EXHIBIT 10.5
EXCLUSIVE DISTRIBUTOR AGREEMENT
THIS AGREEMENT is made this _____ day of _______________, 1996, between
HealthWatch, Inc., a Minnesota corporation having its principal place of
business at 0000 Xxxxx Xxx, Xxxxx, Xxxxxxxxxx 00000 (the "Company") and
______________________________, a ______________________________, having its
principal place of business at _____________________________________________
("Distributor").
WHEREAS, the Company manufactures and distributes medical equipment,
related products and services including those defined in Exhibit A attached
hereto (the "Products"); and
WHEREAS, Distributor has extensive experience in the sale, promotion
and distribution of medical products within the market segment(s) in the
territories set forth in Exhibit B attached hereto (the "Territory");
and
WHEREAS, the Company desires to appoint, and Distributor desires to
distribute, the Products in the Territory upon the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the promises of the parties hereto,
and the mutual benefits to be gained hereby, the parties agree as follows:
1. Appointment. Subject to the terms and conditions below, during the
term of this Agreement, the Company hereby grants to Distributor the exclusive
right to promote and distribute the Products to end users within the market
segment(s) set forth in Exhibit B in the Territory. Distributor hereby accepts
such appointment and agrees to carry out in good faith the duties and
obligations assigned to it by this Agreement. The Company reserves all rights to
distribute and sell the Products outside the Territory and to distribute and
sell goods and/or services other than the Products within the Territory.
Furthermore, Distributor understands that the Company or others under agreement
with the Company may manufacture products similar to the Products for
distribution or sale under names and symbols other than Company Trademarks (as
defined below), and that others may distribute, sell or market these products in
the Territory. The Company reserves the right to distribute, sell or market the
Products to any national organization or company, without regard to whether or
not offices or divisions of such entity may be located in the Territory or
whether or not any such entity distributes, sells or markets the Products in the
Territory. The Company will, at its discretion, compensate Distributor for any
assistance provided in acquiring such customers, including end-user customers of
such national customers. The amount of such compensation shall be set forth on
Exhibit C hereto which may be amended by the Company from time to time, provided
that once established, the amount of such compensation shall not be reduced
without giving Distributor ninety (90) days' prior written notice thereof.
Finally, this Agreement will not restrict or limit the Company from
distributing, selling or marketing the Products to branches or services of the
United States armed forces, or to other governmental agencies who participate in
a contract between the Company and a branch or service of the United States
armed forces, without regard to whether or not offices of such branches,
services or agencies may be located in the Territory.
2. Company Assistance. The Company agrees during the term of this
Agreement to do the following: (a) provide to Distributor a reasonable number of
copies of the Company's sales literature, catalogs, circulars, bulletins, and
other written information for the Products; (b) replace or refurbish samples and
demonstration equipment sold to Distributor, such replacement or refurbishment
to be in accordance with the terms of Exhibit D hereto; (c) at the Company's
discretion, attend national trade shows and conduct advertising or other
marketing or sales promotion activities with respect to the Products; and (d)
subject to Section 1 above, forward to Distributor all inquiries concerning the
Products which originate in the Territory.
