SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
FARREL CORPORATION
------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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FARREL CORPORATION
25 Main Street
Ansonia, Connecticut 06401
========================================
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
========================================
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Farrel Corporation, a Delaware corporation (the "Company"), will
be held at the offices of the Company, 25 Main Street, Ansonia, Connecticut,
06401, on June 12, 2001, at 10:00 a.m. (local time) for the following purposes:
1. to elect three directors of the Company to serve until the
2003 Annual Meeting of Stockholders of the Company;
2. to ratify the selection of Ernst & Young LLP as
independent accountants for the Company for the fiscal year
ending December 31, 2001; and
3. to transact such other business as may properly come before
the Meeting or any adjournment thereof.
Only stockholders of record on the books of the Company at the close of
business on April 27, 2001 will be entitled to notice of, and to vote at, the
Meeting.
By Order of the Board of Directors,
/s/ THEODORE C. MORRIS
Theodore C. Morris
Vice President, General Counsel
and Secretary
Ansonia, Connecticut
April 30, 2001
IMPORTANT: Whether or not you plan to attend the Meeting in person, it is
important that your shares be represented and voted at the Meeting.
Accordingly, you are urged to read the enclosed Proxy Statement and
sign, date, and return the enclosed proxy promptly in the envelope
provided, which requires no postage if mailed in the United States.
2
FARREL CORPORATION
25 Main Street
Ansonia, Connecticut 06401
===============
PROXY STATEMENT
===============
Annual Meeting of Stockholders To Be Held on June 12, 2001
This Proxy Statement is being mailed to you in connection with the
solicitation of proxies by the Board of Directors of Farrel Corporation, a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Meeting"), to be held on June 12, 2001, at 10:00 a.m. (local
time), at the offices of the Company at 25 Main Street, Ansonia, Connecticut
06401.
SOLICITATION OF PROXIES
All shares represented by duly executed proxies in the form enclosed
herewith received by the Company prior to the Meeting will be voted as
instructed at the Meeting. There are boxes on the proxy card to vote for or to
withhold authority to vote for the director nominees. There are also boxes on
the proxy card to vote for or against or to abstain from voting on the
ratification of the Company's independent accountants. If no instructions are
given, the persons named in the accompanying proxy intend to vote FOR the three
director nominees named herein and FOR ratification of the selection of the
independent accountants named herein.
Any stockholder may revoke a previously executed proxy at any time
prior to its exercise (i) by delivery of a later-dated proxy, (ii) by giving
written notice of revocation to the Secretary of the Company at the address set
forth above at any time before such proxy is voted, or (iii) by voting in person
at the Meeting. No proxy will be voted if the stockholder attends the Meeting
and elects to vote in person.
A copy of the 2000 Annual Report of the Company containing financial
statements for the fiscal year ended December 31, 2000, is enclosed herewith.
This Proxy Statement and the form of proxy enclosed herewith are first being
mailed to stockholders on or about May 10, 2001. The mailing address of the
Company's principal executive offices is 25 Main Street, Ansonia, Connecticut
06401.
The Board of Directors does not know of any matter other than as set
forth herein that is expected to be presented for consideration at the Meeting.
However, if any matters properly come before the Meeting, the persons named in
the accompanying proxy (each of whom is an officer and employee of the Company)
intend to vote thereon in accordance with their judgment.
3
EXPENSES AND SOLICITATION
The Company will bear the cost of soliciting proxies, including
expenses in connection with the preparation and mailing of this Proxy Statement
and all papers which now accompany or may hereafter supplement it. Solicitation
of proxies will be primarily by mail. However, proxies may also be solicited by
directors, officers, and regular employees of the Company (who will not be
specifically compensated for such services) by telephone or otherwise. Brokerage
houses and other custodians, nominees, and fiduciaries will be requested to
forward proxies and proxy material to the beneficial owners of the Company's
Common Stock, and the Company will reimburse them for their expenses.
RECORD DATE, OUTSTANDING VOTING SECURITIES,
AND VOTES REQUIRED
The Company's common stock, $.01 par value per share ("Common Stock"),
is the only outstanding class of voting securities of the Company. The record
date for determining the holders of Common Stock entitled to vote on the actions
to be taken at the Meeting is the close of business on April 27, 2001 (the
"Record Date"). As of the Record Date, 5,228,461 shares of Common Stock were
outstanding. Each holder of Common Stock on the Record Date is entitled to cast
one vote per share at the Meeting on each matter.
