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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
FARR COMPANY
(Name of Subject Company)
FARR COMPANY
(Name of Person Filing Statement)
COMMON STOCK, $0.10 PAR VALUE
(INCLUDING THE ASSOCIATED COMMON SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
311648 109 (COMMON STOCK)
(CUSIP Number of Class of Securities)
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STEPHEN E. PEGG
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
FARR COMPANY
2201 PARK PLACE
EL SEGUNDO, CA 90245
(310) 727-6300
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person Filing Statement)
COPY TO:
ROBERT K. MONTGOMERY, ESQ.
GIBSON, DUNN & CRUTCHER, LLP
2029 CENTURY PARK EAST, SUITE 4000
LOS ANGELES, CA 90067
(310) 552-8500
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer
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ITEM 1. SUBJECT COMPANY INFORMATION.
The name of the subject company is Farr Company, a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is
2201 Park Place, El Segundo, CA 90245. The telephone number of the Company at
its principal executive offices is (310) 727-6300.
The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the Common Stock, par value $0.10 per share, of the Company (the
"Common Stock") and the associated common share purchase rights (the "Rights")
issued pursuant to the Rights Agreement, dated as of April 3, 1989, between the
Company and Chase Mellon Shareholder Services, L.L.C. (successor rights agent to
Security Pacific National Bank), as Rights Agent, as amended by the First
Amendment thereto, dated as of March 23, 1999, and the Second Amendment thereto,
dated as of March 26, 2000 (as amended, the "Rights Agreement"). As of
March 24, 2000, there were 7,294,519 shares of Common Stock outstanding and
there were 697,200 shares of Common Stock reserved for issuance under
then-current outstanding stock options pursuant to the Company's stock option
and incentive plans.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSONS.
The filing person is the subject company. The Company's name, business
address and business telephone number are set forth in Item 1 above.
This Statement relates to the tender offer by Ratos Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of
Forvaltnings AB Ratos (publ.), a Swedish corporation ("Parent"), to purchase all
of the outstanding shares of Common Stock and the associated Rights (the shares
of Common Stock together with any associated Rights are referred to in this
Statement as the "Shares"), at a purchase price of $17.45 per Share, net to the
seller in cash (the "Offer Price"), upon the terms and subject to the conditions
set forth in the Purchaser's Offer to Purchase, dated April 4, 2000, and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). The Offer is
described in a Tender Offer Statement on Schedule TO (as amended or supplemented
from time to time, the "Schedule TO"), filed by Parent and the Purchaser with
the Securities and Exchange Commission (the "Commission") on April 4, 2000. The
Offer is being made in accordance with the Agreement and Plan of Merger, dated
as of March 26, 2000, among Parent, the Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions, following completion of the Offer, and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), the Purchaser will be merged with and into the Company (the "Merger").
Following the consummation of the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of Parent. As more fully described in Item 3 below, at the effective
time of the Merger (the "Effective Time"), each issued and outstanding Share
(other than Shares owned by Parent, the Purchaser, any of their respective
subsidiaries, the Company or any of its subsidiaries, which will be cancelled,
and Shares, if any, held by stockholders who did not vote in favor of the Merger
Agreement and who comply with all of the relevant provisions of Section 262 of
the DGCL relating to dissenters' rights of appraisal) will be converted into the
right to receive $17.45 in cash or any greater amount per Share paid pursuant to
the Offer (the "Merger Consideration").
The Schedule TO states that the principal executive offices of Purchaser and
Parent are located at Drottninggatan 2, SE-111 96, Stockholm, Sweden (telephone
number: +46-8-700-17-00).
ITEM 3. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Rule 14f-1 under the Securities Exchange Act (the "Information Statement") that
is attached as Annex B to this Statement and is incorporated herein by
reference. Except as described in this Statement (including in the Exhibits
hereto and in Annex B hereto) or incorporated herein by reference, to the
knowledge of the Company, as of the date of this Statement there exists no
material agreement,
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arrangement or understanding or any actual or potential conflict of interest
between the Company or its affiliates and (1) the Company's executive officers,
directors or affiliates or (2) Parent, the Purchaser or the their respective
executive officers, directors or affiliates.
THE MERGER AGREEMENT. The summary of the Merger Agreement and the
description of the conditions of the Offer contained in Sections 11 and 13,
respectively, of the Offer to Purchase of Parent and the Purchaser, dated
April 4, 2000 and filed as Exhibit (a)(1) to the Schedule TO, which is being
mailed to stockholders together with this Statement, are incorporated herein by
reference. Such summary and description are qualified in their entirety by
reference to the Merger Agreement, which has been filed as Exhibit (e)(1) hereto
and is incorporated herein by reference.
EFFECTS OF THE OFFER AND THE MERGER UNDER COMPANY STOCK PLANS AND AGREEMENTS
BETWEEN THE COMPANY AND ITS EXECUTIVE OFFICERS.
The Merger Agreement provides that each outstanding option (whether vested
or unvested) to purchase shares of Common Stock granted under any stock option
or compensation plan or arrangement of the Company or its subsidiaries
(collectively, the "Company Option Plans") will be cancelled and only entitle
each holder thereof, and each holder thereof shall receive from the surviving
corporation in the Merger, an amount in cash equal to, for each share with
respect to such option, the excess, if any, of the Offer Price over the per
share exercise price under such option, subject to withholding as required
pursuant to applicable tax laws.
The purchase of Shares pursuant to the Offer will constitute a "change of
control" for purposes of the change-of-control employment agreements that the
Company has entered into with Messrs. Richard Larson, Steve Pegg, and John
Vissers. If Messrs. Larson, Pegg and Vissers were to be terminated other than
"for cause" or if they were to have "good reason" to terminate their employment
under their agreements, the Company would be obligated to pay them severance
benefits to which they are entitled under the above agreements. In such case,
the severance amounts payable to these individuals, assuming the Merger occurs
on June 1, 2000, would be: Mr. Larson, $371, 944, Mr. Pegg $310,000 and Mr.
Vissers, $226,977. If Messrs. Larson, Pegg or Vissers were to voluntarily
terminate their employment with the Company, other than for "good reason,"
during the period between the six-month anniversary of the closing of the Offer
and the one-year anniversary of the closing of the Offer, they would be entitled
to receive from the Company as cash severance an amount equal to: Mr. Larson,
$185,972, Mr. Pegg $155,000, and Mr. Vissers, $113,489. The severance amounts
payable to the above individuals may be subject to adjustment per application of
"excess parachute payment" regulations as defined in Section 280G of the Code
pertaining to excise taxes.
An Amended and Restated Employment Continuation Agreement was entered into
as of March 27, 2000, effective as of the effective time of the Merger, by and
between Mr. John C. Johnston and the Company, a copy of which is attached as
Exhibit (e)(5) hereto.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors of the
Company (the "Board" or the "Board of Directors"), at a meeting held on
March 26, 2000, determined that the terms of the Offer and the Merger are fair
to and in the best interests of the stockholders of the Company. At this
meeting, the Board approved the Offer and the Merger and the other transactions
contemplated by the Merger Agreement, and approved the Merger Agreement,
including for purposes of the "interested stockholder" provisions of the DGCL.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES IN THE OFFER.
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(B) (I) BACKGROUND OF THE OFFER; CONTACTS WITH PARENT.
On October 20, 1999, Tucker Anthony Cleary Gull ("Tucker Anthony") made a
presentation to the Company regarding long-term strategic planning alternatives,
including a sale of the Company and discussed those alternatives on a
preliminary basis given the unsolicited proposal that had been received from a
potential buyer (the "Potential Buyer").
On November 9, 1999, the Company retained Tucker Anthony to pursue a
possible transaction with the Potential Buyer as well as other potentially
interested parties.
During November and December 1999 at the instruction of the Board of
Directors and in consultation with the Company's management, Tucker Anthony
contacted the Potential Buyer and other potential strategic acquirors regarding
their interest in a possible transaction involving of the Company.
On December 8, 1999, John Johnston, President and Chief Executive Officer of
the Company, contacted Jan Eric Larson, President and Chief Executive Officer of
Camfil AB ("Camfil") via telephone and informed Mr. Larson that the Company had
retained Tucker Anthony to explore strategic alternatives to maximize
shareholder value. Mr. Johnston asked Mr. Larson if Camfil would be interested
in participating in a controlled auction process. Mr. Larson responded that
Camfil would be interested in such an opportunity.
On December 31, 1999, the Company and Camfil entered into a customary
confidentiality and standstill agreement under which the Company would provide
the Buyer with certain non-public information. The Company also entered into
similar confidentiality and standstill agreements with other possible buyers,
including the Initial Buyer.
During the first two weeks in January 2000, the Company made presentations
to potential strategic acquirors, including Camfil, regarding the Company's
business, operations and projected results of operations. On January 7, 2000,
Tucker Anthony, together with the senior management of the Company, including H.
Jack Meany, John Johnston, Richard Larson and Stephen Pegg, made a presentation
to Jan Eric Larson, Alan O'Connell, Johan Ryrberg and Armando Brunetti of Camfil
regarding the Company's business, operations and projected results of
operations. The meeting took place in Denver, Colorado.
On January 25, 2000, Tucker Anthony distributed final bid procedures to
those parties who had participated in the management presentations. The package
of information also included updated financial information regarding the
Company's fiscal year 1999 results.
On February 4, 2000, two parties, including Parent, submitted preliminary
non-binding indications of interest. On February 4, 2000, Parent and Camfil
submitted a preliminary non-binding proposal letter to Tucker Anthony in which
they indicated that they would be interested in acquiring the Company for a
total purchase price of between $102,042,321--$117,997,097, i.e., between
$13.50-$15.50 per Share.
On February 8, 2000, a representative from Tucker Anthony contacted the
other potential buyer and indicated that their proposal was too low. After
reviewing their valuation work, the other potential buyer decided not to raise
their offer at that time.
On February 9, 2000, Tucker Anthony indicated that the Company would not
pursue a transaction at the valuation range indicated in the February 4, 2000
non-binding proposal of Parent and Camfil. On or around February 10, 2000, a
conference call was held between Parent, Camfil and Tucker Anthony for the
purpose of discussing the Company's projections. The relationship between Parent
and Camfil was also discussed.
On February 11, 2000, Parent and Camfil submitted an amendment to their
non-binding proposal, which amendment increased the parties' non-binding
aggregate valuation of the Company, subject to the findings of a due diligence
investigation of the Company, to $137,940,567, or $18 per share. In this
February 11, 2000 letter the parties also (i) explained that any acquisition of
the Company would be
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effected by Parent and not by Camfil, and (ii) indicated that they considered
the Company's management to be integral to the success of the Company and the
acquisition by Parent of the Company would be conditioned on the execution of
employment agreements with certain key employees of the Company.
On February 14, 2000, a representative of Tucker Anthony reviewed a number
of items with representatives of Parent and Camfil regarding the corporations'
February 11, 2000 amendment to their non-binding proposal. On February 15, 2000,
Parent and Camfil delivered to Tucker Anthony a final amendment to their
non-binding proposal, which amendment confirmed the valuation the interested
parties had placed on the Company in their February 11, 2000 letter and
addressed several due diligence issues raised by a representative of Tucker
Anthony, including, among other things, concerns over the financing of the
transaction, the identity of the individuals whom the interested parties
considered to be key employees, the amount of the break up fee and the
identification of the regulatory approvals that would be required to consummate
the transaction.
A representative of Tucker Anthony talked with representatives of Parent on
two separate occasions on February 16, 2000 to further clarify Parent's
proposal. On February 16, 2000, the other potential buyer submitted a new
proposal to acquire the Company at a higher price than was initially bid, but
lower than $18.00 per share.
On February 17, 2000, in a telephone conference to consider the two
proposals, the Board of Directors of the Company, based upon its judgment as to
the two formal qualifying proposals received, approved the Company's entering
into a letter agreement pursuant to which Parent would obtain a period to
conduct its due diligence investigation on an exclusive basis through midnight
Friday, March 10, 2000.
On February 19, 2000, an Exclusive Negotiating Agreement was entered into
between the Company and Parent, the term of the exclusive negotiating period
thereunder expiring at midnight on March 10, 2000.
