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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DVI, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-2722773
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
(215) 345-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL A. O'HANLON
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
(215) 345-6600
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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WITH A COPY TO:
JOHN A. HEALY, ESQ.
ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 878-8281
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.005 per
share................................. 84,012 shares $24.5625 $2,063,544.75(1) $608.75(1)
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(1) Pursuant to Rule 457(c) under the Securities Act of 1933, the calculation of
the registration fee is based on the average of the high and low prices of
the Registrant's Common Stock reported in the consolidated reporting system
of the New York Stock Exchange on April 23, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION DATED APRIL 27, 1998)
DVI, INC.
84,012 SHARES OF COMMON STOCK
PAR VALUE $.005 PER SHARE
This Prospectus relates to 84,012 shares (the "Shares") of Common Stock,
$.005 par value per share (the "Common Stock"), of DVI, Inc., a Delaware
corporation ("DVI" or the "Company"), which may be offered from time to time by
the persons named in this Prospectus under "Selling Stockholders." The Selling
Stockholders received the Shares in connection with the Company's acquisition of
J.G. Wentworth Partners, Inc., a Pennsylvania corporation ("JGWP"), J.G.
Wentworth Securities, Inc., a Pennsylvania corporation ("JGWS"), J.G. Wentworth
Partners, L.P., a Pennsylvania limited partnership ("Partners"), and J.G.
Wentworth Mortgage Funding, L.P., a Pennsylvania limited partnership ("JGWM"
and, together with JGWP, JGWS and Partners, the "Wentworth Entities") in
November 1997. The Company will receive no portion of the proceeds from the sale
of the Shares offered hereby.
It is anticipated that the Selling Stockholders will offer the Shares for
sale at the prices prevailing on the New York Stock Exchange ("NYSE") (or other
principal market on which the Shares are then traded) on the date of sale. The
Selling Stockholders also may sell the Shares privately, either directly to the
purchaser or through a broker or brokers. All costs, expenses and fees incurred
in connection with the registration of the Shares are being borne by the
Company, but all selling and other expenses incurred by the Selling Stockholders
will be borne by the Selling Stockholders. See "Plan of Distribution."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
The Selling Stockholders, and the brokers through whom sales of the Shares
are made, may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act of 1933, as amended (the "Securities Act"). In addition,
any profits realized by the Selling Stockholders or such brokers on the sale of
the Shares may be deemed to be underwriting commissions. The Company has agreed
to indemnify the Selling Stockholders and any brokers through whom sales of
Shares are made against certain liabilities, including liabilities under the
Securities Act.
Shares of the Company's Common Stock are traded on the NYSE under the
symbol "DVI." On April 24, 1998, the last sale price per share for the Common
Stock, as reported on the NYSE, was $24.375. Prospective purchasers of Common
Stock are urged to obtain a current price quotation.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy the Shares offered hereby in any jurisdiction in which such
offer or solicitation may be unlawful. No person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. Except where otherwise indicated,
neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
The date of this Prospectus is April , 1998
<PAGE> 3
TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 3
THE COMPANY................................................. 4
RISK FACTORS................................................ 5
USE OF PROCEEDS............................................. 9
SELLING STOCKHOLDERS........................................ 9
PLAN OF DISTRIBUTION........................................ 9
EXPERTS..................................................... 10
LEGAL MATTERS............................................... 10
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; and at its
regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048
and at 500 West Madison Street, Suite 1400, Chicago, Illinois, 60661-2511.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a Web site that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission at http://www.sec.gov. Reports, proxy statements and other
information concerning the Company can also be inspected at the office of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. This Prospectus omits certain of the information contained
in the Registration Statement and the exhibits and schedules thereto, in
accordance with the rules and regulations of the Commission. For further
information concerning the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and the exhibits and
schedules filed therewith, which may be inspected without charge at the office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies
of which may be obtained from the Commission at prescribed rates. Any statements
contained herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Station or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein
by reference:
(a) The Company's Annual Report on Form 10-K for its fiscal year ended
June 30, 1997, as amended by Form 10-K/A1 dated October 28, 1997 (the "1997
10-K").
(b) The Company's Quarterly Report on Form 10-Q for the quarters ended
September 30, 1997 and December 31, 1997.
(c) The Company's Current Report on Form 8-K dated October 29, 1997.
(d) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the 1997 10-K.
(e) The description of the Common Stock, $.005 par value, of the
Company contained in the Company's Registration Statement on Form 8-A filed
March 27, 1992, and incorporating by reference the information contained in
the Company's Prospectus dated May 14, 1992, contained in the Company's
Registration Statement on Form S-2 (File No. 33-46664), together with all
reports and other documents filed with the Commission for the purpose of
updating or otherwise amending that description after the date of this
Prospectus.
All documents filed by the Company after the date of the Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
into this Prospectus will be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained in this Prospectus or
any other subsequently filed document which also is or is deemed to be
incorporated by reference into this Prospectus modifies or supersedes that
statement.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF
ANY AND ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THE REGISTRATION STATEMENT
OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD
BE DIRECTED TO: DVI, INC., 500 HYDE PARK, DOYLESTOWN, PENNSYLVANIA 18901
(TELEPHONE: 215-345-6600), ATTENTION: LEGAL DEPARTMENT.
Additional updating information with respect to the matters discussed in
this Prospectus may be provided in the future by means of appendices to this
Prospectus or other documents.
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THE COMPANY
DVI is an independent specialty finance company that conducts a medical
equipment finance business and a related medical receivables finance business.
As of December 31, 1997, the Company's total assets and shareholder's equity
were $726.3 million and $106.3 million, respectively.
The Company finances the acquisition of diagnostic imaging and other types
of sophisticated medical equipment used by outpatient healthcare providers,
medical imaging centers, groups of physicians, integrated healthcare delivery
networks and hospitals. The Company's equipment finance business operates by (i)
providing financing directly to end users of equipment; (ii) providing finance
programs for vendors of diagnostic and patient treatment devices; and (iii)
purchasing medical equipment loans and leases originated by regional finance
companies ("Originators") through the Company's wholesale loan purchase program
(the "Wholesale Program"). The Company also provides lines of credit to a wide
variety of healthcare providers, many of which are also equipment finance
customers. Substantially all of the lines of credit are collateralized by third
party medical receivables due from Medicare, Medicaid, HMO, PPOs and commercial
insurance companies. By effectively and efficiently servicing the equipment
financing needs of healthcare providers and at the same time building productive
relationships with medical equipment manufacturers and vendors seeking to
arrange financing for their customers, the Company has established a niche
leadership position among independent finance companies serving the medical
industry.
The Company is a Delaware corporation and conducts its business through
operating subsidiaries. The principal operating subsidiaries are DVI Financial
Services Inc. ("DVI Financial Services") and DVI Business Credit Corporation
("DVI Business Credit"). The Company conducts securitizations through indirect
wholly-owned subsidiaries. The Company also conducts other structured financings
through its operating subsidiaries. The borrowers under the Company's various
warehouse credit facilities are DVI Financial Services or DVI Business Credit.
Except as the context otherwise requires, the term "Company" refers to DVI, Inc.
and its wholly owned subsidiaries.
The executive offices of the Company are located at 500 Hyde Park,
Doylestown, Pennsylvania 18901 (Telephone: 215-345-6600).
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RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective purchasers of Common Stock should carefully consider the
following risk factors in addition to the other information set forth in this
Prospectus and the documents incorporated by reference herein.
DEPENDENCE ON WAREHOUSE FINANCING. The Company's ability to sustain the
growth of its financing business is dependent upon funding obtained through
warehouse facilities until its equipment and other loans are permanently funded.
The funds the Company obtains through warehouse facilities are full recourse
short-term borrowings secured primarily by the underlying equipment, the medical
receivables and other collateral. These borrowings are in turn typically repaid
with the proceeds received by the Company when its equipment and other loans are
securitized or sold. At December 31, 1997 the Company had available an aggregate
of approximately $435.5 million under various warehouse facilities,
approximately $323.5 million of which is available for funding equipment loans
and approximately $112.0 million of which is available for funding medical
receivables loans. There can be no assurance that this type of warehouse
financing will continue to be available to the Company on acceptable terms. If
the Company were unable to arrange continued access to acceptable warehouse
financing, the Company would have to curtail its equipment and other loan
originations, which in turn would have a material adverse effect on the
Company's financial condition and results of operations.
DEPENDENCE ON PERMANENT FUNDING PROGRAMS. The Company's use of
securitization as its principal form of permanent funding is an important part
of the Company's business strategy. If for any reason the Company were to become
unable to access the securitization markets to fund permanently its equipment
and other loans, the consequences for the Company would be materially adverse.
The Company's ability to complete securitizations and other structured finance
transactions depends upon a number of factors, including general conditions in
the credit markets, the size and liquidity of the market for the types of
receivable-backed securities issued or placed in securitizations sponsored by
the Company and the overall performance of the Company's loan portfolio. The
Company does not have binding commitments from financial institutions or
investment banks to provide permanent funding for its equipment or medical
receivables loans.
IMPACT OF CREDIT ENHANCEMENT REQUIREMENTS. In connection with its
securitizations and other structured financings, the Company is required to
provide credit enhancement for the debt obligations issued and sold to third
parties. Typically, the credit enhancement consists of cash deposits, the
funding of subordinated tranches and/or the pledge of additional equipment or
other loans that are funded with the Company's capital. The requirement to
provide this credit enhancement reduces the Company's liquidity and requires it
to obtain additional capital. If the Company is unable to obtain and maintain
sufficient capital, it may be required to halt or curtail its securitization or
other structured financing programs, which in turn would have a material adverse
effect on the Company's financial condition and operations.
CREDIT RISK. Many of the Company's customers are outpatient healthcare
providers, the loans to whom often require a high degree of credit analysis.
Although the Company seeks to mitigate its risk of default and credit losses
through its underwriting practices and loan servicing procedures and through the
use of various forms of non-recourse or limited recourse financing (in which the
financing sources that permanently fund the Company's equipment and other loans
assume some or all of the risk of default by the Company's customers), the
Company remains exposed to potential losses resulting from a default by an
obligor. Obligors' defaults could cause the Company to make payments to the
extent the Company is obligated to do so and in the case of its permanent
equipment and other funding arrangements to the extent of the Company's
remaining credit enhancement position; could result in the loss of the cash or
other collateral pledged as credit enhancement under its permanent equipment and
other funding arrangements; or could require the Company to forfeit any residual
interest it may have retained in the underlying equipment. During the period
after the Company initially funds an equipment or other loan and prior to the
time it funds the loan on a permanent basis, the Company is exposed to full
recourse liability in the event of default by the obligor. In addition, under
the terms of securitizations and other types of structured finance transactions,
the Company generally is required to replace or repurchase equipment and other
loans in the event they fail to conform to the representations and
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warranties made by the Company, even in transactions otherwise designated as
non-recourse or limited recourse.
Defaults by the Company's customers also could adversely affect the
Company's ability to obtain additional financing in the future, including its
ability to use securitization or other forms of structured finance. The sources
of such permanent funding take into account the credit performance of the
equipment and other loans previously financed by the Company in deciding whether
and on what terms to make new loans. In addition, the credit rating agencies and
insurers that are often involved in securitizations consider prior credit
performance in determining the rating to be given to the securities issued in
securitizations sponsored by the Company and whether and on what terms to insure
such securities. To date, all of the Company's medical receivable loans (as
opposed to its equipment loans) have been funded on a full recourse basis
whereby the Company is fully liable for any losses that are incurred.
Under the Company's wholesale loan origination program, the Company
purchases equipment loans from originators that generally do not have direct
access to the securitization market as a source of permanent funding for their
loans. The Company does not work directly with the borrowers at the origination
of these equipment loans and therefore is not directly involved in structuring
the credits, however the Company independently verifies credit information
supplied by the originator. Accordingly, the Company faces a somewhat higher
degree of risk when it acquires loans under the wholesale program on a wholesale
basis. During the twelve-month period ended June 30, 1997 and the six month
period ended December 31, 1997, loans purchased under the Wholesale Program
constituted 21% and 10%, respectively, of the total loans originated during such
periods. There can be no assurance that the Company will be able to grow this
business successfully or avoid the credit risks related to wholesale loan
origination.
INTEREST RATE RISK. When the Company borrows funds through warehouse
facilities, it is exposed to certain risks caused by interest rate fluctuations.
Although the Company's equipment loans are structured and permanently funded on
a fixed interest rate basis, it uses warehouse facilities until permanent
funding is obtained. The Company uses hedging techniques to protect its interest
rate margins during the period that warehouse facilities are used prior to an
anticipated securitization and sale because funds borrowed through warehouse
facilities are obtained on a floating interest rate basis. The Company uses
derivative financial instruments, such as forward rate agreements, forward
market sales or purchases of treasury securities, and interest rate swaps and
caps, to manage its interest rate risk. The derivatives are used to manage three
components of this risk; mismatches of the maturity of assets and liabilities on
the Company's balance sheet, hedging anticipated loan securitizations and sales,
and interest rate spread protection. There can be no assurance, however, that
the Company's hedging strategy or techniques will be effective, that the
profitability of the Company will not be adversely affected during any period of
changes in interest rates or that the costs of hedging will not exceed the
benefits. A substantial and sustained increase in interest rates could adversely
affect the Company's ability to originate loans. In certain circumstances, the
Company for a variety of reasons may retain for an indefinite period certain of
the equipment and other loans it originates. In such cases, the Company's
interest rate exposure may continue for a longer period of time.
SUBSTANTIAL LEVERAGE. The Company has substantial outstanding indebtedness
and is highly leveraged. As of December 31, 1997, the Company and its
consolidated subsidiaries had total debt of $579.8 million, of which $361.1
million was full recourse debt and $218.7 million was limited recourse debt. Of
the $579.8 million of total debt, $379.2 million was long-term debt and $200.6
million was short-term debt. The ability of the Company to repay its
indebtedness will depend upon future operating performance, which is subject to
the performance of the Company's loan portfolio, the success of the Company's
business strategy, prevailing economic conditions, levels of interest rates and
financial, business and other factors, many of which are beyond the Company's
control. The degree to which the Company is leveraged also may impair its
ability to obtain additional financing on acceptable terms.
ABILITY TO SUSTAIN GROWTH. To sustain the rates of growth it has achieved
in the last three years, the Company will be required to penetrate further the
markets for lower cost diagnostic imaging equipment and for other types of
medical equipment or devices such as lasers used in patient treatment. The
Company faces significant barriers to entry in the patient treatment device
market, which is more diverse than the diagnostic
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imaging market because of the larger number of manufacturers and types of
products and the greater price range of those products. The Company has limited
experience in the patient treatment device market. In an effort to obtain access
to new markets, the Company has initiated operations internationally and has
made investments in certain emerging markets. The success and ultimate recovery
of these investments is dependent upon many factors including foreign regulation
and business practices, currency exchange regulations and currency fluctuations
and the achievement of management's planned objectives for these markets. There
can be no assurance that the Company will be able to penetrate and compete
effectively in the markets described above.
RISKS RELATED TO THE MEDICAL RECEIVABLE FINANCING BUSINESS. In July 1993,
the Company entered the medical receivable financing business and expects to
focus on this business as a part of the Company's growth strategy. The Company's
medical receivable financing business generally consists of providing loans to
healthcare providers that are secured by their receivables from payors such as
insurance companies, large self-insured companies and governmental programs and
by other collateral. While the Company expects to focus on this business as a
significant part of its growth strategy, there can be no assurance that the
Company will be able to expand this business successfully or avoid related
liabilities or losses. The Company has funded its medical receivable financing
business to date through the use of the Company's capital; $100 million in
securitizations; a rated warehouse facility of $30 million; and is in the
process of obtaining a committed $100 million revolving credit facility. The
growth of the Company's medical receivable financing business is dependent upon
the Company's ability to obtain additional funding facilities to finance medical
receivables loans.
While the medical receivable financing business shares certain
characteristics, including an overlapping customer base, with the Company's core
equipment financing business, there are many differences, including unique
risks. Healthcare providers could overstate the quality and characteristics of
their medical receivables, which the Company analyzes in determining the amount
of the line of credit to be secured by such receivables. After the Company has
established or funded a line of credit, the healthcare providers could change
their billing and collection systems, accounting systems or patient records in a
way that could adversely affect the Company's ability to monitor the quality
and/or performance of the related medical receivables. There are technical legal
issues associated with creating and maintaining perfected security interests in
medical receivables, specifically those generated by Medicaid and Medicare
claims. Payors may make payments directly to healthcare providers that have the
effect (intentionally or otherwise) of circumventing the Company's rights in and
access to such payments. Payors may attempt to offset their payments to the
Company against debts owed to the payors by the healthcare providers. In
addition, as a lender whose position is secured by receivables, the Company is
likely to have less leverage in collecting outstanding receivables in the event
of a borrower's insolvency than a lender whose position is secured by medical
equipment that the borrower needs to run its business. A borrower that receives
medical receivables loans from the Company and defaults on obligations secured
by such receivables may require additional loans, or modifications to the terms
of existing loans, in order to continue operations and repay outstanding loans.
The Company may have a conflict of interest when it acts as servicer for an
equipment-based securitization and originates medical receivables loans to
borrowers whose equipment loans have been securitized. The Company's efforts to
develop suitable sources of funding for its medical receivable financing
business through securitization or other structured finance transactions may be
constrained or hindered due to the fact that the use of structured finance
transactions to fund medical receivables is a relatively new process. While the
Company believes it has structured its credit policies and lending practices to
take into account these and other factors, there can be no assurance the Company
will not sustain credit losses in connection with its medical receivable
financing business or that the medical receivable financing business will meet
the Company's growth expectations.
MEDICAL EQUIPMENT MARKET. The demand for the Company's equipment financing
services is affected by numerous factors beyond the control of the Company.
These factors include general economic conditions, including the effects of
recession or inflation, and fluctuations in supply and demand for various types
of sophisticated medical equipment resulting from, among other things,
technological and economic obsolescence and government regulation. In addition,
the demand for sophisticated medical equipment also may be negatively affected
by reductions in the amount of reimbursement to healthcare providers for their
services
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from third-party payors such as insurance companies, large self-insured
companies and government programs, and the increased use of managed healthcare
plans that often restrict the use of certain types of high technology medical
equipment. At December 31, 1997, financing for purchases of magnetic resonance
imaging ("MRI") machines accounted for approximately 38% (by dollar volume) of
the total loans originated by the Company. Any substantial decrease in the
Company's loan originations for the purchase of MRI machines could have a
material adverse effect on the Company.
HEALTHCARE REFORM. During the past half decade, large U.S. corporations
and U.S. consumers of healthcare services have substantially increased their use
of managed healthcare plans such as HMOs and PPOs. This development has
increased the purchasing power of those plans, which in turn have used that
power to lower the amounts they pay for healthcare services. Since 1993,
numerous proposals have been presented to Congress to restructure the U.S.
healthcare system. The principal features of these proposals are to provide
universal access to healthcare services and to achieve overall cost containment.
To date, none of the proposals initiated at the federal government level have
been enacted. In the private sector, however, cost containment initiatives have
continued. Certain aspects of these actual and proposed cost containment
initiatives, particularly plans to eliminate payment for duplicative procedures,
may reduce the overall demand for the types of medical equipment financed by the
Company. Declining reimbursement for medical services also could cause
hospitals, physician groups and other healthcare providers, which form a
significant portion of the Company's customer base, to experience cash flow
problems. This in turn could negatively impact their ability to meet their
financial obligations to the Company and/or reduce their future equipment
acquisitions which could adversely affect the Company. The Company believes that
the general movement toward a managed healthcare system in the U.S. will
materially reduce the demand for medical equipment and for related financing.
DEPENDENCE ON REFERRALS AND SUPPORT FROM EQUIPMENT MANUFACTURERS. The
Company obtains a significant amount of its equipment financing business through
referrals from manufacturers of diagnostic imaging equipment and other
manufacturers of medical equipment it finances. In addition, these manufacturers
occasionally provide credit support for or assume first loss positions with
respect to equipment financing they refer to the Company. These manufacturers
are not contractually obligated to refer their customers to the Company for
equipment financing or to provide credit support or assume first loss positions
in connection with their referrals. There is no assurance that these
manufacturers will continue to refer equipment financing opportunities to the
Company or to provide credit support or assume first loss positions. If for any
reason the Company were no longer to benefit from these referrals or related
credit support and assumptions of first loss positions, its equipment financing
business would be materially adversely affected.
COMPETITION. The business of financing sophisticated medical equipment is
highly competitive. The Company competes with equipment manufacturers that sell
and finance sales of their own equipment and finance subsidiaries of national
and regional commercial banks and equipment leasing and financing companies.
Many of the Company's competitors have significantly greater financial and
marketing resources than the Company. In addition, the competition in the new
markets recently targeted by the Company, specifically the patient treatment
device financing market and medical receivable financing market, may be greater
than the levels of competition historically experienced by the Company.
The Company believes that increased equipment loan originations during the
past three years resulted, in part, from a decrease in the number of competitors
in the higher cost medical equipment financing market and the Company's high
level of penetration in this market. There can be no assurance that new
competitive providers of financing will not enter the medical equipment
financing market in the future. To meet its long-term growth objectives, the
Company must penetrate further its targeted markets for lower cost medical
equipment and medical receivable financing businesses. Such penetration may
require the Company to reduce its margins to be competitive in the lower cost
medical equipment and medical receivable financing businesses. In addition,
there can be no assurance that the Company will sustain the same level of
equipment loan originations in future periods as during the past three years or
that it will be able to meet its long-term growth objectives.
