Security Agreement (Texas UCC Article 9)

SECURITY AGREEMENT (TEXAS UCC ARTICLE 9)

Texas-Specific Notice. This Security Agreement is governed by Texas UCC Article 9, codified at Chapter 9 of the Texas Business & Commerce Code. Perfection of a security interest in personal property is accomplished by filing a UCC-1 Financing Statement with the Texas Secretary of State (or, for fixture filings and certain timber/minerals, with the county clerk's real property records where the property is located), pursuant to Tex. Bus. & Com. Code § 9.501. Approximately 91.5% of Texas UCC filings are now submitted electronically through the Texas SOS Direct Portal.

1. PARTIES

This Security Agreement ("Agreement") is entered into effective [__/__/____] (the "Effective Date") by and between:

Debtor: [________________________________], a [________________________________] organized under the laws of [____] (the "Debtor"), with chief executive office at [________________________________], [____] County, Texas; and

Secured Party: [________________________________], a [________________________________] (the "Secured Party"), with principal office at [________________________________].

2. RECITALS; OBLIGATIONS SECURED

WHEREAS, the Debtor has executed that certain [Promissory Note / Loan Agreement / Line of Credit Agreement] dated [__/__/____] in the principal amount of $[________________________________] (the "Note");

WHEREAS, the Secured Party requires collateral under Texas UCC Article 9 as a condition of the extension of credit;

"Secured Obligations" means all present and future indebtedness, liabilities, and obligations of Debtor to Secured Party, whether matured or unmatured, including principal, interest, fees, expenses, costs of collection, attorney's fees, and any renewal or modification. Interest on the Secured Obligations shall not exceed the maximum rate permitted by Tex. Fin. Code Ch. 302 (generally, 18% per annum for commercial obligations where no other rate is specified, or the ceiling rate published under Tex. Fin. Code § 303.003). Any interest collected in excess of the maximum lawful rate shall be credited against principal or refunded (Tex. Fin. Code § 305.103).

3. GRANT OF SECURITY INTEREST

3.1 Grant. To secure the payment and performance of the Secured Obligations, Debtor hereby GRANTS to Secured Party a continuing security interest in the Collateral described in Section 3.2 under Tex. Bus. & Com. Code § 9.203.

3.2 Description of Collateral (Check applicable categories — UCC Article 9 defined terms).

☐ All Assets of Debtor, now owned or hereafter acquired, wherever located (a "blanket lien"); or

☐ Specific Collateral Categories:
☐ Accounts (Tex. Bus. & Com. Code § 9.102(a)(2))
☐ Chattel Paper (§ 9.102(a)(11)), including tangible and electronic chattel paper
☐ Commercial Tort Claims (§ 9.102(a)(13)), specifically described: [________________________________]
☐ Deposit Accounts (§ 9.102(a)(29)) maintained at [________________________________]
☐ Documents (§ 9.102(a)(30))
☐ Equipment (§ 9.102(a)(33)) located at: [________________________________]
☐ Fixtures (§ 9.102(a)(41)), located at [________________________________], with fixture filing in the real property records of [________________________________] County, Texas
☐ General Intangibles (§ 9.102(a)(42)), including Payment Intangibles and Software
☐ Goods (§ 9.102(a)(44))
☐ Instruments (§ 9.102(a)(47))
☐ Inventory (§ 9.102(a)(48))
☐ Investment Property (§ 9.102(a)(49))
☐ Letter-of-Credit Rights (§ 9.102(a)(51))
☐ Supporting Obligations (§ 9.102(a)(77))
☐ all Proceeds (§ 9.102(a)(64)) and Products of the foregoing
☐ all Accessions, Additions, Substitutions, and Replacements

3.3 Excluded Collateral. The Collateral does NOT include: [________________________________] (e.g., anti-assignment clauses, government licenses, leases prohibiting assignment — subject to Tex. Bus. & Com. Code § 9.406 and § 9.408 anti-assignment override rules).

