DISTRIBUTION AND SPINOFF AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective as of July 1, 2000,
between CHRONIMED INC., a Minnesota corporation ("Chronimed") and MEDgenesis
INC., a Minnesota corporation and a wholly-owned subsidiary of Chronimed
("MGI").
RECITALS
A. Chronimed is the holder of all the issued and outstanding shares of
capital stock of MGI. By Written Action dated May 25, 2000, Chronimed's Board of
Directors declared a dividend of all the issued and outstanding shares of
capital stock of MGI to the Chronimed shareholders, thereby creating an
obligation to distribute such shares.
B. Pursuant to the Chronimed Board Resolutions, the dividend of
substantially all of the shares of stock of MGI to the Chronimed shareholders is
to be effectuated on or about July 1, 2000 or as rapidly thereafter as
practical, with a record date of June 16, 2000, and the dividend payment
completed as soon as applicable corporate and securities law requirements can be
satisfied.
C. Chronimed is contributing certain assets to MGI, is transferring to
MGI certain employees, and is making other arrangements to establish MGI as a
separate enterprise for the purpose of developing and exploiting the products
previously developed and exploited by Chronimed's Diagnostic Products Division
(the "Division").
D. The distribution of substantially all of the issued and outstanding
capital stock of MGI to the shareholders of Chronimed will result in MGI being
independent of Chronimed. Chronimed believes, among other things, that this
arrangement will enable the separated companies to more capably operate within
their unique industries, market and sell their specific goods and services,
attract and procure capital, and independently enhance shareholder value.
E. Chronimed and MGI are entering into certain other agreements and
understandings.
F. MGI and Chronimed desire to set forth their agreements and
understandings in connection with the distribution of the shares of stock of MGI
to the shareholders of Chronimed.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
made herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement and the Exhibits hereto, the
following terms shall have the following meanings and when said meaning is
intended said terms shall be capitalized:
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: Of a Person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporation, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.
"Agent" means Norwest Bank Minnesota, N.A., as distribution agent
appointed by Chronimed to assist in the distribution of copies of the
Information Statement and to distribute certificates for shares of MGI Common
Stock pursuant to the Distribution.
"Ancillary Agreements" means all of the agreements, instruments,
understandings, assignments or other arrangements entered into in connection
with the transactions contemplated hereby, including, without limitation, the
Purchase and Pricing Agreement, and the Transition Services Agreement.
"Assets" means the assets contributed by Chronimed to MGI as described
in Section hereof.
"Business" means the business previously conducted by Chronimed's
Diagnostic Products Division.
"Chronimed Common Stock" means the Common Stock, par value $.0l per
share, of Chronimed.
"Claim" means any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys fees).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Determination" means a "determination" as defined by Section 1313(a)
of the Code.
-2-
"Distribution" means the distribution to holders of Chronimed Common
Stock of all of the outstanding shares of MGI Common Stock.
"Distribution Agency Agreement" means the Distribution Agency Agreement
between Chronimed and the Agent, providing for, among other things, the
dissemination of the Information Statement to Chronimed shareholders as of the
Record Date and the distribution of certificates evidencing shares of MGI Common
Stock to such shareholders.
"Distribution Date" means the date of effecting the Distribution, which
is anticipated to occur on or about July 1, 2000, or the date as soon as
feasible thereafter when all actions necessary to permit the Distribution,
including approval from the Commission, have occurred.
"Effective Date" means July 1, 2000, effective as of 12:01 AM on said
date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form 10" means the registration statement on Form 10 to be filed by
MGI with the Commission to effect the registration of the MGI Common Stock
pursuant to the Exchange Act.
"Income Taxes" means all Taxes based upon or measured by income.
"Information Statement" means the information statement, constituting a
part of the Form 10, in the form to be distributed to the holders of Chronimed
Common Stock as of the Record Date in connection with the Distribution, and as
it may be amended or supplemented subsequent to such dissemination.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all debts, liabilities and obligations,
absolute or contingent, mature or unmature, liquidated or unliquidated, accrued
or unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and those
debts, liabilities and obligations arising under any law, rule, regulation,
order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
"MGI Common Stock" means the Common Stock, par value $.01 per share, of
MGI.
"MGI Liabilities" means all of (i) the Liabilities assumed by MGI under
this Agreement or any of the Ancillary Agreements to which MGI is a party and
(ii) the Liabilities arising out of any of the documents or instruments executed
and delivered by MGI pursuant to the transactions contemplated hereby.
"Purchase and Pricing Agreement" means the Purchase and Pricing
Agreement to be entered into between MGI and Chronimed's wholly owned
subsidiary, Home Service Medical & Pharmacy, Inc. providing for the supply on
standard terms and conditions of products from MGI to Home Service Medical.
-3-
"Record Date" means the date established as the record date for the
Distribution by Chronimed.
"Returns" means returns, reports and forms required to be filed with
respect to Taxes.
"Tax Laws" means the Code, federal, state, county, local, or foreign
laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Taxes" means all taxes (whether federal, state, local or foreign)
based upon or measured by income and any other tax whatsoever, including,
without limitation, gross receipts, profits, sales, use, occupation, value
added, AD VALOREM, transfer, franchise, capital stock, net worth, withholding,
payroll, employment, excise, or property taxes, together with any interest or
penalties imposed with respect thereto.
"Taxing Authority" means any governmental authority, domestic or
foreign, having jurisdiction over the assessment, determination, collection, or
other imposition of Tax.
"Transition Services Agreement" means the Transition Services Agreement
between Chronimed and MGI, providing for, among other things, the extension of
certain administrative and related services by Chronimed to MGI after the
Distribution.
ARTICLE II
PRELIMINARY ACTION
2.1 Cooperation Prior to the Distribution.
(a) Form 10: Information Statement. Chronimed and MGI have
prepared, and MGI shall file with the Commission, the Form 10, which
shall include or incorporate by reference the Information Statement.
Chronimed and MGI shall use reasonable efforts to cause the Form 10 to
become effective under the Exchange Act. Chronimed and MGI shall also
prepare, and Chronimed shall cause to be mailed, on or about ten days
prior to the dividend distribution date, to the holders of record of
Chronimed Common Stock as of such date, the Information Statement,
which shall set forth appropriate disclosures concerning MGI, the
Distribution and other matters.
(b) Blue Sky. Chronimed and MGI shall take all such action as
may be necessary or appropriate under the securities or blue sky laws
of states or other political subdivisions of the United States in
connection with the transactions contemplated by this Agreement and the
Ancillary Agreements.
(c) Listing. Chronimed and MGI shall prepare, and MGI shall
file and pursue, an application to effect the listing of the MGI Common
Stock on the Nasdaq National Market System under the symbol MDGN.
2.2 Consents. The parties shall use reasonable commercial efforts to
obtain all consents and approvals, to enter into all agreements and to make all
filings and applications which may be required for the consummation of the
transactions contemplated by this
-4-
Agreement, including, without limitation, all applicable regulatory filings or
consents under federal or state laws and all necessary consents, approvals,
agreements, filings and applications.
ARTICLE III
CAPITAL CONTRIBUTION OF CHRONIMED
3.1 Contribution. Under its Subscription Agreement for the shares of
stock of MGI, Chronimed agreed to contribute a total amount of $1,000.00 to MGI
with such contribution to be completed on or before the Distribution Date.
Chronimed agrees that such contribution will be completed in accordance with its
terms, and in any event, will be completed no later than Distribution Date.
Chronimed acknowledges that no additional shares of MGI Common Stock will be
issued or issuable in connection with or as a result of completing such
contribution.
3.2 Intended Tax Treatment. The contribution to capital, the transfer
of assets under Article IV and the distribution to Shareholders are intended to
qualify under Section 351 and Section 368(a)(1)(D) of the Code, and shall be
reported on all Chronimed and MGI tax returns and information statements in
accordance with such intentions, unless otherwise indicated by Chronimed.
Chronimed and MGI understand and acknowledge that all of the shares of MGI
Common Stock held by Chronimed will be distributed by Chronimed to the holders
of outstanding shares of Chronimed Common Stock.
ARTICLE IV
TRANSFER AND ASSUMPTION
4.1 Transfer of the Assets.
(a) Subject to and upon the terms and conditions of this
Agreement, effective as of the Effective Date, Chronimed shall
transfer, convey, assign and deliver to MGI, and MGI shall acquire from
Chronimed, the following properties, assets and other claims, rights
and interests:
(i) all inventories of raw materials, work in
process, finished goods, maintenance supplies, packaging
materials, spare parts and similar items of Chronimed which
are used exclusively for the Business (collectively, the
"Inventory") which exist on the Effective Date;
(ii) all accounts, accounts receivable, notes and
notes receivable existing on the Effective Date which are
payable to Chronimed, and which apply exclusively to the
Business (the accounts, accounts receivable, notes and notes
receivable, including any related security therein, to be
transferred to MGI pursuant hereto are collectively referred
to herein as the "Accounts Receivable");
(iii) all prepaid expenses of Chronimed which are
used exclusively for the Business existing on the Effective
Date (the "Prepaid Expenses");
-5-
(iv) all rights of Chronimed under the contracts,
agreements, leases, licenses and other instruments specific to
the Business, including the real estate leases for the
premises at 0000 Xxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxx (the
"Bury Drive Location"), and at 0000 X. 00xx Xx., Xxxxx,
Xxxxxxxxx (the "Edina Location") (collectively, the "Contract
Rights");
(v) all books, records and accounts, correspondence,
production records, technical, manufacturing and procedural
manuals, customer lists, studies which are used exclusively
for the Business; provided, however, that Chronimed's
corporate record books, minute books, tax returns and records
relating to taxes, employment records and general ledgers are
not included in the books and records being conveyed to MGI;
provided further, that Chronimed shall provide or make
available to MGI copies of its general ledgers and records
relating to taxes which relate to the Business and the Assets
being acquired hereunder (the "Records");
(vi) all rights of Chronimed under express or implied
warranties which relate exclusively to the Business from the
suppliers to the Business (the "Warranty Rights");
(vii) except for items specifically listed as
Excluded Assets, all of the machinery, equipment, tools,
tooling, dies, production fixtures, maintenance machinery and
equipment, furniture, office equipment and leasehold
improvements owned by Chronimed on the Effective Date which
are located at the Bury Drive Location, the Edina Location or
in the area at Chronimed's headquarters at Red Circle Drive
used exclusively for the business, whether or not reflected as
capital assets in the accounting records of Chronimed
(collectively, the "Fixed Assets"). It is understood that all
of the furniture, equipment, inventory and other personal
property owned by Chronimed and located at the Edina Location
and the Bury Drive Location are included in the assets, except
for items specifically designated as Excluded Assets;
(viii) all of Chronimed's right, title and interest
in and to all intangible property rights, including but not
limited to inventions, discoveries, trade secrets, processes,
formulas, know-how, software, computer codes, internet domain
names, United States and foreign patents, patent applications,
trade names, trademarks, trademark registrations, applications
for trademark registrations, copyrights, copyright
registrations, which are used exclusively for the Business and
are (i) owned by Chronimed or, (ii) where not owned, used by
Chronimed in its business (it being understood that in the
case of any such items not owned by Chronimed, Chronimed's
interest therein is being conveyed subject to any necessary
consents or approvals being obtained from the third party who
owns the same) and all licenses and other agreements to which
Chronimed is a party (as licensor or licensee) which relate
exclusively to the Business (again subject to any necessary
consents or approvals from third parties who own the same)
(collectively, the "Intangible Property");
-6-
(ix) Chronimed's right, title and interest to its
governmental licenses, permits and authorizations which relate
exclusively to the Business, to the extent transferable under
applicable law (collectively, the "Licenses");
(x) The computer hardware, software and software
licenses designated by Chronimed, with a schedule listing the
same to be delivered as of the Effective Date; -
(xi) The shares of stock in Cell Robotics
International, Inc. ("Cell Robotics"), if any, owned by
Chronimed on the Effective Date, it being understood that
Chronimed will continue to sell the Cell Robotics shares owned
by it on a regular basis until the Effective Date; and
(xii) Except as specifically provided in Subsection
4.1(b) hereof, all other assets, properties, claims, rights
and interests of Chronimed which exist on the Effective Date,
of every kind and nature and description which are used
exclusively for the Business and not for other businesses of
Chronimed or for Chronimed's general and administrative
functions or headquarters activities.
