What is the condition upon which Chem Dry's CDI consents to the financing of equipment by the Lender?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
In consideration of the premises, the mutual promises herein set forth, and for other good and valuable consideration that the parties mutually acknowledge, the parties mutually agree and intend to be legally bound as follows:
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- Franchisee may grant a security interest to Lender in the Equipment and the proceeds, additions, replacements and accessories thereto, so long as Lender pays to CDI all amounts due and owing under the Sales Agreement at or before the time the security interest attaches to the Equipment. CDI will on Lender's request supply payoff amounts and instructions to Lender. Upon receipt of the payoff amount from Lender or Franchisee, CDI's security interest in the Equipment shall be subordinated to the security interest of Lender, and shall remain in effect for the duration of the Franchise Agreement term. Lender will notify CDI when Lender's financing has been repaid and its security interest released within 15 days after such event.
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- Lender's security interest shall be subject to, and Lender acknowledges that its rights and remedies with regard to the Equipment are limited to, the transfer restrictions set forth in Section 5 of the Sales Agreement. Lender covenants with CDI that Lender will not exercise any rights or remedies against the collateral that is inconsistent with the restrictions on disposition set forth in Section 5. Lender may, upon notice to CDI, marshal and assemble the Equipment for sale in accordance with Section 5 but shall make no use of the Equipment nor rent, lease, sell, lend or donate the Equipment. If Lender is unable to resell the Equipment to another franchisee of CDI within 60 days after first offering the Equipment for sale, then CDI will purchase the Equipment as provided in Section 5.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, CDI will consent to the financing of equipment if the Lender pays CDI all amounts due and owing under the Sales Agreement at or before the time the security interest attaches to the equipment. CDI will supply payoff amounts and instructions to the Lender upon request. Upon receipt of the payoff amount from the Lender or Franchisee, CDI's security interest in the Equipment will be subordinated to the security interest of the Lender, and shall remain in effect for the duration of the Franchise Agreement term. The Lender is also required to notify CDI when the Lender's financing has been repaid and its security interest released within 15 days after such event.
This arrangement protects Chem Dry's interest in the equipment while allowing franchisees to obtain financing. The lender's security interest is subject to transfer restrictions outlined in Section 5 of the Sales Agreement, and the lender must agree not to exercise rights against the collateral that conflict with these restrictions. The lender can assemble the equipment for sale, but cannot use, rent, lease, sell, lend, or donate it. If the lender cannot resell the equipment to another Chem Dry franchisee within 60 days of offering it for sale, CDI will purchase the equipment as per Section 5 of the Sales Agreement.
This addendum allows the lender to assign their agreement to a successor, but only after CDI receives a written assumption of the Lender's obligations under this Lender Addendum acceptable to CDI. The lender is obligated to copy CDI on any notices of default, termination, foreclosure, or similar actions related to the security agreement. Both the lender and the franchisee consent to the unrestricted exchange of information between the lender and CDI regarding the franchisee's financing and franchise status. Until the lender notifies CDI of taking possession of the equipment, CDI may continue to treat the franchisee as the lawful possessor and operator, and the franchisee remains responsible for maintaining, insuring, protecting, and servicing the equipment in compliance with the Sales Agreement and Franchise Agreement.