and grants of stock options to key
employees.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership (Forms 3, 4 and 5) with the
Securities and Exchange Commission. Officers, directors and greater-than-ten-
percent holders are required to furnish the Company with copies of all such
forms which they file.
To the Company's knowledge, based solely on the Company's review of such
reports or written representations from certain reporting persons, the Company
believes that during the year ended December 28, 1996, all filing requirements
applicable to its officers, directors, greater-than-ten-percent beneficial
owners and other persons subject to Section 16(a) of the Exchange Act were
complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company to its Chief
Executive Officer and the four other most highly compensated executive officers
whose cash compensation for the fiscal year ended December 28, 1996 for services
rendered in all capacities to the Company exceeded $100,000 (collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION AWARDS
---------------------- -------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
- -------------------------------- ---- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Richard L. Farr, 1996 140,000 69,491 0 --
Vice President 1995 140,000 60,668 25,500 --
1994 114,193 0 6,000 --
Kenneth W. Gerstner, 1996 140,000 69,491 0 --
Senior Vice President and Chief 1995 140,000 61,928 27,000 --
Financial Officer 1994 114,457 0 24,000 --
John C. Johnston (2), 1996 170,000 140,636 0 --
President and Chief Operating 1995 170,000 75,198 66,000 --
Officer 1994 -- -- -- --
H. Jack Meany (3), 1996 246,000 339,180 0 --
Chairman and Chief Executive 1995 246,000 337,512 0 --
Officer 1994 168,493 0 3,000 --
Myron G. Rasmussen, 1996 117,393 45,321 0 --
Vice President 1995 116,749 38,533 3,000 --
1994 113,654 0 6,000 --
</TABLE>
- -----------------
(1) Excludes compensation in the form of other personal benefits, which for
each of the Named Officers did not exceed the lesser of (i) $50,000 or (ii)
10% of the total annual salary and bonus reported for each year.
(2) Mr. Johnston became Senior Vice President of the Company effective January
10, 1995. In February 1996, Mr. Johnston was appointed President and Chief
Operating Officer of the Company.
(3) In February 1996, Mr. Meany became Chairman and Chief Executive Officer of
the Company. Previously, Mr. Meany was Chairman, President and Chief
Executive Officer of the Company from April 1994 to February 1996. Under
an agreement approved by the Compensation Committee in July 1996, Mr.
Meany's base salary was retroactively set at $246,000 per year, effective
April 1994. Prior to such retroactive adjustment, Mr. Meany was paid
nominal annual compensation of $1.00 for his services from April 1994 to
June 1996. In addition, under the July 1996 agreement, Mr. Meany became
retroactively eligible to participate in the Company's Management Incentive
Plan. Based on this agreement, Mr. Meany's 1994, 1995 and first half of
1996 wages and earned incentives were paid to him in July 1996. All wages
and incentive compensation earned by Mr. Meany after June 1996 are being
paid to Mr. Meany concurrently as they are earned. The annual compensation
table set forth above reflects Mr. Meany's compensation for the years 1994,
1995 and 1996 based on the wages retroactively deemed to have been earned
in those years as set forth in the July 1996 agreement.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of options during fiscal year 1996 to any of the
Company's Named Officers.
STOCK OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for the Named Officers information with
respect to unexercised options and year-end option values, in each case with
respect to options to purchase shares of Common Stock.
<TABLE>
<CAPTION> VALUE OF UNEXERCISED IN-THE-
SHARES NUMBER OF UNEXERCISED MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FY-END (#) FY-END ($) (1)
ON REALIZED ------------------------------ -----------------------------
NAME EXERCISE (#) ($) (3) EXERCISABLE UNXERCISABLE EXERCISABLE UNXERCISABLE
- --------------------------- ------------ -------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Farr............ 0 -- 37,312 22,125 217,141 172,406
Kenneth W. Gerstner........ 0 -- 42,750 23,250 209,375 268,375
John C. Johnston........... 0 -- 0 66,000 -- 522,500
H. Jack Meany.............. 0 -- 12,000 0 59,063 --
Myron G. Rasmussen......... 0 -- 20,250 5,250 102,200 36,000
</TABLE>
- -----------------
(1) Calculated based on the closing price of the Company's Common Stock
($16.875 per share) as reported on the Nasdaq National Market on December
28, 1996.