8
<PAGE> 10
DEPENDENCE UPON KEY PERSONNEL. The ability of the Company to successfully
continue its existing financing business, to expand into its targeted markets
and to develop its newer businesses depends upon the ability of the Company to
retain the services of its key management personnel, including Michael A.
O'Hanlon, the Company's President and Chief Executive Officer and Steven R.
Garfinkel, the Company's Executive Vice President and Chief Financial Officer.
The loss of any of these individuals or an inability to attract and maintain
additional qualified personnel could adversely affect the Company. There can be
no assurance that the Company will be able to retain its existing management
personnel or to attract additional qualified personnel.
YEAR 2000 CONCERNS. The Company believes, based on discussions with its
current systems vendors, that its software applications and operational programs
will properly recognize calendar dates beginning in the Year 2000. In addition,
the Company is discussing with its customers and suppliers the possibility of
any interface difficulties relating to the Year 2000 which may affect the
Company. To date, no significant concerns have been identified, however, there
can be no assurance that there will not be any Year 2000-related operating
problems or expenses that will arise with the Company's computer systems and
software or in connection with the Company's interface with the computer systems
and software of its vendors and customers and suppliers.
USE OF PROCEEDS
The Company will receive no portion of the proceeds of the sale of the
Shares offered hereby.
SELLING STOCKHOLDERS
The Selling Stockholders acquired the Shares in connection with the
Company's acquisition of the Wentworth Entities in November 1997. Under the
terms of a Registration Rights Agreement dated as of November 14, 1997 by and
among the Company and the Selling Stockholders, the Company agreed to register
the Shares which may be sold by the Selling Stockholders from time to time. The
table below sets forth: (i) each Selling Stockholder's affiliation with the
Company, (ii) the aggregate number of shares of Common Stock owned by each
Selling Stockholder prior to the offering made by this Prospectus; (iii) the
maximum number of shares that each Selling Stockholder may offer and sell
pursuant to this Prospectus; and (iv) the number of shares (and percentage of
the outstanding shares) of Common Stock owned by each Selling Stockholder after
the offering made by this Prospectus.
<TABLE>
<CAPTION>
MATERIAL MAXIMUM NUMBER OF SHARES
RELATIONSHIP NUMBER OF SHARES NUMBER OF (AND PERCENTAGE OF
WITH COMPANY OF COMMON STOCK SHARES THAT OUTSTANDING SHARES) OF
DURING BENEFICIALLY MAY BE COMMON STOCK
PREVIOUS OWNED OFFERED TO BE
NAME THREE YEARS BEFORE OFFERING (1) HEREBY BENEFICIALLY OWNED
- ---- ------------ -------------------- ----------- ----------------------
<S> <C> <C> <C> <C>
Gary Veloric................. None 37,805 37,805 -0-
James Delaney................ None 37,805 37,805 -0-
John L. Godfrey III.......... (2) 8,402 8,402 -0-
</TABLE>
- ---------------
(1) Acquired on November 14, 1997 in connection with the Company's acquisition
of the Wentworth Entities.
(2) Mr. Godfrey is the President of each of DVI Healthcare Financial Advisors,
Inc. and DVI Mortgage Funding, Inc., each of which are indirectly
wholly-owned subsidiaries of the Company.
PLAN OF DISTRIBUTION
It is anticipated that the Selling Stockholders will offer the Shares for
sale at the prices prevailing on the NYSE (or other principal market on which
the Shares are then traded) on the date of sale. The Selling Stockholders also
may sell the Shares privately, either directly to the purchaser or through a
broker or brokers. There are no arrangements or agreements with any brokers or
dealers to act as underwriters of the Common
9
<PAGE> 11
Stock as of the date hereof. All costs, expenses and fees incurred in connection
with the registration of the Shares, including, but not limited to, all
registration and filing fees, printing expenses and fees (if any) and
disbursements of the Company's counsel and accountants, are being borne by the
Company, but all selling and other expenses incurred by the Selling Stockholders
will be borne by the Selling Stockholders.
The Selling Stockholders, and the brokers through whom the sales of the
Shares are made, may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act. In addition, any profits realized by the
Selling Stockholders or such brokers on the sale of the Shares may be deemed to
be underwriting commissions. The Company has agreed to indemnify the Selling
Stockholders and any brokers through whom sales of Shares are made against
certain liabilities, including liabilities under the Securities Act.
EXPERTS
The financial statements and the related financial statement schedules
included and incorporated in this Prospectus and elsewhere in the Registration
Statement by reference from the Company's Annual Report on Form 10-K for the
year ended June 30, 1997, as amended, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is included and
incorporated herein by reference, and have been so included and incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Rogers & Wells LLP, 200 Park Avenue, New York, New York
10166.
10
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee........................................... $[ ]
Printing and Engraving..................................... 5,000
Accounting Fees............................................ 5,000
Legal Fees and Expenses.................................... 25,000
Blue Sky Fees and Expenses................................. 2,000
Miscellaneous Fees and Expenses............................ 10,000
---------
Total............................................ $[ ]
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145(a) of the General Corporation Law of the State of Delaware (the
"General Corporation Law") provides, in general, that a corporation shall have
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director or officer of the corporation. Such indemnity may be against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding, if the indemnitee acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, the indemnitee must not have
had reasonable cause to believe his conduct was unlawful.
Section 145(b) of the General Corporation Law provides, in general, that a
corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of the corporation
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation.
Section 145(g) of the General Corporation Law provides in general that a
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director or officer of the corporation against any
liability asserted against and incurred by him in any such capacity, or arising
out of his status as such, whether or not the corporation would have the power
to indemnify him against such liability under the provisions of the law.
The Company's By-laws require the Company to indemnify each of its
directors, officers and employees to the fullest extent permitted by law in
connection with any actual or threatened action or proceeding arising out of his
service to the Company or to other organizations at the Company's request.
The Company has agreed to indemnify the Selling Stockholders and any
brokers through whom sales of Shares are made against certain liabilities,
including liabilities under the Securities Act.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<S> <C> <C>
3.1* -- Certificate of Incorporation of the Company
3.2* -- By-Laws of the Company
4.1* -- Specimen of stock certificate for DVI's Common Stock, par
value $.005 per share
5.1** -- Opinion of Rogers & Wells
</TABLE>
II-1
<PAGE> 13
<TABLE>
<S> <C> <C>
10.1** -- Acquisition and Merger Agreement dated as of November 14, 1997 by and among the Company, J.G.
Wentworth Partners, Inc., J.G. Wentworth Management Company, Inc., J.G. Wentworth Securities, Inc.,
DVI Mortgage Funding, Inc., DVI Healthcare Financial Advisors, Inc. and the Selling Stockholders.
10.2** -- Registration Rights Agreement dated as of November 14, 1997 by and between the Company and the
Selling Stockholders
23.1** -- Consent of Rogers & Wells LLP (Included in Exhibit 5.1)
23.2** -- Consent of Deloitte & Touche LLP
</TABLE>
- ---------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-3
(Registration No. 33-84604) and incorporated herein by reference.
** Filed herewith.
(b) Financial Statements
Inapplicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
in the information set forth in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the registrant's Certificate of Incorporation, By-laws,
or otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Doylestown, State of Pennsylvania on April 25, 1998.
DVI, INC.
By:/s/ MICHAEL A. O'HANLON
------------------------------------
Name: Michael A. O'Hanlon
Title: Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of DVI, Inc. hereby severally constitute Michael A. O'Hanlon and
Steven R. Garfinkel and each of them singly, our true and lawful attorneys with
full power to them, and each of them singly, to sign for us and in our names in
the capacities indicated below, the Registration Statement filed herewith and
any and all amendments to said Registration Statement (including without
limitation any amendments filed pursuant to Section 462(b) of the Securities Act
of 1933), and generally to do all such things in our names and in our capacities
as officers and directors to enable DVI, Inc. to comply with the provisions of
the Securities Act of 1933, and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signature as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL A. O'HANLON Chief Executive Officer, President April 25, 1998
- --------------------------------------------------- and Director
MICHAEL A. O'HANLON
/s/ STEVEN R. GARFINKEL Senior Vice President and Chief April 25, 1998
- --------------------------------------------------- Financial Officer (Principal
STEVEN R. GARFINKEL Financial Officer)
/s/ JOHN P. BOYLE Vice President and Chief Accounting April 25, 1998
- --------------------------------------------------- Officer (Principal Accounting
JOHN P. BOYLE Officer)
/s/ GERALD L. COHN Director April 25, 1998
- ---------------------------------------------------
GERALD L. COHN
/s/ WILLIAM S. GOLDBERG Director April 25, 1998
- ---------------------------------------------------
WILLIAM S. GOLDBERG
/s/ JOHN E. MCHUGH Director April 25, 1998
- ---------------------------------------------------
JOHN E. McHUGH
</TABLE>
II-3
<PAGE> 15
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director April 25, 1998
- ---------------------------------------------------
HARRY T.J. ROBERTS
/s/ NATHAN SHAPIRO Director April 25, 1998
- ---------------------------------------------------
NATHAN SHAPIRO
</TABLE>
II-4
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C>
3.1* Certificate of Incorporation of the Company
3.2* By-Laws of the Company
4.1* Specimen of stock certificate for DVI's Common Stock, par
value $.005 per share
5.1** Opinion of Rogers & Wells LLP
10.1** Acquisition and Merger Agreement dated as of November 14,
1997 by and among the Company, J.G. Wentworth Partners,
Inc., J.G. Wentworth Management Company, Inc., J.G.
Wentworth Securities, Inc., DVI Mortgage Funding, Inc., DVI
Healthcare Financial Advisors, Inc. and the Selling
Stockholders.
10.2** Registration Rights Agreement dated as of November 14, 1997
by and between the Company and the Selling Stockholders
23.1** Consent of Rogers & Wells LLP (Included in Exhibit 5.1)
23.2** Consent of Deloitte & Touche LLP
</TABLE>
- ---------------
* Filed as an Exhibit to the Company's Registration Statement on Form S-3
(Registration No. 33-84604) and incorporated herein by reference.
** Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF ROGERS & WELLS LLP]
April 27, 1998
DVI, Inc.
500 Hyde Park
Doylestown, PA 18901
Re:Registration on Form S-3
Ladies and Gentlemen:
We have acted as special counsel for DVI, Inc., a Delaware corporation (the
"Company") in connection with the Registration Statement on Form S-3 (the
"Registration Statement"), filed by the Company with the Securities and Exchange
Commission (the "Commission") for registration under the Securities Act of 1933,
as amended (the "Securities Act"), of 84,012 shares (the "Offered Shares") of
common stock, par value $.005 per share (the "Common Stock") to be offered from
time to time by certain selling stockholders (the "Selling Stockholders") of the
Company.
In rendering the opinion expressed herein, we have examined the Registration
Statement in the form to be filed with the Commission on or about the date
hereof. In addition, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary, including the Certificate of
Incorporation and By-laws of the Company, and the corporate proceedings of the
Company relating to the authorization and issuance of the Offered Shares. As to
the factual matters relevant to the opinions set forth below we have, with your
permission, relied upon certificates of officers of the Company and public
officials.
Based upon the foregoing and on such examination of law as we have deemed
necessary, we are of the opinion that the Common Stock has been duly authorized
and validly issued to the Selling Stockholders by the Company and, when issued
and sold by the Selling Stockholders in the manner described in the Registration
Statement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the reference to this firm under
the caption "Legal Matters" in the Prospectus contained in the Registration
Statement. In giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act, or the Rules and Regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Rogers & Wells LLP
<PAGE> 1
Exhibit 10.1
MERGER AND ACQUISITION AGREEMENT
dated as of November 14, 1997
RELATING TO THE PURCHASE BY
DVI FINANCIAL SERVICES, INC
of
PARTNERSHIP INTERESTS IN
J.G. WENTWORTH PARTNERS, L.P.
and
J.G. WENTWORTH MORTGAGE FUNDING, L.P.
and
THE MERGERS OF
J.G. WENTWORTH SECURITIES, INC.
WITH AND INTO
DVI HEALTHCARE FINANCIAL ADVISORS, INC.
and
J.G. WENTWORTH PARTNERS INC.
WITH AND INTO
DVI MORTGAGE FUNDING, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
ARTICLE I
SALE OF PARTNER INTERESTS
1.01 Purchase and Sale of Partner Interests......................... 1
1.02 Purchase Price................................................. 1
ARTICLE II
THE MERGERS
2.01 The DVIHA Merger............................................... 2
2.02 The DVIMF Merger............................................... 2
2.03 DVIHA Effective Time........................................... 2
2.04 DVIMF Effective Time........................................... 2
2.05 Certificates of Incorporation and Bylaws of the Surviving
Corporations................................................ 3
2.06 Directors and Officers of the Surviving Corporations........... 3
2.07 Effects of the Mergers......................................... 3
2.08 Further Assurances............................................. 3
ARTICLE III
CONVERSION OF SHARES; EXCHANGE PROCEDURES
3.01 DVIHA Merger Conversion of Capital Stock....................... 4
3.02 DVIMF Merger Conversion of Capital Stock....................... 4
3.03 Dissenting Stockholders........................................ 5
ARTICLE IV
CLOSING; CERTIFICATES
4.01 Closing........................................................ 5
4.02 Legend on Certificates......................................... 5
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE PARTNERS
5.01 Organization; Authority........................................ 6
5.02 Capital Structure and Ownership................................ 6
5.03 Corporate and Partnership Documents............................ 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
5.04 Governmental Approvals and Filings............................. 7
5.05 Books and Records.............................................. 7
5.06 Taxes.......................................................... 8
5.07 Legal Proceedings.............................................. 8
5.08 Compliance With Laws and Orders................................ 9
5.09 Tangible Personal Property..................................... 9
5.10 Bank Accounts.................................................. 9
5.11 Brokers........................................................ 9
5.12 Disclosure..................................................... 9
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AND PARTNERS
6.01 Organization; Authority........................................ 10
6.02 No Conflicts................................................... 10
6.03 Title to Shares; Partner Interests............................. 10
6.04 No Government Proceedings...................................... 11
6.05 Investment Representations..................................... 11
6.06 Brokers........................................................ 11
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF JGW & CO.
7.01 Financial Statements........................................... 12
7.02 Absence of Changes; Undisclosed Liabilities.................... 12
7.03 Employee Benefits.............................................. 13
7.04 Subsidiaries................................................... 13
7.05 No Conflicts................................................... 13
7.07 Real Property.................................................. 14
7.08 Employees...................................................... 14
7.09 Organization; Authority........................................ 14
7.10 Material Contracts............................................. 14
7.11 Intellectual Property Rights................................... 15
7.12 Licenses....................................................... 15
7.13 Insurance...................................................... 15
7.14 Broker-Dealer Business......................................... 16
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF PURCHASER, DVIHA AND DVIMF
8.01 Organization................................................... 17
8.02 Authority...................................................... 17
8.03 No Conflicts................................................... 17
8.04 Governmental Approvals and Filings............................. 17
8.05 Legal Proceedings.............................................. 18
8.06 Purchase for Investment........................................ 18
8.07 DVI Stock...................................................... 18
8.08 Capital Stock.................................................. 18
8.09 SEC Reports.................................................... 18
8.10 Brokers........................................................ 18
ARTICLE IX
COVENANTS OF THE STOCKHOLDERS AND THE PARTNERS
9.01 Regulatory and Other Approvals................................. 19
9.02 Investigation by Purchaser..................................... 19
9.03 No Solicitations............................................... 19
9.04 Conduct of Business............................................ 20
9.05 Employee Matters............................................... 21
9.06 Certain Restrictions........................................... 21
9.07 Affiliate Transactions......................................... 22
9.08 Books and Records.............................................. 23
9.09 Noncompetition................................................. 23
9.10 Notice and Cure................................................ 25
9.11 Fulfillment of Conditions...................................... 25
9.12 Relocation of Facilities....................................... 25
9.13 Allocation of Profits and Losses............................... 25
9.14 Use of JGW Name................................................ 26
9.15 Licenses....................................................... 26
ARTICLE X
COVENANTS OF PURCHASER, DVIHA AND DVIMF
10.01 Regulatory and Other Approvals........................... 26
10.02 Notice and Cure.......................................... 27
10.03 Fulfillment of Conditions................................ 27
10.04 Certain Payments......................................... 27
10.05 Non-Solicitation......................................... 27
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
10.06 Compliance with Section 9.13............................. 28
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF PURCHASER, DVIHA AND DVIMF
11.01 Representations and Warranties........................... 28
11.02 Performance.............................................. 28
11.03 Officers' Certificates................................... 28
11.04 Orders and Laws.......................................... 28
11.05 Third Party Consents..................................... 28
11.06 Opinion of Counsel....................................... 29
11.07 Certificates............................................. 29
11.08 Proceedings.............................................. 29
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF THE
STOCKHOLDERS AND THE PARTNERS
12.01 Representations and Warranties........................... 29
12.02 Performance.............................................. 30
12.03 Officers' Certificates................................... 30
12.04 Orders and Laws.......................................... 30
12.05 Third Party Consents..................................... 30
12.06 Registration Rights Agreement............................ 30
12.07 Good Standing Certificates............................... 30
12.08 Opinion of Counsel....................................... 30
ARTICLE XIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
13.01 Survival of Representations, Warranties, Covenants and
Agreements............................................. 31
ARTICLE XIV
INDEMNIFICATION
14.01 Indemnification.......................................... 31
14.02 Method of Asserting Claims............................... 33
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
ARTICLE XV
TERMINATION
15.01 Termination.............................................. 36
15.02 Effect of Termination.................................... 37
ARTICLE XVI
DEFINITIONS
16.01 Definitions.............................................. 37
ARTICLE XVII
MISCELLANEOUS
17.01 Notices.................................................. 44
17.02 Entire Agreement......................................... 45
17.03 Expenses................................................. 45
17.04 Public Announcements..................................... 46
17.05 Confidentiality.......................................... 46
17.06 Further Assurances; Post-Closing Cooperation............. 46
17.07 Waiver................................................... 47
17.08 Amendment................................................ 47
17.09 No Third Party Beneficiary............................... 47
17.10 No Assignment; Binding Effect............................ 47
17.11 Headings................................................. 48
17.12 Invalid Provisions....................................... 48
17.13 Governing Law............................................ 48
17.14 Counterparts............................................. 48
</TABLE>
v
<PAGE> 7
EXHIBIT 10.1
This MERGER AND ACQUISITION AGREEMENT dated as of November 14, 1997
is made and entered into by and among DVI Financial Services, Inc., a Delaware
corporation ("Purchaser"), DVI Healthcare Financial Advisors, Inc., a Delaware
corporation ("DVIHA"), DVI Mortgage Funding, Inc., a Delaware corporation
("DVIMF"), J.G. Wentworth Management Company, Inc., a Pennsylvania corporation
("JGW & Co."), J.G. Wentworth Securities, Inc., a Pennsylvania corporation (the
"Company"), J.G. Wentworth Partners, Inc., a Pennsylvania corporation (the
"General Partner"), the persons listed on Schedule A (the "JGW Partners"),
Schedule B (the "MF Partners" and, together with the JGW Partners, the
"Partners"), Schedule C (the "JGW Stockholders") and Schedule D (the "JGW
Partners Stockholders" and, together with the JGW Stockholders, the
"Stockholders") and relates to (i) the merger of (A) the Company with and into
DVIHA and (B) the General Partner with and into DVIMF and (ii) the purchase by
Purchaser (A) from the respective JGW Partners of the limited partner interests
(the "JGW Partner Interests") in J.G. Wentworth Partners, L.P., a Pennsylvania
limited partnership (the "JGW Partnership"), listed on Schedule A and (B) from
the respective MF Partners of the limited partner interests (the "MF Partner
Interests" and, together with the JGW Partner Interests, the "Partner
Interests") in J.G. Wentworth Mortgage Funding, L.P., a Pennsylvania limited
partnership (the "MF Partnership"), listed on Schedule B. The JGW Partnership,
the MF Partnership, the Company and the General Partner are sometimes
hereinafter collectively referred to as the "Purchased Entities." Capitalized
terms used herein and not otherwise defined have the meanings ascribed to such
terms in Article 16.
WHEREAS, the Boards of Directors of DVIHA, DVIMF, the Company and
the General Partner have each determined that it is advisable and in the best
interests of their respective stockholders to consummate, and have approved, the
business combination transaction provided for herein in which the Company would
merge with and into DVIHA (the "DVIHA Merger") and the General Partner would
merge with and into DVIMF (the "DVIMF Merger");
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF PARTNER INTERESTS
1.01 Purchase and Sale of Partner Interests. The Partners agree to
sell to Purchaser, and Purchaser agrees to purchase from the Partners, all of
the right, title and interest of the Partners in and to the Partner Interests at
the Closing on the terms and subject to the conditions set forth in this
Agreement.
<PAGE> 8
1.02 Purchase Price. The aggregate purchase price for the Partner
Interests (the "Purchase Price") shall be 37,940 shares of common stock, par
value $.005 per share (the "DVI Stock"), of DVI, Inc., a Delaware corporation
and the parent of Purchaser ("DVI"), which will be issued to the Partners in the
amounts set forth on Schedules A and B.
ARTICLE II
THE MERGERS
2.01 The DVIHA Merger. At the DVIHA Effective Time (as defined in
Section 2.03), upon the terms and subject to the conditions of this Agreement
and in accordance with the General Corporation Law of the State of Delaware (the
"DGCL") and the Pennsylvania Business Corporation Law of 1988 (the "PBCL"), the
Company shall be merged with and into DVIHA. DVIHA shall be the surviving
corporation in the DVIHA Merger. As a result of the DVIHA Merger, the
outstanding shares of capital stock of DVIHA and the Company shall be converted
or cancelled in the manner provided in Article III.
