UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to .
Commission File Number 33-11479
SYNTHETIC INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 58-1049400
- -------------------------------- ---------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
309 LaFayette Road, Chickamauga, Georgia 30707
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(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (706) 375-3121
---------------------------
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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____
The number of shares of the Registrant's Common Stock outstanding as of
February 6, 1998 was 8,668,750.
<PAGE>
Part I-FINANCIAL INFORMATION
Item 1. Financial Information SYNTHETIC INDUSTRIES, INC.
......... AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except share and per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1997 1997
---- -----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................................$ 251 $ 338
Accounts receivable, net of allowance for
doubtful accounts of $2,891 and $2,707....................................... 42,858 60,031
Inventory (Note 3)............................................................... 58,267 54,139
Other current assets............................................................. 18,456 17,200
------- -------
TOTAL CURRENT ASSETS......................................................... 119,832 131,708
PROPERTY, PLANT AND EQUIPMENT, net (Note 4)........................................ 192,259 182,102
OTHER ASSETS....................................................................... 82,404 82,781
-------- -------
$ 394,495 $396,591
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................ $ 22,036 $ 27,030
Accrued expenses and other current liabilities................................... 7,788 11,613
Income taxes payable ............................................................ 372 52
Interest payable................................................................. 5,959 2,467
Current maturities of long-term debt (Note 5).................................... 717 718
--------- ---------
TOTAL CURRENT LIABILITIES.................................................... 36,872 41,880
LONG-TERM DEBT (Note 5)............................................................ 221,358 220,464
DEFERRED INCOME TAXES ............................................................. 28,930 28,430
STOCKHOLDERS' EQUITY:
Common stock (par value $1.00 per share, authorized 25,000,000,
issued and outstanding 8,668,750 and 8,656,250, respectively)............... 8,669 8,656
Additional paid-in capital ...................................................... 94,397 94,325
Cumulative translation adjustments............................................... 195 107
Retained earnings................................................................ 4,074 2,729
-------- -------
TOTAL STOCKHOLDERS' EQUITY................................................... 107,335 105,817
------- ---------
$394,495 $396,591
</TABLE>
See notes to consolidated financial statements
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For Three Months Ended December 31,
1997 1996
----- -----
<S> <C> <C>
Net sales.................................................. $76,581 $70,857
------- -------
Costs and expenses:
Cost of sales............................................ 53,197 50,043
Selling expenses......................................... 8,327 6,938
General and administrative expenses...................... 7,188 5,881
Amortization of excess of purchase price over net
assets acquired and other intangibles................. 648 648
---------- ----------
69,360 63,510
--------- --------
Operating income..................................... 7,221 7,347
-------- ---------
Other expenses:
Interest expense, net ................................... 4,790 5,410
Amortization of deferred financing costs................. 151 176
---------- ----------
4,941 5,586
--------- ---------
Income before income tax provision......................... 2,280 1,761
Income tax provision (Note 6).............................. 935 857
--------- ---------
NET INCOME................................................. $ 1,345 $ 904
========= ===========
Income per share
Basic................................................. $ 0.16 $ 0.12
Diluted............................................... $ 0.15 $ 0.12
Weighted average shares outstanding
Basic................................................. 8,660,417 7,697,917
Diluted............................................... 9,117,809 7,870,690
</TABLE>
See notes to consolidated financial statements
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 1,345 $ 904
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization....................................... 5,021 4,480
Provision for bad debts............................................. 212 49
Deferred income taxes .............................................. 500 27
Change in assets and liabilities:
Accounts receivable................................................. 17,040 10,794
Inventory........................................................... (4,128) (9,942)
Other current assets................................................ (1,256) 461
Accounts payable.................................................... (4,994) 8,504
Accrued expenses and other current liabilities...................... (3,825) (965)
Income taxes payable................................................ 320 59
Interest payable.................................................... 3,492 (4,549)
------ -------
Net cash provided by operating activities.......................... 13,727 9,822
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment............................ (14,379) (8,824)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under term loan............................................ (25,000) -
Borrowings (repayments) under long term debt.......................... 33,485 (3,993)
Redemption of 123/4% Senior subordinated debentures.................... (7,403) -
Repayments of capital lease obligation and
other long term debt................................................ (189) (160)
Deferred financing costs.............................................. (422) -
Proceeds from underwritten public offering............................ 33,860
Proceeds from exercise of stock options............................... 85 -
--------- -----------
Net cash provided by financing activities........................ 556 29,707
Effect of exchange rate changes on cash........................... 9 -
--------- ----------
NET (DECREASE) INCREASE IN CASH......................................... (87) 30,705
CASH AT BEGINNING OF PERIOD............................................. 338 101
-------- -------
CASH AT END OF PERIOD................................................... $ 251 $ 30,806
========= ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid during the year for:
Interest.............................................................. $ 1,298 $ 9,959
Income taxes.......................................................... 115 771
</TABLE>
See notes to consolidated financial statements
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of dollars, except share information)
(Information as of December 31, 1997 and for the
periods ending December 31, 1997 and 1996 is unaudited)
1. ORGANIZATION
Synthetic Industries, Inc., a Delaware corporation (the "Company"), was a
wholly owned subsidiary of Synthetic Industries L.P. (the "Partnership")
until November 1, 1996. On that day, the Company completed the underwritten
public offering (the "Offering") of 2,875,000 shares of its common stock
("Common Stock"). Immediately following the Offering, the Partnership owned
5,781,250 shares of Common Stock, or approximately 67% of the issued and
outstanding shares of Common Stock.
The Company manufactures and markets a wide range of primarily
polypropylene-based materials designed for support, strength and
stabilization applications. The Company's products replace commonly used
materials in diverse applications including: floor covering, geotextiles,
erosion control, concrete reinforcement and furniture construction fabrics.
The Company manufactures and sells more than two thousand products in over
65 end-use markets predominately in North America, Europe and the Far East.
2. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of December 31, 1997 and for the
periods ended December 31, 1997 and 1996 included herein have been
prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the financial position at December 31, 1997 and 1996, and
the results of operations for the three months then ended have been made on
a consistent basis. Certain information and footnote disclosures included
in consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures herein are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial
statements of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1997. Operating results for the three months ended
December 31, 1997 may not necessarily be indicative of the results that may
be expected for the full year.
3. INVENTORY
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
<S> <C> <C>
Finished goods........................ $ 38,709 $ 33,572
Work in process....................... 6,820 7,427
Raw materials......................... 12,738 13,140
------- ---------
$ 58,267 $ 54,139
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
<S> <C> <C>
Land.................................... $ 4,585 $ 4,585
Buildings and improvements.............. 35,398 35,398
Machinery and equipment and
leasehold improvements................ 246,656 232,277
------- --------
286,639 272,260
Accumulated depreciation................ 94,380 90,158
-------- ---------
$192,259 $ 182,102
</TABLE>
5. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
<S> <C> <C>
Asset Securitization............................. $20,000 $ -
Secured revolving credit facility:
Secured revolving credit portion................ 26,905 13,420
Term loan portion............................... - 25,000
9 1/4% senior subordinated
notes, due 2007................................. 170,000 170,000
123/4% senior subordinated
debentures, due 2002............................ - 7,403
Capital lease obligation......................... 3,922 4,083
Other............................................ 1,248 1,276
------ -------
222,075 221,182
Less current portion............................. 717 718
---------- -----------
Total long term portion........................ $221,358 $ 220,464
</TABLE>
On December 1, 1997 the Company redeemed the remaining $7,403 aggregate
principal amount of its outstanding 12 3/4% Senior Subordinated Debentures
due 2002 at a redemption price of 106.375% of the principal amount thereof,
together with accrued interest as of the redemption date.
On December 18, 1997, the Company and its lenders, with BankBoston as
agent, entered into a new five year credit facility (the "Credit
Facility"). Proceeds from this agreement were used to repay the Fourth
Amended and Restated Revolving Credit Agreement dated October 20, 1995 .
The Credit Facility consists of up to a $40 million asset based
securitization program, with amounts borrowed through a newly formed
subsidiary, Synthetic Funding Corporation (the "Securitization"), and a $60
million senior secured revolver facility (the "Revolver"). In conjunction
with the Securitization, the Company entered into a five year agreement
with its subsidiary providing for the sale of substantially all of its
receivables on a revolving basis. Securitization and Revolver borrowings
are collateralized by the Company's accounts receivable and substantially
all of the assets of the Company, excluding real property, respectively. In
connection with the Credit Facility, costs of $422 were capitalized.
Interest on the Securitization is based on the applicable commercial paper
rate in effect plus a spread. The Revolver permits borrowings which bear
interest, at the Company's option, (i) for domestic borrowings based on the
lender's base rate or (ii) for Eurodollar borrowings based on a spread over
the Interbank Eurodollar rate at the time of conversion. Spreads for the
Securitization and the Eurodollar borrowings are determined by the
operational performance of the Company. At December 31, 1997, the balances
under the Securitization and Revolver were $20,000 and $26,905 at interest
rates ranging from 6.33% to 8.5%, respectively.
The Revolver provides for borrowings under letters of credit of up to
$10,000, which borrowings reduce amounts available under the Revolver. At
December 31, 1997, no letters of credit were outstanding under the Credit
Facility.
The Credit Facility contains covenants related to the maintenance of
certain operating ratios and limitations as to the amount of capital
expenditures. The Company's ability to pay dividends on its common stock is
restricted by both the Credit Facility and the 9 1/4% Senior Subordinated
Notes due 2007. At December 31, 1997, availability under the Credit
Facility was approximately $33,095.
6. INCOME TAXES
The provision for income taxes in the consolidated statements of operations
reflects an effective tax rate of 41% for the three months ended December
31, 1997.
This provision reflects the non-deductibility of certain expenses for
income tax purposes such as amortization of goodwill. Deferred income taxes
result from temporary differences between tax bases of assets and
liabilities and their reported amounts in the consolidated statements of
operations.
7. LITIGATION
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Most of such litigation involves claims for
personal injury, property damage, breach of contract and claims involving
employee relations and certain administrative proceedings. The Company
believes such claims are adequately covered by insurance or do not involve
a risk of material loss to the Company.
In connection with the proposed dissolution of the Partnership, pursuant to
an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), one
director and certain of the Company's officers who are affiliated with the
General Partner have been named in two putative class action lawsuits filed
by certain limited partners of the Partnership. In the first action, to
which the Company is not a party, filed on February 11, 1997 in the
Delaware Court of Chancery and thereafter amended, the plaintiffs have
alleged, among other things, breach of the defendants' fiduciary duty to
the limited partners, that the Plan is unlawfully coercive, that the
General Partner has allegedly failed to satisfy certain conditions
precedent to the right of limited partners to amend the partnership
agreement and that certain amendments necessary to implement the Plan
violate the terms of the partnership agreement. The plaintiffs seek, among
other equitable and legal remedies, removal of the General Partner,
dissolution of the Partnership, appointment of a liquidating trustee, to
enjoin the implementation of the Plan and compensatory damages in an
undetermined amount. On October 23, 1997, the Court preliminarily enjoined
the implementation of the Plan, although the Plan was subsequently approved
by limited partners on November 7, 1997. On November 7, 1997, the Delaware
Supreme Court accepted the defendants' petition for an expedited appeal of
this injunction, and briefing and oral argument on the appeal was completed
as of January 6, 1998. The defendants have denied any allegation of
wrongdoing and are vigorously contesting the lawsuit.
The second lawsuit was filed in the U.S. District Court of the Northern
District of California on May 1, 1997, and thereafter amended. The
plaintiff has alleged in his amended complaint various federal securities
and proxy violations allegedly arising out of the joint proxy statement and
prospectus which was mailed to limited partners in connection with the
solicitation of proxies for the vote on the Plan and other related
documents. The plaintiff also added the Company as a named defendant,
alleging that all defendants acted in concert with, and as agents of, each
other; however the plaintiff made no specific independent allegations with
respect to the Company. The plaintiff seeks, among other equitable and
legal remedies, to enjoin the implementation of the Plan and unspecified
damages. On November 6, 1997, the Court granted in part the plaintiff's
motion for a temporary restraining order enjoining the implementation of
the Plan. The plaintiff's motion for a preliminary injunction has been
briefed and an oral argument was heard on December 19, 1997. The defendants
have denied any allegation of wrongdoing and are vigorously contesting the
lawsuit.
On December 29, 1997, a purported derivative action was filed in the
Delaware Chancery Court by a limited partner of the Partnership against
certain of the Company's officers and directors with regard to certain
stock options plans adopted by the Company in 1994. Both the Partnership
and the Company have been named as nominal defendants. The plaintiff
alleges that the defendants breached their fiduciary duties by adoption of
the stock option plans. The plaintiff seeks, among other things, a
declaration that the stock options granted under the plans are invalid, the
establishment of a constructive trust over the stock options, unspecified
compensatory damages and reasonable attorneys' fees and expenses. The
defendants deny any allegation of wrongdoing and intend to vigorously
contest the lawsuit.
Based on the Company's review of the allegations made in the above actions
to date, the Company does not believe that the ultimate resolution of these
actions will have a material adverse effect on the Company's results of
operations or financial condition.
The Partnership is a principal stockholder of the Company and certain
members of the Company's management control the General Partner.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the information contained in the
Consolidated Financial Statements, including the notes thereto. The following
discussion includes forward-looking statements that involve certain risks and
uncertainties. See "Forward Looking Statements." Dollars are in thousands,
except per share data.
Liquidity and Capital Resources
To finance its capital expenditures program and fund its operational needs, the
Company has relied upon cash provided by operations, supplemented as necessary
by bank lines of credit and long-term indebtedness. Cash provided by operating
activities was $13,727 and $9,822 for the three months ended December 31, 1997
and 1996, respectively. Cash provided by operating activities for the quarter
ended December 31, 1997 resulted primarily from net income of $1,345 after
deducting non-cash charges of $5,733, a $17,040 decrease in accounts receivable
due to collections partially offset by a $4,994 decrease in accounts payable and
increased inventory quantities totaling $4,128. Cash provided by operating
activities for the three months ended December 31, 1996 resulted primarily from
net income of $904 after deducting non-cash charges of $4,556, a $10,794
decrease in accounts receivable due to collections, a $8,504 increase in
accounts payable balances due to higher inventory quantities, partially offset
by increased inventory quantities of $9,942 and interest payments of $4,549 on
the 12 3/4% Senior Subordinated Debentures due 2002 (the "Debentures").
On December 1, 1997 the Company redeemed the remaining $7,403 aggregate
principal amount of the outstanding Debentures at a redemption price of 106.375%
of the principal amount thereof, together with accrued interest as of the
redemption date.
On December 18, 1997, the Company and its lenders, with BankBoston as agent,
entered into a new five year credit facility (the "Credit Facility"). Proceeds
from this agreement were used to repay the Fourth Amended and Restated Revolving
Credit Agreement dated October 20, 1995. The Credit Facility consists of up to a
$40 million asset based securitization program, with amounts borrowed through a
newly formed wholly owned subsidiary, Synthetic Funding Corporation (the
"Securitization"), and a $60 million senior secured revolver facility (the
"Revolver"). Securitization and Revolver borrowings are collateralized by the
Company's accounts receivable and substantially all of the assets of the
Company, excluding real property and accounts receivable, respectively.
Interest on the Securitization is based on the applicable commercial paper rate
in effect plus a spread. The Revolver permits borrowings which bear interest, at
the Company's option, (i) for domestic borrowings based on the lender's base
rate or (ii) for Eurodollar borrowings based on a spread over the Interbank
Eurodollar rate at the time of conversion. Spreads for the Securitization and
the Eurodollar borrowings are determined by the operational performance of the
Company. At December 31, 1997, the balances under the Securitization and
Revolver were $20,000 and $26,905, respectively, at interest rates ranging from
6.33% to 8.5%.
The Credit Facility contains covenants related to the maintenance of certain
operating ratios and limitations as to the amount of capital expenditures. The
Company's ability to pay dividends on its common stock is restricted by both the
Credit Facility and the 9 1/4% Senior Subordinated Notes due 2007. At December
31, 1997, the availability under the Revolver portion of the Credit Facility was
approximately $33,095 with no letters of credit outstanding.
Capital expenditures planned in fiscal 1998 of approximately $41,000, of which
$14,379 has been spent to date, are primarily to expand capacity of the
Company's manufacturing facilities, subject to prevailing market conditions.
Based on current levels of operations and anticipated growth, the Company's
management expects cash from operations to provide sufficient cash flow to
satisfy the debt service requirements of the Company's long-term debt
obligations, including the Credit Facility and lease agreement, permit
anticipated capital expenditures and fund the Company's working capital
requirements for the next twelve months.
Results of Operations for the First Quarter
Fiscal 1998 compared to Fiscal 1997
The following table sets forth the percentage relationships to net sales of
certain income statement items for the quarters ended December 31, 1997 and
1996.
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Net sales........................... 100.0% 100.0%
Cost of sales....................... 69.5 70.6
---- ----
Gross profit..................... 30.5 29.4
Selling expenses.................... 10.9 9.8
General and administrative
expenses.................... 9.4 8.3
Amortization of intangibles......... 0.8 0.9
--- ---
Operating income.................... 9.4 10.4
Interest expense.................... 6.3 7.6
Amortization of deferred
financing costs............ 0.2 0.3
--- ---
Income before
provision for taxes. 2.9 2.5
Provision for income taxes.......... 1.2 1.2
--- ---
Net income ....................... 1.7% 1.3%
==== ====
</TABLE>
Net sales for the first quarter of fiscal 1998 were $76,581 compared to $70,857
for the same period of fiscal 1997, an increase of $5,724, or 8.1%. Carpet
backing sales for the first quarter of fiscal 1998 were $38,913 compared to
$36,922 for the same period of fiscal 1997, an increase of $1,991, or 5.4%. This
increase was the result of higher unit volume in both primary and secondary
carpet backing offset by lower average selling prices. Construction and civil
engineering product sales for the first quarter of fiscal 1998 were $22,664
compared to $20,852 for the same period of fiscal 1997, an increase of $1,812,
or 8.7%. Technical textiles sales for the first quarter of fiscal 1998 were
$15,004 compared to $13,083 for fiscal 1997, an increase of $1,921, or 14.7%.
Gross profit for the first quarter of fiscal 1998 was $23,384 compared to
$20,814 for the same period of fiscal 1997, an increase of $2,570, or 12.3%. As
a percentage of sales, gross profit increased to 30.5% from 29.4%. This increase
was primarily due to increased sales volume, the growth of higher margin
business and lower average polypropylene costs offset by lower average selling
prices.
Polypropylene is the basic raw material used in the manufacture of substantially
all of the Company's products, accounting for approximately 50% of the Company's
cost of goods sold. The Company believes that the selling prices of its products
have adjusted over time to reflect changes in polypropylene prices. Higher
prices of polypropylene, however, without offsetting selling price increases
could have a significant negative effect on the Company's results of operations
and financial condition. Due to the level of competition, the Company,
historically, has been able to pass through only a portion of the polypropylene
cost increases through higher selling prices of certain product lines. The
Company has not experienced any shortage of supply of polypropylene; however,
continuous increases in demand or major supply disruptions without offsetting
increases in manufacturing capacities could cause future supply shortages.
Selling expenses for the first quarter of fiscal 1998 were $8,327 compared to
$6,938 for the same period of fiscal 1997, an increase of $1,389, or 20.0%. This
increase was primarily due to increased expenditures associated with higher
sales volume and increases in sales and support staff as well as increased
marketing expenses. As a percentage of sales, selling expenses increased from
9.8% to 10.9%.
General and administrative expenses for the first quarter of fiscal 1998 were
$7,188 compared to $5,881 for the same period of fiscal 1997, an increase of
$1,307, or 22.2%. As a percentage of sales, general and administrative expenses
increased from 8.3% to 9.4%. The increase in general and administrative expenses
was primarily due to increased research and market development activities of
$540 and $300 in other expenditures including marketing and computer system
upgrades.
Operating income for the first quarter of fiscal 1998 was $7,221 as compared to
$7,347 for the same period of fiscal 1997, a decrease of $126, or 1.7%. As a
percentage of sales, operating income decreased to 9.4% in fiscal 1998 from
10.4% in fiscal 1997. This was primarily due to the increased investment in
research and market development and other expenditures to support future growth.
Total interest expense for the first quarter of fiscal 1998 was $4,790 compared
to $5,410 for the same period of fiscal 1997, a decrease of $620, or 11.5%, due
to lower average interest rates. The effective income tax rate for the first
quarter of fiscal 1998 was 41%.
Net income for the first quarter of fiscal 1998 was $1,345 compared to net
income of $904 for the same period of fiscal 1997, an increase of $441, or
48.8%. Earnings before interest, taxes, depreciation and amortization
("EBITDA")1 for the first quarter of fiscal 1998 were $12,091 compared to
$11,651 for the same period of fiscal 1997, an increase of $440, or 3.8%. The
increase in net income, as well as EBITDA, was primarily due to factors
discussed earlier.
Basic earnings per share for the first quarter of fiscal 1998 were $0.16
compared to $0.12 for the same period of fiscal 1997 based on weighted average
shares outstanding of 8,660,417 and 7,697,917 for fiscal 1998 and fiscal 1997,
respectively. Diluted earnings per share for the first quarter of fiscal 1998
were $0.15 compared to $0.12 for the same period of fiscal 1997 based on
weighted average shares outstanding of 9,117,809 and 7,870,690 for fiscal 1998
and fiscal 1997, respectively.
Recent Accounting Pronouncement
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which must be adopted for fiscal years beginning after December
15, 1997. Under the new standard, companies will be required to report certain
information about operating segments in consolidated financial statements.
Operating segments will be determined based on the method that management
organizes its businesses for making operating decisions and assessing
performance. SFAS 131 also requires companies to report certain information
about their products and services, the geographic areas in which they operate,
and their major customers. The Company is currently evaluating the effect, if
any, of implementing SFAS 131.
Forward Looking Statements
The discussion of the Company's business and operations in this report includes
several instances of forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Act of 1934, as amended, which are based upon management's good faith
assumptions relating to the financial, market, operating, and other relevant
environments that will exist and affect the Company's business and operations in
the future. No assurance can be made that the assumptions upon which management
based its forward-looking statements will prove to be correct, or that the
Company's business and operations will not be affected in any substantial manner
by other factors not currently foreseeable by management or beyond the Company's
control. All forward-looking statements involve risk and uncertainty, including
those described in this report, and such statements shall be deemed in the
future to be modified in their entirety by the Company's public pronouncements,
including those contained in all future reports and other documents filed by the
Company with the Securities and Exchange Commission.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Most of such litigation involves claims for
personal injury, property damage, breach of contract and claims involving
employee relations and certain administrative proceedings. The Company
believes such claims are adequately covered by insurance or do not involve
a risk of material loss to the Company.
In connection with the proposed dissolution of the Partnership, pursuant to
an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), one
director and certain of the Company's officers who are affiliated with the
General Partner have been named in two putative class action lawsuits filed
by certain limited partners of the Partnership. In the first action, to
which the Company is not a party, filed on February 11, 1997 in the
Delaware Court of Chancery and thereafter amended, the plaintiffs have
alleged, among other things, breach of the defendants' fiduciary duty to
the limited partners, that the Plan is unlawfully coercive, that the
General Partner has allegedly failed to satisfy certain conditions
precedent to the right of limited partners to amend the partnership
agreement and that certain amendments necessary to implement the Plan
violate the terms of the partnership agreement. The plaintiffs seek, among
other equitable and legal remedies, removal of the General Partner,
dissolution of the Partnership, appointment of a liquidating trustee, to
enjoin the implementation of the Plan and compensatory damages in an
undetermined amount. On October 23, 1997, the Court preliminarily enjoined
the implementation of the Plan, although the Plan was subsequently approved
by limited partners on November 7, 1997. On November 7, 1997, the Delaware
Supreme Court accepted the defendants' petition for an expedited appeal of
this injunction, and briefing and oral argument on the appeal was completed
as of January 6, 1998. The defendants have denied any allegation of
wrongdoing and are vigorously contesting the lawsuit.
The second lawsuit was filed in the U.S. District Court of the Northern
District of California on May 1, 1997, and thereafter amended. The
plaintiff has alleged in his amended complaint various federal securities
and proxy violations allegedly arising out of the joint proxy statement and
prospectus which was mailed to limited partners in connection with the
solicitation of proxies for the vote on the Plan and other related
documents. The plaintiff also added the Company as a named defendant,
alleging that all defendants acted in concert with, and as agents of, each
other; however the plaintiff made no specific independent allegations with
respect to the Company. The plaintiff seeks, among other equitable and
legal remedies, to enjoin the implementation of the Plan and unspecified
damages. On November 6, 1997, the Court granted in part the plaintiff's
motion for a temporary restraining order enjoining the implementation of
the Plan. The plaintiff's motion for a preliminary injunction has been
briefed and an oral argument was heard on December 19, 1997. The defendants
have denied any allegation of wrongdoing and are vigorously contesting the
lawsuit.
On December 29, 1997, a purported derivative action was filed in the
Delaware Chancery Court by a limited partner of the Partnership against
certain of the Company's officers and directors with regard to certain
stock options plans adopted by the Company in 1994. Both the Partnership
and the Company have been named as nominal defendants. The plaintiff
alleges that the defendants breached their fidiuciary duties by adoption of
the stock option plans. The plaintiff seeks, among other things, a
declaration that the stock options granted under the plans are invalid, the
establishment of a constructive trust over the stock options, unspecified
compensatory damages and reasonable attorneys' fees and expenses. The
defendants deny any allegation of wrongdoing and intend to vigorously
contest the lawsuit.
Based on the Company's review of the allegations made in the above actions
to date, the Company does not believe that the ultimate resolution of these
actions will have a material adverse effect on the Company's results of
operations or financial condition.
The Partnership is a principal stockholder of the Company and certain
members of the Company's management control the General Partner.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1 10.1 Loan and Security Agreement dated as of December 18, 1997 between
Synthetic Industries, Inc., the financial institutions party thereto from time
to time, as lenders, and BankBoston, N.A., as Agent
1 10.2 Receivables Purchase and Sale Agreement, dated as of December 18,
1997, among Synthetic Industries, Inc. and Synthetic Funding Corporation
1 10.3 Receivables Purchase Agreement, dated as of December 18, 1997, among
Synthetic Funding Corporation, EagleFunding Capital Corporation, BancBoston
Securities Inc. and Synthetic Industries, Inc.
1 10.4 Intercreditor Agreement, dated as of December 18, 1997, among
BankBoston, N.A., Synthetic Funding Corporation, EagleFunding Capital
Corporation, BancBoston Securities Inc. and Synthetic Industries, Inc.
1 27. Financial Data Schedule
- -------------
1 Filed herewith.
(b) Reports of Form 8-K
A current report on Form 8-K was filed on October 27, 1997 in
connection with the Company's filing of a press release dated October
24, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNTHETIC INDUSTRIES, INC.
By: /s/ Leonard Chill
Leonard Chill
President and Chief Executive Officer
Dated: February 6,1998
By: /s/ Joseph Sinicropi
Joseph Sinicropi
Chief Financial Officer and Secretary
Dated: February 6, 1998
- --------
1 The Company believes that EBITDA is helpful in understanding cash flow from
operations that is available for debt service, taxes and capital expenditures.
EBITDA is not a concept in accordance with generally accepted accounting
principles and is not a substitute for operating income, net income or cash
flows from operating activities.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Synthetic Industries, Inc. as of
December 31, 1997, and the related condensed consolidated statement of income
and cash flows for the three months ended December 31, 1997, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000809803
<NAME> Synthetic Industries, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 251
<SECURITIES> 0
<RECEIVABLES> 45,749
<ALLOWANCES> 2,891
<INVENTORY> 58,267
<CURRENT-ASSETS> 119,832
<PP&E> 286,639
<DEPRECIATION> 94,380
<TOTAL-ASSETS> 394,495
<CURRENT-LIABILITIES> 36,872
<BONDS> 170,000
0
0
<COMMON> 8,669
<OTHER-SE> 98,666
<TOTAL-LIABILITY-AND-EQUITY> 394,495
<SALES> 76,581
<TOTAL-REVENUES> 76,581
<CGS> 53,197
<TOTAL-COSTS> 53,197
<OTHER-EXPENSES> 21,104
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,790
<INCOME-PRETAX> 2,280
<INCOME-TAX> 935
<INCOME-CONTINUING> 1,345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,345
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.15
</TABLE>
THIS RECEIVABLES PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of
December 18, 1997, --------- among:
(1) SYNTHETIC INDUSTRIES, INC. ("Synthetic"), a Delaware
corporation, as the originator (the "Originator");
(2) SYNTHETIC FUNDING CORPORATION, a Delaware corporation (the
"Buyer"); and
(3) SYNTHETIC INDUSTRIES, INC., in its capacity as the initial
Collection Agent (as defined below) hereunder (in such
capacity, the "Collection Agent").
WITNESSETH:
WHEREAS, the Originator desires to sell, and the Buyer desires
to purchase, all of the Originator's right, title and interest in the accounts
receivable originated by the Originator on the terms and conditions provided
herein;
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement
are defined above or in this Section 1.01.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined).
"Actual Dilution" means, on any Business Day with respect to
any Receivable or Receivables, the actual reduction in the Outstanding Balance
of such Receivable or Receivables as a result of any of the Dilution Factors.
"Adverse Claim" means a lien, security interest, charge,
encumbrance or other right or claim of any Person.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Asset Report" has the meaning set forth in the Receivables
Purchase Agreement.
<PAGE>
36
"Asset Report Date" means, with respect to any calendar month,
the eighth day of such month, or if such date is not a Business Day, the next
Business Day to occur thereafter.
"Average Maturity"has the meaning set forth in the Receivables
Purchase Agreement.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11
U.S.C. ss.ss. 101 et seq.), as amended from time to time, or any successor
statute.
"Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the per annum rate of interest announced
from time to time by BankBoston, N.A. at its head office in Boston,
Massachusetts as its "base rate", and (ii) 1/2 of one percent per annum above
the Federal Funds Rate.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Originator or any ERISA Affiliate
of the Originator is, or at any time during the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means a day of the year other than a Saturday
or a Sunday on which banks are required to be open in New York City, Atlanta,
Georgia and Boston, Massachusetts.
"Closing Date" means the date on which the Buyer makes the
Initial Purchase of Receivables under this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute.
"Collection Account" has the meaning set forth in the
Receivables Purchase Agreement.
"Collection Account Bank" means the financial institution
maintaining the Collection Account, which initially shall be BankBoston, N.A.
"Collection Agent" means at any time the Person then
authorized pursuant to Article VI to service, administer and collect
Receivables.
"Collection Agent Fee" has the meaning set forth in the
Receivables Purchase Agreement.
"Collection Agent Termination Event" means the occurrence of
any of the following:
(i) any Event of Termination;
<PAGE>
(ii) a material failure on the part of the Collection Agent to
observe or perform any of its duties or obligations as Collection Agent under
this Agreement or as "Collection Agent" under the Receivables Purchase Agreement
and such failure shall continue uncured or unwaived for a period of 15 days
after written notice thereof to the Collection Agent; or
(iii) in the event that the Collection Agent is Synthetic or
any of its Affiliates, Synthetic shall fail to comply at any time with any of
the provisions of Section 12.1 of the Revolving Credit Agreement, or any other
similar provisions of the Revolving Credit Agreement (including, without
limitation, any replacement or refinancing Revolving Credit Agreement) which
from time to time may contain financial covenants or related "Events of Default"
(and in the event that the Revolving Credit Agreement is canceled or terminated
(and not replaced or refinanced), or otherwise ceases to be in force at any time
hereafter, the foregoing provisions shall apply to the above-referenced sections
of the Revolving Credit Agreement, as such provisions were in effect on the day
prior to the day on which the Revolving Credit Agreement was so canceled or
terminated, or otherwise ceased to be in force), and such failure to comply
shall continue uncured or unwaived for a period of 30 days or more.
"Collection Date" means the date following the Termination
Date on which the aggregate Outstanding Balance of all Receivables sold
hereunder has been reduced to zero (or such earlier date which is 365 days after
all outstanding Receivables sold hereunder have become written-off in accordance
with the Credit and Collection Policy), the Buyer has received all other amounts
due to it in connection with this Agreement or any other agreement executed
pursuant hereto or in connection herewith.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of the Related Security with respect thereto.
"Contract" means an invoice issued by the Originator to a
Person, or an agreement between the Originator and a Person, in each case in
substantially the form of one of the forms set forth in Exhibit A pursuant to or
under which such Obligor shall be obligated to make one or more payments to the
Originator.
"Credit and Collection Policy" means those credit and
collection policies and practices relating to Contracts and Receivables
described in Schedule II.
"Daily Settlement Report" means a report prepared by the
Collection Agent under the Receivables Purchase Agreement.
"DCR" means Duff & Phelps Credit Rating Co., and any successor
thereto.
<PAGE>
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services beyond ordinary course of
business payment terms for trade payables, (d) obligations of such Person as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by an Adverse Claim upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations and (f) obligations of such
Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above.
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part thereof, remains unpaid for more than 90 days from the original
due date for such payment, (b) as to which the Obligor thereof has taken any
action constituting an Insolvency Event, or suffered any Insolvency Event to
exist or (c) which, consistent with the Credit and Collection Policy, has been
or should be written off the Originator's books as uncollectible.
"Dilution Factors" means, with respect to the Receivables, any
credits, rebates, freight charges, discounts, allowances, disputes, chargebacks,
returned or repossessed goods, inventory transfers, allowances for early
payments and other allowances or adjustments granted in accordance with the
Collection Agent's or the Originator's usual practices.
"Dilution Adjustment Credit" means, on any Business Day, the
Actual Dilution reported by the Collection Agent in the applicable Daily
Settlement Report for the immediately preceding Business Day.
"Discount Factor" means a percentage calculated to provide the
Buyer with a reasonable return on its investment in the Transferred Assets after
taking account of (i) the time value of money based upon the anticipated dates
of collection of the Transferred Assets, (ii) the risk of nonpayment by the
Obligors and (iii) the costs of servicing the Receivables to be performed by the
Originator. The initial Discount Factor shall be 2.30 %. The Originator and the
Buyer may agree in writing from time to time to change the Discount Factor based
on changes in one or more of the items affecting the calculation thereof;
provided, however, that any change to the Discount Factor shall take effect as
of the commencement of a calendar month, shall apply only prospectively and
shall not affect the Purchase Price payment in respect of Purchases which
occurred during any calendar month ending prior to the calendar month during
which the Originator and the Buyer agree to make such change.
"EagleFunding" means EagleFunding Capital Corporation, a
Delaware corporation.
"Eligible Receivable" means, at any time, a Receivable:
(a) the Obligor of which is not an Affiliate of any of
the parties hereto, and is not a government or a governmental subdivision or
agency;
<PAGE>
(b) which is not a Defaulted Receivable and with respect to
which no scheduled payment, or any part thereof, remains unpaid for
more than 30 days from the original due date therefor, and the Obligor
of which is not the Obligor of any Defaulted Receivables in the
aggregate amount of 20% or more of the aggregate Outstanding Balance of
all Receivables of such Obligor;
(c) which arises under a Contract (i) the performance of which
has been completed by the Originator and by all other parties other
than the Obligor, (ii) that requires such Receivable to be paid in full
within 60 days of the original invoice date therefor (provided,
however, that at any time of determination hereunder, no more than 1.0%
of the Outstanding Balance of Purchased Receivables may have terms
which require payment in full within a number of days of the original
invoice date therefor of between 61 and 90, inclusive) and (iii) that
has been duly authorized and, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable, enforceable against such
Obligor in accordance with its terms and is not subject to any dispute,
offset, counterclaim or defense whatsoever;
(d) (i) which is an "account" within the meaning of Section
9-106 of the UCC of all applicable jurisdictions, (ii) which has been
invoiced by the Originator and as to which all performance and other
action required to be taken in connection therewith by the Originator
for the Obligor has been so performed or taken, (iii) is denominated
and payable only in United States dollars in the United States, (iv) no
portion of which is payable on account of sales taxes, and (v) in which
the Originator can grant a perfected security interest;
(e) which arises in the ordinary course of the Originator's
business in connection with a sale of goods within the United States;
(f) the assignment of which (including, without limitation,
the sale of an undivided percentage interest therein and the assignment
of any Related Security) does not contravene or conflict with any
applicable laws, rules or regulations or any contractual or other
restriction, limitation or encumbrance;
(g) which does not have an Adverse Claim filed against it
(other than pursuant to the Receivables Purchase Agreement) and is not
otherwise subject to an Adverse Claim and has not been compromised,
adjusted or modified in any material respect (including by extension of
time of payment or the granting of any discounts, allowances or credits
(other than as stated on the invoice));
(h) which, together with the Contract related thereto, does
not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
<PAGE>
(i) which satisfies, and has been originated in accordance
with, all applicable requirements of the Credit and Collection Policy;
(j) as to which the Buyer has not notified the Originator and
the Collection Agent that the "Deal Agent" under the Receivables
Purchase Agreement has determined, in its reasonable business judgement
as detailed in such notice, that the Obligor of such Receivable is an
unreasonable risk;
(k) the Obligor of which is not a Person to whom the
Originator or any of its Affiliates owes any accounts payable or other
Debt and is otherwise not a Person in respect of which the Originator
maintains any contra accounts on its books and records; and
(l) with respect to which, (i) prior to the Purchase
hereunder, the Originator has a first priority ownership interest
therein, free and clear of any Adverse Claim, except as otherwise
contemplated under the Intercreditor Agreement, and (ii) from and after
the Purchase hereunder, Buyer has a properly perfected first priority
ownership interest therein, free and clear of any Adverse Claim.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Originator; (b) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with the Originator or (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as the Originator, any
corporation described in clause (a) above or any trade or business described in
clause (b) above.
"Event of Termination" has the meaning assigned to that term
in Section 7.01.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, in each case consistently
applied.
"Indemnified Amounts" has the meaning assigned to that term in
Section 8.01.
"Indemnified Parties" has the meaning assigned to that term in
Section 8.01.
"Initial Purchase" means the initial purchase made by the
Buyer hereunder.
<PAGE>
"Insolvency Event" means, with respect to any Person, any of
the following events: such Person shall make a general assignment for the
benefit of creditors; or any case or proceeding shall be instituted by or
against such Person seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, dissolution, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property.
"Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of December 18, 1997, among BankBoston, N.A. (in its
capacity as "Agent" under the Revolving Credit Agreement), the Collection Agent,
the Originator, the Buyer, EagleFunding and BancBoston Securities Inc. (in its
capacity as the "Deal Agent" under the Receivables Purchase Agreement), as the
same may be amended, restated, supplemented or otherwise modified or replaced,
from time to time thereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Transferred Assets (and interests
therein) pursuant to this Agreement and excluding commission, travel and similar
advances to officers, employees and directors made in the ordinary course of
business.
"Investment Company Act" means the Investment Company Act of
1940, as amended.
"Lock-Box" means a post office box to which Collections are
remitted for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank
into a Lock-Box Account.
"Lock-Box Account" means an account maintained for the purpose
of receiving Collections at a bank or other financial institution which has
executed a Lock-Box Agreement.
"Lock-Box Agreement" means an agreement, in substantially the
form of Exhibit B, among the Originator, the Buyer, the Collection Agent, the
"Deal Agent" under the Receivables Purchase Agreement and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Materially Adverse Effect" means any act, omission,
situation, circumstance, event or undertaking which could, singly or in any
combination with one or more other acts, omissions, situations, circumstances,
events or undertakings, have, or are reasonably likely to have, a materially
adverse effect upon (a) the business, assets, properties, liabilities, financial
condition, or results of operations of the Originator and its subsidiaries taken
as a whole, (b) the value of the whole or any material part of the Transferred
Assets, the interests therein transferred or purported to be transferred
pursuant to the terms hereof or the priority of such interests, (c) the
respective ability of the Originator or any of its subsidiaries to perform any
obligations under this Agreement or any other Originator Document to which it is
a party, or (d) the legality, validity, binding effect or enforceability of any
Originator Document or the ability of the Buyer or the Deal Agent to enforce any
rights or remedies under or in connection with any Originator Document.
<PAGE>
"Moody's" means Moody's Investors Service, Inc., and any
successor thereto.
"Monthly Payment Date" means, with respect to any calendar
month, the [tenth] day of such month, or if such date is not a Business Day, the
next Business Day to occur thereafter.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by the Originator or
any ERISA Affiliate on behalf of its employees.
"Noncomplying Receivable" means any Receivable with respect to
which the Originator has received notice from the Buyer that such Receivable was
not an Eligible Receivable as of the date purchased hereunder or that the
Originator otherwise breached any representation, warranty or covenant made with
respect to such Receivable hereunder.
"Noncomplying Receivables Adjustment" means, with respect to
any calendar month, an amount equal to (i) the aggregate Outstanding Balance for
all Receivables which the Buyer identified to the Originator as Noncomplying
Receivables during such calendar month minus (ii) all Collections received
during such calendar month on account of Receivables originated by the
Originator with respect to which Noncomplying Receivables Adjustments were
previously paid.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator Documents" means this Agreement, the Lock-Box
Agreements, the Intercreditor Agreement, the Revolving Credit Agreement, and all
other certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with this
Agreement, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with this Agreement.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, government (or any agency or political subdivision
thereof) or other entity.
"Purchase" means a purchase of Transferred Assets by the Buyer
from the Originator pursuant to Section 2.01.
