Security Agreement for Alabama

SECURITY AGREEMENT



and hereby enter into and execute this agreement (the "Agreement") effective as of _____________.

  1. PARTIES
  2. PROMISE TO PAY. FOR VALUE RECEIVED, Debtor promises to pay Secured Party a total principal amount of USD. No interest will be due or payable under the terms of this Agreement.
  3. SECURITY INTEREST GRANT. Debtor hereby grants to Secured Party a security interest in the collateral listed on SCHEDULE A - SECURED COLLATERAL (the "Collateral"). Secured Party will hold the security interest in the Collateral until such time as all Debtor obligations are fulfilled in accordance with this Agreement, including repayment of all outstanding monies owed. This security interest secures Debtor's payment of the debt evidenced by this Agreement and the payment and performance of all other Debtor obligations under this Agreement and all costs and expenses that may be incurred by Secured Party in the collection of the debt.
  4. DEBTOR REPRESENTATIONS, WARRANTIES, AND COVENANTS. Debtor represents, warrants, and covenants to Secured Party as follows:
    1. Debtor owns good, marketable, and indefeasible title to the Collateral, has not made any prior sale, pledge, encumbrance, assignment, or other disposition of any of the Collateral, and the Collateral is free from all encumbrances and rights of setoff of any kind except the lien in favor of the Secured Party created by this Agreement;
    2. Except as herein provided, the Debtor will not hereafter without the Secured Party's prior written consent offer, sell, pledge, encumber, assign, or otherwise dispose of any of the Collateral or permit any right of setoff, lien, or security interest to exist thereon except to the Secured Party;
    3. Debtor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein;
    4. Debtor has the full power and authority to enter into and perform this Agreement according to the terms hereof and has taken, and will take, any and all actions necessary to authorize the execution and performance of this Agreement according to the terms hereof;
    5. Debtor warrants that no financing statement including any of the Collateral or any proceeds therefrom is on file at any public office;
    6. Debtor has obtained all necessary approvals, licenses, permits, and/or other authorizations required by any government or other organization in order to execute, perform, and enforce this Agreement, that all such authorizations are in effect, and that it will continue to obtain any such authorizations that may become required hereafter;
    7. Debtor will reimburse Secured Party for all reasonable out-of-pocket expenses Secured Party incurs in enforcing this agreement, including reasonable attorney fees and court costs. Additionally, Debtor will pay any stamp or other similar duties and taxes to which this Agreement is subject;
    8. From time to time and at all reasonable times allow the Secured Party, by or through any of its authorized officers, employees, agents, attorneys, or accountants, to examine or inspect the Collateral, and obtain valuations and audits of the Collateral, at the Debtor's expense, wherever located, and to provide access to Debtor's books, financial statements, records, accounts, files, and other documentation related or pertaining to the Collateral;
    9. Debtor will obtain, make, execute, and deliver all such additional and further acts, things, deeds, assurances, and instruments as the Secured Party may require to vest in and assure to the Secured Party its rights hereunder, including its rights in the Collateral and the proceeds thereof;
    10. Debtor will do all such things as Secured Party at any time or from time to time may reasonably request to establish and maintain a perfected security interest in the Collateral;
    11. Debtor will make all repairs, replacements, additions, and improvements necessary to maintain the Collateral in good working order and condition, will not waste or destroy the Collateral, and will immediately notify Secured Party of any event causing a material loss or decline in value of the Collateral, whether or not covered by insurance, and the amount of such loss or depreciation; and
    12. Debtor will only use or permit the Collateral to be used in accordance with all applicable federal, state, county, and municipal laws and regulations;
  5. FURTHER ASSURANCES. Debtor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto identifying the Collateral and any other required information. Upon request, Debtor agrees to promptly join with Secured Party in executing one or more financing statements required in perfecting the security interest and to pay the costs of filing any financing statements. Debtor agrees to furnish any such information to Secured Party promptly upon request. Debtor also ratifies its authorization for Secured Party to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.
  6. EVENTS OF DEFAULT. In the event of default, Secured Party may choose to proceed directly against Debtor and is not required to rely on the Collateral for repayment. In addition to any other events of default specified herein, the following events will constitute a default:
    1. Debtor's failure to pay any amount owed in full when due;
    2. Debtor's failure to cure a breach of this Agreement on or before thirty (30) days after Secured Party gives Debtor written notice thereof;
    3. Any material misrepresentation or inaccuracy by Debtor of a fact or promise made in this Agreement or any statement, document, or certification delivered to Secured Party in accordance herewith;
    4. An uninsured material loss, theft, damage, or destruction to any of the Collateral, or the entry of any judgment against the Debtor or any lien against or the making of any levy, seizure or attachment of or on the Collateral;
    5. Any withdrawal, revocation, expiration, or termination of a necessary authorization required by any government or other organization in order to execute, perform, and enforce this Agreement;
    6. Debtor's filing any voluntary or involuntary petition for relief under the United States Bankruptcy Code; and
    7. The death or dissolution of either Party.
