<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITY EXCHANGE ACT OF 1934.
For the quarterly period ended: December 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ____ to _____
Commission file number 0-16271
DVI, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2722773
- ---------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
- ---------------------------------- ---------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code: (215) 345-6600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practical date: Common stock, $.005 par value -
10,953,384 shares as of January 30, 1998.
<PAGE> 2
DVI, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION: PAGE
NUMBER
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets -
December 31, 1997 and June 30, 1997 (unaudited) ................. 3-4
Consolidated Statements of Operations -
Three and six months ended December 31, 1997 and 1996 (unaudited) 5
Consolidated Statements of Shareholders' Equity -
July 1, 1996 through December 31, 1997 (unaudited) .............. 6
Reconciliation of Earnings per Share Calculation -
Three and six months ended December 31, 1997 and 1996 (unaudited) 7
Consolidated Statements of Cash Flows -
Six months ended December 31, 1997 and 1996 (unaudited) ......... 8-9
Notes to Consolidated Financial Statements (unaudited) ............... 10-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................ 12-13
PART II. OTHER INFORMATION .......................................... 14
SIGNATURES ........................................................... 15
</TABLE>
2
<PAGE> 3
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ---------
<S> <C> <C>
Cash and cash equivalents ................................................ $ 11,872 $ 9,187
Cash and cash equivalents, restricted .................................... 30,233 26,461
Receivables:
Investment in direct financing leases and notes secured by equipment or
medical receivables:
Receivables in installments ......................................... 503,385 496,861
Receivables and notes - related parties ........................... 7,329 9,453
Recourse credit enhancements ........................................ 51,490 46,095
Notes collateralized by medical receivables ......................... 144,432 85,649
Residual valuation .................................................. 9,783 8,276
Unearned income ..................................................... (61,479) (69,739)
--------- ---------
Net investment in direct financing leases and
notes secured by equipment or medical receivables ................. 654,940 576,595
Allowance for losses on receivables ................................... (7,774) (5,976)
--------- ---------
Net receivables .......................................................... 647,166 570,619
Equipment on operating leases
(net of accumulated depreciation of $2,163 (December 31, 1997)
and $2,301 (June 30, 1997)) ........................................... 7,340 4,041
Furniture and fixtures
(net of accumulated depreciation of $2,220 (December 31, 1997)
and $1,710 (June 30, 1997)) ........................................... 3,351 2,405
Investments in investees ................................................. 6,209 6,609
Goodwill, net ............................................................ 3,799 3,953
Other assets ............................................................. 16,336 11,253
--------- ---------
Total assets ............................................................. $ 726,306 $ 634,528
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ---------
<S> <C> <C>
Accounts payable ......................................................... $ 33,640 $ 30,850
Accrued expenses and other liabilities ................................... 20,573 19,208
Borrowings under warehouse facilities .................................... 185,639 44,962
Deferred income taxes .................................................... 8,610 8,610
Long-term debt, net:
Notes payable to financial institutions ............................... 5,450 6,168
Discounted receivables (primarily limited recourse) ................... 254,493 317,863
9 7/8% senior notes due 2004 .......................................... 96,193 95,883
Subordinated debt ..................................................... 2,000 2,000
Convertible subordinated notes ........................................ 13,381 13,324
--------- ---------
Total long-term debt, net ................................................ 371,517 435,238
--------- ---------
Total liabilities ........................................................ 619,979 538,868
SHAREHOLDERS' EQUITY:
Preferred stock, $10.00 par value; authorized 100,000 shares; no shares
issued Common stock, $0.005 par value; authorized 25,000,000 shares;
outstanding 10,952,884 shares (December 31, 1997) and
10,590,859 shares (June 30, 1997) ................................... 55 53
Additional capital .................................................... 74,499 69,194
Retained earnings ..................................................... 32,133 26,529
Cumulative translation adjustments .................................... (360) (116)
--------- ---------
Total shareholders' equity ............................................... 106,327 95,660
--------- ---------
Total liabilities and shareholders' equity ............................... $ 726,306 $ 634,528
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- -----------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Finance and other income:
Amortization of finance income ............. $15,260 $11,901 $29,500 $23,017
Other income ............................... 3,203 1,789 5,097 3,289
------- ------- ------- -------
Total finance and other income ................ 18,463 13,690 34,597 26,306
Interest expense ............................. 12,118 9,102 23,746 17,404
------- ------- ------- -------
Net interest and other income ................. 6,345 4,588 10,851 8,902
Net gain on sale of financing transactions .... 5,118 3,044 10,142 5,377
------- ------- ------- -------
Net finance income ............................ 11,463 7,632 20,993 14,279
Selling, general and administrative expenses 4,687 3,335 8,473 6,188
Provision for possible losses on receivables 1,438 549 2,430 822
------- ------- ------- -------
Earnings before provision for income taxes and
equity in net loss of investees ............ 5,338 3,748 10,090 7,269
Provision for income taxes .................... 2,129 1,482 4,086 2,978
Equity in net loss of investees ............... 195 67 400 91
------- ------- ------- -------
Net earnings .................................. $ 3,014 $ 2,199 $ 5,604 $ 4,200
======= ======= ======= =======
Net earnings per share:
Basic ...................................... $ 0.27 $ 0.20 $ 0.50 $ 0.38
======= ======= ======= =======
Diluted .................................... $ 0.25 $ 0.19 $ 0.47 $ 0.37
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION> Common Stock
$0.005 Par Value Cumulative Total
------------------- Additional Retained Translation Shareholders'
Shares Amount Capital Earnings Adjustment Equity
---------- ------ ----------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 1, 1996 ........ 10,451,375 $52 $67,284 $17,966 $-- $ 85,302
Issuance of common stock upon
exercise of stock options and
warrants .................... 82,881 1 1,310 1,311
Conversion of subordinated notes 56,603 600 600
Currency translation adjustment . (116) (116)
Net earnings..................... 8,563 8,563
---------- --- ------- ------- ----- ---------
Balances at June 30, 1997 ....... 10,590,859 53 69,194 26,529 (116) 95,660
Issuance of common stock upon
exercise of stock options and
warrants ................... 62,025 447 447
Net proceeds from issuance of
common stock ................ 300,000 2 4,858 4,860
Currency translation adjustment . (244) (244)
Net earnings .................... 5,604 5,604
---------- --- ------- ------- ----- ---------
Balances at December 31, 1997 ... 10,952,884 $55 $74,499 $32,133 $(360) $ 106,327
========== === ======= ======= ===== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
DVI, INC. AND SUBSIDIARIES
RECONCILIATION OF EARNINGS PER SHARE CALCULATION
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
DECEMBER 31, 1997 DECEMBER 31, 1997
--------------------------------------- --------------------------------------
Income Avg. Shares Per Share Income Avg. Shares Per Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET EARNINGS.............................. $ 3,014 $ 5,604
BASIC EPS
Income available to common stockholders... 3,014 11,251 $ 0.27 5,604 11,139 $ 0.50
========== ======
EFFECT OF DILUTIVE SECURITIES:
Warrants................................ 90 66
Options................................. 354 290
Convertible debentures.................. 184 1,311 368 1,311
--------- ------- ------- -------
DILUTED EPS
Income available to common stockholders
+ assumed conversions.................... $ 3,198 13,006 $ 0.25 $ 5,972 12,806 $ 0.47
========= ======= ========== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------------
DECEMBER 31, 1996 DECEMBER 31, 1996
--------------------------------------- --------------------------------------
Income Avg. Shares Per Share Income Avg. Shares Per Share
(numerator) (denominator) Amount (numerator) (denominator) Amount
----------- ------------- ---------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
NET EARNINGS.............................. $ 2,199 $ 4,200
BASIC EPS
Income available to common stockholders... 2,199 10,968 $ 0.20 4,200 10,951 $ 0.38
========== ======
EFFECT OF DILUTIVE SECURITIES:
Warrants................................ 25 27
Options................................... 187 199
Convertible debentures.................... 184 1,311 368 1,311
--------- ------- ------- -------
DILUTED EPS
Income available to common stockholders
+ assumed conversions.................... $ 2,383 12,491 $ 0.19 $ 4,568 12,488 $ 0.37
========= ======= ========== ======= ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings .......................................................... $ 5,604 $ 4,200
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Equity in net loss of investees ................................. 400 91
Depreciation and amortization ................................... 5,980 5,008
Additions to allowance accounts ................................. 2,430 822
Net gain on sale of financing transactions ...................... (10,142) (5,377)
Cumulative translation adjustments .............................. (244) --
Changes in assets and liabilities:
(Increases) decreases in:
Cash and cash equivalents, restricted .................... (3,772) (10,021)
Amounts due from portfolio sale .......................... -- 54,797
Receivables .............................................. (2,687) (2,019)
Other assets ............................................. (5,061) (1,626)
Increases (decreases) in:
Accounts payable ......................................... 2,790 12,777
Accrued expenses and other liabilities ................... 1,365 789
--------- ---------
Total adjustments ..................................................... (8,941) 55,241
--------- ---------
Net cash (used in) provided by operating activities ................... (3,337) 59,441
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cost of equipment acquired ............................................ (264,776) (212,469)
Portfolio receipts net of amounts included in income and proceeds
from sales of financing transactions ............................... 249,087 174,947
Net increase in notes collateralized by medical receivables ........... (57,005) (3,599)
Furniture and fixtures additions ...................................... (1,464) (350)
--------- ---------
Net cash (used in) investing activities ............................ (74,158) (41,471)
--------- ---------
</TABLE>
continued
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE> 9
DVI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
---------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Exercise of stock options and warrants ............ 447 1,104
Issuance of common stock .......................... 4,860 --
Borrowings under:
Warehouse facilities ........................... 413,535 206,266
Long-term debt ................................. -- 116,114
Repayments on:
Warehouse facilities ........................... (272,964) (278,805)
Long-term debt ................................. (65,698) (54,588)
--------- ---------
Net cash provided by (used in) financing activities 80,180 (9,909)
--------- ---------
Net increase in cash and
cash equivalents .................................. 2,685 8,061
Cash and cash equivalents,
beginning of period ............................... 9,187 2,391
--------- ---------
Cash and cash equivalents,
end of period ..................................... $ 11,872 $ 10,452
========= =========
CASH PAID DURING THE YEAR FOR:
Interest .......................................... $ 21,758 $ 16,377
========= =========
Income taxes ...................................... $ 546 $ 2,755
========= =========
</TABLE>
Supplemental disclosures of non-cash transactions:
In July 1996, $600,000 of convertible subordinated notes were converted into
common stock.
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE> 10
DVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission
(Commission). Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles (GAAP) for
complete financial statements. The consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
DVI, Inc.'s (the Company) latest annual report on Form 10-K for the fiscal year
ended June 30, 1997.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement of the consolidated balance sheets as of December
31, 1997 and June 30, 1997, the consolidated statements of operations for the
three and six month periods ended December 31, 1997 and 1996, the consolidated
statements of shareholders' equity for the period from July 1, 1996 through
December 31, 1997, and the consolidated statements of cash flows for the six
month periods ended December 31, 1997 and 1996. The results of operations for
the three and six month periods ended December 31, 1997 are not necessarily
indicative of the results of operations to be expected for the entire fiscal
year ending June 30, 1998.
Certain amounts as previously reported have been reclassified to conform to the
December 31, 1997 presentation.
NOTE 2 - NET EARNINGS PER SHARE
Basic earnings per common share are based on the average number of shares of
common stock outstanding during the respective periods. The average number of
shares of common stock for basic earnings per share increased to 11,251,000 and
11,139,000 in the three and six month periods ended December 31, 1997 from
10,968,000 and 10,951,000 for the same prior year periods. Weighted average
shares for diluted earnings per share increased to 13,006,000 and 12,806,000 for
the three and six month periods ended December 31, 1997 from 12,491,000 and
12,488,000 for the same periods of the prior year. Diluted earnings per share
assumes conversion of the subordinated notes as of the beginning of the period.
10
<PAGE> 11
DVI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 - HEDGE TRANSACTIONS
The Company's equipment loans are structured on a fixed interest rate basis.
When the Company originates equipment loans, it bases its pricing in part on the
spread it expects to achieve between the interest rate it charges its equipment
loan customers and the effective interest cost it will pay when it permanently
funds those loans. Increases in interest rates between the time the loans are
originated and the time they are permanently funded could narrow, eliminate or
even reverse the spread between the interest rate the Company realizes on its
equipment loans and the interest rate that the Company pays under its warehouse
facilities or under a permanent funding program. In an attempt to protect itself
against that risk, the Company uses hedging strategies.
The Company uses derivative financial instruments, such as forward rate
agreements, Treasury locks, and interest rate swaps, caps and collars, to manage
its interest rate risk. The derivatives are used to manage three components of
this interest rate risk: interest sensitivity adjustments, pricing of
anticipated loan securitizations and sales, and interest rate spread protection.
Forward rate agreements in conjunction with cash market activities are for
interest sensitivity adjustments and are used to extend the repricing period of
short-term floating rate warehouse facilities. Treasury locks and collars are
used to hedge the interest rate risk on anticipated loan securitizations and
sales. Treasury lock and collar transactions lock in specific rates and a narrow
range of rates, respectively, of Treasury notes having maturities comparable to
the average life of the anticipated securitizations and sales. Interest rate
swaps and caps are used for interest rate spread protection from rising interest
rates in certain loan sale facilities where the cash flows from the loans sold
are fixed rate but the borrowing costs are variable rate.
The Company uses forward contracts to manage the foreign currency exchange risk
associated with assets that are denominated in a foreign currency. These types
of derivatives are utilized to manage the change in foreign currency until
borrowings can be secured in the currency of the respective assets.
