SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 25, 1997
AVATEX CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-8549 25-1425889
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(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5910 N. CENTRAL EXPRESSWAY, SUITE #1780 75206
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
214-365-7450
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Page 1 of 4 Pages
Exhibit Index on Page 4
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Item 2. Acquisition or Disposition of Assets
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Avatex Corporation ("Avatex") entered into an Agreement, dated as of
November 25, 1997 (the "Agreement"), with National Steel Corporation ("NSC") and
two of NSC's affiliates, NKK Corporation and NKK U.S.A. Corporation. Under the
Agreement, NSC redeemed 10,000 shares of NSC Series B preferred stock owned by
Avatex and agreed to pay Avatex a total of $69 million, of which $59 million was
paid in cash at closing on November 25, 1997 and $10 million will be paid over
the following twelve months. With respect to the additional $10 million payment
to be made to Avatex, $5 million of this amount is subject to Avatex's
compliance with a specified financial covenant. In addition, National Steel
released Avatex from (a) all pension, life, health insurance and other benefit
obligations for the current and former employees of NSC's former Weirton Steel
operations and (b) all environmental liabilities that were previously
indemnified by Avatex. Under the Agreement, Avatex released and assigned to NSC
all of Avatex's rights to assert pre-1987 environmental claims against insurers
of both NSC and Avatex, and released Avatex's share of any settlement proceeds
relating to such claims and all amounts remaining in an environmental account
pre-funded by Avatex to NSC in 1993.
Reference is hereby made to the Agreement and the Press Release, dated
November 25, 1997, issued by Avatex, which are attached hereto as Exhibits 2 and
99, respectively, and incorporated herein by reference.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
2 Agreement, dated as of November 25, 1997, among Avatex
Corporation, National Steel Corporation, NKK Corporation and
NKK U.S.A. Corporation.
99 Press Release dated November 25, 1997, issued by Avatex
Corporation.
Page 2 of 4 Pages
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AVATEX CORPORATION
(Registrant)
By: /s/ Edward L. Massman
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Edward L. Massman
Senior Vice President and
Chief Financial Officer
Page 3 of 4 Pages
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EXHIBIT INDEX
Exhibit No. Description
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2 Agreement, dated as of November 25, 1997, among Avatex
Corporation, National Steel Corporation, NKK Corporation
and NKK U.S.A. Corporation.
99 Press Release dated November 25, 1997, issued by Avatex
Corporation.
Page 4 of 4 Pages
EXHIBIT 2
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AGREEMENT
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BY AND AMONG
AVATEX CORPORATION,
NKK CORPORATION,
NKK U.S.A. CORPORATION
and NATIONAL STEEL CORPORATION
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Dated as of November 25, 1997
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<PAGE>
AGREEMENT (this "Agreement"), dated as of November 25, 1997,
by and among AVATEX CORPORATION, a corporation organized and existing under the
laws of the State of Delaware ("Avatex"), NKK CORPORATION, a corporation
organized and existing under the laws of Japan ("NKK"), NKK U.S.A. CORPORATION,
a wholly owned subsidiary of NKK organized and existing under the laws of the
State of Delaware ("NAC"), and NATIONAL STEEL CORPORATION, a corporation
organized and existing under the laws of the State of Delaware ("NSC"),
W I T N E S S E T H T H A T
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WHEREAS,
1. Pursuant to a Stock Purchase Agreement and related documents dated as of
August 22, 1984 (the "1984 Stock Purchase Agreement"), NKK Corporation ("NKK")
acquired 50% of the outstanding capital stock of National Steel Corporation
("NSC") from National Intergroup, Inc. ("NII"). As a condition to such purchase,
NKK required NII to indemnify it and NSC and hold it and NSC harmless against
certain existing and contingent obligations and liabilities of NSC relating to
NSC's former Weirton Steel Division ("Weirton") which had been sold by NSC (the
"Weirton Sale") prior thereto and certain other liabilities of NSC not related
to its ongoing business. Accordingly, pursuant to the 1984 Stock Purchase
Agreement and the Weirton Liabilities Agreement (the "Weirton Liabilities
Agreement") dated as of August 22, 1984 and entered into by and between NSC and
NII, NII agreed to indemnify and hold NKK and NSC harmless from and against
these liabilities (the "Weirton Liabilities") which consist of, among other
things, pension, life, health insurance and other benefits for employees and
former employees of Weirton (the "Weirton Employee Related Liabilities") as more
specifically described in the Weirton Liabilities Agreements (as defined herein)
and certain environmen tal liabilities (the "Indemnified Environmental
Liabilities") as more specifically described in the Weirton Liabilities
Agreements.
2. NII established, and on December 24, 1985 transferred to,
NII Capital Corporation, a wholly-owned subsidiary of NII ("NCC"), its 50%
interest in the then outstanding capital stock of NSC and as a condition to such
transfer, NII and NCC entered into, with NKK and NSC, the NSC Stock Transfer
Agreement dated as of December 24, 1985 (the "Stock Transfer Agreement"),
pursuant to
<PAGE>
which NII and NCC agreed to be jointly and severally liable for the
Weirton Liabilities.
3. NII, NCC, NKK, NAC and NSC entered into the Stock Purchase
and Recapitalization Agreement dated June 26, 1990 (the "1990 Stock Purchase
Agreement"). Pursuant thereto, among other things, (i) NSC released NII from
indemnification of $146.6 mil lion aggregate present value (the "Notional
Amount") of certain Weirton Employee Related Liabilities, (ii) NII exchanged a
portion of its NSC Common Stock for a new issue of Series B Preferred Stock (the
"B Preferred Stock"), (iii) the parties thereto agreed that, under the
circumstances and at the time specified therein either (a) NSC would pay to NCC
an amount equal to the excess, if any, of (i) the excess, if any, of (A) the
Notional Amount (adjusted as set forth in the 1990 Stock Purchase Agreement) (as
so adjusted, the "Adjusted Notional Amount") over (B) the then present value
(determined under the 1990 Stock Purchase Agreement) of certain amounts paid by
NSC in respect of the Weirton Employee Related Liabilities (the "Employee
Related Liabilities Payments") over (ii) the amount determined in accordance
with the 1990 Stock Purchase Agreement to be the then present value of the
remaining Weirton Employee Related Liabilities (the "Remaining Employee Related
Liabilities") or (b) NII and NCC would pay to NSC an amount equal to the excess,
if any, of (i) the Remaining Employee Related Liabilities over (ii) the excess,
if any, of (A) the Adjusted Notional Amount over (B) the Employee Related
Liabilities Payments and (iv) NII, NCC and NSC entered into the Amended and
Restated Weirton Liabilities Agreement and NCC, NAC and NSC entered into a put
agreement (the "Put Agreement"). The amount determined pursuant to clause
(iii)(a) or (iii)(b) of the preceding sentence is hereinafter referred to as the
RRCEO.