Holders of a majority of the shares entitled to vote must be present at
the Meeting, in person or by proxy, so that a quorum may be present for the
transaction of business. For purposes of determining a quorum, broker non-votes
and abstentions will be considered present. The affirmative vote of the holders
of a plurality of the shares of Common Stock present at the Meeting, in person
or by proxy, is necessary for the election of directors of the Company. The
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting, in person or by proxy, is necessary for ratification of
the selection of Ernst & Young LLP as independent accountants for the
Company and any other matters. Abstentions from the proposal to ratify the
selection of the independent accountants, as well as broker non-votes, will not
be considered as part of the shares present for voting purposes on these
matters.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors of two classes as nearly equal in number as practicable. Directors are
elected for two-year terms. At the Meeting, three persons will be elected to
serve as Class II directors to serve a two-year term expiring at the 2003 Annual
Meeting of Stockholders. The Board's nominees are Glenn J. Angiolillo, Charles
S. Jones and Alberto Shaio, all of whom are currently directors of the Company.
Howard J. Aibel, Rolf K. Liebergesell and James A. Purdy were elected last year
to serve as Class I directors for a term expiring at the Annual Meeting of
Stockholders to be held in 2002.
The Board approved proposing to stockholders the reelection of Glenn J.
Angiolillo, Charles S. Jones and Alberto Shaio to a two-year term expiring in
2003. Glenn J. Angiolillo, Charles S. Jones and Alberto Shaio have consented to
be nominated and, if elected, to serve as directors of the Company. Information
about each nominee for director and each incumbent director whose term will
continue after the Meeting is listed below.
4
NOMINEES FOR ELECTION FOR TERMS EXPIRING 2003
Principal Occupations,
Other Directorships, and Year First
Name of Nominee Age Positions with the Company Became Director
- --------------- --- -------------------------- ---------------
Glenn J. Angiolillo 47 Mr. Angiolillo is a member of the Legal 1990
Affairs Committee, the Audit Committee and
the Compensation Committee of the Board. He
has been an independent business consultant
since February, 1999; in addition, he has
been a partner in the law firm of Cummings
& Lockwood since 1987.
Charles S. Jones 53 Mr. Jones has served as Chairman of the 1987
Executive Committee of the Board since
January 1992, and was elected Chairman of
the Compensation Committee in 1994.
Mr. Jones joined the Company's Board of
Directors in 1987. Since May, 1991
Mr. Jones has been Chairman of First Funding
Corporation.
Alberto Shaio 52 Mr. Shaio served as Vice President-Sales of 1986
the Company from 1986 to 1987 when he became
Senior Vice President-Sales. In 1995, Mr.
Shaio was appointed Senior Vice President,
Large Projects. In 1996, in addition to his
position as Senior Vice President, Mr. Shaio
was appointed General Manager of the
Plastics Machinery Division of the Company.
In 2001, Mr. Shaio was appointed Senior Vice
President - Sales and Marketing. From 1981
until 1996, Mr. Shaio was a director of New
Energy Corporation of Indiana.
5
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT THE 2002 ANNUAL MEETING
Principal Occupations,
Other Directorships, and Year First
Name of Nominee Age Positions With the Company Became Director
- ---------------- --- -------------------------- ---------------
Howard J. Aibel 72 Mr. Aibel is the Chairman of the Legal 1994
Affairs Committee and a member of the Audit
Committee. He is currently of counsel to
the law firm LeBoeuf, Lamb, Greene and MacRae
in New York, New York, having retired as a
partner of the firm in 1999. Mr. Aibel
retired as Executive Vice President and
Chief Legal Officer of ITT Corporation on
March 31, 1994, after thirty years of
service. He also served as a member of the
ITT Management Policy Committee, and had
overall responsibility for environmental,
safety, government relations, labor law,
intellectual property, and taxes. He also
held posts as a director of the Sheraton
Corporation, ITT Financial Corporation, and
ITT Europe, Inc. Prior to joining ITT, Mr.
Aibel served as Anti-Trust Litigation
Counsel to the General Electric Company. He
was previously associated with White &
Case.
6
Principal Occupations,
Other Directorships, and Year First
Name of Nominee Age Positions With the Company Became Director
- ---------------- --- -------------------------- ---------------
Rolf K. Liebergesell 68 Mr. Liebergesell has served as Chairman of 1986
the Board, Chief Executive Officer, and
President of the Company since 1986. During
the period March to June, 1996, he
relinquished the post of President to a
newly appointed executive, but resumed the
Presidency upon the resignation of that
appointee. Prior to joining the Company,
Mr. Liebergesell was Chairman and Chief
Executive Officer of Bailey Corporation, a
manufacturer of rubber and plastic
components for the automobile industry.
Mr. Liebergesell held various positions,
including Product Line Manager for the
Worldwide Automotive Group, with ITT
Corporation from 1973 to 1979.
Mr. Liebergesell also served in various
positions at Chrysler Corporation from 1959
to 1973, including Director, Planning and
Development, of Chrysler International, and
Deputy Managing Director of Mitsubishi
Motors Corporation, a joint venture of
Mitsubishi Heavy Industries, Ltd. and
Chrysler Corporation.
