Under what conditions can the Secured Party determine that a material adverse change has occurred in the business operations or financial condition of Aerus, leading to an Event of Default?

According to Aerus's 2025 Franchise Disclosure Document, the Secured Party can determine that a material adverse change has occurred in the business operations or financial condition of the Debtor (franchisee), leading to an Event of Default, if the Secured Party determines in good faith and reasonably that such a change has occurred. Additionally, this determination can be made if the prospect of payment of the Note (loan) or performance under the Security Agreement has become impaired. This clause grants the Secured Party a degree of discretion in assessing the financial health and operational stability of the Aerus franchisee's business.

This provision is significant for a prospective Aerus franchisee because it highlights the potential for the lender to declare a default based on their subjective assessment of the franchisee's business operations or financial condition. The terms "good faith" and "reasonably" provide some protection, but the franchisee should still be aware that the lender's perception of their business prospects can trigger an Event of Default. This could occur even if the franchisee is technically meeting all payment obligations, but the lender foresees potential future difficulties.

It is important for a potential Aerus franchisee to fully understand the implications of this clause and to maintain open communication with the Secured Party regarding their business operations and financial performance. Franchisees should seek clarification from Aerus and the Secured Party regarding the specific metrics or indicators that would be considered a "material adverse change" to mitigate the risk of unexpected default declarations. Understanding these triggers can help a franchisee proactively manage their business and address any potential concerns before they escalate into an Event of Default.