<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 29, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
DVI, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2722773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
(215) 345-6600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
STEVEN R. GARFINKEL
DVI, INC.
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
(215) 345-6600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
JOHN A HEALY, ESQ. JONATHAN JEWETT
Rogers & Wells Shearman & Sterling
200 Park Avenue 599 Lexington Avenue
New York, New York 10166 New York, New York 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
-------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.[x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of each class of securities Amount to be Aggregate Price Aggregate Registration
to be registered Registered Per Unit(1) Offering Price Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities . . . . . . . . . . . . . . . $100,000,000 100% $100,000,000 $30,304
============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. *
* A registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may *
* not be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED NOVEMBER 29, 1996
PROSPECTUS
$100,000,000
DVI, INC.
DEBT SECURITIES
-------------------
DVI, Inc. (the "Company") may offer from time to time, together or separately,
notes, debentures or other evidences of indebtedness ("Debt Securities") in one
or more series at an aggregate offering price not to exceed $100,000,000. Debt
Securities may be issuable in registered form without coupons. The Company
will offer Debt Securities to the public on terms determined by market
conditions.
The accompanying Prospectus Supplement will set forth the specific terms of the
Debt Securities, including the ranking as unsubordinated Debt Securities, the
specific designation, aggregate principal amount, purchase price, maturity,
redemption terms, interest rate (or manner of calculation thereof), time of
payment of interest (if any), terms for any conversion (including the terms
relating to the adjustment thereof), listing (if any) on a securities exchange
and any other specific terms of the Debt Securities.
The Debt Securities may be sold directly, through agents, underwriters or
dealers as designated from time to time, or through a combination of such
methods. See "Plan of Distribution." If agents of the Company or any dealers
or underwriters are involved in the sale of the Debt Securities in respect of
which this Prospectus is being delivered, the names of such agents, dealers or
underwriters and any applicable commissions or discounts will be set forth in
or may be calculated from the Prospectus Supplement with respect to such Debt
Securities. The net proceeds to the Company from such sale also will be set
forth in the applicable Prospectus Supplement.
-------------------
See "Risk Factors" beginning on page 4 for a discussion of certain factors that
should be carefully considered by prospective investors.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is , 1996
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN
OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549; and at its
regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549, at prescribed rates. The Commission maintains a site on the world-wide
web at http://www.sec.gov that contains reports, proxy statements and other
information regarding the Company. Such reports, proxy statements and other
information can also be inspected at the office of the New York Stock Exchange,
20 Broad Street, New York, New York 10005 on which exchange the Company's
common stock is traded.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Debt Securities offered
hereby. This Prospectus and any accompanying Prospectus Supplement do not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed as a part thereof, as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Debt Securities, reference is hereby made to such Registration
Statement, including the exhibits and schedules filed as a part thereof.
Statements contained in this Prospectus and any Prospectus Supplement as to the
contents of any contract or other document referred to herein are not
necessarily complete and where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. The Registration Statement, including the
exhibits and schedules filed as a part thereof, may be inspected without charge
at the public reference facilities maintained by the Commission as set forth in
the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission
(Registration No. 0-16271) are hereby incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1996; and
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the filing of a post-effective amendment which
indicates the termination of the offering of the Debt Securities made by this
Prospectus shall be deemed to
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be incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above other than exhibits to such documents. Written or oral requests for such
copies should be directed to: DVI, Inc., 500 Hyde Park, Doylestown,
Pennsylvania 18901 (Telephone: 215-345-6600), Attention: Legal Department.
THE COMPANY
DVI, Inc. (the "Company") is a specialty finance company whose core
business is financing diagnostic imaging, radiation therapy and other types of
sophisticated medical equipment used by outpatient healthcare providers,
medical imaging centers, groups of physicians, integrated healthcare delivery
networks and hospitals. In addition to originating equipment loans, the
Company purchases medical equipment loans and leases originated by regional
finance companies ("Originators") through its wholesale loan purchase program
(the "Wholesale Program") and provides innovative finance programs for
manufacturers and vendors of a broad range of lower cost patient treatment
devices. The Company also provides lines of credit to a wide variety of
healthcare providers substantially all of which are collateralized by third
party medical receivables due from Medicare, Medicaid, Health Maintenance
Organizations ("HMOs"), Preferred Provider Organizations ("PPOs") and
commercial insurance companies. By effectively and efficiently servicing the
equipment financing needs of healthcare providers and at the same time building
productive relationships with medical equipment manufacturers and vendors
seeking to arrange financing for their customers, the Company has established a
niche leadership position among independent finance companies serving the
medical industry.
The Company is a Delaware corporation and conducts its business
operations through operating subsidiaries. The principal operating subsidiaries
are DVI Financial Services Inc. ("DVI Financial Services") and DVI Business
Credit Corporation ("DVI Business Credit"). The Company conducts
securitizations through special purpose subsidiaries, each of which is wholly
owned by DVI Financial Services. The Company also conducts other structured
financings through limited purpose subsidiaries or through DVI Financial
Services. The obligors under the Company's various warehouse credit facilities
are DVI Financial Services or DVI Business Credit. Except as the context
otherwise requires, the term "Company" refers to DVI, Inc. and its wholly owned
subsidiaries.
The executive offices of the Company are located at 500 Hyde Park,
Doylestown, Pennsylvania 18901 (Telephone: 215-345-6600).
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RISK FACTORS
An investment in the Debt Securities offered hereby involves a high
degree of risk. Prospective purchasers of Debt Securities should carefully
consider the following risk factors in addition to the other information set
forth in this Prospectus and any Prospectus Supplement.
SUBSTANTIAL INDEBTEDNESS AND LEVERAGE. The Company currently has
substantial outstanding indebtedness and, subsequent to the offering of Debt
Securities, the Company will be highly leveraged. As of September 30, 1996,
the Company and its consolidated subsidiaries had total debt of $398.8 million,
of which $180.0 million was full recourse debt and $218.8 million was limited
recourse debt. Of the $398.8 million of total debt, $260.6 million was
long-term debt and $138.2 million was short-term debt. After completion of the
Offering, the Company will have substantial debt service requirements. The
ability of the Company to repay its indebtedness, including the Debt
Securities, will depend upon future operating performance, which is subject to
the performance of the Company's loan portfolio, the success of the Company's
business strategy, prevailing economic conditions, levels of interest rates and
financial, business and other factors, many of which are beyond the Company's
control. The degree to which the Company is leveraged also may impair its
ability to obtain additional financing on acceptable terms.
ABILITY TO SERVICE DEBT; NEGATIVE CASH FLOWS AND CAPITAL NEEDS. Although
the Company believes that cash available from operations and financing
activities will be sufficient to enable it to make required interest payments
on the Debt Securities and its other debt obligations and other required
payments, there can be no assurance in this regard and the Company may
encounter liquidity problems which could affect its ability to meet such
obligations while attempting to withstand competitive pressures or adverse
economic conditions. In such circumstances, the value of the Debt Securities
could be materially adversely affected.
In a securitization, the Company recognizes a gain on sale of the loans
securitized upon the closing of the securitization, but does not receive the
cash representing such gain until it receives the excess servicing, which in
general is payable over the actual life of the loans securitized. The Company
incurs significant expense in connection with a securitization and incurs both
current and deferred tax liabilities as a result of the gain on sale.
Therefore, the Company requires continued access to short- and long-term
external sources of cash to fund its operations.
The Company expects to continue to operate on a negative cash flow basis
as the volume of the Company's loan purchases and originations increases and
its securitization program grows. The Company's primary cash requirements
include the funding of: (i) loan originations and purchases pending their
securitization and sale; (ii) fees and expenses incurred in connection with the
securitization of loans; (iii) reserve account or overcollateralization
requirements in connection with the securitization and sale of the loans; (iv)
tax payments due on recognition of excess servicing gain; (v) ongoing
administrative and other operating expenses; and (vi) interest and principal
payments under the Company's warehouse facilities and other indebtedness.
