What is the borrower's obligation regarding defending the title to the collateral for Aunt Millies Bakeries?

According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the borrower has a specific obligation to defend the title to the collateral. The borrower must maintain good and marketable title to all collateral, ensuring it is free and clear of all liens, security interests, and encumbrances. This means the borrower must take necessary actions to protect the collateral from any claims or demands.

This obligation extends to defending the title against all persons and against all claims and demands whatsoever. Practically, this means that if anyone asserts a claim against the collateral, such as a lien or another security interest, the borrower is responsible for defending against that claim to protect the secured party's interest. This could involve legal action or other measures to clear the title.

Furthermore, the borrower is restricted from selling, leasing, or disposing of any of the collateral without the secured party's prior written consent, with the exception of inventory, which may be sold, leased, or otherwise disposed of in the ordinary course of business. This ensures that the collateral remains available to secure the obligations under the financing agreement. This requirement is typical in secured lending arrangements to protect the lender's investment and recourse in case of default.