SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
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(AMENDMENT NO. ___)
PHAR-MOR, INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class of Securities)
717113 10 3
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(CUSIP number)
ROBERT H. STONE
AVATEX CORPORATION
5910 NORTH CENTRAL EXPRESSWAY, SUITE 1780
DALLAS, TEXAS 75206
(214) 365-7453
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
AUGUST 22, 1997
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b) (3) or (4), check the following box [X].
Note: Six copies of this statement, including exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 717113 10 3 Page 2 of 8
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1 NAME OF REPORTING PERSON/S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON: AVATEX CORPORATION; 25-1425889
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [__]
(b) [__]
3 SEC USE ONLY
4 SOURCE OF FUNDS: 00
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [__]
6 CITIZENSHIP OR PLACE OF ORGANIZATION: DELAWARE
NUMBER OF
7 SOLE VOTING POWER:
SHARES
BENEFICIALLY
8 SHARED VOTING POWER: 4,908,435
OWNED BY
EACH
9 SOLE DISPOSITIVE POWER: 1,045,935
REPORTING
PERSON WITH
10 SHARED DISPOSITIVE POWER: 3,750,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 4,908,435
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [__]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 39.7%
14 TYPE OF REPORTING PERSON: CO
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ITEM 1. SECURITY AND ISSUER
-------------------
This statement relates to the Common Shares, par value $.01 per share
(the "Common Stock"), of Phar-Mor, Inc. (the "Issuer"), a corporation organized
under the laws of the State of Pennsylvania with its principal executive offices
at 20 Federal Plaza West, Youngstown, Ohio 44501.
ITEM 2. IDENTITY AND BACKGROUND
-----------------------
(a) This statement is filed by Avatex Corporation, a Delaware
corporation ("Avatex").
(b) 5910 North Central Expressway, Suite 1780, Dallas, Texas 75206.
(c) Avatex Corporation is a holding company that is primarily engaged
in owning interests in hotels and office buildings, and also owns interests in
other corporations and partnerships. Attached as Schedule I hereto and
incorporated herein by reference is a list of the directors and executive
officers of Avatex. Schedule I also sets forth the business address and
principal occupation or employment of each individual listed therein.
(d) - (e) During the past five years, neither Avatex nor, to the best
of Avatex's knowledge, any of the persons with respect to whom information is
given in response to this Item 2, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violations with respect to such laws.
(f) All of the individuals listed on Schedule I hereto are citizens of
the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
-------------------------------------------------
Pursuant to the Hamilton Morgan LLC Interests Redemption and Exchange
Agreement (the "Agreement"), entered into by Avatex on August 22, 1997, Avatex
will acquire, subject to certain conditions, 3,750,000 shares of Common Stock
from Hamilton Morgan LLC, a Delaware limited liability company (the "Company").
Under the Agreement, Avatex has agreed to (i) the transfer of certain marketable
securities to the Company in exchange for a portion of the 3,750,000 shares of
Common Stock being acquired under the Agreement, (ii) the satisfaction of a
certain promissory note from the Company to Avatex in exchange for another
portion of the 3,750,000 shares of Common Stock being acquired under the
Agreement, and (iii) the redemption of Avatex's membership interest in the
Company, and the withdrawal by Avatex from the Company, in exchange for the
remaining portion of the 3,750,000 shares of Common Stock being acquired under
the Agreement. After the
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Closing under the Agreement, which will occur within 30 days of August 22, 1997,
the 3,750,000 shares of Common Stock will be owned beneficially and of record by
Avatex.
ITEM 4. PURPOSE OF TRANSACTION
----------------------
Avatex is acquiring the shares of Common Stock for investment purposes,
and has previously reported ownership on Schedule 13G. As part of the Agreement,
Robert M. Haft, President of the Company, and Linda G. Haft, each of whom is a
member of the Board of Directors of the Issuer, have agreed to resign as members
of the Board of Directors of the Issuer. The resignation of Mr. Haft, however,
is contingent upon his being legally entitled to the benefits of that certain
severance agreement to be entered into by Mr. Haft and the Issuer with respect
to the Employment Agreement, dated September 11, 1995, between Mr. Haft and the
Issuer. Avatex will seek to add designees to the Board of Directors of the
Issuer, such that the designees of Avatex will constitute a majority of the
Board of Directors of the Issuer.
From time to time, Avatex will evaluate its position and may determine
to acquire additional shares of Common Stock of the Issuer (subject to the
availability of shares at prices deemed favorable and the availability of
financing) or dispose of shares of the Common Stock of the Issuer, at any time
and from time to time.
Other than as set forth above, Avatex has no plans or proposals which
relate to or would result in any of the action specified in clauses (a) through
(j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
------------------------------------
(a) Avatex, the Company and Robert M. Haft, collectively, currently own
approximately 39.7% of the outstanding Common Stock of the Issuer (based upon
the number of shares of Common Stock outstanding as of March 29, 1997, as
reported by the Issuer in its Quarterly Report on Form 10-Q for the quarterly
period ended March 29, 1997 (the "Outstanding Shares"), plus 91,902 shares that
would be issued upon exercise of warrants held by Avatex and 112,500 shares that
would be issued upon exercise of stock options held by Robert M. Haft). Assuming
the closing under the Agreement occurs, Avatex will beneficially own 4,795,935
shares of Common Stock of the Issuer, which constitute approximately 39.2% of
the outstanding shares of Common Stock of the Issuer (based upon the number of
Outstanding Shares, plus 91,902 shares that would be issued upon exercise of
warrants held by Avatex). Of these 4,795,935 shares, Avatex currently owns
954,033 shares of Common Stock and warrants to purchase 91,902 shares of Common
Stock, and the Company currently owns 3,750,000 shares of Common Stock that will
be acquired by Avatex under the Agreement. Robert M. Haft currently owns options
to purchase an additional 112,500 shares of Common Stock, which he will continue
to own after the closing under the Agreement.
(b) The persons named in Item 5(a) above currently possess shared power
to direct the vote of all 4,908,435 shares of Common Stock of the Issuer
beneficially owned by them, subject to
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a dispute between Avatex and Robert M. Haft regarding voting rights as described
in Note 1 to Item 4 of the Amendment No. 1 to the Schedule 13G filed by Avatex
and the Company on February 8, 1996. The persons named in Item 5(a) above also
currently possess shared power to direct the disposition of 3,750,000 shares of
Common Stock of the Issuer owned by them.
After the closing under the Agreement, but prior to the approval by the
United States Bankruptcy Court for the District of Delaware (the "Court") in
Case Nos. 96-1329 to 1334 (HSB) of the Settlement Agreement between Avatex and
the Chapter 7 Trustee in such cases, (i) Avatex and the Trustee, acting as
co-escrow agents, will have shared power to direct the vote of 1,132,500 shares
of Common Stock of the Issuer that will be beneficially owned by Avatex and held
subject to the Escrow Agreement between Avatex and the Trustee, (ii) Avatex will
have sole power to direct the vote of 3,663,435 shares of Common Stock of the
Issuer beneficially owned by Avatex, and (iii) Avatex will have the sole power
to direct the disposition of 4,795,935 shares of Common Stock of the Issuer
beneficially owned by it, subject to the terms of the Escrow Agreement with
respect to 1,132,500 of the shares. After approval by the Court of the
Settlement Agreement, Avatex will have the sole power to direct the vote and the
disposition of 4,795,935 shares of Common Stock of the Issuer. Robert M. Haft
has, and after the closing will continue to have, the sole power to direct the
disposition of 112,500 of the shares of Common Stock of the Issuer beneficially
owned by him and, after the closing, will have the sole power to direct the vote
of 112,500 of the shares of Common Stock of the Issuer beneficially owned by
him.
(c) No transaction in the Common Shares of the Issuer was effected
during the past sixty days by Avatex.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
-------------------------------------------------------------
RESPECT TO SECURITIES OF THE ISSUER.
------------------------------------
The Issuer, the Company and FoxMeyer Drug Company are parties to a
Registration Rights Agreement dated as of September 1995. On June 19, 1996,
FoxMeyer Drug Company assigned all of its rights under the Registration Rights
Agreement to Avatex. At the closing under the Agreement, the Company will assign
all of its rights under the Registration Rights Agreement to Avatex.
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ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
---------------------------------
1. Hamilton Morgan LLC Interests Redemption and Exchange Agreement,
dated as of August 22, 1997, between Hamilton Morgan LLC, Avatex
Corporation, Abbey Butler, Melvyn J. Estrin, Robert M. Haft, and
Robert M. Haft and Mary Z. Haft, as tenants by the entirety.
2. Escrow Agreement dated July 25, 1997, between Avatex Corporation,
Bart A. Brown, Jr., as trustee under chapter 7 of title 11 of the
United States Code of FoxMeyer Corporation, FoxMeyer Drug Company,
Healthcare Transportation System, Inc., Merchandise Coordinator
Services Corporation, FoxMeyer Software, Inc. and Health Mart, Inc.
and their respective estates, as their interests may appear, and
Bart A. Brown, Jr., individually and as co-escrow agent, and Edward
L. Massman, individually and as co-escrow agent.
3. Registration Rights Agreement dated as of September 1995, between
Phar-Mor, Inc., Hamilton Morgan LLC and FoxMeyer Drug Company.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: August 28, 1997
AVATEX CORPORATION
By: /s/ Robert H. Stone
------------------
Robert H. Stone
Vice President
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF AVATEX CORPORATION
The following information is provided for the directors and executive
officers of Avatex Corporation ("Avatex") listed below: (a) name; (b) business
address; (c) present principal occupation or employment and the name, principal
business and the address of any corporation or other organization in which such
employment is conducted.
(a) Abbey J. Butler, Co-Chairman of the Board and Co-Chief Executive
Officer of Avatex;
(b) 5910 North Central Expressway, Suite 1780, Dallas, Texas 75206 ("Avatex
Address");
(c) Co-Chairman of the Board and Co-Chief Executive Officer of Avatex;
Avatex Address.
(a) Melvyn J. Estrin, Co-Chairman of the Board and Co-Chief Executive
Officer of Avatex;
(b) Avatex Address;
(c) Co-chairman of the Board and Co-Chief Executive Officer of Avatex;
Avatex Address.
(a) Hyman H. Frankel, Director of Avatex;
(b) Avatex Address;
(c) Executive Officer of Human Service Group, Inc. and University Research
Corporation; 7200 Wisconsin Avenue, Bethesda, Maryland 20814-4811.
(a) Fred S. Katz, Director of Avatex;
(b) Avatex Address;
(c) President of First Taconic Capital Corporation; 99 Park Avenue, Suite
2230, New York, New York 10016.
(a) William A. Lemer, Director of Avatex;
(b) Avatex Address;
(c) President of Bethesda Avenue Photo, Inc. and Pentagon Concourse Photo,
Inc.; 4823 Bethesda Avenue, Bethesda, Maryland 20814.
(a) Charles C. Pecarro, Director of Avatex;
(b) Avatex Address;
(c) Chief Financial Officer of Human Service Group, Inc. and University
Research Corporation; 7200 Wisconsin Avenue, Bethesda, Maryland
20814-4811.
(a) John L. Wineapple, Director of Avatex;
(b) Avatex Address;
(c) Principal of First Taconic Capitol Corporation; 99 Park Avenue, Suite
2230, New York, New York 10016.
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(a) Edward L. Massman, Senior Vice President and Chief Financial Officer of
Avatex;
(b) Avatex Address;
(c) Senior Vice President and Chief Financial Officer of Avatex; Avatex
Address.
(a) John G. Murray, Vice President -- Finance of Avatex;
(b) Avatex Address;
(c) Vice President -- Finance of Avatex; Avatex Address.
(a) Scott E. Peterson, Vice President - Finance and Controller of Avatex;
(b) Avatex Address;
(c) Vice President - Finance and Controller of Avatex; Avatex Address.
(a) Grady E. Schleier, Vice President and Treasurer of Avatex;
(b) Avatex Address;
(c) Vice President and Treasurer of Avatex; Avatex Address.
