<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
<TABLE>
<S> <C>
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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
2201 Park Place
El Segundo, California 90245
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 4, 1999
The Annual Meeting of the Stockholders of Farr Company, a Delaware
corporation, will be held in the Company's offices located at 2201 Park Place,
El Segundo, California, on Tuesday, May 4, 1999, at 11:00 a.m. for the following
purposes:
1. To elect three directors to serve for three years. The Board of
Directors' nominees are named in the accompanying proxy statement
which is part of this notice.
2. To vote upon a proposal to amend the Company's Restated Certificate of
Incorporation to increase the total number of authorized shares of
Common Stock from 10,000,000 to 20,000,000.
3. To vote upon a proposal to amend The 1993 Stock Option Plan for Key
Employees of Farr Company to approve an increase in the aggregate
number of shares of Common Stock reserved for issuance under such plan
from 787,500 to 1,100,000 shares.
4. 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 12, 1999 as
the record date for determination of those stockholders entitled to vote at this
meeting.
All stockholders are cordially invited to attend the meeting.
Stephen E. Pegg
Secretary
El Segundo, California
April __, 1999
- --------------------------------------------------------------------------------
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, May 4, 1999. This solicitation
is made by the Company's Board of Directors, 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 April 1, 1999. The Company's principal executive
offices are located at 2201 Park Place, El Segundo, California 90245, and its
telephone number is (310) 727-6300.
The stockholders of record at the close of business on March 12, 1999 are
entitled to one vote for each share of common stock held by them. At the close
of business on March 12, 1999, there were outstanding 7,894,180 shares of the
Company's common stock (the "Common Stock") (such figure does not include
983,944 shares held in treasury). 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.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting will be required for approval of
the proposal to increase the authorized shares of Common Stock. All other
proposals to come before the Annual Meeting will 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 12, 1999 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 SEC and means generally the power to vote or
dispose of securities, regardless of any economic interest therein.
<TABLE>
Amount and
Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class(1)
- ------------------------------------ --------------------------------- -------------------
<S> <C> <C>
Wellington Management Company, LLP.................... 693,150(2) 8.8%
75 State Street
Boston, Massachusetts 02109
Fleet Financial Group, Inc............................ 569,500(3) 7.2%
One Federal Street
Boston, Massachusetts 02110
Wanger Asset Management, L.P.......................... 491,900(4) 6.2%
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Wilen Management Company, Inc......................... 457,776(5) 5.8%
Greenspring Station, Suite 226
2360 West Joppa Road, Suite 226
Lutherville, Maryland 21093
Morgan Stanley Dean Witter & Co....................... 450,000(6) 5.7%
1585 Broadway
New York, New York 10036
Dimensional Fund Advisors Inc......................... 436,460(7) 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Wedbush Morgan Securities Inc......................... 435,628(8) 5.5%
1000 Wilshire Boulevard, 9th Floor
Los Angeles, California 90071
</TABLE>
____________
(1) Based on 7,894,180 shares of Common Stock outstanding as of March 12, 1999
(not including 983,944 shares held in treasury).
(2) Based on information contained in a Schedule 13G/A filed with the SEC on
February 9, 1999.
(3) Based on information contained in a Schedule 13G filed with the SEC on
February 12, 1999.
(4) Based on information contained in a Schedule 13G/A filed with the SEC on
January 29, 1999.
(5) Based on information contained in a Schedule 13G/A filed with the SEC on
February 8, 1999.
(6) Based on information contained in a Schedule 13G filed with the SEC on
February 5, 1999.
(7) Based on information contained in a Schedule 13G filed with the SEC on
February 11, 1999.
(8) Based on information contained in a Schedule 13G filed with the SEC on
February 26, 1999 by Wedbush Morgan Securities Inc., Edward W. Wedbush,
E*Capital Corporation and Wedbush Morgan Securities Employees' Retirement
Plans, as joint filers. Includes 7,330 shares held by a relative of
Edward W. Wedbush over which Mr. Wedbush is deemed to have shared
dispositive power.
2
<PAGE>
Ownership By Management
The following table sets forth as of March 12, 1999 information with
respect to the beneficial ownership of the Common Stock by each director, each
Named Officer (as defined below) and by all of the Company's directors and
executive officers as a group:
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Name of Beneficial Owner Position Owned(1)(2) Class(1)(3)
- --------------------------------- ---------------------------------- ----------------------- -----------------
<S> <C> <C> <C>
H. Jack Meany.................... Chairman of the Board............. 480,975 5.9%
Robert Batinovich................ Director.......................... 247,500 3.1%
Richard P. Bermingham............ Director.......................... 41,625 *
Denis R. Brown................... Director.......................... 19,500 *
John J. Kimes.................... Director.......................... 19,500 *
John A. Sullivan................. Director.......................... 22,050 *
A. Frederick Gerstell............ Director.......................... 9,000 *
John C. Johnston................. President and Chief Executive
Officer, Director......... 121,824 1.5%
Richard Larson................... Senior Vice President............. 9,375 *
Myron G. Rasmussen............... Vice President.................... 51,384 *
John R. Vissers.................. Vice President, Controller........ 14,586 *
Directors and Executive Officers as a group (12 persons)............. 1,066,519 12.6%
</TABLE>
_________________
* Less than 1%.