3. Distributor's Obligations. Distributor agrees to employ its best
efforts to promote the distribution and sale of the Products within the
Territory. In connection with the distribution of the Products and in addition,
to those duties otherwise set forth in this Agreement, Distributor agrees to do
the following:
(a) Aggressively identify, develop and respond to leads
respecting new customers for the Products and promote new uses or
applications respecting the Products to existing customers;
(b) Conduct regular and continuing sales promotion programs
and activities (including participation at trade shows, conventions,
scientific conferences and similar events) within the Territory and
distribute, within the Territory, the Company's literature respecting
the Products, including sales brochures and other materials provided by
the Company to stimulate demand for the Products;
(c) Respond promptly to requests from the Territory for
quotations, orders and similar inquiries for the Products, and maintain
careful attention to potential customers' product requirements, and to
the extent Distributor engages agents, employees, distributors or other
representatives, Distributor shall be solely responsible for all
obligations and its performance hereunder;
(d) Maintain an adequate business location in the Territory to
penetrate the market for the sales of the Products within the
Territory;
(e) Except to the extent the Company may in its discretion
reimburse Distributor for all or part of Distributor's expenses
incurred in connection with its activities under subsection 3(b) above,
be responsible for all expenses incurred in performing services by or
on behalf of Distributor in connection with the distribution of the
Products in the Territory;
(f) Make only representations with respect to the performance
of the Products as authorized by the Company and advertise the Products
consistent therewith which, at no time, shall be deceptive, misleading
or injurious to the goodwill associated with the Products; and
(g) Comply with all applicable laws and regulations of every
governmental authority having jurisdiction over the handling, use and
sale of the Products, and refrain from any action which will cause the
Company to be found in violation thereof. If necessary to insure
compliance with U.S. Food and Drug Administration tracking
requirements, Distributor shall provide to the Company on a monthly
basis the following information regarding Products Distributor provides
to its customers: (i) Product Model number; (ii) Product Serial number;
(iii) date received from the Company; (iv) customer name, address and
telephone number; (v) date Product shipped to/received by customer;
(vi) name, address and telephone number of end-use facility of the
Product.
4. Orders. The Company shall sell the Products to Distributor for
distribution under this Agreement subject to the following conditions:
(a) Distributor shall not intentionally promote or sell the
Products outside the Territory without the written consent of the
Company;
(b) The Company shall fill orders for purchase of the Products
received from Distributor and shall use its best efforts to supply the
Products to Distributor on a timely basis;
(c) The Company reserves the sole right, without limitation
and upon ten (10) days' notice, to alter or change the design,
performance specifications or construction of the Products subject to
this Agreement;
(d) The Products shall be sold to Distributor on those
additional terms and at the prices or discounts set forth in Exhibit E
attached hereto. The prices or discounts listed in the attached Exhibit
may be amended from time to time by the Company, which will be
effective thirty (30) days after notice of such price changes are
mailed to Distributor;
(e) In connection with delivery of the Products to
Distributor, the Company may take a security interest in Distributor's
inventory of the Products, including requesting the execution of a
security agreement and UCC-1 filing statement, in a form acceptable to
the Company. In addition to any other rights and remedies of the
Company, the Company may withhold delivery of the Products ordered by
Distributor if any amounts or prior orders of the Products placed by
Distributor remain unpaid after the due date thereof;
(f) All orders from Distributor shall be submitted on order
forms supplied or approved by the Company; and
(g) Agents of Distributor shall inspect all Products before
any freight xxxx or delivery sheet is signed. Distributor shall
promptly notify the Company of any defects in the Products delivered to
it.
5. Records and Inspection. Distributor shall keep and preserve complete
and accurate records and books of account for all aspects of Distributor's
business subject to this Agreement and shall make such reports to the Company of
Distributor's activities hereunder as Company may from time to time request. The
Company or its authorized representatives shall be admitted to Distributor's
business premises from time to time during normal business hours to determine
Distributor's compliance with the provisions of this Agreement, including, but
not limited to a review of all the books and records of Distributor relating to
its activities hereunder, together with Distributor's methods of and standard of
care in storing, handling, delivering, and inservicing the Products.
6. Trademarks and Patents. The Products shall bear only the trademarks,
trade names or other marks designated by the Company from time to time (the
"Company Trademarks"). To protect the Company Trademarks, Distributor agrees as
follows:
(a) Distributor shall at all times comply with the reasonable
instructions or requests of the Company with respect to the
application, fixation, manner and styling of the Company's Trademarks,
its packaging and all other documents or promotional materials or
products. Distributor acknowledges that the Company has the sole right,
title and interest in and to the Company's Trademarks, patents,
know-how and all other information of the Company with respect to the
sale and distribution of the Products (the "Company Property");
(b) Distributor agrees to promptly inform the Company upon
assertion of a claim, or institution of proceeding by a third party or
any circumstances giving rise to any claim by the Company against any
third party affecting or otherwise with respect to the Products , the
Company, the Company Trademarks or the Company Property. The Company
shall have complete control of any litigation or proceeding related to
alleged or actual pirating or infringement of the Products, the Company
Property or the Company Trademarks; and
(c) Distributor agrees to use the Company Property and the
Company Trademarks and any goodwill related thereto solely for
advertising and promoting the Products , and that such use and goodwill
shall inure to the benefit of the Company.