<PAGE>
"Purchase Price" means, with respect to any Purchase on any
date, the aggregate price to be paid to the Originator for such Purchase in
accordance with Section 2.2 for the Receivables, Related Security and
Collections being sold to the Buyer on such date, which price shall equal the
product of (x) the aggregate Outstanding Balance of such Receivables and (y) one
minus the Discount Factor then in effect.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument, general
intangible or any other type of property, which arises from a sale of
merchandise or the performance of services by the Originator. Each Receivable
shall include the right to payment of any interest or finance charges and other
obligations of the Obligor with respect thereto.
"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors which
the Originator has itself generated or in which the Originator has otherwise
obtained an interest.
"Related Security" means with respect to any Receivable:
(a) all of the Originator's interest in the merchandise
(including returned, repossessed or foreclosed merchandise), if any,
relating to the sale which gave rise to such Receivable;
(b) all other Adverse Claims and property subject thereto from
time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
(c)the assignment to the Buyer of all UCC financing statements
covering any collateral securing payment of such Receivable;
(d) all guarantees, indemnities, warranties, letters of
credit, insurance policies and proceeds and premium refunds thereof and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise;
(e) all Records; and
(f) all proceeds of the foregoing.
"Receivables Purchase Agreement" means that certain
Receivables Purchase Agreement dated as of December 18, 1997 by and among the
Buyer, as the seller thereunder, EagleFunding, as the purchaser, BancBoston
Securities Inc., as the deal agent, and Synthetic, as the collection agent, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.
<PAGE>
"Revolving Credit Agreement" means that certain Loan and
Security Agreement dated as of December 18, 1997, between the Originator, the
financial institutions parties thereto as "Lenders", and BankBoston, N.A., as
agent to the Lenders, as the same may be amended, restated, supplemented,
replaced or otherwise modified from time to time, any successor agreement, and
any agreement pursuant to which the Debt issued under any such "Revolving Credit
Agreement" is refinanced.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Termination Date" means the date on which the Originator's
obligation to sell and the Buyer's obligation to purchase Receivables hereunder
terminates, which date shall occur on the earliest of (i) the occurrence of the
"Termination Date" under the Receivables Purchase Agreement, (ii) the date on
which an Insolvency Event occurs with respect to Synthetic, the Originator or
the Buyer and (iii) upon the occurrence and during the continuance of an Event
of Termination, the date on which the Buyer declares its obligation to purchase
Receivables hereunder to be terminated.
"Transferred Assets" means, with respect to any Purchase or
Purchases, (a) the Receivables sold to the Buyer in connection with such
Purchase or Purchases, (b) all Related Security relating to such Receivables,
and (c) all Collections with respect to, and other proceeds of, such
Receivables.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"United States" means the United States of America.
SECTION 1.02. Accounting and Certain Other Terms. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP, and all accounting determinations made and all financial
statements prepared hereunder shall be made and prepared in accordance with
GAAP. All undefined terms contained in this Agreement which are used in Article
9 of the UCC in the State of New York shall have the meanings provided for by
such Article 9.
SECTION 1.03. Other Terms. The words "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time to
time be amended or supplemented and not to any particular section, subsection,
or clause contained in this Agreement, and all references to Sections, Exhibits
and Schedules shall mean, unless the context clearly indicates otherwise, the
Sections hereof and the Exhibits and Schedules attached hereto, the terms of
which Exhibits and Schedules are hereby incorporated into this Agreement.
Whenever appropriate, in the context, terms used herein in the singular also
include the plural, and vice versa.
<PAGE>
SECTION 1.04. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding."
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES.
SECTION 2.01. Agreement to Purchase. (a) On the terms and
conditions hereinafter set forth, the Buyer agrees to make the Initial Purchase
hereunder on the Closing Date by purchasing from the Originator, and the
Originator agrees to sell to the Buyer, all Receivables of the Originator
existing as of the close of business on the Business Day immediately prior to
the Closing Date, together with all of the Related Security relating to such
Receivables, all Collections with respect to, and other proceeds of, such
Receivables. On each Business Day after the Initial Purchase until the
occurrence of the Termination Date, the Buyer agrees to purchase from the
Originator, and the Originator agrees to sell to the Buyer, all Receivables of
the Originator existing as of the close of business on the immediately preceding
Business Day which have not been previously purchased hereunder, together with
all of the Related Security relating to such Receivables and all Collections
with respect to and other proceeds of such Receivables. Prior to making any
Purchase hereunder, the Buyer may request of the Originator, and the Originator
shall deliver, such approvals, opinions, information, reports or documents as
the Buyer may reasonably request.
(b) It is the intention of the parties hereto that each
Purchase of Receivables to be made hereunder shall constitute a "sale of
accounts," as such term is used in Article 9 of the UCC of the State of New
York, and not a loan secured by such accounts. Except for the Noncomplying
Receivables Adjustment made on each Asset Report Date and the Dilution
Adjustment Credit made on any Business Day, each sale of Receivables by the
Originator to the Buyer is made without recourse; provided, however, that (i)
the Originator shall be liable to the Buyer for all representations, warranties
and covenants made by the Originator pursuant to the terms of this Agreement,
and (ii) such sale does not constitute and is not intended to result in an
assumption by the Buyer or any assignee thereof of any obligation of the
Originator or any other person arising in connection with the Transferred
Assets, or any other obligations of the Originator. In view of the intention of
the parties hereto that the Purchases of Receivables to be made hereunder shall
constitute a sale of such Receivables rather than a loan secured by such
Receivables, the Originator agrees to note on its financial statements that the
Receivables have been sold to the Buyer.
<PAGE>
(c) The parties hereto acknowledge that on the Closing Date
the Originator shall, and from time to time thereafter the Originator may (but
without any obligation to do so), contribute to the capital of Buyer such
amounts as may be necessary or desirable for the operation of Buyer's business
and the payment of its obligations under this Agreement. In connection with any
such contribution, the parties hereto agree that the Originator may, in lieu of
making a cash transfer, authorize Buyer to deduct the amount of such
contributions from the Purchase Price otherwise payable by Buyer to the
Originator on the applicable date. All of the Receivables so paid for through
such deductions shall constitute Transferred Assets within the meaning of this
Agreement and shall be subject to all of the representations, warranties and
covenants hereunder to the same extent as if Buyer had paid the Purchase Price
for such Receivables with cash from its own funds.
SECTION 2.02. Payment for the Purchases. (a) The Purchase
Price for each Purchase shall be payable in full in cash by the Buyer to the
Originator or its designee on the date of such Purchase; except that the Buyer
may, with respect to any Purchase, offset against such Purchase Price, (i) any
positive Noncomplying Receivables Adjustments or other amounts shown on an Asset
Report as owing from the Originator to the Buyer and which remain unpaid; (ii)
any Dilution Adjustment Credits for Receivables sold by the Originator reported
on the Daily Settlement Report for such date and any Dilution Adjustment Credits
for Receivables sold by the Originator and reported in any previous Daily
Settlement Report which remain unpaid; and (iii) any other amounts owed by the
Originator to the Buyer hereunder and which remain unpaid.
(b) If, on any day, the amount of cash available to the Buyer
under the Receivables Purchase Agreement is less than the Purchase Price owing
for all Purchases of Receivables to be made on such day, then the Buyer may, by
written notice to the Originator, elect to pay such remaining part of the
Purchase Price by borrowing a subordinated revolving loan (each an "Originator
Loan") and the Originator shall have irrevocably agreed to advance, and shall be
deemed to have advanced, an Originator Loan in the amount so specified by the
Buyer; provided, however, that the Buyer may not make any such election and the
Originator shall not have any obligation to extend any Originator Loans to the
Buyer if, as a result thereof, the aggregate unpaid principal amount of all of
the Originator Loans would exceed the sum of (i) the aggregate Outstanding
Balance of Eligible Receivables as of the opening of business on such date minus
(ii) the outstanding "Capital" under the Receivables Purchase Agreement minus
(iii) an amount equal to the amount described in clause (ii) above times the
"Loss Reserve Percentage" most recently calculated under the Receivables
Purchase Agreement.
(c) The Originator Loans advanced by the Originator shall be
evidenced by, and payable in accordance with the terms and provisions of, a
promissory note (the "Originator Note") payable to the Originator in the form of
Exhibit E attached hereto. On each Business Day, to the extent that the Buyer
receives either Collections or proceeds from any sales under the Receivables
Purchase Agreement which, in any case, it is not required to hold in trust for,
or remit to, the Collection Agent or the "Deal Agent" under the Receivables
Purchase Agreement, then the Buyer shall remit such funds to the Originator (net
of any funds needed to pay existing expenses which are then accrued and unpaid)
in the following order of priority and application: first to pay the Purchase
Price owed on such date; second to pay any Noncomplying Receivables Adjustment
payments owed under Section 2.03; and third to pay amounts owed under the
Originator Notes.
(d) The Originator Loans shall, subject to the terms of the
Originator Note, be subordinated to the prior right and payment in full of all
recourse obligations of the Buyer under the Receivables Purchase Agreement.
<PAGE>
SECTION 2.03. Settlement Procedures. (a) Daily. On each
Business Day, the Collection Agent shall, as part of the Daily Settlement Report
delivered under the Receivables Purchase Agreement, note the Dilution Adjustment
Credit due to the Buyer from the Originator. The Buyer shall subtract such
Dilution Adjustment Credit from the Purchase Price which would otherwise be owed
to the Originator on such day and, if the amount of such credit exceeds the
amount of such Purchase Price, the unused amount of the Dilution Adjustment
Credit shall be applied as a prepayment of the then outstanding principal amount
of the Originator Note issued in favor of the Originator. Any remaining
unutilized amount of the Dilution Adjustment Credit shall be credited by the
Buyer against all future Purchases from the Originator; provided, however, that
if such credits are not fully utilized within five (5) Business Days, the
Originator shall pay the remaining amount of such credit in cash on the next
succeeding Business Day.
(b) Monthly. On or prior to each Asset Report Date, the
Collection Agent shall prepare and deliver to the Buyer, as part of the Asset
Report delivered under the Receivables Purchase Agreement, a statement of the
Noncomplying Receivables Adjustment due to the Buyer from the Originator or from
the Buyer to the Originator, as the case may be. If the Noncomplying Receivables
Adjustment is a positive number, such number shall be shown on the Asset Report
as an amount due to the Buyer and the Buyer shall subtract such Noncomplying
Receivables Adjustment from the Purchase Price which would otherwise be owed to
the Originator on such day and, if the amount of such adjustment exceeds the
amount of such Purchase Price, the unused positive amount of the Noncomplying
Receivables Adjustment shall be applied as a prepayment of the then outstanding
principal amount of the Originator Note held by the Originator. Any remaining
unutilized positive amount of the Noncomplying Receivables Adjustment shall be
credited by the Buyer against all future Purchases from the Originator;
provided, however, that if such credits are not fully utilized within five (5)
Business Days, the Originator shall pay the remaining amount of such adjustment
in cash on the next succeeding Business Day. Alternatively, if the Noncomplying
Receivables Adjustment is a negative number, such number shall be shown on the
Asset Report as an amount due to the Originator, and the Buyer shall pay to the
Originator the amount, if any, shown on the Asset Report as the net amount due
from Buyer to the Originator. To the extent that such net amount due remains
unpaid as of the end of such Asset Report Date, the principal amount of the
Originator Note issued to the Originator shall be increased on the applicable
Asset Report Date by such remaining unpaid amount, subject, however, to the
limits on the amounts of the Originator Note permitted under Section 2.02(b)
above.
(c) Generally. Until the Originator or the Buyer shall notify
the Collection Agent of any exceptions to the calculations contained therein,
the calculations of the Dilution Adjustment Credit and Noncomplying Receivables
Adjustment in each Daily Settlement Report and each Asset Report shall be deemed
to be correct as originally delivered. If the Originator or the Buyer shall have
notified the Collection Agent of any exceptions to such calculations, the
Originator and the Buyer shall promptly endeavor to resolve the matters set
forth in such notice. If no such resolution is agreed upon on or before the next
Asset Report Date, however, then the Asset Report originally delivered by the
Collection Agent shall, absent manifest error, continue to be presumed correct
until a resolution is reached to the contrary. Nothing contained in this Section
2.03(c) shall be deemed to limit the rights of the Buyer under Section 8.01.
<PAGE>
SECTION 2.04. Payments and Computations, Etc. All amounts to
be paid by the Originator or the Collection Agent to the Buyer hereunder shall
be paid in accordance with the terms hereof no later than 11:00 A.M. (Boston,
Massachusetts time) on the day when due in immediately available funds to such
account as the Buyer may from time to time specify in writing. Payments received
by the Buyer after such time shall be deemed to have been received on the next
Business Day. In the event that any payment becomes due on a day which is not a
Business Day, then such payment shall be made on the next succeeding Business
Day. The Originator shall, and if the Originator is the Collection Agent, the
Collection Agent shall, to the extent permitted by law, pay to the Buyer, on
demand, interest on all amounts not paid when due hereunder (whether owing by
the Originator individually or by the Collection Agent) at 2.0% per annum above
the Base Rate, payable on demand; provided, however, that such interest rate
shall not at any time exceed the maximum rate permitted by applicable law. All
computations of interest payable hereunder shall be made on the basis of a year
of 360 days for the actual number of days (including the first but excluding the
last day) elapsed.
SECTION 2.05. Transfer of Records to the Buyer. (a) Each
Purchase of Receivables hereunder shall include the transfer to the Buyer of all
of the Originator's right and title to and interest in the Records relating to
such Receivables and rights to the use of the Originator's computer software to
access and create the Records, and the Originator hereby agrees that such
transfer shall be effected automatically with each such Purchase, without any
action on the part of the parties hereto or any further documentation.
(b) The Originator shall take such action requested by the
Buyer, from time to time hereafter, that may be necessary or appropriate to
ensure that the Buyer and its assignees have (i) an enforceable ownership
interest in the Records relating to the Receivables purchased hereunder and (ii)
an enforceable right (whether by license or sublicense or otherwise) to use all
of the computer software used to account for the Receivables and/or to recreate
such Records.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase. The
Initial Purchase hereunder is subject to the conditions precedent that the Buyer
shall have received on or before the date of such purchase the items listed in
Schedule I, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Buyer.
<PAGE>
SECTION 3.02. Conditions Precedent to All Purchases and
Remittances of Collections. Each Purchase (including the Initial Purchase) from
the Originator by the Buyer shall be subject to the further conditions precedent
that (a) with respect to any such Purchase (other than the Initial Purchase), on
or prior to the date of such Purchase, the Collection Agent shall have delivered
to the Buyer, in each case in form and substance satisfactory to the Buyer, a
completed Asset Report dated within 30 days prior to the date of such Purchase
and a completed Daily Settlement Report dated no more than one Business Day
prior to the date of such Purchase, and in each case containing such additional
information as may be reasonably requested by the Buyer; (b) on the date of such
Purchase, the following statements shall be true:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result
from such Purchase, which constitutes an Event of Termination, and
(iii) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase by the Buyer in accordance with the provisions hereof.
and (c) the Buyer shall have received such other approvals, opinions or
documents as the Buyer may reasonably request.
SECTION 3.03. Effect of Payment of Purchase Price. The
Originator, by accepting the proceeds of the Purchase Price for a Purchase,
shall be deemed to have certified to the Buyer the satisfaction of the
conditions precedent described in the immediately preceding Section 3.02. Upon
the payment of the Purchase Price for any Purchase, (whether in cash or by the
making of an Originator Loan pursuant to Section 2.02(b)), title to the
Transferred Assets included in such Purchase shall vest irrevocably in the
Buyer, whether or not the conditions precedent to such Purchase were in fact
satisfied; provided, however, that the Buyer shall not be deemed to have waived
thereby any claim for indemnification it may have under this Agreement for the
failure by the Originator in fact to have satisfied any such condition
precedent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Originator. The Originator represents and warrants that as of the date hereof,
as of the date of the Initial Purchase and as of the date of each subsequent
Purchase:
(a) The Originator is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business, and is in good standing, in
every jurisdiction in which the nature of its business requires it to be so
qualified and the failure to do so could reasonably be expected to materially
and adversely affect the Originator's ability to perform hereunder or the
ability to sell or collect the Purchased Receivables hereunder.
<PAGE>
(b) The execution, delivery and performance by the Originator
of this Agreement and all other Originator Documents to be entered into by it,
including the Originator's use of the proceeds of Purchases, are within the
Originator's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Originator's charter or by-laws,
(ii) any law, rule or regulation applicable to the Originator, (iii) any
contractual restriction binding on or affecting the Originator or its property
or (iv) any order, writ, judgment, award, injunction or decree binding on or
affecting the Originator or its property, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties (other than in favor of the Buyer with
respect to the Transferred Assets); and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. This Agreement and
each other Originator Document to be entered into by the Originator has each
been duly executed and delivered by the Originator.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Originator of
this Agreement or any other Originator Document to be entered into by it, except
for the filing of the UCC financing statements referred to in Article III, all
of which financing statements have been duly filed and are in full force and
effect.
(d) This Agreement and each other Originator Document to be
entered into by the Originator constitute the legal, valid and binding
obligation of the Originator enforceable against the Originator in accordance
with their respective terms subject to bankruptcy and similar laws affecting
creditors generally and principles of equity.
(e) (i) The Originator has furnished to the Buyer and the Deal
Agent (as such term is defined in the Receivables Purchase Agreement)
(A) copies of the Originator's audited consolidated balance sheet as at
September 30, 1996, and the related audited consolidated statements of
income and cash flow for the fiscal year of the Originator then ended
reported on by Deloitte & Touche LLP, which financial statements
present fairly in all material respects in accordance with GAAP the
financial position of the Originator and its consolidated subsidiaries
as at September 30, 1996, and the results of operations of the
Originator and its consolidated subsidiaries for the fiscal year of the
Originator then ended, and (B) copies of the Originator's unaudited
consolidated balance sheet as at June 30, 1997, and the related
unaudited consolidated statements of income and cash flow for the
nine-month period then ended, which financial statements present fairly
in all material respects in accordance with GAAP the financial position
of the Originator and its consolidated subsidiaries as at June 30,
1997, and the results of operations of the Originator and its
consolidated subsidiaries for the nine-month period then ended; and
(ii) since June 30, 1997, (A) no material adverse
change has occurred in the business, assets, liabilities, financial
condition, or results of operations or business prospects of the
Originator and its subsidiaries taken as a whole, and (B) no event has
occurred or failed to occur which has had, or may have, singly or in
the aggregate, a Materially Adverse Effect.
<PAGE>
(f) Except as described in Schedule 7.1(k) of the Revolving
Credit Agreement as in effect on the date hereof, there is no pending or
threatened action or proceeding affecting the Originator or any other
subsidiaries of the Originator before any court, governmental agency or
arbitrator that could reasonably be expected to have a Material Adverse Effect.
Neither the Originator, nor any subsidiary of the Originator is in default with
respect to any order of any court, arbitrator or governmental body except for
defaults with respect to orders of governmental agencies which defaults are not
material to the business and operations of the Originator or any subsidiary of
the Originator.
(g) No proceeds of any Purchase will be used by the Originator
to acquire any security in any transaction which is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.
(h) Immediately prior to each Purchase hereunder, each
Receivable to be sold hereunder, together with the Contract related thereto and
the other Transferred Assets relating thereto, is owned by the Originator free
and clear of any Adverse Claim except as provided herein or permitted hereby,
and the Buyer shall acquire all of the Originator's right, title and interest in
such Transferred Assets and a valid and perfected first priority ownership
interest in each such Receivable then existing or thereafter arising and in the
Related Security and Collections with respect thereto, free and clear of any
Adverse Claim except as created hereby or by the Buyer in the Receivables
Purchase Agreement or any related document. No effective financing statement or
other instrument similar in effect covering any Transferred Assets shall at any
time be on file in any recording office except such as may be filed in favor of
the Buyer relating to this Agreement or in favor of assignees of the Buyer under
the Receivables Purchase Agreement. The Purchases of the Transferred Assets by
the Buyer constitute true and valid sales and transfers for consideration (and
not merely a pledge of such Transferred Assets for security purposes),
enforceable against creditors of the Buyers and no Transferred Assets shall
constitute property of the Originator.
(i) No Asset Report or Daily Settlement Report (if prepared by
the Originator or any Affiliate thereof, or to the extent that information
contained therein is supplied by the Originator or any such Affiliates),
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished by the Originator to the Buyer in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Buyer, as the
case may be, at such time) as of the date so furnished, and no such document
contains or will contain any material misstatement of fact or omits or shall
omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.
(j) The principal place of business and chief executive office
of the Originator and the offices where the Originator keeps all the Records is
located at the addresses of the Originator referred to in Section 9.02 hereof
(or at such other locations as to which the notice and other requirements
specified in Section 6.08 shall have been satisfied).
<PAGE>
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks and the names, addresses and account numbers of all accounts to which
Collections of the Receivables outstanding before the Initial Purchase hereunder
have been sent, are specified in Schedule III (which shall be deemed to be
amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof). The Originator has no other lock-box accounts or similar deposit
accounts for the collection of the Transferred Assets except for the Lock-Box
Accounts.
(l) Except as described in Schedule 7.1(x) of the Revolving
Credit Agreement (as in effect on the date hereof), the Originator does not have
any trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done (at any time during the five year period
preceding the date hereof) or is currently doing business (other than the
corporate name of the Originator on the date hereof).
(m) No event has occurred and is continuing, or would result
from any Purchase hereunder or from the application of the proceeds therefrom,
which constitutes an Event of Termination.
(n) The Purchase Price constitutes reasonably equivalent value
in consideration for the transfer to the Buyer of the Transferred Assets from
the Originator and no such transfer shall have been made for or on account of an
antecedent debt owed by the Originator to the Buyer and no such transfer is or
may be voidable under any Section of the Bankruptcy Code.
(o) The Originator has received advice from its counsel which
is consistent with the conclusions set forth in the legal opinion(s) of King &
Spalding, counsel to the Originator relating to the issues of substantive
consolidation and true sale of the Receivables and the related property.
(p) The Originator is solvent at the time of (and immediately
after) each transfer of Transferred Assets to the Buyer hereunder.
(q) The Originator has accounted for and has otherwise treated
each Purchase of Transferred Assets hereunder in its books, records and
financial statements as a sale, in each case consistent with GAAP and with the
requirements set forth herein.
(r) Synthetic owns one hundred percent (100%) of the
outstanding capital stock of the Buyer and has not granted or issued any
options, warrants or other rights to acquire any such capital stock.
<PAGE>
(s) The Originator has not (i) guaranteed any obligation of
the Buyer, allowed any of its other Affiliates to guarantee any obligations of
the Buyer, and neither the Originator nor any of its other Affiliates has held
itself out as responsible for debts of the Buyer or actions with respect to the
business and affairs of the Buyer; or (ii) permitted the commingling or pooling
of its funds or other assets with those of the Buyer and has not otherwise
permitted any other of its Affiliates to commingle or pool any of its funds or
other assets with those of the Buyer. The Originator (i) and the Buyer allocate
between themselves shared corporate operating services and expenses which are
not reflected in the Collection Agent Fee (including, without limitation, the
services of shared employees, consultants and agents and reasonable legal and
auditing expenses) on the basis of the reasonably projected use or the projected
value of services rendered, and otherwise on a basis reasonably related to
actual use or the value of services rendered, (ii) has not named the Buyer, and
has not allowed any other Affiliate to name the Buyer, as a direct or contingent
beneficiary or loss payee on any insurance policy covering the property of the
Originator, Synthetic or any other Affiliates; and (iii) acknowledges that the
Buyer, the "Deal Agent" and the "Purchaser" under the Receivables Purchase
Agreement are entering into the transactions contemplated by the Receivables
Purchase Agreement in reliance on the Buyer's identity as a separate legal
entity from Synthetic, the Originator and Synthetic's other Affiliates.
(t) The Originator is not an "investment company" or a company
controlled by an "investment company" registered or required to be registered
under the Investment Company Act, or otherwise subject to any other federal or
state statute or regulation limiting its ability to incur indebtedness.
(u) The Originator is not engaged, principally or as one of
its important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulation G, T, U or X). No part of the proceeds of any
Transferred Asset has been used for so purchasing or carrying margin stock or
for any purpose which violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X.
(v) The Originator and the Collection Agent have the right
(whether by license, sublicense or assignment) to use all of the computer
software used by the Collection Agent and/or the Originator to account for the
Transferred Assets to the extent necessary to administer the Transferred Assets,
and to assign (by way of sale) or sublicense such rights to use all of such
software to the Buyer.
(w) None of the Originator's inventory, the sale of which
would give rise to a Receivable, is subject to any Adverse Claim except as
contemplated under the Intercreditor Agreement.
(x) The Originator has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Originator has set aside
adequate reserves on its books in accordance with GAAP and which proceedings
have not given rise to any Adverse Claim.
<PAGE>
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence.
The Originator shall comply in all material respects with all applicable laws
(including, without limitation, ERISA and the Code), rules, regulations, orders
and Originator Documents and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges where the failure to comply
could reasonably be expected to materially adversely affect the Originator's
ability to perform its obligations hereunder or the ability to sell or collect
the Purchased Receivables hereunder.
(b) Sales, Liens, Etc. Except as otherwise specifically
provided herein, the Originator shall not (i) sell, assign (by operation of law
or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Transferred Asset, or upon or with respect to
any Lock-Box Account, the Collection Account or any other account to which any
Collections of any Receivable are sent, or assign any right to receive income in
respect thereof or (ii) create or suffer to exist any Adverse Claim upon or with
respect to any of the Originator's inventory, the sale of which would give rise
to a Receivable, except such Adverse Claims as are contemplated under the
Intercreditor Agreement.
(c) General Reporting Requirements. The Originator will
provide to the Buyer the following:
(i) as soon as available and in any event within 90 days after
the end of each fiscal year of the Originator, consolidated balance
sheets of the Originator and its consolidated subsidiaries and the
related statement of income for such year, each prepared in accordance
with GAAP and reported on by nationally recognized independent public
accountants;
(ii) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of the Originator, consolidated balance sheets of the Originator and
its consolidated subsidiaries and the related statements of income,
shareholders' equity and cash flows each for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, prepared in accordance with GAAP and certified by a senior
financial officer of the Originator;
(iii) promptly after the sending or filing thereof (as the
case may be), copies of (1) all reports which the Originator sends to
any of its securityholders, (2) all reports and registration statements
which the Originator files with the Securities and Exchange Commission
or any national securities exchange other than registration statements
relating to employee benefit plans and to registrations of securities
for selling securityholders and (3) all reports, notices and/or
certificates which Synthetic delivers to any of its "Lenders" under the
Revolving Credit Agreement;
<PAGE>
(iv) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the Originator or any ERISA Affiliate files
under ERISA with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or which the
Originator or any ERISA Affiliate receives from such Corporation;
(v) as soon as possible and in any event within three days
after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, a statement of the chief financial officer or
chief accounting officer of the Originator setting forth details of
such Event of Termination or event and the action which the Originator
has taken and proposes to take with respect thereto; and
(vi) promptly following the Buyer's request therefor, such
other information respecting the Receivables or the conditions or
operations, financial or otherwise, of the Originator or any of its
Affiliates as the Buyer may from time to time request in order to
protect the interests of the Buyer in connection with this Agreement.
(d) Merger, Etc. The Originator shall not merge or consolidate
with any other Person, or sell, lease, assign, transfer, or otherwise dispose of
any of its assets, except (a) dispositions of inventory in the ordinary course
of business; (b) dispositions of unnecessary, obsolete or worn out equipment;
(c) sales of Transferred Assets contemplated by and in accordance with the terms
of this Agreement, (d) sales of real estate owned by the Originator in
sale/leaseback transactions (i) as to which the purchaser/lessor has delivered
to the "Agent" under the Revolving Credit Agreement a landlord's subordination
and waiver in form and substance satisfactory to such Agent and (ii) that are
otherwise in compliance with the terms of this Agreement and the other
Originator Documents, and (e) other sales or dispositions of assets for fair
value paid in cash at the closing of the disposition and in arm's length
transactions; provided that with respect to any asset disposed of pursuant to
the provisions of this clause (e):
(1) no Event of Termination exists or would result from such
disposition;
(2) the Originator shall have provided the Deal Agent with
written notice of the proposed disposition not less than 10 Business Days prior
to the date of the proposed disposition, together with a certificate
demonstrating compliance with clauses (1) and (3) of this clause (e); and
(3) the sales price for the assets sold (as determined in
accordance with the applicable sale agreement) in such transaction when added to
the sales price for all other assets disposed of in the same Loan Year (as such
term is defined in the Revolving Credit Agreement) does not exceed $2,000,000.
<PAGE>
(e) Accounting of Purchases. The Originator will not prepare
any financial statements which shall account for the transactions contemplated
hereby in any manner other than as the sale of the Transferred Assets to the
Buyer or in any other respect account for or treat the transactions contemplated
hereby in any manner other than as a sale of the Transferred Assets by the
Originator to the Buyer (it being understood, however, that such sales may not
be recognized for all accounting and tax purposes due to principles of
consolidated financial reporting and the filing of tax returns on a consolidated
basis).
(f) [Reserved].
(g) Maintenance of Separate Existence. The Originator will
take all actions required on its part to help maintain the Buyer's status as a
separate legal entity, including, without limitation, (i) not misleading third
parties as to the Buyer's identity as an entity with assets and liabilities
distinct from those of the Originator and its Affiliates; (ii) not holding
itself out to be responsible for the debts or decisions or actions relating to
the business and affairs of the Buyer; (iii) using its best efforts not to
commingle its funds or other assets with those of the Buyer, and not to hold its
assets in any manner that would create an appearance that such assets belong to
the Buyer or that the Buyer's assets belong to it; (iv) taking such action as is
necessary on its part to ensure that the covenant made in Section 5.1(i) of the
Receivables Purchase Agreement is not breached; (v) taking such other actions as
are necessary on its part to ensure that the representations made in Section
4.01(s) hereunder and by the Buyer in Section 4.01(t) of the Receivables
Purchase Agreement are true and correct at all times; (vi) taking such actions
as are necessary on its part to ensure that the Buyer's corporate procedures
required by its certificate of incorporation and by-laws are duly and validly
taken; and (vii) taking such other actions on its part to ensure that the
factual assumptions set forth in, and forming the basis of the legal opinion(s)
of King & Spalding, counsel to the Originator, issued in connection with this
Agreement and relating to the issues of substantive consolidation and true sale
of the Receivables and the related property, are true and correct at all times.
Without limiting the foregoing, the Originator will cause any financial
statements consolidated with those of the Buyer to contain footnotes or other
disclosures which describe the Buyer's business and otherwise inform the
Originator's creditors that the Buyer is a separate corporate entity whose
creditors have a claim on its assets prior to those assets becoming available to
its equity holders and therefore to any creditors of the Originator or any of
its Affiliates.
(h) Supplemental Opinions. The Originator will cause to be
delivered to the Buyer within 30 days following the Buyer's request therefor,
but in no event more frequently than once during each calendar year commencing
after the first anniversary date of the Initial Purchase, supplemental opinions
of outside counsel to the Originator in the form of Exhibit D or otherwise in
form and substance reasonably satisfactory to the Buyer, reaffirming the
opinions set forth in the opinion letters of King & Spalding delivered to the
Buyer in connection with the Initial Purchase hereunder pursuant to Section 3.01
or providing in reasonable detail the reasons why any such opinions cannot be
reaffirmed.
<PAGE>
(i) Change in Corporate Name. The Originator will not make any
change to its corporate name or use any trade names, fictitious names, assumed
names or conduct business under any names other than those described in Schedule
IV, unless at least 30 days prior to the effective date of any such name change
or use, the Originator shall have delivered to the Buyer such financing
statements (Form UCC-1 and UCC-3) executed by the Originator which the Buyer may
request to reflect such name change or use, together with such other documents
and instruments that the Buyer may request in connection therewith.
(j) Audits. At any time and from time to time upon prior
written notice from the Buyer during regular business hours and on an annual (or
more frequent) basis, if requested by the Buyer, the Originator will permit the
Buyer, or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records, (ii) to visit the offices and properties of the
Originator for the purpose of examining such Records, and to discuss matters
relating to the Receivables or the Originator's performance hereunder with any
of the officers or employees of the Originator having knowledge of such matters
and (iii) to have access to its software for the purposes of examining such
Records. Each such audit shall be at the sole expense of the Originator.
(k) Keeping of Records and Books of Account. The Originator
will maintain (or cause to be maintained) and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain, all documents, books, records and
other information which are reasonably necessary or advisable for the collection
of the Transferred Assets (including all Receivables and Collections included
therein). Such books and records shall be marked to indicate the sales of all
Receivables and Related Security hereunder and shall include, without
limitation, records adequate to permit the daily identification of each new
Receivable and all collections of and adjustments (including, without
limitation, adjustments on account of Dilution Factors) to each Receivable.
(l) Location of Records. The Originator will keep its chief
place of business and chief executive office, and the offices where it keeps the
Records, at the addresses referred to in Section 10.02, or, in any such case,
upon 30 days' prior written notice to the Buyer, at such other locations within
the United States where all action required by Section 6.09 shall have been
taken and completed.
(m) Credit and Collection Policies. The Originator will comply
in all material respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract. The Originator shall not, without the
written consent of the Buyer and the "Deal Agent" under the Receivables Purchase
Agreement, make any change in the Credit and Collection Policy.
<PAGE>
(n) Change in Payment Instructions to Obligors. The Originator
will not add or terminate any bank as a Lock-Box Bank from those listed in
Schedule III or make any change in its instructions to Obligors regarding
payments to be made to any Lock-Box Bank, unless the Buyer shall have given its
prior written consent to such addition, termination or change (which consent
shall not be unreasonably withheld) and the Buyer shall have received (i) ten
Business Days' prior notice of such addition, termination or change, and (ii)
prior to the effective date of such addition, termination or change, (x)
executed copies of Lock-Box Agreements executed by each new Lock-Box Bank and
the Originator and (y) copies of all agreements and documents signed by either
the Originator or the respective Lock-Box Bank with respect to any new Lock-Box
Account.
(o) Taxes. The Originator will file or cause to be filed all
federal, state and local tax returns which are required to be filed by it. The
Originator shall pay or cause to be paid all taxes shown to be due and payable
on such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Originator shall have set
aside adequate reserves on its books in accordance with GAAP.
(p) Segregation of Collections. The Originator will prevent
the deposit into any of the Lock-Box Accounts of any funds other than
Collections and, to the extent that any such funds are nevertheless deposited
into any of such Lock-Box Accounts, promptly identify any such funds to the
Collection Agent for segregation and remittance to the owner thereof.
(q) Insolvency. So long as the Buyer is not "insolvent" within
the meaning of the Bankruptcy Code, the Originator will not cause the Buyer to
file a voluntary petition under the Bankruptcy Code or any other bankruptcy or
insolvency laws.
ARTICLE VI
ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
<PAGE>
SECTION 6.01. Appointment and Designation of the Collection
Agent. The Originator and the Buyer hereby appoint the Person (the "Collection
Agent") designated by the Buyer from time to time pursuant to this Section 6.01,
as the Buyer's agent to service, administer and collect the Receivables and
otherwise to enforce its rights and interests in, to and under the Receivables,
the Related Security and the Contracts. The Collection Agent's authorization
under this Agreement shall terminate on the Collection Date. Until the Buyer
gives notice to the Originator of a designation of a new Collection Agent,
Synthetic is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms hereof. The Buyer may
designate as Collection Agent any Person to succeed Synthetic or any successor
Collection Agent, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Collection
Agent pursuant to the terms hereof and of the Receivables Purchase Agreement.
Each of the Originator and the Collection Agent hereby grants to any successor
Collection Agent an irrevocable power of attorney to take any and all steps in
the Originator's or the Collection Agent's name, as applicable, and on behalf of
the Buyer, as may be necessary or desirable, in the determination of the
successor Collection Agent, to collect all amounts due under any and all
Receivables, including, without limitation, endorsing the Originator's name on
checks and other instruments representing Collections and enforcing such
Receivables and the related Contracts. The Collection Agent may, with the prior
consent of the Buyer, subcontract with any other Person for servicing,
administering or collecting the Receivables, provided that the Collection Agent
shall remain liable for the performance of the duties and obligations of the
Collection Agent pursuant to the terms hereof. Notwithstanding anything to the
contrary contained in this Agreement, the Collection Agent, if not Synthetic or
an Affiliate thereof, shall have no obligation to collect, enforce or take any
other action described in this Article VI with respect to any Receivable that is
not a Transferred Asset other than to deliver to the Originator the Collections
and documents with respect to any such Receivable that is not a Transferred
Asset as described in Sections 6.03 and 6.06(b). The Collection Agent hereunder
acknowledges and agrees that the Collection Agent Fee paid under the Receivables
Purchase Agreement shall constitute the consideration for its performance of
services as Collection Agent hereunder.
SECTION 6.02. Collection of Receivables by the Collection
Agent; Extensions and Amendments of Receivables. The Collection Agent shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy; provided, however, that, (a)
the Buyer shall have the right to direct the Collection Agent (whether the
Collection Agent is Synthetic or otherwise) to commence or settle any legal
action, to enforce collection of any Transferred Asset or to foreclose upon or
repossess any Related Security, and (b) the Collection Agent shall not make the
Buyer a party to any litigation without the express written consent of the
Buyer. If the Termination Date shall not have occurred, Synthetic, while it is
Collection Agent, may, in accordance with the Credit and Collection Policy, (1)
extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as Synthetic may determine to be appropriate to maximize Collections
thereof and (2) adjust the Outstanding Balance of any Receivable to reflect
Actual Dilution and any reductions or cancellations as a result of setoff in
respect of any claim by the Obligor thereof, in accordance with the requirements
of the Credit and Collection Policy and provided that such extension or
adjustment shall not alter the status of such Receivable as a Defaulted
Receivable or limit the rights of the Buyer under this Agreement. Except as
otherwise permitted pursuant to the next preceding sentence, neither the
Collection Agent nor the Originator will extend, amend, cancel or otherwise
modify the terms of any Transferred Asset, or amend, modify, cancel or waive any
term or condition of any Contract related thereto without the prior written
approval of the Buyer.
SECTION 6.03. Distribution and Application of Collections. The
Collection Agent shall set aside and segregate funds to the extent required in
the Receivables Purchase Agreement and shall be required to segregate all
Collections on the Receivables from the other funds belonging to the Collection
Agent. The Collection Agent shall as soon as practicable following receipt turn
over to the Originator the Collections of any Receivable which is not a
Transferred Asset less, in the event neither Synthetic nor an Affiliate thereof
is the Collection Agent, all reasonable and appropriate out-of-pocket costs and
expenses of such Collection Agent of servicing, collecting and administrating
the Receivables to the extent not covered by the Collection Agent Fee received
by it.
SECTION 6.04. Other Rights of the Buyer. At any time following
the occurrence of a Collection Agent Termination Event or the designation of a
Collection Agent other than Synthetic or any Affiliate of either thereof
pursuant to Section 6.01:
<PAGE>
(a) The Buyer may or, at the request of the Buyer, the
Originator shall (in either case, at the Originator's expense) direct the
Obligors of Receivables, or any of them, to pay all amounts payable under any
Receivable directly to the Buyer or its designee;
(b) The Buyer may, or at the request of the Buyer, the
Originator shall (in either case, at the Originator's expense) give each of the
Obligors notice of the Buyer's interests in the Transferred Assets; and
(c) The Originator shall, at the Buyer's request and at the
Originator's expense, (i) assemble all Records and make the same available to
the Buyer or its designee at a place selected by the Buyer or its designee, and
(ii) segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Receivables in a manner acceptable to the
Buyer and, promptly following receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Buyer or its designee.
SECTION 6.05. Records; Audits. (a) The Collection Agent will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in
the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Transferred
Asset and all Collections of and adjustments to each existing Transferred
Asset).
(b) The Collection Agent, whether or not Synthetic or an
Affiliate thereof, shall hold all Records in trust for the Buyer. Subject to the
receipt of contrary instructions from the Buyer, the Originator will deliver all
Records to such Collection Agent; provided, however, that the Collection Agent,
if other than Synthetic, shall as soon as practicable upon demand deliver to the
Originator all Records in its possession relating to Receivables of the
Originator other than Transferred Assets, and copies of Records in its
possession relating to Transferred Assets.
(c) The Collection Agent will, from time to time during
regular business hours as requested by the Buyer, permit the Buyer, or its
agents or representatives, (i) to examine and make copies of and abstracts from
all Records and (ii) to visit the offices and properties of the Collection Agent
for the purpose of examining such Records and to discuss matters relating to the
Receivables or the Collection Agent's or the Originator's performance hereunder
with any of the officers or employees of the Collection Agent or the Originator
having knowledge of such matters.
<PAGE>
SECTION 6.06. Receivable Reporting. (a) The Collection Agent,
so long as it is Synthetic or an Affiliate thereof, and otherwise the
Originator, will deliver to the Buyer (i) prior to the Asset Report Date
occurring during each calendar month hereafter, a report identifying the
Transferred Assets (and the aged balance thereof), by Obligor and invoice
number, as of the last day of the next preceding month, (ii) on the Termination
Date, a report identifying the Transferred Assets (and the aged balance
thereof), by Obligor and invoice number, on the day immediately preceding the
Termination Date, (iii) upon the Buyer's request, on each day, a report
identifying the Transferred Assets (and the aged balance thereof), by Obligor
and invoice number on such day and (iv) prior to the Asset Report Date occurring
in each calendar month hereafter, a report identifying the outstanding accounts
payable of the Originator as of the last day of the next preceding month,
identified by the relevant account payee.
