Hotel Security Agreement

I. The Parties

This Security Agreement ("Agreement") is made and entered into on [Month Day, Year] ("Effective Date") by and between [Your Company Name] hereinafter referred to as the ("Borrower") with a primary place of business at [Your Company Address] and [Lender's Name] hereinafter referred to as the ("Lender") with a place of business at [Lender's Address] collectively referred to as the ("Parties").

WHEREAS, the Borrower is the lawful owner of the property located at [Property Address] (the "Property"), which it desires to use as collateral to secure a loan from the Lender;

WHEREAS, the Lender is willing to extend a loan to the Borrower, provided that the Property is used as collateral to secure the repayment of the loan;

WHEREAS, the Parties agree to enter into this Agreement to clearly set forth their respective rights and obligations concerning the use of the Property as collateral for the loan;

NOW, THEREFORE, in consideration of the mutual covenants and promises stated herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

II. Grant of Security Interest

A. Grant of Security Interest

Security Interest: The Borrower grants the Lender a security interest in the Property to secure the repayment of the loan. This security interest encompasses not only the Property itself but also includes all buildings, fixtures, improvements, and equipment located on the Property.
Comprehensive Coverage: The security interest provided here is in addition to any other security interests or liens that the Lender may have under applicable law. By securing the Property, the Borrower ensures that the Lender has a priority claim in case of default.
Continued Effectiveness: This security interest remains effective until all obligations secured hereby have been fully paid and satisfied. Whether it’s the initial loan or any future advances, renewals, extensions, or modifications, the security interest stands firm.

B. Obligations Secured

Loan Repayment: The security interest granted under this Agreement secures the repayment of the loan. Specifically, it covers the principal amount of [$2,500,000], along with interest, fees, and any other amounts payable as per the loan agreement.
Future Flexibility: Beyond the initial loan, the security interest also extends to any future advances, renewals, extensions, or modifications related to the loan. This flexibility ensures that the collateral remains protected throughout the borrowing relationship.
Persistence of Security: Until all secured obligations are fully settled, the security interest remains in force. Whether it takes months or years, the Lender’s claim on the Property endures until complete satisfaction.

C. Representations and Warranties

Title Assurance: The Borrower represents and warrants that it holds good and marketable title to the Property. This assurance is crucial for the Lender, as it ensures that the collateral is free from defects or competing claims.
Lien Transparency: The Borrower further represents and warrants that there are no existing liens or encumbrances on the Property, except those explicitly disclosed to the Lender. Full transparency regarding existing encumbrances is essential for accurate risk assessment.
Authority to Grant Security Interest: The Borrower confirms that it possesses full authority to grant the security interest in the Property to the Lender. This representation ensures that the Lender’s rights are valid and legally enforceable.

III. Insurance

A. Insurance Coverage

Coverage Adequacy: The Borrower shall maintain insurance coverage on the Property. The coverage must be sufficient and satisfactory to the Lender. This ensures that any potential risks—such as damage, loss, or liability—are adequately addressed.
Property and Liability: The insurance policy should cover both property damage (e.g., fire, natural disasters) and liability (e.g., bodily injury, property damage to third parties). Comprehensive coverage protects both parties in various scenarios.
Additional Insureds: In addition to the Borrower, the policy may include the Lender as an additional insured. This provision extends protection to the Lender, especially if the collateral is damaged or destroyed.

B. Lender as Loss Payee

Clear Identification: The insurance policy shall explicitly name the Lender as a loss payee. By doing so, the Lender is directly involved in any claims related to the collateral. This designation ensures that the Lender’s interests are prioritized.
Loss Settlement: If a covered loss occurs (e.g., fire, theft), the insurance proceeds will be paid to the Lender as the loss payee. This arrangement aligns with the Lender’s security interest in the Property.
Prompt Notification: The Borrower must promptly inform the Lender of any insurance claims or incidents affecting the Property. Timely communication allows the Lender to take necessary steps to protect its interests.

