ESCROW AGREEMENT
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This Escrow Agreement (this "Agreement") is entered into by Avatex
Corporation, formerly FoxMeyer Health Corporation ("Avatex"), Xxxx X. Xxxxx,
Xx., as trustee (the "Trustee") under chapter 7 of title 11 of the United States
Code (the "Bankruptcy 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 (collectively, the "Debtors"), and Xxxx
X. Xxxxx, Xx., individually and as co-escrow agent, and Xxxxxx X. Xxxxxxx,
individually and as co-escrow agent (collectively, "Escrow Agent").
RECITALS
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A. The Debtors are debtors under chapter 7 of the Bankruptcy Code in
cases pending before the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court");
B. On May 19, 1997, the Bankruptcy Court entered an order confirming
the election of Trustee as the trustee under section 702 of the Bankruptcy Code
in the Debtors' chapter 7 cases;
C. On July ___, 1997, Avatex and Trustee entered into a Settlement
Agreement, under which they agreed to settle certain claims against each other
and provided for the consummation of certain transactions involving one or more
of the parties thereto;
D. Pursuant to the terms of the Agreed Preliminary Injunction Order
entered on March 5, 1997 by the Bankruptcy Court in the lawsuit styled Official
Committee of Unsecured Creditors of FoxMeyer Corporation, et al. v. FoxMeyer
Health Corporation, Adversary Proceeding No. 96-205, approximately $33.2 million
is currently being held by Avatex in a segregated bank account, number
0000-000-000 at Bank One, Texas, N.A. (the "Account");
E. Pursuant to Section 2 of the Settlement Agreement, upon execution of
the Settlement Agreement, Avatex and the Trustee have agreed that the Account
shall be transferred to the Escrow Agent, that $6,060,000 of the funds in the
Account may be used to acquire 1,132,500 shares of common stock of Phar-Mor,
Inc. (the "Stock"), and that, if the Stock is acquired before the Closing Date
(as defined in Section 3 of the Settlement Agreement), then the Stock shall be
held pursuant to the terms of this Agreement; and
F. Escrow Agent is willing to serve as escrow agent and hold the
Escrowed Property (as defined below) in accordance with the terms and conditions
hereof.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants, representations, warranties and agreements contained in this
Agreement and the Settlement Agreement, and such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Avatex, the Trustee and Escrow Agent hereby agree as follows:
1. Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings given to them in the Settlement Agreement.
2. Avatex and the Trustee hereby appoint and designate Escrow Agent as
escrow agent for the purposes set forth herein, and Escrow Agent accepts such
appointment and designation.
3. Upon execution of this Agreement, Avatex shall transfer to Escrow
Agent the Account and all funds (the "Funds") in the Account (the Account, the
Funds and all proceeds thereof including the Stock shall be referred to herein
as the "Escrowed Property"). The deposit of the Escrowed Property in accordance
with the terms of this Agreement shall vest equitable title to the Escrowed
Property with Avatex and the Trustee, as their respective interests appear as
set forth herein. Upon the occurrence of the applicable contingencies,
notwithstanding any potential intervening bankruptcy by Avatex, the parties
intend that legal and equitable title to the Funds shall follow possession
thereof in accordance with Section 4 of the Settlement Agreement, and legal and
equitable title to the Stock shall vest in Avatex, subject to the Security
Agreement.
4. Escrow Agent shall deposit all Funds as shall be directed by the
joint instruction of Avatex and the Trustee.
5. The Escrow Agent shall disburse the Escrowed Property in accordance
with the following:
(a) If by the date (the "Final Date") that is 180 days after the
Closing Date the Escrow Agent receives written notification from an officer of
Avatex of (i) the closing of the transactions contemplated by the Redemption
Agreement, (ii) the requirement to fund the purchase of the Stock, and (iii) the
service of such notice on the Trustee, then Escrow Agent shall release
$6,060,000 of the Funds directly to a third party (the "Transferor") in
accordance with Avatex's written instructions (the "Acquisition Disbursement").
If the Acquisition Disbursement occurs before the Closing Date, then
certificate(s) representing the Stock shall be delivered by the Transferor to
the Escrow Agent to be held in escrow pursuant to this Agreement, such Stock and
Stock certificate to be deemed Escrowed Property hereunder. If the Acquisition
Disbursement occurs but the Closing Date does not occur by the date set forth in
the last sentence of Section 1 of the Settlement Agreement, then the Stock
certificate shall be held pursuant to Section 7 of this Agreement.
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(b) If the Escrow Agent receives written notification by an officer of
Avatex and the Trustee (the "Notice Parties") of the occurrence of the Closing
Date under the Settlement Agreement, then within one business day of such
receipt the Escrow Agent shall pay to the Trustee the amount described in
Section 4A of the Settlement Agreement and either (i) if the Escrow Agent
receives written notification by the Notice Parties that the Stock has been
acquired after the Closing Date and on or before the Final Date, then the
Transferor shall deliver the Stock certificate(s) to the Trustee to be held as
collateral under the Security Agreement; or (iii) if the Notice Parties notify
the Trustee in writing that the Final Date has occurred and that the Stock has
not been acquired, then the Escrow Agent shall pay all remaining Funds in
accordance with the last sentence of Section 4 of the Settlement Agreement.