4. PERFECTION

4.1 Authorization to File Financing Statement. Debtor authorizes Secured Party to file a UCC-1 Financing Statement with the Texas Secretary of State under Tex. Bus. & Com. Code § 9.509 describing the Collateral as set forth above or as "all assets" or "all personal property" of Debtor. Such filing is authorized in advance without Debtor's signature per § 9.509(b).

4.2 Place of Filing (§ 9.501).
(a) For most collateral (accounts, inventory, equipment, general intangibles, investment property, chattel paper, instruments), financing statements shall be filed with the Texas Secretary of State.
(b) For fixture filings, as-extracted collateral (minerals/timber), and certain real property-related collateral, filings shall be made with the county clerk of the Texas county where the real property is located.
(c) Debtor's jurisdiction of organization is [________________________________]; if Debtor is a registered organization in Texas, Texas is the proper jurisdiction for perfection under § 9.301 and § 9.307.

4.3 Perfection by Control. For Deposit Accounts, Investment Property, Letter-of-Credit Rights, and Electronic Chattel Paper, Debtor shall, at Secured Party's request, execute control agreements in form satisfactory to Secured Party under Tex. Bus. & Com. Code §§ 9.104–9.107.

4.4 Certificate-of-Title Goods. For collateral subject to Texas certificate of title (vehicles under Tex. Trans. Code Ch. 501, manufactured homes, etc.), Debtor shall cooperate in noting the Secured Party's lien on the certificate of title.

4.5 Texas SOS Direct Portal. Secured Party may file electronically through the Texas Secretary of State's SOSDirect portal at direct.sos.state.tx.us.

5. REPRESENTATIONS AND WARRANTIES

Debtor represents and warrants:

5.1 Organization. Debtor is duly organized, validly existing, and in good standing under the laws of [________________________________]. Debtor's exact legal name as it appears on its public organic record is "[________________________________]" (Tex. Bus. & Com. Code § 9.503). Debtor has not changed its name, form, or jurisdiction within the last four (4) months.

5.2 Title to Collateral. Debtor has good and indefeasible title to the Collateral, free of all liens and encumbrances except those disclosed on Schedule 1 ("Permitted Liens").

5.3 Location; Chief Executive Office. Debtor's chief executive office is at the address shown in Section 1; Debtor's books and records related to the Collateral are maintained at [________________________________]; Collateral (other than inventory in transit) is located at [________________________________], [____] County, Texas. Debtor shall give Secured Party at least 30 days' prior written notice of any change.

5.4 No Default. No Event of Default exists.

5.5 No Violation. Execution does not violate any law, organizational document, or material agreement of Debtor.

6. COVENANTS

6.1 Maintenance. Debtor shall keep the Collateral in good repair.

6.2 Insurance. Debtor shall maintain property and casualty insurance on the Collateral naming Secured Party as loss payee / additional insured for not less than $[____], with a Texas-admitted insurer.

6.3 Taxes. Debtor shall pay all ad valorem property taxes assessed under Tex. Tax Code Title 1 before delinquency.

6.4 No Disposition. Debtor shall not sell, lease, or otherwise transfer any Collateral other than inventory in the ordinary course of business or as permitted by Secured Party. A buyer in the ordinary course takes free of the security interest under Tex. Bus. & Com. Code § 9.320(a).

6.5 No Additional Liens. Debtor shall not create or suffer to exist any lien on the Collateral other than Permitted Liens. Debtor acknowledges that landlord's liens under Tex. Prop. Code Ch. 54 may attach to certain inventory and equipment, and Debtor shall obtain landlord waivers upon request.

6.6 Inspection. Secured Party and its agents may inspect the Collateral and Debtor's records on reasonable notice.

6.7 Further Assurances. Debtor shall execute control agreements, certificated security endorsements, UCC amendments, and any other documents reasonably required.

