What specific rights and obligations does the Bumble Roofing License grant to the franchisee?

WHEREAS, Franchisor and its affiliates have developed a comprehensive system for the operation of a business which offers and sells roofing installation and repairs, and related products and services, for residential and commercial customers.

WHEREAS, Roofing Businesses are operated under a unique business system, including valuable know-how, information, Trade Secrets, Confidential Information, methods, Manual, standards, designs, methods of trademark usage, copyrights, sources and specifications, confidential electronic and other communications, methods of Internet usage, marketing programs, and research and development (the "System").

WHEREAS, the distinguishing characteristics of the System include the trademark "BUMBLE ROOFING" and other trademarks and trade names, confidential operating procedures, confidential Manual, standards and specifications for equipment, services and products, method of Internet usage, methods of service, management and marketing programs and sales techniques and strategies. All of these distinguishing characteristics may be changed, improved, and further developed by Franchisor from time to time. They are Franchisor's Confidential Information and Trade Secrets and are designated by and identified with the Marks described in this Agreement.

WHEREAS, Franchisor's affiliate, Lynx Franchising Intellectual Property, LLC ("Lynx IP") is the owner of certain trademarks and service marks associated with or related to the System, and which represent the System's high standards of quality, service and customer satisfaction, and Lynx IP has granted to Franchisor the right to use and sublicense others to use those trademarks and service marks.

WHEREAS, Franchisee acknowledges the benefits to be derived from being identified with the System, and also recognizes the value of the Marks and the continued uniformity of image to Franchisee, Franchisor, and other franchisees of Franchisor.

WHEREAS, Franchisee acknowledges the importance to the System of Franchisor's high and uniform standards of quality, service and customer satisfaction, and further recognizes the necessity of opening and operating a Roofing Business in conformity with the System, whether such Roofing Business is located in Franchisee's home or an outside leased or owned location.

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:

• 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;

• 8.7 Franchisee must nominate a Designated Business Manager having required experience who shall have direct responsibility for all operations of the Business.

• 11.1 Franchisee acknowledges that local marketing, promotion and advertising are required to advise the public of the Business. During the first twelve (12) months of operations, Franchisee will spend a minimum of $65,000 on promotional advertising within the Territory ("Individual Advertising Investment"), plus an additional $15,000 for each additional contiguous Territory. Franchisee may not advertise outside its Territory without Franchisor's approval, which may be granted or withheld in Franchisor's discretion. After the first year of operations, Franchisee must spend each year the greater of (a) $65,000 plus an additional $15,000 for each additional contiguous Territory, or (b) 5% of the prior year's Gross Revenues.

• 11.2 During the Initial Term and any Interim Period, Franchisee shall furnish each month and/or year, as Franchisor prescribes, and upon Franchisor's request, to Franchisor an accounting of Franchisee's previous month's or year's Individual Advertising Investment expenditures on a form approved by Franchisor. Franchisor has the right, but not the obligation, once Franchisee commences operations, to collect up to the minimum required Individual Advertising Investment from Franchisee and administer it on marketing and advertising investments in Franchisee's Territory on Franchisee's behalf.

• 8.5 Franchisee will not be required to offer or sell new Services or Products as set out in Section 8.2(e) if Franchisee demonstrates to Franchisor's reasonable satisfaction that:

• 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.

Franchisee acknowledges and agrees that such early termination fee is a reasonable approximation of the damages Franchisor will incur resulting from the premature termination of the Franchise Agreement as a result of breach by Franchisee, is appropriate because actual damages incurred by Franchisor will be difficult or impossible to ascertain, is not a penalty, and shall not affect Franchisor's right to, and is not in lieu of, any other payment or remedy, damages or relief to Franchisor.

Source: Item 22 — CONTRACTS (FDD page 53)