Exhibit 10.14

 

FORM OF

FRANCHISE AGREEMENT

(GENERAL INSURANCE SPECIALIST)

 

THIS AGREEMENT made and entered into this          day of                     , 200     (which with all exhibits and addenda shall be referred to herein as the “Agreement”) by and between Brooke Franchise Corporation, a Missouri Corporation, having its principal place of business at Overland Park, Kansas referred to hereafter as “Brooke”; and,                                                  , a/an                                              , whose offices and primary place of business is located at                                     ,             .

 

The proprietorship, partnership, corporation or other Person referenced above is referred to hereafter as “Franchise Agent”.

 

WITNESSETH:

 

WHEREAS, Franchise Agent is primarily in or may enter the business of selling, servicing and/or delivering property and casualty policies from the agency offices referenced above, but may also offer other financial services such as life insurance, health insurance, banking, lending and investment services on a brokerage basis through other franchise agents specializing in those areas or on a brokerage basis through Brooke; and

 

WHEREAS, Brooke is primarily in the business of providing certain services and assistance to businesses selling insurance; however, Brooke is in or may enter the business of selling, servicing and/or delivering other Policies and may provide certain services and assistance to businesses selling same; and

 

WHEREAS, Franchise Agent and Brooke desire to associate together effective             ,            , for the purpose of Brooke providing certain services and assistance to Franchise Agent with respect to Franchise Agent’s business;

 

NOW THEREFORE, in consideration of the mutual promises set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. DEFINITIONS OF TERMS USED IN THIS AGREEMENT:

 

For purposes of this Agreement, the following terms shall have the following meanings unless the context clearly requires otherwise:

 

1.1 Agency Bill Policies: Any Policies for which a Franchise Agent is responsible for all or any part of premium or fee billing and collection.

 

1.2 Agent of Record: Person designated on Company’s records as the agent or representative regarding a specific Policy and the owner of all Sales Commissions.

 

1.3 Company: A company issuing, brokering, selling or making a market for Policies and which has a contract with Brooke. (For the purposes of this definition, “Brooke” shall include a parent, subsidiary or affiliate of Brooke).

 

1.4 Company Billings: Statements or billings received by Brooke from Companies for amounts due Brooke from Companies and for amounts due Companies from Brooke.

 

1.5 Customer Account: A Person who has a Policy purchased from, serviced, renewed or delivered through Franchise Agent. Customer Accounts shall be owned by Franchise Agent or a Subagent.

 

1.6 Direct Bill Policies: Any Policies for which a Company is responsible for premium or fee billing and collection.

 

1.7 Franchise Agent Account: An account on Brooke’s ledgers to which Brooke records amounts due Brooke from Franchise Agent and amounts due Franchise Agent from Brooke.

 

1.8 Gross Premiums: Total premium, fees or other amounts due from the sale, renewal, service or delivery of Policies including the corresponding Sales Commissions.

 

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1.9 Insurance, Investment, Banking and/or Credit Services: Insurance services include but are not limited to the sale, renewal, service or delivery of insurance policies, annuities, insurance brokering services, insurance customer services, risk management services and insurance related consulting or advisory services. Investment services include, but are not limited to, the sale, renewal, service or delivery of mutual funds, stocks, bonds, notes, debentures, real estate services, investment customer services, and investment related consulting, and financial, investment, or economic advisory services. Banking services include any banking service Franchise Agent is allowed to perform under federal and/or state laws. Credit services include, but are not limited to, origination or brokerage of loans or mortgages, credit customer services, and credit related consulting or advisory services. At any point in time, Insurance, Investment, Banking and Credit Services shall be limited to those services then offered by Brooke.

 

1.10 Net Premium: Gross Premiums on Agency Billed Policies less the corresponding Sales Commissions.

 

1.11 Other Receipts: Deposits made to the Receipts Trust Account that are not Sales Commissions. Such receipts may include but are not limited to: Profit Sharing Commissions; Net Premiums, advertising reimbursements, proceeds from sale of personal money orders; Gross Premiums for Direct Billed Policies (e.g. on line payments); loan proceeds; Company refunds; supplier refunds; and vendor refunds.

 

1.12 Person: Any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution or other entity.

 

1.13 Policies: Any and all insurance services, policies, coverages or products sold, renewed, serviced or delivered through Franchise Agent to any Person. Policies include, but are not limited to, any and all Insurance, Investment, Banking or Credit Services, or policies, coverages or products associated therewith sold, renewed, serviced or delivered through Franchise Agent to any Person.

