<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
DVI, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
DVI, INC.
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 4, 1997
------------------------
To the Stockholders of DVI, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of DVI,
Inc. (the "Company") will be held at the Sutton Place Hotel in Chicago,
Illinois, on Thursday, December 4, 1997, at 3:00 p.m., local time, for the
following purposes:
1. To elect six directors to constitute the Board of Directors, each
to serve until the next meeting of Stockholders;
2. To approve the DVI, Inc. 1996 Stock Option Plan and certain option
grants that were made by the Board of Directors to employees and
directors pursuant to the 1996 Stock Option Plan since August 28,
1996, subject to stockholder approval;
3. To ratify the appointment of Deloitte & Touche LLP as independent
public accountants for the Company for the fiscal year ending June
30, 1998; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The close of business on October 7, 1997 has been fixed as the record date
for the determination of all stockholders entitled to receive notice of the
Annual Meeting and to vote at such meeting or any adjournment thereof.
Holders of a majority of the outstanding shares of the Company's Common
Stock must be present either in person or by proxy in order for the meeting to
be held and it is important that your stock be represented regardless of the
number of shares you hold. If you do not expect to attend the meeting, or if you
do plan to attend but wish to vote by proxy, please date, sign and mail promptly
the enclosed proxy for which a return envelope is provided.
By Order of the Board of Directors
BREAUX SIGNATURE
MELVIN C. BREAUX
Secretary
Dated: November 11, 1997
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
ADDRESSED ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE
MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED.
<PAGE> 3
DVI, INC.
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 4, 1997
------------------------
The Board of Directors of DVI, Inc., a Delaware corporation (the
"Company"), is soliciting the enclosed proxy for use at the Company's Annual
Meeting of Stockholders, to be held on Thursday, December 4, 1997, at 3:00 p.m.,
local time, at the Sutton Place Hotel, 21 East Bellevue Place, Chicago, Illinois
60611 (the "Annual Meeting") and at any adjournment thereof. Whether or not you
plan to attend the Annual Meeting, you are requested to date, sign and return
the proxy to the Company as promptly as possible in the enclosed envelope. The
shares of the Company's common stock, par value $.005 per share (the "Common
Stock"), represented by proxies will be voted in accordance with the Board of
Directors' recommendations unless the proxy indicates otherwise. Any stockholder
giving a proxy may revoke it at any time prior to its use by filing with the
Secretary of the Company a written revocation or a proxy bearing a later date,
or by voting in person at the Annual Meeting.
The close of business on October 7, 1997 has been fixed as the record date
(the "Record Date") for the determination of the stockholders entitled to
receive notice of and to vote at the Annual Meeting. At such date, the Company
had outstanding 10,548,748 shares of Common Stock. Each holder of Common Stock
on the record date will be entitled to one vote for each share registered in
such stockholder's name on each of the matters to come before the meeting. A
majority of the outstanding shares of Common Stock will constitute a quorum. A
list of stockholders entitled to vote will be available for examination by
interested stockholders at the corporate headquarters of the Company, office of
the Secretary, 500 Hyde Park, Doylestown, Pennsylvania 18901 during ordinary
business hours from October 7, 1997 to the date of the meeting.
If a stockholder furnishes a proxy but directs the proxy holder to abstain
from voting some or all of the shares covered by the proxy on a proposal
described in this Proxy Statement, that abstention will have the same effect as
voting those shares against the proposal. If shares registered in the name of a
broker or other "street name" nominee are voted only as to certain matters
before the Annual Meeting and not as to others, because the beneficial owner has
not provided voting instructions or the broker has failed to exercise
discretionary voting power (commonly referred to as "broker non-votes"), that
will have the same effect as voting those shares against the proposal as to
which the broker does not vote. The Company expects that under the rules of the
New York Stock Exchange, Inc., brokers who hold shares in street name for
customers will have the authority to vote on all the proposals described in this
Proxy Statement if they do not receive instructions from the beneficial owners
of those shares. Shares that are the subject of abstentions and broker non-votes
are required to be counted for purposes of determining the presence of a quorum
for the transaction of business at the Annual Meeting.
The approximate date on which this Proxy Statement and form of proxy is
first being sent or given to the Company's stockholders is November 12, 1997.
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1997 accompanies this Proxy Statement. The Annual Report shall not be deemed
to be soliciting material or, except as set forth under the heading "Annual
Report to Stockholders," incorporated in this Proxy Statement by reference.
Brokerage houses, custodians, nominees and others may obtain additional copies
of the Annual Report or this Proxy Statement by request to the Company.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
Six Directors are to be elected at the Annual Meeting of Stockholders to
serve one-year terms until the 1998 Annual Meeting of Stockholders and until
their respective successors are elected and shall qualify. The persons named in
the accompanying proxy intend to vote for the election of the nominees
identified below unless authority to vote for one or more of such nominees is
specifically withheld in the proxy. All of the nominees are currently directors
of the Company and were elected Directors at the 1996 Annual Meeting of
Stockholders. The Board of Directors is informed that all the nominees are
willing to serve as Directors, but if any of them should decline to serve or
become unavailable for election as a Director at the meeting, an event which the
Board of Directors does not anticipate, the persons named in the proxy will vote
for such nominee or nominees as may be designated by the Board of Directors,
unless the Board of Directors reduces the number of Directors accordingly.
Directors shall be elected by a majority of the votes cast, in person or by
proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS
The following table sets forth information concerning the Company's
nominees for Director:
<TABLE>
<CAPTION>
NAME: AGE: POSITION:
-------------------------------------- ---- --------------------------------------
<S> <C> <C>
Gerald L. Cohn........................ 69 Director since 1986
John E. McHugh........................ 69 Director since 1990
Michael A. O'Hanlon................... 50 Chief Executive Officer since 1995 and
Director since 1993
Nathan Shapiro........................ 61 Director since 1995
William S. Goldberg................... 41 Director since 1995
Harry T.J. Roberts.................... 63 Director since 1996
</TABLE>
Mr. Cohn is a Director of the Company and has served in that capacity since
1986. Mr. Cohn is a private investor and consultant. Mr. Cohn presently serves
as a director of Niagara Steel Corporation and Diametrics Medical Corporation.
In addition to his responsibilities as a Director, Mr. Cohn also is an employee
of the Company and serves on the Company's senior credit committee. Mr. Cohn is
the father of Cynthia J. Cohn, a Company Vice President.
Mr. McHugh is a Director of the Company and has served in that capacity
since 1990. Mr. McHugh was formerly the President of, and now serves in a
marketing and public relations capacity with, James McHugh Construction Company,
a firm he has been associated with since 1954.
Mr. O'Hanlon is the Company's Chief Executive Officer since November 1995
and the Company's President since September 1994. Mr. O'Hanlon became a Director
in November 1993. From the time Mr. O'Hanlon joined the Company in March 1993
until September 1994 he served as Executive Vice President of the Company.
Before joining the Company he served for nine years as President and Chief
Executive Officer of Concord Leasing, Inc. ("Concord Leasing"), a major source
of medical, aircraft, ship and industrial equipment financing. Previously, Mr.
O'Hanlon was a senior executive with Pitney Bowes Credit Corporation.
Mr. Shapiro is a Director of the Company and has served in that capacity
since 1995. Mr. Shapiro is a founder and President of SF Investments, Inc., a
registered broker/dealer in business since 1972. Since 1979 he has been a
director of Baldwin & Lyons, Inc., a publicly traded property and casualty
insurance company. Mr. Shapiro is also the Chairman of the Investment Committee
of Baldwin & Lyons, Inc. He is a trustee for CT&T Funds, a family of mutual
funds sponsored by Chicago Title and Trust Company. Mr. Shapiro is also a
director of Amli Realty Co.
Mr. Goldberg is a Director of the Company and has served in that capacity
since 1995. Mr. Goldberg is currently Managing Director of GKH Partners, L.P., a
private equity investment and venture capital
2
<PAGE> 5
partnership with which he has been involved since 1988. Mr. Goldberg is current
or former director and/or executive officer of several public and
privately-owned companies controlled by GKH Partners, L.P.
Mr. Roberts is a Director of the Company and has served in that capacity
since 1996. In addition to his responsibilities as a Director, Mr. Roberts also
is an employee of the Company. Mr. Roberts is President of Nakebro, Boston, a
privately-owned property group and since 1995 has been a director of Calmar
Inc., Los Angeles, the largest manufacturer of non-aerosol plastic dispensing
systems in the world. Prior to these posts, Mr. Roberts held senior positions in
international banking for thirty-five years. Since 1978 he has worked in the
United States as General Manager of Midland International Bank, London and
Svenska Handelsbanken, Stockholm. Mr. Roberts is a Fellow of the Chartered
Institute of Bankers.
COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1997, the Company paid $2,500 to
non-employee directors for each meeting attended in person. During the fiscal
year ended June 30, 1997, the Board of Directors met a total of four times.
With the exception of one meeting which was attended by only five of the
incumbent directors, each of the incumbent directors attended all meetings of
the Board and committees of which he was a member held during the period he
served on the Board or such committee.
