-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SrRJ+vIWBJzNYZDbrBga7NrpAVwSdJHw3Qt/5QjHnxzfBMv9NKK7ms9sWJF5DjK/ V6OEcI6wBeuR5vtUHXwBTw== 0001133884-02-000510.txt : 20020430 0001133884-02-000510.hdr.sgml : 20020430 ACCESSION NUMBER: 0001133884-02-000510 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20020429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARREL CORP CENTRAL INDEX KEY: 0000034645 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 222689245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-19703 FILM NUMBER: 02624530 BUSINESS ADDRESS: STREET 1: 25 MAIN STREET CITY: ANSONIA STATE: CT ZIP: 06401-1601 BUSINESS PHONE: 2037365500 DEF 14A 1 gdef14a-28257.txt DEF 14A 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 to ss.240.14a-11(c) or ss.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: --------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: --------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): --------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: --------------------------------------------------------------- 5) Total fee paid: --------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: --------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: --------------------------------------------------------------- 3) Filing Party: --------------------------------------------------------------- 4) Date Filed: --------------------------------------------------------------- [ LOGO ] FARREL 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, 2002, at 8:30 a.m. (local time) for the following purposes: 1. to elect three directors of the Company to serve until the 2004 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, 2002; 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 26, 2002 will be entitled to notice of, and to vote at, the Meeting. By Order of the Board of Directors, /s/ James L. Burns JAMES L. BURNS Vice President, General Counsel and Secretary Ansonia, Connecticut April 30, 2002 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. FARREL CORPORATION 25 MAIN STREET ANSONIA, CONNECTICUT 06401 ============================ PROXY STATEMENT ============================ ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 12, 2002 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, 2002, at 8:30 a.m. (local time), at the principal executive 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 2001 Annual Report of the Company containing financial statements for the fiscal year ended December 31, 2001, is enclosed herewith. This Proxy Statement and the form of proxy enclosed herewith are first being mailed to stockholders on or about May 10, 2002. 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. 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 26, 2002 (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 I directors to serve a two-year term expiring at the 2004 Annual Meeting of Stockholders. The Board's nominees are Howard J. Aibel, Rolf K. Liebergesell and James A. Purdy, all of whom are currently directors of the Company. Glenn J. Angiolillo, Charles S. Jones and Alberto Shaio, were elected last year to serve as Class II directors for a term expiring at the Annual Meeting of Stockholders to be held in 2003. The Board approved proposing to stockholders the reelection of Howard J. Aibel, Rolf K. Liebergesell and James A. Purdy each to a two-year term expiring in 2004. Howard J. Aibel, Rolf K. Liebergesell and James A. Purdy 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. 2 NOMINEES FOR ELECTION FOR TERMS EXPIRING 2004
PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS, AND YEAR FIRST NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY BECAME DIRECTOR --------------- --- -------------------------- --------------- Howard J. Aibel 73 Mr. Aibel is the Chairman of the Legal Affairs 1994 Committee and a member of the Audit Committee. He provides dispute resolution services worldwide as an independent mediator and arbitrator in complex commercial disputes. In 1999 Mr. Aibel retired from the law firm LeBoeuf, Lamb, Greene & MacRae in New York, New York. 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.
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PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS, AND YEAR FIRST NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY BECAME DIRECTOR --------------- --- -------------------------- --------------- Rolf K. Liebergesell 69 Mr. Liebergesell has served as Chairman of 1986 the Board, Chief Executive Officer, and President of the Company since 1986, except for the period March to June, 1996, when he temporarily relinquished the post of President. 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 of 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 79 Mr. Purdy is the Chairman of the Audit Committee 1986 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.
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INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT THE 2003 ANNUAL MEETING PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS, AND YEAR FIRST NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY BECAME DIRECTOR --------------- --- -------------------------- --------------- Glenn J. Angiolillo 48 Mr. Angiolillo is a member of the Legal Affairs 1990 Committee, the Audit Committee and the Compensation Committee of the Board. He has been an independent business consultant since February, 1998; in addition, he was a partner in the law firm of Cummings & Lockwood from 1987 until 2001. Charles S. Jones 54 Mr. Jones has served as Chairman of the Executive 1987 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 53 Mr. Shaio served as Vice President-Sales of the 1986 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 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 five 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. Aibel, who was absent from one Board of Directors meeting. The Audit Committee, which met four 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 one time 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. 6 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 was 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 the 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. 7 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 26, 2002, 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 26, 2002, (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 PERCENTAGE DIRECTORS AND MANAGEMENT SHARES OWNED (1) - ------------------------ Rolf K. Liebergesell(2)....................................... 2,451,812 45.2% Charles S. Jones(3)........................................... 366,413 7.0% Alberto Shaio(4).............................................. 221,581 4.2% James A. Purdy(5)............................................. 22,000 * Howard J. Aibel(6)(7)......................................... 7,000 * Glenn J. Angiolillo(8)(9)..................................... 12,400 * Walter C. Lazarcheck(10)...................................... 73,333 * James L. Burns(11)............................................ 13,333 * Directors and Executive Officers as a group (8 persons)...................................... 3,167,872 56.8%
- ----------------------- * 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 200,000 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 12,000 shares subject to options granted under the 1992 Stock Option Plan, as to which the owner has a right to acquire beneficial ownership. 8 (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 183 Steep Hill Road, Weston, Connecticut 06883. (8) Includes 12,000 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 P.O. Box 128, New Canaan, Connecticut 06840. (10) Includes 73,333 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 13,333 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 2001, all filing requirements under Section 16(a) applicable to its officers, directors and ten percent beneficial owners were complied with in a timely manner. 9 EXECUTIVE OFFICERS The following table sets forth the executive officers of the Company as of April 26, 2002. See "Election of Directors" for a description of the business experience of Mr. Liebergesell and Mr. Shaio.
