Distribution Agreement - MedStrong International Corp. and Medical Data Network
DISTRIBUTION AGREEMENT, DATED DECEMBER 1, 2002, BETWEEN THE COMPANY
AND MEDICAL DATA NETWORK
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement"), effective as of the 1st day of
December, 2002, is entered into by and between MEDSTRONG INTERNATIONAL
CORPORATION ("MIC"), a Delaware corporation, with its principal office located
at 500 Silver Spur Road, Rancho Palos Verdes, California 90274, and MEDICAL DATA
NETWORK ("Distributor"), a Florida corporation, with its principal office
located at 2300 Corporate Boulevard, Suite 214, Boca Raton, Florida 33431.
WITNESSETH:
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WHEREAS, MIC is a member-based provider of healthcare related services to
consumers;
WHEREAS, among the services provided by MIC is a membership program that
allows individuals to store and update their medical records online for
confidential and immediate future access (the "MIC Program");
WHEREAS, Distributor desires to make available to its customers a private
label program that will allow its members to access the MIC Program; and
WHEREAS, MIC desires to work with Distributor to create and administer such
a private label program;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. THE PRIVATE LABEL PROGRAM:
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MIC will work with Distributor to create a private label program (the
"PLP") pursuant to which PLP members will have access to the MIC Program so
that they can store and update their individual medical records online for
confidential and immediate access.
2. DUTIES OF DISTRIBUTOR:
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(a) Distributor will be solely responsible for the development and
maintenance of any website through which Distributor advertises and/or
markets the PLP.
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(b) Distributor will be solely responsible for the design, production and
distribution of any advertising or other marketing materials related
to the PLP.
(c) Distributor will make no representation or warranty regarding the MIC
Program including, but not limited to, its capabilities or
limitations, unless MIC has either (i) made such representation or
warranty to Distributor in writing or (ii) approved such
representation or warranty in writing.
(d) Distributor will make no reference to MIC or use any trade name or
trademark owned by MIC, either electronically or in printed materials,
without the prior written approval of MIC.
(e) Distributor will be solely responsible for registering all PLP
memberships (including renewals) and providing PLP members with any
membership materials as distributor desires.
(f) Distributor will be solely responsible for soliciting renewals of all
PLP memberships.
3. DUTIES OF MIC:
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(a) MIC will be solely responsible for maintaining the hardware and
software necessary to support the MIC program in a protected
environment.
(b) MIC will make all upgrades and improvements to the MIC program
available to distributor unless any such upgrade or improvement is
being made specifically to address the unique requirements of a
particular MIC client.
(c) MIC shall provide distributor with such technical assistance as may be
required, in MIC'S sole reasonable judgment, to facilitate the
electronic interface between the systems of MIC and distributor.
4. PAYMENT:
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(a) For each new plp membership sold, distributor will pay MIC the sum of
one dollar and fifty cents ($1.50).
(b) For each plp membership renewed, distributor will pay MIC in
accordance with the following schedule:
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(i) For each of the first 100,000 plp memberships renewed in a given
year, distributor will pay MIC the sum of five dollars ($5.00);
(ii) For each of the second 100,000 plp memberships renewed in a given
year, distributor will pay MIC the sum of three dollars ($3.00);
and
(iii)For each plp membership renewed in a given year thereafter,
distributor will pay MIC the sum of two dollars ($2.00).
(c) For all PLP memberships sold or renewed in a given calendar month,
payment for such memberships and renewals shall be made to MIC not
later than the fifteenth (15th) day of the immediately succeeding
month. It is understood and agreed by both parties that all such
payments shall be made net of cancellations.
(d) MIC has agreed to pay Distributor a commission on all PLP memberships
sold or renewed during a calendar year provided that certain volume
levels are achieved. If, for any given calendar year, the net amount
paid to MIC by Distributor for PLP membership sales and renewals (the
"Net Payment") is at least $1,000,000 but less than $3,000,000, MIC
will pay Distributor a commission equal to two percent (2.0%) of such
Net Payment. If such Net Payment is at least $3,000,000 but less than
$5,000,000, MIC will pay Distributor a commission equal to two and
one-half percent (2.5%) of such Net Payment. If such Net Payment
equals or exceeds $5,000,000, MIC will pay Distributor a commission
equal to five percent (5.0%) of such Net Payment. Any commission
payment earned with respect to a particular calendar year will be paid
to Distributor not later than March 1st of the immediately succeeding
year.
(e) MIC understands that, from time to time, Distributor may desire to
offer free trial PLP memberships for a period of time not to exceed
three (3) months. MIC agrees to consider all requests for such trial
memberships in good faith. No such trial membership may be offered
unless agreed to in writing by both parties.
5. SALES TERRITORY; EXCLUSIVITY:
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(a) Distributor shall have the right to offer PLP memberships for sale
throughout the United States. Except as set forth below, this right
shall not limit the ability of MIC to offer the MIC Program for sale
to individuals directly or through other distributors and
representatives. Additional territories to be mutually agreed.
