Document:

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:

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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.

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         "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.

<PAGE>

         "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

<PAGE>

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");

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                           (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");

<PAGE>

                           (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.

<PAGE>

                  (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.

<PAGE>

         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

<PAGE>

                  (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

<PAGE>

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,

<PAGE>

         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 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

<PAGE>

         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 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

<PAGE>

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.

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

<PAGE>

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.

         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

<PAGE>

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.

         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:

<PAGE>

         (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 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

<PAGE>

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 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

<PAGE>

of Chronimed or MGI for 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.

<PAGE>

         (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 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

<PAGE>

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, 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).

<PAGE>

         (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.

         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

<PAGE>

Taxes for which MGI would be liable under this Article VIII and for which
Chronimed would be 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

<PAGE>

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, 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.

<PAGE>

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

<PAGE>

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.

<PAGE>

         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.

         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.
                           10900 Red Circle Drive
                           Minnetonka, Minnesota 55343
                           Attention: CEO

         or to:

<PAGE>

                           MEDgenesis Inc.
                           5182 West 76th Street
                           Edina, Minnesota 55439
                           Attention: CEO

         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/ Henry F. Blissenbach
                                       Its Chief Executive Officer

                                       MEDgenesis INC.

                                       By /s/ Maurice R. Taylor II
                                       Its Chief Executive Officer

<PAGE>

EXHIBIT A

AGREEMENT REGARDING SPECIFIC EXPENSES

         Chronimed shall be responsible (i) for the legal fees of Gray, Plant,
Mooty, Mooty & Bennett 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.

<PAGE>

                                    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.

<PAGE>

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/ Henry F. Blissenbach            By: /s/ Maurice R. Taylor II

Its: Chief Executive Officer            Its: Chief Executive OfficerCHRONIMED INC.

                                                                   EXHIBIT 10.17

EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND HENRY F. BLISSENBACH

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT, made effective as of the first day of July 1, 2000,
entered into by and between CHRONIMED INC, a Minnesota corporation (the
"Company") and HENRY F. BLISSENBACH (the "Employee").

         WHEREAS, the Company desires to employ the Employee as its Chief
Executive Officer (CEO) and President in accordance with the following terms,
conditions and provisions; and

         WHEREAS, the Employee desires to perform such services for the Company,
all in accordance with the following terms, conditions and provisions;

         NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed as follows:

         1. EMPLOYMENT AND DUTIES.

         The Company hereby continues Employee's employment, and Employee hereby
accepts and agrees to serve the Company as the Company's CEO and President,
consistent with the job description for this position, and with duties subject
to review and modification from time to time at the direction of the Company's
Board of Directors (the "Board"). The Employee shall also function as Chairman
of the Board, subject to election by the Company's Board of Directors. The
Employee shall remain a member of the Company's Board of Directors, subject to
election by the shareholders of the Company. The Employee shall apply his best
efforts and devote substantially all of his time and attention to the Company's
affairs.

         2. TERM.

         The term of this Agreement and Employee's employment under this
Agreement shall commence on July 1, 2000, and shall continue thereafter for a
period of three years. Upon the expiration of the original term of this
Agreement, this Agreement shall automatically renew for successive two-year
terms, subject to termination as provided in Section 7.

         3. COMPENSATION.

         The Company shall compensate the Employee for his services at the
following salary, bonus, and benefits:

                  A. Base Salary

                           The Employee shall be paid a base salary of $295,000
                  per year, payable on the Company's normal payroll cycle. This
                  base salary is the minimum salary during the term of this
                  Agreement, and may be increased from time to time at the
                  discretion of the Board of Directors. Employee shall receive
                  an annual performance review, and, contingent upon
                  satisfactory review results, shall be eligible for increase of
                  such base salary at the direction of the Board of Directors.