(b) Notwithstanding the provisions of paragraph (a) above, the
assets to be transferred to the MGI under this Agreement shall not
include (i) Chronimed's cash and cash equivalents, deposits, bank
accounts and other similar assets, (ii) except for assets specifically
listed on a schedule of additional assets designated by Chronimed and
delivered as of the Effective Date, any assets of Chronimed utilized in
other businesses of Chronimed, including Chronimed's Disease Management
and Specialty Pharmacy businesses (collectively, the "Other
Businesses") or in Chronimed's general and administrative activities or
headquarters activities (collectively, the "G&A Activities") , and
(iii) those assets listed on a schedule of excluded assets designated
by Chronimed and delivered as of the Effective Date attached hereto
(the "Excluded Assets").
(c) The Inventory, Accounts Receivable, Prepaid Expenses,
Contract Rights, Records, Warranty Rights, Fixed Assets, Intangible
Property, Licenses, Stock of Cell Robotics, if any, and other
properties, assets and business of Chronimed described in paragraph (a)
above, other than the Excluded Assets, shall be referred to
collectively as the "Assets."
4.2 Assumption of Liabilities; Etc.
(a) All of the Business and Assets shall be transferred to MGI
free and clear of security interests, mortgages, liens and encumbrances
of any kind (collectively "Liens") except the following (the "Permitted
Liens"): (i) materialmen's, merchants, carriers, workmen's, repairmen's
or other like liens arising in the ordinary course of business, and
(ii) those Liens, if any, which secure the liabilities of Chronimed
which exist on the Effective Date and which are being assumed by MGI.
(b) Effective as of the Effective Date, MGI shall assume and
agree to pay and perform all liabilities, whether known or unknown,
absolute or contingent, accrued or non-accrued, or otherwise, of
Chronimed which arise or arose in the past in the ordinary
-7-
course of business of the Business, or which primarily relate to or
which primarily arise from or arose from the Assets or from the
Business or its operation, past, present or future, including, but not
limited to:
(i) All accounts payable and accrued liabilities for
the Business as they exist on the Effective Date;
(ii) All warranty and service liabilities and
obligations of Chronimed for products of the Business or
services of the Business sold, leased or provided on, prior to
or after the Effective Date;
(iii) All other liabilities and obligations of
Chronimed for products of the Business or services of the
Business sold, leased or provided on, prior to or after the
Effective Date, including but not limited to liabilities and
obligations for product liability, product defects or for
infringement;
(iv) All claims and litigation that primarily relate
to the Business or the Assets, including any liabilities and
obligations that arise thereunder and all costs and expenses
arising in connection therewith, including but not limited to
the Bayer litigation and the other now known claims and other
litigation specified on Schedule 4.2(b)(iv) attached hereto;
(v) All liabilities and obligations of Chronimed
under the leases, contracts and employee benefit plans set
forth on Schedule 4.2(b)(iv) attached hereto, whether arising
on, prior to or after the Effective Date; and
(vi) All other liabilities and obligations of
Chronimed specifically set forth in Schedule 4.2(b)(vi)
attached hereto.
(Hereinafter, the liabilities and obligations assumed by MGI are
collectively referred to as the "Assumed Liabilities".) MGI shall not
assume or agree to perform, pay or discharge, and Chronimed shall
remain liable for, all obligations, liabilities and commitments, fixed
or contingent, of Chronimed other than the Assumed Liabilities,
specifically including those which relate exclusively to the Other
Businesses and the G&A Activities (the "Retained Liabilities").
MGI shall use reasonable commercial efforts to obtain
Chronimed's release from the Assumed Liabilities, including, without
limitation, from guaranties included in the Assumed Liabilities.
4.3 Conveyance; Further Assurances. At Closing, Chronimed and MGI shall
execute and deliver a Xxxx of Sale and Assumption Agreement (the "Xxxx of Sale")
pursuant to which Chronimed shall transfer, convey and assign the Assets to MGI,
and MGI shall assume and agree to perform, pay and discharge the Assumed
Liabilities.
At any time and from time to time after the Closing, at MGI's or
Chronimed's request and expense, as applicable, but without further
consideration, (i) Chronimed promptly shall execute and deliver such instruments
of sale, transfer, conveyance, assignment and confirmation, and
-8-
take such other action, as MGI may reasonably request to more effectively
transfer, convey and assign to MGI, and to confirm MGI's title to, all of the
Assets, to put MGI in actual possession and operating control thereof, to assist
MGI in exercising all rights with respect thereto and to carry out the purpose
and intent of this Agreement; and (ii) MGI promptly shall execute and deliver
such instruments of assumption, and take such other action, as Chronimed may
reasonably request to evidence and carry out MGI's assumption of the Assumed
Liabilities.
To the extent that any advances, assignments, transfers or deliveries,
or assumptions shall not have been consummated on the Effective Date, Chronimed
and MGI shall cooperate to effect such consummation as promptly thereafter as
shall be practicable, however, neither Chronimed nor MGI shall have any
liability to any third party for any failure of any transfers or assumptions
contemplated hereby to be consummated on or subsequent to the Effective Date.
Whether or not all advances, assignments, transfers and deliveries of the Assets
have occurred by the Effective Date, MGI shall have, and shall be considered to
have acquired complete and sole beneficial ownership over all of the Assets, and
shall be deemed to have assumed in accordance with the terms of the Agreement
all of the Assumed Liabilities.
4.4 Ownership of the Assets; No Other Warranties. The delivery to MGI
of the instruments of transfer of ownership contemplated by this Agreement will
convey all of Chronimed's right, title and interest to the Assets to MGI, free
and clear of all liens, mortgages, pledges, security interests, restrictions,
prior assignments, encumbrances and claims of (i) Chronimed and (ii) Chronimed's
lender, except for the Permitted Liens, and, except as may arise from failure to
obtain the Required Consents (as defined in Section 4.6 below).
Except for the foregoing warranty, MGI understands and agrees that
Chronimed is not making any representation or warranty as to the value or
freedom from encumbrance of or any other matter concerning the Assets, it being
agreed and understood that the Assets and the Assumed Liabilities are being
transferred "AS IS, WHERE IS," without any other representation or warranty of
any kind, express, implied, by description or otherwise. Further, MGI
understands and agrees that it will bear the economic and legal risk that any
necessary consents or approvals are not obtained or any other requirements of
law are not complied with. This provision however, shall not limit any
responsibilities which Chronimed may have to provide further assurances under
this Agreement.
4.5 Payments With Respect to Contract Rights. The parties specifically
agree as follows with respect to payments due with respect to the transferred
Contract Rights:
(a) Where Chronimed made payments under contracts included in
the Contract Rights before the Effective Date, Chronimed shall bear
such payments without reimbursement from MGI even if such payments
relate in whole or in part to obligations arising after the Effective
Date; and
(b) MGI shall be responsible for all other payments due under
contracts included in the Contract Rights even if such payments were
due before the Effective Date or related to time periods before the
Effective Date.
-9-
4.6 Consents. Each of Chronimed and MGI agree to use reasonable
commercial efforts to seek and obtain any required consents (the "Required
Consents") to the assignment of the Contract Rights and Licenses to MGI. It is
understood, however, that neither party shall be required to make any
out-of-pocket payments in order to obtain said consents. In obtaining said
consents, the parties shall use reasonable commercial efforts to obtain a
release and discharge of Chronimed from liabilities under the Contract Rights
effective as of the Effective Date. Chronimed shall use its reasonable
commercial efforts to take such actions as may be reasonably necessary to assure
that MGI and MGI's successors and assigns receive the rights and benefits of the
assignments of the Contract Rights.
4.7 Power of Attorney. Chronimed hereby irrevocably constitutes and
appoints MGI (and MGI's successors and assigns) as the true and lawful agent and
attorney-in-fact of Chronimed, with full power of substitution, to perform the
following acts in the name of MGI or in the name of Chronimed but on behalf of
and for the benefit of MGI: collect for the account of MGI all items transferred
to MGI hereunder; endorse checks received in connection therewith; institute and
prosecute all actions, suits, or proceedings which MGI may deem proper in order
to collect, assert, or enforce any claim, right, or title of any kind in, and to
the Assets transferred hereunder; defend and compromise any and all actions,
suits, or proceedings, in respect of such Assets; and do all such acts and
things in relation thereto as MGI shall deem advisable. Chronimed agrees that
the foregoing powers are coupled with an interest and shall be irrevocable by
Chronimed or by Chronimed's dissolution or in any manner or for any reason.
