IMPORTANT: This information is merely presented as a General Discussion. MedCepts recommends you consult your legal advisor before entering into any agreement. MedCepts is not a legal advisor and never has any intention of offering legal advice. Help me is almost always cheaper than a fix me. To those seeking to "save" money by dispensing with sales agreements, without the advice of legal counsel, beware that the cost of such "savings", should disputes arise, will likely be far more expensive than having done it "right" in the first place.

Sales Agreements for Independent Reps and Distributors - General Discussion

Below are a few considerations, but does not include all of the provisions that should be included in a written agreement. This information may not cover all of your specific needs. MedCepts is positioned as the liaison for Suppliers and Sales Partners. It is our goal that both parties carefully consider the needs of the other, while entering into a mutually satisfying agreement. As an example, the sales partner, meaning the independent rep or distributor, may want exclusivity in a territory, while the company may want sales closed and may need more than one rep in a territory or simply need to replace a rep already acquired. Whereas, when a distributor is involved, historical sales, stocking capabilities and other entities may be a strong consideration for negotiating an agreement.

Term: The term can be made subject to an option to extend the agreement and this option can be exercisable by the company or the rep. The terms would be set forth as well as including the conditions if such options arise and how it is to be exercised. Terms may be simply provisions that give the parties the choice to extend the agreement or not. These provisions may have implications for other provisions, including but not limited to, those relating to commission and other forms of payment.

Services: Describes the services the Independent Contractor will perform. May also include the specific products covered.

Territory: This can be defined in a geographical manner, such as by area, state, zip code, area code, county or it can be defined by a market segment, or even by a listing of specific customers or call points that the rep is engaged to service. e.g. Hospitals over 150 beds or specific hospitals, Primary Care Physicians and/or other specific specialties, Surgery Centers, Veterinarians, Pharmacies (closed, independent, chains), specific hospital departments: biomed, Operating Room, or may be all inclusive to the specific geographic territory. Protecting a territory for the sales partner, independent rep or distributor, is often preferred by the sales partner, while non-exlusive territories are often offered by the Company. One of the major complaints of sales representatives involves territory issues, whereas, the company has divided their territory leaving them less territory coverage while providing more intense coverage for deeper market penetration in their now smaller territory.

Compensation: Commissions should be clearly defined including covering issues as to when the commissions accrue, whether the commissions are paid on sales made during the term of the agreement with the rep or paid on sales throughout the lifetime of the account as placed by the rep. There should also be provisions for considerations dealing with returns of products, credits, uncollected funds, product recalls, termination of the sales agreement, and the like. If you are considering any provisions dealing with the payment or reimbursement of expenses to the rep, you may want to specify what expenses are not payable or reimbursable by the company and exactly what are.

Depending on the relative bargaining position of the parties, payment to the rep can be more extensive than merely percentages of sales. Bonuses, as in the way of additional dollar amounts, or elevated commission percentages, may be offered with sales results as established and needs to be clearly outlined. Top Reps make seek to obtain payment based on increase in value of the company as a result of the activities of the rep. This might be especially significant if the company is a start up or relatively new to the marketplace or may simply be a "bargaining chip" to provide additional benefits for increasing loyalty and dedication to the company.

Sales Quotas: Be reasonable, while being careful not to limit your options and sales potential! Often times, companies expect and place enormously unreasonable sales quotas without research or historical sales results to support same. Reps may see through this immediately. Sales quotas are often considered by the Company to be "The Perfect Out" for the company. Often reps may want to speak with other independent sales representatives to determine the sales potential. MedCepts often times includes this in our process as we anticipate this need by the professional independent sales reps. Our involvement decreases the need for 100 newly acquired reps across the nation calling on your top sales associates, allowing those that may be involved to stay focused on more sales!

