On May 18, 2012, Park City Group, Inc. (the "Company") entered into a Management and Operating Agreement ("Operating Agreement") and a Subscription Agreement (together, the "Agreements"), each by and between the Company and F&D Partners, Inc. ("F&D). The Agreements are effective as of April 1, 2012. F&D is a newly incorporated Utah corporation formed by Leavitt Partners, an internationally known health care and food safety consulting firm, for the purpose of creating a solution targeted toward improving supply chain visibility for food and drug safety. F&D will help food retailers, food service operators, wholesalers and manufacturers protect their brands and be compliant with current and future regulatory requirements that are expected to emerge from the Food Safety Modernization Act.
Under the terms of the Operating Agreement, the Company is to provide management and related services to F&D necessary to the conduct of F&D's business and operations (the "Services"), for and in consideration for the payment to the Company by F&D of a monthly fee consisting of the actual cost to the Company of providing the Services, plus 5%. The Operating Agreement, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1, is terminable on thirty day's written notice.
Under the terms of the Subscription Agreement, F&D is obligated to pay the Company $1.2 million annually during the three year term of the Subscription Agreement, plus 10% of F&D's revenue in excess of $12.0 million. F&D is currently seeking financing necessary to adequately capitalize F&D and fund its operating expenses and financial commitments, including its subscription payments. A copy of the Subscription Agreement is attached to this Current Report on Form 8-K as Exhibit 99.2.
See Item 1.01 above.
| Park City Group, Inc. |
| By: | /s/ David Colbert |
| Name: David Colbert | |
| Title: Chief Financial Officer |
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Exhibit No.
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Description
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EX-99.1
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Management and Operating Agreement
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EX-99.2
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Subscription Agreement
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Management and Operating Agreement
This Management and Operating Agreement (“Agreement”) is made on the 1st day of April, 2012, by and between Park City Group, Inc. (“Manager”) and F&D Partners, Inc., a Utah corporation (“Company”).
Whereas Manager is a manager of businesses and Company wishes to retain the management services of Manager in connection with the carrying on of Company’s business of a software service provider (the “Business”), as more particularly described in Exhibit 1.
Therefore in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt of which is acknowledged by each party, the parties agree with each other as follows:
1)
Management Services. Manager shall provide to Company as required by Company the following management services (“Management Services”), including but not limited to: sales support and activities, accounting processes, software maintenance and development, customer implementations, customer support, and other administrative services, together with:
a)
All equipment (the “Equipment”) required by Company in connection with the Business including but not limited to: computers, facsimile machines, copiers, transcription and reproduction equipment and other office equipment and furniture;
b)
filing and general clerical services;
c)
maintain appropriate levels of business insurance;
d)
systems administration;
e)
general accounting and reporting functions including accounts receivable, accounts accounts payable, GAAP accounting, annual and other regulatory filings, and such other assets and services as may be required from time to time;
f)
governance functions, including the issuance of a complete set of internal controls complying with SOX404 and testing and maintaining the set of internal controls;
g)
establishment and maintenance of SAS70 or SOC2 certification; and
h)
utilization of various internal and external accounting and tax resources to maximize Company’s ongoing enterprise value. Completion and filing of all applicable income, sales and employment tax returns, completion and filing of all relevant regulatory documents and preparation of regular financial statements for Company’s Board of Directors and management, among other activities.
2)
Business Expenditures. Manager will pay all expenditures necessary to maintain the Business including, without limiting the generality of the foregoing or the provisions of paragraph 1,
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rental payments, and the cost of all supplies required by Company in carrying on the Business and all phone and utility bills.
3)
Management Fee. Company agrees to pay to Manager a monthly fee consisting of the actual expenses, including a pro-rata portion of payroll expenses of Manager plus a 5% markup to provide the Management Services. Payment shall be made upon Manager submitting its monthly invoice for payment to Company which will be paid in cash within thirty (30) days.
4)
No Warranties. Manager makes no representation or warranty whatsoever with respect to the suitability or durability of any Equipment for the purposes or uses of Company or any other representation or warranty concerning any Equipment, express or implied.
5)
Location and use of Equipment. The Equipment shall be located and used only on Manager’s premises and shall not be removed without prior written consent of Manager. The Equipment shall be maintained and operated by competent employees only. Manager shall pay all expenses of purchasing, operating and maintaining the Equipment and shall insure the Equipment against normal perils, with loss payable to Manager.
6)
Ownership of Equipment. The Equipment shall at all times be and remain the exclusive property of Manager, and Company shall have no right of property except the right to use the Equipment on the terms and conditions in this Agreement. Nothing in Sections 5 or 6 shall impair Company’s ownership of all Company information and data that may be stored on any equipment.
7)
Events of Default. The following shall each constitute an “event of default”:
a)
failure of Company to pay any amount owing under this Agreement;
b)
a party’s breach of any covenant or condition contained in this Agreement;
c)
any assignment for the benefit of creditors made by a party;
d)
admission by either party in writing of its inability to pay its debts generally as they become due;
e)
appointment of a receiver, trustee, or similar official for a party or for any of its property;
8)
Termination. Manager shall work on a work for hire basis, and shall be subject to termination with thirty (30) days written notice, with or without cause.
