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 Alabama Lock Box Agreement is a cash management system established between lenders and borrowers in the state of Alabama. This agreement is a banking arrangement wherein borrowers' receivables are directed to a lock box account maintained by the lender. Through the Alabama Lock Box Agreement, lenders gain control over the borrowers' cash flow by collecting payments directly into a designated lock box account. This ensures that the lender has timely access to the borrower's incoming funds, allowing for efficient management of loan repayments. Using this cash management system, lenders can closely monitor and control the borrower's cash flow, ensuring that repayments are made promptly. By having a direct channel for receiving funds, the lender can improve cash visibility, optimize cash flow, and mitigate the risk of delinquent repayments. The Alabama Lock Box Agreement facilitates a seamless and secure process for the collection of receivables. Borrowers' customers are typically instructed to redirect their payments to a lock box address specified by the lender. By centralizing the collection of funds, this agreement enhances efficiency and reduces the chances of errors or misappropriation of funds. There are several variations of Alabama Lock Box Agreement that may be offered by lenders to borrowers, each with its unique structure and features. Some common types include: 1. Traditional Alabama Lock Box Agreement: This type involves the borrowers directing all incoming receivables to a specified lock box account held by the lender. The lender has complete control over the funds, ensuring prompt repayments. 2. Reverse Alabama Lock Box Agreement: In this arrangement, the lender establishes a separate lock box account to which the borrower's customers' payments are directed. After servicing any outstanding obligations, excess funds are transferred back to the borrower. 3. Sweep Alabama Lock Box Agreement: This type enables the automatic transfer of funds beyond a predetermined threshold from the lock box account to the borrower's operating account. This helps ensure that the borrower has immediate access to a certain level of cash for daily operations while still allowing the lender to manage and monitor the overall cash flow. 4. Controlled Alabama Lock Box Agreement: In this variant, the lender takes control of a specified portion of the borrower's receivables, usually a percentage, while the borrower retains control over the remaining portion. This type of arrangement allows for a balanced cash management system where both parties have some measure of control. In conclusion, the Alabama Lock Box Agreement is a fundamental cash management system that allows lenders to exert control over borrowers' funds by directing receivables into a designated lock box account. It enables lenders to ensure timely loan repayments, improve cash visibility, and optimize cash flow. The various types of Alabama Lock Box Agreement provide flexibility in tailoring the arrangement to suit the needs of both lenders and borrowers.The Alabama Lock Box Agreement is a cash management system established between lenders and borrowers in the state of Alabama. This agreement is a banking arrangement wherein borrowers' receivables are directed to a lock box account maintained by the lender. Through the Alabama Lock Box Agreement, lenders gain control over the borrowers' cash flow by collecting payments directly into a designated lock box account. This ensures that the lender has timely access to the borrower's incoming funds, allowing for efficient management of loan repayments. Using this cash management system, lenders can closely monitor and control the borrower's cash flow, ensuring that repayments are made promptly. By having a direct channel for receiving funds, the lender can improve cash visibility, optimize cash flow, and mitigate the risk of delinquent repayments. The Alabama Lock Box Agreement facilitates a seamless and secure process for the collection of receivables. Borrowers' customers are typically instructed to redirect their payments to a lock box address specified by the lender. By centralizing the collection of funds, this agreement enhances efficiency and reduces the chances of errors or misappropriation of funds. There are several variations of Alabama Lock Box Agreement that may be offered by lenders to borrowers, each with its unique structure and features. Some common types include: 1. Traditional Alabama Lock Box Agreement: This type involves the borrowers directing all incoming receivables to a specified lock box account held by the lender. The lender has complete control over the funds, ensuring prompt repayments. 2. Reverse Alabama Lock Box Agreement: In this arrangement, the lender establishes a separate lock box account to which the borrower's customers' payments are directed. After servicing any outstanding obligations, excess funds are transferred back to the borrower. 3. Sweep Alabama Lock Box Agreement: This type enables the automatic transfer of funds beyond a predetermined threshold from the lock box account to the borrower's operating account. This helps ensure that the borrower has immediate access to a certain level of cash for daily operations while still allowing the lender to manage and monitor the overall cash flow. 4. Controlled Alabama Lock Box Agreement: In this variant, the lender takes control of a specified portion of the borrower's receivables, usually a percentage, while the borrower retains control over the remaining portion. This type of arrangement allows for a balanced cash management system where both parties have some measure of control. In conclusion, the Alabama Lock Box Agreement is a fundamental cash management system that allows lenders to exert control over borrowers' funds by directing receivables into a designated lock box account. It enables lenders to ensure timely loan repayments, improve cash visibility, and optimize cash flow. The various types of Alabama Lock Box Agreement provide flexibility in tailoring the arrangement to suit the needs of both lenders and borrowers.