The Board of Directors has a standing Audit Committee and a Compensation
Committee. The Board has no nominating committee.
The Audit Committee consists of Messrs. Cohn, McHugh and Roberts and makes
recommendations concerning the engagement of the Company's independent auditors,
consults with the independent auditors concerning the audit plan and thereafter
concerning the auditor's report and management letter. During the fiscal year
ended June 30, 1997, the Audit Committee met one time.
The Compensation Committee consists of Messrs. Cohn, Goldberg, McHugh and
Roberts and met one time as a separate committee during the fiscal year ended
June 30, 1997 and also met in the normal course of each of the four Board of
Directors' meetings. The Compensation Committee reviews the annual compensation
rates of the officers and key employees of the Company, administers the
Company's compensation plans and makes recommendations in connection with such
plans.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation limits the personal liability of a Director of the
Company for monetary damages for breach of fiduciary duty of care as a Director.
Liability is not eliminated for (i) any breach of the Director's duty of loyalty
to the Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) any transaction
from which the Director derived an improper personal benefit.
COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16 OF THE EXCHANGE ACT
Under Section 16(a) of the Exchange Act, the Company's Directors, executive
officers and any persons holding 10% or more of the Company's Common Stock are
required to report their ownership of Common Stock and any changes in that
ownership to the Securities and Exchange Commission (the "SEC") and to furnish
the Company with copies of such report. Specific due dates for these reports
have been established and the Company is required to report in this report any
failure to file on a timely basis by such persons. Based solely upon a review of
copies filed with the SEC during the fiscal year ended June 30, 1997, all
persons subject to the reporting requirements of Section 16(a) filed all
required reports on a timely basis.
3
<PAGE> 6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Cohn, Goldberg, McHugh and
Roberts. No Directors other than those currently serving on the Board of
Directors served as members of the Compensation Committee during the last
completed fiscal year. No member of that Committee, other than Messrs. Cohn and
Roberts, was an officer or employee of the Company or any of its subsidiaries
during the year. None of the executive officers of the Company has served on the
board of directors or on the compensation committee of any other entity, any of
whose officers served either on the Board of Directors or on the Compensation
Committee of the Company.
4
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years 1997, 1996 and 1995 of (i) the Company's Chief Executive Officer
and (ii) the four most highly compensated executive officers who were serving as
executive officers at the end of the 1997 fiscal year.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ---------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK OPTIONS AND GRANTS (SHARES)
- ----------------------------------- ---- --------- -------- ---------------------------------
<S> <C> <C> <C> <C>
Michael A. O'Hanlon................ 1997 $301,154 $50,000 30,000
President, Chief Executive 1996 $279,808 -0- -0-
Officer and Director 1995 $228,654 -0- 132,000
Steven R. Garfinkel................ 1997 $201,924 $25,000 15,000
Executive Vice President and 1996(1) $134,615 -0- 25,000
Chief Financial Officer 1995 -0- -0- -0-
Richard E. Miller.................. 1997 $190,890 -0- 15,000
Executive Vice President 1996 $267,198 -0- 10,000
1995 $256,247 -0- -0-
Anthony J. Turek................... 1997 $170,654 $12,000 15,000
Executive Vice President 1996 $159,038 $35,000 10,000
1995 $142,621 -0- -0-
Alan J. Velotta.................... 1997 $146,750 $50,000 25,000
Vice President 1996 $120,385 $50,000 25,000
1995 $110,846 $40,000 -0-
</TABLE>
- ---------------
(1) Mr. Garfinkel became an employee of the Company in September 1995.
OPTION GRANTS IN 1997 FISCAL YEAR
During the 1997 fiscal year, options to purchase 100,000 shares of Common
Stock were granted to the executive officers listed in the Summary Compensation
Table (contingent upon stockholder approval of the 1996 Stock Option Plan at the
Annual Meeting).
AGGREGATE OPTION EXERCISES IN THE LAST
FISCAL YEAR END AND FISCAL-YEAR-END-OPTION-VALUES
The following table sets forth further information for the executive
officers listed in the Summary Compensation Table with respect to previously
granted options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE (#)(1) REALIZED ($)(1) FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
- ------------------------ --------------- --------------- ------------------------------ -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. O'Hanlon..... -0- N/A 68,250 51,750 $ 447,844 $ 140,281
Steven R. Garfinkel..... -0- N/A 8,333 31,667 $ 34,374 $ 68,751
Richard E. Miller....... -0- N/A 73,333 21,667 $ 380,833 $ 9,167
Anthony J. Turek........ -0- N/A 62,583 27,417 $ 565,797 $ 51,698
Alan J. Velotta......... -0- N/A 15,833 44,167 $ 51,770 $ 36,355
</TABLE>
- ---------------
(1) During the 1997 fiscal year, no stock options were exercised by the
executive officers listed in the Summary Compensation Table.
(2) Represents the difference between the closing price of the Company's Common
Stock on June 30, 1997 and the exercise price of the options.
5
<PAGE> 8
EMPLOYMENT AGREEMENTS AND INCENTIVE COMPENSATION
The Company has not entered into any employment agreements with any of its
employees or executive officers and, other than the Company's 1996 Stock Option
Plan, which is subject to stockholder approval and is described under Proposal 2
of this Proxy Statement, and the DVI, Inc. 1995 Stock Bonus Plan (the "Stock
Bonus Plan") described below, has no long-term incentive compensation plan. The
Company, however, does provide short-term incentive compensation to certain
executive officers through the award of quarterly and/or annual bonuses based
upon certain agreed-upon performance criteria.
THE STOCK BONUS PLAN. Pursuant to the Stock Bonus Plan, the Company has
agreed, subject to the discretion of the Compensation Committee, to issue, from
time to time an aggregate of not more than 200,000 shares of Common Stock of the
Company to certain of its employees if the last sale price of the Company's
Common Stock is $16.00 per share or higher for 30 consecutive calendar days at
any time before December 31, 2000. The employee must have been employed by the
Company during such 30 day period to be eligible to receive shares of Common
Stock. The Company also has agreed that, if, at any time prior to December 31,
1998, there is an event or series of events that constitutes a sale of the
Company and the consideration to be received per share of Common Stock is $13.00
or more, the Company will issue all 200,000 shares pursuant to the Stock Bonus
Plan.
SEVERANCE AGREEMENT. On November 20, 1995 the Company entered into a
Severance Agreement (the "Severance Agreement") with David L. Higgins, the
Company's former Chairman and Chief Executive Officer, pursuant to which Mr.
Higgins agreed to continue to perform certain consulting and other services for
the Company through December 1, 1997 (the "Termination Date"). Pursuant to the
Severance Agreement the Company agreed (i) to pay Mr. Higgins an aggregate of
$275,000 through the Termination Date, in installments consistent with the
Company's regular payroll schedule; (ii) to provide Mr. Higgins, at the
Company's sole expense, with healthcare and life insurance benefits consistent
with those provided to the Company's executive officers; and (iii) to reimburse
Mr. Higgins for certain expenses incurred by him while performing services for
the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
This report of the Compensation Committee shall not be deemed incorporated
by reference to any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the Exchange
Act, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
A publicly held corporation may not, subject to limited exceptions, deduct
for federal income tax purposes certain compensation paid to certain executives
in excess of $1 million in any taxable year (the "Deduction Limitation"). It is
not expected that compensation to executives of the Company will exceed the
Deduction Limitation in the foreseeable future, and, therefore, the Company
generally has not attempted to qualify any of its compensation plans, programs
and arrangements for any of the exceptions to the Deduction Limitation.
OVERVIEW AND PHILOSOPHY
Messrs. Cohn, Goldberg, McHugh and Roberts sitting as the Compensation
Committee (the "Committee") are responsible for developing the Company's
executive compensation policies. The Committee determines the compensation to be
paid to the Chief Executive Officer and each of the other executives of the
Company. The Committee is responsible for setting and administering the policies
which govern annual compensation, the Stock Option Plan, and determination of
bonuses for executives.
There are three elements in the Company's executive compensation program:
- Base salary compensation.
- Short-term incentive compensation (bonuses).
- Long-term incentive compensation (stock options).
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<PAGE> 9
In designing its compensation programs, the Company believes that executive
compensation should reflect the value created for stockholders and support the
Company's strategic goals. Specifically, the objectives of the program are as
follows:
- Attract and retain key executives important to the long-term success of
the Company.
- Provide incentives for performance with respect to the goals established
for each executive by management.
- Provide incentives for performance with respect to the Company's goals.
- Align the executive's interests with those of the Company's stockholders
through participation in stock-based plans.
- Reward individuals for outstanding contributions to the Company's
success.
The executive compensation program provides an overall level of
compensation opportunity that is competitive within the medical equipment
finance industry. Actual compensation levels may be greater or less than average
competitive levels in other companies based upon annual and long-term Company
performance as well as individual performance.