4. In 1993, NSC effected an initial public offering of its
equity securities (the "IPO"). Prior thereto, NII, NCC, NSC, NKK and NAC entered
into an agreement, dated February 3, 1993 (the "1993 Agreement"), pursuant to
which, among other things, NCC paid to NSC $10 million as a prepayment for the
Indemnified Environ mental Liabilities. NSC also contributed approximately $68
million of the IPO proceeds to Plan 056 (as defined in the Weirton Liabilities
Agreement), thereby reducing the underfunding of Plan 056 and causing a portion
of NII's and NCC's indemnity obligations, in the amount of $68 million, to
become due and owing. NSC then redeemed 50% of the B Preferred Stock held by NCC
and paid the redemption amount in the form of a release of NII and NCC from $68
<PAGE>
million of their indemnity obligations to NSC in respect of the Weirton Employee
Related Liabilities.
5. On October 28, 1993, NCC merged with NII, with NII being
the surviving entity. On October 12, 1994, NII changed its name to FoxMeyer
Health Corporation ("FoxMeyer").
6. On January 31, 1997, FoxMeyer changed its name to Avatex
Corporation ("Avatex").
7. The Parties desire to provide for the resolution of all
claims against each other arising from the ownership by Avatex of the B
Preferred Stock, the Weirton Liabilities and the Indemnified Environmental
Liabilities on the terms and conditions hereinafter set forth, and deem such
settlement to be fair, reason able and adequate and in the best interests of the
Parties.
NOW, THEREFORE, on the basis of the representations,
warranties, covenants and agreements contained in this Agreement, and subject to
the terms and conditions of this agreement, it is hereby agreed as follows:
1. Definitions
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Unless the context otherwise requires and unless otherwise
defined herein, terms used herein which are defined in the Weirton Liabilities
Agreements are used herein with the meanings therein described. As used herein,
the following terms shall have the meanings herein specified unless the context
other wise requires. Defined terms in this Agreement shall include in the
singular number the plural and in the plural number the singular.
"Agreement" shall mean this Settlement Agreement as the same
may from time to time hereafter be modified, supplemented or amended.
"Avatex" shall mean Avatex Corporation, a Delaware
corporation.
"Avatex Group" shall mean (i) Avatex, (ii) Bull Moose Tube
Company and other former Subsidiaries of NSC which became
<PAGE>
Avatex's (but not NSC's) Subsidiaries in the reorganization pursuant to which
Avatex (then known as NII) became the parent of NSC and (iii) any of Avatex's
current Subsidiaries.
"Avatex Release" shall have the meaning set forth in Section
2.4 of this Agreement.
"Avatex Releasees" shall have the meaning set forth in Section
2.4 of this Agreement.
"Business Day" shall mean any day excluding Saturday, Sunday
and any day which shall be in New York City a legal holiday or a day on which
banking institutions are authorized or required by law or other government
actions to close.
"Claims" shall have the meaning set forth in Section 2.4
of this Agreement.
"Closing" shall have the meaning set forth in Section 6
of this Agreement.
"Closing Date" shall be the date of this Agreement.
"Consolidated Net Worth" shall mean, at any time, the sum of
the amount by which the total consolidated assets of Avatex and its Subsidiaries
exceeds the total consolidated liabilities of Avatex and its Subsidiaries at
such time, as determined in accor dance with GAAP; it being agreed that the
First Series Cumulative Convertible Preferred Stock, stated price per share $50
(the "First Series Preferred Stock"), and the Cumulative Exchangeable Series A
Preferred Stock, par value $5 per share (the "Series A Preferred Stock"), of
Avatex and all accrued dividends thereon shall not be deemed liabilities for
purposes of this definition.
"Damages" shall have the meaning set forth in Section
2.6(a) of this Agreement.
"Environmental Insurance Claims" shall have the meaning set
forth in Section 2.5(a) of this Agreement.
"Financial Advisor" shall mean The Gordian Group, L.P.
"GAAP" shall mean United States generally accepted ac counting
principles as in effect on the date hereof.
<PAGE>
"Indemnifiable Claims" shall have the meaning set forth
in Section 2.6(a).
"Indemnified Party" shall have the meaning set forth in
Section 2.6(b).
"Indemnified Environmental Liabilities" shall have the meaning
set forth in the whereas clause, paragraph one, of this Agreement.
"Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, properties, assets, prospects or condition
(financial or otherwise) of Avatex and its Subsidiaries, taken as a whole, or
(ii) the ability of Avatex to perform any of its obligations hereunder as they
become due.
"NAC" shall mean NKK U.S.A. Corporation, a Delaware
corporation.
"NKK" shall mean NKK Corporation, a Japan corporation.
"NSC" shall mean National Steel Corporation, a Delaware
corporation.
"NKK, NAC, NSC Release" shall have the meaning set forth in
Section 2.4 of this Agreement.
"NSC Releasees" shall have the meaning set forth in Section
2.4 of this Agreement.
"Person" shall mean and include any individual, partner ship,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Released Avatex Liabilities" shall have the meaning set forth
in Section 2.4 of this Agreement.
"Subsidiary" of any Person shall mean and include (i) any
corporation 50% or more of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the
<PAGE>
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partner ship, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity interest
at the time; provided, however, that Riverside Insurance Company Ltd.
("Riverside") shall not be considered a Subsidiary of Avatex.
"Weirton Liabilities Agreements" shall mean the 1984 Stock
Purchase Agreement, the Weirton Liabilities Agreement, the 1990 Stock Purchase
Agreement, the Amended and Restated Weirton Liabilities Agreement, the Stock
Transfer Agreement, the Put Agreement, the 1993 Agreement and all other
agreements entered into between one or more of the parties hereto in connection
therewith.
2. Agreements
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2.1. Notwithstanding any contrary provision in the Certificate
of Designation of the B Preferred Stock ("Certificate of Designation"), NSC
shall redeem, and Avatex shall surrender to NSC, on the Closing Date, all B
Preferred Stock held by Avatex at such place as is designated by NSC, and Avatex
shall not be entitled to, as of or following the Closing Date, any dividends on
the B Preferred Stock, declared, accrued or otherwise, or any other payment in
respect of the redemption other than the Settlement Payment.
2.2. On the terms and subject to the conditions hereof, (i) at
the Closing, NSC shall pay to Avatex $59 million in cash payable by wire
transfer or delivery of other immediately available funds, and (ii) on each of
the same day as the Closing Date in the 3rd, 6th and 12th month after the
Closing Date (if not a Business Day, the immediately following day which is a
Business Day) (each, a "Payment Date"), NSC shall pay to Avatex an additional
$2.5 mil lion on the Payment Date in the 3rd and 6th months after the Closing
Date and $5 million on the Payment Date in the 12th month after the Closing Date
(each, an "Additional Payment" and, together with the $59 million payment, the
"Settlement Payment"), in cash by wire transfer or delivery of other immediately
available funds. If Avatex is in breach of its obligations set forth in Section
5.2 below and such breach shall remain uncured for 30 days from the date such
breach occurs, the Additional Payments shall be reduced to $5,000,000 (the
"Reduction") and, if all the Additional Payments have been paid, Avatex shall
pay to NSC in cash by wire transfer or delivery of other immediately available
funds on such 30th day
<PAGE>
$5,000,000 (together with the Reduction, "Liquidated Damages"). The parties
acknowledge that if Avatex breaches Section 5.2 below, it would be difficult, if
not impossible to prove the amount of the damages to NSC and the parties hereto
agree that the Liquidated Damages constitute a fair and reasonable amount of
compensation, and is agreed to as a reasonable forecast of probable or actual
loss and not as a penalty.