2.02 The DVIMF Merger. At the DVIMF Effective Time (as defined in
Section 2.04), upon the terms and subject to the conditions of this Agreement
and in accordance with the DGCL and the PBCL, the General Partner shall be
merged with and into DVIMF. DVIMF shall be the surviving corporation in the
DVIMF Merger. As a result of the DVIMF Merger, the outstanding shares of capital
stock of DVIMF and the General Partner shall be converted or cancelled in the
manner provided in Article III.
2.03 DVIHA Effective Time. At the Closing, (a) a certificate of
merger (the "DVIHA Certificate of Merger") shall be duly prepared and executed
by DVIHA as the surviving corporation of the DVIHA Merger and as soon as
practicable thereafter delivered to the Secretary of State of the State of
Delaware (the "Delaware Secretary of State") for filing, as provided in Section
251 of the DGCL and (b) articles of merger (the "DVIHA Articles of Merger")
shall be duly prepared and executed by DVIHA as the surviving corporation of the
DVIHA Merger and, as soon as practicable thereafter, delivered to the Department
of State of the Commonwealth of Pennsylvania (the "Pennsylvania Department of
State") for filing, as provided in Sections 1921 and 1927 of the PBCL, each, on,
or as soon as practicable after, the Closing Date. The DVIHA Merger shall become
effective on the later to occur of (i) the time of the filing of the DVIHA
Certificate of Merger with the Delaware Secretary of State and (ii) the time of
filing of the DVIHA Articles of Merger with the Pennsylvania Department of State
(the date and time of such later filing being referred to herein as the "DVIHA
Effective Time").
2.04 DVIMF Effective Time. At the Closing, (a) a certificate of
merger (the "DVIMF Certificate of Merger") shall be duly prepared and executed
by DVIMF as the surviving corporation of the DVIMF Merger and as soon as
practicable thereafter delivered to the Delaware Secretary of State for filing,
as provided in Section 251 of the DGCL and (b) articles of merger (the "DVIMF
Articles of Merger") shall be duly prepared and executed by DVIMF as the
surviving corporation of the DVIMF Merger and, as soon as practicable
thereafter, delivered to the Pennsylvania Department of State for filing, as
provided in Sections 1921 and 1927 of the PBCL, each, on, or as soon as
practicable after, the Closing Date. The
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DVIMF Merger shall become effective on the later to occur of (i) the time of the
filing of the DVIMF Certificate of Merger with the Delaware Secretary of State
and (ii) the time of filing of the DVIMF Articles of Merger with the
Pennsylvania Department of State (the date and time of such later filing being
referred to herein as the "DVIMF Effective Time").
2.05 Certificates of Incorporation and Bylaws of the Surviving
Corporations.
(a) At the DVIHA Effective Time, (i) the Certificate of
Incorporation of DVIHA as in effect immediately prior to the DVIHA Effective
Time shall be the Certificate of Incorporation of DVIHA, as the surviving
corporation of the DVIHA Merger, until thereafter amended as provided by law and
such Certificate of Incorporation, and (ii) the Bylaws of DVIHA as in effect
immediately prior to the DVIHA Effective Time shall be the Bylaws of DVIHA, as
the surviving corporation of the DVIHA Merger, until thereafter amended as
provided by law, the Certificate of Incorporation of DVIHA and such Bylaws.
(b) At the DVIMF Effective Time, (i) the Certificate of
Incorporation of DVIMF as in effect immediately prior to the DVIMF Effective
Time shall be the Certificate of Incorporation of DVIMF, as the surviving
corporation of the DVIMF Merger, until thereafter amended as provided by law and
such Certificate of Incorporation, and (ii) the Bylaws of DVIMF as in effect
immediately prior to the DVIMF Effective Time shall be the Bylaws of DVIMF, as
the surviving corporation of the DVIMF Merger, until thereafter amended as
provided by law, the Certificate of Incorporation of DVIMF and such Bylaws.
2.06 Directors and Officers of the Surviving Corporations.
(a) The directors and officers of DVIHA immediately prior to the
DVIHA Effective Time shall, from and after the DVIHA Effective Time, be the
directors and officers, respectively, of DVIHA, as the surviving corporation of
the DVIHA Merger, until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the DVIHA's Certificate of Incorporation and Bylaws.
(b) The directors and officers of DVIMF immediately prior to the
DVIMF Effective Time shall, from and after the DVIMF Effective Time, be the
directors and officers, respectively, of DVIMF, as the surviving corporation of
the DVIMF Merger, until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the DVIMF's Certificate of Incorporation and Bylaws.
2.07 Effects of the Mergers. Subject to the foregoing, the effects
of the DVIHA Merger and the DVIMF Merger shall be as provided in the applicable
provisions of the DGCL and the PBCL.
2.08 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the DVIHA Merger and the
DVIMF Merger, to vest the surviving corporations with full title to all assets,
properties, rights, approvals, immunities and
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franchises of the Company or the General Partner, as the case may be, or to
effect the other purposes of this Agreement.
ARTICLE III
CONVERSION OF SHARES; EXCHANGE PROCEDURES
3.01 DVIHA Merger Conversion of Capital Stock. At the DVIHA
Effective Time, by virtue of the DVIHA Merger and without any action on the part
of the holders thereof:
3.011 Capital Stock. Each issued and outstanding share of the common
stock, par value $.01 per share, of DVIHA ("DVIHA Common Stock") shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of DVIHA, as the surviving corporation ("DVIHA
Surviving Corporation Common Stock"). Each certificate representing outstanding
shares of DVIHA Common Stock shall at the DVIHA Effective Time represent an
equal number of shares of DVIHA Surviving Corporation Common Stock.
3.012 Cancellation of Treasury Stock. All shares of common stock,
par value $.01 per share, of the Company (the "JGW Stock") that are owned by the
Company as treasury stock shall be canceled and retired and shall cease to exist
and no stock of DVIHA or other consideration shall be delivered in exchange
therefor.
3.013 Consideration. All of the shares of JGW Stock held by the JGW
Stockholders shall be cancelled, and shall be converted into the right of the
JGW Stockholders to receive 42,005 shares of DVI Stock, which will be issued to
the JGW Stockholders in the amounts set forth on Schedule C.
3.02 DVIMF Merger Conversion of Capital Stock. At the DVIMF
Effective Time, by virtue of the DVIMF Merger and without any action on the part
of the holders thereof:
3.021 Capital Stock. Each issued and outstanding share of the common
stock, par value $.01 per share, of DVIMF ("DVIMF Common Stock") shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of DVIMF, as the surviving corporation ("DVIMF
Surviving Corporation Common Stock"). Each certificate representing outstanding
shares of DVIMF Common Stock shall at the DVIMF Effective Time represent an
equal number of shares of DVIMF Surviving Corporation Common Stock.
3.022 Cancellation of Treasury Stock. All shares of common stock,
par value $.01 per share, of the General Partner (the "JGW Partners Stock" and,
together with the JGW Stock, the "Stock") that are owned by the General Partner
as treasury stock shall be canceled and retired and shall cease to exist and no
stock of DVIMF or other consideration shall be delivered in exchange therefor.
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3.023 Consideration. All of the shares of JGW Partners Stock held by
the JGW Stockholders shall be cancelled, and shall be converted into the right
of the JGW Partners Stockholders to receive 4,065 shares of DVI Stock, which
will be issued to the JGW Partners Stockholders in the amounts set forth on
Schedule D.
3.03 Dissenting Stockholders.
3.031 Any shares of Stock the holder of which has, as of the DVIHA
Effective Time or the DVIMF Effective Time, as the case may be, asserted and
preserved, and not effectively withdrawn or otherwise lost, his dissenters'
rights pursuant to the PBCL (all such holders, collectively, the "Dissenting
Stockholders" and all such shares, the "Dissenting Shares") shall not be
converted into the right to receive the consideration described in Section 3.013
or 3.023, as the case may be, and the Dissenting Stockholders shall be entitled
to payment of the value of the Dissenting Shares in accordance with the
provisions of the PBCL; but if, after the DVIHA Effective Time or the DVIMF
Effective Time, as the case may be, any Dissenting Stockholder fails to perfect
or otherwise loses any such dissenters' rights pursuant to the PBCL, any such
Dissenting Stockholder shall forfeit the right to appraisal of such Dissenting
Shares, and to the extent that the PBCL requires such treatment, such Dissenting
Shares shall thereupon be deemed to have been converted as of the DVIHA
Effective Time or the DVIMF Effective Time, as the case may be, into the right
to receive the consideration described in Section 3.013 or 3.023, as the case
may be, without any interest unless otherwise required by law.
3.032 The Company and the General Partner shall give prompt notice
to Purchaser with respect to any preservation or assertion of rights under
subchapter D of chapter 15 of the PBCL by any holder of Stock. Neither the
Company nor the General Partner shall, except with the prior written consent of
Purchaser, voluntarily make any payment with respect to, or settle or offer to
settle, any rights of any Dissenting Stockholder.
ARTICLE IV
CLOSING; CERTIFICATES
4.01 Closing. The Closing will take place at the offices of Rogers &
Wells, 200 Park Avenue, New York, New York 10166, or at such other place as
Purchaser and the Stockholders and the Partners mutually agree, at 10:00 A.M.
local time, on the Closing Date. At the Closing, Purchaser will cause the DVI
Stock to be delivered to the Stockholders and the Partners in the amounts set
forth on Schedules A, B, C and D. Simultaneously, (a) the Partners will deliver
to Purchaser a document in form satisfactory to Purchaser and executed by each
Partner by which the Partner assigns and transfers to Purchaser its Partner
Interests and (b) the Stockholders will surrender the certificates representing
all the shares of Stock owned by such Stockholders to Purchaser. At the Closing,
there shall also be delivered to Purchaser, DVIHA, DVIMF, the Stockholders and
the Partners the certificates and other documents and instruments to be
delivered under Articles XI and XII.
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4.02 Legend on Certificates. The certificates representing shares of
DVI Stock issued to the Stockholders and the Partners at the Closing may bear
legends to the effect that the shares represented by them have not been
registered under the Securities Act, and may only be sold or transferred in a
transaction which is registered under that Act or is exempt from the
registration requirements of that Act. The legend specified in the preceding
sentence shall not be placed on the certificates if the issuance or resale of
the shares they represent has been registered under the Securities Act, or shall
be removed upon registration of the resale of the shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
AND THE PARTNERS
Each Stockholder and Partner, severally, represents and warrants to
Purchaser, DVIHA and DVIMF as follows:
5.01 Organization; Authority. (a) Each of the Company and the
General Partner is a corporation duly organized and validly existing under the
Laws of the Commonwealth of Pennsylvania. Each of the JGW Partnership and the MF
Partnership is a limited partnership duly organized and validly existing under
the Laws of the Commonwealth of Pennsylvania. Each of the Purchased Entities has
all requisite corporate or partnership power and authority, as the case may be,
to own, lease and operate its properties and to carry on its business as now
being conducted. Each of the Purchased Entities is duly qualified, licensed or
admitted to do business and is in good standing in all jurisdictions in which
the ownership, use or leasing of its Assets and Properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary and in which the failure to be so qualified, licensed or admitted and
in good standing could reasonably be expected to have a material adverse effect
on the Business or Condition of the Company.
(b) Each of the Company and the General Partner has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
the Company and the General Partner of this Agreement, and the performance of
their respective obligations hereunder, have been duly and validly authorized by
the Board of Directors and shareholders of the Company and the General Partner,
no other action on the part of the Company, the General Partner or their
respective stockholders being necessary. This Agreement has been duly and
validly executed and delivered by the Company and the General Partner and
constitutes their legal, valid and binding obligation enforceable against the
Company and the General Partner in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws relating to or affecting creditors'
rights generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law).
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5.02 Capital Structure and Ownership. The authorized capital stock
of the Company consists of 1,000 shares of common stock, no par value per share,
100 of which are issued and outstanding and held of record by the JGW
Stockholders. The JGW Stock constitutes all of the issued and outstanding shares
of capital stock of the Company. The authorized capital stock of the General
Partner consists of 1,000 shares of common stock, par value $.01 per share, all
of which are issued and outstanding and held of record by the JGW Partners
Stockholders. The JGW Partners Stock constitutes all of the issued and
outstanding shares of capital stock of the General Partner. All issued and
outstanding shares of capital stock of the Company and the General Partner are
duly authorized, validly issued, fully paid and non-assessable and free from any
restrictions on transfer, except for those imposed by federal or state
securities or "blue sky" laws and except for those pursuant to this Agreement.
Except for this Agreement, there are no outstanding Options with respect to the
Company or the General Partner, or their respective shares of capital stock.
None of the Stockholders are bound by any Contract relating to its shares of
Stock.
The JGW Partner Interests held by the JGW Partners are the only
limited partner interests in the JGW Partnership, have been duly authorized and
validly issued and constitute 100% of the limited partner interests in the JGW
Partnership. The General Partner is the only general partner of the JGW
Partnership and owns 100% of the general partner interests in the JGW
Partnership. All of the partners, limited and general, have been duly admitted
to the JGW Partnership. The MF Partner Interests held by the MF Partners are the
only limited partner interests in the MF Partnership, have been duly authorized
and validly issued and constitute 100% of the limited partner interests in the
MF Partnership. The General Partner is the only general partner of the MF
Partnership. All of the partners, limited and general, have been duly admitted
to the MF Partnership. Neither the JGW Partnership nor the MF Partnership has
issued any Options, nor is either of them a party to any other agreement, which
requires, or upon the passage of time, the payment of money or the occurrence of
any other event, may require, the JGW Partnership or the MF Partnership to sell
or issue or redeem, repurchase or otherwise acquire any limited partner or
general partner interests.
5.03 Corporate and Partnership Documents. The Stockholders have
prior to the execution of this Agreement delivered to Purchaser true and
complete copies of the certificate of incorporation and by-laws of the Company
and the General Partner as in effect on the date hereof. The Partners have prior
to the execution of this Agreement delivered to Purchaser true and complete
copies of the certificate of limited partnership and partnership agreement of
the JGW Partnership and the MF Partnership, each as in effect on the date
hereof. The General Partner, as the general partner of the JGW Partnership and
the MF Partnership, has at all times acted in compliance with such partnership
agreements and has not breached any obligations applicable to it under or in
connection with the partnership agreements, and none of the General Partner, the
JGW Partnership or the MF Partnership has taken any action that is not
authorized by such partnership agreements.
5.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 5.04, no consent, approval, authorization, license, clearance or order
of, declaration or notification to, or filing, registration or compliance with,
any Governmental or Regulatory Authority on the part of any of the Purchased
Entities is required in connection with the
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execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
5.05 Books and Records. The minute books and other similar records
of the Purchased Entities as made available to Purchaser prior to the execution
of this Agreement contain a true and complete record, in all material respects,
of all action taken at all meetings and by all written consents in lieu of
meetings of the stockholders, the boards of directors and committees of the
board of directors or similar governing bodies of each of the Purchased
Entities. The stock transfer ledgers and other similar records of the Company
and the General Partner as made available to Purchaser prior to the execution of
this Agreement accurately reflect all record transfers prior to the execution of
this Agreement in the capital stock of the Company and the General Partner.
5.06 Taxes. (a) The General Partner has validly elected to be an "S
corporation" (within the meaning of Section 1361(a)(1) of the Code), for federal
income tax purposes as of January 1, 1986, and has maintained its status as an
"S corporation" at all times thereafter. The General Partner has validly elected
to be an "S corporation" in all state and local jurisdictions where it would,
absent such an election, be subject to corporate income or franchise tax, and
has maintained its status as an "S corporation" in such jurisdictions at all
times thereafter. No state of facts exists or existed which presents or
presented any risk that the General Partner's status as an "S corporation" is or
was subject to termination or revocation. The General Partner has no "Subchapter
C" earnings and profits (within the meaning of Code Section 1362(d)(3)(B)).
(b) Each of the Purchased Entities has filed all Tax Returns
(including statements of estimated taxes owed) required to be filed within the
applicable periods for such filings and has paid all Taxes required to be paid,
and has established adequate reserves (net of estimated Tax payments already
made) for the payment of all taxes payable in respect to the period subsequent
to the last periods covered by such returns. All such Tax Returns are true,
correct and complete in all material respects. Proper and adequate amounts have
been withheld by each of the Purchased Entities from its employees for all
periods in compliance with the tax, social security and unemployment withholding
provisions of all federal, state, local and foreign laws. No deficiencies for
any Tax are currently assessed against any of the Purchased Entities, and no Tax
Returns of the Purchased Entities have been audited, and to the knowledge of the
Stockholders and the Partners, there is no such audit pending or contemplated.
There is no Tax lien, whether imposed by any federal, state or local taxing
authority, outstanding against the assets, properties or business of any of the
Purchased Entities, other than any lien for Taxes not yet due and payable. There
are no agreements, waivers or other arrangements providing for an extension of
time with respect to the assessment of any Tax or deficiency against any of the
Purchased Entities.
(c) Within a reasonable period of time after the date of this
Agreement, the Stockholders and the Partners (i) shall cause to be prepared and
filed with the Internal Revenue Service and the applicable state taxing
authorities short period returns for the JGW Partnership and the MF Partnership
for the period ended October 31, 1997 and (ii) shall cause to be prepared Forms
K-1 for the General Partner.
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5.07 Legal Proceedings. (a) There are no Actions or Proceedings
pending or, to the knowledge of the Stockholder and the Partners, threatened
against, relating to or affecting any of the Purchased Entities or any of their
respective Assets and Properties; and
(b) there are no Orders outstanding against any of the Purchased
Entities.
Prior to the execution of this Agreement, the Stockholders and the Partners have
made available to Purchaser or Purchaser's representatives all responses of
counsel for each of the Purchased Entities to auditors' requests for information
delivered in connection with the financial statements (together with any updates
provided by such counsel) regarding Actions or Proceedings pending or threatened
against, relating to or affecting any of the Purchased Entities.
5.08 Compliance With Laws and Orders. None of the Purchased Entities
is nor has at any time within the last five years been, or has received any
notice that it is or has at any time within the last five years been, in
violation of or in default under, in any material respect, any Law or Order
applicable to any of the Purchased Entities (including those relating to
employment of labor), or any of their respective Assets and Properties.
5.09 Tangible Personal Property. The Purchased Entities are in
possession of and have good title to, or have valid leasehold interests in or
valid rights under Contract to use, all tangible personal property which is used
in and individually or in the aggregate with other such property is material to
the Business or Condition of the Company. All such tangible personal property is
free and clear of all Liens, other than Permitted Liens, and is in all material
respects in good working order and condition, ordinary wear and tear excepted.
5.10 Bank Accounts. Set forth on Schedule 5.10 is a true and
complete list of all bank accounts, lock boxes, safety deposit boxes and other
such accounts and boxes maintained by the Purchased Entities and the signatories
thereunder.
5.11 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Stockholders and
the Partners directly with Purchaser, DVIHA and DVIMF, without the intervention
of any Person on behalf of the Stockholders or the Partners in such manner as to
give rise to any valid claim by any Person against Purchaser, DVIHA and DVIMF or
any Purchased Entity for a finder's fee, brokerage commission or similar
payment.
5.12 Disclosure. The representations or warranties of the
Stockholders and the Partners contained in this Agreement, and the statements
contained in the Schedules hereto or any certificate or other writing furnished
to Purchaser, DVIHA and DVIMF by the Stockholders or the Partners pursuant to
any provision of this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements herein or therein, not misleading.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AND PARTNERS
Each Stockholder and Partner, severally and not jointly, hereby
represents and warrants as to such Stockholder or Partner (and not as to any
other Stockholder or Partner) to Purchaser, DVIHA and DVIMF as follows:
6.01 Organization; Authority. If such Stockholder or Partner is a
partnership or a corporation, such Stockholder or Partner is duly organized and
validly existing under the laws of its jurisdiction of organization. Such
Stockholder or Partner has all requisite power and legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery by such Stockholder or Partner of this Agreement, and
the performance of its respective obligations hereunder, have been duly and
validly authorized and no other action on the part of such Stockholder or
Partner is necessary. This Agreement has been duly and validly executed and
delivered by such Stockholder or Partner and constitutes the legal, valid and
binding obligation of such Stockholder or Partner enforceable against such
Stockholder or Partner in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting creditors' rights
generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
6.02 No Conflicts. The execution and delivery by such Stockholder or
Partner of this Agreement do not and the performance by such Stockholder or
Partner of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the
organizational documents if applicable of such Stockholder or Partner;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices described herein, conflict with or result in
a violation or breach of any Law or Order applicable to such Stockholder or
Partner or any of its Assets and Properties (other than such conflicts,
violations or breaches which could not in the aggregate reasonably be expected
to materially adversely affect the validity or enforceability of this
Agreement); or
(c) except as disclosed in Schedule 6.02, (i) conflict with or
result in a violation or breach of or give rise to a right of termination,
cancellation or acceleration of any right or obligation of such Stockholder or
Partner under, (ii) constitute (with or without notice or lapse of time or both)
a default by such Stockholder or Partner under, (iii) require such Stockholder
or Partner to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, or (iv) result
in the creation or imposition of any Lien upon such Stockholder or Partner or
any of its Assets and Properties under, any Contract or License to which such
Stockholder or Partner is a party or by which any
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of its Assets and Properties is bound and which, individually or in the
aggregate with other such Contracts and Licenses, is material to the validity or
enforceability of this Agreement.
