Deposit Account Control Agreement
[Operating Account]
Basic Information
Date:
Customer:
Customer’s Mailing Address:
Secured Party:
Secured Party’s Mailing Address:
Depository Bank:
Depository Bank’s Mailing Address:
Security Agreement:
A.Notice and Acknowledgment of Security Interest
Depository Bank confirms that Depository Bank has established account number [number] (the “Specified Deposit Account”) in the name of Customer. Customer and Secured Party notify Depository Bank of, and Depository Bank acknowledges, the security interest granted by Customer to Secured Party pursuant to the Security Agreement in all of Customer’s right, title, and interest in the Specified Deposit Account and the funds on deposit therein. Depository Bank, Customer, and Secured Party agree that Secured Party has control over the Specified Deposit Account.
B. Control of Specified Deposit Account
B.1.Depository Bank agrees, without further consent of Customer, to (a) comply with all instructions originated by Secured Party for the disposition of funds in the Specified Deposit Account (the “Instructions”) and disregard any instructions from Customer for the Specified Deposit Account and dispositions of its funds except as set forth in paragraph B.2. below and (b) otherwise deal with the Specified Deposit Account as directed by Secured Party.
B.2.Before the receipt of written notice (a “Default Notice”) from Secured Party referencing the Security Agreement and stating that an “Event of Default” has occurred pursuant to the Security Agreement, Depository Bank may permit Customer to operate and transact business through the Specified Deposit Account, including making withdrawals from and writing checks on the Specified Deposit Account, provided that without Secured Party’s written consent, Customer may not close the Specified Deposit Account.
B.3.Subject to paragraph B.4. below, after receipt by Depository Bank of a Default Notice (and until Depository Bank receives a written withdrawal of such notice), (a) Secured Party shall have exclusive dominion and control over the Specified Deposit Account, (b) neither Customer nor any person acting through or on behalf of Customer shall have any right to access or to withdrawal from the Specified Deposit Account, and (c) Depository Bank shall not comply with any instructions originated by Customer or any such person directing disposition of funds in the Specified Deposit Account.
B.4.Any Default Notice shall be in writing, shall refer to this Agreement, and shall include clear and specific instructions for the disposition of funds in the Specified Deposit Account. Depository Bank shall have a period not exceeding three Business Days following the date on which Depository Bank receives a Default Notice to act on such Default Notice. Depository Bank may rely on a Default Notice notwithstanding any other or conflicting information it may receive from Customer. As used in this Agreement, the term “Business Day” means any day on which Depository Bank is not authorized or required to close.
B.5.Secured Party’s power under this Agreement to give Depository Bank Instructions includes, without limitation, the power to give stop payment orders for any items being presented to the Specified Deposit Account for payment. Customer confirms that Depository Bank should follow the Instructions even if the result of following the Instructions is that Depository Bank dishonors items presented for payment from the Specified Deposit Account. Customer confirms that Depository Bank will have no liability to Customer for the wrongful dishonor of such items in following the Instructions.
C.Certain Other Agreements
C.1.Depository Bank will not be liable to Customer for complying with the Instructions even if Customer notifies Depository Bank that Secured Party is not legally entitled to issue the Instructions, unless Depository Bank takes the action after it is served with an injunction, restraining order, or other legal process enjoining it from doing so, issued by a court of competent jurisdiction, and had a reasonable opportunity to act on the injunction, restraining order, or other legal process. Depository Bank need not investigate whether Secured Party is entitled, under the Security Agreement or any other agreement between Secured Party and Customer, to give the Instructions.
C.2.Depository Bank will have no responsibility or liability to Secured Party for complying with any order or instruction, whether oral or written, concerning the Specified Deposit Account, except to the extent such compliance would violate (a) section B. above or (b) written instructions or orders previously received from Secured Party, but only to the extent Depository Bank received such instruction before the third Business Day after Depository Bank receives a contrary Instruction from Secured Party. Depository Bank will not have any liability to Customer or Secured Party for losses or liabilities resulting from any failure to comply with instructions relating to the Specified Deposit Account or delay in complying with such instructions if (a) compliance with such instructions would require Depository Bank to violate any then-existing injunction or order of any court of competent jurisdiction, including, without limitation, in any bankruptcy case under title 11 of the United States Code, or (b) the failure or delay is due to circumstances beyond Depository Bank’s reasonable control.
C.3.If any conflict between this Agreement and any other agreement between Depository Bank and Customer arises, the terms of this Agreement will prevail.
D.Account Information
Customer instructs Depository Bank, and Depository Bank agrees, to furnish to Secured Party, upon request of Secured Party, bank statements for the Specified Deposit Account that are customarily provided to customers of Depository Bank at the times such statements are normally provided to customers of Depository Bank, through the normal method of transmission, including United States mail, with a copy to Customer, at Customer’s expense. Customer instructs Depository Bank, and Depository Bank agrees, to make available to Secured Party and Customer, upon request of Secured Party, copies of all daily debit and credit advices of the Specified Deposit Account and any other item reasonably requested by Secured Party. If Depository Bank receives any notice of a claim of a third party for the Specified Deposit Account or legal process of any kind relating to Customer, Depository Bank will make a reasonable effort to give notice to Secured Party and Customer of such legal process.
E.Governing Law
This Agreement will be construed according to Texas law, without regard to choice-of-law rules of any jurisdiction. Depository Bank agrees that Texas is Depository Bank’s jurisdiction for all purposes.
F.Definitions; Rules of Construction
Any term defined in sections 1.101 to 9.709 of the Texas Business and Commerce Code and not defined in this Agreement has the meaning given to the term in the Code.
G.Returned Items; Fees and Expenses of Depository Bank
Depository Bank will not charge or debit, or exercise any right of offset or banker’s lien against, the Specified Deposit Account except as provided in this section G. Depository Bank may charge the Specified Deposit Account for all customary and reasonable charges of Depository Bank resulting from the Specified Deposit Account, and Depository Bank may set off against the Specified Deposit Account for any items deposited in the Specified Deposit Account that are returned for any reason or otherwise not collected; for overdrafts on the Specified Deposit Account; and for all service charges, commissions, expenses, fees, and other items ordinarily chargeable to the Specified Deposit Account. Customer agrees to pay the amount of any customary fees and any returned item immediately upon demand to the extent that there are not sufficient funds in the Specified Deposit Account to cover such amount on the day of the debit. Secured Party agrees to reimburse Depository Bank for all charges and fees for which there were insufficient funds in the Specified Deposit Account to satisfy the amount thereof as a result and to the extent of the funds that Depository Bank forwarded to Secured Party pursuant to the terms of this Agreement. The provisions of this section G. shall survive termination of this Agreement.
Signed on [date].
[Name of customer]
By:
[Name and title of representative for customer]
[Name of depository bank]
By:
[Name and title of representative for depository bank]
[Name of secured party]
By:
[Name and title of representative for secured party]