(a) Robert H. Stone, Vice President, General Counsel and Secretary of
Avatex;
(b) Avatex Address;
(c) Vice President and General Counsel of Avatex; Avatex Address.
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EXHIBIT INDEX
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Exhibit
Number Exhibit
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Exhibit 1 Hamilton Morgan LLC Interests Redemption and Exchange Agreement,
dated as of August 22, 1997, between Hamilton Morgan LLC, Avatex
Corporation, Abbey Butler, Melvyn J. Estrin, Robert M. Haft, and
Robert M. Haft and Mary Z. Haft, as tenants by the entirety.
Exhibit 2 Escrow Agreement dated July 25, 1997, between Avatex
Corporation, Bart A. Brown, Jr., as trustee under chapter 7 of
title 11 of the United States Code of FoxMeyer Corporation,
FoxMeyer Drug Company, Healthcare Transportation System, Inc.,
Merchandise Coordinator Services Corporation, FoxMeyer Software,
Inc. and Health Mart, Inc. and their respective estates, as
their interests may appear, and Bart A. Brown, Jr., individually
and as co- escrow agent, and Edward L. Massman, individually and
as co-escrow agent.
Exhibit 3 Registration Rights Agreement dated as of September
1995, between Phar- Mor, Inc., Hamilton Morgan LLC
and FoxMeyer Drug Company.
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HAMILTON MORGAN LLC INTERESTS REDEMPTION AND EXCHANGE AGREEMENT
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THIS HAMILTON MORGAN LLC INTERESTS REDEMPTION AND EXCHANGE
AGREEMENT (this "Agreement") is made and entered into, effective for all
purposes and in all respects, as of August , 1997, by and between (i) HAMILTON
MORGAN L.L.C., a Delaware limited liability company (the "Company"), (ii) AVATEX
CORPORATION (formerly FoxMeyer Health Corporation), a Delaware corporation ("Fox
Health"), (iii) ABBEY BUTLER ("Butler"), (iv) MELVYN J. ESTRIN ("Estrin"), (v)
ROBERT M. HAFT ("R. Haft") and (vi) ROBERT M.
HAFT and MARY Z. HAFT, tenants by the entirety ("Haft").
RECITALS
--------
WHEREAS, Fox Health and Haft are members of the Company pursuant to the
Operating Agreement (as defined below);
WHEREAS, on December 18, 1996, Fox Health sent notice to Haft that Fox
Health was triggering the buy-sell provisions of paragraph 14 of the Operating
Agreement (the "Buy-Sell");
WHEREAS, by notice dated December 23, 1996 Haft informed Fox Health
that Haft was disputing certain interpretations of Fox Health's triggering of
the Buy-Sell and that Haft was invoking the arbitration provisions of paragraph
18(l) of the Operating Agreement;
WHEREAS, Fox Health asserts that the Company owes Fox Health the sum of
$3,000,000 pursuant to the "FoxMeyer Note" (as defined in the Operating
Agreement);
WHEREAS, the Company asserts that the FoxMeyer Note has never been
executed and disputes its obligation therefor;
WHEREAS, Fox Health and Haft each acknowledges that, by virtue of the
terms of the Operating Agreement and the Joint Proxy (as defined below), each of
them presently does not possess (i) exclusive voting power control over the
Company or (ii) exclusive voting power or control over either the Stock (as
defined below) or the Proxy Stock (as defined in the Joint Proxy) for which it
or its affiliates is the record owner;
WHEREAS, Fox Health acknowledges that (i) it would be materially
benefited by its acquiring exclusive dominion and control over the Stock, (ii)
the block of shares comprising the Stock have, by virtue of their collective
percentage of the total number of issued and outstanding shares of Phar-Mor,
Inc. stock, an aggregate value in excess of the value that would be
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computed by multiplying the number of such shares by the current trading price
per share of Phar-Mor, Inc. stock, (iii) Fox Health would be materially
benefited by gaining voting power over any shares of Proxy Stock for which it or
its affiliates is the record shareholder, and (iv) Fox Health would be
materially benefited by resolving any disputes concerning collection of the
FoxMeyer Note;
WHEREAS, in resolution of the disputes between Haft and Fox Health
concerning Fox Health's triggering of the Buy-Sell and all other disputes
between them, the parties have mutually agreed for (i) Fox Health to exchange
certain marketable securities for certain other marketable securities owned by
the Company, (ii) the Company to redeem Fox Health's interests in the Company,
and Fox Health has agreed to withdraw from the Company and to have its interests
in the Company completely liquidated by the Company, and the non-withdrawing
members of the Company have caused the Company to agree to liquidate all such
interests of Fox Health in the Company, and (iii) the Company to satisfy the
FoxMeyer Note.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises set forth herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. Recitals. The foregoing recitals are hereby incorporated by reference
in, and made a substantive part of, this Agreement.
2. Definitions. As used herein, the following terms shall have the
following meanings (applicable to both the singular and plural forms thereof):
2.1. "Arbitrator" shall mean the American Arbitration
Association which is administering the pending arbitration proceeding between
Haft and Fox Health brought pursuant to paragraph 18(l) of the Operating
Agreement.
2.2. "Bankruptcy Code" shall mean 11 U.S.C.ss.101 et. seq.
2.3. "Butler" shall mean Abbey Butler, Co-Chairman of Fo
Health and a member of the Board of Directors of Phar-Mor.
2.4. "Closing" shall have the meaning ascribed to it in
Section 9.1 below.
2.5. "Company's Counsel Opinion" shall mean the legal
opinion of Tucker, Flyer & Lewis, counsel to the Company, to be delivered at
Closing in the form of Exhibit A attached hereto.
2.6. "Company Interests" shall mean the Fox Health LLC
Interest.
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2.7. "Company Note" shall mean that certain promissory note
referenced in the Operating Agreement as the "FoxMeyer Note".
2.8. "Credit Lyonnais-Company Pledge" shall mean that certain
Security Agreement (Hamilton Morgan, L.L.C.) between the Company and Credit
Lyonnais, dated September 6, 1995.
2.9. "Credit Lyonnais-Fox Pledge" shall mean that certain
Security Agreement (FoxMeyer Health Corporation) between Fox Health and Credit
Lyonnais, dated September 6, 1995.
2.10."Credit Lyonnais" shall mean Credit Lyonnais New York
Branch, a duly licensed branch under the New York Banking Law of a foreign
banking corporation organized under the laws of the Republic of France.
2.11."Credit Lyonnais Consent and Termination Agreement" shall
mean a written agreement to be executed at Closing by the Company and Credit
Lyonnais whereby Credit Lyonnais (i) consents to the Company's transfer of the
Distributed Shares, the Exchange Shares and the Payoff Shares to Fox Health
pursuant to Sections 3, 4.2 and 4.3 of this Agreement, (ii) releases the Company
of all of the Company's covenants, undertakings and obligations under, and
terminates, the Credit Lyonnais-Company Pledge, and (iii) releases and
terminates its security interest in the Fox Health LLC Interest (and executes
and delivers to the Company appropriate Forms UCC-3), and the Company provides
Credit Lyonnais with a reciprocal release, all in form and content acceptable to
the Company and its counsel in their reasonable discretion.
2.12.[Intentionally left blank.]
2.13."Delaware Court Order" shall mean an order of the United
States Bankruptcy Court for the District of Delaware in that action styled
Official Committee of Unsecured Creditors of FoxMeyer Corporation et al., v.
FoxMeyer Health Corporation (Adversary No. 96-205), whereby the Court (a)
modifies the Agreed Preliminary Injunction Order entered on March 5, 1997 in
such adversary proceeding (i) to permit Fox Health to enter into, and perform
its obligations under, this Agreement and the other Transaction Documents to
which it is a party, and (ii) to permit the use of $6,060,000 of the funds now
held pursuant to the Escrow Agreement (as defined in the Trustee Settlement
Agreement) to purchase the Exchange Assets; or (b) dissolves the Agreed
Preliminary Injunction Order (without issuing a comparable injunction order in
lieu thereof).
2.14."Distributed Shares" shall mean a number of shares of
common stock, $0.01 par value per share, of Phar-Mor equal to (a) three million
seven hundred fifty thousand (3,750,000) less (b) the number of Payoff Shares
less (c) the number of Exchange Shares. The
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Distributed Shares shall be distributed to Fox Health pursuant to Section 4.2
hereof. The sum of (a) the Distributed Shares plus (b) the Payoff Shares plus
(c) the Exchange Shares shall equal three million seven hundred fifty thousand
(3,750,000).
2.15."Estrin" shall mean Melvyn J. Estrin, Co-Chairman of Fox
Health and a member of the Board of Directors of Phar-Mor.
2.16."Exchange Assets" shall mean publicly traded (on the New
York Stock Exchange or the NASDAQ over-the-counter trading system) registered
shares of common stock that are free and clear of any lien, claim, encumbrance
or restriction of any kind whatsoever, which are purchased on the day of Closing
and which cost at least $6,060,000 (including normal brokerage costs) and are to
be assigned to the Company by Fox Health pursuant to Section 3 below. The
Exchange Assets shall be subject to the selection and approval of Haft, in their
reasonable discretion.
2.17."Exchange Shares" shall mean a number of shares of
common stock, $0.01 par value per share, of Phar-Mor calculated by dividing (a)
Six Million Sixty Thousand Dollars ($6,060,000) by (b) the closing trading price
per share of Phar-Mor common stock as reported in The Wall Street Journal for
the day that is five (5) business days prior to Closing (if no trading price is
reported, the closing trading price shall be the average trading price for the
last five (5) business days on which trading occurred).
2.18."Fairness Opinion/FBR" shall mean a written opinion
rendered to the Company and Haft by Friedman Billings & Ramsey that, as the
result of the Company's (i) distribution of the Distributed Shares to Fox Health
in complete redemption of the Fox Health LLC Interest, (ii) transfer of the
Exchange Shares to Fox Health for the Exchange Assets, and (iii) payment of the
Payoff Shares in full satisfaction of the Company Note, the consideration being
received by Fox Health in exchange for the consideration being transferred by
Fox Health in the aggregate is fair from a financial point of view to Fox
Health. Haft shall be solely responsible for all of the costs and expenses
relating to the preparation and delivery of the Fairness Opinion/FBR.
2.19."Fairness Opinion/Gordian" shall mean a written opinion
rendered to Fox Health by Gordian Group L.P. in the form of Exhibit A-1 attached
hereto that, as the result of the Company's (i) distribution of the Distributed
Shares to Fox Health in complete redemption of the Fox Health LLC Interest, (ii)
transfer of the Exchange Shares to Fox Health for the Exchange Assets, and (iii)
payment of the Payoff Shares in full satisfaction of the Company Note, the
consideration being received by Fox Health in exchange for the consideration
being transferred by Fox Health in the aggregate is fair from a financial point
of view to Fox Health.
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Fox Health shall be solely responsible for all of the costs and expenses
relating to the preparation and delivery of the Fairness Opinion/Gordian. The
Fairness Opinion/Gordian shall be in substantially the same form as Exhibit A-1
hereto; provided, however, that it shall be subject to change due to any
material changes in relevant facts and circumstances prior to the Closing;
provided, further, however, that the opinion rendered by Gordian Group L.P. at
Closing shall reach the conclusion stated in the immediately preceding sentence.
2.20."Fox Corp." shall mean FoxMeyer Corporation, a Delaware
corporation and wholly-owned subsidiary of Fox Health.
2.21."Fox Drug" shall mean FoxMeyer Drug Company, a Delaware
corporation and wholly-owned subsidiary of Fox Corp.
2.22."Fox Health's Counsel Opinion" shall mean the legal
opinion of Weil, Gotshal & Manges, counsel to Fox Health, to be delivered at
Closing in the form of Exhibit B attached hereto.
