SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
Commission file number 1-804
SEQUA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-188-5030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Park Avenue, New York, New York 10166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(212) 986-5500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Class A Common Stock, no par value New York Stock Exchange
Class B Common Stock, no par value New York Stock Exchange
$5.00 Cumulative Convertible
Preferred Stock, $1.00 Par value New York Stock Exchange
10-1/2% Senior Subordinated Notes
due 1998 New York Stock Exchange
9-5/8% Senior Notes, Due
October 15, 1999 New York Stock Exchange
8-3/4% Senior Notes, Due
December 15, 2001 New York Stock Exchange
9-3/8% Senior Subordinated Notes,
Due December 15, 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of registrant's voting stock (Common and
Preferred) held by nonaffiliates as of March 17, 1993 was
$247,005,565.
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock:
Class Outstanding at March 17, 1993
Class A Common Stock, no par value 6,223,629
Class B Common Stock, no par value 3,430,978
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive proxy statement for its annual
meeting of stockholders scheduled to be held on May 12, 1994 are
incorporated herein by reference into Part III.
<PAGE>
SEQUA CORPORATION
FORM 10-K
* * * * * *
PART I
ITEM 1. BUSINESS
(a) General development of business. Sequa Corporation is a
diversified industrial company that produces a broad range of
products and provides a broad range of services through operating
units in four industry segments: Aerospace, Machinery and Metal
Coatings, Specialty Chemicals, and Professional Services and Other
Products. Sequa Corporation, incorporated in 1929 and formerly
known as Sun Chemical Corporation, is hereinafter sometimes
referred to as the "Registrant" and, together with its consolidated
subsidiaries, is hereinafter sometimes referred to as the "Company"
or "Sequa."
Divestitures
During 1991, the Company adopted a formal plan to divest Sequa
Capital's investment portfolio and to sell the Valley Line and
Sabine Towing and Transportation operations in the Transportation
segment, as well as the engineered services and the men's apparel
units in the Professional Services and Other Products segment.
During 1992, the Company completed the asset sales of Valley Line,
Sabine Towing and Transportation and the Gemoco division of
engineered services and in 1993, the Sturm unit of engineered
services was sold. As of December 31, 1993, approximately
$329,000,000 of Sequa Capital's investment portfolio has been sold,
written down or otherwise disposed of since the Company adopted a
formal plan to divest the portfolio. Efforts continue to divest
the men's apparel unit and to liquidate the remaining Sequa Capital
investment portfolio.
On December 30, 1993, the Company sold the stock of ARC
Professional Services for gross cash proceeds of $59.9 million, and
the purchaser assumed $4.5 million of ARC Professional Services'
debt. The sale resulted in a pre-tax gain of $12.4 million. Also
during 1993, Northern Can Systems' two can making facilities were
sold for gross cash proceeds of $15.0 million.
(b) Financial information about industry segments. Segment
information is included in Note 18 to the Consolidated Financial
Statements on Page 55 of this Annual Report on Form 10-K and is
hereby incorporated by reference.
<PAGE>
(c) Narrative description of business. The following is a
narrative description of the business segments of Sequa:
Aerospace
The Aerospace segment includes three operating units: Gas
Turbine, ARC Propulsion and the Kollsman division.
Gas Turbine. The largest individual operating unit of the
Company, Gas Turbine, is a leader in the development and use of
advanced metallurgical and other processes to manufacture, repair
and coat blades, vanes and other components of gas turbine engines.
The unit serves all major jet engine models used by the global
commercial airline market. The Company believes that the
leadership position of its Gas Turbine operations is largely
attributable to the effectiveness of its continuing development
efforts on new and improved metallurgical coating, manufacturing
and repair processes, and its responsiveness to customer service
requirements.
Gas Turbine has built on its metallurgical process technologies
to develop procedures that permit the repair and reuse of turbine
engine components. Management believes Gas Turbine has played a
key role in the development of the repair market for certain jet
engine parts. Over the years, the Company has continued to invest
steadily in research and development projects that have led to
ceramic coatings, vacuum plasma coatings, advanced laser drilling
and welding, and diffused precious metal/aluminide coatings. Gas
Turbine works in close cooperation with the manufacturers of jet
engines (including Pratt & Whitney, General Electric and Rolls
Royce) in connection with the design of new engines, the upgrading
of old designs and the development of repair processes and
procedures. Gas Turbine has introduced a series of innovative and
in some cases proprietary processes that allow engines to perform
at improved efficiency levels at higher operating temperatures and
under severe environmental conditions.
ARC Propulsion. ARC Propulsion, a supplier of solid rocket
fuel propulsion systems since 1949, is a leading developer and
manufacturer of advanced rocket propulsion systems, gas generators
and auxiliary rockets, and engages in research and development
relating to new rocket propellants and advanced materials. For the
military contract market, ARC Propulsion produces propulsion
systems for tactical weapons, and for space applications, ARC
Propulsion produces small liquid fueled rocket engines designed to
provide attitude and orbit control for a number of satellite
systems worldwide.
ARC Propulsion's strategy is to pursue opportunities to develop
products for commercial markets in order to reduce its reliance on
defense-related business. While maintaining its traditional
position as a supplier of solid propellant rocket motors to the
military, ARC Propulsion has initiated several commercial market
ventures, including Bendix Atlantic Inflator Company (BAICO), a
fifty-fifty joint venture with AlliedSignal Inc. to produce airbag
inflator systems.
<PAGE>
Kollsman. Kollsman consists of three units: the military
systems unit, a government contract supplier of electro-optical and
electronic systems for military weapons; the avionics products
unit, a designer and manufacturer of aircraft instruments and
related test equipment; and Kollsman Manufacturing Company, Inc.
(KMC), a separate subsidiary that produces medical diagnostic
instrumentation.
Machinery and Metal Coatings Segment
The Company's Machinery and Metal Coatings segment is composed
of Precoat Metals, Sequa Can Machinery and Materiels Equipements
Graphiques. The Company recently realigned its Rutherford
Machinery and Standun Canforming Systems operations into Sequa Can
Machinery as part of a strategy to improve the utilization of its
assets through increased efficiencies and the reduction of costs.
Precoat Metals. The largest individual unit of the segment,
Precoat Metals is a leader in the application of protective
coatings to continuous steel and aluminum coil. Precoat's
principal market is the building products industry, where coated
steel is used for the construction of pre-engineered building
systems, and as components in the industrial, commercial and
agricultural sectors. Precoat also serves the container industry,
where the division has established a position in the application of
coatings to steel and aluminum stock used to fabricate two-piece
metal cans and can lids. In addition, the division is establishing
a presence in the truck trailer and appliance markets as a supplier
of pre-painted steel for use in trailer panels and as an exterior
wrap on air conditioners and for office furniture. Precoat's
strategy is to expand its existing market share in building
products and to further its penetration of the container industry
and other growing markets.
Sequa Can Machinery. Rutherford and Standun design and
manufacture equipment for the two-piece can industry.
Rutherford is the world's leading manufacturer of equipment to
coat and decorate two-piece beverage cans. With an installed base
of approximately 700 machines, Rutherford has successfully
developed a retrofit business to upgrade older equipment to match
the technical standards of newer lines. At the same time, the
division's product development team has improved the technology of
precision printing to achieve higher speeds without compromising
quality. The current generation of equipment runs at a rate of
2,000 cans per minute, applying an even base coat and printing
crisp, clear images in up to six colors.
<PAGE>
The Standun line of can forming equipment includes cupping
presses, which punch the cup of a can from a coil of metal, and
bodymakers, which form the shallow cup into the shape of a two-
piece beer, soft drink or food can. The equipment operates at high
speed and within close tolerances.
Materiels Equipements Graphiques (MEG). MEG supplies equipment
for the web offset printing industry, including dryers, chill
rolls, paper guides, in-feeds and related equipment for high-speed
web presses. MEG's products include a line of advanced flying
pasters, devices that spin a fresh roll, or "web" of paper, to
press speed and splice it to an expiring roll without interrupting
press operation.
Specialty Chemicals Segment
The two operations that make up the Company's Specialty
Chemicals segment, Warwick and Sequa Chemicals, serve distinctly
different markets with performance-enhancing additives for a broad
range of end products.
Warwick. The larger of the two businesses in the Specialty
Chemicals segment, Warwick is a leading producer and supplier of
TAED, a bleach activator for powdered laundry detergent products.
TAED is used in perborate- or oxygen-based bleaching systems to
increase the cleaning power of detergent at low wash temperatures.
These bleaching systems, as opposed to the chlorine-based bleaches
traditionally used in the U.S., are used in international markets,
primarily in Europe.
Sequa Chemicals. Sequa Chemicals manufactures high-quality
performance-enhancing chemicals used by the textile and graphic
arts industries. Sequa Chemicals supplies the woven and knit
fabric market with permanent press resins, softeners, water
repellents, soil release agents and other chemicals to improve the
look, feel and durability of clothing and other textiles. The
Company also produces specialty emulsion polymers incorporated into
non-woven fabrics for a variety of end uses, including medical
drape, fiberfill and filters. For the paper industry, Sequa
Chemicals produces three key synthetic coating additives for coated
papers. In addition, Sequa Chemicals has developed and patented a
unique series of specialty polymers currently marketed to the
building products industry for use in roofing mat, ceiling tiles,
wall board and carpet tiles.
Professional Services and Other Products Segment
The Professional Services and Other Products segment -- which
includes the ARC Professional Services unit that was sold in
December 1993 -- also includes Casco Products, which manufactures
automotive cigarette lighters, power outlets and electronic sensing
devices; Northern Can Systems, which manufactures easy-open steel
lids for cans; and Centor, a real estate holding company which owns
and operates, among other properties, the Chromalloy Plaza
Building.
<PAGE>
Casco Products (Casco). Casco, which has been serving the
automotive products market since 1921, is a major manufacturer of
automotive cigarette lighters and the leading supplier in North
America to Chrysler, Ford, General Motors and Honda. In addition,
the unit has begun operating in the United Kingdom to further its
penetration of the European automotive markets.
Casco offers a growing line of automotive accessories, led by
a series of electronic devices to monitor automotive fluid levels.
These products are presently used as gauges for engine oil and
engine coolant and may also be used to monitor brake, transmission
and power steering fluids. Casco's other products include
auxiliary power outlets and electronic control modules.
Northern Can Systems (NCS). NCS supplies the domestic and
international food processing market with easy-open lids for cans.
Fabricated from steel, easy-open ends are gaining market share for
use on packs for pet foods, snacks, fruits and vegetables. When
made as pour-spout lids, which incorporate a pull-tab, easy-open
ends are used for beverages, including nutritional drinks.
<PAGE>
<PAGE>
Principal Products
The percentage of Sequa's consolidated sales and revenues
contributed by each class of similar products and services, which
accounted for 10 percent or more of such consolidated sales and
revenues during the last three fiscal years, is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Gas Turbine 42% 46% 46%
ARC Propulsion 9% 11% 12%
</TABLE>
Markets and Methods of Distribution
Sequa markets its gas turbine engine component manufacturing
and repair services primarily to commercial and military aircraft
customers and to users of industrial gas turbines worldwide. These
and other products of Chromalloy Gas Turbine Corporation are
marketed directly and through sales representatives working on a
commission basis.
A portion of the sales of Gas Turbine's operations is made
pursuant to contracts with various agencies of the United States
Government, particularly the Department of the Air Force, with
which Chromalloy has had a long-term relationship.
Sequa markets its electronic and electro-optical systems and
its avionics products to both commercial and military customers.
The electro-optical systems, and related spares and repair work,
are sold primarily under government contracts to the U.S. military,
and to foreign governments. KMC products are sold directly to
medical equipment suppliers.
Sequa markets its rocket propulsion systems generally on a
subcontract basis under various defense programs of the United
States Government. Programs to which the Company contributes and
which are presently important to the rocket propulsion business
include the Multiple Launch Rocket System, the U.S. Army Tactical
Missile System, the booster rocket for the U.S. Navy's Tomahawk
cruise missile and gas generators for the Trident II missile's
post-boost control system. In addition, ARC Propulsion has a
number of advanced programs in various stages of development and
qualification, including ERINT, an anti-missile missile that is a
prime candidate for the next generation Patriot mission.
<PAGE>
By their terms, government contracts are subject to
termination by the government either for its convenience or for
default by the contractor. Some government contracts are secured
through competitive bidding. The largest single government agency
contract accounted for 2% of Sequa's sales and revenues in 1993, 2%
in 1992 and 4% in 1991. Prime contracts and subcontracts with all
government agencies accounted for 22%, 23% and 27% of Sequa's sales
and revenues in 1993, 1992 and 1991, respectively. The anticipated
impact of defense spending levels on the Company's 1994 sales and
revenues and operating income is set forth in the Management's
discussion and analysis of financial condition and results of
operations on pages 18 and 20 of this Annual Report on Form 10-K
and is hereby incorporated by reference.
Sequa's Machinery and Metal Coatings Segment sells its
machinery products directly to the container and food industries,
as well as to the web printing industry. The metal coatings
business sells its coating services to regional steel and aluminum
producers, building product manufacturers, merchant can makers and
other participants in the food industry.
The Specialty Chemicals Segment sells textile chemicals and
emulsion polymers directly to manufacturers of fabric for clothing
and other products. Paper chemicals are sold directly to paper
mills and detergent chemicals are sold to detergent manufacturers.
The automotive products subsidiary sells cigarette lighters
and various electronic monitoring devices directly to the
automotive industry.
Competition
There is significant competition in the industries in which
Sequa operates, and, in several cases, it competes with larger
companies having substantially greater resources than those of
Sequa.
Sequa believes that it is currently the world's largest
manufacturer of cylindrical can-decorating equipment, one of the
largest manufacturers of permanent-press textile finishing resins,
a leading supplier of aircraft barometric altitude reporting
instruments for military and commercial air transport aircraft, and
the largest domestic supplier of automotive cigarette lighters in
the United States.
Sequa, through its gas turbine operations, is a leader in the
development and use of advanced metallurgical and other processes
to manufacture, repair and coat blades, vanes and other components
of gas turbine engines used for military and commercial jet
aircraft and for industrial purposes. Gas Turbine's divisions
operate in highly competitive environments and compete for repair
service business with a number of other major companies, including
the major turbine engine manufacturers who often specify to their
customers that vendors such as Gas Turbine must be approved by such
manufacturers to manufacture components for their engines and/or
perform repair services on their engines and components.
<PAGE>
Gas Turbine has a number of such approvals, including licensing
agreements which allow it to manufacture and repair certain
components of the new generation of flight engines now coming into
widespread use.
The impact on Gas Turbine of the government investigations of
the Orangeburg, New York facility is set forth in the Management's
discussion and analysis of financial condition and results of
operations on pages 18, 20, 24 and 25 of this Annual Report on Form
10-K and is hereby incorporated by reference. The loss of approval
by one of the major jet engine manufacturers to manufacture or
repair components for such producer's engines could have an adverse
effect on Gas Turbine. In such event, however, Gas Turbine would
seek to replace any approvals lost by obtaining approvals with
respect to the same components directly from the Federal Aviation
Administration (FAA) or, alternatively, the customer.
Sequa's rocket propulsion systems business competes with
several other companies for defense business. In some cases, these
competitors are larger than Sequa and have substantially greater
resources. Government contracts in this area are generally awarded
on the basis of proven engineering capability and price. The
Company's ability to compete is enhanced by the needs of the U.S.
Government to have alternative sources of supply under these
contracts.
Sequa's Kollsman unit competes in each of its markets with a
number of other manufacturers, some of which are larger and have
greater resources than Kollsman. This unit competes on the basis
of technical competence, quality and price.
Sequa's Precoat Metals operation, a leader in coating coils of
steel for metal building panels, is also the most fully integrated
supplier of coated metal coil stock in the United States. Sequa's
cylindrical can printing and can forming equipment operations are
world leaders in their markets. MEG is Europe's leading supplier
of auxiliary press equipment.
Sequa's automotive products manufacturer is the nation's
leading producer of cigarette lighters and holds a commanding share
of both the domestic original equipment market and the auto
aftermarket. Sequa's easy-open can lid manufacturing business
competes with a number of larger and well established entities
which have substantially greater financial and other resources.
Raw Materials
The various segments of Sequa's business use a wide variety of
raw materials and supplies. Generally, these have been available
in sufficient quantities to meet requirements, although occasional
shortages have occurred.
<PAGE>
Seasonal Factors
Overall, Sequa's business is not considered seasonal to any
significant extent.
Patents and Trademarks
The Company owns and is licensed to manufacture and sell under
a number of patents, including patents relating to its
metallurgical processes. These patents and licenses were secured
over a period of years and expire at various times. The Company
has also created and acquired a number of trade names and
trademarks. While Sequa believes its patents, patent licenses,
trade names and trademarks are valuable, it does not consider its
business as a whole to be materially dependent upon any particular
patent, license, trade name, trademark or any related group
thereof. It regards its technical and managerial knowledge and
experience as more important to its business.
Backlog
The businesses of Sequa for which backlogs are significant are
the Kollsman division, the Turbine Airfoil, Caval Tool and Castings
units of Gas Turbine, and the ARC propulsion operations of the
Aerospace segment; and the Can Machinery and MEG operations of the
Machinery and Metal Coatings segment. The aggregate dollar amount
of backlog in these units at December 31, 1993 was $369,700,000
($435,200,000 at December 31, 1992). The year-to-year decline is
a reflection of the overall weakness in the domestic defense and
the worldwide airline industries. At December 31, 1992, the
professional services unit of ARC had $120,500,000 of backlog which
is excluded from the above comparison.
Research and Development
Research and development costs, charged to expense as
incurred, amounted to approximately $17,166,000 in 1993,
$17,557,000 in 1992, and $19,482,000 in 1991.
The reduction in research and development costs reflects a
focusing of the Company's research and development effort with the
objective of realizing improved returns on those projects which are
undertaken and discontinuing expenditures in areas the Company
believes will not be profitable due to the lack of sufficient
future commercial opportunities. Reductions primarily occurred at
the units serving the domestic defense markets, while expenditures
increased at Sequa Can Machinery. It is not anticipated that this
approach will affect the Company's ability to be competitive.
Costs relating to customer-sponsored research and development
activities are not material.
Environmental Matters
The Company has been notified that it has been named as a
potentially responsible party under Federal and State Superfund
laws and/or has been named as a defendant in suits by private
parties (or governmental suits including private parties as co-
defendants) with respect to sites currently or previously owned or
operated by the Company or to which the Company may have sent
hazardous wastes. The Company is not presently aware of other such
<PAGE>
lawsuits or notices contemplated or planned by any private parties
or environmental enforcement agencies. The aggregate liability
with respect to these matters, net of liabilities already accrued
in the Consolidated Balance Sheet, will not, in the opinion of
management, have a material adverse effect on the results of
operations or the financial position of the Company. These
environmental matters include the following:
A number of claims have been filed in connection with alleged
groundwater contamination in the vicinity of a predecessor
corporation site which operated during the 1960s and early 1970s in
Dublin, Pennsylvania. In October 1987, a tort action was filed by
residents of Dublin against the Company and two other defendants.
The Borough of Dublin also filed suit seeking remediation of
alleged contamination of the Borough's water supply and damages in
an unspecified amount. The Company expects that a trial date will
be scheduled in 1994.
The Pennsylvania Department of Environmental Regulation
entered into a Consent Decree with the Company in 1990 providing
for the performance of a remedial investigation and feasibility
study with respect to the same alleged groundwater contamination in
Dublin. The U.S. Environmental Protection Agency (EPA) also placed
the site on the Superfund List in 1990 and, in conjunction
therewith, entered into a Consent Agreement with the Company on
December 31, 1990. EPA estimates that the cost of the interim
remedy will be less than $4 million. The investigation for the
final remedy is still in progress.
The State of Florida issued an Administrative Order requiring
TurboCombustor Technology, Inc. (TCT), a subsidiary of Chromalloy
Gas Turbine Corporation, to investigate and to take appropriate
corrective action in connection with alleged groundwater
contamination in Stuart, Florida. The contamination is alleged to
have arisen from a 1985 fire which occurred at TCT's former
facility in Stuart.
The City of Stuart has subsequently constructed and is
operating a groundwater remediation system. The Company has
negotiated a settlement with the City of Stuart whereby it would
contribute its ratable share of the capital and operating costs for
the groundwater treatment system. The Company estimates the amount
to be paid in settlement plus additional groundwater sampling and
analysis will be approximately $2 million to be paid over a ten
year period.
In September 1993, fourteen homeowners residing in West Nyack,
New York served a complaint on Gas Turbine and others alleging,
among other things, that contamination from a former Gas Turbine
site caused the plaintiffs' alleged property damage. Gas Turbine
believes it has strong defenses under New York law to the
plaintiffs' complaint. Gas Turbine entered into a Consent Order
with the New York Department of Environmental Conservation on
February 14, 1994, to undertake the remedial investigation and
feasibility study relating to the alleged contamination in the
vicinity of the former Gas Turbine site.
<PAGE>
In connection with the sale of the Graphic Arts Materials
Segment, now known as Sun Chemical Corporation, to Dainippon Ink
and Chemicals, Inc. (DIC) in December 1986, the Company has
continuing contingent liability for all off-site environmental
claims which relate to activities prior to the sale. In connection
therewith, the Company provided a letter of credit in the original
amount of $25.0 million in favor of DIC as security for said
obligation for a period of ten years from date of sale. The amount
of this letter of credit is adjusted each year. It is increased by
an interest factor and decreased by the amount actually paid by the
Company for related off-site environmental claims. In late 1993,
the agreement was amended with the amount of the letter of credit
being reduced to $15.0 million, subject to annual adjustment, and
the obligation to provide said letter was extended three years to
December 1999.
On April 3, 1989, the Company and Gas Turbine instituted a law
suit in the Delaware Superior Court against forty-one of the
Company's comprehensive general liability insurance carriers (the
Defendants). The Company and Gas Turbine seek to enforce their
rights under insurance policies sold to them by the Defendants in
connection with various environmental actions that have been
brought against the Company and Gas Turbine and are seeking
indemnity and defense costs with respect to all Superfund actions
and third-party environmental litigation.
The Company has identified cost estimates for all sites it is
involved with and has established reserves as required by generally
accepted accounting principles. The Company anticipates that
actual cash expenditures related to these sites will be in the
range of $6 million to $12 million in 1994 and in the $5 million to
$7 million range for each of the following several years.
Anticipated expenditure levels for 1994 reflect clean-up costs on
sites where work will begin earlier than previously expected.
Actual cash expenditures were $7.7 million in 1993, $6.2 million in
1992, and $4.7 million in 1991.
Employment
At December 31, 1993, Sequa employed approximately 10,250
persons in its continuing operations of whom approximately 2,000
were covered by union contracts.
The approximate number of employees attributable to each
reportable business segment as of December 31, 1993 was:
<TABLE>
<CAPTION>
Approximate
Segment Number of Employees
<S> <C>
Aerospace 8,100
Machinery and Metal Coatings 950
Specialty Chemicals 650
Professional Services and Other Products 450
Corporate 100
Total 10,250
</TABLE>
<PAGE>
The Company considers its relations with employees to be
generally satisfactory. Sequa maintains a number of employee
benefit programs, including life, hospitalization, surgical,
dental, and major medical insurance, and a number of 401(k) and
pension plans.
(d) Foreign Operations. Sequa's foreign operations, spread
primarily throughout Europe, include Gas Turbine operations within
its Aerospace Segment; detergent chemicals operations included in
the Specialty Chemicals Segment; the auxiliary press equipment
supplier in the Machinery and Metal Coatings Segment; and an
automotive products operation in the United Kingdom in the
Professional Services and Other Products Segment. These operations
consist primarily of wholly-owned foreign subsidiaries. Sales and
revenues, operating earnings and identifiable assets attributable
to foreign operations, and export sales, are set forth in Note 18
to the Consolidated Financial Statements on page 56 of this Annual
Report on Form 10-K and is incorporated herein by reference.
ITEM 2. PROPERTIES
Aerospace
The Chromalloy Gas Turbine Corporation operates over 50 plants
in fifteen states and eight foreign countries, primarily in Europe,
which have aggregate floor space of approximately 4,600,000 square
feet, of which approximately 2,300,000 square feet is owned and
approximately 2,300,000 square feet is leased. The leases covering
the leased facilities in this business have various expiration
dates and some have renewal or purchase options.
Rocket propulsion operations lease a 1,014-acre manufacturing
facility in Camden, Arkansas. The Camden lease, which has various
renewal options, expires in 1998. The Company owns 12 acres and an
89,000 square foot office and manufacturing complex in Gainsville,
Virginia. An additional 189,000 square feet (of which 120,000
square feet is sublet) is leased for administrative and
manufacturing purposes in Alabama, California and Virginia. The
liquid propulsion division leases a 101,000 square foot facility in
Niagara, New York. The Company also owns 2,430 acres of land in
Orange County, Virginia, which has been developed for use in the
propellant business. An additional 38,000 square feet is owned in
Alexandria and is used for administrative purposes.
The Kollsman operation owns two plants in New Hampshire with
aggregate floor space of 405,000 square feet and leases another
facility in New Hampshire with aggregate floor space of 91,000
square feet where various production, administrative, warehousing
and technical services are performed. This business also owns one
23,000 square foot manufacturing facility in Wichita, Kansas and
leases 6 domestic facilities aggregating approximately 55,000
square feet in which sales, repairs, and warehousing operations are
conducted.
<PAGE>
Facilities in this segment are suitable and adequate for the
business. Gas Turbine facilities serving the commercial repair
market operate at a higher utilization rate than facilities serving
either the original jet engine manufacturers or the military.
Capital spending plans for the operations in this segment are
primarily designed to keep up with current technology or to meet
specific requirements for various government or commercial
contracts.
Machinery and Metal Coatings
The can forming and decorating operations own two plants in the
United States with aggregate floor space of 228,000 square feet and
lease one small warehouse facility of approximately 5,000 square
feet. In Europe, through the segment's auxiliary press equipment
supplier, MEG, the Company owns a plant with aggregate floor space
of approximately 57,000 square feet. MEG also leases two sales
offices and owns a storage facility in Europe with a total of
20,000 square feet and leases a 1,000 square foot sales office in
Singapore. The Precoat Metals operation owns four manufacturing
facilities in Missouri, Illinois and Texas, with a total of 500,000
square feet of manufacturing and office space. In June 1993, the
division broke ground for construction of a new 150,000 square foot
facility in Mississippi designed to increase capacity in the south,
to enhance customer service and to free capacity at existing
locations. An additional 56,000 square feet of warehouse space is
leased in Illinois and Texas.
The properties in this segment are suitable and adequate for
the business presently being conducted. Precoat Metals facilities
are functioning at a high level of utilization and the can forming
and decorating operations are functioning at a moderate level of
utilization. The 1994 capital spending plans call for the
finalization of the new metal coatings facility in Mississippi.
Specialty Chemicals
The Specialty Chemicals segment owns one plant situated on 86
acres in Chester, South Carolina with aggregate floor space of
160,000 square feet in addition to a 22,000 square foot leased
warehouse also in Chester. The segment owns two plants in the
United Kingdom with aggregate floor space of 223,000 square feet on
approximately 43 acres of land and leases 8,000 square feet of
office and warehouse space in five separate locations in France,
Spain, the United Kingdom and Italy.
Facilities in this segment are adequate and suitable for the
business being conducted. They operate at a high utilization rate.
Capital spending plans call for capacity increases and for
installation of equipment required to meet or exceed environmental
regulations.
<PAGE>
Professional Services and Other Products
The automotive products subsidiary, Casco Products, owns a
205,000 square foot plant in Connecticut and leases a 1,600 square
foot sales office in Detroit, Michigan. In June 1994, Casco will
begin to relocate to a new 168,000 square foot leased facility also
located in Connecticut. In addition, Casco Ltd. leases 8,700
square feet of manufacturing, warehouse and office space in the
United Kingdom. NCS owns a manufacturing facility in Ohio with
floor space of 90,000 square feet.
The Centor Company, a wholly-owned subsidiary, owns and
operates the Chromalloy Plaza Building, a modern 18-story office
building in Clayton, Missouri with approximately 284,000 square
feet of rentable office and commercial space. Centor also owns and
rents a manufacturing facility and a warehouse in Wisconsin with
aggregate floor space of 185,000 square feet as well as owning 10
smaller properties that are either leased to third parties and/or
held for sale.
Facilities in this segment are adequate. At NCS, utilization
continues to be below 50%, but management anticipates that this
will improve.
Corporate
The Company leases 58,000 square feet of corporate office space
in New York, New York and Hackensack, New Jersey.
ITEM 3. LEGAL PROCEEDINGS
Sequa is involved in a number of claims, lawsuits and
proceedings (environmental and otherwise) which arose in the
ordinary course of business. Additional information on
environmental matters is covered in the Environmental Matters
section on pages 10 through 12 of this Annual Report on Form 10-K
and is hereby incorporated by reference.
Other litigation is pending against the Company involving
allegations that are not routine and include, in certain cases,
compensatory and punitive damage claims. Included in this other
class of litigation is an arbitration proceeding that was formally
commenced in 1992 to resolve a dispute between the Egyptian Air
Force and Chromalloy Gas Turbine. In the damage portion of the
arbitration hearing in October 1993, Chromalloy Gas Turbine claimed
$29.6 million in damages (which includes $17.5 million of net
assets in the Company's Consolidated Balance Sheet) and the
Egyptian Air Force counterclaimed for $46.5 million in damages.
The ultimate legal and financial liability of the Company in
respect to all claims, lawsuits and proceedings referred to above
cannot be estimated with any certainty. However, in the opinion of
management, based on its examination of such matters, its
experience to date and discussions with counsel, the ultimate
outcome of these contingencies, net of liabilities already accrued
in the Company's Consolidated Balance Sheet, is not expected to
have a material adverse effect on the results of operations or
financial position of the Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
<TABLE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information.
The following table sets forth the high and low closing sales prices
of Sequa Class A common stock and Sequa Class B common stock for the calendar
periods indicated on the Exchange Composite Tape, as reported by the National
Quotation Bureau Incorporated:
<CAPTION>
Sequa Class A Sequa Class B
High Low High Low
1993:
<S> <C> <C> <C> <C>
First Quarter....... 32 7/8 26 33 7/8 26 3/4
Second Quarter...... 30 18 32 1/2 18
Third Quarter....... 33 1/4 27 3/4 33 3/4 28 7/8
Fourth Quarter...... 34 3/8 30 1/2 34 1/2 30 1/4
1992:
First Quarter....... 51 41 3/8 57 3/4 45 1/2
Second Quarter...... 44 1/4 36 1/4 55 1/2 47 1/4
Third Quarter....... 42 36 3/4 50 1/2 45 3/8
Fourth Quarter...... 37 1/2 29 1/8 45 3/8 30 1/4
</TABLE>
(b) Holders.
Shares of Sequa Class A common stock and Sequa Class B common
stock are listed on the New York Stock Exchange. There were
approximately 3,350 holders of record of the Sequa Class A common
stock (plus 360 holders of unexchanged shares) and approximately
780 holders of record of the Sequa Class B common stock (plus 110
holders of unexchanged shares) at March 17, 1994.
(c) Dividends.
During the year ended December 31, 1993, Sequa declared two
quarterly dividends of $.15 per share, or $.30 per share for the
year, on Sequa Class A common shares and two quarterly dividends of
$.125 per share, or $.25 per share for the year on Sequa Class B
common shares.
During the year ended December 31, 1992, Sequa declared four
quarterly dividends of $ .15 per share, or $ .60 per share for the
year, on the Sequa Class A common stock and four quarterly
dividends of $ .125 per share, or $ .50 per share for the year, on
the Sequa Class B common stock.
Commencing in the third quarter of 1993, under the terms of
the Company's senior subordinated notes due 1998, there was a
deficiency in consolidated retained earnings available for the
payment of cash dividends and the repurchase of the Company's
stock. As a result, common and preferred stock dividends were not
declared in the third and fourth quarters of 1993. At December 31,
1993, the deficiency in consolidated retained earnings
<PAGE>
available for payments of cash dividends was $45.8 million. In the
future, net income will reduce this deficiency by seventy-five
cents on the dollar while net losses will increase this deficiency
on a dollar-for-dollar basis. In addition, as of December 31,
1993, the Company's earnings were not sufficient to maintain a
consolidated interest coverage ratio of 2.0 to 1.0 which, pursuant
to the terms of the Company's senior notes due 2001 and the senior
subordinated notes due 2003, precludes the Company from paying
dividends, among other restricted activities.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for, and as of the
end of, each of the five years in the period ended December 31, 1993. Such
information should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto, filed herewith.
(Amounts in millions, except per share)
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Summary of operations
Continuing operations:
Sales and revenues $1,697.0 $1,868.3 $1,878.8 $1,957.8 $1,701.2
Operating income 15.7 124.6 117.7 181.2 152.6
Income (loss) from
continuing operations (55.5) 17.9 15.0 59.4 34.7
Income (loss) from
discontinued operations - (21.7) (21.6) (26.7) 21.2
Extraordinary loss (8.5) - - - -
Cumulative effect of
accounting change - (7.3) - - -
Net income (loss) (64.0) (11.1) (6.6) 32.7 55.9
Earnings (loss) per share of
common stock
Continuing operations $ (6.07) $ 1.53 $ 1.24 $ 5.81 3.02
Discontinued operations - (2.26) (2.26) (2.78)
Extraordinary loss (.88) - - - -
Cumulative effect of
accounting change - (.76) - - -
Net income (loss) (6.95) (1.49) (1.02) 3.03 5.10
Cash dividends declared
Preferred $ 2.50 $ 5.00 $ 5.00 $ 5.00 5.00
Class A common .30 .60 .60 .60 .60
Class B common .25 .50 .50 .50 .50
Financial position
Current assets $ 661.6 $ 679.2 $ 778.5 $ 802.8 $ 810.2
Total assets 1,803.5 1,912.5 2,108.3 1,995.0 1,903.7
Current liabilities 376.5 350.1 383.2 370.4 388.6
Long-term debt 624.1 690.0 825.5 677.2 588.7
Shareholders' equity 575.8 651.7 696.6 716.4 705.0
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS 1993-1992
SALES AND REVENUES
Sales and revenues from continuing operations declined 9% in 1993,
primarily as a result of decreases at the Gas Turbine and Atlantic
Research (ARC) propulsion units of the Aerospace segment and the
overseas unit of the Specialty Chemicals segment.
Aerospace segment sales declined 16% in 1993, principally as a
result of a substantial fall-off in sales of Gas Turbine, the
largest individual operation in the segment and in the Company as
a whole. ARC propulsion sales, which represent a smaller portion
of overall revenues, declined approximately 20%, and the Kollsman
division, the smallest part of the segment, posted a 9% increase in
sales.
Gas Turbine sales declined 18% from 1992 levels. Over half the
decline occurred at the unit's largest facility in Orangeburg, New
York, which was severely affected by government investigations. In
addition, other Gas Turbine installations were affected by
sustained weakness in the jet engine component repair and new parts
market, as well as by the continuing decline in the domestic
defense market. Overall market sluggishness also affected
locations specializing in the overhaul and repair of both aircraft
engines and industrial turbines, as well as those serving the
auxiliary power equipment market. Management anticipates that the
commercial airline market will improve gradually, with only a
modest upturn in demand for component repair in 1994.
The investigations of the Orangeburg plant are discussed in
detail in the Government Investigations section of this management
discussion and analysis. From the standpoint of operations, the
Federal Aviation Administration's restoration of the Orangeburg
facility's repair station certificate in June 1993 was a first step
in restoring the facility to full operation. Since that time, each
individual repair process and procedure at the facility has been
subject to review. By March 1, 1994, approvals had been received
for the repair of parts representing approximately 85% of the
facility's ongoing repair revenues. While the approval process has
taken longer than originally anticipated, management expects that
all approvals will be received by July 1994. As a result, revenues
at the Orangeburg facility are expected to increase gradually in
1994.
The 20% reduction in sales of the ARC propulsion unit was in
line with management's previous estimates and primarily resulted
from reduced revenues on several major rocket motor programs
including Trident D-5, Stinger and MLRS, and the completion of two
other programs (MK104 Standard Missile and MK30). Barring
additional Defense Department spending cuts, management anticipates
that sales will decline a further 5%-10% in 1994. Kollsman's sales
<PAGE>
increased 9% in 1993 principally as a result of higher sales of
military electro-optics products, including the new domestic
contract with the U.S. Marine Corps to upgrade the optical system
on the Cobra helicopter. Sales of avionics products also increased
in 1993, but the overall advance was partially offset by a
reduction in the sale of medical instrumentation.
Sales of the Machinery and Metal Coatings segment increased 7%
in 1993, paced by a sharp advance at the metal coatings unit. The
metal coating division posted a 15% increase in sales, primarily as
a result of strong demand from the building products industry and
improved market penetration of this key market. At the can
machinery division, sales advanced 4%, as gains in can forming
equipment were largely offset by reduced shipments of can
decorating equipment and lower sales of spare parts and
accessories. The European auxiliary press equipment supplier
posted a small sales increase measured in local currency. However,
after translation into U.S. dollars, reported sales were down 5%.
Sales of the Specialty Chemicals segment declined 6% in 1993
with fourth-quarter increases at both units mitigating the effect
of lower sales for the the first nine months of the year. At the
overseas unit, an increase in local currency sales of TAED, a
bleach activator, was more than offset by an unfavorable foreign
currency translation swing of 15%. At the domestic unit, sales
were down marginally, as continued weakness in the paper, textile
and graphic arts markets was offset by a solid advance in the
specialty polymer product line, and by the sales added through a
paper specialties product line acquired in late 1992. At the
domestic unit, 1993 sales trends are expected to continue in the
early part of 1994, and overseas sales are expected to remain at a
high level.
Sales and revenues of the Professional Services and Other
Products segment increased 5% in 1993, as two of the four units
posted increases. Revenues of the ARC professional services unit,
which was sold in December 1993, increased 3% to $162.6 million.
Sales of the automotive products unit advanced sharply, a
reflection of the overall health of the domestic automobile market,
and the resulting increase in demand for automotive cigarette
lighters and power outlets. The unit also improved its penetration
of the automotive lighter market in Europe. Sales of Northern Can
Systems (NCS) were on a par with 1992 levels, as a doubling of can
lid sales more than offset the absence of sales from two can making
plants which were sold in the first half of 1993. Revenues of
Centor, the real estate company, declined modestly in 1993
primarily due to a lower occupancy rate in its office building in
Clayton, Missouri.
<PAGE>
OPERATING INCOME
Operating income declined 87% in 1993, primarily as a result of the
operating loss posted by Gas Turbine and the recording of
restructuring charges amounting to $26.6 million during the year.
The Aerospace segment posted a $40.9 million loss in 1993
compared to a profit of $75.5 million in 1992. This swing was
primarily due to losses at Gas Turbine. Gas Turbine was adversely
impacted by three major factors: the interruption of operations at
the Orangeburg facility; the charge to reflect implementation of a
restructuring plan; and the legal fees, payments to the government
and severance costs at the Orangeburg plant. Results of all other
Gas Turbine units, in total, declined modestly from a 1992 base
that was already severely affected by two years of turmoil in the
commercial airline market. Management anticipates that Gas Turbine
will return to profitability in the first quarter of 1994.
ARC propulsion profits declined 28%, a reflection of lower
sales and an unfavorable sales mix shift, partially offset by
reduced general and administrative, and bid and proposal costs.
Management of the unit anticipates that profits will decline
modestly in 1994 as the unit continues to adjust to the restrictive
market conditions. Kollsman's profits increased from a modest 1992
base, primarily as a result of improvements in electro optics, and
reduced selling, general and administrative expenses. Conditions
in the markets Kollsman serves are not expected to strengthen in
1994, nonetheless management expects Kollsman will be able to
maintain its profit level in 1994 and plans to further shrink its
asset base to improve returns.
Operating profit in the Machinery and Metal Coatings segment
decreased 3% in 1993, as strength at the metal coatings unit and a
turnaround at the auxiliary press equipment unit were more than
offset by a decline in the can machinery operation. Throughout
1993, the metal coating operation benefitted from increased sales
and improved capacity utilization. Although this unit will incur
start-up expenses when it brings a new facility on stream in mid-
1994, profits for the full year are currently expected to remain at
least on a par with 1993, due to continued strong demand from the
building products market. At the can machinery operation, reduced
factory utilization, competitive pricing pressures in the can
decorating market, a bad debt provision, and the recording of a
restructuring charge combined to cause a significant profit decline
in 1993. Based on year-end backlog, this operation is expected to
have a weak first quarter in 1994. The auxiliary press equipment
operation returned to profitability in 1993 due to a general
program of cost reduction and the absence of unusual warranty,
severance and bad debt provisions that had been recorded in 1992.
Based on the current level of firm backlog, losses are expected in
the first half of 1994.
Operating income in the Specialty Chemicals segment declined
11% in 1993, with both units down from the preceding year. At the
overseas unit, strong operating results were offset by the
<PAGE>
combination of unfavorable foreign currency exchange movements and
the establishment of environmental clean-up and bad debt reserves
related to the non-detergent chemicals portion of the business.
The decline in operating income at the domestic unit resulted from
three principal factors: the start-up of a new paper specialties
product line; the cost to realign and expand the European sales and
marketing effort; and the reduced gross profit that resulted from
lower sales and an unfavorable sales mix shift.
Operating income in the Professional Services and Other
Products segment more than doubled in 1993. Both ARC professional
services and the automotive products units achieved solid profit
advances and NCS moved from a loss in 1992 to a modest profit in
1993. Profits of the automotive products unit advanced due to the
increased volume of automotive cigarette lighters. At NCS,
increased sales of can ends and the benefits of cost reductions and
manufacturing improvements implemented in both 1992 and 1993 fueled
a turnaround. In the second half, NCS recorded a small loss, as
the unit adjusted to the downsizing that resulted from the sale of
the can plants. Management anticipates that this unit will return
to profitability in the first quarter of 1994 and will post a
profit for the full year. At Centor, profit declined from a
relatively low 1992 base, primarily as a result of lower rental
income.
During 1993, the Company recorded restructuring charges
totaling $26.6 million primarily relating to plans adopted to
reduce Gas Turbine's investment in plants that are engaged in
activities other than the repair of components for flight engines,
and to sell excess machinery and permanently reduce the number of
employees in other Gas Turbine facilities. Included in the
restructuring charges are: severance costs, $7.5 million; write-
down of equipment to be sold, $4.1 million; write-down of inventory
to net realizable value, $3.2 million; relocation of equipment,
$1.8 million; write-down of other assets, $1.5 million; operating
losses through date of sale, $6.5 million; other costs, $2.0
million. As of December 31, 1993, $20.7 million of these amounts
remained in Accrued expenses.
INTEREST EXPENSE
In 1993, interest expense declined $6.6 million due to a lower
level of average borrowings related to the Company's cash
generation program.
OTHER, NET
In 1993, Other, net included a $6.6 million loss on interest rate
options sold, $3.1 million of discount expense related to the sale
of accounts receivable, a $3.1 million loss incurred on a sale and
leaseback transaction, a $7.6 million equity loss in the Company's
unconsolidated airbag business, amortization of capitalized debt
costs in the amount of $4.2 million, and $2.5 million in charges
for a minority shareholder's interest in the earnings of ARC.
Based upon market interest rates on March 15, 1994, adjustment of
the carrying value of interest rate options
sold would result in an additional loss of approximately $3.5
million to
<PAGE>
be recorded in the first quarter of 1994. In 1992, Other, net
included $3.9 million of discount expense related to the sale of
accounts receivable, a $4.7 million equity loss in the Company's
unconsolidated airbag business, amortization of capitalized debt
costs in the amount of $3.1 million, and $1.7 million in charges
for a minority shareholder's interest in the earnings of ARC.
ENVIRONMENTAL MATTERS
The Company's engineering and environmental department, under
senior management direction, manages all activities related to the
Company's involvement in environmental clean-up. This department
establishes the projected range of expenditures for individual
sites with respect to which the Company may be considered a
potentially responsible party under applicable Federal or state
law. These projected expenditures, which are reviewed
periodically, include: remedial investigation and feasibility
studies; outside legal, consulting and remediation project
management fees; the projected cost of remediation activities; site
closure and post-remediation monitoring costs. The assessments
take into account known conditions, probable conditions, regulatory
requirements, past expenditures, and other potentially responsible
parties and their probable level of involvement. Outside
technical, scientific and legal consulting services are used to
support management's assessments of costs at significant individual
sites.
The Company has identified cost estimates for all sites it is
involved with and has established reserves as required by generally
accepted accounting principles. The Company anticipates that
actual cash expenditures related to these sites will be in the $6
million to $12 million range in 1994 and in the $5 million to $7
million range during each of the following several years.
Anticipated expenditure levels for 1994 reflect clean-up costs on
sites where work will begin earlier than previously expected.
Actual cash expenditures were $7.7 million in 1993, $6.2 million in
1992, and $4.7 million in 1991.
AUTOMOTIVE AIRBAGS
In 1989, Atlantic Research and AlliedSignal formed a 50/50 joint
venture, called Bendix Atlantic Inflator Company (BAICO), to
develop, produce and market hybrid inflators for automotive airbag
systems. The joint venture has expended substantial sums on the
development and marketing of both passenger- and driver-side
inflators. As a result of these efforts, the joint venture has
orders from seven car companies covering 13 models beginning with
the 1994 model year. The first deliveries of production units were
made in 1993 with total shipments of 319,000 units. Shipments in
1994 are expected to reach nearly one million units.
In 1993, Atlantic Research, AlliedSignal and Gilardini (a unit
of the Fiat Group) formed an Italian company to produce and market
hybrid inflators for Fiat and other European car companies. Each
participant owns a one-third interest in this venture. Atlantic
Research expects to spend approximately $4 million over the next 12
months for its share of the cost to equip a leased facility in
Colleferro, Italy. First deliveries from this plant to fill an
order from a European customer are scheduled for June 1995.
The Company's equity loss in its airbag business was $7.6
million in 1993 and $4.7 million in 1992. Management currently
anticipates the airbag business will achieve profitability in late
1995 or early 1996.
<PAGE>
BACKLOG
The businesses of Sequa for which backlogs are significant are the
Kollsman division, the Turbine Airfoil, Caval Tool and Castings
units of Gas Turbine, and the ARC propulsion operations of the
Aerospace segment; and the Can Machinery and MEG operations of the
Machinery and Metal Coatings segment. The aggregate dollar amount
of backlog in these units at December 31, 1993 was $369.7 million
($435.2 million at December 31, 1992). The year-to-year decline is
a reflection of the overall weakness in the domestic defense and
the worldwide airline industries. At December 31, 1992, the
professional services unit of ARC had $120.5 million of backlog
which is excluded from the above comparison.
CAPITAL SPENDING AND OTHER INVESTMENTS
Capital expenditures amounted to $76.9 million in 1993, with
spending concentrated in the Gas Turbine, metal coatings and
overseas chemicals operations. These funds were primarily used to
upgrade existing facilities and equipment and to expand capacity.
The two largest projects were the installation of an electron beam
physical vapor deposition coater in a United Kingdom Gas Turbine
plant and the start of construction for a new metal coatings
facility in Jackson, Mississippi. Both projects are expected to be
operational by the third quarter of 1994. In addition, the Company
invested $2.7 million for its share of capital costs in the airbag
business. The Company accounts for its airbag investment using the
equity method of accounting. Accordingly, these funds were
accounted for as an increase in the Company's investment and are
included in Non-current receivables and other investments in the
Consolidated Balance Sheet.
The Company anticipates that capital spending in 1994 will be
approximately $85 million and will again be concentrated in the Gas
Turbine, metal coatings and chemicals operations. The Company also
anticipates investing approximately $10.5 million in the airbag
business.
LIQUIDITY AND CAPITAL RESOURCES
Management anticipates that cash flow from operations, proceeds
from the divestiture of the remaining discontinued operations and
other assets, the $111 million of credit available at March 15,
1994 under the new revolving credit agreement, and dividends that
management expects to receive from the Company's European
subsidiaries will be more than sufficient to fund the Company's
operations for the foreseeable future.
During 1993, the Company lengthened debt maturities by
successfully restructuring its long-term debt, and dramatically
improved liquidity. In addition, the Company generated $127
million from its program to trim its asset base. The largest
portion of these proceeds was used to reduce debt, which declined
$96 million in 1993.
<PAGE>
In 1994, the Company plans to continue its program of asset
disposals and debt reduction. As part of the restructuring plan at
Gas Turbine, which was announced in the third quarter, the Company
currently has signed letters of intent for the sale of two Gas
Turbine units which would generate approximately $50 million in
cash if the transactions are successfully completed. In addition,
the Company is actively pursuing additional asset disposals under
the Gas Turbine restructure program; marketing the remaining
discontinued business assets either through outright sale; or, in
the case of Sequa Capital's leveraged leases, a transaction
designed to monetize the portfolio.
At December 31, 1993, under the terms of the Company's senior
subordinated notes due 1998, there is a $45.8 million deficiency in
consolidated retained earnings available for the payment of cash
dividends and the repurchase of the Company's stock. As a result,
common and preferred stock dividends were not declared in the third
and fourth quarters of 1993. Under the terms of the Company's
preferred stock, upon the Company's failure to make six consecutive
quarterly dividend payments, the holders thereof, voting as a
class, will have the right to elect two members of the Board of
Directors of the Company at the next annual meeting of
shareholders. These special voting rights terminate when all
dividends in arrears have been paid. In addition, as of December
31, 1993, the Company's earnings were not sufficient to maintain a
consolidated interest coverage ratio of 2.0 to 1.0 which, pursuant
to the terms of the Company's senior notes due 2001 and the senior
subordinated notes due 2003, precludes the Company from paying
dividends among other restricted activities.
In the short term, the Company's objective is to return to
profitability, to continue to improve its capital structure and to
resume dividend payments. In the longer term, the Company's
objective is to regain an investment grade rating from the major
rating agencies.
OTHER INFORMATION
Statement of Financial Accounting Standards (SFAS) No. 112,
"Employer's Accounting for Postemployment Benefits," was issued in
November 1992 and must be implemented by the first quarter of 1994.
This statement requires benefits to former employees after
employment, but before retirement, to be accrued when it is
probable that a liability has been incurred and the amount can be
reasonably estimated. The impact of adopting SFAS No. 112 will not
have a material effect on the Company's results of operations or
financial position.
GOVERNMENT INVESTIGATIONS
During the second quarter of 1993, the Company entered into
agreements with the U.S. Attorney's Office, Southern District of
New York (SDNY), and the Federal Aviation Administration (FAA) in
connection with investigations by these offices and other related
governmental agencies of the Company's Orangeburg facility and
certain of its then employees begun in November 1992. Management
believes that the investigations were in connection with
allegations that the Orangeburg facility had performed repairs on
certain parts in a defective manner and in violation of applicable
requirements. The investigations resulted in the Orangeburg
facility voluntarily surrendering its FAA repair station
<PAGE>
certification and suspending FAA authorized repair operations in
April 1993. Gas Turbine's other operating facilities, as well as
work done for original equipment manufacturers at the Orangeburg
facility, were unaffected by the suspension.
Throughout the investigations, the Company and the Orangeburg
facility cooperated fully with federal authorities. In addition,
the Company instituted extensive changes in the management and
operations of the facility. As a result of the Company's
cooperation with the government and its good faith efforts to
comply with all applicable FAA standards, the FAA restored the
facility's FAA repair station certificate on June 10, 1993, ending
the suspension of repair operations and resolving all FAA civil
matters relating to the Orangeburg facility. Subsequently, the
U.S. Attorney's Office, SDNY, entered into an agreement with the
Company, under which it declined to prosecute the Company in
connection with its investigation.
In April 1993, the Company signed a consent order with the FAA
providing for a non-punitive remedial payment by the Company of
$5.0 million, representing the costs incurred by the FAA to
investigate the Orangeburg facility and enforce its consent decree.
In addition, under the terms of the agreement with the U.S.
Attorney's Office, SDNY, the Company agreed to deposit $2.5 million
into a fund (with up to an additional $2.5 million to be deposited,
if needed) to cover the cost of testing and analyzing jet engine
parts seized by federal authorities during an early stage of the
investigations.
Currently, the Company is in the process of obtaining
recertification on certain repair processes and procedures. By
March 1, 1994, approvals had been received for the repair of parts
that represent approximately 85% of the facility's ongoing repair
revenues. While it has taken longer than anticipated to obtain the
required approvals, the process is continuing and the Company
anticipates receiving the balance of the outstanding approvals
during the second quarter of 1994. As a result, revenues of the
Orangeburg facility are expected to increase gradually in 1994. At
the same time, overall airline industry conditions remain
depressed, affecting demand for new and repaired parts. Management
does not anticipate significant improvement in market conditions in
the near term, but believes the Orangeburg facility's repair
operations are recovering from the effects of the investigations,
and operating results are continuing to improve.
As a result of the investigations and the related suspension,
the Company incurred direct expenses in 1993 of $12.8 million.
Direct expenses included the remedial payment to the FAA, the
deposit of funds described above, severance payments and related
legal fees and expenses.
<PAGE>
OPERATING RESULTS 1992-1991
Sales and Revenues
Sales and revenues from continuing operations declined slightly in
1992, as advances at three of the Company's four operating segments
largely offset a 4% decline in the Aerospace segment.
The reduction in Aerospace sales reflects declines at ARC
propulsion and Kollsman. Sales of Gas Turbine were unchanged from
1991, as increased activity in landbased turbines and flight engine
overhaul offset declines in the repair and manufacture of parts for
aircraft engines. ARC propulsion sales declined approximately 10%
in 1992, as a result of continued defense spending cuts. The
impact of reductions in four solid rocket motor programs and the
cancellation of a development program was partially offset by a
significant increase in the Trident D-5 program. Kollsman sales
declined 22% in 1992, primarily due to a substantial drop in
avionics products for the general aviation market, as well as the
completion of low-margin electro-optics contracts for the U.S.
Government. By contrast, sales of medical instrumentation
increased 12%.
Sales of the Machinery and Metal Coatings segment increased 9%
in 1992, with strong advances at the metal coatings and can
machinery units, partially offset by a decline in sales of
auxiliary press equipment. The metal coatings operation
experienced strong demand and increased its penetration of the
building products and container markets. The can machinery units
benefitted from a high level of demand from export markets and from
the successful introduction of new can forming equipment. Sales of
the overseas auxiliary press equipment operation declined in 1992
with a sharp decline in the first half of the year partially offset
by improved second-half results.
Sales of the Specialty Chemicals segment advanced 7% in 1992
with both the overseas and domestic units contributing to the
increase. At the overseas unit, TAED sales advanced modestly, with
strength concentrated in the first half of the year. Softness in
the second half reflected the economic recession in Europe, and a
slowdown in consumer demand for laundry detergents using TAED.
Other overseas sales of chemicals advanced sharply in 1992,
primarily due to a mid-1991 acquisition of a chemical sales
distribution company. At the domestic unit, the sales improvement
was primarily the result of increased penetration of the markets
for specialty polymers, with the successful introduction of new
roofing and filtration products. Sales of paper chemicals
increased due to overall improved demand.
Sales and revenues in the Professional Services and Other
Products segment increased 3%, with advances at three of the four
operating units in the segment. ARC professional services
registered a small revenue increase, primarily as the result of
efforts to increase foreign military consulting activities. In
1992, Casco's sales increased 9%, as both the original equipment
market and the aftermarket for automotive cigarette lighters
improved. The NCS unit experienced a small sales decline in 1992,
and the revenues of Centor, a real estate company, increased 7%.
<PAGE>
OPERATING INCOME
Operating income from continuing operations improved 6% in 1992, as
improvements at Kollsman, Warwick, Precoat Metals and Casco
Products more than offset declines at Gas Turbine, MEG, the
domestic chemicals unit and the ARC propulsion and professional
services units.
Operating income of the Aerospace segment was down 1%, as a
turnaround at Kollsman substantially offset a sharp decline at Gas
Turbine and a more modest decline at ARC propulsion. Gas Turbine's
profits declined 41%, primarily due to the poor conditions and
severe pricing pressures in the markets it serves. The operation
also incurred significant severance costs, as it reduced its
workforce in response to the restrictive market conditions.
Profits were further affected for the last six weeks of the year by
a government investigation at the Gas Turbine Orangeburg facility,
which began on November 19, 1992. Profits at ARC propulsion
declined in 1992, although less than sales. Management has been
able to "manage down," aggressively cutting costs in anticipation
of lower government contract revenue. Kollsman recorded a modest
profit in 1992, a significant improvement from 1991, when the unit
recorded a large loss. The division benefitted from a downsizing
program initiated in 1991, which was designed to generate
profitability at a significantly lower sales level.
