EXHIBIT 10.7
DEPOSIT ACCOUNT CONTROL AGREEMENT
THIS DEPOSIT ACCOUNT CONTROL AGREEMENT ("Agreement") is dated June 29,
2005 by and among BancorpSouth Bank (together with its successors and assigns,
"Bank"), Xxxxxxx Fabrics, Inc. (together with its successors and assigns, the
"Company") and Wachovia Bank, National Association, in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the parties thereto as lenders (in such capacity, together with its
successors and assigns, "Agent").
W I T N E S S E T H
WHEREAS, Bank maintains or will maintain for the use of the Company the
deposit account listed on Schedule 1 hereto as the collection account (the
"Collection Account") and in addition, Bank maintains the other deposit accounts
used by or on behalf of the Company listed on Schedule 1 hereto (the "Operating
Accounts", and together with the Collection Account and any other deposit
accounts at any time established or maintained at Bank by or for the benefit of
the Company or to which any funds of the Company are at any time remitted or
deposited, but excluding deposit accounts specifically and exclusively used for
payroll, payroll taxes and other employee wage and benefit payments, being
collectively, the "Deposit Accounts", and individually, each a "Deposit
Account");
WHEREAS, the Company has entered or is about to enter into financing
arrangements with Agent and the parties to the Loan Agreement as lenders
(collectively, together with their respective successors and assigns, "Lenders")
pursuant to which the Company may from time to time have certain indebtedness or
other obligations to Agent and Lenders as set forth in the Loan and Security
Agreement by and among Agent, Lenders, the Company and certain of its affiliates
(as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement");
WHEREAS, such indebtedness and other obligations of the Company to Agent
and Lenders are secured by, among other things, all right, title and interest of
the Company in and to the following, whether now or hereafter existing or
arising (collectively, the "Deposit Account Collateral"): (a) the Deposit
Accounts, (b) all checks, money orders, drafts, instruments, electronic funds
transfers and other items and forms of remittances and all funds and other
amounts at any time paid, deposited or credited (whether for collection,
provisionally or otherwise), held or otherwise in the possession or under the
control of, or in transit to, Bank or any agent or custodian thereof for credit
to or to be deposited in any Deposit Account, (c) all funds and cash balances or
other amounts in or attributable to any Deposit Account, and (d) any and all
proceeds of any of the foregoing;
WHEREAS, in connection with such financing arrangements, Agent and Lenders
require that Bank and the Company enter into this Agreement to establish certain
rights and benefits with respect to the Deposit Accounts;
NOW, THEREFORE, in order for the Company to comply with the requirements
of Agent and Lenders under their financing arrangements with the Company, the
Company, Bank and Agent agree as follows:
1. Deposit Account Collateral. Bank hereby represents, warrants and
covenants with and to Agent and Lenders that: (a) Bank has established and will
maintain the Deposit Accounts and has identified the Company as the sole owner
of the Deposit Accounts, subject to the rights of Agent therein as provided
herein; (b) the records of Bank do not reflect, and it has not received any
notice of, any assignment or pledge of, or security interest in the Deposit
Accounts or any of the other Deposit Account Collateral (other than the pledge
and security interest of Agent referred to herein), or any notice of any adverse
claim with respect to any of the same; (c) Bank has not entered and will not
enter into any agreement with any person other than Agent by which it is
obligated for any reason to comply with instructions from such other person as
to the disposition of funds in or from the Deposit Accounts or with respect to
any other dealings with any of the Deposit Account Collateral; (d) Bank will not
agree that any person other than the Company or Agent is the Bank's customer
with respect to any Deposit Account; (e) Schedule 1 is a correct and complete
list of the Deposit Accounts as of the date hereof and each of them constitutes
a "deposit account" as such term is defined in the UCC; (f) effective as of the
Effective Date (as hereinafter defined), the title of the Collection Account
shall be changed to "Xxxxxxx Fabrics, Inc. -- Wachovia Bank, National
Association as Agent Blocked Account"; (g) Bank acknowledges that it holds and
will hold possession of the Deposit Account Collateral consisting of instruments
and money as bailee for Agent and for the benefit of Agent; and (h) Bank is
hereby irrevocably authorized and instructed to change the designation of the
customer on any Deposit Account to Agent upon the request of Agent and Bank
shall so change the customer promptly upon such request by Agent.
2. Control.
(a) Notwithstanding any other term or provision of this Agreement or
any other agreement between Bank and the Company or otherwise, Bank is hereby
irrevocably authorized and directed to, and Bank agrees that it will, comply
with instructions originated by Agent directing the disposition of funds from
time to time in any Deposit Account or as to any other matters relating to any
Deposit Account or any of the other Deposit Account Collateral without further
consent by the Company (which instructions may include the giving of stop
payment orders for any items being presented to a Deposit Account for payment).
