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.
A Maine Lock Box Agreement is a type of cash management system used by lenders to ensure the efficient and secure handling of borrower payments. Under this agreement, borrowers are required to direct their customers to send payments to a designated lock box controlled by the lender. Here is a detailed description of the Maine Lock Box Agreement as a cash management system with lenders: 1. Definition: The Maine Lock Box Agreement is a legally binding contract between a lender and a borrower that establishes the procedures for collecting and processing borrower's payments. It outlines the rules and responsibilities of both parties in handling customer payments. 2. Purpose: The primary purpose of the Maine Lock Box Agreement is to streamline the payment collection process and ensure the timely availability of funds for the lender. It eliminates the need for borrowers to manually process payments, reducing the risk of errors and delays. 3. Setup Process: The agreement begins with the lender providing the borrower with detailed instructions on how to direct customers to make payments to the lock box. The borrower then communicates these instructions to their customers through various channels such as invoices, statements, or website notifications. 4. Lock Box Operations: The designated lock box serves as a centralized payment collection point. Customers are instructed to mail their payments directly to the lock box address provided by the lender. Once received, the lock box operator (often a third-party service provider) opens and processes the payments. 5. Payment Processing: Upon receipt, the lock box operator processes the payments by recording the relevant information and depositing the funds into a specified bank account belonging to the lender. The operator may also perform additional tasks such as endorsing checks, separating the documents, and generating reports. 6. Reporting: To keep both parties informed, the Maine Lock Box Agreement includes provisions for regular reporting. The lock box operator provides the lender with detailed reports on the payments received, the deposit amounts, any exceptions or discrepancies found, and the available balance. 7. Exceptions and Reconciliation: In case of exceptions or discrepancies, the lock box operator notifies the lender, who then investigates and resolves the issues with the borrower or the customer directly. Reconciliation statements are prepared periodically to ensure the accuracy of the deposited amounts. Types of Maine Lock Box Agreement as Cash Management System with Lenders: 1. Traditional Lock Box: In this type, the lock box operator receives physical payments such as checks or money orders by mail. The operator manually opens and processes the payments following established procedures. 2. Electronic Lock Box: Here, the lock box operator receives electronic payments, such as Automated Clearing House (ACH) transactions or online payments initiated by customers. The operator electronically processes these payments and transfers the funds to the lender's designated bank account. In conclusion, the Maine Lock Box Agreement as a cash management system with lenders provides a secure and efficient mechanism for collecting borrower payments. Whether utilizing a traditional or electronic lock box, this agreement streamlines payment processing, minimizes errors, and ensures quick availability of funds for the lender.A Maine Lock Box Agreement is a type of cash management system used by lenders to ensure the efficient and secure handling of borrower payments. Under this agreement, borrowers are required to direct their customers to send payments to a designated lock box controlled by the lender. Here is a detailed description of the Maine Lock Box Agreement as a cash management system with lenders: 1. Definition: The Maine Lock Box Agreement is a legally binding contract between a lender and a borrower that establishes the procedures for collecting and processing borrower's payments. It outlines the rules and responsibilities of both parties in handling customer payments. 2. Purpose: The primary purpose of the Maine Lock Box Agreement is to streamline the payment collection process and ensure the timely availability of funds for the lender. It eliminates the need for borrowers to manually process payments, reducing the risk of errors and delays. 3. Setup Process: The agreement begins with the lender providing the borrower with detailed instructions on how to direct customers to make payments to the lock box. The borrower then communicates these instructions to their customers through various channels such as invoices, statements, or website notifications. 4. Lock Box Operations: The designated lock box serves as a centralized payment collection point. Customers are instructed to mail their payments directly to the lock box address provided by the lender. Once received, the lock box operator (often a third-party service provider) opens and processes the payments. 5. Payment Processing: Upon receipt, the lock box operator processes the payments by recording the relevant information and depositing the funds into a specified bank account belonging to the lender. The operator may also perform additional tasks such as endorsing checks, separating the documents, and generating reports. 6. Reporting: To keep both parties informed, the Maine Lock Box Agreement includes provisions for regular reporting. The lock box operator provides the lender with detailed reports on the payments received, the deposit amounts, any exceptions or discrepancies found, and the available balance. 7. Exceptions and Reconciliation: In case of exceptions or discrepancies, the lock box operator notifies the lender, who then investigates and resolves the issues with the borrower or the customer directly. Reconciliation statements are prepared periodically to ensure the accuracy of the deposited amounts. Types of Maine Lock Box Agreement as Cash Management System with Lenders: 1. Traditional Lock Box: In this type, the lock box operator receives physical payments such as checks or money orders by mail. The operator manually opens and processes the payments following established procedures. 2. Electronic Lock Box: Here, the lock box operator receives electronic payments, such as Automated Clearing House (ACH) transactions or online payments initiated by customers. The operator electronically processes these payments and transfers the funds to the lender's designated bank account. In conclusion, the Maine Lock Box Agreement as a cash management system with lenders provides a secure and efficient mechanism for collecting borrower payments. Whether utilizing a traditional or electronic lock box, this agreement streamlines payment processing, minimizes errors, and ensures quick availability of funds for the lender.