<PAGE>

                  B. Bonus.

                           The Employee shall continue to participate in a
                  Company Management Incentive Plan, as approved and amended by
                  the Board of Directors from time to time, and which is
                  designed to deliver an annual bonus consistent with current
                  levels established for this position by the Board of
                  Directors. Employee shall periodically meet with the Board of
                  Directors, to establish quantitative and qualitative
                  initiatives and objectives for the purpose of assessing the
                  amount of bonus to be paid to Employee at the end of the
                  associated bonus period. Target annual bonus for satisfactory
                  performance shall be 60% of base salary. Amount payable to be
                  determined by Board based on Company and personal performance
                  criteria established by the Board. Bonus payable may range
                  from 0% to 150% of target amount (i.e., maximum bonus shall be
                  90% of base salary), depending on actual performance.

                  C. Stock Options.

                           The Employee shall be eligible to participate in the
                  annual grant of the Company's Stock Option Plan, consistent
                  with its terms and conditions, and with amounts of options,
                  including exercise price and vesting provisions determined by
                  the Board of Directors from time to time. Provisions under
                  this item 3C, stock options, are also subject to the
                  provisions found in Section 7, under termination of Agreement.

                  D. Employee Benefits Plans.

                           The Employee shall be entitled to participate in any
                  and all Company employee benefit plans, in accordance with the
                  eligibility requirements and other terms and provisions of
                  such plan or plans.

                  E. Insurance.

                           The Employee agrees that the Company, at the
                  discretion of its Board of Directors, may apply for and
                  procure on its own behalf, life insurance on the life of the
                  Employee, for the purpose of protecting the Company against
                  loss caused by the death of the Employee (commonly referred to
                  as "Key" insurance). Employee agrees to cooperate and submit
                  to medical examination, and to execute or deliver any
                  documentation reasonably required by the Company's insurer in
                  order to effectuate such insurance.
<PAGE>

         4. VACATION AND TIME OFF.

         The Employee shall be entitled to four weeks of paid vacation in each
year of employment under the terms of this Agreement, without reduction of
salary. Unused vacation time may be carried over to future years of employment,
consistent with Company policy affecting use of employee vacation time. In
addition, Employee shall be entitled to such additional time off from work,
without loss of compensation, for attendance at professional meetings,
conventions, approved "other business activities", as per Section 10, and
educational courses in accordance with the Company's general policies in this
regard, and as from time to time determined by its Board of Directors.

         5. EXPENSES.

         The Company will reimburse Employee for reasonable expenses incurred by
the Employee in connection with the business of the Company, according to
policies promulgated from time to time by the Board of Directors, and upon
presentation by Employee of appropriate substantiation for such expenses.
Further, the Company will allow Employee to travel business class, by air, and
reimburse Employee's monthly dues for country club or private club membership.
Also, the Company will provide reimbursement for tax/financial planning
assistance and preparation, up to $2,500 per year, as well as supplemental
medical examinations.

                  A. Automobile Allowance.

                           During the term of this Agreement, Employee shall
                  receive an automobile allowance of $800.00 per month.

         6. DISABILITY.

         Not withstanding any other provision of this Agreement, if employee is
totally disabled, as defined below, for an aggregate of 180 calendar days in any
one calendar year of employment, the company shall not be obligated to pay
employee the compensation provided in this contract for any period of total
disability during such year in excess of 120 days. In such event, Employee's
salary under Section 3 shall be prorated for such year of employment in the same
manner as if this Agreement had been terminated at the end of such 120th day.

         The Company agrees that, while on disability leave of absence, and for
the duration of such disability, Employee may continue to receive Employer's
group insurance plan coverage by compliance with the provisions of the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"), until the end of such
disability leave, or upon attainment of the age of 65, whichever is earlier.

<PAGE>

         For purposes of this Agreement, Employee shall be considered to be
totally disabled when he is considered to be as such by any insurance company
used by the Company to provide disability benefits for the Employee, and
Employee shall continue to be considered totally disabled until such insurance
company ceases to recognize him as totally disabled for purposes of disability
benefits. If no such disability policies are in effect for the benefit of the
Employee or for any reason an insurance company fails to make a determination of
the question of whether Employee is totally disabled, Employee shall be
considered to be totally disabled if, because of mental or physical illness or
other cause, he is unable to perform the majority of his usual duties on behalf
of the Company. The existence of a total disability of the Employee, the date it
commenced, and the date it ceases, shall be determined by the Board of Directors
and the Employee, under these circumstances. If the parties cannot agree on the
foregoing questions of disability, then any such determination shall be made
after examination of Employee by medical doctor selected by the Board of
Directors, and a medical doctor selected by the Employee. If the medical doctor
so selected cannot agree on the foregoing questions of disability, a third
medical doctor shall be selected by the two and the opinion of a majority of all
three shall be binding.

