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Chronimed - Distribution And Spinoff Agreement
CHRONIMED INC.
EXHIBIT 10.1
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.
"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.
"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 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");
(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 6214 Bury Drive, Eden Prairie, Minnesota (the
"Bury Drive Location"), and at 5182 W. 76th St., Edina,
Minnesota (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");
(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 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 Bill of Sale and Assumption Agreement (the "Bill 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 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.
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.
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 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 ...
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