6.03 Title to Shares; Partner Interests. (a) Such Stockholder owns
the shares of Stock opposite its name on Schedule C and Schedule D, if any,
beneficially and of record, free and clear of all Liens and such Stockholder has
the full authority to sell its shares of Stock as contemplated by this
Agreement. Except for this Agreement and as disclosed in Schedule 6.03, there
are no outstanding Options with respect to such Stockholder's shares of Stock.
Except as set forth on Schedule 6.03, such Stockholder is not bound by any
Contract relating to its shares of Stock.
(b) Such Partner owns the Partner Interests opposite its name on
Schedule A and Schedule B, if any, beneficially and of record, free and clear of
all Liens and such Partner has the full authority and unrestricted right to sell
its Partner Interests as contemplated by this Agreement. Except for this
Agreement and as disclosed in Schedule 6.03, there are no outstanding Options
with respect to such Partner's Partner Interests. Except as set forth on
Schedule 6.03, such Partner is not bound by any Contract relating to its Partner
Interests.
6.04 No Government Proceedings. Such Stockholder or Partner has not,
during the past ten years, been the subject of any governmental proceeding,
investigation or inquiry, including, without limitation, any proceeding,
investigation or inquiry involving the United States Securities and Exchange
Commission or any other federal or state regulatory authority having
jurisdiction over the business activities of such Stockholder or Partner or any
of the Purchased Entities.
6.05 Investment Representations. Such Stockholder or Partner
understands and acknowledges that the shares of DVI Stock being acquired
pursuant to this Agreement are not registered under the Securities Act or any
applicable state securities law, and that such DVI Stock may not be transferred
or sold except pursuant to the registration provisions of the Securities Act or
pursuant to an applicable exemption therefrom and pursuant to applicable state
securities laws and regulations, and that the shares of DVI Stock will bear
appropriate legends to that effect pursuant to Section 4.02. The DVI Stock is
being acquired for such Stockholder's or Partner's own account, for investment
and not with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act or the securities laws of any
other state applicable to such Stockholder or Partner. Such Stockholder or
Partner is able to bear the economic risk of the purchase of the DVI Stock
pursuant to the terms of this Agreement, including a complete loss of such
Stockholder's or Partner's investment in the DVI Stock. Such Stockholder or
Partner, either alone or with such Stockholder's or Partner's professional
financial advisers who are unaffiliated with and are not compensated by
Purchaser, is knowledgeable in and experienced with respect to investments in
general, and experienced with respect to investments in general, and experienced
in evaluating and investing in businesses such as Purchaser. Such Stockholder or
Partner has received all information he or she has requested with respect to
DVI, Purchaser, this Agreement and the transactions contemplated hereby, and has
been given the opportunity to ask questions of and receive answers from officers
of the DVI and Purchaser concerning the transactions contemplated by this
Agreement and to obtain such additional information which DVI or Purchaser
possess or can acquire without
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unreasonable effort or expense that is necessary to verify the information that
was otherwise provided. By reason of such knowledge and experience and the
receipt of such information, such Stockholder or Partner is capable of
evaluating the merits and risks of, and making an informed business decision
with regard to, investment in DVI.
6.06 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by such Stockholder or
Partner directly with Purchaser, DVIHA and DVIMF without the intervention of any
Person on behalf of such Stockholder or Partner in such manner as to give rise
to any valid claim by any Person against Purchaser, DVIHA and DVIMF or any
Purchased Entity for a finder's fee, brokerage commission or similar payment.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF JGW & CO.
JGW & Co. hereby represents and warrants to Purchaser, DVIHA and
DVIMF as follows:
7.01 Financial Statements. Prior to the execution of this Agreement,
JGW & Co. has delivered to Purchaser complete copies of the following financial
statements:
(a) the audited balance sheet of the Company as of December 31, 1996
and the related audited statements of income, retained earnings and cash flows
for the fiscal year then ended, together with a true and correct copy of the
report on such audited information by BDO Seidman;
(b) the unaudited balance sheet of the JGW Partnership and the MF
Partnership as of December 31, 1996 and the related unaudited statements of
income, partners equity and cash flows for the fiscal year then ended; and
(c) the unaudited balance sheets of the Company, the JGW Partnership
and the MF Partnership as of October 31, 1997 and the related unaudited
statements of income, retained earnings or partners equity, as the case may be,
for the portion of the fiscal year then ended.
Except as set forth in the notes thereto, all such financial statements were
prepared in accordance with GAAP and fairly present, in all material respects,
the financial condition and results of operations of the Company, the JGW
Partnership and the MF Partnership as of the respective dates thereof and for
the respective periods covered thereby subject, with respect to the unaudited
financial statements, to normal year-end adjustments and lack of footnotes.
7.02 Absence of Changes; Undisclosed Liabilities. Except for the
execution and delivery of this Agreement and the transactions to take place
pursuant hereto on the Closing Date, since December 31, 1996 there has not been
any material adverse change, or any event
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or development which, individually or together with other such events, could
reasonably be expected to result in a material adverse change in the Business or
Condition of the Company other than any change arising out of any general
business, economic or political conditions.
Except as reflected in the balance sheets of the Company, the JGW
Partnership and the MF Partnership and the notes thereto furnished to Purchaser,
none of the Purchased Entities has Liabilities of any nature, known or unknown,
fixed or contingent, except (i) Liabilities not required under GAAP to be
presented in the balance sheets or the corresponding notes thereto and (ii)
Liabilities incurred in the ordinary course of business since December 31, 1996.
None of the Purchased Entities has (i) incurred any liability for money borrowed
since December 31, 1996, other than borrowings in the ordinary course of
business consistent with past practice to fund operations or (ii) incurred any
liability or made any payment not in the ordinary course of business consistent
with past practice since December 31, 1996.
7.03 Employee Benefits. (a) Each of the Purchased Entities has
complied with all applicable laws, rules and regulations relating to employment
and labor management relations, including those relating to wages and the
payment thereof, conditions of employment, hours, collective bargaining and the
payment and withholding of taxes. Each of the Purchased Entities has withheld
all amounts required by law to be withheld from the wages or salaries of its
employees, if any, and none of the Purchased Entities is liable for any arrears
of wages or other taxes or penalties for failure to comply with any of the
foregoing. No union has been certified or recognized by any of the Purchased
Entities.
(b) There are no pending or threatened labor disputes, arbitration
proceedings, complaints, charges, cases or controversies pending or threatened
between any of the Purchased Entities, on the one hand, and any employee or any
governmental authority, on the other hand.
(c) None of the Purchased Entities maintains or contributed to and
does not currently contribute to or sponsor or maintain any Welfare Benefit
Plan, Pension Benefit Plan or fringe benefit plan and does not have any
outstanding present obligations to contribute or make payments, whether
voluntary, contingent or otherwise under any such plans.
(d) None of the Purchased Entities has any liability (accrued,
contingent or otherwise) with respect to any Welfare Benefit Plan, Pension
Benefit Plan or fringe benefit plan.
7.04 Subsidiaries. None of the Purchased Entities have any
Subsidiaries or other equity investments in any other Person.
7.05 No Conflicts. The consummation of the transactions contemplated
hereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-laws
of the Company or the General Partner or the certificate of limited partnership
or partnership agreement of the JGW Partnership or the MF Partnership;
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(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to any of the Purchased Entities or any
of their respective Assets and Properties; or
(c) except as disclosed in Schedule 7.05, (i) conflict with or
result in a violation or breach of, (ii) constitute (with or without notice or
lapse of time or both) a default by any of the Purchased Entities under, (iii)
require any Purchased Entity to obtain any consent, approval or action of, make
any filing with or give any notice to any Person as a result or under the terms
of, (iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
Person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under, or (vi) result in the creation or
imposition of any Lien (other than Permitted Liens) upon any of the Purchased
Entities or any of their respective Assets and Properties under, any Contract or
License to which any of the Purchased Entities is a party or by which any of
their respective Assets and Properties is bound.
7.06 Environmental Matters. None of the Purchased Entities has any
material liability under any federal, state or local environmental laws.
7.07 Real Property. (a) Schedule 7.07 contains a true, correct and
complete list of the leases to which any of the Purchased Entities is a party as
lessee (the "Leases");
(b) None of the Purchased Entities owns any real property;
(c) The Leases are in full force and effect and have not been
amended in any material respect except as set forth in Schedule 7.07. None of
the Purchased Entities has given nor has any Purchased Entity received, any
written notice of a material default under any of the Leases which remains
uncured (the foregoing does not apply to delinquencies in the payment of monthly
rent that have existed for less than thirty (30) days), except as set forth in
Schedule 7.06; and
(d) Prior to the execution of this Agreement, the Stockholders and
the Partners have delivered to Purchaser true, correct and complete copies of
the Leases.
7.08 Employees. Schedule 7.08 contains a list of the name of each
officer and full-time employee of each of the Purchased Entities at the date
hereof, together with each such person's position or function, annual base
salary or wages and any incentive or bonus arrangement with respect to such
person in effect on such date. None of the Purchased Entities has received any
information that would lead it to believe that a material number of such persons
will or may cease to be employees, or will refuse offers of employment from
Purchaser, because of the consummation of the transactions contemplated by this
Agreement.
7.09 Organization; Authority. JGW & Co. is a corporation, duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania. JGW & Co. has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by JGW & Co.
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of this Agreement, and the performance of its obligations hereunder, have been
duly and validly authorized and no other action on the part of JGW & Co. is
necessary. This Agreement has been duly and validly executed and delivered by
JGW & Co. and constitutes its legal, valid and binding obligation, enforceable
against JGW & Co. in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting creditors' rights
generally and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
7.10 Material Contracts. (a) Schedule 7.10 lists all Material
Contracts (other than Leases) to which any of the Purchased Entities is a party.
True, correct and complete copies of each such Material Contract previously have
been furnished or made available to Purchaser. Each such Material Contract is in
full force and effect and contains the complete understanding between the
parties thereto with respect to the subject matter thereof, and with respect to
such Material Contract, (i) to the knowledge of the Stockholders and the
Partners, there exists no material default or claim thereof by any party to any
Material Contract, (ii) none of the Purchased Entities has received any notice
that any person intends to cancel, modify or terminate any Material Contract or
to exercise or not to exercise any options thereunder and (iii) none of the
Purchased Entities has given any notice of cancellation, modification or
termination of any Material Contract or to exercise or not to exercise any
options thereunder.
(b) Each Material Contract is valid and binding, and enforceable
against each party thereto in accordance with its terms, except as
enforceability or the availability of particular remedies may be limited by
bankruptcy, insolvency, moratorium and other similar creditors rights laws, by
general equitable principles and by considerations of public policy.
(c) None of the Purchased Entities has an outstanding power of
attorney to any person, firm or corporation for any purpose whatsoever. None of
the Purchased Entities is restricted by written agreement from carrying on its
business anywhere in the world.
7.11 Intellectual Property Rights. Schedule 7.11 discloses all
Intellectual Property which is material to the Business or Condition of the
Company. The Company, the General Partner, the JGW Partnership or the MF
Partnership, as the case may be, either has all right, title and interest in or
a license to use such Intellectual Property. Except as disclosed in Schedule
7.11, (i) none of the Purchased Entities is in default (nor with the giving of
notice or lapse of time or both, would be in default) in any material respect
under any license to use the Intellectual Property disclosed in Schedule 7.11,
and (ii) to the knowledge of the Stockholders and the Partners, the Intellectual
Property disclosed in Schedule 7.11 is not being infringed by any other Person.
None of the Purchased Entities has received notice alleging infringement of any
Intellectual Property of any other Person. There are no infringement claims
pending or unresolved and, to the knowledge of the Stockholders and the
Partners, it is not infringing any Intellectual Property rights of any other
Person, the effect of which could reasonably be expected to materially adversely
affect to the Business or Condition of the Company.
7.12 Licenses. Schedule 7.12 contains a true, correct and complete
list of all Licenses which are used in and individually or in the aggregate with
other such Licenses
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material to the Business or Condition of the Company. Prior to the execution of
this Agreement, the Stockholders and the Partners have delivered to Purchaser
true and complete copies of all such Licenses. Except as disclosed in Schedule
7.12, each such License is in full force and effect.
7.13 Insurance. Schedule 7.13 contains a true and complete list of
all material insurance policies currently in effect that insure the business,
operations or employees of the Purchased Entities or affect or relate to the
ownership, use or operation of any of their respective Assets and Properties and
that (i) have been issued to a Purchased Entity or (ii) have been issued to any
Person (other than a Purchased Entity) for the benefit of a Purchased Entity.
Each policy referred to in clause (i) above is valid and binding and in full
force and effect, no premiums due thereunder have not been paid, none of the
Purchased Entities has received any notice of cancellation or termination in
respect of any such policy and none of the Purchased Entities is in default
thereunder in any material respect.
7.14 Broker-Dealer Business. The Company is duly registered as a
broker-dealer under the Exchange Act, with the National Association of
Securities Dealers, Inc. (the "NASD") and in each state where the character of
its business requires such registration and is in substantial compliance with
all state and federal laws requiring registration, licensing or qualification as
a broker-dealer. Each such registration is in full force and effect. The JGW
Stockholders have made available to the Purchaser a true and complete copy of
the Company's Form BD and all amendments thereto as filed with all applicable
regulatory authorities, its NASD restriction agreement (the "Restriction
Agreement"), if any, and copies of all current reports required to be filed
pursuant to the Exchange Act, and the rules and regulations promulgated
thereunder, the rules and regulations of the NASD and all applicable state
statutes and regulations. The information contained in the Company's current
Form BD and such reports was true and complete in all material respects at the
time of filing. The Company has at all times operated in substantial compliance
with the Restriction Agreement. The Company has filed all amendments to its Form
BD and its state registrations as required to be filed. The Company has filed
all reports required to be filed by it under the Exchange Act, and the rules and
regulations promulgated thereunder, the rules and regulations of the NASD and
all applicable state statutes and regulations, and all such reports conform in
all material respects with the requirements of the respective act or state law
and the rules and regulations thereunder. Copies of all inspection reports or
similar documents and correspondence relating thereto dated since January 13,
1993 have been provided to Purchaser. Schedule 7.14 contains (i) an accurate
description of the broker-dealer business of the Company and (ii) a list of each
state or other jurisdiction in which the Company is duly registered or licensed
as a broker-dealer. The Company has operated and is currently operating its
broker-dealer business in compliance in all material respects with all laws,
rules, regulations and orders applicable to it, including, without limitation,
the Exchange Act and the rules and regulations of the NASD.
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7.15 Disclosure. The representations or warranties of JGW & Co.
contained in this Agreement, and the statements contained in the Schedules
hereto or any certificate or other writing furnished to Purchaser, DVIHA and
DVIMF by JGW & Co. pursuant to any provision of this Agreement (including
without limitation the financial statements of the Purchased Entities), do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements herein or therein, not misleading.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF PURCHASER, DVIHA AND DVIMF
Each of Purchaser, DVIHA and DVIMF, jointly and severally,
represents and warrants to the Stockholders and the Partners as follows:
8.01 Organization. Each of Purchaser, DVIHA and DVIMF is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware. Each of Purchaser, DVIHA and DVIMF has full corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
Each of Purchaser, DVIHA and DVIMF is duly qualified, licensed or admitted to do
business and is in good standing in all jurisdictions in which the ownership,
use or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary and in
which the failure to be so qualified, licensed or admitted and in good standing
could reasonably be expected to have an adverse effect on the validity or
enforceability of this Agreement or on the ability of Purchaser, DVIHA and DVIMF
to perform its obligations hereunder.
8.02 Authority. The execution and delivery by Purchaser, DVIHA and
DVIMF of this Agreement, and the performance by Purchaser, DVIHA and DVIMF of
their respective obligations hereunder, have been duly and validly authorized by
their respective Board of Directors, no other corporate action being necessary.
This Agreement has been duly and validly executed and delivered by Purchaser,
DVIHA and DVIMF and constitutes the legal, valid and binding obligation of
Purchaser, DVIHA and DVIMF, enforceable against each of them in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws relating
to or affecting creditors' rights generally and except as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
8.03 No Conflicts. The execution and delivery by Purchaser, DVIHA
and DVIMF of this Agreement do not, and the performance by Purchaser, DVIHA and
DVIMF of its respective obligations under this Agreement and the consummation of
the transactions contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or by-laws
of Purchaser, DVIHA or DVIMF;
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(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Purchaser, DVIHA or DVIMF or any of
their respective Assets and Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default by
Purchaser, DVIHA or DVIMF under, (iii) require Purchaser, DVIHA or DVIMF to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of, or (iv) result in the
creation or imposition of any Lien upon Purchaser, DVIHA or DVIMF or any of
their respective Assets or Properties under, any Contract or License to which
Purchaser, DVIHA or DVIMF is a party or by which any of their respective Assets
and Properties is bound.
8.04 Governmental Approvals and Filings. No consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority on
the part of Purchaser, DVIHA or DVIMF is required in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
8.05 Legal Proceedings. There are no Actions or Proceedings pending
or, to the knowledge of Purchaser, DVIHA or DVIMF, threatened against, relating
to or affecting Purchaser, DVIHA or DVIMF or any of their respective Assets and
Properties which could reasonably be expected to result in the issuance of an
Order restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement.
8.06 Purchase for Investment. The Partner Interests will be acquired
by Purchaser for its own account for the purpose of investment, it being
understood that the right to dispose of such Partner Interests shall be entirely
within the discretion of Purchaser. Purchaser will refrain from transferring or
otherwise disposing of any of the Partner Interests, or any interest therein, in
such manner as to cause the Partners to be in violation of the registration
requirements of the Securities Act or applicable state securities or blue sky
laws.
8.07 DVI Stock. The issuance of the DVI Stock has been authorized by
DVI, and when issued to the Stockholders and the Partners as contemplated in
this Agreement the DVI Stock will be duly authorized, validly issued, fully paid
and non-assessable.
8.08 Capital Stock. The authorized capital stock of DVI consists of
(i) 25,000,000 shares of common stock, $.005 par value per share and (ii)
100,000 shares of preferred stock, $10.00 per share. As of the date hereof, DVI
has issued and outstanding 10,868,748 shares of common stock and no shares of
preferred stock.
8.09 SEC Reports. The annual report of DVI on Form 10-K for the
fiscal year ended June 30, 1997 (as amended, the "1997 Form 10-K") and the
quarterly report of DVI on Form 10-Q for the quarterly period ended September
30, 1997 (the "DVI Form 10-Q") as each of them was filed with the Securities and
Exchange Commission each complied in all material respects with the requirements
for a report on Form 10-K or Form 10-Q, as the case may be, and did not contain
an untrue statement of a material fact or omit to state a material fact which
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was necessary to make the statements which were made not misleading. Except as
described in the 1997 Form 10-K or the DVI Form 10-Q there has not been any
adverse event, occurrence or circumstance since September 30, 1997 that would be
material and required to be disclosed in a Form 10-K for a year ended on the
date of this Agreement or the Closing Date, as applicable, or any Form 8-K filed
with the Securities and Exchange Commission under the Securities Act.
8.10 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser, DVIHA and
DVIMF directly with JGW & Co., the Stockholders and the Partners without the
intervention of any Person on behalf of Purchaser, DVIHA or DVIMF in such manner
as to give rise to any valid claim by any Person against the Stockholders, the
Partners or any Purchased Entity for a finder's fee, brokerage commission or
similar payment.
ARTICLE IX
COVENANTS OF THE STOCKHOLDERS AND THE PARTNERS
The Stockholders and the Partners covenant and agree with Purchaser,
DVIHA and DVIMF that, at all times from and after the date hereof until the
Closing and, with respect to any covenant or agreement by its terms to be
performed in whole or in part after the Closing, for the period specified herein
or, if no period is specified herein, indefinitely, the Stockholders and the
Partners, as the case may be, will comply with all covenants and provisions of
this Article IX, except to the extent Purchaser may otherwise consent in
writing.
9.01 Regulatory and Other Approvals. Prior to the Closing Date, the
Stockholders and the Partners will and will cause each of the Purchased Entities
to (a) take all commercially reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts, as promptly as practicable to obtain all consents, approvals or actions
of, to make all filings with and to give all notices to Governmental or
Regulatory Authorities or any other Person required of the Stockholders or the
Partners or any of the Purchased Entities to consummate the transactions
contemplated hereby, (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other Persons as Purchaser, DVIHA
and DVIMF or such Governmental or Regulatory Authorities or other Persons may
reasonably request in order to consummate the transactions contemplated hereby
and (c) cooperate with Purchaser, DVIHA and DVIMF as promptly as practicable in
obtaining all consents, approvals or actions of, making all filings with and
giving all notices to Governmental or Regulatory Authorities or other Persons
required of Purchaser, DVIHA and DVIMF to consummate the transactions
contemplated hereby. The Stockholders and the Partners will and will cause each
of the Purchased Entities to provide prompt notification to Purchaser when any
such consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise Purchaser of
any communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
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9.02 Investigation by Purchaser. The Stockholders and the Partners
will and will cause each of the Purchased Entities to, (a) provide Purchaser,
DVIHA and DVIMF and their respective officers, directors, employees, agents,
counsel, accountants, financial advisors, consultants and other representatives
(together "Representatives") with reasonable access, upon reasonable prior
notice and during normal business hours, to all officers, employees, agents and
accountants of each of the Purchased Entities and their respective Assets and
Properties and Books and Records, and (b) furnish Purchaser, DVIHA and DVIMF and
such other Persons with all such information and data (including without
limitation copies of Contracts, and other Books and Records) concerning the
business and operations of the Purchased Entities as Purchaser, DVIHA and DVIMF
or any of such other Persons reasonably may request in connection with such
investigation.
