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Exhibit 10.5
CONFIDENTIAL TREATMENT REQUESTED
TRANSITIONAL SERVICES AGREEMENT
AGREEMENT, dated as of December 31, 1996, between SmithKline Xxxxxxx
Corporation, a Pennsylvania corporation ("SB") and Connective Therapeutics Inc.,
a Delaware corporation ("Connective").
WHEREAS, SB and Connective have entered into an Asset Purchase
Agreement dated December 2, 1996 (the "Purchase Agreement"), pursuant to which
Connective has acquired certain products listed on EXHIBIT A (the "Products");
WHEREAS, in connection with such acquisition Connective desires SB to
continue to provide certain services with respect to the Products, and SB is
willing to continue to provide such services for the benefit of Connective;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and intending to be legally bound, the parties hereby
agree as follows:
SECTION 1
ORDER ENTRY, SHIPPING AND INVOICING
1.1 Services. During the period beginning January 7, 1997 and ending
December 31, 1997 or such earlier date as Connective may reasonably request (the
"Period"), SB shall perform order entry, packaging, shipping, invoicing and
credit and collection services for the Products. SB also agrees not to remove
the Products from its price list prior to the end of the Period; thereafter SB
shall remove the Products from its price list as soon as practical. All such
services shall be performed on a timely basis consistent with SB's practices in
effect immediately prior to the date of this Agreement.
1.2 Payments. SB shall receive no separate consideration for the
provision of services hereunder other than as set forth in the Purchase
Agreement. No later than the 30th day following the last day of each calendar
quarter (or the last day of the Period if the Period does not conclude at the
end of a calendar quarter) during the Period (each a "Collection Period"), SB
shall pay Connective an amount equal to the net sales (computed on the basis set
forth in EXHIBIT B) of the Products for such Collection Period less [*] percent
([*]%) of such net sales for cash discounts (to the extent that SB has given
such discounts); provided that during the period from the date of this Agreement
through February 28, 1997 SB shall pay Connective on the basis of gross sales
(computed on the basis set forth in EXHIBIT B) rather than net sales, again
subject to applicable cash discounts. SB shall fulfill orders from its existing
inventory of Products until such inventory is exhausted and the cost of such
Products shall be deducted (at [*] per bottle of 60 capsules) from the related
net sales.
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* Confidential treatment has been requested for the language which has
been omitted. All such omitted material has been filed separately with
the SEC.
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1.3 Supporting Statements. Each payment made pursuant to Section 1.2
shall be accompanied by a statement setting forth gross sales and all
information used to calculate the payment made to Connective, together with a
certificate signed by the Director, Finance and Planning, SmithKline Xxxxxxx
Pharmaceuticals division of SB, that such statement complies with this
Agreement. SB shall permit Connective's independent auditors to have access to
SB's records and work papers as may be necessary to verify the accuracy of the
statements provided to Connective hereunder and to assure that SB has complied
with the terms of this Agreement. Bad debts incurred in connection with sales of
the Products after the date hereof will be at the expense of Connective. During
the Period the bad debt expense for any account shall be apportioned between the
Products and other SB products sold to the same customer pro rata based on total
amounts due. Connective shall have no right to separately pursue collections
directly from customers of any amounts due with respect to bad debts for sales
during the Period.
1.4 Sales Information. On the second business day after each calendar
month, SB shall provide Connective (in a format reasonably acceptable to
Connective) quantities of Products sold and related sales dollars (itemized by
customer and/or distributor), cost of Products sold, inventory of Products as of
the end of the Collection Period and any other information reasonably requested
in advance by Connective.
SECTION 2
NOTIFICATION TO THE TRADE
During the Period SB shall (a) notify all customers of the transfer of
the Products to Connective and make available a duplicate set of mailing labels
for wholesalers for Connective's use and (b) print a brief notice concerning the
sale of the Products to Connective on appropriate invoices after the date of the
Purchase Agreement.
SECTION 3
GENERAL PROVISIONS
3.1 Independent Contractors. SB is an independent contractor in
providing services with respect to the Products.
3.2 Confidentiality. The confidentiality obligations set forth in
Sections 6.5 and 8.4 of the Purchase Agreement shall apply to any proprietary or
confidential information provided by either party to the other party in
connection with this Agreement.
