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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-3/A
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
AMENDMENT NO. 1
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AVATEX CORPORATION
(NAME OF ISSUER AND PERSON FILING STATEMENT)
$5 CUMULATIVE CONVERTIBLE PREFERRED STOCK
$4.20 CUMULATIVE EXCHANGEABLE SERIES A PREFERRED STOCK
(TITLE OF CLASS OF SECURITIES)
$5 CUMULATIVE CONVERTIBLE PREFERRED
STOCK--05349F204
$4.20 CUMULATIVE EXCHANGEABLE SERIES A PREFERRED
STOCK--05349F303
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
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ROBERT H. STONE, ESQ.
AVATEX CORPORATION
5910 NORTH CENTRAL EXPRESSWAY, SUITE 1780
DALLAS, TEXAS 75206
TELEPHONE NUMBER (214) 365-7450
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
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Copies to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10022
(212) 310-8000
This statement is filed in connection with (check the appropriate box):
/x/ a. The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C, or
Rule 13e-3(c) under the Securities Exchange Act of 1934.
/x/ b. The filing of a registration statement under the Securities
Act of 1933.
/ / c. A tender offer.
/ / d. None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. /x/
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CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$27,895,411 $5,579
</TABLE>
* Determined pursuant to Rule 0-11(b)(2) by adding (x) 652,273, the number of
outstanding shares of $5 cumulative convertible preferred stock of Avatex
Corporation, multiplied by $7.4375 per share, and (y) 4,312,352, the number
of outstanding shares of $4.20 cumulative exchangeable series A preferred
stock of Avatex Corporation, by $5.34375 per share. The value of each class
of preferred stock is determined pursuant to Rule 0-11(a)(4) by using the
average of the bid and asked price of each class of preferred stock quoted on
the OTC Bulletin Board System on August 4, 1999.
** Determined pursuant to Rule 0-11(b) by multiplying $27,895,411 by 1/50 of 1%.
/x/ Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: $9,014 Filing Party: Avatex Corporation; Avatex Funding, Inc.
Form or Registration No.: Registration on Form S-4 Date Filed: August 9, 1999
</TABLE>
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INTRODUCTION
This Amendment No. 1 to the Rule 13e-3 Transaction Statement on
Schedule 13E-3 (as originally filed with the Securities and Exchange Commission
on August 10, 1999, the "Schedule 13E-3") is filed by Avatex Corporation, a
Delaware corporation (the "Company"), pursuant to Section 13(e) of the
Securities Exchange Act of 1934, as amended, and Rule 13e-3 thereunder, in
connection with the proposed merger of Xetava Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Company, with and into the
Company, pursuant to an Amended and Restated Agreement and Plan of Merger, dated
June 18, 1999 (the "Merger Agreement"). The Company will be the surviving
corporation in the merger. Pursuant to the terms and conditions of the Merger
Agreement, if the merger is consummated, each share of existing common stock of
the Company will be converted into one share of class A common stock, par value
$.01 per share (the "New Avatex Common Stock"), of the Company, as the surviving
corporation. Each share of existing $5 cumulative convertible preferred stock of
the Company will be converted into 9.134 shares of New Avatex Common Stock or,
at the election of the holder thereof, (1) $3.7408 in cash, (2) $8.34 principal
amount of 6.75% notes due 2002 to be issued by Avatex Funding, Inc., a new
wholly-owned subsidiary of the Company, (3) warrants to purchase 0.67456 shares
of New Avatex Common Stock, and (4) a deferred contingent right to receive
(a) 16% of an amount equal to 20% of any net recovery that the Company may
receive in certain litigation brought by it against McKesson HBOC, Inc. and
certain major pharmaceutical manufacturers, divided by (b) the number of
outstanding shares of $5 cumulative convertible preferred stock. Each share of
existing $4.20 cumulative exchangeable series A preferred stock of the Company
will be converted into 7.253 shares of New Avatex Common Stock or, at the
election of the holder, (1) $2.9705 in cash, (2) $6.623 principal amount of the
6.75% notes to be issued by Avatex Funding, Inc., (3) warrants to purchase
0.53567 shares of New Avatex Common Stock, and (4) a deferred contingent right
to receive (a) 84% of an amount equal to 20% of any net recovery that the
Company may receive in the McKesson litigation, divided by (b) the number of
outstanding shares of $4.20 cumulative exchangeable series A preferred stock.
The maximum amount of any payments on the deferred contingent rights that could
be made is $7.5 million.
If all of the holders of the $5 cumulative convertible preferred stock and
the $4.20 cumulative exchangeable series A preferred stock elect to receive the
common stock alternative consideration for their shares of preferred stock in
the merger, they will receive, in the aggregate, $15,250,000 in cash,
$34,000,000 principal amount of the Avatex Funding 6.75% notes, and warrants to
purchase 2,750,000 shares of New Avatex Common Stock.
The merger will effect a recapitalization of the Company's capital stock
resulting in the elimination of the Company's $5 cumulative convertible
preferred stock and $4.20 cumulative exchangeable series A preferred stock.
Concurrently with the initial filing of the Schedule 13E-3, the Company
filed a Registration Statement on Form S-4 that contains a preliminary proxy
statement/prospectus (the "Proxy Statement/Prospectus"). Pursuant to the Proxy
Statement/Prospectus, among other things, the stockholders of the Company will
be given notice of the merger. The cross reference sheet below is being supplied
pursuant to Instruction F to Schedule 13E-3 and shows the location in the Proxy
Statement/Prospectus of the information required to be included in response to
the items of the Schedule 13E-3. The information in the Proxy
Statement/Prospectus is hereby expressly incorporated herein by reference, and
capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Proxy Statement/Prospectus.
2
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<TABLE>
<CAPTION>
SCHEDULE 13E-3 LOCATION IN PROXY
ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--The Companies
(b) Not Applicable.
(c) THE MERGER--Market Price and Dividend Information
(d) THE MERGER--Market Price and Dividend Information
(e) Not Applicable
(f) Not Applicable
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
(a)-(g) Statement filed by Issuer.
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
<TABLE>
<S> <C>
(a)(1) and (2) Not Applicable
(b) THE MERGER--QUESTIONS AND ANSWERS ABOUT THE MERGER, THE MERGER--THE MERGER
TRANSACTION--Background of the Merger, THE MERGER--AGREEMENTS WITH CERTAIN
STOCKHOLDERS--Settlement Agreement
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER TRANSACTION, THE
MERGER--THE MERGER AGREEMENT, THE MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS, THE
MERGER--DESCRIPTION OF WARRANTS, THE MERGER--DESCRIPTION OF THE AVATEX FUNDING 6.75% NOTES,
THE MERGER--DESCRIPTION OF DEFERRED CONTINGENT CASH RIGHTS
(b) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--AGREEMENTS WITH CERTAIN
STOCKHOLDERS
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a) Not Applicable
(b) THE MERGER--MERGER INFORMATION SUMMARY--Summary of the Terms of the 6.75% Notes, THE
MERGER--DESCRIPTION OF THE AVATEX FUNDING 6.75% NOTES--Collateral and Security, THE
MERGER--DESCRIPTION OF THE AVATEX FUNDING 6.75% NOTES--Subrogation Agreement
(c) Not Applicable
(d) THE MERGER--MERGER INFORMATION SUMMARY--Dividends
(e) Not Applicable
(f) & (g) THE MERGER--STOCK EXCHANGE LISTING; DELISTING OUR PREFERRED STOCK
</TABLE>
3
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ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER AGREEMENT--Merger
Consideration
(b) THE MERGER--HISTORICAL FINANCIAL AND PRO FORMA FINANCIAL DATA--Merger Related Expenses
(c) and (d) Not Applicable
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the Merger, THE MERGER--THE MERGER
TRANSACTION--Our Reasons for the Merger
(b) THE MERGER--THE MERGER TRANSACTION--Background of the Merger, THE MERGER--THE MERGER
TRANSACTION--Our Reasons for the Merger
(c) THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the Merger, THE MERGER--THE MERGER
TRANSACTION--Background of the Merger, THE MERGER--THE MERGER TRANSACTION--Factors Considered
by, and Recommendation of, Our Board
(d) THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the Merger, THE MERGER--MERGER
INFORMATION SUMMARY--Comparative Rights of Stockholders, THE MERGER--RISK FACTORS, THE
MERGER--THE MERGER TRANSACTION--Background of the Merger, THE MERGER--THE MERGER
TRANSACTION--Our Reasons for the Merger, THE MERGER--THE MERGER TRANSACTION--Factors
Considered by, and Recommendation of, Our Board, THE MERGER--THE MERGER TRANSACTION--Opinions
of Financial Advisor, THE MERGER--DESCRIPTION OF NEW AVATEX COMMON STOCK, THE MERGER--
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--Recommendation of our Board of Directors, THE
MERGER--THE MERGER TRANSACTION--Background of the Merger, MERGER--THE MERGER
TRANSACTION--Factors Considered by, and Recommendation of, Our Board
(b) THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the Merger, THE MERGER--MERGER
INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER TRANSACTION--Our Reasons for the
Merger, THE MERGER--THE MERGER TRANSACTION--Factors Considered by, and Recommendation of, Our
Board, THE MERGER--THE MERGER TRANSACTION--Opinions of Financial Advisor
(c) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER
AGREEMENT--Conditions to the Completion of the Merger, INFORMATION ABOUT THE MEETING AND
VOTING--THE ANNUAL MEETING--Vote Necessary to Approve Merger Proposal
(d) No.
(e) THE MERGER--MERGER INFORMATION SUMMARY--Recommendation of our Board of Directors, THE
MERGER--THE MERGER TRANSACTION--Background of the Merger, THE MERGER--THE MERGER
TRANSACTION--Factors Considered by, and Recommendation of, Our Board
(f) Not Applicable
</TABLE>
4
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ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a) and (b) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER
TRANSACTION--Background of the Merger, THE MERGER--THE MERGER TRANSACTION--Opinions of
Financial Adviser
(c) Not Applicable
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) THE MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS
(b) Not Applicable
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--AGREEMENTS WITH CERTAIN
STOCKHOLDERS
</TABLE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the Merger, THE MERGER--MERGER
INFORMATION SUMMARY--Recommendation of our Board of Directors, THE MERGER--MERGER INFORMATION
SUMMARY--The Merger, THE MERGER--THE MERGER TRANSACTION--Our Reasons for the Merger, THE
MERGER--THE MERGER TRANSACTION--Factors Considered by, and Recommendation of, Our Board, THE
MERGER--INTERESTS OF CERTAIN PERSONS IN THE MERGER, THE MERGER--AGREEMENTS WITH CERTAIN
STOCKHOLDERS, INFORMATION ABOUT THE MEETING AND VOTING--THE ANNUAL MEETING--Shares
Beneficially Owned by Directors, Executive Officers and Phar-Mor
(b) No recommendation has been made by such person.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) THE MERGER--MERGER INFORMATION SUMMARY--The Merger, THE MERGER--THE MERGER
TRANSACTION--Appraisal Rights, THE MERGER--THE MERGER AGREEMENT--Appraisal Rights
(b) Not Applicable
(c) THE MERGER----THE MERGER TRANSACTION--Federal Securities Laws Consequences, THE MERGER--STOCK
EXCHANGE LISTING; DELISTING OF OUR PREFERRED STOCK
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) THE MERGER--HISTORICAL AND PRO FORMA FINANCIAL DATA--Our Historical Financial Data,
INFORMATION REGARDING AVATEX--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(b) THE MERGER--HISTORICAL AND PRO FORMA FINANCIAL DATA--Pro Forma Condensed Consolidated
Financial Information
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) INFORMATION ABOUT THE MEETING AND VOTING--THE ANNUAL MEETING--Proxies
(b) Not Applicable
</TABLE>
5
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ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
None
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Not Applicable
(b)(1) Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6, 1999, as
to the reasonable range of fair value for the consideration to be received by holders of the
$5 cumulative convertible preferred stock and the $4.20 cumulative exchangeable series A
preferred stock, attached as Annex C to the Proxy Statement/Prospectus, attached to this
Schedule 13e-3 as Exhibit D.
(b)(2) Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. with respect to the fair value opinion described above in
Exhibit (b)(1).
(b)(3) Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6, 1999, as
to factors affecting Avatex's solvency, attached as Annex D to the Proxy Statement/Prospectus,
attached to this Schedule 13e-3 as Exhibit D.
(b)(4) Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. with respect to the solvency opinion described above in
Exhibit (b)(3).
(c)(1) Amended and Restated Agreement and Plan of Merger, dated as of June 18, 1999, by and between
Avatex and Xetava Corporation. (Filed as Exhibit 2 to Avatex's Current Report on Form 8-K
filed June 24, 1999 and incorporated herein by reference).
(c)(2) Stipulation of Settlement of the lawsuits styled In re Avatex Corporation Shareholders
Litigation and Elliott Associates, L.P. v. Avatex Corporation, et al.
(c)(3) Stockholders' Agreement dated June 18, 1999, by and among Avatex, Elliott Associates, L.P.,
Martley International, Inc., Moses Marx, Momar Corporation, and United Equities Commodities
Company. (Filed as Exhibit 10-A to Avatex's Current Report on Form 8-K filed June 24, 1999
and incorporated herein by reference.)
(c)(4) Voting Agreement, dated June 18, 1999, by and among Avatex, Mark S. Zucker, Anvil Investment
Partners, L.P. and Anvil Investors, Inc. (Filed as Exhibit 10-B to Avatex's Current Report on
Form 8-K filed June 24, 1999 and incorporated herein by reference).
(d)(1) Proxy Statement/Prospectus contained in registration statement on Form S-4, together with the
proxy card.
(e)(1) Section 262 of the Delaware General Corporation Law (set forth as Annex G to the Proxy
Statement).*
(f)(1) Not Applicable
</TABLE>
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* Incorporated by reference to the Proxy Statement.
6
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ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Companies" of the
Proxy Statement is incorporated herein by reference.
(b) The titles of the securities that are the subject of the Rule 13e-3 transaction are $5
cumulative convertible preferred stock ("$5 Preferred Stock"), and $4.20 cumulative exchangeable
series A preferred stock ("$4.20 Preferred Stock"). As of July 31, 1999, approximately 652,273
shares of $5 Preferred Stock and 4,312,352 shares of $4.20 Preferred Stock were issued and
outstanding. Avatex had approximately 75 holders of record of $5 Preferred Stock and 815 holders
of record of $4.20 Prefered Stock as of July 31, 1999.
(c) The information set forth in "THE MERGER--MARKET PRICE AND DIVIDEND INFORMATION" of the Proxy
Statement is incorporated by reference herein.
(d) The information set forth in "THE MERGER--MARKET PRICE AND DIVIDEND INFORMATION" of the Proxy
Statement is incorporated by reference herein.
(e) Not applicable.
(f) Not Applicable.
</TABLE>
ITEM 2. IDENTITY AND BACKGROUND.
<TABLE>
<S> <C>
This Statement is being filed by the Company (which is the issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction).
</TABLE>
ITEM 3. PAST CONTACTS, TRANSACTIONS OR QUOTATIONS.
<TABLE>
<S> <C>
(a)(1) and (2) Not applicable.
(b) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--The Merger," "THE
MERGER--THE MERGER TRANSACTION--Background of the Merger" and "THE MERGER--AGREEMENTS WITH
CERTAIN STOCKHOLDERS--Settlement Agreement" of the Proxy Statement is incorporated herein by
reference.
</TABLE>
ITEM 4. TERMS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Merger," "THE
MERGER--THE MERGER TRANSACTION," "THE MERGER-- THE MERGER AGREEMENT," "THE MERGER--AGREEMENTS
WITH CERTAIN STOCKHOLDERS," "THE MERGER--DESCRIPTION OF WARRANTS," "THE MERGER--DESCRIPTION OF
THE AVATEX FUNDING 6.75% NOTES" and "THE MERGER--DESCRIPTION OF DEFERRED CONTINGENT CASH RIGHTS"
of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--The Merger" and "THE
MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS" of the Proxy Statement is incorporated herein by
reference.
</TABLE>
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
<TABLE>
<S> <C>
(a) Not Applicable.
(b) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Summary of the Terms of
the 6.75% Notes," "THE MERGER--DESCRIPTION OF THE AVATEX FUNDING 6.75% NOTES--Collateral and
Security," "THE MERGER--DESCRIPTION OF THE AVATEX FUNDING 6.75% NOTES--Subrogation Agreement" of
the Proxy Statement is incorporated herein by reference.
</TABLE>
7
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<TABLE>
<S> <C>
(c) Not Applicable.
(d) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Dividends" of the Proxy
Statement is incorporated herein by reference.
(e) Not Applicable.
(f) & (g) The information set forth in "THE MERGER--STOCK EXCHANGE LISTING; DELISTING OF OUR PREFERRED
STOCK" of the Proxy Statement is incorporated herein by reference.
</TABLE>
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Merger," "THE
MERGER--THE MERGER AGREEMENT--Merger Consideration" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in "THE MERGER--HISTORICAL FINANCIAL AND PRO FORMA FINANCIAL
DATA--Merger Related Expenses" of the Proxy Statement is incorporated herein by reference.
(c) and (d) Not Applicable.
</TABLE>
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- Our Reasons for the
Merger" and "THE MERGER--THE MERGER TRANSACTION--Our Reasons for the Merger" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in "THE MERGER--THE MERGER TRANSACTION--Background of the Merger" and
"THE MERGER--THE MERGER TRANSACTION--Our Reasons for the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the
Merger," "THE MERGER--THE MERGER TRANSACTION--Background of the Merger" and "THE MERGER--THE
MERGER TRANSACTION--Factors Considered by, and Recommendation of, Our Board" of the Proxy
Statement is incorporated herein by reference.
(d) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the
Merger," "THE MERGER--MERGER INFORMATION SUMMARY--Comparative Rights of Stockholders," "THE
MERGER--RISK FACTORS," "THE MERGER--THE MERGER TRANSACTION--Background of the Merger," "THE
MERGER--THE MERGER TRANSACTION--Our Reasons for the Merger, "THE MERGER--THE MERGER
TRANSACTION--Factors Considered by, and Recommendation of, Our Board," "THE MERGER--THE MERGER
TRANSACTION--Opinions of Financial Advisor," "THE MERGER--DESCRIPTION OF NEW AVATEX COMMON
STOCK," "THE MERGER--MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER," of the Proxy
Statement is incorporated herein by reference.
</TABLE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- Recommendation of our
Board of Directors," "THE MERGER--THE MERGER TRANSACTION--Background of the Merger," "THE
MERGER--THE MERGER TRANSACTION--Factors Considered by, and Recommendation of, Our Board" of the
Proxy Statement is incorporated herein by reference.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
(b) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Our Reasons for the
Merger," "THE MERGER--MERGER INFORMATION SUMMARY--The Merger," "THE MERGER--THE MERGER
TRANSACTION--Our Reasons for the Merger," "THE MERGER--THE MERGER TRANSACTION--Factors
Considered by, and Recommendation of, Our Board," "THE MERGER--THE MERGER TRANSACTION--Opinions
of Financial Advisor" of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--The Merger," "THE
MERGER--THE MERGER AGREEMENT--Conditions to the Completion of the Merger," "INFORMATION ABOUT
THE MEETING AND VOTING--THE ANNUAL MEETING--Vote Necessary to Approve Merger Proposal," "THE
MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS--Elliott/Marx Stockholders' Agreement," "THE
MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS--Zucker Voting Agreement" of the Proxy Statement is
incorporated herein by reference.
(d) The majority of non-employee directors have not retained a representative.
(e) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY--Recommendation of our
Board of Directors," "THE MERGER--THE MERGER TRANSACTION--Background of the Merger," "THE
MERGER--THE MERGER TRANSACTION--Factors Considered by, and Recommendation of, Our Board" of the
Proxy Statement is incorporated herein by reference.
(f) No such offer has been received.
</TABLE>
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
<TABLE>
<S> <C>
(a) and (b) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Merger," "THE
MERGER--THE MERGER TRANSACTION--Background of the Merger," "THE MERGER--THE MERGER
TRANSACTION----Opinions of Financial Adviser" of the Proxy Statement is incorporated herein by
reference.
(c) The Opinions of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., each dated May 6, 1999,
are included in the information to be circulated to the stockholders and shall also be made
available for inspection and copying at the principal executive offices of the Company during
its regular business hours by any interested stockholder of the Company or his or her
representative who has been designated in writing. At the written request of such stockholder, a
copy of such opinion will be sent, at the stockholder's expense, to such stockholder or his or
her representative.
</TABLE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS--Elliott/Marx
Stockholders' Agreement" of the Proxy Statement is incorporated herein by reference.
(b) Not Applicable.
</TABLE>
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
<TABLE>
<S> <C>
The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Merger," "THE
MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS" of the Proxy Statement is incorporated herein by
reference.
</TABLE>
9
<PAGE>
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- Our Reasons for the
Merger," "THE MERGER--MERGER INFORMATION SUMMARY-- Recommendation of our Board of Directors,"
"THE MERGER--MERGER INFORMATION SUMMARY--The Merger," "THE MERGER--THE MERGER TRANSACTION--Our
Reasons for the Merger," "THE MERGER--THE MERGER TRANSACTION--Factors Considered by, and
Recommendation of, Our Board," "THE MERGER--INTERESTS OF CERTAIN PERSONS IN THE MERGER," "THE
MERGER--AGREEMENTS WITH CERTAIN STOCKHOLDERS," "INFORMATION ABOUT THE MEETING AND VOTING--THE
ANNUAL MEETING--Shares Beneficially Owned by Directors, Executive Officers and Phar-Mor" of the
Proxy Statement is incorporated herein by reference.
(b) Not applicable.
</TABLE>
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--MERGER INFORMATION SUMMARY-- The Merger," "THE
MERGER--THE MERGER TRANSACTION--Appraisal Rights," "THE MERGER--THE MERGER AGREEMENT--Appraisal
Rights" of the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
(c) The information set forth in "THE MERGER----THE MERGER TRANSACTION--Federal Securities Laws
Consequences," "THE MERGER--STOCK EXCHANGE LISTING; DELISTING OF OUR PREFERRED STOCK" of the
Proxy Statement is incorporated herein by reference.
</TABLE>
ITEM 14. FINANCIAL INFORMATION.
<TABLE>
<S> <C>
(a) The information set forth in "THE MERGER--HISTORICAL AND PRO FORMA FINANCIAL DATA--Our
Historical Financial Data," "INFORMATION REGARDING AVATEX--FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "THE MERGER--HISTORICAL AND PRO FORMA FINANCIAL DATA--Pro Forma
Condensed Consolidated Financial Information" of the Proxy Statement is incorporated herein by
reference.
</TABLE>
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
<TABLE>
<S> <C>
(a) The information set forth in "INFORMATION ABOUT THE MEETING AND VOTING-- THE ANNUAL
MEETING--Proxies" of the Proxy Statement is incorporated herein by reference.
(b) Not Applicable.
</TABLE>
10
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
<TABLE>
<S> <C>
None.
</TABLE>
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1) Not Applicable.
(b)(1) Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6, 1999, as
to the reasonable range of fair value for the consideration to be received by holders of the $5
cumulative convertible preferred stock and the $4.20 cumulative exchangeable series A preferred
stock, attached as Annex C to the Proxy Statement/Prospectus, attached to this Schedule 13e-3 as
Exhibit D.*
(b)(2) Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. with respect to the fair value opinion described above in Exhibit
(b)(1).+
(b)(3) Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6, 1999, as
to factors affecting Avatex's solvency, attached as Annex D to the Proxy Statement/Prospectus,
attached to this Schedule 13e-3 as Exhibit D.*
(b)(4) Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. with respect to the solvency opinion described above in Exhibit
(b)(3).+
(c)(1) Amended and Restated Agreement and Plan of Merger, dated as of June 18, 1999, by and between
Avatex and Xetava Corporation. (Filed as Exhibit 2 to Avatex's Current Report on Form 8-K filed
June 24, 1999 and incorporated herein by reference).*
(c)(2) Stipulation of Settlement of the lawsuits styled In re Avatex Corporation Shareholders
Litigation and Elliott Associates, L.P. v. Avatex Corporation, et al. (Filed as Exhibit 10-W to
Avatex's registration statement on Form S-4 filed August 9, 1999 and incorporated herein by
reference).*
(c)(3) Stockholders' Agreement dated June 18, 1999, by and among Avatex, Elliott Associates, L.P.,
Martley International, Inc., Moses Marx, Momar Corporation, and United Equities Commodities
Company. (Filed as Exhibit 10-A to Avatex's Current Report on Form 8-K filed June 24, 1999 and
incorporated herein by reference).*
(c)(4) Voting Agreement, dated June 18, 1999, by and among Avatex, Mark S. Zucker, Anvil Investment
Partners, L.P. and Anvil Investors, Inc. (Filed as Exhibit 10-B to Avatex's Current Report on
Form 8-K filed June 24, 1999 and incorporated herein by reference).*
(d)(1) Proxy Statement/Prospectus contained in registration statement on Form S-4.**
(e)(1) Section 262 of the Delaware General Corporation Law (set forth as Annex G to the Proxy
Statement).*
(f)(1) Not Applicable.
</TABLE>
- ------------------
* Incorporated by reference
** Previously filed
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to
Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
11
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Date: September 16, 1999
AVATEX CORPORATION
By: /s/ Melvyn J. Estrin
----------------------------
Name: Melvyn J. Estrin
-----------------------
Title: Co-Chairman of the Board and
Co-Chief Executive Officer
----------------------------
12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------ ---------------------------------------------------------------------------------------------
<S> <C> <C>
99.17(b)(1) -- Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6,
1999, as to the reasonable range of fair value for the consideration to be received by
holders of the $5 cumulative convertible preferred stock and the $4.20 cumulative
exchangeable series A preferred stock, attached as Annex C to the Proxy
Statement/Prospectus, attached to this Schedule 13e-3 as Exhibit D.*
99.17(b)(2) -- Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. with respect to the fair value opinion described above
in Exhibit (b)(1).+
99.17(b)(3) -- Opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated as of May 6,
1999, as to factors affecting Avatex's solvency, attached as Annex D to the Proxy
Statement/Prospectus, attached to this Schedule 13e-3 as Exhibit D.*
99.17(b)(4) -- Materials presented to the Board of Directors on May 6, 1999 by Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. with respect to the solvency opinion described above in
Exhibit (b)(3).+
99.17(c)(1) -- Amended and Restated Agreement and Plan of Merger, dated as of June 18, 1999, by and
between Avatex and Xetava Corporation. (Filed as Exhibit 2 to Avatex's Current Report
on Form 8-K filed June 24, 1999 and incorporated herein by reference).*
99.17(c)(2) -- Stipulation of Settlement of the lawsuits styled In re Avatex Corporation Shareholders
Litigation and Elliott Associates, L.P. v. Avatex Corporation, et al. (Filed as
Exhibit 10-W to Avatex's registration statement on Form S-4 filed August 9, 1999 and
incorporated herein by reference).*
99.17(c)(3) -- Stockholders' Agreement dated June Avatex, Elliott Associates, L.P., Martley
International, Inc., Moses Marx, Momar Corporation, and United Equities Commodities
Company. (Filed as Exhibit 10-A to Avatex's Current Report on Form 8-K filed June 24,
1999 and incorporated herein by reference).*
99.17(c)(4) -- Voting Agreement, dated June 18, 1999, by and among Avatex, Mark S. Zucker, Anvil
Investment Partners, L.P. and Anvil Investors, Inc. (Filed as Exhibit 10-B to Avatex's
Current Report on Form 8-K filed June 24, 1999 and incorporated herein by reference).*
99.17(d)(1) -- Proxy Statement/Prospectus contained in registration statement on Form S-4.**
99.17(e)(1) -- Section 262 of the Delaware General Corporation Law (set forth as Annex G to the Proxy
Statement).*
</TABLE>
- ------------------
* Incorporated by reference
** Previously filed
+ Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 under the Securities Exchange Act of 1934, as amended.
13
<PAGE>
Information contained herein, marked with [**], has been omitted pursuant to a
request for confidential treatment. A complete copy of this document has been
supplied to the Securities and Exchange Commission under separate cover.
Materials presented to the Board of Directors of Avatex Corporation on May 6,
1999 by Houlihan Lokey Howard & Zukin Financial Advisors, Inc. with respect to
the fair value opinion described in Exhibit 99.17(b)(1).
<PAGE>
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Astericks denote ommissions.
- --------------------------------------------------------------------------------
Presentation to
The Board of Directors of Avatex Corporation
--------------------------------------------------------------------
May 6, 1999
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
[LOGO]
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
1650 Tysons Boulevard, Suite 565
McLean, VA 22102
Tel. (703) 847-5225 o Fax: (703) 848-9667 o http://www.hlhz.com
Washington, D.C. o Los Angeles o Chicago o San Fancisco o New York
o Minneaplis o Dallas o Atlanta o Toronto o Seoul o Hong Kong
2
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------
Executive Summary............................................. A
Scope of Engagement
Summary of Recent Trading Activity
Summary of Analysis Completed
Summary of Due Diligence Performed
Limiting Conditions
Conclusions
Valuation of Avatex........................................... B
Valuation of Avatex Assets
Aggregate Historical Trading Values of Avatex's Equity
Securities
Valuation of Preferred Stock.................................. C
Key Attributes
Hypothetical Restructuring Approach (Aggregate)
Historical Trading Analysis (Aggregate)
Summary of Preferred Valuation
Relative Value of Preferred Stock Issues
Value of Preferred vs. Recent Trading Value
Exchange Ratios For Each Preferred Issue
Valuation of Consideration Being Offered to Preferred......... D
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------
Value of Aggregate Cash Deal
Valuation of $34 Million Note
Value of Conversion Deal at a 7.5x Exchange Ratio
Post Deal Avatex Ownership with Varying Exchange Ratios
Value of Preferred Consideration vs. Preferred Value
Fairness to Common............................................ E
Valuation of Common
Minority Interest Discount
Avatex Minority Interest Value
Estimated Avatex Values Per Share Post Transaction
Analysis of Avatex Common Stock Value: Pre-Deal and Post-Deal
Fairness Opinion.............................................. F
Supporting Material........................................... G
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Executive Summary
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Executive Summary
--------------------------------------------------------------------
SCOPE OF ENGAGEMENT
We understand that the Company is considering a merger with Xetava
Corporation, a Delaware corporation and wholly-owned subsidiary of
the Company ("Xetava"), or another transaction, pursuant to which
(x) shares of the Company's common stock, par value $5.00 per share
(the "Old Avatex Common Stock"), will be converted into common
shares of the surviving company in such merger or other transaction;
and (y) (1) shares of the Company's $4.20 Cumulative Exchangeable
Series A Preferred Stock (the "$4.20 Preferred") and shares of the
Company's $5.00 Cumulative Convertible Preferred Stock (the "$5.00
Preferred") will be converted into common shares of the surviving
company in such merger or other transaction, or (2) holders of
shares of the $4.20 Preferred and $5.00 Preferred could elect to
receive in such merger or other transaction for their shares of
$4.20 Preferred and/or $5.00 Preferred a pro rata share of (i) a
cash amount, (ii) debt and/or other securities of the Company or of
a subsidiary of the Company, and/or (iii) a portion of any recovery
the Company receives from certain litigation. The foregoing or any
other transaction pursuant to which the Company or any other party
issues cash or debt or equity securities in exchange for or in
consideration of, or the purchase or redemption, directly or
indirectly, by the Company or any other party, of all or a
substantial portion of the Old Avatex Common Stock, the $4.20
Preferred and the $5.00 Preferred, is referred to collectively
herein as the "Transaction."
SUMMARY OF RECENT TRADING ACTIVITY
The following table highlights the recent trading activity for the
Company's common stock and preferred stock.
--------------------------------------------------------------------
Common $4.20 Pfd. $5.00 Pfd.
------ ---------- ----------
52 Week High $2.63 $16.88 $21.00
52 Week Low $0.50 $2.75 $2.13
Current Price (as of 4/28/99) $0.75 $4.44 $4.81
30-Day Average (as of 4/28/99) $0.91 $4.14 $4.63
6-Month Average (as of 4/28/99) $0.88 $4.25 $6.53
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Executive Summary
--------------------------------------------------------------------
SUMMARY OF ANALYSIS COMPLETED
In assessing the reasonableness of the consideration being offered
to the Company's preferred shareholders and the financial fairness
of the Transaction to the Company's common shareholders we have:
(i) analyzed the reasonableness of the historical trading value of
the Company's publicly traded equity securities;
(ii) independently valued the total equity of the Company using a
widely accepted valuation methodology;
(iii) independently valued each of the Company's preferred
securities;
(iv) analyzed the value of the consideration being offered to the
Company's preferred shareholders in the Transaction; and
(v) reviewed the valuation implications to the Company's common
stockholders of the Transaction.
The purpose of this presentation is to summarize the finding of our
analysis and present our conclusions.
2
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Executive Summary
--------------------------------------------------------------------
SUMMARY OF DUE DILIGENCE PERFORMED
In connection with this Opinion, we have made such reviews, analyses
and inquiries as we have deemed necessary and appropriate under the
circumstances. Among other things, we have:
o reviewed the Company's form 10-K for the fiscal year ended
March 31, 1998, the Company's form 10-Q for the nine month
period ending December 31, 1998, which the Company's
management has identified as the most current information
available;
o reviewed copies of the following agreements: Employment
Agreements and Amendments, Real Estate Appraisals and
Agreements, Certificate of Designation of $5.00 Cumulative
Convertible Preferred Stock, Certificate of Designation of the
$4.20 Cumulative Exchangeable Series A Preferred Stock, Draft
Settlement Agreement between Avatex and Trustee, and Draft
Promissory Note;
o reviewed the Company's Draft Stockholders Agreement, the Draft
Amended and Restated Agreement And Plan of Merger, Draft
Pledge and Security Agreement, Draft Voting Agreement and
Draft Warrant Agreement;
o reviewed the General Terms and Conditions of Settlement
Between Avatex Corp. and Certain Preferred Shareholders;
o met with certain members of the senior management of the
Company to discuss the operations, financial condition, future
prospects and projected operations and performance of the
Company;
o visited certain facilities and business offices of the
Company;
o reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the period March
1999 to May 2003;
o reviewed the historical market prices and trading volume for
the Company's publicly traded securities;
o reviewed other publicly available financial data for the
Company and certain publicly-held investments of the Company;
and
o conducted such other studies, analyses and investigations as
we have deemed appropriate
3
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Executive Summary
--------------------------------------------------------------------
LIMITING CONDITIONS
We have not been requested to, and did not, solicit third party
indications of interest in acquiring all or any part of the Company.
We understand that the terms and conditions of the Transaction have
not been finalized. Our analysis is necessarily based on the latest
available information as of the date of this presentation.
We have relied upon and assumed, without independent verification,
that the financial forecasts and projections provided to us, and
adjusted based on discussions with management, have been reasonably
prepared and reflect the best currently available estimates of the
future financial results and condition of the Company, and that
there has been no material change in the assets, financial
condition, business or prospects of the Company since the date of
the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of
the information supplied to us with respect to the Company and do
not assume any responsibility with respect to it. We have not made
any physical inspection or independent appraisal of any of the
properties or assets of the Company. Our analysis is necessarily
based on business, economic, market and other conditions as they
exist and can be evaluated by us at the date of this presentation.
CONCLUSIONS
In summary, it is our conclusion that (i) the value being received
by the preferred shareholders in the aggregate and for each issue is
within a reasonable range of fair value, and (ii) the Transaction to
the common shareholders is fair from a financial point of view.
