What security is required for repayment of a Management Recruiters loan?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
Required Security. You must provide us with certain security for repayment of your loan. The Security Agreement (following the Note at FDD Exhibit B) grants us a security interest in all of your trade accounts and notes receivable (if we do not already own the accounts receivable) and in all franchise rights or other agreements between us and you, as well as in certain of your other assets.
You must also comply with certain covenants to protect our interest in the pledged collateral. Among other restrictions typical of financing arrangements, you must provide monthly financial statements and accounts receivable data; must not increase the compensation of or pay dividends to any officer, director or shareholder without our prior consent; must not issue or redeem capital stock or securities without our consent; and must maintain insurance on the collateral.
The Security Agreement applies to all indebtedness you may have to us on or after the dates of that agreement. Thus, even if you have repaid your loan in full, if you have other indebtedness to us, we have the right to keep our security interest in the collateral and to require you to be bound by the covenants mentioned above. Our current policy, however, is to cancel the Loan Documents when you have repaid your loan in full.
Waiver of Defenses. Under the Loan Documents, you and all guarantors agree to waive presentment, demand, protest, notice of protest, dishonor, notice of dishonor, and all other notices; guarantors, in addition, waive notice of default and any right to require us to sue or take other action to enforce payment. These provisions are in the Security Agreement. In addition, you and all guarantors agree to waive any right to a jury trial. (Security Agreement, last paragraph.)
Source: Item 10 — FINANCING (FDD pages 31–34)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, if you receive financing from HQ Financial Corporation, Management Recruiters's affiliate, you must provide security for the loan's repayment. The Security Agreement grants Management Recruiters a security interest in all of your trade accounts and notes receivable (if Management Recruiters does not already own the accounts receivable). It also includes all franchise rights or other agreements between you and Management Recruiters, as well as certain of your other assets.
Management Recruiters requires you to comply with certain covenants to protect their interest in the pledged collateral. These covenants include providing monthly financial statements and accounts receivable data. You must also obtain Management Recruiters's prior consent before increasing the compensation of or paying dividends to any officer, director, or shareholder. Similarly, you need their consent before issuing or redeeming capital stock or securities. Additionally, you are required to maintain insurance on the collateral.
The Security Agreement applies to all indebtedness you may have to Management Recruiters on or after the dates of that agreement. Even if you have repaid your loan in full, if you have other indebtedness to Management Recruiters, they have the right to keep their security interest in the collateral and require you to be bound by the covenants mentioned above. However, Management Recruiters's current policy is to cancel the Loan Documents when you have repaid your loan in full. Under the Loan Documents, you and all guarantors agree to waive presentment, demand, protest, notice of protest, dishonor, notice of dishonor, and all other notices; guarantors, in addition, waive notice of default and any right to require Management Recruiters to sue or take other action to enforce payment. These provisions are in the Security Agreement. In addition, you and all guarantors agree to waive any right to a jury trial.