James A. Purdy 78 Mr. Purdy is the Chairman of the Audit 1986
Committee and a member of the Compensation
Committee. He is the President of Purdy
Investments, Inc., a private investment and
consulting firm. He has performed
consulting and advisory services for the
Company since 1987, and from 1990-1992 for
the State of Connecticut Department of
Economic Development. Formerly, Mr. Purdy
was a Senior Vice President of ITT
Corporation responsible for all Asia,
Pacific, and Latin American activities.
7
MEETINGS OF THE BOARD OF DIRECTORS;
COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's most recent fiscal year, the Board of Directors
held three meetings. There are currently four standing committees of the Board
of Directors: the Audit Committee, the Executive Committee, the Compensation
Committee, and the Legal Affairs Committee. Each current director attended all
of the meetings of the Board and all meetings of committees of which he was a
member held during the most recent fiscal year while he was in office except for
Mr. Angiolillo who attended two out of the three Board meetings.
The Audit Committee, which met two times in the Company's most recent
fiscal year, recommends to the Board for stockholder approval an independent
accounting firm to conduct the annual audit, and discusses with the Company's
independent accountants the scope of their examinations with particular
attention to areas where either the Committee or the independent accountants
believe special emphasis should be directed. The Committee reviews the annual
financial statements and independent accountants' report, invites the
accountants' recommendations on internal controls and on other matters, and
reviews the evaluation given and corrective action taken by management. It
reviews the independence of the accountants and their fees. It also reviews the
Company's internal accounting controls and submits reports and proposals to the
Board of Directors. The members of the Committee are James A. Purdy, Chairman,
Howard J. Aibel and Glenn J. Angiolillo.
The Compensation Committee, which met one time in the Company's most
recent fiscal year, oversees administration of the Company's 1992 Stock Option
Plan, which is described below, (the "1992 Stock Option Plan"), the 1992
Employees' Stock Purchase Plan, the 1997 Omnibus Stock Incentive Plan, which is
described below, (the "1997 Stock Option Plan"), and the 1997 Employees' Stock
Purchase Plan of the Company. The Compensation Committee also reviews and
recommends to the Board of Directors all forms of remuneration and perquisites
for the directors and senior management of the Company. The members of the
Committee are Charles S. Jones, Chairman, James A. Purdy, and Glenn J.
Angiolillo.
During the Company's most recent fiscal year, the Executive Committee
met as necessary to address matters within its purview. The members of the
Executive Committee are Charles S. Jones, Chairman, and Rolf K. Liebergesell.
The Legal Affairs Committee, which met four times in the Company's most
recent fiscal year, oversees the Company's policies and practices and its
compliance with governmental laws and regulations. The members of the Committee
are Howard J. Aibel, Chairman, and Glenn J. Angiolillo.
8
DIRECTOR COMPENSATION
Directors who are officers or employees of the Company receive no
additional compensation for service as members of the Board of Directors or
committees thereof. Directors who are not officers or employees of the Company
receive such compensation for their services as the Board of Directors may from
time to time determine. Non-employee directors, other than Mr. Jones who has
declined such remuneration, currently receive a fee of $2,500 for each Board
meeting attended and $750 for each Committee meeting attended, plus expense
reimbursement. In addition, each non-employee director was granted an option to
purchase 3,000 shares of the Company's Common Stock on January 27th of each year
from 1992 through 1996 pursuant to the 1992 Stock Option Plan.
During the Company's most recent fiscal year, the Company paid to
Cummings & Lockwood, the law firm of which Mr. Angiolillo is a partner,
certain fees for professional services rendered to the Company. The Company is
also a party to an agreement with First Funding Corporation. Mr. Jones is an
executive officer and owner of a majority of the capital stock of First Funding
Corporation. Pursuant to this agreement, the Company paid fees to First Funding
Corporation for professional services rendered to the Company during the most
recent fiscal year. This agreement, and the fees paid, are described below under
the caption "Certain Relationships and Related Transactions -- Agreement with
First Funding Corporation."
During the Company's most recent fiscal year, each of Mr. Aibel, Mr.
Angiolillo and Mr. Purdy also received $15,000 as retainer payments for being an
outside director of the Company.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth information with respect to the
beneficial ownership of Common Stock as of April 18, 2001, unless otherwise
indicated in the footnotes, by (i) the Company's directors and executive
officers named in the Summary Compensation Table who were employees of the
Company as of April 27, 2001, (ii) the Company's directors and executive
officers as a group and (iii) each person known to the Company to own
beneficially more than 5% of the outstanding Common Stock. Except as otherwise
indicated below, each of the persons named in the table has sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by him as set forth opposite his name. Unless otherwise indicated in the
footnotes, the address of each stockholder is c/o the Company, 25 Main Street,
Ansonia, Connecticut 06401.