9.03 No Solicitations. Neither the Stockholders nor the Partners
will take, nor will the Stockholders or the Partners permit any of the Purchased
Entities or any Affiliate of the Stockholders or Partners (or authorize or
permit any investment banker, financial advisor, attorney, accountant or other
Person retained by or acting for or on behalf of the Stockholders, the Partners,
the Purchased Entities or any such Affiliate) to take, directly or indirectly,
any action to initiate, assist, solicit, receive, negotiate, encourage or accept
any offer or inquiry from any Person (a) to engage in any Business Combination
with any Purchased Entity, (b) to reach any agreement or understanding (whether
or not such agreement or understanding is absolute, revocable, contingent or
conditional) for, or otherwise attempt to consummate, any Business Combination
with any Purchased Entity or (c) to furnish or cause to be furnished any
information with respect to a Purchased Entity to any Person (other than as
contemplated by Section 9.02) who the Stockholders, the Partners, any Purchased
Entity or such Affiliate (or any such Person acting for or on their behalf)
knows or has reason to believe is in the process of considering any Business
Combination with any Purchased Entity. If the Stockholders or the Partners, or
any such Affiliate (or any such Person acting for or on their behalf) receives
from any Person (other than Purchaser or any other Person referred to in Section
9.02) any offer, inquiry or informational request referred to above, the
Stockholders or the Partners will promptly advise such Person, by written
notice, of the terms of this Section 9.03 and will promptly, orally and in
writing, advise Purchaser of such offer, inquiry or request and deliver a copy
of such notice to Purchaser.
9.04 Conduct of Business. Prior to the Closing Date, the Company and
the General Partner will and the Stockholders and the Partners will cause each
of the Purchased Entities to conduct business only in the ordinary course
consistent with past practice except to the extent affected by this Agreement.
Without limiting the generality of the foregoing, the Stockholders and the
Partners will cause each of the Purchased Entities to:
(a) use commercially reasonable efforts to (i) preserve intact the
present business organization and reputation of each Purchased Entity, (ii) keep
available (subject to dismissals and retirements in the ordinary course of
business consistent with past practice) the services of the present officers,
employees and consultants of each Purchased Entity, (iii) maintain the Assets
and Properties of each Purchased Entity in good working order and condition,
ordinary wear and tear excepted, (iv) maintain the good will of customers,
suppliers, lenders and other Persons to whom such Purchased Entity sells goods
or provides services or
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with whom such Purchased Entity otherwise has significant business relationships
and (v) continue all current sales, marketing and promotional activities
relating to the business and operations of each Purchased Entity;
(b) except to the extent required by applicable Law, (i) cause the
Books and Records to be maintained in the usual, regular and ordinary manner and
(ii) not permit any material change in (A) any pricing, investment, accounting,
financial reporting, inventory, credit, allowance or Tax practice or policy of
any Purchased Entity, (B) any method of calculating any bad debt, contingency or
other reserve of any Purchased Entity for accounting, financial reporting or Tax
purposes or (C) the fiscal year of any Purchased Entity;
(c) use commercially reasonable efforts (i) to maintain in full
force and effect until the Closing substantially the same levels of coverage as
the insurance afforded under the Contracts listed in Schedule 7.13, and (ii)
cause any and all benefits under such Contracts paid or payable (whether before
or after the date of this Agreement) with respect to the business, operations,
employees or Assets and Properties of such Purchased Entity to be paid to such
Purchased Entity; and
(d) comply, in all material respects, with all Laws and Orders
applicable to the business and operations of each Purchased Entities, and
promptly following receipt thereof to give Purchaser copies of any notice
received from any Governmental or Regulatory Authority or other Person alleging
any violation of any such Law or Order.
9.05 Employee Matters. Prior to the Closing Date, except as may be
required by Law, the Company, the General Partner, the Stockholders and the
Partners will and the Stockholders and the Partners will cause each Purchased
Entity to refrain, from directly or indirectly:
(a) making any increase in the salary, wages or other compensation
of any officer, employee or consultant of such Purchased Entity whose annual
salary is or, after giving effect to such change, would be $50,000 or more;
(b) establishing or modifying any (i) targets, goals, pools or
similar provisions in respect of any fiscal year under any employment Contract
or other employee compensation arrangement or (ii) salary ranges, increase
guidelines or similar provisions in respect of any employment Contract or other
employee compensation arrangement; or
(c) entering into, amending, modifying or terminating (partially or
completely), any Contract that is, or had it been in existence on the date of
this Agreement would have been required to be, disclosed in Schedule 7.10.
9.06 Certain Restrictions. Prior to the Closing Date, the Company
and the General Partner will, and the Stockholders and the Partners will cause
each Purchased Entity to, refrain from:
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(a) amending its certificates of incorporation or by-laws or
certificate of limited partnership or partnership agreement (as applicable) or
taking any action with respect to any such amendment or any reorganization,
liquidation or dissolution of any such corporation or partnership;
(b) authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any Option with respect to the Company or the
General Partner, or modifying or amending any right of any holder of outstanding
shares of capital stock of or Option with respect to the Company or the General
Partner;
(c) authorizing, issuing, selling or otherwise disposing of any
limited or general partner interest of or any option with respect to the JGW
Partnership or the MF Partnership or modifying or amending any right of any
limited or general partner of or Option with respect to the JGW Partnership or
the MF Partnership;
(d) declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of the Company or the General
Partner, or directly or indirectly redeeming, purchasing or otherwise acquiring
any capital stock of or any Option with respect to the Company or the General
Partner;
(e) acquiring or disposing of, or incurring any Lien (other than a
Permitted Lien) on, any Assets and Properties, other than in the ordinary course
of business consistent with past practice;
(f) (i) entering into, amending, modifying, terminating (partially
or completely), granting any waiver under or giving any consent with respect to
(A) any Contract that would, if in existence on the date of this Agreement, be
required to be disclosed in Schedule 7.10, or (B) any material License or (ii)
granting any irrevocable powers of attorney;
(g) violating, breaching or defaulting under in any material
respect, or taking or failing to take any action that (with or without notice or
lapse of time or both) would constitute a material violation or breach of, or
default under, any term or provision of any License or any Material Contract is
a party or by;
(h) (i) incurring Indebtedness in an aggregate principal amount
exceeding $25,000 (net of any amounts of Indebtedness discharged during such
period), or (ii) voluntarily purchasing, cancelling, prepaying or otherwise
providing for a complete or partial discharge in advance of a scheduled payment
date with respect to, or waiving any right of any Purchased Entity under, any
Indebtedness of or owing to any Purchased Entity;
(i) engaging with any Person in any Business Combination;
(j) making capital expenditures or commitments for additions to
property, plant or equipment constituting capital assets in an aggregate amount
exceeding $10,000;
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(k) making any change in the lines of business in which they
participate or are engaged;
(l) writing off or writing down any of their Assets and Properties
outside the ordinary course of business consistent with past practice; or
(m) entering into any agreement to do or engage in any of the
foregoing.
9.07 Affiliate Transactions. Except as set forth in Schedule 9.07,
immediately prior to the Closing, all Indebtedness and other amounts owing under
Contracts between the Stockholders, the Partners, any Affiliate or Associate of
the Stockholders or the Partners or any Associate of any such Affiliate (other
than any of the Purchased Entities), on the one hand, and any of the Purchased
Entities on the other, will be paid in full, and the Stockholders or the
Partners, as the case may be, will terminate and will cause any such Affiliate
or Associate to terminate each Contract with any of the Purchased Entities.
Prior to the Closing, none of the Purchased Entities will enter into any
Contract with the Stockholders or the Partners or any such Affiliate or
Associate or amend or modify any existing Contract with the Stockholders or the
Partners or any such Affiliate or Associate, and will not engage in any
transaction outside the ordinary course of business consistent with past
practice or not on an arm's-length basis, with the Stockholders or the Partners
or any such Affiliate or Associate.
9.08 Books and Records. On the Closing Date, the Stockholders will
cause each of the Purchased Entities to, deliver or make available to Purchaser
at the offices of the Company all of the Books and Records, and if at any time
after the Closing the Stockholders or the Partners, as the case may be, discover
in their possession or under their control any other Books and Records, they
will forthwith deliver such Books and Records to Purchaser.
9.09 Noncompetition. (a) Covenants Against Competition. Each
Stockholder and Partner hereby acknowledges that (i) such Stockholder or
Partner, as the case may be, is one of a limited number of Persons who have
developed the Business; (ii) the Business is, in part, national in scope; (iii)
such Stockholder's or Partner's ownership of shares of Stock or Partner
Interests, as the case may be, has brought such Stockholder or Partner in close
contact with certain confidential affairs of the Company, the General Partner,
the JGW Partnership and the MF Partnership not readily available to the public;
and (iv) Purchaser would not purchase the Stock or the Partner Interests but for
the agreements and covenants of each Stockholder contained in this Section 9.09.
Accordingly, each Stockholder and Partner covenants and agrees that:
(i) Each Stockholder and Partner (other than John L. Godfrey
III) and their respective Affiliates shall not in the United States of
America, directly or indirectly, for a period commencing on the Closing
Date and terminating on the date three (3) years following the Closing
Date (the "Restricted Period"); (A) engage in the Business for such
Stockholder's or Partner's own account; (B) render any services (other
than ancillary services which are not related to conduct of the Business,
such as accounting, data processing and other similar unrelated activities
as an independent third party service provider and not as an employee) to
any Person (other than Purchaser or its Affiliates)
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engaged in the Business; or (C) become interested in any such Person
(other than Purchaser or its Affiliates) as a partner, shareholder,
principal, agent, consultant or in any other relationship or capacity
provided, however, that notwithstanding the above each Stockholder and
Partner may own, directly or indirectly, solely as an investment,
securities of any Person which are traded on any national securities
exchange or NASDAQ if such Stockholder or Partner (x) is not a controlling
Person, or a member of a group which controls such Person and (y) does
not, directly or indirectly, own in the aggregate 4.99% or more of any
class of securities of such Person.
(ii) During and after the Restricted Period, each Stockholder and
Partner and their respective Affiliates shall keep secret and retain in
strictest confidence, and shall not use for the benefit of itself or
others except in connection with the business and affairs of Purchaser and
its Affiliates, all specifications, drawings, sketches, models, samples,
reports, plans, forecasts, current or historical data, computer programs
or documentation, customers, clients, suppliers, sources of supply and
customer lists and all other technical, financial and business data, trade
secrets, know how and proprietary information with respect to the Business
or the Assets and Properties of any Purchased Entity ("Confidential Seller
Information") and shall not disclose such Confidential Seller Information
to anyone outside of Purchaser and its Affiliates except with Purchaser's
express written consent and except for Confidential Seller Information
which (A) is at the time of receipt or thereafter becomes publicly known
through no wrongful act of the Stockholders or the Partners, (B) is
received from a third party not under an obligation to keep such
information confidential and without breach of this Agreement, or (C) is
required to be disclosed by any Law or Order.
(iii) During the Restricted Period, each Stockholder and Partner
and their respective Affiliates shall not, directly or indirectly,
knowingly solicit or encourage to leave the employment of Purchaser or any
of its Affiliates, any employee of Purchaser or any of its Affiliates or
hire any employee who has left the employment of Purchaser or any of its
Affiliates after the date of this Agreement within two (2) years of the
termination of such employee's employment with Purchaser or any of its
Affiliates.
(b) Rights and Remedies Upon Breach. If any Stockholder or Partner
or any of their respective Affiliates breaches, or threatens to commit a breach
of, any of the provisions of this Section 9.09 (the "Restrictive Covenants"),
Purchaser shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such remedies),
each of which rights and remedies shall be independent of the other and
severally enforceable and all of which rights and remedies shall be in addition
to, and not in lieu of, any other rights and remedies available to Purchaser and
its Affiliates under law or in equity: the right and remedy to have the
Restrictive Covenants specifically enforced (without posting any bond) by any
court having equity jurisdiction, including, without limitation, the right to an
entry against the Stockholder or Partner or its Affiliates of restraining orders
and injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants, it being acknowledged and agreed that any such breach or threatened
breach will cause irreparable injury to Purchaser and
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its Affiliates and that money damages will not provide adequate remedy to
Purchaser and its Affiliates.
(c) Severability of Covenants. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
(d) Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration of such provision or the area covered thereby, such court shall have
the power to reduce the duration or area of such provisions and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
(e) Enforceability in Jurisdictions. Purchaser and each Stockholder
and Partner intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of Purchaser and
each Stockholder and Partner that such determination not bar or in any way
affect Purchaser's right to the relief provided above in the courts of any other
jurisdiction within the geographical scope of the Restrictive Covenants, as to
breaches of such Restrictive Covenants in such other respective jurisdictions,
such Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants, subject, where
appropriate, to the doctrine of res judicata.
9.10 Notice and Cure. Each Stockholder and Partner, as the case may
be, will notify Purchaser promptly in writing of, and contemporaneously will
provide Purchaser with true and complete copies of any and all information or
documents relating to, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance occurring after the
date of this Agreement that causes or will cause any covenant or agreement of
such Stockholder or Partner under this Agreement to be breached or that renders
or will render untrue any representation or warranty of such Stockholder or
Partner contained in this Agreement as if the same were made on or as of the
date of such event, transaction or circumstance. Each Stockholder or Partner, as
the case may be, also will notify Purchaser promptly in writing of, and will use
all commercially reasonable efforts to cure, before the Closing, any violation
or breach of any representation, warranty, covenant or agreement made by such
Stockholder or Partner in this Agreement, whether occurring or arising before,
on or after the date of this Agreement. No notice given pursuant to this Section
shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit Purchaser's right to
seek indemnity under Article XIV.
9.11 Fulfillment of Conditions. The Stockholders and the Partners
will take all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the obligations of
Purchaser, DVIHA and DVIMF contained in this
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Agreement and will not, and the Stockholders and the Partners will not permit
any Purchased Entity to, take or fail to take any action that could reasonably
be expected to result in the nonfulfillment of any such condition.
9.12 Relocation of Facilities. Within 30 days following the Closing
Date the Stockholders and the Partners will cooperate with Purchaser, DVIHA and
DVIMF to cause the operations of the Purchased Entities located in Philadelphia,
Pennsylvania to be re-located to Purchaser's facilities in Doylestown,
Pennsylvania but in no event shall the Stockholders or the Partners be required
to expend any funds or incur any Liabilities in connection therewith.
9.13 Allocation of Profits and Losses. (a) The Stockholders and the
Partners shall ensure that throughout the period (the "Interim Period") from
November 1, 1997 through and including the Closing Date all monies received by
or remitted to any of the Purchased Entities, from any source whatsoever, from
the operation of the Business shall be for the benefit of and shall be promptly
paid over to Purchaser.
(b) During the Interim Period, the Stockholders and the Partners
shall conduct the Business at an expense level consistent with past practice and
not in violation of any of the covenants and agreements contained in this
Agreement. During such Interim Period, all costs and expenses incurred by the
Purchased Entities in the conduct of the Business consistent with past practice
shall be the responsibility of and shall be promptly paid by Purchaser,
provided, however, that any expense in excess of $15,000 shall be submitted to
Purchaser for its approval which shall not be unreasonably withheld.
(c) If this Agreement is terminated prior to the Closing Date, then
within five (5) Business Days following such termination, (i) Purchaser shall
remit to the Purchased Entities all monies received by Purchaser from the
conduct of the Business during the Interim Period and (ii) the Stockholders and
the Partners shall cause the Purchased Entities to reimburse Purchaser for all
costs and expenses incurred by Purchaser from the conduct of the Business during
the Interim Period.
9.14 Use of JGW Name. For a period of 15 months following the
Closing Date, Purchaser and any of its Affiliates will be permitted to use the
name "J.G. Wentworth" in the conduct of the Business as follows: "formerly known
as J.G. Wentworth Merchant Banking." In connection therewith, JGW & Co., the
Stockholders and the Partners hereby grant to Purchaser and its Affiliates a
non-exclusive, fully-paid license to use the name "J.G. Wentworth" in such
manner in the conduct of the Business for such 15-month period.
9.15 Licenses. The Stockholders and the Partners shall do or cause
to be done all things reasonably requested by Purchaser to assist Purchaser in
the transfer or reissuance in the name of Purchaser, DVIHA or DVIMF, as the case
may be, each License listed on Schedule 7.12, provided that the Stockholders and
the Partners will in no event be required to expend any funds or incur any
Liabilities in connection therewith.
ARTICLE X
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COVENANTS OF PURCHASER, DVIHA AND DVIMF
Purchaser, DVIHA and DVIMF covenant and agree with each of JGW &
Co., the Stockholders and the Partners that, at all times from and after the
date hereof until the Closing and, with respect to any covenant or agreement by
its terms to be performed in whole or in part after the Closing, for the period
specified herein or, if no period is specified herein, indefinitely, Purchaser,
DVIHA and DVIMF will comply with all covenants and provisions of this Article X,
except to the extent a majority of the Stockholders and the Partners may
otherwise consent in writing.
10.01 Regulatory and Other Approvals. Purchaser will (a) take all
commercially reasonable steps necessary or desirable, and proceed diligently and
in good faith and use all commercially reasonable efforts, as promptly as
practicable to obtain all consents, approvals or actions of, to make all filings
with and to give all notices to Governmental or Regulatory Authorities or any
other Person required of Purchaser, DVIHA and DVIMF to consummate the
transactions contemplated hereby, (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other Persons
as JGW & Co., the Stockholders or the Partners or such Governmental or
Regulatory Authorities or other Persons may reasonably request and (c) cooperate
with JGW & Co., the Stockholders and the Partners as promptly as practicable in
obtaining all consents, approvals or actions of, making all filings with and
giving all notices to Governmental or Regulatory Authorities or other Persons
required of JGW & Co., the Stockholders or the Partners to consummate the
transactions contemplated hereby. Purchaser will provide prompt notification to
the Stockholders and the Partners when any such consent, approval, action,
filing or notice referred to in clause (a) above is obtained, taken, made or
given, as applicable, and will advise the Stockholders and the Partners of any
communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by this
Agreement.
10.02 Notice and Cure. Purchaser will notify the Stockholders and
the Partners promptly in writing of, and contemporaneously will provide the
Stockholders and the Partners with true and complete copies of any and all
information or documents relating to, and will use all commercially reasonable
efforts to cure before the Closing, any event, transaction or circumstance
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Purchaser, DVIHA or DVIMF under this Agreement to be
breached or that renders or will render untrue any representation or warranty of
DVIHA, DVIMF or Purchaser contained in this Agreement as if the same were made
on or as of the date of such event, transaction or circumstance. Purchaser also
will notify the Stockholders and the Partners promptly in writing of, and will
use all commercially reasonable efforts to cure, before the Closing, any
violation or breach of any representation, warranty, covenant or agreement made
by Purchaser, DVIHA or DVIMF in this Agreement, whether occurring or arising
before, on or after the date of this Agreement. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein or shall in any way limit the Stockholders' or
the Partners' right to seek indemnity under Article XIV.
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10.03 Fulfillment of Conditions. Purchaser will take all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the obligations of the Stockholders
and the Partners contained in this Agreement and will not take or fail to take
any action that could reasonably be expected to result in the nonfulfillment of
any such condition.
10.04 Certain Payments. Purchaser will assume the Purchased
Entities' obligations to Gary Veloric and James Delaney in the aggregate amount
of $361,422.90 and shall pay such amounts on the Closing Date.
10.05 Non-Solicitation. Purchaser shall cause DVI not to, and none
of Purchaser, DVIHA or DVIMF or any Affiliate thereof shall, directly or
indirectly, during the Restricted Period, knowingly solicit or encourage to
leave the employment of JGW & Co., or any of its Affiliates, any employee or JGW
& Co. or any of its Affiliates or hire any employee who has left the employment
of JGW & Co. or any of its Affiliates after the date of this Agreement within
two (2) years of the termination of such employee's employment with JGW & Co. or
any of its Affiliates.
10.06 Compliance with Section 9.13. Purchaser, DVIHA and DVIMF shall
comply in all respects with the provisions of Section 9.13 hereof.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF PURCHASER, DVIHA AND DVIMF
The obligations of Purchaser, DVIHA and DVIMF hereunder are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by Purchaser
in its sole discretion):
11.01 Representations and Warranties. Each of the representations
and warranties made by JGW & Co., the Stockholders and the Partners in this
Agreement (other than those made as of a specified date earlier than the Closing
Date) shall be true and correct in all material respects on and as of the
Closing Date as though such representation or warranty was made on and as of the
Closing Date, and any representation or warranty made as of a specified date
earlier than the Closing Date shall have been true and correct in all material
respects on and as of such earlier date.
11.02 Performance. Each of JGW & Co., the Stockholders and the
Partners shall have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to be so performed
or complied with by JGW & Co. or such Stockholder or Partner at or before the
Closing.
11.03 Officers' Certificates. [Intentionally Omitted].
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11.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement or which could reasonably be expected to otherwise result in a
material diminution of the benefits of the transactions contemplated by this
Agreement to Purchaser, and there shall not be pending on the Closing Date any
Action or Proceeding or any other action in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Purchaser, DVIHA and DVIMF, JGW & Co., the Stockholders, the
Partners, any Purchased Entity or the transactions contemplated by this
Agreement of any such Law.