Operating income for the Machinery and Metal Coatings segment
was on a par with 1991 results. The effect of strong improvements
at the Precoat Metals division was tempered by a loss at the
auxiliary press equipment unit. Can machinery results were
consistent with the prior year. Profit increases at metal coatings
were due to higher sales and increased capacity utilization. The
1992 loss at the overseas auxiliary press equipment operation
resulted from lower sales, combined with warranty, severance and
bad debt provisions. At the can machinery operations, the benefits
of increased sales were largely offset by increased development
costs for new can forming equipment, and higher start-up and
warranty costs related to the introduction of new can decorating
equipment.
Operating income for the Specialty Chemicals segment increased
10% in 1992. The operating performance of both units was ahead of
the prior year, although a fourth-quarter environmental clean-up
provision of $2.5 million reduced the domestic unit's results below
1991. Higher profits at the overseas unit resulted from increased
sales and savings derived from improved manufacturing processes.
Profits at the domestic unit, before the environmental provision,
increased 16%, the result of improved sales and the continuing
shift to a higher value-added sales mix.
Operating income for the Professional Services and Other
Products segment increased $3.4 million in 1992, as three of the
four units registered improvement. A change in the method of
allocating self-insurance losses to other operating segments also
favorably affected this segment in 1992. The results of the ARC
professional services units declined primarily as a result of
higher development costs for imaging software products. Casco
Products profits were up, the result of increased sales, improved
manufacturing efficiencies and tight cost controls. Losses at NCS
<PAGE>
narrowed in 1992, as costs were reduced and manufacturing
improvements were implemented. Centor profits were up 27% in 1992,
from a low 1991 base.
INTEREST EXPENSE
In 1992, interest expense declined $9.7 million due to both a lower
level of average borrowings and a reduction in the average cost of
funds. The reduction of debt was directly related to the Company's
cash generation program, while the average cost of borrowings
declined due to lower prevailing short-term interest rates.
OTHER, NET
Other, net registered a $4.7 million increase in expense in 1992,
primarily due to a $4.2 million increase in the Company's share of
start-up costs in the airbag joint venture and a $2.2 million
increase in the amortization of capitalized debt costs. A $2.5
million reduction in expenses related to the sale of accounts
receivable, which partially offset these increases, resulted
primarily from lower discount rates.
DISCONTINUED OPERATIONS
During 1992, the Company completed the sale of Valley Line, Sabine
Towing and Transportation and the Gemoco division of the engineered
services group for gross cash proceeds of $197.2 million. In
addition, $112.6 million of cash from asset sales and portfolio
run-off was generated by Sequa Capital.
In the fourth quarter of 1992, the Company recorded a $35.0
million pre-tax charge to recognize larger than expected losses
from Sequa Capital, a greater than expected loss on the fourth-
quarter sale of a discontinued business, higher projected
litigation expenses and recent adverse developments related to
contingent lease liabilities associated with an operation
discontinued and sold in an earlier year.
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
the Board of Directors,
Sequa Corporation:
We have audited the accompanying consolidated balance sheet
of Sequa Corporation (a Delaware corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated
statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
Sequa Corporation and subsidiaries as of December 31, 1993 and
1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, effective January 1, 1992, the Company changed its
method of accounting for income taxes.
ARTHUR ANDERSEN & CO.
New York, New York
March 21, 1994
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,780 $ 14,807
Receivables, net (Note 7) 227,688 200,345
Unbilled receivables, net (Note 8) 55,451 110,941
Inventories (Note 9) 290,323 312,310
Other current assets 63,350 40,791
Total current assets 661,592 679,194
INVESTMENTS
Net assets of discontinued operations
(Note 2) 188,964 198,542
Non-current receivables and other
investments 17,179 21,321
206,143 219,863
PROPERTY, PLANT AND EQUIPMENT, NET
(Note 10) 562,623 630,409
OTHER ASSETS
Excess of cost over net assets of
companies acquired 348,696 362,357
Deferred charges and other 24,467 20,645
373,163 383,002
TOTAL ASSETS $1,803,521 $1,912,468
<FN>
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
(Amounts in thousands, except share data)
AT DECEMBER 31,
1993 1992
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt
(Note 11) $ 23,998 $ 16,867
Accounts payable 114,529 116,525
Taxes on income (Note 12) 16,357 20,363
Accrued expenses (Note 15) 221,654 196,391
Total current liabilities 376,538 350,146
LONG-TERM DEBT, NET OF
CURRENT MATURITIES (Note 11) 624,092 689,970
DEFERRED TAXES AND OTHER LONG-TERM
LIABILITIES
Deferred taxes on income (Note 12) 27,039 41,437
Other long-term liabilities 200,068 179,249
227,107 220,686
SHAREHOLDERS' EQUITY (Notes 11, 13 and 16)
Preferred stock--$1 par value,
1,825,000 shares authorized; 797,000
shares of $5 cumulative convertible
stock issued at December 31, 1993
and 1992 (involuntary liquidation
value--$26,359 at December 31, 1993) 797 797
Class A common stock--no par value,
25,000,000 shares authorized; 7,054,000
shares issued at December 31, 1993 and
7,042,000 shares issued at
December 31, 1992 7,054 7,042
Class B common stock--no par value,
5,000,000 shares authorized; 3,861,000
shares issued at December 31, 1993
and 3,873,000 shares issued at
December 31, 1992 3,861 3,873
Capital in excess of par value 295,841 295,806
Cumulative translation adjustment (16,771) (10,583)
Retained earnings 383,617 453,486
674,399 750,421
Less: cost of treasury stock 98,615 98,755
TOTAL SHAREHOLDERS' EQUITY 575,784 651,666
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,803,521 $1,912,468
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
(Amounts in thousands, except per share)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
SALES AND REVENUES $1,696,968 $1,868,341
COSTS AND EXPENSES
Cost of sales and revenues 1,382,509 1,480,412
Selling, general and administrative 272,145 263,325
Restructuring charges (Note 4) 26,640 -
1,681,294 1,743,737
OPERATING INCOME 15,674 124,604
OTHER INCOME (EXPENSE)
Interest expense (66,501) (73,125)
Interest income 2,679 4,137
Gain on sale of ARC Professional
Services (Note 5) 12,408 -
Other, net (Note 6) (28,275) (11,816)
(79,689) (80,804)
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (64,015) 43,800
Income tax benefit (provision) (Note 12) 8,557 (25,900)
INCOME (LOSS) FROM CONTINUING OPERATIONS (55,458) 17,900
Loss from discontinued operations (Note 2) - (21,700)
LOSS BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (55,458) (3,800)
Extraordinary loss on early retirement
of debt, net of applicable income
taxes (Note 11) (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes
(Notes 1 and 12) - (7,337)
NET LOSS (63,982) (11,137)
Preferred dividend requirements (3,163) (3,168)
NET LOSS APPLICABLE TO COMMON STOCK $ (67,145) $ (14,305)
EARNINGS (LOSS) PER SHARE
Continuing operations $ (6.07) $ 1.53 $
Discontinued operations - (2.26)
Loss before extraordinary item and
cumulative effect of accounting change (6.07) (.73)
Extraordinary loss (.88) - -
Cumulative effect on prior years of
change in accounting for income taxes - (.76) -
Net loss $ (6.95) $ (1.49) $
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations
before income taxes $ (64,015) $ 43,800
Adjustments to reconcile income (loss) to
net cash provided by operating activities:
Depreciation and amortization 110,061 117,792
Provision for losses on receivables 7,051 6,528
Gain on sale of ARC Professional Services (12,408) -
Equity in losses of unconsolidated
subsidiaries 7,097 4,243
Other items not requiring (providing) cash 5,367 (3,350)
Changes in operating assets and liabilities,
net of businesses disposed and acquired:
Receivables 1,535 53,959
Inventories 16,158 25,027
Other current assets (17,895) 3,024
Accounts payable and accrued expenses 41,531 (8,560)
Other long-term liabilities 28,915 (574)
Net cash provided by continuing operations
before income taxes 123,397 241,889
Net cash provided by (used for) discontinued
operations before income taxes 2,750 (154,937)
Income taxes paid, net (5,111) (25,146)
Net cash provided by (used for) operating
activities 121,036 61,806
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (76,858) (92,685)
Sale of property, plant and equipment 29,628 4,801
Sale of businesses, net of cash sold 76,153 197,233
Other investing activities (53) (9,133)
Net cash provided by (used for) investing
activities 28,870 100,216
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt, net of issuance costs 292,320 -
Payments of debt (165,963) (140,340)
Early retirement of debt (222,661) -
Dividends paid (4,305) (8,628)
Proceeds from sale of accounts receivable - 84,006
Repurchase of accounts receivable (39,000) (90,000)
Proceeds from exercise of stock options - -
Net cash provided by (used for) financing
activities (139,609) (154,962)
Effect of exchange rate changes on cash
and cash equivalents (324) (5,163)
Net increase (decrease) in cash and cash
equivalents 9,973 1,897
Cash and cash equivalents at beginning of year 14,807 12,910
Cash and cash equivalents at end of year $ 24,780 $ 14,807
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION>
Class A Class B Capital in C
Amounts in thousands, Preferred Common Common Excess of T
except per share data Stock Stock Stock Par Value A
Earnings Stock
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 $ 797 $ 7,042 $3,873 $299,971
Net loss - - - -
Exercise of stock options - - - (304)
Revaluation and amortization
of restricted stock grant - - - (216)
Foreign currency translation
adjustment - - - -
Cash dividends:
Class A - $.60 per share - - - -
Class B - $.50 per share - - - -
Preferred - $5.00 per share - - - -
BALANCE AT DECEMBER 31, 1991 $ 797 $ 7,042 $3,873 $299,451
Net loss - - - -
Revaluation and amortization
of restricted stock grant - - - (174)
Treasury stock contributed to
pension plan - - - (3,471)
Foreign currency translation
adjustment - - - -
Cash dividends:
Class A - $.60 per share - - - -
Class B - $.50 per share - - - -
Preferred - $5.00 per share - - - -
BALANCE AT DECEMBER 31, 1992 $ 797 $ 7,042 $3,873 $295,806
Net loss - - - -
Revaluation and amortization
of restricted stock grant - - - 35
Exchange of common stock - 12 (12) -
Foreign currency translation
adjustment - - - -
Sale of foreign subsidiary - - - -
Cash dividends:
Class A - $.30 per share - - - -
(1,854) -
Class B - $.25 per share - - - -
(870) -
Preferred - $2.50 per share - - - -
Preferred dividends in
arrears - $2.50 per share - - - -
BALANCE AT DECEMBER 31, 1993 $ 797 $ 7,054 $3,861 $295,841
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
SEQUA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of Sequa Corporation (the
Company) include the accounts of all majority-owned subsidiaries,
including those of Sequa Receivables Corp. (SRC), a special purpose
corporation formed for the sale of eligible receivables. Under the
terms of the receivables purchase agreement, SRC's assets will be
available to satisfy its obligations to its creditors, which have
security interests in certain of SRC's assets, prior to any
distribution to the Company. All material accounts and
transactions between the consolidated subsidiaries have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the Consolidated Statement of Cash Flows, the
Company considers time deposits, certificates of deposit and
marketable securities with original maturities of three months or
less to be cash equivalents. Where the right of set-off exists the
Company has netted overdrafts with unrestricted cash and cash
equivalents.
INVENTORIES AND CONTRACT ACCOUNTING
Inventories are stated at the lower of cost or market. The cost of
approximately 34% of inventories in 1993 and 36% in 1992 was
determined by the last-in, first-out (LIFO) method of inventory
valuation. The remaining non-contract related inventories are
valued principally on a first-in, first-out basis (FIFO).
Inventoried costs relating to long-term contracts are stated at
actual or average costs, including engineering and manufacturing
labor and related overhead incurred, reduced by amounts identified
with sales. The costs attributable to sales reflect the estimated
costs of all items to be produced under the related contract.
PROPERTY, PLANT AND EQUIPMENT
For financial reporting purposes, depreciation and amortization are
computed using the straight-line method to amortize the cost of
assets over their estimated useful lives. Accelerated depreciation
methods are used for income tax purposes.
Upon sale or retirement of properties, the related cost and
accumulated depreciation is removed from the accounts, and any gain
or loss is reflected currently. Expenditures for maintenance and
repairs of $44,362,000 in 1993, $46,393,000 in 1992 and $43,130,000
in 1991 were expensed as incurred, while betterments and
replacements were capitalized.
EXCESS OF COST OVER NET ASSETS OF COMPANIES ACQUIRED
Excess of cost over net assets of companies acquired (goodwill) is
being amortized on a straight-line basis over periods not exceeding
<PAGE>
forty years. The Company periodically reviews goodwill to assess
recoverability, and impairments would be recognized in operating
results if a permanent diminution in value were to occur. The
amortization charged against earnings in 1993, 1992 and 1991 was
$10,821,000, $10,807,000 and $10,804,000, respectively.
Accumulated amortization at December 31, 1993 and 1992 was
$73,562,000 and $62,741,000, respectively.
FOREIGN CURRENCY TRANSLATION
The financial position and results of operations of the Company's
foreign subsidiaries are measured using local currency as the
functional currency. Assets and liabilities of operations
denominated in foreign currencies are translated into U.S. dollars
at exchange rates in effect at year-end, while revenues and
expenses are translated at average exchange rates prevailing during
the year. The resulting translation gains and losses are charged
directly to cumulative translation adjustment, a component of
shareholders' equity, and are not included in net income until
realized through sale or liquidation of the investment. Foreign
exchange gains and losses incurred on foreign currency transactions
are included in net income.
POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Statement of Financial Accounting Standards (SFAS) No. 106,
"Employer's Accounting for Postretirement Benefits Other Than
Pensions," was implemented by the Company in the first quarter of
1993. This statement requires the expected costs of providing
postretirement benefits to be accrued during the years an employee
provides services rather than the Company's past practice of
recognizing these costs on the pay-as-you-go (cash) basis. At
January 1, 1993, the Company's date of adoption, the actuarial
present value of the accumulated benefit obligation for
postretirement health care and other insurance benefits provided to
certain retirees was $3,074,000. The Company is recognizing this
transition obligation using the delayed recognition basis by
amortizing the obligation on a straight-line basis over 20 years.
The implementation of SFAS No. 106 in 1993 did not have a material
impact on the Company's results of operations and had no effect on
the Company's cash outlays for these retiree benefits.
SFAS No. 112, "Employer's Accounting for Postemployment
Benefits," was issued in November 1992 and must be implemented by
the first quarter of 1994. This statement requires benefits to
former employees after employment, but before retirement, to be
accrued when it is probable that a liability has been incurred and
the amount can be reasonably estimated. The impact of adopting
SFAS No. 112 will not have a material effect on the Company's
results of operations or financial position.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE
Environmental remediation and compliance costs are accrued when
environmental assessments and/or remedial efforts are probable, and
<PAGE>
the cost can be reasonably estimated. Accrued environmental
remediation and compliance costs include remedial investigation and
feasibility studies, outside legal, consulting and remediation
project management fees, projected cost of remediation activities,
site closure and postremediation monitoring costs.
REVENUE RECOGNITION
Generally, sales and revenues are recorded when products are
shipped or services are rendered. Long-term contracts are
accounted for under the percentage-of-completion method whereby
sales and revenues are primarily recognized based upon costs
incurred as a percentage of estimated total costs, and gross
profits are recognized under a more conservative "efforts-expended
method" primarily based upon direct labor costs incurred as a
percentage of estimated total direct labor costs. Changes in
estimates for sales and revenues, costs and gross profits are
recognized in the period in which they are determinable using the
cumulative catch-up method. Any anticipated losses on contracts
are charged to current operations as soon as they are determinable.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred
and amounted to approximately $17,166,000 in 1993, $17,557,000 in
1992 and $19,482,000 in 1991.
INCOME TAXES
The Company adopted the provisions of SFAS No. 109, "Accounting for
Income Taxes," as of January 1, 1992, and the cumulative effect of
this change is reported separately in the 1992 Consolidated
Statement of Income. Prior years' financial statements have not
been restated to apply the provisions of SFAS No. 109.
The adoption of SFAS No. 109 changed the Company's method of
accounting for income taxes from the deferred method as required by
Accounting Principles Board Opinion No. 11 (APB 11) to an asset and
liability approach. Under the deferred method, annual income tax
expense prior to 1992 was based on pre-tax financial accounting
income and deferred taxes were provided at current rates for timing
differences between financial accounting and taxable earnings.
Under the asset and liability method, deferred taxes are
established for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such
amounts are realized or settled.
Under SFAS No. 109, assets and liabilities acquired in purchase
business combinations are assigned their fair values assuming equal
tax bases, and deferred taxes are provided for lower or higher tax
bases. Under APB 11, values assigned were net of tax. In adopting
SFAS No. 109, the Company adjusted the carrying amounts of assets
and liabilities acquired in purchase business combinations. As a
result, pre-tax income from continuing operations was reduced by
<PAGE>
$1,520,000 for the year ended December 31, 1992 due to an increase
in depreciation expense resulting from the higher carrying amounts
of depreciable assets. The $7,337,000 charge recorded as of the
beginning of 1992 for the cumulative effect on prior years of the
change in the method of accounting for income taxes primarily
represents the impact of adjusting deferred taxes recorded for
assets and liabilities acquired in purchase business combinations.
In connection with the Company's periodic reevaluation of
foreign earnings estimated to be indefinitely reinvested, deferred
income taxes of $14,000,000 were provided in 1993 for the estimated
income tax liability that will be incurred upon the anticipated
future repatriation of approximately $65,000,000 of foreign
undistributed earnings in the form of dividends. Provision has not
been made for U.S. or additional foreign taxes on the remaining
$121,855,000 of undistributed earnings of foreign subsidiaries as
those earnings are intended to be permanently reinvested. Such
earnings would become taxable upon the sale or liquidation of these
foreign subsidiaries or upon the remittance of dividends. It is
not practicable to estimate the amount of deferred tax liability on
foreign undistributed earnings which are intended to be permanently
reinvested.
EARNINGS PER SHARE
Primary earnings per share for each of the respective years has
been computed by dividing the net earnings, after deducting
dividend requirements on cumulative convertible preferred stock, by
the weighted average number of common and common equivalent shares
outstanding during the year. The weighted average number of common
and common equivalent shares for 1993, 1992 and 1991 was 9,655,000
shares, 9,620,000 shares and 9,534,000 shares, respectively.
Fully diluted earnings per common share calculations for the
assumed conversion of the cumulative convertible preferred stock
were anti-dilutive in 1993, 1992 and 1991.
NOTE 2. DISCONTINUED OPERATIONS
During 1991, the Company adopted a formal plan to divest Sequa
Capital's investment portfolio and to sell the Valley Line and
Sabine Towing and Transportation operations in the Transportation
segment, as well as the engineered services and the men's apparel
units in the Professional Services and Other Products segment.
During 1992, the Company completed the asset sales of Valley
Line, Sabine Towing and Transportation and the Gemoco division of
engineered services and in 1993, the Sturm unit of engineered
services was sold. As of December 31, 1993, approximately
$329,000,000 of Sequa Capital's investment portfolio had been sold,
written down or otherwise disposed of since the Company adopted a
formal plan to divest the portfolio. During the same period, Sequa
Capital's debt was reduced from approximately $367,000,000 to zero.
Efforts continue to divest the men's apparel unit and to liquidate
<PAGE>
<TABLE>
the remaining Sequa Capital investment portfolio.
Operating results from discontinued operations were:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1992 1991
<S> <C> <C>
Loss from operations $ - $ (9,784)
Income tax benefit - 3,675
- (6,109)
Loss on disposal (35,000) (25,000)
Income tax benefit 13,300 9,500
(21,700) (15,500)
Total loss from discontinued
operations $(21,700) $(21,609)
</TABLE>
Sales and revenues of discontinued operations prior to the
measurement date were $130,429,000 in 1991.
Net assets of discontinued operations approximate net realizable
value and have been classified as noncurrent. A summary of the net
assets of discontinued operations is as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Funds designated for use by
Sequa Capital $ 571 $ 1,851
Receivables 6,380 11,760
Inventories 10,354 11,630
Sequa Capital investment portfolio,
net 176,363 220,309
Property, plant and equipment, net 3,519 5,747
Other assets 11,818 12,696
Total assets 209,005 263,993
Accounts payable 2,756 5,157
Accrued expenses 15,776 19,865
Debt - 37,432
Other long-term liabilities 1,509 2,997
Total liabilities 20,041 65,451
Net assets of discontinued operations $188,964 $198,542
</TABLE>
<PAGE>
<TABLE>
NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by (used for) discontinued operations:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C
Loss from discontinued operations
before income taxes $ - $ (35,000)
Depreciation and amortization 506 2,412
Loss provisions 2,562 27,369
Changes in working capital (64) (4,476)
Decrease in debt (37,432) (264,331)
Decrease (increase) in funds designated for
use by Sequa Capital 1,280 4,409
Investment in leasing assets (1,323) (2,201)
Principal repayments on leasing assets 1,621 15,396
Sale of leasing assets 41,463 97,213
Purchase of property, plant and equipment (607) (724)
Other changes in net assets (5,256) 4,996
$ 2,750 $(154,937)
</TABLE>
Non-cash investment activities:
In December 1993, the Company entered into two sale and
leaseback agreements related to various Chromalloy Gas Turbine and
Precoat Metals equipment. Aggregate cash proceeds from the sale of
$20,845,000 have been presented as an investing activity in the
accompanying Consolidated Statement of Cash Flows for the year
ended December 31, 1993. The sales resulted in a loss on one
transaction of $3,051,000, which is included in 1993 in Other, net
in the Consolidated Statement of Income, and a gain on the other
transaction of $5,738,000. The Company entered into agreements to
lease back the equipment and recorded fixed assets and capital
lease obligations in the amount of $20,845,000. The $5,738,000
gain on sale has been deferred and is being amortized to income
over the life of the related leaseback agreement.
In February 1991 and June 1991, the Company took title to
several food can and lid manufacturing businesses with a fair
market value of aproximately $25,400,000 from one of Sequa
Capital's borrowers in settlement of debt owed to Sequa Capital.
These transactions were accounted for as troubled debt
restructurings, as defined by SFAS No. 15. Based upon fair values
of the net assets received, Sequa Capital recorded pre-tax losses
of $46,200,000 in 1991 and $45,000,000 in 1990. These losses were
included in Loss from discontinued operations.
Other supplemental cash flow information:
<TABLE>
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Interest paid $70,052 $74,379 $80,947
</TABLE>
<PAGE>
NOTE 4. RESTRUCTURING CHARGE
During 1993, the Company recorded restructuring charges totaling
$26,640,000 primarily relating to plans adopted to reduce Gas
Turbine's investment in plants that are engaged in activities other
than the repair of components for flight engines, and to sell
excess machinery and permanently reduce the number of employees in
other Gas Turbine facilities. Included in the restructuring
charges are: severance costs, $7,500,000; write-down of equipment
to be sold, $4,100,000; write-down of inventory to net realizable
value, $3,200,000; relocation of equipment, $1,800,000; write-down
of other assets, $1,500,000; operating losses through date of sale,
$6,500,000; other costs, $2,040,000. As of December 31, 1993,
$20,689,000 of these amounts remained in Accrued expenses.
NOTE 5. SALE OF ARC PROFESSIONAL SERVICES
On December 30, 1993, the Company sold the stock of ARC
Professional Services for gross cash proceeds of $59,926,000, and
the purchaser assumed $4,524,000 of ARC Professional Services'
debt. The sale resulted in a pre-tax gain of $12,408,000. ARC
Professional Services had revenues of $162,606,000, $157,979,000
and $153,943,000 in 1993, 1992 and 1991, respectively, and
operating income of $10,699,000, $9,278,000 and $10,805,000 in
1993, 1992 and 1991, respectively. The consolidated financial
statements and accompanying footnotes reflect the operating results
of ARC Professional Services as continuing operations.
In connection with the sale of ARC Professional Services, the
Company was contractually required to purchase the seven percent
minority interest in Atlantic Research Corporation. In January
1994, the Company purchased the minority interest at a cost of
$16,701,000. The excess of the book value of the minority interest
acquired over the cost was $13,709,000.
NOTE 6. OTHER, NET
In 1993, Other, net included a $6,557,000 loss on interest rate
options sold, $3,136,000 of discount expense related to the sale of
accounts receivable, a $3,051,000 loss incurred on a sale and
leaseback transaction, a $7,551,000 equity loss in the Company's
unconsolidated airbag business, amortization of capitalized debt
costs in the amount of $4,158,000, and $2,517,000 in charges for a
minority shareholder's interest in the earnings of ARC. In 1992,
Other, net included $3,912,000 of discount expense related to the
sale of accounts receivable, a $4,709,000 equity loss in the
Company's unconsolidated airbag business, amortization of
capitalized debt costs in the amount of $3,074,000, and $1,704,000
in charges for a minority shareholder's interest in the earnings of
ARC. In 1991, Other, net included several income items, offset by
the following: $6,440,000 of discount expense related to the sale
of accounts receivable, a $497,000 equity loss in the Company's
unconsolidated airbag business, amortization of capitalized debt
costs in the amount of $909,000, and $1,704,000 in charges for a
minority shareholder's interest in the earnings of ARC.
<PAGE>
<PAGE>
NOTE 7. RECEIVABLES
In June 1993, Sequa Receivables Corporation (SRC), a wholly owned
special purpose subsidiary of the Company, amended and restated its
Receivables Purchase Agreement (the Receivables Agreement) and the
receivables sales program agent thereunder assigned its interest in
the Receivables Agreement to the group of banks which were party to
the Company's revolving credit agreement. Under the Receivables
Agreement, SRC was able to sell up to $65,000,000 of Company
receivables without recourse. The Receivables Agreement, which was
to expire in January 1994, was amended in December 1993 to allow
SRC to sell up to $45,000,000 of receivables through March 1997.
At December 31, 1993 and 1992, receivables as shown in the
Consolidated Balance Sheet were net of $45,000,000 and $84,006,000,
respectively, of receivable interests sold under the current and
previous receivable sale agreements. Other, net, in the
Consolidated Statement of Income includes discount expenses of
$3,136,000 in 1993, $3,912,000 in 1992, and $6,440,000 in 1991,
related to the sale of receivables under these agreements.
Receivables at December 31, 1993 and 1992 have been reduced by
allowances for doubtful accounts of $10,892,000 and $11,419,000,
respectively.
<TABLE>
NOTE 8. UNBILLED RECEIVABLES
Unbilled receivables consist of the following:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Fixed-price contracts $ 51,950 $ 83,240
Cost-reimbursement contracts 3,501 27,701
$ 55,451 $110,941
</TABLE>
Unbilled receivables on fixed-price contracts arise as revenues are
recognized under the percentage of completion method. These
amounts are billable at specified dates, when deliveries are made
or at contract completion, which is expected to occur within one
year. All amounts included in unbilled receivables are related to
long-term contracts and are reduced by appropriate progress
billings.
Unbilled amounts on cost-reimbursement contracts represent
recoverable costs and accrued profits not yet billed. These
amounts are billable upon receipt of contract funding, final
settlement of indirect expense rates, or contract completion.
Allowances for estimated nonrecoverable costs are primarily to
provide for losses which may be sustained on contract costs
awaiting funding and for the finalization of indirect expenses.
Unbilled amounts at December 31, 1993 and 1992 are reduced by
allowances for estimated nonrecoverable costs of $13,165,000 and
$17,941,000, respectively.
<PAGE>
<TABLE>
NOTE 9. INVENTORIES
The components of inventories are as follows:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Finished goods $ 75,284 $ 65,040
Work in process 100,341 128,206
Raw materials 111,866 115,453
Long-term contract costs 9,097 20,227
Progress payments (4,441) (12,312)
292,147 316,614
Adjustment to reduce
carrying value to LIFO basis (1,824) (4,304)
$290,323 $312,310
</TABLE>
<TABLE>
NOTE 10. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consists of the following:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Land and improvements $ 47,799 $ 48,411
Buildings and improvements 240,738 251,311
Machinery and equipment 691,412 698,942
Construction in process 49,815 56,182
1,029,764 1,054,846
Accumulated depreciation (467,141) (424,437)
$ 562,623 $ 630,409
/TABLE
<PAGE>
<PAGE>
<TABLE>
NOTE 11. INDEBTEDNESS
Long-term debt is as follows:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Senior unsecured notes, at 9 5/8%,
due 1999 $150,000 $150,000
Senior unsecured notes, at 8 3/4%, due 2001 125,000 -
Medium-term notes, at weighted average
interest rate of 9.9%, payable in varying
amounts from 1996 through 2001 100,000 100,000
Private placement, at 10.27%, due 1994 15,000 50,000
Revolving credit agreement - 83,000
Senior subordinated notes, at 10 1/2%,
due 1998 33,450 247,450
Senior subordinated notes at 9 3/8%,
due 2003 175,000 -
Capital lease obligations, at weighted
average interest rates of 9.3% and 11.0%,
respectively, payable in varying amounts
through 2004 27,025 44,951
Other, at weighted average interest rates of
7.0% and 8.8%, respectively, payable in
varying amounts through 2003 22,615 31,436
648,090 706,837
Less current maturities (23,998) (16,867)
TOTAL LONG-TERM DEBT $624,092 $689,970
</TABLE>
In December 1993, the Company entered into a new $150,000,000
revolving credit agreement with a group of banks that extends
through March 1997. This agreement replaced an existing revolving
credit agreement which was due to expire in January 1994. The rate
of interest payable under the new agreement is, at the Company's
option, a function of the prime rate or the Eurodollar rate. The
agreement requires the Company to pay a facility fee at an annual
rate of .5% of the maximum amount available under the credit line.
Under the new credit facility, borrowings up to approximately
$50,000,000 will be secured by the stock of certain of the
Company's subsidiaries. At December 31, 1993, there were no
borrowings outstanding under this facility; however, $18,500,000 of
the available credit line was used for the issuance of letters of
credit leaving $131,500,000 of unused credit available.
Revolving credit debt at December 31, 1992 was classified as
long-term, as the Company had the intent and the ability, supported
by the terms of its existing revolving credit agreement, to
maintain through January 1994 principal amounts outstanding under
the agreement.
<PAGE>
In December 1993, the Company sold $125,000,000 of 8 3/4%
senior unsecured notes due 2001 and $175,000,000 of 9 3/8% senior
subordinated notes due 2003, pursuant to a public offering. The
net proceeds from the offering together with proceeds from the sale
of ARC Professional Services were used to repay $90,000,000 of
indebtedness under the Company's existing revolving credit
agreement, to repay $35,000,000 of the private placement due 1994
and to execute a partial in-substance defeasance of the Company's
senior subordinated notes due 1998. In December 1993, the Company
called $211,000,000 principal amount of the senior subordinated
notes for redemption in January and February of 1994 and deposited
$222,661,000 of U.S. government securities into an irrevocable
trust to cover the principal amount called, the call premium of
$9,847,000 and interest during the 30-day call period of
$1,814,000. For financial reporting purposes, the debt has been
considered extinguished; accordingly, the government securities,
$211,000,000 principal amount of senior subordinated notes due 1998
and related unamortized debt issuance costs were removed from the
Consolidated Balance Sheet at December 31, 1993 and the in-
substance defeasance transaction resulted in an extraordinary loss
of $8,524,000, net of tax benefits of $4,590,000.
Based on the borrowing rates available to the Company for debt
with similar terms and average maturities, the fair value of
current and long-term debt at December 31, 1993 is approximately
$669,000,000 compared with $648,090,000 included in the
Consolidated Balance Sheet. The estimate is based on the present
value of future debt and interest payments using specific discount
rates which take into account the Company's credit ratings and
maturity dates for each significant issue of debt.
The Company has a policy aimed at managing interest rate risk
associated with its current and future anticipated borrowings;
accordingly, the Company has entered into various interest rate
swaps, options, and similar arrangements. Any premiums paid or
received in connection with these arrangements are deferred and
amortized as yield adjustments over appropriate future periods.
During 1993, the Company received proceeds of $9,796,000 from the
early termination of interest rate swaps that were accounted for as
hedges and that effectively converted $75,000,000 of fixed-rate
debt into variable-rate borrowings. The resulting gains were
deferred and are being amortized to income over the remaining
original lives of the swaps terminated. At December 31, 1993, the
Company had outstanding interest rate swaps expiring in 1996 that
are accounted for as hedges and that effectively convert
$50,000,000 of variable-rate borrowings under short-term financing
facilities to fixed-rate borrowings with an average interest rate
of 8.7%. Based upon market interest rates at the balance sheet
date, the Company would have to pay approximately $5,200,000 to
terminate its interest rate swaps outstanding at December 31, 1993.
In addition, the Company adjusted to market value the carrying
amount of interest rate options sold which gave the buyer the
future right to enter into interest rate swaps. The resulting loss
of $6,557,000 is included in Other, net in the Consolidated
Statement of Income for 1993.
The aggregate maturities of total long-term debt during the
next five years are $23,998,000 in 1994, $10,874,000 in 1995,
$14,620,000 in 1996, $2,176,000 in 1997 and $55,818,000 in 1998.
<PAGE>
The Company's loan agreements and indentures contain covenants
which, among other matters, restrict or limit the ability of the
Company to pay dividends, incur indebtedness, make capital
expenditures, repurchase common and preferred stock, and repurchase
the 9 3/8% senior subordinated notes due 2003. The Company must
also maintain certain ratios regarding interest coverage, leverage
and net worth, among other restrictions.
At December 31, 1993, under the terms of the Company's senior
subordinated notes due 1998, there is a $45,770,000 deficiency in
consolidated retained earnings available for the payment of cash
dividends and the repurchase of the Company's stock. As a result,
common and preferred stock dividends were not declared in the third
and fourth quarters of 1993. Under the terms of the Company's
preferred stock, upon the Company's failure to make six consecutive
quarterly dividend payments, the holders thereof, voting as a
class, will have the right to elect two members of the Board of
Directors of the Company at the next annual meeting of
shareholders. These special voting rights terminate when all
dividends in arrears have been paid. In addition, as of December
31, 1993, the Company's earnings were not sufficient to maintain a
consolidated interest coverage ratio of 2.0 to 1.0 which, pursuant
to the terms of the Company's senior notes due 2001 and the senior
subordinated notes due 2003, precludes the Company from paying
dividends among other restricted activities.
<TABLE>
NOTE 12. INCOME TAXES
The components of income (loss) from continuing operations before
income taxes were:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Domestic $(93,507) $ 13,371 $(15,373)
Foreign 29,492 30,429 49,392
$(64,015) $ 43,800 $ 34,019
</TABLE>
The income tax provision (benefit) on income (loss) from continuing
operations consisted of the following:
<TABLE>
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
United States Federal
Current $ 2,084 $(20,327) $ 8,044
Deferred (19,776) 29,257 (4,154)
State and local (119) 8,280 3,916
Foreign 9,254 8,690 11,194
$ (8,557) $ 25,900 $ 19,000
</TABLE>
<PAGE>
<TABLE>
The income tax provision (benefit) on income (loss) is different
from the amount computed by applying the U.S. Federal statutory
income tax rate of 35% in 1993 and 34% in 1992 and 1991 to income
(loss) from continuing operations before income taxes. The reasons
for this difference are as follows:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Computed income taxes at statutory
rate $(22,405) $14,892 $11,566
Foreign subsidiaries at different
tax rates 3,931 (656) (3,262)
State and local taxes, net of
Federal income tax benefit (1,164) 6,236 2,585
Investment and other tax credits - 9 3,040
Benefit from Foreign Sales Corporations (767) (1,273) (1,224)
Book basis of assets over (under)
tax basis (2,818) 6,365 7,248
Taxes on undistributed foreign
earnings 14,000 - -
Effect of tax rate change (2,012) - -
Other, net 2,678 327 (953)
$(8,557) $ 25,900 $ 19,000
</TABLE>
As discussed in Note 1, Summary of Significant Accounting
Policies, the Company adopted SFAS No. 109 as of January 1, 1992
and the cumulative effect of this change is reported separately in
the 1992 Consolidated Statement of Income. Prior years' financial
statements have not been restated to apply the provisions of SFAS
No. 109.
The 1993 and 1992 deferred tax provision represents the change
in deferred tax liabilities and assets from the beginning of the
year to the end of the year resulting from changes in the temporary
differences between the financial reporting basis and the tax basis
of the Company's assets and liabilities. These temporary
differences are determined in accordance with SFAS No. 109 and are
more inclusive in nature than timing differences as determined
under previously applicable accounting principles.
<PAGE>
<TABLE>
Temporary differences and carryforwards which gave rise to
deferred tax assets and liabilities are as follows:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993
Deferred Deferred
Tax Tax
Assets Liabilities
<S> <C> <C>
Accounts receivable allowances $ 3,002 $ -
Inventory valuation differences 18,912 4,728
Recognition of income on
long-term contracts 646 1,286
Depreciation 12,125 59,879
Lease and finance transactions - 94,682
Accruals not currently deductible
for tax purposes 99,723 -
Taxes on undistributed foreign earnings - 14,000
Tax net operating loss carryforward 31,146 -
Tax capital loss carryforward 33,448 -
Alternative minimum tax (AMT)
credit carryforward 36,681 -
All other 26,367 16,637
Subtotal 262,050 191,212
Valuation allowance (33,448) -
Total deferred taxes 228,602 191,212
</TABLE>
<TABLE>
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1992
Deferred Deferred
Tax Tax
Assets Liabilities
<S> <C> <C>
Accounts receivable allowances $ 3,743 $ -
Inventory valuation differences 16,944 4,644
Recognition of income on
long-term contracts 228 7,400
Depreciation 2,652 53,446
Lease and finance transactions - 103,090
Accruals not currently deductible
for tax purposes 87,761 -
Tax net operating loss carryforward 25,602 -
Tax capital loss carryforward 32,025 -
Alternative minimum tax (AMT)
credit carryforward 48,101 -
All other 19,815 20,832
Subtotal 236,871 189,412
Valuation allowance (32,025) -
Total deferred taxes $204,846 $189,412
</TABLE>
<PAGE>
The Company has a tax net operating loss carryforward of
$88,989,000 at December 31, 1993 which expires in 2006 through
2008 and will be used in the periods that net deferred tax
liabilities mature. The tax capital loss carryforward of
$95,565,000 at December 31, 1993 may expire unutilized in 1994 and
1995; accordingly, a valuation allowance has been established to
reduce the deferred tax asset recorded for the capital loss
carryforward to zero. The AMT credit carryforward can be carried
forward indefinitely.
During 1991, deferred taxes were provided for timing differences
in the recognition of income and expense for tax and financial
reporting purposes. The sources of significant timing differences
generated by income from continuing operations which gave rise to
deferred taxes were as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1991
<S> <C>
Recognition of income on long-term
contracts $(2,879)
Depreciation 4,776
State and local tax provision 1,006
Inventory valuation differences (7,741)
Accruals not deductible for tax purposes (2,607)
Amortization of change from cash basis
to accrual basis 2,515
Other, net 776
$(4,154)
</TABLE>
Note 13. Capital Stock
The Company's capital stock consists of Class A and Class B common
stock, and $5.00 cumulative convertible preferred stock. Holders
of Class A common stock have one vote per share, holders of Class
B common stock have ten votes per share and preferred stockholders
have one vote per share. Holders of Class B common stock are
entitled to convert their shares into Class A common stock at any
time on a share-for-share basis. Each share of $5.00 cumulative
convertible preferred stock is convertible into 1.322 shares of
Class A common stock. The preferred stock is redeemable, at the
option of the Company, at $100 per share.
At December 31, 1993, 4,633,434 shares of Sequa Class A common
stock were reserved for conversion of preferred and Class B common
stock and stock options.
<TABLE>
The following table summarizes shares held in treasury:
<CAPTION>
AT DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Class A common stock 864,052 864,052 984,044
Class B common stock 396,283 396,283 396,283
Preferred stock 163,489 163,489 163,489
</TABLE>
<PAGE>
NOTE 14. PENSION PLANS AND POSTRETIREMENT BENEFITS
The Company sponsors various noncontributory defined benefit
pension plans covering certain hourly and most salaried employees.
The defined benefit plans provide benefits based primarily on the
participant's years of service and compensation. It has been the
Company's policy to fund domestic plans to meet the minimum funding
requirements of the Employee Retirement Income Security Act
(ERISA). Plan assets consist primarily of equity and fixed income
securities.
The status of all the Company's significant funded domestic and
foreign defined benefit plans was as follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
Overfunded Underfunded Overfunded
Plans Plans Plans
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 64,381 $93,324 $129,911
Accumulated benefit obligation 65,451 95,865 133,659
Projected benefit obligation 72,148 105,452 151,208
Plan assets at fair value 70,966 92,144 144,872
Projected benefit obligation in
excess of plan assets 1,182 13,308 6,336
Unrecognized net transition asset
(obligation) (1,440) 7,487 6,794
Unrecognized prior service cost (1,935) 909 (760)
Unrecognized net gain (loss) 5,922 (11,105) (2,518)
Adjustment needed to recognize
minimum liability - 699 -
Total pension liability $ 3,729 $11,298 $ 9,852
Included in:
Accrued expenses 1,825 5,109 -
Other long-term liabilities 1,904 6,189 9,852
Total pension liability $ 3,729 $11,298 $ 9,852
</TABLE>
<PAGE>
<TABLE>
Assumptions used in the accounting for all the Company's significant
funded domestic and foreign defined benefit plans were:
<CAPTION>
AT DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Discount rate for obligations 7.5% 8.5% 8.5%
Rate of increase in compensation levels 4.5% 5.5% 6.0%
Expected long-term rate of return on
plan assets 9.0% 9.0% 9.0%
</TABLE>
The periodic net pension cost of all the Company's significant funded
domestic and foreign defined benefit plans includes the following
components:
<TABLE>
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Service cost for benefits earned $ 7,255 $ 8,408 $ 7,699
Interest cost on projected benefit
obligation 12,532 12,170 11,502
Actual return on plan assets (25,108) (9,175) (20,690)
Net amortization and deferral 11,623 (4,838) 9,168
$ 6,302 $ 6,565 $ 7,679
</TABLE>
The net amortization and deferral component of pension cost
includes $12,379,000 of deferred asset gains in 1993, $3,615,000 of
deferred asset losses in 1992, and $9,703,000 of deferred asset
gains in 1991. These unrecognized gains and losses resulted from
actual returns on plan assets differing from the expected returns
on plan assets. Such deferred gains and losses are subject to
amortization in future periods. Pension expense includes a
curtailment gain of $568,000 in 1992 and approximately $550,000 of
costs in 1991 attributable to employees of discontinued operations
who were participants in the Sequa Retirement Plan.
Employees not covered by the defined benefit plans discussed
above generally are covered by multiemployer plans as part of
collective bargaining agreements or small local plans. Pension
expense for these multiemployer plans and small local plans was not
significant in the aggregate.
The Company also has several nonfunded supplemental executive
retirement plans for certain key executives. These plans provide
for benefits that supplement those provided by the Company's other
retirement plans. At December 31, 1993, the accumulated benefit
<PAGE>
obligation for these plans of $10,317,000 is included in Other
long-term liabilities in the accompanying Consolidated Balance
Sheet. The projected benefit obligation at December 31, 1993
totaled $10,904,000 and the expense for these plans was $1,919,000
in 1993, $2,221,000 in 1992, and $2,497,000 in 1991.
Most of the Company's domestic non-union employees are
eligible to participate in the Company's 401(k) plans. Expenses
recorded for the Company's matching contributions under these plans
were $7,146,000 in 1993, $8,602,000 in 1992, and $8,092,000 in
1991.
SFAS No. 106, "Employer's Accounting for Postretirement
Benefits Other Than Pensions," was implemented by the Company in
the first quarter of 1993. This statement requires the expected
costs of providing postretirement benefits to be accrued during the
years an employee provides services rather than the Company's past
practice of recognizing these costs on the pay-as-you-go (cash)
basis. At January 1, 1993, the Company's date of adoption, the
actuarial present value of the accumulated benefit obligation for
postretirement health care and other insurance benefits provided to
certain retirees was $3,074,000. The Company is recognizing this
transition obligation using the delayed recognition basis by
amortizing the obligation on a straight-line basis over 20 years.
The actuarial and recorded liabilities for these post-
retirement benefits, none of which have been funded, are as
follows:
<TABLE>
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993
<S> <C>
Accumulated postretirement benefit
obligation:
Retirees $2,056
Employees fully eligible 282
Other active participants 650
Total 2,988
Unrecognized net gain 51
Unrecognized transition obligation (2,921)
Postretirement benefit liability $ 118
</TABLE>
<PAGE>
<TABLE>
Net periodic postretirement benefit cost includes the following
components:
<CAPTION>
(Amounts in thousands)
YEAR END DECEMBER 31, 1993
<S> <C>
Service cost for benefits earned $130
Interest cost on accumulated
postretirement benefit obligation 248
Amortization of the transition
obligation 153
Net periodic postretirement benefit
cost $531
</TABLE>
The accumulated postretirement benefit obligation was
determined using a discount rate of 7.5%, and an average health
care cost trend rate of approximately 14% progressively decreasing
to approximately 6% in the year 2008 and thereafter.
Increasing the assumed health care cost trend rates by one
percentage point in each year and holding all other assumptions
constant would increase the accumulated postretirement benefit
obligation as of December 31, 1993 by approximately $163,000 and
increase the aggregate of the service and interest cost components
of the net periodic postretirement benefit cost for 1993 by
approximately $24,000.
<TABLE>
NOTE 15. ACCRUED EXPENSES
The Company's accrued expenses consisted of the following items:
<CAPTION>
(Amounts in thousands)
AT DECEMBER 31, 1993 1992
<S> <C> <C>
Salaries and wages $ 34,052 $ 46,690
Restructuring costs 20,689 -
Current portion of environmental
liabilities 9,500 7,500
Current portion of self-insurance
liabilities 9,000 9,000
Current portion of pension liabilities 6,934 -
Warranty 9,848 5,714
Legal 6,884 6,537
Royalties 5,100 5,418
Interest 8,031 11,582
Insurance 6,402 10,459
Loss on interest rate options sold 6,557 -
Billings in excess of revenue recognized 3,037 7,580
Taxes other than income 4,962 4,906
Other 90,658 81,005
$221,654 $196,391
</TABLE>
<PAGE>
<TABLE>
NOTE 16. STOCK OPTIONS
The Company has incentive and nonqualified stock option plans in
effect. As of December 31, 1993, only options on Class A common
stock remained outstanding and exercisable. At December 31, 1993,
26,722 shares of Class A common stock were available for future
grant. Summarized data relating to stock options are as follows:
<CAPTION>
Year ended Number of Average option
Options December 31, Common Shares price per share
<S> <C> <C> <C>
Outstanding 1993 331,600 $32.68
Granted 1993 326,300 32.50
1992 - -
1991 4,500 53.60
Exercised 1993 - -
1992 - -
1991 9,948 36.41
Cancelled or expired 1993 157,647 63.19
1992 38,193 58.20
1991 34,224 63.24
Exercisable 1993 4,133 61.51
Available for future
grant 1993 26,722 -
1992 195,375 -
</TABLE>
<TABLE>
NOTE 17. OPERATING LEASES
Certain businesses of the Company utilize leased premises or
equipment under noncancelable agreements having initial or
remaining terms of more than one year. The majority of the real
property leases require the Company to pay maintenance, insurance
and real estate taxes. Rental expense totaled $24,780,000,
$25,708,000, and $28,136,000 in 1993, 1992 and 1991, respectively.
At December 31, 1993, future minimum lease payments under
noncancelable operating leases are as follows:
<CAPTION>
(Amounts in thousands)
<S> <C> <C>
1994 $10,585
1995 9,258
1996 7,609
1997 6,754
1998 4,464
After 1998 11,851
$50,521
</TABLE>
<PAGE>
<TABLE>
NOTE 18. SEGMENT INFORMATION
Operations by business segment is presented below:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
AEROSPACE
Sales $ 983,113 $1,167,496 $1,220,617
Operating income (loss) (40,892) 75,506 76,331
Identifiable assets 1,200,782 1,257,870 1,379,561
Capital expenditures 45,418 61,991 89,265
Depreciation and amortization 79,623 84,733 75,716
MACHINERY AND METAL COATINGS
Sales $ 254,680 $ 237,998 $ 218,330
Operating income 25,919 26,596 26,835
Identifiable assets 146,231 128,960 137,977
Capital expenditures 14,984 3,961 4,557
Depreciation and amortization 6,045 6,112 5,570
SPECIALTY CHEMICALS
Sales $ 214,866 $ 229,386 $ 213,165
Operating income 35,781 40,270 36,686
Identifiable assets 128,904 126,893 126,828
Capital expenditures 11,457 19,627 22,354
Depreciation and amortization 10,819 12,079 10,383
PROFESSIONAL SERVICES AND
OTHER PRODUCTS
Sales and revenues $ 244,309 $ 233,461 $ 226,675
Operating income 18,950 8,703 5,296
Identifiable assets 78,499 175,569 188,630
Capital expenditures 4,794 6,972 6,486
Depreciation and amortization 9,779 11,356 10,731
CORPORATE
Expenses $ (24,084) $ (26,471) $ (27,458)
Identifiable assets (a) 249,105 223,176 275,261
Capital expenditures 205 134 1,164
Depreciation and amortization 3,795 3,512 1,803
TOTALS
Sales and revenues $1,696,968 $1,868,341 $1,878,787
Operating income 15,674 124,604 117,690
Identifiable assets 1,803,521 1,912,468 2,108,257
Capital expenditures 76,858 92,685 123,826
Depreciation and amortization 110,061 117,792 104,203
<FN>
(a) Includes net assets of discontinued operations.
</TABLE>
<PAGE>
<TABLE>
Geographic data is presented below.
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
SALES AND REVENUES
United States $1,307,559 $1,457,650 $1,472,939
Europe 389,409 410,691 405,848
Total $1,696,968 $1,868,341 $1,878,787
OPERATING INCOME
United States $ 6,160 $ 116,988 $ 93,091
Europe 33,598 34,087 52,057
Corporate expenses (24,084) (26,471) (27,458)
Total $ 15,674 $ 124,604 $ 117,690
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
United States $1,237,066 $1,375,946 $1,481,196
Europe 317,350 313,346 351,800
Corporate and discontinued
operations 249,105 223,176 275,261
Total $1,803,521 $1,912,468 $2,108,257
</TABLE>
Operating income includes all costs and expenses directly related
to the segment or geographic area. Identifiable assets are those
used in each segment's operation.
No single commercial customer accounted for more than 5% of
sales and revenues in any year.
<TABLE>
Export sales were as follows:
<CAPTION>
(Amounts in thousands)
YEAR ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
Europe $118,666 $144,155 $137,981
Far East 69,917 85,867 90,482
Middle East 32,377 21,463 24,132
Canada 16,758 19,358 24,877
Central and South America 30,771 63,296 21,711
Other 11,474 17,242 21,683
$279,963 $351,381 $320,866
</TABLE>
The largest single contract with any one U.S. Government agency
accounted for 2% of sales in 1993, 2% in 1992 and 4% in 1991.
Prime and subcontracts with all government agencies accounted for
22%, 23% and 27% of sales and revenues in 1993, 1992 and 1991,
respectively.
<PAGE>
NOTE 19. GOVERNMENT INVESTIGATIONS
During the second quarter of 1993, the Company entered into
agreements with the U.S. Attorney's Office, Southern District of
New York (SDNY), and the Federal Aviation Administration (FAA) in
connection with investigations by these offices and other related
governmental agencies of the Company's Orangeburg facility and
certain of its then employees begun in November 1992. Management
believes that the investigations were in connection with
allegations that the Orangeburg facility has performed repairs on
certain parts in a defective manner and in violation of applicable
requirements. The investigations resulted in the Orangeburg
facility voluntarily surrendering its FAA repair operations in
April 1993. Gas Turbine's other operating facilities, as well as
work done for original equipment manufacturers at the Orangeburg
facility, were unaffected by the suspension.
The FAA restored the Orangeburg facility's FAA repair
station certificate on June 10, 1993, ending the suspension of
repair operations and resolving all FAA civil matters relating to
the Orangeburg facility. Subsequently, the U.S. Attorney's Office,
SDNY, entered into an agreement with the Company, under which it
declined to prosecute the Company in connection with its
investigation.
In April 1993, the Company signed a consent order with
the FAA providing for a non-punitive remedial payment by the
Company of $5,000,000, representing the costs incurred by the FAA
to investigate the Orangeburg facility and enforce its consent
decree. In addition, under the terms of the agreement with the
U.S. Attorney's Office, SDNY, the Company agreed to deposit
$2,500,000 into a fund (with up to an additional $2,500,000 to be
deposited, if needed) to cover the cost of testing and analyzing
jet engine parts seized by federal authorities during an early
stage of the investigations.
As a result of the investigations and the related
suspension, the Company incurred direct expenses in 1993 of
$12,800,000. Direct expenses included the remedial payment to the
FAA, the deposit of funds described above, severance payments and
related legal fees and expenses.
NOTE 20. CONTINGENCIES
At December 31, 1993, the Company was contingently liable for
outstanding letters of credit, not reflected in the accompanying
consolidated financial statements, in the aggregate amount of
approximately $66,271,000. In addition, the Company is involved in
a number of claims, lawsuits and proceedings (environmental and
otherwise) which arose in the ordinary course of business. Other
litigation is pending against the Company involving allegations
that are not routine and include, in certain cases, compensatory
and punitive damage claims. Included in this other class of
litigation is an arbitration
<PAGE>
proceeding that was formally commenced in 1992 to resolve a dispute
between the Egyptian Air Force and Chromalloy Gas Turbine. In the
damage portion of the arbitration hearing in October 1993,
Chromalloy Gas Turbine claimed $29,600,000 in damages (which
includes $17,500,000 of net assets in the accompanying Consolidated
Balance Sheet) and the Egyptian Air Force counterclaimed for
$46,500,000 in damages.
The ultimate legal and financial liability of the
Company in respect to all claims, lawsuits and proceedings referred
to above cannot be estimated with any certainty. However, in the
opinion of management, based on its examination of such matters,
its experience to date and discussions with counsel, the ultimate
outcome of these contingencies, net of liabilities already accrued
in the Company's Consolidated Balance Sheet, is not expected to
have a material adverse effect on the results of operations or
financial position of the Company.
<PAGE>
<TABLE>
NOTE 21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
(Amounts in thousands except per share)
1993 Quarter ended March 31 June 30 Sept. 30 Dec. 31 Year
<S> <C> <C>
Sales and revenues $427,221 $412,402
Cost of sales and revenues 342,954 349,316
Restructuring charges - 7,640
Operating income (loss) 16,463 (4,223)
Gain on sale of ARC Professional Services - -
Loss from continuing operations (3,495) (18,547)
Extraordinary loss - -
Net loss $ (3,495) $(18,547)
Loss per share:
Continuing operations $ (.44) $ (2.00) $
Extraordinary loss - - - (.88)
Net loss $ (.44) $ (2.00) $
1992 Quarter ended March 31 June 30 Sept. 30 Dec. 31 Year
Sales and revenues $460,867 $474,396
Cost of sales and revenues 365,308 373,682
Operating income 31,153 34,976
Income from continuing operations 3,352 5,136
Loss from discontinued operations - -
Income (loss) before cumulative effect
of accounting change 3,352 5,136
(17,724) (3,800)
Cumulative effect of accounting change (7,337) -
Net income (loss) $ (3,985) $ 5,136
Earnings (loss) per share:
Continuing operations $ .27 $ .45 $
Discontinued operations - - -
Income (loss) before cumulative
effect of accounting change .27 .45
Cumulative effect of accounting change (.76) - - -
Net income (loss) $ (.49) $ .45 $
<FN>
Net loss in the fourth quarter of 1993 includes a deferred tax provision of $14,000,000 for the estimated
income tax liability that will be incurred upon the anticipated repatriation of approximately $65,000,000
of foreign undistributed earnings in the form of dividends. Loss from discontinued operations for the
fourth quarter of 1992 includes a pre-tax charge of $35,000,000, or a reduction of earnings per share of
$2.26, to provide for additional losses on the disposal of operations discontinued during 1991.
/TABLE
<PAGE>
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
<TABLE>
ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is furnished pursuant to General
Instruction G(3) of Form 10-K and Instruction 3 to Item 401(b) of
Regulation S-K with respect to the executive officers of the
Registrant:
<CAPTION>
Name Age Position Held
<S> <C> <C> <C>
Norman E. Alexander (1) 79 Chairman of the Board, Chief
Executive Officer and Director
John J. Quicke (2) 44 President, Chief Operating
Officer and Director
Stuart Z. Krinsly (1) 76 Senior Executive Vice President-
General Counsel and Director
Gerald S. Gutterman (1) 65 Executive Vice President -
Finance and Administration
Antonio L. Savoca (3) 70 Senior Vice President -
Atlantic Research Operations
Martin Weinstein (4) 58 Senior Vice President -
Gas Turbine Operations
Ronald H. Wright (5) 60 Senior Vice President - Kollsman
<FN>
(1) Has served in the same or similar capacity for more than the
past ten years.