(b) Prior to the Asset Report Date occurring in each calendar
month, the Collection Agent shall prepare and forward to the Buyer, an Asset
Report relating to all Transferred Assets, as of the close of business of the
Collection Agent on the last day of the next preceding month.
SECTION 6.07. Collections and Lock-Boxes. The Originator and
the Collection Agent will
(i) instruct all Obligors to cause all Collections to be
either (A) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve
such Collections promptly and deposit the same to the respective Lock-Box
Accounts or (B) deposited directly with the Lock-Box Bank, and
(ii) pursuant to the Receivables Purchase Agreement, instruct
all Lock-Box Banks to transfer such Collections in same day funds to a
Collection Account maintained with a Collection Account Bank. If the Originator
receives any Collections, the Originator will remit such Collections to the
Collection Account within one Business Day following the Originator's receipt
thereof. The Originator will not add or terminate any bank as Lock-Box Bank from
those listed in Schedule III or make any change in its instructions to Obligors
regarding payments to be made to any Lock Box or any Lock-Box Bank, unless the
Buyer shall have received at least ten Business Days' prior written notice of
such addition, termination or change and all actions reasonably requested by the
Buyer to protect and perfect the interest of the Buyer in the Collections of
Transferred Assets have been taken and completed. The Originator hereby
transfers to the Buyer, effective upon the Initial Purchase, the exclusive
ownership and control of each of the Lock-Box Accounts, and each Lock-Box Bank
shall be instructed to remit any amounts deposited in its Lock-Box Accounts
solely according to the direction of the Buyer or its assigns. The Originator
hereby agrees to take any further action necessary that the Buyer may reasonably
request to effect such transfer.
<PAGE>
SECTION 6.08. UCC Matters; Protection and Perfection of
Transferred Assets. The Originator will keep its principal place of business and
chief executive office, and the office where it keeps the Records, at the
address of the Originator referred to in Section 9.02 or, upon 30 days' prior
written notice to the Buyer, at such other locations within the United States
where all actions reasonably requested by the Buyer to protect and perfect the
interest of the Buyer in the Transferred Assets have been taken and completed.
The Originator will not make any change to its corporate name or use any
tradenames, fictitious names, assumed names, "doing business as" names or other
names other than those described in Schedule IV, unless prior to the effective
date of any such name change or use, the Originator delivers to the Buyer such
executed financing statements as the Buyer may request to reflect such name
change or use, together with such other documents and instruments as the Buyer
may request in connection therewith. The Originator agrees that from time to
time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Buyer may
reasonably request in order to perfect, protect or more fully evidence the
Transferred Assets acquired by the Buyer hereunder, or to enable the Buyer to
exercise or enforce any of its rights hereunder. Without limiting the generality
of the foregoing, the Originator will: (a) upon the request of the Buyer,
execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate or as the Buyer may request, and (b) on or prior to the
date hereof, mark its master data processing records evidencing such Transferred
Assets and related Contracts with a legend, acceptable to the Buyer, evidencing
that the Buyer or its assigns have purchased all right and title thereto. The
Originator hereby authorizes the Buyer to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Transferred Assets now existing or hereafter
arising without the signature of the Originator where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Transferred Assets or any part thereof shall be
sufficient as a financing statement. If the Originator fails to perform any of
its agreements or obligations under this Section 6.08, the Buyer may (but shall
not be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Buyer incurred in connection therewith shall
be payable by the Originator upon the Buyer's demand therefor. For purposes of
enabling the Buyer to exercise its rights described in the preceding sentence
and elsewhere in this Article VI, the Originator hereby authorizes the Buyer to
take any and all steps in the Originator's name and on behalf of the Originator
necessary or desirable, in the determination of the Buyer, to collect all
amounts due under any and all Receivables, including, without limitation,
endorsing the Originator's name on checks and other instruments representing
Collections and enforcing such Receivables and the related Contracts.
SECTION 6.09. Obligations of the Originator With Respect to
Receivables. The Originator will (a) at its expense, regardless of any exercise
by the Buyer of its rights hereunder, timely and fully perform and comply with
all material provisions, covenants and other promises required to be observed by
it under the Contracts related to the Transferred Assets to the same extent as
if Transferred Assets therein had not been sold hereunder and (b) pay when due
any taxes, including without limitation, sales and excise taxes, payable in
connection with the Transferred Assets. In no event shall the Buyer have any
obligation or liability with respect to any Transferred Assets or related
Contracts, nor shall it be obligated to perform any of the obligations of the
Originator or any of its Affiliates thereunder. The Originator will timely and
fully comply in all material respects with the Credit and Collection Policy in
regard to each Receivable and the related Contract. The Originator will not make
any change in the character of its businesses or in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Transferred Asset.
<PAGE>
SECTION 6.10. Applications of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to the Originator shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Buyer, be applied as a Collection
of any Receivables constituting Transferred Assets of such Obligor, in the order
of the age of such Receivables, starting with the oldest such Receivable, to the
extent of any amounts then due and payable thereunder, before being applied to
any Receivable that is not a Transferred Asset or other indebtedness of such
Obligor.
SECTION 6.11. Annual Servicing Report of Independent Public
Accountants. On an annual basis on or before December 31 of each calendar year,
beginning with December 31, 1998, the Collection Agent shall cause nationally
recognized independent public accountants acceptable to the Buyer (the Buyer
acknowledges that in each case any of the "Big 5" accounting firms will be
acceptable to the Buyer,) to furnish a report to each of the Collection Agent
and the Buyer substantially to the effect that (i) such accountants have
examined certain documents and records relating to the servicing of Receivables
under this Agreement, compared the information contained in the Daily Settlement
Reports and Asset Reports delivered by or on behalf of the Originator under this
Agreement during the annual period covered by such report (or such shorter
initial period, as the case may be) with such documents and records and that, on
the basis of such examination, and subject to such reasonable limitations and
qualifications as may be set forth in such report, such accountants are of the
opinion that the servicing has been conducted substantially in compliance with
the terms and conditions as set forth in Article VI of this Agreement, except
for such exceptions as they believe to be immaterial and such other exceptions
as shall be set forth in such statement and (ii) such accountants have compared
the mathematical calculations of each amount set forth in the Daily Settlement
Reports and Asset Reports delivered pursuant to this Agreement during the period
covered by such report with the Collection Agent's computer reports which were
the source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur:
(a) (i) The Collection Agent (if Synthetic or any Affiliate
thereof) shall fail to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (ii) of this Section 7.01(a)) and
such failure shall remain unremedied for two Business Days or (ii) either the
Collection Agent (if Synthetic or any Affiliate thereof) or the Originator shall
fail to make any payment or deposit to be made by it hereunder when due; or
(b) (i) Any representation or warranty made or deemed to be
made by the Originator (or any of its officers or agents) under or in connection
with this Agreement or any Asset Report or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made or (ii) any representation or warranty made or deemed to be
made by the Collection Agent (or any of its officers or agents) under or in
connection with the Receivables Purchase Agreement or this Agreement (as the
case may be) shall prove to have been false or incorrect in any material respect
when made; or
<PAGE>
(c) The Originator or Synthetic (individually or in its
capacity as Collection Agent) shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for five Business Days
after written notice thereof shall have been given by the Buyer to the
Originator; or
(d) (i) The Originator shall fail to pay any principal of or
premium or interest on any Debt, if the aggregate principal amount of such Debt
is $500,000 or more, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or (ii) any other default or
any event which, with the passage of time or the giving of notice, or both,
would constitute a default under any agreement or instrument (other than the
Revolving Credit Agreement) relating to any such Debt, shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument; or (iii) any "Event of Default" as such term is defined in the
Revolving Credit Agreement or any event (however named in any successor
Revolving Credit Agreement to the Revolving Credit Agreement in effect on the
date hereof) under such successor agreement which, with the passage of time or
the giving of notice, or both, would constitute a default shall have occurred
and be continuing for a period which exceeds the lesser of (x) 30 days and (y)
the corresponding period set forth in documents relating to any Debt of
Synthetic or its Affiliates having an aggregate principal balance of greater
than $500,000 as the period during which the holders of such Debt are stayed
from any enforcement or acceleration as a result of the occurrences of such an
"Event of Default" or other event; or (iv) any Debt of the Originator, or of any
of its Affiliates, if, in the case of the Originator the aggregate principal
amount of such Debt is $500,000 or more, shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; or
(e) Either (i) any Purchase shall for any reason, except to
the extent permitted by the terms hereof, cease to create a valid and perfected
ownership interest in each Transferred Asset with respect thereto free and clear
of an Adverse Claim or (ii) this Agreement shall for any reason cease to
evidence the transfer to the Buyer of legal and equitable title to, and
ownership of, the Transferred Assets; or
(f) (i) The Originator shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Originator seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property; or (ii) the Originator shall take any
corporate action to authorize any of the actions set forth in clause (i) above
in this Section 7.01(f); or
<PAGE>
(g) There shall have occurred and be continuing an "Event of
Termination" under the Receivables Purchase Agreement;
(h) A Collection Agent Termination Event shall have occurred
and be continuing;
(i) The Originator or the Collection Agent shall fail to
perform or observe any material term, covenant or agreement contained in the
Credit and Collection Policy;
(j) The Revolving Credit Agreement shall cease to (A) be in
full force and effect, or (B) provide for a commitment to fund (subject only to
conditions that are not materially more restrictive than those set forth in the
Revolving Credit Agreement as in effect on the date hereof) in an aggregate
amount of not less than $30,000,000;
(k) The IRS or the PBGC shall have filed notice of one or more
Adverse Claims against the Originator or any of its ERISA Affiliates under ERISA
or the Code, unless such Adverse Claim does not purport to cover the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by the Originator or any of their ERISA
Affiliates (as the case may be) in a transaction with respect to which the Buyer
has given its prior written approval; or
(l) The Buyer shall have become subject to registration as an
"investment company" within the meaning of the Investment Company Act;
then, and in any such event, the Buyer may, by notice to the Originator declare
the Termination Date to have occurred, except that, in the case of any event
described in Section 7.01(f) above, the Termination Date shall be deemed to have
occurred automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence, the Buyer shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Originator. Without limiting
any other rights which the Buyer may have hereunder or under applicable law, the
Originator hereby agrees to indemnify the Buyer and its assigns, and each of
their respective directors, officers, employees, agents and attorneys (all of
the foregoing being collectively referred to as "Indemnified Parties") from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively referred to as "Indemnified Amounts") awarded
against or incurred by any of them arising out of or resulting from:
<PAGE>
(i) the sale of any Receivable under this Agreement which is
not at the date of Purchase an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by the Originator, the Collection Agent (if Synthetic or one of its
Affiliates) or any of their respective officers under or in connection with this
Agreement, which shall have been false or incorrect in any material respect when
made or deemed made or delivered;
(iii) the failure by the Originator or the Collection Agent
(if Synthetic or one of its Affiliates) to comply with any term, provision or
covenant contained in this Agreement or the Receivables Purchase Agreement or
any of the other Originator Documents, or with any applicable law, rule or
regulation with respect to any Receivable, the related Contract or the Related
Security, or the nonconformity of any Receivable, the related Contract or the
Related Security with any such applicable law, rule or regulation;
(iv) (A) the failure to vest and maintain vested in the Buyer
or to transfer to the Buyer, legal and equitable title to and ownership of, the
Receivables and the other Transferred Assets which are, or are purported to be,
sold by the Originator hereunder; or (B) the failure to grant to the Buyer a
valid and perfected ownership interest under Article 9 of the UCC in and to the
Receivables which are, or are purported to be, Transferred Assets, together with
all Collections and Related Security; in each case free and clear of any Adverse
Claim whether existing at the time of the Purchase of any such Receivable or at
any time thereafter (other than Adverse Claims created in favor of the Buyer
hereunder or by the Buyer under the Receivables Purchase Agreement);
(v) the failure by the Originator to make any payment
required on its part to be made hereunder;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables
and other Transferred Assets which are, or are purported to be, sold by the
Originator hereunder, whether at the time of any Purchase or at any subsequent
time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable which is, or is purported to be sold by an Originator hereunder
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or services related to such
Receivable or the furnishing or failure to furnish such merchandise or services;
(viii) any failure of the Originator or the Collection Agent
(if Synthetic or one of its Affiliates) to perform its duties or obligations in
accordance with the provisions of this Agreement or any failure by the
Originator or any Affiliate thereof to perform its respective duties under the
Contracts;
<PAGE>
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of whatever
sort arising out of or in connection with goods and/or merchandise which are the
subject of any Receivable or Contract;
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in connection with
the Transferred Assets;
(xi) the commingling of Collections of Transferred Assets at
any time with other funds;
(xii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or the ownership by the Buyer
of Transferred Assets;
(xiii) any attempt by any Person to void or otherwise avoid
any transfer of a Transferred Asset from the Originator to the Buyer under any
statutory provision or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
(xiv) the failure of the Originator or any of its respective
agents or representatives (including, without limitation, agents,
representatives and employees of the Originator acting pursuant to authority
granted under Section 6.01) to remit to the Collection Agent, Collections of
Transferred Assets remitted to the Originator or any such agent or
representative.
Any amounts subject to the indemnification provisions of this
Section 8.01 shall be paid by the Originator to the Buyer within two (2)
Business Days following the Buyer's demand therefor. Notwithstanding any other
provision of this Agreement to the contrary, the Originator shall not indemnify
the Indemnified Parties for or with respect to any Indemnified Amounts that
would constitute recourse for uncollectible Transferred Assets due to credit
reasons.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments and Waivers. No amendment to or
modification of any provision of this Agreement shall be effective without the
written agreement of the parties hereto and, to the extent then required in the
Receivables Purchase Agreement, the written consent of the "Deal Agent"
thereunder. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
<PAGE>
SECTION 9.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication and communication by facsimile copy)
and mailed, telexed, transmitted or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or at such other
address as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, upon
receipt, or in the case of (a) notice by mail, five days after being deposited
in the United States mails, first class postage prepaid, (b) notice by telex,
when telexed against receipt of answerback, or (c) notice by facsimile copy,
when verbal communication of receipt is obtained, except that notices and
communications pursuant to Article II shall not be effective until received.
SECTION 9.03. Setoff and Counterclaim. All payments to be made
by the Originator or the Collection Agent under this Agreement shall be made
free and clear of any counterclaim, set-off, deduction or other defense, which
the Originator or the Collection Agent may have against the Buyer, or against
each other.
SECTION 9.04. No Waiver; Remedies. No failure on the part of
the Buyer to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9.05. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the Originator, the
Buyer and their respective successors and permitted assigns. The Originator may
not assign its rights and obligations or any interest herein without the prior
written consent of the Buyer. The Buyer may, subject to any restrictions in the
Receivables Purchase Agreement, assign at any time all of its rights and
obligations hereunder and interests herein without the consent of the
Originator. Without limiting the foregoing, the Originator acknowledges the
assignment of Buyer's rights and interests hereunder pursuant to the Receivables
Purchase Agreement and agrees that, subject to the terms set forth in the
Receivables Purchase Agreement, any such assignee of the Buyer (and any further
assignee of such assignee) shall have the right, as the assignee of the Buyer
(or the assignee of such assignee), to enforce the Buyer's rights and remedies
under this Agreement directly against such party (including, without limitation,
the right (i) to appoint a successor Collection Agent and (ii) to give or
withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement or the
obligations in respect of the Originator hereunder to the same extent as the
Buyer may do), but without any obligation on the part of any such assignee to
perform any of the obligations of the Buyer hereunder. The Originator also
agrees that it shall send to "Deal Agent" under the Receivables Purchase
Agreement a copy of all notices required or desired to be given by the
Originator to the Buyer hereunder.
SECTION 9.06. Term of this Agreement. This Agreement,
including, without limitation, the Originator's obligations to observe its
covenants set forth in Articles V and VI, and the Collection Agent's obligation
to observe its covenants set forth in Article VI, shall remain in full force and
effect until the Collection Date; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made or
deemed made by Synthetic or the Originator pursuant to Articles III and IV, and
the indemnification and payment provisions of Article VIII shall be continuing
and shall survive any termination of this Agreement.
<PAGE>
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE BUYER, THE ORIGINATOR,
AND THE COLLECTION AGENT EACH HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL
COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE
OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.
SECTION 9.08. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE BUYER, THE ORIGINATOR AND THE COLLECTION AGENT EACH WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
SECTION 9.09. Costs, Expenses and Taxes. In addition to the
rights of indemnification granted to the Buyer and the Indemnified Parties under
Article VIII hereof, the Originator agrees to pay on demand all costs and
expenses of the Buyer and its assignee incurred in connection with the
preparation, execution, delivery, administration (including periodic auditing),
amendment or modification of, or any waiver or consent issued in connection
with, this Agreement and the other documents to be delivered hereunder or in
connection herewith, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Buyer and its assignee with respect
thereto, and with respect to advising the Buyer and its assignee as to its
rights and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, and all costs and expenses, if any
(including reasonable counsel fees and expenses), incurred by the Buyer and its
assignee in connection with the enforcement of this Agreement and the other
documents to be delivered hereunder or in connection herewith.
SECTION 9.10. Execution in Counterparts; Severability;
Integration. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
<PAGE>
SECTION 9.11. Confidentiality. Except to the extent otherwise
required by applicable laws, rules or regulation, unless the provider thereof
shall otherwise consent in writing the Originator agrees that it shall (i)
maintain the confidentiality of information obtained as a result of being a
party hereto, to any related documents or to any of the transactions
contemplated hereby or thereby (including, without limitation, the contents of
any summary of indicative terms and conditions with respect to such
transactions, and the provisions of this Agreement and any of the other
Originator Documents)("Confidential Information") and (ii) not disclose, deliver
or otherwise make available to any third party any part of any such Confidential
Information; provided, however, that the Originator may disclose any
Confidential Information (w) to its legal counsel, auditors and accountants, (x)
as may be required or requested by any governmental authority, regulatory body
or rating agency, (y) subject to a written confidentiality agreement having
terms substantially similar to this Section 9.11, to any financial institution
or other party that extends or is considering the extension of material debt or
equity financing to the Originator or (z) as may be required or appropriate in
response to a court order or in connection with any litigation; provided
further, however, that the Originator shall have no obligation of
confidentiality whatsoever in respect of any information which may be generally
available to the public or becomes available to the public through no fault of
the Buyer.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE ORIGINATOR: SYNTHETIC INDUSTRIES, INC.
By_________________________________
Title:
309 Lafayette Road
Chickamauga, Georgia 30707
Facsimile No.: 706-
Telephone No.: 706-
THE BUYER: SYNTHETIC FUNDING CORPORATION
By_________________________________
Title:
309 Lafayette Road
Chickamauga, Georgia 30707
Facsimile No.: 706-
Telephone No.: 706-
<PAGE>
THE COLLECTION AGENT: SYNTHETIC INDUSTRIES, INC.
By_________________________________
Title:
309 Lafayette Road
Chickamauga, Georgia 30707
Facsimile No.: 706-
Telephone No.: 706-
<PAGE>
4
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.01 of the Agreement, each of the
following items must be delivered to the Buyer prior to the Closing Date:
(a) a copy of this Agreement duly executed by each of the
Originator, the Collection Agent and the Buyer;
(b) a certificate of the Secretary or Assistant Secretary of
the Originator dated the date of this Agreement, certifying (i) the names and
true signatures of the incumbent officers of the Originator authorized to sign
this Agreement and the other documents to be delivered by it hereunder, (ii)
that the copy of the certificate of incorporation of the Originator attached
thereto is a complete and correct copy and that such certificate of
incorporation has not been amended, modified or supplemented and is in full
force and effect, (iii) that the copy of the by-laws of the Originator attached
thereto is a complete and correct copy and that such by-laws have not been
amended, modified or supplemented and are in full force and effect, and (iv) the
resolutions of the Originator's board of directors approving and authorizing the
execution, delivery and performance by the Originator of this Agreement and the
documents related thereto;
(c) Good standing certificate for the Originator issued by
the Secretary of State of its jurisdiction of incorporation;
(d) Acknowledgment copies of proper financing statements (the
"Facility Financing Statements"), dated a date reasonably near to the Closing
Date, describing the Receivables and Related Security and (i) naming the
Originator as seller of Receivables and Related Security, the Buyer as
purchaser, or other, similar instruments or documents, as may be necessary or,
in the opinion of the Buyer, desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the Buyer's interests in all
Receivables and Related Security and other Transferred Assets;
(e) Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Receivables and Related Security previously granted by the Originator;
(f) Certified copies of requests for information or copies (or
a similar search report certified by a party acceptable to the Buyer), dated a
date reasonably near to the Closing Date, listing all effective financing
statements (including the Facility Financing Statements) which name the
Originator and/or Synthetic (under their present names and any previous names)
as debtor and which are filed in the jurisdictions in which the Facility
Financing Statements were filed, together with copies of such financing
statements (none of which, other than the Facility Financing Statements, shall
cover any Receivables or Contracts except to the extent permitted under the
Intercreditor Agreement);
<PAGE>
(g) Executed copies of Lock-Box Agreements with each of the
Lock-Box Banks and an executed copy of the Collection Account Agreement with the
Collection Account Bank;
(h) The Intercreditor Agreement executed by all parties
thereto;
(i) An opinion of King & Spalding, counsel to the Originator
relating to the issues of substantive consolidation and true sale of the
Receivables and the related property, in form and substance satisfactory to the
Buyer;
(j) An opinion of King & Spalding, counsel to the Originator,
issued in connection with this Agreement and relating to corporate issues,
perfection and priority of security interests, in substantially the form of
Exhibit D, and as to such other matters as the Buyer may reasonably request;
(k) Original copies of the Receivables Purchase Agreement and
all documents described in Section 3.01 of the Receivables Purchase Agreement
and not otherwise described above; and
(l) A fully and correctly completed Asset Report, as of the
last day of the most recently concluded calendar month and a fully and correctly
completed Daily Settlement Report as of the most recent Business Day.
<PAGE>
SCHEDULE II
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached.
<PAGE>
SCHEDULE III
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Bank:
SOUTHTRUST BANK, N.A.
One Georgia Center
600 West Peachtree Street
22nd Floor
Atlanta, GA 30308
Title of Account: Account No. Lock-Box No.
Synthetic Industries 66-864-572 A0063
<PAGE>
SCHEDULE IV
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
Product Name
Fibermesh
<PAGE>
EXHIBIT A
FORM OF CONTRACTS
Attached.
<PAGE>
EXHIBIT B
FORM OF LOCK-BOX AGREEMENT
____________, 19__
[Name and Address of
Lock-Box Bank]
Re: Synthetic Industries, Inc.
Lock-Box Account No. 66-864-572
(the "Lock-Box Account")
Ladies and Gentlemen:
The undersigned, Synthetic Industries, Inc. ("Synthetic")
hereby notifies you that we have transferred exclusive ownership and control of
the above-referenced Lock-Box Account to Synthetic Funding Corporation, a
Delaware corporation, and that Synthetic Funding Corporation (the "Seller"), in
connection with certain purchase and financing arrangements between the Seller
and EagleFunding Capital Corporation (the "Purchaser"), hereby transfers
exclusive ownership and control of the above-referenced Lock-Box Account to
BancBoston Securities Inc., acting in its capacity as deal agent (the "Deal
Agent") for itself and for the Purchaser.
In connection with the foregoing, Synthetic, the Seller and
the Deal Agent each hereby instructs you, beginning on the date hereof and in
accordance with your existing procedures for management of the Lock-Box Account,
(i) to collect and deposit into the Lock-Box Account all monies, checks,
instruments and other items of payment received in the related lock-box and (ii)
to transfer to the Deal Agent an amount equal to all monies, checks, instruments
and other items of payment deposited in the Lock-Box Account on a daily basis.
All such transfers shall be made on a daily basis by depository transfer check
(DTC), automated clearing house (ACH) transfer, or wire or otherwise, as the
Deal Agent may direct you in its sole discretion, to the following account (the
"Collection Account"):
BankBoston, N.A.
Account No: __________________
Reference: BancBoston Securities Inc. Collection Account,
as Deal Agent for Synthetic Funding Securitization
or to such other account as the Deal Agent may instruct from time to time.
<PAGE>
The Seller and Synthetic also each hereby notifies you that
the Deal Agent shall be irrevocably entitled to exercise any and all rights (if
any) of Synthetic and the Seller in respect of or in connection with the
Lock-Box Account, including, without limitation, the right to specify when
payments are to be made out of or in connection with the Lock-Box Account. All
monies in the Lock-Box Account will be held for and in trust for the Deal Agent
upon deposit therein and neither Synthetic nor the Seller will have any control
over the Lock-Box Account or the funds on deposit therein. Without limiting the
generality of the foregoing, neither Synthetic nor the Seller shall have any
right to draw against the Lock-Box Account, direct the transfer of funds therein
or otherwise assign, pledge or have access to the Lock-Box Account or the funds
on deposit therein.
You will have no duty to inquire into the source or use of any
monies, checks, drafts, instruments or other items or amounts deposited into the
Lock-Box Account. The Seller and Synthetic each hereby agrees that any deposits
of monies, checks, drafts, instruments or other items into or withdrawals from
the Lock-Box Account now or hereafter directed by the Deal Agent are authorized
by the Seller and Synthetic, and each of Synthetic and the Seller acknowledges
that it has no right to direct such transfers at any time. You shall be fully
protected in acting on any instruction of the Deal Agent with respect to the
Lock-Box Account without making any inquiry as to the Deal Agent's authority to
give such instruction.
Notwithstanding anything herein or elsewhere to the contrary,
including but not limited to any provision of the Loan and Security Agreement
dated as of December 18, 1997, by and between Synthetic and the financial
institutions party thereto from time to time as lenders and BankBoston, N.A., as
Agent (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Loan and Security Agreement"), you hereby waive any and
all rights to bankers liens and rights to deduct from or set-off against amounts
in the Lock-Box Account, except that: (i) in the event that any checks deposited
in the Lock-Box Account are returned unpaid to you, the amount thereof shall be
charged to the Lock-Box Account, and (ii) any monthly maintenance fees in
connection with the Lock-Box Account may also be charged to the Lock-Box
Account. The Seller hereby agrees that if there are insufficient funds in the
Lock-Box Account to cover any such charges to the Lock-Box Account, then it will
pay to you the amount of such deficiency on demand. In the event the Seller
fails to reimburse you as set forth above, you may so notify the Deal Agent, and
the Deal Agent may, but shall have no obligation to, pay the same.
The use of any such checks or electronic or other means of
funds transfer, together with the resolutions authorizing the same, are intended
to affirm the rights and the interests of the Deal Agent in the Lock-Box Account
and all funds deposited therein and not to derogate therefrom.
The taxpayer identification number associated with the
Lock-Box Account shall be that of the Seller and the Seller will report for
federal, state and local income tax purposes the income, if any, earned on funds
in the Lock-Box Account.
<PAGE>
This letter agreement may not be terminated at any time by
Synthetic or the Seller, but may be terminated by either you or the Deal Agent
upon 30 days' prior written notice to the other and to the undersigned.
You will not assign or transfer your rights or obligations
hereunder (other than to the Deal Agent) without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this letter
agreement shall inure to the benefit of and be binding upon all parties hereto
and their respective successors and assigns.
Any change, amendment, modification or waiver of this letter
agreement or any provision hereof will not be effective unless such change,
amendment, modification or waiver is in writing and signed by all parties
hereto.
All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be
effective if communicated in writing and personally delivered or sent by
registered, certified, express or regular mail, postage prepaid, return receipt
requested, or by telex, telecopy (receipt promptly confirmed by telephone) or
prepaid telegram (with messenger delivery specified in the case of a telegram)
or by telephone (promptly confirmed in writing) and shall be deemed to be given
for purposes of this letter agreement on the day that such communication is
delivered to the intended recipient thereof in accordance with the provisions of
this paragraph. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
telex, telecopy or telephone numbers) indicated below, or at such other address
as any party hereto may notify to the other parties in accordance with the
provisions of this paragraph.
All bank statements on the Lock-Box Account should be sent to the
Seller at:
Synthetic Funding Corporation
309 LaFayette Road
Chickamauga, Georgia 30707
Attn:
With a copy to the Deal Agent at:
BancBoston Securities Inc.
100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: John T. Hackett III
<PAGE>
Each of Synthetic and the Seller consents and agrees to the
foregoing, authorizes you to enter into this letter agreement, and agrees to
indemnify and hold you harmless from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses and
liabilities of every nature and character arising out of your compliance with
the terms of this letter agreement, except such as result from your gross
negligence or willful misconduct, and in no event shall you be liable for any
consequential, indirect or special damages and except that losses for
uncollected checks shall be the responsibility of the Seller to the extent not
set-off against other funds in the Lock-Box Account.
You and each of the parties hereto (other than the Seller)
hereby agree (which agreement shall, pursuant to the terms of this letter
agreement, be binding upon its successors and assigns) that you and each of the
parties hereto shall not institute against, or join any other Person in
instituting against the Seller any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and a day after the payment in
full of all of the indebtedness of the Seller and the termination of any of the
commitments under each of the "Facility Documents", as such term is defined
under the Receivables Purchase Agreement. The provisions of this paragraph shall
survive the termination of this letter agreement.
This letter agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts and
applicable federal law.
This letter agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute one and the same instrument.
This letter agreement constitutes the entire agreement between
the parties hereto relating to the Lock-Box Account and the other matters herein
described and supersedes any and all prior agreements relating to such matters,
including but not limited to the Agency Account Agreement between Synthetic,
SouthTrust Bank of Georgia, N.A. and BankBoston, N.A. (formerly known as "The
First National Bank of Boston"), dated as of October 20, 1995.
[Remainder of Page Intentionally Left Blank]
<PAGE>
Please agree to the terms of, and acknowledge receipt of, this
notice by signing in the space provided below.
Very truly yours,
SYNTHETIC INDUSTRIES, INC.
By:____________________________
Title:
Address: 309 LaFayette Road
Chickamauga, Georgia 30707
Telephone:
Telecopy:
SYNTHETIC FUNDING CORPORATION
By:____________________________
Title:
Address: 309 LaFayette Road
Chickamauga, Georgia 30707
Telephone:
Telecopy:
BANCBOSTON SECURITIES INC.,
as Deal Agent
By:____________________________
Title:
Address: 100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: Mitchell Feldman
Telephone: (617) 434-5760
Telecopy: (617) 434-9591
<PAGE>
6
Accepted this __th day
of December, 19__
[NAME OF BANK]
By:________________________________
Title:
Address: ___________________
-------------------
Attn: ______________
Telephone: (___) ________
Telecopy: (___) ________
<PAGE>
The undersigned, BankBoston, N.A. (formerly known as "The First
National Bank of Boston") on behalf of itself and in its capacity as agent under
(a) the Fourth Amended and Restated Revolving Credit and Security Agreement
among Synthetic Industries, Inc., the financial institutions party thereto from
time to time as the "Lenders" and The First National Bank of Boston, as agent
for the Lenders, dated October 20, 1995, and (b) the "Loan and Security
Agreement" (as defined in the attached letter agreement), hereby agrees that the
attached letter agreement supersedes any and all prior agreements relating to
Account # 66-864-572 at SouthTrust Bank of Georgia, N.A. (the "Lock-Box
Account") and the other matters described in the attached letter agreement,
including but not limited to the Agency Account Agreement between itself,
Synthetic Industries, Inc. and SouthTrust Bank of Georgia, N.A., dated as of
October 20, 1995, and hereby releases, relinquishes and disclaims any and all of
its right, title and interest in, to and under the Lock-Box Account, which
release shall become effective with respect to such Agency Account upon the
effectiveness of the attached letter agreement.
Date: _________________ BANKBOSTON, N.A.
By:_______________________
Title:______________________
<PAGE>
EXHIBIT C
FORM OF ASSET REPORT
Attached.
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE ORIGINATOR
Attached.
<PAGE>
EXHIBIT E
FORM OF ORIGINATOR NOTE
Attached.
<PAGE>
5
EXHIBIT E
FORM OF
SYNTHETIC FUNDING CORPORATION
NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE
[Date]
THIS NON-NEGOTIABLE SUBORDINATED PROMISSORY NOTE AND ANY
INTEREST REPRESENTED HEREBY SHALL NOT BE TRANSFERRED,
ASSIGNED, EXCHANGED, CONVEYED, PLEDGED, HYPOTHECATED, OR
OTHERWISE THE SUBJECT OF A GRANT OF A SECURITY INTEREST,
ABSENT THE PRIOR WRITTEN CONSENT OF THE HOLDER AND THE DEAL
AGENT, AND ANY ATTEMPT TO TRANSFER, ASSIGN, CONVEY, PLEDGE,
HYPOTHECATE OR GRANT A SECURITY INTEREST IN THIS NOTE OR ANY
INTEREST REPRESENTED HEREBY, EXCEPT WITH THE PRIOR WRITTEN
CONSENT OF THE HOLDER AND THE AGENT, SHALL BE VOID AND OF NO
EFFECT.
SYNTHETIC FUNDING CORPORATION (the "Issuer"), for value
received, hereby promises to pay to SYNTHETIC INDUSTRIES, INC. (the "Holder"),
or its permitted assigns, at its address for payments set forth in the
Originator Purchase Agreement hereinafter referred to, an amount equal to the
aggregate principal amount of the Originator Loans, as calculated under the
Originator Purchase Agreement from time to time (which amount shall be equal to
the Purchase Price of the Purchase made on December ___, 1997 minus the amount
of cash paid to the Holder on the date of such Purchase pursuant to Section
2.02(a) of the Originator Purchase Agreement minus the amount of the Purchase
Price of the Purchase paid by way of a capital contribution under Section
2.01(c) of the Originator Purchase Agreement, upon the date occurring one year
and one day after the occurrence of the Collection Date (the "Final Payment
Date"), unless earlier prepaid pursuant to the provisions for repayment referred
to herein, to the extent permitted under the terms of the Originator Purchase
Agreement, and to pay interest (computed on the basis of a 360-day year and the
actual number of days in each calendar year) on the unpaid principal sum, at a
variable interest rate per annum equal to the Base Rate, from the date such
principal sum is advanced, such interest being payable on (a) __________ __,
1998, and on each Monthly Payment Date thereafter and (b) on the earlier of (1)
the date of prepayment and (2) the Final Payment Date, until the principal
hereof is paid in full. The Holder shall enter on the grid attached hereto, as
Attachment A, information reflecting the date and the amount of any payments
made hereon.
Payments of the principal of and interest on this
Non-negotiable Subordinated Promissory Note (the "Note") will be made in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts by check
<PAGE>
mailed to, or wire transfer in federal funds to the account of, the Holder as
directed by the Holder. If any payment on this Note shall remain unpaid on the
due date thereof, the same shall thereafter be payable with interest thereon (to
the extent permitted by law) at a variable rate equal to 2% per annum above the
Base Rate, from such due date to the date of payment thereof.
This Note is issued under the Receivables Purchase and Sale
Agreement dated as of December 18, 1997, among Synthetic Industries, Inc., as
the originator and the "Collection Agent" thereunder, and the Issuer (as
amended, restated, supplemented or otherwise modified from time to time, the
"Originator Purchase Agreement"), and is the "Originator Note" described in, and
is subject to the terms and conditions set forth in, the Originator Purchase
Agreement. This Note represents all or a portion of the Purchase Price for
Receivables purchased by the Issuer pursuant to the terms of the Originator
Purchase Agreement. Each capitalized term utilized herein which is defined in
the Originator Purchase Agreement shall have the meaning ascribed to such term
in the Originator Purchase Agreement.
This Note is subject to prepayment in full or in part at the
option of the Issuer at any time upon three Business Days' prior notice to the
Holder, without a premium, subject in all events to the terms of the Originator
Purchase Agreement.
This Note is subordinate and junior in right and time of
payment to all obligations and required payments or deposits of the Issuer in
favor of EagleFunding Capital Corporation ("EagleFunding") and/or BancBoston
Securities Inc. (as the "Deal Agent" for and on behalf of Eagle Funding and its
assignees) (collectively, together with their respective successors and
assignees, the "Senior Claimants"), howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter, or due or
to become due on or before the Final Payment Date (collectively, the "Senior
Issuer Claims"), pursuant to the following subordination provisions (the
"Subordination Provisions"):
(A) The Holder agrees upon any distribution of all or any
of the assets of the Issuer to creditors of the Issuer upon the dissolution,
winding up, total or partial liquidation, arrangement, reorganization,
adjustment protection, relief, or composition of the Issuer or its debts, any
payment or distribution of any kind in respect of this Note (including, without
limitation, cash, property, securities and any payment or distribution which may
be payable or deliverable by reason of the payment of any other Debt of the
Issuer being subordinated to the payment of this Note) that otherwise would be
payable or deliverable upon or with respect to this Note, directly or
indirectly, by set-off or in any other manner, including, without limitation,
from or by way of liquidation of the Transferred Assets, shall be paid or
delivered directly to the Deal Agent for application (in the case of cash) to,
or as Related Security or Collections on the Transferred Assets, for the payment
or prepayment in full of all amounts payable under the Senior Issuer Claims,
until all of the Senior Issuer Claims shall have been indefeasibly paid in full
in cash. BancBoston Securities Inc. as the Deal Agent, is irrevocably authorized
and empowered (in its own name or in the name of the Holder or otherwise), but
shall have no obligation, to demand, sue for, collect and receive every payment
or distribution referred to in the preceding sentence and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting this Note and enforcing any security
interest or other lien securing payment of this Note) as the Deal Agent may
request to (i) collect this Note for the
<PAGE>
account of itself and the other Senior Claimants and to file appropriate claims
or proofs of claim in respect of this Note, (ii) execute and deliver to the Deal
Agent such powers of attorney, assignments or other instruments as the Deal
Agent may request in order to enable the Deal Agent to enforce any and all
claims with respect to, and any security interest and other liens securing
payment of, this Note, and (iii) collect and receive any and all payments or
distribution which may be payable or deliverable upon or with respect to this
Note.
(B) All payments or distributions upon or with respect to this
Note that are received by the Holder contrary to the provisions of this Note,
any of the Originator Purchase Agreement, the Receivables Purchase Agreement,
the Intercreditor Agreement or the Lock-Box Agreement, or any of the other
documents, agreements and instruments entered into in connection therewith and
the transactions contemplated thereby (collectively, the "Facility Documents")
shall be received in trust for the benefit of the Senior Claimants, shall be
segregated from other funds and property held by the Holder and shall be
forthwith paid over to the Deal Agent in the same form as so received (with any
necessary endorsement) to be applied (in the case of cash) to, or held as
Related Security or Collections (in the case of non-cash property) for the
payment or prepayment in full of the Senior Issuer Claims until the Senior
Issuer Claims shall have been indefeasibly paid in full in cash. The Holder
agrees that no payment or distribution to any of the Senior Claimants pursuant
to the provisions of this Note shall entitle the Holder to exercise any rights
of subrogation in respect thereof against the Issuer until the Senior Issuer
Claims shall have been indefeasibly paid in full and in cash. The Holder and the
Issuer hereby waive promptness, diligence, notice of acceptance and any other
notice with respect to any of the Senior Issuer Claims and any requirement that
the Agent or any other Person protect, secure, perfect or insure any security
interest or lien on any property subject thereto or exhaust any right or take
any action against the Issuer or any other Person or any assets or property.
(C) The Holder agrees and confirms that none of the Senior
Claimants (including, without limitation, the Deal Agent) shall have any duty
whatsoever to the Holder as holder of this Note and that none of the Senior
Claimants shall be liable to the Holder for any action taken or omitted, to the
extent authorized under the terms of any Facility Document, with respect to this
Note.
(D) Prior to the indefeasible payment in full and in cash of
all of the Senior Issuer Claims, the Holder will not seek to collect, ask,
demand, sue for or take or receive from the Issuer in cash or other property, by
set-off or in any other manner, any amounts owing under this Note in any manner,
or exercise or enforce any of its rights under this Note.
(E) The Holder and the Issuer agree that at no time hereafter
will any part of the indebtedness represented by this Note be represented by any
negotiable instruments or other writings except this Note.
(F) The Holder and the Issuer waive notice of and consent to
the creation of additional Senior Issuer Claims from time to time pursuant to
the other Facility Documents, and any other obligation, any extensions granted
by any of the Senior Claimants with respect thereto, the taking or releasing of
collateral or any obligors or guarantors for the payment thereof, and the
releasing of the Holder or any other subordinating creditors. No failure or
delay by any of the
<PAGE>
Senior Claimants to exercise any right granted herein, or in any other agreement
or bylaw shall constitute a waiver of such right or of any other right.
(G) The Holder and the Issuer agree to execute and deliver to
any of the Senior Claimants, such additional documents, and to take such further
actions as any of such Senior Claimants may hereafter reasonably require to
evidence the subordination of this Note.
(H) The terms of this Note and the subordination effected
hereby and the rights of the Senior Claimants, and the obligations of the Holder
and the Issuer arising hereunder and under the Originator Purchase Agreement,
shall not be affected, modified or impaired in any manner or to any extent by
(i) any amendment or modification of or supplement to any provision of any
Facility Document, or any instrument or document executed or delivered pursuant
thereto or in connection with the transactions contemplated thereby; (ii) the
validity or enforceability of any of such documents; (iii) any exercise or
non-exercise of any right, power or remedy under or in respect of any of the
Issuer or the Senior Issuer Claims or any agreements, instruments or documents
related thereto or arising at law or equity; or (iv) any waiver, consent
release, indulgence, extension, renewal, modification, delay or other action,
inaction, or omission in respect of the Issuer, the Senior Issuer Claims or any
of the instruments, documents or agreements related thereto.