4
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Valuation of Avatex
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Avatex
--------------------------------------------------------------------
VALUATION OF AVATEX ASSETS
o The valuation of Avatex Corporation was conducted using the
adjusted book value methodology. The Company's assets and
liabilities (including contingent liabilities) were marked to
fair market value. The difference between the fair market
value of the assets and the fair market value of the
liabilities is the Company's net equity on a control basis.
o The concluded fair market value of Avatex on a control basis
is $77.6 million as presented below:
Pre-Transaction Fair Market Value (Thousands)
As of
Assets 4/28/99
-------
Liquid Assets $24.0
Receivables 2.5
Investments in Public Securities 57.2
Venture Capital Investments 10.0
Real Estate 11.0
Other 5.4
-------
Total Assets $110.2
Liabilities
Debt $9.2
Contingent Liabilities 19.8
Accounts Payable and Accruels 3.6
-------
Total Liabilities $32.6
-------
Net Equity $77.6
=======
AGGREGATE HISTORICAL TRADING VALUES OF AVATEX'S EQUITY SECURITIES
6
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Avatex
--------------------------------------------------------------------
<TABLE>
<CAPTION>
(4/28/99)
Current 30-Day Average 6-Month Average
--------- -------------- ---------------
<S> <C> <C> <C>
Common $ 10,355 $ 13,277 $ 12,122
$4.20 Preferred $ 19,136 $ 18,450 $ 18,343
$5.00 Preferred $ 3,139 $ 2,993 $ 4,262
--------- -------------- ---------------
Aggregate Market Value of Equity $ 32,630 $ 34,720 $ 34,727
========= ============== ===============
</TABLE>
7
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
KEY ATTRIBUTES
FIRST SERIES PREFERRED STOCK ($5.00)
<TABLE>
<S> <C>
Par Value $5.00 per share
Dividends $5.00 per share
Liquidation Preference $50.00 per share
Redemption $50.00 per share
Voting No voting rights, currently have two board seats
Conversion $25.80 per share of common (1.94x)
Shares Outstanding / Face Value 652,273 / $32,613,650
Arrearage Total (3/31/99) $8,153,413
Face Value plus Arrearage $40,767,063
</TABLE>
CUMULATIVE EXCHANGEABLE SERIES A PREFERRED STOCK ($4.20)
<TABLE>
<S> <C>
Par Value $5.00 per share
Dividends $4.20 per share
Liquidation Preference $40.00 per share
Redemption $40.00 per share
Voting No voting rights, currently have two board seats
Exchangeable 10.5% subordinate notes (at Avatex Option)
Shares Outstanding / Face Value 4,312,352 / $172,494,080
Arrearage Total (3/31/99) $51,020,513
Face Value plus Arrearage $223,514,593
</TABLE>
9
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
HYPOTHETICAL RESTRUCTURING APPROACH
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current Estimated Avatex
Control Value 77,600
Employment Agreement
Claim [a] (24,000) (12,000)
--------- ----------
Net Potential Recovery to
Preferred Shareholders 53,600 65,600
Preferred Allocation in
Restructuring
Transactions 75% 80% 85% 90% 95% 75% 80% 85% 90% 95%
--------------------------------------------- --------------------------------------------
--------------------------- ---------------------------
Est. Preferred Proceeds
From Restructuring [b] 40,200 42,880 45,560 48,240 50,920 49,200 52,480 55,760 59,040 62,320
--------------------------- ---------------------------
Indicated Range of Aggregate Preferred Fair Value 45,560 - 49,200
</TABLE>
[a] Source: Avatex management estimates the liability associated
with the Employment Agreements at $24MM.
[b] Preferred recovery expectations on lower end of range based on
current inability to force restructuring to occur.
10
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
HISTORICAL TRADING ANALYSIS ($000S)
<TABLE>
<CAPTION>
Value Range (As a Percentage of Avatex TEV)
Low High Median
-------------------------------------------
<S> <C> <C> <C>
Avatex Historical Trading Evidence
Historical Trading (All Value Ranges) 51.1% 79.8% 70.7%
Historical Trading - When TEV is $40MM - $70MM 66.4% 78.2% 72.6%
Estimated Minority Interest Value of Avatex (A) $54,300
-------
Indicated Range of Aggregate Preferred Fair Value
(Rounded) (B) $38,400 - $39,300
</TABLE>
Notes:
TEV = Total Equity Value
(A) Based on 30% minority interest discount.
(B) Using a 25% minority interest discount, the Indicated Range of
Aggregate Preferred Fair Value is $41,100 and $42,300
11
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
SUMMARY OF PREFERRED VALUATION
Low High
--- ----
Restructuring Approach $45,600 - $49,200
Historical Trading (A) $38,400 - $42,300
------- -------
Concluded Range of Fair Value $41,000 - $47,000
======= =======
(A) High end value range from this approach utilizes a 25%
minority interest discount.
12
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
RELATIVE VALUE OF PREFERRED STOCK ISSUES
o Using historical pricing evidence, it was determined that
approximately 84% of total preferred market value was
attributable to the Series A $4.20 Preferred. The remaining
16% would be attributable to the First Series $5.00 Preferred.
<TABLE>
<CAPTION>
Series A ($4.20) % of Total Preferred Market Cap
Low High Median
------------------------------------------------
<S> <C> <C> <C>
Historical Trading (All Value Ranges) 73.8% 92.6% 84.1%
Historical Trading - When TEV is $40MM - $70MM 73.8% 86.1% 83.9%
Conclusion - $4.20 Preferred 84.0%
Range of Fair Value Preferred (Aggregate) $41,000 - $47,000
Range of Fair Value - $4.20 Preferred (84%) $34,400 - $39,500
Range of Fair Value - $5.00 Preferred (16%) $6,600 - $7,500
</TABLE>
13
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
VALUE OF PREFERRED VS. RECENT TRADING VALUE
$4.20 Preferred $5.00 Preferred
--------------- ---------------
--------------------------------------------------------------------
Indicated Range of Fair Value $7.98 - $9.16 $10.12 - $11.50
--------------------------------------------------------------------
Current Price (4/28/99) $4.44 $4.81
30-Day Average Price $4.14 $4.63
6-Month Average Price $4.25 $6.53
14
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Preferred Stock
--------------------------------------------------------------------
EXCHANGE RATIOS FOR EACH PREFERRED ISSUE
o Using a weighted average 7.5x conversion ratio and 84%/16%
allocation of the value to the $4.20 Preferred and $5.00
Preferred, the implied conversion ratio for the $4.20
Preferred and the $5.00 Preferred are:
<TABLE>
<CAPTION>
$4.20 Preferred $5.00 Preferred Total
--------------- --------------- -----
<S> <C> <C> <C>
Shares Outstanding 4,312,352 652,273 4,964,625
Concluded Weighted Avg. Conversion Ratio 7.50
---------
Total Converted Common Shares (A) 37,234,688
Concluded Allocation / Issue 84% 16%
Allocation of Common Shares (A) 31,277,138 5,957,550
-----------------------------------------------------------------------------
Conversion Ratio Per Preferred Issue 7.253 9.134
-----------------------------------------------------------------------------
</TABLE>
(A) Assuming 0.0% elect cash and note alternative.
15
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
--------------------------------------------------------------------
VALUE OF AGGREGATE CASH DEAL
<TABLE>
<CAPTION>
% of Preferred Electing Cash Deal 60% 80% 100%
--------------------------
<S> <C> <C> <C> <C> <C> <C>
IRR On Note Based on Post Deal Collateral/Leverage Position 14% 16% 18%
$34MM Note @ 6.75% (Pro-Rata) Value Per 16,875 21,384 25,421
$15.25MM Cash (Pro-Rata) Warrant 15,250 9,150 12,200 15,250
---------
2.75MM Warrants @ $2.25 (5 year life) (A) 2,750 $ 0.33 908 545 726 908
20% of McKesson Settlement (B) -- -- --
--------------------------
Total Value of Preferred - Cash (Pro-Rata) 26,570 34,310 41,578
Implied Value of 100% Preferred Interest 44,283 42,888 41,578
</TABLE>
(A) Based on Black-Scholes Option Pricing Model.
(B) Amount of recovery unknown at this time.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
--------------------------------------------------------------------
VALUATION OF $34 MILLION NOTE
o The present value of the $34 Million note was calculated using
discount rates in line with required rates of return for
similarly collateralized, below-investment grade, low interest
coverage, securities.
INTERNAL RATE VALUE
OF RETURN ($000)
------------- -------------
14% $28,125
16% $26,731
18% $25,421
18
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
--------------------------------------------------------------------
VALUE OF CONVERSION DEAL AT A 7.5X EXCHANGE RATIO
<TABLE>
<S> <C> <C> <C> <C>
Estimated Value of Avatex Equity (Control Basis) $77,600 $77,600 $77,600
% of Preferred Electing Cash Deal 60% 80% 100%
Value Deduction For Preferred Shareholders Taking Cash Deal $26,570 $34,310 $41,578
------------------------------------
Remaining TEV (Control Basis) - Avatex Common Shareholders $51,030 $43,290 $36,022
Minority Interest Adjustment of 30% ($15,309) ($12,987) ($10,807)
------------------------------------
Post Deal TEV (Minority Interest Basis) 35,721 30,303 25,215
Current Common Shares O/S 13,806 13,806 13,806 13,806
Preferred Shares Converting 4,965 1,986 993 --
Common Shares Rec'd By Conv. Pref 14,894 7,447 --
------------------------------------
Avatex Shares O/S Post Deal 28,700 21,253 13,806
Estimated Avatex Value/Share Post Deal $ 1.24 $ 1.43 $ 1.83
Value of Conversion Deal (Pro-Rata) $18,537 $10,618 --
Implied Value Of Conversion Deal (100% Basis) $46,343 $53,088 N/A
</TABLE>
19
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
--------------------------------------------------------------------
POST DEAL AVATEX OWNERSHIP WITH VARYING EXCHANGE RATIOS (A)
WEIGHTED AVERAGE CONVERSION RATIO 7.25 7.50 7.75
---- ---- ----
PREFERRED OWNERSHIP 72% 73% 74%
COMMON OWNERSHIP 28% 27% 26%
(A) Assuming 100% elect conversion alternative.
20
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Consideration Being Offered to Preferred
--------------------------------------------------------------------
VALUE OF PREFERRED CONSIDERATION VS. PREFERRED VALUE
<TABLE>
<CAPTION>
$4.20 Preferred $5.00 Preferred Total
--------------- --------------- -----
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
60% $37,200 $7,100 $44,300
Cash Deal 80% $36,000 $6,900 $42,900
100% $34,900 $6,700 $41,600
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
60% $38,900 $7,400 $46,300
Conversion Deal
80% $44,600 $8,500 $53,100
------------------------------------------------------------------------------------------
Range of Fair Values $34,400 - $39,500 $6,600 - $7,500 $41,000 - $47,000
</TABLE>
21
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Fairness To Common
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Common
--------------------------------------------------------------------
VALUATION OF COMMON
o As previously determined, the aggregate equity value of Avatex
is estimated at $77.6 million on a controlling interest basis.
The aggregate value attributable to the Avatex common
shareholders post-deal is the difference between the total
equity value of the Company and the value of the consideration
granted to the Preferred electing the cash alternative.
<TABLE>
<CAPTION>
Percentage of Preferred Electing Cash Deal 60% 80% 100%
--- --- ----
<S> <C> <C> <C>
Estimated Value of Avatex Equity (Control Basis) 77,600 77,600 77,600
Value Deduction for Preferred Shareholders Taking Cash Deal 26,570 34,310 41,578
--------------------------------------
Remaining TEV- Avatex Common Shareholders (Control Basis) 51,030 43,290 36,022
</TABLE>
TEV = Total Equity Value
23
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation of Common
--------------------------------------------------------------------
MINORITY INTEREST DISCOUNT
o Each share of common stock represents a fractional interest in
the value of Avatex; therefore, a minority interest discount
is applied to the residual value attributable to the common
shareholders.
o A minority interest discount of 30% was selected based upon
research conducted on discounts to net asset value experienced
by closed-end funds, deregulated investment companies, and
master limited partnership interests.
<TABLE>
<CAPTION>
Premium/Discount from Net Asset Value
-------------------------------------
Low High Median Average
--------------------------------------------------
<S> <C> <C> <C> <C>
Closed-End Funds (Regulated Investment Companies)
Closed-End Equity Funds (General & Specialized) -24.7% 20.3% -10.2% -8.4%
Closed-End Funds With Market Value of Assets < $200 Million -24.7% 20.3% -15.9% -10.6%
Deregulated Investment Companies
Real Silk Hosiery Mills, Inc. (1984-1988) -23.8% -34.4% -25.0% -27.9%
Master Limited Partnership
LP Secondary Market Discounts [a] N/A N/A N/A -44.0%
Publicly Registered Limited Partnership Interests [b] -36.6%[c] -69.1%[d] -43.1%[e] -49.6%
Range of Minority Interest Discounts 25% - 35%
</TABLE>
24
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Fairness to Common
--------------------------------------------------------------------
AVATEX MINORITY INTEREST VALUE
o After adjusting the value attributable to the post-deal Avatex
common stockholders for minority interest considerations, the
aggregate minority interest value attributable to the Avatex
common shareholders (post deal) ranges from $35.7 million
under the scenario where 60% of the Preferreds' elect the
"cash" alternative to $25.2 million under the scenario where
100% of the Preferreds' elect the cash alternative.
<TABLE>
<CAPTION>
Preferred Shareholders Election 60% Cash 80% Cash 100% Cash
-------- -------- ---------
<S> <C> <C> <C>
Remaining TEV (Control Basis) - Avatex Common Shareholders 51,030 43,290 36,022
Adjustment For Minority Interest @ 30% (15,309) (12,987) (10,807)
-------------------------------
Post Deal TEV (Minority Interest Basis) 35,721 30,303 25,215
</TABLE>
25
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Fairness to Common
--------------------------------------------------------------------
ESTIMATED AVATEX VALUES PER SHARE POST TRANSACTION
<TABLE>
<CAPTION>
Scenario
Preferred Shareholder Election 60% Cash 80% Cash 100% Cash
-------- -------- ---------
<S> <C> <C> <C> <C>
Post Deal TEV (Minority Interest Basis) 35,721 30,303 25,215 [A]
Avatex Common 13,806 13,806 13,806
Avatex Common - From Preferred Conversion 14,894 7,447 --
------ ----- ------
Total Avatex Common Shares Outstanding Post Deal 28,700 21,253 13,806 [B]
------ ------ ------
Avatex Post Deal Value Per Share $1.24 $1.43 $1.83 [A]/[B]
</TABLE>
o As the percentage of Preferreds' electing cash alternative
increases from 60% to 100%, the total number of common shares
outstanding decreases because there are less Preferreds electing to
take common shares.
26
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Fairness to Common
--------------------------------------------------------------------
ANALYSIS OF AVATEX COMMON STOCK VALUE: PRE-DEAL AND POST-DEAL
<TABLE>
<CAPTION>
Percentage of Preferred Shareholders Electing Cash Deal 60% 80% 100%
--- --- ----
<S> <C> <C> <C>
Estimated Range of Post Deal Stock Prices $1.24 $1.43 $1.83
-------------------
Premium to Current Stock Price - $0.75 65% 91% 144%
Premium to 30-Day Average Stock Price - $.91 36% 57% 101%
Premium to 6-Month Average Stock Price - $.88 41% 63% 108%
-------------------
</TABLE>
o Assumes a conversion ratio of 7.5 x.
27
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
- --------------------------------------------------------------------------------
Fairness Opinion
- --------------------------------------------------------------------------------
<PAGE>
May 6, 1999
To The Board of Directors of
Avatex Corporation
Dear Directors:
We understand that Avatex Corporation (hereinafter the "Company") is considering
a merger with Xetava Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("Xetava"), or another transaction, pursuant to which
(x) shares of the Company's common stock, par value $5.00 per share (the "Old
Avatex Common Stock"), will be converted into common shares of the surviving
company in such merger or other transaction; and (y) (1) shares of the Company's
$4.20 Cumulative Exchangeable Series A Preferred Stock (the "$4.20 Preferred")
and shares of the Company's $5.00 Cumulative Convertible Preferred Stock (the
"$5.00 Preferred") will be converted into common shares of the surviving company
in such merger or other transaction, or (2) holders of shares of the $4.20
Preferred and $5.00 Preferred could elect to receive in such merger or other
transaction for their shares of $4.20 Preferred and/or $5.00 Preferred a pro
rata share of (i) a cash amount, (ii) debt and/or other securities of the
Company or of a subsidiary of the Company, and/or (iii) a portion of any
recovery the Company receives from certain litigation. The foregoing or any
other transaction pursuant to which the Company or any other party issues cash
or debt or equity securities in exchange for or in consideration of, or the
purchase or redemption, directly or indirectly, by the Company or any other
party, of all or a substantial portion of the Old Avatex Common Stock, the $4.20
Preferred and the $5.00 Preferred, is referred to collectively herein as the
"Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it. We understand that the terms and
conditions of the Transaction have not been finalized. Our Opinion is
necessarily based on the latest available information as of the date of this
Opinion.
<PAGE>
The Board of Directors of
Avatex Corporation
May 6, 1999
Page 2
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's form 10-K for the fiscal year ended March 31,
1998, the Company's form 10-Q for the nine month period ending
December 31, 1998, and the Company's internal, unaudited results
through February 28, 1999, which the Company's management has
identified as the most current information available;
2. reviewed copies of the following agreements: Employment Agreements
and Amendments, Real Estate Appraisals, Certificate of Designation
of $5.00 Cumulative Preferred Stock, Certificate of Designation of
the $4.20 Cumulative Exchangeable Series A Preferred Stock;
3. reviewed the General Terms and Conditions of Settlement Between
Avatex Corp. and Certain Preferred Shareholders;
4. reviewed the Company's Draft Stockholders Agreement, the Draft
Amended and Restated Agreement And Plan of Merger, Draft Pledge and
Security Agreement, Draft Voting Agreement, Draft Warrant Agreement,
and Draft Promissory Note;
5. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
6. visited certain facilities and business offices of the Company;
7. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the period March 1999 to
May 2003;
8. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
9. reviewed other publicly available financial data for the Company and
certain publicly-held investments of the Company; and
10. conducted such other studies, analyses and investigations as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition,
<PAGE>
The Board of Directors of
Avatex Corporation
May 6, 1999
Page 3
business or prospects of the Company since the date of the most recent financial
statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the $4.20 Preferred shareholders, pursuant to
the Transaction, is within a reasonable range of fair value of the $4.20
Preferred; and the consideration to be received by the $5.00 Preferred
shareholders, pursuant to the Transaction, is within a reasonable range of fair
value of $5.00 Preferred.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE>
May 6, 1999
To The Board of Directors of
Avatex Corporation
Dear Directors:
We understand that Avatex Corporation (hereinafter the "Company") is considering
a merger with Xetava Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("Xetava"), or another transaction, pursuant to which
(x) shares of the Company's common stock, par value $5.00 per share (the "Old
Avatex Common Stock"), will be converted into common shares of the surviving
company in such merger or other transaction; and (y) (1) shares of the Company's
$4.20 Cumulative Exchangeable Series A Preferred Stock (the "$4.20 Preferred")
and shares of the Company's $5.00 Cumulative Convertible Preferred Stock (the
"$5.00 Preferred") will be converted into common shares of the surviving company
in such merger or other transaction, or (2) holders of shares of the $4.20
Preferred and $5.00 Preferred could elect to receive in such merger or other
transaction for their shares of $4.20 Preferred and/or $5.00 Preferred a pro
rata share of (i) a cash amount, (ii) debt and/or other securities of the
Company or of a subsidiary of the Company, and/or (iii) a portion of any
recovery the Company receives from certain litigation. The foregoing or any
other transaction pursuant to which the Company or any other party issues cash
or debt or equity securities in exchange for or in consideration of, or the
purchase or redemption, directly or indirectly, by the Company or any other
party, of all or a substantial portion of the Old Avatex Common Stock, the $4.20
Preferred and the $5.00 Preferred, is referred to collectively herein as the
"Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it. We understand that the terms and
conditions of the Transaction have not been finalized. Our Opinion is
necessarily based on the latest available information as of the date of this
Opinion.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's form 10-K for the fiscal year ended March 31,
1998, the Company's form 10-Q for the nine month period ending
December 31, 1998, and the Company's internal, unaudited results
through February 28, 1999, which the Company's management has
identified as the most current information available;
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 2
2. reviewed copies of the following agreements: Employment Agreements and
Amendments, Real Estate Appraisals, Certificate of Designation of
$5.00 Cumulative Preferred Stock, Certificate of Designation of the
$4.20 Cumulative Exchangeable Series A Preferred Stock;
3. reviewed the General Terms and Conditions of Settlement Between Avatex
Corp. and Certain Preferred Shareholders;
4. reviewed the Company's Draft Stockholders Agreement, the Draft Amended
and Restated Agreement And Plan of Merger, Draft Pledge and Security
Agreement, Draft Voting Agreement, Draft Warrant Agreement, and Draft
Promissory Note;
5. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
6. visited certain facilities and business offices of the Company;
7. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the period March 1999 to
May 2003;
8. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
9. reviewed other publicly available financial data for the Company and
certain publicly-held investments of the Company; and
10. conducted such other studies, analyses and investigations as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 3
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by public common stockholders of the Company,
pursuant to the Transaction, is fair to them from a financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE>
- --------------------------------------------------------------------------------
Supporting Material
- --------------------------------------------------------------------------------
<PAGE>
Confidential materials omitted and filed separately with the Securities and
Exchange Commission. Astericks denote ommissions.
- --------------------------------------------------------------------------------
Avatex Corporation
Summary of Current Balance Sheet Items
- --------------------------------------------------------------------------------
ASSUMPTION: 100% CASH ELECTION
-----------------------------------------------
Pre Deal Post Deal Management
Estimated Impact Of Estimated Estimated
Assets FMV Transaction FMV FMV
-----------------------------------------------
Total Liquid Assets 24,012 (17,650) 6,362 6,362
Total Receivables 2,544 -- 2,544 3,544
Total Inv. In Public Securities 57,204 -- 57,204 66,155
Total VC Investments 9,977 -- 9,977 9,593
Total Real Estate 11,000 -- 11,000 12,000
Total Other Assets 5,433 -- 5,433 5,433
-----------------------------------------------
Total Assets 110,169 (17,650) 92,519 103,087
Liabilities
Total Debt Obligations 9,226 34,000 43,226 43,226
Total Contingent Liabilities 19,804 -- 19,804 22,010
Total A/P & Accruals [**] -- [**] [**]
-----------------------------------------------
Total Obligations [**] 34,000 [**] [**]
-----------------------------------------------
NET EQUITY CUSHION [**] (51,650) [**] [**]
30
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
Solvency Analysis
<TABLE>
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
----------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Estimated
Book Value GAAP Value
At 12/31/98 2/28/99 At 7/31/99
----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 27,569 27,892 31,528
Cash Accounts 113 -- --
Grand Bank money market 1,251 -- --
Cash surrender value 1,026 1,076 1,484
Restricted Cash (Real Estate) 340 324 324
Cash Associated W/Real Estate 313 770 770
----------------------------------------
Total Liquid Assets 30,612 30,062 34,106
Receivables
Real Estate operating receivables 230 247 247
Other receivables parent company 75 44 44
Receivable from Nat Steel Corp. -- -- --
Note receivable from Shopko 2,500 2,500 3,500
Bernstein Receivable -- -- 3,035
Best Western sale -- -- --
----------------------------------------
Total Receivables 2,805 2,791 6,826
Investment In Public Securities Ownership Price As Of
------------------------ ----------------------
Carson Inc Stock 1,731.690 11.6% [**] 4/28/99 6,927 5,412 6,386
JW-Genesis Stock 80.000 1.5% $14.13 4/28/99 1,781 2,059 1,130
Phar-Mor Stock 4,704.033 38.4% [**] 4/28/99 23,877 23,802 23,520
Phar-Mor Warrants 91.902 N/A $0.750 4/28/99 75 70 69
Imagyn Med. Tech. Stock 1,914.827 4.9% $0.313 4/28/99 383 1,666 598
Imagyn Warrants -- -- --
----------------------------------------
Total Investment In Public Securities 33,043 33,009 31,703
Venture Capital Investments
RAS Service LP 27 31 --
RAS Holding 934 1,480 2,480
Chemlink Acquisition Co 2,807 2,726 3,016
Caring Technologies 1,490.462 $1.000 1,288 1,288 1,490
HPD Holdings Corp. 1,250 1,250 1,413
Dividends accrued on investments 166 163 --
Alumet Partnership -- -- --
Cyclone -- -- --
Ben Franklin -- -- --
AM Partners -- -- --
Emultek -- 44 44
Proscape Technologies 150 150 150
----------------------------------------
Total Venture Capital Investments 6,622 7,132 8,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 8,432 8,395 8,395
Best Western -- -- --
RIVA Properties 4,953 4,901 4,901
NRA Building (Marriott) 16,650 17,407 17,407
----------------------------------------
Total Real Estate 30,035 30,703 30,703
Other Assets
Pension Plans 10,535 10,779 10,779
PP&E (Parent) 133 126 126
Trust Assets 11 -- --
Prepaids 290 307 307
Real Estate deferred costs for debt, invent. 213 200 200
Intangibles (relating to real estate purchases) 720 703 703
Deferred debt issue costs (real estate) 787 783 783
Best Western franchise purchase 38 38 38
Litigation Settlement -- -- --
----------------------------------------
Total Other Assets 12,727 12,936 12,936
----------------------------------------
TOTAL ASSETS 115,844 116,633 124,868
========================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- --
Note Foxmeyer Bankruptcy Trustee (PIK) 8,835 8,944 9,226
Real Estate - RIVA (Non-Recourse) 5,163 5,151 5,151
Real Estate - Howard Johnson (Non-Recourse) 7,403 7,333 7,333
Real Estate - NRA Builiding (Non-Recourse) 13,002 13,008 13,008
New Line Of Credit
----------------------------------------
Total Debt Obligations 34,403 34,436 34,718
Contingent Liabilities
Environmental Claims [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Reserve for USHDI Disc. Ops. [**] [**] [**]
PBM accrued commission on Shopko note [**] [**] [**]
Directors' pension/Wilson/Thompson [**] [**] [**]
Retiree Healthcare (Total) [**] [**] [**]
Nonqualified Ret. Plans (Total) [**] [**] [**]
Reserve For O/S Permian LP units [**] [**] [**]
NAC Shut-down Reserves [**] [**] [**]
Natmin reserves [**] [**] [**]
National Intergroup Pension Liability [**] [**] [**]
Alumet Obligation [**] [**] [**]
Other Contingent Liabilities [**] [**] [**]
Tax On Built In Capital Gains [**] [**] [**]
----------------------------------------
Total Contingent Liabilities 11,577 11,423 11,207
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,173 1,281 1,303
Real Estate Accrued Payables 587 606 606
[**] [**] [**] [**]
Proxy-Annual report costs 87 99 99
Payroll 765 904 904
Accrued franchise taxes 78 78 78
[**] [**] [**] [**]
Audit accrual 134 87 87
Real Estate Accrued Liabilities 898 2,213 2,213
----------------------------------------
Total A/P & Accruals [**] [**] [**]
Total Obligations [**] [**] [**]
Net Equity Cushion [**] [**] [**]
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
---------------------------------------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Pre Deal
Less: Accounting FMV Estimated Impact Of
Real Estate Adjustments Adjustments FMV Transaction
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments (9,000) -- -- 22,528 (17,650)
Cash Accounts -- -- -- -- --
Grand Bank money market -- -- -- -- --
Cash surrender value -- -- -- 1,484 --
Restricted Cash (Real Estate) (324) -- -- -- --
Cash Associated W/Real Estate (770) -- -- -- --
---------------------------------------------------------------------
Total Liquid Assets (10,094) -- -- 24,012 (17,650)
Receivables
Real Estate operating receivables (247) -- -- -- --
Other receivables parent company -- -- -- 44 --
Receivable from Nat Steel Corp. -- -- -- -- --
Note receivable from Shopko -- -- (1,000) 2,500 --
Bernstein Receivable (3,035) -- -- -- --
Best Western sale -- -- -- -- --
---------------------------------------------------------------------
Total Receivables (3,282) -- (1,000) 2,544 --
Investment In Public Securities
Carson Inc Stock -- -- [**] [**] --
JW-Genesis Stock -- -- 0 1,130 --
Phar-Mor Stock -- -- [**] [**] --
Phar-Mor Warrants -- -- -- 69 --
Imagyn Med. Tech. Stock -- -- (150) 449 --
Imagyn Warrants -- -- -- -- --
---------------------------------------------------------------------
Total Investment In Public Securities -- -- 25,501 57,204 --
Venture Capital Investments
RAS Service LP -- -- -- -- --
RAS Holding -- -- -- 2,480 --
Chemlink Acquisition Co -- -- -- 3,016 --
Caring Technologies -- -- -- 1,490 --
HPD Holdings Corp. -- -- -- 1,413 --
Dividends accrued on investments -- -- -- -- --
Alumet Partnership -- -- 1,383 1,383 --
Cyclone -- -- -- -- --
Ben Franklin -- -- -- -- --
AM Partners -- -- -- -- --
Emultek 44
Proscape Technologies -- -- -- 150 --
--
---------------------------------------------------------------------
Total Venture Capital Investments -- -- 1,383 9,977 --
Real Estate
Howard Johnson (Includes Total FMV Adj.) (8,395) -- 11,000 11,000 --
Best Western -- -- -- -- --
RIVA Properties (4,901) -- -- -- --
NRA Building (Marriott) (17,407) -- -- -- --
---------------------------------------------------------------------
Total Real Estate (30,703) -- 11,000 11,000 --
Other Assets
Pension Plans (10,779) -- -- -- --
PP&E (Parent) -- -- -- 126 --
Trust Assets -- -- -- -- --
Prepaids -- -- -- 307 --
Real Estate deferred costs for debt, invent. (200) -- -- -- --
Intangibles (relating to real estate purchases) (703) -- -- -- --
Deferred debt issue costs (real estate) (783) -- -- -- --
Best Western franchise purchase (38) -- -- -- --
Litigation Settlement -- -- [**] [**] --
---------------------------------------------------------------------
Total Other Assets (12,503) -- [**] [**] --
---------------------------------------------------------------------
TOTAL ASSETS (56,582) -- 41,884 110,169 (17,650)
=====================================================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- -- -- -- 34,000
Note Foxmeyer Bankruptcy Trustee (PIK) -- -- -- 9,226 --
Real Estate - RIVA (Non-Recourse) (5,151) -- -- -- --
Real Estate - Howard Johnson (Non-Recourse) (7,333) -- -- -- --
Real Estate - NRA Builiding (Non-Recourse) (13,008) -- -- -- --
New Line Of Credit
---------------------------------------------------------------------
Total Debt Obligations (25,492) -- -- 9,226 34,000
Contingent Liabilities
Environmental Claims -- -- [**] [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- [**] [**] --
Reserve for USHDI Disc. Ops. -- -- [**] [**] --
PBM accrued commission on Shopko note -- -- -- [**] --
Directors' pension/Wilson/Thompson -- -- -- [**] --
Retiree Healthcare (Total) -- -- [**] [**] --
Nonqualified Ret. Plans (Total) -- -- -- [**] --
Reserve For O/S Permian LP units -- -- -- [**] --
NAC Shut-down Reserves -- -- [**] [**] --
Natmin reserves -- [**] -- -- --
National Intergroup Pension Liability -- -- [**] -- --
Alumet Obligation -- -- [**] -- --
Other Contingent Liabilities -- -- [**] [**] --
Tax On Built In Capital Gains -- -- -- -- --
---------------------------------------------------------------------
Total Contingent Liabilities -- (244) 8,841 19,804 --
Accounts Payable & Accruals
Outstanding checks and accounts payable -- -- -- 1,303 --
Real Estate Accrued Payables (606) -- -- -- --
[**] [**] [**] [**] [**] [**]
Proxy-Annual report costs -- -- -- 99 --
Payroll -- 879) -- 25 --
Accrued franchise taxes -- -- -- 78 --
[**] [**] [**] [**] [**] [**]
Audit accrual -- -- -- 87 --
Real Estate Accrued Liabilities (2,213) -- -- -- --
---------------------------------------------------------------------
Total A/P & Accruals (2,819) [**] [**] [**] --
Total Obligations (28,311) [**] [**] [**] 34,000
Net Equity Cushion (28,271) [**] [**] [**] (51,650)
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Post Deal Management
Estimated Estimated
FMV FMV
------------------------------
<S> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 4,878 4,878
Cash Accounts -- --
Grand Bank money market -- --
Cash surrender value 1,484 1,484
Restricted Cash (Real Estate) -- --
Cash Associated W/Real Estate -- --
------------------------------
Total Liquid Assets 6,362 6,362
Receivables
Real Estate operating receivables -- --
Other receivables parent company 44 44
Receivable from Nat Steel Corp. -- --
Note receivable from Shopko 2,500 3,500
Bernstein Receivable -- --
Best Western sale -- --
------------------------------
Total Receivables 2,544 3,544
Investment In Public Securities
Carson Inc Stock [**] [**]
JW-Genesis Stock 1,130 1,130
Phar-Mor Stock [**] [**]
Phar-Mor Warrants 69 69
Imagyn Med. Tech. Stock 449 598
Imagyn Warrants -- --
------------------------------
Total Investment In Public Securities 57,204 66,155
Venture Capital Investments
RAS Service LP -- --
RAS Holding 2,480 2,480
Chemlink Acquisition Co 3,016 3,016
Caring Technologies 1,490 1,490
HPD Holdings Corp. 1,413 1,413
Dividends accrued on investments -- --
Alumet Partnership 1,383 1,000
Cyclone -- --
Ben Franklin -- --
AM Partners -- --
Emultek 44 44
Proscape Technologies 150 150
------------------------------
Total Venture Capital Investments 9,977 9,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 11,000 12,000
Best Western -- --
RIVA Properties -- --
NRA Building (Marriott) -- --
------------------------------
Total Real Estate 11,000 12,000
Other Assets
Pension Plans -- --
PP&E (Parent) 126 126
Trust Assets -- --
Prepaids 307 307
Real Estate deferred costs for debt, invent. -- --
Intangibles (relating to real estate purchases) -- --
Deferred debt issue costs (real estate) -- --
Best Western franchise purchase -- --
Litigation Settlement [**] [**]
------------------------------
Total Other Assets [**] [**]
------------------------------
TOTAL ASSETS 92,519 103,087
==============================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs 34,000 34,000
Note Foxmeyer Bankruptcy Trustee (PIK) 9,226 9,226