(2) Mr. Meany holds total options to purchase 12,000 shares of Common Stock
that were granted pursuant to the Director Plan for his services to the
Company as a non-employee director.
(3) Calculated based on the closing price of the Company's Common Stock on the
date of exercise.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee in the year ended December 28,
1996 were Messrs. Batinovich (Chairman) and D.J. Farr, both of whom are non-
employee directors and neither of whom has any direct or indirect material
interest in or relationship with the Company (outside of his position as
director). To the Company's knowledge, there were no interrelationships
involving members of the Compensation Committee or other directors of the
Company requiring disclosure in this Proxy Statement.
REPORT ON ANNUAL COMPENSATION OF EXECUTIVE OFFICERS
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the Exchange
Act, except to the extent the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such the Securities
Act of 1933 or the Exchange Act.
* * * *
The policy of the Compensation Committee is to establish compensation
levels for the Chief Executive Officer and the other executive officers
reflecting both (i) the Company's overall performance and (ii) the executive's
contribution to the growth and profitability of the Company. The Compensation
Committee strives to determine the appropriate executive compensation levels
that will allow the Company to attract and retain qualified executives.
The Compensation Committee, with the assistance of the Chief Executive
Officer, determines the compensation of the other executive officers.
Compensation levels are generally based on the Company's overall performance,
particularly in the areas of sales and earnings. Such performance is typically
measured by comparing the Company's operating plan for the year versus actual
achievement of that plan. In determining compensation levels, the Compensation
Committee also considers qualitative factors such as new product development,
organizational improvements and other factors considered vital to the Company's
success in meeting its long-term sales growth and profit objectives. The
Compensation Committee also focuses on each executive's area of responsibility
and such person's contribution in helping to reach Company objectives.
The principal part of the compensation of each executive officer is base
salary. Based upon its review of the Company's operating plan measured against
actual achievement, the Compensation Committee establishes salary levels for the
executives and awards bonuses. The Compensation Committee considers data from
outside compensation consultants and also considers the practices of various
industry groups. Such industry groups generally include companies in the same
industry as the Company as well as companies of comparable size in other
industries. The Compensation Committee believes that the Company's overall
executive compensation levels generally are lower than the compensation levels
at other companies studied by the Compensation Committee.
In February 1996, Mr. Meany became Chairman and Chief Executive Officer of
the Company. Previously, Mr. Meany was Chairman, President and Chief Executive
Officer of the Company from April 1994 to February 1996. Prior to April 1994,
Mr. Meany served as a non-employee director of the Company. At Mr. Meany's
request, and as approved by the Compensation Committee, Mr. Meany received an
annual base salary of $1.00 from April 1994 to February 1996. However, under an
agreement approved by the Compensation Committee in July 1996, Mr. Meany's base
salary was retroactively set at $246,000 per year, effective April 1994. In
addition, Mr. Meany became retroactively eligible to participate in the
Company's Management Incentive Plan. Based on this agreement, Mr. Meany's 1994,
1995 and first half of 1996 wages and earned incentives were paid to him in July
1996. All earned wages and incentives eared by Mr. Meany after June 1996 are
being paid to Mr. Meany concurrently as they are earned. The annual
compensation table set forth above reflects Mr. Meany's compensation for the
years 1994, 1995 and 1996 based on the wages retroactively deemed to have been
earned in
9
<PAGE>
those years as set forth in the July 1996 agreement. Mr. Meany's base salary was
determined in accordance with a number of factors, including Mr. Meany's success
at achieving significant improvement in the Company's operations, performance
and overall operating success (including the recent appreciation in the
Company's stock price), and Mr. Meany's ability to build and maintain a strong
management team capable of meeting Company plans on a consistent basis.
Executive officers are eligible to receive bonuses under the Company's
Management Incentive Plan. Under this plan, bonuses are based on the Company
achieving a targeted return on assets and certain income levels. Based on 1996
operating results, corporate performance exceeded the targeted return on assets
and income levels, thereby providing for bonuses to be awarded to management.