(I) All payments of principal, interest and all other amounts
payable in respect of the Senior Issuer Claims must be paid before any portion
of the principal amount of this Note may be paid or prepaid. All payments of
principal, interest and all other amounts then due and payable in respect of the
Senior Issuer Claims must be paid before any portion of the accrued interest on
this Note may be paid on any day. All scheduled payments of principal and
interest then due on this Note shall be payable only to the extent that the
Issuer has available funds to make such payments, and is permitted to make such
payments under the Facility Documents (including, without limitation, the
Originator Purchase Agreement).
The Holder, and any assignee of the Holder, by accepting this
Note, hereby agrees to the Subordination Provisions. Neither this Note nor any
right of the Holder to receive any payment thereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated or otherwise
conveyed; provided, however, that the Holder may pledge or otherwise transfer
this Note with the prior written consent of the Issuer and the Deal Agent;
provided, further, that any assignee of this Note shall be bound by all of the
terms applicable to this Note set forth in the Facility Documents.
The Holder of this Note and any of its assignees, by its
acceptance hereof, hereby covenants and agrees that it will not at any time
institute against the Issuer, or join any other Person in instituting against
the Issuer, any proceedings of the type referred to in clause (i) of Section
7.01(f) of the Originator Purchaser Agreement, or take any corporate action in
furtherance of any such action.
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be duly executed manually by its undersigned officer duly authorized thereunto.
Dated: December __, 1997
SYNTHETIC FUNDING CORPORATION
By: _________________________
Name:
Title:
<PAGE>
[Execution Version]
[Synthetic]
RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of December 18, 1997
Among
SYNTHETIC INDUSTRIES, INC.,
as the Originator
and
SYNTHETIC FUNDING CORPORATION,
as the Buyer
and
SYNTHETIC INDUSTRIES, INC.
as the Collection Agent
<PAGE>
iv
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE IDEFINITIONS..............................................................................................1
SECTION 1.01. Certain Defined Terms.....................................................................1
SECTION 1.02. Accounting & Certain Other Terms.........................................................11
SECTION 1.03. Other Terms..............................................................................11
SECTION 1.04. Computation of Time Periods..............................................................12
ARTICLE IIAMOUNTS AND TERMS OF THE PURCHASES.....................................................................12
SECTION 2.01. Agreement to Purchase....................................................................12
SECTION 2.02. Payment for the Purchases................................................................13
SECTION 2.03. Settlement Procedures....................................................................14
SECTION 2.04. Payments and Computations, Etc...........................................................16
SECTION 2.05. Transfer of Records to the Buyer..........................................................16
ARTICLE IIICONDITIONS OF PURCHASES...............................................................................17
SECTION 3.01. Conditions Precedent to Initial Purchase.................................................17
SECTION 3.02. Conditions Precedent to All Purchases and Remittances of Collections.....................17
SECTION 3.03. Effect of Payment of Purchase Price......................................................17
ARTICLE IVREPRESENTATIONS AND WARRANTIES.........................................................................18
SECTION 4.01. Representations and Warranties of the Originator.........................................18
ARTICLE VGENERAL COVENANTS.......................................................................................23
SECTION 5.01. General Covenants........................................................................23
ARTICLE VIADMINISTRATION, COLLECTION AND MONITORING OF ASSETS....................................................28
SECTION 6.01. Appointment and Designation of the Collection Agent......................................28
SECTION 6.02. Collection of Receivables by the Collection Agent; Extensions and Amendments of
Receivables....................................................................................29
SECTION 6.03. Distribution and Application of Collections..............................................29
SECTION 6.04. Other Rights of the Buyer................................................................30
SECTION 6.05. Records; Audits..........................................................................30
SECTION 6.06. Receivable Reporting.....................................................................31
SECTION 6.07. Collections and Lock-Boxes...............................................................31
SECTION 6.08. UCC Matters; Protection and Perfection of Transferred Assets.............................32
SECTION 6.09. Obligations of the Originator With Respect to Receivables................................33
SECTION 6.10. Applications of Collections..............................................................34
SECTION 6.11. Annual Servicing Report of Independent Public Accountants................................34
ARTICLE VIIEVENTS OF TERMINATION.................................................................................35
SECTION 7.01. Events of Termination....................................................................35
ARTICLE VIIIINDEMNIFICATION......................................................................................37
SECTION 8.01. Indemnities by the Originator.............................................................37
ARTICLE IXMISCELLANEOUS..........................................................................................40
SECTION 9.01. Amendments and Waivers...................................................................40
SECTION 9.02. Notices, Etc.............................................................................40
SECTION 9.04. No Waiver; Remedies......................................................................40
SECTION 9.05. Binding Effect; Assignability............................................................41
SECTION 9.06. Term of this Agreement...................................................................41
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF OBJECTION TO VENUE........................................................................41
SECTION 9.08. WAIVER OF JURY TRIAL.....................................................................42
SECTION 9.09. Costs, Expenses and Taxes................................................................42
SECTION 9.10. Execution in Counterparts; Severability; Integration....................................42
SECTION 9.11. Confidentiality..........................................................................43
</TABLE>
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I Condition Precedent Documents
SCHEDULE II Description of Credit and Collection Policy
SCHEDULE III Lock-Box Banks and Lock-Box Accounts
SCHEDULE IV Tradenames, Fictitious Names and "Doing Business As" Names
EXHIBITS
EXHIBIT A Form of Contracts
EXHIBIT B Form of Lock-Box Agreements
EXHIBIT C Form of Asset Report
EXHIBIT D Form of Opinion of Counsel for the Originator
EXHIBIT E Form of Originator Note
::ODMA\PCDOCS\WASHINGTON\37565\11 September 4, 1997 (11:46am)
THIS RECEIVABLES PURCHASE AGREEMENT (the "Agreement") is made
as of December 18, 1997, among:
(1) SYNTHETIC FUNDING CORPORATION, a Delaware corporation (the
"Seller");
(2) EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation
("EagleFunding");
(3) BANCBOSTON SECURITIES INC. ("BSI"), as agent (the "Deal
Agent"); and
(4) SYNTHETIC INDUSTRIES, INC., a Delaware corporation
("Synthetic"), in its capacity as the initial Collection Agent
hereunder (in such capacity, the "Collection Agent").
IT IS AGREED as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.
(a) Certain capitalized terms used throughout this Agreement
are defined above or in this Section 1.01.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined).
"Adjusted Base Rate" means at any time, the rate of interest
equal to the sum of (i) the Applicable Base Rate Margin and (ii) the Base Rate
in effect at such time and from time to time.
"Adjusted Eurodollar Rate" means, with respect to any Purchase
Period for all Capital allocated to such Purchase Period, an interest rate per
annum equal to the sum of
(a) a per annum rate equal to the Applicable Eurodollar
Margin; plus
(b) the quotient, stated as a percentage, of (i) the per annum
rate determined by the Deal Agent at which Dollar deposits for such Purchase
Period are offered by BankBoston, N.A. based on information presented on
Telerate Page 3750 as of 11:00 a.m. London time on the second Business Day prior
to the first day of such Purchase Period, divided by (ii) a number equal to 1.00
minus the Eurodollar Reserve Percentage, if applicable.
<PAGE>
-7-
"Administrative Fee" means the fee payable by the Seller to
the Deal Agent annually in advance on the Closing Date and on each anniversary
of the Closing Date, and identified as the "Administrative Fee" in the Fee
Letter. If a Termination Date occurs prior to December 18, 2002 for any reason
other than (i) the date of the declaration or automatic occurrence of the
Termination Date pursuant to Section 7.01, or (ii) as the result of the
occurrence of a Reinvestment Termination Date resulting from the failure of the
condition precedent of Section 3.02 to be satisfied, the Deal Agent shall be
required to refund to the Seller the unearned portion of the Administrative Fee
(calculated based on a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed from the Closing Date (or such anniversary) to
such Termination Date.
"Adverse Claim" means a lien, security interest, charge,
encumbrance or other right or claim of any Person.
"Affected Party" has the meaning assigned to that term in
Section 2.10(a).
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Aggregate Reserves" means, on any day, the greater of (i) the
sum of the Dilution Reserve, the Loss Reserve and the Yield Reserve, in each
case as in effect on such day, and (ii) the product of (A) a fraction, the
numerator of which is .15 and the denominator of which is the remainder of 1.0
minus .15, multiplied by (B) the aggregate amount of Capital outstanding on such
day.
"Alternative Rate" means, with respect to any Purchase Period
for all Capital allocated to such Purchase Period, an interest rate per annum
equal to the Adjusted Eurodollar Rate or the Adjusted Base Rate as the Seller
shall select by notice to the Deal Agent in accordance with the terms of this
Agreement; provided, however, that the "Alternative Rate" for such Capital
allocated to such Purchase Period shall be the Adjusted Base Rate if (a) on or
before the first day of such Purchase Period, the Purchaser shall have notified
the Deal Agent that a Eurodollar Disruption Event has occurred, (b) such
Purchase Period is a period of 29 days or less, or (c) such Capital is less than
$1,000,000.
"Applicable Base Rate Margin" means the "Applicable Margin" as
such term is defined in the Revolving Credit Agreement applicable to "Base Rate
Loans" thereunder (as such agreement is in effect on the date hereof without
giving effect to any amendments or modifications thereof).
"Applicable Eurodollar Rate Margin" means the "Applicable
Margin" as such term is defined in the Revolving Credit Agreement applicable to
Eurodollar Rate Loans thereunder (as such agreement is in effect on the date
hereof without giving effect to any amendments or modifications thereof).
<PAGE>
"Asset Report" means a report, in substantially the form of
Exhibit C, furnished by the Collection Agent to the Deal Agent for the Purchaser
pursuant to Section 6.06(b).
"Asset Report Date" means, with respect to any calendar month,
the eighth day of such month, or if such date is not a Business Day, the next
Business Day to occur thereafter.
"Assignment and Acceptance" means an assignment and acceptance
pursuant to which the assignee agrees to purchase an interest in the Purchased
Interest and this Agreement from the Purchaser, in form and substance
satisfactory to the Deal Agent and the Seller, entered into by the Purchaser and
such assignee pursuant to Section 10.04.
"Average Maturity" means, on any day, that period (expressed
in days) computed as of the last day of the calendar month relating to the Asset
Report most recently delivered hereunder, as the average days outstanding of the
Receivables in accordance with the following formula: the quotient of (a) the
Outstanding Balance of Receivables on the first day of such month plus the
Outstanding Balance of Receivables on the last day of the month, divided by two,
and then multiplied by 30; divided by (b) the aggregate amount of the original
principal balances of all Receivables which became Receivables during such
month.
"Bankruptcy Code" means the United States Bankruptcy Reform
Act of 1978 (11 U.S.C. ss.ss. 101, et seq.), as amended from time to time, or
any successor statute.
"Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the per annum rate of interest announced
from time to time by BankBoston, N.A. at its head office in Boston,
Massachusetts as its "base rate", and (ii) 1/2 of one percent per annum above
the Federal Funds Rate.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Seller or any ERISA Affiliate of
the Seller is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means a day of the year other than a Saturday
or a Sunday on which (a) banks are required to be open in New York City,
Atlanta, Georgia and Boston, Massachusetts and (b) if the term "Business Day" is
used in connection with the Adjusted Eurodollar Rate, dealings in dollar
deposits are carried on in the London interbank market.
"Capital" means the sum of the amounts paid to the Seller for
the initial Purchase and in connection with each Capital Increase pursuant to
Section 2.02, reduced from time to time by any amounts paid by the Seller as a
reduction to Capital and any Collections received and distributed on account of
such Capital pursuant to Section 2.06; provided, however, that such Capital
shall not be reduced by any distribution of any portion of Collections if at any
time such distribution is rescinded or must be returned for any reason.
"Capital Increase" means any increase in the aggregate
outstanding Capital hereunder pursuant to Sections 2.01 and 2.02.
<PAGE>
"Capital Limit" means, at any time, an amount equal to the
remainder of (a) the Eligible Receivables Balance at such time, minus (b) the
Aggregate Reserve at such time.
"Closing Date" means December 23, 1997.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor.
"Collection Account" has the meaning specified in Section 6.07
"Collection Account Bank" means the financial institution
maintaining the Collection Account, which initially shall be BankBoston, N.A.
"Collection Agent" means at any time the Person then
authorized pursuant to Article VI to service, administer and collect
Receivables.
"Collection Agent Fee" has the meaning assigned to that term
in Section 2.09(b).
"Collection Agent Fee Percentage" means, at any time, the per
annum rate used to calculated the Collection Agent Fee pursuant to Section
2.09(b),as set forth in the Asset Report most recently delivered to the Deal
Agent hereunder.
"Collection Agent Termination Event" means the occurrence of
any of the following:
(i) any Event of Termination;
(ii) a material failure on the part of the Collection Agent to
observe or perform any of its duties or obligations as Collection Agent under
this Agreement or as "Collection Agent" under the Originator Sale Agreement, as
determined by the Deal Agent in the exercise of its reasonable commercial
judgment and such failure shall continue uncured or unwaived for a period of 15
days after written notice thereof to the Collection Agent; or
(iii) in the event that the Collection Agent is Synthetic or
any of its Affiliates, Synthetic shall fail to comply at any time with any of
the provisions of Section 12.1 of the Revolving Credit Agreement, or any other
similar provisions of the Revolving Credit Agreement (including, without
limitation, any replacement or refinancing of the Revolving Credit Agreement)
which from time to time may contain financial covenants or related "Events of
Default" (and in the event that the Revolving Credit Agreement is canceled or
terminated (and not replaced or refinanced), or otherwise ceases to be in force
at any time hereafter, the foregoing provisions shall apply to the
above-referenced sections of the Revolving Credit Agreement, as such provisions
were in effect on the day prior to the day on which the Revolving Credit
Agreement was so canceled or terminated, or otherwise ceased to be in force),
and such failure to comply shall continue uncured or unwaived for a period of 30
days or more.
<PAGE>
"Collection Date" means the date following the Termination
Date on which the aggregate outstanding Capital has been reduced to zero, the
Purchaser has received all Yield and other amounts due to it in connection with
this Agreement and the Deal Agent has received all amounts due to it in
connection with this Agreement.
"Collections" means, (a) with respect to any Receivable, all
cash collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of the Related Security with respect to such
Receivable, and any "Collection" of such Receivable deemed to have been received
pursuant to Section 2.07, and (b) any amounts paid to the Seller (or the Deal
Agent, the Collection Agent, the Purchaser or any assignees thereof) pursuant to
the terms of the Originator Sale Agreement.
"Commercial Paper" means the short-term promissory notes of
EagleFunding denominated in dollars, issued by EagleFunding in connection with
the transactions contemplated by the Facility Documents, including any portion
of such short-term promissory notes that are identified on the books and records
of EagleFunding as issued in respect of the transactions contemplated by the
Facility Documents.
"Concentration Limit" for any Obligor means at any time the
percentage of the aggregate Outstanding Balance of Eligible Receivables in
effect at such time, as follows: (a) for any single Obligor having an
indebtedness rating of at least "A-1" or its equivalent by each of S&P, Moody's
and DCR (if rated by DCR), there shall be no "Concentration Limit"; (b) for any
single Obligor having an indebtedness rating of at least "A-2" or its equivalent
by each of S&P, Moody's and DCR (if rated by DCR) (but not satisfying the
criteria set forth in clause (a) above), 10.0%; (c) for any single Obligor
having an indebtedness rating of at least "A-3" or its equivalent by each of
S&P, Moody's and DCR (if rated by DCR) (but not satisfying the criteria set
forth in either of clauses (a) or (b) above), 5.0%; and (d) any other single
Obligor, 2.0%; unless, a "Special Concentration Limit" has been determined for a
particular Obligor by the mutual agreement of the Deal Agent and the Seller, in
which case, such Special Concentration Limit shall apply; provided, however, the
Concentration Limit for any Obligor shall be calculated as if such Obligor and
all of such Obligor's Affiliates were one single Obligor. The parties hereto
agree that, as of the date hereof and unless otherwise agreed to by each of the
Deal Agent and the Seller, a "Special Concentration Limit" of 4.0% exists for
Shaw Industries Inc. Any amendment or modification of the Concentration Limit
and the Special Concentration Limit shall not be effective absent written
confirmation by each Rating Agency then rating the Commercial Paper at the
request of EagleFunding in accordance with Section 10.01(c) of this Agreement.
"Contract" means an invoice issued by the Originator to a
Person, or an agreement between the Originator and a Person, in each case in
substantially the form of one of the forms set forth in Exhibit A or otherwise
acceptable to the Deal Agent, pursuant to or under which such Obligor shall be
obligated to make one or more payments to the Originator.
"Coverage Shortfall Event" means, at any time, the aggregate
Capital outstanding hereunder exceeds the lesser of (i) the Purchase Limit in
effect at such time or (ii) the Capital Limit in effect at such time.
<PAGE>
"CP Dealer Fee" means, on any day, the fees payable to the
Dealer in respect of any Commercial Paper.
"CP Disruption Event" means the inability of EagleFunding, at
any time, whether as a result of a prohibition, a contractual restriction or any
other event or circumstance whatsoever, to raise funds through the issuance of
its commercial paper notes (whether or not constituting "Commercial Paper"
hereunder) in the United States commercial paper market.
"CP Rate" means, with respect to any Purchase Period for all
Capital allocated to such Purchase Period, the rate equivalent to the rate (or
if more than one rate, the weighted average of the rates) at which commercial
paper notes of EagleFunding having a term equal to such Purchase Period and to
be issued to fund or maintain the applicable Purchase by EagleFunding may be
sold by any placement agent or commercial paper dealer selected by EagleFunding,
as agreed between each such agent or dealer and EagleFunding and notified by
EagleFunding or such agent or dealer to the Deal Agent and the Collection Agent,
including an increment to such rate sufficient in amount to enable EagleFunding
to collect all amounts of CP Dealer Fees payable in respect of all such
commercial paper notes issued for the term of such Purchase Period; provided,
however, if the rate (or rates) as agreed between any such agent or dealer and
EagleFunding with regard to any Purchase Period for the applicable Purchase is a
discount rate (or rates), the "CP Rate" for such Purchase Period shall be the
rate (or if more than one rate, the weighted average of the rates) resulting
from converting such discount rate (or rates) to an interest-bearing equivalent
rate per annum.
"Credit and Collection Policy" means those credit and
collection policies and practices relating to Contracts and Receivables
described in Schedule II, as modified in compliance with this Agreement.
"Daily Settlement Report" has the meaning assigned to that
term in Section 5.01(c)(viii).
"DCR" means Duff & Phelps Credit Rating Co., and any successor
thereto.
"Deal Agent's Account" means a special account (account number
24207) in the name of the Deal Agent (or for so long as EagleFunding is the
Purchaser, in the name of EagleFunding), maintained at Bankers Trust Company for
the benefit of the Deal Agent and the Purchaser.
"Dealer" means any dealer or placement agent in respect of the
Commercial Paper.
<PAGE>
"Debt" of any Person means (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services beyond ordinary course of
business payment terms for trade payables, (d) obligations of such Person as
lessee under leases which shall have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by an Adverse Claim upon
property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations and (f) obligations of such
Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (a) through (e) above.
"Defaulted Receivable" means a Receivable (a) as to which any
payment, or part thereof, remains unpaid for more than 90 days from the original
due date for such payment, (b) as to which the Obligor thereof has taken any
action, or suffered any event to occur, of the type described in Section
7.01(f), or (c) which, consistent with the Credit and Collection Policy, has
been or should be written off the Seller's books as uncollectible.
"Delinquency Ratio" means, in respect of any calendar month,
the arithmetic average of the ratios (each expressed as a percentage) for each
of the three most recently ended calendar months, computed as of the last day of
each such month, by dividing
(a) the aggregate Outstanding Balance of all
Receivables that were 61-90 days past due as of the last day
of such calendar month plus (without duplication) the amount
of all Receivables which, consistent with the Credit and
Collection Policy, were or should have been written off the
books of the Seller during such month, by
(b) the sum of the aggregate Outstanding Balances of
all Receivables as of the last day of the fourth calendar
month next preceding the calendar month then ended.
"Dilution Factors" means, with respect to the Receivables, any
credits, rebates, freight charges, discounts, allowances, disputes, chargebacks,
returned or repossessed goods, inventory transfers, allowances for early
payments and other allowances or adjustments granted in accordance with the
Originator's and the Seller's usual practices.
"Dilution Ratio" means, in respect of any calendar month, the
arithmetic average of the ratios (each expressed as a percentage) for each of
the 12 most recently ended calendar months, computed as of the last day of each
such month, by dividing
(a) the aggregate reduction as a result of any of the Dilution
Factors in the aggregate original principal balance of the Receivables
during the period of one month then ended, by
(b) the aggregate original principal balances of all
Receivables which became Receivables during the calendar month next
preceding the calendar month then ended.
<PAGE>
"Dilution Reserve" means, at any time, the product of (a) the
aggregate outstanding Capital at such time multiplied by (b) a fraction, the
numerator of which is the Dilution Reserve Percentage in effect at such time and
the denominator of which is the remainder of 1 minus the sum of the Dilution
Reserve Percentage, the Loss Reserve Percentage and the Yield Reserve
Percentage, each as in effect at such time.
"Dilution Reserve Percentage" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month as the greater of
(a) 3.0% and (b) the Dilution Ratio for such month.
"Eligible Receivable" means, at any time, a Receivable:
(a) the Obligor of which is not an Affiliate of any of the
parties hereto, and is not government or a governmental subdivision or agency;
(b) which is not a Defaulted Receivable and with respect to which
no scheduled payment, or any part thereof, remains unpaid for more than
30 days from the original due date therefor, and the Obligor of which
is not the Obligor of any Defaulted Receivables in the aggregate amount
of 20% or more of the aggregate Outstanding Balance of all Receivables
of such Obligor;
(c) which arises under a Contract (i) the performance of which
has been completed by the Seller and by all other parties other than
the Obligor, (ii) that requires such Receivable to be paid in full
within 60 days of the original invoice date therefor (provided,
however, that at any time of determination hereunder, no more than 1.0%
of the Outstanding Balance of Purchased Receivables may have terms
which require payment in full within a number of days of the original
invoice date therefor of between 61 and 90, inclusive) and (iii) that
has been duly authorized and, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable, enforceable against such
Obligor in accordance with its terms and is not subject to any dispute,
offset, counterclaim or defense whatsoever;
(d) (i) which is an "account" within the meaning of Section
9-106 of the UCC of all applicable jurisdictions, (ii) which has been
invoiced by the Originator and as to which all performance and other
action required to be taken in connection therewith by the Originator
(and, if applicable, the Seller) for the Obligor has been so performed
or taken, (iii) is denominated and payable only in United States
dollars in the United States, (iv) no portion of which is payable on
account of sales taxes, and (v) in which the Originator can grant a
perfected security interest;
(e) which arises in the ordinary course of the Originator's
business in connection with a sale of goods within the United States;
(f) the assignment of which (including, without limitation,
the sale of an undivided percentage interest therein and the assignment
of any Related Security) does not contravene or conflict with any
applicable laws, rules or regulations or any contractual or other
restriction, limitation or encumbrance;
<PAGE>
(g) which does not have an Adverse Claim filed against it and is
not otherwise subject to an Adverse Claim and has not been compromised,
adjusted or modified in any material respect (including by extension of
time of payment or the granting of any discounts, allowances or credits
(other than as stated on the invoice));
(h) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(i) which satisfies, and has been originated in accordance with,
all applicable requirements of the Credit and Collection Policy;
(j) as to which the Deal Agent has not notified the Seller and
the Collection Agent that the Deal Agent has determined, in its
reasonable business judgement as detailed in such notice, that the
Obligor of such Receivable is an unreasonable risk;
(k) the Obligor of which is not a Person to whom the
Originator or any of its Affiliates owe any accounts payable or other
Debt and is otherwise not a Person in respect of which the Originator
maintains any contra accounts on its books and records; and
(l) with respect to which, (i) prior to the Purchase thereof,
Seller has a first priority ownership interest therein, free and clear
of any Adverse Claim, and (ii) from and after the Purchase thereof,
EagleFunding has a properly perfected first priority undivided
percentage ownership interest therein, free and clear of any Adverse
Claim.
"Eligible Receivables Balance" means, at any time, the
aggregate Outstanding Balance of Eligible Receivables which constitute Purchased
Receivables, minus the sum of, (a) in the case of each Obligor, the amount (if
any) by which the aggregate Outstanding Balance of any Eligible Receivables
owing by such Obligor and its Affiliates exceeds the Concentration Limit for
such Obligor, and (b) the excess of the Outstanding Balance of Purchased
Receivables which have payment terms of between 61 days and 90 days, inclusive,
over 1.0% of the Outstanding Balance of Purchased Receivables and (c) the excess
of the Outstanding Balance of Eligible Receivables in respect of which the
Obligor is not a resident of the United States or Canada over 2.0% of the
Outstanding Balance of all Eligible Receivables.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
<PAGE>
"ERISA Affiliate" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Seller; (b) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with the Seller or (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Code) as the Seller, any
corporation described in clause (a) above or any trade or business described in
clause (b) above.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"Eurodollar Disruption Event" means, with respect to all
Capital allocated to any Purchase Period, any of the following: (a) a
determination by the Purchaser that it would be contrary to law or to the
directive of any central bank or other governmental authority (whether or not
having the force of law) to obtain United States dollars in the London interbank
market to make, fund or maintain any Purchase for such Purchase Period, (b) the
failure of BankBoston, N.A. to furnish timely information for purposes of
determining the Adjusted Eurodollar Rate, (c) a determination by the Purchaser
that the rate at which deposits of United States dollars are being offered in
the London interbank market does not accurately reflect the cost to the
Purchaser of making, funding or maintaining any Purchase for such Purchase
Period or (d) the inability of the Purchaser to obtain United States dollars in
the London interbank market to make, fund or maintain any Purchase for such
Purchase Period.
"Eurodollar Reserve Percentage" means, for any day with
respect to a Purchase Period to which Capital has been allocated hereunder, the
maximum rate (expressed as a decimal) at which any lender subject thereto would
be required to maintain reserves under Regulation D of the Board of Governors of
the Federal Reserve System (or any successor or similar regulations relating to
such reserve requirements) against Eurocurrency Liabilities, if such liabilities
were outstanding. The Eurodollar Reserve Percentage shall be adjusted
automatically on and as of the effective date of any change in the maximum rate
described above.
"Event of Termination" has the meaning assigned to that term
in Section 7.01.
"Facility Documents" means this Agreement, the Lock- Box
Agreements, the Collection Account Agreement, the Originator Sale Agreement, the
Intercreditor Agreement, the Fee Letter, the Liquidity Agreement, the Liquidity
Security Agreement, and all other certificates, instruments, UCC financing
statements, reports, notices, agreements and documents executed or delivered
under or in connection with this Agreement, in each case as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
this Agreement.
"Federal Funds Rate" means, for any day, a fluctuating
interest rate per annum 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, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day for such transactions
received by the Liquidity Agent from three Federal funds brokers of recognized
standing selected by it.
"Fee Letter" has the meaning assigned to that term in Section
2.09(a).
<PAGE>
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, in each case consistently
applied.
"Indemnified Amounts" has the meaning assigned to that term in
Section 8.01.
"Indemnified Parties" has the meaning assigned to that term in
Section 8.01.
"Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of December 18, 1997, among BankBoston, N.A. (in its
capacity as "Agent" under the Revolving Credit Agreement), the Originator, the
Collection Agent, the Seller, the Purchaser and the Deal Agent, as the same may
be amended, restated, supplemented or otherwise modified or replaced, from time
to time thereafter.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance or investment by such Person in any other Person, whether
by means of share purchase, capital contribution, loan or otherwise, excluding
the acquisition of Receivables and other Purchased Property (and interests
therein) pursuant to the Originator Sale Agreement and excluding commission,
travel and similar advances to officers, employees and directors made in the
ordinary course of business.
"Investment Company Act" means the Investment Company Act of
1940, as amended.
"IRS" shall mean the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Issuer" means EagleFunding and any other Purchaser whose
principal business consists of issuing commercial paper or other rated
securities to fund the acquisition and maintenance of interests in, or the
making of loans secured by a grant of security interests in, receivables,
accounts, instruments, chattel paper, general intangibles and other similar
assets.
"Liquidation Fee" means, for the Capital allocated to a
Purchase Period (computed without regard to any shortened duration of such
Purchase Period as a result of the occurrence of the Termination Date) during
which such Capital is reduced or the applicable Yield Rate for such Capital is
for any reason changed, the amount, if any, by which (a) the additional Yield
(calculated without taking into account any Liquidation Fee) which would have
accrued on the reduction of such Capital during such Purchase Period (as so
computed) if such reductions had remained as Capital or if the applicable Yield
Rate had remained unchanged, as the case may be, exceeds (b) the sum of (i)
Yield actually received by a Purchaser in respect of such Capital for such
Purchase Period and (ii) if applicable, the income, if any, received by such
Purchaser from such Purchaser's investing the proceeds of reductions of Capital.
"Liquidity Agent" means BankBoston, N.A., in its capacity as
"Liquidity Agent" under the Liquidity Agreement, together with any successor or
permitted assign in such capacity.
<PAGE>
"Liquidity Agreement" means that certain Liquidity Agreement
dated as of even date herewith by and among EagleFunding, the financial
institutions party thereto from time to time as "Liquidity Providers," and the
Liquidity Agent, as the same may be amended, restated, supplemented or otherwise
modified from time to time.
"Liquidity Fee" means the fee payable by the Seller and
identified as the "Liquidity Fee" in the Fee Letter.
"Liquidity Fee Percentage" means, at any time, the per annum
rate used to calculate the "Liquidity Fee" under the Fee Letter, as in effect at
such time.
"Liquidity Providers" means the financial institutions party
to the Liquidity Agreement from time to time as "Liquidity Providers"
thereunder.
"Liquidity Security Agreement" means that certain Security
Agreement dated as of even date herewith by and among EagleFunding and Bankers
Trust Company, as "Collateral Agent" thereunder, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Lock-Box" means a post office box to which Collections are
remitted for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank
into a Lock-Box Account.
"Lock-Box Account" means an account maintained for the purpose
of receiving Collections at a bank or other financial institution which has
executed a Lock-Box Agreement.
"Lock-Box Agreement" means an agreement, in substantially the
form of Exhibit B, among the Originator, the Seller, the Collection Agent and
the Deal Agent under the Receivables Purchase Agreement and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"Loss Horizon Factor" means, as of any date, a ratio computed
by dividing (i) the aggregate Outstanding Balance of all Receivables acquired by
the Seller during the three most recently ended calendar months by (ii) the
Eligible Receivables Balance computed as of the last day of the most recently
ended calendar month.
"Loss Reserve" means, at any time, the product of aggregate
outstanding Capital at such time times a fraction, the numerator of which is the
Loss Reserve Percentage in effect at such time and the denominator of which is
the remainder of 1 minus the sum of the Dilution Reserve Percentage, the Loss
Reserve Percentage and the Yield Reserve Percentage, each as in effect at such
time.
"Loss Reserve Percentage" means, as of any date, the greatest of
<PAGE>
(a) the product (stated as a percentage) of (i) a factor of
2.0, times (ii) the Loss Horizon Factor as of the last day of the most
recently ended calendar month, times (iii) the largest Loss Reserve
Ratio for any of the next preceding twelve calendar months, computed as
of the last day of each such month (including, without limitation, the
most recently ended calendar month);
(b) the quotient (stated as a percentage), computed as of the
last day of the most recently ended calendar month of
(i) the sum, for each of the four largest Obligors
described in clause (d) of the definition of the term
"Concentration Limit" (determined on the basis of the
aggregate amount of Outstanding Balances of Eligible
Receivables owing by such Obligors on such day), of the lesser
of (A) the aggregate amount of Outstanding Balances of
Eligible Receivables of such Obligor on such day, and (B) the
product of the Concentration Limit described in such clause
(d) and the aggregate Outstanding Balance of all Eligible
Receivables in effect at such time; divided by
(ii) the aggregate Outstanding Balance of all
Eligible Receivables in effect at such time;
(c) the quotient (stated as a percentage), computed as of the
last day of the most recently ended calendar month of
(i) the sum, for each of the two largest Obligors
described in clause (c) of the definition of the term
"Concentration Limit" (determined on the basis of the
aggregate amount of Outstanding Balances of Eligible
Receivables owing by such Obligors on such day), of the lesser
of (A) the aggregate amount of Outstanding Balance of Eligible
Receivables of such Obligor on such day, and (B) the product
of the Concentration Limit described in such clause (c) and
the aggregate Outstanding Balance of all Eligible Receivables
in effect at such time; divided by
(ii) the aggregate Outstanding Balance of all
Eligible Receivables in effect at such time; and
(d) the quotient (stated as a percentage), computed as of the
last day of the most recently ended calendar month of
(i) for the largest Obligor described in clause (b)
of the definition of the term "Concentration Limit"
(determined on the basis of the aggregate amount of
Outstanding Balances of Eligible Receivables owing by the
Obligors on such day), the lesser of (A) the aggregate
Outstanding Balance of Eligible Receivables of such Obligor on
such day, and (B) the product of the Concentration Limit
described in such clause (b) and the aggregate Outstanding
Balance of all Eligible Receivables in effect at such time;
divided by
<PAGE>
(ii) the aggregate Outstanding Balance of all
Eligible Receivables in effect at such time.
"Loss Reserve Ratio" means, in respect of any calendar month,
the arithmetic average of the ratios (each expressed as a percentage) for each
of the three most recently ended calendar months, computed as of the last day of
each such month, by dividing
(a) the aggregate Outstanding Balance of all
Receivables that became Defaulted Receivables during such
month plus (without duplication) the amount of all Receivables
which were written off the books of the Seller during such
month, by
(b) the sum of the original principal balances of all
Receivables acquired by the Seller during the fifth calendar
month next preceding such month.
"Monthly Payment Date" means, with respect to any calendar
month, the tenth day of such month, or if such date is not a Business Day, the
next Business Day to occur thereafter.
"Moody's" means Moody's Investors Service, Inc., and any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding five years contributed to by the Seller or any
ERISA Affiliate on behalf of its employees.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator" means Synthetic.
"Originator Sale Agreement" means the Receivables Purchase and
Sale Agreement, dated as of December 18, 1997, among the Originator, the Seller
and the Collection Agent, together with all instruments, documents and
agreements executed by the Originator in connection therewith, in each case as
the same may from time to time be amended, supplemented or otherwise modified in
accordance with the terms hereof.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any Person succeeding to the functions thereof.
<PAGE>
"Permitted Investments" means (a) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of no more than 90 days from
the date of acquisition (or, if earlier, maturing no later than the next
occurring end of any Purchase Period); (b) time deposits and certificates of
deposit having maturities of no more than 90 days from the date of acquisition
(or, if earlier, maturing no later than the next occurring end of any Purchase
Period), maintained with or issued by any commercial bank having capital and
surplus in excess of $500,000,000 and having a short-term rating of not less
than P-1 or the equivalent thereof from Moody's, A-1 or the equivalent thereof
from S&P, and D-1 or the equivalent thereof from DCR (if rated by DCR); (c)
repurchase obligations for underlying securities of the types described in
clauses (a) or (b) above with a term of not more than ten days and maturing no
later than 90 days after the date of acquisition (or, if earlier, maturing no
later than the next occurring end of any Purchase Period); and (d) commercial
paper maturing within 90 days after the date of acquisition (or, if earlier,
maturing no later than the next occurring end of any Purchase Period) and having
a rating of not less than P-1 or the equivalent thereof from Moody's, A-1 or the
equivalent thereof from S&P, and D-1 or the equivalent thereof from DCR (if
rated by DCR).
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture, government (or any agency or political subdivision
thereof) or other entity.
"Program Fee" means the fee payable by the Seller and
identified as the "Program Fee" in the Fee Letter.
"Program Fee Percentage" means, at any time, the per annum
rate used to calculate the "Program Fee" under the Fee Letter, as in effect at
such time.
"Purchase" means a purchase by the Purchaser of interests in
the Purchased Property from the Seller pursuant to Article II, including without
limitation, any such purchase in consideration of the remittance by the
Collection Agent to the Seller of Collections of Purchased Receivables pursuant
to Section 2.05.
"Purchase Limit" means, at any time, $40,000,000, as such
amount may be adjusted from time to time pursuant to Section 2.03, provided,
however, that at all times, on or after the Termination Date, the "Purchase
Limit" shall mean the aggregate outstanding Capital.
"Purchase Period" for any outstanding Capital means (a) if
Yield in respect of all or any part thereof is computed by reference to the CP
Rate, a period of 1 to and including 60 days, (b) if Yield in respect thereof is
computed by reference to the Adjusted Eurodollar Rate, a period of one, two or
three months and (c) if Yield in respect thereof is computed at the Adjusted
Base Rate, a period of 1 to and including 31 days, in each case, as determined
pursuant to Section 2.04.
<PAGE>
"Purchased Interest" means the undivided percentage ownership
interest in the Purchased Property conveyed by Seller to the Purchaser under
this Agreement, which percentage interest shall be computed as of the close of
business on each Business Day as a fraction, the numerator of which equals
Capital plus the Aggregate Reserves and the denominator of which equals the
Eligible Receivables Balance at such time. The Purchased Interest shall be
determined from time to time in accordance with the provisions of Section
2.05(c).
"Purchased Property" means (a) at any time prior to the
Termination Date, (i) all then outstanding Receivables, (ii) all Related
Security relating to such Receivables and (iii) all Collections with respect to,
and other proceeds of, such Receivables and (b) at all times on and after the
Termination Date, (i) all Receivables outstanding as of the close of business of
the Collection Agent on the date preceding the Termination Date (including any
interest or finance charges accruing before or after the Termination Date which
relate to any Receivable outstanding as of the close of business on the day
preceding the Termination Date), (ii) all Related Security related to such
Receivables and (iii) all Collections with respect to, and other proceeds of,
such Receivables.
"Purchased Receivable" means any Receivable included in the
Purchased Property and in which a Purchased Interest has been purchased under
this Agreement.
"Purchaser" means EagleFunding or any other Person that
agrees, pursuant to an Assignment and Acceptance, to purchase an interest in
this Agreement and in the Purchased Interest pursuant to Sections 2.02 or 2.05
of this Agreement, and to assume the obligations of the EagleFunding under this
Agreement.
"Rate Variance Factor" means that number which reflects the
Deal Agent's reasonable estimate of the potential variance in selected interest
rates over a period of time designated by the Deal Agent, as shall be computed
from time to time by the Deal Agent. The Deal Agent shall notify the Collection
Agent in writing of the Rate Variance Factor in effect from time to time.
"Rating Agency" has the meaning assigned to such term in
Section 10.01 of this Agreement.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument, general
intangible or any other type of property, (a) which arises from a sale of
merchandise or the performance of services by the Originator and (b) in which
the Seller has acquired an interest pursuant to the Originator Sale Agreement.
Each Receivable shall include the right to payment of any interest or finance
charges and other obligations of such Obligor with respect thereto.
"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, disks, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors which
the Seller has itself generated, in which the Seller has acquired an interest
pursuant to the Originator Sale Agreement or in which the Seller has otherwise
obtained an interest.
<PAGE>
"Reinvestment Termination Date" means that Business Day which
the Seller designates as the Reinvestment Termination Date by notice to the Deal
Agent at least 30 Business Days prior to such Business Day or, if any of the
conditions precedent in Section 3.02 are not satisfied, that Business Day which
the Deal Agent designates as the Reinvestment Termination Date by notice to the
Seller at least one Business Day prior to such Business Day.
"Related Security" means with respect to any Receivable:
(a) all of the Seller's interest in the merchandise (including
returned, repossessed or foreclosed merchandise), if any, relating to
the sale which gave rise to such Receivable;
(b) all other Adverse Claims and property subject thereto from
time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
(c) the assignment to the Deal Agent, for the benefit of the
Purchaser, of all UCC financing statements covering any collateral
securing payment of such Receivable;
(d) all guarantees, indemnities, warranties, letters of
credit, insurance policies and proceeds and premium refunds thereof and
other agreements or arrangements of whatever character from time to
time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise;
(e) all Records;
(f) all of the Seller's right and title to, and interest in,
the Originator Sale Agreement and the assignment to the Deal Agent of
all UCC financing statements filed by the Seller against the Originator
under or in connection with the Originator Sale Agreement; and
(g) all proceeds of the foregoing.
"Revolving Credit Agreement" means that certain Loan and
Security Agreement dated as of even date herewith by and among the Originator,
the financial institutions parties thereto as "Lenders" and BankBoston, N.A., as
agent to the Lenders, as the same may be amended, restated, supplemented,
replaced or otherwise modified from time to time, any successor agreement, and
any agreement pursuant to which the Debt issued under any such "Revolving Credit
Agreement" is refinanced.
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto.
"Stop Event" means any of the following events:
(a) An Event of Termination;
<PAGE>
(b) A regulatory, tax or accounting body has ordered that the
activities of the Purchaser, or any Affiliate of the Purchaser,
contemplated hereby be terminated or, as a result of any other event or
circumstance, the activities of the Purchaser contemplated hereby may
reasonably be expected to cause the Purchaser, the Person then acting
as the administrator or the manager for the Purchaser (if any), or any
of their respective Affiliates to suffer materially adverse regulatory,
accounting or tax consequences.