Real Estate - RIVA (Non-Recourse) -- --
Real Estate - Howard Johnson (Non-Recourse) -- --
Real Estate - NRA Builiding (Non-Recourse) -- --
New Line Of Credit --
--
------------------------------
Total Debt Obligations 43,226 43,226
Contingent Liabilities
Environmental Claims [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Reserve for USHDI Disc. Ops. [**] [**]
PBM accrued commission on Shopko note [**]
Directors' pension/Wilson/Thompson [**] [**]
Retiree Healthcare (Total) [**] [**]
Nonqualified Ret. Plans (Total) [**] [**]
Reserve For O/S Permian LP units [**] [**]
NAC Shut-down Reserves [**] [**]
Natmin reserves -- --
National Intergroup Pension Liability -- --
Alumet Obligation -- --
Other Contingent Liabilities [**] [**]
Tax On Built In Capital Gains -- [**]
------------------------------
Total Contingent Liabilities 19,804 22,010
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,303 1,303
Real Estate Accrued Payables -- --
[**] [**] [**]
Proxy-Annual report costs 99 99
Payroll 25 25
Accrued franchise taxes 78 78
[**] [**] [**]
Audit accrual 87 87
Real Estate Accrued Liabilities -- --
------------------------------
Total A/P & Accruals [**] [**]
Total Obligations [**] [**]
Net Equity Cushion [**] [**]
</TABLE>
31
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
- --------------------------------------------------------------------------------
Avatex Corporation
Summary of Current Balance Sheet Items
- --------------------------------------------------------------------------------
ASSUMPTION: 80% CASH ELECTION
-----------------------------------------------
Pre Deal Post Deal Management
Estimated Impact Of Estimated Estimated
Assets FMV Transaction FMV FMV
-----------------------------------------------
Total Liquid Assets 24,012 (14,600) 9,412 9,412
Total Receivables 2,544 -- 2,544 3,544
Total Inv. In Public Securities 57,204 -- 57,204 66,155
Total VC Investments 9,977 -- 9,977 9,593
Total Real Estate 11,000 -- 11,000 12,000
Total Other Assets 5,433 -- 5,433 5,433
-----------------------------------------------
Total Assets 110,169 (14,600) 95,569 106,137
Liabilities
Total Debt Obligations 9,226 27,200 36,426 36,426
Total Contingent Liabilities 19,804 -- 19,804 22,010
Total A/P & Accruals [**] -- [**] [**]
-----------------------------------------------
Total Obligations [**] 27,200 [**] [**]
-----------------------------------------------
NET EQUITY CUSHION [**] (41,800) [**] [**]
32
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
Solvency Analysis
<TABLE>
<CAPTION>
ASSUMPTION: 80% CASH ELECTION
As of April 28, 1999
(in millions $, except shares and mkt. prices) Estimated
Book Value GAAP Value
At 12/31/98 2/28/99 At 7/31/99
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 27,569 27,892 31,528
Cash Accounts 113 -- --
Grand Bank money market 1,251 -- --
Cash surrender value 1,026 1,076 1,484
Restricted Cash (Real Estate) 340 324 324
Cash Associated W/Real Estate 313 770 770
Total Liquid Assets 30,612 30,062 34,106
Receivables
Real Estate operating receivables 230 247 247
Other receivables parent company 75 44 44
Receivable from Nat Steel Corp. -- -- --
Note receivable from Shopko 2,500 2,500 3,500
Bernstein Receivable -- -- 3,035
Best Western sale -- -- --
Total Receivables 2,805 2,791 6,826
Investment In Public Securities Ownership Price As Of
Carson Inc Stock 1,731.690 11.6% [$ **] 4/28/99 6,927 5,412 6,386
JW-Genesis Stock 80.000 1.5% $14.13 4/28/99 1,781 2,059 1,130
Phar-Mor Stock 4,704.033 38.4% [$ **] 4/28/99 23,877 23,802 23,520
Phar-Mor Warrants 91.902 N/A $0.750 4/28/99 75 70 69
Imagyn Med. Tech. Stock 1,914.827 4.9% $0.313 4/28/99 383 1,666 598
Imagyn Warrants -- -- --
Total Investment In Public Securities 33,043 33,009 31,703
Venture Capital Investments
RAS Service LP 27 31 --
RAS Holding 934 1,480 2,480
Chemlink Acquisition Co 2,807 2,726 3,016
Caring Technologies 1,490.462 $1.000 1,288 1,288 1,490
HPD Holdings Corp. 1,250 1,250 1,413
Dividends accrued on investments 166 163 --
Alumet Partnership -- -- --
Cyclone -- -- --
Ben Franklin -- -- --
AM Partners -- -- --
Emultek -- 44 44
Proscape Technologies 150 150 150
Total Venture Capital Investments 6,622 7,132 8,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 8,432 8,395 8,395
Best Western -- -- --
RIVA Properties 4,953 4,901 4,901
NRA Building (Marriott) 16,650 17,407 17,407
Total Real Estate 30,035 30,703 30,703
Other Assets
Pension Plans 10,535 10,779 10,779
PP&E (Parent) 133 126 126
Trust Assets 11 -- --
Prepaids 290 307 307
Real Estate deferred costs for debt, invent. 213 200 200
Intangibles (relating to real estate purchases) 720 703 703
Deferred debt issue costs (real estate) 787 783 783
Best Western franchise purchase 38 38 38
Litigation Settlement -- -- --
Total Other Assets 12,727 12,936 12,936
TOTAL ASSETS 115,844 116,633 124,868
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- --
Note Foxmeyer Bankruptcy Trustee (PIK) 8,835 8,944 9,226
Real Estate - RIVA (Non-Recourse) 5,163 5,151 5,151
Real Estate - Howard Johnson (Non-Recourse) 7,403 7,333 7,333
Real Estate - NRA Builiding (Non-Recourse) 13,002 13,008 13,008
New Line Of Credit
Total Debt Obligations 34,403 34,436 34,718
Contingent Liabilities
Environmental Claims [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] -- -- --
Reserve for USHDI Disc. Ops. [**] [**] [**]
PBM accrued commission on Shopko note [**] [**] [**]
Directors' pension/Wilson/Thompson [**] [**] [**]
Retiree Healthcare (Total) [**] [**] [**]
Nonqualified Ret. Plans (Total) [**] [**] [**]
Reserve For O/S Permian LP units [**] [**] [**]
NAC Shut-down Reserves [**] [**] [**]
Natmin reserves [**] [**] [**]
National Intergroup Pension Liability -- -- --
Alumet Obligation [**] [**] [**]
Other Contingent Liabilities -- -- --
Tax On Built In Capital Gains -- -- --
Total Contingent Liabilities 11,577 11,423 11,207
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,173 1,281 1,303
Real Estate Accrued Payables 587 606 606
[**] [**] [**] [**]
Proxy-Annual report costs 87 99 99
Payroll 765 904 904
Accrued franchise taxes 78 78 78
[**] [**] [**] [**]
Audit accrual 134 87 87
Real Estate Accrued Liabilities 898 2,213 2,213
Total A/P & Accruals [**] [**] [**]
Total Obligations [**] [**] [**]
Net Equity Cushion [**] [**] [**]
<CAPTION>
ASSUMPTION: 80% CASH ELECTION
As of April 28, 1999
(in millions $, except shares and mkt. prices) Pre Deal
Less: Accounting FMV Estimated Impact Of
Real Estate Adjustments Adjustments FMV Transaction
<S> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments (9,000) -- -- 22,528 (14,600)
Cash Accounts -- -- -- -- --
Grand Bank money market -- -- -- -- --
Cash surrender value -- -- -- 1,484 --
Restricted Cash (Real Estate) (324) -- -- -- --
Cash Associated W/Real Estate (770) -- -- -- --
Total Liquid Assets (10,094) -- -- 24,012 (14,600)
Receivables
Real Estate operating receivables (247) -- -- -- --
Other receivables parent company -- -- -- 44 --
Receivable from Nat Steel Corp. -- -- -- -- --
Note receivable from Shopko -- -- (1,000) 2,500 --
Bernstein Receivable (3,035) -- -- -- --
Best Western sale -- -- -- -- --
Total Receivables (3,282) -- (1,000) 2,544 --
Investment In Public Securities
Carson Inc Stock -- -- [**] [**] --
JW-Genesis Stock -- -- 0 1,130 --
Phar-Mor Stock -- -- [**] [**] --
Phar-Mor Warrants -- -- -- 69 --
Imagyn Med. Tech. Stock -- -- (150) 449 --
Imagyn Warrants -- -- -- -- --
Total Investment In Public Securities -- -- 25,501 57,204 --
Venture Capital Investments
RAS Service LP -- -- -- -- --
RAS Holding -- -- -- 2,480 --
Chemlink Acquisition Co -- -- -- 3,016 --
Caring Technologies -- -- -- 1,490 --
HPD Holdings Corp. -- -- -- 1,413 --
Dividends accrued on investments -- -- -- -- --
Alumet Partnership -- -- 1,383 1,383 --
Cyclone -- -- -- -- --
Ben Franklin -- -- -- -- --
AM Partners -- -- -- -- --
Emultek 44
Proscape Technologies -- -- -- 150 --
--
Total Venture Capital Investments -- -- 1,383 9,977 --
Real Estate
Howard Johnson (Includes Total FMV Adj.) (8,395) -- 11,000 11,000 --
Best Western -- -- -- -- --
RIVA Properties (4,901) -- -- -- --
NRA Building (Marriott) (17,407) -- -- -- --
Total Real Estate (30,703) -- 11,000 11,000 --
Other Assets
Pension Plans (10,779) -- -- -- --
PP&E (Parent) -- -- -- 126 --
Trust Assets -- -- -- -- --
Prepaids -- -- -- 307 --
Real Estate deferred costs for debt, invent. (200) -- -- -- --
Intangibles (relating to real estate purchases) (703) -- -- -- --
Deferred debt issue costs (real estate) (783) -- -- -- --
Best Western franchise purchase (38) -- -- -- --
Litigation Settlement -- -- [**] [**] --
Total Other Assets (12,503) -- [**] [**] --
TOTAL ASSETS (56,582) -- 41,884 110,169 (14,600)
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- -- -- -- 27,200
Note Foxmeyer Bankruptcy Trustee (PIK) -- -- -- 9,226 --
Real Estate - RIVA (Non-Recourse) (5,151) -- -- -- --
Real Estate - Howard Johnson (Non-Recourse) (7,333) -- -- -- --
Real Estate - NRA Builiding (Non-Recourse) (13,008) -- -- -- --
New Line Of Credit
Total Debt Obligations (25,492) -- -- 9,226 27,200
Contingent Liabilities
Environmental Claims -- -- [**] [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- [**] [**] --
Reserve for USHDI Disc. Ops. -- -- [**] [**] --
PBM accrued commission on Shopko note -- -- -- [**] --
Directors' pension/Wilson/Thompson -- -- -- [**] --
Retiree Healthcare (Total) -- -- [**] [**] --
Nonqualified Ret. Plans (Total) -- -- -- [**] --
Reserve For O/S Permian LP units -- -- -- [**] --
NAC Shut-down Reserves -- -- [**] [**] --
Natmin reserves -- [**] -- -- --
National Intergroup Pension Liability -- -- [**] -- --
Alumet Obligation -- -- [**] -- --
Other Contingent Liabilities -- -- [**] [**] --
Tax On Built In Capital Gains -- -- -- -- --
Total Contingent Liabilities -- (244) 8,841 19,804 --
Accounts Payable & Accruals
Outstanding checks and accounts payable -- -- -- 1,303 --
Real Estate Accrued Payables (606) -- -- -- --
[**] [**] [**] [**] [**] [**]
Proxy-Annual report costs -- -- -- 99 --
Payroll -- (879) -- 25 --
Accrued franchise taxes -- -- -- 78 --
[**] [**] [**] [**] [**] [**]
Audit accrual -- -- -- 87 --
Real Estate Accrued Liabilities (2,213) -- -- -- --
Total A/P & Accruals (2,819) [**] [**] [**] --
Total Obligations (28,311) [**] [**] [**] 27,200
Net Equity Cushion (28,271) [**] [**] [**] (41,800)
<CAPTION>
ASSUMPTION: 80% CASH ELECTION
As of April 28, 1999
(in millions $, except shares and mkt. prices) Post Deal Management
Estimated Estimated
FMV FMV
<S> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 7,928 7,928
Cash Accounts -- --
Grand Bank money market -- --
Cash surrender value 1,484 1,484
Restricted Cash (Real Estate) -- --
Cash Associated W/Real Estate -- --
Total Liquid Assets 9,412 9,412
Receivables
Real Estate operating receivables -- --
Other receivables parent company 44 44
Receivable from Nat Steel Corp. -- --
Note receivable from Shopko 2,500 3,500
Bernstein Receivable -- --
Best Western sale -- --
Total Receivables 2,544 3,544
Investment In Public Securities
Carson Inc Stock [**] [**]
JW-Genesis Stock 1,130 1,130
Phar-Mor Stock [**] [**]
Phar-Mor Warrants 69 69
Imagyn Med. Tech. Stock 449 598
Imagyn Warrants -- --
Total Investment In Public Securities 57,204 66,155
Venture Capital Investments
RAS Service LP -- --
RAS Holding 2,480 2,480
Chemlink Acquisition Co 3,016 3,016
Caring Technologies 1,490 1,490
HPD Holdings Corp. 1,413 1,413
Dividends accrued on investments -- --
Alumet Partnership 1,383 1,000
Cyclone -- --
Ben Franklin -- --
AM Partners -- --
Emultek 44 44
Proscape Technologies 150 150
Total Venture Capital Investments 9,977 9,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 11,000 12,000
Best Western -- --
RIVA Properties -- --
NRA Building (Marriott) -- --
Total Real Estate 11,000 12,000
Other Assets
Pension Plans -- --
PP&E (Parent) 126 126
Trust Assets -- --
Prepaids 307 307
Real Estate deferred costs for debt, invent. -- --
Intangibles (relating to real estate purchases) -- --
Deferred debt issue costs (real estate) -- --
Best Western franchise purchase -- --
Litigation Settlement [**] [**]
Total Other Assets [**] [**]
TOTAL ASSETS 95,569 106,137
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs 27,200 27,200
Note Foxmeyer Bankruptcy Trustee (PIK) 9,226 9,226
Real Estate - RIVA (Non-Recourse) -- --
Real Estate - Howard Johnson (Non-Recourse) -- --
Real Estate - NRA Builiding (Non-Recourse) -- --
New Line Of Credit --
--
Total Debt Obligations 36,426 36,426
Contingent Liabilities
Environmental Claims [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Reserve for USHDI Disc. Ops. [**] [**]
PBM accrued commission on Shopko note [**] [**]
Directors' pension/Wilson/Thompson [**] [**]
Retiree Healthcare (Total) [**] [**]
Nonqualified Ret. Plans (Total) [**] [**]
Reserve For O/S Permian LP units [**] [**]
NAC Shut-down Reserves [**] [**]
Natmin reserves -- --
National Intergroup Pension Liability -- --
Alumet Obligation -- --
Other Contingent Liabilities [**] [**]
Tax On Built In Capital Gains -- [**]
Total Contingent Liabilities 19,804 22,010
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,303 1,303
Real Estate Accrued Payables -- --
[**] [**] [**]
Proxy-Annual report costs 99 99
Payroll 25 25
Accrued franchise taxes 78 78
[**] [**] [**]
Audit accrual 87 87
Real Estate Accrued Liabilities -- --
Total A/P & Accruals [**] [**]
Total Obligations [**] [**]
Net Equity Cushion [**] [**]
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
Avatex Corporation
Summary of Current Balance Sheet Items
- --------------------------------------------------------------------------------
ASSUMPTION: 60% CASH ELECTION
-----------------------------------------------
Pre Deal Post Deal Management
Estimated Impact Of Estimated Estimated
Assets FMV Transaction FMV FMV
-----------------------------------------------
Total Liquid Assets 24,012 (11,550) 12,462 12,462
Total Receivables 2,544 -- 2,544 3,544
Total Inv. In Public Securities 57,204 -- 57,204 66,155
Total VC Investments 9,977 -- 9,977 9,593
Total Real Estate 11,000 -- 11,000 12,000
Total Other Assets 5,433 -- 5,433 5,433
----------------------------------------------
Total Assets 110,169 (11,550) 98,619 109,187
Liabilities
Total Debt Obligations 9,226 20,400 29,626 29,626
Total Contingent Liabilities 19,804 -- 19,804 22,010
Total A/P & Accruals [**] -- [**] [**]
----------------------------------------------
Total Obligations [**] 20,400 [**] [**]
----------------------------------------------
NET EQUITY CUSHION [**] (31,950) [**] [**]
34
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
Solvency Analysis
<TABLE>
<CAPTION>
ASSUMPTION: 60% CASH ELECTION
----------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Estimated
Book Value GAAP Value
At 12/31/98 2/28/99 At 7/31/99
----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 27,569 27,892 31,528
Cash Accounts 113 -- --
Grand Bank money market 1,251 -- --
Cash surrender value 1,026 1,076 1,484
Restricted Cash (Real Estate) 340 324 324
Cash Associated W/Real Estate 313 770 770
----------------------------------------
Total Liquid Assets 30,612 30,062 34,106
Receivables
Real Estate operating receivables 230 247 247
Other receivables parent company 75 44 44
Receivable from Nat Steel Corp. -- -- --
Note receivable from Shopko 2,500 2,500 3,500
Bernstein Receivable -- -- 3,035
Best Western sale -- -- --
----------------------------------------
Total Receivables 2,805 2,791 6,826
Investment In Public Securities Ownership Price As Of
------------------------ ----------------------
Carson Inc Stock 1,731.690 11.6% $ [**] 4/28/99 6,927 5,412 6,386
JW-Genesis Stock 80.000 1.5% $14.13 4/28/99 1,781 2,059 1,130
Phar-Mor Stock 4,704.033 38.4% $ [**] 4/28/99 23,877 23,802 23,520
Phar-Mor Warrants 91.902 N/A $0.750 4/28/99 75 70 69
Imagyn Med. Tech. Stock 1,914.827 4.9% $0.313 4/28/99 383 1,666 598
Imagyn Warrants -- -- --
----------------------------------------
Total Investment In Public Securities 33,043 33,009 31,703
Venture Capital Investments
RAS Service LP 27 31 --
RAS Holding 934 1,480 2,480
Chemlink Acquisition Co 2,807 2,726 3,016
Caring Technologies 1,490.462 $1.000 1,288 1,288 1,490
HPD Holdings Corp. 1,250 1,250 1,413
Dividends accrued on investments 166 163 --
Alumet Partnership -- -- --
Cyclone -- -- --
Ben Franklin -- -- --
AM Partners -- -- --
Emultek -- 44 44
Proscape Technologies 150 150 150
----------------------------------------
Total Venture Capital Investments 6,622 7,132 8,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 8,432 8,395 8,395
Best Western -- -- --
RIVA Properties 4,953 4,901 4,901
NRA Building (Marriott) 16,650 17,407 17,407
----------------------------------------
Total Real Estate 30,035 30,703 30,703
Other Assets
Pension Plans 10,535 10,779 10,779
PP&E (Parent) 133 126 126
Trust Assets 11 -- --
Prepaids 290 307 307
Real Estate deferred costs for debt, invent. 213 200 200
Intangibles (relating to real estate purchases) 720 703 703
Deferred debt issue costs (real estate) 787 783 783
Best Western franchise purchase 38 38 38
Litigation Settlement -- -- --
----------------------------------------
Total Other Assets 12,727 12,936 12,936
----------------------------------------
TOTAL ASSETS 115,844 116,633 124,868
========================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- --
Note Foxmeyer Bankruptcy Trustee (PIK) 8,835 8,944 9,226
Real Estate - RIVA (Non-Recourse) 5,163 5,151 5,151
Real Estate - Howard Johnson (Non-Recourse) 7,403 7,333 7,333
Real Estate - NRA Builiding (Non-Recourse) 13,002 13,008 13,008
New Line Of Credit
----------------------------------------
Total Debt Obligations 34,403 34,436 34,718
Contingent Liabilities
Environmental Claims [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] -- -- --
Reserve for USHDI Disc. Ops. [**] [**] [**]
PBM accrued commission on Shopko note [**] [**] [**]
Directors' pension/Wilson/Thompson [**] [**] [**]
Retiree Healthcare (Total) [**] [**] [**]
Nonqualified Ret. Plans (Total) [**] [**] [**]
Reserve For O/S Permian LP units [**] [**] [**]
NAC Shut-down Reserves [**] [**] [**]
Natmin reserves [**] [**] [**]
National Intergroup Pension Liability -- -- --
Alumet Obligation [**] [**] [**]
Other Contingent Liabilities -- -- --
Tax On Built In Capital Gains -- -- --
----------------------------------------
Total Contingent Liabilities 11,577 11,423 11,207
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,173 1,281 1,303
Real Estate Accrued Payables 587 606 606
[**] [**] [**] [**]
Proxy-Annual report costs 87 99 99
Payroll 765 904 904
Accrued franchise taxes 78 78 78
[**] [**] [**] [**]
Audit accrual 134 87 87
Real Estate Accrued Liabilities 898 2,213 2,213
----------------------------------------
Total A/P & Accruals [**] [**] [**]
Total Obligations [**] [**] [**]
Net Equity Cushion [**] [**] [**]
<CAPTION>
ASSUMPTION: 60% CASH ELECTION
---------------------------------------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Pre Deal
Less: Accounting FMV Estimated Impact Of
Real Estate Adjustments Adjustments FMV Transaction
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments (9,000) -- -- 22,528 (11,550)
Cash Accounts -- -- -- -- --
Grand Bank money market -- -- -- -- --
Cash surrender value -- -- -- 1,484 --
Restricted Cash (Real Estate) (324) -- -- -- --
Cash Associated W/Real Estate (770) -- -- -- --
---------------------------------------------------------------------
Total Liquid Assets (10,094) -- -- 24,012 (11,550)
Receivables
Real Estate operating receivables (247) -- -- -- --
Other receivables parent company -- -- -- 44 --
Receivable from Nat Steel Corp. -- -- -- -- --
Note receivable from Shopko -- -- (1,000) 2,500 --
Bernstein Receivable (3,035) -- -- -- --
Best Western sale -- -- -- -- --
---------------------------------------------------------------------
Total Receivables (3,282) -- (1,000) 2,544 --
Investment In Public Securities
Carson Inc Stock -- -- [**] [**] --
JW-Genesis Stock -- -- 0 1,130 --
Phar-Mor Stock -- -- [**] [**] --
Phar-Mor Warrants -- -- -- 69 --
Imagyn Med. Tech. Stock -- -- (150) 449 --
Imagyn Warrants -- -- -- -- --
---------------------------------------------------------------------
Total Investment In Public Securities -- -- 25,501 57,204 --
Venture Capital Investments
RAS Service LP -- -- -- -- --
RAS Holding -- -- -- 2,480 --
Chemlink Acquisition Co -- -- -- 3,016 --
Caring Technologies -- -- -- 1,490 --
HPD Holdings Corp. -- -- -- 1,413 --
Dividends accrued on investments -- -- -- -- --
Alumet Partnership -- -- 1,383 1,383 --
Cyclone -- -- -- -- --
Ben Franklin -- -- -- -- --
AM Partners -- -- -- -- --
Emultek 44
Proscape Technologies -- -- -- 150 --
--
---------------------------------------------------------------------
Total Venture Capital Investments -- -- 1,383 9,977 --
Real Estate
Howard Johnson (Includes Total FMV Adj.) (8,395) -- 11,000 11,000 --
Best Western -- -- -- -- --
RIVA Properties (4,901) -- -- -- --
NRA Building (Marriott) (17,407) -- -- -- --
---------------------------------------------------------------------
Total Real Estate (30,703) -- 11,000 11,000 --
Other Assets
Pension Plans (10,779) -- -- -- --
PP&E (Parent) -- -- -- 126 --
Trust Assets -- -- -- -- --
Prepaids -- -- -- 307 --
Real Estate deferred costs for debt, invent. (200) -- -- -- --
Intangibles (relating to real estate purchases) (703) -- -- -- --
Deferred debt issue costs (real estate) (783) -- -- -- --
Best Western franchise purchase (38) -- -- -- --
Litigation Settlement -- -- [**] [**] --
---------------------------------------------------------------------
Total Other Assets (12,503) -- [**] [**] --
---------------------------------------------------------------------
TOTAL ASSETS (56,582) -- 41,884 110,169 (11,550)
=====================================================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- -- -- -- 20,400
Note Foxmeyer Bankruptcy Trustee (PIK) -- -- -- 9,226 --
Real Estate - RIVA (Non-Recourse) (5,151) -- -- -- --
Real Estate - Howard Johnson (Non-Recourse) (7,333) -- -- -- --
Real Estate - NRA Builiding (Non-Recourse) (13,008) -- -- -- --
New Line Of Credit
---------------------------------------------------------------------
Total Debt Obligations (25,492) -- -- 9,226 20,400
Contingent Liabilities
Environmental Claims -- -- [**] [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- [**] [**] --
Reserve for USHDI Disc. Ops. -- -- [**] [**] --
PBM accrued commission on Shopko note -- -- -- [**] --
Directors' pension/Wilson/Thompson -- -- -- [**] --
Retiree Healthcare (Total) -- -- [**] [**] --
Nonqualified Ret. Plans (Total) -- -- -- [**] --
Reserve For O/S Permian LP units -- -- -- [**] --
NAC Shut-down Reserves -- -- [**] [**] --
Natmin reserves -- [**] -- -- --
National Intergroup Pension Liability -- -- [**] -- --
Alumet Obligation -- -- [**] -- --
Other Contingent Liabilities -- -- [**] [**] --
Tax On Built In Capital Gains -- -- -- -- --
---------------------------------------------------------------------
Total Contingent Liabilities -- (244) 8,841 19,804 --
Accounts Payable & Accruals
Outstanding checks and accounts payable -- -- -- 1,303 --
Real Estate Accrued Payables (606) -- -- -- --
[**] [**] [**] [**] [**] [**]
Proxy-Annual report costs -- -- -- 99 --
Payroll -- (879) -- 25 --
Accrued franchise taxes -- -- -- 78 --
[**] [**] [**] [**] [**] [**]
Audit accrual -- -- -- 87 --
Real Estate Accrued Liabilities (2,213) -- -- -- --
---------------------------------------------------------------------
Total A/P & Accruals (2,819) [**] [**] [**] --
Total Obligations (28,311) [**] [**] [**] 20,400
Net Equity Cushion (28,271) [**] [**] [**] (31,952)
<CAPTION>
ASSUMPTION: 60% CASH ELECTION
------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Post Deal Management
Estimated Estimated
FMV FMV
------------------------------
<S> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 10,978 10,978
Cash Accounts -- --
Grand Bank money market -- --
Cash surrender value 1,484 1,484
Restricted Cash (Real Estate) -- --
Cash Associated W/Real Estate -- --
------------------------------
Total Liquid Assets 12,462 12,462
Receivables
Real Estate operating receivables -- --
Other receivables parent company 44 44
Receivable from Nat Steel Corp. -- --
Note receivable from Shopko 2,500 3,500
Bernstein Receivable -- --
Best Western sale -- --
------------------------------
Total Receivables 2,544 3,544
Investment In Public Securities
Carson Inc Stock [**] [**]
JW-Genesis Stock 1,130 1,130
Phar-Mor Stock [**] [**]
Phar-Mor Warrants 69 69
Imagyn Med. Tech. Stock 449 598
Imagyn Warrants -- --
------------------------------
Total Investment In Public Securities 57,204 66,155
Venture Capital Investments
RAS Service LP -- --
RAS Holding 2,480 2,480
Chemlink Acquisition Co 3,016 3,016
Caring Technologies 1,490 1,490
HPD Holdings Corp. 1,413 1,413
Dividends accrued on investments -- --
Alumet Partnership 1,383 1,000
Cyclone -- --
Ben Franklin -- --
AM Partners -- --
Emultek 44 44
Proscape Technologies 150 150
------------------------------
Total Venture Capital Investments 9,977 9,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 11,000 12,000
Best Western -- --
RIVA Properties -- --
NRA Building (Marriott) -- --
------------------------------
Total Real Estate 11,000 12,000
Other Assets
Pension Plans -- --
PP&E (Parent) 126 126
Trust Assets -- --
Prepaids 307 307
Real Estate deferred costs for debt, invent. -- --
Intangibles (relating to real estate purchases) -- --
Deferred debt issue costs (real estate) -- --
Best Western franchise purchase -- --
Litigation Settlement [**] [**]
------------------------------
Total Other Assets [**] [**]
------------------------------
TOTAL ASSETS 98,619 109,187
==============================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs 20,400 20,400
Note Foxmeyer Bankruptcy Trustee (PIK) 9,226 9,226
Real Estate - RIVA (Non-Recourse) -- --
Real Estate - Howard Johnson (Non-Recourse) -- --
Real Estate - NRA Builiding (Non-Recourse) -- --
New Line Of Credit -- --
--
------------------------------
Total Debt Obligations 29,626 29,626
Contingent Liabilities
Environmental Claims [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Reserve for USHDI Disc. Ops. [**] [**]
PBM accrued commission on Shopko note [**] [**]
Directors' pension/Wilson/Thompson [**] [**]
Retiree Healthcare (Total) [**] [**]
Nonqualified Ret. Plans (Total) [**] [**]
Reserve For O/S Permian LP units [**] [**]
NAC Shut-down Reserves [**] [**]
Natmin reserves -- --
National Intergroup Pension Liability -- --
Alumet Obligation -- --
Other Contingent Liabilities [**] [**]
Tax On Built In Capital Gains -- [**]
------------------------------
Total Contingent Liabilities 19,804 22,010
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,303 1,303
Real Estate Accrued Payables -- --
[**] [**] [**]
Proxy-Annual report costs 99 99
Payroll 25 25
Accrued franchise taxes 78 78
[**] [**] [**]
Audit accrual 87 87
Real Estate Accrued Liabilities -- --
------------------------------
Total A/P & Accruals [**] [**]
Total Obligations [**] [**]
Net Equity Cushion [**] [**]
</TABLE>
- --------------------------------------------------------------------------------
35
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
- --------------------------------------------------------------------------------
Phar-Mor, Inc.
Valuation Summary
- --------------------------------------------------------------------------------
Avatex Ownership
Shares 4,704,033
Ownership 38.4%
HLHZ Value/Share $[**]
-----------
Value of Avatex Holdings $[**]
Median M&A Control Premium 20.0%
Minority Avatex Interest
-------------------------------
Current Market Price (4/28/99) $ 5.00 $ [**]
Shares Outstanding 12.36 12.36
--------- ---------
61.80 [**]
Add: Minority Interest 0.54 0.54
Less: Cash & Other Investments (40.37) (40.37)
Add: Interest Bearing Debt $ 136.22 $ 136.22
--------- ---------
Indicated Enterprise Value $ 158.19 $ [**]
Revenue $1,118.71 $1,118.71
EBITDA $ 44.35 $ 44.35
Assets $ 354.38 $ 354.38
Avatex Market Implied
Multiples Multiples
------------- ---------
EV/Revenue 0.14 0.19
EV/EBITDA 3.6 4.7
EV/Assets 0.45 0.59
Avatex Indication @
Market Capitalization Range Median Low $ 12.07
------------------ -------------------
EV/Revenue 1.07 0.20 0.22
EV/EBITDA 12.0 8.0 5.6
EV/Assets 1.58 0.76 0.70
Avatex Indication @
M&A Multiple Range Median Low $ 11.44
------------------ -------------------
EV/Revenue 0.50 0.18 0.22
EV/EBITDA 10.7 6.7 5.4
EV/Assets 1.31 0.61 0.68
Observations
1) Based on an comparative basis, Phar-Mor appears underpriced
2) HLHZ priced Avatex's 38% block of Phar-Mor at a premium over market price
(based on control elements) but at a discount to M&A and Comparable
Publicly Traded Company analysis.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
Confidential Materials omitted and filed separately with the Securities and
Exchange Commision. Asterisks denote omissions.
36
<PAGE>
Avatex Corp.
Exhibit 1
Valuation Date 4/28/99
Run Date 7/16/99
Comparable Company Financial Analysis
- --------------------------------------------------------------------------------
($Millions, Except Per Share Data)
<TABLE>
<CAPTION>
DRUG
DUANE EMPORIUM LONGS DRUG RITE AID
CVS CORP READE INC INC STORES INC CORP
-------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Ticker Symbol cvs drd demp ldg rad
Exchange NYSE NYSE NASDAQ NYSE NYSE
Fiscal Year End 12/1998 12/1998 02/1998 01/1999 02/1998
Latest Financial Information 12/1998 12/1998 11/1998 01/1999 11/1998
Closing Price as of Valuation Date $48.44 $26.81 $7.38 $34.31 $23.88
20-Day Average Stock Price $46.07 $26.68 $6.57 $31.96 $24.29
52 Week Price Range
High $58.38 $45.00 $9.56 $44.50 $51.13
Low $33.06 $21.88 $3.19 $26.00 $21.00
52 Week Return 36.9% 19.5% 71.0% 22.5% -22.4%
Diluted Shares Outstanding 405.200 17.508 13.180 38.707 283.711
Closing Price as of Valuation Date $48.44 $26.81 $7.38 $34.31 $23.88
Market Value of Equity (MVE) $19,626.9 $469.4 $97.2 $1,328.1 $6,773.6
plus: Total Debt (book) 1,061.4 311.0 69.4 26.0 3,417.3
less: Converted Debt -- -- -- -- 18.0
plus: Preferred Stock Redemption Value 280.0 -- -- -- --
plus: Minority Interest -- -- -- -- --
less: Converted Preferred -- -- -- -- --
less: Cash & ST Investments (book) 180.8 0.9 0.6 15.0 97.8
---------------------------------------------------------------------------
Enterprise Value $20,787.5 $779.5 $166.0 $1,339.2 $10,075.1
LTM EPS $1.18 $1.07 $0.05 $1.72 $1.33
NTM EPS $1.59 $0.94 #N/A $1.88 $1.56
NFY EPS $1.48 $0.75 #N/A $1.82 $1.51
NFY + 1 EPS $1.74 $1.23 #N/A $2.02 $1.82
Annual Dividend Yield 0.5% 0.0% 0.0% 1.6% 1.5%
Return on Equity 19.4% -73.2% 1.2% 10.9% 13.2%
Return on Assets 7.7% 5.5% 0.3% 6.8% 4.9%
Return on Average Invested Capital 19.8% 33.6% 3.5% 10.2% 11.7%
Valuation Multiples
Price to:
LTM EPS 41.2 x 25.0 x 157.2 x 19.9 x 17.9 x
52 Week High/LTM EPS 49.6 x 41.9 x 203.8 x 25.8 x 38.4 x
52 Week Low/LTM EPS 28.1 x 20.4 x 67.9 x 15.1 x 15.8 x
NTM EPS 30.6 x 28.4 x #N/A 18.2 x 15.3 x
NFY EPS 32.7 x 35.8 x #N/A 18.9 x 15.8 x
NFY + 1 EPS 27.8 x 21.8 x #N/A 17.0 x 13.1 x
Enterprise Value to:
LTM Revenue 1.36 x 1.33 x 0.20 x 0.41 x 0.82 x
LTM EBITDA 17.5 x 12.7 x 11.3 x 8.0 x 9.3 x
LTM EBIT 22.1 x 16.9 x 30.4 x 11.5 x 12.6 x
NTM EBITDA 14.8 x 11.3 x #N/A 7.7 x 8.5 x
NTM EBIT 18.0 x 14.7 x #N/A 10.9 x 11.2 x
<CAPTION>
WALGREEN PHAR-MOR
CO INC
-------- --------
<S> <C> <C>
Ticker Symbol wag pmor
Exchange NYSE NASDAQ
Fiscal Year End 08/1998 06/1998
Latest Financial Information 02/01/99 12/1998
Closing Price as of Valuation Date $27.50 $5.00
20-Day Average Stock Price $27.22 $5.12
52 Week Price Range
High $33.94 $11.25
Low $16.34 $4.19
52 Week Return 66.7% -51.2%
Diluted Shares Outstanding 1,013.600 12.362
Closing Price as of Valuation Date $27.50 $5.00
Market Value of Equity (MVE) $27,874.0 $61.8
plus: Total Debt (book) -- 136.2
less: Converted Debt -- --
plus: Preferred Stock Redemption Value -- --
plus: Minority Interest -- 0.5
less: Converted Preferred -- --
less: Cash & ST Investments (book) 263.6 40.4
------------------------
Enterprise Value $27,610.4 $158.2
LTM EPS $0.55 $2.53
NTM EPS $0.67 $0.52
NFY EPS $0.60 $0.28
NFY + 1 EPS $0.70 $0.55
Annual Dividend Yield 0.4% 0.0%
Return on Equity 19.6% 37.1%
Return on Assets 11.3% 8.7%
Return on Average Invested Capital 19.6% 55.9%
<CAPTION>
Valuation Multiples
High Low Median
------- ------ ------
<S> <C> <C> <C> <C> <C>
Price to:
LTM EPS 49.7 x 2.0 x 157.2 x 2.0 x 25.0 x
52 Week High/LTM EPS 61.4 x 4.4 x 203.8 x 4.4 x 41.9 x
52 Week Low/LTM EPS 29.5 x 1.7 x 67.9 x 1.7 x 20.4 x
NTM EPS 40.8 x 9.5 x 40.8 x 9.5 x 23.3 x
NFY EPS 45.8 x 17.9 x 45.8 x 15.8 x 25.8 x
NFY + 1 EPS 39.3 x 9.1 x 39.3 x 9.1 x 19.4 x
Enterprise Value to:
LTM Revenue 1.68 x 0.14 x 1.68 x 0.14 x 0.82 x
LTM EBITDA 25.1 x 3.6 x 25.1 x 3.6 x 11.3 x
LTM EBIT 30.1 x 7.3 x 30.4 x 7.3 x 16.9 x
NTM EBITDA 21.0 x 3.2 x 21.0 x 3.2 x 9.9 x
NTM EBIT 24.3 x 5.9 x 24.3 x 5.9 x 12.9 x
</TABLE>
<PAGE>
Phar-Mor, Inc.
Market Multiple Approach
- --------------------------------------------------------------------------------
($000,000s Omitted)
<TABLE>
<CAPTION>
Indicated
Multiple Range Total
Representative -------------------------- Selected Invested
Debt-free Approach Level High Low Median Multiple Capital
- ------------------ ---------------------------------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
EV/Revenues
LTM $1,118.71 1.68 0.20 1.07 0.20 x $223.740
EV/EBITDA
LTM $44.36 25.1 8.0 12.0 6.00 x $266.130
EV/Assets
LTM $314.01 5.36 0.76 1.58 0.60 x $188.410
INDICATED ENTERPRISE VALUE $245.641
LESS: INTEREST BEARING DEBT ($136.224)
INDICATED EQUITY VALUE $109.417
---------
ADD: CASH & OTHER INVESTMENT ASSETS $40.366
LESS: MINORITY INTEREST ($0.535)
CONCLUDED MARKETABLE MINORITY EQUITY VALUE $149.248
---------
TOTAL SHARES OUTSTANDING (MM) $12.36
PRICE PER SHARE (MINORITY INTEREST) $12.07
</TABLE>
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
37
<PAGE>
Phar-Mor, Inc.
Comparative Merger & Acquisition Analysis
- --------------------------------------------------------------------------------
($000,000s Omitted)
<TABLE>
<CAPTION>
Multiple Range
Representative ----------------------- Selected Indicated
Debt-Free Approach Level High Low Median Multiple Value
- ------------------ -------------- ----------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
LTM Revenues $1,113.930 6.44 x 0.18 x 0.50 x 0.18 x $195.147
LTM EBITDA $41.610 22.5 x 6.7 x 10.7 x 6.00 x $249.660
LTM Assets $292.670 4.56 x 0.61 x 1.31 x 0.61 x $177.476
INDICATED CONTROL ENTERPRISE VALUE $237.796
LESS: INTEREST BEARING DEBT ($136.224)
---------
INDICATED CONTROL EQUITY VALUE $101.572
ADD: CASH & OTHER INVESTMENTS $40.366
LESS: MINORITY INTEREST ($0.535)
---------
CONCLUDED MARKETABLE CONTROLLING INTEREST VALUE $141.40
=========
TOTAL SHARES OUTSTANDING 12.36
PRICE PER SHARE (CONTROLLING INTEREST) $ 11.44
</TABLE>
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
38
<PAGE>
Avatex Corp.
Transaction Summary Analysis: Phar-Mor
Exhibit 6
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Transaction Summaries:
Target Companies: Pharmhouse Corp. Genovese Drug Arbor Drugs, Inc.
Stores, Inc.
<S> <C> <C> <C>
Revenue Size (Millions): $189,192 $815,454 $1,024,110
Effective Date of Transaction: 3/16/99 3/02/99 3/31/98
Acquiror: Phar-Mor, Inc. J.C. Penney Co. CVS Corp.
Control Premium: 156.0% -3.4% 18.6%
Transaction Multiples:
EV/EBIT DF* 21.2 24.9
EV/EBITDA DF* 11.2 19.4
EV/Revenue 0.18 0.49 1.43
EV/Assets 0.61 1.57 4.56
Performance Measures:
EBIT ROS -2.4% 2.3% 5.7%
EBITDA ROS -1.0% 4.3% 7.3%
EBIT/Assets -8.4% 7.4% 18.4%
<CAPTION>
Transaction Summaries:
Target Companies: Eckerd Corp. Revco D. S. Inc. Thrifty Payless
Holdings
<S> <C> <C> <C>
Revenue Size (Millions): $5,376,221 $5,575,300 $4,798,900
Effective Date of Transaction: 2/27/97 5/27/97 12/12/96
Acquiror: J.C. Penney Co. CVS Corp. Rite Aid Corp.
