SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 18, 1999
AVATEX CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
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(STATE OR OTHER JURISDICTION OF INCORPORATION)
1-8549 25-1425889
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(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5910 N. CENTRAL EXPRESSWAY, SUITE #1780 75206
DALLAS, TEXAS
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
214-365-7450
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
Page 1 of 5 Pages
Exhibit Index on Page 5
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Item 5. Other Events
On June 18, 1999, Avatex Corporation, a Delaware corporation ("Avatex"),
the owner of all of the outstanding shares of common stock of Xetava
Corporation, a Delaware corporation ("Xetava"), and Xetava entered into an
Amended and Restated Agreement and Plan of Merger (the "Amended Merger
Agreement"). The Amended Merger Agreement amends and restates the Agreement and
Plan of Merger between Avatex and Xetava dated April 9, 1998. Under the Amended
Merger Agreement, and subject to the terms and conditions set forth therein,
Xetava will merge with and into Avatex (the "Merger") and, as described more
fully below, holders of existing Avatex common stock ("Existing Common Stock")
will receive new common stock of Avatex, par value $.01 per share ("New Common
Stock"). Holders of existing Avatex preferred stock will receive New Common
Stock or such stockholders may in lieu thereof elect to receive a combination of
cash, secured notes, warrants and other consideration.
Under the Amended Merger Agreement, and subject to the terms and
conditions set forth therein, each share of Existing Common Stock will be
converted into one share of New Common Stock. Each share of existing Avatex
First Series preferred stock will be converted into 9.134 shares of New Common
Stock or, at the election of the holder, (1) $3.7408 in cash, (2) $8.340
principal amount of 6.75% notes (the "Notes") to be issued by Avatex Funding,
Inc. ("AFI"), a new wholly-owned subsidiary of Avatex, (3) warrants ("Warrants")
to purchase 0.67456 shares of New Common Stock, and (4) a deferred contingent
right to receive 16% of an amount equal to 20% of any net recovery that Avatex
may receive in certain litigation brought by Avatex against McKesson Corporation
and a number of large pharmaceutical manufacturers ("Net Recovery"), divided by
the number of outstanding shares of First Series preferred stock. Each share of
existing Avatex Series A preferred stock will be converted into 7.253 shares of
New Common Stock or, at the election of the holder, (1) $2.9705 in cash, (2)
$6.623 principal amount of Notes, (3) Warrants to purchase 0.53567 shares of New
Common Stock, and (4) a deferred contingent right to receive 84% of an amount
equal to 20% of any Net Recovery, divided by the number of outstanding shares of
Series A preferred stock. The maximum amount of any payments on the deferred
contingent rights that could be made to holders of the First Series and Series A
preferred stock is $7.5 million.
AFI will be a new Avatex subsidiary whose purpose will be to issue the
Notes in connection with the Merger and to own 3,571,533 shares of common stock
of Phar-Mor, Inc. ("Phar-Mor"), which are now owned by Avatex and will be
transferred to AFI and pledged to secure the Notes. The principal of the Notes
will be due three years from issuance, and interest will accrue on the Notes at
the rate of 6.75% per year and will be payable semi-annually in cash. Avatex
will guarantee the Notes. The Warrants will be exercisable at the price of $2.25
per share of New Common Stock for a five year term beginning three months after
the closing of the Merger.
Page 2 of 5 Pages
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Avatex has also entered into settlement, stockholder and voting agreements
with the preferred stockholder plaintiffs in three Delaware lawsuits pending
against Avatex, Xetava and certain of the Avatex directors. Under a Stipulation
of Settlement entered into by and among Avatex and the plaintiffs in the class
action lawsuits brought on behalf of all holders of existing Avatex preferred
stock and the plaintiff in the non-class action lawsuit, subject to court
approval and effective upon the closing of the Merger, the lawsuits will be
settled in consideration for the new terms of the Amended Merger Agreement and
Avatex will pay the plaintiffs' attorneys' fees up to $1.1 million. Under a
Voting Agreement with one of the named plaintiffs in one of the class action
lawsuits, the plaintiff has agreed to vote in favor of the Merger and to waive
any appraisal rights in connection with the Merger. Such plaintiff will also
receive $300,000 in exchange for a ten year standstill agreement with Avatex, a
general release of liability (subject to certain specified exceptions) as to
Avatex and its directors and other consideration. Under a Stockholders'
Agreement with Elliott Associates, L.P. ("Elliott"), the plaintiff in the
non-class action lawsuit, and Mr. Moses Marx, Elliott, Mr. Marx and their
respective affiliates and associated companies have agreed to vote in favor of
the Merger, to waive any appraisal rights in connection with the Merger, and to
elect to receive the cash, the Notes, the Warrants and other consideration upon
consummation of the Merger. Avatex will also pay Elliott, Mr. Marx and their
respective affiliates and associated companies $600,000 in exchange for a ten
year standstill agreement with Avatex, a general release of liability as to
Avatex and its directors and other consideration.
In addition, Avatex has been advised that Elliott, Mr. Marx and their
respective affiliates and associated companies have entered into a Stock
Purchase Agreement with Phar-Mor, Inc. ("Phar-Mor"), which is 38%-owned by
Avatex. Subject to the consummation of the Merger, Phar-Mor has agreed to
purchase approximately 2.8 million shares of Existing Common Stock from Elliott,
Mr. Marx and their respective affiliates and associated companies for $2.00 per
share, with the closing to occur simultaneously with the closing of the Merger.
Elliott, Mr. Marx and their respective affiliates and associated companies have
granted a proxy to Phar-Mor to vote their shares of Existing Common Stock in
favor of the Merger.
The Amended Merger Agreement has been approved by the board of directors
of Avatex, which believes that the Merger and related transactions is fair to
and in the best interests of Avatex and its stockholders.
Consummation of the Merger is conditioned upon, among other requirements,
(i) approval of the transaction by the holders of a majority of the outstanding
shares of Existing Common Stock and two-thirds of each series of existing Avatex
preferred stock, voting separately as a class, (ii) effectiveness of a
registration statement to be filed with the Securities and Exchange Commission
with respect to the New Common Stock, the Notes and the Warrants; and (iii)
dismissal of the three Delaware lawsuits and the approval of the settlement by
the Delaware Court of Chancery.
Page 3 of 5 Pages
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Reference is hereby made to the Amended Merger Agreement dated June 18,
1999, and the Press Release, issued June 18, 1999, issued by Avatex, which are
attached hereto as Exhibits 2 and 99, respectively, and incorporated herein by
reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
2-A Amended and Restated Agreement and Plan of Merger, dated June 18,
1999, among Avatex and Xetava.
10-A Stockholders' Agreement, dated June 18, 1999, by and among Avatex,
Elliott Associates, L.P., Westgate International, L.P., Martley
International, Inc., Moses Marx, Momar Corporation and United
Equities Commodities Company.
10-B Voting Agreement, dated June 18, 1999, by and among Avatex, Mark S.
Zucker, Anvil Investment Partners, L.P. and Anvil Investors, Inc.
99 Press Release dated June 18, 1999, issued by Avatex.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AVATEX CORPORATION
(Registrant)
By: /s/ Robert H. Stone
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Robert H. Stone
Vice President and
General Counsel
Page 4 of 5 Pages
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EXHIBIT INDEX
Exhibit No. Description
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2 Amended and Restated Agreement and Plan of Merger, dated
June 18, 1999, among Avatex and Xetava.
10-A Stockholders' Agreement, dated June 18, 1999, by and among
Avatex, Elliott Associates, L.P., Westgate International,
L.P., Martley International, Inc., Moses Marx, Momar
Corporation and United Equities Commodities Company.
10-B Voting Agreement, dated June 18, 1999, by and among Avatex,
Mark S. Zucker, Anvil Investment Partners, L.P. and Anvil
Investors, Inc.
99 Press Release dated June 18, 1999, issued by Avatex.
Page 5 of 5 Pages
EXHIBIT 2
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<PAGE>
EXECUTION COPY
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
AVATEX CORPORATION
AND
XETAVA CORPORATION
DATED AS OF JUNE 18, 1999
#377352 v10.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article I THE MERGER........................................................................2
SECTION 1.1 The Merger...............................................................2
SECTION 1.2 Effective Time...........................................................2
SECTION 1.3 Effects of the Merger....................................................3
SECTION 1.4 Certificate of Incorporation.............................................3
SECTION 1.5 By-Laws..................................................................3
SECTION 1.6 Directors................................................................3
SECTION 1.7 Officers.................................................................3
Article II CONVERSION OF SHARES..............................................................3
SECTION 2.1 Conversion of Shares.....................................................3
SECTION 2.2 Alternate Consideration Elections........................................6
SECTION 2.3 Exchange of Shares.......................................................8
SECTION 2.4 Closing of Transfer Books...............................................11
SECTION 2.5 Stock Options...........................................................11
SECTION 2.6 Employment Agreements and Related Arrangements..........................12
SECTION 2.7 Certain Matters Relating to Deferred Contingent Cash
Rights..................................................................12
SECTION 2.8 Dissenting Shares.......................................................15
Article III COVENANTS........................................................................15
SECTION 3.1 Registration Statement; Proxy Statement/Prospectus......................15
SECTION 3.2 Stockholder Approval....................................................16
SECTION 3.3 OTCBB/Other Exchange Listing............................................16
SECTION 3.4 Fees and Expenses.......................................................16
SECTION 3.5 Fairness and Solvency Opinions..........................................16
SECTION 3.6 Organization and Capitalization of Newco................................17
SECTION 3.7 Newco Certificate of Incorporation......................................17
SECTION 3.8 Authorization of Issuance of Merger Consideration.......................17
Article IV CONDITIONS TO THE OBLIGATIONS OF AVATEX AND XETAVA...............................17
SECTION 4.1 Stockholder Approval....................................................17
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
SECTION 4.2 Certain Proceedings.....................................................18
SECTION 4.3 Listing of New Avatex Common Stock......................................18
SECTION 4.4 Registration Statement..................................................18
SECTION 4.5 Blue Sky Laws...........................................................18
SECTION 4.6 Tax Opinion.............................................................18
SECTION 4.7 Fairness and Solvency Opinions..........................................18
SECTION 4.8 Resignations of Certain Directors.......................................18
SECTION 4.9 Settlements of Certain Litigation.......................................18
SECTION 4.10 Stockholders' Agreement; Voting Agreement...............................19
SECTION 4.11 Dissenting Shares.......................................................19
SECTION 4.12 Releases................................................................19
Article V CLOSING..........................................................................19
SECTION 5.1 Time and Place..........................................................19
SECTION 5.2 Filings at the Closing..................................................19
Article VI TERMINATION......................................................................19
SECTION 6.1 Termination.............................................................19
Article VII MISCELLANEOUS....................................................................20
SECTION 7.1 Amendment and Modification..............................................20
SECTION 7.2 Indemnification.........................................................20
SECTION 7.3 Assignment..............................................................21
SECTION 7.4 Governing Law...........................................................21
SECTION 7.5 Counterparts............................................................22
SECTION 7.6 Interpretation; Definitions.............................................22
SECTION 7.7 Entire Agreement........................................................25
</TABLE>
EXHIBITS AND SCHEDULES
Exhibit A -- Form of Stockholders' Agreement
Exhibit B -- Form of Voting Agreement
Exhibit C -- Certificate of Merger of Xetava Corporation with and into
Avatex Corporation
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Exhibit D -- Form of 6.75% Notes Indenture
Exhibit E -- Form of Warrant Agreement
Exhibit F -- Form of Certificate of Incorporation of Avatex Funding, Inc.
Exhibit G -- Form of Closing Releases
Schedule 2.6 -- Employment Agreements, Benefit Plans
iii
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of June 18, 1999, by and between AVATEX CORPORATION, a
Delaware corporation ("Avatex"), and XETAVA CORPORATION, a Delaware corporation
("Xetava"). Avatex and Xetava are sometimes collectively referred to herein as
the "Constituent Corporations".
W I T N E S S E T H:
WHEREAS, the Constituent Corporations have entered into an
Agreement and Plan of Merger, dated as of April 9, 1998 (the "Original Merger
Agreement");
WHEREAS, the Constituent Corporations wish to amend and
restate the Original Merger Agreement in its entirety as hereinafter set forth;
WHEREAS, Avatex has authorized capital stock consisting of (i)
50,000,000 shares of common stock, $5.00 par value per share (the "Old Avatex
Common Stock"), of which 13,806,375 shares are issued and outstanding as of the
date hereof, and (ii) 10,000,000 shares of Preferred Stock, $5.00 par value, of
which (a) 652,273 shares of $5 Cumulative Convertible Preferred Stock (the
"Convertible Preferred Stock"), and (b) 4,312,352 shares of $4.20 Cumulative
Exchangeable Series A Preferred Stock (the "Series A Preferred Stock" and
together with the Old Avatex Common Stock and the Convertible Preferred Stock,
the "Avatex Shares") are issued and outstanding as of the date hereof;
WHEREAS, Xetava is a direct, wholly-owned subsidiary of
Avatex;
WHEREAS, in connection with the consummation of the
transactions contemplated hereby, Avatex will organize Avatex Funding, Inc., a
Delaware corporation, as a direct, wholly-owned subsidiary of Avatex ("Newco");
WHEREAS, the Board of Directors of Avatex and Xetava believe
it is in the best interest of each respective corporation and their respective
stockholders to consummate the merger of Xetava with and into Avatex (the
"Merger") pursuant to the applicable provisions of the General Corporation Law
of the State of Delaware ("DGCL");
WHEREAS, concurrently with the execution of this Agreement and
in order to induce Avatex and Xetava to enter into this Agreement, certain
holders of Avatex Shares have executed and delivered an agreement, substantially
in the form of Exhibit A hereto, pursuant to which, among other things, such
stockholders granted to Avatex their proxy to vote all of the votes entitled to
be cast by such stockholders with respect to the Avatex Shares that they own in
favor of the adoption of this Agreement, and such stockholders have agreed,
among other things, that, in connection with the Merger, they will elect to
receive the Convertible Preferred Stock Alternate Consideration (as defined in
<PAGE>
Section 2.1 hereof) and the Series A Preferred Stock Alternate Consideration (as
defined in Section 2.1 hereof), as applicable (the "Stockholders' Agreement");
WHEREAS, concurrently with the execution of this agreement and
in order to induce Avatex and Xetava to enter into this Agreement, certain
holders of Avatex Shares have executed and delivered an agreement, substantially
in the form of Exhibit B hereto, pursuant to which, among other things, such
stockholders have agreed to vote all Avatex Shares that they own in favor of the
adoption of this Agreement (the "Voting Agreement");
WHEREAS, the Board of Directors of Avatex, pursuant to the
applicable provisions of the DGCL, has declared the Merger advisable, has
approved this Agreement, and has recommended adoption of this Agreement by the
stockholders of Avatex entitled to vote thereon;
WHEREAS, the Board of Directors of Xetava, pursuant to the
applicable provisions of the DGCL, has declared the Merger advisable, has
approved this Agreement and has recommended adoption of this Agreement by its
sole stockholder; and
WHEREAS, capitalized and other defined terms used in this
Agreement are defined in Section 7.6 hereof.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereto agree as follows:
Article I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the
conditions hereof and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2 hereof) Xetava shall be merged with and into Avatex in
accordance with the applicable provisions of the DGCL, and the separate
corporate existence of Xetava shall thereupon cease. Following the Merger,
Avatex shall continue as the surviving corporation (hereinafter referred to for
periods from and after the Effective Time as the "Surviving Corporation") under
the laws of the State of Delaware under the name "Avatex Corporation." Unless
the context requires otherwise, any references herein to Avatex with respect to
periods from and after the Effective Time shall be deemed to refer to Avatex as
the Surviving Corporation.
SECTION 1.2 EFFECTIVE TIME. The Merger shall be consummated by
and shall be effective at the time (the "Effective Time") of the filing with the
Secretary of State of the State of Delaware of a certificate of merger
substantially in the form annexed as Exhibit C hereto (the "Certificate of
Merger"), or in such other form as is required by the relevant provisions of the
DGCL, and executed in accordance with the relevant provisions of the DGCL, and
such other documents as may be required by the provisions of the DGCL (which
filings shall be made as soon as practicable following the satisfaction or
waiver of the conditions set forth in Article IV hereof).
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SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.4 CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Avatex shall be amended in its entirety to read as set forth in
the Restated Certificate of Incorporation of Avatex attached as Annex A to the
Certificate of Merger, and as so amended, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter duly amended in
accordance with the terms thereof and the DGCL.
SECTION 1.5 BY-LAWS. The By-Laws of Avatex, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by the terms thereof and of the
Certificate of Incorporation of the Surviving Corporation and as provided by
applicable law.
SECTION 1.6 DIRECTORS. The directors of Avatex at the
Effective Time shall be the initial directors of the Surviving Corporation and
will hold office from the Effective Time for the duration of their terms of
office and until their respective successors are thereafter duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise provided
by law.
SECTION 1.7 OFFICERS. The officers of Avatex immediately prior
to the Effective Time shall be the initial officers of the Surviving Corporation
and will hold office from the Effective Time until their respective successors
are thereafter duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation and By-Laws of the Surviving Corporation, or as
otherwise provided by law.
Article II
CONVERSION OF SHARES
SECTION 2.1 CONVERSION OF SHARES. (a) At the Effective Time,
by virtue of the Merger and without any action on the part of Avatex or Xetava
or their respective stockholders:
(i) Each share of Old Avatex Common Stock issued and
outstanding immediately prior to the Effective Time shall automatically be
converted into one (1) share (the "Common Stock Exchange Ratio") of class A
common stock, par value $0.01 per share (the "New Avatex Common Stock"), of the
Surviving Corporation.
