EXHIBIT 10.30
TERMINATION AGREEMENT
AGREEMENT, made and entered into as of the 27th day of June, 1997, by
and between Orphan Medical, Inc., a Minnesota corporation ("Orphan"), and
Chronimed, Inc., a Minnesota corporation ("Chronimed").
WHEREAS, Orphan and Chronimed are parties to each of the following
agreements (collectively referred to as the "Agreements") which were entered
into by them in connection with, and at the time of, the dividend distribution
by Chronimed to its shareholders of all of the then outstanding shares of
Orphan's common stock:
i. Marketing and Distribution Agreement, dated as of July 2,
1994, together with amendments thereto dated December 22, 1995
and June 3, 1996 (dealing with Antizol-Vet(TM) and Elliots
B(TM) Solution) (collectively, the "Distribution Agreement");
ii. Security Agreement, dated as of July 2, 1994 (the "Security
Agreement"); and
iii. Services Agreement, dated as of July 2, 1994 (the "Services
Agreement")
WHEREAS, Orphan wishes to terminate the Distribution Agreement and the
other Agreements so that Orphan can assume full responsibility for the
distribution and sale of its products, other than Cystadane; and
WHEREAS, Chronimed is willing to terminate the Distribution Agreement
and the other Agreements on the terms and for the consideration set forth in
this agreement;
NOW THEREFORE, in consideration of the premises, the respective
commitments and undertakings of Chronimed and Orphan set forth in this
agreement, and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Orphan and Chronimed hereby agree as follows:
1. Termination of the Agreements. (a) Except as provided in section
1(b), effective as of the date of this agreement (the "Termination Date"), each
of the Agreements shall be terminated and shall be of no continuing force or
effect, and the rights and obligations of Orphan and Chronimed under each of the
Agreements shall become null and void. The cystadane agreement, dated October
11, 1996, between Orphan and Chronimed (the "Cystadane Agreement") shall not be
regarded as one of the Agreements and shall continue in full force and effect
after the Termination Date.
(b) The confidentiality provisions set forth in section 6.3 of the
Distribution Agreement shall remain in full force and effect from and after the
Termination Date.
(c) On or before the Termination Date, Chronimed shall execute and
deliver to Orphan such termination statements and other documents as shall be
reasonably necessary to terminate all security interests which were granted to
Chronimed under the Security Agreement to secure the performance of Orphan under
the Distribution Agreement.
2. Termination Payments. In full and final consideration for
Chronimed's agreement to terminate the Agreements, Orphan agrees to make
termination payments to Chronimed in the aggregate amount of $2,500,000, which
payments shall be made in the following manner:
(a) Orphan shall make a cash payment of $250,000 to Chronimed on the
Termination Date;
(b) On March 31, 1998 and on the last day of each three (3)-month
period thereafter, Orphan shall issue and deliver to Chronimed that number of
unregistered shares of Orphan's common stock (the "Shares") as shall be equal to
one percent (1%) of the total outstanding shares of Orphan common stock
immediately prior to the date of issuance of the Shares; provided, however, that
Orphan's obligation to issue Shares to Chronimed shall terminate at such time as
(i) the aggregate cash payments made, or owing to, Chronimed pursuant to section
2(c), plus (ii) the net sales proceeds realized by Chronimed from the sale of
Shares sold by Chronimed (after payment of any brokerage commissions and fees,
other costs of sale and Chronimed Expenses (as defined in exhibit A)) within
ninety (90) days after the effective date for the registration statement
covering such Shares, plus (iii) the Market Value of Shares issued to Chronimed
pursuant to this section 2(b) which are not sold by Chronimed within ninety (90)
days after the effective date of any registration statement covering such
Shares, exceeds $2,250,000. For purposes of this section 2(b), the term "Market
Value" means the average last bid price for shares of Orphan common stock on the
NASDAQ over-the-counter market for the last five (5) market days in such ninety
(90) day period.