7. Confidentiality. Distributor shall treat as confidential and
appropriately safeguard during and after the term of this Agreement, all
information identified as confidential and pertaining to the Products or the
Company, its pricing, business, or assets including but not limited to, any
confidential memorandum, manuals or customer lists provided by the Company. Upon
termination of this Agreement, Distributor shall return to the Company and
refrain after the term from any use of all of the foregoing confidential
materials and samples, manuals, product information, letters and similar
materials supplied to it by the Company.
8. Term and Termination. The initial term of this Agreement shall
commence on the date hereof and shall continue in full force and effect until
June 30, 1999, unless terminated earlier in accordance with the following:
(a) Effective upon ninety (90) days' written notice in the
event either party should breach any material obligation of this
Agreement and the defaulting party fails to cure such default within
such ninety (90)-day period;
(b) Effective immediately in the event of the dissolution,
insolvency, assignment for benefit of creditors or the filing of a
petition in bankruptcy by or against either party hereto;
(c) Effective immediately, at the end of any of the periods
set forth below, in the event that Distributor fails to purchase at
least the number of units of the Products set forth below:
(i) Twenty-five (25) units during the first ninety (90)
days following the effective date hereof;
(ii) An additional seventy-five (75) units by June 30,
1997;
(iii) Three hundred (300) units during the twelve
(12)-month period ending June 30, 1998;
(iv) Five hundred (500) units during the twelve (12)-month
period ending June 30, 1999; and
(v) In the event that the term of this Agreement is
automatically extended as provided herein, six
hundred (600) units during the twelve (12)-month
period ending June 30, 2000, and any additional
twelve (12)-month period thereafter.
Only purchases by Distributor for Distributor's use for
demonstrations or evaluations in the Territory and Distributor's market
segment or for sale to end users residing in the Territory and within
Distributor's market segment shall count toward such minimum purchase
amounts.
(d) During the first one hundred eighty (180) days of this
Agreement, either party may terminate this Agreement for any reason by
giving the other ninety (90) days' written notice thereof. Following
such one hundred eighty (180)-day period, either party may terminate
this Agreement for any reason by giving the other one hundred eighty
(180) days' written notice thereof. In the event this Agreement is
terminated pursuant to this paragraph 8(d), the Company shall, subject
to the terms hereof, pay Distributor a commission equal to five (5)
percent of the amount the Company receives for Products sold, leased or
rented in the Territory, other than sales, leases or rentals of the
Products in the Territory which are not within the exclusive
appointment of Distributor pursuant to Section 1 hereof, during the one
hundred eighty (180) days following such termination.
The term of this Agreement shall, subject to the foregoing, be renewed
for additional twelve (12)-month terms following the initial term unless
terminated by either party by written notice given at least ninety (90) days
prior to the end of the initial or any renewal term. Termination of this
Agreement shall have no effect on any obligation accrued prior to the date of
termination; provided, however, the Company may, in its sole discretion,
condition any acceptance of an order for Products received by it from
Distributor after delivery of notice of termination upon prepayment in cash or
by irrevocable letter of credit or other similar credit instrument acceptable to
the Company.
Upon termination, Distributor shall discontinue the use of the Company
Trademarks and Company Property and shall thereafter cease holding itself out as
an authorized distributor of the Company's Products. Within twenty (20) days of
any termination by the Company pursuant to paragraph 8(a) or 8(d) hereof, the
Company shall repurchase any and all of the Products that Distributor designates
which are new, unused and unencumbered and which are in the Company's then
current catalog. The Company shall pay Distributor the price it originally
charged for the Products, less any credits issued and the cost of freight to
Vista, California or such other destination as the Company may designate.