(b) Notwithstanding paragraph (a) above, MIC acknowledges that primary
care physicians constitute Distributor's target market. From the date
of this Agreement through and including December 31, 2003, MIC agrees
that (i) it shall not offer any product competitive with PLP to
primary care physicians at a price less than that charged by
Distributor for a PLP membership, and (ii) it shall not provide its
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products to any other distributor or representative that directly
solicits primary care physicians. For each succeeding calendar year,
the exclusivity granted by this paragraph (b) shall remain in force
and effect if and only if Distributor has produced the following
volume of sales and/or renewals (net of cancellations) for the
immediately preceding calendar year:
(i) Exclusivity in the second year: 75,000 memberships in the first year
(ii) Exclusivity in the third year: 180,000 memberships in the second year
(iii) Exclusivity in all subsequent years: 350,000 memberships in prior year
6. COVENANTS NOT TO COMPETE:
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(a) MIC will not directly solicit PLP members' customer lists and data is
property of Distributor.
(b) During the term of this Agreement, and for a period of one (1) year
thereafter, neither party shall directly solicit or hire any current
or past employee contractor of the other with an offer of employment.
7. TERM AND TERMINATION:
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(a) The initial term ("Initial Term") of this Agreement shall run from
December 1, 2002 through December 1, 2005. Unless otherwise terminated
pursuant to the terms hereof, this Agreement shall automatically renew
for additional one-year periods.
(b) This agreement may be terminated with one hundred-twenty (120) days
written notice as follows:
(i) by mutual written agreement of the parties;
(ii) If a party commits a material breach of this Agreement, and such
breach is not cured for a period of 30 days after written notice
is given to the breaching party specifying the nature of the
breach and requesting that it be cured within the thirty (30) day
period to the satisfaction of the non-breaching party;
(iii)In the event any party files bankruptcy, becomes insolvent, has
a receiver of its assets appointed, make a general assignment for
the benefit of creditors, or has any procedure commenced for
reorganization of its affairs.
(c) Upon termination of this Agreement by either party, all obligations
hereunder shall cease, except as follows:
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(i) MIC will provide the services contracted for hereunder until such
time as all PLP memberships then in existence expire; and
(ii) Each party shall be entitled to receive any and all compensation
that became due the party prior to such termination.
8. SOFTWARE:
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(a) MIC acknowledges that its inability to support plp would have an
adverse effect on distributor's business. therefore, MIC hereby grants
distributor a non-transferable and non-exclusive license to possess
and use the software necessary to support the MIC program (the
"software") in strict accordance with the following terms and
conditions:
(i) MIC must have committed a termination event as described in
section 7(c)(ii) or (iii) above;
(ii) MIC must have failed to provide distributor with support for the
plp as contracted for hereunder for a period of not less that ten
(10) consecutive business days; and
(iii)The failure of MIC to provide the support described in clause
(ii) above must result from a cause other than force majeure.
(iv) Distributor to provide, at no charge, back-up server hosting for
MIC.
Distributor shall not sell, lease, assign, transfer, sublicense,
modify, translate, duplicate, reproduce, copy or otherwise disseminate
all or any portion of the software, or any information pertaining
thereto, to any other party without the prior written consent of MIC.
Any use and/or dissemination of the software not expressly permitted
hereunder shall constitute a breach of this agreement and distributor
shall be subject to any and all legal remedies available to MIC.
(b) In the event that this agreement shall terminate for any reason
whatsoever, distributor shall be entitled to purchase a permanent,
non-transferable, non-exclusive license to possess and use the
software for its own business purposes in consideration for the
following payments to MIC:
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(i) Annual payments of fifty thousand dollars ($50,000) for a period
of four (4) years; such payments to be made within thirty (30)
days of the effective date of such termination; and
(c) For so long a distributor shall have a license to use and possess the
software, distributor shall have the right to make such modifications,
upgrades and other improvements to the software in its possession as
distributor shall desire at its sole cost and expense. distributor
shall make such modifications, upgrades and other improvements, if
any, available to mic for its general use at no additional cost or
expense to MIC.
9. ACQUISITION OF EQUITY INTEREST:
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Distributor's interest in acquiring equity interest in MIC to be
negotiated at a future date.
10. MIC WARRANTS:
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At the time of its initial offering, MIC sold shares of its common
stock with certain warrants attached (the "Warrants"). MIC can require
that these Warrants be exercised upon the satisfaction of certain
conditions and such exercise will generate additional equity for MIC.
As an additional inducement for Distributor to enter into this
Agreement and to assist Distributor in recovering a portion of its
start-up costs, MIC agrees to pay Distributor the sum of Two Hundred
Fifty Thousand Dollars ($250,000) in the event the Warrants are
exercised at any time during the first 270 days of the term of this
Agreement. If the Warrants are exercised at any time during the term
of this Agreement after the first 270 days have elapsed, MIC shall pay
Distributor the sum of One Hundred Thousand Dollars ($100,000). If (i)
the Warrants are never exercised or (ii) this Agreement has terminated
prior to any such exercise, MIC shall make no additional payment to
Distributor pursuant to this Section 10.
