Execution Copy
RESTRICTED ACCOUNT AGREEMENT
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TO: The First National Bank of Chicago
as contractual representative (the "Agent")
under that certain Credit Agreement, dated as of
February 27, 1997 (the "Credit Agreement"),
among GFSI, Inc., a Delaware corporation
(the "Borrower"), the Agent and those financial
institutions from time to time parties thereto
(the "Holders of Secured Obligations").
Ladies and Gentlemen:
You have advised us that the Borrower has entered or will enter into the
Credit Agreement and that in connection therewith the Borrower has granted to
the Agent, for its benefit and the benefit of the Holders of Secured
Obligations, a lien on and security interest in substantially all of the assets
of the Borrower, including all of the accounts receivable and inventory of the
Borrower.
This will confirm that the Borrower and the undersigned collection bank
(the "Bank") have agreed as follows with respect to (i) the accounts identified
on Schedule 1 attached hereto (the "Accounts") and (ii) the lock box identified
on Schedule 2 attached hereto, to which the Borrower's customers and other
persons and entities obligated to the Borrower deliver checks and other items of
payment (said lock box is hereinafter referred to as the "Lock Box"):
1. The Borrower and the Bank acknowledge and confirm that although the
Accounts and Lock Box shall remain in the name of the Borrower, all funds now or
at any time hereafter deposited to the Accounts and Lock Box and all of the
Borrower's rights regarding such Accounts and Lock Box constitute part of the
collateral in which the Borrower has granted a security interest to the Agent,
to secure the Borrower's obligations under the Credit Agreement and the other
instruments, documents and agreements executed in connection therewith, and that
during a "Notification Period" (as defined below), the Bank shall not be
permitted to follow the Borrower's directions as to disbursements and deposits
with respect thereto. The Bank's authorized representatives will have access to
the Lock Box, under the authority given by the Borrower to the appropriate Post
Office, and will make regular pick-ups from the Lock Box timed to gain the
maximum benefit of early presentation and availability of funds. Upon the Bank's
receipt thereof, checks and other items of payment so received will be processed
in accordance with the terms of the most current lock box agreement between the
Bank and the Borrower.
2. The Bank will not exercise, and hereby releases, any banker's lien upon
and any right of set off against checks or other items of payment remitted to
the Lock Box and/or deposited in the Accounts, except (i) with respect to the
Bank's normal fees and charges for operating the Accounts and (ii) for amounts
previously credited to Borrower's Accounts which the Bank subsequently
determines are uncollectible items. Checks returned unpaid because of
uncollected or insufficient funds shall be handled in accordance with the most
current lock box agreement between the Bank and the Borrower.
3. From and after the date on which the Agent notifies the Bank, in
writing, that it is exercising its rights under this Collection Account
Agreement (the "Notice") until the date on which the Agent notifies the Bank
that it is withdrawing such Notice (such period being referred to herein as a
"Notification Period"), the Bank, the Borrower and the Agent agree that, unless
the Agent otherwise instructs the Bank in writing:
A. The Bank will not honor drafts, demands, withdrawal requests or
remittance instructions by the Borrower.
B. The Bank will hold solely for account of the Agent all funds which
may be on deposit in the Accounts and the Agent shall have the exclusive
right to direct the Bank as to the disposition of all checks, other items
of payment and amounts deposited in the Accounts and remitted to the Lock
Box.
C. The Bank will remit all such funds directly to the Agent, as soon
as the funds are collected, by electronic transfer of immediately available
funds in accordance with the Agent's written wire-transfer instructions
given from time to time to the Bank.
D. The Bank shall be entitled to rely upon any notice or other writing
received from the Agent and the Borrower waives any claim of, and releases
the Bank from any liability for, complying with the terms of this
Collection Account Agreement.
4. The Borrower will receive a receipted copy of the activity relating to
the Lock Box for its records. The Bank will not close the Account without giving
the Agent at least thirty (30) days' prior written notice at the address set
forth below or such other address as the Agent may from time to time indicate by
written notice to the Bank, the Bank will send to the Agent at such address a
copy of each periodic statement for the Account, as and when the statement is
sent to the Borrower.
5. Any notice (including, without limitation, any Notice) required or
desired to be served, given or delivered hereunder shall be in writing and shall
be deemed to have been validly served, given or delivered (i) three (3) business
days after deposit in the United States mails, with proper postage prepaid, (ii)
when sent after receipt of confirmation if sent by telecopy, (iii) one (1)
business day after deposit with a reputable overnight courier with all charges
prepaid, or (iv) when delivered, if hand delivered by messenger.
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6. This Collection Account Agreement shall be binding upon the Bank and the
Borrower and their respective successors and assigns and shall inure to the
benefit of the Agent, each of the Holders of Secured Obligations and their
respective successors and assigns. This Collection Account Agreement may not be
modified without the Agent's prior written consent, but may be terminated by the
Agent or the Bank upon thirty (30) days' prior written notice to the other
parties hereto. The Bank reserves the right to debit any of the Accounts for
reasonable and customary fees relating to the services performed.
This Collection Account Agreement shall be deemed effective as of February 27,
1997, upon execution hereof by the Bank.
BOATMEN'S NATIONAL BANK:
By:
Name: Steven O. Stoecker
Title: Senior Vice President
Address:
14 West 10th Street
Kansas City, Missouri 64105
Attn: Steven O. Stoecker
Ann Mauzy
Telecopy No.: 816-979-7174
Confirmation No.: 816-979-7149
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Acknowledged and agreed to as of this
27th day of February, 1997:
GFSI, Inc., as Borrower
By: /s/ Illegible
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Name:
Title:
Address:
9700 Commerce Parkway
Lenexa, KS 66219
Attn: Robert Shaw
Telecopy No.: 913/752-3346
Confirmation No.: 913/888-0445
Acknowledged and agreed to as of this
27th day of February, 1997
THE FIRST NATIONAL BANK
OF CHICAGO, as Agent
By: /s/ Nathan L. Bloch
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Name: Nathan L. Bloch
Title: First Vice President
Address:
One First National Plaza
Suite 0088
Chicago, Illinois 60670-0088
Attn: Nathan L. Bloch
Telecopy No.: 312-732-1117
Confirmation No.: 312-732-2243
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