What rights and obligations does a Bumble Roofing franchisee obtain under the franchise agreement?

WHEREAS, Franchisee recognizes that in order to enhance the value of the System and goodwill associated with it, this Agreement places detailed obligations on Franchisee, including strict adherence to Franchisor's reasonable present and future requirements regarding the types of products sold, services offered, advertising used, operational techniques, marketing and sales strategies and related matters.

WHEREAS, Franchisee is aware of the foregoing and is desirous of obtaining the right and obligation to use the System and in association therewith, the right and obligation to use the Marks, and wishes to be assisted, trained, and franchised to operate a Roofing Business pursuant to the provisions and

within the Territory specified in this Agreement, subject to the terms and conditions contained in this Agreement.

The parties therefore agree as follows:

DEFINITIONS

For the purposes of this Agreement, the following are hereby defined:

• (a) "Agreement" means this agreement, attachments, addenda and all instruments in amendment hereof.

• (b) "Affiliate" means any person or entity that controls, is controlled by, or is in common control with, Franchisor.

• (c) "Business" or "Roofing Business" means the business operations conducted or to be conducted by Franchisee consisting of a business offering and selling roofing installation, maintenance, and repairs, and related products and services, for residential and commercial customers.

3. TERM OF THE AGREEMENT AND LICENSE

3.1 This Agreement and the License granted shall continue for a period of seven years ("Initial Term"). This Initial Term shall begin on the date this Agreement is executed by Franchisor, subject, however, to termination in accordance with the provisions of this Agreement. When the Initial Term expires Franchisee shall have the option to extend its rights to operate the Roofing Business for one additional term equal to the length of Franchisor's then-current initial term as described in its then-current BUMBLE ROOFING® franchise agreement ("Successor Term"), provided Franchisor determines in its sole and absolute discretion that Franchisee has met all of the following requirements:

• (a) Franchisee has not failed to remedy any breach of this Agreement specified by Franchisor in a written notice to Franchisee as per Sections 17.1 or 17.2;

• (b) Franchisee has not committed and received notice of two or more breaches of this Agreement in the 12 months prior to the end of the current Initial Term, even if such breaches were timely remedied;

• (c) Franchisee has given Franchisor a written notice of intent to extend its rights to operate the Roofing Business no less than two months or more than six months prior to expiration of the Initial Term;

• (d) Franchisee is current in its payment obligations to Franchisor, Franchisor's Affiliates, and Franchisee's trade creditors;

• (e) Franchisee has met Franchisor's then-current qualifications for new or renewing BUMBLE ROOFING® franchisees;

• (f) Franchisee executes a successor franchise agreement ("Successor Franchise Agreement") and all other agreements in the form then being used by Franchisor in granting new franchises, which may contain materially different terms and conditions than this Agreement, provided that Franchisee will pay Franchisor the Successor Franchise Fee (defined below) instead of the Initial Franchise Fee and the Successor Term will be no less than five years, as described above.

• (g) Franchisee pays Franchisor the successor franchise fee equal to the greater of $5,000 or 25% of the then existing Initial Franchise Fee as described in the Franchisors then existing Franchise Agreement ("Successor Franchise Fee"), which is due and payable to Franchisor at the time of signing the Successor Franchise Agreement;

4. TERRITORY

• 4.1 During the Initial Term and any Interim Period and for so long as Franchisee is in compliance with all of its obligations hereunder, except as otherwise provided in this Agreement, including Franchisor's reservation of rights as set forth in Sections 4.2, 4.4 and 4.7, neither Franchisor nor any Affiliate will establish or license another person or entity to establish a Roofing Business using the Marks licensed to Franchisee within the Territory encompassed by the boundaries and with the population base set forth in Attachment A, attached hereto and incorporated herein by reference. Except as otherwise specifically provided in this Agreement, this Agreement does not restrict Franchisor or its Affiliates and does not grant rights to Franchisee to pursue any of Franchisor's or its Affiliates other business concepts other than the Roofing Business.

• 4.2 Franchisee acknowledges that Franchise granted hereunder is non-exclusive and that Franchisor and its Affiliates retain the exclusive right, among others:

  • (a) to use, and to license others to use, the Marks and System for the operation of Roofing Businesses at any location other than in the Territory, regardless of proximity to the Territory;
  • (b) to use, license or franchise the use of trademarks or service marks other than the Marks, whether in alternative channels of distribution or at any location including the Territory, in association with operations that are the same as, similar to or different than Roofing Business;

• (c) to use the Marks and the System in connection with the provision of other services and products or in alternative channels of distribution such as those described in 4.2(d), at any location including the Territory;

• (d) to offer the Services or Products, or grant others the right to offer the Services or Products, whether using the Marks or other trademarks or service marks, through alternative channels of distribution, including without limitation, wholesalers, retail outlets or other distribution outlets (other than Roofing Businesses), or by Internet commerce (e-commerce), mail order or otherwise, whether inside or outside the Territory;

• (e) to use any websites utilizing a domain name incorporating one or more of the words "Bumble Roofing" or similar derivatives thereof.

• 17.8 Upon termination of this Agreement prior to its natural expiration date in accordance with its terms, Franchisee shall pay to Franchisor within thirty (30) days of the date of the termination, as an early termination fee for the premature termination of this Agreement and not as a penalty, an amount equal to twenty-four (24) times the average monthly continuing royalty fees payable to Franchisor over (a) the last twelve (12) months of the Business's active operations, or (b) the entire period the Business has been open for business, whichever is the shorter period.

• 3.2 Franchisor reserves the right, but not the obligation, in Franchisor's sole discretion, to modify Franchisee's Territory at the time Franchisee executes a Successor Franchise Agreement to conform the size of Franchisee's Territory to Franchisor's then-current standards for protected territorial areas that are being granted to new BUMBLE ROOFING® franchisees, for example, if there has been an increase or decrease in the population or number of qualified households within Franchisee's original Territory, or if Franchisor uses different standards or calculations in determining the size of protected territories that are granted to new BUMBLE ROOFING® franchisees.

Source: Item 22 — CONTRACTS (FDD page 53)