 

1.14 Profit Sharing Commissions: Commissions or fees which are generally not associated with the sale of a specific Policy through Franchise Agent. Profit Sharing Commissions are typically contingent upon factors such as sales volume, premium volume, profitability and other special concessions negotiated by Brooke. Profit Sharing Commissions include, but are not limited to, payments identified by the Companies as profit sharing commissions, contingency commissions, advertising allowances, prizes, override commissions, expense reimbursements and bonus commissions.

 

1.15 Receipts Trust Account: An account established and owned by Brooke, but controlled by a trustee, to which premiums, fees, Sales Commissions and Other Receipts received by Franchise Agent or Brooke from Companies or customers shall be deposited and from which Brooke, or its designee, makes regular withdrawals by Electronic Funds Transfer. (For the purposes of this definition, “Brooke” shall include a parent, subsidiary or affiliate of Brooke.)

 

1.16 Return Commissions: Direct Bill Policy commissions that are unearned because Policy premium or fee was reduced or Policy canceled.

 

1.17 Sales Commissions: Commissions paid by Companies to Brooke or assigned by Franchise Agent to Brooke for the sale, renewal, service or delivery of a specific Policy through Franchise Agent. Sales Commissions are not normally contingent upon factors such as Brooke’s loss ratio, premium volume, sales volume or special concessions negotiated by Brooke. For the purposes of this Agreement, Sales Commissions shall specifically exclude Profit Sharing Commissions and other similar payments. However, Sales Commissions shall specifically include amounts paid by Brooke pursuant to a bonus plan, the terms of which are defined by Brooke in its sole discretion and for which Brooke makes no representation regarding future payments or Franchise Agent’s eligibility. Sales Commissions shall also include any consulting fees, advisory fees, placement fees, service fees, renewal fees, or any similar payments paid on or related to any Customer Account by any Person. (For the purposes of this definition, “Brooke” shall include a parent, subsidiary or affiliate of Brooke.)

 

1.18 Subagent: A Person which has entered or may enter into a Subagent Agreement with Franchise Agent.

 

1.19 Subagent Agreement: An agreement entered into by and between Subagent and Franchise Agent and approved by Brooke pursuant to which Subagent is allowed vested ownership rights in Customer Accounts coded to Subagent and Franchise Agent performs certain accounting and processing services for Subagent.

 

2. OBLIGATIONS TO BE PERFORMED BY BROOKE:

 

2.1 As of the effective date of this agreement, Brooke shall provide services with respect to accounting for and processing of Policies for Franchise Agent. Brooke may provide other services as may be agreed upon by Brooke and Franchise Agent from time to time. Furthermore, certain duties and obligations of Brooke set forth in this Agreement may be performed by a subsidiary or an affiliate of Brooke.

 

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2.2 Brooke shall account for all Sales Commissions on Direct Bill Policies issued, renewed, endorsed, changed, serviced, delivered or canceled on behalf of Customer Accounts. Brooke shall credit Franchise Agent Account for Sales Commissions received by Brooke from Companies for Customer Accounts in the amounts indicated on the appropriate Company Billing. Brooke shall debit Franchise Agent Account for Return Commissions due to Companies by Brooke for Customer Accounts in the amounts indicated on the appropriate Company Billing.

 

2.3 (a) Brooke shall account for all Net Premiums on Agency Bill Policies issued, renewed, endorsed, changed, serviced, delivered or canceled on behalf of Customer Accounts. Brooke shall debit Franchise Agent Account for Net Premiums due to Companies by Brooke for Customer Accounts in the amounts indicated on the appropriate Company Billing. Brooke shall credit Franchise Agent Account for Net Premiums returned to Brooke from Companies for Customer Accounts in the amounts indicated on the appropriate Company Billing. Brooke has the absolute right to and is fully vested in all Net Premiums. Franchise Agent has no right, title or interest in such amounts. (b) Brooke shall credit Franchise Agent Account for Agent Billed Policy premiums received from any insured or other Person for a Customer Account. At Brooke’s option, Brooke may defer any such credit for Agent Billed Policy premiums until a corresponding charge is made to Franchise Agent Account for Net Premiums in accordance with subparagraph 2.3 (a).

 

2.4 Brooke shall calculate and credit Franchise Agent Account monthly for amounts due Franchise Agent by Brooke. Amounts due Franchise Agent shall be Eighty-five percent (85%) of any Sales Commissions from Companies for Customer Accounts.

