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.
Pennsylvania Lock Box Agreement is a cash management system utilized by lenders to efficiently handle borrower payments. This agreement is designed to streamline the payment process, ensuring timely and accurate processing of funds. With the use of a lockbox, lenders can collect payments from borrowers and deposit them into a specific bank account. The lockbox acts as a secure intermediary, receiving payments on behalf of the lender. It is typically set up at a local branch of a financial institution, conveniently located for the borrowers. The bank then collects the payments, performs initial processing, and deposits the funds into the designated account. This system offers lenders several advantages, such as enhanced cash flow management, reduced administrative burden, and improved efficiency in handling borrower payments. There are various types of Pennsylvania Lock Box Agreements available, each offering distinct features and benefits. Some common types are: 1. Basic Lock Box Agreement: This is a standard lockbox arrangement where the bank receives payments in a designated account on behalf of the lender. The lender maintains full control and ownership over the funds and can access them as per their requirements. 2. Sweep Lock Box Agreement: In this type of arrangement, the bank automatically sweeps the funds from the lockbox account to a predefined account of the lender. This helps in streamlining cash management by consolidating funds into a centralized location for better control and utilization. 3. Remittance Processing Lock Box Agreement: This agreement involves the bank processing the payments received in the lockbox and providing detailed remittance information to the lender. The lender can reconcile payments more efficiently with the help of this information. 4. Electronic Lock Box Agreement: This type of arrangement enables borrowers to make electronic payments directly into the lockbox account. It eliminates the need for physical checks, increasing the speed and convenience of payment processing. 5. Integrated Lock Box Agreement: An integrated lock box agreement involves the bank seamlessly integrating the lockbox system with the lender's financial software or cash management platform. This integration enables real-time visibility and reporting of payments, improving overall cash management capabilities. When considering a Pennsylvania Lock Box Agreement as a cash management system with lenders, it is essential to evaluate the specific requirements and preferences of both the lender and the borrowers. This ensures that the chosen agreement aligns with the desired level of security, efficiency, and functionality for efficient management of borrower payments.