11. INDEMNIFICATION:
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Distributor agrees to indemnify and hold harmless MIC, its officers,
employees, affiliates and agents, from any and all claims, lawsuits or
damages, (including any punitive or extra contractual damages) or
other liabilities resulting from (i) any breach of this Agreement by
Distributor, or (ii) any willful misconduct or gross negligence
attributable to the acts or omissions of Distributor, its affiliates,
or any of its officers, employees or representatives.
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MIC agrees to indemnify and hold harmless Distributor, its officers,
employees, affiliates, and agents from any and all claims, lawsuits, damages
(including any punitive or extra contractual damages) or other liabilities
resulting from (i) any breach of this Agreement by MIC, or (ii) any willful
misconduct or gross negligence attributable to the acts or omissions of MIC, its
affiliates, or any of its officers, employees or representatives.
12. INFORMATION AND REPORTS:
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(a) Each payment made to MIC pursuant to Section 4 hereof shall be
accompanied by a report prepared by Distributor, in a format
reasonably acceptable to MIC, containing such information as MIC shall
reasonably request with respect to the sale and renewal of PLP
memberships for the corresponding month.
(b) Each payment made to Distributor pursuant to Section 4(d) hereof shall
be accompanied by a report prepared by MIC, in a format mutually
agreed by both parties, containing such information as Distributor
shall reasonably request with respect to earned commission.
13. NOTICES:
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Any and all notices required to be given under this Agreement or which
either of the parties may desire to give shall be in writing and shall
be served by (i) registered or certified mail, postage prepaid, return
receipt requested, or (ii) any recognized national or international
overnight delivery service to the addresses first set forth below.
Medstrong International Corporation Medical Data Network
500 Silver Spur Road 2300 Corporate Boulevard, Suite 214
Rancho Palos Verdes, California 90274 Boca Raton, Florida 33431
Attention: Jerry R. Farrar Attention: Stuart Graff
14. ASSIGNMENT:
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This Agreement shall not be assignable by either party without the
express written consent of the other party, which consent may denied
at the sole discretion of such other party.
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15. GOVERNING LAW:
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The laws of the State of California shall govern this Agreement. The
section headings are for purposes of convenience only, and shall not
be deemed to constitute a part of this Agreement or to affect the
meaning of this Agreement in any way.
IN WITNESS WHEREOF, the duly authorized representatives of the parties
hereto have executed this Agreement, effective as of the date first set forth
above.
MEDSTRONG INTERNATIONAL CORPORATION
By:
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Name:
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Title:
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MEDICAL DATA NETWORK
By:
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Name:
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Title:
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ADDENDUM A
1. Title of the agreement is modified to read:
WHOLESALE PRIVATE LABEL AGREEMENT
2. In the first Paragraph, the phase "THIS DISTRIBUTION AGREEMENT" is
replaced with:
THIS WHOLESALE PRIVATE LABEL AGREEMENT
3. Section 1 is appended as follows:
Distributor is utilizing MIC's system on a wholesale, private label
basis. Distributor is not acting as an agent on behalf of MIC.
Distributor's Customers shall remain the sole property of Distributor
under all circumstances. No solicitations, marketing material, or any
other use of Distributor's customer base or customer list may be done
under any circumstances without express written permission of
Distributor.
4. In Section 7(b), it is understood that items (i), (ii), (iii) are
separated by "OR" and that any one of the conditions is sufficient to
satisfy 7(b).
5. Item 8.(a)(iv) is removed.
6. All references to Medical Data Network are changed to MD Data
Networks, LLC.
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AMENDMENT
This document constitutes an Amendment to the Distribution Agreement dated
December 1, 2002 by and between MedStrong International Corporation ("MIC") and
MD Data Networks LLC ("Distributor").
The title of the December 1, 2002 Distribution Agreement is hereby modified to
read: Wholesale License Agreement.
In the first paragraph, the phrase "THIS DISTRIBUTION AGREEMENT" is hereby
replaced with "THIS WHOLESALE LICENSE AGREEMENT". Distributor shall hereinafter
be known as Licensee.
Section 1 is appended as follows: Licensee is utilizing MIC's system on a
license basis. Licensee is not acting as an agent on behalf of MIC. Licensee's
customers shall remain the sole property of Licensee. No solicitations,
marketing material, or any other use of Licensee's customer base or customer
list may be done under any circumstances without the express written consent of
Licensee
Section 4, PAYMENT, is appended as follows: The price to be paid by Licensee to
MIC is modified in Section 4a, b (i) (ii) (iii) to be one dollar ($1.00) for
each plan sold new, and one dollar ($1.00) for each renewal plan sold.
Section 4 (d), Volume Commission, shall hereby be made null and void.
Software enhancements:
Any improvements to the software systems will be disclosed to MIC and
MIC can choose to use or not to use said enhancements under a license
arrangement from Licensee. Such license agreement granted by Licensee will not
be unreasonably withheld, and not unreasonably priced to MedStrong. The use and
price to be mutually agreed upon by MIC and Licensee.
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Licensee can choose to host and/or back up MIC's servers at their own expense.
MedStrong International Corporation
By:
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Jerry R. Farrar, President/CEO
Date:
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MD Data Networks, LLC
By:
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Name:
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Title:
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Date:
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