Termination of this Agreement will not release Distributor of any obligations
arising prior to the effective date of termination, including but not limited to
any obligation to pay money or perform services as provided in this Agreement.
To the extent that any provision of this Agreement with respect to termination
provides for periods of notice and cure less than those required by applicable
law, such provisions shall, to the extent not in accordance with such law, be
superseded by such law.
9. Relationship. The relationship of the parties hereto shall be and at
all times remain independent. Distributor is not an agent, franchisee, partner
or joint venturer of the Company. Distributor is not authorized to enter into or
execute any contract, order, or other commitment and shall have no authority to
otherwise obligate the Company.
10. Warranties. The Company makes no warranties, express or implied, to
Distributor as to the Products, except as set forth in Exhibit F attached
hereto, which may be amended from time to time by the Company, which amendment
will be effective thirty (30) days after notice of such warranty changes are
mailed to Distributor. Distributor represents and agrees that it will make all
statements, representations and warranties with respect to the Products in
strict compliance with Exhibit F, and shall not deviate therefrom except upon
written authorization of the Company. With respect to claims by a customer of
the Company based upon a defect in the Products, the sole and exclusive remedy
of the customer, as well as the sole and exclusive liability of the Company,
shall be limited to repair or replacement, at the Company's sole option, of any
Products which are defective in material workmanship and returned to the Company
in accordance with the Company's applicable standard service rules provided to
Distributor from time to time. In no event shall the Company be liable for
direct, special, incidental or consequential damages or losses or loss of
profits as a result thereof.
The Company assumes no duties or obligations beyond those specified in
this Agreement or the Warranty Agreement attached hereto as Exhibit F.
THE ABOVE-MENTIONED WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY ARISING FROM COURSE OF DEALING
OR USAGE OF TRADE.
Warranty repair service for the Products sold to purchasers within the
Territory shall be performed by the Company in accordance with the Company's
Warranty Policy as in effect as of the date upon which the subject Product is
sold. Distributor acknowledges receipt of a copy of the Company's warranty
policy in effect as of the date of this Agreement.
11. Covenant Not to Compete. In consideration of entering into this
Agreement, Distributor agrees that without the prior written consent of the
Company or as set forth in Exhibit B hereto that during the term of this
Agreement neither Distributor nor any of its related parties or affiliates
shall, directly or indirectly, anywhere in the Territory, sell or market any
product which is similar to or competitive with the Products and that during the
term of this Agreement and for one (1) year thereafter, neither Distributor nor
any of its shareholders, partners, officers, directors, employees or affiliates
shall directly or indirectly, anywhere in the Territory, own, manage, control,
be employed by, or act as a consultant to any person or entity engaged in the
business of designing, producing or manufacturing any product which is similar
to or competitive with the Products.
12. Indemnification. Distributor agrees to indemnify the Company for,
and to hold it harmless against, any loss, liability or expense, including costs
and expenses of investigating any claim and attorneys' fees incurred in
litigation, arising out of or in connection with any acts of Distributor outside
the scope of the acts of Distributor authorized by the Company in this
Agreement. Distributor also agrees to discharge and to hold the Company harmless
on account of any taxes or governmental charges of the government or territory
which may be imposed upon the Company with respect to the execution of this
Agreement or any transactions hereunder or any income earned or payments
received by Distributor hereunder.
13. Notices. All notices, correspondence, and payments shall be in
writing and shall be deemed effective three (3) days after having been deposited
in the United States mail, certified or registered, postage prepaid, and
addressed to the other party at the address set forth above.