(1) Based on 7,894,180 shares of Common Stock outstanding as of March 12, 1999
(not including 983,944 shares held in treasury). 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 does not have any information as
to whether any shares shown in this table are subject to California
community property law.
(2) Includes shares purchasable within 60 days upon exercise of outstanding
stock options as follows: H.J. Meany, 268,000; R. Batinovich, 22,500; R.P.
Bermingham, 36,000; D. Brown, 9,000; J.J. Kimes, 18,000; J. Sullivan,
13,500; A.F. Gerstell, 4,500; J. Johnston, 119,625; R. Larson, 9,375; M.G.
Rasmussen, 35,719; J. Vissers, 6,000; and all Directors and Executives
Officers as a group, 542,219.
(3) 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
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Company's Bylaws, the Board of Directors is 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 2002 Annual Meeting or 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.
1999 Nominees
-------------
<TABLE>
<CAPTION>
Principal Business Experience During Past Director
Name Age 5 Years and Certain Other Directorships Since
- ------------------------- ------- ----------------------------------------------------------- ----------------
<S> <C> <C> <C>
John C. Johnston 55 President and Chief Executive Officer of the Company since 1996
February 1999; President and Chief Operating Officer of the
Company from February 1996 to February 1999; 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 59 Chairman of Bermingham Investment Company since 1997; Vice 1990
Chairman of American Golf Corporation, a golf course
management company, from 1994 to 1997; President and Chief
Executive Officer from May 1987 to June 1994 of Sizzler
International, Inc., an operator and franchisor of
restaurants.
John A. Sullivan 44 Investment Advisor of Relational Investors, LLC since 1998; 1996
Financial Consultant with Batchelder & Partners, Inc., from
May 1996 to March 1998; 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, Inc. since October
1995.
</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>
H. Jack Meany 75 Chairman of the Board since April 1994; Chief 1976 2000
Executive Officer of the Company from February 1996
to February 1999; 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, ESI, Inc. since 1980.
John J. Kimes 55 President and Chief Executive Officer of Computerized 1995 2000
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.
Denis R. Brown 58 President and Chief Executive Officer and a Director 1997 2000
of Pinkerton, Inc. since April 1994, a leading
supplier of global security solutions; President and
Chief Executive Officer of Concurrent Computer
Corporation, from 1990 to 1993; Director, CalMat Co.
since January 1997.
Robert Batinovich 62 Chairman and Chief Executive Officer of Glenborough 1994 2001
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.
A. Frederick Gerstell 61 Vice Chairman, Director and Consultant of Vulcan 1998 2001
Materials Company since January 1999; Chairman and
Chief Executive Officer of CalMat Co., a producer of
construction materials, from 1996 to January 1999;
Chairman, President, Chief Executive Officer and
Chief Operating Officer of CalMat from 1991 to 1996;
Director, Ameron, Inc., since 1997; Director and Vice
Chairman of the National Stone Association since 1997.
</TABLE>
5
<PAGE>
Board of Directors and Committees of the Board
The Board of Directors held seven meetings during 1998. During 1998, 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 a sitting director.
Directors who are not employees of the Company were paid an annual retainer
of $12,000 and $700 for each Board and committee meeting attended. Committee
chairmen were paid $1,000 for each committee meeting attended. Directors who
are employees of the Company are not paid for attending Board of Directors or
committee 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 108,000 to 225,000 and extended the duration of
the Director Plan from 1995 to 2001, among other things. Pursuant to the
Director Plan, each non-employee director of the Company is automatically
granted, on an annual basis, an option to purchase 4,500 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 or (b) the
minimum legal consideration necessary for the issuance of such shares. Under
the Director Plan, as of March 1, 1999, the Company had granted options to
purchase shares of Common Stock to the following directors:
. options for 18,000 shares to Mr. Meany,
. options for 27,000 shares to Mr. Batinovich,
. options for 40,500 shares to Mr. Bermingham,
. options for 22,500 shares to Mr. Kimes,
. options for 18,000 shares to Mr. Sullivan,
. options for 13,500 shares to Mr. Brown and
. options for 9,000 shares to Mr. Gerstell.
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.
Executive 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 held
one meeting in 1998.
Audit Committee
The Audit Committee, which is comprised of Messrs. Bermingham (Chairman),
Sullivan and Kimes, held two meetings in 1998. 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,
6
<PAGE>
. 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.
