-----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, PHCeQ7WbdVOJm3F8CBUmyLqUIN1goQRXBp/YpA5afNKV/mrUNb8nKC/XqZaG3Xak U7QtAzw9Mx86F/pvOWJV/w== 0000914039-96-000142.txt : 19960625 0000914039-96-000142.hdr.sgml : 19960625 ACCESSION NUMBER: 0000914039-96-000142 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FARREL CORP CENTRAL INDEX KEY: 0000034645 STANDARD INDUSTRIAL CLASSIFICATION: 3559 IRS NUMBER: 222689245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19703 FILM NUMBER: 96561490 BUSINESS ADDRESS: STREET 1: 25 MAIN STREET CITY: ANSONIA STATE: CT ZIP: 06401 BUSINESS PHONE: 2037365500 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 ------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------------- --------------------- Commission file number 0 -19703 ------------ Farrel Corporation ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 22-2689245 - - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 25 Main Street, Ansonia, Connecticut, 06401 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (203) 736-5500 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING AT May 9, 1996 - - -------------------------------------------------------------------------------- Common Stock (Voting), $.01 par value 5,972,757 2 Farrel Corporation Index
Page ---- Part I. Financial Information Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 3 Consolidated Statements of Operations - Three Months Ended March 31, 1996 and April 2, 1995 4 Consolidated Statements of Cash Flows - Three Months ended March 31, 1996 and April 2, 1995 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 Exhibit 11 - Computation of Earnings Per Share 9 Part II. Other Information 10
Page 2 of 24 3 Part I - Financial Information FARREL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
March 31, December 31, --------- ------------ 1996 1995 ---- ---- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $ 3,177 $ 4,066 Accounts receivable, net of allowance for doubtful accounts of $104 and $102, respectively 13,992 23,536 Inventory 15,079 12,836 Other current assets 2,267 1,553 -------- -------- Total current assets 34,515 41,991 Property, plant and equipment - net of accumulated depreciation of $7,457 and $7,136, respectively 9,658 9,676 Other Assets 1,587 1,745 -------- -------- Total Assets $ 45,760 $ 53,412 ======== ======== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 9,105 $ 14,303 Accrued expenses & taxes payable 1,252 2,822 Advances from customers 3,603 3,936 Accrued installation & warranty costs 1,486 1,623 Short - term debt 191 194 -------- -------- Total current liabilities 15,637 22,878 Long - term debt 382 388 Postretirement benefit obligation 1,319 1,332 Other long-term obligations 696 696 Deferred income taxes 286 304 Commitments and contingencies -- -- -------- -------- Total Liabilities 18,320 25,598 -------- -------- Stockholders' Equity: Preferred stock, par value $100, 1,000,000 shares authorized, no shares issued -- -- Common stock, par value $.01, 10,000,000 shares authorized, 6,142,806 shares issued 61 61 Paid in capital 19,295 19,295 Cumulative translation adjustment (782) (646) Treasury stock 170,800 and 151,349 shares at March 31, 1996 and December 31, 1995, respectively (896) (837) Retained earnings 10,108 10,287 Minimum pension liability (346) (346) -------- -------- Total Stockholders' Equity 27,440 27,814 -------- -------- Total Liabilities and Stockholders' Equity $ 45,760 $ 53,412 ======== ========
See Accompanying Notes to Consolidated Financial Statements Page 3 of 24 4 FARREL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share and share data)
Three Months Ended ------------------ March 31, April 2, 1996 1995 ---- ---- (unaudited) Net Sales $ 17,865 $ 10,038 Cost of sales 13,506 7,770 ----------- ----------- Gross margin 4,359 2,268 Operating expenses: Selling 1,537 1,765 General & administrative 1,911 2,036 Research & development 523 524 ----------- ----------- Total operating expenses 3,971 4,325 ----------- ----------- Operating income/(loss) 388 (2,057) Interest income, net 43 103 Other (expense), net (91) (52) ----------- ----------- Income/(loss) before income taxes 340 (2,006) Provision/(benefit) for income taxes 159 (762) ----------- ----------- Net Income/(loss) $ 181 ($ 1,244) =========== =========== Per share data: Net Income/(loss) per common share $ 0.03 ($ 0.21) =========== =========== Average shares outstanding 5,985,177 6,045,684 =========== =========== Dividends per share $ 0.06 $ 0.20 =========== ===========
