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.
Kansas Lock Box Agreement is a cash management system that lenders use to enhance control over funds from the borrower's accounts. This agreement ensures that the lender has exclusive access to the borrower's cash flows, enabling them to manage it effectively. The Kansas Lock Box Agreement serves as a safeguard for the lender, allowing them to collect and distribute payments directly. One type of Kansas Lock Box Agreement is the Basic Lock Box Agreement. In this type, the borrower's payments are directed to a designated lock box operated by a financial institution. The lender has authority over the lock box, enabling them to collect payments promptly. They can use the funds in the lock box to pay off the borrower's outstanding obligations, reducing the risk of default. Another type is the Controlled Lock Box Agreement. Unlike the Basic Lock Box Agreement, the borrower retains some control over the cash flows in the lock box. The lender still has access to collect payments but may allow the borrower to allocate a portion of the funds for specific purposes, such as operating expenses or capital investments. This arrangement offers more flexibility while maintaining a level of control for the lender. Additionally, the Redirected Lock Box Agreement is a variation where the borrower's payments are redirected to the lock box account without the need for a specific lock box arrangement. This type works well for lenders who want to streamline their cash management process without involving a physical lock box. The Kansas Lock Box Agreement as a cash management system with lenders provides numerous benefits. Firstly, it improves the lenders' ability to monitor cash flows, reducing the risk of fraud or misappropriation. Secondly, it streamlines payment collection and allocation, ensuring timely payment of the borrower's obligations. Lastly, it offers a level of assurance for lenders by enforcing stricter control measures over the borrower's funds. In summary, the Kansas Lock Box Agreement as a cash management system with lenders is a valuable tool that enhances control and efficiency in managing cash flows. Whether it is the Basic Lock Box Agreement, Controlled Lock Box Agreement, or Redirected Lock Box Agreement, each type provides distinct advantages to lenders in mitigating risks and maximizing cash management capabilities.Kansas Lock Box Agreement is a cash management system that lenders use to enhance control over funds from the borrower's accounts. This agreement ensures that the lender has exclusive access to the borrower's cash flows, enabling them to manage it effectively. The Kansas Lock Box Agreement serves as a safeguard for the lender, allowing them to collect and distribute payments directly. One type of Kansas Lock Box Agreement is the Basic Lock Box Agreement. In this type, the borrower's payments are directed to a designated lock box operated by a financial institution. The lender has authority over the lock box, enabling them to collect payments promptly. They can use the funds in the lock box to pay off the borrower's outstanding obligations, reducing the risk of default. Another type is the Controlled Lock Box Agreement. Unlike the Basic Lock Box Agreement, the borrower retains some control over the cash flows in the lock box. The lender still has access to collect payments but may allow the borrower to allocate a portion of the funds for specific purposes, such as operating expenses or capital investments. This arrangement offers more flexibility while maintaining a level of control for the lender. Additionally, the Redirected Lock Box Agreement is a variation where the borrower's payments are redirected to the lock box account without the need for a specific lock box arrangement. This type works well for lenders who want to streamline their cash management process without involving a physical lock box. The Kansas Lock Box Agreement as a cash management system with lenders provides numerous benefits. Firstly, it improves the lenders' ability to monitor cash flows, reducing the risk of fraud or misappropriation. Secondly, it streamlines payment collection and allocation, ensuring timely payment of the borrower's obligations. Lastly, it offers a level of assurance for lenders by enforcing stricter control measures over the borrower's funds. In summary, the Kansas Lock Box Agreement as a cash management system with lenders is a valuable tool that enhances control and efficiency in managing cash flows. Whether it is the Basic Lock Box Agreement, Controlled Lock Box Agreement, or Redirected Lock Box Agreement, each type provides distinct advantages to lenders in mitigating risks and maximizing cash management capabilities.