Control Premium: 23.5% 12.5% 41.2%
Transaction Multiples:
EV/EBIT 14.6 15.9 9.0
EV/EBITDA 10.2 10.7 6.7
EV/Revenue 0.58 0.68 0.36
EV/Assets 1.72 1.34 0.83
Performance Measures:
EBIT ROS 4.0% 4.3% 4.0%
EBITDA ROS 5.7% 6.4% 5.4%
EBIT/Assets 11.8% 8.5% 9.2%
</TABLE>
* Excluded from range calculation.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
39
<PAGE>
Avatex Corp.
Transaction Summary Analysis: Phar-Mor
Exhibit 6 (Continued)
- --------------------------------------------------------------------------------
<TABLE>
Transaction Summaries:
Target Companies: Big B, Inc. Fay's Inc. Medicine Shoppe Perry Drug Stores,
International, Inc. Inc.
<S> <C> <C> <C> <C>
Revenue Size (Millions): $778,498 $1,003,469 $53,827 $743,778
Effective Date of Transaction: 10/28/96 10/11/96 11/13/95 1/30/95
Acquiror: Revco D.S., Inc. J.C. Penney Cardinal Health, Rite Aid Corp.
Company, Inc. Inc.
Control Premium: 56.8% 28.8% 21.3% 44.3%
Transaction Multiples:
EV/EBIT 116.7* 17.9 14.4 18.0
EV/EBITDA 22.5 10.2 14.0 10.9
EV/Revenue 0.51 0.34 6.44 0.30
EV/Assets 1.24 1.27 4.00 0.90
Performance Measures:
EBIT ROS 0.4% 1.9% 44.7% 1.7%
EBITDA ROS 2.2% 3.4% 45.9% 2.7%
EBIT/Assets 1.1% 7.1% 27.8% 5.0%
<CAPTION>
Transaction Summaries:
Range of Pricing Evidence
Low High Median Mean
-------------------------------------------
<S> <C> <C> <C> <C>
Revenue Size (Millions): 53.827 5,575.300 909.462 2,035.875
Control Premium: -3.4% 156.0% 26.1% 39.9%
Transaction Multiples:
EV/EBIT 9.0 24.9 15.3 28.1
EV/EBITDA 6.7 22.5 10.7 12.9
EV/Revenue 0.18 6.44 0.50 1.13
EV/Assets 0.61 4.56 1.31 1.80
Performance Measures:
EBIT ROS -2.4% 44.7% 3.1% 6.7%
EBITDA ROS -1.0% 45.9% 4.9% 8.2%
EBIT/Assets -8.4% 27.8% 7.9% 8.8%
-------------------------------------------
</TABLE>
* Excluded from range calculation.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
40
<PAGE>
Avatex Corporation
Minority Interest Valuation Range
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Minority Interest Discount
15.0% 17.5% 20.0% 22.5% 25.0% 27.5% 30.0% 32.5% 35.0%
----------------------------------------------------------------------
Controlling
Interest Indication
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 70,000 59,500 57,750 56,000 54,250 52,500 50,750 49,000 47,250 45,500
---------------------------------------
$ 75,000 63,750 61,875 60,000 58,125 56,250 54,375 52,500 50,625 48,750
---------------------------------------
$ 80,000 68,000 66,000 64,000 62,000 60,000 58,000 56,000 54,000 52,000
- ----------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Avatex Corporation
Minority Interest Discount Summary
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Premium/Discount from Net Asset Value
-------------------------------------
Low High Median Average
------------------------------------------------
<S> <C> <C> <C> <C>
Closed-End Funds (Regulated Investment Companies)
Closed-End Equity Funds (General & Specialized) -24.7% 20.3% -10.2% -8.4%
Closed-End Funds With Market Value of Assets < $200 Million -24.7% 20.3% -15.9% -10.6%
Deregulated Investment Companies
Real Silk Hosiery Mills, Inc. (1984-1988) -23.8% -34.4% -25.0% -27.9%
Baldwin Securities, Inc. N/A N/A N/A N/A
Master Limited Partnership
LP Secondary Market Discounts [a] N/A N/A N/A -44.0%
Publicly Registered Limited Partnership Interests [b] -36.6% [c] -69.1% [d] -43.1% [e] -49.6%
</TABLE>
[a] Mark S. Thompson and Eric S. Spunt, "The Widespread Overvaluation of
Fractional Ownership Positions," Trusts & Estates, June 1993, p. 63,
citing Partnership Profiles, Inc., "LP Secondary Market Discounts How
Much?" The Perspective, May/June 1992, pp. 1-2.
[b] The publicly registered limited partnership interests information on
average discount from NAV is taken from a report in the Business Valuation
Review written by Spencer Jeffries of Partnership Profiles, Inc. There are
three types of partnerships listed: Categories A, B and C.
[c] Category A, these are limited partnerships in which the general partners
have a direct relationship with their investors.
[d] Category C, general partners have very little incentive to operate the
partnership in the best interest of the limited partners.
[e] Category B, the general partner has no direct relationship with the
limited partnership.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
42
<PAGE>
AVATEX Corp.
Closed-End Fund Study
Funds with Market Value of Assets < $200 million
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Net
Asset Market Premium/ 52 Week 3 Year
Ticker Name Exchange Value Price Discount Return Return
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CREN Corp Renaissance Nasdaq 9.27 7.06 -23.8% 20.2% -8.3%
EGX Engex American 10.05 8.38 -16.7% -9.4% -11.1%
RIF C&S Realty American 7.48 9.00 20.3% -10.6% 14.7%
HQL H&Q Life Sciences Investors NYSE 16.30 12.50 -23.3% -3.9% -0.9%
MFV MFS Special Value Trust NYSE 15.05 15.38 2.2% -10.4% 10.4%
ETF Emerging Markets Telecommunications NYSE 11.17 9.19 -17.7% -13.4% -2.6%
DGF Delaware Group Global Div & Inc NYSE 15.37 15.19 -1.2% -6.5% 12.6%
EQS Equus II NYSE 21.59 16.25 -24.7% -31.9% 8.6%
HQH H&Q Health Inv NYSE 19.66 14.81 -24.7% -7.4% -2.1%
AMO Alliance All-Market NYSE 45.00 46.31 2.9% 70.2% 48.6%
GGT Gabelli Global Media NYSE 13.19 11.13 -15.7% 40.6% 28.9%
MGC Morgan Growth Small Cap Fund NYSE 11.67 9.81 -15.9% -3.4% 9.4%
OTCM Royce Micro-Cap Trust Nasdaq 9.87 8.25 -16.4% -13.0% 10.6%
BLU Blue Chip Value NYSE 10.20 10.00 -2.0% 8.6% 23.5%
ASG Liberty All-Star Growth Fund NYSE 12.80 11.13 -13.1% 2.1% 18.9%
EMG Emerging Markets Infrastructure NYSE 9.37 7.19 -23.3% -31.9% -11.6%
DDF Delaware Group Div & Inc NYSE 15.24 17.19 12.8% 5.8% 17.0%
-------------------------------------------
Low -24.7% -31.9% -11.6%
High 20.3% 70.2% 48.6%
Median -15.9% -6.5% 10.4%
Average -10.6% 0.3% 9.8%
-------------------------------------------
<CAPTION>
- ----------------------------------------------
Market Potential Debt to
Shares Value of Cap Gains Total
Ticker Out. Assets Exposure Equity
- ----------------------------------------------
<S> <C> <C> <C> <C>
CREN 0.76 7.05 N/A N/A
EGX 0.98 9.85 -22.00 7.7%
RIF 2.88 21.54 12.00 N/A
HQL 3.70 60.31 23.00 N/A
MFV 6.00 90.30 14.00 45.1%
ETF 8.43 94.16 -22.00 N/A
DGF 6.65 102.21 9.00 36.6%
EQS 4.83 104.28 33.00 44.3%
HQH 5.55 109.11 27.00 21.5%
AMO 2.51 112.95 45.00 11.9%
GGT 8.61 113.57 31.00 37.7%
MGC 9.79 114.25 12.00 29.5%
OTCM 12.15 119.92 22.00 20.5%
BLU 14.15 144.33 28.00 31.8%
ASG 11.34 145.15 10.00 25.4%
EMG 16.11 150.95 -52.00 N/A
DDF 13.00 198.12 13.00 43.1%
- ---------------------------------------------
Low 7.05 -52.00 7.7%
High 198.12 45.00 45.1%
Median 109.11 13.50 30.7%
Average 99.89 11.44 29.6%
- ---------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ticker Description
<S> <C>
CREN Conservative, blue-chip, growth oriented stocks
EGX Equity securities of large, intensely researched, high-quality companies; may use short-selling
RIF Invests in common stocks and other equity securities, including convertible debt securities
HQL Seeks long-term capital appreciation through equity investment; focus on venture capitalization
MFV Invests in diversified portfolio of common stocks
ETF Invests in dividend paying common stocks to grow capital; income is secondary objective
DGF Seeks long-term capital appreciaiton by investing in existing businesses
EQS Invests in a high-risk portfolio of equity securities
HQH Seeks to generate long-term capital gains with equity investments in small to medium privately owned businesses
AMO Invests in equity securities for long-term growth of capital; income is secondary objective
GGT Pursues common stocks with better than average growth potential; income secondary
MGC Invests in a diversified portfolio of equity securities seeking total investment return (capital appreciation and income)
OTCM Invests in a diversified portfolio of equity securities; may also invest in government securities (capital appreciation)
BLU Seeks to maintain an annual distribution rate of 11% based on $15 IPO (capital appreciation)
ASG Invests in equity securities of entertainment related companies; seeks long-term capital appreciation
EMG Seeks long-term capital appreciation by investing in common stocks and convertible securities
DDF Seeks growth of capital through equity securities
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
43
<PAGE>
Avatex, Inc.
Present Value of Note
- --------------------------------------------------------------------------------
Interest Rate 6.750%
Note Amount 34 MM
Payments 4
Rate per Q 1.688%
<TABLE>
<CAPTION>
1 2 3 4 5 6 7 8
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
34 0.574 0.574 0.574 0.574 0.574 0.574 0.574 0.574
Period
6.75% 0.564 0.555 0.546 0.537 0.528 0.519 0.510 0.502
8.00% 0.563 0.551 0.541 0.530 0.520 0.509 0.499 0.490
9.00% 0.561 0.549 0.537 0.525 0.513 0.502 0.491 0.480
10.00% 0.560 0.546 0.533 0.520 0.507 0.495 0.483 0.471
11.00% 0.558 0.543 0.529 0.515 0.501 0.488 0.475 0.462
12.00% 0.557 0.541 0.525 0.510 0.495 0.481 0.467 0.453
13.00% 0.556 0.538 0.521 0.505 0.489 0.474 0.459 0.444
14.00% 0.554 0.536 0.517 0.500 0.483 0.467 0.451 0.436
15.00% 0.553 0.533 0.514 0.495 0.477 0.460 0.443 0.427
16.00% 0.552 0.530 0.510 0.490 0.472 0.453 0.436 0.419
17 00% 0.550 0.528 0.506 0.486 0.466 0.447 0.429 0.411
18.00% 0.549 0.525 0.503 0.481 0.460 0.441 0.422 0.403
19.00% 0.548 0.523 0.499 0.477 0.455 0.434 0.415 0.396
20.00% 0.546 0.520 0.496 0.472 0.450 0.428 0.408 0.388
21.00% 0.545 0.518 0.492 0.468 0.444 0.422 0.401 0.381
22.00% 0.544 0.515 0.489 0.463 0.439 0.416 0.394 0.374
23.00% 0.543 0.513 0.485 0.459 0.434 0.410 0.388 0.367
24.00% 0.541 0.511 0.482 0.454 0.429 0.404 0.382 0.360
25.00% 0.540 0.508 0.478 0.450 0.424 0.399 0.375 0.353
<CAPTION>
9 10 11 12 TOTAL % of Face Discount
--------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
34 0.574 0.574 0.574 34.574 $40.885
Period
6.75% 0.494 0.485 0.477 28.284 $34.000 100% 0%
8.00% 0.480 0.471 0.461 27.261 $32.876 97% 3%
9.00% 0.470 0.459 0.449 26.472 $32.008 94% 6%
10.00% 0.459 0.448 0.437 25.708 $31.166 92% 8%
11.00% 0.449 0.437 0.426 24.967 $30.350 89% 11%
12.00% 0.440 0.427 0.414 24.249 $29.558 87% 13%
13.00% 0.430 0.417 0.404 23.554 $28.790 85% 15%
14.00% 0.421 0.407 0.393 22.880 $28.045 82% 18%
15.00% 0.412 0.397 0.383 22.227 $27.322 80% 20%
16.00% 0.403 0.388 0.373 21.595 $26.621 78% 22%
17 00% 0.394 0.378 0.363 20.981 $25.941 76% 24%
18.00% 0.386 0.369 0.354 20.387 $25.280 74% 26%
19.00% 0.378 0.361 0.344 19.811 $24.640 72% 28%
20.00% 0.370 0.352 0.335 19.252 $24.018 71% 29%
21.00% 0.362 0.344 0.327 18.710 $23.414 69% 31%
22.00% 0.354 0.336 0.318 18.185 $22.828 67% 33%
23.00% 0.347 0.328 0.310 17.676 $22.259 65% 35%
24.00% 0.340 0.320 0.302 17.182 $21.707 64% 36%
25.00% 0.332 0.313 0.295 16.703 $21.171 62% 38%
</TABLE>
Houlihan Lokey Howard & Zukin
- --------------------------------------------------------------------------------
44
<PAGE>
First Series Preferred Stock ($5.00)
Par Value
$5.00
Dividends
$5.00 per share, paid quarterly; cumulative; no interest on dividends in arrears
Co. cannot declare or set apart for payment any dividends or other payment on
any capital stock ranking junior to the First Series.
Liquidation Preference
$50 per share plus all dividends accrued
Redemption
Company can redeem, at its option, all or part of First Series, at $50.00 per
share after January 15, 1992 plus accrued and unpaid dividends. Company cannot
redeem less than all outstanding shares unless full cumulative dividends have
been paid.
Voting
No voting rights.
When dividends payable are in arrears for an amount equal to at least six
quarterly dividends, the holders of the First Series shall have exclusive right,
voting separately as a class with other holders of preferred stock on a parity
basis, to elect two directors of the Company at the next annual meeting. Until
dividends are paid in full, BOD elected by First Series will remain BOD. First
Series Preferred currently has 2 Board seats out of 11.
Sinking Fund
Company to set aside in trust, when appropriated by Board, funds to redeem on
each January 15 1993 to 2002, 88,000 shares of First Series and 220,000 shares
in 2003. If BOD fails to make sinking fund payments, Company cannot make
dividend or other distribution and cannot make payments to purchase, redeem or
retire Junior Stock.
Conversion
Conversion price of $25.80 per share
45
<PAGE>
Cumulative Exchangeable Series A Preferred Stock ($4.20)
Par Value
$5.00
Dividends
$4.20 per share, paid quarterly; cumulative; dividends may be paid at option of
Company in additional shares of Series A Preferred Stock for all dividend
payment dates through 10/15/96 (with shares valued at liquidation value of
$40.00 per share). Quarterly dividends not paid in full in cash or in shares
will cumulate without interest and will cumulate as if quarterly dividends had
been paid in additional shares.
Liquidation Preference
Ranks in parity to First Series Preferred. $40.00 per share plus all dividends
accrued. Upon dissolution or liquidation, assets of Company will be distributed
ratably amongst First Series and Series A.
Redemption
Redeemable at $40.00 per share at the option of Company on or after 10/15/98.
All shares shall be redeemed on November 30, 2003 at $40.00 per share plus
accrued and unpaid dividends. If preferred shares are not redeemed and a surplus
exists, Series A Preferred shareholders can bring a breach of contract claim
against the Company.
Exchangeable
Series A are exchangeable for exchange notes (10.5% subordinated notes due 2003)
provided (a) Company paid all accrued and unpaid dividends (b) no event of
default under the indenture (c) legal under Delaware law. Holders of shares
entitled to receive $40.00 principal note for each share with interest accruing
from date of exchange.
Voting
No voting rights.
When dividends payable are unpaid for six consecutive periods, the holders of
Series A shall be entitled to elect two directors. Until dividends are paid in
full, BOD elected by Series A will remain BOD.
First Series Preferred currently has 2 Board seats out of 11.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
46
<PAGE>
Avatex Corporation
Summary of Preferred Stock Outstanding - 4/28/99
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
$5.00 $4.20
Preferred Preferred Totals
----------- --------------------- -----------
<S> <C> <C> <C>
Face/Liquidation Value 50 40
Cumulative Cumulative Cumulative
Convertible Convertible No (Exchangeable) [a]
Payment Form Cash PIK thru 10/96 [b]
Conversion/Exchange Ratio 1.94 N/A
Shares Outstanding 652,273 4,312,352
----------- ------------
Equivalent Common Shares 1,264,095 N/A
Avatex Stock Price - 4/28/99 $ 0.75 N/A
----------- ------------
Implied Value of Preferred 948,071 N/A
Face Amount of Preferred 32,613,650 172,494,080 205,107,730
Arrearage - 3/31/99 8,153,413 51,020,513 59,173,926
----------- ------------ -----------
Total Preferred Claim - 40,767,063 223,514,593 264,281,656
15.4% 84.6%
Preferred Claim/Share 62.50 51.83
Trading Price Of Preferred - 4/28/99 $ 4.81 $ 4.44
----------- ------------
Trading Price/Preferred Claim 7.70% 8.57%
</TABLE>
a) Avatex had the option, if no arrears exist, to exchange the $4.20 Preferred
into 10.5% Subordinated Debt.
b) While Avatex's PIK option expired 10/96, dividends accrue assuming additional
shares had been issued in lieu of cash until unpaid dividends are paid.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
47
<PAGE>
Avatex Corporation
Aggregate Trading Value of Common and Preferred Securities [a]
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
4/28/99 Low High Mean Median
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common
Total Market Cap 10.355 6.903 36.242 19.573 18.984
% of Total Market Cap 31.7% 20.25% 48.89% 29.70% 29.25%
$4.20 Preferred (PIK)
Total Market Cap 19.136 11.859 72.771 40.401 43.124
% of Total Market Cap 58.6% 40.72% 68.30% 53.74% 59.34%
% of Total Preferred Market Cap 85.9% 73.77% 92.61% 83.53% 84.14%
$5.00 Convertible Preferred
Total Market Cap 3.139 1.386 13.699 7.692 8.236
% of Total Market Cap 9.6% 4.46% 18.46% 11.56% 11.28%
% of Total Preferred Market Cap 14.1% 7.39% 26.23% 16.47% 15.86%
Total Market Cap of Avatex Corporation 32.630 24.662 122.222 67.666 69.994
- ------------------------------------------------------------------------------------------------------------------------
----------------
Total Preferred as % of Market Cap 51.11% 79.75% 70.30% 70.75%
Common as % of Market Cap 20.25% 48.89% 29.70% 29.25%
----------------
Total Market Cap of Avatex Corporation between $40 and $70 million
----------------
Total Preferred as % of Market Cap 66.41% 78.23% 72.71% 72.63%
Common as % of Market Cap 21.77% 33.59% 27.29% 27.37%
----------------
</TABLE>
[a] Pricing is for the two years from April 23, 1997 - April 28, 1999.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
48
<PAGE>
Avatex Corporation
Relative Trading Value of Preferred Securities [a]
- --------------------------------------------------------------------------------
Low High Mean Median
- --------------------------------------------------------------------------------
$4.20 Preferred (PIK)
% of Total Market Cap 40.72% 68.30% 58.74% 59.34%
% of Total Preferred Market Cap 73.77% 92.61% 83.53% 84.14%
$5.00 Convertible Preferred
% of Total Market Cap 4.46% 18.46% 11.56% 11.28%
% of Total Preferred Market Cap 7.39% 26.23% 16.47% 15.86%
Total Preferred as % of Market Cap 51.11% 79.75% 70.30% 70.75%
- --------------------------------------------------------------------------------
Total Market Cap of Avatex Corporation between $40 and $70 million
$4.20 Preferred (PIK)
% of Total Market Cap 49.12% 66.01% 60.22% 60.95%
% of Total Preferred Market Cap 73.77% 86.12% 32.80% 83.86%
$5.00 Convertible Preferred
% of Total Market Cap 10.27% 17.86% 12.49% 11.76%
% of Total Preferred Market Cap 13.88% 26.23% 17.20% 16.14%
Total Preferred as % of Market Cap 66.41% 78.23% 72.71% 72.63%
[a] Pricing is for the two years from April 28, 1997 - April 28, 1999.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
49
<PAGE>
Avatex Corporation
Relative Value of Preferred Stock Issues
- --------------------------------------------------------------------------------
Series A ($4.20) % of Total Preferred Market Cap
Low High Median
----- ----- ------
Historical Trading (All Value
Ranges) 73.8% 92.6% 84.1%
Historical Trading - When
TEV is $40MM - $70MM 73.8% 86.1% 83.8%
Conclusion 84.0%
$4.20 $5.00
Preferred Preferred Total
--------- --------- -----
Shares Outstanding 4,312,352 652,215 4,964,567
Concluded Weighted Avg. Conversion Ratio 7.50
----------
Total Converted Common Shares 37,234,253
Concluded Allocation/Issue 84% 16%
Allocation of Common Shares 31,276,772 5,957,480
Implied Conversion Ratio 7.253 9.134
50
<PAGE>
Avatex Corporation
Preferred Recovery In Hypothetical Restructuring
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current Estimated Avatex Control Value 77,600
Employment Agreement Claim [a] (24,000) (12,000)
------- -------
Net Potential Recovery To Preferred
Shareholders 53,600 65,600
Preferred Allocations In Restructuring
Transactions 75% 80% 85% 90% 95% 75% 80% 85% 90% 95%
---------------------------------------- ---------------------------------------
Est. Preferred Proceeds From ----------------------- -----------------------
Restructuring [b] 40,200 42,880 45,560 48,240 50,920 49,200 52,480 55,760 59,040 62,320
----------------------- -----------------------
Indicated Range of Aggregate Preferred
Fair Value 45,560 -- 49,200
</TABLE>
a. Source: Avatex management estimates the liability associated with the
Employment Agreements at $24MM
b. Preferred recovery expectations on lower end of range based on current
inability to force restructuring to occur
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
51
<PAGE>
Avatex Corporation
Analysis of Preferred Value - Cash Deal
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Analysis
<S> <C> <C> <C> <C> <C> <C>
% of Preferred Electing Cash Deal 60% 80% 100%
---------------------------
IRR On Note Based on Post Deal Collateral/Leverage Position 14% 16% 18%
$34MM Note @ 6 75% (Pro- Rata) Value Per 16,875 21,384 25,421
$15.25MM Cash (Pro-Rata) Warrant [b] 15,250 9,156 12,266 15,256
-----------
2.75MM Warrants @ $2.25 (5 year life) 2,750 $0.33 908 545 726 908
20% of McKesson Settlement [a] -- -- --
---------------------------
Total Value of Preferred - Cash (Pro-Rata) 26,570 34,310 41,578
Implied Value of 100% Preferred Interest 44,283 42,888 41,578
</TABLE>
a. Amount of recovery unknown at this time.
b. Based on 80% cash election by Preferred shareholders.
52
<PAGE>
Avatex Corporation
Value of Consideration Received By Preferred Shareholders - Conversion Deal
- --------------------------------------------------------------------------------
Minority Interest Discount 30%
<TABLE>
<CAPTION>
Conversion Ratio 7.25
Implied Exchange Ratio 72%
<S> <C> <C> <C> <C> <C>
Estimated Value of Avatex Equity (Rounded, Control Basis) 77,600 77,600 77,600 77,600
% of Preferred Electing Cash Deal 0% 60% 80% 100%
Value Deduction For Preferred Shareholders Taking Cash Deal -- 26,570 34,310 41,578
-------------------------------------------
Remaining TEV (Control Basis)- Xetava Common Shareholders 77,600 51,030 43,290 36,022
Adjustment For Minority Interest @ 30% (23,280) (15,309) (12,987) (10,807)
-------------------------------------------
Post Deal TEV (Minority Interest Basis) 54,320 35,721 30,303 25,215
Current Common Shares O/S 13,806 13,806 13,806 13,806 13,806
Preferred Shares Converting 4,965 4,965 1,986 993 --
Common Shares Rec'd By Conv. Pref 35,994 14,397 7,199 --
-------------------------------------------
Xetava Shares O/S Past Deal 49,800 28,204 21,005 13,806
Estimated Xetava Value/Share Post Deal $ 1.09 $ 1.27 $ 1.44 $ 1.83
Value of Conversion Deal (Pro-Rata) 39,260 18,235 13,385 --
Implied Value Of Conversion Deal (100% Basis) 39,260 45,587 51,525 N/A
Preferred Ownership 72% 34%
Common Ownership 28% 66%
<CAPTION>
Conversion Ratio 7.50
Implied Exchange Ratio 0.73
<S> <C> <C> <C> <C>
Estimated Value of Avatex Equity (Rounded, Control Basis) 77,600 77,600 77,600 77,600
% of Preferred Electing Cash Deal 0% 60% 80% 100%
Value Deduction For Preferred Shareholders Taking Cash Deal -- 26,570 34,310 41,578
-------------------------------------------
Remaining TEV (Control Basis)- Xetava Common Shareholders 77,600 51,030 43,290 36,022
Adjustment For Minority Interest @ 30% (23,280) (15,309) (12,987) (10,807)
-------------------------------------------
Post Deal TEV (Minority Interest Basis) 54,320 35,721 30,303 25,215
Current Common Shares O/S 13,806 13,806 13,806 13,806
Preferred Shares Converting 4,965 1,986 993 --
Common Shares Rec'd By Conv. Pref 37,235 14,894 7,447 --
-------------------------------------------
Xetava Shares O/S Past Deal 51,041 28,700 21,253 13,806
Estimated Xetava Value/Share Post Deal $ 1.06 $ 1.24 $ 1.43 $ 1.83
Value of Conversion Deal (Pro-Rata) 39,627 18,537 10,618 --
Implied Value Of Conversion Deal (100% Basis) 39,627 46,343 53,088 N/A
Preferred Ownership 73% 35%
Common Ownership 27% 65%
<CAPTION>
Conversion Ratio 7.75
Implied Exchange Ratio 0.74
<S> <C> <C> <C> <C>
Estimated Value of Avatex Equity (Rounded, Control Basis) 77,600 77,600 77,600 77,600
% of Preferred Electing Cash Deal 0% 60% 80% 100%
Value Deduction For Preferred Shareholders Taking Cash Deal -- 26,570 34,310 41,578
-------------------------------------------
Remaining TEV (Control Basis)- Xetava Common Shareholders 77,600 51,030 43,290 36,022
Adjustment For Minority Interest @ 30% (23,280) (15,309) (12,987) (10,807)
-------------------------------------------
Post Deal TEV (Minority Interest Basis) 54,320 35,721 30,303 25,215
Current Common Shares O/S 13,806 13,806 13,806 13,806
Preferred Shares Converting 4,965 1,986 993 --
Common Shares Rec'd By Conv. Pref 38,476 15,390 7,695 --
-------------------------------------------
Xetava Shares O/S Past Deal 52,232 29,197 21,502 13,806
Estimated Xetava Value/Share Post Deal $ 1.04 $ 1.22 $ 1.41 $ 1.83
Value of Conversion Deal (Pro-Rata) 39,975 18,830 10,845 --
Implied Value Of Conversion Deal (100% Basis) 39,975 47,074 54,225 N/A
Preferred Ownership 74% 36%
Common Ownership 26% 64%
</TABLE>
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
53
<PAGE>
Avatex Corporation
Value of Total Preferred Consideration
- --------------------------------------------------------------------------------
% Electing Cash Deal
60% 80% 100%
------ ------ ------
Value of Conversion Deal [a] 18,537 10,618 --
Value of Cash Deal 26,570 34,310 41,578
------ ------ ------
Total 45,107 44,928 41,578
====== ====== ======
a. Assuming a weighted average preferred:common conversion ratio of 7.5:1.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
54
<PAGE>
Avatex Corporation
Black Scholes Option Pricing Model
- --------------------------------------------------------------------------------
<TABLE>
-------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock Price S(t) = $1.43
Exercise Price X = $2.25
d1 = 0.175
Time to expiration Days = 1825
Risk Free Rate r = 4.8%
Standard Deviation [a] s = 38.1% d2 = (0.677)
-------- --------------------------
--------------------------
Value of Call Option N(d1) = 0.569 Call Price $0.37
N(d2) = 0.249
Value of Put Option 1 - N(d1) = 0.431 Put Price $0.71
1 - N(d2) = 0.751
--------------------------
Determination of Discount
-------------
Cost of Put Option A $0.71
Stock Price B $1.43
Cost of Put Option as a Percentage of Stock Price (A/B) 49.9%
-------------
</TABLE>
Sensitivity Analysis of Value of Call Option
Stock Price
---------------------------------------------------------
$1.30 $1.40 $1.50 $1.60 $1.70
---------------------------------------------------------
20.0% $0.10 $0.13 $0.17 $0.22 $0.27
-------
30.0% $0.21 $0.26 $0.31 $0.36 $0.42
Volatility [a] 40.0% $0.32 $0.38 $0.44 $0.50 $0.56
-------
45.0% $0.38 $0.44 $0.50 $0.57 $0.63
50.0% $0.44 $0.50 $0.56 $0.63 $0.70
---------------------------------------------------------
[a] The standard deviation is calculated as the median of the volatility of
Phar-Mor (38.1%), Safeguard Scientifics (47.1%), and the NASDAQ Composite Index
(20.5%)
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
55
<PAGE>
Avatex Corporation
Summary of Debt Outstanding
- --------------------------------------------------------------------------------
(1) Foxmeyer Trustee Note - Approximately $9MM PIK at the prime rate maturing
in 18 months (10/2000). Note secured by 1.1MM shares of Phar-Mor common
stock. Note conservatively valued at face value.
(2) Preferred Security (Note/Preferred Stock) - $34 million face value with
interest at 6.75%, payable semi-annually. Entire principal amount due in
36 months. No interim amortization. Preferred security will be
collateralized by the 3.6MM Phar-Mor shares not pledged to the Foxmeyer
bankruptcy trustee.
56
<PAGE>
Avatex Corporation
Summary of Real Estate Investments
- --------------------------------------------------------------------------------
(000s)
<TABLE>
<CAPTION>
Howard Marriott Days Inn &
Johnsons Courtyard Office Bldg Totals
-------- --------- ----------- -------
<S> <C> <C> <C> <C>
Est. FMV of Property [a] 15,000 18,000 8,000 41,000
Current Debt O/S [b] (7,403) (13,002) (5,158) (25,563)
------ ------- ------ -------
Indicated Equity Value 7,597 4,998 2,842 15,437
Avatex Preferred Interest [c] (3,976) (4,998) -- (8,974)
------ ------- ------ -------
Residual Equity Interest 3,620 -- 2,842 6,462
Avatex Share Of Res. Interest [d] 50% 50% 50% 50%
------ ------- ------ -------
Value of Avatex Res. Interest 1,810 -- 1,421 3,231
Aggregate Value of Avatex Interests 5,787 4,998 1,421 12,206
Adjustments
------ ------- ------ -------
Net Value of Avatex Interests 5,787 4,998 1,421 12,206
</TABLE>
a) Based on Avatex Mgmt value estimate (Arthur Andersen appraisal $11.7MM),
Thorne Consultants appraisal and Avatex Mgmt value estimate, respectively.
b) Source: Avatex Corporation. Debt is non-recourse to Avatex Corporation.
c) Source: Avatex Corporation.
d) Source: Avatex Corporation.
Summary
According to Avatex management, the Company is currently negotiating to sell
both its preferred and residual interests in these properties to its JV partner
(Bernstein) for $12MM.
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
57
<PAGE>
Avatex Corporation
Summary of Major Venture Capital Investments
- --------------------------------------------------------------------------------
(1) RAS Holdings - Avatex directly owns approximately 9% (including warrants).
Investment of $2,480,000 includes the additional $1,000,000 investment to
be made in June 1999.
(2) Chemlink - Avatex's ownership is indirect with an acquisition company
(CLAC) of which Mel Estrin and Abbey Butler are the 2 BOD members. Avatex
owns 40% of CLAC which owns 50% of Chemlink (Avatex indirectly 20% of
Chemlink). Avatex's initial investment in CLAC was in 3/98. As of 4/28/99,
Avatex had invested $3,015,700 in CLAC/Chemlink.
(3) Caretech - Avatex directly owns 6.3% of Caring Technologies. Its
investment of $1,287,600 was made in December 1997 at a basis of $1.30 per
share. The Company records its investment at $1.00 per share and intends
to purchase an additional 500,000 shares in May 1999 for $1.00 per share.
(4) HPD - Avatex made a direct investment of $1,250,000 in April 1998 for 125
shares of preferred stock. As part of this investment, Avatex also
received a 2.5% interest in HPD's common stock. The Company records its
investment of $1,413,000 inclusive of dividends.
58
<PAGE>
Information contained herein, marked with [**], has been omitted pursuant to a
request for confidential treatment. A complete copy of this document has been
supplied to the Securities and Exchange Commission under separate cover.
Materials presented to the Board of Directors of Avatex Corporation on May 6,
1999 by Houlihan Lokey Howard & Zukin Financial Advisors, Inc. with respect to
the solvency opinion described in Exhibit 99.17(b)(3).
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Presentation to
The Board of Directors of
Avatex Corporation
----------------------------------------------------------------------
May 6, 1999
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------
[LOGO] HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
1650 Tysons Blvd., Suite 565
McLean, VA 22102
(703) 847-5225 http://www.hlhz.com
Washington D.C. Los Angeles Chicago San Francisco New York
Minneapolis Dallas Atlanta Toronto Seoul Hong Kong
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
- --------------------------------------------------------------------------------
<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Table of Contents
--------------------------------------------------------------------
Section
-------
Overview of Houlihan Lokey........................... A
Solvency Opinion Experience.......................... B
Overview of Opinion.................................. C
Valuation Methodologies.............................. D
Summary of Solvency Analyses......................... E
Supporting Cash Flow Analysis Material............... F
Solvency Opinion..................................... G
Supporting Exhibits.................................. H
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
- --------------------------------------------------------------------------------
<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
--------------------------------------------------------------------
BACKGROUND
o Founded in 1970, Houlihan Lokey Howard & Zukin has become a
major provider of specialized investment banking services.
o Having risen to the forefront of business and securities
valuation early in its history, Houlihan Lokey is now equally
recognized as a leader in the areas of corporate finance,
financial restructuring and merchant banking.
o The expansion into middle market corporate finance occurred in
1988 with the addition of investment banking professionals and
today Houlihan Lokey is recognized as one of the prominent
middle market firms.
o The development of merchant banking capabilities occurred in
the early 90's with the acquisition of $800 million of
distressed loan portfolios and the establishment of a $188
million private equity/mezzanine fund.
o Headquartered in Los Angeles, Houlihan Lokey today has more
than 200 professionals in nine North American and two overseas
offices:
o Los Angeles o San Francisco o Dallas o Seoul
o New York o Minneapolis o Atlanta o Hong Kong
o Chicago o Washington, D.C. o Toronto
[GRAPHIC OMITTED]
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 1
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
--------------------------------------------------------------------
VALUATION
o Full-Service Valuation Capabilities
Houlihan Lokey provides valuation services in a broad array of
situations and for a wide range of transactions, both in type
and size. The general categories of such services include:
-- Solvency Opinions -- Purchase Price Allocations
-- Fairness Opinions -- Litigation Support
-- Business Valuations
o A Leading Provider of Solvency Opinions
Houlihan Lokey became one of the preeminent firms during the
1980s in providing solvency opinions in leveraged
transactions. By utilizing highly complex financial
methodologies, the firm has been able to provide both lenders
and boards of directors with the comfort level necessary to
enable them to proceed forward with a particular leveraged
transaction.
o Recognized Market Leader in Valuation Opinions
The firm's valuation opinions are used regularly in a large
number of contexts including: shareholder liquidity
alternatives; private company valuations; mergers and
acquisitions; restructurings and reorganizations; ESOPs;
corporate redemptions; management stock plans; estate, gift
and income planning.
o Extensive Experience in the Issuance of Fairness Opinions
The firm has developed a strong reputation in providing
fairness opinions and analyses to boards of directors,
independent committees, investors, foundations and ESOPs.