(ii) (A) Each share of Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Convertible
Preferred Stock Electing Shares (as defined below), which shall be converted as
described in clause (B) below, and other than Dissenting Shares (as defined
below), which shall be converted as described in Section 2.8 below) shall
automatically be converted into 9.134 shares (the "Convertible Preferred
Exchange Ratio") of New Avatex Common Stock, and (B) each share of Convertible
Preferred Stock issued and outstanding with respect to which a Convertible
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Preferred Stock Alternate Consideration Election (as defined below) has been
effectively made and not revoked on or prior to the Election Deadline (as
defined below) pursuant to Section 2.2 below (the "Convertible Preferred Stock
Electing Shares") shall be automatically converted into the right to receive the
Convertible Preferred Stock Alternate Consideration (as defined in subparagraph
(I) below).
(I) For the purposes of this Agreement, the term "Convertible
Preferred Stock Alternate Consideration" shall mean, for each Convertible
Preferred Stock Electing Share, (1) $ 3.7408 in cash, (2) $ 8.340 (rounded to
the nearest whole dollar) principal amount of 6.75% Notes due 2002 of Newco (the
"6.75% Notes"), which 6.75% Notes shall be issued in accordance with and
governed by an Indenture substantially in the form annexed hereto as Exhibit D
(the "6.75% Notes Indenture") and will be guaranteed by the Surviving
Corporation as provided in the 6.75% Notes Indenture, (3) warrants to purchase
0.67456 shares (rounded to the nearest whole share) of New Avatex Common Stock
exercisable on or after the day that is the three-month anniversary of the
Closing Date (except as otherwise set forth in the Warrant Agreement (as defined
below)) and until the day that is the five-year and three-month anniversary of
the Closing Date at a price per share equal to $2.25, which warrants shall be
issued pursuant to a Warrant Agreement substantially in the form annexed hereto
as Exhibit E (the "Warrant Agreement"), and (4) a deferred contingent cash right
(rounded to the nearest whole number) (a "Convertible Preferred Deferred
Contingent Cash Right") equal to 16% of the Net Recovery Participation Cap (as
defined in subparagraph (II) below) divided by the total number of shares of
Convertible Preferred Stock outstanding immediately prior to the Effective Time.
(II) For the purposes of this Agreement, the term "Net
Recovery Participation Cap" shall mean an amount equal to 20% of the Net
Recovery (as defined below), provided that the Net Recovery Participation Cap
shall in no event exceed $7.5 million; and the term "Net Recovery" shall mean
the amount obtained from the following equation: (1) all of the cash payments,
if any, actually received by the Surviving Corporation in respect of a final,
non-appealable judgment in, a voluntary dismissal with prejudice of, or any and
all final settlements of, all claims, counterclaims, third-party claims and
other claims asserted in or with respect to the lawsuit styled FoxMeyer Health
Corporation v. McKesson Corporation, et al., Case No. 9700311, filed by Avatex
on January 10, 1997, in the 95th Judicial District Court of Dallas County, Texas
(the "McKesson Litigation") (any and all such cash payments are hereinafter
referred to collectively (if applicable) as, the "Cash Payment"); minus (2) the
sum of the following: (x) the aggregate out-of-pocket expenses incurred
previously and hereafter by Avatex in prosecuting the McKesson Litigation and
obtaining any such Cash Payment (including, but not limited to, any contingent
fee payable to any attorney); (y) any payments, offsets or settlements made by
the Surviving Corporation on or with respect to any counterclaims, third-party
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<PAGE>
claims and other claims in connection with or with respect to the McKesson
Litigation; and (z) an amount (the "Actual Tax Amount") equal to any portion of
the Cash Payment includible in income by the Surviving Corporation for federal
Income Tax (as defined below) purposes multiplied by the effective Income Tax
rate applicable to the Surviving Corporation for the taxable year in which the
obligation to pay the Cash Payment to the Surviving Corporation becomes fixed
(determined taking into account federal, state and local taxes and all
deductions and credits claimed by the Surviving Corporation with respect to such
taxable year, and with appropriate adjustments, including, but not limited to,
as to the applicable tax rate, to account for any actual or imputed interest in
respect of the Cash Payment). The Actual Tax Amount shall be determined by the
Surviving Corporation's independent accountants in good faith and such
determination shall be final and binding on all parties. For the purposes of
this Agreement, the term "Income Tax" shall mean any tax on or measured by
income or gross receipts.
(iii) (A) Each share of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Series A
Preferred Stock Electing Shares (as defined below, which shall be converted as
described in clause (B) below, and other than Dissenting Shares, which shall be
converted as described in Section 2.8 below) shall automatically be converted
into 7.253 shares (the "Series A Preferred Exchange Ratio") of New Avatex Common
Stock, and (B) each share of Series A Preferred Stock issued and outstanding
with respect to which a Series A Preferred Stock Alternate Consideration
Election (as defined below) has been effectively made and not revoked on or
prior to the Election Deadline pursuant to Section 2.2 below (the "Series A
Preferred Stock Electing Shares") shall be automatically converted into the
right to receive the Series A Preferred Stock Alternate Consideration (as
defined in subparagraph (I) below).
(I) For the purposes of this Agreement, the term "Series A
Preferred Stock Alternate Consideration" shall mean, for each Series A Preferred
Stock Electing Share, (1) $ 2.9705 in cash, (2) $ 6.623 (rounded to the nearest
whole dollar) principal amount of 6.75% Notes, which 6.75% Notes shall be issued
in accordance with and governed by the 6.75% Notes Indenture and will be
guaranteed by the Surviving Corporation as provided in the 6.75% Notes
Indenture, (3) warrants to purchase 0.53567 shares (rounded to the nearest whole
share) of New Avatex Common Stock exercisable on or after the day that is the
three-month anniversary of the Closing Date (except otherwise set forth in the
Warrant Agreement) and until the day that is the five-year and three-month
anniversary of the Closing Date at a price per share equal to $2.25, which
warrants shall be issued pursuant to the Warrant Agreement, and (4) a deferred
contingent cash right (rounded to the nearest whole number) (a "Series A
Preferred Deferred Contingent Cash Right") equal to 84% of the Net Recovery
Participation Cap divided by the total number of shares of Series A Preferred
Stock outstanding immediately prior to the Effective Time.
(iv) The Series A Preferred Contingent Cash Rights and the
Convertible Preferred Contingent Cash Rights are hereinafter referred to,
collectively, as the "Deferred Contingent Cash Rights". The shares of New Avatex
5
<PAGE>
Common Stock, the Convertible Preferred Stock Alternate Consideration and/or the
Series A Preferred Stock Alternate Consideration to be received in the Merger
are sometimes hereinafter referred to, collectively, as the "Merger
Consideration."
(v) Notwithstanding the foregoing, each share of Old Avatex
Common Stock, each share of Convertible Preferred Stock and each share of Series
A Preferred Stock that immediately prior to the Effective Time is held in the
treasury of Avatex shall be cancelled by virtue of the Merger without any
payment of any consideration therefor and shall cease to exist, and no shares of
New Avatex Common Stock or other consideration shall be delivered in exchange
for such shares.
(vi) Each share of common stock, $0.01 par value per share, of
Xetava issued and outstanding immediately prior to the Effective Time shall
automatically be cancelled by virtue of the Merger without any payment of any
consideration therefor and shall cease to exist.
(b) Between the date hereof and immediately prior to the
Effective Time, (i) the outstanding shares of Old Avatex Common Stock,
Convertible Preferred Stock or Series A Preferred Stock shall not be changed
into a different number of shares by reason of any reclassification, split-up,
combination or exchange of shares, and (ii) no dividend payable in stock or
other securities shall be declared thereon with a record date within such
period.
SECTION 2.2 ALTERNATE CONSIDERATION ELECTIONS. (a) Each person
who, on or prior to the Election Deadline (as defined in Section 2.2(c) below),
is a record holder of shares of Convertible Preferred Stock shall be entitled to
make an unconditional election (the "Convertible Preferred Stock Alternate
Consideration Election") with respect to any or all of such person's shares of
Convertible Preferred Stock (such shares thereby becoming Convertible Preferred
Stock Electing Shares, subject to the provisions of this Section 2.2) on or
prior to the Election Deadline to receive, for each Convertible Preferred Stock
Electing Share of such person, Convertible Preferred Stock Alternate
Consideration.
(b) Each person who, on or prior to the Election Deadline, is
a record holder of shares of Series A Preferred Stock shall be entitled to make
an unconditional election (the "Series A Preferred Stock Alternate Consideration
Election") with respect to any or all of such person's shares of Series A
Preferred Stock (such shares thereby becoming Series A Preferred Stock Electing
Shares, subject to the provisions of this Section 2.2) on or prior to the
Election Deadline to receive, for each Series A Preferred Stock Electing Share
of such person, Series A Preferred Stock Alternate Consideration.
(c) Avatex shall prepare and mail a form of election (the
"Form of Election") and a letter of transmittal (which shall specify that
delivery of the certificates representing shares of Convertible Preferred Stock
or Series A Preferred Stock shall be effected, and risk of loss and title to
such certificates shall pass only upon proper delivery of such certificates to
the Exchange Agent, and shall contain or request any information that Avatex may
reasonably require) with the Proxy Statement (as defined in Section 3.1 below)
to the record holders of Convertible Preferred Stock and Series A Preferred
Stock as of the record date (the "Record Date") for the Stockholders' Meeting
(defined in Section 3.2(a) below), which Form of Election shall be used by each
record holder of shares of Convertible Preferred Stock or Series A Preferred
Stock who wishes to make a Convertible Preferred Stock Alternate Consideration
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Election or a Series A Preferred Stock Alternate Consideration Election, as
applicable, and shall contain therein the acknowledgment and agreement referred
to in Section 2.7(e) below and may request any other information that Avatex may
reasonably require. Avatex will use reasonable best efforts to make the Form of
Election, a letter of transmittal and the Proxy Statement available to all
persons who become record holders of Convertible Preferred Stock or Series A
Preferred Stock during the period between the Record Date and the Election
Deadline. Any election by any such record holder of Convertible Preferred Stock
or Series A Preferred Stock to receive Convertible Preferred Stock Alternate
Consideration or Series A Preferred Stock Alternate Consideration, respectively,
shall have been properly made only if such record holder has affirmatively made
an election on the Form of Election to receive the Convertible Preferred Stock
Alternate Consideration or the Series A Preferred Stock Alternate Consideration,
as the case may be, and the Exchange Agent (as defined in Section 2.3 below)
shall have received at its designated office, by 5:00 p.m., New York City time,
on the second business day next preceding the date of the Stockholders' Meeting
(or such other time and date as Avatex shall determine, including, but not
limited to, as a result of any adjournment or postponement of the Stockholders'
Meeting, the "Election Deadline"), a Form of Election properly completed and
signed and accompanied by the stock certificates representing the Convertible
Preferred Stock Electing Shares or the Series A Preferred Stock Electing Shares,
as the case may be, to which such Form of Election relates, and a duly executed
letter of transmittal. Holders of record of shares of Convertible Preferred
Stock or Series A Preferred Stock who hold such shares as nominees, trustees or
in other representative capacities (a "Representative") may submit multiple
Forms of Election, provided that such Representative certifies that each such
Form of Election covers all of the shares of Convertible Preferred Stock or
Series A Preferred Stock held by each Representative for a particular beneficial
owner.
(d) Any Form of Election submitted to the Exchange Agent may
be revoked or changed by the stockholder submitting it to the Exchange Agent
only by written notice in form and substance reasonably satisfactory to the
Exchange Agent, or by a revised, duly executed, Form of Election received by the
Exchange Agent (i) prior to the Election Deadline or (ii) after the date of the
Proxy Statement, if (and to the extent that) the Exchange Agent is legally
required to permit revocations and the Effective Time of the Merger shall not
have occurred prior to such date. In addition, all Forms of Election shall
automatically be revoked if the Exchange Agent is notified in writing by Avatex
that the Merger has been abandoned. If a Form of Election is revoked, the
certificate or certificates representing the Convertible Preferred Stock
Electing Share or the Series A Preferred Stock Electing Shares to which such
Form of Election relates shall be promptly returned to the stockholder
submitting the same to the Exchange Agent.
(e) The good faith determination of Avatex as to whether or
not a Convertible Preferred Stock Alternate Consideration Election or a Series A
Preferred Stock Alternate Consideration Election has been properly made or
revoked pursuant to this Section 2.2 with respect to Convertible Preferred Stock
Electing Shares or Series A Preferred Stock Electing Shares and when elections
and/or revocations were received by it shall be binding. If Avatex determines in
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good faith that any Convertible Preferred Stock Alternate Consideration Election
or Series A Preferred Stock Alternate Consideration Election was not properly
made with respect to shares of Convertible Preferred Stock or Series A Preferred
Stock, as the case may be, such shares shall be treated by the Exchange Agent as
shares which were not Convertible Preferred Stock Electing Shares or Series A
Preferred Stock Electing Shares, as the case may be, at the Election Deadline,
and such shares will be automatically converted into shares of New Avatex Common
Stock in accordance with, and pursuant to, clause (A) of Section 2.1(a)(ii) or
clause (A) of Section 2.1(a)(iii), as applicable. The Exchange Agent may, with
the agreement of Avatex, make such rules as are consistent with this Section 2.2
for the implementation of the elections provided for herein as shall be
necessary or desirable fully to effect such elections. Avatex, in its sole
discretion, may, but in no circumstance will be obligated to, accept any Form of
Election received by it or the Exchange Agent after the Election Deadline.
SECTION 2.3 EXCHANGE OF SHARES. (a) Prior to the mailing to
the record holders of capital stock of Avatex entitled to vote at the
Stockholders' Meeting, Avatex shall designate a bank or trust company to act as
exchange agent (the "Exchange Agent") in connection with the Merger. Promptly
following the Effective Time, Avatex shall take all steps necessary to enable
and cause the Exchange Agent to deliver the applicable Merger Consideration as
and when certificates for Avatex Shares are properly surrendered in accordance
with this Section 2.3 and the provisions of the letter of transmittal referred
to in Section 2.3(b) below. Notwithstanding anything herein to the contrary, New
Avatex Common Stock into which Avatex Shares shall be converted in the Merger,
or the Convertible Preferred Stock Alternate Consideration or Series A Preferred
Stock Alternate Consideration into which Convertible Preferred Stock Electing
Shares or Series A Preferred Stock Electing Shares shall be converted in the
Merger, shall be deemed to have been received, issued and/or paid as of the
Effective Time. No dividends, payments or other distributions with a record or
other applicable determination or payment date after the Effective Time with
respect to shares of New Avatex Common Stock, or, if applicable, 6.75% Notes or
Deferred Contingent Cash Rights, shall be paid to the holder of any
unsurrendered stock certificate previously representing Avatex Shares (in any
such case, a "Certificate") with respect to which shares of New Avatex Common
Stock, or, if applicable, Convertible Preferred Stock Alternate Consideration or
Series A Preferred Stock Alternate Consideration, shall be issuable in the
Merger until such Certificate shall be surrendered for exchange as provided
herein, but (i) upon such surrender there shall be paid, without interest, to
the person in whose name the Certificates representing such shares of New Avatex
Common Stock, or, if applicable, 6.75% Notes or Deferred Contingent Cash Rights,
shall be issued the amount of dividends, payments or other distributions
theretofore paid with respect to such shares of New Avatex Common Stock, or, if
applicable, 6.75% Notes or Deferred Contingent Cash Rights, as of any record or
other applicable determination or payment date subsequent to the Effective Time
(but prior to such surrender) and the amount of any cash payable to such person
in lieu of fractional shares of New Avatex Common Stock, pursuant to this
Section 2.3, and (ii) at the appropriate payment date or as soon as practicable
thereafter, there shall be paid to such person the amount of dividends, payments
or other distributions with a record or other applicable determination date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares of New Avatex
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Common Stock, or, if applicable, 6.75% Notes or Deferred Contingent Cash Rights,
subject in any case to any applicable abandoned property, escheat or similar
laws.
(b) Promptly after the Effective Time, Avatex shall cause the
Exchange Agent to mail to each former record holder of Avatex Shares (other than
holders of Convertible Preferred Stock Electing Shares and Series A Preferred
Stock Electing Shares), a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass only upon proper delivery of the Certificates to the Exchange Agent,
and shall contain or request any information that Avatex may reasonably require)
and instructions for use in effecting the surrender of the Certificates.
(c) Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal and, if applicable, a Form of Election,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be requested, the holder of such Certificate shall,
following the Effective Time, be entitled to receive in exchange therefor the
applicable Merger Consideration deliverable in respect of the Avatex Shares
formerly evidenced by such Certificate or Certificates (together with any cash
in lieu of fractional shares of New Avatex Common Stock, if applicable, pursuant
to Section 2.3(e)) and any other amounts payable pursuant to Section 2.3(a)
hereof, and such Certificate or Certificates shall forthwith be cancelled. Until
surrendered in accordance with the provisions of this Section 2.3, each
Certificate shall represent for all purposes the right to receive the applicable
Merger Consideration and the right to receive cash in lieu of fractional shares
of New Avatex Common Stock, if applicable, and any other amounts payable
pursuant to Section 2.3(a) hereof. If a Certificate or Certificates formerly
evidencing more than one Avatex Share shall be surrendered for exchange as
provided in this Agreement at one time by the same holder, (x) certificates
representing the number of full shares of New Avatex Common Stock, or, in the
case of Convertible Preferred Stock Electing Shares or Series A Preferred Stock
Electing Shares, the amount of Convertible Preferred Stock Alternate
Consideration or Series A Preferred Stock Alternate Consideration, (y) the
amount of cash in lieu of fractional shares of New Avatex Common Stock, if
applicable, and (z) any other amounts payable pursuant to Section 2.3(a) hereof
deliverable upon the surrender thereof shall be computed on the basis of the
aggregate number of Avatex Shares formerly evidenced by such Certificates so
surrendered. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Avatex Shares for any Merger
Consideration or any other consideration payable pursuant to this Article II
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) If any stock portion of the applicable Merger
Consideration is to be delivered to a person other than the person in whose name
the Certificate surrendered in exchange thereof is registered, it shall be a
condition to the delivery of such certificates representing stock that the
Certificate so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of the
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foregoing or establish to the satisfaction of the Exchange Agent that such taxes
have been paid or are not required to be paid.
