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