The Company's primary sources of liquidity in the future are expected to
be existing cash fundings under its warehouse facilities, sales of loans
through securitizations and other permanent fundings, the net proceeds from
sales of Debt Securities and further issuances of debt or equity.
The Company's primary sources of liquidity as described in the paragraph
above are expected to be sufficient to fund the Company's liquidity
requirements for at least the next 12 months if the Company's future operations
are consistent with management's current growth expectations. However, because
the Company expects to continue to operate on a negative cash flow basis for
the foreseeable future, it anticipates that it will need to effect debt or
equity financings regularly. The type, timing and terms of financing selected
by the Company will be dependent upon the Company's cash needs, the
availability of other financing sources and the prevailing conditions in the
financial markets. There can be no assurance that any such sources will be
available to the Company at any given time or as to the favorableness of the
terms on which such sources may be available.
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HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW OF
OPERATING COMPANIES; EFFECTIVE SUBORDINATION. The Debt Securities will be
obligations solely of the Company, which is a holding company with no business
operations of its own. The Company's assets consist primarily of its ownership
interests in its operating subsidiaries and all of the operations of the
Company are conducted through its subsidiaries, which are separate and distinct
legal entities and, unless otherwise provided in any Prospectus Supplement,
have no obligations, contingent or otherwise, to pay any amounts due pursuant
to the Debt Securities or to make any funds available to the Company to enable
it to make payments on the Debt Securities or meet working capital needs or
other liabilities of the Company, or for any other reason. In addition, to the
extent that any of the operating subsidiaries generates positive cash flow, the
Company may be unable to access such cash flow because certain of such entities
are currently or may become parties to credit or other borrowing agreements
that restrict or prohibit the payment of dividends or interest and principal on
the Debt Securities, and such entities are likely to continue to be subject to
such restrictions and prohibitions for the foreseeable future. The Debt
Securities also will be effectively subordinated to all existing and future
indebtedness and other liabilities of the Company's subsidiaries because the
Company's right to receive the assets of any such entities upon their
liquidation, dissolution or reorganization will be effectively subordinated to
the claims of such entities' creditors arising from the first priority
perfected liens on those assets granted under warehouse facilities and other
loans. To the extent that the Company is itself recognized as a creditor of
any such subsidiary, the claims of the Company would still be subordinated to
the claims of such entities' trade creditors as well as any indebtedness of
such entity that is senior in right of payment to the Company's claim or that
is secured by the assets of any such entity. As of September 30, 1996, the
Company's subsidiaries had total debt of $385.6 million, $166.8 million of
which was full recourse and $218.8 million of which was limited recourse.
DEPENDENCE ON WAREHOUSE FINANCING. The Company's ability to sustain the
growth of its financing business is dependent upon funding obtained through
warehouse facilities until its equipment and other loans are permanently
funded. The funds the Company obtains through warehouse facilities are full
recourse short-term borrowings secured primarily by the underlying equipment,
the medical receivables and other collateral. These borrowings are in turn
typically repaid with the proceeds received by the Company when its equipment
and other loans are securitized or sold. At September 30, 1996 the Company had
available an aggregate of approximately $376.5 million under various warehouse
facilities, approximately $298.5 million of which is available for funding
equipment loans and approximately $78.0 million of which is available for
funding medical receivables loans. There can be no assurance that this type of
warehouse financing will continue to be available to the Company on acceptable
terms. If the Company were unable to arrange continued access to acceptable
warehouse financing, the Company would have to curtail its equipment and other
loan originations, which in turn would have a material adverse effect on the
Company's financial condition and results of operations.
DEPENDENCE ON PERMANENT FUNDING PROGRAMS. The Company's use of
securitization as its principal form of permanent funding is an important part
of the Company's business strategy. If for any reason the Company were to
become unable to access the securitization market to fund permanently its
equipment and other loans, the consequences for the Company would be materially
adverse. The Company's ability to complete securitizations and other
structured finance transactions depends upon a number of factors, including
general conditions in the credit markets, the size and liquidity of the market
for the types of receivable-backed securities issued or placed in
securitizations sponsored by the Company and the overall performance of the
Company's loan portfolio. The Company does not have binding commitments from
financial institutions or investment banks to provide permanent funding for its
equipment or medical receivables loans.
IMPACT OF CREDIT ENHANCEMENT REQUIREMENTS. In connection with its
securitizations and other structured financings, the Company is required to
provide credit enhancement for the debt obligations issued and sold to third
parties. Typically, the credit enhancement consists of cash deposits, the
funding of subordinated tranches and/or the pledge of additional equipment or
other loans that are funded with the Company's capital. The requirement to
provide this credit enhancement reduces the Company's liquidity and requires it
to obtain additional capital. If the Company is unable to obtain and maintain
sufficient capital, it may be required to halt or curtail its securitization or
other structured financing programs, which in turn would have a material
adverse effect on the Company's financial condition and operations.
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CREDIT RISK. Many of the Company's customers are outpatient healthcare
providers, the loans to whom often require a high degree of credit analysis.
Although the Company seeks to mitigate its risk of default and credit losses
through its underwriting practices and loan servicing procedures and through
the use of various forms of non-recourse or limited recourse financing (in
which the financing sources that permanently fund the Company's equipment and
other loans assume some or all of the risk of default by the Company's
customers), the Company remains exposed to potential losses resulting from a
default by an obligor. Obligors' defaults could cause the Company to make
payments to the extent the Company is obligated to do so and in the case of its
permanent equipment and other funding arrangements to the extent of the
Company's remaining credit enhancement position; could result in the loss of
the cash or other collateral pledged as credit enhancement under its permanent
equipment and other funding arrangements; or could require the Company to
forfeit any residual interest it may have retained in the underlying equipment.
During the period after the Company initially funds an equipment or other loan
and prior to the time it funds the loan on a permanent basis, the Company is
exposed to full recourse liability in the event of default by the obligor. In
addition, under the terms of securitizations and other types of structured
finance transactions, the Company generally is required to replace or
repurchase equipment and other loans in the event they fail to conform to the
representations and warranties made by the Company, even in transactions
otherwise designated as non-recourse or limited recourse.
Defaults by the Company's customers also could adversely affect the
Company's ability to obtain additional financing in the future, including its
ability to use securitization or other forms of structured finance. The
sources of such permanent funding take into account the credit performance of
the equipment and other loans previously financed by the Company in deciding
whether and on what terms to make new loans. In addition, the credit rating
agencies and insurers that are often involved in securitizations consider prior
credit performance in determining the rating to be given to the securities
issued in securitizations sponsored by the Company and whether and on what
terms to insure such securities. To date, all of the Company's medical
receivable loans (as opposed to its equipment loans) have been funded on a full
recourse basis whereby the Company is fully liable for any losses that are
incurred.
Under the Company's Wholesale Program, the Company purchases equipment
loans from Originators that generally do not have direct access to the
securitization market as a source of permanent funding for their loans. The
Company does not work directly with the borrowers at the origination of these
equipment loans and therefore is not directly involved in structuring the
credits, however the Company independently verifies credit information supplied
by the Originator. Accordingly, the Company faces a somewhat higher degree of
risk when it acquires loans under the Wholesale Program on a wholesale basis.
During the twelve-month period ended June 30, 1996 and the three month period
ended September 30, 1996, loans purchased under the Wholesale Program
constituted 29.5% and 34.0%, respectively, of the total loans originated during
the period. There can be no assurance that the Company will be able to grow
this business successfully or avoid the credit risks related to wholesale loan
origination.