Beneficial Ownership
Directors and Management
- ------------------------ Percentage
Shares Owned (1)
Rolf K. Liebergesell(2).......................... 2,491,812 45.4%
Charles S. Jones(3).............................. 366,413 7.0%
Alberto Shaio(4)................................. 221,581 4.2%
James A. Purdy(5)................................ 20,000 *
Howard J. Aibel(6)(7)............................ 7,000 *
Glenn J. Angiolillo(8) (9)....................... 15,400 *
Walter C. Lazarcheck(10)......................... 40,000 *
Theodore C. Morris(11)........................... 6,666 *
Directors and Executive Officers
as a group (8 persons)......................... 3,168,872 56.7%
__________________________
* Represents less than one percent of the Common Stock.
(1) Shares issuable upon the exercise of stock options owned by that person
which can be exercised within 60 days of the date hereof, are deemed
outstanding for the purpose of computing the number and percentage of
outstanding shares owned by that person (and any group that includes that
person) but are not deemed outstanding for the purpose of computing the
percentage of outstanding shares owned by any other person.
(2) Includes 240,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(3) Includes 9,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(4) Includes 20,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(5) Includes 15,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
10
(6) Includes 6,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(7) Address is c/o LeBoeuf, Lamb, Greene & MacRae, 125 West 55th Street,
New York, N.Y. 10019.
(8) Includes 15,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(9) Address is c/o Cummings & Lockwood, Four Stamford Plaza, 107 Elm
Street, Stamford, Connecticut, 06904.
(10) Includes 40,000 shares subject to options granted under the 1997 Stock
Option Plan as to which the owner has a right to acquire beneficial
ownership.
(11) Includes 6,666 shares subject to options granted under the 1997 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file reports of ownership and changes
in ownership of the Company's securities with the Securities and Exchange
Commission. Officers, directors and greater than ten percent beneficial owners
are required by applicable regulations to furnish the Company with copies of all
forms they file pursuant to Section 16(a). Based solely upon a review of the
copies of the forms furnished to the Company, and written representations from
certain reporting persons that no Forms 5 were required, the Company believes
that during 2000, all filing requirements under Section 16(a) applicable to its
officers, directors and ten percent beneficial owners were complied with in a
timely manner.
11
EXECUTIVE OFFICERS
The following table sets forth the executive officers of the Company as
of April 27, 2001. See "Election of Directors" for a description of the business
experience of Mr. Liebergesell and Mr. Shaio.
Name Age Position
Walter C. Lazarcheck..... 37 Vice President and Chief Financial Officer
Rolf K. Liebergesell .... 68 Chairman of the Board, Chief Executive
Officer, and President
Theodore C. Morris....... 36 Vice President, General Counsel and
Corporate Secretary
Alberto Shaio ........... 52 Director, Senior Vice President - Sales and
Marketing
WALTER C. LAZARCHECK joined the Company on October 25, 1999, as Vice
President and Chief Financial Officer. Prior to joining the Company, Mr.
Lazarcheck was Vice President and Chief Financial Officer of Bridgeport
Machines, Inc. from January 1995 until October 22, 1999. Prior to working for
Bridgeport Machines, Inc., Mr. Lazarcheck worked for Arthur Andersen LLP from
August 1985 until December 1994.
THEODORE C. MORRIS joined the Company on March 20, 2000, as Assistant
General Counsel. In June 2000, Mr. Morris became Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Morris was an attorney at Day,
Berry and Howard from August 1991 until October, 1994, Hebb and Gitlin from
October, 1994 until July, 1999 and Bingham Dana from July, 1999 until March,
2000.
Executive officers of the Company are appointed by the Board of
Directors and serve at the discretion of the Board. Except as described below
under "Executive Compensation and Related Information," the Company has no
employment agreements with any of its executive officers.
12
Report of The Audit Committee
To Our Fellow Stockholders at Farrel Corporation:
We, the members of the Audit Committee of the Board of Directors, are
three independent directors, as defined by NASDAQ. Management is responsible for
the Company's financial reporting process and internal controls. The
responsibility of the Committee is to provide general oversight of the Company's
financial accounting, reporting and underlying internal controls. The Committee,
in conjunction with the Board of Directors, has the ultimate authority for the
selection, evaluation and retention of the independent auditors.
On June 12, 2000, the Board of Directors, upon the Committee's
recommendation, adopted the Audit Committee's charter to comply with new rules
of NASDAQ. A copy of the Committee's charter is attached as Annex I to this
Proxy Statement. In 2000, the Committee operated in accordance with its charter.
The Committee holds regularly scheduled meetings for the purpose of
providing a forum for communication among the directors, the Company's
independent auditors, Ernst & Young LLP and the Company's management. During
these meetings, the Committee reviewed and discussed the interim and the audited
financial statements with management and Ernst & Young. In accordance with
Statement of Auditing Standards No. 61, Communication with Audit Committees, the
Committee discussed all required matters with Ernst & Young including the
conduct of the audit of the Company's financial statements.
