What is the purpose of the Lender Addendum in relation to the Chem Dry Equipment Sales and Security Agreement?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
LENDER ADDENDUM
TO EQUIPMENT SALES AND SECURITY AGREEMENT
This "Lender Addendum" is made and entered into as of the Effective Date by and among the undersigned lender ("Lender"), the Franchisee and CDI. This Lender Addendum supplements and amends that certain Equipment Sales and Security Agreement dated the Effective Date (the "Sales Agreement") between CDI and Franchisee. Defined terms from the Sales Agreement are incorporated into this Lender Addendum.
Background. CDI and Franchisee have entered into the Sale Agreement ancillary to the Franchisee's entry into the Franchise Agreement with CDI so that Franchisee may obtain certain equipment that is proprietary to CDI and that is necessary to perform Franchisee's obligations under the Franchise Agreement. Lender desires to finance the purchase of the Equipment by Franchisee and take a security interest in the Equipment as collateral for the financing. CDI has restricted the right of the Franchisee to resell and dispose of the Equipment as provided in Section 5 of the Sales Agreement. CDI will consent to the financing of the Equipment purchase by Lender and Franchisee's grant of a security interest in the Equipment subject to and conditioned upon Lender's undertakings as set forth in this Lender Addendum.
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.
Lender Addendum 1
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- Lender may assign this Lender Addendum to any successor in interest to the financing of the Equipment only after CDI receives a written assumption of the Lender's obligations under this Lender Addendum acceptable to CDI.
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- Lender will copy CDI on any notices of default, termination, foreclosure, marshaling, or similar exercises of the secured party's rights under its agreement with Franchisee. Franchisee consents to the unrestricted exchange of information about Franchisee and the status of its financing or franchise and the related agreements between Lender and CDI.
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- Until CDI is notified by Lender that it has taken possession or constructive possession of the Equipment, CDI may deal with Franchisee as the lawful possessor and operator of the Equipment, and Franchisee shall at all times remain obligated to comply with its obligations to maintain, insure, protect and service the Equipment under the Sales Agreement and to use the Equipment only in compliance with the Franchise Agreement.
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- All notices to Lender, CDI and Franchisee shall be sent to respective address set forth below.
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- Sections 8, 9, 10 and 11 of the Sales Agreement are incorporated by this reference into this Lender Addendum as integral parts hereof.
Signature Page Follows
Lender Addendum 2
IN WITNESS WHEREOF, Lender, the Franchisee and CDI have executed this Lender Addendum effective as of the date first above written in one or more counterparts.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, the Lender Addendum supplements and amends the Equipment Sales and Security Agreement between Chem Dry (CDI) and the franchisee. This addendum is used when a franchisee seeks financing from a lender to purchase equipment necessary to operate their Chem Dry franchise. Chem Dry recognizes that franchisees may need to finance the equipment, and the Lender Addendum outlines the conditions under which Chem Dry will allow a lender to have a security interest in the equipment.
The Lender Addendum ensures that Chem Dry's interests are protected while allowing the franchisee to obtain financing. It restricts the franchisee's right to resell or dispose of the equipment without Chem Dry's consent. The lender's rights regarding the equipment are also limited to these transfer restrictions. The lender cannot take actions inconsistent with these restrictions, such as using, renting, leasing, selling, lending, or donating the equipment. The lender can assemble the equipment for sale, but must first offer it to other Chem Dry franchisees. If the lender cannot resell the equipment to another franchisee within 60 days, Chem Dry will purchase the equipment as per Section 5 of the Sales Agreement.
Several provisions within the Lender Addendum protect Chem Dry. Chem Dry will provide payoff amounts to the lender upon request. Upon the lender's payment of the payoff amount, Chem Dry's security interest is subordinated to the lender's, but remains in effect for the duration of the Franchise Agreement. The lender must notify Chem Dry when the financing is repaid and the security interest is released within 15 days. Chem Dry must be copied on any default, termination, foreclosure, or similar notices from the lender to the franchisee, and the franchisee consents to the unrestricted exchange of information between the lender and CDI. Until the lender takes possession of the equipment, Chem Dry may continue to deal with the franchisee as the lawful operator, and the franchisee remains obligated to maintain and insure the equipment and use it in compliance with the Franchise Agreement.