2.23."Fox Health LLC Interest" shall mean the sixty-nine and
eight-tenths percent (69.8%) limited liability company interest in the Company
owned by Fox Health, including, without limitation, (i) all cash, proceeds,
interests, surplus, issues, profits, payments, distributions and other property
currently on account or at any time received, receivable or otherwise payable or
distributable, after the date hereof, in respect of such limited liability
company interest, and the right to receive, receipt for, use and enjoy all such
items, (ii) all right, title and interest of the owner of such limited liability
company interest in and to all real and personal property of the Company, (iii)
all voting rights associated with such limited liability company interest and
(iv) all other rights, however characterized, now or hereafter held by the
Company attributable to such limited liability company interest.
2.24.[Intentionally Omitted.]
2.25."Haft" shall mean Robert M. Haft and Mary Z. Haft,
tenants by the entirety and members of the Company.
2.26."Indemnification Agreement" shall mean that certain
Indemnification Agreement to be executed by Fox Health for the benefit of the
Company and Haft in the form of Exhibit C attached hereto.
2.27."L. Haft" shall mean Linda G. Haft, a member of the
Board of Directors of Phar-Mor appointed by Haft under the Operating Agreement.
2.28."Insolvent" has the meaning ascribed to it in 11 U.S.C.
ss. 101(32) or under any applicable state insolvency statute.
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2.29."Joint Proxy" shall mean that certain Joint Irrevocable
Proxy dated May 5, 1995, by and among R. Haft, Fox Health, Fox Corp. and the
Company.
2.30."Joint Proxy Termination Agreement" shall mean that
certain Joint Proxy Termination Agreement to be executed by and among R. Haft,
the Company and Fox Health, in the form of Exhibit D attached hereto.
2.31."Member Consent" shall mean the irrevocable written
consent of Haft and Fox Health to be executed as of the date hereof authorizing
R. Haft, as President of the Company, to enter into the Transaction Documents
and consummate the transactions contemplated thereunder.
2.32."Operating Agreement" shall mean that certain Amended
and Restated Limited Liability Company Agreement of Robert Haft Group/Phar-Mor
L.L.C. (now Hamilton Morgan L.L.C.) dated May 5, 1995 between Fox Health and
Haft.
2.33."Operating Agreement Amendment" shall mean the amendment
to the Operating Agreement, in the form of Exhibit E attached hereto.
2.34."Payoff Shares" shall mean a number of shares of common
stock, $0.01 par value per share, of Phar-Mor calculated by dividing (a) Three
Million Dollars ($3,000,000) by (b) the closing trading price per share of
Phar-Mor common stock as reported in The Wall Street Journal for the day that is
five (5) business days prior to Closing (if no trading price is reported, the
closing trading price shall be the average trading price for the last five (5)
business days on which trading occurred. At Closing, the Payoff Shares shall be
paid to Fox Health in complete satisfaction of the Company Note pursuant to
Section 4.3 hereof.
2.35."Phar-Mor" shall mean Phar-Mor, Inc., a Pennsylvania
corporation.
2.36."Proxy Stock" has the meaning ascribed to it in the
Joint Proxy.
2.37."R. Haft" shall mean Robert M. Haft, President of the
Company.
2.38."Registration Rights Agreement" shall mean that certain
Phar-Mor, Inc. Registration Rights Agreement dated as of September, 1995 by and
among Phar-Mor, the Company and Fox Drug.
2.39."Registration Rights Assignment" shall mean that certain
Assignment and Assumption Agreement to be executed by the Company and Fox Health
as of Closing, in the form of Exhibit F attached hereto, which Agreement is to
assign to Fox Health all of the Company's contractual rights, if any, with
respect to Phar-Mor.
6
<PAGE>
2.40."Release" shall mean that certain general Release to be
executed by the Company, R. Haft, Haft, Fox Health, Estrin and Butler as of
Closing, in the form of Exhibit G attached hereto.
2.41."Stock" shall mean the Company's three million seven
hundred fifty thousand (3,750,000) shares of common stock, $0.01 par value per
share, of Phar-Mor.
2.42."Tolling Agreement" shall mean that certain Tolling
Agreement to be executed by Fox Health, Haft and the Company as of the date
hereof.
2.43."Transaction Documents" shall mean this Agreement, the
Credit Lyonnais Consent and Termination Agreement, the Indemnification
Agreement, the Joint Proxy Termination Agreement, the Member Consent, the
Operating Agreement Amendment, the Registration Rights Assignment, the Release
and the Tolling Agreement.
2.44."Trustee Settlement Agreement" shall mean that certain
Settlement Agreement between Bart A. Brown, Jr., as Trustee, and Avatex
Corporation.
3. Exchange of Exchange Shares for Exchange Assets. At Closing, Fox
Health shall transfer good and marketable title to the Exchange Assets to the
Company (and execute an appropriate stock power therefor) and, in return, the
Company shall transfer the Exchange Shares to Fox Health (and execute an
appropriate stock power therefor).
4. Redemption of Company Interests; Consideration; Pay Off of
Company Note.
4.1. At Closing, Fox Health shall withdraw from the Company
and transfer and deliver Fox Health's entire legal and beneficial right, title
and interest in and to the Company Interests to the Company, free and clear of
any lien, pledge, claim, option unrecorded or unfiled agreement, contract,
charge, encumbrance, security interest, assessment, limitation and restriction
of any nature whatsoever and the Company shall redeem the Company Interests and
accept such transfer and delivery of the entire legal and beneficial right,
title and interest in and to the Company Interests.
4.2. As consideration for the redemption of the Company
Interests, the Company shall distribute the Distributed Shares to Fox Health and
execute an appropriate stock power therefor.
4.3. At Closing, in full payment and satisfaction of the
Company Note the Company shall deliver the Payoff Shares to Fox Health and
execute an appropriate stock power therefor. At Closing, Fox Health shall mark
the original Company Note "Paid in Full" and deliver it to the Company (or
execute and deliver a lost note affidavit and indemnity in form and content
satisfactory to Haft in his reasonable discretion).
7
<PAGE>
5. Representations and Warranties.
5.1. Fox Health represents and warrants to the Company that, as of
the date hereof, and as of Closing, each of the following representations and
warranties is, and shall be, true, complete and correct:
5.1.1 Except for the Credit Lyonnais-Fox Pledge, Fox
Health has good and marketable title to the Company Interests, free and clear of
any lien, pledge, claim, option, unrecorded or unfiled agreement, contract,
charge, encumbrance, security interest, assessment, limitation or restriction of
any nature whatsoever and Fox Health has not taken or failed to take any action
and shall not take or fail to take any action which, with respect to the Company
Interests, has created or resulted, or could create or result, in any lien,
pledge, claim, option, unrecorded or unfiled agreement, contract, charge,
encumbrance, security interest, assessment, limitation or restriction of any
nature whatsoever.
5.1.2 Subject to the receipt of the Delaware Court
Order and subject to Credit Lyonnais's execution of the Credit Lyonnais Consent
and Termination Agreement, Fox Health has the full power, right, authority and
legal capacity to enter into, execute and deliver the Transaction Documents to
be executed and delivered by Fox Health and to perform all of Fox Health's
obligations under such Transaction Documents.
5.1.3 The Transaction Documents to be executed and
delivered by Fox Health are and shall be duly executed and delivered by Fox
Health and are and shall be the valid and binding obligations of Fox Health,
enforceable in accordance with their respective terms.
5.1.4 Fox Health is not the debtor in any bankruptcy
or insolvency proceeding, nor, based upon its review of its most recent
financial statements and other relevant information, is it Insolvent, nor will
the performance of any actual or potential obligations under this Agreement or
any of the other Transaction Documents executed pursuant to this Agreement
render Fox Health Insolvent.
5.1.5 Fox Health has good and marketable title to
te Company Note and has not transferred, assigned or otherwise conveyed any
interest therein to any other party.
5.1.6
A. Fox Health is acquiring the Distributed
Shares, the Payoff Shares and the Exchange Shares (collectively, the
"Securities") solely for its own account as an investment and not with a view to
any distribution or resale thereof within the meanings of such terms under the
Securities Act of 1933, as amended (the "Securities Act"). Fox Health has been
advised that the transfer of the Securities hereunder has not been, and will not
be,
8
<PAGE>
registered under the Securities Act or under the provisions of any state
securities or "blue sky" law.
B. Fox Health is an "Accredited Investor"
(as such term is defined in Rule 501 of Regulation D of the Securities Act). The
knowledge and experience of Fox Health in financial and business matters is such
that it is capable of evaluating the risk of the investment in the Securities.
Fox Health acknowledges that it has had access to such financial and other
information, and has been afforded the opportunity to ask such question of
representatives of the Company and receive answers thereto, as Fox Health has
deemed necessary in connection with its decision to enter into the transactions
involving the Securities, and that no representation or warranties, express or
implied, are being made by the Company with respect to the Securities, other
than those expressly set forth herein.
5.2. The Company represents and warrants to Fox Health
that, as of the date hereof, and as of Closing, each of the following
representations and warranties is true, complete and correct:
5.2.1 The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
5.2.2 Upon execution of the Member Consent (and
subject to Credit Lyonnais's execution of the Credit Lyonnais Consent and
Termination Agreement), the Company has the full power, right authority and
legal capacity to enter into, execute and deliver the Transaction Documents to
be executed and delivered by the Company and to perform all of the Company's
obligations under such Transaction Documents, and all actions required to
authorize the transactions contemplated by such Transaction Documents and the
execution and delivery by the Company of such Company Interests Documents have
been duly performed and obtained.
5.2.3 The Transaction Documents to be executed and
delivered by the Company have been duly executed and delivered on behalf of the
Company and are the valid and binding obligations of the Company, enforceable in
accordance with their respective terms.
5.2.4 Except for the Credit Lyonnais Company Pledge,
the Company has good and marketable title to the Stock free and clear of any
lien, pledge, claim, option, unrecorded or unfiled agreement, contract, charge,
encumbrance, security interest, assessment, limitation or restriction of any
nature whatsoever and the Company has not taken or failed to take any actin and
shall not take or fail to take any actin which, with respect to the Stock, has
created or resulted, or could create or result, in any lien, pledge, claim,
option, unrecorded or unfiled agreement, contract, charge, encumbrance, security
interest, assessment, limitation or restriction of any nature whatsoever, and
has not transferred, assigned or otherwise conveyed any interest therein to any
other party.
9
<PAGE>
6. Fox Health Covenants and Agreements. Fox Health covenants and agrees
as follows:
6.1. Fox Health shall use its best efforts to cause Credit
Lyonnais to execute and deliver at Closing the Credit Lyonnais Consent and
Termination Agreement.
6.2. Fox Health shall execute and deliver at Closing the
Operating Agreement Amendment.
6.3. Fox Health shall deliver at Closing the original Company
Note, or an appropriate affidavit of loss and indemnification agreement in form
and content satisfactory to Haft in his reasonable discretion.
6.4. Fox Health shall execute and deliver the Member Consent
as of the date hereof.
6.5. Fox Health shall fully and completely satisfy its
obligations under Section 2 of the Trustee Settlement Agreement.
6.6. Fox Health shall promptly use its best efforts to seek
and obtain prior to Closing the Delaware Court Order.
6.7. Fox Health shall use its best efforts to cause its
counsel to prepare and deliver at Closing the Fox Health's Counsel Opinion.
6.8. At Closing, Fox Health shall execute and deliver the
Release.
6.9. In accordance with the requirements of this Agreement,
Fox Health shall use its best efforts to obtain and deliver the Fairness
Opinion/Gordian.
6.10. At Closing, Fox Health shall execute and deliver the
Joint Proxy Termination Agreement.
6.11. Fox Health shall execute and deliver at Closing the
Registration Rights Assignment.
6.12. Fox Health shall execute and deliver at Closing the
Indemnification Agreement.
6.13. Fox Health, Estrin and Butler each acknowledges and
agrees that, for purposes of that certain Employment Agreement between R. Haft
and Phar-Mor, Inc. dated September 11, 1995 (the "Employment Agreement"), as of
Closing R. Haft will have the legal
10
<PAGE>
right (but not the obligation) to require Phar-Mor to treat the transactions
contemplated under this Agreement as a "change of control" for purposes of the
Employment Agreement, including, without limitation, paragraph 1.50 thereof.