INTEREST RATE RISK. When the Company borrows funds through warehouse
facilities, it is exposed to certain risks caused by interest rate
fluctuations. Although the Company's equipment loans are structured and
permanently funded on a fixed interest rate basis, it uses warehouse facilities
until permanent funding is obtained. Because funds borrowed through warehouse
facilities are obtained on a floating interest rate basis, the Company uses
hedging techniques to protect its interest rate margins during the period that
warehouse facilities are used prior to an anticipated securitization and sale.
The Company uses derivative financial instruments, such as forward rate
agreements, forward market sales or purchases of treasury securities, and
interest rate swaps and caps, to manage its interest rate risk. The
derivatives are used to manage three components of this risk; mismatches of the
maturity of assets and liabilities on the Company's balance sheet, hedging
anticipated loan securitizations and sales, and interest rate spread
protection. There can be no assurance, however, that the Company's hedging
strategy or techniques will be effective, that the profitability of the Company
will not be adversely affected during any period of changes in interest rates
or that the costs of hedging will not exceed the benefits. A substantial and
sustained increase in interest rates could adversely affect the Company's
ability to originate loans. In certain circumstances, the Company for a
variety of reasons may retain for an indefinite period certain of the equipment
and other loans it originates. In such cases, the Company's interest rate
exposure may continue for a longer period of time.
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POSSIBLE ADVERSE CONSEQUENCES FROM RECENT GROWTH. In the past three
years, the Company originated a significantly greater number of equipment and
other loans than it did in previous years. As a result of this rapid growth,
the Company's loan portfolio grew from $234.0 million at June 30, 1994 to
$474.3 million at September 30, 1996. In light of this growth, the historical
performance of the Company's loan portfolio, including rates of credit loss,
may be of limited relevance in predicting future loan portfolio performance.
Any credit or other problems associated with the large number of equipment and
other loans originated in the recent past will not become apparent until
sometime in the future. Further, while the Company's loan originations have
grown substantially in the past three years, its net interest margins have
declined during that same period due to a general decline in interest rates,
the Company's pricing strategy, the sale of higher-yielding loans to finance
the cost of its developing domestic and international business units and the
increase in the amount of lower-yielding credit enhancements due to the
increased number of securitizations. Periodic permanent financing which shifts
portions of the Company's borrowings from short term facilities to more costly
long term facilities increases the cost of funds. As a result, the Company's
historical results of operations may be of limited relevance to an investor
seeking to predict the Company's future performance.
ABILITY TO SUSTAIN GROWTH. To sustain the rates of growth it has
achieved in the last three years, the Company will be required to penetrate
further the markets for lower cost diagnostic imaging equipment and for other
types of medical equipment or devices such as lasers used in patient treatment.
The Company faces significant barriers to entry in the patient treatment device
market, which is more diverse than the diagnostic imaging market because of the
larger number of manufacturers and types of products and the greater price
range of those products. The Company has limited experience in the patient
treatment device market. In an effort to obtain access to new markets, the
Company has initiated operations internationally and has made investments in
certain emerging markets. The success and ultimate recovery of these
investments is dependent upon many factors including foreign regulation and
business practices, currency exchange regulations and currency fluctuations and
the achievement of management's planned objectives for these markets. There
can be no assurance that the Company will be able to penetrate and compete
effectively in the markets described above.
RISKS RELATED TO THE MEDICAL RECEIVABLE FINANCING BUSINESS. In July 1993,
the Company entered the medical receivable financing business and expects to
focus on this business as a part of the Company's growth strategy. The
Company's medical receivable financing business generally consists of providing
loans to healthcare providers that are secured by their receivables from payors
such as insurance companies, large self-insured companies and governmental
programs and by other collateral. While the Company expects to focus on this
business as a significant part of its growth strategy, there can be no
assurance that the Company will be able to expand this business successfully or
avoid related liabilities or losses. The Company has funded its medical
receivable financing business to date through the use of the Company's capital;
a $25 million securitization; a recently established $50.0 million medical
receivables warehouse/securitization facility; and, on a limited basis,
through the Company's revolving credit facility which the Company generally
uses for its equipment financing business. The growth of the Company's medical
receivable financing business is dependent upon the Company's ability to obtain
additional funding facilities to finance medical receivables loans.
While the medical receivable financing business shares certain
characteristics, including an overlapping customer base, with the Company's
core equipment financing business, there are many differences, including unique
risks. Healthcare providers could overstate the quality and characteristics of
their medical receivables, which the Company analyzes in determining the amount
of the line of credit to be secured by such receivables. After the Company has
established or funded a line of credit, the healthcare providers could change
their billing and collection systems, accounting systems or patient records in
a way that could adversely affect the Company's ability to monitor the quality
and/or performance of the related medical receivables. There are technical
legal issues associated with creating and maintaining perfected security
interests in medical receivables, specifically those generated by Medicaid and
Medicare claims. Payors may make payments directly to healthcare providers
that have the effect (intentionally or otherwise) of circumventing the
Company's rights in and access to such payments. Payors may attempt to offset
their payments to the Company against debts owed to the payors by the
healthcare providers. In addition, as a lender whose position is secured by
receivables, the Company is likely to have less leverage in collecting
outstanding receivables in the event of a borrower's insolvency than a lender
whose position is secured by medical equipment
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that the borrower needs to run its business. A borrower that receives medical
receivables loans from the Company and defaults on obligations secured by such
receivables may require additional loans, or modifications to the terms of
existing loans, in order to continue operations and repay outstanding loans.
The Company may have a conflict of interest when it acts as servicer for an
equipment-based securitization and originates medical receivables loans to
borrowers whose equipment loans have been securitized. The Company's efforts
to develop suitable sources of funding for its medical receivable financing
business through securitization or other structured finance transactions may be
constrained or hindered due to the fact that the use of structured finance
transactions to fund medical receivables is a relatively new process. While
the Company believes it has structured its credit policies and lending
practices to take into account these and other factors, there can be no
assurance the Company will not sustain credit losses in connection with its
medical receivable financing business or that the medical receivable financing
business will meet the Company's growth expectations.
MEDICAL EQUIPMENT MARKET. The demand for the Company's equipment
financing services is affected by numerous factors beyond the control of the
Company. These factors include general economic conditions, including the
effects of recession or inflation, and fluctuations in supply and demand for
various types of sophisticated medical equipment resulting from, among other
things, technological and economic obsolescence and government regulation. In
addition, the demand for sophisticated medical equipment also may be negatively
affected by reductions in the amount of reimbursement to healthcare providers
for their services from third-party payors such as insurance companies, large
self-insured companies and government programs, and the increased use of
managed healthcare plans that often restrict the use of certain types of high
technology medical equipment. At September 30, 1996, financing for purchases
of magnetic resonance imaging ("MRI") machines accounted for approximately
44.7% (by dollar volume) of the total loans originated by the Company. Any
substantial decrease in the Company's loan originations for the purchase of MRI
machines could have a material adverse effect on the Company.
HEALTHCARE REFORM. During the past half decade, large U.S. corporations
and U.S. consumers of healthcare services have substantially increased their
use of managed healthcare plans such as HMOs and PPOs. This development has
increased the purchasing power of those plans, which in turn have used that
power to lower the amounts they pay for healthcare services. Since 1993,
numerous proposals have been presented to Congress to restructure the U.S.
healthcare system. The principal features of these proposals are to provide
universal access to healthcare services and to achieve overall cost
containment. To date, none of the proposals initiated at the federal
government level have been enacted. In the private sector, however, cost
containment initiatives have continued. Certain aspects of these actual and
proposed cost containment initiatives, particularly plans to eliminate payment
for duplicative procedures, may reduce the overall demand for the types of
medical equipment financed by the Company. Declining reimbursement for medical
services also could cause hospitals, physician groups and other healthcare
providers, which form a significant portion of the Company's customer base, to
experience cash flow problems. This in turn could negatively impact their
ability to meet their financial obligations to the Company and/or reduce their
future equipment acquisitions which could adversely affect the Company. The
Company believes that the general movement toward a managed healthcare system
in the U.S. will materially reduce the demand for medical equipment and for
related financing.