Chronimed further agrees that MGI shall retain for its own account any amounts
collected pursuant to the foregoing powers, including any amounts payable as
interest in respect thereof, and Chronimed agrees to pay to MGI, when received,
any amounts which shall be received by Chronimed in respect of any Assets
transferred to MGI hereunder.
4.8 Delivery of Payments, Etc. From and after the Effective Date, if
either MGI or Chronimed receives any payments, mail, communications or
deliveries to which the other party is entitled, the receiving party shall
promptly deliver the same to the other party entitled thereto.
ARTICLE V
THE DISTRIBUTION
5.1 General. MGI shall take all steps required by Chronimed or the
Agent to effect the transactions contemplated by the Distribution Agency
Agreement.
5.2 Rounding of Fractional Shares; Issuance of Additional Shares, If
Necessary. It is anticipated that each Chronimed shareholder on the Record Date
will receive one (1) share of MGI Common Stock for each three (3) shares of
Chronimed held by such a shareholder. No fractional shares of the MGI Common
Stock shall be issued. In lieu thereof, each Chronimed shareholder having a
fractional interest equal to or greater than one-half share of MGI Common Stock
shall be entitled to receive one additional full share of the MGI Common Stock
and each Chronimed shareholder having a fractional interest less than one-half
share of MGI Common Stock shall be entitled to receive only the actual number of
full shares of the MGI Common Stock which such shareholder is entitled to
receive in accordance with the Distribution.
-10-
5.3 Contribution of MGI Common Stock to MGI. Immediately following the
Distribution, Chronimed shall contribute to the capital of MGI all of the shares
of MGI Common Stock owned by Chronimed which are distributed to Chronimed's
shareholders. Chronimed expects that of the 4,500,000 shares of MGI Common Stock
which Chronimed currently owns or will own, approximately 4,100,000 shares will
be distributed to Chronimed shareholders, and approximately 400,000 shares will
be contributed to the capital of MGI.
ARTICLE VI
LIABILITIES AND INDEMNIFICATION
6.1 MGI's Liabilities: Indemnification. Subject to the provisions of
Article VIII (Tax Matters) below, MGI shall be liable for (i) any and all
liabilities assumed by it pursuant to this Agreement, including the Assumed
Liabilities, (ii) any and all Liabilities incurred by it subsequent to the
Effective Date, (iii) any breach of this Agreement or the Ancillary Agreements
by MGI; and (iv) any claims by third parties that the information provided by
MGI included in the Information Statement or the Form 10 is false or misleading
with respect to any material fact or misstates any material fact required to be
stated therein, or omits to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. MGI hereby agrees to indemnify, save and hold harmless Chronimed
from and against such claims, Liabilities and breaches including any third party
claims arising in connection with such claims, Liabilities and breaches. In the
event Chronimed incurs any Liability or expense to be borne by MGI hereunder,
MGI agrees to reimburse, indemnify and hold harmless Chronimed for any expense
or Liability associated therewith.
6.2 Chronimed Liabilities; Indemnification. Subject to the provisions
of Article VIII (Tax Matters) below, Chronimed shall be liable for (i) any and
all claims and Liabilities relating to the business and assets not transferred
to MGI and the Liabilities not assumed by MGI under the terms of this Agreement
and the Ancillary Agreements, including the Retained Liabilities, and (ii) any
breach of this Agreement or the Ancillary Agreements by Chronimed. Chronimed
hereby agrees to indemnify and hold harmless MGI from and against such claims,
Liabilities and breaches, including any third party claims arising in connection
with such claims, Liabilities and breaches. In the event MGI incurs any
Liability or expense to be borne by Chronimed hereunder, Chronimed agrees to
reimburse, indemnify and hold harmless MGI for any expense or Liability
associated therewith.
6.3 Notice; Defense of Claims.
(a) The party which is entitled to indemnification hereunder
(for purposes of this Section 6.3, the "Indemnified Party") may make claims for
indemnification hereunder by giving written notice thereof to the party required
to indemnify (for purposes of this Section 6.3, the "Indemnifying Party"). If
indemnification is sought for a claim or liability asserted by a third party,
the Indemnified Party shall also give written notice thereof to the Indemnifying
Party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so, or any delay in doing so, shall not relieve
the Indemnifying Party from any liability, unless, and then only to the extent
that, the rights and remedies of the Indemnifying Party are prejudiced as a
result of the failure to give, or delay in giving, such notice. Such notice
shall summarize the
-11-
bases for the claim for indemnification and any claim or liability being
asserted by a third party. Within 30 days after receiving such notice, the
Indemnifying Party shall give written notice to the Indemnified Party stating
whether it disputes the claim for indemnification and whether it will defend
against any third party claim or liability at its own cost and expense. If the
Indemnifying Party fails to give notice that it disputes an indemnification
claim within 30 days after receipt of notice thereof, it shall be deemed to have
accepted and agreed to the claim, which shall become immediately due and
payable.
(b) The Indemnifying Party shall be entitled to direct the
defense against a third party claim or litigation with counsel selected by it
(subject to the consent of the Indemnified Party, which consent shall not be
unreasonably withheld) as long as the Indemnifying Party is conducting a good
faith and diligent defense. Notwithstanding the foregoing, the obligations of
the Indemnifying Party hereunder as to such third party claim or litigation
shall include taking all steps necessary in the defense, settlement, or
compromise of such claim or litigation and holding the Indemnified Party
harmless from and against any and all damages, liabilities, losses and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) caused by or arising out of any settlement or compromise approved by
the Indemnifying Party or any judgment in connection with such claim or
litigation. The Indemnifying Party shall not, in the defense of such third party
claim or any litigation resulting therefrom, consent to entry of any judgment
(other than a judgment of dismissal on the merits without costs) except with the
written consent of the Indemnified Party, or enter into any settlement or
compromise (except with the written consent of the Indemnified Party) which does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party a full release from all liability in respect
of such claim or litigation. The Indemnified Party shall at all times have the
right to fully participate in the defense of a third party claim or liability at
its own expense directly or through counsel; provided, however, that if the
named parties to the action or proceeding include both the Indemnifying Party
and the Indemnified Party and the Indemnified Party is advised that
representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the Indemnified Party may engage
separate counsel at the expense of the Indemnifying Party.
(c) If the Indemnifying Party shall not give notice of its
intent to dispute and defend a third party claim or liability or litigation
resulting therefrom after receipt of notice from the Indemnified Party, or if
such good faith and diligent defense is not being or ceases to be conducted by
the Indemnifying Party, the Indemnified Party shall have the right, at the
expense of the Indemnifying Party, to undertake the defense of such claim or
liability in such manner as it deems appropriate (with counsel selected by the
Indemnified Party), and to compromise or settle such claim or litigation on such
terms as it may deem appropriate, exercising reasonable business judgment.
(d) The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any settlement or compromise in connection
with, or any judgment rendered with respect to, any claim by a third party in
such litigation and for all damages, liabilities, losses and expenses
(including, without limitation, reasonable fees of counsel) of any kind or
nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in
-12-
investigation, defense or settlement of the foregoing) incurred by the
Indemnified Party in connection with the defense against such claim or
litigation, whether or not resulting from, arising out of, or incurred with
respect to, the act of a third party.
(e) If the third party claim or liability is one that by its
nature cannot be defended solely by the Indemnifying Party, the Indemnified
Party shall make available such information and assistance in connection
therewith as the Indemnifying Party may reasonably request and shall cooperate
with the Indemnifying Party in such defense at the expense of the Indemnifying
Party.
6.4 Agreements Relating to Indemnification. The amount which any
Indemnifying Party is required to pay to any Indemnified Party pursuant to this
Article VI shall be reduced (including, without limitation, retroactively) by
any insurance proceeds and other amounts actually recovered by such Indemnified
Party in reduction of the claim for which indemnification is provided. If an
Indemnified Party shall have received an indemnity payment in respect of an
indemnifiable loss and shall subsequently actually receive insurance proceeds or
other amounts (such as settlement amounts) in respect of the indemnifiable loss
then such Indemnified Party shall immediately pay to such Indemnifying Party a
sum equal to the lesser of the amount of such insurance proceeds or other
amounts actually received or the net amount of indemnity payments actually
received by the Indemnified Party previously.
If an Indemnified Party is able to deduct an amount attributable to the
indemnifiable loss (the "Indemnifiable Loss Deduction"), and the Indemnified
Party does not have to include in income an amount attributable to the indemnity
payment it receives from the Indemnifying Party, the Indemnified Party shall be
deemed to have received a tax saving; provided, however, that if the
Indemnifying Party is able to deduct the amount attributable to the Indemnity
Payment, no tax saving shall be deemed to have occurred.
Where an Indemnified Party is deemed to have received a tax saving,
such Indemnified Party shall pay the Indemnifying Party an amount equal to the
tax saving achieved by the Indemnified Party within forty-five (45) days after
the filing of the tax return giving rise to the tax saving by the Indemnified
Party. The amount of the tax saving shall be calculated based on the highest
marginal combined federal and state income tax rate applicable to the
Indemnified Party on the return whereby the tax saving is realized.
6.5 No Beneficiaries. Except to the extent expressly provided otherwise
in this Article VI, the indemnification provided for by this Article VI shall
not inure to the benefit of any third party or parties, and shall not relieve
any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto, and each
party agrees to waive such rights against the other to the fullest extent
permitted.
-13-
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
7.1 Provision of Corporate Records. Upon MGI's request, Chronimed shall
arrange as soon as practicable following the Distribution Date for the delivery
to MGI of existing corporate records in the possession of Chronimed relating to
the business and assets to be transferred to MGI, together with all active
agreements relating to the businesses to be transferred to MGI, except to the
extent such items are already in the possession of MGI. Such records shall be
the property of MGI, but shall be available to Chronimed for review and
duplication until Chronimed shall notify MGI in writing that such records are no
longer of use to Chronimed.
7.2 Access to Information. From and after the Distribution Date,
Chronimed shall afford to MGI and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Chronimed's possession relating to the businesses
transferred to MGI, insofar as such access is reasonably required by MGI. MGI
shall afford to Chronimed and its authorized accountants, counsel and other
designated representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing Information) and duplicating
rights during normal business hours to Information within MGI's possession
relating to the Chronimed business as constituted after the Distribution and to
the business of the Division before MGI was spun-off, insofar as such access is
reasonably required by Chronimed. Information may be requested under this
Article VII for, without limitation, audit, accounting, claims, litigation and
tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing the transactions contemplated in this Agreement
and the Ancillary Agreements.