Compensation Committee
The Compensation Committee, which is comprised of Messrs. Batinovich
(Chairman), Brown and Gerstell, held one meeting in 1998. The functions
performed by the Compensation Committee include:
. reviewing management's recommendations as to grants of stock options to
key employees,
. the hiring of outside consultants to study and report on the
competitiveness of the Company's compensation to its officers and
. the setting of executive compensation levels.
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 SEC.
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 its review of such reports or
written representations from certain reporting persons, the Company believes
that during its fiscal year ended January 2, 1999, 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.
Corporate Governance
The Board of Directors has adopted two policies which are significant steps
toward further enhancement of the Company's corporate governance.
No less than once per year the Board of Directors selects at least three
employees of the Company from below the Senior Vice President level for an off-
the-record interview from which officers are excluded. The purpose of this
interview is to gain input from the lower-level employees as to their opinions
of how well the Company is being managed and answer any questions board members
may have regarding the Company from the employees' point of view.
A second policy of significance to sound corporate governance regards the
role of outside consultants who provide data and analyses to the Board and make
recommendations pertaining to executive pay and benefits. Under this policy all
officers and employees of the Company are excluded from both the selection and
the hiring of the consultants and from receiving information and reports direct
from the consultants. This is beneficial because it removes the consultant from
any position of risk of having a conflict of interest and it assures the Board
of Directors that the consultant is working only to the committee's
instructions. A further explanation of the application of this policy can be
found in the Compensation Committee Report contained herein.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the compensation earned by the Company's Chief
Executive Officer and the four other most highly compensated officers whose cash
compensation for the fiscal year ended January 2, 1999 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>
H. Jack Meany, 1998 246,002 203,307 0 23,546(3)
Chairman of the Board (2) 1997 246,002 247,834 0 25,829(3)
1996 246,000 339,180 0 10,500(3)
John C. Johnston, 1998 170,000 112,397 22,500 13,187(4)
President and Chief Executive 1997 170,000 137,013 30,000 14,522(4)
Officer(2) 1996 170,000 140,636 0 13,337(4)
Richard Larson, 1998 140,000 57,851 22,500 59,065(6)
Senior Vice President(5) 1997 72,693 36,617 15,000 30,728(6)
Myron G. Rasmussen, 1998 117,393 27,165 0 16,613(7)
Vice President 1997 117,393 33,115 0 18,090(7)
1996 117,393 45,321 0 14,976(7)
John R. Vissers, 1998 96,461 22,322 0 8,655(8)
Vice President, Controller 1997 91,924 22,226 3,000 8,371(8)
1996 88,301 24,349 0 7,598(8)
</TABLE>
_________________
(1) Excludes compensation in the form of perquisites and other personal
benefits that do not exceed the lesser of (i) $50,000 or (ii) 10% of the
total annual salary and bonus reported for each year.
(2) Effective February 16, 1999, Mr. Meany resigned from the position of the
Company's Chief Executive Officer, though he still serves the Company as
its Chairman of the Board and remains an officer of the Company. Effective
the same date, Mr. Johnston, who previously served as President and Chief
Operating Officer, assumed the role of President and Chief Executive
Officer of the Company.
(3) Consists of contributions by the Company under its Supplemental Executive
Savings Plan and 401(k) Plan (collectively, the "Retirement Plans").
(4) In 1998, consists of $9,002 of contributions by the Company under the
Retirement Plans and $4,185 of certain life insurance premiums paid on
behalf of Mr. Johnston. In 1997, consists of $11,666 of contributions by
the Company under the Retirement Plans and $2,856 of certain life insurance
premiums paid on behalf of Mr. Johnston. In 1996, consists of $10,659 of
contributions by the Company under the Retirement Plans and $2,678 of
certain life insurance premiums paid on behalf of Mr. Johnston.
(5) Mr. Larson's employment with the Company commenced in June 1997.
(6) In 1998, includes $47,662 for reimbursement of relocation costs, $6,517 of
contributions by the Company under the Retirement Plans and $800 of certain
life insurance premiums paid on behalf of Mr. Larson. In 1997, includes
$27,180 for reimbursement of relocation costs and $770 of certain life
insurance premiums paid on behalf of Mr. Larson.
(7) In 1998, consists of $10,084 of contributions by the Company under the
Retirement Plans and $6,529 of certain life insurance premiums paid on
behalf of Mr. Rasmussen. In 1997, consists of $11,130 of contributions by
the Company under the Retirement Plans and $6,960 of certain life insurance
premiums paid on behalf of Mr. Rasmussen. In 1996, consists of $10,791 of
8
<PAGE>
contributions by the Company under the Retirement Plans and $4,185 of
certain life insurance premiums paid on behalf of Mr. Rasmussen.
(8) In 1998, consists of $8,158 of contributions by the Company under the
Retirement Plans and $497 of certain life insurance premiums paid on behalf
of Mr. Vissers. In 1997, consists of $7,905 of contributions by the
Company under the Retirement Plans and $466 of certain life insurance
premiums paid on behalf of Mr. Vissers. In 1996, consists of $7,194 of
contributions by the Company under the Retirement Plans and $404 of certain
life insurance premiums paid on behalf of Mr. Vissers.