2.3. At the Closing, NSC, Avatex and NAC agree that a number
of Put Consideration Shares (as defined in the Put Agreement) as calculated
pursuant to Section 3(d) of the Put Agreement shall be deemed to have been
transferred, in turn, from NSC to NAC to Avatex, and from Avatex to NSC for
retirement in partial consideration for the Settlement Payment.
2.4. At the Closing, in consideration of the Settlement
Payment, Avatex shall execute a release in the form annexed hereto as Exhibit A
("NKK, NAC, NSC Release"), pursuant to which it shall release NKK, NAC, NSC and
their respective Subsidiaries, officers, directors and employees (the "NSC
Releasees") from any and all claims, causes of action or obligations
(collectively, "Claims") owed to Avatex by the NSC Releasees, whether known or
presently un known, foreseen or presently unforeseen, asserted or not yet
asserted, of any kind or character, including and not limited to any Claims
relating to the ownership by Avatex of any securities of NSC or the Weirton
Liabilities Agreements, including the RRCEO, the Weirton Liabilities and any
amounts that have or may become payable to Avatex pursuant to the 1993 Agreement
in connection with NSC's Recapitalization (as defined therein); provided,
however, that NSC shall not be released from the claims identified in Schedule 1
to Exhibit A hereto. NKK, NAC and NSC shall execute a release in the form
annexed hereto as Exhibit B (the "Avatex Release"), pursuant to which they shall
release Avatex, its Subsidiaries, officers, directors and employees (the "Avatex
Releasees") from any and all obligations (the "Released Avatex Liabilities"),
owed by the Avatex Releasees to NKK, NAC and NSC, whether known or presently
unknown, foreseen or presently unforeseen, asserted or not yet asserted, of any
kind or character, including and not limited to any and all Claims arising out
of the ownership by NKK and/or NAC of any securities of NSC or the Weirton
Liabilities Agreements, including the RRCEO, the Weirton Liabilities and the
Indemnified Environmental Liabilities other than obligations identified in the
Avatex Release. Notwithstanding the foregoing, Avatex shall not be released from
any claims against Avatex and its Subsidiaries for contribution or joint
liability that (a) arise not from contract
<PAGE>
but from federal, state or local environmental laws and regulations, (b) do not
relate to an Indemnified Environmental Liability and (c) relate to: (i) any site
that is or was owned or operated by any member of the Avatex Group or (ii) any
off-site disposal by any member of the Avatex Group of materials at any site
owned or operated by a third party.
2.5. (a) Avatex hereby surrenders and assigns to NSC all
rights it has under any insurance policy incepting prior to January 1, 1987 with
respect to Environmental Insurance Claims. Environmental Insurance Claims shall
mean claims made under any such insurance policy, including but not limited to
the Indemnified Environmental Liabilities, for property damage or personal
injury caused or allegedly caused by the discharge of pollutants.
(b) (1) Avatex hereby surrenders and assigns to NSC all rights
that it may have to settlement proceeds under the Allocation Agreement dated
September 26, 1997 (the "Allocation Agreement"), including but not limited to
rights to payments under settlements concluded with Continental Casualty
Company, Evanston Insurance Company, London Market Insurers, Fireman's Fund
Insurance Company, Yasuda Fire & Marine Insurance Company of Europe, Ltd., and
Ludgate Insurance Company. Avatex further agrees that to the extent that the
Allocation Agreement calls for certain settlement funds received from insurance
carriers to be paid into a joint escrow account for the benefit of NSC and
Avatex, that any such funds received after the Closing Date shall be paid
directly to NSC. Nothing in this agreement shall affect any rights that
Southwire Company ("Southwire") may have under the Allocation Agreement or under
any individual settlement agreement with an insurance carrier.
(2) Avatex hereby surrenders and assigns to NSC all rights
that it may have to funds placed in an escrow account (the "Escrow Account")
under the Escrow Agreement dated August 20, 1997 (the "Escrow Agreement"),
except that NSC agrees that Avatex may authorize the payment of all of Avatex's
outstanding legal fees, disbursements, expert witness fees and other
professional service fees incurred in connection with National Steel Corp. v.
Continental Casualty Co., 95-C-52W (Circuit Court of Hancock County, West
Virginia) (the "WVA Litigation"), as of the Closing Date, from the Escrow
Account in accordance with paragraph 3 of the Escrow Agreement. After the
Closing Date, NSC shall be solely responsible for any outstanding WVA Litigation
Expenses and Avatex
<PAGE>
and NSC hereby authorize Weil, Gotshal & Manges LLP, as escrow agent, to pay the
balance of the Escrow Account to NSC.
(3) NSC hereby agrees that as of the Closing Date, Avatex
shall have no further obligation to pay legal and other expenses in connection
with the WVA Litigation. NSC shall assume Avatex's obligations to pay the legal
and other expenses of the action under cost sharing arrangements with LTV Steel
Company and with Southwire. Avatex shall remain a plaintiff in the action and
shall cooperate with NSC in the prosecution of the lawsuit.
(4) NSC, Avatex, and Southwire are in the process of
negotiating a settlement agreement with Insurance Company of North America
("INA") a/k/a The Cigna Companies. Under the terms of the proposed settlement
agreement, INA would make two initial payments and would make certain additional
payments thereafter up to a limited amount, contingent upon certain events, and
may agree to reimburse Riverside, an Avatex subsidiary, those amounts which
Riverside had paid to INA. In the event INA does not agree to so reimburse
Riverside, Avatex shall not make any claim to the monies otherwise payable by
INA under the proposed or any other settlement agreement (the "INA Agreement").
Avatex hereby surrenders and assigns to NSC its rights to payment under the INA
Agreement (other than any reimbursement monies to Riverside) which does not
increase in any material respect the liabilities of Avatex hereunder. Avatex
also will sign the INA Agreement negotiated with INA and release all
Environmental Insurance Claims against INA under policies incepting prior to
January 1, 1987.
(5) NSC, Avatex and Southwire are in the process of
negotiating a settlement agreement with Everest Reinsurance Company ("Everest").
Avatex hereby surrenders and assigns to NSC its rights to payment under the
proposed or any other settlement agreement (the "Everest Agreement") which does
not increase in any material respect the liabilities of Avatex hereunder. Avatex
also will sign the Everest Agreement negotiated with Everest and release all
claims with respect to policies issued by Prudential Reinsurance Company
(Everest's predecessor in interest) to NSC in 1978 and 1979.