  7. REMEDIES. Should Debtor default under or otherwise breach this Agreement and not cure said default or breach on or before thirty (30) days after Secured Party gives Debtor written notice thereof, by personal delivery or certified mailing, ALL PRINCIPAL REMAINING UNPAIND AND INTEREST ACCRUING THEREON WILL, AT THE OPTION OF SECURED PARTY, BECOME IMMEDIATELY DUE AND PAYABLE TO SECURED PARTY. The date of notice will be the date of delivery or the date of mailing. In addition, Secured Party will have, in addition to any remedies provided herein or by any applicable law or in equity, all the remedies of a secured party under the Uniform Commercial Code. The Secured Party's remedies include, but are not limited to, to the extent permitted by law, the right to (a) peaceably by its own means or with judicial assistance enter the Debtor's premises and take possession of the Collateral without prior notice to the Debtor or the opportunity for a hearing, (b) render the Collateral unusable, (c) dispose of the Collateral on the Debtor's premises, and (d) require the Debtor to assemble the Collateral and make it available to the Secured Party at a place designated by the Secured Party. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Secured Party will give the Debtor reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. The requirements of commercially reasonable notice shall be met if such notice is sent to the Debtor at least five (5) days before the time of the intended sale or disposition. Expenses of retaking, holding, preparing for sale, selling or the like shall include the Secured Party's reasonable attorney's fees and legal expenses, incurred or expended by the Secured Party to enforce any payment due it under this Agreement either as against the Debtor, or in the prosecution or defense of any action, or concerning any matter growing out of or connection with the subject matter of this Agreement and the Collateral pledged hereunder. The Debtor waives all relief from all appraisement or exemption laws now in force or hereafter enacted.
  8. RECOURSE. THIS AGREEMENT ALLOWS SECURED PARTY TO SEEK RECOURSE AGAINST ANY PERSONAL ASSETS OF DEBTOR. The personal assets are therefore subject to the payment of this debt.
  9. NOTICE ADDRESSES. Notices will be in writing and delivered in person, sent by facsimile, or sent by reputable overnight delivery service to each Party's respective address stated herein or to any place or in any other manner as may be designated from time to time in writing by the Parties.
  10. NO WAIVER. No delay or failure in giving notice of a default or breach will constitute a waiver of the right of Secured Party to exercise its right of acceleration or any other right Secured Party may have hereunder in the event of a subsequent or continuing default or breach.
  11. ATTORNEY FEES AND COURT COSTS. In the event of a default or breach under this Agreement, Debtor covenants to pay Secured Party all collection and/or litigation costs incurred, including reasonable attorney fees and court costs, whether or not a judgment is received and whether or not a lawsuit is filed.
  12. TAXES. Debtor agrees to promptly pay all taxes and assessments imposed upon the Collateral, whether directly or for its use or operation.
  13. EXPENSES. Secured Party may choose to, but is not required to, discharge taxes, liens, security interests, or such other encumbrances as may attach to the Collateraland pay for the maintenance, appraisal or reappraisal, and preservation of the Collateral, as determined by the Secured Party to be necessary. The Debtor will reimburse the Secured Party on demand for any payment so made or any expense incurred by the Secured Party pursuant to this paragraph, and the Collateral also will secure any advances or payments so made or expenses so incurred by the Secured Party.
  14. GENERAL PROVISIONS
    1. Governing Law. The Parties agree that the laws of the State of _____________ will govern this Agreement without regard to its conflict-of-law provisions.
    2. Successors and Assigns. Secured Party may transfer this Agreement to another holder without notice to Debtor; however, Debtor will not be liable to any assignee for any amounts greater than it would otherwise be liable for under this Agreement. Debtor agrees to remain bound under the terms of this Agreement to any subsequent holder of this Agreement. Debtor covenants and warrants not to assign its rights or obligations under this Agreement without Secured Party's prior written consent. Each Debtor identified in this Agreement will be jointly and severally liable for the repayment of the debt described herein, and the terms of this Agreement will be equally binding upon and will inure to the benefit of the Parties and their heirs, executors, administrators, successors, and permitted assigns.
    3. Entire Agreement. This Agreement constitutes the entire agreement of the Parties and supersedes any and all other prior and contemporaneous agreements and understandings, both written and oral, between the Parties.
    4. Amendment. No amendment, modification, termination, or waiver of any provision of this Agreement will be effective unless it is in writing and signed by both Debtor and Secured Party.
    5. Time of Essence. Time is of the essence concerning all provisions contained in this Agreement.
    6. Waivers. Debtor hereby waives presentment for payment, demand, protest and notice of dishonor and protest, and all other demands and notices in connection with the delivery, acceptance, performance, or other enforcement of this Agreement.
    7. No Implied Waiver; Cumulative Remedies. Secured Party's failure to exercise any right or remedy provided in this Agreement will not be construed as a waiver of any future exercise of that right or exercise of any other right or remedy to which Secured Party may be entitled. No delay or omission on the part of Secured Party in exercising any right hereunder will operate as a waiver of any other right under this Agreement. No right conferred upon Secured Party by this Agreement will be exclusive of any other right referred to herein or now or hereafter available at law, in equity, by statute or otherwise, and all remedies will be cumulative and not in the alternative.
    8. Severability. If any provision of this Agreement is held by a court of law to be illegal, invalid, or unenforceable, then that provision will be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and the legality, validity, and enforceability of the remaining provisions of this Agreement will not be affected or impaired thereby.
    9. Headings. The headings used in this Agreement are provided for convenience only and will not be used in construing the meaning or intent of the corresponding provisions.
    10. Counterparts. This Agreement may be executed in any number of counterparts, including by facsimile transmission or by e-mail delivery, each of which when executed and delivered will constitute an original of this Agreement, but all the counterparts will together constitute the same agreement. No counterpart will be effective until each Party has executed at least one counterpart.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Parties, duly authorized and intending to be legally bound, execute and deliver these presents as of the day and year first above written.