In addition, the Committee obtained formal, written disclosures from
Ernst & Young, including a letter affirming their independence as required
by Independence Standards Board Standard No. 1. The information contained in
this letter was discussed with Ernst & Young.
The Committee reviewed aggregate fees billed by Ernst & Young for
the year 2000 which are as follows:
Audit Fees........................................ $152,700
Tax Return and Tax Planning Fees.................. 96,775
Audits of Pension and Benefit Plans............... 27,700
Financial Information Systems Design and
Implementation Fees............................. 0
Other............................................. 17,355
--------
Total Fees........................................ $294,530
========
The Committee concluded that the non-audit services rendered in 2000
did not impair the independence of Ernst & Young.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, inclusion of
the audited financial statements in the Company's Annual Report on Form 10-K,
for the year ended December 31, 2000, for filing with the Securities and
Exchange Commission. The Committee has also recommended to the Board that Ernst
& Young be selected as the Company's independent accountants for 2001.
James A. Purdy, Chairperson
Howard J. Aibel
Glenn J. Angiolillo
13
REPORT OF
THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Executive Officers Generally
Role of Compensation Committee. The Compensation Committee (the
"Committee") reviews and recommends to the Board of Directors all forms of
remuneration for the directors and executive officers of the Company, including
salary, bonuses, and awards under the 1997 Stock Option Plan. The Committee is
currently composed of three directors, none of whom is or has been at any time
an officer or employee of the Company.
Objectives of Executive Compensation Programs. The Company's executive
compensation program's objectives are as follows:
o To provide a competitive basic compensation and benefits program
in order to attract and retain quality personnel.
o To provide further a performance-oriented environment and
programs that reward individual and team performance, and the
success of the Company.
o To align executives' financial interests with shareholders'
values.
Base Salaries. Base salaries are targeted to be moderate yet
competitive in relation to salaries of executive officers in comparably sized
companies in the Company's industry. The Committee reviews management
recommendations for executives' salaries, and also considers independent surveys
that provide data on compensation levels and benefit programs in similar
companies. Individual salary determinations are based on experience and
sustained performance, as well as on the general criteria set forth above.
Bonuses. Although the Company does not have a formal bonus program, the
Compensation Committee may recommend bonuses to be paid to executive officers
based on Company and individual performance.
1992 Stock Option Plan and 1997 Stock Option Plan. The 1992 Stock
Option Plan and the 1997 Stock Option Plan were designed to secure for the
Company and its stockholders the benefit of the incentives inherent in increased
Common Stock ownership by key employees.
Chief Executive Officer
The salary of Mr. Liebergesell, including his 2000 compensation, is
established pursuant to his employment agreement which sets an annual base
salary of $550,000.
Charles S. Jones, Chairman
James A. Purdy
Glenn J. Angiolillo
14
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Summary Compensation Table
The following table sets forth the annual compensation, and all long
term compensation, for the past three fiscal periods for the Company's Chief
Executive Officer and for the five or six most highly compensated other
executive officers.
Long Term
Annual Compensation Other Compensation
Name and Annual Securities Underlying All Other
Principal Position Year Salary(1) Bonus(2) Compensation Options(3) Compensation
- -------------------------------------------------------------------------------------------------------------
Rolf K. Liebergesell 2000 $550,000 --- --- --- $34,862(4)
Chief Executive 1999 $550,000 $250,000 --- --- $34,862(4)
Officer, President 1998 $550,000 --- --- --- $34,862(4)
and Chairman
of the Board
Alberto Shaio 2000 $230,000 --- --- --- $ 3,200(5)
Senior Vice President - 1999 $230,000 --- --- --- $ 3,200(5)
Sales and Marketing 1998 $230,000 $30,000 --- --- $ 3,200(5)
Karl N. Svensson 2000 $170,000 --- $109,057(6) --- $ 2,624(5)
Senior Vice President 1999 $170,000 --- $ 81,331(6) --- $ 2,591(5)
Worldwide Supply 1998 $170,000 $10,000 $102,068(6) --- $ 2,591(5)
Management
Walter C. Lazarcheck 2000 $150,000 --- --- --- ---
Vice President and 1999 $ 27,885 --- --- 60,000 ---
Chief Financial Officer(7)
15
Long Term
Annual Compensation Other Compensation
Name and Annual Securities Underlying All Other
Principal Position Year Salary(1) Bonus(2) Compensation Options(3) Compensation
- -------------------------------------------------------------------------------------------------------------
John A. Brunjes 2000 $83,667 --- --- --- ---
Former Vice President, 1999 $66,441 --- $16,708(9) 25,000 ---
General Counsel
and Secretary (8)
Theodore C. Morris 2000 $104,475 --- - -- 10,000 ---
Vice President,
General Counsel
and Secretary(10)
- --------------------------
(1) Includes amounts deferred pursuant to the Company's Salary Retirement
Program.