From February 21, 2000, until March 1, 2000, representatives of Parent
conducted a due diligence investigation of the Company in Los Angeles. Between
February 23, 2000 and February 25, 2000, Mr. Larson and Mr. O'Connell traveled
to most of the Company's domestic manufacturing facilities with Mr. Johnston. On
February 25, 2000, a representative of Tucker Anthony discussed the status of
the due diligence efforts with a representative of Parent.
On March 4, 2000, a representative of Tucker Anthony discussed with a
representative of Parent the Company's desire that the merger agreement not be
subject to any "outs," including environmental due diligence. As a result, it
was decided that the exclusivity period needed to be extended. Prior to
extending the exclusivity period, it was important that any outstanding due
diligence issues between Parent and the Company be identified. A conference call
between Parent, Camfil, the Company and their respective advisors was conducted
on March 6, 2000, regarding, among other things, environmental due diligence
issues.
On March 7, 2000, Mr. Johnston discussed valuation issues with
representatives of both Parent and Camfil. During these discussions, Parent
indicated that, owing to certain due diligence findings, Parent was no longer
willing to pay the $18.00 per Share suggested in the February 11, 2000 amendment
to the non-binding proposal. The parties negotiated a tentative valuation for
the Company of approximately $17.50 per Share, subject to the outcome of
Parent's investigation of its remaining due diligence concerns, which by this
time were limited to certain litigation, environmental and real property
matters.
On March 10, 2000, Parent indicated that it needed more time to conduct
additional environmental due diligence. On March 10, 2000, the Board of
Directors of the Company approved an extension of the exclusive negotiating
period to permit Parent to complete its due diligence investigation of the
Company. By action of the Board of Directors, the exclusivity period was
extended through the execution by the Company and Parent of an amendment to the
Exclusive Negotiating Agreement, effective as of March 10,
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2000, which extended the exclusive negotiating period until midnight on
March 25, 2000. It was agreed that the definitive merger agreement could be
negotiated over the next two weeks.
On March 22, 2000, representatives of Parent met with members of the senior
management of the Company, including Mr. Johnston, at the Los Angeles offices of
Sullivan & Cromwell to discuss employment-related matters. It was determined
that the employment agreements already in place for the senior executives of the
Company, with the exception of Mr. Johnston and Mr. Meany, were satisfactory and
did not require revision prior to the commencement of the Offer.
On March 23, 2000, representatives of Parent and the Company met to
negotiate the definitive Merger Agreement at the Los Angeles (Century City)
offices of Counsel to the Company, Gibson, Dunn & Crutcher, LLP. A draft of the
Merger Agreement reflecting the negotiations to such date and a draft of Tucker
Anthony's fairness opinion were distributed to the members of the Board of
Directors of the Company in the early evening. Negotiations continued the
following day and included representatives of Parent, Camfil and the Company.
Parent and the management of the Company reached an agreement on the acquisition
by Parent, through Purchaser, of all of the outstanding Shares of the Company
for $17.45 per Share, subject to Board approval. In addition, Mr. Johnston
entered into a long term Amended and Restated Employment Continuation Agreement
("Employment Agreement") with the Company, the effective date of the Agreement
being the effective date of the Merger. The terms of the Employment Agreement of
Mr. Johnston are set forth in Section 11 of the Offer to Purchase and are
incorporated herein by reference. A copy of the Employment Agreement is attached
as Exhibit (e)(5) hereto. Prior to the conclusion of the negotiations, the
Company and Parent executed an agreement that extended the exclusive negotiating
period until midnight on March 27, 2000.
On March 26, 2000, the Board of Directors of the Company met to determine
whether or not it was advisable for the Company to enter into the Merger
Agreement as negotiated by the Company's management and advisers. The Board of
Directors of the Company received presentations from the Company's legal and
financial advisors and considered the Offer, the Merger and the Merger
Agreement. At the meeting, Tucker Anthony delivered its opinion that, as of such
date, and based upon and subject to certain matters and assumptions, the
consideration to be received by the holders of Shares pursuant to the Merger
Agreement is fair from a financial point of view to such holders. After
considerable deliberation, including a discussion of Tucker Anthony's fairness
opinion, the Board of Directors of the Company determined that the terms of the
Offer and the Merger are fair to and in the best interests of the stockholders
of the Company, approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and determined to recommend that
the Company's stockholders accept the Offer and tender their Shares pursuant to
the Offer and approve and adopt the Merger Agreement. Subsequently, signature
pages being held in escrow were released and the Merger Agreement became
effective as of March 26, 2000. Also as of March 26, 2000, the individual
members of the Board of Directors of the Company each executed an Agreement
whereby each member agreed to, among other things, tender his Shares (including
any and all options to purchase Shares) into the Offer, subject to a right of
withdrawal should the Company receive an offer that is, among other things, more
favorable to the Company's stockholders from a financial point of view than the
Offer. Finally, Mr. Meany executed an Amendment to his Employment Agreement on
March 26, 2000, whereby Mr. Meany agreed to relinquish his duties of Chairman of
the Board of Directors of the Company following the Merger and to accept the
role of Director of Corporate Development. The terms of the Merger Agreement and
the Agreement to Tender Shares are set forth in Section 11 of the Offer to
Purchase and are incorporated herein by reference.
On April 4, 2000, in accordance with the Merger Agreement, the Purchaser
commenced the Offer.
Copies of the Merger Agreement and the Agreement to Tender Shares have been
filed as Exhibits to the Schedule TO filed by Parent with the SEC, and are
available for inspection and copying at the principal
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office of the SEC in the manner set forth in Section 8 of the Offer to Purchase.
The foregoing descriptions of these documents are qualified in their entireties
by reference to such documents.
(II) REASONS FOR THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
In reaching its recommendations described above in paragraph (a) of this
Item 4, the Board of Directors considered a number of factors, including the
following:
1. TRANSACTION FINANCIAL TERMS/PREMIUM TO MARKET PRICE. The relationship
of the Offer Price and the Merger Consideration to the historical market prices
of the Shares. The $17.45 Offer Price and Merger Consideration exceed the
highest trading price of the Shares during the twelve-month period preceding the
announcement of the Merger Agreement ($11.00) and represent a 47% premium over
the closing price of the Shares on the Nasdaq National Market on March 24, 2000
(the last trading day prior to the Board meeting at which the Board of Directors
approved the Merger Agreement) and a 67% premium over the 30 day average closing
price of the Shares prior to such Board meeting. The Board also considered the
form of consideration to be paid to holders of Shares in the Offer and the
Merger, and the certainty of value of such cash consideration compared to stock.
The Board was aware that the consideration received by holders of Shares in the
Offer and Merger would be taxable to such holders for federal income tax
purposes.
2. COMPANY OPERATING AND FINANCIAL CONDITION. The current and historical
financial condition and results of operations of the Company, as well as the
prospects and strategic objectives of the Company, including the risks involved
in achieving those prospects and objectives, and the current and expected
conditions in the industries in which the Company's businesses operate.
3. STRATEGIC ALTERNATIVES. The presentation of the Company's financial
advisor and the Board's review with respect to trends in the industries in which
the Company's businesses operate and the strategic alternatives available to the
Company, including the Company's alternative to remain an independent public
company, the possibility of acquisitions or mergers with other companies in such
industries, a break-up or leveraged buy-out of the Company and other
extraordinary corporate transactions, as well as the risks and uncertainties
associated with such alternatives.
4. TUCKER ANTHONY FAIRNESS OPINION. Presentations from Tucker Anthony and
the opinion of Tucker Anthony, dated March 26, 2000, that, based upon and
subject to certain considerations and assumptions, the consideration to be
received by holders of Shares pursuant to the Merger Agreement is fair from a
financial point of view to such holders. A copy of the opinion delivered by
Tucker Anthony to the Board of Directors, setting forth the procedures followed,
the matters considered and the assumptions made by Tucker Anthony in arriving at
its opinion, is attached hereto as Annex A and incorporated herein by reference.
Stockholders are urged to read this opinion in its entirety. The Board of
Directors was aware that Tucker Anthony becomes entitled to certain fees
described in Item 5 upon the consummation of the Offer.
5. TIMING OF COMPLETION. The Board of Directors considered the anticipated
timing of consummation of the transactions contemplated by the Merger Agreement,
including the structure of the transactions as a tender offer for all of the
Shares, which should allow stockholders to receive the transaction consideration
earlier than in an alternative form of transaction, followed by the Merger in
which stockholders will receive the same consideration as received by
stockholders who tender their Shares in the Offer. The Board of Directors also
considered the financial condition and business reputation of Parent and the
ability of Parent to complete the Offer and Merger in a timely manner.
6. LIMITED CONDITIONS TO CONSUMMATION. Parent's obligation to consummate
the Offer and the Merger is subject to a limited number of conditions, with no
financing condition. The Board also considered the likelihood of obtaining
required regulatory approvals, and the terms of the Merger Agreement regarding
the obligations of both companies to pursue such regulatory approvals.
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7. AUCTION PROCESS. The Board of Directors considered the auction process
conducted by Tucker Anthony and the extensive arms-length negotiations between
the Company and Parent and the Company and another potential buyer that resulted
in the Merger Agreement and the $17.45 per share Offer Price.
8. ALTERNATIVE TRANSACTIONS. The Board of Directors considered that under
the terms of the Merger Agreement, while the Company is prohibited from
initiating, soliciting or facilitating acquisition proposals from third parties,
the Company may engage in discussions or negotiations with, and may furnish
non-public information to, a third party who makes a written acquisition
proposal if, among other things, the Board determines in good faith, after
taking into consideration the advice of its outside legal counsel, that it is
likely to be required to do so in order for the Board members to comply with
their fiduciary duties under applicable law. The Board considered that the terms
of the Merger Agreement permit the Company to terminate the Merger Agreement to
enter into an alternative transaction, in which more than 50% of the Shares or
all or substantially all of the assets of the Company and its Subsidiaries would
be acquired, if the Board determines in its good faith judgment (after
consultation with its financial advisors) that the alternative transaction is
reasonably capable of being completed and is more favorable to the Company's
stockholders from a financial point of view than the transactions contemplated
hereby, and if the Company pays Parent a $5,360,972.34 termination fee
(representing 4% of the Transaction Value (as defined in the Merger Agreement)
plus an expense allowance of $1,000,000) prior to terminating the Merger
Agreement. The Board considered the possible effect of these provisions of the
Merger Agreement on third parties who might be interested in exploring an
acquisition of the Company. In this regard, the Board recognized that the
provisions of the Merger Agreement relating to termination fees and solicitation
of acquisition proposals were insisted upon by Parent as a condition to entering
into the Merger Agreement. The Board of Directors also considered the
preliminary contacts that the Company had had with third parties regarding a
potential transaction involving the Company, and took into account the views of
management and Tucker Anthony as to the likelihood that a third party would be
prepared to pay a higher price for the Shares than the consideration offered in
the Offer and the Merger in a transaction that could be completed on a timely
basis.
The foregoing includes all material factors considered by the Board of
Directors. In view of its many considerations, the Board did not find it
practical to, and did not, quantify or otherwise assign relative weights to the
specific factors considered. In addition, individual members of the Board may
have given different weights to the various factors considered. After weighing
all of these considerations, the Board determined to approve the Merger
Agreement and recommend that holders of Shares tender their Shares in the Offer.
(c) INTENT TO TENDER. Simultaneously with entering into the Merger
Agreement, Parent and Purchaser entered into an Agreement, dated as of
March 26, 2000 (the "Tender Agreement"), with Robert Batinovich, Richard P.
Bermingham, Dennis R. Brown, Frederick Gerstell, John C. Johnston, John J.
Kimes, H. Jack Meany and John A. Sullivan (each a "Director") wherein each
Director agreed to tender his Shares (including any and all options to purchase
Shares) into the Offer, subject to a right of withdrawal should the Company
receive an offer that is, among other things, more favorable to the Company's
stockholders from a financial point of view than the Offer. See "Background of
the Offer; Contacts with the Company."
ITEM 5. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
Pursuant to the terms of a letter agreement, dated November 9, 1999, between
Tucker Anthony and the Company (the "Tucker Anthony Engagement Letter"), the
Company's Board of Directors retained Tucker Anthony to act as the Company's
exclusive financial advisor in connection with the proposed sale of the Company.