EXECUTIVE OFFICER COMPENSATION PROGRAM
BASE SALARY AND SHORT-TERM INCENTIVE COMPENSATION
The Company's general approach to base salary and short-term incentive
compensation is to pay salaries which when combined with bonuses are competitive
with the salaries and bonuses paid to executives of other companies in the
medical equipment finance industry based upon the individual's experience and
past and potential contribution to the Company. As described in the Company's
Proxy Statement, the base salary for the Company's executive officers for fiscal
year 1997 reflects levels deemed by the Company to have been appropriate in view
of the prior and expected contribution of the executives to the Company's
development. The Company believes that a significant part of the overall
compensation paid to executives should consist of bonuses paid annually or
quarterly based on the ability of the executive to achieve specified Company,
departmental and individual goals.
STOCK OPTION PLAN
The Board of Directors and the Committee believe that stock ownership is a
significant incentive in building stockholder wealth and aligning the interest
of employees and stockholders. Stock options will only have value if the
Company's stock price increases. In addition, the Company's stock options
utilize vesting periods to encourage key employees to continue in the employ of
the Company. The Stock Option Plan authorizes the Committee to award key
employees stock options at exercise prices, vesting schedules and with terms
established by the Committee.
Compensation Committee
Gerald L. Cohn
William S. Goldberg
John E. McHugh
Harry T.J. Roberts
November 10, 1997
PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the Company's total stockholder
return on Common Stock with the S&P 500 Index, and a Peer Group Index, weighted
by market equity capitalization, as of the market close on June 30, 1992 through
the end of the fiscal year ended June 30, 1997. The Peer Group consists of
publicly traded specialty finance companies, selected by the Company in good
faith. The companies selected are the Beneficial Corp., Finova Group Inc.,
Household International Inc., Comdisco Inc. and Green Tree Financial
7
<PAGE> 10
Corp. Cumulative total returns are calculated assuming that $100 was invested on
June 29, 1992 in each of the Common Stock, the S&P 500 Index and the Peer Group
Index, and that all dividends were reinvested.
PERFORMANCE CHART
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DVI, INC. S & P 500 PEER GROUP INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 60.02 110.94 110.82
1994 101.28 109.75 120.53
1995 125.27 135.02 179.17
1996 167.91 166.22 221.09
1997 157.25 219.39 339.70
</TABLE>
DATA PERIOD: JUNE 30, 1992 THROUGH JUNE 30, 1997
CERTAIN TRANSACTIONS
EMPLOYMENT ARRANGEMENTS. Gerald L. Cohn and Harry T.J. Roberts, who are
directors of the Company, also act as employees and advisors to the Company.
During the Company's 1997 fiscal year Messrs. Cohn and Roberts were paid $95,523
and $120,000, respectively for the provision of such services.
FACILITIES LEASE. The Company's principal executive offices located in
Doylestown, Pennsylvania are leased from Mr. Walter S. Smerconish, who is the
step-son of one of the directors of the Company. During the 1997 fiscal year the
Company paid rent of approximately $242,510 to Mr. Smerconish.
DIAGNOSTIC IMAGING SERVICES, INC. The Company owns approximately 4.5
million shares of convertible preferred stock (Series F and Series G) of
Diagnostic Imaging Services, Inc. ("DIS"), a Company that operates diagnostic
imaging equipment. 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 $2.42 per share for the Series F convertible preferred
stock and $1.00 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. DIS is a customer of the Company.
MEDICAL EQUIPMENT FINANCE CORP. In January 1993, the Company acquired all
of the outstanding shares of common stock of Medical Equipment Finance Corp.
("MEF Corp.") from MEFC Partners L.P., a Delaware limited partnership ("MEFC
Partners"). Under the terms of the original purchase agreement, the purchase
price was payable before October 15, 1998 in cash or Common Stock of the
Company, as elected by the Company. The Company and the former shareholders of
MEF Corp. agreed in June 1995 to set the purchase price of MEF Corp. at 400,000
shares of Common Stock (the "MEFC Shares"). Michael A. O'Hanlon (President,
Chief Executive Officer and a Director of the Company), Dominic A. Guglielmi
(formerly employed by the Company as a Vice President) and Mark H. Idzerda (an
employee of DVI Financial Services) are general partners of MEFC Partners and
are entitled to receive 132,000, 88,000 and 80,000 of the MEFC Shares,
respectively. The remaining 100,000 MEFC Shares are to be distributed among
8
<PAGE> 11
approximately 12 other individuals. In addition, the MEFC Partners have been
granted certain registration rights with respect to the MEFC Shares.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information regarding beneficial ownership
of shares of Common Stock as of October 7, 1997 by each stockholder known to the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock, each director, each of the officers named in the Summary
Compensation Table and all current officers and directors as a group. Persons
named in the following table have sole voting and investment powers with respect
to all shares shown as beneficially owned by them, subject to community property
laws where applicable and other information contained in the footnotes to the
table. Information with respect to beneficial ownership is based upon the
Company's Common Stock records and data supplied to the Company by its
stockholders.
<TABLE>
<CAPTION>
AMOUNT
AND
NATURE
OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ----------------------------------------------------- ----------------
<S> <C> <C>
Gerald L. Cohn***............................. 415,471(1)(2)(3) 3.9%
Steven R. Garfinkel***........................ 23,866 (4) *
William S. Goldberg***........................ -- --
John E. McHugh***............................. 50,400 (1) *
Richard E. Miller**........................... 83,800 (5)(6) *
Michael A. O'Hanlon***........................ 94,755 (7)(8)(9) *
Harry T. J. Roberts***........................ 2,000 *
Nathan Shapiro***............................. 57,200 *
Anthony J. Turek**............................ 94,666 (10) *
Alan J. Velotta***............................ 32,949 (11) *
Ronald Baron****.............................. 2,416,950(12) 22.9%
CIBC Trust Company (Bahamas) Limited*****..... 2,200,720(13)(14) 19.5%
All directors & officers as a group (13
persons).................................... 976,071(1)(2)(3)(4)(5)(7) 8.9%(15)
(10)(11)(12)(15)
</TABLE>
- ---------------
* Less than 1%
** 4041 MacArthur Boulevard, Suite 401, Newport Beach, California 92660
*** 500 Hyde Park, Doylestown, Pennsylvania 18901
**** 767 Fifth Avenue, New York, New York 10153
***** P.O. Box N-3933, Nassau, Bahamas
(1) Includes 20,000 shares of Common Stock which may be purchased on the
exercise of warrants granted to directors of the Company.
(2) Does not include (a) 36,500 shares of Common Stock held of record by
Cynthia J. Cohn, who is a Vice President of the Company and one of Mr.
Cohn's daughters, in her capacity as trustee of the Cynthia J. Cohn
Revocable Trust and (b) 9,750 shares of Common Stock held of record by a
trust established for the benefit of Clayton Schmidt, Mr. Cohn's
grandchild, as to all of which Mr. Cohn disclaims any beneficial interest.
(3) Includes 75,472 shares of Common Stock which may be exercised upon
conversion of $800,000 of the Company's 9 1/8% Convertible Subordinated
Notes due 2002.
(4) Includes 21,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(5) Includes 81,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(6) Includes 134 shares of Common Stock held through the Employee Savings
Plan.
(7) Includes 84,500 shares of Common Stock which may be purchased on the
exercise of stock options.
9
<PAGE> 12
(8) Includes 1,655 shares of Common Stock held through the Employee Savings
Plan.
(9) Does not include 132,000 shares of Common Stock which Mr. O'Hanlon, a
former shareholder of MEF Corp., is entitled to receive in connection with
the Company's acquisition of MEF Corp.
(10) Includes 94,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(11) Includes 32,499 shares of Common Stock which may be purchased on the
exercise of stock options.
(12) According to Amendment No. 6 to a Schedule 13D dated October 1, 1997 (the
"Schedule 13D") filed with the Securities and Exchange Commission Mr.
Baron holds (i) 1,678,200 shares of Common Stock in his capacity as a
controlling person of BAMCO, Inc., a registered investment adviser
controlled by Mr. Baron which advises Baron Asset Fund; (ii) 518,700
shares of Common Stock in his capacity as a controlling person of Baron
Capital Management, Inc., a registered investment adviser; (iii) 220,000
shares of Common Stock in his capacity as one of the general partners of
Baron Capital Partners; and (iv) 50 shares of Common Stock personally.
According to the Schedule 13D, Mr. Baron disclaims beneficial ownership of
the shares of Common Stock described in subclauses (i), (ii) and (iii) of
the preceding sentence.
(13) Held by Canadian Imperial Bank of Commerce Trust Company (Bahamas) Limited
("CIBC"), as trustee of trusts for the benefit of the grandchildren of
A.N. Pritzker, deceased. Does not include 56,339 shares of Common Stock
owned by a partnership comprised of trusts for the benefit of members of
the Pritzker Family. CIBC is not the trustee of such trusts. As used
herein, the term "Pritzker Family" refers to the lineal descendants of
Nicholas J. Pritzker, deceased.
(14) Includes 716,981 shares of Common Stock held by CIBC, as trustee for
certain trusts which may be exercised upon conversion of $7,600,000 of the
Company's 9 1/8% Convertible Subordinated Notes due 2002.