(b) Effective upon the receipt by Bank of written notice from Agent
that Agent is exercising exclusive control over any Deposit Account (each such
notice being referred to as a "Notice of Exclusive Control"), Bank shall not
permit the Company or any of its affiliates to withdraw any amounts from, to
draw upon or otherwise exercise any authority or powers with respect to the
Deposit Account and all Deposit Account Collateral related thereto specified in
any such Notice of Exclusive Control and Bank shall not at any time honor, any
instructions with respect to the such Deposit Account and Deposit Account
Collateral, other than those approved in writing by Agent. Until the receipt by
Bank of a Notice of Exclusive Control, the Company shall be entitled to present
items drawn on and otherwise to withdraw or direct the disposition of funds from
the Deposit Accounts.
3. Remittance of Funds. Unless and until Bank shall receive written
instruction from Agent to the contrary, effective as of the Effective Date, all
checks, money orders, drafts, instruments, electronic funds transfers and other
items and forms of remittances received for deposit in the Collection Account
shall be deposited only in the Collection Account on the date received. On and
after the date of the receipt by Bank of a Notice of Exclusive Control as to any
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Deposit Account, all available funds in such Deposit Account shall automatically
and without further direction on each business day be remitted, at the Company's
cost and expense, by federal funds wire transfer solely to Wachovia Bank,
National Association, ABA No. 000-000-000, for credit to Wachovia Bank, National
Association, Account No. 5000000030295, re: Xxxxxxx Fabrics or to such other
account as Agent may specify.
4. Indemnity; Bank's Responsibility. The Company agrees to indemnify,
defend and hold harmless Bank against any loss, liability or expense (including
reasonable fees and disbursements of counsel) incurred in connection with this
Agreement, including any action taken by Bank pursuant to the instructions of
Agent, except to the extent due to the gross negligence or willful misconduct of
Bank or breach of any of the provisions hereof. The Company confirms and agrees
that neither Bank nor Agent or Lenders shall have any liability to the Company
for wrongful dishonor of any items as a result of any instructions of Agent.
Bank shall have no duty to inquire or determine whether the obligations of the
Company to Agent or Lenders are in default or whether Agent is entitled to give
any such instructions and Bank is fully entitled to rely upon such instructions
from Agent (even if such instructions are contrary or inconsistent with any
instructions or demands given by the Company).
5. Statements, Confirmations and Notices of Adverse Claims. At such time
or times as Agent may request, Bank will promptly report to Agent the amounts
received in and held in the Deposit Accounts and will furnish to Agent any
copies of bank statements, deposit tickets, deposited items, debit and credit
advices and other records maintained by Bank under the terms of its arrangements
with the Company (as in effect on the date hereof). Agent will reimburse Bank
for its reasonable expenses in providing such items to Agent. Upon receipt of
notice of any lien, encumbrance or adverse claim against any Deposit Account
Collateral, Bank will promptly notify Agent and the Company thereof.
6. Subordination of Bank's Security Interest; Setoff Rights.
(a) In the event that at any time Bank has a security interest in or
lien upon any of the Deposit Account Collateral, such security interest and lien
of Bank shall be subject and subordinate to the security interest and lien of
Agent therein. Bank shall not for any reason charge, debit, deduct or offset, or
exercise any security interest or lien rights, against any checks, automated
clearinghouse transfers or other form of remittances at any time deposited in or
credited to any Deposit Account, except that Bank may setoff against funds in
the Deposit Accounts for all amounts due to Bank in respect of its customary
fees and expenses for routine operation of the Deposit Accounts that are unpaid
and outstanding, for the amount of any checks, automated clearinghouse
transfers, items or other form of remittances that have been credited to any
Deposit Account and subsequently returned unpaid or lawfully demanded to be
refunded by any paying or collecting bank (whether for insufficient funds or any
other reason), for the amount of any checks, automated clearinghouse transfers,
items or other form of remittances which have been credited to any Deposit
Account incorrectly by reason of inadvertent error which is corrected as soon as
practicable after the discovery of such error, and for any overdrafts arising as
a result thereof; provided, that, Bank shall first setoff for such amounts due
to it against funds held in the Operating Accounts before the Collection
Account.
(b) In the event that the funds in the Deposit Accounts are
insufficient to reimburse Bank, on and after the receipt by Bank of a Notice of
Exclusive Control from Agent with respect
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to a Deposit Account, Agent shall reimburse Bank for the face amount of any
checks, automated clearinghouse transfers, items or other forms of remittances
that were deposited in such Deposit Account or such fees and expenses, in each
case to the extent that: (i) in the case of a check, automated clearinghouse
transfer, items or other form of remittance returned unpaid, or which is
lawfully demanded to be refunded by any paying or collecting bank (whether for
insufficient funds or any other reason), or which was credited to any Deposit
Account incorrectly by reason of inadvertent error, Agent received final payment
in respect thereof and Agent has received notice from Bank of the failure of the
Company to pay Bank prior to the date that is ninety (90) days after such check,
automated clearinghouse transfer, items or other form of remittance is returned
to Bank or such demand is made to Bank or such error was discovered by Bank and
(ii) in the case of such fees and expenses, Agent has received written demand
from Bank for payment for such fees and expenses prior to the date that is sixty
(60) days after the date such fees were due and payable to Bank. The Company
shall reimburse Agent for any amounts paid by Agent to Bank under this Section 6
or otherwise under this Agreement promptly upon demand by Agent (without inquiry
as to, and regardless of, any dispute between the Company and Bank). Such
amounts shall be paid to Agent by Company (or at Agent's option, Agent may
charge any loan account of the Company or its affiliates maintained by Agent)
without offset, defense or counterclaim.