At December 31, 1997, the Company had $100.0 million in Treasury lock
transactions and $170.0 million in collars. The Company also had $18.0 million
in interest rate swaps. At December 31, 1997, the Company had 8.7 million German
Marks in forward contracts.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total finance and other income increased to $18.5 and $34.6 million in the three
and six month periods ended December 31, 1997 from $13.7 and $26.3 million for
the three and six month periods ended December 31, 1996. Amortization of finance
income increased to $15.3 and $29.5 million from $11.9 and $23.0 million for the
three and six month periods ended December 31, 1997 as compared to the same
periods of the prior year. The increase primarily was a result of the overall
increase in the size of the Company's loan portfolio. Other income increased to
$3.2 and $5.1 million in the three and six month periods ended December 31, 1997
from $1.8 and $3.3 million in the comparable prior year period. The increase was
due mainly to fees earned on the larger portfolio, service fees earned on
serviced assets and fees associated with the repayment of two contracts.
Interest expense increased to $12.1 and $23.7 million for the three and six
months ended December 31, 1997 from $9.1 and $17.4 million for the three and six
months ended December 31, 1996. The increase is primarily a result of the growth
of the Company's loan portfolio. As a percentage of finance and other income,
interest expense decreased to 65.6% in the three months ended December 31, 1997
as compared to 66.5% in the same period of the prior year. Interest expense as a
percentage of finance and other income increased to 68.6% for the six months
ended December 31, 1997 as compared to 66.2% for the six month period ended
December 31, 1996.
Net gain on sale of financing transactions increased to $5.1 and $10.1 million
for the three and six months ended December 31, 1997 from $3.0 and $5.4 million
for the same periods of the prior fiscal year. Loans sold during the three and
six month periods ended December 31, 1997 were $70.2 million and $148.6 million
compared to $70.0 million and $116.8 million during the same periods of the
prior fiscal year. Higher relative gains are attributable to better structuring
and timing, as well as lower costs.
Selling, general and administrative expenses for the second quarter ended
December 31, 1997 increased by 40.5% to $4.7 million from $3.3 million for the
same quarter of the prior fiscal year. For the six months ended December 31,
1997 selling, general and administrative expenses increased by 36.9% to $8.5
million from $6.2 million for the same prior year period. The increase in the
Company's selling, general and administrative expenses was primarily related to
the expansion of the Company's new domestic and international businesses and the
Company's 40.0% growth in managed net financed assets.
The provision for possible losses on receivables was $1.4 and $2.4 million for
the three and six month periods ended December 31, 1997 as compared to $549,000
and $822,000 for the three and six month periods ended December 31, 1996. On a
quarterly basis, the Company evaluates the collectibility of its receivables and
records a provision for amounts deemed uncollectible. In the opinion of
Management, the provisions are adequate based on current trends in the Company's
delinquencies and losses.
Earnings before provision for income taxes and equity in net loss of investees
increased 42.4% and 38.8% to $5.3 and $10.1 million for the three and six month
periods ended December 31, 1997 compared to $3.7 and $7.3 million for the same
periods ended December 31, 1996. Net earnings increased 37.1% and 33.4% to $3.0
and $5.6 million from $2.2 and $4.2 million in comparing the three and six month
periods ended December 31, 1997 to the same periods ended December 31, 1996.
Diluted earnings per share increased 31.6% and 27.0% to $0.25 and $0.47 from
$0.19 and $0.37 when comparing the three and six month periods ended December
31, 1997 and December 31, 1996. The increase in diluted earnings per share
results from an increase in the Company's net earnings, partially offset by an
increase in average diluted shares.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION
Total shareholders' equity increased $10.6 million to $106.3 million at December
31, 1997 from $95.7 million at June 30, 1997. The increase primarily was due to
net earnings of $5.6 million, issuance of 300,000 shares for $4.9 million, and
exercise of stock options and warrants for $0.4 million.
The Company believes that its present warehouse and permanent funding sources
are sufficient to fund the Company's current needs for its equipment and medical
receivables financing businesses.
At December 31, 1997, the Company had available an aggregate of $453.5 million
in warehouse facilities of which $185.6 million was utilized.
Through December 31, 1997, the Company has completed eighteen securitizations or
other structured finance transactions for medical equipment financings totaling
$1,245.8 million, including two public debt issues totaling $165.6 million and
sixteen private placements of debt and whole loan sales totaling $1,080.1
million. The Company expects for the foreseeable future to continue to use
securitization, on both a public and private basis, as its principal means to
permanently fund its loans.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Any statements contained in this Form 10-Q which are not historical facts are
forward-looking statements; and, therefore, many important factors could cause
actual results to differ materially from those in the forward-looking
statements. Such factors include, but are not limited to, changes (legislative
and otherwise) in the healthcare industry, those relating to demand for DVI's
services, pricing, market acceptance, the effect of economic conditions,
litigation, competitive products and services, the results of financing efforts,
the ability to complete transactions, and other risks identified in the
Company's Securities and Exchange Commission filings.
13
<PAGE> 14
PART II - OTHER INFORMATION
Items 1 through 5 have been omitted because the related information is either
inapplicable or has been previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Credit Agreement, dated December 31, 1997, between CoreStates
Bank, N.A., DVI Financial Services Inc., and Oferil, S.A.
(Filed herewith)
10.2 Guaranty Agreement, dated December 31, 1997, executed by DVI,
Inc. in favor of CoreStates Bank, N.A. in connection with the
aforementioned Credit (Filed herewith)
(b) Form 8-K
The Company filed a Current Report on Form 8-K dated October
29, 1997 with respect to the Company's private sale of an
aggregate of 300,000 shares of its common stock pursuant to
Regulation S promulgated under the Securities Act of 1933, as
amended.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DVI, INC.
--------------------------------------
(Registrant)
By: /s/ MICHAEL A. O'HANLON
Michael A. O'Hanlon
President and Chief Executive Officer
By: /s/ STEVEN R. GARFINKEL
Steven R. Garfinkel
Executive Vice President and
Chief Financial Officer
Date: February 11, 1998
15
<PAGE> 16
EXHIBIT INDEX
10.1 Credit Agreement, dated December 31, 1997, between CoreStates
Bank, N.A., DVI Financial Services Inc., and Oferil, S.A.
(Filed herewith)
10.2 Guaranty Agreement, dated December 31, 1997, executed by DVI,
Inc. in favor of CoreStates Bank, N.A. in connection with the
aforementioned Credit (Filed herewith)
27 Financial Data Schedule
<PAGE> 1
[CORESTATES LOGO]
CREDIT AGREEMENT
$20,000,000
among
DVI FINANCIAL SERVICES, INC.
OFERIL, S.A.
and
CORESTATES BANK, N.A.
dated
DECEMBER 31, 1997
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<S> <C>
1. Certain Definitions.............................................................................................................1
1.1. Definitions.............................................................................................................1
1.2. Accounting Terms........................................................................................................8
2. The Credit......................................................................................................................8
2.1. The Loan................................................................................................................8
2.2. The Note................................................................................................................8
2.3. Interest................................................................................................................9
2.4. Structuring and Arranging Fee...........................................................................................9
2.5. Voluntary Prepayments...................................................................................................9
2.6. All Payments and Prepayments.............................................................................................9
(a) Accrued Interest...................................................................................................9
(b) Form of Payments, Application of Payments, Payment Administration, Etc..............................................9
(c) Demand Deposit Account..............................................................................................9
3. Representations and Warranties.................................................................................................10
3.1. Organization, Standing.................................................................................................10
3.2. Corporate Authority, Validity, Etc.....................................................................................10
3.3. Litigation.............................................................................................................10
3.4. ERISA..................................................................................................................11
3.5. Financial Statements...................................................................................................11
3.6. Not in Default, Judgments, Etc.........................................................................................11
3.7. Taxes..................................................................................................................11
3.8. Permits, Licenses, Etc.................................................................................................11
3.9. No Materially Adverse Contracts, Etc...................................................................................12
3.10. Compliance with Laws, Etc.............................................................................................12
3.11. Solvency..............................................................................................................12
3.12. Subsidiaries, Etc.....................................................................................................12
3.13. Title to Properties, Leases...........................................................................................12
3.14. Public Utility Holding Company; Investment Company....................................................................13
3.15. Margin Stock..........................................................................................................13
3.16. Use of Proceeds.......................................................................................................13
3.17. Disclosure Generally..................................................................................................13
4. Conditions Precedent...........................................................................................................13
4.1. Conditions to the Loan.................................................................................................13
(a) Covenants; Representations........................................................................................13
(b) Defaults..........................................................................................................13
(c) Material Adverse Change...........................................................................................13
(d) Articles, Bylaws..................................................................................................14
(e) Evidence of Authorization.........................................................................................14
(f) Legal Opinions....................................................................................................14
(g) Incumbency........................................................................................................14
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<PAGE> 3
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(h) Note..............................................................................................................14
(i) Guaranty Agreement................................................................................................14
(j) Security Agreements................................................................................................14
(k) Consents..........................................................................................................14
(l) Fees, Expenses....................................................................................................15
(m) Further Documents..................................................................................................15
5. Affirmative Covenants..........................................................................................................15
5.1. Financial Statements and Reports.......................................................................................15
(a) Annual Statements.................................................................................................15
(b) Quarterly Statements..............................................................................................15
(c) No Default........................................................................................................16
(d) ERISA.............................................................................................................16
(e) Material Changes..................................................................................................16
(f) Other Information.................................................................................................16
5.2. Corporate Existence.....................................................................................................16
5.3. ERISA...................................................................................................................16
5.4. Compliance with Regulations.............................................................................................17
5.5. Conduct of Business; Permits and Approvals, Compliance with Laws........................................................17
5.6. Maintenance of Insurance................................................................................................17
5.7. Payment of Debt; Payment of Taxes, Etc..................................................................................17
5.8. Notice of Events........................................................................................................17
5.9. Inspection Rights.......................................................................................................18
5.10. Generally Accepted Accounting Principles...............................................................................18
5.11. Compliance with Material Contracts.....................................................................................18
5.12. Use of Proceeds........................................................................................................18
5.13. Further Assurances.....................................................................................................18
5.14. Restrictive Covenants in Other Agreements..............................................................................18
6. Negative Covenants.............................................................................................................19
6.1. Consolidation and Merger...............................................................................................19
6.2. Liens..................................................................................................................19
6.3. Guarantees.............................................................................................................19
6.4. Margin Stock...........................................................................................................19
6.5. Acquisitions and Investments...........................................................................................19
6.6. Transfer of Assets; Nature of Business.................................................................................19
6.7. Restricted Payments....................................................................................................20
6.8. Accounting Change......................................................................................................20
6.9. Transactions with Affiliates...........................................................................................20
6.10. Restriction on Amendment of this Agreement.............................................................................20
7. Default........................................................................................................................20
7.1. Events of Default......................................................................................................20
(a) Payments..........................................................................................................20
(b) Covenants.........................................................................................................20
(c) Representations, Warranties.......................................................................................20
(d) Bankruptcy........................................................................................................20
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(e) Certain Other Defaults...........................................................................................21
(f) Judgments.......................................................................................................21
(g) Attachments......................................................................................................21
(h) Security Interests...............................................................................................21
(i) Material Adverse Change..........................................................................................21
8. Collateral....................................................................................................................22
8.1. Collateral.............................................................................................................22
9. Miscellaneous.................................................................................................................22
9.1. Waiver................................................................................................................22
9.2. Amendments............................................................................................................22
9.3. Governing Law.........................................................................................................22
9.4. Participations and Assignments........................................................................................22
9.5. Captions..............................................................................................................23
9.6. Notices...............................................................................................................23
9.7. Expenses; Indemnification.............................................................................................23
9.8. Survival of Warranties and Certain Agreements.........................................................................23
9.9. Severability..........................................................................................................23
9.10. No Fiduciary Relationship............................................................................................24
9.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.......................................................................24
9.12. WAIVER OF JURY TRIAL.................................................................................................24
9.13. Counterparts; Effectiveness..........................................................................................24
9.14. Use of Defined Terms.................................................................................................25
9.15. Offsets..............................................................................................................25
9.16. Entire Agreement.....................................................................................................25
- ---------------------------
EXHIBIT A NOTE
EXHIBIT B GUARANTY AGREEMENT
EXHIBIT C PLEDGE AGREEMENT
EXHIBIT D SUBORDINATION AGREEMENT
SCHEDULE 1 MISCELLANEOUS INFORMATION
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<PAGE> 5
CREDIT AGREEMENT
This Credit Agreement, dated December 31, 1997 (the "Agreement"), is
entered into by and among DVI FINANCIAL SERVICES, INC., a Delaware corporation
("DVI FINANCIAL SERVICES"), OFERIL, S.A., a Uruguay corporation ("OFERIL") and
CORESTATES BANK, N.A., a national banking association ("CORESTATES", "CORESTATES
BANK" or the "BANK").
PRELIMINARY STATEMENT
WHEREAS, DVI, Inc., a Delaware corporation, is the owner of all of the
issued and outstanding capital stock of DVI Financial Services and Oferil.
WHEREAS, DVI, Inc. and DVI Financial Services provide substantial
amounts of the working capital required by Oferil in connection with the
operation of its business.
WHEREAS, DVI, DVI Financial Services and Oferil desire to have a short
term bridge loan available to finance the purchase of additional loans to be
added to the portfolio of loans currently owned by Oferil.
WHEREAS, DVI, DVI Financial Services and Oferil have requested that
CoreStates Bank make such short term bridge loan under the terms and conditions
hereinafter set forth.
