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 California Lock Box Agreement serves as a crucial cash management system between lenders and borrowers. It enables lenders to maintain a level of control over the borrower's cash flow, ensuring timely repayment of loans and efficient cash management practices. This agreement is commonly used in California and is designed to protect the interests of both parties involved. Under the California Lock Box Agreement, the borrower agrees to establish a dedicated lock box account where all their receivables are deposited. This account is exclusively controlled by the lender, who has the authority to collect and allocate funds as necessary to meet loan obligations. This arrangement minimizes the risk of misused or allocated funds, providing transparency and security for the lender. There are different types of California Lock Box Agreements as cash management systems with lenders, based on the specific stipulations agreed upon by the parties involved. Some common variations include: 1. Standard California Lock Box Agreement: This is the basic form of the agreement where the borrower establishes a single lock box account, and the lender exercises control over the funds in that account. 2. Multiple Lock Box Agreement: In certain cases, borrowers may have multiple revenue streams or businesses requiring separate lock box accounts. This agreement allows for the establishment of multiple lock boxes, each dedicated to specific revenue sources. The lender maintains control over the allocation and distribution of funds from each lock box account. 3. Escrow Lock Box Agreement: This type of agreement is often used in real estate transactions. The borrower deposits rent or lease payments into the lock box account, and the lender disburses the funds to pay property-related expenses such as mortgage payments or property management fees. 4. Concentration Account Agreement: In some instances, the borrower's cash receipts may flow into a concentration account before being transferred to the lock box account. This arrangement allows the lender to monitor and consolidate cash flows from multiple sources, thereby streamlining the funds' allocation process. Keywords: California, lock box agreement, cash management system, lenders, borrowers, receivables, dedicated account, control, funds allocation, timely repayment, loans, interests, allocated funds, transparency, security, revenue streams, multiple lock boxes, escrow, real estate transactions, concentration account.The California Lock Box Agreement serves as a crucial cash management system between lenders and borrowers. It enables lenders to maintain a level of control over the borrower's cash flow, ensuring timely repayment of loans and efficient cash management practices. This agreement is commonly used in California and is designed to protect the interests of both parties involved. Under the California Lock Box Agreement, the borrower agrees to establish a dedicated lock box account where all their receivables are deposited. This account is exclusively controlled by the lender, who has the authority to collect and allocate funds as necessary to meet loan obligations. This arrangement minimizes the risk of misused or allocated funds, providing transparency and security for the lender. There are different types of California Lock Box Agreements as cash management systems with lenders, based on the specific stipulations agreed upon by the parties involved. Some common variations include: 1. Standard California Lock Box Agreement: This is the basic form of the agreement where the borrower establishes a single lock box account, and the lender exercises control over the funds in that account. 2. Multiple Lock Box Agreement: In certain cases, borrowers may have multiple revenue streams or businesses requiring separate lock box accounts. This agreement allows for the establishment of multiple lock boxes, each dedicated to specific revenue sources. The lender maintains control over the allocation and distribution of funds from each lock box account. 3. Escrow Lock Box Agreement: This type of agreement is often used in real estate transactions. The borrower deposits rent or lease payments into the lock box account, and the lender disburses the funds to pay property-related expenses such as mortgage payments or property management fees. 4. Concentration Account Agreement: In some instances, the borrower's cash receipts may flow into a concentration account before being transferred to the lock box account. This arrangement allows the lender to monitor and consolidate cash flows from multiple sources, thereby streamlining the funds' allocation process. Keywords: California, lock box agreement, cash management system, lenders, borrowers, receivables, dedicated account, control, funds allocation, timely repayment, loans, interests, allocated funds, transparency, security, revenue streams, multiple lock boxes, escrow, real estate transactions, concentration account.
