Under what conditions can an Epcon Communities debtor sell or dispose of the collateral?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
The Debtor further covenants with the Secured Party as follows: (a) the Collateral, to the extent not delivered to the Secured Party, will be kept at its address listed on the signature page hereof and the Debtor will not remove the Collateral from such location, without providing at least thirty days prior written notice to the Secured Party, (b) except for the security interest herein granted and liens permitted by the Franchise Documents, the Debtor shall be the owner of the Collateral free from any right or claim of any other person, lien, security interest or other encumbrance, and the Debtor shall defend the same against all claims and demands of all persons at any time claiming the same or any interests therein adverse to the Secured Party, (c) the Debtor shall not pledge, mortgage or create, or suffer to exist any right of any person in or claim by any person to the Collateral, or any security interest, lien or encumbrance in the Collateral in favor of any person, other than the Secured Party except for liens permitted by the Franchise Documents, (d) the Debtor will keep the Collateral in good order and repair and will not use the same in violation of law or any policy of insurance thereon, (e) the Debtor will permit the Secured Party, or its designee, to inspect the Collateral at any reasonable time, wherever located, and (f) the Debtor will not sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein except for (i) sales of inventory and licenses of general intangibles in the ordinary course of business and (ii) so long as no Event of Default has occurred and is continuing, sales or other dispositions permitted by the Franchise Documents.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to Epcon Communities' 2025 Franchise Disclosure Document, a debtor can sell or dispose of the collateral under specific conditions. Generally, the debtor cannot sell or dispose of the collateral or any interest in it. However, there are two exceptions to this rule.
First, sales of inventory and licenses of general intangibles are permitted in the ordinary course of business. This allows the franchisee to conduct day-to-day operations without requiring specific approval for each sale. Second, sales or other dispositions are allowed if no Event of Default has occurred and is continuing, and if such sales or dispositions are permitted by the Franchise Documents.
These conditions provide some flexibility for the franchisee while protecting the secured party's interest in the collateral. It is important for a prospective franchisee to understand what constitutes an Event of Default and what sales or dispositions are explicitly permitted in the Franchise Documents to avoid violating these covenants.