Fairness opinions have been rendered in every conceivable
change of control transaction, as well as recapitalizations,
sales of securities and leveraged purchases.
o Extensive Legal Support Services
Houlihan Lokey has developed a substantial background and has
worked closely with litigation teams in providing expert
valuation and financial advice and testimony in major
lawsuits. The firm has been retained to define valuation
issues, analyze the fairness of transactions, critique the
work of opposing experts and provide expert testimony.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 2
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
--------------------------------------------------------------------
INVESTMENT BANKING
o Focused Corporate Finance Capabilities for the Public and
Private Mid-Size Company
Houlihan Lokey focuses its corporate finance services on a
diverse range of clients and offers the advantage of
experience gained through years of involvement in highly
sophisticated transactions. The firm's areas of financial
advisory expertise include:
-- Raising equity and debt capital
-- Arranging strategic corporate partnerships
-- Structuring and financing leveraged transactions
-- Assisting financially troubled companies
-- Initiating and closing mergers and acquisitions
-- Structuring and financing ESOP/management buyouts
o Significant Market Share of the Mid-Size Sector
Houlihan Lokey has established itself as one of the preeminent
middle market investment banking firms. The firm's credentials
include:
-- Private Placements
o In 1997 and 1998, completed over $2 billion
of financings
o Currently retained on financings totaling
over $700 million
-- Mergers and Acquisitions
o In 1998, represented 81 clients in announced
M&A transactions totaling over $33.3 billion
o Ranked among the top 20 M&A advisors for the
seventh straight year and in the top five in
1997 and 1998 middle market transactions
o Currently retained on over 50 M&A
transactions
-- ESOP/Management Buyouts
o Advised on over $20 billion of
ESOP/management buyout transactions
o Partner in the largest ESOP fund in the
United States
o A pioneer in the structuring of ESOP buyouts
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 3
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
--------------------------------------------------------------------
FINANCIAL RESTRUCTURING
o Full Service Restructuring Capabilities
To devise and implement the numerous strategies available in
an out-of-court workout, corporate reorganization, or Chapter
11 setting, the Financial Restructuring Group offers a variety
of specialized services including:
o Restructuring existing debt and equity
o Structuring and analysis of exchange offers
o Chapter 11 planning
o Corporate viability assessment
o Structuring and negotiation plans of reorganization
o Litigation support and expert testimony
o Leading Market Share
Houlihan Lokey's Financial Restructuring Group has advised on
well over $30 billion of transactions in the last decade. The
firm has advised on some of the largest and most prominent
financial restructurings in history, including:
o Carter Hawley Hale o Harcourt Brace Janovich
o R.H. Macy & Co. o ICH International
o Allegheny International
o Extensive Expertise and Experience
In addition to the financial and analytical abilities which
Houlihan Lokey professionals offer, four of the senior
professionals who work on financial restructuring engagements
have practiced bankruptcy, corporate/securities and real
estate law, providing the group with a better understanding of
the legal issues which inevitably affect financial strategy in
situations of distress.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 4
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<PAGE>
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Avatex Corporation
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Overview of Houlihan Lokey
--------------------------------------------------------------------
MERCHANT BANKING
o $188 Million Mezzanine/Private Equity Fund - Through a
partnership formed with Churchill Capital, Houlihan Lokey
raised a private investment fund specializing in subordinated
debt and equity investments in closely-held, private
middle-market companies. The fund provides between $5 to $25
million in subordinated debt and equity capital for
recapitalizations, acquisitions, internal growth and buyouts.
Since its establishment in 1995, the fund has made several
investments including the following:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Company Transaction Business Amount Securities
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] National ESOP acquisition and Manufacturer of $6.0 million Senior Subordinated Notes
Diversified Sales, subsequent specialty drainage Preferred Stock
Inc. recapitalization products Majority Equity Holder
[LOGO] Angus Industries, ESOP acquisition Manufactures cabs, $6.7 million Senior Subordinated Notes
Inc. roll-over protective Majority Equity Holder
structures
[LOGO] Specialty Desserts, Acquisition of the Manufacturer and $3.0 million Senior Subordinated Notes
LLC. assets of three distributor of Warrants
cheesecake specialty desserts
manufacturers
[LOGO] Meade Instruments ESOP Manufacturer of $6.0 million Preferred Stock
Corp. recapitalization telescopes and related Warrants
accessories
[LOGO] The Westwind Group Acquisition related Owner/operator of $6.7 million Senior Subordinated Notes
financing for the Burger King restaurants Warrants
purchase of certain
restaurant assets
[LOGO] St. Louis Management buyout of Specialized label $6.1 million Senior Subordinated Notes
Lithographing a strategic printer Common Stock
Company divestiture by a Majority Equity Holder
major US public
company
</TABLE>
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 5
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Houlihan Lokey
--------------------------------------------------------------------
MERCHANT BANKING (CONT)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Company Transaction Business Amount Securities
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[LOGO] Dynamic Circuits Inc. Recapitalization Manufactures complex $6.0 million Preferred Stock
printed circuit Warrants
[LOGO] Leeco Steel ESOP acquisition Distributor and $15.0 million Senior Subordinated Notes
Products, Inc. processor of specialty Preferred Stock
steel Majority Equity Holder
[LOGO] The Kinetics Group Recapitalization Manufacturer, $10.0 million Senior Subordinated Notes
/Growth fabricator and
installer of
high-purity piping
[LOGO] C.D. Smith Drug Strategic Acquisition Distributor of $12.0 million Senior Subordinated Notes
Company/ pharmaceutical products
GD Holdings, Inc.
[LOGO] Hord Crystal ESOP Acquisition Leading manufacturer of $7.0 million Senior Subordinated Notes
Corporation Rhinestone fittings Preferred Stock
Majority Equity Holder
</TABLE>
o Manage $800 Million Distressed Loan Portfolio
Through partnerships with Nomura Securities and Cargill
Financial, Houlihan Lokey acquired $800 million of distressed
loans and securities, which it manages. The firm continues to
look for opportunities to purchase distressed loan portfolios.
o Partner in a $60 Million Opportunity Fund
Through a partnership formed with Nomura Securities, known as
Rosewood Partners, Houlihan Lokey raised a private investment
fund specializing in providing senior, subordinated debt and
equity investments in opportunistic situations.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 6
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<PAGE>
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Solvency Opinion Experience
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Solvency Opinion Experience
--------------------------------------------------------------------
SELECTED SOLVENCY OPINION CLIENTS
Houlihan Lokey Howard & Zukin, a leading provider of independent
financial opinions, has rendered hundreds of solvency and fairness
opinions in a variety of public and private transactions.
Selected Solvency Opinion Engagements
- --------------------------------------------------------------------------------
Recapitalizations Spin-offs
- --------------------------------------------------------------------------------
American Bumper & Mfg. Co. Consolidated Freightways, Inc.
ATC Group Services Inc. Furniture Brands (formerly INTERCO)
CBP Resources, Inc. GAF Corp.
Centennial Resources, Inc. Hanson plc.
Elgar Electronics Humana
Foamex Int'l., Inc. James River Corporation of Virginia
Fountain View Management, Inc. Superior Telecom, Inc.
Graham Packaging Corp. Thorn EMI plc
Koppers Industries Inc. Westinghouse Electric Corp.
Leiner Health Products, Inc. WHG Resorts & Casinos
MAG Aerospace Industries, Inc. WR Grace & Co.
Neopost, Inc.
Packard Industries, Inc.
Scovill Fasteners
- -------------------------------------
Acquisitions
- -------------------------------------
Advanced Medical, Inc.
Aetna Industries, Inc.
Allied Waste Industries, Inc.
AMF Bowling, Inc.
Decision One
DuPont Diagnostic Imaging Division
Elis, S.A.
Ensearch Corp.
Hayes Wheel Int'l. Inc.
The Keebler Co.
Mitel Corporation
Reliant Building Products
Ryder Truck Rental, Inc.
Starrett Corporation
- --------------------------------------------------------------------------------
Refinancings Dividends
- --------------------------------------------------------------------------------
Caribbean Restaurants, Inc. Kelley Oil & Gas Corp.
EZ Buy & EZ Sell Recycler Corp. Reebok Int'l. Ltd.
Houston Industries
Lifestyles Furnishings Int'l.
Mack Printing Co., Inc.
National Gypsum Co.
Westin Hotel Co.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 8
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<PAGE>
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Overview of Opinion
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
HOULIHAN LOKEY ROLE IN TRANSACTION
Render a written opinion (the "Opinion") to the Board as to whether,
assuming the Transaction has been consummated as proposed,
immediately after and giving effect to the Transaction: (a) on a pro
forma basis, the fair value and present fair saleable value of the
Company's assets would exceed the Company's stated liabilities and
identified contingent liabilities; (b) the Company should be able to
pay its debts as they become absolute and mature; and (c) the
capital remaining in the Company after the Transaction would not be
unreasonably small for the business in which the Company is engaged,
as management has indicated it is now conducted and is proposed to
be conducted following the consummation of the Transaction.
SUMMARY DESCRIPTION OF TRANSACTION
The Company is considering a merger with Xetava Corporation, or
another transaction, pursuant to which shares of the Company's
common stock, par value $5.00 per share (the "Old Avatex Common
Stock"), will be converted into common shares of the surviving
company in such merger or transaction; and (1) shares of the
Company's $4.20 Cumulative Exchangeable Series A Preferred Stock
(the "$4.20 Preferred") and shares of the Company's $5.00 Cumulative
Convertible Preferred Stock (the "$5.00 Preferred") will be
converted into common shares of the surviving company in such merger
or transaction, or (2) holders of shares of the $4.20 Preferred and
$5.00 Preferred could elect to receive in such merger or other
transaction for their shares of $4.20 Preferred and/or $5.00
Preferred a pro rata share of (I) a cash payment, (II) debt and/or
other securities of the Company or of a subsidiary of the Company,
and/or (III) a portion of any recovery the Company receives from
certain litigation.
SOURCES AND USES OF CASH IN THE TRANSACTION (IN 000'S) [A]
Sources of Cash Uses of Cash
--------------- ------------
Cash $17,650 Stock Conversion $49,250
Notes [B] 34,000 Standstill Agreement 900
------ Transaction Fees 500
Legal Fees 1,000
-----
$51,650 $51,650
======= =======
[A] Figures assume all preferred shareholders select cash and debt
alternative.
[B] To previous holders of preferred securities.
For purposes of this presentation, in the event that there is any
inconsistency or conflict between the terms and conditions of the
Opinion and the oral and written components of this presentation,
the terms and conditions of the Opinion shall govern.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 10
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
DEFINITIONS
o The Opinion values the Company as a going-concern (including
goodwill), on a pro forma basis, immediately after and giving
effect to the Transaction and the associated indebtedness.
o For purposes of the Opinion, fair value is defined as the
amount at which the Company would change hands between a
willing buyer and a willing seller, each having reasonable
knowledge of the relevant facts, neither being under any
compulsion to act, with equity to both; and present fair
saleable value is defined as the amount that may be realized
if the Company's aggregate assets (including goodwill) are
sold as an entirety with reasonable promptness in an arm's
length transaction under present conditions for the sale of
comparable business enterprises as such conditions can be
reasonably evaluated by Houlihan Lokey. We have used the same
valuation methodologies in determining fair value and present
fair saleable value for purposes of rendering the Opinion.
o The term identified contingent liabilities means the stated
amount of contingent liabilities identified to us and valued
by responsible officers of the Company, upon whom we have
relied upon without independent verification; no other
contingent liabilities will be considered.
o The term should be able to pay its debts as they become
absolute and mature means that, assuming the Transaction has
been consummated as proposed, the Company's financial
forecasts for the period 1999 to May 2002 indicate positive
cash flow for such period, including (and after giving effect
to) the payment of installments due under loans made pursuant
to the indebtedness incurred in the Transaction, as such
installments are scheduled at the close of the Transaction.
o It is Houlihan Lokey's understanding, upon which it is
relying, that the Company's Board of Directors and any other
recipient of the Opinion will consult with and rely solely
upon their own legal counsel with respect to said definitions.
No representation is made herein, or directly or indirectly by
the Opinion, as to any legal matter or as to the sufficiency
of said definitions for any purpose other than setting forth
the scope of Houlihan Lokey's Opinion.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 11
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
LIMITING CONDITIONS
o Notwithstanding the use of the defined terms fair value and
present fair saleable value, we have not been engaged to
identify prospective purchasers or to ascertain the actual
prices at which and terms on which the Company can currently
be sold, and we know of no such efforts by others. Because the
sale of any business enterprise involves numerous assumptions
and uncertainties, not all of which can be quantified or
ascertained prior to engaging in an actual selling effort, we
express no opinion as to whether the Company would actually be
sold for the amount we believe to be its fair value and
present fair saleable value.
o We have relied upon and assumed, without independent
verification, that the financial forecasts and projections
provided to us have been reasonably prepared and reflect the
best currently available estimates of the future financial
results and condition of the Company, and that there has been
no material adverse change in the assets, financial condition,
business or prospects of the Company since the date of the
most recent financial statements made available to us.
o We have not independently verified the accuracy and
completeness of the information supplied to us with respect to
the Company, and do not assume any responsibility with respect
to it. We have not made any physical inspection or independent
appraisal of any of the properties or assets of the Company.
Our opinion is necessarily based on business, economic, market
and other conditions as they exist and can be evaluated by us
at the date of the Opinion.
o The Opinion is furnished solely for your benefit and may not
be relied upon by any other person without our prior written
consent. This Opinion is delivered to each recipient subject
to the conditions, scope of engagement, limitations and
understandings set forth in this Opinion and our engagement
letter dated January 8, 1999.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 12
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
CONTENTS OF OPINION
Houlihan Lokey's opinion values the Company as a going-concern
(including goodwill) on a pro forma consolidated basis, immediately
after and giving effect to the Transaction.
Houlihan Lokey's solvency opinion considers whether:
(a) on a pro forma basis, the fair value and present fair
saleable value of the Company's assets would exceed the
Company's stated liabilities and identified contingent
liabilities;
(b) the Company should be able to pay its debts as they
become absolute and mature;
(c) the capital remaining in the Company after the
Transaction would not be unreasonably small for the
business in which the Company is engaged, as management
has indicated it is now conducted and is proposed to be
conducted following the consummation of the Transaction;
and
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 13
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
BALANCE SHEET TEST
The Balance Sheet Test determines whether or not the fair value and
present fair salable value of the Company's assets exceeds its
stated liabilities, identified contingent liabilities and the total
par value of the Company's capital stock after giving effect to the
Transaction. This test requires an analysis of the fair market value
of the Company as a going-concern. As part of this analysis, we
considered, among other things, these factors:
o Historical and projected financial performance for the
Company;
o The publicly and privately held assets of the Company;
o Management's estimation of fair market value of the assets and
liabilities of the Company;
o The capital structure and debt obligations of the Company; and
o Non-operating assets and identified contingent liabilities.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 14
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
CASH FLOW TEST
The Cash Flow Test focuses on whether or not the Company should be
able to repay its debts as they become absolute and mature
(including the debts incurred in the Transaction). This test
involves a two-step analysis of the Company's financial projections:
o Examine the consistency of the projections with historical
performance, current marketing strategies and operating cost
structure; and
o Test the sensitivity of the projections to changes in the
timing of expected cash inflows (specifically, asset sales).
In testing cash flows, we perform sensitivity analyses to determine
the "safety margin" available to deal with unexpected downturns in
the Company's ability to generate operating cash flow.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 15
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
REASONABLE CAPITAL TEST
The Reasonable Capital Test follows from the Balance Sheet and Cash
Flow Tests. A company may have assets that exceed liabilities, but
if the amount is too small to provide some downside protection, the
capital amount may not be deemed to be adequate and, in such a
situation, the company would fail the Reasonable Capital Test. The
determination as to whether the net assets remaining with the
Company constitute unreasonably small capital involves an analysis
of various factors, including:
o The degree of sensitivity demonstrated in the cash flow test;
o Historical and expected volatility in revenues, cash flow and
capital expenditures;
o The adequacy of working capital;
o Historical and expected volatility of going-concern asset
values;
o The maturity structure and the ability to refinance the
Company's obligations;
o The magnitude, timing and nature of identified contingent
liabilities; and
o The nature of the business and the impact of financial
leverage on its operations.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 16
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<PAGE>
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Avatex Corporation
- --------------------------------------------------------------------------------
Overview of Opinion
--------------------------------------------------------------------
DUE DILIGENCE PERFORMED
We have made such reviews, analyses and inquiries as we have deemed
necessary and appropriate under the circumstances. Among other
things, we have:
o reviewed the Company's form 10-K for the fiscal year ended
March 31, 1998, the Company's form 10-Q for the nine month
period ending December 31, 1998, and the Company's internal,
unaudited results through February 28, 1999, which the
Company's management has identified as the most current
information available;;
o reviewed copies of the following documents: Employment
Agreements and Amendments, certain real estate appraisals and
agreements, Certificate of Designation of $5.00 Cumulative
Convertible Preferred Stock, Certificate of Designation of the
$4.20 Cumulative Exchangeable Series A Preferred Stock,
Settlement Agreement between Avatex and Trustee, and Draft
Promissory Note;
o reviewed the General Terms and Conditions of Settlement
Between Avatex Corp. and Certain Preferred Shareholders and
draft versions of the Amended and Restated Merger Agreement,
Draft Shareholders Agreement and Draft Warrant Agreement
o reviewed the Company's Performance Incentive Plan;
o met with certain members of the senior management of the
Company to discuss the operations, financial condition, future
prospects and projected operations and performance of the
Company;
o visited certain facilities and business offices of the
Company;
o reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the period March
1999 to March 2003;
o reviewed other publicly available financial data for the
Company and certain publicly-held investments of the Company;
and
o conducted such other studies, analyses and investigations as
we have deemed appropriate
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 17
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<PAGE>
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Valuation Methodologies
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Valuation Methodologies
--------------------------------------------------------------------
In determining the fair value and present fair saleable value of the
aggregate assets of the Company, the adjusted book value methodology
was employed.
o Given the company's lack of operations, the market
capitalization and discounted cash flow approaches were not
considered appropriate.
o The adjusted book value methodology focuses on individual
asset and liability values from the Company's balance sheet.
All of the Company's assets and liabilities are adjusted to
fair market value as of the valuation date. The difference
between the adjusted assets and adjusted liabilities
represents the net stockholders' equity on a controlling
interest basis.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 19
- --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Summary of Solvency Analyses
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Summary of Solvency Analyses
--------------------------------------------------------------------
($ in 000)
Balance Sheet Test (A)
<TABLE>
<CAPTION>
----------------------------
HLHZ Management
----------------------------
<S> <C> <C>
Fair Value and Present Fair Salable Value of Assets 87,519 - 98,087
Less: Debt Obligations 43,226 - 43,226
Less: Identified Contingent Liabilities (B) 19,804 - 22,010
Less: Accounts Payable & Accured Expenses 3,588 - 3,588
------ -----
Implied Equity Value 20,901 - 29,263
============================
</TABLE>
(A) Assumes all preferred shareholders select cash and debt
alternative.
(B) Difference results from treatment of potential capital
gains tax liabilities.
- --------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 21
- --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Summary of Solvency Analyses
--------------------------------------------------------------------
Cash Flow Test
<TABLE>
<CAPTION>
------------------------------------------------ --------------- --------------
FY 2000 FY 2001 FY 2002 FY 2003 Aggregate Adjusted
CF CF CF CF Aggregate [a]
------------------------------------------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations 9.701 6.308 4.482 4.483 24.974 24.974
Other Cash Outflows 0.969 10.793 0.708 0.605 13.075 13.075
Preferred Stock Settlement (100%) 19.455 2.295 2.295 35.333 59.378 42.128
Investments 1.500 -- -- -- 1.500 1.500
------------------------------------------------ --------------- --------------
Net Cash Outflow, Corporate 31.625 19.396 7.485 40.421 98.927 81.677
------------------------------------------------ --------------- --------------
Cash Inflows 35.033 3.205 2.547 35.327 76.112 76.112
------------------------------------------------ --------------- --------------
Net Cash Inflow, Corporate 35.033 3.205 2.547 35.327 76.112 76.112
------------------------------------------------ --------------- --------------
Corporate Net Cash Flow 3.408 (16.191) (4.938) (5.094) (22.815) (5.565)
------------------------------------------------ --------------- --------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -
------------------------------------------------ --------------- --------------
Consolidated Net Cash Flow 3.408 (16.191) (4.938) (5.094) (22.815) (5.565)
================================================ =============== ==============
Cash Balance, Beginning of Period 27.036 30.444 14.253 9.315 27.036 27.036
Cash Balance, End of Period 30.444 14.253 9.315 4.221 4.221 21.471
</TABLE>
[a] Considers performance post-transaction and assumes asset sales only
sufficient to cover obligations.
Note: Avatex's fiscal year ends March 31.
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Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 22
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<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Summary of Solvency Analyses
--------------------------------------------------------------------
Reasonable Capital Test
<TABLE>
<CAPTION>
--------------------------------------------------
HLHZ Management
--------------------------------------------------
<S> <C> <C>
Implied Equity Value 20,901 - 29,263
Fair Value and Present Fair Salable Value of Assets 87,519 - 98,087
------- ------
Implied Equity Value 23.9% - 29.8%
==================================================
Post-Deal Avatex Interest Bearing Debt/Total Capital (A) 67.4% - 59.6%
Holding Company Ranges 48.4% - 7.7%
REIT Ranges 78.0% - 17.3%
</TABLE>
(A) Assumes all preferred shareholders elect cash and debt
alternative
- --------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 23
- --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Summary of Solvency Analyses
--------------------------------------------------------------------
Observations/Recommendations
Limitation on future cash bonuses
Amendments to Estrin/Butler employment agreements
Limitation on investments in non-liquid assets
Line of credit or sale of real estate pre-deal
- --------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 24
- --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Supporting Cash Flow Analysis Material
- --------------------------------------------------------------------------------
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Supporting Cash Flow Analysis Material
--------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
1999 2000 2000 2000 2000 2001 2001 2001 2001
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash 27.036 31.264 13.222 [**] [**] 30.422 28.222 16.772 14.253
Shopko Receivable 3.500 3.500 3.500 3.500 -- -- -- -- --
Bernstein Receivable -- 3.017 3.070 3.123 3.175 1.509 1.535 1.562 1.587
Liquidation of Unidentified Assets -- -- -- -- -- -- -- -- --
Imagyn Medical Technologies 1.077 0.598 0.598 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 27.636 23.520 23.520 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.092 0.069 0.069 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. 7.576 6.386 6.386 -- -- -- -- -- --
JWGenesis Financial 1.845 1.130 -- -- -- -- -- -- --
Caring Technologies 0.990 1.490 1.490 1.490 [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413 1.413 1.413 1.413
RAS 1.480 2.480 2.480 2.480 [**] [**] [**] [**] [**]
ChemLink Laboratories 3.016 3.016 3.016 3.016 [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office 0.789 -- -- -- -- -- -- -- --
Howard Johnson 5.665 -- -- -- -- -- -- -- --
Courtyard by Marriot 5.524 -- -- -- -- -- -- -- --
Cash Surrender Value 1.484 1.484 1.622 1.622 1.785 1.785 1.923 1.923 2.087
---------------------------------------------------------------------------------
Total Assets 89.123 79.367 60.386 [**] 88.716 87.028 84.992 73.569 115.980
---------------------------------------------------------------------------------
A/P & Accrued Liabilities 1.008 0.977 0.907 0.843 0.874 0.875 0.819 0.755 0.787
Reserve for USHDI 0.356 0.346 0.346 0.346 0.346 0.412 0.346 0.346 0.346
Environmental 1.478 1.461 1.378 1.363 1.332 1.315 1.232 1.217 1.186
Shopko Commissions 0.172 0.172 0.172 0.172 -- -- -- -- --
Trustee Note 9.001 9.169 9.338 9.520 9.700 9.881 10.064 -- --
Preferred Note -- -- 34.289 34.868 34.371 34.943 34.384 34.962 34.371
Directors Pension/Wilson 0.962 0.949 0.939 0.929 0.902 0.892 0.882 0.872 0.862
Retiree HealthCare 3.804 3.724 3.645 3.566 3.488 3.462 3.436 3.410 3.385
Non-Qualified Plans 0.900 0.898 0.893 0.887 0.862 0.860 0.854 0.849 0.823
Lawsuits:
'94 Shareholder Suit 1.000 -- -- -- -- -- -- -- --
'96 (St. & Fd.) Suits [**] [**] [**] [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Suits-Company -- -- -- -- -- -- -- -- --
USHDI -- -- -- -- -- -- -- -- --
Derivative [**] [**] [**] -- -- -- -- -- --
Midwest Freight 0.050 -- -- -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- -- -- -- --
Remaining Lease Obligation 0.389 0.353 0.317 0.280 0.244 0.208 0.172 0.136 0.099
---------------------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**] [**] [**] [**]
---------------------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**] [**] [**] [**]
---------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------
1Q 2Q 3Q 4Q 1Q 2Q
2002 2002 2002 2002 2003 2003
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 14.425 12.489 11.496 9.315 7.828 6.348
Shopko Receivable -- -- -- -- -- --
Bernstein Receivable -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- -- (35.000)
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.52 23.52
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 --
Carson, Inc. -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- --
Howard Johnson -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- --
Cash Surrender Value 2.087 2.224 2.224 2.388 2.388 2.526
-----------------------------------------------------------
Total Assets 114.565 112.766 111.773 153.376 151.889 115.478
-----------------------------------------------------------
A/P & Accrued Liabilities 0.788 0.732 0.668 0.714 0.737 0.698
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 1.169 1.086 1.071 1.040 1.023 1.004
Shopko Commissions -- -- -- -- -- --
Trustee Note -- -- -- -- -- --
Preferred Note 34.943 34.384 34.962 34.371 34.943 --
Directors Pension/Wilson 0.853 0.843 0.833 0.825 0.827 0.829
Retiree HealthCare 3.359 3.334 3.308 3.283 3.256 3.23
Non-Qualified Plans 0.821 0.816 0.811 0.785 0.783 0.778
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- --
'96 (St. & Fd.) Suits [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Suits-Company -- -- -- -- -- --
USHDI -- -- -- -- -- --
Derivative -- -- -- -- -- --
Midwest Freight -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation 0.063 0.027 -- -- -- --
-----------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
-----------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
-----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 26
- --------------------------------------------------------------------------
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Avatex Corporation
- --------------------------------------------------------------------------------
Supporting Cash Flow Analysis Material
--------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
1999 2000 2000 2000 2000 2001 2001 2001 2001
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.666 0.624 0.696 0.792 0.560 0.501 0.567 0.664 0.520
Travel 0.032 0.075 0.075 0.075 0.075 0.075 0.075 0.075 0.075
Directors' Fees 0.065 0.069 0.053 0.045 0.042 0.045 0.045 0.045 0.042
Consulting 0.079 0.051 0.026 0.000 0.000 0.020 0.005 0.000 0.000
Equity Restructuring Costs -- -- -- -- -- -- -- -- --
Audit 0.046 0.033 0.021 -- 0.015 0.033 0.021 -- 0.015
Actuarial Fees 0.003 0.013 0.006 0.000 0.009 0.013 0.006 0.000 0.009
Legal Fees 0.931 1.091 0.851 0.841 0.538 0.538 0.503 0.503 0.439
Legal Settlements 0.175 1.050 -- [**] -- -- -- -- --
Insurance 0.171 0.625 0.138 0.055 0.166 0.625 0.138 0.055 0.166
Public Company Expenses 0.055 0.015 0.087 0.015 0.015 0.015 0.087 0.015 0.015
Rent, Supplies and Other 0.086 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090
Other Cash Outflows
Retiree Payments 0.222 0.165 0.165 0.177 0.201 0.108 0.111 0.123 0.131
Environmental Payments 0.151 0.017 0.083 0.015 0.031 0.017 0.083 0.015 0.031
Tax Payments (0.025) 0.046 0.023 0.023 0.023 0.023 0.023 0.023 0.023
Repayment of Trustee Note -- -- -- -- -- -- -- 10.082 --
Interest Expense -- -- -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- 15.250 -- -- -- -- -- --
Elliot/Marx Expenses -- -- 2.000 -- -- -- -- -- --
Avatex Transaction and Legal Expense 0.339 0.642 0.500 -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- 1.063 -- 1.138 -- 1.157
Payment of Note -- -- -- -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- -- -- -- --
Caring Technology -- 0.500 -- -- -- -- -- -- --
RAS Holdings 0.467 1.000 -- -- -- -- -- -- --
Real Estate 0.238 -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------
Net Cash Outflow, Corporate 3.701 6.106 20.064 [**] 2.828 2.103 2.892 11.690 2.713
--------------------------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- -- -- --
Dividends Received from Real Estate -- -- -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- -- -- --
Alumet -- -- 0.350 -- -- -- 0.325 -- --
Pittsburgh Seed Fund/Atlas Energy 0.050 -- -- -- -- -- -- -- --
Collection of Shopko Note Receivable -- -- -- -- 4.754 -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- -- -- -- -- --
Borrowed Funds -- -- -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share -- -- -- [**] -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- -- -- --
Real Estate -- 9.000 -- -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- 1.710 -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- -- -- --
Sale of JWGenesis 1.413 1.002 1.400 -- -- -- -- -- --
Interest Income 0.337 0.332 0.271 0.261 0.346 0.371 0.366 0.240 0.193
--------------------------------------------------------------------------------------
Net Cash Inflow, Corporate 1.800 10.334 2.021 [**] 5.100 2.081 0.691 0.240 0.193
--------------------------------------------------------------------------------------
Corporate Net Cash Flow (1.901) 4.229 (18.043) [**] 2.272 (0.022) (2.201) (11.450) (2.520)
======================================================================================
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- -- -- --
--------------------------------------------------------------------------------------
Consolidated Net Cash Flow (1.901) 4.229 (18.043) [**] 2.272 (0.022) (2.201) (11.450) (2.520)
======================================================================================
Cash Balance, Beginning of Period 28.937 27.036 31.264 [**] [**] 30.444 30.422 28.222 16.772
Cash Balance, End of Period 27.036 31.264 13.222 [**] 30.444 30.422 28.222 16.772 14.253
<CAPTION>
---------------------------------------------------------
1Q 2Q 3Q 4Q 1Q 2Q
2002 2002 2002 2002 2003 2003
---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.501 0.567 0.664 0.520 0.501 0.567
Travel 0.075 0.075 0.075 0.075 0.075 0.075
Directors' Fees 0.045 0.045 0.045 0.042 0.045 0.045
Consulting 0.020 0.005 0.000 0.000 0.020 0.005
Equity Restructuring Costs -- -- -- -- -- --
Audit 0.033 0.021 -- 0.015 0.033 0.021
Actuarial Fees 0.013 0.006 0.000 0.009 0.013 0.006
Legal Fees 0.038 0.039 0.039 0.039 0.039 0.039
Legal Settlements -- -- -- -- -- --
Insurance 0.625 0.138 0.055 0.166 0.625 0.138
Public Company Expenses 0.015 0.087 0.015 0.015 0.015 0.087
Rent, Supplies and Other 0.090 0.090 0.090 0.090 0.090 0.090
Other Cash Outflows
Retiree Payments 0.108 0.111 0.123 0.129 0.096 0.100
Environmental Payments 0.017 0.083 0.015 0.031 0.017 0.040
Tax Payments 0.023 0.023 0.023 0.022 0.023 0.023
Repayment of Trustee Note -- -- -- -- -- --
Interest Expense -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- --
Avatex Transaction and Legal Expense -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- 1.138 -- -- -- 1.333
Payment of Note -- -- -- 1.157 2.314 34.000
Investments
ChemLink -- -- -- -- -- --
Caring Technology -- -- -- -- -- --
RAS Holdings -- -- -- -- -- --
Real Estate -- -- -- -- -- --
---------------------------------------------------------
Net Cash Outflow, Corporate 1.603 2.428 1.144 2.310 1.592 36.569
---------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- --
Dividends Received from Real Estate -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet -- 0.325 -- -- -- --
Pittsburgh Seed Fund/Atlas Energy -- -- -- -- -- --
Collection of Shopko Note Receivable -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- -- 35.000
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- -- -- -- --
Collection of Bernstein Receivable 1.605 -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- --
Interest Income 0.170 0.167 0.151 0.129 0.105 0.089
---------------------------------------------------------
Net Cash Inflow, Corporate 1.775 0.492 0.151 0.129 0.105 35.089
---------------------------------------------------------
Corporate Net Cash Flow 0.172 (1.936) (0.993) (2.181) (1.487) (1.480)
=========================================================
Real Estate Net Cash Used (Provided) -- -- -- -- 0.000 0.000
---------------------------------------------------------
Consolidated Net Cash Flow 0.172 (1.936) (0.993) (2.181) (1.487) (1.480)
=========================================================
Cash Balance, Beginning of Period 14.253 14.425 12.489 11.496 9.315 7.828
Cash Balance, End of Period 14.425 12.489 11.496 9.315 7.828 6.348
</TABLE>
- --------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. 27
- --------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Solvency Opinion
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
HOULIHAN LOKEY HOWARD & ZUKIN
-----------------------------
FINANCIAL ADVISORS
May 6, 1999
To The Board of Directors
of Avatex Corporation
Dear Directors:
We understand that Avatex Corporation (hereinafter the "Company") is considering
a merger with Xetava Corporation, a Delaware corporation and wholly-owned
subsidiary of the Company ("Xetava"), or another transaction, pursuant to which
(x) shares of the Company's common stock, par value $5.00 per share (the "Old
Avatex Common Stock"), will be converted into common shares of the surviving
company in such merger or other transaction; and (y) (1) shares of the Company's
$4.20 Cumulative Exchangeable Series A Preferred Stock (the "$4.20 Preferred")
and shares of the Company's $5.00 Cumulative Convertible Preferred Stock (the
"$5.00 Preferred") will be converted into common shares of the surviving company
in such merger or other transaction, or (2) holders of shares of the $4.20
Preferred and $5.00 Preferred could elect to receive in such merger or other
transaction for their shares of $4.20 Preferred and/or $5.00 Preferred a pro
rata share of (i) a cash amount, (ii) debt and/or other securities of the
Company or of a subsidiary of the Company, and/or (iii) a portion of any
recovery the Company receives from certain litigation. The foregoing or any
other transaction pursuant to which the Company or any other party issues cash
or debt or equity securities in exchange for or in consideration of, or the
purchase or redemption, directly or indirectly, by the Company or any other
party, or all or a substantial portion of the Old Avatex Common Stock, the $4.20
Preferred and the $5.00 Preferred, is referred to collectively herein as the
"Transaction." It is our understanding that the initial cash requirements for
the Transaction will be obtained from the Company's currently existing cash
balances.
You have requested our written opinion (the "Opinion") as to the matters set
forth below. This Opinion values the Company as a going-concern (including
goodwill), on a pro forma basis, immediately after and giving effect to the
Transaction and the associated indebtedness. For purposes of this Opinion, "fair
value" shall be defined as the amount at which the Company would change hands
between a willing buyer and a willing seller, each having reasonable knowledge
of the relevant facts, neither being under any compulsion to act, with equity to
both;
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 2
and "present fair saleable value" shall be defined as the amount that may
be realized if the Company's aggregate assets (including goodwill) are sold as
an entirety with reasonable promptness in an arm's length transaction under
present conditions for the sale of comparable business enterprises, as such
conditions can be reasonably evaluated by Houlihan Lokey Howard & Zukin
Financial Advisors, Inc. ("Houlihan Lokey"). We have used the same valuation
methodologies in determining fair value and present fair saleable value for
purposes of rendering this Opinion. The term "identified contingent liabilities"
shall mean the stated amount of contingent liabilities identified to us and
valued by responsible officers of the Company, upon whom we have relied upon
without independent verification; no other contingent liabilities will be
considered. Being "able to pay its debts as they become absolute and mature"
shall mean that, assuming the Transaction has been consummated as proposed, and
including the Company's cash balances after the close of the Transaction, the
Company's financial forecasts for the period 1999 to 2003 indicate positive cash
flow for such period, including proceeds from asset sales (and after giving
effect to) the payment of installments due under loans made pursuant to the
indebtedness incurred in the Transaction, as such installments are scheduled at
the close of the Transaction. It is Houlihan Lokey's understanding, upon which
it is relying, that the Company's Board of Directors and any other recipient of
the Opinion will consult with and rely solely upon their own legal counsel with
respect to said definitions. No representation is made herein, or directly or
indirectly by the Opinion, as to any legal matter or as to the sufficiency of
said definitions for any purpose other than setting forth the scope of Houlihan
Lokey's Opinion hereunder.
