RESTRICTED ACCOUNT AGREEMENT
SIDLEY & AUSTIN
TO: The First National Bank of Chicago
as contractual representative (the "Agent")
under that certain Credit Agreement, dated as of LONDON
February 27, 1997 (the "Credit Agreement"), ------
among GFSI, Inc., a Delaware corporation SINGAPORE
(the "Borrower"), the Agent and those financial ------
institutions from time to time parties thereto TOKYO
(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 bank (the "Bank")
have agreed as follows with respect to the accounts identified on Schedule 1
attached hereto (the "Accounts") to which the Borrower deposits funds:
1. The Borrower and the Bank acknowledge and confirm that although the
Accounts shall remain in the name of the Borrower, all funds now or at any time
hereafter deposited to the Accounts and all of the Borrower's rights regarding
such Accounts 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.
2. The Bank will not exercise, and hereby releases, any banker's lien upon
and any right of set off against any checks or other items of payment 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 redeposited without advice.
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.
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 Bank will not close the Accounts 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.
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.
This Collection Account Agreement shall be deemed effective as of February
27,1997 upon execution hereof by the Bank.
HILL CREST BANK:
By: /s/ Marvin Szneler
----------------------------
Name: Marvin Szneler
Title: Vice President
Address: 11111 W. 95th
Overland Park, KS 66214
Attn: ______________
Telecopy No.:
Confirmation No.: ___
-2-
Acknowledged and agreed to as of this
27th day of February, 1997:
GFSI, Inc., as Borrower
By: /s/ Illegible
---------------------------
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
---------------------------
Name: Nathan L. Bloch
Title: First Vice President
Address:
One First National Plaza
Suite 6173
Chicago, Illinois 60670-6173
Attn: Nathan L. Bloch
Telecopy No.: 312-732-1117
Confirmation No.: 312-732-2243
-3-