-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESxcGNruYV/IMQNPm+7//FdPp5IjH0F1PXAcYr+mcWe52HWxSUJcE06nRCxnLpvs q5KxyN1x9/H6AuD1TfIiBA== 0000809803-95-000013.txt : 19951211 0000809803-95-000013.hdr.sgml : 19951211 ACCESSION NUMBER: 0000809803-95-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951208 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNTHETIC INDUSTRIES INC CENTRAL INDEX KEY: 0000809803 STANDARD INDUSTRIAL CLASSIFICATION: KNITTING MILLS [2250] IRS NUMBER: 581049400 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-11479 FILM NUMBER: 95600261 BUSINESS ADDRESS: STREET 1: 309 LAFAYETTE RD CITY: CHICKAMAUGA STATE: GA ZIP: 30707 BUSINESS PHONE: 7063753121 MAIL ADDRESS: STREET 1: 309 LA FAYETTE ROAD CITY: CHICKAMAUGA STATE: GA ZIP: 30707 10-K 1 1995 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1995 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 (Address of principal executive offices) (Zip Code) (706) 375-3121 (Registrant's telephone number, including area code) Indicate by check mark whether 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 ____ State the aggregate market value of the voting stock held by non-affiliates of the registrant at December 5, 1995. Common Stock, $1.00 par value -- $0 Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date: Outstanding at Class December 7, 1995 Common Stock, $1.00 par value 49.95 PART I ITEM 1. BUSINESS GENERAL Synthetic Industries, Inc., a Delaware corporation (the "Company"), manufactures and markets a wide range of polypropylene-based fabric and fiber products designed for industrial applications. The Company is the second largest manufacturer of polypropylene-based industrial textile fabrics in the United States. The Company's diverse mix of products are marketed to the floor covering, construction and technical textile markets for such end-use applications as carpet backing, geotextiles, erosion control, concrete reinforcement and furniture construction fabrics. Such products also have agricultural, filtration and recreational applications. Sales are managed through six specialized marketing groups and products are manufactured through the close coordination of six manufacturing facilities. Although the end-use applications are diverse, the Company's manufacturing processes are focused around a core process of converting polypropylene resin into performance based engineered industrial textiles. HISTORY The Company was founded in 1969 to produce polypropylene-based primary carpet backing. Following the acquisition of the Company in 1976 by a group of private investors, the Company diversified into the manufacture and sale of polypropylene-based industrial fabrics and specialty yarns. The Company first entered the construction/civil engineering products market in 1981 by manufacturing geotextiles. In 1983, the Company further expanded its presence in the construction/civil engineering products market through the introduction of Fibermeshr fibers for concrete reinforcement. In 1985, the Company added secondary carpet backing to its product line. In 1990, the Company purchased a technical fabrics operation from Johnson and Johnson's Chicopee division in Gainesville, Georgia. Apart from broadening the Company's line of geosynthetic products, the acquisition gave the Company access to new markets for high performance fabrics. The latest expansion occurred in 1992 when the Company opened a nonwoven fabric plant in Ringgold, Georgia. The Company was acquired by Synthetic Industries L.P., a Delaware limited partnership (the "Partnership"), in December 1986. All of the issued and outstanding capital stock of the Company is currently owned by the Partnership. See "Security Ownership of Certain Beneficial Owners and Management." In April 1993, Synthetic Management G.P. ("Synthetic G.P.") acquired the general partner interest in SI Management L.P. ("Management L.P."), a Delaware limited partnership which is the sole general partner of the Partnership. Synthetic G.P. is a Georgia general partnership whose five partners are controlled by certain members of the Company's senior management. See "Directors and Executive Officers." The Company's principal executive offices are located at 309 LaFayette Road, Chickamauga, Georgia 30707, and its telephone number is (706) 375-3121. MANUFACTURING PROCESS Polypropylene, a chemically inert plastic derived from petroleum, is the basic raw material used in the manufacture of substantially all of the Company's products. The Company extrudes polypropylene into a wide range of fibers and yarns. Products are manufactured using various textile processes resulting in staple fibers, fibrillated yarns, monofilament and multifilament yarns, slit tape, woven fabrics and nonwoven fabrics. Woven fabrics are produced by interlacing thousands of extruded yarns at right angles to one another. The manner in which the yarns are interlaced determines the type of weave. Woven fabrics are characterized by strength and dimensional stability. The Company's woven fabric products include primary and secondary carpet backing, geotextiles, erosion control fabrics, and specialty fabrics for the filtration, recreational, construction and agricultural markets. Nonwoven fabrics are produced by first stacking several layers of webbed short length fibers and then entangling the layers by punching barbed needles through the layers. Nonwoven fabrics provide extensibility without rupture and dimensionality. The Company's nonwoven fabric products include geotextiles, erosion control fabrics, furniture and bedding construction fabrics, and spill control fabrics. The Company maintains a complete rigorous quality control program centered around statistical process control and customer key measures. Each stage of the process from the raw material to the final product is monitored using standard procedures and test methods which satisfy the quality control standards established by the International Standards Organization ("ISO"). The Company's Chickamauga, Chattanooga and Ringgold manufacturing facilities have been granted ISO-9002 certification for their systematic approach to quality in all areas of operation. The Company anticipates the completion of certification at its Gainesville manufacturing facility in the second quarter of fiscal 1996. The Company's weaving and nonwoven production equipment is capable of manufacturing a variety of woven and nonwoven products, respectively. This versatility enables the Company to alter the product mix within its woven and nonwoven product lines in response to market demand or to take advantage of profit opportunities. The Company generally purchases polypropylene under supply contracts of varying lengths and receives the material in rail car shipments. The Company's plants are run on a continuous 24-hour per day basis, seven days a week. Orders are typically filled from inventory. PRODUCTS AND MARKETING The Company's three principal product lines are carpet backing, construction/civil engineering products and technical textiles. The following table sets forth the Company's net sales attributable to each product line, and the percentage of total net sales represented by each, for the past five fiscal years: YEAR ENDED SEPTEMBER 30, 1995 1994 1993 1992 1991 (Thousands of dollars) CARPET BACKING $133,025 49.0% $117,791 50.1% $106,406 50.5% $108,005 55.2% $113,905 60.4% CONSTRUCTION/CIVIL ENGINEERING 82,933 30.6 68,706 29.3 47,899 22.8 34,950 17.8 24,139 12.8 TECHNICAL TEXTILES 55,469 20.4 48,480 20.6 56,211 26.7 52,784 27.0 50,402 26.8 NET SALES $271,427 100.0% $234,977 100.0% $210,516 100.0% $195,739 100.0% $188,446 100.0% CARPET BACKING Products. The Company's carpet backing product line consists of woven primary and secondary fabrics in a variety of styles and widths that are manufactured from polypropylene raw materials. Carpet yarn is tufted into the primary carpet backing in the manufacture of broadloom floorcoverings. Secondary carpet backing is then laminated to the back of tufted broadloom carpet to insure both carpet integrity and dimensional stability. The Company produces a broad range of primary and secondary backing. Markets and Marketing. The Company sells most of its carpet backing to United States carpet manufacturers. In fiscal 1995, the Company's ten largest carpet backing customers accounted for approximately 77% of its total net sales to the carpet industry. In fiscal 1995, sales to Shaw Industries, Inc., the Company's largest customer, accounted for approximately 37% of net carpet backing sales and approximately 18% of the Company's total net sales. Shaw Industries, Inc. is estimated to have 27% of the United States carpet market. The Company's carpet backing products are sold primarily through five full- time salespersons directed from a central sales office in Calhoun, Georgia, all of whom have significant industry experience and monitor ongoing product requirements, styling changes and competitive trends affecting their customers. The Company's carpet backing salespersons are paid on a salary-plus-commission basis. Competition. In sales of carpet backing, the Company competes principally with Amoco, which has the dominant position in the primary carpet backing market worldwide and, to a lesser extent, Wayn-Tex Inc. Amoco has substantially greater resources than the Company. In the United States, only the Company and Amoco produce a broad range of primary and secondary carpet backing in a variety of styles and widths. The Company competes in the carpet backing market primarily on the basis of quality, availability, service and product line variety, providing carpet manufacturers with a reliable alternative source of supply to Amoco. CONSTRUCTION/CIVIL ENGINEERING Products. Construction and civil engineering products consist of the Company's line of geosynthetic products and Fibermesh(r) concrete reinforcing fibers. The Company's geosynthetic product line consists of erosion control fabrics, geotextiles, and soil fibers. These products control erosion and capture sediment; provide filtration, separation and reinforcement of soils; improve engineering properties of native soils; protect landfill liners; and extend pavement life. The specifications of the Company's geosynthetic fabrics and fibers vary depending on specific site conditions including such factors as slope angles, water flow velocities, climate, runoff, soil profile and ultimate land use. The Company's geosynthetic products comply with most of the state agency guidelines pertaining to geosynthetic products which have been issued to date. The Company's soil fiber products are sold under three trade names depending on their application. Most of the volume is sold under the Fibergrids(r) name to highway maintenance departments for the repair of failed slopes and as a structural layer in new roadway construction. Soil fibers are also sold under the Turfgrids(r) and Sportgrids(r) names for playing field, equestrian race track and golf course turf and surface reinforcement. These products carry patent protection and their accepted use is gaining in popularity. The addition of Fibermesh(r) to concrete while it is being mixed gives the concrete increased crack resistance and improves impact strength. In concrete construction, where nonstructural wire mesh is used, Fibermesh(r) provides a cost-effective replacement for the wire mesh in addition to improving the concrete's durability. Fibermeshr complies with construction guidelines and specifications issued by all of the national building code associations. This brand has grown to become the world leader in fibers for concrete. Markets and Marketing. The Company's geosynthetic products are sold primarily in North America to regional and national distributors, installers of landfill liners and various governmental transportation departments, port authorities and waterway commissions. In fiscal 1995, the ten largest geosynthetic product customers accounted for approximately 28% of its total net sales. The Company's geosynthetic products are marketed by nine full-time salespersons with expertise in civil engineering and agronomy who are directed from a central office in Chattanooga, Tennessee. These salespersons often provide design and field engineering services to their customers as well as assistance in obtaining the required permits. The Company's geosynthetic products sales force is paid on a salary-plus-commission basis. Fibermesh(r) is sold through a direct sales force to ready-mix concrete companies and precast concrete product manufacturers located primarily in the United States and the United Kingdom. Fibermesh(r) is currently sold by 45 salespersons, paid on a salary-plus-commission basis, operating out of divisional offices in Austin, Denver, Chattanooga and Chesterfield, England. In addition, the Company sells Fibermesh(r) to Master Builders, Inc. and other construction industry product distributors outside the United States. In fiscal 1995, the ten largest Fibermesh(r) customers accounted for approximately 12% of the Company's total net sales of Fibermesh Competition. The primary direct competitors in the construction/civil engineering business are Amoco and Nicolon Corporation. The Company has numerous competitors in the erosion control fabric business but only one in the soil fiber business due mainly to the patent protection. The Company competes in all businesses on the basis of product line quality, service and variety. The Company believes it has the broadest civil engineering/erosion control product line in North America. The principal direct competitor in the concrete fiber reinforcement business is W.R. Grace & Co., which markets but does not manufacture concrete reinforcement fibers. The Company competes in the concrete reinforcement fiber market primarily on the basis of product design and technical service. In some applications, Fibermesh(r) also competes with welded wire fabric. Fibermesh(r) competes with welded wire fabric on the basis of product performance and cost. TECHNICAL TEXTILES Products. The Company's technical textiles consist of specialty fabrics, industrial yarns and fibers. The specialty fabrics in the Company's line of technical textiles are manufactured in a variety of widths, weights, permeability ranges and dimensional configurations primarily from polypropylene and, to a minor extent, other synthetic fibers for specific end uses. Customers use these fabrics to manufacture products having applications in filtration (e.g., bauxite mining, wastewater treatment, electrostatic air filters and chemical separation), agriculture (e.g., shade for foliage protection and environmental screening), and recreation (e.g., swimming pool covers and trampoline mats). All of the Company's industrial yarns and fibers are manufactured from polypropylene. The Company sells its industrial yarns and fibers directly to weavers, knitters, and non-woven manufacturers who produce niche market products, such as automobile upholstery, coat linings, geotextiles, air filters and water filtration media. Markets and Marketing. The Company sells its specialty fabrics to a diverse group of approximately 400 manufacturers located primarily in North and Central America and the Pacific Rim countries. The Company sells its industrial yarns and fibers to a diverse group of approximately 100 manufacturers located in North America and Europe. In fiscal 1995, the Company's ten largest technical textile customers accounted for approximately 29% of its total net sales of technical textiles. The Company's technical textiles are marketed by seventeen full-time salespersons, paid on a salary-plus-commission basis, through sales offices in Gainesville, Ringgold and Calhoun Georgia and Chesterfield, England. Competition. Competitors vary depending upon the specific market. The Company competes in each market primarily on the basis of service, quality, innovation and product line variety. RESEARCH AND DEVELOPMENT The Company's research and development is focused primarily on development rather than on basic research and as such engages in product design, development and performance validation to enhance existing and develop new products. In fiscal 1995, the Company expended approximately $1.9 million on Company- sponsored research and development activities. INTERNATIONAL OPERATIONS The Company conducts its foreign operations through subsidiary operations in Europe and a network of distributors worldwide. In fiscal 1995, the aggregate sales (principally of construction/civil engineering products) by such foreign subsidiaries and marketing divisions were approximately $5.3 million. International sales from United States operations in 1995 were $28.5 million, or 11% of net sales. RAW MATERIALS Polypropylene, which is a petroleum derivative, is the basic raw material used in the manufacture of substantially all of the Company's products. The Company currently purchases polypropylene in pellet form principally from four suppliers, with Fina Oil & Chemical Company being the Company's largest supplier of polypropylene. These purchases are generally made pursuant to annual contracts which have various price adjustment mechanisms. The price of polypropylene is primarily a function of manufacturing capacity, the demand for polypropylene and prices of petrochemical feedstocks, crude oil and natural gas liquids. The average market cost of polypropylene was approximately 50% higher in fiscal 1995 than in fiscal 1994. The Company believes this significant increase was primarily due to increased demand throughout the polypropylene market coupled with the inadequate expansion of polypropylene manufacturing capacity. Costs began to decrease during the fourth quarter of fiscal 1995. The Company expects that polypropylene costs will continue to decrease during fiscal 1996 as additional polypropylene manufacturing facilities are completed and commence production during the balance of calendar 1995 through 1997. Historically, the creation of additional facilities has helped to relieve supply pressures although there can be no assurance that this will continue to be the case. Polypropylene purchases account for approximately 50% of the Company's cost of sales. Increases in the price of polypropylene without offsetting selling price increases could have a significant negative effect on the Company's results of operations and financial condition. As a result of the level of competition, the Company has historically been able to pass through only a portion of any polypropylene cost increases through higher selling prices. The Company did not experience production curtailment due to shortages of polypropylene supply during the very tight market in fiscal 1995. REGULATION The Company is subject to federal, state and local laws and regulations affecting its business, including those promulgated under the Occupational Safety and Health Act and by the Environmental Protection Agency. Many of the Company's construction/civil engineering products have applications that are subject to building code association guidelines and specifications, and highway department guidelines. Obtaining the necessary approvals can delay new product introductions in some areas. Moreover, the enactment of new legislation or the issuance of new guidelines may require the Company to modify its existing geotextile and erosion control fabric products and may also delay the Company's introduction of new geotextiles and erosion control fabric products. The Company's expenditures to date in connection with such federal, state and local laws and regulations have not been material to its operations. The Company believes it is currently in compliance with applicable governmental regulations. ORDER BACKLOG The Company generally sells its products pursuant to customer orders which are either satisfied out of inventory or from the shipment of newly manufactured products promptly following receipt of an order. Accordingly, the dollar amount of backlog orders believed to be firm is not significant or indicative of the Company's future sales and earnings. EMPLOYEES As at September 30, 1995, the Company employed 1,969 persons in the United States, of whom 434 were salaried employees and the remainder were hourly employees. None of the Company's employees are unionized. The Company has never experienced any strikes and believes its relations with employees to be satisfactory. The Company employs 13 persons in the United Kingdom. PATENTS The Company owns or is licensed under several United States and foreign patents. While these patents are helpful to the Company's business, it is believed that a loss of patent exclusivity would not be materially adverse to the Company's business. ITEM 2. PROPERTIES The following table sets forth certain information concerning the Company's manufacturing and distribution facilities. The Company's facilities are maintained in good condition and the Company believes that its facilities are suitable and adequate for the operations conducted therein. SQUARE ACREAGE OF LOCATION FEET FUNCTION PROPERTY OWNED FACILITIES Chickamauga, Georgia 738,800 Manufactures carpet backing, certain fabrics, geotextiles and fibers 86.8 Chattanooga, Tennessee 126,432 Manufactures specialty yarns and construction products 10.5 Dalton, Georgia 216,000 Distribution center and multi-product warehouse 13.6 Dalton, Georgia 44,945 Needlepunching of carpet backing 5.0 Ringgold, Georgia 183,750 Manufactures geotextiles and certain nonwoven fabrics 68.5 Alto, Georgia 92,400 Manufactures certain yarns 42.7 LEASED FACILITIES LEASED THROUGH Chickamauga, Georgia 143,736 Manufactures carpet backing, January 2009 certain fabrics, geotextiles and fibers Gainesville, Georgia 200,000 Manufactures certain fabrics December 2000 Chattanooga, Tennessee 62,500 Specialty yarn warehouse September 1995 Westside, Georgia 86,440 Carpet backing warehouse January 1996 Dalton, Georgia South Dug Gap 48,000 Nonwoven and geotextile warehouse January 1996 Dalton, Georgia Florence 36,000 Geosynthetic products warehouse July 1996 Dalton, Georgia Keen 185,000 Woven, nonwoven and geotextile warehouse January 1997 Dalton, Georgia 1408 Coronet 31,500 Geosynthetic products warehouse July 1996 Dalton, Georgia 1406 Coronet 30,000 Geosynthetic products warehouse November 1996 Dalton, Georgia North Dug Gap 85,000 Carpet backing warehouse February 1996 Cornelia, Georgia 100,000 Assembly of certain fabrics March 1998 Dalton, Georgia Cleveland Highway 104,827 Specialty yarn warehouse July 1997 Tupelo, Mississippi 13,500 Nonwoven fabrics warehouse October 1997 The Company has the option to renew its leases expiring in 1996 and 1997 for additional periods. Indebtedness under the Company's secured revolving credit facility is secured by a lien on, and a security interest in, substantially all of the Company's assets, including all real estate, plants, equipment, inventory, accounts receivable and cash. Under the terms of the secured revolving credit facility, the lenders thereunder may exercise certain remedies, including foreclosure, in the event of a default. ITEM 3. CLAIMS AND 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 or its subsidiaries. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Partnership, the Company's sole stockholder, during fiscal 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no trading market for the Company's Common Stock. All of the issued and outstanding Common Stock of the Company is owned by the Partnership. The Company has never paid cash dividends on its Common Stock. The Company's ability to pay dividends on its Common Stock is currently restricted by both the Amended Credit Facility and the indenture (the "Indenture") relating to the Company's 12-3/4% Senior Subordinated Debentures due 2002 (the "Debentures"). See Note 8 to the financial statements for a description of the Amended Credit Facility and the Indenture. ITEM 6. SELECTED FINANCIAL DATA YEAR ENDED SEPTEMBER 30, 1995 1994 1993 1992 1991 (IN THOUSANDS OF DOLLARS) SUMMARY OF OPERATIONS DATA: Net sales $271,427 $234,977 $210,516 $195,739 $188,446 Operating income 28,687 40,770 29,921 27,656 27,591 Income from continuing operations before provision for income taxes 5,436 20,020 8,134 8,155 6,285 Income from continuing operations 1,936 11,420 3,662 3,595 1,810 Income (loss) from discontinued operations - - 1,420 (7,567) (309) Extraordinary item- loss from early extinguishment of debt - - (8,892) - - Cumulative effect of accounting change - - (8,500) - - Net income (loss) 1,936 11,420 (12,310) (3,972) 1,501 AS OF SEPTEMBER 30, 1995 1994 1993 1992 1991 (IN THOUSANDS OF DOLLARS) BALANCE SHEET DATA: Total assets $312,300 $287,933 $260,372 $254,581 $251,918 Long-term debt 192,048 172,490 164,723 158,638 152,381 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN 000'S) RESULTS OF OPERATIONS FISCAL 1995 COMPARED TO FISCAL 1994 The following table sets forth certain financial data for the years ended September 30, 1995 and 1994. 1995 1994 Net sales $271,427 $234,977 Gross profit 76,721 82,672 Gross profit margin 28% 35% EBITDA (1) 42,887 52,425 Net sales increased 16% in fiscal 1995 from fiscal 1994 principally due to unit volume growth in certain product lines and higher average selling prices. Carpet backing sales grew to $133,025 in fiscal 1995, a 13% increase as compared to $117,791 in fiscal 1994. Construction/civil engineering sales increased $14,227 to $82,933, up 21% over 1994 sales. This was attributable to a 35% growth in geosynthetic products as well as a 9% increase in Fibermeshr fibers. Technical textiles sales increased 14% to $55,469 in fiscal 1995 from $48,480 in fiscal 1994. The decrease in gross profit, gross profit margin and EBITDA was a direct result of higher polypropylene raw material costs which affect every product line, offset partially by higher average selling prices. The average market cost of polypropylene increased approximately 50% per pound in fiscal 1995 over fiscal 1994. Costs began to decrease during the fourth quarter of fiscal 1995 and the Company expects, although there can be no assurance, that polypropylene costs will further decrease during fiscal 1996 as additional polypropylene manufacturing facilities are completed. Polypropylene purchases account for approximately 50% of the Company's cost of sales. Increases in the price of polypropylene without offsetting selling price increases could have a significant negative effect on the Company's results of operations and financial condition. Historically, as a result of the level of competition, the Company has been able to pass through only a portion of any polypropylene cost increase through higher selling prices. See Business - Raw Materials. Direct selling expenses increased $2,458 to $24,273 in fiscal 1995 (9% of net sales) from $21,815 in fiscal 1994 (9% of net sales). This increase was primarily attributable to increased marketing efforts in the construction/civil engineering product lines as a direct result of increased sales. General and administrative expenses, while remaining constant at 8% of net sales, increased 19% to $21,195 in fiscal 1995 from $17,588 in fiscal 1994, primarily due to an charge of $2,852 to increase in the allowance for doubtful accounts. The charge was taken to establish a reserve for accounts receivable of a carpet backing customer who is experiencing severe financial difficulties. The Company believes the reserve provided is adequate for this account to cover any future potential losses and in the opinion of management, no significant future loss of revenue is anticipated. Operating income decreased 30% to $28,687 during fiscal 1995 (11% of net sales) from $40,770 during fiscal 1994 (17% of net sales). This decrease was primarily due to the change in gross profit associated with higher raw material costs. Total interest expense for fiscal 1995 increased by $2,503 from fiscal 1994 due to higher average total debt outstanding and a higher base rate for the Amended Credit Facility. The effective income tax rate was 64% and 43% in fiscal 1995 and 1994, respectively. The increase was primarily due to the effect of nondeductible expenses, including the amortization of goodwill, on lower taxable income in fiscal 1995. Net income for fiscal 1995 was $1,936 compared to net income of $11,420 for fiscal 1994, a decrease primarily due to increased raw material and interest costs. FISCAL 1994 COMPARED TO FISCAL 1993 Net sales for fiscal 1994 were $234,977, compared to $210,516 for fiscal 1993, an increase of 12%. This increase was due to increased sales of carpet backing and construction/civil engineering products offset by a decrease in sales of technical textiles. Carpet backing sales were $117,791 for fiscal 1994, an increase of $11,385, or 11%, from fiscal 1993. This was principally due to increased volume of both primary and secondary carpet backing. Construction/civil engineering product sales were $68,706 for fiscal 1994 up from $47,899 for the same period in fiscal 1993, an increase of $20,807, or 44% due to a 20% increase in Fibermeshr sales and an 85% increase in sales of geotextiles and erosion control fabrics. Technical textiles were $48,480 for fiscal 1994, compared to $56,211 for the same period last year, a decrease of $7,731, or 14%, due to decreased sales volume of industrial fabrics. The decreased sales volume was due to the phase out of several product lines. The equipment associated with the discontinued product lines was redirected to the additional production of woven geotextiles. Gross profit for fiscal 1994 was $82,672, an increase of $14,337, or 21%, from the gross profit of $68,335 for fiscal 1993. As a percentage of net sales, gross profit increased from 33% for fiscal 1993 to 35% in fiscal 1994. The increase in gross profit was due primarily to the increased sales volume, as well as the increased gross margin. Gross margin improved principally as a result of lower average polypropylene cost during fiscal 1994. Selling expenses for fiscal 1994 were $21,815, an increase of $2,420, or 13%, over selling expenses of $19,395 for fiscal 1993. The increase in selling expenses was primarily due to the growth in net sales. As a percentage of net sales, selling expenses remained constant at 9% in fiscal 1994. General and administrative expenses for fiscal 1994 were $17,588, an increase of $1,184 over general and administrative expenses of $16,404 for fiscal 1993. As a percentage of net sales, general and administrative expenses remained constant at 8% in fiscal 1994. Operating income increased to $40,770 for fiscal 1994 (17% of net sales) compared to $29,921 for fiscal 1993 (14% of net sales). The increase in operating income was primarily due to increased gross profit partially offset by higher selling expenses. Total interest expense for fiscal 1994 decreased by $843 from fiscal 1993. This was a result of decreased average borrowings relating to the Credit Facility and the redemption of the Company's $40,000 zero coupon junior debenture at its accreted value ($17,093) during 1993, partially offset by the interest payments made in fiscal 1994 relating to the Debentures. Net income from continuing operations for fiscal 1994 was $11,420, an increase of $7,758 from the $3,662 of income from continuing operations for fiscal 1993. The Company had net income of $11,420 for fiscal 1994, compared to a net loss of $12,310 for fiscal 1993 which included an $8,500 charge for the cumulative effect on prior years of a change in accounting principle for income taxes and an $8,892 charge (net of tax) for losses from early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES Cash used in operating activities of $35 in fiscal 1995 resulted primarily from net income of $1,936, after deducting non-cash charges of approximately $14,600, and increases in accounts payable of approximately $5,200, offset by increases in accounts receivable of $8,800 and inventory of $13,100. The increase in accounts receivable results from increased sales over the prior year particularly in certain seasonal product lines. The increases in inventory and accounts payable result from the effects of higher polypropylene costs, as well as increased units in finished goods and raw materials to support continued anticipated sales growth. During fiscal 1994 and 1993, cash provided by operating activities was $23,962 and $24,334, respectively. Working capital amounted to $69,039, $44,114 and $42,055 at the end of fiscal 1995, 1994 and 1993, respectively. During fiscal 1995, 1994 and 1993, the Company had capital expenditures of $13,313, $31,866 and $11,759, respectively. Such capital expenditures consist primarily of property, plant and equipment. In fiscal 1995, expenditures included the expansion of the Company's carpet backing facilities. In fiscal 1994, the Company expanded its secondary carpet backing and nonwoven specialty fabrics facilities. In fiscal 1993, capital expenditures included multifilament and nonwoven production lines. Capital expenditures in fiscal 1995 have been financed primarily through additional borrowings under the Company's Third Amended and Restated Revolving Credit Agreement (the "Credit Facility"). The term loan portion of the Credit Facility was increased on January 13, 1995 to $30,000 from $19,000, of which $26,000 was outstanding on September 30, 1995. In addition, borrowings under the revolving credit portion of the Credit Facility increased from $16,129 in fiscal 1994 to $24,727 in fiscal 1995. At September 30, 1995, there was $9,173 available for borrowing under the Credit Facility. In fiscal 1996, the Company plans a $35,000 expansion of its manufacturing facility in Chickamauga, Georgia to focus on increasing capacity for the production of carpet backing and woven geotextiles. To finance the expansion, the Company entered into the Fourth Amended and Restated Revolving Credit Agreement (the "Amended Credit Facility") dated October 20, 1995. The Amended Credit Facility terminates on October 20, 2001 and provides for total borrowings of up to $85,000. The Amended Credit Facility consists of a term loan of $45,000, of which $10,000 is payable in 1999 and $17,500 is payable in each of 2000 and 2001, and a revolving credit loan of $40,000. Borrowings available under the revolving credit loan are based on a borrowing formula consisting of 85% of eligible accounts receivable and 50% of eligible inventory, subject to certain limitations. Management's plans indicate that current and future operations will provide sufficient cash flow to satisfy the debt service requirements of the long-term debt obligations, including the Amended Credit Facility and lease agreements. Historically, the Company's operations have not been significantly affected by inflation. ACCOUNTING CHANGES None. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the financial statements, together with the auditors' report thereon, appearing immediately after Part IV, Item 14 hereof. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS DIRECTORS OF THE COMPANY The Board of Directors of the Company consists of six (6) persons. Directors all serve for terms of one year. Certain information concerning the directors of the Company is set forth below: Date Name Age Appointed Present Occupation Jon P. Beckman 55 1987 Vice President - Finance, Chief Financial Officer, Treasurer and Secretary of the Company Leonard Chill 63 1987 President and Chief Executive Officer of the Company Joseph F. Dana 48 1993 Member of the law firm of Watson & Dana Lee J. Seidler 60 1993 Private Investor William J. Shortt 70 1993 Management Consultant Robert L. Voigt 77 1993 Management Consultant Jon P. Beckman - Mr. Beckman joined the Company in 1976 and has been Secretary, Treasurer and Vice President - Finance since 1980. From 1969 to 1976, he was employed by Thiokol Corporation in its Fibers Division where he held several positions, including Director of Finance. Mr. Beckman is also the sole director and the controlling stockholder of one of the general partners of Synthetic G.P. Leonard Chill - Mr. Chill joined the Company in December 1973 as President. From 1967 until joining the Company, he held a number of positions with Thiokol Corporation in its Fibers Division, including that of General Manager. Mr. Chill has been a director of Synthetic Textiles, LTD since March 1993. In addition, Mr. Chill is the sole director and the controlling stockholder of one of the general partners of Synthetic G.P. Joseph F. Dana - Mr. Dana has been engaged in the private practice of law for over twenty (20) years and has been a member of the law firm Watson & Dana, LaFayette, Georgia, since its formation in 1978. Mr. Dana has served as general counsel to the Company since 1987. Lee J. Seidler - Mr. Seidler retired from Bear Stearns & Co., Inc. in 1989 at which time he was a Senior Managing Director. Mr. Seidler is a director of The Shubert Foundation, The Shubert Organization, and Players International, Inc. William J. Shortt - Mr. Shortt retired from Johnson & Johnson in 1989. From 1977 to 1989, he was Director of Government and Trade Relations, Southeast, at Johnson & Johnson. Mr. Shortt has also been a director of Standard Telephone Company, Standard Group Insurance, and First National Bank of Habersham. Robert L. Voigt - Mr. Voigt served as a consultant to Dixie Yarns, Inc. from 1985 until his retirement at the end of 1991. Mr. Voigt also served as a director of Dixie Yarns, Inc. from 1981 to 1987. There are no family relationships between any of the directors of the Company. EXECUTIVE OFFICERS OF THE COMPANY The names, ages and positions held by the executive officers of the Company are set forth below: Name Age Present Occupation Leonard Chill 63 President and Chief Executive Officer Jon P. Beckman 55 Vice President - Finance, Chief Financial Officer, Treasurer and Secretary Ralph Kenner 51 Vice President - Manufacturing William Gardner Wright, Jr. 66 Vice President - Sales W. Wayne Freed 60 Vice President - Marketing Robert J. Breyley 66 Vice President - Fibermeshr John Michael Long 52 Vice President - Specialty Products Division Ted Koerner 46 Vice President - General Manager - Construction/Civil Engineering Products Division W.O. Falkenberry 53 Vice President - Human Resources Joseph Sinicropi 41 Chief Accounting Officer Bobby Callahan 53 Controller Executive officers are appointed annually and serve at the discretion of the Board of Directors, except for Messrs. Long and Sinicropi, each of whom has an employment agreement with the Company. There are no family relationships between any of the above officers. See the immediately preceding section for a description of the employment backgrounds of Messrs. Chill and Beckman. Ralph Kenner - Mr. Kenner has been Vice President - Manufacturing since 1984. He joined the Company in 1974 as Director, Industrial Relations and served in that capacity until 1976. In 1976, he was appointed Plant Manager and served in that capacity until 1984. Mr. Kenner is also the sole director and controlling stockholder of one of the general partners of Synthetic G.P. William Gardner Wright, Jr. - Mr. Wright has been Vice President - Sales since 1983. From 1977 until 1983, he was President of Synca Marketing Corp., a textile sales agency which served as an agent for the Company's primary carpet backing, as well as the products of other manufacturers. Mr. Wright is also a Director of the Trust Company Bank of Northwest Georgia. Mr. Wright is also the sole director and controlling stockholder of one of the general partners of Synthetic G.P. W. Wayne Freed - Mr. Freed joined the Company in 1981 and became Vice President - Marketing of the Company in 1987. Prior thereto, he had 22 years experience in the textile industry. Mr. Freed is also the sole director and controlling stockholder of one of the general partners of Synthetic G.P. Robert J. Breyley - Mr. Breyley joined the Company in 1984 and became Vice President -Fibermeshr Division in December 1986. Prior thereto, he held a variety of managerial positions with Master Builders, Inc., a leading concrete admixtures supplier. During his last six years with Master Builders, he was Senior Vice President of Sales and Marketing. Mr. Breyley is also a limited partner of Management L.P. John Michael Long - Mr. Long was elected Vice President - Specialty Products Division in October 1991. Prior thereto, he held a variety of managerial positions with Spartan Mills, a manufacturer of nonwoven geotextile fabrics. During his last five years at Spartan, he was Vice President and General Manager. Ted Koerner - Mr. Koerner joined the Company in 1990 and became Vice President - Construction Products Division in 1993. He was named Vice President and General Manager - Construction/Civil Engineering Products Division in 1995. Prior thereto, Mr. Koerner was an Engineer with the Ohio Department of Transportation; Sales Engineer, Product Supervisor and Regional Engineer with Armco Steel Corporation; and Sales Manager with National Seal Corporation. W.O. Falkenberry - Mr. Falkenberry joined the Company in 1993 as Vice President of Human Resources. Prior thereto, he was Director of Human Resources with the Champion Products Division of the Sara Lee Corporation. Joseph Sinicropi - Mr. Sinicropi joined the Company in 1995 as Chief Accounting Officer. Prior to joining the Company, he was an audit senior manager in the international accounting firm of Deloitte & Touche LLP. Bobby Callahan - Mr. Callahan joined the Company in 1977 and has been Controller since 1980. Prior thereto, he held a variety of financial management positions in the carpet industry. Mr. Callahan is also a limited partner of Management L.P. ITEM 11. REMUNERATION OF DIRECTORS AND OFFICERS COMPENSATION OF DIRECTORS Outside directors receive $15,000 per annum for services as a director and $800 per meeting attended. Directors who are members of management do not receive any meeting attendance fees or additional compensation for services as a director or on committees of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with their attendance at Board of Directors and committee meetings. See "Renumeration of Directors and Officers - Option Plans". COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth certain information as to the compensation paid during each of the Company's last three completed fiscal years to (I) the chief executive officer of the Company and (ii) the four most highly compensated executive officers of the Company (other than the chief executive officer). Fiscal Year Ended Name and September All Other Principal Position 30, Salary ($) Bonus Compensation($) Leonard Chill 1995 254,871 89,939 11,857 (2) Chief Executive Officer and President 1994 247,447 127,260 11,458 1993 240,240 95,073 11,514 Jon P. Beckman 1995 147,130 50,539 10,311 (3) Vice-President - Finance 1994 142,845 71,508 10,353 1993 138,684 53,737 10,515 Ralph Kenner 1995 145,973 41,926 7,476 (4) Vice President - Manufacturing 1994 125,973 66,660 7,468 1993 122,304 49,603 8,514 William Gardner Wright, Jr. 1995 235,664 70,238 4,547 (5) Vice President - Marketing and Sales 1994 235,664 99,384 4,497 1993 228,800 74,404 4,549 Robert J. Breyley 1995 141,720 49,500 3,614 (6) Vice President - Fibermesh(r) Division 1994 141,720 72,000 5,548 1993 137,592 46,851 6,748 EMPLOYMENT AGREEMENTS Leonard Chill was employed by the Company pursuant to an employment agreement dated October 1, 1989, as amended, which expired on October 1, 1995. Mr. Chill's annual salary pursuant to this agreement in fiscal 1995 was $254,871. The Company provides for the purchase of a term life insurance policy in the face amount of $1,000,000 and grants Mr. Chill the exclusive right to designate his beneficiary thereunder. Jon P. Beckman was employed by the Company pursuant to an employment agreement dated October 1, 1989, as amended, which expired on October 1, 1995. Mr. Beckman's annual salary pursuant to this agreement in fiscal 1995 was $147,130. The Company provides for the purchase of a term life insurance policy in the face amount of $300,000 and grants Mr. Beckman the exclusive right to designate his beneficiary thereunder. Ralph Kenner was employed by the Company pursuant to an employment agreement dated October 1, 1989, as amended, which expired on October 1, 1995. Mr. Kenner's annual salary pursuant to this agreement in fiscal 1995 was $145,973. W. Gardner Wright was employed by the Company pursuant to an employment agreement dated July 1, 1993, which expired on October 1, 1995. Mr. Wright's annual salary pursuant to this agreement in fiscal 1995 was $235,664. The Company does not currently intend to enter into new employment agreements with Messrs. Chill, Beckman, Kenner and Wright. In addition, a maximum of $115,000 is payable in the event a "change in control" provision contained in Mr. Sinicropi's contract is triggered. INCENTIVE COMPENSATION AND BONUS PLANS The Company has adopted for fiscal 1996 incentive plans for each of its divisions similar to those in effect during fiscal 1995, 1994 and 1993. Each provides for the payment of bonuses to certain key employees if the particular division achieves at least a designated minimum amount of operating profit for the fiscal year. RETIREMENT PLAN The Company has established a retirement plan (the "Retirement Plan") under Section 401(k) of the Internal Revenue Code of 1986, as amended, effective October 1, 1986. Employees who have completed at least one year of service with the Company qualify for participation in the Retirement Plan. A participant may contribute an amount ranging from one percent (1%) to twenty percent (20%) of his or her annual compensation not to exceed $150,000, which contribution in no event may exceed a limit set annually by the Internal Revenue Service ($9,240 in 1995). All participant contributions, together with earnings thereon, are fully vested. The Company currently makes matching contributions of $0.50 for each dollar contributed to the Retirement Plan by a participant up to a maximum of three percent (3%) of such participant's annual compensation. In addition, the Company may, but has not elected to, contribute to the Retirement Plan a portion of its net profits as determined by its Board of Directors. Employer contributions vest over three to seven years. The account balance of a participant is paid to the participant or his beneficiary, beginning with the participant's retirement or separation from service, in a lump sum, or installments over the life expectancy of the participant, as selected by the participant. OPTION PLANS Directors Plan. Under the Company's 1994 Stock Option Plan for Non-Employee Directors (the "Directors Plan"), Messrs. Dana, Seidler, Shortt and Voigt were granted non- qualified stock options (the "Directors Options") to purchase 0.24975, 0.4995, 0.1665 and 0.1665 shares of Common Stock, respectively. At the time the Directors Plan was adopted, the Company had (and continued to have as at December 1, 1995) 49.95 shares of Common Stock outstanding. The Directors Plan does not provide for any further grants of options thereunder. The purchase price of the shares of Common Stock subject to the Directors Options was determined by reference to the fair market value of the Common Stock, as determined by the DP Committee (as defined below), at the time Messrs. Dana, Seidler, Shortt and Voigt became members of the Board of Directors. As at December 1, 1995, 75% of the number of shares of Common Stock subject to each Director Option had vested and become exercisable. As Company employees, Messrs. Beckman and Chill are not eligible to participate in the Directors Plan. In the event that the outstanding shares of Common Stock are changed by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination or exchange of shares and the like, or dividends payable in Common Stock, an appropriate adjustment shall be made by the DP Committee in the aggregate number of shares of Common Stock available under the Directors Plan and in the number of shares and price per share subject to outstanding Director Options. The term of each Director's Option is ten years from date of grant. Management Plan. Under the Company's 1994 Stock Option Plan (the "Management Plan"), incentive stock options ("ISOs"), as provided in Section 422A of the Internal Revenue Code, and non-qualified stock options may be granted to any full-time employee of the Company or its subsidiaries. The maximum aggregate number of shares of Common Stock that may be issued under the Management Plan is 4.24575. At the time the Management Plan was adopted, the Company had (and continued to have as at December 1, 1995) 49.95 shares of Common Stock outstanding. As at December 1, 1995, options to purchase an aggregate of 2.736225 shares of Common Stock had been granted under the Management Plan. Of such amount, Messrs. Chill, Beckman, Wright, Freed, Kenner and other key managers hold options to purchase 0.953913, 0.351442, 0.288684, 0.288684, 0.288684 and 0.564818 shares of Common Stock, respectively. Options may not be granted under the Management Plan after August 28, 2004. The Management Plan provides for administration by a committee (the "Committee") whose members are Messrs. Dana, Seidler, Shortt and Voigt. Subject to the express provisions of the Management Plan, the Committee has the discretion and authority to determine to whom from among the eligible employees an option may be granted, the time or times at which each option may be exercised, the number of shares of Common Stock subject to each option and the terms and conditions of each stock option agreement issued pursuant to the Management Plan; provided, however, that shares of Common Stock subject to any such agreement shall vest and become exercisable at a minimum rate of 25% per year over a four-year period. The purchase price of the shares of Common Stock subject to options under the Management Plan must be no less than the fair market value of the Common Stock at the date of grant, as determined by the Committee; provided, however, that the purchase price of shares of Common Stock subject to ISOs granted to any optionee who owns shares possessing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company ("Ten Percent Stockholder") must not be less than 110% of the fair market value of the Common Stock at the date of the grant. The maximum term of an option may not exceed ten years from the date of grant, except with respect to ISOs granted to Ten Percent Shareholders which must expire within five years of the date of grant. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As at December 1, 1995, all of the issued and outstanding capital stock of the Company was owned by the Partnership. See "Renumeration of Directors and Officers - Option Plans". Management L.P. is the sole general partner of the Partnership. Synthetic G.P. is the sole general partner of Management L.P. By virtue of these relationships, Synthetic G.P. controls the management and affairs of the Partnership. The general partners of Synthetic G.P. are the following Delaware corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed Investments, Inc., Kenner Investments, Inc. and Wright Investments, Inc. Each of Messrs., Chill, Beckman, Freed, Kenner and Wright is the sole director and the controlling stockholder of one of Synthetic G.P.'s general partners. For further information concerning Messrs. Chill, Beckman, Freed, Kenner and Wright, see "Directors and Executive Officers." The address of the Partnership is 309 LaFayette Road, Chickamauga, Georgia, 30707. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During fiscal 1995, the Company paid legal fees totaling approximately $140,000 to the law firm of Watson & Dana located in LaFayette, Georgia. Mr. Dana, a director of the Company, is a member of Watson & Dana. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Index to Consolidated Financial Statements: Page No. of Financial Statement (1)Financial Statements: Independent Auditors' Report F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Changes in Stockholder's Equity F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 (b) No reports on Form 8-K were filed during the last quarter of the Company's fiscal year ended September 30,1995. (c) Exhibits: See exhibit index immediately following Item 14. (d) No additional financial statements are required to be filed. Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Securities Exchange Act of 1934, as amended, by Registrants Which Have Not Registered Securities Pursuant to Section 12 thereunder. No annual reports or proxy materials have been sent to the sole stockholder of the Company or to the holders of the Debentures.. EXHIBIT INDEX Location in Sequential Page Numbering System The following are the Exhibits as required by Item 14 (c). 1 2.1 Acquisition Agreement dated November 21, 1986 between Synthetic Industries, Inc., Synthetic Industries Limited, Polyweave Corporation, the shareholders of Synthetic Industries, Inc., Synthetic Industries Limited and SI Holding Inc. including exhibits thereto. 1 2.2 Plan and Agreement of Merger dated December 4, 1986. 2 2.3 Asset Purchase Agreement dated October 12, 1990 between Synthetic Industries, Inc. and Chicopee. 2 3.1 Certificate of Incorporation of Synthetic Industries, Inc. (including all amendments to date) filed with the Secretary of the State of Delaware. 2 3.2 Amended and Restated By-Laws of Synthetic Industries, Inc. (including all amendments to date). 4 4.1 Form of Indenture between Synthetic Industries, Inc. and United States Trust Company of New York, Trustee, in respect to the 12-3/4% Senior Subordinated Debentures due 2002. 9 4.2 Supplemental Form of Indenture between Synthetic Industries, Inc. and United States Trust Company of New York, Trustee, in respect to the 12-3/4% Senior Subordinated Debentures due 2002. 9 10.1 Fourth Amended and Restated Revolving Credit and Security Agreement dated as of October 20, 1995 among Synthetic Industries, Inc., The First National Bank of Boston and other Lenders listed on Schedule I thereto, and The First National Bank of Boston, as agent on behalf of the Lenders. 9 10.2 Amendment No. 1 to the Fourth Amended and Restated Revolving Credit and Security Agreement dated as of December 1, 1995 2 10.3 US Patent No. 4,867,614, Reinforced Soil and Method (Exp. December 13, 2003). 2 10.4 US Patent No.4,790,691, Fiber Reinforced Soil and Method (Exp. December 13, 2003). 2 10.5 US Patent No. 5,007,766, Shaped Barrier for Erosion Control and Sediment Collection (Exp. April 16, 2008). 10.6 Fiscal 1994 Management Incentive Bonus Plan. 1 10.7 Lease agreement dated November 22, 1971 between Murray Sobel and Synthetic Industries, Inc. (including all amendments to date). 1 10.8 Lease agreement dated February 13, 1969, between Murray Sobel and wife, Marcela S. Sobel, and Joseph F. Decosimo, Frank M. Thompson and Murray Sobel, Trustees and Synthetic Industries, Inc. (including all amendments to date). 2 10.9 Lease agreement dated December 17, 1990 between Chicopee and Synthetic Industries, Inc. 2 10.10 Lease agreement dated January 17, 1991 between Herchel L. Webster and Allie Ree Webster and Synthetic Industries, Inc. (the "Lumite Lease"). 6 10.11 Amendment to the Lumite Lease dated October 1, 1992. 2 10.12 Consulting Agreement dated July 23, 1991 between Texpro Limitada y Cia S.C.A. and Synthetic Industries, Limited. 2 10.13 Employment Agreement dated September 2, 1991 between John M. Long and Synthetic Industries, Inc. 7 10.14 Supply Contract between Eastman Chemical Products, Inc. and Synthetic Industries, Inc. dated December 13, 1991. 2 10.15 Agreement dated February 18, 1986 between Leonard Chill and Synthetic Industries, Inc. 2 10.16 Agreement dated February 18, 1986 between Richard E. Hingson and Synthetic Industries, Inc. 2 10.17 Agreement dated February 18, 1986 between Ralph A. Kenner and Synthetic Industries, Inc. 2 10.18 Agreement dated February 18, 1986 between Blake M. Putnam and Synthetic Industries, Inc. 2 10.19 Agreement dated February 18, 1986 between Gardner Wright, Jr. and Synthetic Industries, Inc. 2 10.20 Agreement dated September 2, 1991 between John M. Long and Synthetic Industries, Inc. 2 10.21 Agreement dated July 16, 1990 between Charles T. Koerner and Synthetic Industries, Inc. 2 10.22 Agreement dated September 1, 1984 between Robert J. Breyley, Sr. and Fibermesh Company. 9 10.23 Agreement dated April 27, 1995 between Joseph Sinicropi and Synthetic Industries, Inc. 8 10.24 1994 Stock Option Plan for Non-Employee Directors 8 10.25 1994 Stock Option Plan 2 21. List of Subsidiaries of Synthetic Industries, Inc. 27. Financial Data Schedule - -------------- 1 Filed as an exhibit to the Company's Registration Statement on Form S-1 (33-11479) as filed with the Securities and Exchange Commission on January 23, 1987 and incorporated herein by reference. 2 Filed as an exhibit to the Company's Registration Statement on Form S-1 (33-51206) as filed with the Securities and Exchange Commission on August 24, 1992 and incorporated herein by reference. 3 Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. 4 Filed as an exhibit to the Company's Amendment No. 3 to the Registration on Form S-1 (33-51206) as filed with the Securities and Exchange Commission on December 4, 1992 and incorporated herein by reference. 5 Filed as an exhibit to the Partnership's Registration Statement on Form 10 (0-21548) as filed with the Securities and Exchange Commission on April 16, 1993 and incorporated herein by reference. 6 Filed as an exhibit to the Partnership's Amendment No. 1 to the Registration Statement on Form 10 (0-21548) as filed with the Securities and Exchange Commission on August 10, 1993 and incorporated herein by reference. 7 Pursuant to an order dated October 19, 1992, the Securities and Exchange Commission granted confidential treatment with respect to certain portions of this exhibit under Rule 406 of the Securities Act of 1933, as amended. 8 Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1994 and incorporated herein by reference. 9 Filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995 and incorporated herein by reference. INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholder Synthetic Industries, Inc. Chickamauga, Georgia We have audited the accompanying consolidated balance sheets of Synthetic Industries, Inc. (a wholly owned subsidiary of Synthetic Industries, L.P.) and its subsidiaries as of September 30, 1995 and 1994, and the related consolidated statements of operations, changes in stockholder's equity and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Synthetic Industries, Inc. and subsidiaries at September 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995 in conformity with generally accepted accounting principles. As discussed in Note 11 to the consolidated financial statements, the Company changed its method of accounting for income taxes during the year ended September 30, 1993. Deloitte & Touche LLP November 17, 1995 New York, New York SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS OF DOLLARS, EXCEPT SHARE INFORMATION) SEPTEMBER 30, ASSETS 1995 1994 CURRENT ASSETS: Cash $ 108 $ 117 Accounts receivable, net (Note 3) 47,947 39,094 Inventory (Note 4) 45,597 32,520 Other current assets (Note 5) 14,708 10,859 -------- -------- TOTAL CURRENT ASSETS 108,360 82,590 PROPERTY, PLANT AND EQUIPMENT, net (Note 6) 116,729 115,050 OTHER ASSETS (Note 7) 87,211 90,293 -------- -------- $312,300 $287,933 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Accounts payable $24,021 $ 18,767 Accrued expenses and other current liabilities 7,378 6,944 Income taxes payable (Note 11) 1,455 482 Interest payable 6,427 6,247 Current maturities of long-term debt (Note 8) 40 6,036 -------- -------- TOTAL CURRENT LIABILITIES 39,321 38,476 LONG-TERM DEBT (Note 8) 192,048 172,490 DEFERRED INCOME TAXES (Note 11) 23,175 21,150 -------- -------- 254,544 232,116 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 10) STOCKHOLDER'S EQUITY: Common stock, $1 par value: Authorized, issued and outstanding 49.95 shares - - Additional paid-in capital 69,300 69,300 Cumulative translation adjustments 29 26 Deficit (11,573) (13,509) --------- ------- TOTAL STOCKHOLDER'S EQUITY 57,756 55,817 --------- ------- $312,300 $287,933 ========= ======== See notes to consolidated financial statements SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS) YEAR ENDED SEPTEMBER 30, 1995 1994 1993 Net sales $271,427 $234,977 $210,516 Costs and expenses: Cost of sales 194,706 152,305 142,181 Selling expenses 24,273 21,815 19,395 General and administrative expenses 21,195 17,588 16,404 Amortization of excess of purchase price over net assets acquired and other intangibles 2,566 2,499 2,615 -------- ------- ------- 242,740 194,207 180,595 -------- ------- ------- Operating income 28,687 40,770 29,921 -------- ------- ------- Other expenses: Interest expense 22,514 20,011 20,854 Amortization of deferred financing and organization costs 737 739 933 -------- ------- ------- 23,251 20,750 21,787 -------- ------- ------- Income from continuing operations before provision for income taxes 5,436 20,020 8,134 Provision for income taxes (Note 11) 3,500 8,600 4,472 -------- ------- ------- Income from continuing operations 1,936 11,420 3,662 Reversal of provision for discontinued operations (Note 12) - - 1,420 -------- ------- ------- Income before extraordinary item and cumulative effect of change in accounting principle - - 5,082 Extraordinary item - Loss from early extinguishment of debt (Note 9) - - (8,892) Cumulative effect on prior years of change in accounting principle for income taxes - - (8,500) -------- --------- ---------- NET INCOME (LOSS) $ 1,936 $ 11,420 $ (12,310) ======== ========= ========== See notes to consolidated financial statements SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (IN THOUSANDS OF DOLLARS) ADDITIONAL CUMULATIVE COMMON PAID-IN TRANSLATION STOCK CAPITAL ADJUSTMENTS DEFICIT TOTAL Balance, October 1, 1992 $ - $69,300 $ 19 $(12,619) $56,700 Net loss - - - (12,310) (12,310) Foreign currency translation - - 33 - 33 ----- -------- ----- -------- ------- Balance, September 30, 1993 - 69,300 52 (24,929) 44,423 Net income - - - 11,420 11,420 Foreign currency translation - - (26) - (26) ----- -------- ----- ------- ------ Balance, September 30, 1994 - 69,300 26 (13,509) 55,817 Net income - - - 1,936 1,936 Foreign currency translation - - 3 - 3 ----- -------- ----- ------- ------ Balance, September 30, 1995 $ - $69,300 $ 29 $(11,573) $57,756 ===== ======== ===== ========= ======= See notes to consolidated financial statements SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS OF DOLLARS) Year ended September 30, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Income before extraordinary item and cumulative effect of change in accounting principle $ 1,936 $ 11,420 $ 5,082 Adjustments to reconcile net income to net cash provided by operations: Provision for loss on disposal of discontinued operations (net of tax) - - (1,420) Depreciation 11,634 9,152 8,515 Amortization of intangibles, deferred financing and organizational costs 3,303 3,238 3,558 Deferred income taxes (355) 3,830 5,489 Provision for bad debts 3,363 217 383 Loss on disposal of equipment - 266 751 Change in assets and liabilities, net of disposition: Increase in accounts receivable (12,212) (2,861) (5,335) (Increase) decrease in inventory (13,076) (7,255) 1,758 Increase in other current assets (1,469) (632) (647) Increase (decrease) in accounts payable 5,254 5,348 (1,700) Increase in accrued expenses and other current liabilities 434 533 2,499 Increase (decrease) in income taxes payable 973 482 (356) Increase in interest payable 180 224 5,757 ------- ------- --------- Cash (used in) provided by operating activities (35) 23,962 24,334 ------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (13,313) (31,866) (11,759) -------- ------- -------- Cash used in investing activities (13,313) (31,866) (11,759) -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under term loan 11,000 - 30,000 Repayments under term loan (6,000) (6,000) (19,303) Issuance of 12 3/4% senior subordinated debentures - - 140,000 Redemption of 11 1/2% senior subordinated debentures - - (116,344) Repayment costs on early extinguishment of debt - - (720) Repayment of junior subordinated debenture - - (17,093) Net borrowing (repayment) under revolving credit line 8,598 13,802 (23,298) Repayments of other long term debt (36) (31) (28) Other assets (221) - (5,784) ------- ------ ------ Cash provided by (used in) financing activities 13,341 7,771 (12,570) Effect of exchange rate changes on cash (2) (3) (1) ------- ------ ------ NET (DECREASE) INCREASE IN CASH (9) (136) 4 CASH AT BEGINNING OF PERIOD 117 253 249 ------- ------ ------ CASH AT END OF PERIOD $ 108 $ 117 $ 253 ======= ====== ====== SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 22,334 $ 19,787 $ 14,913 Income taxes 2,882 3,901 - See notes to consolidated financial statements SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS) 1.ORGANIZATION Synthetic Industries, Inc., a Delaware corporation (the "Company"), manufactures and markets a wide range of polypropylene-based fabric and fiber products designed for industrial applications. The Company's diverse mix of products are marketed to the floor covering, construction and technical textile markets for such end-use applications as carpet backing, geotextiles, erosion control, concrete reinforcement and furniture construction fabrics. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions and balances have been eliminated. FOREIGN CURRENCY TRANSLATION The assets and liabilities of foreign subsidiaries are translated at the fiscal year-end rates of exchange, and the results of operations are translated at the average rates of exchange for the years presented. Gains or losses resulting from translating foreign currency financial statements are accumulated in the cumulative translation adjustments account in the stockholder's equity section of the accompanying consolidated balance sheets. INVENTORY Inventory is stated at the lower of cost, determined using the first-in, first-out method, or market. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is provided on the straight-line method based on estimated useful lives, as follows: Building and improvements 25 years Machinery and equipment 14 years Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease. Expenses for repairs, maintenance and renewals are charged to operations as incurred. Expenditures which improve an asset or extend its useful life are capitalized. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in the results of operations The Company had capitalized interest costs of $255, $729 and $283 in fiscal 1995, 1994 and 1993, respectively. INCOME TAXES The Company accounts for income taxes using an asset and liability approach in accordance with Statement of Financial Standards No. 109 ("SFAS 109"). Under SFAS 109, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in the statement of operations for the period that includes the enactment date. EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED The excess of purchase price over net assets acquired is amortized on a straight-line basis over a period of 40 years. Excess of purchase price over net assets acquired is assessed for recoverability on a regular basis. In evaluating the value and future benefits of goodwill, its carrying value would be reduced by the excess, if any, of the balance over management's best estimate of undiscounted future operating income before amortization of the related intangible assets over the remaining amortization period. DEFERRED FINANCING AND INTANGIBLE ASSETS Deferred financing costs are amortized over periods from 5 to 12 years. Intangible assets consist of a trademark and patent on Fibermeshr which are amortized on a straight-line basis over 40 and 5 years, respectively. EARNINGS PER SHARE INFORMATION The Company is owned by one stockholder. As such, earnings per share information is not considered relevant and is not presented in the consolidated financial statements or notes thereto. RECLASSIFICATION OF PRIOR FINANCIAL STATEMENTS Certain reclassifications have been made to previous years' financial statements to conform with 1995 classifications. 3.ACCOUNTS RECEIVABLE Accounts receivable are presented net of the doubtful allowances of $4,053, $1,201 and $1,090 for fiscal 1995, 1994 and 1993, respectively. Amounts written off against established allowances were $511, $217 and $383 for the years ended September 30, 1995, 1994 and 1993, respectively. Most of the Company's carpet backing sales are with customers located in Georgia. Net sales to one customer represented 18%, 18% and 17%, respectively, of consolidated net sales for the fiscal years presented. 4.INVENTORY SEPTEMBER 30, 1995 1994 Finished goods $ 27,867 $ 20,580 Work in process 5,541 5,263 Raw materials 12,189 6,677 -------- -------- $ 45,597 $ 32,520 ======== ======== 5.OTHER CURRENT ASSETS SEPTEMBER 30, 1995 1994 Prepaid supplies $ 7,192 $ 6,416 Deferred tax assets 5,465 3,085 Other 2,051 1,358 ------- ------- $14,708 $10,859 ======= ======= 6.PROPERTY, PLANT AND EQUIPMENT SEPTEMBER 30, 1995 1994 Land $ 3,511 $ 3,061 Buildings and improvements 23,457 21,183 Machinery and equipment and leasehold improvements 151,921 141,332 -------- ------- 178,889 165,576 Accumulated depreciation 62,160 50,526 -------- ------- $116,729 $115,050 ======== ======== 7.OTHER ASSETS SEPTEMBER 30, 1995 1994 Excess of purchase price over net assets acquired $99,818 $99,818 Intangible assets 3,546 4,485 Deferred financing and organizational costs 12,230 12,034 -------- ------- 115,594 116,337 Accumulated amortization 28,383 26,044 -------- -------- $ 87,211 $ 90,293 ======== ======== The excess of purchase price over net assets acquired arose from the purchase of the Company's Common Stock in 1986. 8.LONG-TERM DEBT Long-term debt consists of the following at September 30: 1995 1994 Secured revolving credit facility (a): Secured revolving credit portion $ 24,727 $ 16,129 Term loan portion 26,000 21,000 12 3/4% senior subordinated debentures (b) 140,000 140,000 Other 1,361 1,397 -------- ------- 192,088 178,526 Less current portion 40 6,036 -------- ------- Total long-term portion $ 192,048 $172,490 ========= ======== A.THE SECURED REVOLVING CREDIT FACILITY On January 13, 1995, the Company and its lenders entered into a Third Amended and Restated Revolving Credit Agreement (as amended to date, the "Credit Facility"). The Company's term loan portion of the Credit Facility increased to $30,000 from $19,000. Expenses associated with the Credit Facility of $196 were incurred and are included within the deferred financing and organizational costs. Prior to the execution of the Fourth Amended and Restated Revolving Credit Agreement (the "Amended Credit Facility") on October 20, 1995, such term loan was payable in equal monthly installments of $500, plus interest beginning on February 1, 1995. The Company entered into the Amended Credit Facility, with a termination date of October 20, 2001, which provides for term loan borrowings of $45,000 of which $10,000 is payable in 1999 and $17,500 is payable in each of 2000 and 2001. Accordingly, at September 30, 1995, all term loan borrowings are classified as long term. The revolving credit loan portion of the Amended Credit Facility (the "Revolver") provides for availability based on a borrowing formula consisting of 85% of eligible accounts receivable and 50% of eligible inventory, subject to certain limitations. At September 30, 1995, the Company had $9,173 available under the Revolver. Under the Amended Credit Facility, the maximum amount available for borrowing under the revolving credit loan portion is increased to $40,000. The Amended Credit Facility permits borrowings which bear interest, at the Company's option, (i) for domestic borrowings based on the lender's base rate plus .75% (9.5% at September 30, 1995) or (ii) for Eurodollar borrowings based on the Interbank Eurodollar rate at the time of conversion plus 2.5% or 2.75% for term loan or revolver advances, respectively (8.5% to 8.625% at September 30, 1995). The Credit Facility contained similar provisions for payment of interests thereunder. The Amended Credit Facility provides for borrowings under letters of credit of up to $3,000, which borrowings reduce amounts available under the Revolver. The Company is required to pay a .375% fee on the unused portion of the commitment and an agency fee of $150 per annum. The Amended Credit Facility is collateralized by substantially all of the Company's assets and contains covenants related to the maintenance of certain operating and working capital levels 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 Amended Credit Facility and the indenture relating to the Debentures discussed below. The Credit Facility was similarly collaterialized and contained like limitations and restrictions. B.SENIOR SUBORDINATED DEBENTURES On December 14, 1992, the Company issued $140,000 of 12-3/4% Senior Subordinated Debentures due 2002 (the "Debentures"), which represent unsecured obligations of the Company. The Debentures are redeemable at the option of the Company at any time on or after December 1, 1997, initially at 106.375% of their principal amount, together with accrued interest, with declining redemption prices thereafter. Interest on the Debentures is payable semi-annually on June 1 and December 1. The fair value of the Company's Debentures is estimated based on quoted market prices for the Debentures in the over-the-counter market. The estimated fair value of the Debentures at September 30, 1995 is 97.5% of their face amount or $136,500. Approximate aggregate minimum annual payments due on long term debt, inclusive of additional borrowings pursuant to the Amended Credit Facility, for the subsequent five years are as follows: 1996, $40; 1997, $45; 1998, $50; 1999, $10,057; 2000, $42,291; and thereafter, $158,605. 9.EXTINGUISHMENT OF DEBT On January 13, 1993, the Company's 11-1/2% Senior Subordinated Debentures, due 1999 (the "Old Debentures"), with a principal amount of $110,000, were redeemed at 105.11% of the principal amount thereof. On April 22, 1993, the Company redeemed a $40,000 maturity value zero coupon junior subordinated debenture scheduled to mature on December 1, 1999, for $17,488. Also in fiscal 1993, deferred financing fees and prepayment costs associated with a prior credit facility were written off. The principal amounts, related prepayment costs and unamortized issuance costs resulted in an extraordinary loss of $8,892 (net of tax benefit of $5,392). 10. COMMITMENTS AND CONTINGENCIES A.LEASE COMMITMENTS The Company leases certain factory and warehouse buildings and equipment under long-term operating leases expiring through 2009. Future minimum lease payments under noncancellable operating leases at September 30, 1995 are as follows: Operating Year leases 1996 $3,755 1997 2,637 1998 1,707 1999 1,248 2000 1,080 Thereafter 1,461 Total $11,888 Total rental expense for the above operating leases and other short-term leases for the fiscal years 1995, 1994 and 1993 was $3,731, $4,684 and $4,340, respectively. B.CAPITAL EXPENDITURES In fiscal 1996, the Company plans a $35,000 expansion of its manufacturing facilities of which $3,028 is committed at September 30, 1995. C.CONTINGENCIES The Company is a party to litigation arising out of its normal business operations. The litigation primarily involves claims for personal injury, property damage, breach of contract and employee relations. The Company believes it has meritorious defenses to these suits and believes these claims do not involve a risk of material loss to the Company or are adequately covered by insurance. 11. INCOME TAXES Income tax expense for each of the years presented is determined in accordance with SFAS 109. The Company adopted SFAS 109 as of October 1, 1992 and reflected a charge of $8,500 representing the cumulative effect of this accounting change on net income. The provision (benefit) for income taxes is as follows: YEAR ENDED SEPTEMBER 30, 1995 1994 1993 Current: Federal $3,180 $3,770 $ (764) State 400 1,000 (200) Foreign 275 - - ----- ----- ----- 3,855 4,770 (964) ----- ----- ----- Deferred: Federal (218) 3,405 795 State (137) 425 49 ------ ----- ----- (355) 3,830 844 ------ ----- ----- Total taxes on income $3,500 $8,600 $ (120) ====== ====== ======== The Omnibus Budget Reconciliation Act of 1993 (the "Tax Act"), enacted in August 1993, increased the statutory corporate income tax 1% (to 35%) and made other changes concerning the deductibility of certain costs in determining taxable income. Provisions of the Tax Act were effective retroactive to January 1, 1993. As a result and in accordance with SFAS 109, deferred federal income tax expense was increased by $423 in the quarter ended September 30, 1993. A reconciliation of US income tax from continuing operations computed at the statutory rate and actual tax expense is as follows: YEAR ENDED SEPTEMBER 30, 1995 1994 1993 Amount computed at statutory rate $1,900 $7,007 $2,522 State and local taxes less applicable federal income tax 270 747 289 Amortization of goodwill 873 871 915 Other nondeductible expenses 210 348 142 Effect of federal tax rate increase - - 423 Other, net 247 (373) 181 ------ ------ ------ $3,500 $8,600 $4,472 ====== ====== ====== The tax effects of significant items comprising the Company's net deferred tax liability are as follows: YEAR ENDED SEPTEMBER 30, 1995 1994 Property, plant and equipment $22,121 $20,058 Trademarks and patents 1,054 1,092 ------- ------- Total deferred liabilities 23,175 21,150 ------- ------- Receivables 1,609 480 Inventory 628 397 Accrued expenses 1,581 691 AMT credit carryforward 1,647 1,517 ------- ------- Total deferred assets 5,465 3,085 ------- ------- Net deferred liability $17,710 $18,065 ======= ======= United States Income tax returns for fiscal years 1992 and 1993 are currently under examination by the Internal Revenue Service. In the opinion of management, adjustments resulting from the examination will not have a material adverse effect on the Company's consolidated financial position or results of operations. 12. DISCONTINUED OPERATIONS On March 15, 1993, the Company completed the disposal of its Irish manufacturing operations, which had been accounted for as a discontinued operation. In fiscal 1993, the Company reduced amounts previously provided for the loss on disposal by $1,420 (net of $800 tax provision). 13. RETIREMENT PROGRAMS For US employees, the Company maintains a trusteed profit-sharing plan ("Plan") which is qualified under Section 401(k) of the Internal Revenue Code. All full-time employees over the age of 21 who have been employed continuously for at least one year are eligible for participation in the Plan. The Company may, but has not elected to, contribute a portion of its profits to the Plan, as determined by the Board of Directors. Employer contributions vest over 3 to 7 years. The Company has elected to match employee contributions to the Plan on a 50% basis but not to exceed 3% of the employee's annual compensation. During fiscal years 1995, 1994 and 1993, the Company contributed $921, $891 and $813, respectively. The Plan provides for the Company to bear the expense of the administration of the Plan. Pension expense on the foreign plans is not significant. 14. STOCK OPTION PLANS In August 1994, the Company adopted a stock option plan (the "Plan") pursuant to which non-qualified stock options (the "Options") to purchase an aggregate of 1.08225 shares of Common Stock were granted to the four non-employee Directors of the Company at an exercise price which was determined by reference to the fair market value of the Company's equity at the time such Directors joined the Board of Directors. The Options will be fully vested by October 1, 1996 and have a term which expires on August 4, 2004. In August 1994, the Company adopted a stock option plan ( the "Management Plan") for its key employees which provides for the grant of "incentive stock options," within the meaning of Section 422A of the Internal Revenue Code, and non-qualified options. The maximum aggregate number of shares of Common Stock that may be issued under the Management Plan is approximately 4.25 shares. As of September 30, 1995 options to purchase an aggregate of approximately 2.7 shares of Common Stock had been granted. 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 Dated: December 7, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on the behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Leonard Chill Leonard Chill President and Director Dated: December 7, 1995 By:/s/ Jon P. Beckman Jon P. Beckman Vice President - Finance, Treasurer, Dated: December 7, 1995 Secretary and Director (Chief Financial Officer, Principal Accounting Officer) By: /s/ Joseph F. Dana Joseph F. Dana Director Dated: December 7, 1995 By: /s/ Lee J. Siedler Lee J. Seidler Director Dated: December 7, 1995 By:/s/ William J. Shortt William J. Shortt Director Dated: December 7, 1995 By:/s/ Robert L. Voigt Robert L. Voigt Director Dated: December 7, 1995 _______________________________ 1 The Company believes that earnings before interest, taxes, depreciation and amortization ("EBITDA") is helpful in understanding cash flow from operations that is available for debt service, taxes and capital expenditures. EBITDA is not a concept contained in Generally Accepted Accounting Principles and is not a substitute for operating income, net income or cash flows from operating activities. 2 This amount consists of $5,424 of insurance premiums paid by the Company under a term life insurance policy; $1,813 pertaining to an auto allowance; and $4,620 contributed by the Company under the Retirement Plan. See "Retirement Plan". 3 This amount consists of $2,928 of insurance premiums paid by the Company under a term life insurance policy; $3,245 pertaining to an auto allowance; and $4,138 contributed by the Company under the Retirement Plan. See "Retirement Plan". 4 This amount consists of $4,482 contributed by the Company under the Retirement Plan and $2,994 pertaining to an auto allowance. See "Retirement Plan". 5 This amount consists of $4,005 contributed by the Company under the Retirement Plan and $542 pertaining to an auto allowance. See "Retirement Plan". 6 This amount consists of $3,329 contributed by the Company under the Retirement Plan and $285 pertaining to an auto allowance. See "Retirement Plan". EX-99 2 ATBB\bkboston\syntheti\4A&R\4A&Rloan.exe 12/05/95 11:42AM [Execution Draft] FOURTH AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT Dated as of October 20, 1995 Among SYNTHETIC INDUSTRIES, INC. as the Borrower and THE FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME as the Lenders and THE FIRST NATIONAL BANK OF BOSTON as the Agent TABLE OF CONTENTS* Page ARTICLE 1 - DEFINITIONS -2- SECTION 1.1. Definitions -2- SECTION 1.2. General -30- ARTICLE 2 - REVOLVING CREDIT FACILITY -32- SECTION 2.1. Revolving Credit Loan -32- SECTION 2.2. Manner of Borrowing -32- SECTION 2.3. Repayment of Advances -34- SECTION 2.4. Revolving Credit Note -35- ARTICLE 2A - TERM LOAN FACILITY -36- SECTION 2A.1. Term Loan -36- SECTION 2A.2. Manner of Borrowing Term Loan -36- SECTION 2A.3. Repayment of Term Loans -36- SECTION 2A.4. Term Note -37- ARTICLE 2B - LETTER OF CREDIT FACILITY -38- SECTION 2B.1. Letters of Credit -38- SECTION 2B.2. Payments under Letters of Credit -38- SECTION 2B.3. Letter of Credit Expiration Date -38- SECTION 2B.4. Letter of Credit Fees -39- ARTICLE 2C - INTEREST RATE PROTECTION AGREEMENTS -40- SECTION 2C.1. Interest Rate Protection Agreement -40- SECTION 2C.2. Conditions to Transactions -40- ARTICLE 3 - GENERAL LOAN PROVISIONS -41- SECTION 3.1. Interest -41- SECTION 3.2. Agent's Fee and Arrangement Fee -43- SECTION 3.3. Intentionally Omitted -43- SECTION 3.4. Commitment Fee -43- SECTION 3.5. Computation of Fees, Etc. -43- SECTION 3.6. Voluntary Reductions of Facility. -43- SECTION 3.7. Conversion or Continuation of Advances -43- SECTION 3.8. Duration of Interest Periods; Number of Borrowings -45- SECTION 3.9. Voluntary Prepayments; Termination of Agreement -45- SECTION 3.10. Changed Circumstances -47- SECTION 3.10A Replacement of Lender -50- SECTION 3.11. Payments Not at End of Interest Period; Failure to Borrow -51- SECTION 3.12. Manner of Payment -52- SECTION 3.13. Pro Rata Treatment; Settlement between Agent and Lenders -52- SECTION 3.14. Loan Account -53- ARTICLE 4 - CONDITIONS PRECEDENT -55- SECTION 4.1. Conditions Precedent to Effectiveness -55- SECTION 4.2. Subsequent Borrowings -58- ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER -59- SECTION 5.1. Representations and Warranties -59- SECTION 5.2. Survival of Representations and Warranties, Etc. -66- ARTICLE 6 - SECURITY INTEREST -68- SECTION 6.1. Security Interest -68- SECTION 6.2. Continued Priority of Security Interest -69- ARTICLE 7 - COLLATERAL COVENANTS -71- SECTION 7.1. Collection of Receivables -71- SECTION 7.2. Verification and Notification -72- SECTION 7.3. Disputes, Returns and Adjustments -72- SECTION 7.4. Invoices -72- SECTION 7.5. Delivery of Instruments -73- SECTION 7.6. Sales of Inventory -73- SECTION 7.7. Work in Process -73- SECTION 7.8. Ownership and Defense of Title -73- SECTION 7.9. Insurance -74- SECTION 7.10. Location of Offices and Collateral -75- SECTION 7.11. Records Relating to Collateral -75- SECTION 7.12. Inspection -75- SECTION 7.13. Maintenance of Equipment -76- SECTION 7.14. Information and Reports -76- SECTION 7.15. Power of Attorney -77- SECTION 7.16. Leaseholds -77- SECTION 7.17. Motor Vehicle Title Certificates -78- SECTION 7.18. Title Insurance -78- ARTICLE 8 - AFFIRMATIVE COVENANTS -79- SECTION 8.1. Preservation of Legal Existence and Similar Matters -79- SECTION 8.2. Compliance with Applicable Law -79- SECTION 8.3. Maintenance of Property -79- SECTION 8.4. Conduct of Business -79- SECTION 8.5. Insurance -79- SECTION 8.6. Payment of Taxes and Claims -80- SECTION 8.7. Accounting Methods and Financial Records -80- SECTION 8.8. Visits and Inspections -80- SECTION 8.9. Use of Proceeds -81- SECTION 8.10. Hazardous Waste and Substances; Environmental Requirements -81- SECTION 8.11. Loans to Foreign Subsidiaries -82- ARTICLE 9 - INFORMATION -83- SECTION 9.1. Financial Statements -83- SECTION 9.2. Accountants' Certificate -84- SECTION 9.3. Officer Certificate -84- SECTION 9.4. Copies of Other Reports -85- SECTION 9.5. Notice of Litigation and Other Matters -86- SECTION 9.6. ERISA -86- SECTION 9.7. Accuracy of Information -87- SECTION 9.8. Revisions or Updates to Schedules -87- ARTICLE 10 - NEGATIVE COVENANTS -88- SECTION 10.1. Financial Ratios -88- SECTION 10.2. Indebtedness for Money Borrowed -89- SECTION 10.3. Guaranties -90- SECTION 10.4. Investments -90- SECTION 10.5. Capital Expenditures -90- SECTION 10.6. Restricted Payments and Purchases, Etc. -91- SECTION 10.7. Merger, Consolidation and Sale of Assets -91- SECTION 10.8. Transactions with Affiliates -91- SECTION 10.9. Liens -91- SECTION 10.10. Capitalized Lease Obligations -91- SECTION 10.11. Operating Leases -91- SECTION 10.12. Plans -91- SECTION 10.13. Sales and Leasebacks -92- SECTION 10.14. Prepayments of Indebtedness for Money Borrowed -92- SECTION 10.15. Change in Business -92- SECTION 10.16. Issuance of Stock by Subsidiaries -92- SECTION 10.17. No Amendment. -92- ARTICLE 11 - DEFAULT -93- SECTION 11.1. Events of Default -93- SECTION 11.2. Remedies -97- SECTION 11.3. Control by Majority Lenders -100- SECTION 11.4. Application of Proceeds -100- SECTION 11.5. Power of Attorney -101- SECTION 11.6. Miscellaneous Provisions Concerning Remedies -102- ARTICLE 12 - AGENT -104- SECTION 12.1. Grant of Authority -104- SECTION 12.2. Action on Instructions -104- SECTION 12.3. Responsibility of the Agent -104- SECTION 12.4. Representations by the Lenders -105- SECTION 12.5. Expenses and Indemnification -105- SECTION 12.6. Rights of Agent -106- SECTION 12.7. Right to Resign -106- SECTION 12.8. Reliance by Borrower -106- ARTICLE 13 - MISCELLANEOUS -107- SECTION 13.1. Notices -107- SECTION 13.2. Expenses -108- SECTION 13.3. Stamp and Other Taxes -108- SECTION 13.4. Setoff -108- SECTION 13.5. Pro-Rata Participation -109- SECTION 13.6. Litigation -110- SECTION 13.7. Consent to Advertising and Publicity -111- SECTION 13.8. Reversal of Payments -111- SECTION 13.9. Injunctive Relief -111- SECTION 13.10. Accounting Matters -111- SECTION 13.11. Participations; Assignments -112- SECTION 13.12. Amendments -115- SECTION 13.13. Performance of Borrower's Duties -115- SECTION 13.14. Indemnification -116- SECTION 13.15. All Powers Coupled with Interest -116- SECTION 13.16. Survival -116- SECTION 13.17. Titles and Captions -117- SECTION 13.18. Severability of Provisions -117- SECTION 13.19. Governing Law -117- SECTION 13.20. Counterparts -117- SECTION 13.21. Reproduction of Documents -117- SECTION 13.22. Term of Agreement -118- SECTION 13.23. Effect of Effectiveness of Agreement -118- ARTICLE 14 - GUARANTY OF FOREIGN FACILITY DEBT -119- SECTION 14.1. Guaranty -119- SECTION 14.2. Payment by Borrower -119- SECTION 14.3. Waiver -119- SECTION 14.4. Absolute Obligation -120- SECTION 14.5. Payments Free and Clear of Taxes, Etc. -121- SECTION 14.6. Currency Changes -121- SECTION 14.7. Recovery of Payments -122- SECTION 14.8. Subrogation -122- SECTION 14.9. Consent to Amendments, Etc. -123- SECTION 14.10. Binding Nature of Certain Adjudications -123- SECTION 14.11. Validity and Enforceability of Guaranty -124- EXHIBITS AND SCHEDULES Exhibit A Form of Fourth Amended and Restated Revolving Credit Note Exhibit B Form of Term Note Exhibit C-1 Form of Opinion of Counsel for Borrower (Watson & Dana) Exhibit C-2 Form of Opinion of Counsel for Borrower (Gordon Altman Butowsky Weitzen Shalov & Wein) Exhibit C-3 Form of Opinion of Tennessee Counsel for Borrower (Miller & Martin) Exhibit D Financial Certificate Exhibit E Form of Borrowing Base Certificate Exhibit F Form of Notice of Borrowing Exhibit G Form of Notice of Conversion or Continuation Exhibit H Form of Assignment and Acceptance Schedule 1.1 Mortgages Permitted Liens Foreign Facilities Schedule 5.1(a) Jurisdictions in which Qualified Schedule 5.1(b) Subsidiaries Schedule 5.1(d) Conflicts Schedule 5.1(f) Governmental Approvals Schedule 5.1(g) Title Exceptions Schedule 5.1(h) Liens Schedule 5.1(i) Indebtedness for Money Borrowed and Guarantees Schedule 5.1(j) Litigation Schedule 5.1(k) Patents and Trademarks Schedule 5.1(l) Tax Returns, etc. Schedule 5.1(m) Burdensome Provisions Schedule 5.1(p) Plans Schedule 5.1(t) Principal Office and Location of Books and Records Schedule 5.1(u) Location of Inventory Schedule 5.1(v) Location of Equipment Schedule 5.1(w) Real Property Schedule 5.1(x) Corporate and Fictitious Names Schedule 8.9 Use of Proceeds FOURTH AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT Dated as of October 20, 1995 SYNTHETIC INDUSTRIES, INC., a Delaware corporation, as the Borrower, hereby agrees with the financial institutions party to this Agreement from time to time as the Lenders and THE FIRST NATIONAL BANK OF BOSTON, a national banking association, as agent for the Lenders, as follows: PRELIMINARY STATEMENT The Borrower, as borrower, The First National Bank of Boston ("Bank of Boston"), Sanwa Business Credit Corporation, and SouthTrust Bank of Georgia, N.A. as lenders, and Bank of Boston, as agent for the lenders, are parties to a Third Amended and Restated Revolving Credit and Security Agreement dated as of January 13, 1995, as amended by Amendment No. 1 dated as of May 26, 1995 (said Agreement, as so amended, the "Existing Credit Agreement"). As of the date of this Agreement, the aggregate outstanding principal balance of the Revolving Credit Loans, under and as defined in the Existing Credit Agreement, is approximately $19,887,944.44, the aggregate principal balance of the Term Loan outstanding under (and as defined in) the Existing Credit Agreement, is approximately $25,500,000, the aggregate outstanding principal amount of Foreign Facility Debt as defined in the Existing Credit Agreement is approximately $112,000, and the aggregate face amount of outstanding Letters of Credit as defined in the Existing Credit Agreement is $1,100,000. The Borrower has requested certain modifications to the terms of the Existing Credit Agreement, and the Lenders have agreed to such requested modifications, all upon and subject to the terms, provisions and conditions hereinafter set forth. The Borrower, the Lenders and the Agent have further agreed, in connection with making such modifications to the Existing Credit Agreement and for the convenience of the parties and others, to amend and restate, in its entirety, the Existing Credit Agreement, including all such agreed modifications thereto. NOW, THEREFORE, in consideration of the foregoing, the modifications to the Existing Credit Agreement and the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree that the Existing Credit Agreement is hereby amended and restated in its entirety, subject to the applicable conditions set forth in ARTICLE 4, as follows: ARTICLE 1 - DEFINITIONS SECTION 1.1. Definitions. For the purposes of this Agreement: "Account Debtor" means a Person who is obligated on a Receivable. "Acquire" or "Acquisition", as applied to any Business Unit or Investment, means the acquiring or acquisition of such Business Unit or Investment by purchase, exchange, issuance of stock or other securities, or by merger, reorganization or any other method. "Advance" means an advance by a Lender to the Borrower pursuant to ARTICLE 2 or ARTICLE 2A and refers to a Base Rate Advance or a Eurodollar Advance. "Affiliate" means, with respect to a Person, any other Person (other than a Subsidiary) that, (a) directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such given Person, (b) directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting stock or partnership or other interest of such Person or any Subsidiary of such Person, or (c) ten percent (10%) or more of the voting stock or partnership or other interest of which is directly or indirectly beneficially owned or held by such Person or a Subsidiary of such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, partnership or other interests by contract or otherwise. SI Management, Synthetic Management and Synthetic L.P. each shall be deemed to be an Affiliate of the Borrower. "Agency Account" means an account of the Borrower maintained by it with a Clearing Bank pursuant to an Agency Account Agreement. "Agency Account Agreement" means an agreement among the Borrower, the Agent on behalf of the Lenders and a Clearing Bank concerning the collection of payments which represents the proceeds of Receivables or of any other Collateral. "Agent" means Bank of Boston and any successor Agent appointed pursuant to SECTION 12.7. "Agent's Office" means the office of the Agent designated as such from time to time as provided in SECTION 13.1(C). "Agreement" means and includes the Existing Credit Agreement as amended and restated by this Fourth Amended and Restated Revolving Credit and Security Agreement, including all Schedules, Exhibits and other attachments hereto, and all amendments, modifications and supplements thereto and hereto. "Agreement Date" means the date as of which this Agreement is dated. "Applicable Law" means all applicable provisions of constitutions, statutes, rules, regulations and orders of all governmental bodies and of all orders and decrees of all courts and arbitrators, including, without limitation, of all Environmental Laws. "Applicable Margin" means (a) as to the Base Rate, 0.75% as to each Base Rate Advance made as part of a Borrowing under the Revolving Credit Facility and 1% as to each Base Rate Advance made as part of a Borrowing under the Term Loan Facility, and (b) as to the Eurodollar Rate, 2.50% as to each Eurodollar Advance made as part of a Borrowing under the Revolving Credit Facility and 2.75% as to each Eurodollar Advance made as part of a Borrowing under the Term Loan Facility. "Assignment and Acceptance" means an assignment and acceptance in the form attached hereto as EXHIBIT H assigning all or a portion of a Lender's interests, rights and obligations under this Agreement pursuant to SECTION 13.11. "Authorized Officer" means those officers of the Borrower authorized to execute and deliver Loan Documents and to request Borrowings and identified in the certificate described in SECTION 4.1(A)(III) or from time to time thereafter pursuant to authorizations in form and substance satisfactory to the Agent. "Bank of Boston" means The First National Bank of Boston, Boston, Massachusetts, and its successors and assigns. "Base Rate" means at any time the greater of (i) the rate of interest announced from time to time by Bank of Boston at its head office at 100 Federal Street, Boston, Massachusetts 02110, as its "base rate" at such time (or the comparable rate of any successor Agent acting as such at such time) and (ii) 1/2 of 1% per annum over the Federal Funds Effective Rate at such time (rounded upwards, if necessary, to the next higher 1/8 of 1%). "Base Rate Advance" means an Advance bearing interest determined with reference to the Base Rate. "Basket Debt" means outstanding "Indebtedness" (as defined in the Indenture) of the Borrower (other than the Loans) that is "Permitted Indebtedness" (as defined in the Indenture) solely by reason of the provisions of clause (x) of the Indenture definition "Permitted Indebtedness." "Borrower" means Synthetic Industries, Inc., a Delaware corporation, and its successors and assigns. "Borrowing" means all Advances of the same Type made by the Lenders, or converted or continued by the Borrower (or otherwise in accordance with the provisions of SECTION 3.7) on the same date for the same Interest Period (if applicable). "Borrowing Base" means, at any time, an amount equal to the lesser of (a) the Revolving Credit Facility in effect at such time MINUS the Letter of Credit Reserve MINUS the Foreign Facility Reserve MINUS any Basket Debt MINUS the Interest Rate Protection Reserve, and (b) the sum of (i) 85% (or such lesser percentage as the Majority Lenders in their sole discretion determine from time to time) of the face value of Eligible Receivables due and owing at such time, PLUS (ii) the lesser of (A) $20,000,000, and (B) 50% (or such lesser percentage as the Majority Lenders in their sole discretion determine from time to time) of the lesser of cost (on a full absorption basis), determined on a first-in- first-out or FIFO accounting basis, and fair market value of Eligible Inventory at such time, MINUS (iii) the Letter of Credit Reserve MINUS (iv) the Foreign Facility Reserve MINUS (v) any Basket Debt MINUS (vi) the Interest Rate Protection Reserve. "Borrowing Base Certificate" means a certificate in the form attached hereto as EXHIBIT E. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Boston, Massachusetts, New York, New York or Atlanta, Georgia are authorized to close, and, with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Advances, any day that is also a day for trading by and between banks in Dollar deposits in the interbank Eurodollar market. "Business Unit" means the assets constituting the business or a division or operating unit thereof of any Person. "Capital Expenditures" means, with respect to any Person, all expenditures made or liabilities incurred for the acquisition of assets (other than an Acquisition of assets which constitute a Business Unit or the purchase of Inventory) which are not, in accordance with GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years. "Capitalized Lease Obligation" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Chief Financial Officer" means the Chief Financial Officer of the Borrower, who currently is Jon P. Beckman. "Clearing Bank" means a banking institution with which an Agency Account has been established pursuant to an Agency Account Agreement. "Collateral" means and includes all of the Borrower's right, title and interest in and to each of the following, wherever located and whether now or hereafter existing or now owned or hereafter acquired or arising: (a) all Receivables, (b) all Inventory, (c) all Equipment, (d) all Foreign Subsidiary Stock, (e) all Foreign Subsidiary Debt, (f) all General Intangibles, (g) all Patent Collateral, (h) all Trademark Collateral, (i) all goods and other property, whether or not delivered, (i) the sale or lease of which gives or purports to give rise to any Receivable, including, but not limited to, all merchandise returned or rejected by or repossessed from customers, or (ii) securing any Receivable, including, without limitation, all rights as an unpaid vendor or lienor (including, without limitation, stoppage in transit, replevin and reclamation) with respect to such goods and other properties, (j) All mortgages, deeds to secure debt and deeds of trust on real or personal property, guaranties, leases, security agreements, and other agreements and property which secure or relate to any Receivable, or other Collateral, or are acquired for the purpose of securing and enforcing any item thereof, (k) all documents of title, including bills of lading and warehouse receipts, policies and certificates of insurance, securities, chattel paper, and any other documents and instruments, (l) all files, correspondence, computer programs, tapes, discs and related data processing software which contain information identifying or pertaining to any of the Collateral, including, without being limited to, any Receivables or any Account Debtor, or showing the amounts thereof or payments thereon or otherwise necessary or helpful in the realization thereon or the collection thereof, (m) all cash or property deposited with a Lender or any Affiliate of a Lender or in any Agency Account or which a Lender or such Affiliate is entitled to retain or otherwise possess as Collateral pursuant to the provisions of this Agreement, any of the Security Documents, any agreement relating to any Letters of Credit or any Interest Rate Protection Agreement or foreign exchange arrangement or agreement, (n) any demand, time, savings, passbook, money market or like depository account, and all certificates of deposit, maintained with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a certificate of deposit that is an instrument under the UCC, (o) all general intangibles, including, without limitation, all tax refunds, trademarks, trade names, patents, patent applications, trade secrets and proprietary information, and (p) any and all products and cash and non-cash proceeds of the foregoing (including, but not limited to, any claims to any items referred to in this definition, and any claims against third parties for loss of, damage to or destruction of any or all of the Collateral or for proceeds payable under or unearned premiums with respect to policies of insurance) in whatever form, including, but not limited to, cash, negotiable instruments and other instruments for the payment of money, chattel paper, security agreements and other documents. "Commitment" means, as to each Lender, the amount set forth opposite such Lender's name on ANNEX A hereto under the caption "Commitment," as such amount may be reduced pursuant to SECTION 3.6 or otherwise modified as reflected in the Register (as defined in SECTION 13.11(D) below). "Commitment Percentage" of any Lender means the percentage set forth opposite the name of such Lender on ANNEX A hereto. "Consolidated" or "Consolidation" means the consolidation in accordance with GAAP of the accounts or items as to which such term applies. "Consolidated Subsidiaries" means the Foreign Subsidiaries and such other Subsidiaries whose Consolidation with the Borrower is consented to from time to time in writing by the Majority Lenders. "Controlled Disbursement Account" means the account maintained by and in the name of the Borrower with the Disbursing Bank for the purposes of disbursing Revolving Credit Loan proceeds and amounts deposited thereto pursuant to SECTION 7.1(B). "Default" means any of the events specified in SECTION 11.1 which with the passage of time or giving of notice or both would constitute an Event of Default. "Designated Deposit Account" means a deposit account to be maintained by the Borrower with the Agent at the Agent's Office, as from time to time designated by the Borrower by written notification to the Agent. "Disbursing Bank" means any United States commercial bank with which a Controlled Disbursement Account is maintained. "Dollar" and "$" means freely transferrable United States dollars. "Dollar Equivalent" of the principal or face amount of any Foreign Facility Debt means, at any time, the amount in Dollars for which such principal or face amount could be exchanged as determined by the spot rate quoted by the principal office of the Agent's Affiliate in London at 11:00 A.M. (London time) two Business Days prior to the date on which such equivalent is to be determined. "EBITDA" means, for any period, Consolidated Net Income of the Borrower and its Consolidated Subsidiaries for such period, PLUS any amount in respect of federal or state income taxes, interest expense, depreciation expense or amortization expense in connection with intangible assets, and MINUS any amount in respect of federal or state income tax refunds or interest income, in each case of the Borrower and its Consolidated Subsidiaries for the same period, to the extent deducted or included, as the case may be, in computing such Consolidated Net Income. "Effective Date" means the later of: (a) the Agreement Date, and (b) the date on which the applicable conditions set forth in ARTICLE 4 shall first have been fulfilled. "Effective Interest Rate" means the rate of interest per annum on the Loans in effect from time to time pursuant to the provisions of SECTIONS 3.1(A), (B), (C) AND (D). "Eligible Assignee" means (i) a commercial bank organized under the laws of the United States, or any State thereof, having total assets in excess of $3,000,000,000 or any commercial finance or asset-based lending affiliate of any such commercial bank, having total assets in excess of $3,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, having a net worth of at least $250,000,000 calculated in accordance with GAAP; (iii) any Person, having a net worth of at least $250,000,000 calculated in accordance with GAAP, whose primary business is asset-based lending; and (iv) any Lender listed on the signature page of this Agreement; PROVIDED in each case that the representation contained in SECTION 12.4 hereof shall be applicable with respect to such institution or Lender. "Eligible Inventory" means Inventory which the Majority Lenders in their sole discretion determine to meet all of the following requirements: (a) such Inventory is owned by the Borrower, is subject to the Security Interest, which is perfected as to such Inventory, and is subject to no other Lien whatsoever other than a Permitted Lien, (b) such Inventory consists of either raw materials or finished goods (but does not include supplies and packaging used or consumed in packaging, packing, shipping, advertising, selling or leasing such raw materials or finished goods), (c) such Inventory is in good condition and meets, in all material respects, all standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale, (d) such Inventory is currently either usable or salable, at prices approximating at least cost, in the normal course of the Borrower's business, (e) such Inventory is located at one of the locations set forth in the most recent Schedule of Inventory and, if such location is premises leased by the Borrower, the landlord at such location has agreed in writing, in form and substance satisfactory to the Agent, to waive any lien such landlord may have on the Inventory, (f) such Inventory does not exceed six months' sales determined on the basis of average monthly sales for the 12 months immediately preceding the date of determination and does not include any item of a product line or type of Inventory of which no sales have been made during the 180 days immediately preceding the date of determination, (g) such Inventory is not Inventory of the Borrower's Lumite Division, and (h) such Inventory is not determined by the Majority Lenders to be ineligible based on customary credit and collateral criteria utilized by asset based lenders. "Eligible Receivable" means a Receivable which the Majority Lenders in their sole discretion determine to meet all of the following requirements: (a) such Receivable is owned by the Borrower and represents a complete bona fide transaction which requires no further act under any circumstances on the part of the Borrower to make such Receivable payable by the Account Debtor, (b) such Receivable is not past due more than 60 days from the due date of the original invoice, (c) the goods the sale of which gave rise to such Receivable were shipped or delivered to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding and no material part of such goods has been returned or rejected, (d) such Receivable is not evidenced by chattel paper or an instrument of any kind unless such chattel paper or instrument has been delivered to and is in the possession of the Agent, (e) the Account Debtor with respect to such Receivable is not insolvent or the subject of any bankruptcy or insolvency proceedings of any kind or of any other proceeding or action, threatened or pending, which might have a Materially Adverse Effect on such Account Debtor, (f) such Receivable is not owing by an Account Debtor having 50% or more in face value of its then-existing Receivables owing to the Borrower past due more than 60 days from the due date of the original invoice, (g) such Receivable is not owing by an Account Debtor (other than Shaw Industries, Inc.) whose then-existing Receivables owing to the Borrower exceed in face amount 15% of the Borrower's total Eligible Receivables or 35% of the Borrower's total Eligible Receivables if the Account Debtor thereon is Shaw Industries, Inc. (PROVIDED that in each case only such excess shall be excluded from Eligible Receivables pursuant to this CLAUSE (G)), (h) if such Receivable arises from the performance of services, such services have been fully rendered, (i) such Receivable is a valid, legally enforceable obligation of the Account Debtor with respect thereto and is not subject to any present, or contingent, and no facts exist which are the basis for any future, offset, deduction or counterclaim, dispute or other defense on the part of such Account Debtor, (j) such Receivable is subject to the Security Interest, which is perfected as to such Receivable, and is subject to no other Lien whatsoever other than a Permitted Lien, (k) such Receivable is evidenced by an invoice or other documentation in form acceptable to the Majority Lenders in their reasonable judgment, (l) such Receivable does not arise out of any transaction with any Subsidiary or Affiliate of the Borrower, (m) such Receivable is not subject to the Assignment of Claims Act of 1940, as amended from time to time, or any Applicable Law now or hereafter existing similar in effect thereto, or to any provision prohibiting its assignment or requiring notice of or consent to such assignment, unless all such required notices have been given, all such required consents have been received and all other procedures have been complied with such that such Receivable shall have been duly and validly assigned to the Agent on behalf of the Lenders pursuant to ARTICLE 6, (n) the goods giving rise to such Receivable were not, at the time of the sale thereof, subject to any Lien except the Security Interest and Permitted Liens, (o) if the Account Debtor with respect to such Receivable is not located in Canada or the United States of America, the face value of such Receivable when added to the aggregate face value of all other Receivables the Account Debtors in respect of which are not located in Canada or the United States of America, does not exceed 15% of the Borrower's total Eligible Receivables, and (p) neither the Account Debtor with respect to such Receivable, nor such Receivable, is determined by the Majority Lenders to be ineligible based on customary credit and collateral criteria utilized by asset based lenders. "Environmental Laws" means all federal, state, local and foreign laws now or hereafter in effect relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, without limitation, ambient air, surface water, ground water, or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes, and any and all regula tions, codes, plans, orders, decrees, judgments, injunctions, notices or demand letters issued, entered, promulgated or approved thereunder. "Equipment" means and includes, all machinery, apparatus, equipment, fittings, fixtures and other tangible personal property (other than Inventory) of every kind and description used in a Person's business operations or owned by a Person or in which a Person has an interest, and all parts, accessories and special tools and all increases and accessions thereto and substitutions and replacements therefor and shall include, without limitation, all property that would be included in the term "equipment" or "fixture" as defined in the UCC. "ERISA" means the Employee Retirement Income Security Act of 1974, as in effect from time to time. "Eurocurrency Liability" has the meaning specified in Regulation D (or any successor regulation) of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurodollar Advance" means an Advance bearing interest at a rate determined with reference to the Eurodollar Rate. "Eurodollar Rate" means for the Interest Period for each Eurodollar Advance made as part of the same Borrowing, a rate of interest determined by Bank of Boston to be the prevailing rate per annum at which deposits in Dollars are offered to Bank of Boston by first-class banks in the interbank Eurodollar market in which it regularly participates on or about 10:00 a.m. (Boston time) two Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of such Borrowing for a period approximately equal to such Interest Period. "Eurodollar Reserve Percentage" applicable to any Interest Period as to each Lender, means the rate (expressed as a decimal) applicable to such Lender during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the reserve requirement (including, without limitation, any basic, supplemental, emergency or marginal reserve requirement) of such Lender with respect to Eurocurrency Liabilities. "Event of Default" means any of the events specified in SECTION 11.1, provided that any requirement for notice or lapse of time or any other condition has been satisfied. "Existing Guaranties" means the Guaranties outstanding on the Agreement Date to the extent set forth on SCHEDULE 5.1(I). "Existing Indebtedness" means Indebtedness issued and outstanding on the Agreement Date to the extent set forth on SCHEDULE 5.1(I) and any renewals, extensions or refundings thereof, but not any increases in principal amounts thereof outstanding on the date of such renewal, extension or refunding. "Existing Liens" means the Liens outstanding on the Agreement Date to the extent set forth on SCHEDULE 5.1(H). "Federal Funds Effective Rate" means for any day, the 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 that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent. "Financing Statements" means any and all Uniform Commercial Code financing statements executed and delivered by the Borrower to the Agent, naming the Agent on behalf of the Lenders as secured party and the Borrower as debtor, in connection with this Agreement and the Mortgages. "Foreign Facilities" means any and all loan facilities, guarantees, letters of credit or other financial accommodations, listed on SCHEDULE 1.1 - FOREIGN FACILITIES or made at any time and from time to time on or after the Effective Date, in each case made by any of the Lenders or any Affiliate of a Lender directly to or for the benefit of any of the Foreign Subsidiaries. "Foreign Facility Agreements" means any and all notes, letters of credit, guarantees, instruments, agreements and other documents given as evidence of, as security for or in extension or renewal of, or otherwise executed in connection with, the Foreign Facilities. "Foreign Facility Debt" means the aggregate amount determined from time to time to be the Dollar Equivalent of the Indebtedness outstanding from time to time under the Foreign Facilities. "Foreign Facility Reserve" means, on any date, the aggregate amount of all Foreign Facility Debt outstanding and unpaid on the last day of the calendar month next preceding the date of determination. "Foreign Subsidiaries" means, collectively, SIE and Fibermesh GmbH. "Foreign Subsidiary Debt" means all Indebtedness at any time and from time to time of each of the Foreign Subsidiaries to the Borrower and all instruments, documents and agreements evidencing, securing or otherwise relating thereto. "Foreign Subsidiary Stock" means all of the issued and outstanding capital stock of SIE. "GAAP" means generally accepted accounting principles consistently applied and maintained throughout the period indicated and, when used with reference to the Borrower or its Consolidated Subsidiaries, consistent with the prior financial practice of the Borrower; PROVIDED, HOWEVER, that, in the event that changes shall be mandated by the Financial Accounting Standards Board or any similar accounting authority of comparable standing, or shall be recommended by Borrower's certified public accountants, such changes shall be included in GAAP only from and after such date as the Borrower and the Majority Lenders shall have amended this Agreement to the extent necessary to reflect any such changes in the financial covenants set forth in ARTICLE 10. "General Intangibles" means any and all of the Borrower's rights under contracts not yet earned by performance and not evidenced by an instrument or chattel paper and all of the Borrower's now owned or hereafter acquired general intangibles, choses in action and causes of action and all other intangible personal property of the Borrower of every kind and nature (other than Receivables), including, without limitation, all Patent Collateral, Trademark Collateral, corporate or other business records, inventions, designs, blueprints, plans, specifications, trade secrets, goodwill, computer software, customer lists, registrations, licenses, franchises, tax refund claims, reversions or any rights thereto and any other amounts payable to the Borrower from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, property, casualty or any similar type of insurance and any proceeds thereof, proceeds of insurance covering the lives of key employees on which the Borrower is beneficiary and any letter of credit, guarantee, claim, security interest or other security held by or granted to the Borrower to secure payment by an Account Debtor of any of the Receivables. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all governmental bodies, whether federal, state, foreign, national, provincial or local, and all agencies thereof. "Guaranteed Foreign Facility Obligations" means any and all obligations Guaranteed by the Borrower pursuant to ARTICLE 14 hereof. "Guaranty", "Guaranteed" or to "Guarantee" as applied to any obligation of another Person shall mean and include (a) a guaranty (other than by endorsement of negotiable instruments for collection in the ordinary course of business), directly or indirectly, in any manner, of any part or all of such obligation of such other Person, and (b) an agreement, direct or indirect, contingent or otherwise, and whether or not constituting a guaranty, the practical effect of which is to assure the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation of such other Person whether by (i) the purchase of securities or obligations, (ii) the purchase, sale or lease (as lessee or lessor) of property or the purchase or sale of services primarily for the purpose of enabling the obligor with respect to such obligation to make any payment or performance (or payment of damages in the event of nonperformance) of or on account of any part or all of such obligation, or to assure the owner of such obligation against loss, (iii) the supplying of funds to or in any other manner investing in the obligor with respect to such obligation, (iv) repayment of amounts drawn down by beneficiaries of letters of credit, or (v) the supplying of funds to or investing in a Person on account of all or any part of such Person's obligation under a Guaranty of any obligation or indemnifying or holding harmless, in any way, such Person against any part or all of such obligation. "Indebtedness" as applied to a Person means, without duplication, (a) all items (except items of capital stock, additional paid-in capital or retained earnings, or of general contingency) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is to be determined, (b) all obligations for money borrowed or for the deferred purchase price of property or services, (c) all obligations (including, during the noncancellable term of any lease in the nature of a title retention agreement, all future payment obligations under such lease discounted to their present value in accordance with GAAP) secured by any Lien to which any property or asset owned or held by such Person is subject, whether or not the obligation secured thereby shall have been assumed or is non-recourse, (d) all obligations of other Persons which such Person has Guaranteed, including, but not limited to, all obligations of such Person consisting of recourse liability with respect to accounts receivable sold or otherwise disposed of by such Person, (e) in the case of the Borrower (without duplication) all obligations under the Loans and the Senior Subordinated Debt, and (f) all obligations (including contingent obligations) of such Person in respect of Interest Rate Protection Agreements. "Indenture" means the Indenture dated as of December 14, 1992, between the Borrower and United States Trust Company of New York, Trustee, as supplemented by a Supplemental Indenture dated as of October 20, 1995, pursuant to which the Senior Subordinated Debentures are issued, as the same may be amended, modified or supplemented from time to time as permitted hereby. "Initial General Partners" means, collectively, Chill Investments, Inc., a Delaware corporation, Beckman Investments, Inc., a Delaware corporation, Wright Investments, Inc., a Delaware corporation, Kenner Investments, Inc., a Delaware corporation and Freed Investments, Inc., a Delaware corporation. "Installment Payment Date" means the first day of each calendar month commencing November 1, 1998. "Interest Payment Date" means the first day of each calendar month, commencing November 1, 1995 and continuing thereafter until the Secured Obligations have been irrevocably paid in full. "Interest Period" means as to each Borrowing consisting of Eurodollar Advances, the period commencing on the date of the making or continuation of or conversion to such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing or Notice of Conversion or Continuation, provided that: (a) no Interest Period applicable to a Borrowing under the Revolving Credit Facility shall end after the Termination Date; (b) no Interest Period applicable to a Borrowing constituting part of the Term Loan shall end after the final maturity date of the Term Loan nor end after any applicable Installment Payment Date unless an aggregate principal amount of Borrowings constituting part of the Term Loan at least equal to the principal amount due on such Installment Payment Date shall consist of Base Rate Advances or of other Borrowings consisting of Eurodollar Advances having Interest Periods that end on or before such Installment Payment Date; (c) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month or such extension would conflict with clause (a) or (b) above, in which case such Interest Period shall end on the immediately preceding Business Day; (d) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of a calendar month; and (e) no Interest Period shall be available for a duration of less than one month. "Interest Rate Protection Agreement" shall mean an interest rate swap, cap or collar agreement or similar arrangement between any Person and a financial institution providing for the transfer or mitigation of interest risks either generally or under specific contingencies. "Interest Rate Protection Reserve" means, on any date, the aggregate amount of the estimated liability of the Borrower and its Subsidiaries under all Interest Rate Protection Agreements, as determined by the Agent using its customary practices and criteria. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended. "Inventory" means and includes, (a) all goods intended for sale or lease by a Person, or for display or demonstration, including, without limitation, in the case of the Borrower, all primary and secondary carpet backing, bale wrap, intermediate bulk containers, geo-textiles, yarns, concrete additives and industrial fabrics, (b) all work in process, (c) all raw materials and other materials and supplies of every nature and description used or which might be used in connection with the manufacture, packing, shipping, advertising, selling, leasing or furnishing of such goods or otherwise used or consumed in a Person's business, (d) all documents evidencing and General Intangibles relating to any of the foregoing, and (e) shall include, without limitation, all property that would be included in the term "inventory" of a Person as defined in the UCC. "Investment" means, with respect to any Person: (a) any share of capital stock, partnership interest, evidence of Indebtedness or other security issued by any other Person, (b) any loan, advance or extension of credit to, or contribution to the capital of, any other Person, (c) any Guaranty of the obligation of any other Person, (d) any other investment (other than the Acquisition of a Business Unit) in any other Person, and (e) any commitment or option to make an Investment if, in the case of an option, the consideration therefor exceeds $100. "Lender" means, at any time, any financial institution party to this Agreement as a "Lender" at such time, including any such Person becoming a party hereto pursuant to assignment from another Lender, and each of their respective successors and assigns. "Lender's Office" means the office of each Lender specified in or determined in accordance with the provisions of SECTION 13.1. "Letter of Credit" means any letter of credit outstanding on the Effective Date as a "Letter of Credit" under the Existing Credit Agreement or issued by Bank of Boston for the account of the Borrower pursuant to the provisions of ARTICLE 2B. "Letter of Credit Facility" means at any time obligations arising under Letters of Credit in the aggregate face amount of up to the lesser of (a) the excess of the Borrowing Base (before deduction of the Letter of Credit Reserve) over the sum of the principal amount of the Revolving Credit Loan outstanding at such time, and (b) $3,000,000. "Letter of Credit Reserve" means at any time an amount equal to the sum of the aggregate face amount of all Letters of Credit PLUS unsatisfied reimbursement obligations in respect of Letters of Credit, outstanding at such time. "Lien" as applied to the property of any Person means: (a) any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease constituting a Capitalized Lease Obligation, conditional sale or other title retention agreement, or other security interest, security title or encumbrance of any kind in respect of any property of such Person, or upon the income or profits therefrom, (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person, (c) any Indebtedness which is unpaid more than 60 days after the same shall have become due and payable and which if unpaid might by law (including but not limited to bankruptcy and insolvency laws), or otherwise, be given any priority whatsoever over general unsecured creditors of such Person, and (d) the filing of, or any agreement to give, any financing statement under the Uniform Commercial Code or its equivalent in any jurisdiction. "Loan" means the Revolving Credit Loan or the Term Loan, and "Loans" means more than one such Loan. "Loan Documents" means collectively this Agreement, the Notes, the Security Documents and each other instrument, agreement or document executed by the Borrower or any Affiliate or Subsidiary of the Borrower in connection with this Agreement. "Loan Party" means the Borrower and each Subsidiary and Affiliate of the Borrower that is a party to one or more of the Loan Documents. "Lockbox" means a U. S. Post Office Box specified in, or pursuant to, an Agency Account Agreement. "Majority Lenders" means Lenders whose outstanding Loans aggregate at least 66-2/3% of all outstanding Loans or, if no Loans are outstanding, Lenders whose Commitments represent at least 66-2/3% of the Commitments of all Lenders. "Materially Adverse Effect" means, with respect to any Person, a materially adverse effect upon such Person's business, assets, liabilities, condition (financial or otherwise), results of operations or business prospects. "Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness for money borrowed, (b) Indebtedness, whether or not in any such case the same was for money borrowed, (i) represented by notes payable, and drafts accepted, that represent extensions of credit, (ii) constituting obligations evidenced by bonds, debentures, notes or similar instruments, or (iii) upon which interest charges are customarily paid or that was issued or assumed as full or partial payment for property, (c) Indebtedness that constitutes a Capitalized Lease Obligation, and (d) Indebtedness that is such by virtue of CLAUSE (D) of the definition thereof, but only to the extent that the obligations Guaranteed are obligations that would constitute Indebtedness for Money Borrowed. "Mortgages" means and includes any and all of the mortgages, deeds of trust, deeds to secure debt and other instruments (including any and all assignments of any of the foregoing) executed and delivered by the Borrower to or for the benefit of the Lenders in connection with this Agreement, including, without limitation, each of such instruments listed on SCHEDULE 1.1 - MORTGAGES hereto, as the same may be modified from time to time. "Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of ERISA, as amended or revised from time to time. "Net Amount" means, with respect to any Investments made by any Person, the gross amount of all such Investments MINUS the aggregate amount of all cash received and the fair value, at the time of receipt by such Person, of all property received as payments of principal or premiums, returns of capital, liquidating dividends or distributions, proceeds of sale or other dispositions with respect to such Investments. "Net Income" means, as applied to any Person, the net income (or net loss) of such Person for the period in question after giving effect to deduction of or provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accor dance with GAAP provided that there shall be excluded: (a) any restoration of any contingency reserve, except to the extent that provision for such reserve was made out of income during such period, (b) any net gains or losses on the sale or other disposition, not in the ordinary course of business, of Investments, Business Units and other capital assets, provided that there shall also be excluded any related charges for taxes thereon, (c) any net gain arising from the collection of the proceeds of any insurance policy, (d) any write-up of any asset, and (e) any other extraordinary item. "Net Worth" means, with respect to any Person, such Person's total shareholders' equity (including capital stock, additional paid-in capital and retained earnings, after deducting treasury stock) which would appear as such on a balance sheet of such Person prepared in accordance with GAAP. "Note" means any of the Revolving Credit Notes or the Term Notes, and "Notes" means more than one such Note. "Notice of Borrowing" has the meaning specified in SECTION 2.2(A). "Notice of Conversion or Continuation" has the meaning specified in SECTION 3.7(B). "Operating Cash Flow" means, for any period of four consecutive fiscal quarters of the Borrower, EBITDA for such period, MINUS (a) the amount of any federal or state income taxes paid in cash by the Borrower and its Consolidated Subsidiaries during such period (net of any cash refunds of federal or state income taxes received during such period), MINUS (b) an amount equal to the lesser of (i) Capital Expenditures during such period and (ii)(A) for any such period ending after the Effective Date and on or before September 30, 1996, $6,000,000 and (B) for any such period ending thereafter, $10,000,000. "Operating Lease" means any lease (other than a lease constituting a Capitalized Lease Obligation) of real or personal property, having a stated term of 12 months or more, including specified renewals and extensions exercisable at the option of the Borrower. "PBGC" means the Pension Benefit Guaranty Corporation and any successor agency. "Patent Assignment" means, collectively, the Assignment for Security, dated December 2, 1986, and the Security Assignment (Patents) dated as of March 12, 1992, each made by the Borrower to the Agent, for the benefit of the Lenders, with respect to certain patents owned by the Borrower, as such documents may have been or may be amended or supplemented from time to time. "Patent Collateral" means and includes, in each case whether now existing or hereafter arising, (a) any and all patents and patent applications, together with any reissue, continuation, continuation-in-part or extension of any thereof, (b) the inventions which are the subject matter thereof, and (c) all proceeds of any of the foregoing. "Pending Borrowing" has the meaning specified in SECTION 3.10(A). "Permitted Investments" means: (a) Investments of the Borrower in: (i) negotiable certificates of deposit, time deposits and banker's acceptances issued by a Lender or an Affiliate of a Lender or by any United States bank or trust company having capital, surplus and undivided profits in excess of $100,000,000, (ii) any direct obligation of the United States of America or any agency or instrumentality thereof which has a remaining maturity at the time of purchase of not more than one year and repurchase agreements relating to the same, (iii) sales on credit and employee or similar advances in the ordinary course of business, (iv) notes, accepted in the ordinary course of business, evidencing overdue accounts payable arising in the ordinary course of business, and (v) existing Investments in Foreign Subsidiaries, and Investments in Foreign Subsidiaries arising after the Effective Date, including those in connection with the Foreign Facilities, not in excess of $100,000 in the aggregate at any time; (b) other Investments of the Borrower, the Net Amount of which does not at any time exceed $100,000; and (c) Investments of any Subsidiary of the Borrower in notes made to such Subsidiary by the Borrower or by any other Subsidiary of the Borrower. "Permitted Liens" means: (a) Liens securing taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA) or the claims of materialmen, mechanics, carriers, warehousemen or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, but (i) in all cases only if payment shall not at the time be required to be made in accordance with SECTION 8.6 and (ii) in the case of landlords, only if such liens are junior to the Security Interest in any of the Collateral, (b) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation, (c) Liens constituting encumbrances in the nature of zoning restrictions, easements, and rights or restrictions of record on the use of real property, which do not materially detract from the value of such property or impair the use thereof in the business of the Borrower, (d) Liens shown on SCHEDULE 1.1 - PERMITTED LIENS, (e) Purchase Money Liens, and (f) Liens of the Agent and the Lenders arising under this Agreement and the other Loan Documents. "Permitted Purchase Money Indebtedness" means Purchase Money Indebtedness of the Borrower incurred after the Agreement Date (a) which is secured by a Purchase Money Lien, (b) the aggregate principal amount of which does not exceed an amount equal to 80% of the lesser of (i) the cost (including the principal amount of such indebtedness, whether or not assumed) of the property subject to such Lien, and (ii) the fair value of such property at the time of its acquisition, and (iii) which, when aggregated with the principal amount of all other such Indebtedness and Capitalized Lease Obligations of the Borrower incurred after the Agreement Date does not exceed $5,000,000 For the purposes of this definition, the principal amount of any Purchase Money Indebtedness consisting of Capitalized Leases shall be computed as a Capitalized Lease Obligation. "Person" means an individual, corporation, partnership, limited liability company, association, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Plan" means an employee benefit plan maintained for employees of the Borrower that is covered by Title IV of ERISA, including such plans as may be established after the Agreement Date. "Pledge Agreement" means the Pledge Agreement, dated as of December 4, 1986, made by the Borrower in favor of the Agent for the account of the Lenders, pursuant to which the Borrower has pledged to the Agent, for the benefit of the Lenders, as security for the Secured Obligations, the Foreign Subsidiary Stock and the Foreign Subsidiary Debt, as amended by Amendment No. 1 to Pledge Agreement dated March 12, 1992 and as further amended, modified or supplemented from time to time. "Purchase Money Indebtedness" means (a) Indebtedness created to secure the payment of all or any part of the purchase price of any property, (b) any Indebtedness incurred at the time of or within 10 days prior to or after the acquisition of any property for the purpose of financing all or any part of the purchase price thereof, and (c) any renewals, extensions or refinancings thereof, but not any increases in the principal amounts thereof outstanding at the time. "Purchase Money Liens" means Liens securing Permitted Purchase Money Indebtedness, but only if such Lien shall at all times be confined solely to the property the purchase price of which was financed through the incurrence of the Purchase Money Indebtedness secured by such Lien. "Real Estate" means the real property, including land and buildings and improvements thereon, covered by or described in the Mortgages. "Receivables" means and includes (a) any and all rights to the payment of money or other forms of consideration of any kind (whether classified under the UCC as accounts, contract rights, chattel paper, general intangibles, or otherwise) including, but not limited to, accounts receivable, letters of credit and the right to receive payment thereunder, chattel paper, tax refunds, insurance proceeds, any rights under contracts not yet earned by performance