(2) President and Chief Operating Officer - Sequa Corporation
since March 1993; Senior Executive Vice President, Operations,
- Sequa Corporation from June 1992 to March 1993; from
February 1991 to June 1992, served as Vice President,
Financial Services, of the Company; from 1987 to February
1991, served as Vice President, Financial Projects, of the
Company. Served as Vice President and Controller of
Chromalloy American Corporation (which became a subsidiary of
the Company in 1987) from 1983 to 1987, and held various other
positions in Chromalloy American Corporation from 1979 to
1983. Has also served as President of Sequa Capital
Corporation (a subsidiary of the Company) since February 1991.
Has been a director of the Company since March 1993 and is a
member of the Executive Committee.
</TABLE>
<PAGE>
(3) Senior Vice President - Atlantic Research Operations since
February 1991; Vice President - Atlantic Research Operations
from April 1990 to February 1991. Also serves as President
and Chief Executive Officer of Atlantic Research Corporation
and has held those positions since October 1989. From
September 1985 to October 1989, Mr. Savoca served as a
consultant to a number of companies, including Atlantic
Research Corporation. From 1983 to September 1985, he was
Chief Executive Officer of Transpace Carriers, Inc. From 1963
to 1983, he held planning and management positions with
Thiokol Corporation, including, most recently, senior vice
president and general manager of its solid rocket motor
division.
(4) Vice President - Gas Turbine Operations since May 1987 and
Senior Vice President since February 1988. Also serves as
Chairman and Chief Executive Officer of Chromalloy Gas Turbine
Corporation (since January 1987) and previously was President
of the CompTech Group of Chromalloy American Corporation.
(5) Vice President and General Manager of Kollsman since August
1985 and Senior Vice President since February 1988.
Previously, he was employed by Sperry Corporation where he
served as Vice President of Sperry Defense Group from 1978 to
1983; Vice President of Operations for defense electronics
products/northwest at Sperry from 1983 to July 1985.
Sequa is not aware of any family relationship among any of the
above-named executive officers. Each of such officers holds his
office for a term expiring on the date of the annual organization
meeting of the Board of Directors, subject to the provisions of
Section 5 of Article IV of the Company's By-Laws relative to
removal of officers.
ITEMS 10 (IN PART) THROUGH 13
The Company intends to file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A
involving the election of directors not later than 120 days after
the end of its fiscal year ended December 31, 1993. Accordingly,
the information required by Part III (Items 10 (concerning Sequa's
directors and disclosure pursuant to Item 405 of Regulation S-K),
11, 12 and 13) is incorporated herein by reference to such
definitive proxy statement in accordance with General Instruction
G(3) to Form 10-K.
<PAGE>
<TABLE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM
8-K.
<CAPTION>
(a) 1. Financial Statements:
The following consolidated financial statements are included
in Part II of this Annual Report on Form 10-K:
Page Numbers
in this Annual
Report on Form
10-K
<S> <C>
Report of Independent Public Accountants. 29
Consolidated Balance Sheet as of December 31,
1993 and 1992. 30-31
Consolidated Statement of Income for the three
years ended December 31, 1993. 32
Consolidated Statement of Cash Flows for the three
years ended December 31, 1993. 33
Consolidated Statement of Shareholders' Equity for
the three years ended December 31, 1993. 34
Notes to Consolidated Financial Statements. 35-59
2. Financial Statement Schedules:
The following financial statement schedules are
included in Part IV of this report:
Report of Independent Public Accountants on
Supplemental Schedules. 68
Schedule II Amounts Receivable from Related
Parties, Underwriters, Promoters
and Employees other than Related
Parties 69
Schedule V Property, Plant and Equipment 70
Schedule VI Accumulated Depreciation of
Property, Plant and Equipment 71
Schedule VIII Valuation and Qualifying Accounts 72
<FN>
Other schedules are omitted because of the absence of conditions
under which they are required or because the required information
is given in the financial statements or notes thereto.
</TABLE>
<PAGE>
3. Exhibits
Exhibit No. (Referenced to Item 601(b) of Regulation S-K)
3.1 - Restated Certificate of Incorporation of Sequa and two
Certificates of Amendment of the Restated Certificate
of Incorporation of Sequa (incorporated by reference
to Exhibit 4(a) of Sequa's Registration Statement No.
33-12420 on Form S-8 filed on March 6, 1987).
3.2 - Certificate of Amendment of Certificate of
Incorporation of Sequa, dated May 7, 1987
(incorporated by reference to Exhibit 3(b) of Sequa's
Annual Report on Form 10-K for the year ended December
31, 1988, filed on March 28, 1989).
3.3 - Restated and amended (as of August 26, 1993) By-laws
of Sequa, (incorporated by reference to Exhibit 3.3 of
Sequa's Registration Statement No. 33-50843 on Form S-
1, filed on October 29, 1993).
4.1 - Indenture, dated as of December 15, 1993, by and
between Sequa and Bankers Trust Company, as Trustee,
and Form of 9 3/8% Senior Subordinated Note due
December 15, 2003 (incorporated by reference to
Exhibits 4.7 and 4.3, respectively, of Sequa's
Registration Statement on Form 8-A, File No. 1-804,
filed on January 25, 1994).
4.2 - Indenture, dated as of December 15, 1993, by and
between Sequa and IBJ Schroder Bank & Trust Company,
as Trustee, and Form of 8 3/4% Senior Note due
December 15, 2001 (incorporated by reference to
Exhibits 4.6 and 4.2, respectively, of Sequa's
Registration Statement on Form 8-A, File No. 1-804,
filed on January 25, 1994).
4.3 - Indenture with respect to $250,000,000 of Sequa
10-1/2% senior subordinated notes due 1998
(incorporated by reference to Amendment No. 1 to Form
S-3 Registration Statement No. 33-21047 filed on April
17, 1988).
4.4 - Indenture, dated as of September 1, 1989, by and
between Sequa and The First National Bank of Chicago,
as Trustee, with respect to an aggregate of $250
million of senior debt (incorporated by reference to
Exhibit 4.1 of Sequa's Form S-3 Registration Statement
No. 33-30959, filed on September 12, 1989).
4.5 - First Supplemental Indenture, dated as of October 15,
1989, by and between Sequa and The First National Bank
of Chicago, as Trustee (incorporated by reference to
Exhibit 4.5 of Sequa's Registration Statement on Form
8-A, File No. 1-804, filed on January 25, 1994).
<PAGE>
4.6 - Prospectus Supplement, dated October 19, 1989, for
$150 million of senior unsecured 9 5/8% Notes due
October 15, 1999 (incorporated by reference to Sequa's
filing under Rule 424 (b)(2) on October 20, 1989).
4.7 - Purchase Agreement, dated October 19, 1989, by and
between Sequa and certain Underwriters, and Form of
Supplemental Indenture, dated as of October 15, 1989,
both with respect to $150 million of senior unsecured
9 5/8% Notes due October 15, 1999 (incorporated by
reference to Sequa's Report on Form 8-K, File No. 1-
804, filed on October 25, 1989) and Form of 9 5/8%
Note (incorporated by reference to Exhibit 4.1 of
Sequa's Registration Statement on Form 8-A, File No.
1-804, filed on January 25, 1994).
4.8 - Prospectus and Prospectus Supplement, both dated April
22, 1991, with respect to $100 million of medium-term
notes (incorporated by reference to Sequa's filing
under Rule 424 (b)(5) on April 23, 1991).
4.9 - Sales Agency and Distribution Agreement, executed as
of April 22, 1991, by and among Sequa and Bear,
Stearns & Co., Inc. and Merrill Lynch & Co., with
respect to $100 million of medium-term notes, and
Forms of Notes thereunder (incorporated by reference
to Exhibits 4.1 and 12.1 of Sequa's Report on Form
8-K, File No. 1-804, filed on April 25, 1991).
4.10 - Instruments with respect to other long-term debt of
Sequa and its consolidated subsidiaries are omitted
pursuant to Item 601(b)(4)(iii) of Regulation S-K
since the amount of debt authorized under each such
omitted instrument does not exceed 10 percent of the
total assets of Sequa and its subsidiaries on a
consolidated basis. Sequa hereby agrees to furnish a
copy of any such instrument to the Securities and
Exchange Commission upon request.
10.1 - Amended and Restated Receivables Purchase Agreement,
dated as of June 24, 1993, among Sequa, Sequa
Receivables Corp., Chemical Bank, Barton Capital
Corporation and Westpac Banking Corporation
(incorporated by reference to Exhibit 10.1 of Sequa's
Report on Form 8-K, File No. 1-804, filed on July 12,
1993) and Amendments No. 1 (dated as of September 30,
1993), No. 2 (dated as of December 1, 1993) and No. 3
(dated as of December 14, 1993) thereto (filed
herewith).
<PAGE>
10.2 - $150 Million Amended and Restated Credit Agreement,
dated as of December 14, 1993, among Sequa
Corporation, The Bank of New York, The Bank of Nova
Scotia, Chemical Bank, Bank of America NT & SA, Chase
Manhattan Bank, N.A. and The Nippon Credit Bank, Ltd.
and certain other lenders (filed herewith).
10.3 Stock Purchase Agreement, dated December 30, 1993, by
and among Sequa and various of its affiliates and
Computer Sciences Corporation and its affiliates, in
connection with the sale of ARC Professional Services
Group, Inc., and certain related entities
(incorporated by reference to Exhibit 10.1 of Sequa's
Report on Form 8-K, File no. 1-804, filed on January
15, 1994).
COMPENSATORY PLANS OR ARRANGEMENTS
10.4 - 1986 Key Employees Stock Option Plan (incorporated by
reference to Annex B of Sequa's Registration Statement
No. 33-12420 on Form S-8 filed March 6, 1987).
10.5 - 1988 Key Employees Stock Option Plan (incorporated by
reference to Annex A of Sequa's Registration Statement
No. 33-30711 on Form S-8 filed August 25, 1989).
10.6 - Sequa's Supplemental Executive Retirement Plans I, II,
and III, effective as of January 1, 1990 (incorporated
by reference to Exhibit 10(c) of Sequa's Annual Report
on Form 10-K, File No. 1-804, for the year ended
December 31, 1990, filed on April 1, 1991) and
amendments thereto (incorporated by reference to
Exhibit 10(c) of Sequa's Annual Report on Form 10-K,
for the year ended December 31, 1991, filed on March
30, 1992).
10.7 - Management Incentive Bonus Program of Sequa for
Corporate Executive Officers and Corporate Staff
(filed herewith).
10.8 - Management Incentive Bonus Programs of Atlantic
Research Corporation for Corporate Staff (filed
herewith).
10.9 - Letter Agreements, dated May 24, 1984, by and between
Norman E. Alexander and Sequa, and Stuart Z. Krinsly
and Sequa (incorporated by reference to Exhibit 10(h)
of Sequa's Annual Report on Form 10-K, File No. 1-804,
for the year ended December 31, 1989, filed on March
30, 1990).
10.10 - Letter Agreements, dated April 30, 1990, by and
between Norman E. Alexander and Sequa, and Stuart Z.
Krinsly and Sequa (incorporated by reference to
Exhibit 10 (h) of Sequa's Annual Report on Form 10-K,
File No. 1-804, for the year ended December 31, 1990,
filed on April 1, 1991).
<PAGE>
10.11 - Employment Agreement, dated April 1, 1993, by and
between John J. Quicke and Sequa, (incorporated by
reference to Exhibit 10(k) of Sequa's Annual Report on
Form 10-K, File No. 1-804 for the year ended December
31, 1992 filed on March 31, 1993).
10.12 - Employment Agreement, dated May 6, 1991, by and
between Antonio L. Savoca and Sequa, (incorporated by
reference to Exhibit 10(1) of Sequa's Annual Report on
Form 10-K for the year ended December 31, 1991, filed
on March 30, 1992). Amendment thereto, dated August
18, 1992 (incorporated by reference to Exhibit 10(1)
of Sequa's Annual Report on Form 10-K, File No. 1-804
for the year ended December 31, 1992, filed on March
31, 1993); and Amendment thereto, dated June 10, 1993
(filed herewith).
10.13 - Employment Agreement, dated as of October 1, 1991, by
and between Martin Weinstein and Chromalloy Gas
Turbine Corporation, (incorporated by reference to
Exhibit 10(n) of Sequa's Annual Report on Form 10-K,
File No. 1-804 for the year ended December 31, 1991,
filed on March 30, 1992) and Amendment thereto, dated
as of June 1, 1993 by and between Chromalloy Gas
Turbine Corporation and Martin Weinstein (incorporated
by reference to Exhibit 10.14 of Sequa's Registration
Statement No. 33-50843 on Form S-1 filed on October
29, 1993).
10.14 - Executive Life Insurance Plan of Sequa, (incorporated
by reference to Exhibit 10(o) of Sequa's Annual Report
on Form 10-K, File No. 1-804 for the year ended
December 31, 1991, filed on March 30, 1992).
10.15 - Key Employee Medical Insurance Plan of Sequa,
(incorporated by reference to Exhibit 10(p) of Sequa's
Annual Report on Form 10-K, File No. 1-804 for the
year ended December 31, 1991, filed on March 30,
1992).
10.16 - Exec-U-Care Medical Reimbursement Insurance Trust of
Atlantic Research Corporation, (incorporated by
reference to Exhibit 10(q) of Sequa's Annual Report on
Form 10-K, File No. 1-804 for the year ended December
31, 1991, filed on March 30, 1992).
10.17 - Cafeteria Plan of Atlantic Research Corporation,
(incorporated by reference to Exhibit 10(r) of Sequa's
Annual Report on Form 10-K, File No. 1-804 for the
year ended December 31, 1991, filed on March 30,
1992).
10.18 - Supplemental Retirement Program of Atlantic Research
Corporation, (incorporated by reference to Exhibit
10(s) of Sequa's Annual Report on Form 10-K, File No.
1-804 for the year ended December 31, 1991, filed on
March 30, 1992).
<PAGE>
11.1 - Computation of earnings per share, filed herewith.
21.1 - List of subsidiaries of Sequa, filed herewith.
24.1 - Consent of Independent Public Accountants, filed
herewith.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the last quarter of
1993.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES
To Sequa Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in Sequa
Corporation's Annual Report on Form 10-K, and have issued our
report thereon dated March 21, 1994. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole.
The schedules listed in Item 14(a)2 are the responsibility of the
Company's management and are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
New York, New York
March 21, 1994
<PAGE>
<TABLE>
SCHEDULE II
SEQUA CORPORATION AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS, PROMOTERS
AND EMPLOYEES OTHER THAN RELATED PARTIES
(Thousands of Dollars)
<CAPTION>
Balance,
Beginning Balance
Name of Debtor of year Additions Deductions End of Year
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
[1] J. Quicke $ - $300 $ - $300
[2] M. Weinstein $ - $300 $ - $300
<FN>
[1] President, Chief Operating Officer and Director. In connection with Mr.
Quicke's relocation to New York, the Company made a $300 interest-free
loan, payable on demand, and secured by a second mortgage on his new
home.
[2] Senior Vice President, Gas Turbine operations. In connection with Mr.
Weinstein's relocation to New York, the Company has made a $300
interest-free loan payable in 1997.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES SCHEDULE V
PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(Thousands of Dollars)
<CAPTION>
Balance Other Balance
at Additions changes at
beginning at Translation add (deduct) end
Classification of year cost (1) Retirements adjustment (2) of year
YEAR ENDED
DECEMBER 31, 1993
<S> <C> <C> <C> <C
Land and improvements $ 48,411 $ 1,613 $ (268)
Building and improvements 251,311 5,191 (5,881)
Machinery and equipment 698,942 48,653 (47,826)
Construction in progress 56,182 42,246 -
$1,054,846 $ 97,703 $(53,975)
YEAR ENDED
DECEMBER 31, 1992
Land and improvements $ 48,021 $ 913 $ (4)
Building and improvements 237,554 4,595 (6,173)
Machinery and equipment 655,160 42,873 (17,258)
Construction in progress 79,238 44,304 -
$1,019,973 $ 92,685 $(23,435)
YEAR ENDED
DECEMBER 31, 1991
Land and improvements $ 39,850 $ 5,241 $ (1,088)
Building and improvements 211,617 14,574 (3,986)
Machinery and equipment 544,094 56,030 (20,002)
Construction in progress 50,771 47,981 -
$846,332 $123,826 $(25,076)
<FN>
NOTE:
(1) 1993 includes $20,845 of machinery and equipment reacquired under sale and leaseback transactions.
(2) 1993 includes $58,112 of property, plant and equipment of businesses sold. 1992 includes a $9,123
write-down of excess equipment to net realizable value and a $6,863 increase in fixed assets acquired
in purchase business combinations which resulted from the adoption of SFAS 109, "Accounting for
Income Taxes." 1991 includes $73,460 of property, plant and equipment of companies acquired during
the year. This column also includes transfers from construction in progress to the other various
classes of fixed assets for all three years.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES SCHEDULE VI
ACCUMULATED DEPRECIATION OF PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(Thousands of Dollars)
<CAPTION>
Balance Additions Other Balance
at charged to changes at
beginning cost and Translation add (deduct) end
Classification of year expenses(1) Retirements adjustment (2) of year
<S> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1993
Land and improvements $ 1,383 $ 531 $ - $
Building and improvements 73,183 15,440 (1,888)
Machinery and equipment 349,871 77,259 (15,157)
$424,437 $93,230 $ (17,045) $
YEAR ENDED
DECEMBER 31, 1992
Land and improvements $ 893 $ 504 $ (1) $
Building and improvements 65,275 15,254 (5,943)
Machinery and equipment 288,013 83,546 (9,454) (
$354,181 $99,304 $(15,398) $(
YEAR ENDED
DECEMBER 31, 1991
Land and improvements $ 724 $ 172 $ (3) $
$ - $ 893
Building and improvements 53,716 13,773 (2,491)
Machinery and equipment 231,073 75,861 (18,269)
$285,513 $89,806 $(20,763) $
<FN>
NOTE:
(1) Depreciation is generally provided on the straight-line method based upon the estimated useful
lives of the various classes of assets.
(2) In 1993, Other changes primarily represents the accumulated depreciation on the property, plant and
equipment of businesses sold.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION AND SUBSIDIARIES SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(Thousands of Dollars)
<CAPTION>
Additions Other
Balance Charged to Deductions Changes Balance
Beginning Costs and from Additions End of
Description of Year Expenses Reserves (Deductions) Year
<S> <C> <C>
Year Ended December 31, 1993:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $11,419 $ 4,178
Allowance for unbilled receivables 17,941 2,873
Reserve for losses of
discontinued operations 43,321 -
Year Ended December 31, 1992:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $17,758 $ 2,706
Allowance for unbilled receivables 14,788 3,822
Reserve for losses of
discontinued operations 23,444 35,000
Year Ended December 31, 1991:
Reserves deducted from balance sheet
captions to which they apply-
Allowance for billed receivables $11,003 $ 7,690
Allowance for unbilled receivables 13,832 6,496
- 14,788
Reserve for losses of
discontinued operations 25,314 25,000
<FN>
Note:
(1) Allowance for billed receivables of business sold.
(2) Allowance for unbilled receivables of business sold.
(3) EPA liabilities reclassified to other long-term liabilities.
(4) Allowance for billed receivables of businesses acquired.
</TABLE>
<PAGE>
<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SEQUA CORPORATION
Date: March 24, 1994 By: /S/ GERALD S. GUTTERMAN
Gerald S. Gutterman
Executive Vice President,
Finance and Administration
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on March
24, 1994.
<S> <C>
By: /S/ NORMAN E. ALEXANDER Chairman of the Board, Chief Executive
Norman E. Alexander Officer and Director
By: /S/ JOHN J. QUICKE President, Chief Operating Officer
John J. Quicke and Director
By: /S/ STUART Z. KRINSLY Senior Executive Vice President,
Stuart Z. Krinsly General Counsel and Director
By: /S/ GERALD S. GUTTERMAN Executive Vice President, Finance and
Gerald S. Gutterman Administration
By: /S/ WILLIAM P. KSIAZEK Vice President and Controller
William P. Ksiazek
By: Director
Alvin Dworman
By: /S/ A. LEON FERGENSON Director
A. Leon Fergenson
By: /S/ RAYMOND FRANKEL Director
Raymond Frankel
By: /S/ DAVID GOTTESMAN Director
David S. Gottesman
By: /S/ DONALD D. KUMMERFELD Director
Donald D. Kummerfeld
By: /S/ RICHARD S. LEFRAK Director
Richard S. LeFrak
By: /S/ FRED R. SULLIVAN Director
Fred R. Sullivan
By: Director
Gerald Tsai, Jr.
</TABLE>
<TABLE>
SEQUA CORPORATION & SUBSIDIARIES Exhibit 11.1
CALCULATION OF PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
FOR THE YEARS ENDED DECEMBER 31,
(Thousands of Dollars except per share data)
<CAPTION>
Primary 1993 1992 1991
<S> <C> <C> <C
Earnings
Earnings (loss) from continuing operations $(55,458) $ 17,900
Preferred stock dividend requirements (3,163) (3,168)
Net earnings (loss) from continuing operations
applicable to common stock (58,621) 14,732
Net loss from discontinued operations - (21,700)
Loss applicable to common stock
before extraordinary item and before
cumulative effect of accounting change (58,621) (6,968)
Extraordinary loss (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes - (7,337)
Net loss applicable to common stock $(67,145) $(14,305)
Shares
Common and common equivalent shares 9,655 9,620
Primary earnings (loss) per common share
Continuing operations $ (6.07) $ 1.53 $
Discontinued operations - (2.26)
Loss before extraordinary item
and cumulative effect of accounting change (6.07) (.73)
Extraordinary loss (.88) - -
Cumulative effect on prior years of change
in accounting for income taxes - (.76) -
Net loss $ (6.95) $ (1.49) $
Fully Diluted
Earnings
Earnings (loss) from continuing operations $(55,458) $ 17,900
Net loss from discontinued operations - (21,700)
Loss applicable to common stock
before extraordinary item and cumulative
effect of accounting change (55,458) (3,800)
Extraordinary loss (8,524) -
Cumulative effect on prior years of change
in accounting for income taxes - (7,337)
Net loss $(63,982) $(11,137)
Shares
Common and common equivalent shares 10,493 10,458
Fully diluted earnings (loss) per common
share (a)
Continuing operations $ (5.29) $ 1.71 $
Discontinued operations - (2.07)
Loss before extraordinary item
and cumulative effect of accounting change (5.29) (.36)
Extraordinary loss (.81) - -
Cumulative effect on prior years of change
in accounting for income taxes - (.70) -
Net loss $ (6.10) $ (1.06) $
Shares
Weighted average common shares outstanding 9,655 9,620
Preferred stock assumed to be converted 838 838
Common and common equivalent shares 10,493 10,458
<FN>
(a) Fully diluted earnings per share calculation is anti-dilutive; therefore,
fully diluted earnings per share have not been presented in the Consolidated
Statement of Income.
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
There follows alphabetically a list of domestic and foreign
subsidiaries of the registrant as of December 31, 1993. The names
of particular subsidiaries which, considered in the aggregate as a
single subsidiary would not constitute a significant subsidiary as
of December 31, 1993 within the meaning of Regulation S-X, have
been omitted:
<CAPTION>
State or Other
Jurisdiction
in which
Name of Subsidiary Incorporated
<S> <C>
Atlantic Research Corporation Delaware
Casco Investors Corporation New York
Casco Products Corporation Delaware
Casco Products Ltd. England
The Centor Company Missouri
Chromalloy Aeroservices International Ltd. Delaware
Chromalloy American Corporation Delaware
Chromalloy Castings Miami Corporation Delaware
Chromalloy Castings Tampa Corporation Delaware
Chromalloy Compressor Technologies, Inc. Delaware
Chromalloy Gas Turbine Corporation Delaware
Chromalloy Heavy Industrial Turbines, Ltd. Delaware
Chromalloy U.K. Ltd. England
Chromalloy Wallkill Corp. New York
Chromizing, S.A. Mexico
CRO Foreign Sales Corporation U.S. Virgin Islands
Gas Turbine Corp., Ltd. Scotland
GTC Gas Turbine, Ltd. England
Heurchrome, S.A. France
Jamo Motrizjen B.V. Netherlands
Jet Services West California
Malichaud et CIE S.A. France
Materiels Equipements Graphiques France
Nortech Acquisition Corp. Delaware
Northern Can Systems, Inc. Delaware
Sequa Capital Corporation New York
Sequa Chemicals Corporation Delaware
Sequa Export Corporation U.S. Virgin Islands
Sequa Receivables Corporation Delaware
SNL Insurance, Ltd. Bermuda
Specialized Overhaul Services Group, Inc. Delaware
SunRise Insurance Company Vermont
Turbine Support Europa B.V. Netherlands
Turbochrome, Ltd. Israel
TurboCombustor Technology, Inc. Florida
Warwick International Group Plc England
</TABLE>
Exhibit 24.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Annual Report on Form
10-K, into the Company's previously filed Registration Statements
on Form S-8 (File No. 33-12420) and on Form S-3 (File No.
33-47552).
ARTHUR ANDERSEN & CO.
New York, New York
March 28, 1994
EXHIBIT 10.12
Sequa Corporation
200 Park Avenue
New York, New York 10166
212 986-5500
212 370-1969 (fax)
June 10, 1993
Mr. Antonio L. Savoca
1200 Crystal Drive
Suite 1013
Arlington, VA 22202
Dear Tony:
Reference is made to your Employment Agreement, dated May 6,
1991, as revised on August 18, 1992 (together, the "Agreement").
This is to confirm that paragraph 3(e) of the Agreement is hereby
amended to read in its entirety as follows:
"(e) Payment by Arc of a monthly housing allowance in the
amount of $3,163.00, for your residence located at 1200
Crystal Avenue, Suite 1013, Arlington, Virginia 22202, until
such time that you sell your present home in Utah; and"
Except as set forth above, this letter shall not amend or
affect your Agreement, said Agreement, as hereby amended, to
remain in full force and effect. If the above is in accordance
with your understanding, please sign the enclosed duplicate of
this letter and return it to the undersigned. Upon our receipt
of such fully-executed copy, this shall constitute a binding
agreement between us.
SEQUA CORPORATION
By:
John J. Quicke
Chief Operating Officer
AGREED AND ACCEPTED:
By:
Antonio L. Savoca
dated
EXHIBIT 10.7
SEQUA CORPORATION
MANAGEMENT INCENTIVE
BONUS PROGRAM
CORPORATE EXECUTIVE OFFICERS
AND
CORPORATE STAFF
<PAGE>
INDEX
I. General Outline
II. Bonus Program
III. Policies & Procedures
IV. Exhibits
2
<PAGE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE BONUS PROGRAM
GENERAL OUTLINE
The purpose of implementing Sequa Corporation's Management
Incentive Bonus Program (MIBP) is to improve the Company's
performance through the efforts of key executives and management
personnel who are in position to significantly contribute to
operating results.
Specific financial and performance goals will be established
in the beginning of the plan year for all MIBP participants, with
the exception of Corporate Executive Officers, who will be
measured exclusively on attainment of the financial goal.
The MIBP will provide substantial rewards for non-executive
officer participants who accomplish or exceed targeted goals at
the end of the plan year. The bonus paid to each such participant
will be based on a combination of (a) the overall financial
performance of the company and (b) performance consideration by
executive management. The Corporate Executive Officers' bonuses
will be certified by the Compensation Committee of The Board of
Directors after completion of the fiscal year provided that the
required financial goals (as set forth in the exhibits to this
plan) have been met.
<TABLE>
I. MIBP PARTICIPANTS AND POTENTIAL PAYOUT LEVELS (PERCENTAGE OF SALARY)
<CAPTION>
MINIMUM BONUS BONUS LEVEL MAXIMUM BONUS
LEVEL ("PAR" LEVEL
(MINIMUM PERFORMANCE) (OUTSTANDING
PERFORMANCE) (100% OF PERFORMANCE)
PARTICIPANTS (85% OF PLAN) PLAN) (115% OF PLAN)*
<S> <C> <C> <C>
Chief Executive Officer........ 32.5% 65% 97.5%
President...................... 30% 60% 90.0%
Senior Executive VP and
General Counsel.............. 27.5% 55% 82.5%
Executive VP, Finance and
Administration............... 27.5% 55% 82.5%
Corporate Officers............. 25% 50% 75%
Directors (A-Pool)............. 15% 30% 45%
Managers and Professionals
(B-Pool)............. Up to 15% Up to 15% Up to 15%
<FN>
* For 1994 only, outstanding performance will require 150% of Plan.
</TABLE>
3
<PAGE>
II. PARTICIPANT BONUS FORMULA
Participants' total bonus will be based on the following
breakdown:
Corporate Executive Officers
A. 100% - achievement of Company financial goal.
Corporate Officers
A. 75% - achievement of Company financial goal.
B. 25% - achievement of individual performance goals.
Directors (A-Pool)
A. 50% - achievement of Company financial goal.
B. 50% - achievement of individual performance goals.
Managers and Professionals (B-Pool)
A. 25% - achievement of Company financial goal.
B. 75% - achievement of individual performance goals.
4
<PAGE>
CORPORATE
MANAGEMENT INCENTIVE BONUS PROGRAM
I. PARTICIPANTS
A. Corporate Executive Officers
1. For purposes of this plan, Corporate Executive
Officers shall consist of the Chief Executive Officer, the
President, the Senior Executive Vice President and General
Counsel, and the Executive Vice President, Finance and
Administration and such other senior officers of the Corporation
as the Board of Directors shall designate from time to time.
B. Corporate Officers
These include all corporate officers who are not
Corporate Executive Officers.
C. Corporate Vice Presidents will establish a list of A-Pool
(Director) and B-Pool (Manager and Professional) participants in
accordance with the following guidelines:
1. A-Pool participation shall consist of:
First level managers who are not otherwise
Corporate Officers reporting directly to a Corporate Vice
President.
Certain first-level managers may be excluded if
the reporting relationship is due to special reasons.
Certain second-level managers may be included if
the responsibilities of their position warrant participation at
the A-Pool level.
2. B-Pool participation shall consist of:
Select Manager and Professional level employees
who are in a position to influence earnings through sustained
performance.
3. Prior to January 1st of each year, the recommended
lists of participants are to be submitted by the Corporate Vice
Presidents to the Chief Executive Officer, President and the Vice
President, Human Resources for their approval.
D. Any organizational changes during the year which impact
on participation will be reviewed and approved by the Chief
Executive Officer, President and the Vice President, Human
Resources.
5
<PAGE>
II. CORPORATE GOALS
A. Financial goal:
1. The financial goal for this Management Incentive
Bonus Plan will be budgeted Earnings Per Share from Continuing
Operations of the Company.
2. The achievement of the financial goal will be
applied to all participants according to the participants' bonus
formula set forth in the General Outline at II.
B. Individual Performance Goals:
1. Performance goals for Corporate Vice Presidents will
be agreed upon with the appropriate Corporate Executive Officer.
2. Performance goals for Corporate Officers who are not
Corporate Vice Presidents and for A and B-Pool participants will
be agreed upon with the appropriate Corporate Vice President.
All goals will be reviewed by the Vice President Human
Resources and approved by the Chief Executive Officer or the
President.
6
<PAGE>
POLICIES AND PROCEDURES
MANAGEMENT INCENTIVE BONUS PROGRAM
I. TIME OF PARTICIPATION
A. In order to participate in the MIBP, each participant
must be in an eligible position at the end of the plan year.
B. Any employee promoted or hired to a position included in
the MIBP during the plan year will be eligible to participate in
the bonus program on a pro-rated basis.
C. The plan year is the Company fiscal year.
II. BONUS PLAN REVIEWS
A. Once each quarter, the Chief Executive Officer or
President, in coordination with the Vice President Human
Resources, will meet with each Corporate Vice President to review
performance goals for that Vice President and his/her participant
reports. Prior to these meetings the Corporate Vice President
will meet with his/her reports to review their performance goals.
III. DETERMINATION OF FINANCIAL AND PERFORMANCE RATINGS
A. Following the close of the plan year, the Executive Vice
President, Finance and Administration, will report to the Chief
Executive Officer and the President earnings per share from
continuing operations. These calculations shall be based upon the
unaudited financial statements of the Company (which shall
contain all adjustments necessary to fairly present the Company's
results for the year then ended). Based on this result, the
Executive Vice President, Finance and Administration will
calculate the financial rating for the Plan using the format
contained in Exhibit 1.A. This rating will be used to calculate
bonus awards for Corporate Executive Officers.
B. Performance ratings will be determined by appropriate
Corporate Executive Officers for their direct reports. Corporate
Vice Presidents in coordination with the appropriate Corporate
Executive Officers will determine performance ratings for their
reports.
C. The Corporate Vice Presidents shall be advised of the
financial rating which shall be added to the performance rating
calculated in III.B. The sum of these ratings shall be the basis
for calculating participant bonus payments.
7
<PAGE>
IV. AWARD CALCULATION
A. Awards shall be calculated by the Corporate Executive
Officers for their direct reports and by Corporate Vice
Presidents for their reports using the format contained in
Exhibit 1.
B. The Compensation Committee of The Board of Directors
shall determine and approve the awards for the Corporate
Executive Officers. It shall review and recommend to the Board of
Directors proposed awards for all Corporate Officers.
C. The Board of Directors will approve payments to all other
Corporate Officers pursuant to the Plan.
V. COMPANY PROFIT AND PLAN PAYOUT
Notwithstanding anything contained in this plan to the
contrary, if there is no company profit for the plan year, there
will be no awards.
VI. FREQUENCY OF AWARDS
Bonus awards will be generated during the month of February
for performance in the previous plan year.
VII. CONTINGENCIES BEYOND PARTICIPANT'S CONTROL
In those instances where significant events affect the
accomplishment of individual performance goals for a participant,
the Chief Executive Officer may use his judgment regarding the
amount of bonus to be awarded for this element of the plan.
Examples of such events could include: Labor disputes,
acquisitions, natural catastrophes. This shall not apply to
awards to Corporate Executive Officers.
VIII. FORTEITURE OF AWARD
A participant will not be eligible for consideration for an
award if:
A. The participant is discharged for cause at anytime
prior to the end of the plan year.
B. The participant voluntarily resigns prior to the end
of the plan year.
Any exception to this policy must be approved by the Chief
Executive Officer or President and Vice President, Human
Resources.
8
<PAGE>
IX. RETIREMENT, DISABILITY, NOT FOR CAUSE TERMINATION, OR DEATH
DURING THE PLAN YEAR
Any participant who retires, becomes permanently disabled,
is terminated other than for cause, or dies during the plan year
shall be reviewed individually to determine whether a bonus award
is appropriate.
X. BUDGETING
The budget for Earnings Per Share from continuing operations
shall include the cost for "Par" performance on both the
financial and performance elements for all participants in the
Plan.
XI. AMENDMENTS
This plan may not be substantively amended except (i) with
respect to Corporate Executive Officers, by a vote of the
shareholders of the Company, or (ii) with respect to all other
participants, by the Board of Directors of the Company.
XII. DISCLAIMER
This plan shall neither create any right to a bonus payment
or future participation therein for any employee, nor limit the
right of Sequa Corporation to modify, amend or rescind this plan
for any subsequent plan year. Nor shall it be construed as
creating any right to employment.
9
<PAGE>
<TABLE>
EXHIBIT 1
DETERMINATION OF BONUS POINTS
A. FINANCIAL BONUS POINTS
For the Corporate staff to earn bonus points for financial objectives, the
Company must achieve a minimum of 85% of its approved budget for Earnings Per
Share (E.P.S.) from continuing operations. For each percentage point actual
E.P.S. results exceed 85% of budget, up to 115% (150% for 1994) of original
budget, participants earn additional bonus points. The following table details
bonus points earned upon achievement of the 85% of E.P.S. as well as points
earned for each 1% over the 85% level up to par, and for each 1% over par up to
115% (150% for 1994) of par for each level of participant.
<CAPTION>
Financial Points Earned
For
Each For
1% Over Each 1% For
Minimum Over Par Each 1%
For Up 1995 and Over Par
Minimum to Par Beyond 1994
<S> <C> <C> <C> <C>
Chief Executive Officer................. 32.5 2.167 2.167 .65
President............................... 30.0 2.0 2.0 .60
Sr. Exec. Vice Pres. & General Counsel.. 27.5 1.833 1.833 .55
Executive Vice President Finance........ 27.5 1.833 1.833 .55
Corporate Officers...................... 18.75 1.25 2.5 .75
A-Pool.................................. 12.5 0.833 1.67 .50
B-Pool.................................. 06.25 0.416 0.833 .25
</TABLE>
10
<PAGE>
<TABLE>
EXHIBIT 1
B. Examples of financial point calculations at $1.90, $2.00 and $2.20 E.P.S. vs
a budget of $2.00 follows:
<CAPTION>
Actual
1995
and
Beyond 1994
<S> <C> <C> <C> <C>
1.90 2.00 2.20 2.20
Chief Executive Officer
Minimum points.......................... 32.5 32.5 32.5 32.5
% over minimum
1.90/2.00 = 95% - 85%
10% x 2.167..................... 21.7
2.00/2.00 = 100% - 85%
15% x 2.167..................... 32.5
2.20/2.00 = 110% - 85%
25% x 2.167..................... 54.2
1994 calculation:
15% x 2.167........................ 32.5
10% x .65.......................... 6.5
Total financial points earned 54.2 65.0 86.7 71.5
</TABLE>
<TABLE>
Since Corporate Executive Officers are paid exclusively on financial
performance, the above results would be the bonus payout percentages.
<CAPTION>
Actual
1995
and
Beyond 1994
<S> <C> <C> <C> <C>
1.90 2.00 2.20 2.20
Corporate Officers*
Minimum points......................... 18.75 18.75 18.75 18.75
% over minimum/par
$1.90 = 10 x 1.25................. 12.50
$2.00 = 15 x 1.25................. 18.75
$2.20 = 15 x 1.25................. 18.75
10 x 2.5.................. 25.00
1994 calculation:
15 x 1.25......................... 18.75
10 x .75.......................... 7.5
31.25 37.50 62.50 45.00
</TABLE>
11
<PAGE>
<TABLE>
EXHIBIT 1
<CAPTION>
Actual
1995
and
Beyond 1994
<S> <C> <C> <C> <C>
1.90 2.00 2.20 2.20
A-Pool
Minimum points........................ 12.5 12.5 12.5 12.5
% over minimum
1.90/2.00 = 95% - 85%
10% x .833.................... 8.3
2.00/2.00 = 100% - 85%
15% x .833.................... 12.5
2.20/2.00 = 110% - 85%
15% x .833.................... 12.5
10% x 1.67.................... 16.7
1994 calculation:
15 x .833......................... 12.5
10 x .50.......................... 5.0
Total financial points earned 20.8 25.0 41.7 30.0
<FN>
* Based on point allocations as set forth on Exhibit 2
</TABLE>
12
<PAGE>
EXHIBIT 1
C. PERFORMANCE BONUS POINTS
Since Corporate Officers' bonus payments are based 75% on
financial results and 25% on performance, the points calculated
above would be combined with the performance points awarded in
determining the bonus award. For example -- if the Vice President
was earning $200,000 and received 12.5 points for performance,
the bonus would be calculated as follows for each of the earnings
levels.
@ $1.90 31.25 pts. + 12.5 pts. = 43.75 pts.
43.75 pts. x 1% = 43.75%
43.75% x $200,000 = $ 87,500
@ $2.00 37.5 pts. + 12.5 pts. = 50 pts.
50 pts. x 1% = 50%
50% x $200,000 = $100,000
1995 and Beyond
@ $2.20 62.5 pts. + 12.5 pts. = 75 pts.
(50 pts. x 1%) + (25 pts. x .5%) = 62.5%
62.5% x $200,000 = $125,000
1994
@ $2.20 45.0 pts. + 12.5 pts. = 57.5 pts.
(50 pts. x 1%) + (7.5 pts. x .5%) = 53.75%
53.75% x $200,000 = $107,500
Since A-Pool bonus payments are based 50% on financial
results and 50% on performance, the points calculated above
would be combined with the performance points awarded in
determining the bonus award. For example -- if the participant
was earning $100,000 and received 25 points for performance, the
bonus would be calculated as follows for each of the earnings
levels.
@ $1.90 20.8 pts. + 25 pts. = 45.8 pts.
45.8 pts. x .6% = 27.5%
27.5% x $100,000 = $27,500
@ $2.00 25 pts. + 25 pts. = 50 pts.
50 pts. x .6% = 30%
30% x $100,000 = $30,000
13
<PAGE>
EXHIBIT 1
1995 and Beyond
@ $2.20 41.7 pts. + 25 pts. = 66.7 pts.
(50 pts. x .6%) + (16.7 pts. x .3%) = 35%
35% x $100,000 = $35,000
1994
@ $2.20 30.0 pts. + 25 pts. = 55.0 pts.
(50 pts. x .6%) + (5.0 pts. x .3%) = 31.5%
31.5% x $100,000 = $31,500
14
EXHIBIT 10.1
AMENDMENT NO. 1
Dated as of September 30, 1993
to
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1993
Sequa Receivables Corp., a New York corporation ("SRC" or
the "Seller"), Sequa Corporation, a Delaware corporation (in its
individual capacity and as Servicer, "Sequa"), the financial
institution parties hereto (the "Purchasers") and Chemical Bank,
as managing agent (the "Managing Agent") agree as follows:
Section 1. Receivables Purchase Agreement. Reference is
made to the Amended and Restated Receivables Purchase Agreement
dated as of June 24, 1993, among SRC, Sequa, the Managing Agent
and the Purchasers (the "Receivables Purchase Agreement").
Capitalized terms used herein but not defined herein shall have
the meanings ascribed thereto in the Receivables Purchase
Agreement. The Receivables Purchase Agreement, as amended by
this Amendment No. 1 (this "Amendment No. 1"), is and shall
continue to be in full force and effect and is hereby in all
respects ratified and confirmed.
Section 2. Amendments. Upon and after the Effective Date
(as defined in Section 4 hereof), the Receivables Purchase
Agreement shall be amended as follows:
(a) Section 5.02(e) of the Receivables Purchase Agreement
shall be restated in its entirety to read as follows:
"(e) Consolidated Net Worth is at least (i) $645,000,000, as
of the end of the calendar quarter ending immediately before
the Closing Date, (ii) $620,000,000, as of July 1, 1993
through September 30, 1993 and (iii) $615,000,000, as of
October 1, 1993 or any calendar quarter ending thereafter.";
<PAGE>
(b) Section 7.03(k)(i) of the Receivables Purchase
Agreement shall be restated in its entirety to read as follows:
"(i) Consolidated Net Worth to be less than (a)
$645,000,000, at any time from the Closing Date to and
including June 30, 1993, (b) $620,000,000, at any time from
July 1, 1993 to and including September 30, 1993 and (c)
$615,000,000, from October 1, 1993 and thereafter;" and
(c) Section 7.03(k)(iii) of the Receivables Purchase
Agreement shall be restated to read as follows:
"(iii) the Consolidated Fixed Charge Coverage Ratio on
June 30, 1993 to be less than 1.90 to 1, on September 30,
1993 to be less than 1.65 to 1 and on December 31, 1993 to
be less than 1.60 to 1."
Section 3. Covenants, Representations and Warranties.
(a) Each of SRC and Sequa has the power, and has taken
all necessary action (including any necessary stockholder
action) to authorize it, to execute, deliver and perform in
accordance with its terms this Amendment No. 1. This
Amendment No. 1 has been duly executed and delivered by SRC
and Sequa and is a legal, valid and binding obligation of
each such party, enforceable against such party in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally;
(b) The execution, delivery and performance in
accordance with its terms by SRC and Sequa of this Amendment
No. 1 and the Receivables Purchase Agreement, as amended by
this Amendment No. 1 (including, without limitation, each
Reinvestment under the Receivables Purchase Agreement), do
not and (absent any change in any applicable law or
applicable Transaction Document) will not (i) require any
governmental approval or any other consent or approval,
including any consent or approval of the stockholders of SRC
or Sequa, other than consents and approvals that have been
obtained, are final and not subject to review on appeal or
to collateral attack and are in full force and effect, or
(ii) violate or conflict with, result in a breach of,
constitute a default under, or result in or require the
creation of any lien upon any assets of SRC, Sequa or any
Originator under, (A) any Transaction Document to which SRC,
Sequa or any Originator is a party or by which SRC, Sequa or
any Originator or any of their respective properties may be
bound, the breach of which, either singly or in the
<PAGE>
aggregate with all other such Transaction Documents, would
have a Materially Adverse Effect upon SRC, Sequa or any
Originator, or (B) any applicable law;
(c) SRC and Sequa hereby reaffirm all agreements,
covenants, representations and warranties made in the
Receivables Purchase Agreement and, to the extent the same
are not amended hereby, agree that all such agreements,
covenants, representations and warranties shall be deemed to
have been remade as of the Effective Date. SRC and Sequa
hereby further represent and warrant that as of the
Effective Date no event has occurred and is continuing or
will result from the execution, delivery and performance by
it of this Amendment No. 1 which constitutes a Liquidation
Event or event which after notice or lapse of time or both,
would constitute a Liquidation Event; and
(d) Except as specifically amended herein, the
Receivables Purchase Agreement shall remain in full force
and effect and is hereby ratified and confirmed. The
execution, delivery and effectiveness of this Amendment No.
1 shall not operate as a waiver of any right, power or
remedy of the Managing Agent or any of the Purchasers under
the Receivables Purchase Agreement or any other document,
instrument or agreement executed and delivered in connection
therewith, except specifically set forth herein.
Section 4. Effective Date; Conditions to Effectiveness.
This Amendment No. 1 shall become effective as of the date first
written above on the first day (the "Effective Date") on which
each of the following conditions is satisfied:
(a) The Managing Agent shall have received an
officer's certificate, dated the Effective Date of this
Amendment No. 1, in the form attached hereto as Schedule 1.
(b) This Amendment No. 1 shall have been duly executed
and delivered by SRC, Sequa and the Required Purchasers.
Section 5. Governing Law. This Amendment No. 1 shall be
construed in accordance with and governed by the substantive law
of the State of New York.
Section 6. Headings. Section headings in this Amendment
No. 1 are included herein for convenience and reference only and
shall not constitute a part of this Amendment No. 1 for any other
purpose.
Section 7. Counterparts. This Amendment No. 1 may be
executed in any number of counterparts and on separate
<PAGE>
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
Section 8. Cross-References. References in this Amendment
No. 1 to any Section or Subsection, unless otherwise specified,
refer to such Section or Subsection of this Amendment No. 1.
Section 9. Instrument Pursuant to Receivables Purchase
Agreement. This Amendment No. 1 is an instrument executed
pursuant to the Receivables Purchase Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the
Receivables Purchase Agreement, including Article XIV thereof.
[Next page is signature page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH
as Purchaser
By
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Purchasers
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.,
as Purchaser
By
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Purchaser,
By
Name:
Title:
THE NIPPON CREDIT BANK,
as Purchaser
By
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA,
as Purchaser
By
Name:
Title:
ROYAL BANK OF CANADA,
as Purchaser
By
Name:
Title:
<PAGE>
Schedule 1
SEQUA CORPORATION
OFFICERS'S CERTIFICATE
I, Kenneth A. Drucker, do hereby certify that I am the duly
elected and qualified Treasurer of SEQUA CORPORATION, a Delaware
corporation (the "Company"), that I am authorized to execute this
Certificate, and that as of the date hereof, the following
statements are true and correct. Capitalized terms used herein
but not otherwise defined herein shall have the meanings assigned
thereto in Appendix A to that certain Amended and Restated
Receivables Purchase Agreement dated June 25, 1993, as amended by
Amendment No. 1 thereto dated as of September 30, 1993, Amendment
No. 2 thereto dated as of December __, 1993 and Amendment No. 3
thereto dated as of December 14, 1993 (the "Receivables Purchase
Agreement"), among the Company, Sequa Receivables Corp. ("SRC"),
Chemical Bank, as Managing Agent, and the financial institution
parties thereto.
(i) The representations, warranties and covenants
made by the Company and SRC in the Receivables Purchase
Agreement and in the certificates delivered by officers of
the Company or SRC (as the case may be) in connection
therewith, are true and correct in all material respects on
and as of the date hereof, with the same effect as if made
on the date hereof, and the Company and SRC have complied
with all agreements and satisfied all conditions to be
performed or satisfied on their part at or prior to the
execution of Amendment No. 3 to the Receivables Purchase
Agreement; and
(ii) As of the date hereof, no event has occurred and
is continuing or will result from the execution, delivery
and performance by the Company or SRC of Amendment No. 3 to
the Receivables Purchase Agreement which constitutes a
Liquidation Event or which, after notice or lapse of time or
both, would constitute a Liquidation Event.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this ____ day of December, 1993.
______________________________
Kenneth A. Drucker
Treasurer
<PAGE>
AMENDMENT NO. 2 AND CONSENT
Dated as of December 1, 1993
to
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1993
Sequa Receivables Corp., a New York corporation ("SRC" or
the "Seller"), Sequa Corporation, a Delaware corporation (in its
individual capacity and as Servicer, "Sequa"), the financial
institution parties hereto (the "Purchasers") and Chemical Bank,
as managing agent (the "Managing Agent") agree as follows:
Section 1. Receivables Purchase Agreement. Reference is
made to the Amended and Restated Receivables Purchase Agreement
dated as of June 24, 1993 and as amended by Amendment No. 1 dated
as of September 30, 1993, among SRC, Sequa, the Managing Agent
and the Purchasers (the "Receivables Purchase Agreement").
Capitalized terms used herein but not defined herein shall have
the meanings ascribed thereto in the Receivables Purchase
Agreement. The Receivables Purchase Agreement, as amended by
this Amendment No. 2 and Consent (this "Amendment No. 2"), is and
shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
Section 2. Amendments. Upon and after the Effective Date
(as defined in Section 5 hereof), the Receivables Purchase
Agreement shall be amended as follows:
(a) Section 6.01(o) of the Receivables Purchase
Agreement is amended by deleting the parenthetical "(other
than ARC and ARC Professional Services)" and inserting in
lieu thereof the words "(other than ARC");
<PAGE>
(b) Appendix A to the Receivables Purchase Agreement
is amended by:
(i) deleting the definition of the term "ARC
Professional Services" in its entirety;
(ii) amending clause (ii)(A) of the definition of
the term "Change of Control" by deleting the words
"other than ARC and ARC Professional Services" and
inserting in lieu thereof the words "other than ARC";
(iii) deleting the definition of the term "Loss
Ratio" in its entirety and inserting the following
definition in lieu thereof:
"Loss Ratio" means the ratio (expressed as a
percentage) computed as of each Month End Date by
dividing (x) the sum of (1) the aggregate Unpaid
Balance on such date of all Receivables that became
Defaulted Receivables during the three month period
preceding such Month End Date, plus (2) the aggregate
Unpaid Balance of Receivables that were written off the
Seller's books at any time during such three month
period (to the extent written off prior to becoming
Defaulted Receivables) by (y) the total Collections of
all Receivables received during such three month
period.
(iv) amending the definition of the term
"Originators" by deleting the words "ARC Professional
Services," ; and
(v) amending the definition of the term
"Subscription Agreement" by deleting the words "and ARC
Professional Services".
Section 3. Consent. The Required Purchasers hereby consent
to the amendment to the Purchase and Sale Agreement, dated the
date hereof, and in form and substance satisfactory to the
Managing Agent.
Section 4. Covenants, Representations and Warranties.
(a) Each of SRC and Sequa has the power, and has taken
all necessary action (including any necessary stockholder
action) to authorize it, to execute, deliver and perform in
accordance with its terms this Amendment No. 2. This
Amendment No. 2 has been duly executed and delivered by SRC
and Sequa and is a legal, valid and binding obligation of
<PAGE>
each such party, enforceable against such party in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally;
(b) The execution, delivery and performance in
accordance with its terms by SRC and Sequa of this Amendment
No. 2 and the Receivables Purchase Agreement, as amended by
this Amendment No. 2 (including, without limitation, each
Reinvestment under the Receivables Purchase Agreement), do
not and (absent any change in any applicable law or
applicable Transaction Document) will not (i) require any
governmental approval or any other consent or approval,
including any consent or approval of the stockholders of SRC
or Sequa, other than consents and approvals that have been
obtained, are final and not subject to review on appeal or
to collateral attack and are in full force and effect, or
(ii) violate or conflict with, result in a breach of,
constitute a default under, or result in or require the
creation of any lien upon any assets of SRC, Sequa or any
Originator under, (A) any Transaction Document to which SRC,
Sequa or any Originator is a party or by which SRC, Sequa or
any Originator or any of their respective properties may be
bound, the breach of which, either singly or in the
aggregate with all other such breaches, would have a
Materially Adverse Business Effect upon SRC, Sequa or any
Originator, or (B) any applicable law or judgment;
(c) Each of SRC and Sequa hereby reaffirms all
agreements, covenants, representations and warranties made
in the Receivables Purchase Agreement and, to the extent the
same are not amended hereby, agrees that all such
agreements, covenants, representations and warranties shall
be deemed to have been remade as of the Effective Date.
Each of SRC and Sequa hereby further represents and warrants
that as of the Effective Date no event has occurred and is
continuing or will result from the execution, delivery and
performance by it of this Amendment No. 2 which constitutes
a Liquidation Event or which, after notice or lapse of time
or both, would constitute a Liquidation Event; and
(d) Except as specifically amended herein, the
Receivables Purchase Agreement shall remain in full force
and effect and is hereby ratified and confirmed. The
execution, delivery and effectiveness of this Amendment No.
2 shall not operate as a waiver of any right, power or
remedy of the Managing Agent or any of the Purchasers under
the Receivables Purchase Agreement or any other document,
instrument or agreement executed and delivered in connection
therewith, except as specifically set forth herein.
<PAGE>
Section 5. Effective Date; Conditions to Effectiveness.
This Amendment No. 2 shall become effective as of the date first
written above on the first day (the "Effective Date") on which
each of the following conditions is satisfied:
(a) The Managing Agent shall have received an
officer's certificate, dated the Effective Date of this
Amendment No. 2, in the form attached hereto as Schedule 1.
(b) SRC and the Originators shall have executed and
delivered Amendment No. 2 to the Purchase and Sale Agreement
in form and substance satisfactory to the Managing Agent.
(c) This Amendment No. 2 shall have been duly executed
and delivered by SRC, Sequa and the Required Purchasers.
Section 6. Governing Law. This Amendment No. 2 shall be
construed in accordance with and governed by the substantive law
of the State of New York.
Section 7. Headings. Section headings in this Amendment
No. 2 are included herein for convenience and reference only and
shall not constitute a part of this Amendment No. 2 for any other
purpose.
Section 8. Counterparts. This Amendment No. 2 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties hereto, their successors and
assigns.
Section 9. Cross-References. References in this Amendment
No. 2 to any Section or Subsection, unless otherwise specified,
refer to such Section or Subsection of this Amendment No. 2.
Section 10. Instrument Pursuant to Receivables Purchase
Agreement. This Amendment No. 2 is an instrument executed
pursuant to the Receivables Purchase Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the
Receivables Purchase Agreement, including Article XIV thereof.
[Next page is signature page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 2, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH
as Purchaser
By
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Purchasers
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.,
as Purchaser
By
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Purchaser,
By
Name:
Title:
THE NIPPON CREDIT BANK,
as Purchaser
By
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA,
as Purchaser
By
Name:
Title:
ROYAL BANK OF CANADA,
as Purchaser
By
Name:
Title:
<PAGE>
SEQUA CORPORATION
OFFICERS'S CERTIFICATE
I, Kenneth A. Drucker, do hereby certify that I am the duly
elected and qualified Treasurer of SEQUA CORPORATION, a Delaware
corporation (the "Company"), that I am authorized to execute this
Certificate, and that as of the date hereof, the following
statements are true and correct. Capitalized terms used herein
but not otherwise defined herein shall have the meanings assigned
thereto in Appendix A to that certain Amended and Restated
Receivables Purchase Agreement dated June 25, 1993, as amended by
Amendment No. 1 thereto dated as of September 30, 1993, Amendment
No. 2 thereto dated as of December __, 1993 and Amendment No. 3
thereto dated as of December 14, 1993 (the "Receivables Purchase
Agreement"), among the Company, Sequa Receivables Corp. ("SRC"),
Chemical Bank, as Managing Agent, and the financial institution
parties thereto.