6.8 Name / Jurisdiction Change. Debtor shall provide 30 days' prior written notice of any change in name, form, or state of organization (which would require new UCC filings under § 9.507).

7. EVENTS OF DEFAULT

Each of the following constitutes an "Event of Default":

7.1 Failure to pay any Secured Obligation when due, beyond any applicable grace period.

7.2 Failure to perform any material covenant in this Agreement or the Note, continuing for [____] days after notice.

7.3 Material misrepresentation in any representation or warranty.

7.4 Insolvency, general assignment for benefit of creditors, or commencement of a federal bankruptcy case by or against Debtor.

7.5 Attachment, garnishment, or seizure of any material Collateral.

7.6 Dissolution or termination of Debtor.

7.7 Cross-default under any other agreement between Debtor and Secured Party.

8. TEXAS UCC ARTICLE 9 REMEDIES

Upon an Event of Default, Secured Party shall have all rights and remedies of a secured party under Texas UCC Article 9, including without limitation:

8.1 Acceleration. Declare all Secured Obligations immediately due and payable.

8.2 Possession. Take possession of the Collateral under Tex. Bus. & Com. Code § 9.609. Secured Party may enter Debtor's premises to take possession without breach of the peace. Debtor shall, upon Secured Party's demand, assemble the Collateral at a place designated by Secured Party reasonably convenient to both parties (§ 9.609(c)).

8.3 Sequestration / Replevin. Secured Party may apply to a Texas court for a writ of sequestration under Tex. Civ. Prac. & Rem. Code Ch. 62 or comparable pre-judgment possession under Tex. R. Civ. P. 696 et seq.

8.4 Disposition of Collateral. Secured Party may sell, lease, license, or otherwise dispose of the Collateral at public or private sale under Tex. Bus. & Com. Code § 9.610. Every aspect of the disposition, including method, manner, time, place, and terms, must be commercially reasonable. Secured Party may purchase the Collateral at a public sale, and at a private sale if the Collateral is of a kind customarily sold on a recognized market or is subject to standard price quotations.

8.5 Notification of Disposition. Secured Party shall send Debtor a reasonable authenticated notification of disposition. Under Tex. Bus. & Com. Code § 9.611(b) and § 9.612(b), in a non-consumer transaction, notification sent at least 10 days before the date of sale is presumed reasonable.

8.6 Strict Foreclosure. Secured Party may, with Debtor's consent (or Debtor's failure to object within 20 days), accept the Collateral in full or partial satisfaction of the obligation under Tex. Bus. & Com. Code § 9.620–9.622.

8.7 Collection Rights. Secured Party may notify account debtors to pay Secured Party directly under Tex. Bus. & Com. Code § 9.607 and may take any action to collect Collateral that is an account, instrument, or chattel paper.

8.8 Setoff. Secured Party may exercise its right of setoff against any Deposit Accounts of Debtor at Secured Party's institution.

8.9 Application of Proceeds. Proceeds shall be applied in the order set forth in § 9.615: (i) expenses of repossession and sale, including reasonable attorney's fees; (ii) satisfaction of the Secured Obligations; (iii) subordinate security interests; and (iv) surplus, if any, to Debtor.

8.10 Deficiency. Debtor shall remain liable for any deficiency, subject to Debtor's right under § 9.626 to challenge the commercial reasonableness of the disposition.

8.11 Non-Waivable Debtor Rights. Debtor acknowledges that certain rights under Tex. Bus. & Com. Code § 9.602 may not be waived, including the right to notification of disposition and the right to redemption before disposition under § 9.623.

9. INDEMNIFICATION

Debtor shall indemnify Secured Party against all Losses arising from (a) the Collateral, (b) Debtor's breach of this Agreement, and (c) any claim by a third party regarding the Collateral, except to the extent caused by Secured Party's gross negligence or willful misconduct.