(e) Notwithstanding anything herein to the contrary, no
certificates representing fractional shares of New Avatex Common Stock shall be
issued upon the surrender for exchange of Certificates pursuant to this Section
2.3, and no fractional shares of New Avatex Common Stock shall be issued in the
Merger. Such fractional share interests shall not entitle the holder thereof to
vote or to any rights as a security holder of Avatex or the Surviving
Corporation. In lieu of any fractional shares of New Avatex Common Stock, each
person who otherwise would have been entitled to receive any such fractional
shares shall be entitled to receive at the time Merger Consideration is paid
pursuant to this Article II, an amount in cash equal to the product obtained by
multiplying the fractional share interest to which such person would otherwise
be entitled by the average of the last reported sales prices (or the average of
the quoted closing bid and ask prices if there were no sales) of a share of Old
Avatex Common Stock quoted on the OTC Bulletin Board System (the "OTCBB") (or
any other stock exchange, over-the-counter market or trading facility (in any
such case, an "Other Exchange") on which the Old Avatex Common Stock is
primarily listed or admitted for trading) during the 30 consecutive Trading Days
(as defined below) ending on the Trading Day next preceding the Effective Time.
For the purposes of this paragraph, the term "Trading Day" shall mean each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any of such days on
which securities are generally not traded or quoted on the OTCBB or the
applicable Other Exchange.
(f) As soon as practicable after the determination of the
amount of the applicable Merger Consideration to be received, paid and/or issued
to the persons who would otherwise have been entitled to such amounts, without
interest, shall be received, paid and/or issued to such persons; provided,
however, that no such amount will be received, paid and/or issued to any such
person prior to the surrender by such person of the Certificates formerly
representing such person's Avatex Shares. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable for any cash proceeds
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(g) Promptly following the date that is six months after the
Effective Time, the Exchange Agent shall return to the Surviving Corporation all
certificates, instruments or documents representing or otherwise evidencing the
Merger Consideration issuable pursuant to this Article II in its possession, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing an Avatex Share may surrender such Certificate
to the Surviving Corporation and (subject to applicable abandoned property,
escheat or similar laws) receive in exchange therefor Shares of New Avatex
Common Stock issuable pursuant to this Article II, any cash in lieu of
fractional shares, if applicable, pursuant to the terms hereof and any other
amounts payable pursuant to Section 2.3(a) hereof.
(h) Notwithstanding anything to the contrary contained in the
Agreement, in the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
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such Certificate to be lost, stolen or destroyed, the Surviving Corporation
shall issue (or cause the Exchange Agent to issue) in exchange for such lost,
stolen or destroyed certificate, certificates or other instruments representing
the applicable Merger Consideration, any cash in lieu of fractional shares, if
applicable, and any other amounts payable pursuant to Section 2.3(a) hereof,
deliverable in respect thereof as determined in accordance with this Article II;
provided, however, that the Board of Directors of the Surviving Corporation may,
in its discretion and as a condition precedent to the delivery thereof, require
the owner of such lost, stolen or destroyed Certificate to give the Surviving
Corporation a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(i) The issuance and/or payment of Merger Consideration in
accordance with the terms of this Article II shall be deemed to have been issued
and/or paid in full satisfaction of all rights pertaining to the Avatex Shares
theretofore represented by such Certificates representing such Avatex Shares.
SECTION 2.4 CLOSING OF TRANSFER BOOKS. After the Effective
Time there shall be no transfers on the stock transfer books of Avatex of the
Avatex Shares that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates or other
instruments representing the applicable Merger Consideration, any cash in lieu
of fractional shares, if applicable, as provided in this Article II and any
other amounts payable pursuant to Section 2.3(a) hereof.
SECTION 2.5 STOCK OPTIONS. At the Effective Time and without
limiting the generality of the matters referred to in Section 1.3, Avatex's
obligations with respect to each outstanding option to purchase shares of Old
Avatex Common Stock (collectively, the "Stock Options") granted pursuant to
Avatex's 1993 Stock Option and Performance Award Plan, as amended (the "Avatex
Option Plan"), or any of Avatex's other stock option plans or agreements (the
"Avatex Stock Option Plans") shall continue to be obligations of the Surviving
Corporation. The Stock Options shall continue to have, and be subject to, the
same terms and conditions set forth in the Avatex Stock Option Plans and
agreements pursuant to which such Stock Options were issued as in effect
immediately prior to the Effective Time, except that the Stock Options shall
thereupon be exercisable for shares of New Avatex Common Stock and (a) the
number of shares for which such Stock Option shall be exercisable shall equal
the product of the Common Stock Exchange Ratio and the number of shares of Old
Avatex Common Stock subject to the Stock Option immediately prior to the
Effective Time (rounded to the nearest whole number), and (b) the per share
exercise price for the shares of New Avatex Common Stock issuable upon the
exercise of such assumed Stock Option shall be equal to the aggregate exercise
price for the shares of Old Avatex Common Stock subject to the Stock Option,
divided by the number of shares of New Avatex Common Stock deemed to be
purchasable pursuant to the Stock Option. The date of grant shall be the date on
which the Stock Option was originally granted. The Surviving Corporation shall
(i) reserve for issuance the number of shares of New Avatex Common Stock that
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will become issuable upon the exercise of such Stock Options pursuant to this
Section 2.5 and (ii) at the Effective Time, execute a document acknowledging the
Surviving Corporation's obligations with respect thereto under this Section 2.5.
Nothing in this Section 2.5 shall affect the schedule of the vesting (or the
acceleration thereof) with respect to the Stock Options, in accordance with the
terms thereof, to be assumed by the Surviving Corporation as provided in this
Section 2.5.
SECTION 2.6 EMPLOYMENT AGREEMENTS AND RELATED ARRANGEMENTS.
(a) At the Effective Date and without limiting the generality of the matters
referred to in Section 1.3 hereof, all of Avatex's rights and obligations under
the employment agreements and other benefit plans and arrangements applicable to
or covering current employees of Avatex listed on Schedule 2.6 hereto shall
continue to be the rights and obligations of the Surviving Corporation.
(b) Without limiting the generality of the matters referred to
in Section 1.3 or 2.6(a) hereof, after the Effective Time, Avatex's Performance
Incentive Plan, effective as of January 1, 1997 (as amended by Amendment No. 1
thereto, effective as of June 23, 1997, and by Amendment No. 2 thereto,
effective as of January 22, 1998, and as the same may be further amended,
supplemented or modified from time to time, the "Incentive Plan"), shall
continue in effect after the Effective Time as a benefit plan of the Surviving
Corporation and the rights and obligations of Avatex thereunder shall continue
after the Effective Time to be the rights and obligations of the Surviving
Corporation in accordance with, and pursuant to, this Section 2.6. For the
purposes of clarification, it is understood that, for the purposes of
determining any amount payable under the Incentive Plan with respect to
Litigation Income (as such term is defined in the Incentive Plan), Litigation
Income shall be calculated in the same manner as Net Recovery is to be
calculated herein, provided that the provisions of Section 2.1 (a)(ii) (II) (z)
hereof shall not be deemed applicable with respect to the definition of
Litigation Income or otherwise with respect to the calculation or payment of any
amounts payable under the Incentive Plan with respect to Litigation Income.
SECTION 2.7 CERTAIN MATTERS RELATING TO DEFERRED CONTINGENT
CASH RIGHTS. (a) No Deferred Contingent Cash Right shall (i) be transferable by
any recipient thereof in connection with the Merger, except by will or pursuant
to the laws of descent and distribution or by operation of law, (ii) be
evidenced by a certificate or other instrument, (iii) possess any voting rights,
(iv) receive or be entitled to receive any dividends or interest, or (v)
represent any equity interest in Avatex, Xetava or the Surviving Corporation.
(b) The Surviving Corporation will maintain (or cause to be
maintained) books of record of the recipients of Deferred Contingent Cash Rights
in the Merger as provided by this Agreement. Such books of record shall show the
names and addresses of the respective recipients of Deferred Contingent Cash
Rights, as the same are made available to Avatex in connection with the
consummation of the Merger.
(c) Notwithstanding anything to the contrary contained herein
or in the Incentive Plan, no provision of the Incentive Plan shall affect or be
deemed to affect any payment on the Deferred Contingent Cash Rights hereunder;
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provided, however, that if the Surviving Corporation amends the Incentive Plan
in such a manner that accelerates when payments under the Incentive Plan with
respect to Litigation Income may be made, the terms of this Agreement shall be
deemed amended to the extent necessary so that the time at which the Surviving
Corporation becomes obligated to make any payments on the Deferred Contingent
Cash Rights hereunder shall occur concurrently with the time that the Surviving
Corporation first becomes obligated to make payments under the Incentive Plan
with respect to Litigation Income.
(d) (i) Subject to subparagraph (ii) below, payment, if any,
on the Deferred Contingent Cash Rights shall be made to the registered
recipients thereof as of a date that is not later than 30 days following the
date on which the Surviving Corporation receives the full Cash Payment;
provided, however, that, if the Cash Payment is to be received by the Surviving
Corporation in more than one installment, the Surviving Corporation shall make
interim payments on the Deferred Contingent Cash Rights not later than 30 days
following the date on which the Surviving Corporation actually receives any
portion of the full Cash Payment, individually or in the aggregate with other
Cash Payments with respect to which an Interim Payment (as defined below) has
not yet been paid, that would result in the Surviving Corporation being able to
make, in accordance with the applicable provisions of Sections 2.1(a)(ii)(I),
2.1(a)(ii)(II) and 2.1(b)(iii)(I) hereof and this Section 2.7, a payment on the
Deferred Contingent Cash Rights at such time of at least $500,000 (each of any
such payments, an "Interim Payment"). Notwithstanding anything to the contrary
herein and to avoid any confusion herein, under no circumstances will the
Surviving Corporation be obligated to make any payment on the Deferred
Contingent Cash Rights until such time as there has been, with respect to each
and every defendant in the McKesson Litigation, a final, non-appealable
judgment, a voluntary dismissal with prejudice of, or final settlement of all
claims, counterclaims, third-party claims and other claims asserted in or with
respect to the McKesson Litigation.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, for the purposes of calculating an actual payment on the
Deferred Contingent Cash Rights, Avatex shall exclude from the Cash Payment upon
which such payment on the Deferred Contingent Cash Rights is to be based an
amount equal to any portion of such Cash Payment that is includible in income by
the Surviving Corporation for federal Income Tax purposes multiplied by the
highest, combined marginal rate of federal, state and local Income Taxes that is
likely to be applicable to the Surviving Corporation for the taxable year in
which the obligation to pay the Cash Payment to the Surviving Corporation became
fixed (such amount, the "Retained DCCR Payment Amount"), which Retained DCCR
Payment Amount shall be determined by the Surviving Corporation's independent
accountants in good faith and may include appropriate adjustments, including,
but not limited to, to account for any actual or imputed interest that is likely
to be includible in income in respect of the Cash Payment, and such
determination shall be final and binding on all parties. If the Retained DCCR
Payment Amount exceeds the Actual Tax Amount with respect to the Cash Payment
upon which such payment on the Deferred Contingent Cash Rights is based, the
amount of such excess shall be paid pro rata to the registered recipients of
Deferred Contingent Cash Rights (such payment, the "Excess Payout"). The Excess
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Payout, including interest thereon at a rate of 5% per annum accruing from the
date on which the Surviving Corporation receives the Cash Payment upon which
such payment on the Deferred Contingent Cash Rights is based to the date of the
actual payment of the Excess Payout, shall be made not later than 30 days
following the later of (x) the date on which the Surviving Corporation actually
files all of its federal, state and local Income Tax returns for the taxable
year in which the obligation to pay the Cash Payment to the Surviving
Corporation became fixed, and (y) the date on which the Surviving Corporation
actually receives the Cash Payment upon which such payment on the Deferred
Contingent Cash Rights is based.
(iii) Any payments on the Deferred Contingent Cash Rights
shall be made to the registered recipients of Deferred Contingent Cash Rights at
their respective addresses in the books of record of the Surviving Corporation.
A recipient of a Deferred Contingent Cash Right shall not be entitled to any
interest for the period of time between the date on which the Surviving
Corporation receives any portion of the Cash Payment and the date on which
timely payment is made on the Deferred Contingent Cash Rights in accordance with
the terms hereof; provided, however, that any payments made on the Deferred
Contingent Cash Rights after expiration of the 30-day periods referred to in the
subparagraphs (i) and (ii) above shall include interest thereon at a rate of 8%
per annum accruing from the first day following the expiration of such
applicable 30-day period to the date of the actual applicable payment on
Deferred Contingent Cash Rights in accordance with the terms hereof; provided
further, however, that such interest shall in no event accrue on any portion of
the Retained DCCR Payment Amount until after the expiration of the 30-day
payment period applicable to the payment of the Excess Payout referred to in
subparagraph (ii) above, or on any payment made on the Deferred Contingent Cash
Rights during either such 30-day period so long as such applicable payment was
made to the registered recipient of Deferred Contingent Cash Rights at their
respective addresses in the books and records of the Surviving Corporation.
(e) Notwithstanding anything to the contrary in this Agreement
or otherwise, (i) the Surviving Corporation shall retain sole and exclusive
control of the McKesson Litigation and may, among other things, dismiss, settle
or cease prosecuting all or any portion of the McKesson Litigation at any time,
including, without limitation, without obtaining any cash or other recovery,
(ii) no recipient of Deferred Contingent Cash Rights shall have any rights
against the Surviving Corporation or its directors, officers, agents, attorneys,
representatives, stockholders or affiliates for any decision regarding the
conduct or disposition of the McKesson Litigation, including, without
limitation, any decision to dispose or cease the prosecution of all or any
portion of the McKesson Litigation without a cash recovery by the Surviving
Corporation (except for any claim for violation or breach of Section 2.7(f)
below), and (iii) the Surviving Corporation's good faith determination of the
amounts of the Net Recovery and the Net Recovery Participation Cap will be
final, conclusive and binding on the recipients of Deferred Contingent Cash
Rights. In addition, in the event that any applicable law, rule, regulation or
order limits or prevents the distribution of all or any portion of the Net
Recovery, the Surviving Corporation shall have no obligation whatsoever to make
any payment in excess of the allowable amount, if any. Consequently, should all
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or any portion of the payments on the Deferred Contingent Cash Rights required
by this Agreement be in excess of the allowable amount at the time such payment
is to be made, the Surviving Corporation will not make all or any portion of the
payment, as the case may be, in excess of the allowable amount at such time or
at any future time. Each record holder of shares of Convertible Preferred Stock
or Series A Preferred Stock electing to receive the Convertible Preferred Stock
Alternate Consideration or the Series A Preferred Stock Alternate Consideration,
as applicable, in accordance with this Agreement will be required to acknowledge
and agree to the foregoing provisions of this Section 2.7(e), and, in connection
therewith, each Form of Election to be signed by such record holders will
contain such acknowledgment and agreement.
(f) Avatex agrees and covenants not to artificially arrange
its affairs so as to avoid or minimize the payment on the Deferred Contingent
Cash Rights (including, without limitation, arranging for some payment of goods
or services, directly or indirectly, from the McKesson Litigation defendants
outside of a settlement thereof).
SECTION 2.8 DISSENTING SHARES. Notwithstanding any other
provision of this Agreement to the contrary, the shares of Convertible Preferred
Stock and Series A Preferred Stock that are outstanding immediately prior to the
Effective Time and which are held by stockholders who shall be entitled to
perfect appraisal rights pursuant to Section 262 of the DGCL and who have fully
complied with all of the requirements of Section 262 of the DGCL for perfecting
appraisal rights (any such shares, the "Dissenting Shares"), shall not be
converted into or represent the right to receive the applicable Merger
Consideration unless such stockholders fail to perfect, withdraw or otherwise
lose their right to appraisal. Such stockholders shall be entitled to receive
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of Section 262 of the DGCL. If, after the Effective Time, any such
stockholder fails to perfect, withdraws or loses its right to appraisal, such
shares of Convertible Preferred Stock and Series A Preferred Stock shall be
treated as if they had been converted as of the Effective Time into a right to
receive the applicable Merger Consideration, without interest thereon, upon
surrender of the Certificate or Certificates that formerly evidenced such shares
of Convertible Preferred Stock or Series A Preferred Stock in the manner set
forth in Section 2.1.
Article III
COVENANTS
SECTION 3.1 REGISTRATION STATEMENT; PROXY
STATEMENT/PROSPECTUS. After the execution of this Agreement, Avatex and Newco
shall prepare and file with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act"), a
registration statement (the "Registration Statement") with respect to the New
Avatex Common Stock, warrants to purchase shares of New Avatex Common Stock
(including the shares of New Avatex Common Stock issuable upon the exercise of
such warrants) and the 6.75% Notes to be issued in the Merger and shall use all
reasonable efforts to have the Registration Statement declared effective by the
SEC as promptly as practicable. Avatex also shall take any action required to be
taken under state blue sky or securities laws in connection with the issuance of
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New Avatex Common Stock, warrants to purchase shares of New Avatex Common Stock
(including the shares of New Avatex Common Stock issuable upon the exercise of
such warrants) and the 6.75% Notes pursuant to the Merger, and Avatex, Xetava
and Newco shall furnish all information concerning Avatex, Xetava and Newco and
the holders of Avatex Shares and shall take such other action as may be
reasonably requested by the SEC. Avatex shall maintain the effectiveness of the
Registration Statement as it relates to the warrants to purchase shares of New
Avatex Common Stock (including the shares of New Avatex Common Stock issuable
upon the exercise of such warrants) covered thereunder until the earlier of when
(i) all of such warrants have been exercised or (ii) the exercise period for the
exercise of such warrants under the Warrant Agreement has expired. Avatex shall
prepare for inclusion in the Registration Statement, shall file with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on
or before the time the Registration Statement is filed as provided above, and
shall use all reasonable efforts to have cleared by the SEC, a proxy statement
with respect to the meeting of stockholders of Avatex as provided in Section 3.2
below (the "Proxy Statement"), and shall mail the Proxy Statement to such
stockholders as promptly as practicable after clearance of the Proxy Statement
with the SEC. The Proxy Statement shall include the recommendation of the Board
of Directors of Avatex in favor of adoption of this Agreement and the Merger.