(c) Orphan shall make additional cash payments (the "Supplemental
Payments") to Chronimed equal to three percent (3%) of the net revenues (i.e.
gross sales revenues less allowances, discounts, bad debts, returns and customs
and excise taxes) received by Orphan from the sale or licensing of any of its
products (other than Cystadane) subsequent to the Termination Date; provided,
however, that the aggregate amount of Supplemental Payments shall not exceed (i)
$2,250,000, less (ii) the amounts determined pursuant to sections 2(b)(ii) and
2(b)(iii). Orphan shall make payment of
Supplemental Payments to Chronimed in quarterly installments within thirty (30)
days after the end of each calendar quarter (commencing for the quarter ending
September 30, 1997) based on net revenues received by Orphan in such calendar
quarter (with net revenues for the period from the Termination Date through June
30, 1997 being included in the first calendar quarter). Each such Supplemental
Payment shall be accompanied by a report which substantiates the net revenues
and the determination of the Supplemental Payment. Until such time as Chronimed
has received aggregate payments of $2,500,000 under this agreement, Chronimed
and its representatives may, upon reasonable request and at its expense, review
and copy records of Orphan pertaining to the determination of the Supplemental
Payments.
(d) Notwithstanding the foregoing, Orphan reserves the right, at any
time, to make a cash payment to Chronimed equal to the then unpaid balance of
the $2,500,000 termination payment amount. Upon delivery of such payment to
Chronimed, Orphan shall have no further payment obligations under this section
2, and Chronimed shall endorse and deliver to Orphan, without further
consideration, any Shares then owned by Chronimed, other than Shares described
in section 2(b)(iii).
(e) In the event that shares of Orphan's common stock cease being
tradeable on a national or regional securities market for any reason, the unpaid
balance of the $2,500,000 termination amount shall be immediately due and
payable by Orphan or its successor to Chronimed in cash. Upon delivery of such
payment to Chronimed, Orphan shall have no further payment obligations under
this section 2, and Chronimed shall endorse and deliver to Orphan, without
further consideration, any Shares then owned by Chronimed, other than Shares
described in section 2(b)(iii).
3. Chronimed Commitments. Within ten (10) days after the sale of any
Shares by Chronimed, Chronimed shall deliver to Orphan a copy of a broker's sale
confirmation which evidences the net sales proceeds realized by Chronimed. In
the event that the aggregate amounts paid to, or realized by, Chronimed, as
determined pursuant to sections 2(a), 2(b)(ii), 2(b)(iii) or 2(c), exceed
$2,500,000, Chronimed shall refund such excess amount to Orphan, in cash, within
fifteen (15) days after such aggregate amount is first determinable.
4. Chronimed Representations. Chronimed represents and warrants to
Orphan as follows:
(a) The Shares being acquired by Chronimed pursuant to this agreement
are being acquired for Chronimed's own account and not with the view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the federal Securities Act of 1933 (the "Securities Act").
Chronimed understands that at the time of their issuance the Shares will not be
registered under the Securities Act by reason of their contemplated issuance in
transactions exempt from the
registration and prospectus delivery requirements of the Securities Act pursuant
to section4(2) thereof.
(b) This agreement has been duly authorized by the requisite corporate
action of Chronimed, has been duly executed and delivered by Chronimed, and is a
valid and binding obligation of Chronimed which is enforceable against Chronimed
in accordance with its terms.
(c) Chronimed has reviewed all of Orphan's filings with the Securities
and Exchange Commission and has taken all actions that it has determined to be
appropriate or necessary to assess the merits and risks of an investment in the
Shares.
(d) Chronimed understands that each certificate representing the Shares
shall initially be endorsed with the following legend:
"The Shares represented by this certificate may not be transferred
without (i) the opinion of counsel satisfactory to the issuer of such
Shares that such transfer may lawfully be made without registration or
qualification under the federal Securities Act of 1933, as amended, and
applicable state Shares laws; or (ii) such registration or
qualification."