NAME AGE POSITION James L. Burns........................ 34 Vice President, General Counsel and Secretary Walter C. Lazarcheck.................. 38 Vice President and Chief Financial Officer Rolf K. Liebergesell ................. 69 Chairman of the Board, Chief Executive Officer, and President Alberto Shaio ........................ 53 Director, Senior Vice President - Sales and Marketing
JAMES L. BURNS joined the Company on December 10, 2001, as Vice President, General Counsel and Secretary. Prior to joining the Company, Mr. Burns was an attorney at Skadden Arps Slate Meagher & Flom, LLP from November 1995 until February 1997 and O'Sullivan LLP (formerly O'Sullivan Graev & Karabell, LLP) from March 1997 until November 2001. 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. 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. 10 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 was attached as Annex I to the Company's April 30, 2001 Proxy Statement. In 2001, 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 2001, which are as follows: Audit Fees.................................... $150,350 Tax Return and Tax Planning Fees.............. 74,800 Audits of Pension and Benefit Plans........... 19,400 Financial Information Systems Design and Implementation Fees......................... 0 Other......................................... 0 -------- Total Fees.................................... $244,550 -------- The Committee concluded that the non-audit services rendered in 2001 did not impair the independence of Ernst & Young. 11 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, 2001, 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 2002. James A. Purdy, Chairperson Howard J. Aibel Glenn J. Angiolillo 12 REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION EXECUTIVE OFFICERS 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 a performance-oriented environment and programs that reward individual and team performance, and the Company's success. 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. The salary of Mr. Liebergesell, including his 2001 compensation, is established pursuant to his employment agreement which sets an annual base salary of $550,000. BONUSES. Although the Company does not have a formal bonus program for executive officers, the Compensation Committee may recommend bonuses to be paid to executive officers based on Company and individual performance. No bonuses were awarded in 2001. 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. Charles S. Jones, Chairman James A. Purdy Glenn J. Angiolillo 13 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 other most highly compensated executive officers.
LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ Securities Name and Underlying All Other Principal Position Year Salary(1) Bonus(2) Other Options(3) Compensation - -------------------------------------------------------------------------------------------------------------- Rolf K. Liebergesell 2001 $550,000 --- --- --- $ 34,862(4) Chief Executive 2000 $550,000 --- --- --- $ 34,862(4) Officer, President 1999 $550,000 $250,000 --- --- $ 34,862(4) and Chairman of the Board Alberto Shaio 2001 $230,000 --- --- --- $ 3,200(5) Senior Vice President - 2000 $230,000 --- --- --- $ 3,200(5) Sales and Marketing 1999 $230,000 --- --- --- $ 3,200(5) Karl N. Svensson 2001 $ 62,494 --- $ 43,734(6) --- $ 1,372(5) Former Senior Vice 2000 $170,000 --- $ 109,057(6) --- $ 2,624(5) President Worldwide 1999 $170,000 --- $ 81,331(6) --- $ 2,591(5) Supply Management (7) Walter C. Lazarcheck 2001 $155,000 --- --- 40,000 $ 2,250(5) Vice President and 2000 $150,000 --- --- --- --- Chief Financial Officer (8) 1999 $ 27,885 --- --- 60,000 ---
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LONG TERM ANNUAL COMPENSATION COMPENSATION ------------------- ------------ Securities Name and Underlying All Other Principal Position Year Salary(1) Bonus(2) Other Options(3) Compensation - ---------------------------------------------------------------------------------------------------------- Theodore C. Morris 2001 $104,910 --- --- --- --- Former Vice President, 2000 $104,475 --- --- 10,000 --- General Counsel and Secretary (9) James L. Burns 2001 $ 9,231 --- --- 40,000 --- 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. (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 $37,734, $69,370 and $41,016 for 2001, 2000 and 1999, 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. (7) Mr. Svensson retired from the Company on March 31, 2001. (8) Mr. Lazarcheck joined the Company in October 1999. (9) Mr. Morris joined the Company in March 2000 and resigned in September 2001. (10) Mr. Burns joined the Company in December 2001. 15 COMPENSATION PLANS AND ARRANGEMENTS OF THE COMPANY OPTION GRANTS The following table set forth information concerning stock options that 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 Assumed Annual Rates of Stock Price Appreciation Securities % of Total for Option Term(3) Underlying Options Granted Options to Employees In Exercise Expiration Name Granted(1) Fiscal Year(2) Price Date of Grant 5% 10% - ---- ---------- -------------- ----- ------------- -- --- James December Burns 40,000 44% $0.76 10, 2011 $19,200 $48,400 Walter November Lazarcheck 40,000 44% $0.60 5, 2011 $15,200 $38,400
- ------------------ (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 90,000 shares were granted to employees of the Company or its subsidiaries in 2001. (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. There is no assurance that the amounts of appreciation shown in the table actually will be realized. 16 OPTION VALUE AT DECEMBER 31, 2001 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, 2001. The value of "in-the-money" options is based on a closing price of $0.72 at December 31, 2001. FISCAL YEAR-END OPTION VALUES