Notwithstanding the use of the defined terms "fair value" and "present fair
saleable value," we have not been engaged to identify prospective purchasers or
to ascertain the actual prices at which and terms on which the Company can
currently be sold, and we know of no such efforts by others. Because the sale of
any business enterprise involves numerous assumptions and uncertainties, not all
of which can be quantified or ascertained prior to engaging in an actual selling
effort, we express no opinion as to whether the Company would actually be sold
for the amount we believe to be its fair value and present fair saleable value.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's form 10-K for the fiscal year ended March
31, 1998, the Company's form 10-Q for the nine month period
ending December 31, 1998, and the Company's internal, unaudited
results through February 28, 1999, which the Company's management
has identified as the most current information available;
2. reviewed copies of the following agreements: Employment
Agreements and Amendments, certain real estate appraisals,
Certificate of Designation of $5.00 Cumulative Preferred Stock,
Certificate of Designation of the $4.20 Cumulative Exchangeable
Series A Preferred Stock;
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 3
3. reviewed the General Terms and Conditions of Settlement Between
Avatex Corp. and Certain Preferred Shareholders, the Draft
Amended and Restated Merger Agreement, Draft Shareholders
Agreement, Draft Warrant Agreement, and Draft Promissory Note;
4. reviewed the Company's Performance Incentive Plan;
5. met with certain members of the senior management of the Company
to discuss the operations, financial condition, future prospects
and projected operations and performance of the Company;
6. visited certain facilities and business offices of the Company;
7. reviewed forecasts and projections prepared by the Company's
management with respect to the Company for the period March 1999
to May 2003 ("Certified Forecast");
8. reviewed other publicly available financial data for the Company
and certain publicly-held investments of the Company; and
9. conducted such other studies, analyses and investigations as we
have deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material
adverse change in the assets, financial condition, business or prospects of the
Company since the date of the most recent financial statements made available to
us. In addition, we have assumed the following:
1. The Company will limit employee cash bonuses to 25% of the
cumulative excess, after tax, cash flow from the sale of assets
(or from other sources not included in the forecast) since the
Transaction settlement in excess of the cumulative estimated,
after tax, cash proceeds projected for the respective period
subsequent to the Transaction in the Certified Forecast. Further,
the Company will make no distribution of cash bonuses until the
1-year anniversary of the Transaction. In addition, the Company
will make no cash bonuses if the Company's cash balance after
payment of such cash bonuses is less than $10 million prior to
the extinguishment of the Foxmeyer Bankruptcy Trustee note
("Trustee Note" hereinafter). Once the Trustee Note is
extinguished, the Company will make no cash bonuses if the
Company's cash balance after payment of such cash bonuses is less
than $5 million. Upon extinguishment of the Trustee Note and the
6.75% note to the Company's pre-Transaction preferred
shareholders ("Preferred Note" hereinafter), the above
limitations on the Company's
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 4
cash bonuses will be terminated. In addition, the above
limitations shall not apply to Litigation Income related bonuses
as defined in the Company's Performance Incentive Plan;
2. The Company and Mssrs. Butlers and Estrin will enter into
additional amendments to their respective employment agreements
under which Messrs. Butler or Estrin, as the case may be, will
agree to the deferred payment of severance or other benefits if
he is terminated without just cause under Section 5(d) of his
employment agreement, provided that (i) the agreement to defer
payment will not apply to any termination pursuant to the terms
of the paragraph immediately preceding Section 6 of the
employment agreement (other than as a result of the Transaction,
in which case no severance or other benefits will be paid of
deferred, or actions involving Phar-Mor or other entities
affiliated with Mr. Butler or Mr. Estrin, in which case severance
and other benefits will be deferred), and (ii) any severance and
other benefits that are deferred will be paid after the Trustee
note and the Preferred Note are paid or otherwise satisfied.
3. The Company will limit investments in non-publicly traded
securities (not included in the Certified Forecast) to the
greater of $2 million or 50% of the cumulative excess, after tax,
cash flow from the sale of assets (or from other sources not
included in the forecast) since the Transaction settlement in
excess of the cumulative estimated, after tax, cash proceeds
projected for the respective period subsequent to the Transaction
in the Certified Forecast until the Trustee Note is extinguished.
However, the Company will make no cash investments in
non-publicly traded securities (not included in the Certified
Forecast) if the Company's aggregate cash balances (excluding
cash related to the Company's real estate interests) after such
investments is less than $10 million before the Trustee Note is
extinguished. Once the Trustee Note is extinguished, the Company
will not make investments in non-publicly traded securities (not
included in the Certified Forecast) if the cash balance after
such investments is less than $5 million. Upon extinguishment of
the Trustee Note and the 6.75% note to the Company's
pre-Transaction preferred shareholders ("Preferred Note"
hereinafter), the above limitations on the Company's investments
in non-publicly traded securities (not included in the Certified
Forecast) will be terminated.
In addition, our analysis was predicated on the one of the following events
occurring prior to closing:
a) The Company obtaining a line of credit (or overdraft
availability) of at least $4MM from a financial institution; or
b) The Company completing the sale of its real estate investments
for an amount greater than $10MM before the transaction closing.
<PAGE>
Board of Directors
Avatex Corporation
May 6, 1999
Page 5
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion as of the
date of this letter that, assuming the Transaction had been consummated as
proposed, immediately after and giving effect to the Transaction: (a) on a pro
forma basis, the fair value and present fair saleable value of the Company's
assets would exceed the Company's stated liabilities and identified contingent
liabilities; (b) the Company should be able to pay its debts as they become
absolute and mature; and (c) the capital remaining in the Company after the
Transaction would not be unreasonably small for the business in which the
Company is engaged, as management has indicated it is now conducted and is
proposed to be conducted following the consummation of the Transaction.
This Opinion is furnished solely for your benefit and may not be relied upon by
any other person without our express, prior written consent. This Opinion is
delivered to each recipient subject to the conditions, scope of engagement,
limitations and understandings set forth in this Opinion and our engagement
letter dated January 8, 1999, and subject to the understanding that the
obligations of Houlihan Lokey in the Transaction are solely corporate
obligations, and no officer, director, employee, agent, shareholder or
controlling person of Houlihan Lokey shall be subjected to any personal
liability whatsoever to any person, nor will any such claim be asserted by or on
behalf of you or your affiliates.
/s/ HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE>
- --------------------------------------------------------------------------------
Supporting Exhibits
- --------------------------------------------------------------------------------
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- -------------------------------------------------------------------------------
Avatex Corporation
Summary of Current Balance Sheet Items
- --------------------------------------------------------------------------------
ASSUMPTION: 100% CASH ELECTION
-----------------------------------------------
Pre Deal Post Deal Management
Estimated Impact Of Estimated Estimated
Assets FMV Transaction FMV FMV
-----------------------------------------------
Total Liquid Assets 24,012 (17,650) 6,362 6,362
Total Receivables 2,544 -- 2,544 3,544
Total Inv. In Public Securities 57,204 -- 57,204 66,155
Total VC Investments 9,977 -- 9,977 9,593
Total Real Estate 11,000 -- 11,000 12,000
Total Other Assets 5,433 -- 5,433 5,433
-----------------------------------------------
Total Assets 110,169 (17,650) 92,519 103,087
Liabilities
Total Debt Obligations 9,226 34,000 43,226 43,226
Total Contingent Liabilities 19,804 -- 19,804 22,010
Total A/P & Accruals [**] -- [**] [**]
-----------------------------------------------
Total Obligations [**] 34,000 [**] [**]
-----------------------------------------------
NET EQUITY CUSHION [**] (51,650) [**] [**]
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
Avatex Corporation
Solvency Analysis
<TABLE>
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
----------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Estimated
Book Value GAAP Value
At 12/31/98 2/28/99 At 7/31/99
----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 27,569 27,892 31,528
Cash Accounts 113 -- --
Grand Bank money market 1,251 -- --
Cash surrender value 1,026 1,076 1,484
Restricted Cash (Real Estate) 340 324 324
Cash Associated W/Real Estate 313 770 770
----------------------------------------
Total Liquid Assets 30,612 30,062 34,106
Receivables
Real Estate operating receivables 230 247 247
Other receivables parent company 75 44 44
Receivable from Nat Steel Corp. -- -- --
Note receivable from Shopko 2,500 2,500 3,500
Bernstein Receivable -- -- 3,035
Best Western sale -- -- --
----------------------------------------
Total Receivables 2,805 2,791 6,826
Investment In Public Securities Ownership Price As Of
------------------------ ----------------------
Carson Inc Stock 1,731.690 11.6% [**] 4/28/99 6,927 5,412 6,386
JW-Genesis Stock 80.000 1.5% $14.13 4/28/99 1,781 2,059 1,130
Phar-Mor Stock 4,704.033 38.4% [**] 4/28/99 23,877 23,802 23,520
Phar-Mor Warrants 91.902 N/A $0.750 4/28/99 75 70 69
Imagyn Med. Tech. Stock 1,914.827 4.9% $0.313 4/28/99 383 1,666 598
Imagyn Warrants -- -- --
----------------------------------------
Total Investment In Public Securities 33,043 33,009 31,703
Venture Capital Investments
RAS Service LP 27 31 --
RAS Holding 934 1,480 2,480
Chemlink Acquisition Co 2,807 2,726 3,016
Caring Technologies 1,490.462 $1.000 1,288 1,288 1,490
HPD Holdings Corp. 1,250 1,250 1,413
Dividends accrued on investments 166 163 --
Alumet Partnership -- -- --
Cyclone -- -- --
Ben Franklin -- -- --
AM Partners -- -- --
Emultek -- 44 44
Proscape Technologies 150 150 150
----------------------------------------
Total Venture Capital Investments 6,622 7,132 8,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 8,432 8,395 8,395
Best Western -- -- --
RIVA Properties 4,953 4,901 4,901
NRA Building (Marriott) 16,650 17,407 17,407
----------------------------------------
Total Real Estate 30,035 30,703 30,703
Other Assets
Pension Plans 10,535 10,779 10,779
PP&E (Parent) 133 126 126
Trust Assets 11 -- --
Prepaids 290 307 307
Real Estate deferred costs for debt, invent. 213 200 200
Intangibles (relating to real estate purchases) 720 703 703
Deferred debt issue costs (real estate) 787 783 783
Best Western franchise purchase 38 38 38
Litigation Settlement -- -- --
----------------------------------------
Total Other Assets 12,727 12,936 12,936
----------------------------------------
TOTAL ASSETS 115,844 116,633 124,868
========================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- --
Note Foxmeyer Bankruptcy Trustee (PIK) 8,835 8,944 9,226
Real Estate - RIVA (Non-Recourse) 5,163 5,151 5,151
Real Estate - Howard Johnson (Non-Recourse) 7,403 7,333 7,333
Real Estate - NRA Builiding (Non-Recourse) 13,002 13,008 13,008
New Line Of Credit
----------------------------------------
Total Debt Obligations 34,403 34,436 34,718
Contingent Liabilities
Environmental Claims [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] [**] [**] [**]
Lawsuit - [**] -- -- --
Reserve for USHDI Disc. Ops. [**] [**] [**]
PBM accrued commission on Shopko note [**] [**] [**]
Directors' pension/Wilson/Thompson [**] [**] [**]
Retiree Healthcare (Total) [**] [**] [**]
Nonqualified Ret. Plans (Total) [**] [**] [**]
Reserve For O/S Permian LP units [**] [**] [**]
NAC Shut-down Reserves [**] [**] [**]
Natmin reserves [**] [**] [**]
National Intergroup Pension Liability -- -- --
Alumet Obligation [**] [**] [**]
Other Contingent Liabilities -- -- --
Tax On Built In Capital Gains -- -- --
----------------------------------------
Total Contingent Liabilities 11,577 11,423 11,207
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,173 1,281 1,303
Real Estate Accrued Payables 587 606 606
[**] [**] [**] [**]
Proxy-Annual report costs 87 99 99
Payroll 765 904 904
Accrued franchise taxes 78 78 78
[**] [**] [**] [**]
Audit accrual 134 87 87
Real Estate Accrued Liabilities 898 2,213 2,213
----------------------------------------
Total A/P & Accruals [**] [**] [**]
Total Obligations [**] [**] [**]
Net Equity Cushion [**] [**] [**]
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
---------------------------------------------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Pre Deal
Less: Accounting FMV Estimated Impact Of
Real Estate Adjustments Adjustments FMV Transaction
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Liquid Assets
Overnight Investments (9,000) -- -- 22,528 (17,650)
Cash Accounts -- -- -- -- --
Grand Bank money market -- -- -- -- --
Cash surrender value -- -- -- 1,484 --
Restricted Cash (Real Estate) (324) -- -- -- --
Cash Associated W/Real Estate (770) -- -- -- --
---------------------------------------------------------------------
Total Liquid Assets (10,094) -- -- 24,012 (17,650)
Receivables
Real Estate operating receivables (247) -- -- -- --
Other receivables parent company -- -- -- 44 --
Receivable from Nat Steel Corp. -- -- -- -- --
Note receivable from Shopko -- -- (1,000) 2,500 --
Bernstein Receivable (3,035) -- -- -- --
Best Western sale -- -- -- -- --
---------------------------------------------------------------------
Total Receivables (3,282) -- (1,000) 2,544 --
Investment In Public Securities
Carson Inc Stock -- -- [**] [**] --
JW-Genesis Stock -- -- 0 1,130 --
Phar-Mor Stock -- -- [**] [**] --
Phar-Mor Warrants -- -- -- 69 --
Imagyn Med. Tech. Stock -- -- (150) 449 --
Imagyn Warrants -- -- -- -- --
---------------------------------------------------------------------
Total Investment In Public Securities -- -- 25,501 57,204 --
Venture Capital Investments
RAS Service LP -- -- -- -- --
RAS Holding -- -- -- 2,480 --
Chemlink Acquisition Co -- -- -- 3,016 --
Caring Technologies -- -- -- 1,490 --
HPD Holdings Corp. -- -- -- 1,413 --
Dividends accrued on investments -- -- -- -- --
Alumet Partnership -- -- 1,383 1,383 --
Cyclone -- -- -- -- --
Ben Franklin -- -- -- -- --
AM Partners -- -- -- -- --
Emultek 44
Proscape Technologies -- -- -- 150 --
-
---------------------------------------------------------------------
Total Venture Capital Investments -- -- 1,383 9,977 --
Real Estate
Howard Johnson (Includes Total FMV Adj.) (8,395) -- 11,000 11,000 --
Best Western -- -- -- -- --
RIVA Properties (4,901) -- -- -- --
NRA Building (Marriott) (17,407) -- -- -- --
---------------------------------------------------------------------
Total Real Estate (30,703) -- 11,000 11,000 --
Other Assets
Pension Plans (10,779) -- -- -- --
PP&E (Parent) -- -- -- 126 --
Trust Assets -- -- -- -- --
Prepaids -- -- -- 307 --
Real Estate deferred costs for debt, invent. (200) -- -- -- --
Intangibles (relating to real estate purchases) (703) -- -- -- --
Deferred debt issue costs (real estate) (783) -- -- -- --
Best Western franchise purchase (38) -- -- -- --
Litigation Settlement -- -- 5,000 5,000 --
---------------------------------------------------------------------
Total Other Assets (12,503) -- 5,000 5,433 --
---------------------------------------------------------------------
TOTAL ASSETS (56,582) -- 41,884 110,169 (17,650)
=====================================================================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs -- -- -- -- 34,000
Note Foxmeyer Bankruptcy Trustee (PIK) -- -- -- 9,226 --
Real Estate - RIVA (Non-Recourse) (5,151) -- -- -- --
Real Estate - Howard Johnson (Non-Recourse) (7,333) -- -- -- --
Real Estate - NRA Builiding (Non-Recourse) (13,008) -- -- -- --
New Line Of Credit
---------------------------------------------------------------------
Total Debt Obligations (25,492) -- -- 9,226 34,000
Contingent Liabilities
Environmental Claims -- -- [**] [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- -- [**] --
Lawsuit - [**] -- -- [**] [**] --
Reserve for USHDI Disc. Ops. -- -- [**] [**] --
PBM accrued commission on Shopko note -- -- -- [**] --
Directors' pension/Wilson/Thompson -- -- -- [**] --
Retiree Healthcare (Total) -- -- [**] [**] --
Nonqualified Ret. Plans (Total) -- -- -- [**] --
Reserve For O/S Permian LP units -- -- -- [**] --
NAC Shut-down Reserves -- -- [**] [**] --
Natmin reserves -- [**] -- -- --
National Intergroup Pension Liability -- -- [**] -- --
Alumet Obligation -- -- [**] -- --
Other Contingent Liabilities -- -- [**] [**] --
Tax On Built In Capital Gains -- -- -- -- --
---------------------------------------------------------------------
Total Contingent Liabilities -- (244) 8,841 19,804 --
Accounts Payable & Accruals
Outstanding checks and accounts payable -- -- -- 1,303 --
Real Estate Accrued Payables (606) -- -- -- --
[**] [**] [**] [**] [**] [**]
Proxy-Annual report costs -- -- -- 99 --
Payroll -- 879) -- 25 --
Accrued franchise taxes -- -- -- 78 --
[**] [**] [**] [**] [**] [**]
Audit accrual -- -- -- 87 --
Real Estate Accrued Liabilities (2,213) -- -- -- --
---------------------------------------------------------------------
Total A/P & Accruals (2,819) [**] [**] [**] --
Total Obligations (28,311) [**] [**] [**] 34,000
Net Equity Cushion (28,271) [**] [**] [**] (51,650)
<CAPTION>
ASSUMPTION: 100% CASH ELECTION
------------------------------
As of April 28, 1999
(in millions $, except shares and mkt. prices) Post Deal Management
Estimated Estimated
FMV FMV
------------------------------
<S> <C> <C>
ASSETS
Liquid Assets
Overnight Investments 4,878 4,878
Cash Accounts -- --
Grand Bank money market -- --
Cash surrender value 1,484 1,484
Restricted Cash (Real Estate) -- --
Cash Associated W/Real Estate -- --
------------------------------
Total Liquid Assets 6,362 6,362
Receivables
Real Estate operating receivables -- --
Other receivables parent company 44 44
Receivable from Nat Steel Corp. -- --
Note receivable from Shopko 2,500 3,500
Bernstein Receivable -- --
Best Western sale -- --
------------------------------
Total Receivables 2,544 3,544
Investment In Public Securities
Carson Inc Stock [**] [**]
JW-Genesis Stock 1,130 1,130
Phar-Mor Stock [**] [**]
Phar-Mor Warrants 69 69
Imagyn Med. Tech. Stock 449 598
Imagyn Warrants -- --
------------------------------
Total Investment In Public Securities 57,204 66,155
Venture Capital Investments
RAS Service LP -- -
RAS Holding 2,480 2,480
Chemlink Acquisition Co 3,016 3,016
Caring Technologies 1,490 1,490
HPD Holdings Corp. 1,413 1,413
Dividends accrued on investments -- --
Alumet Partnership 1,383 1,000
Cyclone -- --
Ben Franklin -- --
AM Partners -- --
Emultek 44 44
Proscape Technologies 150 150
------------------------------
Total Venture Capital Investments 9,977 9,593
Real Estate
Howard Johnson (Includes Total FMV Adj.) 11,000 12,000
Best Western -- --
RIVA Properties -- --
NRA Building (Marriott) -- --
------------------------------
Total Real Estate 11,000 12,000
Other Assets
Pension Plans -- --
PP&E (Parent) 126 126
Trust Assets -- --
Prepaids 307 307
Real Estate deferred costs for debt, invent. -- --
Intangibles (relating to real estate purchases) -- --
Deferred debt issue costs (real estate) -- --
Best Western franchise purchase -- --
Litigation Settlement 5,000 5,000
------------------------------
Total Other Assets 5,433 5,433
------------------------------
TOTAL ASSETS 92,519 103,087
==============================
LIABILITIES
Debt Obligations
Note To Former Preferred S/Hs 34,000 34,000
Note Foxmeyer Bankruptcy Trustee (PIK) 9,226 9,226
Real Estate - RIVA (Non-Recourse) -- --
Real Estate - Howard Johnson (Non-Recourse) -- --
Real Estate - NRA Builiding (Non-Recourse) -- --
New Line Of Credit --
--
------------------------------
Total Debt Obligations 43,226 43,226
Contingent Liabilities
Environmental Claims [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Lawsuit - [**] [**] [**]
Reserve for USHDI Disc. Ops. [**] [**]
PBM accrued commission on Shopko note [**]
Directors' pension/Wilson/Thompson [**] [**]
Retiree Healthcare (Total) [**] [**]
Nonqualified Ret. Plans (Total) [**] [**]
Reserve For O/S Permian LP units [**] [**]
NAC Shut-down Reserves [**] [**]
Natmin reserves -- --
National Intergroup Pension Liability -- --
Alumet Obligation -- --
Other Contingent Liabilities [**] [**]
Tax On Built In Capital Gains -- [**]
------------------------------
Total Contingent Liabilities 19,804 22,010
Accounts Payable & Accruals
Outstanding checks and accounts payable 1,303 1,303
Real Estate Accrued Payables -- --
[**] [**] [**]
Proxy-Annual report costs 99 99
Payroll 25 25
Accrued franchise taxes 78 78
[**] [**] [**]
Audit accrual 87 87
Real Estate Accrued Liabilities -- --
------------------------------
Total A/P & Accruals [**] [**]
Total Obligations [**] [**]
Net Equity Cushion [**] [**]
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Avatex Corporation
Summary of Debt Outstanding
- --------------------------------------------------------------------------------
(1) Foxmeyer Trustee Note - Approximately $9MM PIK at the prime rate maturing
in 18 months (10/2000). Note secured by 1.1MM shares of Phar-Mor common
stock. Note conservatively valued at face value.
(2) Preferred Security (Note/Preferred Stock) - $34 million face value with
interest at 6.75%, payable semi-annually. Entire principal amount due in
36 months. No interim amortization. Preferred security will be
collateralized by the 3.6MM Phar-Mor shares not pledged to the Foxmeyer
bankruptcy trustee.
<PAGE>
Avatex Corporation
Summary of Real Estate Investments
- --------------------------------------------------------------------------------
(000s)
<TABLE>
<CAPTION>
Howard Marriott Days Inn &
Johnsons Courtyard Office Bldg Totals
-------- --------- ----------- ------
<S> <C> <C> <C> <C>
Est. FMV of Property [a] 15,000 18,000 8,000 41,000
Current Debt O/S [b] (7,403) (13,002) (5,158) (25,563)
------- ------- ------- -------
Indicated Equity Value 7,597 4,998 2,842 15,437
Avatex Preferred Interest [c] (3,976) (4,998) -- (8,974)
------- ------- ------- -------
Residual Equity Interest 3,620 -- 2,842 6,462
Avatex Share Of Res. Interest [d] 50% 50% 50% 50%
------- ------- ------- -------
Value of Avatex Res. Interest 1,810 -- 1,421 3,231
Aggregate Value of Avatex Interests 5,787 4,998 1,421 12,206
Adjustments
------- ------- ------- -------
Net Value of Avatex Interests 5,787 4,998 1,421 12,206
</TABLE>
a) Based on Avatex Mgmt value estimate (Arthur Andersen appraisal $11.7MM),
Thorne Consultants appraisal and Avatex Mgmt value estimate, respectively.
b) Source: Avatex Corporation. Debt is non-recourse to Avatex Corporation
c) Source: Avatex Corporation.
d) Source: Avatex Corporation.
Summary
According to Avatex management, the Company is currently negotiating to sell
both its preferred and residual interests in these properties to its JV partner
(Bernstein) for $12MM.
- --------------------------------------------------------------------------------
<PAGE>
Avatex Corporation
Summary of Major Venture Capital Investments
- --------------------------------------------------------------------------------
(1) RAS Holdings - Avatex directly owns approximately 9% (including warrants).
Investment of $2,480,000 includes the additional $1,000,000 investment to
be made in June 1999.
(2) Chemlink - Avatex's ownership is indirect with an acquisition company
(CLAC) of which Mel Estrin and Abbey Butler are the 2 BOD members. Avatex
owns 40% of CLAC which owns 50% of Chemlink (Avatex indirectly 20% of
Chemlink). Avatex's initial investment in CLAC was in 3/98. As of 4/28/99,
Avatex had invested $3,015,700 in CLAC/Chemlink.
(3) Caretech - Avatex directly owns 6.3% of Caring Technologies. Its
investment of $1,287,600 was made in December 1997 at a basis of $1.30 per
share. The Company records its investment at $1.00 per share and intends
to purchase an additional 500,000 shares in May 1999 for $1.00 per share.
(4) HPD - Avatex made a direct investment of $1,250,000 in April 1998 for 125
shares of preferred stock. As part of this investment, Avatex also
received a 2.5% interest in HPD's common stock. The Company records its
investment of $1,413,000 inclusive of dividends.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Statement of Cash Flows @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000
Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flow Used for Operations
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and Benefits 0.213 0.221 0.232 0.214 0.208 0.202 0.296 0.200
Travel 0.006 0.001 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.026 0.017 0.022 0.025 0.022 0.022 0.025 0.014
Consulting 0.063 0.008 0.008 0.033 0.004 0.014 0.017 0.004
Equity Restructuring Costs -- -- -- -- -- -- -- --
Audit 0.042 0.004 -- -- 0.010 0.023 0.021 --
Actuarial Fees -- -- 0.003 0.003 0.005 0.005 0.003 0.003
Legal Fees 0.271 0.334 0.326 0.509 0.309 0.274 0.274 0.274
Legal Settlements 0.000 0.175 -- -- 0.050 1.000 -- --
Insurance 0.007 0.164 -- 0.572 0.051 0.002 -- --
Public Company Expenses -- 0.010 0.045 0.005 0.005 0.005 0.005 0.077
Rent, Supplies and Other 0.027 0.029 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.077 0.042 0.103 0.057 0.054 0.054 0.057 0.054
Environmental Payments 0.029 0.069 0.053 0.005 0.007 0.005 0.019 0.059
Tax Payments 0.003 (0.028) -- 0.023 -- 0.023 -- --
Repayment of Trustee Note -- -- -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- -- -- 15.250
Elliot/Marx Expenses -- -- -- -- -- -- -- 2.000
Avatex Transaction and Legal Expense, Including
Merger Expense 0.143 0.072 0.124 0.142 0.400 0.100 0.100 0.300
Interest Expense on Preferred Stock Note -- -- -- -- -- -- -- --
Payment of Note -- -- -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- -- -- --
Caring Technology -- -- -- -- 0.500 -- -- --
RAS Holdings -- 0.467 -- -- 1.000 -- -- --
Real Estate 0.238 -- -- -- -- -- -- --
--------------------------------------------------------------------------
Net Cash Outflow, Corporate 1.145 1.585 0.971 1.643 2.680 1.784 0.872 18.290
--------------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- -- --
Alumet -- -- -- -- -- -- -- --
Pittsburgh Seed Fund/Atlas Energy 0.010 0.040
Collection of Shopko Note Receivable -- -- -- -- -- -- -- --
Liquidation of Unidentified Assets
Borrowed Funds -- -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share
(1,731,690 shares) -- -- -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- -- --
Real Estate -- -- -- -- -- 9.000 -- --
Collection of Bernstein Receivable -- -- -- -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- -- --
Sale of JWGenesis -- 1.413 -- 1.002 -- -- -- --
Interest Income 0.120 0.103 0.114 0.112 0.105 0.115 0.129 0.089
--------------------------------------------------------------------------
Net Cash Inflow, Corporate 0.130 1.556 0.114 1.114 0.105 9.115 0.129 0.089
--------------------------------------------------------------------------
Corporate Net Cash Flow (1.015) (0.029) (0.857) (0.529) (2.575) 7.332 (0.743) (18.201)
==========================================================================
--------------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- -- --
--------------------------------------------------------------------------
Consolidated Net Cash Flow (1.015) (0.029) (0.857) (0.529) (2.575) 7.332 (0.743) (18.201)
==========================================================================
Cash Balance, Beginning of Period 28.937 27.922 27.893 27.036 26.507 23.933 31.264 30.522
Cash Balance, End of Period 27.922 27.893 27.036 26.507 23.933 31.264 30.522 12.321
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000 FY 2000
Sep-99 Oct-99 Nov-99 Dec-99 Jan-00 Feb-00 Mar-00 Average
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow Used for Operations
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and Benefits 0.200 0.200 0.300 0.292 0.217 0.174 0.169 0.223
Travel 0.025 0.025 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.014 0.017 0.014 0.014 0.014 0.014 0.014 0.017
Consulting 0.005 -- -- -- -- -- -- 0.006
Equity Restructuring Costs -- -- -- -- -- -- -- --
Audit -- -- -- -- -- 0.015 -- 0.006
Actuarial Fees -- -- -- -- 0.003 0.003 0.003 0.002
Legal Fees 0.304 0.274 0.274 0.294 0.173 0.173 0.193 0.277
Legal Settlements -- -- -- [**] -- -- -- [**]
Insurance 0.138 -- 0.055 -- 0.166 -- -- 0.082
Public Company Expenses 0.005 0.005 0.005 0.005 0.005 0.005 0.005 0.011
Rent, Supplies and Other 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.054 0.054 0.054 0.069 0.077 0.053 0.071 0.059
Environmental Payments 0.005 0.005 0.005 0.005 0.013 0.005 0.013 0.012
Tax Payments 0.023 -- -- 0.023 -- -- 0.023 0.010
Repayment of Trustee Note -- -- -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- -- -- 1.271
Elliot/Marx Expenses -- -- -- -- -- -- -- 0.167
Avatex Transaction and Legal Expense, Including
Merger Expense 0.100 -- -- -- -- -- -- 0.095
Interest Expense on Preferred Stock Note -- -- -- -- -- 1.063 -- 0.089
Payment of Note -- -- -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- -- -- --
Caring Technology -- -- -- -- -- -- -- 0.042
RAS Holdings -- -- -- -- -- -- -- 0.083
Real Estate -- -- -- -- -- -- -- --
----------------------------------------------------------------------------
Net Cash Outflow, Corporate 0.903 0.610 0.762 [**] 0.723 1.560 0.546 [**]
----------------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- -- --
Alumet 0.350 -- -- -- -- -- -- 0.029
Pittsburgh Seed Fund/Atlas Energy
Collection of Shopko Note Receivable -- -- -- -- -- -- 4.754 0.396
Liquidation of Unidentified Assets
Borrowed Funds -- -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share
(1,731,690 shares) -- -- [**] -- -- -- -- [**]
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- -- 0.750
Collection of Bernstein Receivable -- -- -- -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- -- --
Sale of JWGenesis 1.400 -- -- -- -- -- -- 0.200
Interest Income 0.053 0.054 0.087 0.120 0.116 0.112 0.118 0.101
----------------------------------------------------------------------------
Net Cash Inflow, Corporate 1.803 0.054 [**] 0.120 0.116 0.112 4.872 [**]
----------------------------------------------------------------------------
Corporate Net Cash Flow 0.901 (0.556) [**] (1.137) (0.607) (1.448) 4.326 [**]
============================================================================
----------------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- -- --
----------------------------------------------------------------------------
Consolidated Net Cash Flow 0.901 (0.556) [**] (1.137) (0.607) (1.448) 4.326 [**]
============================================================================
Cash Balance, Beginning of Period 12.321 13.222 12.666 [**] 28.172 27.565 26.118 [**]
Cash Balance, End of Period 13.222 12.666 [**] 28.172 27.565 26.118 30.444 [**]
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Statement of Cash Flows @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2001
Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.170 0.166 0.165 0.241 0.163 0.163 0.163
Travel 0.025 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.017 0.014 0.014 0.017 0.014 0.014 0.017
Consulting 0.010 -- 0.010 -- -- 0.005 --
Equity Restructuring Costs -- -- -- -- -- -- --
Audit -- 0.010 0.023 0.021 -- -- --
Actuarial Fees 0.003 0.005 0.005 0.003 0.003 -- --
Legal Fees 0.173 0.173 0.193 0.153 0.153 0.198 0.153
Legal Settlements -- -- -- -- -- -- --
Insurance 0.572 0.051 0.002 -- -- 0.138 --
Public Company Expenses 0.005 0.005 0.005 0.005 0.077 0.005 0.005
Rent, Supplies and Other 0.030 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.036 0.036 0.036 0.039 0.036 0.036 0.036
Environmental Payments 0.005 0.007 0.005 0.019 0.059 0.005 0.005
Tax Payments -- 0.023 -- -- -- 0.023 --
Repayment of Trustee Note -- -- -- -- -- -- 10.082
Interest Expense on Negative Cash @ 10% -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- 1.138 -- --
Payment of Note -- -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- -- --
Caring Technology -- -- -- -- -- -- --
RAS Holdings -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
------------------------------------------------------------------------
Net Cash Outflow, Corporate 1.046 0.545 0.513 0.553 1.698 0.642 10.516
------------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- --
Alumet -- -- -- -- -- 0.325 --
Collection of Shopko Note Receivable -- -- -- -- -- -- --
Borrowed Funds -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
Collection of Bernstein Receivable -- -- 1.710 -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- -- --
Interest Income 0.125 0.122 0.124 0.126 0.122 0.118 0.096
------------------------------------------------------------------------
Net Cash Inflow, Corporate 0.125 0.122 1.834 0.126 0.122 0.443 0.096
------------------------------------------------------------------------
Corporate Net Cash Flow (0.921) (0.423) 1.322 (0.427) (1.576) (0.199) (10.420)
========================================================================
------------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- --
------------------------------------------------------------------------
Consolidated Net Cash Flow (0.921) (0.423) 1.322 (0.427) (1.576) (0.199) (10.420)
========================================================================
Cash Balance, Beginning of Period 30.444 29.523 29.101 30.422 29.996 28.420 28.222
Cash Balance, End of Period 29.523 29.101 30.422 29.996 28.420 28.222 17.802
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2001 FY 2001
Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Average
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.263 0.238 0.177 0.174 0.169 0.188
Travel 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.014 0.014 0.014 0.014 0.014 0.015
Consulting -- -- -- -- -- 0.002
Equity Restructuring Costs -- -- -- -- -- --
Audit -- -- -- 0.015 -- 0.006
Actuarial Fees -- -- 0.003 0.003 0.003 0.002
Legal Fees 0.153 0.198 0.153 0.153 0.133 0.165
Legal Settlements -- -- -- -- -- --
Insurance 0.055 -- 0.166 -- -- 0.082
Public Company Expenses 0.005 0.005 0.005 0.005 0.005 0.011
Rent, Supplies and Other 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.036 0.051 0.059 0.036 0.036 0.039
Environmental Payments 0.005 0.005 0.013 0.005 0.013 0.012
Tax Payments -- 0.023 -- -- 0.023 0.008
Repayment of Trustee Note -- -- -- -- -- 0.840
Interest Expense on Negative Cash @ 10% -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- 1.157 -- 0.191
Payment of Note -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- --
Caring Technology -- -- -- -- -- --
RAS Holdings -- -- -- -- -- --
Real Estate -- -- -- -- -- --
-------------------------------------------------------------------
Net Cash Outflow, Corporate 0.586 0.589 0.645 1.617 0.451 1.616
-------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet -- -- -- -- -- 0.027
Collection of Shopko Note Receivable -- -- -- -- -- --
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- 0.143
CD's from 6 Months to 3 Months -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- --
Interest Income 0.073 0.071 0.069 0.064 0.060 0.098
-------------------------------------------------------------------
Net Cash Inflow, Corporate 0.073 0.071 0.069 0.064 0.060 0.267
-------------------------------------------------------------------
Corporate Net Cash Flow (0.513) (0.518) (0.576) (1.553) (0.391) (1.349)
===================================================================
-------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- --
-------------------------------------------------------------------
Consolidated Net Cash Flow (0.513) (0.518) (0.576) (1.553) (0.391) (1.349)
===================================================================
Cash Balance, Beginning of Period 17.802 17.290 16.772 16.197 14.644 24.069
Cash Balance, End of Period 17.290 16.772 16.197 14.644 14.253 22.720
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Statement of Cash Flows @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 20002
Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.170 0.166 0.165 0.241 0.163 0.163 0.163
Travel 0.025 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.017 0.014 0.014 0.017 0.014 0.014 0.017
Consulting 0.010 -- 0.010 -- -- 0.005 --
Equity Restructuring Costs -- -- -- -- -- -- --
Audit -- 0.010 0.023 0.021 -- -- --
Actuarial Fees 0.003 0.005 0.005 0.003 0.003 -- --
Legal Fees 0.013 0.013 0.013 0.013 0.013 0.013 0.013
Legal Settlements -- -- -- -- -- -- --
Insurance 0.572 0.051 0.002 -- -- 0.138 --
Public Company Expenses 0.005 0.005 0.005 0.005 0.077 0.005 0.005
Rent, Supplies and Other 0.030 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.036 0.036 0.036 0.039 0.036 0.036 0.036
Environmental Payments 0.005 0.007 0.005 0.019 0.059 0.005 0.005
Tax Payments -- -- 0.023 -- -- 0.023 --
Repayment of Trustee Note -- -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- 1.138 -- --
Payment of Note -- -- -- -- -- -- --
Investments
ChemLink -- -- -- -- -- -- --
Caring Technology -- -- -- -- -- -- --
RAS Holdings -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
----------------------------------------------------------------------------
Net Cash Outflow, Corporate 0.886 0.362 0.356 0.413 1.558 0.457 0.294
----------------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- --
Alumet -- -- -- -- -- 0.325 --
Collection of Shopko Note Receivable -- -- -- -- -- -- --
Borrowed Funds -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
Collection of Bernstein Receivable -- -- 1.605 -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- -- --
Interest Income 0.058 0.055 0.057 0.059 0.056 0.052 0.052
----------------------------------------------------------------------------
Net Cash Inflow, Corporate 0.058 0.055 1.662 0.059 0.056 0.377 0.052
----------------------------------------------------------------------------
Corporate Net Cash Flow (0.828) (0.307) 1.306 (0.354) (1.502) (0.080) (0.242)
