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.:
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3) Filing Party:
---------------------------
4) Date Filed:
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<PAGE>
[INSERT FARREL CORPORATION LOGO IN SHIELD]
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 2, 1999, at 10:00 a.m. (local time) for the following purposes:
1. to elect three directors of the Company to serve until the 2001 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,
1999; 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 16, 1999, will be entitled to notice of and to vote at the
Meeting.
By Order of the Board of Directors,
/S/ PETER L. HESS
-------------------------------------
PETER L. HESS
General Counsel and Secretary
Ansonia, Connecticut
April 19, 1999
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.
<PAGE>
FARREL CORPORATION
25 Main Street
Ansonia, Connecticut 06401
===============
PROXY STATEMENT
===============
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 2, 1999
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 2, 1999, 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 1998 Annual Report of the Company containing financial
statements for the fiscal year ended December 31, 1998, is enclosed herewith.
This Proxy Statement and the form of proxy enclosed herewith are first being
mailed to stockholders on or about April 29, 1999. 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.
1
<PAGE>
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 16, 1999 (the
"Record Date"). As of the Record Date, 5,386,586 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 2001 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 2000.
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 2001. 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.
2
<PAGE>
NOMINEES FOR ELECTION FOR TERMS EXPIRING 2001
Principal Occupations, Year
Other Directorships, and First Became
Name of Nominee Age Positions With the Company Director
- ---------------- --- -------------------------- ------------
Glenn J. Angiolillo 45 Mr. Angiolillo is a member of the 1990
Legal Affairs Committee and the
Compensation Committee of the
Board. He has been an independent
business consultant since February,
1998; in addition, he has been a
partner in the law firm of Cummings
& Lockwood since 1987. Mr.
Angiolillo is a director of the
Waveny Care Center and the Boys and
Girls Club of Stamford, each of
which is a non-profit corporation.
Charles S. Jones 51 Mr. Jones has served as Chairman of 1987
the 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 when he was the
Managing Director of First Funding
Corporation. He was President and
Chief Executive Officer of
Shandwick North America, Inc., from
1987 to 1990, when he was appointed
Group Managing Director and Chief
Operating Officer of Shandwick plc,
a global public relations company
in London, England. In May, 1991,
Mr. Jones rejoined First Funding
Corporation as Chairman and Chief
Executive Officer. In 1997 he was
elected a director of GEAC Computer
Ltd. of Toronto, Canada, and is
Chairman of its Audit Committee.
Alberto Shaio 50 Mr. Shaio served as Vice 1986
President-Sales of 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. From 1981 until 1996,
Mr. Shaio was a director of New
Energy Corporation of Indiana.
3
<PAGE>
INCUMBENT DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING
Principal Occupations, Year
Other Directorships, and First Became
Name of Director Age Positions With the Company Director
- ----------------- --- -------------------------- ------------
Howard J. Aibel 70 Mr. Aibel is the Chairman of the 1994
Legal 1994 Affairs Committee and a
member of the Audit Committee. He
is currently a partner of 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.
Rolf K. Liebergesell 66 Mr. Liebergesell has served as 1986
Chairman of 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.
4
<PAGE>
Principal Occupations, Year
Other Directorships, and First Became
Name of Director Age Positions With the Company Director
- ----------------- --- -------------------------- ------------
James A. Purdy 76 Mr. Purdy is the Chairman of the 1986
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 Asian, Pacific,
and Latin American activities.
5
<PAGE>
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 at
least 75% of all Board meetings and all meetings of committees of which he was a
member held during the most recent fiscal year while he was in office.
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,
and Howard J. Aibel.
The Compensation Committee, which met three times 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 two 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.
6
<PAGE>
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 $18,700 for consulting services rendered
to the Company.
7
<PAGE>
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 1, 1999, unless otherwise
indicated in the footnotes, by (i) the Company's directors and executive
officers named in the Summary Compensation Table, (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)............................ 2,622,312 48.7%
Charles S. Jones(3)................................ 365,413 6.8%
Alberto Shaio(4)................................... 277,581 5.1%
James A. Purdy(5).................................. 20,000 *
Howard J. Aibel(6)(7).............................. 7,000 *
Glenn J. Angiolillo(8) (9)......................... 15,200 *
Karl N. Svensson(10)............................... 37,002 *
Theodore E. Jenny (11)............................. 22,000 *
Hans U. Baurmeister (12)........................... 25,000 *
Peter L. Hess...................................... 0 *
B. Robert Sedelmyer................................ 0 *
Directors and Executive Officers
as a group (11 persons).......................... 3,391,508 63%
Certain Beneficial Owners
- -------------------------
David L. Babson and Company Incorporated(13) ...... 398,400 7.4%
T. Rowe Price Associates (14)...................... 0 *
- -----------------
* 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 10,000 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.
