Sales Agency Agreement: Definition & Sample

A sales agency agreement is a legal agreement between a company and an agency the company hires to perform sales services. The agreement defines the rights and obligations of both the company and the sales agency. Sometimes this agreement is called a selling agency agreement.

When putting together a sales agency agreement, companies consider the sales agency an independent contractor and not an employee of the company, so different rules, and regulations govern their relationship. Typically sales agencies will sell goods on behalf of the company in exchange for a commission on those sales.

Common Sections in Sales Agency Agreements

Below is a list of common sections included in Sales Agency Agreements. These sections are linked to the below sample agreement for you to explore.

Sales Agency Agreement Sample

ALPHATEC SPINE, INC. SALES AGENCY AGREEMENT

This Sales Agency Agreement (the “Agreement”) is between Alphatec Spine, Inc., a California corporation (the “Company”) and SS Fusion Medical, Inc. (Employer Identification Number # [***]) (hereinafter referred to as “Sales Agent”) is made as of January 2, 2008 (the “Effective Date”).

WHEREAS Sales Agent has established and maintained a business office staffed with professional sales personnel in the Territory (as hereinafter defined); and

WHEREAS the Company wishes to retain Sales Agent to sell its Products (as hereinafter defined) and Sales Agent wishes to act as the Company’s exclusive Sales Agent within the Territory.

NOW THEREFORE, in consideration of the mutual covenants and provisions herein contained, and other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the parties hereto the parties agree as follows:

Subject to the provisions of the Agreement, the Company hereby appoints Sales Agent and Sales Agent hereby accepts appointment as the Sales Agent for the products described in Exhibit A (hereinafter the “Products”) with exclusive responsibility for the geographical areas listed on Exhibit B (hereinafter the “Territory”). Sales Agent shall have the right to solicit orders for Products only from persons and entities having their places of business within the Territory that agree to use the Products so ordered within the Territory. Sales agent shall be the exclusive agent for the Company for sale of Products in the Territory for the term of this Agreement. Except as specifically provided herein to the contrary, any sale of Products in the Territory shall be credited as sales made by Sales Agent and Sales Agent shall be entitled to the commission provided herein.

In addition to any and all covenants, duties and obligations of Sales Agent set forth elsewhere in this Agreement, Sales Agent agrees:

2.1. To use its best efforts to promote the sale of the Products throughout the Territory;

2.2. To use its best efforts to meet the sales quotas set forth on Exhibit D ;

2.3. To bear all costs and liabilities relating to the conduct of its business, including but not limited to the cost and expense of providing and maintaining its place of business, the wages of its employees, the payment of commissions or other compensation to its agents or independent contractors, and its expenses incurred for or in connection with its performance under or breach of this Agreement;

2.4. To refrain from making any representations or warranties in respect of the Products, except: (i) those representations and warranties authorized in writing by the Company, in the form of brochures, memorandums, press releases, advertisements, specification sheets, or correspondences, and (ii) verbal technical assistance that Sales Agent received from the Company which was subsequently confirmed in writing by Sales Agent;

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2.5. To promote the Products in strict adherence to (i) regulatory and professional requirements, and all applicable laws, rules, guidelines and regulations including, but not limited to, the Federal Food, Drug and Cosmetic Act of 1938, as amended, and the regulations promulgated thereunder (the “Act”); and (ii) those portions of the Company’s Code of Conduct that address interactions with healthcare professionals (available at http://atec.client. shareholder.com/documentdisplay.cfm?DocumentID=900) (the “Code of Conduct”), and to make such certifications in writing that may be reasonably requested by the Company as evidence of such compliance;

2.6. That it has read and understands the Code of Conduct; and that it acknowledges that any violation of the Code of Conduct by it or any of its officers, employees or agents shall constitute a material breach of this Agreement;

2.7. To render reasonable assistance to the Company, at the Company’s request, in the defense of any and all Liabilities (as defined below);

2.8. To refrain from disparaging the Company and its subsidiaries or its Products, or from otherwise injuring the reputation and good standing of the Company and its subsidiaries;

2.9. To not, directly or indirectly, solicit any sale of the Products or establish any branch or distribution depot for the sale of the Products outside the Territory without the prior written approval of the Company;

2.10. Take full responsibility for the actions of any Sales Agent Indemnitee (as defined below);

2.11. To assist the Company, on request, in ascertaining the credit standing of and in collecting receivables from any customer;

2.12. To attend, at its own expense, all sales meetings, training sessions, seminars, trade shows and the like for which the Company reasonably requests attendance by Sales Agent;

