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.
Puerto Rico Lock Box Agreement as a Cash Management System with Lenders: Puerto Rico's Lock Box Agreement is a financial arrangement between the Puerto Rican government and its lenders, aimed at improving the cash management system and ensuring debt service payments. The agreement functions as a mechanism to provide security and transparency for creditors, as well as to enforce certain conditions and safeguards. Keywords: Puerto Rico, Lock Box Agreement, cash management system, lenders, financial arrangement, debt service payments, security, transparency, creditors, conditions, safeguards. There are two primary types of Puerto Rico Lock Box Agreement as a Cash Management System with Lenders: 1. Basic Lock Box Agreement: Under this type of agreement, the Puerto Rican government sets up a dedicated bank account known as the "lock box," into which all revenue generated from specific sources is deposited. These sources can include taxes, fees, or other income streams designated for debt servicing. The lenders have exclusive control over the lock box, allowing them to ensure the timely receipt of funds and apply them towards debt payments. 2. Enhanced Lock Box Agreement: The enhanced lock box agreement builds upon the basic structure and involves additional features to further protect the interests of lenders. It may include provisions such as: a. Lock Box Control Agreement: This agreement specifically outlines the rights and responsibilities of lenders in controlling the cash flow in the lock box account. It defines the procedures for reconciling funds, handling excess collections, and resolving any disputes or issues that may arise. b. Cash Sweep Mechanism: A cash sweep mechanism may be incorporated into the lock box agreement, which allows for automatic transfers of excess cash from the lock box account to a sinking fund or debt service reserve account. This mechanism ensures that funds not immediately required for debt service are put aside for future payments, strengthening the overall financial stability of the borrowing entity. c. Reporting and Monitoring Requirements: The enhanced lock box agreement may require enhanced reporting and monitoring mechanisms, ensuring transparency and accountability. Lenders may have access to real-time financial information, including daily cash balances, revenue collections, and disbursements, providing them with complete visibility into the cash management system. Overall, the Puerto Rico Lock Box Agreement as a Cash Management System with Lenders is a critical tool in maintaining fiscal discipline, improving creditor confidence, and ensuring the consistent and timely payment of debt obligations.Puerto Rico Lock Box Agreement as a Cash Management System with Lenders: Puerto Rico's Lock Box Agreement is a financial arrangement between the Puerto Rican government and its lenders, aimed at improving the cash management system and ensuring debt service payments. The agreement functions as a mechanism to provide security and transparency for creditors, as well as to enforce certain conditions and safeguards. Keywords: Puerto Rico, Lock Box Agreement, cash management system, lenders, financial arrangement, debt service payments, security, transparency, creditors, conditions, safeguards. There are two primary types of Puerto Rico Lock Box Agreement as a Cash Management System with Lenders: 1. Basic Lock Box Agreement: Under this type of agreement, the Puerto Rican government sets up a dedicated bank account known as the "lock box," into which all revenue generated from specific sources is deposited. These sources can include taxes, fees, or other income streams designated for debt servicing. The lenders have exclusive control over the lock box, allowing them to ensure the timely receipt of funds and apply them towards debt payments. 2. Enhanced Lock Box Agreement: The enhanced lock box agreement builds upon the basic structure and involves additional features to further protect the interests of lenders. It may include provisions such as: a. Lock Box Control Agreement: This agreement specifically outlines the rights and responsibilities of lenders in controlling the cash flow in the lock box account. It defines the procedures for reconciling funds, handling excess collections, and resolving any disputes or issues that may arise. b. Cash Sweep Mechanism: A cash sweep mechanism may be incorporated into the lock box agreement, which allows for automatic transfers of excess cash from the lock box account to a sinking fund or debt service reserve account. This mechanism ensures that funds not immediately required for debt service are put aside for future payments, strengthening the overall financial stability of the borrowing entity. c. Reporting and Monitoring Requirements: The enhanced lock box agreement may require enhanced reporting and monitoring mechanisms, ensuring transparency and accountability. Lenders may have access to real-time financial information, including daily cash balances, revenue collections, and disbursements, providing them with complete visibility into the cash management system. Overall, the Puerto Rico Lock Box Agreement as a Cash Management System with Lenders is a critical tool in maintaining fiscal discipline, improving creditor confidence, and ensuring the consistent and timely payment of debt obligations.