 

2.5 Subject to the prior approval of the insurance company involved, Brooke shall endorse Brooke’s errors and omissions insurance policy to provide errors and omissions insurance coverage for Franchise Agent. Brooke shall calculate and debit Franchise Agent Account for Franchise Agent’s share of the errors and omissions insurance policy premium. Brooke may adjust said policy premium to maintain a Franchise Agent deductible fund. Brooke shall calculate Franchise Agent’ share of said errors and omissions insurance policy premium by dividing the estimated annual commissions received on Customer Accounts by the total estimated annual commissions received by Brooke from all Companies. However, Franchise Agent’s share of Brooke’s annual policy premium shall not be less than the minimum annual premium that is set from time to time by Brooke. Franchise Agent has the responsibility to provide Brooke with copies of those documents which Brooke deems necessary for errors & omissions documentation. Franchise Agent must also be a member of the state independent agents association to be eligible for errors and omissions coverage and may be required to participate in errors and omissions loss control seminars. If Franchise Agent fails to participate, Franchise Agent may be assessed an additional amount for errors and omissions coverage.

 

2.6 Brooke will pay for 50% of advertising that is pre-approved by Brooke and shall be reimbursed by Franchise Agent for Franchise Agent’s share of payments made to advertisers on behalf of Franchise Agent.

 

2.7 Brooke shall account for and debit Franchise Agent Account monthly for any other supplies or services provided by Brooke to Franchise Agent if previously agreed upon by Brooke and Franchise Agent. Franchise Agent acknowledges that, pursuant to this paragraph, Brooke provides Franchise Agent with additional services and retains additional commissions when Policies are sold, renewed, serviced or delivered through Franchise Agent through a Brooke subsidiary or affiliate which provides such Policies to agents on a brokerage or non-exclusive basis and when agency listing or consulting services of a Brooke subsidiary or affiliate are utilized.

 

2.8 Brooke shall forward a record of Franchise Agent Account to Franchise Agent on or about the 15th day of each month. Upon written notice to Franchise Agent, Brooke may change the date on or about which statements are forwarded.

 

2.9 Brooke, or its designee, shall pay to Franchise Agent, by electronic funds transfer, the credit balance recorded on the Franchise Agent Account on or about the 20th day of each month. If Franchise Agent has not paid to Brooke, or its designee, the debit balance recorded on the Franchise Agent Account by the 20th day of each month, then Brooke, or its designee, shall withdraw the amount of any such debit balance from Franchise Agent’s checking account using an electronic funds transfer. Upon written notice to Franchise Agent, Brooke may change the date on or about which Franchise Agent’s account is credited or debited.

 

2.10 Brooke shall provide Franchise Agent with a rules and procedures manual that has been adopted by Brooke and shall provide Franchise Agent with notice of any changes made by Brooke to said manual from time to time.

 

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2.11 Brooke shall provide Franchise Agent with a unique written list of Companies that have been approved for Franchise Agent use by Brooke and shall provide Franchise Agent with notice of any changes made by Brooke to said list from time to time. Franchise Agent acknowledges that changes to the list of Companies may be made by Brooke at its sole and absolute discretion.

 

2.12 Brooke shall provide Franchise Agent with a unique written list specifying Franchise Agent authority for binding Companies to Policies or coverages and shall provide Franchise Agent with notice of any changes made by Brooke to said list from time to time.

 

2.13 Unless otherwise agreed in writing by Brooke, Franchise Agent shall do business under the name “Brooke Financial Services” or “Brooke Insurance and Financial Services”. Therefore Brooke permits the use of its trade names, trademarks, service marks, logotypes, commercial symbol and promotional materials for the purpose of advertising such relationship. Brooke does not represent or guarantee that Franchise Agent will have exclusive use of such name, that such name is available for use in Franchise Agent’s market and/or that there are no competing names or uses. If such name is not available for use, Franchise Agent shall do business under a name mutually agreed upon by the parties.

 

2.14 Brooke shall provide Franchise Agent full and complete access to Brooke’s records of Customer Accounts provided that it shall be upon reasonable advance request and during such times and upon such conditions as shall not unreasonably impair the operations of Brooke.

 

2.15 Brooke shall license Franchise Agent to use Brooke’s proprietary Document Manager system provided that Franchise Agent purchase, license, install and maintain all software and hardware, other than Brooke’s proprietary Document Manager programs, which may be required to use the Document Manager system and provided that Franchise Agent not sell, lease or authorize the use of the Document Manager programs to anyone else and provided that Franchise Agent not configure, program or change any Document Manager programs. Franchise Agent can only access customer information through the Document Manager system via the Internet. Franchise Agent, its owners, officers, directors, employees and independent contractors agree to release, defend, indemnify and hold Brooke harmless for and from any and all claims, losses, liabilities, damages or expenses (including, but not limited to reasonable attorneys’ fees, court costs, and costs of investigation) of any kind or nature whatsoever incurred by Franchise Agent, its owners, officers, directors, employees and independent contractors resulting from an interruption in Internet services or from any unauthorized use of or access to Customer Account information through the Internet. This release, defense, indemnification and hold harmless shall survive the termination of this Agreement.