         7. TERMINATION.

         This Agreement shall terminate upon the occurrence of any of the
following:

                  A. Mutual agreement, in writing, of the parties to terminate;

                  B. Employee's death. Under circumstance of Employee's death,
         Company agrees to make termination payments to Employee's designated
         beneficiaries, in the amount of one year of base salary, and annual
         bonus payment for bonus payable in the fiscal year in which Employee's
         death occurred. Additionally, any unexercised, vested stock options
         which were available to Employee immediately prior to date of death
         shall be exercisable by beneficiaries in accordance with the Company's
         stock option plan. In addition, Employee's designated beneficiaries
         may, at their option, continue to pay and to receive insurance coverage
         under the COBRA provisions, and beyond, for a period of up to two years
         following death, or upon attainment of age 65 of beneficiary, whichever
         is earlier.

                  C. Upon the expiration of the initial or any renewal term of
         this Agreement, following 90 days of written notice prior to the date
         of renewal by one party to the other indicating the party's intention
         not to renew;

                  D. At the Company's option, if Employee shall be totally
         disabled, as defined above for a continuous period in excess of nine
         months. The Company's option to terminate in such event shall be
         exercised upon at least 30 days written notice to Employee;

<PAGE>

                  E. Termination by the Company for cause.

                  For purposes of this provision of this Agreement, cause shall
         be defined as:

                           1.       Willful failure of the Employee to
                                    substantially perform any duties reasonably
                                    required by the Company that are consistent
                                    with Employees position (except as a result
                                    of any disabling injury for which Employee
                                    has been receiving benefits under a short
                                    term or long term disability program),and
                                    which is not remedied promptly by Employee
                                    after receipt of notice thereof by the
                                    Company; or

                           2.       A. The commission by Employee of any act of
                                    fraud or dishonesty which has a direct,
                                    substantial and adverse affect on the
                                    company, and which is related to or in
                                    connection with his Employment by the
                                    company; or

                                    B. The commission by Employee of any
                                    criminal act which is punishable by a
                                    sentence exceeding 90 days.

                           3.       Employee materially breaches Employee's
                                    other covenants contained in this Agreement.

                  F. Change of employment or termination without cause by the
         Company.

                  A Change in Employment shall be deemed to have occurred if,
         without Employee's consent,

                           1.       Employee's position, duties, or title are
                                    materially and adversely changed without
                                    cause: or

                           2.       Employee's salary or benefits are reduced
                                    without cause, or

                           3.       The location of performance of most of
                                    Employee's duties is moved from the general
                                    geographic location in which Employee
                                    performed such duties prior to the move.

                  The effective date of a change in employment shall be the date
         Employee elects, by written notice to the Company, to treat such action
         as termination due to change in employment, provided it occurs within
         90 days of the date Employee is notified of the change in employment.
         Failure to treat a particular change in employment as a termination of
         employment shall not preclude Employee from treating a subsequent
         change of employment as a termination of employment.

<PAGE>

                  G. Termination by Employee with Good Reason.

                  Good reason includes any of the following:

                           1.       Assignment of duties by the Company
                                    inconsistent with Employee's position;

                           2.       Other action by the Company that results in
                                    the diminution of Employee's position,
                                    authority, duties or responsibilities;

                           3.       Breach of Employee's employment agreement by
                                    the Company (including, but not limited to
                                    reduction in Employee's salary, bonus,
                                    long-term compensation, retirement benefits
                                    or welfare benefits);

                           4.       Requirement that Employee maintain his home
                                    or principal place of business outside the
                                    Minneapolis/St. Paul metropolitan area;