7.3 Securities Filings. For a period of five years following the
Distribution Date, each of Chronimed and MGI shall provide to the other, if the
other has requested it, promptly following such time at which such documents
shall be filed with the Commission, copies of all documents which shall be
publicly filed with the Commission pursuant to the periodic and interim
reporting requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder.
7.4 Provision of Services. In addition to any services contemplated to
be provided following the Distribution Date by any Ancillary Agreement, each
party, upon written request, shall make available to the other party, during
normal business hours and in a manner that will not unreasonably interfere with
such party's business, its financial, tax, accounting, legal, employee benefits
and similar staff services (collectively "Services") whenever and to the extent
that they may be reasonably required in connection with the preparation of tax
returns, audits, claims, litigation or administration of employee benefit plans,
and otherwise to assist in effecting an orderly transition following the
Distribution.
-14-
7.5 Production of Witnesses. At all times from and after the
Distribution Date, each of Chronimed and MGI shall use reasonable efforts to
make available to the other, upon written request, its officers, directors,
employees and agents as witnesses to the extent that such persons may reasonably
be required in connection with legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
7.6 Reimbursement. Except to the extent otherwise contemplated by any
Ancillary Agreement, a party providing Information, Services or witnesses to the
other party under this Article VIII shall be entitled to receive from the
recipient, upon the presentation of invoices therefor, payments for such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(but not salary payments), as may be reasonably incurred in providing such
Information or Services.
7.7 Retention of Records. For a period of six (6) years following the
Distribution Date, each of Chronimed and MGI shall retain all Information
relating to the other, except as otherwise required by law or set forth in an
Ancillary Agreement or except to the extent that such Information is in the
public domain or in the possession of the other party; provided, that, after the
expiration of such retention period, such Information shall not be destroyed or
otherwise disposed of at any time, unless, prior to such destruction or
disposal, (a) the party proposing to destroy or otherwise dispose of such
Information shall provide no less than ninety (90) days' prior written notice to
the other, specifying in reasonable detail the Information proposed to be
destroyed or disposed of and (b) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested, at the
expense of the party requesting such Information.
7.8 Confidentiality. Subject to any contrary requirement of law and the
right of each party to enforce its rights hereunder in any legal action, each
party shall keep strictly confidential, and shall cause its employees and agents
to keep strictly confidential, any Information of or concerning the other party
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under, any provisions of this Agreement or
any Ancillary Agreement; provided, however, that such restriction shall not
apply to any Confidential Information which is (a) independently developed by
the receiving party outside the scope of this Agreement, (b) in the public
domain at the time of its receipt or thereafter becomes part of the public
domain through no fault of the receiving party, (c) received without an
obligation of confidentiality from a third party having the right to disclose
such information, (d) released from the restrictions of this Section 7.8 by the
express written consent of the disclosing party, (e) disclosed to any permitted
assignee, permitted sublicensee or permitted subcontractor of either Chronimed
or MGI hereunder (if such assignee, sublicense or subcontractor is subject to
the provisions of this Section 7.8 or comparable provisions), or (f) required by
law, statute, rule or court order to be disclosed (the disclosing party shall,
however, use commercially reasonable efforts to obtain confidential treatment of
any such disclosure). The obligations set forth in this Section 7.8 shall
survive for a period of five (5) years from the Effective Date.
-15-
7.9 Privileges. Chronimed and MGI agree to maintain, preserve and
assert all privileges that either party may have, including without limitation,
any privilege or protection arising under or relating to any attorney-client
relationship that existed prior to the Distribution Date ("Privilege" or
"Privileges"). MGI and Chronimed shall be entitled to require the assertion of,
or to decide whether to consent to the waiver of, any and all Privileges which,
in the case of MGI, relate to the Assets and/or Assumed Liabilities, and, in the
case of Chronimed, relate to the assets and/or liabilities not transferred to
MGI. Each of Chronimed and MGI shall use the same degree of care as it would
with respect to itself so as not to waive any Privilege which could be asserted
under applicable law.
Upon receipt by any party of any subpoena, discovery or other requests
which arguably calls for the production or disclosure of information subject to
Privilege of the other party, such receiving party shall promptly notify the
other party of the existence of the request and shall provide the other party
reasonable opportunity to review the information and to assert any rights that
it may have under this section or otherwise with respect to such information.
Nothing in this Agreement shall operate to reduce, minimize or
condition the right either party has under its Privileges, or the rights granted
to either party in, or the obligations imposed upon either party by, this
Section 7.9.
ARTICLE VIII
TAX MATTERS
8.1 Effective Date. It is the intention of Chronimed and MGI that the
Distribution shall be treated as being effective on the Effective Date for
purposes of allocating Tax liability (other than Taxes as a result of the
Transfer of Assets to MGI and the Distribution). Consistent with this intention,
liabilities for such Taxes relating to periods ending on or prior to the
Effective Date, and, correspondingly, the benefit of any credits, refunds or
other Tax benefits relating to such periods, shall be for the account of
Chronimed. Similarly, all liabilities for such Taxes relating to the operations
of MGI and the MGI business for periods on or after the Effective Date, and
corresponding, any credits, refunds or other Tax benefits relating to such
periods, shall be for the account of MGI. The sections set forth below specify
in greater detail how said objectives are to be achieved (and the sections below
shall govern if there are any inconsistencies between this section and such
sections) and address other matters relating to Taxes.
8.2. Tax Indemnification by Chronimed. Chronimed shall indemnify and
hold MGI and any successor corporation thereto or post-Distribution Date
Affiliates thereof harmless from and against the following Taxes arising from or
attributable to the business or operations of MGI or Chronimed or their
respective Affiliates:
(a) Any and all Taxes arising in or attributable to any taxable period
ending before the Effective Date;
(b) Except as provided in Section 8.6 below, 60% of any and all Taxes
of Chronimed and/or MGI or their Affiliates in connection with the Transfer of
Assets to MGI described herein
-16-
and the Distribution (including any liability of Chronimed and/or MGI or their
Affiliates to shareholders of Chronimed or MGI for Taxes of shareholders in
connection with the Distribution), specifically including but not limited to any
Taxes attributable to gain imposed on Chronimed under Sections 311 or 355 of the
Code, and any sales and use, gross receipts, or other transfer Taxes imposed on
the Transfer of Assets to MGI described herein or on the Distribution;
(c) Any several liability of MGI under Treasury Regulations section
1.1502-6 or under any comparable or similar provision under state, local or
foreign Laws or regulations for Tax periods beginning on or prior to the
Distribution Date;
(d) Any Taxes allocated to Chronimed under Section 8.4.
On or prior to the Effective Date, Chronimed shall cancel any other Tax sharing
agreements to which MGI would be subject.
8.3 Tax Indemnification by MGI. MGI shall indemnify and hold Chronimed
and any successor corporations thereto and any Affiliates thereof (other than
MGI) harmless from and against the following Taxes:
(a) any and all Taxes from or attributable to the Business or
operations of MGI arising in or attributable to any taxable period beginning on
or after the Effective Date, due or payable by MGI or by Chronimed, except Taxes
described in Sections 8.2(b) or (c) above or Section 8.3(b);
(b) Except as provided in Section 8.6 below, 40% of any and all Taxes
of Chronimed and/or MGI or their Affiliates in connection with the Transfer of
Assets to MGI described herein and the Distribution (including any liability of
Chronimed and/or MGI or their Affiliates to shareholders of Chronimed or MGI for
Taxes of shareholders in connection with the Distribution), specifically
including but not limited to any Taxes attributable to gain imposed on Chronimed
under Sections 311 and 355 of the Code, and any sales and use, gross receipts,
or other transfer Taxes imposed on the Transfer of Assets to MGI described
herein or on the Distribution;
(c) any Taxes allocated to MGI under Section 8.4.
8.4 Allocation of Certain Taxes. Any Taxes for a taxable period
beginning before the Effective Date and ending after the Effective Date with
respect to MGI or the Business (other than Taxes described in Sections 8.2(b) or
(c), Section 8.3(b), or Section 8.6 herein) shall be paid by Chronimed or MGI,
and the Taxes for such period shall be apportioned for purposes of Section 8.2
and Section 8.3 between Chronimed and MGI based upon (i) whether the date of the
transaction or incident creating the Tax liability occurred before the Effective
Date on the one hand, or on or after the Effective Date, for transactional or
similar Taxes (such as sales tax), (ii) on the portion of the income for the
period before the Effective Date and the portion of the income on or following
the Effective Date for Income Taxes (with the allocation of income being made as
if the books were closed as of the day before the Effective Date), and (iii) on
the portion of such period before the Effective Date and the portion of such
period on and after the
-17-
Effective Date for all other Taxes. For purposes of Section 8.3(a), MGI's Income
Tax liability for periods beginning on or after the Effective Date for Returns
for which MGI and Chronimed filed consolidated or combined Returns shall be the
excess of Chronimed's combined or consolidated (as the case may be) Income Tax
liability for its Return including MGI, over Chronimed's combined or
consolidated Income Tax liability for such Return if neither the Business nor
MGI were included in the combined or consolidated group for the Tax year
beginning on the Effective Date.
8.5 Indemnification Matters. Unless otherwise specified in this
Agreement, all indemnification and other Tax payments to be made pursuant to
this Article VIII shall be made within thirty (30) days of (a) written notice of
a payment by or the incurrence of such an amount based on a Determination by a
Taxing Authority or the filing of a Tax Return, which notice shall be
accompanied by a computation of the Tax due, or (b) written notice of an other
indemnifiable Tax payment due, which notice shall be accompanied by a
computation of the Tax due. Chronimed and MGI agree to report for Tax purposes
any Tax indemnity payment made pursuant to this Article VIII as a distribution
or capital contribution, as appropriate, occurring immediately before the
Effective Date. If, notwithstanding the manner in which Tax indemnity payments
are reported, there is an adjustment to the Tax liability of the recipient of a
Tax indemnity payment, the payment shall be appropriately adjusted to place the
parties in the same after-Tax position they would have enjoyed absent such
adjustment to Tax liability. If an indemnified party realizes a benefit in any
period as a result of making the payment with respect to which an
indemnification or other Tax payment is required to be made, the indemnified
party shall pay to the indemnifying party the amount of such Tax benefit. If any
indemnification payment required to be made pursuant to this Agreement is not
made when due, such payment shall bear interest at the prevailing interest rate
for underpayments as determined under Section 6621 of the Code; provided,
however, that this sentence shall not permit a doubling up of interest for a
time period if the amount to paid as an indemnity payment includes interest for
such time period.