11.05 Third Party Consents. The consents (or in lieu thereof
waivers) listed in Schedule 7.05 hereto, and all other consents (or in lieu
thereof waivers) to the performance by JGW & Co., the Stockholders and the
Partners of their obligations under this Agreement or to the consummation of the
transactions contemplated hereby as are required under any Contract to which
Purchaser, DVIHA, DVIMF, a Purchased Entity, a Stockholder or a Partner is a
party or by which any of their respective Assets and Properties are bound and
where the failure to obtain any such consent (or in lieu thereof waiver) could
reasonably be expected, individually or in the aggregate with other such
failures, to materially adversely affect Purchaser, DVIHA, DVIMF or the Business
or Condition of the Company or otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to Purchaser (a)
shall have been obtained, (b) shall be in form and substance reasonably
satisfactory to Purchaser, (c) shall not be subject to the satisfaction of any
condition that has not been satisfied or waived and (d) shall be in full force
and effect.
11.06 Opinion of Counsel. Purchaser, DVIHA and DVIMF shall have
received the opinion of Wolf, Block, Schorr and Solis-Cohen LLP, counsel to JGW
& Co., the Purchased Entities, the Stockholders and the Partners, dated the
Closing Date, in form and substance reasonably satisfactory to Purchaser.
11.07 Certificates. JGW & Co., the Stockholders and the Partners
shall have delivered to Purchaser (a) copies of the articles of incorporation,
including all amendments thereto, of JGW & Co., the Company and the General
Partner, certified by the Secretary of State of the jurisdiction of
organization, (b) copies of the certificates of limited partnership, including
all amendments thereto, of the JGW Partnership and the MF Partnership, certified
by the Secretary of State of the jurisdiction of organization, (c) certificates
from the Secretary of State or other appropriate official of the jurisdiction of
incorporation to the effect that each Purchased Entity is subsisting in such
jurisdiction and (d) a certificate from the Secretary of State or other
appropriate official in each jurisdiction in which each Purchased Entity is
qualified or admitted to do business to the effect that each Purchased Entity is
duly qualified or admitted in such jurisdiction.
11.08 Proceedings. All proceedings to be taken on the part of JGW &
Co., the Stockholders, the Partners and the Purchased Entities in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall be reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received copies of all
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such documents and other evidences as Purchaser may reasonably request in order
to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE XII
CONDITIONS TO OBLIGATIONS OF THE
STOCKHOLDERS AND THE PARTNERS
The obligations of the Stockholders and the Partners hereunder are
subject to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by a majority
of the Stockholders and the Partners in their sole discretion):
12.01 Representations and Warranties. Each of the representations
and warranties made by Purchaser, DVIHA and DVIMF in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
12.02 Performance. Purchaser, DVIHA and DVIMF shall have performed
and complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by
Purchaser, DVIHA and DVIMF at or before the Closing.
12.03 Officers' Certificates. [Intentionally Omitted].
12.04 Orders and Laws. There shall not be in effect on the Closing
Date any Order or Law that became effective after the date of this Agreement
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or which
could reasonably be expected to otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement to the Stockholder
and the Partners, and there shall not be pending on the Closing Date any Action
or Proceeding or any other action in, before or by any Governmental or
Regulatory Authority which could reasonably be expected to result in the
issuance of any such Order or the enactment, promulgation or deemed
applicability to Purchaser, DVIHA, DVIMF, JGW & Co., the Stockholders, the
Partners, any Purchased Entity or the transactions contemplated by this
Agreement of any such Law.
12.05 Third Party Consents. All consents (or in lieu thereof
waivers) to the performance by Purchaser, DVIHA and DVIMF of their obligations
hereunder and to the consummation of the transactions contemplated hereby (a)
shall have been obtained, (b) shall be in full form and substance reasonably
satisfactory to the Stockholders and the Partners, (c) shall not be subject to
the satisfaction of any condition that has not been satisfied or waived and (d)
shall be in full force and effect.
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12.06 Registration Rights Agreement. DVI, the Stockholders and the
Partners shall have entered into a registration rights agreement provided by DVI
and in form and substance reasonably satisfactory to the Stockholders and the
Partners.
12.07 Good Standing Certificates. Purchaser shall have delivered to
the Stockholders and the Partners (a) copies of the certificates of
incorporation, including all amendments thereto, of DVI, Purchaser, DVIHA and
DVIMF, certified by the Secretary of State of the State of Delaware and (b)
certificates from the Secretary of State of the State of Delaware to the effect
that each of DVI, Purchaser, DVIHA and DVIMF is in good standing in such
jurisdiction.
12.08 Opinion of Counsel. The Purchased Entities, the Stockholders
and the Partners shall have received the opinion of Rogers & Wells, counsel to
Purchaser, DVIMF and DVIHA, dated the Closing Date, in form and substance
reasonably satisfactory to Purchaser.
ARTICLE XIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
13.01 Survival of Representations, Warranties, Covenants and
Agreements. Notwithstanding any right of Purchaser (whether or not exercised) to
investigate the affairs of the Purchased Entities or any right of any party
(whether or not exercised) to investigate the accuracy of the representations
and warranties of the other party contained in this Agreement, JGW & Co., the
Stockholders, the Partners, DVIHA and DVIMF and Purchaser have the right to rely
fully upon the representations, warranties, covenants and agreements of the
other contained in this Agreement. The representations, warranties, covenants
and agreements of JGW & Co., the Stockholders, the Partners, DVIHA and DVIMF and
Purchaser contained in this Agreement will survive the Closing (a) until four
(4) years following the Closing Date with respect to the representations and
warranties contained in Sections 5.01, 5.02, 5.03, 5.11, 6.01, 6.03, 6.06, 7.09,
8.01, 8.02 and 8.10, (b) until sixty (60) calendar days after the expiration of
all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive) with respect to matters covered by Section 5.06
and Section 7.03, (c) until twelve (12) months following the Closing Date in the
case of all other representations and warranties and any covenant or agreement
to be performed in whole or in part on or prior to the Closing or (d) with
respect to each other covenant or agreement contained in this Agreement, for a
period of twelve (12) months following the last date on which such covenant or
agreement is to be performed or, if no such date is specified, indefinitely,
except that any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with clause (a), (b) or (c) above will
continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall
have been timely given under Article XIV on or prior to such termination date,
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article XIV.
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ARTICLE XIV
INDEMNIFICATION
14.01 Indemnification. (a) Each Stockholder and Partner, severally
to the extent of their respective Indemnification Percentage, shall indemnify
Purchaser, DVIHA and DVIMF and their respective officers, directors, employees,
agents and Affiliates in respect of, and hold each of them harmless from and
against, any and all Losses suffered, incurred or sustained by any of them or to
which any of them becomes subject, resulting from, arising out of or relating to
(i) any misrepresentation, breach of warranty or nonfulfillment of or failure to
perform any covenant or agreement on the part of such Stockholder or Partner
contained in this Agreement and (ii) any Liability for Indebtedness for borrowed
money or trade payables to the extent attributable to or based upon the
operations or activities of any of the Purchased Entities prior to Closing.
(b) JGW & Co. shall indemnify Purchaser, DVIHA and DVIMF and their
respective officers, directors, employees, agents and Affiliates in respect of,
and hold each of them harmless from and against, any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject,
resulting from, arising out of or relating to (i) any misrepresentation or
breach of warranty on the part of JGW & Co. contained in this Agreement and (ii)
any Liability for Indebtedness for borrowed money or trade payables to the
extent attributable to or based upon the operations or activities of any of the
Purchased Entities prior to Closing.
(c) Purchaser agrees to indemnify JGW & Co., each Stockholder and
Partner and each of their respective officers, directors, employees, agents and
Affiliates, if any, in respect of, and hold JGW & Co., each Stockholder and
Partner harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Purchaser, DVIHA or DVIMF, contained in this Agreement.
(d) No amounts of indemnity shall be payable as a result of any
claim arising under Section 14.01(a) or 14.01(b) in respect of a
misrepresentation or breach of warranty by a Partner, a Stockholder or JGW & Co.
unless and until the Indemnified Parties thereunder have suffered, incurred,
sustained or become subject to Losses referred to in such Sections in excess of
$25,000 in the aggregate, in which event the Indemnified Party shall be entitled
to seek indemnity for the full amount of such Losses, provided that this
paragraph (d) shall not apply to a misrepresentation or breach of warranty by
(i) a Partner or a Stockholder contained in Section 5.01, 5.02, 5.03, 5.12,
6.01, 6.03, 6.06 or (ii) JGW & Co. contained in Section 7.09. For the purposes
of this Section 14.01, in computing such individual or aggregate amounts of
Losses, the amount of each Loss shall be deemed to be an amount net of any
insurance proceeds and any indemnity, contribution or other similar payment
payable by any third party with respect thereto.
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(e) Notwithstanding the foregoing, in no event shall (i) the
Stockholders or the Partners be liable to make aggregate indemnification
payments hereunder in excess of their respective Pro Rata Share, provided that
such Pro Rata Share shall be reduced by the Stockholder's or Partner's
applicable Indemnification Percentage of the amount of all indemnification
payments received by Purchaser from JGW & Co., or (ii) JGW & Co. be liable to
make indemnification payments hereunder in excess of $2,161,423 less the amount
of all indemnification payments received by Purchaser from the Partners and the
Stockholders; provided that the following items shall not be included in
computing such cap: (i) fees and expenses of attorney's and accountant's
retained by JGW & Co., the Partners and the Stockholders in connection with any
disputed claim for indemnification and (ii) any additional out-of-pocket costs
incurred by JGW & Co., the Stockholders or the Partners in connection with the
matters referred to in the preceding clauses (i). Notwithstanding the foregoing,
the limitations set forth in this Section 14.01(e) shall not apply with respect
to any indemnification claim made by Purchaser, DVIHA or DVIMF pursuant to
Section 14.01(a) or 14.01(b) with respect to (i) a misrepresentation or breach
of warranty by a Stockholder or a Partner contained in Section 6.03 with respect
to its title or ownership of Stock or Partner Interests, as the case may be;
(ii) any Liability of Purchaser, DVIHA or DVIMF for Indebtedness for money
borrowed or trade payables to the extent attributable to or based upon the
operation or activities of the Purchased Entities prior to the Closing Date and
not otherwise reflected on the October 31, 1997 balance sheet of the Purchased
Entities previously delivered to Purchaser, a copy of which is attached hereto
as Schedule F; or (iii) any actual or intentional fraudulent act or omission of
JGW & Co., a Stockholder or a Partner made in connection with the transactions
contemplated by this Agreement. It being understood that each Stockholder and
Partner will only be liable for its own actual or intentional fraudulent acts or
omissions and not for any other Partner's or Stockholder's act or omission.
14.02 Method of Asserting Claims. All claims for indemnification by
any Indemnified Party under Section 14.01 will be asserted and resolved as
follows:
(a) In the event any claim or demand in respect of which an
Indemnifying Party might seek indemnity under Section 14.01 is asserted against
or sought to be collected from such Indemnified Party by a Person other than the
Stockholders, the Partners, Purchaser or any Affiliate of the Stockholders, the
Partners or Purchaser (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice with reasonable promptness to the Indemnifying Party. If
the Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third Party
Claim, the Indemnifying Party will not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the Indemnifying
Party's ability to defend has been materially prejudiced by such failure of the
Indemnified Party. The Indemnifying Party will notify the Indemnified Party as
soon as practicable within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party under Section 14.01 and whether
the Indemnifying Party desires, at its sole cost and expense, to defend the
Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with
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respect to the Third Party Claim pursuant to this Section 14.02(a), then
the Indemnifying Party will have the right to defend, with counsel
reasonably satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be actively and diligently
prosecuted by the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only with the
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed, in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified Party will not be
indemnified in full pursuant to Section 14.01). The Indemnifying Party
will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that the Indemnified
Party may, at the sole cost and expense of the Indemnified Party, at any
time prior to the Indemnifying Party's delivery of the notice referred to
in the first sentence of this clause (i), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests; and
provided further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and except as provided in
the preceding sentence, the Indemnified Party will bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the defense
or settlement of a Third Party Claim at any time if it irrevocably waives
its right to indemnity under Section 14.01 with respect to such Third
Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 14.02(a), or if the
Indemnifying Party gives such notice but fails to prosecute actively and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party will have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party, which consent will not be unreasonably withheld).
The Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that if requested by the Indemnified Party, the Indemnifying
Party will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is
contesting. Notwithstanding the foregoing provisions of this clause (ii),
if the Indemnifying Party has notified the Indemnified Party within the
Dispute Period that the Indemnifying Party disputes its liability
hereunder to the Indemnified Party with respect to such Third Party Claim
and if such dispute is resolved in favor of the Indemnifying Party in the
manner
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provided in clause (iii) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this clause (ii) or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party will
reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such
litigation. The Indemnifying Party may participate in, but not control,
any defense or settlement controlled by the Indemnified Party pursuant to
this clause (ii), and the Indemnifying Party will bear its own costs and
expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under Section 14.01, the Loss in the
amount specified in the Claim Notice will be conclusively deemed a
liability of the Indemnifying Party under Section 10.01 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party within 30 days of demand. If the Indemnifying Party has timely
disputed its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (d) of this Section 14.02.
(b) In the event any Indemnified Party should have a claim under
Section 14.01 against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable
promptness to the Indemnifying Party. The failure by any Indemnified Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that an Indemnifying Party demonstrates that it has been
materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 10.01
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party within 30 days of demand. If the Indemnifying Party has timely disputed
its liability with respect to such claim, the Indemnifying Party and the
Indemnified Party will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the Resolution Period,
such dispute shall be resolved by arbitration in accordance with paragraph (d)
of this Section 14.02.
(c) In the event of any Loss resulting from a misrepresentation,
breach of warranty or nonfulfillment or failure to be performed of any covenant
or agreement contained in this Agreement as to which an Indemnified Party would
be entitled to claim indemnity under Section 14.01 but for the provisions of
paragraph (d) thereof, such Indemnified Party may nevertheless deliver a written
notice to the Indemnifying Party containing the information that would be
required in a Claim Notice or an Indemnity Notice, as applicable, with respect
to such Loss. If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim described therein the Loss specified in the notice
will be conclusively deemed to have been incurred by the Indemnified Party for
purposes of making the determination set forth in paragraph (d) of Section
14.01. If the Indemnifying Party has timely disputed the claim described in such
Claim Notice or Indemnity Notice, as the case may be, the Indemnifying Party
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and the Indemnified Party will proceed in good faith to negotiate a resolution
of such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (d) of this Section 14.02.
(d) Any dispute submitted to arbitration pursuant to this Section
14.02 shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter sometimes called the
"Board of Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one (1) member (who
must be an independent commercial attorney experienced in the matters in
dispute) and the third member (who must be an independent commercial attorney
experienced in the matters in dispute) shall be selected by mutual agreement of
the other members, or if the other members fail to reach agreement on a third
member within twenty (20) days after their selection, such third member (who
must ben an independent commercial attorney experienced in the matters in
dispute) shall thereafter be selected by the American Arbitration Association
upon application made to it for such purpose by the Indemnified Party. The Board
of Arbitration shall meet in New York, New York or such other place as a
majority of the members of the Board of Arbitration determines more appropriate,
and shall reach and render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration) with respect to the amount, if any,
which the Indemnifying Party is required to pay to the Indemnified Party in
respect of a claim filed by the Indemnified Party. In connection with rendering
its decisions, the Board of Arbitration shall adopt and follow such rules and
procedures reasonably proposed by the Indemnifying Party and approved by a
majority of the members of the Board of Arbitration. To the extent practical,
decisions of the Board of Arbitration shall be rendered no more than thirty (30)
calendar days following commencement of proceedings with respect thereto. The
Board of Arbitration shall cause its written decision to be delivered to the
Indemnified Party and the Indemnifying Party. Any decision made by the Board of
Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the Indemnified
Party and the Indemnifying Party and entitled to be enforced to the fullest
extent permitted by law and entered in any court of competent jurisdiction. The
Board of Arbitration shall not be entitled to render punitive damages with
respect to any such dispute. The prevailing party in any arbitration shall be
entitled to be reimbursed by the other party for the prevailing party's costs
and expenses incurred in connection with that arbitration and the underlying
dispute, including reasonable attorneys' fees and expenses, and to interest on
any amount of money determined by the Board of Arbitration to be due, at a rate
of 9% per annum, from the date or dates the Board of Arbitration determines
payment should have been made. The expenses and fees of the Board of Arbitration
shall be paid by the losing party.
ARTICLE XV
TERMINATION
15.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
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(a) at any time before the Closing, by mutual written agreement of
the Stockholders, the Partners and Purchaser;
(b) at any time before the Closing, by the Stockholders and the
Partners or by Purchaser, in the event (i) of a material breach hereof by the
non-terminating party if such non-terminating party fails to cure such breach as
soon as commercially reasonable and, in any event, at least five (5) Business
Days prior to the Closing Date or (ii) upon notification of the non-terminating
party by the terminating party that the satisfaction of any condition to the
terminating party's obligations under this Agreement becomes impossible or
impracticable with the use of commercially reasonable efforts if the failure of
such condition to be satisfied is not caused by a breach hereof by the
terminating party; or
(c) at any time after November 30, 1997 by the Stockholders and the
Partners or by Purchaser upon notification of the non-terminating party by the
terminating party if the Closing shall not have occurred on or before such date
and such failure to consummate is not caused by a breach of this Agreement by
the terminating party.
15.02 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 14.01, this Agreement will forthwith become null and void,
and there will be no liability or obligation on the part of the Stockholders,
the Partners or Purchaser (or any of their respective officers, directors,
employees, agents or other representatives or Affiliates), except as provided in
the next succeeding sentence and except that the provisions with respect to
expenses in Section 17.03 and confidentiality in Section 17.05 will continue to
apply following any such termination. Notwithstanding any other provision in
this Agreement to the contrary, upon termination of this Agreement pursuant to
Section 15.01(b) or (c), the Stockholders and the Partners will remain liable to
Purchaser for any breach of this Agreement by the Stockholder or the Partner
existing at the time of such termination, and Purchaser will remain liable to
the Stockholders and the Partners for any breach of this Agreement by Purchaser
existing at the time of such termination, and the Stockholders and the Partners
or Purchaser may seek such remedies, including damages and fees of attorneys,
against the other with respect to any such breach as are provided in this
Agreement or as are otherwise available at Law or in equity.
ARTICLE XVI
DEFINITIONS
16.01 Definitions. (a) As used in this Agreement, the following
defined terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means any Person that directly, or indirectly through
one of more intermediaries, controls or is controlled by or is under common
control with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect,
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to direct or cause the direction of the management and policies of such Person
whether by Contract or otherwise and, in any event and without limitation of the
previous sentence, any Person owning ten percent (10%) or more of the voting
securities of a second Person shall be deemed to control that second Person.
"Agreement" means this Purchase Agreement and the Exhibits and the
Schedules hereto and the certificates delivered in accordance with Sections 7.03
and 8.03, as the same shall be amended from time to time.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned or leased by such Person, including without
limitation cash, cash equivalents, Investment Assets, accounts and notes
receivable, chattel paper, documents, instruments, general intangibles, real
estate, equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Board of Arbitration" has the meaning ascribed to it in Section
10.02(c).
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including without limitation financial statements, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs, retrieval programs, operating data and plans and environmental studies
and plans.
"Business" means healthcare investment banking marketed to entities
involved in the long-term healthcare sector of the healthcare market.
"Business Combination" means with respect to any Person any merger,
consolidation or combination to which such Person is a party, any sale,
dividend, split or other disposition of capital stock or other equity interests
of such Person or any sale, dividend or other disposition of all or
substantially all of the Assets and Properties of such Person.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York or the State of Pennsylvania are
authorized or obligated to close.
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"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, Assets and Properties of the
Purchased Entities taken as a whole.
"Claim Notice" means written notification pursuant to Section
14.02(a) of a Third Party Claim as to which indemnity under Section 14.01 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Section 14.01,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim.
"Closing" means the closing of the DVIHA Merger, the DVIMF Merger
and the transactions contemplated by Section 1.01.
"Closing Date" means (a) the fifth Business Day after the day on
which the last of the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in Sections 11.05 and
12.05 has been obtained, made or given or has expired, as applicable, or (b)
such other date as Purchaser and the Stockholders and the Partners mutually
agree upon in writing.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Contract" means any agreement, lease, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract (whether written or
oral).
"Delaware Secretary of State" has the meaning ascribed to it in
Section 2.03.
"DGCL" has the meaning ascribed to it in Section 2.01.
"DVI" has the meaning ascribed to it in Section 1.02.
"DVIHA" has the meaning ascribed to it in forepart of this
Agreement.
"DVIHA Articles of Merger" has the meaning ascribed to it in Section
2.03.
"DVIHA Certificate of Merger" has the meaning ascribed to it in
Section 2.03.
"DVIHA Effective Time" has the meaning ascribed to it in Section
2.03.
"DVIHA Common Stock" has the meaning ascribed to it in Section
3.011.
"DVIHA Surviving Corporation Common Stock" has the meaning ascribed
to it in Section 3.011.
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"DVIMF" has the meaning ascribed to it in the forepart of this
Agreement.
"DVIMF Articles of Merger" has the meaning ascribed to it in Section
2.04.
"DVIMF Certificate of Merger" has the meaning ascribed to it in
Section 2.04.
"DVIMF Common Stock" has the meaning ascribed to it in Section
3.021.
"DVIMF Effective Time" has the meaning ascribed to it in Section
2.04.
"DVIMF Surviving Corporation Common Stock" has the meaning ascribed
to it in Section 3.021.
"DVI Stock" has the meaning ascribed to it in Section 1.02.
"Dispute Period" means the period ending forty-five (45) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Dissenting Shares" has the meaning set forth in Section 3.031.
"Dissenting Stockholders" has the meaning set forth in Section
3.031.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately prior comparable
period.
"General Partner" has the meaning ascribed to it in the forepart of
this Agreement.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Indebtedness" of any Person means all obligations of such Person
(i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar
instruments, (iii) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(iv) under capital leases and (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnification Percentage" means 40.5% with respect to Gary
Veloric, 40.5% with respect to John Delaney and 19% with respect to John G.