                           5.       Requirement that Employee travel on business
                                    to a substantially greater extent than he
                                    has in the past twelve (12) months;

                           6.       Failure to assign the employment agreement
                                    to a successor employer.

                  H. Termination Payments.

                  In the event Employee's employment with the Company is
         terminated without cause, or a change in employment occurs and Employee
         elects to treat the change in employment as a termination of employment
         and so notifies the Company of such election within 90 days following
         the change of employment (with a date of notice to be deemed the
         effective date of termination) or the geographic location changes as
         defined above, or upon non-renewal of this agreement by the Company, or
         upon termination by Employee with good reason, as defined above, then:

                           (a) Employee shall receive regular pay through date
                           of termination, including pro-rated bonus earned for
                           the partial year, if any.

                           (b) Employee shall receive payment equal to
                           twenty-four (24) months of Employee's then current
                           annualized salary; payable monthly, plus the average
                           of any bonus or incentive compensation paid or
                           payable for the most recent two full years payable
                           monthly; and all unvested stock options held by
                           Employee shall immediately vest.

<PAGE>

                           (c) Employee shall be entitled to continue
                           participation in the healthcare coverage, life
                           insurance and general employee benefit plans of the
                           Company. The Company shall for two years following
                           the effective date of the termination under this
                           Section 7H, or until Employee becomes eligible for
                           such insurance coverages with another employer,
                           continue to provide such coverage for Employee and
                           his dependents to the same extent and cost the
                           Company is then providing for other employees with
                           comparable coverage during this two year period.

                           (d) Termination by Company Without Cause or by
                           Employee With Good Reason - Within Two Years After a
                           Change in Control.

                           For purposes of this provision, a change in control
                           will be defined as follows:

                                    (1.) When any "person" as defined in Section
                                    3(a)(9) of the Securities Exchange Act as
                                    used in sections 13(d) and 14(d) thereof,
                                    including a "group" as defined in Section
                                    13(d) of the Securities Exchange Act, but
                                    excluding the Company or any subsidiary or
                                    parent or any employee benefit plan
                                    sponsored or maintained by the Company or
                                    any subsidiary or parent (including any
                                    trustee of such plan acting as trustee),
                                    directly or indirectly, becomes the
                                    "beneficial owner" (as defined in Rule 13d-3
                                    under the Securities Exchange Act, as
                                    amended from time to time), of securities of
                                    the Company representing greater than 50
                                    (fifty) percent of the combined voting power
                                    of the Company's then outstanding
                                    securities; or

                                    (2) When, subsequent to the effective date
                                    of this agreement, the individuals who, at
                                    the beginning of such period, constitute the
                                    Board ("Incumbent Directors") cease for any
                                    reason other than death to constitute at
                                    least a majority thereof; provided however
                                    that a Director who was not a Director at
                                    the beginning of this period will be deemed
                                    to have satisfied the definition of
                                    "Incumbent Director" if such Director was
                                    elected by, or with the approval of at least
                                    60% (sixty percent) of the Directors who
                                    then qualified as Incumbent Directors; or

<PAGE>

                                    (3) The approval by the shareholders of any
                                    sale, lease, exchange or other transfer (in
                                    one transaction or a series of related
                                    transactions) of all or substantially all of
                                    the assets of the Company or the adoption of
                                    any plan or proposal for the liquidation or
                                    dissolution of the Company.

                           If during a two year period subsequent to a change in
                  control, Employee is terminated without cause, or Employee
                  terminates for good reason, the then controlling Company
                  agrees to pay Employee regular pay through the date of
                  termination, including pro-rated bonus for partial year; base
                  salary equal to 36 months of Employee's then current
                  annualized salary; sum of the annual bonus compensation paid
                  for preceding three full years or three times the target bonus
                  for the year of termination, whichever is greater; vesting of
                  all outstanding stock options; and continued participation in
                  medical, dental, life and disability insurance benefits at
                  same premium cost in effect for active employees for two
                  years.

                  (e) Termination by Company with Cause.
                           Upon termination of the Employee by the Company with
                           cause, regular pay will continue through the date of
                           termination, including pro-rated bonus for the
                           partial year.