8.6 Covenant Against Certain Actions. Chronimed agrees that it shall
not, and MGI agrees that it shall not, take or fail to take any action
(including, without limitation, any cessation, transfer to Affiliates or
disposition of its active trade or business, certain reacquisitions of its
stock, and entering into any transaction or arrangement pursuant to which one or
more persons acquire stock of the company representing a "50% or greater
interest" within the meaning of Section 355(d)(2)(4) of the Code that would
cause Section 355(e) of the Code to apply to the Distribution) that would cause
the Transfer of Assets to MGI hereunder to be taxable, the Distribution to fail
to qualify under Section 355 of the Code, or the Distribution to result in Tax
to Chronimed under Sections 355(d) or (e) of the Code. Chronimed shall be
responsible for all of any Taxes of Chronimed and MGI in connection with the
Transfer of Assets to MGI and the Distribution (including any liability of
Chronimed and/or MGI or their Affiliates to shareholders of Chronimed or MGI for
-18-
Taxes of shareholders in connection with the Distribution) that are solely
attributable to, or solely result from, Chronimed's violation of its covenant in
this Section 8.6. MGI shall be responsible for all of any Taxes of Chronimed and
MGI in connection with the Transfer of Assets to MGI and the Distribution
(including any liability of Chronimed and/or MGI or their Affiliates to
shareholders of Chronimed or MGI for Taxes of shareholders in connection with
the Distribution) that are solely attributable to, or solely result from, MGI's
violation of its covenant in this Section 8.6.
8.7 Filing Responsibility.
(a) Chronimed shall prepare and file or shall cause MGI to prepare and
file the following Returns with respect to MGI:
(i) all Income Tax Returns for any taxable period ending on or
before the Distribution Date; and
(ii) all other Returns required to be filed (taking into
account extensions) on or before the Distribution Date.
(b) MGI shall prepare and file all other Returns with respect to MGI
required to be filed (taking into account extensions) after the Distribution
Date. MGI and Chronimed agree that they will treat MGI as if such entity ceased
to be part of Chronimed's affiliated group, within the meaning of Section 1504
of the Code, as of the opening of business on the day after the Distribution
Date.
(c) With respect to any Return to be filed by MGI including Taxes for
which Chronimed has liability hereunder, MGI shall consult with Chronimed
concerning such Return and shall report all items directly resulting in Tax
liability to Chronimed in accordance with this Agreement and the instruction of
Chronimed (but in accordance with past practices in preparing such returns to
the extent still permissible), unless otherwise agreed by Chronimed and MGI. MGI
shall provide Chronimed with a copy of each proposed return at least fifteen
(15) days prior to the filing of such Return, and Chronimed may propose comments
to MGI, which comments shall be delivered to MGI within seven (7) days of
receiving such copies from MGI.
(d) With respect to any Return to be filed by Chronimed including Taxes
for which MGI has liability hereunder (other than by reason of Section 8.3(b)),
Chronimed shall consult with MGI concerning each such Return and shall report
all items directly resulting in Tax liability to MGI in accordance with this
Agreement and the instruction of MGI (but in accordance with past practices in
preparing such returns to the extent still permissible), unless otherwise agreed
by Chronimed and MGI. Chronimed shall provide MGI with a copy of each proposed
return at least fifteen (15) days prior to the filing of such Return, and MGI
may propose comments to Chronimed, which comments shall be delivered to
Chronimed within seven (7) days of receiving such copies from Chronimed.
(e) All Returns shall be filed consistent with the Distribution
qualifying as a spin-off under Section 355 of the Code.
8.8 Refunds and Carrybacks.
(a) Chronimed shall be entitled to an amount equal to any refunds or
credits of Taxes attributable to taxable periods ending before the Effective
Date and attributable to Taxes
-19-
allocated to Chronimed under Section 8.4. MGI shall be entitled to an amount
equal to any refunds or credits of Taxes attributable MGI or the Business for
taxable periods beginning on or after the Effective Date (except for Taxes
described in Sections 8.2(b), 8.3(b) and 8.6) and attributable to Taxes
allocated to MGI under Section 8.4. Refunds of credits of Taxes described in
Sections 8.2(b), 8.3(b), and 8.6 shall be allocated to Chronimed and MGI in
proportion to the parties' liability hereunder for such Taxes.
(b) MGI shall promptly forward to Chronimed or reimburse Chronimed for
any refunds or credits due Chronimed (pursuant to the terms of this Article
VIII) after receipt thereof, and Chronimed shall promptly forward to MGI or
reimburse MGI (pursuant to the terms of this Article VIII) for any refunds or
credits due MGI after receipt thereof.
(c) Chronimed agrees to pay to MGI the Income Tax benefit from its use
of an item of loss, deduction or credit of the Business or MGI, or a carryback
thereof, which arises in any taxable period beginning on or after the Effective
Date (or is attributable to the portion of the taxable period on or after the
Effective Date for a Tax period that begins before the Effective and ends after
the Effective Date); provided, however, that if such use permanently prevents
Chronimed from receiving a Tax benefit from its own loss, deduction, or credit
carryback, MGI shall reimburse Chronimed for such payment to the extent of such
lost Tax benefit at the time Chronimed would have received such benefit. Unless
Chronimed otherwise agrees in writing, MGI agrees to elect under Section
172(b)(3) of the Code, and any corresponding state or foreign statutes, to
relinquish any right to carryback net operating losses (in which event no
payment is due from Chronimed to MGI).
(d) (i) If (xx) any adjustment is made to any Return where the
adjustment relates to the Tax Liability of Chronimed or any of its Affiliates
(including, prior to the Effective Date, MGI) for any period prior to the
Effective Date or under Section 8.2(b) and there is a correlative offsetting
adjustment to any Return applicable to the Business or MGI or any of its
Affiliates for any period on or after the Effective Date (including Chronimed's
combined or consolidated Return including MGI for the period beginning on the
Effective Date and ending on the Distribution Date but only with respect to the
Tax liability allocated to MGI under Section 8.4 hereof) or (yy) any adjustment
is made to any Return where the adjustment relates to the Tax Liability of MGI
or of its Affiliates for any period on or after the Effective Date (including
Chronimed's combined or consolidated Return including MGI for the period
beginning on the Effective Date and ending on the Distribution Date but only
with respect to the Tax liability allocated to MGI under Section 8.4 hereof) and
there is a correlative offsetting adjustment applicable to any Return of
Chronimed or any of its Affiliates (including, prior to Effective Date, MGI),
the party whose adjustment is favorable (i.e., the party to which there inures,
directly or indirectly, a net Tax benefit as the result of any adjustment (MGI
or Chronimed, as the case may be)) shall pay to the other party the amount of
such net Tax benefit at such time or times as and to the extent that such
benefit is realized through a refund of Tax or actual reduction in the amount of
Taxes which would otherwise be paid if such adjustment had not been made;
provided, however, that the party whose adjustment is favorable shall not be
required to make a payment to the other party in excess of the amount (if any)
of the net Tax detriment to such other party correlative to such net Tax
benefit; provided, further, that if the party whose adjustment is favorable
realizes a net Tax benefit prior to the time the other party realizes a net Tax
determent,
-20-
the party whose adjustment is favorable shall not be required to make any
payments to the other party until such time or times as the net Tax detriment is
actually realized by such other party. This subparagraph (i) shall apply whether
the adjustment is a result of or in settlement of any audit, other
administrative proceeding or judicial proceeding or the filing of an amended
Return to reflect the consequences of any Determination made in connection with
any such audit or proceeding or otherwise. This subparagraph (i) shall not be
applicable to the extent that the party obligated to make a payment under this
subparagraph is obligated under this Article VIII (aside from this subparagraph)
to make a payment to the other party for the Tax detriment described in this
subparagraph.
(ii) If either MGI or Chronimed makes a payment to the other party
pursuant to subparagraph (i) above, and (a) it is later determined by the
applicable Taxing Authority that the party who made such payment is not entitled
to the net Tax benefit which gave rise to such payment, then the party who
received such payment shall promptly remit to the party who made such payment
the amount of such payment that is attributable to the disallowed Tax benefit,
or (b) if, as a result of a correlative adjustment, an attribute arising in a
later period which would otherwise be able to be carried back to the taxable
year or years in which the party making the payment thereunder realized a net
Tax benefit (a "Displaced Carryback") cannot be utilized, the party receiving a
payment pursuant to this subsection (d) will repay to the payer an amount
sufficient to place the payer in the same position (ignoring for this purpose
any potential carry forward of the Displaced Carryback) as it would have been if
the correlative adjustment had not occurred, except that the payer shall
subsequently return an amount up to such repayment when as and to the extent the
payer actually receives a net Tax benefit from the Displaced Carryback.
(iii) For purposes of determining whether a correlative adjustment
described in this subsection (d) has a net Tax benefit, or detriment to the
party affected, all effects of such adjustment, including without limitation,
interest, penalties and additions to Tax required to be paid or received, any
Tax imposed upon a refund or reduction in Tax and any Tax consequences
occasioned by any payment made or to be made by one party to the other shall be
taken into account.
(iv) Each of Chronimed and MGI agrees that, unless the other company
consents in writing, no amended Return shall be filed with a Taxing Authority
(other than an amended Return to reflect the consequences of any Determination
made in connection with any Tax Audit described in subparagraph 8.8(d)(i)) if
the effect of the amended Return would be to produce a correlative Tax detriment
to the company not filing the amended Return in the manner described in
subparagraph 8.8(d)(i).
(f) Where a payment is required under this Section 8.8, such payment
shall be made within thirty (30) days of the filing of any Tax Return that
creates the Tax benefit or detriment giving rise thereto, or the payment or
reduction in credit creating the Tax detriment or the receipt of the refund or
credit creating the Tax benefit.
-21-
8.9 Cooperation and Exchange of Information.
(a) As soon as practicable but in any event within sixty (60) days
after Chronimed's request, from and after the Effective Date, MGI shall provide
Chronimed with such cooperation and shall deliver to Chronimed such information
and data concerning the pre-Distribution Date operations of MGI and make
available such knowledgeable employees of such entities as Chronimed may
reasonably request, including providing the information and data required by
Chronimed 's customary Tax accounting questionnaires, in order to enable
Chronimed to complete and file all Returns which it may be required to file with
respect to the operations and business of MGI through the Distribution Date or
to respond to audits by any Taxing Authorities with respect to such operations
and to otherwise enable Chronimed to satisfy its internal accounting, Tax and
other legitimate requirements. Such cooperation and information shall include
without limitation provision of powers of attorney for the purpose of signing
Returns and defending audits for the periods ending on or prior to the
Distribution Date and MGI will promptly forward copies of appropriate notices
and forms or other communications received from or sent to any Taxing Authority
which relate to Chronimed or its obligations hereunder and provide copies of all
relevant Returns, together with accompanying schedules and related workpapers,
documents relating to rulings or other Determinations by any Taxing Authority
and records concerning the ownership and Tax basis or property, which MGI and
its Affiliates, if any, may possess. Chronimed shall furnish MGI with its
cooperation in a manner comparable to that described in this Section 8.9(a) for
all pre-Distribution periods.