7. Company Covenants and Agreements. The Company covenants and agrees as
follows:
7.1. The Company shall use its best efforts to cause Haft and
R. Haft to execute and deliver at Closing the Release and the Operating
Agreement Amendment.
7.2. The Company shall use its best efforts to cause its
counsel to prepare and deliver at Closing the Company's Counsel Opinion.
7.3. The Company shall execute and deliver at Closing the
Joint Proxy Termination Agreement.
7.4. The Company shall execute and deliver at Closing the
Registration Rights Assignment.
7.5. The Company shall execute and deliver at Closing the
Credit Lyonnais Consent and Termination Agreement.
7.6. The Company shall use its best efforts to obtain the
Fairness Opinion/FBR.
7.7. The Company shall execute and deliver at Closing the
Release.
11
<PAGE>
8. Other Covenants and Agreements.
8.1. R. Haft and Haft shall execute and deliver the Release
and the Operating Agreement Amendment at Closing.
8.2. R. Haft shall cause L. Haft to resign as a member of the
board of directors of Phar-Mor on or prior to Closing.
8.3. At or prior to Closing, R. Haft shall resign as a member
of the board of directors of Phar-Mor, provided that he is legally entitled to
the benefits of the written severance agreement contemplated by Section 10.1.11.
8.4. R. Haft shall execute and deliver the Proxy Termination
Agreement at Closing.
9. Closing.
9.1. Closing under this Agreement shall occur as soon as
practicable and, in any event, within thirty (30) days of the date of this
Agreement at Tucker, Flyer & Lewis, 1615 L Street, N.W., Suite 400, Washington,
D.C. 20036.
9.2. R. Haft shall have the right, exercisable in his sole
discretion, to terminate this Agreement if the Delaware Court Order is not
issued within thirty (30) days after the date of this Agreement.
10. Conditions Precedent.
10.1. The Company's and Haft's obligations to close under this
Agreement shall be subject to the following conditions precedent (any of which
may be waived, in whole or in part, by the Company and/or Haft in its or their
sole discretion):
10.1.1 Fox Health shall have transferred good and
marketable title to the Exchange Assets to the Company.
10.1.2 Credit Lyonnais shall have executed and
delivered the Credit Lyonnais Consent and Termination Agreement, in form and
content acceptable to the Company and its counsel in their reasonable
discretion.
10.1.3 Fox Health shall have executed and delivered
to the Company the Operating Agreement Amendment.
12
<PAGE>
10.1.4 Fox Health shall have delivered to the Company
the original Company Note or an appropriate affidavit of loss and
indemnification agreement (in form and content satisfactory to Haft in his
reasonable discretion).
10.1.5 Fox Health shall have executed and delivered
to the Company the Release.
10.1.6 Fox Health's counsel shall have delivered to
the Company the Fox Health's Counsel Opinion.
10.1.7 As of Closing, there shall be no pending or
threatened action, proceeding, judgment, ruling, order or injunction that
prevents, impairs or impedes, or, if successful, reasonably could be expected to
prevent, impair or impede, the consummation of the transactions contemplated
hereby.
10.1.8 Fox Health shall have obtained the Delaware
Court Order.
10.1.9 Fox Health shall have executed and delivered
to the Company the Joint Proxy Termination Agreement.
10.1.10 Fox Health shall have executed and delivered
the Registration Rights Assignment.
10.1.11 R. Haft shall have entered into a written
severance agreement with Phar-Mor, with respect to the Employment Agreement on
terms and conditions and in form and content acceptable to R. Haft, and Phar-Mor
shall have fully performed all of its obligations thereunder for which
performance is due on or before the "Effective Date" (as defined in such
severance agreement).
10.1.12 Fox Health shall have delivered a copy of the
final signed version of the Fairness Opinion/Gordian to the Company in the form
required by this Agreement.
10.1.13 The Company and Haft shall have received the
Fairness Opinion/FBR.
10.1.14 Fox Health shall be in full compliance with
all of its representations, warranties and covenants under the Trustee
Settlement Agreement and the Trustee (as defined under the Trustee Settlement
Agreement) shall not have claimed any default by Fox Health thereunder. Fox
Health shall certify at Closing to the Company and Haft in writing as to such
compliance.
13
<PAGE>
10.2. Fox Health's obligations to close under this Agreement
shall be subject to the following conditions precedent (any of which may be
waived, in whole or in part, by Fox Health in its sole discretion):
10.2.1 Credit Lyonnais and the Company shall have
executed and delivered the Credit Lyonnais Consent and Termination Agreement, in
form and content acceptable to Fox Health and its counsel in their reasonable
discretion.
10.2.2 The Company and Haft shall have executed and
delivered to Fox Health the Operating Agreement Amendment.
10.2.3 The Company, Haft and R. Haft shall have
executed and delivered to Fox Health the Release.
10.2.4 The Company's counsel shall have delivered to
Fox Health the Company's Counsel Opinion.
10.2.5 As of Closing, there shall be no pending or
threatened action, proceeding, judgment, ruling, order or injunction that
prevents, impairs or impedes, or, if successful, reasonably could be expected to
prevent, impair or impede, the consummation of the transactions contemplated
hereby.
10.2.6 The Company and R. Haft shall have executed
and delivered to Fox Health at Closing the Joint Proxy Termination Agreement.
10.2.7 The Company shall have executed and delivered
the Registration Rights Assignment.
10.2.8 R. Haft and L. Haft shall each have resigned
as a member of Phar-Mor's Board of Directors.
10.2.9 Fox Health shall have obtained the Delaware
Court Order and the Fairness Opinion/Gordian.
10.2.10 The Company shall have transferred good and
marketable title to the Payoff Shares, Exchange Shares and Distributed Shares to
Fox Health; provided, however, that certificate(s) for 1,132,500 of the Shares
shall be delivered directly to the "Trustee" or the "Escrow Agent" (as both such
terms are defined under the Trustee Settlement Agreement) as required by the
Trustee Settlement Agreement.
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<PAGE>
11. Tolling of Arbitration Proceeding and Suspension of Buy-Sell.
Concurrently with the execution of this Agreement, Fox Health, Haft and the
Company shall enter into the Tolling Agreement and shall submit the Tolling
Agreement to the Arbitrator.
12. Governing Law. This Agreement shall be governed and construed in
accordance with the internal laws of (and not the laws pertaining to conflicts
or choice of law) the State of Delaware.
13. Costs and Expenses. The Company and Fox Health and each of the other
parties shall each bear their respective costs and expenses incurred in
connection with the negotiation and preparation of the Transaction Documents,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
14. No Third Party Beneficiaries. This Agreement is made for the
benefit of the parties hereto and no third person or entity shall have any
right, claim or interest by virtue of any provision hereof.
15. Binding Effect; No Assignment. This Agreement and all covenants,
agreements, representations and warranties contained herein shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs, executors or administrators, personal or legal
representatives and permitted assigns. Neither party hereto may sell, transfer
or assign all or any portion of its rights or obligations hereunder.
16. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
17. Severability of Provisions. If any term, provision or condition or
any portion of any term, provision or condition of this Agreement, or the
application of any such term, provision or condition or any portion thereof to
any person or circumstance, shall be held to be invalid or unenforceable by any
court or governmental agency of competent jurisdiction, such invalidity or
unenforceability shall not affect the remainder of such term, provision or
condition, and this Agreement shall survive and be construed as if such invalid
or unenforceable term, provision or condition had not been contained herein, but
only to the extent of such invalidity or unenforceability.
18. Entire Agreement. This Agreement (including the Exhibits hereto)
and the other Transaction Documents contain the entire understandings and
agreements among the parties with respect to the matters covered and the
transactions contemplated hereunder and no other agreement, statement or promise
made by any party hereto or by any employee, officer,
15
<PAGE>
agent or attorney of any party hereto which is not contained herein or therein
shall be valid or binding.
19. Drafting. Each party hereto hereby acknowledges that all parties
hereto participated equally in the drafting of this Agreement and that,
accordingly, no court construing this Agreement shall construe this Agreement
more stringently against one party than any other party.
20. Waivers and Amendments. This Agreement and any term, covenant,
agreement or condition contained herein may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived, and consent or approval
hereunder may be given, only by a written instrument signed personally by the
parties hereto or, in the case of a waiver, by the party personally waiving
compliance by a written instrument signed personally by such party and after the
event of any such amendment, waiver or consent, the failure to observe, perform
or discharge any such term, covenant, agreement or condition (whether such
amendment is executed or such waiver or consent is given before or after such
failure shall not be construed as a breach of such term, covenant, agreement or
condition or an event of default. Unless otherwise expressly set forth in such
waiver or consent, a waiver or consent given hereunder shall be effective only
in the specific instance and for the specific purpose for which given. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, and no waiver on the part of any party of any
such right, power or privilege, nor any single or partial exercise of any such
right, power or privilege, shall preclude any further exercise thereof or the
exercise of any other such right, power or privilege.
21. Notices.
21.1. All notices, requests, demands, consents, approvals and
other communications that may or are required to be served or given hereunder
(collectively, "notices") shall be in writing and shall be delivered personally,
sent by registered or certified mail, return receipt requested, or by reputable
overnight delivery service, addressed as follows:
21.1.1 If to the Company:
Hamilton Morgan, L.L.C.
3000 K Street, N.W.
Suite 105
Washington, D.C. 20007
with a copy to:
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<PAGE>
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036
ATTN: Michael A. Schlesinger, Esquire
21.1.2 If to Robert M. Haft:
3000 K Street, N.W.
Suite 105
Washington, D.C. 20007
with a copy to:
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036
ATTN: Michael A. Schlesinger, Esquire
21.1.3 If to Haft:
2346 Massachusetts Avenue, N.W.
Washington, D.C. 20008
with a copy to:
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036
ATTN: Michael A. Schlesinger, Esquire
21.1.4 If to Fox Health:
Avatex Corporation
5910 North Central Expressway
Suite 1780
Dallas, Texas 75206
Attn: Robert Stone, Esquire
with a copy to:
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<PAGE>
Weil, Gotshal & Manges
767 5th Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esquire
21.1.5 If to Butler:
Mr. Abbey Butler
207 Dune Road
Box 137
West Hampton Beach, New York 11978
with a copy to:
Weil, Gotshal & Manges
767 5th Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esquire
21.1.6 If to Estrin:
Mr. Melvyn J. Estrin
Human Service Group, Inc.
7200 Wisconsin Avenue, N.W.
Suite 600
Bethesda, Maryland 20814
with a copy to:
Weil, Gotshal & Manges
767 5th Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esquire
21.2. All notices shall be deemed given (i) when received, in
the case of notices given by registered or certified mail, (ii) one business day
after delivery to an overnight delivery service, in the case of notices given by
reputable overnight delivery service, or (iii) upon delivery thereof, in the
case of notices given personally with failure to accept delivery constituting
delivery for this purpose.
22. Survival. All agreements, covenants, representations and
warranties made hereunder or in any other of the Transaction Documents by or on
behalf of the parties hereto shall continue after execution hereof and survive
the date hereof indefinitely.
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<PAGE>
23. Limitation on Remedies. Notwithstanding anything contained in this
Agreement, the sole and exclusive remedy of Fox Health, Butler and Estrin
against Mary Z. Haft for any breach or default under this Agreement (but not any
of the other Transaction Documents) shall be the remedy of specific performance,
and Fox Health, Butler and Estrin hereby irrevocably and forever waive any and
all other legal and equitable remedies (including, without limitation, the
remedy of a suit or claim for damages) against Mary Z. Haft for any such breach
or default; provided, however, that R. Haft shall be fully liable and
responsible for, and shall pay all damages in respect of, any breach or default
by Mary Z. Haft under this Agreement.
24. Duration. This Agreement shall be a continuing one and shall be
binding upon the parties regardless of how long before or after the date of this
Agreement any of the parties, obligations were or are incurred. This Agreement
may be terminated only by a writing executed personally and delivered by all of
the parties.