(6) NSC, Avatex and Southwire are in the process of
negotiating a settlement agreement with Lexington Insurance Company
("Lexington"). Avatex hereby surrenders and assigns to NSC its rights to payment
under the proposed or any other settlement agreement (the "Lexington Agreement")
which does not increase in
<PAGE>
any material respect the liabilities of Avatex hereunder. Avatex also will sign
the Lexington Agreement negotiated with Lexington and release all claims with
respect to policies issued by Lexington to Avatex or NSC prior to January 1,
1987.
(7) NSC, Avatex and Southwire are in the process of
negotiating a settlement agreement with International Insurance Company
("International"). Avatex hereby agrees to surrender and assign to NSC its
rights to payment under the proposed or any other settlement agreement (the
"International Agreement") which does not increase in any material respect the
liabilities of Avatex hereunder. Avatex also will sign the International
Agreement negotiated with International and release all claims with respect to
policies issued by International to Avatex prior to January 1, 1987.
(8) NSC, Avatex and Southwire are in the process of
negotiating a settlement agreement with National Union Fire Insurance Company
("National Union"). Avatex hereby surrenders and assigns to NSC its rights to
payment under the proposed or any other settlement agreement (the "National
Union Agreement") which does not increase in any material respect the
liabilities of Avatex hereunder. Avatex also will sign the National Union
Agreement negotiated with National Union and release Environmental Insurance
Claims against National Union with respect to a specific excess policy issued to
Avatex in 1984.
(9) Avatex shall cooperate with NSC in NSC's efforts to
negotiate settlements of Environmental Insurance Claims with the outstanding
defendants in the WVA Litigation, and with any excess insurance carriers. Avatex
will sign all necessary settlement agreements and release all carriers from
Environmental Insurance Claims, as may be reasonably requested by NSC. NSC
agrees that if NSC (i) asserts any environmental or related claim against any
insurer which has a potential reinsurance claim against Riverside and (ii)
recovers any amounts on such claim, whether by settlement, judgment or
otherwise, then (x) if such recovery is obtained through settlement or other
consensual means, NSC shall obtain the insurer's agreement to waive any
reinsurance claim against Riverside or pay through Avatex to Riverside
Sufficient funds with which to pay the reinsurance claim, or (y) if such
recovery is otherwise obtained, NSC shall pay through Avatex to Riverside
sufficient funds with which to pay the reinsurance claim.
<PAGE>
(c) As between Avatex and NSC, NSC shall be solely responsible
for payment and discharge for: (i) any claims made by any insurer for
indemnification pursuant to indemnities made by NSC and Avatex in the settlement
agreements referenced in Section 2.5(b) above or in any future settlement
agreements with insurers regarding Environmental Insurance Claims, except for
indemnification claims relating to Bull Moose Tube Company, for which Avatex
shall be solely responsible; (ii) any claims against NSC for breach of any
provision of the settlement agreements referenced in Section 2.5(b) above or any
future settlement agreements with insurers regarding Environmental Insurance
Claims; and (iii) any counterclaims, arising out of acts or omissions of NSC,
asserted against NSC or Avatex in any action in or relating to the WVA
Litigation or any action to enforce any of the settlement agreements referenced
in Section 2.5(b) above or any future settlement agreements with insurers
regarding Environmental Insurance Claims; provided, however, with respect to
each of Section 2.5(c)(i) and (ii), NSC shall be liable only to the extent of
any net proceeds received under such settlement agreements.
(d) NSC acknowledges that, as between Avatex and NSC, NSC and
its Subsidiaries will be solely liable for paying and discharging any
environmental claims in connection with (i) any of the Indemnified Environmental
Liabilities, (ii) any site owned or operated by NSC, which has not been owned or
operated by any member of the Avatex Group, or (iii) any site receiving any
off-site disposal of materials from NSC, but in the case of subsection (iii)
only with respect to off-site disposal of materials received by such site from
NSC. NSC will support the dismissal of Avatex and its Subsidiaries from any
legal action involving any of the Indemnified Environmental Liabilities or any
of the sites described in clauses (i) or (ii) above except with respect to a
site at which Avatex or its Subsidiaries has disposed materials. For the purpose
of the foregoing two sentences, NSC shall mean NSC and its Subsidiaries, other
than any member of the Avatex Group.
2.6. (a) NSC shall in accordance with the provisions of this
Section 2.6, indemnify and hold harmless Avatex, against any and all losses,
liabilities, damages, demands, claims, actions, judgments or causes of action,
assessments, costs and expenses, including, without limitation, interest,
penalties and reasonable attorneys' fees (collectively, "Damages"), asserted
against, resulting to, imposed upon or incurred or suffered by Avatex (whether
originally asserted against or imposed on Avatex, by a third party or originally
resulting to, incurred or suffered by
<PAGE>
NSC, and asserted by NSC directly against Avatex), if such Damages arise by
reason of a breach by NSC of the agreements made by it in Section 2.5 of this
Agreement ("Indemnifiable Claims").
(b) Avatex, when seeking indemnification under this Section
2.6 (the "Indemnified Party") with respect to Indemnifiable Claims resulting
from the assertion of liability by third parties shall give notice to NSC within
20 days of becoming aware of any such Indemnifiable Claim; provided, however,
any delay in such notice shall not release NSC from any of its obligations
hereunder, except where failure to give timely notice results in actual
prejudice to the rights of NSC hereunder. In case any such liability is asserted
against Avatex, and it accordingly notifies NSC thereof, NSC will promptly
assume the defense thereof with counsel reasonably satisfactory to Avatex.
(c) In the event that NSC, within twenty (20) days after
receipt of a notice pursuant to Section 2.6(b) of an Indemnifiable Claim, fails
to assume the defense of Avatex against such Indemnified Claim, Avatex shall
have the right to undertake the defense, compromise or settlement of such
Indemnifiable Claim on behalf of and for the account and risk of NSC.
2.7. Effective as of the Closing Date, Avatex shall
cause the members of the Pension Committee and the Investment Committee (as each
such term is defined in Section 3 of the Amended and Restated Weirton
Liabilities Agreement) under Plan 056 who are appointed by Avatex to resign from
such committees. From and after the Closing Date, NSC shall appoint, in its sole
discretion, such individuals to the Pension Committee and the Investment
Committee as it shall deem appropriate.
2.8. Immediately after the Closing Date, NSC shall
pay to Avatex $12,522.54 on account of the legal bills previously paid by
Avatex. In addition, NSC shall pay directly, in the ordinary course of NSC's
business, any legal bills properly payable for (a) "Weirton Liabilities
Monitoring" services performed by Thorp, Reed & Armstrong and (b) "NSC Workers'
Compensation" services performed by Frankovitch & Anetakis, whether such
services were performed before or after the Closing Date.
3. Representations and Warranties of Avatex
----------------------------------------
Avatex represents and warrants to each of NSC, NKK and NAC as
follows:
<PAGE>
3.1. Organization. It is a corporation duly organized, validly
existing and in good standing, under the laws of Delaware.
