casemark/security-agreement

Security Agreement (Granting Lien)

Drafts an enforceable security agreement creating a first-priority security interest under UCC Article 9. Ensures collateral descriptions satisfy § 9-108 and support UCC-1 filing.

Prerequisites

Gather before drafting:

• Loan documents — agreement/note/facility with principal, rate, maturity
• Party identification — exact legal names per Secretary of State, entity type, jurisdiction, principal address
• Collateral details — asset descriptions, serial numbers, locations, account numbers
• Corporate authority — organizational documents confirming signatory authority
• Lien search — UCC search results showing prior filings against debtor

Quick Start

1. Confirm debtor's exact legal name against Secretary of State records
2. Map collateral to UCC Article 9 classifications
3. Draft using the 10-section structure below
4. Verify collateral description works for both the agreement and UCC-1 financing statement
5. Cross-check all defined terms and cross-references for internal consistency

Output Structure

1. Preamble & Parties

• Debtor: exact legal name per SoS records (Inc. vs. Incorporated matters for perfection)
• Secured Party: full legal name, entity type, jurisdiction
• Individual debtors: include last-4 SSN or DL number for filing
• Entity debtors: organizational ID, jurisdiction of organization
• Include principal place of business for each party

2. Recitals

Reference underlying obligation (date, type, principal amount). State voluntary grant, confirm UCC Article 9 governance, establish consideration and intent.

3. Grant of Security Interest

Granting clause: "Debtor hereby grants to Secured Party a continuing security interest in all of the Debtor's right, title, and interest in and to the Collateral described below."

"Obligations" definition must cover: current principal; accrued/future interest, fees, costs, attorneys' fees; modifications, extensions, renewals, refinancings; future advances (if intended — note subordination risk with intervening lienholders).

4. Collateral Description

Must "reasonably identify" collateral per UCC § 9-108. Use UCC classifications plus specific identifiers:

| Collateral Type | Required Detail | |---|---| | Equipment | Make, model, serial number, location | | Inventory | Type, location; state after-acquired if floating lien | | Accounts receivable | Nature; include proceeds, collections, supporting obligations | | Investment property | Securities, account numbers, issuing entities | | General intangibles | IP registrations, contract rights, licenses |

Always include proceeds clause: "All proceeds, products, offspring, rents, profits, accessions, substitutions, and replacements of and to the Collateral, and all insurance proceeds and claims relating thereto."

After-acquired property (if intended): "whether now owned or hereafter acquired by Debtor."

• Avoid "all personal property" unless genuine blanket lien; supplement with specific categories even then
• Description must work for both the agreement and UCC-1 financing statement

5. Representations & Warranties

General: good/marketable title free of liens (except scheduled permitted liens); duly organized, validly existing, in good standing; full authority to grant security interest; no violation of existing agreements/laws; legal name, org ID, jurisdiction accurate.

Collateral-specific: Equipment — condition, operability, compliance. Accounts — genuine, enforceable, no defenses/offsets, bona fide transactions.

6. Covenants

Affirmative: maintain collateral condition; insure (name Secured Party as loss payee); pay taxes; maintain legal existence; deliver periodic financial statements and collateral reports.

Negative: no sale/transfer/encumbrance without consent; no name/structure/jurisdiction changes without notice; no collateral relocation without consent; no action diminishing value.

Tailor to collateral type: inventory → minimum levels + regular reports; equipment → maintenance schedules + usage restrictions.

7. Events of Default

| Default Type | Cure Period | |---|---| | Payment default | Immediate | | Rep/warranty breach | Immediate | | Covenant breach (technical) | 10–30 days after notice | | Bankruptcy/insolvency | Immediate | | Cross-default | Per underlying agreement | | Material adverse change | Immediate | | Judgment exceeding threshold | Per negotiated threshold | | Loss/damage to collateral | Immediate |

8. Remedies

Upon default, Secured Party may: accelerate all obligations; possess collateral by self-help (no breach of peace) or judicial process; dispose at public/private sale (commercially reasonable per UCC Art. 9); collect accounts directly from account debtors.

Application of proceeds: (1) collection/disposition expenses including attorneys' fees → (2) secured obligations → (3) surplus to debtor. Debtor liable for deficiency. Remedies are cumulative.

9. Governing Law & Administrative Provisions

• Governing law (contract): party-selected state law
• Governing law (security interest): UCC as adopted in debtor's location state (governs perfection/priority)
• Jurisdiction: exclusive; debtor consents to personal jurisdiction, waives inconvenient forum
• Include: jury waiver, severability, written-amendments-only, notice provisions, waiver (no waiver by delay), assignment (debtor restricted / Secured Party may assign), entire agreement merger clause, counterparts, further assurances (debtor must execute UCC-1s, amendments, continuations)

10. Execution

| Party Type | Requirements | |---|---| | Corporation | Authorized officer with title | | LLC | Manager or authorized member per operating agreement | | Partnership | General partner with binding authority | | Individual | Simple signature; consider spousal signature for marital property | | Notarization | Required only if collateral includes fixtures or filed in real property records |

Critical Checks

• [ ] Debtor legal name matches Secretary of State records exactly — minor variations defeat perfection
• [ ] Collateral description matches schedules/exhibits and underlying term sheet
• [ ] Description sufficient for both security agreement and UCC-1 filing
• [ ] All defined terms, cross-references, and party names internally consistent
• [ ] No gaps in debtor name, collateral specifics, or obligation terms
• [ ] Terms reconciled against term sheet or commitment letter
• [ ] UCC citations verified against applicable state's adopted version