Exhibit 10.1
EXECUTION COPY
(Lockbox - With
Activation)
DEPOSIT ACCOUNT CONTROL
AGREEMENT
This Agreement is entered into as of
May 26, 2006, among Unifi Manufacturing, Inc.
(“Company”), Bank of America, N.A.
(“Lender”), as agent for itself and the financial
institutions party thereto from time to time as lenders
(“Agent”), under that certain Amended and Restated
Credit Agreement (as amended, restated, supplemented, modified,
replaced or refinanced from time to time, the “Credit
Agreement”), dated as of May 26, 2006, among Unifi, Inc.
(the “Parent”) and certain of its domestic
subsidiaries, including, without limitation, the Company, as
borrowers, such lenders and the Lender, in its capacity as Agent,
and Bank of America, N.A. (“Bank”) with respect
to the following:
A. Bank has agreed to establish and
maintain for Company post office number 404617 (the “Lockbox
Address”) and deposit account number 3752163784 (the
“Account”). Bank performs the services described in
Exhibit A, which includes receiving mail at the Lockbox Address,
processing it and depositing checks and other payment instructions
(“Checks”) into the Account (the “Lockbox
Service”).
B. Company has assigned to Lender
and the Notes Agent (as defined below) a security interest in the
Account and in Checks mailed to the Lockbox Address.
C. Company, Lender and Bank are
entering into this Agreement to evidence the security interest of
the Lender and the Notes Agent in the Account and such Checks and
to provide for the disposition of net proceeds of Checks deposited
in the Account.
Accordingly, Company, Lender and
Bank agree as follows :
1. (a) This Agreement evidences
Lender’s control over the Account and the Account is a
“Deposit Account” (as such term is defined in
Section 9-102(29) of the Uniform Commercial Code, as in effect
from time to time in New York (the “UCC”)).
Notwithstanding anything to the contrary in the agreement between
Bank and Company governing the Account, Bank will comply with
instructions originated by Lender as set forth herein directing the
disposition of funds in the Account without further consent of the
Company.
(b) Company represents and warrants
to Lender and Bank that it has not assigned or granted a security
interest in the Account or any Check deposited in the Account,
except to Lender and the Notes Agent. Bank represents that it
qualifies as a “Bank” within the meaning of
Section 9-102(8) of the UCC and agrees that, for the purposes
of this Agreement, its “jurisdiction” (as determined by
the rules set forth in Section 9-304(b) of the UCC) be shall
be the State of New York.
(c) Company will not permit the
Account to become subject to any other pledge, assignment, lien,
charge or encumbrance of any kind, other than Lender’s
security interest referred to herein.
2. During the Activation Period (as
defined below), Bank shall prevent Company from making any
withdrawals from the Account. Prior to the Activation Period,
Company may operate and transact business through the Account in
its normal fashion, including making withdrawals from the Account,
but covenants to Lender it will not close the Account. Bank shall
have no liability in the event Company breaches this covenant to
Lender. A reasonable period of time following the commencement of
the Activation Period, and continuing on each Business Day
thereafter, Bank shall transfer all available balances in the
Account to Lender at its account specified in the Notice (as
defined below). The “Activation Period” means the
period which commences within a reasonable period of time not to
exceed two Business Days after Bank’s acknowledgement of
receipt of a written notice from Lender in the form of Exhibit B
(the “Notice”). A “Business Day” is each
day except Saturdays, Sundays and Bank holidays. Funds are not
available if, in the reasonable determination of Bank, they are
subject to a hold, dispute or legal process preventing their
withdrawal.
3. Bank agrees it shall not offset,
charge, deduct or otherwise withdraw funds from the Account, except
as permitted by Section 4, until it has been advised in
writing by Lender that all of Company’s obligations that are
secured by the Checks and the Account are paid in full. Lender
shall notify Bank promptly in writing upon payment in full of
Company’s obligations.
4. Bank is permitted to charge the
Account:
(a) for its fees and charges
relating to the Account or associated with the Lockbox Service and
this Agreement; and
(b) in the event any Checks
deposited into the Account is returned unpaid for any reason or for
any breach of warranty claim.
(c) for any account adjustments as
it relates to encoding errors or other adjustments as a result of
customary banking practices.
5. (a) If the balances in the
Account are not sufficient to compensate Bank for any fees, account
adjustments or charges due Bank in connection with the Account, the
Lockbox Service or this Agreement, Company agrees to pay Bank on
demand the amount due Bank. Company will have breached this
Agreement if it has not paid Bank, within five days after such
demand, the amount due Bank.
(b) If the balances in the Account
are not sufficient to compensate Bank for any account adjustment as
described in Section 4 or returned Checks, Company agrees to
pay Bank on demand the amount due Bank. If Company fails to so pay
Bank immediately upon demand, Lender agrees to pay Bank within five
days after Bank’s demand to Lender to pay any amount received
by Lender with respect to such returned Checks or account
adjustments as described in section 4. The failure to so pay Bank
shall constitute a breach of this Agreement.
(c) Company hereby authorizes Bank,
without prior notice, from time to time to debit any other account
Company may have with Bank for the amount or amounts due Bank under
subsection 5(a) or 5(b).
6. (a) Each Business Day, Bank
will send any Checks not processed in accordance with the Lockbox
Service set-up documents as well as any other materials, such as
invoices, received at the Lockbox Address plus information
regarding the deposit for the day to the address specified below
for Company or as otherwise specified in writing by Company to
Bank.
(b) In addition to the original Bank
statement provided to Company, Bank will provide Lender with a
duplicate of such statement.
7. (a) Bank will not be liable
to Company or Lender for any expense, claim, loss, damage or cost
(“Damages”) arising out of or relating to its
performance under this Agreement other than those Damages which
result directly from its acts or omissions constituting gross
negligence or intentional misconduct.
(b) In no event will Bank be liable
for any special, indirect, exemplary or consequential damages,
including but not limited to lost profits.
(c) Bank will be excused from
failing to act or delay in acting, and no such failure or delay
shall constitute a breach of this Agreement or otherwise give rise
to any liability of Bank, if (i) such failure or delay is
caused by circumstances beyond Bank’s reasonable control,
including but not limited to legal constraint, emergency
conditions, action or inaction of governmental, civil or military
authority, fire, strike, lockout or other labor dispute, war, riot,
theft, flood, earthquake or other natural disaster, breakdown of
public or private or common carrier communications or transmission
facilities, equipment failure, or negligence or default of Company
or Lender or (ii) such failure or delay resulted from
Bank’s reasonable belief that the action would have violated
any guideline, rule or regulation of any governmental
authority.
(d) Bank shall have no duty to
inquire or determine whether Company’s obligations to Lender
are in default or whether Lender is entitled to provide the Notice
to Bank. Bank may rely on notices and communications it believes in
good faith to be genuine and given by the appropriate
party.
(e) Notwithstanding any of the other
provisions in this Agreement, in the event of the commencement of a
case pursuant to Title 11, United States Code, filed by or against
Company, or in the event of the commencement of any similar case
under then applicable federal or state law providing for the relief
of debtors or the protection of creditors by or against Company,
Bank may act as Bank deems necessary to comply with all applicable
provisions of governing statutes and shall not be in violation of
this Agreement as a result.
(f) Bank shall be