(2) The cash bonuses for officers are stated for the fiscal year in respect of
which they were paid.
(3) Options were granted under the 1997 Stock Option Plan at exercise prices
equal to the fair market value on the date of grant.
(4) Other compensation is comprised of term life insurance premiums paid by the
Company pursuant to Mr. Liebergesell's employment agreement, described
below.
(5) Represents the Company's contributions under the Company's Salary
Retirement Program, pursuant to which the Company matches a percentage of
salary deferral contributions made by participating employees and may make
discretionary contributions.
(6) Includes $69,370, $41,016 and $63,490 for 2000, 1999 and 1998,
respectively, paid in connection with Mr. Svensson's reassignment from the
United States to the United Kingdom for the purpose of a tax equalization
payment adjusting Mr. Svensson's compensation in the fiscal year so that he
is not adversely affected by differing tax rates in the United States and
the United Kingdom. The balance includes housing and other assistance
relating to Mr. Svensson's reassignment from the United States to the
United Kingdom. Mr. Svensson retired on March 31, 2001.
(7) Mr. Lazarcheck joined the Company in October 1999.
(8) Mr. Brunjes joined the Company in July 1999 and resigned in April 2000.
(9) Consists of a signing bonus.
(10) Mr. Morris joined the Company in March 2000.
16
COMPENSATION PLANS AND ARRANGEMENTS
OF THE COMPANY
Option Grants
The following table sets forth information concerning stock options
which were granted during the most recent fiscal year to executive officers
named in the Summary Compensation Table. The options were granted pursuant to
the 1997 Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Potential Realizable Value at
% of Total Assumed Annual Rates of Stock Price
Options Appreciation for Option Term(3)
Name Securities Granted to
Underlying Employees
Options in Fiscal Exercise Expiration Date
Granted(1) Year(2) Price of Grant 5% 10%
Theodore
Morris 10,000 100% $2.13 March 20, 2010 $3.47 $5.52
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(1) All options were granted at an exercise price equal to the market value of
the underlying shares on the date of grant.
(2) Options with respect to a total of $10,000 shares were granted to employees
in 2000.
(3) Represents the potential appreciation of the options over their stated term
of 10 years, based upon assumed compounded rates of appreciation of 5% per
year and 10% per year. The amounts set forth in these columns are not
intended as forecasts of future appreciation, which is dependent upon the
actual increase, if any, in the market price of the underlying shares, and
there is no assurance that the amounts of appreciation shown in the table
actually will be realized.
17
Option Value at December 31, 2000
The following table sets forth, for the executive officers named in the
Summary Compensation Table, information with respect to holdings of unexercised
options at December 31, 2000. None of the options listed was "in-the-money" at
year-end.
FISCAL YEAR-END OPTION VALUES
Number of Unexercised
Options at Year End
Exercisable/Non-Exercisable
---------------------------
Walter C. Lazarcheck............. 40,000/None
Rolf K. Liebergesell............. 240,000/None
Theodore C. Morris............... 3,333/6,667
Alberto Shaio.................... 20,000/None
Karl N. Svensson................. 40,000/None
18
1992 Stock Option Plan
Under the 1992 Stock Option Plan, awards of incentive stock options (as
defined in Section 422 of the Internal Revenue Code of 1986, as amended), and
non-qualified stock options were permitted to be granted to eligible employees
through January 27, 1997.
The exercise price of incentive stock options and non-qualified stock
options granted under the 1992 Stock Option Plan are not less than 100% of the
fair market value of the Common Stock at the time of grant. With respect to any
person who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock options are not less than 110% of the fair market value of such shares at
the time of grant.
Pursuant to the 1992 Stock Option Plan, each non-employee director of
the Company, including members of the Compensation Committee, was granted a
non-qualified stock option to purchase 3,000 shares of Common Stock on January
27 of each year (beginning January 27, 1992) through January 27, 1996. Mr.
Liebergesell was granted a non-qualified stock option to purchase 40,000 shares
of Common Stock on the 30th day after the end of each fiscal year of the Company
through 1996.
Options granted automatically to non-employee directors and Mr.
Liebergesell have a term of 10 years, and become exercisable as to all shares
covered by the option after one year continuous service after the date of grant
of the option. Options which were granted to employees have a term not in excess
of 10 years, and become exercisable in installments of 25% of the number of
shares covered by the option after the employee completes one, two, three and
four years, respectively, of cumulative service following the date of grant.
1997 Stock Option Plan
Under the 1997 Stock Option Plan, awards of incentive stock options (as
defined in Section 422 of the Internal Revenue Code of 1986, as amended), and
non-qualified stock options are permitted to be granted to eligible employees.
The exercise price of incentive stock options and non-qualified stock
options under the 1997 Stock Option Plan is not less than 100% of the fair
market value of the shares of Common Stock at the time of grant. With respect to
any person who owns stock representing more than 10% of the voting power of the
outstanding capital stock of the Company, the exercise price of any incentive
stock options is not less than 110% of the fair market value of the shares of
Common Stock at the time of grant.