See Accompanying Notes to Consolidated Financial Statements Page 4 of 24 5 FARREL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended ------------------ March 31, April 2, --------- -------- 1996 1995 ---- ---- (Unaudited) Cash flows from operating activities: Net Income/loss $ 181 ($ 1,244) Adjustments to reconcile net income/(loss) to net cash (used in)/provided by operating activities: Depreciation and amortization 414 356 Decrease in accounts receivable 9,423 10,850 (Increase) in inventory (2,312) (4,113) (Decrease) in accounts payable (5,120) (1,240) (Decrease)/increase in customer advances (317) 4,754 (Decrease) in accrued expenses & taxes (1,864) (1,593) (Decrease) in accrued installation and warranty costs (122) (533) (Decrease) in deferred income taxes (100) (435) Other (213) (359) ------- -------- Total adjustments (211) 7,687 ------- -------- Net cash (used in)/provided by operating activities (30) 6,443 ------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (430) (264) ------- -------- Net cash (used in) investing activities (430) (264) Cash flows from financing activities: Repayment of short term borrowings -- (1,064) Used for repurchase of common stock (59) (76) Used for dividends paid (360) (1,209) ------- -------- Net cash (used in) financing activities (419) (2,349) Effect of foreign currency exchange rate changes on cash (10) 77 ------- -------- Net (decrease)/increase in cash and cash equivalents (889) 3,907 Cash and cash equivalents - Beginning of period 4,066 9,384 ------- -------- Cash and cash equivalents - End of period $ 3,177 $ 13,291 ======= ======== Income taxes paid $ 481 $ 1,024 ======= ======== Interest paid $ 15 $ 15 ======= ========
See Accompanying Notes to Consolidated Financial Statements Page 5 of 24 6 FARREL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in accordance with generally accepted accounting principles, the consolidated financial position of Farrel Corporation ("Farrel" or "the Company") as of March 31, 1996, and the consolidated results of its operations and cash flows for the three months ended March 31, 1996 and April 2, 1995. These results are not necessarily indicative of results to be expected for the full fiscal year. These statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report and Form 10-K for the year ended December 31, 1995. NOTE 2 - INVENTORY Inventory is comprised of the following:
March 31, December 31, --------- ------------ 1996 1995 ---- ---- (In thousands) Stock and raw materials .................... $ 6,465 $ 4,485 Work-in process ............................ 8,614 8,351 ------- ------- Total ...................................... $15,079 $12,836 ======= =======
Page 6 of 24 7 PART I - ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED APRIL 2, 1995 Net sales for the first quarter of fiscal 1996 were $17.9 million compared to $10.0 million during the first quarter of 1995. The increase in net sales is the primary reason for the increase in income in the first quarter of 1996 compared to the first quarter of 1995. The increase in net sales is largely attributed to the timing of when customer orders shipped in each respective period. Management continues to believe the markets served by the Company's products remain extremely competitive. Management further believes the Company operates, at least to some extent, in markets still experiencing the after-effects of recessions in the United States and Western Europe and to ongoing political and economic instability in Eastern Europe and the Middle East. Far Eastern markets remain extremely competitive and difficult to penetrate. Management anticipates these market conditions to continue to prevail during the remainder of 1996. Order intake has remained slow in the first quarter of 1996 when the Company received $17.6 million in orders compared to $20.6 million during the first quarter of fiscal 1995. In the case of major equipment orders, up to 12 months are required to complete the manufacturing process. Accordingly, revenues may be recognized in a later accounting period than the one in which the order was received. In addition, the cyclical nature of industry demand and, therefore order intake, may effect the Company's quarterly results of operations. Firm backlog at the end of the first quarter of 1996 was $29.4 million compared to $29.7 million at December 31, 1995 and $49.7 million at the end of the first quarter of 1995. Firm backlog as of May 9, 1996 and 1995 was $50.0 million and $51.7 million, respectively. The Company's ability to increase net sales depends upon a strengthening in the Company's traditional markets. There can be no assurance that such an improvement will lead to increased orders for the Company's products. Gross margin in the first quarter of 1996 