25. Tense, Gender. As used herein, the plural shall refer to and
include the singular, and the singular the plural, and the use of any gender
shall include and refer to any other gender.
26. Captions. The captions herein are for reference purposes only and
in no way define or limit the scope or content of this Agreement or in any way
affect its provisions.
27. Press Release; Disclosure. The parties agree that they shall not
issue any press release or statement or otherwise communicate with the media
concerning the terms, conditions or events surrounding the transactions
reflected by or contemplated under the Transaction Documents without the prior
written consent of the other parties hereto; provided, however, that nothing
contained herein shall prevent the parties from making any public disclosure to
the extent necessary to comply with any applicable securities law, rule or
regulation. A copy of the press release that Fox Health shall issue in
connection with these transactions is attached hereto as Exhibit I; it being
understood and agreed that Fox Health may modify such press release to the
extent required for it to comply with applicable securities law reporting
requirements in light of material changes in relevant facts and circumstances
after the date hereof.
28. Dispute Resolution. Effective on and after the Closing, in the
event a controversy or claim arises under or related to this Agreement or any of
the other Transaction Documents and the parties to the dispute do not settle
their dispute, any unresolved claim or controversy shall, at the election of
either party to pursue such controversy or claim, be submitted to binding
arbitration before a single neutral arbitrator, said arbitrator to be an
attorney admitted to practice before the District of Columbia Superior Court
with at least ten (10) years experience in complex commercial transactions (a
"Qualified Arbitrator"). The Qualified Arbitrator shall be selected through the
following procedure: within ten (10) days
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<PAGE>
following a party's notice of its election to arbitrate, each party shall submit
to the other a list of at least five (5) qualified attorneys and the parties
shall proceed in good faith to select a Qualified Arbitrator from such lists. If
the parties are unable to agree upon a Qualified Arbitrator within thirty (30)
days of submission of such lists, then they shall seek appointment of a
Qualified Arbitrator from the Large Complex Case Panel of the American
Arbitration Association. The arbitration shall be conducted within the greater
Washington, D.C. metropolitan area in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association (provided,
however, that discovery shall be governed by the rules of the United States
District Court for the Eastern District of Virginia), and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof; it being the intent of the parties hereto that, if arbitration is
pursued hereunder, any award made pursuant thereto shall be binding upon and
enforceable against the parties hereto. The parties hereto specifically and
expressly desire that any such controversy or claim be resolved in the most
expeditious manner possible, and, accordingly, irrevocably instruct any such
arbitrator to issue a decision and award within ninety (90) days from the date
such arbitration is commenced.
[The remainder of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
HAMILTON MORGAN L.L.C., a Delaware
limited liability company
By: /s/ Robert M. Haft
------------------------------------
Robert M. Haft, President
AVATEX CORPORATION (formerly
FoxMeyer Health Corporation),
a Delaware corporation
By: /s/ Abbey Butler
------------------------------------
Name: Abbey Butler
Title: Co- Chief Executive Officer
/s/ Abbey Butler
-----------------------------------
ABBEY BUTLER
/s/ Melvyn J. Estrin
-----------------------------------
MELVYN J. ESTRIN
/s/ Robert M. Haft
-----------------------------------
ROBERT M. HAFT, individually
/s/ Robert M. Haft
-----------------------------------
ROBERT M. HAFT, tenant by
the entirety
21
<PAGE>
/s/ Mary Z. Haft
------------------------------------
MARY Z. HAFT, tenant by
the entirety
22
<PAGE>
ESCROW AGREEMENT
----------------
This Escrow Agreement (this "Agreement") is entered into by Avatex
Corporation, formerly FoxMeyer Health Corporation ("Avatex"), Bart A. Brown,
Jr., as trustee (the "Trustee") under chapter 7 of title 11 of the United States
Code (the "Bankruptcy Code") of FoxMeyer Corporation, FoxMeyer Drug Company,
Healthcare Transportation System, Inc., Merchandise Coordinator Services
Corporation, FoxMeyer Software, Inc. and Health Mart, Inc. and their respective
estates, as their interests may appear (collectively, the "Debtors"), and Bart
A. Brown, Jr., individually and as co-escrow agent, and Edward L. Massman,
individually and as co-escrow agent (collectively, "Escrow Agent").
RECITALS
--------
A. The Debtors are debtors under chapter 7 of the Bankruptcy Code in
cases pending before the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court");
B. On May 19, 1997, the Bankruptcy Court entered an order confirming
the election of Trustee as the trustee under section 702 of the Bankruptcy Code
in the Debtors' chapter 7 cases;
C. On July ___, 1997, Avatex and Trustee entered into a Settlement
Agreement, under which they agreed to settle certain claims against each other
and provided for the consummation of certain transactions involving one or more
of the parties thereto;
D. Pursuant to the terms of the Agreed Preliminary Injunction Order
entered on March 5, 1997 by the Bankruptcy Court in the lawsuit styled Official
Committee of Unsecured Creditors of FoxMeyer Corporation, et al. v. FoxMeyer
Health Corporation, Adversary Proceeding No. 96-205, approximately $33.2 million
is currently being held by Avatex in a segregated bank account, number
1826-340-190 at Bank One, Texas, N.A. (the "Account");
E. Pursuant to Section 2 of the Settlement Agreement, upon execution of
the Settlement Agreement, Avatex and the Trustee have agreed that the Account
shall be transferred to the Escrow Agent, that $6,060,000 of the funds in the
Account may be used to acquire 1,132,500 shares of common stock of Phar-Mor,
Inc. (the "Stock"), and that, if the Stock is acquired before the Closing Date
(as defined in Section 3 of the Settlement Agreement), then the Stock shall be
held pursuant to the terms of this Agreement; and
F. Escrow Agent is willing to serve as escrow agent and hold the
Escrowed Property (as defined below) in accordance with the terms and conditions
hereof.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants, representations, warranties and agreements contained in this
Agreement and the Settlement Agreement, and such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Avatex, the Trustee and Escrow Agent hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings given to them in the Settlement Agreement.
2. Avatex and the Trustee hereby appoint and designate Escrow Agent as
escrow agent for the purposes set forth herein, and Escrow Agent accepts such
appointment and designation.
3. Upon execution of this Agreement, Avatex shall transfer to Escrow
Agent the Account and all funds (the "Funds") in the Account (the Account, the
Funds and all proceeds thereof including the Stock shall be referred to herein
as the "Escrowed Property"). The deposit of the Escrowed Property in accordance
with the terms of this Agreement shall vest equitable title to the Escrowed
Property with Avatex and the Trustee, as their respective interests appear as
set forth herein. Upon the occurrence of the applicable contingencies,
notwithstanding any potential intervening bankruptcy by Avatex, the parties
intend that legal and equitable title to the Funds shall follow possession
thereof in accordance with Section 4 of the Settlement Agreement, and legal and
equitable title to the Stock shall vest in Avatex, subject to the Security
Agreement.
4. Escrow Agent shall deposit all Funds as shall be directed by the
joint instruction of Avatex and the Trustee.
5. The Escrow Agent shall disburse the Escrowed Property in accordance
with the following:
(a) If by the date (the "Final Date") that is 180 days after the
Closing Date the Escrow Agent receives written notification from an officer of
Avatex of (i) the closing of the transactions contemplated by the Redemption
Agreement, (ii) the requirement to fund the purchase of the Stock, and (iii) the
service of such notice on the Trustee, then Escrow Agent shall release
$6,060,000 of the Funds directly to a third party (the "Transferor") in
accordance with Avatex's written instructions (the "Acquisition Disbursement").
If the Acquisition Disbursement occurs before the Closing Date, then
certificate(s) representing the Stock shall be delivered by the Transferor to
the Escrow Agent to be held in escrow pursuant to this Agreement, such Stock and
Stock certificate to be deemed Escrowed Property hereunder. If the Acquisition
Disbursement occurs but the Closing Date does not occur by the date set forth in
the last sentence of Section 1 of the Settlement Agreement, then the Stock
certificate shall be held pursuant to Section 7 of this Agreement.
2
<PAGE>
(b) If the Escrow Agent receives written notification by an officer of
Avatex and the Trustee (the "Notice Parties") of the occurrence of the Closing
Date under the Settlement Agreement, then within one business day of such
receipt the Escrow Agent shall pay to the Trustee the amount described in
Section 4A of the Settlement Agreement and either (i) if the Escrow Agent
receives written notification by the Notice Parties that the Stock has been
acquired after the Closing Date and on or before the Final Date, then the
Transferor shall deliver the Stock certificate(s) to the Trustee to be held as
collateral under the Security Agreement; or (iii) if the Notice Parties notify
the Trustee in writing that the Final Date has occurred and that the Stock has
not been acquired, then the Escrow Agent shall pay all remaining Funds in
accordance with the last sentence of Section 4 of the Settlement Agreement.
6. If the Escrow Agent receives written notification from the Notice
Parties that the Closing Date has not occurred by the date set forth in the last
sentence of Section 1 of the Settlement Agreement, then Escrow Agent shall
transfer the Escrowed Property only in accordance with (a) written documentation
signed by the Notice Parties that jointly directs the disposition of the
Escrowed Property or (b) a judgment or order of a court of competent
jurisdiction certified by the clerk of such court or other appropriate official.
7. Notwithstanding anything in this Agreement, upon written
notification by the Notice Parties that (a) the Stock has been acquired by and
possession of the Stock certificate is in the possession of Escrow Agent and (b)
the Closing Date has not occurred unless due to the fault or negligence of
Avatex, then Escrow Agent shall transfer and deliver the Stock certificate to
Avatex upon payment by Avatex to Escrow Agent of $6,060,000 in cash, plus
interest at the "prime rate" of interest reported from time to time in the Wall
Street Journal, Southwest Edition, in the "Money Rates" section or equivalent
substitute section of such paper (the "Prime Rate") on the sum of $6,060,000,
accrued from the date of the Stock is acquired to the date of payment, such
funds to constitute Escrowed Property to be held pursuant to the terms of this
Agreement.
8. The Stock shall be issued in the name of Avatex. So long as the
Stock is held by Escrow Agent pursuant to this Agreement, Avatex and the Trustee
shall jointly instruct Escrow Agent as to voting of the Stock. If Avatex and the
Trustee are unable to agree as to the voting of the Stock on a particular
matter, then the Stock shall not be voted on that matter.
9. Escrow Agent shall be entitled to rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to, any instruction, order, judgment, certification,
affidavit, demand, notice, opinion, instrument or other writing delivered to it
hereunder without being required to determine the authenticity of such document,
the correctness of any fact stated therein, the propriety of the service thereof
or the capacity, identity or authority of any party purporting to sign or
deliver such document.
3
<PAGE>
10. The duties of Escrow Agent are only as herein specifically
provided, and are purely ministerial in nature. This Agreement sets forth all
the obligations of Escrow Agent with respect to any and all matters pertinent to
the escrow contemplated hereunder and no additional obligations of Escrow Agent
shall be implied from the terms of this Agreement or any other agreement. Escrow
Agent shall incur no liability in connection with the discharge of its
obligations under this Agreement or otherwise in connection therewith, except
such liability as may arise from the willful misconduct or gross negligence of
Escrow Agent.
11. Escrow Agent may consult with counsel of its choice, and shall not
be liable for accordance with any action taken or omitted to be taken by Escrow
Agent in the advice of such counsel.
12. Escrow Agent shall not be bound by any modification, cancellation
or rescission of this Agreement unless in writing and signed by Escrow Agent.
13. Escrow Agent shall have no tax reporting duties with respect to the
Escrowed Property or income thereon, such duties being the responsibility of the
party or parties which receive, or have the right to receive, any taxable income
hereunder. Notwithstanding the foregoing, Escrow Agent has the authority to
comply with the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder. Such authority shall include, without limitation, (i)
the filing of tax returns (including information returns) with respect to the
Escrowed Property or income thereon, (ii) the payment of any tax, interest or
penalties imposed thereon, (iii) the withholding of any amounts which are
required to be withheld, and (iv) the payment over of such withheld amounts to
the appropriate taxing authority. Escrow Agent may withdraw from the Escrowed
Property amounts necessary to pay all applicable income or withholding taxes
(plus interest and penalties thereon) that are required to be paid. The parties
to this Agreement, other than the Escrow Agent, shall provide the Escrow Agent
with all information necessary to enable Escrow Agent to comply with the
foregoing.