(i) The representations, warranties and covenants
made by the Company and SRC in the Receivables Purchase
Agreement and in the certificates delivered by officers of
the Company or SRC (as the case may be) in connection
therewith, are true and correct in all material respects on
and as of the date hereof, with the same effect as if made
on the date hereof, and the Company and SRC have complied
with all agreements and satisfied all conditions to be
performed or satisfied on their part at or prior to the
execution of Amendment No. 3 to the Receivables Purchase
Agreement; and
(ii) As of the date hereof, no event has occurred and
is continuing or will result from the execution, delivery
and performance by the Company or SRC of Amendment No. 3 to
the Receivables Purchase Agreement which constitutes a
Liquidation Event or which, after notice or lapse of time or
both, would constitute a Liquidation Event.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this ____ day of December, 1993.
______________________________
Kenneth A. Drucker
Treasurer
<PAGE>
EXECUTION COPY
AMENDMENT NO. 3
Dated as of December 14, 1993
to
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 24, 1993
Sequa Receivables Corp., a New York corporation ("SRC" or
the "Seller"), Sequa Corporation, a Delaware corporation (in its
individual capacity and as Servicer, "Sequa"), the financial
institution parties hereto (the "Purchasers") and Chemical Bank,
as managing agent (the "Managing Agent") agree as follows:
Section 1. Receivables Purchase Agreement. Reference is
made to the Amended and Restated Receivables Purchase Agreement
dated as of June 24, 1993, and as amended by Amendment No. 1
dated as of September 30, 1993 and Amendment No. 2 dated as of
December 1, 1993, among SRC, Sequa, the Managing Agent and the
Purchasers (the "Receivables Purchase Agreement"). Capitalized
terms used herein but not defined herein shall have the meanings
ascribed thereto in the Receivables Purchase Agreement. The
Receivables Purchase Agreement, as amended by this Amendment
No. 3 (this "Amendment No. 3"), is and shall continue to be in
full force and effect and is hereby in all respects ratified and
confirmed.
Section 2. Amendments. Upon and after the Effective Date
(as defined in Section 4 hereof), the Receivables Purchase
Agreement shall be amended as follows:
(a) Section 1.02(a)(x) of the Receivables Purchase
Agreement shall be restated in its entirety to read as
follows: "(x) $45,000,000, as such amount may be reduced
<PAGE>
pursuant to Section 1.05 or 1.06 (such amount, as so
reduced, herein being called the "Purchase Limit")".
(b) Section 1.05 of the Receivables Purchase Agreement
shall be restated in its entirety to read as follows:
"1.05 Commitment Termination Date. The
"Commitment Termination Date" shall be the earliest to
occur of (i) March 31, 1997 (such date, the "Scheduled
Termination Date"), (ii) the date on which the
commitment is terminated pursuant to Section 1.06, 1.07
or 10.02 and (iii) the closing date of a replacement
structured receivables financing.".
(c) Section 3.02(a)(iv) of the Receivables Purchase
Agreement is amended by deleting the proviso appearing on
lines 8 through 12 thereof.
(d) Section 3.06(d) of the Receivables Purchase
Agreement is amended by deleting the parenthetical appearing
on lines 5 and 6 thereof.
(e) Section 4.01 of the Receivables Purchase Agreement
shall be amended by deleting the amount "$65,000,000"
appearing in the fifth line, and substituting in lieu
thereof "45,000,000".
(f) Section 5.02(e) of the Receivables Purchase
Agreement shall be restated in its entirety to read as
follows:
"(e) Consolidated Net Worth at any time is at least the
sum of (i) $585,000,000 and (ii) fifty percent of its
Consolidated Net Income (but not less than zero), for
each full fiscal quarter occurring during the period
commencing January 1, 1994 and ending on the date of
determination.".
(g) Section 7.03(k) of the Receivables Purchase
Agreement shall be restated in its entirety to read as
follows:
"(k) Financial Condition. Sequa shall not
permit:
(i) Consolidated Net Worth at any time to be
less than the sum of (i) $585,000,000 and (ii)
fifty percent of its Consolidated Net Income (but
not less than zero), for each full fiscal quarter
occurring during the period commencing January 1,
1994 and ending on the date of determination;
<PAGE>
(ii) the Consolidated Indebtedness Ratio at
any time from the Closing Date to and including
September 30, 1993 to be greater than 0.58 to 1,
from October 1, 1993 to and including December 31,
1994, to be greater than 0.55 to 1, and at any
time thereafter, to be greater than 0.525 to 1; or
(iii) the Consolidated Fixed Charge Coverage
Ratio on the following dates to be less than the
following:
June 30, 1993 1.90 to 1.00
September 30, 1993 1.65 to 1.00
December 31, 1993 1.30 to 1.00
March 31, 1994 1.30 to 1.00
June 30, 1994 1.30 to 1.00
September 30, 1994 1.75 to 1.00
December 31, 1994 2.00 to 1.00
March 31, 1995 2.10 to 1.00
June 30, 1995 2.25 to 1.00
September 30, 1995 2.25 to 1.00
and thereafter 2.50 to 1.00.
(h) Appendix A to the Receivables Purchase Agreement
is amended by:
(i) adding the following definition of
"Consolidated Net Income":
"Consolidated Net Income" for any period means the
aggregate of the net income (or net deficit, as
the case may be) of Sequa and its Subsidiaries for
such period, on a consolidated basis before the
payment of dividends or the making of any
distribution on any of the capital stock of Sequa,
determined in accordance with GAAP; provided,
however, that all extraordinary gains in excess of
all extraordinary losses shall be disregarded in
the computation of Consolidated Net Income.
(ii) deleting the definition of
"Consolidated Net Worth" in its entirety and
inserting the following definition in lieu
thereof:
"Consolidated Net Worth" means, as at any date of
determination, the sum of the capital stock and
additional paid-in capital plus/minus marketable
equity securities valuation adjustment plus
<PAGE>
retained earnings (or minus accumulated deficit)
excluding (x) any non-recurring restructuring
charges taken with respect to then identified
Discontinued Subsidiaries or Non-Core Businesses,
(y) gains or losses with respect to any
Discontinued Asset Sale or disposition of any Non-
Core Business and (z) extraordinary gains or
losses caused by the early redemption or other
extinguishment of Indebtedness of the Borrower (in
each case of (x), (y) and (z), taking into account
any tax benefits from such charges or losses) less
the cost of treasury stock of the Borrower and its
Subsidiaries on a consolidated basis calculated in
conformity with GAAP.
(iii) adding the following definition of
"Discontinued Asset Sale":
"Discontinued Asset Sale" means each Asset Sale
involving the assets of a Discontinued Subsidiary.
(iv) deleting the definition of "EBITDA" in
its entirety and inserting the following
definition in lieu thereof:
"EBITDA" means, with respect to the Borrower and
its Consolidated Subsidiaries for any period, its
consolidated net income from continuing
operations, as determined in accordance with GAAP,
plus (x) the sum of (i) provision for income
taxes, (ii) Consolidated Interest Expense, (iii)
depreciation, depletion and amortization of
properties, (iv) any non-recurring restructuring
charges taken with respect to then identified
Discontinued Subsidiaries or Non-Core Businesses,
(v) losses with respect to any Discontinued Asset
Sale or disposition of any Non-Core Business and
(vi) extraordinary losses caused by the early
redemption or other extinguishment of
Indebtedness, in each case to the extent deducted
in the determination of net income less (y) gains
with respect to any Discontinued Asset Sale or
disposition of any Non-Core Businesses and
extraordinary gains caused by the early redemption
or other extinguishment of Indebtedness, in each
case to the extent included in the determination
of net income.
(v) deleting the definition of "GAAP" and
inserting in lieu thereof the following
definition:
<PAGE>
"GAAP" means (i) generally accepted
accounting principles as in effect at December 31,
1992 as followed in the preparation of the audited
consolidated balance sheet of Sequa and the
Consolidated Subsidiaries referred to in Section
6.01(i)(ii) for the fiscal year ended December 31,
1992 and the related statements of income,
shareholders' equity and, as applicable, changes
in financial position or cash flows for the fiscal
year ended with the date of such balance sheet.
(vi) adding the following definition of
"Non-Core Business":
"Non-Core Business" means each Subsidiary or
division identified as a Non-Core Business in a
letter from Sequa to the Managing Agent dated as
of December 15, 1993.
(i) Schedule A-3 to the Receivables Purchase Agreement
(marked as Exhibit A-3 therein) is amended in its entirety
to read as set forth on Schedule 1 hereto.
Section 3. Covenants, Representations and Warranties.
(a) Each of SRC and Sequa has the power, and has taken all
necessary action (including any necessary stockholder action) to
authorize, execute, deliver and perform in accordance with its
terms this Amendment No. 3. This Amendment No. 3 has been duly
executed and delivered by SRC and Sequa and is a legal, valid and
binding obligation of each such party, enforceable against such
party in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights
generally;
(b) The execution, delivery and performance in accordance
with its terms by SRC and Sequa of this Amendment No. 3 and the
Receivables Purchase Agreement, as amended by this Amendment
No. 3 (including, without limitation, each Reinvestment under the
Receivables Purchase Agreement), do not and (absent any change in
any applicable law or applicable Transaction Document) will not
(i) require any governmental approval or any other consent or
approval, including any consent or approval of the stockholders
of SRC or Sequa, other than consents and approvals that have been
obtained, are final and not subject to review on appeal or to
collateral attack and are in full force and effect, or
(ii) violate or conflict with, result in a breach of, constitute
a default under, or result in or require the creation of any lien
upon any assets of SRC, Sequa or any Originator under, (A) any
Transaction Document to which SRC, Sequa or any Originator is a
<PAGE>
party or by which SRC, Sequa or any Originator or any of their
respective properties may be bound, the breach of which, either
singly or in the aggregate with all other such breach, would have
a Materially Adverse Effect upon SRC, Sequa or any Originator, or
(B) any applicable law or judgment;
(c) Each of SRC and Sequa hereby reaffirms all agreements,
covenants, representations and warranties made in the Receivables
Purchase Agreement and, to the extent the same are not amended
hereby, agrees that all such agreements, covenants,
representations and warranties shall be deemed to have been
remade as of the Effective Date. Each of SRC and Sequa hereby
further represents and warrants that as of the Effective Date no
event has occurred and is continuing or will result from the
execution, delivery and performance by it of this Amendment No. 3
which constitutes a Liquidation Event or event which after notice
or lapse of time or both, would constitute a Liquidation Event;
and
(d) Except as specifically amended herein, the Receivables
Purchase Agreement shall remain in full force and effect and is
hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment No. 3 shall not operate as a
waiver of any right, power or remedy of the Managing Agent or any
of the Purchasers under the Receivables Purchase Agreement or any
other document, instrument or agreement executed and delivered in
connection therewith, except specifically set forth herein.
Section 4. Effective Date; Conditions to Effectiveness.
This Amendment No. 3 shall become effective as of the date first
written above on the first day (the "Effective Date") on which
each of the following conditions is satisfied:
(a) The Managing Agent shall have received an
officer's certificate, dated the Effective Date, in the form
attached hereto as Schedule 2;
x and delivered by SRC, Sequa and the Purchasers;
(c) The amendment to the Credit Agreement, dated as of
November 13, 1991, as amended or modified or amended and
restated, as the case may be, among Sequa, The Bank of
New York, The Bank of Nova Scotia and Manufacturers Hanover
Trust Company as co-agents, Chemical Bank as successor in
interest to Manufacturers Hanover Trust Company and the
banks parties thereto, which, among other things, extends
the termination date thereof to March 31, 1997 and is
satisfactory to the Managing Agent in all other respects,
shall have been executed and delivered by the parties
thereto and shall be in full force and effect;
<PAGE>
(d) In connection with the reduction of the Purchase
Limit and concomitant adjustments to the Commitments of the
respective Purchasers under the Receivables Purchase
Agreement, if, after giving effect to this Amendment No. 3,
any Purchaser's Commitment is reduced or terminated, the
Seller shall repurchase Receivables from such Purchaser, in
immediately available funds, in an amount equal to the
amount by which its Commitment has been reduced plus all
other amounts owing thereon; and
(e) No material adverse change has occurred in respect
of the Receivables or operating or financial condition of
Sequa or SRC since June 30, 1993.
Section 5. Effect of Terminating Commitments. Each
Purchaser receiving funds in connection with the termination of
its Commitments under the Receivables Purchase Agreement (an
"Exiting Purchaser") and the Seller and Sequa hereby agree that
upon receipt of payment in full of all amounts (including costs
and expenses) owing to such Exiting Purchaser thereunder, such
Exiting Purchaser shall have no further rights or obligations
under the Receivables Purchase Agreement.
Section 6. Deferred Fee. In connection with the execution
of this Amendment No. 3, the Seller shall pay to the Managing
Agent for the pro rata benefit of each Purchaser (other than an
Exiting Purchaser) deferred fees equal to the product of (i)
$45,000,000 and (ii) 0.25%, payable on the last Business Day of
each March, June, September and December during 1994.
Section 7. Governing Law. This Amendment No. 3 shall be
construed in accordance with and governed by the substantive law
of the State of New York.
Section 8. Headings. Section headings in this Amendment
No. 3 are included herein for convenience and reference only and
shall not constitute a part of this Amendment No. 3 for any other
purpose.
Section 9. Counterparts. This Amendment No. 3 may be
executed in any number of counterparts and on separate
counterparts, each of which shall be deemed to be an original and
shall be binding upon the parties, their successors and assigns.
Section 10. Cross-References. References in this Amendment
No. 3 to any Section or Subsection, unless otherwise specified,
refer to such Section or Subsection of this Amendment No. 3.
Section 11. Instrument Pursuant to Receivables Purchase
Agreement. This Amendment No. 3 is an instrument executed
pursuant to the Receivables Purchase Agreement and shall (unless
<PAGE>
otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the
Receivables Purchase Agreement, including Article XIV thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 3, or caused it to be executed and delivered by
their duly authorized officers, all as of the day and year first
above written.
SEQUA RECEIVABLES CORP.,
as Seller
By
Name:
Title:
SEQUA CORPORATION,
individually and as Servicer
By
Name:
Title:
CHEMICAL BANK,
as Managing Agent and Purchaser
By
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH
as Purchaser
By
Name:
Title:
<PAGE>
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION,
as Purchasers
By
Name:
Title:
THE BANK OF NEW YORK,
as Purchaser
By
Name:
Title:
THE CHASE MANHATTAN BANK, N.A.,
as Purchaser
By
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Purchaser,
By
Name:
Title:
THE NIPPON CREDIT BANK,
as Purchaser
By
Name:
Title:
<PAGE>
THE BANK OF NOVA SCOTIA,
as Purchaser
By
Name:
Title:
ROYAL BANK OF CANADA,
as Purchaser
By
Name:
Title:
<PAGE>
Schedule 1
Sequa Receivables Corporation
Amended and Restated Receivables Purchase Agreement dated as of
June 24, 1993, as amended
Percentage
Purchaser Commitment Commitment
Chemical Bank $15,000,000.00 33.33333333%
The Bank of Nova Scotia 15,000,000.00 33.33333333%
The Bank of New York 15,000,000.00 33.33333333%
Schedule 2
SEQUA CORPORATION
OFFICERS'S CERTIFICATE
I, Kenneth A. Drucker, do hereby certify that I am the duly
elected and qualified Treasurer of SEQUA CORPORATION, a Delaware
corporation (the "Company"), that I am authorized to execute this
Certificate, and that as of the date hereof, the following
statements are true and correct. Capitalized terms used herein
but not otherwise defined herein shall have the meanings assigned
thereto in Appendix A to that certain Amended and Restated
Receivables Purchase Agreement dated June 25, 1993, as amended by
Amendment No. 1 thereto dated as of September 30, 1993, Amendment
No. 2 thereto dated as of December __, 1993 and Amendment No. 3
thereto dated as of December 14, 1993 (the "Receivables Purchase
Agreement"), among the Company, Sequa Receivables Corp. ("SRC"),
Chemical Bank, as Managing Agent, and the financial institution
parties thereto.
(i) The representations, warranties and covenants
made by the Company and SRC in the Receivables Purchase
Agreement and in the certificates delivered by officers of
the Company or SRC (as the case may be) in connection
therewith, are true and correct in all material respects on
and as of the date hereof, with the same effect as if made
on the date hereof, and the Company and SRC have complied
with all agreements and satisfied all conditions to be
performed or satisfied on their part at or prior to the
execution of Amendment No. 3 to the Receivables Purchase
Agreement; and
(ii) As of the date hereof, no event has occurred and
is continuing or will result from the execution, delivery
and performance by the Company or SRC of Amendment No. 3 to
the Receivables Purchase Agreement which constitutes a
Liquidation Event or which, after notice or lapse of time or
both, would constitute a Liquidation Event.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this ____ day of December, 1993.
______________________________
Kenneth A. Drucker
Treasurer
EXHIBIT 10.2
EXECUTION COPY
___________________________________________________________
$150,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
Among
SEQUA CORPORATION,
THE BANK OF NEW YORK,
as Administrative Agent,
THE BANK OF NEW YORK,
THE BANK OF NOVA SCOTIA, and
CHEMICAL BANK
as Managing Agents,
BANK OF AMERICA NT&SA,
CHASE MANHATTAN BANK, N.A., and
THE NIPPON CREDIT BANK, LTD.,
as Co-Agents,
and
THE BANKS LISTED ON THE SIGNATURE PAGES HEREOF
___________________________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
CREDIT FACILITY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Commitment to Lend . . . . . . . . . . . . . . . . 1
1.02. Manner of Borrowing. . . . . . . . . . . . . . . . 2
Section 1.03. Swing Loans. . . . . . . . . . . . . . . . 3
(a) Swing Loan Commitment . . . . . . . . . . . . . 3
(b) Repayment . . . . . . . . . . . . . . . . . . . 3
(c) Participation . . . . . . . . . . . . . . . . . 4
(d) Obligations of Banks. . . . . . . . . . . . . . 4
1.04. Interest . . . . . . . . . . . . . . . . . . . . . 5
(a) Rates . . . . . . . . . . . . . . . . . . . . . 5
(b) Payment . . . . . . . . . . . . . . . . . . . . 5
(c) Conversion and Continuation . . . . . . . . . . 5
(d) Maximum Interest Rate . . . . . . . . . . . . . 6
1.05. Repayment. . . . . . . . . . . . . . . . . . . . . 6
1.06. Prepayments. . . . . . . . . . . . . . . . . . . . 7
1.07. Limitation on Types of Loans . . . . . . . . . . . 7
Section 1.08. Letters of Credit. . . . . . . . . . . . . 7
1.09. Fees; Reduction of Commitments . . . . . . . . . 10
1.10. Computation of Interest and Fees . . . . . . . . 11
1.11. Payments by the Borrower . . . . . . . . . . . . 12
(a) Time, Place and Manner. . . . . . . . . . . . 12
(b) No Reductions . . . . . . . . . . . . . . . . 12
(c) Taxes . . . . . . . . . . . . . . . . . . . . 12
(d) Authorization to Charge Accounts. . . . . . . 13
(e) Extension of Payment Dates. . . . . . . . . . 13
1.12. Distribution of Payments by the Administrative
Agent. . . . . . . . . . . . . . . . . . . . . . . 14
1.13. Evidence of Indebtedness . . . . . . . . . . . . 14
1.14. Pro Rata Treatment . . . . . . . . . . . . . . . 14
1.15. Extension of Maturity Date . . . . . . . . . . . 15
ARTICLE 2
CONDITIONS TO EFFECTIVENESS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.01. Conditions to Effective Date . . . . . . . . . . 15
2.02. Conditions to Each Extension of Credit . . . . . 17
<PAGE>
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.01. Organization; Power; Qualification . . . . . . . 18
3.02. Subsidiaries . . . . . . . . . . . . . . . . . . 18
3.03. Authorization; Enforceability; Required
Consents; Absence of Conflicts . . . . . . . . . . 19
3.04. Litigation . . . . . . . . . . . . . . . . . . . 20
3.05. Burdensome Provisions. . . . . . . . . . . . . . 20
3.06. No Adverse Change or Event . . . . . . . . . . . 20
3.07. Additional Adverse Facts . . . . . . . . . . . . 21
3.08. Payment of Taxes . . . . . . . . . . . . . . . . 21
3.09. ERISA Compliance . . . . . . . . . . . . . . . . 21
3.10. Title to Properties. . . . . . . . . . . . . . . 22
3.11. Investment Company Act . . . . . . . . . . . . . 22
3.12. Federal Reserve Regulations. . . . . . . . . . . 22
3.13. Disaster . . . . . . . . . . . . . . . . . . . . 22
3.14. Agreements . . . . . . . . . . . . . . . . . . . 23
3.15. Environmental Matters. . . . . . . . . . . . . . 23
3.16. Ownership of Material Subsidiaries . . . . . . . 24
A.. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.01. Preservation of Existence and Properties, Scope
of Business, Compliance with Law, Payment of Taxes
and Claims, Preservation of Enforceability . . . . 24
4.02. Maintenance of Properties; Insurance . . . . . . 25
4.03. Use of Proceeds. . . . . . . . . . . . . . . . . 25
B.. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.04. Guaranties . . . . . . . . . . . . . . . . . . . 26
4.05. Liens. . . . . . . . . . . . . . . . . . . . . . 27
4.06. Restricted Payments. . . . . . . . . . . . . . . 27
4.07. Merger or Consolidation. . . . . . . . . . . . . 28
4.08. Disposition of Assets. . . . . . . . . . . . . . 28
4.09. Taxes of Other Persons . . . . . . . . . . . . . 29
4.10. Benefit Plans. . . . . . . . . . . . . . . . . . 29
4.11. Transactions with Affiliates . . . . . . . . . . 29
4.12. Limitation on Restrictive Covenants. . . . . . . 29
4.13. Issuance or Disposition of Capital Securities;
Investments; Capital Expenditures; Acquisitions. . 30
4.14. Short Term Indebtedness. . . . . . . . . . . . . 31
C.. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.15. Minimum Consolidated Net Worth . . . . . . . . . 31
4.16. Fixed Charge Coverage. . . . . . . . . . . . . . 31
4.17. Consolidated Current Ratio . . . . . . . . . . . 32
4.18. Consolidated Total Debt/Consolidated
Capitalization Ratio . . . . . . . . . . . . . . . 32
D.. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.19. Subsidiary Indebtedness. . . . . . . . . . . . . 32
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
<PAGE>
5.01. Financial Statements and Information to Be
Furnished. . . . . . . . . . . . . . . . . . . . . 33
(a) Monthly Operating Reports; Officer's
Certificate . . . . . . . . . . . . . . . . . 33
(b) Quarterly Financial Statements; Officer's
Certificate . . . . . . . . . . . . . . . . . 33
(c) Year-End Financial Statements; Accountants'
and Officer's Certificates. . . . . . . . . . 34
(d) Reports and Filings . . . . . . . . . . . . . 35
(e) Requested Information. . . . . . . . . . . . . . . 35
(f) Notice of Defaults, Material Adverse Changes
and Other Matters . . . . . . . . . . . . . . 35
5.02. Accuracy of Financial Statements and
Information. . . . . . . . . . . . . . . . . . . . 36
(a) Historical Financial Statements . . . . . . . 36
(b) Future Financial Statements . . . . . . . . . 36
(c) Historical Information. . . . . . . . . . . . 37
(d) Future Information. . . . . . . . . . . . . . 37
5.03. Additional Covenants Relating to Disclosure. . . 38
(a) Accounting Methods and Financial Records. . . 38
(b) Fiscal Year . . . . . . . . . . . . . . . . . 38
(c) Visits and Inspections. . . . . . . . . . . . 38
ARTICLE 6
DEFAULT
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.01. Events of Default. . . . . . . . . . . . . . . . 39
6.02. Remedies upon Event of Default . . . . . . . . . 43
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.01. Mandatory Suspension and Conversion of Fixed
Rate Loans . . . . . . . . . . . . . . . . . . . . 44
7.02. Regulatory Changes . . . . . . . . . . . . . . . 45
7.03. Change of Lending Office . . . . . . . . . . . . 46
7.04. Funding Losses . . . . . . . . . . . . . . . . . 47
7.05. Determinations . . . . . . . . . . . . . . . . . 47
ARTICLE 8
THE ADMINISTRATIVE AGENT
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.01. Appointment and Powers . . . . . . . . . . . . . 47
8.02. Limitation on Administrative Agent's Liability . 48
8.03. Defaults . . . . . . . . . . . . . . . . . . . . 48
8.04. Rights as a Managing Agent and as a Bank . . . . 49
8.05. Indemnification. . . . . . . . . . . . . . . . . 49
8.06. Non-Reliance on Administrative Agent, Managing
Agents, Co-Agents, and Other Banks . . . . . . . . 50
8.07. Execution and Amendment of Loan Documents on
<PAGE>
Behalf of the Banks. . . . . . . . . . . . . . . . 50
8.08. Resignation of the Administrative Agent. . . . . 51
ARTICLE 9
MISCELLANEOUS
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.01. Notices and Deliveries . . . . . . . . . . . . . 51
(i) Manner of Delivery. . . . . . . . . . . . . . 51
(ii) Addresses. . . . . . . . . . . . . . . . . . 52
(iii) Effectiveness . . . . . . . . . . . . . . . 54
(iv) Reasonable Notice. . . . . . . . . . . . . . 55
9.02. Expenses; Indemnification. . . . . . . . . . . . 55
9.03. Amounts Payable Due upon Request for Payment . . 56
9.04. Remedies of the Essence. . . . . . . . . . . . . 56
9.05. Rights Cumulative. . . . . . . . . . . . . . . . 56
9.06. Disclosures. . . . . . . . . . . . . . . . . . . 57
9.07. Amendments; Waivers. . . . . . . . . . . . . . . 57
9.08. Set-Off; Suspension of Payment and Performance . 57
9.09. Sharing of Recoveries. . . . . . . . . . . . . . 58
9.10. Assignments and Participations . . . . . . . . . 59
(a) Assignments . . . . . . . . . . . . . . . . . 59
(b) Participations. . . . . . . . . . . . . . . . 59
(c) Rights of Assignees and Participants. . . . . 59
9.11. Governing Law. . . . . . . . . . . . . . . . . . 60
9.12. Judicial Proceedings; Waiver of Jury Trial . . . 60
9.13. LIMITATION OF LIABILITY. . . . . . . . . . . . . 61
9.14. Reference Banks. . . . . . . . . . . . . . . . . 61
9.15. Severability of Provisions . . . . . . . . . . . 61
9.16. Counterparts . . . . . . . . . . . . . . . . . . 61
9.17. Survival of Obligations. . . . . . . . . . . . . 61
9.18. Entire Agreement . . . . . . . . . . . . . . . . 62
9.19. Successors and Assigns . . . . . . . . . . . . . 62
9.20. Acceptance of Release of Rights by Guarantors. . 62
ARTICLE 10
INTERPRETATION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
10.01. Definitional Provisions . . . . . . . . . . . . 62
(a) Defined Terms . . . . . . . . . . . . . . . . 62
(b) Other Definitional Provisions . . . . . . . . 84
10.02. Accounting Matters. . . . . . . . . . . . . . . 85
10.03. Representations and Warranties. . . . . . . . . 85
10.04. Captions. . . . . . . . . . . . . . . . . . . . 85
Annex A Banks, Lending Offices, Notice
Addresses and Commitments
Schedule 1.02 Notice of Borrowing
Schedule 1.04(c)(iv) Notice of Conversion or Continuation
<PAGE>
Schedule 1.06(a) Notice of Prepayment
Schedule 2.01(a)(i) Borrower's Certificate as to
Resolutions, etc.
Annex A Resolutions of Board of Directors
Annex A-1 Resolutions of Shareholders
Annex B By-laws
Schedule 2.01(a)(ii) Guarantor's Certificate as to
Resolutions, etc.
Annex A Resolutions of Board of Directors
Annex A-1 Resolutions of Shareholders
Annex B By-laws
Schedule 2.01(f) Certificate of Negotiating Officer
Schedule 3.02 Schedule of Material Subsidiaries
Schedule 3.03 Schedule of Required Consents and
Governmental Approvals
Schedule 3.09 Schedule of Withdrawal Liabilities
Schedule 4.04 Schedule of Existing Guaranties
Schedule 4.05 Schedule of Existing Liens
Schedule 4.08 Schedule of Discontinued Subsidiaries
Schedule 4.10 Schedule of Existing Benefit Plans
Schedule 4.12 Schedule of Existing Restrictive
Covenants
Schedule 4.19 Schedule of Existing Subsidiary
Indebtedness
Schedule 5.01(a) Certificate as to Quarterly Financial
Statements
Schedule 5.01(b) Certificate as to Annual Financial
Statements
Schedule 5.02(a) Schedule of Historical Financial
Information
Schedule 9.10(a) Notice of Assignment
<PAGE>
Schedule 10.01 Form of Segment Operating Report
Schedule 10.01(a) Form of Monthly Operating Report
Schedule 10.01(b) Form of Monthly Projected Cash Flow
Report
Exhibit A-1 Base Rate Note
Exhibit A-2 Eurodollar Rate Note
Exhibit A-3 Swing Loan Note
Exhibit B Form of Guaranty Agreement Amendment
Exhibit C Form of Security Agreement Amendment
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 14, 1993
WHEREAS, SEQUA CORPORATION, a Delaware Corporation, as
Borrower (the "Borrower"), The Bank of New York, as
Administrative Agent, the Co-Agents listed therein and certain
banks were parties to a Credit Agreement dated as of November 13,
1991, which Credit Agreement was amended by Amendment No. 1 and
Consent dated as of June 9, 1992, and Amendment No. 2 dated as of
July 29, 1992, and Amendment No. 3 dated as of September 30,
1992, and Amendment No. 4 dated as of March 25, 1993, and
Amendment No. 5 dated as of April 15, 1993, and Amendment No. 6
dated as of May 14, 1993, and Amendment No. 7 and Consent dated
as of June 24, 1993, and Amendment No. 8 dated as of August 31,
1993, and Amendment No. 9 dated as of September 30, 1993 and
Amendment No. 10 and Waiver dated as of December 13, 1993 (as
amended, the "Original Agreement"); and
WHEREAS, the Borrower, The Bank of New York, as
Administrative Agent (the "Administrative Agent"), The Bank of
New York, The Bank of Nova Scotia, and Chemical Bank, as Managing
Agents (the "Managing Agents"), Bank of America NT&SA, Chase
Manhattan Bank, N.A., and The Nippon Credit Bank, Ltd., as Co-
Agents (the "Co-Agents"), and the banks listed on the signature
pages hereof (the "Banks"), wish to amend and restate the
Original Agreement;
NOW, THEREFORE, the Borrower, the Administrative Agent,
the Managing Agents, the Co-Agents, and the Banks agree that the
Original Agreement is amended and restated in its entirety as of
the Effective Date as follows (as amended and restated hereby,
the "Agreement") (with certain terms used herein being defined in
Article 10):
ARTICLE 1
CREDIT FACILITY
Section 1.01. Commitment to Lend. Upon the terms and
subject to the conditions of this Agreement, each Bank agrees to
make, from time to time during the period from the Effective Date
through the Maturity Date, one or more Loans to the Borrower in
an aggregate unpaid principal amount, together with such Bank's
<PAGE>
pro rata share of (x) the undrawn face amount of all outstanding
Letters of Credit, (y) all unreimbursed drawings under Letters of
Credit (whether or not outstanding) and (z) all outstanding Swing
Loans, not exceeding at any time such Bank's Commitment at such
time. Subject to Section 1.06 and the other terms and conditions
of this Agreement, the Loans may, at the option of the Borrower,
be made as, and from time to time continued as or converted into,
Base Rate or Eurodollar Rate Loans of any permitted Type, or any
combination thereof. The aggregate amount of the Commitments on
the Agreement Date is $150,000,000.
Section 1.02. Manner of Borrowing. (a) The Borrower
shall give the Administrative Agent notice (which shall be
irrevocable) no later than 11:00 a.m. (New York time) on, in the
case of Base Rate Loans, the second Business Day, and, in the
case of Eurodollar Rate Loans, the third Eurodollar Business Day,
before the requested date for the making of such Loans. Each
such notice shall be in the form of Schedule 1.02 and shall
specify (i) the requested date for the making of the requested
Loans, which shall be, in the case of Base Rate Loans, a Business
Day and, in the case of Eurodollar Rate Loans, a Eurodollar
Business Day, (ii) the Type or Types of Loans requested and (iii)
the amount of each such Type of Loan, which amount shall be, in
the case of each such Type of Loan, in integral multiples of
$1,000,000 not less than $5,000,000 or, if less, the aggregate
amount of the unused Commitments. Upon receipt of any such
notice, the Administrative Agent shall promptly notify each Bank
of the contents thereof and of the amount and Type of each Loan
to be made by such Bank on the requested date specified therein.
(b) Not later than 11:00 a.m. (New York time) on each
requested date for the making of Loans, each Bank shall make
available to the Administrative Agent, in Dollars in funds
immediately available to the Administrative Agent at the
Administrative Agent's Office, the Loans to be made by such Bank
on such date. Any Bank's failure to make any Loan to be made by
it on the requested date therefor shall not relieve any other
Bank of its obligation to make any Loan to be made by such other
Bank on such date, but such other Bank shall not be liable for
such failure.
(c) Unless the Administrative Agent shall have
received notice from a Bank prior to 10:00 a.m. (New York time)
on the requested date for the making of any Loans that such Bank
will not make available to the Administrative Agent the Loans
requested to be made by such Bank on such date, the
Administrative Agent may assume that such Bank has made such
Loans available to the Administrative Agent on such date in
accordance with Section 1.02(b) and the Administrative Agent in
its sole discretion may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount on
behalf of such Bank. If and to the extent such Bank shall not
have so made available to the Administrative Agent the Loans
<PAGE>
requested to be made by such Bank on such date and the
Administrative Agent shall have so made available to the Borrower
a corresponding amount on behalf of such Bank, such Bank shall,
on demand, pay to the Administrative Agent such corresponding
amount together with interest thereon, for each day from the date
such amount shall have been so made available by the
Administrative Agent to the Borrower until the date such amount
shall have been repaid to the Administrative Agent, at the
Federal Funds Rate until (and including) the third Business Day
after demand is made and thereafter at the Base Rate. If such
Bank does not pay such corresponding amount promptly upon the
Administrative Agent's demand therefor, the Administrative Agent
shall promptly notify the Borrower and the Borrower shall
immediately repay such corresponding amount to the Administrative
Agent together with accrued interest thereon at the applicable
rate or rates provided in Section 1.04(a).
(d) All Loans made available to the Administrative
Agent in accordance with Section 1.02(b) shall be disbursed by
the Administrative Agent not later than 12:00 noon (New York
time) on the requested date therefor in Dollars in funds
immediately available to the Borrower by credit to an account of
the Borrower at the Administrative Agent's Office or in such
other manner as may have been specified in the applicable notice
and as shall be acceptable to the Administrative Agent.
Section 1.03. Swing Loans. (a) Swing Loan Commitment.
Upon the terms and subject to the conditions, including those
specified in Article 2, of this Agreement, the Swing Loan Lender
may, at it sole discretion and for its sole account, from time to
time, make one or more Swing Loans to the Borrower at the
Borrower's request, the aggregate unpaid principal amount of
which at any time shall not exceed the lesser of (A) the
aggregate amount of the Commitments at such time minus the
aggregate principal amount of (x) all Loans outstanding at such
time, (y) the undrawn face amount of all Letters of Credit
outstanding at such time and (z) all unreimbursed drawings under
Letters of Credit (whether or not outstanding) at such time, and
(B) $5,000,000. All Swing Loans shall be in a minimum amount of
$500,000 and in integral multiples of $100,000 in excess thereof.
All Swing Loans shall be disbursed by the Swing Loan Lender in
Dollars in funds immediately available to the Borrower at the
Swing Loan Lender's Domestic Lending Office, or in such other
manner as shall be acceptable to the Borrower and the Swing Loan
Lender, on the day requested if such request is received not
later than 3:00 p.m. (New York time) on such day, and if received
thereafter, on the next Business Day.
(b) Repayment. The Borrower shall repay each Swing
Loan no later than the earlier of (x) 3:00 p.m. (New York time)
on the first Business Day after the date on which such Swing Loan
<PAGE>
was made and (y) the Maturity Date. Such repayment may be
effected by the Borrower from the proceeds of Loans or Swing
Loans or from other moneys available to the Borrower.
(c) Participation. Upon demand to all Banks by the
Swing Loan Lender whether before or after a Default, each Bank
(other than the Swing Loan Lender) shall irrevocably and
unconditionally purchase from the Swing Loan Lender, without
recourse or warranty (except that the outstanding Swing Loans in
fact were made in accordance with Section 1.03(a), an undivided
interest and participation in the Swing Loans then outstanding,
by paying to the Swing Loan Lender, without reduction or
deduction of any kind, including but not limited to reductions or
deductions for set-off, recoupment or counterclaim, in Dollars
immediately available to the Swing Loan Lender at the Swing Loan
Lender's Domestic Lending Office, an amount equal to such Bank's
Commitment Percentage of the principal amount of all Swing Loans
then outstanding, and thereafter, except as otherwise provided in
the second succeeding sentence, the Banks' respective interests
in such Swing Loans, and the remaining interest of the Swing Loan
Lender in such Swing Loans, shall in all respects be treated as
Loans under this Agreement, but such Swing Loans shall continue
to be evidenced by the Swing Loan Note, provided that the
obligation of any Bank to purchase such a participation in a
Swing Loan shall be subject to the provisions of Section 1.03(d).
If any Bank does not pay any amount which it is required to pay
after giving effect to the provisions of Section 1.03(d)
forthwith upon the Swing Loan Lender's demand therefor, the Swing
Loan Lender shall be entitled to recover such amount on demand
from such Bank, together with interest thereon, at the Federal
Funds Rate for the first three Business Days, and thereafter at
the Base Rate, for each day from the date of such demand, if made
prior to 2:00 p.m. (New York time) on any Business Day, or, if
made at any other time, from the next Business Day following the
date of such demand, until the date such amount is paid to the
Swing Loan Lender by such Bank. If such Bank does not pay such
amount forthwith upon the Swing Loan Lender's demand therefor,
and until such time as such Bank makes the required payment, the
Swing Loan Lender shall be deemed to continue to have outstanding
a Swing Loan in the amount of such unpaid participation
obligation for all purposes of this Agreement other than those
provisions requiring the other Banks to purchase a participation
therein.
(d) Obligations of Banks. No Bank shall be obligated
to purchase a participation in any Swing Loan unless (i) the
Swing Loan Lender believed in good faith that all conditions
specified in Section 2.02 to making of such Swing Loan were
satisfied at the time such Swing Loan was made or (ii) such Bank
had actual knowledge, by receipt of information furnished to it
pursuant to Section 5.01(f) hereof, or otherwise, that any such
condition had not been satisfied and failed to notify the Swing
<PAGE>
Loan Lender in a writing received by the Swing Loan Lender one
Business Day prior to the time that it made such Swing Loan that
the Swing Loan Lender was not authorized to make such Swing Loan
or (iii) the satisfaction of such condition that was not
satisfied had been waived in accordance with the provisions of
this Agreement.
Section 1.04. Interest. (a) Rates. Each Loan shall
bear interest on the outstanding principal amount thereof until
due at a rate per annum equal to, (i) so long as it is a Base
Rate Loan, the Base Rate as in effect from time to time plus the
Applicable Margin, or (ii) so long as it is a Eurodollar Rate
Loan, the applicable Adjusted Eurodollar Rate plus the Applicable
Margin. Each Swing Loan shall bear interest on the outstanding
principal amount thereof until due at a rate per annum agreed
upon from time to time by the Borrower and the Swing Loan Lender.
If all or any part of a Loan, a Swing Loan, or any other amount
due and payable under this Agreement is not paid when due
(whether at maturity, by reason of notice of prepayment or
acceleration, or otherwise), such unpaid amount shall, to the
maximum extent permitted by Applicable Law, bear interest for
each day during the period from the date such amount became so
due until it shall be paid in full (whether before or after
judgment) at a rate per annum equal to the applicable Post-
Default Rate.
(b) Payment. Interest shall be payable, (i) in the
case of Base Rate Loans, on each Interest Payment Date, (ii) in
the case of Eurodollar Rate Loans, on the last day of each
applicable Interest Period (and, if an Interest Period is longer
than three months, at intervals of three months after the first
day of such Interest Period), (iii) in the case of any Loan or
Swing Loan, when such Loan or Swing Loan shall be due (whether at
maturity, by reason of notice of prepayment or acceleration, or
otherwise), or converted, but only to the extent then accrued on
the amount then so due or converted, and (iv) in the case of all
other amounts due and payable under this Agreement, on demand.
Interest at the Post-Default Rate shall be payable on demand.
(c) Conversion and Continuation. (i) All or any part
of the principal amount of Loans of any Type may, on any Business
Day, be converted into any other Type or Types of Loans, except
that (A) Eurodollar Rate Loans may be converted only on the last
day of an applicable Interest Period and (B) Base Rate Loans may
be converted into Eurodollar Rate Loans only on a Eurodollar
Business Day.
(ii) Base Rate Loans shall continue as Base Rate
Loans unless and until such Loans are converted into Loans of
another Type. Eurodollar Rate Loans of any Type shall continue
as Loans of such Type until the end of the then current Interest
Period therefor, at which time they shall be automatically
<PAGE>
converted into Base Rate Loans unless the Borrower shall have
given the Administrative Agent notice in accordance with Section
1.04(c)(iv) requesting either that such Loans continue as Loans
of such Type for another Interest Period or that such Loans be
converted into Loans of another Type at the end of such Interest
Period.
(iii) Notwithstanding anything to the contrary
contained in Section 1.04(c)(i) or (ii), during a Default, the
Administrative Agent may notify the Borrower that as of the date
specified in such notice Loans shall automatically be converted
into or continued as Base Rate Loans (whether or not such
conversion would require a conversion of Eurodollar Rate Loans
prior to the last day of an applicable Interest Period or would
result in losses, costs, or expenses compensable under
Section 7.04) and, thereafter, until no Default shall continue to
exist, Loans may not be converted into or continued as Loans of
any Type other than Base Rate Loans.
(iv) The Borrower shall give the Administrative
Agent notice (which shall be irrevocable) of each conversion of
Loans or continuation of Eurodollar Rate Loans no later than
11:00 a.m. (New York time) on, in the case of a conversion into
Base Rate Loans, the second Business Day, and, in the case of a
conversion into or continuation of Eurodollar Rate Loans, the
third Eurodollar Business Day, before the requested date of such
conversion or continuation. Each notice of conversion or
continuation shall be in the form of Schedule 1.04(c)(iv) and
shall specify (A) the requested date of such conversion or
continuation, (B) the amount and Type and, in the case of
Eurodollar Rate Loans, the last day of the applicable Interest
Period of the Loans to be converted or continued and (C) the
amount and Type or Types of Loans into which such Loans are to be
converted or as which such Loans are to be continued. Upon
receipt of any such notice, the Administrative Agent shall
promptly notify each Bank of (x) the contents thereof, (y) the
amount and Type and, in the case of Eurodollar Rate Loans, the
last day of the applicable Interest Period of each Loan to be
converted or continued by such Bank and (z) the amount and Type
or Types of Loans into which such Loans are to be converted or as
which such Loans are to be continued.
(d) Maximum Interest Rate. Nothing contained in the
Loan Documents shall require the Borrower at any time to pay
interest at a rate exceeding the Maximum Permissible Rate. If
interest payable by the Borrower on any date would exceed the
maximum amount permitted by the Maximum Permissible Rate, such
interest payment shall automatically be reduced to such maximum
permitted amount, and interest for any subsequent period, to the
extent less than the maximum amount permitted for such period by
the Maximum Permissible Rate, shall be increased by the unpaid
amount of such reduction. Any interest actually received for any
period in excess of such maximum amount permitted for such period
<PAGE>
shall be deemed to have been applied as a prepayment of the Loans
or Swing Loans, as the case may be.
Section 1.05. Repayment. The Loans and Swing Loans
outstanding on the Maturity Date shall mature and become due and
payable on the Maturity Date.
Section 1.06. Prepayments. The Borrower may, at any
time and from time to time, prepay the Swing Loans in whole or in
part, without premium or penalty except that any partial payment
shall be in an aggregate principal amount not less than $500,000
and shall be an integral multiple of $100,000. The Borrower may,
at any time and from time to time, prepay the Loans in whole or
in part, without premium or penalty (but subject to compensation
pursuant to Section 7.04), except that any partial prepayment
shall be in an aggregate principal amount not less than
$5,000,000 and shall be an integral multiple of $1,000,000. The
Borrower shall give the Administrative Agent notice of each
prepayment pursuant to this Section 1.06 no later than 10:00 a.m.
(New York time) on, in the case of a prepayment of a Swing Loan,
the Business Day of such prepayment, in the case of a prepayment
of a Base Rate Loan, one Business Day prior to the date of such
prepayment, and, in the case of a prepayment of a Eurodollar Rate
Loan, the third Eurodollar Business Day before the date of such
prepayment. Each such notice of prepayment shall be in the form
of Schedule 1.06 and shall specify (i) the date such prepayment
is to be made and (ii) the amount and Type and, in the case of
Eurodollar Rate Loans, the last day of the applicable Interest
Period of the Loans to be prepaid. Upon receipt of any such
notice, other than any such notice which relates solely to the
prepayment of Swing Loans, the Administrative Agent shall
promptly notify each Bank of the contents thereof and the amount
and Type and, in the case of Eurodollar Rate Loans, the last day
of the applicable Interest Period of each Loan of such Bank to be
prepaid. Amounts to be prepaid pursuant to this Section 1.06
shall irrevocably be due and payable on the date specified in the
applicable notice of prepayment, together with interest thereon
as provided in Section 1.04.
Section 1.07. Limitation on Types of Loans.
Notwithstanding anything to the contrary contained in this
Agreement, the Borrower shall borrow, prepay, convert and
continue Loans in a manner such that (a) the aggregate principal
amount of Eurodollar Rate Loans of the same Type and having the
same Interest Period shall at all times be not less than
$5,000,000, (b) there shall not be, at any one time, more than
seven Interest Periods in effect with respect to Eurodollar Rate
Loans of all Types and (c) no payment of Eurodollar Rate Loans
will have to be made prior to the last day of an applicable
Interest Period in order to repay the Loans in the amounts and
(subject to Section 1.11(e)) on the date specified in Section
1.05.
<PAGE>
Section 1.08. Letters of Credit. (a) Subject to the
terms and conditions hereof, the Issuing Bank agrees to issue as
fronting bank one or more Letters of Credit for the account of
the Borrower. The following provisions shall apply to Letters of
Credit.
(i) Each Letter of Credit (A) shall have a minimum
face amount at least equal to $100,000, (B) shall have an
undrawn face amount, in the aggregate with the undrawn face
amount of all outstanding Letters of Credit and all
unreimbursed drawings under all Letters of Credit (whether
or not outstanding), not in excess of $75,000,000 and, in
the aggregate with the undrawn face amount of all
outstanding Letters of Credit and all unreimbursed drawings
under all Letters of Credit (whether or not outstanding) and
all Loans and Swing Loans, not in excess of the aggregate
total of the Commitments, (C) shall each have a term not in
excess of one year, (D) may, at the sole option of the
Issuing Bank, be renewable, (E) shall not extend beyond the
Maturity Date and (F) shall be for the account of the
Borrower, provided, however, that the Borrower, without in
any way limiting the Borrower's obligation as account party
hereunder and under such Letters of Credit, may instruct the
Issuing Bank to name a Subsidiary or division of the
Borrower as the account party as it appears on the face of
the Letter of Credit.
(ii) The Borrower shall give the Administrative
Agent at least five Business Days' prior notice specifying
the date each Letter of Credit is to be issued and attaching
a completed form of such Letter of Credit. Upon receipt of
such notice the Administrative Agent shall notify the
Issuing Bank and each Bank of the contents thereof.
(iii) Upon the date of issuance of a Letter of
Credit by the Issuing Bank, the Issuing Bank shall be
deemed, without further action by any party hereto, to have
sold to each Bank, and each Bank shall be deemed, without
further action by any party hereto, to have purchased from
the Issuing Bank an undivided and continuing participation,
to the extent of such Bank's Commitment Percentage, in such
Letter of Credit.
(iv) Upon receipt from the beneficiary of any
Letter of Credit of any demand for payment under such Letter
of Credit, the Issuing Bank shall promptly notify the
Borrower as to the amount to be paid as a result of such
demand and the respective payment date.
(v) Each Bank shall promptly, upon the demand by
the Issuing Bank, remit to the Issuing Bank, through the
Administrative Agent, its pro rata share of the payment made
by the Issuing Bank under such Letter of Credit together
<PAGE>
with interest thereon for each day from the day of demand by
the Issuing Bank through the day of payment at a rate equal
to the Federal Funds Rate for the first three Business Days
and thereafter at the Base Rate.
(vi) The Borrower shall, not later than 1:00 p.m.
(New York time) on the date of payment of each drawing,
reimburse the Issuing Bank, through the Administrative
Agent, for any amounts paid by the Issuing Bank under any
Letter of Credit. The Issuing Bank shall promptly remit to
each Bank, through the Administrative Agent, such Bank's pro
rata share of any payment received by the Issuing Bank from
the Borrower to the extent that such Bank has reimbursed the
Issuing Bank in accordance with clause (v) of this Section
1.08(a).
(vii) The Borrower may, in accordance with Section
1.02, request one or more Loans in order to pay the amounts
required to be paid by the Borrower pursuant to clause (vi)
above. To the extent the Borrower has not otherwise paid
such amount on such day, the Borrower shall be deemed to
have given a timely notice of borrowing of Loans to be made
(A) on the day the Banks are to reimburse the Issuing Bank
pursuant to clause (v) above, (B) as Base Rate Loans and (C)
in an aggregate amount equal to the amount required to be
paid by the Borrower in accordance with clause (vi) above
which has not been repaid. On the day such Loans are to be
made in order to pay such amount, each Bank shall, subject
to and in accordance with the terms and conditions of this
Agreement (including satisfaction of the conditions set
forth in Section 2.02 hereof), make available to the
Administrative Agent such Loan in accordance with Section
1.02(b); provided, however, that, with respect to such Loan,
such Bank shall only be required to make available to the
Administrative Agent under Section 1.02(b) hereof an amount
equal to the difference, if any, between the amount of such
Loan and the amount remitted through the Administrative
Agent to the Issuing Bank by such Bank pursuant to clause
(v) above.
(viii) The Borrower will pay to the Administrative
Agent for the account of each Bank a letter of credit fee
(A) so long as the Letter of Credit is a standby Letter of
Credit, on such Bank's Commitment Percentage of the daily
average undrawn face amount of each standby Letter of Credit
for the period from and including the date of issuance
thereof to but excluding the date of expiration or
termination thereof at a rate per annum equal to the then
Applicable Margin for Eurodollar Rate Loans, such fee to be
paid quarterly in arrears on each Interest Payment Date and
on the Maturity Date, and (B) so long as the Letter of
Credit is a documentary Letter of Credit, in an amount equal
to 0.25% of such Bank's Commitment Percentage of the actual
<PAGE>
drawing against each documentary Letter of Credit at the
time of drawing, such fee being due and payable at the time
of drawing.
(ix) The Borrower agrees to pay to the Issuing
Bank for its own account a fronting fee for the period from
the Effective Date to the Maturity Date on the average daily
undrawn face amount of all Letters of Credit outstanding on
each day at a rate per annum equal to 0.125% payable in
arrears on successive Interest Payment Dates and on the
Maturity Date, as well as such other charges as may be
agreed upon from time to time by the Issuing Bank and the
Borrower with respect to the issuance of and payments under
the Letters of Credit.
(x) The issuance by the Issuing Bank of each
Letter of Credit shall, in addition to the conditions
precedent set forth in Sections 2.01 and 2.02 hereof, be
subject to the conditions precedent that such Letter of
Credit shall be completed in such form as shall be
satisfactory to the Issuing Bank, and that the Borrower
shall have executed and delivered such other instruments and
agreements relating to such Letter of Credit as the Issuing
Bank shall have reasonably requested.
(b) The Borrower agrees to reimburse the
Administrative Agent, the Banks and the Issuing Bank for any out-
of-pocket costs and expenses incurred by such parties in
connection with the preparation of any Letter of Credit pursuant
to a notice from the Borrower which notice was revoked.
(c) Without affecting any rights the Banks may have
under Applicable Law (including under the UCP), the Borrower
agrees that none of the Banks, the Administrative Agent, the
Issuing Bank, nor any of their respective officers or directors
shall be liable or responsible for, and the obligations of the
Borrower to the Banks, the Issuing Bank, and the Administrative
Agent hereunder shall not in any manner be affected by: (i) the
use which may be made of any Letter of Credit or the proceeds
thereof by the beneficiary thereof or any other Person; (ii) the
validity, sufficiency or genuineness of documents other than the
Letters of Credit, or of any endorsement(s) thereon, even if such
documents should, in fact, prove to be in any or all respects,
invalid, insufficient, fraudulent or forged; or (iii) any other
circumstances whatsoever in making or failing to make payment
under any Letter of Credit, except that the Borrower shall have a
claim against the Issuing Bank and the Issuing Bank shall be
liable to the Borrower, to the extent, but only to the extent, of
any direct, as opposed to consequential, damages suffered by the
Borrower which are caused by the Issuing Bank's willful
misconduct or gross negligence in determining whether documents
presented under any Letter of Credit complied with the terms of
such Letter of Credit or the Issuer's willful failure to pay
<PAGE>
under such Letter of Credit after the presentation to it of
documents strictly complying with the terms and conditions of
such Letter of Credit. In furtherance and not in limitation of
the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order without responsibility for further
investigation, regardless of any notice or information to the
contrary.
Section 1.09. Fees; Reduction of Commitments.
(a) The Borrower shall pay to the Administrative Agent for the
account of each Bank a closing fee equal to, in the case of each
Bank with an Initial Commitment equal to or in excess of
$35,000,000, 2.125% of such Bank's allocated Commitment as
specified in Annex A hereto, in the case of each Bank with an
Initial Commitment of less than $35,000,000, but equal to or in
excess of $20,000,000, 1.750% of such Bank's allocated Commitment
as specified in Annex A hereto, and, in the case of each Bank
with an Initial Commitment of less than $20,000,000, 1.375% of
such Bank's allocated Commitment as specified in Annex A hereto.
(b) The Borrower shall pay to the Administrative Agent
for the account of each Bank a facility fee on the daily amount
of such Bank's Commitment for each day from the Effective Date
through the Maturity Date at a rate per annum of 0.50%, payable
in arrears on successive Interest Payment Dates, on the Maturity
Date and on the date of any reduction of such Commitment (to the
extent accrued and unpaid on the amount of the reduction);
provided that, for each day during which the Borrower's long-term
senior debt shall be rated both (i) Baa3 or better by Moody's
Investors Service and (ii) BBB or better by Standard & Poor's
Corporation, the applicable rate per annum shall instead be
0.375%.
(c) On the effective date of an extension of the
Maturity Date pursuant to Section 1.15 of this Agreement, the
Borrower shall pay to the Administrative Agent for the account of
each Bank, an Extension Fee equal to 0.25% of the amount of such
Bank's Commitment on the effective date of the extension of the
Maturity Date.
(d) The Borrower may reduce the Commitments by giving
the Administrative Agent notice (which shall be irrevocable)
thereof no later than 11:00 a.m. (New York time) on the third
Business Day before the requested date of such reduction, except
that each partial reduction shall be in an aggregate amount not
less than $5,000,000 and shall be in an integral multiple of
$1,000,000. Upon receipt of any such notice, the Administrative
Agent shall promptly notify each Bank of the contents thereof and
the amount to which such Bank's Commitment is to be reduced.
Notwithstanding the foregoing, the Borrower may not reduce the
Commitments to an aggregate amount less than the aggregate amount
of (x) all outstanding Loans and Swing Loans, (y) the undrawn
face amount of all outstanding Letters of Credit an (z) all
<PAGE>
unreimbursed drawings under Letters of Credit (whether or not
outstanding).
Section 1.10. Computation of Interest and Fees.
Interest and the facility fee shall be computed on the basis of a
year of 360 days (except for interest at the Base Rate employing
the Prime Rate, which shall be computed on the basis of a year of
365/6 days) and paid for the actual number of days elapsed.
Interest for any period shall be calculated from and including
the first day thereof to but excluding the last day thereof.