Option Grants in Last Fiscal Year
Shown below is information concerning grants of options by the Company to
the Named Officers in 1998:
<TABLE>
<CAPTION>
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of Stock
Securities Options Granted Exercise Price Appreciation For Option Term(2)
Underlying Options to Employees in Price Expiration --------------------------------------
Name Granted(#)(1) Fiscal Year ($/Share) Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Johnston......... 22,500 33.1% $12.75 3/25/08 $180,414 $457,205
Richard Larson........... 22,500 33.1% $12.75 3/25/08 $180,414 $457,205
</TABLE>
________________
(1) Such options were granted on March 25, 1998 with an exercise price equal to
the closing sale price of the Common Stock as reported on the Nasdaq
National Market on such date.
(2) The 5% and 10% assumed rates of appreciation are specified under the rules
of the SEC and do not represent the Company's estimate or projection of the
future price of the Common Stock. The actual value, if any, which a Named
Officer may realize upon the exercise of stock options will be based upon
the difference between the market price of the Common Stock on the date of
exercise and the exercise price.
Stock Option Exercises and Fiscal Year-End Option Values
The following table sets forth for the Named Officers information with
respect to unexercised options and year-end option values, in each case with
respect to options to purchase shares of Common Stock held as of January 2,
1999.
<TABLE>
<CAPTION>
Value of Unexercised
Shares In-the-Money Options at
Acquired Value Number of Unexercised Options at FY-End ($) (1)
on Realized FY-End (#) ------------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
H. Jack Meany(2)............ 0 -- 18,000 -- 122,750 --
John C. Johnston............ 0 -- 7,500 144,000 15,938 830,188
Richard Larson.............. 0 -- 3,750 33,750 0 0
Myron G. Rasmussen.......... 0 -- 34,594 1,125 215,074 7,953
John R. Vissers............. 1,968 18,000 3,562 3,938 21,977 16,711
</TABLE>
- -----------------
(1) Calculated based on the closing price of the Company's Common Stock
($10.125 per share) as reported on the Nasdaq National Market on January 2,
1999.
(2) Mr. Meany holds options to purchase 18,000 shares of Common Stock that were
granted pursuant to the Director Plan for his services to the Company as a
non-employee director.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee in the year ended January 2, 1999
were Messrs. Batinovich (Chairman), Brown and Gerstell, each of whom is a non-
employee director and none 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 the Securities Act
or the Exchange Act.
* * * *
The policy of the Compensation Committee is to establish compensation
levels for the Chief Executive Officer and the other 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
determines the appropriate executive compensation levels that it believes will
allow the Company to attract and retain qualified executives.
The Compensation Committee retains the services of an outside consultant
who is recruited, selected and retained solely by the Compensation Committee,
acting entirely independently of and without direction from management.
The consultant provides reports and information on a confidential basis to
the Compensation Committee. No reports or other information are provided to
management by the consultant other than by direction of the Compensation
Committee, at its sole discretion. No files or records of the consultant's
reports or work papers are kept by management or in the Company's files except
at the specific direction of the Chairman of the Compensation Committee and only
for specific documents or information.
The consultant's assignment is to use available current salary data for
companies of comparable size in manufacturing and related businesses, and make
comparative evaluations of salaries, incentive compensation and perquisites. To
facilitate this process, the Company provides to the consultant the value of all
options existing at the beginning of the year for each individual officer along
with a comparison of the value of all options existing at the end of the year
and any gain on options exercised during the year. This information is included
in the consultant's report to the Compensation Committee. Such information as
is reasonably available which may be of value to the Compensation Committee in
its deliberations is also provided by the consultant. Specific recommendations
are made by the consultant to the Compensation Committee, if and when requested
by the Committee.
The scope of the work to be performed and the fees and costs for such work
are determined between the consultant and the Chairman of the Compensation
Committee for each assignment. This is normally once each year, but may include
other work or at other times, as required by the Compensation Committee. The
positions covered are determined by the Compensation Committee and are the
entire officer staff as then-existing, and may include planned positions.
The Compensation Committee considers recommendations from the Chief
Executive Officer in determining 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
10
<PAGE>
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 officer's area of responsibility and
contribution in helping to reach Company objectives.
A major part of the compensation of each officer is base salary. Upon its
review of the Company's operating plan measured against actual achievement, the
Compensation Committee establishes the salary levels for executives and awards
bonuses. The Compensation Committee considers data from the outside
compensation consultant 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 are generally in line with the compensation levels at other
companies studied by the Compensation Committee. This is made up of base
salaries, which are slightly lower, and incentive compensation, which is
generally higher, than the average of the comparable companies studied.