WHEREAS, DVI will unconditionally guarantee the prompt and punctual
performance of all liabilities and obligations of DVI Financial Services and
Oferil hereunder and under any other Loan Document (as defined herein).
WHEREAS, the Bank is willing to make the requested short term bridge
loan under the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and promises
hereinafter set forth and intending to be legally bound hereby, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS
1.1. DEFINITIONS.
"AFFILIATE" shall mean any Person: (1) which directly or indirectly
controls, or is controlled by, or is under common control with DVI
Financial Services or Oferil; (2) which directly or indirectly
beneficially owns or holds ten percent (10%) or more of any class of
voting stock of DVI Financial Services or Oferil; or (3) ten percent
(10%) or more of whose voting stock of which is directly or
indirectly beneficially owned or held by DVI Financial Services or
Oferil. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise.
Credit Agreement - 1 - December 31, 1997
<PAGE> 6
"AGREEMENT" shall mean this Credit Agreement, as amended, supplemented,
modified, replaced, substituted for or restated from time to time and all
exhibits and schedules attached hereto.
"BASE RATE" shall mean, for any day, the higher of the Federal Funds Rate plus
1/2 of 1% or the prime commercial lending rate of CoreStates Bank, N.A., as
announced from time to time at its head office, calculated on the basis of 30
day months and a year of 360 days. Any change in the prime commercial lending
rate of CoreStates Bank, N.A. shall be effective as of the opening of business
on the date on which such change is announced.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, or other day on
which commercial banks in Philadelphia are authorized or required to close under
the laws of the Commonwealth of Pennsylvania and a day on which dealings in
Dollar deposits are also carried on in the London interbank market and banks are
open for business in London.
"CAPITALIZED LEASE" shall mean all lease obligations of any Person for any
property (whether real, personal or mixed) which have been or should be
capitalized on the books of the lessee in accordance with Generally Accepted
Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" with respect to any Person, shall mean the
aggregate amount which, in accordance with GAAP, is required to be reported as a
liability on the balance sheet of such Person at such time in respect of such
Person's interest as lessee under a Capital Lease.
"CLOSING" shall mean this Agreement shall have been executed and delivered by
DVI Financial Services, Oferil and the Bank, and all of the conditions to the
loan have been satisfied in full or waived in writing by the Bank.
"CLOSING DATE" shall mean the date on which Closing shall have occurred.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and all rules and regulations with respect thereto in effect from time to
time.
"COLLATERAL" shall have the meaning set forth in Section 8.1.
"COMPLIANCE CERTIFICATE" shall mean a certificate in such form as the Bank shall
reasonably request, which shall be signed by the President, chief executive
officer, chief operating officer or chief financial officer of DVI Financial
Services or Oferil, as applicable.
"MATURITY DATE" shall have the meaning set forth in Section 2.2.
"DEBT" shall mean, as of any date of determination with respect to DVI Financial
Services or Oferil, as applicable, without duplication, (i) all items which in
accordance with Generally Accepted Accounting Principles would be included in
determining total liabilities as shown on the liability side of a consolidated
balance sheet of DVI Financial Services and its subsidiaries or Oferil and its
subsidiaries, as applicable, as of the date on which Debt is to be determined,
(ii) all indebtedness of others with respect to which DVI Financial Services or
Oferil or any
Credit Agreement - 2 - December 31, 1997
<PAGE> 7
Subsidiary has become liable by way of a guarantee or endorsement
(other than for collection or deposit in the ordinary course of business), (iii)
all contingent liabilities of DVI Financial Services, Oferil or any Subsidiary,
and (iv) lease obligations that, in conformity with GAAP, have been capitalized
on DVI Financial Services' or Oferil's consolidated balance sheet.
"DEFAULT RATE" on any Loan shall mean 2% per annum above the Base Rate.
"DOLLARS" shall mean the lawful currency of the United States of America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
"ERISA AFFILIATE" shall mean any corporation which is a member of the same
controlled group of corporations as DVI, DVI Financial Services or Oferil within
the meaning of Section 414(b) of the Code, or any trade or business which is
under common control with DVI, DVI Financial Services or Oferil within the
meaning of Section 414(c) of the Code.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 7.1.
"ENVIRONMENTAL CONTROL STATUTES" shall mean each and every applicable federal,
state, county or municipal environmental statute, ordinance, rule, regulation,
order, directive or requirement, together with all successor statutes,
ordinances, rules, regulations, orders, directives or requirements, of any
Governmental Authority, including without limitation laws in any way related to
Hazardous Substances.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that if the day for which such rate is to be determined is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day.
"FISCAL QUARTER" shall mean a fiscal quarter of DVI Financial Services or
Oferil, which shall be any quarterly period ending on March 31, June 30,
September 30 or December 31 of any year.
"FISCAL YEAR" shall mean a fiscal year of DVI Financial Services or Oferil,
which shall end on the last day of December.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" shall mean generally
accepted accounting principles as in effect from time to time in the United
States, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean the federal, state, county or municipal
government, or any department, agency, bureau or other similar type body
obtaining authority therefrom or created pursuant to any laws, including without
limitation Environmental Control Statutes.
Credit Agreement - 3 - December 31, 1997
<PAGE> 8
"GUARANTOR" shall mean DVI.
"HAZARDOUS SUBSTANCES" shall mean without limitation, any regulated substance,
toxic substance, hazardous substance, hazardous waste, pollution, pollutant or
contaminant, as defined or referred to in the Resource Conservation and Recovery
Act, as amended, 15 U.S.C., Section 2601 et seg.; the Comprehensive
Environmental Response, Compensation and Liability Act, 33 U.S.C. Section 1251
et seg.; the federal underground storage tank law, Subtitle I of the Resource
Conservation and Recovery Act, as amended, P.L. 98-616, 42 U.S.C. Section 6901
et seg.; together with any amendments thereto, regulations promulgated
thereunder and all substitutions thereof, as well as words of similar purport or
meaning referred to in any other federal, state, county or municipal
environmental statute, ordinance, rule or regulation.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean (i) all indebtedness, liabilities,
and obligations, now existing or hereafter arising, for money borrowed by DVI
Financial Services, Oferil or any Subsidiary, whether or not evidenced by any
note, indenture, or agreement (including, without limitation, the Note and any
indebtedness for money borrowed from an Affiliate) and (ii) all indebtedness of
others for money borrowed (including indebtedness of an Affiliate) with respect
to which DVI Financial Services, Oferil or any Subsidiary has become liable by
way of a guarantee or indemnity.
"INTANGIBLE ASSETS" shall mean all assets which would be classed as intangible
assets under GAAP consistently applied, including, without limitation, goodwill
(whether representing the excess of cost over book value of assets acquired or
otherwise), patents, trademarks, trade names, copyrights, franchises, and
deferred charges (including, without limitation, unamortized debt discount and
expense, organization costs, and research and development costs).
"INTEREST PERIOD" shall mean the period commencing on the date the Loan is made
and ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day of the calendar month) in the second calendar
month thereafter; provided that if the Interest Period would otherwise end on a
day which is not a Business Day, the Interest Period shall end on the next
succeeding Business Day unless such next succeeding Business Day falls in the
next succeeding calendar month, in which case the Interest Period shall end on
the next preceding Business Day.
"INVESTMENT" in any Person shall mean (a) the acquisition (whether for cash,
property, services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of such
Person; (b) any deposit with, or advance, loan or other extension of credit to,
such Person (other than any such deposit, advance, loan or extension of credit
having a term not exceeding 90 days in the case of unaffiliated Persons and 120
days in the case of Affiliates representing the purchase price of inventory or
supplies purchased in the ordinary course of business) or guarantee or
assumption of, or other contingent obligation with respect to, Indebtedness for
Borrowed Money or other liability of such Person; and (c) (without duplication
of the amounts included in (a) and (b)) any amount that may, pursuant to the
terms of such investment, be required to be paid, deposited, advanced, lent or
extended to or guaranteed or assumed on behalf of such Person.
Credit Agreement - 4 - December 31, 1997
<PAGE> 9
"LIBO RATE" shall mean, for the applicable Interest Period, (i) the rate,
rounded upwards to the next one-sixteenth of one percent, determined by
CoreStates Bank two Business Days prior to the date of the Loan, at which
CoreStates Bank is offered deposits in dollars at approximately 11:00 A.M.,
London time by leading banks in the interbank eurodollar or eurocurrency market
for delivery on the date of the Loan in an amount and for a period comparable to
the amount and Interest Period of the Loan and in like funds, divided by (ii) a
number equal to one (1.0) minus the LIBO Rate Reserve Percentage. The LIBO Rate
shall be adjusted automatically on the effective date of any change in the LIBO
Rate Reserve Percentage, as of such effective date. LIBO Rate shall be
calculated on the basis of the number of days elapsed in a year of 360 days.
"LIBO RATE RESERVE PERCENTAGE" shall mean for any Interest Period, the daily
average of the stated maximum rate (expressed as a decimal) at which reserves
(including any marginal, supplemental, or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by CoreStates Bank
against "Eurocurrency liabilities" (as such term is used in Regulation D) but
without benefit of credit proration, exemptions, or offsets that might otherwise
be available to CoreStates Bank from time to time under Regulation D. Without
limiting the effect of the foregoing, the LIBO Rate Reserve Percentage shall
reflect any other reserves required to be maintained by CoreStates Bank against
(1) any category of liabilities which includes deposits by reference to which
the LIBO Rate is to be determined; or (2) any category of extension of credit or
other assets which include the Loan.
"LIEN" shall mean any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of any obligation to any Person, including any agreement to give
any of the foregoing, any conditional sales or other title retention agreement,
any lease in the nature thereof, and the filing of or the agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction or
similar evidence of any encumbrance, whether within or outside the United
States.
"LOAN" shall mean the meaning set forth in Section 2.1.
"LOAN DOCUMENTS" shall mean this Agreement, the Note, the Subordination
Agreement, the Guaranty Agreement and all other documents directly related or
incidental to said documents, the Loan or the Collateral.
"MATERIAL ADVERSE CHANGE" shall mean any event or condition which, in the
reasonable determination of the Bank, could result in a material adverse change
in the financial condition, business, properties, profits or prospects of DVI,
DVI Financial Services or Oferil, or which gives reasonable grounds to conclude
that DVI, DVI Financial Services or Oferil, may not or will not be able to
perform or observe (in the normal course) its obligations under the Loan
Documents to which it is a party, including but not limited to the Note.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect (i) on the
financial condition, business, properties, or profits of DVI, DVI Financial
Services or Oferil, (ii) the ability of DVI, DVI Financial Services or Oferil to
perform its obligations under this Agreement, the Note and the other Loan
Documents, or (iii) the legality, validity or enforceability of this Agreement
or the Note or the rights and remedies of the holder of the Loan.
Credit Agreement - 5 - December 31, 1997
<PAGE> 10
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan as defined in
ERISA Section 4001(a)(3), which covers employees of DVI, DVI
Financial Services or Oferil or any ERISA Affiliate.
"NOTE" shall have the meaning set forth in Section 2.2.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every
kind, matured or unmatured, direct or contingent, owing, arising,
due, or payable to the Bank by or from DVI, DVI Financial Services or
Oferil arising out of this Agreement or any other Loan Document,
including, without limitation, all obligations to repay principal of
and interest on the Loan, and to pay interest, fees, costs, charges,
expenses, professional fees, and all sums chargeable to DVI, DVI
Financial Services or Oferil or for which DVI, DVI Financial Services
or Oferil is liable as indemnitor under the Loan Documents, whether
or not evidenced by any note or other instrument.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"PENSION PLAN" shall mean, at any time, any Plan (including a
Multiemployer Plan), the funding requirements of which (under ERISA
Section 302 or Code Section 412) are, or at any time within the six
years immediately preceding the time in question, were in whole or in
part, the responsibility of DVI, DVI Financial Services or Oferil or
any ERISA Affiliate.
"PERMITTED LIENS" shall mean (a) any Liens for current taxes,
assessments and other governmental charges not yet due and payable or
being contested in good faith by DVI Financial Services or Oferil by
appropriate proceedings and for which adequate reserves have been
established by DVI Financial Services or Oferil, as applicable, as
reflected in DVI Financial Services' or Oferil's financial
statements; (b) any mechanic's, materialman's, carrier's,
warehousemen's or similar Liens for sums not yet due or being
contested in good faith by DVI Financial Services or Oferil by
appropriate proceedings and for which adequate reserves have been
established by DVI Financial Services or Oferil as reflected in DVI
Financial Services' or Oferil's financial statements, as applicable;
(c) easements, rights-of-way, restrictions and other similar
encumbrances on the real property or fixtures of DVI Financial
Services or Oferil incurred in the ordinary course of business which
individually or in the aggregate are not substantial in amount and
which do not in any case materially detract from the value or
marketability of the property subject thereto or interfere with the
ordinary conduct of the business of DVI Financial Services or Oferil;
(d) Liens (other than Liens imposed on any property of DVI Financial
Services or Oferil pursuant to ERISA or Section 412 of the Code)
incurred or deposits made in the ordinary course of business,
including Liens in connection with workers' compensation,
unemployment insurance and other types of social security and Liens
to secure performance of tenders, statutory obligations, surety and
appeal bonds (in the case of appeal bonds such Lien shall not secure
any reimbursement or indemnity obligation in an amount greater than
$250,000), bids, leases that are not Capitalized Leases, performance
bonds, sales contracts and other similar obligations, in each case,
not incurred in connection with the obtaining of credit or the
payment of a deferred purchase price, and which do not, in the
aggregate, result in a Material Adverse Effect; (e) Liens, if any,
existing on the date hereof and listed in Schedule 1 hereto; (f)
Liens on specific assets, if any, whether existing on the date hereof
or hereafter created, with respect to Indebtedness for Borrowed
Money, capital leases,
Credit Agreement - 6 - December 31, 1997
<PAGE> 11
or capital expenditures, provided that no such Lien shall be a Lien
on any of the Collateral; (g) any Liens created hereby in favor of
the Bank; and (h) any Liens resulting from any judgments or awards
against DVI Financial Services or Oferil.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity, or other
entity of whatever nature.
