Under the Aerus guarantee, what happens if the borrower files for bankruptcy?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
), in consideration of the benefits which will accrue to Guarantor and as an inducement for and in consideration of Lender making loans and advances and providing other financial accommodations to Borrower pursuant to the Note and the other Financing Agreements, Guarantor hereby agrees in favor of Lender as follows:
1. Guarantee.
(a) Guarantor absolutely and unconditionally guarantees and agrees to be liable for the full and indefeasible payment and performance when due of the following (all of which are collectively referred to herein as the "Guaranteed Obligations"): (i) all obligations, liabilities and indebtedness of any kind, nature and description of Borrower to Lender and/or its affiliates, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under the Note, the other Financing Agreements or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Note or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges and expenses related thereto and all other obligations of Borrower or its successors to Lender arising after the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender and (ii) all expenses (including, without limitation, attorneys' fees and legal expenses) incurred by Lender in connection with the preparation, execution,
delivery, recording, administration, collection, liquidation, enforcement and defense of Borrower's obligations, liabilities and indebtedness as aforesaid to Lender, the rights of Lender in any collateral or under this Guarantee and all other Financing Agreements or in any way involving claims by or against Lender directly or indirectly arising out of or related to the relationships between Borrower, Guarantor or any other Obligor (as hereinafter defined) and Lender, whether such expenses are incurred before, during or after the initial or any renewal term of the Note and the other Financing Agreements or after the commencement of any case with respect to Borrower or Guarantor under the United States Bankruptcy Code or any similar statute.
- (b) This Guarantee is a guaranty of payment and not of collection. Guarantor agrees that Lender need not attempt to collect any Guaranteed Obligations from Borrower, Guarantor or any other Obligor or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations to Lender when due, whether by maturity, acceleration or otherwise, or at any time thereafter. Lender may apply any amounts received in respect of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in part (including attorneys' fees and legal expenses incurred by Lender with respect thereto or otherwise chargeable to Borrower or Guarantor) and in such order as Lender may elect.
- (c) Payment by Guarantor shall be made to Lender at the office of Lender from time to time on demand as Guaranteed Obligations become due. Guarantor shall make all payments to Lender on the Guaranteed Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. One or more successive or concurrent actions may be brought hereon against Guarantor either in the same action in which Borrower or any other Obligor is sued or in separate actions.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to Aerus's 2025 Franchise Disclosure Document, the guarantor's obligations extend even if the borrower (franchisee) files for bankruptcy. Specifically, the guarantor remains liable for all obligations, including principal, interest, charges, fees, costs, and expenses, regardless of whether the bankruptcy case has commenced. This includes amounts that would accrue but for the bankruptcy filing, and any post-bankruptcy obligations of the borrower to the lender. This ensures that Aerus Franchising, LLC as the lender, is protected financially even if the franchisee faces bankruptcy.
The guarantee covers all expenses incurred by Aerus in connection with the borrower's obligations, including legal fees for collection, liquidation, enforcement, and defense. These expenses apply whether they arise before, during, or after the bankruptcy case. The guarantor is also liable for interest, fees, and expenses, even if the borrower's liability ceases to exist due to bankruptcy law. This provision is designed to provide Aerus with maximum financial security, shifting the risk of franchisee bankruptcy onto the guarantor.
Furthermore, the guarantor waives any claims against the borrower for subrogation, reimbursement, or contribution regarding payments made to Aerus. The guarantor's payment obligations are primary, meaning Aerus does not need to attempt to collect from the borrower or realize any collateral before demanding payment from the guarantor. This underscores the strength of the guarantee and the guarantor's commitment to covering the borrower's debts to Aerus, even in the event of bankruptcy.