"Termination Date" means the earliest of (a) the Reinvestment
Termination Date, (b) the date of termination of the Purchase Limit pursuant to
Section 2.03, (c) the date of the declaration or automatic occurrence of the
Termination Date pursuant to Section 7.01, (d) the date on which some or all of
the "Liquidity Commitments" under the Liquidity Agreement shall cease to be
effective or shall terminate without renewal, and (e) December 18, 2002.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"United States" means the United States of America.
"Yield" means, for all Capital allocated to any Purchase
Period during any such Purchase Period, the product of
YRT x C x ED
360
where:
C = the Capital allocated to such Purchase Period,
ED = the actual number of days elapsed during such Purchase Period, and
YRT = the Yield Rate for such Purchase Period;
provided, however that (a) no provision of this Agreement shall require the
payment or permit the collection of Yield in excess of the maximum permitted by
applicable law and (b) Yield shall not be considered paid by any distribution if
at any time such distribution is rescinded or must otherwise be returned for any
reason.
"Yield Rate" means, for any Purchase Period for all Capital
allocated to such Purchase Period:
(a) to the extent a Purchaser will be funding the applicable
Purchase on the first day of such Purchase Period through the issuance
of commercial paper, a rate equal to the CP Rate for such Purchase
Period, and
<PAGE>
(b) to the extent a Purchaser will not be funding the
applicable Purchase on the first day of such Purchase Period through
the issuance of commercial paper, a rate equal to the Alternative Rate
for such Purchase Period or such other rate as the Deal Agent and the
Seller shall agree to in writing.
"Yield Reserve" means at any time an amount equal to the sum
of (a) the product of (i) the aggregate outstanding Capital at such time times
(ii) a rate equal to the sum of (v) the Liquidity Fee Percentage at such time,
plus (w) the Program Fee Percentage at such time, plus (x) the Collection Agent
Fee Percentage at such time, plus (y) the Applicable Base Rate Margin, plus (z)
the product of (1) the Rate Variance Factor times (2) the Base Rate then in
effect, times (iii) a fraction, the numerator of which equals a factor of 2.0
times the Average Maturity at such time and the denominator of which equals 360
plus (b) all accrued and unpaid Yield, Liquidity Fee, Program Fee and Collection
Agent Fee minus any Collections of Purchased Receivables set aside for payment
thereof pursuant to Section 2.05(a).
"Yield Reserve Percentage" means at any time an amount equal
to a ratio (expressed as a percentage) computed by dividing (i) the Yield
Reserve on such day by (ii) the Eligible Receivables Balance on such day.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
SECTION 1.03. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to but excluding."
ARTICLE II
THE PURCHASE FACILITY.
SECTION 2.01. Purchases of Purchased Interests; Stop Events.
(a) On the terms and conditions hereinafter set forth, the Purchaser shall
purchase Purchased Interests from the Seller and make Capital Increases from
time to time during the period from the date hereof until the Termination Date.
Under no circumstances shall the Purchaser make the initial Purchase or any
Capital Increase if, after giving effect to such Purchase or Capital Increase, a
Coverage Shortfall Event would exist or the Purchased Interest would exceed
100%.
<PAGE>
(b) Notwithstanding anything to the contrary herein, upon the
occurrence and during the continuation of a Stop Event, the Purchaser shall not
issue Commercial Paper in order to fund or maintain its investments in the
Purchased Interests. In addition, after the occurrence of a Stop Event triggered
by Section 7.01(n), the Purchaser shall not issue Commercial Paper without
written confirmation from each Rating Agency then rating the Commercial Paper at
the request of EagleFunding, that the ratings of such Commercial Paper will not
be reduced or withdrawn as a result thereof. Each of Seller and Collection Agent
agrees to give the Deal Agent prompt written notice of the occurrence of any
Stop Event. It is expressly understood that the occurrence of a Stop Event
(other than a Stop Event arising as a result of an Event of Termination) shall
not relieve the Purchaser of its obligations to fund or maintain investments in
Purchased Interests.
(c) If at any time a court characterizes the transactions
hereunder as loans by the Purchaser to the Seller, then the Seller hereby
pledges, grants a security interest in and assigns to the Deal Agent, for the
benefit of the Purchaser, all of its right and title to and interest in the
Purchased Property, including the Purchased Receivables, Related Security and
Collections related thereto, as security for such loans and for the payment and
performance of all obligations of the Seller hereunder (including, without
limitation, its indemnification obligations under Article VIII). The security
interest granted pursuant to the foregoing sentence shall be released and
terminated upon the occurrence of the Collection Date.
SECTION 2.02. The Initial Purchase, Subsequent Purchases and
Capital Increases. (a) Subject to the conditions described in Section 2.01(a),
the initial Purchase and each Capital Increase shall be made in accordance with
the procedures described in Section 2.02(b). After the date of the initial
Purchase, until the occurrence of the Termination Date, the Purchaser shall on
each day make subsequent Purchases of Purchased Property in accordance with
Section 2.05 and the Purchased Interest shall be automatically recalculated in
accordance with Section 2.05(c). Subsequent Purchases of Purchased Property and
Capital Increases are made in consideration of the Purchaser's agreement to
permit the Collection Agent to remit Collections of Purchased Property to the
Seller in accordance with Section 2.05. After the Collection Date has occurred,
the Purchaser and the Deal Agent, in accordance with their respective interests,
shall assign and transfer to the Seller their respective remaining interest in
the Purchased Property to the Seller in accordance with Section 2.06 free and
clear of any Adverse Claim resulting or arising from any act or omission by the
Purchaser or the Deal Agent, but without any other representation or warranty,
express or implied.
<PAGE>
(b) The initial Purchase shall be made on at least three
Business Days' notice from the Seller to the Deal Agent. Each subsequent Capital
Increase shall be made on notice from the Seller to the Deal Agent received by
the Deal Agent prior to 10:00 a.m. (Boston, Massachusetts time) on the Business
Day next preceding the proposed Business Day of such Capital Increase; provided,
however, that if the Yield to accrue with respect to such Capital Increase is
computed by reference to the Adjusted Eurodollar Rate, such notice must be
received by the Deal Agent prior to 10:00 a.m. (Boston, Massachusetts time) on
the third Business Day next preceding the date of such Capital Increase. Each
such notice shall specify (i) the aggregate amount of such Purchase or Capital
Increase, which shall be in an amount equal to $250,000 or an integral multiple
thereof (unless Yield is to accrue with respect to such Purchase or Capital
Increase by reference to the Adjusted Eurodollar Rate, in which case, the
minimum amount of such Purchase or Capital Increase shall be $1,000,000), (ii)
the date of such Purchase or Capital Increase, (iii) the duration of the initial
Purchase Periods for the Capital arising as a result of such Purchase or Capital
Increase, and (iv) the rate at which Yield is to accrue on such Capital for such
Purchase Periods. The Deal Agent shall notify the Seller whether the duration
and applicable rates of the initial Purchase Periods described in such notice
are acceptable or, if not acceptable, the Deal Agent shall advise the Seller of
such Purchase Periods and rates as may be acceptable. On the date of such
Purchase or Capital Increase, as the case may be, the Purchaser shall, upon
satisfaction of the applicable conditions set forth in Article III, make
available to the Seller in same day funds, at Account No. 56391264, Synthetic
Funding Corporation Operating Account at BankBoston, N.A., the amount of such
initial Purchase or Capital Increase, as the case may be.
(c) It is expressly acknowledged that each Purchase or Capital
Increase hereunder shall be made without recourse to the Seller; provided,
however, that the Seller shall be liable to the Deal Agent and the Purchaser (i)
for all representations, warranties, covenants and indemnities made hereunder,
(ii) for all obligations to remit any deemed Collections of Purchased
Receivables pursuant to Section 2.07, and (iii) for all fees, costs, expenses,
taxes and other indemnifications owed under this Agreement.
SECTION 2.03. Termination or Reduction of the Purchase Limit.
The Seller may, upon at least three Business Days' notice to the Deal Agent,
terminate in whole or reduce in part the portion of the Purchase Limit that
exceeds the sum of the aggregate Capital; provided, however, that each partial
reduction of the Purchase Limit shall be in an aggregate amount equal to
$5,000,000 or an integral multiple thereof.
<PAGE>
SECTION 2.04. Selection of Purchase Periods. At all times
hereafter until the Termination Date, the Seller shall, subject to the Deal
Agent's and the Purchaser's approval and the limitations described below, select
(a) Purchase Periods and allocate a portion of the outstanding Capital to each
selected Purchase Period, so that the outstanding Capital is at all times
allocated to a Purchase Period and (b) Yield Rates to apply to such Capital for
such Purchase Periods. The initial Purchase Period(s) and Yield Rate(s)
applicable to the Capital arising as a result of the initial Purchase or any
Capital Increase shall be specified in the notice relating to the Purchase or
Capital Increase described in Section 2.02(b). Each subsequent Purchase Period
shall commence on the last day of the immediately preceding Purchase Period, and
the duration of and Yield Rate applicable to such subsequent Purchase Period
shall be such as the Seller shall select and the Deal Agent shall approve on
notice from the Seller received by the Deal Agent (including notice by
telephone, confirmed in writing) not later than 11:00 A.M. (Boston,
Massachusetts time) on the Business Day next preceding such last day, except
that (a) if the Deal Agent shall not have received such notice before 11:00 A.M.
(Boston, Massachusetts time) or the Deal Agent and the Seller shall not have so
mutually agreed before 12:30 P.M. (Boston, Massachusetts time) on the Business
Day next preceding such last day, such Purchase Period shall be one day and the
applicable Yield Rate shall be the Adjusted Base Rate and (b) if the Seller is
requesting that Yield accrue at the Adjusted Eurodollar Rate for such Purchase
Period, such notice must be received by the Deal Agent no later than 11:00 A.M.
(Boston, Massachusetts time) on the third Business Day prior to such last day.
Any Purchase Period which would otherwise end on a day which is not a Business
Day shall be extended to the next succeeding Business Day; provided, however,
that if Yield in respect of such Purchase Period is computed by reference to the
Adjusted Eurodollar Rate, and such next succeeding Business Day is in the next
calendar month, then such Purchase Period shall end on the next preceding
Business Day. In addition, whenever any Purchase Period as to which Yield
accrues at the Adjusted Eurodollar Rate commences on the last Business Day in a
month or on a day for which there is no numerically corresponding day in the
month in which such Purchase Period ends, the last day of such Purchase Period
shall occur on the last Business Day of the month in which such Purchase Period
ends. Furthermore, if a CP Disruption Event shall have occurred and be
continuing, the Purchaser, or the Deal Agent on its behalf, may, upon notice to
the Seller, terminate any Purchase Period then in effect if the Purchaser has
funded the Capital allocated to such Purchase Period by issuing its commercial
paper notes. Any Purchase Period which commences before the Termination Date and
would otherwise end on a date occurring after the Termination Date shall end on
the Termination Date. On or after the Termination Date, the Deal Agent shall
have the right to allocate outstanding Capital to Purchase Periods of such
duration as shall be selected by the Deal Agent. The Purchaser shall, on the
first day of each Purchase Period, notify the Deal Agent of the Yield Rate for
the Capital allocated to such Purchase Period.
<PAGE>
SECTION 2.05. Non-Liquidation Settlement Procedures. (a) On
each day prior to the Termination Date, the Collection Agent shall cause all
Collections received by it or deposited in the Lock-Box Accounts to be
transferred in same day funds to the Collection Account and shall instruct the
Collection Account Bank: (i) out of the percentage interest representing the
Purchased Interest in Collections of Purchased Receivables received on such day,
to set aside and hold in trust in the Collection Account, for the Purchaser, an
amount equal to the Yield, Program Fee, Liquidity Fee and Collection Agent Fee
accrued through such day and not so previously set aside, (ii) on each Business
Day occurring in the week prior to the date on which the Administrative Fee is
payable, out of the percentage interest representing the Purchased Interest in
Collections of Purchased Receivables received on such day, to set aside and hold
in trust in the Collection Account, for the Deal Agent, an amount equal to the
Administrative Fee to be so paid, and (iii) except as otherwise required under
Section 2.05(b) below, to reinvest the remainder of such Collections in
Purchased Interests by paying such Collections to the Seller. Each such payment
shall constitute a Purchase by the Purchaser of Purchased Interests in all
Purchased Property not previously purchased hereunder, as such Purchased
Interest is recomputed pursuant to Section 2.05(c) below, it being agreed that
such Purchased Property shall, to the extent of the Purchased Interest,
automatically become the property of the Purchaser when the Seller acquires an
interest in such new Purchased Property from the Originator. On the last day of
each Purchase Period to occur prior to the Termination Date, the Collection
Agent shall deposit to the Deal Agent's Account the amounts in respect of Yield
set aside as described in clause (i) of the first sentence of this Section 2.05.
On each Monthly Payment Date to occur prior to the Termination Date, the
Collection Agent shall deposit to the Deal Agent's Account the amounts in
respect of Program Fee, Liquidity Fee and Collection Agent Fee set aside as
described in clause (i) of the first sentence of this Section 2.05. On the
Business Day prior to the date on which the Administrative Fee is due and
payable under the Fee Letter, the Collection Agent shall deposit to the Deal
Agent's Account the amounts in respect of the Administrative Fee set aside as
described in clause (ii) of the first sentence of this Section 2.05. Upon
receipt of such funds by the Deal Agent, the Deal Agent shall distribute them
first, to the Purchaser, on the next succeeding last day of a Purchase Period,
in full payment of the accrued and unpaid Yield for such Purchase Period,
second, to the Purchaser, on the next succeeding Monthly Payment Date, in full
payment of the accrued and unpaid Program Fee for the related calendar month,
third, to the Purchaser (or to the Liquidity Agent on behalf of the Purchaser),
on the next succeeding Monthly Payment Date, in full payment of the accrued and
unpaid Liquidity Fee for the related calendar month, fourth, to the Deal Agent,
on the next succeeding date on which the Administrative Fee is payable under the
Fee Letter, in full payment of the Administrative Fee for the following year,
and fifth, to the Collection Agent, on the next succeeding Monthly Payment Date,
in full payment of any accrued and unpaid Collection Agent Fee payable with
respect to the Purchased Receivables for the related calendar month.
(b) Notwithstanding anything to the contrary contained in this
Section 2.05 or any other provision in this Agreement, if, on any Business Day
prior to the Termination Date a Coverage Shortfall Event exists, then the Seller
shall remit to the Deal Agent, prior to any reinvestment of funds in Purchased
Interests and in any event no later than the close of business of the Deal Agent
on the third succeeding Business Day, a payment (to be applied by the Deal Agent
to outstanding Capital allocated to Purchase Periods selected by the Deal Agent,
in its sole discretion) in such amount as may be necessary to reduce outstanding
Capital so that a Coverage Shortfall Event no longer exists.
(c) The Purchased Interest shall be initially computed on the
date of the initial Purchase hereunder. Thereafter until the Termination Date,
the Purchased Interest shall be automatically recomputed (or deemed to be
recomputed) on each Business Day and concurrently with each Capital Increase
based on the aggregate Capital then outstanding and on the Eligible Receivables
Balance and Aggregate Reserves as computed for such day. From and after the
Termination Date, the Purchased Interest, as computed (or deemed recomputed) as
of the close of business on the day immediately preceding the Termination Date,
shall remain constant until the Collection Date, on which date the Purchased
Interest shall become zero.
SECTION 2.06. Liquidation Settlement Procedures.
(a) On the Termination Date and on each Business Day
thereafter, the Collection Agent shall segregate, set aside and hold in trust
for the Purchaser, in the Collection Account, the percentage interest
representing the Purchased Interest in Collections of Purchased Receivables
received on such day.
(b) On the Termination Date and on each Business Day
thereafter, the amounts set aside in the Collection Account in accordance with
clause (a) above shall be withdrawn from the Collection Account solely upon
direction of the Deal Agent to be applied in the following order of priority;
(i) (A) First, to pay any accrued and unpaid Collection Agent
Fee (if the Collection Agent is a party other than the Originator or an
Affiliate thereof) which is then due and payable, and (B) second, to be
retained in the Collection Account to the extent of any daily accrued
and unpaid amounts of such Collection Agent Fee which are not then due
and payable, until the next relevant payment date therefor, and not to
be applied to any of the following items;
<PAGE>
(ii)(A) First, to pay accrued and unpaid Yield which is then
due and payable, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such Yield
which are not then due and payable, and not to be applied to any of the
following items;
(iii)(A) First, to pay all Capital then outstanding relating
to any Yield which is then due and payable, and (B) second, to be
retained in the Collection Account to the extent of any Capital
remaining outstanding;
(iv)(A) First, to pay accrued and unpaid Liquidity Fee which
is then due and payable, and (B) second, to be retained in the
Collection Account to the extent of any accrued and unpaid amounts of
such Liquidity Fee which are not then due and payable, and not to be
applied to any of the following items;
(v)(A) First, to pay accrued and unpaid Program Fee which is
then due and payable, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such Program
Fee which are not then due and payable, and not to be applied to any of
the following items;
(vi) (A) First, to pay any Administrative Fee which is then
due and payable, and (B) second, to be retained in the Collection
Account to the extent of the Administrative Fee payable in respect of
the next succeeding annual period, until the next relevant payment date
therefor, and not to be applied to any of the following items;
(vii) (A) First, to pay the portion of any other accrued and unpaid
obligations which have not been paid pursuant to clauses (i) through
(vi) above and which are then due and payable by the Seller to the
Purchaser or the Deal Agent under this Agreement or any of the other
Facility Documents, and (B) second, to be retained in the Collection
Account to the extent of any accrued and unpaid amounts of such
obligations which are not then due and payable, until the next relevant
payment date therefor, and not to be applied to any of the following
items;
(viii) (A) First, to pay any accrued and unpaid Collection Agent Fee
(if the Collection Agent is the Originator or an Affiliate thereof)
which is then due and payable, and (B) second, to be retained in the
Collection Account to the extent of any accrued and unpaid amounts of
such Collection Agent Fee which are not then due and payable, until the
next relevant payment date therefor.
Following the Collection Date, the Collection Agent shall pay to the Seller any
remaining Collections set aside and held by the Collection Agent pursuant to
clause (a) of this Section 2.06.
<PAGE>
(c) If at any time on or after the Termination Date, the Deal
Agent or the Seller determines that as of the close of business on the day
immediately preceding the Termination Date the outstanding amount of Capital was
greater than the lesser of (i) the Purchase Limit, or (ii) the Capital Limit,
then the Seller shall immediately pay to the Deal Agent, for the benefit of the
Purchaser, the amount (to be applied against Capital) which would have been
required to make the outstanding amount of Capital equal to the lesser of (i)
the Purchase Limit, or (ii) the Capital Limit on or as of the close of business
on the date immediately preceding the Termination Date.
SECTION 2.07. Special Settlement Procedures. If on any day the
Outstanding Balance of any Purchased Receivable is either (a) reduced or
adjusted as a result of any defective, rejected, returned, repossessed or
foreclosed merchandise, any defective or rejected services, any failure to
provide services, any discount, rebate or any other adjustment made or performed
by the Seller or any other Person (including, without limitation, those
described in the definition of "Dilution Factors") or (b) reduced or canceled as
a result of a setoff in respect of any claim by the Obligor thereof against the
Originator, the Seller or any other Person (whether such claim arises out of the
same or a related transaction or an unrelated transaction), the Seller shall be
deemed to have received on such day a Collection of such Purchased Receivable in
the amount of such reduction, cancellation or adjustment. If on any day any of
the representations or warranties in Section 4.01(h) is no longer true with
respect to a Purchased Receivable or the Seller discovers or is notified that a
Purchased Receivable was not an Eligible Receivable on the day it was purchased,
the Seller shall be deemed to have received on such day a Collection of such
Purchased Receivable in full. If on any day the representation and warranty in
Section 4.01(i) is no longer true the Seller shall, in accordance with Section
2.05(b) and/or 2.06(c), immediately pay to the Deal Agent, for the benefit of
the Purchaser, an amount sufficient to make such representation true and
accurate.
SECTION 2.08. Payments and Computations, Etc. (a) All amounts
to be paid or deposited by the Seller or the Collection Agent hereunder shall be
paid or deposited in accordance with the terms hereof no later than 11:00 A.M.
(Boston, Massachusetts time) on the day when due in lawful money of the United
States in immediately available funds to the Deal Agent's Account. The Seller
shall, to the extent permitted by law, pay to the Deal Agent interest on all
amounts not paid or deposited when due hereunder (whether owing by the Seller
individually or by the Collection Agent) at 2.0% per annum above the Adjusted
Base Rate, payable on demand; provided, however, that such interest rate shall
not at any time exceed the maximum rate permitted by applicable law. Such
interest shall be retained by the Deal Agent except to the extent that such
failure to make a timely payment or deposit has continued beyond the date for
distribution by the Deal Agent of such overdue amount to the Purchaser, in which
case such interest accruing after such date shall be for the account of, and
distributed by the Deal Agent to the Purchaser. All computations of interest and
all computations of Yield, Collection Agent Fee, Program Fee, Liquidation Fee
and other fees hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the last day)
elapsed.
<PAGE>
(b) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of Yield, interest or any fee payable
hereunder, as the case may be; provided, however, that, if such extension would
cause payment of Yield on or Capital in respect of any Purchased Property on
which Yield accrues at the Adjusted Eurodollar Rate to be made in the next
following month, such payment shall be made on the next preceding Business Day.
(c) If any Purchase or Capital Increase requested by the
Seller and approved by the Purchaser and the Deal Agent pursuant to Section 2.02
or any selection of a subsequent Purchase Period for any Capital requested by
the Seller and approved by the Deal Agent pursuant to Section 2.05 is not for
any reason other than the act or omission of Purchaser contrary to this
Agreement made or effectuated, as the case may be, on the date specified
therefor, the Seller shall indemnify the Purchaser against any loss, cost or
expense incurred by the Purchaser, including, without limitation, any loss
(including loss of anticipated profits, net of anticipated profits in the
reemployment of such funds in the manner determined by the Purchaser), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Purchaser to fund or maintain such Purchase or
Capital Increase, as the case may be, during such Purchase Period.
SECTION 2.09. Fees. (a) The Seller shall pay to the Purchaser
(either directly or through the Deal Agent) and to the Deal Agent certain fees
in the amounts and on the dates set forth in a fee letter executed among the
Seller, the Purchaser and the Deal Agent, dated on or about the date hereof (as
the same may be amended, restated, supplemented or otherwise modified from time
to time, the "Fee Letter").
(b) The Purchaser shall pay to the Collection Agent a
collection fee (the "Collection Agent Fee") of 1% per annum on the average daily
amount of the Outstanding Balance of Purchased Receivables, from the date hereof
until the Collection Date, payable on the last day of each Purchase Period to
which such Capital is allocated; provided, however, that such fee shall be
payable only from Collections pursuant to, and subject to the priority of
payment set forth in, Sections 2.05 and 2.06; and provided, further, that, upon
three Business Days' notice to the Deal Agent, the Collection Agent may (if not
Synthetic or an Affiliate thereof), elect to be paid, as such fee, another
percentage per annum on the average daily amount of outstanding Capital, but in
no event shall the Collection Agent Fee payable in respect of any month after
the date any such election is made exceed 110% of the reasonable and appropriate
costs and expenses of the Collection Agent incurred during such month.
(c) The Seller shall pay to the Deal Agent, written two
Business Days after the Deal Agent's written demand therefor, for the benefit of
the Purchaser, the Liquidation Fee relating to the Purchased Property.
<PAGE>
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality.
(a) If either (i) the introduction of or any change (including, without
limitation, any change by way of imposition or increase of reserve requirements)
in any law, regulation, treaty or official directive, or in the interpretation
or application thereof by any central bank or other governmental agency or
authority charged with the administration thereof (whether or not having the
force of law), or (ii) the compliance by the Deal Agent, the Purchaser or any
affiliate of either thereof (each of which, an "Affected Party") with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), (A) shall subject an
Affected Party to any tax (except for taxes on the overall net income of such
Affected Party imposed by the United States of America or any political
subdivision thereof), duty or other charge with respect to the Purchased
Property, or any right or obligation to make Purchases hereunder, or on any
payment made hereunder or (B) shall impose, modify or deem applicable any
reserve requirement (including, without limitation, any reserve requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any reserve requirement, if any, included in the determination of Yield),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Affected Party or (C) shall impose
any other condition affecting the Purchased Property or the Purchaser's rights
or obligations hereunder, the result of which is to increase the cost to any
Affected Party or to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, then within ten days after demand by such
Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Seller shall pay directly to such Affected Party
such additional amount or amounts as will compensate such Affected Party for
such additional or increased cost incurred or such reduction suffered; provided,
however, that no Affected Party shall be entitled to charge, nor shall the
Seller be obligated to pay, any such amount relating to a period more than 90
days prior to the date on which such statement is presented.
(b) If either (i) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in any law, regulation, treaty or official directive, or
in the interpretation or application thereof, in each case occurring after the
date hereof, by any central bank or other governmental agency or authority
charged with the administration thereof (whether or not having the force of
law), or (ii) the compliance by an Affected Party with any guideline or request
from any central bank or other governmental agency or authority (whether or not
having the force of law) in each case promulgated after the date hereof,
including, without limitation, compliance by an Affected Party with any request
or directive regarding capital adequacy, has or would have the effect of
reducing the rate of return on the capital of any Affected Party as a
consequence of its obligations hereunder or otherwise arising in connection
herewith to a level below that which any such Affected Party could have achieved
but for such introduction, change or compliance (taking into consideration the
policies of such Affected Party with respect to capital adequacy and assuming
full utilization of such Affected Party's capital) by an amount deemed by such
Affected Party to be material, then from time to time, within ten days after
demand by such Affected Party (which demand shall be accompanied by a statement
setting forth the basis for such demand), the Seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such reduction; provided, however, that no Affected Party
shall be entitled to charge, nor shall the Seller be obligated to pay, any such
amount relating to a period more than 90 days prior to the date on which such
statement is presented.
(c) If as a result of any event or circumstance similar to
those described in Section 2.10(a) or 2.10(b), any Affected Party is required to
compensate a bank or other financial institution providing liquidity support,
credit enhancement or other similar support to such Affected Party in connection
with this Agreement or the funding or maintenance of Purchases hereunder, then
within ten days after demand by such Affected Party, the Seller shall pay to
such Affected Party such additional amount or amounts as may be necessary to
reimburse such Affected Party for any amounts to be paid by it.
<PAGE>
(d) In determining any amount provided for in this Section
2.10, the Affected Party may use any reasonable averaging and attribution
methods. Any Affected Party making a claim under this Section 2.10 shall submit
to the Seller a certificate as to the calculation of such additional or
increased cost or reduction, which certificate shall be conclusive absent
manifest error.
(e) If the Purchaser shall notify the Deal Agent that a
Eurodollar Disruption Event as described in clause (a) of the definition of
"Eurodollar Disruption Event" has occurred, the Deal Agent shall in turn so
notify the Seller, whereupon all Capital in respect of which Yield accrues at
the Adjusted Eurodollar Rate for the then current Purchase Period shall
immediately be converted into Capital in respect of which Yield accrues at the
Adjusted Base Rate for the remainder of such Purchase Period.
(f) Without prejudice to the survival of any other agreement
of the Seller hereunder, the agreements and obligations of the Seller contained
in this Section 2.10 shall survive the termination of this Agreement.
SECTION 2.11. Taxes. (a) Any and all payments by the Seller or
the Collection Agent hereunder shall be made, in accordance with Section 2.08,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of the Purchaser and the Deal Agent, net
income taxes and branch profits taxes that are imposed by the United States and
franchise taxes, net income taxes and branch profits taxes that are imposed on
the Purchaser or the Deal Agent by the state or foreign jurisdiction under the
laws of which the Purchaser or the Deal Agent (as the case may be) is organized
or conducts business or any political subdivision thereof (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Seller or the Collection Agent shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Purchaser or the Deal Agent, (i) the Seller shall make an
additional payment to the Purchaser or the Deal Agent, as the case may be, in an
amount sufficient so that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.11), the
Purchaser or the Deal Agent (as the case may be) receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Seller or
the Collection Agent, as the case may be, shall make such deductions and (iii)
the Seller or the Collection Agent, as the case may be, shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
<PAGE>
(b) The Seller will indemnify the Purchaser and the Deal Agent for
the full amount of Taxes (including, without limitation, any Taxes imposed by
any jurisdiction on amounts payable under this Section 2.11) paid by the
Purchaser or the Deal Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto;
provided that the Purchaser or the Deal Agent, as appropriate, making a demand
for indemnity payment shall provide the Seller, at its address referred to in
Section 10.02, with a certificate from the relevant taxing authority or from a
responsible officer of the Purchaser or the Deal Agent stating or otherwise
evidencing that the Purchaser or the Deal Agent has made payment of such Taxes
and will provide a copy of or extract from documentation, if available,
furnished by such taxing authority evidencing assertion or payment of such
Taxes. This indemnification shall be made within ten days from the date the
Purchaser or the Deal Agent (as the case may be) makes written demand therefor.
(c) Within 30 days after the date of any payment by the Seller of
any Taxes, the Seller will furnish to the Deal Agent, at its address referred to
in Section 10.02, appropriate evidence of payment thereof.
(d) Within 30 days of the written request of the Seller
therefor, the Deal Agent and the Purchaser, as appropriate, shall execute and
deliver to the Seller such certificates, forms or other documents which can be
furnished consistent with the facts and which are reasonably necessary to assist
the Seller in applying for refunds of taxes remitted hereunder.
(e) If, in connection with an agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Purchaser in connection with this Agreement or the funding or maintenance of
Purchases hereunder, the Purchaser is required to compensate a bank or other
financial institution in respect of taxes under circumstances similar to those
described in this Section 2.11 then within ten days after written demand by the
Purchaser (which demand shall be accompanied by a statement setting forth the
basis of such demand), the Seller shall pay to the Purchaser such additional
amount or amounts as may be necessary to reimburse such Purchaser for any
amounts paid by it.
(f) Without prejudice to the survival of any other agreement
of the Seller hereunder, the agreements and obligations of the Seller contained
in this Section 2.11 shall survive the termination of this Agreement.
SECTION 2.12. Assignment of the Originator Sale Agreement. The
Seller hereby represents, warrants and confirms to the Deal Agent that the
Seller has assigned to the Deal Agent, for the benefit of itself and the
Purchaser hereunder, all of the Seller's right and title to and interest in the
Originator Sale Agreement. The Seller confirms and agrees that the Deal Agent
shall have, following an Event of Termination, the sole right to enforce the
Seller's rights and remedies under the Originator Sale Agreement for the benefit
of the Purchaser, but without any obligation on the part of the Deal Agent, the
Purchaser or any of their respective Affiliates, to perform any of the
obligations of the Seller under the Originator Sale Agreement. The Seller
further confirms and agrees that such assignment to the Deal Agent shall
terminate upon the Collection Date; provided, however, that the rights of the
Deal Agent and the Purchaser pursuant to such assignment with respect to rights
and remedies in connection with any indemnities and any breach of any
representation, warranty or covenants made by the Originator pursuant to the
Originator Sale Agreement, which rights and remedies survive the termination of
the Originator Sale Agreement, shall be continuing and shall survive any
termination of such assignment.
<PAGE>
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase. The
initial Purchase hereunder is subject to the conditions precedent (a) that the
Deal Agent shall have received on or before the date of such purchase the items
listed in Schedule I, each (unless otherwise indicated) dated such date, in form
and substance satisfactory to the Deal Agent and the Purchaser, and (b) that all
fees and expenses required to be paid prior to the initial Purchase pursuant to
the Fee Letter have been paid.
SECTION 3.02. Conditions Precedent to All Purchases and
Remittances of Collections. Each Purchase (including the initial Purchase) from
the Seller by the Purchaser, the right of the Collection Agent to remit
Collections to the Seller pursuant to Section 2.05 and each Capital Increase
shall be subject to the further conditions precedent that (a) with respect to
any such Purchase or Capital Increase, on or prior to the date of such Purchase
or Capital Increase, the Collection Agent shall have delivered to the Deal
Agent, in each case in form and substance satisfactory to the Deal Agent, a
completed Asset Report dated within 30 days prior to the date of such Purchase
or Capital Increase, and a completed Daily Settlement Report dated no more than
one Business Day prior to the date of such Purchase or Capital Increase, and in
each case containing such additional information as may be reasonably requested
by the Deal Agent; (b) on the date of such Purchase, remittance of Collections
or Capital Increase the following statements shall be true and the Seller by
accepting the amount of such Purchase or by receiving the proceeds of such
reinvestment shall be deemed to have certified that:
(i) The representations and warranties contained in Section
4.01 are correct on and as of such day as though made on and as of such
date,
(ii) No event has occurred and is continuing, or would result
from such purchase or reinvestment, which constitutes an Event of
Termination,
(iii) On and as of such day, after giving effect to such
Purchase, remittance of Collections or Capital Increase, a Coverage
Shortfall Event does not exist and the Purchased Interest does not
exceed 100%, and
(iv) No law or regulation shall prohibit, and no order,
judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of
such Purchase, remittance of Collections or Capital Increase by the
Purchaser in accordance with the provisions hereof.
and (c) the Deal Agent shall have received such other approvals, opinions or
documents as the Deal Agent may reasonably request.
<PAGE>
Notwithstanding the fact that any of the above-described
conditions precedent may not have been satisfied in connection with any Purchase
hereunder, prior to the Termination Date and as a result of the Seller's
acceptance of the amount of any Capital Increase, and/or its receipt of the
proceeds of any reinvestment of Collections (x) the Seller shall be deemed to
have certified to the Deal Agent that such conditions precedent have, in fact,
been satisfied and (y) the Purchase of the Purchased Interests shall be deemed
to have been made automatically pursuant to Section 2.01 and Section 2.05.
SECTION 3.03. Conditions Precedent to Certain Capital
Increases. Each Capital Increase hereunder shall be subject to the further
condition precedent that, on the date of such Capital Increase, no event has
occurred and is continuing, or would result from such Capital Increase, which
constitutes an "Event of Default" or similar event (however named) under the
Revolving Credit Agreement or event which with the giving of notice or passage
of time or both would constitute an "Event of Default" or similar event (however
named) thereunder, and the Seller by accepting the amount of such Capital
Increase shall be deemed to have certified to such effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction named at the
beginning hereof and is duly qualified to do business, and is in good standing,
in every jurisdiction in which the nature of its business requires it to be so
qualified and the failure to do so could reasonably be expected to materially
and adversely affect the Seller's ability to perform hereunder or the ability to
assign or collect the Purchased Receivables hereunder; however, notwithstanding
the foregoing, the Seller is not qualified to do business in the State of
Georgia on the Closing Date and shall not be required to do so until the tenth
day following the Closing Date.
(b) The execution, delivery and performance by the Seller of
this Agreement, the Originator Sale Agreement and all other Facility Documents
to be entered into by it, including the Seller's use of the proceeds of
Purchases and reinvestments of Collections, are within the Seller's corporate
powers, have been duly authorized by all necessary corporate action, do not
contravene (i) the Seller's charter or by-laws, (ii) any law, rule or regulation
applicable to the Seller, (iii) any contractual restriction binding on or
affecting the Seller or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting the Seller or its property, and do
not result in or require the creation of any lien, security interest or other
charge or encumbrance upon or with respect to any of its properties (other than
in favor of the Deal Agent for the benefit of the Purchaser with respect to the
Purchased Receivables and related Purchased Property); and no transaction
contemplated hereby or by the Originator Sale Agreement requires compliance with
any bulk sales act or similar law. This Agreement, the Originator Sale Agreement
and each other Facility Document to be entered into by the Seller have each been
duly executed and delivered by the Seller.
<PAGE>
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of this
Agreement, the Originator Sale Agreement or any other Facility Document to be
entered into by it, except for the filing of the UCC financing statements
described in Schedule I, all of which financing statements have been duly filed
and are in full force and effect.
(d) This Agreement, the Originator Sale Agreement and each
other Facility Document to be entered into by the Seller constitute the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with their respective terms subject to bankruptcy and similar laws
affecting creditors generally and principles of equity.
(e) (i) The Seller has furnished to the Deal Agent (A) copies
of the Originator's audited consolidated balance sheet as at September
30, 1996, and the related audited consolidated statements of income and
cash flow for the fiscal year of the Originator then ended reported on
by Deloitte & Touche LLP, which financial statements present fairly in
all material respects in accordance with GAAP the financial position of
the Originator and its consolidated subsidiaries as at September 30,
1996, and the results of operations of the Originator and its
consolidated subsidiaries for the fiscal year of the Originator then
ended, and (B) copies of the Originator's unaudited consolidated
balance sheet as at June 30, 1997, and the related unaudited
consolidated statements of income and cash flow for the nine-month
period then ended, which financial statements present fairly in all
material respects in accordance with GAAP the financial position of the
Originator and its consolidated subsidiaries as at June 30, 1997, and
the results of operations of the Originator and its consolidated
subsidiaries for the nine-month period then ended; and
(ii) since June 30, 1997, (A) no material adverse change has
occurred in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Originator and its
subsidiaries taken as a whole, and (B) no event has occurred or failed
to occur which has had, or may have, singly or in the aggregate, a
Materially Adverse Effect.
(f) Except as described in Schedule 7.1(k) of the Revolving
Credit Agreement as in effect on the date hereof, there is no pending or
threatened action or proceeding affecting the Originator and its subsidiaries as
a whole or the Seller before any court, governmental agency or arbitrator that
could reasonably be expected to have a Material Adverse Effect. None of the
Originator, the Seller, or any other subsidiary of the Originator is in default
with respect to any order of any court, arbitrator or governmental body except
for defaults with respect to orders of governmental agencies which defaults are
not material to the business or operations of the Originator and its
subsidiaries taken as a whole or the Seller.
(g) No proceeds of any Purchase or Capital Increase will be
used by the Seller (i) to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended,
or (ii) for any purpose other than to fund a purchase of Receivables and related
assets from the Originator.
<PAGE>
(h) Each Receivable, together with the Contract related
thereto, shall, at all times, be owned by the Seller free and clear of any
Adverse Claim except as provided herein, and upon each Purchase, remittance of
Collections or Capital Increase, the Purchaser shall acquire a valid and
perfected first priority undivided percentage ownership interest in each
Purchased Receivable then existing or thereafter arising and in the Related
Security and Collections with respect thereto, which percentage shall correspond
at any time hereunder to the Purchased Interest in effect at such time, free and
clear of any Adverse Claim except as provided hereunder. No effective financing
statement or other instrument similar in effect covering any Receivable or the
Related Security or Collections with respect thereto shall at any time be on
file in any recording office except such as may be filed in favor of the Deal
Agent relating to this Agreement or in favor of Seller relating to the
Originator Sale Agreement. The purchases of the Receivables and related assets
by the Seller from the Originator constitute valid and true sales and transfers
for consideration (and not merely a pledge of such Receivables and assets for
security purposes), enforceable against creditors of the Originator, and no such
Receivables or related assets shall constitute property of the Originator.
(i) As of the close of business on each Business Day prior to
the Termination Date, a Coverage Shortfall Event shall not exist.
(j) No Asset Report or Daily Settlement Report (if prepared by
the Seller or any Affiliate thereof, or to the extent that information contained
therein is supplied by the Seller or such Affiliate), information, exhibit,
financial statement, document, book, record or report furnished or to be
furnished by the Seller to the Deal Agent or the Purchaser in connection with
this Agreement is or will be inaccurate in any material respect as of the date
it is or shall be dated or (except as otherwise disclosed to the Deal Agent or
the Purchaser, as the case may be, at such time) as of the date so furnished,
and no such document contains or will contain any material misstatement of fact
or omits or shall omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.
(k) The principal place of business and chief executive office
of the Seller and the office where the Seller keeps all the Records are located
at the address of the Seller referred to in Section 10.02 hereof (or at such
other locations as to which the notice and other requirements specified in
Section 6.08 shall have been satisfied).
(l) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks and the names, addresses and account numbers of all accounts to which
Collections of the Receivables outstanding before the initial Purchase hereunder
have been sent, are specified in Schedule III (which shall be deemed to be
amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in respect
thereof). The Seller has no other lock-box accounts or similar deposit accounts
for the collection of the Purchased Property except for the Lock-Box Accounts.
<PAGE>
(m) Except as described in Schedule IV, the Seller has no
trade names, fictitious names, assumed names or "doing business as" names or
other names under which it has done or is doing business.
(n) The Originator Sale Agreement is the only agreement
pursuant to which the Seller purchases Receivables; the Seller has furnished to
the Deal Agent true, correct and complete copies of the Originator Sale
Agreement; and the Originator Sale Agreement is in full force and effect and no
event or circumstance has occurred that would constitute (or, with the giving of
notice or the passage of time or both, would constitute) an Event of Termination
pursuant to Section 7.01(k).
(o) The Seller shall have given reasonably equivalent value to
the Originator in consideration for the transfer by the Originator to the Seller
of the Receivables and Related Security under the Originator Sale Agreement, no
such transfer shall have been made for or on account of an antecedent debt owed
by the Originator to the Seller, and no such transfer is or may be voidable or
subject to avoidance under any section of the Bankruptcy Code.
