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.
Missouri Lock Box Agreement as Cash Management System with Lenders is a contractual arrangement entered into by borrowers and lenders to streamline the cash management process. This cash management system involves the collection, processing, and deposit of funds on behalf of the borrower. The Missouri Lock Box Agreement aims to establish a centralized location, usually with a financial institution, where all payments, such as customer checks or electronic transfers, are sent. This location acts as a lock box, providing a secure place for the funds to be deposited. Through this system, lenders gain control over the borrower's cash flow by directly receiving and managing the incoming payments. By utilizing the Missouri Lock Box Agreement, lenders ensure timely and efficient processing of payments, reducing the risk of mismanaged or delayed funds. This system allows lenders to have quick access to the funds, which can be essential for meeting debt obligations, funding projects, or maintaining liquidity. Different types of Missouri Lock Box Agreements as Cash Management System with Lenders may include: 1. Traditional Lock Box Agreement: This type involves physical checks being sent to a designated lock box address. Upon receipt, the financial institution collects, processes, and deposits the funds into a specified account. 2. Electronic Lock Box Agreement: In this type, electronic payments such as wire transfers or Automated Clearing House (ACH) transactions are sent directly to the lock box account without the need for physical checks. 3. Remote Deposit Capture (RDC) Lock Box Agreement: This innovative agreement allows borrowers to electronically scan and deposit checks themselves, eliminating the need to send physical checks to the lock box location. The borrower retains the convenience of depositing funds remotely while still benefiting from the centralized cash management system. 4. Retail Lock Box Agreement: A specialized form of the Missouri Lock Box Agreement, designed for businesses that rely heavily on checks received through retail channels or storefronts. Under this agreement, the financial institution provides lock box services to handle high-volume check collections from various retail locations. In summary, a Missouri Lock Box Agreement as Cash Management System with Lenders streamlines the payment collection process, improves cash flow control, and ensures efficient fund utilization. It provides both borrowers and lenders with the benefit of centralized funds management, with different types tailored to specific needs such as traditional, electronic, RDC, and retail lock box agreements.