2.13. To immediately notify the Company prior to any physician, hospital or any other health care supplier or provider who is in a position to refer or recommend patients to the Company (a “Health Care Provider”) acquiring an equity interest in the Sales Agent, and upon such instance to provide in writing a listing, by percentage of equity interest owned, of all Health Care Providers that have an equity interest in the Sales Agent at the time of each disclosure. A breach of this Section 2.13 shall constitute a material breach of this Agreement;

2.14. To deliver all Products using documented procedures for handling, storage, packing, preservation, and delivery of such Products;

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2.15. To promptly notify the Company in writing of the following: (i) any serious regulatory action relating to the Products; (ii) any material complaints regarding the Products or the related instrumentation; or (iii) any adverse incidents that may be subject to FDA’s (as hereinafter defined) Medical Device Reporting regulation; and

2.16. To comply with recalls or general corrective actions initiated by the Company.

In order to assist Sales Agent in fostering the promotion and sale of the Company’s Products, the Company agrees:

3.1. To reasonably assist Sales Agent with, and provide to Sales Agent reasonable quantities of, advertising material, sales promotion aids, displays, catalogues, literature and convention assistance;

3.2. To provide Sales Agent with new Product information and reasonably assist Sales Agent in promotional activities;

3.3. To provide Sales Agent with reasonable technical assistance, through sales seminars, meetings and training programs; and

3.4. To use commercially reasonable efforts to make Products available to the Sales Agent to be used by customers.

4.1. Sales Agent will make quotations in respect to the sales of the Products only in accordance with the Company’s then current policies and procedures and on prices established by the Company and the Company’s terms and conditions of sale, including the terms of payment specified by the Company. The Sales Agent will assist the Company in obtaining the appropriate documentation needed for customers (credit reports, sales tax exemptions, etc.).

4.2. Sales orders generated by Sales Agent will be submitted directly to the Company by the customer and such sales orders shall be paid by Company if Sales Agent makes a sale and even if the Company unilaterally decides to reject the customer; provided that if the rejection of the customer occurs in accordance with this Agreement, the Company shall not be obligated to pay the Sales Agent for such sale. If Sales Agent receives any order for Products, it will promptly forward it to the Company. The Company will establish and promulgate the criteria for sales orders to be generated by Sales Agent and Sales Agent will use its best efforts to secure sales orders that meet the Company’s criteria. The Company will have the right at any time to reject any order in whole or in part for good cause. Good cause shall include the following: (i) the sales order fails to meet the Company’s criteria, (ii) the customer fails to meet the Company’s credit criteria, (iii) lack of Product availability due to no fault of the Company, or (iv) poor payment history by the customer. If the Company rejects a sales order generated by Sales Agent without good cause, then Company shall pay to Sales Agent full commission on such order. If the Company reasonably rejects any sales order generated by Sales Agent, then Sales Agent

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shall be notified and given the opportunity to inform its customer or potential customer of said rejection in an attempt to preserve Sales Agent’s business goodwill. On request of the Company, Sales Agent will not supply Product to customers placed on credit hold until released by the Company.

4.3. The Company will bill the customer for the purchased Products. Sales Agent will not bill customers for the Product unless expressly requested to do so by the Company in writing. Payments against purchase orders are to be made directly to the Company, without intervention by Sales Agent unless expressly requested in writing by the Company in each instance. If Sales Agent receives any payment from a customer, then Sales Agent will immediately forward the entire amount of such payment to the Company.

4.4. The Company will have the right, in its sole discretion, to issue credits, make discounts and allowances, and/or accept returns of the Products. Sales Agent in an effort to be competitive with the orthopedic market or to develop new customers will have the right to request the Company to issue credits, make discounts and allowances and/or accept returns of the Products. The Company shall use its sole discretion in determining whether to grant Sales Agent’s request. In the event that the Company issue credits, make discounts and allowances and/or accept returns of the Products, the Company shall be entitled to unilaterally reduce the commission rate paid to the Sales Agent with respect to all sales of Products that are subject to a credit, discount, allowance or return. The Company shall indicate such reduction in commission rate by sending written or electronic notice of such reduction to the Sales Agent. All reductions shall be effective as of the date that such notice of commission reduction was delivered to the Sales Agent.

