What options does Epcon Communities have if a Mortgagor defaults under the Obligations?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
Assignor hereby expressly grants, bargains, sells, conveys, transfers and assigns to Assignee such of Assignor's right, title and interest in and to the Franchise Agreement and the Market Area Agreement (copies of which are attached hereto, made a part hereof and marked as Exhibit "A"), and the license granted thereunder, which may be necessary to permit Assignee to complete any Project which is the subject thereof upon the default or occurrence of an event of default by Assignor under any of the Loan Agreements (hereinafter, the "Assignment"). The Assignment shall not include the rights of the franchisee provided under Sections 3.4 of the Franchise Agreement.
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- Acceptance of Assignment and Assumption of the Obligations. Assignee hereby accepts the Assignment and, if, upon the default by Assignor under the Loan Agreements, Assignee decides to use the Development System to complete any unfinished Project(s), assumes, and agrees to be bound by all of Assignor's obligations under the Franchise Agreement as such obligations relate to the Epcon Communities project developed by Assignor and such of Assignor's obligations under the Franchise Agreement and the Market Area Agreement as are corresponding with the right, title, and interest transferred to Assignee in Section 1 hereof (hereinafter, the "Obligations"). Assignee shall promptly communicate in writing to Epcon Communities its decision respecting assumption of the Obligations as franchisee under the Franchise Agreement and the Market Area Agreement. If Assignee, in full compliance with the terms of the Franchise Agreement and the Market Area Agreement uses the Development System to complete a Project or Projects, Assignee shall have no obligation to Epcon Communities to cause Assignee's stock certificates or other certificates evidencing ownership to be inscribed with a legend referencing the Franchise Assignment Agreement, the Lender Agreement, or the Market Area Agreement.
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- Assignor's Continuing Liability for the Obligations. Notwithstanding the Assignment, Assignor hereby acknowledges and agrees that it shall remain liable to Epcon Communities for all of the Obligations.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, if an Epcon Communities Assignor defaults under the Loan Agreements, the Assignee has options regarding the completion of unfinished projects. According to the agreement, the Assignor grants to the Assignee the necessary rights to complete any project that is subject to the default. This includes rights to the Franchise Agreement and the Market Area Agreement. However, the assignment does not include rights of the franchisee under Sections 3.4 of the Franchise Agreement.
The Assignee can choose to accept the assignment and assume the Assignor's obligations to complete the project using Epcon Communities' Development System. If the Assignee decides to use the Development System, they must comply with the terms of the Franchise Agreement and the Market Area Agreement. The Assignee must also communicate their decision in writing to Epcon Communities regarding the assumption of obligations as a franchisee.
Even with the assignment, the original Assignor remains liable to Epcon Communities for all obligations. This means that Epcon Communities retains recourse against the original franchisee even if the project is taken over by another party. This provides Epcon Communities with a degree of security in ensuring the completion of projects and adherence to the franchise agreement.