Independent contractor (ISR): Independent Contractor (Self-Employed) or Employee? Clarifies the contractor's status as independent, and not an employee of the company - reaffirming that an employer/employee relationship is not being created. Companies should check with applicable state and federal laws regarding taxes, workmen's compensation and other laws in this regard. Note: Ownership of work product of the rep. Issues may abound about the ownership of the rep's work product especially if the work product involves creating materials that may have protection under copyright, trademark or other laws. This includes writings, graphics, advertising materials and the like. Check with your state laws in addition to the impact federal legislation may have. Independent contractors are treated very differently than employees. Independent vs. employee: Often an agreement will spell out the agreement is for an independent contractor, reflecting the contractor is responsible to pay all applicable taxes arising from payments made to them by the Company, including, but not limited to, social security, self-employment taxes and disability insurance. We have seen agreements include specifics regarding no entitlement to participate in any Company plans, arrangements or distributions pertaining to any pension, stock, bonus, profit sharing or similar benefits. Check with your legal advisor to determine the specifics you will need.

Termination: Describes the terms upon which the agreement may be terminated. Both parties may wish to have an easy out clause relative to termination of the agreement. However, often times, the Company seeks the easy out clause, whereas the sales rep seeks some sort of protection for their sales closed and sales efforts put forth for closings pending. Clearly define the termination clause and commission compensation relative to same. Check with your legal advisor for options relative to this. Remember your legal advisor is there to protect you, but consider the protection the rep may need as MedCepts also recommends reps seek legal advice prior to executing any agreement. The goal is for a mutual agreement, with fairness and protection for both parties. As an example, if the company is offering "Residual Income on established accounts" but adds a 30 day termination clause to the agreement, does the agreement provide protection for those accounts already established by the rep?

Exclusive or non-exclusive: This could refer to territory and/or sales exclusivity. The agreement would address whether the rep is exclusive to the company (as similar to a Non-Compete*: meaning that the rep cannot handle other competitive products) or whether the company is exclusive to the rep (meaning that the company can or cannot engage the services of other reps within the territory as defined). If the company is exclusive to the rep, the agreement should contain some form of non-circumvent provisions protecting the rep against the company or other reps going to the customers directly or otherwise interfering with whatever rights the rep is granted, territorially and otherwise, and thereby depriving the rep of commissions. The company would also want to consider the sales potential and other terms of the agreement. What if the sales are not as expected and the company has provided exclusivity to that rep? What if the rep has dedicated an enormous amount of time and provides sales results they're expecting commissions from and the company wishes to share the workload with additional reps? (Resulting in commission losses as provided to the new reps) *Note: The laws around the country varies as to the validity and enforceability of provisions of Non-Competes. The reader is strongly cautioned to consult an attorney experienced in these matters in the reader's state since the law varies from state to state. Often times, a Company will present that their product has no real competition, while presenting an agreement with a Non-Compete clause. The reps may view this as, if there are no competitive products why include such a clause? While the company is training and educating the sales associates to succeed with their product, generally the Company often wants to protect their invested time, company plans, and other information. (Confidentiality provisions may enter here) Why should the Company train a sales associate only to lose them to a competitor? Often times, Medical Product Dealers and Medical Product Distributors (and some Independent Reps) carry multiple product lines that may be considered somewhat competitive in nature, but with price point differences, product capabilities and the like, are they really competitive? As an example, if the end-user cannot be sold on a $50,000 unit whereas a portable unit offered at $15,000 is available should the independent rep be able to make that sale? What if: one unit offers better commission? Branded and/or highly competitive companies may have different preferences and specific feelings in this area.

Confidentiality: Address issues dealing with confidentiality of materials the company deems to be secret or otherwise protected such as customer lists, marketing material, sales plans and other such materials. Merely stating in the rep agreement that certain materials are confidential or trade secrets does not make it so.

Warranties and Indemnities: There may be provisions about warranties and indemnities and/or insurance on the part of the company as to the products. Hold harmless issues should be covered as well. Reps may prefer to see protective coverage extended to them, whereas the company may want coverage by the reps for errors in representation by the reps.

Assigning Obligations: The agreement should address the right of the rep to assign his or her obligations and duties and any restrictions thereon.

Notifications: Is there mention of the portal or carrier utilized for notifications? USPS Certified mail? Is there an address identified for same?

Governing Laws

Arbitration: May include a process in the event a dispute arises.

Sample Agreements

Agreement Prepared by Attorneys - Small fee - See Money Back guarantee with downloadable versions specific for individual states

Independent Contractor Agreement

Free Versions Small Business Find Law:

  -  Short Version
  -  Long Version




***MedCepts takes special interest in physician developed medical products and diversity businesses such as, but not limited to, small businesses, veteran owned, woman or minority owned businesses***
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