DEPENDENCE ON REFERRALS AND SUPPORT FROM EQUIPMENT MANUFACTURERS. The
Company obtains a significant amount of its equipment financing business
through referrals from manufacturers of diagnostic imaging equipment and other
manufacturers of medical equipment it finances. In addition, these
manufacturers occasionally provide credit support for or assume first loss
positions with respect to equipment financing they refer to the Company. These
manufacturers are not contractually obligated to refer their customers to the
Company for equipment financing or to provide credit support or assume first
loss positions in connection with their referrals. There is no assurance that
these manufacturers will continue to refer equipment financing opportunities to
the Company or to provide credit support or assume first loss positions. If
for any reason the Company were no longer to benefit from these referrals or
related credit support and assumptions of first loss positions, its equipment
financing business would be materially adversely affected.
COMPETITION. The business of financing sophisticated medical equipment
is highly competitive. The Company competes with equipment manufacturers that
sell and finance sales of their own equipment and finance
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<PAGE> 10
subsidiaries of national and regional commercial banks and equipment leasing
and financing companies. Many of the Company's competitors have significantly
greater financial and marketing resources than the Company. In addition, the
competition in the new markets recently targeted by the Company, specifically
the patient treatment device financing market and medical receivable financing
market, may be greater than the levels of competition historically experienced
by the Company.
The Company believes that increased equipment loan originations during
the past three years resulted, in part, from a decrease in the number of
competitors in the higher cost medical equipment financing market and the
Company's high level of penetration in this market. There can be no assurance
that new competitive providers of financing will not enter the medical
equipment financing market in the future. To meet its long-term growth
objectives, the Company must penetrate further its targeted markets for lower
cost medical equipment and medical receivable financing businesses. Such
penetration may require the Company to reduce its margins to be competitive in
the lower cost medical equipment and medical receivable financing businesses.
In addition, there can be no assurance that the Company will sustain the same
level of equipment loan originations in future periods as during the past three
years or that it will be able to meet its long-term growth objectives.
NO PRIOR PUBIC TRADING MARKET FOR THE DEBT SECURITIES. Prior to the
Offering of any series of Debt Securities, there will have been no public
market for such series of Debt Securities and there can be no assurance as to
the liquidity of the trading market for such series of Debt Securities or that
an active public market will develop or, if developed, will continue. If an
active public market does not develop or is not maintained, the market price
and liquidity of such series of Debt Securities may be adversely affected.
INVESTEE COMPANY. The Company has receivables from and investments in
Diagnostic Imaging Services, Inc. ("DIS"), a company that operates diagnostic
imaging equipment and accordingly is subject to the risks of that business. At
September 30, 1996, the total amount of outstanding receivables due to the
Company from DIS was $20.8 million. DIS received a qualified going concern
opinion from its auditors on its December 31, 1995 financial statements. In
addition, the Company owns approximately 4.5 million shares of convertible
preferred stock (Series F and Series G) of DIS. The DIS preferred stock has an
aggregate liquidation preference of approximately $4.5 million, is redeemable
at the option of DIS for approximately $4.5 million plus accrued dividends, and
is convertible into common stock of DIS at $2.482 per share for the Series F
convertible preferred stock and $2.00 per share for the Series G convertible
preferred stock. In addition, the majority shareholder of DIS has the right to
repurchase the DIS convertible preferred stock for approximately $4.5 million
plus accrued dividends through September 2001.
DEPENDENCE UPON KEY PERSONNEL. The ability of the Company to
successfully continue its existing financing business, to expand into its
targeted markets and to develop its newer businesses depends upon the ability
of the Company to retain the services of its key management personnel,
including Michael A. O'Hanlon, the Company's President and Chief Executive
Officer. The loss of any of these individuals or an inability to attract and
maintain additional qualified personnel could adversely affect the Company.
There can be no assurance that the Company will be able to retain its existing
management personnel or to attract additional qualified personnel.
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<PAGE> 11
RATIO OF EARNINGS TO FIXED CHARGES
The following are the ratios of consolidated earnings to fixed charges
for the Company for each of the fiscal years ended June 30, 1992, 1993, 1994,
1995 and 1996 and for the three months ended September 30, 1995 and 1996.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------ --------------
1992 1993 1994 1995 1996 1995 1996
------- ----- ------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
RATIO:
Earnings/Fixed
Charges . . . . . 1.82 1.89 1.49 1.31 1.47 1.46 1.42
---- ---- ---- ---- ---- ---- ----
</TABLE>
For purposes of computing this ratio, earnings consist of earnings from
continuing operations before provision for income taxes, equity in net loss of
investees and discontinued operations. Fixed charges are interest expense.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the Company intends to use the net proceeds from the sale of Debt
Securities offered hereby for general corporate purposes, which may include the
continued expansion and diversification of its financing activities, both by
internal growth and by acquisition; repayment of any outstanding indebtedness
of the Company or its subsidiaries; or for such other uses as may be set forth
in a Prospectus Supplement. Pending any of the foregoing applications, the net
proceeds may be invested temporarily in short-term, interest bearing
securities.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more
series. The particular terms of each series of Debt Securities offered by any
Prospectus Supplement will be described therein. The Debt Securities will be
issued under the Indenture (the "Indenture"), between the Company and the
trustee named in the applicable Prospectus Supplement (the "Trustee") prior to
the issuance of the Debt Securities. The Indenture is subject to and is
governed by the Trust Indenture Act of 1939, as amended.
The statements herein relating to the Debt Securities and the Indenture
are summaries and are subject to the detailed provisions of the Indenture. The
following summaries of certain provisions of the Indenture do not purport to be
complete and, where reference is made to particular provisions of the
Indenture, such provisions, including the definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference and with respect to any
particular Debt Securities, to the description thereof in the Prospectus
Supplement related thereto. The definitions of certain capitalized terms used
in the following summary are set forth below under "Certain Definitions."