The Compensation Committee of the Board of Directors will determine the
time for exercise of each option and each option's expiration date; provided
that no incentive stock option may be exercised more than ten years after the
date of grant and no incentive stock option granted to a 10% Stockholder may be
exercised more than five years after the date of grant.
19
PERFORMANCE GRAPH
Common Stock Performance: The following graph compares, for each of the
fiscal years indicated, the yearly percentage change in the Company's total
stockholder return on its Common Stock with the cumulative total return of a)
the NASDAQ (U.S. Market) Index, a broad equity market index, and b) the S &
P Machinery Diversified Group, a published industry index. The stock performance
graph assumes that $100 was invested on December 31, 1995.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
FARREL CORPORATION
Source: Standard and Poor's Computstat
Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00
FARREL CORP .......................... 100 75.26 171.13 74.97 72.55 34.49
NASDAQ US INDEX ...................... 100 123.04 150.76 212.44 383.79 259.86
MACHINERY (DIVERSIFIED)-S&P ...... 100 124.64 164.87 137.21 162.22 153.14
20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Charles S. Jones, Chairman,
James A. Purdy, and Glenn J. Angiolillo. Mr. Jones is an executive officer of
First Funding Corporation and owner of a majority of its capital stock. First
Funding Corporation is a party to a Financial Services Agreement with the
Company, the terms of which are described below. See "Certain Relationships and
Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Agreement with First Funding Corporation
The Company is a party to an agreement with First Funding Corporation
("First Funding") dated June 17, 1986, as amended by a letter agreement dated
November 1, 1991 (the "Financial Services Agreement"), pursuant to which the
Company retains First Funding as its exclusive financial adviser. Charles S.
Jones, a director and a principal stockholder of the Company, is an executive
officer of First Funding and owner of a majority of its outstanding capital
stock. The Financial Services Agreement may be terminated by either party upon a
twelve-month prior written notice to the other. The agreement is also terminable
by the Company in the event that Mr. Jones is no longer an officer or employee
of First Funding.
Under the Financial Services Agreement, the Company pays First Funding
an annual retainer of $450,000 in respect of Mr. Jones' commitment to spend a
majority of his normal working time each year on behalf of the Company. Mr.
Jones has agreed to serve as Chairman of the Company's Executive Committee and
to provide certain other services as requested by the Company including
financial advisory services, strategic planning, budgeting and forecasting, and
advice relating to the establishment and/or modification of the Company's
corporate goals and objectives. The Company is billed on an hourly basis for
other First Funding employees who work on the Company's account and will pay a
transaction fee to First Funding in the event of certain transactions, such as
acquisitions, divestitures, mergers, joint ventures and debt or equity
investments.
The amounts paid or accrued to First Funding for services under the
Financial Services Agreement during the Company's most recent fiscal year
totaled approximately $733,000, which includes the retainer to Mr. Jones and
$207,000 of reimbursement for out-of-pocket expenses. From January 1, 2001
through April 1, 2001, the Company has been invoiced by First Funding
approximately $138,000, which includes $13,000 of reimbursement for
out-of-pocket expenses, for services performed under the Financial Services
Agreement in 2001.
21
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Company has selected the firm of Ernst & Young LLP, independent
certified public accountants, to serve as independent accountants for the
Company for the fiscal year ending December 31, 2001. The decision to retain
Ernst & Young LLP, to serve as independent accountants of the Company was
recommended by the Audit Committee and approved by the Board of Directors.
It is expected that a representative of Ernst & Young LLP, will be
present at the Meeting and will be available to make a statement (if he or she
desires to do so) and to respond to appropriate questions at the Meeting. If the
stockholders do not ratify the selection of Ernst & Young LLP, the Board of
Directors may consider selection of other independent certified public
accountants to serve as independent accountants, but no assurance can be made
that the Board of Directors will do so or that any other independent certified
public accountants would be willing to serve.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THIS SELECTION.
22
Annex 1
FARREL CORPORATION
AUDIT COMMITTEE CHARTER
Organization
This charter governs the operations of the Farrel Corporation Audit Committee
(the "Committee"). The Committee shall review and reassess the charter annually
and obtain the approval of the Board of Directors. The Committee shall be
appointed by the Chairman and approved by the Board of Directors and shall be
comprised of at least three Directors, each of whom are independent of
management and the Company. Members of the Committee shall be considered
independent if they have no relationship to the Company that may interfere with
the exercise of their independence. All Committee members shall be financially
literate, and at least one member shall have accounting or related financial
management expertise.