approximated $4.4 million, approximately $2.1 million greater than the $2.3 million reported for the first quarter of 1995, while the margin percentage increased to 24.4 % from 22.6%. The improved gross margin is attributed to higher first quarter 1996 sales compared to 1995 as well as the mix of products sold. The extremely competitive conditions previously discussed continue to exert pressure on the levels of margin percentages achieved, a situation which is expected to continue in the foreseeable future. As previously reported, the Company announced a plan to cease component manufacturing operations in the United States and to consolidate all component manufacturing in its Rochdale, England facility. The Company's U.K. facility was selected for this cost-effective consolidation into one facility because of its overall greater efficiency. The change in component manufacturing was substantially completed by the end April, 1996. Assembly operations will continue to be performed in both the United States and England. Operating expenses in the first quarter of 1996 and 1995 approximated $4.0 million and $4.3 million, respectively. The reduction of operating costs is largely attributed to elimination of selected executive positions and to continuing efforts to strictly control expenses. The Company has capitalized approximately $.7 million and $.8 million, respectively of third party costs as of March 31, 1996 and December 31, 1995, respectively. These costs were incurred to identify, negotiate and contract with several acquisition candidates primarily outside the United States. It is possible that efforts related to individual acquisition candidates may prove unsuccessful in the near term, at which point the capitalized costs would be charged to current operations. Page 7 of 24 8 The income tax rate in the first quarter of 1996 and 1995, as a percentage of pre-tax income/(loss), was 46.8% and 38.0%, respectively. The unusually high 1996 rate is due to the consolidation of domestic income with a foreign loss. Management does not anticipate the effective income tax rate to approximate this level for the full fiscal year. MATERIAL CONTINGENCIES In 1995 the Company settled litigation against USM Corporation, Emhart Corporation and certain of their affiliates regarding responsibility for environmental conditions at the Ansonia and Derby, CT facilities ("Facilities") at the time of the Company's acquisition of the business from USM in May 1986. Pursuant to the 1995 settlement agreement with the Company, The Black and Decker Corporation, a Fortune 150 company, which acquired USM in 1989, has assumed full responsibility for all investigation and any remediation of pre-1986 contamination at the Facilities in accordance with a consent decree entered into between Black and Decker and the Connecticut Department of Environmental Protection. An environmental assessment of the Facilities is currently being conducted. Although this assessment is not complete, on the basis of preliminary data now available there is no reason to believe that any activities which might be required as a result of the findings of the assessment will have a material effect upon the capital expenditures, earnings or the competitive position of the Company. LIQUIDITY AND CAPITAL RESOURCES; CAPITAL EXPENDITURES Working capital and the working capital ratio at March 31, 1996 were $18.9 million and 2.2 to 1, respectively, compared to $ 19.1 million and 1.8 to 1 at December 31, 1995, respectively. The Company paid a dividend of $.06 per share in the first quarter of 1996 from 1995 earnings. The Company's ability to pay dividends in the future is limited under its credit facility. Due to the nature of the Company's business, many sales are of a large dollar amount. Consequently, the timing of recording such sales may cause the balances in accounts receivable and/or inventory to fluctuate dramatically between quarters and may result in significant fluctuations in cash provided by operations. Historically, the Company has not experienced significant problems regarding the collection of accounts receivable. The Company has also generally financed its operations with cash generated by operations, with progress payments from customers and with borrowings under its bank credit facilities. Management anticipates that its cash balances, operating cash flows and available credit line will be adequate to fund anticipated capital commitments and working capital requirements for at least the next twelve months. The Company made capital expenditures of $.4 and $.3 million during the first quarter of fiscal 1996 and 1995, respectively. The Company has a