Does the Big O Tires agreement allow for exceptions to the debtor's ownership of the collateral?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Maker shall pay or cause to be paid any obligations under any notes, indebtedness or other obligations to its owners, shareholders, partners or members, or their spouses;
The abandonment (as the term "abandonment" is defined in the Franchise Agreement) or vacation of the Big O Tires Store and/or Maker abandons all or a substantial portion of the Collateral;
Maker shall sell or transfer any interest owned in Maker's Big O Tires Store and/or the owners, shareholders, partners or members of Maker shall sell or transfer over fifty percent (50%) of all issued and outstanding capital stock or other ownership interest of Maker, and/or additional capital stock or other ownership interests in Maker are issued to a third party so as to reduce the existing ownership to less than fifty percent (50%) of all of the issued and outstanding capital stock or other ownership interests of Maker;
The dissolution, liquidation or business failure of Maker; or
Any representation or warranty in the Loan Agreement or this Note or in any written statement pursuant thereto or hereto, report, or certificate made or delivered to Holder by Maker shall be untrue or incorrect in any material respect, as of the date when made or deemed made;
The Collateral or any part thereof or interest therein is sold, conveyed, transferred, pledged, mortgaged, leased or hypothecated, outside the normal and ordinary course of business and/or in violation of this Note or any of the other Loan Documents; or
The assignment or transfer of the Note or any obligation of Maker and Co-Makers under this Note without Holder's consent (with consent shall be granted or withheld in Holder's sole discretion); or
Any other event shall have occurred which would have a material adverse effect on Maker, and Holder shall have given Maker at least 10 days notice thereof.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
According to the 2025 Big O Tires Franchise Disclosure Document, the agreement outlines specific events that could trigger acceleration of debt and affect the debtor's ownership of the collateral. These events provide exceptions to the franchisee's (Maker's) ownership under certain conditions.
The agreement states that the Holder (lender) can accelerate payments if Maker fails to meet obligations to owners, shareholders, partners, or members, or their spouses. Abandonment of the Big O Tires store or a significant portion of the collateral also triggers this acceleration. Furthermore, if the Maker sells or transfers more than fifty percent of the ownership interest in the Big O Tires store, or issues additional stock that reduces existing ownership below fifty percent, it constitutes an event of default.
Other events that allow the Holder to demand immediate payment include the dissolution, liquidation, or business failure of the Maker, or if any representation or warranty made by the Maker is untrue. Critically, the agreement specifies that if the collateral is sold, transferred, pledged, mortgaged, leased, or hypothecated outside the normal course of business or in violation of the loan documents, it constitutes an event of default. Similarly, assigning or transferring the Note or any obligation without the Holder's consent also triggers acceleration.
Finally, the agreement includes a general clause stating that any other event that has a material adverse effect on the Maker, after a 10-day notice, can lead to accelerated payment. These provisions collectively mean that while the franchisee initially owns the collateral, several actions or events can create exceptions where the lender can seize the collateral, highlighting the importance of adhering to the loan terms and maintaining the financial health of the Big O Tires store.