 

3. OBLIGATIONS TO BE PERFORMED BY FRANCHISE AGENT:

 

3.1 Upon the signing of this Agreement, Franchise Agent shall pay to Brooke an initial nonrecurring and nonrefundable set up fee of One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00), the receipt of which is acknowledged, following which Franchise Agent shall do business under the name “Brooke Financial Services” or “Brooke Insurance and Financial Services”, unless otherwise approved in writing by Brooke.

 

3.2 Franchise Agent shall provide competent and qualified personnel for the sale, renewal, service and delivery of Policies and to serve as liaison or contact with Customer Accounts. Franchise Agent agrees to submit an application (in a form approved by Brooke) for any licensed individuals Franchise Agent wishes to hire or contract. Brooke shall be entitled to approve or disapprove such applications in its sole discretion. As a property and casualty insurance specialist, Franchise Agent acknowledges that the primary financial service offered by it will be property and casualty insurance; however, Franchise Agent may also offer other financial services such as life insurance, health insurance, banking, lending and investment services on a brokerage basis through other franchise agents specializing in those areas or on a brokerage basis through Brooke. Brooke may require Franchise Agent to participate in additional training and/or meet additional qualifications to offer life and health insurance, investment, banking and/or credit services. Further, Franchise Agent acknowledges that this Agreement may need to be amended to accommodate the sale of policies and services outside Franchise Agent’s specialization.

 

3.3 On or before the effective date of this Agreement, Franchise Agent shall, subject to prior approval of the Companies involved, change the Agent of Record for all existing Customer Accounts to Brooke (for the purposes of this subparagraph, “Brooke” shall include a subsidiary or affiliate of Brooke).

 

3.4 After the effective date of this Agreement, Franchise Agent shall process all applications for Policies exclusively through the facilities of Brooke.

 

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3.5 Franchise Agent shall make Brooke (for the purposes of this subparagraph, “Brooke” shall include a subsidiary or affiliate of Brooke) the Agent of Record for all Policies sold, renewed, serviced or delivered through Franchise Agent with an effective date for coverage after the effective date of this agreement, unless prior written approval is obtained from Brooke. If a Company refuses to make Brooke the Agent of Record for all Policies sold, renewed, serviced or delivered through Franchise Agent, then Franchise Agent shall assign all Sales Commissions and Profit Sharing Commissions associated with such Policies to Brooke. Franchise Agent agrees and acknowledges that by making Brooke the Agent of Record, all Sales Commissions and Profit Sharing Commissions are assigned to Brooke for accounting and distribution to Franchise Agent Account pursuant to this Agreement. Franchise Agent appoints Brooke as its attorney in fact to endorse or deposit checks made payable to Franchise Agent by customers, Companies or master general agents. Franchise Agent also agrees to obtain from its producers or Sub Agents an appointment of Brooke as attorney in fact to endorse or deposit checks made payable to such producers or subagents by customers, Companies or master general agents.

 

3.6 Franchise Agent shall apply for issuance of Direct Bill Policies if payment of premiums in this manner is permitted by the Company providing coverages. Franchise Agent shall obtain specific approval of Brooke prior to submitting any application for issuance of an Agency Bill Policy. Brooke may at its discretion require Franchise Agent to provide documentation substantiating Franchise Agent’s inability to procure Direct Bill Policy coverage prior to Brooke approving Franchise Agent’s placement of an Agency Bill Policy. If Brooke requests such documentation and Franchise Agent fails to provide it, subject to applicable law, Brooke reserves the right to cancel or require Franchise Agent to cancel the corresponding Agency Bill Policy(ies). Furthermore, if Brooke approves the use of a supplier that issues Agency Bill Policies or the placement of an Agency Bill Policy, Brooke may require that the full premium payment be deposited and receipted to the Receipts Trust Account prior to such policy being issued on a fully earned premium basis.

