FORM OF SUBROGATION AGREEMENT
Subrogation Agreement dated as of _________, 1999 by and between Xxxx
X. Xxxxx, Xx., as trustee under Chapter 7 of Title 11 of the United States Code
of FoxMeyer Corporation, FoxMeyer Drug Company, Healthcare Transportation
System, Inc., Merchandise Coordinator Services Corporation, FoxMeyer Software,
Inc. and Health Mart, Inc. and their respective estates, as their interests may
appear ("Trustee"); and Xxxxx Fargo & Company ("Agent"), as trustee under the
Indenture to cover the 6.75% Notes (as defined below) and as collateral agent
under the related security agreement (the "Noteholders Security Agreement").
WHEREAS, under the terms of a Settlement Agreement dated October 9,
1997, between Avatex Corporation (the "Debtor") and the Trustee, (i) the Debtor
executed and delivered to the Trustee a Promissory Note payable to the Trustee
in the original principal amount of $8,000,000 (the "Trustee Note") and (ii) to
secure payment of the Trustee Note, the Debtor executed and delivered to the
Trustee a Pledge and Security Agreement (the "Trustee Security Agreement");
WHEREAS, under the Trustee Security Agreement, the Debtor granted to
the Trustee a security interest in, among other things, 1,132,500 shares of
common stock of Phar-Mor, Inc. owned by the Debtor (together with, to the extent
provided in the Trustee Security Agreement, any securities or instruments
received on account of or in exchange for such common stock, the "FoxMeyer
Trustee Phar-Mor Collateral"), which shares are represented by certificate
number 2832 (the "Certificate"), and the Debtor has transferred physical
possession of the Certificate to the Trustee to enable the Trustee to perfect
its security interest in the FoxMeyer Trustee Phar-Mor Collateral;
WHEREAS, on or prior to December 15, 1999, Avatex Funding, Inc., a
wholly-owned subsidiary of the Debtor ("Subsidiary"), intends to issue 6.75%
Notes (the "6.75% Notes") due in 2002 to various persons (the "Noteholders");
WHEREAS, to secure payment of the 6.75% Notes, the Debtor intends to
transfer to Subsidiary 3,571,533 additional shares of common stock of Phar-Mor,
Inc. owned by the Debtor (the "6.75% Notes Phar-Mor Collateral"), and Subsidiary
intends to execute and deliver to Agent the Noteholders Security Agreement,
under which Subsidiary intends to grant a security interest in such shares to
Agent; and
WHEREAS, to further secure the 6.75% Notes, the Debtor wishes to
transfer the FoxMeyer Trustee Phar-Mor Collateral to Subsidiary and have
Subsidiary grant a security interest to the Agent in the FoxMeyer Trustee
Phar-Mor Collateral as soon as that is possible, subject to the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
COVENANTS
1.1 Subject to Section 1.2 below, upon Debtor's satisfaction
of all of the Obligations (as such term is defined in the Trustee Security
Agreement) to Trustee (or any successor-in-interest with respect to the Trustee
Note), Trustee (or such successor-in-interest) shall deliver to Agent the
Certificate representing the FoxMeyer Trustee Phar-Mor Collateral, together
with the accompanying stock power duly endorsed in blank by the Debtor. Debtor
shall then cause the FoxMeyer Trustee Phar-Mor Collateral to be registered in
the name of the Subsidiary and the Subsidiary shall execute and deliver to
Agent a new stock power duly executed in blank. It is expressly agreed that at
any time while Trustee holds the Trustee Note, Trustee may and shall accept
payment in full of the Obligations by the Debtor.
1.2 (a) The Debtor and Trustee (on behalf of itself and any
successor-in-interest with respect to the Trustee Note) each agrees that
(subject to the last sentence of subsection 1.1) an "Eligible Group" of
Noteholders (as defined below) may elect at any time to pay to Trustee an
amount equal to all of the Obligations (as such term is defined in the Trustee
Security Agreement) on account thereof; provided that the security interest
previously granted by the Debtor to Trustee in all collateral other than the
FoxMeyer Trustee Phar-Mor Collateral would be terminated. An "Eligible Group"
of Noteholders shall mean a group of Noteholder(s) consisting entirely of
original Noteholders each holding at least 5% of the aggregate principal amount
of 6.75% Notes originally issued.