"PLAN" shall mean an employee benefit plan as defined in Section 3(3)
of ERISA, other than a Multiemployer Plan, whether formal or informal
and whether legally binding or not.
"POTENTIAL DEFAULT" shall mean an event, condition or circumstance
that with the giving of notice or lapse of time or both would become
an Event of Default.
"PROHIBITED TRANSACTION" shall mean a transaction that is prohibited
under Code Section 4975 or ERISA Section 406 and not exempt under
Code Section 4975 or ERISA Section 408.
"REGULATION" shall mean any statute, law, ordinance, regulation,
order or rule of any United States or foreign, federal, state, local
or other government or governmental body, including, without
limitation, those covering or related to banking, financial
transactions, securities, public utilities, environmental control,
energy, safety, health, transportation, bribery, record keeping,
zoning, antidiscrimination, antitrust, wages and hours, employee
benefits, and price and wage control matters.
"RELEASE" shall mean without limitation, the presence, leaking,
leaching, pouring, emptying, discharging, spilling, using,
generating, manufacturing, refining, transporting, treating, or
storing of Hazardous Substances at, into, onto, from or about the
property or the threat thereof, regardless of whether the result of
an intentional or unintentional action or omission, and which is in
violation of applicable law.
"REPORTABLE EVENT" shall mean, with respect to a Pension Plan: (a)
Any of the events set forth in ERISA Sections 4043(b) (other than a
reportable event as to which the provision of 30 days' notice to the
PBGC is waived under applicable regulations) or 4063(a) or the
regulations thereunder, (b) an event requiring any DVI Financial
Services or any ERISA Affiliate to provide security to a Pension Plan
under Code Section 401(a)(29) and (c) any failure by any DVI
Financial Services or any ERISA Affiliate to make payments required
by Code Section 412(m).
"SECURITY AGREEMENT" shall mean the security agreement, collateral
assignments, assignments, notices and all related documents, each in
the form and substance provided to DVI Financial Services and Oferil
by the Bank at the Closing.
"SOLVENT" shall mean, with respect to any Person, that the aggregate
present fair saleable value of such Person's assets is in excess of
the total amount of its probable liabilities on its existing debts as
they become absolute and matured, such Person has not incurred debts
beyond its foreseeable ability to pay such debts as they mature, and
such Person has capital adequate to conduct the business it is
presently engaged in or is about to engage in.
"STRUCTURING AND ARRANGING FEE" shall have the meaning set forth in
Section 2.5.(b).
Credit Agreement - 7 - December 31, 1997
<PAGE> 12
"SUBSIDIARY" shall mean a corporation or other entity the shares of
stock or other equity interests of which having ordinary voting power
(other than stock or other equity interests having such power only by
reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries or both, by
DVI Financial Services.
"TERMINATION EVENT" shall mean, with respect to a Pension Plan: (a) a
Reportable Event, (b) the termination of a Pension Plan, or the
filing of a notice of intent to terminate a Pension Plan, or the
treatment of a Pension Plan amendment as a termination under ERISA
Section 4041(c), (c) the institution of proceedings to terminate a
Pension Plan under ERISA Section 4042 or (d) the appointment of a
trustee to administer any Pension Plan under ERISA Section 4042.
"UNFUNDED PENSION LIABILITIES" shall mean, with respect to any
Pension Plan at any time, the amount determined by taking the
accumulated benefit obligation, as disclosed in accordance with
Statement of Accounting Standards No. 87, over the fair market value
of Pension Plan assets.
"UNRECOGNIZED RETIREE WELFARE LIABILITY" shall mean, with respect to
any Plan that provides post-retirement benefits other than pension
benefits, the amount of the accumulated post-retirement benefit
obligation, as determined in accordance with Statement of Financial
Accounting Standards No. 106, as of the most recent valuation date.
Prior to the date such statement is applicable to DVI Financial
Services, such amount of the obligation shall be based on an estimate
made in good faith.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with Generally Accepted Accounting
Principles consistent with those applied in the preparation of the financial
statements referred to in Section 3.5, and all financial data submitted pursuant
to this Agreement shall be prepared in accordance with such principles;
provided, that if any change in GAAP results in a change in the operation or
calculation of any of the defined terms used herein, DVI Financial Services and
Oferil shall promptly notify the Bank thereof and compliance with any such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until such notice is withdrawn and
such compliance is computed in a manner satisfactory to DVI Financial Services
or Oferil, as applicable, and the Bank.
2. THE CREDIT
2.1. THE LOAN. Subject to the terms and conditions herein set forth,
CoreStates Bank agrees to make a loan (the "LOAN") to DVI Financial Services and
Oferil, jointly and severally, at Closing in the principal amount of Twenty
Million Dollars ($20,000,000). The Loan shall be made to DVI Financial Services
and Oferil at the main office of the Bank, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19101. Any amounts repaid in respect of the Loan
after Closing may not be reborrowed.
2.2. THE NOTE. The Loan made by the Bank shall be evidenced by a
single promissory note of DVI Financial Services and Oferil (such promissory
note as it may be amended, extended, modified,
Credit Agreement - 8 - December 31, 1997
<PAGE> 13
restated, replaced, substituted for or renewed, the "NOTE") in principal face
amount equal to TWENTY MILLION DOLLARS ($20,000,000) payable to the order of the
Bank and otherwise in the form attached hereto as Exhibit A. The Note shall be
dated the Closing Date, shall bear interest at the rate per annum and be payable
as to principal and interest in accordance with the terms hereof. The Note shall
mature on the earliest to occur of (i) the date the maturity of the Note is
accelerated as provided in Section 7.1 hereof, (ii) that day which is five days
immediately following the receipt by MSF Holdings, Ltd., a Bahamian company, of
subscriptions for __________, or (iii) February 27, 1998, (such earliest date to
be deemed the "MATURITY DATE"). Upon maturity, the Loan evidenced by the Note
shall be due and payable. The Bank shall maintain records of all payments on the
Note, which records shall be conclusive absent manifest error.
2.3. INTEREST. The Loan shall bear interest on the principal amount
thereof from the date made until the Maturity Date at a rate per annum equal to
the LIBO Rate on the Closing Date plus 125 basis points.
2.4. STRUCTURING AND ARRANGING FEE. DVI Financial Services and Oferil
agree to pay to the Bank a fee (the "STRUCTURING AND ARRANGING FEE") in the
amount of $225,000 minus the aggregate amount of interest payable hereunder
through the Maturity Date. This fee shall be payable in two installments the
first in the amount of $150,000 which shall be paid on January 2, 1998 and the
second in the amount of the remainder which shall be paid on the Maturity Date.
2.5. VOLUNTARY PREPAYMENTS. On three Business Day's notice to the
Bank, DVI Financial Services may, at its option, prepay, without premium or
penalty, the Loan in whole at any time but not in part.
2.6. ALL PAYMENTS AND PREPAYMENTS.
(a) ACCRUED INTEREST. Accrued interest on the Loan shall be due and
payable on [the first Business Day of each calendar month and] upon maturity of
the Note, whether by demand, acceleration of maturity or otherwise.
(b) FORM OF PAYMENTS, APPLICATION OF PAYMENTS, PAYMENT
ADMINISTRATION, ETC. Except as otherwise provided herein, all payments of
principal, interest, fees, or other amounts payable by DVI Financial Services
and/or Oferil hereunder shall be remitted to the Bank at the address set forth
opposite its name on the signature page hereof or at such office or account as
the Bank shall specify to DVI Financial Services and/or Oferil, in immediately
available funds not later than 2:00 p.m. on the day when due. Whenever any
payment is stated as due on a day which is not a Business Day, the maturity of
such payment shall be extended to the next succeeding Business Day and interest
shall continue to accrue during such extension. DVI Financial Services and
Oferil each authorizes the Bank to deduct from any account of DVI Financial
Services or Oferil maintained at the Bank or over which the Bank has control any
amount payable under this Agreement, the Note or any other Loan Document which
is not paid in a timely manner. In the event of any such deduction, the Bank
will provide notice thereof to DVI Financial Services or Oferil, as applicable,
within three Business Days specifying the account or accounts and the amounts
deducted. The Bank's failure to deliver any bill, statement or invoice with
respect to amounts due under this Section or under any Loan Document shall not
affect DVI Financial Services' and Oferil's obligation to pay any installment of
principal, interest or any other amount under this Agreement when due and
payable.
Credit Agreement - 9 - December 31, 1997
<PAGE> 14
(c) DEMAND DEPOSIT ACCOUNT. DVI Financial Services and Oferil
shall maintain at least one demand deposit account with the Bank for purposes of
this Agreement. DVI Financial Services and Oferil each authorizes the Bank (but
the Bank shall not be obligated) to deposit into said account all amounts to be
advanced to DVI Financial Services or Oferil hereunder. Further, DVI Financial
Services and Oferil each authorizes the Bank (but the Bank shall not be
obligated) to deduct from said account, or any other account maintained by DVI
Financial Services and/or Oferil at the Bank, any amount payable hereunder on or
after the date upon which it is due and payable. The Bank shall notify DVI
Financial Services or Oferil, as applicable, of any deduction made in accordance
with this subsection 2.6(c) within a reasonable period of time after such
deduction. Such authorization shall include but not be limited to amounts
payable with respect to principal, interest, fees and expenses.
3. REPRESENTATIONS AND WARRANTIES
DVI Financial Services and Oferil each represents and warrants to the
Bank that:
3.1. ORGANIZATION, STANDING. It (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the corporate power and authority necessary to own its
assets, carry on its business and enter into and perform its obligations
hereunder, under each Loan Document to which it is a party, and (iii) is
qualified to do business and is in good standing in each jurisdiction where the
nature of its business or the ownership of its properties requires such
qualification, except where the failure to be so qualified would not have a
Material Adverse Effect.
3.2. CORPORATE AUTHORITY, VALIDITY, ETC. The making and performance
of the Loan Documents to which it is a party are within its power and authority
and have been duly authorized by all necessary corporate action. The making and
performance of the Loan Documents do not and under present law will not require
any consent or approval of any of its shareholders or any other person, do not
and under present law will not violate any law, rule, regulation order, writ,
judgment, injunction, decree, determination or award, do not violate any
provision of its charter or by-laws, do not and will not result in any breach of
any material agreement, lease or instrument to which it is a party, by which it
is bound or to which any of its assets are or may be subject, and do not and
will not give rise to any Lien upon any of its assets, other than any Liens
created hereunder in favor of the Bank. The number of shares and classes of the
capital stock of DVI Financial Services and Oferil, respectively, and the
ownership thereof are accurately set forth on Schedule 1 attached hereto; all
such shares are validly issued, fully paid and non-assessable, and the issuance
and sale thereof are in compliance with all applicable federal and state
securities and other applicable laws; and the shareholders' ownership thereof is
free and clear of any liens or encumbrances or other contractual restrictions.
Neither DVI Financial Services nor Oferil nor any Subsidiary of either of them
is in default under any such agreement, lease or instrument except to the extent
such default reasonably could not have a Material Adverse Effect. No
authorizations, approvals or consents of, and no filings or registrations with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by DVI Financial Services or Oferil of any
Loan Document to which it is a party or for the validity or enforceability
thereof, other than [Uniform Commercial Code filings and any other filing
necessary to perfect any and all security interest granted by DVI Financial
Services in favor of the Bank under the Security Agreement]. Each Loan Document,
when executed and delivered, will be the
Credit Agreement - 10 - December 31, 1997
<PAGE> 15
legal, valid and binding obligation of DVI Financial Services and Oferil,
respectively, enforceable against it in accordance with its terms.
3.3. LITIGATION. Except as disclosed on Schedule 1, there are no
actions, suits or proceedings pending or, to its knowledge, threatened against
or affecting it or any of its assets before any court, government agency, or
other tribunal which if adversely determined reasonably could have a Material
Adverse Effect upon the ability of it to perform under the Loan Documents. If
there is any disclosure on Schedule 1, the status (including the tribunal, the
nature of the claim and the amount in controversy) of each such litigation
matter as of the date of this Agreement is set forth in Schedule 1.
3.4. ERISA. (a) It and each ERISA Affiliate are in compliance in all
material respects with all applicable provisions of ERISA and the regulations
promulgated thereunder; and, neither it nor any ERISA Affiliate maintains or
contributes to or has maintained or contributed to any multiemployer plan (as
defined in Section 4001 of ERISA) under which it or any ERISA Affiliate could
have any withdrawal liability; (b) neither DVI Financial Services nor any ERISA
Affiliate, sponsors or maintains any Plan under which there is an accumulated
funding deficiency within the meaning of Section 412 of the Code, whether or not
waived; (c) the aggregate liability for accrued benefits and other ancillary
benefits under each Plan that is or will be sponsored or maintained by it or any
ERISA Affiliate (determined on the basis of the actuarial assumptions prescribed
for valuing benefits under terminating single-employer defined benefit plans
under Title IV of ERISA) does not exceed the aggregate fair market value of the
assets under each such defined benefit pension Plan; (d) the aggregate liability
of it and each ERISA Affiliate arising out of or relating to a failure of any
Plan to comply with the provisions of ERISA or the Code, will not have a
Material Adverse Effect; and (e) there does not exist any unfunded liability
(determined on the basis of actuarial assumptions utilized by the actuary for
the plan in preparing the most recent Annual Report) of it or any ERISA
Affiliate under any plan, program or arrangement providing post-retirement life
or health benefits.