(15) Includes shares which may be purchased on the exercise of stock options,
in addition to those shares that may be purchased on the exercise of
options and warrants set forth in footnotes (1), (4), (5), (7), (10) and
(11).
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock present
and voting in person or by proxy at the Annual Meeting is required for the
election of each nominee specified in this proposal. The Board of Directors
unanimously recommends that you vote FOR the election of each nominee specified
in this proposal. Proxies solicited by the Board of Directors will be voted for
the nominees specified in this proposal unless authority to vote for one or more
of such nominees is specifically withheld in the proxy.
10
<PAGE> 13
PROPOSAL 2
PROPOSAL TO ADOPT THE DVI 1996 STOCK OPTION PLAN
GENERAL
The stockholders are being asked to vote on a proposal to adopt the
Company's 1996 Stock Option Plan (the "Stock Option Plan") which authorizes the
grant of non-qualified stock options and incentive stock options to employees,
consultants and directors. The Stock Option Plan was approved by the Board of
Directors of DVI, subject to approval by the stockholders. The Stock Option Plan
is effective as of August 29, 1996. Options consistent with the plan have been
granted, subject to stockholder approval, on or subsequent to August 28, 1996.
The terms and provisions of the Stock Option Plan are summarized below.
This summary, however, does not purport to be a complete description of the
Stock Option Plan and this description is qualified in its entirety by the terms
of the Stock Option Plan. A copy of the Stock Option Plan is attached to this
Proxy Statement as Annex A.
PURPOSE
The purpose of the Stock Option Plan is to authorize the grant of (i)
non-qualified stock options and (ii) incentive stock options (collectively,
"Options") to eligible employees, consultants and directors of the Company or
any subsidiary thereof. This granting of Options is intended to benefit the
Company by attracting such employees, consultants, and directors to, and
inducing them to remain with, the Company and its subsidiaries and by giving
such eligible employees, consultants and directors equity-based incentives to
increase their efforts to make the Company's business more successful whether
directly or through its subsidiaries.
ADMINISTRATION
The Stock Option Plan will be administered by the Compensation Committee.
The Compensation Committee has exclusive authority to authorize the granting of
Options. Any interpretation and construction of any provision of the Stock
Option Plan made by the Compensation Committee shall be final, binding and
conclusive on all persons having any interest thereunder.
SECURITIES SUBJECT TO THE STOCK OPTION PLAN
The shares issued upon an exercise of an Option under the Stock Option Plan
may be either authorized but unissued shares or Treasury shares of the Company
or shares purchased on the open market or otherwise. The maximum aggregate
number of shares which may be made the subject of Options granted under the
Stock Option Plan may not exceed 1,500,000. No Optionee may receive Options for
more than 1,000,000 shares of Common Stock over the life of the Stock Option
Plan.
ELIGIBILITY
The Compensation Committee will determine the eligibility of each employee,
consultant and director of the Company or of a subsidiary thereof, based on,
among other factors, the position and responsibilities of such employee,
consultant or director, the nature and value to the Company of such employee's,
consultant's or director's services, accomplishments and the employee's,
consultant's or director's potential contribution to the success of the Company
whether directly or through its subsidiaries.
OPTIONS
The Options will have exercise prices not less than 100% of the fair market
value (as defined in the Stock Option Plan) of the Common Stock at the date of
grant. Unless otherwise provided by the particular Option, the exercise price
may be paid by check or bank draft.
11
<PAGE> 14
The Optionee will be able to exercise Options from time to time as
specified in the particular Option. The Compensation Committee shall determine
the expiration date of the Options, which date shall be no later than ten years
from the date of grant. Except in the circumstances described below and except
as provided in any award agreement, the Option must be exercised during the
period the Optionee is in the employ (or, in the case of consultants or
directors, other service) of the Company. If an Optionee's employment (or other
service) terminates, for any reason, within the first twelve months following
the grant of an Option, such Option, to the extent then unexercised, shall cease
to be exercisable and shall be forfeited immediately, unless the applicable
award agreement provides otherwise. If an Optionee's service to the Company
terminates by reason of disability, after the first twelve months following the
grant, the Optionee may, unless otherwise provided in the applicable award
agreement, exercise his Options on, or any time within the one-year period
following, the date of such termination to the extent that the Optionee was
entitled to exercise the Options at the date of the termination. If an Optionee
dies while in the service of the Company after the first twelve months following
the grant of the Option, unless otherwise provided in the applicable award
agreement, such Option is exercisable by the Optionee's legal representative for
the period of one-year next succeeding the date of his death, to the extent that
the Optionee was entitled to exercise the Option on the date he terminated
service. Unless otherwise provided in the applicable award agreement, if the
Optionee should die after termination of service, such termination for a reason
other than disability or retirement, but while the Option is still in effect,
the Option (if and to the extent otherwise exercisable by the Optionee at the
time of death) may be exercised until the earlier of (i) one year from the date
of termination of service of the Optionee, or (ii) the date on which the term of
the Option otherwise expires. If an Optionee's service to the Company terminates
due to retirement after the twelfth month following the date on which the option
was granted, unless otherwise provided in the applicable award agreement, the
Optionee may exercise his Options on, or any time within the three-month period
following, the date of such termination to the extent that the Optionee was
entitled to exercise the Options at the date of the termination. Upon voluntary
termination of the Optionee's employment by the Optionee or upon the termination
of the Optionee's employment for cause, all Options held by the Optionee, to the
extent then unexercised, shall automatically cease to be exercisable and shall
be forfeited immediately, unless the applicable award agreement provides
otherwise. If the Optionee's employment by the Company terminates, after the
twelfth month following the date of the grant of the option, for any reason
other than death, disability, retirement, for cause, or voluntary termination by
the Optionee and unless the Optionee's award agreement provides otherwise, the
Optionee may exercise his Options for a period of three months following the
termination to the extent that the Optionee was entitled to exercise the Options
at the date of the termination. Subject to the above conditions, the exercise
price and duration of the Options will be set by the Compensation Committee. No
Option shall be transferable other than by will or the laws of descent and
distribution and (other than with respect to incentive stock options) as
otherwise provided by the Compensation Committee.
SPECIAL LIMITATIONS FOR INCENTIVE STOCK OPTIONS
The Stock Option Plan imposes certain limitations with respect to incentive
stock options, including the following limitations:
(i) The aggregate fair market value (determined at the time the
incentive stock options are granted) of the shares of Common Stock or
shares of stock of any Subsidiary of the Company with respect to which
incentive stock options under the Stock Option Plan or any other plan are
exercisable for the first time by any Optionee during any calendar year
shall not exceed $100,000.
(ii) If an incentive stock option is to be granted to an employee who
immediately before such grant owned 10% or more of the total combined
voting power of all classes of stock of the Company or any Subsidiary of
the Company, the exercise price per share of Common Stock shall be not less
than 110% of the fair market value at the time of the grant of the
incentive stock option, and the incentive stock option shall expire not
more than five years from the date of grant.
12
<PAGE> 15
STOCKHOLDER RIGHTS
Neither the Optionee nor any person entitled to exercise the Optionee's
rights in the event of death shall have any rights of a stockholder with respect
to the Shares subject to an Option, except to the extent that a certificate for
such Shares shall have been issued upon the exercise of the Option as provided
for herein.
AMENDMENT AND TERMINATION
The Board may amend the Stock Option Plan as it shall deem advisable,
except that (i) no amendment may adversely affect an Optionee with respect to
Options previously granted unless such amendments are in compliance with
applicable laws and (ii) no amendment shall be made by the Board without the
approval of the stockholders of the Company, if such amendment would cause the
Stock Option Plan to fail to comply with any requirement of applicable law or
regulation if it were not so approved by the stockholders.
No Option shall be granted under the Stock Option Plan after ten years from
the effective date of the Plan.
STOCK OPTION PLAN BENEFITS
From August 28, 1996 through the date of this Proxy Statement, the Company
granted options (contingent upon stockholder approval of the Stock Option Plan
at the Annual Meeting) to acquire 646,000 shares of Common Stock to a total of
132 persons under the Stock Option Plan. The following table sets forth the
number of shares of Common Stock underlying such options and the dollar value
such options would have had on November 6, 1997 (the difference between the
closing price of the Common Stock on such date and the exercise price times the
number of options vested on that date) for such options that were exercisable as
of such date:
<TABLE>
<CAPTION>
STOCK OPTION PLAN
-------------------------------
NAME NO. OF OPTIONS DOLLAR VALUE
- ------------------------------------------------------------------ -------------- ------------
<S> <C> <C>
Michael A. O'Hanlon............................................... 130,000 $ 41,300
Steven R. Garfinkel............................................... 65,000 20,650
Richard E. Miller................................................. 65,000 20,650
Anthony J. Turek.................................................. 65,000 20,650
Alan J. Velotta................................................... 50,000 34,417
Director Group (excluding Mr. O'Hanlon)........................... 50,000 0
Non-Executive Officer/Employee Group (excluding all other
individuals listed above)....................................... 221,000 84,659
</TABLE>
FEDERAL TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. In general, neither the grant nor the exercise of
an incentive stock option will result in taxable income to an Optionee or a
deduction for the Company. To receive special tax treatment as an incentive
stock option under the Internal Revenue Code of 1986, as amended (the "Code"),
as to shares acquired upon exercise of an incentive stock option, an Optionee
must neither dispose of such shares within two years after the incentive stock
option is granted nor within one year after the transfer of the shares to the
Optionee pursuant to exercise of the option. In addition, the Optionee must be
an employee of the Company or a qualified Company subsidiary at all times
between the date of grant and the date three months (one year in the case of
death or disability) before exercise of the option. Special tax treatment as an
incentive stock option under the Code generally allows the sale of Common Stock
received upon the exercise of an incentive stock option to result in any gain
being treated as a capital gain to the Optionee, but the Company will not be
entitled to a tax deduction. However, the exercise of an incentive stock option
(if the holding period rules described in this paragraph are satisfied) will
give rise to income includable by the Optionee in his or her alternative minimum
taxable income for purposes of the alternative minimum tax in an amount equal to
the excess of the fair market value of the stock acquired on the date of the
exercise of the option over the option price.