14. Escrow Agent is acting as only a stakeholder with respect to the
Escrowed Property. If any dispute arises as to whether Escrow Agent is obligated
to deliver the Escrowed Property or as to whom the Escrowed Property is to be
delivered or the amount thereof, Escrow Agent shall not be required to make any
delivery, but in such event Escrow Agent may hold the Escrowed Property until
receipt by Escrow Agent of instructions in writing, signed by all parties which
the Escrow Agent in its sole judgment believes have, or claim to have, an
interest in the Escrowed Property, directing the disposition of the Escrowed
Property, or in the absence of such authorization, Escrow Agent may hold the
Escrowed Property until receipt of a certified copy of a final judgment of a
court of competent jurisdiction providing for the disposition of the Escrowed
Property. Escrow Agent may require, as a condition to the disposition of the
Escrowed Property pursuant to written instructions, indemnification and/or
opinions of counsel, in form and substance satisfactory to Escrow Agent, from
each party providing such instructions. If such written instructions,
4
<PAGE>
indemnification and opinions are not received, or proceedings for such
determination are not commenced, within 30 days after receipt by Escrow Agent of
notice of any such dispute and diligently continued, or if the Escrow Agent is
uncertain as to which party or parties are entitled to the Escrowed Property,
Escrow Agent may either (i) hold the Escrowed Property until receipt of (X) such
written instructions and indemnification, or (Y) a certified copy of a final
judgment of a court of competent jurisdiction providing for the disposition of
the Escrowed Property, or (ii) deposit the Escrowed Property in the registry of
a court of competent jurisdiction; provided, however, that notwithstanding the
foregoing, Escrow Agent may, but shall not be required to, institute legal
proceedings of any kind.
15. The Trustee and Avatex, jointly and severally, agree to reimburse
Escrow Agent on demand for, and to indemnify and hold Escrow Agent harmless
against and with respect to, any and all loss, liability, damage, or expense
(including, without limitation, attorneys' fees and costs) that Escrow Agent may
suffer or incur in connection with the entering into of this Agreement and
performance of its obligations under this Agreement or otherwise in connection
therewith, except to the extent such loss, liability, damage or expense arises
from the willful misconduct or gross negligence of Escrow Agent.
16. Escrow Agent (or either co-escrow agent) and any successor escrow
agent may at any time resign as such by delivering the Escrowed Property to
either (i) any successor escrow agent designated in accordance with this
Section, or (ii) in the absence of such designation, any court having competent
jurisdiction. Any successor to Bart A. Brown, Jr. as co-Escrow Agent may be
designated solely by the Trustee, and any successor to Edward L. Massman as
co-Escrow Agent may be designated solely by Avatex. Upon his resignation and
delivery of the Escrowed Property as set forth in this paragraph, Escrow Agent
shall be discharged of, and from, any and all further obligations arising in
connection with the escrow contemplated by this Agreement.
17. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective successors and assigns. Nothing in this
Agreement, express or implied, shall give to anyone, other than the parties
hereto and their respective permitted successors and assigns, any benefit, or
any legal or equitable right, remedy or claim, under or in respect of this
Agreement or the escrow contemplated hereby.
18. Any notice authorized or required to be given to a party hereto
pursuant to this Agreement shall be deemed to have been given when
hand-delivered, or when mailed by United States certified or registered mail,
postage prepaid, return receipt requested, or when transmitted by reputable
overnight delivery service, addressed to the address set forth under the name of
such party, and its counsel, on Exhibit A to this Agreement. Any party may
change its respective address by giving notice thereof in writing to the other
parties hereto in the same manner as set forth above.
19. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York. All actions arising under
this Agreement shall be subject to the exclusive jurisdiction and venue of the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). Each of the parties hereto hereby agrees to submit to personal
jurisdiction and to waive any objection as to jurisdiction in the Bankruptcy
Court in any action arising under this Agreement. Service of process in any such
action shall be effective if made in accordance with Section 18 of this
Agreement.
20. This Agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
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<PAGE>
21. The rights of Escrow Agent contained in this Agreement, including
without limitation the right to indemnification, shall survive the resignation
of Escrow Agent and the termination of the escrow contemplated hereunder.
22. This Agreement shall remain in full force and effect until the
Escrowed Property has been disbursed in accordance with Section 5 and/or 6
hereof and shall terminate on such date.
23. EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY ENTERING INTO
THIS AGREEMENT.
IN WITNESS WHEREOF, these parties have executed and delivered this
Agreement as of July 25, 1997.
AVATEX CORPORATION
By: /s/ Robert H. Stone
-------------------------
Robert H. Stone
Its: Vice President
/s/ Bart A. Brown, Jr.
- ----------------------------------
BART A. BROWN, JR.
Chapter 7 Trustee for FoxMeyer Corporation,
FoxMeyer Drug Company, Healthcare Transportation
System, Inc., Merchandise Coordinator Services
Corporation, FoxMeyer Software, Inc. and Health Mart, Inc.
/s/ Bart A. Brown, Jr.
- ----------------------------------
BART A. BROWN, JR., individually,
and as Co-Escrow Agent
/s/ Edward L. Massman
- -----------------------------------
EDWARD L. MASSMAN, individually,
and as Co-Escrow Agent
6
<PAGE>
EXHIBIT A
Bart A. Brown, Jr., as With a copy to: David Rosner, Esq.
Escrow Agent and/or Trustee Kasowitz, Benson, Torres &
5050 North 40th Street Friedman, LLP
Suite 200 1301 Avenue of the Americas
Phoenix, Arizona 85108 36th Floor
Fax (602) 852-9076 New York, NY 10019
Fax (212) 506-1800
Avatex Corporation
Attn: General Counsel
5910 North Central Expressway
Suite 1780
Dallas, Texas 75206
Fax (214) 365-7499
Mr. Edward L. Massman, as
Escrow Agent
7523 Marquette
Dallas, Texas 75225
7
<PAGE>
PHAR-MOR, INC.
REGISTRATION RIGHTS AGREEMENT
DATED AS OF SEPTEMBER__, 1995
<PAGE>
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS.................................................1
Section 2. SHELF REGISTRATION..........................................3
Section 3. DEMAND REGISTRATION RIGHTS..................................4
Section 4. SUSPENSION OF EFFECTIVENESS.................................6
Section 5. INCIDENTAL REGISTRATION RIGHTS..............................6
Section 6. HOLDBACK AGREEMENT..........................................7
Section 7. REGISTRATION PROCEDURES.....................................8
Section 8. REGISTRATION EXPENSES......................................10
Section 9. INDEMNIFICATION; CONTRIBUTION..............................11
(a) Indemnification by Company................................11
(b) Conduct of Indemnification Proceedings....................11
(c) Indemnification by Holders of Registrable Shares..........12
(d) Contribution..............................................12
Section 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS................13
Section 11. MISCELLANEOUS..............................................13
(a) Amendments and Waivers....................................13
(b) Notices...................................................13
(c) Successors and Assigns....................................14
(d) Counterparts..............................................14
(e) Headings..................................................14
(f) Governing Law.............................................14
(g) Consent to Jurisdiction; Service of Process...............14
(h) Severability..............................................14
(i) Entire Agreement..........................................14
(j) Effectiveness.............................................15
2
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of September __, 1995 by PHAR-MOR, INC., a Pennsylvania
corporation (the "COMPANY"), and the holders of the Registrable Shares (as
defined) located on the signature pages hereto who execute this Agreement and
for the benefit of any Eligible Transferee (as hereinafter defined).
The New Common Stock (as defined herein) is being issued pursuant to
Section 1145 of Title 11 of the United States Code. In order to induce holders
of the requisite percentages of the Allowed Senior Secured Claims (as such term
is defined in the Third Amended Joint Plan of Reorganization of Phar-Mor, Inc.
et al. dated as of May 25, 1995, (the "PLAN OF REORGANIZATION")) to approve the
Plan of Reorganization, the Company has agreed to provide registration rights
with respect to the Registrable Shares as set forth in this Agreement.
This Agreement is incorporated into the Plan of Reorganization and
its terms and conditions shall be binding upon each of the Holders, regardless
of whether any or all of such Holders are signatories hereto.
The parties hereto agree as follows:
SECTION 1. DEFINITIONS.
The terms set forth below are used herein as so defined:
"COMMISSION" means the Securities and Exchange Commission, or any
other federal agency at the time administering the Exchange Act or the
Securities Act.
"COMPANY" means Phar-Mor, Inc., the Reorganized Phar-Mor under and as
defined in the Plan of Reorganization.
"DEMAND REGISTRATION" means a registration requested pursuant to the
terms of Section 3 hereof
"EFFECTIVE DATE" means the date the Plan of Reorganization becomes
effective.
"ELIGIBLE TRANSFEREE" means (a) any transferee, in a single
transaction of all, but not less than all, of the Registrable Shares held by a
Holder (including Holders that are themselves Eligible Transferees) on the date
of such transfer, (b) not more than two members of Hamilton Morgan, L.L.C. (the
"LLC") which may acquire, obtain or otherwise receive any or all of the
Registrable Shares from the LLC, and (c) Credit Lyonnais New York Branch upon
its foreclosure of Registrable
<PAGE>
Shares pledged to it by any Holder.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"HOLDER" means the holders of Registrable Shares named on the
signature pages of this Agreement and the Eligible Transferees.
"INDEMNIFIED PERSON" has the meaning assigned to that term in Section
9(a) hereof
"INSPECTORS" has the meaning assigned to that term in Section 7(e)
hereof
"NEW COMMON STOCK" means the common stock, par value $0.01 per share,
of the Company.
"PARTICIPATING HOLDER" means any Holder that has Registrable Shares
registered for sale pursuant to a Registration Statement.
"PERSON" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, or other entity.
"RECORDS" has the meaning assigned to that term in Section 7(e)
hereof.
"REGISTRABLE SHARES" means the shares of New Common Stock issued
pursuant to the Plan of Reorganization to the Holders party hereto and held by
the Holders from time to time. A share of New Common Stock will cease to be a
Registrable Share when (a) a registration statement covering a Registrable Share
has been declared effective by the Commission and such share has been disposed
of pursuant to such effective registration statement, (b) such shares is
transferred to a Person other than an Eligible Transferee, (c) such share is
held by the Company or one of its subsidiaries or otherwise ceases to be
outstanding, or (d) such share may be traded without restriction pursuant to
paragraph (k) of Rule 144.
"REGISTRATION EXPENSES" has the meaning assigned that term in Section
8 hereof.
"REGISTRATION STATEMENT" means any registration statement or
comparable document under the Securities Act through which a public sale or
disposition of the Registrable Shares may be registered, including the
prospectus, amendments and supplements to such registration statement, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such Registration Statement.
"REQUESTING HOLDERS" has the meaning assigned to that term in Section
3(a) of this Agreement.
2
<PAGE>
"REQUISITE HOLDERS" means Holders holding at least 25% of the total
number of Registrable Shares of New Common Stock that were issued or issuable
pursuant to the Plan of Reorganization to the Holders party hereto and that
remain Registrable Shares.
"RULE 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SELLING HOLDER" means a Holder who is selling Registrable Shares
pursuant to a Registration Statement under this Agreement.
"SHELF REGISTRATION" has the meaning assigned to that term in Section
2(a) of this Agreement.
SECTION 2. SHELF REGISTRATION.