SCHEDULE A - SECURED COLLATERAL



This SCHEDULE A - SECURED COLLATERAL is incorporated into the SECURITY AGREEMENT (the "Agreement") entered into on ______________________, by and between and .



Instructions for Your Security Agreement



This security agreement provides the Secured Party with a security interest in collateral in order to insure Debtor's repayment. You may choose to include multiple Debtors, Secured Parties, and Co-Signers depending on the requirements of the transaction. The information below will guide you through some of the important issues and considerations you will encounter when creating your security agreement.

Party Information

Begin by entering the name and address of each Debtor and Secured Party. If a party is a business, be sure to include the full legal name of that entity, such as "eDemand, Inc." If you include multiple Debtors, each Debtor will be "jointly and severally liable" under the agreement. This is legalese meaning that each Debtor will be required to repay the full amount of the debt should another Debtor default on its obligation. However, if a Debtor is ever forced to pay back part of another Debtor's portion of the debt, often that Debtor will be able to then obtain a judgment in court against the defaulting Debtor for the money it is owed. Joint and several liability will also apply if you choose to include one or more Co-Signers, discussed below.

Transaction Details

Next enter the details of the transaction, including principal amount owed, interest rate, and the date that interest will begin to accrue. When entering the interest rate, use the annual percentage rate (A.P.R.).

Payment Details

If the details of repayment are already included in a separate agreement—such as a promissory note or loan agreement—then simply indicate the name of the agreement and its effective date. If not, you may include repayment terms in your security agreement, including whether repayment will be made on a monthly basis, on demand of the Secured Party, or in a one-time lump sum payment.

You may choose to require a higher interest rate for any delinquent payments made after their due date. This will serve to help incentivize timely repayment.

Prepayment

Prepayment refers to the Debtor's ability to repay the debt ahead of schedule. Often, Debtors are prohibited from, or receiving a fee for, making prepayments because it prevents the Secured Party from receiving steady payments and from collecting a predictable amount of interest on the debt. If you choose to allow prepayment, you can then choose to require a fee for a percentage of the amount of the principal prepaid.

