EXHIBIT 10.29
COMBINATION INDEMNIFICATION
AND SECURITY AGREEMENT
THIS AGREEMENT is made April ____, 1997, by and between XXXXXXX X.
XXXXXX ("XXXXXX"), and CHRONIMED Inc., a Minnesota corporation ("CHRONIMED").
WHEREAS, Xxxxxx is an owner of a significant number of shares of
Chronimed stock, and Xxxxxx is or may be subject to certain margin calls issued
by brokerage firms with which Xxxxxx holds Chronimed stock on account, and
WHEREAS, without facilitation of short term financing for Xxxxxx'x
benefit, such margin call could result in Xxxxxx'x sale of a significant number
of shares of Chronimed stock, and
WHEREAS, any such sales of stock could have significant negative impact
on the market value of Chronimed stock, and
WHEREAS, FIRST BANK NATIONAL ASSOCIATION ("FIRST BANK") has agreed to
extend short-term financing to Xxxxxx for the sole purpose of covering such
margin calls, conditioned upon First Bank's receipt of Chronimed's guaranty of
such financing, and
WHEREAS, Xxxxxxxxx xxxxx it to be in its own best interests to
facilitate such financing and issue First Bank its guaranty (the "Chronimed
Guaranty"), and
WHEREAS, Chronimed is willing to guaranty Xxxxxx'x indebtedness and
Xxxxxx is willing to indemnify Chronimed on the terms set forth below.
It is therefore agreed:
1. GUARANTY.
Chronimed, at Xxxxxx'x request, shall guaranty Xxxxxx'x indebtedness to
First Bank under that certain Short Term Finance Facility (the "Principal
Indebtedness") to be entered by and among Xxxxxx and First Bank, a copy of which
is attached hereto as Exhibit A. Chronimed's guaranty obligation shall be
limited strictly to and dictated by the terms of the Principal Indebtedness and
shall extend to no other indebtedness, undertaking, or extension of the
Principal Indebtedness existing between Xxxxxx and First Bank or any other
lending institution.
2. INDEMNITY.
Xxxxxx shall indemnify and hold Chronimed harmless against all
liability, loss, and expense, including reasonable attorneys' fees, incurred by
Chronimed by reason of its guaranty of the Principal Indebtedness, or in
defending or prosecuting any suit, action, or other proceeding
brought in connection therewith, or in obtaining or attempting to obtain a
release from liability in respect thereof. Xxxxxx covenants that he will
reimburse Chronimed for, or pay over to Chronimed, all sums of money which
Chronimed pays or becomes liable to pay by reason of any of the foregoing, and
will make such payments to Chronimed as soon as it becomes liable therefor,
whether or not the Chronimed shall have paid out such sums or any part thereof.
3. SECURITY.
In order to secure Chronimed against loss by reason of any breach of
the foregoing covenant of indemnity by Xxxxxx, Xxxxxx hereby grants to Chronimed
the following security interests:
(a) In the event the per share price of Chronimed common stock shall be
reduced to Five and 75/100 Dollars ($5.75) or less per share, as of the close of
any trading day as reported on the NASDAQ exchange, Xxxxxx (and Xxxxxx'x spouse,
as the case may be) shall:
(i) pledge to Chronimed all Chronimed stock and any other securities
held by Xxxxxx, other than any securities held in street name in brokerage
accounts (the "Xxxxxx Securities"); and
(ii) convey to Chronimed an executed mortgage in that certain real
property owned by Xxxxxx and his spouse described generally as 000 Xxxx Xxxx
Xxxx Xxxx, Xxxxxxx, Xxxxxxxxx, 00000 (the "Home Mortgage");
each as collateral for the performance of Xxxxxx'x obligations under the
Principal Indebtedness. This Agreement shall constitute a fully enforceable
security interest and pledge with respect to the Xxxxxx Securities, without
requirement of further instrumentation or undertaking of the parties, contingent
only upon the occurrence of the market price condition stated herein. Xxxxxx
agrees, in the event Chronimed shall elect to enforce its right to receive the
Home Mortgage, that Xxxxxx (and Xxxxxx'x spouse) shall execute and deliver to
Chronimed, in recordable form, a real estate mortgage valid under the laws of
the State of Minnesota and securing Xxxxxx'x payment to Chronimed of any
indebtedness which may accrue to Chronimed under the Chronimed Guaranty.