C. Evidence of Insurance

Documentation Requirement: Upon the Lender’s request, the Borrower shall provide evidence of the insurance coverage. This documentation may include policy certificates, declarations pages, and proof of premium payments.
Regular Updates: The Borrower should keep the Lender informed of any changes to the insurance policy, such as renewals, modifications, or cancellations. Transparency ensures that the Lender’s security interest remains valid.
Risk Mitigation: By maintaining proper insurance and promptly providing evidence, the Borrower minimizes risks for both parties. Adequate coverage and compliance contribute to a successful lending relationship.

IV. Taxes and Assessments

A. Real Property Taxes

Payment Obligation: The Borrower shall promptly pay all real property taxes assessed against the Property. These taxes cover various aspects, such as land value, improvements, and local assessments.
Timely Settlement: The Borrower must ensure that property tax payments are made on time. Delays or non-payment could jeopardize the Lender’s security interest.
Evidence of Payment: Upon the Lender’s request, the Borrower shall provide receipts or other evidence of tax payment. Transparency is crucial to demonstrate compliance.

B. Other Governmental Charges

Assessment Coverage: Beyond property taxes, the Borrower is responsible for other governmental charges related to the Property. These may include special assessments, fees, or levies imposed by local authorities.
Comprehensive Compliance: The Borrower must stay informed about any additional charges or assessments. Compliance ensures that the Property remains free from liens or encumbrances.
Lender’s Assurance: By furnishing evidence of payment, the Borrower assures the Lender that all relevant charges are settled. This documentation reinforces the security interest.

C. Lender’s Oversight

Receipt Verification: The Lender has the right to request and review receipts or other proof of payment. This oversight ensures that the Borrower fulfills its tax and assessment obligations.
Collateral Protection: Proper tax management contributes to the overall value and viability of the collateral. The Lender’s interest is directly tied to the Property’s financial health.
Collaboration: The Borrower and Lender work together to maintain compliance. Open communication and cooperation are essential for a successful lending relationship.

V. Maintenance of Property

A. Good Condition and Repair

Obligation: The Borrower agrees to maintain the Property in good condition. This encompasses regular upkeep, preventive maintenance, and addressing any wear and tear promptly.
Comprehensive Approach: “Good condition” includes not only the physical structure but also fixtures, equipment, and common areas within the Hotel. Regular inspections and timely repairs are essential.
Preserving Value: Proper maintenance ensures that the Property retains its value over time. A well-maintained Hotel is more attractive to guests and potential buyers.

B. Prompt Notification

Material Damage: If the Property sustains material damage (e.g., structural issues, significant wear, or damage due to natural disasters), the Borrower must promptly notify the Lender. Early communication allows the Lender to assess the situation and take necessary steps.
Loss Reporting: Similarly, in case of loss (e.g., fire, theft), the Borrower must inform the Lender promptly. Transparency helps the Lender protect its interests and plan accordingly.
Mitigating Risks: By promptly reporting damage or loss, the Borrower minimizes risks and ensures that necessary repairs or insurance claims are handled efficiently.

VI. Default

A. Payment Default

Missed Payments: An Event of Default occurs if the Borrower fails to make any payment due under the loan agreement. Whether it’s the principal amount, interest, fees, or other financial obligations, timely payments are essential.
Consequences: A payment default jeopardizes the entire lending relationship. The Lender relies on consistent payments to manage risk and maintain financial stability.

B. Breach of Covenants

Covenant Violations: An Event of Default also arises if the Borrower breaches any covenant specified in this Agreement. Covenants are contractual promises or restrictions that the Borrower must adhere to during the loan term.
Examples of Covenants

2.1. Financial Ratios: Breaching financial ratios (e.g., debt-to-equity ratio, interest coverage ratio) specified in the Agreement.