Collateral

"Collateral" is any property owned by the Debtor used to secure the debt to the Secured Party. For example, in a mortgage agreement the collateral is the house itself. However, collateral is often other types of property, such as the Debtor's inventory, equipment, accounts payable, or real estate. If the Debtor defaults on repayment, the Secured Party will be able to keep or sell the collateral. It's often also a good idea to require the Debtor to maintain insurance on the collateral. The Secured Party will be allowed to require insurance against any reasonable risks associated with the collateral, such as fire, theft, damage, and other losses.

Notary and Witness

Lastly, you will be asked whether or not you want to include spaces for a notary and/or witness to sign. It is always recommended to include a notary to help prove the validity of the document should there ever be a question. For the same reason, including a witness is helpful. If possible, it is a good idea to include both.

Personal Recourse

It is common for security and loan agreements to include personal recourse provisions. Personal recourse provisions state that, if the Debtor defaults on its payments and if any pledged collateral is insufficient to repay the outstanding principal and interest amount still owed on the loan, then the Secured Party can hold the borrower personally responsible for the payment.

Co-Signer

Here you have the option to include one or more Co-Signers to guarantee the repayment of the debt should a Debtor be unable to pay part or all of the outstanding debt. A separate Co-Signer Agreement will automatically be included for each Co-Signer to sign along with the Secured Party(s) and any notary or witness included.

As discussed above, each Co-Signer will be jointly and severally liable with each Debtor and with each other Co-Signer for the full repayment of the debt. This helps assure that the Secured Party will be repaid first and in full, and then the other parties can sort out how much they owe each other after the fact, should the need arise.

Executing Your Security Agreement

After you are done filling out the form, simply have the Debtor, Secured Party, and any notary and witness available sign the document. Again, although a notary and witness are not required in most jurisdictions, it is always a good idea to include them. When the document has been signed and witnessed, you are done! Make sure each Debtor, Secured Party, and Co-Signer (if any) each get a copy.

Perfecting Your Security Interest

Three things must be present in order for the Secured Party to obtain a protected security interest in the collateral: 1) the Secured Party must pay for or give something of value in exchange for receiving the security interest, 2) the Debtor must own the collateral or have proper authority over the collateral in order to pledge the security interest, and 3) the Debtor must sign a security agreement. Once all three items occur, then the Secured Party will rightfully have a security interest in the collateral. This process is called "attachment" of a security interest. Assuming the first to items are present, the Secured Party should have an attached security interest when the Debtor signs the security agreement.

Next, the Secured Party needs to "perfect" its security interest. This means that the Secured Party has taken steps to ensure that no other creditor has a prior claim over the collateral and that the Secured Party will be able to claim the collateral in the event that the Debtor becomes insolvent or declares bankruptcy. While taking the step to perfect a security interest is not required by law, it is often the only way that the Secured Party can rest assured that its interest in the collateral is safe from other creditors.

You can perfect your interest by simply filing a short document, called a financing statement, in the Debtor's state or local jurisdiction. If the Debtor is an individual, this is the state where the Debtor resides, and, if the Debtor is a business, this is the state where the business was formed. While the rules vary by location, a financing statement normally only requires identifying the parties and providing a description of the collateral. In most states you can easily provide this information by completing Form UCC-1 and filing it with the Secretary of State's office. You can find your state's requirements online or by calling your state office.

Please note that the language you see here changes depending on your answers to the document questionnaire.

Security Agreement

Use a security agreement in order to secure an interest in a debtor's collateral and help ensure repayment. This agreement is required in order to receive a security interest in collateral and may be used along with a financing statement if you wish to register your security interest with the state (known as "perfecting" your interest).

LegalNature's step-by-step guidance makes it easy to quickly customize a security agreement to your needs. You may optionally include repayment details, insurance requirements, co-signers, and more. Get started now to see how our agreement takes the time and stress out of securing collateral.

Show Less
user guide icon Help Guide

This guide provides an explanation of the key terms and considerations when creating a security agreement. Here we elaborate on the step-by-step guidance we provide you when answering our document questionnaire.

Read the Help Guide arrow
checklist icon Checklist

Review the basic steps you will need to follow before and after completing a security agreement. This includes tips on gathering information, signing and witnessing your agreement, perfecting a security interest, and completing related documents.

Read the Checklist arrow

Why choose LegalNature?

No matter if you are a small business, a large corporation, or an independent landlord, we have you covered.

As seen on

Fulfill your legal needs

Sign up now and get instant access to our entire library of customizable legal documents.