8
<PAGE>
(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 30,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(11) Includes 20,000 shares subject to options granted under the 1997 Stock
Option Plan as to which the owner has a right to acquire beneficial
ownership.
(12) Includes 25,000 shares subject to options granted under the 1992 Stock
Option Plan, as to which the owner has a right to acquire beneficial
ownership.
(13) David L. Babson and Company Incorporated ("Babson") has indicated in an
amendment to a Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") in April, 1999, that of the shares reported as
beneficially owned as of March 31, 1999, Babson has sole voting power
over 398,400 shares and sole dispositive power over 398,400 shares.
Address is One Memorial Drive, Cambridge, Massachusetts, 02142-1300.
(14) T. Rowe Price Associates, Inc. ("Price Associates"), in an amendment to
Schedule 13G filed with the SEC in February, 1999, indicated that it was
the beneficial owner of 520,500 shares. However, in a letter to the
Company dated April 16, 1999, Price Associates stated that as of that
date clients of Price Associates did not own any shares of Farrel
Corporation.
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 1998, 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
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the current executive officers of the
Company. See "Election of Directors" for a description of the business
experience of Mr. Liebergesell and Mr. Shaio.
NAME AGE POSITION
Hans U. Baurmeister............ 61 Vice President & General Manager -
Rubber Machinery Division
Peter L. Hess.................. 56 General Counsel & Secretary
Theodore E. Jenny.............. 49 Vice President and Chief Financial
Officer
Rolf K. Liebergesell .......... 66 Chairman of the Board, Chief
Executive Officer, and President
B. Robert Sedelmyer............ 57 Vice President, Operations
Alberto Shaio ................. 50 Director, Senior Vice President &
General Manager - Plastics
Machinery Division
Karl N. Svensson .............. 63 Senior Vice President - Worldwide
Supply Management
HANS U. BAURMEISTER became Vice President and General Manager - Rubber
Machinery Division in May, 1997. Prior to joining the Company in 1990, Mr.
Baurmeister was Vice President, Distribution and Supply for Exide Corp. until
1983 and subsequently was Vice President, Operations at Hardigg Industries.
PETER L. HESS has been General Counsel and Secretary of the Company
since July, 1995. Prior to joining the Company, Mr. Hess had been General
Counsel for the Resource Recovery Systems Division of ABB Combustion Engineering
and subsequently Of Counsel with LeBoeuf, Lamb, Greene & MacRae in its Hartford,
Connecticut, office.
THEODORE E. JENNY joined the Company in November, 1998, and was
elected Vice President and Chief Financial Officer in December of that year.
Prior to joining the Company, Mr. Jenny served in a variety of capacities for
more than twenty years at United Technologies Corporation, most recently at
United Technologies' Hamilton Standard Division, where he held various
management positions, including Vice President of Finance and Administration, as
well as Director of Operations for one of that Division's business units.
B. ROBERT SEDELMYER joined the Company in March, 1998. Mr. Sedelmyer
held a number of materials and manufacturing positions with General Electric and
then Cooper Cameron Corporation, where he spent fifteen years and where his last
position was Director of Operations for Cooper-Bessemer Reciprocating Products.
Prior to joining the Company he was Director of Manufacturing for Demag-Delaval
Turbo Machinery Corp., a unit of Mannesmann AG.
KARL N. SVENSSON was Senior Vice President - Operations, of the
Company since 1988. From 1973 to 1988, Mr. Svensson was employed by Bird Machine
Company, a manufacturer of capital equipment for the petrochemical and coal
industries and held various executive positions, including Vice President. In
1995, he was appointed to the additional position of Managing Director of Farrel
Limited. In 1997, Mr. Svensson's position changed to Senior Vice President -
Worldwide Supply Management.
10
<PAGE>
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.