GENERAL
The Indenture does not limit the aggregate amount of Debt Securities
which may be issued thereunder, and Debt Securities may be issued thereunder
from time to time in separate series up to the aggregate amount from time to
time authorized by the Company for each series. The Debt Securities when
issued will be direct, unsecured
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<PAGE> 12
obligations of the Company and will rank equally with all other unsecured and
unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement will describe the following terms of
the series of Debt Securities in respect of which this Prospectus is being
delivered: (1) the title of such Debt Securities; (2) any limit on the
aggregate principal amount of such Debt Securities; (3) the person to whom any
interest on any Debt Security of the series shall be payable if other than the
person in whose name the Debt Security is registered on the regular record
date; (4) the date or dates on which such Debt Securities will mature; (5) the
rate or rates of interest, if any, or the method of calculation thereof, which
such Debt Securities will bear, the date or dates from which any such interest
will accrue, the interest payment dates on which any such interest on such Debt
Securities will be payable and the regular record date for any interest payable
on any interest payment date; (6) the place or places where the principal of
and any premium and interest on such Debt Securities will be payable; (7) the
period or periods within which, the events upon the occurrence of which, and
the price or prices at which, such Debt Securities may, pursuant to any
optional or mandatory provisions, be redeemed or purchased, in whole or in
part, by the Company and any terms and conditions relevant thereto; (8) the
obligations of the Company, if any, to redeem or repurchase such Debt
Securities at the option of the Holders; (9) the denominations in which any
such Debt Securities will be issuable, if other than denominations of $1,000
and any integral multiple thereof; (10) any index or formula used to determine
the amount of payments of principal of and any premium and interest on such
Debt Securities; (11) the currency, currencies or currency unit or units of
payment of principal of and any premium and interest on such Debt Securities if
other than U.S. dollars; (12) if the principal of, or premium, if any, or
interest on such Debt Securities is to be payable, at the election of the
Company or a holder thereof, in one or more currencies or currency units other
than that or those in which such Debt Securities are stated to be payable, the
currency, currencies or currency units in which payment of the principal of and
any premium and interest on Debt Securities of such series as to which such
election is made shall be payable, and the periods within which and the terms
and conditions upon which such election is to be made; (13) if other than the
principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon acceleration of the maturity thereof;
(14) if the principal amount of any Debt Securities which will be payable at
the maturity thereof will not be determinable as of any date prior to such
maturity, the amount which will be deemed to be the outstanding principal
amount of such Debt Securities; (15) the applicability of any provisions
described under "--Defeasance or Covenant Defeasance of Indenture"; (16)
whether any of such Debt Securities are to be issuable in permanent global form
("Global Security") and, if so, the terms and conditions, if any, upon which
interests in such Debt Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented thereby; (17) the
applicability of, and modifications to, any provisions described under "Events
of Default" and any additional Event of Default applicable thereto; (18) any
covenants applicable to such Debt Securities in addition to, or in lieu of, the
covenants described under "--Certain Covenants of the Company"; (19) whether
such Debt Securities are secured; and (20) any other terms of such Debt
Securities not inconsistent with the provisions of the Indenture.
Debt Securities may be issued at a discount from their principal amount.
United States Federal income tax considerations and other special
considerations applicable to any such original issue discount Debt Securities
will be described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or
units, the restrictions, elections, general tax considerations, specific terms
and other information with respect to such issue of Debt Securities will be set
forth in the applicable Prospectus Supplement.
FORM, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form in denominations
of $1,000 or integral multiples thereof. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of principal, premium, if any, and
interest on the Debt Securities will be payable, and the transfer of Debt
Securities will be registerable, at the office or agency of the Company
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<PAGE> 13
maintained for such purposes and at any other office or agency maintained for
such purpose. No service charge will be made for any registration of transfer
of the Debt Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
All monies paid by the Company to a Paying Agent (as defined in the
Indenture) for the payment of principal of and any premium or interest on any
Debt Security which remain unclaimed for two years after such principal,
premium or interest has become due and payable may be repaid to the Company and
thereafter the Holder (as defined in the Indenture) of such Debt Security may
look only to the Company for payment thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denomination equal to the portion of the
aggregate principal amount of outstanding Debt Securities of the series to be
represented by such Global Security or Global Securities. Unless and until it
is exchanged in whole or in part for Debt Securities in registered form, a
Global Security may not be registered for transfer or exchange except as a
whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any nominee to a successor
Depositary or a nominee of such successor Depositary and except in the
circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited
with or on behalf of a Depositary will be represented by a Global Security
registered in the name of such Depositary or its nominee. Upon the issuance of
such Global Security, and the deposit of such Global Security with or on behalf
of the Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts
of the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters of, or agents for, such Debt Securities or by the Company, if such
Debt Securities are offered and sold directly by the Company. Ownership of
beneficial interests in such Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such Global Security.
Ownership of beneficial interests in such Global Security by persons that hold
through participants will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by such
participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to transfer
beneficial interests in such Global Securities.
Debt Securities will be issued in fully registered, certificated form
("Definitive Securities") to holders or their nominees, rather than to the
Depositary or its nominee, only if (i) the Depositary advises the applicable
Trustee in writing that the Depositary is no longer willing or able to
discharge properly its responsibilities as depositary with respect to such Debt
Securities and it is unable to locate a qualified successor, (ii) the Company,
at its option, elects to terminate the book-entry system or (iii) after the
occurrence of an Event of Default with respect to such Debt Securities, a
Holder of Debt Securities advises the applicable Trustee in writing that it
wishes to receive a Definitive Security.
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<PAGE> 14
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all applicable
holders through the Depositary and its participants of the availability of
Definitive Securities. Upon surrender by the Depositary of the definitive
certificates representing the corresponding Debt Securities and receipt of
instructions for re- registration, the applicable Trustee will reissue such
Debt Securities as Definitive Securities to such holders.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or nominee will be
considered the sole owner or holder of the Securities represented by such
Global Security for all purposes under the Indenture. Unless otherwise
specified in the applicable Prospectus Supplement, owners of beneficial
interests in such Global Security will not be entitled to have Debt Securities
of the series represented by such Global Security registered in their names,
will not receive or be entitled to receive physical delivery of Debt Securities
of such series in certificated form and will not be considered the holders
thereof for any purposes under the Indenture. Accordingly, each person owning
a beneficial interest in such Global Security must rely on the procedures of
the Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Company understands that under
existing industry practices, if the Company requests any action of holders or
an owner of a beneficial interest in such Global Security desires to give any
notice or take any action a holder is entitled to give or take under the
Indenture, the Depositary would authorize the participants to give such notice
or take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN DEFINITIONS
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents (however
designated) of such person's equity interest (however designated).
"Capitalized Lease Obligation" means, with respect to any person,
an obligation incurred or assumed under or in connection with any capital lease
of real or personal property that, an obligation incurred or assumed under or
in connection with any capital lease of real or personal property that, in
accordance with GAAP, has been recorded as a capitalized lease.
"Closing Date" means, with respect to any Debt Securities, the date
on which such Debt Securities are originally issued under the Indenture.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity of the Company and its Restricted Subsidiaries as set
forth on the most recently available quarterly or annual consolidated balance
sheet of the Company and its Restricted Subsidiaries, less any amounts
attributable to Disqualified Stock or any equity security convertible into or
exchangeable for Debt, the cost of treasury stock and the principal amount of
any promissory notes receivable from the sale of the Capital Stock of the
Company or any of its Restricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Debt" means (without duplication), with respect to any person,
whether recourse is to all or a portion of the assets of such person and
whether or not contingent (a) every obligation of such person for money
borrowed, (b) every obligation of such person evidenced by bonds, debentures,
notes or other similar instruments, (c) every reimbursement obligation of such
person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such person, (d) every obligation of such
person issued or assumed as the deferred purchase price of property or
services, (e) Capitalized Lease Obligations, (f) all Disqualified Stock of such
person valued at its maximum fixed repurchase price, plus accrued and unpaid
dividends, (g) all obligations of such
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<PAGE> 15
person under or in respect of Hedging Agreements, and (h) every obligation of
the type referred to in clauses (a) through (g) of another person and all
dividends of another person the payment of which, in either case, such person
has guaranteed. For purposes of this definition, the "maximum fixed repurchase
price" of any Disqualified Stock that does not have a fixed repurchase price
will be calculated in accordance with the terms of such Disqualified stock as
if such Disqualified Stock were repurchased on any date on which Debt is
required to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Stock, such
fair market value will be determined in good faith by the board of directors of
the issuer of such Disqualified Stock. Notwithstanding the foregoing, trade
accounts payable and accrued liabilities arising in the ordinary course of
business and any liability for federal, state or local taxes or other taxes
owed by such person will not be considered Debt for purposes of this
definition.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (i) is or upon the
happening of any event or passage of time would be, required to be redeemed
prior to the final Stated Maturity of the Notes, (ii) is redeemable at the
option of the holder thereof at any time prior to such final Stated Maturity or
(iii) at the option of the holder thereof, is convertible into or exchangeable
for debt securities at any time prior to such final Stated Maturity.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that are in effect on the Closing Date.