13
<PAGE> 16
If the holding period rules noted above are not satisfied, gain recognized
on the disposition of the shares acquired upon the exercise of an incentive
stock option will be characterized as ordinary income. Such gain will be equal
to the difference between the option price and the fair market value of the
shares at the time of exercise. (Special rules may apply to disqualifying
dispositions where the amount realized is less than the value at exercise.) The
Company will generally be entitled to a deduction equal to the amount of such
gain included by an Optionee as ordinary income. Any excess of the amount
realized upon such disposition over the fair market value at exercise will
generally be long-term or short-term capital gain depending on the holding
period involved. Notwithstanding the foregoing, in the event that exercise of
the Option is permitted other than by cash payment of the exercise price,
various special tax rules may apply.
NON-QUALIFIED STOCK OPTIONS. No income will be recognized by an Optionee
at the time a non-qualified stock option is granted. Generally, ordinary income
will, however, be recognized by an Optionee at the time a non-qualified stock
option is exercised in an amount equal to the excess of the fair market value of
the underlying Common Stock on the exercise date over the option price. The
Company will generally be entitled to a deduction for Federal income tax
purposes in the same amount as the amount included in ordinary income by the
Optionee with respect to his or her non-qualified stock option.
Gain or loss on a subsequent sale or other disposition of the shares
acquired upon the exercise of a non-qualified stock option will be measured by
the difference between the amount realized on the disposition and the tax basis
of such shares, and will generally be long-term or short-term capital gain
depending on the holding period involved. The tax basis of the shares acquired
upon the exercise of any non-qualified stock option will be equal to the sum of
the option price of such non-qualified stock option and the amount included in
income with respect to such option. Notwithstanding the foregoing, in the event
that exercise of the Option is permitted other than by cash payment of the
exercise price, various special tax rules may apply.
Additional special tax rules may apply to those Stock Option Plan
participants who are subject to Section 16 of the Securities and Exchange Act of
1934, as amended.
The foregoing tax discussion is a general description of certain expected
Federal income tax results under current law, and all affected individuals
should consult their own advisors if they wish any further details or have
special questions.
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock present
and voting in person or by proxy at the Annual Meeting is required for the
approval of the 1996 Stock Option Plan and the option grants that were made
thereunder by the Board of Directors to employees and certain officers since
August 28, 1996, subject to stockholder approval. The Board of Directors
unanimously recommends that you vote FOR the approval of the 1996 Stock Option
Plan and the option grants made thereunder on or subsequent to August 28, 1996.
Proxies solicited by the Board of Directors will be voted for the approval of
this proposal unless a vote against the proposal or an abstention is
specifically indicated.
14
<PAGE> 17
PROPOSAL 3
PROPOSAL TO RATIFY APPOINTMENT OF ACCOUNTANTS
The Company proposes to select Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending June 30, 1998. Deloitte &
Touche LLP has been the independent accountants for the Company since May 1987.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and to
make such statements as they may desire.
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the outstanding shares of Common
Stock present and voting in person or by proxy at the Annual Meeting is required
to ratify the appointment of Deloitte & Touche LLP as the Company's independent
certified public accountants. The Board of Directors unanimously recommends that
you vote FOR the ratification of Deloitte & Touche LLP as the Company's
independent certified public accountants. Proxies solicited by the Board of
Directors will be voted for the proposal unless a vote against the proposal or
an abstention is specifically indicated.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1997 (the "Annual Report"), which accompanies this Proxy Statement, contains
the consolidated financial statements of the Company. Such consolidated
financial statements, including the notes thereto and management's discussion
and analysis of financial condition and results of operations (collectively, the
"Financial Statements"), are incorporated by reference herein and are considered
a part of the proxy soliciting material. Except for the Financial Statements,
the Annual Report is not incorporated in this Proxy Statement and is not
considered a part of the proxy soliciting material.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company has received no stockholder proposals to be voted on at this
meeting. Appropriate stockholder proposals which are intended to be presented at
the 1998 Annual Stockholders' Meeting must be received by the Company no later
than June 30, 1998, in order to be included in the 1998 proxy materials.
OTHER MATTERS
All expenses in connection with the solicitation of proxies will be paid by
the Company. The Company may pay brokers, nominees, fiduciaries or other
custodians for their reasonable expenses in sending proxy materials to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies primarily by mail, but directors,
officers and other employees of the Company may also solicit proxies in person
or by telephone, facsimile, telex or telegraph.
As of the date of this Proxy Statement, the management has no knowledge of
any matters to be presented at the meeting other than those referred to above.
If any other matters properly come before the meeting, the persons named in the
accompanying form of proxy intend to vote such proxy in accordance with their
best judgment.
By Order of the Board of Directors
MELVIN C. BREAUX
Secretary
November 11, 1997
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE, A COPY OF THE COMPANY'S 1997 ANNUAL
REPORT ON FORM 10-K BY SENDING A WRITTEN REQUEST TO INVESTOR COMMUNICATIONS,
DVI, INC., 500 HYDE PARK, DOYLESTOWN, PENNSYLVANIA 18901.
15
<PAGE> 18
APPENDIX A
DVI, INC.
1996 STOCK OPTION PLAN
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Definitions....................................................................... 1
2. Effective Date and Termination of Plan............................................ 3
3. Administration of Plan............................................................ 3
4. Eligibility and Grant of Options; Administrator Authority......................... 4
5. Number of Shares Subject to Options............................................... 5
6. Option Price...................................................................... 6
7. Period of Option and Vesting...................................................... 6
8. Exercisability Upon and After Termination of Optionee............................. 8
9. Exercise of Options............................................................... 11
10. Payment........................................................................... 12
11. Tax Withholding................................................................... 12
12. Exercise by Successors and Payment in Full........................................ 13
13. Nontransferability of Option...................................................... 13
14. Right of Repurchase............................................................... 14
15. Regulations and Approvals......................................................... 14
16. Interpretation and Amendments; Other Rules........................................ 15
17. Changes in Capital Structure...................................................... 17
18. Notices........................................................................... 20
19. Rights as Stockholder............................................................. 20
20 Rights to Employment.............................................................. 20
21. Exculpation and Indemnification................................................... 21
22. Captions.......................................................................... 21
23. Governing Law..................................................................... 21
</TABLE>
A-(i)
<PAGE> 20
DVI, INC.
1996 STOCK OPTION PLAN
DVI, Inc., a Delaware corporation, wishes to attract key employees,
consultants and directors to the Company and its Subsidiaries, to induce key
employees, consultants and directors to remain with the Company and its
Subsidiaries, and to encourage them to increase their efforts to make the
Company's business more successful whether directly or through its Subsidiaries.
In furtherance thereof, the DVI, Inc. 1996 Stock Option Plan is designed to
provide equity-based incentives to key employees, consultants and directors of
the Company and its Subsidiaries.
1. DEFINITIONS.
Whenever used herein, the following terms shall have the meanings set forth
below:
"Administrator" means the Board, or, if the Board so determines, the
Committee.
"Award Agreement" means a written agreement in a form approved by the
Administrator to be entered into by the Company and the Optionee of an Option,
as provided in Section 4.
"Board" means the Board of Directors of the Company.
"Cause" means, unless otherwise provided in the applicable Award Agreement,
with respect to the termination of an employee's employment or a consultant's or
director's service, termination by reason of commission of a felony, fraud,
willful misconduct, or habitual neglect of the Optionee's duties, which has
resulted, or is likely to result, in substantial and material damage to the
Company or a parent or a Subsidiary, all as the Administrator, in its sole
discretion, may determine.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Committee appointed by the Board under Section 3, if
any.
"Common Stock" means the Company's Common Stock, par value $.005, either
currently existing or authorized hereafter.
"Company" means DVI, Inc., a Delaware corporation.