============================================================================
----------------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- --
----------------------------------------------------------------------------
Consolidated Net Cash Flow (0.828) (0.307) 1.306 (0.354) (1.502) (0.080) (0.242)
============================================================================
Cash Balance, Beginning of Period 14.253 13.425 13.119 14.425 14.071 12.569 12.489
Cash Balance, End of Period 13.425 13.119 14.425 14.071 12.569 12.489 12.247
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year 20002 FY 2002
Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Average
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.263 0.238 0.177 0.174 0.169 0.188
Travel 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.014 0.014 0.014 0.014 0.014 0.015
Consulting -- -- -- -- -- 0.002
Equity Restructuring Costs -- -- -- -- -- --
Audit -- -- -- 0.015 -- 0.006
Actuarial Fees -- -- 0.003 0.003 0.003 0.002
Legal Fees 0.013 0.013 0.013 0.013 0.013 0.013
Legal Settlements -- -- -- -- -- --
Insurance 0.055 -- 0.166 -- -- 0.082
Public Company Expenses 0.005 0.005 0.005 0.005 0.005 0.011
Rent, Supplies and Other 0.030 0.030 0.030 0.030 0.030 0.030
Other Cash Outflows
Retiree Payments 0.036 0.051 0.059 0.036 0.034 0.039
Environmental Payments 0.005 0.005 0.013 0.005 0.013 0.012
Tax Payments -- 0.023 -- -- 0.022 0.008
Repayment of Trustee Note -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- -- 0.095
Payment of Note -- -- -- 1.157 -- 0.096
Investments
ChemLink -- -- -- -- -- --
Caring Technology -- -- -- -- -- --
RAS Holdings -- -- -- -- -- --
Real Estate -- -- -- -- -- --
---------------------------------------------------------------------
Net Cash Outflow, Corporate 0.446 0.404 0.505 1.477 0.328 0.624
---------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet -- -- -- -- -- 0.027
Collection of Shopko Note Receivable -- -- -- -- -- --
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- 0.134
CD's from 6 Months to 3 Months -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- --
Interest Income 0.050 0.049 0.047 0.043 0.039 0.051
---------------------------------------------------------------------
Net Cash Inflow, Corporate 0.050 0.049 0.047 0.043 0.039 0.212
---------------------------------------------------------------------
Corporate Net Cash Flow (0.396) (0.355) (0.458) (1.434) (0.289) (0.412)
=====================================================================
---------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- --
---------------------------------------------------------------------
Consolidated Net Cash Flow (0.396) (0.355) (0.458) (1.434) (0.289) (0.412)
=====================================================================
Cash Balance, Beginning of Period 12.247 11.851 11.496 11.038 9.604 12.549
Cash Balance, End of Period 11.851 11.496 11.038 9.604 9.315 12.137
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Statement of Cash Flows @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003
Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.170 0.166 0.165 0.241 0.163 0.163 0.163
Travel 0.025 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.017 0.014 0.014 0.017 0.014 0.014 0.017
Consulting 0.010 -- 0.01 -- -- 0.005 --
Equity Restructuring Costs -- -- -- -- -- -- --
Audit -- 0.010 0.023 0.021 -- -- --
Actuarial Fees 0.003 0.005 0.005 0.003 0.003 -- --
Legal Fees 0.013 0.013 0.013 0.013 0.013 0.013 0.013
Legal Settlements -- -- -- -- -- -- --
Insurance 0.572 0.051 0.002 -- -- 0.138 --
Public Company Expenses 0.005 0.005 0.005 0.005 0.077 0.005 0.005
Rent, Supplies and Other 0.030 0.030 0.03 0.03 0.03 0.03 0.03
Other Cash Outflows
Retiree Payments 0.032 0.032 0.032 0.036 0.032 0.032 0.032
Environmental Payments 0.005 0.007 0.005 0.019 0.016 0.005 0.005
Tax Payments -- -- 0.023 -- -- 0.023 --
Repayment of Trustee Note -- -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- 1.333 -- --
Payment of Note -- -- -- -- 34.000 -- --
Investments
ChemLink -- -- -- -- -- -- --
Caring Technology -- -- -- -- -- -- --
RAS Holdings -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
---------------------------------------------------------------------
Net Cash Outflow, Corporate 0.882 0.358 0.352 0.410 35.706 0.453 0.290
---------------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- -- --
Alumet -- -- -- -- -- -- --
Collection of Shopko Note Receivable -- -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- 35.000 -- --
Borrowed Funds -- -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- -- --
Real Estate -- -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- -- --
Interest Income 0.037 0.035 0.033 0.032 0.030 0.027 0.026
---------------------------------------------------------------------
Net Cash Inflow, Corporate 0.037 0.035 0.033 0.032 35.030 0.027 0.026
---------------------------------------------------------------------
Corporate Net Cash Flow (0.845) (0.323) (0.319) (0.378) (0.676) (0.426) (0.264)
=====================================================================
---------------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- -- --
---------------------------------------------------------------------
Consolidated Net Cash Flow (0.845) (0.323) (0.319) (0.378) (0.676) (0.426) (0.264)
=====================================================================
Cash Balance, Beginning of Period 9.315 8.470 8.147 7.828 7.450 6.774 6.348
Cash Balance, End of Period 8.470 8.147 7.828 7.450 6.774 6.348 6.084
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003 FY 2003
Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Average
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.263 0.238 0.177 0.174 0.169 0.188
Travel 0.025 0.025 0.025 0.025 0.025 0.025
Directors' Fees 0.014 0.014 0.014 0.014 0.014 0.015
Consulting -- -- -- -- -- 0.002
Equity Restructuring Costs -- -- -- -- -- --
Audit -- -- -- 0.015 -- 0.006
Actuarial Fees -- -- 0.003 0.003 0.003 0.002
Legal Fees 0.013 0.013 0.013 0.013 0.013 0.013
Legal Settlements -- -- -- -- -- --
Insurance 0.055 -- 0.166 -- -- 0.082
Public Company Expenses 0.005 0.005 0.005 0.005 0.005 0.011
Rent, Supplies and Other 0.03 0.03 0.03 0.03 0.03 0.030
Other Cash Outflows
Retiree Payments 0.032 0.046 0.054 0.029 0.029 0.035
Environmental Payments 0.005 0.005 0.005 0.005 0.013 0.008
Tax Payments -- 0.023 -- -- 0.023 0.008
Repayment of Trustee Note -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- -- 0.111
Payment of Note -- -- -- -- -- 2.833
Investments
ChemLink -- -- -- -- -- --
Caring Technology -- -- -- -- -- --
RAS Holdings -- -- -- -- -- --
Real Estate -- -- -- -- -- --
-------------------------------------------------------------
Net Cash Outflow, Corporate 0.442 0.399 0.492 0.313 0.324 3.368
-------------------------------------------------------------
Cash Inflows
Other Income -- -- -- -- -- --
Dividends Received from Real Estate Operations -- -- -- -- -- --
Collection of NSC Note -- -- -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet -- -- -- -- -- --
Collection of Shopko Note Receivable -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- --
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- --
Interest Income 0.025 0.023 0.021 0.020 0.018 0.027
-------------------------------------------------------------
Net Cash Inflow, Corporate 0.025 0.023 0.021 0.020 0.018 2.944
-------------------------------------------------------------
Corporate Net Cash Flow (0.417) (0.376) (0.471) (0.293) (0.306) (0.424)
=============================================================
-------------------------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- -- -- --
-------------------------------------------------------------
Consolidated Net Cash Flow (0.417) (0.376) (0.471) (0.293) (0.306) (0.424)
=============================================================
Cash Balance, Beginning of Period 6.084 5.667 5.291 4.820 4.527 6.727
Cash Balance, End of Period 5.667 5.291 4.820 4.527 4.221 6.302
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Balance Sheet @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000
Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 28.937 27.922 27.893 27.036 26.507 23.933
Shopko Receivable 3.500 3.500 3.500 3.500 3.500 3.500
Bernstein Receivable -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- -- --
Imagyn Medical Technologies 0.383 1.264 1.666 1.077 0.598 0.598
Phar-Mor Stock 35.868 37.338 27.636 27.636 23.520 23.520
Phar-Mor Warrants 0.075 0.115 0.070 0.092 0.069 0.069
Carson, Inc. 6.927 6.169 5.412 7.576 6.386 6.386
JWGenesis Financial 1.781 2.100 2.059 1.845 1.130 1.130
Caring Technologies 0.990 0.990 0.990 0.990 1.490 1.490
HPD 1.352 1.352 1.413 1.413 1.413 1.413
RAS 0.963 0.963 1.480 1.480 1.480 2.480
ChemLink Laboratories 3.016 3.016 3.016 3.016 3.016 3.016
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office 0.789 0.789 0.789 0.789 0.789 0.789
Howard Johnson 5.665 5.665 5.665 5.665 5.665 5.665
Courtyard by Marriot 5.524 5.524 5.524 5.524 5.524 5.524
Cash Surrender Value 1.316 1.320 1.484 1.484 1.484 1.484
------------------------------------------------------------------------
Total Assets 97.086 98.027 88.597 89.123 82.571 80.997
------------------------------------------------------------------------
A/P & Accrued Liabilities 1.730 1.472 1.765 1.008 0.993 1.003
Reserve for USHDI 0.422 0.415 0.401 0.356 0.346 0.346
Environmental 1.629 1.600 1.531 1.478 1.473 1.466
Shopko Commissions 0.172 0.172 0.172 0.172 0.172 0.172
Trustee Note 8.835 8.892 8.944 9.001 9.056 9.113
Preferred Note -- -- -- -- -- --
Directors Pension/Wilson 1.021 1.015 1.013 0.962 0.955 0.952
Retiree HealthCare 3.928 3.917 3.830 3.804 3.777 3.751
Non-Qualified Plans 0.925 0.901 0.901 0.900 0.899 0.899
Lawsuits:
'94 Shareholder Suit 1.000 1.000 1.000 1.000 1.000 1.000
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- --
USHDI 0.175 0.175 -- -- -- --
Derivative [**] [**] [**] [**] [**] [**]
Midwest Freight 0.050 0.050 0.050 0.050 0.050 --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation 0.425 0.413 0.401 0.389 0.377 0.365
------------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
------------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
========================================================================
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000
Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 31.264 30.522 12.321 13.222 12.666 [**]
Shopko Receivable 3.500 3.500 3.500 3.500 3.500 3.500
Bernstein Receivable 3.017 3.035 3.053 3.070 3.088 3.105
Liquidation of Unidentified Assets -- -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. 6.386 6.386 6.386 6.386 6.386 --
JWGenesis Financial 1.130 1.130 1.130 -- -- --
Caring Technologies 1.490 1.490 1.490 1.490 1.490 1.490
HPD 1.413 1.413 1.413 1.413 1.413 1.413
RAS 2.480 2.480 2.480 2.480 2.480 2.480
ChemLink Laboratories 3.016 3.016 3.016 3.016 3.016 3.016
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- --
Howard Johnson -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- --
Cash Surrender Value 1.484 1.484 1.484 1.622 1.622 1.622
------------------------------------------------------------------------
Total Assets 79.367 78.643 60.460 60.386 59.848 [**]
------------------------------------------------------------------------
A/P & Accrued Liabilities 0.977 0.962 0.910 0.907 0.928 0.848
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 1.461 1.442 1.383 1.378 1.373 1.368
Shopko Commissions 0.172 0.172 0.172 0.172 0.172 0.172
Trustee Note 9.169 9.226 9.283 9.338 9.398 9.458
Preferred Note -- -- 34.101 34.289 34.484 34.673
Directors Pension/Wilson 0.949 0.946 0.942 0.939 0.936 0.932
Retiree HealthCare 3.724 3.698 3.672 3.645 3.619 3.593
Non-Qualified Plans 0.898 0.894 0.893 0.893 0.892 0.891
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- --
USHDI -- -- -- -- -- --
Derivative [**] [**] [**] [**] [**] [**]
Midwest Freight -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation 0.353 0.341 0.329 0.317 0.305 0.293
------------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
------------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
========================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Fiscal Year 2000 FY 2000
Dec-99 Jan-00 Feb-00 Mar-00 Average
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash [**] 27.565 26.118 30.444 24.337
Shopko Receivable 3.500 3.500 3.500 -- 3.208
Bernstein Receivable 3.123 3.141 3.157 3.175 2.580
Liquidation of Unidentified Assets -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069
Carson, Inc. -- -- -- -- 3.725
JWGenesis Financial -- -- -- -- 0.471
Caring Technologies 1.490 [**] [**] [**] 2.356
HPD 1.413 1.413 1.413 1.413 1.413
RAS 2.480 [**] [**] [**] 3.616
ChemLink Laboratories 3.016 [**] [**] [**] 6.112
Cyclone -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- 0.132
Howard Johnson -- -- -- -- 0.944
Courtyard by Marriot -- -- -- -- 0.921
Cash Surrender Value 1.622 1.785 1.785 1.785 1.605
----------------------------------------------------------------
Total Assets [**] 89.303 87.872 88.716 75.607
----------------------------------------------------------------
A/P & Accrued Liabilities 0.843 0.883 0.881 0.874 0.917
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346
Environmental 1.363 1.350 1.345 1.332 1.395
Shopko Commissions 0.172 0.172 0.172 -- 0.158
Trustee Note 9.520 9.581 9.639 9.700 9.373
Preferred Note 34.868 35.063 34.176 34.371 23.002
Directors Pension/Wilson 0.929 0.926 0.923 0.902 0.936
Retiree HealthCare 3.566 3.540 3.514 3.488 3.632
Non-Qualified Plans 0.887 0.863 0.862 0.862 0.886
Lawsuits:
'94 Shareholder Suit -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- --
USHDI -- -- -- -- --
Derivative -- -- -- -- [**]
Midwest Freight -- -- -- -- 0.004
Underfunded Pension -- -- -- -- --
Remaining Lease Obligation 0.280 0.268 0.256 0.244 0.311
----------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**]
----------------------------------------------------------------
Net [**] [**] [**] [**] [**]
================================================================
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Balance Sheet @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2001
Apr-00 May-00 Jun-00 Jul-00 Aug-00 Sep-00 Oct-00
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash 29.523 29.101 30.422 29.996 28.420 28.222 17.802
Shopko Receivable -- -- -- -- -- -- --
Bernstein Receivable 3.192 3.210 1.509 1.518 1.526 1.535 1.544
Liquidation of Unidentified Assets -- -- -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. -- -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- -- --
Howard Johnson -- -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- -- --
Cash Surrender Value 1.785 1.785 1.785 1.785 1.785 1.923 1.923
------------------------------------------------------------------------
Total Assets 87.812 87.408 87.028 86.611 85.043 84.992 74.581
------------------------------------------------------------------------
A/P & Accrued Liabilities 0.895 0.879 0.875 0.874 0.821 0.819 0.839
Reserve for USHDI 0.346 0.346 0.412 0.346 0.346 0.346 0.346
Environmental 1.327 1.320 1.315 1.296 1.237 1.232 1.227
Shopko Commissions -- -- -- -- -- -- --
Trustee Note 9.760 9.821 9.881 9.943 10.004 10.064 --
Preferred Note 34.560 34.755 34.943 35.138 34.195 34.384 34.578
Directors Pension/Wilson 0.899 0.895 0.892 0.889 0.885 0.882 0.879
Retiree HealthCare 3.479 3.470 3.462 3.453 3.445 3.436 3.427
Non-Qualified Plans 0.861 0.860 0.860 0.856 0.855 0.854 0.854
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- -- --
USHDI -- -- -- -- -- -- --
Derivative -- -- -- -- -- -- --
Midwest Freight -- -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- -- --
Remaining Lease Obligation 0.232 0.220 0.208 0.196 0.184 0.172 0.160
------------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**] [**]
------------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**] [**]
========================================================================
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fiscal Year 2001 FY 2001
Nov-00 Dec-00 Jan-01 Feb-01 Mar-01 Average
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 17.290 16.772 16.197 14.644 14.253 23.490
Shopko Receivable -- -- -- -- -- --
Bernstein Receivable 1.553 1.562 1.570 1.579 1.587 1.845
Liquidation of Unidentified Assets -- -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- --
Howard Johnson -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- --
Cash Surrender Value 1.923 1.923 2.087 2.087 2.087 1.890
----------------------------------------------------------------
Total Assets 74.078 73.569 117.907 116.363 115.980 88.672
----------------------------------------------------------------
A/P & Accrued Liabilities 0.760 0.755 0.792 0.794 0.787 0.828
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.352
Environmental 1.222 1.217 1.204 1.199 1.186 1.254
Shopko Commissions -- -- -- -- -- --
Trustee Note -- -- -- -- -- 5.407
Preferred Note 34.767 34.962 35.157 34.176 34.371 34.692
Directors Pension/Wilson 0.876 0.872 0.869 0.866 0.862 0.882
Retiree HealthCare 3.419 3.410 3.402 3.393 3.385 3.436
Non-Qualified Plans 0.853 0.849 0.825 0.824 0.823 0.850
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- --
USHDI -- -- -- -- -- --
Derivative -- -- -- -- -- --
Midwest Freight -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation 0.148 0.136 0.124 0.111 0.099 0.172
----------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
----------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
================================================================
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
AVATEX CORPORATION
Projected Balance Sheet @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2002
Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash 13.425 13.119 14.425 14.071 12.569 12.489 12.247
Shopko Receivable -- -- -- -- -- -- --
Bernstein Receivable 1.596 1.605 -- -- -- -- --
Liquidation of Unidentified Assets -- -- -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. -- -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- -- --
Howard Johnson -- -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- -- --
Cash Surrender Value 2.087 2.087 2.087 2.087 2.087 2.224 2.224
---------------------------------------------------------------------
Total Assets 115.161 114.864 114.565 114.211 112.709 112.766 112.524
---------------------------------------------------------------------
A/P & Accrued Liabilities 0.808 0.815 0.788 0.787 0.734 0.732 0.752
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 1.181 1.174 1.169 1.150 1.091 1.086 1.081
Shopko Commissions 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Trustee Note -- -- -- -- -- -- --
Preferred Note 34.560 34.755 34.943 35.138 34.195 34.384 34.578
Directors Pension/Wilson 0.859 0.856 0.853 0.849 0.846 0.843 0.839
Retiree HealthCare 3.376 3.368 3.359 3.351 3.342 3.334 3.325
Non-Qualified Plans 0.823 0.822 0.821 0.817 0.817 0.816 0.815
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- -- --
USHDI -- -- -- -- -- -- --
Derivative -- -- -- -- -- -- --
Midwest Freight -- -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- -- --
Remaining Lease Obligation 0.087 0.075 0.063 0.051 0.039 0.027 0.015
---------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**] [**]
---------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**] [**]
=====================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Fiscal Year 2002 FY 2002
Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Average
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 11.851 11.496 11.038 9.604 9.315 12.137
Shopko Receivable -- -- -- -- -- --
Bernstein Receivable -- -- -- -- -- 0.267
Liquidation of Unidentified Assets -- -- -- -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 0.069
Carson, Inc. -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- --
Howard Johnson -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- --
Cash Surrender Value 2.224 2.224 2.388 2.388 2.388 2.208
----------------------------------------------------------------
Total Assets 112.128 111.773 155.099 153.665 153.376 123.570
----------------------------------------------------------------
A/P & Accrued Liabilities 0.673 0.668 0.705 0.707 0.714 0.740
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 1.076 1.071 1.058 1.053 1.040 1.103
Shopko Commissions 0.000 0.000 0.000 0.000 0.000 --
Trustee Note -- -- -- -- -- --
Preferred Note 34.767 34.962 35.157 34.176 34.371 34.666
Directors Pension/Wilson 0.836 0.833 0.830 0.826 0.825 0.841
Retiree HealthCare 3.317 3.308 3.300 3.291 3.283 3.330
Non-Qualified Plans 0.815 0.811 0.787 0.786 0.785 0.810
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- --
USHDI -- -- -- -- -- --
Derivative -- -- -- -- -- --
Midwest Freight -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation 0.003 -- -- -- -- 0.030
----------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
----------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
================================================================
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Projected Balance Sheet @ 4/29/99
($000,000s)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003
Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash 8.470 8.147 7.828 7.450 6.774 6.348 6.084
Shopko Receivable -- -- -- -- -- -- --
Bernstein Receivable -- -- -- -- -- -- --
Liquidation of Unidentified Assets -- -- --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants 0.069 0.069 0.069 0.069 0.069 -- --
Carson, Inc. -- -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- -- --
Howard Johnson -- -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- -- --
Cash Surrender Value 2.388 2.388 2.388 2.388 2.388 2.526 2.526
-----------------------------------------------------------------------
Total Assets 152.531 152.208 151.889 151.511 150.835 150.478 150.214
-----------------------------------------------------------------------
A/P & Accrued Liabilities 0.743 0.757 0.737 0.743 0.698 0.704 0.731
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 1.035 1.028 1.023 1.004 0.988 0.983 0.978
Shopko Commissions -- -- -- -- -- -- --
Trustee Note -- -- -- -- -- -- --
Preferred Note 34.560 34.755 34.943 35.138 -- -- --
Directors Pension/Wilson 0.826 0.826 0.827 0.827 0.828 0.829 0.829
Retiree HealthCare 3.274 3.265 3.256 3.247 3.239 3.23 3.221
Non-Qualified Plans 0.784 0.784 0.783 0.779 0.778 0.778 0.777
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- -- --
USHDI -- -- -- -- -- -- --
Derivative -- -- -- -- -- -- --
Midwest Freight -- -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- -- --
Remaining Lease Obligation -- -- -- -- -- -- --
-----------------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**] [**]
-----------------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**] [**]
=======================================================================
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003 FY 2003
Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Average
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash 5.667 5.291 4.820 4.527 4.221 6.302
Shopko Receivable -- -- -- -- -- --
Bernstein Receivable -- -- -- -- -- --
Liquidation of Unidentified Assets --
Imagyn Medical Technologies 0.598 0.598 0.598 0.598 0.598 0.598
Phar-Mor Stock 23.520 23.520 23.520 23.520 23.520 23.520
Phar-Mor Warrants -- -- -- -- -- 0.029
Carson, Inc. -- -- -- -- -- --
JWGenesis Financial -- -- -- -- -- --
Caring Technologies [**] [**] [**] [**] [**] [**]
HPD 1.413 1.413 1.413 1.413 1.413 1.413
RAS [**] [**] [**] [**] [**] [**]
ChemLink Laboratories [**] [**] [**] [**] [**] [**]
Cyclone -- -- -- -- -- --
Real Estate:
Days Inn and Riva Office -- -- -- -- -- --
Howard Johnson -- -- -- -- -- --
Courtyard by Marriot -- -- -- -- -- --
Cash Surrender Value 2.526 2.526 2.690 2.690 2.690 2.510
---------------------------------------------------------------
Total Assets 149.797 149.421 219.256 218.963 218.657 167.980
---------------------------------------------------------------
A/P & Accrued Liabilities 0.659 0.662 0.706 0.716 0.717 0.714
Reserve for USHDI 0.346 0.346 0.346 0.346 0.346 0.346
Environmental 0.973 0.968 0.963 0.958 0.945 0.987
Shopko Commissions -- -- -- -- -- --
Trustee Note -- -- -- -- -- --
Preferred Note -- -- -- -- -- 11.616
Directors Pension/Wilson 0.83 0.832 0.834 0.839 0.843 0.831
Retiree HealthCare 3.212 3.203 3.194 3.158 3.176 3.223
Non-Qualified Plans 0.776 0.772 0.748 0.748 0.747 0.771
Lawsuits:
'94 Shareholder Suit -- -- -- -- -- --
'96 (St. & Fd.) Shareholder Suits - D&O [**] [**] [**] [**] [**] [**]
'96 (St. & Fd.) Shareholder Suits - Company -- -- -- -- -- --
USHDI -- -- -- -- -- --
Derivative -- -- -- -- -- --
Midwest Freight -- -- -- -- -- --
Underfunded Pension -- -- -- -- -- --
Remaining Lease Obligation -- -- -- -- -- --
---------------------------------------------------------------
Total Liabilities [**] [**] [**] [**] [**] [**]
---------------------------------------------------------------
Net [**] [**] [**] [**] [**] [**]
===============================================================
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
Avatex Corporation
Analysis of Average Monthly Management Cash Flow Projections
($000,000s)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
6 Month Actual FY 2000 FY 2001
Monthly Monthly Monthly
Average % Actual Average % Actual Average % Actual
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits [a] 0.264 100.0% 0.223 84.3% 0.188 71.1%
Travel 0.011 100.0% 0.025 238.1% 0.025 238.1%
Directors' Fees 0.018 100.0% 0.017 95.0% 0.015 80.5%
Consulting 0.017 100.0% 0.006 37.7% 0.002 12.3%
Equity Restructuring Costs 0.114 100.0% -- -- -- --
Audit 0.005 100.0% 0.006 115.0% 0.006 115.0%
Actuarial Fees 0.001 100.0% 0.002 175.0% 0.002 175.0%
Legal Fees [b] 0.125 100.0% 0.277 222.2% 0.165 132.6%
Legal Settlements [c] -- -- [**] -- -- --
Insurance [d] 0.032 100.0% 0.082 253.7% 0.082 253.6%
Public Company Expenses 0.016 100.0% 0.011 70.2% 0.011 70.2%
Rent, Supplies and Other 0.017 100.0% 0.030 180.0% 0.030 180.0%
Reimbursable Expenses (0.009) 100.0% -- -- -- --
Other Cash Outflows
Retiree Payments 0.078 100.0% 0.059 75.5% 0.039 50.4%
Environmental Payments 0.018 100.0% 0.012 66.4% 0.012 66.4%
Tax Payments 0.022 100.0% 0.010 43.6% 0.008 34.8%
USHDI Cash Outflows 0.032 100.0% -- 0.0% -- 0.0%
NAC Discounted Operations -- -- -- -- -- --
Purchase of PP&E 0.006 100.0% -- 0.0% -- 0.0%
Reclass of CD's Out of "Cash & Equivalents" 0.143 100.0% -- 0.0% -- 0.0%
Miscellaneous 0.001 100.0% -- 0.0% -- 0.0%
Interest Expense -- -- -- -- -- --
Repayment of Trustee Note -- -- -- -- 0.840 --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- 1.271 -- -- --
Elliot/Marx Expenses -- -- 0.167 -- -- --
Avatex Transaction and Legal Expense, Including Merger Expense -- -- 0.095 -- -- --
Interest Expense on Preferred Stock Note -- -- 0.089 -- 0.191 --
Payment of Note -- -- -- -- -- --
Investments
ChemLink 0.371 100.0% -- -- -- --
Caring Technology -- -- 0.042 -- -- --
RAS Holdings 0.078 100.0% 0.083 107.1% -- --
HPD Holdings Corp. -- -- -- -- -- --
Real Estate -- -- -- -- -- --
-------------------------------------------------------------------
Net Cash Outflow, Corporate [e] 1.213 100.0% [**] 217.3% 1.616 133.3%
-------------------------------------------------------------------
Cash Inflows
Other Income 0.002 100.0% -- 0.0% -- --
Dividends Received from Real Estate Operations 0.033 100.0% -- 0.0% -- --
Collection of NSC Note 0.833 100.0% -- 0.0% -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet 0.083 100.0% 0.029 35.0% 0.027 32.5%
Collection of Shopko Note Receivable 0.008 100.0% 0.396 4754.0% -- --
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) [f] -- -- [**] -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- 0.750 -- -- --
Sale of JWGenesis -- -- 0.200 -- -- --
Interest Income 0.130 100.0% 0.101 77.4% 0.098 74.8%
-------------------------------------------------------------------
Net Cash Inflow, Corporate 1.233 100.0% [**] 236.7% 0.267 21.7%
-------------------------------------------------------------------
Corporate Net Cash Flow 0.021 100.0% [**] 1385.4% (1.349) -6581.7%
===================================================================
-------------------------------------------------------------------
Real Estate Net Cash Used (Provided) 0.040 100.0% -- -- -- --
-------------------------------------------------------------------
Consolidated Net Cash Flow (0.019) 100.0% [**] 765.0% (1.349) 6978.9%
===================================================================
Cash Balance, Beginning of Period 29.210 100.0% 24.053 82.3% 24.069 82.4%
Cash Balance, End of Period 29.267 100.0% [**] 83.2% 22.720 77.6%
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FY 2002 FY 2003
Monthly Monthly
Average % Actual Average % Actual
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits [a] 0.188 71.1% 0.188 71.1%
Travel 0.025 238.1% 0.025 238.1%
Directors' Fees 0.015 80.5% 0.015 80.5%
Consulting 0.002 12.3% 0.002 12.3%
Equity Restructuring Costs -- -- -- --
Audit 0.006 115.0% 0.006 115.0%
Actuarial Fees 0.002 175.0% 0.002 175.0%
Legal Fees [b] 0.013 10.4% 0.013 10.4%
Legal Settlements [c] -- -- -- --
Insurance [d] 0.082 253.6% 0.082 253.6%
Public Company Expenses 0.011 70.2% 0.011 70.2%
Rent, Supplies and Other 0.030 180.0% 0.030 180.0%
Reimbursable Expenses -- -- -- --
Other Cash Outflows
Retiree Payments 0.039 50.2% 0.035 44.6%
Environmental Payments 0.012 66.4% 0.008 43.2%
Tax Payments 0.008 34.5% 0.008 34.8%
USHDI Cash Outflows -- -- -- --
NAC Discounted Operations -- -- -- --
Purchase of PP&E -- -- -- --
Reclass of CD's Out of "Cash & Equivalents" -- -- -- --
Miscellaneous -- -- -- --
Interest Expense -- -- -- --
Repayment of Trustee Note -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- --
Elliot/Marx Expenses -- -- -- --
Avatex Transaction and Legal Expense, Including Merger Expense -- -- -- --
Interest Expense on Preferred Stock Note 0.095 -- 0.111 --
Payment of Note 0.096 -- 2.833 --
Investments
ChemLink -- -- -- --
Caring Technology -- -- -- --
RAS Holdings -- -- -- --
HPD Holdings Corp. -- -- -- --
Real Estate -- -- -- --
---------------------------------------------
Net Cash Outflow, Corporate [e] 0.624 51.4% 3.368 277.8%
---------------------------------------------
Cash Inflows
Other Income -- -- -- --
Dividends Received from Real Estate Operations -- -- -- --
Collection of NSC Note -- -- -- --
Collection of Miscellaneous Receivables -- -- -- --
Alumet 0.027 32.5% -- 0.0%
Collection of Shopko Note Receivable -- -- -- --
Borrowed Funds -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) [f] -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- --
Real Estate -- -- -- --
Sale of JWGenesis -- -- -- --
Interest Income 0.051 39.5% 0.027 20.9%
---------------------------------------------
Net Cash Inflow, Corporate 0.212 17.2% 2.944 238.7%
---------------------------------------------
Corporate Net Cash Flow (0.412) -2007.3% (0.424) -2070.5%
=============================================
---------------------------------------------
Real Estate Net Cash Used (Provided) -- -- -- --
---------------------------------------------
Consolidated Net Cash Flow (0.412) 2128.4% (0.424) 2195.5%
=============================================
Cash Balance, Beginning of Period 12.549 43.0% 6.727 23.0%
Cash Balance, End of Period 12.137 41.5% 6.302 21.5%
</TABLE>
- --------------------------------------------------------------------------------
Notes:
[a] Salaries and benefits are declining over the course of the forecast
due to the expected decline in the number of individuals employed by
Avatex.
[b] Legal fees are increasing considerably in FY 2000 due to the $775k
for legal expenses in accounts payable to be paid in February 1999.
The fees associated with the Derivative lawsuit are another factor
associated with the higher legal fees forecast in the near-term.
[c] Legal settlements are expected in 5/99 with payment of $1.0 million
in the '94 Shareholder Suit and $[**] in [**] for the Derivative
suit. In [**] settlement of $[**] is expected to be paid
in the Derivative lawsuit.
[d] Insurance costs are increasing considerably in FY 2000 and
continuing at this level throughout the forecast period.
[e] The preferred stock settlement, primarily the cash ($17mm) paid to
preferreds, caused the corporate net cash outflow in FY 2000 to rise
considerably. The repayment of the trustee note ($10 mm) is the
primary reason for the rise in net cash outflow in FY 2001. In FY
2002, Avatex has not forecast any venture capital investments.
[f] The sale of all of the shares of Carson, Inc. owned by Avatex for
$[**] million is forecast for [**].
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Confidential Materials omitted and filed separately with the Securities and
Exchange Commission. Asterisks denote omissions.
- --------------------------------------------------------------------------------
AVATEX CORPORATION
Actual Statement of Cash Flows
($000,000s)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
6 Month Actual
Apr-98 May-98 Jun-98 Jul-98 Aug-98 Sep-98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 1.366 0.976 0.271 0.314 0.214 0.211
Travel 0.059 0.005 0.046 0.015 0.011 0.009
Directors' Fees 0.009 0.014 0.013 0.017 0.017 0.017
Consulting 0.022 0.011 0.011 0.022 0.020 0.017
Equity Restructuring Costs 0.318 0.104 0.517 0.035 0.385 0.056
Audit -- 0.042 -- -- -- 0.014
Actuarial Fees 0.003 0.012 -- 0.006 -- --
Legal Fees 0.154 0.049 0.129 0.081 0.157 0.098
Legal Settlements -- -- -- -- -- --
Insurance 0.362 0.077 0.057 0.001 0.138 --
Public Company Expenses 0.019 0.016 0.007 0.006 0.065 0.006
Rent, Supplies and Other 0.026 0.035 0.038 0.019 0.027 0.010
Other Cash Outflows
Retiree Payments 0.204 0.095 0.328 0.041 (0.102) 0.037
Environmental Payments 0.076 0.002 0.011 0.017 0.011 0.043
Tax Payments 0.002 -- 0.035 0.085 0.022 --
Repayment of Trustee Note -- -- -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- -- -- --
Elliot/Marx Expenses -- -- -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- -- -- --
Payment of Note -- -- -- -- -- --
Investments
ChemLink -- -- 0.125 -- -- --
Caring Technology -- -- -- -- -- --
RAS Holdings 0.467 -- -- 0.467 -- --
Real Estate -- -- -- -- -- --
----------------------------------------------------------------
Net Cash Outflow, Corporate 4.367 1.447 2.468 1.121 0.970 0.499
----------------------------------------------------------------
Cash Inflows
Other Income 0.014 0.061 0.004 0.002 0.002 0.002
Dividends Received from Real Estate Operations -- -- -- 0.100 -- --
Collection of NSC Note -- 2.500 -- -- -- --
Collection of Miscellaneous Receivables -- -- -- -- -- --
Alumet -- -- -- -- -- 0.500
Collection of Shopko Note Receivable -- -- -- -- 0.050 --
Borrowed Funds -- -- -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- -- -- --
Real Estate -- -- -- -- -- --
Collection of Bernstein Receivable -- -- -- -- -- --
CD's from 6 Months to 3 Months -- -- -- -- --
Sale of JWGenesis -- -- -- -- -- --
Interest Income 0.142 0.136 0.139 0.141 0.132 0.124
----------------------------------------------------------------
Net Cash Inflow, Corporate 0.156 2.697 0.143 0.243 0.184 0.626
----------------------------------------------------------------
Corporate Net Cash Flow (4.211) 1.250 (2.325) (0.878) (0.786) 0.127
================================================================
----------------------------------------------------------------
Real Estate Net Cash Used (Provided) (0.146) 0.017 (1.051) (0.064) (0.226) 0.595
----------------------------------------------------------------
Consolidated Net Cash Flow (4.065) 1.233 (1.274) (0.814) (0.560) (0.468)
================================================================
Cash Balance, Beginning of Period 34.193 30.128 31.361 30.087 29.273 28.713
Cash Balance, End of Period 30.128 31.361 30.087 29.273 28.713 28.245
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
6 Month Actual 6-Month
Oct-98 Nov-98 Dec-98 Average
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash Flow Used for Operations
Salaries and Benefits 0.205 0.318 0.322 0.264
Travel 0.005 0.012 0.011 0.011
Directors' Fees 0.017 0.017 0.025 0.018
Consulting 0.027 0.008 0.008 0.017
Equity Restructuring Costs 0.207 -- -- 0.114
Audit -- -- 0.016 0.005
Actuarial Fees 0.001 -- 0.001 0.001
Legal Fees 0.389 0.004 0.018 0.125
Legal Settlements -- -- -- --
Insurance -- 0.055 -- 0.032
Public Company Expenses 0.005 0.001 0.011 0.016
Rent, Supplies and Other 0.021 0.009 0.014 0.017
Other Cash Outflows
Retiree Payments 0.331 0.110 0.052 0.078
Environmental Payments 0.034 -- 0.005 0.018
Tax Payments -- -- 0.025 0.022
Repayment of Trustee Note -- -- -- --
Interest Expense on Negative Cash @ 10% -- -- -- --
Preferred Stock Settlement (100%)
Cash Paid to all Preferreds -- -- -- --
Elliot/Marx Expenses -- -- -- --
Avatex Transaction and Legal Expense, Including
Merger Expense -- -- -- --
Interest Expense on Preferred Stock Note -- -- -- --
Payment of Note -- -- -- --
Investments
ChemLink -- -- 2.228 0.371
Caring Technology -- -- -- --
RAS Holdings -- -- -- 0.078
Real Estate -- -- -- --
----------------------------------------------
Net Cash Outflow, Corporate 1.238 0.712 2.736 1.213
----------------------------------------------
Cash Inflows
Other Income 0.003 0.002 -- 0.002
Dividends Received from Real Estate Operations 0.100 -- -- 0.033
Collection of NSC Note -- 5.000 -- 0.833
Collection of Miscellaneous Receivables -- -- -- --
Alumet -- -- -- 0.083
Collection of Shopko Note Receivable -- -- -- 0.008
Borrowed Funds -- -- -- --
Sale of Carson, Inc. @ $[**]/share (1,731,690 shares) -- -- -- --
Sale of Phar-Mor, Inc. @ $[**]/share -- -- -- --
Real Estate -- -- -- --
Collection of Bernstein Receivable -- -- -- --
CD's from 6 Months to 3 Months -- -- 0.856 0.143
Sale of JWGenesis -- -- -- --
Interest Income 0.121 0.113 0.151 0.130
----------------------------------------------
Net Cash Inflow, Corporate 0.224 5.115 1.007 1.233
----------------------------------------------
Corporate Net Cash Flow (1.014) 4.403 (1.729) 0.021
==============================================
----------------------------------------------
Real Estate Net Cash Used (Provided) (0.352) 0.286 -- 0.040
----------------------------------------------
Consolidated Net Cash Flow (0.662) 4.117 (1.729) (0.019)
==============================================
Cash Balance, Beginning of Period 28.245 27.583 30.666 29.210
Cash Balance, End of Period 27.583 31.700 28.937 29.267
</TABLE>
Source: Avatex Management Projections
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Avatex Corporation
Benchmark Capital Structure Summary - Total Debt to Total Capital
- --------------------------------------------------------------------------------
High Low Median
---- --- ------
Closed End Funds < $200mm NAV 45.1% 7.7% 30.7%
Closed End Funds (General Equity and Specialty Equity) 48.4% 7.7% 32.4%
REIT Capital Structure
Office Properties 54.6% 10.4% 43.0%
Lodging 78.0% 17.3% 37.9%
- --------------------------------------------------------------------------------
<PAGE>
AVATEX Corp.
