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.
The Illinois Lock Box Agreement is a widely used cash management system implemented by lenders to efficiently manage funds received from borrowers. This agreement aims to enhance the security and transparency of financial transactions by establishing a designated lock box account for the collection and processing of borrower payments. Under the Illinois Lock Box Agreement, lenders require borrowers to make payments directly into a specifically designated bank account maintained by a qualified financial institution. This ensures that all payments are promptly collected, deposited, and accurately credited to the lender's account. Moreover, this agreement streamlines the cash management process by automating the reconciliation of payments and enhances the overall efficiency of financial operations. This cash management system provides lenders with greater control and visibility over cash flows, allowing them to closely monitor incoming payments and efficiently allocate funds for various purposes. Additionally, the Illinois Lock Box Agreement enables lenders to rapidly identify and address any discrepancies or irregularities in payment processing, minimizing the risk of fraud and potential financial losses. The Illinois Lock Box Agreement offers several variations tailored to different lender requirements and preferences. Some common types include: 1. Standard Lock Box Agreement: This type of agreement follows the standard guidelines and procedures for receiving and processing borrower payments. It ensures secure handling of funds, efficient payment reconciliation, and increased cash management control. 2. Advanced Reporting Lock Box Agreement: This variation provides lenders with enhanced reporting capabilities, enabling them to gain valuable insights into payment trends, debtor behaviors, and other crucial financial data. It allows lenders to make data-driven decisions and optimize their cash management strategies accordingly. 3. Customized Lock Box Agreement: This type of agreement is tailored to meet specific lender requirements, such as unique payment processing preferences, specialized reporting needs, or integration with existing financial systems. It offers flexibility and customization options based on the lender's individual cash management objectives. In conclusion, the Illinois Lock Box Agreement serves as an essential cash management system for lenders, ensuring secure and efficient processing of borrower payments. Its various types cater to different lender needs, providing enhanced reporting capabilities, customization options, and overall financial control. By implementing this agreement, lenders can effectively optimize their cash management operations and mitigate potential risks associated with payment processing.