(p) A copy of the Certificate of Incorporation of the Seller
as in effect on the date of this Agreement is attached as Exhibit E hereto, and
Synthetic has confirmed in writing to the Seller that, so long as the Seller is
not "insolvent" within the meaning of the Bankruptcy Code, Synthetic will not
cause the Seller to file a voluntary petition under the Bankruptcy Code or any
other bankruptcy or insolvency laws. Each of the Seller and Synthetic has
received advice from its counsel which is consistent with the conclusions set
forth in the legal opinion(s) of King & Spalding, counsel to the Originator and
the Seller, issued in connection with the Originator Sale Agreement and relating
to the issues of substantive consolidation and true sale of the Receivables and
the related property.
(q) The Seller is not "insolvent" (within the meaning of such
term in the Bankruptcy Code); at the time of (and immediately after) each
transfer of Purchased Receivables to the Seller under the Originator Sale
Agreement, the Seller shall not have been insolvent; and at the time of (and
immediately after) each purchase hereunder, the Seller shall not have been
insolvent.
(r) The Seller accounts for the transfers to it from the
Originator of interests in Receivables, Related Security and Collections under
the Originator Sale Agreement as sales of such Receivables, Related Security and
Collections in its books, records and financial statements, in each case
consistent with GAAP and with the requirements set forth herein.
(s) The sole and exclusive business of the Seller is the
purchase of Receivables and Related Security pursuant to the Originator Sale
Agreement for its own account and for resale to the Purchaser pursuant to the
terms of this Agreement.
<PAGE>
(t) The Seller is operated as an entity with assets and
liabilities distinct from those of the Originator and any Affiliates thereof
(other than the Seller), and the Seller hereby acknowledges that the Deal Agent
and the Purchaser are entering into the transactions contemplated by this
Agreement in reliance upon the Seller's identity as a separate legal entity from
the Originator and from each such other Affiliate.
(u) The Seller is not an "investment company" or a company
controlled by an "investment company" registered or required to be registered
under the Investment Company Act, or otherwise subject to any other federal or
state statute or regulation limiting its ability to incur indebtedness.
(v) The Seller is not engaged, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulation G, T, U or X). No part of the proceeds of any
Purchased Receivable has been used for so purchasing or carrying margin stock or
for any purpose which violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X.
(w) Each of the Seller, the Collection Agent and the Deal
Agent has the right (whether by license, sublicense or assignment) to use all of
the computer software used by the Collection Agent and/or the Originator to
account for the Purchased Property to the extent necessary to administer the
Purchased Property, and, in the case of the Seller and the Collection Agent, to
assign (by way of sale or collateral pledge) or sublicense such rights to use
all of such software to the Deal Agent.
(x) The Seller has filed or caused to be filed all Federal,
state and local tax returns which are required to be filed by it, and has paid
or caused to be paid all taxes shown to be due and payable on such returns or on
any assessments received by it, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings
and with respect to which the Seller has set aside adequate reserves on its
books in accordance with GAAP and which proceedings have not given rise to any
Adverse Claim.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. General Covenants.
(a) Compliance with Laws; Preservation of Corporate Existence.
The Seller shall comply in all material respects with all applicable laws
(including, without limitation, ERISA and the Code), rules, regulations, orders
and Facility Documents and preserve and maintain its corporate existence,
rights, franchises, qualifications and privileges where the failure to comply
could reasonably be expected to materially adversely affect the Seller's ability
to perform its obligations hereunder or the ability to assign or collect the
Purchased Receivables hereunder.
<PAGE>
(b) Sales, Liens, Etc. Except as otherwise specifically
provided herein, the Seller shall not (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Purchased Receivable or the related Contract,
Collections or Related Security, or upon or with respect to any Lock-Box
Account, the Collection Account or any other account to which any Collections of
any Receivable are sent, or assign any right to receive income in respect
thereof or (ii) create or suffer to exist any Adverse Claim upon or with respect
to any of the Seller's other assets.
(c) General Reporting Requirements. The Seller will
provide to the Deal Agent (with a copy for the Purchaser) the following:
(i) as soon as available and in any event within 90 days after
the end of each fiscal year of the Seller, a copy of the balance sheet
of the Seller and the related statement of income for such year, each
prepared in accordance with GAAP consistently applied and reported on
by nationally recognized independent public accountants acceptable to
the Deal Agent (the Deal Agent acknowledges that in each case any of
the "Big 5" accounting firms will be acceptable to the Deal Agent);
(ii) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of Synthetic, consolidated balance sheets of Synthetic and its
consolidated subsidiaries and the related statements of income,
shareholders' equity and cash flows each for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, prepared in accordance with GAAP and certified by a senior
financial officer of Synthetic;
(iii) as soon as available and in any event within 90 days
after the end of each fiscal year of Synthetic, a copy of the
consolidated balance sheets of Synthetic and its consolidated
subsidiaries and the related statements of income, shareholders' equity
and cash flows for such year, each prepared in accordance with GAAP
consistently applied and reported on by nationally recognized
independent public accountants;
(iv) promptly after the sending or filing thereof (as the case
may be), copies of (1) all reports which Synthetic sends to any of its
securityholders, (2) all reports and registration statements which
Synthetic files with the Securities and Exchange Commission or any
national securities exchange other than registration statements
relating to employee benefit plans and to registrations of securities
for selling securityholders and (3) all reports, notices and/or
certificates which Synthetic sends to any of its "Lenders" under the
Revolving Credit Agreement, in each such case to the extent that the
Seller has received the same from Synthetic pursuant to the Originator
Sale Agreement;
(v) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the Seller or any ERISA Affiliate files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Seller or any
ERISA Affiliate receives from such Corporation;
<PAGE>
(vi) as soon as possible and in any event within three days
after the occurrence of each Event of Termination or each event which,
with the giving of notice or lapse of time or both, would constitute an
Event of Termination, a statement of the chief financial officer or
chief accounting officer of the Seller setting forth details of such
Event of Termination or event and the action which the Seller has taken
and proposes to take with respect thereto;
(vii) promptly following receipt thereof, copies of all
financial statements, settlement statements, portfolio and other
reports, notices, disclosures, certificates, budgets and other written
material delivered to the Seller by the Originator pursuant to the
terms of the Originator Sale Agreement;
(viii) no later than 10:00 a.m. Boston, Massachusetts time on
each Business Day, and at the time of any Capital Increase, a
certificate in form and substance satisfactory to the Deal Agent
setting forth, as of close business of the next preceding Business Day,
the Purchase Limit, the Capital Limit, the outstanding Capital, the
Aggregate Reserves, and the Purchased Interest (and demonstrating
compliance with the representation and warranty set forth in Section
4.01(i)) (the "Daily Settlement Report"); and
(ix) promptly following the Deal Agent's request therefor,
such other information respecting the Receivables or the conditions or
operations, financial or otherwise, of the Seller as the Deal Agent may
from time to time request in order to protect the interests of the Deal
Agent or the Purchaser in connection with this Agreement.
(d) Merger, Etc. The Seller will not merge or consolidate
with, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially all of its
assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership interest of
any Person, other than, with respect to asset dispositions, in connection
herewith.
(e) Accounting of Purchases. The Seller will not account for
or treat (whether in financial statements or otherwise) the transactions
contemplated by the Originator Sale Agreement in any manner other than the sale
of the "Transferred Assets" (as defined therein) by the Originator to the
Seller.
(f) [Reserved].
(g) Nature of Business. The Seller will engage in no business
other than the purchase of Receivables and Related Security from the Originator,
the resale or grant of such Receivables and Related Security to the Purchaser
and the other transactions permitted or contemplated by this Agreement.
<PAGE>
(h) Originator Receivables. With respect to each Receivable
acquired by the Seller from the Originator, the Seller will (i) acquire such
Receivable pursuant to and in accordance with the terms of the Originator Sale
Agreement, (ii) take all action necessary to perfect, protect and more fully
evidence the Seller's ownership of such Receivable, including, without
limitation, (A) filing and maintaining effective financing statements (Form
UCC-1) against the Originator in all necessary or appropriate filing offices,
and filing continuation statements, amendments or assignments with respect
thereto in such filing offices and (B) executing or causing to be executed such
other instruments or notices as may be necessary or appropriate and (iii) take
all additional action that the Deal Agent may reasonably request to perfect,
protect and more fully evidence the respective interests of the parties to this
Agreement in the Receivables and other Purchased Property related thereto.
<PAGE>
(i) Maintenance of Separate Existence. The Seller will do all
things necessary to maintain its corporate existence separate and apart from the
Originator and all other Affiliates of the Seller, including, without
limitation, (i) practicing and adhering to corporate formalities, such as
maintaining appropriate corporate books and records; (ii) maintaining at all
times at least one "Independent Director", as defined in and as required under
the Seller's Certificate of Incorporation; (iii) owning or leasing pursuant to
written leases all office furniture and equipment necessary to operate its
business; (iv) refraining from (A) guaranteeing or otherwise becoming liable for
any obligations of any of its Affiliates, (B) having obligations guaranteed by
its Affiliates, (C) holding itself out as responsible for debts of any of its
Affiliates or for decisions or actions with respect to the affairs of any of its
Affiliates, and (D) being named as a direct or contingent beneficiary or loss
payee on any insurance policy of any Affiliate; (v) maintaining all of its
deposit and other bank accounts and all of its assets separate from those of any
other Person; (vi) maintaining all of its financial records separate and apart
from those of any other Person and ensuring that any of the Originator's
consolidated financial statements contain appropriate disclosures concerning the
Seller's separate existence; (vii) compensating all its employees, officers,
consultants and agents for services provided to it by such Persons, or
reimbursing any of its Affiliates in respect of services provided to it by
employees, officers, consultants and agents of such Affiliate, out of its own
funds; (viii) maintaining office space that is physically segregated from that
of any of its Affiliates (even if such office space is subleased from or is on
or near premises occupied by any of its Affiliates) and a separate telephone
number which will be answered only in its name; (ix) accounting for and managing
all of its liabilities separately from those of any of its Affiliates; (x)
allocating, on an arm's-length basis, all shared corporate operating services,
leases and expenses, including, without limitation, those associated with the
services of shared consultants and agents and shared computer equipment and
software; (xi) refraining from paying dividends or making distributions, loans
or other advances to any of its Affiliates except, in each case, as duly
authorized by its board of directors and in accordance with applicable
corporation law; (xii) refraining from filing or otherwise initiating or
supporting the filing of a motion in any bankruptcy or other insolvency
proceeding involving the Seller, the Originator or any other Affiliate of the
Seller to substantively consolidate assets and liabilities of the Seller with
the assets and liabilities of any such Person or any other Affiliate of the
Seller; (xiii) maintaining adequate capitalization in light of its business and
purpose; (xiv) conducting all of its business (whether written or oral) solely
in its own name; (xv) require that its employees, if any, when conducting its
business identify themselves as such and not as employees of any other Affiliate
of the Seller (including, without limitation, by means of providing appropriate
employees with business or identification cards identifying such employees as
the Seller's employees); and (xvi) taking all other actions necessary to
maintain the accuracy of the factual assumptions set forth in the legal
opinion(s) of King & Spalding, counsel to the Originator and the Seller, issued
in connection with the Originator Sale Agreement and relating to the issues of
substantive consolidation and true sale of the Receivables and the related
property.
(j) Supplemental Opinions. The Seller will cause to be
delivered to the Deal Agent within 30 days following the Deal Agent's request
therefor, but in no event more frequently than once during each calendar year
commencing after the first anniversary date of the initial Purchase,
supplemental opinions of outside counsel to the Seller and the Originator in the
form of Exhibit D or otherwise in form and substance reasonably satisfactory to
the Deal Agent, reaffirming the opinions set forth in the opinion letters of
King & Spalding delivered to the Deal Agent in connection with the initial
Purchase hereunder pursuant to Section 3.01 or providing in reasonable detail
the reasons why any such opinions cannot be reaffirmed.
(k) Transactions with Affiliates. The Seller will not enter
into, or be a party to, any transaction with any of its Affiliates, except (i)
the transactions permitted or contemplated by this Agreement and the Originator
Sale Agreement, and (ii) other transactions (including, without limitation, the
lease of office space or computer equipment or licensing of software by the
Seller to or from an Affiliate) (A) in the ordinary course of business, (B)
pursuant to the reasonable requirements of the Seller's business, (C) upon fair
and reasonable terms that are substantially similar to the terms that could be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Seller, and (D) not inconsistent with the factual assumptions set forth
in the opinion letter issued by King & Spalding delivered to the Deal Agent
pursuant to Section 3.01 (relating to the issues of substantive consolidation
and true sale of the Receivables and the related property), as such assumptions
may be modified in any subsequent opinion letter delivered pursuant to Section
5.01(j). It is understood that any compensation arrangement for officers shall
be permitted under clause (ii)(A), (B) and (C) above if such arrangement has
been expressly approved by the board of directors of the Seller.
(l) Debt; Investments. The Seller will not incur any Debt
other than (i) Debt arising hereunder or under the Originator Sale Agreement and
(ii) Debt owing to the Originator evidenced by a subordinated non-negotiable
promissory note in form and substance satisfactory to the Deal Agent and not
inconsistent with the factual assumptions set forth in the opinion letter issued
by King & Spalding delivered to the Deal Agent pursuant to Section 3.01
(relating to the issues of substantive consolidation and true sale of the
Receivables and the related property), as such assumptions may be modified in
any subsequent opinion letter delivered pursuant to Section 5.01(j). The Seller
will not make any Investments (including, without limitation, the creation of,
and the making of capital contributions to, a subsidiary) other than Permitted
Investments.
(m) Change in the Originator Sale Agreement. The Seller will
not (a) amend, modify, waive or terminate any terms or conditions of the
Originator Sale Agreement or of any other Facility Document to which it is a
party, or (b) without the prior consent of the Deal Agent, exercise any
discretionary rights granted to the Seller under the Originator Sale Agreement
pursuant to provisions thereof providing for certain actions to be taken "with
the consent of the Buyer", "acceptable to the Buyer" as "specified by the
Buyer", "in the reasonable judgment of the Buyer" or similar provisions.
<PAGE>
(n) Amendment to Certificate of Incorporation. The Seller will
not amend, modify or otherwise make any change to its Certificate of
Incorporation, except in accordance with the terms and provisions thereof.
(o) Audits. At any time and from time to time upon prior
written notice to the Seller during regular business hours and on an annual (or
more frequent) basis, if requested by the Deal Agent, the Seller will permit the
Deal Agent, or its agents or representatives, (i) to examine and make copies of
and abstracts from all Records, and (ii) to visit the offices and properties of
the Seller for the purpose of examining such Records, and to discuss matters
relating to the Receivables or the Seller's performance hereunder with any of
the officers or employees of the Seller having knowledge of such matters. Each
such audit shall be at the sole expense of the Seller (subject to the Seller's
right under the Originator Sale Agreement to recover such expenses from the
Originator).
(p) Keeping of Records and Books of Account. The Seller will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in
the event of the destruction of the originals thereof) and keep and maintain,
all documents, books, records and other information reasonably necessary or
advisable for the collection of all Purchased Receivables (including, without
limitation, records adequate to permit the daily identification of all
collections of and adjustments to each Purchased Receivable).
(q) Location of Records. The Seller will keep its chief place
of business and chief executive office, and the offices where it keeps the
Records, at the address of the Seller referred to in Section 10.02, or, in any
such case, upon 30 days' prior written notice to the Deal Agent, at such other
locations within the United States where all action required by Section 6.08
shall have been taken and completed.
(r) Credit and Collection Policies. The Seller will, and will
cause the Collection Agent to, comply in all material respects with the Credit
and Collection Policy in regard to each Purchased Receivable and the related
Contract. The Seller shall not, without the written consent of the Deal Agent
(i) make any change in the character of its business or (ii) make or agree to
make any material change in the Credit and Collection Policy.
<PAGE>
(s) Change in Payment Instructions to Obligors. The Seller
will not add or terminate any bank as a Lock-Box Bank from those listed in
Schedule III to the Originator Sale Agreement or Schedule III hereto or make any
change in its instructions to Obligors regarding payments to be made to any
Lock-Box Bank, unless the Deal Agent shall have given its prior written consent
to such addition, termination or change (which consent shall not be unreasonably
withheld) and the Deal Agent shall have received (i) ten Business Days' prior
notice of such addition, termination or change, (ii) prior to the effective date
of such addition, termination or change, (x) executed copies of Lock-Box
Agreements executed by each new Lock-Box Bank and the Seller and (y) copies of
all agreements and documents signed by either the Seller or the respective
Lock-Box Bank with respect to any new Lock-Box Account, and (iii) the prior
written consent of the Purchaser to such addition, termination or change (which
consent shall not be unreasonably withheld).
(t) Change in Corporate Name. The Seller will not make
any change to its corporate name, or use any trade names, fictitious names,
assumed names or "doing business as" names.
(u) Taxes. The Seller will file or cause to be filed all
federal, state and local tax returns which are required to be filed by it. The
Seller shall pay or cause to be paid all taxes shown to be due and payable on
such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the Seller shall have set
aside adequate reserves on its books in accordance with GAAP.
(u) Facility Documents. The Seller will comply in all material
respects with the terms of and employ the procedures outlined in and enforce the
obligations of the Originator under the Originator Sale Agreement, enforce all
of the other rights of the Seller under each of the other Facility Documents to
which it is a party, take all such action to such end as may be from time to
time reasonably requested by the Deal Agent, and maintain all such Facility
Documents in full force and effect and make to the Originator such reasonable
demands and requests for information and reports or for action as the Seller is
entitled to make thereunder and as may be from time to time reasonably requested
by the Deal Agent.
(v) Segregation of Collections. The Seller will prevent the
deposit into any of the Lock-Box Accounts of any funds other than Collections
and, to the extent that any such funds are nevertheless deposited into any of
such Lock-Box Accounts, promptly identify any such funds to the Collection Agent
for segregation and remittance to the owner thereof.
(w) Accounting Treatment. The Seller will not prepare any
financial statements or other statements (including any tax filings which are
not consolidated with those of the Originator) which shall account for the
transactions contemplated by the Originator Sale Agreement in any manner other
than as the sale of, or a capital contribution of, the "Transferred Assets" (as
defined therein) by the Originator to the Seller.
(x) Qualification to Do Business. The Seller will duly qualify
to do business, and be in good standing, in every jurisdiction in which the
nature of its business requires it to be so qualified and the failure to do so
could reasonably be expected to materially and adversely affect the Seller's
ability to perform hereunder or the ability to assign or collect the Purchased
Receivables. Without limiting the foregoing, the Seller will qualify to do
business in the State of Georgia within ten days from the Closing Date.
<PAGE>
ARTICLE VI
ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
SECTION 6.01. Appointment and Designation of the Collection
Agent. The Seller, the Purchaser and the Deal Agent hereby appoint the Person
(the "Collection Agent") designated by the Deal Agent from time to time with the
approval of the Purchaser pursuant to this Section 6.01, as their agent to
service, administer and collect the Receivables and otherwise to enforce their
respective rights and interests in, to and under the Receivables, the Related
Security and the Contracts. The Collection Agent's authorization under this
Agreement shall terminate on the Collection Date. Until the Deal Agent gives
notice to the Seller of a designation of a new Collection Agent after the
occurrence of a Collection Agent Termination Event, or consents to the
appointment by the Seller of a new "Collection Agent" under and pursuant to the
Originator Sale Agreement, Synthetic is hereby designated as, and hereby agrees
to perform the duties and obligations of, the Collection Agent pursuant to the
terms hereof. The Deal Agent may (with the approval of the Purchaser after the
occurrence of a Collection Agent Termination Event) designate as Collection
Agent any Person to succeed Synthetic or any successor Collection Agent, on the
condition in each case that any such Person so designated shall agree to perform
the duties and obligations of the Collection Agent pursuant to the terms hereof.
Each of the Seller and the Collection Agent hereby grants to any successor
Collection Agent an irrevocable power of attorney to take any and all steps in
the Seller's or the Collection Agent's name, as applicable, and on behalf of the
Seller or the Purchaser, as may be necessary or desirable, in the determination
of the successor Collection Agent, to collect all amounts due under any and all
Receivables, including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections and enforcing such
Receivables and the related Contracts. The Collection Agent may, with the prior
consent of the Deal Agent, subcontract with any other Person for servicing,
administering or collecting the Receivables, provided that the Collection Agent
shall remain liable for the performance of the duties and obligations of the
Collection Agent pursuant to the terms hereof. Notwithstanding anything to the
contrary contained in this Agreement, the Collection Agent, if not the Seller or
an Affiliate thereof, shall have no obligation to collect, enforce or take any
other action described in this Article VI with respect to any Receivable that is
not a Purchased Receivable other than to deliver to the Seller the Collections
and documents with respect to any such Receivable that is not a Purchased
Receivable as described in Sections 6.03 and 6.06(b).
<PAGE>
SECTION 6.02. Collection of Receivables by the Collection
Agent; Extensions and Amendments of Receivables. The Collection Agent shall take
or cause to be taken all such actions as may be necessary or advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy; provided, however, that, (a)
the Deal Agent shall have the right to direct the Collection Agent (whether the
Collection Agent is the Seller, the Originator or otherwise) to commence or
settle any legal action, to enforce collection of any Purchased Receivable or to
foreclose upon or repossess any Related Security, (b) the Collection Agent shall
not make the Deal Agent or the Purchaser a party to any litigation without the
express written consent of the Deal Agent or the Purchaser, as the case may be.
If the Termination Date shall not have occurred, Synthetic, while it is
Collection Agent, may, in accordance with the Credit and Collection Policy, (a)
extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as Synthetic may determine to be appropriate to maximize Collections
thereof and (b) adjust the Outstanding Balance of any Receivable to reflect the
reductions or cancellations described in the first sentence of Section 2.07, in
each such case in accordance with the requirements of the Credit and Collection
Policy and provided that such extension or adjustment shall not alter the status
of such Receivable as a Defaulted Receivable or limit the rights of the
Purchaser or Deal Agent under this Agreement. Except as otherwise permitted
pursuant to the next preceding sentence, neither the Collection Agent nor the
Seller will extend, amend, cancel or otherwise modify the terms of any Purchased
Receivable, or amend, modify, cancel or waive any term or condition of any
Contract related thereto without the prior written approval of the Deal Agent.
SECTION 6.03. Distribution and Application of Collections. The
Collection Agent shall set aside for the account of the Seller and the Purchaser
their respective allocable shares of the Collections of Receivables in
accordance with Sections 2.05 and 2.06. The Collection Agent shall as soon as
practicable following receipt turn over to the Seller the Collections of any
Receivable which is not a Purchased Receivable less, in the event neither
Synthetic nor an Affiliate thereof is the Collection Agent, all reasonable and
appropriate out-of-pocket costs and expenses of such Collection Agent of
servicing, collecting and administering the Receivables to the extent not
covered by the Collection Agent Fee received by it.
SECTION 6.04. Other Rights of the Deal Agent. At any time
following the occurrence of a Collection Agent Termination Event or the
designation of a Collection Agent other than Synthetic, the Seller or any
Affiliate of either thereof pursuant to Section 6.01:
(a) The Deal Agent may or, at the request of the Deal Agent,
the Seller shall (in either case, at the Seller's expense) direct the
Obligors of Receivables, or any of them, to pay all amounts payable
under any Receivable directly to the Deal Agent or its designee;
(b) The Deal Agent may or, at the request of the Deal Agent,
the Seller shall (in either case, at the Seller's expense) give each of
the Obligors notice of the Purchaser's interests in the Purchased
Receivables; and
(c) The Seller shall, at the Deal Agent's request and at the
Seller's expense, (i) assemble all Records and make the same available
to the Deal Agent or its designee at a place selected by the Deal Agent
or its designee, and (ii) segregate all cash, checks and other
instruments received by it from time to time constituting Collections
of Receivables in a manner acceptable to the Deal Agent and, promptly
following receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the Deal
Agent or its designee.
<PAGE>
SECTION 6.05. Records; Audits. (a) The Collection Agent will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing the Receivables in
the event of the destruction of the originals thereof), and keep and maintain
all documents, books, records and other information reasonably necessary or
advisable for the timely and full collection of all Receivables (including,
without limitation, records adequate to permit the daily identification of each
new Purchased Receivable and all Collections of and adjustments to each existing
Purchased Receivable).
(b) The Collection Agent, whether or not the Seller or an
Affiliate thereof, shall hold all Records in trust for the Seller and the
Purchaser in accordance with their respective interests. Subject to the receipt
of contrary instructions from the Deal Agent, the Seller will deliver all
Records to such Collection Agent; provided, however, that the Collection Agent,
if other than the Seller, shall as soon as practicable upon demand deliver to
the Seller all Records in its possession relating to Receivables of the Seller
other than Purchased Receivables, and copies of Records in its possession
relating to Purchased Receivables.
(c) The Collection Agent will, from time to time during
regular business hours as requested by the Deal Agent, permit the Deal Agent, or
its agents or representatives, (i) to examine and make copies of and abstracts
from all Records and (ii) to visit the offices and properties of the Collection
Agent for the purpose of examining such Records and to discuss matters relating
to the Receivables or the Collection Agent's or the Seller's performance
hereunder with any of the officers or employees of the Collection Agent or the
Seller having knowledge of such matters.
SECTION 6.06. Receivable Reporting. (a) The Collection Agent,
so long as it is Synthetic or an Affiliate thereof, and otherwise the Seller,
will deliver to the Deal Agent (i) prior to the Asset Report Date occurring
during each calendar month hereafter, a report identifying the Purchased
Receivables (and the aged balance thereof), by Obligor and invoice number, as of
the last day of the next preceding month, (ii) on the Termination Date, a report
identifying the Purchased Receivables (and the aged balance thereof), by Obligor
and invoice number, on the day immediately preceding the Termination Date, (iii)
upon the Deal Agent's request, on each day, a report identifying the Purchased
Receivables (and the aged balance thereof), by Obligor and invoice number on
such day and (iv) prior to the Asset Report Date occurring in each calendar
month hereafter, a report identifying the outstanding accounts payable of the
Originator as of the last day of the next preceding month, identified by the
relevant account payee.
(b) Prior to the Asset Report Date occurring in each calendar
month, the Collection Agent shall prepare and forward to the Deal Agent for the
Purchaser, an Asset Report relating to all Purchased Receivables, as of the
close of business of the Collection Agent on the last day of the next preceding
month.
SECTION 6.07. Collections and Lock-Boxes. The Seller and the
Collection Agent will
<PAGE>
(i) instruct all Obligors to cause all Collections to be
either (A) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve
such Collections promptly and deposit the same to the respective Lock-Box
Accounts or (B) deposited directly with the Lock-Box Bank, and
(ii) instruct all Lock-Box Banks to transfer such Collections
in same day funds to a special-purpose segregated interest-bearing trust account
in the name of the Deal Agent (the "Collection Account") maintained with a
financial institution (the "Collection Account Bank") acceptable to the Deal
Agent, which shall initially be BankBoston, N.A. (provided, however, that in the
event that the Collection Account is maintained at a commercial bank having (x)
combined capital and surplus of at least $250,000,000 and (y) a short-term debt
rating of at least A-1 from S&P, P-1 from Moody's and D-1 from DCR (if rated by
DCR), the Collection Account need not be a trust account). In accordance with
the terms of the Collection Account Agreement, to be entered into among the
Collection Account Bank, the Collection Agent, the Purchaser and the Deal Agent,
the Collection Agent shall instruct the Collection Account Bank to allocate and
remit such Collections in accordance with Sections 2.05 and 2.06; provided,
however, that the Deal Agent may, at any time, revoke the Collection Agent's
authority with respect to the Collection Account, direct the Collection Account
Bank to cease taking instructions from the Collection Agent and to thereafter
take direction solely from the Deal Agent. If the Seller receives any
Collections, the Seller will remit such Collections to the Collection Account
(including, without limitation, any Collections deemed to have been received
pursuant to Section 2.07) within one Business Day following the Seller's receipt
thereof. The Seller will not add or terminate any bank as Lock-Box Bank from
those listed in Schedule III or make any change in its instructions to Obligors
regarding payments to be made to any Lock Box or any Lock-Box Bank, unless the
Deal Agent shall have received at least ten Business Days' prior written notice
of such addition, termination or change and all actions reasonably requested by
the Deal Agent to protect and perfect the interest of the Deal Agent and the
Purchaser in the Collections of Purchased Receivables have been taken and
completed. The Seller hereby transfers to the Deal Agent, effective upon the
initial Purchase, the exclusive ownership and control of each of the Lock-Box
Accounts. The Seller hereby agrees to take any further action necessary that the
Deal Agent may reasonably request to effect such transfer.
<PAGE>
SECTION 6.08. UCC Matters; Protection and Perfection of
Purchased Property. The Seller will keep its principal place of business and
chief executive office, and the office where it keeps the Records, at the
address of the Seller referred to in Section 4.01(k) or, upon 30 days' prior
written notice to the Deal Agent, at such other locations within the United
States where all actions reasonably requested by the Deal Agent to protect and
perfect the interest of the Deal Agent and the Purchaser in the Purchased
Receivables have been taken and completed. The Seller will not make any change
to its corporate name or use any tradenames, fictitious names, assumed names,
"doing business as" names or other names other than those described in Schedule
IV, unless prior to the effective date of any such name change or use, the
Seller delivers to the Deal Agent such executed financing statements as the Deal
Agent may request to reflect such name change or use, together with such other
documents and instruments as the Deal Agent may request in connection therewith.
The Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all further instruments and documents, and take all further
action that the Deal Agent may reasonably request in order to perfect, protect
or more fully evidence the Purchased Interests acquired by the Purchaser
hereunder, or to enable the Purchaser or the Deal Agent to exercise or enforce
any of their respective rights hereunder. Without limiting the generality of the
foregoing, the Seller will: (a) upon the request of the Deal Agent, execute and
file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be necessary
or appropriate or as the Deal Agent may request, and (b) on or prior to the date
hereof, mark its master data processing records evidencing such Purchased
Receivables and related Contracts with a legend, acceptable to the Deal Agent,
evidencing that the Purchaser has acquired an interest therein as provided in
this Agreement. The Seller hereby authorizes the Deal Agent to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Purchased Property now existing or
hereafter arising without the signature of the Seller where permitted by law. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Purchased Property or any part thereof shall be
sufficient as a financing statement. If the Seller fails to perform any of its
agreements or obligations under this Section 6.08, the Deal Agent may (but shall
not be required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of the Deal Agent incurred in connection therewith
shall be payable by the Seller upon the Deal Agent's demand therefor. For
purposes of enabling the Deal Agent to exercise its rights described in the
preceding sentence and elsewhere in this Article VI, the Seller and the
Purchaser hereby authorize the Deal Agent to take any and all steps in the
Seller's name and on behalf of the Seller and the Purchaser necessary or
desirable, in the determination of the Deal Agent, to collect all amounts due
under any and all Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing Collections and
enforcing such Receivables and the related Contracts.
SECTION 6.09. Obligations of the Seller With Respect to
Receivables. The Seller will (a) at its expense, regardless of any exercise by
the Deal Agent or the Purchaser of their rights hereunder, timely and fully
perform and comply with all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Purchased
Receivables to the same extent as if Purchased Interests therein had not been
sold hereunder and (b) pay when due any taxes, including without limitation,
sales and excise taxes, payable in connection with the Purchased Receivables. In
no event shall the Deal Agent or the Purchaser have any obligation or liability
with respect to any Purchased Receivables or related Contracts, nor shall any of
them be obligated to perform any of the obligations of the Seller or the
Originator or any of their Affiliates thereunder. The Seller will and will cause
the Collection Agent to timely and fully comply in all material respects with
the Credit and Collection Policy in regard to each Purchased Receivable and the
related Contract. The Seller will not make any change in the character of its
business or make or agree to make any change in the Credit and Collection
Policy, which change would, in either case, impair the collectibility of any
Purchased Receivable.
<PAGE>
SECTION 6.10. Applications of Collections. Any payment by an
Obligor in respect of any indebtedness owed by it to the Seller or the
Originator shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless otherwise instructed by the Deal Agent,
be applied as a Collection of any Purchased Receivable of such Obligor, in the
order of the age of such Receivables, starting with the oldest such Purchased
Receivable, to the extent of any amounts then due and payable thereunder, before
being applied to any Receivable that is not a Purchased Receivable or other
indebtedness of such Obligor.
SECTION 6.11. Annual Servicing Report of Independent Public
Accountants. On an annual basis on or before December 31 of each calendar year,
beginning with December 31, 1998, the Collection Agent shall cause nationally
recognized independent public accountants acceptable to the Deal Agent, (the
Deal Agent acknowledges that in each case any of the "Big 5" accounting firms
will be acceptable to the Deal Agent,) to furnish a report to each of the
Collection Agent, the Seller, the Purchaser, the Deal Agent and each Rating
Agency then rating the Commercial Paper at the request of EagleFunding
substantially to the effect that (i) such accountants have examined certain
documents and records relating to the servicing of Receivables under this
Agreement, compared the information contained in the Daily Settlement Reports
and Asset Reports delivered by or on behalf of the Seller under this Agreement
during the annual period covered by such report (or such shorter initial period,
as the case may be) with such documents and records and that, on the basis of
such examination, and subject to such reasonable limitations and qualifications
as may be set forth in such report, such accountants are of the opinion that the
servicing has been conducted substantially in compliance with the terms and
conditions as set forth in Article VI of this Agreement, except for such
exceptions as they believe to be immaterial and such other exceptions as shall
be set forth in such statement and (ii) such accountants have compared the
mathematical calculations of each amount set forth in the Daily Settlement
Reports and Asset Reports delivered pursuant to this Agreement during the period
covered by such report with the Collection Agent's computer reports which were
the source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such statement.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the following
events ("Events of Termination") shall occur:
(a) (i) The Collection Agent (if other than the Deal Agent)
shall fail to perform or observe any term, covenant or agreement hereunder
(other than as referred to in clause (ii) of this Section 7.01(a)) and such
failure shall remain unremedied for two Business Days or (ii) either the
Collection Agent (if other than the Deal Agent) or the Seller shall fail to make
any payment or deposit to be made by it hereunder when due; or
<PAGE>
(b) (i) Any representation or warranty made or deemed to be
made by the Seller (or any of its officers or agents) under or in connection
with this Agreement or any Asset Report or other information or report delivered
pursuant hereto shall prove to have been false or incorrect in any material
respect when made or (ii) any representation or warranty made or deemed to be
made by the Originator or the Collection Agent (or any of their respective
officers or agents) under or in connection with the Originator Sale Agreement or
this Agreement (as the case may be) shall prove to have been false or incorrect
in any material respect when made; or
(c) Either the Seller or the Originator (individually or in
its capacity as Collection Agent) shall fail to perform or observe any term,
covenant or agreement (other than any term covenant, or agreement described in
either of clauses (a) or (b) above) contained in this Agreement or in the
Originator Sale Agreement on its part to be performed or observed and any such
failure shall remain unremedied for five Business Days after written notice
thereof shall have been given by the Deal Agent to the Seller; or
(d) (i) The Seller or the Originator shall fail to pay any
principal of or premium or interest on any Debt, if, in the case of the
Originator, the aggregate principal amount of such Debt is $500,000 or more,
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or (ii) any other default or any event which,
with the passage of time or the giving of notice, or both, would constitute a
default under any agreement or instrument (other than the Revolving Credit
Agreement) relating to any such Debt, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument; or
(iii) any "Event of Default" (other than a payment event of default) as such
term is defined in the Revolving Credit Agreement or any event (however named in
any successor Revolving Credit Agreement to the Revolving Credit Agreement in
effect on the date hereof) under such successor agreement which with the passage
of time or the giving of notice, or both, would constitute a default shall have
occurred and be continuing for a period which exceeds the lesser of (x) 30 days
and (y) the corresponding period set forth in documents relating to any Debt of
Synthetic or its Affiliates having an aggregate principal balance of greater
than $500,000 as the period during which the holders of such Debt are stayed
from any enforcement or acceleration as a result of the occurrences of such an
"Event of Default" or other event; or (iv) any Debt of the Seller or the
Originator, if, in the case of the Originator the aggregate principal amount of
such Debt is $500,000 or more, shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof; or
(e) Either (i) any Purchase, Capital Increase or remittance of
Collections shall for any reason, except to the extent permitted by the terms
hereof, cease to create a valid and perfected first priority undivided
percentage ownership or security interest in each Purchased Receivable and the
Related Security and Collections with respect thereto or (ii) any purchase by
the Seller of a Receivable from the Originator shall, for any reason, cease to
create in favor of the Seller a valid and perfected first priority ownership or
security interest in each Purchased Receivable and the Related Security and
Collections with respect thereto; or
<PAGE>
(f) (i) The Seller or the Originator shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Seller or the
Originator seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property; or (ii) the Seller
or the Originator shall take any corporate action to authorize any of the
actions set forth in clause (i) above in this Section 7.01(f); or
(g) the Delinquency Ratio for any month shall exceed 4.00%, or
the Dilution Ratio for any month shall exceed 4.20%, or the Average Maturity for
any month shall exceed 75 days; or
(h) (i) There shall have occurred and be continuing an "Event
of Termination" under the Originator Sale Agreement, or (ii) the Originator Sale
Agreement shall have ceased to be valid, binding and enforceable as against any
of the parties thereto without any amendment, modification, waiver or
termination of any terms or conditions thereof, other than as agreed to in
writing by the Deal Agent, or (iii) the Originator shall have ceased for any
reason to sell all of the "Receivables" under and as defined in the Originator
Sale Agreement to the Seller pursuant to the Originator Sale Agreement, or (iv)
the assignment to the Deal Agent of all of the Seller's right and title to and
interest in the Originator Sale Agreement shall have ceased, for any reason, to
be fully effective and enforceable by the Deal Agent as against any of the
parties of the Originator Sale Agreement; or
(i) Synthetic shall cease to own (whether directly or
indirectly) 100% of the issued and outstanding stock of the Seller; or
(j) The Seller shall fail to make payment as specified in
Section 2.05(b) and such failure shall remain unremedied for two Business Days
after written notice thereof shall have been given by the Deal Agent to the
Seller; or
(k) A Collection Agent Termination Event shall have occurred
and be continuing; or
(l) The date on which some or all of the "Liquidity
Commitments" under the Liquidity Agreement shall cease to be effective or shall
terminate without renewal; or
(m) The Originator, the Seller or the Collection Agent shall
fail to perform or observe any material term, covenant or agreement contained in
the Credit and Collection Policy; or
(n) A Coverage Shortfall Event shall exist and such Coverage
Shortfall Event shall remain unremedied for five Business Days, or the Purchased
Interest shall exceed 100% and such condition shall remain unremedied for five
Business Days; or
<PAGE>
(o) The Revolving Credit Agreement shall cease to (A) be in
full force and effect, or (B) provide for a commitment to fund (subject only to
conditions that are not materially more restrictive than those set forth in the
Revolving Credit Agreement as in effect on the date hereof) in an aggregate
amount of not less than $30,000,000; or
(p) The IRS or the PBGC shall have filed notice of one or more
Adverse Claims against the Originator, the Seller or any ERISA Affiliate under
ERISA or the Code, unless such Adverse Claim does not purport to cover the
Receivables, and such notice shall have remained in effect for more than thirty
(30) Business Days unless, prior to the expiration of such period, such Adverse
Claims shall have been adequately bonded by such Originator, Seller or the ERISA
Affiliate (as the case may be) in a transaction with respect to which the Deal
Agent has given its prior written approval; or
(q) The Seller shall have become subject to registration as an
"investment company" within the meaning of the Investment Company Act; or
(r) The Deal Agent shall have received an "Enforcement Notice"
under the Intercreditor Agreement;
then, and in any such event, the Deal Agent may, by notice to the Seller declare
the Termination Date to have occurred, except that, in the case of any event
described in Section 7.01(l), (n) or (q), or in clause (i) of Section 7.01(f)
above, the Termination Date shall be deemed to have occurred automatically upon
the occurrence of such event. Upon any such declaration or automatic occurrence,
the Deal Agent and the Purchaser shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of the applicable jurisdiction and other applicable laws,
which rights shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller. Without limiting any
other rights which the Deal Agent, the Purchaser, the Liquidity Providers or any
of their respective Affiliates may have hereunder or under applicable law, the
Seller hereby agrees to indemnify the Deal Agent, the Purchaser, each Liquidity
Provider, each of their respective Affiliates, and each of their respective
directors, officers, employees, agents and attorneys (all of the foregoing being
collectively referred to as "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or actually
incurred by any of them arising out of or resulting from:
(i) any Purchased Receivable represented or deemed represented
by the Seller to be an Eligible Receivable which is not an Eligible
Receivable at the time such representation is made or deemed made;
<PAGE>
(ii) reliance on any representation or warranty made or deemed
made by the Seller, the Collection Agent (if Synthetic or one of its
Affiliates) or any of their respective officers under or in connection
with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
(iii) the failure by the Seller or the Collection Agent (if
Synthetic or one of its Affiliates) to comply with any term, provision
or covenant contained in this Agreement or any of the other Facility
Documents, or with any applicable law, rule or regulation with respect
to any Receivable, the related Contract or the Related Security, or the
nonconformity of any Receivable, the related Contract or the Related
Security with any such applicable law, rule or regulation;
(iv) (A) the failure to vest and maintain vested in the
Purchaser or to transfer to the Purchaser, legal and equitable title to
and ownership of, a percentage ownership interest, corresponding to the
Purchased Interest, in the Receivables which are, or are purported to
be, Purchased Receivables, together with all Collections and Related
Security; or (B) the failure to grant to the Deal Agent, for the
benefit of itself and the Purchaser, a valid and perfected first
priority "security interest," under Article 9 of the UCC, in and to the
Receivables which are, or are purported to be, Purchased Receivables,
together with all Collections and Related Security; in each case free
and clear of any Adverse Claim whether existing at the time of the
Purchase of any such Receivable or at any time thereafter;
(v) the failure to prevent, as of the close of business on
each Business Day prior to the Termination Date, a Coverage Shortfall
Event from occurring;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables which are, or are purported to be, Purchased
Receivables, whether at the time of any Purchase or at any subsequent
time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable which is, or is purported to be, a Purchased
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the
merchandise or services related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(viii) any failure of the Seller or the Collection Agent (if
Synthetic or one of its Affiliates) to perform its duties or
obligations in accordance with the provisions of this Agreement or any
failure by the Originator, the Seller or any Affiliate thereof to
perform its respective duties under the Contracts;
(ix) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable or Contract;
<PAGE>
(x) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in
connection with the Purchased Receivables;
(xi) any repayment by the Deal Agent or the Purchaser of any
amount previously distributed in reduction of Capital or payment of
Yield or any other amount due hereunder, in each case which amount the
Deal Agent or the Purchaser believes in good faith is required to be
repaid;
(xii) the commingling of Collections of Purchased Receivables
at any time with other funds;
(xiii) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of Purchases or reinvestments or
the ownership of Purchased Property or in respect of any Receivable,
Related Security or Contract;
(xiv) any failure by the Seller to give reasonably equivalent
value to the Originator in consideration for the transfer by the
Originator to the Seller of any Receivables or Related Security, or any
attempt by any Person to void or otherwise avoid any such transfer
under any statutory provision or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code; or
(xv) the failure of the Seller, the Originator or any of their
respective agents or representatives (including, without limitation,
agents, representatives and employees of the Originator acting pursuant
to authority granted under Section 6.01) to remit to the Collection
Agent or the Deal Agent, Collections of Purchased Receivables remitted
to the Seller, the Originator or any such agent or representative.