6. If the Escrow Agent receives written notification from the Notice
Parties that the Closing Date has not occurred by the date set forth in the last
sentence of Section 1 of the Settlement Agreement, then Escrow Agent shall
transfer the Escrowed Property only in accordance with (a) written documentation
signed by the Notice Parties that jointly directs the disposition of the
Escrowed Property or (b) a judgment or order of a court of competent
jurisdiction certified by the clerk of such court or other appropriate official.
7. Notwithstanding anything in this Agreement, upon written
notification by the Notice Parties that (a) the Stock has been acquired by and
possession of the Stock certificate is in the possession of Escrow Agent and (b)
the Closing Date has not occurred unless due to the fault or negligence of
Avatex, then Escrow Agent shall transfer and deliver the Stock certificate to
Avatex upon payment by Avatex to Escrow Agent of $6,060,000 in cash, plus
interest at the "prime rate" of interest reported from time to time in the Wall
Street Journal, Southwest Edition, in the "Money Rates" section or equivalent
substitute section of such paper (the "Prime Rate") on the sum of $6,060,000,
accrued from the date of the Stock is acquired to the date of payment, such
funds to constitute Escrowed Property to be held pursuant to the terms of this
Agreement.
8. The Stock shall be issued in the name of Avatex. So long as the
Stock is held by Escrow Agent pursuant to this Agreement, Avatex and the Trustee
shall jointly instruct Escrow Agent as to voting of the Stock. If Avatex and the
Trustee are unable to agree as to the voting of the Stock on a particular
matter, then the Stock shall not be voted on that matter.
9. Escrow Agent shall be entitled to rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to, any instruction, order, judgment, certification,
affidavit, demand, notice, opinion, instrument or other writing delivered to it
hereunder without being required to determine the authenticity of such document,
the correctness of any fact stated therein, the propriety of the service thereof
or the capacity, identity or authority of any party purporting to sign or
deliver such document.
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10. The duties of Escrow Agent are only as herein specifically
provided, and are purely ministerial in nature. This Agreement sets forth all
the obligations of Escrow Agent with respect to any and all matters pertinent to
the escrow contemplated hereunder and no additional obligations of Escrow Agent
shall be implied from the terms of this Agreement or any other agreement. Escrow
Agent shall incur no liability in connection with the discharge of its
obligations under this Agreement or otherwise in connection therewith, except
such liability as may arise from the willful misconduct or gross negligence of
Escrow Agent.
11. Escrow Agent may consult with counsel of its choice, and shall not
be liable for accordance with any action taken or omitted to be taken by Escrow
Agent in the advice of such counsel.
12. Escrow Agent shall not be bound by any modification, cancellation
or rescission of this Agreement unless in writing and signed by Escrow Agent.
13. Escrow Agent shall have no tax reporting duties with respect to the
Escrowed Property or income thereon, such duties being the responsibility of the
party or parties which receive, or have the right to receive, any taxable income
hereunder. Notwithstanding the foregoing, Escrow Agent has the authority to
comply with the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder. Such authority shall include, without limitation, (i)
the filing of tax returns (including information returns) with respect to the
Escrowed Property or income thereon, (ii) the payment of any tax, interest or
penalties imposed thereon, (iii) the withholding of any amounts which are
required to be withheld, and (iv) the payment over of such withheld amounts to
the appropriate taxing authority. Escrow Agent may withdraw from the Escrowed
Property amounts necessary to pay all applicable income or withholding taxes
(plus interest and penalties thereon) that are required to be paid. The parties
to this Agreement, other than the Escrow Agent, shall provide the Escrow Agent
with all information necessary to enable Escrow Agent to comply with the
foregoing.
14. Escrow Agent is acting as only a stakeholder with respect to the
Escrowed Property. If any dispute arises as to whether Escrow Agent is obligated
to deliver the Escrowed Property or as to whom the Escrowed Property is to be
delivered or the amount thereof, Escrow Agent shall not be required to make any
delivery, but in such event Escrow Agent may hold the Escrowed Property until
receipt by Escrow Agent of instructions in writing, signed by all parties which
the Escrow Agent in its sole judgment believes have, or claim to have, an
interest in the Escrowed Property, directing the disposition of the Escrowed
Property, or in the absence of such authorization, Escrow Agent may hold the
Escrowed Property until receipt of a certified copy of a final judgment of a
court of competent jurisdiction providing for the disposition of the Escrowed
Property. Escrow Agent may require, as a condition to the disposition of the
Escrowed Property pursuant to written instructions, indemnification and/or
opinions of counsel, in form and substance satisfactory to Escrow Agent, from
each party providing such instructions. If such written instructions,
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indemnification and opinions are not received, or proceedings for such
determination are not commenced, within 30 days after receipt by Escrow Agent of
notice of any such dispute and diligently continued, or if the Escrow Agent is
uncertain as to which party or parties are entitled to the Escrowed Property,
Escrow Agent may either (i) hold the Escrowed Property until receipt of (X) such
written instructions and indemnification, or (Y) a certified copy of a final
judgment of a court of competent jurisdiction providing for the disposition of
the Escrowed Property, or (ii) deposit the Escrowed Property in the registry of
a court of competent jurisdiction; provided, however, that notwithstanding the
foregoing, Escrow Agent may, but shall not be required to, institute legal
proceedings of any kind.