5. Representations of Orphan. Orphan represents and warrants to
Chronimed as follows:
(a) This agreement has been duly authorized by the requisite corporate
action of Orphan, has been duly executed and delivered by Orphan, and is a valid
and binding obligation of Orphan which is enforceable against Orphan in
accordance with its terms.
(b) As of the date of this agreement, there are 6,063,588 shares of
Orphan's common stock issued and outstanding.
(c) When issued and delivered to Chronimed pursuant to this agreement,
the Shares shall be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of any liens or security interests.
(d) Orphan is currently qualified to register shares of its capital
stock on Form S-3, pursuant to the federal Securities Act of 1933 and the
applicable regulations promulgated thereunder, and until such time as Chronimed
receives the aggregate payments pursuant to this agreement of $2,500,000, Orphan
shall make such filings and shall take such other actions as shall be necessary
for Orphan to continue to qualify for the use of Form S-3.
(e) At the next regularly scheduled meeting of its Board of Directors,
Orphan shall reserve a sufficient number of shares of its authorized common
stock for issuance to Chronimed to satisfy its obligations under section 2(b) of
this agreement.
6. Registration Rights. Orphan shall cause the Shares to be registered
for subsequent sale by Chronimed in the manner contemplated by exhibit A to this
agreement.
7. Mutual Release.
(a) Orphan, acting for itself, its insurers, its successors and
assigns, and each of them, does hereby release and forever discharge Chronimed,
its officers, employees, agents, consultants, successors and assigns, and each
of them, from any and all liabilities, claims, demands and causes of action,
either in law or in equity, known or unknown, liquidated or unliquidated, which
have arisen or may arise out of or are in any way connected with any of the
Agreements, on account of any act, omission, event, occurrence, representation,
warranty, failure, default or breach, actual or asserted, of Chronimed, its
officers, employees, agents, consultants, or any of them on or prior to the date
of this instrument; provided, however, that this release does not affect the
obligations or commitments of Chronimed under this agreement.
(b) Chronimed, acting for itself, its insurers, its successors and
assigns, and each of them, does hereby release and forever discharge Orphan and
its officers, employees, agents, consultants, successors and assigns, and each
of them, from any and all liabilities, claims, demands and causes of action,
either in law or in equity, known or unknown, liquidated or unliquidated, which
have arisen or may arise out of or are in any way connected with any of the
Agreements, on account of any act omission, occurrence, representation,
warranty, failure, default or breach, actual or asserted, of Orphan and its
officers, employees, agents or consultants, or any of them, on or prior to the
date of this instrument; provided, however, that this release does not affect
(i) the obligations or commitments of Orphan under this agreement, or (ii) the
obligation of Orphan to make payment to Chronimed of any royalties payable to
Chronimed with respect to the sale of Antizol-Vet(TM) or Elliots B(TM) products.
8. Miscellaneous.
(a) Binding Effect. This agreement shall be binding on, and shall inure
to the benefit of, Orphan and Chronimed and their respective successors and
assigns.
(b) Entire Agreement. This agreement evidences the complete agreement
and understanding between Orphan and Chronimed with respect to the subject
matter hereof and supersedes and preempts any prior understandings,
agreements or representation, by or between them, whether written or oral, which
related to the subject matter hereof in any way.
(c) Public Announcement. Any public announcement relative to the
matters set forth in this agreement shall be mutually acceptable to both Orphan
and Chronimed, and the parties agree to cooperate in coordinating the timing and
content of such announcement.
(d) Governing Law. This agreement shall be governed by and interpreted
in accordance with the internal law, not the law of conflicts, of the state of
Minnesota.
IN WITNESS WHEREOF, each of Orphan and Chronimed have caused this
agreement to be executed and delivered by a duly authorized representative as of
the date set forth in the first paragraph.
CHRONIMED, INC. ORPHAN
MEDICAL, INC.