3.2. Authority. It has all requisite corporate power and
authority to execute, deliver, and perform this Agreement and all other
agreements, instruments, and documents being or to be delivered by it hereunder
or in connection herewith. All necessary corporate proceedings have been duly
taken to authorize the execution, delivery, and performance by it of this
Agreement. This Agreement has been duly authorized, executed, and delivered by
it and, assuming due execution and delivery by all other parties thereto, upon
execution and delivery by it as contemplated hereby, will be its legal, valid,
and binding obligation, in each case enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors generally and the
availability of equitable remedies (regardless of whether enforcement is sought
in a proceeding at law or in equity).
3.3. No Violation. Neither the execution and delivery of this
Agreement and all other agreements to be delivered here under, nor the
consummation of the transactions contemplated hereby nor its compliance with the
terms hereof will (i) violate any provision of its certificate of incorporation
or bylaws; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to it, or any of its
properties or assets; or (iii) violate, conflict with, result in a breach of any
of the provisions of, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under or give rise to any right of termination,
acceleration or cancellation with respect to, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of its property or assets under, any note, bond, loan, mortgage, indenture,
obligation, deed of trust, license, lease, agreement, permit, concession, grant,
franchise, judgment, injunction, order, decree or any security issued by it or
any other instrument to which it is a party or by which it or any of its
properties or assets may be bound or affected either directly or indirectly.
3.4. Consents and Approvals of Governmental Authorities. It
has complied and will comply with all applicable laws and all applicable rules
and regulations of any governmental authority in connection with the execution
and delivery of this Agreement and
<PAGE>
all other agreements to be delivered hereunder. It has obtained all governmental
authorizations and approvals required with respect to the execution and delivery
of this Agreement and all other agreements to be delivered hereunder and the
consummation of the transactions contemplated hereby or thereby. It is not
required to submit any notice, report or other filing with any governmental
authority or to seek governmental authorization or approval and no consent,
approval or authorization of any governmental or regulatory authority is
required to be obtained by it, in either case.
3.5. Consents. Other than consents which have been obtained
and are in full force and effect, no consent of any Person or any group is
necessary to the consummation of the transactions contemplated by this Agreement
and all other agreements to be delivered hereunder, including, without
limitation, consents from parties to or beneficiaries of, loans, mortgages,
notes, indentures, material contracts, loan guarantees, material leases or other
material agreements, including pension agreements, collective bargaining
agreements and any other material agreements.
3.6. Solvency. Avatex is, and upon and after giving effect to
transactions to take place at the Closing shall be, Sol vent. "Solvent" means
that: (a) Avatex's assets exceed its liabilities, at a fair valuation; it being
agreed that the First Series Preferred Stock and the Series A Preferred Stock
and all accrued dividends thereon shall not be deemed liabilities for purposes
of this section 3.6; (b) the present fair saleable value of Avatex's assets
exceeds the amount that will be required to pay its probable liability on its
existing debts as they become abso lute and matured; (c) Avatex does not have
unreasonably small capital for the businesses in which it is engaged; and (d)
Avatex has not incurred and does not intend to incur obligations beyond its
ability to pay as they mature.
3.7. Financial Statements. (a) Attached hereto as Exhibit C-1
are the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated balance sheets for the fiscal years ended
March 31, 1996 and 1997 and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended March 31, 1995, 1996,
and 1997 for Avatex and its Subsidiaries; (ii) unaudited consolidated balance
sheets and statements of income and cash flow (the "Most Recent Financial
Statements") as of and for the six months ended September 30, 1997 (the "Most
Recent Fiscal Month End") for Avatex
<PAGE>
and its Subsidiaries and (iii) a pro forma consolidated balance sheet of Avatex
and its Subsidiaries, dated as of September 30, 1997, giving effect to the
transactions contemplated hereby and giving effect to the settlement of the
claims made against Avatex in the bankruptcy proceeding involving certain
Subsidiaries of Avatex, certified by the principal financial officer of Avatex.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of Avatex and its
Subsidiaries as of such dates and the results of operations of Avatex and its
Subsidiaries for such periods; in the case of the Most Recent Financial
Statements, subject to year-end and audit adjustments.
(b) Attached hereto as Exhibit C-2 are projections prepared by
Avatex demonstrating the projected cash flow of Avatex and its Subsidiaries
after giving effect to the transactions contemplated hereby, for the 12 month
period subsequent to the Closing Date, which projections are accompanied by a
written statement of the assumptions underlying the projections. Such
projections have been prepared on the basis of the assumptions accompanying
them, and such projections and assumptions, as of the date of preparation and as
of the Closing Date, are reasonable and represent Avatex's good faith estimate
of its future cash flow, it being understood that nothing contained in this
Section 3.7(b) shall be construed as a representation or warranty that such
future cash flow will in fact be achieved.
3.8. Indebtedness; Liabilities; No Undisclosed Liabili ties.
Set forth in Schedule 3.8 is a full and complete list of all indebtedness of
Avatex for money borrowed. Except as set forth in Schedule 3.8, Avatex is not in
default in respect of any agreement or instrument evidencing borrowed money and
has not requested any deferral of the payment of interest or principal due in
respect thereof. Neither Avatex nor any of its Subsidiaries has any liabilities
or obligations (absolute, accrued, contingent or other wise) as of the date
hereof which are required by GAAP to be reflected but which are not reflected in
the Financial Statements, except for liabilities and obligations incurred in the
ordinary course of business and consistent with past practice.
3.9. Events Subsequent to Most Recent Fiscal Month End. Since
September 30, 1997, there has not been any change that has resulted in a
Material Adverse Effect compared with the comparable prior period. Without
limiting the generality of the foregoing,
<PAGE>
since that date Avatex has not engaged in any practice, taken any action, or
entered into any transaction outside the ordinary course of business.
3.10. Good Title to B Preferred Stock. Upon surrender of the B
Preferred Stock by Avatex pursuant to Section 2.1 above, NSC shall have
reacquired the B Preferred Stock free and clear of all claims, liens, charges,
encumbrances, pledges, options, security interests, shareholders' agreements and
voting trusts.
3.11. Absence of Litigation. There is not (i) any preliminary
or permanent injunction issued by any federal or state court of competent
jurisdiction or by any governmental or other regulatory or administrative agency
or commission or (ii) any litigation instituted by any federal agency or
administrative authority or any governmental authority which would, if
successful, enjoin or prohibit the consummation of the transactions contem
plated hereby or require rescission of this Agreement or any such transactions.
3.12. Reports. Avatex has filed all required forms, reports
and documents with the Securities and Exchange Commission ("SEC") since January
1, 1997, all of which are complete and com plied and shall continue to comply in
all material respects with applicable requirements of the Securities Act of
1934, as amended (the "1934 Act"). None of such forms, reports or documents,
including without limitation any financial statements or schedules included
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4. Representations and Warranties of NSC, NAC and NKK
--------------------------------------------------
Except as to Section 4.6, each of NSC, NAC and NKK repre sents
and warrants to Avatex as follows:
4.1. Organization. It is a corporation duly organized, validly
existing and in good standing, under the laws of Delaware, in the case of NSC
and NAC, and duly organized and validly existing under the laws of Japan, in the
case of NKK.