Section 1.11. Payments by the Borrower. (a) Time,
Place and Manner. All payments due to the Administrative Agent
under this Agreement or the other Loan Documents shall be made to
the Administrative Agent, or to such other Person as the
Administrative Agent may designate, at the Administrative Agent's
Office or at such other address as the Administrative Agent may
designate by notice to the Borrower. All payments due to any
Bank under this Agreement or the other Loan Documents shall, in
the case of payments on account of principal of or interest on
the Loans or fees, be made to the Administrative Agent at the
Administrative Agent's Office and, in the case of all other
payments, be made directly to such Bank at its Domestic Lending
Office or at such other address as such Bank may designate by
notice to the Borrower. All payments due to any Bank under this
Agreement or the other Loan Documents, whether made to the
Administrative Agent or directly to such Bank, shall be made for
the account of, in the case of payments in respect of Eurodollar
Rate Loans, such Bank's Eurodollar Rate Lending Office and, in
the case of all other payments, such Bank's Domestic Lending
Office. A payment shall not be deemed to have been made on any
day unless such payment has been received by the required Person,
at the required place of payment, in Dollars in funds immediately
available to such Person, no later than 12:00 noon (New York
time) on such day.
(b) No Reductions. All payments due to the
Administrative Agent or any Bank under this Agreement or the
other Loan Documents, and all other terms, conditions, covenants
and agreements to be observed and performed by the Borrower
hereunder or under the other Loan Documents, shall be made,
observed or performed by the Borrower without any reduction or
deduction whatsoever, including any reduction or deduction for
any set-off, recoupment, counterclaim (whether sounding in tort,
contract or otherwise) or Tax, except for any withholding or
deduction for Taxes required to be withheld or deducted under
Applicable Law.
(c) Taxes. If any Tax (other than income taxes
payable by the Administrative Agent or any Bank in its respective
home jurisdiction) is required to be withheld or deducted from,
or is otherwise payable by the Borrower in connection with, any
payment due to the Administrative Agent or any Bank under this
<PAGE>
Agreement or the other Loan Documents, the Borrower (i) shall, if
required, withhold or deduct the amount of such Tax from such
payment and, in any case, pay such Tax to the appropriate taxing
authority in accordance with Applicable Law and (ii) shall pay to
the Administrative Agent or such Bank, as applicable, (A) such
additional amounts as may be necessary so that the net amount
received by the Administrative Agent or such Bank with respect to
such payment, after withholding or deducting all Taxes required
to be withheld or deducted, is equal to the full amount payable
under this Agreement or the other Loan Documents and (B) an
amount equal to all Taxes payable by the Administrative Agent or
such Bank as a result of payments made by the Borrower (whether
to a taxing authority or to the Administrative Agent or such
Bank) pursuant to this Section 1.11(c). If any Tax is withheld
or deducted from any payment due to the Administrative Agent or
any Bank under this Agreement or the other Loan Documents, the
Borrower shall, within 30 days after the date of such payment,
furnish to the Administrative Agent or such Bank, as applicable,
the original or a certified copy of a receipt for such Tax from
the applicable taxing authority. If any payment due to the
Administrative Agent or any Bank under this Agreement or the
other Loan Documents is or is expected to be made without
withholding or deducting therefrom, or otherwise paying in
connection therewith, any Tax payable to any taxing authority,
the Borrower shall, within 30 days after any request from the
Administrative Agent or such Bank, as applicable, furnish to the
Administrative Agent or such Bank a certificate from such taxing
authority, or an opinion of counsel acceptable to the
Administrative Agent or such Bank, in either case stating that no
Tax payable to such taxing authority was or is, as the case may
be, required to be withheld or deducted from, or otherwise paid
by the Borrower in connection with, such payment.
(d) Authorization to Charge Accounts. The Borrower
hereby authorizes the Administrative Agent, the Managing Agents,
the Co-Agents, the Issuing Bank and each Bank, if and to the
extent payable by the Borrower under this Agreement or any other
Loan Document (whether payable to such Person or to any other
Person that is the Administrative Agent or a Bank) is not
otherwise paid when due, to charge such amount against any or all
of the accounts of the Borrower or any Material Subsidiary (other
than Atlantic Research Corporation, Sequa Receivables
Corporation, SCC, Sequa Limited and Warwick International Group
plc) with such Person or any of its Affiliates (whether
maintained at a branch or office located within or without the
United States), with the Borrower remaining liable for any
deficiency.
(e) Extension of Payment Dates. Whenever any payment
to the Administrative Agent or any Bank under this Agreement or
the other Loan Documents would otherwise be due (except by reason
of acceleration) on a day that is not a Business Day, or, in the
case of payments of the principal of Eurodollar Rate Loans, a
<PAGE>
Eurodollar Business Day, such payment shall instead be due on the
next succeeding Business or Eurodollar Business Day, as the case
may be, unless, in the case of a payment of the principal of
Eurodollar Rate Loans, such extension would cause payment to be
due in the next succeeding calendar month, in which case such due
date shall be advanced to the next preceding Eurodollar Business
Day. If the date any payment under this Agreement or the other
Loan Documents is due is extended (whether by operation of this
Agreement or the other Loan Documents, Applicable Law or
otherwise), such payment shall bear interest for such extended
time at the rate of interest applicable hereunder or under the
other Loan Documents.
Section 1.12. Distribution of Payments by the
Administrative Agent. (a) The Administrative Agent shall
promptly distribute to each Bank its ratable share of each
payment received by the Administrative Agent under the Loan
Documents for the account of the Banks by credit to an account of
such Bank at the Administrative Agent's Office or, upon written
request of such Bank, by wire transfer to an account of such Bank
at an office of any other commercial bank located in the United
States.
(b) Unless the Administrative Agent shall have
received notice from the applicable Loan Party prior to the date
on which any payment is due to the Banks under the Loan Documents
that such Loan Party will not make such payment in full, the
Administrative Agent may assume that such Loan Party has made
such payment in full to the Administrative Agent on such date and
the Administrative Agent in its sole discretion may, in reliance
upon such assumption, cause to be distributed to each Bank on
such due date a corresponding amount with respect to the amount
then due such Bank. If and to the extent such Loan Party shall
not have so made such payment in full to the Administrative Agent
and the Administrative Agent shall have so distributed to any
Bank a corresponding amount, such Bank shall, on demand, repay to
the Administrative Agent the amount so distributed together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to the Administrative Agent, at the Federal Funds Rate
until (and including) the third Business Day after demand is made
and thereafter at the Base Rate.
Section 1.13. Evidence of Indebtedness. Each Bank's
Loans and the Borrower's obligation to repay such Loans with
interest in accordance with the terms of this Agreement shall be
evidenced by this Agreement, the records of such Bank and, in the
case of Base Rate Loans, a single Base Rate Note payable to the
order of such Bank and, in the case of Eurodollar Rate Loans, a
single Eurodollar Note payable to the order of such Bank. The
Swing Loans and the Borrower's obligation to repay the Swing
Loans with interest in accordance with the terms of this
Agreement shall be evidenced by this Agreement, the records of
<PAGE>
the Swing Loan Lender, and a single Swing Loan Note payable to
the order of the Swing Loan Lender. The records of each Bank and
the Swing Loan Lender shall be prima facie evidence of such
Bank's Loans and the Swing Loans, as the case may be, and accrued
interest thereon and of all payments made in respect thereof.
Section 1.14. Pro Rata Treatment. Except to the
extent otherwise provided herein, (a) Loans shall be made by the
Banks pro rata in accordance with their respective Commitments,
(b) Loans of the Banks shall be converted and continued pro rata
in accordance with their respective amounts of Loans of the Type
and, in the case of Eurodollar Rate Loans, having the Interest
Period being so converted or continued, (c) each reduction in the
Commitments shall be made pro rata in accordance with the
respective amounts thereof and (d) each payment of the principal
of or interest on the Loans or of fees or any other amounts due
hereunder shall be made for the account of the Banks pro rata in
accordance with their respective amounts of such principal,
interest, fees or other amounts then due and payable.
Section 1.15. Extension of Maturity Date. If no
Default or Event of Default has occurred or is continuing, no
earlier than thirty (30) days prior to, and no later than thirty
(30) days after, March 31, 1995, the Borrower may, by written
notice to the Administrative Agent (an "Extension Notice"),
request the Banks to extend the Maturity Date for a period of one
year commencing on the Maturity Date then in effect. Each Bank
shall notify the Administrative Agent of its decision on such
request for extension within thirty (30) days of its receipt of
such request from the Administrative Agent, which notice shall be
irrevocable; provided, that, if any Bank shall fail to notify the
Administrative Agent, such Bank shall be deemed to have given
notice of a determination not to extend. Upon receipt of such
notice or deemed notice from each Bank, the Administrative Agent
shall notify each Bank of the contents thereof and the new
Maturity Date, if any; provided, however, that such extension
shall be effective if, and only if, Banks having 100% of the
Commitments have consented to so extend their respective
Commitments.
ARTICLE 2
CONDITIONS TO EFFECTIVENESS
Section 2.01. Conditions to Effective Date. This
Agreement shall become effective on the date (the "Effective
Date") on which the Administrative Agent has received each of the
following, in form and substance and, in the case of the
materials referred to in clauses (a), (b), (c), (e), (f), (g),
(h) and (l) certified in a manner satisfactory to the
Administrative Agent and Winthrop, Stimson, Putnam & Roberts,
<PAGE>
special counsel to the Administrative Agent:
(a) a certificate of the Secretary or an Assistant
Secretary of each Loan Party, dated the Effective Date,
substantially in the form of Schedule 2.01(a)(i) or (ii), as the
case may be, to which shall be attached copies of the resolutions
and by-laws referred to in such certificate;
(b) a copy of the certificate of incorporation of each
Loan Party, (x) certified, as of a recent date, by the Secretary
of State or other appropriate official of such Loan Party's
jurisdiction of incorporation or (y) if such Loan Party has
previously delivered such a certified copy of its certificate of
incorporation to the Administrative Agent, certified, as of the
Effective Date, by the Secretary or other appropriate officer of
such Loan Party, which certificate shall certify that the
certificate of incorporation for such Loan Party has not been
amended or modified since the date of the previously delivered
Secretary of State's certificate;
(c) a good standing certificate with respect to each
Loan Party and each of their respective U.S. domestic Material
Subsidiaries, issued as of a recent date by the Secretary of
State or other appropriate official of such Person's jurisdiction
of incorporation, together with a telegram from such Secretary of
State or other official, updating the information in such
certificate;
(d) an opinion of counsel for each Loan Party, dated
the Effective Date, in form satisfactory to the Managing Agents;
(e) a certified copy of each other document under
which any Loan Party and any of its Subsidiaries shall have
incurred Indebtedness for Money Borrowed, or Guaranties in
respect thereof, each in an aggregate principal amount of
$10,000,000 or more, each as amended;
(f) a certificate in the form of Schedule 2.01(f) from
the appropriate officer of each Loan Party;
(g) a copy of each Governmental Approval and other
consent or approval listed on Schedule 3.03;
(h) a certificate of the president, chief financial
officer or treasurer of the Borrower, certifying that,
immediately prior to giving effect to this Agreement, no Default
exists under the Original Agreement;
(i) a Base Rate Note and Eurodollar Note for each
Bank, each duly executed, and a Swing Loan Note for the Swing
Loan Lender, duly executed;
(j) evidence that the Borrower has made such
<PAGE>
arrangements satisfactory to the Administrative Agent such that
immediately upon the effectiveness of this Agreement, the Loans
outstanding under the Original Agreement shall have been prepaid
in full;
(k) a duly executed copy of this Agreement, the
Security Agreement Amendment, and the Guaranty Agreement
Amendment;
(l) copies of Existing Guaranties, each in an
aggregate guaranteed amount of $10,000,000 or more;
(m) payment of closing fees pursuant to Section
1.09(a) and payment of such fees and expenses of Winthrop,
Stimson, Putnam & Roberts, special counsel to the Administrative
Agent, as shall have been billed as of the Effective Date; and
(n) evidence that the Borrower shall have received the
proceeds from the issuance of notes under an Indenture between
the Borrower and I.B.J. Schroder Bank & Trust Co., as Trustee
dated on or about December 15, 1993, in an aggregate amount of
not less than $100,000,000.00;
(o) evidence that the Receivables Purchase Agreement
will have been extended to a maturity date not earlier than March
31, 1997 by an amendment dated December 15, 1993; and
(p) such instruments and other documents as the
Administrative Agent or its special counsel may request.
Section 2.02. Conditions to Each Extension of Credit.
The obligation of each Bank to make each Loan requested to be
made by it, including its initial Loan, the obligation of the
Issuing Bank to issue each Letter of Credit requested to be
issued by it and the obligation of the Swing Loan Lender to
consider making each Swing Loan requested to be made by it (which
Swing Loan shall be made, nevertheless, at the sole and absolute
discretion of the Swing Loan Lender notwithstanding compliance or
non-compliance with any such condition), is subject to the
determination of such Bank, the Issuing Bank or the Swing Loan
Lender, as the case may be, in its sole and absolute discretion,
that each of the following conditions has been fulfilled:
(a) the Administrative Agent shall have received a
notice of borrowing complying with the requirements of
Section 1.02, in the case of a Loan, or Section 1.08, in the case
of a Letter of Credit, or, in the case of a Swing Loan, the Swing
Loan Lender shall have received a notice of borrowing complying
with the requirements of Section 1.03;
(b) each Loan Document Representation and Warranty
shall be true and correct at and as of the time such Loan or
Swing Loan is to be made or Letter of Credit issued, both with
<PAGE>
and without giving effect to such Loan or Swing Loan or Letter of
Credit and all other Loans or Swing Loans to be made or Letters
of Credit to be issued at such time and to the application of the
proceeds thereof;
(c) no Default shall have occurred and be continuing
at the time such Loan or Swing Loan is to be made or Letter of
Credit is to be issued or would result from the making of such
Loan or Swing Loan or the issuance of such Letter of Credit and
all other Loans or Swing Loans to be made or Letters of Credit to
be issued at such time or from the application of the proceeds
thereof;
(d) such Bank shall have received such materials as it
may have requested pursuant to Section 5.01(e);
(e) such Loan or Swing Loan or Letter of Credit will
not contravene any Applicable Law applicable to such Bank.
Each notice of borrowing and request for issuance shall
constitute a Representation and Warranty by the Borrower made as
of the time of the making of the requested Loans or Swing Loans
or the issuance of the requested Letters of Credit that the
conditions specified in clauses (b) and (c) have been fulfilled
as of such time, except, in the case of clause (c), for Defaults
of which the Borrower shall have notified the Banks prior to 5:00
p.m. (New York time) on the Business Day before the requested
date for the making of such Loans or Swing Loans or issuance of
such Letters of Credit.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent, each
Managing Agent, each Co-Agent and each Bank to enter into this
Agreement and each Bank to make each Loan requested to be made by
it, and the Swing Loan Lender to make each Swing Loan requested
to be made by it, and the Issuing Bank to issue each Letter of
Credit requested to be issued by it, the Borrower represents and
warrants as follows:
Section 3.01. Organization; Power; Qualification.
The Borrower and each Subsidiary are corporations duly organized,
validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, have the corporate
power and authority to own their respective properties and to
carry on their respective businesses as now being and hereafter
proposed to be conducted and are duly qualified and in good
standing as foreign corporations, and are authorized to do
business, in all jurisdictions in which the character of their
<PAGE>
respective properties or the nature of their respective
businesses requires such qualification or authorization, except
for qualifications and authorizations the lack of which, singly
or in the aggregate, has not had and will not have a Materially
Adverse Effect on the Borrower and the Consolidated Subsidiaries
taken as a whole.
Section 3.02. Subsidiaries. Schedule 3.02 sets forth,
as of the Agreement Date, all of the Material Subsidiaries, their
jurisdictions of incorporation and the percentages of the various
classes of their Capital Securities owned by the Borrower or
another Subsidiary and indicates which Material Subsidiaries are
Consolidated Subsidiaries. The Borrower or another Wholly Owned
Subsidiary, as the case may be, has the unrestricted right to
vote (subject to limitations imposed by Applicable Law or, in the
case of SCC, by the GATX Documents or, in the case of Sequa
Receivables Corp., by the Receivables Purchase Agreement), and
to receive dividends and distributions on, all Capital Securities
indicated on Schedule 3.02 as owned by the Borrower or such
Subsidiary (other than the right to receive dividends and
distributions on Capital Securities issued by SCC, Sequa
Receivables Corp. or Atlantic Research Corporation). All such
Capital Securities have been duly authorized and issued and are
fully paid and nonassessable.
Section 3.03. Authorization; Enforceability; Required
Consents; Absence of Conflicts. Each of the Borrower and each
Guarantor has the power, and has taken all necessary action
(including any necessary stockholder action) to authorize it, to
execute, deliver and perform in accordance with their respective
terms the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow or otherwise incur obligations
hereunder in the unused amount of the Commitments. Each of this
Agreement, the Guaranty Agreement and the Security Agreement has
been duly executed and delivered by the Borrower and is, and each
Note when executed and delivered to the Administrative Agent will
be, a legal, valid and binding obligation of each Loan Party that
is party thereto, enforceable against such Loan Party in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally. The execution, delivery and
performance in accordance with their respective terms by the
Borrower and the Guarantors of the Loan Documents to which they
are parties, and each borrowing or other incurrence of
obligations hereunder, whether or not in the amount of the unused
Commitments, do not and (absent any change in any Applicable Law
or applicable Contract) will not (a) require any Governmental
Approval or any other consent or approval, including any consent
or approval of any Subsidiary or any consent or approval of the
stockholders of the Borrower or any Subsidiary, other than
Governmental Approvals and other consents and approvals that have
been obtained, are final and not subject to review on appeal or
<PAGE>
to collateral attack, are in full force and effect and, in the
case of any such consents or approvals required under any
Applicable Law or Contract as in effect on the Agreement Date,
are listed on Schedule 3.03, or (b) violate or conflict with,
result in a breach of, constitute a default under, or result in
or require the creation of any Lien upon any assets of the
Borrower or any Subsidiary under, (i) any Contract to which the
Borrower or any Subsidiary is a party or by which the Borrower or
any Subsidiary or any of their respective properties may be bound
(other than, in the case of any violation, conflict, breach or
default, any such violation, conflict, breach or default which,
individually or in the aggregate with all other such violations,
conflicts, breaches and defaults, would not have a Materially
Adverse Effect on (x) the Borrower and its Consolidated
Subsidiaries taken as a whole or (y) any Loan Document) or (ii)
any Applicable Law.
Section 3.04. Litigation. Except as disclosed in the
1993 Form S-1 Registration Statement or in the financial
statements listed on Schedule 5.02(a):
(a) There are not, in any court or before any
arbitrator of any kind or before or by any governmental or non-
governmental body, any actions, suits or proceedings, pending or
(to the knowledge of the Borrower and its Subsidiaries)
threatened (nor, to the knowledge of the Borrower and its
Subsidiaries, is there any basis therefor) against or in any
other way relating to or affecting (i) the Borrower or any
Subsidiary or any of their respective businesses or properties or
(ii) any Loan Document, except actions, suits or proceedings
that, if adversely determined, would not, singly or in the
aggregate, have a Materially Adverse Effect on (x) the Borrower
and the Consolidated Subsidiaries taken as a whole or (y) any
Loan Document.
(b) Neither the Borrower nor any of its Subsidiaries
(i) is in default with respect to any order of any court,
arbitrator or governmental body or is subject to or party to any
order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law
respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters or (ii) has violated or is in
violation of any statute, rule or regulation of any governmental
authority, the consequence of which in the case of (i) or (ii) of
this Section 3.04(b) would (individually or in the aggregate)
have a Materially Adverse Effect on the Loan Documents or the
Borrower and the Consolidated Subsidiaries taken as a whole.
Section 3.05. Burdensome Provisions. Neither the
Borrower nor any Subsidiary is a party to or bound by any
Contract or Applicable Law, compliance with which might have a
Materially Adverse Effect on (a) the Borrower and the
Consolidated Subsidiaries taken as a whole or (b) any Loan
<PAGE>
Document.
Section 3.06. No Adverse Change or Event. Since
December 31, 1992, except as disclosed in the 1993 Form S-1
Registration Statement, no change in the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower or any Subsidiary has
occurred, and no event has occurred or failed to occur, that has
had or could reasonably be expected to have, either alone or in
conjunction with all other such changes, events and failures, a
Materially Adverse Effect on (a) the Borrower and the
Consolidated Subsidiaries taken as a whole or (b) any Loan
Document. Such an adverse change may have occurred, and such an
event may have occurred or failed to occur, at any particular
time notwithstanding the fact that at such time no Default shall
have occurred and be continuing. If a fact or circumstance
disclosed in the 1993 Form S-1 Registration Statement should in
the future have a Materially Adverse Effect (including, but not
limited to, as a result of any adverse finding or decision
resulting from, or any material claim arising out of, any facts
or circumstances so disclosed) on (x) the Borrower and the
Consolidated Subsidiaries taken as a whole or (y) any Loan
Document, such Materially Adverse Effect shall be a change or
event subject to this Section 3.06 notwithstanding such
disclosure.
Section 3.07. Additional Adverse Facts. Except for
facts and circumstances disclosed in the 1993 Form S-1
Registration Statement, or in the notes to the financial
statements referred to in Schedule 5.02(a), no fact or
circumstance is known to the Borrower, as of the Agreement Date,
that, either alone or in conjunction with all other such facts
and circumstances, has had or could reasonably be expected to
have (so far as the Borrower and its Subsidiaries can foresee) a
Materially Adverse Effect on (a) the Borrower and the
Consolidated Subsidiaries taken as a whole or (b) any Loan
Document. If a fact or circumstance disclosed on such Schedules
or in such notes should in the future have a Materially Adverse
Effect on (x) the Borrower and the Consolidated Subsidiaries
taken as a whole or (y) any Loan Document, such Materially
Adverse Effect shall be a change or event subject to Section 3.06
notwithstanding such disclosure.
Section 3.08. Payment of Taxes. Except to the extent
permitted by Section 4.01(e), (a) all Federal and other tax
returns required to be filed with respect to Taxes upon the
Borrower and each Subsidiary and upon their respective
properties, assets, income and franchises have been filed, and
(b) all Taxes owing by the Borrower and each Subsidiary which are
due and payable have been paid.
Section 3.09. ERISA Compliance.
<PAGE>
A. The Borrower and its Subsidiaries and each of their
respective ERISA Affiliates are in compliance in all material
respects with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect
to all Benefit Plans.
B. No Termination Event has occurred or is expected to
occur with respect to any Benefit Plan (other than a
Multiemployer Benefit Plan), as the case may be, which has
resulted or would result in any liability to the PBGC or to any
other Person under Section 4062, 4063 or 4064 of ERISA.
C. Except as listed on Schedule 3.09, neither the
Borrower nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any withdrawal liability under Part 1
of subtitle E of Title IV of ERISA with respect to any
Multiemployer Benefit Plan.
D. Neither the Borrower nor any of its ERISA
Affiliates has or reasonably expects to become subject to a Lien
on any of their respective properties or assets in favor of any
Benefit Plan (other than a Multiemployer Benefit Plan) under
Section 302(f) of ERISA or Section 412(n) of the Code, or to be
required to furnish security to any Benefit Plan (other than a
Multiemployer Benefit Plan) under Section 307 of ERISA or Section
401(a)(29) of the Code.
Section 3.10. Title to Properties. Each of the
Borrower and its Subsidiaries has good title to, or a valid and
enforceable leasehold interest in, all of its significant real
properties and significant interests in real properties and good
title to all of its other significant properties and assets,
tangible and intangible, free and clear of any Liens, other than
Permitted Liens, and such imperfections and encumbrances, if any,
as do not have a Materially Adverse Effect on the value in
present use or interfere materially with the present use of any
of the properties or otherwise materially impair the business
operations of the Borrower and the Consolidated Subsidiaries
taken as a whole. There are no actual, or to the best knowledge
of the Borrower after having made due inquiry with respect
thereto, threatened or alleged, defaults or events which but for
the lapse of time or the giving of notice or both, would
constitute a default thereunder with respect to any leases of
real property under which the Borrower or any of its Subsidiaries
is or will be lessee other than defaults that do not, either in
any case or in the aggregate, have a Materially Adverse Effect on
the Loan Documents or the Borrower and the Consolidated
Subsidiaries taken as a whole. Each of the Borrower and its
Subsidiaries enjoys peaceful and undisturbed possession under all
leases of real property on which facilities operated by it are
situated and all such leases are valid and subsisting and are in
full force and effect without any actual, threatened or alleged
default by any party thereto other than defaults that do not,
<PAGE>
either in any case or in the aggregate, have a Materially Adverse
Effect on the value or use of any such property.
Section 3.11. Investment Company Act. Neither the
Borrower nor any of its Subsidiaries is an "investment company"
or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
Section 3.12. Federal Reserve Regulations. Neither
the Borrower nor any of its Subsidiaries is engaged, directly or
indirectly, principally, or as one of its important activities,
in the business of extending, or arranging for the extension of,
credit for the purpose of purchasing or carrying any Margin
Stock.
Section 3.13. Disaster. Neither the business nor the
properties of the Borrower and its Subsidiaries is affected by
any fire, explosion, accident, strike, lockout or other dispute,
drought, storm, hail, earthquake, embargo, Act of God or of the
public enemy or other casualty (whether or not covered by
insurance), which has had a Materially Adverse Effect, or if such
event or condition were to continue for more than ten (10)
additional days could have a Materially Adverse Effect on the
Borrower and the Consolidated Subsidiaries taken as a whole.
Section 3.14. Agreements. (a) Neither the Borrower
nor any of its Subsidiaries is a party to any Contract or subject
to any corporate restriction that has or is likely to have a
Materially Adverse Effect on the Loan Documents or the Borrower
and the Consolidated Subsidiaries taken as a whole.
(b) Neither the Borrower nor any of its Subsidiaries
is in default in any manner under any Contract that could have a
Materially Adverse Effect on the Borrower and the Consolidated
Subsidiaries taken as a whole or the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in the Loan Documents.
Section 3.15. Environmental Matters. (a) There are
no chemical substances, pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature, at any premises owned, operated, controlled or
used by the Borrower or any of its Subsidiaries where such could
reasonably be expected to have a Materially Adverse Effect on the
Borrower and its Subsidiaries taken as a whole, and none of the
Borrower, any of its Subsidiaries, or any of their respective
predecessors in interest have manufactured, processed,
distributed, used, treated, stored, disposed, transported or
handled any such substances, where such could have a Materially
Adverse Effect on the Loan Documents or the Borrower and the
Consolidated Subsidiaries taken as a whole. There is no ambient
air, surface water, groundwater or land contamination within,
under or relating to any real property of the Borrower or any of
<PAGE>
its Subsidiaries or other location geologically or hydrologically
connected to such properties and none of such properties has been
used for the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any
substance described in the preceding sentence where such could
have a Materially Adverse Effect on the Loan Documents or the
Borrower and its Subsidiaries taken as a whole.
(b) Except as is otherwise reserved against in the
financial statements listed on Schedule 5.02(a), neither the
Borrower nor any of its Subsidiaries has any obligations or
Liabilities, known or unknown, matured or not matured, absolute
or contingent, assessed or unassessed, where such could
reasonably be expected to have a Materially Adverse Effect on the
Loan Documents or the Borrower and the Consolidated Subsidiaries
taken as a whole, and no claims have been made against any of
them during the past five years (except minor claims, all of
which have been resolved without material fines or penalties),
and no presently outstanding citations or notices have been
issued against any of them, imposed or based upon any provision
of any domestic, foreign, federal, state or local law, rule or
regulation or common law pertaining to exploration and mining
operations, reclamation, health or safety or environmental
protection where such could be expected to have a Materially
Adverse Effect on the Loan Documents or the Borrower and the
Consolidated Subsidiaries taken as a whole including, without
limitation, any such obligations or liabilities relating to or
arising out of or attributable, in whole or in part, to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any substance described in
Section 3.15(a) by the Borrower or any of its Subsidiaries, or
any of their respective employees, agents, representatives or
predecessors in interest in connection with or in any way arising
out of or relating to the Borrower or any of its Subsidiaries or
any of their respective properties, or relating to or arising out
of or attributable, in whole or in part, to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of any such substance, by any other person
at, on or under any of the real properties of the Borrower or any
of its Subsidiaries or any other location where such could have a
Materially Adverse Effect on the Loan Documents or the Borrower
and the Consolidated Subsidiaries taken as a whole. Neither the
Borrower nor any of its Subsidiaries has been subject to any
action, suit, claim or proceeding for failure to comply with, or
received notice of any potential liability under, any domestic,
foreign, federal, state or local environmental law, rule or
regulation where such could have a Materially Adverse Effect on
the Loan Documents or the Borrower and the Consolidated
Subsidiaries taken as a whole.
Section 3.16. Ownership of Material Subsidiaries.
Each of the Borrower's Material Subsidiaries is a Wholly Owned
Subsidiary, except that in the case of Atlantic Research
<PAGE>
Corporation, up to 24.99% of its Capital Securities may be owned,
directly or indirectly, by Bankers Trust New York Corporation.
ARTICLE 4
CERTAIN COVENANTS
From the Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each Subsidiary to:
Section 4.01. Preservation of Existence and
Properties, Scope of Business, Compliance with Law, Payment of
Taxes and Claims, Preservation of Enforceability. (a) Preserve
and maintain its corporate existence and all of its other
franchises, licenses, rights and privileges, (b) preserve,
protect and obtain all Intellectual Property, and preserve and
maintain in good repair, working order and condition all other
properties, required for the conduct of its business, (c)
maintain the substantial portion of its businesses in
substantially the same fields as the businesses conducted on the
Agreement Date, (d) comply with Applicable Law, (e) pay or
discharge when due all Taxes and all Liabilities that might
become a Lien on any of its properties, provided that no such
amount with respect to Taxes need be paid if being contested in
good faith by appropriate proceedings promptly instituted and
diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with
Generally Accepted Accounting Principles shall have been made
therefor and (f) take all action and obtain all consents and
Governmental Approvals required so that its obligations under the
Loan Documents will at all times be legal, valid and binding and
enforceable in accordance with their respective terms, except
that this Section 4.01 (other than clauses (a), in so far as it
requires any Loan Party to preserve its corporate existence, (c)
and (f)) shall not apply in any circumstance where noncompliance,
together with all other noncompliances with this Section 4.01,
will not have a Materially Adverse Effect on (x) the Borrower and
the Consolidated Subsidiaries taken as a whole, or (y) any Loan
Document.
Section 4.02. Maintenance of Properties; Insurance.
(a) Maintain or cause to be maintained in good repair,
working order and condition all properties used or useful in the
business of the Borrower and its Subsidiaries and from time to
time make or cause to be made all appropriate material repairs
and renewals thereto and replacements thereof, except to the
extent that the failure to do so does not have a Materially
Adverse Effect on the Borrower and the Consolidated Subsidiaries
taken as a whole.
<PAGE>
(b) Maintain insurance (including self-insurance)
against at least such risks and in at least such amounts as is
customarily maintained by similar businesses, or as may be
required by Applicable Law or reasonably requested by any
Managing Agent or the Required Banks.
Section 4.03. Use of Proceeds. Use the proceeds of
the Loans for general corporate purposes. None of the proceeds
of any of the Loans shall be used to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or
carrying any margin stock. If requested by any Bank, the
Borrower shall complete and sign Part I of a copy of Federal
Reserve Form G-3 or U-1 referred to in Regulation G or U and
deliver such copy to such Bank.
B. The Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly:
Section 4.04. Guaranties. Be obligated, at any time,
in respect of any Guaranty, except that this Section 4.04 shall
not apply to:
(i) Existing Guaranties,
(ii) Permitted Guaranties,
(iii) a contribution arrangement entered into by the
Borrower and the Guarantors relating to Guaranties permitted
under this Section 4.04,
(iv) Letter of Credit Obligations in an aggregate
amount not in excess of $125,000,000 at any time, provided
that the aggregate amount of Letter of Credit Obligations
outstanding at any time, incurred other than pursuant to
Section 1.08, may not exceed $75,000,000,
(v) a Guaranty by the Borrower created to
Guarantee those Liabilities of SCC or SFC incurred by SCC or
SFC in connection with representations, warranties,
covenants and indemnifications (other than any such
representation, warranty, covenant, or indemnification
relating to the performance or observance of any obligations
by any other Person) agreed to by SCC or SFC pursuant to the
sale, transfer or other disposition by SCC or SFC of any of
its assets pursuant to a sale, transfer, or other
disposition permitted under Section 4.08,
(vi) other Guaranties (other than Letter of Credit
obligations) by the Borrower (other than Guaranties of (x)
Indebtedness or (y) Guaranties, in each case of SCC) in an
<PAGE>
aggregate amount not in excess of $10,000,000 at any time,
(vii) the Guaranty of the Borrower created pursuant
to the GATX Documents, or
(viii) Guaranties by the Borrower of the performance
obligations of Subsidiaries of the Borrower issued in the
ordinary course of business (other than any Guaranties of
Indebtedness).
Notwithstanding the foregoing, (x) to the extent the Indebtedness
supported by a Guaranty is counted in the calculation of any
financial covenant set forth in Sections 4.15 through 4.18 or (y)
to the extent any Guaranty supported by another Guaranty is
permitted to be outstanding under this Section 4.04, such
supporting Guaranty shall not be subject to the restrictions set
forth in this Section 4.04.
Section 4.05. Liens. Permit to exist, at any time,
any Lien upon any of its properties or assets of any character,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, except that this Section 4.05 shall not apply
to Permitted Liens, provided, however, that if, notwithstanding
this Section 4.05, any Lien to which this Section is applicable
shall be created or arise, the Liabilities of the Loan Parties
under the Loan Documents shall, to the extent such Lien attaches
to any asset, automatically be secured by such Lien equally and
ratably with the other Liabilities secured thereby, and the
holder of such other Liabilities, by accepting such Lien, shall
be deemed to have agreed thereto and to share with the
Administrative Agent, the Managing Agents, the Co-Agents, the
Issuing Bank, the Swing Loan Lender, and the Banks, on that
basis, the proceeds of such Lien, whether or not the security
interest of the Administrative Agent, the Managing Agents, the
Co-Agents, the Issuing Bank, the Swing Loan Lender, and the Banks
shall be perfected, provided further, however, that
notwithstanding such equal and ratable securing and sharing, the
existence of such Lien shall constitute a default by the Borrower
in the performance or observance of this Section 4.05. Nothing
in this Section 4.05 shall prohibit the sale, assignment,
transfer, conveyance or other disposition of any Margin Stock
owned by the Borrower or any of its Subsidiaries at its fair
value, or the creation, incurrence, assumption or existence of
any Lien on or with respect to any Margin Stock.
Section 4.06. Restricted Payments. Make or declare or
otherwise become obligated to make any Restricted Payment, except
that this Section 4.06 shall not apply to any Restricted Payment
(other than the type set forth in clause (iv) of the definition
thereof) if (a) at both the time of the declaration or other
incurrence of the obligation to make such Restricted Payment, if
any, and the time of the making thereof, and immediately after
giving effect thereto, a Default would not exist and (b) the
<PAGE>
amount thereof, together with the amounts of all Restricted
Payments that the Borrower and its Subsidiaries have made or
declared or otherwise become obligated to make since the
Agreement Date (the amount expended for such purposes, if other
than in cash, to be determined in good faith by the Board of
Directors of the Borrower, whose determination shall be
conclusive and evidenced by a certified resolution of such Board
of Directors furnished to the Administrative Agent), would not
exceed in the aggregate an amount equal to $5,000,000 plus 50% of
the cumulative Consolidated Net Income for the period from
January 1, 1994 to and including the date the Borrower makes or
declares or otherwise becomes obligated to make; provided,
further, that this Section 4.06 shall not apply to the redemption
or other prepayment of the Borrower's 10.50% Senior Subordinated
Notes due 1998 if (x) such payment is made with the proceeds of
the Borrower's Senior Subordinated Notes due 2003 issued pursuant
to the Indenture dated on or about December 15, 1993 between the
Borrower and Bankers Trust Company or (y), so long as (A) no
Default exists at the time such Restricted Payment is made, both
before and after giving effect to such Restricted Payment and (B)
the aggregate principal amount of all Loans and Swing Loans
outstanding at such time and all unreimbursed drawings under
Letters of Credit (whether or not outstanding) at such time, in
each case both immediately before and immediately after such
prepayment, is less than $10,000,000, such Restricted Payment is
made with the Net Cash Proceeds from any Discontinued Asset Sale
or disposition of a Non-Core Business effected on or after the
Effective Date or with the GATX Proceeds.
Section 4.07. Merger or Consolidation. Merge or
consolidate with, or sell, lease or dispose of all or
substantially all of its assets as an entirety or substantially
as an entirety, in one transaction or a series of related
transactions, to any Person, except that, if after giving effect
thereto no Default would exist and the Borrower shall have
delivered a certificate in form and substance satisfactory to the
Managing Agents and the Required Banks demonstrating that no
Default would so exist, this Section 4.07 shall not apply to (a)
any merger or consolidation of the Borrower with any one or more
Persons, provided that the Borrower shall be the continuing
Person, (b) any merger or consolidation of any Subsidiary with
any one or more other Subsidiaries, provided that (x) if any
Subsidiary involved in such merger or consolidation is a Wholly
Owned Subsidiary, the survivor shall be such Wholly Owned
Subsidiary and (y) if a Loan Party is involved in such merger or
consolidation, the survivor shall be such Loan Party or shall
have taken such action as shall be satisfactory to the
Administrative Agent, its special counsel, the Issuing Bank, and
the Required Banks to become a Loan Party to the same extent as
such Loan Party, (c) the acquisition by the Borrower or any
Subsidiary of all or substantially all the capital stock or
assets of another Subsidiary (other than a Guarantor), or (d) the
sale or other disposition of the assets of a Subsidiary or the
<PAGE>
merger of a Subsidiary, in a transaction in which the other
Person party to the transaction is the survivor and to the extent
such sale or merger constitutes a disposition to which Section
4.08 does not apply.
Section 4.08. Disposition of Assets. Sell, lease,
license, transfer or otherwise dispose of any asset or any
interest therein, except that this Section 4.08 shall not apply
to (a) any disposition of any asset or interest therein in the
ordinary course of business, (b) any disposition of any obsolete
or retired property not used or useful in its business, (c) any
disposition of any asset or interest therein to the Borrower or
any Guarantor, (d) any Discontinued Asset Sale, any disposition
of Non-Core Businesses, and any other Asset Sale approved by the
Required Banks, (e) any disposition of Margin Stock, (f) any
disposition of receivables in accordance with the Receivables
Purchase Agreement, (g) Sale and Leaseback Transactions (in
addition to those otherwise permitted by this Section 4.08), as
long as the aggregate gross proceeds from the sale portion of
such transactions permitted by this subclause (g) for the period
from December 1, 1993 through the Maturity Date (i) do not exceed
in the aggregate $25,000,000 and (ii) are used within 120 days
from the date of each such Sale and Leaseback Transaction to
repay Indebtedness for Money Borrowed of the Borrower which has a
maturity date more than 12 months after the date of such payment
(other than any such Indebtedness which is subordinated to the
Indebtedness outstanding under the Indenture dated as of
September 1, 1989 between the Borrower and The First National
Bank of Chicago, as Trustee), (h) other dispositions not
otherwise permitted pursuant to clauses (a) through (g) of this
Section 4.08, provided that the fair market value of all assets
so disposed of pursuant to this clause (h) on or after the
Agreement Date does not exceed in the aggregate $5,000,000, and
(i) any transaction to which any of the other provisions of this
Agreement (other than Section 4.11) is by its express terms
inapplicable.
Section 4.09. Taxes of Other Persons. (a) File a
consolidated tax return with any other Person other than, in the
case of the Borrower, a Consolidated Subsidiary and, in the case
of any such Subsidiary, the Borrower or a Consolidated
Subsidiary, or (b) except as required by Applicable Law, pay or
enter into any Contract to pay any Taxes owing by any Person
other than the Borrower or a Consolidated Subsidiary.
Section 4.10. Benefit Plans. (a) Establish, amend, or
become obligated to contribute to any Benefit Plan subject to the
funding requirements of ERISA (including any Existing Benefit
Plan) in any manner that would increase the aggregate Unfunded
Benefit Liabilities under all Benefit Plans subject to the
funding requirements of ERISA in an aggregate amount in excess of
$20,000,000; or (b) permit any Benefit Plan subject to the
funding requirements of ERISA to have a Funded Current Liability
<PAGE>
Percentage of less than 60%.
Section 4.11. Transactions with Affiliates. Effect
any transaction with any Affiliate on a basis less favorable than
would at the time be obtainable for a comparable transaction in
arms-length dealing with an unrelated third party, except that
the Borrower may effect the transactions specifically permitted
under Section 4.04 and 4.13(b).
Section 4.12. Limitation on Restrictive Covenants.
Except as currently existing with respect to Atlantic Research
Corporation, permit to exist, at any time, any consensual
restriction limiting the ability (whether by covenant, event of
default, subordination or otherwise) of any Subsidiary to (a) pay
dividends or make any other distributions on shares of its
Capital Securities held by the Borrower or any other Subsidiary,
(b) pay any obligation owed to the Borrower or any other
Subsidiary, (c) make any loans or advances to or investments in
the Borrower or in any other Subsidiary, (d) transfer any of its
property or assets to the Borrower or any other Subsidiary, or
(e) create any Lien upon its property or assets whether now owned
or hereafter acquired or upon any income or profits therefrom,
except that this Section 4.12 shall not apply to (i) Permitted
Restrictive Covenants, (ii) any restriction contained in the
Receivables Purchase Agreement.
Section 4.13. Issuance or Disposition of Capital
Securities; Investments; Capital Expenditures; Acquisitions.
(a) Issue any of its Capital Securities or sell, transfer or
otherwise dispose of any Capital Securities of any Subsidiary,
except that this Section 4.13(a) shall not apply to (i) any
issuance by the Borrower of any of its Capital Securities other
than Mandatorily Redeemable Stock, (ii) any issuance by a
Guarantor of any of its Capital Securities to the Borrower, (iii)
any disposition by any Subsidiary of any Capital Securities of a
Subsidiary to the Borrower, (iv) Capital Securities issued by
Atlantic Research Corporation to Bankers Trust New York
Corporation up to an aggregate amount of not more than 24.99% of
all Capital Securities issued by Atlantic Research Corporation
and (v) any sale, transfer or other disposition permitted under
Section 4.07 or 4.08, or any Investment permitted under Section
4.13(b).
(b) Make any investments (including by way of capital
contribution, purchase of Capital Securities or otherwise),
Guaranties, loans or advances (collectively, "Investments") in,
to or on behalf of SCC other than Guaranties specifically
permitted pursuant to Sections 4.04(v) and 4.04(vii), and
Investments in SCC in any year in an amount in the aggregate not
to exceed the amount of management fees, if any, payable by SCC
in such year pursuant to the GATX Documents.
(c) Make Capital Expenditures in excess of the
<PAGE>
following amounts in each of the following calendar years:
Calendar Year Maximum Capital Expenditures
1993 $85,000,000;
1994 $95,000,000 (less the
aggregate amount of
Capital Expenditures made
in calendar year 1993 in
excess of $80,000,000);
1995 $100,000,000;
1996 $100,000,000;
1997 $100,000,000;
provided, that, in any calendar year commencing on or after
January 1, 1994, additional Capital Expenditures may be made in
such year in an amount equal to 25% of the excess, if any, of the
amount of Capital Expenditures specifically permitted for the
immediately preceding calendar year in accordance with the chart
above over the actual amount of Capital Expenditures made in such
immediately preceding calendar year (less any amount of such
excess which has been used in calculating the permitted Asset
Acquisitions pursuant to subsection (d) below).
(d) Make any Asset Acquisition, provided that this
Section 4.13(d) shall not apply to any Asset Acquisition so long
as (i) no Default exists at the time such Asset Acquisition is
effected, both before and after giving effect to such Asset
Acquisition, (ii) the aggregate principal amount of all Loans and
Swing Loans outstanding at such time and all unreimbursed
drawings under Letters of Credit (whether or not outstanding) at
such time both immediately before and immediately after such
Asset Acquisition, is less than $10,000,000, (iii) all
Indebtedness outstanding under each of the Note Agreements dated
as of March 1, 1989 between the Borrower and each of the
purchasers named therein shall have been repaid in full and (iv)
the purchase price of the assets acquired in such Asset
Acquisition, in the aggregate with the purchase price of all
Asset Acquisitions effected during the period from the Effective
Date to the date of determination, does not exceed the lesser of
(x) $40,000,000 and (y) the sum of (A) the Net Cash Proceeds from
all Discontinued Asset Sales and dispositions of a Non-Core
Businesses effected during the period from the Effective Date
through the date of determination (to the extent not utilized to
effect a Restricted Payment pursuant to clause (y) of the proviso
of Section 4.06), (B) the GATX Proceeds and (C) the aggregate
unutilized amount which is available to make Capital Expenditures
by reason of the proviso in subsection (c) above.
Section 4.14. Short Term Indebtedness. Create, incur,
assume or suffer to exist any Short Term Indebtedness for Money
Borrowed (other than Short Term Indebtedness for Money Borrowed
incurred pursuant to a Committed Facility, or Short Term
<PAGE>
Indebtedness for Money Borrowed by the Borrower or any Subsidiary
constituting an Originator (as defined in the PSA) in accordance
with the terms of the Receivables Purchase Agreement) or any
Indebtedness with respect to commercial paper if the aggregate
amount of such Indebtedness outstanding at the time of
determination thereof is greater than the aggregate unused amount
of the Commitments at such time.
C. The Borrower shall not:
Section 4.15. Minimum Consolidated Net Worth. Permit
its Consolidated Net Worth at any time to be less than the sum of
(i) $585,000,000 and (ii) fifty percent of Consolidated Net
Income (but not less than zero) for each full fiscal quarter
occurring during the period commencing January 1, 1994 and ending
on the date of determination.
Section 4.16. Fixed Charge Coverage. Permit its Fixed
Charge Coverage Ratio on the following dates to be less than the
following:
Date Minimum Fixed Charge Coverage Ratio
December 31, 1993 1.30 to 1.00
March 31, 1994 1.30 to 1.00
June 30, 1994 1.30 to 1.00
September 30, 1994 1.75 to 1.00
December 31, 1994 2.00 to 1.00
March 31, 1995 2.10 to 1.00
June 30, 1995 2.25 to 1.00
September 30, 1995 2.25 to 1.00
and thereafter 2.50 to 1.00.
Section 4.17. Consolidated Current Ratio. Permit its
Consolidated Current Ratio at any time to be less than 1.50 to
1.00.
Section 4.18. Consolidated Total Debt/Consolidated
Capitalization Ratio. Permit the ratio of its Consolidated Total
Debt to its Consolidated Capitalization at any time (a) during
the period commencing the Agreement Date and ending December 31,
1994 to be greater .55 to 1.00, and (b) thereafter to be greater
than .525 to 1.00.
D. The Borrower shall not permit any Subsidiary to:
<PAGE>
Section 4.19. Subsidiary Indebtedness. Have at any
time any Indebtedness (or Guaranties of Indebtedness to the
extent such Indebtedness is by its terms subordinate in right of
payment to the Indebtedness outstanding or available to be drawn
hereunder), except that this Section 4.19 shall not apply to (a)
Existing Subsidiary Indebtedness of such Subsidiary, (b) so long
as written notice to the contrary shall not have been delivered
by the Administrative Agent to the Borrower during the occurrence
and continuance of an Event of Default, Indebtedness in
connection with borrowings by such Subsidiary from the Borrower
pursuant to the Borrower's cash management system in accordance
with the customary practices of the Borrower and its Subsidiaries
as in effect on the Agreement Date, (c) the Loans, (d) other
Indebtedness of Subsidiaries other than those incorporated in the
United States in an aggregate amount not in excess of
$10,000,000, (e) other Indebtedness of Subsidiaries incorporated
in the United States in an aggregate amount not in excess of
$15,000,000, (f) Indebtedness of Sequa Receivables Corp. or any
Subsidiary constituting an Originator (as defined in the PSA)
incurred pursuant to the terms of the Receivables Purchase
Agreement or (g) Indebtedness incurred pursuant to the GATX
Documents.
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
Section 5.01. Financial Statements and Information to
Be Furnished. From the Agreement Date and until the Repayment
Date, the Borrower shall furnish to each Bank:
(a) Monthly Operating Reports; Officer's Certificate.
As soon as available and in any event within 30 days after the
close of each monthly accounting period beginning on or after
November 1, 1993:
(i) Monthly Operating Reports and Monthly Cash
Flow Reports of the Borrower and the Consolidated
Subsidiaries as at the end of such monthly period;
(ii) Monthly Operating Reports of Chromalloy Gas
Turbine Corporation, both on a consolidated basis and for
the Chromalloy Research and Technology Division;
(iii) monthly management discussion and analysis of
Chromalloy Gas Turbine Corporation's results; and
(iv) a certificate of the president, chief
financial officer, controller or treasurer of the Borrower
stating that such reports described in clauses (i) through
(iii) above (a) were prepared in good faith and (b) present
<PAGE>
with reasonable accuracy the financial performance for the
covered period.
(b) Quarterly Financial Statements; Officer's
Certificate. As soon as available and in any event within 55
days after the close of each of the first three quarterly
accounting periods in each fiscal year of the Borrower,
commencing with the quarterly period ending
March 31, 1994:
(i) consolidated balance sheets and Segment
Operating Reports of the Borrower and the Consolidated
Subsidiaries as at the end of such quarterly period and the
related consolidated statements of income, shareholders'
equity and cash flows of the Borrower and the Consolidated
Subsidiaries for such quarterly period and for the elapsed
portion of the fiscal year ended with the last day of such
quarterly period, setting forth in each case in comparative
form the figures for the corresponding periods of the
previous fiscal year in the manner set forth in the Form
10-Q filed by the Borrower for such period; and
(ii) a certificate with respect thereto of the
president, chief financial officer, controller, or treasurer
of the Borrower in the form of Schedule 5.01(a).
(c) Year-End Financial Statements; Accountants' and
Officer's Certificates. As soon as available and in any event
within 100 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending December 31,
1993:
(i) consolidated balance sheets and Segment
Operating Reports of the Borrower and the Consolidated
Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, shareholders'
equity and cash flows of the Borrower and the Consolidated
Subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the
previous fiscal year in the manner set forth in the Form 10-
K filed by the Borrower for such period;
(ii) an audit report of independent certified
public accountants of recognized standing satisfactory to
the Required Banks, on the consolidated financial statements
referred to in clause (i), which report shall be unqualified
as to going concern and scope of audit and shall state that
such consolidated financial statements present fairly the
financial position of the Borrower and the Consolidated
Subsidiaries as at the dates indicated and the results of
their operations and changes in their financial position for
the periods indicated in conformity with Generally Accepted
Accounting Principles applied on a basis consistent with
<PAGE>
prior years (except as noted in such report) and that the
examination by such accountants in connection with such
consolidated financial statements has been made in
accordance with Generally Accepted Accounting Principles and
shall otherwise be in scope and substance satisfactory to
the Required Banks;
(iii) a certificate of such accountants addressed
to the Banks and in form and substance satisfactory to the
Required Banks (A) confirming that (1) the Borrower is
authorized to deliver their report referred to in clause
(ii) to the Banks pursuant to this Agreement and (2) it is
their understanding that the Banks are relying on such
report and such certificate, (B) stating that they have
caused this Agreement to be reviewed and that, in making the
examination necessary for their report on such consolidated
financial statements, nothing came to their attention that
caused them to believe that, as of the date of such
financial statements, any Default exists or, if such is not
the case, specifying such Default and its nature, when it
occurred and whether it is continuing and (C) having
attached the calculations reviewed by such accountants and
required to establish whether or not the Borrower was in
compliance with the covenants contained in Sections 4.15
through 4.18; and
(iv) a certificate of the president, chief
financial officer, controller, or treasurer of the Borrower
in the form of Schedule 5.01(b).
(d) Reports and Filings. (i) Within 30 days of the
date of receipt thereof, copies of all reports, if any, submitted
to the Borrower or any Subsidiary, or the Board of Directors of
the Borrower or any Subsidiary, by its independent certified
public accountants, including any management letter, but
excluding the Statutory Audit Reports filed by the Borrower with
regulatory authorities outside the United States; (ii) as soon as
practicable, copies of all such financial statements and reports
as the Borrower or any Subsidiary shall send to its stockholders
and of all registration statements and all regular or periodic
reports that the Borrower or any Subsidiary shall file, or may be
required to file, with the Securities and Exchange Commission or
any successor commission; and (iii) promptly upon the preparation
thereof, but in any event no later than February 15 of each year,
the financial projections of the Borrower and its Subsidiaries
prepared by management for such fiscal year, prepared in
accordance with its customary practice.
(e) Requested Information. From time to time and
promptly upon request of any Bank, such Information regarding the
Loan Documents or the Loans and the business, assets,
Liabilities, financial condition, results of operations or
business prospects of the Borrower and the Subsidiaries as such
<PAGE>
Bank may reasonably request, in each case in form and substance
and certified by an appropriate officer of the Borrower in a
manner satisfactory to the requesting Bank provided, that any
confidential Information so obtained by any Bank shall remain
confidential except where disclosure is mandated by Applicable
Law or such Information otherwise becomes public other than by a
breach of such Bank of this Section 5.01(d); provided, further,
that this section 5.01(d) shall not prohibit any Bank, any Co-
Agent, any Managing Agent, the Issuing Bank or the Administrative
Agent (i) from disclosing, exchanging, or discussing such
Information with its advisors in accordance with Section 9.06 or
(ii) from disclosing to one another any Default or Event of
Default.
(f) Notice of Defaults, Material Adverse Changes and
Other Matters. With its delivery of its financial statements
pursuant to Section 5.01(a) and (b), written notice of (i) the
acquisition or formation of a new Subsidiary and, in the case of
each such new Subsidiary, its name, jurisdiction of
incorporation, the percentages of the various classes of its
Capital Securities owned by the Borrower or another Subsidiary
and whether or not such new Subsidiary is a Consolidated
Subsidiary, and (ii) any change in the name of any Subsidiary,
its jurisdiction of incorporation, the percentages of the various
classes of its Capital Securities owned by the Borrower or
another Subsidiary or its status as a Consolidated or non-
Consolidated Subsidiary. Additionally, the Borrower shall
furnish to each Bank prompt notice upon the chairman of the
board, the president, the chief accounting officer, the chief
financial officer, the treasurer or the general counsel of the
Borrower obtaining knowledge of: (i) any Default, (ii) the
commencement of, or the occurrence or nonoccurrence of any change
or event relating to, any action, suit, proceeding or
investigation that would cause the Representation and Warranty
contained in Section 3.04 to be incorrect if made at such time,
(iii) the occurrence or nonoccurrence of any change or event that
would cause the Representation and Warranty contained in Section
3.06 to be incorrect if made at such time, (iv) any event or
condition referred to in clauses (i) through (vii) of Section
6.01(h), whether or not such event or condition shall constitute
an Event of Default, and (v) any amendment of the certificate of
incorporation or by-laws of the Borrower or any Subsidiary.
Section 5.02. Accuracy of Financial Statements and
Information.
(a) Historical Financial Statements. The Borrower
hereby represents and warrants that (i) Schedule 5.02(a) sets
forth a complete and correct list of the financial statements
submitted by the Borrower to the Administrative Agent, the
Managing Agents, the Issuing Bank, the Co-Agents and the Banks in
order to induce them to execute and deliver this Agreement, (ii)
such financial statements are complete and correct and present
<PAGE>
fairly, in accordance with Generally Accepted Accounting
Principles, the consolidated financial position of the Borrower
and the Consolidated Subsidiaries as at their respective dates
and the consolidated results of operations, shareholders' equity
and, as applicable, changes in financial position or cash flows
of the Borrower and such Subsidiaries for the respective periods
to which such statements relate, and (iii) except as disclosed or
reflected in such financial statements and schedules thereto, as
at September 30, 1993, neither the Borrower nor any Subsidiary
had any Liability, contingent or otherwise, or any unrealized or
anticipated loss, that, singly or in the aggregate, has had or
might have a Materially Adverse Effect on the Borrower and the
Consolidated Subsidiaries taken as a whole.
(b) Future Financial Statements. The financial
statements delivered pursuant to Section 5.01(a) or (b) shall be
complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles (except for changes
therein or therefrom that are described in the certificate or
report accompanying such statements and that have been approved
in writing by the Borrower's then current independent certified
public accountants), the consolidated financial position of the
Borrower and the Consolidated Subsidiaries as at their respective
dates and the consolidated results of operations, shareholders'
equity and cash flows of the Borrower and such Subsidiaries for
the respective periods to which such statements relate, subject,
in the case of financial statements delivered pursuant to Section
5.01(a), to year-end adjustments, and the furnishing of the same
to the Managing Agents, the Issuing Bank, the Co-Agents, and the
Banks shall constitute a representation and warranty by the
Borrower made on the date the same are furnished to the Managing
Agents, the Co-Agents, and the Banks to that effect and to the
further effect that, except as disclosed or reflected in such
financial statements, as at the respective dates thereof, neither
the Borrower nor any Subsidiary had any Liability, contingent or
otherwise (except as (i) disclosed on Schedule 4.04 or as
otherwise permitted by Section 4.04(a) or (ii) disclosed or
reflected in the financial statements listed on Schedule 5.02(a),
and schedules thereto), or any unrealized or anticipated loss,
that, singly or in the aggregate, has had or might have a
Materially Adverse Effect on the Borrower and the Consolidated
Subsidiaries taken as a whole.