and not evidenced by an instrument or chattel paper, notes, drafts, instruments, documents, acceptances, and all other debts, obligations and liabilities in whatever form from any Person, (b) all guarantees, security and Liens for payment thereof, (c) all goods, whether now owned or hereafter acquired, and whether sold, delivered, undelivered, in transit or returned, which may be represented by, or the sale or lease of which may have given rise to, any such right to payment or other debt, obligation or liability, and (d) all proceeds of any of the foregoing. "Register" has the meaning set forth in SECTION 13.11(D). "Replacement Lender" has the meaning set forth in SECTION 3.10A. "Reportable Event" has the meaning set forth in Section 4043(b) of ERISA, but shall not include a Reportable Event as to which the provision for 30 days' notice to the PBGC is waived under applicable regulations. "Restricted Dividend Payment" means any dividend, distribution or payment on or with respect to any shares of a Person's capital stock (other than dividends payable solely in shares of its capital stock), excluding, however, any such dividend, distribution or payment by any Wholly Owned Subsidiary of the Borrower to any shareholder of such Subsidiary. "Restricted Payment" means any redemption or prepayment, prior to the stated maturity or any regularly scheduled installment or amortization payment date with respect to such Indebtedness, of any Subordinated Indebtedness or other Indebtedness that is junior and subordinate to the Loans or to any Foreign Facility Debt. "Restricted Purchase" means any payment on account of the purchase, redemption or other acquisition or retirement of any shares of a Person's capital stock (except shares acquired on the conversion thereof into other shares of capital stock of such Person). "Revolving Credit Facility" means, an amount equal to $40,000,000. "Revolving Credit Loan" means each loan outstanding on the Effective Date as a "Revolving Credit Loan" evidenced by the Third Amended and Restated Revolving Credit Notes dated January 13, 1995 made by the Borrower to the order of a "Lender" under the Existing Credit Agreement, and the Borrowings made pursuant to ARTICLE 2. "Revolving Credit Note" means each Fourth Amended and Restated Revolving Credit Note made by the Borrower to the order of a Lender evidencing the obligation of the Borrower to pay the aggregate unpaid principal amount of all Revolving Credit Loans made to it by such Lender (and any promissory note or notes that may be issued from time to time in substitution, renewal, extension, replacement or exchange therefor, whether payable to such Lender or a different lender and whether issued in connection with a Person becoming a Lender after the Effective Date or otherwise) substantially in the form of EXHIBIT A hereto, with all blanks properly completed, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or refinanced, and "Revolving Credit Notes" means more than one such Revolving Credit Note. "SIE" means Synthetic Industries Europe Limited (Reg. No. 2772124), a registered English limited liability company, wholly owned by the Borrower. "SI Management" means SI Management L.P., a Delaware limited partnership, which is the general partner of Synthetic L.P., and its successors and assigns. "Schedule of Equipment," "Schedule of Inventory" and "Schedule of Receivables" mean the Schedules described in SECTION 7.14. "Secured Obligations" means, in each case whether now in existence or hereafter arising, (a) the principal of, and interest on, the Loans, (b) all reimbursement and other obligations to Bank of Boston, the Agent or any Lender relating to the Letters of Credit, (c) the Guaranteed Foreign Facility Obligations; and (d) all indebtedness, liabilities, fees, charges, obligations, cove nants and duties of the Borrower to the Agent, any Affiliate or Subsidiary of the Agent, any Lender or any Affiliate or Subsidiary of any Lender, of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note, and whether or not for the payment of money, under or in respect of this Agreement or any of the Loan Documents, other than obligations under Interest Rate Protection Agreements. "Security Documents" means each of the following: (a) the Mortgages, (b) the Patent Assignment, (c) the Trademark Assignment, (d) the Pledge Agreement, (e) the Financing Statements, and (f) this Agreement and each other agreement or instrument from time to time securing the Secured Obligations. "Security Interest" means the Liens of the Agent on behalf of the Lenders now or hereafter existing on and in the Collateral or the Real Estate effected hereby or by any of the Security Documents or pursuant to the terms hereof or thereof. "Senior Debt" means with respect to the Borrower and any Consolidated Subsidiary of the Borrower, the Indebtedness from time to time outstanding under the Loans and the Foreign Facility Debt and any other Indebtedness for Money Borrowed which is senior in right of payment to the Senior Subordinated Debentures. "Senior Subordinated Debentures" means the Senior Subordinated Debentures Due 2002 in an original aggregate principal amount of $140,000,000, issued by the Borrower pursuant to the Indenture. "Senior Subordinated Debt" means the Indebtedness of the Borrower under the Senior Subordinated Debentures. "Subordinated Indebtedness" means, at any time, Indebtedness of the Bor rower at such time evidenced by the Senior Subordinated Debentures or otherwise subordinated to the Loans and Notes upon terms and conditions satisfactory to the Majority Lenders. "Subsidiary" (a) when used to determine the relationship of a Person to another Person, means a Person of which an aggregate of 50% or more of the stock of any class or classes or 50% or more of other ownership interests is owned of record or beneficially by such other Person, or by one or more Subsidiaries of such other Person, or by such other Person and one or more Subsidiaries of such Person, (i) if the holders of such stock, or other ownership interests, (A) are ordinarily, in the absence of contingencies, entitled to vote for the election of a majority of the directors (or other individuals performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency, or (B) are entitled, as such holders, to vote for the election of a majority of the directors (or individuals performing similar functions) of such Person, whether or not the right so to vote exists by reason of the happening of a contingency, or (ii) in the case of such other ownership interests, if such ownership interests constitute a majority voting interest, and (b) when used with respect to a Plan, ERISA or a provision of the Internal Revenue Code pertaining to employee benefit plans, also means any corporation, trade or business (whether or not incorporated) which is under common control with the Borrower and is treated as a single employer with the Borrower under Section 414(b) or (c) of the Internal Revenue Code and the regula tions thereunder. "Synthetic L.P." means Synthetic Industries L.P., a Delaware limited partnership, which owns all of the outstanding capital stock of the Borrower, and its successors and assigns. "Synthetic Management" means Synthetic Management G.P., a Georgia general partnership, the general partners of which are the Initial General Partners. "Tangible Net Worth" means, as applied to any Person, the Net Worth of such Person at the time in question, after deducting therefrom the amount of all intangible items reflected therein, including all unamortized debt discount and expense, unamortized research and development expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, unamortized excess cost of investment in Subsidiaries over equity at dates of acquisition, and all similar items which should properly be treated as intangibles in accordance with GAAP. "Term Loan" means the advances outstanding and unpaid under the Existing Credit Agreement on the Effective Date (immediately before giving effect to the Advances to be made under this Agreement on the Effective Date), made as the principal amount of the "Term Loan" thereunder and the Advances made by the Lenders to the Borrower on the Effective Date pursuant to SECTION 2A.1. "Term Loan Facility" means an amount equal to $45,000,000. "Term Note" means each promissory note made by the Borrower to the order of a Lender evidencing the obligation of the Borrower to pay the aggregate unpaid principal amount of the Advances made by such Lender as part of the Term Loan (and any promissory note or notes that may be issued from time to time in substitution, renewal, extension, replacement or exchange therefor, whether payable to such Lender or a different lender and whether issued in connection with a Person becoming a Lender after the Effective Date or otherwise) substantially in the form of EXHIBIT B hereto, with all blanks properly completed, either as originally executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or refinanced, and "Term Notes" means more than one such Term Note. "Termination Date" means October 1, 2001, or such earlier date as all Secured Obligations shall have been irrevocably paid in full and this Agreement shall have been terminated at the election of the Borrower, or such later date to which the same may be extended by agreement of the Borrower, the Agent and the Lenders. "Termination Event" means (a) a Reportable Event, or (b) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (c) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment of a trustee to administer any Plan. "Total Interest Expense" means, with respect to the Borrower or any Consolidated Subsidiary, the total interest expense expressed in Dollars paid or accrued by the Borrower or such Consolidated Subsidiary, as the case may be, during a given period on Indebtedness for Money Borrowed determined in accordance with GAAP. "Total Unsubordinated Debt" means, with respect to the Borrower or any Consolidated Subsidiary, all Indebtedness of the Borrower or such Consolidated Subsidiary, as the case may be, other than Subordinated Indebtedness. "Trademark Assignment" means, collectively, the Assignment for Security dated as of December 2, 1986, the Assignment for Security dated as of December 17, 1990, the Security Assignment (Trademarks) dated as of March 12, 1992 and the Security Assignment (Trademarks) dated as of March 17, 1993, each made by the Borrower in favor of the Agent, for the benefit of the Lenders, with respect to certain trademarks owned by the Borrower, as such documents may be amended or supplemented from time to time. "Trademark Collateral" means and includes in each case, whether now existing or hereafter arising, (a) any and all marks, trademarks, trade names and trademark applications, and the goodwill of the business symbolized thereby, and (b) all proceeds of any of the foregoing. "Type" means a type of Advance and refers to a Base Rate Advance or a Eurodollar Advance. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of Georgia. "Unfunded Vested Accrued Benefits" means with respect to any Plan at any time, the amount (if any) by which (a) the present value of all vested nonforfeitable benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan. "Unused Facility" means, at any time, the Revolving Credit Facility in effect at such time LESS the sum at such time of (i) the aggregate outstanding principal amount of the Revolving Credit Loan and (ii) the Letter of Credit Reserve. "Wholly Owned Subsidiary" when used to determine the relationship of a Subsidiary to a Person or Persons, means a Subsidiary all of the issued and outstanding shares (other than directors' qualifying shares) of the capital stock of which shall at the time be owned by such Person or Persons or one or more of such Person's Wholly Owned Subsidiaries or by such Person or Persons and one or more of its respective Wholly Owned Subsidiaries. "Working Capital Assets" means, with respect to any Person, the aggregate amount of accounts receivable (less any allowance for doubtful accounts) and inventory of such Person properly classified as accounts receivable (less any allowance for doubtful accounts) or inventory in accordance with GAAP. "Working Capital Liabilities" means, with respect to any Person, the aggregate amount of current liabilities of such Person, other than current maturities of long-term debt (all as determined in accordance with GAAP). SECTION 1.2. General. All terms of an accounting nature not specifically defined herein shall have the meaning ascribed thereto by GAAP. The terms accounts, chattel paper, contract rights, documents, equipment, instruments, general intangibles, inventory, proceeds, cash proceeds and non-cash proceeds, as and when used in this Agreement or the Security Documents, shall have the meanings given those terms in the UCC, except where otherwise specifically defined herein. Unless otherwise specified, a reference in this Agreement to a particular article, section or subsection is a reference to that article, section or subsection of this Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. ARTICLE 2 - REVOLVING CREDIT FACILITY SECTION 2.1. Revolving Credit Loan. Upon the terms and subject to the conditions of, and in reliance upon the representations and warranties made under, this Agreement, each Lender severally and not jointly agrees to make Advances, ratably according to such Lender's Commitment Percentage, to the Borrower from time to time from and after the Effective Date to the Termination Date, as requested by the Borrower in accordance with the terms of SECTION 2.2, in such amounts as the Borrower shall request, up to an aggregate principal amount at any one time outstanding equal to the result obtained by multiplying such Lender's Commitment Percentage by the Borrowing Base in effect at such time; PROVIDED, HOWEVER, that it is agreed that should such Advances made by any Lender exceed the maximum amount so determined or any other limitation set forth in this Agreement, such Advances shall nevertheless constitute Secured Obligations and, as such, shall be entitled to all benefits thereof and security therefor. Each Borrowing under the Revolving Credit Facility shall consist of Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitment Percentages and each Borrowing comprised of (i) Base Rate Advances and requested pursuant to SECTION 2.2(A)(I) shall be in an aggregate amount of $100,000 or an integral multiple thereof or (ii) Eurodollar Rate Advances shall be in an aggregate amount of $3,000,000 or an integral multiple of $500,000 in excess thereof. Within the limits of each Lender's Commitment, the principal amount of any Advance which is repaid may be reborrowed subject to the terms of this SECTION 2.1. The Agent's and each Lender's books and records reflecting the date and the amount of each Borrowing under the Revolving Credit Facility and each repayment of principal thereof shall constitute PRIMA FACIE evidence of the accuracy of the information contained therein, subject to the provisions of SECTION 3.14. SECTION 2.2. Manner of Borrowing. Borrowings under the Revolving Credit Facility shall be made as follows: (a) Requests for Borrowing. A request for a Borrowing shall be made, or shall be deemed to be made, in the following manner: (i) The Borrower may give the Agent written notice, which shall be irrevocable, of its intention to make a Borrowing specifying the amount of the proposed Borrowing and the proposed Borrowing date not later than 2:00 p.m.(Boston time), at least two Business Days prior to the date of a proposed Borrowing comprised of Base Rate Advances or 10:00 a.m. (Boston time) at least three Business Days prior to the date of a proposed Borrowing comprised of Eurodollar Rate Advances. Each such notice (a "Notice of Borrowing") shall, in addition, specify the Type of Advances and, if applicable, the Interest Period applicable to such Advances, and shall be substantially in the form of EXHIBIT F hereto. The Agent may in its sole and absolute discretion permit any such notice to be made by telephone, telecopier or telex by an Authorized Officer in which case the Borrower shall confirm the same by mailing a written Notice of Borrowing to the Agent within 48 hours thereafter. (ii) Whenever a check is presented to the Disbursing Bank for payment against the Controlled Disbursement Account in an amount greater than the then available balance in such account, the Disbursing Bank shall, and is hereby irrevocably authorized by the Borrower to, give the Agent notice thereof, which notice shall be deemed to be a request for a Borrowing comprised of Base Rate. Advances on the date of such notice in an amount equal to the excess of such check over such available balance. (iii) Whenever a drawing occurs under a Letter of Credit, Bank of Boston shall, and is hereby irrevocably authorized by the Borrower to, give the Agent notice thereof, which notice shall be deemed to be a request for a Borrowing comprised of Base Rate Advances on the date of such notice (or on the next succeeding Business Day if such notice is given after 11:00 a.m. (Boston time) on such date) in an amount equal to the amount of such drawing. (iv) Unless the Borrower shall have otherwise notified the Agent, the becoming due of any amount required to be paid under this Agreement as interest shall be deemed to be a request for a Borrowing comprised of Base Rate Advances on the due date in the amount required to pay such interest. (v) The becoming due of any other Secured Obligation shall be deemed to be a request for a Borrowing comprised of Base Rate Advances on the due date in the amount then so due, and such request shall be irrevocable. (b) Disbursement. Promptly following receipt of a Notice of Borrowing under the Revolving Credit Facility, the Agent shall notify each Lender by telephone, telecopier or telex of the date and amount of the Borrowing, the Type of Advances comprising such Borrowing and, if such Borrowing is comprised of Eurodollar Advances, the interest rate and Interest Period applicable thereto. Not later than 12:00 noon (Boston time) on the date specified for any Borrowing, each Lender shall make available its ratable portion of the Borrowing in immediately available funds to the Agent at the Agent's Office. Upon fulfillment of the applicable conditions set forth in ARTICLE 4, the Borrower hereby irrevocably authorizes the Agent on behalf of the Lenders to disburse the proceeds of the Advances made upon each Borrowing requested, or deemed to be requested, pursuant to this SECTION 2.2 as follows: (i) the proceeds of each Borrowing requested under SECTIONS 2.2(A)(I) and (II) shall be disbursed by the Agent in lawful money of the United States of America in immediately available funds, (A) in the case of the initial Borrowing, in accordance with the terms of the letter from the Borrower to the Agent referred to in SECTION 4.1(A)(XIV) and (B) in the case of each subsequent Borrowing, by wire transfer to the Controlled Disbursement Account or, in the absence of a Controlled Disbursement Account, by credit to the Designated Deposit Account or by wire transfer to such other account as may be agreed upon by the Borrower and the Agent from time to time, and (ii) the proceeds of each Borrowing requested under SECTION 2.2(A)(III), (IV) or (V) shall be disbursed by the Agent on behalf of the Lenders by way of direct payment of the relevant Secured Obligation. (c) Assumption by Agent. Unless the Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with SECTION 2.2(B) and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Agent, such Lender and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, if repaid by the Borrower, at the interest rate applicable at the time to Advances comprising such Borrowing or, if paid by such Lender, at the Federal Funds Effective Rate, for each such day. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement. The failure of any Lender to make its Advance available shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance available on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make its Advance available on the date of any Borrowing. SECTION 2.3. Repayment of Advances. The Advances under the Revolving Credit Facility will be repaid as follows: (a) whether or not any Default or Event of Default has occurred, the outstanding principal amount of all Advances under the Revolving Credit Facility is due and payable, and shall be repaid by the Borrower, on the Termination Date; (b) if at any time the aggregate outstanding principal amount of all Advances under the Revolving Credit Facility exceeds the Borrowing Base in effect at such time, the Borrower shall pay to the Agent, upon demand by the Agent, for the ratable account of the Lenders for application to the repayment of the Advances under the Revolving Credit Facility made by them, an amount equal to such excess; and (c) the Borrower hereby irrevocably instructs the Agent to pay to the Lenders ratably for application to the repayment of the Advances under the Revolving Credit Facility outstanding on any day, an amount equal to the amount received by the Agent for the account of the Lenders on such day pursuant to SECTION 7.1(B). Amounts received pursuant to SUBSECTION (B) OR (C) above shall be applied first to the repayment of all Base Rate Advances and then to the repayment of Eurodollar Advances, in each case outstanding under the Revolving Credit Facility. SECTION 2.4. Revolving Credit Note. Each Lender's Advances under the Revolving Credit Facility and the obligations of the Borrower to repay such Advances shall also be evidenced by, and be repayable in accordance with the terms of, a single Revolving Credit Note payable to the order of such Lender. Each Revolving Credit Note shall be dated the Effective Date (or the later "Effective Date" of any Assignment and Acceptance, if issued pursuant thereto) and be duly and validly executed and delivered by the Borrower. ARTICLE 2A - TERM LOAN FACILITY SECTION 2A.1. Term Loan. Upon the terms and subject to the conditions of, and in reliance upon the representations and warranties made under, this Agreement, each Lender, severally and not jointly, agrees to make a Base Rate Advance as part of a single Borrowing under the Term Loan Facility to the Borrower on the Effective Date, in a principal amount equal to the excess of (a) such Lender's Commitment Percentage multiplied by the Term Loan Facility, over (b) the amount outstanding from such Lender to the Borrower as principal of the "Term Loan" under and as defined in the Existing Credit Agreement, on the Effective Date, immediately before the Advances contemplated to be made under this Agreement on the Effective Date are made. The Lenders agree to accept from the Borrower, in exchange for (but not in extinguishment of Indebtedness outstanding under) the "Term Notes" issued under and as defined in the Existing Credit Agreement, Term Notes conforming to the requirements of this Agreement, in the aggregate original principal amount of $45,000,000. SECTION 2A.2. Manner of Borrowing Term Loan. Provided that the Borrower has given the Agent at least two Business Days' prior notice of the occurrence of the Effective Date, then, not later than 12:00 noon (Boston time) on the Effective Date, each Lender shall make available to the Agent in Dollars in same day funds, an amount equal to such Lender's Base Rate Advance under the Term Loan Facility to be made on such date in the amount determined in accordance with the provisions of SECTION 2A.1. Upon the Agent's receipt thereof and the occurrence of the Effective Date, the Agent shall make such funds available to the Borrower in accordance with the terms of the letter from the Borrower to the Agent referred to in SECTION 4.1(A)(XIV). SECTION 2A.3. Repayment of Term Loans. The Advances constituting the Term Loan are due and payable, and shall be repaid by the Borrower as follows: (i) beginning on November 1, 1998 and on each of the eleven successive Installment Payment Dates thereafter in consecutive monthly installments of $833,333.33 each; and (ii) beginning on November 1, 1999 and on each of the twenty-three successive Installment Payment Dates thereafter, in consecutive monthly installments of $1,458,333.33 each, PROVIDED, that the final installment of the Term Loan payable on October 1, 2001 shall be in the amount of the entire outstanding unpaid balance of the Term Loan. SECTION 2A.4. Term Note. Each Lender's Advances under the Term Loan Facility and the obligation of the Borrower to repay such Advances shall also be evidenced by, and be repayable in accordance with the terms of, a Term Note payable to the order of each such Lender. Each Term Note shall be dated the Effective Date (or the later "Effective Date" of any Assignment and Acceptance, if issued pursuant thereto), and all of such Term Notes shall be duly and validly executed and delivered by the Borrower. ARTICLE 2B - LETTER OF CREDIT FACILITY SECTION 2B.1. Letters of Credit. Upon the written request of the Borrower from time to time, the Bank of Boston may in its discretion, provided no Default or Event of Default has occurred and is continuing, issue Letters of Credit for the account of the Borrower in an aggregate face amount at any time outstanding not to exceed the Letter of Credit Facility, pursuant to Bank of Boston's customary application and other letter of credit procedures in effect from time to time. Upon the issuance of any such Letter of Credit, each other Lender shall automatically and without further action acquire an undivided participation in such Letter of Credit in an amount equal to such Lender's Commitment Percentage multiplied by the face amount of such Letter of Credit. Promptly upon the issuance thereof, Bank of Boston shall provide to the Agent and the Agent shall thereafter provide to each other Lender, a copy of each Letter of Credit issued pursuant to this SECTION 2B.1. The Borrower's obligations in respect of each Letter of Credit, including, without being limited to, its obligations to reimburse Bank of Boston and the other Lenders for the amount of any drawing thereunder and to pay the fees, charges and expenses provided for herein or in any other document related to such Letter of Credit, shall constitute Secured Obligations. SECTION 2B.2. Payments under Letters of Credit. Bank of Boston shall notify the Agent of each drawing under a Letter of Credit and the Borrower hereby irrevocably instructs the Agent (a) to consider each such notification by Bank of Boston as a request for a Borrowing pursuant to SECTION 2.2(A)(III) and (b) to pay to Bank of Boston, from the proceeds of the Advances made in accordance with the provisions of SECTION 2.2(B), an amount equal to the amount of such drawing. All such Advances shall constitute a Borrowing under the Revolving Credit Facility made at the time of such payment. Notwithstanding the provisions of SECTION 2.2 and the foregoing provisions of this SECTION 2B.2, each Lender shall be obligated directly to Bank of Boston as a participant in each Letter of Credit to pay directly to Bank of Boston an amount equal to such Lender's Commitment Percentage multiplied by the amount of each drawing under a Letter of Credit. Each other Lender shall pay to Bank of Boston, on demand, its ratable share, in accordance with its Commitment Percentage, of each such drawing, without regard to whether the Lenders have any obligation to make Advances under the Revolving Credit Facility or any Lender shall have failed or refused to make an Advance in the amount of its Commitment Percentage of any drawing. SECTION 2B.3. Letter of Credit Expiration Date. No Letter of Credit issued under this ARTICLE 2B shall have an expiration date later than the earlier of (a) the first anniversary of the issuance of such Letter of Credit and (b) the Termination Date, PROVIDED, that, a Letter of Credit may provide for automatic extensions of the expiration date thereof for successive periods of one year (but not beyond the Termination Date). SECTION 2B.4. Letter of Credit Fees. The Borrower shall pay to the Agent for the account of the Lenders such periodic fees for maintaining any standby Letter of Credit at the rate of 1-1/2% per annum of the face amount of such Letter of Credit outstanding from time to time and as to any other type of Letter of Credit, such fee as Bank of Boston and the Borrower shall agree (which agreement will be reflected in the application relating to each such Letter of Credit), but shall pay to Bank of Boston directly and for its own account, on demand, Bank of Boston's charges for administering each Letter of Credit, including any fee charged in connection with opening, transferring or processing drawings under such Letter of Credit. Letter of Credit fees payable to the Agent for the account of the Lenders shall be paid quarterly in arrears on the first day of each January, April, July and October so long as any Letter of Credit is outstanding. ARTICLE 2C - INTEREST RATE PROTECTION AGREEMENTS SECTION 2C.1. Interest Rate Protection Agreement. The Borrower may from time to time enter into interest rate caps, swaps, collars, floors and other similar transactions including, without limitation, the Master Swap Agreement between the Bank of Boston and the Borrower dated October 20, 1995, that satisfy the description set forth in the definition "Interest Rate Protection Agreement"; PROVIDED, that the aggregate notional amount of all such Interest Rate Protection Agreements in effect at any time shall be less than the outstanding principal amount of the Term Loans at such time PLUS the lesser of (i) $10,000,000 or (ii) the average outstanding Revolving Credit Loan during the preceding year. SECTION 2C.2. Conditions to Transactions. Before the Borrower becomes obligated in respect of any specific transaction pursuant to an Interest Rate Protection Agreement otherwise consistent with the provisions of this Agreement (it being understood that any such transaction pursuant to the Master Swap Agreement would require the further independent agreement of both the Borrower and the Bank of Boston), the Borrower shall have (i) entered into an amendment to this Agreement, in form and substance satisfactory to the Agent and the Lenders, providing that all obligations of the Borrower under any such Interest Rate Protection Agreement shall constitute "Secured Obligations" hereunder and (ii) caused to be delivered to the Agent and the Lenders a legal opinion letter of counsel satisfactory to the Agent and Lenders in their reasonable judgment and in form and substance acceptable to the Agent and the Lenders to the effect that obligations of the Borrower pursuant to such Interest Rate Protection Agreement constitute "Senior Indebtedness" as such term is defined in the Indenture. ARTICLE 3 - GENERAL LOAN PROVISIONS SECTION 3.1. Interest. (a) Base Rate Advances. The Borrower shall pay interest on the unpaid principal amount of each Base Rate Advance for each day from the day such Advance is made (including, in respect of amounts outstanding on the Effective Date as "Loans" under the Existing Credit Agreement, from the date of the last payment of interest on such Loans under the Existing Credit Agreement) until the date such Advance is due or is converted to an Advance of a different Type, at a rate per annum equal to the Base Rate, PLUS the Applicable Margin, which rate shall change contemporaneously with any change in the Base Rate. Such interest shall be payable in arrears on each Interest Payment Date, when such Base Rate Advance is due (whether at maturity, by reason of acceleration or otherwise) and upon any conversion of the principal amount of such Base Rate Advance (or any portion thereof) into an Advance of a different Type, on the date of such conversion on the principal amount so converted. (b) Eurodollar Advances. (i) The Borrower shall pay interest on the unpaid principal amount of each Eurodollar Advance for each Interest Period applicable thereto, at a rate per annum equal to the Eurodollar Rate, PLUS the Applicable Margin. Such interest shall be payable on the last day of such Interest Period and, if such Interest Period is longer than one month, on each Interest Payment Date after the first day thereof, and when such Eurodollar Advance is due (whether at maturity, by reason of acceleration or otherwise). (ii) Additional interest on the unpaid principal amount of each Eurodollar Advance of each Lender shall also be payable from the date of such Advance until such principal amount is paid in full, so long as such Lender shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, at an interest rate per annum equal at all times to the remainder obtained by subtracting (A) the Eurodollar Rate for the Interest Period for such Advance from (B) the rate obtained by dividing such Eurodollar Rate by a percentage (expressed as a decimal) equal to 1.00 minus the Eurodollar Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Advance. Such additional interest shall be determined by such Lender and notified to the Borrower through the Agent. (c) Late Payment, etc. If the Borrower shall fail to pay when due (whether at maturity, by reason of acceleration or otherwise) all or any portion of the principal amount of any Advance or if there shall occur an Event of Default, from and after the date on which the Agent shall give the Borrower notice thereof, the unpaid principal amount of each Advance shall no longer bear interest in accordance with the terms of SECTION 3.1(A) or 3.1(B), as applicable, but shall bear interest for each day from the date of such failure to pay or Event of Default, as the case may be, until such failure to pay or Event of Default shall have been cured or waived, at a rate per annum equal to 2% per annum above the otherwise applicable interest rate, payable on demand. (d) Basis of Computation. The interest rates provided for in SECTIONS 3.1(A), (B) and (C) shall be computed on the basis of a year of 360 days and the actual number of days elapsed and shall be adjusted automatically as of the opening of business on the effective date of each change in the Base Rate, if applicable. (e) Maximum Rate. It is not intended by the Agent or the Lenders, and nothing contained in this Agreement or any Note shall be deemed, to establish or require the payment of a rate of interest in excess of the maximum rate permitted by Applicable Law (the "Maximum Rate"). If, in any month, the Effective Interest Rate, absent such limitation, would have exceeded the Maximum Rate, then the Effective Interest Rate for that month shall be the Maximum Rate, and, if in future months, the Effective Interest Rate would otherwise be less than the Maximum Rate, then the Effective Interest Rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event, upon payment in full of the Secured Obligations, the total amount of interest paid or accrued under the terms of this Agreement and the Notes is less than the total amount of interest which would have been paid or accrued if the Effective Interest Rate had at all times been in effect, then the Borrower shall, to the extent permitted by Applicable Law, pay to the Agent for the account of the Lenders an amount equal to the excess of (i) the lesser of (A) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (B) the amount of interest which would have accrued had the Effective Interest Rate, at all times, been in effect over (ii) the amount of interest actually paid or accrued under this Agreement and the Notes. In the event any Lender ever receives, collects or applies as interest any sum in excess of the Maximum Rate, such excess amount shall be applied to the reduction of the principal balance of the Secured Obligations, and if no such principal is then outstanding, such excess or part thereof remaining, shall be paid to the Borrower. SECTION 3.2. Agent's Fee and Arrangement Fee. In connection with the transactions contemplated by this Agreement and the amendment and restructuring of the credit facilities outstanding under the Existing Credit Agreement and as compensation to the Agent for its part therein, and in consideration of the ongoing administration of the Revolving Credit Facility, the Borrower will pay to Bank of Boston such fees as are separately agreed to by them. [SECTION 3.3. Intentionally Omitted.] SECTION 3.4. Commitment Fee. In consideration of the Lenders' holding available for the use of the Borrower hereunder the Unused Facility, the Borrower shall pay to the Agent for the ratable account of the Lenders, a fee which shall accrue and be fully earned at the time due and payable and shall not be subject to refund or rebate by reason of prepayment, acceleration of any Loans upon Default or any other circumstance, on the average daily Unused Facility for each day from the Effective Date until the Termination Date at the rate of 3/8 of 1% per annum, payable quarterly in arrears on the first day of each January, April, July and October on the average daily Unused Facility for each day of the preceding quarter (or portion thereof). SECTION 3.5. Computation of Fees, Etc. All fees stated as a percentage rate per annum shall be computed on the basis of a year of 360 days and the actual number of days elapsed and are not, and shall not be deemed to be, interest or a charge for the use of money, but shall constitute other charges as contemplated by O.C.G.A. 7-4-2(a)(1). SECTION 4.6. Voluntary Reductions of Facility. The Borrower shall have the right, at any time and from time to time, to reduce the amount of the Unused Facility upon at least three Business Days' written notice to the Agent, specifying the amount of such reduction, which shall be an integral multiple of $1,000,000, and the effective date of such reduction, which shall be a Business Day. On the date specified in such notice, the Revolving Credit Facility shall automatically be reduced by the amount specified in such notice (and each Lender's Commitment shall also automatically be reduced by such Lender's Commitment Percentage of such reduction) and the Borrower shall pay to the Agent for the ratable account of the Lenders any accrued and unpaid commitment fee, determined in accordance with the provisions of SECTION 3.4, on the amount by which the Revolving Credit Facility is reduced. SECTION 3.7. Conversion or Continuation of Advances. (a) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower may convert or continue all or any part (subject to the restrictions applicable to Borrowings comprised of each Type of Advance set forth in SECTION 2.1 and to the provisions of SECTIONS 3.8 and 3.10) of any outstanding Borrowing which is part of the Revolving Credit Loan or the Term Loan and is comprised of Advances of one Type (i) into a Borrowing or Borrowings comprised of Advances of a different Type available hereunder or (ii) as a Borrowing or Borrowings comprised of Advances of the same Type for a subsequent Interest Period, in the same aggregate principal amount, on any Business Day (which, in the case of conversion into or continuation as a Borrowing comprised of Eurodollar Advances, shall be the last day of the applicable Interest Period), upon notice given in accordance with SECTION 3.7(B)). (b) Whenever the Borrower desires to convert an outstanding Borrowing into a Borrowing comprised of Advances of a different Type available hereunder or to continue an outstanding Borrowing comprised of Eurodollar Advances for a subsequent Interest Period, the Borrower shall give notice to the Agent (which notice shall be irrevocable) not later than 10:00 a.m. (Boston time) on the date one Business Day before the day on which a proposed conversion of a Borrowing into a Borrowing comprised of Base Rate Advances or three Business Days prior to the day on which a proposed conversion or continuation of a Borrowing into or as a Borrowing comprised of Eurodollar Advances is to be effective (and if the Borrowing to be converted or continued is comprised of Eurodollar Advances, such effective date shall be the last day of the Interest Period for such Borrowing). Each such notice (each a "Notice of Conversion or Continuation") shall (i) identify the Borrowing to be converted or continued, including the Type of Advances comprising such Borrowing, the aggregate principal balance thereof and, if applicable, the last day of the Interest Period therefor, (ii) specify the effective date of conversion or continuation, (iii) specify the principal amount of such Borrowing to be converted or continued and, if converted, the Type or Types of Advances into which conversion of such principal amount (or specified portions thereof) is to be made, and (iv) in the case of any conversion into or continuation as a Borrowing comprised of Eurodollar Advances, the Interest Period to be applicable to such converted or continued Borrowing. Each such Notice of Conversion or Continuation shall be substantially in the form of EXHIBIT G hereto. The Agent may in its sole and absolute discretion permit any such notice to be given by telephone, telecopier or telex by an Authorized Officer, in which case the Borrower shall confirm the same by mailing a written Notice of Conversion or Continuation to the Agent within 48 hours thereafter. No provision of this Agreement shall be deemed or construed to permit the "conversion" of the Term Loan (or portion thereof) into a Revolving Credit Loan or the reverse. SECTION 3.8. Duration of Interest Periods; Number of Borrowings. (a) Subject to the provisions of the definition of Interest Period, the duration of each Interest Period applicable to the Advances comprising a Borrowing shall be as specified in the relevant Notice of Borrowing or Notice of Conversion or Continuation. The Borrower shall have the option to elect a subsequent Interest Period to be applicable to such Borrowing by giving notice of such election in accordance with the provisions of SECTION 3.7(B). (b) If the Agent does not receive, in accordance with the provisions of SECTION 3.7(B), a Notice of Conversion or Continuation specifying a subsequent Interest Period for any outstanding Borrowing comprised of Eurodollar Advances, or if, when such Notice must be given, a Default or Event of Default exists, then the Borrower shall be deemed to have elected to convert such Borrowing in whole into a Borrowing comprised of Base Rate Advances on the last day of the Interest Period applicable to such outstanding Borrowing. (c) The Borrower may not elect an Interest Period which, when added to the number of Interest Periods then applicable, would result in there being, at any one time (and treating all Base Rate Advances outstanding under the Revolving Credit Facility as one Borrowing and all Base Rate Advances outstanding under the Term Loan Facility as one Borrowing), more than eleven Borrowings outstanding. SECTION 3.9. Voluntary Prepayments; Termination of Agreement. (a) The Borrower shall have the right, at any time and from time to time, upon at least two Business Days' notice to the Agent specifying the date and amount of such prepayment, to prepay the Term Loan and the Revolving Credit Loan in whole or in part and, if the Loans are prepaid in full, to terminate this Agreement, without penalty (it being understood and acknowledged by all parties that application of Collateral proceeds to repay Advances under the Revolving Credit Facility pursuant to SECTION 2.3(B) is not and shall not be deemed to be a voluntary prepayment of the Revolving Credit Loan for purposes of this SECTION 3.9) but subject to the provisions of SECTION 3.11; PROVIDED, that any partial prepayment of the Loans shall be applied first to the prepayment of the principal amount of the Term Loan, and, after payment in full of the principal amount of the Term Loan, to the prepayment of the outstanding principal amount of the Revolving Credit Loan and all other amounts then due under this Agreement and the Notes; PROVIDED, FURTHER, that if the Loans are prepaid in whole or in part pursuant to this SECTION 3.9 (i) prior to November 1, 1998, the Borrower shall pay to the Agent, for the ratable account of the Lenders, on the date of such prepayment, a fee as liquidated damages therefor and not as a penalty, as follows: (A) $850,000 in connection with the prepayment in full of the Loans from the proceeds of Indebtedness for Money Borrowed, or (B) an amount equal to 1% of the principal amount so prepaid in connection with any prepayment made from any source other than proceeds of Indebtedness for Money Borrowed or internal cash flow of the Borrower, and (ii) on or after November 1, 1998 and prior to October 1, 2001, an amount equal to 1% of the principal amount so prepaid. (b) Each partial prepayment of the Loans shall be in an aggregate principal amount equal to $500,000 or an integral multiple of $100,000 in excess thereof and, to the extent such prepayment is a prepayment of the Term Loan, as applicable, shall be applied to the principal installments of the Term Loan in inverse order of maturity. Interest on the amount prepaid, accrued to the prepayment date, and all other amounts then due and payable by the Borrower to the Agent or to the Agent for the account of the Lenders under this Agreement or the Notes shall be paid on such date. Any notice of prepayment given by the Borrower hereunder shall be irrevocable, and the amount to be prepaid (including accrued interest thereon) shall be due and payable on the date, which shall be a Business Day, specified in such notice. (c) On any date on which the aggregate principal amount of the Loans is to be prepaid in full or substantially in full, the Borrower shall also pay to the Agent (i) the principal amount of the Foreign Facilities, together with interest accrued thereon to the date of such prepayment, (ii) an amount in cash, to be held by the Agent for the benefit of the Lenders as cash collateral pursuant to such agreement as the Agent and the Lenders shall reasonably specify, equal to the aggregate face amount of all Letters of Credit outstanding (or the Borrower may satisfy its obligations under this clause (ii) by causing all outstanding Letters of Credit to be returned to Bank of Boston for cancellation in a manner and pursuant to agreements and other documents in form and substance satisfactory to the Agent and the Lenders), and (iii) any and all other amounts accrued or due and payable to the Agent and the Lenders hereunder and under the