4.2. Authority. It has all requisite corporate power
and authority to execute, deliver, and perform this Agreement and
<PAGE>
all other agreements, instruments, and documents being or to be delivered by it
hereunder or in connection herewith. All necessary corporate proceedings have
been duly taken to authorize the execution, delivery, and performance by it of
this Agreement. This Agreement has been duly authorized, executed, and delivered
by it and, assuming due execution and delivery by all other parties thereto,
upon execution and delivery by it as contemplated hereby, will be its legal,
valid, and binding obligation, in each case enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the rights of creditors generally and the
availability of equitable remedies (regardless of whether enforcement is sought
in a proceeding at law or in equity).
4.3. No Violation. Neither the execution and delivery of this
Agreement and all other agreements to be delivered here under, nor the
consummation of the transactions contemplated hereby nor its compliance with the
terms hereof will (i) violate any provision of its certificate of incorporation
or bylaws, in the case of NSC and NAC, or certificate of incorporation (teikan),
in the case of NKK; (ii) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to it, or any of its
properties or assets; or (iii) violate, conflict with, result in a breach of any
of the provisions of, result in the loss of any material benefit under,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under or give rise to any right of termination,
acceleration or cancellation with respect to, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance upon any
of its property or assets under any note, bond, loan, mortgage, indenture,
obligation, deed of trust, license, lease, agreement, permit, concession, grant,
franchise, judgment, injunction, order, decree or any security issued by it or
any other instrument to which it is a party or by which it or any of its
properties or assets may be bound or affected either directly or indirectly.
4.4. Consents and Approvals of Governmental Authorities. It
has complied and will comply with all applicable laws and all applicable rules
and regulations of any governmental authority in connection with the execution
and delivery of this Agreement and all other agreements to be delivered
hereunder. It has obtained all governmental authorizations and approvals
required with respect to the execution and delivery of this Agreement and all
other agreements to be delivered hereunder and the consummation of the
<PAGE>
transactions contemplated hereby or thereby. It is not required to submit any
notice, report or other filing with any governmental authority or to seek
governmental authorization or approval and no consent, approval or authorization
of any governmental or regulatory authority is required to be obtained by it, in
either case.
4.5. Consents. Other than consents which have been obtained
and are in full force and effect, no consent of any Person or any group is
necessary to the consummation of the transactions contemplated by this Agreement
and all other agreements to be delivered hereunder, including, without
limitation, consents from parties to or beneficiaries of, loans, mortgages,
notes, indentures, material contracts, loan guarantees, material leases or other
material agreements, including pension agreements, collective bargaining
agreements and any other material agreements.
4.6. Events Subsequent to Most Recent Fiscal Month End. NSC
represents and warrants that since September 30, 1997, there has not been any
change that has resulted in a material adverse effect upon (i) the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of NSC and its Subsidiaries, taken as a whole or (ii) the ability of NSC to
perform any of its obligations hereunder as they become due, compared with the
comparable prior period. Without limiting the generality of the foregoing, since
that date NSC has not engaged in any practice, taken any action, or entered into
any transaction outside the ordinary course of business.
4.7. Absence of Litigation. There is not (i) any preliminary
or permanent injunction issued by any federal or state court of competent
jurisdiction or by any governmental or other regulatory or administrative agency
or commission or (ii) any litigation instituted by any federal agency or
administrative authority or any governmental authority which would, if
successful, enjoin or prohibit the consummation of the transactions contem
plated hereby or require rescission of this Agreement or any such transactions.
5. Covenants
---------
Avatex covenants and agrees that on and after the Closing Date
and until the same day as the day of the Closing Date in the 15th month after
the month in which the Closing Date occurs:
<PAGE>
5.1. Information Covenants. Avatex will furnish to NSC:
(a) Quarterly Financial Statements. Within 45
days after the close of each quarterly accounting period in each fiscal year of
Avatex, the consolidated balance sheet of Avatex and its Subsidiaries, as at the
end of such quarterly period and the re lated consolidated statements of income,
cash flow and retained earnings for such quarterly period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly period, and
in each case setting forth comparative figures for the related periods in the
prior fiscal year.
(b) Annual Financial Statements. Within 90 days
after the close of each fiscal year of Avatex, the consolidated balance sheet of
Avatex and its Subsidiaries, as at the end of such fiscal year, and the related
consolidated statements of income, cash flow and retained earnings for such
fiscal year, setting forth comparative figures for the preceding fiscal year and
certified by its independent certified public accountants.
(c) Management Letters. Promptly after Avatex's
receipt thereof, a copy of any "management letter" or other material report
received by Avatex from its certified public accountants.
(d) Dividends and Stock Payments. No less
than 15 days prior thereto, notification of any action to be voted upon by the
Board of Directors of Avatex to declare or pay any cash dividend on or cause to
be purchased for cash by Avatex or any of its Subsidiaries any capital stock of
Avatex.
(e) Officer's Certificates. At the time of the
delivery of the financial statements under clauses (a) and (b) above, a
certificate of the chief financial officer of Avatex which certifies (x) that
such financial statements fairly present the financial condition and the results
of operations of Avatex and its Subsidiaries on the dates and for the periods
indicated, subject, in the case of interim financial statements, to normally
recurring year-end adjustments and (y) that such officer has reviewed the terms
of this Agreement and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and condition of
Avatex and its Subsidiaries during the accounting period covered by such
financial statements, and that as a result of such review such officer has
concluded that no breach of any covenant hereunder has occurred during the
period commencing
<PAGE>
at the beginning of the accounting period covered by the financial statements
accompanied by such certificate and ending on the date of such certificate or,
if any breach of any covenant hereunder has occurred, specifying the nature and
extent thereof and, if continu ing, the action Avatex proposes to take in
respect thereof.
(f) Notice of Breach or Litigation. Promptly
and in any event within ten Business Days after Avatex or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occur rence of any
breach of this Section 5 and (ii) any litigation or governmental proceeding
pending or threatened against Avatex or any of its Subsidiaries which would be
likely to result in a Material Adverse Effect.
(g) SEC Filings. Promptly upon filing thereof,
copies of all regular and periodic financial information, proxy materials and
other information and reports, if any, which Avatex shall file with the SEC or
any governmental agencies substituted therefor or which Avatex shall send to its
stockholders.
(h) Other Information. From time to time, such
other information or documents (financial or otherwise) as NSC, NKK or NAC may
reasonably request.
5.2. Other Covenants
Consolidated Net Worth. The Consolidated Net Worth
of Avatex shall at all times be greater than or equal to
$15,000,000.
6. The Closing
-----------
6.1. Obligations of All Parties. Simultaneous with the
execution of this Agreement, the following documents were
delivered:
(a) Solvency Opinion. The solvency opinion by
the Financial Advisor, satisfactory to all parties hereto, was duly executed and
delivered by the Financial Advisor.
(b) Opinions. NSC, NKK and NAC received the
written opinion, dated the Closing Date, of Thorp, Reed & Armstrong, special
counsel to Avatex, in the form set forth in Exhibit D-1 hereto, and of the
general counsel to Avatex, in the form set forth in Exhibit D-2 hereto.