The Board of Directors retained Tucker Anthony based upon Tucker Anthony's
qualifications, experience and expertise. Tucker Anthony is a well-recognized
investment banking and advisory firm. Tucker Anthony, as part of its investment
banking and financial advisory business, is continuously engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated
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underwritings, secondary distributions of listed and unlisted securities,
private placements, leveraged buyouts, recapitalizations, and valuations for
corporate and other purposes. Additionally, Tucker Anthony has been involved in
a number of transactions in the filtration industry.
In the ordinary course of business, Tucker Anthony and its affiliates may
actively trade in the securities of the Company for their own account and for
the accounts of their customers and, accordingly, may at any time hold a long or
short position in such securities. Tucker Anthony currently provides research
coverage on the Company and makes a market in the Shares on the Nasdaq National
Market. Tucker Anthony has never provided investment banking services to the
Parent.
Pursuant to the terms of the Tucker Anthony Engagement Letter, the Company
agreed to pay Tucker Anthony a $50,000 retainer ("Retainer Fee") upon signing
the Tucker Anthony Engagement Letter and a $200,000 fairness opinion fee
("Fairness Opinion Fee") within three business days after the delivery of the
written fairness opinion to the Board of Directors. Tucker Anthony's Fairness
Opinion Fee was not contingent upon the content of the opinion or the approval
and consummation of the Offer and the Merger. In addition, in the event of a
consummation of the Offer and the Merger, Tucker Anthony would earn a
transaction fee net of the Retainer Fee and Fairness Opinion Fee equal to
approximately $2,100,000. Also, the Company has agreed to reimburse Tucker
Anthony for its reasonable out-of-pocket expenses (including the fees and
disbursements of its attorneys), and in addition, the Company has also agreed to
indemnify Tucker Anthony and certain persons affiliated with Tucker Anthony
against certain liabilities and expenses, including certain liabilities under
the federal securities laws, arising out of Tucker Anthony's engagement.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
No transactions in Shares have been effected during the past 60 days by the
Company or, to the knowledge of the Company, by any executive officer, director,
affiliate or subsidiary of the Company.
ITEM 7. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.
Except as set forth in this Statement, the Company is not currently
undertaking or engaged in any negotiations in response to the Offer that relate
to (1) a tender offer for or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person; (2) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any subsidiary of the Company; (3) a purchase, sale or
transfer of a material amount of assets of the Company or any subsidiary of the
Company; or (4) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company.
Except as set forth in this Statement, there are no transactions,
resolutions of the Board of Directors, agreements in principle, or signed
contracts in response to the Offer that relate to one or more of the events
referred to in the preceding paragraph.
ITEM 8. ADDITIONAL INFORMATION.
INFORMATION PROVIDED PURSUANT TO RULE 14F-1 UNDER THE EXCHANGE ACT. The
Information Statement attached hereto as Annex B is being furnished to the
stockholders of the Company in connection with the possible designation by
Parent, pursuant to the Merger Agreement, of certain persons to be appointed to
the Company's Board other than at a meeting of the Company's stockholders, and
such information is incorporated herein by reference.
8
<PAGE>
CERTAIN FINANCIAL PROJECTIONS (UNAUDITED). In the course of discussions
between representatives of the Company and Parent, the Company provided Parent'
representatives with certain projections of future operating performance of the
Company prepared by the Company's management (the "Plan Projections"). Such
information has been set forth for the limited purpose of giving stockholders
access to projections by the Company's management that were available for review
by Parent in connection with the Offer.
The projected financial information set forth below necessarily reflects
numerous assumptions with respect to general business and economic conditions
and other matters, many of which are inherently uncertain or beyond the
Company's or Parent' control, and does not take into account any changes in the
Company's operations or capital structure which may result from the Offer and
the Merger. It is not possible to predict whether the assumptions made in
preparing the projected financial information will be valid, and actual results
may prove to be materially higher or lower than those contained in the
projections. The inclusion of this information should not be regarded as an
indication that the Company or any other person who received this information
considered it a reliable predictor of future events, and this information should
not be relied on as such. None of Parent, the Company or any of their respective
representatives assumes any responsibility for the validity, reasonableness,
accuracy or completeness of the projected financial information, and the Company
has made no representations to Parent or Purchaser regarding such information.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
2000 2001 2002 2003
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue............................. $129,666 $152,463 $182,919 $213,690
EBITDA.............................. $ 16,124 $ 22,118 $ 30,984 $ 40,287
</TABLE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS. Certain matters
discussed herein, including without limitation, the Plan Projections, are
forward-looking statements that involve risks and uncertainties. Such
information has been included in this Schedule 14D-9 for the limited purpose of
giving stockholders access to projections by the Company's management that were
made available to Parent. Information was prepared by the Company's management
for internal use and not with a view to publication. The foregoing Plan
Projections were based on assumptions concerning the Company's operations and
business prospects in 2000 through 2003, including the assumption that the
Company would continue to operate under the same ownership structure as then
existed. The Plan Projections were also based on other revenue, expense and
operating assumptions. Information of this type is based on estimates and
assumptions that are inherently subject to significant economic and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the Company's control. Such uncertainties and contingencies
include, but are not limited to: changes in the economic conditions in which the
Company operates; greater than anticipated competition or price pressures; new
product offerings; better or worse than expected customer growth resulting in
the need to expand operations and make capital investments; and the impact of
investments required to enter new markets. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those set forth above. In
addition, the Plan Projections were not prepared with a view to public
disclosure or compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections and forecasts, and are included in this Offer to Purchase
only because such information was made available to Parent by the Company.
Neither Parent' nor the Company's independent accountants have examined or
applied any agreed upon procedures to this information, and, accordingly, assume
no responsibility for this information. Neither Parent nor the Company nor any
other party assumes any responsibility for the accuracy or validity of the Plan
Projections. Neither Parent nor the Company intends to provide any updated
information with respect to any forward-looking statements.
9
<PAGE>
RIGHTS AGREEMENT. Each Right issued pursuant to the Rights Agreement
entitles the registered holder thereof to purchase one half of one Share at a
price of $40 per whole Share, subject to adjustment. On the earlier of (1) the
tenth day following a public announcement that a person or group of affiliated
or associated persons (an "Acquiring Person") has acquired beneficial ownership
of 20% or more of the outstanding Shares or (2) the tenth business day following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the Beneficial
Ownership by a person or group of at least 30% of the Shares (the earlier of
such dates being the "Distribution Date"), the Rights would become exercisable
and trade separately from the Common Stock. After the Distribution Date, each
holder of a Right (other than the Acquiring Person) would thereafter have the
right to acquire Shares having a market value of two times the exercise price of
the Right. The Rights may be redeemed at a price of $0.01 per Right at any time
prior to the tenth Business Day following the public announcement that a person
has become an Acquiring Person.
The Company and the Rights Agent under the Rights Agreement amended the
Rights Agreement as of March 26, 2000 to provide that (1) so long as the Merger
Agreement has not been terminated pursuant to the termination provisions
thereof, a Distribution Date will not occur or be deemed to occur, and neither
Parent nor the Purchaser will become an Acquiring Person, as a result of the
execution, delivery or performance of the Merger Agreement, the announcement,
making or consummation of the Offer, the acquisition of Shares pursuant to the
Offer or the Merger, the consummation of the Merger or any other transaction
contemplated by the Merger Agreement and (2) the Rights will expire immediately
prior to the consummation of the Offer.
CERTAIN LEGAL MATTERS.
Except as otherwise disclosed herein, the Company is not aware of any
licenses or other regulatory permits which appear to be material to the business
of the Company and which might be adversely affected by the acquisition of
Shares by Purchaser pursuant to the Offer or of any approval or other action by
any governmental, administrative or regulatory agency or authority which would
be required for the acquisition or ownership of shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, Parent and
Purchaser have stated that it is currently contemplated that such approval or
action would be sought or taken. There can be no assurance that any such
approval or action, if needed, would be obtained or, if obtained, that it will
be obtained without substantial conditions or that adverse consequences might
not result to the Company's or Parent's business or that certain parts of the
Company's or Parent's business might not have to be disposed of in the event
that such approvals were not obtained or such other actions were not taken, any
of which could cause Purchaser to elect to terminate the Offer without the
purchase of the Shares thereunder. Purchaser's obligation under the Offer to
accept for payment and pay for shares is subject to certain conditions, which
are set forth in Section 13 of the Offer to Purchase and are incorporated herein
by reference.
The transactions contemplated by the Offer and Merger are or may be subject
to a number of applicable laws and regulations, including but not limited to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules that have been promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain foreign laws and regulations, certain
regulations of the Federal Reserve Board, certain state takeover laws and
regulations and Section 721 of Title VII of the United States Defense Production
Act of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness
Act of 1988 ("Exon-Florio"). Information concerning these matters is set forth
in Section 15 of the Offer to Purchase and is incorporated herein by reference.
10
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
(a)(1) Letter to Stockholders of the Company, dated April 4, 2000.*
(a)(2) Opinion of Tucker Anthony Cleary Gull, dated March 26, 2000
(included as Annex A to the Statement).*
(a)(3) Press Release issued by Parent on March 26, 2000
(incorporated by reference to press release under cover of
Schedule TO filed by Purchaser and Parent on March 27,
2000).
(a)(4) The Offer to Purchase dated March 26, 2000 (incorporated by
reference to Exhibit (a)(1) to the Schedule TO of Parent
and the Purchaser filed on April 4, 2000).
(a)(5) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(2) to the Schedule TO of Parent and the
Purchaser filed on April 4, 2000).
(a)(6) Second Amendment to Rights Agreement, dated as of March 26,
2000.
(a)(7) Audit Committee Charter (included as Annex C to the
Statement).*
(e)(1) Agreement and Plan of Merger, dated as of March 26, 2000,
among Parent, the Purchaser and the Company (incorporated
by reference to Exhibit (d)(1) to the Schedule TO of
Parent and the Purchaser filed on April 4, 2000).
(e)(2) The Information Statement of the Company dated April 4, 2000
(included as Annex B to the Statement).*
(e)(3) Items 10, 11 and 12 of the Annual Report on Form 10-K of
Farr Company for the fiscal year ended January 1, 2000,
filed by the Company on March 27, 2000.*
(e)(4) Agreement to Tender, dated as of March 26, 2000, among
Parent, Purchaser and Messrs. Batinovitch, Bermingham,
Brown, Gerstell, Johnston, Kimes, Meany and Sullivan
(incorporated by reference to Exhibit (d)(2) to the
Schedule TO of Parent and Purchaser filed on April 4,
2000).
(e)(5) Amended and Restated Employment Continuation Agreement,
dated as of March 27, 2000, by and between the Company
and John C. Johnston.
(g) None.
</TABLE>
* Included with the Statement mailed to stockholders.
11
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
<TABLE>
<S> <C> <C>
FARR COMPANY
By: /s/ STEPHEN E. PEGG
-----------------------------------------
Stephen E. Pegg
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
Dated: April 4, 2000
</TABLE>
12
<PAGE>
ANNEX A
[Letterhead of Tucker Anthony Cleary Gull]
March 26, 2000
Board of Directors
Farr Company
2201 Park Place
El Segundo, CA 90245
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders (the "Stockholders") of shares of common stock, $0.10 par
value per share ("Farr Common Stock"), of Farr Company ("Farr") of the
consideration to be received by the Stockholders pursuant to the terms of the
draft Agreement and Plan of Merger dated as of March 24, 2000 (the "Merger
Agreement") by and among Forvaltnings AB Ratos, a Swedish corporation
("Parent"), Merger Sub, a Delaware corporation and a direct wholly-owned
subsidiary of Parent ("Subsidiary"), and Farr. Pursuant to the Merger Agreement,
Subsidiary will offer to purchase all of the outstanding Farr Common Stock in a
tender offer (the "Tender Offer") and, following completion of the Tender Offer,
the Subsidiary will be merged (the "Merger") with and into Farr and Farr will
become a wholly-owned subsidiary of Parent. The Tender Offer and the Merger are
collectively referred to herein as the "Acquisition."
Under the Merger Agreement, Subsidiary will offer to purchase all of the
issued and outstanding shares of Farr Common Stock in the Tender Offer for
$17.45 per share, net to the seller in cash (the "Offer Consideration"). Upon
consummation of the Merger, any shares of Farr Common Stock not acquired in the
Tender Offer will be converted into the right to receive the Offer Consideration
in the Merger.