Notes, including, without being limited to, any and all accrued fees, amounts payable pursuant to SECTIONS 2B.4, 3.4 and 13.2, any amounts payable under the separate agreement referred to in SECTION 3.2, and the applicable prepayment fee determined in accordance with the provisions of SECTION 3.9(A). Upon receipt by the Agent of an amount equal to the aggregate unpaid principal amount of all Loans and interest accrued thereon, an amount equal to the aggregate amount of all Foreign Facility Debt and accrued interest thereon, an amount equal to the aggregate stated amount of all outstanding Letters of Credit or the return of such Letters of Credit, as the case may be, and all such other amounts, this Agreement shall be terminated and none of the Agent, the Lenders or the Borrower shall have any further obligations to any other party hereto except for the Borrower's obligations to the Agent and the Lenders pursuant to SECTIONS 13.2 and 13.14. (d) Notwithstanding the foregoing provisions of this SECTION 3.9, if the Majority Lenders shall have determined that Inventory of the Borrower is not Eligible Inventory solely pursuant to the provisions of SUBPARAGRAPH (H) of the definition of Eligible Inventory or that Receivables of the Borrower are not Eligible Receivables solely pursuant to the provisions of SUBPARAGRAPH (P) of the definition of Eligible Receivables and (i) the result of such determination or determinations is to reduce the Borrowing Base to an amount which is less than 80% of the average monthly principal amount of the Revolving Credit Loan outstanding during the 12 months (determined for each such month based on average daily principal outstanding during such month) immediately preceding the date of such determination (or of the last of such determinations) and (ii) within 60 days thereafter the Borrower prepays the outstanding principal amount of the Loans in full, together with accrued interest thereon and the other amounts required to be paid pursuant to SECTION 3.9(C), the prepayment fee otherwise required to be paid pursuant to SECTION 3.9(A) shall not be payable. SECTION 3.10. Changed Circumstances. (a) In the event that: (i) on any date on which the Eurodollar Rate would otherwise be set, Bank of Boston shall have determined in good faith (which determination shall be final and conclusive) that adequate and reasonable means do not exist for ascertaining the Eurodollar Rate, or (ii) the Majority Lenders shall notify the Agent that they have determined in good faith (which determination shall be final and conclusive) that the Eurodollar Rate shall no longer represent the effective cost to the Majority Lenders of making or maintaining Eurodollar Advances to be made by them, or (iii) any Lender shall notify the Agent that it has determined in good faith (which determination shall be final and conclusive) that the making or continuation of or conversion of any Advance of such Lender to a Eurodollar Advance has been made impracticable or unlawful by (A) the occurrence of a contingency that materially and adversely affects the interbank Eurodollar market or (B) compliance by such Lender in good faith with any Applicable Law or interpretation or change thereof by any governmental authority charged with the interpretation or administration thereof or with any request or directive of any such governmental authority (whether or not having the force of law); then, and in any such event, the Agent shall forthwith so notify the Borrower thereof and: (A) Until the Agent notifies the Borrower that the circumstances giving rise to any notice given pursuant to SECTION 3.10(A) no longer apply, the obligation of the Lenders to allow selection by the Borrower of Eurodollar Advances shall be suspended. If at the time the Agent so notifies the Borrower, the Borrower has previously given the Agent a Notice of Borrowing or a Notice of Conversion or Continuation with respect to one or more Borrowings to be made as or to be converted into or continued as Borrowings comprised of Eurodollar Advances (each, a "Pending Borrowing") but such Pending Borrowings have not yet been so made, converted or continued, each such Notice shall be deemed to be an election by the Borrower of Borrowings comprised of Base Rate Advances. (B) On such date as is specified in any notice to the Borrower from the Agent pursuant to SECTION 3.10(A) (which date shall not be earlier than the date such notice is given), the Borrower shall prepay the outstanding principal amount of all Eurodollar Advances, together with interest thereon and any amount required to be paid pursuant to SECTION 3.11, or convert all such outstanding Eurodollar Advances into Base Rate Advances by giving a Notice of Conversion or Continuation pursuant to SECTION 3.7(B). (b) In case of any change in law, regulation, treaty or official directive or the interpretation or application thereof by any court or by any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law): (i) subjects any Lender to any tax with respect to payments of principal or interest or any other amounts payable hereunder by the Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of such Lender imposed by the United States of America or any political subdivision thereof), or (ii) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, any Lender (other than such requirements as are already provided for in SECTION 3.1(B)(II)), or (iii) imposes upon any Lender any other condition with respect to its performance under this Agreement, and the result of any of the foregoing is to increase the cost to such Lender, reduce the income receivable by such Lender or impose any expense upon such Lender with respect to any Advances, such Lender shall notify the Agent and the Borrower thereof. The Borrower agrees to pay to such Lender the amount of such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by such Lender of a statement of the amount and setting forth such Lender's calculation thereof, which statement shall be deemed true and correct absent manifest error, PROVIDED, that no Lender shall be entitled to charge nor shall the Borrower 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 any Lender determines that (i) the adoption of or change in, in each case after the date hereof, any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies, or any change after the date hereof in the interpretation or application thereof by any governmental authority charged with the administration thereof, or (ii) compliance by such Lender with any guideline, request or directive of any such entity regarding capital adequacy (whether or not having the force of law) promulgated after the date hereof, has the effect of reducing the return on such Lender's capital as a consequence of its Commitment to make Advances hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's then- existing policies with respect to capital adequacy and assuming the full utilization of such Lender's capital) by any amount deemed by such Lender to be material, then such Lender shall notify the Agent and the Borrower thereof. The Borrower agrees to pay to such Lender the amount of such reduction of capital as and when such reduction is determined, upon presentation by such Lender of a statement of the amount and setting forth such Lender's calculation thereof, which statement shall be deemed true and correct absent manifest error, PROVIDED, that no Lender shall be entitled to charge nor shall the Borrower be required to pay any such amount relating to a period more than 90 days prior to the date on which such statement is presented. In determining such amount, a Lender may use any reasonable averaging and attribution methods. SECTION 3.10A Replacement of Lender. In the event that any Lender makes a demand for payment pursuant to SECTION 3.10, or terminates the Commitment of the Lender to make Eurodollar Advances or to convert Base Rate Advances to Eurodollar Advances pursuant to SECTION 3.10(A)(III), the Borrower shall have the right, if no Default or Event of Default then exists, to replace such Lender in accordance with this SECTION 3.10A. If the Borrower determines to replace such Lender, the Borrower shall have the right to replace such Lender with an entity that is an Eligible Assignee (a "Replacement Lender"); provided that such Replacement Lender, (i) shall obtain the consent of the Agent, such consent not to be unreasonably withheld, (ii) shall unconditionally offer in writing (with a copy to the Agent) to purchase all of such Lender's rights and obligations under this Agreement and the Loan Documents as of the date specified in the Assignment and Acceptance (including, without limitation, the assigning Lender's Commitment as then in effect, the assigning Lender's obligations in respect of the Letter of Credit Facility, the Advances owing to the assigning Lender and the Notes held by the assigning Lender), in each case without recourse, at the principal amount thereof plus interest and fees accrued thereon to the date of such purchase on a date therein specified, (iii) shall execute and deliver to the Agent an Assignment and Acceptance and (iv) shall comply with all the terms and conditions set forth in SECTIONS 13.11(B) and 13.11(C), including payment to the Agent of the amount set forth in SECTION 13.11(B)(IV). Upon satisfaction of the requirements set forth in the second sentence of this SECTION 3.10A, acceptance of such offer to purchase by the Lender to be replaced, payment to such Lender of the purchase price in immediately available funds, and the payment by the Borrower of all requested costs accruing to the date of purchase which the Borrower is obligated to pay under SECTIONS 13.1, 13.10(B)(IV) and 13.14 (if any) and all other amounts owed by the Borrower to such Lender (including any amounts owing pursuant to SECTION 3.10 but excluding principal of and interest on the Notes and reimbursement obligations relating to the Letters of Credit of such Lender purchased by the Replacement Lender) and execution of the Assignment and Acceptance by all parties thereto in accordance with SECTION 13.11 hereof, the Replacement Lender shall constitute a "Lender" hereunder with a Commitment as so specified and the Lender being so replaced shall no longer constitute a "Lender" hereunder and shall thereupon be released from any and all liabilities in respect of this Agreement and the other Loan Documents. If, however, (x) a Lender accepts such an offer and such proposed Replacement Lender fails to purchase such rights and interests on such specified date in accordance with the terms of such offer and this SECTION 3.10A and to execute an Assignment and Acceptance, the Borrower shall continue to be obligated to pay the increased costs or additional amounts due to such Lender pursuant to SECTION 3.10 or Eurodollar Advances shall be terminated or not renewed as determined by such Lender, as the case may be, or (y) the Lender proposed to be replaced fails to accept such purchase offer, the Borrower shall not be obligated to pay to such Lender such increased costs or additional amounts pursuant to SECTION 3.10 incurred or accrued from and after the date of such purchase offer but shall be obligated to and shall pay any such increased costs or additional amounts incurred or accrued prior to the date of such purchase offer. SECTION 3.11. Payments Not at End of Interest Period; Failure to Borrow. If for any reason any payment of principal of Eurodollar Advances is made other than on the last day of the Interest Period applicable to the Borrowing comprised of such Advances or the Borrower fails to borrow or to convert or continue any Borrowing comprised of Eurodollar Advances after giving a Notice of Borrowing or a Notice of Conversion or Continuation with respect thereto, then the Borrower shall pay to the Agent for the ratable account of the Lenders an amount computed pursuant to the following formula: L = (R - T) x P x D 360 L = amount payable to the Agent R = interest rate on Eurodollar Advances comprising such Borrowing T = effective interest rate per annum at which any readily marketable bond or other obligation of the United States, selected at the Agent's sole discretion, maturing on or near the last day of the Interest Period applicable to such Borrowing and in approximately the same amount as such Borrowing can be purchased by the Agent on the day of such payment of principal or failure to borrow or convert or continue P = the amount of principal prepaid or the amount of the requested Borrowing D = the number of days remaining in the applicable Interest Period as of the date of such payment or the number of days of the requested Interest Period The Borrower shall pay such amount upon presentation by the Agent of a statement setting forth the amount and the Agent's calculation thereof pursuant hereto, which statement shall be deemed true and correct absent manifest error. SECTION 3.12. Manner of Payment. (a) Each payment (including prepayments) by the Borrower on account of the principal of or interest on the Loans or of any other amounts payable to the Agent or to the Agent for the account of any or all Lenders under this Agreement or any Note shall be made not later than 12:00 noon (Boston time) on the date specified for payment under this Agreement to the Agent at the Agent's Office, in Dollars, in immediately available funds and shall be made without any setoff, counterclaim or deduction whatsoever. Any payment received on such day after such time shall be deemed a payment on such date for the purposes of SECTION 11.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Settlement among the Agent and the Lenders will be made in accordance with SECTION 3.13. (b) The Borrower hereby irrevocably authorizes each Lender and each Affiliate of each Lender to charge any account of the Borrower maintained with such Lender or Affiliate with such amounts as may be necessary from time to time to pay any Secured Obligations (whether or not owed to the Agent or such Lender) which are not paid when due. (c) If any payment under this Agreement or any Note shall be specified to be made on a day which is not a Business Day, it shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing interest, if any, in accordance with such payment, PROVIDED, that if such payment is a payment of principal of or interest on a Eurodollar Advance and such extension of time would cause the payment date to fall in the next calendar month, such payment shall be made on the next preceding Business Day. SECTION 3.13. Pro Rata Treatment; Settlement between Agent and Lenders. (a) Each Borrowing under the Revolving Credit Facility shall be made pro rata from the Lenders on the basis of their respective Commitment Percentages. Each payment or prepayment of principal and interest on the Loans shall be made to the Agent for the account of the Lenders, and shall be applied by the Agent, pro rata on the basis of the respective Commitment Percentages of the Lenders in effect immediately prior to such payment or prepayment; PROVIDED, HOWEVER, that if any Lender shall fail or refuse to make available to the Agent the Advance to be made by such Lender as part of any Borrowing under the Revolving Credit Facility and the provisions of SECTION 2.2(C) are not applicable, then all amounts thereafter received by the Agent for application to repayment of the principal of or payment of interest on the outstanding Revolving Credit Loan shall be paid by the Agent (i) as to principal, to the Lender, if any, the aggregate principal amount of whose outstanding Advances under the Revolving Credit Facility exceeds such Lender's Commitment Percentage of the total principal amount of the outstanding Revolving Credit Loan until such excess is eliminated and (ii) as to interest, to the Lenders ratably in the same proportion that the Advances under the Revolving Credit Facility outstanding from each of them bears to the total outstanding Revolving Credit Loan. (b) The Agent shall pay to each Lender such Lender's pro rata share of all payments received by the Agent hereunder in respect of the principal of, or interest on, the Loans, and such Lender's share of any other Secured Obligation owed to such Lender, by wire transfer of same day funds not later than the first Business Day after such payment is received. Any such amount which is not paid by the Agent to such Lender on the day such payment is received by the Agent, provided such payment is received by the Agent prior to 12:00 noon (Boston time) on such day, shall bear interest for each day until paid in full at the Federal Funds Effective Rate in effect on such day, payable by the Agent. SECTION 3.14. Loan Account. (a) Each Lender shall open and maintain on its books a loan account in the Borrower's name. Such loan account shall show as debits thereto each Advance made by such Lender under this Agreement and as credits thereto all payments received by such Lender and applied to repayment or prepayment of the principal of each such Advance, so that the balance of the loan account at all times reflects the principal amount due such Lender from the Borrower. (b) The Agent shall maintain on its books a control account for the Borrower in which shall be recorded (i) the amount of each disbursement made hereunder (ii) the amount of any principal or interest due or to become due from the Borrower hereunder, and (iii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's ratable share thereof. The Agent shall also maintain on its books a control account for the Borrower in which shall be recorded the amount of any fees due from the Borrower to the Agent and each Lender hereunder and the amount of any fees received by the Agent from the Borrower and each Lender's share thereof. (c) The entries made in the accounts pursuant to SECTIONS 3.14(A) and (B) shall be PRIMA FACIE evidence, in the absence of manifest error, of the existence and amounts of the obligations of the Borrower therein recorded and in case of discrepancy between such accounts, in the absence of manifest error, the accounts maintained pursuant to SECTION 3.14(B) shall be controlling. (d) The Agent on behalf of the Lenders will account to the Borrower monthly with a statement of Borrowings, of the aggregate outstanding principal balance, if any, of the Loans and of charges and payments made pursuant to this Agreement, and such account rendered by the Agent shall be deemed final, binding and conclusive unless the Agent is notified by the Borrower in writing to the contrary within 20 days after the date the account was so rendered. Such notice by the Borrower shall be deemed an objection only to those items specifically objected to therein. Failure of the Agent to render such account shall in no way affect its or any Lender's rights hereunder. ARTICLE 4 - CONDITIONS PRECEDENT SECTION 4.1. Conditions Precedent to Effectiveness. Notwithstanding any other provision of this Agreement, this Agreement shall not become effective and the Lenders shall not be obligated to make the Advances under the Term Loan Facility contemplated by SECTION 2A.1 or under the Revolving Credit Facility until each of the following conditions has been fulfilled prior to or contemporaneously with the making of such Advances: (a) Closing Documents. The Agent shall have received each of the following documents, all of which shall be satisfactory in form and substance to the Agent and its special counsel and the Lenders: (i) certified copies of the certificate of incorporation and by-laws of the Borrower as in effect on the Effective Date, (ii) certified copies of all corporate action, including stockholder or partner approval, if necessary, taken by the Borrower to authorize the execution, delivery and performance of this Agreement, the Loan Documents and the Borrowings under this Agreement, (iii) certificates of incumbency and specimen signatures with respect to each of the Authorized Officers of the Borrower or other Persons authorized to execute and deliver this Agreement and the Loan Documents on behalf of the Borrower or other Person executing any document to be delivered in connection with this Agreement and to request Borrowings under this Agreement, (iv) a certificate evidencing the good standing of the Borrower in the jurisdiction of its incorporation and in each other jurisdiction in which it is qualified to transact business, (v) copies of all the financial statements referred to in SECTION 5.1(N) and meeting the requirements thereof, (vi) a signed opinion of (A) Watson & Dana, counsel for the Borrower, substantially in the form of Exhibit C-1, (B) Gordon Altman Butowsky Weitzen Shalov & Wein, special New York counsel for the Borrower, substantially in the form of Exhibit C-2, and (C) Miller & Martin, special Tennessee counsel for the Borrower, substantially in the form of Exhibit C-3, and in each case opining as to such other matters in connection with this Agreement as the Agent or its special counsel may reasonably request, (vii) any Financing Statements (including amendments thereto) necessary or appropriate in connection with the transactions contemplated by this Agreement, duly executed by the Borrower, and searches of the Uniform Commercial Code (or equivalent) records of each office in which the filing of a Financing Statement naming the Borrower as debtor and the Agent for the benefit of the Lenders as secured party is necessary or appropriate to perfect the Security Interest as security for the Secured Obligations, evidencing the filing of such Financing Statements and no others affecting the Collateral, (viii) copies of a modification agreement with respect to each Mortgage, duly executed and delivered by the Borrower and evidence of the recording of such instrument in the appropriate jurisdiction for the recording of a mortgage (or equivalent) on the Real Estate subject thereto, (ix) as to each Mortgage, a fully paid endorsement to each of the mortgagee title insurance policies issued to the Agent in respect of such Mortgage, or, in each case, at the option of the Agent, unconditional commitments for the issuance thereof with all requirements and conditions to the issuance of the final policy or endorsement, as the case may be, deleted or marked satisfied, issued by a title insurance company satisfactory to the Agent, each in an amount equal to not less than the fair market value of the Real Estate subject to the Mortgage insured thereby, insuring each Mortgage, as modified, to create a valid first Lien on, and security title to, all Real Estate described therein with no exceptions which the Agent shall not have approved in writing and no survey exceptions, (x) copies of each of the other Loan Documents duly executed by the parties thereto, together with evidence satisfactory to the Agent of the due authorization and binding effect of each such Loan Document on such party, (xi) a certification from the Borrower as to such factual matters as shall be requested by the Agent, (xii) certificates of insurance relating to (i) each of the policies of insurance covering any of the Collateral together with loss payable clauses which comply with the terms of SECTION 7.9(B) and (ii) each of the policies of insurance required by the Mortgages, in each case together with loss payable clauses satisfactory to the Agent, (xiii) a Certificate of the President or Chief Financial Officer of the Borrower stating that, to the best of his knowledge and based on an examination sufficient to enable him to make an informed statement, (A) all of the representations and warranties made or deemed to be made under this Agreement are true and correct as of the Effective Date, both with and without giving effect to the Loans to be made at such time and the application of the proceeds thereof, and (B) no Default or Event of Default exists, (xiv) a letter from the Borrower to the Agent requesting the Advances under the Term Loan Facility and, if any, the Revolving Credit Facility contemplated to be made on the Effective Date and specifying the method of disbursement, (xv) duly executed amendments or modifications to or confirmations of the Agency Account Agreements, the Patent Assignment, the Trademark Assignments, and the Pledge Agreement duly executed and delivered by the Borrower, as the Agent may reasonably request, each in form and substance satisfactory to the Agent and the Lenders, (xvi) such assignments of lease and landlord's waiver and consent agreements, or confirmations thereof, duly executed on behalf of each landlord of real property on which any Collateral is located, as the Agent may request, (xvii) a Borrowing Base Certificate prepared as of the last day of the month for which the Borrower has available financial information that immediately precedes the Effective Date, and (xviii) such other documents and instruments as the Agent or any Lender may reasonably request. (b) Notes. Each Lender shall have received a Revolving Credit Note and Term Note complying with the terms of SECTIONS 2.4 AND 2A.4, respectively, (c) No Material Adverse Change. As of the Effective Date, no change shall have occurred which is materially adverse to the assets, liabilities, businesses, operations, condition (financial or otherwise) or prospects of the Borrower and its Consolidated Subsidiaries taken as a whole from those presented by the unaudited financial statements for the Borrower and its Consolidated Subsidiaries as of June 30, 1995 and for the nine-month period ended on such date, copies of which have been delivered to Lenders, and the Agent shall be provided with a certificate of the Chief Financial Officer of the Borrower to such effect. (d) No Litigation. As of the Effective Date, no action or proceeding, excluding those listed on SCHEDULE 5.1(J), shall have been instituted against the Borrower or any of its Subsidiaries in which an adverse outcome is likely to have a Materially Adverse Effect on the Borrower and its Subsidiaries taken as a whole and the Agent shall be provided with a certificate of the Chief Financial Officer of the Borrower to such effect. (e) Commitment Percentages. The Lenders shall have taken such actions and sold or purchased such amounts of the Revolving Credit Loans as shall satisfy the Agent that the principal amount of the Revolving Credit Loans outstanding to each Lender is in an amount equal to such Lender's Commitment Percentage times the aggregate outstanding principal balance of such Revolving Credit Loans. SECTION 4.2. Subsequent Borrowings. (a) At the time of making of each Borrowing: (i) all of the representations and warranties made or deemed to be made under SECTIONS 5.1(A) (insofar as it pertains to continued existence of the Borrower), 5.1(G), 5.1(H), 5.1(J), 5.1(O), 5.1(Q) AND 5.1(S) shall be true and correct at such time both with and without giving effect to the Borrowing to be made at such time and the application of the proceeds thereof, and (ii) the corporate actions of the Borrower referred to in SECTION 4.1(A)(II) shall remain in full force and effect and the incumbency of the officers or other persons authorized to act on behalf of the Borrower shall be as stated in the certificates of incumbency delivered pursuant to SECTION 4.1(A)(III) or as subsequently modified and reflected in a certificate of incumbency delivered to the Agent. (b) Each Notice of Borrowing shall constitute a certification to the effect set forth in CLAUSES (A)(I) and (II) above by the Borrower to the Agent for the benefit of the Lenders and the Agent may, without waiving either condition, consider the conditions specified in SECTION 4.2(A)(I) and (II) fulfilled and a certification by the Borrower to such effect made, if no written notice to the contrary is received by the Agent prior to the making of the Borrowing then to be made. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER SECTION 5.1. Representations and Warranties. The Borrower represents and warrants to the Agent and each Lender as follows: (a) Organization; Power; Qualification. The Borrower is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the failure to be so qualified would have a Materially Adverse Effect on the Borrower. The jurisdictions in which the Borrower is qualified to do business are listed on SCHEDULE 5.1(A). (b) Subsidiaries and Capital Structure. SCHEDULE 5.1(B) correctly sets forth the name of each Subsidiary of the Borrower, its jurisdiction of incorporation, the name of its immediate parent or parents, and the percentage of its issued and outstanding securities owned by the Borrower or any other Subsidiary of the Borrower and indicating whether such Subsidiary is a Consolidated Subsidiary. Except as set forth on SCHEDULE 5.1(B), (i) no Subsidiary of the Borrower has issued any securities convertible into shares of such Subsidiary's capital stock or any options, warrants or other rights to acquire any shares or securities convertible into such shares, (ii) the outstanding stock and securities of each such Subsidiary are owned by the Borrower or a Wholly Owned Subsidiary of the Borrower, or by the Borrower and one or more of its Wholly Owned Subsidiaries, free and clear of all Liens, warrants, options and rights of others of any kind whatsoever, and (iii) the Borrower has no Subsidiaries. The outstanding capital stock of the Borrower and each of its Subsidiaries has been duly and validly issued and is fully paid and nonassessable by the issuer, and the owners of such shares of capital stock of the Borrower and each of its Subsidiaries are set forth on SCHEDULE 5.1(B). The sole general partner of Synthetic L.P. is SI Management and the sole general partner of SI Management is Synthetic Management. (c) Authorization of Agreement and Loan Documents and Borrowing. Each Loan Party has the right and power, and has taken all necessary action to autho rize it, to execute, deliver and perform the Loan Documents to which it is a party in accordance with their respective terms and to make Borrowings hereunder. This Agreement and each of the Loan Documents have been duly executed and delivered by the duly Authorized Officers of the appropriate Loan Party and each is, or each when executed and delivered in accordance with this Agreement will be, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms. (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, etc. Except as provided in SCHEDULE 5.1(D), the execution, delivery and performance of this Agreement and each of the Loan Documents in accordance with their respective terms and the Borrowings hereunder do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Government Approval or violate any Applicable Law relating to the Borrower or any Subsidiary of the Borrower, (ii) conflict with, result in a breach of or constitute a default under the certificate of incorporation or by-laws of the Borrower or any Subsidiary of the Borrower, any indenture, agreement or other instrument to which the Borrower or any Subsidiary of the Borrower is a party or by which the Borrower or any Subsidiary of the Borrower or any property of the Borrower or any Subsidiary of the Borrower may be bound or any Governmental Approval relating to the Borrower or any Subsidiary of the Borrower, or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any Subsidiary of the Borrower other than the Security Interest. (e) Business. The Borrower is engaged principally in the business of converting polypropylene resins into woven and non-woven non-apparel products. (f) Compliance with Law; Governmental Approvals. Except as set forth in SCHEDULE 5.1(F), the Borrower and each of its Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or threatened attack by direct or collateral proceeding, except as would not, singly or in the aggregate, cause a Default or Event of Default or have a Materially Adverse Effect on the Borrower or such Subsidiary and in respect of which adequate reserves have been established on the books of the Borrower or such Subsidiary, and (ii) is in compliance with each Governmental Approval and in compliance with all other Applicable Law relating to it, except for such noncompliance which would not, singly or in the aggregate, cause a Default or Event of Default or have a Materially Adverse Effect on the Borrower or such Subsidiary and in respect of which adequate reserves have been established on the books of the Borrower or such Subsidiary. (g) Titles to Properties. Except as set forth in SCHEDULE 5.1(G), the Borrower and each Subsidiary has good, marketable and legal title to, or a valid leasehold interest in, its real properties and valid and legal title to all personal property and assets, including but not limited to, those reflected on the balance sheet delivered pursuant to SECTION 5.1(N), except those which have been disposed of by the Borrower or such Subsidiary subsequent to such date in the ordinary course of business. (h) Liens. Except for Permitted Liens (including Existing Liens set forth on SCHEDULE 5.1(H)), none of the respective properties and assets of the Borrower or its Subsidiaries is, as of the Agreement Date, subject to any Lien. No financing statement under the Uniform Commercial Code or other instrument evidencing a Lien which names the Borrower or any Subsidiary as debtor (other than the Financing Statements) which has not been terminated has been filed in any State or other jurisdiction and neither the Borrower nor any Subsidiary has signed any such financing statement or other instrument or any security agreement authorizing any secured party thereunder to file any such financing statement or instrument, except to perfect those Liens listed on SCHEDULE 5.1(H). (i) Indebtedness and Guarantees. SCHEDULE 5.1(I) is a complete and correct listing of all (i) Indebtedness for Money Borrowed and (ii) Guarantees of the Borrower and each of its Subsidiaries as of the Agreement Date. The Borrower and each Subsidiary has performed and is in compliance with all of the terms of such Indebtedness and Guarantees and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with notice or lapse of time or both would constitute such a default or event of default, exists as of the Agreement Date with respect to any such Indebtedness or Guarantee. (j) Litigation. Except as set forth on SCHEDULE 5.1(J), there are no actions, suits or proceedings pending (nor, to the knowledge of the Borrower, are there any actions, suits or proceedings threatened, nor is there any basis therefor) against or in any other way relating adversely to or affecting the Borrower or any Subsidiary of the Borrower or any of its respective properties in any court or before any arbitrator of any kind or before or by any governmental body, except actions, suits or proceedings of the character normally incident to the kind of business conducted by the Borrower and such Subsidiaries which, if adversely determined, would not singly or in the aggregate (together with those described in SCHEDULE 5.1(J)) have a Materially Adverse Effect on the Borrower or any such Subsidiary and there are no strikes or walkouts in progress relating to any labor contracts to which the Borrower or any such Subsidiary is a party. (k) Patents and Trademarks. The Borrower owns or possesses all patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct the business of the Borrower and its Subsidiaries as now and presently planned to be conducted without conflict with the rights of others and SCHEDULE 5.1(K) lists all patents and trademarks owned by the Borrower on the Agreement Date or to be acquired and owned on the Effective Date. (l) Tax Returns and Payments. All United States federal, state and local as well as foreign national, provincial and local, tax returns of the Borrower and each Subsidiary of the Borrower required by Applicable Law to be filed have been duly filed, and all federal, state foreign national, provincial and local taxes, assessments and other governmental charges or levies upon the Borrower and each Subsidiary of the Borrower and its respective property, income, profits and assets which are due and payable have been paid, except any such nonpayment which is at the time permitted under SECTION 8.6. Federal income tax returns for the Borrower and its Consolidated Subsidiaries have been examined and reported on by the Internal Revenue Service (or closed by applicable statutes), and all deficiencies satisfied as reflected on SCHEDULE 5.1(L). Foreign national and provincial tax returns of the Foreign Subsidiaries have been settled and agreed with the foreign taxing authorities as reflected on SCHEDULE 5.1(L). The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of federal, state, foreign national, provincial and local taxes for all fiscal years and portions thereof since the organization of such companies are in the judgment of the Borrower adequate, and the Borrower knows of no reason to anticipate any additional assessments for any of such years which, singly or in the aggregate, might have a Materially Adverse Effect on the Borrower or its Subsidiaries. (m) Burdensome Provisions. Except as set forth on SCHEDULE 5.1(M), neither the Borrower nor any Subsidiary of the Borrower is a party to any indenture, agreement, lease or other instrument, or subject to any charter or corporate restriction, Governmental Approval or Applicable Law compliance with the terms of which might have a Materially Adverse Effect on the Borrower or such Subsidiary. (n) Financial Statements. The Borrower has furnished to the Agent and each Lender copies of the audited Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of September 30, 1994 and the related audited Consolidated statements of income, cash flow and shareholders' equity of the Borrower and its Consolidated Subsidiaries for the fiscal year of the Borrower ended on such date, certified, without qualification, by Deloitte & Touche. In addition, the Borrower has furnished to the Agent and each Lender copies of the unaudited Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1995 and the related Consolidated statements of income and cash flow of the Borrower and its Consolidated Subsidiaries for the nine-month period ended on such date. Such financial statements are complete and correct, and present fairly in accordance with GAAP the Consolidated financial position of the Borrower and its Consolidated Subsidiaries as at, and results of operations of the Borrower and its Consolidated Subsidiaries for the periods ended on, the respective dates thereof (subject, in the case of such interim statements, to the absence of notes and to normal year-end audit adjustments). Except as disclosed or reflected in such financial statements and except as disclosed in writing to the Lenders prior to the Effective Date, as at the Effective Date the Borrower had no material liabilities, contingent or otherwise, and there were no material unrealized or anticipated losses of the Borrower. (o) Adverse Change. Since June 30, 1995, (i) no material adverse change in the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower and its Subsidiaries taken as a whole has occurred, and (ii) no event has occurred or failed to occur which has had, or may have, a Materially Adverse Effect on the Borrower and its Subsidiaries taken as a whole. (p) ERISA. Except as set forth on SCHEDULE 5.1(P), as supplemented from time to time, the Borrower has no Plans. Each Plan is in compliance with ERISA in all material respects. No material liability to the PBGC or to a Multi employer Plan has been, or is expected by the Borrower to be, incurred by the Borrower. (q) Absence of Defaults. Neither the Borrower nor any Subsidiary of the Borrower is in default under its certificate of incorporation, charter, other incorporation documents or by-laws and no event has occurred, which has not been remedied, cured or waived, (i) which constitutes a Default or an Event of Default, or (ii) which constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by the Borrower or any Subsidiary of the Borrower under any material agreement (other than this Agreement) or judgment, decree or order to which the Borrower or any Subsidiary of the Borrower is a party or by which the Borrower or any Subsidiary of the Borrower or any of their respective properties may be bound, except, in the case only of any such agreement, for alleged defaults which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established on the books of the Borrower or the relevant Subsidiary. (r) Accuracy and Completeness of Information. All written nformation, reports and other papers and data produced by or on behalf of the Borrower and furnished to the Agent were, to the best of the Borrower's knowledge, at the time the same were so furnished, complete and correct in all material respects, to the extent necessary to give the recipient a true and accurate knowledge of the subject matter. No fact is known to the Borrower which has had, or may in the future have (so far as the Borrower can foresee), a Materially Adverse Effect upon the Borrower and its Subsidiaries taken as a whole which has not been set forth in the financial statements referred to in SECTION 5.1(N) or in such information, reports or other papers or data or otherwise disclosed in writing to the Agent prior to the Agreement Date. No document furnished or written statement made to the Agent in connection with the negotiation, preparation or execution of this Agreement or any of the Loan Documents contains or will contain any untrue statement of a fact material to the creditworthiness of the Borrower or its Subsidiaries or omits or will omit to state a material fact necessary in order to make the statement contained therein not misleading. (s) Solvency. In each case after giving effect to the Indebtedness represented by the Loans outstanding and to be incurred, the Senior Subordinated Debt and the other transactions contemplated by this Agreement, the Borrower is solvent, having assets of a fair salable value which exceeds the amount required to pay its debts and the Borrower is able to and anticipates that it will be able to meet its debts as they mature and has adequate capital to conduct the business in which it is or proposes to be engaged. (t) Receivables. (i) Status. The Borrower has no knowledge of any fact or circumstance not disclosed to the Agent in writing which would impair the validity or collectibility of any Receivable. (ii) Principal Executive Offices. The principal executive office of the Borrower and the books and records relating to the Receivables are located at the address or addresses set forth on SCHEDULE 5.1(T) and, except as shown on such schedule, have been located there for the five years immediately preceding the Agreement Date or for the duration of such Person's existence, whichever is less. (u) Inventory. (i) Condition. All Inventory is in good condition, meets in all material respects, all standards imposed by any governmental agency, or department or division thereof, having regulatory authority over such goods, their use or sale, and is currently either usable or salable in the normal course of the Borrower's business, except to the extent reserved against in the financial statements referred to in SECTION 5.1(N) or delivered pursuant to ARTICLE 9. (ii) Location. All Inventory is located on the premises set forth on SCHEDULE 5.1(U) or is Inventory in transit to one of such locations, except as otherwise disclosed in writing to the Agent, and has been so located for the last five years. (v) Equipment. All Equipment of the Borrower is in good order and repair in all material respects and is located on the premises set forth on SCHEDULE 5.1(V) and no Equipment of the Borrower has been located on other premises during the last five years. (w) Real Property. The Borrower owns no real property other than the Real Estate and leases no real property other than that described on SCHEDULE 5.1(W) and, except as otherwise disclosed on SCHEDULE 5.1(W) such Real Property and leaseholds constitute all of the real property employed in the business of the Borrower. (x) Corporate and Fictitious Names. Except as otherwise disclosed on SCHEDULE 5.1(X), during the five-year period preceding the Agreement Date, neither the Borrower nor any predecessor thereof has been known as or used any corporate or fictitious name other than the corporate name on the Effective Date. (y) Federal Regulations. Neither the Borrower nor any of its Subsidiaries is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purposes of "purchasing" or "carrying" any "margin stock" (as each of the quoted terms is defined or used in Regulations G and U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Loans will be 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 of such Board of Governors. If requested by any Lender or the Agent, the Borrower will furnish to the Agent, with a counterpart for each Lender, a statement in conformity with the requirements of said Regulation G, T, U or X to the foregoing effect. (z) Investment Company Act. The Borrower is not an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). (aa) Hazardous Waste and Substances; Environmental Requirements. Without limiting the generality of SECTION 5.1(F), (i) the Borrower has all material permits required by any Environmental Laws for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the knowledge of the Borrower, threatened attack by direct or collateral proceedings and (ii) the Borrower is in compliance with all Environmental Laws and occupational health and safety laws applicable to the Borrower or its properties, including the Real Estate, except for instances of noncompliance which would not, singly or in the aggregate, cause a Default or Event of Default or have a Materially Adverse Effect and in respect of which adequate reserves have been established on the books of the Borrower. The Borrower shall promptly notify the Agent of its receipt of any notice of a violation of any such law, standard or regulation. The Borrower hereby agrees to indemnify and hold the Agent and each of the Lenders harmless from all loss, cost, damage, claim and expense incurred by the Agent or such Lender on account of the Borrower's failure to perform the obligations of this subparagraph. SECTION 5.2. Survival of Representations and Warranties, Etc. All representations and warranties set forth in this ARTICLE 5 and all statements contained in any certificate, financial statement, or other instrument, delivered by or on behalf of the Borrower pursuant to or in connection with this Agreement