The Compensation Committee also retains the discretion to award bonuses based on
corporate or individual performance.
The Compensation Committee annually considers grants of stock options for
each of the executive officers, determines the recipients for such options and
the number of options to be granted to each recipient. The purpose of the stock
option program is to provide incentives to the Company's management to maximize
stockholder value. The option program also utilizes vesting periods to
encourage key employees to continue in the employ of the Company. The number of
options to be granted to an executive is based on the responsibility of the
executive, the historic levels of option awards granted to other executives, the
appropriate incentive level for purposes of achieving the objectives set for the
option plan, the executive's past performance and overall corporate performance.
In 1996, the Compensation Committee did not make any option grants to the
Company's Named Officers, but did grant option to certain employees in
connection with their commencement of employment with the Company.
Section 162(m) of the Internal Revenue Code of 1986, as amended, denies a
deduction to a public corporation for compensation exceeding $1,000,000 to
"covered employee." A "covered employee" is defined as the Chief Executive
Officer and the Company's four other most highly compensated officers at the end
of any taxable year. Compensation which is payable pursuant to written binding
agreements entered into before February 18, 1993 and compensation which includes
performance-based compensation (as defined in Section 162(m)) is excludable from
the $1,000,000 limit. It is the Company's policy to qualify all compensation
paid to its top executives for deductibility under Section 162(m) in order to
maximize the Company's income tax deductions. However, this policy does not
rule out the possibility that the Compensation Committee may approve
compensation that may not qualify for the compensation deduction. This may be
done if in light of all applicable circumstances it would be in the best
interest of the Company for such compensation to be paid.
ROBERT BATINOVICH
DAVID J. FARR
10
<PAGE>
PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the Exchange
Act, except to the extent the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under the Securities Act
of 1933 or the Exchange Act. The following table compares total stockholder
returns over the last five fiscal years to the Standard & Poor's 500 Stock Index
("S&P 500 Index") and the Standard & Poor's Pollution Control Index (the "S&P
Pollution Control Index") over the period from January 1, 1991 to December 28,
1996.
COMPARISON OF CUMULATIVE TOTAL RETURN OF FARR COMPANY,
S&P 500 INDEX AND THE S&P POLLUTION CONTROL INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period FARR S&P POLLUTION S&P 500
(Fiscal Year Covered) COMPANY CONTROL INDEX INDEX
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-1/1/91 $100.00 $100.00 $100.00
FYE 1992 $ 67.93 $116.29 $107.64
FYE 1993 $ 67.93 $150.20 $118.50
FYE 1994 $ 66.57 $143.69 $120.06
FYE 1995 $ 86.95 $166.35 $165.18
FYE 1996 $180.69 $178.05 $203.11
</TABLE>
The cumulative total return shown on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
Each line on the stock performance graph assumes that $100 was invested in the
Company's Common Stock and the respective indices on January 1, 1991. The graph
then tracks the value of these investments, assuming reinvestment of dividends,
through December 28, 1996.
11
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen"), the Company's auditors since 1970,
audited the Company's financial statements for the year ended December 28, 1996.
In connection with its audit of the Company's financial statements for the year
ended December 28, 1996, Arthur Andersen reviewed the Company's Annual Report to
Stockholders, its filings with the Securities and Exchange Commission and its
unaudited quarterly financial information. Representatives of Arthur Andersen
are expected to be present at the meeting and will be given the opportunity to
make a statement if they desire to do so. It is expected that they will be
available to respond to appropriate questions from the stockholders at the
meeting. The Board of Directors has selected Arthur Andersen as the Company's
auditors for the fiscal year ending January 3, 1998.
STOCKHOLDER PROPOSALS
Any stockholder wishing to submit a proposal to be presented to all
stockholders at the Company's 1998 Annual Meeting must submit such proposal to
the Company so that it is received by the Company at its principal executive
offices no later than November 26, 1997.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended December 28, 1996 is being mailed herewith to all
stockholders of record. The Annual Report does not form part of the material
for solicitation of proxies.
MISCELLANEOUS
Should any matter not described in the Proxy Statement properly come before
the meeting, the persons named in the accompanying proxy form will vote in
accordance with their best judgment.
