What is the effect of other encumbrances on the security interest created by the 1-800-GOT-JUNK? General Security Agreement?

According to the 2025 FDD, the 1-800-GOT-JUNK? General Security Agreement addresses the impact of other encumbrances through a 'Permitted Encumbrances' clause. This clause specifically allows for Purchase Money Security Interests held by lessors or creditors related to Vehicle Leases, provided they meet certain conditions.

These permitted encumbrances are limited to (i) encumbering no more than the minimum number of Vehicles required under the Franchise Agreement, and (ii) only encumbering the particular Vehicle, and no other property of the Debtor. This means a franchisee can lease vehicles necessary for operation and the lessor's security interest in those vehicles will take precedence over 1-800-GOT-JUNK?'s general security interest, but only to the extent of the leased vehicles themselves.

This arrangement benefits the franchisee by allowing them to finance vehicle acquisition without violating the General Security Agreement, while 1-800-GOT-JUNK? maintains a primary security interest in all other assets. The arrangement protects 1-800-GOT-JUNK? by preventing the franchisee from using other assets as collateral for vehicle financing, which could dilute 1-800-GOT-JUNK?'s security interest. The General Security Agreement ensures that 1-800-GOT-JUNK? has a broad claim on the franchisee's assets, subordinate only to specific vehicle leases under certain conditions.