What is the Debtor prohibited from doing with the Collateral under the 1-800-GOT-JUNK? General Security Agreement, other than selling, leasing, or disposing?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
3.1
The Debtor shall have no right to sell, lease or dispose of any of the Collateral except for a sale in the ordinary course of business upon customary sales terms for value received and then only upon the express condition that on or before delivery to a third party the Debtor shall secure full settlement of the entire purchase price for the Collateral so sold in cash, notes, chattel paper or other property in form satisfactory to the Secured Party.
Until the Debtor shall have made settlement with the Secured Party of the full amount due to the Secured Party with respect to all such Collateral sold or disposed of by the Debtor, the Debtor shall aggregate such cash, notes, chattel paper or other property and hold the same in trust for the Secured Party and the Secured Party shall have a security interest therein.
The Debtor shall be entitled to transfer such notes or chattel paper free of such trust if at or prior to the time of such transfer the payment due from the Debtor to the Secured Party shall be assured to the satisfaction of the Secured Party.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
According to the 2025 1-800-GOT-JUNK? Franchise Disclosure Document, the Debtor has no right to take actions regarding the collateral, except for sales in the ordinary course of business.
Specifically, a 1-800-GOT-JUNK? franchisee can only sell collateral if it's a sale in the ordinary course of business, using customary sales terms, and for value received. Furthermore, before the collateral is delivered to a third party, the franchisee must secure full settlement of the entire purchase price. This settlement must be in cash, notes, chattel paper, or other property that is satisfactory to 1-800-GOT-JUNK?.
The franchisee is obligated to hold any cash, notes, chattel paper, or other property received from the sale of collateral in trust for 1-800-GOT-JUNK? until full settlement is made. 1-800-GOT-JUNK? maintains a security interest in these proceeds. The franchisee can transfer notes or chattel paper free of this trust if the payment due to 1-800-GOT-JUNK? is assured to their satisfaction.