In February 1996, Mr. Meany became Chairman and Chief Executive Officer of
the Company (as discussed above, Mr. Meany resigned as Chief Executive Officer
on February 16, 1999). 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 set by the Compensation Committee, Mr. Meany received an
annual base salary of $1.00 from April 1994 to February 1996. The Compensation
Committee in July 1996 then re-established Mr. Meany's base salary retroactively
at $246,000 per year, effective April 1994. In addition, Mr. Meany became
retroactively eligible to participate in the Company's Management Incentive
Plan. Mr. Meany's base salary and incentive compensation levels were determined
by the Compensation Committee through reference to only the base salaries and
total compensation being paid to chief executives of comparable manufacturing
and other business companies, along with the Company's performance and Mr.
Meany's ability to build and maintain a strong management team, capable of
meeting the Company plan on a consistent basis. As the Company's new Chief
Executive Officer, Mr. Johnston's compensation levels will be determined in a
similar fashion.
Officers are eligible to receive bonuses under the Company's Management
Incentive Plan. Under this plan, bonuses are based on the Company achieving
profits above a minimum return on assets and certain income levels. Based on
1998 operating results, corporate performance exceeded the minimum return on
assets and certain 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
employees; 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 and other personnel to maximize
stockholder value. The option program also utilizes vesting periods to
encourage employees to continue in the employ of the Company. The aggregate
number of options granted to an employee is based on the responsibilities of the
employee, the historic levels of option awards granted to other employees, the
appropriate incentive level for purposes of achieving the objectives set for the
option plan and the potential dilution effect of additional options to the
overall earnings per share. In 1998, the Compensation Committee granted options
to two of the Named Officers (as set forth in the option-grant table above) and
to two other employees.
ROBERT BATINOVICH (Chairman)
DENIS R. BROWN
A. FREDERICK GERSTELL
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<PAGE>
Performance Graph
The 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 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 or the Exchange
Act. The following table compares total stockholder returns 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, 1994 to December 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN OF FARR COMPANY,
S&P 500 INDEX AND THE S&P POLLUTION CONTROL INDEX
[GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FARR COMPANY $100.00 $ 98.00 $128.00 $266.00 $359.81 $364.13
- -----------------------------------------------------------------------------------------------------------------------------
S&P POLLUTION CONTROL INDEX $100.00 $ 93.84 $134.23 $147.58 $183.90 $ 96.84
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX $100.00 $101.32 $139.40 $171.41 $228.59 $293.92
=============================================================================================================================
</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, 1994. The graph
then tracks the value of these investments, assuming reinvestment of dividends,
through December 31, 1998.
12
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted a resolution amending Article IV of the
Company's Restated Certificate of Incorporation (the "Charter") to increase the
authorized shares of the Company's capital stock from the current amount of
10,000,000 shares of Common Stock to 20,000,000 shares of Common Stock (the
"Charter Amendment"). Article IV of the Charter, as proposed to be amended by
the Charter Amendment, would be restated in its entirety to say:
"The total number of shares of stock which the Corporation shall have
authority to issue is 20,000,000 shares of common stock, par value $.10 per
share (the "Common Stock")."
At the close of business on March 12, 1999, there were:
. 8,878,124 shares of Common Stock issued and outstanding,
. 983,944 shares of Common Stock held in treasury,
. 31,669 shares of Common Stock reserved for issuance upon exercise of
outstanding options issued under the 1983 Stock Option Plan for Key
Employees,
. 567,187 shares of Common Stock reserved for issuance upon exercise of
outstanding options issued under The 1993 Stock Option Plan for Key
Employees of Farr Company (with options for an additional 32,536
shares available for grant under this plan) and
. 148,500 shares of Common Stock reserved for issuance upon exercise of
outstanding options issued under the Company's 1991 Stock Option Plan
for Non-Employee Directors (with options for an additional 45,000
shares available for grant under this plan).
The increase in the authorized number of shares is proposed in order to
provide the Company with the flexibility to issue shares of Common Stock for
various strategic corporate purposes, including the following:
. to raise additional capital, as needed,
. to effect future stock dividends, if and when declared by the Board,
. to grant additional stock options or other stock-based compensation to
the Company's key employees and non-employee directors and
. in connection with future acquisitions or other business combinations,
where advantageous.
Management believes that the number of shares of Common Stock that would be
available for issuance following adoption of the Charter Amendment would be
sufficient for any foreseeable purposes. Except for the shares of Common Stock
issuable under the Company's stock option plans listed above, the Company does
not presently have any immediate plans to issue any of the additional shares of
Common Stock which would be authorized if the increase in authorized shares of
Common Stock contemplated by the Charter Amendment is approved. Other than
increasing the number of authorized shares of the Common Stock, the proposal to
increase the authorized shares of Common Stock will not affect the rights,
preferences or privileges of the Company's stockholders.
The Board of Directors has directed that the Charter Amendment be submitted
for stockholder approval. The affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting will be required
for approval of the proposal to increase the authorized shares of Common Stock.
In the absence of approval, the authorized number of shares of Common Stock of
the Company will remain at 10,000,000.