 

3.7 Franchise Agent shall be solely responsible for the collection of all Agency Bill Policy premiums from Customer Accounts, which amounts shall be made payable to Brooke Corporation. Franchise Agent agrees that if premiums on Agency Bill Policies are uncollected and past due for a period of over 60 days, Brooke may cancel or require Franchise Agent to cancel the associated Agency Bill Policy and Brooke will apply net proceeds to the Franchise Agent Account. Franchise Agent shall not have authority to endorse or deposit such payments to its own account. Franchise Agent appoints Brooke as its attorney in fact to endorse or deposit checks made payable to Franchise Agent by customers, Companies or master general agents. Franchise Agent also agrees to obtain from its producers or Sub Agents an appointment of Brooke as attorney in fact to endorse or deposit checks made payable to such producers or Sub Agents by customers, Companies or master general agents. Brooke shall establish a Receipts Trust Account to which all premiums, fees, Sales Commissions and Other Receipts from Companies or customers shall be deposited and from which Brooke, or its designee, makes regular withdrawals by Electronic Funds Transfer. Franchise Agent acknowledges that it is solely responsible for return of credits it receives which are due Customers and agrees that it will pay Customers any credits due them within thirty (30) days of the date such amount has been credited to its Franchise Agent Account.

 

3.8 Franchise Agent shall be responsible for payment to Brooke of all Agency Bill Policy net premiums and Direct Bill Policy return commission resulting from Customers Accounts.

 

3.9 Franchise Agent authorizes Brooke to retain Fifteen percent (15%) of any Sales Commissions from Companies under contract with Brooke for Customer Accounts; Franchise Agent shall pay its share of: errors and omissions insurance policy premiums; cost for motor vehicle reports, clue reports, association membership dues, and rating software, which may be calculated by Brooke by dividing the estimated annual commissions received on Customer Accounts by the total estimated annual commissions received by Brooke from all Companies or in some instances, from all Companies in Franchise Agent’s state; postage and express mail charges; appointment and licensing fees; and fees for any other supplies and services provided by Brooke if previously agreed upon by Franchise Agent and Brooke.

 

3.10 If Franchise Agent has not paid to Brooke, or its designee, the debit balance recorded on the Franchise Agent Account by the 20th day of each month, then Franchise Agent authorizes Brooke, or its designee, to withdraw the amount of such debit balance from Franchise Agent’s checking account using an electronic funds transfer. Without waiving any other rights Brooke may have pursuant to this Agreement, if Franchise Agent fails to pay amounts due Brooke when due, Brooke may at its discretion charge interest on unpaid amounts at a rate not to exceed the maximum rate allowed by law until such amounts are paid. Brooke may at its sole discretion allow Franchise Agent additional time to pay amounts Franchise Agent owes Brooke; however, in such event, Brooke may still charge Franchise Agent interest until such amounts are paid.

 

3.11 Franchise Agent shall be responsible for providing to Brooke any information regarding Franchise Agent or Franchise Agent’s owners, officers, employees and independent contractors that may be required from Brooke by any self regulatory organization, governmental agency or any Company. Franchise Agent shall be responsible for ensuring that Franchise Agent and Franchise Agent’s owners, officers, employees and independent contractors comply with all federal, state, local and

 

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Company requirements including but not limited to the sales practices, education and licensing requirements of all governmental agencies and any Company. Franchise Agent shall provide evidence satisfactory to Brooke that Franchise Agent and Franchise Agent owners, officers, employees and independent contractors have complied with such requirements. If Franchise Agent does not comply with the terms of this paragraph, it is cause for immediate termination of this Agreement without any liability on or against Brooke.

 

3.12 Franchise Agent shall abide by and conform to the rules and procedures adopted from time to time by Brooke. Franchise Agent acknowledges that said rules and procedures include, among other requirements, a requirement that Franchise Agent provide Brooke with copies of all Policy applications and all other records or documents originated, received or processed by Franchise Agent which are related to Customer Accounts, Policies or Franchise Agent’s business. Franchise Agent acknowledges the importance of complete and timely transmittal of all records and documents and agrees to submit in a timely manner to Brooke all such records and documents.

 

3.13 Franchise Agent shall apply for coverages only with the Companies that are authorized for Franchise Agent’s use from time to time by Brooke. Franchise Agent acknowledges that Brooke, in its sole and absolute discretion, shall decide which Companies Franchise Agent may use.

 

3.14 Franchise Agent shall abide by and conform to the conditions and limits of authority for binding Companies to insurance and other coverages which are set forth from time to time by Brooke.

 

3.15 Franchise Agent shall obtain the prior written consent of Brooke before using Brooke’s trade names, trademarks, service marks, logotypes or commercial symbols on any advertising literature, promotional materials, signs or business forms that are not provided by Brooke.

 

3.16 Immediately upon termination of this Agreement for whatever reason, Franchise Agent shall cease the dissemination of any advertising material containing any of Brooke’s trade names, trademarks, service marks, logotypes or commercial symbols. Brooke shall have a cause of action against Franchise Agent for failure to immediately cease using the same upon any such termination.

 

3.17 Franchise Agent shall purcha