                  (f) Termination by Employee Without Good reason.
                           Upon termination of the Employee by the Company with
                           cause, regular pay will continue through the date of
                           termination, including pro-rated bonus for the
                           partial year.

         8. PAYMENT OF "PARACHUTE" TAX.

         Company agrees to pay an amount sufficient to restore the full amount
payable under the other terms of the employment agreement, after application of
excise tax on excess Parachute payments within the meaning of Code Section
280(g), including the excise tax, penalities and interest.

         9. OUTPLACEMENT ASSISTANCE.

         Upon termination of employment without cause, with good reason by
employee, or change-in-control, the Company will pay for outplacement assistance
to assist Employee in job transition process. The Company will select the
service provider to be used for this purpose.

<PAGE>

         10. PAYMENT OF LEGAL FEES.

         Subject to a total expenditure of up to $10,000 maximum, the Company
agrees to pay all reasonable legal fees incurred by Employee in connection with
the drafting and negotiation of Employee's employment agreement and any
amendments thereto. Subject to the same maximum mentioned above, the Company
will also pay for reasonable legal fees incurred by Employee in connection with
any claim or dispute regarding Employees employment agreement, as amended from
time to time; providing however, that before he retains counsel in connection
with such a claim or dispute, he notifies the Company of any alleged failure to
abide by the terms of the employment agreement, and, to the extent the matter
can be cured, provides the Company with a reasonable opportunity to cure.

         11. COVENANT NOT TO COMPETE.

         Employee hereby covenants and agrees that during the initial and any
renewal term of this Agreement, and for a period of one year following the
termination of this Agreement, Employee shall not be engaged within the United
States, either directly or indirectly, in any matter or capacity, whether as an
advisor, principal, agent, partner, officer, director, employee, member of an
association, or otherwise, in any business or activity, or own beneficially or
of record, five percent or more of the outstanding stock of any class of equity
securities in any corporation in competition with the business then being
conducted by the Company. If Employee should breach the foregoing covenant, the
Company will cease making payments described in the previous section regarding
Termination of Agreement, and any associated payments contained therein; and
remaining unexercised stock options shall immediately be cancelled and benefit
plan provisions described in the Termination Section 7 shall be immediately
discontinued.

         Additionally, at the option of the Board of Directors, the Company may
choose to extend the covenant not to compete set forth herein for a period of up
to an additional twelve months, beyond the initial twelve month period already
stipulated herein. In consideration for such election, the Company agrees to
make payment to the Employee the annualized salary and bonus equal to that in
effect during the fiscal year at the time of termination.

         During this additional period of extension and payment, Employee agrees
not to solicit, directly or indirectly, any current employee of the Company for
employment or engagement in any capacity outside of the Company, its
subsidiaries or affiliates.

         12. CONFIDENTIALITY.

         Employee will, in the course of his employment with the Company have
access to confidential and proprietary data or information belonging to the
Company. Employee will not at any time divulge or communicate to any person
(other than to a person bound by confidentiality obligations to the Company
similar to those contained in this Agreement) or use to the detriment of the
Company, or for the benefit of any other person such data or information. The
provisions of this section shall survive Employee's employment hereunder
regardless of the cause of termination of employment or this Agreement. The
phase "confidential or proprietary data or information" shall mean information
not generally available to the public, including, but not limited to, personnel
information, financial information, customer lists, supplier lists, trade
secrets, secret processes, computer data and programs, pricing, marketing and
advertising data. Employee acknowledges and agrees that any confidential or
proprietary information that Employee has already acquired was in fact received
in confidence in Employees fiduciary capacity with respect to the Company.

<PAGE>

         All written materials, records and documents made by Employer or coming
into Employee's possession during the term of employment concerning any product,
processes, information or services used, developed, investigated or considered
by the Company, or otherwise concerning the business or affairs of the Company,
shall be the sole property of the Company and upon termination of Employee's
employment for any reason, or upon request of the Board of Directors during
Employee's employment, Employee shall promptly deliver the same to the Company.
In addition, upon termination of Employee's employment for any reason, or upon
request of the Board of Directors during Employee's employment, Employee shall
deliver to the Company all of the property of the Company in Employee's
possession or under Employee's control, including, but not limited to, financial
statements, marketing and sales data, computers, and Company credit cards.