worldwide multi-currency credit facility with a major U.S. bank in an amount of $20.0 million for direct borrowings and letters of credit and up to (pound)3.0 million for foreign exchange contracts. The facility contains limitations on direct borrowings and letters of credit combined based upon stipulated levels of accounts receivable, inventory and backlog. The facility also contains covenants specifying minimum and maximum thresholds for operating results and selected financial ratios. There were $4.3 million and $8.3 million of letters of credit outstanding at March 31, 1996 and December 31, 1995, respectively. The facility expires on December 31, 1999. Page 8 of 24 9 Exhibit 11 FARREL CORPORATION STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share and share data)
Three Months Ended -------------------------- March 31, April 2, 1996 1995 ---- ---- Primary - - ------- Net income (loss) applicable to common stock $ 181 ($ 1,244) ========== =========== Weighted average number of common shares outstanding during the period 5,982,669 6,045,684 Stock option and purchase plans 2,508 -- ---------- ----------- Total common and common equivalent shares outstanding 5,985,177 6,045,684 Net income (loss) per common and common equivalent share - primary $ 0.03 ($ 0.21) ========== =========== Fully Diluted - - ------------- Net income (loss) applicable to common stock $ 181 ($ 1,244) ========== =========== Weighted average number of common shares outstanding during the period 5,982,669 6,045,684 Stock option and purchase plans 2,508 -- ---------- ----------- Total common and common equivalent shares outstanding 5,985,177 6,045,684 ========== =========== Net income (loss) per common and common equivalent share - fully diluted $ 0.03 ($ 0.21) ========== ===========
Page 9 of 24 10 PART II - OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K Exhibit 10(a) Amendment (April 17, 1996) to Employment Agreement between Rolf. K. Liebergesell and the Company, dated November 1, 1991 Exhibit 10(b) Employment Agreement between Harold J. Wilson and the Company, dated March 18, 1996. Exhibit 10(c) Amendments (April 10, 1996) to the Secondment Agreements between Karl N. Svensson and the Company dated March 3, 1995, also attached. Exhibit 11 - (Regulation S-K) Computation of Earnings Per Share. See Page 9. Reports on Form 8-K No Reports on Form 8-K were filed by the registrant during the periods covered by this report. Page 10 of 24 11 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. FARREL CORPORATION ------------------ REGISTRANT DATE: May 13, 1996 /s/ Rolf K. Liebergesell ------------ ----------------------------- ROLF K. LIEBERGESELL CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD DATE: May 13, 1996 /s/ Catherine M. Boisvert ------------ ----------------------------- CATHERINE M. BOISVERT VICE PRESIDENT AND CONTROLLER (CHIEF ACCOUNTING OFFICER) Page 11 of 24 EX-10.A 2 AMENDMENT TO EMPLOYMENT AGREEMENT 1 EXHIBIT 10(a) AMENDMENT TO EMPLOYMENT AGREEMENT AMENDMENT TO EMPLOYMENT AGREEMENT dated as of April 17, 1996, by and between FARREL CORPORATION, a Delaware corporation (the "Company") and ROLF K. LIEBERGESELL (the "Executive"). WHEREAS, the Company and the Executive are parties to an Employment Agreement dated as of November 1, 1991; and WHEREAS, the appointment of Harold J. Wilson as President of the Company makes it necessary to amend the Agreement to reflect that appointment; NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements set forth herein, and intending to be legally bound hereby, the Company and the Executive agree as follows. 1. The recital on page 1 of the Agreement is deleted and the following is substituted therefor. WHEREAS, the Board of Directors of the Company (the "Board") desires to provide for the employment of Executive in the capacity of Chief Executive Officer and Chairman of the Board and Executive desires to commit himself to serve the Company on the terms and conditions herein provided; 2. The Article of the Agreement entitled "3. Position and Duties" is deleted and the following is substituted therefor. 3. Position and Duties. Executive shall serve as Chief Executive Officer of the Company and shall faithfully perform such duties and responsibilities as the Board may from time to time direct provided such duties and responsibilities are of a nature customarily assigned to and performed by a Chief Executive Officer of a corporation which is similar in size and nature to the Company. Executive shall devote his entire working time and efforts to the business and Page 12 of 24 2 EXHIBIT 10(a) affairs of the Company, however, the Executive may engage in charitable and public activities so long as such activities do not interfere with the performance of his duties and responsibilities under this Agreement. In addition to serving as Chief Executive Officer, the Executive shall also serve in the capacity of Chairman of the Board, subject to the discretion of the Board of Directors. 