(c) Historical Information. The Borrower hereby
represents and warrants that all Information furnished to the
Administrative Agent, the Managing Agents, the Issuing Bank, the
Co-Agents, or the Banks by or on behalf of the Borrower or any
Subsidiary prior to the Agreement Date in connection with or
pursuant to the Loan Documents and the relationships established
thereunder, at the time the same was so furnished, but in the
case of Information dated as of a prior date, as of such date,
(i) in the case of any such prepared in the ordinary course of
business, was complete and correct in the light of the purpose
<PAGE>
prepared, and, in the case of any such the preparation of which
was requested by the Administrative Agent, any Managing Agent,
the Issuing Bank, any Co-Agent, or any Bank, was complete and
correct in all material respects to the extent necessary to give
the Administrative Agent, the Managing Agents, the Issuing Bank,
the Co-Agents, and the Banks true and accurate knowledge of the
subject matter thereof, (ii) did not contain any untrue statement
of a material fact, and (iii) did not omit to state a material
fact necessary in order to make the statements contained therein
not misleading in the light of the circumstances under which they
were made.
(d) Future Information. All Information furnished to
the Administrative Agent, the Managing Agents, the Issuing Bank,
the Co-Agents, or the Banks by or on behalf of the Borrower or
any Subsidiary on or after the Agreement Date in connection with
or pursuant to the Loan Documents or in connection with or
pursuant to any amendment or modification of, or waiver of rights
under, the Loan Documents, shall, at the time the same is so
furnished, but in the case of Information dated as of a prior
date, as of such date, (i) in the case of any Information
prepared in the ordinary course of business, be complete and
correct in the light of the purpose prepared, and, in the case of
any Information required by the terms of the Loan Documents or
the preparation of which was requested by the Administrative
Agent, any Managing Agent, the Issuing Bank, any Co-Agent, or any
Bank, be complete and correct to the extent necessary to give the
Administrative Agent, the Managing Agents, the Issuing Bank, the
Co-Agents, and the Banks true and accurate knowledge of the
subject matter thereof, (ii) not contain any untrue statement of
a material fact, and (iii) not omit to state a material fact
necessary in order to make the statements contained therein not
misleading in the light of the circumstances under which they
were made, and the furnishing of the same to the Bank shall
constitute a representation and warranty by the Borrower made on
the date the same are so furnished to the effect specified in
clauses (i), (ii) and (iii).
Section 5.03. Additional Covenants Relating to
Disclosure. From the Agreement Date and until the Repayment
Date, the Borrower shall and shall cause each Subsidiary to:
(a) Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete), as may be required
or necessary to permit (i) the preparation of financial
statements required to be delivered pursuant to Section 5.01(a)
and (b) and (ii) the determination of the compliance of the
Borrower and its Material Subsidiaries with the terms of the Loan
Documents.
(b) Fiscal Year. Maintain the opening and closing
dates for each fiscal year as, respectively, January 1 and
<PAGE>
December 31, except that this Section 5.03(b) shall not apply to
Subsidiaries other than those in existence on the Agreement Date.
(c) Visits and Inspections. Permit, or, in the case
of properties, books, records or Persons not within its immediate
control, promptly take such actions as are reasonably practicable
in order to permit, representatives (whether or not officers or
employees) of any Bank, from time to time, as often as may be
reasonably requested, upon reasonable notice and during normal
business hours, to (i) visit and inspect any properties of the
Borrower and each Subsidiary, (ii) inspect and make extracts from
the books and records of the Borrower and each Subsidiary,
including management letters prepared by their respective
independent certified public accountants, and (iii) discuss with
any Person, including the principal officers and the independent
certified public accountants of the Borrower and each Subsidiary,
the respective businesses, assets, Liabilities, financial
conditions, results of operations and business prospects of the
Borrower and each Subsidiary; provided, that any confidential
Information so obtained by any Bank shall remain confidential
except where disclosure is mandated by Applicable Law or such
Information otherwise becomes public other than by a breach of
such Bank of this Section 5.03(c); provided, further, that this
Section 5.03(c) shall not prohibit any Bank, any Co-Agent, the
Issuing Bank, any Managing Agent, or the Administrative Agent (x)
from disclosing, exchanging or discussing such Information with
its advisors in accordance with Section 9.06, or (y) from
disclosing to one another any Default or Event of Default.
ARTICLE 6
DEFAULT
Section 6.01. Events of Default. Each of the
following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or
involuntary, or within or without the control of the Borrower, or
any Subsidiary, or be effected by operation of law or pursuant to
any judgment or order of any court or any order, rule or
regulation of any governmental or nongovernmental body:
(a) Any payment of principal of or interest on any of
the Loans or the Notes or of the facility fee or any other amount
under this Agreement shall not be made when and as due (whether
at maturity, by reason of notice of prepayment or acceleration or
otherwise) and in accordance with the terms of this Agreement and
the Notes and, in the case of interest or facility fee or such
other amount, shall remain not fully paid for two Business Days;
(b) Any Loan Document Representation and Warranty
shall at any time prove to have been incorrect or misleading in
<PAGE>
any material respect when made;
(c) (i) The Borrower shall default in the performance
or observance of
(A) any term, covenant, condition or
agreement contained in Section 4.01(a) (insofar as such
Section requires the preservation of the corporate existence
of the Borrower and the Guarantors), 4.01(f), 4.03, 4.04
through 4.19, 5.01(c)(i), 5.03(b), 5.03(c) or 9.20; or
(B) any term, covenant, condition or
agreement contained in this Agreement (other than a term,
covenant, condition or agreement a default in the
performance or observance of which is elsewhere in this
Section specifically dealt with) and, if capable of being
remedied, such default shall continue unremedied for a
period of 30 days after the earlier of (x) the giving of
notice by the Administrative Agent of such default to the
Borrower and (y) the Borrower becoming aware of such
default;
(ii) Any Guarantor shall default in the
performance or observance of any term, covenant, condition or
agreement contained in the Guaranty Agreement (other than any
term, covenant, condition or agreement a default in the
performance or observance of which is elsewhere in this Section
specifically dealt with) and, if capable of being remedied, such
default shall continued unremedied for a period of 30 days after
the earlier of (x) the giving of notice by the Administrative
Agent of such default to such Guarantor and (y) the Guarantor
becoming aware of such default; or
(iii) the Borrower shall default in the performance
or observance of:
(A) any term, covenant, condition or
agreement contained in Section 1.02, 4.01(d), 4.01(e), 4.02,
4.03, 4.04 or 4.34 of the Security Agreement (after giving
effect to Section 4.37 thereof to the extent applicable
thereto), or
(B) any term, covenant, condition or
agreement contained in the Security Agreement (other than a
term, covenant, condition or agreement a default in the
performance or observance of which is elsewhere in this
Section specifically dealt with and other than Sections
4.01(a), 4.01(b), 4.01(c), 4.05, 4.06, and 4.09 through and
including 4.33) and, if capable of being remedied, such
default shall continue unremedied for a period of 15 days
after the earlier of (x) the giving of notice by the
Administrative Agent of such default to the Borrower and (y)
the Borrower becoming aware of such default;
<PAGE>
(d) (i) Any Loan Party or any Subsidiary of any Loan
Party shall fail to pay, in accordance with its terms and when
due and payable, the principal of or interest on any Indebtedness
(other than the Loans) having a then aggregate outstanding
principal amount in excess of $5,000,000, (ii) the maturity of
any such Indebtedness shall, in whole or in part, have been
accelerated, or any such Indebtedness shall, in whole or in part,
have been required to be prepaid prior to the stated maturity
thereof, in accordance with the provisions of any Contract
evidencing, providing for the creation of or concerning such
Indebtedness, or (iii) (A) any event shall have occurred and be
continuing that permits (or, with the passage of time or the
giving of notice or both, would permit) any holder or holders of
such Indebtedness, any trustee or agent acting on behalf of such
holder or holders or any other Person so to accelerate such
maturity or require any such prepayment and (B) if the Contract
evidencing, providing for the creation of or concerning such
Indebtedness provides for a cure period for such event, such
event shall not be cured prior to the end of such cure period or
such shorter period of time as the Administrative Agent may
specify;
(e) A default shall be continuing under any Contract
(other than a Contract relating to Indebtedness to which clause
(d) of this Section 6.01 is applicable) binding upon any Loan
Party or any Subsidiary of any Loan Party, except a default that,
together with all other such defaults, has not had and will not
have a Materially Adverse Effect on (i) the Borrower and its
Consolidated Subsidiaries taken as a whole or (ii) any Loan
Document;
(f) (i) (1) Any Subsidiary (or any group of
Subsidiaries in the aggregate in any 12-month period) which (x)
accounts for more than 5% of the consolidated revenues of the
Borrower and its Subsidiaries during the 12-month period ending
on the date of the most recent consolidated balance sheet of the
Borrower delivered to the Banks pursuant to section 5.01 or (y)
was the owner of more than 5% of the consolidated assets of the
Borrower and its Subsidiaries at the date of the most recent
consolidated balance sheet of the Borrower delivered to the Banks
pursuant to Section 5.01 or (2) any Loan Party shall (A) commence
a voluntary case under the Federal bankruptcy laws (as now or
hereafter in effect), (B) file a petition seeking to take
advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition
or adjustment of debts, (C) consent to or fail to contest in a
timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (D)
apply for, or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or the
like of itself or of a substantial part of its assets, domestic
or foreign, (E) admit in writing its inability to pay, or
<PAGE>
generally not be paying, its debts (other than those that are the
subject of bona fide disputes) as they become due, (F) make a
general assignment for the benefit of creditors, or (G) take any
corporate action for the purpose of effecting any of the
foregoing; or
(ii) (A) A case or other proceeding shall be
commenced against any Loan Party or any Subsidiary of any Loan
Party seeking (1) relief under the Federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or
foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts or (2) the
appointment of a trustee, receiver, custodian, liquidator or the
like of any Loan Party or any Subsidiary of any Loan Party, or of
all or any substantial part of the assets, domestic or foreign,
of any Loan Party or any Subsidiary of any Loan Party, and such
case or proceeding shall continue undismissed or unstayed for a
period of 30 days, or (B) an order granting the relief requested
in such case or proceeding against any Loan Party or any
Subsidiary of any Loan Party (including an order for relief under
such Federal bankruptcy laws) shall be entered;
(g) A judgment or order shall be entered against any
Loan Party or any Subsidiary of any Loan Party by any court, and
(i) in the case of a judgment or order for the payment of money,
either (A) such judgment or order shall continue undischarged,
unvacated, unbonded and unstayed for a period of 30 days in which
the aggregate amount of all such judgments and orders exceeds
$5,000,000 or (B) enforcement proceedings shall have been
commenced upon such judgment or order and (ii) in the case of any
judgment or order for other than the payment of money, such
judgment or order could, in the reasonable judgment of the
Required Banks, together with all other such judgments or orders,
have a Materially Adverse Effect on the Borrower and its
Consolidated Subsidiaries taken as a whole;
(h) (i) any Termination Event shall occur with
respect to any Benefit Plan of the Borrower or any Subsidiary or
any ERISA Affiliate of the Borrower or any Subsidiary, (ii) any
Accumulated Funding Deficiency, whether or not waived, shall
exist with respect to any Benefit Plan of the Borrower or any
Subsidiary or any ERISA Affiliate of the Borrower or any
Subsidiary, (iii) any Person shall engage in any Prohibited
Transaction involving any Benefit Plan of the Borrower or any
Subsidiary or any ERISA Affiliate of the Borrower or any
Subsidiary, (iv) the Borrower or any Subsidiary or any ERISA
Affiliate of the Borrower or any Subsidiary shall be in "default"
(as defined in ERISA Section 4219(c)(5)) with respect to payments
owing to a Multiemployer Benefit Plan of the Borrower or any
Subsidiary or any ERISA Affiliate of the Borrower or any
Subsidiary as a result of such Person's complete or partial
withdrawal (as described in ERISA Section 4203 or 4205) from such
Multiemployer Benefit Plan, (v) the Borrower or any Subsidiary or
<PAGE>
any ERISA Affiliate of the Borrower or any Subsidiary shall fail
to pay when due an amount that is payable by it to the PBGC or to
a Benefit Plan of the Borrower or any Subsidiary or any ERISA
Affiliate of the Borrower or any Subsidiary under Title IV of
ERISA, (vi) a proceeding shall be instituted by a fiduciary of
any Benefit Plan of the Borrower or any Subsidiary or any ERISA
Affiliate of the Borrower or any Subsidiary against the Borrower
or any Subsidiary or any ERISA Affiliate of the Borrower or any
Subsidiary to enforce ERISA Section 515 and such proceeding shall
not have been dismissed within 30 days thereafter, or (vii) any
other event or condition shall occur or exist with respect to a
Benefit Plan of the Borrower or any Subsidiary or any ERISA
Affiliate of the Borrower or any Subsidiary, except that no event
or condition referred to in clauses (i) through (iii) and (v)
through (vii) shall constitute an Event of Default if it,
together with all other such events or conditions at the time
existing, has not caused, and in the reasonable determination of
the Required Banks will not cause, the Borrower and its
Consolidated Subsidiaries taken as a whole to incur Liabilities
to any Benefit Plan, the PBGC or any other Person (calculated
after giving effect to the tax consequences thereof) in excess of
$10,000,000, and except that no event or condition referred to in
clause (iv) shall constitute an Event of Default if it, together
with all other events or conditions at the time existing, has not
caused, and in the reasonable estimation of the Required Banks
will not cause, the Borrower and its Consolidated Subsidiaries
taken as a whole to become obligated to pay one or more
Multiemployer Benefit Plans annual payments in excess of
$3,000,000;
(i) Any Loan Party or any Affiliate of any Loan Party
asserts, or any Loan Party or any Affiliate of any Loan Party or
any other Person institutes any proceedings seeking to establish,
that (i) any provision of the Loan Documents is invalid, not
binding or unenforceable or (ii) the Guaranty of any Guarantor
under the Guaranty Agreement is limited in amount pursuant to
Section 1.02 thereof; or
(j) The acquisition of beneficial ownership by any
Person or group of related Person or Persons acting together,
together with any Affiliates thereof (collectively, the
"Interested Stockholders"), of a direct or indirect interest in
more than 35% of the voting power of the then outstanding capital
stock of the Borrower entitled to vote generally in the election
of the Board of Directors of the Company or (ii) during the
period from the Agreement Date through the Maturity Date,
individuals who at the beginning of such period constituted the
Borrower's Board of Directors (together with any new directors
whose election or appointment by such board or whose nomination
for election or appointment by the shareholders of the Borrower
was approved by a vote of a majority of the directors then still
in office who were either directors at the beginning of such
period or whose election or nomination for election was
<PAGE>
previously so approved) cease for any reason to constitute a
majority of the Borrower's Board of Directors then in office;
provided, however, that for the purposes of the foregoing clause
(i), the term "Person" shall not be deemed to include the
individual who is the Chairman of the Board of Directors of the
Borrower on the Agreement Date, his spouse, any descendant of
such Chairman or the spouse of any such descendant, the estate of
such Chairman, or any trust or other similar arrangement for the
benefit of such Chairman or his spouse, any descendant of such
Chairman or the spouse of any such descendant or the estate of
such Chairman or any corporation or other Person controlled
solely by such Chairman or his spouse, any descendant of such
Chairman or the spouse of any such descendant or the estate of
such Chairman through the ownership of a majority of the
outstanding voting capital stock of such corporation or other
Person; or
(k) Except for expiration in accordance with their
terms, the Security Agreement or the Guaranty Agreement shall be
terminated or shall cease to be in full force and effect, for
whatever reason.
Section 6.02. Remedies upon Event of Default. During
the continuance of any Event of Default (other than one specified
in Section 6.01(f)) and in every such event, the Administrative
Agent, upon notice to the Borrower, may do any or all of the
following: (a) declare, in whole or, from time to time, in part,
the principal of and interest on the Loans, the Swing Loans and
the Notes and all other amounts owing under this Agreement to be,
and the Loans and the Notes and all such other amounts shall
thereupon and to that extent become, due and payable, (b)
terminate, in whole or, from time to time, in part, the
Commitments and (c) request the Borrower and the Borrower shall
thereupon deposit with the Administrative Agent as cash
collateral an amount equal to the maximum amount currently or at
any time thereafter available to be drawn under outstanding
Letters of Credit, and the Borrower hereby pledges to the
Administrative Agent, the Managing Agents, the Co-Agents, the
Issuing Bank, and the Banks, and grants to the Administrative
Agent, the Managing Agents, the Co-Agents, the Issuing Bank, and
the Banks a security interest in all such cash as security for
all current and future obligations with respect to the Letters of
Credit. Upon the occurrence of an Event of Default specified in
Section 6.01(f), automatically and without any notice to the
Borrower, (a) the principal of and interest on the Loans and the
Notes and all other amounts owing under this Agreement shall be
due and payable, (b) the Commitments shall terminate and (c) the
Borrower shall thereupon deposit with the Administrative Agent as
cash collateral an amount equal to the maximum amount currently
or at any time thereafter available to be drawn under outstanding
Letters of Credit, and the Borrower hereby pledges to the
Administrative Agent, the Managing Agents, the Co-Agents, the
Issuing Bank and the Banks, and grants to the Administrative
<PAGE>
Agent, the Managing Agents, the Co-Agents, the Issuing Bank and
the Banks a security interest in all such cash as security for
all current and future Reimbursement Obligations. Presentment,
demand, protest or notice of any kind (other than the notice
provided for in the first sentence of this Section 6.02) are
hereby expressly waived.
ARTICLE 7
ADDITIONAL CREDIT FACILITY PROVISIONS
Section 7.01. Mandatory Suspension and Conversion of
Fixed Rate Loans. A Bank's obligations to make, continue or
convert into Fixed Rate Loans of any Type shall be suspended, all
outstanding Loans of that Type shall be converted on the last day
of their applicable Interest Periods (or, if earlier, in the case
of clause (c) below, on the last day such Bank may lawfully
continue to maintain Loans of that Type or, in the case of clause
(d) below, on the day determined by such Bank to be the last
Business Day before the effective date of the applicable
restriction) into, and all pending requests for the making or
continuation of or conversion into Loans of such Type by such
Bank shall be deemed requests for, Base Rate Loans, if:
(a) on or prior to the determination of an interest
rate for a Fixed Rate Loan of that Type for any Interest
Period, the Administrative Agent determines that for any
reason appropriate information is not available to it for
purposes of determining the Adjusted Eurodollar Rate for
such Interest Period;
(b) on or prior to the first day of any Interest
Period for a Fixed Rate Loan of that Type, such Bank
determines that the Adjusted Eurodollar Rate as determined
by the Administrative Agent for such Interest Period would
not accurately reflect the cost to such Bank of making,
continuing or converting into a Fixed Rate Loan of such Type
for such Interest Period;
(c) at any time such Bank determines that any
Regulatory Change makes it unlawful or impracticable for
such Bank or its applicable Lending Office to make, continue
or convert into any Fixed Rate Loan of that Type, or to
comply with its obligations hereunder in respect thereof; or
(d) such Bank determines that, by reason of any
Regulatory Change, such Bank or its applicable Lending
Office is restricted, directly or indirectly, in the amount
that it may hold of (i) a category of liabilities that
includes deposits by reference to which, or on the basis of
which, the interest rate applicable to Fixed Rate Loans of
<PAGE>
that Type is directly or indirectly determined or (ii) the
category of assets that includes Fixed Rate Loans of that
Type.
If, as a result of this Section 7.01, any Loan of any Bank that
would otherwise be made or maintained as or converted into a
Fixed Rate Loan of any Type for any Interest Period is instead
made or maintained as or converted into a Base Rate Loan, then,
unless the corresponding Loan of each of the other Banks is also
to be made or maintained as or converted into a Base Rate Loan,
such Loan shall be treated as being a Fixed Rate Loan of such
Type for such Interest Period for all purposes of this Agreement
(including the timing, application and proration among the Banks
of interest payments, conversions and prepayments) except for the
calculation of the interest rate borne by such Loan. The
Administrative Agent shall promptly notify the Borrower and each
Bank of the existence or occurrence of any condition or
circumstance specified in clause (a) above, and each Bank shall
promptly notify the Borrower and the Administrative Agent of the
existence or occurrence of any condition or circumstance
specified in clause (b), (c) or (d) above applicable to such
Bank's Loans, but the failure by the Administrative Agent or such
Bank to give any such notice shall not affect such Bank's rights
hereunder.
Section 7.02. Regulatory Changes. If in the
determination of any Bank (an "Affected Bank") (a) any Regulatory
Change shall directly or indirectly (i) reduce the amount of any
sum received or receivable by such Bank with respect to any Loan
or Swing Loan or Letter of Credit or the return to be earned by
such Bank on any Loan or Swing Loan or Letter of Credit, (ii)
impose a cost on such Bank or any Affiliate of such Bank that is
attributable to the making or maintaining of or issuing of or
participating in, or such Bank's commitment to make issue or
participation, any Loan or Swing Loan or Letter of Credit, (iii)
require such Bank or any Affiliate of such Bank to make any
payment on or calculated by reference to the gross amount of any
amount received by such Bank under any Loan Document or (iv)
reduce, or have the effect of reducing, the rate of return on the
capital of such Bank or any Affiliate of such Bank allocable to
any Loan or Swing Loan or Letter of Credit or such Bank's
commitment to make, issue or participate in any Loan or Swing
Loan or Letter of Credit and (b) such reduction, increased cost
or payment shall not be fully compensated for by an adjustment in
the applicable rates of interest payable under the Loan
Documents, then the Borrower shall pay to such Bank such
additional amounts as such Bank determines will, together with
any adjustment in the applicable rates of interest payable
hereunder, fully compensate for such reduction, increased cost or
payment, such amounts to be paid, in the case of those applicable
to prior periods, within 15 days after request by such Bank for
such payment or, in the case of those applicable to future
periods, on the dates specified, or determined in accordance with
<PAGE>
a method specified, by such Bank. Each Bank will promptly notify
the Borrower of any Regulatory Change of which it has knowledge
that will entitle such Bank to compensation pursuant to this
Section 7.02, but the failure to give such notice shall not
affect such Bank's right to such compensation.
If additional moneys are required to be paid pursuant
to this Section 7.02, then upon payment to an Affected Bank of
all such additional moneys which have then accrued, the Borrower
may upon written notice to the Administrative Agent and each
Bank, the Borrower may terminate the obligations of the Affected
Bank to make Loans of any Type or Types and in such event, the
Borrower shall, prior to the time any payment pursuant to this
Section 7.02 is required to be made prepay all of the Loans of
such Type or Types and reborrow such Loans as Loans of any other
Type or Types by furnishing a notice of borrowing as contemplated
by Section 1.02(a) but without satisfying the advance notice
requirements of Section 1.02(a); provided that such notice shall
pertain only to the Loans of the Affected Bank and shall have no
effect on the obligations of the other Banks to make or maintain
Loans of any Type.
Section 7.03. Change of Lending Office. If an event
occurs with respect to a Lending Office of any Bank that
obligates the Borrower to pay any amount under Section 1.09(c),
makes operable the provisions of clause (b) or (c) of Section
7.01 or entitles such Bank to make a claim under Section 7.02,
such Bank shall, if requested by the Borrower, use reasonable
efforts to designate another Lending Office or Offices the
designation of which will eliminate such operability or reduce
the amount such Bank is so entitled to claim, provided that such
designation would not, in the sole and absolute discretion of
such Bank, be disadvantageous to such Bank in any manner or
contrary to such Bank's policies. Each Bank may at any time and
from time to time change any Lending Office and shall give notice
of any such change to the Administrative Agent and the Borrower.
Except in the case of a change in the Lending Offices made at the
request of the Borrower, the designation of a new Lending Office
by any Bank shall not make operable the provisions of clause (b)
or (c) of Section 7.01 or entitle such Bank to make a claim under
Section 7.02 if the operability of such clause or such claim
results solely from such designation and not from a subsequent
Regulatory Change.
Section 7.04. Funding Losses. The Borrower shall pay
to each Bank, upon request, such amount or amounts as such Bank
determines are necessary to compensate it for any loss, cost or
expense incurred by it as a result of (a) any payment, prepayment
or conversion of a Fixed Rate Loan on a date other than the last
day of an Interest Period for such Fixed Rate Loan or (b) a Fixed
Rate Loan for any reason not being made or converted, or any
payment of principal thereof or interest thereon not being made,
on the date therefor determined in accordance with the applicable
<PAGE>
provisions of this Agreement, other than pursuant to the
requirements of Section 1.03(d). At the election of such Bank,
and without limiting the generality of the foregoing, but without
duplication, such compensation on account of losses may include
an amount equal to the excess of (i) the interest (excluding the
Applicable Margin) that would have been received from the
Borrower under this Agreement on any amounts to be reemployed
during an Interest Period or its remaining portion over (ii) the
interest component of the return that such Bank determines it
could have obtained had it placed such amount on deposit in the
interbank Dollar market selected by it for a period equal to such
Interest Period or its remaining portion.
Section 7.05. Determinations. In making the
determinations contemplated by Sections 7.01, 7.02 and 7.04, each
Bank may make such estimates, assumptions, allocations and the
like that such Bank in good faith determines to be appropriate,
but such Bank's selection thereof in accordance with this Section
7.05, and the determinations made by such Bank on the basis
thereof, shall be final, binding and conclusive upon the
Borrower, except, in the case of such determinations, for
manifest errors in computation or transmission. Each Bank shall
furnish to the Borrower upon request a certificate outlining in
reasonable detail the computation of any amounts claimed by it
under this Article 7 and the assumptions underlying such
computations.
ARTICLE 8
THE ADMINISTRATIVE AGENT
Section 8.01. Appointment and Powers. Each Bank
hereby irrevocably appoints and authorizes The Bank of New York,
and The Bank of New York hereby agrees, to act as agent for and
representative (within the meaning of Section 9-105(m) of the
Uniform Commercial Code) of such Bank under the Loan Documents
with such powers as are expressly delegated to the Administrative
Agent and the Secured Party by the terms thereof, together with
such other powers as are reasonably incidental thereto. The
Administrative Agent's duties shall be purely ministerial and it
shall have no duties or responsibilities except those expressly
set forth in the Loan Documents and shall not be required under
any circumstances to take any action that, in its judgment, is
contrary to the Loan Documents or Applicable Law or would expose
it to any Liability. The Administrative Agent shall not, by
reason of its serving as the Administrative Agent, be a trustee
or other fiduciary for any Bank.
Section 8.02. Limitation on Administrative Agent's
Liability. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall be liable or
<PAGE>
responsible for any action taken or omitted to be taken by it or
them under or in connection with the Loan Documents except for
its or their own gross negligence or willful misconduct or
knowing violations of law. The Administrative Agent shall not be
responsible to any Bank for (a) any recitals, statements,
representations or warranties contained in the Loan Documents or
in any certificate or other document referred to or provided for
in, or received by any of the Banks under, the Loan Documents,
(b) the validity, effectiveness or enforceability of the Loan
Documents or any such certificate or other document, (c) the
value or sufficiency of the Collateral, or (d) any failure by the
Loan Parties to perform any of their obligations under the Loan
Documents. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence
or misconduct of any such agents or attorneys-in-fact. The
Administrative Agent shall be entitled to rely upon any
certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable)
believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants
and other experts selected by the Administrative Agent. As to
any matters not expressly provided for by the Loan Documents, the
Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under the Loan Documents in
accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks and any action taken or
failure to act pursuant thereto shall be binding on all of the
Banks.
Section 8.03. Defaults. The Administrative Agent
shall not be deemed to have knowledge of the occurrence of a
Default (other than the non-payment to it of facility fees or
principal of or interest on Loans) unless the Administrative
Agent has received notice from a Bank or the Borrower specifying
such Default and stating that such notice is a "Notice of
Default". In the event that the Administrative Agent receives
such a notice of the occurrence of a Default, the Administrative
Agent shall give prompt notice thereof to the Banks. In the
event of any Default, the Administrative Agent shall (subject to
Section 8.05(b)) (a) in the case of a Default that constitutes an
Event of Default, take either or both of the actions referred to
in clauses (a) and (b) of the first sentence of Section 6.02 if
so directed by the Required Banks, and (b) in the case of any
Default, take such other action with respect to such Default as
shall be reasonably directed by the Required Banks; provided
that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem
advisable in the best interests of the Banks.
Section 8.04. Rights as a Managing Agent and as a
<PAGE>
Bank. Each Person acting as the Administrative Agent that is
also a Managing Agent and a Bank shall, in its capacity as a
Managing Agent or a Bank, have the same rights and powers under
the Loan Documents as any other Managing Agent or Bank and may
exercise the same as though it were not acting as the
Administrative Agent, and the term "Managing Agent", "Managing
Agents", "Bank" or "Banks" shall include such Person in its
individual capacity. Each Person acting as the Administrative
Agent and its Affiliates may (without having to account therefor
to any Managing Agent, the Co-Agents, or any Bank) accept
deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Loan Parties and their
Affiliates as if it were not acting as the Administrative Agent,
and such Person and its Affiliates may accept fees and other
consideration from the Borrower and its Affiliates for services
in connection with the Loan Documents or otherwise without having
to account for the same to the Managing Agents, the Co-Agents,
and the Banks.
Section 8.05. Indemnification. (a) The Banks agree
to indemnify the Administrative Agent (to the extent not
reimbursed by the Loan Parties under the Loan Documents), ratably
on the basis of the respective principal amounts of the Loans
outstanding made by the Banks (or, if no Loans are at the time
outstanding, ratably on the basis of their respective
Commitments), for any and all Liabilities, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Administrative
Agent (including the costs and expenses that the Loan Parties are
obligated to pay under the Loan Documents) in any way relating to
or arising out of the Loan Documents or any other documents
contemplated thereby or referred to therein or the transactions
contemplated thereby or the enforcement of any of the terms
thereof or of any such other documents, provided that no Bank
shall be liable for any of the foregoing to the extent they arise
from gross negligence, willful misconduct or knowing violations
of law by the Administrative Agent.
(b) Notwithstanding any other provision of the Loan
Documents, the Administrative Agent shall in all cases be fully
justified in failing or refusing to act thereunder unless it
shall be indemnified to its satisfaction by the Banks against any
and all Liability and expense that may be incurred by it by
reason of taking or continuing to take any such action.
Section 8.06. Non-Reliance on Administrative Agent,
Managing Agents, Co-Agents, and Other Banks. Each Managing
Agent, each Co-Agent, and each Bank agrees that it has,
independently and without reliance on the Administrative Agent or
any other Managing Agent, Co-Agent, or Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Loan Parties, its own evaluation of
<PAGE>
the Collateral, and its own decision to enter into the Loan
Documents, and that it will, independently and without reliance
upon the Administrative Agent or any other Managing Agent, Co-
Agent, or Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under the
Loan Documents. The Administrative Agent, the Managing Agents,
and the Co-Agents each shall not be required to keep itself
informed as to the performance or observance by the Loan Parties
of the Loan Documents or any other document referred to or
provided for therein or to inspect the properties or books of any
Loan Party or any Subsidiary thereof or the Collateral. Except
for notices, reports and other documents and other Information
expressly required to be furnished to the Banks or the Managing
Agents or the Co-Agents by the Administrative Agent or the
Managing Agents or the Co-Agents under the Loan Documents, the
Administrative Agent and the Managing Agents and the Co-Agents
shall not have any duty or responsibility to provide any Bank or
other Co-Agent or other Managing Agent with any credit or other
Information concerning the affairs, financial condition or
business of any Loan Party or any Subsidiary thereof that may
come into the possession of the Administrative Agent or any
Managing Agent or any Co-Agent or any of its Affiliates.
Section 8.07. Execution and Amendment of Loan
Documents on Behalf of the Banks. Each Bank hereby authorizes
the Administrative Agent to execute and deliver, in the name of
and on behalf of such Bank, (a) the Guaranty Agreement, (b) the
Security Agreement, (c) all UCC financing and continuation
statements and other documents the filing or recordation of which
are, in the determination of the Administrative Agent, necessary
or appropriate to create, perfect or maintain the perfected
status of the Collateral, and (d) with such Bank's consent, any
other Loan Document requiring execution by or on behalf of such
Bank. The Administrative Agent shall consent to any amendment of
any term, covenant, agreement or condition of the Guaranty
Agreement or the Security Agreement, or to any waiver of rights
thereunder, if, but only if, the Administrative Agent is directed
to do so in writing by the Managing Agents, the Co-Agents, and
the Required Banks; provided, however, that (i) the
Administrative Agent shall not be required to consent to any such
amendment or waiver that affects its rights or duties, (ii) the
Administrative Agent shall not, unless directed to do so in
writing by each Bank, consent to any assignment by any Loan Party
of any of its rights or obligations under any such agreement, and
(iii) the Administrative Agent shall not, unless directed to do
so in writing by the Supermajority Banks (A) release any
Collateral or (B) release any Guarantor from its obligations
under Section 1.01 of the Guaranty Agreement, except as required
or contemplated by the Loan Documents; provided further, that
clause (iii) hereof shall not be amended without the written
consent of all the Banks; and provided further, that the Banks
hereby consent to the execution of the Security Agreement
<PAGE>
Amendment on, or effective as of, the Effective Date, and such
other instruments (including UCC-3 termination statements and
amendments) in connection therewith, and the execution of the
Guaranty Agreement Amendment on, or effective as of, the GATX
Effective Date.
Section 8.08. Resignation of the Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent
may resign at any time by giving notice thereof to the Managing
Agents, the Co-Agents, the Banks, and the Borrower. Upon receipt
of any such notice of resignation, the Managing Agents, the Co-
Agents, and the Required Banks may, after consultation with the
Borrower, appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by
the Managing Agents, the Co-Agents, and the Required Banks and
shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation,
then the retiring Administrative Agent may, on behalf of the
Managing Agents, the Co-Agents, and the Banks and after
consultation with the Borrower, appoint a successor
Administrative Agent. Upon the acceptance by any Person of its
appointment as a successor Administrative Agent, such Person
shall thereupon succeed to and become vested with all the rights,
powers, privileges, duties and obligations of the retiring
Administrative Agent and the retiring Administrative Agent shall
be discharged from its duties and obligations as Administrative
Agent under the Loan Documents.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices and Deliveries.
(i) Manner of Delivery. All notices,
communications and materials (including all Information) to be
given or delivered pursuant to this Agreement shall, except in
those cases where a telephone notice is expressly permitted, be
in writing (which shall include facsimile transmissions).
Notices under Sections 1.02, 1.03(c), 1.05, 1.07 and 6.02 may be
by telephone, promptly, in the case of each notice other than one
under Section 6.02, confirmed in writing. In the event of a
discrepancy between any telephonic notice and any written
confirmation thereof, such written confirmation shall be deemed
the effective notice except to the extent that the Administrative
Agent has acted in reliance on such telephonic notice.
(ii) Addresses. All notices, communications and
materials to be given or delivered pursuant to this Agreement
<PAGE>
shall be given or delivered at the following respective addresses
and facsimile and telephone numbers and to the attention of the
following individuals or departments:
(A) if to the Borrower, to it at:
Sequa Corporation
200 Park Avenue
New York, New York 10166
Facsimile No.: (212) 370-3419 or 370-1969
Telephone No.: (212) 986-5500
Attention: Treasurer
(B) if to the Administrative Agent, to it at:
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-6365
Telephone No.: (212) 635-4695
Attention: Carolyn Surles
Agency Function Administration
with a copy to:
The Bank of New York
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-1480
Telephone No.: (212) 635-1368
Attention: William A. Kerr,
New York Corporate Division
(C) if to the Swing Loan Lender, to it at:
The Bank of New York, as Swing Loan Lender
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-6365
Telephone No.: (212) 635-4695
Attention: Carolyn Surles
Agency Function Administration
with a copy to:
<PAGE>
The Bank of New York
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-1480
Telephone No.: (212) 635-1368
Attention: William A. Kerr,
New York Corporate Division
(D) if to the Issuing Bank, to it at:
The Bank of New York
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-6465
Telephone No.: (212) 635-4695
Attention: Carolyn Surles
Agency Function Administration
with a copy to:
The Bank of New York
One Wall Street
New York, New York 10286
Facsimile No.: (212) 635-1480
Telephone No.: (212) 635-1368
Attention: William A. Kerr,
New York Corporate Division
(E) if to any Managing Agent, any Co-Agent, or
any Bank, to it at the address or facsimile or
telephone number and to the attention of the
individual or department, set forth below such
Managing Agent's or Co-Agent's or Bank's name
under the heading "Notice Address" on Annex A or,
in the case of a Bank that becomes a Bank pursuant
to an assignment, set forth under the heading
"Notice Address" in the Notice of Assignment given
to the Borrower and the Administrative Agent with
respect to such assignment;
or at such other address or facsimile or telephone number or to
the attention of such other individual or department as the party
to which such information pertains may hereafter specify for the
purpose in a notice specifically captioned "Notice of Change of
Address" given to (x) if the party to which such information
pertains is the Borrower, the Administrative Agent, each Managing
Agent, the Issuing Bank, each Co-Agent, and each Bank, (y) if the
<PAGE>
party to which such information pertains is the Administrative
Agent, the Borrower, each Managing Agent, the Issuing Bank, each
Co-Agent, and each Bank and (z) if the party to which such
information pertains is a Bank, the Borrower, each Managing
Agent, the Issuing Bank, each Co-Agent, and the Administrative
Agent.
(iii) Effectiveness. Each notice and
communication and any material to be given or delivered pursuant
to this Agreement shall be effective or deemed delivered or
furnished (A) if sent by registered or certified mail, postage
prepaid, return receipt requested, on the third Business Day
after such notice, communication or material, addressed as above
provided is delivered to a United States post office and a
receipt therefor is issued thereby, (B) if given by any other
means of physical delivery, when such notice, communication or
material is delivered to the appropriate address as above
provided, (C) if sent by facsimile, when such notice,
communication or material is transmitted to the appropriate
facsimile number as above provided and is received at such number
and (D) if given by telephone, when communicated to the
individual or any member of the department specified as the
individual or department to whose attention notices,
communications and materials are to be given or delivered, or, in
the case of notice by the Administrative Agent to the Borrower
under Section 6.02 given by telephone as provided below, if any
individual or any member of the department to whose attention
notices, communications and materials are to be given or
delivered is unavailable at the time, to any other officer or
employee of the Borrower, except that notices of a change of
address, telex, facsimile or telephone number or individual or
department to whose attention notices, communications and
materials are to be given or delivered, and notices to the
Administrative Agent under Sections 1.02, 1,03(a), 1.04(c), 1.06,
1.08, 1.09 and 1.12(b), shall not be effective, and materials to
be furnished to any Managing Agent, the Issuing Bank, any Co-
Agent, or any Bank pursuant to Article 5 shall not be deemed
furnished, until received, and such notices to the Administrative
Agent, any Managing Agent, the Issuing Bank, or any Co-Agent
shall not be deemed received until received by the officer of the
Administrative Agent, Managing Agent, the Issuing Bank, or Co-
Agent responsible, at the time, for the administration of this
Agreement.
(iv) Reasonable Notice. Any requirement under
Applicable Law of reasonable notice by the Administrative Agent,
the Managing Agents, the Issuing Bank, the Co-Agents, or the
Banks to the Borrower of any event in connection with, or in any
way related to, the Loan Documents or the exercise by the
Administrative Agent, the Managing Agents, the Issuing Bank, the
Co-Agents, or the Banks of its or their rights thereunder shall
be met if notice of such event is given to the Borrower in the
manner prescribed above at least 10 days before (A) the date of
<PAGE>
such event or (B) the date after which such event will occur.
Section 9.02. Expenses; Indemnification. Whether or
not any Loans are made or Letters of Credit are issued hereunder,
the Borrower shall:
(a) pay or reimburse the Administrative Agent, each
Managing Agent, the Issuing Bank, the Swing Loan Lender, each Co-
Agent, and each Bank for all transfer, documentary, stamp and
similar taxes, and all recording and filing fees and taxes,
payable in connection with, arising out of, or in any way related
to, the execution, delivery and performance of the Loan Documents
or the making of the Loans or the Swing Loans or the issuance of
the Letters of Credit;
(b) pay or reimburse the Administrative Agent, the
Managing Agents, the Issuing Bank, the Swing Loan Lender, the Co-
Agents, and the Banks for all reasonable costs and expenses
(including reasonable fees and disbursements of legal counsel,
appraisers, accountants and other experts employed or retained by
the Administrative Agent and including, in the case of (2) below,
reasonable allocation of costs of internal counsel of any Bank)
(1) incurred by the Administrative Agent in connection with,
arising out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) the Loan Documents and
(B) whether or not executed, any waiver, amendment or consent
thereunder or thereto, (ii) the administration of and any
operations under the Loan Documents (but only such costs and
expenses as shall be out-of-pocket), or (iii) consulting with
respect to any matter in any way arising out of, related to, or
connected with, the Loan Documents, including (A) the protection,
preservation, exercise or enforcement of any of the rights of the
Administrative Agent, the Managing Agents, the Issuing Bank, the
Swing Loan Lender, the Co-Agents, or the Banks in, under or
related to the Loan Documents or (B) the performance of any of
the obligations of the Administrative Agent, the Managing Agents,
the Issuing Bank, the Swing Loan Lender, the Co-Agents, or the
Banks under or related to the Loan Documents, and (2) incurred by
the Administrative Agent, the Managing Agents, the Issuing Bank,
the Swing Loan Lender, the Co-Agents, and the Banks in connection
with, arising out of, or in any way related to protecting,
preserving, exercising or enforcing any of the rights of the
Administrative Agent, the Managing Agents, the Co-Agents, the
Issuing Bank, the Swing Loan Lender or the Banks in, under or
related to the Loan Documents; and
(c) indemnify and hold each Indemnified Person
harmless from and against all losses (including judgments,
penalties and fines) suffered, and pay or reimburse each
Indemnified Person for all costs and expenses (including
reasonable fees and disbursements of legal counsel (including
reasonable allocation of costs of internal counsel) and other
experts employed or retained by such Indemnified Person)
<PAGE>
incurred, by such Indemnified Person in connection with, arising
out of, or in any way related to (i) any Loan Document Related
Claim (whether asserted by such Indemnified Person or the
Borrower or any other Person), including the prosecution or
defense thereof and any litigation or proceeding with respect
thereto (whether or not, in the case of any such litigation or
proceeding, such Indemnified Person is a party thereto), or (ii)
any investigation, governmental or otherwise, arising out of,
related to, or in any way connected with, the Loan Documents or
the relationships established thereunder, except that the
foregoing indemnity shall not be applicable to any loss suffered
by any Indemnified Person to the extent such loss is determined
by a judgment of a court that is binding on the Borrower and such
Indemnified Person, final and not subject to review on appeal, to
be the result of acts or omissions on the part of such
Indemnified Person constituting (x) gross negligence or willful
misconduct, (y) knowing violations of law or (z) in the case of
claims by the Borrower against such Indemnified Person, such
Indemnified Person's failure to observe any other standard
applicable to it under any of the other provisions of the Loan
Documents or, but only to the extent not waivable thereunder,
Applicable Law.
Section 9.03. Amounts Payable Due upon Request for
Payment. All amounts payable by the Borrower under Section 9.02
and under the other provisions of this Agreement shall, except as
otherwise expressly provided, be immediately due upon request for
the payment thereof.
Section 9.04. Remedies of the Essence. The various
rights and remedies of the Administrative Agent, the Managing
Agents, the Co-Agents, and the Banks under this Agreement are of
the essence of this Agreement, and the Administrative Agent, the
Managing Agents, the Co-Agents, and the Banks shall be entitled
to obtain a decree requiring specific performance of each such
right and remedy.
Section 9.05. Rights Cumulative. Each of the rights
and remedies of the Administrative Agent, the Managing Agents,
the Co-Agents, and the Banks under this Agreement shall be in
addition to all of their other rights and remedies under the Loan
Documents and Applicable Law, and nothing in the Loan Documents
shall be construed as limiting any such rights or remedies.
Section 9.06. Disclosures. The Administrative Agent,
the Managing Agents, the Co-Agents, and the Banks may disclose
to, and exchange and discuss with, any other Person (the
Administrative Agent, the Managing Agents, the Co-Agents, the
Banks and each such other Person being hereby irrevocably
authorized to do so) any Information concerning the Borrower or
any Subsidiary (whether received by the Administrative Agent, the
Managing Agents, the Co-Agents, the Banks or such other Person in
connection with or pursuant to the Loan Documents or otherwise)
<PAGE>
for the purpose of (a) complying with Applicable Law, (b)
protecting, preserving, exercising or enforcing any of its rights
in, under or related to the Loan Documents, (c) performing any of
its obligations under or related to the Loan Documents or (d)
consulting with respect to any of the foregoing matters.
Section 9.07. Amendments; Waivers. Any term,
covenant, agreement or condition of this Agreement may be
amended, and any right under this Agreement may be waived, if,
but only if, such amendment or waiver is in writing and is signed
by the Required Banks and, if the rights and duties of the
Administrative Agent, the Managing Agents, or the Co-Agents are
affected thereby, by the Administrative Agent, the Managing
Agents, or the Co-Agents, as the case may be, and, in the case of
an amendment, by the Borrower; provided, however, that no
amendment or waiver shall be effective, unless in writing and
signed by all Banks, to the extent it (i) increases the amount of
a Bank's Commitment, (ii) reduces the principal of or the rate of
interest on a Bank's Loans or Notes or the facility fees payable
to a Bank hereunder, (iii) postpones any date fixed for any
payment of principal of or interest on a Bank's Loans or Notes or
the facility fees payable to a Bank hereunder or (iv) amends the
definition of Required Banks, this Section 9.07, Article 2 or any
provision of this Agreement requiring the consent or other action
of all of the Banks. Unless otherwise specified in such waiver,
a waiver of any right under this Agreement shall be effective
only in the specific instance and for the specific purpose for
which given. No election not to exercise, failure to exercise or
delay in exercising any right, nor any course of dealing or
performance, shall operate as a waiver of any right of the
Administrative Agent, any Managing Agent, the Issuing Bank, any
Co-Agent, or any Bank under this Agreement or Applicable Law, nor
shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any
other right of the Administrative Agent, any Managing Agent, the
Issuing Bank, any Co-Agent, or any Bank under this Agreement or
Applicable Law.
Section 9.08. Set-Off; Suspension of Payment and
Performance. The Administrative Agent, each Managing Agent, the
Issuing Bank, each Co-Agent, and each Bank is hereby authorized
by the Borrower, at any time and from time to time, without
notice, (a) during any Event of Default, to set off against, and
to appropriate and apply to the payment of, the Liabilities of
the Borrower under this Agreement (whether owing to such Person
or to any other Person that is the Administrative Agent, a
Managing Agent, the Issuing Bank, a Co-Agent, or a Bank and
whether matured or unmatured, fixed or contingent or liquidated
or unliquidated) any and all Liabilities owing by such Person or
any of its Affiliates to the Borrower or any Wholly Owned
Subsidiary (whether payable in Dollars or any other currency,
whether matured or unmatured and, in the case of Liabilities that
are deposits, whether general or special, time or demand and
<PAGE>
however evidenced and whether maintained at a branch or office
located within or without the United States) and (b) during any
Default, to suspend the payment and performance of such
Liabilities owing by such Person or its Affiliates and, in the
case of Liabilities that are deposits, to return as unpaid for
insufficient funds any and all checks and other items drawn
against such deposits.
Section 9.09. Sharing of Recoveries. Each Bank agrees
that, if, for any reason, including as a result of (i) the
exercise of any right of counterclaim, set-off, banker's lien or
similar right, (ii) its claim in any applicable bankruptcy,
insolvency or other similar law being deemed secured by a Debt
owed by it to any Loan Party, including a claim deemed secured
under Section 506 of the Bankruptcy Code, or (iii) the allocation
of payments by the Administrative Agent or any Loan Party in a
manner contrary to the provisions of Section 1.12, such Bank
shall receive payment of a proportion of the aggregate amount due
and payable to it hereunder as principal, interest or facility
fees that is greater than the proportion received by any other
Bank in respect of the aggregate of such amounts due and payable
to such other Bank hereunder, then the Bank receiving such
proportionately greater payment shall purchase participations
(which it shall be deemed to have done simultaneously upon the
receipt of such payment) in the rights of the other Banks
hereunder so that all such recoveries with respect to such
amounts due and payable hereunder (net of costs of collection)
shall be pro rata; provided that if all or part of such
proportionately greater payment received by the purchasing Bank
is thereafter recovered by or on behalf of any Loan Party from
such Bank, such purchases shall be rescinded and the purchase
prices paid for such participations shall be returned to such
Bank to the extent of such recovery, but without interest (unless
the purchasing Bank is required to pay interest on the amount
recovered to the Person recovering such amount, in which case the
selling Bank shall be required to pay interest at a like rate).
The Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any rights hereunder
so purchased or acquired pursuant to this Section 9.09(a) shall,
with respect to such participation, be entitled to all of the
rights of a Bank under Sections 7.02, 7.04, 9.02 and 9.08 and may
exercise any and all rights of set-off with respect to such
participation as fully as though the Borrower were directly
indebted to the holder of such participation for Loans in the
amount of such participation.
Section 9.10. Assignments and Participations. (a)
Assignments. (i) The Borrower may not assign any of its rights
or obligations under this Agreement without the prior written
consent of each Bank, and no assignment of any such obligation
shall release the Borrower therefrom unless each Bank shall have
consented to such release in a writing specifically referring to
the obligation from which the Borrower is to be released.
<PAGE>
(ii) Each Bank may from time to time assign any
or all of its rights and obligations, in a minimum amount of
$5,000,000, under this Agreement to one or more Persons with the
consent of the Borrower and the Issuing Bank, which may not be
unreasonably withheld; provided that no such assignment shall be
effective unless and until (x) the assignor and the assignee
shall have given the Borrower and the Administrative Agent a
Notice of Assignment with respect thereto and (y) either the
assignor or the assignee shall have paid an assignment fee to the
Administrative Agent in the amount of $2,500. In the event of
any such assignment by a Bank, the Borrower shall, upon request
of such Bank, against receipt of the existing Notes of the
assignor Bank, issue new Notes to the assignee Bank and, in the
case of a partial assignment, to the assignor Bank, appropriately
reflecting such assignment. Notwithstanding the foregoing, each
Bank may from time to time pledge and assign any or all of its
rights and obligations under this Agreement as collateral to a
federal reserve bank without the consent on the Borrower or the
Issuing Bank.
(b) Participations. Each Bank may from time to time,
(A) with the consent of the Issuing Bank, which consent shall not
be unreasonably withheld sell or otherwise grant participations
in any or all of its rights and obligations under this Agreement
to one or more Persons. No participation sold or otherwise
granted pursuant to this Section 9.10(b) shall require the
consent of the Borrower.
(c) Rights of Assignees and Participants. Each
assignee of, and each holder of a participation in, the rights of
any Bank under this Agreement, if and to the extent the
applicable assignment or participation agreement so provides, (i)
shall, with respect to its assignment or participation, be
entitled to all of the rights of a Bank (as fully, in the case of
a holder of a participation, as though it were a Bank) and (ii)
may exercise any and all rights of set-off or banker's lien with
respect thereto (as fully, in the case of a holder of a
participation, as though the Borrower were directly indebted to
such holder for amounts payable under this Agreement to which
such holder is entitled under the applicable participation
agreement); provided, however, that (A) no assignee or holder of
a participation shall be entitled to any amounts that would
otherwise be payable to it with respect to its assignment or
participation under Section 1.09(b) or (c) or Section 7.02 unless
(x) such amounts are payable in respect of Regulatory Changes
that become effective or are implemented or first required or
expected to be complied with after the date the applicable
assignment or participation agreement was executed or (y) such
amounts would have been payable to the Bank that made such
assignment or granted such participation if such assignment had
not been made or such participation had not been granted, and (B)
none of the Banks shall agree, in connection with any
participation agreement, to restrict its ability to make any
<PAGE>
modification or amendment to, or waiver under, this Agreement
except for any such modification, amendment or waiver which would
(x) reduce the facility fees payable hereunder or the principal
of, or the interest rate applicable to, the Loans or the Notes,
(y) extend the Termination Date or any scheduled date for payment
of principal, interest or facility fees hereunder, or (z) change
the Commitment of such Bank.
(d) Notwithstanding the other provisions of this
Section 9.10, each Bank may at any time, without complying with
any restrictions set forth in this Section 9.10, assign all or
any portion of its rights under such Bank's Commitment under this
Agreement, its Loans and its Notes to (i) an Affiliate of such
Bank or (ii) a Federal Reserve Bank, provided that any such
assignment to a Federal Reserve Bank shall not release the Bank
assignor from its obligations under this Agreement.
Section 9.11. Governing Law. This Agreement and the
Notes (including matters relating to the Maximum Permissible
Rate) shall be construed in accordance with and governed by the
substantive law of the State of New York.
Section 9.12. Judicial Proceedings; Waiver of Jury
Trial. Any judicial proceeding brought against the Borrower with
respect to any Loan Document Related Claim may be brought in any
court of competent jurisdiction in the City of New York, and, by
execution and delivery of this Agreement, the Borrower (a)
accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with any Loan Document Related Claim and (b)
irrevocably waives any objection it may now or hereafter have as
to the venue of any such proceeding brought in such a court or
that such a court is an inconvenient forum. The Borrower hereby
waives personal service of process and consents that service of
process upon it may be made by certified or registered mail,
return receipt requested, at its address specified or determined
in accordance with the provisions of Section 9.01(ii), and
service so made shall be deemed completed on the third Business
Day after such service is deposited in the mail. Nothing herein
shall affect the right of the Administrative Agent, any Managing
Agent, the Issuing Bank, any Co-Agent, any Bank, or any other
Indemnified Person to serve process in any other manner permitted
by law or shall limit the right of the Administrative Agent, any
Managing Agent, the Issuing Bank, any Co-Agent, any Bank, or any
other Indemnified Person to bring proceedings against the
Borrower in the courts of any other jurisdiction. Any judicial
proceeding by the Borrower against the Administrative Agent, any
Managing Agent, the Issuing Bank, any Co-Agent, or any Bank
involving any Loan Document Related Claim shall be brought only
in a court located in, the case of the Administrative Agent, the
Issuing Bank, the City and State of New York and, in the case of
a Bank, a Co-Agent, or a Managing Agent, the Issuing Bank, the
<PAGE>
jurisdiction in which such Bank's, such Co-Agent's, or such
Managing Agent's principal United States office is located. THE
BORROWER, THE ADMINISTRATIVE AGENT, EACH MANAGING AGENT, THE
ISSUING BANK, EACH CO-AGENT, AND EACH BANK HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT
RELATED CLAIM.
Section 9.13. LIMITATION OF LIABILITY. NEITHER THE
ADMINISTRATIVE AGENT, THE MANAGING AGENTS, THE CO-AGENTS, THE
ISSUING BANK, THE SWING LOAN LENDER NOR THE BANKS NOR ANY OTHER
INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND
THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR,
ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY THE
BORROWER IN CONNECTION WITH ANY LOAN DOCUMENT RELATED CLAIM.
Section 9.14. Reference Banks. Each Reference Bank
shall furnish to the Administrative Agent timely Information for
the purpose of determining the CD Rate and the Eurodollar Rate.
If any Reference Bank shall notify the Administrative Agent that
thenceforth it shall not be able to furnish such information in a
timely manner or shall assign all of its Loans or Commitment to a
Person that is not an Affiliate of such Reference Bank, the
Administrative Agent shall, with the consent of the Managing
Agents, the Co-Agents, and the Required Banks and after
consultation with the Borrower, appoint another Bank as a
Reference Bank in place of such Reference Bank.
Section 9.15. Severability of Provisions. Any
provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions thereof or
affecting the validity or enforceability of such provision in any
other jurisdiction. To the extent permitted by Applicable Law,
the Borrower hereby waives any provision of Applicable Law that
renders any provision of this Agreement prohibited or
unenforceable in any respect.
Section 9.16. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto were
upon the same instrument.
Section 9.17. Survival of Obligations. Except as
otherwise expressly provided therein, the rights and obligations
of the Borrower, the Administrative Agent, the Managing Agents,
the Co-Agents, the Banks, and the other Indemnified Persons under
this Agreement shall survive the Repayment Date.