Closed-End Fund Study
Funds with Market Value of Assets < $200 million
<TABLE>
<CAPTION>
Market
Net Asset Market Premium/ 52 Week 3 Year Shares Value
Ticker Name Exchange Value Price Discount Return Return Out. of Assets
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <C> <C> <C> <C> <C> <C> <C>
CREN Corp Renaissance Nasdaq 9.27 7.06 -23.8% 20.2% -8.3% 0.76 7.05
EGX Engex American 10.05 8.38 -16.7% -9.4% -11.1% 0.98 9.85
RIF C&S Realty American 7.48 9.00 20.3% -10.6% 14.7% 2.88 21.54
HQL H&Q Life Sciences Investors NYSE 16.30 12.50 -23.3% -3.9% -0.9% 3.70 60.31
MFV MFS Special Value Trust NYSE 15.05 15.38 2.2% -10.4% 10.4% 6.00 90.30
ETF Emerging Markets Telecommunications NYSE 11.17 9.19 -17.7% -13.4% -2.6% 8.43 94.16
DGF Delaware Group Global Div & Inc NYSE 15.37 15.19 -1.2% -6.5% 12.6% 6.65 102.21
EQS Equus II NYSE 21.59 16.25 -24.7% -31.9% 8.6% 4.83 104.28
HQH H&Q Health Inv NYSE 19.66 14.81 -24.7% -7.4% -2.1% 5.55 109.11
AMO Alliance All-Market NYSE 45.00 46.31 2.9% 70.2% 48.6% 2.51 112.95
GGT Gabelli Global Media NYSE 13.19 11.13 -15.7% 40.6% 28.9% 8.61 113.57
MGC Morgan Growth Small Cap Fund NYSE 11.67 9.81 -15.9% -3.4% 9.4% 9.79 114.25
OTCM Royce Micro-Cap Trust Nasdaq 9.87 8.25 -16.4% -13.0% 10.6% 12.15 119.92
BLU Blue Chip Value NYSE 10.20 10.00 -2.0% 8.6% 23.5% 14.15 144.33
ASG Liberty All-Star Growth Fund NYSE 12.80 11.13 -13.1% 2.1% 18.9% 11.34 145.15
EMG Emerging Markets Infrastructure NYSE 9.37 7.19 -23.3% -31.9% -11.6% 16.11 150.95
DDF Delaware Group Div & Inc NYSE 15.24 17.19 12.8% 5.8% 17.0% 13.00 198.12
---------------------------------------------------------------
Low -24.7% -31.9% -11.6% 7.05
High 20.3% 70.2% 48.6% 198.12
Median -15.9% -6.5% 10.4% 109.11
Average -10.6% 0.3% 9.8% 99.89
---------------------------------------------------------------
<CAPTION>
Potential Debt to
Cap Gains Total
Ticker Name Exposure Equity Description
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CREN Corp Renaissance N/A N/A Conservative, blue-chip, growth oriented
stocks
EGX Engex -22.00 7.7% Equity securities of large, intensely
researched, high-quality companies;
may use short-selling
RIF C&S Realty 12.00 N/A Invests in common stocks and other
equity securities, including convertible
debt securities
HQL H&Q Life Sciences Investors 23.00 N/A Seeks long-term capital appreciation
through equity investment; focus on
venture capitalization
MFV MFS Special Value Trust 14.00 45.1% Invests in diversified portfolio of
common stocks
ETF Emerging Markets Telecommunications -22.00 N/A Invests in dividend paying common stocks
to grow capital; income is secondary
objective
DGF Delaware Group Global Div & Inc 9.00 36.6% Seeks long-term capital appreciaiton by
investing in existing businesses
EQS Equus II 33.00 44.3% Invests in a high-risk portfolio of
equity securities
HQH H&Q Health Inv 27.00 21.5% Seeks to generate long-term capital gains
with equity investments in small to
medium privately owned businesses
AMO Alliance All-Market 45.00 11.9% Invests in equity securities for long-term
growth of capital; income is secondary
objective
GGT Gabelli Global Media 31.00 37.7% Pursues common stocks with better than
average growth potential; income secondary
MGC Morgan Growth Small Cap Fund 12.00 29.5% Invests in a diversified portfolio of
equity securities seeking total investment
return (capital appreciation and income)
OTCM Royce Micro-Cap Trust 22.00 20.5% Invests in a diversified portfolio of
equity securities; may also invest in
government securities (capital appreciation)
BLU Blue Chip Value 28.00 31.8% Seeks to maintain an annual distribution rate
of 11% based on $15 IPO (capital appreciation)
ASG Liberty All-Star Growth Fund 10.00 25.4% Invests in equity securities of entertainment
related companies; seeks long-term capital
appreciation
EMG Emerging Markets Infrastructure -52.00 N/A Seeks long-term capital appreciation by
investing in common stocks and convertible
securities
DDF Delaware Group Div & Inc 13.00 43.1% Seeks growth of capital through equity
securities
------------------------------------
Low -52.00 7.7%
High 45.00 45.1%
Median 13.50 30.7%
Average 11.44 29.6%
------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
AVATEX Corp.
Closed-End Fund Study
All Funds
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Market
Net Asset Market Premium/ 52 Week 3 Year Shares Value
Ticker Name Exchange Value Price Discount Return Return Out. of Assets
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
ADX Adams Express NYSE 31.96 26.25 -17.9% 19.4% 21.6% 44.40 1419.02
AMO Alliance All-Market NYSE 45.00 46.31 2.9% 70.2% 48.6% 2.51 112.95
BKF Baker Fentress NYSE 19.72 14.88 -24.6% 5.1% 11.5% 26.44 521.40
BEM Bergstrom Cap American 199.25 178.50 -10.4% 36.8% 24.1% 1.21 241.09
BLU Blue Chip Value NYSE 10.20 10.00 -2.0% 8.6% 23.5% 14.15 144.33
RIF C&S Realty American 7.48 9.00 20.3% -10.6% 14.7% 2.88 21.54
RFI C&S Total Return Realty NYSE 12.13 13.25 9.2% -15.1% 15.1% N/A N/A
CET Central Secs American 29.62 25.00 -15.6% -10.0% 13.5% 13.56 401.65
CWF Chartwell Dividend & Income Fund NYSE 13.99 13.38 -4.4% N/A N/A N/A N/A
CREN Corp Renaissance Nasdaq 9.27 7.06 -23.8% 20.2% -8.3% 0.76 7.05
DDF Delaware Group Div & Inc NYSE 15.24 17.19 12.8% 5.8% 17.0% 13.00 198.12
DGF Delaware Group Global Div & Inc NYSE 15.37 15.19 -1.2% -6.5% 12.6% 6.65 102.21
DNP Duff & Phelps Utilities NYSE 10.31 11.13 7.9% 12.8% 14.2% 142.84 1472.68
EMG Emerging Markets Infrastructure NYSE 9.37 7.19 -23.3% -31.9% -11.6% 16.11 150.95
ETF Emerging Markets Telecommunications NYSE 11.17 9.19 -17.7% -13.4% -2.6% 8.43 94.16
EGX Engex American 10.05 8.38 -16.7% -9.4% -11.1% 0.98 9.85
EQS Equus II NYSE 21.59 16.25 -24.7% -31.9% 8.6% 4.83 104.28
FF First Financial NYSE 9.27 9.81 5.9% -29.1% 12.4% N/A N/A
GAB Gabelli Equity NYSE 11.52 11.69 1.5% 11.2% 19.5% 88.15 1015.49
GGT Gabelli Global Media NYSE 13.19 11.13 -15.7% 40.6% 28.9% 8.61 113.57
GAM General American NYSE 33.25 31.00 -6.8% 42.1% 30.6% 23.58 784.04
HQH H&Q Health Inv NYSE 19.66 14.81 -24.7% -7.4% -2.1% 5.55 109.11
HQL H&Q Life Sciences Investors NYSE 16.30 12.50 -23.3% -3.9% -0.9% 3.70 60.31
GHS INVESCO Global Health Sciences NYSE 19.78 18.94 -4.3% 30.4% 25.7% 20.51 405.69
BTO John Hancock Bank & Thrift Opp Fund NYSE 11.04 9.81 -11.1% -8.3% 28.6% 88.40 975.94
PGD John Hancock Patriot Global Div Fund NYSE 15.02 13.38 -11.0% 8.9% 7.5% N/A N/A
DIV John Hancock Patriot Select Div Fund NYSE 16.88 15.38 -8.9% 9.0% 8.0% N/A N/A
USA Liberty All-Star Equity Fund NYSE 13.91 12.69 -8.8% 10.2% 17.7% 79.00 1098.89
ASG Liberty All-Star Growth Fund NYSE 12.80 11.13 -13.1% 2.1% 18.9% 11.34 145.15
MFV MFS Special Value Trust NYSE 15.05 15.38 2.2% -10.4% 10.4% 6.00 90.30
MFUN Morgan FunShares Nasdaq 7.47 7.25 -2.9% 33.3% N/A N/A N/A
MGC Morgan Growth Small Cap Fund NYSE 11.67 9.81 -15.9% -3.4% 9.4% 9.79 114.25
GRF NAIC Growth Fund Chicago 12.26 10.75 -12.3% -23.2% N/A N/A N/A
NBM Nations Balanced Target Maturity Fund NYSE 10.42 9.38 -10.0% 5.6% 10.5% N/A N/A
PEO Petroleum & Resources Corporation NYSE 33.31 30.94 -7.1% -4.7% 5.9% 12.38 412.38
OTCM Royce Micro-Cap Trust Nasdaq 9.87 8.25 -16.4% -13.0% 10.6% 12.15 119.92
RVT Royce Value Trust NYSE 15.26 13.69 -10.3% 4.1% 12.6% 26.35 402.10
SBF Salomon Brothers Fund NYSE 18.67 17.94 -3.9% 30.7% 27.4% 83.48 1558.57
SOR Source Capital NYSE 46.32 50.00 7.9% 6.1% 19.3% 7.31 338.60
STBF Southeastern Thrift & Bank Fund Nasdaq 23.00 20.75 -9.8% -17.0% 17.7% N/A N/A
TMF Thermo Opportunity Fund American N/A 6.50 N/A -35.4% N/A N/A N/A
TY Tri-Continental NYSE 33.80 28.50 -15.7% 27.1% 23.7% 83.87 2834.81
TUX Tuxis Corp American 16.56 15.75 -4.9% 11.2% N/A N/A N/A
ZF Zweig Fund NYSE 11.79 10.56 -10.4% -9.4% 9.2% 48.60 572.99
------------------------------------------------------------------
Low -24.7% -35.4% -11.6% 7.05
High 20.3% 70.2% -11.6% 2834.81
Median -10.2% 3.1% 14.7% 150.95
Average -8.4% 3.5% 14.9% 382.39
------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Potential Debt to
Cap Gains Total
Ticker Name Exposure Capital Description
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
ADX Adams Express 50.00 35.5% Conservative, blue-chip, growth oriented stocks
AMO Alliance All-Market 45.00 11.9% Equity securities of large, intensely
researched, high-quality companies; may use
short-selling
BKF Baker Fentress 21.00 40.9% Invests in common stocks and other equity
securities, including convertible debt
securities
BEM Bergstrom Cap 71.00 23.8% Seeks long-term capital appreciation through
equity investment; focus on venture
capitalization
BLU Blue Chip Value 28.00 31.8% Invests in diversified portfolio of common
stocks
RIF C&S Realty 12.00 N/A Invests in dividend paying common stocks to grow
capital; income is secondary objective
RFI C&S Total Return Realty 8.00 N/A Seeks long-term capital appreciaiton by
investing in existing businesses
CET Central Secs 62.00 15.5% Invests in a high-risk portfolio of equity
securities
CWF Chartwell Dividend & Income Fund N/A N/A Seeks to generate long-term capital gains with
equity investments in small to medium privately
owned businesses
CREN Corp Renaissance N/A N/A Invests in equity securities for long-term growth
of capital; income is secondary objective
DDF Delaware Group Div & Inc 13.00 43.1% Pursues common stocks with better than average
growth potential; income secondary
DGF Delaware Group Global Div & Inc 9.00 36.6% Invests in a diversified portfolio of equity
securities seeking total investment return
(capital appreciation and income)
DNP Duff & Phelps Utilities 13.00 48.3% Invests in a diversified portfolio of equity
securities; may also invest in government
securities (capital appreciation)
EMG Emerging Markets Infrastructure -52.00 N/A Seeks to maintain an annual distribution rate of
11% based on $15 IPO (capital appreciation)
ETF Emerging Markets Telecommunications -22.00 N/A Invests in equity securities of entertainment
related companies; seeks long-term capital
appreciation
EGX Engex -22.00 7.7% Seeks long-term capital appreciation by investing
in common stocks and convertible securities
EQS Equus II 33.00 44.3% Seeks growth of capital through equity securities
FF First Financial -8.00 N/A Invests primarily in equity securities of
micro-cap companies in the OTC market
GAB Gabelli Equity 38.00 37.5% Invests primarily in the equity securities of
small to medium sized companies
GGT Gabelli Global Media 31.00 37.7% Invests for the longer term in a common stock
portfolio of companies
GAM General American 43.00 28.0% Intends to meet dividend requirements of preferred
shareholders
HQH H&Q Health Inv 27.00 21.5% Serves pension plans, institutions and individuals
by investing in a portfolio of equity securities
HQL H&Q Life Sciences Investors 23.00 N/A Seeks capital appreciation by investing in equity
securities
GHS INVESCO Global Health Sciences 21.00 22.4% Invests in publicly traded real estate securities;
seeks high current income and capital appreciation
BTO John Hancock Bank & Thrift Opp Fund 57.00 N/A Invests in publicly traded real estate securities;
seeks high current income and capital appreciation
PGD John Hancock Patriot Global Div Fund 8.00 48.4% Seeks high current income by investing in equity
securities and preferred stocks
DIV John Hancock Patriot Select Div Fund 13.00 47.2% Seeks high current income by investing in equity
securities, preferred stocks, convertibles and
corporate bonds
USA Liberty All-Star Equity Fund 182.00 32.9% Fund invests in income-generating equity securities
of U.S. and foreign issuers and non-convertible
debt securities
ASG Liberty All-Star Growth Fund 10.00 25.4% Invests in a diversified portfolio of equity and
fixed income securities of companies in the public
utilities industry
MFV MFS Special Value Trust 14.00 45.1% Seeks long-term capital appreciation by investing
in equity securities of infrastructure companies
in emergin countries
MFUN Morgan FunShares 56.00 27.7% Seeks long-term capital appreciation by investing
in equity securities of telecommunication companies
in emerging countries
MGC Morgan Growth Small Cap Fund 12.00 29.5% Seeks long-term capital appreciation by investing
in savings and banking institutions and their
holding companies
GRF NAIC Growth Fund 60.00 27.9% Seeks long-term capital appreciation by investing
in common stock and other securities of foreign
and domestic companies in the telecomm, media
and publishing industries
NBM Nations Balanced Target Maturity Fund 12.00 35.5% Seeks long-term capital growth in securities of
companies in the health services and medical
technology industries; 40% of net assets may be
invested in venture capital
PEO Petroleum & Resources Corporation 30.00 32.7% Seeks long-term capital appreciation in companies
engaged in facilitating scientific advances in
healthcare and agriculture
OTCM Royce Micro-Cap Trust 22.00 20.5% Seeks capital appreciation from equity and related
securities of U.S. and foreign companies involved
in the products and services relating to health
sciences
RVT Royce Value Trust 24.00 24.5% Seeks long-term capital appreciation from equity
securities of U.S. regional banks and thrifts
and their holding companies
SBF Salomon Brothers Fund 44.00 32.4% Seeks high level of current income by investing in
dividend paying preferred and common stocks of
foreign and domestic issuers
SOR Source Capital 15.00 22.1% Seeks high level of current income by investing in
dividend paying preferred and common stocks to
maximize income qualifying for Dividend Received
Reduction
STBF Southeastern Thrift & Bank Fund 65.00 N/A Seeks long-term growth of capital by investing in
zero coupon U.S. treasury obligations, common
stocks and other investment grade debt securities
TMF Thermo Opportunity Fund N/A 28.6% Seeks preservation of capital by investing in
companies in petroleum or natural resources
industries
TY Tri-Continental 41.00 35.9% Seeks long-term capital appreciation by investing
in equity securities of Southwester savings and
loan institutions and S&L holding companies
TUX Tuxis Corp 1.00 N/A Seeks long-term capital appreciation by investing
in direct and indirect subsidiaries of Thermo
Electron Corporation and companies in related
industries
ZF Zweig Fund 10.00 37.7% Seeks highest possible income exempt from federal
income taxes by investing in municipal and equity
securities
----------------------------------
Low -52.00 48.4%
High 182.00 7.7%
Median 23.5% 32.4%
Average 29.0% 31.5%
----------------------------------
</TABLE>
Sources: Bloomberg, Barron's (January 25, 1999), Standard & Poor's Stock Guide
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
<PAGE>
Houlihan Lokey Howard & Zukin
REIT Discounts, Yields & Pricing
- --------------------------------------------------------------------------------
(As of December 24, 1998)
<TABLE>
<CAPTION>
Closing Estimated Premium/ Indicated Dividend FFO Value (1)
Price as Per-Share (Discount) Annual Yield on ---------------------
REIT Name of 12/24/98 NAV (1) to NAV Dividend 12/24/98 1998 (E) 1999 (E)
=================================== ================================ ===================== ============================
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------
Lodging
- -----------------------------------
Boykin Lodging Co $13.50 $30.72 -56.1% $1.88 13.9% $2.61 $2.64
Equity Inns Inc $10.06 $15.09 -33.3% $1.24 12.3% $1.70 $1.78
Felcor Suite Hotels Inc $22.56 $28.00 -19.4% $2.20 9.8% $3.77 $4.06
Hospitality Properties Trust $26.13 $27.36 -4.5% $2.68 10.3% $3.60 $3.97
Innkeepers USA $10.75 $13.40 -19.8% $1.12 10.4% $1.65 $1.79
Patriot Amern Hospitality Inc $5.75 $21.84 -73.7% $0.64 11.1% $1.90 $2.01
RFS Hotel Invs $12.75 $18.66 -31.7% $1.44 11.3% $2.30 $2.47
Starwood Lodging Trust $22.88 $31.28 -26.9% $0.60 2.6% $4.59 $4.89
Sunstone Hotel Invs Inc $9.13 $13.01 -29.8% $1.14 12.5% $1.50 $1.65
Winston Hotels $8.81 $16.03 -45.0% $1.08 12.3% $1.68 $1.74
Number of REITs Sampled: 10
- ------------------------------------------------------------------------------------------------------------------------------
High -4.5% 13.9%
Low -73.7% 2.6%
Median -30.7% 11.2%
Mean -34.0% 10.6%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AFFO Multiples
FFO Multiple AFFO Value (1) ------------------------------------
-------------------- ------------------ AFFO Mult. LTM LTM
REIT Name 1998 (E) 1999 (E) 1998 (E) 1999 (E) 12/24/98 High Low 1998 (E) 1999 (E)
=================================== ============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------
Lodging
- -----------------------------------
Boykin Lodging Co 5.2 5.1 $1.91 $1.93 7.0 14.9 6.0 7.1 7.0
Equity Inns Inc 5.9 5.7 $1.51 $1.58 6.4 10.6 5.8 6.7 6.4
Felcor Suite Hotels Inc 6.0 5.6 $2.91 $3.05 7.4 13.6 6.0 7.8 7.4
Hospitality Properties Trust 7.3 6.6 $2.97 $3.19 8.2 12.4 8.3 8.8 8.2
Innkeepers USA 6.5 6.0 $1.53 $1.57 6.8 11.0 5.5 7.0 6.8
Patriot Amern Hospitality Inc 3.0 2.9 $1.24 $1.40 4.1 23.8 4.4 4.6 4.1
RFS Hotel Invs 5.5 5.2 $1.90 $2.05 6.2 11.3 5.0 6.7 6.2
Starwood Lodging Trust 5.0 4.7 $3.42 $3.55 6.4 17.0 5.5 6.7 6.4
Sunstone Hotel Invs Inc 6.1 5.5 $1.10 $1.24 7.4 15.8 5.9 8.3 7.4
Winston Hotels 5.2 5.1 $1.50 $1.59 5.5 9.3 4.5 5.9 5.5
Number of REITs Sampled: 10
- ---------------------------------------------------------------------------------------------------------------------------------
High 23.8 8.3 8.8 8.2
Low 9.3 4.4 4.6 4.1
Median 13.0 5.7 6.9 6.6
Mean 14.0 5.7 7.0 6.5
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AFFO
Growth Rate
----------- Debt as a Implicit
1999 Total Total % of Total LTM
REIT Name vs 1998 Debt Mrkt Cap Mrkt Cap Return
=================================== =========== ================================= ==========
<S> <C> <C> <C> <C> <C>
- -----------------------------------
Lodging
- -----------------------------------
Boykin Lodging Co 1.0% $122.0 $369.1 33.1% 15.0%
Equity Inns Inc 4.6% $233.1 $618.5 37.7% 17.0%
Felcor Suite Hotels Inc 4.8% $1,504.9 $3,208.2 46.9% 14.6%
Hospitality Properties Trust 7.4% $250.0 $1,441.3 17.3% 17.7%
Innkeepers USA 2.6% $160.5 $594.0 27.0% 13.0%
Patriot Amern Hospitality Inc 12.9% $3,664.0 $4,696.1 78.0% 24.0%
RFS Hotel Invs 7.9% $222.6 $584.4 38.1% 19.2%
Starwood Lodging Trust 3.8% $7,431.0 $12,050.8 61.7% 6.4%
Sunstone Hotel Invs Inc 12.7% $369.6 $745.6 49.6% 25.2%
Winston Hotels 6.0% $44.1 $203.6 21.7% 18.3%
Number of REITs Sampled: 10
- -------------------------------------------------------------------------------------------------
High 12.9% 78.0% 25.2%
Low 1.0% 17.3% 6.4%
Median 5.4% 37.9% 17.3%
Mean 6.4% 41.1% 17.0%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents a consensus of estimates supplied by analysts and portfolio
managers
Source: Realty Stock Review
- --------------------------------------------------------------------------------
Houlihan Lokey Howard & Zukin
<PAGE>
Houlihan Lokey Howard & Zukin
REIT Discounts, Yields & Pricing
- --------------------------------------------------------------------------------
(As of December 24, 1998)
<TABLE>
<CAPTION>
Closing Estimated Premium/ Indicated Dividend FFO Value (1)
Price as Per-Share (Discount) Annual Yield on ---------------------
REIT Name of 12/24/98 NAV (1) to NAV Dividend 12/24/98 1998 (E) 1999 (E)
=================================== ================================ ===================== ===========================
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------
Office Properties
- -----------------------------------
Alexandria Real Estate Equities $31.38 $24.63 27.4% $1.60 5.1% $2.40 $2.69
Arden Realty Group $22.94 $24.50 -6.4% $1.68 7.3% $2.37 $2.64
Boston Properties $30.38 $27.87 9.0% $1.70 5.6% $2.47 $2.88
Carramerica Rlty Corp $23.25 $27.99 -16.9% $1.85 8.0% $2.63 $2.86
Cornerstone Properties $15.38 $15.82 -2.8% $1.20 7.8% $1.45 $1.58
Equity Office Properties $23.00 $21.66 6.2% $1.36 5.9% $1.88 $2.12
Duke Realty Invt $23.69 $24.79 -4.4% $1.48 6.2% $2.30 $2.51
Great Lakes Reit $15.56 $17.51 -11.1% $1.28 8.2% $1.70 $1.87
Highwoods Properties Inc $25.75 $29.96 -14.1% $2.16 8.4% $3.25 $3.55
Kilroy Rlty Corp $22.38 $22.86 -2.1% $1.62 7.2% $2.29 $2.50
Mack-Cali Realty Corp $30.38 $30.25 0.4% $2.20 7.2% $3.05 $3.28
Parkway Pptys Inc $32.25 $32.75 -1.5% $1.80 5.6% $2.99 $3.32
Prentiss Properties $20.88 $25.34 -17.6% $1.60 7.7% $2.54 $2.85
Prime Group Realty Tr $14.50 #N/A #N/A $1.35 9.3% $1.85 $2.15
Reckson Associates Realty $22.75 $22.12 2.8% $1.35 5.9% $2.01 $2.18
Spieker Pptys Inc. $35.13 $32.67 7.5% $2.28 6.5% $2.93 $3.27
Tower Realty $19.94 $25.93 -23.1% $1.69 8.5% $2.26 $2.44
Trizec Hahn Corp $20.31 $23.22 -12.5% $0.30 1.5% $1.65 $2.05
Number of REITs Sampled: 18
- -----------------------------------------------------------------------------------------------------------------------------
High 7.5% 9.3%
Low -23.1% 1.5%
Median -2.8% 7.2%
Mean -5.6% 6.9%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
Industrial Properties
- -----------------------------------
AMB Ppty $21.44 $20.02 7.1% $1.37 6.4% $1.89 $2.11
Bedford Ppty Invs Inc $16.56 $20.50 -19.2% $1.44 8.7% $1.86 $2.07
Brandywine Rlty Tr $17.94 $23.76 -24.5% $1.56 8.7% $2.16 $2.44
Cabot Industrial Tr $18.63 $20.00 -6.9% $1.30 7.0% $1.79 $2.04
Centerpoint Properties $33.94 $25.91 31.0% $1.90 5.6% $2.57 $2.96
Eastgroup Properties $18.75 $19.72 -4.9% $1.36 7.3% $2.05 $2.24
First Indl Rlty Tr Inc $25.75 $26.46 -2.7% $2.40 9.3% $2.95 $3.31
Liberty Ppty Tr $25.00 $22.76 9.8% $1.80 7.2% $2.54 $2.77
Meridian Indl Tr Inc $23.19 $19.15 21.1% $1.16 5.0% $1.98 $2.20
Prologis Trust $20.06 $19.19 4.5% $1.27 6.3% $1.82 $2.06
Weeks Corp $28.06 $28.46 -1.4% $1.86 6.6% $2.67 $2.98
Number of REITs Sampled: 10
- -----------------------------------------------------------------------------------------------------------------------------
High 31.0% 9.3%
Low -24.5% 5.0%
Median -1.4% 7.0%
Mean 1.3% 7.1%
- -----------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------
Combined Office & Industrial Properties
- ---------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
High 31.0% 9.3%
Low -24.5% 1.5%
Median -2.4% 7.2%
Mean -1.6% 6.9%
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AFFO Multiples
FFO Multiple AFFO Value (1) ------------------------------------
-------------------- ------------------ AFFO Mult. LTM LTM
REIT Name 1998 (E) 1999 (E) 1998 (E) 1999 (E) 12/24/98 High Low 1998 (E) 1999 (E)
=================================== =============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------
Office Properties
- -----------------------------------
Alexandria Real Estate Equities 13.1 11.7 $2.20 $2.38 13.2 15.7 11.4 14.3 13.2
Arden Realty Group 9.7 8.7 $1.95 $2.16 10.6 16.0 10.1 11.8 10.6
Boston Properties 12.3 10.5 $1.94 $2.35 12.9 18.6 12.1 15.7 12.9
Carramerica Rlty Corp 8.8 8.1 $2.08 $2.31 10.1 15.4 9.1 11.2 10.1
Cornerstone Properties 10.6 9.7 $1.21 $1.28 12.0 16.4 11.0 12.7 12.0
Equity Office Properties 12.2 10.8 $1.63 $1.83 12.6 15.3 12.0 14.1 12.6
Duke Realty Invt 10.3 9.4 $1.71 $1.90 12.5 18.9 11.8 13.9 12.5
Great Lakes Reit 9.2 8.3 $1.38 $1.52 10.2 14.6 10.3 11.3 10.2
Highwoods Properties Inc 7.9 7.3 $2.70 $2.99 8.6 14.0 8.4 9.5 8.6
Kilroy Rlty Corp 9.8 9.0 $1.99 $2.18 10.3 15.1 9.3 11.2 10.3
Mack-Cali Realty Corp 10.0 9.3 $2.63 $2.81 10.8 16.2 9.9 11.6 10.8
Parkway Pptys Inc 10.8 9.7 $2.43 $2.78 11.6 14.4 10.6 13.3 11.6
Prentiss Properties 8.2 7.3 $1.95 $2.21 9.4 14.5 9.5 10.7 9.4
Prime Group Realty Tr 7.8 6.7 $1.60 $1.85 7.8 13.9 8.1 9.1 7.8
Reckson Associates Realty 11.3 10.4 $1.67 $1.78 12.8 16.1 11.4 13.6 12.8
Spieker Pptys Inc. 12.0 10.7 $2.53 $2.84 12.4 17.4 12.3 13.9 12.4
Tower Realty 8.8 8.2 $1.98 $2.10 9.5 13.4 8.6 10.1 9.5
Trizec Hahn Corp 12.3 9.9 $1.16 $1.45 14.0 21.7 13.9 17.5 14.0
Number of REITs Sampled: 18
- -----------------------------------------------------------------------------------------------------------------------------------
High 14.0 21.7 13.9 17.5 14.0
Low 7.8 13.4 8.1 9.1 7.8
Median 11.2 15.2 10.5 12.1 11.2
Mean 11.0 15.9 10.5 12.3 11.0
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------
Industrial Properties
- -----------------------------------
AMB Ppty 11.3 10.2 $1.60 $1.81 11.8 16.3 13.0 13.4 11.8
Bedford Ppty Invs Inc 8.9 8.0 $1.69 $1.88 8.8 13.0 8.9 9.8 8.8
Brandywine Rlty Tr 8.3 7.4 $1.87 $2.09 8.6 14.6 8.4 9.6 8.6
Cabot Industrial Tr 10.4 9.1 $1.51 $1.77 10.5 16.6 11.2 12.3 10.5
Centerpoint Properties 13.2 11.5 $2.36 $2.71 12.5 15.7 13.0 14.4 12.5
Eastgroup Properties 9.1 8.4 $1.76 $1.92 9.8 12.6 9.3 10.7 9.8
First Indl Rlty Tr Inc 8.7 7.8 $2.65 $3.01 8.6 14.3 8.2 9.7 8.6
Liberty Ppty Tr 9.8 9.0 $2.10 $2.33 10.7 14.0 9.6 11.9 10.7
Meridian Indl Tr Inc 11.7 10.5 $1.72 $1.92 12.1 15.6 10.7 13.5 12.1
Prologis Trust 11.0 9.7 $1.51 $1.73 11.6 17.5 13.1 13.3 11.6
Weeks Corp 10.5 9.4 $2.35 $2.64 10.6 14.3 11.3 11.9 10.6
Number of REITs Sampled: 10
- -----------------------------------------------------------------------------------------------------------------------------------
High 13.2 11.5 12.5 17.5 13.1 14.4 12.5
Low 8.3 7.4 8.6 12.6 8.2 9.6 8.6
Median 10.4 9.1 10.6 14.6 10.7 11.9 10.6
Mean 10.3 9.2 10.5 15.0 10.6 11.9 10.5
- -----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------
Combined Office & Industrial Properties
- ---------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
High 13.2 11.7 14.0 21.7 13.9 17.5 14.0
Low 7.8 6.7 7.8 12.6 8.1 9.1 7.8
Median 10.3 9.3 10.7 15.4 10.6 11.9 10.7
Mean 10.3 9.2 10.9 15.6 10.6 12.3 10.9
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AFFO
Growth Rate
----------- Debt as a Implicit
1999 Total Total % of Total LTM
REIT Name vs 1998 Debt Mrkt Cap Mrkt Cap Return
=================================== =========== ================================= ==========
<S> <C> <C> <C> <C> <C>
- -----------------------------------
Office Properties
- -----------------------------------
Alexandria Real Estate Equities 8.2% $258.9 $654.2 39.6% 13.3%
Arden Realty Group 10.8% $175.0 $1,678.4 10.4% 18.1%
Boston Properties 21.1% $1,947.4 $4,637.5 42.0% 26.7%
Carramerica Rlty Corp 11.1% $1,371.2 $3,606.9 38.0% 19.0%
Cornerstone Properties 5.8% $997.6 $337.7 295.4% 13.6%
Equity Office Properties 12.3% $1,027.0 $3,400.2 30.2% 18.2%
Duke Realty Invt 11.1% $5,672.1 $12,699.0 44.7% 17.4%
Great Lakes Reit 10.1% $221.3 $484.3 45.7% 18.4%
Highwoods Properties Inc 10.7% $1,857.0 $4,049.3 45.9% 19.1%
Kilroy Rlty Corp 9.5% $403.9 $1,189.1 34.0% 16.8%
Mack-Cali Realty Corp 6.8% $1,400.0 $3,620.4 38.7% 14.1%
Parkway Pptys Inc 14.4% $256.6 $582.3 44.1% 20.0%
Prentiss Properties 13.3% $882.7 $1,846.1 47.8% 21.0%
Prime Group Realty Tr 15.6% $451.1 $825.5 54.6% 24.9%
Reckson Associates Realty 6.6% $841.9 $2,111.4 39.9% 12.5%
Spieker Pptys Inc. 12.3% $1,773.8 $4,786.8 37.1% 18.7%
Tower Realty 6.1% $291.2 $660.1 44.1% 14.5%
Trizec Hahn Corp 25.0% $4,076.9 $7,605.3 53.6% 26.5%
Number of REITs Sampled: 18
- -------------------------------------------------------------------------------------------------
High 25.0% 295.4% 26.5%
Low 5.8% 10.4% 12.5%
Median 10.9% 43.0% 18.3%
Mean 11.4% 54.8% 18.3%
- -------------------------------------------------------------------------------------------------
- -----------------------------------
Industrial Properties
- -----------------------------------
AMB Ppty 13.1% $922.1 $2,954.5 31.2% 19.5%
Bedford Ppty Invs Inc 11.2% $135.6 $511.6 26.5% 19.9%
Brandywine Rlty Tr 11.8% $955.3 $1,724.8 55.4% 20.5%
Cabot Industrial Tr 17.2% $217.6 $1,027.3 21.2% 24.2%
Centerpoint Properties 14.8% $261.3 $1,035.4 25.2% 20.4%
Eastgroup Properties 9.1% $161.4 $467.0 34.6% 16.3%
First Indl Rlty Tr Inc 13.6% $1,184.2 $2,739.4 43.2% 22.9%
Liberty Ppty Tr 11.0% $1,237.9 $3,257.9 38.0% 18.2%
Meridian Indl Tr Inc 11.6% $482.7 $1,341.5 36.0% 16.6%
Prologis Trust 14.6% $1,402.6 $4,659.1 30.1% 20.9%
Weeks Corp 12.3% $676.3 $1,578.4 42.8% 19.0%
Number of REITs Sampled: 10
- -------------------------------------------------------------------------------------------------
High 17.2% 55.4% 24.2%
Low 9.1% 21.2% 16.3%
Median 12.3% 34.6% 19.9%
Mean 12.8% 34.9% 19.9%
- -------------------------------------------------------------------------------------------------
- ---------------------------------------
Combined Office & Industrial Properties
- ---------------------------------------
- -------------------------------------------------------------------------------------------------
High 25.0% 295.4% 26.7%
Low 5.8% 10.4% 12.5%
Median 11.6% 39.6% 19.0%
Mean 12.1% 47.2% 19.0%
- -------------------------------------------------------------------------------------------------
</TABLE>