SECTION 3.2 STOCKHOLDER APPROVAL. (a) Avatex shall take all
steps necessary to call, give notice of in accordance with the DGCL, convene and
hold a meeting of its stockholders entitled to vote on the Merger (the
"Stockholders' Meeting") as soon as practicable for the purpose of adopting this
Agreement, approving the Merger and for such other purposes as may be necessary
or desirable.
(b) The Board of Directors of Avatex shall recommend to its
stockholders the adoption of this Agreement and shall use its reasonable best
efforts to obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby.
SECTION 3.3 OTCBB/OTHER EXCHANGE LISTING. Avatex and Newco
shall use their respective reasonable best efforts to effect, at or before the
Effective Time, approval for quotation or listing on the OTCBB or an Other
Exchange, upon official notice of issuance, of the New Avatex Common Stock,
warrants to purchase shares of New Avatex Common Stock (including the shares of
New Avatex Common Stock issuable upon the exercise of such warrants) and the
6.75% Notes to be issued pursuant to the Merger.
SECTION 3.4 FEES AND EXPENSES. Each party hereto shall pay all
costs and expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby.
SECTION 3.5 FAIRNESS AND SOLVENCY OPINIONS. (a) The Board of
Directors of Avatex shall use its reasonable best efforts to have updated in
form and substance satisfactory to the Board of Directors of Avatex, as of the
time of the mailing of the Proxy Statement and as of the Effective Time, the
opinions of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., financial
16
<PAGE>
advisor to the Board of Directors of Avatex (the "HL"), that the Board of
Directors of Avatex received to the effect that (i) the consideration that the
holders of the Old Avatex Common Stock are entitled to receive pursuant to the
Merger is fair to such holders from a financial point of view, and (ii) the
consideration that the holders of the Convertible Preferred Stock and the Series
A Preferred Stock are entitled to receive pursuant to the Merger is, in the
aggregate, within a reasonable fair value of the Convertible Preferred Stock or
the Series A Preferred Stock, as applicable (such opinions as of the date hereof
and as so updated, collectively, the "Fairness Opinions").
(b) The Board of Directors of Avatex shall use its reasonable
best efforts to have updated in form and substance satisfactory to the Board of
Directors of Avatex, as of the time of the mailing of the Proxy Statement and as
of the Effective Time, the opinion of HL that the Board of Directors of Avatex
received as to the solvency of the Surviving Corporation after giving effect to
the Merger and the consummation of the other transactions contemplated herein
(such opinion as of the date hereof and as so updated, the "Solvency Opinion").
SECTION 3.6 ORGANIZATION AND CAPITALIZATION OF NEWCO. (a)
Prior to the Effective Time, Avatex will organize Newco as a direct,
wholly-owned subsidiary of Avatex. At all times after such organization and
prior to the transfer of the Phar-Mor Stock (as defined below) contemplated by
this Section 3.6, Newco will have no assets or liabilities of any kind
whatsoever and will not have conducted any business operations of any kind
whatsoever, other than the activities associated with its incorporation, its
authorization of any agreement, document or instrument it is to execute or be
subject to in connection with the consummation of the transactions contemplated
by this Agreement, and its consummation of transactions contemplated by this
Agreement.
(b) On or prior to the tenth business day after the Election
Deadline, Avatex shall, in the form of a contribution to the capital of Newco,
assign, transfer, convey and deliver to Newco, and Newco shall acquire and
accept from Avatex, free and clear of all liens, claims and encumbrances (other
than those created under the 6.75% Notes Indenture and the Pledge and Security
Agreement contemplated thereby) all of Avatex's right, title and interest in and
to 3,571,533 shares of common stock, par value $0.01 per share, of Phar-Mor,
Inc., a Pennsylvania corporation (the "Phar-Mor Stock").
SECTION 3.7 NEWCO CERTIFICATE OF INCORPORATION. Prior to the
Effective Time, Avatex shall cause Newco to file with the Secretary of State of
the State of Delaware the Newco Certificate of Incorporation substantially in
the form annexed hereto as Exhibit F.
SECTION 3.8 AUTHORIZATION OF ISSUANCE OF MERGER CONSIDERATION.
Avatex shall use reasonable efforts to obtain any authorizations and consents
necessary, and shall use reasonable efforts to take such further actions as may
be required, for the payment and/or issuance of the Merger Consideration to
holders of Avatex Shares pursuant to the terms of this Agreement.
17
<PAGE>
Article IV
CONDITIONS TO THE OBLIGATIONS OF AVATEX
AND XETAVA
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
SECTION 4.1 STOCKHOLDER APPROVAL. This Agreement shall have
been adopted by the affirmative vote of the holders (collectively, the
"Stockholder Approval") of (i) at least a majority of the outstanding shares of
Old Avatex Common Stock, (ii) at least two thirds of the outstanding shares of
Convertible Preferred Stock, and (iii) at least two thirds of the outstanding
shares of Series A Preferred Stock, in each case, voting separately as a class,
at the Stockholders' Meeting or any other meeting of Avatex stockholders, and by
written consent of the sole stockholder of Xetava.
SECTION 4.2 CERTAIN PROCEEDINGS. Neither Avatex nor Xetava
shall be subject to any writ, order, decree or injunction of a court of
competent jurisdiction prohibiting or restricting the consummation of the
Merger.
SECTION 4.3 LISTING OF NEW AVATEX COMMON STOCK. The New Avatex
Common Stock to be issued in the Merger shall have been approved for quotation
or listing on the OTCBB, subject to official notice of issuance, or on an Other
Exchange as so provided for in Section 3.3.
SECTION 4.4 REGISTRATION STATEMENT. The Registration Statement
shall have been declared effective, shall be effective at the Effective Time,
and no stop order suspending such effectiveness or the use of the Proxy
Statement shall have been issued or proceedings for either such purpose shall
have been instituted.
SECTION 4.5 BLUE SKY LAWS. Avatex shall have received all Blue
Sky authorizations necessary to issue the Merger Consideration.
SECTION 4.6 TAX OPINION. Avatex and Xetava shall have received
an opinion of their counsel, Weil, Gotshal & Manges LLP, to the effect that, for
federal income tax purposes, (i) the Merger will constitute a recapitalization
of Avatex within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); (ii) no gain or loss will be recognized by Avatex
or Xetava pursuant to the Merger (other than possibly with respect to the
issuance of Deferred Contingent Cash Rights); and (iii) no gain or loss will be
recognized by a holder of Avatex Shares upon the exchange of such shares solely
for shares of New Avatex Common Stock pursuant to the Merger (except with
respect to any cash received in lieu of fractional shares and any New Avatex
Common Stock received by a holder of Series A Preferred Stock or Convertible
Preferred Stock on account of dividend arrearages). In rendering such opinion,
Weil, Gotshal & Manges LLP may receive and rely upon representations contained
in certificates.
SECTION 4.7 FAIRNESS AND SOLVENCY OPINIONS. The Fairness
Opinions and the Solvency Opinion, including the updates thereof referred to in
Section 3.5 above, shall have been received and shall not have been modified,
18
<PAGE>
withdrawn or revoked (i) as of the time of the mailing of the Proxy Statement to
the stockholders of Avatex or (ii) before the Effective Time.
SECTION 4.8 RESIGNATIONS OF CERTAIN DIRECTORS. Each of Messrs.
Daniel Gropper, Vincent Intrieri, Ralph DellaCamera, Jr. and Brian Miller shall
have delivered a written letter to Avatex providing for the resignation of each
of them as directors of Avatex effective immediately prior to the Effective
Time.
SECTION 4.9 SETTLEMENTS OF CERTAIN LITIGATION. The lawsuits,
filed in April 1998 in the Delaware Chancery Court, styled Harbor Finance
Partners Ltd., et. al. v. Butler, et al., C.A. No. 16334 and Strougo v. Butler,
et. al., C.A. No. 16345, each of which lawsuits was consolidated by the Delaware
Chancery Court in May 1998 under the caption In re: Avatex Corporation
Shareholders Litigation, C.A. No. 16334, and Elliott Associates, L.P. v. Avatex
Corporation, et. al., C.A. No. 16336, shall be settled pursuant to a settlement
agreement with terms and provisions satisfactory to Avatex and such settlement
agreement shall be approved by a court of competent jurisdiction and, in
connection therewith, such litigation shall be dismissed with prejudice, and
such settlement, approval and dismissal shall be final and non-appealable.
SECTION 4.10 STOCKHOLDERS' AGREEMENT; VOTING AGREEMENT.
Neither the Stockholders' Agreement nor the Voting Agreement shall have
terminated or been terminated, and no notice of any such termination shall have
been delivered to Avatex by any stockholder party thereto. There shall not have
been a breach of the Stockholders' Agreement or the Voting Agreement by any of
the stockholders of Avatex party thereto.
SECTION 4.11 DISSENTING SHARES. On the Closing Date, shares of
Convertible Preferred Stock that constitute Dissenting Shares shall aggregate no
more than 5% of the then outstanding shares of Convertible Preferred Stock, or
shares of Series A Preferred Stock that constitute Dissenting Shares shall
aggregate no more than 5% of the then outstanding shares of Series A Preferred
Stock.
SECTION 4.12 RELEASES. Each of the stockholders of Avatex
party to the Stockholders' Agreement or the Voting Agreement, for themselves and
each of their respective affiliates, shall have executed and delivered to Avatex
a written release, substantially in the form of Exhibit G hereto, which release
shall be as of, and effective upon, the effectiveness of the Merger.
Article V
CLOSING
SECTION 5.1 TIME AND PLACE. The closing of the Merger (the
"Closing") shall take place at the offices of Weil, Gotshal & Manges LLP, 767
Fifth Avenue, New York, New York 10153, on a date agreed to by Avatex and Xetava
following satisfaction or waiver by Avatex or Xetava, as the case may be, of the
19
<PAGE>
conditions set forth in Article IV. The date on which the Closing actually
occurs is herein referred to as the "Closing Date."
SECTION 5.2 FILINGS AT THE CLOSING. Avatex and Xetava shall
immediately after the Closing (a) file with the Delaware Secretary of State the
Certificate of Merger and (b) take all such other and further actions as may be
required by law to make the Merger effective.
Article VI
TERMINATION
SECTION 6.1 TERMINATION. Avatex may terminate this Agreement
(a) if holders of at least 50.1% of each of the shares of Convertible Preferred
Stock and Series A Preferred Stock outstanding as of immediately prior to the
Election Deadline have not effectively made (and not revoked) prior to the
Election Deadline a Convertible Preferred Stock Alternate Consideration Election
or Series A Preferred Stock Alternate Consideration Election, as the case may
be, pursuant to Section 2.2 hereof, or (b) if shares of Convertible Preferred
Stock that constitute Dissenting Shares shall aggregate more than 5% of the then
outstanding shares of Convertible Preferred Stock or shares of Series A
Preferred Stock that constitute Dissenting Shares shall aggregate more than 5%
of the then outstanding shares of Series A Preferred Stock. In addition, this
Agreement may be terminated at any time prior to the Effective Time, whether
before or after Stockholder Approval, by the Board of Directors of either of
Avatex or Xetava, including, without limitation, because of the non-fulfillment
of any of the conditions set forth in Article IV hereof. In the event of
termination of the Merger pursuant to the foregoing sentences, this Agreement
shall terminate and the Merger shall be abandoned, without further action by any
of the parties hereto.
Article VII
MISCELLANEOUS
SECTION 7.1 AMENDMENT AND MODIFICATION. Subject to applicable
law, this Agreement may be amended, modified or supplemented, before or after
Stockholder Approval, only by written agreement of Avatex and Xetava at any time
prior to the Effective Time with respect to any of the terms contained herein;
provided, however, that, after this Agreement is adopted by Avatex's
stockholders pursuant to Section 3.2, no such amendment or modification shall be
made that by law requires further approval by the stockholders of Avatex
entitled to vote thereon without the further approval of such stockholders.
SECTION 7.2 INDEMNIFICATION. (a) The Surviving Corporation
shall maintain, for a period of at least six years from the Effective Time, (i)
director and officer liability insurance providing at least $30 million of
coverage with respect to Avatex's present and former officers and directors and
other similar coverage as the current policies maintained by or on behalf of
Avatex, and containing terms and conditions which are no less advantageous with
respect to matters existing or occurring at or prior to the Effective Time, and
in the event any claim is made against present or former directors or officers
20
<PAGE>
of Avatex that is covered, in whole or in part, or potentially so covered by
insurance, the Surviving Corporation shall not do anything that would forfeit,
jeopardize, restrict or limit the insurance coverage available for that claim
until the final disposition of that claim; provided, however, that if the cost
of maintaining such insurance exceeds twice the current cost related to
providing such insurance (the "Current Cost"), then the Surviving Corporation
shall maintain such director and officer liability insurance with the maximum
amount of coverage obtainable at twice such Current Cost, and (ii) provisions in
its certificate of incorporation and by-laws relating to indemnification,
exculpation and advancement of expenses no less favorable than the rights to
indemnification, exculpation and advancement of expenses now existing in favor
of the present and former directors and officers of Avatex and its subsidiaries
as provided in its certificate of incorporation or by-laws or otherwise in
effect on the date hereof; provided, however, that with respect to any claim
asserted, made or originated prior to the expiration of such six-year period
until the final disposition of such Claim (as hereinafter defined), and that
during such period, the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall not be amended to reduce or limit the rights of
indemnity or advancement of expenses of the present and former directors or
officers of Avatex, or the ability of the Surviving Corporation to indemnify (or
advance expenses to) them, nor to hinder, delay or make more difficult the
exercise of such rights of indemnity or advancement of expenses or the ability
to indemnify or advance expenses.
(b) From and after the Effective Time, the Surviving
Corporation shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date of this Agreement or who becomes prior to
the Effective Time, an officer or director of Avatex against all losses, claims,
damages, costs, expenses or liabilities, or in connection with any claim,
action, suit, proceeding or investigation (a "Claim"), arising out of the fact
that such person is or was an officer or director of Avatex (or out of any
action taken by any such person on behalf of Avatex), pertaining to any matter
existing or occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), whether asserted
or claimed prior to, or at or after, the Effective Time. In each case such
indemnification shall be to the fullest extent that a corporation is permitted
under applicable law to indemnify its own directors and officers, as the case
may be (and the Surviving Corporation will pay expenses in advance of the final
disposition of any such action or proceeding to each such present or former
director or officer of Avatex seeking indemnification hereunder to the full
extent permitted by law).
(c) Without limiting the foregoing, in any case in which
approval by the Surviving Corporation is required to effectuate any
indemnification under this Section 7.2, it shall direct, at the election of the
director or officer of Avatex seeking indemnification hereunder, that the
determination of any such approval shall be made by independent counsel
acceptable to the Surviving Corporation selected by such present or former
director or officer of Avatex seeking indemnification hereunder.
(d) This Section 7.2 shall survive the consummation of the
Merger. The provisions of this Section 7.2 are intended to be for the benefit
of, and shall be enforceable by the present and former directors and officers of
Avatex. The rights provided under this Section 7.2 shall be in addition to, and
21
<PAGE>
not in lieu of, any rights to which any party may have under the Certificate of
Incorporation or By-Laws of Avatex or the Surviving Corporation, any other
agreements or otherwise.
SECTION 7.3 ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other party, nor is this Agreement intended to confer upon any other person
except the parties hereto any rights or remedies hereunder.
SECTION 7.4 GOVERNING LAW. This Agreement shall be governed by
the laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable Delaware principles of conflicts of law) as to all
matters, including, but not limited to, matters of validity, construction,
effect, performance and remedies.
SECTION 7.5 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 7.6 INTERPRETATION; DEFINITIONS. (a) The article and
section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement. As used in this
Agreement, (i) the term "person" shall mean and include an individual, a
partnership, a limited liability company, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; (ii) the term "subsidiary" of any specified corporation shall
mean any corporation of which the outstanding securities having ordinary voting
power to elect a majority of the board of directors are directly or indirectly
owned by such specified corporation; and (iii) the term "business day" shall
mean any day of the week other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
Terms defined herein in the singular shall have a comparable meaning when used
in the plural, and vice versa.