"Hedging Obligations" means the obligations of any person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation, assignment for
security, claim, or preference or priority or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired. A person will be deemed to own subject to a
Lien any property that such person has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that together with its Subsidiaries, (a) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated net sales
of the Company and its Restricted Subsidiaries or (b) as to the end of such
fiscal year, was the owner of more than 10% of the consolidated assets of the
Company and its Restricted Subsidiaries, in the case of either (a) or (b), as
set forth on the most recently available consolidated financial statements of
the Company for such fiscal year or (c) was organized or acquired since the end
of such fiscal year and would have been a Significant Subsidiary if it had been
owned during such fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or installment of interest is due and
payable and, when used with respect to any other Debt, means the date specified
in the instrument governing such Debt as the fixed date on which the principal
of such Debt or any installment of interest thereon is due and payable.
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<PAGE> 16
"Subsidiary" means any person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more other Subsidiaries of the Company.
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary in
accordance with the "Unrestricted Subsidiaries" covenant and (b) any Subsidiary
of an Unrestricted Subsidiary.
CERTAIN COVENANTS OF THE COMPANY
Unless otherwise specified in the applicable Prospectus Supplement, the
following covenants contained in the Indenture shall be applicable with respect
to each series of Debt Securities:
LIMITATION ON INVESTMENT COMPANY STATUS. The Company shall not
take any action, or otherwise permit to exist any circumstance, that would
require the Company or any of its subsidiaries to register as an "investment
company" under the Investment Company Act of 1940, as amended.
REPORTS. The Company will be required to file on a timely basis
with the Commission, to the extent such filings are accepted by the Commission
and whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
the Company would be required to file if it were subject to Section 13 or 15(d)
of the Exchange Act. The Company will also be required (a) to file with the
applicable Trustee, and provide to each holder of Debt Securities, without cost
to such holder, copies of such reports and documents within 15 days after the
date on which the Company files such reports and documents with the Commission
or the date on which the Company would be required to file such reports and
documents if the Company were so required and (b) if filing such reports and
documents with the Commission is not accepted by the Commission or is
prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective holder of Debt Securities
promptly upon written request.
EVENTS OF DEFAULT
Unless otherwise specified in the applicable Prospectus Supplement, the
following will constitute "Events of Default" under the Indenture with respect
to Debt Securities of any series (unless they are inapplicable to such series
of Debt Securities or they are specifically deleted in the supplemental
indenture or the Board Resolution under which such series of Debt Securities is
issued or has been modified):
(a) default in the payment of any interest on any Debt Security
of such series when it becomes due and payable, and continuance of such
default for a period of 30 days;
(b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series when due;
(c) failure to perform or comply with the Indenture provisions
described under "Consolidation, Merger and Sale of Assets";
(d) default in the performance, or breach, of any covenant or
agreement of the Company contained in the Indenture (other than a default
in the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere therein), and continuance of such
default or breach for a period of 60 days after written notice has been
given to the Company by the Trustee or to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the Debt
Securities of such series then outstanding as provided in the Indenture;
(e) (i) an event of default has occurred under any mortgage,
bond, indenture, loan agreement or other document evidencing an issue of
Debt of the Company or any Significant Subsidiary, which issue
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<PAGE> 17
has an aggregate outstanding principal amount of not less than $___
million, and such default has resulted in such Debt becoming, whether by
declaration or otherwise, due and payable prior to the date on which it
would otherwise become due and payable or (ii) a default in any payment
when due at final maturity of any such Debt;
(f) failure by the Company or any of its Restricted Subsidiaries
to pay one or more final judgments the uninsured portion of which exceeds
in the aggregate $___ million, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days;
(g) the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary;
or
(h) any other Event of Default specified for such series.
If an Event of Default (other than as specified in clause (g) above)
occurs and is continuing under the Indenture applicable to any series of Debt
Securities, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all of the outstanding Debt Securities of such series
immediately due and payable and, upon any such declaration, such principal will
become due and payable immediately.
If an Event of Default specified in clause (g) above occurs and is
continuing, then the principal of all of the outstanding Debt Securities of any
series will ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of Debt
Securities of such series.
At any time after a declaration of acceleration under the Indenture, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the
outstanding Debt Securities of any series, by written notice to the Company and
the Trustee, may rescind such declaration and its consequences if (i) the
Company has paid or deposited with the Trustee a sum sufficient to pay (A) all
overdue interest on all Debt Securities of such series, (B) all unpaid
principal of (and premium, if any, on) any outstanding Debt Securities of such
series that has become due otherwise than by such declaration of acceleration
and interest thereon at the rate borne by the Debt Securities of such series,
(C) to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the Debt Securities
of such series and, (D) all sums paid or advanced by the Trustee under the
Indenture and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and (ii) all Events of Default, other
than the non-payment of amounts of principal of (or premium, if any, on) or
interest on the Debt Securities of such series that have become due solely by
such declaration of acceleration, have been cured or waived. No such
rescission will affect any subsequent default or impair any right consequent
thereto.
The holders of not less than a majority in aggregate principal amount of
the outstanding Debt Securities of any series may, on behalf of the holders of
all of the Debt Securities of such series, waive any past defaults under the
Indenture, except a default in the payment of the principal of (and premium, if
any on) or interest on any Debt Securities of such series, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each such Debt Security outstanding.
If a Default or an Event of Default occurs with respect to a series of
Debt Securities and is continuing and is known to the Trustee, the Trustee will
mail to each holder of the Debt Securities of such series notice of the Default
or Event of Default within 90 days after the occurrence thereof. Except in the
case of a Default or an Event of Default in payment of principal of (and
premium, if any, on) or interest on any Debt Securities of any series, the
Trustee may withhold the notice to the holders of the Debt Securities of such
series if a committee of its trust officers in good faith determines that
withholding such notice is in the interests of the holders of the Debt
Securities of such series.
16
<PAGE> 18
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and any Subsidiary Guarantors (as defined in the
Indenture) of their respective obligations under the Indenture and as to any
default in such performance. The Company is also required to notify the
Trustee within five days of any Default.
SATISFACTION AND DISCHARGE OF THE INDENTURE AND THE DEBT SECURITIES
Upon the request of the Company, the Indenture will cease to be of
further effect (except as to surviving rights of registration of transfer of
the Debt Securities of any series outstanding under the Indenture, as expressly
provided for in the Indenture) and the Trustee, at the expense of the Company,
will execute proper instruments acknowledging satisfaction and discharge of the
Indenture when (a) either (i) all the Debt Securities of any series theretofore
authenticated and delivered (other than destroyed, lost or stolen Debt
Securities of any series that have been replaced or paid and Debt Securities of
any series that have been subject to defeasance under "Defeasance or Covenant
Defeasance of Indenture") have been delivered to the Trustee for cancellation
or (ii) all Debt Securities of any series not theretofore delivered to the
Trustee for cancellation (A) have become due and payable, (B) will become due
and payable at maturity within one year or (C) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in trust for the purpose and in an amount sufficient to
pay and discharge the entire Debt on such Debt Securities of any series not
theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any, on) and interest on the Debt Securities of any series to the
date of such deposit (in the case of Debt Securities of any series that have
become due and payable) or to the Stated Maturity or Redemption Date (as
defined in the Indenture), as the case may be; (b) the Company has paid or
caused to be paid all sums payable under the Indenture by the Company; and (c)
the Company has delivered to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided in the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
outstanding principal amount of the Debt Securities of any series to be offered
under the Indenture; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Debt Security of
such series affected thereby,
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Debt Securities of such series, or reduce
the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the coin or
currency in which any Debt Securities of such series or any premium or
the interest thereon is payable, or impair the right to institute suit
for the enforcement of any such payment after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date);
(b) reduce the percentage in principal amount of outstanding Debt
Securities of such series, the consent of whose holders is required for
any waiver of compliance with certain provisions of, or certain defaults
and their consequences provided for under, the Indenture; or
(c) modify any provisions relating to "--Modification and Waiver"
except to increase the percentage of outstanding Debt Securities of such
series required for such actions or to provide that certain other
provisions of the Indenture cannot be modified or waived without the
consent of the holder of each outstanding Debt Security of such series
affected thereby.