13
<PAGE>
The Board of Directors unanimously recommends that the stockholders vote
"FOR" approval of the Charter Amendment to increase the number of authorized
shares of Common Stock.
When a proxy in the form of the proxy enclosed with this proxy statement is
returned properly executed, unless marked to the contrary, such proxy will be
voted in favor of the increase in the authorized shares of Common Stock
contemplated by the Charter Amendment.
PROPOSAL 3
APPROVAL OF INCREASE IN NUMBER OF SHARES OF COMMON STOCK RESERVED UNDER THE 1993
STOCK OPTION PLAN FOR KEY EMPLOYEES OF FARR COMPANY
The stockholders of the Company will be asked to approve an amendment (the
"Amendment") to The 1993 Stock Option Plan for Key Employees of Farr Company
(the "1993 Plan"). The proposed Amendment (i) provides for an increase in the
number of shares of Common Stock issuable by the Company upon exercise of
options granted pursuant to the 1993 Plan from 787,500 to 1,100,000 and (ii)
amends the language with respect to the composition of the committee overseeing
the 1993 Plan to comport with recent amendments to Section 16b-3 of the Exchange
Act (as amended, the committee shall be composed solely of two or more "non-
employee directors," which replaces the old reference under Section 16b-3 of
"disinterested persons").
There are presently 787,500 shares of the Company's Common Stock authorized
for issuance under the 1993 Plan. At the close of business on March 12, 1999,
187,777 shares of Common Stock had been issued pursuant to the exercise of
options previously granted under the 1993 Plan and there were outstanding
options to purchase 567,187 shares of Common Stock.
In March 1999, the Board approved the Amendment to the 1993 Plan, subject
to stockholder approval, to ensure that the Company can continue to grant stock
options to employees, directors and consultants at levels determined appropriate
by the Board and the Compensation Committee. The ability to offer options in
order to attract and retain talented employees is particularly important to the
Company's competitive position in its industry.
The principal features of the 1993 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1993 Plan itself,
copies of which may be obtained by making a written request to the Company's
Secretary at the address provided on the last page of this proxy statement.
General
The 1993 Plan is intended (1) to further the growth, development and
financial success of the Company by providing additional incentives to certain
of its key employees who have been or will be given responsibility for the
management or administration of the Company's business affairs, by assisting
them to become owners of the Common Stock and thus to benefit directly from its
growth, development and financial success, and (2) to enable the Company to
obtain and retain the services of the type of professional, technical and
managerial employees considered essential to the long-range success of the
Company by providing and offering them an opportunity to become owners of the
Common Stock under options, including options that are intended to qualify as
incentive stock options ("ISOs") under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
As amended to date, and giving effect to stock dividends effected by the
Company, a total of 787,500 shares of Common Stock are presently reserved for
issuance upon the exercise of options granted under the 1993 Plan. Subject to
stockholder approval, the 1993 Plan, as amended, will increase the number of
shares of Common Stock issuable upon exercise of options to 1,100,000. The
Board of Directors believes that the increase in shares is desirable in order to
enable the Compensation Committee to continue to provide stock-based incentive
compensation to the Company's key employees and to attract new key employees,
thereby continuing to align the interests of such employees with those of the
stockholders. The 1993 Plan also authorizes the Compensation
14
<PAGE>
Committee to award non-qualified stock options having an exercise price which is
less than the market price. The Board of Directors determined that it was
desirable for the Compensation Committee to have the flexibility to award
options having an exercise price below market value in those circumstances in
which the Compensation Committee believes it is necessary in order to fulfill
the goals of the 1993 Plan as described above.
Administration of the 1993 Plan
The 1993 Plan is administered by the Compensation Committee which, as set
forth in the Amendment, is to consist of at least two members of the Board of
Directors, each of whom is a "Non-Employee Director" as defined by Rule 16b-3 of
the Exchange Act. The 1993 Plan further requires that the members be "outside"
directors as defined by Section 162(m) of the Code. The Compensation Committee
is authorized to select from among the eligible employees the individuals to
whom options are to be granted and to determine the number of shares to be
subject to the options, whether such options are to be ISOs or non-qualified
options and whether such options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and the terms and
conditions of the options, consistent with the 1993 Plan. The Compensation
Committee is also authorized to adopt, amend and rescind rules relating to the
administration of the 1993 Plan and the interpretation of options.
Eligibility to Receive Options
Options may be granted to individuals who are then officers or other
employees of the Company or any of its present or future subsidiaries (as
defined in Section 424(f) of the Code) and who are determined by the
Compensation Committee to be key employees. More than one option may be granted
to a key employee. The maximum number of shares which may be subject to options
granted under the 1993 Plan to any individual in any calendar year shall not
exceed 250,000, as set forth in the Amendment, and the method of counting such
shares shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code.