Number of Unexercised Value of Unexercised Options at Year End "In-the-Money" Options Exercisable/non-exercisable Exercisable/non-exercisable --------------------------- --------------------------- James L. Burns............. 13,333/26,667 None/None Walter C. Lazarcheck....... 73,333/26,667 $1,600/$3,200 Rolf K. Liebergesell....... 240,000/None None/None Alberto Shaio.............. 20,000/None None/None
17 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. 18 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, which is a broad equity market index, and (b) the S & P Machinery Diversified Group, which is a published industry index. The stock performance graph assumes that $100 was invested on December 31, 1996. Comparison of Five Year-Cumulative Total Returns Performance Graph for FARREL CORPORATION Source: Standard & Poor's Computstat [ PERFORMANCE GRAPH ]
Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 FARREL CORP 100.00 227.38 99.62 96.40 45.82 40.58 NASDAQ US INDEX 100.00 122.53 172.66 311.92 211.20 179.73 MACHINERY (DIVERSIFIED)- S&P 100.00 132.28 110.08 130.15 122.86 132.39
19 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 (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 act on behalf of the Company. Pursuant to an amendment to the Financial Services Agreement dated February 8, 2002, First Funding agreed to reduce the annual retainer to $400,000 for the period March 1, 2002 to March 1, 2003. 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, dispute resolution, executive assessment, and advice relating to the establishment and/or modification of the Company's corporate goals, business practices and objectives. The Company also is billed for out-of-pocket expenses and on an hourly basis for other First Funding employees who work on the Company's account; however, since July 1, 2001, and until further notice, First Funding has agreed to provide these services as part of its annual retainer fee. The Company also 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 $626,000, which includes the retainer and $104,000 of reimbursement for out-of-pocket expenses. From January 1, 2002 through April 24, 2002, the Company has been invoiced by First Funding approximately $171,000, which includes $12,700 of reimbursement for out-of-pocket expenses, for services performed under the Financial Services Agreement in 2002. 20 INDEBTEDNESS OF MANAGEMENT From time to time the Company makes advances to management. As of December 31, 2001, Mr. Liebergesell had received advances from the Company totaling approximately $165,500, approximately $83,000 of which remained outstanding as of April 26, 2002. The Company does not charge interest on amounts due from management. 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, 2002. 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. 21 STOCKHOLDER PROPOSALS It is presently contemplated that the 2003 Annual Meeting of Stockholders will be held on or about June 12, 2003. 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, 2002. Stockholder proposals intended to be presented at, but not included in the Company's proxy materials for, the 2003 Annual Meeting must be received by the Company no later than February 14, 2003; otherwise such proposals will be subject to the grant of discretionary authority contained in the Company's form of proxy to vote on them. 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/ James L. Burns JAMES L. BURNS Vice President, General Counsel and Secretary Ansonia, Connecticut April 30, 2002 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, 2001 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 26, 2002 (THE RECORD DATE), THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE AT THE 2002 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. 22
DETACH HERE FARREL CORPORATION 25 MAIN STREET, ANSONIA, CONNETICUT 06401 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints James L. Burns 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 26, 2002 at the Annual Meeting of Stockholders of the Company to be held on June 12, 2002 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 iin 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? - -------------------------------------------------------------- -------------------------------------------------------------- - -------------------------------------------------------------- -------------------------------------------------------------- - -------------------------------------------------------------- --------------------------------------------------------------
FARREL CORPORATION C/O EQUISERVE P.O. BOX 9398 BOSTON, MA 02205-9398 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, 2002. Thank you in advance for your prompt consideration of these matters. Sincerely, Farrel Corporation DETACH HERE PLEASE MARK /X/ VOTES AS IN THIS EXAMPLE. - -------------------------------------------------- FARREL CORPORATION - -------------------------------------------------- 1. Election of Directors: FOR AGAINST ABSTAIN (01) Howard J. Aibel 2. To consider and act upon the ratification of the / / / / / / (02) Rolf K. Liebergesell selection of Ernst & Young LLP as independent (03) James A. Purdy accountants for the Company for the fiscal year ending December 31, 2002. FOR WITHHELD ALL / / / / FROM ALL NOMINEES NOMINEES / / ------------------------------------------ For all nominees except as noted above Please be sure to sign and date this Proxy. Mark box at right if an address change or comment / / has been noted on the reverse side of this card. Signature: Date: Signature: Date: ------------------------------------------ ---------- ------------------------------------ -----------
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