(a) Subject to the terms of Section 2(d) hereof, the Company agrees
to use its best efforts to file with the Commission as soon as practicable after
the Effective Date a "shelf" Registration Statement on any appropriate form
pursuant to Rule 415 under the Securities Act and/or any similar rule that may
be adopted by the Commission with respect to all of the Registrable Shares (the
"SHELF REGISTRATION"). This Agreement shall constitute the consent of each
Holder to the inclusion of such Holder's Registrable Shares in the Shelf
Registration upon its effectiveness, except with respect to those Registrable
Shares the Holder of which notifies the Company in writing no later than thirty
(30) days following the Effective Date that it does not want to be included in
the Shelf Registration. The Company agrees (i) to use its best efforts to have
such Shelf Registration declared effective as soon as reasonably practicable
after such filing and (ii) to keep such Shelf Registration continuously
effective for a period of three (3) years following the date on which such Shelf
Registration is declared effective; provided, however, that the effectiveness of
the Shelf Registration may be terminated earlier to the extent that none of the
shares of New Common Stock registered therein are then Registrable Shares.
(b) The Company agrees, if necessary, to supplement or make
amendments to the Shelf Registration, if required by the registration form
utilized by the Company for such Shelf Registration or by the instructions
applicable to such registration form or by the Securities Act or the rules and
regulations thereunder or as reasonably requested by a Participating Holder in
connection with any material change in the information provided by such
Participating Holder and the Company agrees to furnish to the Participating
Holders, on request, copies of any supplements or amendments. The
3
<PAGE>
Company will pay all Registration Expenses in connection with such Shelf
Registration or any supplements or amendments thereto, whether or not it becomes
effective. The Shelf Registration may include securities other than Registrable
Shares.
(c) In connection with any underwritten offering of Registrable
Shares under the Shelf Registration, the Company shall have the right, with the
consent of the Holders of a majority of the Registrable Shares to be offered
pursuant to such distribution (which consent shall not be unreasonably
withheld), to designate an investment banker to act as managing underwriter with
respect to such offering.
(d) The Holders acknowledge that the Company has audited financial
statements only as of July 2, 1994 and June 26, 1993, and for the fifty-three
week period ended July 2, 1994 and the thirty-nine week period ended June 26,
1993. As a result thereof, the Company is not currently eligible to file a
Registration Statement and shall have no obligation under this Section 2 to file
with the Commission a Registration Statement until the earliest to occur of the
following: (i) the Company has sufficient historical audited and unaudited
financial information to satisfy the disclosure requirements for a Registration
Statement on Form S-1 or S-3 or other appropriate form; (ii) the Company files
with the Commission a Registration Statement and such Registration Statement is
declared effective; or (iii) the Company obtains a "no action" or other
interpretive position from the Commission permitting it to register equity
securities under the Securities Act (it being understood and agreed that the
Company shall have no obligation to seek any such "no action" or interpretive
position).
SECTION 3. DEMAND REGISTRATION RIGHTS.
(a) At any time after the expiration of the Shelf Registration,
Requisite Holders may by written notice to the Company request that the Company
register all or a portion of the Registrable Shares held by such Holders under
the Securities Act and, subject to the provisions of this Agreement, the Company
shall use its best efforts to effect such registration promptly. Each notice to
the Company shall set forth (i) the names of the Requisite Holders requesting
registration ("Requesting Holders") and the number of shares to be sold by each
and (ii) the proposed manner of sale. Within ten (10) days after receipt of
notice from Requisite Holders, the Company shall notify each Holder who is not a
party to the written notice served on the Company and offer to them the
opportunity to include their shares in such registration. Each such Holder shall
have 20 days following delivery of such notice to elect, by notice to the
Company, to have such Holder's Registrable Shares included in such registration.
The Company shall have no obligation to effect any Demand Registration under
this Section 3 unless the number of Registrable Shares in such Demand
Registration shall be equal to at least 5% of the number of shares of New Common
Stock outstanding at the time of such request. The maximum number of such
demands under this Section 3 shall be two (2); provided, however, that no such
demand may be made after the eighteenth month following the expiration of the
Shelf Registration. A Registration Statement will not count as a Demand
Registration hereunder unless it is declared effective by the Commission and
remains effective for at least ninety (90) days or such shorter period which
shall terminate when all of the
4
<PAGE>
Registrable Shares covered by such Demand Registration have been sold pursuant
to such Demand Registration; provided, however. that in the event a Registration
Statement is withdrawn at the request of the Requesting Holders (other than a
withdrawal pursuant to Section 3(c) of this Agreement), such Requesting Holders
will pay all Registration Expenses unless they agree to forfeit such Demand
Registration to which such Registration Expenses relate. The demand registration
rights granted pursuant to this Section 3 are in addition to, and shall not
limit, the registration rights of the Holders of Registrable Shares These rights
are in addition to, and shall not limit, the registration rights of the Holders
of registrable Shares granted pursuant to Section 2 or 5 hereunder.
(b) If the managing underwriter of an underwritten offering under
this Section 3 advises the Company in writing that in its opinion the number of
shares requested to be included in such registration (including, without
limitation, shares to be included in such registration pursuant to incidental or
"piggyback" rights heretofore or hereafter granted by the Company) exceeds the
number which can be sold in such offering, the Company will include in such
registration only the number of shares which in the opinion of such underwriter
can be sold. If the number of shares which can be sold is less than the number
of shares proposed to be registered, the amount to be so registered shall be
allocated, (i) first, pro rata among the Holders of Registrable Shares desiring
to participate in such registration on the basis of the number of such
Registrable Shares initially proposed to be registered by such Holders and (ii)
second, among other holders of shares of New Common Stock requested to be
included in such registration, in such proportions as the Company shall
determine.
(c) The Company shall not be obligated to effect any Demand
Registration within three (3) months after the effective date of a previous
demand registration under which the Holders had piggyback rights pursuant to
Section 5 hereof (irrespective of whether such rights were exercised). The
Company may (i) postpone for up to 120 days the filing or the effectiveness of a
Registration Statement for a Demand Registration if, based on the good faith
judgment of the Company's Board of Directors, such registration and offering
would materially interfere with any material financing& acquisition, corporate
reorganization, security offering or other material transaction, or such
postponement or withdrawal is necessary in order to avoid premature disclosure
of a matter the Board has determined would not be in the best interest of the
Company to be disclosed at such time or (ii) postpone the filing of a Demand
Registration for a period of not more than 120 days in the event the Company
shall be required to prepare audited financial statements as of a date other
than its fiscal year end (unless the Holders requesting such registration agree
to pay the expenses of such an audit); provided, however, that in no event shall
the Company withdraw a Registration Statement under clause (i) after such
Registration Statement has been declared effective; and provided. further that
in any of the events described in clause (i) or (ii) above, the Holders
initiating the request for such Demand Registration shall be entitled to
withdraw such request (without expense to such Holders) and, if such request is
withdrawn, such Demand Registration shall not count as a permitted Demand
Registration. The Company shall provide prompt written notice to the Requesting
Holders of (x) any postponement or withdrawal of the filing or effectiveness of
a Registration Statement pursuant to this paragraph (c), (y) the Company's
decision to file or seek effectiveness of such
5
<PAGE>
Registration Statement following such withdrawal or postponement and (z) the
effectiveness of such Registration Statement.
(d) If any of the Registrable Shares covered by a Demand Registration
are to be sold in an underwritten offering, the Company shall have the right to
select the managing underwriter(s) to administer the offering, subject to the
approval of the Holders of a majority of the Registrable Shares initiating the
request for registration, which approval shall not be unreasonably withheld.
(e) Notwithstanding anything to the contrary contained in this
Section 3, if the Company has effected a Shelf Registration in accordance with
the provisions of Section 2 of this Agreement, the Company may elect to extend
such Shelf Registration for a period of at least eighteen months beyond the
three (3) year term required pursuant to Section 2 and (i) for so long as such
Shelf Registration remains effective, the Company shall have no obligation to
effect a Demand Registration pursuant to this Section 3 and (ii) if such Shelf
Registration remains effective for such eighteen month period, the rights of the
Holders to request registration pursuant to this Section 3 shall be terminated
and the Company shall have no obligation to effect a Demand Registration.
SECTION 4. SUSPENSION OF EFFECTIVENESS.
The Company's obligations under Section 2(a) and Section 3(a) shall
not restrict its ability to suspend the effectiveness of the Shelf Registration
or any Demand Registration, at any time, for such reasonable period of time
which the Company believes is necessary to prevent the premature disclosure of
any events or information having a material effect on the Company. In addition,
the Company shall not be required to keep the Shelf Registration or any Demand
Registration, effective, or may, without suspending such effectiveness, instruct
the holders of Registrable Shares included in the Shelf Registration or any
Demand Registration, not to sell such shares, during any period during which the
Company is instructed, directed, ordered or otherwise requested by any
governmental agency or self-regulatory organization to stop or suspend such
trading or sales.
SECTION 5. INCIDENTAL REGISTRATION RIGHTS.
(a) If the Company, at any time during the period commencing on the
Effective Date and ending on the date that is four years and six months after
the date on which the Shelf Registration becomes effective, proposes to register
any New Common Stock under the Securities Act (other than pursuant to Sections 2
or 3 of this Agreement or pursuant to a registration statement on a form
exclusively for the sale or distribution of securities by the Company to
employees of the Company or its subsidiaries or for use exclusively in
connection with a business combination) whether or not for sale for its own
account, and the registration form to be used may be used for the registration
of Registrable Shares, it will give prompt written notice to all Holders of the
Company's intention to effect such a registration and include in such
registration all Registrable Shares with respect to which the Company has
received written notice for inclusion therein within 20 days after the date of
the Company's notice; provided that:
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(i) if, at any time after giving written notice of its intention to
register any shares and, prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason not to register such shares, the Company may, at its
election, give written notice of such determination to each Holder requesting
inclusion therein, and, thereupon, the Company shall be relieved of its
obligation to register any Registrable Shares in connection with such
registration (but not of its obligation to pay the Registration Expenses in
connection therewith); and
(ii) if such registration shall be in connection with an
underwritten public offering and the managing underwriter shall advise the
Company in writing that in its opinion the number of shares requested to be
included in such registration exceeds the number of such securities which can be
sold in such offering or would have an adverse impact on the price of such
securities, the Company shall include in such registration (A) first, the
securities the Company proposes to sell and, if such registration includes an
underwritten secondary registration on behalf of holders of the Company's
securities exercising demand registration rights, the securities requested to be
included therein by such holders requesting such registration, in such
proportions as the Company shall determine, and (B) second, the number (if any)
of other securities of the Company (including, without limitation, Registrable
Shares) so requested to be included which in the opinion of such underwriter can
be sold (and if, in the opinion of such underwriter, some but not all of such
securities may be so included, all holders of New Common Stock requested to be
included therein shall share pro rata in the number of shares of New Common
Stock included in such underwritten public offering on the basis of the number
of shares of New Common Stock requested to be included therein);
(b) If any Registration pursuant to this Section 5 is an underwritten
primary offering, the Company shall have the right to select the managing
underwriter to administer such offering.
SECTION 6. HOLDBACK AGREEMENT.
(a) In the event of any post-effective amendment to the Shelf
Registration or the filing of a prospectus supplement, as the case may be, or
the commencement of an underwritten public distribution of New Common Stock
under a Registration Statement, whether or not Registrable Shares are included,
each Holder agrees not to effect any public sale or distribution of New Common
Stock (except as part of such underwritten public distribution), including a
sale pursuant to Rule 144 or Rule 144A under the Securities Act, during a period
designated by the Company in a written notice duly given to the Holders in
accordance with Section 11(b), which period shall commence approximately 14 days
prior to the effective date of any such post-effective amendment to the Shelf
Registration or filing of such prospectus supplement, as the case may be, or the
commencement of such underwritten public distribution of New Common Stock under
a Registration Statement and shall continue for up to 104 consecutive days.
(b) The foregoing provisions shall not apply to any Holder to the
extent such Holder is prohibited by applicable law from agreeing to withhold
from sale.
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SECTION 7. REGISTRATION PROCEDURES.