         13. OTHER BUSINESS ACTIVITIES.

         Employee shall not serve as an officer of another company, whether for
compensation or otherwise, requiring more than nominal duties by the Employee,
during the term of this contract without the express prior written consent of
the Company's Board of Directors. Employee may not serve as a Director of any
other organizations without express prior written approval by the Company's
Board of Directors, such approval not to be unreasonably withheld.

         14. INVENTIONS AND PATENTS.

         Employee agrees to assign all rights, ownership and related privileges
and benefits associated with inventions and patents to the Company. Employee
agrees that any inventions or patents obtained in association with ideas or
concepts initiated by Employee related to the Company's business are deemed to
be Company property. This includes but is not limited to product ideas, changes
or improvements; process ideas, changes or improvements; pertinent intellectual
property, or other pertinent information.

         15. ARBITRATION/DISPUTE RESOLUTION.

         The Company and the Employee agree that as a first option prior to any
legal action arising out of the dispute over provisions in this agreement,
parties may seek arbitration, and submit to authority of binding arbitration.

<PAGE>

         16. COOPERATION IN CLAIMS.

         Both during employment and post employment, Employee agrees that in the
event of a legal action against the Company, or legal action initiated by the
Company against another party, in which Employee is deemed by the Company to be
a material witness or affiant, Employee agrees to make reasonable and best
efforts to cooperate with the Company in such matters. If Employee is no longer
employed, Company will reimburse Employee for time and expenses incurred as a
result of cooperation for this purpose.

         17. INDEMNIFICATION.

         The Company agrees to make its best efforts to indemnify and hold
harmless the Employee from liability incurred as a result of performance of
duties as an Officer and member of the Board of Directors. This includes but is
not limited to applicable statute, as well as efforts to secure coverage under
pertinent insurance policies.

         18. NOTICES.

         All notices, requests, demands and other communications provided for by
this Contract shall be in writing and shall be deemed to have been given when
mailed at any general or branch United States Post Office enclosed in a
certified postpaid envelope, return receipt requested, and addressed to the
address of the respective party stated below or to such changed address as the
party may have fixed by notice:

         If to the Employee:

         Henry F. Blissenbach
         607 Pond View Drive
         Mendota Heights, MN 55120

         If to the Company:

         Chairman of The Board of Directors
         Chronimed Inc.
         10900 Red Circle Drive
         Minnetonka, MN 55343

         Any notice of change of address shall only be effective, however, when
received.

<PAGE>

         19. SUCCESSORS AND ASSIGNS.

         This Contract shall inure to the benefit of, and be binding upon, the
Company, its successors and assigns, including, without limitation, any
corporation which may acquire all or substantially all of the Company's assets
and business or into which the Company may be consolidated or merged, and the
Employee, his heirs, executors, administrators and legal representatives. The
Employee may assign his right to payment, and his obligations, under this
Contract.

         20. APPLICABLE LAW.

         This Contract shall be governed by the laws of the State of Minnesota.

         21. OTHER AGREEMENTS

         This Contract supersedes all prior understandings and agreements
between the parties. It may not be amended orally, but only by a writing signed
by the parties hereto.

         22. NON-WAIVER.

         No delay or failure by either party in exercising any right under this
Contract, and no partial or single exercise of that right, shall constitute a
waiver of that or any other right.

         23. HEADINGS.

         Headings in this Contract are for convenience only and shall not be
used to interpret or construe its provisions.

         24. COUNTERPARTS.

         This Contract may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

CHRONIMED INC.

By /s/ Shawn L. Featherston
  ------------------------------------

Its Vice President Human Resources
   -----------------------------------

AND /s/ Charles V. Owens
   -----------------------------------

Its Chairman, Compensation Committee
   -----------------------------------

EMPLOYEE

  /s/ Henry F. Blissenbach
--------------------------------------
Henry F. Blissenbach

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