2.2. Maintenance of Collateral: Failing to maintain the Property (collateral) in good condition, as required.

2.3. Insurance Compliance: Failing to promptly provide documented proof of insurance coverage.

2.4. Tax Obligations: Defaulting on property tax payments or other governmental charges.
Lender’s Rights: When a covenant is breached, the Lender has the right to take corrective actions, including declaring an Event of Default. These provisions protect the Lender’s interests.

C. Overall Impact

Acceleration of Debt: Upon an Event of Default, the Lender may accelerate the repayment of the entire loan amount. This means that the Borrower must pay off the outstanding balance immediately.
Other Remedies: In addition to acceleration, the Lender may pursue other remedies, such as foreclosure on the collateral or legal action.
Communication: Clear communication between the parties is essential. If the Borrower anticipates any challenges in meeting payment obligations or complying with covenants, early communication with the Lender is advisable.

VII. Remedies

A. Acceleration of Loan

Immediate Due and Payable: Upon the occurrence of an Event of Default (such as missed payments or covenant breaches), the Lender may declare the entire loan amount immediately due and payable. This means that the Borrower must repay the outstanding balance promptly.
Consequences: Acceleration can have significant consequences for the Borrower. It accelerates the repayment timeline and may require the Borrower to secure alternative financing quickly.

B. Possession and Sale of Property

Taking Possession: If the Borrower fails to cure the default (e.g., by making overdue payments), the Lender may take possession of the Property. This involves assuming control over the collateral.
Selling the Property: In accordance with applicable law (which varies by jurisdiction), the Lender may sell the Property. The sale proceeds are used to satisfy the outstanding debt.
Foreclosure Process: The Lender follows a legal process to sell the Property. This may involve public auctions, private sales, or negotiated settlements.

C. Protecting Lender’s Interests

Risk Mitigation: These remedies protect the Lender’s financial interests. By taking possession and selling the Property, the Lender aims to recover the outstanding loan amount.
Communication: Ideally, the Borrower and Lender should communicate openly during default situations. If the Borrower faces challenges, discussing options with the Lender is advisable.

VIII. Miscellaneous

A. Governing Law

Applicable Jurisdiction: This Agreement shall be governed by and construed in accordance with the laws of [State Name]. The choice of governing law ensures consistency and clarity in interpreting the Agreement.
Legal Framework: By specifying the governing law, both parties understand the legal principles that apply to their rights, obligations, and any disputes that may arise.

B. Dispute Resolution

Dispute Handling: Any disputes that arise under the terms and conditions of this Agreement will need to be addressed and resolved.
Court Proceedings: Disputes shall be resolved in the courts of [State Name]. This means that if a disagreement arises, the parties will seek legal remedies through the judicial system.
Alternative Methods: While court proceedings are one option, parties may also explore alternative dispute resolution methods (e.g., mediation, arbitration) if agreed upon.

IX. Amendments

A. Written Amendments

Formal Process: Any amendments or changes to this Agreement must be in writing. Verbal agreements are not sufficient. This formal process ensures clarity and prevents misunderstandings.
Mutual Consent: Both Parties—the Borrower and the Lender—must agree to the proposed amendments. Their signatures on the written document signify their consent.

B. Waiver of Provisions

No Implied Waivers: No waiver of any provision of this Agreement shall be valid unless it is in writing. This means that even if one party overlooks a particular provision temporarily, it does not imply a permanent waiver.
Clear Intent: If either Party intends to waive a specific provision, they must explicitly state it in writing. Clarity prevents confusion and ensures that both parties understand the implications.
Party to Be Charged: The waiver must be signed by the Party seeking the waiver (the Party to be charged). This ensures that the waiver is legally binding.

X. SIGNATURES

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

Borrower

[Authorized Representative Name]

[Your Company Name]

Date: [Month Day, Year]

Lender

[Authorized Representative Name]

[Lender's Name]

Date: [Month Day, Year]