"Constituent Corporation" means a corporation which has been merged into or
consolidated with the Company or one or more Subsidiaries, or whose assets or
stock has been acquired by or liquidated into the Company, or by or into any one
or more Subsidiaries, or any parent or any subsidiary of any such corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per Share as of a particular date means (i) if Shares
are then listed on a national stock exchange, the closing sales price per Share
on the exchange for the last preceding date on which there was a sale of Shares
on such exchange, as determined by the Administrator; (ii) if Shares are not
then listed on a national stock exchange but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for the
Shares in such over-the-counter market for the last preceding date on which
there was a sale of such Shares in such market, as determined by the
Administrator; or (iii) if Shares are not then listed on a national stock
exchange or traded on an over-the-counter market, such value as the
Administrator in its discretion may in good faith determine; provided that,
where the Shares are so listed or traded, the Administrator may make
discretionary determinations where the Shares have not been traded for 10
trading days.
"Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422(b) of the Code.
"Non-Qualified Stock Option" means an Option which is not an Incentive
Stock Option.
A-1
<PAGE> 21
"Option" means the right to purchase, at a price and for the term fixed by
the Administrator in accordance with the Plan, and subject to such other
limitations and restrictions in the Plan and the applicable Award Agreement, a
number of Shares determined by the Administrator.
"Optionee" means an employee, consultant or director of the Company to whom
an Option is granted, or the Successors of the Optionee, as the context so
requires.
"Option Price" means the exercise price per Share.
"Plan" means this DVI, Inc. 1996 Stock Option Plan, as set forth herein and
as the same may from time to time be amended.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Common Stock of the Company.
"Subsidiary" means any corporation (other than the Company) that is a
"subsidiary corporation" with respect to the Company under Section 424(f) of the
Code. In the event the Company becomes a subsidiary of another company, the
provisions hereof applicable to subsidiaries shall, unless otherwise determined
by the Administrator, also be applicable to any Company that is a "parent
corporation" with respect to the Company under Section 424(e) of the Code.
"Successor of the Optionee" means the legal representative of the estate of
a deceased Optionee or the person or persons who shall acquire the right to
exercise an Option by bequest or inheritance or by reason of the death of the
Optionee.
2. EFFECTIVE DATE AND TERMINATION OF PLAN.
The effective date of the Plan is August 29, 1996. The Plan shall terminate
on, and no Option shall be granted hereunder on or after, August 29, 2006.
3. ADMINISTRATION OF PLAN.
The Plan shall be administered by the Administrator. If the Administrator
is the Committee, then the Committee shall consist of at least two individuals
each of whom shall be a "nonemployee director" as defined in Rule 16b-3 as
promulgated by the Securities and Exchange Commission ("Rule 16b-3") under the
Exchange Act and shall, at such times as the Company is subject to Section
162(m) of the Code (to the extent relief from the limitation of Section 162(m)
of the Code is sought with respect to Options), qualify as "outside directors"
for purposes of Section 162(m) of the Code. The acts of a majority of the
members present at any meeting of the Committee at which a quorum is present, or
acts approved in writing by a majority of the entire Committee, shall be the
acts of the Committee for purposes of the Plan. If and to the extent applicable,
no member of the Committee may act as to matters under the Plan specifically
relating to such member.
4. ELIGIBILITY AND GRANT OF OPTIONS; ADMINISTRATOR AUTHORITY.
Subject to the provisions of the Plan, the Administrator shall, in its
discretion as reflected by the terms of the Award Agreements: (i) authorize the
granting of Options to key employees, consultants and directors of the Company
and its Subsidiaries; (ii) determine and designate from time to time those key
employees, consultants and directors of the Company and its Subsidiaries to whom
Options are to be granted and the number of Shares to be optioned to each
employee, consultant or director; (iii) determine whether to grant Incentive
Stock Options, or Non-Qualified Stock Options, or both (to the extent that any
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option); (iv) determine the number of Shares
subject to each Option; (v) determine the time or times when and the manner and
condition in which each Option shall be exercisable and the duration of the
exercise period; and (vi) determine or impose other conditions to the grant or
exercise of Options under the Plan as it may deem appropriate. In determining
the eligibility of an employee, consultant or director to receive an Option, as
well as in determining the number of Shares to be optioned to any employee,
consultant or director, the
A-2
<PAGE> 22
Administrator may consider the position and responsibilities of such employee,
consultant or director, the nature and value to the Company of the employee's,
consultant's or director's services and accomplishments whether directly or
through its Subsidiaries, the employee's, consultant's or director's present and
potential contribution to the success of the Company whether directly or through
its Subsidiaries and such other factors as the Administrator may deem relevant.
The Award Agreement shall contain such other terms, provisions and conditions
not inconsistent herewith as shall be determined by the Administrator. The
Optionee shall take whatever additional actions and execute whatever additional
documents the Administrator may in its reasonable judgment deem necessary or
advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on the Optionee pursuant to the express provisions of the
Plan and the Award Agreement. The Administrator shall cause each Option to be
designated as an Incentive Stock Option or a Non-Qualified Stock Option.
5. NUMBER OF SHARES SUBJECT TO OPTIONS.
Subject to adjustments pursuant to Section 17, Options with respect to an
aggregate of no more than 1,500,000 Shares may be granted under the Plan. In no
event may any Optionee receive Options for more than 1,000,000 Shares of Common
Stock over the life of the Plan. Notwithstanding the foregoing provisions of
this Section 5, Shares as to which an Option is granted under the Plan that
remains unexercised at the expiration, forfeiture or other termination of such
Option may be the subject of the grant of further Options. Shares of Common
Stock issued hereunder may consist, in whole or in part, of authorized and
unissued shares or treasury shares or any Shares purchased in the open market or
otherwise. The certificates for Shares issued hereunder may include any legend
which the Administrator deems appropriate to reflect any repurchase rights of
the Company, restrictions on transfer hereunder or under the Award Agreement, or
as the Administrator may otherwise deem appropriate.
The aggregate Fair Market Value, determined as of the date an Option is
granted, of the Common Stock for which any Optionee may be awarded Incentive
Stock Options which are first exercisable by the Optionee during any calendar
year under the Plan (or any other stock option plan required to be taken into
account under Section 422(d) of the Code) shall not exceed $100,000.
6. OPTION PRICE.
The Option Price shall not be less than 100% (or 110%, in the case of an
Incentive Stock Option granted to an individual described in Section 422(b)(6)
of the Code (relating to certain 10% owners)) of the Fair Market Value of a
Share on the day the Option is granted.
7. PERIOD OF OPTION AND VESTING.
(a) Unless earlier expired, forfeited or otherwise terminated, each Option
shall expire in its entirety upon the 10th anniversary of the date of grant or
shall have such other term as is set forth in the applicable Award Agreement
(except that, in the case of an individual described in Section 422(b)(6) of the
Code (relating to certain 10% owners) who is granted an Incentive Stock Option,
the term of such Option shall be no more than five years from the date of
grant). The Option shall also expire, be forfeited and terminate at such times
and in such circumstances as otherwise provided hereunder or under the Award
Agreement.
(b) Each Option, to the extent that there has been no termination of the
Optionee's employment (or, in the case of consultants and directors, other
service) and the Option has not otherwise lapsed, expired, terminated or been
forfeited, shall first become exercisable according to the terms and conditions
set forth in the Award Agreement, as determined by the Administrator at the time
of grant; provided that no Option shall be exercisable at the rate of less than
20% per year over a five-year period. Unless otherwise provided in the Award
Agreement or herein, no Option (or portion thereof) shall ever be exercisable if
the Optionee's employment (or other service, if applicable) with the Company and
its Subsidiaries has terminated before the time at which such Option would
otherwise have become exercisable, and any Option that would otherwise become
exercisable after such termination shall not become exercisable and shall be
forfeited upon such termination. Notwithstanding the foregoing provisions of
this Section 7(b), Options exercisable pursuant to
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<PAGE> 23
the schedule set forth by the Administrator at the time of grant may be fully or
more rapidly exercisable or otherwise vested at any time in the discretion of
the Administrator. Upon and after the death of an Optionee, such Optionee's
Options, if and to the extent otherwise exercisable hereunder or under the
applicable Award Agreement after the Optionee's death, may be exercised by the
Successors of the Optionee.
8. EXERCISABILITY UPON AND AFTER TERMINATION OF OPTIONEE.
(a) Unless otherwise provided in the Award Agreement, if the Optionee's
employment (or other service, as applicable) with the Company and its
Subsidiaries is terminated within twelve months after the date of grant, the
Optionee's Options, to the extent then unexercised, shall thereupon cease to be
exercisable and shall be forfeited forthwith.
(b) Unless otherwise provided in the Award Agreement, other than by reason
of voluntary separation, Cause, death, retirement or disability, no exercise of
an Option may occur after the expiration of the three-month period to follow the
termination, or if earlier, the expiration of the term of the Option as provided
under Section 7; provided that, if the Optionee should die after termination of
employment (or other service, if applicable) such termination being for a reason
other than disability or retirement, but while the Option is still in effect,
the Option (if and to the extent otherwise exercisable by the Optionee at the
time of death) may be exercised until the earlier of (i) one year from the date
of termination of employment (or other service, if applicable) of the Optionee,
or (ii) the date on which the term of the Option expires in accordance with
Section 7.