The holders of a majority in aggregate principal amount of the Debt
Securities of any series outstanding may waive compliance with certain
restrictive covenants and provisions of the Indenture with respect to such
series.
17
<PAGE> 19
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any other
person or, directly or indirectly, convey, sell, assign, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any other person (in one transaction or a series of related transactions),
unless:
(a) either (i) the Company is the surviving corporation or (ii)
the person (if other than the Company) formed by such consolidation or
into which the Company is merged or the person that acquires by sale,
assignment, transfer, lease or other disposition the properties and
assets of the Company substantially as an entirety (the "Surviving
Entity") (A) is a corporation, partnership or trust organized and validly
existing under the laws of the United States, any state thereof or the
District of Columbia and (B) expressly assumes, by a supplemental
indenture in form satisfactory to the Trustee, all of the Company's
obligations under the Indenture and the Debt Securities;
(b) immediately after giving effect to such transaction and
treating any obligation of the Company or a Restricted Subsidiary in
connection with or as a result of such transaction as having been
incurred as of the time of such transaction, no Default or Event of
Default has occurred and is continuing;
(c) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of the Company (or of the
Surviving Entity if the Company is not the continuing obligor under the
Indenture) is equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction;
(d) immediately after giving effect to such transaction on a pro
forma basis (on the assumption that the transaction occurred at the
beginning of the most recently ended four full fiscal quarter period for
which internal financial statements are available, the Company (or the
Surviving Entity if the Company is not the continuing obligor under the
Indenture) could incur at least $1.00 of additional Debt (other than
Permitted Debt (as defined in the Indenture)) pursuant to the first
paragraph of any "Limitation on Debt" covenant applicable to any series
of Debt Securities;
(e) if any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of any "Limitation on Liens" covenant applicable to any series
of Debt Securities are complied with; and
(f) the Company delivers, or causes to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
officers' certificate and an opinion of counsel, each stating that such
transaction complies with the requirements of the Indenture.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will be discharged
from all its obligations and covenants under the Indenture and the Debt
Securities.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
If the Prospectus Supplement relating to the offered Debt Securities so
provides, the Company may, at its option and at any time, terminate the
obligations of the Company and any Subsidiary Guarantors with respect to the
outstanding Debt Securities of any series ("defeasance"). Such defeasance
means that the Company will be deemed to have paid and discharged the entire
Debt represented by the outstanding Debt Securities of such series, except for
(i) the rights of holders of outstanding Debt Securities of such series to
receive payments in respect of the principal of (and premium, if any, on) and
interest on such Debt Securities when such payments are due, (ii) the Company's
obligations to issue temporary Debt Securities of such series, register the
transfer or exchange of any
18
<PAGE> 20
Debt Securities of such series, replace mutilated, destroyed, lost or stolen
Debt Securities of such series, maintain an office or agency for payments in
respect of the Debt Securities of any series and segregate and hold such
payments in trust, (iii) the rights, powers, trusts, duties and immunities of
the Trustee and (iv) the defeasance provisions of the Indenture. In addition,
the Company may, at its option and at any time, elect to terminate the
obligations of the Company and any Subsidiary Guarantor with respect to certain
covenants set forth in the Indenture, and any failure to comply with such
obligations would not constitute a Default or an Event of Default with respect
to the Debt Securities of such series ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Debt Securities of a series, money
in an amount, or U.S. Government Obligations (as defined in the Indenture)
that through the scheduled payment of principal and interest thereon will
provide money in an amount, or a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants, to
pay and discharge the principal of (and premium, if any, on) and interest on
the outstanding Debt Securities of such series at maturity (or upon redemption,
if applicable) of such principal or installment of interest; (b) no Default or
Event of Default has occurred and is continuing on the date of such deposit or,
insofar as an event of bankruptcy under clause (g) of "Events of Default" above
is concerned, at any time during the period ending on the 91st day after the
date of such deposit; (c) such defeasance or covenant defeasance may not result
in a breach or violation of, or constitute a default under, the Indenture or
any material agreement or instrument to which the Company or any Subsidiary
Guarantor is a party or by which it is bound; (d) in the case of defeasance,
the Company must deliver to the Trustee an opinion of counsel stating that the
Company has received from, or there has been published by, the U.S. Internal
Revenue Service a ruling, or there has been a change in applicable federal
income tax law, to the effect, and based thereon such opinion must confirm
that, the holders of the outstanding Debt Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (e) in the case of covenant defeasance, the
Company must have delivered to the Trustee an opinion of counsel to the effect
that the Holders of the outstanding Debt Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such covenant defeasance had not occurred; and (f) the Company must have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided for relating to either the
defeasance or the covenant defeasance, as the case may be, have been complied
with.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received
in respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities, it must
eliminate such conflict or resign.
The Trustee may resign or be removed with respect to one or more series
of Debt Securities and a successor Trustee may be appointed to act with respect
to such series. In the event that two or more persons are acting as Trustee
with respect to different series of Debt Securities, each such Trustee shall be
a Trustee of a trust under the Indenture separate and apart from the trust
administered by any other such Trustee, and any action described herein to be
taken by the "Trustee" may then be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which
it is Trustee.
19
<PAGE> 21
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters or
dealers, directly to other purchasers, or through agents. The Prospectus
Supplement with respect to any Debt Securities will set forth the terms of the
offering of the Debt Securities, including the name or names of any
underwriters, dealers or agents, the price of the offered Debt Securities and
the net proceeds to the Company from such sale, any underwriting discounts or
other items constituting underwriters' compensation, any discounts or
concessions allowed or reallowed or paid to dealers and any securities
exchanges on which such Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public price or at varying prices determined at the time of sale. The
underwriter or underwriters with respect to a particular underwritten offering
of Debt Securities will be named in the Prospectus Supplement relating to such
offering, and if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement, the obligations of the
underwriters or agents to purchase the Debt Securities will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all the Debt Securities if any are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If a dealer is utilized in the sale of any Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities
to the public at varying prices to be determined by such dealer at the time of
resale. The name of the dealer and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by the Company to one or more
institutional purchasers, or through agents designated by the Company from time
to time, at a fixed price, or prices, which may be changed, or at varying
prices determined at the time of sale. Any agent involved in the offer or sale
of the Debt Securities will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Debt Securities, underwriters or
agents may receive compensation from the Company or from purchasers of Debt
Securities for whom they may act as agents in the form of discounts,
concessions, or commissions. Underwriters, agents, and dealers participating
in the distribution of the Debt Securities may be deemed to be underwriters,
and any discounts or commissions received by them from the Company and any
profit on the resale of the Debt Securities by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
Each series of Debt Securities will be a new issue with no established
trading market. Any underwriters to whom Debt Securities are sold by the
Company for public offering and sale may make a market in such Debt Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Debt Securities.
Underwriters, dealers, and agents may be entitled under agreements
entered into with the Company to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Underwriters,
dealers, or agents and their associates may be customers of, engage in
transactions with and perform services for, the Company in the ordinary course
of business.