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 1998 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
11
<PAGE>
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 six most highly compensated other executive
officers.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- Other ------------
Name and Annual Securities Underlying All Other
Principal Position Year Salary(1) Bonus(2) Compensation Options(3) Compensation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rolf K. Liebergesell 1998 $550,000 --- --- --- $ 34,862(4)
Chief Executive 1997 $550,000 --- --- --- $ 34,862(4)
Officer, President 1996 $550,000 --- --- 40,000 $ 34,862(4)
and Chairman
of the Board
Alberto Shaio 1998 $230,000 $30,000 --- --- $ 3,200(5)
Senior Vice President 1997 $230,000 --- --- --- $ 3,200(5)
and General Manager - 1996 $230,000 --- --- 20,000 $ 4,600(5)
Plastics Machinery
Division
Karl N. Svensson 1998 $170,000 $10,000 $102,068(6) --- $ 2,591(5)
Senior Vice President 1997 $170,000 --- $105,166(6) --- $ 2,375(5)
Worldwide Supply 1996 $165,000 --- $ 88,731(6) 20,000 $ 2,375(5)
Management
Catherine M. Boisvert 1998 $121,055 --- --- --- $ 2,421(5)
Vice President, 1997 $112,000 --- --- --- $ 2,240(5)
Controller, and 1996 $108,500 --- --- 20,000 $ 2,170(5)
Chief Financial
Officer(7)
Peter L. Hess 1998 $132,000 --- --- --- $ 2,500(5)
General Counsel and 1997 $132,000 --- --- --- $ 2,375(5)
Secretary 1996 $126,000 --- --- --- $ 975(5)
Hans U. Baurmeister 1998 $115,000 --- --- --- $ 2,300(5)
Vice President and 1997 $115,000 --- --- --- $ 2,300(5)
General Manager - Rubber
Machinery Division(8)
Theodore E. Jenny 1998 $ 23,180 --- --- 60,000 ---
Vice President and
Chief Financial Officer(9)
B. Robert Sedelmyer 1998 $150,000 --- $ 58,877(11) --- ---
Vice President
Operations(10)
</TABLE>
- --------------------------
(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) Except for options granted to Mr. Jenny, reflects options granted pursuant
to the 1992 Stock Option Plan at an exercise price equal to the fair market
value on the date of grant. Options granted to Mr.
12
<PAGE>
Liebergesell under the 1992 Stock Option Plan were granted pursuant to the
terms of his employment agreement, described below. Options granted to Mr.
Jenny were granted under the 1997 Stock Option Plan.
(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 $63,490, $53,443, and $46,225 for 1998, 1997, and 1996,
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) Ms. Boisvert resigned her positions with the Company in November, 1998.
(8) Mr. Baurmeister became an executive officer of the Company in May, 1997.
(9) Mr. Jenny joined the Company in November, 1998.
(10) Mr. Sedelmyer joined the Company in March, 1998.
(11) Includes reimbursement for relocation expenses.
The Company is a party to an employment agreement dated November 1,
1991, as amended, with Mr. Liebergesell which provides for his employment as
Chairman of the Board and Chief Executive Officer of the Company. The initial
term of the employment agreement ran from December 1, 1991, through November 30,
1994. The agreement was automatically renewed for an additional three-year
period which ended November 30, 1997. During his employment, Mr. Liebergesell is
entitled to receive an annual base salary of $550,000, subject to annual
increases as may be recommended by the Compensation Committee and approved by
the Board of Directors. Mr. Liebergesell also received, under the terms of his
employment agreement, options to purchase an aggregate of 240,000 shares of
Common Stock under the 1992 Stock Option Plan. The employment agreement does not
provide for any additional options to be granted to Mr. Liebergesell. See
"Compensation Plans and Arrangements of the Company - 1992 Stock Option Plan"
below. In addition to participation in benefit plans available generally to its
executive employees, Mr. Liebergesell is entitled to the use of a car provided
by the Company and is provided with a life insurance policy in an amount equal
to three times his annual base salary. Following Mr. Liebergesell's termination
as an employee of the Company for any reason and in consideration of his
agreement not to compete with the Company for a period of two years following
such termination, Mr. Liebergesell will be entitled to receive, for the period
while the non-compete provision remains in effect, payments equal to his then
current annual base salary. In the event of his death, such consideration is
payable to his estate. Effective 12/1/97 the employment agreement was extended
until such time as either the Company or Mr. Liebergesell gives the other twelve
months notice of termination. In addition, the employment agreement was amended
to provide that the payments required to be made by the Company to Mr.
Liebergesell in consideration for the two year non-compete included in the
agreement would be reduced by 12.5% for each full year the employment agreement
extends beyond 12/1/97.
The Company is a party to agreements dated March 3, 1995, as amended
as of April 10, 1996, with Karl N. Svensson which provided for his serving as
Managing Director of Farrel Limited while retaining his office as Senior Vice
President of the Company. The agreements adjust his compensation and benefits
for the purposes of tax equalization and for certain housing assistance costs.