9)
Notices. Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or a recognized overnight delivery service such as FedEx.
If to Company: F&D Partners, Inc., _________________________________________.
If to Manager: Park City Group, Inc., 3160 Pinebrook Rd., Park City, Utah 84098.
10)
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No Waiver. The waiver or failure of either party to exercise in any respect any right provided in this Agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled.
11)
Entirety of Agreement. The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement. There are no written or oral understandings directly or indirectly related to this Agreement that are not set forth herein. No change can be made to this Agreement other than in writing and signed by both parties.
12)
Governing Law. This Agreement shall be construed and enforced according to the laws of the State of Utah and any dispute under this Agreement must be brought in this venue and no other.
In Witness whereof, the parties have executed this Agreement as of the date first written above.
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Park City Group, Inc. |
F&D Partners, Inc. |
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By: /s/ David Colbert________________ |
By: /s/ Rich McKeown__________________ |
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McIts: Chief Financial Officer___________ |
Its: Incorporator_______________________ |
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Date: /s/ May 18. 2012______________ |
Date: May 18, 2012____________________ |
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Exhibit 1: Description of the Business and Software Solution to be managed.
The business to manage is a Software-as-a-Service business that addresses food and drug safety throughout the respective supply chains. The following items further describe the business and software solution:
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Software industry business that includes, but not limited to, development, professional services, customer service, accounting, legal, marketing and sales support functions.
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Utilizes universal translation technology;
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A data base that contains all of the “One Forward – One Back” information in a single location;
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Enables end-to-end forward or backward chaining;
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Generating alerts about missing information and safety related issues;
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Stores documents related to transactional information;
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Stores static compliance and regulatory documents;
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Acts as a universal translator and “store & forward” database:
The technology extracts data from existing electronic documents (EDI to Excel);
The solution is compatible with all other food safety initiatives, i.e. GS1, produce tracking initiative, etc.
Can be the single source for tracking and tracing and industry compliance and regulatory documents.
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Subscription Agreement
This Subscription Agreement is entered into by and between Park City Group, Inc. (“PCG”) and F&D Partners, Inc. (“Client”) as of the 1st day of April, 2012 (the “Effective Date”).
PCG and Client acknowledge that, since the Effective Date, PCG has engaged in the business relationship contemplated by and documented by the terms of this Agreement and for and in consideration of the mutual agreements and terms and conditions contained herein, PCG and Client hereby agree as follows:
Term: This term of this Agreement shall be three (3) years commencing on the Effective Date. Following the initial term, this Agreement shall automatically renew for one year terms.
Description of Service Offered
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Subscription Service and Software Tool |
Service that addresses food and drug safety throughout the respective supply chains by providing end-to-end forward or backward chaining (“Subscribed Software”). Service includes, but not limited to, access to the software, on-going maintenance and service, hosting and scalability. |
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Training & Consulting |
PCG will train Client and its customers on the solution limited to the services outlined above and governed by the Management and Operating Agreement between PCG and Client. |
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Professional Services - Connection |
PCG will setup and configure the necessary data exchanges and formats between the Client’s customers and PCG to enable the services outlined above and governed by the Management and Operating Agreement between PCG and Client. |
Fee Summary
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Annual Subscription |
$1,200,000 plus 10% of Client revenue in excess of $12,000,000 |
Invoicing Terms: PCG shall invoice Client for the initial Term of the subscription services as an upfront, prepayment. This invoice is due within one hundred twenty (120) days from the invoice date. Unless stated otherwise, all other invoices are due within thirty (30) days of invoice date, unless there is a good faith dispute regarding a breach of the parties’ obligations under this Agreement. Within forty-five (45) days of the close of each fiscal quarter during each fiscal year of the initial Term or any subsequent term of this Agreement PCG will calculate Client’s revenue-based invoice and invoice Client for any amount owed.
Termination. Either party shall have the right to terminate this Agreement in the event the other party breaches its obligations hereunder and fails to cure such breach within thirty (30) days of the date on which written notice of such breach is delivered to the breaching party.
Professional Services Travel and Travel Expenses: PCG’s travel and travel related expenses are not included in the Annual Subscription Fee above for Connection or Training and Consulting. Reasonable travel and living expenses are billed in addition to professional services, consulting and training fees. These expenses are billed as incurred and are based on itemized actual expenses.
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Choice of Law: This Agreement shall be interpreted under the laws of the State of Utah without regard to conflict of law principles.
Independent Contractor: PCG is acting as an independent contractor hereunder and shall not be deemed to be engaged in a joint venture, partnership, agency relationship, or similar arrangement for purposes of this Agreement. Each party is responsible for the conduct of its own personnel.