3. In Section 5(a) of the Agreement, the sixth and seventh sentences are deleted and the following are substituted therefor. In the event the Executive challenges any such termination, pending final resolution by the Arbitrator, the Executive shall be relieved of his duties and responsibilities as Chief Executive Officer, however, Executive shall be entitled to receive all of his compensation and benefits payable hereunder without giving effect to such termination. In the event the arbitrator appointed pursuant to Section 6 determines that the purported termination for Cause was in fact without proper Cause, the termination, will not be effective and the Executive shall be reinstated as Chief Executive Officer. Page 13 of 24 3 EXHIBIT 10(a) 4. Except as expressly changed by the foregoing, the Agreement remains in effect as originally written. IN WITNESS WHEREOF, the parties have executed this Amendment to the Employment Agreement effective as of the date first written above. FARREL CORPORATION By /s/ Charles S. Jones ------------------------------------ Name: Charles S. Jones Title: Chairman, Executive Committee EXECUTIVE /s/ Rolf K. Liebergesell -------------------------------------- Rolf K. Liebergesell Page 14 of 24 EX-10.B 3 EMPLOYMENT AGREEMENT 1 EXHIBIT 10(b) March 18, 1996 Mr. Harold J. Wilson 1064 Rambling Way Fairlawn, Ohio 44333 Dear Hal: I am pleased to summarize all the understandings we have reached in connection with your appointment to the position of President and Chief Operating Officer of Farrel Corporation. As you know, the Farrel Board of Directors agreed to your appointment in its meeting on March 8, 1996. 1. Farrel is a meritocracy; financial performance dictates financial rewards. 2. The base salary will be $250,000 and will be subject to annual review by the Compensation Committee of the Board, based on my recommendations. 3. You will be granted stock options for 120,000 Farrel shares at $4.00/share and 80,000 shares at $6.00/share on 3/25/96. Subsequent stock option awards will be determined annually by the Compensation Committee of the Board, again based on my recommendations. I will see to it that you are provided with a copy of Farrel's Stock Option Program. 4. Farrel's bonus scheme is entirely discretionary and not based on a formula. As mentioned in my letter of February 27, 1996, we envision a range of $0 - 100,000 depending on achievement of pre-determined operating objectives. We will need to agree on the specific targets to be achieved and the bonus awards which would be triggered by meeting such targets. The major threshold targets we wish to achieve are as follows: - Return to pre-IPO levels of net income, i.e. $5-6 million, in 1997. - Gross margin improvement over, say, a 3-year period by 8-10 percentage points with the greatest improvements in fiscal `97, but clearly important to achieve 2 1/2 percentage points in fiscal `96. - Reduction of operating expense by at least 4% per year for the next 3 years. - Growth in our top line has been elusive in recent years. We would welcome organic growth in our core business to meet and exceed these thresholds for profit improvement, but organic profit growth even without top line growth is essential. Page 15 of 24 2 EXHIBIT 10(b) Mr. Harold J. Wilson March 18, 1996 Page 2 5. Farrel will arrange for a life insurance policy in an amount twice your annual salary with your wife as beneficiary. 6. You will be provided with a company car in either the Cadillac or Lincoln class. 7. You will participate in the Farrel salaried employee benefit program. Description material is enclosed. 8. a) The initial duration of our agreement is for two years and will be automatically renewed for subsequent one-year periods unless six months' notice of termination is given by you or us. b) In case you wish to terminate the agreement, you would need to give Farrel four months' notice. c) If Farrel wishes to terminate the agreement for reasons other than "cause", it could do so at any time, with a compensation payment of 14 months' salary. d) Termination for "cause" would be without compensation beyond the date of termination. The term "cause" is defined on the attached page. 9. Transitional Matters Farrel will pay your expenses for relocating from Ohio to Connecticut which shall consist of packing, moving, and insuring of