Further, in the event the Company terminates his employment for reasons other
than cause, he will be paid the salary and benefits at the time of the
commencement of his services as Managing Director of Farrel Limited or his then
current salary and benefits, whichever is higher, until his normal retirement
anticipated in the year 2000, less any salary he receives in subsequent
employment. In 1997, Mr. Svensson's position was changed to Senior Vice
President - Worldwide Supply Management.
13
<PAGE>
COMPENSATION PLANS AND ARRANGEMENTS
OF THE COMPANY
OPTION GRANTS
The following table set forth information concerning stock options
which were granted during the most recent fiscal year to executive officers name
in the Summary Compensation Table. The options were granted pursuant to the 1997
Stock Option Plan.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total Potential Realizable Value at Assumed
Options Annual Rates of Stock Price
Securities Granted to Appreciation for Option Term(3)
Underlying Employees Expiration
Options in Fiscal Exercise Date of
Name Granted(1) Year(2) Price Grant 5% 10%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Theordore E. December
Jenny 60,000 100% $2.19 31, 2008 $82,637 $209,418
</TABLE>
- -------------------
(*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 60,000 shares were granted to employees
in 1998.
(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.
OPTION VALUE AT DECEMBER 31, 1998
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, 1998. 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
Hans U. Baurmeister..................... 25,000/10,000
Theodore E. Jenny....................... 20,000/40,000
Rolf K. Liebergesell.................... 240,000/None
Alberto Shaio........................... 10,000/10,000
Karl N. Svensson........................ 30,000/10,000
14
<PAGE>
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.
15
<PAGE>
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
500 Machinery Diversified Group, a published industry index. The stock
performance graph assumes that $100 was invested on December 31, 1993.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
FARREL CORPORATION
Source: Standard & Poor's Computstat
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
FARREL $100.00 $ 88.18 $ 57.83 $ 43.52 $ 98.96 $ 43.35
S&p 500 MACHINERY
DEVERSIFIED GROUP 100.00 97.34 120.13 149.73 198.06 164.84
NASDAQ (US MARKET) 100.00 112.21 158.68 195.18 239.53 249.86
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."
16
<PAGE>
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 $1,102,139, which includes the retainer to Mr. Jones and
$236,086 of reimbursement for out-of-pocket expenses. From January 1, 1999
through April 1, 1999, the Company has paid or accrued to First Funding
approximately $219,057, which includes $50,961 of reimbursement for
out-of-pocket expenses, for services performed under the Financial Services
Agreement in 1999.
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, 1999. 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.
17
<PAGE>
STOCKHOLDER PROPOSALS
It is presently contemplated that the 2000 Annual Meeting of
Stockholders will be held on or about May 19, 2000. 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, 1999. 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/ PETER L. HESS
-------------------------------------
PETER L. HESS
General Counsel and Secretary
Ansonia, Connecticut
April 19, 1999
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, 1998 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
16, 1999 (THE RECORD DATE), THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL
OWNER OF SECURITIES ENTITLED TO VOTE AT THE 1999 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.
18
<PAGE>
<TABLE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<S> <C>
- ------------------------------ 1. Election of Directors
FARRELL CORPORATION For all With- For all
- ------------------------------ Glenn J. Angiolillo Nominees hold Except
Charles S. Jones [ ] [ ] [ ]
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 nominees(s).
Your shares will be voted for the remaining nominee(s).
CONTROL NUMBER:
RECORD DATE SHARES:
2. To consider and act For Against Abstain
upon the ratification of [ ] [ ] [ ]
the selection of Ernest &
Young LLP as Independent
accountants for the
Company for the fiscal
year ending December 31,
1999.
</TABLE>
Please be sure to sign and date Mark box at right if an address [ ]
this Proxy. change or comment has been noted
Date: on the reverse side of this card
--------------------------
- -------------------------------------- --------------------------------------
Stockbroker sign here Co-owner sign here
DETACH HERE DETACH HERE
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
2, 1999.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Farrel Corporation
<PAGE>
FARREL CORPORATION
25 Main Street, Ansonia, Connecticut 06401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Peter L. Hess and Theodore E. Jenny, 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 16, 1999 at the Annual Meeting of Stockholders of the Company to be held
on June 2, 1999 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?
- ---------------------------------- ----------------------------------------
- ---------------------------------- ----------------------------------------
- ---------------------------------- ----------------------------------------