In arriving at our opinion, we have reviewed, among other things, the Merger
Agreement and certain business and financial information relating to Farr,
including certain financial projections, estimates and analyses provided to us
by Farr. We have also reviewed and discussed the business and prospects of Farr
with representatives of Farr's management. In arriving at our opinion, we have
considered (a) certain financial and stock market data relating to Farr and have
compared that information to similar data for other publicly held companies in
businesses considered to be generally comparable to Farr; (b) certain publicly
available information concerning the nature and terms of certain transactions
that we believed to be relevant on a comparative basis; (c) an unleveraged,
after-tax discounted cash flow analysis of Farr; (d) a leveraged buy out
analysis of Farr; (e) a comparison of the purchase price premium to be paid for
the Farr Common Stock based on the Offer Consideration to certain other
similar-sized acquisitions; (f) a discounted stand-alone trading valuation of
Farr; (g) a historical review of Farr's stock market price; and (h) such other
information, financial studies and analyses and financial, economic and market
criteria as we deemed relevant and appropriate.
In connection with our review, we have not independently verified any of the
foregoing information and have relied on its being complete and accurate in all
material respects. We have not made an independent evaluation or appraisal of
any assets or liabilities (contingent or otherwise) of Farr, nor have we been
furnished with any such evaluation or appraisal. With respect to the financial
plans, estimates and analyses provided to us by Farr, we have assumed, with your
permission, that all such information was
A-1
<PAGE>
Farr Company
March 26, 2000
Page 2
reasonably prepared on bases reflecting the best currently available estimates
and judgments of management of Farr as to future financial performance and was
based upon the historical performance of Farr and certain estimates and
assumptions which were reasonable at the time made. Finally, we have assumed
that the executed Merger Agreement will be in the same form as the draft Merger
Agreement reviewed by us, and that the Tender Offer and the Merger will be
consummated on the terms described in the Merger Agreement, without any waiver
of any material term or condition, and that obtaining any necessary regulatory
or third party approval for the Tender Offer and the Merger will not have an
adverse effect on the Company. Our opinion is based on economic, monetary and
market conditions existing on the date hereof.
We have not been requested to evaluate the reasonableness, adequacy, or
feasibility of Parent's plans for financing the Acquisition and this opinion
assumes that Parent has, or at closing will have, financing adequate to complete
the Acquisition in accordance with the Merger Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Offer Consideration to be received by the Stockholders in the
Tender Offer and the subsequent Merger pursuant to the Merger Agreement is fair,
from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of Farr in this
transaction pursuant to an engagement letter dated November 9, 1999. Under the
engagement letter, we are entitled to a retainer from Farr, an additional fee
for our services, payable upon delivery of this opinion to Farr's Board of
Directors, a success fee payable at the closing of the Acquisition and an
incentive fee payable based on the Offer Consideration. Our fee for this opinion
is not contingent upon the contents of this opinion or the approval and
consummation of the Acquisition. In addition, Farr has agreed to indemnify us
for certain liabilities that may arise out of the rendering of this opinion.
Farr has also agreed to reimburse us for our reasonable and properly documented
expenses incurred in connection with the performance of its services under the
engagement letter.
Tucker Anthony Cleary Gull ("Tucker Anthony") provides research coverage on
Farr. In the ordinary course of business, we also actively trade the Farr Common
Stock for our own account and for the accounts of our customers (including Farr)
and, accordingly, may at any time hold a long or short position in the Farr
Common Stock. We currently make a market in the Farr Common Stock on the Nasdaq
National Market.
This opinion is for the use and benefit of the Board of Directors of Farr
and is rendered to the Board of Directors of Farr in connection with its
consideration of the Acquisition. We are not making any recommendation regarding
whether or not it is advisable for Stockholders to tender their shares of Farr
Common Stock in the Tender Offer. We have not been requested to opine as to, and
our opinion does not in any manner address, Farr's underlying business decision
to proceed with or consummate the Acquisition (or whether stockholders should
vote in favor of the Merger).
Very truly yours,
/s/ Tucker Anthony Cleary Gull
TUCKER ANTHONY CLEARY GULL
A-2
<PAGE>
ANNEX B
FARR COMPANY
2201 PARK PLACE
EL SEGUNDO, CA 90245
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about April 4, 2000 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Statement") of Farr Company (the "Company"). You are receiving this Information
Statement in connection with the possible election of persons designated by
Forvaltnings AB Ratos (publ.), a Swedish corporation ("Parent") to a majority of
seats on the Board of Directors (the "Board of Directors" or the "Board") of the
Company. On March 26, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Parent and Ratos Acquisition Corp. (the
"Purchaser"), a Delaware corporation and a wholly owned subsidiary of Parent,
pursuant to which the Purchaser is required to commence a tender offer to
purchase all outstanding shares of Common Stock, par value $0.10 per share, of
the Company (the "Common Stock") and the associated common share purchase rights
(the shares of Common Stock and any associated common share purchase rights are
referred to in this Statement as the "Shares"), at a price per Share of $17.45,
net to the seller in cash (the "Offer Price"), upon the terms and conditions set
forth in the Purchaser's Offer to Purchase, dated April 4, 2000, and in the
related Letter of Transmittal (which, together with any amendments and
supplements thereto, collectively constitute the "Offer"). Copies of the Offer
to Purchase and the Letter of Transmittal have been mailed to stockholders of
the Company and are filed as Exhibits (a)(1) and (a)(2) respectively, to the
Tender Offer Statement on Schedule TO (as amended from time to time, the
"Schedule TO") filed by Parent and the Purchaser with the Securities and
Exchange Commission (the "Commission") on April 4, 2000. The Merger Agreement
provides that, subject to the satisfaction or waiver of certain conditions,
following completion of the Offer, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), the Purchaser will be
merged with and into the Company (the "Merger"). Following consummation of the
Merger, the Company will continue as the surviving corporation and will be a
wholly owned subsidiary of Parent. At the effective time of the Merger (the
"Effective Time"), each issued and outstanding Share (other than Shares that are
owned by Parent, the Purchaser, any of their respective subsidiaries, the
Company or any of its subsidiaries, and Shares held by stockholders of the
Company who did not vote in favor of the Merger Agreement and who comply with
all of the relevant provisions of Section 262 of the DGCL) will be converted
into the right to receive $17.45 in cash or any greater amount per Share paid
pursuant to the Offer.
The Offer, the Merger, and the Merger Agreement are more fully described in
the Statement to which this Information Statement forms Annex B, which was filed
by the Company with the Commission on April 4, 2000 and which is being mailed to
stockholders of the Company along with this Information Statement.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act and Rule 14f-1 promulgated
thereunder. The information set forth herein supplements certain information set
forth in the Statement. Information set forth herein related to Parent, the
Purchaser or the Parent Designees (as defined herein) has been provided by
Parent. You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with the matters set forth
herein.
B-1
<PAGE>
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
April 4, 2000. The Offer is currently scheduled to expire at 12:00 midnight, New
York City time, on Monday, May 1, 2000, unless the Purchaser extends it.
GENERAL
The Common Stock is the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of the stockholders of the
Company. As of the close of business on [March 24, 2000], there were 7,294,519
shares of Common Stock outstanding of which Parent and the Purchaser own no
shares as of the date hereof.
RIGHTS TO DESIGNATE DIRECTORS AND PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment for Shares by the Purchaser pursuant to the Offer, Parent will be
entitled to designate such number of directors (the "Parent Designees") on the
Board of Directors, rounded up to the next whole number, as is equal to the
product obtained by multiplying the total number of directors on the Board by
the percentage that the number of Shares so purchased and paid for bears to the
total number of Shares then outstanding.
The Merger Agreement provides that the Company will, upon request of the
Purchaser, promptly increase the size of the Board of Directors or exercise its
best efforts to secure the resignations of such number of directors, or both, as
is necessary to enable the Parent Designees to be elected to the Board and,
subject to Section 14(f) of the Securities Exchange Act and Rule 14f-1
promulgated thereunder, will cause the Parent Designees to be so elected. At
such time, the Company will, if requested by Parent, also cause directors
designated by Parent to constitute at least the same percentage (rounded up to
the next whole number) of each committee of the Board of Directors as is on the
Board of Directors.
Notwithstanding the foregoing, if Shares are purchased pursuant to the
Offer, there will be until the Effective Time at least two members of the Board
who were directors on the date of the Merger Agreement and who are not employees
of the Company.
The Parent Designees will be selected by Parent from among the individuals
listed below. Each of the following individuals has consented to serve as a
director of the Company if appointed or elected. None of the Parent Designees
currently is a director of, or holds any positions with, the Company. Parent has
advised the Company that, to the best of Parent' knowledge, except as set forth
below, none of the Parent Designees or any of their affiliates beneficially owns
any equity securities or rights to acquire any such securities of the Company,
nor has any such person been involved in any transaction with the Company or any
of its directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the Commission other than
with respect to transactions between Parent and the Company that have been
described in the Schedule TO or the Statement.
The name, age, present principal occupation or employment and five-year
employment history of each of the individuals who may be selected as Parent
Designees are set forth below. Unless otherwise indicated, each such individual
has held his or her present position as set forth below for the past five years
and each occupation refers to employment with Parent. Each such person is a
citizen of Sweden, and the business address of each person listed below is c/o
Forvaltnings AB Ratos, Drottninggatan 2, SE-111 96, Stockholm, Sweden. The
information contained in this Information Statement concerning Parent Designees
has been furnished to the Company by Parent and its designees. Accordingly, the
Company assumes no responsibility for the accuracy or completeness of this
information.
B-2
<PAGE>
PARENT
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT,
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ---- ------------------------------------------------------------
<S> <C>
Arne Karlsson.......... PRESENT PRINCIPAL OCCUPATIONS:
Chief Executive Officer of Forvaltnings AB Ratos (since
January 1, 1999).
MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS:
Chief Analyst, Atle AB (private equity firm) (1993-1998);
Managing Director of Atle Mergers & Acquisitions AB (private
equity firm) (1996-1998).
Thomas Mossberg........ PRESENT PRINCIPAL OCCUPATIONS:
Executive Vice President of Directors, Forvaltnings AB Ratos
(since 1988).
MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS:
Employed by Forvaltnings AB Ratos since 1977.
Bo Jungner............. PRESENT PRINCIPAL OCCUPATIONS:
Senior Investment Manager of Forvaltnings AB Ratos (since
1998).
MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS:
Employed by Brummer & Partners (investment bank)
(1996-1998); SEB Enskilda Securities (1983-1996).
</TABLE>
B-3
<PAGE>
STOCK OWNERSHIP
COMMON STOCK OWNERSHIP BY 5% STOCKHOLDERS, OFFICERS, AND DIRECTORS
Information is set forth in Item 12 of the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 2000 (and such information is
incorporated herein by reference) concerning the Common Stock ownership (1) for
each person or group known by the Company to beneficially own more than 5% of
the Common Stock as of March 15, 2000; and (2) for each director of the Company,
the executive officers named in the Summary Compensation Tables referred to
below, and all of the directors and executive officers of the Company as a
group, in each case as of March 25, 2000.
BOARD OF DIRECTORS
TERMS OF DIRECTORS
Information with respect to the directors of the Company is set forth in
Item 10 of the Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 and is incorporated herein by reference.
DIRECTOR COMPENSATION
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, 2000, 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.
1999 BOARD MEETINGS
The Board of Directors held 7 meetings during 1999. During 1999, all
directors attended at least 75% of the meetings of the Board of Directors and
committees on which he served and which were held while a sitting director
except Messrs. Kimes and Bermingham, who attended five of the seven Board
meetings.
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
two meetings in 1999.
B-4
<PAGE>
AUDIT COMMITTEE
The Audit Committee, which is comprised of Messrs. Bermingham (Chairman),
Sullivan and Kimes, held one meeting in 1999. 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
Board of Directors adopted a written charter for the Audit Committee, a copy of
which is attached as Exhibit (e)(2) to the Schedule 14D-9 to which this
Information Statement is annexed.