Any amounts subject to the indemnification provisions of this Section 8.01 shall
be paid by the Seller to the Deal Agent within two Business Days following the
Deal Agent's demand therefor. Notwithstanding any other provision of this
Agreement to the contrary, the Seller shall not indemnify the Indemnified
Parties for or with respect to any Indemnified Amounts that would constitute
recourse for uncollectible Purchased Receivables due to credit reasons.
SECTION 8.02. Optional Repurchases of Purchased Interest. (a)
The Seller may, at any time upon not less than five Business Days' prior written
notice to the Deal Agent, elect to repurchase the Purchased Interest (or a
portion thereof), which repurchase shall take place on the Business Day next
succeeding the fifth Business Day to occur following the Deal Agent's receipt of
such notice, in consideration of the payment of all or a portion of outstanding
Capital and accrued Yield on such day in accordance with the terms of subsection
(b) of this Section 8.02.
<PAGE>
(b) In the case of a repurchase from the Purchaser by the
Seller of the Purchased Interest (or a portion thereof) pursuant to this Section
8.02, the Seller shall, on the Business Day coinciding with such repurchase,
make a payment to the Deal Agent, the proceeds of which repurchase shall be
deemed to be Collections relating to the Purchased Interest received by the
Seller, and the amount of which payment shall be applied in the following order
of priority:
(i) (A) First, to pay any accrued and unpaid Collection Agent
Fee (if the Collection Agent is a party other than the Originator or an
Affiliate thereof), and (B) second, to pay any such Collection Agent
Fee to be accrued through (and including) the next scheduled payment
date therefor;
(ii)(A) First, to pay accrued and unpaid Yield with respect to
Purchase Periods associated with the portions of Capital to be reduced
in accordance with clause (vii) below, and (B) second, to pay any
Liquidation Fee payable in connection with such reduction of Capital;
(iii)(A) First, to pay accrued and unpaid Liquidity Fee which
is then due and payable, and (B) second, to pay any such Liquidity Fee
to be accrued through such date;
(iv)(A) First, to pay accrued and unpaid Program Fee which is
then due and payable, and (B) second, to pay any such Program Fee to be
accrued through such date;
(v) (A) First, to pay any Administrative Fee which is then due
and payable, and (B) second (unless such payment is sufficient to
reduce Capital to zero in accordance with the application to be made
pursuant to this Section 8.02(b)), to be retained in the Collection
Account to the extent of the Administrative Fee payable in respect of
the next succeeding annual period;
(vi) (A) First, to pay to pay the portion of any other accrued and
unpaid obligations which have not been paid pursuant to clauses (i)
through (v) above and which are then due and payable by the Seller to
the Purchaser or the Deal Agent under this Agreement or any of the
other Facility Documents;
(vii) to pay all Capital relating to any Purchase Periods
selected by the Deal Agent in the exercise of its sole discretion;
(viii) (A) First, to pay any accrued and unpaid Collection
Agent Fee (if the Collection Agent is the Originator or an Affiliate
thereof) which is then due and payable, and (B) second, to pay any such
Collection Agent Fee to be accrued through (and including) the next
scheduled payment date therefor.
(c) Notwithstanding anything herein or elsewhere to the
contrary, the Purchased Interest shall be recomputed as of the close of business
of the Collection Agent on the date of any repurchase made under this Section
8.02, after giving effect to the reduction of Capital arising as a result of
such repurchase, and thereafter shall be automatically recomputed or deemed
recomputed, or remain constant, as the case may be, in accordance with the
provisions of Section 2.05(c).
<PAGE>
(d) Any repurchase made pursuant to this Section 8.02 shall be
made without recourse or warranty, express or implied (other than a
representation and warranty that the Purchased Interest (or portion thereof) so
repurchased is free and clear of any Adverse Claim created by or through the
Purchaser).
ARTICLE IX
THE DEAL AGENT.
SECTION 9.01. Authorization and Action. The Purchaser hereby
appoints and authorizes the Deal Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Deal Agent by the terms hereof, together with such powers as are reasonably
incidental thereto, including, without limitation, the power and authority to
hold and to perfect any ownership interest or security interest created pursuant
hereto or in connection herewith on behalf of the Purchaser.
SECTION 9.02. Deal Agent's Reliance, Etc. Neither the Deal
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them as Deal Agent under or
in connection with this Agreement (including, without limitation, any action
taken or omitted to be taken by it or them if the Deal Agent is designated as
Collection Agent pursuant to Section 6.01) or any other agreement executed
pursuant hereto, except for its or their own negligence or willful malfeasance
or misfeasance. Without limiting the foregoing, the Deal Agent: (i) may consult
with legal counsel (including counsel for the Seller), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Person and shall not be responsible to any other Person
for any statements, warranties or representations made in or in connection with
this Agreement or in connection with any of the other agreements executed
pursuant hereto; (iii) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this Agreement on the part of the Seller or to inspect the property (including
the books and records) of the Seller; (iv) shall not be responsible to the
Purchaser or any other Person for the due execution, legality, validity,
enforceability, genuineness or sufficiency of value of this Agreement or any
other agreement, instrument or document furnished pursuant hereto; and (v) shall
incur no liability under or in respect of this Agreement or any other agreement
executed pursuant hereto, by acting upon any notice (including notice by
telephone with respect to notices under Section 2.02), consent, certificate or
other instrument or writing (which may be by telex or facsimile) believed by it
to be genuine and signed or sent by the proper party or parties. Notwithstanding
anything in this Section 9.02 to the contrary, the foregoing provisions of this
Section 9.02 shall not run in favor of the Deal Agent in connection with any
claim against the Deal Agent made by EagleFunding.
<PAGE>
SECTION 9.03. Deal Agent and Affiliates. With respect to any
interests which may be assigned by the Purchaser to BSI, or any Affiliate of
BSI, pursuant to Section 10.04, BSI or such Affiliate shall have the same rights
and powers under this Agreement as would the Purchaser if it were holding such
interests and may exercise the same as though it were not the Deal Agent. BSI
and its Affiliates may generally engage in any kind of business with the Seller,
the Originator or any Obligor, any of their respective Affiliates and any Person
who may do business with or own securities of the Seller, the Originator or any
Obligor or any of their respective Affiliates, all as if BSI were not the Deal
Agent and without any duty to account therefor to the Purchaser or any Liquidity
Provider.
SECTION 9.04. [Reserved].
SECTION 9.05. Resignation of the Deal Agent. The Deal Agent
may resign as Deal Agent hereunder at any time by giving not less than five (5)
Business Days' prior written notice to the Purchaser, the Seller, the Collection
Agent and each Rating Agency then rating the Commercial Paper, at the request of
EagleFunding; such resignation to become effective only upon the later to occur
of
(i) the earlier of (x) the appointment and acceptance of a
successor Deal Agent as provided below and (y) the 30th day following
delivery of such notice, and
(ii) the Purchaser's obtaining of written confirmation from
each such Rating Agency that such resignation and appointment will not
result in a withdrawal or downgrading of the then-current rating of the
Commercial Paper by such Rating Agency.
Upon any such resignation, the Purchaser shall appoint a financial institution
of its choosing as Deal Agent. Following the appointment of a successor Deal
Agent and such successor Deal Agent's acceptance thereof, such successor Deal
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Deal Agent as Deal Agent hereunder, and the
resigning Deal Agent shall be discharged from its duties and obligations as Deal
Agent hereunder. After the Deal Agent's resignation, the provisions of this
Article IX shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Deal Agent.
SECTION 9.06 Payments. If in the opinion of the Deal Agent the
distribution of any amount received by it in such capacity hereunder or under
any of the other Facility Documents might involve it in liability, it may
refrain from making distribution until its right to make distribution shall have
been adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Deal
Agent is to be repaid, each Person to whom any such distribution shall have been
made shall either repay to the Deal Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments and Waivers. (a) Except as provided
in Section 10.01(b), no amendment or modification of any provision of this
Agreement shall be effective without the written agreement of the Seller, the
Collection Agent and the Deal Agent, and no termination or waiver of any
provision of this Agreement or consent to any departure therefrom by the Seller
shall be effective without the written concurrence of the Deal Agent. Any waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
(b) Notwithstanding the provisions of Section 10.01(a), (i)
the written consent of the Purchaser shall be required for any amendment,
modification or waiver (A) reducing any Capital, or the Yield thereon, for any
Purchase Period, (B) postponing any date for any payment of any Capital or the
Yield thereon, for any Purchase Period, or for any payment of fees payable under
the terms of the Fee Letter, or (C) modifying the provisions of this Section
10.01, and (ii) the written consent of the Purchaser shall be required for any
amendment, modification or waiver increasing the Purchase Limit.
(c) Any time that the Commercial Paper is being rated by one
or more of Moody's, S&P and DCR (as applicable) (each, a "Rating Agency"), at
the request of EagleFunding, no material amendment or modification of any
material provisions hereof shall be effective absent written confirmation by
each such Rating Agency that such amendment or modification will not result in a
withdrawal or downgrading of the then-current rating of the Commercial Paper by
such Rating Agency. EagleFunding shall send, or shall cause to be sent, copies
of all amendments, modifications or supplements to this Agreement to each Rating
Agency then rating the Commercial Paper, at the request of EagleFunding, prior
to the execution thereof by all parties thereto.
SECTION 10.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication and communication by facsimile copy)
and mailed, telexed, transmitted or delivered, as to each party hereto, at its
address set forth under its name on the signature pages hereof or specified in
such party's Assignment and Acceptance or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, upon receipt, or in the case
of (a) notice by mail, five days after being deposited in the United States
mails, first class postage prepaid, (b) notice by telex, when telexed against
receipt of answerback, or (c) notice by facsimile copy, when verbal
communication of receipt is obtained, except that notices and communications
pursuant to Article II shall not be effective until received.
SECTION 10.03 Setoff and Counterclaim. All payments to be made
by the Seller or the Collection Agent under this Agreement shall be made free
and clear of any counterclaim, set-off, deduction or other defense, which the
Seller or the Collection Agent may have against the Purchaser, the Deal Agent,
any Liquidity Provider, or against each other.
<PAGE>
SECTION 10.04. No Waiver; Remedies. No failure on the part of
the Deal Agent or the Purchaser to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 10.05. Binding Effect; Assignability. This Agreement
shall be binding upon and inure to the benefit of the Seller, the Deal Agent,
the Purchaser, the Collection Agent and their respective successors and
permitted assigns. This Agreement and the Purchaser's rights and obligations
hereunder and interest herein shall be assignable in whole or in part (including
by way of the sale of participation interests therein) by the Purchaser and
their respective successors and assigns; provided however that neither the
Purchaser nor any such successor or assignee may make an assignment absent the
prior written consent of the Seller, to any Person which is not created or
organized under the laws of the United States or a political subdivision
thereof. EagleFunding shall send, or cause to be sent, notice of such proposed
assignment by the Purchaser, to each Rating Agency then rating the Commercial
Paper at the request of EagleFunding, prior to the effectiveness thereof. The
Seller may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of the Purchaser and the Deal
Agent. The parties to each assignment or participation made pursuant to this
Section 10.05 shall execute and deliver to the Deal Agent for its acceptance and
recording in its books and records, an Assignment and Acceptance or a
participation agreement or other transfer instrument reasonably satisfactory in
form and substance to the Deal Agent and the Seller. Each such assignment or
participation shall be effective as of the date specified in the applicable
Assignment and Acceptance or other agreement or instrument only after the
execution, delivery, acceptance and recording as described in the preceding
sentence. The Deal Agent shall notify the Seller of any assignment or
participation thereof made pursuant to this Section 10.05. The Purchaser may, in
connection with any assignment or participation or any proposed assignment or
participation pursuant to this Section 10.05, disclose to the assignee or
participant or proposed assignee or participant any information relating to the
Seller and the Purchased Property furnished to the Purchaser by or on behalf of
the Seller or the Collection Agent.
SECTION 10.06. Term of this Agreement. This Agreement,
including, without limitation, the Seller's obligation to observe its covenants
set forth in Articles V and VI, and the Collection Agent's obligation to observe
its covenants set forth in Article VI, shall remain in full force and effect
until the Collection Date; provided, however, that the rights and remedies with
respect to any breach of any representation and warranty made or deemed made by
the Seller pursuant to Articles III and IV, and the indemnification and payment
provisions of Article VIII and Article IX and the provisions of Section 10.10
and Section 10.11 shall be continuing and shall survive any termination of this
Agreement.
<PAGE>
SECTION 10.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE PURCHASER, THE SELLER
AND THE DEAL AGENT EACH HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT.
SECTION 10.08. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE PURCHASER, THE SELLER AND THE DEAL AGENT EACH WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
SECTION 10.09. Costs, Expenses and Taxes. (a) In addition to
the rights of indemnification granted to the Deal Agent, the Purchaser and the
Indemnified Parties under Article VIII hereof, the Seller agrees to pay on
demand all costs and expenses of EagleFunding and the Deal Agent incurred in
connection with the preparation, execution, delivery, administration (including
periodic auditing), amendment or modification of, or any waiver or consent
issued in connection with, this Agreement and the other documents to be
delivered hereunder or in connection herewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Deal Agent and
EagleFunding with respect thereto, and with respect to advising the Deal Agent
and the Purchaser as to their respective rights and remedies under this
Agreement and the other documents to be delivered hereunder or in connection
herewith, and all costs and expenses, if any (including reasonable counsel fees
and expenses), incurred by the Deal Agent or the Purchaser in connection with
the enforcement of this Agreement and the other documents to be delivered
hereunder or in connection herewith.
(b) The Seller shall pay on demand any and all commissions of
placement agents and dealers in respect of commercial paper notes (to the extent
not otherwise received by the Purchaser as a portion of Yield) issued to fund
the Purchase of any interests in Purchased Property and any and all stamp,
sales, excise and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement,
the other documents to be delivered hereunder or any agreement or other document
providing liquidity support, credit enhancement or other similar support to the
Purchaser in connection with this Agreement or the funding or maintenance of
Purchases hereunder.
<PAGE>
(c) The Seller shall pay on demand all other costs, expenses
and taxes (excluding income taxes) incurred by an Issuer or any general or
limited partner or shareholder of such Issuer ("Other Costs"), including,
without limitation, the cost of auditing such Issuer's books by certified public
accountants, the cost of rating such Issuer's commercial paper by independent
financial rating agencies, the taxes (excluding income taxes) resulting from
such Issuer's operations, and the reasonable fees and out-of-pocket expenses of
counsel for such Issuer or any counsel for any general or limited partner or
shareholder of such Issuer with respect to (i) advising such Person as to its
rights and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, (ii) the enforcement of this Agreement and
the other documents to be delivered hereunder or in connection herewith or
matters relating to such Issuer's operations and (iii) advising such Person as
to the issuance of its commercial paper notes and action in connection with such
issuance.
SECTION 10.10. No Proceedings. Each of the Seller, the Deal
Agent, the Collection Agent and the Purchaser hereby agrees that it will not
institute against, or join any other Person in instituting against, any Issuer
any proceedings of the type referred to in clause (i) of Section 7.01(f) so long
as any commercial paper issued by such Issuer shall be outstanding or there
shall not have elapsed one year and one day since the last day on which any such
commercial paper shall have been outstanding.
SECTION 10.11. Recourse Against Certain Parties. No recourse
under or with respect to any obligation, covenant or agreement (including,
without limitation, the payment of any fees or any other obligations) of the
Purchaser as contained in this Agreement or any other agreement, instrument or
document entered into by it pursuant hereto or in connection herewith shall be
had against any administrator of the Purchaser or any incorporator, affiliate,
stockholder, officer, employee or director of the Purchaser or of any such
administrator, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise; it being expressly
agreed and understood that the agreements of the Purchaser contained in this
Agreement and all of the other agreements, instruments and documents entered
into by it pursuant hereto or in connection herewith are, in each case, solely
the corporate obligations of the Purchaser, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Purchaser
or any incorporator, stockholder, affiliate, officer, employee or director of
the Purchaser or of any such administrator, as such, or any other of them, under
or by reason of any of the obligations, covenants or agreements of the Purchaser
contained in this Agreement or in any other such instruments, documents or
agreements, or which are implied therefrom, and that any and all personal
liability of every such administrator of the Purchaser and each incorporator,
stockholder, affiliate, officer, employee or director of the Purchaser or of any
such administrator, or any of them, for breaches by the Purchaser of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement. The provisions of this Section 10.11 shall survive the termination of
this Agreement.
<PAGE>
SECTION 10.12. Execution in Counterparts; Severability;
Integration. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings
other than the fee letters described in Section 2.09(a).
SECTION 10.13. Confidentiality. Except to the extent otherwise
required by applicable laws, rules or regulation, unless the provider thereof
shall otherwise consent in writing the Seller agrees that it shall (i) maintain
the confidentiality of information obtained as a result of being a party hereto,
to any related documents or to any of the transactions contemplated hereby or
thereby (including, without limitation, the contents of any summary of
indicative terms and conditions with respect to such transactions, and the
provisions of this Agreement and any of the other Facility Documents)
("Confidential Information") and (ii) not disclose, deliver or otherwise make
available to any third party any part of any such Confidential Information;
provided, however, that the Seller may disclose any Confidential Information (w)
to its legal counsel, auditors and accountants, (x) as may be required or
requested by any governmental authority, regulatory body or rating agency, (y)
subject to a written confidentiality agreement having terms substantially
similar to this Section 10.13, to the Originator or any Affiliate thereof, any
financial institution or other party that extends or is considering the
extension of material debt or equity financing to the Originator or any
Affiliate, or (z) as may be required or appropriate in response to a court order
or in connection with any litigation; provided further, however, that the Seller
shall have no obligation of confidentiality whatsoever in respect of any
information which may be generally available to the public or becomes available
to the public through no fault of the Seller, the Originator or any of their
respective Affiliates.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE SELLER: SYNTHETIC FUNDING CORPORATION
By_________________________________
Title:
309 Lafayette Road
Chickamauga, Georgia 30707
Attention: [______________]
Facsimile No.: (706)[__________]
Telephone No.: (706)[__________]
THE COLLECTION AGENT: SYNTHETIC INDUSTRIES, INC.
By_________________________________
Title:
309 Lafayette Road
Chickamauga, Georgia 30707
Attention: [______________]
Facsimile No.: (706)[__________]
Telephone No.: (706)[__________]
THE DEAL AGENT: BANCBOSTON SECURITIES INC.
By_________________________________
Title:
BancBoston Securities Inc.
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Mitchell Feldman
Facsimile No.: (617) 434-1533
Telephone No.: (617) 434-5760
<PAGE>
THE PURCHASER: EAGLEFUNDING CAPITAL CORPORATION
By: BankBoston, N.A., as its attorney-in-fact
By_______________________
Title:
EagleFunding Capital Corporation
c/o BancBoston Securities Inc.
100 Federal Street, 9th Floor
Boston, Massachusetts 02110
Attention: Mitchell Feldman
Facsimile No.: (617) 434-1533
Telephone No.: (617) 434-5760
c/o Lord Securities Corporation
2 Wall Street, 19th Floor
New York, New York 10005
Attention: Dwight Jenkins
Telephone No.: (212) 346-9007
Facsimile No.: (212) 346-9012
<PAGE>
SCHEDULE I
CONDITION PRECEDENT DOCUMENTS
As required by Section 3.01 of the Agreement, each of the
following items must be delivered to the Deal Agent prior to the date of the
initial Purchase:
(a) A copy of this Agreement duly executed by the Seller, the
Purchaser and the Deal Agent;
(b) A certificate of the Secretary or Assistant Secretary of
the Seller dated the date of this Agreement, certifying (i) the names and true
signatures of the incumbent officers of the Seller authorized to sign this
Agreement and the other documents to be delivered by it hereunder (on which
certificate the Deal Agent and the Purchaser may conclusively rely until such
time as the Deal Agent shall receive from the Seller a revised certificate
meeting the requirements of this paragraph (b)), (ii) that the copy of the
certificate of incorporation of the Seller attached thereto is a complete and
correct copy and that such certificate of incorporation has not been amended,
modified or supplemented and is in full force and effect, (iii) that the copy of
the by-laws of the Seller attached thereto is a complete and correct copy and
that such by-laws have not been amended, modified or supplemented and are in
full force and effect, and (iv) the resolutions of the Seller's board of
directors approving and authorizing the execution, delivery and performance by
the Seller of this Agreement and the documents related thereto;
(c) Good standing certificate for the Seller issued by the
Secretary of State of Delaware;
(d) Acknowledgment copies of proper financing statements (the
"Facility Financing Statements"), dated a date reasonably near to the date of
the initial Purchase, describing the Receivables and Related Security and (i)
naming the Originator as Seller, the Seller as purchaser and the Deal Agent as
assignee and (ii) naming the Seller as debtor and the Deal Agent, on behalf of
the Purchaser, as secured party, or other, similar instruments or documents, as
may be necessary or, in the opinion of the Deal Agent or the Purchaser,
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Purchaser's interests in all Receivables and Related Security and
other Purchased Property;
(e) Acknowledgment copies of proper financing statements, if
any, necessary to release all security interests and other rights of any Person
in the Receivables and Related Security previously granted by the Originator or
the Seller;
(f) Certified copies of requests for information or copies (or
a similar search report certified by a party acceptable to the Deal Agent),
dated a date reasonably near to the date of the initial Purchase, listing all
effective financing statements (including the Facility Financing Statements)
which name the Originator or the Seller (under their present names and any
previous names) as debtor and which are filed in the jurisdictions in which the
Facility Financing Statements were filed, together with copies of such financing
statements (none of which, other than the Facility Financing Statements, shall
cover any Receivables or Contracts except to the extent permitted under the
Intercreditor Agreement);
<PAGE>
--
(g) Executed copies of Lock-Box Agreements with each of the
Lock-Box Banks and an executed copy of the Collection Account Agreement with the
Collection Account Bank;
(h)The Intercreditor Agreement executed by all parties thereto
(i) An opinion of King & Spalding, counsel to the Originator
and the Seller, issued in connection with the Originator Sale Agreement and
relating to the issues of substantive consolidation and true sale of the
Receivables and the related property, in form and substance satisfactory to the
Deal Agent;
(j) An opinion of King & Spalding, counsel to the Seller,
issued in connection with this Agreement and relating to corporate issues,
perfection and priority of security interests, in substantially the form of
Exhibit D, and as to such other matters as the Deal Agent may reasonably
request, together with a similar opinion of King & Spalding, counsel to the
Originator, issued in connection with the Originator Sale Agreement; and
(k) Original copies of the Originator Sale Agreement and all
documents described in Section 3.01 of the Originator Sale Agreement and not
otherwise described above.
(l) A fully and correctly completed Daily Settlement Report,
as of the close of business of the Collection Agent on the next preceding
Business Day, and a fully and correctly completed Asset Report, as of the last
day of the most recently concluded calendar month.
<PAGE>
SCHEDULE II
DESCRIPTION OF CREDIT AND COLLECTION POLICY
Attached.
<PAGE>
SCHEDULE III
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
Lock-Box Banks:
SOUTHTRUST BANK, N.A.
One Georgia Center
600 West Peachtree Street
22nd Floor
Atlanta, GA 30308
Title of Account Account No. Lock-box No.
Synthetic Industries 66-864-572 A0063
<PAGE>
SCHEDULE IV
TRADENAMES, FICTITIOUS NAMES AND "DOING BUSINESS AS" NAMES
Product Name:
Fibermesh
<PAGE>
EXHIBIT A
FORM OF CONTRACTS
Attached.
<PAGE>
EXHIBIT B
FORM OF LOCK-BOX AGREEMENT
____________, 19__
[Name and Address of
Lock-Box Bank]
Re: Synthetic Industries, Inc.
Lock-Box Account No. 66-864-572
(the "Lock-Box Account")
Ladies and Gentlemen:
The undersigned, Synthetic Industries, Inc. ("Synthetic")
hereby notifies you that we have transferred exclusive ownership and control of
the above-referenced Lock-Box Account to Synthetic Funding Corporation, a
Delaware corporation, and that Synthetic Funding Corporation (the "Seller"), in
connection with certain purchase and financing arrangements between the Seller
and EagleFunding Capital Corporation (the "Purchaser"), hereby transfers
exclusive ownership and control of the above-referenced Lock-Box Account to
BancBoston Securities Inc., acting in its capacity as deal agent (the "Deal
Agent") for itself and for the Purchaser.
In connection with the foregoing, Synthetic, the Seller and
the Deal Agent each hereby instructs you, beginning on the date hereof and in
accordance with your existing procedures for management of the Lock-Box Account,
(i) to collect and deposit into the Lock-Box Account all monies, checks,
instruments and other items of payment received in the related lock-box and (ii)
to transfer to the Deal Agent an amount equal to all monies, checks, instruments
and other items of payment deposited in the Lock-Box Account on a daily basis.
All such transfers shall be made on a daily basis by depository transfer check
(DTC), automated clearing house (ACH) transfer, or wire or otherwise, as the
Deal Agent may direct you in its sole discretion, to the following account (the
"Collection Account"):
BankBoston, N.A.
Account No: __________________
Reference: BancBoston Securities Inc. Collection Account,
as Deal Agent for Synthetic Funding Securitization
or to such other account as the Deal Agent may instruct from time to time.
<PAGE>
-3-
The Seller and Synthetic also each hereby notifies you that
the Deal Agent shall be irrevocably entitled to exercise any and all rights (if
any) of Synthetic and the Seller in respect of or in connection with the
Lock-Box Account, including, without limitation, the right to specify when
payments are to be made out of or in connection with the Lock-Box Account. All
monies in the Lock-Box Account will be held for and in trust for the Deal Agent
upon deposit therein and neither Synthetic nor the Seller will have any control
over the Lock-Box Account or the funds on deposit therein. Without limiting the
generality of the foregoing, neither Synthetic nor the Seller shall have any
right to draw against the Lock-Box Account, direct the transfer of funds therein
or otherwise assign, pledge or have access to the Lock-Box Account or the funds
on deposit therein.
You will have no duty to inquire into the source or use of any
monies, checks, drafts, instruments or other items or amounts deposited into the
Lock-Box Account. The Seller and Synthetic each hereby agrees that any deposits
of monies, checks, drafts, instruments or other items into or withdrawals from
the Lock-Box Account now or hereafter directed by the Deal Agent are authorized
by the Seller and Synthetic, and each of Synthetic and the Seller acknowledges
that it has no right to direct such transfers at any time. You shall be fully
protected in acting on any instruction of the Deal Agent with respect to the
Lock-Box Account without making any inquiry as to the Deal Agent's authority to
give such instruction.
Notwithstanding anything herein or elsewhere to the contrary,
including but not limited to any provision of the Loan and Security Agreement
dated as of December 18, 1997, by and between Synthetic and the financial
institutions party thereto from time to time as lenders and BankBoston, N.A., as
Agent (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "Loan and Security Agreement"), you hereby waive any and
all rights to bankers liens and rights to deduct from or set-off against amounts
in the Lock-Box Account, except that: (i) in the event that any checks deposited
in the Lock-Box Account are returned unpaid to you, the amount thereof shall be
charged to the Lock-Box Account, and (ii) any monthly maintenance fees in
connection with the Lock-Box Account may also be charged to the Lock-Box
Account. The Seller hereby agrees that if there are insufficient funds in the
Lock-Box Account to cover any such charges to the Lock-Box Account, then it will
pay to you the amount of such deficiency on demand. In the event the Seller
fails to reimburse you as set forth above, you may so notify the Deal Agent, and
the Deal Agent may, but shall have no obligation to, pay the same.
The use of any such checks or electronic or other means of
funds transfer, together with the resolutions authorizing the same, are intended
to affirm the rights and the interests of the Deal Agent in the Lock-Box Account
and all funds deposited therein and not to derogate therefrom.
The taxpayer identification number associated with the
Lock-Box Account shall be that of the Seller and the Seller will report for
federal, state and local income tax purposes the income, if any, earned on funds
in the Lock-Box Account.
<PAGE>
This letter agreement may not be terminated at any time by
Synthetic or the Seller, but may be terminated by either you or the Deal Agent
upon 30 days' prior written notice to the other and to the undersigned.
You will not assign or transfer your rights or obligations
hereunder (other than to the Deal Agent) without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this letter
agreement shall inure to the benefit of and be binding upon all parties hereto
and their respective successors and assigns.
Any change, amendment, modification or waiver of this letter
agreement or any provision hereof will not be effective unless such change,
amendment, modification or waiver is in writing and signed by all parties
hereto.
All notices, demands, instructions and other communications
required or permitted to be given to or made upon any party hereto shall be
effective if communicated in writing and personally delivered or sent by
registered, certified, express or regular mail, postage prepaid, return receipt
requested, or by telex, telecopy (receipt promptly confirmed by telephone) or
prepaid telegram (with messenger delivery specified in the case of a telegram)
or by telephone (promptly confirmed in writing) and shall be deemed to be given
for purposes of this letter agreement on the day that such communication is
delivered to the intended recipient thereof in accordance with the provisions of
this paragraph. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this paragraph, notices, demands,
instructions and other communications shall be given to or made upon the
respective parties hereto at their respective addresses (or to their respective
telex, telecopy or telephone numbers) indicated below, or at such other address
as any party hereto may notify to the other parties in accordance with the
provisions of this paragraph.
All bank statements on the Lock-Box Account should be sent to the
Seller at:
Synthetic Funding Corporation
309 LaFayette Road
Chickamauga, Georgia 30707
Attn:
With a copy to the Deal Agent at:
BancBoston Securities Inc.
100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: John T. Hackett III
<PAGE>
Each of Synthetic and the Seller consents and agrees to the
foregoing, authorizes you to enter into this letter agreement, and agrees to
indemnify and hold you harmless from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses and
liabilities of every nature and character arising out of your compliance with
the terms of this letter agreement, except such as result from your gross
negligence or willful misconduct, and in no event shall you be liable for any
consequential, indirect or special damages and except that losses for
uncollected checks shall be the responsibility of the Seller to the extent not
set-off against other funds in the Lock-Box Account.
You and each of the parties hereto (other than the Seller)
hereby agree (which agreement shall, pursuant to the terms of this letter
agreement, be binding upon its successors and assigns) that you and each of the
parties hereto shall not institute against, or join any other Person in
instituting against the Seller any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and a day after the payment in
full of all of the indebtedness of the Seller and the termination of any of the
commitments under each of the "Facility Documents", as such term is defined
under the Receivables Purchase Agreement. The provisions of this paragraph shall
survive the termination of this letter agreement.
This letter agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts and
applicable federal law.
This letter agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute one and the same instrument.
This letter agreement constitutes the entire agreement between
the parties hereto relating to the Lock-Box Account and the other matters herein
described and supersedes any and all prior agreements relating to such matters,
including but not limited to the Agency Account Agreement between Synthetic,
SouthTrust Bank of Georgia, N.A. and BankBoston, N.A. (formerly known as "The
First National Bank of Boston"), dated as of October 20, 1995.
[Remainder of Page Intentionally Left Blank]
<PAGE>
Please agree to the terms of, and acknowledge receipt of, this
notice by signing in the space provided below.
Very truly yours,
SYNTHETIC INDUSTRIES, INC.
By:________________________________
Title:
Address: 309 LaFayette Road
Chickamauga, Georgia 30707
Telephone:
Telecopy:
SYNTHETIC FUNDING CORPORATION
By:________________________________
Title:
Address: 309 LaFayette Road
Chickamauga, Georgia 30707
Telephone:
Telecopy:
BANCBOSTON SECURITIES INC.,
as Deal Agent
By:________________________________
Title:
Address: 100 Federal Street
Boston, MA 02110
Mail Stop: 01-09-02
Attn: Mitchell Feldman
Telephone: (617) 434-5760
Telecopy: (617) 434-9591
<PAGE>
--
Accepted this __th day
of December, 19__
[NAME OF BANK]
By:________________________________
Title:
Address: ___________________
-------------------
Attn: ______________
Telephone: (___) ________
Telecopy: (___) ________
<PAGE>
The undersigned, BankBoston, N.A. (formerly known as "The First
National Bank of Boston") on behalf of itself and in its capacity as agent under
(a) the Fourth Amended and Restated Revolving Credit and Security Agreement
among Synthetic Industries, Inc., the financial institutions party thereto from
time to time as the "Lenders" and The First National Bank of Boston, as agent
for the Lenders, dated October 20, 1995, and (b) the "Loan and Security
Agreement" (as defined in the attached letter agreement), hereby agrees that the
attached letter agreement supersedes any and all prior agreements relating to
Account # 66-864-572 at SouthTrust Bank of Georgia, N.A. (the "Lock-Box
Account") and the other matters described in the attached letter agreement,
including but not limited to the Agency Account Agreement between itself,
Synthetic Industries, Inc. and SouthTrust Bank of Georgia, N.A., dated as of
October 20, 1995, and hereby releases, relinquishes and disclaims any and all of
its right, title and interest in, to and under the Lock-Box Account, which
release shall become effective with respect to such Agency Account upon the
effectiveness of the attached letter agreement.
Date: _________________ BANKBOSTON, N.A.
By:_______________________
Title:______________________
<PAGE>
EXHIBIT C
FORM OF ASSET REPORT
Attached.
<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE SELLER
[Date of Initial Purchase]
To: EagleFunding Capital Corporation,
as the Purchaser under the Purchase Agreement dated as of ________,
19__, among [_________], said Purchaser and BancBoston Securities Inc.,
as Deal Agent for said Purchaser; and
BancBoston Securities Inc., as Deal Agent under said
Purchase Agreement.
[Moody's]
[S&P]
[DCR]
[Synthetic Funding Corporation]
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01 of
the Purchase Agreement dated as of ______________, 19__ (the "Purchase
Agreement") among ___________________________, EagleFunding Capital Corporation
("EagleFunding") and BancBoston Securities, Inc., as Deal Agent. Terms defined
in the Purchase
Agreement are used herein as therein defined.
We have acted as counsel for the Seller in connection with the
preparation, execution and delivery of, and the initial purchase of Receivable
Interests made under, the Purchase Agreement.
In that connection we have examined:
(1) The Purchase Agreement.
(2) The documents furnished by the Seller pursuant to Section
3.01 of the Purchase Agreement, and each of the other Facility
Documents.
(3) The Certificate of Incorporation of the Seller and all
amendments thereto (the "Charter").
(4) The by-laws of the Seller and all amendments thereto (the
"By-Laws").
<PAGE>
--
(5) Certificates from the Secretary of State of Delaware,
dated ________, 19__, the Secretary of State of [the state in which the
Seller's chief executive office is located], dated ________, 19__, the
Secretary of State of ________, dated ________, 19__, and the Secretary
of State of ________, dated ________, 19__, each attesting to the
continued corporate existence and good standing of the Seller in such
States.*
(6) Acknowledgment cop[y][ies] of [appropriate number]
financing statement[s] (the "Financing Statement[s]") under the Uniform
Commercial Code (the "UCC") as in effect in the State of [the state in
which the Seller's chief executive office is located], naming the
Seller as debtor and the Deal Agent as secured party, which Financing
Statements have been filed in the filing offices listed in Schedule I
hereto located in the respective states listed in Schedule I hereto.
(7) Certificates from [name of search report service] as to
copies of financing statements on file with the filing offices listed
in Schedule I hereto located in the respective states listed in
Schedule I hereto.
We have also examined the originals, or copies certified to our satisfaction, of
the documents listed in a certificate of the chief financial officer of the
Seller, dated the date hereof (the "Seller's Certificate"), certifying that the
documents listed in such Certificate are all of the indentures, loan or credit
agreements, security agreements, bonds and notes (except bonds and notes issued
pursuant to the aforesaid indentures and loan or credit agreements), which
affect or purport to affect the Seller's ability to sell or otherwise dispose of
Receivables or the Seller's obligations under the Purchase Agreement. In
addition, we have examined the originals, or copies certified to our
satisfaction, of such other corporate records of the Seller, certificates of
public officials and of officers of the Seller, and agreements, instruments and
documents, as we have deemed necessary as a basis for the opinions hereinafter
expressed. As to questions of fact material to such opinions, we have, when
relevant facts were not independently established by us, relied upon
certificates of the Seller or its officers or of public officials. We have
assumed the due execution and delivery, pursuant to due authorization, of the
Purchase Agreement by EagleFunding and the Deal Agent. In our examination of the
certificates referred to in (7) above, we have assumed that all financing
statements, other than the Financing Statements, in which the Seller is named as
debtor have been properly filed and indexed in the appropriate filing offices in
the states listed on Schedule I hereto, that such certificates are accurate and
complete, and that you have no knowledge of the contents of any other financing
statement.
Based upon the foregoing and upon such investigation as we
have deemed necessary, we are of the opinion that:
<PAGE>
1. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business, and is in good standing, in every
jurisdiction where the nature of its business requires it to be so
qualified.
2. The execution, delivery and performance by the Seller of
the Purchase Agreement, each of the Facility Documents to which it is a
party, and all other instruments and documents to be delivered by the
Seller thereunder, and the transactions contemplated thereunder, are
within the Seller's corporate powers, have been duly authorized by all
necessary corporate action, and (a) do not contravene (i) the Charter
or the By-Laws or (ii) any law, rule or regulation applicable to the
Seller or (iii) any contractual or legal restriction contained in any
document listed in the Seller's Certificate or, to the best of our
knowledge, contained in any other similar document, and (b) do not
result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of the Seller's
properties, and (c) do not require compliance with any bulk sales act
or similar law. Each of the Facility Documents to which the Seller is a
party has been duly executed and delivered on behalf of the Seller.
3. No authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Seller of the Purchase Agreement or any other document or instrument to
be delivered under the Purchase Agreement or for the perfection of or
the exercise by the Deal Agent or the Purchaser of its respective
rights and remedies under the Purchase Agreement, except for the
filings referred to in paragraph 6 below and as otherwise stated in
such paragraph 6.
4. The Purchase Agreement and the other Facility Documents to
which the Seller is a party constitute the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance
with its terms.
5. To the best of our knowledge there is no pending or
threatened action, suit or proceeding, or any order, writ, judgment,
award, injunction or decree, against or affecting the Seller or any of
its subsidiaries before any court, governmental agency or arbitrator
which may materially adversely affect the financial condition or
operations of the Seller or the Seller and its consolidated
subsidiaries taken as a whole or materially adversely affect the
ability of the Seller to perform its obligations under the Facility
Documents. Neither the Seller nor any subsidiary is in default with
respect to any order of any court, arbitrator or governmental body
except for defaults with respect to orders of governmental agencies
which defaults are not material to the Seller or to the business or
operations of the Seller or any subsidiary.
6. [Insert opinion as to the perfection and priority of the
Purchaser's interest in each Purchased Receivable then existing or
thereafter arising and in the Related Security and Collections with
respect thereto, such opinion to be negotiated for this transaction,
taking into account the circumstances of the transaction, the nature of
the Purchased Receivables and Related Security and applicable law.]
<PAGE>
The opinions set forth above are subject to the following
qualifications:
(a) The enforceability of the Seller's obligations under the
Facility Documents is subject to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.
(b) The enforceability of the Seller's obligations under the
Facility Documents is subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
We do not purport to be experts on, or to express any opinion
herein concerning, any law other than the general corporation law of the State
of [Delaware], law of the States of New York and [the state in which the
Seller's chief executive office is located] and the federal law of the United
States.