(b) For a period of ten (10) years after the Distribution Date or such
longer period as may be required by law, each of Chronimed and MGI shall retain
and not destroy or dispose of all Returns (including supporting materials),
books and records (including computer files) of, or with respect to its
activities or Taxes, for all taxable periods ending on or prior to the
Distribution Date. Thereafter, each of Chronimed or MGI shall not destroy or
dispose of any such Returns, books or records unless it first offers such
Returns, books and records to the other party in writing and the other party
fails to accept such offer within sixty (60) days of its being made.
(c) MGI and Chronimed and their respective Affiliates shall cooperate
in the preparation of all Returns relating in whole or in part to taxable
periods ending on or before or including the Effective Date or Distribution
Date.
(d) Whenever Chronimed or MGI receives in writing from the IRS or any
other Taxing Authority notice of an adjustment which may give rise to a payment
from the other party under this Article VIII, Chronimed or MGI (as the case may
be) shall give notice of the adjustment to the other party within ten (10) days
after the receipt of the notice. Chronimed shall have the right, at its own
expense, to control any audit or examination by any Taxing Authority ("Tax
Audit"), initiate any claim for refund, contest, resolve and defend against any
assessment, notice of deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for which it would be liable under this Article
VIII. MGI shall have the right, at its own expense, to control any other Tax
Audit, initiate any other claim for refund, and contest, resolve and defend
against any other assessment, notice of deficiency, or other adjustment or
proposed adjustment relating to Taxes for which it would be liable under this
Article VIII. If the Tax Audit relates to Taxes for which MGI would be liable
under this Article VIII and for which Chronimed would be
-22-
liable under this Article VIII, Chronimed shall control the Tax Audit subject to
provisions of this Section 8.9(d). Chronimed and MGI, as the case may be, shall
keep the other party duly informed and shall consult with each other with
respect to the resolution of any issue that would adversely affect the other
party, and not settle any such issue, or file any amended Return relating to any
such issue, without the consent of the affected party, which consent shall not
unreasonably be withheld. Where consent to a settlement is withheld pursuant to
this Section, the party controlling the audit or examination may nevertheless
settle, continue or initiate any further proceedings at its own expense,
provided that any adjustments required shall be made and treated as set forth in
Section 8.9(d).
(e) If MGI or Chronimed fails to provide any information requested by
the other party in the time specified herein, or if no time is specified
pursuant to this Section 8.9, within a reasonable period, or otherwise fails to
do any act required of it under this Section 8.9, then, notwithstanding any
other provision of this Agreement, the party failing to provide the information
shall indemnify and hold the other party harmless from and against any and all
costs, claims or damages, including, without limitation, all Taxes or
deficiencies thereof, payable as a result of such failure.
(f) MGI and Chronimed shall cooperate with each other by providing any
appropriate certificates or statements (such as a Minnesota resale exemption
certificate) if needed for the Transfer of Assets to MGI hereunder or the
Distribution to qualify for a Tax exemption or other provision making the
transaction nontaxable.
ARTICLE IX
ADDITIONAL ASSURANCES
9.1 Mutual Assurances. Chronimed and MGI agree to cooperate with
respect to the implementation of this Agreement and the Ancillary Agreements and
to execute such further documents and instruments as may be necessary to confirm
the transactions contemplated hereby. Such cooperation may include joint
meetings with corporate partners, suppliers, customers and others to the extent
necessary to assure the orderly transition of the business and assets
contemplated hereby; provided, however, that nothing herein shall be deemed to
obligate either Chronimed or MGI to take any action or reach any understandings
which may violate any applicable laws.
ARTICLE X
EMPLOYEES AND BENEFITS
10.1 Offers of Employment and Benefits. Effective as of the Effective
Date, MGI shall offer employment to all employees of Chronimed primarily
employed in the Business, including but not limited to those employees who are
then on authorized leaves of absence or legally required leaves of absence, and
to those employees specified on Schedule 10.1. Said offers of employment to each
employee shall be at rates of compensation, including incentive compensation, no
less favorable than the rate of compensation currently being paid to each
employee, and the package of benefits offered to each employee shall be
reasonably comparable,
-23-
taken as a whole, to the package of benefits presently received by such employee
from Chronimed; provided, however, that it is specifically understood and agreed
that MGI will be establishing its own Stock Option Plan, which may or may not be
similar to the Stock Option Plan of Chronimed; and provided further, that MGI
reserves the right to reevaluate, alter, amend, terminate or suspend any
employee benefit plan at MGI at any time after the Distribution Date for any
reason.
After the Effective Date wherever any employee benefit plan, program or
policy is made available by MGI to the former employees of Chronimed who are now
employed by MGI: (i) to the extent permitted by law, service with Chronimed by
any such employee prior to the Effective Date shall be credited in determining
such employee's eligibility, vesting, vacation accruals and benefit levels under
any such plan, program or policy; and (ii) with respect to any welfare benefit
plans for which such employees may become eligible, MGI shall, to the extent
permitted by law, cause such plans to provide credit for any applicable
co-payments or deductibles paid prior to the Effective Date by such employees
and waive pre-existing conditions, exclusions and waiting periods, other than
exclusions or waiting periods that have not been satisfied or waived under any
welfare plans maintained by Chronimed for such employees prior to the Closing
Date.
10.2 Termination of Employment and Chronimed Obligations.
Contemporaneously with such offers of employment by MGI, Chronimed shall
terminate each such employee. In the event that any employee does not accept
MGI's offer of employment, and Chronimed is required to pay severance to said
employee, MGI shall reimburse Chronimed for the cost of such severance payments.
Any severance payments will be made in accordance with Chronimed's current
policy.
Chronimed shall pay to each employee terminated by Chronimed as of the
Effective Date all accrued wages, salary, commission and other employee
compensation payments due for services prior to the Effective Date promptly, and
in any event no later than such payments would have otherwise been due to said
employees. Chronimed shall not pay accrued vacation or holiday pay due to said
employees; rather, said amounts shall be assumed and paid by MGI and the amount
thereof shall be treated as an Assumed Liability pursuant to Section 4.2.
10.3 401(k) Plan. MGI shall establish a 401(k) Plan which is
substantially similar in its terms and provisions to the 401(k) Plan currently
maintained by Chronimed. However, MGI intends to use a different trustee and
custodian for its Plan and, as a result, investment choices under the MGI Plan
will not be identical to those provided under Chronimed's Plan. No distributions
will be made from the Chronimed Plan to Chronimed employees who become employees
of MGI. Rather, there will be a plan-to-plan transfer of account balances for
all such employees from the Chronimed Plan to the MGI Plan.
10.4 No Hiring. For a period of 12 months following the Effective Date,
each of Chronimed and MGI shall not employ any employee of the other without the
written consent of the other party.
-24-
ARTICLE XI
CERTAIN ADDITIONAL MATTERS
11.1 Nasdaq National Market Listing. MGI hereby agrees to use its
reasonable efforts to effect and maintain the listing of the MGI Common Stock on
the Nasdaq National Market System.
11.2 PaineWebber. Under an agreement with PaineWebber dated March 25,
1999 ("PaineWebber Agreement"), Chronimed will be obligated to pay a fee to
PaineWebber if certain types of transactions are closed by either Chronimed or
MGI for the time period specified in the PaineWebber Agreement. If Chronimed is
party to a transaction which gives rise to a fee obligation under the
PaineWebber Agreement, Chronimed shall be solely responsible for, and shall
indemnify, save and hold harmless MGI against, any obligation for said fee.
Correspondingly, if MGI is party to any transaction which gives rise to a fee
obligation under the PaineWebber Agreement, MGI shall be solely responsible for,
and shall indemnify, save and hold harmless Chronimed against, any obligation
for said fee.
11.3 Use of Chronimed Name. Within 90 days after the Distribution Date,
MGI, at its own expense, shall remove (or, if necessary, cover-up) any and all
exterior and interior signs and identifiers which refer or pertain to Chronimed
at MGI's locations. Until March 31, 2001, MGI shall have the right to use
existing supplies and documents, such as, but not limited to forms, labels,
shipping materials, packaging materials, catalogs, manuals, advertising material
and similar material being transferred to it pursuant to this Agreement which
have imprinted thereon the name "Chronimed" or trademarks or symbols comprising
the name "Chronimed." At the end of such time period, MGI shall destroy all such
remaining supplies and documents.
11.4 Limitation of Liability. Notwithstanding anything to the contrary
contained herein, each of Chronimed's and MGI's respective obligations under
this Agreement to the other where either has claims against the other, shall be
limited to direct and actual damages and shall exclude incidental,
consequential, punitive and special damages; provided, however, that the
foregoing shall not be deemed to limit either party's obligation to indemnify
the other with respect to claims by a third party where the damages obtained by
the third party might otherwise be subject to the foregoing limitations.
11.5 Letters of Credit. MGI shall use its commercially reasonable
efforts to substitute MGI letters of credit for any Chronimed letters of credit
outstanding on the Effective Date with respect to obligations of the Assets and
Business transferred to MGI hereunder. In addition, MGI shall reimburse
Chronimed for any costs incurred or funds advanced by Chronimed following the
Effective Date with respect to any such letters of credit.
11.6 Liabilities Related to Transaction. The parties have reached
specific agreement regarding which party should bear certain specific expenses
and liabilities relating the implementation of the transactions contemplated by
this Agreement and the Ancillary Agreements. Exhibit A attached hereto sets
forth the expenses which are subject to the parties' specific agreement and sets
forth the agreement of the parties regarding the bearing of such
-25-
expenses. Each of MGI and Chronimed agree to pay and be responsible for those
expenses allocated to them pursuant to Exhibit A.
Except as otherwise specifically provided in this Agreement, Chronimed
and MGI shall bear their own expenses associated with the Distribution.
