EXHIBIT 1
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of June 18, 1999, among Xxxxxxx Associates, L.P.
("Xxxxxxx"), Westgate International L.P. ("Westgate"), Martley International,
Inc. ("Martley"), Xxxxx Xxxx ("Xxxx"), 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 Xxxxxxx Associates, L.P. v. Avatex Corporation, et al.,
C.A. 16336, and Harbor Finance Partners Ltd., et al. x. Xxxxxx, et al., C.A. No.
16334 (the "Harbor Action") and Strougo x. Xxxxxx, 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:
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.
-2-
"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 Xxxx, (w) Xxxx, (x)
Xxxx'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 Xxxx; and (ii) with respect to Elliott, Westgate, Xxxxxxx,
Xxxxx 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 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 11
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:
-3-
(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.
(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
-4-
(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
-5-
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 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
-6-
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.
-7-
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
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
-8-
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, 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
-9-
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 Xxxx) an
amount in cash equal to $300,000 and (ii) each of Xxxxxxx 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.
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
-10-
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
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
-11-
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.
-12-
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-Mo ") 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, Xxxxx Xxxx
shall unconditionally withdraw his demand for nomination of Messrs. Xxxxxxx X.
XxxXxxxxx and Xxxxxx Press for election to the Board of Directors of Avatex,
which demand was made in a letter, dated February 27, 1998, from Xx. Xxxx to
Avatex. Such withdrawal shall be made pursuant to a written
-13-
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.
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:
-14-
If to Avatex, to:
Avatex Corporation
0000 Xxxxx Xxxxxxx Xxxxxxxxxx Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: General Counsel
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Stockholders, at such address as may be
furnished to Avatex from time to time;
with a copy to:
Kleinberg, Kaplan, Xxxxx & Xxxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 10 176
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, 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.
-15-
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
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
-16-
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.]
-17-
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/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Co-Chief Executive Officer
XXXXXXX ASSOCIATES, L.P
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Xxxx X. Xxxxxx
General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.,
as Attorney-in-Fact
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Xxxx X. Xxxxxx
President
MARTLEY INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxxx
---------------------------------
Xxxx X. Xxxxxx
President
/s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx
MOMAR CORPORATION
By: /s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx
President
-18-
UNITED EQUITIES COMMODITIES COMPANY
By: /s/ Xxxxx Xxxx
---------------------------------
Xxxxx Xxxx
General Partner
-19-
Schedule A
=======================================================================================================
Number of Shares Number of Shares Number of Shares
of Old Avatex of Convertible of Series A
Stockholder Common Stock(1) Preferred Stock Preferred Stock
-------------------------------------------------------------------------------------------------------
Xxxxxxx Associates, L.P. 417,600 111,637 547,613
-------------------------------------------------------------------------------------------------------
Westgate International L.P. 416,300 -0- 661,797
-------------------------------------------------------------------------------------------------------
Martley International, Inc. -0- -0- -0-
-------------------------------------------------------------------------------------------------------
Xxxxx Xxxx 75,000 100 270,000
-------------------------------------------------------------------------------------------------------
Momar Corporation 802,500 26,000 257,026
-------------------------------------------------------------------------------------------------------
United Equities Commodities 1,151,000 178,300 425,974
Company
=======================================================================================================
----------
(1) Xxxxxxx Associates, L.P., Westgate International L.P., Martley
International, Inc., Springfield Associates, L.L.C., Kensington
international Ltd., Xxxxx Xxxx, 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.
-20-