(c) Unless otherwise provided in the Award Agreement, if the Optionee's
employment (or other service) with the Company and its Subsidiaries terminates
due to the death or disability of the Optionee, no exercise of an Option may
occur after the expiration of the one-year period to follow such termination or,
if earlier, the expiration of the term of the Option in accordance with Section
7.
(d) Unless otherwise provided in the Award Agreement, if the Optionee's
employment (or other service, as applicable) with the Company and its
Subsidiaries terminates due to the retirement of the Optionee, no exercise of an
Option may occur after the expiration of the three-month period to follow such
termination or, if earlier, the expiration of the term of the Option in
accordance with Section 7.
(e) Notwithstanding any other provision hereof, unless otherwise provided
in the Award Agreement, if (i) the Optionee's employment (or other service, as
applicable) is terminated by the Company and its Subsidiaries for Cause or (ii)
the Optionee voluntarily terminates employment (or other service, as applicable)
with the Company and its Subsidiaries (other than on account of death,
retirement or disability) the Optionee's Options, to the extent then
unexercised, shall thereupon cease to be exercisable and shall be forfeited
forthwith.
(f) If the Optionee commences or continues service as a consultant or
director of the Company upon termination of employment, such continued service
shall, if the Administrator in its discretion so consents, be treated as
continued employment hereunder.
(g) Except as may otherwise be expressly set forth in this Section 8, and
except as may otherwise be expressly provided under the Award Agreement, no
provision of this Section 8 is intended to or shall permit the exercise of the
Option to the extent the Option was not exercisable upon cessation of employment
(or other service, as applicable).
(h) Notwithstanding any other provision hereof, whether a termination of
employment (or other service, if applicable) is considered to be a retirement or
disability and whether an authorized leave of absence on military or government
service shall constitute a termination of employment (or other service, if
applicable) for the purposes of the Plan shall be determined by the
Administrator, which determination, unless overruled by the Board, shall be
final and conclusive. An Optionee's employment (or other service, as applicable)
with a Constituent Corporation shall be deemed to be employment (or other
service, as applicable) with the Company. An Optionee's employment (or other
service, as applicable) by the Company shall be deemed to continue during such
periods as he or she is employed (or otherwise serves) by the a corporation
which is a Subsidiary both (i) at the time the Optionee's Option is granted and
(ii) throughout the period of the
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<PAGE> 24
Optionee's employment (or other service, as applicable) by such Subsidiary. If
the Optionee shall be transferred from the Company to a Subsidiary or from a
Subsidiary to the Company or from a Subsidiary to another Subsidiary, his or her
employment (or other service, as applicable) shall not be deemed to be
terminated by reason of such transfer. An Option shall terminate immediately if
while the Optionee is employed (or othwerwise services) by a Subsidiary, such
Subsidiary shall cease to be a Subsidiary and the Optionee is not thereupon
transferred to and employed by the Company or another Subsidiary.
9. EXERCISE OF OPTIONS.
(a) Subject to vesting and other restrictions provided for hereunder or
otherwise imposed in accordance herewith, an Option may be exercised, and
payment in full of the aggregate Option Price made, by an Optionee only by
written notice (in the form prescribed by the Administrator) to the Company
specifying the number of Shares to be purchased.
(b) Without limiting the scope of the Administrator's discretion hereunder,
the Administrator may impose such other restrictions on the exercise of
Incentive Stock Options (whether or not in the nature of the foregoing
restrictions) as it may deem necessary or appropriate.
(c) If Shares acquired upon exercise of an Incentive Stock Option are
disposed of in a disqualifying disposition within the meaning of Section 422 of
the Code by an Optionee prior to the expiration of either two years from the
date of grant of such Option or one year from the transfer of Shares to the
Optionee pursuant to the exercise of such Option, or in any other disqualifying
disposition within the meaning of Section 422 of the Code, such Optionee shall
notify the Company in writing as soon as practicable thereafter of the date and
terms of such disposition and, if the Company thereupon has a tax-withholding
obligation, shall pay to the Company an amount equal to any withholding tax the
Company is required to pay as a result of the disqualifying disposition.
10. PAYMENT.
(a) The aggregate Option Price shall be paid in full upon the exercise of
the Option. Except to the extent otherwise provided by the Administrator,
payment must be made by check or bank draft.
(b) Except in the case of Options exercised by check or bank draft, the
Administrator may impose limitations and prohibitions on the exercise of Options
as it deems appropriate, including, without limitation, any limitation or
prohibition designed to avoid accounting consequences which may result from the
use of Common Stock as payment upon exercise of an Option. Any fractional Shares
resulting from an Optionee's election that are accepted by the Company shall in
the discretion of the Administrator be paid in cash.
11. TAX WITHHOLDING.
The Administrator may, in its discretion, require the Optionee to pay to
the Company at the time of exercise of any Option the amount that the
Administrator deems necessary to satisfy the Company's obligation to withhold
federal, state or local income or other taxes incurred by reason of the
exercise. Upon exercise of the Option, the Optionee may, if approved by the
Administrator in its discretion, make a written election to have Shares then
issued withheld by the Company from the Shares otherwise to be received, or to
deliver previously owned Shares, in order to satisfy the liability for such
withholding taxes. In the event that the Optionee makes, and the Administrator
permits, such an election, the number of Shares so withheld or delivered shall
have an aggregate Fair Market Value on the date of exercise sufficient to
satisfy the applicable withholding taxes. Where the exercise of an Option does
not give rise to an obligation by the Company to withhold federal, state or
local income or other taxes on the date of exercise, but may give rise to such
an obligation in the future, the Administrator may, in its discretion, make such
arrangements and impose such requirements as it deems necessary or appropriate.
Notwithstanding anything contained in the Plan to the contrary, the Optionee's
satisfaction of any tax-withholding requirements imposed by the Administrator
shall be a condition precedent to the Company's obligation as may otherwise be
provided hereunder to provide Shares to the Optionee, and the failure of the
Optionee to satisfy such requirements with respect to the exercise of an Option
shall cause such Option to be forfeited.
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<PAGE> 25
12. EXERCISE BY SUCCESSORS AND PAYMENT IN FULL.
An Option may be exercised, and payment in full of the aggregate Option
Price made, by the Successors of the Optionee only by written notice (in the
form prescribed by the Administrator) to the Company specifying the number of
Shares to be purchased. Such notice shall state that the aggregate Option Price
will be paid in full, or that the Option will be exercised as otherwise provided
hereunder, in the discretion of the Company or the Administrator, if and as
applicable.
13. NONTRANSFERABILITY OF OPTION.
Each Option granted under the Plan shall by its terms be nontransferable by
the Optionee except by will or the laws of descent and distribution of the state
wherein the Optionee is domiciled at the time of his death; provided, however,
that the Administrator may (but need not) permit other transfers, where the
Administrator concludes that such transferability (i) does not result in
accelerated taxation, (ii) does not cause any Option intended to be an Incentive
Stock Option to fail to be described in Section 422(b) of the Code and (iii) is
otherwise appropriate and desirable.
14. RIGHT OF REPURCHASE.
At the time of grant, the Administrator may provide in connection with any
grant made under the Plan that Shares received in connection with Options shall
be subject to a right of repurchase, pursuant to which the Company shall be
entitled to purchase such Shares at no less than the greater of the Option Price
paid by the Optionee for such Shares or the Fair Market Value of such Shares on
the date of such repurchase.
15. REGULATIONS AND APPROVALS.
(a) The obligation of the Company to sell Shares with respect to Options
granted under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable federal and state securities laws, and the
obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Administrator.
(b) The Administrator may make such changes to the Plan as may be necessary
or appropriate to comply with the rules and regulations of any government
authority or to obtain tax benefits applicable to stock options.
(c) Each Option is subject to the requirement that, if at any time the
Administrator determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions in a manner acceptable to the
Administrator.
(d) In the event that the disposition of stock acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required under the Securities
Act, and the Administrator may require any individual receiving Shares pursuant
to the Plan, as a condition precedent to receipt of such Shares, to represent to
the Company in writing that the Shares acquired by such individual are acquired
for investment only and not with a view to distribution and that such Shares
will be disposed of only if registered for sale under the Securities Act or if
there is an available exemption for such disposition.