3.5. FINANCIAL STATEMENTS. The consolidated financial statements of
DVI Financial Services and Subsidiaries, and Oferil and Subsidiaries, each as of
and for the Fiscal Years ending December 31, 1996 and December 31, 1995, and the
interim consolidated financial statements of each of them for the nine-month
periods ending September 30, 1997 and September 30, 1996, respectively,
consisting in each case of a balance sheet, a statement of operations, a
statement of stockholders' equity, a statement of cash flows and accompanying
footnotes, furnished to the Bank in connection herewith, present fairly, in all
material respects, the consolidated financial position, results of operations
and operating statistics of each of them as of the dates and for the periods
referred to, in conformity with Generally Accepted Accounting Principles. Except
as set forth on Schedule 1 hereto, there are no material liabilities, fixed or
contingent, which are not reflected in such financial statements, other than
liabilities which are not required to be reflected in such balance sheets. There
has been no Material Adverse Change since September 30, 1997.
3.6. NOT IN DEFAULT, JUDGMENTS, ETC. No Event of Default or Potential
Default under any Loan Document has occurred and is continuing. It and each
Subsidiary has satisfied all judgments and is not in default with respect to any
judgment, writ, injunction, decree, rule, or regulation of any court,
arbitrator, or federal, state, municipal, or other governmental authority,
commission, board bureau, agency, or instrumentality, domestic or foreign.
3.7. TAXES. It and its subsidiaries each has filed all federal,
state, local and foreign tax returns
Credit Agreement - 11 - December 31, 1997
<PAGE> 16
and reports which it is required by law to file and as to which its failure to
file would have a Material Adverse Effect, and has paid all taxes, including
wage taxes, assessments, withholdings and other governmental charges which are
presently due and payable, other than those being contested in good faith by
appropriate proceedings, if any, and disclosed on Schedule 1. The tax charges,
accruals and reserves on the consolidated books of it and its subsidiaries are
adequate to pay all such taxes that have accrued but are not presently due and
payable.
3.8. PERMITS, LICENSES, ETC. It and each Subsidiary possesses all
permits, licenses, franchises, trademarks, trade names, copyrights and patents
necessary to the conduct of its business as presently conducted or as presently
proposed to be conducted, except where the failure to possess the same would not
have a Material Adverse Effect.
3.9. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither it nor any
Subsidiary is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of its
directors or officers has or is expected in the future to have a materially
adverse effect on its operations, business, assets, liabilities or upon its
ability to perform under the Loan Documents. Neither it nor any Subsidiary is a
party to any contract or agreement which in the judgment of its directors or
officers has or is expected to have any materially adverse effect on its
business, except as otherwise reflected in adequate reserves.
3.10. COMPLIANCE WITH LAWS, ETC.
(a) COMPLIANCE GENERALLY. It and its Subsidiaries are in compliance
in all material respects with all Regulations applicable to its business
(including obtaining all authorizations, consents, approvals, orders, licenses,
exemptions from, and making all filings or registrations or qualifications with,
any court or governmental department, public body or authority, commission,
board, bureau, agency, or instrumentality), the noncompliance with which
reasonably could be expected to have a Material Adverse Effect.
(b) HAZARDOUS WASTES, SUBSTANCES AND PETROLEUM PRODUCTS. It and its
Subsidiaries have received all material permits and filed all material
notifications necessary to carry on its business; and are in compliance in all
respects with all Environmental Control Statutes. Neither it nor any Subsidiary
has given any written or oral notice, nor has it failed to give required notice,
to the Environmental Protection Agency ("EPA") or any state or local agency with
regard to any actual or imminently threatened Release of Hazardous Substances on
properties owned, leased or operated by it or used in connection with the
conduct of its business and operations. Neither it nor any Subsidiary has
received notice that it is potentially responsible for costs of clean-up or
remediation of any actual or imminently threatened Release of Hazardous
Substances pursuant to any Environmental Control Statute. To the best of its
knowledge and belief, no real property owned or leased by it or any Subsidiary
is in violation of any Environmental Laws and no Hazardous Substances are
present on said real property in violation of applicable law. Neither it nor any
Subsidiary has been identified in any litigation, administrative proceedings or
investigation as a potentially responsible party for any liability under any
Environmental Laws.
3.11. SOLVENCY. It and each Subsidiary is, and after giving effect to
the transactions contemplated hereby, will be, Solvent.
Credit Agreement - 12 - December 31, 1997
<PAGE> 17
3.12. SUBSIDIARIES, ETC. It has no Subsidiaries, except as set forth
in Schedule 1 hereto. Set forth in Schedule 1 hereto is a complete and correct
list, as of the date of this Agreement, of all material Investments held by it
and its Subsidiaries in any joint venture or other Person.
3.13. TITLE TO PROPERTIES, LEASES. It and its Subsidiaries have good
and marketable title to all assets and properties reflected as being owned by
them in its financial statements as well as to all assets and properties
acquired since said date (except property disposed of since said date in the
ordinary course of business). Except for the Liens set forth in Schedule 1
hereto and any other Permitted Liens, there are no Liens on any of such assets
or properties. It has the right to, and does, enjoy peaceful and undisturbed
possession under all material leases under which it is leasing property as a
lessee. All such leases are valid, subsisting and in full force and effect, and
none of such leases is in default, except where such default, either
individually or in the aggregate, could not have a Material Adverse Effect.
3.14. PUBLIC UTILITY HOLDING COMPANY; INVESTMENT COMPANY. Neither it
nor any Subsidiary is a "public utility company" or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended; or a
"public utility" within the meaning of the Federal Power Act, as amended.
Further, neither it nor any Subsidiary is an "investment company" or an
"affiliated person" of an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
3.15. MARGIN STOCK. Neither it nor any Subsidiary is and will be
engaged principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying or trading in any
margin stocks or margin securities (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System as amended from time to time).
Neither it nor any Subsidiary will use or permit any proceeds of the Loan to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying margin stocks or margin
securities.
3.16. USE OF PROCEEDS. It will use the proceeds of any Loan to be
made pursuant hereto for the ___________________________________.
3.17. DISCLOSURE GENERALLY. The representations and statements made
by it or on its behalf in connection with this credit facility and the Loan,
including representations and statements in each of the Loan Documents, do not
and will not contain any untrue statement of a material fact or omit to state a
material fact or any fact necessary to make the representations made not
materially misleading. No written information, exhibit, report, brochure or
financial statement furnished by it or on its behalf to the Bank in connection
with this credit facility, the Loan, or any Loan Document contains or will
contain any material misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained therein not materially
misleading.
4. CONDITIONS PRECEDENT
4.1. CONDITIONS TO THE LOAN. After this Agreement has become
effective, the obligation of the Bank to make the Loan is conditioned upon the
following:
Credit Agreement - 13 - December 31, 1997
<PAGE> 18
(a) COVENANTS; REPRESENTATIONS. DVI Financial Services, Oferil and
DVI, Inc. shall be in compliance with all covenants, agreements and conditions
in each Loan Document and each representation and warranty contained in each
Loan Document shall be true with the same effect as if such representation or
warranty had been made on the date such Loan is made or issued.
(b) DEFAULTS. Immediately prior to and after giving effect to the
Loan, no Event of Default or Potential Default shall exist.
(c) MATERIAL ADVERSE CHANGE. Since September 30, 1997, there shall
not have been any Material Adverse Change with respect to DVI Financial
Services, Oferil, or DVI, Inc., and there shall not be any other event or
circumstance which gives the Bank reasonable grounds to conclude that DVI
Financial Services, Oferil or DVI, Inc. may not or will not be able to perform
or observe (in the normal course) its obligations hereunder and under the Note,
the Guaranty Agreement or the other Loan Documents.
(d) ARTICLES, BYLAWS. The Bank shall have received copies of the
Articles or Certificates of Incorporation and Bylaws of DVI Financial Services,
Oferil and DVI, Inc., respectively, certified by its Secretary or Assistant
Secretary; together with Certificate of Good Standing from any jurisdiction
where the nature of its business or the ownership of its properties requires
such qualification except where the failure to be so qualified would not have a
Material Adverse Effect.
(e) EVIDENCE OF AUTHORIZATION. The Bank shall have received copies
certified by the Secretary or Assistant Secretary of DVI Financial Services,
Oferil and DVI, Inc., respectively, or other appropriate official (in the case
of a Person other than DVI Financial Services, Oferil and DVI, Inc.) of all
corporate or other action taken by each Person other than the Bank who is a
party to any Loan Document to authorize its execution and delivery and
performance of the Loan Documents and to authorize the Loan, together with such
other related papers as the Bank shall reasonably require.
(f) LEGAL OPINIONS. The Bank shall have received a favorable written
opinion in form and substance reasonably satisfactory to the Bank from Melvin
Breaux, Esq., as counsel for DVI Financial Services, Oferil and DVI, Inc., which
shall be addressed to the Bank and be dated the date of the Loan. [Add: Uruguay
counsel opinion re Oferil, Brazil counsel opinion re Oferil]
(g) INCUMBENCY. The Bank shall have received a certificate signed by
the secretary or assistant secretary of DVI Financial Services, Oferil and DVI,
Inc., respectively, together with the true signature of the officer or officers
authorized to execute and deliver the Loan Documents and certificates
thereunder, upon which the Bank shall be entitled to rely conclusively until it
shall have received a further certificate of the secretary or assistant
secretary of DVI Financial Services, Oferil or DVI, Inc., as applicable,
amending the prior certificate and submitting the signature of the officer or
officers named in the new certificate as being authorized to execute and deliver
Loan Documents and certificates thereunder.
(h) NOTE. The Bank shall have received the Note duly executed,
completed and issued in accordance herewith.
(i) GUARANTY AGREEMENT. The Bank shall have received a guaranty
agreement signed by DVI, Inc., in form and substance reasonably acceptable to
the Bank, duly executed, completed and
Credit Agreement - 14 - December 31, 1997
<PAGE> 19
issued in accordance herewith.
(j) SECURITY AGREEMENTS. The Bank shall have received [ADD:
itemization of security documents - Oferil collateral assignment, notice,
Philips assignment, etc.]
(k) CONSENTS. DVI Financial Services and Oferil shall have provided
to the Bank evidence satisfactory to it that all governmental, shareholder and
third party consents and approvals necessary in connection with the transactions
contemplated hereby have been obtained and remain in effect.
(l) FEES, EXPENSES. DVI Financial Services and Oferil shall
simultaneously pay or shall have paid all fees and expenses due hereunder or any
other Loan Document, including but not limited to legal fees and expenses
incurred through the date of the Loan.
(m) FURTHER DOCUMENTS. The Bank shall have received all
certificates, instruments and other documents then required to be delivered
pursuant to any Loan Documents, in each instance in form and substance
reasonably satisfactory to it.
5. AFFIRMATIVE COVENANTS
DVI Financial Services and Oferil each covenants and agrees that,
without the prior written consent of CoreStates Bank, from and after the date
hereof and for so long as any Obligation remains unpaid or outstanding, it will:
5.1. FINANCIAL STATEMENTS AND REPORTS. Furnish to the Bank the
following financial information:
(a) ANNUAL STATEMENTS. No later than ninety (90) days after the end
of each Fiscal Year, the consolidated and consolidating balance sheet of it and
its subsidiaries as of the end of such year and the prior year in comparative
form, and related statements of operations, stockholders' equity, and cash flows
for the Fiscal Year and the prior Fiscal Year in comparative form. The financial
statements shall be in reasonable detail with appropriate notes and be prepared
in accordance with Generally Accepted Accounting Principles. The consolidated
annual financial statements shall be certified (without any qualification or
exception) by __________________ or other independent public accountants
reasonably acceptable to the Bank. Such financial statements shall be
accompanied by a report of such independent certified public accountants stating
that, in the opinion of such accountants, such financial statements present
fairly, in all material respects, the financial position, and the results of
operations and the cash flows of it and its subsidiaries for the period then
ended in conformity with Generally Accepted Accounting Principles, except for
inconsistencies resulting from changes in accounting principles and methods
agreed to by such accountants and specified in such report, and that, in the
case of such financial statements, the examination by such accountants of such
financial statements has been made in accordance with generally accepted
auditing standards and accordingly included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements and assessing
the accounting principles used and significant estimates made, as well as
evaluating the overall financial statement presentation. Each financial
statement provided under this subsection (a) shall be accompanied by a
certificate signed by such accountants either stating that during the course of
their examination nothing came to their attention which would cause them to
believe that any event has
Credit Agreement - 15 - December 31, 1997
<PAGE> 20
occurred and is continuing which constitutes an Event of Default or Potential
Default, or describing each such event. In addition to the annual financial
statements, DVI Financial Services shall, promptly upon receipt thereof, furnish
to the Bank a copy of each other report submitted to its board of directors by
its independent accountants in connection with any annual, interim or special
audit made by them of the financial records of it or its Subsidiaries. Such
annual statement shall be accompanied by a Compliance Certificate in form and
substance satisfactory to the Bank.