11.7 Insurance. MGI acknowledges that from and after the Distribution
Date, MGI will not be covered under, nor will it be entitled to protection
pursuant to this Agreement under, the insurance policies maintained by
Chronimed. MGI acknowledges that it is its responsibility to obtain such
insurance coverage as it deems appropriate, specifically including insurance
coverage for actions, events and transactions which have occurred with respect
to the Business prior to the Effective Date.
ARTICLE XII
DISPUTE RESOLUTION
12.1 Procedure; Initial Meeting. In the event a dispute arises between
Chronimed and MGI arising out of or related to this Agreement or the Ancillary
Agreements or otherwise in connection with this Agreement and the transactions
contemplated hereby, the aggrieved party shall promptly notify the other party
by written notice, describing briefly the nature of the dispute (the "Dispute").
A meeting shall be held between the parties within ten (10) business days of
receipt of the notice, attended by individuals with decision-making authority
regarding the Dispute, to attempt in good faith to negotiate a resolution of the
Dispute.
12.2 Submission to Mediation. If, within thirty (30) days after such
meeting, the parties have not succeeded in negotiating a resolution to the
Dispute, they shall submit the Dispute at the earliest possible date to
non-binding mediation in accordance with the Commercial Mediation Rules of the
American Arbitration Association. In the event the mediation is not successful
in obtaining an agreed resolution of the Dispute, then the Dispute shall be
submitted to binding arbitration in accordance with the following section.
12.3 Binding Arbitration. If the mediation has not been successful,
either party may submit the dispute to binding arbitration before three (3)
arbitrators in Minneapolis, Minnesota (or such other location mutually
acceptable to the parties) pursuant to the then existing Commercial Arbitration
Rules of the American Arbitration Association. Each of Chronimed and MGI shall
select one (1) arbitrator, and the arbitrator so selected shall select the third
arbitrator. The arbitrators shall issue a written decision within forty-five
(45) days of the date all evidence is finally submitted to the panel. The
majority decision of the panel of arbitrators shall be final and binding on the
parties to this Agreement. Judgment upon the majority award of the arbitrators
may be entered by any court of competent jurisdiction.
Each party shall pay the fees of the arbitrator selected by that party.
Remaining costs of the arbitration shall be shared equally by the parties.
All negotiations and mediations pursuant to this Article XII shall be
treated as compromise and settlement negotiations for purposes of Federal Rules
of Evidence and comparable State Rules of Evidence.
-26-
12.4 Equitable Relief. Nothing herein shall preclude either party from
seeking equitable relief to prevent any immediate or irreparable harm to its
interests, including multiple breaches of this Agreement or an Ancillary
Agreement by the other party. Otherwise, the procedures set forth in this
Article XII are the exclusive means of resolving any Disputes. Either party may
seek specific enforcement of any arbitrator's decision under this Article XII.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing law. This Agreement shall be governed by the laws of the
State of Minnesota.
13.2 Construction. Each provision of this Agreement shall be
interpreted in a manner to be effective and valid to the fullest extent
permissible under applicable law. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions of
this Agreement which shall remain in full force and effect.
13.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
13.4 Complete Agreement: Construction. This Agreement and the Ancillary
Agreements and other agreements and documents referred to herein, shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
13.5 Exhibits. Exhibits to this Agreement shall be deemed to be an
integral part hereof, and schedules or exhibits to such Exhibits shall be deemed
to be an integral part thereof.
13.6 Amendments; Waivers. This Agreement may be amended or modified
only in writing executed on behalf of Chronimed and MGI. No waiver shall operate
to waive any further or future act and no failure to object of forbearance shall
operate as a waiver.
13.7 Notices. Notices hereunder shall be effective if given in writing
and delivered or mailed, postage prepaid, by registered or certified mail to:
Chronimed Inc.
00000 Xxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: CEO
or to:
MEDgenesis Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxx, Xxxxxxxxx 00000
Attention: CEO
-27-
13.8 Successors and Assigns. this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, provided that this Agreement and the rights and obligations
contained herein or in any exhibit or schedule hereto shall not be assignable,
in whole or in part, without the prior written consent of the parties hereto and
any attempt to effect any such assignment without such consent shall be void.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CHRONIMED INC.
By /s/ Xxxxx X. Xxxxxxxxxxx
Its President/COO
MEDgenesis INC.
By /s/ Xxxxxxx X. Xxxxxx
Its CEO
-28-
EXHIBIT A
AGREEMENT REGARDING SPECIFIC EXPENSES
Chronimed shall be responsible (i) for the legal fees of Xxxx, Plant,
Xxxxx, Xxxxx & Xxxxxxx relating to the Spin-Off transaction incurred through the
Distribution Date, (ii) for the fees of Ernst & Young relating to the Spin-off
transaction incurred through the Distribution Date, (iii) for the printing of
stock certificates, and (iv) for the charges of the Transfer Agent in connection
with the Distribution, for the Nasdaq fee and for the SEC fee.
Schedule 4.1(b)
(PG. 7)
EXCLUDED ASSETS
EXCLUDED "EDINA LOCATION AND BURY DRIVE LOCATION" ITEMS:
Any and all Data General computer equipment, including but not limited
to the main CPU, terminals, communications modems and printers.
Fireproof safe used for offsite tape storage.
Uninterrupted Power Supply battery system.
Seller's insurance claim for losses stemming from humidity problems
during calendar year 1999 in its Edina production facility.
Any and all laptop computers returned or not being used by the
Business.
Any and all inventory specifically identifiable to Seller's Home
Service Medical business.
All leasehold improvements not owned by Seller.
Copiers:
Bury Drive Location Sharp 5500 fax
(owned) Canon 202 copier (owned)
Sharp 2020 copier (leased) Sharp
9400 copier (owned)
Red Circle Drive Sharp 2020 copier (leased)
Sharp 5500 fax (leased)
-30-
Schedule 4.2(b)(iv)
(PG. 8)
CLAIMS AND LITIGATION
Chronimed Inc. x. Xxxxx Corporation, USDC (Minn.), #99CV369 (JRT/FLN)
In Re Diabetics Wholesale Club, Inc., Bankr. E.D. N.Y., #99-86372 dte
In Re Sun Healthcare Group, Inc. et. al., Bankr. Del., # 99- 3657 through
99-3841 (MWF)
Mariner Post Acute Care Network Chap. 11 petition in bankruptcy; Proof of Claim
to be filed.
-31-
Schedule 4.2 (b)(v)
(PG. 8)
LEASES, CONTRACTS AND
EMPLOYEE BENEFIT PLANS
Development, license, royalty and distribution agreements:
Meter Product Development and Supply Agreement,
LRE Technology Partner GmbH, April 2, 1999
License Agreement, LXN Corporation, November 24, 1998
Development and Distribution Agreement,
Cell Robotics International, Inc., July 30, 1998
Asset Purchase Agreement, Dia-Screen Corporation, January 13, 1998
Exclusive Distributor Agreement, Metertech Inc., November 20, 1996
Manufacturing Agreement,
MIT Development Corporation, September 26, 1996
Non-exclusive Distribution Agreement,
Maersk Medical (fka Pharma-Plast International A/S),
March 30, 1994
Distribution Agreement,
Maersk Medical (fka Pharma-Plast International A/S),
March 30, 1994
Distribution Agreement, Haemofix Medical Products AB, October 11, 1993
License Agreement, Hypoguard Limited, February 18, 1993
Customer pricing and volume discount agreements:
Advantage Health Services, May 14, 1999
*AMERICA'S BLOOD CENTERS, JANUARY 1, 2000
Xxxxxxx Enterprises, October 1, 1999
Certified Diabetic Services, Inc., March 1, 1999
Complete Care Services, February 11, 1999
*COUNSEL CORPORATION, NOVEMBER 1, 1997
Diabetic Supplies - Mid Atlantic/
All American Diabetes Supply/
U.S. Diabetic Supply/
Advantage Diabetes Supply, May 21, 1999
-32-
*DIABETIC SUPPLY PROGRAM, FEBRUARY 15, 1999
*DIVERSIFIED MANAGEMENT SERVICES, APRIL 13, 1999
Extendicare/UPC Health Network, April 5, 1999
Global Enterprises Group of Miami, Inc., September 9, 1999
Gulf South Medical Supply, April 5, 1999
Healthcare Centers of Indiana, LLC, April 1, 1999
Independent Medical Co-op, April 1, 1999
Insulin Infusion Specialist, April 5, 1999
NCS Healthcare, October 5, 1998
*PARAGON HEALTH NETWORK
Park Associates, Inc., April 1, 1999
*RX MED, MARCH 1, 1998
*SUNCHOICE MEDICAL SUPPLY, JANUARY 4, 1999
*UNITED DRUGS, JANUARY 1, 1999
Dept. of Veterans Affairs, January 1, 1997
*VITALINK PHARMACY SERVICES, DECEMBER 1, 1997
*XXXXXXX AND ASSOCIATES, INC., APRIL 1, 1999
* PRICING AGREEMENTS WHICH MAY HAVE EXPIRED OR ARE UNSIGNED.
International distribution agreements:
DISMED, Inc., March 1, 1999
*HUMAN GMBH
*SHELDRICK XXXXXXX PHARMACEUTICALS, LLC
* UNSIGNED AGREEMENTS IN NEGOTIATION .
Customer orders, orders for raw materials, manufacturing supplies, product
packaging, and the like, existing as of the Effective Date.
Personal property leases:
YSI 2300 Stat Plus Single Channel Analyzer
Glucose Starter Kit
Preventive Maintenance Kit Walnut Equipment Leasing, Lessor
Xxxx Slitter Imperial Capital, Lessor
Visual Manufacturing computer system
hardware and software Colonial Pacific Leasing, Lessor
Real property leases:
-33-
0000 X. 00xx Xx., Xxxxx, XX, October 27, 1998, Landlord Duke Realty
Investments LLP
0000 Xxxx Xxxxx, Xxxx Xxxxxxx, XX, June 10, 1997, Landlord Jorandcor
Inc.
Employment or similar agreements:
Employment Agreement, Xxxx Xxxxxx, March 17, 1998
Employment Agreement, Xxxxxx Xxxxx, March 17, 1998
Employee (Inventor) Agreement, Dr. Nam Won Huh, October 30, 1997
Employment Agreement, Xxxxxxx X. Xxxxxx, July 1, 1999
Employee benefits:
All obligations, fiduciary or otherwise, with respect to MEDgenesis
employee assets held in the Chronimed 401(k) benefit plan, to be transferred by
a plan-to-plan transfer on the Effective Date to the MEDgenesis 401(k) plan. All
obligations, fiduciary or otherwise, with respect to MEDgenesis employee health,
dental, disability, and life insurance premiums and benefits, and employee flex
account deposits, to be transferred on the Effective Date to equivalent
MEDgenesis company plans.