Godfrey III.
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"Indemnified Party" means any Person claiming indemnification under
any provision of Article XIV.
"Indemnifying Party" means any Person against whom a claim for
indemnification are being asserted under any provision of Article XIV.
"Indemnity Notice" means written notification pursuant to Section
14.02(b) of a claim for indemnity under Article XIV by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim.
"Intellectual Property" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service mark rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
"Interim Period" has the meaning set forth in Section 9.13.
"IRS" means the United States Internal Revenue Service.
"JGW & Co." has the meaning ascribed to it in the forepart of this
Agreement.
"JGW Partners" has the meaning ascribed to it in the forepart of
this Agreement.
"JGW Partner Interests" has the meaning ascribed to it in the
forepart of this Agreement.
"JGW Partnership" has the meaning ascribed to it in the forepart of
this Agreement.
"JGW Partners Stock" has the meaning ascribed to it in Section
3.022.
"JGW Partners Stockholders" has the meaning ascribed to it in the
forepart of this Agreement.
"JGW Stock" has the meaning ascribed to it in Section 3.012.
"JGW Stockholders" has the meaning ascribed to it in the forepart of
this Agreement.
"knowledge" means, all matters actually known to such party and all
matters which should have been known by such party after reasonable inquiry.
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"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, orders, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention Contract or other Contract to
give any of the foregoing.
"Loss" means any and all damages, fines, fees, penalties,
deficiencies, losses (including loss of value) and expenses (including without
limitation interest, court costs, fees of attorneys, accountants and other
experts or other expenses of litigation or other proceedings or of any claim,
default or assessment).
"Material Contract" means any of the Contracts and Other Agreements,
if (a) it involves, relates to or affects the business or assets of any
Purchased Entity and (b) one or more of the following applies: (i) it involves,
or may reasonably be expected to involve, the payment or receipt of $10,000 or
more (whether in cash or in goods or services of an equivalent value) over its
initial term (not including renewal options); (ii) it imposes material and
substantial restrictions on the conduct of the business of any Purchased Entity;
or (iii) it is not cancelable on notice of 60 days or less without liability,
penalty or premium.
"MF Partners" has the meaning ascribed to it in the forepart of this
Agreement.
"MF Partnership" has the meaning ascribed to it in the forepart of
this Agreement.
"MF Partners Interests" has the meaning ascribed to it in the
forepart of this Agreement.
"NASD" has the meaning ascribed to it in Section 7.14.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such Person or
(ii) receive any benefits or rights similar to any rights enjoyed by or accruing
to the holder of shares of capital stock of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
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"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Partner Interests" has the meaning ascribed to it in the forepart
of this Agreement.
"Partners" has the meaning ascribed to it in the forepart of this
Agreement.
"PBCL" has the meaning ascribed to it in Section 2.01.
"Pennsylvania Department of State" has the meaning ascribed to it in
Section 2.03.
"Pension Benefit Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent, (iii) any
workman, repairman, warehouseman and carrier Liens arising in the ordinary
course of business and which are being contested in good faith by appropriate
proceedings, and (iv) any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property subject to such Lien or the use of such
property in the conduct of the business of the Purchased Entity.
"Person" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental or Regulatory Authority.
"Plan" means an "employee benefit plan" within the meaning of
Section 3(3) of ERISA and each insurance, severance, pension, retirement, profit
sharing, medical, dental, health, sick leave, vacation, fringe benefit, equity
(or equity-based), bonus, incentive, employment, consulting, deferred
compensation or other employee or independent contractor benefit or otherwise
compensatory plan, agreement (including without limitation any collective
bargaining agreement), understanding, contract, policy, fund, commitment or
arrangement, whether oral or written and whether or not subject to ERISA, which
provides benefits to any employee, former employee, independent contractor,
former independent contractor, or any of their dependents or beneficiaries.
"Pro Rata Share" means, with respect to each individual Stockholder
and/or Partner, as the case may be, that amount set forth next to his name on
Schedule E.
"Purchase Price" has the meaning ascribed to it in the forepart of
this Agreement.
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"Purchased Entities" has the meaning ascribed to it in the forepart
of this Agreement.
"Purchaser" has the meaning ascribed to it in the forepart of this
Agreement.
"Representatives" has the meaning ascribed to it in Section 9.02.
"Resolution Period" means the period ending thirty (30) calendar
days following receipt by an Indemnified Party of a Dispute Notice.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock" has the meaning ascribed to it in Section 3.022.
"Stockholders" has the meaning ascribed to it in the forepart of
this Agreement.
"Subsidiary" means any Person in which the Company, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
"Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs, duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer, gains,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Returns" means all returns, declarations, reports, claims for
refund, information returns or statements relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning ascribed to it in Section
14.02(a).
"Welfare Benefit Plan" means an employee welfare benefit plan, as
defined in Section 3(1) of ERISA.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company. All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
44
<PAGE> 51
ARTICLE XVII
MISCELLANEOUS
17.01 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to Purchaser, DVIHA or DVIMF to:
c/o DVI, Inc.
500 Hyde Park
Doylestown, Pennsylvania 18901
Facsimile No.: (215) 345-6600
Attn: Steven R. Garfinkel
with a copy to:
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
Facsimile No.: (212) 878-8375
Attn: John A. Healy
If to JGW & Co, the Stockholders or the Partners:
c/o J.G Wentworth & Co., Inc.
The Graham Building
15th and Ranstead Streets, 10th Floor
Philadelphia, Pennsylvania 19102
Facsimile No.: (215) 567-4215
Attn: Mr. Gary Veloric
With a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
Philadelphia, Pennsylvania 19102
Facsimile No.: (215) 977-2710
Attn: Robert C. Jacobs
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section and confirmed by overnight courier, be deemed given
upon receipt, and (iii) if delivered by mail in the manner described
45
<PAGE> 52
above to the address as provided in this Section, be deemed given upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.
17.02 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, including without limitation any letter of intent between the
parties, and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof.
17.03 Expenses. Except as otherwise expressly provided in this
Agreement (including without limitation as provided in Section 15.02), whether
or not the transactions contemplated hereby are consummated, each party will pay
its own costs and expenses, incurred in connection with the negotiation,
execution and closing of this Agreement and the transactions contemplated
hereby.
17.04 Public Announcements. At all times at or before the Closing,
the Stockholders, the Partners and Purchaser will not issue or make any reports,
statements or releases to the public or generally to the employees, customers,
suppliers or other Persons with respect to this Agreement or the transactions
contemplated hereby without the consent of the other, which consent shall not be
unreasonably withheld. If either party is unable to obtain the approval of its
public report, statement or release from the other party and such report,
statement or release is, in the opinion of legal counsel to such party, required
by Law in order to discharge such party's disclosure obligations, then such
party may make or issue the legally required report, statement or release and
promptly furnish the other party with a copy thereof. The Stockholders, the
Partners and Purchaser will also obtain the other party's prior approval of any
press release to be issued immediately following the Closing announcing the
consummation of the transactions contemplated by this Agreement.
17.05 Confidentiality. Each party hereto will hold, and will use its
best efforts to cause its Affiliates and their respective Representatives to
hold, in strict confidence from any Person (other than any such Affiliate or
Representative), unless (i) compelled to disclose by judicial or administrative
process (including without limitation in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law or (ii)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder, all documents and
information concerning the other party or any of its Affiliates furnished to it
by the other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known by
the party receiving such documents or information or (b) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of such receiving party.
17.06 Further Assurances; Post-Closing Cooperation. (a) At any time
or from time to time after the Closing, JGW & Co., the Stockholders and the
Partners shall execute and
46
<PAGE> 53
deliver to Purchaser such other documents and instruments, provide such
materials and information and take such other actions as Purchaser may
reasonably request more effectively to vest title to the shares of Stock and
Partner Interests in Purchaser.
(b) Following the Closing, each party will afford the other party,
its counsel and its accountants, during normal business hours, reasonable access
to the books, records and other data relating to the Business or Condition of
the Company in its possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party in connection with (i) the
preparation of Tax Returns, (ii) the determination or enforcement of rights and
obligations under this Agreement, (iii) compliance with the requirements of any
Governmental or Regulatory Authority, (iv) the determination or enforcement of
the rights and obligations of any Indemnified Party or (v) in connection with
any actual or threatened Action or Proceeding. Further, each party agrees for a
period extending six (6) years after the Closing Date not to destroy or
otherwise dispose of any such books, records and other data unless such party
shall first offer in writing to surrender such books, records and other data to
the other party and such other party shall not agree in writing to take
possession thereof during the ten (10) day period after such offer is made.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or Regulatory
Authorities or its financial statements or to fulfill its obligations hereunder,
it is necessary that a party be furnished with additional information, documents
or records relating to the Business or Condition of the Company not referred to
in paragraph (b) above, and such information, documents or records are in the
possession or control of the other party, such other party shall use its
commercially reasonable efforts to furnish or make available such information,
documents or records (or copies thereof) at the recipient's request, cost and
expense. Any information obtained by the Stockholders or the Partners in
accordance with this paragraph shall be held confidential by the Stockholders
and the Partners in accordance with Section 17.05.
(d) Notwithstanding anything to the contrary contained in this
Section, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with any provision of this Section shall be subject to applicable rules relating
to discovery.
17.07 Waiver. Any term or condition of this Agreement may be waived
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
17.08 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
47
<PAGE> 54
17.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnity under Article XIV.
17.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void, except (a) for assignments and transfers by operation of Law
and (b) that Purchaser may assign any or all of its rights, interests and
obligations hereunder (including without limitation its rights under Article
XIV) to (i) a wholly-owned subsidiary, provided that any such subsidiary agrees
in writing to be bound by all of the terms, conditions and provisions contained
herein, (ii) any post-Closing purchaser of all of the issued and outstanding
stock of Purchaser, or all or a substantial part of its assets or (iii) any
financial institution providing purchase money or other financing to Purchaser
or the Company, the General Partner, the JGW Partnership or the MF Partnership
from time to time as collateral security for such financing, but no such
assignment referred to in clause (i), (ii) or (iii) shall relieve Purchaser of
its obligations hereunder. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
17.11 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
17.12 Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
17.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the Commonwealth of Pennsylvania
applicable to a Contract executed and performed in such State without giving
effect to the conflicts of laws principles thereof.
17.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
48
<PAGE> 55
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
DVI FINANCIAL SERVICES INC.
By:/s/ Steven R. Garfinkel
----------------------------------------
Name: Steven R. Garfinkel
Title: Executive Vice President and C.F.O.
DVI HEALTHCARE FINANCIAL ADVISORS,INC.
By:/s/ Steven R. Garfinkel
----------------------------------------
Name: Steven R. Garfinkel
Title:
DVI MORTGAGE FUNDING, INC.
By:/s/ Steven R. Garfinkel
----------------------------------------
Name: Steven R. Garfinkel
Title:
J.G. WENTWORTH MANAGEMENT
COMPANY, INC.
By:/s/ Gary Veloric
----------------------------------------
Name: Gary Veloric
Title: President
J.G WENTWORTH SECURITIES, INC.
/s/ Gary Veloric
-------------------------------------------
Name: Gary Veloric
Title: President
49
<PAGE> 56
STOCKHOLDERS:
/s/ Gary Veloric
-------------------------------------------
Gary Veloric
/s/ John G. Godfrey III
-------------------------------------------
John G. Godfrey III
/s/ John Delaney
-------------------------------------------
John Delaney
PARTNERS:
/s/ Gary Veloric
-------------------------------------------
Gary Veloric
/s/ John G. Godfrey III
-------------------------------------------
John G. Godfrey III
/s/ John Delaney
-------------------------------------------
John Delaney
J.G WENTWORTH PARTNERS, INC.
/s/ Gary Veloric
-------------------------------------------
Name: Gary Veloric
Title: Chairman of the Board
J.G WENTWORTH SECURITIES, INC.
/s/ Gary Veloric
-------------------------------------------
Name: Gary Veloric
Title: President
50
<PAGE> 57
SCHEDULE A
J.G. WENTWORTH PARTNERS, L.P.
<TABLE>
<CAPTION>
Name Partner Interest Owner Consideration To Be Received
- ---- ---------------------- ----------------------------
<S> <C> <C>
G. Veloric 39.6% 4,293 shares of DVI Stock
J. Delaney 39.6% 4,293 shares of DVI Stock
J. Godfrey 19.8% 2,146 shares of DVI Stock
J.G. Wentworth Partners, Inc. 1.0% 108 shares of DVI Stock
</TABLE>
A-1
<PAGE> 58
SCHEDULE B
J.G. WENTWORTH MORTGAGE FUNDING, L.P.
<TABLE>
<CAPTION>
Name Partner Interest Owner Consideration To Be Received
- ---- ---------------------- ----------------------------
<S> <C> <C>
G. Veloric 39.6% 10,732 shares of DVI Stock
J. Delaney 39.6% 10,372 shares of DVI Stock
J. Godfrey 19.8% 5,366 shares of DVI Stock
J.G. Wentworth Partners, Inc. 1.0% 271 shares of DVI Stock
</TABLE>
B-1
<PAGE> 59
SCHEDULE C
J.G. WENTWORTH SECURITIES, INC.
<TABLE>
<CAPTION>
Name Stock Owned Consideration To Be Received
- ---- ----------- ----------------------------
<S> <C> <C>
G. Veloric 50 shares (50.0%) 21,003 shares of DVI Stock
J. Delaney 50 shares (50.0%) 21,003 shares of DVI Stock
</TABLE>
C-1
<PAGE> 60
SCHEDULE D
J.G. WENTWORTH PARTNERS, INC.
<TABLE>
<CAPTION>
Name Stock Owned Consideration To Be Received
- ---- ----------- ----------------------------
<S> <C> <C>
G. Veloric 400 shares (40.0%) 1,626 shares of DVI Stock
J. Delaney 400 shares (40.0%) 1,626 shares of DVI Stock
T. Godfrey 200 shares (20.0%) 813 shares of DVI Stock
</TABLE>
D-1
<PAGE> 61
SCHEDULE E
PRO RATA SHARE AMOUNTS
<TABLE>
<CAPTION>
Name Amount
- ---- ------
<S> <C>
G. Veloric $878,211.45
J. Delaney $878,211.45
T. Godfrey $405,000.00
</TABLE>
D-2
<PAGE> 62
SCHEDULE F
OCTOBER 31, 1997 BALANCE SHEET
Annexed hereto.
D-3
<PAGE> 1
EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of November 14, 1997, between DVI,
Inc., a Delaware corporation (the "Company"), and the stockholders listed on the
signature pages hereto (each, a "Holder").
WHEREAS, DVI Financial Services, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company, DVI Healthcare Financial Advisors, Inc.,
a Delaware corporation, DVI Mortgage Funding, Inc., a Delaware corporation, J.G.
Wentworth Management Company, Inc., a Pennsylvania corporation, J.G. Wentworth
Securities, Inc., a Pennsylvania corporation, J.G. Wentworth Partners, Inc., a
Pennsylvania corporation, and the Holders have entered into an Acquisition and
Merger Agreement dated as of November 14, 1997 (the "Acquisition Agreement")
pursuant to which the Company has issued to the Holders 84,012 shares of the
Company's common stock, par value $.005 per share (the "Common Stock"); and
WHEREAS, in order to induce the Holders to enter into the Acquisition
Agreement and to consummate the transactions contemplated thereby, the Company
agreed to grant to the Holders the registration rights set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
SECTION 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Acquisition Agreement" has the meaning set forth in the introductory
clauses.
"Advice" shall have the meaning set forth in Section 5.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE> 2
"Business Day" means any day that is not a Saturday, a Sunday or a legal
holiday on which banking institutions in the State of New York or the
Commonwealth of Pennsylvania are not required to be open.
"Capital Stock" means, with respect to the Company, any and all shares,
interests, participations or other equivalents (however designated) of capital
stock issued by the Company, including each class of common stock and preferred
stock of the Company.
"Common Stock" has the meaning set forth in the introductory clauses.
"Company" has the meaning set forth in the introductory clauses.
"Delay Period" has the meaning set forth in Section 2(c).
"Effectiveness Period" has the meaning set forth in Section 2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Holdback Period" has the meaning set forth in Section 4.
"Holder" has the meaning set forth in the introductory clauses and
includes any assignee thereof in accordance with Section 9 of this Agreement.
"Indemnified Party" has the meaning set forth in Section 8(c).
"Indemnifying Party" has the meaning set forth in Section 8(c).
"Inspectors" has the meaning set forth in Section 5(j).
"Interruption Period" has the meaning set forth in Section 5.
"Losses" has the meaning set forth in Section 8(a).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Piggyback Registration" has the meaning set forth in Section 3(a).
"Prospectus" means the prospectus included in any Registration Statement
(including a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable Shares
covered by such Registration Statement and all other amendments and
2
<PAGE> 3
supplements to such prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such prospectus.
"Records" has the meaning set forth in Section 5(j).
"Registrable Shares" means shares of Common Stock owned by a Holder at any
time during the Registration Period, unless (i) they have been effectively
registered under Section 5 of the Securities Act and disposed of pursuant to an
effective Registration Statement, (ii) such securities can be freely sold and
transferred without restriction under Rule 144 or any other restrictions under
the Securities Act or (iii) such securities have been transferred pursuant to
Rule 144 under the Securities Act or any successor rule such that, after any
such transfer referred to in this clause (iii), such securities may be freely
transferred without restriction under the Securities Act.
"Registration" means registration under the Securities Act of an offering
of Registrable Shares pursuant to a Shelf Registration, a Piggyback Registration
or otherwise pursuant to the terms of this Agreement.
"Registration Statement" means any registration statement under the
Securities Act of the Company that covers any of the Registrable Shares pursuant
to the provisions of this Agreement, including the related Prospectus, all
amendments and supplements to such registration statement, including pre- and
post-effective amendments, all exhibits thereto and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Shelf Registration" has the meaning set forth in Section 2(a).
"Underwritten Registration or Underwritten Offering" means a registration
under the Securities Act in which securities of the Company are sold to an
underwriter for reoffering to the public.
SECTION 2. Registration.
(a) The Company, within 30 days of the date hereof, shall file with
the SEC, and the Company thereafter shall use its best efforts to cause to be
declared effective within six months after the date of such filing and in no
event later than one year after the date hereof, a Registration Statement on the
appropriate form, including Form S-3 (or its successor form) if such form is
then available for use by the Company, for the registration and sale, in
accordance with the intended method or methods of distribution, of the total
number of Registrable Shares held of record by the Holders, which shall include
a "shelf" registration (a "Shelf Registration") pursuant to Rule 415 under the
Securities Act.
3
<PAGE> 4
(b) The Company shall use commercially reasonable efforts to keep
each Registration Statement filed pursuant to this Section 2 continuously
effective and usable for the resale of the Registrable Shares covered thereby
(i) in the case of a Registration that is not a Shelf Registration, for a period
of 120 days from the date on which the SEC declares such Registration Statement
effective and (ii) in the case of a Shelf Registration, continuously from the
date on which the SEC declares such Registration Statement effective, in either
case until all the Registrable Shares covered by such Registration Statement
have been sold (pursuant to such Registration Statement).
(c) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of time,
but not in excess of 30 days (a "Delay Period"), if either the President and
Chief Executive Officer or Executive Vice President and Chief Financial Officer
of the Company determines that in such officer's reasonable judgment and good
faith the registration and distribution of the Registrable Shares covered or to
be covered by such Registration Statement would materially interfere with any
pending material financing, acquisition or corporate reorganization or other
material corporate development involving the Company or any of its subsidiaries
or would require premature disclosure thereof and promptly gives the Holders
written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the period of the
anticipated delay; provided, however, that (i) the aggregate number of days
included in all Delay Periods during any consecutive 12 months shall not exceed
the aggregate of (x) 90 days minus (y) the number of days occurring during all
Holdback Periods (as defined in Section 4) and Interruption Periods (as defined
in Section 5(k)) during such consecutive 12 months and (ii) a period of at least
60 days shall elapse between the termination of any Delay Period, Holdback
Period or Interruption Period and the commencement of the immediately succeeding
Delay Period. If the Company shall so postpone the filing of a Registration
Statement, such filing shall be commenced immediately following the end of such
Delay Period and the time period for which the Company is required to maintain
the effectiveness of any Registration Statement shall be extended by the
aggregate number of days of all Delay Periods, all Holdback Periods and all
Interruption Periods occurring during such Registration and such period and any
extension thereof is hereinafter referred to as the "Effectiveness Period." The
Company shall not be entitled to initiate a Delay Period unless it shall (A) to
the extent permitted by agreements with other security holders of the Company,
concurrently prohibit sales by such other security holders under registration
statements covering securities held by such other security holders and (B) in
accordance with the Company's policies from time to time in effect, forbid
purchases and sales in the open market by senior executives of the Company.
(d) Except to the extent required by agreements with other security
holders of the Company entered into prior to the date of the Acquisition
Purchase Agreement, the Company shall not include any securities that are not
Registrable Shares in any Registration Statement filed pursuant to this Section
2 without the prior written consent of the Holders of a majority in number of
the Registrable Shares covered by such Registration Statement.
4
<PAGE> 5
SECTION 3. Piggyback Registration.