In the event Xxxxxx shall default under any of the terms of the
Principal Indebtedness, or First Bank shall take any steps in enforcement of its
rights against Chronimed under the terms of the Chronimed Guaranty, whether
First Bank shall have first sought recovery against Xxxxxx or otherwise, Xxxxxx
also specifically grants to Chronimed, in addition to Chronimed's right to
enforce the security interests identified in the Paragraph 3(a)(i) and 3(a)(ii):
(iii) a lien on and right of offset against any profits which Xxxxxx
may incur by reason of Xxxxxx'x exercise of stock options in and subsequent sale
of Chronimed stock;
(iv) an ongoing right of offset, and authorization to enforce such
offset by voluntary garnishment or other legal process if required by law,
against any salary, bonus(es), financial
compensation, or other moneys due Xxxxxx by Chronimed, in amounts of up to 30%
of any such salary or other compensation per single payment event, and
(v) a right to require Xxxxxx to make a good faith application for
procurement of a home equity loan, at commercially reasonable terms, with the
proceeds of such loan to be applied directly to any and all indebtedness of
Xxxxxx or Chronimed under the Principal Indebtedness or the Chronimed Guaranty,
each until Chronimed's liability on the Chronimed Guaranty shall be discharged
in full and with prejudice. Each of the foregoing remedies shall be deemed
cumulative, not exclusive, and the enforcement in whole or in part of any single
remedy shall not be construed as a waiver or preclusion of Chronimed's right to
enforce any other remedy in part or in whole.
Chronimed shall have ongoing security interests in all the collateral
security given above until receipt of satisfactory evidence of the termination
of its liability on the Chronimed Guaranty. Xxxxxx agrees to provide Chronimed
with a verified personal financial statement in conjunction with the execution
of this Agreement.
4. STATUTORY RIGHTS IN COLLATERAL.
If Xxxxxx defaults under his covenant of indemnity, Chronimed shall
have, in addition to the rights enumerated above, any rights with respect to the
collateral security as may be afforded creditors or mortgagees under the Uniform
Commercial Code and the laws of the State of Minnesota on the date of this
agreement.
5. DEFENSE, COMPROMISE AND SETTLEMENT.
Chronimed may defend, adjust, settle, or compromise any claim, suit, or
judgment in respect of any obligation of Xxxxxx, guaranteed by Chronimed, after
notice to Xxxxxx and at Xxxxxx'x expense, unless Xxxxxx desires to litigate such
claim, defend such suit, or appeal such judgment, and simultaneously therewith
deposits with Chronimed additional collateral security sufficient to pay any
judgment rendered, with interest, costs, and expenses. Chronimed's right to
indemnification under this agreement shall extend to any money paid by it in
settlement or compromise of any such claims, suits, and judgments in good faith,
after notice to Xxxxxx.
6. LIABILITY AMONG PARTIES.
As between Xxxxxx and Chronimed, the former shall be primarily liable
for the payment of all of his obligations guaranteed by Chronimed. Nothing in
this agreement shall be construed to waive, abridge, or diminish any right or
remedy which Chronimed might otherwise have against Xxxxxx.
7. EVIDENCE OF LIABILITY.
If Chronimed pays any sums of money by reason of its Guaranty, the
vouchers or other evidence showing such payment shall be prima facie evidence
against Xxxxxx of the fact and amount of his liability to Chronimed hereunder.
9. COMMISSION.
In consideration of its becoming a guarantor on the obligations of
Xxxxxx, Xxxxxxxxx shall be entitled to receive a monthly commission of
three-quarters of 1 percent (0.75%) of the average amount of Xxxxxx'x
indebtedness under the Principal Indebtedness in each month with respect to
which Chronimed is a guarantor, payable to Chronimed on a quarterly basis
without demand.
10. MAINTENANCE OF ACCOUNT.
Xxxxxx agrees that so long as Chronimed retains any liability on the
Chronimed Guaranty, Xxxxxx shall not agree to nor permit any increase in the
limits of his margin loan accounts, with any brokerage firm, above or beyond
those loan limits as stated in his brokerage account statements dated March 31,
1997.
11. BINDING EFFECT.
This agreement shall be binding upon and inure to the benefit of the
parties and their legal representatives and successors, but it shall not inure
to the assigns of either party unless the other party gives written consent
thereto.
_________________________________ Date:________________________
Xxxxxxx X. Xxxxxx
CHRONIMED INC.
By:_______________________________ Date:________________________
Its:______________________________