10. TEXAS USURY SAVINGS CLAUSE

Notwithstanding any other provision of this Agreement or the Note, it is the intent of the parties to comply strictly with all applicable Texas usury laws, including Tex. Fin. Code Ch. 302–305. If any interest contracted for, charged, or received exceeds the maximum lawful rate, such excess shall be (i) applied to reduce principal or (ii) refunded to Debtor. Under Tex. Fin. Code § 305.103, a lender is not liable for usury if it cures within 60 days of discovery.

11. GOVERNING LAW AND FORUM

11.1 Governing Law. This Agreement is governed by the laws of the State of Texas, including the Texas UCC, and, as to perfection and priority of the security interest, by the jurisdiction designated by Tex. Bus. & Com. Code § 9.301–9.307.

11.2 Venue. Exclusive venue shall lie in the state district courts of [________________________________] County, Texas, or the U.S. District Court for the [____] District of Texas.

11.3 Attorney's Fees. Debtor shall pay Secured Party's reasonable attorney's fees and costs of collection, including fees recoverable under Tex. Civ. Prac. & Rem. Code § 38.001 and Tex. Bus. & Com. Code § 9.615(a)(1).

11.4 Jury Waiver. EACH PARTY KNOWINGLY WAIVES THE RIGHT TO A JURY TRIAL IN ANY ACTION ARISING FROM THIS AGREEMENT, CONSISTENT WITH IN RE PRUDENTIAL INS. CO., 148 S.W.3d 124 (TEX. 2004).

11.5 Statute of Limitations. Action on this written contract is subject to the 4-year SOL under Tex. Civ. Prac. & Rem. Code § 16.004.

12. TERMINATION

Upon payment in full of the Secured Obligations, Secured Party shall, within the time required by Tex. Bus. & Com. Code § 9.513 (20 days after demand), file a UCC-3 Termination Statement with the Texas Secretary of State and deliver to Debtor any other release documents.

13. MISCELLANEOUS

13.1 Amendment. Written amendment signed by both parties.

13.2 Assignment. Secured Party may assign its rights; Debtor may not assign without consent.

13.3 Notices. In writing to addresses shown in Section 1.

13.4 Counterparts; Electronic Signatures. Enforceable under Tex. Bus. & Com. Code Ch. 322 (Texas UETA).

13.5 Severability. Invalid provisions reformed to minimum extent.

14. SIGNATURES

DEBTOR: [________________________________]
By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

SECURED PARTY: [________________________________]
By: [________________________________]
Name: [________________________________]
Title: [________________________________]
Date: [__/__/____]

TEXAS NOTARY ACKNOWLEDGMENT (Optional for Fixture Filings)

STATE OF TEXAS
COUNTY OF [________________________________]

Before me, the undersigned notary public, on this [____] day of [________________________________], 20[____], personally appeared [________________________________], known to me (or proved to me by satisfactory evidence) to be the person whose name is subscribed to the foregoing instrument and acknowledged that s/he executed the same for the purposes and consideration therein expressed.

[SEAL] Notary Public, State of Texas
My commission expires: [__/__/____]

SOURCES AND REFERENCES

• Tex. Bus. & Com. Code Ch. 9 (Texas UCC Article 9): https://statutes.capitol.texas.gov/Docs/BC/htm/BC.9.htm
• Texas Secretary of State UCC Section: https://www.sos.state.tx.us/ucc/index.shtml
• Texas SOSDirect UCC filing portal: https://direct.sos.state.tx.us/
• Tex. Fin. Code Ch. 302–305 (Usury): https://statutes.capitol.texas.gov/Docs/FI/htm/FI.302.htm
• Tex. Prop. Code Ch. 54 (Landlord's liens): https://statutes.capitol.texas.gov/Docs/PR/htm/PR.54.htm
• Tex. Civ. Prac. & Rem. Code § 38.001 (attorney's fees)
• Texas SOS 2024 UCC Report: https://www.sos.texas.gov/ucc/ucc-legislative-report-2024.shtml