Representations and Warranties: PCG represents and warrants to Client that: (i) PCG will operate its business and perform its obligations hereunder in accordance with all applicable federal, state and local laws, ordinances, executive orders and regulations; (ii) all materials (other than Client or its customer supplied materials) do not, and none of PCG’s products or services will, infringe any patent, trademark, trade secret, copyright, design or any other proprietary right of third parties; and (iii) PCG has the full right, power and capacity to perform its obligations under this Agreement, and in connection with the performance of its obligations under this Agreement, has obtained all authorizations required from third parties.
Limitation of Liability: PCG hereby agrees that the obligations contained herein are the sole and singular obligations of Client and as such PCG agrees that it will hold harmless all agents, shareholders, employees, directors, officers, parents, subsidiaries, affiliates, successors, and assigns (collectively the “Releasees”) for any and all obligations, including the payment of the Annual Subscription Fee, set forth in this Agreement (the “Obligations”), and shall indemnify the Releasees for any losses or expenses which relate to or arise out of the Obligations.
Indemnification: Each party to this Agreement (the "Indemnifying Party") shall indemnify, defend and hold harmless the other party and its officers, directors, employees and representatives against any and all third party claims, actions, lawsuits, proceedings, damages, losses and expenses (including interest, penalties, judgments, costs of preparation and investigation, and reasonable attorneys' fees) suffered, sustained, incurred or that they may become subject in connection with, arising out of or due to: (a) any representations or warranties made by the Indemnifying Party, its employees, agents, affiliates or third-party contractors regarding the products or services provided under this Agreement; (b) any damage or loss, by whomsoever suffered, resulting or claimed to result in whole or in part from any act or omission of the Indemnifying Party, its agents, employees and subcontractors; or (c) the non-fulfillment of any covenant, agreement or other obligation of the Indemnifying Party under this Agreement.
Confidentiality: Any information of a proprietary or confidential nature disclosed by a party concerning any aspect of its business, finances, or operations, including, without limitation, any data disclosed in connection with this Subscription (“Confidential Information”), shall be the sole and exclusive property of the disclosing party. Each party agrees not to disclose any Confidential Information of the disclosing party to any third party except as required in the performance of this Agreement or as permitted in writing by the disclosing party. Each party agrees not to use the Confidential Information of the other party for any purpose other than performing this Agreement.
Limitation of Liability: NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, GOODWILL, USE, DATA OR OTHER INTANGIBLE LOSSES, AND INCLUDING DAMAGES RESULTING FROM: (i) THE USE OR INABILITY TO USE THE SERVICE, INCLUDING ERRORS, INTERRUPTIONS OR DELAYS; (ii) ANY
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OTHER MATTER RELATING TO THE SERVICE NOT ARISING FROM NEGLIGENCE OR MISCONDUCT BY A PARTY. NOTWITHSTANDING THE FOREGOING, UNDER NO CIRCUMSTANCE WILL EITHER PARTY’S LIABILITY EXCEED, IN THE AGGREGATE, A SUM EQUAL TO THE AMOUNT OF THE ANNUAL SUBSCRIPTION FEE PAYABLE IN RESPECT OF THE YEAR IN WHICH A CLAIM OCCURSFEES..
Assignment: Client shall have the right to assign this Agreement and all of the obligations contained herein to any present or future affiliate, subsidiary, or parent corporation of Client, or pursuant to a corporate plan of merger, reorganization, or consolidation, without securing the consent of PCG and may grant to any such assignee all of the rights and privileges Client enjoys under this Agreement. Provided such assignee accepts the assignment and assumes the obligations contained herein, and does so in writing, with a copy of such assignment and assumption delivered to PCG, Client shall be released from its duties and obligations contained in this Agreement and PCG shall look solely to the assignee for performance under this Agreement.
Escrow: PCG shall maintain on deposit with a nationally recognized Escrow Company, Source Code, Documentation, and machine readable copies of current versions of the Subscribed Software. Upon Client’s request, PCG shall provide a copy of the escrow agreement and, subject to PCG’s then-current fees, shall cause Client to be named as a beneficiary of such escrow agreement. The terms and conditions of the software escrow agreement shall govern PCG’s obligations to deliver, and Client’s rights to use the Subscribed Software. The escrow agreement will include terms for, but not limited to, the Client receiving full release and rights to the source code, documentation, and machine-readable copies in the event (i) PCG enters insolvency, receivership or bankruptcy proceedings, (ii) upon PCG making an assignment for the benefit of creditors, (iii) upon PCG’s dissolution or ceasing to do business, or (iv) PCG elects to discontinue the subscription service other than pursuant to a termination of this Agreement for cause. Escrow fees are payable by Client.
In Witness whereof, the parties have executed this Agreement on the ___ day of May, 2012.
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Park City Group, Inc. |
F&D Partners, Inc. |
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By: /s/ David Colbert________________ |
By: Rich McKeown_________________ |
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Its: Chief Financial Officer___________ |
Its: Incorporator____________________ |
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Date: May 18, 2012________________ |
Date: May 18, 2012_________________ |
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