F i r s t   F u n d i n g   C o r p o r a t i o n
         Corporate Investment Bankers

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     February 8, 2002                       700 Canal Street, 2nd Floor
                                            Stamford, Connecticut 06902-5921
                                            203-324-2626
     Strictly Confidential                  Facsimile 203-965-0605
     ---------------------                  Email: FrstFund@aol.com


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     Mr. Rolf K. Liebergesell
     Chairman, President & CEO
     FARREL CORPORATION
     25 Main Street
     Ansonia, CT 06401-1601

     Dear Rolf:

     I thought it might be a good idea to memorialize in this letter some of the
     conversations we have had concerning unilateral alterations we have made to
     the  administration  of First  Funding  Corporation's  contract with Farrel
     Corporation   which  has  been  to  Farrel's  benefit  during  its  current
     challenging time.

     Since  July 1st of 2001 we have not  billed  for  regular  hourly  services
     pursuant to Section III,  Paragraph D of our Corporate  Financial  Services
     Contract as has been our custom and practice since 1986. Indeed,  this work
     has been utilized to support the range of services I have  provided  during
     this period of time so with the normal monthly  retainer,  we have utilized
     other personnel to support my activities.

     I am also attaching  herewith an invoice governed by that same Section III,
     Paragraph D of our contract for the deferred  hours in connection  with the
     First Union  financing and we are canceling  this invoice as we will not be
     billing for this either.

     Pursuant  to the Letter  Agreement  dated  November  1, 1991  amending  the
     Corporate  Financial Services Contract dated June 17, 1986, as you know for
     my  services  First  Funding is  entitled  to a monthly  retainer  check of
     $41,666.67.  Effective  March 1, 2002, as I discussed  with you, we will be
     reducing  this  amount by $50,000 per year and  hereinafter  until March 1,
     2003,  we will instead be billing  $37,500  monthly.  Accordingly,  we will
     adjust  our  services  with  a  view  toward   helping  Farrel  reduce  its
     expenditures.

     None of this is to  indicate  that we do not  stand  ready  to  assist  the
     Company in any way as we have in the past.  I wish you all success and look
     forward  to  participating  in any way you feel which may be helpful to the
     Company.

     Yours very truly,

     /s/ Charles S. Jones
     Charles S. Jones
     Chairman