(b) Each of the following terms shall have the respective
meaning ascribed such term in the section of this Agreement set forth opposite
such term below:
Term Section
- ---- -------
Actual Tax Amount 2.1(a)(ii)(A)(II)
Agreement Introductory Paragraph
Avatex Introductory Paragraph
Avatex Option Plan 2.5
Avatex Shares Recitals
Avatex Stock Option Plans 2.5
22
<PAGE>
Cash Payment 2.1(a)(ii)(A)(II)
Certificate 2.3(a)
Certificate of Merger 1.2
Claim 7.2(b)
Closing 5.1
Closing Date 5.1
Code 4.6
Common Stock Exchange Ratio 2.1(a)(i)
Constituent Corporations Introductory Paragraph
Convertible Preferred Deferred
Contingent Cash Right 2.1(a)(ii)(A)(I)
Convertible Preferred Exchange Ratio 2.1(a)(ii)
Convertible Preferred Stock Recitals
Convertible Preferred Stock Alternate
Consideration 2.1(a)(ii)(A)(I)
Convertible Preferred Stock Alternate
Consideration Election 2.2(a)
Convertible Preferred Stock Electing
Shares 2.1(a)(ii)
Current Cost 7.2(a)
Deferred Contingent Cash Rights 2.1(a)(iv)
DGCL Recitals
Dissenting Shares 2.8
Effective Time 1.2
Election Deadline 2.2(c)
Excess Payout 2.7(d)
Exchange Act 3.1
Exchange Agent 2.3(a)
Fairness Opinion 3.5(a)
Form of Election 2.2(c)
HL 3.5(a)
Incentive Plan 2.6(b)
23
<PAGE>
Interim Payment 2.7(d)
Income Tax 2.1(a)(ii)(A)(II)
Litigation Income 2.6(b)
McKesson Litigation 2.1(a)(ii)(A)(II)
Merger Recitals
Merger Consideration 2.1(a)(iv)
Net Recovery 2.1(a)(ii)(A)(II)
Net Recovery Participation Cap 2.1(a)(ii)(A)(II)
New Avatex Common Stock 2.1(a)(i)
Newco Recitals
Old Avatex Common Stock Recitals
Original Merger Agreement Recitals
Other Exchange 2.3(e)
OTCBB 2.3(e)
Phar-Mor Stock 3.6(b)
Proxy Statement 3.1
Record Date 2.2(c)
Registration Statement 3.1
Retained DCCR Payment Amount 2.7(d)
Representative 2.2(c)
SEC 3.1
Securities Act 3.1
Series A Preferred Deferred Contingent
Cash Right 2.1(a)(iii)(A)(I)
Series A Preferred Exchange Ratio 2.1(a)(iii)(A)
Series A Preferred Stock Recitals
Series A Preferred Stock Alternate
Consideration 2.1(a)(iii)(A)(I)
Series A Preferred Stock Alternate
Consideration Election 2.2(b)
Series A Preferred Stock Electing
Shares 2.1(a)(iii)(A)
24
<PAGE>
6.75% Notes 2.1(a)(ii)(A)(I)
6.75% Notes Indenture 2.1(a)(ii)(A)(I)
Solvency Opinion 3.5(b)
Stock Options 2.5
Stockholder Approval 4.1
Stockholders' Agreement Recitals
Stockholders' Meeting 3.2
Surviving Corporation 1.1
Trading Day 2.3(e)
Voting Agreement Recitals
Warrant Agreement 2.1(a)(ii)(A)(I)
Xetava Introductory Paragraph
SECTION 7.7 ENTIRE AGREEMENT. This Agreement, including the
schedules and exhibits hereto and the documents and instruments referred to
herein, embodies the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and the understandings between the
parties with respect to such subject matter, including the Original Merger
Agreement.
[SIGNATURES ON FOLLOWING PAGE]
25
<PAGE>
IN WITNESS WHEREOF, Avatex and Xetava have caused this
Agreement to be signed by their respective duly authorized officers on the date
first above written.
AVATEX CORPORATION
By: /s/ Abbey J. Butler
---------------------------
Abbey J. Butler,
Co-Chief Executive Officer
XETAVA CORPORATION
By: /s/ Melvyn J. Estrin
---------------------------
Melvyn J. Estrin,
Co-Chief Executive Officer
26
<PAGE>
SCHEDULE 2.6
EMPLOYMENT AGREEMENTS:
- ----------------------
1. Employment Agreement dated as of February 27, 1995, as amended by the
Amendment thereto effective as of February 1, 1998, with Abbey J.
Butler.
2. Employment Agreement dated as of November 12, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Tanis A.
Darnell.
3. Employment Agreement, dated as of February 27, 1995, as amended by the
Amendment thereto effective as of February 1, 1998, with Melvyn J.
Estrin..
4. Employment Agreement dated as of November 7, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Edward L.
Massman.
5. Employment Agreement effective as of February 1, 1998, with John G.
Murray.
6. Employment Agreement dated as of November 20, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Scott E.
Peterson.
7. Employment Agreement dated as of November 12, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Grady E.
Schleier.
8. Employment Agreement dated as of November 12, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Stephen N.
Shapu.
9. Employment Agreement dated as of November 12, 1996, as amended by the
Amendment thereto effective as of February 1, 1998, with Robert H.
Stone.
INDEMNIFICATION AGREEMENTS:
- ---------------------------
1. Indemnification Agreement dated as of October 23, 1997 with Abbey J.
Butler.
2. Indemnification Agreement dated as of October 23, 1997 with Melvyn J.
Estrin.
3. Indemnification Agreement dated as of October 23, 1997 with Edward L.
Massman.
4. Indemnification Agreement dated as of October 23, 1997 with John G.
Murray.
5. Indemnification Agreement dated as of October 23, 1997 with Scott E.
Peterson.
6. Indemnification Agreement dated as of October 23, 1997 with Grady E.
Schleier.
7. Indemnification Agreement dated as of October 23, 1997 with Robert H.
Stone.
8. Indemnification Agreement dated as of October 23, 1997 with Hyman H.
Frankel.
9. Indemnification Agreement dated as of October 23, 1997 with Fred S.
Katz.
#600291 v1.
<PAGE>
10. Indemnification Agreement dated as of October 23, 1997 with William A.
Lemer.
11. Indemnification Agreement dated as of October 23, 1997 with Charles C.
Pecarro.
12. Indemnification Agreement dated as of October 23, 1997 with John L.
Wineapple.
BENEFIT PLANS:
- --------------
1. Performance Incentive Plan, effective as of January 1, 1997, as amended
by Amendment No. 1 thereto, effective as of June 23, 1997, and
Amendment No. 2 thereto, effective as of January 22, 1998.
2. Avatex Corporation Employees' Savings and profit Sharing Plan,
effective as of April 1, 1997.
3. Avatex Corporation Employees' Medical Plan.
4. Avatex Corporation Employees' Dental Plan.
5. Avatex Corporation Employees' Basic and Supplemental Voluntary
Accidental Death and Dismemberment Plan.
6. Avatex Corporation Employees' Long-Term Disability Plan.
7. Avatex Corporation Employees' Short-Term Disability Plan.
8. Avatex Corporation Employees' Vision Plan.
9. Avatex Corporation Employees' Business Travel Accident Plan.
10. Avatex Corporation Employees' Basic and Supplemental Voluntary Life
Insurance Plan.
11. Avatex Corporation Employees'Flexible Benefit Program.
2
<PAGE>
EXHIBIT A
FORM OF STOCKHOLDERS' AGREEMENT
(see attached)
A-1
<PAGE>
EXHIBIT B
FORM OF VOTING AGREEMENT
(see attached)
B-1
<PAGE>
EXHIBIT C
CERTIFICATE OF MERGER
OF
XETAVA CORPORATION
WITH AND INTO
AVATEX CORPORATION
Under Section 251
of
the Delaware General Corporation Law
AVATEX CORPORATION, a Delaware corporation, hereby certifies
that:
FIRST: The name and the state of incorporation of each of the
constituent corporations is as follows:
Name State of Incorporation
---- ----------------------
Avatex Corporation ("Avatex") Delaware
Xetava Corporation ("Xetava") Delaware
SECOND: An Agreement and Plan of Merger, dated as of May __,
1999 (the "Agreement of Merger"), by and between Avatex and Xetava has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations named above in accordance with Section 251 (and, with
respect to Xetava, by the written consent of its sole stockholder in accordance
with Section 228) of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation is Avatex
Corporation (the "Surviving Corporation").
FOURTH: The Certificate of Incorporation of Avatex shall be
amended in its entirety to read as set forth in the Restated Certificate of
Incorporation of Avatex attached hereto as Annex A, and as so amended, shall be
the Certificate of Incorporation of the Surviving Corporation, until duly
amended in accordance with applicable law and the terms thereof.
FIFTH: The executed Agreement of Merger is on file at the
principal place of business of the Surviving Corporation at 5190 N. Central
Expressway, Suite 1780, Dallas, Texas 75206.
C-1
<PAGE>
SIXTH: A copy of the Agreement of Merger will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
any constituent corporation.
IN WITNESS WHEREOF, Avatex has caused this certificate to be
executed as of the day of ___________, 1999.
AVATEX CORPORATION
By:
------------------------------
Name:
Title:
C-2
<PAGE>
EXHIBIT D
FORM OF 6.75% NOTES INDENTURE
(see attached)
D-1
<PAGE>
EXHIBIT E
FORM OF WARRANT AGREEMENT
(see attached)
E-1
<PAGE>
EXHIBIT F
FORM OF NEWCO CERTIFICATE OF INCORPORATION
(see attached)
F-1
<PAGE>
EXHIBIT G
FORM OF CLOSING RELEASES
(see attached)
G-1
EXHIBIT 10-A
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EXECUTION COPY
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of June 18, 1999, among Elliott
Associates, L.P. ("Elliott"), Westgate International L.P. ("Westgate"), Martley
International, Inc. ("Martley"), Moses Marx ("Marx"), Momar Corporation
("Momar") and United Equities Commodities Company ("United Equities"), and
Avatex Corporation, a Delaware corporation ("Avatex"). Elliott, Westgate,
Martley, Marx, Momar and United Equities sometimes are referred to herein
collectively as the "Stockholders" and individually as a "Stockholder."
W I T N E S S E T H:
WHEREAS, each of the Stockholders is the beneficial and record
owner of the shares of capital stock of Avatex set forth opposite each such
Stockholder's name on Schedule A hereto;
WHEREAS, concurrently with the execution of this Agreement,
Avatex and Xetava Corporation, a Delaware corporation and wholly-owned
subsidiary of Avatex ("Xetava"), are entering into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Xetava
will be merged with and into Avatex (the "Merger"), with Avatex continuing as
the Surviving Corporation;
WHEREAS, concurrently with the execution of this Agreement,
Avatex and each of the Stockholders are entering into (or causing its counsel to
enter into) a Stipulation of Settlement (the "Settlement Agreement") relating to
the settlement and dismissal of all litigation brought by the Stockholders
and/or their affiliates against Avatex, Xetava and/or certain of Avatex's and/or
Xetava's directors in respect of, among other things, a proposed merger of
Avatex with and into Xetava, which proposed merger was previously announced on
April 14, 1998, including the lawsuits filed in April 1998 in the Delaware
Chancery Court styled Elliott Associates, L.P. v. Avatex Corporation, et al.,
C.A. 16336, and Harbor Finance Partners Ltd., et al. v. Butler, et al., C.A. No.
16334 (the "Harbor Action") and Strougo v. Butler, et al., C.A. No. 16345 (the
"Strougo Action") (the Harbor Action and the Strougo Action were consolidated by
the Delaware Chancery Court in May 1998 under the caption In re: Avatex
Corporation Shareholders Litigation, C.A. No. 16334) (the lawsuits referred to
in this recital are sometimes hereinafter collectively referred to as the
"Lawsuits"); and
WHEREAS, in order to induce Avatex and Xetava to enter into
the Merger Agreement, the Stockholders are making certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
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Article I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Merger Agreement, and the following terms shall have the following meanings:
"Affiliate" means with respect to any Person, any Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with such Person. For purposes of this definition, a subsidiary
of a Person is an Affiliate of such Person and of each other subsidiary of that
Person.
"beneficially own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
"Control" shall mean, as to any Person, the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of Voting Securities, by contract or otherwise. The terms
"Controlling Person", "Controlling" and "Controlled by" shall have correlative
meanings.
"Equity Securities" shall have the meaning set forth in Rule
405 under the Securities Act, and, with respect to Avatex or the Surviving
Corporation, as applicable, shall include, but not be limited to, Old Avatex
Common Stock, Convertible Preferred Stock, Series A Preferred Stock, New Avatex
Common Stock and the warrants to be issued as part of the Convertible Preferred
Stock Alternate Consideration or the Series A Preferred Stock Alternate
Consideration.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Governmental Entity" shall mean any government or
governmental or regulatory body thereof, or political subdivision thereof,
whether federal, state or local, or any agency, instrumentality or authority
thereof, or any court or arbitration tribunal (public or private).
"Permitted Assignee" shall mean (i) with respect to Marx, (w)
Marx, (x) Marx's lineal descendants, (y) a trust for the benefit of, the estate
of, executors, personal representatives, administrators, guardians or
conservators of, any of the individuals referred to in the foregoing clauses (w)
and (x) (but only in their capacity as such) and (z) charitable trusts and
charitable foundations formed by Marx; and (ii) with respect to Elliott,
Westgate, Martley, Momar and United Equities, (x) any Person Controlled by or
under common Control with such Stockholder and (y) its respective partners,
members, stockholders or other holders of equity interests in such Stockholder.
"Person" shall mean and include an individual, a partnership,
a limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization, a governmental or regulatory body or any
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department, instrumentality or agency thereof, and any court.
"Preferred Shares" shall mean, collectively, shares of
Convertible Preferred Stock and Series A Preferred Stock.
"Securities Act" shall mean the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder.
"Voting Securities" shall have the meaning set forth in Rule
405 under the Securities Act.
For the purposes of this Agreement, the term "Surviving
Corporation" shall include any successor, by operation of law or otherwise, or
any Person that acquires or succeeds to all or substantially all of the assets
of Avatex, and the term "Avatex" shall include the Surviving Corporation.
Article II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.1 Representations and Warranties of the Stockholders. Each
Stockholder represents and warrants, severally but not jointly, to Avatex as
follows:
(a) Ownership of Avatex Shares. Such Stockholder is the
beneficial owner of the Avatex Shares set forth opposite such Stockholder's name
on Schedule A hereto, free and clear of all liens, claims, charges, security
interests or other encumbrances and, except for this Agreement, the Merger
Agreement or as otherwise indicated on Schedule A hereto, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which such Stockholder or, to its best knowledge after due inquiry,
any of its Affiliates, is a party relating to the holding, pledge, disposition,
acquisition or voting of any shares of capital stock of Avatex (or securities
convertible into or exchangeable for shares of capital stock of Avatex), and
there are no voting trusts or voting agreements with respect to such shares (or
securities convertible into or exchangeable for shares of capital stock of
Avatex). The Avatex Shares set forth opposite such Stockholder's name on
Schedule A hereto constitute all of the outstanding shares of capital stock of
Avatex owned beneficially or of record by such Stockholder and, to its best
knowledge after due inquiry, any of its Affiliates, and neither such Stockholder
nor, to its best knowledge after due inquiry, any of its Affiliates has any
options, warrants or other rights (including through derivative transactions) to
acquire any additional shares of capital stock of Avatex or any security
exercisable or exchangeable for, or convertible into, shares of capital stock of
Avatex.
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(b) Authority to Execute and Perform Agreements. Such
Stockholder has the full legal right and power and all authority required to
enter into, execute and deliver this Agreement and to perform fully such
Stockholder's obligations hereunder. The execution and delivery of this
Agreement by such Stockholder have been duly authorized by all requisite
organizational action, if any, on the part of such Stockholder. This Agreement
has been duly executed and delivered and constitutes the legal, valid and
binding obligation of such Stockholder enforceable against such Stockholder in
accordance with its terms, except as the enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws now or hereafter in effect generally affecting creditors' rights or
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(c) No Conflicts; Consents.
(i) The execution and delivery by such Stockholder of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with or result in any violation of or default (with or
without notice or lapse of time, or both) under (A) any contract, agreement or
other binding arrangement to which such Stockholder is a party or (B) any
judgment, order, writ, injunction or decree of any court, governmental body,
administrative agency or arbitrator applicable to such Stockholder.
(ii) No consents, approvals or authorizations of, or notices
or filings with, any Person are required to be obtained or made by such
Stockholder in connection with the execution and delivery by such Stockholder of
this Agreement and the consummation of the transactions contemplated hereby.
(d) Information Supplied. None of the written information
specifically supplied or to be supplied by such Stockholder with respect to such
Stockholder for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement is filed with the SEC and
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to stockholders
of Avatex and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Article III
REPRESENTATIONS AND WARRANTIES OF AVATEX
3.1 Representations and Warranties of Avatex. Avatex
represents and warrants to each Stockholder as follows:
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(a) Authority.
(i) Avatex has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Avatex and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Avatex.
(ii) Avatex has the requisite corporate power and authority to
execute and deliver the Merger Agreement and, subject to obtaining the
Stockholder Approval, to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Merger Agreement by Avatex and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of Avatex subject to obtaining the
Stockholder Approval.
(b) Due Execution.
(i) This Agreement has been duly executed and delivered by
Avatex and, assuming this Agreement constitutes the valid and binding obligation
of the Stockholders, constitutes the valid and binding obligation of Avatex,
enforceable against Avatex in accordance with its terms, except that (A) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter relating to creditors' rights generally,
and (B) the remedy of specific performance and injunctive relief hereunder may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(ii) The Merger Agreement has been duly executed and delivered
by Avatex and constitutes the valid and binding obligation of Avatex,
enforceable against Avatex in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter relating to creditors' rights generally.
(c) No Consents. No consent, approval, order or authorization
of or registration, declaration or filing with, any Governmental Entity is
required by Avatex in connection with the execution and delivery of this
Agreement or the Merger Agreement by Avatex or the consummation by Avatex of the
transactions contemplated hereby or thereby, except for (i) the filings,
permits, authorizations, consents and approvals described herein or in the
Merger Agreement, or as may be required by, and other applicable requirements
of, the Securities Act, the Exchange Act, any applicable state securities or
"blue sky" laws and the General Corporation Law of the State of Delaware, and
(ii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, (x) impair, in any material respect, the
ability of the Company to perform its obligations under this Agreement or the
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Merger Agreement or (y) prevent the consummation of or materially impair the
ability of Avatex to consummate the transactions contemplated by this Agreement
or the Merger Agreement.
(d) No Conflicts. Except as set forth in the immediately
preceding paragraph, the execution and delivery of this Agreement and the Merger
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
under, (i) the certificate of incorporation or by-laws of Avatex, (ii) any loan
or credit agreement, note, bond, indenture, lease or other material agreement or
instrument applicable to Avatex or its properties or assets, or (iii) any law,
ordinance, regulation, statute, judgment or decree applicable to Avatex, other
than any such conflicts, violations or defaults that, individually or in the
aggregate, would not (x) impair in any material respect the ability of Avatex to
perform its obligations under this Agreement and the Merger Agreement or (y)
prevent or impede the consummation of the transactions contemplated by this
Agreement or the Merger Agreement.