5.1. Except as set forth in this Agreement, during the term of this Agreement the Company will pay to Sales Agent a commission at the rate specified in Exhibit C on the Company’s Net Sales (as defined below) of Products in the Territory that were generated by the Sales Agent in accordance with this Agreement. For purposes of this Agreement, the terms “Net Sales” shall mean, for any period, the gross amount properly set forth on a purchase order received by the Company from the customer in connection with such customer’s purchase of Product, less deductions for: (i) normal and customary quantity and/or cash discounts, including, without limitation, those granted on account of price adjustments, rebates actually allowed and taken, administrative or other fees or reimbursements or similar payments to buying groups, pharmacy benefit management organizations, health care insurance carriers or other institutions, fees paid to other distributors and chargebacks; (ii) customs or excise duties or other duties directly imposed and related to the sales making up the gross purchase order amount; (iii) any rebates or similar payments made with respect to sales paid for by any governmental or regulatory authority such as, by way of illustration and not in limitation of the parties’ rights hereunder, Federal or state Medicaid, Medicare or similar state program or equivalent foreign governmental program; (iv) sales and other taxes and duties directly related to the sale of Products, to the extent that such items are included in the gross purchase order price (but not including taxes assessed against the income derived from such sale); and (v) any such amounts included in the purchase order that are not collected by the Company which are over 90 days past due and are recorded on the books of the Company as bad debt in accordance with generally accepted accounting principles; provided, if the amount due from such purchase order is subsequently paid,

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then Sales Agent shall be paid commission on the amount ultimately received by the Company (less any expenses incurred by the Company in collecting such amount). For purposes of determining commissions, the Product shall be deemed to be sold when a properly executed purchase order is received by the Company from the customer in connection with such sale, and a “sale” shall not include transfers or dispositions for charitable, promotional, pre-clinical, clinical, regulatory, or governmental purposes.

5.2. All commission amounts payable to the Sales Agent shall be subject to the Company’s then-current Distribution Shipping Policy, which policy shall set forth that certain shipping charges that are not paid by customer shall reduce the commissions paid to the Sales Agent.

5.3. If new product lines are added to the Product list the commission rate related to such new Product shall be set forth on Exhibit C attached hereto. The parties agree and acknowledge that the Company shall have sole decision-making authority in connection with establishing commission rates for product lines added to the Product list after the Effective Date.

5.4. The Sales Agent agrees to promptly submit an invoice to the Company in connection with each sale and that all such invoices for payment shall include a listing of all lot numbers of the Products that were sold in connection with such invoice.

5.5. Commissions will be released to the Sales Agent on the twenty-fifth (25 th ) day after the close of the month in which the applicable sales are made, or in the event that such day is not a business day, on the next business day. Any commissions paid on outstanding accounts receivable at the close of the month that exceed the payment terms of net ninety (90) days will be deducted from the Sales Agent’s outstanding commission or invoiced to Sales Agent pursuant to Section 5.7. Upon collection of past due accounts commissions will be re-posted to the Sales Agent.

5.6. The Company will keep and maintain accurate, complete and current books and records relating to commissions earned by Sales Agent. Upon payment of commission to Sales Agent by the Company, the Company shall provide Sales Agent with a detailed breakdown of the customer sales used to calculate the commission as well as any credit, discount, allowance or set-off taken by the Company or applied against Sales Agent commission. Any discrepancies must be reported to the Company within thirty (30) days of the receipt of the detailed statement. Once per calendar year, upon written request from Sales Agent, the Company will permit an independent certified public accountant designated by and at the expense of Sales Agent to audit the Company’s books and records pertaining to commissions earned by Sales Agent, such audit to be conducted on the Company’s premises during normal business hours.

5.7. In the event that the Company has previously paid Sales Agent commissions on sales to a customer whose account is subsequently entitled to a credit, for returns or otherwise, and sufficient commission is not available to deduct the credit within the period, the Company will submit an invoice and a written explanation containing the reasons why the Company is entitled to reimbursement by Sales Agent of any portion or all of the commission previously paid to Sales Agent. Sales Agent agrees to pay all properly invoiced amounts within thirty (30) days of receipt of said invoice.

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5.8. The Company will have no liability whatsoever to Sales Agent for commission payments for the Company’s rejection of all or part of any order.

6.1. The Company and Sales Agent will mutually establish sales objectives for Products to be sold by the Sales Agent within the Territory as measured in dollar volume. Such sales quotas shall be set forth on Exhibit D attached hereto.

6.2. The Company and Sales Agent may add new product lines to the Product list. If new product lines are added to the Product list the Company and Sales Agent shall establish an additional quota for such new Product and such quota shall be set forth on Exhibit D .