14. Miscellaneous. This Agreement, together with the Exhibits attached
hereto, constitute the entire agreement between the parties and shall not be
amended, except by a written instrument signed by both parties, provided that,
as indicated herein, Exhibits C, E and F may be amended by the Company. This
Agreement is personal to Distributor and shall not be assigned by it without the
prior written consent of the Company. In the event of any dispute between the
parties under or relating to this Agreement, such dispute shall be submitted to
and settled by arbitration in Vista, California, in accordance with the rules
and regulations of the American Arbitration Association then in effect, with one
arbitrator selected from the panel of arbitrators of that Association, in
accordance with its Commercial Arbitration Rules. The arbitrator shall have the
right and authority to determine how his or her award or decision as to each
issue and matter in dispute may be implemented or enforced. Any decision or
award shall be final and conclusive on the parties. The parties hereto consent
to the application by any party and interest to any court of competent
jurisdiction for confirmation or enforcement of such award. The party against
whom a decision is made shall pay the fees of the American Arbitration
Association.
15. Governing Law; Severability. This Agreement shall be governed by
and enforced in accordance with the laws of the State of California. If any
provision or term of this Agreement is held to be unlawful or unenforceable, the
remainder of the provision shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written.
DISTRIBUTOR: THE COMPANY:
HEALTHWATCH, INC.
By By
Its Its
EXHIBIT A
PRODUCTS
PACER Model 100, including any improvements or enhancements thereto,
and related ancillary products.
PACER Model 000 Xxxxx Xxxx and Power Supply
PACER Model 100 Battery Pack
EXHIBIT B
TERRITORY (BY ZIP CODES)
DISTRIBUTOR'S MARKET SEGMENT(S)
COMPETING PRODUCTS OFFERED BY DISTRIBUTOR
EXHIBIT C
TERMS RESPECTING SALES BY NATIONAL COMPANIES IN TERRITORY
Company Payment to Distributor (1)
----------------------------------- --------------------------------------
Universal Hospital Services, Inc.
All other national accounts (2)
-------------------------
(1) Distributor shall be paid a commission on all sales, leases or rentals
of the Products in the Territory within Distributor's market segment(s)
by the national company equal to the stated percentage of the amount
earned by, net of all credits, discounts or returns, and paid to the
Company by the national company.
(2) As of the date of this Agreement, the Company has no national
accounts/agreements other than Universal Hospital Services, Inc. The
Company will advise Distributor of the names of any additional national
accounts/agreements within fifteen (15) days of the commencement of any
such account/agreement. The commission to be paid with respect to any
such additional accounts/agreements will be __________ percent until,
and unless, amended by the Company pursuant to Section 1 of the
Agreement.
EXHIBIT D
POLICY REGARDING SAMPLES AND DEMONSTRATION EQUIPMENT
The Company shall refurbish/replace PACER Model 100 units used by
Distributor for demonstrations, evaluations or as loaners in accordance with the
following policy, provided that the units have been registered with the Company:
1. Registered Products may be returned to the Company once to be
refurbished/replaced by the Company. Distributor will be required to
pay only the cost of delivering the Products to the Company and the
Company's cost of delivering the refurbished/replaced Products to
Distributor.
2. Products to be put into Distributor's inventory for resale, shall be
replaced with new units.
3. Products to be used for demonstration units or as loaners shall be
refurbished or replaced as determined by the Company.
4. The maximum number of Distributor's Products which may be included
in this program during the period from the date of this Agreement until
June 30, 1997 and in any twelve (12)-month period thereafter shall be
limited to the number of units equal to twenty-five (25) percent of the
number of units of the Products purchased by Distributor prior to June
30, 1997.
EXHIBIT E
PRICE OF PRODUCTS
Product Price to Distributor (1) Suggested Retail Price
------- ------------------------ ----------------------
PACER Model 100 (2)
Swing Lok
Power Supply
Battery Pack
--------------------
(1) F.O.B. Company warehouse. Payment terms are two (2) percent discount if
paid in full within ten (10) days of date of invoice; net thirty (30)
days from date of invoice. Distributor shall have the right to inspect
all Products and to reject Products which are defective or damaged.
Defective Products rejected by Distributor shall be returned to the
Company at the Company's expense, provided that Distributor has
received prior authorization for the return from the Company.
Distributor shall immediately notify the Company with respect to any
invoice questions or discrepancies.
(2) Includes one (1) Swing Lok and Power Supply.
EXHIBIT F
WARRANTY