Terms of Options
The 1993 Plan requires that the price of the shares subject to both ISOs
and non-qualified options shall be no less than the par value of a share of
Common Stock and in the case of ISOs must be at least 100% of the fair market
value of the shares on the date the option is granted; provided, however, in the
case of any person who then owns (within the meaning of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of Company
stock (including the stock of any subsidiary or any parent corporation), the
price per share must be at least 110% of the fair market value of such shares on
the date the option is granted.
During the first year after an option is granted, it may not be exercised
as to any shares. Thereafter, options granted under the 1993 Plan are
exercisable at such times and in such installments (which may be cumulative) as
the Compensation Committee shall provide in the terms of the option. In
consideration of the granting of an option, the optionee must agree in the
written stock option agreement to remain in the employ of the Company or its
subsidiary for at least one year after the option is granted. The Compensation
Committee may subsequently determine to accelerate the time at which an option
becomes exercisable.
No ISO and no non-qualified option can be exercised after ten years from
the date of grant; provided, however, that shorter option periods may be
established by the Compensation Committee. In the case of any person who owns
(within the meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of Company stock (including the stock of
any subsidiary or any parent corporation) at the time an ISO is granted, such
ISO cannot be exercised after five years from the date of such grant. The
Compensation Committee may provide in the terms and conditions of an option that
it will terminate upon the dissolution or liquidation of the Company by another
corporation; but in such event, the Compensation Committee may also give
optionees the right to exercise their outstanding options in full during some
period prior to such event, even though the options have not yet become fully
exercisable.
15
<PAGE>
Options may be exercised by compliance with certain prescribed procedures
and the option price must be paid in full at the time of exercise. In any
event, the Common Stock will not be issued until the purchase price has been
paid in full. The option price may be paid in cash, or by the tendering of
Common Stock or by a combination of the two methods. The Compensation Committee
may, as a condition of the exercise of any option, require that the optionee
deliver such representations and documents as it deems necessary to effect
compliance with applicable federal and state securities laws and regulation. No
option granted under the 1993 Plan may be assigned or transferred by the
optionee except upon death and, during the lifetime of the optionee, the option
may be exercised only by the optionee. Subject to the other termination
provisions in the 1993 Plan and in the respective option agreements, an option
cannot be exercised after one year from the date the optionee's employment
terminates by reason of death or disability or after three months from the date
of an employment termination for any other reason (unless the optionee dies in
this three-month period). The options of optionees who are terminated for cause
expire immediately upon the termination of their employment. The Compensation
Committee may provide in the terms of an option that said option expires
immediately upon termination of employment for any reason.
The 1993 Plan provides for appropriate adjustments in the number and kind
of shares subject to the 1993 Plan and to outstanding options in the event of a
stock split, stock dividend or certain other types of recapitalizations. If any
ISO or non-qualified option becomes unexercisable for any reason, the number of
shares which were subject to the unexercised portion of the option shall
continue to be subject to the 1993 Plan and new ISOs or non-qualified options
may be granted in respect of such shares. Any option that is intended to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall conform to any requirements applicable to such compensation under
Section 162(m) of the Code or any additional regulations or rules issued
thereunder.
Amendment and Termination of the 1993 Plan
Future amendments of the 1993 Plan to (i) increase the share limit on the
number of shares which may be issued on exercise of options granted under the
1993 Plan (except for adjustments resulting from stock splits, etc.), (ii)
materially modify the eligibility requirements for participation in the 1993
Plan, (iii) reduce the minimum option price requirements, (iv) extend the period
during which options may be granted or (v) effect such other amendments which
require stockholder approval under Section 16b-3 of the Exchange Act would each
require the approval of the Company's stockholders within twelve months before
or after such amendments. In all other respects, the 1993 Plan can be amended,
modified, suspended or terminated by the Compensation Committee or the Board of
Directors.
Federal Income Tax Consequences
The following is a brief description of the federal income tax treatment
that will generally apply to awards made under the 1993 Plan, based on federal
income tax laws in effect on the date hereof. The exact federal income tax
treatment of awards will depend on the specific nature of any such award.
Pursuant to the 1993 Plan, participants may be granted options that are
intended to qualify as ISOs under Section 422 of the Code. Generally, the
optionee is not taxed, and the Company is not entitled to a deduction, on the
grant or exercise of an ISO. However, if the optionee sells the shares acquired
upon the exercise of an ISO ("ISO Shares") at any time within (i) one year after
the transfer of ISO Shares to the optionee pursuant to the exercise of the ISO
or (ii) two years from the date of grant of the ISO, then the optionee will
recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the sale price or the fair market value of the ISO Shares on the date
of exercise, over the exercise price of the ISO. The Company will generally be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee. If the optionee sells the ISO Shares at any time after the optionee
has held the ISO Shares for at least (i) one year after the date of transfer of
the ISO Shares to the optionee pursuant to the exercise of the ISO and (ii) two
years from the date of grant of the ISO, then the optionee will recognize
capital gain or loss equal to the difference between the sale price and the
exercise price of such ISO, and the Company will not be entitled to any
deduction.
