A lock box agreement is a service offered by banks to companies in which the company receives payments by mail to a post office box and the bank picks up the payments several times a day, deposits them into the company's account, and notifies the company of the deposit. This enables the company to put the money to work as soon as it's received, but the amounts must be large in order for the value obtained to exceed the cost of the service.
This lock box agreement is to be used by the collateral agent for a syndicate of banks to receive, control and apply to the Borrower's line of credit, payments made on the debtor's accounts receivable collateral. This agreement when executed, perfects the secured party's security interest in funds in the lock box account by control under Uniform Commercial Code § 9-104(a)(3) by making the agent bank the owner of and party in whose name the account is held. Because the account is controlled by ownership in the name of the secured party, the lock box bank cannot offset claims it has against the debtor against the account as provided in Uniform Commercial Code § 9-340(c). To avoid any doubt on this issue, the lock box bank expressly waives its rights of setoff. On the other hand, the agent bank agrees to indemnify the lock box bank for any unpaid fees or claims concerning the account, in the event the debtor fails to do so.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
Idaho Lock Box Agreement as Cash Management System with Lenders is a financial arrangement established between a borrower and a lender, typically utilized in commercial lending transactions. This agreement allows lenders to maintain control over the borrower's incoming cash flows, ensuring timely repayment and reduction of default risk. Keywords: Idaho Lock Box Agreement, cash management system, lenders, commercial lending, borrower, incoming cash flows, repayment, default risk. In the Idaho Lock Box Agreement, the borrower designates a specific bank or financial institution as the "lock box bank." This bank acts as a custodian for all incoming payments made by the borrower's customers or clients. The lock box bank collects these payments and deposits them directly into a dedicated account controlled by the lender. By implementing this cash management system, lenders gain increased visibility and control over the borrower's cash flow. They can monitor the inflow of funds and ensure that repayments are made according to the terms of the loan agreement. This system also reduces the risk of misappropriation or diversion of funds by the borrower. There are different types of Idaho Lock Box Agreements that can be customized based on the specific needs and preferences of the lender and borrower. Some common variations include: 1. Concentrated Lock Box Agreement: Under this type, all the borrower's funds are directed to a single lock box account, providing a centralized system for managing cash flows. 2. Disbursement Lock Box Agreement: In this variation, incoming payments are first deposited into the lock box account and then disbursed to cover specific expenses, such as loan repayments, operating expenses, or vendor payments. 3. Remote or Virtual Lock Box Agreement: Instead of relying on a physical lock box at a specific bank branch, this arrangement enables the borrower to utilize electronic or online banking services to collect and redirect incoming payments. This allows for greater convenience and flexibility. 4. Provisional Lock Box Agreement: This type ensures that the lock box bank retains a portion of the incoming payments as a reserve or collateral against the borrower's outstanding debt. The reserve amount is released to the borrower once certain conditions, such as loan repayment milestones, are met. Overall, the Idaho Lock Box Agreement as a cash management system with lenders provides a secure and efficient method for lenders to monitor and manage borrower's cash flows while mitigating default risk. This arrangement promotes transparency, reduces financial fraud, and ensures timely repayment, benefiting both the borrower and the lender.