(b) QUARTERLY STATEMENTS. No later than forty-five (45) calendar
days after the end of each Fiscal Quarter of each Fiscal Year, the consolidated
and consolidating balance sheet and related statements of operations and
stockholders' equity of it and its subsidiaries for such quarterly period and
for the period from the beginning of such fiscal year to the end of such Fiscal
Quarter and a corresponding financial statement for the same periods in the
preceding Fiscal Year certified by its President, chief executive officer, chief
operating officer or chief financial officer as having been prepared in
accordance with Generally Accepted Accounting Principles (subject to changes
resulting from audits and year-end adjustments); provided, however, that if the
independent certified public accountants issue a review report on its quarterly
financial statements, the financial statements required by this subsection (b)
shall be accompanied by a certificate signed by such accountants either stating
that during the course of their examination nothing came to their attention
which would cause them to believe that any event has occurred and is continuing
which constitutes an Event of Default or Potential Default, or describing each
such event and the remedial steps being taken by it or its subsidiaries. Such
quarterly statement shall be accompanied by a Compliance Certificate in form and
substance satisfactory to the Bank.
(c) NO DEFAULT. Within forty-five (45) calendar days after the end
of each of the first three Fiscal Quarters of each Fiscal Year and within ninety
(90) calendar days after the end of each Fiscal Year, a certificate signed by
its President, chief executive officer, chief operating officer or chief
financial officer certifying that, to the best of such officer's knowledge,
after due inquiry, (i) it has complied with all covenants, agreements and
conditions in each Loan Document and that each representation and warranty
contained in each Loan Document is true and correct with the same effect as
though each such representation and warranty had been made on the date of such
certificate (except to the extent such representation or warranty related to a
specific prior date), and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Potential Default, or describing each such
event and the remedial steps being taken by it.
(d) ERISA. All reports and forms filed with respect to all Plans,
except as filed in the normal course of business and that would not result in an
adverse action to be taken under ERISA, and details of related information of a
Reportable Event, promptly following each filing.
(e) MATERIAL CHANGES. It shall, in a reasonable period of time and
manner, notify the Bank of any litigation, administrative proceeding,
investigation, business development, or change in financial condition which
could reasonably have a Material Adverse Effect, promptly following its
discovery.
(f) OTHER INFORMATION. Promptly, upon request by the Bank from time
to time (which may be on a monthly or other basis), it shall provide such other
information and reports regarding its operations, business affairs, prospects
and financial condition as the Bank may reasonably request.
5.2. CORPORATE EXISTENCE. It shall preserve its corporate existence
and all material franchises,
Credit Agreement - 16 - December 31, 1997
<PAGE> 21
licenses, patents, copyrights, trademarks and trade names consistent with good
business practice; and maintain, keep, and preserve all of its properties
(tangible and intangible) materially necessary or useful in the conduct of its
business in good working order and condition, ordinary wear and tear expected.
5.3. ERISA. It shall comply in all material respects with the
provisions of ERISA to the extent applicable to any Plan maintained for the
employees of it or any ERISA Affiliate; do or cause to be done all such acts and
things that are required to maintain the qualified status of each Plan and tax
exempt status of each trust forming part of such Plan; not incur any material
accumulated funding deficiency (within the meaning of ERISA and the regulations
promulgated thereunder), or any material liability to the PBGC (as established
by ERISA); not permit any event to occur as described in Section 4042 of ERISA
or which may result in the imposition of a lien on its properties or assets;
notify the Bank in writing promptly after it has come to the attention of its
senior management of the assertion or threat of any "reportable event" or other
event described in Section 4042 of ERISA (relating to the soundness of a Plan)
or the PBGC's ability to assert a material liability against it or impose a lien
on its, or any ERISA Affiliates' properties or assets; and refrain from engaging
in any Prohibited Transactions or actions causing possible liability under
Section 5.02 of ERISA.
5.4. COMPLIANCE WITH REGULATIONS. It will comply in all material
respects with all Regulations applicable to its business, the noncompliance with
which reasonably could have a Material Adverse Effect.
5.5. CONDUCT OF BUSINESS; PERMITS AND APPROVALS, COMPLIANCE WITH
LAWS. It will continue to engage in an efficient and economical manner in a
business of the same general type as conducted by it on the date of this
Agreement; maintain in full force and effect, its franchises, and all licenses,
patents, trademarks, trade names, contracts, permits, approvals and other rights
materially necessary to the profitable conduct of its business.
5.6. MAINTENANCE OF INSURANCE. It will maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may
provide for reasonable deductibility from coverage thereof.
5.7. PAYMENT OF DEBT; PAYMENT OF TAXES, ETC. Where the amount
involved exceeds $250,000 or where the non-payment or non-discharge would
otherwise have a Material Adverse Effect on it or any of its assets, it will
promptly pay and discharge (a) all of its Debt in accordance with the terms
thereof; (b) all taxes, assessments, and governmental charges or levies imposed
upon it or upon its income and profits, upon any of its property, real, personal
or mixed, or upon any part thereof, before the same shall become in default; (c)
all lawful claims for labor, materials and supplies or otherwise, which, if
unpaid, might become a lien or charge upon such property or any part thereof;
provided, however, that so long as it first notifies the Bank of its intention
to do so, it shall not be required to pay and discharge any such Debt, tax,
assessment, charge, levy or claim so long as the failure to so pay or discharge
does not constitute or result in an Event of Default or a Potential Default
hereunder and so long as no foreclosure or other similar proceedings shall have
been commenced against such property or any part thereof and so long as the
validity thereof shall be contested in good faith by appropriate proceedings
diligently pursued and it shall have set aside on its books adequate reserves
with respect thereto.
Credit Agreement - 17 - December 31, 1997
<PAGE> 22
5.8. NOTICE OF EVENTS. Promptly upon discovery by it of any of the
following events, it will provide telephone notice to the Bank (confirmed within
three (3) calendar days by written notice), describing the event and all action
it proposes to take with respect thereto:
(a) an Event of Default or Potential Default under this Agreement or
any other Loan Document;
(b) any default or event of default under a contract or contracts and
such default or event of default involves payments by it or any Subsidiary in an
aggregate amount equal to or in excess of $250,000;
(c) a default or event of default under or as defined in any evidence
of or agreements for Indebtedness for Borrowed Money under which it or any
Subsidiary's liability is equal to or in excess of $250,000, singularly or in
the aggregate, whether or not an event of default thereunder has been declared
by any party to such agreement or any event which, upon the lapse of time or the
giving of notice or both, would become an event of default under any such
agreement or instrument or would permit any party to any such instrument or
agreement to terminate or suspend any commitment to lend to it or any Subsidiary
or to declare or to cause any such indebtedness to be accelerated or payable
before it would otherwise be due;
(d) the institution of, any material adverse determination in, or the
entry of any default judgment or order or stipulated judgment or order in, any
suit, action, arbitration, administrative proceeding, criminal prosecution or
governmental investigation against it or any Subsidiary in which the amount in
controversy is in excess of $250,000, singularly or in the aggregate; or
(e) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which would have a Material Adverse Effect.
5.9. INSPECTION RIGHTS. At any time during the existence of an Event
of Default or Potential Default, during regular business hours and then as often
as requested of it by the Bank, permit the Bank, or any authorized officer,
employee, agent, or representative of the Bank to examine and make abstracts
from its records and books of account, wherever located, and to visit its
properties; and to discuss its affairs, finances, and accounts with its
President, chief executive officer, chief operating officer, chief financial
officer or independent accountants. It shall reimburse the Bank for the Bank's
expense of such inspection. At all times, it is understood and agreed by it that
all expenses in connection with any such inspection which it may be incur, or
any of its officers and employees may incur or its attorneys and independent
certified public accountants therefor may incur, shall be expenses payable by it
and shall not be expenses of the Bank.
5.10. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. It will maintain its
books and records at all times in accordance with Generally Accepted Accounting
Principles.
5.11. COMPLIANCE WITH MATERIAL CONTRACTS. It will comply in all
material respects with all obligations, terms, conditions and covenants, as
applicable, in all Debt and all instruments and agreements related thereto, and
all other instruments and agreements to which it is a party or by which it is
bound or any of its properties is affected and in respect of which the failure
to comply reasonably could have a Material Adverse Effect.
Credit Agreement - 18 - December 31, 1997
<PAGE> 23
5.12. USE OF PROCEEDS. It will use the proceeds of any Loan made
pursuant hereto for ____________________________________________.
5.13. FURTHER ASSURANCES. Do such further acts and things and execute
and deliver to the Bank such additional assignments, agreements, powers and
instruments, as the Bank may reasonably require or reasonably deem advisable to
carry into affect the purposes of this Agreement or to better assure and confirm
unto the Bank its rights, powers and remedies hereunder.
5.14. RESTRICTIVE COVENANTS IN OTHER AGREEMENTS. In the event that it
shall enter into or otherwise become subject to or suffer to exist any agreement
pertaining to Debt which contains covenants or restrictions that are more
restrictive on it than the covenants and restrictions contained in this
Agreement, each and every such covenant and restriction shall be deemed
incorporated herein by reference as fully as if set forth herein. If and to the
extent that any such covenant or restriction shall be inconsistent with or
otherwise be in conflict with any covenant or restriction set forth herein
(other than by reason of its being more restrictive), this Agreement shall
govern.
6. NEGATIVE COVENANTS
DVI Financial Services and Oferil each covenants and agrees that,
without the prior written consent of CoreStates Bank, from and after the date
hereof and for so long as any Obligation remains unpaid or outstanding, it will
not:
6.1. CONSOLIDATION AND MERGER. Merge or consolidate with or into any
corporation except if no Potential Default or Event of Default shall have
occurred and be continuing either immediately prior to or upon the consummation
of such transaction, any Person may be merged into it as long as it is the
surviving entity.
6.2. LIENS. Create, assume or permit to exist any Lien on any of its
property or assets, whether now owned or hereafter acquired, or upon any income
or profits therefrom, except Permitted Liens.
6.3. GUARANTEES. Guarantee or otherwise in any way become or be
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts) of any other Person, contingently or
otherwise.
6.4. MARGIN STOCK. Use or permit any proceeds of the Loan to be used,
either directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock within the meaning of Regulation U
of The Board of Governors of the Federal Reserve System, as amended from time to
time.
6.5. ACQUISITIONS AND INVESTMENTS. If an Event of Default or a
Potential Default exists or would exist immediately thereafter: purchase or
otherwise acquire (including without limitation by way of share exchange) any
part or amount of the capital stock or assets of, or make any Investments in any
other Person; or enter into any new business activities or ventures not directly
related to its present business; or create any Subsidiary, except (a) it may
acquire and hold stock, obligations or securities
Credit Agreement - 19 - December 31, 1997
<PAGE> 24
received in settlement of debts (created in the ordinary course of business)
owing to it, and (b) it may make and own (i) Investments in certificates of
deposit or time deposits having maturities in each case not exceeding one year
from the date of issuance thereof and issued by a Bank, or any FDIC-insured
commercial bank incorporated in the United States or any state thereof having a
combined capital and surplus of not less than $150,000,000, (ii) Investments in
marketable direct obligations issued or unconditionally guaranteed by the United
States of America, any agency thereof, or backed by the full faith and credit of
the United States of America, in each case maturing within one year from the
date of issuance or acquisition thereof, (iii) Investments in commercial paper
issued by a corporation incorporated in the United States or any State thereof
maturing no more than one year from the date of issuance thereof and, at the
time of acquisition, having a rating of A-1 (or better) by Standard & Poor's
Corporation or P-1 (or better) by Moody's Investors Service, Inc., (iv)
investments in money market mutual funds all of the assets of which are invested
in cash or investments described in the immediately preceding clauses (i), (ii)
and (iii).
6.6. TRANSFER OF ASSETS; NATURE OF BUSINESS. Sell, transfer, pledge,
assign or otherwise dispose of any of its assets unless such sale or disposition
shall be in the ordinary course of its business for value received; or
discontinue, liquidate or change in any material respect any substantial part of
its operations or business. Sales of individual or portfolios of leases and
related equipment from time to time and sales of groups of leases in
securitization transactions shall be deemed to be in the ordinary course of the
business of DVI Financial Services. Notwithstanding the foregoing and provided
that no Potential Default or Event of Default shall have occurred and be
continuing either immediately prior to or upon the consummation of any
transaction, it may sell, transfer or dispose of assets constituting up to ten
percent (10%) of its assets during any period of twelve months.
6.7. RESTRICTED PAYMENTS. Make or pay any redemptions, repurchases,
dividends or distributions of any kind with respect to its capital stock.
6.8. ACCOUNTING CHANGE. Make or permit any change in financial
accounting policies or financial reporting practices, except as required by
Generally Accepted Accounting Principles or regulations of the Securities and
Exchange Commission, if applicable.
6.9. TRANSACTIONS WITH AFFILIATES. Enter into any transaction
(including, without limitation, the purchase, sale or exchange of property, the
rendering of any services or the payment of management fees) with any Affiliate,
except transactions in the ordinary course of, and pursuant to the reasonable
requirements of, its business, and in good faith and upon commercially
reasonable terms.
6.10. RESTRICTION ON AMENDMENT OF THIS AGREEMENT. Enter into or
otherwise become subject to or suffer to exist any agreement which would require
it to obtain the consent of any other person as a condition to the ability of
CoreStates, DVI Financial Services and Oferil to amend or otherwise modify this
Agreement.
7. DEFAULT
7.1. EVENTS OF DEFAULT. DVI Financial Services and Oferil shall be in
default if any one or more of the following events (each an "EVENT OF DEFAULT")
occurs:
Credit Agreement - 20 - December 31, 1997
<PAGE> 25
(a) PAYMENTS. DVI Financial Services or Oferil fails to pay (1) any
principal of or interest on the Note when due and payable (whether
at, by notice of intention to prepay, or otherwise), or (2) any other
amount payable under any Loan Document when it is due and payable and
in either case such failure shall continue for a period of five (5)
Business Days or more.