Statement of Policy
The Committee shall provide assistance to the Board of Directors in fulfilling
their oversight responsibility to shareholders, potential shareholders, the
investment community, and others relating to the Company's financial statement
and the financial reporting process, the systems of internal accounting and
financial controls, the annual independent audit of the Company's financial
statements, and the legal compliance and ethics programs as established by
management and the Board of Directors. It is the responsibility of the Committee
to maintain free and open communication between Committee members, independent
auditors and management of the Company. In particular, the Committee shall have
free access to the Chief Financial Officer, and vice-versa, to discuss any and
all matters as necessary. In discharging its oversight role, the Committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities, and personnel of the Company and the power to
retain outside counsel or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. In carrying out its responsibilities, the
Committee believes its policies and procedures should remain flexible, in order
to best react to changing conditions and circumstances. The Committee should
take appropriate actions to ensure the corporate direction for quality financial
reporting, sound financial practices, and ethical behavior.
23
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Committee, as representatives of the
Company's shareholders. The Committee shall have ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The Committee shall discuss with the auditors their independence
from management and the Company, and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
Committee shall review and recommend to the Board of Directors the
selection of the Company's independent auditors, subject to shareholders'
approval.
o The Committee shall discuss with the independent auditors the overall scope
and plans for their respective audits including adequacy of staffing and
compensation. Also, the Committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business risk, and legal and ethical compliance programs. Further, the
Committee shall meet regularly with the independent auditors, with and
without management present, to discuss the results of their examinations.
o The Committee shall review interim financial statements prior to the filing
of the Company's Quarterly Report on Form 10-Q. Also, as necessary, the
Committee shall discuss the results of the quarterly review and any other
matters required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards. The chair of the
Committee may represent the entire Committee for the purposes of this
review.
o The Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality and
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
24
STOCKHOLDER PROPOSALS
It is presently contemplated that the 2002 Annual Meeting of
Stockholders will be held on or about June 12, 2002. Proposals by stockholders
intended for inclusion in the proxy statement to be furnished to all
stockholders entitled to vote at the next annual meeting of the Company must be
received at the Company's principal executive offices not later than December
31, 2001. In order to curtail controversy as to the date on which a proposal was
received by the Company, it is suggested that proponents submit their proposals
by certified mail, return receipt requested.
By Order of the Board of Directors,
/s/ THEODORE C. MORRIS
THEODORE C. MORRIS
Vice President, General Counsel
and Secretary
Ansonia, Connecticut
April 30, 2001
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE
YEAR ENDED DECEMBER 31, 2000 TO EACH STOCKHOLDER WHO FORWARDS A WRITTEN REQUEST
TO THE SECRETARY, FARREL CORPORATION, 25 MAIN STREET, ANSONIA CONNECTICUT 06401.
SUCH WRITTEN REQUEST MUST INCLUDE A GOOD FAITH REPRESENTATION THAT, AS OF APRIL
27, 2001 (THE RECORD DATE), THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL
OWNER OF SECURITIES ENTITLED TO VOTE AT THE 2001 ANNUAL MEETING OF THE COMPANY.
COPIES OF SUCH FORM 10-K FURNISHED WITHOUT CHARGE WILL NOT INCLUDE ALL
OF THE EXHIBITS THERETO, IF ANY, BUT WILL INCLUDE A LIST DESCRIBING ALL OF THE
EXHIBITS NOT INCLUDED, COPIES OF WHICH WILL BE AVAILABLE AT A COST OF $1.00 PER
PAGE.
25
PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. Election of Directors:
- ------------------------------
FARREL CORPORATION
- ------------------------------
For All With- For All
(01) Glenn J. Angiolillo Nominees hold Except
(02) Charles S. Jones
(03) Alberto Shaio
NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name(s) of
the nominee(s). Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. To consider and act upon the ratification of
the selection of Ernst & Young LLP as
independent accountants for the Company
for the fiscal year ending December 31, 2001.
Please be sure to sign
and date this Proxy. Date
Mark box at right if an address change or comment has
been noted on the reverse side of this card
Stockholder sign here Co-owner sign here
DETACH CARD DETACH
CARD
FARREL CORPORATION
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Company that require your immediate attention and approval. These are discussed
in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted, then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders on June
12, 2001.
Thank you in advance for your prompt consideration of these maters.
Sincerely,
Farrel Corporation
26
FARREL CORPORATION
25 Main Street, Ansonia, Connecticut 06401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Theodore C. Morris and Walter C. Lazarcheck, and each of them,
as proxies, with full powers of substitution, and hereby authorizes them to
represent and vote as designated on the reverse hereof, all shares of common
stock of Farrel Corporation (the "Company") held of record by the undersigned on
April 27, 2001 at the Annual Meeting of Stockholders of the Company to be held
on June 12, 2001 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
"FOR" ALL PROPOSALS.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
Please sign exactly as your name(s) appear(s) on the reverse side of this card.
If a corporation, please sign in full corporate name by president or other
authorized person. When signing as trustee, please give full title as such.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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27