<PAGE>
(c) Opinions. Avatex received the written
opinions, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP,
counsel to NKK and NAC, in the form set forth in Exhibit E hereto, and of
general counsel of NSC, in the form set forth in Exhibit F hereto.
7. Miscellaneous.
-------------
7.1. Further Actions. At any time and from time to time each
party agrees, at its expense, to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
7.2. Submission to Jurisdiction. Solely for the purposes of
disputes among the parties hereto, the parties hereby consent and submit to
personal jurisdiction of the Federal District Court in the State of Delaware and
of any other court in Delaware having jurisdiction over any controversy, and to
service of process upon them in accordance with the rules and statutes governing
service of process, solely in connection with actions or proceedings involving
the parties to and relating to this Agreement. Each of the parties hereto
appoints CT Corporation Systems as its agent for the purpose of receiving and
accepting service of process on its behalf.
7.3. Survival. Except for Section 3.10 of this Agreement,
which shall survive the Closing Date and continue in full force and effect
without time limit, all representations, warranties, covenants and agreements
made by the parties hereto shall survive the Closing Date for a period of 15
months. There are no representations, warranties, covenants or agreements by or
among the parties and relating to the subject matter of this Agreement, except
as contained in this Agreement.
7.4. Entire Agreement; Modification. This Agreement, and the
exhibits and schedules hereto, set forth the entire understanding of the parties
with respect to the subject matter hereof, supersede all existing agreements and
understandings among them concerning such subject matter, and may be modified
only by a written instrument duly executed by each party. With respect to the
recitals, to the extent that there are inconsistencies between the description
of the terms of any of the Weirton Liabilities Agreements with the actual
Weirton Liabilities Agreements, the Weirton Liabilities Agreements shall govern.
The Weirton
<PAGE>
Liabilities Agreements shall not survive the execution and delivery of this
Agreement.
7.5. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt to the
party to whom it is to be given at the address of such party set forth below:
If to NSC:
National Steel Corporation
4100 Edison Lakes Parkway
Mishawaka, IN 46545
Attention: Senior Vice President and
General Counsel; and
Vice President-Finance,
Fax: 219-273-7868
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Edmund C. Duffy, Esq.
Fax: 212-735-2000
If to Avatex:
Avatex Corporation
5910 North Central Expressway
Suite 1780
Dallas, TX 75206
Attention: Senior Vice President, Chief Financial
Officer, General Counsel and
Secretary
Fax: 214-365-7499
with a copy to Thorp, Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
Attn: Joseph Shuman, Esq.
Fax: 412-394-2555
If to NKK:
<PAGE>
NKK Corporation
1-1-2 Marunouchi Chiyoda-ku
Tokyo 100, Japan
Attention: Assistant General Manager
North American Business
Steel Division
Fax: 011-81-3-3214-8426
with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP
at the address set forth above
If to NAC:
NKK U.S.A. Corporation
1013 Centre Road
Wilmington, New Castle County
DE 19805
Attention: Secretary
with a copy to:
NKK and
Skadden, Arps, Slate, Meagher & Flom LLP
at the addresses set forth above
7.6. Waiver. Any waiver by any party of a breach of any
provision of this Agreement must be in writing and shall not oper ate as or be
construed to be a waiver of any other breach of such provision or of any other
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
7.7. Binding Effect; Assignment. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and the respective successors and assigns of the parties hereto. No party may
assign or otherwise transfer any of its rights under this Agreement without the
written consent of all other parties hereto.
7.8. No Third Party Beneficiaries. This Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement.
<PAGE>
7.9. Severability. If any provision of this Agreement is
invalid, illegal, or unenforceable, the balance of this Agreement shall remain
in effect, and if any provision is inappli cable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
7.10. Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
7.11. Counterparts; Governing Law. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. It shall be governed by and construed in accordance with the laws of
the State of Delaware, without giving effect to its principles of conflict of
laws.
7.12. Expenses. Except as otherwise provided herein, each
party hereto shall pay its own costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed by their duly authorized officers as of the day and year first
above written.
AVATEX CORPORATION
By:___________________________
Name:
Title:
NKK CORPORATION
By:___________________________
Name:
Title:
NKK U.S.A. CORPORATION
By:___________________________
Name:
Title:
NATIONAL STEEL CORPORATION
By:___________________________
Name:
Title:
<PAGE>
RELEASE
-------
AVATEX CORPORATION, a corporation organized under the laws of
the State of Delaware ("Releasor"), which is a party to the Agreement (the
"Settlement Agreement"), dated as of November 25, 1997, by and among itself,
NATIONAL STEEL CORPORATION, a corporation organized and existing under the laws
of the State of Delaware ("NSC"), NKK CORPORATION, a corporation organized and
existing under the laws of Japan ("NKK"), NKK U.S.A. Corporation, a wholly owned
subsidiary of NKK organized and existing under the laws of the State of Delaware
("NAC") (NSC, NKK, and NAC and their respective Subsidiaries, officers,
directors and employees are hereinafter referred to collectively as "Releasee"),
in consider ation of the Settlement Payment (as defined in the Settlement
Agreement) received from NSC pursuant to Section 2.2 of the Settlement
Agreement, the sufficiency and receipt of which is hereby acknowledged, hereby
releases and discharges Releasee and Releasee's successors and assigns as
follows:
1. For purposes of this Release, capitalized terms not
otherwise defined herein shall have the meanings set forth in the Settlement
Agreement.
2. Releasor hereby releases and discharges Releasee from any
and all claims, causes of action or obligations (collectively, "Claims") owed by
any Releasee to the Releasor, whether known or presently unknown, foreseen or
presently unforeseen, asserted or not yet asserted, of any kind or character,
including and not limited to any Claims relating to the ownership by Avatex of
any securities of NSC or the Weirton Liabilities Agreements, including the
RRCEO, the Weirton Liabilities and any amounts that may become payable to Avatex
pursuant to the 1993 Agreement; provided, however, this release shall not cover
any claims, causes of action or liabilities identified in Schedule 1 hereto.
3. Whenever the text hereof so requires, the use of a singular
number shall include the appropriate plural number.
<PAGE>
4. This Release may be modified only by a written instrument
duly executed by Releasor and Releasee. This Release shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to conflict of laws.
<PAGE>
IN WITNESS WHEREOF, Releasor has caused this Release to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed on this day of November, 1997.
AVATEX CORPORATION
By: ____________________________
Name:
Title:
Accepted and Agreed:
NATIONAL STEEL CORPORATION
By: _________________________
Name:
Title:
NKK CORPORATION
By: __________________________
Name:
Title:
NKK U.S.A. CORPORATION
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE 1
1. Any claims made by any insurer for indemnification in
accordance with the terms and conditions of the
settlement agreements referenced in Section 2.5(b) to the
Settlement Agreement or in any future settlement
agreements with insurers regarding Environmental
Insurance Claims, except for indemnification claims which
relate to Bull Moose Tube Company, for which Avatex will
be solely responsible.
