What is the purpose of the Security Agreement required by MICC for Delta Hotels By Marriott franchisees?
Delta_Hotels_By_Marriott Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 6: Obligations of Franchisee.** Franchisee agrees to the following:]
4. Covenants. Grantors covenant and agree that from and after the date of this
Security Agreement and until the Liabilities are fully satisfied:
- (a) Further Documentation; Delivery of Certificates; Assignment of Instruments.
At any time and from time to time, upon the written request of MICC, and at the sole expense of Grantors, Grantors will promptly and duly (1) execute and deliver to MICC, or MICC's designee, (i) all certificates, endorsements, instruments or other documents evidencing any of the Collateral which may at any time come into the possession of such Grantor, (ii) a notice of MICC's security interest in the Collateral (which notice shall be satisfactory to MICC in form and substance and which shall require acknowledgment from the addressee) to any third party which either has possession of the Collateral or any certificates evidencing any of the Collateral or otherwise has the ability under applicable law or the terms of any agreement to record transfers or transfer ownership of any of the Collateral (whether at the direction of such Grantor or otherwise), and (iii) any and all such further instruments and documents, and (2) furnish to MICC such information, and (3) take such further actions as MICC may reasonably deem desirable to obtain the full benefits of this Security Agreement and of the rights and powers herein granted including, without limitation, the execution and delivery of control agreements, and, if otherwise required by MICC, Grantors shall transfer the Collateral to the possession of MICC.
If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note or other instrument (other than an instrument which constitutes chattel paper under the Code), such note or instrument shall be immediately assigned hereunder and a security interest therein hereby granted to MICC, and such note or other instrument shall be duly endorsed without recourse or warranty in a manner satisfactory to MICC and delivered to MICC.
If, at any time, any Grantor's right or interest in any of the Collateral becomes an interest in real property, such Grantor immediately shall execute, acknowledge and deliver to MICC such further documents as MICC deems necessary or advisable to create a perfected lien in favor of MICC in such real property interest.
[Item 6: Obligations of Franchisee.** Franchisee agrees to the following:]
(a) Upon the occurrence of an Event of Default, MICC, at its option, may declare all Liabilities to be immediately due and payable, regardless of whether Senior Lender has made any demand upon MICC under the Credit Enhancement Agreement, and may require
Grantors to (i) pledge and grant to MICC a security interest in additional collateral in the form of cash or readily marketable U.S. government securities acceptable to MICC, in an amount equal to the maximum amount of Advances that MICC may be required to pay under the Credit Enhancement Agreement, as determined by MICC in its sole discretion ("Supplemental Collateral") and shall require that any Supplemental Collateral that is comprised of cash be placed in a segregated deposit account ("Supplemental Collateral Account", which shall be deemed part of the Collateral for purposes of this Security Agreement), and (ii) execute and deliver to MICC such security agreements, endorsements, control agreements and other documents necessary to perfect MICC's security interest in the Supplemental Collateral and/or the Supplemental Collateral Account.
(b) Upon the occurrence of any Event of Default, MICC or MICC's designee may, at MICC's option, elect to become a substituted [member / partner / shareholder] of the Company with respect to the Collateral, and Grantors shall execute or cause to be executed all documents necessary to evidence MICC so becoming substituted [member / partner / shareholder].
If any Event of Default shall occur, MICC or MICC's designee may exercise, in addition to all other rights and remedies granted to them in this Security Agreement (including without limitation those provided in Sections 6 and 7) and in any other MICC Loan Document or instrument or agreement securing, evidencing or relating to the Liabilities, all rights and remedies of a secured party under the Code.
[Item 6: Obligations of Franchisee.** Franchisee agrees to the following:]
MICC or MICC's designee shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of said Collateral so sold, free of any right or equity of redemption, which equity of redemption Grantors hereby release. Grantors further agree, at the request of MICC, to assemble
the Collateral and make it available to MICC at places which MICC shall reasonably select, whether at Grantors' premises or elsewhere. MICC shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale in the manner set forth in Section 10(e) of this Security Agreement. MICC must account for the surplus, if any, to Grantors only after so paying over such net proceeds and after the payment by MICC of any other amount required by any provision of law, including Section 9-615(a)(3) of the Code. To the extent permitted by applicable law, Grantors waive all claims, damages, or demands against MICC arising out of the repossession, retention or sale of the Collateral except, in each case, such claims, damages, or demands that arise solely from the gross negligence or willful misconduct of MICC.
Source: Item 6 — Obligations of Franchisee.** Franchisee agrees to the following: (FDD pages 363–513)
What This Means (2025 FDD)
According to the 2025 FDD, the Security Agreement required by MICC (presumably Marriott International Credit Corporation) outlines the obligations and protections related to the collateral provided by Delta Hotels By Marriott franchisees. The agreement ensures that MICC has a secured interest in the franchisee's assets, allowing MICC to take certain actions in the event of a default.
The Security Agreement enables MICC to request further documentation, delivery of certificates, and assignment of instruments from the franchisee to solidify MICC's security interest in the collateral. This includes the ability for MICC to take possession of the collateral if deemed necessary. If any amount payable becomes evidenced by a promissory note or other instrument, it must be assigned to MICC with proper endorsement. Should the franchisee's interest in the collateral become an interest in real property, the franchisee must execute documents to create a perfected lien in favor of MICC.
Upon an Event of Default, MICC can declare all liabilities immediately due and payable and require the franchisee to provide additional collateral, known as Supplemental Collateral, in the form of cash or readily marketable U.S. government securities. MICC also has the option to become a substituted member, partner, or shareholder of the company with respect to the collateral. Furthermore, MICC can exercise all rights and remedies of a secured party under the Code, in addition to the rights granted in the Security Agreement and other loan documents.
The agreement also details MICC's rights in the event of a public or private sale of the collateral, including the right to purchase the collateral. The franchisee agrees to assemble the collateral and make it available to MICC. The proceeds from any sale will be applied as set forth in Section 10(e) of the Security Agreement, with MICC accounting for any surplus to the franchisee after covering net proceeds and other required payments. The franchisee waives claims against MICC arising from the repossession, retention, or sale of the collateral, except in cases of gross negligence or willful misconduct by MICC.