7. Termination. This Agreement cannot be changed, modified or terminated
except that this Agreement may be terminated either: (a) by Bank upon thirty
(30) days prior written notice to the Company and Agent and (b) upon written
notice by Agent to Bank of the termination of the financing arrangements of
Agent and Lenders with the Company or its affiliates. In the event that for any
reason this Agreement shall be terminated other than pursuant to the written
notice by Agent to Bank of the termination of the financing arrangements of
Agent with the Company, Bank will immediately transfer any funds in the
Collection Account to the account of Agent specified in Section 3 hereof, the
Collection Account will be closed and Bank will forward any mail received in the
Deposit Accounts after such termination to Agent or to such address as Agent may
designate to Bank in writing for such purpose.
8. Notices. All notices hereunder to the Bank shall be in writing, sent by
telecopier and by nationally recognized overnight courier with instructions to
deliver the next business day, and shall be deemed to have been given or made
when Bank has had a reasonable period of time to act thereon (but in no event
longer than two business days after the Bank has received such notice). All
notices to any other party hereunder shall be in writing and deemed to have been
given or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing. All notices to any party shall be given to its address set forth below
(or to such other address as any party may designate by notice in accordance
with this Section).
9. Customer Agreement. This Agreement supplements any other agreements
between the Company and Bank with respect to the Deposit Accounts, as such
agreements may now exist or may hereafter be amended and whether now existing or
hereafter arising. No consent of the Agent or the Lenders shall be required to
amend any such other agreement or for the Company and the Bank to enter into any
additional agreement. In the event of any inconsistency between this Agreement
and the terms of such other agreements of the Company or its affiliates with
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Bank, the terms of this Agreement control. Notwithstanding anything to the
contrary contained herein, the Deposit Accounts shall not include any deposit
accounts specifically and exclusively used for payroll, payroll taxes and other
employee wage and benefit payments (collectively, "Payroll Accounts") and the
terms of this Agreement shall not apply to any Payroll Accounts.
10. Governing Law. This Agreement shall be governed by the laws of the
State of Mississippi. Notwithstanding anything to the contrary contained in any
other agreement among any of the parties hereto, for purposes of the UCC, the
State of Mississippi shall be deemed to be the Bank's jurisdiction within the
meaning of Section 9-304 of the UCC. All references to the "UCC" herein shall
mean the Uniform Commercial Code as in effect on the date hereof in the State of
Mississippi.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile or other means of electronic
transmission shall have the same force and effect as the delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of any such agreement by telefacsimile or other means of electronic
transmission shall also deliver an original executed counterpart, but the
failure to do so shall not affect the validity, enforceability or binding effect
of such agreement.
12. Successors and Assigns. Agent and Lenders are relying upon this
Agreement in providing financing to the Company and this Agreement shall be
binding upon the Company and Bank and their respective successors and assigns
and inure to the benefit of Agent and Lenders and their respective successors
and assigns.
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13. Effective Date. This Agreement shall become effective on the date when
each of the following conditions shall have been satisfied (the "Effective
Date"): (a) this Agreement shall have been executed and delivered by Agent,
Company and Bank, and (b) the Termination Agreement, dated on or about the date
hereof, between Union Planters Bank, National Association and Company shall have
become effective.
XXXXXXX FABRICS, INC. WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
By: _________________________________
By: _________________________________
Title:_______________________________
Title:_______________________________
Address for Notices:
Address for Notices:
Xxx Xxxxxxx Xxx
Xxxxxxx, XX 00000 Heritage Square II, Suite 1050
Attention: Xxxxx X. Xxxxx 5001 LBJ Freeway
Telecopy: 000-000-0000 Xxxxxx, XX 00000
Attention: Portfolio Manager
Telecopy: 000-000-0000
BANCORPSOUTH BANK
By: _________________________________
Title:_______________________________
Address for Notices:
Corporate Banking Department
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxxx
Telecopy: 000-000-0000
with a copy to:
Cash Management Department
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: X.X. Xxxxxx
Telecopy: 000-000-0000
with a copy to:
Cash Management Department
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxx X
Xxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx Xxxx
Telecopy: 000-000-0000
SCHEDULE 1
TO
DEPOSIT ACCOUNT CONTROL AGREEMENT
1. Collection Account:
Xxxxxxx Fabrics, Inc. - Account No. 01-210513
2. Operating Accounts:
Xxxxxxx Fabrics, Inc. - Account No.: 01-247794
Xxxxxxx Fabrics, Inc. - Account No.: 01-236083
Xxxxxxx Fabrics, Inc. - Account No.: 01-248669
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