(a) Right to Piggyback. If at any time prior to the time a Shelf
Registration Statement is declared effective for the registration and sale of
the total number of Registrable Shares the Company proposes to file a
registration statement under the Securities Act with respect to a public
offering of securities of the same type as the Registrable Shares pursuant to a
firm commitment underwritten offering solely for cash for its own account (other
than a registration statement (i) on Form S-4 or Form S-8 or any successor forms
thereto, or (ii) filed solely in connection with a dividend reinvestment plan or
employee benefit plan covering officers or directors of the Company or its
Affiliates) or for the account of any holder of securities of the same type as
the Registrable Shares (to the extent that the Company has the right to include
Registrable Shares in any registration statement to be filed by the Company on
behalf of such holder), then the Company shall give written notice of such
proposed filing to the Holders at least 30 days before the anticipated filing
date. Such notice shall offer the Holders the opportunity to register such
amount of Registrable Shares as they may request (a "Piggyback Registration").
Subject to Section 3(b), the Company shall include in each such Piggyback
Registration all Registrable Shares with respect to which the Company has
received written requests for inclusion therein within 15 days after notice has
been given to the Holders. Each Holder shall be permitted to withdraw all or any
portion of the Registrable Shares of such Holder from a Piggyback Registration
at any time prior to the effective date of such Piggyback Registration;
provided, however, that if such withdrawal occurs after the filing of the
Registration Statement with respect to such Piggyback Registration, the
withdrawing Holders shall reimburse the Company for the portion of the SEC
registration fee paid by the Company with respect to the Registrable Shares so
withdrawn.
(b) Priority on Piggyback Registrations. The Company shall permit
the Holders to include all such Registrable Shares on the same terms and
conditions as any similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the Company or the managing underwriter or
underwriters participating in such offering advise the Holders in writing that
in their good faith determination the total amount of securities requested to be
included in such Piggyback Registration exceeds the amount which can be sold in
(or during the time of) such offering without delaying or jeopardizing the
success of the offering (including the price per share of the securities to be
sold), then the amount of securities to be offered for the account of the
Holders and other holders of securities who have piggyback registration rights
with respect thereto shall be reduced (to zero if necessary) pro rata on the
basis of the number of common stock equivalents requested to be registered by
each such Holder or holder participating in such offering.
(c) Right to Abandon. Nothing in this Section 3 shall create any
liability on the part of the Company to the Holders if the Company in its sole
discretion should decide not to file a registration statement proposed to be
filed pursuant to Section 3(a) or to withdraw such registration statement
subsequent to its filing, regardless of any action whatsoever that a Holder may
have taken, whether as a result of the issuance by the Company of any notice
hereunder or otherwise.
5
<PAGE> 6
SECTION 4. Holdback Agreement. If (i) during the Effectiveness Period, the
Company shall file a registration statement (other than in connection with the
registration of securities issuable pursuant to an employee stock option, stock
purchase or similar plan or pursuant to a merger, exchange offer or a
transaction of the type specified in Rule 145(a) under the Securities Act) with
respect to the Common Stock or similar securities or securities convertible
into, or exchangeable or exercisable for, such securities and (ii) with
reasonable prior notice, the Company (in the case of a non-underwritten public
offering by the Company pursuant to such registration statement) advises the
Holders in writing that a public sale or distribution of such Registrable Shares
would materially adversely affect such offering or the managing underwriter or
underwriters (in the case of an underwritten public offering by the Company
pursuant to such registration statement) advises the Company in writing (in
which case the Company shall notify the Holders) that a public sale or
distribution of Registrable Shares would materially adversely impact such
offering, then each Holder shall, to the extent not inconsistent with applicable
law, refrain from, and agree in a writing to the Company and the underwriter or
underwriters to refrain from, effecting any public sale or distribution of
Registrable Shares during the ten days prior to the effective date of such
registration statement and until the earliest of (A) the abandonment of such
offering, (B) 90 days from the effective date of such registration statement and
(C) if such offering is an underwritten offering, the termination in whole or in
part of any "hold back" period obtained by the underwriter or underwriters in
such offering from the Company in connection therewith but in no event longer
than 180 days (each such period, a "Holdback Period").
SECTION 5. Registration Procedures. In connection with the registration
obligations of the Company pursuant to and in accordance with Sections 2 and 3
(and subject to Sections 2 and 3), the Company shall use commercially reasonable
efforts to effect such registration to permit the sale of such Registrable
Shares in accordance with the intended method or methods of disposition thereof,
and pursuant thereto the Company shall as expeditiously as possible (but subject
to Sections 2 and 3):
(a) prepare and file with the SEC a Registration Statement for the
sale of the Registrable Shares on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate in accordance with such
Holders' intended method or methods of distribution thereof, subject to Section
2(a) and, subject to the Company's right to terminate or abandon a registration
pursuant to Section 3(c), use commercially reasonable efforts to cause such
Registration Statement to become effective and remain effective as provided
herein;
(b) prepare and file with the SEC such amendments and supplements
(including post-effective amendments) to such Registration Statement, and such
supplements to the related Prospectus, as may be required by the rules,
regulations or instructions applicable to the Securities Act during the
applicable period in accordance with the intended methods of disposition
specified by the Holders of the Registrable Shares covered by such Registration
Statement, make generally available earnings statements satisfying the
provisions of Section 11(a) of the Securities Act (provided that the Company
shall be deemed to have complied with this clause if it has complied with Rule
158 under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act;
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<PAGE> 7
provided, however, that before filing a Registration Statement or Prospectus, or
any amendments or supplements thereto (other than reports required to be filed
by it under the Exchange Act), the Company shall furnish to the Holders of
Registrable Shares covered by such Registration Statement and their counsel for
review and comment, copies of all documents required to be filed;
(c) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice in
writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to such Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to such Registration Statement
or the related Prospectus or for additional information regarding such Holders,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of such Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (v) of the happening of any
event that requires the making of any changes in such Registration Statement,
Prospectus or documents incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(d) use commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement, or the
lifting of any suspension of the qualification or exemption from qualification
of any Registrable Shares for sale in any jurisdiction in the United States;
(e) furnish to the Holder of any Registrable Shares covered by such
Registration Statement, each counsel for such Holders and each managing
underwriter, if any, without charge, one conformed copy of such Registration
Statement, as declared effective by the SEC, and of each post-effective
amendment thereto, in each case including financial statements and schedules and
all exhibits and reports incorporated or deemed to be incorporated therein by
reference; and deliver, without charge, such number of copies of the preliminary
prospectus, any amended preliminary prospectus, each final Prospectus and any
post-effective amendment or supplement thereto, as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Shares of such
Holder covered by such Registration Statement in conformity with the
requirements of the Securities Act;
(f) prior to any public offering of Registrable Shares covered by
such Registration Statement, use commercially reasonable efforts to register or
qualify such Registrable Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Holders of such Registrable Shares shall
reasonably request in writing; provided, however, that the Company shall in no
event be required to qualify generally to do business as a foreign corporation
or as a dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has
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<PAGE> 8
not theretofore done so or to take any action that would subject it to general
service of process or taxation in any such jurisdiction where it is not then
subject;
(g) upon the occurrence of any event contemplated by paragraph
5(c)(v), prepare a supplement or post-effective amendment to such Registration
Statement or the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference and file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Shares being sold
thereunder (including upon the termination of any Delay Period), such Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(h) use commercially reasonable efforts to cause all Registrable
Shares covered by such Registration Statement to be listed on each securities
exchange or automated interdealer quotation system, if any, on which similar
securities issued by the Company are then listed or quoted;
(i) on or before the effective date of such Registration Statement,
provide the transfer agent of the Company for the Registrable Shares with
printed certificates for the Registrable Shares covered by such Registration
Statement, which are in a form eligible for deposit with The Depository Trust
Company;
(j) if such offering is an underwritten offering, make available for
inspection by any Holder of Registrable Shares included in such Registration
Statement, any underwriter participating in any offering pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by
any such Holder or underwriter (collectively, the "Inspectors"), all financial
and other records and other information, pertinent corporate documents and
properties of any of the Company and its subsidiaries and affiliates
(collectively, the "Records"), as shall be reasonably necessary to enable them
to exercise their due diligence responsibilities; provided, however, that the
Records that the Company determines, in good faith, to be confidential and which
it notifies the Inspectors in writing are confidential shall not be disclosed to
any Inspector unless such Inspector signs a confidentiality agreement reasonably
satisfactory to the Company (which shall permit the disclosure of such Records
in such Registration Statement or the related Prospectus if necessary to avoid
or correct a material misstatement in or material omission from such
Registration Statement or Prospectus) or either (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
Registration Statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction; provided
further, however, that (A) any decision regarding the disclosure of information
pursuant to subclause (i) shall be made only after consultation with counsel for
the applicable Inspectors and the Company and (B) with respect to any release of
Records pursuant to subclause (ii), each Holder of Registrable Shares agrees
that it shall, promptly after learning that disclosure of such Records is sought
in a court having jurisdiction, give notice to the Company so that the Company,
at the Company's expense, may undertake appropriate action to prevent disclosure
of such Records; and
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<PAGE> 9
(k) if such offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other appropriate and
reasonable actions requested by the Holders of a majority of the Registrable
Shares being sold in connection therewith (including those reasonably requested
by the managing underwriters) in order to expedite or facilitate the disposition
of such Registrable Shares, and in such connection, (i) use commercially
reasonable efforts to obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters and counsel to the Holders
of the Registrable Shares being sold), addressed to each selling Holder of
Registrable Shares covered by such Registration Statement and each of the
underwriters as to the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such counsel and underwriters, (ii) use commercially reasonable efforts to
obtain "cold comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement), addressed to
each selling holder of Registrable Shares covered by the Registration Statement
(unless such accountants shall be prohibited from so addressing such letters by
applicable standards of the accounting profession) and each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings, (iii) if requested and if an underwriting agreement is entered into,
provide indemnification provisions and procedures substantially to the effect
set forth in Section 8 hereof with respect to all parties to be indemnified
pursuant to such Section. The above shall be done at each closing under such
underwriting or similar agreement, or as and to the extent required thereunder.
The Company may require each Holder of Registrable Shares covered by a
Registration Statement to furnish such information regarding such Holder and
such Holder's intended method of disposition of such Registrable Shares as it
may from time to time reasonably request in writing. If any such information is
not furnished within a reasonable period of time after receipt of such request,
the Company may exclude such Holder's Registrable Shares from such Registration
Statement.
Each Holder of Registrable Shares covered by a Registration Statement
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v),
that such Holder shall forthwith discontinue disposition of any Registrable
Shares covered by such Registration Statement or the related Prospectus until
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 5(g), or until such Holder is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amended or supplemented Prospectus or any additional or
supplemental filings which are incorporated, or deemed to be incorporated, by
reference in such Prospectus (such period during which disposition is
discontinued being an "Interruption Period") and, if requested by the Company,
the Holder shall deliver to the Company (at the expense of the Company) all
copies then in its
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<PAGE> 10
possession, other than permanent file copies then in such holder's possession,
of the Prospectus covering such Registrable Shares at the time of receipt of
such request.
Each Holder of Registrable Shares covered by a Registration Statement
further agrees not to utilize any material other than the applicable current
preliminary prospectus or Prospectus in connection with the offering of such
Registrable Shares.
SECTION 6. Registration Expenses. Whether or not any Registration
Statement is filed or becomes effective, the Company shall pay all costs, fees
and expenses incident to the Company's performance of or compliance with this
Agreement, including (i) all registration and filing fees, including NASD filing
fees, (ii) all fees and expenses of compliance with securities or Blue Sky laws,
including reasonable fees and disbursements of counsel in connection therewith,
(iii) printing expenses (including expenses of printing certificates for
Registrable Shares and of printing prospectuses if the printing of prospectuses
is requested by the Holders or the managing underwriter, if any), (iv)
messenger, telephone and delivery expenses, (v) fees and disbursements of
counsel for the Company, (vi) fees and disbursements of all independent
certified public accountants of the Company (including expenses of any "cold
comfort" letters required in connection with this Agreement) and all other
persons retained by the Company in connection with such Registration Statement,
(vii) fees and disbursements of underwriters customarily paid by the issuers or
sellers of securities and (viii) all other costs, fees and expenses incident to
the Company's performance or compliance with this Agreement. Notwithstanding the
foregoing, the fees and expenses of any persons retained by any Holder and any
discounts, commissions or brokers' fees or fees of similar securities industry
professionals and any transfer taxes relating to the disposition of the
Registrable Shares by a Holder, will be payable by such Holder and the Company
will have no obligation to pay any such amounts.
SECTION 7. Underwriting Requirements. In the case of any underwritten
offering pursuant to a Piggyback Registration, the Company shall select the
institution or institutions that shall manage or lead such offering. No Holder
shall be entitled to participate in an underwritten offering unless and until
such Holder has entered into an underwriting or other agreement (including a
"holdback agreement" to the effect set forth in Section 4) with such institution
or institutions for such offering in such form as the Company and such
institution or institutions shall reasonably determine.
SECTION 8. Indemnification.
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Shares whose Registrable Shares are
covered by a Registration Statement or Prospectus and each underwriter if such
offering is an underwritten offering, the officers, directors and agents and
employees of each of them, each Person who controls each such Holder or
underwriter, as the case may be (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), and the officers, directors,
agents and employees of each such controlling person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
judgment, costs (including, without limitation, costs of preparation and
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<PAGE> 11
reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or based upon (A) any untrue or alleged untrue statement of a
material fact contained in such Registration Statement or Prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or based upon any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are based upon information furnished in writing to
the Company by or on behalf of such Holder expressly for use therein; provided,
however, that the Company shall not be liable to any such Holder to the extent
that any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any preliminary
prospectus if (i) having previously been furnished by or on behalf of the
Company with copies of the Prospectus, such Holder failed to send or deliver a
copy of the Prospectus with or prior to the delivery of written confirmation of
the sale of Registrable Shares by such Holder to the person asserting the claim
from which such Losses arise and (ii) the Prospectus would have corrected in all
material respects such untrue statement or alleged untrue statement or such
omission or alleged omission; and provided further, however, that the Company
shall not be liable in any such case to the extent that any such Losses arise
out of or are based upon an untrue statement or alleged untrue statement or
omission or alleged omission in the Prospectus, if (x) such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in all
material respects in an amendment or supplement to the Prospectus and (y) having
previously been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior to or concurrently
with the sale of Registrable Shares or (B) any violation by the Company of any
federal or state securities rule or regulation applicable to the Company and
relating to any action or inaction by the Company in connection with such
registration. Such indemnification and reimbursement obligations shall remain in
full force and effect following the transfer of Registrable Shares.
(b) Indemnification by Holder of Registrable Shares. In connection
with any Registration Statement in which a Holder is participating, such Holder
shall furnish to the Company in writing such information as the Company
reasonably requests for use in connection with such Registration Statement or
the related Prospectus and agrees to indemnify, to the full extent permitted by
law, the Company, its directors, officers, agents or employees, each Person who
controls the Company (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act) and the directors, officers, agents or employees
of such controlling Persons, from and against all Losses arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement
thereto, or any preliminary prospectus, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent that such
untrue or alleged untrue statement or omission or alleged omission is based upon
any information so furnished in writing by or on behalf of such Holder to the
Company expressly for use in such Registration Statement or Prospectus; provided
that the aggregate amount which any such Holder shall be required to pay
pursuant hereto shall be limited to the amount of net proceeds received by the
Holder upon the sale of the Registrable Shares pursuant to the Registration
Statement giving rise to such matters.
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<PAGE> 12
(c) Conduct of Indemnification Proceedings. If any Person shall be
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified Party
shall give prompt notice to the party from which such indemnity is sought (the
"Indemnifying Party") of any claim or of the commencement of any proceeding with
respect to which such Indemnified Party seeks indemnification or contribution
pursuant hereto; provided, however, that the delay or failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any obligation
or liability except to the extent that the Indemnifying Party has been
prejudiced by such delay or failure. The Indemnifying Party shall have the
right, exercisable by giving written notice to an Indemnified Party promptly
after the receipt of written notice from such Indemnified Party of such claim or
proceeding, to assume, at the Indemnifying Party's expense, the defense of any
such claim or proceeding, with counsel reasonably satisfactory to such
Indemnified Party; provided, however, that (i) an Indemnified Party shall have
the right to employ separate counsel in any such claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless: (1) the Indemnifying
Party agrees to pay such fees and expenses; (2) the Indemnifying Party fails
promptly to assume the defense of such claim or proceeding or fails to employ
counsel reasonably satisfactory to such Indemnified Party; or (3) the named
parties to any proceeding (including impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it that are inconsistent with those available to the Indemnifying
Party or that a conflict of interest is likely to exist among such Indemnified
Party and any other indemnified parties (in which case the Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party); and (ii) subject to clause (3) above, the Indemnifying Party
shall not, in connection with any one such claim or proceeding or separate but
substantially similar or related claims or proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one firm of attorneys (together with appropriate
local counsel) at any time for all of the indemnified parties, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the
Indemnifying Party, such Indemnified Party shall not be subject to any liability
for any settlement made without its consent. The Indemnifying Party shall not
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release, in form and substance reasonably
satisfactory to the Indemnified Party, from all liability in respect of such
claim or litigation for which such Indemnified Party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any Losses (other
than in accordance with its terms), then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party, on the one hand, and indemnified party, on the
other hand, shall be determined by reference to, among other things,
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<PAGE> 13
whether any action in question, including any untrue statement of a material
fact or omission or alleged omission to state a material fact, has been taken
by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include any legal or other fees or expenses incurred by such party
in connection with any investigation or proceeding. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provision of this Section
8(d), an indemnifying party that is a Holder shall not be required to contribute
any amount which is in excess of the amount by which the total proceeds received
by such Holder from the sale of the Registrable Shares sold by such Holder (net
of all underwriting discounts and commissions) exceeds the amount of any damages
that such indemnifying party has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
SECTION 9. Transfer of Registration Rights. The rights to cause the
Company to register Registrable Shares pursuant to this Agreement may not be
assigned by a Holder to a transferee or assignee of such securities except to
(i) a Person who acquires Registrable Shares and who has agreed to be bound by
the terms of this Agreement as if such Person were a Holder, (ii) a Person who
is upon the death of any Holder, the executor of the estate of such Holder or
any of such Holder's heirs, devisees, legatees or assigns or (iii) upon the
disability of any Holder, any guardian or conservator of such Holder.
SECTION 10. Miscellaneous.
(a) Termination. This Agreement and the obligations of the Company
and the Holders hereunder (other than Section 8) shall terminate on the first
date on which no Registrable Shares remain outstanding.
(b) Notices. All notices or communications hereunder shall be in
writing (including telecopy or similar writing), addressed as follows:
To the Company:
DVI, Inc.
500 Hyde Park
Doylestown, Pennsylvania 18901
Attention: Steven R. Garfinkel
and
Melvin C. Breaux, Esq.
Telecopier: (214) 345-4428
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To the Holders:
To the Addresses set forth on the Signature Pages hereto
with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
S.E. Corner of 15th and Chestnut Street
Philadelphia, Pennsylvania 18902
Telecopier: (215) 977-2740
Attention: Michael Sherman, Esq.
or such other addresses as each of the parties hereto or any future Holder may
designate to the other parties.
Any such notice or communication shall be deemed given (i) when
made, if made by hand delivery, (ii) upon transmission, if sent by confirmed
telecopier, (iii) one business day after being deposited with a next-day
courier, postage prepaid, or (iv) three business days after being sent certified
or registered mail, return receipt requested, postage prepaid, in each case
addressed as above (or to such other address or to such other telecopier number
as such party may designate in writing from time to time).
(c) Separability. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforcibility shall not affect the remaining provisions hereof which shall
remain in full force and effect.
(d) Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, devisees,
legatees, legal representatives, successors and assigns; provided that the
Company may not assign any of its obligations hereunder.
(e) Entire Agreement. This Agreement represents the entire agreement
of the parties and shall supersede any and all previous contracts, arrangements
or understandings between the parties hereto with respect to the subject matter
hereof.
(f) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of at least a
majority in number of the Registrable Shares then outstanding.
(g) Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other parties, except to the extent that such party is advised by
counsel that such release or announcement is
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<PAGE> 15
necessary or advisable under applicable law or the rules or regulations of any
securities exchange, in which case the party required to make the release or
announcement shall to the extent practicable provide the other party with an
opportunity to review and comment on such release or announcement in advance of
its issuance.
(h) Expenses. Whether or not the transactions contemplated hereby
are consummated, except as otherwise provided herein, all costs and expenses
incurred in connection with the execution of this Agreement shall be paid by the
party incurring such costs or expenses, except as otherwise set forth herein.
(i) Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be one and the same agreement, and shall become
effective when counterparts have been signed by each of the parties and
delivered to each other party.
(k) Governing Law. This Agreement shall be construed, interpreted,
and governed in accordance with the internal laws of Delaware without giving
regard to the principles of conflicts of law.
(l) Waiver. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.
(m) Calculation of Time Periods. Except as otherwise indicated, all
periods of time referred to herein shall include all Saturdays, Sundays and
holidays; provided, however, that if the date to perform the act or give any
notice with respect to this Agreement shall fall on a day other than a Business
Day, such act or notice may be timely performed or given if performed or given
on the next succeeding Business Day.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
DVI, INC.
By:/s/ Steven R. Garfinkel
-----------------------------------------
Name: Steven R. Garfinkel
Title: Executive Vice President and C.F.O.
STOCKHOLDERS:
/s/ Gary Veloric
--------------------------------------------
Gary Veloric
Address:
/s/ James Delaney
--------------------------------------------
James Delaney
Address:
/s/ John G. Godfery III
--------------------------------------------
John G. Godfrey III
Address:
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INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form S-3 dated April 27, 1998, of DVI, Inc., of our report dated July 31, 1997,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
DVI, Inc. for the year ended June 30, 1997, which is part of this Registration
Statement.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 27, 1998