20
<PAGE> 22
LEGAL MATTERS
The validity of the Debt Securities offered hereby will be passed upon
for the Company by Rogers & Wells, New York, New York and for any underwriters,
dealers or agents by Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended June 30, 1996 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
21
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14.
The following table sets forth the expenses to be borne by the
Company in connection with the offerings described in this Registration
Statement. All such expenses other than the Securities and Exchange Commission
registration fee are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission $30,304
Registration Fee . . . . . . . . . . .
Trustees' Fees and Expenses . . . . . . *
Printing and Engraving Fees and Expenses *
Accounting Fees and Expenses . . . . . *
Blue Sky Fees and Expenses . . . . . . *
Legal Fees and Expenses . . . . . . . . *
Rating Agency Fees . . . . . . . . . . *
Miscellaneous (including Listing
Fees, if applicable) . . . . . . *
---------
Total $ *
=========
</TABLE>
- ----------------
* To be provided by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers
a corporation, subject to certain limitations, to indemnify its directors and
officers against expenses (including attorneys' fees), judgments, fines and
certain settlements actually and reasonably incurred by them in connection with
any action, suit or proceeding to which they are a party or threatened to be
made a party so long as they acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to a criminal action or proceeding, so long as they had no
reasonable cause to believe their conduct to have been unlawful. The By-laws
of the Company require the Company to indemnify each of its directors, officers
and employees to the fullest extent permitted by law in connection with any
actual or threatened action or proceeding arising out of his or her service to
the Company or to other organizations at the Company's request.
Section 102 of the DGCL and the Company's Certificate of Incorporation
permit the Company to limit or eliminate a director's liability to the Company
or its shareholders for monetary damages for breaches of fiduciary duty except
that liability for breaches of the duty of loyalty, acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of the
law, the unlawful purchase or redemption of stock or payment of unlawful
dividends or the receipt of improper personal benefits cannot be eliminated or
limited in this manner.
The Company has directors and officers liability insurance. The
insurance policy covers liability for claims made against directors and
officers for their wrongful acts involving errors, misstatements, misleading
statements or acts or omissions or neglect or breach of duty, while acting in
their individual or collective capacities for any matter claimed against them
solely by reason of their being directors or officers of the Company. The
coverage
II-1
<PAGE> 24
includes damages, judgments, settlements and costs of legal actions, claims or
proceedings and appeals therefrom but does not include fines or penalties
imposed by law for matters which may be deemed uninsurable under the law.
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
Exhibit
Number Description of Exhibit
- -------- ----------------------
1 The Form of Underwriting Agreement will be filed as an exhibit to a
Current Report of the Registrant on Form 8-K and incorporated
herein by reference.
4(a)* Form of Indenture for Debt Securities.
4(b) The form or forms of Debt Securities with respect to each
particular series of Debt Securities registered hereunder will be
filed as an exhibit to a Current Report of the Registrant on Form
8-K and incorporated herein by reference.
5* Opinion of Rogers & Wells.
12 Statement regarding computation of ratio of earnings to fixed
charges.
23(a) Consent of Deloitte & Touche LLP, Independent Public Accountants.
23(b)* Consent of Rogers & Wells (included in Exhibit 5).
24 Power of Attorney (included in the signature pages hereto).
25* Statement of Eligibility of ____________, as Trustee under the
Indenture on Form T-1.
- ----------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the Debt Securities offered herein, and the offering of such Debt
Securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in Item 15, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Debt Securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
II-2
<PAGE> 25
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) To
include any prospectus required by section 10(a)(3) of the Securities Act of
1933; (ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume of Debt
Securities offered (if the total dollar value of Debt Securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; (iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement; provided, however, that
paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on
Form S-3 or Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be deemed to
be a new registration statement relating to the Debt Securities offered
therein, and the offering of such Debt Securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the Debt Securities being registered which remain unsold at
the termination of the offering.
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Act"), the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Doylestown, Commonwealth
of Pennsylvania on November 27, 1996.
DVI, INC.
By: /s/ Michael A. O'Hanlon
---------------------------------
Name: Michael A. O'Hanlon
Title:President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael A. O'Hanlon and Steven R.
Garfinkel his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including pre-effective
and post-effective amendments) to this Registration Statement and any and all
registration statements for the same offering as is registered by this
Registration Statement and that will be effective on filing pursuant to Rule
462(b) of the Act, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/Michael A. O'Hanlon President, Chief November 27, 1996
------------------------ Executive Officer and
Michael A. O'Hanlon Director
/s/Steven R. Garfinkel Executive Vice President November 27, 1996
------------------------ and Chief Financial
Steven R. Garfinkel Officer (Principal
Financial Officer).
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/John P. Boyle Vice President and Chief November 27, 1996
------------------------- Accounting Officer
John P. Boyle (Principal Accounting
Officer)
/s/Gerald L. Cohn Director November 27, 1996
-------------------------
Gerald L. Cohn
/s/William S. Goldberg Director November 27, 1996
-------------------------
William S. Goldberg
/s/John E. McHugh Director November 27, 1996
-------------------------
John E. McHugh
/s/Harry T.J. Roberts Director November 27, 1996
-------------------------
Harry T.J. Roberts
/s/Nathan Shapiro Director November 27, 1996
-------------------------
Nathan Shapiro
</TABLE>
<PAGE> 28
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- -------- ----------------------
1 The Form of Underwriting Agreement will be filed as an exhibit to a
Current Report of the Registrant on Form 8-K and incorporated
herein by reference.
4(a)* Form of Indenture for Debt Securities.
4(b) The form or forms of Debt Securities with respect to each
particular series of Debt Securities registered hereunder will be
filed as an exhibit to a Current Report of the Registrant on Form
8-K and incorporated herein by reference.
5* Opinion of Rogers & Wells.
12 Statement regarding computation of ratio of earnings to fixed
charges.
23(a) Consent of Deloitte & Touche LLP, Independent Public Accountants.
23(b)* Consent of Rogers & Wells (included in Exhibit 5).
24 Power of Attorney (included in the signature pages hereto).
25* Statement of Eligibility of ____________, as Trustee under the
Indenture on Form T-1.
- ----------------
* To be filed by amendment.
<PAGE> 1
Exhibit 12
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, SEPTEMBER 30,
----------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings from continuing
operations before provision
for income taxes, equity in
net loss of investees and
discontinued operations .... $ 4,915 $ 4,459 $ 4,313 $ 7,015 $14,333 $ 3,191 $ 3,525
Add back fixed charges
(interest expense) charged
to earnings ................ 5,989 5,005 8,833 22,860 30,489 6,989 8,302
------- ------- ------- ------- ------- ------- -------
Adjusted earnings ....... $10,904 $ 9,464 $13,146 $29,875 $44,822 $10,180 $11,827
======= ======= ======= ======= ======= ======= =======
FIXED CHARGES:
Interest expense ........... 5,989 5,005 8,833 22,860 30,489 6,989 8,302
------- ------- ------- ------- ------- ------- -------
Total fixed charges ..... $ 5,989 $ 5,005 $ 8,833 $22,860 $30,489 $ 6,989 $ 8,302
======= ======= ======= ======= ======= ======= =======
RATIO:
Earnings/Fixed Charges ..... 1.82 1.89 1.49 1.31 1.47 1.46 1.42
------- ------- ------- ------- ------- ------- -------
</TABLE>
For purposes of computing this ratio, earnings consist of earnings
from continuing operations before provision for income taxes, equity in net
loss of investees and discontinued operations. Fixed charges are interest
expense.
<PAGE> 1
Exhibit 23(a)
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
DVI, Inc. on Form S-3 of our report dated August 30, 1996, appearing in the
Annual Report on Form 10-K of DVI, Inc. for the year ended June 30, 1996 and to
the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, PA
November 27, 1996
