What constitutes 'Insolvency' as an Event of Default under the Aerus Security Agreement, and what is the timeframe for terminating the appointment of a trustee, custodian, or receiver to avoid default?

According to Aerus's 2025 Franchise Disclosure Document, an 'Event of Default' can occur under the Security Agreement if the debtor (franchisee) becomes insolvent. Insolvency is defined as the franchisee becoming insolvent, admitting an inability to pay debts as they become due, or applying for or consenting to the appointment of a trustee, custodian, or receiver for any property.

For an Aerus franchisee, this means that if they face financial difficulties to the point of insolvency, it could trigger a default under the Security Agreement. This could have serious repercussions, potentially leading to the loss of assets used as collateral.

The appointment of a trustee, custodian, or receiver, even without the franchisee's consent, also constitutes insolvency. However, the franchisee has a 30-day window to terminate such an appointment to avoid triggering a default. Additionally, if dissolution or liquidation proceedings are instituted against the franchisee, or if the franchisee makes an assignment for the benefit of creditors, and such inability or assignment continues for 30 days, it also constitutes insolvency. This 30-day period provides a limited opportunity for the franchisee to resolve the situation and prevent further action by Aerus.