Article IV
COVENANTS
4.1 No Disposition or Acquisition of Shares. Subject to
Sections 4.4 and 6.1 hereof, each of the Stockholders agrees that, except as
otherwise specifically contemplated by this Agreement or the Merger Agreement,
such Stockholder shall not, and shall use its best efforts to cause its
Affiliates not to, directly or indirectly, sell, transfer, pledge, hypothecate,
encumber, grant a participation in, place in trust, or otherwise dispose of
(including through any "short sales" or derivative transactions), or enter into
any contract, option or other arrangement or understanding with respect to the
sale, transfer, pledge, hypothecation, encumbrance or other disposition of
(including through any "short sales" or derivative transactions), any of the
Avatex Shares set forth opposite such Stockholder's name on Schedule A hereto;
provided, however, that such Stockholder shall have the right to transfer such
shares to a Permitted Assignee if such Permitted Assignee becomes a party to
this Agreement and agrees to be bound by the terms hereof pursuant to a written
instrument satisfactory to Avatex. Each Stockholder agrees that within five
business days of the date hereof it will surrender to Avatex the certificates
representing the Avatex Shares owned by such Stockholder and Avatex shall cause
the transfer agent for such Avatex Shares to endorse on such certificates a
legend indicating that such Avatex Shares are subject to this Agreement.
Promptly following the endorsement of such legend, Avatex shall cause the
transfer agent to return the certificates to the Stockholders. In addition, each
Stockholder acknowledges that Avatex will provide the transfer agent for the
Avatex Shares stop-order instructions that the Avatex Shares owned by such
Stockholder are subject to this Agreement. Such legend and stop-order
instructions will be removed upon such Stockholder's surrender of such
certificates in connection with the Merger and as contemplated by this Agreement
and as long as, prior to the Effective Time, such Stockholder does not breach
this Agreement.
4.2 Voting Arrangements. Except as otherwise indicated on
Schedule A hereto, each of the Stockholders agrees, that, except pursuant to
this Agreement, it shall not grant any proxies, deposit any Avatex Shares into a
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voting trust or enter into any voting agreement with respect to any Avatex
Shares now or hereafter owned by such Stockholder.
4.3 Satisfaction of Conditions to the Merger. Each of the
Stockholders agrees that such Stockholder, solely in its capacity as such, shall
use reasonable efforts to assist and cooperate with the parties to the Merger
Agreement in doing all things reasonably necessary, proper or advisable under
applicable laws as promptly as practicable to consummate and make effective the
Merger and the other transactions contemplated by the Merger Agreement, and the
other agreements and documents referred to in the Merger Agreement (but without
being required to incur any material unreimbursed expenses) and such Stockholder
shall not take any action that would or is reasonably likely to result in any of
the conditions set forth in Article IV of the Merger Agreement not being
satisfied.
4.4 Standstill; Transfer Restrictions.
(a) Each Stockholder agrees that, from the date hereof until
the date that is the tenth anniversary of the Closing Date, such Stockholder
shall not, and shall use its best efforts to cause its Affiliates not to,
without the prior written consent of the Board of Directors of Avatex, (i) in
any manner acquire, agree to acquire or make any proposal to acquire, directly
or indirectly, any Equity Securities of Avatex or the Surviving Corporation, or
any rights, warrants, options or securities to acquire any such Equity
Securities (other than with respect to the Merger Consideration to be received
by such Stockholder in the Merger); provided, however, that, the Stockholders
may engage in hedging and other similar transactions with respect to the shares
of New Avatex Common Stock it then owns as long as such transactions are for
trading purposes only and do not violate or conflict with any of the other
provisions of this Section 4.4, (ii) other than with respect to the Merger,
propose to enter into, directly or indirectly, a merger or other business
combination involving Avatex or the Surviving Corporation or propose to
purchase, directly or indirectly, a material portion of the assets of Avatex or
the Surviving Corporation, (iii) make, or in any way participate, directly or
indirectly, in, any "solicitation" of "proxies" (as such terms are used in
Regulation 14A under the Exchange Act) to vote or consent or seek to advise or
influence any Person with respect to the voting of, or granting of a consent
with respect to, any Equity Securities of Avatex or the Surviving Corporation,
including, but not limited to, for the purpose of nominating candidates for
election, or otherwise electing directors, to the Board of Directors of Avatex
at any meeting of the stockholders of Avatex or otherwise, (iv) form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) for the purpose of acquiring, holding, voting or disposing of any
Equity Securities of Avatex or the Surviving Corporation (other than with an
Affiliate of such Stockholder), (v) otherwise act, alone or in concert with
others, to seek to control or influence in any public manner or public forum the
management or policies of Avatex or the Surviving Corporation, (vi) disclose any
intention, plan or arrangement inconsistent with the foregoing, (vii) advise,
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assist (including by knowingly providing or arranging financing for that
purpose) or encourage any other Person in connection with any of the foregoing,
(viii) request Avatex or the Surviving Corporation or any agent of Avatex or the
Surviving Corporation, directly or indirectly, to amend or waive any provision
of this Section 4.4(a) (including this sentence) or (ix) other than with respect
to entering into this Agreement or the consummation of the Merger, take any
action which might require Avatex or the Surviving Corporation to make a public
announcement regarding the possibility of a transaction between such Stockholder
and Avatex or the Surviving Corporation (including any of their respective
Affiliates).
(b) Except as otherwise indicated on Schedule A hereto, each
Stockholder agrees that, from the date hereof until the Closing Date, such
Stockholder shall not, and shall use its best efforts to cause its Affiliates
not to without the prior written consent of the Board of Directors of Avatex,
directly or indirectly, sell, transfer, pledge, encumber or otherwise dispose
of, or agree to sell, transfer, pledge, encumber or otherwise dispose of
(including through any "short sales" or derivative transactions), any Equity
Securities of Avatex or any rights or options (including through derivative
transactions) to acquire such Equity Securities.
(c) Nothing contained in this Section 4.4 shall prevent a
Stockholder from (i) enforcing its rights with respect to the Merger, the
Convertible Preferred Stock Alternate Consideration and/or the Series A
Preferred Stock Alternate Consideration, (ii) discussing with Avatex or other
stockholders of the Company any possible amendments or modifications to the
Merger, the Merger Agreement or the Merger Consideration proposed by Avatex, or
(iii) following the consummation of the Merger, discussing with the Surviving
Corporation or other recipients of the Convertible Preferred Stock Alternate
Consideration or the Series A Preferred Stock Alternate Consideration any
possible amendments or modifications proposed by the Surviving Corporation to
the 6.75% Notes, the 6.75% Notes Indenture, the Warrants or any other document,
agreement or instrument related to the Convertible Preferred Stock Alternate
Consideration or the Series A Preferred Stock Alternate Consideration. The
standstill provisions contained in this Section 4.4 shall not apply to any
Equity Securities of Avatex acquired of record or beneficially by any
stockholder which are or were exchanged for Phar-Mor, Inc. securities (pursuant
to a merger or similar business combination transaction), which Phar-Mor, Inc.
securities were pledged (or subject to a later pledge) as collateral for the
6.75% Notes.
(d) In consideration for the agreements and covenants of the
Stockholders set forth in this Section 4.4, within one business day following
the Effective Time, Avatex shall pay to (i) Momar or United Equities (as
directed by Marx) an amount in cash equal to $300,000 and (ii) each of Elliott
and Westgate an amount in cash equal to $150,000.
4.5 Certain Information. Each Stockholder shall, on or prior
to the Closing Date, deliver to Avatex a written certification as to (i) the
aggregate amount of shares of Old Avatex Common Stock, Convertible Preferred
Stock and Series A Preferred Stock which such Stockholder acquired between
January 1, 1995 and October 1, 1996, and (ii) the amount of Old Avatex Common
Stock owned by such Stockholder both directly and by attribution under Section
318(a) of the Internal Revenue Code of 1986 as of the Closing Date.
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Article V
AGREEMENT TO VOTE; ELECTIONS;
PROXY; WAIVER OF RIGHTS
5.1 Agreement to Vote; Elections; Proxy.
(a) Each Stockholder hereby agrees that, at any meeting of the
stockholders of Avatex, however called, including the Stockholders' Meeting, and
at every adjournment thereof, and in any action by written consent of the
stockholders of Avatex, in any such case, and/or in which holders of Preferred
Shares are given the right or are entitled to vote, to (i) vote all of the
Preferred Shares then owned by such Stockholder, in favor of the adoption of the
Merger Agreement as in effect on the date hereof (as such agreement may be
amended as contemplated by the Merger Agreement, provided that any such
amendment could not reasonably be deemed to adversely affect the Merger
Consideration to be received by such Stockholders in the Merger), the Merger and
each of the other transactions contemplated thereby and any action required in
furtherance thereof, (ii) vote such Preferred Shares against any action or
agreement that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of Avatex or Xetava under the
Merger Agreement, and (iii) vote such shares against any other action or
agreement that, directly or indirectly, is inconsistent with or that would, or
is reasonably likely to, directly or indirectly, impede, interfere with or
attempt to discourage the Merger or any other transaction contemplated by the
Merger Agreement, including, but not limited to (A) any extraordinary corporate
transaction (other than the Merger on the terms set forth in the Merger
Agreement), such as a merger, consolidation, business combination,
reorganization, recapitalization or liquidation involving Avatex, (B) a sale or
transfer of a material amount of assets of Avatex, or (C) any material change in
Avatex's corporate structure or business, unless such action or agreement has
been approved by the Board of Directors of Avatex and recommended for approval
by the Stockholders of Avatex; provided, however, that, if any representative of
any such Stockholder is a member of the Board of Directors of Avatex, nothing
herein shall be construed to obligate such Avatex representative to act in such
representative's capacity as a director in any manner which may conflict with
such Person's fiduciary duties as a director of Avatex.
(b) In addition, each Stockholder hereby agrees, in connection
with the Merger and as contemplated by the Merger Agreement (as such agreement
may be amended as contemplated by the Merger Agreement, provided that any such
amendment could not reasonably be deemed to adversely affect the Merger
Consideration to be received by such Stockholder in the Merger), to make an
irrevocable and unconditional Convertible Preferred Stock Alternate
Consideration Election and/or Series A Preferred Stock Alternate Consideration
Stock Election with respect to all shares of Convertible Preferred Stock and/or
Series A Preferred Stock, as applicable, beneficially owned by such Stockholder
as set forth on Schedule A hereto in accordance with Section 2.2 of the Merger
Agreement, including, but not limited to, duly executing a Form of Election and
returning such Form of Election to the Exchange Agent or, if applicable, The
Depository Trust Company, prior to the Election Deadline. As a result of such
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elections, each Stockholder further agrees that all such shares of Convertible
Preferred Stock and/or Series A Preferred Stock shall be Convertible Preferred
Stock Electing Shares and/or Series A Preferred Stock Electing Shares, as
applicable, in accordance with Section 2.2 of the Merger Agreement.
(c) In furtherance of the foregoing, (i) (A) each Stockholder
hereby appoints Avatex and the proper officers of Avatex, and each of them, with
full power of substitution in the premises, its proxies to vote all such
Stockholder's Preferred Shares at any meeting, general or special, of the
stockholders of Avatex, including the Stockholders' Meeting, and to execute one
or more written consents or other instruments from time to time in order to take
such action without the necessity of a meeting of the stockholders of Avatex, in
accordance with the provisions of the paragraph (a) above of this Section 5.1,
and (B) Avatex hereby agrees to vote such shares or execute written consents or
other instruments in accordance with the provisions of the paragraph (a) above
of this Section 5.1; and (ii) each Stockholder hereby appoints Avatex and the
proper officers of Avatex, and each of them, with full power of substitution in
the premises, as its true and lawful attorney-in-fact, in the name and behalf of
such Stockholder, to make an irrevocable and unconditional Convertible Preferred
Stock Alternate Consideration Election and/or Series A Preferred Stock Alternate
Consideration Stock Election with respect to all shares of Convertible Preferred
Stock and/or Series A Preferred Stock, as applicable, beneficially owned by such
Stockholder as set forth on Schedule A hereto in accordance with Section 2.2 of
the Merger Agreement and, in connection therewith, to execute and deliver to the
Exchange Agent a Form of Election with respect to such shares of Convertible
Preferred Stock and/or Series A Preferred Stock, and (B) Avatex hereby agrees to
make such elections with respect to such shares and complete such Forms of
Election in accordance with the provisions of the paragraph (b) above of this
Section 5.1. Notwithstanding the foregoing, such proxies and powers may be
revoked by the Stockholders, acting unanimously, if the Merger Agreement in
effect on the date hereof is amended or modified, or if any provision thereof is
waived or not complied with, and such amendment, modification, waiver or
non-compliance could reasonably be deemed to adversely affect the Merger
Consideration to be received by the Stockholders in the Merger.
(d) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest and shall revoke all prior proxies and/or powers of attorney
granted by such Stockholder. Such Stockholder shall not grant any proxy and/or
powers of attorney to any Person which conflicts with the proxy and power of
attorney granted herein, and any attempt to do so shall be void. The power of
attorney granted herein is a durable power of attorney and, in the case of a
Stockholder that is an individual, shall survive the disability or incompetence
of such Stockholder.
5.2 Waiver of Appraisal Rights. Subject to Section 6.1 hereof,
each Stockholder hereby waives its rights to appraisal under Section 262 of the
DGCL with respect to any shares of Convertible Preferred Stock and Series A
Preferred Stock owned by it in connection with the transactions contemplated by
the Merger Agreement.
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5.3 Waiver of Certain Rights; Dismissal and Settlement of the
Lawsuits.
(a) Except with respect to the Lawsuits, each Stockholder
hereby irrevocably waives, releases and discharges, and agrees not to assert,
any claim, action, cause of action, suit, right or demand, known or unknown, it
has or can, shall or may have against Avatex or any director, officer, employee,
Affiliate, representative, successor and assign of Avatex (including, but not
limited to, the Surviving Corporation) based upon, in respect of, as a result
of, or by reason of any matter, cause or thing, whatsoever arising out of, in
connection with, or in any way related to, (i) the Original Merger Agreement or
the transactions contemplated thereby, (ii) the approval or adoption of the
Merger Agreement or the consummation of the Merger or the other transactions
contemplated thereby, or (iii) such Stockholder's investment in and/or ownership
of Avatex Shares at any time prior to the date hereof. Each Stockholder hereby
acknowledges and confirms in all respects that the execution and delivery to
Avatex by each of them of a release as of, and effective immediately upon, the
effectiveness of the Merger, with substantially the provisions set forth in the
preceding sentence and in form reasonably satisfactory to Avatex, shall be a
condition precedent to Avatex consummating the Merger.
(b) Each Stockholder hereby agrees, effective as of the
Effective Time, to settle and dismiss (or cause to be settled and dismissed)
with prejudice each of the Lawsuits in accordance with the Settlement Agreement,
which settlements shall be final and non-appealable.
(c) Without limiting the generality of Section 4.3 hereof,
Section 5.1 hereof and paragraph (a) above of this Section 5.3, each Stockholder
hereby agrees that in no event and under no circumstances will such Stockholder,
directly or indirectly, challenge, attempt to prohibit or enjoin, or otherwise
object to the right or ability of any Person, including, but not limited to, any
director, officer, employee or Affiliate of Avatex (including Phar-Mor, Inc.
("Phar-Mor") or any pension plan sponsored by Avatex or any of its Affiliates),
to vote, in such Person's capacity as a holder of Avatex Shares, on the Merger
Agreement or the Merger at any meeting of stockholders of Avatex, including the
Stockholders' Meeting, or otherwise.
5.4 Withdrawal of Director Nominations. As of the date hereof,
Moses Marx shall unconditionally withdraw his demand for nomination of Messrs.
Charles K. MacDonald and Donald Press for election to the Board of Directors of
Avatex, which demand was made in a letter, dated February 27, 1998, from Mr.
Marx to Avatex. Such withdrawal shall be made pursuant to a written instrument
addressed to Avatex and its Board of Directors making specific reference to such
February 27, 1998 letter, which written instrument shall be delivered to Avatex
and its Board of Directors concurrently with the execution and delivery of this
Agreement.
11
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Article VI
MISCELLANEOUS
6.1 Termination.
(a) This Agreement shall terminate upon the earlier to occur
of (i) the mutual written consent of Avatex and all of the Stockholders, (ii)
the termination of the Merger Agreement prior to the consummation of the Merger
and (iii) the tenth anniversary of the Closing Date. The Stockholders, acting
unanimously, may terminate this Agreement if the Effective Time shall have not
occurred on or before December 15, 1999, provided that no Stockholder shall have
breached any provision of or any of its obligations under this Agreement. In
addition, the Stockholders, acting unanimously, shall have the right to
terminate this Agreement only if (i) the Merger Agreement in effect on the date
hereof is amended or modified, or if any provision thereof is waived or not
complied with, and such amendment, modification, waiver or non-compliance could
reasonably be deemed to adversely affect the Merger Consideration to be received
by the Stockholders in the Merger, or (ii) Phar-Mor fails to cause all shares of
Old Avatex Common Stock beneficially owned by the Stockholders as set forth on
Schedule A hereto to be purchased at or prior to the Effective Time at a
purchase price per share equal to $2.00.
(b) If this Agreement is terminated pursuant to Section 6.1(a)
above, this Agreement, except for the provisions of this Section 6.1(b), shall
forthwith become void and have no effect.
6.2 Amendment. This Agreement may be amended only by a written
instrument executed by the parties or their respective successors or assigns.
6.3 Notices. Notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by telecopy:
If to Avatex, to:
Avatex Corporation
5910 North Central Expressway
Suite 1780
Dallas, Texas 75206
Telephone: (214) 365-7450
Telecopy: (214) 365-7498
Attention: General Counsel
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Stephen E. Jacobs, Esq.
If to the Stockholders, at such address as may be furnished
to Avatex from time to time;
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Telephone: (212) 986-6000
Telecopy: (212) 986-8866
Attention: Martin D. Sklar, Esq.