COMPENSATION COMMITTEE
The Compensation Committee, which is comprised of Messrs. Batinovich
(Chairman), Brown and Gerstell, held two meetings in 1999. 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 1, 2000, 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
B-5
<PAGE>
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.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The Summary Compensation Table setting forth 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 1, 2000
exceeded $100,000 (collectively, the "Named Officers"), is set forth in Item 11
of the Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 and is incorporated herein by reference.
OPTION/SAR GRANTS IN 1999
Information with respect to grants of options by the Company to the Named
Officers in 1999 is set forth in Item 11 of the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 2000 and is incorporated herein
by reference.
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND YEAR-END OPTION/SAR VALUES
Information with respect to unexercised options and year-end option vales,
in each case with respect to options to purchase shares of Common Stock held as
of January 1, 2000 is set forth in Item 11 of the Company's Annual Report on
Form 10-K for the fiscal year ended January 1, 2000 and is incorporated herein
by reference.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into change of control agreements with Messrs.
Richard Larson, Steve Pegg and John Vissers. These agreeements are intended to
provide for continuity of employment in the event of a change in control as
defined by the agreements, including the following events: (i) any person or
persons acquires "beneficial ownership" (within the meaning of Rule 13d-3, as
promulgated under section 13(d) of the Securities Exchange Act of 1934, as
amended of securities of the Company representing 50 percent or more of the
combined Voting Power, of the Company's securities; (ii) certain changes occur
in the composition of the Board of Directors; or (iii) the stockholders of the
Company approve a merger, consolidation, share exchange, division, sale or other
disposition of all or substantially all of the assets of the Company (Corporate
Event), as a result of which the shareholders of the Company immediately prior
to such Corporate Event shall not hold, directly or indirectly, immediately
following such Corporate Event, a majority of the Voting Power of (x) in the
case of a merger or consolidation, the surviving or resulting corporation, (y)
in the case of a share exchange, the acquiring corporation or (z) in the case of
a division or a sale or other disposition of assets, each surviving, resulting
or acquiring corporation which, immediately following the relevant Corporate
Event, holds more than 10 percent of the consolidated assets of the Company
immediately prior to such Event.
An Amended and Restated Employment Continuation Agreement was entered into
as of March 27, 2000, effective as of the effective time of the Merger, by and
between Mr. John C. Johnston and the Company, the terms of which are set forth
in Section 11 of the Offer to Purchase and a copy of which is attached as
Exhibit (e)(8) to the Schedule 14D-9 to which this Information Statement is
annexed.
B-6
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee in the fiscal year ended
January 1, 2000 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 herein.
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 Information
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 measured by comparing the Company's operating plan for the year
versus actual achievement of
B-7
<PAGE>
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 (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 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
1999 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 1999, the Compensation Committee granted options to four of the
Named Officers (as set forth in the option-grant table referred to above) and to
two other employees.
ROBERT BATINOVICH (Chairman)
DENIS R. BROWN
A. FREDERICK GERSTELL
B-8
<PAGE>
PERFORMANCE GRAPH
The following graph compares cumulative stockholder return on the Common
Stock for the five-year period beginning January 1, 1995, and ending
December 31, 1999, as measured against (i) the Standard & Poor's 500 Stock Index
("S&P 500 Index") and (ii) the Standard & Poor's Waste Management Index
(formerly the Standard & Poor's Pollution Control Index) ("S&P Waste Management
Index").
The cumulative total return shown on the stock performance graph indicates
historical results only and is not necessarily indicative of future results.
Each line of the stock performance graph assumes that $100 was invested in the
Company's Common Stock and in the respective indices on January 1, 1995. The
graph then tracks the value of these investments, assuming reinvestment of
dividends, through December 31, 1999. Stockholders are cautioned against drawing
any conclusions from the data contained therein, as past performance is no
guarantee of future results.
COMPARISON OF CUMULATIVE TOTAL RETURN OF FARR COMPANY,
S&P 500 INDEX AND THE S&P POLLUTION CONTROL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P POLLUTION
<S> <C> <C> <C>
Farr Company Control Index S&P 500 Index
12/94 $100.00 $100.00 $100.00
12/95 $130.60 $143.04 $137.58
12/96 $271.40 $157.27 $169.18
12/97 $367.15 $195.97 $225.61
12/98 $371.56 $103.20 $290.09
12/99
</TABLE>
B-9
<PAGE>
ANNEX C
AUDIT COMMITTEE CHARTER
MEMBERS. The Audit Committee is appointed annually to serve at the pleasure
of the Board. The Committee will be composed of three or more "outside"
Directors.
The Chairman of the Committee will be appointed by the Board and will preside at
all meetings of the Committee. If not present, the senior outside Director shall
preside at all meetings of the Committee.
The Chief Financial Officer of the Company is the Secretary of the Committee.
Minutes of the meetings are to be prepared and following approval by the
Committee, sent to Committee members and Directors who are not members of the
Committee.
MEETINGS. The Audit Committee is to hold regular meetings at least two
times per year, once at the beginning and once at the end of the normal audit
cycle. Special meetings may be held at such times as the Committee Chairman may
request.
QUORUM. For the transaction of business at any meeting of the Committee,
two members shall constitute a quorum.
AUTHORITY. The Audit Committee is granted the authority to investigate any
activity of the Company and its subsidiaries. All employees are directed to
cooperate as requested by members of the Committee. The Committee is empowered
to retain persons having special competency as necessary to assist the Committee
in fulfilling its responsibility. The Committee may recommend a special audit in
event of unusual circumstances to be conducted by independent accountants or
internal auditors. The Committee may require the attendance of the independent
accountants and/ or any of the internal audit staff at meetings of the Committee
and to direct either to furnish reports and information to the Committee.
RESPONSIBILITIES:
Recommend to the Board the selection of independent accountants for the
ensuing year including proposed fees.
Review and approve scope of the independent accountants audit activity based
on reports concerning evaluation of internal controls and procedures.
Instruct the independent accountants and internal auditors to communicate
directly with the committee and each other at all times.
Particularly the following:
(a) Any matter which in their judgment the accountants have not resolved
with management
(b) Any defalcation
(c) Lack of cooperation with any level of management
Review the results of internal audit activities
Review internal audit budget and staffing level
During the year, consult with management and the independent public
accountants on matters related to the annual audit, the published financial
statements and the accounting principles and auditing procedures being
applied. Determine if changes in accounting and financial reporting
practices or other unusual events may have a significant impact on published
financial statements.
C-1
<PAGE>
Meet with the independent accountants after year end to discuss the results
of their examination and submit to the Board of Directors any
recommendations requiring Board approval.
To monitor compliance with the Foreign Corrupt Practices Act and the
Company's policies on ethical business practices and report same to the
Board of Directors annually.
The Committee should meet regularly with the Company's General Counsel and
outside counsel when appropriate, to discuss legal matters that may have a
significant impact on the Company's financial statements.
Review the findings of internal auditors and independent accountants from
the annual audit and interim work, including comments on controls and
procedures. Review management responses relating to recommended changes in
controls and/or accounting procedures.
C-2
<PAGE>
Exhibit 99(a)(1)
[LOGO]
April 4, 2000
Dear Stockholder:
I am pleased to inform you that Farr Company has entered into a merger
agreement with Forvaltnings AB Parent (publ.), a Swedish corporation ("Parent"),
pursuant to which a wholly owned subsidiary of Parent has commenced a tender
offer to purchase all of the outstanding shares of Farr's common stock for
$17.45 per share in cash. The tender offer is conditioned upon, among other
things, a minimum of a majority of Farr's shares outstanding on a fully diluted
basis being tendered and not withdrawn and the receipt of required regulatory
approvals. The tender offer will be followed by a merger, in which each share of
Farr common stock not purchased in the tender offer will be converted into the
right to receive $17.45 per share in cash.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF FARR'S STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT FARR'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES OF FARR COMMON STOCK PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors considered a
number of factors, as described in the attached Schedule 14D-9, including the
written opinion of the Company's financial advisor, Tucker Anthony Cleary Gull,
that, as of the date of the opinion, the consideration to be received by the
holders of Farr common stock pursuant to the merger agreement with Parent is
fair from a financial point of view to Farr's stockholders. A copy of Tucker
Anthony's written opinion, which sets forth the assumptions made, procedures
followed and matters considered by Tucker Anthony in rendering its opinion, can
be found in Annex A to the Schedule 14D-9. You should read the opinion carefully
and in its entirety.
Enclosed are the Offer to Purchase, dated April 4, 2000, Letter of
Transmittal and related documents. These documents set forth the terms and
conditions of the tender offer. The Schedule 14D-9 describes in more detail the
reasons for your Board's conclusions and contains other information relating to
the tender offer. We urge you to consider this information carefully.
<TABLE>
<CAPTION>
<S> <C>
/s/ H. JACK MEANY /s/ JOHN C. JOHNSTON
------------------------------------------- -------------------------------------------
H. Jack Meany John C. Johnston
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
EXHIBIT 99(a)(6)
SECOND AMENDMENT TO RIGHTS AGREEMENT
SECOND AMENDMENT, dated as of March 26, 2000 ("Second Amendment"), to that
certain Rights Agreement, dated as of April 3, 1989, between Farr Company, a
Delaware corporation (the "Company"), and ChaseMellon Shareholder Services,
L.L.C., a New Jersey limited liability company (the "Rights Agent"), as
successor to Security Pacific National Bank, the original rights agent under the
Rights Agreement, as amended by that certain First Amendment to Rights Agreement
dated as of March 23, 1999 (the "First Amendment")(as amended, the "Rights
Agreement"). Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Rights Agreement. All section and exhibit
references are to sections and exhibits of the Rights Agreement.
WHEREAS, pursuant to Section 26 of the Rights Agreement, the Company and
the Rights Agent may from time to time supplement or amend any provision of the
Rights Agreement in accordance with the terms of such Section 26.
NOW, THEREFORE, in connection of the foregoing premises and mutual
agreements set forth in this Second Amendment, the parties hereby amend the
Rights Agreement as follows:
1. A new Section 33 is hereby added, which shall read in its entirety as
follows:
"33. Notwithstanding anything to the contrary contained in this
Rights Agreement: (1) so long as that certain Agreement and Plan of Merger,
dated as of March 26, 2000 (the "Merger Agreement"), among the Company,
Forvaltnings AB Ratos (publ.), a Swedish corporation ("Ratos") and Ratos
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Ratos (the "Purchaser") has not been terminated pursuant to the termination
provisions thereof, a Distribution Date will not occur or be deemed to
occur, and neither Ratos, the Purchaser nor Camfil AB, a Swedish
corporation ("Camfil") will become an Acquiring Person, as a result of the
execution, delivery or performance of the Merger Agreement, the
announcement, making or consummation of the tender offer contemplated
thereby (the "Offer"), the acquisition of Common Shares pursuant to the
Offer or the merger contemplated by the Merger Agreement (the "Merger"),
the consummation of the Merger or any other transaction contemplated by the
Merger Agreement, provided, however, that the Company will promptly notify
the Rights Agent upon the termination of the Merger Agreement; and (2) the
Rights will expire immediately prior to the consummation of the Offer."
2. A new paragraph is hereby inserted immediately prior to the final
paragraph of Exhibit B; such new paragraph shall read, in its entirety, as
follows:
"Notwithstanding anything to the contrary contained in the Rights
Agreement or in this Summary of Rights to Purchase Common Shares: (1) so
long as that certain Agreement and Plan of Merger, dated as of March 26,
2000 (the "Merger Agreement"), among the Company, Forvaltnings AB Ratos
(publ.), a Swedish corporation ("Ratos") and Ratos Acquisition Corp., a
Delaware corporation and a wholly-
<PAGE>
owned subsidiary of Ratos (the "Purchaser") has not been terminated
pursuant to the termination provisions thereof, a Distribution Date will
not occur or be deemed to occur, and neither Ratos, the Purchaser nor
Camfil AB, a Swedish corporation ("Camfil") will become an Acquiring
Person, as a result of the execution, delivery or performance of the Merger
Agreement, the announcement, making or consummation of the tender offer
contemplated thereby (the "Offer"), the acquisition of Common Shares
pursuant to the Offer or the merger contemplated by the Merger Agreement
(the "Merger"), the consummation of the Merger or any other transaction
contemplated by the Merger Agreement, provided, however, that the Company
will promptly notify the Rights Agent upon the termination of the Merger
Agreement; and (2) the Rights will expire immediately prior to the
consummation of the Offer."