3.3 Indemnification. SB agrees to indemnify, defend and hold Connective
harmless from and against any and all claims, liabilities, damages, losses,
costs and expenses (including reasonable attorney fees), from any third party
claims or suits brought against Connective which arise out of the negligence or
willful misconduct of SB or one of its employees in performing the services
under this Agreement. The procedures for indemnification shall be the same as
provided in Section 14.3 of the Purchase Agreement.
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3.4 Notices. Any notices permitted or required by this Agreement shall
be sent by telecopy or by certified or registered mail and shall be effective
when received if sent and addressed as follows or to such other address as may
be designated by a party in writing:
If to SB SmithKline Xxxxxxx Pharmaceuticals
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxx
Fax: 000-000-0000
Copy to: SmithKline Xxxxxxx Corporation
Xxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Corporate Legal
Fax: 000-000-0000
If to Connective: Connective Therapeutics, Inc.
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
Copy to: Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
3.5 Entire Agreement. The parties hereto acknowledge that this
Agreement sets forth the entire agreement and understanding of the parties and
supersedes all prior written or oral agreements or understandings with respect
to the subject matter hereof, except for the Purchase Agreement and the
agreements, including this Agreement, entered into pursuant to the Purchase
Agreement. No modification of any of the terms of this Agreement, or any
amendment hereto, shall be deemed to be valid unless in writing and signed by
the party against whom enforcement is sought. No course of dealing or usage of
trade shall be used to modify the terms and conditions herein.
3.6 Waiver. No waiver by either party of any default shall be effective
unless in writing, nor shall any such waiver operate as a waiver of any other
default or of the same default on any future occasion.
3.7 Obligations to Third Parties. Each party warrants and represents
that proceeding herewith is not inconsistent in any material way with any
contractual obligations, expressed or implied, undertaken with any third party.
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3.8 Assignment. This Agreement shall be binding upon and shall inure to
the benefit of the successors or permitted assigns of each of the parties. Any
assignment of rights or obligations of one party hereunder shall be effective
only after receipt of written consent from the other party, which consent shall
not be unreasonably withheld or delayed; provided that SB may assign this
Agreement to another entity controlled by, controlling or under common control
with SB without the consent of Connective so long as SB remains jointly and
severally liable with such assignee for the performance of all SB's obligations
hereunder.
3.9 Governing Law. The validity, interpretation and effect of this
Agreement shall be governed by and construed under the laws of the Commonwealth
of Pennsylvania.
3.10 Severability. In the event that any term or provision of this
Agreement shall violate any applicable statute, ordinance or rule of law in any
jurisdiction in which it is used, or otherwise be unenforceable, such provision
shall be ineffective to the extent of such violation without invalidating any
other provision hereof.
3.11 Headings. The headings used in this Agreement are for convenience
only and are not a part of this Agreement.
3.12 Counterparts. This Agreement may be executed in two (2)
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same original.
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IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed by their duly-authorized representatives as of the date first above
written.
SMITHKLINE XXXXXXX CORPORATION
By: /s/ Xxxxxx Xxxxxx
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Title: Vice President
CONNECTIVE THERAPEUTICS INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: President and CEO
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Exhibit A
Products
Ridaura capsules (auranofin 3 mg)
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Exhibit B
Gross and Net Sales
Gross and Net Sales are reported according to generally accepted accounting
practices by SB in the ordinary course of its business.
Gross Sales
Gross Sales is defined as the recording of Revenue with associated Accounts
Receivable for accounting purposes for specific shipment/invoicing transactions.
Invoices are prepared immediately following notification of shipment of goods.
Invoices are dated as the same day of shipment and reflect the number of units
shipped multiplied by the Unit price, which in most cases is WAC (Wholesale
Acquisition Cost). Gross Sales is recorded to the general ledger monthly from
the SB Month-to-Date Sales Report. Quarterly summarization of Gross Sales for
Connective will be in accordance with the SB Finance calendar. This calendar is
based upon a 13 week quarter comprised of 4 weeks, 4 weeks and 5 weeks for each
quarter.
Net Sales
Net Sales is defined as Gross Sales less allowable adjustments. Adjustments
include product returns, Medicaid reimbursements, chargebacks, rebates, state
payments, admin. fees and any other contractual reimbursement but do not include
cash discounts.
