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.
Indiana Lock Box Agreement as Cash Management System with Lenders is a financial arrangement commonly used in commercial real estate transactions in the state of Indiana. This cash management system allows lenders to monitor and control the flow of funds associated with a property or project. The Indiana Lock Box Agreement is designed to provide lenders with a secure and efficient method of managing the incoming funds from lease payments and other sources of income. By utilizing a lock box system, the agreement aims to minimize the risk of misappropriation or loss of funds, ensuring that lenders receive their payments in a timely manner. The lock box system works by redirecting all incoming payments from tenants and other sources to a designated bank account, referred to as the "lock box account." The funds are then immediately applied towards loan payments, interest, and other financial obligations specified in the agreement. By implementing this cash management system, lenders gain the ability to closely monitor incoming funds, allowing them to track the financial performance of the property or project. The lock box agreement provides lenders with a level of control and transparency, reducing the likelihood of financial mismanagement. Types of Indiana Lock Box Agreement as Cash Management System with Lenders: 1. Standard Lock Box Agreement: In this type of agreement, all funds received are automatically deposited into the lock box account, with the lender having complete control over the disbursement of funds for loan payments, interest, and other expenses. 2. Controlled Lock Box Agreement: This type of agreement allows the borrower some level of control over the disbursement of funds. The borrower is typically required to maintain a minimum balance in the lock box account, from which they can make predetermined disbursements for expenses related to the property or project. 3. Multi-tiered Lock Box Agreement: In certain cases, a multi-tiered lock box agreement may be utilized. This type of agreement involves multiple lock box accounts, each designated for specific types of payments, such as rent, utility bills, or other income sources. The funds received in each account are disbursed according to predetermined instructions laid out in the agreement. In summary, the Indiana Lock Box Agreement as a Cash Management System with Lenders is a financial mechanism designed to ensure the efficient and secure flow of funds associated with a property or project. By implementing this agreement, lenders can effectively monitor and control incoming funds, reducing the risk of financial mismanagement. Various types of lock box agreements, such as the standard lock box agreement, controlled lock box agreement, and multi-tiered lock box agreement, provide flexibility and customization options for both lenders and borrowers.