6.4 Counterparts. This Agreement may be executed in one or
more counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
6.5 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO CHOICE OF LAW PRINCIPLES, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
6.6 Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that
any court of the United States located in the State of Delaware or any Delaware
state court may enforce such restriction to the maximum extent permitted by law,
and each party hereby consents and agrees that such scope may be judicially
modified accordingly in any proceeding brought to enforce such restriction.
6.7 Further Assurances. Each party hereto shall execute and
deliver such additional documents as may be reasonably requested by another
party to consummate the transactions contemplated by this Agreement.
6.8 Parties in Interest; Assignment. Neither this Agreement
nor any of the rights, interest or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties.
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6.9 Entire Agreement. This Agreement and the Merger Agreement
and the other agreements and documents referred to in the Merger Agreement
contain the entire understanding of the parties hereto and thereto with respect
to the subject matter contained herein and therein, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings and communications
of the parties, oral or written, respecting such subject matter. There are no
restrictions, promises, representations, warranties, agreements or undertakings
of any party hereto or to the Merger Agreement or any of the other agreements
and documents referred to in the Merger Agreement with respect to the
transactions contemplated by this Agreement and the Merger Agreement and the
other agreements and documents referred to in the Merger Agreement other than
those set forth or described herein or therein or made hereunder or thereunder.
6.10 Specific Performance; Consent to Jurisdiction.
(a) The parties hereto agree that the remedy at law for any
breach of this Agreement will be inadequate and that any party by whom this
Agreement is enforceable shall be entitled to specific performance in addition
to any other appropriate relief or remedy. SUCH PARTY MAY, IN ITS SOLE
DISCRETION, APPLY TO ANY COURT OF THE UNITED STATES LOCATED IN THE STATE OF
DELAWARE OR ANY DELAWARE STATE COURT FOR SPECIFIC PERFORMANCE OR INJUNCTIVE OR
SUCH OTHER RELIEF AS SUCH COURT MAY DEEM JUST AND PROPER IN ORDER TO ENFORCE
THIS AGREEMENT OR PREVENT ANY VIOLATION HEREOF AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY WAIVES ANY OBJECTION TO THE IMPOSITION OF SUCH
RELIEF.
(b) IN ADDITION, EACH OF THE PARTIES HERETO (I) CONSENTS TO
SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE
STATE OF DELAWARE OR ANY DELAWARE STATE COURT IN THE EVENT ANY DISPUTE ARISES
OUT OF THIS AGREEMENT OR ANY MATTER REFERRED TO HEREIN, (II) AGREES THAT IT WILL
NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER
REQUEST FOR LEAVE FROM ANY SUCH COURT AND (III) AGREES THAT IT WILL NOT BRING
ANY ACTION RELATING TO THIS AGREEMENT OR ANY MATTER REFERRED TO HEREIN IN ANY
COURT OTHER THAN A FEDERAL OR STATE COURT SITTING IN THE STATE OF DELAWARE.
6.11 Headings; References. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Sections" or "Exhibits" shall be deemed to be references to Articles
or Sections hereof or Exhibits hereto unless otherwise indicated.
[Signatures appear on following pages.]
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IN WITNESS WHEREOF, each of the parties hereto had caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
AVATEX CORPORATION
By: /s/ Melvyn J. Estrin
----------------------------------
Name: Melvyn J. Estrin
Title: Co-Chief Executive Officer
ELLIOTT ASSOCIATES, L.P
By: /s/ Paul E. Singer
----------------------------------
Paul E. Singer
General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
as Attorney-in-Fact
By: /s/ Paul E. Singer
----------------------------------
Paul E. Singer
President
MARTLEY INTERNATIONAL, INC.
By: /s/ Paul E. Singer
----------------------------------
Paul E. Singer
President
/s/ Moses Marx
----------------------------------
Moses Marx
MOMAR CORPORATION
By: Moses Marx
----------------------------------
Moses Marx
President
15
<PAGE>
UNITED EQUITIES COMMODITIES COMPANY
By: Moses Marx
----------------------------------
Moses Marx
General Partner
16
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Number of Shares
Number of Shares of Convertible Number of Shares
of Old Avatex Preferred of Series A
Stockholder Common Stock(1) Stock Preferred Stock
- -------------------------------------- --------------------------- -------------------- ----------------------
<S> <C> <C> <C>
Elliott Associates, L.P. 417,600 111,637 547,613
Westgate International L.P. 416,300 -0- 661,797
Martley International, Inc. -0- -0- -0-
Moses Marx 75,000 100 270,000
Momar Corporation 802,500 26,000 257,026
United Equities Commodities Company 1,151,000 178,300 425,974
</TABLE>
- ---------------------------
(1) Elliott Associates, L.P., Westgate International L.P., Martley
International, Inc., Springfield Associates, L.L.C., Kensington
international Ltd., Moses Marx, Momar Corporation and United Equities
Company have entered into a stock purchase agreement with Phar-Mor,
Inc. pursuant to which (i) Phar-Mor, Inc. has agreed to purchase the
shares of Old Avatex Common Stock owned by each such Stockholder at or
prior to the Effective Time, and (ii) each such Stockholder has granted
to Phar-Mor, Inc. an irrevocable proxy to vote the shares of Old Avatex
Common Stock owned by each such Stockholder until the earlier of
Phar-Mor's purchase of such shares or the termination of such stock
purchase agreement.
17
EXHIBIT 10-B
------------
<PAGE>
EXECUTION COPY
--------------
VOTING AGREEMENT
AGREEMENT, dated as of June 17, 1999, among Mark S. Zucker
("Zucker"), Anvil Investment Partners, L.P. ("Anvil"), Anvil Investors, Inc.
("Anvil Investors"), and Avatex Corporation, a Delaware corporation ("Avatex").
Zucker, Anvil and Anvil Investors sometimes are referred to herein collectively
as the "Stockholders" and individually as a "Stockholder."
W I T N E S S E T H:
WHEREAS, each of the Stockholders is the beneficial and record
owner of the shares of capital stock of Avatex set forth opposite each such
Stockholder's name on Schedule A hereto;
WHEREAS, it is contemplated that promptly following the
execution of this Agreement, Avatex and Xetava Corporation, a Delaware
corporation and wholly-owned subsidiary of Avatex ("Xetava"), will be entering
into an Amended and Restated Agreement and Plan of Merger in substantially the
form attached hereto as Exhibit A (the "Merger Agreement") pursuant to which,
among other things, Xetava will be merged with and into Avatex (the "Merger"),
with Avatex continuing as the Surviving Corporation;
WHEREAS, concurrently with the execution of this Agreement,
Avatex and each of the Stockholders, as well as certain other stockholders of
Avatex, are entering into (or causing its counsel to enter into) a Stipulation
of Settlement (the "Settlement Agreement") relating to the settlement and
dismissal of all litigation brought by the Stockholders and such other
stockholders and/or their affiliates against Avatex, Xetava and/or certain of
Avatex's and/or Xetava's directors in respect of a proposed merger of Avatex
with and into Xetava, which proposed merger was previously announced on April
14, 1998, including the lawsuits filed in April 1998 in the Delaware Chancery
Court styled Harbor Finance Partners Ltd. and Anvil Investment Partners, L.P.,
on behalf of themselves and all other similarly situated, v. Butler, et al.,
C.A. No. 16334 (the "Harbor Action") and Strougos v. Butler, et al., C.A. No.
16345 (the "Strougo Action") (the Harbor Action and the Strougo Action were
consolidated by the Delaware Chancery Court in May 1998 under the caption In re:
Avatex Corporation Shareholders Litigation, C.A. No. 16334), and Elliott
Associates, L.P. v. Avatex Corporation, et al., C.A. 16336 (the lawsuits
referred to in this recital are sometimes hereinafter collectively referred to
as the "Lawsuits"); and
WHEREAS, in order to induce Avatex to enter into the
Settlement Agreement and Avatex and Xetava to enter into the Merger Agreement,
the Stockholders are making certain representations, warranties, covenants and
agreements in connection with the Merger.
#393429 v10.
<PAGE>
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Article I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Merger Agreement, and the following terms shall have the following meanings:
"Affiliate" means with respect to any Person, any Person
directly or indirectly Controlling or Controlled by or under direct or indirect
common Control with such Person. For purposes of this definition, a subsidiary
of a Person is an Affiliate of such Person and of each other subsidiary of that
Person.
"Associate" shall, with respect to any Person, have the
meaning set forth in Rule 405 under the Securities Act.
"beneficially own" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
"Control" shall mean, as to any Person, the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of Voting Securities, by contract or otherwise. The terms
"Controlling Person", "Controlling" and "Controlled by" shall have correlative
meanings.
"Equity Securities" shall have the meaning set forth in Rule
405 under the Securities Act, and, with respect to Avatex or the Surviving
Corporation, as applicable, shall include, but not be limited to, Old Avatex
Common Stock, Convertible Preferred Stock, Series A Preferred Stock, New Avatex
Common Stock and the warrants to be issued as part of the Convertible Preferred
Stock Alternate Consideration or the Series A Preferred Stock Alternate
Consideration.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Person" shall mean and include an individual, a partnership,
a limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization, a governmental or regulatory body or any
department, instrumentality or agency thereof, and any court.
"Preferred Shares" shall mean, collectively, shares of
Convertible Preferred Stock and Series A Preferred Stock.
"Securities Act" shall mean the Securities Act of 1933, or
amended and the rules and regulations promulgated thereunder.
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<PAGE>
"Voting Securities" shall have the meaning set forth in Rule
405 under the Securities Act.
For the purposes of this Agreement, the term "Surviving
Corporation" shall include any successor, by operation of law or otherwise, or
any Person that acquires or succeeds to all or substantially all of the assets
of, Avatex, and the term "Avatex" shall include the Surviving Corporation.
Article II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.1 Representations and Warranties of the Stockholders. Each
Stockholder represents and warrants, jointly and severally, to Avatex as
follows:
(a) Ownership of Avatex Shares. Such Stockholder is the
beneficial owner of the Avatex Shares set forth opposite such Stockholder's name
on Schedule A hereto, free and clear of all liens, claims, charges, security
interests or other encumbrances and, except for this Agreement, the Merger
Agreement or as otherwise indicated on Schedule A hereto, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which such Stockholder or, to its best knowledge after due inquiry,
any of its Affiliates, is a party relating to the holding, pledge, disposition,
acquisition or voting of any shares of capital stock of Avatex (or securities
convertible into or exchangeable for shares of capital stock of Avatex), and
there are no voting trusts or voting agreements with respect to such shares (or
securities convertible into or exchangeable for shares of capital stock of
Avatex). The Avatex Shares set forth opposite such Stockholder's name on
Schedule A hereto constitute all of the outstanding shares of capital stock of
Avatex owned beneficially or of record by such Stockholder and, to its best
knowledge after due inquiry, any of its Affiliates, and neither such Stockholder
nor, to its best knowledge after due inquiry, any of its Affiliates has any
options, warrants or other rights (including through derivative transactions) to
acquire any additional shares of capital stock of Avatex or any security
exercisable or exchangeable for, or convertible into, shares of capital stock of
Avatex.
(b) Authority to Execute and Perform Agreements. Such
Stockholder has the full legal right and power and all authority required to
enter into, execute and deliver this Agreement and to perform fully such
Stockholder's obligations hereunder. The execution and delivery of this
Agreement by such Stockholder have been duly authorized by all requisite
organizational action, if any, on the part of such Stockholder. This Agreement
has been duly executed and delivered and constitutes the legal, valid and
binding obligation of such Stockholder enforceable against such Stockholder in
accordance with its terms, except as the enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws now or hereafter in effect generally affecting creditors' rights or
by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
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<PAGE>
(c) No Conflicts; Consents.
(i) The execution and delivery by such Stockholder of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, conflict with or result in any violation of or default (with or
without notice or lapse of time, or both) under (A) any contract, agreement or
other binding arrangement to which such Stockholder is a party or (B) any
judgment, order, writ, injunction or decree of any court, governmental body,
administrative agency or arbitrator applicable to such Stockholder.
(ii) No consents, approvals or authorizations of, or notices
or filings with, any Person are required to be obtained or made by such
Stockholder in connection with the execution and delivery by such Stockholder of
this Agreement and the consummation of the transactions contemplated hereby.
(d) Information Supplied. None of the written information
specifically supplied or to be supplied by such Stockholder with respect to such
Stockholder for inclusion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement is filed with the SEC and
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading and (ii) the Proxy
Statement will, at the date the Proxy Statement is first mailed to stockholders
of Avatex and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
Article III
REPRESENTATIONS AND WARRANTIES OF AVATEX
3.1 Representations and Warranties of Avatex. Avatex
represents and warrants to each Stockholder as follows:
(a) Authority.
(i) Avatex has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Avatex and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Avatex.
(ii) Avatex has the requisite corporate power and authority to
execute and deliver the Merger Agreement and, subject to obtaining the
Stockholder Approval, to consummate the transactions contemplated thereby. The
execution, delivery and performance of the Merger Agreement by Avatex and the
consummation of the transactions contemplated thereby have been duly authorized
4
<PAGE>
by all necessary corporate action on the part of Avatex subject to obtaining the
Stockholder Approval.
(b) Due Execution.
(i) This Agreement has been duly executed and delivered by
Avatex and, assuming this Agreement constitutes the valid and binding obligation
of the Stockholders, constitutes the valid and binding obligation of Avatex,
enforceable against Avatex in accordance with its terms, except that (A) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter relating to creditors' rights generally,
and (B) the remedy of specific performance and injunctive relief hereunder may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(ii) The Merger Agreement has been duly executed and delivered
by Avatex and constitutes the valid and binding obligation of Avatex,
enforceable against Avatex in accordance with its terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter relating to creditors' rights generally.
Article IV
COVENANTS
4.1 Voting Arrangements. Each of the Stockholders agrees,
that, except pursuant to this Agreement or the Merger Agreement, it shall not
grant any proxies, deposit any Avatex Shares into a voting trust or enter into
any voting agreement with respect to any Avatex Shares now or hereafter owned by
such Stockholder.
4.2 Standstill; Transfer Restrictions.
(a) Each Stockholder agrees that, from the date hereof until
the date that is the tenth anniversary of the Closing Date, such Stockholder
shall not, and shall use its best efforts to cause its Affiliates not to,
without the prior written consent of the Board of Directors of Avatex, (i)
except for the Merger Consideration to be received by such Stockholder in the
Merger, in any manner acquire, agree to acquire or make any proposal to acquire,
directly or indirectly, any Equity Securities or other securities of Avatex or
the Surviving Corporation, or any rights, warrants, options or securities to
acquire any such Equity Securities or such other securities; provided, however,
that, the Stockholders may engage in hedging and other similar transactions with
respect to the shares of New Avatex Common Stock it then owns as long as such
transactions are for trading purposes only and do not violate or conflict with
any of the other provisions of this Section 4.2, (ii) other than with respect to
the Merger, propose to enter into, directly or indirectly, a merger or other
business combination involving Avatex or the Surviving Corporation or propose to
purchase, directly or indirectly, a material portion of the assets of Avatex or
the Surviving Corporation, (iii) make, or in any way participate, directly or
indirectly, in, any "solicitation" of "proxies" (as such terms are used in
Regulation 14A under the Exchange Act) to vote or consent or seek to advise or
5
<PAGE>
influence any Person with respect to the voting of, or granting of a consent
with respect to, any Equity Securities of Avatex or the Surviving Corporation,
including, but not limited to, for the purpose of nominating candidates for
election, or otherwise electing directors, to the Board of Directors of Avatex
at any meeting of the stockholders of Avatex or otherwise, (iv) form, join or in
any way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) for the purpose of acquiring, holding, voting or disposing of any
Equity Securities of Avatex or the Surviving Corporation (other than with an
Affiliate of such Stockholder), (v) except in connection with the prosecution of
the claims presently asserted in the New York Action (as defined in Section 5.3
below), otherwise act, alone or in concert with others, to seek to control or
influence in any public manner or public forum the management or policies of
Avatex or the Surviving Corporation, (vi) disclose any intention, plan or
arrangement inconsistent with the foregoing, (vii) advise, assist (including by
knowingly providing or arranging financing for that purpose) or encourage any
other Person in connection with any of the foregoing, (viii) request Avatex or
the Surviving Corporation or any agent of Avatex or the Surviving Corporation,
directly or indirectly, to amend or waive any provision of this Section 4.2(a)
(including this sentence) or (ix) other than with respect to entering into this
Agreement or the consummation of the Merger or any settlement of the New York
Action, take any action which might require Avatex or the Surviving Corporation
to make a public announcement regarding the possibility of a transaction between
such Stockholder and Avatex or the Surviving Corporation (including any of their
respective Affiliates).
(b) Nothing contained in this Section 4.2 shall prevent a
Stockholder from (i) enforcing its rights with respect to the Merger, the
Convertible Preferred Stock Alternate Consideration and/or the Series A
Preferred Stock Alternate Consideration, (ii) discussing with Avatex or other
stockholders of the Company any possible amendments or modifications to the
Merger, the Merger Agreement or the Merger Consideration proposed by Avatex, or
(iii) following the consummation of the Merger, discussing with the Surviving
Corporation or other recipients of the Convertible Preferred Stock Alternate
Consideration or the Series A Preferred Stock Alternate Consideration any
possible amendments or modifications proposed by the Surviving Corporation to
the 6.75% Notes, the 6.75% Notes Indenture, the Warrants or any other document,
agreement or instrument related to the Convertible Preferred Stock Alternate
Consideration or the Series A Preferred Stock Alternate Consideration.
(c) In consideration for the agreements and covenants of the
Stockholders set forth in this Section 4.2, within one business day following
the Effective Time, Avatex shall pay to Anvil (or as otherwise directed by
Anvil) an amount in cash equal to $300,000 by wire transfer of immediately
available funds to the following account: Citibank, AB # 021000089, Acct. A/C
09253186 for the account of Bear Stearns for further credit to Anvil Investment
Partners, L.P. A/C 10300702-29.