3. This Second Amendment shall be effective as of the date first above
written and, except as expressly set forth herein, the Rights Agreement shall
remain in full force and effect and be otherwise unaffected hereby.
4. This Second Amendment may be executed in any number of counterparts,
each of which, when executed, shall be deemed to be an original and all such
counterparts shall together constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this Second Amendment as of
the date first written above.
FARR COMPANY
By: /s/ STEVE PEGG
---------------------------------
Name: Steve Pegg
Title: Sr. Vice President & CFO
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/ MARY ANN MCELROY
---------------------------------
Name: Mary Ann McElroy
Title: Relationship Manager
2
<PAGE>
Item 10. Directors and Executive Officers of the Registrant.
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 2003 Annual Meeting or until their
respective successors shall have been elected or appointed.
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.
<TABLE>
<CAPTION>
2000 Nominees
Principal Business Experience During Past Director
Name Age 5 Years and Certain Other Directorships Since
- --------------- ----- ---------------------------------------------------------- ---------
<S> <C> <C> <C>
Denis R. Brown 59 President and Chief Executive Officer and a Director of 1997
Pinkerton, Inc. since April 1994, a leading supplier of
global security solutions; Director, CalMat Co. since
January 1997.
John J. Kimes 56 President and Chief Executive Officer of Computerized 1995
Security Systems since 1988, a manufacturer of electronic
and mechancial lock hardware and systems.
H. Jack Meany 76 Chairman of the Board since April 1994; Chief Excutive 1976
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, APS Inc. since
1990; Director, ESI, Inc. since 1980.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Continuing Directors
Principal Business Experience During Past Director Term
Name Age 5 Years and Certain Other Directorships Since Expires
- ---------------- ----- ---------------------------------------------- ----------- -----------
<S> <C> <C> <C> <C>
Robert Batinovich 63 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.
Richard P. Bermingham 60 Chairman of Bermingham Investment Company since 1997; 1990 2002
Vice Chairman of American Golf Corporation, a golf
course management company, from 1994 to 1997.
A. Frederick Gerstell 62 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.
John C. Johnston 56 President and Chief Executive Officer of the Company 1996 2002
since 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 atheletic equipment manufacturer,
from 1986 to December 1994.
John A. Sullivan 45 Investments Advisor of Relational Investors, LLC 1996 2002
since 1998; 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; Director, American
Coin Merchandising, Inc. since October 1995.
</TABLE>
<PAGE>
Item 11. 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 1, 2000 exceeded $100,000
(collectively, the "Named Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
-------------
Annual Compensation Awards
---------------------------- -------------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($)(1)
- ---------------------------- ------ ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
H. Jack Meany, 1999 187,615 82,729 250,000 21,688(3)
Chairman of the Board (2) 1998 246,002 203,307 0 23,546(3)
1997 246,002 247,834 0 25,829(3)
John C. Johnston, 1999 195,500 119,804 15,000 18,881(4)
President and Chief Executive 1998 170,000 112,397 22,500 13,187(4)
Officer (2) 1997 170,000 137,013 30,000 14,522(4)
Richard Larson, 1999 147,500 56,493 5,000 13,962(6)
Executive Vice President (5) 1998 140,000 57,851 22,500 59,065(6)
1997 72,693 36,617 15,000 30,728(6)
Steve Pegg, 1999 124,000 49,600 5,000 16,987(8)
SeniorVice President and Chief 1998 50,077 20,031 20,000 18,090(8)
Financial Officer (7)
Myron Rasmussen, 1999 117,393 25,179 0 15,945(9)
Vice President 1998 117,393 27,165 0 16,613(9)
1997 117,393 33,115 0 18,090(9)
- ----------------------------------------
</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) Retirement Plan (collectively, the "Retirement
Plans") except in 1999 that included $2,301 of certain life insurance
premiums paid on behalf of Mr. Meany.
(4) In 1999, consists of $15,731 of contributions by the Company under the
Retirement Plans and $3,150 of certain life insurance premiums paid on
behalf of Mr. Johnston. 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.
(5) Mr. Larson's employment with the Company commenced in June 1997.
(6) In 1999 , consists of $12,652 of contributions by the Company under the
retirement Plans and $1,310 of certain life insurance premiums paid on
behalf of Mr. Larson. In 1998, consists of $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) Mr. Pegg's employment with the Company commenced in August 1998.
<PAGE>
(8) In 1999, consists of $10,389 for reimbursement for relocation cost, $6,150
of contributions by the Company under the Retirement Plans and $448 of
certain life insurance premiums paid on behalf of Mr. Pegg. In 1998,
consists of $2,850 for reimbursement of relocation costs and $140 of
certain life insurance premiums paid on behalf of Mr. Pegg.
(9) In 1999, consists of $11,057 of contributions by the Company under the
Retirement Plans and $ ,000 of certain life insurance premiums paid on
behalf of Mr. Rasmussen. 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 $6,960 of
certain life insurance premiums paid on behalf of Mr. Rasmussen.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning grants of options by the Company to
the Named Officers in 1999:
Potential Realizable Value at
Assumed Annual Rates of Stock
Number of % of Total Price Appreciation
Securities Options For Option Term (2)
Underlying Granted to Exercise ------------------------------------
Options Employees in Price Expiration
Name Granted(#)(1) Fiscal Year ($/Share) Date 5% 10%
- --------------- ------------- ------------- ---------- ----------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
H. Jack Meany 250,000 86.5% $9.50 2/16/09 $1,493,624 $3,785,138
John C. Johnston 15,000 5.2% $9.50 2/16/09 $ 89,617 $ 227,108
Richard Larson 5,000 1.7% $9.50 2/16/09 $ 29,872 $ 75,703
Steve Pegg 5,000 1.7% $9.50 2/16/09 $ 29,872 $ 75,703
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Such options were granted on February 16, 1999 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 1,
2000.
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Shares Number of Unexercised Money Options at
Acquired Value Options at FY-End (#) FY-End ($) (1)
on Realized ------------------------------- ---------------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ------------- --------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
H. Jack Meany(2) 0 -- 268,000 -- 178,500 --
John C. Johnston 0 -- 119,625 46,875 771,500 30,000
Richard Larson 0 -- 13,125 29,375 -- 1,250
Steve Pegg 0 -- 5,000 20,000 -- 3,125
Myron G. Rasmussen 1,406 $6,452 34,313 -- 201,422 --
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated based on the closing price of the Company's Common Stock ($9.75
per share) as reported on the Nasdaq National Market on January 1, 2000.
(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.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 15, 2000 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>
<CAPTION>
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) 9.5%
75 State Street
Boston, Massachusetts 02109
Fleet Boston Corporation 553,375(3) 7.6%
One Federal Street
Boston, Massachusetts 02110
DimensionalFund Advisors, Inc. 423,985(4) 5.8%
1299 Ocean Ave, 11th Floor
Santa Monica, CA 90401
Reed Conner & Birdwell, Inc. 375,060(5) 5.2%
11111 Santa Monica Boulevard, Suite 1700
Los Angeles, California 90025
- ------------------------------------
</TABLE>
(1) Based on 7,278,207 shares of Common Stock outstanding as of March 15, 2000
(not including 1,635,445 shares held in treasury).
(2) Based on information contained in a Schedule 13G/A filed with the SEC on
February 4, 2000.
(3) Based on information contained in a Schedule 13G filed with the SEC on
February 14, 2000.
(4) Based on information contained in a Schedule 13G/A filed with the SEC on
January 24, 2000.
(5) Based on information contained in a Schedule 13G/A filed with the SEC on
February 14, 2000.
<PAGE>
OWNERSHIP BY MANAGEMENT
The following table sets forth as of March 15, 2000 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 6.4%
Robert Batinovich.................. Director........................ 252,000 3.4%
Richard P. Bermingham.............. Director........................ 46,125 *
Denis R. Brown..................... Director........................ 24,000 *
John J. Kimes...................... Director........................ 24,000 *
John A. Sullivan................... Director........................ 26,550 *
A. Frederick Gerstell.............. Director........................ 13,500 *
John C. Johnston................... President and Chief Executive
Officer, Director............... 138,699 1.9%
Richard Larson..................... Executive Vice President........ 20,000 *
Stephen Pegg....................... Senior Vice President........... 31,250 *
Myron G. Rasmussen................. Vice President.................. 43,758 *
Directors and Executive Officers as a group (11 persons)............. 1,100,857 14.0%
- -----------------------------------
</TABLE>
* = Less than 1%.
(1) Based on 7,278,207 shares of Common Stock outstanding as of March 15, 2000
(not including 1,635,445 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, 27,000; R.P.
Bermingham, 40,500; D. Brown, 13,500; J.J. Kimes, 22,500; J. Sullivan,
18,000; A.F. Gerstell, 9,000; J. Johnston, 136,500; R. Larson, 20,000; M.G.
Rasmussen, 16,312; Steve Pegg, 6,250; and all Directors and Executives
Officers as a group, 577,562.
(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.
<PAGE>
AGREEMENT TO TENDER
AGREEMENT (this "AGREEMENT"), dated as of March 26, 2000,
among Forvaltnings AB Ratos (publ.), a Swedish corporation ("PARENT"), Ratos
Acquisition Corp., a Delaware corporation ("MERGER SUB"), Robert Batinovich,
Richard P. Bermingham, Dennis R. Brown, A. Frederick Gerstell, John C. Johnston,
John J. Kimes, H. Jack Meany and John A. Sullivan (each a "Director" and
collectively, the "DIRECTORS").
RECITALS
WHEREAS, Parent, Merger Sub and Farr Company, a Delaware
corporation (the "COMPANY"), have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "MERGER AGREEMENT"), pursuant to which Merger
Sub will commence a cash tender offer to acquire all of the outstanding shares
of common stock, par value $.10 per share, of the Company (the "COMPANY COMMON
STOCK") and the Company and Merger Sub will merge, with the Company as the
surviving corporation in the merger;
WHEREAS, as of the date hereof, each Director is a member of
the board of directors of the Company (the "BOARD");
WHEREAS, each Director is the record and beneficial owner of
the number of shares of Company Common Stock set forth opposite such Director's
name on Schedule A hereto and the number of options to purchase shares of
Company Common Stock set forth opposite such Director's name on Schedule B
hereto; such shares and options, as they may be adjusted by stock dividend,
stock split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other transaction or event involving the
Company, together with any shares of Company Common Stock or options to purchase
shares of Company Common Stock that may be acquired after the date hereof by
such Director, being collectively referred to herein as the "SHARES"; and
WHEREAS, as a condition to their willingness to enter into
the Merger Agreement, Parent and Merger Sub have requested that the Directors
enter into this Agreement;
NOW, THEREFORE, to induce Parent and Merger Sub to enter
into, and in consideration of their entering into, the Merger Agreement, the
parties hereto agree as follows:
1. TENDER OF SHARES. Each Director hereby agrees that he or
she shall tender his or her Shares into the Offer (as defined in the Merger
Agreement) and that he
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<PAGE>
or she shall not withdraw any Shares so tendered, unless the Board determines
not to recommend the Offer pursuant to Section 1.2(b) or Section 6.2(b) of the
Merger Agreement.
2. APPOINTMENT OF NEW DIRECTORS AND RESIGNATION OF CURRENT
DIRECTORS.
(a) Subject to the terms and conditions contained in Section 1.3
of the Merger Agreement, each Director hereby agrees (i) to take all actions
necessary to appoint such number of new members of the Board designated by
Parent as provided for in Section 1.3(a) of the Merger Agreement and (ii) to
resign as director of the Company upon request of Parent and/or Merger Sub, in
each case, to the extent required in order to allow the Company to comply with
Section 1.3(a) of the Merger Agreement and in accordance with the terms and
conditions contained therein.
(b) In the event that one or more Directors fail to resign from
the Board in accordance with the terms of paragraph 2(a), above, the Board shall
immediately call a special meeting of the shareholders of the Company in order
to vote upon the removal of such Director or Directors from the Board.
3. REPRESENTATIONS AND WARRANTIES OF THE DIRECTORS. Each
Director hereby represents and warrants severally and not jointly to Parent and
Merger Sub as follows:
(a) AUTHORITY. The Director has all requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Director and, assuming this Agreement constitutes a valid and binding obligation
of Parent and Merger Sub, constitutes a valid and binding obligation of the
Director enforceable against the Director in accordance with its terms.