household goods. Farrel will pay for a suitable apartment for you and your wife for up to four months while you are securing a permanent residence in Connecticut. As discussed, you will be responsible for all day-to-day operational matters of the Polymer Machinery and related business and the senior operational executives will report to you on a "solid line". The Finance and Legal Departments will continue to report to me. During the necessary transition period, I look forward to working together closely to support you in taking operational control. I will be mindful of the necessity of chain of command. Once completed, I expect to be able to devote a large portion of my time designing, developing and executing a diversification program which will concentrate on profitable growth. I will see to it that you are invested with the appropriate authority to run the Company's operations efficiently and effectively. Page 16 of 24 3 EXHIBIT 10(b) Mr. Harold J. Wilson March 18, 1996 Page 3 If you agree with the above, please counter sign a copy of this letter and return it to me. I look forward to seeing you and having you start on March 25/26. Sincerely, /s/ Rolf K. Liebergesell Agreed and Accepted: /s/ Harold J. Wilson - - -------------------------- Harold J. Wilson Date: 3/18/96 --------------------- Page 17 of 24 4 EXHIBIT 10(b) Attachment to agreement letter between Harold Wilson and Farrel Corporation As used in this Agreement, the term "cause" shall include, but not be limited to, willful and repeated violation of the conditions of employment, failure or refusal to carry out the instructions of the Board of Directors or its Chairman, or acts of insubordination, engaging in activities which constitute fraud or other crime against the company or creating a conflict of interest, conviction of a crime involving moral turpitude or the misuse of funds, or any other conduct inimical to the best interests of the company. In the event of failure or refusal to carry out the instructions of the Board of Directors or its Chairman, the Board or the Chairman may advise you of such and grant a reasonable period of time, not to exceed thirty (30) days, to correct same, failing which the failure or refusal shall constitute "cause". Page 18 of 24 EX-10.C 4 AMENDMENTS TO THE SECONDMENT AGREEMENTS 1 EXHIBIT 10(c) April 10, 1996 Mr. Karl N. Svensson 60 Broadway Bramhall, Stockport SK7-3BU Dear Karl: The purpose of this letter is to clarify the attached letter dated March 3, 1995, regarding your secondment to Farrel Limited. The second paragraph of the attached letter is deleted and the following is substituted in its place: In the event the Company terminates your employment for any reason other than a health-related incapacity to work lasting more than 9 months, gross misconduct, malfeasance or conviction of a felony, you will be paid, on a monthly schedule, your salary and benefits at the time of initial secondment or your then current salary and benefits, whichever is higher, until your normal retirement at age 65 in 2000, less any salary received from substitute employment during the period between your termination and such retirement. Except as modified by the substituted paragraph, the attached March 3, 1995, letter remains in effect as originally written. Sincerely, FARREL CORPORATION By /s/ R. K. Liebergesell ------------------------------------ R. K. Liebergesell Chairman and Chief Executive Officer Acknowledged and Accepted /s/ Karl N. Svensson - - -------------------------------------- Karl N. Svensson Page 19 of 24 2 EXHIBIT 10(c) March 3, 1995 Mr. Karl N. Svensson 20 Abrams Road Cheshire, CT 06410 Dear Karl: This letter sets forth your secondment to Farrel Limited as Managing Director effective April 1, 1995. During your tenure as Managing Director, you will remain Senior Vice President of Farrel Corporation responsible for worldwide manufacturing. At the expiration of the initial term, we shall decide whether to extend your assignment for an additional period of time on terms equivalent to those embodied here. In the event the Company terminates your employment for any reason other than a health-related incapacity to work lasting more than 9 months, gross misconduct, malfeasance or conviction of a felony, you will be paid, on a monthly schedule, your then current salary and benefits until your normal retirement in 2000 less any salary received in subsequent employment during the period. Sincerely, /s/ Rolf K. Liebergesell ACKNOWLEDGED & ACCEPTED: /s/ Karl N. Svensson - - ------------------------- Karl N. Svensson Page 20 of 24 3 EXHIBIT 10(c) April 10, 1996 Mr. Karl N. Svensson 60 Broadway Bramhall, Stockport