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 North Dakota Lock Box Agreement is a cash management system that allows lenders to have better control over the funds they lend to borrowers. This agreement is designed to provide a secure and efficient way of managing the flow of funds between the lender and the borrower. In a North Dakota Lock Box Agreement, lenders and borrowers agree to set up a lock box account in which the borrower's payments are deposited. The lock box account is managed by a third-party intermediary, typically a financial institution, to ensure transparency and fairness in the distribution of funds. The primary purpose of the lock box account is to provide a seamless process for lenders to receive loan repayments and interest payments directly from the borrower. By having the payments deposited into the lock box account, lenders have immediate access to the funds, thus reducing the risk of payment delays or defaults. One of the key features of the North Dakota Lock Box Agreement is the automatic payment allocation mechanism. This ensures that loan repayments are allocated correctly based on predefined rules, such as paying off overdue amounts first or allocating a specific percentage to interest and principal payments. This systematic approach streamlines the cash management process and reduces the need for manual intervention. Additionally, the North Dakota Lock Box Agreement offers lenders enhanced security measures to protect their funds. These security measures may include electronic payment notifications, fraud detection tools, and strict access controls to the lock box account. There are different types of North Dakota Lock Box Agreements available, depending on the specific needs of lenders and borrowers. Some common variations include: 1. Traditional Lock Box Agreement: This type follows the standard process of depositing borrower payments into a lock box account managed by a financial institution. 2. Remote Deposit Lock Box Agreement: This variation allows borrowers to remotely deposit their payments into the lock box account using electronic payment methods such as mobile banking apps or online transfer services. This option provides added convenience for borrowers while still ensuring proper fund allocation. 3. Automated Clearing House (ACH) Lock Box Agreement: This type allows borrowers to make payments directly through the Automated Clearing House network, bypassing the need for physical checks or cash deposits. ACH lock box agreements offer faster funds clearance and automated payment reconciliation. In summary, the North Dakota Lock Box Agreement is a comprehensive cash management system that provides lenders with greater control and security over their funds. Whether through traditional, remote deposit, or ACH variations, this agreement streamlines loan repayments and interest payments, ensuring smooth financial operations between lenders and borrowers.
