What constitutes a default under the Aunt Millies Bakeries Security Agreement?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
The following shall constitute a default by the Borrower:
- a) Borrower's failure to pay to Secured Party when due any obligation secured by this Agreement;
- b) Borrower's failure to comply with or perform any provisions or covenants of this Agreement or any other agreement between Borrower and Secured Party, including Borrower's failure to maintain the insurance required in Article 3 above;
- c) any expiration, cancellation or termination of the Distribution Agreement executed between Borrower and PERFECTION BAKERIES, INC.;
- d) the death of Borrower;
- e) failure to submit to Secured Party, in form satisfactory to Secured Party, current personal financial information, as requested by Secured Party, current quarterly business financial statements within 30 days of the close of each calendar quarter and annual tax returns within 30 days of the date due for filing;
- f) any reduction in the value of the Collateral, due to the fault of the Borrower, which adversely affects the likelihood of satisfaction of Borrower's obligations hereunder or under the Note;
- g) Any action or failure to act of Borrower which, in the reasonable judgment of the Secured Party, adversely affects the Collateral or the ability to satisfy any of Borrower's obligations hereunder;
- h) the creation of any lien or the issuance of an attachment against or seizure of any property of, or the entry of judgment against, the Borrower except that the Borrower may execute general liens and grant security interests to and in favor of PERFECTION BAKERIES, INC., Distribution Services of America, Inc and. B&G Leasing, Inc. for obligations other than those created hereunder;
- i) with respect to Borrower or a guarantor of Borrower's obligations hereunder: dissolution, insolvency, inability to pay debts as they mature, appointment of a receiver for any part of its/his/her property, assignment for the benefit of creditors, the commencement of any proceeding under any bankruptcy or insolvency laws;
- j) the occurrence of any material adverse change in Borrower's financial condition or means or ability to satisfy the obligations of this Agreement; or
- k) the transfer of any of the assets pledged as Collateral for this Note, without the prior written consent of the Note Holder.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to the 2025 Aunt Millies Bakeries FDD, several actions or failures by the borrower (the franchisee) can trigger a default under the Security Agreement. These defaults range from financial missteps to breaches of the agreement itself, and even external events that impact the franchisee's financial stability or the collateral securing the agreement.
Specifically, a default occurs if the borrower fails to make payments when due, breaches any terms of the Security Agreement or any other agreement with the secured party, or if the Distribution Agreement with Perfection Bakeries, Inc. is terminated. Furthermore, the death of the borrower, failure to provide requested financial information (personal or business), or a reduction in the collateral's value due to the borrower's fault also constitute default events. Actions that negatively affect the collateral or the ability to fulfill obligations, creation of unauthorized liens, or adverse financial events like insolvency or bankruptcy also trigger a default.
Additionally, transferring pledged assets without prior written consent from the note holder is considered a default. It is important to note that some exceptions exist, such as the borrower's ability to grant security interests to Perfection Bakeries, Inc., Distribution Services of America, Inc., and B&G Leasing, Inc. for other obligations. These detailed conditions highlight the importance of understanding all facets of the Security Agreement and maintaining open communication with Aunt Millies Bakeries to avoid inadvertent defaults.
For a prospective Aunt Millies Bakeries franchisee, this underscores the need for careful financial management, adherence to all contractual obligations, and proactive communication with the franchisor. Understanding these default triggers is crucial for maintaining a healthy business relationship and avoiding potential legal or financial repercussions.