(b) COVENANTS. DVI Financial Services or Oferil fails to observe or
perform (1) any term, condition or covenant set forth in
Sections 5.1(a), 5.1(b), 5.1(c), 5.1(g) or 5.1(h), Section 5.2
(first sentence only), all sections of Article 6 or Section 7.1(a) of
this Agreement, as and when required, or (2) any term, condition or
covenant contained in this Agreement or any other Loan Document other
than as set forth in (1) above, as and when required and in either
case such failure shall continue and not be waived in writing by the
Bank for a period of 30 days or more.
(c) REPRESENTATIONS, WARRANTIES. Any representation or warranty made
or deemed to be made by DVI Financial Services, Oferil or DVI, Inc.
herein or in any Loan Document or in any exhibit, schedule, report or
certificate delivered pursuant hereto or thereto shall prove to have
been false, misleading or incorrect in any material respect when made
or deemed to have been made.
(d) BANKRUPTCY. DVI Financial Services, Oferil, DVI, Inc. or any
Subsidiary of any of them is dissolved or liquidated, makes an
assignment for the benefit of creditors, files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or
applies to any tribunal for any receiver or trustee, commences any
proceeding relating to itself under any bankruptcy, reorganization,
readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, has commenced against it any such proceeding which
remains undismissed for a period of thirty (30) days, or indicates
its consent to, approval of or acquiescence in any such proceeding,
or any receiver of or trustee for DVI Financial Services, Oferil,
DVI, Inc. or any Subsidiary of any of them or any substantial part of
any of their property is appointed, or if any such receivership or
trusteeship to continues undischarged for a period of thirty (30)
days.
(e) CERTAIN OTHER DEFAULTS. (i) DVI Financial Services, Oferil, DVI,
Inc. or any Subsidiary of any of them shall fail to pay when due any
Indebtedness for Borrowed Money which singularly or in the aggregate
exceeds $250,000, and such failure shall continue beyond any
applicable cure period; or (ii) DVI Financial Services, Oferil, DVI,
Inc. or any Subsidiary of any of them shall suffer to exist any
default or event of default in the performance or observance, subject
to any applicable grace period, of any agreement, term, condition or
covenant with respect to any agreement or document relating to
Indebtedness for Borrowed Money if the effect of such default is to
permit, with the giving of notice or passage of time or both, the
holders thereof, or any trustee or agent for said holders, to
terminate or suspend any commitment (which is equal to or in excess
of $250,000) to lend money or to cause or declare any portion of any
borrowings thereunder to become due and payable prior to the date on
which it would otherwise be due and payable, provided that during any
applicable cure period the Bank's obligations hereunder to make
further Loans shall be suspended.
(f) JUDGMENTS. Any judgments against DVI Financial Services, Oferil,
DVI, Inc. or any Subsidiary of any of them or against its assets or
property for amounts in excess of $250,000 in the aggregate remain
unpaid, unstayed on appeal, undischarged, unbonded and undismissed
for a period of thirty (30) days.
Credit Agreement - 21 - December 31, 1997
<PAGE> 26
(g) ATTACHMENTS. Any assets of DVI Financial Services, Oferil, DVI,
Inc. or any Subsidiary of any of them shall be subject to
attachments, levies, or garnishments for amounts in excess of
$250,000 in the aggregate which have not been dissolved or satisfied
within twenty (20) days after service of notice thereof to DVI
Financial Services, Oferil, DVI, Inc. or such Subsidiary, as
applicable.
(h) SECURITY INTERESTS. Any security interest created pursuant to any
Loan Document shall cease to be in full force and effect, or shall
cease in any material respect to give the Bank, the Liens, rights,
powers and privileges purported to be created thereby (including,
without limitation, a perfected security interest in, and Lien on,
all of the Collateral), superior to and prior to the rights of all
third Persons, and subject to no other Liens (except as permitted by
Section 6.2).
(i) MATERIAL ADVERSE CHANGE. In the determination of the Bank, in its
sole discretion reasonably exercised, a Material Adverse Change shall
have occurred.
THEN and in every such event other than that specified in Section 7.1.(d), the
Bank may immediately declare the Note and all other Obligations, including
without limitation accrued interest, to be, and they shall thereupon forthwith
become due and payable without presentment, demand, or notice of any kind, all
of which are hereby expressly waived by DVI Financial Services and Oferil. Upon
the occurrence of any event specified in Section 7.1.(d), the Note and all other
Obligations, including without limitation accrued interest, shall immediately be
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by DVI Financial Services and
Oferil. From and after the date an Event of Default shall have occurred and for
so long as an Event of Default shall be continuing, the Loan shall bear interest
at the Default Rate whether or not the Maturity Date shall have occurred.
8. COLLATERAL
8.1. COLLATERAL. Except as otherwise specifically set forth herein or
in any other Loan Document, any Loan made and outstanding and their repayment at
all times shall be secured by a [first priority, perfected,] security interest
in the Collateral (as defined in [the Security Agreement], hereinafter referred
to as the "COLLATERAL").
9. MISCELLANEOUS
9.1. WAIVER. No failure or delay on the part of the Bank or any
holder of the Note in exercising any right, power or remedy under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under any
Loan Document. The remedies provided under the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
9.2. AMENDMENTS. No amendment, modification, termination or waiver of
any Loan Document or any provision thereof nor any consent to any departure by
DVI Financial Services, Oferil or DVI, Inc. therefrom shall be effective unless
the same shall have been approved in writing by the
Credit Agreement - 22 - December 31, 1997
<PAGE> 27
Bank, be in writing and be signed by the Bank and DVI Financial Services and
Oferil, and then any such waiver or consent shall be effective only in the
instance and for the specific purpose for which given. No notice to or demand on
DVI Financial Services or Oferil shall entitle DVI Financial Services or Oferil
to any other or further notice or demand in similar or other circumstances.
9.3. GOVERNING LAW. The Loan Documents and all rights and obligations
of the parties thereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard to
Pennsylvania or federal principles of conflict of laws.
9.4. PARTICIPATIONS AND ASSIGNMENTS. DVI Financial Services and
Oferil each hereby acknowledges and agrees that CoreStates may at any time: (a)
grant participations in all or any portion of the Note or of its right, title
and interest therein or in or to this Agreement (collectively, "PARTICIPATIONS")
to any other lending office of CoreStates or to any other bank, lending
institution or other entity which has the requisite sophistication to evaluate
the merits and risks of investments in Participations ("PARTICIPANTS");
provided, however, that: (i) all amounts payable by DVI Financial Services and
Oferil hereunder shall be determined as if CoreStates had not granted such
Participation; and (ii) any agreement pursuant to which CoreStates may grant a
Participation: (x) shall provide that CoreStates shall retain the sole right and
responsibility to enforce the obligations of DVI Financial Services and/or
Oferil hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provisions of this Agreement; and (y)
such participation agreement may provide that CoreStates will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participant if such modification, amendment or waiver would reduce the principal
of or rate of interest on any Loan or postpone the date fixed for any payment of
principal of or interest on any Loan; and (b) CoreStates may assign any of its
Note.
9.5. CAPTIONS. Captions in the Loan Documents are included for
convenience of reference only and shall not constitute a part of any Loan
Document for any other purpose.
9.6. NOTICES. All notices, requests, demands, directions,
declarations and other communications between the Bank and DVI Financial
Services and Oferil provided for in any Loan Document shall, except as otherwise
expressly provided, be mailed by registered or certified mail, return receipt
requested, or telegraphed, or faxed, or delivered in hand to the applicable
party at its address indicated opposite its name on the signature pages hereto.
The foregoing shall be effective and deemed received three days after being
deposited in the mails, postage prepaid, addressed as aforesaid and shall
whenever sent by telegram, telegraph or fax or delivered in hand be effective
when received. Any party may change its address by a communication in accordance
herewith.
9.7. EXPENSES; INDEMNIFICATION. DVI Financial Services and Oferil
will from time to time reimburse the Bank promptly following demand for all
out-of-pocket expenses (including the fees and expenses of legal counsel) in
connection with (i) the preparation of the Loan Documents, (ii) the making of
the Loan, (iii) the administration or revision of the Loan Documents, and (iv)
the enforcement of the Loan Documents; and reimburse the Bank for all
out-of-pocket expenses (including fees and expenses of legal counsel) in
connection with the enforcement of the Loan Documents. In addition to the
payment of the foregoing expenses, DVI Financial Services and Oferil each hereby
agrees to indemnify, protect and hold the Bank and any holder of the Note and
the officers, directors, employees, agents, affiliates and attorneys of the Bank
and such holder (collectively, the
Credit Agreement - 23 - December 31, 1997
<PAGE> 28
"INDEMNITEES") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature, including reasonable fees and expenses of
legal counsel, which may be imposed on, incurred by, or asserted against such
Indemnitee by DVI Financial Services, Oferil or other third parties and arise
out of or relate to this Agreement or the other Loan Documents or any other
matter whatsoever related to the transactions contemplated by or referred to in
this Agreement or the other Loan Documents; provided, however, that neither DVI
Financial Services nor Oferil shall have any obligation to an Indemnitee
hereunder to the extent that the liability incurred by such Indemnitee has been
determined by a court of competent jurisdiction to be the result of gross
negligence or willful misconduct of such Indemnitee.
9.8. SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loan hereunder and
the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of DVI Financial
Services and Oferil set forth in Section 9.7 shall survive the payment of the
Loan and the termination of this Agreement. This Agreement shall remain in full
force and effect until the repayment in full of all amounts owed by DVI
Financial Services and Oferil under the Note or any other Loan Document.
9.9. SEVERABILITY. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement, the
Note or other Loan Documents shall not affect or impair the validity, legality
or enforceability of the remaining provisions or obligations under this
Agreement, the Note or other Loan Documents or of such provision or obligation
in any other jurisdiction.
9.10. NO FIDUCIARY RELATIONSHIP. No provision in this Agreement or in
any of the other Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty by the Bank to DVI Financial
Services, Oferil or DVI, Inc..
9.11. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. DVI FINANCIAL
SERVICES INC, OFERIL, S.A. AND CORESTATES EACH HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE EASTERN DISTRICT
OF PENNSYLVANIA AND IRREVOCABLY AGREES THAT, ANY ACTIONS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY
BE LITIGATED IN SUCH COURTS. EACH PARTY TO THIS AGREEMENT ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENT, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR SUCH OTHER LOAN
DOCUMENT.
9.12. WAIVER OF JURY TRIAL. DVI FINANCIAL SERVICES INC, OFERIL, S.A.
AND CORESTATES EACH HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE
LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE
SCOPE OF THIS
Credit Agreement - 24 - December 31, 1997
<PAGE> 29
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. DVI FINANCIAL SERVICES
INC, OFERIL, S.A. AND CORESTATES EACH ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. DVI FINANCIAL SERVICES INC, OFERIL,
S.A. AND CORESTATES EACH FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED
THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS
WAIVER IS IRREVOCABLE, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS, MODIFICATIONS, REPLACEMENTS OR RESTATEMENTS TO THIS
AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE LOAN. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
9.13. COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement and any amendments
hereto or waivers hereof shall become effective when the Bank shall have
received signed counterparts or notice by fax of the signature page that the
counterpart has been signed and is being delivered to it or facsimile that such
counterparts have been signed by all the parties hereto or thereto.
9.14. USE OF DEFINED TERMS. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
9.15. OFFSETS. Nothing in this Agreement shall be deemed a waiver or
prohibition of the Bank's right of banker's lien or offset.
9.16. ENTIRE AGREEMENT. This Agreement, the Note issued hereunder and
the other Loan Documents constitute the entire understanding of the parties
hereto as of the date hereof with respect to
Credit Agreement - 25 - December 31, 1997
<PAGE> 30
the subject matter hereof and thereof and supersede any prior agreements,
written or oral, with respect hereto or thereto.
IN WITNESS WHEREOF, the parties hereto have each caused this
Agreement to be duly executed by their duly authorized representatives as of the
date first above written.
DVI FINANCIAL SERVICES INC. OFERIL, S.A.
By ______________________________ By ___________________________
Name: Name:
Title: Title:
Notices To:
Melvin C. Breaux, Esq.
DVI Financial Services Inc.
500 Hyde Park
Doylestown, PA 18901
FAX No. (215) 345-4428
CORESTATES BANK, N.A.
By ___________________________
Hugh W. Connelly
Vice President
Notices To:
Mr. Hugh W. Connelly
Vice President
CoreStates Bank, N.A.