or any of the Loan Documents (including but not limited to any such made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall (unless otherwise provided) be made or deemed to be made at and as of the Agreement Date and at and as of the Effective Date and to the extent provided in SECTION 4.2(B) as of the date of each Borrowing made after the Effective Date. All representations and warranties made or deemed to be made under this Agreement shall survive and not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Agent or any Lender, or any Borrowing hereunder. ARTICLE 6 - SECURITY INTEREST SECTION 6.1. Security Interest. (a) To secure the payment, observance and performance of the Secured Obligations, the Borrower hereby confirms the mortgage, pledge and assignment pursuant to the Existing Credit Agreement and re-mortgages, re-pledges and re- assigns all of the Collateral to the Agent on behalf, and for the account, of the Lenders and confirms the grant pursuant to the Existing Credit Agreement and re-grants to the Agent on behalf, and for the account, of the Lenders a continuing security interest in, and a continuing Lien upon, all of the Collateral. (b) As additional security for all of the Secured Obligations, the Borrower hereby confirms the grant pursuant to the Existing Credit Agreement and re-grants to the Agent on behalf, and for the account, of the Lenders a security interest in, and assigns to the Agent on behalf, and for the account, of the Lenders all of the Borrower's right, title and interest in and to, any deposits or other sums at any time credited by or due from each Lender, or Affiliate of such Lender, to the Borrower, or credited by or due from any participant to the Borrower, with the same rights therein as if the deposits or other sums were credited by or due from such Lender. The Borrower hereby authorizes each Lender and each Affiliate of each Lender and each participant to pay or deliver to the Agent for the account of the Lenders, without any necessity on the Agent's or any Lender's part to resort to other security or sources of reimbursement for the Secured Obligations, at any time upon the occurrence of any Event of Default or in the event that the Agent on behalf of the Lenders should make demand for payment hereunder and without further notice to the Borrower (such notice being expressly waived), any of the aforesaid deposits (general or special, time or demand, provisional or final) or other sums for application to any Secured Obligation, irrespective of whether any demand has been made or whether such Secured Obligation is mature, and the rights given the Agent, the Lenders, their Affiliates and participants hereunder are cumulative with such Person's other rights and remedies, including other rights of set-off. The Agent will promptly notify the Borrower of its receipt of any such funds for application to the Secured Obligations, but failure to do so will not affect the validity or enforceability thereof. The Agent may give notice of the above grant of a security interest in and assignment of the aforesaid deposits and other sums, and authorization to, and make any suitable arrangements with, any such Lender, Affiliate or participant of a Lender for effectuation thereof, and the Borrower hereby irrevocably appoints the Agent as its attorney to collect any and all such deposits or other sums to the extent any such payment is not made to the Agent or any Lender by such Lender, Affiliate or participant. SECTION 6.2. Continued Priority of Security Interest. (a) The Security Interest granted by the Borrower shall at all times be valid, perfected and enforceable against the Borrower and all third parties in accordance with the terms of this Agreement, as security for the Secured Obligations, and the Collateral shall not at any time be subject to any Liens that are prior to, on a parity with or junior to the Security Interest, other than Permitted Liens. (b) The Borrower shall, at its sole cost and expense, take all action that may be necessary or desirable, or that the Agent may reasonably request, so as at all times to maintain the validity, perfection, enforceability and rank of the Security Interest in the Collateral in conformity with the requirements of SECTION 6.2(A), or to enable the Agent and the Lenders to exercise or enforce their rights hereunder, including but not limited to: (i) paying all taxes, assessments and other claims lawfully levied or assessed on any of the Collateral, except to the extent that such taxes, assessments and other claims constitute Permitted Liens, (ii) obtaining, after the Agreement Date, landlords', mortgagees' or mechanics' releases, subordinations or waivers, (iii) delivering to the Agent, endorsed or accompanied by such instruments of assignment as the Agent may specify, and stamping or marking, in such manner as the Agent may specify, any and all chattel paper, instruments, letters and advices of guaranty and documents evidencing or forming a part of the Collateral, and (iv) executing and delivering financing statements, pledges, designations, mortgages, deeds to secure debt, deeds of trust, hypothecations, notices and assignments, in each case in form and substance satisfactory to the Agent, relating to the creation, validity, perfection, maintenance or continuation of the Security Interest under the Uniform Commercial Code or other Applicable Law. (c) The Agent is hereby authorized to file one or more financing or continuation statements or amendments thereto without the signature of or in the name of the Borrower for any purpose contemplated in this SECTION 6.2. The Agent will give the Borrower notice of the filing of any such statements or amendments, which notice shall specify the locations where such statements or amendments were filed. A carbon, photographic, xerographic or other reproduction of this Agreement or of any of the Security Documents or of any financing statement filed in connection with this Agreement is sufficient, to the extent permitted by law, as a financing statement. (d) The Borrower shall mark its books and records as directed by the Agent and as may be necessary or appropriate to evidence, protect and perfect the Security Interest and shall cause its financial statements to reflect the Security Interest. ARTICLE 7 - COLLATERAL COVENANTS Until this Agreement has been terminated and all the Secured Obligations have been irrevocably paid in full, unless the Majority Lenders shall otherwise consent in the manner provided in SECTION 13.12: SECTION 7.1. Collection of Receivables. (a) The Borrower will cause all moneys, checks, notes, drafts and other payments relating to or constituting proceeds of Receivables, or of any other Collateral, to be forwarded to a Lockbox for deposit in an Agency Account in accordance with the procedures set out in the corresponding Agency Account Agreement, and in particular the Borrower will: (i) advise each Account Debtor to address all remittances with respect to amounts payable on account of any Receivables to a specified Lockbox, and (ii) stamp all invoices relating to any such amounts with a legend satisfactory to the Agent indicating that payment is to be made to the Borrower via a specified Lockbox. (b) Each Agency Account Agreement shall provide that all deposits in each Agency Account be transmitted daily by wire transfer or depository transfer check in accordance with procedures set forth in such Agency Account Agreement to the Agent at the Agent's Office: (i) for credit on account of the Secured Obligations, as provided in SECTIONS 2.3(C), 11.2 AND 11.4, such credits to be entered as of the Business Day after receipt and to be conditional upon final payment in cash or solvent credits of the items giving rise to them, and (ii) with respect to the balance, so long as no Default or Event of Default has occurred and is continuing, for transfer by wire transfer or depository transfer check to the Controlled Disbursement Account or, in the absence of a Controlled Disbursement Account, to the Designated Deposit Account. (c) Any moneys, checks, notes, drafts or other payments referred to in SUBSECTION (A) of this SECTION 7.1 which are received by or on behalf of the Borrower will be held in trust for the Agent and will be delivered to a Clearing Bank, as promptly as possible, in the exact form received, together with any necessary endorsements for deposit in the Agency Account maintained with such Clearing Bank and processing in accordance with the terms of the corresponding Agency Account Agreement. SECTION 7.2. Verification and Notification. The Agent shall have the right, (a) at any time and from time to time, in the name of the Agent, the Lenders or the Borrower, to verify the validity, amount or any other matter relating to any Receivables by mail, telephone, telegraph or otherwise, and (b) from and after the occurrence of a Default or Event of Default, to notify the Account Debtors or obligors under any Receivables of the assignment of such Receivables to the Agent on behalf of the Lenders and to direct such Account Debtor or obligors to make payment of all amounts due or to become due thereunder directly to the Agent on behalf of the Lenders and, upon such notification and at the expense of the Borrower, to enforce collection of any such Receivables, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as the Borrower might have done. SECTION 7.3. Disputes, Returns and Adjustments. (a) In the event any amounts due and owing under any Receivable for an amount in excess of $500,000 are in dispute between the Account Debtor and the Borrower, the Borrower shall provide the Agent with prompt written notice thereof. (b) The Borrower shall notify the Agent promptly of all material returns and credits in respect of any Receivables which notice shall specify the Receivables affected. (c) The Borrower may, in the ordinary course of business and prior to a Default or an Event of Default, grant any extension of time for payment of any Receivable or compromise, compound or settle the same for less than the full amount thereof, or release wholly or partly any Person liable for the payment thereof, or allow any credit or discount whatsoever thereon, PROVIDED that (i) no such action results in the reduction of more than $500,000 in the amount payable with respect to any Receivable, and (ii) the Agent is promptly notified of the amount of any such adjustments in excess of $200,000 and the Receivable affected thereby. SECTION 7.4. Invoices. (a) The Borrower will not use any invoices except invoices in the forms delivered to the Agent prior to the Agreement Date, unless the Borrower shall have given the Agent 30 days prior notice of their intended use. (b) Upon the request of the Agent, the Borrower shall deliver to the Agent copies of customers' invoices or the equivalent, original shipping and delivery receipts or other proof of delivery, customers' statements, the original copy of all documents, including, without limitation, repayment histories and present status reports, relating to Receivables and such other documents and information relating to the Receivables as the Agent shall specify. SECTION 7.5. Delivery of Instruments. In the event any Receivable becomes evidenced by a promissory note, trade acceptance or any other instrument for the payment of money, the Borrower will immediately thereafter deliver such instrument to the Agent, appropriately endorsed to the Agent on behalf of the Lenders. SECTION 7.6. Sales of Inventory. All sales of Inventory will be made in compliance with all requirements of Applicable Law. SECTION 7.7. Work in Process. The Security Interest in the Inventory shall continue through all stages of manufacture (to the extent, in the case of goods being manufactured for the Borrower by others, of the Borrower's interest in such goods) and shall, without further act, attach to raw materials, to work in process, to the finished goods and to the proceeds resulting from the sale or other disposition thereof and to all Inventory which is returned to the Borrower by customers or is otherwise recovered. SECTION 7.8. Ownership and Defense of Title. (a) Except for Permitted Liens, the Borrower shall at all times be the sole owner of each and every item of Collateral and shall not create any Lien on, or sell, lease, exchange, assign, transfer, pledge, hypothecate, grant a security interest or security title in or otherwise dispose of, any of the Collateral or any interest therein, except for sales of Inventory in the ordinary course of business, for cash or on open account or on terms of payment ordinarily extended to its customers, and except for the disposition of Equipment no longer used or deemed useful in the business of the Borrower in an amount of up to $250,000 in aggregate fair market value during any 12-month period in excess of the amount of proceeds of such dispositions applied by the Borrower to acquire replacement Equipment which, no later than the Borrower's obtaining possession thereof, will be subject to the Security Interest which shall be perfected as to such Equipment and shall be subject to no other Lien (other than Permitted Liens). The inclusion of "proceeds" of the Collateral under the Security Interest shall not be deemed a consent by the Agent or the Lenders to any other sale or other disposition of any part or all of the Collateral. (b) The Borrower shall defend its title in and to, and the Security Interest in, the Collateral against the claims and demands of all Persons. SECTION 7.9. Insurance. (a) The Borrower shall at all times maintain insurance on the Inventory and Equipment against loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Agent or any Lender shall reasonably specify, in amounts and under policies issued by the Borrower's present insurers or other insurers reasonably acceptable to the Majority Lenders. All premiums on such insurance shall be paid by the Borrower and copies of the policies delivered to the Agent. The Borrower will not use or permit the Inventory or Equipment owned or used by it to be used unlawfully or outside of any insurance coverage. (b) All insurance policies required under SECTION 7.9(A) shall contain loss payable clauses in the form submitted to the Borrower by the Agent or in other form and substance satisfactory to the Majority Lenders, naming the Agent, on behalf of the Lenders, as loss payee as their interests may appear, and providing (i) that all proceeds thereunder shall be payable to the Agent on behalf of the Lenders, (ii) that no such insurance shall be affected by any act or neglect of the insurer or owner of the property described in such policy, and (iii) that such policy and loss payable clauses may not be canceled, amended or terminated unless at least 30 days' prior written notice is given to the Agent. (c) Any proceeds of insurance referred to in this SECTION 7.9 which are paid to the Agent shall be, at the sole option of the Majority Lenders, either (i) applied to rebuild, restore or replace the damaged or destroyed property, or (ii) applied to the payment or prepayment of the Secured Obligations; PROVIDED, HOWEVER, that if the total loss is $10,000,000 or less, and at the time no Event of Default has occurred and is continuing, then the Borrower may reborrow under the terms of this Agreement the amount of any such proceeds applied to repay Secured Obligations to rebuild, restore or replace the damaged or destroyed property, subject to reasonable conditions as would ordinarily be applied by the Lenders in making construction loans. (d) With respect to the Real Estate, the Borrower shall maintain insurance as provided in the Mortgages. SECTION 7.10. Location of Offices and Collateral. (a) The Borrower will not change the location of its chief executive office or its books and records relating to the Collateral or change its name, its identity or corporate structure without giving the Agent 60 days prior written notice thereof. (b) All Inventory, other than Inventory in transit, to any such location, and all Equipment will at all times be kept by the Borrower at the locations set forth in SCHEDULES 5.1(U) AND 5.1(V), respectively, and shall not, without the prior written approval of the Agent, be removed therefrom except, prior to an Event of Default, for sales of Inventory permitted under SECTIONS 7.6 and 7.8. (c) If any Inventory is in the possession or control of any of the Borrower's agents or processors, the Borrower shall notify such agents or processors of the Security Interest and, upon the occurrence of an Event of Default shall instruct them to hold all such Inventory for the account of the Lenders, subject to the instructions of the Agent. SECTION 7.11. Records Relating to Collateral. (a) The Borrower will at all times (i) keep complete and accurate records of Inventory on a FIFO basis, itemizing and describing the kind, type and quantity of Inventory and the Borrower's cost therefor and a current price list for such Inventory, and (ii) keep complete and accurate records of all other Collateral. (b) The Borrower will take, or cause to be taken, a complete physical listing of all Inventory, wherever located, at least annually. SECTION 7.12. Inspection. The Agent and each Lender (by any of its officers, employees or agents) shall have the right, to the extent that the exercise of such right shall be within the control of the Borrower, at any reasonable time or times during normal business hours and at their own expense to inspect the Collateral, all files relating thereto and the premises upon which any of the Collateral is located, to discuss the Borrower's affairs and finances, insofar as the same are reasonably related to the rights of the Agent and each Lender hereunder or under any of the Loan Documents, with any Person, to verify the amount, quantity, value and condition of, or any other matter relating to, any of the Collateral and in this connection to review, audit and make extracts from all records and files related to any of the Collateral. The Borrower will deliver to the Agent and each Lender any instrument necessary for it to obtain records from any service bureau maintaining records on behalf of the Borrower. SECTION 7.13. Maintenance of Equipment. The Borrower shall maintain all physical property that constitutes Equipment in good and workable condition in all material respects, with reasonable allowance for wear and tear, and shall exercise proper custody over all such property. SECTION 7.14. Information and Reports. (a) Schedule of Receivables. The Borrower shall deliver to the Agent and each Lender by the first day and the 15th day of each month a Schedule of Receivables which (i) shall be as of the 15th day and the last Business Day, respectively, of the immediately preceding accounting month of the Borrower, (ii) shall, in the case of the Schedule delivered not later than the 15th day of each calendar month, be reconciled to the Borrowing Base Certificate as of the last Business Day of the immediately preceding month, (iii) shall set forth a detailed aged trial balance of all its then existing Receivables, specifying the names, addresses and balance due for each Account Debtor obligated on a Receivable so listed, and (iv) shall set forth a detailed report of balances due from and rebates owing to Account Debtors, specifying the names and addresses of each Account Debtor, the balance due on each Account Debtor's Account and the amount of any rebate owed to that Account Debtor in the ordinary course of the Borrower's business. (b) Schedule of Inventory. The Borrower shall deliver to the Agent and each Lender by the 15th day of each month a Schedule of Inventory as of the last Business Day of the immediately preceding accounting month of the Borrower, itemizing and describing the kind, type and quantity of Inventory and the Borrower's cost thereof together with a current price list for such Inventory. (c) Schedule of Equipment. The Borrower shall deliver to the Agent and each Lender on such dates as may be requested by the Agent or any Lender, a Schedule of Equipment describing each item of Equipment having an original purchase price in excess of $250,000 and the appraised value, if any, and the cost thereof. (d) Borrowing Base Certificate. The Borrower shall deliver to the Agent and each Lender not later than the 15th day of each calendar month a Borrowing Base Certificate prepared as of the close of business on the last Business Day of the immediately preceding month. (e) Notice of Diminution of Value. The Borrower shall give prompt notice to the Agent and each Lender of any matter or event which has resulted in, or may result in, the actual or potential diminution in excess of $200,000 in the value of any of its Collateral. (f) Other Information. The Agent may in its discretion from time to time require the Borrower to deliver the schedules described in SECTIONS 7.14(A), (B), (C) and (D) more or less often and on different schedules. Additionally the Borrower shall furnish to the Agent and each Lender such other information with respect to the Collateral as the Agent or any Lender may reasonably request. SECTION 7.15. Power of Attorney. The Borrower hereby appoints the Agent, as its attorney, with power (a) to endorse the name of the Borrower on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Agent's or a Lender's possession, and (b) to sign the name of the Borrower on any invoice or bill of lading relating to any Receivables, Inventory or other Collateral, on any drafts against customers related to letters of credit, on schedules and assignments of Receivables furnished to the Agent by the Borrower, on notices of assignment, financing statements and other public records relating to the perfection or priority of the Security Interest, or verifications of account and on notices to or from customers. .16. Leaseholds. The Borrower shall execute and deliver to the Agent on behalf of the Lenders, promptly after request by the Agent, such duly executed leasehold mortgages, assignments of leases, financing statements and landlords consents with respect to real property leased by the Borrower as the Agent may request, subject however to the ability of the Borrower to obtain necessary consents from the landlord to such leasehold mortgages, assignments of leases, financing statements and consents after employing its good faith best efforts to do so. In addition, the Borrower shall cause to be furnished to the Agent on behalf of the Lenders, at the Borrower's expense, fully-paid mortgagee title insurance with respect to the property covered by such leasehold mortgages, in form, substance and amount and from an insurer satisfactory to the Agent. The Borrower shall pay all fees, costs, expenses (including, without limitation, recording and filing fees and fees of counsel) incurred in connection with the preparation, recording and filing of such leasehold mortgages, assignments of leases and financing statements. SECTION 7.17. Motor Vehicle Title Certificates. The Borrower shall deliver to the Agent promptly after the Agent's request therefor, certificates of title for each vehicle included in the Equipment, together with duly executed applications to the appropriate State authorities requesting that each such certificate of title be reissued with the Security Interest noted thereon. SECTION 7.18. Title Insurance. In the event that the conditions of SECTION 4.1(A)(IX) are met by the delivery to the Agent on or prior to the Effective Date of commitments for the issuance of endorsements to mortgagee title insurance policies, the Borrower agrees that fully-paid endorsements meeting the requirements set forth in SECTION 4.1(A)(IX) shall be delivered to the Agent within 45 days after the Effective Date. ARTICLE 8 - AFFIRMATIVE COVENANTS Until this Agreement has been terminated and all the Secured Obligations have been irrevocably paid in full, unless the Majority Lenders shall otherwise consent in the manner provided for in SECTION 13.12, the Borrower will, and will cause each of its Subsidiaries to: SECTION 8.1. Preservation of Legal Existence and Similar Matters. Preserve and maintain its corporate existence, rights, franchises, licenses and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign entity and authorized to do business in each jurisdiction in which the failure to be so qualified would have a Materially Adverse Effect on the Borrower or such Subsidiary. SECTION 8.2. Compliance with Applicable Law. (a) Comply with all Applicable Law relating to the Borrower or such Subsidiary where the failure to so comply would have a Materially Adverse Effect on the Borrower or such Subsidiary. (b) Whenever, subsequent to the Agreement Date, a material Governmental Approval shall be required by Applicable Law and is not routine in nature, deliver to the Agent on behalf of the Lenders a listing of such Governmental Approval and a copy thereof. SECTIN 8.3. Maintenance of Property. In addition to, and not in derogation of, the requirements of SECTION 7.8 and of any of the Security Documents, (a) protect and preserve all properties material to its business, including copyrights, patents, trade names and trademarks, and maintain in good repair, working order and condition in all material respects all tangible properties, and (b) from time to time make or cause to be made all needed and appropriate repairs, renewals, replacements and additions to such properties necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 8.4. Conduct of Business. At all times carry on its business in an efficient manner and engage only in businesses in substantially the same fields as the businesses conducted on the Agreement Date. SECTION 8.5. Insurance. Maintain, in addition to that required by SECTION 7.9 or any of the Security Documents, insurance with responsible insurance companies against such risks and in such amounts as is customarily maintained by similar businesses or as may be required by Applicable Law, and from time to time deliver to the Agent or any Lender upon its request a detailed list of the insurance then in effect, stating the names of the insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. SECTION 8.6. Payment of Taxes and Claims. Pay or discharge when due (a) all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or upon any properties belonging to it, and (b) all lawful claims of materialmen, mechanics, carriers, warehousemen and landlords for labor, materials, supplies and rentals before the same become a Lien on any properties of the Borrower or such Subsidiary; except that this SECTION 8.6 shall not require the payment or discharge of any such tax, assessment, charge, levy or claim which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established on the appropriate books. SECTION 8.7. Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete), as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP consistently applied and maintain October 1 - September 30 as its fiscal year unless the Majority Lenders shall have agreed to a change in the Borrower's fiscal year. SECTION 8.8. Visits and Inspections. Permit representatives of the Agent or any Lender, from time to time, as often as may be reasonably requested, but only during normal business hours and at their own expense, to (a) visit and inspect its properties, (b) inspect and make extracts from its relevant books and records, including but not limited to management letters prepared by independent accountants, and (c) discuss with its principal officers and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. The rights granted the Agent and the Lenders by the Borrower under this Section are in addition to and not in derogation of the rights of the Agent and the Lenders under SECTION 7.12 and nothing in this Section shall be construed as imposing any additional requirement of notice or any other limitation on the rights of the Agent or the Lenders under SECTIONS 7.2 OR 7.3. SECTION 8.9. Use of Proceeds. (a) Use the proceeds of all Advances made on the Effective Date for the purposes set forth on SCHEDULE 8.9, (b) use the proceeds of all subsequent Advances only for working capital and general business purposes of the Borrower, including Capital Expenditures, and (c) not use any part of such proceeds to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) or for any other purpose which would involve a violation of such Regulation U or Regulations G, T or X of such Board of Governors, or for any other purpose prohibited by law or by the terms and conditions of this Agreement. SECTION 8.10. Hazardous Waste and Substances; Environmental Requirements. (a) In addition to, and not in derogation of, the requirements of SECTION 8.2 and of any of the Security Documents, comply with all laws, governmental standards and regulations applicable to the Borrower, the Real Estate or any of the Borrower's other assets in respect of occupational health and safety and Environmental Laws applicable to the Borrower, the Real Estate or any of the Borrower's other assets, promptly notify the Agent and each Lender of its receipt of any notice of a violation of any such law, rule, standard or regulation, and indemnify and hold the Agent and each Lender harmless from all loss, cost, damage, claim and expense incurred by the Agent or such Lender on account of the Borrower's failure to perform the obligations of this SECTION 8.10(A). (b) Whenever the Borrower gives notice to the Lender pursuant to this SECTION 8.10 with respect to a matter that reasonably could be expected to result in liability to the Borrower in excess of $500,000 in the aggregate, the Borrower shall, at the Agent's request and the Borrower's expense, (i) cause an independent environmental engineer acceptable to the Agent to conduct such tests of the site where the noncompliance or alleged noncompliance with Environmental Laws has occurred and prepare and deliver to the Agent and each Lender a report setting forth the results of such tests, a proposed plan to bring the Borrower into compliance with such Environmental Laws and an estimate of the costs thereof, and (ii) provide to the Agent and each Lender a supplemental report of such engineer whenever the scope of the noncompliance or the response thereto or the estimated costs thereof shall materially change. SECTION 8.11. Loans to Foreign Subsidiaries. In the event that the Majority Lenders consent to the Borrower making any loans to any Foreign Subsidiaries, require and cause such loans, if requested by the Majority Lenders, to be secured by a charge against all assets of such Foreign Subsidiary, and assign and pledge (pursuant to the Pledge Agreement or otherwise) to the Agent on behalf of the Lenders all such loans and charges as security for the Secured Obligations together with all instruments and other documents evidencing such loans and charges. ARTICLE 9 - INFORMATION Until this Agreement has been terminated and all the Secured Obligations have been irrevocably paid in full, unless the Majority Lenders shall otherwise consent in the manner set forth in SECTION 13.12, the Borrower will furnish to the Agent at its office then designated for notices pursuant to SECTION 13.1: SECTION 9.1. Financial Statements. (a) Monthly Financial Statements. As soon as available after the end of each month, but in any event within 20 days after the end of each month, copies of (i) the unaudited Consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such month and the related unaudited Consolidated statement of income for the Borrower and its Consolidated Subsidiaries for such month, for the fiscal quarter of the Borrower then ended (if such month is the last month in any such fiscal quarter) and for the portion of the fiscal year of the Borrower through such month, certified by the Chief Financial Officer as presenting fairly the Consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries taken as a whole (subject to normal year-end audit adjustments), (ii) if such month is the last month in any fiscal quarter of the Borrower, the unaudited Consolidated statement of cash flow of the Borrower and its Consolidated Subsidiaries for such fiscal quarter and for the portion of the fiscal year of the Borrower through such fiscal quarter, certified by the Chief Financial Officer as presenting fairly the cash flow of the Borrower and its Consolidated Subsidiaries taken as a whole (subject to normal year-end audit adjustments), (iii) the unaudited consolidating balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such month and the related unaudited consolidating statement of income for the portion of the fiscal year through such month, in each case showing intercompany eliminations, certified by the Chief Financial Officer as being fairly stated in all material respects (subject to normal year-end adjustments) when considered in relation to the Consolidated financial statements of the Borrower and its Consolidated Subsidiaries, (iv) a forecast of cash flow from operations for the ensuing six months, and (v) if such month is the last month of a fiscal quarter, a forecast of consolidating and Consolidated sales and operating earnings for the next succeeding fiscal quarter, which forecast shall be furnished only to the Agent and such of the Lenders as shall specifically request to be furnished with a copy of thereof; and (b) Audited Year-End Statements. As soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, copies of (i) the Consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such fiscal year and the related Consolidated statements of income, shareholders' equity and cash flow for such fiscal year, in each case setting forth in comparative form the figures for the previous year of the Borrower (unless there is no previous full year), certified, without qualification as to the scope of the audit, by independent certified public accountants of nationally recognized standing, whose certificates shall be in scope and substance satisfactory to the Agent and the Majority Lenders and who shall have authorized the Borrower to deliver such financial statements and certifications thereof to the Agent and Lenders pursuant to this Agreement, and (ii) the consolidating balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year and the related consolidating statement of income for such fiscal year, in each case showing intercompany eliminations, certified by the Chief Financial Officer as being fairly stated in all material respects when considered in relation to the Consolidated financial statements of the Borrower and its Consolidated Subsidiaries; all such financial statements to be complete and correct in all material respects and, except for forecasts, prepared in accordance with GAAP (except, with respect to interim financial statements, for the omission of footnotes and for the effect of normal year-end audit adjustments) applied consistently throughout the periods reflected therein. SECTION 9.2. Accountants' Certificate. Together with the financial statements referred to in SECTION 9.1(B), the Borrower shall deliver a certificate of such accountants addressed to the Agent (a) stating that in making the examination necessary for the certification of such financial statements, nothing has come to their attention to lead them to believe that any Default or Event of Default exists and, in particular, they have no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature, and (b) having attached the calculations, prepared by the Borrower and reviewed by such accountants, required to establish whether or not the Borrower is in compliance with the covenants contained in SECTIONS 10.1, 10.2, 10.5, 10.10 and 10.11, as at the date of such financial statements. SECTION 9.3. Officer Certificate. At the time the financial statements are furnished pursuant to SECTION 9.1(A), the Borrower shall also furnish a certificate of its President or Chief Financial Officer in the form of EXHIBIT D hereto (a) setting forth as at the end of such month the calculations required to establish whether or not the Borrower was in compliance with the requirements of SECTIONS 10.1, 10.2, 10.5, 10.10 and 10.11, as at the end of each respective period, and (b) stating that, based on an examination sufficient to enable him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default and its nature, when it occurred, whether it is continuing and the steps being taken by the Borrower with respect to such event or failure. SECTION 9.4. Copies of Other Reports. (a) Promptly upon receipt thereof, copies of all reports, if any, submitted to the Borrower or any Subsidiary or Affiliate of the Borrower, or their respective Boards of Directors by their independent public accountants, including, without limitation, any management report. (b) As soon as practicable, copies of all financial statements and reports as the Borrower or any Subsidiary or Affiliate of the Borrower shall send to its stockholders, and of all registration statements and all regular or periodic reports which the Borrower or any Subsidiary or Affiliate of the Borrower shall file with the Securities and Exchange Commission or any successor commission. (c) At the same time as the monthly or annual financial statements are delivered pursuant to SECTIONS 9.1, a statement setting forth the cash flows of the Borrower and each Consolidated Subsidiary of the Borrower for the period covered by such statements. (d) From time to time and promptly upon each request, such forecasts, data, certificates, reports, statements, opinions of counsel, documents or further information regarding the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower and each Subsidiary as the Agent or any Lender may request and that the Borrower or any Subsidiary has or (except in the case of legal opinions relating to the perfection or priority of the Security Interest) without unreasonable expense can obtain. The rights of the Agent and each Lender under this SECTION 9.4(D) are in addition to and not in derogation of its rights under any other provision of this Agreement or any of the Security Documents. (e) If requested by the Agent or any Lender, the Borrower will furnish to the Agent or such Lender statements in conformity with the requirements of Federal Reserve Form FR G-3 or FR U-1 referred to in Regulations G or U of the Board of Governors of the Federal Reserve System. SECTION 9.5. Notice of Litigation and Other Matters. Prompt notice of: (a) to the extent the Borrower is aware of the same, the commencement of all proceedings and investigations by or before any governmental or nongovernmental body and all actions and proceedings in any court or before any arbitrator against or in any other way relating adversely to, or adversely affecting, the Borrower or any Subsidiary or Affiliate of the Borrower or any of their respective property, assets or businesses, which might, singly or in the aggregate, cause a Default or an Event of Default or have a Materially Adverse Effect on the Borrower or such Subsidiary, (b) any amendment of the certificate of incorporation, or the charter documents, by-laws or partnership certificate or agreement of the Borrower or any Subsidiary or Affiliate of the Borrower, (c) any change in the business, assets, liabilities, financial condition, results of operations or business prospects of the Borrower or any Subsidiary or Affiliate of the Borrower which has had or may foreseeably have any Materially Adverse Effect on the Borrower or any such Subsidiary and any change in the executive officers of the Borrower or any such Subsidiary, and (d) any Default or Event of Default or any event which constitutes or which with the passage of time or giving of notice or both would constitute a default or event or default by the Borrower or any Subsidiary of the Borrower under any material agreement other than this Agreement to which such Borrower or any such Subsidiary is a party or by which the Borrower or any such Subsidiary or any of their respective properties may be bound, including, without limitation, the Indenture. SECTION 9.6. ERISA. As soon as possible and in any event within 30 days after the Borrower knows, or has reason to know, that: (a) any Termination Event with respect to a Plan has occurred or will occur, or (b) the aggregate present value of the Unfunded Vested Accrued Benefits under all Plans has increased to an amount in excess of $0, or (c) the Borrower or any of its Subsidiaries is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required by reason of its complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Plan, a certificate of the President or Chief Financial Officer of the Borrower setting forth the details of such of the events described in CLAUSES (A) through (C) as applicable and the action which is proposed to be taken with respect thereto, together with any notice or filing which may be required by the PBGC or other agency of the United States government with respect to such of the events described in CLAUSES (A) through (C) as applicable. SECTION 9.7. Accuracy of Information. All written information, reports, statements and other papers and data furnished to the Agent or any Lender, whether pursuant to this ARTICLE 9 or any other provision of this Agreement, or any of the Security Documents, shall be, at the time the same is so furnished, complete and correct in all material respects to the extent necessary to give the Agent and the Lenders true and accurate knowledge of the subject matter. SECTION 9.8. Revisions or Updates to Schedules. Should any of the information or disclosures provided on any of the Schedules originally attached hereto become outdated or incorrect in any material respect, Borrower promptly shall provide to the Agent and each Lender such revisions or updates to such Schedule(s) as may be necessary or appropriate to update or correct such Schedule(s), PROVIDED that no such revisions or updates to any Schedule(s) shall be deemed to have amended, modified or superseded such Schedule(s) as originally attached hereto, or to have cured any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule(s), unless and until the Majority Lenders, in their sole and absolute discretion, shall have accepted in writing such revisions or updates to such Schedule(s). ARTICLE 10 - NEGATIVE COVENANTS Until this Agreement has been terminated and all the Secured Obligations have been irrevocably paid in full, unless the Majority Lenders shall otherwise consent in the manner set forth in SECTION 13.12, the Borrower will not directly or indirectly, and in the case of SECTION 10.2 through 10.16 will not permit its Subsidiaries to: SECTION 10.1. Financial Ratios. Permit: (a) Working Capital. The ratio of Working Capital Assets of the Borrower and its Consolidated Subsidiaries to Working Capital Liabilities of the Borrower and its Consolidated Subsidiaries to be less than 2.00 to 1 at any time after the Effective Date; (b) Total Interest Coverage. The ratio of EBITDA to Consolidated Total Interest Expense (plus capitalized interest in connection with Capital Expenditures, but excluding therefrom any amortization of bond discount in connection with the Senior Subordinated Debentures) of the Borrower and its Consolidated Subsidiaries, for any period of 12 consecutive months ending (i) on the last day of any month ending after the Effective Date and on or before August 31, 1996 to be less than 1.75 to 1; (ii) on the last day of any month ending after August 31, 1996 and on or before August 31, 1997 to be less than 2.00 to 1; (iii) on the last day of any month ending after August 31, 1997 and on or before August 31, 1998 to be less than 2.25 to 1; and (iv) on the last day of any month ending after August 31, 1998, to be less than 2.50 to 1. (c) Total Debt Service Coverage. The ratio of Operating Cash Flow for any period described below to the sum of the aggregate amount of Total Interest Expense PLUS principal of Indebtedness for Money Borrowed paid (or payable as regularly scheduled principal repayments thereof) by the Borrower and its Consolidated Subsidiaries during the same period, other than principal amounts of any "Term Loan" (as defined in the Existing Credit Agreement or the Second Amended and Restated Revolving Credit and Security Agreement dated as of March 15, 1993, as amended) paid by the Borrower and its Consolidated Subsidiaries during the same period, to be less than: (i) 1.40 to 1 for any period of four consecutive fiscal quarters ending after the Effective Date and on or before March 31, 1996; (ii) 1.45 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1996 and on or before March 31, 1997; (iii) 1.55 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1997 and on or before March 31, 1999; (iv) 1.45 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1999 and on or before March 31, 2000; and (v) 1.40 to 1 for any period of four consecutive fiscal quarters ending after March 31, 2000. (d) Total Debt Coverage. The ratio of Indebtedness for Money Borrowed to EBITDA of the Borrower and its Consolidated Subsidiaries to be greater than: (i) 5.75 to 1 for any period of four consecutive fiscal quarters ending after the Effective Date and on or before June 30, 1996; (ii) 5.00 to 1 for any period of four consecutive fiscal quarters ending after June 30, 1996 and on or before June 30, 1998; and (iii) 4.00 to 1 for any period of four consecutive fiscal quarters ending after June 30, 1998. (e) Debt to Worth. The ratio of Consolidated Total Unsubordinated Debt (other than deferred taxes) of the Borrower and its Consolidated Subsidiaries to the sum of Consolidated Tangible Net Worth PLUS Subordinated Indebtedness to be greater than: (i) 1.15 to 1 at any time after the Effective Date to and including September 29, 1996; (ii) 1.10 to 1 at any time after September 29, 1996 to and including September 29, 1997; and (iii) 1.00 to 1 at any time after September 29, 1997. SECTION 10.2. Indebtedness for Money Borrowed. Create, assume, or otherwise become or remain obligated in respect of, or permit or suffer to exist or to be created, assumed or incurred or to be outstanding any Indebtedness for Money Borrowed, except that this SECTION 10.2 shall not apply to: (a) Indebtedness of the Borrower for Money Borrowed represented by the Loans and the Senior Subordinated Debentures, (b) without duplication of such Indebtedness specifically listed in the foregoing SUBSECTION (A), Existing Indebtedness for Money Borrowed, (c) Permitted Purchase Money Indebtedness, (d) Indebtedness for Money Borrowed of any Consolidated Subsidiary (i) arising under a Foreign Facility Agreement in an aggregate principal amount not greater than $4,000,000 or the Dollar Equivalent of such amount, or (ii) which is not secured by any Lien on the assets of such Consolidated Subsidiary or any of its Affiliates or Subsidiaries or Guaranteed by any Affiliate or Subsidiary of such Consolidated Subsidiary, and (e) other Indebtedness of the Borrower and its Subsidiaries for Money Borrowed, excluding Capitalized Lease Obligations, the aggregate principal amount of which outstanding at any time does not exceed $250,000. SECTION 10.3. Guaranties. Become or remain liable with respect to any Guaranty of any obligation of any other Person, except for Existing Guaranties and the guaranty of the Borrower under ARTICLE 14. SECTION 10.4. Investments. Acquire, after the Agreement Date, any Business Unit or Investment or, after such Agreement Date, permit any Investment to be outstanding, except that this SECTION 10.4 shall not apply to Permitted Investments. SECTION 10.5. Capital Expenditures. Make or incur any Capital Expenditures, except that this SECTION 10.5 shall not apply to Capital Expenditures in any fiscal year of the Borrower which, together with all other such Capital Expenditures by the Borrower and its Subsidiaries made during such fiscal year, would not exceed, in the aggregate: (a) for the fiscal year of the Borrower ended September 30, 1995, $13,100,000; (b) for the fiscal year of the Borrower ending September 30, 1996, $42,000,000; (c) for the fiscal year of the Borrower ending September 30, 1997, $10,000,000 plus the lesser of $3,000,000 and the amount, if any, by which $42,000,000 exceeds the actual amount of Capital Expenditures of the Borrower and its Consolidated Subsidiaries made during the fiscal year of the Borrower ending September 30, 1996; and (d) for any fiscal year of the Borrower ending after September 30, 1997, $10,000,000. SECTION 10.6. Restricted Payments and Purchases, Etc. Declare or make any Restricted Dividend Payment, Restricted Payment or Restricted Purchase. SECTION 10.7. Merger, Consolidation and Sale of Assets. Merge or consolidate with any other Person or sell, lease or transfer or otherwise dispose of all or a substantial portion of its assets to any Person, except that the provisions of this SECTION 10.7 shall not apply to sales or other transfers of assets by any Subsidiary of the Borrower to the Borrower or to any other Subsidiary of the Borrower. SECTION 10.8. Transactions with Affiliates. Effect any transaction with any Affiliate on a basis less favorable to the Borrower or such Subsidiary than would be the case if such transaction had been effected with a Person not an Affiliate, except that the provisions of this SECTION 10.8 shall not apply to transactions entirely between (a) the Borrower and any Subsidiary of the Borrower or (b) Subsidiaries of the Borrower. SECTION 10.9. Liens. Create, assume or permit or suffer to exist or to be created or assumed any Lien on any of the property or assets of the Borrower or any of its Subsidiaries, real, personal or mixed, tangible or intangible, other than Permitted Liens. SECTION 10.10. Capitalized Lease Obligations. Incur after the Agreement Date any Capitalized Lease Obligation if such Capitalized Lease Obligation when added to other Capitalized Lease Obligations and Permitted Purchase Money Indebtedness of the Borrower and its Subsidiaries shall exceed $5,000,000. SECTION 10.11. Operating Leases. Enter into any Operating Lease if the aggregate annual rental under all Operating Leases of the Borrower and its Subsidiaries would exceed $6,000,000 at the Effective Date or at any time thereafter; PROVIDED, FURTHER, that a purchase of equipment by the Borrower for which the Borrower is reimbursed by a leasing company shall be deemed to be an Operating Lease and subject to this SECTION 10.11 and shall not be deemed to be a sale and leaseback. SECTION 10.12. Plans. Permit, or take any action which would result in, the aggregate present value of the Unfunded Vested Accrued Benefits under all Plans of the Borrower and its Subsidiaries to exceed $-0-. SECTION 10.13. Sales and Leasebacks. Enter into any arrangement with any Person providing for its leasing from such Person of real or personal property which has been or is to be sold or transferred, directly or indirectly, by the Borrower or any Subsidiary of the Borrower to such Person. SECTION 10.14. Prepayments of Indebtedness for Money Borrowed. Make any prepayments (other than regularly scheduled installment or amortization payments), directly or indirectly, on account of the principal of any Indebtedness for Money Borrowed (except the Loans and the Foreign Facilities in accordance with the other provisions of this Agreement or of the applicable Foreign Facility Agreements, as the case may be), or amend in any way the interest rate or principal amount or schedule of payments of principal and interest with respect to any such Indebtedness. SECTION 10.15. Change in Business. Engage in any line of business other than that engaged in on the Effective Date. SECTION 10.16. Issuance of Stock by Subsidiaries. Permit any Subsidiary (either directly or indirectly by issuance of rights or options for, or securities convertible into, such shares) to issue, sell or otherwise dispose of any shares of any class of its capital stock (other than directors' qualifying shares). SECTION 10.17. No Amendment. Amend in any material respect any term or provision contained in the Indenture, the Senior Subordinated Debentures, or consent to or enter into any agreement providing for the designation of any Indebtedness for Money Borrowed of the Borrower or any of its Subsidiaries, other than Indebtedness represented by the Loans, the Notes and the Foreign Facilities, as "Designated Senior Indebtedness," as such term is defined in the Indenture. ARTICLE 11 - DEFAULT SECTION 11.1. Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a) Default in Payment. The Borrower or any Foreign Subsidiary shall default in any payment of principal of, or interest on, any Loan, Note or any Foreign Facility when and as due (whether upon demand, at maturity, by reason of acceleration or otherwise) or in the reimbursement on demand (including by a Borrowing if permitted hereunder) of any amount drawn under a Letter of Credit. (b) Other Payment Default. The Borrower or any Foreign Subsidiary shall default in the payment, as and when due, of principal of or interest on, any other Secured Obligation or obligation under the Foreign Facilities, and such default shall continue for a period of five days after written notice thereof has been given to the Borrower by the Agent on behalf of the Lenders. (c) Misrepresentation. Any representation or warranty made or deemed to be made by the Borrower under this Agreement or any Loan Document or by a Foreign Subsidiary under any Foreign Facility Agreement, or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made. (d) Default in Performance. The Borrower shall default in the performance or observance of any term, covenant, condition or agreement contained in (i) ARTICLES 6, 7 OR 10 OR SECTIONS 8.1 (insofar as it requires the preservation of the corporate existence of the Borrower and the Foreign Subsidiaries), 8.9, 9.5 OR 9.6, or (ii) this Agreement (other than any such term, covenant, condition or agreement a default in the performance or observance of which is dealt with specifically elsewhere in this SECTION 11.1) and such default shall continue for a period of 30 days after written notice thereof has been given to the Borrower by the Agent. (e) Indebtedness Cross-Default. (i) There shall have occurred any default or event of default or other event, including, without limitation, a "Change in Control Triggering Event" as defined in the Indenture, which then permits any holder or holders, or any trustee or agent acting on behalf of such holder or holders, or any other Person to accelerate (without regard to any subordination or other agreements restricting such right) the maturity of, or require the purchase of, Indebtedness outstanding under the Senior Subordinated Debentures, or (ii) The Borrower or any Subsidiary shall fail to pay when due and payable the principal of or interest on any Indebtedness for Money Borrowed in an amount in excess of $500,000 (other than the Loans or Note and other than as described in CLAUSE (I) above), or (iii) The maturity of any Indebtedness described in CLAUSE (II) above shall have (A) been accelerated in accordance with the provisions of any indenture, contract or instrument providing for the creation of or concerning such Indebtedness or (B) been required to be prepaid prior to the stated maturity thereof. (f) Other Cross-Defaults. The Borrower or any Subsidiary shall default in the payment when due, or in the performance or observance, of any material obligation or condition of any material contract or lease (other than one of the Security Documents or one relating to Indebtedness for Money Borrowed), unless, but only as long as the existence of any such default is being contested by the Borrower or such Subsidiary, as the case may be, in good faith by appropriate proceedings and adequate reserves in respect thereof have been established on the books of the Borrower or such Subsidiary, as the case may be. (g) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary of the Borrower shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any formal corporate or partnership action for the purpose of effecting any of the foregoing. (h) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Subsidiary of the Borrower in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower or any such Subsidiary or of all or any substantial part of the assets, domestic or foreign, of the Borrower or any such Subsidiary, and such case or proceeding shall continue undismissed or unstayed for a period of 60 consecutive calendar days, or an order granting the relief requested in such case or proceeding against any Borrower or any such Subsidiary (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (i) Litigation. Except for good faith disputes regarding the interpretation of this Agreement, neither the Borrower nor any Subsidiary or any Affiliate of the Borrower shall challenge or contest in any action, suit or proceeding in any court or before any arbitrator or governmental body the validity or enforceability of this Agreement or any Loan Document or the perfection or priority of the Security Interest or any Lien granted to the Agent on behalf of the Lenders under any Security Document. (j) Judgment. A judgment or order for the payment of money shall be entered against the Borrower or any Subsidiary of the Borrower by any court which is $500,000 or more in excess of the amount of the insurance proceeds payable with respect to such judgment and such judgment or order shall continue undischarged or unstayed for 30 days. (k) Attachment. A warrant or writ of attachment or execution or similar process shall be issued against any property of the Borrower or any Subsidiary of the Borrower which exceeds $100,000 in value and such warrant or process shall continue undischarged or unstayed for 10 days. (l) Loan Documents. Any "Event of Default" as defined in any Mortgage shall occur. (m) ERISA. (i) Any Termination Event with respect to a Plan shall occur that results in an Unfunded Vested Accrued Benefit in excess of $0, or (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA) for which a waiver has not been obtained in accordance with the applicable provisions of the Code and ERISA, or (iii) the Borrower or any Subsidiary of the Borrower is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from the Borrower's or any Subsidiary's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such plan. (n) Cross-default with Foreign Facilities. Any Foreign Subsidiary shall default in the performance or observance of any terms, covenants, conditions or agreements contained in, or the payment of any other sums covenanted to be paid by such Foreign Subsidiary under, any Foreign Facility Agreement (other than any such default which is specifically provided for elsewhere in this SECTION 11.1). (o) Change in Management. Leonard Chill and Jon P. Beckman shall cease to be the Chief Executive Officer and Chief Financial Officer, respectively, of the Borrower or to be actively involved in the day-to-day management of the Borrower. (p) Change in Ownership. (i) Leonard Chill, Jon P. Beckman, W. Gardner Wright, Jr., Ralph Kenner or W. Wayne Freed, together in each case with all members of such individual's immediate family, shall cease to be the record and beneficial owners of all of the issued and outstanding capital stock of the Initial General Partner which bears such individual's last name, (ii) The Initial General Partners (or any of them) shall cease to be the sole general partners of Synthetic Management, or (iii) Synthetic Management shall cease to be the sole general partner of SI Management, or (iv) SI Management shall cease to be the sole general partner of Synthetic L.P., or (v) Synthetic L.P. shall cease to be the record and beneficial owner of at least 51% of the issued and outstanding capital stock of the Borrower (or such ownership shall not entitle Synthetic L.P. to elect a majority of the directors of the Borrower), EXCEPT (A) Synthetic L.P. may distribute to the limited and general partners of Synthetic L.P., shares of the voting capital stock of the Borrower in the same proportion to the total issued and outstanding voting capital stock of the Borrower that each such partner's interest in Synthetic L.P. bears to 100% of the partnership interests in Synthetic L.P., with the result that, the Borrower will be owned directly by the former partners of Synthetic L.P., or (B) to the extent such event occurs as a result of a public offering of equity securities of the Borrower. SECTION 11.2. Remedies. (a) Automatic Acceleration and Termination of Facilities. Upon the occurrence of an Event of Default specified in SECTION 11.1(G) OR (H), (i) the principal of and the interest on the Loans and the Notes at the time outstanding, all other amounts owed to the Agent and the Lenders under this Agreement or any of the Loan Documents and all other Secured Obligations (including, without limitation, any fees accrued under ARTICLE 3) shall thereupon become due and payable without presentment, demand, protest, or other notice of any kind, all of which are expressly waived, anything in this Agreement or any of the Loan Documents to the contrary notwithstanding, and (ii) the Commitments and any obligation of the Lenders to make Loans hereunder shall immediately terminate. (b) Other Remedies. If any Event of Default shall have occurred, during the continuance of any such Event of Default, the Agent may, and at the direction of the Majority Lenders, in their sole and absolute discretion, shall do any of the following: (i) declare the principal of and interest on the Loans and the Notes at the time outstanding, all other amounts owed to the Agent or any Lender under this Agreement or any of the Loan Documents and all other Secured Obligations (including, without limitation, any fees accrued under ARTICLE 3) to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the Loan Documents to the contrary notwithstanding; (ii) terminate the Commitments and any obligation of the Lenders to make Advances hereunder; (iii) notify, or request the Borrower to notify, in writing or otherwise, any Account Debtor or obligor with respect to any one or more of the Receivables to make payment to the Agent on behalf of the Lenders or any agent or designee of the Agent, at such address as may be specified by the Agent (if, notwithstanding the giving of any notice, any Account Debtor or other such obligor shall make payments to the Borrower, the Borrower shall hold all such payments it receives in trust for the Agent on behalf of the Lenders, without commingling the same with other funds or property of, or held by, the Borrower, and shall deliver the same to the Agent or any such agent or designee immediately upon receipt by the Borrower in the identical form received, together with any necessary endorsements); (iv) settle or adjust disputes and claims directly with Account Debtors and other obligors on Receivables for amounts and on terms which the Agent considers advisable and in all such cases only the net amounts received by the Agent on behalf of the Lenders in payment of such amounts, after deductions of costs and attorney's fees which the Agent shall be entitled to apply to such costs and fees and only such net amount shall constitute Collateral, and the Borrower shall not have any further right to make any such settlements or adjustments or to accept any returns of merchandise; (v) enter upon any premises in which Inventory or Equipment may be located and, without resistance or interference by the Borrower, take physical possession of any or all thereof and maintain such possession on such premises or move the same or any part thereof to such other place or places as the Agent shall choose, without being liable to the Borrower on account of any loss, damage or depreciation that may occur as a result thereof, so long as the Agent shall act in a commercially reasonable manner and in good faith (as such term is defined in the UCC); (vi) require the Borrower to and the Borrower shall, without charge to the Agent or any Lender, assemble the Inventory and Equipment and maintain or deliver it into the possession of the Agent or any agent or representative of the Agent at such place or places as the Agent may designate and as are reasonably convenient to both the Agent and the Borrower; (vii) at the expense of the Borrower, cause any of the Inventory and Equipment to be placed in a public or field warehouse and neither the Agent nor any Lender shall be liable to the Borrower on account of any loss, damage or depreciation that may occur as a result thereof, so long as the Agent or such Lender shall act in a commercially reasonable manner and in good faith (as such term is defined in the UCC); (viii) without notice, demand or other process, and without payment of any rent or any other charge enter any of the Borrower's premises and, without breach of the peace, until the Agent on behalf of the Lenders completes the enforcement of its rights in the Collateral, take possession of such premises or place custodians in exclusive control thereof, remain on such premises and use the same and any of the Borrower's equipment, for the purpose of (A) completing any work in process, preparing any Inventory and Equipment for disposition and disposing thereof and (B) collecting any Receivable; (ix) in the exercise of the rights of the Agent or the Lenders under this Agreement, without payment of compensation of any kind, use any and all trademarks, trade styles, trade names, patents, patent applications, licenses, franchises and the like to the extent of the rights of the Borrower therein, subject, in the case of any federally registered trademark, to any control over the quality of the goods manufactured, advertised or sold under such trademark necessary to preserve such registration, and the Borrower hereby grants a nonexclusive license to the Agent on behalf of the Lenders for this purpose; (x) exercise any and all of its rights under any and all of the Security Documents; (xi) apply any cash Collateral to the payment of the Secured Obligations in any order in which the Agent on behalf of the Lenders may elect or use such cash in connection with the exercise of any of its other rights hereunder or under any of the Security Documents; (xii) establish or cause to be established one or more Lockboxes or other arrangement for the deposit of proceeds of Receivables, and, in such case, the Borrower shall cause to be forwarded to the Agent at the Agent's Office, on a daily basis, copies of all checks and other items of payment and deposit slips related thereto deposited in such Lockboxes, together with collection reports in form and substance satisfactory to the Agent; and (xiii) exercise all of the rights and remedies of a secured party under the UCC and under any other Applicable Law, including, without limitation, the right, without notice except as specified below and with or without taking the possession thereof, to sell the Collateral or any part thereof in one or more parcels at public or private sale, at any location chosen by the Agent, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable. The Borrower agrees that, to the extent notice of sale shall be required by law, at least 10 days' notice to the Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification, but notice given in any other reasonable manner or at any other reasonable time shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. SECTION 11.3. Control by Majority Lenders. The Majority Lenders shall have the right, at any time after the occurrence of and during the continuance of an Event of Default, (a) to require the Agent to proceed to enforce the remedies contained in this Agreement, to the extent permitted by Applicable Law, by the exercise of the powers hereby conferred on the Agent, and (b) to direct the time, place and method of conducting any proceeding for any remedy available to the Agent or exercising any trust or power conferred upon it under this Agreement. SECTION 11.4. Application of Proceeds. All proceeds from each sale of, or other realization upon, all or any part of the Collateral following an Event of Default shall be applied or paid over as follows: (a) First: to the payment of all costs and expenses incurred in connection with such sale or other realization, including attorneys' fees, (b) Second: to the payment of the Secured Obligations (with the Borrower remaining liable for any deficiency), ratably in accordance with the principal amount of Secured Obligations owing to each Lender and otherwise in any order which the Majority Lenders may elect, and (c) Third: the balance (if any) of such proceeds shall be paid to the Borrower, subject to any duty imposed by law or otherwise to whomsoever will be entitled thereto. The Borrower shall remain liable and will pay, on demand, any deficiency remaining in respect of the Secured Obligations, together with interest thereon at a rate per annum equal to the highest rate then payable hereunder on such Secured Obligations, which interest shall constitute part of the Secured Obligations. The principal amounts of all Secured Obligations owing to any Lender (including those that do not arise under the Notes held by such Lender) shall be pari passu. SECTION 11.5. Power of Attorney. In addition to the authorizations granted to the Agent under SECTION 7.15 or under any other provision of this Agreement or any of the Loan Documents, upon and after an Event of Default and for so long as such Event of Default shall be continuing, the Borrower hereby irrevocably designates, makes, constitutes and appoints the Agent (and all Persons designated by the Agent from time to time) as the Borrower's true and lawful attorney, and agent in fact, and the Agent, or any agent of the Agent, may, without notice to the Borrower, and at such time or times as the Agent or any such agent in its sole discretion may determine, in the name of the Borrower or the Agent or the Lenders, (i) demand payment of the Receivables, (ii) enforce payment of the Receivables by legal proceedings or otherwise, (iii) exercise all of the Borrower's rights and remedies with respect to the collection of Receivables, (iv) settle, adjust, compromise, extend or renew any or all of the Receivables, (v) settle, adjust or compromise any legal proceedings brought to collect the Receivables, (vi) discharge and release the Receivables or any of them, (vii) prepare, file and sign the name of the Borrower on any proof of claim in bankruptcy or any similar document against any Account Debtor, (viii) prepare, file and sign the name of the Borrower on any notice of Lien, assignment or satisfaction of Lien, or similar document in connection with any of the Collateral, (ix) endorse the name of the Borrower upon any chattel paper, document, instrument, notice, freight bill, bill of lading or similar document or agreement relating to the Receivables, the Inventory or any other Collateral, (x) use the stationery of the Borrower and sign the name of the Borrower to verifications of the Receivables and on any notice to the Account Debtors, (xi) open the Borrower's mail, (xii) notify the post office authorities to change the address for delivery of the Borrower's mail to an address designated by the Agent, and (xiii) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Receivables, Inventory or other Collateral to which the Borrower has access. SECTION 11.6. Miscellaneous Provisions Concerning Remedies. (a) Rights Cumulative. The rights and remedies of the Agent and the Lenders under this Agreement and each of the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which it or they would otherwise have. In exercising their rights and remedies the Agent and the Lenders may be selective and no failure or delay by the Agent or any Lender in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right. (b) Waiver of Marshalling. The Borrower hereby waives any right to require any marshalling of assets and any similar right. (c) Limitation of Liability. Nothing contained in this ARTICLE 11 or elsewhere in this Agreement or in any of the Loan Documents shall be construed as requiring or obligating the Agent, any Lender or any agent or designee of the Agent or any Lender to make any demand, or to make any inquiry as to the nature or sufficiency of any payment received by it, or to present or file any claim or notice or take any action, with respect to any Receivable, or any other Collateral or the moneys due or to become due thereunder or in connection therewith, or to take any steps necessary to preserve any rights against prior parties, and neither of the Agent, any Lender nor any of their respective agents or designees shall have any liability to the Borrower for actions taken pursuant to this ARTICLE 11, any other provision of this Agreement or any of the Loan Documents so long as the Agent or such Lender shall act in a commercially reasonable manner and in good faith (as defined in the UCC). (d) Appointment of Receiver. In any action under this ARTICLE 11, the Agent shall be entitled to the appointment of a receiver, without notice of any kind whatsoever, to take possession of all or any portion of the Collateral and to exercise such power as the court shall confer upon such receiver. ARTICLE 12 - AGENT SECTION 12.1. Grant of Authority. Each Lender and each holder of a Note by its acceptance thereof hereby appoints and authorizes the Agent to take such action and exercise such powers hereunder as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. SECTION 12.2.Action on Instructions. The Agent shall in all cases (including, without limitation, enforcement or collection of any Notes) be fully protected in acting or refraining from acting under this Agreement and any of the Loan Documents upon written instructions signed by the Majority Lenders, and such instructions and any action taken or any failure to act pursuant thereto shall be binding on all the Lenders, all holders of the Notes and their respective successors and assigns. The Agent shall not have any duty to exercise any right, power or remedy under this Agreement or any of the Loan Documents or to take any affirmative action hereunder unless directed to do so by the Majority Lenders. The Agent shall not be required to take any action under ARTICLE 11, nor shall any other provision of this Agreement be deemed to impose a duty on the Agent to take any action, if the Agent has been advised by legal counsel that such action is contrary to the terms of this Agreement or is otherwise contrary to any Applicable Law or could expose the Agent to liability. SECTION 12.3. Responsibility of the Agent. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken under or in connection with this Agreement or any of the other Loan Documents, except for its or their gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) shall not be responsible to the Borrower or any other Person as a result of any failure or delay in performance by, or any breach by, any Lender of any of its obligations under this Agreement or any of the Loan Documents, (b) shall not be responsible to any Lender or the holder of any Note as a result of any failure or delay in performance by, or any breach by, the Borrower of any of its obligations under this Agreement or any of the Loan Documents, (c) shall not be responsible to any Lender for any statements, representations or warranties in this Agreement or any of the Loan Documents or for the validity, effectiveness, enforceability or sufficiency of this Agreement or any of the Loan Documents or any document or instrument delivered in connection with the transactions contemplated by this Agreement, including, without limitation, any documents that may be delivered pursuant to ARTICLE 4, (d) shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents on the part of the Borrower, (e) shall be entitled to rely upon any writing, statement or notice or any telegraphed, telexed or teletyped message believed by it to be genuine and correct and to have been signed or sent by the proper Person, (f) may consult with counsel and shall be fully protected in any action taken or omitted to be taken in accordance with the advice or opinion of such counsel, (g) may employ agents and attorneys-in-fact and shall not be liable for the default or misconduct of any such selected by the Agent with reasonable care, and (h) may treat the payee of a Note as the holder thereof until it receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent. SECTION 12.4. Representations by the Lenders. Each Lender hereby represents and warrants to each other Lender and the Agent that its decision to enter into this Agreement and to make its Advances was made on the basis of its own credit judgment and in making such decision it did not rely upon any representation by the Agent or any other Lender as to the creditworthiness or financial position of the Borrower. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 12.5. Expenses and Indemnification. To the extent that the Borrower fails to do so, each Lender and each subsequent holder of a Note, by its acceptance thereof, agree to reimburse the Agent upon demand in proportion to the respective Commitment Percentage of each Lender, or, in the case of any such subsequent holder, in proportion that the outstanding balance of such holder's Note bears to the total balance outstanding under all Notes, and to indemnify and hold the Agent harmless in such proportion against any and all losses, liabilities or expenses incurred by the Agent arising out of or in connection with the administration of this Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers and duties hereunder and of taking any action hereunder, provided that neither the Lenders nor the holder of any Note shall be liable for any portion of such losses, liabilities or expenses incurred by the Agent as a result of the Agent's gross negligence or willful misconduct. SECTION 12.6. Rights of Agent. The Bank of Boston (or any successor as "Agent") and any of its Affiliate may accept deposits from, lend money to, and generally engage in any kind of lending, banking or trust business with, the Borrower and any of its Subsidiaries and Affiliates as if it were not the Agent or such Affiliate. SECTION 12.7. Right to Resign. The Agent may resign at any time by giving 30 days written notice thereof to each Lender and the Borrower. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after any such notice of resignation, then the retiring entity may, on behalf of the Lenders, appoint a successor which shall be another Lender, if any other Lender is willing to serve in such capacity, or, if not, a commercial bank organized under the laws of the United States of America or any State thereof having a combined capital and surplus of at least $100,000,000. After any such resignation, the provisions of this ARTICLE 12 shall continue in effect for the benefit of the retiring entity with respect to any actions taken or omitted by it while acting as Agent. SECTION 12.8. Reliance by Borrower. The Borrower shall not be bound to ascertain the authority of the Agent to act on behalf of the Lenders in connection with any of the matters governed or contemplated by this Agreement, or to inquire as to the satisfaction of any conditions precedent to the exercise of such authority. The Borrower shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the Agent on behalf of the Lenders. ARTICLE 13 - MISCELLANEOUS SECTION 13.1. Notices. (a) Method of Communication. Except as specifically provided in this Agreement or in any of the Loan Documents, all notices and the communications hereunder and thereunder shall be in writing or by telephone or facsimile, subsequently confirmed in writing. Notices in writing shall be delivered personally (including by any reputable overnight courier) or sent by certified or registered mail postage pre-paid or by telegraph or telex and shall be deemed received in the case of personal delivery, when delivered, in the case of mailing, on the third day after mailing, in the case of telegraph, on the day after delivery to the telegraph office and in the case of telex, upon transmittal, provided that in the case of notices to the Agent, notice shall be deemed to have been given only when such notice is actually received by the Agent. A telephonic notice to the Agent, as understood by the Agent, will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address of which all the other parties are notified in writing If to the Borrower: Synthetic Industries, Inc. 309 LaFayette Road Chickamauga, Georgia 30707 Attn: Jon P. Beckman Telecopier No.: (706) 375-7842 If to the Agent: The First National Bank of Boston Suite 500 115 Perimeter Center Place, N.E. Atlanta, Georgia 30346 Attn: James A. Mahoney Stephen Y. McGehee Telecopier No.: (770) 393-4166 If to a Lender: At the address of such Lender set forth on ANNEX A hereto. (c) Agent's Office. The Agent hereby designates its office located at 100 Federal Street, Boston, Massachusetts 02110, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower, as the office to which payments due are to be made and at which Advances will be disbursed. SECTION 13.2. Expenses. The Borrower will pay all reasonable out-of-pocket expenses of the Agent and any Affiliate of the Agent in connection with (a) the preparation, execution and delivery of this Agreement and each of the Loan Documents and each of the Foreign Facility Agreements, whenever the same shall be executed and delivered, including appraisers' fees, fees in connection with environmental site assessments, search fees, recording fees, taxes, title insurance premium and the fees and disbursements of special counsel for the Agent and of each local counsel retained by the Agent, (b) the preparation, execution and delivery of any waiver, amendment or consent relating to this Agreement, the Notes or any of the Loan Documents or any Foreign Facility Agreements or the process of a Person becoming a Lender hereunder, including reasonable attorneys' fees and disbursements, search fees, recording fees, taxes and title insurance premiums, (c) consulting with one or more Persons, including appraisers, accountants and lawyers, concerning or related to the nature, scope or value of any right or remedy hereunder or under any of the Loan Documents or under any of the Foreign Facility Documents, including any review of factual matters in connection therewith, which expenses shall include the fees and disbursements of such Persons, and (d) prosecuting or defending any claim in any way arising out of, related to, or connected with, or enforcing any provision of, this Agreement or any of the Loan Documents or any of the Foreign Facility Documents, which expenses shall include the fees and disbursements of counsel and of experts and other consultants retained by the Agent. SECTION 13.3. Stamp and Other Taxes. The Borrower will pay any and all stamp, registration, recordation and similar taxes, fees or charges and shall indemnify the Agent and the Lenders against any and all liabilities with respect to or resulting from any delay in the payment or omission to pay any such taxes, fees or charges, which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this Agreement and any of the Loan Documents or the perfection of any rights or security interest thereunder. SECTION 13.4. Setoff. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Default or Event of Default, each Lender and any participant with any Lender in the Loans are hereby authorized by the Borrower at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender or any Affiliate of such Lender, or any participant to or for the credit or the account of the Borrower against and on account of the Secured Obligations irrespective or whether or not (a) the Agent or such Lender shall have made any demand under this Agreement or any of the Loan Documents, or (b) the Agent or such Lender shall have declared any or all of the Secured Obligations to be due and payable as permitted by SECTION 11.2 and although such Secured Obligations shall be contingent or unmatured. SECTION 13.5. Pro-Rata Participation. (a) Each Lender agrees that (i) if it or any of its Affiliates shall exercise any right of counterclaim, set-off, banker's lien or similar right, or if under any applicable bankruptcy, insolvency or other similar law it receives a secured claim the security for which is a debt owed by it to the Borrower, it shall apportion the amount thereof, on a pro rata basis, between (A) the amount at the time owed to it by the Borrower under this Agreement, and (B) amounts otherwise owed to it by the Borrower, and (ii) if, as a result of the exercise of a right or the receipt of a secured claim and the apportionment thereof described in CLAUSE (I) of this SECTION 13.5(A) or otherwise, it shall receive payment of a proportion of the aggregate amount of principal and interest due with respect to the Secured Obligations and any other Indebtedness owed to it under this Agreement (for purposes of this SECTION 13.5(B), "Agreement Debt") such that the proportion of the aggregate remaining amount of such Lender's Agreement Debt as compared to the total Agreement Debt of all the Lenders is less than the proportion of Agreement Debt of any other Lender as compared to the total Agreement Debt of all the Lenders, such Lender shall purchase participations (which it shall be deemed to have purchased simultaneously upon the receipt of such payment) in the Agreement Debt of the other Lenders so that after giving effect to all such purchases the amount of Agreement Debt of each Lender shall bear the same relation to the total amount of Agreement Debt that each Lender's Agreement Debt bore to the total amount of Agreement Debt immediately prior to the receipt of the subject non-ratable payment (but after completion of any purchases pursuant to this SECTION 13.5 from the proceeds of any earlier received non-ratable payment), PROVIDED that if all or part of such payment received by such purchasing Lender is thereafter recovered by or on behalf of the Borrower from such Lender, such purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such Lender to the extent of such recovery, but without interest. (b) Each Lender which receives such a secured claim shall exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this SECTION 13.5 to share in the benefits of any recovery on such secured claim. (c) The Borrower expressly consents to the foregoing arrangements and agrees that any holder of a participation in any indebtedness so purchased or otherwise acquired may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by the borrower to such holder as fully as if such holder were a holder of such indebtedness in the amount of the participation held by such holder. SECTION 13.6. Litigation. EACH OF THE BORROWER, THE AGENT AND EACH LENDER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE AGENT OR ANY LENDER ARISING OUT OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER AND THE AGENT OR ANY LENDER OF ANY KIND OR NATURE. THE BORROWER AND THE AGENT AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE AGENT OR ANY LENDER, ANY COURT IN WHICH THE AGENT OR ANY LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER AND THE AGENT OR ANY LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE BORROWER AT THE ADDRESS OF THE BORROWER SET FORTH ABOVE. SHOULD THE BORROWER FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30) DAYS AFTER THE MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION. __JPB____ (Initial) SECTION 13.7. Consent to Advertising and Publicity. The Borrower hereby consents and agrees that the Agent on behalf of the Lenders may issue and disseminate to the public, subject to the Borrower's approval, information describing the credit accommodation entered into pursuant to this Agreement, including the names and addresses of the Borrower and its Subsidiaries and Affiliates, the amount, interest rate, maturity, collateral, and a general description of the Borrower's and its Subsidiaries' business. SECTION 13.8. Reversal of Payments. The Agent and each Lender shall have the continuing and exclusive right to apply, reverse, and reapply any and all payments to any portion of the Secured Obligations. To the extent the Borrower makes a payment or payments to the Agent on behalf of the Lenders or to a Lender or the Agent or a Lender receives any payment or proceeds of the Collateral for the Borrower's benefit, which payment(s) or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the Secured Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect, as if such payment or proceeds had not been received by the Agent or such Lender. SECTION 13.9. Injunctive Relief. The Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Agent and the Lenders; therefore, the Borrower agrees that the Agent or any Lender, if the Agent or such Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. SECTION 13.10. Accounting Matters. All financial and accounting calculations, measurements and computations made for any purpose relating to this Agreement, including, without limitation, all computations utilized by the Borrower in complying with any covenant contained herein, shall, unless there is an express agreement among the parties to the contrary, be performed in accordance with GAAP consistently applied. SECTION 13.11. Participations; Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent, all future holders of the Notes, and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Subject to the consent of the Agent and the Borrower, which consent shall not be unreasonably withheld, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Loans at the time owing to it and the Notes held by it); PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations under this Agreement, (ii) the amount of the Commitment of the assigning Lender that is subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall in no event be less than $5,000,000, (iii) in the case of a partial assignment, the amount of the Commitment that is retained by the assigning Lender (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall in no event be less than $5,000,000, (iv) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as hereinafter defined) an Assignment and Acceptance, together with any Note or Notes subject to such assignment, and a processing and recording fee in an amount equal to $2,500, (v) such assignment shall not, without the consent of the Borrower, require the Borrower to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Loans or the Notes under the blue sky laws of any state, and (vi) the representation contained in SECTION 12.4 hereof shall be true with respect to any such proposed assignee. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (y) the Lender assignor thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement, from and after the effective date of such assignment. (c) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Lender assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such Lender assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in SECTION 5.1(N) and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Lender assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (d) The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitment Percentage of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Eligible Assignee together with any Note or Notes subject to such assignment and the written consent to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in the form of EXHIBIT H, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register, (iii) give prompt notice thereof to the Lenders and the Borrower, and (iv) promptly deliver a copy of such Acceptance and Assignment to the Borrower. Within five Business Days after receipt of notice, the Borrower shall execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such Eligible Assignee in amounts equal to the Commitment Percentage assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and a new Note or Notes to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes delivered to the assignor Lender. Each surrendered Note or Notes shall be canceled and returned to the Borrower. (f) Each Lender may, without the consent of the Borrower or the Agent, sell participations to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment hereunder and the Loans owing to it and the Notes held by it); PROVIDED, HOWEVER, that (i) each such participation shall be in an amount not less than $5,000,000, (ii) such Lender's obligations under this Agreement (including, without limitation, its Commitment hereunder) shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) such Lender shall remain the holder of the Notes held by it for all purposes of this Agreement, (v) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement; PROVIDED, that such Lender may agree with any participant that such Lender will not, without such participant's consent, agree to or approve any waivers or amendments which would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the commitments of such participant, reduce the amount of any fees to which such participant is entitled, extend any scheduled payment date for principal or release Collateral securing the Loans (other than Collateral disposed of pursuant to SECTION 7.8 hereof or otherwise in accordance with the terms of this Agreement or the Security Documents), and (vi) any such disposition shall not, without the consent of the Borrower, require any Borrower to file a registration statement with the Securities and Exchange Commission to apply to qualify the Loans or the Notes under the blue sky law of any state. The Lender selling a participation to any bank or other entity that is not an Affiliate of such Lender shall give prompt notice thereof to the Borrower, the Agent and the other Lenders. (g) Any Lender may, in connection with any assignment, proposed assignment, participation or proposed participation pursuant to this SECTION 13.11, disclose to the assignee, participant, proposed assignee or proposed participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; PROVIDED that, prior to any such disclosure, each such assignee, proposed assignee, participant or proposed participant shall agree with the Borrower or such Lender (which in the case of an agreement with only such Lender, the Borrower shall be recognized as a third party beneficiary thereof) to preserve the confidentiality of any confidential information relating to the Borrower received from such Lender. SECTION 13.12. Amendments. No amendment or waiver of any provision of this Agreement or the Notes, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by the Majority Lenders and, in the case of an amendment, by the Borrower, and then such waiver or consent shall be effective only in the specified instance and for the specific purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders and, in the case of an amendment, by the Borrower, do any of the following: (a) waive any of the conditions specified in ARTICLE 4, (b) increase the Commitments or Commitment Percentages of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, or rate of interest applicable to, the Notes or reduce any fees or other amounts payable to the Lenders hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the Notes or of any fees or other amounts payable to the Lenders hereunder, (e) release any material Collateral or any Real Estate, other than in accordance with the provisions of this Agreement or the applicable Mortgage, as the case may be, (f) change the percentage of the aggregate unpaid principal amount of the Loans or the Commitments which shall be required for the Lenders or any of them to take any action hereunder, (g) amend the definition "Borrowing Base" or increase any advance rate thereunder or (h) amend the provisions of SECTION 2C.2, SECTION 11.4, SECTION 13.5, SECTION 13.11(B) or this SECTION 13.12; and PROVIDED, FURTHER, that no amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Agent under this Agreement or any Note or any other Loan Document. SECTION 13.13. Performance of Borrower's Duties. (a) The Borrower's obligations under this Agreement and each of the Loan Documents shall be performed by the Borrower at its sole cost and expense. (b) If the Borrower shall fail to do any act or thing which it has covenanted to do under this Agreement or any of the Loan Documents, the Agent on behalf of the Lenders may (but shall not be obligated to) do the same or cause it to be done either in the name of the Agent or the Lenders or in the name and on behalf of the Borrower and the Borrower hereby irrevocably authorizes the Agent so to act. SECTION 13.14. Indemnification. The Borrower agrees to reimburse the Agent and each Lender and their respective directors, officers, employees, agents and representatives for all costs and expenses, including counsel fees and disburse ments, incurred, and to indemnify, defend and hold the Agent and each Lender harmless from and against all losses suffered by, the Agent or any Lender in connection with (a) the exercise by the Agent or any Lender of any right or remedy granted to it under this Agreement or any of the Loan Documents, (b) any claim, and the prosecution or defense thereof, arising out of or in any way connected with this Agreement or any of the Loan Documents, and (c) the collection or enforcement of the Secured Obligations or any of them; except that the Borrower shall not be required to indemnify the Agent or any Lender, respectively, for any losses resulting from the gross negligence or willful misconduct on the part of the Agent or such Lender, respectively. SECTION 13.15. All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Agent and the Lenders and any Persons designated by the Agent or any Lender pursuant to any provisions of this Agreement or any of the Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Secured Obligations remain unpaid or unsatisfied or any Lender has any obligation to extend any financial accommodation to the Borrower hereunder. SECTION 13.16. Survival. Notwithstanding any termination of this Agreement, (a) until all Secured Obligations have been irrevocably paid in full or otherwise satisfied and the Commitment of each Lender has been terminated, the Agent on behalf of the Lenders shall retain its Security Interest and shall retain all rights under this Agreement and each of the Security Documents with respect to such Collateral as fully as though this Agreement had not been terminated, and (b) the indemnities to which the Agent and the Lenders are entitled under the provisions of this ARTICLE 13 and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Agent and the Lenders against events arising after such termination as well as before. SECTION 13.17. Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 13.18. Severability of Provisions. Any provision of this Agreement or any Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 13.19. Governing Law. This Agreement and the Notes shall be construed in accordance with and governed by the law of the State of Georgia (without regard to conflicts of law principles) other than the provisions of SECTION 13.6 as to waiver of jury trial which shall be governed by the internal laws (without regard to conflicts of law principles) of the jurisdiction in which suit is brought. SECTION 13.20. 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 shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. SECTION 13.21. Reproduction of Documents. This Agreement, each of the Loan Documents and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by the Agent or the Lenders and (c) financial statements, certificates and other information previously or hereafter furnished to the Agent or the Lenders, may be reproduced by the Agent or any Lender by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and such Person may destroy any original document so produced. Each party hereto stipulates that, to the extent permitted by Applicable Laws, any such reproduction shall be as admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original shall be in existence and whether or not such reproduction was made by such Lender in the regular course of business), and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. SECTION 13.22. Term of Agreement. This Agreement shall remain in effect from the Effective Date through the Termination Date and thereafter until all Secured Obligations shall have been irrevocably paid and satisfied in full and the Commitment of each Lender has terminated. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. SECTION 13.23. Effect of Effectiveness of Agreement. (a) From and after the Effective Date, all references in this Agreement or in any other Loan Document (whether delivered pursuant to this Agreement or pursuant to the Existing Credit Agreement) to this Agreement or the "Credit Agreement," and the words "herein," "hereof" and words of like import referring to this Agreement, shall mean and be references to the Existing Credit Agreement as amended and restated in its entirety by this Agreement, and all references in this Agreement, in any other Loan Document (whether delivered pursuant to this Agreement or pursuant to the Existing Credit Agreement) or in any Revolving Credit Note or Term Note to a "Revolving Credit Note" or to a "Term Note," and the words "herein," "hereof" and words of like import referring to any such Note, shall mean and be references to the Fourth Amended and Restated Revolving Credit Notes and the Amended, Restated and Consolidated Term Notes, respectively, in the forms attached hereto as EXHIBITS A and B, respectively, appropriately completed and duly executed and delivered by the Borrower. (b) Without limiting the generality of the foregoing, from and after the Effective Date, the Commitments and the Commitment Percentages of the Lenders shall be as set forth on Annex A attached hereto. ARTICLE 14 - GUARANTY OF FOREIGN FACILITY DEBT SECTION 14.1. Guaranty. In consideration of the Foreign Facilities provided by the Lenders or their Affiliates, the Borrower, as primary obligor and not as surety merely, hereby irrevocably guarantees absolutely and unconditionally to each Lender and each Affiliate thereof the due and punctual payment, when and as due (whether upon demand, at maturity, by reason of acceleration or otherwise) and performance, of the Foreign Facility Debt and all other obligations arising under the Foreign Facility Agreements (collectively, the Guaranteed Obligations) and agrees to pay any and all expenses (including, but not limited to, reasonable legal fees and disbursements) which may be incurred by the Agent or such Lender in collecting any or all of such amounts or in enforcing any rights under this Guaranty or any of the Foreign Facility Agreements. The liability of the Borrower under this Guaranty shall be unlimited and unconditional, and this Guaranty shall be a continuing guaranty of all obligations of the Foreign Subsidiaries under the Foreign Facility Debt and Foreign Facility Agreements. ARTICLE 14.2. Payment by Borrower. If any Foreign Subsidiary shall fail to pay, when due and payable, any amount due to any Lender or any Affiliate of such Lender under any Foreign Facility, the Borrower will, without demand or notice, immediately pay the same to the Agent for the account of such Lender or Affiliate. If any Foreign Facility would be subject to acceleration, but such acceleration is enjoined or stayed, the Borrower will to the extent permitted by Applicable Law, purchase such Foreign Facility for a price equal to the outstanding principal amount thereof, plus such accrued interest and other amounts as would have been payable had such Foreign Facility been paid or prepaid at the time of such purchase. All payments by the Borrower under this Guaranty shall be made without any setoff, counterclaim, or deduction whatsoever, and in the same currency and funds as are required to be paid by the Foreign Subsidiaries. ARTICLE 14.3. Waiver. The Borrower, to the extent permitted by Applicable Law, (a) waives (i) diligence, presentment, demand, protest and notice of any kind whatsoever, (ii) any requirement that the Agent or any Lender or any Affiliate of any Lender exhaust any right or remedy or take any action against any Foreign Subsidiary or any other Person which may be or become liable in respect of all or any part of such amounts or obligations, or against any assets of any Foreign Subsidiary or collateral security or guaranty therefor or right of offset with respect thereto, and (iii) the benefit of all principles or provi sions of Applicable Law which are or might be in conflict with the terms of this Guaranty, including, without limitation, Section 10-7-24 of the Official Code of Georgia Annotated, and (b) consents that the time of payment of any Foreign Facility may be extended or any provision of the Foreign Facility Agreements may be amended, waived or modified without notice to or further assent from the Borrower and the Borrower will remain bound under this Guaranty notwithstanding such changes, extensions, amendments, waivers or modifications or any other circumstances, whether or not referred to above, which might otherwise constitute a legal or equitable discharge of a guaranty. ARTICLE 14.4. Absolute Obligation. To the extent permitted by law, the obligations of the Borrower hereunder are irrespective of and shall not be depen dent upon or affected by (a) the validity, legality, regularity or enforceability of the Foreign Facility Agreements or any of the obligations in respect thereof or any collateral security or guaranty thereof, (b) the existence, value or condition of any of the assets of any Foreign Subsidiary, (c) the validity, perfection or priority of any charge on or security interest in the assets of any Foreign Subsidiary, (d) any action or failure to take action by the Agent, any Lender or any Affiliate of any Lender under, or with respect to, any of the Foreign Facility Agreements, (e) any right of offset with respect to Foreign Subsidiary Debt or other obligations under the Foreign Facilities at any time or from time to time held by the Agent or any Lender or any Affiliate thereof and without regard to any defense, setoff or counterclaim which may at any time be available to or be asserted by the Borrower or any of the Foreign Subsidiaries against the Agent or any Lender or any Affiliate thereof, (f) any other dealings among the Agent, the Lenders, any Affiliate thereof, the Borrower and the Foreign Subsidiaries, (g) any present or future law or order of any government agency thereof purporting to reduce, amend or otherwise affect any obligations of the Foreign Subsidiaries, or (h) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or any Foreign Subsidiary) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower or such Foreign Subsidiary for any Foreign Subsidiary Debt or other obligations of such Foreign Subsidiary under any Foreign Facility Agreements, in bankruptcy or in any other instance. SECTION 14.5. Payments Free and Clear of Taxes, Etc. (a) All payments under this Guaranty shall be made free and clear of and without deduction for any and all present and future taxes, levies, imposts, deductions, charges, withholdings, and all liabilities with respect thereto, excluding income and franchise taxes of the United States and of the jurisdiction of the lending office of the appropriate Lender or Affiliate and any political subdivision of either thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). Within 10 days after the date of each such payment hereunder, the Borrower will also furnish to the appropriate Lender or Affiliate the original or a certified copy of either a receipt for payment of each of the Taxes payable in respect of such payment hereunder or, if no Taxes are payable in respect of such payment, a certificate from each appropriate taxing authority, or an opinion of counsel acceptable to such Lender or Affiliate, in either case stating that such payment is exempt from or not subject to Taxes. (b) In addition, the Borrower will pay any United States taxes on the acquisition of debt obligations of a Foreign Subsidiary and any stamp or other taxes of any jurisdiction with respect to the execution, delivery, registration, performance and enforcement of this Guaranty, Taxes specified in CLAUSE (A) above and taxes of all jurisdictions with respect to any amounts paid under this CLAUSE (B). If any Taxes specified in CLAUSE (A) above or any taxes mentioned in this CLAUSE (B) are paid by a Lender or such Lender's Affiliate, the Borrower will, upon demand of such Lender or Affiliate, and whether or not such Taxes or taxes shall be correctly or legally asserted, indemnify such Lender or Affiliate for such payments, together with any interest, penalties and expenses in connection therewith plus interest thereon at the rate specified in SECTION 3.1 of this Agreement (calculated as if such payments constituted overdue amounts of principal as of the date of the making of such payments). SECTION 14.6. Currency Changes. The Borrower shall be liable to pay any amount due hereunder in the currency in which, and at the place where, the Foreign Subsidiaries are to pay that amount under the terms of the respective Foreign Facility Agreement. If for the purposes of obtaining judgment in any court in any country it becomes necessary to convert into any other currency (the "Judgment Currency"), any amount in the currency due hereunder (the "Guaranteed Currency"), then the conversion shall be made at the rate of exchange prevailing either on the date when the guaranteed obligation shall have become due or on the Business Day before the day on which judgment is given, whichever shall be the more favorable to Lender or its Affiliate. In the event that there is a change in the rate of exchange prevailing between the date when the guaranteed obligation became due (or, as the case may be, the Business Day before the day on which the judgment is given) and the date of payment of the guaranteed obligation, whether such payment is by the Foreign Subsidiary or by the Borrower, the Borrower will pay such additional amount (if any, but in any event not a lesser amount) as may be necessary to insure that the amount paid on such date is the amount in the Judgment Currency which, when converted at the rate of exchange prevailing on the date of payment, is the amount then due in accordance with this Guaranty in the Guaranteed Currency. Any amount due from the Borrower under this SECTION 14.6 will be due as a separate debt and shall not be affected by a judgment's being obtained for any other sums due under or in respect of this Guaranty. For purposes of this SECTION 14.6, the rate of exchange shall be the rate at which a Lender or its Affiliate is able on the relevant date to purchase the Guaranteed Currency with the Judgment Currency and includes any premiums and costs of exchange. SECTION 14.7. Recovery of Payments. In the event that any or all of the amounts guaranteed by the Borrower are or were paid by a Foreign Subsidiary or are or were paid or reduced by application of the proceeds of any assets of the Foreign Subsidiary, and all or any part of such payment is rescinded or must otherwise be restored or recovered from any Lender or any Affiliate of a Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any of the Foreign Subsidiaries, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, such Foreign Subsidiary or any substantial part of its property, or otherwise, then all as though such payment had not been made, the liability of the Borrower under this Guaranty shall continue, or be reinstated, and shall remain in full force and effect to the extent permitted by law. SECTION 14.8. Subrogation. Any and all rights of subrogation or similar rights which the Borrower may have against any Foreign Subsidiary or any assets of any Foreign Subsidiary or against any other guarantor or any collateral security held by the Agent or any Lender or any Affiliate of a Lender for the payment of the obligations in respect of any Foreign Facility or otherwise shall be subordinate to any and all rights which the Agent or any Lender or any such Affiliate may have against such Foreign Subsidiary or any assets of such Foreign Subsidiary or against such other guarantor or collateral security pursuant to any Foreign Facility Agreement or otherwise and the Borrower will not enforce any such right of subrogation or any similar right until all amounts guaranteed by it hereunder have been paid in full. SECTION 14.9. Consent to Amendments, Etc. The Borrower hereby consents that, without the necessity of any reservation of rights against the Borrower and without notice to or further assent by the Borrower, any demand for payment of any of the obligations in respect of any Foreign Facility made by the Agent or any Lender or any Affiliate thereof may be rescinded and any of such obligations continued and such obligations, or the liability of any of the Foreign Subsidiaries in respect thereof or any other Person upon or for any part thereof, or any collateral security or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agent or any Lender or any Affiliate thereof and any obligation under any Foreign Facility, Foreign Facility Debt or Foreign Facility Agreement, any collateral security documents or guaranties or documents in connection herewith or therewith may be amended, modified, supplemented or terminated, in whole or in part, in accordance with the terms thereof, as the Agent and the Lenders and their respective Affiliates may deem advisable from time to time, and any collateral security or guaranty or right of offset at any time held by the Agent or any Lender or any such Affiliate for the payment of such obligations may be sold, exchanged, waived, surrendered or released, all without the necessity of any reservation of rights against the Borrower and without notice to or further assent by the Borrower, which will remain bound under this SECTION 14.9, notwithstanding any such renewal, extension, modification, acceleration, compromise, amendment, supplement, termination, sale, exchange, waiver, surrender or release. Neither the Agent nor any Lender nor any of their respective Affiliates shall have any obligation to protect, secure, perfect or insure any other collateral security documents or property subject thereto at any time held as security for such obligations. The Borrower waives any and all notice of the creation, renewal, extension or accrual of any of the obligations and notice of or proof of reliance by the Agent or any Lender or any such Affiliate upon this SECTION 14.9, and such obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this SECTION 14.9, and all dealings between such Foreign Subsidiary, the Borrower, the Agent, the Lenders and such Affiliates shall likewise be conclusively presumed to have been had or consummated in reliance upon this SECTION 14.9. SECTION 14.10. Binding Nature of Certain Adjudications. Upon written notice of the institution by the Agent or any Lender of any action or proceedings, legal or otherwise, for the adjudication of any controversy with any Foreign Subsidiary, the Borrower will be conclusively bound by the adjudication in any such action or proceedings and by any judgment, award or decree entered therein. The Borrower waives the right to assert in any action or proceeding brought by the Agent or any Lender or any Affiliate thereof, upon any of the Foreign Facility Agreements, any offsets or counterclaims which the Borrower may have with respect thereto; provided, however, that this SECTION 14.10 shall not prohibit the Borrower from bringing any action in its own name under any Foreign Facility Agreement or from asserting any mandatory counterclaim required to be asserted by Applicable Law. SECTION 14.11. Validity and Enforceability of Guaranty. The Borrower agrees that at any time and from time to time upon the written request of the Agent or any Lender, the Borrower will execute and deliver such further documents and do such further acts and things as the Agent or such Lender may reasonably request in order to effect the purposes of this ARTICLE 14 and will take all action required so that this Guaranty will at all times be a binding obligation of the Borrower enforceable in accordance with its terms. [NEXT PAGE IS A SIGNATURE PAGE] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers in several counterparts all as of the day and year first written above. BORROWER: SYNTHETIC INDUSTRIES, INC. By: ______Leonard Chill________ [Corporate Seal] Name: Leonard Chill Title: President Attest: Jon P. Beckkman____ Name: Jon P. Beckman Title: Secretary AGENT: THE FIRST NATIONAL BANK OF BOSTON By: WILLIAM C. Purinton_____ William C. Purinton Vice President LENDERS: THE FIRST NATIONAL BANK OF BOSTON By: William C. Purinton____ William C. Purinton Vice President SANWA BUSINESS CREDIT CORPORATION By: __Peter L. Skavla_____ Name: Peter L. Skavla Title: Vice President SOUTHTRUST BANK OF GEORGIA, N.A. By: __Melinda M. Bergbom____ Name: Melinda M. Bergbom Title: Vice President ANNEX A PROPORTIONATE SHARE OF PROPORTIONATE COMMITMENT REVOLVING SHARE OF LENDER PERCENTAGE COMMITMENT CREDIT FACILITY TERM LOAN The First National Bank of Boston 35.2942% $30,000,070 $14,117,680 $15,882,390 Sanwa Business Credit Corporation 35.2941% $29,999,985 $14,117,640 $15,882,345 SouthTrust Bank of Georgia, N.A. 29.4117% $24,995,945 $11,764,680 $13,235,265 TOTALS 100.000% $85,000,000 $40,000,000 $45,000,000 _______________________________ * This Table of Contents is included for reference purposes only and does not constitute part of the Fourth Amended and Restated Revolving Credit and Security Agreement. EX-99 3 AMENDMENT NO. 1 to FOURTH AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT dated as of October 20, 1995 THIS AMENDMENT NO. 1 dated as of December 1, 1995 is made by and among Synthetic Industries, Inc., a Delaware corporation (the "Borrower"), The First National Bank of Boston ("Bank of Boston'), Sanwa Business Credit Corporation ("Sanwa') and SouthTrust Bank of Georgia, N.A. ("SouthTrust" and together with Bank of Boston and Sanwa, the "Lenders"), and Bank of Boston as agent (the "Agent") for the Lenders. Preliminary Statements The Borrower, the Lenders and the Agent are parties to a Fourth Amended and Restated Revolving Credit and Security Agreement dated as of October 20, 1995 (the "Credit Agreement"; terms defined therein and not otherwise defined herein being used herein as therein defined). The Borrower has requested, and the Lenders and the Agent have agreed, upon and subject to the terms, conditions and provisions of this Amendment, further to amend certain provisions of the Credit Agreement to permit certain sale and leaseback transactions by the Borrower and to amend provisions of the Credit Agreement relating to the Capital Expenditures of the Borrower. NOW, THEREFORE, in consideration of the Credit Agreement, the Loans made by the Lenders and outstanding thereunder, the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Amendments to Credit Agreement. The Credit Agreement is hereby amended, subject to the provisions of Section 2 hereof, effective as of the Effective Date, by (a) amending Section 1.1 Definitions by amending the definition "Capital Expenditures" in its entirety to read as follows: "Capital Expenditures" means, with respect to any Person, all expenditures made or liabilities incurred for the acquisition of assets (other than an Acquisition of assets which constitute a Business Unit or the purchase of Inventory) which are not, in accordance with GAAP, treated as expense items for such Person in the year made or incurred or as a prepaid expense applicable to a future year or years; PROVIDED, HOWEVER, that Capital Expenditures shall not include capitalized interest incurred in connection with Capital Expenditures. (b) amending Section 10.1 (c) Total Debt Service Coverage in its entirety to read as follows: (c) Total Debt Service Coverage. The ratio of Operating Cash Flow for any period described below to the sum of the aggregate amount of Total Interest Expense (plus capitalized interest in connection with Capital Expenditures, but excluding therefrom any amortization of bond discount in connection with the Senior Subordinated Debentures) PLUS principal of Indebtedness for Money Borrowed paid (or payable as regularly scheduled principal repayments thereof) by the Borrower and its Consolidated Subsidiaries during the same period, other than principal amounts of any "Term Loan" (as defined in the Existing Credit Agreement or the Second Amended and Restated Revolving Credit and Security Agreement dated as of March 15, 1993, as amended ) paid by the Borrower and its Consolidated Subsidiaries during the same period, to be less than: (i) 1.40 to 1 for any period of four consecutive fiscal quarters ending after the Effective Date and on or before March 31, 1996; (ii) 1.45 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1996 and on or before March 31, 1997; (iii) 1.55 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1997 and on or before March 31, 1999; (iv) 1.45 to 1 for any period of four consecutive fiscal quarters ending after March 31, 1999 and on or before March 31, 2000; and (v) 1.40 to 1 for any period of four consecutive fiscal quarters ending after March 31, 2000. (c) amending subsection (a) of Section 10.5 Capital Expenditures in its entirety to read as follows: (a) for the fiscal year of the Borrower ended September 30, 1995, $13,500,000; (d) amending Section 10.13 Sales and Leasebacks in its entirety to read as follows: SECTION 10.13 Sales and Leasebacks. Enter into any arrangement with any Person providing for its leasing from such Person of real or personal property which has been or is to be sold or transferred, directly or indirectly, by the Borrower or any Subsidiary of the Borrower to such Person, except that the provisions of this SECTION 10.13 shall not apply to sale and leaseback transactions of personal property by the Borrower having an original cost to the Borrower not exceeding an aggregate amount outstanding at the time of $500,000. Section 2. Effectiveness of Amendment. This Amendment shall become effective as of the Effective Date upon receipt by the Agent of the following, each in form and substance satisfactory to the Agent: (a) at least seven copies of this Amendment, each duly executed and delivered by the Borrower and each Lender, (b) a certificate of the president or chief financial officer of the Borrower to the effect that (i) all representations and warranties of the Borrower set forth in the Credit Agreement and the other Loan Documents are true and correct on and as of the effective date of this Amendment, both before and after giving effect to this Amendment, and (ii) no Default or Event of Default has occurred and is continuing, and such statements shall be true, and (c) such other documents, instruments and certificates as the Agent may reasonably request in connection with the transactions contemplated by the Amendment. Section 3. Effect of Amendment. From and after the effectiveness of this Amendment, all references in the Credit Agreement and in any other Loan Document to "this Agreement," "the Credit Agreement," "hereunder," "hereof" and words of like import referring to the Credit Agreement, shall mean and be references to the Credit Agreement as amended by this Amendment. Except as expressly amended hereby, the Credit Agreement and all terms, conditions and provisions thereof remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. Section 4 Counterpart Execution; Governing Law. (a) Execution in Counterparts. This Amendment 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 to be an original and all of which taken together shall constitute but one and the same agreement. (b) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. SYNTHETIC INDUSTRIES, INC. [Corporate Seal] By: __Leonard Chill_______ Leonard Chill President ATTEST __Jon P. Beckman_____ Jon P. Beckman Assistant Secretary THE FIRST NATIONAL BANK OF BOSTON, as the Agent and as a Lender By: __William C. Purinton_____ William C. Purinton Vice President SANWA BUSINESS CREDIT CORPORATION By: __ Peter L. Skavla____ Peter K. Skavla Vice President SOUTHTRUST BANK OF GEORGIA, N.A. By: __Melinda M Bergbom______ Melinda M. Bergbom Vice President CERTIFICATE AS TO REPRESENTATION, WARRANTIES AND DEFAULTS I, Leonard Chill, President of Synthetic Industries, Inc., a Delaware corporation (the "Borrower"), hereby certify in connection with Amendment No. 1 dated as of December 1, 1995 ("Amendment No. 1") to the Fourth Amended and Restated Revolving Credit and Security Agreement dated as of October 20, 1995 (the "Credit Agreement'; terms defined herein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, the "Lenders" named therein and The First National Bank of Boston, as agent for the Lenders, that, to the best of my knowledge and based on an examination sufficient to enable me to make an informed statement: (i) all of the representation and warranties made or deemed to be made under the Credit Agreement and any other Loan Document are true and correct as of the date hereof, both before and after giving effect to Amendment No. 1, and (ii) no Default or Event of Default has occurred and is continuing as of the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand and the seal of the Borrower this 1st day of December 1995. ___Leonard Chill________ Leonard Chill President EX-99 4 STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 18th day of October, 1995, before me personally came Patricia Stermer, to me known, who, being by me duly sworn, did depose and say that s/he resides at 414 Reservoir Ridge Road, East Stroutsburg, PA; that s/he is Assistant Vice President of United States Trust Company of New York, one of the corporations described in and which executed the above instrument; that s/he knows the corporate seal of such corporation; that the seal affixed to said instrument is such corporate seal; that is was so affixed pursuant to authority of the Board of Directors of such corporation; and that s/he signed her/his name thereto pursuant to like authority. Robert E. Patterson III____ Notarial Seal (Seal) Robert E. Patterson III Notary Public, State of New York No. 4784543 Qualified in New York County Commission Expires October 31, 1995 STATE OF GEORGIA ) ) ss.: COUNTY OF WALKER ) On the 20th day of October, 1995, before me personally came Leonard Chill, to me known, who, being by me duly sworn, did depose and say that he resides in Chattanooga, Tennessee; that he is President of Synthetic Industries, Inc., one of the corporations described in and which executed the above instrument; that he knows the corporate seal of such corporation; that the seal is affixed to said instrument is such corporate seal; that it was so affixed pursuant to authority of the Board of Directors of such corporation; and that he signed his name thereto pursuant to like authority. Diane Brown_____ Notarial Seal (Seal) Notary Public, Walker Co.. GA. My Commission expires 8/15/98 This supplemental indenture may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this supplemental indenture. IN WITNESS WHEREOF, the parties hereto have caused this supplemental indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. SYNTHETIC INDUSTRIES, INC. By: __Leonard Chill_____ Leonard Chill President Attest: __Jon P. Beckman_____ Jon P. Beckman Vice President-Finance UNITED STATES TRUST COMPANY OF NEW YORK By: __Patricia Stermer___ Patricia Stermer Assistant Vice President Attest: __Cynthia Chaney____ Cynthia Chaney Assistant Vice President EX-27 5
5 1000 12-MOS SEP-30-1995 SEP-30-1995 108 0 52000 4053 45597 108360 178889 62160 312300 39321 192048 0 0 0 57756 312300 271427 271427 242740 242740 737 0 22514 5436 3500 1936 0 0 0 1936 0 0
EX-99 6 Page EMPLOYMENT CONTRACT THIS AGREEMENT entered into this 27th day of April, 1995, by and between SYNTHETIC INDUSTRIES, INC., a Delaware corporation ("Employer") and JOSEPH SINICROPI ("Employee"). WHEREAS, the parties are desirous of entering into a contract of employment concerning the employment of Joseph Sinicropi by Synthetic Industries, Inc. NOW, THEREFORE, for good and valuable consideration and the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employer agrees to employ the Employee, and the Employee agrees to be so employed, in the capacity of Chief Accounting Officer. The employment contract shall be for a term of three (3) years effective as of July 1, 1995 and terminating on June 30, 1998 (the "Term"). 2. The Employee shall diligently and conscientiously devote his full and exclusive time and attention and best efforts in discharging his duties as Employer's Chief Accounting Officer. The Employee shall at all times discharge his duties in consultation with and under the supervision of Employer's Chief Financial Officer and the Employer's Board of Directors. 3. Employee shall receive as compensation for his services an annual base salary of One Hundred Fifteen Thousand ($115,000.00) Dollars payable in the same manner as other executive salaried employees. During the term of this Agreement, the rate of base salary shall be reviewed annually by Employer's Compensation Committee. 4. In addition to his annual base salary beginning with fiscal year 1996, Employee shall be entitled to participate in the Management Incentive Compensation Plan established each year by Employer for salaried employees. Under the Management Incentive Compensation Plan, compensation is calculated by a standard formula based upon the attainment of Employer's fiscal year business plan. If the Management Incentive Compensation Plan is achieved for fiscal year 1996, Employee's incentive compensation shall be Thirty Thousand ($30,000.00) Dollars. 5. In addition to the base salary and incentive compensation, the Employee shall receive the following additional benefits: (a) Employer shall provide the Employee with an automobile, including all related maintenance, repairs, gasoline, insurance and other costs. The automobile and related costs shall be comparable to those which the Employer presently provides executive salaried employees. (b) Coverage for Employee and his dependents in Employer's group insurance plan. Pre-existing conditions shall be waived for the Employee and members of the Employee's immediate family. Coverage will be effective on the first day of employment. (c) Coverage for Employee and his dependents in Employer's dental insurance plan. (d) Coverage in Employer's disability insurance plan. (e) Coverage in Employer's group life insurance plan. Coverage will be effective after three (3) months employment. (f) Participation in the retirement plan maintained by Employer for its employees under Section 401 K of the Internal Revenue Code. Eligibility for participation will begin after one (1) full year of service. Enrollment will be on the first calendar day of the next quarter after one (1) year of service. (g) Paid vacation each year based upon Employer's vacation policy. The health, dental, disability and life insurance coverage to be purchased and maintained by the Employer for the benefit of the Employee shall be in such amounts as are presently available to all other executive salaried employees. Whatever portion of the above described fringe benefits which are deemed to be personal income under applicable federal and state tax laws shall be grossed up by amount sufficient to pay any personal income taxes assessed against said Employee as a result of such fringe benefits. 6. This Agreement shall not be in lieu of any additional rights, benefits and privileges to which Employee may be entitled as an employee of the Employer under any retirement, pension, profit sharing, insurance, hospitalization plan, disability plan, or other plan which may now be in effect or which may hereafter be adopted. The Employee shall have the same rights and privileges to participate in such plans and benefits as any other salaried employee during his period of employment. 7. Employee shall be reimbursed in full for all reasonable business related expenses incurred during the performance of his duties. The Employer will reimburse Employee for all such expenses upon the presentation by the Employee from time to time of an itemized account of such expenditures together with such supporting vouchers. 8. In connection with the Employee's relocation, the Employer will reimburse the Employee for the following: (a) Reasonable and customary expenses incurred by the Employee in moving furniture, normal household goods and personal belongings to Employee's new residence. (b) Reasonable and customary travel expenses incurred by the Employee and his immediate family to relocate to Employee's new residence. (c) Closing expenses associated with the purchase of the Employee's current residence totalling Twelve Thousand Three Hundred Forty-One ($12,341.00) Dollars. (d) Reasonable and customary closing costs, legal fees, and points on the sale of Employee's current residence. 9. The Employer shall indemnify the Employee and hold him harmless for all acts or decisions made by him in good faith while performing services for the Employer within the scope of his employment hereunder and with respect to any criminal action or proceeding provided that the Employee had no cause to believe his conduct was unlawful. The Employer shall pay all expenses including attorney's fees, actually and necessarily incurred by the Employee in connection with the defense of such act, suit, or proceeding and in connection with any related appeal including the cost of court settlements; except in the event that such acts are shown to constitute fraud. In the event of any such action, suit or proceeding, whether civil, criminal, administrative or investigative to which the Employee is a party is threatened to be made a party, the Employer in its sole discretion shall have the right to assume the defense thereof, including, but not limited to, the employment of counsel. Notwithstanding anything to the contrary herein contained, the indemnity referred to in this paragraph shall not be available to the Employee if it is finally judicially shown that such Employee's acts or decisions constituted fraud or malfeasance. 10. Employer will provide and maintain Directors and Officers liability insurance coverage ("D & O Coverage") for the benefit of Employee comparable to the D & O Coverage presently in existence. If, in the opinion of Employer's Board of Directors, D & O Coverage cannot be economically provided, then Employer reserves the right to cancel or reduce such D & O Coverage. In the event such D & O Coverage is canceled or the coverage reduced, Employee shall have the right to terminate this contract and resign as an officer, director and employee. 11. In the event the Employee is terminated other than for cause as provided for herein, within ninety (90) days after the consummation of the sale by Employer of all or substantially all of its assets or the sale by Synthetic Industries, L.P. of all or substantially all of the capital stock of Employer, Employee shall be entitled to receive from Employer the annual base salary of Employee for the greater of (a) twelve (12) months or (b) the remainder of the Term. 12. Employee shall be entitled to participate in Employer's Stock Option Plan as administered by Employer's Compensation Committee. Options granted to the Employee will be granted subject to the terms and conditions of Employer's Stock Option Plan. 13. Employee acknowledges that the Employer's products and services are proprietary in nature and have been manufactured and marketed through the use of customer lists, supplier lists, trade secrets, methods of operation and other confidential information possessed by the Employer and disclosed in confidence to the Employee (hereinafter referred to as "Trade Secrets") which may not be easily accessible to other persons in the trade. Employee further acknowledges that he will gain knowledge of customer needs and preferences, sources of supply, methods of manufacture, and other valuable information necessary for the success of Employer's business. Employee therefore covenants and agrees (all of which covenants and agreements shall survive termination of this Agreement regardless of the reason therefor), that he will at no time during the term of this Agreement or at any time subsequent to its termination, disclose to any person or entity, or use for personal gain any of the Trade Secrets or any other confidential information of or pertaining to Employer or its products and services disclosed to or obtained by Employee during the Term. 14. During the Term of this Agreement, Employee will not without prior written consent of Employer, own, advise, counsel, assist or engage in, for the purpose of financial gain, profit or pecuniary advantage, any business activity that competes, directly or indirectly, with Employer or is similar in nature to the business in which Employer is engaged. 15. The Employer shall have the right to terminate this Agreement if the Employee becomes permanently and totally disabled as defined by Employer's long term disability plan. In the event of total disability, Employee's compensation will be limited to disability compensation under Employer's long term disability plan. 16. The employment of Employee under this Agreement and the Term hereof, may be terminated by Employer for cause, or as otherwise provided in paragraph (15) hereof. Notwithstanding anything to the contrary contained in the preceding sentence, this Agreement shall terminate upon the death of the Employee. For purposes hereof, the term "cause" includes, but is not limited to: (i) Employee's fraud, felonious conduct, dishonesty or willful misconduct in the performance of his duties hereunder; provided, however, that bona fide disagreements or disputes as to expense reimbursements shall not be deemed fraud or felonious conduct; or (ii) the willful neglect, failure or refusal of the Employee to carry out his duties hereunder, which results in harm to the business, reputation, prospects, or financial condition of Employer; or (iii) Employee's material breach of any provision of this Employment Agreement. 17. Employee agrees to execute Employer's standard Confidentiality Agreement. 18. This Agreement has been executed and delivered in the State of Georgia, and its interpretation, validity and performance shall be construed and enforced in accordance with the laws of such State. 19. If any term or provision of this Agreement, or the application thereof to any person or circumstance shall, to any extent be found invalid or unenforceable, this Agreement shall be deemed to be amended only to the extent necessary to render it valid and enforceable. 20. This instrument contains the entire agreement of the parties with respect to the subject matter hereof. It may not be changed orally, but only by an agreement in writing signed by all parties hereof. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. EMPLOYER: SYNTHETIC INDUSTRIES, INC. By:Jon P.Beckman__________________________________ Title:_Vice President-Finance__________ EMPLOYEE: Joseph Sinicropi JOSEPH SINICROPI S4\SINICROPI.SYN -----END PRIVACY-ENHANCED MESSAGE-----