SK7-3BU Dear Karl: The purpose of this letter is to clarify the terms contained in the fifth paragraph of the attached letter dated March 3, 1995, regarding your secondment to Farrel Limited. The Company currently pays, and will until the sale of your house in the U.S. and the permanent relocation of your wife to the U.K. continue to pay, your housing costs and other miscellaneous costs in the U.K. Commencing upon the sale of your house in the U.S. and the permanent relocation of your wife to the U.K., the Company will pay you: (a) a housing allowance at the rate of $12,000 per year, which amount shall be reviewed for potential adjustment at the time of each renewal of your lease for housing in the U.K.; and (b) a cost of living allowance at the rate of $12,000 per year, which amount shall be reviewed periodically for potential adjustment. Both allowances will be paid in equal monthly installments of 1/12 of the annual amount. If your employment is terminated during the term of any lease for your housing in the U.K., the Company agrees to assume responsibility for all remaining lease payments, provided the remaining term of the lease does not exceed one year. The Company requires that a copy of any lease for which Farrel might become responsible be provided to us before it is signed and that you endeavor to have included in any such lease a termination clause which would allow you to terminate the lease with no cost or liability provided a specified amount of notice is given. Page 21 of 24 4 EXHIBIT 10(c) Mr. Karl N. Svensson April 10, 1996 Page 2 Upon your return to the U.S., the Company will provide you with reasonable and suitable housing for up to 4 months. In addition, the Company will pay transportation of your goods from the U.K. to the U.S. and storage of those goods in the U.S. until you secure a new residence. Except as clarified by the foregoing provisions, the attached March 3, 1995, letter remains in effect as originally written. Sincerely, FARREL CORPORATION By /s/ R.K. Liebergesell ------------------------------------- R. K. Liebergesell Chairman and Chief Executive Officer Acknowledged and Accepted /s/ Karl N. Svensson - - --------------------------------------- Karl N. Svensson Page 22 of 24 5 EXHIBIT 10(c) March 3, 1995 Mr. Karl N. Svensson 20 Abrams Road Cheshire, CT 06410 Dear Karl: This memorandum sets forth our understanding concerning your secondment to Farrel Limited as Managing Director effective, pending approval of your work permit, April 1, 1995. During your tenure as Managing Director, you will continue in your position as Senior Vice President of Farrel Corporation, responsible for US and worldwide manufacturing. Our intention is that the initial secondment shall be for a period of two and one half years. While seconded to Farrel Limited, we shall adjust your income and benefits for purposes of tax equalization. Ernst & Young will advise you in this regard as well as assist you in obtaining a work permit. During your secondment as Managing Director, your benefits will be essentially the same as those currently held as an employee of Farrel Corporation. Although you can avail yourself of Farrel Limited's health scheme, you will remain covered by Farrel Corporation's health and welfare plan, as well as the 401(k) plan. We will fund the employer share of your US social security payments as you will remain an employee of Farrel Corporation. As long as you are primarily based in the UK, we will permit you three family visits to the US per year, coach air fare paid, for you and your spouse. In the UK, you will be entitled to an automobile similar to the automobile provided to you at Farrel Corporation. Page 23 of 24 6 EXHIBIT 10(c) Mr. Karl N. Svensson March 3, 1995 Page 2 In further consideration of the appointment, the Company will assure you that temporary housing moving, storage and transportation will be paid in relocating to the Manchester, England area and when you eventually return. While you reside overseas, we shall provide a housing allowance, including a stipend to purchase household goods, and shall store the household effects remaining in the US. Sincerely, /s/ Rolf K. Liebergesell ACKNOWLEDGED AND ACCEPTED: /s/ Karl N. Svensson - - ------------------------------ Karl N. Svensson EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FARREL CORPORATION AS OF MARCH 31, 1996 AND FOR THE THREE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 3,177 0 14,096 104 15,079 34,515 17,115 7,457 45,760 15,637 0 0 0 61 27,379 45,760 17,865 17,865 13,506 13,506 3,968 3 91 340 159 181 0 0 0 181 0.03 0.03
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