Except as otherwise expressly provided herein, in connection with any
registration of Registrable Shares pursuant to this Agreement, the Company
shall, as expeditiously as possible, at its own expense:
(a) prepare and file with the Commission a Registration Statement on
the appropriate form with respect to such Registrable Shares and use its best
efforts to cause such Registration Statement to become effective as soon as
practicable thereafter; and before filing a Registration Statement or prospectus
or any amendments or supplements thereto, furnish to each Selling Holder, copies
of such Registration Statement and such other documents as proposed to be filed
(including copies of any document to be incorporated by reference therein), and
thereafter furnish to such Selling Holder such number of copies of such
Registration Statement, each amendment and supplement thereto (including copies
of any document to be incorporated by reference therein), in each case at the
written request of the Selling Holder, including all exhibits thereto, the
prospectus included in such registration statement (including each preliminary
prospectus), and, promptly after the effectiveness of a Registration Statement,
the definitive final prospectus filed with the Commission, and such other
documents as such Selling Holder may reasonably request in order to facilitate
the disposition of the Registrable Shares owned by such Selling Holder;
(b) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions within
the United States as any Selling Holder reasonably (in light of such Selling
Holder's intended plan of distribution) requests; provided that the Company will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 7(b),
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction;
(c) notify each Selling Holder of such Registrable Shares, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of any event as a result of which the
prospectus included in such Registration Statement (including any document to be
incorporated by reference therein) contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading
and, at the request of any such Selling Holder, the Company shall prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and promptly make available to each Selling Holder any such supplement or
amendment;
(d) in connection with an underwritten public offering, enter into
customary agreements (including, if requested, an underwriting agreement),
reasonably satisfactory in form and substance to the Company, and take such
other actions in connection therewith as the Holders of at least a majority of
the Registrable Shares being sold or the underwriter shall reasonably request in
order to consummate the disposition of such Registrable Shares;
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(e) make available for inspection during business hours on reasonable
advance notice by any Selling Holder of such Registrable Shares, any underwriter
participating in any disposition pursuant to a Registration Statement, and any
attorney, accountant or other professional retained by any such Selling Holder
or underwriter (collectively, the "INSPECTORS"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such Registration Statement. Records which the
Company determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in the Registration Statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction. Each Selling Holder of such Registrable Shares further
agrees that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give written notice to the Company, and allow
the Company, at the Company's expense, to undertake appropriate action to
prevent disclosure of the Records it deemed confidential. Each Selling Holder of
such Registrable Shares further agrees that information obtained by it as a
result of such inspections which is deemed confidential by the Company shall not
be used by it, and it shall cause each of its Inspectors not to use such
confidential information, as the basis for any market transactions in securities
of the Company or for any purpose other than any due diligence review with
respect to decisions regarding such Selling Holder's investment in the
Registrable Shares, unless and until such information is made generally
available to the public;
(f) in the event such sale is pursuant to an underwritten offering,
use its best efforts to obtain (i) a comfort letter or comfort letters from the
Company's independent public accountants in customary form and covering such
financial and accounting matters of the type customarily covered by comfort
letters as the Selling Holders of a majority of the Registrable Shares being
sold or the managing underwriter reasonably request, and (ii) an opinion or
opinions from counsel for the Company, addressed to the underwriters, covering
the matters customarily covered in opinions given by counsel in similar
transactions; and
(g) notify the Selling Holders and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in writing,
(i) when the Registration Statement, the prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of the issuance by the Commission of any stop order suspending
the effectiveness of a Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the initiation of any
proceedings for that purpose and the Company shall promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Registrable Shares
for offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose.
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The Company may require each Selling Holder of Registrable Shares as
to which any registration is being effected to furnish to the Company such
information regarding the Selling Holder and the distribution of such
Registrable Shares as the Company may from time to time reasonably request in
writing and such other information as may be legally required in connection with
such registration. Each Selling Holder agrees, by its acquisition of Registrable
Shares and its acceptance of the benefits provided to it hereunder, to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Selling Holder
not materially misleading.
Each Holder agrees that upon receipt of any notice from the Company
of the happening of any event of the kind described in Sections 7(c), (g)(ii) or
(g)(iii) hereof, such Holder will forthwith discontinue disposition of
Registrable Shares pursuant to the Registration Statement covering such
Registrable Shares until such Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by Section 7(c) hereof, or until it is
advised in writing by the Company that the use of the prospectus may be resumed,
and, if so directed by the Company, such Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Shares current
at the time of receipt of such notice. In the event the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
7(c) hereof to and including the date when each Holder of Registrable Shares
covered by such Registration Statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 7(c) hereof
SECTION 8. REGISTRATION EXPENSES.
All expenses incident to the Company's performance of or compliance
with this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or "blue sky" laws
(including reasonable fees and disbursements of counsel of the Company and
counsel for the underwriters in connection with "blue sky" qualifications of the
Registrable Shares), and listing on any national securities exchange or
exchanges in which listing may be sought, fees and expenses associated with
filings required to be made with the National Association of Securities Dealers,
Inc., printing expenses, messenger and delivery expenses, fees and expenses of
counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or "cold comfort") letters required
by or incident to such performance), securities acts liability insurance (if the
Company elects to obtain such insurance), the fees and expenses of any special
experts retained by the Company in connection with such registration, and fees
and expenses of other persons retained by the Company (all such expenses being
herein called "REGISTRATION EXPENSES") will be borne by the Company whether or
not any registration statement becomes effective; provided that in no event
shall Registration Expenses include any (i) underwriting discounts, commissions,
or fees attributable to the sale of the Registrable Shares, (ii) fees and
expenses of any counsel, accountants, or other persons retained or employed by
the Holders or underwriters (other than the reasonable fees and expenses (of
which the Company shall only be
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obligated to pay up to an aggregate maximum of $15,000) of one counsel for
Participating Holders of Registrable Shares included in the Registration
Statement, which counsel shall be selected by Holders of a majority of the
Registrable Shares included in the Registration Statement), or (iii) transfer
taxes, if any.
SECTION 9. INDEMNIFICATION; CONTRIBUTION.
(A) INDEMNIFICATION BY COMPANY. The Company agrees to indemnify and
hold harmless each Selling Holder of Registrable Shares, its officers,
directors, partners and agents and each Person, if any, who controls such
Selling Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each such person being sometimes hereinafter
referred to as an "INDEMNIFIED PERSON") from and against any and all losses,
claims, damages, liabilities and judgments (including, the reasonable legal
expenses incurred in connection with any action, suit or proceeding) arising out
of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
registration hereunder or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which they were made, not misleading, or (ii) any violation by the Company of
any federal state or common law rule or regulation applicable to Company and
relating to action or inaction required by the Company in connection with any
such registration; provided, however, that the Company shall not be liable for
any losses, claims, damages, liabilities or judgments arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such Selling Holder or on
such Selling Holder's behalf expressly for use therein, or by any Holder's
failure to deliver a copy of the Registration Statement or prospectus or any
amendment or supplement thereto after being furnished with a sufficient number
of copies thereof by the Company.
(B) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any Indemnified Person in respect of which indemnity may be
sought from the Company, such Indemnified Person shall promptly notify the
Company in writing, and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
the payment of all reasonable expenses. Such Indemnified Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless (i) the Company has agreed to pay such
fees and expenses or (ii) the named parties to any such action or proceeding
(including any impleaded parties) include both such Indemnified Person and the
Company, and such Indemnified Person shall have been advised in writing by the
counsel employed by the Company in accordance with the provisions of this
Section 9(b) that there may exist a conflict of interest between such
Indemnified Person and the Company with respect to such claim (in which case, if
such Indemnified Person notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or
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proceeding on behalf of such Indemnified Person, it being understood, however,
that the Company shall not, in connection with any one such action or proceeding
or separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for such Indemnified Person and any other Indemnified
Persons, which firm shall be designated in writing by a majority of such
Indemnified Persons). The Company shall not be liable for any settlement of any
such action or proceeding effected without the Company's written consent, but if
settled with its written consent, or if there be a final, unappealable judgment
for the plaintiff in any such action or proceeding, the Company agrees to
indemnify and hold harmless such Indemnified Persons from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment.
(C) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SHARES. Each Selling
Holder agrees severally and not jointly to indemnify and hold harmless the
Company, its directors, officers and agents and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Selling Holder, but only with respect to
information furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any Registration Statement or prospectus or
any amendment or supplement thereto, or any preliminary prospectus. In case any
action or proceeding shall be brought against the Company or its directors,
officers or agents or any such controlling person, in respect of which indemnity
may be sought against such Selling Holder, such Selling Holder shall have the
rights and duties given to the Company, and the Company or its directors,
officers or agents or such controlling person shall have the rights and duties
given to such Selling Holder by the preceding Section 9(b).
(D) CONTRIBUTION. If the indemnification provided for in this Section
8 is unavailable to or unenforceable by the Company or the Indemnified Persons
in respect of any losses, claims, damages, liabilities or judgments referred to
herein, then each such indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
judgments in such proportions as is appropriate to reflect the relative fault of
the Company and the Indemnified Persons in connection with the actions or
inactions which resulted in such losses, claims, damages, liabilities and
judgments, as well as any other relevant equitable considerations (including the
relative fault and indemnification or contribution obligations of other relevant
parties). The relative fault of the indemnifying party on the one hand and of
the indemnified person on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party, and
by such party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Indemnified Persons agree that it would not be
just and equitable if contribution pursuant to this Section 9(d) were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the
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immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No Person may participate in any underwritten registration hereunder
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and (c) agrees to pay such Person's pro rata portion of all
underwriting discounts, commissions and fees.
SECTION 11. MISCELLANEOUS.
(A) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of at least a majority of the Registrable Shares.
Notwithstanding the foregoing, (i) if a waiver or consent to departure from the
provisions hereof does not adversely affect the rights of all of the Holders,
the Company shall not be required to obtain the consent of any such Holder not
adversely affected thereby, and (ii) if such waiver or consent to departure
relates exclusively to the rights of Holders whose Registrable Shares are being
sold pursuant to a Registration Statement and does not directly or indirectly
affect the rights of other Holders, such waiver or consent to departure may be
given by Holders of at least a majority in interest of the Registrable Shares
being sold by such Holders pursuant to such Registration Statement; provided
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(B) NOTICES. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be delivered personally or by
first-class mail, telecopier or overnight courier:
(i) if to a Holder of Registrable Shares, at the most current
address set forth on the books of the Company, and
(ii) if to the Company, initially at Phar-Mor, Inc., 20 Federal
Plaza West, Youngstown, Ohio 45501-0400, Attention: General Counsel, and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 11(b).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail (postage prepaid), if mailed; upon
receipt of a telecopy confirmation sheet, if telecopied; and on the day
delivered if sent by an air courier guaranteeing overnight delivery.
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(C) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and, to the extent set forth herein, the
assigns of each of the parties, including without limitation and without the
need for an express assignment, Eligible Transferees.
(D) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(E) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof
(F) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
(G) CONSENT TO JURISDICTION; SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF OHIO OR THE STATE OF DELAWARE, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT EACH PARTY HERETO ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OFT HE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO HEREBY AGREES THAT SERVICE
OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY such court may be made by
registered or certified mail, return receipt requested, to the applicable
address provided in Section 11(b), such service being hereby acknowledged by
each party hereto to be sufficient for personal jurisdiction in any action
against such party in any such court and to be otherwise effective and binding
service in every respect.
(H) SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall not invalidate the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable any such provision in
any other jurisdiction.
(I) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Shares. This Agreement supersedes all prior
agreements and understandings between the parties with respect to
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such subject matter.
(J) EFFECTIVENESS. This Agreement shall become effective on the
Effective Date.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company and the Holder have executed this
Agreement as of the date first written above.
COMPANY:
PHAR-MOR, INC.
By: /s/ John R. Ficarro
-------------------------------
John R. Ficarro, Vice President
HOLDERS:
HAMILTON MORGAN L.L.C.
By: /s/ Robert Haft
-------------------------------
Name: Robert Haft
Title: President
FOXMEYER DRUG COMPANY
By: /s/ Michael C. Kearney
-------------------------------
Name: Michael C. Kearney
Title: Vice President and Treasurer
16