16
<PAGE>
The amount by which the fair market value of the ISO Shares received upon
exercise of an ISO exceeds the exercise price will be included as a positive
adjustment in the calculation of an optionee's "alternative minimum taxable
income" ("AMTI") in the year of exercise. The "alternative minimum tax"
imposed on individual taxpayers is generally equal to the amount by which 28%
(26% of AMTI below certain amounts) of the individual's AMTI (reduced by certain
exemption amounts) exceeds his or her regular income tax liability for the year.
The grant of an option or other similar right to acquire stock that does
not qualify for treatment as an ISO (a "non-qualified stock option") is
generally not a taxable event for the optionee. Upon exercise of the option,
the optionee will generally recognize ordinary income in an amount equal to the
excess of the fair market value of the stock acquired upon exercise (determined
as of the date of exercise) over the exercise price of such option, and the
Company will be entitled to a deduction equal to such amount.
Special rules will apply in cases where a recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations under the 1993 Plan by delivering previously owned shares of Common
Stock or by reducing the amount of shares otherwise issuable pursuant to the
award. The surrender or withholding of such shares will in certain circumstances
result in the recognition of income with respect to such shares or a carryover
basis in the shares acquired.
The terms of the agreements pursuant to which specific awards are made
under the 1993 Plan may provide for accelerated vesting or payment of an award
in connection with a change in ownership or control of the Company. In that
event and depending upon the individual circumstances of the recipient, certain
amounts with respect to such award may constitute "excess parachute payments"
under the "golden parachute" provisions of the Code. Pursuant to these
provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payment" and the Company will be denied any deduction with respect
to such payment.
In certain circumstances, the Company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the 1993 Plan) to certain officers
of the Company to the extent that the compensation exceeds $1,000,000 (per
person) annually.
Conclusion
The Board of Directors has directed that the Amendment to the 1993 Plan be
submitted for stockholder approval. The affirmative vote of a majority of the
shares of Common Stock represented at the Annual Meeting will be required for
approval. In the absence of approval, the increase in the number of shares of
Common Stock reserved for issuance under the 1993 Plan will be without effect,
and the maximum number of shares of Common Stock issuable under the 1993 Plan
will remain 787,500.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" approval of the Amendment to the 1993 Plan.
When a proxy in the form of the proxy enclosed with this proxy statement is
returned properly executed, unless marked to the contrary, such proxy will be
voted in favor of adoption of the Amendment to the 1993 Plan.
17
<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 January 2, 1999.
In connection with its audit of the Company's financial statements for the year
ended January 2, 1999, 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 1, 2000.
STOCKHOLDER PROPOSALS
Any stockholder wishing to submit a proposal to be presented to all
stockholders at the Company's 2000 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 __, 1999.
ANNUAL REPORT
The Company's Annual Report to Stockholders containing audited financial
statements for the year ended January 2, 1999 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,
Stephen E. Pegg
Secretary
El Segundo, California
April __, 1999
Stockholders of record on March 12, 1999 may obtain copies of the Company's
Annual Report on Form 10-K as filed with the Securities and Exchange Commission
and The 1993 Stock Option Plan for Key Employees of Farr Company by writing to
Stephen E. Pegg, 2201 Park Place, El Segundo, California 90245, and a copy will
be sent to you.
18
<PAGE>
FARR COMPANY
ANNUAL MEETING OF STOCKHOLDERS--MAY 4, 1999
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 Steve E. Pegg, 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 12, 1999, at the Annual Meeting of
Stockholders to be held at the offices of the
corporation, 2201 Park Place, El Segundo,
California, on May 4, 1999 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, FOR AMENDMENT OF THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AND
FOR AMENDMENT OF THE 1993 STOCK OPTION PLAN FOR KEY
EMPLOYEES OF FARR COMPANY.
(Continued and to be signed on other side)
P
R
O
X
Y
<PAGE>
Please mark [X]
your votes
as this
WITHHELD
FOR FOR ALL
1. Election of Directors [ ] [ ]
John C. Johnston
Richard P. Bermingham
John A. Sullivan
(INSTRUCTION: To withhold authority to vote for
any individual nominee write that nominee's name
on the space provided below.)
- ------------------------------------------------
FOR AGAINST
2. To vote upon a proposal to amend the Company's [ ] [ ]
Restated Certificate of Incorporation to increase
the total number of authorized shares of Common
Stock from 10,000,000 to 20,000,000.
FOR AGAINST
3. To vote upon a proposal to amend the 1993 [ ] [ ]
Stock Option Plan for Key Employees of Farr Company
to approve an increase in the aggregate number of
shares of Common Stock reserved for issuance under
such plan from 787,500 to 1,100,000 shares.
4. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come
before the meeting.
___ The undersigned hereby acknowledges receipt of the
| Notice of Annual Meeting of Stockholders dated
April __, 1999 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.