(b) THE SHARES. The Director's Shares and the certificates
representing such Shares are now, and at all times during the term hereof will
be, held by such Director, or by a nominee or custodian for the benefit of such
Director, and the Director has good and marketable title to such Shares, free
and clear of any liens, proxies, voting trusts or agreements, understandings or
arrangements, except for any such liens or proxies arising hereunder.
4. COVENANTS OF THE DIRECTORS. Each Director hereby agrees as
follows:
(a) The Director shall not, except as contemplated by the terms of
this Agreement and the Merger Agreement, sell, transfer, pledge, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, assignment or other
disposition of, or grant of any lien with
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<PAGE>
respect to, the Shares to any person other than Parent or Merger Sub or take any
other action that would in any way restrict, limit or interfere with the
performance of his/her obligations hereunder or the transactions contemplated
hereby.
(b) Each Director will, from time to time, execute and deliver, or
cause to be executed and delivered, such additional or further transfers,
assignments, endorsements, consents and other instruments as Parent or Merger
Sub may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
Each Director agrees that the obligations to tender the Shares hereunder shall
attach to such Director's Shares and shall be binding upon any person or entity
to which legal or beneficial ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation such Director's
heirs or successors.
6. AMENDMENT; WAIVER. This Agreement may be amended only by a
written instrument signed by all of the parties hereto. No provision of this
Agreement may be waived orally, but only by a written instrument signed by the
party against whom enforcement of such waiver is sought.
7. COUNTERPARTS. For the convenience of the parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
8. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Delaware
without giving effect to Delaware conflicts of law principles.
9. NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be deemed given
if in writing and delivered personally or sent by registered mail (return
receipt requested) or overnight courier (providing proof of delivery), postage
prepaid or facsimile (which is confirmed):
IF TO PARENT OR MERGER SUB, ADDRESSED TO:
Arne Karlsson
Forvaltnings AB Ratos (publ.)
Drottninggatan 2
SE-111 96 Stockholm, Sweden
-3-
<PAGE>
Attention: President
Fax: +46 810 2559
IF TO ANY DIRECTOR, ADDRESSED TO HIM OR HER C/O:
Robert K. Montgomery
Gibson, Dunn & Crutcher LLP
2029 Century Park East
Los Angeles, California 90067-3026
Fax: (310) 551-8741
or to such other addresses as may be designated in writing by the party to
receive such notice as provided above.
10. ENTIRE AGREEMENT. This Agreement (i) constitutes the
entire agreement, and supersedes all other prior agreements and understandings,
both written and oral, among the parties, with respect to the subject matter
hereof; and (ii) is for the benefit only of the parties hereto and is not
intended to create any obligations to, or rights in respect of, any other
persons or entities.
11. ILLEGALITY. In case any provision in this Agreement shall
be declared or held invalid, illegal or unenforceable, in whole or in part,
whether generally or in any particular jurisdiction, such provision shall be
deemed amended to the extent, but only to the extent, necessary to cure such
invalidity, illegality or unenforceability, and the validity, legality and
enforceability of the remaining provisions, both generally and in every other
jurisdiction, shall not in any way be affected or impaired thereby.
12. INJUNCTIVE RELIEF. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties hereto
acknowledge their intention that, to the fullest extent permissible under
applicable laws, the parties shall be entitled to an injunction or injunctions
to prevent or cure breaches of the provisions of this Agreement, this being in
addition to any other remedy to which they may be entitled by law or equity.
13. HEADINGS. The paragraph headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
-4-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or their duly authorized officers on the date
first hereinabove written.
FORVALTNINGS AB RATOS (PUBL.)
By: ______________________
Name:
Title:
RATOS ACQUISITION CORP.
By: ______________________
Name:
Title:
- --------------------------- ---------------------------
ROBERT BATINOVICH RICHARD P. BERMINGHAM
- --------------------------- ---------------------------
DENNIS R. BROWN A. FREDERICK GERSTELL
- --------------------------- ---------------------------
JOHN C. JOHNSTON JOHN J. KIMES
- --------------------------- ---------------------------
H. JACK MEANY JOHN A. SULLIVAN
-5-
<PAGE>
SCHEDULE A
HOLDINGS OF SHARES OF FARR COMPANY
-6-
<PAGE>
SCHEDULE B
HOLDINGS OF OPTIONS TO PURCHASE SHARES OF FARR COMPANY
-7-
<PAGE>
EXHIBIT 99(e)(5)
AMENDED AND RESTATED EMPLOYMENT CONTINUATION AGREEMENT
THIS AGREEMENT is between FARR COMPANY, a Delaware corporation (the
"Company"), and John C. Johnston (the "Executive"), dated as of this 27th day of
March, 2000.
WHEREAS, the Company has entered into the Agreement and Plan of Merger
(the "Merger Agreement") dated as of March 26, 2000 among the Company,
Forvaltnings AB Ratos, a Swedish corporation and Ratos Acquisition Corp., a
Delaware corporation.
WHEREAS, the Company and the Executive have entered into an Employment
Continuation Agreement dated February 15, 2000.
WHEREAS, in connection with the Merger Agreement, the Company and the
Executive agree to amend and restate such Employment Continuation Agreement in
its entirety as set forth in this Amended and Restated Employment Continuation
Agreement (this "Agreement").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
1. EFFECTIVE DATE. The effective date of this Agreement (the
"Effective Date") shall be the Effective Time of the merger of Ratos Acquisition
Corp. with and into Farr Company, as defined in the Merger Agreement.
2. EMPLOYMENT PERIOD. Subject to Section 5 of this Agreement, the
Company agrees to continue the Executive in its employ, and the Executive agrees
to remain in the employ of the Company, for the period (the "Employment Period")
commencing on the Effective Date and ending on December 31, 2003.
3. NO REDUCTION IN POSITION. During the Employment Period, the
Executive's position, authority and responsibilities shall be at least
commensurate with those held, exercised and assigned immediately prior to the
Effective Date. The Executive's services shall be performed at the location
where the Executive was employed immediately preceding the Effective Date, or at
another location within 75 miles of it.
4. COMPENSATION. (a) BASE SALARY. During the Employment Period, the
Executive shall receive a base salary at a rate at least equal to $204,000. The
Executive's base salary, as it may be increased from time to time, shall
hereafter be referred to as "Base Salary". Neither the Base Salary nor any
increase in Base Salary after the Effective Date shall serve to limit or reduce
any other obligation of the Company hereunder.
<PAGE>
(b) ANNUAL BONUS. During the Employment Period, in addition to the
Base Salary, for each fiscal year of the Company ending during the Employment
Period or partial year beginning during the Employment Period, the Executive
shall participate in an annual bonus plan on the same terms and conditions as
the annual bonus plan the Executive had participated in during the fiscal year
ended immediately prior to the Effective Date, the Executive's annual bonus
hereunder to be calculated in accordance with the April 27, 1999, summary of the
plan attached hereto as Exhibit A (the "Annual Bonus") provided that: (i) the
yearly target operating income shall be established pursuant to the four year
plan forecast contained in the January, 2000 Management Presentation of Farr
Company prepared by Tucker Anthony Cleary Gull (ii) the Executive's
participation level in connection with the annual bonus plan shall be 100% of
the Base Salary (the "Target Incentive Payment"); and (iii) the maximum Annual
Bonus that may be earned by the Executive in any year should Farr Company exceed
its target operating profit under the annual bonus plan shall be 180% of the
Target Incentive Payment.
(c) BENEFIT PLANS. During the Employment Period, the Executive (and,
to the extent applicable, his dependents) shall be entitled to participate in or
be covered under any pension, retirement deferred compensation, savings,
medical, dental, health, disability, group life, accidental death and travel
accident insurance plans and programs of the Company for which Executive is
eligible at a level that is commensurate with the Executive's participation in
such plans immediately prior to the Effective Date, or, if more favorable to the
Executive, at the level made available to the Executive or other similarly
situated officers at any time thereafter.
(d) PERQUISITES AND FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to perquisites and fringe benefits at a level that
is commensurate with the perquisites and fringe benefits available to the
Executive immediately prior to the Effective Date, or, if more favorable to the
Executive, at the level made available from time to time to the Executive or
other similarly situated officers at any time thereafter.
(e) INDEMNIFICATION. During and after the Employment Period, to the
extent permitted by law and under the Certificate of Incorporation and By-laws
of the Company, the Company shall indemnify the Executive and hold the Executive
harmless from and against any claim, loss or cause of action arising from or out
of the Executive's performance as an officer, director or employee of the
Company or any of its Subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive serves at the request of the Company.
5. TERMINATION. (a) DEATH, DISABILITY OR RETIREMENT. This Agreement
shall terminate automatically upon the Executive's death or termination due to
"Disability". For purposes of this Agreement, Disability shall mean the
Executive's inability to perform the duties of his position, as determined in
accordance with the policies and procedures applicable with respect to the
Company's long-term disability plan, as in effect immediately prior to the
Effective Date or its equivalent.
-2-
<PAGE>
(b) VOLUNTARY TERMINATION. Notwithstanding anything in this Agreement
to the contrary, the Executive may, upon not less than 30 days' written notice
to the Company, voluntarily terminate employment for any reason (including early
retirement under the terms of any of the Company's retirement plans as in effect
from time to time), PROVIDED THAT any termination by the Executive pursuant to
Section 5(d) on account of Good Reason (as defined therein) shall not be treated
as a voluntary termination under this Section 5(b).
(c) CAUSE. The Company may terminate the Executive's employment for
Cause. For purposes of this Agreement, "Cause" means (I) the Executive's
conviction of a felony or the entering by the Executive of a plea of non
contendere to a felony charge, (II) the Executive's gross neglect, willful
malfeasance or willful gross misconduct in connection with his employment
hereunder which has had a significant adverse effect on the business of the
Company and its subsidiaries, unless the Executive reasonably believed in good
faith that such act or nonact was in or not opposed to the best interests of the
Company, (III) the Executive's repeated failure to substantially perform his
duties hereunder following receipt by Executive of written notice specifying the
nature of such unsatisfactory performance, or (IV) use of alcohol or drugs to an
extent determined by the board of directors in its sole discretion to be
excessive.
(d) GOOD REASON. During the Employment Period, the Executive may
terminate his employment for Good Reason. For purposes of this Agreement, "Good
Reason" means the occurrence of any of the following, without the express
written consent of the Executive:
(i) (A) the assignment to the Executive of any duties inconsistent in
any material adverse respect with the Executive's position, authority or
responsibilities as contemplated by Section 3 of this Agreement, or (B) any
other material adverse change in such position (not including changes in
title), authority or responsibilities, provided, however, that Good Reason
shall not be deemed to occur upon a change in duties or responsibilities
that is solely a result of the Company no longer being a publicly traded
entity and does not involve any other event set forth in this paragraph (d);
(ii) any failure by the Company to comply with any of the provisions of
Section 4 of this Agreement, other than an insubstantial or inadvertent
failure remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location more than 75 miles from that location at which he performed his
services specified under the provisions of Section 3 immediately prior to
the Effective Date;
(iv) any other material breach of this Agreement by the Company; or
-3-
<PAGE>
(v) any failure by the Company to obtain the assumption and agreement
to perform this Agreement by a successor as contemplated by Section 11(b).
For purposes of this Section 5(d), no action or inaction shall give rise
to the right of Executive to terminate the Employment Period and Executive's
employment hereunder for Good Reason unless a written notice is given by
Executive to the Company, within ninety (90) days after Executive has actual
knowledge of the occurrence of the event giving rise to Executive's right to
terminate pursuant to this Section 5(e), and such event has not been cured
within fifteen (15) days after such notice. Executive's continued employment
during the ninety (90) day period referred to above in this Section 5(d) shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(e) NOTICE OF TERMINATION. Any termination by the Company for Cause or
by the Executive for Good Reason shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(e). For purposes
of this Agreement, a "Notice of Termination" means a written notice given within
a reasonable time after the event or action believed to constitute the reason
for giving notice.