By the Order of the Board of Directors,
Kenneth W. Gerstner
Secretary
El Segundo, California
March 26, 1997
STOCKHOLDERS OF RECORD ON MARCH 7, 1997 MAY OBTAIN COPIES OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
BY WRITING TO KENNETH W. GERSTNER, 2221 PARK PLACE, EL SEGUNDO, CALIFORNIA
90245, AND A COPY WILL BE SENT TO YOU.
12
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
PROXY FARR COMPANY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 29, 1997
TO: WELLS FARGO BANK AS TRUSTEE UNDER THE
401(K) RETIREMENT PLAN OF FARR COMPANY
I hereby instruct the Trustee to vote (in person or by proxy) all the shares
of Farr Company Common Stock which are credited to my account at the Annual
Meeting of Stockholders of Farr Company to be held at the offices of the
corporation, 2221 Park Place, El Segundo, California, on April 29, 1997 or at
any adjournment thereof, on the following matters, as provided in the proxy
statement, and upon any other matter which may properly come before the
meeting.
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN DARK INK AND SIGN AND DATE ON THE
REVERSE SIDE
(1) ELECTION OF THREE DIRECTORS [_] Vote FOR ALL (except as marked to the
contrary below) [_] WITHHELD for ALL
John J. Kimes, H. Jack Meany and Denis R. Brown
(Instruction: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
(Continued and to be signed on other side.)
----------------------
Shares of Common Stock
PLEASE DATE AND SIGN EXACTLY AS YOUR NAME APPEARS BELOW AND RETURN IN THE
ENCLOSED ENVELOPE. YOUR SHARES WILL BE VOTED ACCORDING TO YOUR INSTRUCTIONS. IF
THIS CARD IS RETURNED SIGNED WITH NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
VOTED FOR THE ELECTION OF THE DIRECTORS NAMED ABOVE.
Unless you sign and return this card so that it is received by the Trustee
before April 22, 1997 your shares will be voted as provided by the Plan.
Date: ................, 1997
............................
............................
(Please sign EXACTLY as your
name appears hereon)
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If more
than one trustee, all
should sign. All joint
owners should sign.
<PAGE>
PROXY
FARR COMPANY
ANNUAL MEETING OF STOCKHOLDERS--APRIL 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED STOCKHOLDER OF FARR COMPANY DOES HEREBY NOMINATE, CONSTITUTE
AND APPOINT H. J. MEANY AND KENNETH W. GERSTNER, OR EITHER OF THEM, THE TRUE
AND LAWFUL PROXIES, AGENTS AND ATTORNEYS OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE FOR THE UNDERSIGNED ALL OF THE COMMON STOCK OF SAID
CORPORATION STANDING IN THE NAME OF THE UNDERSIGNED ON ITS BOOKS AT THE CLOSE
OF BUSINESS ON MARCH 7, 1997 AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
AT THE OFFICES OF THE CORPORATION, 2221 PARK PLACE, EL SEGUNDO, CALIFORNIA, ON
APRIL 29, 1997 OR AT ANY ADJOURNMENT THEREOF, WITH ALL OF THE POWERS WHICH
WOULD BE POSSESSED BY THE UNDERSIGNED IF PERSONALLY PRESENT, AS FOLLOWS:
IF NO CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF MANAGEMENT'S THREE NOMINEES AS DIRECTORS.
(Continued and to be signed on other side)
<PAGE>
IF NO CONTRARY INSTRUCTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF MANAGEMENT'S THREE NOMINEES AS DIRECTORS.
Please mark
your votes [X]
as this
WITHHELD
1. Election of Directors FOR FOR ALL
John I. Kimes, H. Jack Meany [_] [_]
and Denis R. Brown
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- -------------------------------------------------------------------------------
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders dated April 29, 1997 and the Proxy Statement of the same date
furnished therewith.
Signature(s) ___________________________ Date ______________________________
NOTE: Please sign name exactly as your name (or names) appear on the stock
certificate. When signing as attorney, executor, administrator, trustee or
guardian please give full title. If more than one trustee, all should sign.
All joint owners must sign.