15. The Trustee and Avatex, jointly and severally, agree to reimburse
Escrow Agent on demand for, and to indemnify and hold Escrow Agent harmless
against and with respect to, any and all loss, liability, damage, or expense
(including, without limitation, attorneys' fees and costs) that Escrow Agent may
suffer or incur in connection with the entering into of this Agreement and
performance of its obligations under this Agreement or otherwise in connection
therewith, except to the extent such loss, liability, damage or expense arises
from the willful misconduct or gross negligence of Escrow Agent.
16. Escrow Agent (or either co-escrow agent) and any successor escrow
agent may at any time resign as such by delivering the Escrowed Property to
either (i) any successor escrow agent designated in accordance with this
Section, or (ii) in the absence of such designation, any court having competent
jurisdiction. Any successor to Xxxx X. Xxxxx, Xx. as co-Escrow Agent may be
designated solely by the Trustee, and any successor to Xxxxxx X. Xxxxxxx as
co-Escrow Agent may be designated solely by Avatex. Upon his resignation and
delivery of the Escrowed Property as set forth in this paragraph, Escrow Agent
shall be discharged of, and from, any and all further obligations arising in
connection with the escrow contemplated by this Agreement.
17. This Agreement shall inure to the benefit of, and be binding upon,
the parties hereto and their respective successors and assigns. Nothing in this
Agreement, express or implied, shall give to anyone, other than the parties
hereto and their respective permitted successors and assigns, any benefit, or
any legal or equitable right, remedy or claim, under or in respect of this
Agreement or the escrow contemplated hereby.
18. Any notice authorized or required to be given to a party hereto
pursuant to this Agreement shall be deemed to have been given when
hand-delivered, or when mailed by United States certified or registered mail,
postage prepaid, return receipt requested, or when transmitted by reputable
overnight delivery service, addressed to the address set forth under the name of
such party, and its counsel, on Exhibit A to this Agreement. Any party may
change its respective address by giving notice thereof in writing to the other
parties hereto in the same manner as set forth above.
19. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York. All actions arising under
this Agreement shall be subject to the exclusive jurisdiction and venue of the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). Each of the parties hereto hereby agrees to submit to personal
jurisdiction and to waive any objection as to jurisdiction in the Bankruptcy
Court in any action arising under this Agreement. Service of process in any such
action shall be effective if made in accordance with Section 18 of this
Agreement.
20. This Agreement may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
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21. The rights of Escrow Agent contained in this Agreement, including
without limitation the right to indemnification, shall survive the resignation
of Escrow Agent and the termination of the escrow contemplated hereunder.
22. This Agreement shall remain in full force and effect until the
Escrowed Property has been disbursed in accordance with Section 5 and/or 6
hereof and shall terminate on such date.
23. EACH OF THE PARTIES HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY ENTERING INTO
THIS AGREEMENT.
IN WITNESS WHEREOF, these parties have executed and delivered this
Agreement as of July 25, 1997.
AVATEX CORPORATION
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
Its: Vice President
/s/ Xxxx X. Xxxxx, Xx.
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XXXX X. XXXXX, XX.
Chapter 7 Trustee for FoxMeyer Corporation,
FoxMeyer Drug Company, Healthcare Transportation
System, Inc., Merchandise Coordinator Services
Corporation, FoxMeyer Software, Inc. and Health Mart, Inc.
/s/ Xxxx X. Xxxxx, Xx.
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XXXX X. XXXXX, XX., individually,
and as Co-Escrow Agent
/s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXXXX, individually,
and as Co-Escrow Agent
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EXHIBIT A
Xxxx X. Xxxxx, Xx., as With a copy to: Xxxxx Xxxxxx, Esq.
Escrow Agent and/or Trustee Kasowitz, Benson, Xxxxxx &
0000 Xxxxx 00xx Xxxxxx Xxxxxxxx, LLP
Suite 200 1301 Avenue of the Americas
Xxxxxxx, Xxxxxxx 00000 36th Floor
Fax (000) 000-0000 Xxx Xxxx, XX 00000
Fax (000) 000-0000
Avatex Corporation
Attn: General Counsel
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax (000) 000-0000
Xx. Xxxxxx X. Xxxxxxx, as
Escrow Agent
0000 Xxxxxxxxx
Xxxxxx, Xxxxx 00000
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