Section 9.18. Entire Agreement. This Agreement and
the Notes embody the entire agreement among the Borrower, the
Administrative Agent, the Managing Agents, the Issuing Bank, the
Co-Agents, and the Banks relating to the subject matter hereof
<PAGE>
and supersede all prior agreements, representations and
understandings, if any, relating to the subject matter hereof.
Section 9.19. Successors and Assigns. All of the
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns.
Section 9.20. Acceptance of Release of Rights by
Guarantors. The Borrower hereby accepts the releases effected by
Section 1.11(a) of the Guaranty Agreement and agrees not to
restore or attempt to restore any of the rights thereby released.
ARTICLE 10
INTERPRETATION
Section 10.01. Definitional Provisions. (a) Defined
Terms. For the purposes of this Agreement:
"Accumulated Funding Deficiency" has the meaning
ascribed to that term in Section 302 of ERISA.
"Adjusted Eurodollar Rate" means, for any Interest
Period, a rate per annum (rounded upward, if necessary, to the
next higher 1/16 of 1%) equal to the rate obtained by dividing
(i) the Eurodollar Rate for such Interest Period by (ii) a
percentage equal to 1 minus the Reserve Requirement in effect
from time to time during such Interest Period.
"Administrative Agent" means The Bank of New York, as
agent for and representative (within the meaning of Section
9-105(m) of the Uniform Commercial Code) of the Banks under Loan
Documents, and any successor Administrative Agent appointed
pursuant to Section 8.08.
"Administrative Agent's Office" means the address of
the Administrative Agent specified in or determined in accordance
with the provisions of Section 9.01(ii).
"Affected Bank" has the meaning ascribed to it in
Section 7.02.
"Affiliate" means, with respect to a Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such first Person; unless otherwise specified,
"Affiliate" means an Affiliate of the Borrower.
"Agreement" means this Agreement, including all
schedules, annexes and exhibits hereto, as it may be amended,
<PAGE>
supplemented or otherwise modified or restated.
"Agreement Date" means December 14, 1993.
"Applicable Law" means, anything in Section 9.11 to the
contrary notwithstanding, (i) all applicable common law and
principles of equity and (ii) all applicable provisions of all
(A) constitutions, statutes, rules, regulations and orders of
governmental bodies, (B) Governmental Approvals and (C) orders,
decisions, judgments and decrees of all courts (whether at law or
in equity or admiralty) and arbitrators.
"Applicable Margin" means the applicable percentage,
determined as follows:
If the Fixed Then the Applicable Margin for
Charge Coverage each of the following Types of
Ratio is: Loan or Swing Loan shall be:
Eurodollar
Rate Base Rate
less than or equal
to 2.0 to 1.0 2.00% 1.00%
greater than 2.0 to 1.0
but less than or equal
to 2.5 to 1.0 1.75% 0.75%
greater than 2.5 to 1.0
but less than or equal
to 2.75 to 1.0 1.50% 0.50%
greater than 2.75 to 1.0 1.00% 0.00%
provided that if at any time the Administrative Agent determines
in its reasonable judgment, or is informed by any applicable
governmental authority or agency, that the Loans and/or
Commitments of the Banks hereunder should be classified as a
"highly leveraged transaction" as defined in any applicable law,
or governmental rule, regulation, order or request (whether or
not having the force of law and including, without limitation,
those announced or published prior to the date of this
Agreement), the Administrative Agent shall so notify the Banks
and the Borrower and, on and after the date of such notification,
the Applicable Margin for each Type of Loan shall be increased by
0.5%.
The Applicable Margin shall in each case (other than
each case for which the Applicable Margin shown above is 0.00%)
be reduced by 0.125% for so long as the Borrower's long-term
senior debt shall be rated both (a) BBB- or better by Standard &
Poor's Corporation and (b) Baa3 or better by Moody's Investors
<PAGE>
Service.
For the purposes of this definition Fixed Charge
Coverage Ratio (a) shall be determined, based upon Information
contained in the financial statements delivered pursuant to
Section 5.01(a) or Section 5.01(b), as the case may be, as of the
earlier of (i) each date of receipt by The Bank of New York of
the respective balance sheets delivered pursuant to Section
5.01(a) or Section 5.01(b) and (ii) the last date prescribed for
the delivery thereof pursuant to Section 5.01(a) or Section
5.01(b), as the case may be, and (b) shall be effective from such
date until the following date as of which a determination of
Fixed Charge Coverage Ratio is made pursuant to clause (a) of
this sentence.
"Assessment Rate" means, at any time, the annual rate
(rounded upwards, if necessary, to the next higher 1/100th of 1%)
then estimated by The Bank of New York as the net annual
assessment rate that will be employed in determining the annual
assessment payable by such bank to the Federal Deposit Insurance
Corporation (or any successor) for insuring domestic Dollar
deposits at such bank.
"Asset Acquisition" means the acquisition of all or
substantially all of the assets of a corporation, partnership or
other similar entity, or a division thereof.
"Asset Sale" means the sale, lease, license, transfer
or other disposition (including Sale and Leaseback Transactions)
by the Borrower or any of its Subsidiaries to any Person other
than the Borrower or any of its Subsidiaries of any asset or any
interest therein, other than any disposition of Margin Stock, or
of receivables in accordance with the Receivables Purchase
Agreement.
"Bank" means (i) any Person listed on the signature
pages hereof following the Administrative Agent or (ii) any
successor or assignee of any Bank, including any assignee
pursuant to Section 9.10(a).
"Bank Default" means (i) the refusal (which has not
been retracted) of a Bank to make available its portion of any
Borrowing or (ii) a Bank having notified in writing the Borrower
and/or the Administrative Agent that it does not intend to comply
with its obligations under Sections 1.01, 1.02, 1.03 or 1.08, in
each case other than its determination in good faith that
compliance with such Sections is not required hereunder.
"Base Rate" means the greater, at the time that
interest is calculated, of (i) the Prime Rate, or (ii) 0.50% plus
the Federal Funds Rate.
"Base Rate Loan" means any Loan the interest on which
<PAGE>
is, or is to be, as the context may require, computed on the
basis of the Base Rate.
"Base Rate Note" means any promissory note in the form
of Exhibit A-1.
"Benefit Plan" of any Person, means, at any time, any
employee benefit plan (including a Multiemployer Benefit Plan),
the funding requirements of which (under Section 302 of ERISA or
Section 412 of the Code) are, or at any time within six years
immediately preceding the time in question were, in whole or in
part, the responsibility of such Person or an ERISA Affiliate of
such Person.
"Borrower" means Sequa Corporation, a Delaware
corporation, and its successors and assigns.
"Business Day" means any day other than a Saturday,
Sunday or other day on which banks in New York City are
authorized to close.
"Capital Expenditure" means with respect to any Person,
any expense or Liability incurred or expenditure made, in each
case in connection with long-lived tangible assets used for the
production of goods or services, which, in accordance with
Generally Accepted Accounting Principles, is required to be
capitalized on such Person's balance sheet as property, plant and
equipment; provided that Capital Expenditure shall not include
any expense or Liability incurred or expenditure made in
connection with the acquisition of any assets to the extent the
same would constitute an Asset Acquisition.
"Capital Lease", as applied to any Person, means any
lease of any property (whether real, personal or mixed) by that
Person as lessee which, in conformity with Generally Accepted
Accounting Principles, is accounted for as a capital lease on the
balance sheet of that Person.
"Capital Security" means, with respect to any Person,
(i) any share of capital stock of such Person or (ii) any
security convertible into, or any option, warrant or other right
to acquire, any share of capital stock of such Person.
"Co-Agent" means (i) any Bank identified as a Co-Agent
on the first page of this Agreement, and (ii) any successor of
such Bank.
"Code" means the Internal Revenue Code of 1986 (as
amended).
"Collateral" has the meaning ascribed to that term in
the Security Agreement.
<PAGE>
"Commitment" of any Bank means (i) the amount set forth
opposite such Bank's name under the heading "Commitment" on Annex
A or, in the case of a Bank that becomes a Bank pursuant to an
assignment, the amount of the assignor's Commitment assigned to
such Bank, in either case as the same may be reduced from time to
time pursuant to Section 1.07 or increased or reduced from time
to time pursuant to assignments in accordance with Section
9.10(a), or (ii) as the context may require, the obligation of
such Bank to make Loans in an aggregate unpaid principal amount
not exceeding such amount.
"Commitment Percentage" means, with respect to any
Bank, the percentage equivalent to the fraction the numerator of
which is the amount set forth opposite such Bank's name on Annex
A hereto under the heading "Commitment" and the denominator of
which is the aggregate of all amounts set forth on Annex A under
the heading "Commitment".
"Committed Facility" means a Contract or understanding
pursuant to which a financial institution or group of financial
institutions have committed, for a fee computed at the rate of at
least 10 basis points per annum, on the terms and subject to the
conditions provided for therein and pursuant thereto, to extend
credit to the Borrower or any of its Subsidiaries.
"Consolidated Capitalization" means the sum of
Consolidated Net Worth plus Consolidated Total Debt.
"Consolidated Current Assets" means, at any date, the
aggregate amount of all assets of the Borrower and its
Consolidated Subsidiaries which would be classified as current
assets, computed on a consolidated basis in accordance with
Generally Accepted Accounting Principles, excluding, to the
extent otherwise included, current assets of Discontinued
Subsidiaries.
"Consolidated Current Liabilities" means, at any date,
the aggregate amount of all Liabilities of the Borrower and its
Consolidated Subsidiaries (including Tax and other proper
accruals) which would be classified as current liabilities,
computed on a consolidated basis in accordance with Generally
Accepted Accounting Principles, excluding, to the extent
otherwise included, current Liabilities of Discontinued
Subsidiaries and outstanding Loans under this Agreement.
"Consolidated Current Ratio" means the ratio of (i) the
Consolidated Current Assets to (ii) the Consolidated Current
Liabilities.
"Consolidated Interest Expense" means, with respect to
any period, the interest expense of the Borrower and its
Consolidated Subsidiaries determined on a consolidated basis
including, without limitation, (i) the amortization of debt
<PAGE>
discount, (ii) the amortization of all fees payable in connection
with the incurrence of Indebtedness to the extent included in
interest expense and (iii) the portion of any obligation with
respect to a Capital Lease allocable to interest expense. For
the purposes of this definition, "Consolidated Subsidiary" shall
not include Discontinued Subsidiaries.
"Consolidated Net Income" for any period means the
aggregate of the net income (or net deficit, as the case may be)
of the Borrower and its Subsidiaries for such period, on a
consolidated basis before the payment of dividends or the making
of any distribution on any of the capital stock of the Borrower,
determined in accordance with Generally Accepted Accounting
Principles; provided, however, that all extraordinary gains in
excess of all extraordinary losses shall be disregarded in the
computation of Consolidated Net Income.
"Consolidated Net Worth" means, as at any date of
determination, the sum of the capital stock and additional paid-
in capital plus/minus marketable equity securities valuation
adjustment plus retained earnings (or minus accumulated deficit)
excluding (x) any non-recurring restructuring charges taken with
respect to then identified Discontinued Subsidiaries or Non-Core
Businesses, (y) gains or losses with respect to any Discontinued
Asset Sale or disposition of any Non-Core Business and (z)
extraordinary gains or losses caused by the early redemption or
other extinguishment of Indebtedness of the Borrower (in each
case of (x), (y) and (z), taking into account any tax benefits
from such charges or losses) less the cost of treasury stock of
the Borrower and its Subsidiaries on a consolidated basis
calculated in conformity with Generally Accepted Accounting
Principles.
"Consolidated Rental Payments" means, for any period,
the aggregate amount of all rents paid under all Operating Leases
of the Borrower and any of its Subsidiaries as lessee for such
period, all as determined on a consolidated basis in conformity
with Generally Accepted Accounting Principles. For the purposes
of this definition, "Subsidiary" shall not include Discontinued
Subsidiaries.
"Consolidated Subsidiary" means, with respect to any
Person at any time, any Subsidiary or other Person the accounts
of which would be consolidated with those of such first Person in
its consolidated financial statements as of such time; unless
otherwise specified, "Consolidated Subsidiary" means a
Consolidated Subsidiary of the Borrower.
"Consolidated Total Debt" means, as at any date of
determination, the aggregate amount of all the Indebtedness of
the Borrower and its Consolidated Subsidiaries at such date, all
determined on a consolidated basis in conformity with Generally
Accepted Accounting Principles. For the purposes of this
<PAGE>
definition, "Consolidated Subsidiary" shall not include
Discontinued Subsidiaries.
"Contract" means (i) any agreement (whether bi-lateral
or uni-lateral or executory or non-executory and whether a Person
entitled to rights thereunder is so entitled directly or as a
third-party beneficiary), including an indenture, lease or
license, (ii) any deed or other instrument of conveyance, (iii)
any certificate of incorporation or charter and (iv) any bylaw.
"Debt" means any Liability that constitutes "debt" or
"Debt" under section 101(12) of the Bankruptcy Code or under the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any analogous Applicable Law.
"Default" means any condition or event that constitutes
an Event of Default or that with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of
Default.
"Discontinued Asset Sale" means each Asset Sale
involving the assets of a Discontinued Subsidiary.
"Discontinued Subsidiary" means each Subsidiary or
division of the Borrower or any Subsidiary identified on Schedule
4.08.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"Domestic Lending Office" of any Bank means (i) the
branch or office of such Bank set forth below such Bank's name
under the heading "Domestic Lending Office" on Annex A or, in the
case of a Bank that becomes a Bank pursuant to an assignment, the
branch or office of such Bank set forth under the heading
"Domestic Leading Office" in the Notice of Assignment given to
the Borrower and the Administrative Agent with respect to such
assignment or (ii) such other branch or office of such Bank
designated by such Bank from time to time as the branch or office
at which its Domestic Rate Loans are to be made or maintained.
"EBITDA" means, with respect to the Borrower and its
Consolidated Subsidiaries for any period, its consolidated net
income from continuing operations, as determined in accordance
with Generally Accepted Accounting Principles, plus the sum of
(i) provision for income taxes, (ii) Consolidated Interest
Expense, (iii) depreciation, depletion and amortization of
properties, (iv) any non-recurring restructuring charges taken
with respect to then identified Discontinued Subsidiaries or Non-
Core Businesses, (v) losses with respect to any Discontinued
Asset Sale or disposition of any Non-Core Business and (vi)
extraordinary losses caused by the early redemption or other
extinguishment of Indebtedness, in each case to the extent
<PAGE>
deducted in the determination of net income minus (1) gains with
respect to any Discontinued Asset Sale or disposition of any Non-
Core Business and (2) extraordinary gains caused by the early
redemption or other extinguishment of Indebtedness, in each case
to the extent included in the determination of net income.
"Effective Date" has the meaning ascribed to it in
Section 2.01.
"ERISA" means the Employee Retirement Income Security
Act of 1974 (as amended).
"ERISA Affiliate" means, with respect to any Person,
any other Person, including a Subsidiary or other Affiliate of
such first Person, that is a member of any group of organizations
within the meaning of Code Sections 414(b), (c), (m) or (o) of
which such first Person is a member; unless otherwise specified,
"ERISA Affiliate" means an ERISA Affiliate of the Borrower.
"Eurodollar Business Day" means any Business Day on
which dealings in Dollar deposits are carried on in the London
interbank market and on which commercial banks are open for
domestic and international business (including dealings in Dollar
deposits) in London, England.
"Eurodollar Lending Office" of any Bank means (i) the
branch or office of such Bank set forth below such Bank's name
under the heading "Eurodollar Lending Office" on Annex A or, in
the case of a Bank that becomes a Bank pursuant to an assignment,
the branch or office of such Bank set forth under the heading
"Eurodollar Lending Office" in the Notice of Assignment given to
the Borrower and the Administrative Agent with respect to such
assignment or (ii) such other branch or office of such Bank
designated by such Bank from time to time as the branch or office
at which its Eurodollar Rate Loans are to be made or maintained.
"Eurodollar Note" means any promissory note in the form
of Exhibit A-2.
"Eurodollar Rate" means, for any Interest Period, the
rate per annum determined by the Administrative Agent to be the
average (rounded upward, if necessary, to the next higher 1/16 of
1%) of the rates per annum determined, respectively, by each
Reference Bank to be the rate at which such Reference Bank
offered or would have offered to place with first-class banks in
the London interbank market deposits in Dollars in amounts
comparable to the Eurodollar Rate Loan of such Reference Bank to
which such Interest Period applies, for a period equal to such
Interest Period, at 11:00 a.m. (London time) on the second
Eurodollar Business Day before the first day of such Interest
Period. If any Reference Bank is unable or otherwise fails to
furnish the Administrative Agent with appropriate rate
information in a timely manner, the Administrative Agent shall
<PAGE>
determine the Eurodollar Rate based on the rate information
furnished by the remaining Reference Banks.
"Eurodollar Rate Loan" means any Loan the interest on
which is, or is to be, as the context may require, computed on
the basis of the Adjusted Eurodollar Rate.
"Event of Default" means any of the events specified in
Section 6.01.
"Existing Benefit Plan" means any Benefit Plan listed
on Schedule 4.10.
"Existing Guaranty" means any Guaranty outstanding, to
the extent, in the case of any Guaranty other than a Guaranty by
SCC, set forth on Schedule 4.04, and any renewals and extensions
thereof, provided that, in the case of any such renewals or
extensions, the amount of the Liabilities so Guaranteed shall not
be increased.
"Existing Subsidiary Indebtedness" means, in the case
of any Subsidiary (i) Indebtedness of such Subsidiary outstanding
on the Agreement Date to the extent set forth on Schedule 4.19,
(ii) in the case of any Subsidiary that became a Subsidiary after
the Agreement Date, any Indebtedness of such Subsidiary
outstanding immediately prior to, and at the time such Subsidiary
became a Subsidiary, but only if such Indebtedness was not
incurred in contemplation thereof, and (iii) any Indebtedness of
such Subsidiary constituting a renewal, extension or refunding of
any Existing Subsidiary Indebtedness of such Subsidiary, but only
if (A) at the time such Indebtedness is incurred and immediately
after giving effect thereto, no Default would exist, (B) the
principal amount of such Indebtedness does not exceed the
principal amount of the Indebtedness so renewed, extended or
refunded and (C) such Indebtedness bears interest at a rate per
annum not exceeding the rate borne by, and on terms and
conditions substantially the same as, the Indebtedness so
renewed, extended or refunded except for any increase in interest
rate that is commercially reasonable at the time such
Indebtedness is incurred.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no
such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate
<PAGE>
(similarly rounded) quoted to The Bank of New York on such day on
such transactions as determined by the Administrative Agent.
"Fixed Charge Coverage Ratio" means the ratio of (i)
EBITDA for the four consecutive fiscal quarters ending
immediately prior to the date of determination plus the
Consolidated Rental Payments for such period to (ii) the
aggregate Consolidated Interest Expense plus Consolidated Rental
Payments plus all dividends declared or paid (without
duplication) upon stock of the Borrower or any Subsidiary for
such period (without including any such dividend paid to the
Borrower from any Subsidiary).
"Funded Current Liability Percentage" has the meaning
ascribed to that term in Code Section 401(a)(29).
"GATX Documents" means the GATX Guaranty and Indemnity
Agreement, the GATX Loan and Management Agreement and each other
related agreement between the Borrower and/or SCC and GATX
Capital Corporation relating to the disposition of or borrowing
against the assets of SCC, in each case in form and substance
(including, but not limited to, the extent of the Liabilities
incurred by the Borrower in connection therewith) satisfactory to
the Required Banks.
"GATX Effective Date" means the first date on which the
GATX Documents have been executed by the parties thereto and all
closing conditions with respect to the effectiveness of the GATX
Documents have been satisfied and SCC has received the proceeds
of the loans or other advances contemplated by the GATX
Documents.
"GATX Guaranty and Indemnity Agreement" means the
Guaranty and Indemnity Agreement between the Borrower and GATX
Capital Corporation in form and substance satisfactory to the
Required Banks.
"GATX Loan and Management Agreement" means the Loan and
Management Agreement between SCC and GATX Capital Corporation in
form and substance satisfactory to the Required Bank.
"GATX Proceeds" means the aggregate cash proceeds of
the loans or advances actually received by SCC from GATX Capital
Corporation as contemplated by the GATX Documents, to the extent
such proceeds have been transferred (by dividend or other
distribution on equity) to the Borrower.
"Generally Accepted Accounting Principles" means (i)
generally accepted accounting principles as in effect at December
31, 1992 as followed in the preparation of the audited
consolidated balance sheet of the Borrower and the Consolidated
Subsidiaries referred to in Schedule 5.02(a) for the fiscal year
ended December 31, 1992 and the related statements of income,
<PAGE>
shareholders' equity and, as applicable, changes in financial
position or cash flows for the fiscal year ended with the date of
such balance sheet.
"Governmental Approval" means any authorization,
consent, approval, license or exemption of, registration or
filing with, or report or notice to, any governmental unit.
"Guarantor" means each of Casco Investors Corporation;
Casco Products Corporation; Chromalloy American Corporation;
Chromalloy Gas Turbine Corporation; Kollsman Manufacturing
Company, Inc.; Northern Technologies, Inc.; Sequa Chemicals Inc.;
Sequa Financial Corporation; and, prior to the GATX Effective
Date, Sequa Capital Corporation.
"Guaranty" of any Person means any obligation,
contingent or otherwise, of such Person (i) to pay any Liability
of any other Person or to otherwise protect, or having the
practical effect of protecting, the holder of any such Liability
against loss (whether such obligation arises by virtue of such
Person being a partner of a partnership or participant in a joint
venture or by agreement to pay, to keep well, to purchase assets,
goods, securities or services or to take or pay, or otherwise) or
(ii) incurred in connection with the issuance by a third Person
of a Guaranty of any Liability of any other Person (whether such
obligation arises by letter of credit, or agreement to reimburse
or indemnify such third Person or otherwise). The word
"Guarantee" when used as a verb has the correlative meaning.
"Guaranty Agreement" means the Guaranty Agreement,
dated as of the November 13, 1991, among Casco Investors
Corporation, Sequa Chemicals Inc., Chromalloy American
Corporation, Chromalloy Gas Turbine Corporation and the
Administrative Agent and the Guaranty Agreement, dated as of May
14, 1993, among Casco Products Corporation, Sequa Capital
Corporation, Kollsman Manufacturing Company, Inc., Northern
Technologies, Inc., Glenrock Can Systems, Inc., Northern Can
Systems, Inc., Northern Can Systems of Wisconsin and the
Administrative Agent, in each case as amended, modified or waived
from time to time.
"Guaranty Agreement Amendment" means the Amended and
Restated Guaranty Agreement in the form attached hereto as
Exhibit B.
"Indebtedness", as applied to any Person, means,
without duplication, (i) all Indebtedness for Money Borrowed of
that Person, (ii) that portion of obligations with respect to
Capital Leases which is properly classified as a liability on a
balance sheet of that Person in conformity with Generally
Accepted Accounting Principles, (iii) notes payable of that
Person and drafts accepted by that Person representing extensions
of credit whether or not representing obligations for borrowed
<PAGE>
money, and (iv) all indebtedness secured by any Lien on any
property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person.
"Indebtedness for Money Borrowed" means, with respect
to any Person, at the time any determination is to be made (i)
all Indebtedness of such Person, current or funded, secured or
unsecured, incurred in connection with borrowings (including the
sale of debt securities) or the making available of credit or
funds to or on behalf of another Person, (ii) all Indebtedness of
such Person issued, incurred or assumed in respect of the
purchase price of property except for trade accounts payable
incurred in the ordinary course of business consistent with the
policies of such Person in effect for the year ended
December 31, 1992 and (iii) all Capital Leases and Industrial
Revenue Bonds of such Person. "Industrial Revenue Bonds" means,
as at the time any determination thereof is to be made, any
Indebtedness for Money Borrowed of a government of any state, or
political subdivision thereof, or municipality in the United
States of America, incurred (or any refinancing thereof, provided
the principal amount thereof is not increased) for the purpose of
financing the acquisition, construction or improvement of
property to be used by the Borrower or any of its Subsidiaries
under an arrangement by which the proceeds of the Indebtedness
for Money Borrowed are made available by such state, subdivision
or municipality to the Borrower or any of its Subsidiaries
through a loan, a Capital Lease or other financial obligation.
"Indemnified Person" means any Person that is, or at
any time was, the Administrative Agent, a Managing Agent, a Co-
Agent, a Bank, the Issuing Bank, an Affiliate of the
Administrative Agent, a Managing Agent, a Co-Agent, the Issuing
Bank, or a Bank or a director, officer, employee or agent of any
such Person.
"Information" means data, certificates, reports,
written statements (including financial statements), opinions of
counsel, documents and other written information.
"Initial Commitment" means with respect to any Bank,
the commitment specified by such Bank in a commitment letter
delivered to the Borrower and the Administrative Agent on or
prior to December 1, 1993.
"Intellectual Property" means (i) (A) patents and
patent rights, (B) trademarks, trademark rights, trade names,
trade name rights, corporate names, business names, trade styles,
service marks, logos and general intangibles of like nature and
(C) copyrights, in each case whether registered, unregistered or
under pending registration and, in the case of any such that are
registered or under pending registration, whether registered or
under pending registration under the laws of the United States or
<PAGE>
any other country, (ii) reissues, continuations, continuations-
in-part and extensions of any Intellectual Property referred to
in clause (i), and (iii) rights relating to any Intellectual
Property referred to in clause (i) or (ii), including rights
under applications (whether pending under the laws of the United
States or any other country) or licenses relating thereto.
"Interest Payment Date" means the last day of March,
June, September, and December of each year.
"Interest Period" means a period commencing, in the
case of the first Interest Period applicable to a Fixed Rate
Loan, on the date of the making of, or conversion into, such
Loan, and, in the case of each subsequent, successive Interest
Period applicable thereto, on the last day of the immediately
preceding Interest Period, and ending, depending on the Type of
Loan, in the case of Eurodollar Interest Periods, on the same day
in the first, second, third or sixth calendar month thereafter,
except that (i) any Interest Period that would otherwise end on a
day that is not a Business Day or, in the case of a Eurodollar
Interest Period a Eurodollar Business Day shall be extended to
the next succeeding Business Day or Eurodollar Business Day, as
the case may be, unless, in the case of a Eurodollar Interest
Period, such Eurodollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next
preceding Eurodollar Business Day and (ii) any Eurodollar
Interest Period that begins on the last Eurodollar Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month in which such
Interest Period ends) shall end on the last Eurodollar Business
Day of a calendar month. "Eurodollar Interest Period" means an
Interest Period applicable to a Eurodollar Rate Loan.
"Issuing Bank" means The Bank of New York.
"Lending Office" of any Bank means the Domestic Lending
Office or the Eurodollar Lending Office of such Bank.
"Letter of Credit" means a letter of credit issued
pursuant to Section 1.08.
"Letter of Credit Obligations" means any repayment
obligations, contingent or otherwise, under any outstanding
letters of credit, including any Letters of Credit issued under
Section 1.08 of this Agreement.
"Liability" of any Person means (in each case, whether
with full or limited recourse) any indebtedness, liability,
obligation, covenant or duty of or binding upon, or any term or
condition to be observed by or binding upon, such Person or any
of its assets, of any kind, nature or description, direct or
indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, whether arising under
<PAGE>
Contract, Applicable Law, or otherwise, now existing or hereafter
arising, and whether or not (i) for the payment of money or the
performance or non-performance of any act or (ii) an allowable
claim under the Bankruptcy Code, and includes any Indebtedness or
Debt of such Person.
"Lien" means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind (including, without
limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof and any agreement to
give any security interest).
"Loan" means any amount advanced by a Bank pursuant to
Section 1.01.
"Loan Document Related Claim" means any claim (whether
civil, criminal or administrative and whether sounding in tort,
contract or otherwise) in any way arising out of, related to, or
connected with, the Loan Documents or the relationships
established thereunder, whether such claim arises or is asserted
before or after the Agreement Date or before or after the
Repayment Date.
"Loan Document Representation and Warranty" means any
"Representation and Warranty" as defined in any Loan Document and
any other representation or warranty made or deemed made under
any Loan Document.
"Loan Documents" means (i) this Agreement, the Notes,
the Security Agreement and the Guaranty Agreement and (ii) all
other agreements, documents and instruments relating to, arising
out of, or in any way connected with (A) any agreement, document
or instrument referred to in clause (i), (B) any other agreement,
document or instrument referred to in this clause (ii) or (C) any
of the transactions contemplated by any agreement, document or
instrument referred to in clause (i) or in this clause (ii).
"Loan Party" means each of the Borrower and each
Guarantor.
"Managing Agent" means (i) any Bank identified as a
Managing Agent on the first page of this Agreement, and (ii) any
successor of such Bank.
"Mandatorily Redeemable Stock" means, with respect to
any Person, any share of such Person's capital stock to the
extent that it is (i) redeemable, payable or required to be
purchased or otherwise retired or extinguished, or convertible
into any Indebtedness or other Liability of such Person, (A) at a
fixed or determinable date, whether by operation of a sinking
fund or otherwise, (B) at the option of any Person other than
such Person or (C) upon the occurrence of a condition not solely
<PAGE>
within the control of such Person, such as a redemption required
to be made out of future earnings or (ii) convertible into
Mandatorily Redeemable Stock.
"Margin Stock" means "margin stock" as defined in
Regulation U.
"Material Subsidiary" means, (a) each Guarantor and (b)
at any time of determination, in the case of the Borrower, each
Subsidiary (or a group of Subsidiaries that would constitute a
Material Subsidiary if consolidated and which are engaged in the
same or related lines of business) now existing or hereafter
acquired or formed by the Borrower which (x) accounted for more
than 5% of the consolidated revenues of the Borrower and its
Subsidiaries during the twelve month period ending on the date of
the most recent consolidated balance sheet of the Borrower
delivered to the Administrative Agent, the Managing Agents, the
Co-Agents, and the Banks pursuant to Section 5.01, or (y) was the
owner of more than 5% of the consolidated assets of the Borrower
and its Subsidiaries at the date of the most recent consolidated
balance sheet of the Borrower delivered to the Administrative
Agent, the Managing Agents, the Co-Agents, and the Banks pursuant
to Section 5.01.
"Materially Adverse Effect" means, (i) with respect to
any Person, any materially adverse effect on such Person's
business, assets, Liabilities, financial condition, results of
operations or business prospects, (ii) with respect to a group of
Persons "taken as a whole", any materially adverse effect on such
Persons' business, assets, Liabilities, financial conditions,
results of operations or business prospects taken as a whole on,
where appropriate, a consolidated basis in accordance with
Generally Accepted Accounting Principles, and (iii) with respect
to any Loan Document, any adverse effect, WHETHER OR NOT
MATERIAL, on the binding nature, validity or enforceability
thereof as an obligation of any Loan Party that is a party
thereto.
"Maturity Date" means, unless extended under Section
1.15 of this Agreement, March 31, 1997.
"Maximum Permissible Rate" means, with respect to
interest payable on any amount, the rate of interest on such
amount that, if exceeded, could, under Applicable Law, result in
(i) civil or criminal penalties being imposed on the payee or
(ii) the payee's being unable to enforce payment of (or, if
collected, to retain) all or any part of such amount or the
interest payable thereon.
"Monthly Cash Flow Reports" means a monthly cash flow
report in the form of Schedule 10.01(b).
"Monthly Operating Reports" means a monthly operating
<PAGE>
report in the form of Schedule 10.01(a).
"Multiemployer Benefit Plan" means any Benefit Plan
that is a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"Net Cash Proceeds" means proceeds received by the
Borrower or any Subsidiary in cash (including any cash received
by way of deferred payment pursuant to a note receivable or
otherwise (other than the portion of such deferred payment
constituting interest)) from any Asset Sale or the sale portion
of any Sale and Leaseback Transaction, net of (i) the costs, fees
and expenses of such transaction, (ii) any income, franchise,
transfer or other Tax arising from such transaction which
generates a current tax Liability (as reasonably estimated in
good faith by the Borrower or such Subsidiary), (iii) amounts
applied to the repayment of Indebtedness secured, to the extent
permitted by Section 4.05, by a Lien on the asset disposed of and
(iv) in the case of any disposition by or of a Subsidiary,
amounts applied to the repayment of Indebtedness of such
Subsidiary.
"1993 Form S-1 Registration Statement" means the
Borrower's Form S-1 Registration Statement as filed with the
Securities and Exchange Commission (the "SEC") on October 29,
1993, and as amended by amendments filed with the SEC on November
18, 1993, and December 1, 1993.
"Non-Core Business" means each Subsidiary or division
identified as a Non-Core Business in a letter from the Borrower
to the Administrative Agent dated as of December 14, 1993.
"Note" means any Base Rate Note, Eurodollar Note, or
Swing Loan Note.
"Notice of Assignment" means any notice to the Borrower
and the Administrative Agent with respect to an assignment
pursuant to Section 9.10(a) in the form of Schedule 9.10(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Guaranty" means any Guaranty that is (i) an
endorsement of a check for collection in the ordinary course of
business or (ii) a Guaranty of and only of the obligations of the
Loan Parties under the Loan Documents.
"Permitted Lien" means:
(a) Liens for Taxes the payment of which is not at the
time required by Section 4.01;
(b) Statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and other
<PAGE>
Liens imposed by law incurred in the ordinary course of
business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision,
if any, as shall be required by Generally Accepted
Accounting Principles, shall have been made therefor;
(c) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure
the performance of tenders, statutory obligations, bids,
leases, government contracts, performance and return-of-
money bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);
(d) Any attachment or judgment Lien individually or in
the aggregate not in excess of $5,000,000 unless the
judgment it secures shall, within 30 days after the entry
thereof, not have been discharged or execution thereof
stayed pending appeal, or shall not have been discharged
within 30 days after the expiration of any such stay;
(e) Easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with
the ordinary conduct of the business of the Borrower or any
of its Subsidiaries;
(f) Liens in existence as set forth, in the case of
the Borrower and each Subsidiary on Schedule 4.05 hereto;
(g) Liens incurred in connection with the acquisition
or construction of equipment or other property (real or
personal) by the Borrower or any of its Subsidiaries for a
cost less than $25,000,000 in the aggregate, provided that
the principal amount of the indebtedness or obligations so
secured shall not exceed in any case 80% of the cost to the
Borrower or such Subsidiary of the equipment or other
property acquired or constructed; provided, further, that
each such Lien shall cover only the equipment or other
property acquired or constructed and the proceeds thereof,
substitutions therefor and replacements thereof; and
provided further that any such Lien will attach within 120
days of the date of such acquisition or the completion of
such construction;
(h) Liens (other than Liens permitted by clauses (a)
through (g) above) on property of the Borrower and its
Subsidiaries provided that the principal amount of the
Indebtedness secured is not in excess of $5,000,000 in the
aggregate at any time;
(i) Liens pursuant to the Security Agreement;
<PAGE>
(j) Liens arising out of the Receivables Purchase
Agreement;
(k) Liens created pursuant to the GATX Documents; and
(l) Liens created in connection with a Sale and
Leaseback Transaction with AT&T Capital Corporation and a
Sale and Leaseback Transaction with GE Capital Corporation,
provided that (i) the aggregate fair market value of the
assets of the Borrower which are either sold or encumbered
by a Lien in connection with both of such Sale and Leaseback
Transactions does not exceed $19,000,000 and (ii) within 120
days from the date of each of such Sale and Leaseback
Transactions, the Borrower shall repay Indebtedness for
Money Borrowed of the Borrower which has a maturity date
more than 12 months after the date of such payment (other
than any such Indebtedness which is subordinated to the
Indebtedness outstanding under the Indenture dated as of
September 1, 1989 between the Borrower and The First
National Bank of Chicago, as Trustee) in an amount equal to
the gross proceeds from the sale portion of each such Sale
and Leaseback Transaction.
"Permitted Restrictive Covenant" means (i) any covenant
or restriction contained in any Loan Document, (ii) any covenant
or restriction binding upon any Person at the time such Person
becomes a Subsidiary of the Borrower if the same is not created
in contemplation thereof, (iii) any covenant or restriction of
the type contained in Section 4.05 that is contained in any
Contract evidencing or providing for the creation of or
concerning purchase money Indebtedness, to the extent that it
restricts Liens on the asset acquired with the proceeds of such
Indebtedness, (iv) any covenant or restriction described in
Schedule 4.12, but only to the extent such covenant or
restriction is there identified by specific reference to the
provision of the Contract in which such covenant or restriction
is contained, (v) any covenant or restriction contained in the
GATX Documents, or (vi) any covenant or restriction that (A) is
not more burdensome than an existing Permitted Restrictive
Covenant that is such by virtue of clause (ii), (iii), (iv) or
(v), (B) is contained in a Contract constituting a renewal,
extension or replacement of the Contract in which such existing
Permitted Restrictive Covenant is contained and (C) is binding
only on the Person or Persons bound by such existing Permitted
Restrictive Covenant.
"Person" means any individual, sole proprietorship,
corporation, partnership, trust, unincorporated organization,
mutual company, joint stock company, estate, union, employee
organization, government or any agency or political subdivision
thereof or, for the purpose of the definition of "ERISA
Affiliate", any trade or business.
<PAGE>
"Post-Default Rate" means, in the case of any Loan, the
rate otherwise applicable under Section 1.04(a) plus 2%, and in
the case of any other amount due and owing hereunder, the rate
then applicable to Base Rate Loans plus 2%.
"Prime Rate" means, at any time, the rate of interest
publicly announced from time to time by The Bank of New York as
its "prime" rate (which rate is not necessarily such bank's
lowest rate of interest).
"Prohibited Transaction" means any transaction that is
prohibited under Code Section 4975 or ERISA Section 406 and not
exempt under Code Section 4975 or ERISA Section 408.
"PSA" shall have the meaning ascribed to such term in
the definition of Receivables Purchase Agreement.
"Receivables Purchase Agreement" means (x) the Amended
and Restated Purchase Agreement, dated as of June 24, 1993 among
Sequa Receivables Corp., the Borrower, certain financial
institutions listed on the signature pages thereto, as
Purchasers, and Chemical Bank, as Managing Agent for the
Purchasers and (y) any renewal, extension, refinancing or
replacement thereof or successor agreement thereto, provided
that, with respect to performance requirements or restrictions
placed on the Borrower and its Subsidiaries by the terms thereof
and Liens granted on the assets of the Borrower or its
Subsidiaries pursuant thereto, any such renewal, extension,
refinancing or replacement thereof or successor agreement thereto
be on terms no more restrictive or extensive than the Receivables
Purchase Agreement as in effect on the Agreement Date.
"Reference Banks" means The Bank of New York, The Bank
of Nova Scotia, and Chemical Bank, and any replacement Reference
Bank appointed pursuant to Section 9.14.
"Regulation D" means Regulation D issued by the Board
of Governors of the Federal Reserve System and any successor
regulation.
"Regulation U" means Regulation U issued by the Board
of Governors of the Federal Reserve System (12 CFR 221.1 et seq.)
and any successor regulation.
"Regulatory Change" means any Applicable Law,
interpretation, directive, request or guideline (whether or not
having the force of law), or any change therein or in the
administration or enforcement thereof, that becomes effective or
is implemented or first required or expected to be complied with
after the Agreement Date, whether the same is (i) the result of
an enactment by a government or any agency or political
subdivision thereof, a determination of a court or regulatory
authority, or otherwise or (ii) enacted, adopted, issued or
<PAGE>
proposed before or after the Agreement Date, including any such
that imposes, increases or modifies any Tax, reserve requirement,
insurance charge, special deposit requirement, assessment or
capital adequacy requirement, but excluding any such that
imposes, increases or modifies any income or franchise tax
imposed upon the Bank by any jurisdiction (or any political
subdivision thereof) in which the Bank or any Lending Office is
located.
"Repayment Date" means the later of (i) the termination
of the Commitments (whether as a result of the occurrence of the
Maturity Date, reduction to zero pursuant to Section 1.07 or
termination pursuant to Section 6.02) and (ii) the payment in
full of the Loans and all other amounts payable or accrued
hereunder.
"Reportable Event" means, with respect to any Benefit
Plan, (i) the occurrence of any of the events set forth in ERISA
Sections 4043(b) (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under
applicable regulations), 4068(f) or 4063(a) or the regulations
thereunder with respect to such Benefit Plan, (ii) any event
requiring the Borrower or any ERISA Affiliate to provide security
to such Benefit Plan under Code Section 401(a)(29) or (iii) any
failure to make a payment required by Code Section 412(m) with
respect to such Benefit Plan.
"Representation and Warranty" means any representation
or warranty made pursuant to or under (i) Section 2.02, Article
3, Section 5.02 or any other provision of this Agreement or (ii)
any amendment to, or waiver of rights under, this Agreement,
WHETHER OR NOT, IN THE CASE OF ANY REPRESENTATION OR WARRANTY
REFERRED TO IN CLAUSE (i) OR (ii) OF THIS DEFINITION (EXCEPT, IN
EACH CASE, TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED), THE
INFORMATION THAT IS THE SUBJECT MATTER THEREOF IS WITHIN THE
KNOWLEDGE OF THE BORROWER.
"Required Banks" means, at any time, Banks (other than
a Bank subject to a Bank Default) holding 66 2/3% of the
aggregate Commitments.
"Reserve Requirement" means, at any time, the then
current maximum rate at which reserves (including any marginal,
supplemental or emergency reserve) are required to be maintained
under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding five billion Dollars
against "Eurocurrency liabilities", as that term is used in
Regulation D. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in
the applicable Reserve Requirement.
"Restricted Payment" means (i) any dividend or other
distribution on account of any shares of the Borrower's capital
<PAGE>
stock (other than dividends payable solely in shares of any of
its capital stock other than Mandatorily Redeemable Stock), (ii)
any payment on account of the principal of or premium, if any, on
any Indebtedness convertible into shares of the Borrower's
capital stock, (iii) any payment on account of any purchase,
redemption, retirement, exchange or conversion of any of the
Borrower's Capital Securities, or (iv) any prepayment,
redemption, acquisition, defeasance or other payment (other than
with respect to scheduled maturities or interest) with respect to
any subordinated Indebtedness of the Borrower or any Subsidiary
(other than Sequa Receivables Corp. in connection with, in the
case of Sequa Receivables Corp., subordinated Indebtedness
incurred by Sequa Receivables Corp. pursuant to and in accordance
with the terms of the Receivables Purchase Agreement).
"RPA" shall have the meaning ascribed to such term in
the definition of Receivables Purchase Agreement.
"Sale and Leaseback Transaction" means any arrangement,
directly or indirectly, entered into with any person whereby the
Borrower or any Subsidiary of the Borrower shall sell or transfer
any property, real or personal, and used or useful in its
business, whether now owned or hereafter acquired, and thereafter
rent or lease such property or other property which the Borrower
or such Subsidiary intends to use for substantially the same
purpose or purposes as the property being sold or transferred.
"SCC" means Sequa Capital Corporation, a New York
corporation.
"Secured Party" has the meaning ascribed to such term
in the Security Agreement.
"Security Agreement" means the Security Agreement,
dated as of May 14, 1993, between the Borrower and the
Administrative Agent, as amended from time to time.
"Security Agreement Amendment" means Amendment No. 1 to
the Security Agreement in the form attached hereto as Exhibit C.
"Segment Operating Report" means a segment operating
report in the form of Schedule 10.01.
"SFC" means Sequa Financial Corporation, a New York
corporation.
"Short Term Indebtedness for Money Borrowed" means, at
the time any determination thereof is to be made, all
Indebtedness for Money Borrowed of the Borrower and its
Subsidiaries determined on a consolidated basis maturing on
demand or having a maturity at the time such Indebtedness is
incurred of 12 months or less and any other Indebtedness for
<PAGE>
Money Borrowed of the Borrower and its Subsidiaries which under
Generally Accepted Accounting Principles would be included as a
current liability on a balance sheet of such Person at such time
(other than Indebtedness which when incurred had a maturity of 12
months or more), in each case other than the Loans.
"Subsidiary" means, with respect to any Person, any
other Person (i) securities of which having ordinary voting power
to elect a majority of the board of directors (or other persons
having similar functions) or (ii) other ownership interests of
which ordinarily constituting a majority voting interest, are at
the time, directly or indirectly, owned or controlled by such
first Person, or by one or more of its Subsidiaries, or by such
first Person and one or more of its Subsidiaries; unless
otherwise specified, "Subsidiary" means a Subsidiary of the
Borrower.
"Supermajority Banks" means, at any time, Banks (other
than a Bank subject to a Bank Default) having more than 80% of
the Loans and Letters of Credit outstanding from Banks not
subject to a Bank Default or, if there are no Loans or Letters of
Credit outstanding, more than 80% of the aggregate amount of the
Commitments held by Banks not subject to a Bank Default. This
definition shall not be amended without the written consent of
all the Banks.
"Swing Loan" means an amount advanced by the Swing Loan
Lender pursuant to Section 1.03 hereof.
"Swing Loan Lender" means The Bank of New York.
"Swing Loan Lender's Office" means the address of the
Swing Loan Lender specified in or determined in accordance with
the provisions of Section 9.01(ii) hereof.
"Swing Loan Note" means any promissory note in the form
of Exhibit A-3.
"Tax" means any Federal, State or foreign tax,
assessment or other governmental charge or levy (including any
withholding tax) upon a Person or upon its assets, revenues,
income, profits or franchises.
"Termination Event" means, with respect to any Benefit
Plan, (i) any Reportable Event with respect to such Benefit Plan,
(ii) the termination of such Benefit Plan, or the filing of a
notice of intent to terminate such Benefit Plan, or the treatment
of any amendment to such Benefit Plan as a termination under
ERISA Section 4041(e), (iii) the institution of proceedings to
terminate such Benefit Plan under ERISA Section 4042 or (iv) the
appointment of a trustee to administer such Benefit Plan under
ERISA Section 4042.
<PAGE>
"Type" means, with respect to Loans, any of the
following, each of which shall be deemed to be a different "Type"
of Loan: Base Rate Loans, Eurodollar Rate Loans having a one-
month Interest Period, Eurodollar Rate Loans having a two-month
Interest Period, Eurodollar Rate Loans having a three-month
Interest Period and Eurodollar Rate Loans having a six-month
Interest Period. Any Eurodollar Rate Loan having an Interest
Period with a duration that differs from the duration specified
for a Type of Eurodollar Rate Loan listed above solely as a
result of the operation of clauses (i) and (ii) of the definition
of "Interest Period" shall be deemed to be a Loan of such above-
listed Type notwithstanding such difference in duration of
Interest Periods.
"UCP" means the Uniform Customs and Practice for
Documentary Credits, 1983 revision, International Chamber of
Commerce Publication No. 400, as the same may be amended and in
effect from time to time.
"Unfunded Benefit Liabilities" means, with respect to
any Benefit Plan at any time, the amount of unfunded benefit
liabilities of such Benefit Plan at such time as determined under
ERISA Section 4001(a)(18).
"Uniform Commercial Code" means the Uniform Commercial
Code as in effect from time to time in the State of New York.
"Wholly Owned Subsidiary" means any Consolidated
Subsidiary all of the Capital Securities and all other ownership
interests and rights to acquire ownership interests of which
(except directors' qualifying shares) are, directly or
indirectly, owned or controlled by the Borrower or one or more
Wholly Owned Subsidiaries or by the Borrower and one or more of
such Subsidiaries.
(b) Other Definitional Provisions. (i) Except as
otherwise specified herein, all references herein (A) to any
Person shall be deemed to include such Person's successors and
assigns, (B) to any Applicable Law defined or referred to herein
shall be deemed references to such Applicable Law as the same may
have been or may be amended or supplemented from time to time and
(C) to any Loan Document or Contract defined or referred to
herein shall be deemed references to such Loan Document or
Contract (and, in the case of any Note or other instrument, any
instrument issued in substitution therefor) as the terms thereof
may have been or may be amended, supplemented, waived or
otherwise modified from time to time.
(ii) When used in this Agreement, the words
"herein", "hereof" and "hereunder" and words of similar import
shall refer to this Agreement as a whole and not to any provision
of this Agreement, and the words "Article", "Section", "Annex",
"Schedule" and "Exhibit" shall refer to Articles and Sections of,
<PAGE>
and Annexes, Schedules and Exhibits to, this Agreement unless
otherwise specified.
(iii) Whenever the context so requires, the
neuter gender includes the masculine or feminine, the masculine
gender includes the feminine, and the singular number includes
the plural, and vice versa.
(iv) Any item or list of items set forth
following the word "including", "include" or "includes" is set
forth only for the purpose of indicating that, regardless of
whatever other items are in the category in which such item or
items are "included", such item or items are in such category,
and shall not be construed as indicating that the types of items
in the category in which such item or items are "included" are
limited to such items or to items similar to such items.
(v) Except as otherwise specified herein, all
references herein to the Administrative Agent, any Managing
Agent, any Co-Agent, the Issuing Bank, any Bank or any Loan Party
shall be deemed to refer to such Person however designated in
Loan Documents, so that a reference to costs incurred by a Bank
in connection with the Loan Documents shall be deemed to include
costs incurred by such Person as a Guaranteed Party under the
Guaranty Agreement.
(vi) Except as otherwise specified therein, all
terms defined in this Agreement shall have the meanings herein
ascribed to them when used in the Notes or any certificate,
opinion or other document delivered pursuant hereto.
Section 10.02. Accounting Matters. Unless otherwise
specified herein, all accounting determinations hereunder and all
computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms
used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles, except,
in the case of such financial statements, for departures from
Generally Accepted Accounting Principles that may from time to
time be approved in writing by the independent certified public
accountants who are at the time, in accordance with Section
5.01(b), reporting on the Borrower's financial statements.
Section 10.03. Representations and Warranties. All
Representations and Warranties shall be deemed made (a) in the
case of any Representation and Warranty contained in this
Agreement at the time of its initial execution and delivery, at
and as of the Agreement Date, (b) in the case of any
Representation and Warranty contained in this Agreement or any
other document at the time any Loan is made, at and as of such
time and (c) in the case of any particular Representation and
Warranty, wherever contained, at such other time or times as such
<PAGE>
Representation and Warranty is made or deemed made in accordance
with the provisions of this Agreement or the document pursuant
to, under or in connection with which such Representation and
Warranty is made or deemed made.
Section 10.04. Captions. Captions to Articles,
Sections and subsections of, and Annexes, Schedules and Exhibits
to, this Agreement are included for convenience of reference only
and shall not constitute a part of this Agreement for any other
purpose or in any way affect the meaning or construction of any
provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers all as
of the Agreement Date.
SEQUA CORPORATION
By
Name:
Title:
THE BANK OF NEW YORK,
as Administrative Agent, a
Managing Agent, the Issuing
Bank and individually as a Bank
By
Name:
Title:
THE BANK OF NOVA SCOTIA,
as a Managing Agent and
individually as a Bank
By
Name:
Title:
CHEMICAL BANK,
as a Managing Agent and
individually as a Bank
By
Name:
Title:
<PAGE>
BANK OF AMERICA NT&SA
as a Co-Agent and individually
as a Bank
By
Name:
Title:
CHASE MANHATTAN BANK, N.A.
as a Co-Agent and individually
as a Bank
By
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
as a Co-Agent and individually
as a Bank
By
Name:
Title:
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH, as a Bank
By
Name:
Title:
Acknowledged and Agreed:
CASCO INVESTORS CORPORATION
By
Name:
Title:
<PAGE>
CASCO PRODUCTS CORPORATION
By
Name:
Title:
CHROMALLOY AMERICAN CORPORATION
By
Name:
Title:
CHROMALLOY GAS TURBINE CORPORATION
By
Name:
Title:
KOLLSMAN MANUFACTURING COMPANY, INC.
By
Name:
Title:
NORTHERN TECHNOLOGIES, INC.
By
Name:
Title:
SEQUA CHEMICALS INC.
By
Name:
Title:
<PAGE>
SEQUA FINANCIAL CORPORATION
By
Name:
Title:
SEQUA CAPITAL CORPORATION
By
Name:
Title:
<PAGE>
ANNEX A
Banks, Lending Offices
and Notice Addresses Commitments
THE BANK OF NEW YORK $30,000,000
Domestic Lending Office:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Eurodollar Lending Office:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Notice Address:
THE BANK OF NEW YORK
One Wall Street
New York, New York 10286
Facsimile No. : (212) 635-1480
Telephone No. : (212) 635-1368
Attention: William A. Kerr
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 20.00000000%
<PAGE>
THE BANK OF NOVA SCOTIA $30,000,000
Domestic Lending Office:
THE BANK OF NOVA SCOTIA
NEW YORK AGENCY
One Liberty Plaza
New York, New York 10006
Eurodollar Lending Office:
THE BANK OF NOVA SCOTIA
NEW YORK AGENCY
One Liberty Plaza
New York, New York 10006
Notice Address:
THE BANK OF NOVA SCOTIA
One Liberty Plaza
26th Floor
New York, New York 10006
Facsimile No. : (212) 225-5090
Telephone No. : (212) 225-5070
Attention: Herman Santiago
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 20.00000000%
<PAGE>
CHEMICAL BANK $30,000,000
Domestic Lending Office:
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Eurodollar Lending Office:
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Notice Address:
CHEMICAL BANK
270 Park Avenue, 10th Floor
New York, New York 10017
Facsimile No. : (212) 682-8937
Telephone No. : (212) 270-3867
Attention: Andrew Stawsi
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 20.00000000%
<PAGE>
BANK OF AMERICA NT&SA $17,500,000
Domestic Lending Office:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Eurodollar Lending Office:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Notice Address:
BANK OF AMERICA NT&SA
1850 Gateway Blvd.
Concord, CA 94520
Facsimile No. : (510) 675-7531
Telephone No. : (510) 675-7706
Attention: Daine Fowler
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 11.66666667%
<PAGE>
THE CHASE MANHATTAN BANK, N.A. $17,500,000
Domestic Lending Office:
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Eurodollar Lending Office:
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Notice Address:
THE CHASE MANHATTAN BANK, N.A.
1 Chase Manhattan Plaza
10th Floor
New York, New York 10081
Facsimile No. : (212) 552-1477
Telephone No. : (212) 552-7529
Attention: Loretta Fava
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 11.66666667%
<PAGE>
THE NIPPON CREDIT BANK, LTD. $17,500,000
Domestic Lending Office:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Eurodollar Lending Office:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Notice Address:
THE NIPPON CREDIT BANK, LTD.
245 Park Avenue - 30th Floor
New York, New York 10167
Facsimile No. : (212) 697-8034
Telephone No. : (212) 984-1263
Attention: PETER FIORILLO
Loan Administration
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 11.66666667%
<PAGE>
BANK BRUSSELS LAMBERT, $7,500,000
NEW YORK BRANCH
Domestic Lending Office:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
Eurodollar Lending Office:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
Notice Address:
BANK BRUSSELS LAMBERT
NEW YORK BRANCH
630 Fifth Avenue
Suite 2020
New York, New York 10111
Facsimile No. : (212) 333-5786
Telephone No. : (212) 632-5316
Attention: JOHN E. KIPPAX
Vice President
Pro rata share of aggregate amount of all Commitments on the
Agreement Date : 5.00000000%
<PAGE>
Schedule 1.02
NOTICE OF BORROWING
The Bank of New York,
as Administrative Agent
One Wall Street
New York, New York 10005
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of December 14, 1993, among Sequa
Corporation, The Bank of New York, as Administrative Agent, The
Bank of New York, The Bank of Nova Scotia, and Chemical Bank, as
Managing Agents, Bank of America NT&SA, Chase Manhattan Bank,
N.A. and The Nippon Credit Bank, Ltd., as Co-Agents and the banks
listed on the signature pages thereof (the "Credit Agreement").
The undersigned hereby gives notice pursuant to Section 1.02 of
the Credit Agreement of its request to have the following Loans
made to it on [insert requested date of borrowing]:
Type of Loan1 Amount
[Please disburse the proceeds of the Loans by [insert
requested method of disbursement].]2
1. Be sure to include the duration of the Interest Period in
the case of Eurodollar Rate Loans (e.g., one-month
Eurodollar Rate).
2. Include and complete this sentence if the proceeds of the
requested Loans are to be disbursed in a manner other than
by credit to an account of the Borrower at the
Administrative Agent's Office.<PAGE>
<PAGE>
The undersigned represents and warrants that the
borrowing requested hereby complies with the requirements of
Section 1.02 of the Credit Agreement.