By______________________________________ By_____________________________
EXHIBITA
REGISTRATION RIGHTS PROVISIONS
1. Registration Commitment. As soon as reasonably practicable after
each issuance of Shares pursuant to this agreement, but not later than thirty
(30) days thereafter, Orphan shall prepare and file a registration statement
under the Securities Act covering such Shares on Form S-3 (or any successor form
subsequently promulgated by the Commission as a replacement for Form) if such
form is then available for use by Orphan.
2. Registration Procedures. In connection with the registration of
Shares under the Securities Act, Orphan will:
(a) prepare and file with the Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act (the "Commission") a registration statement with respect
to such Shares, and use its best efforts to cause such registration
statement to become effective and to remain effective for such period
as may be reasonably necessary to effect the sale of such Shares, not
to exceed nine (9) months;
(b) prepare and file with the Commission such amendments to
such registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such Shares, not to exceed nine (9) months;
(c) furnish to Chronimed and to the underwriters, if any, of
the Shares being registered such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as such underwriters may reasonably request in
order to facilitate the public offering of such Shares;
(d) use its best efforts to register or qualify the Shares
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as Chronimed may reasonably request
within twenty (20) days following the original filing of such
registration statement, except that Orphan shall not for any purpose be
required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified;
(e) notify Chronimed, promptly after it shall receive notice
thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(f) notify Chronimed promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of Chronimed, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for Chronimed (and concurred in by counsel for Orphan), is required
under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Shares by Chronimed;
(h) prepare and promptly file with the Commission and promptly
notify Chronimed of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to
such Shares is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(i) advise Chronimed, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which Chronimed shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for Orphan the filing
of such amendment or supplement is reasonably necessary to protect
Orphan from any liabilities under any applicable federal or state law
and such filing will not violate applicable law; and
(k) at the request of Chronimed, furnishan opinion, dated the
closing date, of the counsel representing Orphan for the purposes of
such registration, addressed to the underwriters, if any, and to
Chronimed, covering such matters as such underwriters and Chronimed may
reasonably request.
3. Expenses. With respect to each inclusion of Shares in a registration
statement pursuant to section 1, Orphan shall bear the following fees, costs and
expenses: all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for Orphan, all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the Shares to be offered are to be registered
or qualified. Fees and disbursements of counsel and accountants for Chronimed,
underwriting discounts and commissions and transfer taxes for Chronimed and any
other expenses incurred by Chronimed not expressly included above shall be borne
by Chronimed (collectively, "Chronimed Expenses").
4. Indemnification.
(a) Orphan will indemnify and hold harmless Chronimed and any
underwriter (as defined in the Securities Act) for Chronimed, and each person,
if any, who controls Chronimed or such underwriter within the meaning of the
Securities Act, from and against any and all loss, damage, liability, cost and
expense to which Chronimed or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that Orphan will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with written information
furnished by Chronimed, such underwriter or such controlling person specifically
for use in the preparation thereof; provided, however, that the foregoing
indemnity, insofar as it relates to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary prospectus but eliminated
or remedied in the prospectus shall not inure to the benefit of any underwriter
(or any employee, agent or affiliate of or any person controlling such
underwriter) with respect to any action or claim asserted by a person who
purchased any Shares from such underwriter unless such person was sent or given
a copy of the prospectus with or prior to the written confirmation of the sale
involved.
(b) Chronimed will indemnify and hold harmless Orphan, any controlling
person and any underwriter from and against any and all loss, damage, liability,
cost or expense to which Orphan or any controlling person and/or any underwriter
may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was so made in reliance upon and in strict conformity with written
information furnished by Chronimed specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this section of notice of the commencement
of any action involving the subject matter of the foregoing indemnity
provisions, such indemnified party will, if a claim thereof is to be made
against the indemnifying party pursuant to the provisions of said paragraph (a)
or (b), promptly notify the indemnifying party of the commencement thereof; but
the omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
if the defendants in any action include both the indemnified party and the
indemnifying party and there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party or parties shall have the right to select separate counsel
to participate in the defense of such action on behalf of such indemnified party
or parties. After notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of said
paragraph (a) or (b) for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party shall have
employed counsel in accordance with the proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