-34-
Schedule 10.1
(PG. 23)
MEDGENESIS EMPLOYMENT OFFEREES
LAST NAME FIRST NAME POSITION TITLE
Xxxxx Xxxxxx Sales Representative
Xxxxxxxx Xxxxx Production Operator
Xxxxxxxx Xxxx Supervisor, Chem Process
Xxxxxxxx Xxxxxx Order Processor
Xxxxxx-Xxxxxx Xxxxx Production Operator
Xxxxx Xxxxx Sales Support Rep II
Xxxxxxxx Xxxxxxxx Documentation Coordinator
Xxxxx Xxx Production Operator
Xxxx Xxxx Manager, Manufacturing - EP
Xxxxxxx Xxxxxx Quality Lab Technician
Xxxxx Xxxxxxxxx Sales Representative
Xxxxx Xxxx R&D Technician
Xxxxxxxx Xxxxxxx Sales Representative
Xxxxx Xxxxxxx Senior Process Technician
Xxxxxxxxxx Xxxxxxx Sales Representative
Xxxxxxx Xxxxxxx Manager, Purch & Inventory Control
Xxxxxxx Xxxx Manufacturing Technician
Xxxxxxx Xxxxx Process Technician
Xxxxxxxx Xxxxx Sales Representative
Xxxx Xxxxx Technical Service Rep.
Xxxxxx Xxxxxx Director, Marketing
Custard Xxxxx Xx. Quality Systems Technician
Xxxxxx Xxxx Production Operator
Xxx Xxxxxxx Sales Representative
Xxxxxxx Xxxxxxx Account Representative
Xxxxxxxx Xxxxxxxxx National Sales Manager
Xxxxxxxx Xxxx Quality Systems Supervisor - Edina
Xxxxxxx Xxxxx Production Operator
Xxxxx Xxxxxxxx Production Operator
Xxxxx Xxxxx Production Operator
Xxxxxx Xxxxxx Manufacturing Technician
Xxxx Xxxxxx Senior Production Operator
Xxxxxxx Xxxxx Mgr, Research & Development
Xxxxxxx Xxxxx Xxxx National Sales Coordinator
Xxxxx Xxxxxx Sr. Sales Representative
Xxxxx Xxxxxx Sales Representative
Xxxxxx Xxxxxxx Sr. Manufacturing Technician
Xxxxxx Xxxxxxx R Manager, Applied Technology
Xxxxxxxxxx Xxxxx M Manuf. Material Coord./Expeditor
Xxxxxxxx Xxxx Sales Representative
Xxxxxx Xxxxxxx Mgr, Qual Assur/Reg Affs
Xxxxxxx Xxxxx Product Manager - Int'l Marketing
Xxxxxxx Xxxxx HR Manager
Xxxx Xxxxxxx Manufacturing Technician
Xxxxxxx Xxxxxx Supv, Billing/Cust Serv.
Xxxx Xxxxxx Sr. Marketing Manager
Huh Xxx Xx. R & D Scientist
Xxxx Xxxx Manager, Manufacturing - Edina
Xxxxxxx Xxxxxxxxx Manufacturing Technician
-35-
Xxxxxx Xxxx Sales Support Rep I
Xxxxxx Xxxxxx Asst. Marketing Manager
Xxxxxxxx Xxxxxx Maintenance Manager
Xxxx Xxxx Senior Process Technician - Lead
Xxxxxx Xxxxxxx Sales Support Rep III
Xxxxxx-Xxxxxx Xxxxxx Xx. Development & Support Tech
Xxxxxxxx Xxxxxx Asst Devel & Support Scientist
Xxxxxxxxxxx Xxxxx Sales Representative
Xxxxxxx Xxxx Manager, Distribution
Xxxxx Xxxxxxx Regional Sales Manager
Xxxxxxxx Xxxxxxx Quality Systems Supervisor - Eden Prairie
Xxx Xxxxx Sales Representative
Xxx Xxxxxxx Account Representative
Xxx Xxxx Production Operator
Xxxxx Xxxxxxxxxxx Sales Coordinator
Lor Plia Production Operator
XxxXxxxxxx Xxxxx VP, Regulatory Affairs & Quality Systems
Xxxxxxxx Xxxxxx Development & Support Technician
Xxxxxxx Xxxxxx Sales Representative
Xxxxxxxx Xxxxxxx Production Operator
Xxxxxx Xxxxxx Xx. Sales Representative
XxXxxx Xxxx Dir., Operations/Finance
XxXxxxxxxx Xxxxx Sales Representative
Xxxxxx Xxx Process Technician
Xxxxx Xxxxxx VP, Engineering
Xxxxxx Xxxx Vice President, Marketing
Xxxx Xxxxx Mngr., Art & Design
Xxxxxx Xxxxxxxx Sales Representative
Xxxxxxx Xxxxx Preventative Maint. Tech
X'Xxxxx Xxxxx Xxxxxxx Sales Representative
Xxxxxxxx Xxxxxx Administrative Assistant
Xxxxx Xxxx Sales Representative
Xxxxx Xxxx Manufacturing Technician
Xxxxxxxxx Xxxxx Sales Representative
Xxxxxxxx Xxxx Sales Representative
Xxxxxxxx Xxxxxxx Mgr, Research & Development
Xxxxxxxxxxxxx Xxxxxxx Production Group Lead
Xxxxxxxx Xxx Sales Representative
Xxxxxx X.X. Production Group Lead
Xxxxxx Xxxxxxx Sales Representative
Xxxxxx Xxxxxxxx Supervisor, Tech Service
Xxxxx Xxxxx Production Operator
Xxxxxx Xxxxxx Regional Sales Manager
Xxxxxx Xxxxxx Sales Representative
Xxxxxxxx Xxxxx Technical Service Rep.
Saengsudham Xxxxx Xxxxx Production Supervisor
Xxxxx Xxxxx Production Operator
Xxxxxxxxxxx Xxxxx Devel. & Support Scientist
Xxxxx Xxxxxx Sales Representative
Xxxxxx Xxxx Lead Order Processor
Xxxxxxx Xxxx Business Research Manager
Xxxx Xxxxx Regional Sales Manager
Xxxxxxxxx Xxxxx Sales Representative
Xxxxxxxxx Xxxxxxx Regional Sales Manager
Xxxxxx Xxxxx Sales Representative
Xxxxxxxx Xxxxx Quality Lab Technician
Xxxxxxx Xxxx Assistant R&D Scientist
-00-
Xxxxxx Xxxxxxxxxxxx Production Operator
Taylor II Xxxxxxx Chairman / CEO
Xxxx Xxxxxxx CFO
Xxxxxxx Xxxxxx Process Technician
Tin Chhara Production Operator
Xxxxxxxxxxx Xxxxxxxxx AR Specialist II
Xxxx Dia Production Operator
Xxxxxxx Xx Xxx Quality Control Tech
Von Xxxxx Xxxxxxx Returned Goods Coordinator
Vue Tong Production Operator
Watt W. Claudius Production Operator
Xxxx Xxxxxxx Preventative Maint. Tech
Xxxxxx Xxxxxxx I/S Manager
Xxxx Xxxx Production Operator
-37-
AMENDMENT
TO
DISTRIBUTION AND
SPINOFF AGREEMENT
This Amendment is made effective July 1, 2000, between Chronimed Inc.
and MEDgenesis Inc. Chronimed and MEDgenesis have entered into a Distribution
and Spinoff Agreement effective July 1, 2000. The parties desire to amend the
Distribution and Spinoff Agreement with respect to the matters addressed below.
1. Except as specifically amended by this Amendment, the Distribution and
Spinoff Agreement and its terms remain unmodified and fully in force. In the
event of any contradictions between the terms or interpretation of this
Amendment and the Distribution Agreement, the terms of this Amendment shall
control.
2. Chronimed and MEDgenesis have agreed to make certain cash adjustments,
effective June 30, 2000, to account for activities affecting the parties'
businesses during the period March 31, 2000 to June 30, 2000. The total amount
of the adjustment (the "Net Adjustment") will be computed by Chronimed on or
before August 15, 2000, to be paid by the appropriate party on or before August
25, 2000. The Net Adjustment will be determined as follows:
A. Working Capital Adjustment. Chronimed will prepare two MEDgenesis
balance sheets for review and approval by MEDgenesis, a March 31, 2000
balance sheet and a June 30, 2000 balance sheet. Working capital from
these balance sheets is defined as total current assets (excluding
available-for-sale securities and deferred taxes) minus total current
liabilities (excluding deferred taxes). The Working Capital Adjustment
will be computed by taking working capital as of June 30, 2000 minus
working capital as of March 31, 2000. If the resulting amount is a
positive number, then MEDgenesis will owe Chronimed such amount. If the
resulting amount is a negative number, then Chronimed will owe
MEDgenesis such amount.
B. Property and Equipment Adjustment. For new MEDgenesis property and
equipment projects commenced after March 31, 2000 and paid for by
Chronimed on or before June 30, 2000, MEDgenesis will owe Chronimed
such amount. For MEDgenesis property and equipment projects commenced
on or prior to March 31, 2000, Chronimed will make such payments that
are due on or before June 30, 2000. MEDgenesis will make such payments
that are due after June 30, 2000.
C. Cell Robotics Adjustment. MEDgenesis will pay Chronimed the net
proceeds received from the sale of 68,200 shares of unrestricted stock
of Cell Robotics (CRII) held by MEDgenesis. Such sales will take place
in June, July and August 2000 and are for a portion of the specific
89,700 shares of CRII that became unrestricted in June, 2000.
-38-
D. Net Adjustment. The Net Adjustment will be calculated by taking the
positive or negative number from the Working Capital Adjustment section
plus the Property and Equipment Adjustment number from the Property and
Equipment Adjustment section, plus the Cell Robotics Adjustment number
from the Cell Robotics Adjustment section. The resulting number, if
positive, will be due to Chronimed from MEDgenesis. The resulting
number, if negative, will be due to MEDgenesis from Chronimed. This
number will then be recorded on the respective balance sheets of
Chronimed and MEDgenesis but will not affect the working capital
calculations proposed in the Working Capital Adjustment section.
CHRONIMED INC. MEDGENESIS INC.
By: /s/ Xxxxx X. Xxxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
Its: Chairman & CEO Its: Chairman & CEO
-39-