16. INTERPRETATION AND AMENDMENTS; OTHER RULES.
The Administrator may make such rules and regulations and establish such
procedures for the administration of the Plan as it deems appropriate. Without
limiting the generality of the foregoing, the Administrator may (i) determine
(A) the conditions under which an Optionee will be considered to have retired or
become disabled and (B) whether any Optionee has done so; (ii) establish or
assist in the establishment of a program (which need not be administered in a
nondiscriminatory or uniform manner)
A-6
<PAGE> 26
under which the Company or a third party may make bona-fide loans on
arm's-length terms to any or all Optionees to assist such Optionees with the
satisfaction of any or all of the obligations that such Optionees may have
hereunder or under which third-party sales may be made for such purpose
(including, without limitation, a loan program under which the Company or a
third party would advance the aggregate Option Price to the Optionee and be
repaid with Option stock or the proceeds thereof and a sale program under which
funds to pay for Option stock are delivered by a third party upon the third
party's receipt from the Company of stock certificates); (iii) determine the
extent, if any, to which Options or Shares shall be forfeited (whether or not
such forfeiture is expressly contemplated hereunder); (iv) interpret the Plan
and the Award Agreements hereunder, with such interpretations to be conclusive
and binding on all persons and otherwise accorded the maximum deference
permitted by law; and (v) take any other actions and make any other
determinations or decisions that it deems necessary or appropriate in connection
with the Plan or the administration or interpretation thereof. The Administrator
may in the Award Agreement provide that the Optionee shall notify the Company of
the failure to meet any holding period requirement under the Code applicable to
Shares received upon the exercise of an Incentive Stock Option. Unless otherwise
expressly provided hereunder, the Administrator, with respect to any Option, may
exercise its discretion hereunder at the time of the award or thereafter. In the
event of any dispute or disagreement as to the interpretation of the Plan or of
any rule, regulation or procedure, or as to any question, right or obligation
arising from or related to the Plan, the decision of the Administrator shall be
final and binding upon all persons. The Board may amend the Plan as it shall
deem advisable, except that no amendment may adversely affect an Optionee with
respect to Options previously granted unless such amendments are in connection
with compliance with applicable laws; provided that the Board may not make any
amendment in the Plan that would, if such amendment were not approved by the
holders of the Common Stock, cause the Plan to fail to comply with any
requirement of applicable law or regulation, unless and until the approval of
the holders of such Common Stock is obtained. Without limiting the generality of
the foregoing, the Administrator may (subject to such considerations as may
arise under Section 16 of the Exchange Act, or under other corporate, securities
or tax laws) take any steps it deems appropriate, that are not inconsistent with
the purposes and intent of the Plan, to take into account the provisions of
Section 162(m) of the Code.
17. CHANGES IN CAPITAL STRUCTURE.
If (i) the Company or its Subsidiaries shall at any time be involved in a
merger, consolidation, dissolution, liquidation, reorganization, exchange of
shares, sale of all or substantially all of the assets or stock of the Company
or its Subsidiaries or a transaction similar thereto, (ii) any stock dividend,
stock split, reverse stock split, stock combination, reclassification,
recapitalization or other similar change in the capital structure of the Company
or its Subsidiaries, or any distribution to holders of Common Stock other than
cash dividends, shall occur or (iii) any other event shall occur which in the
judgment of the Administrator necessitates action by way of adjusting the terms
of the outstanding Options, then the Administrator shall forthwith take any such
action as in its judgment shall be necessary to preserve to the Optionees rights
substantially proportionate to the rights existing prior to such event, and to
maintain the continuing availability of Shares under Section 5 (if Shares are
otherwise then available) in a manner consistent with the intent hereof,
including, without limitation, adjustments in (x) the number and kind of shares
subject to Options, (y) the Option Price, and (z) the number and kind of shares
available under Section 5; provided that no such action taken by the
Administrator shall cause Options intended to qualify as Incentive Stock Options
to fail to qualify as Incentive Stock Options. To the extent that such action
shall include an increase or decrease in the number of Shares (or units of other
property then available) subject to outstanding Options, the number of Shares
(or units) available under Section 5 above shall be increased or decreased, as
the case may be, proportionately, as may be provided by Administrator in its
discretion.
If the Company sells all, or substantially all, of its assets, or the
Company merges or consolidates with another corporation and the stockholders of
the Company immediately prior to such transaction do not own, immediately after
such transaction, stock of the purchasing or surviving corporation in such
transaction (or of the parent corporation of the purchasing or surviving
corporation) possessing more than 50% of the voting power of the outstanding
stock of that corporation, which ownership shall be measured without regard to
any stock of the purchasing, surviving or parent corporation owned by the
stockholders of the Company before the
A-7
<PAGE> 27
transaction, then any outstanding Options shall become fully vested and
exercisable thirty (30) days prior to such merger, consolidation or sale of
assets (but shall terminate thereafter), unless provisions are made in
connection with such transaction for the continuance of the Plan or the
assumption or the substitution for outstanding Options of new options covering
the stock of the successor employer corporation, or a parent or subsidiary
thereof, with such equitable and appropriate adjustments as to price, number and
kind of shares as is just and reasonable under the circumstances. Upon the
dissolution or liquidation of the Company, all outstanding Options shall
terminate; provided, however, that the persons then entitled to exercise an
unexercised portion of an Option shall have the right, at such time immediately
prior to such dissolution or liquidation as the Company shall designate, to
exercise the Option to the full extent not theretofore exercised.
Anything in the Plan to the contrary notwithstanding, the Board may,
without further approval of the stockholders of the Company, substitute new
options for prior options of a Constituent Corporation or assume the prior
options of a Constituent Corporation.
The judgment of the Administrator with respect to any matter referred to in
this Section 17 shall be conclusive and binding upon each Optionee without the
need for any amendment to the Plan.
18. NOTICES.
All notices under the Plan shall be in writing, and if to the Company,
shall be delivered to the Board or mailed to its principal office, addressed to
the attention of the Board; and if to the Optionee, shall be delivered
personally or mailed to the Optionee at the address appearing in the records of
the Company. Such addresses may be changed at any time by written notice to the
other party given in accordance with this Section 18.
19. RIGHTS AS STOCKHOLDER.
Neither the Optionee nor any person entitled to exercise the Optionee's
rights in the event of death shall have any rights of a stockholder with respect
to the Shares subject to an Option, except to the extent that a certificate for
such Shares shall have been issued upon the exercise of the Option as provided
for herein.
20. RIGHTS TO EMPLOYMENT.
Nothing in the Plan or in any Option granted pursuant to the Plan shall
confer on any individual any right to continue in the employ (or other service,
as applicable) of the Company or its Subsidiaries or interfere in any way with
the right of the Company or its Subsidiaries to terminate the individual's
employment (or other service, as applicable) at any time.
21. EXCULPATION AND INDEMNIFICATION.
To the maximum extent permitted by law, the Company shall indemnify and
hold harmless the members of the Board and the members of the Administrator from
and against any and all liabilities, costs and expenses incurred by such persons
as a result of any act or omission to act in connection with the performance of
such person's duties, responsibilities and obligations under the Plan, other
than such liabilities, costs and expenses as may result from the gross
negligence, bad faith, willful misconduct or criminal acts of such persons.
22. CAPTIONS.
The use of captions in this Plan is for convenience. The captions are not
intended to and do not provide substantive rights.
23. GOVERNING LAW.
THE PLAN SHALL BE GOVERNED BY THE LAWS OF DELAWARE, WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICT OF LAWS.
A-8
<PAGE> 28
PROXY
DVI, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 4, 1997
The undersigned hereby constitutes and appoints Michael A. O'Hanlon and
Melvin C. Breaux, or either of them, attorneys and proxies of the undersigned
with full power of substitution to vote all shares of Common Stock of DVI, Inc.
(the "Company") owned or held by the undersigned at the Annual Meeting of
Stockholders of the Company to be held at the Sutton Place Hotel, Chicago,
Illinois, on Thursday, December 4, 1997, at 3:00 p.m. and at any adjournment
thereof.
The Board of Directors recommends a vote "FOR ALL NOMINEES" in Item 1
and "FOR" Item 2 and Item 3.
ITEM 1. Election of Directors.
/ / For all nominees listed below (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees
INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.
G. Cohn, J. McHugh, M. O'Hanlon, N. Shapiro, W. Goldberg, H. Roberts
ITEM 2. To approve the DVI 1996 Stock Option Plan and the option grants
made to employees and directors pursuant to the 1996 Stock Option Plan since
August 28, 1996.
/ / For / / Against
/ / Abstain
ITEM 3. To ratify the appointment of Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year ending June
30, 1998.
/ / For / / Against
/ / Abstain
ITEM 4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
<PAGE> 29
PAGE 2
THE PROXY HOLDERS ARE DIRECTED TO VOTE AS SET FORTH ABOVE. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER. IF NO
DIRECTION IS GIVEN WHEN THE DULY EXECUTED AND DATED PROXY IS RETURNED, SUCH
SHARES WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1, "FOR" ITEM 2 AND ITEM 3 AND
IN ACCORDANCE WITH THE JUDGMENT OF SUCH PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING. IF ANY OF THE NOMINEES FOR DIRECTOR IS
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PROXY HOLDERS WILL VOTE
FOR SUCH OTHER PERSON OR PERSONS AS THE BOARD OF DIRECTORS MAY RECOMMEND.
The undersigned hereby acknowledges receipt of the Company's Annual
Report to Stockholders and of the Notice of Annual Meeting of Stockholders and
Proxy Statement relating to the Annual Meeting.
Dated: ____________________________________________, 1997
Signature(s):
Please mark, date and sign as your name appears above and return in the
enclosed envelope. When signing as an agent, attorney, or fiduciary, or
for a corporation or partnership, indicate the capacity in which you
are signing. Shares registered in joint names should be signed by each
joint tenant or trustee.