(b) An Eligible Group may elect, at its option, to cause the
Debtor and/or the Agent to use their reasonable best efforts, effective upon
the satisfaction of the Obligations to the Trustee, to appropriately amend,
supplement and waive the applicable provisions of the Noteholders Security
Agreement and the Indenture for the 6.75% Notes (the "Indenture") so as to
cause the FoxMeyer Trustee Phar-Mor Collateral to secure the 6.75% Notes as
well as the Obligations under the Trustee Note (which Obligations would
thereafter run either to the Eligible Group or Agent by virtue of subrogation)
(a "Security Restructuring"). It is contemplated, though not required, that
following the consummation of a Security Restructuring, the Trustee Note would
be amended to substitute the Subsidiary as the maker thereunder, and the Debtor
would guaranty the obligations of Subsidiary under the Trustee Note under
substantially the same terms and conditions as apply to the Debtor's guaranty
of the 6.75% Notes contained in the Indenture; provided, however, that the
Debtor and Subsidiary shall not be required to consent to such substitution and
guaranty to the extent that the same would, in the written opinion of
independent counsel, necessitate registration of any securities by Debtor
and/or Subsidiary (including, perhaps, such guaranty) under the Securities Act
of 1933, as amended. The Debtor shall also not be required to consent to have a
default under the Trustee Note in and of itself constitute a default under the
6.75% Notes, or vice versa. Nothing contained within Section 1.2 shall require
the Debtor, Subsidiary, Trustee or Agent to take any action that would result
in a violation of any applicable law, including, but not limited to, federal
and state securities laws.
(c) Trustee agrees to confirm in writing any such transfer of
the Obligations by subrogation and consent in writing to any such Security
Restructuring effected pursuant to subsection 1.2(b) above and otherwise in
compliance with the proviso contained in subsection
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1.2(a) above, provided that (i) the Obligations to the Trustee have been (or
will simultaneously be) satisfied in full and (ii) Trustee shall thereafter
have no further obligations in connection with the Trustee Note or the Trustee
Security Agreement.
(d) If there is more than one Eligible Group of Noteholders
who wish to make a payment to Trustee on account of all of the Obligations
pursuant to subsection 1.2(b) above, Trustee may accept payment from any such
group of Noteholders, and not from other Noteholders, in Trustee's sole
discretion. Trustee shall be entitled to rely (without any duty of inquiry)
upon any representation made by a putative Eligible Group as to its status as
an Eligible Group. Nothing contained in this subsection 1.2(d) shall be
construed to limit the parties' obligations under subsection 1.2(b) above.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Trustee hereby confirms to Agent as of the date hereof
that Trustee has no knowledge of any security interest in or lien against the
Collateral other than its own pursuant to the Trustee Security Agreement.
2.2 Agent hereby represents and warrants to Trustee that it
has the authority to execute, deliver and perform its obligations under this
Agreement and this Agreement constitutes the legal, valid and binding obligation
of Agent, enforceable in accordance with its terms and this Agreement is not in
contravention of any law, rule or regulation or any order, decree or agreement
in each case by which Agent is bound. Agent represents that the Debtor consents
to the execution hereof and disclaims any claim against Trustee for its entry
herein.
ARTICLE III
MISCELLANEOUS
3.1 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
PRINCIPLES OF CONFLICTS OF LAWS AND SHALL BE BINDING UPON AND INURE TO THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. AGENT
SHALL NOT ASSIGN ITS RIGHTS HEREUNDER WITHOUT THE CONSENT OF TRUSTEE.
Each party hereby agrees that any action or proceeding
arising hereunder and involving the Trustee shall be brought only in the United
States Bankruptcy Court for the District of Delaware. If such Court declines
jurisdiction, the parties hereto agree that such action or proceeding shall
then be brought only in the state and federal courts located in the State and
County of New York.
3.2 All communications provided for hereunder shall be given
in writing and delivered personally, via overnight mail, by a reputable carrier
or by facsimile (confirmed by
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telephone) to such address as is identified by a party to the other party
hereto from time to time in accordance with the terms of this Section 3.2.
3.3 Each party agrees to execute and deliver any and all such
further instruments and assurances, and to take all such further actions, as may
be reasonably necessary or appropriate to effectuate the transactions
contemplated hereby.
3.4 This Agreement cannot be amended, modified or any of its
terms waived, except by a writing executed by each of the parties hereto.
3.5 This Agreement may be executed in two or more counterparts
which together shall constitute one and the same instrument. Facsimile
signatures shall be sufficient to bind the parties.
3.6 The Trustee's obligations hereunder are subject to the
prior approval of the United States Bankruptcy Court for the District of
Delaware. Neither the Trustee nor the Trustee's estate shall have any liability
for any breach of this Agreement. The other parties' sole remedy for any breach
of this Agreement by the Trustee shall be specific performance. Nothing
contained herein shall prevent the Trustee from agreeing with Debtor to
restructure the Obligations or the security arrangements therefor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
TRUSTEE:
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Xxxx X. Xxxxx, Xx., as Trustee under
Chapter 7 of Title 11 of the U.S. Code of
FoxMeyer Corporation et al.
Address:
AGENT:
XXXXX FARGO & COMPANY
By:
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Name:
Title:
Address:
The terms of this Agreement are hereby acknowledged, accepted and consented to:
AVATEX CORPORATION
By:
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Name:
Title:
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