In the context of Epcon Communities financing, what is the definition of 'Security Instruments'?

According to Epcon Communities' 2025 Franchise Disclosure Document, 'Security Instruments' is a collective term referring to various financial tools that Epcon Communities may require a franchisee to provide as security for the payment of fees owed to them. These instruments can include a mortgage, security agreement, deed of trust, or letter of credit.

Specifically, Epcon Communities requires a mortgage in a minimum amount of $200,000 on the real property where the project will be constructed. This mortgage serves as collateral to ensure that Epcon Communities is paid all due fees. The franchise agreement states that if the franchisee increases the number of units in their project, Epcon Communities has the right to demand an increase in the mortgage amount or require additional security.

The security interests granted to Epcon Communities through these Security Instruments are subject and junior to any liens granted to lenders providing land acquisition and construction financing. This means that the franchisee's primary lender takes precedence over Epcon Communities in the event of default. The franchisee is responsible for reimbursing Epcon Communities for all expenses related to subordinating the Security Instruments and for the costs associated with obtaining, filing, and recording these instruments.

Epcon Communities retains the right to assign its interests in the Security Instruments to a third party without the franchisee's consent. However, Epcon Communities remains primarily obligated to provide assistance to the franchisee as outlined in the Franchise Agreement, even if the Security Instruments are assigned to a third party.