EXHIBIT 10-A
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EXECUTION COPY
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of June 18, 1999, among ▇▇▇▇▇▇▇
Associates, L.P. ("▇▇▇▇▇▇▇"), Westgate International L.P. ("Westgate"), Martley
International, Inc. ("Martley"), ▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), 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 ▇▇▇▇▇▇▇ Associates, L.P. v. Avatex Corporation, et al.,
C.A. 16336, and Harbor Finance Partners Ltd., et al. ▇. ▇▇▇▇▇▇, et al., C.A. No.
16334 (the "Harbor Action") and Strougo ▇. ▇▇▇▇▇▇, 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 ▇▇▇▇, (w)
▇▇▇▇, (x) ▇▇▇▇'▇ 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 ▇▇▇▇; and (ii) with respect to Elliott,
Westgate, ▇▇▇▇▇▇▇, ▇▇▇▇▇ 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 ▇▇▇▇) an amount in cash equal to $300,000 and (ii) each of ▇▇▇▇▇▇▇
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,
▇▇▇▇▇ ▇▇▇▇ shall unconditionally withdraw his demand for nomination of Messrs.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Press for election to the Board of Directors of
Avatex, which demand was made in a letter, dated February 27, 1998, from ▇▇.
▇▇▇▇ 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
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
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
12
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Stockholders, at such address as may be furnished
to Avatex from time to time;
with a copy to:
Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, 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.
13
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.]
14
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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Co-Chief Executive Officer
▇▇▇▇▇▇▇ ASSOCIATES, L.P
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
as Attorney-in-Fact
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
MARTLEY INTERNATIONAL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
President
/s/ ▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇
MOMAR CORPORATION
By: ▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇
President
15
UNITED EQUITIES COMMODITIES COMPANY
By: ▇▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇
General Partner
16
Schedule A
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
-------------------------------------- --------------------------- -------------------- ----------------------
▇▇▇▇▇▇▇ Associates, L.P. 417,600 111,637 547,613
Westgate International L.P. 416,300 -0- 661,797
Martley International, Inc. -0- -0- -0-
▇▇▇▇▇ ▇▇▇▇ 75,000 100 270,000
Momar Corporation 802,500 26,000 257,026
United Equities Commodities Company 1,151,000 178,300 425,974
---------------------------
(1) ▇▇▇▇▇▇▇ Associates, L.P., Westgate International L.P., Martley
International, Inc., Springfield Associates, L.L.C., Kensington
international Ltd., ▇▇▇▇▇ ▇▇▇▇, 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