2. Any claims against NSC for breach of any provision of the
settlement agreements referenced in Section 2.5(b) to the
Settlement Agreement or any future settlement agreements with
insurers regarding Environmental Insurance Claims.
3. Any counterclaims, arising out of acts or omissions of NSC,
asserted against NSC or Avatex in any action in or relating to
the WVA Litigation or any claims in any action to enforce any
of the settlement agreements referenced in Section 2.5(b) of
the Settlement Agreement or any future settlement agreements
with insurers regarding Environmental Insurance Claims.
4. The indemnification obligation of NSC relating to 21 Pacella
Corporation as set forth in the settlement, release
indemnification agreement dated October 28, 1997 between NSC
and Avatex.
5. NSC's obligations pursuant to the Settlement Agreement.
6. Any claims against NSC or its Subsidiaries for
contribution or joint liability which (a) arise not from
contract but from federal, state or local environmental
laws and regulations and (b) relate to (i) any site owned
or operated by NSC, which has not been owned or operated
by any member of the Avatex Group, or (ii) any site
receiving any off-site disposal of materials from NSC,
but in the case of subsection (ii) only with respect to
off-site disposal of materials received by such site from
NSC. For the purpose of the foregoing sentence, NSC
<PAGE>
shall mean NSC and its Subsidiaries, other than any
member of the Avatex Group.
<PAGE>
RELEASE
-------
NKK CORPORATION, a corporation organized under the laws of
Japan ("NKK"), NKK U.S.A. Corporation, a wholly owned subsidiary of NKK
organized and existing under the laws of the State of Delaware ("NAC"), and
NATIONAL STEEL CORPORATION, a corporation organized and existing under the laws
of the State of Delaware ("NSC" and, together with NKK and NAC, the
"Releasors"), which are parties to the Agreement (the "Settlement Agreement"),
dated as of November 25, 1997, by and among themselves and AVATEX CORPORATION, a
corporation organized and existing under the laws of the State of Delaware
("Avatex" and, together with its Subsidiaries, officers directors and employees,
are hereinafter referred to collectively as "Releasees"), in consideration of
Avatex's release of certain claims pursuant to Section 2.4 of the Settlement
Agreement, the sufficiency and receipt of which is hereby acknowledged, hereby
release and discharge Releasee and Releasee's successors and assigns as follows:
1. For purposes of this Release, capitalized terms not
otherwise defined herein shall have the meanings set forth in the Settlement
Agreement.
2. Releasors hereby release and discharge Releasees from any
and all claims, causes of action or obligations (collectively, "Claims") owed by
any Releasee to any Releasor, whether known or presently unknown, foreseen or
presently unforeseen, asserted or not yet asserted, of any kind or character,
including and not limited to any Claims relating to the ownership by Avatex of
any securities of NSC or the Weirton Liabilities Agreements, including the
RRCEO, the Weirton Liabilities and the Indemnified Environmental Liabilities.
Notwithstanding the foregoing, the Releasees shall not be released from any
claims of the Releasors for contribution or joint liability that (a) arise not
from contract but from federal, state or local environmental laws and
regulations, (b) do not relate to an Indemnified Environmental Liability, and
(c) relate to: (i) any site which is or was owned or operated by any member of
the Avatex Group; or (ii) any off-site disposal by any member of the Avatex
Group of materials at any site
<PAGE>
owned or operated by a third party. In addition, the Avatex Release will also
not cover any obligations of Avatex (i) under the Settlement Agreement and (ii)
to indemnify NSC with respect to NSC's payment of long-term disability payments
to or on behalf of Charles ("Chuck") Ladd.
3. Whenever the text hereof so requires, the use of a singular
number shall include the appropriate plural number.
4. This Release may be modified only by a written instrument
duly executed by the Releasors and Releasees. This Release shall be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to conflict of laws.
<PAGE>
IN WITNESS WHEREOF, the Releasors have caused this Release to
be executed by their respective duly authorized officers and their respective
corporate seals to be hereunto affixed on this
day of November, 1997.
NKK CORPORATION
By: ______________________________
Name:
Title:
NKK U.S.A. CORPORATION
By: _____________________________
Name:
Title:
NATIONAL STEEL CORPORATION
By: _____________________________
Name:
Title:
Accepted and Agreed:
AVATEX CORPORATION
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT C-1
FINANCIAL STATEMENTS PURSUANT TO SECTION 3.7(a)
<PAGE>
EXHIBIT C-2
CASH FLOW PROJECTION PURSUANT TO SECTION 3.7(b)
<PAGE>
EXHIBIT D-1
AVATEX'S SPECIAL COUNSEL OPINION PURSUANT TO SECTION 6.1(b)
<PAGE>
EXHIBIT D-2
AVATEX'S GENERAL COUNSEL OPINION PURSUANT TO SECTION 6.1(b)
<PAGE>
EXHIBIT E
NKK and NAC'S COUNSEL OPINION PURSUANT TO SECTION 6.1(c)
<PAGE>
EXHIBIT F
NSC'S GENERAL COUNSEL OPINION PURSUANT
TO SECTION 6.1(c)
<PAGE>
SCHEDULE 3.8
CERTAIN INDEBTEDNESS
EXHIBIT 99
----------
For: Avatex Corporation
Contact: Edward Massman
Chief Financial Officer
(214) 365-7450
FOR IMMEDIATE RELEASE
- ---------------------
AVATEX REACHES AGREEMENT WITH NATIONAL STEEL CORPORATION
OVER PREFERRED STOCK INVESTMENT AND RELATED LIABILITIES
DALLAS, TX -- NOVEMBER 25, 1997 -- AVATEX CORPORATION (NYSE: AAV) today
announced that National Steel Corporation and certain of its affiliates have
agreed to redeem National Steel preferred stock owned by Avatex and release
Avatex of various related liabilities. Pursuant to the agreement, National Steel
will pay Avatex a total of $69 million, of which $59 million was paid in cash at
closing and an additional $10 million will be paid over the next year.
Approximately $5 million of the additional $10 million payment is subject to
Avatex's compliance with a financial covenant. In addition, National Steel has
released Avatex from all pension, life, health insurance and other benefit
obligations for the current and former employees of National Steel's former
Weirton Steel operations, as well as various environmental liabilities that were
previously indemnified by Avatex. In return, Avatex has released and assigned to
National Steel all of Avatex's rights to assert pre-1987 environmental claims
against insurers of both National Steel and Avatex, and released Avatex's share
of any settlement proceeds against such claims and all amounts remaining in the
environmental account pre-funded by Avatex to National Steel in 1993.
Avatex stated that it is using approximately $14.9 million of the cash
received from National Steel to pay its debt in full to its primary secured
lender, Credit Lyonnais. In connection with this transaction, Avatex will record
a charge to income in its third fiscal quarter ended December 31, 1997 of
approximately $59.0 million, inclusive of transaction and other related costs.
However, because reserves against the carrying value of the National Steel
investment, which were previously taken as a direct adjustments to equity of
$77.8 million, must now be reversed, Avatex will experience a net improvement to
its stockholder deficit of approximately $20.7 million as a result of this
transaction.