Copies of this opinion letter may be delivered to the
Purchaser, any financial institution providing liquidity support or credit
enhancement in connection with the transactions contemplated by the Purchase
Agreement, any financial institution acting as agent in connection with any such
liquidity support or credit enhancement facility or any successor or assign of
the foregoing, and each such Person shall be entitled to rely upon the opinions
set forth herein.
Very truly yours,
<PAGE>
EXHIBIT E
SELLER'S CERTIFICATE OF INCORPORATION
<PAGE>
[Execution Version]
[Synthetic]
U.S. $40,000,000
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 18, 1997
Among
SYNTHETIC FUNDING CORPORATION,
as the Seller
and
EAGLEFUNDING CAPITAL CORPORATION,
as the Purchaser
and
BANCBOSTON SECURITIES INC.,
as the Deal Agent
and
SYNTHETIC INDUSTRIES, INC.,
as the Collection Agent
<PAGE>
--
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
<S> <C>
SECTION 1.01. Certain Defined Terms.....................................................................1
SECTION 1.02. Other Terms..............................................................................22
SECTION 1.03. Computation of Time Periods..............................................................23
ARTICLE II
THE PURCHASE FACILITY
SECTION 2.01. Purchases of Purchased Interests; Stop Events............................................23
SECTION 2.02. The Initial Purchase, Subsequent Purchases and Capital Increases.........................24
SECTION 2.03. Termination or Reduction of the Purchase Limit. .........................................25
SECTION 2.04. Selection of Purchase Periods............................................................25
SECTION 2.05. Non-Liquidation Settlement Procedures....................................................26
SECTION 2.06. Liquidation Settlement Procedures........................................................28
SECTION 2.07. Special Settlement Procedures............................................................30
SECTION 2.08. Payments and Computations, Etc...........................................................30
SECTION 2.09. Fees.....................................................................................31
SECTION 2.10. Increased Costs; Capital Adequacy; Illegality............................................32
SECTION 2.11. Taxes....................................................................................34
SECTION 2.12. Assignment of the Originator Sale
Agreement.....................................................................................35
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial
Purchase.......................................................................................36
SECTION 3.02. Conditions Precedent to All Purchases and Remittances of Collections.....................36
SECTION 3.03. Conditions Precedent to Certain Capital Increases........................................37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. General Covenants........................................................................42
ARTICLE VI
ADMINISTRATION, COLLECTION AND MONITORING OF ASSETS
SECTION 6.01. Appointment and Designation of the Collection Agent......................................51
SECTION 6.02. Collection of Receivables by the Collection Agent; Extensions and Amendments of
Receivables....................................................................................52
SECTION 6.03. Distribution and Application of
Collections....................................................................................52
SECTION 6.04. Other Rights of the Deal Agent...........................................................53
SECTION 6.05. Records; Audits..........................................................................53
SECTION 6.06. Receivable Reporting............................................................54 Payments
SECTION 6.07. Collections and Lock-Boxes...............................................................54
SECTION 6.08. UCC Matters; Protection and Perfection of Purchased Property.............................55
SECTION 6.09. Obligations of the Seller With Respect to Receivables....................................56
SECTION 6.10. Applications of Collections..............................................................57
SECTION 6.11. Annual Servicing Report of Independent Public Accountants................................57
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination....................................................................58
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Indemnities by the Seller................................................................61
ARTICLE IX
THE DEAL AGENT
SECTION 9.01. Authorization and Waivers....................................................................66
SECTION 9.02. Deal Agent's Reliance, etc...............................................................66
SECTION 9.03. Deal Agent and Affiliates................................................................67
SECTION 9.04. [Reserved]...............................................................................67
SECTION 9.05. Resignation of the Deal Agent............................................................67
SECTION 9.06. Payments ................................................................................67
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments and Waivers..................................................................68
SECTION 10.02. Notices, Etc............................................................................68
SECTION 10.03. Setoff and Counterclaim.................................................................69
SECTION 10.04. No Waiver; Remedies.....................................................................69
SECTION 10.05. Binding Effect; Assignability...........................................................69
SECTION 10.06. Term of this Agreement..................................................................70
SECTION 10.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF OBJECTION TO VENUE....................70
SECTION 10.08. WAIVER OF JURY TRIAL....................................................................70
SECTION 10.09. Costs, Expenses and Taxes...............................................................71
SECTION 10.10. No Proceedings..........................................................................72
SECTION 10.11. Recourse Against Certain Parties........................................................72
SECTION 10.12. Execution in Counterparts; Severability; Integration....................................72
SECTION 10.13. Confidentiality.........................................................................73
</TABLE>
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE I Condition Precedent Documents
SCHEDULE II Description of Credit and Collection Policy
SCHEDULE III Lock-Box Banks and Lock-Box Accounts
SCHEDULE IV Tradenames, Fictitious Names and "Doing Business
As" Names
EXHIBITS
EXHIBIT A Form of Contracts
EXHIBIT B Form of Lock-Box Agreements
EXHIBIT C Form of Asset Report
EXHIBIT D Form of Opinion of Counsel for the Seller
EXHIBIT E Seller's Certificate of Incorporation
::ODMA\PCDOCS\WASHINGTON\36545\12 February 5, 1998 (9:09AM)
- --------
* Enumerated jurisdictions should include the State of New Jersey and any
other State that has enacted legislation comparable to the New Jersey
Corporation Business Activities Reporting Act, or compliance with the
relevant statute should be otherwise confirmed.
[EXECUTION VERSION]
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT is made as of this 18th day of
December, 1997 by and among BANKBOSTON, N.A., as "Agent" for itself and the
other "Lenders" party to the Revolving Credit Agreement referred to below (in
such capacity, the "Lender Agent"), SYNTHETIC FUNDING CORPORATION, a Delaware
corporation (the "Finco"), SYNTHETIC INDUSTRIES, INC., a Delaware corporation
(sometimes hereinafter referred to as "Synthetic" or the "Originator"),
Synthetic, in its separate capacity as "Collection Agent" (as defined below),
EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation ("EagleFunding"), and
BANCBOSTON SECURITIES INC., a Delaware corporation ("BSI"), individually and as
the "Deal Agent" for EagleFunding (in such capacity, the "Purchaser Agent").
W I T N E S S E T H:
WHEREAS, the Originator has agreed to sell, transfer and
assign to the Finco, and the Finco has agreed to purchase and assume from the
Originator, all of the right, title and interest of the Originator in the
"Receivables" and "Related Security" now existing or hereafter created until the
"Purchase Termination Date") (as each of such terms is hereinafter defined)
pursuant to that certain Receivables Purchase and Sale Agreement (as amended,
supplemented, modified or restated from time to time, the "Originator Sale
Agreement") of even date herewith among the Originator, the Finco and the
Collection Agent;
WHEREAS, BankBoston, N.A., certain other financial
institutions (the "Lenders") and the Lender Agent thereunder are parties to that
certain Loan and Security Agreement dated as of December 18, 1997 (as amended,
supplemented, modified or restated from time to time, the "Revolving Credit
Agreement");
WHEREAS, to secure the loans and other extensions of credit
made by the Lenders under the Revolving Credit Agreement, the Originator has
granted to the Lender Agent a security interest in substantially all of its
personal property, including, its inventory, the Receivables and Related
Security, and all proceeds of the foregoing;
WHEREAS, the Finco, EagleFunding, the Purchaser Agent and the
Collection Agent have entered into that certain Receivables Purchase Agreement
(as amended, supplemented, modified or restated from time to time, the "Investor
Purchase Agreement") of even date herewith, pursuant to which EagleFunding has
agreed to purchase from the Finco an undivided percentage ownership interest in
the Receivables and Related Security which the Finco purchases from the
Originator;
<PAGE>
6
WHEREAS, the parties hereto wish to set forth certain
agreements with respect to the Purchased Property and with respect to the
"Collateral" (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows:
ARTICLE 1. DEFINITIONS.
1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
"Agent" means the Purchaser Agent or the Lender Agent, as
applicable, and "Agents" means both the Purchaser Agent and the Lender Agent.
"Claim" means the Lender Claim or the Purchaser Claim, as
applicable.
"Collateral" means all property and interests in property now
owned or hereafter acquired by the Originator or any of its Affiliates and in
which a security interest, lien or mortgage is granted by any such party to the
Lender Agent or the Lenders under any of the Loan Documents.
"Collection Agent" means the Person then acting as "Collection
Agent" under the Originator Sale Agreement and the Investor Purchase Agreement,
which shall initially be Synthetic.
"Collection Date" has the meaning specified in the Investor
Purchase Agreement.
"Company Claim" means all of the indebtedness, obligations and
other liabilities of the Finco to the Originator arising under, or in connection
with, the Originator Sale Agreement, including, but not limited to, the purchase
price owed for sales of Receivables, any obligations evidenced by the Originator
Note and any fees owed to the Originator as Collection Agent.
"Contract" means an agreement (including, but not limited to,
a written contract or an open account agreement evidenced by invoices) between
the Originator and a Person pursuant to which such Person shall be obligated to
pay for merchandise sold or services rendered from time to time.
<PAGE>
"Enforcement" means, collectively or individually, for (i)
EagleFunding, the Purchase Agent and/or the Finco to declare an "Event of
Termination" under the Originator Sale Agreement or the Investor Purchase
Agreement and to cease the purchase of Receivables under the Originator Sale
Agreement; and/or (ii) the Lenders and/or the Lender Agent to declare an "Event
of Default" under the Revolving Credit Agreement and/or demand payment in full
of or accelerate the indebtedness of Synthetic to the Lenders, and to commence
the judicial or nonjudicial enforcement of any of the rights and remedies under
the Loan Documents.
"Enforcement Notice" means a written notice delivered in
accordance with Section 2.5 which notice shall (i) if delivered by the Purchaser
Agent, state that an "Event of Termination" has occurred, specify the nature of
such event, and announce that an Enforcement Period has commenced and (ii) if
delivered by the Lender Agent, state that an "Event of Default" under the
Revolving Credit Agreement has occurred, specify the nature of such event, and
announce that an Enforcement Period has commenced.
"Enforcement Period" means the period of time commencing with
the earliest of the following: (i) three Business Days after the receipt by the
Purchaser Agent of an Enforcement Notice delivered by the Lender Agent; or (ii)
the receipt by the Lender Agent of an Enforcement Notice delivered by the
Purchaser Agent; and ending with the earliest of the following: (1) the
Collection Date shall have occurred; (2) the Lender Claim has been satisfied in
full; and (3) the parties hereto agree in writing to terminate the Enforcement
Period.
"Lender Claim" means all of the "Secured Obligations" as
defined in the Revolving Credit Agreement, including, but not limited to, all
sums now or hereafter loaned or advanced thereunder, any interest thereon, any
reimbursement or other obligations in respect of letters of credit issued
thereunder, obligations of Synthetic under any interest rate hedging agreements
or foreign currency option or purchase agreements, fees or expenses due
thereunder, and any costs of collection or enforcement.
"Lender Collateral" means all Collateral which does not
constitute Purchased Property.
"Lenders" means the financial institutions party to the
Revolving Credit Agreement as "Lenders" from time to time, together with their
successors and assigns.
"Liquidity Agent" means the financial institution then acting
as "Liquidity Agent" under the Purchaser Documents.
"Liquidity Providers" has the meaning specified in the
Investor Purchase Agreement.
<PAGE>
"Loan Documents" means the Revolving Credit Agreement and all
other instruments, agreements or other documents executed by the Originator or
any Affiliate of the Originator and delivered to the Lenders and/or the Lender
Agent in connection therewith, as any of the same may be amended, supplemented,
modified or restated from time to time.
"Lock-Box Account" has the meaning ascribed to such term in
the Originator Sale Agreement.
"Lock-Box Bank" has the meaning ascribed to such term in the
Originator Sale Agreement.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
"Originator Note" has the meaning ascribed to such term in the
Originator Sale Agreement.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity.
"Purchase Termination Date" means the earliest to occur of (i)
the date on which the Finco ceases to purchase Receivables and Related Security
from the Originator, and (ii) the commencement of an Enforcement Period.
"Purchased Property" means (i) the Purchased Receivables, (ii)
the Related Security and Receivables Collections related to such Purchased
Receivables and (iii) any Lock-Box Accounts to which any Receivables Collections
of such Purchased Receivables are sent.
"Purchased Receivables" means now owned or hereafter existing
Receivables sold, assigned, transferred or contributed or purported to be sold,
assigned, transferred or contributed to the Finco under the Originator Sale
Agreement.
"Purchaser" means any of (A) the Finco, as the purchaser of
Receivables under the Originator Sale Agreement; (B) EagleFunding or BSI, in
each case as assignee of the Finco's interests in the Purchased Property; (C)
the Purchaser Agent, as representative of EagleFunding or (D) the Liquidity
Agent or any Liquidity Provider as assignee of EagleFunding, in each case
together with their successors and assigns.
"Purchaser Claim" means all obligations of the Originator to
the Finco and of the Finco to the other Purchasers arising under the Purchaser
Documents, including, but not limited to, all right of the Purchasers to receive
the Receivables Collections of the Purchased Receivables and all recourse claims
of the Purchasers arising thereunder.
<PAGE>
"Purchaser Documents" means the Originator Sale Agreement, the
Investor Purchase Agreement and any other agreements, instruments or documents
(i) executed by, among other Persons, the Originator and delivered to the Finco
or (ii) executed by, among other Persons, the Finco and delivered to any of the
other Purchasers, in each case pursuant to or in connection with the Originator
Sale Agreement or the Investor Purchase Agreement, as any of the same may be
amended, supplemented, modified or restated from time to time.
"Receivable" means the indebtedness of any Obligor under a
Contract whether constituting an account, chattel paper, instrument or general
intangible, arising from a sale of merchandise or the performance of services by
the Originator, and including the right to payment of any interest or finance
charges and other obligations of such Obligor with respect thereto.
"Receivables Collections" means, with respect to any
Receivable, all cash collections and other cash proceeds of such Receivable,
including, without limitation, all cash proceeds of Related Security with
respect to such Receivable.
"Records" means all Contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors.
"Related Security" means with respect to any Receivable, as
applicable:
(i) all of the Originator' right and title to and interest
in the merchandise (including Returned Goods) if any, relating to the
sale which gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise;
(iii) the assignment for the benefit of the Purchasers of all
UCC financing statements covering any collateral securing payment of
such Receivable; and
(iv) all of the Originator' right and title to and interest
in, all guarantees, indemnities, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise.
<PAGE>
"Returned Goods" means all right, title and interest of the
Originator or the Purchasers, as applicable, in and to returned, repossessed or
foreclosed goods and/or merchandise.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction.
"Unmatured Default" means:
(i), with respect to the Purchaser Documents (as in effect at
any time), (A) any event or condition which, with the giving of notice
or the passage of time or both, would then constitute an "Event of
Termination" under either the Originator Sale Agreement or the Investor
Purchase Agreement and (B) any such "Event of Termination which is not
waived and with respect to which the Purchaser Agent has not commenced
Enforcement; and
(ii) with respect to the Loan Documents (as in effect at any
time), (A) any event or condition which, with the giving of notice or
the passage of time or both, would then constitute an "Event of
Default" thereunder and (B) any "Event of Default" thereunder which is
not waived and with respect to which the Lender Agent has not commenced
Enforcement.
"Unsold Receivables" means any Receivables which have arisen
on or after the Purchase Termination Date.
1.2. References to Terms Defined in the Purchaser Documents
and the Loan Documents. Whenever in Section 1.1 a term is defined by reference
to the meaning ascribed to such term in any of the Purchaser Documents or in any
of the Loan Documents, then, unless otherwise specified herein, such term shall
have the meaning ascribed to such term in the Purchaser Documents or Loan
Documents, respectively, as in existence on the date hereof, without giving
effect to any amendments of such term as may hereafter be agreed to by the
parties to such documents, unless such amendments have been consented to in
writing by all of the parties hereto.
ARTICLE 2. INTERCREDITOR PROVISIONS.
2.1. Priorities with Respect to Purchased Property.
<PAGE>
(a) Notwithstanding any provision of the UCC, any applicable law or
decision or any of the Loan Documents or the Purchaser Documents, the Lender
Agent hereby agrees that, upon the sale, assignment, transfer or contribution or
purported sale, assignment, transfer or contribution of each Receivable and
Related Security by the Originator to the Finco, any lien, claim, encumbrance,
security interest or other interest acquired by the Lender Agent in such
Receivable, the Related Security and proceeds thereof shall automatically and
without further action cease and be released and the Lender Agent shall have no
lien, claim, encumbrance, security interest or other interest therein; provided,
however, that:
(i) nothing in this Section 2.1 shall be deemed to constitute
a release by the Lender Agent of: (A) its lien on and security interest
in the proceeds received by the Originator from the Finco for the sale
or purported sale of the Receivables (including, without limitation,
cash payments made by the Finco, payments made under the Originator
Note and any indebtedness owed to the Originator evidenced thereby);
(B) any lien on, security interest in or assignment of the Company
Claim; (C) any lien, claim, encumbrance or security interest the Lender
Agent may have in any Unsold Receivables and Related Security therefor,
including, without limitation, Receivables Collections of Unsold
Receivables which are at any time deposited in the Lock-Box Accounts;
(D) any lien, claim, encumbrance or security interest the Lender Agent
may have as against any interest of the Originator in Returned Goods,
provided, however, that any lien the Lender Agent has against any
interest of the Originator in such Returned Goods shall be junior in
interest to that of the Purchasers unless and until the Originator
shall have made all adjustments required to be made under the
Originator Sale Agreement on account of the reduction of the
outstanding balance of any Receivable related to such Returned Goods;
and (E) any lien on, security interest in or pledge or assignment the
Lender Agent may have on or in the capital stock of the Finco; and
(ii) if any goods or merchandise, the sale of which has given
rise to a Purchased Receivable, are returned to or repossessed by the
Originator, then such Returned Goods shall constitute Purchased
Property, provided, however, that upon payment by the Originator of all
adjustments required on account thereof under the Originator Sale
Agreement, the Purchaser's interest in such Returned Goods shall
automatically and without further action cease to exist and be released
and extinguished and such Returned Goods shall thereafter not
constitute Purchased Property for purposes of this Agreement unless and
until such Returned Goods have been resold so as to give rise to a
Receivable and such Receivable has been sold, assigned, transferred or
contributed or purported to be sold, assigned, transferred or
contributed to the Finco.
(b) The Lender Agent hereby acknowledges that the Originator
Note and the indebtedness evidenced thereby is subordinated to the Purchaser
Claim pursuant to the terms of the Originator Note and the Purchaser Documents.
<PAGE>
2.2 Respective Interests in Purchased Property and Collateral.
Except for (i) the specific interests in Purchased Property described in Section
2.1 above and (ii) all rights of access to and use of Records and related
Collateral described in Section 2.6 below, each Purchaser agrees that it does
not have and shall not have any security interest in, lien upon or interest in
the Collateral. Except for (i) the specific retained rights described in Section
2.1 above and (ii) all rights of access to and use of Records described in
Section 2.6 below, the Lender Agent agrees that it does not have and shall not
have any security interest in, lien upon or interest in the Purchased Property.
2.3. Distribution of Proceeds -- Enforcement Period. During
any Enforcement Period, all proceeds of Collateral and/or Purchased Property
shall be distributed in accordance with the following procedure:
(a) Except as otherwise provided in clause (c) or in Section
2.4 below, (i) all proceeds of the Lender Collateral shall be paid to
the Lender Agent for application on the Lender Claim; and (ii) any
remaining proceeds shall be paid to the Originator, its Affiliates or
as otherwise required by applicable law.
(b) Except as otherwise provided in Section 2.4 or in clause
(c) below, all proceeds of the Purchased Property shall be paid first,
to the Purchasers for application against the Purchaser Claim;
provided, however, that all proceeds of the Purchased Property which,
pursuant to the Purchaser Documents, are to be paid to the Originator
for application against the Company Claim shall be paid directly to the
Lender Agent (if and to the extent that the Lender Agent has retained a
lien against such Company Claim pursuant to Section 2.1 above) for
application against the Lender Claim before being paid to the
Originator or the Finco; and any remaining proceeds shall be paid to
the Finco or as otherwise required by applicable law.
<PAGE>
(c) If any inventory of the Originator has been commingled
with Returned Goods in which the Purchaser Agent continues to have an
interest as provided in Section 2.1 above, and any of the Lenders (or
the Lender Agent) receives any proceeds on account of such inventory
(whether by reason of sale or by reason of insurance payments on
account thereof) prior to release of such interest, then: (i) all
proceeds of such inventory received by a Lender shall be paid to the
Lender Agent and the Lender Agent shall, immediately upon receipt of
such proceeds, pay to the Purchaser Agent for application against the
Purchaser Claim a share of such proceeds equal to the dollar amount
thereof times a fraction, the numerator of which equals the book value
of the Returned Goods constituting Purchased Property and the
denominator of which equals the book value of all of the inventory on
account of which the Lender Agent has received such cash proceeds; and
(ii) any remaining proceeds shall be paid to the Lender Agent for
application against the Lender Claim. The Lender Agent agrees that it
shall not, without the prior written consent of the Purchaser Agent,
sell any Returned Goods in which the Purchaser Agent continues to have
an interest at a price below book value.
2.4 Lock-Box Accounts.
(a) The Lender Agent, on behalf of itself and each of the
Lenders, hereby releases, relinquishes and disclaims any and all of its right,
title and interest in, to and under each of the Lock-Box Accounts, which release
shall become effective with respect to each such Lock-Box Account upon the
effectiveness of the corresponding "Lock-Box Agreement" (as such term is defined
in the Originator Sale Agreement) in favor of the Finco and the Deal Agent and
relating to such Lock-Box Account; provided, however, that each of the
Originator, the Purchasers and the Purchaser Agent hereby acknowledges that the
Lender Agent shall have a senior security interest in Receivables Collections of
Unsold Receivables which may be deposited in the Lock-Box Accounts. The
Purchaser Agent agrees, upon the Lender Agent's request from and after the
Purchase Termination Date, to notify the Lock-Box Banks of the Lender Agent's
interest in and to such Lock-Box Accounts in order to perfect the Lender Agent's
interest in such Collections as against the Lock-Box Banks.
(b) Each of the Originator, the Purchasers and the Lender
Agent hereby acknowledges and agrees that the Purchasers own the Purchased
Receivables, and shall be entitled to Receivables Collections or other proceeds
received on account of the Purchased Receivables which may be deposited in the
Lock-Box Accounts.
(c) The Originator, the Purchasers and the Lender Agent hereby
agree that all Receivables Collections or other proceeds received on account of
Purchased Receivables shall be paid or delivered to the Purchasers for
application against the Purchaser Claim and all Receivables Collections or other
proceeds received on account of Unsold Receivables shall be paid or delivered to
the Lender Agent for application against the Lender Claim. For purposes of
determining whether specific Receivables Collections have been received on
account of Purchased Receivables or on account of Unsold Receivables, the
parties hereto agree as follows:
<PAGE>
(i) All payments made by an Obligor which is obligated to make
payments on Purchased Receivables but is not obligated to make
any payments on Unsold Receivables shall be conclusively
presumed to be payments on account of Purchased Receivables
and all payments made by an Obligor which is obligated to make
payments on Unsold Receivables but is not obligated to make
any payments on Purchased Receivables shall be conclusively
presumed to be payments on account of Unsold Receivables.
(ii) All payments made by an Obligor which is obligated to
make payments with respect to both Purchased Receivables and
Unsold Receivables shall be applied against the specific
Receivables, if any, which are designated by such Obligor by
reference to the applicable invoice as the Receivables with
respect to which such payments should be applied. In the
absence of such designation, such payments shall be applied
against the oldest outstanding Receivables owed by such
Obligor.
(d) Subject to the second sentence of this Section 2.4(d), the
Purchaser Agent agrees that it shall transfer prior ownership and control over
the Lock-Box Accounts to the Lender Agent upon the Collection Date; provided,
however, that any Receivables Collections of Purchased Property which are then
on deposit in the Lock-Box Account and are not required to be paid to the Lender
Agent pursuant to Section 2.3(b) above shall be delivered to the Finco before
the foregoing transfer of ownership and control of the Lock-Box Accounts. Any
such transfer shall be without representation, recourse or warranty of any kind
on the part of the Purchaser Agent. Notwithstanding any such transfer, all
Receivables Collections and other proceeds subsequently deposited into the
Lock-Box Accounts on account of the Purchased Property shall continue to be
delivered and applied as provided in Section 2.3(b) above.
(e) In order to effect more fully the provisions of this
Agreement, each Agent hereby agrees that neither Agent shall, without the
consent of the other Agent, send any notices to the Obligors directing them to
remit Receivables Collections of any Receivables other than to a Lock-Box
Account except as may be necessary in connection with the enforcement of any
delinquent or Defaulted Receivable as against the Obligor thereof (in which
case, the Agent receiving such Receivables Collections shall deliver and apply
such Receivables Collections in accordance with the terms of Section 2.3).
<PAGE>
(f) The Lender Agent agrees that it shall not, at any time
prior to the Collection Date, exercise any rights it may have under the Loan
Documents to send any notices to Obligors (i) informing them of the Lenders' or
the Lender Agent's interest in the Receivables, or (ii) directing such Obligors
to make payments in any particular manner of any amounts due under the
Receivables. The Lender Agent further agrees that, in the event it shall receive
payments directly from any Obligor on account of an Unsold Receivable, at any
time prior to the Collection Date, it shall immediately forward such payment to
the Purchaser Agent (or, if a successor Collection Agent has been appointed, to
such successor Collection Agent) in order that the Purchaser Agent or Collection
Agent, as applicable, may determine whether such payment was, in fact, properly
allocated to such Unsold Receivable consistent with the terms of this Section
2.4 and, if necessary pursuant to the terms hereof, re-allocate such payment.
2.5. Enforcement Actions. Each of the Lender Agent and the
Purchaser Agent agrees to use its best efforts to give an Enforcement Notice to
the other prior to commencement of Enforcement and further agrees, that, during
the period, if any, between the giving of such Enforcement Notice and the
commencement of Enforcement thereunder, the Agent receiving such notice shall
have the right (but not the obligation) to cure the "Event of Default" or "Event
of Termination" which has occurred under the Loan Documents or the Purchaser
Documents, respectively, and to which such Enforcement Notice relates. Subject
to the foregoing, the parties hereto agree that during an Enforcement Period:
(a) Subject to any applicable restrictions in the Purchaser
Documents, the Purchaser Agent may, at its option, take any action to
liquidate the investment of the Purchasers in the Purchased Property
and/or to foreclose or realize upon or enforce any of their rights with
respect to the Purchased Property without the prior written consent of
any Originator or the Lender Agent; provided, however, that the
Purchasers shall not take any action to foreclose or realize upon or to
enforce any rights they may have with respect to any Purchased Property
constituting Returned Goods which have been commingled with the Lender
Collateral, unless the Purchaser Agent, pursuant to the last sentence
of Section 2.3(c), has withheld consent to a sale or other disposition
of such inventory.
b. Subject to any applicable restrictions in the Loan
Documents, the Lender Agent may, at its option and without the prior
written consent of the Purchasers, take any action to accelerate
payment of the Lender Claim and to foreclose or realize upon or enforce
any of its rights with respect to (i) the Lender Collateral and (ii)
except as otherwise provided in Section 2.3(c), with respect to any
Purchased Property constituting Returned Goods which have been
commingled with the Lender Collateral; provided, however, that the
Lender Agent shall not otherwise take any action to foreclose or
realize upon or to enforce any rights it may have with respect to any
of the Purchased Property without the Purchaser Agent's prior written
consent unless the Purchaser Claim shall have been first paid and
satisfied in full and the Lender Agent shall apply the proceeds of any
Purchased Property consisting of Returned Goods as provided in Section
2.3(c) above.
<PAGE>
2.6 Access to and Use of Collateral and Purchased Property.
The Purchasers and the Lender Agent hereby agree that, notwithstanding the
priorities set forth in this Agreement, the Purchasers and the Lender Agent
shall have the following rights of access to and use of the Collateral and
Purchased Property respectively:
a. Subject to any applicable restrictions in the Purchaser
Documents, the Purchasers may enter one or more premises of the
Originator, whether leased or owned, at any time during reasonable
business hours, without force or process of law and without obligation
to pay rent or compensation to the Originator, the Finco, the Lender
Agent or the Lenders, whether before, during or after an Enforcement
Period, and may use any Lender Collateral constituting computer
equipment located thereon and may have access to and use of all books,
records and computer software located thereon (whether the same
constitute Records) and may have access to and use of any other
property to which such access and use are granted under the Purchaser
Documents, in each case provided that such use is for the purposes of
enforcing the Purchasers' rights with respect to the Purchased
Property.
b. Subject to any applicable restrictions in the Loan
Documents, the Lender Agent may enter one or more premises of the
Originator or the Finco, whether leased or owned, at any time during
reasonable business hours, without force or process of law and without
obligation to pay rent or compensation to the Originator, the Finco,
the Purchasers or the Purchaser Agent, whether before, during or after
an Enforcement Period, and may have access to and use of all Records
located thereon, provided that such use is for the purposes of
enforcing the Lender Agent's rights with respect to the Lender
Collateral (including any interests in Unsold Receivables and other
interests in property retained by the Lender Agent as described in
Section 2.1 above).
c. In order to facilitate the purposes of this Section 2.6,
the Lender Agent and the Purchasers hereby agree as follows: (1) any
mortgage of, assignment of, security interest in or lien upon any real
property and interests in real property of the Originator or its
Affiliates (whether leased or owned) and any of the Collateral in favor
of the Lender Agent shall be subject to the Purchasers' rights of
access and use described above; and (2) any ownership interest of the
Purchasers in the Purchased Property shall be subject to the Lender
Agent's right of access and use described above.
<PAGE>
2.7. Accountings. The Lender Agent agrees to render statements
of the Lender Claim to the Purchaser Agent upon request, giving effect to the
application of proceeds of Purchased Property and Collateral as hereinbefore
provided. The Purchaser Agent agrees to render statements to the Lender Agent
upon request, which statements shall identify in reasonable detail the Purchased
Receivables and shall render an account of the Purchaser Claim, giving effect to
the application of proceeds of Purchased Property and Collateral as hereinbefore
provided.
2.8. Notice of Defaults. The Lender Agent agrees to use
reasonable efforts to give to the Purchaser Agent copies of any notice sent to
the Originator with respect to the occurrence or existence of an Unmatured
Default under the Loan Documents, and the Purchaser Agent agrees to use
reasonable efforts to give to the Lender Agent copies of any notice sent to the
Originator or the Finco with respect to the occurrence or existence of an
Unmatured Default under the Purchaser Documents, in each case simultaneously
with the sending of such notice to the Originator or the Finco as applicable;
provided, however, that any failure to give such notice shall not create a cause
of action against any party failing to give such notice or create any claim or
right on behalf of any third party. In each of the above cases, the Agent
receiving such notice shall have the right (but not the obligation) to cure the
Unmatured Default which gave rise to the sending of such notice.
2.9. Agency for Perfection. The Purchasers and the Lender
Agent hereby appoint each other as agent for purposes of perfecting by
possession their respective security interests and ownership interests and liens
on the Collateral and Purchased Property described hereunder. In the event that
any Purchaser obtains possession of any of the Lender Collateral (including
Receivables Collections of Unsold Receivables), such Purchaser shall notify the
Lender Agent of such fact, shall hold such Collateral in trust and shall deliver
such Collateral to the Lender Agent upon request. In the event that the Lender
Agent obtains possession of any of the Purchased Property (including Receivables
Collections of Purchased Receivables), the Lender Agent shall notify the
Purchaser Agent of such fact, shall hold such Purchased Property in trust and
shall deliver such Purchased Property to the Purchaser Agent upon request.
2.10. UCC Notices. In the event that any party hereto shall be
required by the UCC or any other applicable law to give notice to the other of
intended disposition of Purchased Property or Collateral, respectively, such
notice shall be given in accordance with Section 3.1 hereof and ten (10) days'
notice shall be deemed to be commercially reasonable.
<PAGE>
2.11. Independent Credit Investigations. Neither the
Purchasers nor the Lender Agent nor any of their respective directors, officers,
agents or employees shall be responsible to the other or to any other person,
firm or corporation for the solvency, financial condition or ability of the
Originator or the Finco to repay the Purchaser Claim or the Lender Claim, or for
the worth of the Purchased Property or the Collateral, or for statements of any
Originator or the Finco, oral or written, or for the validity, sufficiency or
enforceability of the Purchaser Claim, the Lender Claim, the Purchaser
Documents, the Loan Documents, the Purchaser's interest in the Purchased
Property or the Lender Agent's interest in the Collateral. Each of the Lender
Agent and the Purchasers has entered into its respective financing agreements
with the Originator and/or the Finco, as applicable, based upon its own
independent investigation, and makes no warranty or representation to the other
nor does it rely upon any representation of the other with respect to matters
identified or referred to in this Section 2.11.
2.12. Limitation on Obligations of Parties to Each Other.
Except as expressly provided in this Agreement, neither the Lenders nor the
Lender Agent shall have any duties to the Purchasers and the Purchasers shall
have no duties to the Lender Agent.
2.13. Amendments to Financing Arrangements or to this
Agreement. The Lender Agent agrees to use reasonable efforts to, concurrently
with any written amendment or modification in the Loan Documents, give prompt
notice to the Purchaser Agent of the same and the Purchaser Agent agrees to use
reasonable efforts to, concurrently with any written amendment or modification
in the Purchaser Documents, notify the Lender Agent of the same; provided,
however, that the failure to do so shall not create a cause of action against
any party failing to give such notice or create any claim or right on behalf of
any third party. Notwithstanding the foregoing, each party hereto agrees not to
amend any of the Loan Documents or Purchaser Documents so as to materially alter
the rights and benefits intended hereunder to be enjoyed by the respective
Agents and the other parties hereto. Each party hereto shall, upon request of
any other party hereto, provide copies of all such modifications or amendments
and copies of all other documentation relevant to the Purchased Property or the
Collateral. All modifications or amendments of this Agreement must be in writing
and duly executed by an authorized officer of each party hereto to be binding
and enforceable.
2.14. Marshaling of Assets. Nothing in this Agreement will be
deemed to require either Agent (i) to proceed against certain property securing
the Lender Claim or the Purchaser Claim, as applicable, prior to proceeding
against other property securing such Claim or (ii) to marshall the Lender
Collateral or the Purchased Property (as applicable) upon the enforcement of
such Agent's remedies under the Purchaser Documents or Loan Documents, as
applicable.
<PAGE>
2.15. Relative Rights of Purchasers as Among Themselves. The
relative rights of the Purchasers, each as against the other, with respect to
the exercise of the rights and the receipt of the benefits granted by the Lender
Agent hereunder shall be determined by mutual agreement among such parties in
accordance with the terms of the Purchaser Documents. The Lender Agent shall be
entitled to rely on the power and authority of the Purchaser Agent to act on
behalf of all of the Purchasers. The Purchaser Agent shall be entitled to rely
on the power and authority of the Lender Agent to act on behalf of all of the
Lenders.
2.16. Effect Upon Loan Documents and Purchaser Documents. By
executing this Agreement, each of the Originator and the Finco agrees to be
bound by the provisions hereof (i) as they relate to the relative rights of the
Lender Agent, the Purchaser Agent and EagleFunding with respect to the property
of the Originator; (ii) as they relate to the relative rights of the Originator,
Purchaser Agent and EagleFunding with respect to the property of the Finco; and
(iii) as they relate to the relative rights of the Lender Agent and the Finco as
creditors of the Originator. The Originator acknowledges that, except as
otherwise provided in Section 2.1, the provisions of this Agreement shall not
give it any substantive rights as against the Lender Agent or the Lenders nor
otherwise amend, modify, change or supersede the terms of the Loan Documents as
among the parties thereto. Each of the Originator and the Finco acknowledges
that, except as otherwise provided in Section 2.1, the provisions of this
Agreement shall not give the Originator any substantive rights as against the
Purchasers nor give the Finco any substantive rights as against the other
Purchasers nor otherwise amend, modify, change or supersede the terms of the
Purchaser Documents as among the parties thereto. Notwithstanding the foregoing,
each of EagleFunding and the Agents hereby agrees, that, as among themselves and
their successors and assigns, to the extent the terms and provisions of the Loan
Documents or the Purchaser Documents are inconsistent with the terms and
provisions of this Agreement, the terms and provisions of this Agreement shall
control.
2.17. Further Assurances. Each of the Agents hereto agrees (i)
to take such actions as may be reasonably requested by the other Agent, whether
before, during or after an Enforcement Period, in order to effect the rules of
distribution and allocation set forth above in this Article 2 and (ii) not to
amend the Loan Documents or the Purchaser Documents, as applicable, in any
manner which would materially alter such rules of distribution and allocation
set forth herein.
ARTICLE 3. MISCELLANEOUS.
<PAGE>
3.1. Notices. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
telecommunications and communication by facsimile copy) and mailed, telexed,
transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall
be designated by such part in a written notice to the other parties hereto. All
such notices and communications shall be effective upon receipt, or, in the case
of notice by mail, five days after being deposited in the mails, postage
prepaid, or in the case of notice by telex, when telexed against receipt of the
answerback, or in the case of notice by facsimile copy, when verbal confirmation
of receipt is obtained, in each case addressed as aforesaid.
3.2. Agreement Absolute. Each of the Purchasers shall be
deemed to have entered into the Purchaser Documents in express reliance upon
this Agreement and the Lender Agent and the Banks shall be deemed to have
entered into the Revolving Credit Agreement in express reliance upon this
Agreement. This Agreement shall be and remain absolute and unconditional under
any and all circumstances, and no acts or omissions on the part of any party to
this Agreement shall affect or impair the agreement of any party to this
Agreement, unless otherwise agreed to in writing by all of the parties hereto.
This Agreement shall be applicable both before and after the filing of any
petition by or against the Originator or the Finco under the Bankruptcy Code and
all references herein to the Originator or the Finco shall be deemed to apply to
a debtor-in-possession for such party and all allocations of payments between
the Lender Agent and the Purchasers shall, subject to any court order to the
contrary, continue to be made after the filing of such petition on the same
basis that the payments were to be applied prior to the date of the petition.
3.3. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of each of the parties hereto and their respective
successors and assigns. The successors and assigns for the Originator and/or the
Finco shall include a debtor-in-possession or trustee of or for such party. The
successors and assigns for the Agents shall include any successor Agents
appointed under the terms of the Loan Documents or the Purchaser Documents, as
applicable. Each of the Agents agrees not to transfer any interest it may have
in the Loan Documents or the Purchaser Documents unless such transferee has been
notified of the existence of this Agreement and has agreed to be bound hereby.
3.4. Third-Party Beneficiaries. The terms and provisions of
this Agreement shall be for the sole benefit of the Agents, the Purchasers and
the Lenders and their respective successors and assigns and no other Person
shall have any right, benefit, or priority by reason of this Agreement.
3.5. Governing Law. This Agreement shall be governed by and
construed in accordance with, the internal laws (as opposed to conflicts of law
provisions) of the State of New York.
3.6. Section Titles. The article and section headings
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
<PAGE>
3.7. Severability. 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 hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
3.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
3.9. No Petition. Each party hereto (including each Lender, by
the Lender Agent on its behalf) hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of all outstanding
senior indebtedness of EagleFunding, it will not institute against, or join any
other Person in instituting against, EagleFunding any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States. Each party hereto (including each Lender, by the Lender Agent on
its behalf) hereby covenants and agrees that prior to the date which is one year
and one day after the payment in full of all outstanding senior indebtedness of
the Finco, it will not institute against, or join any other Person in
instituting against, the Finco any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the laws
of the United States or any state of the United States. The Lenders and the
Lender Agent agree that, in the event they shall at any time have the right to
exercise or otherwise control, directly or indirectly, any voting rights in
respect of any person or entity owning voting capital of the Finco, the Lenders
and the Lender Agent shall cause such person or entity to comply with the terms
of this Section 3.9 as if such person or entity were a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYNTHETIC INDUSTRIES, INC.,
individually and as
Collection Agent
By: _________________________
Title:
Address: 309 Lafayette Road
Chickamauga, Georgia 30707
Telephone: 706-
Telecopy: 706-
SYNTHETIC FUNDING CORPORATION
By: _________________________
Title:
Address: 309 Lafayette Road
Chickamauga, Georgia 30707
Telephone: 706-
Telecopy: 706-
BANKBOSTON, N.A., as the
Lender Agent
By: _________________________
Title:
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Steve McGehee
Telephone: 770-390-6524
Telecopy: 770-393-4166
<PAGE>
EAGLEFUNDING CAPITAL CORPORATION,
By: BANCBOSTON SECURITIES INC., its
attorney-in-fact
By:
Title:
EagleFunding Capital Corporation
c/o BancBoston Securities Inc.
100 Federal Street
Boston, Massachusetts 02110
Attention: Mitchell Feldman
Facsimile No.: 617-434-9591
Telephone No.: 617-434-5760
c/o Lord Securities Corporation
Two Wall Street, 19th Floor
New York, New York 10005
Attention: Dwight Jenkins
Facsimile No.: 212-346-9012
Telephone No.: 212-346-9007
BANCBOSTON SECURITIES INC.,
individually and as Purchaser Agent
By____________________________
Title:
100 Federal Street
Boston, Massachusetts 02110
Attn: Mitchell Feldman
Telephone: 617-434-5760
Telecopy: 617-434-9591
::ODMA\PCDOCS\WASHINGTON\37776\6 February 5, 1998 (9:10AM)