6
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Article V
AGREEMENT TO VOTE;
WAIVER OF RIGHTS
5.1 Agreement to Vote. Each Stockholder hereby agrees that, at
any meeting of the stockholders of Avatex, however called, including the
Stockholders' Meeting, and at every adjournment thereof, and in any action by
written consent of the stockholders of Avatex, in any such case, and/or in which
holders of Avatex Shares are given the right or are entitled to vote, to (i)
vote all of the Avatex Shares then owned (or owned on the record date to
determine stockholders entitled to vote thereat or thereby, as applicable) by
such Stockholder, in favor of the adoption of the Merger Agreement as in effect
on the date hereof (as such agreement may be amended as contemplated by the
Merger Agreement and as long as any such amendment could not be reasonably
deemed to adversely affect the Merger Consideration to be received by such
Stockholders in the Merger), the Merger and each of the other transactions
contemplated thereby and any action required in furtherance thereof, (ii) vote
such Avatex Shares against any action or agreement that would result in a breach
in any material respect of any covenant, representation or warranty or any other
obligation of Avatex or Xetava under the Merger Agreement, and (iii) vote such
shares against any other action or agreement that, directly or indirectly, is
inconsistent with or that would, or is reasonably likely to, directly or
indirectly, impede, interfere with or attempt to discourage the Merger or any
other transaction contemplated by the Merger Agreement, including, but not
limited to (A) any extraordinary corporate transaction (other than the Merger on
the terms set forth in the Merger Agreement), such as a merger, consolidation,
business combination, reorganization, recapitalization or liquidation involving
Avatex, (B) a sale or transfer of a material amount of assets of Avatex, or (C)
any material change in Avatex's corporate structure or business, unless such
action or agreement has been approved by the Board of Directors of Avatex and
recommended for approval by the Stockholders of Avatex.
5.2 Waiver of Appraisal Rights. Subject to Section 6.1 hereof,
each Stockholder hereby waives its rights to appraisal under Section 262 of the
DGCL with respect to any Preferred Shares owned by it in connection with the
transactions contemplated by the Merger Agreement.
5.3 Waiver of Certain Rights; Dismissal and Settlement of the
Lawsuits.
(a) Except with respect to each of the claims asserted in the
Lawsuits, the lawsuit styled Stephen Mizel IRA and Anvil Investment Partners,
L.P. v. Butler, et. al., No. 602773/98, filed on June 5, 1998, in the Supreme
Court of the State of New York, County of New York (the "New York Action"), and
the lawsuit styled Zuckerman, et. al. v. FoxMeyer Health Corporation, et. al.,
in the United States District Court for the Northern District of Texas, Dallas
Division, Case No. 396-CV-2258-L, each Stockholder, for him or itself and his or
its Affiliates and Associates, hereby irrevocably waives, releases and
7
<PAGE>
discharges, and agrees not to assert, any claim, action, cause of action, suit,
right or demand, known or unknown, he or it, or his or its Affiliates or
Associates, has or can, shall or may have against Avatex or any director,
officer, employee, Affiliate, representative, successor and assign of Avatex
(including, but not limited to, the Surviving Corporation) based upon, in
respect of, as a result of, or by reason of any matter, cause or thing,
whatsoever arising out of, in connection with, or in any way related to, (i) the
Original Merger Agreement or the transactions contemplated thereby, (ii) the
approval or adoption of the Merger Agreement or the consummation of the Merger
or the other transactions contemplated thereby, including, but not limited to,
any registration statement, prospectus, proxy statement, public filing or
statement by or of Avatex or any of its Affiliates relating to the Merger
Agreement or the Merger, or (iii) such Stockholder's investment in and/or
ownership of Avatex Shares at any time prior to the date hereof. Each
Stockholder hereby acknowledges and confirms in all respects that the execution
and delivery to Avatex by each of them of a release (the "Bring-Down Release")
as of, and effective immediately upon, the effectiveness of the Merger, with
substantially the provisions set forth in the preceding sentence and in form
reasonably satisfactory to Avatex, shall be a condition precedent to Avatex
consummating the Merger. Notwithstanding anything to the contrary contained
herein, including, but not limited to, Section 4.2 and 5.1 hereof, in this
Voting Agreement and the Bring-Down Release shall in no way be deemed to
prejudice or compromise the rights of the Stockholders with respect to the
claims presently asserted in the New York Action. It is understood and agreed by
the parties that the Stockholders shall be free to prosecute the claims now
asserted in the New York Action as if this Voting Agreement and the Bring-Down
Release had not been executed and that no challenge to the prosecution of the
New York Action shall be made based on this Voting Agreement or the Bring-Down
Release.
(b) Each Stockholder hereby agrees, effective as of the
Effective Time, to settle and dismiss (or cause to be settled and dismissed)
with prejudice each of the Lawsuits in accordance with the Settlement Agreement,
which settlements shall be final and non-appealable.
(c) Without limiting the generality of Section 4.2 hereof,
Section 5.1 hereof and paragraph (a) above of this Section 5.3, each Stockholder
hereby agrees that in no event and under no circumstances will such Stockholder,
directly or indirectly, challenge, attempt to prohibit or enjoin, or otherwise
object to the right or ability of any Person, including, but not limited to, any
director, officer, employee or Affiliate of Avatex (including Phar-Mor, Inc. or
any pension plan sponsored by Avatex or any of its Affiliates), to vote, in such
Person's capacity as a holder of Avatex Shares, on the Merger Agreement or the
Merger at any meeting of stockholders of Avatex, including the Stockholders'
Meeting, or otherwise.
Article VI
MISCELLANEOUS
6.1 Termination.
(a) This Agreement shall terminate upon the earlier to occur
of (i) the mutual consent of Avatex and all of the Stockholders and (ii) the
termination of the Merger Agreement prior to the consummation of the Merger. The
8
<PAGE>
Stockholders, acting unanimously, may terminate this Agreement if the Effective
Time shall have not occurred on or before the later of (i) the day on which the
settlements of each of the Lawsuits becomes final and non-appealable and (ii)
December 31, 1999, provided that no Stockholder shall have breached any
provision of or any of its obligations under this Agreement. In addition, the
Stockholders, acting unanimously, shall have the right to terminate this
Agreement only if the Merger Agreement in effect on the date hereof is amended
or modified, or if any provision thereof is waived or not complied with, and
such amendment, modification, waiver or non-compliance could reasonably be
deemed to adversely affect the Merger Consideration to be received by the
Stockholders in the Merger.
(b) If this Agreement is terminated pursuant to Section 6.1(a)
above, this Agreement, except for the provisions of this Section 6.1(b), shall
forthwith become void and have no effect.
6.2 Amendment. This Agreement may be amended only by a written
instrument executed by the parties or their respective successors or assigns.
6.3 Notices. Notices, requests, permissions, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by telecopy:
If to Avatex, to:
Avatex Corporation
5910 North Central Expressway
Suite 1780
Dallas, Texas 75206
Telephone: (214) 365-7450
Telecopy: (214) 365-7498
Attention: General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Stephen E. Jacobs, Esq.
9
<PAGE>
If to the Stockholders, at such address as may be furnished
to Avatex from time to time;
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Telephone: (212) 753-7200
Telecopy: (212) 755-1467
Attention: Thomas J. Fleming, Jr. Esq.
6.4 Counterparts. This Agreement may be executed in one or
more counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
6.5 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO CHOICE OF LAW PRINCIPLES, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
6.6 Severability; Enforcement. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that
any court of the United States located in the State of Delaware or any Delaware
state court may enforce such restriction to the maximum extent permitted by law,
and each party hereby consents and agrees that such scope may be judicially
modified accordingly in any proceeding brought to enforce such restriction.
6.7 Further Assurances. Each party hereto shall execute and
deliver such additional documents as may be reasonably requested by another
party to consummate the transactions contemplated by this Agreement.
6.8 Parties in Interest; Assignment. Neither this Agreement
nor any of the rights, interest or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties.
6.9 Entire Agreement. This Agreement and the Merger Agreement
and the other agreements and documents referred to in the Merger Agreement
contain the entire understanding of the parties hereto and thereto with respect
to the subject matter contained herein and therein, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings and communications
of the parties, oral or written, respecting such subject matter. There are no
restrictions, promises, representations, warranties, agreements or undertakings
of any party hereto or to the Merger Agreement or any of the other agreements
and documents referred to in the Merger Agreement with respect to the
10
<PAGE>
transactions contemplated by this Agreement and the Merger Agreement and the
other agreements and documents referred to in the Merger Agreement other than
those set forth or described herein or therein or made hereunder or thereunder.
6.10 Specific Performance; Consent to Jurisdiction.
(a) The parties hereto agree that the remedy at law for any
breach of this Agreement will be inadequate and that any party by whom this
Agreement is enforceable shall be entitled to specific performance in addition
to any other appropriate relief or remedy. SUCH PARTY MAY, IN ITS SOLE
DISCRETION, APPLY TO ANY COURT OF THE UNITED STATES LOCATED IN THE STATE OF
DELAWARE OR ANY DELAWARE STATE COURT FOR SPECIFIC PERFORMANCE OR INJUNCTIVE OR
SUCH OTHER RELIEF AS SUCH COURT MAY DEEM JUST AND PROPER IN ORDER TO ENFORCE
THIS AGREEMENT OR PREVENT ANY VIOLATION HEREOF AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY WAIVES ANY OBJECTION TO THE IMPOSITION OF SUCH
RELIEF.
(b) IN ADDITION, EACH OF THE PARTIES HERETO (I) CONSENTS TO
SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE
STATE OF DELAWARE OR ANY DELAWARE STATE COURT IN THE EVENT ANY DISPUTE ARISES
OUT OF THIS AGREEMENT OR ANY MATTER REFERRED TO HEREIN, (II) AGREES THAT IT WILL
NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER
REQUEST FOR LEAVE FROM ANY SUCH COURT AND (III) AGREES THAT IT WILL NOT BRING
ANY ACTION RELATING TO THIS AGREEMENT OR ANY MATTER REFERRED TO HEREIN IN ANY
COURT OTHER THAN A FEDERAL OR STATE COURT SITTING IN THE STATE OF DELAWARE.
6.11 Headings; References. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All references
herein to "Sections" or "Schedules" shall be deemed to be references to Sections
hereof or Schedules hereto unless otherwise indicated.
6.12 Effectiveness. This Agreement shall become and be
effective as to, and binding upon, each of the parties hereto, without any
further action by any party hereto, immediately upon the execution and delivery
of the Merger Agreement by Avatex and Xetava
[Signatures appear on following page]
11
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto had caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
AVATEX CORPORATION
By: /s/ Melvyn J. Estrin
---------------------------------
Melvyn J. Estrin
Co-Chief Executive Officer
ANVIL INVESTMENT PARTNERS, L.P.
By: Anvil Investors, Inc.,
as General Partner
By: /s/ Mark S. Zucker
---------------------------------
Mark S. Zucker
President
ANVIL INVESTORS, INC.
By: /s/ Mark S. Zucker
---------------------------------
Mark S. Zucker
President
/s/ Mark S. Zucker
---------------------------------
Mark S. Zucker
<PAGE>
Schedule A
<TABLE>
<CAPTION>
Number of Shares
Number of Shares of Convertible Number of Shares
of Old Avatex Preferred of Series A
Stockholder Common Stock(1) Stock Preferred Stock
- --------------------------------- --------------------------- -------------------- ----------------------
<S> <C> <C> <C>
Mark S. Zucker 0 6,000 10,262
Anvil Investment Partners, L.P. 0 40,200 53,705
Anvil Investors, Inc.(1) 0 40,200 53,705
</TABLE>
- --------------
(1) Anvil Investors, Inc. is the general partner of Anvil Investment
Partners, L.P. and, thus, may be deemed to beneficially own the 40,200
shares of Convertible Preferred Stock and 53,705 shares of Series A
Preferred Stock owned by Anvil Investment Partners, L.P. Other than as
explained in the preceding sentence, Anvil Investors, Inc. owns no
Avatex shares.
<PAGE>
Exhibit A
Form of Merger Agreement
(see attached)
EXHIBIT 99
----------
<PAGE>
FOR: AVATEX CORPORATION
CONTACT: GRADY E. SCHLEIER
VICE PRESIDENT AND TREASURER
(2140 365-7450
FOR IMMEDIATE RELEASE
AVATEX CORPORATION ANNOUNCES AGREEMENT
ON AMENDED MERGER TRANSACTION AND
SETTLEMENT OF PREFERRED STOCKHOLDER LITIGATION
DALLAS, TX -- JUNE 18, 1999 -- AVATEX CORPORATION (OTCBB: AVAX) today
announced that it has reached an agreement with a majority of holders of its two
series of preferred stock on the terms of a revised merger between Avatex and
its wholly-owned subsidiary, Xetava Corporation, and the settlement of the
preferred stockholders' litigation against the companies relating to their prior
merger transaction announced in April 1998. Under the revised merger agreement,
Xetava will merge with and into Avatex, and Avatex's existing preferred
stockholders will receive new common stock of Avatex, or such stockholders may
in lieu thereof elect to receive a combination of cash, secured notes, warrants
and other consideration. Avatex's existing common stockholders will receive new
common stock of Avatex.
Specifically, under the revised merger agreement, each share of existing
Avatex common stock will be converted into one share of new Avatex common stock.
Each share of existing Avatex First Series preferred stock will be converted
into 9.134 shares of new Avatex common stock or, at the election of the holder,
(1) $3.7408 in cash, (2) $8.340 principal amount of 6.75% notes to be issued by
Avatex Funding, Inc., a new wholly-owned subsidiary of Avatex, (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 Avatex may receive in certain litigation brought by Avatex against
McKesson Corporation and a number of large pharmaceutical manufacturers, divided
by (b) the number of outstanding shares of First Series preferred stock. Each
share of existing Avatex Series A preferred stock 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 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 Avatex may receive in the described litigation,
divided by (b) the number of outstanding shares of Series A preferred stock. The
maximum amount of any payments on the deferred contingent rights that could be
made to holders of the First Series and Series A preferred stock is $7.5
million.
<PAGE>
Avatex Funding, Inc. will be a new Avatex subsidiary whose purpose will be
to issue the 6.75% notes under the merger and to own 3,571,533 shares of common
stock of Phar-Mor, Inc., which are now owned by Avatex and will be transferred
to Avatex Funding and pledged to secure the notes. The principal of the notes
will be due three years from issuance, and interest will accrue on the notes at
the rate 6.75% per year and will be payable semi-annually in cash. Avatex will
also guarantee the notes. The Avatex warrants will be exercisable at the price
of $2.25 per share of new Avatex common stock for a five year term beginning
three months after the closing of the proposed merger.
Avatex has also entered into settlement, stockholder and voting agreements
with the preferred stockholder plaintiffs in the three Delaware lawsuits pending
against Avatex, Xetava and certain of the Avatex directors. Under the settlement
stipulation with the plaintiffs in the class action lawsuits brought on behalf
of all holders of Avatex First Series and Series A preferred stock and the
plaintiff in the non-class action lawsuit, subject to court approval and
effective upon the closing of the merger, the lawsuits will be settled in
consideration for the new terms of the merger agreement and Avatex will pay the
plaintiffs' attorneys' fees up to $1.1 million. Under a voting agreement with
one of the named plaintiffs in one of the class action lawsuits, the plaintiff
has agreed to vote in favor of the proposed merger and to waive any appraisal
rights in connection with the proposed merger. Such plaintiff will also receive
$300,000 in exchange for a ten year standstill agreement with Avatex, a general
release of liability (subject to certain specified exceptions) as to Avatex and
its directors and other consideration. Under a separate stockholder agreement
with Elliott Associates, L.P., the plaintiff in the non-class action lawsuit,
and Mr. Moses Marx, Elliott Associates, Mr. Marx and their respective affiliates
and associated companies have agreed to vote in favor of the proposed merger, to
waive any appraisal rights in connection with the proposed merger, and to elect
to receive the cash, notes, warrants and other consideration upon consummation
of the proposed merger. Avatex will also pay Mr. Marx, Elliott Associates and
their respective affiliates and associated companies $600,000 in exchange for a
ten year standstill agreement with Avatex, a general release of liability as to
Avatex and its directors and other consideration.
In addition, Avatex has been advised that Mr. Marx, Elliott Associates and
their respective affiliates and associated companies have entered into a Stock
Purchase Agreement with Phar-Mor, Inc., which is 38%-owned by Avatex. Subject to
the consummation of the proposed merger between Avatex and Xetava, Phar-Mor has
agreed to purchase approximately 2.8 million shares of Avatex common stock from
Mr. Marx, Elliott Associates and their respective affiliates and associated
companies for $2.00 per share, with the closing to occur simultaneously with the
closing of the proposed merger between Avatex and Xetava. Mr. Marx, Elliott
Associates and their respective affiliates and associated companies have granted
a proxy to Phar-Mor to vote their shares of Avatex common stock in favor of the
proposed merger.
The merger agreement has been approved by the board of directors of
Avatex. Consummation of the merger is conditioned upon, among other
requirements, (i) approval of the transaction by the holders of a majority of
the outstanding shares of Avatex common stock
<PAGE>
and two-thirds of each series of Avatex preferred stock, voting separately as a
class, (ii) effectiveness of a registration statement to be filed with the
Securities and Exchange Commission with respect to the shares of new Avatex
common stock, 6.75% notes and warrants that will be issued in the merger; and
(iii) dismissal of the three Delaware lawsuits and the approval of the
settlement by the Delaware Court of Chancery.
Avatex will schedule a meeting of its common and preferred stockholders to
vote on the proposed merger after its proxy statement/prospectus is available
for mailing. Avatex currently expects the meeting to take place in the fall of
1999.
Avatex is a holding company that, along with its subsidiaries, owns
interests in other corporations and partnerships. Through Phar-Mor, Inc., Avatex
is involved in operating a chain of retail discount drug stores devoted to the
sale of prescription and over-the-counter drugs, health and beauty aids and
other general merchandise.