(f) DATE OF TERMINATION. For purposes of this Agreement, the term
"Date of Termination" means (I) in the case of a termination for which a Notice
of Termination is required, the date of receipt of such Notice of Termination,
or if later, the date specified therein up to 30 days after receipt, as the case
may be, and (II) in all other cases, the actual date on which the Executive's
employment terminates during the Employment Period.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) DEATH OR
DISABILITY. If the Executive's employment is terminated during the Employment
Period by reason of the Executive's death or Disability, this Agreement shall
terminate without further obligations to the Executive or the Executive's legal
representatives under this Agreement other than those obligations accrued
hereunder at the Date of Termination, and the Company shall pay to the Executive
(or his beneficiary or estate) (I) the Executive's full Base Salary through the
Date of Termination (the "Earned Salary"), (II) any vested amounts or vested
benefits owing to the Executive under the Company's otherwise applicable
employee benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings thereon) and not
yet paid by the Company (the "Accrued Obligations") which in each instance under
this Agreement shall be paid in accordance with the terms of the applicable
plan, program or arrangement, and (III) any other benefits payable due to the
Executive's Death or Disability under the Company's plans, policies or programs
(the "Additional Benefits").
(b) CAUSE AND VOLUNTARY TERMINATION. If, during the Employment Period,
the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive, the Company shall pay the Executive (A) the Earned
Salary in cash in a single lump sum as soon
-4-
<PAGE>
as practicable, but in no event more than 10 days, following the Date of
Termination, and (B) the Accrued Obligations.
(c) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE AND TERMINATION BY
THE EXECUTIVE FOR GOOD REASON.
(i) PAYMENTS. If, during the Employment Period, the Company terminates
the Executive's employment other than for Cause, or the Executive terminates
his employment for Good Reason, the Company shall pay to the Executive the
following amounts: (A) the Executive's Earned Salary; (B) a cash amount (the
"Severance Amount") equal to two times the sum of (X) the Executive's annual
Base Salary and (Y) an amount equal to the last Annual Bonus earned by the
Executive during the full year preceding the Effective Date; and (C) the
Accrued Obligations.
The Earned Salary shall be paid in accordance with the Company's regular
payroll practices. The Severance Amount shall be paid in fifty-two (52)
equal payments at dates concurrent with the Company's regular payroll cycle
commencing with the next payroll cycle following the Date of Termination.
(ii) CONTINUATION OF BENEFITS. If, during the Employment Period, the
Company terminates the Executive's employment other than for Cause, the
Executive terminates his employment for Good Reason, the Executive (and, to
the extent applicable, his dependents) shall be entitled, after the Date of
Termination until the second anniversary of the Date of Termination (the
"End Date") to continue participation in any medical, health, dental, group
life and group disability insurance plans in which executive participated
prior to his termination (the "Benefit Plans"). To the extent any such
benefits cannot be provided under the terms of the applicable plan, policy
or program, the Company shall provide a comparable benefit under another
plan or from the Company's general assets. The Executive's participation in
the Benefit Plans will be on the same terms and conditions (including
required contributions by the Executive) that would have applied had the
Executive continued to be employed by the Company through the End Date.
(d) DISCHARGE OF THE COMPANY'S OBLIGATIONS. Except as expressly
provided in the last sentence of this Section 6(d), the amounts payable to the
Executive pursuant to this Section 6 (whether or not reduced pursuant to Section
6(e)) following termination of his employment shall be in full and complete
satisfaction of the Executive's rights under this Agreement and any other claims
he may have in respect of his employment by the Company or any of its
Subsidiaries. Such amounts shall constitute liquidated damages with respect to
any and all such rights and claims and, upon the Executive's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to the Executive in connection with this Agreement or otherwise in connection
with the Executive's employment with the Company and
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its Subsidiaries. Nothing in this Section 6(d) shall be construed to release the
Company from its commitment to indemnify the Executive pursuant to Section 4(e).
(e) LIMIT ON PAYMENTS BY THE COMPANY.
(i) APPLICATION OF SECTION 6(e). In the event that any amount or
benefit paid or distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid or distributed to
the Executive by the Company or any affiliated company (collectively, the
"Covered Payments"), would be an "excess parachute payment" as defined in
Section 280G of the Code and would thereby subject the Executive to the tax
(the "Excise Tax") imposed under Section 4999 of the Code (or any similar
tax that may hereafter be imposed), the provisions of this Section 6(e)
shall apply to determine the amounts payable to Executive pursuant to this
Agreement.
(ii) CALCULATION OF BENEFITS. Immediately following delivery
of any Notice of Termination, the Company shall notify the Executive of the
aggregate present value of all termination benefits to which he would be
entitled under this Agreement and any other plan, program or arrangement as
of the projected Date of Termination, together with the projected maximum
payments, determined as of such projected Date of Termination that could be
paid without the Executive being subject to the Excise Tax.
(iii) IMPOSITION OF PAYMENT CAP. If the aggregate value of all
compensation payments or benefits to be paid or provided to the Executive
under this Agreement and any other plan, agreement or arrangement with the
Company exceeds the amount which can be paid to the Executive without the
Executive incurring an Excise Tax, then the amounts payable to the Executive
under this Section 6 shall be reduced (but not below zero) to the maximum
amount which may be paid hereunder without the Executive becoming subject to
such an Excise Tax (such reduced payments to be referred to as the "Payment
Cap"). In the event that the Executive receives reduced payments and
benefits hereunder, the Executive shall have the right to designate which of
the payments and benefits otherwise provided for in this Agreement that he
will receive in connection with the application of the Payment Cap.
(iv) APPLICATION OF SECTION 280G. For purposes of determining whether
any of the Covered Payments will be subject to the Excise Tax and the amount
of such Excise Tax,
(A) (X) whether Covered Payments are "parachute payments" within the
meaning of Section 280G of the Code, and (Y) whether there are
"parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be determined in good
faith by the Company's independent certified public accountants
appointed prior to the
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Effective Date (the "Accountants") or tax counsel selected by such
Accountants, and
(B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with
the principles of Section 280G of the Code.
(v) ADJUSTMENTS IN RESPECT OF THE PAYMENT CAP. If the Executive
receives reduced payments and benefits under this Section 6(e) (or this
Section 6(e) is determined not to be applicable to the Executive because the
Accountants conclude that Executive is not subject to any Excise Tax) and it
is established pursuant to a final determination of a court or an Internal
Revenue Service proceeding (a "Final Determination") that, notwithstanding
the good faith of the Executive and the Company in applying the terms of
this Agreement, the aggregate "parachute payments" within the meaning of
Section 280G of the Code paid to the Executive or for his benefit are in an
amount that would result in the Executive's being subject to an Excise Tax,
then any amounts actually paid to or on behalf of the Executive which are
treated as excess parachute payments shall be deemed for all purposes to be
a loan to the Executive made on the date of receipt of such excess payments,
which the Executive shall have an obligation to repay to the Company on
demand, together with interest on such amount at the applicable Federal rate
(as defined in Section 1274(d) of the Code) from the date of the payment
hereunder to the date of repayment by the Executive. If the Executive
receives reduced payments and benefits by reason of this Section 6(e) and it
is established pursuant to a Final Determination that the Executive could
have received a greater amount without exceeding the Payment Cap, then the
Company shall promptly thereafter pay the Executive the aggregate additional
amount which could have been paid without exceeding the Payment Cap,
together with interest on such amount at the applicable Federal rate (as
defined in Section 1274(d) of the Code) from the original payment due date
to the date of actual payment by the Company.
7. NON-EXCLUSIVITY OF RIGHTS. Except as expressly provided herein,
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other plan or program
provided by the Company for which the Executive may qualify, nor shall anything
herein limit or otherwise prejudice such rights as the Executive may have under
any other agreements with the Company, including employment agreements or stock
option agreements. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
8. NO MITIGATION OR OFFSET. The Executive shall have no obligation to
seek other employment and there shall be no offset against amounts due to
Executive under the Agreement on account of any remuneration attributable to
subsequent employment that he may
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obtain or on account of other claims. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Company may have against the Executive or others whether by reason of the
subsequent employment of the Executive or otherwise.
9. LEGAL FEES AND EXPENSES. If the Executive asserts any claim in any
contest (whether initiated by the Executive or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Executive's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses in a form
acceptable to the Company, PROVIDED THAT the Executive shall reimburse the
Company for such amounts, plus simple interest thereon at the 90-day United
States Treasury Bill rate as in effect from time to time, compounded annually,
if the Executive shall not prevail, in whole or in part, as to any material
issue as to the validity, enforceability or interpretation of any provision of
this Agreement.
10. CONFIDENTIAL INFORMATION; COMPANY PROPERTY. By and in
consideration of the salary and benefits to be provided by the Company
hereunder, including the severance arrangements set forth herein, the Executive
agrees that:
(a) CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, (I) obtained by the Executive during his
employment by the Company or any of its affiliated companies and (II) not
otherwise public knowledge (other than by reason of an unauthorized act by the
Executive). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
unless compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
(b) COMPANY PROPERTY. Except as expressly provided herein, promptly
following the Executive's termination of employment, the Executive shall return
to the Company all property of the Company and all copies thereof in the
Executive's possession or under his control, except that the Executive may
retain his personal notes, diaries, Rolodexes, calendars and correspondence.
(c) NON-COMPETE. During the Employment Period and during the period
that Executive is receiving payments in respect of the Severance Amount or is
participating in any continued benefit plans in accordance with Section
6(c)(ii), Executive shall not directly or indirectly own, manage, control,
participate in, consult with render services for or otherwise engage in any
business (including as an employee, agent, or partner by himself or through any
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other entity that is in competition with the business of the Company. Nothing
herein shall prohibit the Executive from being a passive owner of not more than
2% of the outstanding stock or other equity interests of a corporation or other
entity which is publicly traded, so long as the Executive has no active
participation in the business of such corporation.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and,
without the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors. The Company shall require any successor to all
or substantially all of the business and/or assets of the Company, whether
direct or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
12. MISCELLANEOUS. (a) APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
applied without reference to principles of conflict of laws.
(b) ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be resolved by binding arbitration. The
arbitration shall be held in the county of Los Angeles, California and except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the Expedited Employment Arbitration Rules of the American Arbitration
Association (or such other voluntary arbitration rules applicable to employment
contract disputes) in effect at the time of the arbitration, supplemented, as
necessary, by those principles which would be applied by a court of law or
equity. The arbitrator shall be acceptable to both the Company and the
Executive. If the parties cannot agree on an acceptable arbitrator, the dispute
shall be heard by a panel of three arbitrators, one appointed by each of the
parties and the third appointed by the other two arbitrators.
(c) AMENDMENTS. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein. No
other agreement relating to the terms of the Executive's employment by the
Company, oral or otherwise, shall be binding between the parties unless it is in
writing and signed by the party against whom enforcement is sought. There are no
promises, representations, inducements or statements
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between the parties other than those that are expressly contained herein. The
Executive acknowledges that he is entering into this Agreement of his own free
will and accord, and with no duress, that he has read this Agreement and that he
understands it and its legal consequences.
(e) NOTICES. All notices and other communications hereunder shall be
in writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the home address of the Executive noted
on the records of the Company
If to
the Company: FARR COMPANY with a copy to: John D. Hannesson, Esq.
2201 Park Place 18661 Via Palatino
E1 Segundo, California 90245 Irvine, California 92612
Attn.: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(f) TAX WITHHOLDING. The Company shall withhold from any amounts
payable under this Agreement such Federal, state or local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(g) SEVERABILITY: REFORMATION. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event that any
of the provisions of any of Section 11(a) are not enforceable in accordance with
its terms, the Executive and the Company agree that such Section shall be
reformed to make such Section enforceable in a manner which provides the Company
the maximum rights permitted at law.
(h) WAIVER. Waiver by any party hereto of any breach or default by the
other party of any of the terms of this Agreement shall not operate as a waiver
of any other breach or default, whether similar to or different from the breach
or default waived. No waiver of any provision of this Agreement shall be implied
from any course of dealing between the parties hereto or from any failure by
either party hereto to assert its or his rights hereunder on any occasion or
series of occasions.
(i) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
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(j) CAPTIONS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, and
its corporate seal to be hereunto affixed and attested by its Secretary, all as
of the day and year first above written.
FARR COMPANY
By:
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WITNESSED Name:
Title:
EXECUTIVE:
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WITNESSED: John C. Johnston
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EXHIBIT A
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