SEQUA CORPORATION
By
Name:
Title:
<PAGE>
Schedule 1.04(c)(iv)
NOTICE OF CONVERSION OR CONTINUATION
The Bank of New York,
as Administrative Agent
One Wall Street
New York, New York 10005
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of December 14, 1993, among Sequa
Corporation,
The Bank of New York, as Administrative Agent, The Bank of New
York, The Bank of Nova Scotia, and, as Managing Agents, Bank of
America, NT&SA, Chase Manhattan Bank, N.A. and The Nippon Credit
Bank, Ltd. as Co-Agents, and the banks listed on the signature
pages thereof (the "Credit Agreement"). The undersigned hereby
gives notice pursuant to Section 1.04(c)(iv) of the Credit
Agreement of its desire to convert or continue the Loans
specified
below into or as Loans of the Types and in the amounts specified
below on [insert date of conversion or continuation]:
Converted
Loans to be Converted or Continued or Continued Loans
Last Day of
Type Current Type
of Loan Interest Period Amount of Loan1 Amount
The undersigned represents and warrants that
conversions
and continuations requested hereby comply with the requirements
of
Section 1.04(c) of the Credit Agreement.
SEQUA CORPORATION
By
Name:
Title:
<PAGE>
Schedule 1.06(a)
NOTICE OF PREPAYMENT
The Bank of New York,
as Administrative Agent
One Wall Street
New York, New York 10005
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of December 14, 1993, among Sequa
Corporation,
The Bank of New York, as Administrative Agent, The Bank of New
York, The Bank of Nova Scotia, and, as Managing Agents, Bank of
America NT&SA, Chase Manhattan Bank, N.A. and The Nippon Credit
Bank, Ltd. as Co-Agents, and the banks listed on the signature
pages thereof (the "Credit Agreement"). The undersigned hereby
gives notice pursuant to Section 1.06 of the Credit Agreement
that
it will prepay the Loans specified below on [insert date of
prepayment]:
Last Day of
Current
Type of Loan1 Interest Period Amount
The undersigned represents and warrants that the
prepayment requested hereby complies with the requirements of
Section 1.06 of the Credit Agreement.
SEQUA CORPORATION
By
Name:
Title:
1. Be sure to specify the duration of the Interest Period in
the case of Eurodollar Rate Loans (e.g., one-month
Eurodollar Rate).
<PAGE>
Schedule 2.01(a)(i)
SEQUA CORPORATION
CERTIFICATE AS TO RESOLUTIONS, ETC.
I, , [Assistant] Secretary of Sequa
Corporation, a Delaware corporation (the "Company"), hereby
certify, pursuant to Section 2.01(a) of the Amended and Restated
Credit Agreement dated as of December 14, 1993 among the Company,
The Bank of New York, as Administrative Agent, The Bank of New
York, The Bank of Nova Scotia, and, Chemical Bank, as Managing
Agents, Bank of America NT&SA, Chase Manhattan Bank, N.A. and The
Nippon Credit Bank, Ltd., as Co-Agents, and the banks listed on
the signature pages thereof, that:
1. The below named persons have been duly elected (or
appointed) and have duly qualified as, and on this day are,
officers of the Company holding their respective offices
below set opposite their names, and the signatures below set
opposite their names are their genuine signatures:
Name Office Signature
[Insert names and offices
of persons authorized to sign
the Borrower Loan Documents
and any related documents]
2. (a) Attached as Annex A is a true and correct
copy of resolutions duly adopted by [unanimous written
consent of] the Board of Directors of the Company. Such
resolutions have not been amended, modified or revoked and
are in full force and effect on the date hereof.
[(b) Attached as Annex A-1 is a true and correct
copy of resolutions duly adopted by [unanimous written
consent of] the stockholders of the Company. Such
resolutions have not been amended, modified or revoked and
are in full force and effect on the date hereof.]1
3. The Amended and Restated Credit Agreement, as
executed and delivered on behalf of the Company, is in the
form thereof approved by [unanimous written consent of] the
Board of Directors of the Company.
<PAGE>
4. There has been no amendment to the Certificate of
Incorporation of the Company since December ___, 1993.2
5. Attached as Annex B is a true and correct copy of
the By-laws of the Company as in effect on December 14,
1993.
IN WITNESS WHEREOF, I have signed this certificate this
14th day of December, 1993.
[Assistant] Secretary
I, , [title] of the Company, hereby
certify that [name of the above [Assistant] Secretary] has been
duly elected or appointed and has been duly qualified as, and on
this day is, [Assistant] Secretary of the Company, and the
signature in paragraph 1 above is his genuine signature.
IN WITNESS WHEREOF, I have signed this certificate this
14th day of December, 1993.
[Title]
1. Omit if not applicable.
2. Date of Certification by Secretary of State.
<PAGE>
Annex A
SEQUA CORPORATION
RESOLUTIONS OF BOARD OF DIRECTORS
[Insert applicable resolutions]
<PAGE>
Annex A-1
[NAME OF LOAN PARTY]
RESOLUTIONS OF SHAREHOLDERS
[Insert applicable resolutions]
<PAGE>
Annex B
[NAME OF LOAN PARTY]
BY-LAWS
[Insert applicable by-laws]
<PAGE>
Schedule 2.01(a)(ii)
[NAME OF GUARANTOR]
CERTIFICATE AS TO RESOLUTIONS, ETC.
I, , [Assistant] Secretary of [name of
Guarantor], a corporation (the "Company"),
hereby certify, pursuant to Section 2.01(a) of the Amended and
Restated Credit Agreement dated as of December 14, 1993 among
Sequa Corporation, The Bank of New York, as Administrative Agent,
The Bank of New York, The Bank of Nova Scotia, and, Chemical
Bank, as Managing Agents, Bank of America NT&SA, Chase Manhattan
Bank, N.A. and The Nippon Credit Bank, Ltd. as Co-Agents, and the
banks listed on the signature pages thereof, that:
1. The below named persons have been duly elected (or
appointed) and have duly qualified as, and on this day are,
officers of the Company holding their respective offices
below set opposite their names, and the signatures below set
opposite their names are their genuine signatures:
Name Office Signature
[Insert names and offices of
persons authorized to sign the
Guaranty Agreement and other Loan
Documents to which the Company is
a party, and any related documents]
2. (a) Attached as Annex A is a true and correct
copy of resolutions duly adopted by [unanimous written
consent of] the Board of Directors of the Company. Such
resolutions have not been amended, modified or revoked and
are in full force and effect on the date hereof.
[(b) Attached as Annex A-1 is a true and correct
copy of resolutions duly adopted by [unanimous written
consent of] the stockholders of the Company. Such
resolutions have not been amended, modified or revoked and
are in full force and effect on the date hereof.]1
3. The Guaranty Agreement dated as of November 13,
1991 among the Company, the other Guarantors, and The Bank
<PAGE>
of New York, as Administrative Agent, as executed and
delivered on behalf of the Company, is in the form thereof
approved by [unanimous written consent of] the Board of
Directors of the Company.
4. There has been no amendment to the Certificate of
Incorporation of the Company since December ___ , 1993.2
5. Attached as Annex B is a true and correct copy of
the By-laws of the Company as in effect on December 14,
1993.
IN WITNESS WHEREOF, I have signed this certificate this
14th day of December, 1993.
[Assistant] Secretary
I, , [title] of the Company, hereby
certify that [name of the above [Assistant] Secretary] has been
duly elected or appointed and has been duly qualified as, and on
this day is, [Assistant] Secretary of the Company, and the
signature in paragraph 1 above is his genuine signature.
IN WITNESS WHEREOF, I have signed this certificate this
14th day of December, 1993.
[Title]
1. Omit if not applicable.
2. Date of Certification by Secretary of State
<PAGE>
Annex A
[NAME OF GUARANTOR]
RESOLUTIONS OF BOARD OF DIRECTORS
[Insert applicable resolutions]
<PAGE>
Annex A-1
[NAME OF LOAN PARTY]
RESOLUTIONS OF SHAREHOLDERS
[Insert applicable resolutions]
<PAGE>
Annex B
[NAME OF LOAN PARTY]
BY-LAWS
[Insert applicable by-laws]
<PAGE>
Schedule 2.01(f)
CERTIFICATE OF NEGOTIATING OFFICER
Dated December 14, 1993
Sequa Corporation (the "Borrower") is today entering
into an Amended and Restated Credit Agreement dated as of
December 14, 1993 with The Bank of New York, as Administrative
Agent, The Bank of New York, The Bank of Nova Scotia and Chemical
Bank, as Managing Agents, Bank of America NT&SA, Chase Manhattan
Bank, N.A. and The Nippon Credit Bank, Ltd., as Co-Agents, and
the banks listed on the signature pages thereof or referred to
therein (the "Banks"), and Casco Investors Corporation,
Chromalloy American Corporation, Chromalloy Gas Turbine
Corporation, and Sequa Chemicals Inc. have entered into a
Guaranty Agreement dated as of November 13, 1991 with the
Administrative Agent (collectively the "Loan Documents").
I am the Vice President and Treasurer of the Borrower,
an officer of each Guarantor, and the officer who was principally
involved in negotiating the Loan Documents.
I hereby confirm that I have read the Loan Documents
and that I understand that they require the Borrower and each
Guarantor to waive any rights it may have to trial by jury and to
claim any special, indirect and consequential damages. I also
confirm that I understand that the Loan Documents embody the
entire agreement among the Borrower and each Guarantor, the
Administrative Agent, the Managing Agents, the Co-Agents and the
Banks and supersede all prior agreements, representations and
understandings relating to the subject matter thereof.
I further confirm that I have reviewed my understanding
of the Loan Documents with Ira Schreger, Esq., who has acted as
counsel for the Borrower and the Guarantors in the transaction,
and that, in particular, he has called to my attention those
provisions under and pursuant to which (a) the Borrower and each
Guarantor waives its right to trial by jury and its right to
claim special, indirect and consequential damages and (b) the
Loan Documents embody the entire agreement among the Borrower and
each Guarantor, the Administrative Agent, the Managing Agents,
the Co-Agents, and the Banks relating to the subject matter
thereof and supersede all prior agreements, representations and
understandings, if any, relating to the subject matter thereof
and may only be amended, or any of the terms or provisions
thereof waived, or any departures therefrom consented to, in a
writing signed by or on the behalf of the Required Banks or all
<PAGE>
of the Banks, as the case may be.
I further confirm that I have reviewed certain terms
and provisions of the Loan Documents with the Boards of Directors
of the Borrower and the Guarantors.
Finally, I confirm to you that in the course of
negotiating the Loan Documents I worked principally with
Messrs. Nichols, Fryett and Lane of The Bank of New York, The
Bank of Nova Scotia and Chemical Bank, respectively, and neither
they nor any other representative of the Administrative Agent,
any Managing Agents, any Co-Agent, or any Bank, has made any
representations to me that are inconsistent with the terms and
provisions of the Loan Documents.
Kenneth Drucker
<PAGE>
<TABLE>
Schedule 3.02
SCHEDULE OF MATERIAL SUBSIDIARIES
Jurisdiction of % of Stock C
Name of Material Subsidiary Incorporation Ownership Stock
<S> <C> <C> <C> <C>
1. ARC Professional Services Group, Inc. Maryland 100% Atlantic
Corporation
2. Atlantic Research Corporation Delaware 93%
Corporation
3. Chromalloy Gas Turbine Corporation Delaware 100%
Corporation
4. Sequa Capital Corporation New York 100%
5. Sequa Limited England 99% Casco Investors
Corporation
1% Sequa Corporation
6. Warwick International Group plc England * (see below) * (see below
7. Chromalloy American Corporation Delaware 100%
8. Casco Investors Corporation New York 100% Sequa Cor
<FN>
* Total number of outstanding shares of Warwick International Group plc is 19,647,919, of which
19,647,819 are owned by Sequa Limited and 100 are owned by Sequa Corporation.
</TABLE>
<PAGE>
Schedule 3.03
SCHEDULE OF REQUIRED CONSENTS AND
GOVERNMENTAL APPROVALS
None
<PAGE>
Schedule 3.09
MULTIEMPLOYER BENEFIT PLAN WITHDRAWAL LIABILITY
Current Payments:
1. Teamsters Pension Trust Fund of Philadelphia & Vicinity: For
Discontinued Operation - Chromalloy Glass
At 9/30/93 $83,083.91 remaining. Quarterly installments of
$7,402.17 with a final partial payment of $1,660.04 payable
9/96.
2. Teamsters Pension Trust Fund of Philadelphia & Vicinity: For
Discontinued Operation - Chromalloy Glass
At 9/30/93 $26,926.39 remaining. Quarterly installments of
$4,664.09 with a final partial payment of $2,505.94 payable
1/95.
3. The Amalgamated Insurance Fund: For Discontinued Operation-
Gordon's of Philadelphia
At 9/30/93 $674,693.88 remaining. Quarterly installments of
$42,892.17 with a final partial payment of $31,311.26
payable 3rd quarter of 1997.
Potential Liability:
1. Plainview, New York facility of the Kollsman Group: District
Council 15 Machinists Pension Fund - As of 12/31/91:
Unfunded Liability of Accumulated Benefits $606,388.00
Present Value (at 12/31/91) of Unfunded $301,247.52
Liability
Installment Schedule of Present Value 80 Quarterly
Payments Payments at
$7,579.60/Qtr.
NOTES:
(a) The Plainview facility has from time to time been
considered as a candidate for possible closure.
(b) The Employer's Council representing participating
employers has advised Sequa that in their opinion the
District Council 15 Machinists Pension Fund will be
considered terminally underfunded as of the end of 1997.
(c) Sequa anticipates an actuarial report on the Plan as of
12/31/92 early in 1994.
<PAGE>
Schedule 4.04
SEQUA CORPORATION
SCHEDULE OF EXISTING GUARANTIES
DECEMBER, 1993
Guaranties of Third Party Indebtedness:
National Seating Industrial Revenue Bond ($6,500,000)
Bendix - Atlantic Joint Venture ($2,500,000)
Guaranties of Subsidiary Indebtedness:
Atlantic Research Canada (C$500,000)
Turbochrome Overdraft Facility ($300,000)
TSE Overdraft Facility ($10,000,000)
Malichaud ($4,000,000)
Guaranties of Letters of Credit:
SunRise Insurance Sequa Reinsurance ($3,500,000)
Direct Pay Facility for ARC IRB ($6,300,000)
Guidance Line for Advance Payment and Performance
Bonds for Gas Turbine (2,300,000 Pounds Sterling)
Superior Pants Trade ($750,000)
ARC/Rappahannock IRB ($159,000)
Sumitomo/DIC Americas ($29.2MM)
Letters of Credit:
Direct Reinsurance ($13,850,000)
Trade Finance ($16,744,000)
DIC Americas for EPA cost related to property
sold in 1986 ($29,200,000)
LOC for ARC IRB ($6,300,000)
Performance Guaranties:
GTC Gas Turbine Limited Contract with the Secretary
of State for Defence, Great Britain
Chromalloy Gas Turbine Corporation Contracts with
U.S. Government
GTC Gas Turbine Limited Contract with Ruston Gas
Turbines
SCC/Textron Financial Corp ($2,706,000)
Stock Purchase Agreement among Pepsi-Cola,
Sequa Capital and Sequa Corporation
Asset Purchase Agreement with Sequa Leasing and GECC
Leasehold Interest Transfer Agreement to Norwest Bank
Minnesota National Association from Sequa
Capital Corporation
<PAGE>
Leasehold Interest Transfer Agreement to MetLife
Capital Corporation from Sequa Capital Corporation
Trade Guaranties:
Apparel Factoring Accounts ($1,085,000)
Guaranties of Lessee:
Computer Lease/CGTC ($1,500,000)
<PAGE>
Schedule 4.05
SCHEDULE OF EXISTING LIENS
Capital Lease Agreements between Northern Can Systems, lessee,
and CIT collateralized by can-manufacturing equipment
($23,882,000)
Trust Indenture dated August 15, 1988 between Atlantic Research
Corporation, the Industrial Development Authority of the County
of Prince William, Virginia, and Crestar Bank as Trustee -
Virginia IRB ($6,300,000)
Letter of Pledge between ABN-AMRO Bank and Sequa relating to the
Reimbursement Agreement for the Letter of Credit issued in favor
of Crestar Bank, as Trustee, for the Trust Indenture dated August
15, 1988 ($6,300,000)
Real Estate Mortgage, between Atlantic Research Corporation,
mortgagor, and B.S. Saul, dated January 4, 1990 - Sterling
Building ($3,994,000)
Mortgage and Indenture of Trust dated as of June 1, 1974, by and
between the Industrial Development Authority of the State of New
Hampshire and the First National Bank of Boston, as Trustee -
Merrimack IRB ($1,655,000)
Trust Indenture between Sequa Corporation, Chester County, South
Carolina and NCNB National Bank of North Carolina, as Trustee -
Chester IRB ($1,000,000)
Liens associated with the Amended and Restated Purchase and Sale
Agreement dated as of June 24, 1993 and the Amended and Restated
Receivables Purchase Agreement dated as of June 24, 1993.
Additional mortgages and capital leases which in aggregate do not
exceed $10,000,000
Liens associated with the Security Agreement dated as of May 14,
1993
<PAGE>
Schedule 4.08
SCHEDULE OF DISCONTINUED SUBSIDIARIES
"DISCONTINUED SUBSIDIARY"
(Subsidiaries and Divisions)
The Valley Line Company
Valley Transportation Inc.
Sabine Towing & Transportation Company, Inc.
Sequa Engineered Services
Raffinati Division
Special Products Engineering Company (SPEC)
Sequa Capital Corporation and its subsidiaries
<PAGE>
Schedule 4.10
SCHEDULE OF EXISTING BENEFIT PLANS
ARC Accidental Death & Dismemberment Insurance Plan 511
ARC Benefits Plus Plan 507
ARC Educational Assistance Plan 508
ARC Employee Assistance Program 509
ARC Health and Major Medical Plan 501
ARC Group Life Insurance Plan 502
ARC Long-Term Disability Plan 503
ARC Non-Qualified Benefit Plan 008
ARC Employees' Pension Plan 002
ARC Non-Qualified Benefit Plan 008
ARC Savings Plus Plan 001
ARC Severance Pay Program 510
ARC PSG Educational Assistance Program 510
ARC PSG FLEX Plan 508
Group Life and AD&D Plan for ARC PSG, Inc. 506
Group Long-Term Disability Plan for ARC PSG, Inc. 507
Group Medical Plan for ARC PSG, Inc. 501
ARC PSG Tax Deferred Savings & Retirement Plan 001
* The Campus Casuals of California Division of 109
Chromalloy American Corporation Profit Sharing Plan
Caval Tool Division Flexible Benefits Plan 507
Chromalloy American Corporation Employee Welfare Plan 509
Chromalloy Castings Miami Corporation Cafeteria Plan 501
Chromalloy Castings Tampa Corporation Cafeteria Plan 501
Chromalloy Compressor Technologies Group Insurance Plan 502
Chromalloy Gas Turbine Corporation Employee Educational 504
Reimbursement Plan
Chromalloy Incentive Savings Plan for 083
Salaried Employees/Sequa Thrift Plan
DRB Section 125 Plan 506
EDM of Texas Group Insurance Plan 501
Kollsman Section 125 Plan 511
Long-Term Disability Plan (GTC) 503
Long-Term Disability Plan (Precoat) 508
Long-Term Disability Plan for Employees of Sequa 505
NCS Group Life Insurance & Short-Term Disability 502
Benefits Plan
NCS Medical Benefits Plan 501
NCS Tuition Reimbursement Plan 503
Group Medical Plan for the Employees of Quantum Division 505
Chromalloy Gas Turbine Corporation
Sequa Corporation Defined Benefit Plan 024
for Men's Apparel Employees
Sequa Corporation Optional Life Insurance Plan 510
Pension Plan for Employees of Sequa and 001
Certain Subsidiary Companies
<PAGE>
Sequa Retirement Plan 002
Sequa Corporation Section 125 Plan 512
Travel Accident Insurance Plan Sequa 504
Sequa Tuition Aid Plan 507
Sequa Corporation Voluntary AD&D Plan 506
* The Sturm Machine Company, Inc. Profit Sharing Plan 001
Sturm Machine Company Tuition Aid Program 501
Turbine Airfoils Division Long-Term Disability Plan 508
TurboCombustor Technology, Inc. Life Insurance Plan 502
TurboCombustor Technology, Inc. Section 125 Plan 503
TurboCombustor Technology, Inc. Tuition 501
Reimbursement Plan
KEY
* Terminated Plan. Unlocatable participants account balances
are being maintained in interest-bearing accounts.
<PAGE>
Schedule 4.12
SCHEDULE OF EXISTING RESTRICTIVE COVENANTS
[None]
<PAGE>
Schedule 4.19
SCHEDULE OF EXISTING SUBSIDIARY INDEBTEDNESS*
(000's omitted)
Continuing Operations:
Atlantic Research Corporation
Industrial Revenue Bond - Virginia $ 6,300
Sterling building mortgage - B.S. Saul 4,033
Capital leases and other 1,389
Northern Can Systems
Capital leases payable to CIT 42,821
Revolving credit facility - Bank of Nova Scotia 4,828
Notes payable 1,501
Chromalloy Gas Turbine Corporation
Capital leases 5,680
TSE note payable 3,435
Topps and TSE 3,530
Malichaud 1,012
Heurchrome 53
Chromalloy American Corporation
Mortgage - SouthTrust Bank 1,394
Mortgage - Nanuet National Bank 601
MEG 1,568
Warwick 3,569
Janus 346
Continuing Operations Subtotal 82,060
Discontinued Operations:
Valley Line Company
Merchant Marine Bonds 6,554
Preferred Ship Mortgages 798
DRAVO 275
Sequa Engineered Services 80
Discontinued Operations Subtotal 7,707
Total Subsidiary Indebtedness $89,767
* Excludes Sequa Capital Corporation Indebtedness
<PAGE>
Schedule 5.01(a)
SEQUA CORPORATION
CERTIFICATE AS TO QUARTERLY FINANCIAL STATEMENTS
I, , [President, Chief Financial
Officer, Treasurer, Controller] of Sequa Corporation, a Delaware
corporation (the "Borrower"), hereby certify, pursuant to Section
5.01(a) of the Amended and Restated Credit Agreement dated as of
December 14, 1993, among the Borrower, the banks listed on the
signature pages thereof, Bank of America NT&SA, Chase Manhattan
Bank, N.A. and the Nippon Credit Bank, Ltd., as Co-Agents, The
Bank of New York, The Bank of Nova Scotia, and Chemical Bank, as
Managing Agents, and The Bank of New York, as Administrative
Agent, that:
1. (a) The accompanying unaudited consolidated
balance sheet and Segment Operating Reports of the Borrower and
the Consolidated Subsidiaries as at and for the
quarterly accounting period ended , 19 , are complete and
correct and present fairly, in accordance with Generally Accepted
Accounting Principles (except for changes therein or therefrom
described below that have been approved in writing by Messrs.
, the Borrower's current independent certified
public accountants), the consolidated financial position of the
Borrower and the Consolidated Subsidiaries as at the end of such
quarterly period, and the consolidated results of operations,
shareholders' equity, and cash flows for such quarterly period,
and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, in each case on the basis
presented and subject only to normal year-end auditing
adjustments.
(b) Except as disclosed or reflected in such financial
statements, as at , neither the Borrower nor any
Subsidiary had any Liability, contingent or otherwise, or any
unrealized or anticipated loss, that, singly or in the aggregate,
have had or might have a Materially Adverse Effect on the
Borrower and the Consolidated Subsidiaries taken as a whole.
2. (a) The changes from Generally Accepted Accounting
Principles are as follows:
All such changes have been approved in writing by Messrs.
.
[(b) Attached as Annex A are the unaudited
consolidated balance sheet and Segment Operating Reports of the
<PAGE>
Borrower and the Consolidated Subsidiaries as at
and for the quarterly accounting period ended , 19 ,
which have been prepared in accordance with Generally Accepted
Accounting Principles without giving effect to the changes
referred to in Paragraph 2(a) of this Certificate or any previous
Certificate. Such balance sheet and Segment Operating Reports
are complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles, the consolidated
financial position of the Borrower and the Consolidated
Subsidiaries as at the end of such quarterly period, and the
consolidated results of operations, shareholders' equity, and
cash flows for such quarterly period, and for the elapsed portion
of the fiscal year ending with the last day of such quarterly
period, in each case on the basis presented and subject only to
normal year-end auditing adjustments.]*
3. There follow the calculations required to establish
whether or not the Borrower was in compliance with the following
Sections of the Agreement:**
(a) Section 4.06.
(b) Section 4.13.
(c) Section 4.15.
(d) Section 4.16.
(e) Section 4.17.
* Paragraph (b) should be included in, and Annex A attached
to, the Certificate only if changes from Generally Accepted
Accounting Principles are specified in Paragraph 2(a) of
this or any previous Certificate.
** The calculations should be made in the same manner and with
the same degree of detail as the calculations set forth in
<PAGE>
the certificate delivered by the Borrower pursuant to
Section 2.01(h).
(f) Section 4.18.
(g) Section 4.19.
4. Based on an examination sufficient to enable me to
make an informed statement, no Default exists, including, in
particular, any such arising under the provisions of Article 4,
except the following:
[If none such exist, insert "None"; if any do exist,
specify the same by Section, give the date the same occurred,
whether it is continuing, and the steps being taken by the
Borrower or a Subsidiary with respect thereto.]
Dated:
____________________________
[President, Chief Financial
Officer, Treasurer,
Controller]
<PAGE>
Schedule 5.01(b)
SEQUA CORPORATION
CERTIFICATE AS TO ANNUAL FINANCIAL STATEMENTS
I, , [President, Chief Financial
Officer, Treasurer, Controller] of Sequa Corporation, a Delaware
corporation (the "Borrower"), hereby certify, pursuant to Section
5.01(b) of the Amended and Restated Credit Agreement dated as of
December 14, 1993, among the Borrower, the banks listed on the
signature pages thereof, Bank of America NT&SA, Chase Manhattan
Bank, N.A. and The Nippon Credit Bank, Ltd., as Managing Agents,
The Bank of New York, The Bank of Nova Scotia, and Chemical Bank,
as Managing Agents, and The Bank of New York, as Administrative
Agent, that:
1. (a) The accompanying consolidated balance sheet
and Segment Operating Reports of the Borrower and the
Consolidated Subsidiaries as at and for the [fiscal
year] [12 months] ended , 19 , are complete and correct
and present fairly, in accordance with Generally Accepted
Accounting Principles (except for changes therein or therefrom
described below, that have been approved in writing by Messrs.
, the Borrower's current independent certified
public accountants), the consolidated financial position of the
Borrower and the Consolidated Subsidiaries as at the end of such
fiscal [year] [period], and the consolidated results of
operations, shareholders' equity, and cash flows for such fiscal
[year] [period], in each case on the basis presented.
(b) Except as disclosed or reflected in such financial
statements, as at , neither the Borrower nor any
Subsidiary had any Liability, contingent or otherwise, or any
unrealized or anticipated loss, that, singly or in the aggregate,
have had or might have a Materially Adverse Effect on the
Borrower and the Consolidated Subsidiaries taken as a whole.
2. (a) The changes from Generally Accepted Accounting
Principles are as follows:
All such changes have been approved in writing by Messrs.
.
<PAGE>
[(b) Attached as Annex A are the unaudited
consolidated balance sheet and Segment Operating Reports of the
Borrower and the Consolidated Subsidiaries as at
and for the [fiscal year] [12 months] ended , 19 ,
which have been prepared in accordance with Generally Accepted
Accounting Principles without giving effect to the changes
referred to in Paragraph 2(a) of this Certificate or any previous
Certificate. Such balance sheet and Segment Operating Reports
are complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles, the consolidated
financial position of the Borrower and the Consolidated
Subsidiaries as at the end of such fiscal [year] [period], and
the consolidated results of operations, shareholders' equity, and
cash flows for such fiscal [year] [period], in each case on the
basis presented.]*
3. There follow the calculations required to establish
whether or not the Borrower was in compliance with the following
Sections of the Agreement:**
(a) Section 4.06.
(b) Section 4.13.
(c) Section 4.15.
* Paragraph (b) should be included in, and Annex A attached
to, the Certificate only if changes from Generally Accepted
Accounting Principles are specified in Paragraph 2(a) of
this or any previous Certificate.
** The calculations should be made in the same manner and with
the same degree of detail as the calculations set forth in
the certificate delivered by the Borrower pursuant to
Section 2.01(h).
<PAGE>
(d) Section 4.16.
(e) Section 4.17.
(f) Section 4.18.
(g) Section 4.19.
4. Based on an examination sufficient to enable me to
make an informed statement, no Default exists, including, in
particular, any such arising under the provisions of Article 4,
except the following:
[If none such exist, insert "None"; if any do
exist, specify the same by Section, give the date the
same occurred, whether it is continuing, and the steps
being taken by the Borrower or a Subsidiary with
respect thereto.]
Dated:
[President, Chief
Financial Officer, Treasurer,
Controller]
<PAGE>
Schedule 5.02(a)
SCHEDULE OF HISTORICAL FINANCIAL INFORMATION
<PAGE>
Schedule 9.10(a)
NOTICE OF ASSIGNMENT
Sequa Corporation
200 Park Avenue
New York, New York 10166
The Bank of New York, as Administrative Agent
One Wall Street
New York, New York 10015
Date:
Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement, dated as of December 14, 1993 among Sequa Corporation,
the banks listed on the signature pages thereof, Bank of America
NT&SA, Chase Manhattan Bank, N.A. and The Nippon Credit Bank,
Ltd., as Co-Agents, The Bank of New York, The Bank of Nova
Scotia, and Chemical Bank, as Managing Agents, and The Bank of
New York, as Administrative Agent (the "Amended and Restated
Credit Agreement"). The undersigned hereby give notice pursuant
to Section 9.10(a) of the Amended and Restated Credit Agreement
that [name of Assignor] [(the "Assignor")]1 has made the
following assignment to [name of Assignee] [(the "Assignee")]2:
Rights and Obligations
Assigned:
Effective Date of
Assignment:
[The Assignee's Lending Offices and address for notices
are as follows:
Domestic Lending Office:
Eurodollar Lending Office:
Notice Address:]3
<PAGE>
[The Assignor hereby requests that the Borrower and the
Administrative Agent consent to the assignment described above by
signing a copy of this letter in the space provided below and
returning it to the Assignor. Such consent shall release the
Assignor from all of the obligations described above as having
been assigned to the Assignee.]4
[NAME OF ASSIGNOR]
By__________________________
Name:
Title:
[NAME OF ASSIGNEE]
By__________________________
Name:
Title:
Assignment and release consented to:
SEQUA CORPORATION
By___________________________
Name:
Title:
THE BANK OF NEW YORK,
as Administrative Agent
By___________________________
Name:
Title:
_________________________
1. Include definition if Footnote 4 material is to be
included.
2. Include definition if Footnote 3 or Footnote 4 material is
to be included.
3. Omit if the Assignee is a Bank.
4. Include if (i) the Assignor desires to be released from the
assigned obligations, (ii) the consent of the Borrower and
the Agent is required for such release and (iii) the
Assignor has not otherwise obtained such consents.
<PAGE>
Schedule 10.01
FORM OF SEGMENT OPERATING REPORT
<PAGE>
<TABLE>
S
FORM OF MONTHLY OPERATING REPORT
SEQUA CORPORATION
INCOME STATEMENT
$000's
One Month Ended January 31, 1993
Last Year 1
Actual Budget Variance Actual
<S> <C> <C> <C> <C> <C> <C>
Sales and revenues
Operating income % of sales
Interest expense
Interest Income
Other, net
Pre-tax income (loss)
Tax (provision) benefit
Income (loss) from continuing ops
Income (loss) from discounted ops
Net Income (loss)
Preferred dividend
Net to common
Earnings (loss) per share:
Continuing ops
Discontinued ops
Net Income (loss)
Shares outstanding
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION
INCOME STATEMENT
$000's
One Month Ended January 31, 1993
Last Year 1
Actual Budget Variance Actual
<S> <C> <C> <C> <C> <C> <C>
Aerospace
Gas Turbine
Kollsman
Atlantic Aerospace
Corporate Adjustments
Machinery & Metal Coatings
Rutherford
Standun
MEG
Precoat
Corporate Adjustments
Specialty Chemicals
Warwick
Sequa Chemicals
Corporate Adjustments
Services & Products
ARC Services
Casco Products
Northern Can Systems
Centor
*Sunrise
Corporate Adjustments
Total sales and revenues
<FN>
* All sales are intercompany
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION
INCOME STATEMENT
$000's
One Month Ended January 31, 1993
Last Year 1
Actual Budget Variance Actual
<S> <C> <C> <C> <C> <C> <C>
Aerospace
Gas Turbine
Kollsman
Atlantic Aerospace
Corporate Adjustments
Machinery & Metal Coatings
Rutherford
Standun
MEG
Precoat
Corporate Adjustments
Specialty Chemicals
Warwick
Sequa Chemicals
Corporate Adjustments
Services & Products
ARC Services
Casco Products
Northern Can Systems
Centor
Sunrise
Corporate Adjustments
Corporate
Plan revenue
Total operating income
</TABLE>
<PAGE>
<TABLE>
S
Sequa Corporation SCHEDULE A
Weekly Projected Cash Flows
Company _____________________
(Dollars in Thousands)
Actual Cash Receipts (Disbursements)
for the
Week Forecast for the Week Ending
Ended
<S> <C> <C> <C>
RECEIPTS:
Cash Received From Customers:
Progress Payments
Other Collections
Other Receipts (Describe):
Total Cash Receipts
DISBURSEMENTS:
Cash Paid to Suppliers
Payroll & Payroll Taxes Paid
Capital Expenditures
Interest Paid
Income Taxes Paid
Principal Payments of Debt
Other Disbursements (Describe):
Total Cash Disbursements
Net Inc(Dec) in Cash &
Sequa I/C
</TABLE>
<PAGE>
<TABLE>
S
Sequa Corporation SCHEDULE B
Monthly Statement of Cash Flows
Company _____________________
(Dollars in Thousands)
Cash Receipts (Disbursements)
E
Monthly Cash Flow
<S> <C> <C>
Operating Income
Adjustments to income:
Depreciation & Amortization
Provision for Bad Debts & Other
Changes in Operating Assets & Liab:
Receivables
Inventory
Other Current Assets
Payables & Accrued Expenses
Other Deferred Liabilities
Capital Expenditures, Net
Other Investment Activities
Net Cash From Oper & Invest
Other Income (Expense)
Other (Inc) Exp Not Requiring Cash
Net Borrowings
Interest Paid
Income Taxes Paid
Other
Net Inc(Dec) in Cash & Sequa I/C
</TABLE>
<PAGE>
EXHIBIT A-1
SEQUA CORPORATION
BASE RATE NOTE
[__________ ___, 199__]
FOR VALUE RECEIVED, SEQUA CORPORATION (the "Borrower")
hereby promises to pay to the order of ________________________
(the "Bank") the principal amount of Dollars
($ ), or, if less, the principal amount of the Domestic
Rate Loans of the Bank outstanding, on the dates and in the
amounts specified in Section 1.05 of the Amended and Restated
Credit Agreement referred to below, and to pay interest on such
principal amount on the dates and at the rates specified in
Section 1.04 of such Amended and Restated Credit Agreement. All
payments due the Bank hereunder shall be made to the Bank at the
place, in the type of money and funds and in the manner specified
in Section 1.11 of such Amended and Restated Credit Agreement.
Each holder hereof is authorized to endorse on the grid
attached hereto, or on a continuation thereof, each Domestic Rate
Loan of the Bank and each payment, prepayment or conversion with
respect thereto.
Presentment, demand, protest, notice of dishonor and
notice of intent to accelerate are hereby waived by the
undersigned.
This Domestic Note evidences Loans made under, and is
entitled to the benefits of, the Amended and Restated Credit
Agreement, dated as of December 14, 1993 among the Borrower, the
banks listed on the signature pages thereof, Bank of America
NT&SA, Chase Manhattan Bank, N.A. and The Nippon Credit Bank,
Ltd., as Co-Agents, The Bank of New York, The Bank of Nova
Scotia, and Chemical Bank, as Managing Agents, and The Bank of
New York, as Administrative Agent, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
Reference is made to such Amended and Restated Credit Agreement,
as so amended, supplemented, restated or otherwise modified, for
provisions relating to the prepayment and the acceleration of the
maturity hereof. This Domestic Note is also entitled to the
benefits of the Guaranty Agreement.
This Domestic Note shall be construed in accordance
with and governed by the substantive law of the State of New
York.
SEQUA CORPORATION
By
Name:
Title:
<PAGE>
GRID
BASE RATE NOTE
_________________________________________________________________
Amount of
Amount of Principal Paid, Unpaid Principal
Domestic Rate Prepaid or Amount of Notation
Date Loan Converted Domestic Note Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<PAGE>
EXHIBIT A-2
SEQUA CORPORATION
EURODOLLAR NOTE
[__________ ___, 199__]
FOR VALUE RECEIVED, SEQUA CORPORATION (the "Borrower")
hereby promises to pay to the order of (the
"Bank") the principal amount of Dollars ($
), or, if less, the principal amount of the Eurodollar Rate
Loans of the Bank outstanding, on the dates and in the amounts
specified in Section 1.05 of the Amended and Restated Credit
Agreement referred to below, and to pay interest on such
principal amount on the dates and at the rates specified in
Section 1.04 of such Amended and Restated Credit Agreement. All
payments due the Bank hereunder shall be made to the Bank at the
place, in the type of money and funds and in the manner specified
in Section 1.11 of such Amended and Restated Credit Agreement.
Each holder hereof is authorized to endorse on the grid
attached hereto, or on a continuation thereof, each Eurodollar
Rate Loan of the Bank and each payment, prepayment or conversion
with respect thereto.
Presentment, demand, protest, notice of dishonor and
notice of intent to accelerate are hereby waived by the
undersigned.
This Eurodollar Note evidences Loans made under, and is
entitled to the benefits of, the Amended and Restated Credit
Agreement, dated as of December 14, 1993 among the Borrower, the
banks listed on the signature pages thereof, Bank of America
NT&SA, Chase Manhattan Bank, N.A. and The Nippon Credit Bank,
Ltd., as Co-Agents, The Bank of New York, The Bank of Nova
Scotia, and Chemical Bank, as Managing Agents, and The Bank of
New York, as Administrative Agent, as the same may be amended,
supplemented, restated or otherwise modified from time to time.
Reference is made to such Amended and Restated Credit Agreement,
as so amended, supplemented, restated or otherwise modified, for
provisions relating to the prepayment and the acceleration of the
maturity hereof. This Eurodollar Note is also entitled to the
benefits of the Guaranty Agreements.
This Eurodollar Note shall be construed in accordance
with and governed by the substantive law of the State of New
York.
SEQUA CORPORATION
By
Name:
Title:
<PAGE>
GRID
EURODOLLAR NOTE
_________________________________________________________________
Amount of
Amount of Principal Paid, Unpaid Principal
Eurodollar Prepaid or Amount of Notation
Date Rate Loan Converted Eurodollar Note Made By
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<PAGE>
EXHIBIT A-3
SEQUA CORPORATION
SWING LOAN NOTE
________ __, 199_
FOR VALUE RECEIVED, SEQUA CORPORATION (the "Borrower")
hereby promises to pay to the order of ________________________
(the "Bank") the principal amount of the Swing Loans of the Bank
outstanding, on the dates and in the amounts specified in Section
1.05 of the Amended and Restated Credit Agreement referred to
below, and to pay interest on such principal amount on the dates
and at the rates specified in Section 1.04 of such Amended and
Restated Credit Agreement. All payments due the Bank hereunder
shall be made to the Bank at the place, in the type of money and
funds and in the manner specified in Section 1.11 of such Amended
and Restated Credit Agreement.
Each holder hereof is authorized to endorse on the grid
attached hereto, or on a continuation thereof, each Swing Loan of
the Bank and each payment, prepayment or conversion with respect
thereto.
Presentment, demand, protest, notice of dishonor and
notice of intent to accelerate are hereby waived by the
undersigned.
This Swing Loan Note evidences Swing Loans made under,
and is entitled to the benefits of, the Amended and Restated
Credit Agreement, dated as of December 14, 1993, among the
Borrower, the banks listed on the signature pages thereof, Bank
of America NT&SA, Chase Manhattan Bank, N.A. and The Nippon
Credit Bank, Ltd., as Co-Agents, The Bank of New York, The Bank
of Nova Scotia, and Chemical Bank, as Managing Agents, and The
Bank of New York, as Administrative Agent, as the same may be
amended, supplemented, restated or otherwise modified from time
to time. Reference is made to such Amended and Restated Credit
Agreement, as so amended, supplemented, restated or otherwise
modified, for provisions relating to the prepayment and the
acceleration of the maturity hereof. This Swing Loan Note is
also entitled to the benefits of the Guaranty Agreement.
This Swing Loan Note shall be construed in accordance
with and governed by the substantive law of the State of New
York.
SEQUA CORPORATION
By
Name:
Title:
<PAGE>
GRID
SWING LOAN NOTE
Amount of
Principal Paid, Unpaid Principal
Amount of Prepaid or Amount of Notation
Date Swing Loan Converted Swing Loan Note Made By
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EXHIBIT 10.8
ATLANTIC RESEARCH CORPORATION - CORPORATE STAFF
1993 INCENTIVE BONUS PROGRAM
The 1993 Incentive Bonus goals for the ARC Corporate Staff have
been prepared in accordance with the Bonus Program document
published by ARC Corporate on December 19, 1990, and revised in
1993, incorporating the changes stipulated by Sequa, and these
other relevant changes. The bonus formula for 1993 has been
changed to correspond with the formula used by Sequa.
PARTICIPATION
The number of participants in the Plan for 1993 is 9; up one
from 8 in 1992. Participation in the plans is not
automatic, regardless of organizational level, and must be
approved by the Group President.
SHORT-TERM INCENTIVE AWARDS
Fc. Fg AND Fd FACTORS
The financial curves for the Fc factor are included in the
Performance Curve section of this Plan. Two curves have
been developed, based on the 1993 Profit Plan as approved by
Sequa. The curve which includes Kollsman will be used for
scoring the financial performance of A. Savoca and
A. Principe only. The ARC curve which excludes Kollsman
will be used for all others.
Fcf AND Fr FACTORS
A "Sequa Cash Flow" factor of 10 points has been included in
the bonus formula for 1993. All Corporate Plan participants
on the A-curve have a factor for "Return on Net Assets"
valued at 40 points. All Corporate C-curve participants
have RONA set at 30 points.
Fd2 FACTOR
The Fd2 Factor represents the 10 point discretionary factor
included at the request of Sequa, which will determine the
scoring. All Corporate employees on the A-Curve have the
Fd2 factor included in their formulas. Fd2 is not included
for employees on the C-curve.
<PAGE>
Fw FACTOR
The Fw Factor represents the participants' specific work
goals. The ARC President and C.E.O. and his direct reports
will have 100% of their performance determined by financial
goals and the Sequa discretionary factor. Corporate employees
included in the Plan below those levels will have an Fw factor
valued at 20 points.
BONUS FORMULA
The bonus formula has been revised to more closely correspond
to Sequa's method of scoring. The participant's base salary
on January 1 of the bonus year multiplied by the maximum bonus
percentage for the position equals the maximum potential
allowed under the plan. At year-end, the points are totalled
to determine the score, which is then divided by 100. No
bonus is paid if the result is lower than .25. Results up to
and including .50 are multiplied by four-thirds of the maximum
bonus potential. For results of .50 to 1.00, the employee is
awarded two-thirds of the maximum for achieving par (50
points.) The additional results over .50 are also multiplied
by two-thirds of the maximum bonus potential and the total of
the two determines the dollars to be distributed. The formula
follows:
SCORE FORMULA
0-24.99 points: No bonus;
25-50 points: Bonus =Score/100*(Maximum bonus
potential*4/3);
> 50 points: Bonus=(((Score/100)-.5)*(Maximum bonus
potential*2/3)+ (Maximum bonus
potential*2/3)
If an employee undergoes a significant change in
responsibilities during the plan year, salary, fomula and
maximum bonus potential may be pro-rated to appropriately
reward the employee for performance during the entire plan
year.
No bonus payments will be made under the incentive or other bonus
plans, unless ARC achieves a minimum profit (EBIT), 85% of par,
established by the President and C.E.O. and Sequa at the beginning
of the Plan year. A possible exception is in the areas of Special
Recognition Awards which are paid throughout the year.
Special Recognition Awards
A budget of $1,550 has been established for 1993 Special
Recognition Awards. Awards. In accordance with the
guidelines outlined in the December 19, 1990 document, the
fund was determined by assuming that 5% of the employees who
were on the Corporate payroll as of January I would be
eligible for the award and multiplying that number by $1,000
as the predicted award amount.
<PAGE>
ALL EMPLOYEE BONUS
The All Employee Bonus is distributed to recognize and
reward the collective efforts of Corporate employees in
achieving organizational profitability goals. The payment
of an all employee bonus, if any, will be made in accordance
with the Plan guidelines.
DISCRETIONARY YEAR-END AWARDS
Discretionary Year-End awards will continue to be used to
recognize those individuals who have contributed
significantly to the organization and who are not normally
Plan participants, in accordance with the Incentive/Bonus
Program document.
<PAGE>
ATLANTIC RESEARCH CORPORATION
CORPORATE OFFICE
1991 INCENTIVE/BONUS PROGRAM
(REVISED 1993)
The ARC Corporate Office Bonus Plan consists of the following
elements:
1. Primary - Short-Term Incentive Awards (A, B, C
Performance Plans)
2. Optional - All Employee Bonus
- Special Recognition Awards
- Discretionary Year-End Awards
A. SHORT-TERM INCENTIVE AWARDS
The short-term incentive program is designed to reward key
personnel who achieve pre-established annual goals.
1. DETERMINATION OF FACTORS AND TARGETS
Awards are based on achievement of goals using the following
factors:
Fc = ARC Corporate Financial Performance
Fg = Group Financial Performance
Fd = Division Financial Performance
Fi = Individual Profit (EBIT) Responsibility Performance
Fr = Return on Net Assets
Fcf = Sequa Cash Flow
Fo = Other Financial Performance
Fd2 = Sequa Discretionary
Fw = Work Goals
ARC CORPORATE FINANCIAL PERFORMANCE FACTOR (Fc)
Established by agreement between the ARC President and the
Sequa President. It represents Sequa's expectation of
profit (EBIT) from ARC.
GROUP FINANCIAL PERFORMANCE FACTOR (Fg)
Established by agreement between the Group President and the
ARC President.
<PAGE>
DIVISION FINANCIAL PERFORMANCE FACTOR (Fd)
Established by agreement of the Group President and the
Division General Managers.
INDIVIDUAL PROFIT (EBIT) RESPONSIBILITY PERFORMANCE FACTOR (Fi)
Established by agreement of the President, and the
individuals with profit responsibility.
SEQUA CASH FLOW FACTOR (Fcf)
The Fcf Factor will be included in all positions.
Determinations of par and maximum values will be determined
each year by agreement of Sequa, the ARC President and
C.E.O. and the Group President.
RETURN ON NET ASSETS FACTOR (Fr)
Return on Net Assets are determined by the ARC President and
CEO and the Group Presidents as appropriate.
OTHER FACTOR (Fo)
Other factor, normally financial, to be defined by the ARC
President and CEO.
WORK GOALS FACTOR (Fw)
Established by agreement of the individual and his/her
supervisor, with approval of the President.
2. PARTICIPATION AND AWARD LEVELS
(a) A-PLAN
MAXIMUM BONUS AWARD LEVELS RANGE FROM 50% TO 75% OF BASE
PAY.
Participation in the A-Plan is restricted to senior
management.
A-Plan participants include:
President and C.E.O.
Corporate Vice Presidents and above*
Other Select Individuals Approved by the President and C.E.0
<PAGE>
All participants recommended for inclusion in the A-Plan
must be approved by the President & C.E.O.
*Not all Corporate Vice Presidents are automatically
included in the A-Plan. Those Vice Presidents who are not
included in the A-Plan, will be included in the B-Plan.
(b) B-PLAN
MAXIMUM BONUS AWARD LEVELS RANGE FROM 30% TO 40% OF BASE
PAY.
Eligibility for the B-Plan is based upon the following:
Director Level** or above.
Other individuals who can contribute significantly to
the operation can be recommended for approval. Each
recommendation for inclusion in the B-Plan must be
reviewed and approved each year.
**Inclusion of Directors in the B-Plan is not automatic.
All participants recommended for inclusion in the B-Plan
must be recommended by the Group President and approved by
the President and C. E. 0.
(c) C-PlAN
MAXIMUM BONUS AWARD LEVELS RANGE UP TO 20% OF BASE PAY.
The C-Plan provides incentive opportunities to upper middle
management and senior technical employees.
Participants may include:
Director level employees and other individuals
identified as key contributors whose performance may
not have the same impact on the organization's success
as B-Plan participants.
Inclusion in the C-curve is not automatic. All participants
recommended for inclusion in the C-Plan must be approved by
the President and C.E.O.
3. ELIGIBILITY
An individual may be eligible for participation in the
short-term incentive plan if he/she meets the criteria for
participation as shown in one of the above plans and has
worked for the Company for six months and one day by year-
end. Bonus payment for employees who work for the Company
for 6 to 12 months will be paid on a prorated basis for the
number of months worked. In addition, the employee must
have regular employee status at year-end and on the day of
distribution of the bonuses. Exceptions to the above must
be granted by the ARC President and C.E.O.
<PAGE>
4. BONUS FORMULA
The bonus formula has been revised to more closely
correspond to Sequa's method of scoring. The participant's
base salary on January I of the bonus year multiplied by the
maximum bonus percentage for the position equals the maximum
potential allowed under the plan. At year-end, the points
are totalled to determine the score, which is then divided
by 100. No bonus is paid if the result is lower than .25.
Results up to and including .50 are multiplied by four-
thirds of the maximum bonus potential. For results of .50
to 1.00, the employee is awarded two-thirds of the maximum
for achieving par (50 points.) The additional results over
.50 are also multiplied by two-thirds of the maximum bonus
potential and the total of the two determines the dollars to
be distributed. The formula follows:
SCORE FORMULA
0-24.99 points: No bonus;
25-50 points: Bonus =Score/100*(Maximum bonus
potential*4/3);
> 50 points: Bonus =(((Score/100)-.5)*(Maximum bonus
potential-d*2/3)+ (Maximum bonus
potential*2/3)
If an employee undergoes a significant change in
responsibilities during the plan year, salary, formula and
maximum bonus potential may be pro-rated to appropriately
reward the employee for performance during the entire plan
year.
No bonus payments will be made under the incentive or other bonus
plans, unless ARC achieves a minimum profit (EBIT). The minimum,
normally 85% of par, will be established by the President and
C.E.O. and Sequa at the beginning of the Plan year, and
communicated to the participants. A possible exception is in the
area of Special Recognition Awards which are paid throughout the
year.
B. ALL-EMPLOYEE BONUS
The collective efforts of all ARC employees to uphold the
highest standards of quality, productivity, and customer
service are necessary to ensure the success of the organiza-
tion. The All-Employee Bonus was established to recognize
and reward those efforts.
If the Corporation (ARC) meets pre-established profit
objectives, an all-employee bonus may be paid.
<PAGE>
The amount of bonus pool to be distributed will be
determined by the President and C.E.O. The actual individual
distribution will be determined using the total pool dollars
factored by salary, length of service and total number of
eligible employees.
If an all-employee bonus is paid, all eligible employees
will receive a bonus. Awards for Corporate employees
normally are based upon total Corporate performance. How-
ever, the amount of bonus award will be affected by
Division/Group performance, where applicable.
As with the short-term incentive plan, to be eligible to
receive payment, an employee must have worked six months and
one day; must have been on the payroll on December 31 of the
plan year; and must have been on the payroll on the day of
distribution, unless an exception is made by ARC's President
and C.E.O. Bonus payment for employees who work for the
company for 6 to 12 months will be paid on a prorated basis
for the number of months worked.
C. SPECIAL RECOGNITION AWARDS
The objectives of the Special Recognition Program are to
stimulate innovative ideas which are needed to remain
competitive; to ensure that all employees understand that
their ideas are important, needed and valued; and to
identify, reward and retain those employees whose
contributions are critical to meeting the Company's goals.
Monies available for distribution for Special Recognition
Awards are achieved using the following guidelines: 5% of
employees on payroll as of January 1 x $1,000.
The Special Recognition Awards provide immediate recognition
for outstanding efforts of achievement, beyond normal job
expectations, resulting in a significant, positive impact on
the organization. Awards are generally made based upon one
of the following categories:
Technical Achievement
New Business
Program/Business Achievement
Cost Savings Recommendation of Considerable Impact
to the Organization
Awards are distributed at the time of the achievement.
This award, while available to all employees, is not
normally given to a participant in the A, B. or C Plans.
The awards range from a letter of appreciation to $15K.
Total awards distributed during the year will normally not
exceed the maximum amount
<PAGE>
available for distribution as described above. Individuals
are nominated by their management and approved in accordance
with the signature authority matrix.
D. DISCRETIONARY YEAR-END AWARDS
With appropriate justification, discretionary awards can be
made at year-end to those individuals who have contributed
significantly to the organization and who are not par-
ticipants in the Short-Term Incentive Awards (A, B, C
Performance Plans). These awards are made in lieu of an
all-employee bonus. Individuals are nominated by their
management and approved in accordance with the signature
authority matrix. The maximum bonus level is 20% of base
salary, not to exceed $15K.
<PAGE>
<TABLE>
1993 INCENTIVE BONUS
RECOMMENDATIONS FOR THE ALLOCATION OF THE
MAXIMUM POINTS EARNED
<CAPTION>
Operating Income
Prod. Cash Sequa
ARC Group Division Line RONA Flow Discr.
<S> <C> <C> <C> <C> <C> <C> <C>
ARC Corporate * 40 40 10 10
Group President 15 25 40 10 10
Aerospace Group Staff 10 30 30 10
Aerospace Divisions
GENERAL MANAGERS 10 15 15 30 10
All Other 10 10 20 30 10
PSG Group Staff 10 40 40 10
PSG Divisions
GENERAL MANAGERS 10 25 30 25 10
Vice Presidents 10 15 20 20 25 10
Marketing 10 20 35 25 10
ARCanda (Pres; VP Bus) 10 10 10 35 25 10
Greece President 10 15 40 25 10
<FN>
*Distribution of ARC Corporate, Group President & PSG per J.J. Quicke's memo, June 7,
1993. Aerospace Group Staff and division have maximum of 20 points assigned to work
goals.
Max Bonus Dollars are based on max ebit performance curves. Funds available for
bonuses for the Aerospace Group and the Professional Services Group will be 15% of
all ebit earned over the minimum of 85% of Par.
Monies allocated but not earned for curve incentives can be reallocated for
Special Recognition, Discretionary and/or All-Employee bonuses. Monies can be
interchanged among those categories as well.
Ebit Calculation have been computed excluding ARC corporate participants. The
business units for ARC are Aerospace and PSG. BAICO performance is shown below
operating profit calculations for Aerospace. Kollsman is a separate business unit
and its performance affects the incentives of A. Savoca and A. Principe only.
</TABLE>
<PAGE>
<TABLE>
SEQUA CORPORATION
MANAGEMENT INCENTIVE BONUS PLAN
<CAPTION>
DIVISION: AEROSPACE GROUP PERIOD COVERED: 1994
POSITION: SENIOR V.P. APPROVED BY:
J.J. QUICKE
NAME: T. SAVOCA
Potential Bonus - Par Performance: 50%
Maximum Bonus - Outstanding Performance: 75%
I. FINANCIAL AWARD
Weighting
<S> <C> <C> <C> <C> <C> <C> <C>
Goals Minimum Par Out Minimum Par Out Actual
Results
1. Operating
Profit 10 20 40
2. Return on 10 20 40
Net Assets
TOTAL FINANCIAL 10 40 80
II. PERFORMANCE AWARD
Minimum Par Out
5 10 20
TOTAL PERFORMANCE 5 10 20
GRAND TOTAL 25 50 100
</TABLE>
<PAGE>
<TABLE>
ARC Page of
CORPORATE OFFICE - 1993
INDIVIDUAL INCENTIVE BONUS PLAN
<CAPTION>
NAME: Bonus List:
TITLE: Maximum Bonus % of Base Salary
DIVISION: Bonus Formual
<S> <C> <C>
1. FINANCIAL GOALS ( %)
PERFORMANCE
% RESULTS
1. Corporate (Fc)
2. Group (Fg)
3. Division (Fd)
4. Individual Responsibility (Fi)
5. Sequa Loan Balance (Flb)
6. RONA (Fr)
7. Other (Fo):
(Description)
TOTAL FINANCIAL:
II. SPECIFIC OBJECTIVES ( %) (Fs)
DESCRIPTION
% ACTUAL
RESULTS
TOTAL WORK GOALS:
GRAND TOTAL 100
APPROVALS:
Division Group Corporate
Date Date Date
</TABLE>