Transportation and Leasing Division
FC 1-8-11-24
1339 Chestnut Street
Philadelphia, PA 19107
FAX No. (215) 786-7704
Credit Agreement - 26 - December 31, 1997
<PAGE> 31
REFERENCE TABLE OF DEFINITIONS
<TABLE>
<CAPTION>
DEFINITION PAGE DEFINED
- ---------- ------------
<S> <C>
Affiliate.............................................................1
Agreement.............................................................1
Bank..................................................................1
Base Rate.............................................................2
Business Day..........................................................2
Capitalized Lease.....................................................2
Capitalized Lease Obligations.........................................2
Closing...............................................................2
Closing Date..........................................................2
Code..................................................................2
Collateral...........................................................22
Compliance Certificate................................................2
CoreStates............................................................1
CoreStates Bank.......................................................1
Debt..................................................................2
Default Rate..........................................................3
Dollars...............................................................3
DVI Financial Services................................................1
Environmental Control Statutes........................................3
ERISA.................................................................3
ERISA Affiliate.......................................................3
Event of Default.....................................................20
Federal Funds Rate....................................................3
Fiscal Quarter........................................................3
Fiscal Year...........................................................3
GAAP..................................................................3
Generally Accepted Accounting Principles..............................3
Governmental Authority................................................3
Guarantor.............................................................3
Hazardous Substances..................................................4
Indebtedness for Borrowed Money.......................................4
Indemnitees..........................................................23
Intangible Assets.....................................................4
Interest Period.......................................................4
Investment............................................................4
LIBO Rate.............................................................4
LIBO Rate Reserve Percentage..........................................5
Lien..................................................................5
Loan..................................................................8
Loan Documents........................................................5
Material Adverse Change...............................................5
Material Adverse Effect...............................................5
</TABLE>
Credit Agreement - 27 - December 31, 1997
<PAGE> 32
<TABLE>
<S> <C>
Maturity Date............................................................9
Multiemployer Plan.......................................................5
Note.....................................................................8
Obligations..............................................................6
Oferil...................................................................1
Participants............................................................22
Participations..........................................................22
PBGC.....................................................................6
Pension Plan.............................................................6
Permitted Liens..........................................................6
Person...................................................................7
Plan.....................................................................7
Potential Default........................................................7
Prohibited Transaction...................................................7
Regulation...............................................................7
Release..................................................................7
Reportable Event.........................................................7
Security Agreement.......................................................7
Solvent..................................................................7
Structuring and Arranging Fee............................................7
Subsidiary...............................................................7
Termination Event........................................................8
Unfunded Pension Liabilities.............................................8
Unrecognized Retiree Welfare Liability...................................8
</TABLE>
Credit Agreement - 28 - December 31, 1997
<PAGE> 33
[CORESTATES LOGO]
EXHIBIT A
NOTE
$20,000,000 Philadelphia, PA
December 31, 1997
For Value Received, DVI FINANCIAL SERVICES INC., a Delaware corporation ("DVI
FINANCIAL SERVICES") and OFERIL, S.A., a Uruguay corporation, jointly and
severally, hereby promise to pay to the order of CORESTATES BANK, N.A. (the
"BANK"), in lawful currency of the United States of America in immediately
available funds at the Bank's offices located at Broad and Chestnut Streets,
Philadelphia, Pennsylvania, on the Maturity Date as provided in the Credit
Agreement described below, the principal sum of TWENTY MILLION DOLLARS
($20,000,000).
DVI Financial Services and Oferil each promises also to pay interest on the
unpaid principal amount hereof in like money at such office from the date hereof
until paid in full at the rates and at the times provided in the Credit
Agreement.
This Note is the Note referred to in, is entitled to the benefits of and is
secured by security interests referred to in the Credit Agreement, dated
December 31, 1997 by and among DVI Financial Services, Oferil and the Bank (as
such may be amended, modified, supplemented, restated or replaced from time to
time, the "CREDIT AGREEMENT"). This Note is subject to voluntary prepayment the
Maturity Date, in whole but not in part, as provided in the Credit Agreement.
In case an Event of Default shall occur and be continuing, the maturity date of
the principal of and the accrued interest on this Note may be accelerated and be
declared to be due and payable in the manner and with the effect provided in the
Credit Agreement.
DVI Financial Services and Oferil each hereby waives presentment, demand,
protest or notice of any kind in connection with this Note.
The undersigned's liability hereunder shall be for principal, interest, and all
fees and expenses as provided in the Credit Agreement, as established by the
Bank's books and records, which shall be conclusive absent manifest error.
Capitalized terms used but not defined herein shall have the respective meanings
assigned to them in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL
PRINCIPLES OR CONFLICT OF LAWS.
DVI FINANCIAL SERVICES INC.
By ______________________________
Note - 1 - December 31, 1997
<PAGE> 34
Name:
Title:
OFERIL, S.A.
By ______________________________
Name:
Title:
Note - 2 - December 31, 1997
<PAGE> 35
GUARANTY AGREEMENT
[Omitted]
Pledge Agreement - - 1 - - December 31, 1997
<PAGE> 36
[CORESTATES LOGO]
PLEDGE AGREEMENT
[TO BE ADDED]
Pledge Agreement - - 2 - - December 31, 1997
<PAGE> 37
Pledge Agreement - - 3 - - December 31, 1997
<PAGE> 38
[CORESTATES LOGO]
SUBORDINATION AGREEMENT
[TO BE ADDED]
Subordination Agreement - - 1 - - December 31, 1997
<PAGE> 39
SCHEDULE I
DISCLOSURE SCHEDULE
Schedule 1 - - 1 - - December 31, 1997
<PAGE> 1
GUARANTY AGREEMENT
Guaranty Agreement, executed and delivered December 31, 1997(this
"AGREEMENT"), made by DVI, INC., a Delaware corporation, in favor of CORESTATES
BANK, N.A., a national banking association with its executive offices in
Philadelphia, Pennsylvania ("CORESTATES BANK").
PRELIMINARY STATEMENT
DVI Financial Services Inc. ("DVI FINANCIAL SERVICES"), Oferil, S.A.
(AOFERIL@) and CoreStates Bank are entering into a $20,000,000 Credit Agreement
of even date herewith (such agreement as it may be amended from time to time
after the date hereof, the "CREDIT AGREEMENT"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Credit Agreement.
DVI is the owner, beneficially and of record, of all of the issued and
outstanding capital stock of DVI Financial Services and Oferil, and as such will
benefit for the extension of credit to DVI Financial Services and Oferil
pursuant to the Credit Agreement.
It is a condition to the making of the Loan under the Credit Agreement
that this Agreement be executed and delivered by DVI, Inc. in favor of
CoreStates Bank and be in continuous full force and effect.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, DVI, Inc. hereby
makes the following representations and warranties to CoreStates Bank and
covenants and agrees with CoreStates Bank as follows:
1. CONTINUING AND UNCONDITIONAL GUARANTY. DVI, Inc. hereby
unconditionally and absolutely guaranties to and for CoreStates Bank the due
performance, including without limitation the prompt payment when due or within
any applicable grace Period, whether at stated maturity, upon acceleration or
otherwise and at all times thereafter of any and all obligations of DVI
Financial Services and/or Oferil owed to CoreStates Bank under the Credit
Agreement and the Note and Loan Documents referred to therein, or under any
renewals, extensions or modifications thereof (the "OBLIGATIONS") irrespective
of (a) any lack of enforceability of any Obligation in any jurisdiction, (b) any
change of the time, manner, place of payment, or any other term of any
Obligation, (c) any exchange, release or non-perfection of any collateral
securing payment of any Obligation, (d) any law, regulation or order of any
jurisdiction affecting the genuineness, validity, or rights of CoreStates Bank
with respect to the Obligations or any instruments evidencing any of the
Obligations, or (e) any other circumstance which might otherwise constitute a
defense to or discharge of either or both of DVI Financial
<PAGE> 2
Services or Oferil. DVI, Inc. agrees that its obligations hereunder are
irrevocable; that a separate action or actions may be brought and prosecuted
against it regardless of whether DVI Financial Services and/or Oferil is joined
in any such action or actions; and that DVI, Inc. waives the benefit of any
statute of limitations affecting its liabilities hereunder or the enforcement
hereof.
If, absent the provisions of this paragraph, this Agreement would be
held or determined to be void, invalid or unenforceable on account of the amount
of DVI, Inc.'s liability under this Agreement, then, notwithstanding any other
provision of this Agreement to the contrary, the amount of such liability shall,
without any further action by DVI, Inc., CoreStates Bank or any other person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding, which (without limiting
the generality of the foregoing) may be an amount which is not greater than the
greater of the excess of the amount of the fair saleable value of the assets of
said DVI, Inc., over the amount of all liabilities of DVI, Inc. (all as
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors), (a) as of the date hereof, and (b)
as of the date of the enforcement of this Agreement. Nothing contained in this
paragraph shall be deemed to waive, diminish or modify DVI, Inc.'s
representations, acknowledgments or recitals set forth herein, or in any other
Loan Document.
DVI, Inc. agrees that its obligations as guarantor shall not be
impaired, modified, changed, released, or limited in any manner whatsoever by
any impairment, modification, change, release or limitation of the liability of
DVI Financial Services and/or Oferil or its estate in bankruptcy, resulting from
the operation of any present or future provision of the bankruptcy laws or other
similar statute, or from the decision of any court in a bankruptcy proceeding.
Notwithstanding any provision herein to the contrary, the Obligations shall
include all amounts that would otherwise constitute Obligations but for the fact
that they are unenforceable or not allowable due to the existence of any
proceedings or taking of any actions under any such laws. This Agreement shall
continue to be effective, or shall be reinstated, as the case may be, if at any
time payment, or any part thereof, of any Obligation is rescinded or must
otherwise be restored or returned by CoreStates Bank in connection with any
proceeding involving DVI Financial Services, Oferil, DVI, Inc. or any other
person under any bankruptcy, insolvency, reorganization or similar laws relating
to relief of debtors.
This is a continuing guaranty and shall remain in full force and effect
and be binding upon each DVI, Inc., its successors and assigns until payment in
full of all the Obligations.
2. PAYMENT OF OBLIGATIONS. In furtherance of, and not limiting either
DVI, Inc.'s obligations pursuant to Section 1 hereof, upon the occurrence of an
Event of Default under the Credit Agreement or any demand by CoreStates Bank
upon DVI Financial Services and/or Oferil for payment of any amount in respect
of any Obligation, DVI, Inc. shall immediately pay, in full, the Obligation or
Obligations demanded (as determined pursuant to Section 1 hereof) in lawful
currency of the United States of America and in same day funds to the office of
CoreStates Bank as set forth in the Credit Agreement, or to such other location
as CoreStates Bank may from time to time specify. Notwithstanding anything to
the contrary contained herein or elsewhere, it shall not be necessary for
CoreStates Bank to make any demand upon or bring any legal, equitable or other
action, institute suit, to exhaust it rights against DVI Financial Services
and/or Oferil or any other person, or to proceed, enforce or exhaust its rights
against any security given to secure payment of the Obligations.
<PAGE> 3
3. WAIVER. DVI, Inc. hereby waives all notices of any character
whatsoever with respect to this Agreement and the Obligations, including but not
limited to notice of the acceptance hereof and reliance hereon, of the present
existence or future incurring of any Obligations, of the amounts, terms and
conditions thereof, and of any defaults thereon and further waives the defenses
of diligence, presentment for payment, protest, demand or extensions of time for
payment. DVI, Inc. hereby consents to the taking of, or failure to take, from
time to time without notice to him, any such action of any nature whatsoever
with respect to the Obligations and with respect to any rights against any
person or persons or in any property, including but not limited to any renewals,
extensions, modifications, postponements, compromises, settlements,
substitutions, refusals or failures to exercise or enforce, indulgences,
waivers, surrenders, exchanges and releases, and DVI, Inc. will remain fully
liable hereon notwithstanding any of the foregoing. DVI, Inc. hereby waives the
benefit of all laws now or hereafter in effect in any way limiting or
restricting its liability hereunder, including without limitation (a) all
defenses whatsoever to his liability hereunder except the defense of payment
made on account of the Obligations to CoreStates Bank and his liability
hereunder; (b) all right to stay of execution and exemption of property in any
action to enforce its liability hereunder; and (c) all rights accorded to him
under any other statutory provisions of any other applicable jurisdiction
affecting the rights of CoreStates Bank to enforce his obligations under this
Agreement.
4. REPRESENTATIONS AND WARRANTIES. DVI, Inc. hereby represents and
warrants to CoreStates Bank as follows:
(a) VALIDITY OF DOCUMENTS. This Agreement is a legal, valid and binding
obligations enforceable against it in accordance with its terms.
(b) CONFIRMATION OF CREDIT AGREEMENT REPRESENTATIONS AND WARRANTIES.
All representations and warranties with respect to DVI Financial Services and/or
Oferil which are set forth in the Credit Agreement and the other Loan Documents
are true and correct as of their respective dates.
5. COVENANT OF ASSISTANCE TO DVI FINANCIAL SERVICES AND/OR OFERIL. DVI,
Inc. hereby covenants and agrees that from and after the date hereof and so long
as any Obligation remains unpaid or outstanding it will provide its full
assistance and cooperation in order to enable the DVI Financial Services and/or
Oferil to comply with all covenants and agreements set forth in the Credit
Agreement and the other Loan Documents to the extent such covenants and
agreements relate to DVI Financial Services and/or Oferil, its assets, business
and operations.
6. EXPENSES. In addition to all other liabilities he may have
hereunder, DVI, Inc. also agrees to pay to CoreStates Bank, on demand, all costs
and expenses (including fees, costs and disbursements of counsel) which may be
incurred in the enforcement of the Obligations or DVI, Inc.=s liabilities
hereunder.
7. MODIFICATION OF OBLIGATIONS. DVI, Inc. hereby consents and agrees
that without further notice to or assent from it, the amount of the Obligations,
the time of payment of any or all the Obligations may be changed, any other term
or condition relating to any or all the Obligations may be changed, DVI
Financial Services and/or Oferil may be discharged from
<PAGE> 4
any or all the Obligations, any composition or settlement relating thereto may
be consummated and accepted, and that DVI, Inc. will remain bound upon this
Agreement notwithstanding any or all of the foregoing.
8. NO WAIVERS; RIGHTS AND REMEDIES CUMULATIVE. No failure on the part
of CoreStates Bank to exercise, and no delay in exercising, any right, power or
remedy shall operate as a waiver thereof, nor shall any single or partial
exercise by CoreStates Bank of any right, power or remedy preclude any other
further exercise thereof or the exercise of any other right, power or remedy.
The rights and remedies provided herein shall be in addition to and not
exclusive of any rights or remedies provided at law or in equity, and may be
exercised in such order as CoreStates Bank shall determine, in its sole
discretion.
9. OTHER GUARANTIES. A subsequent guaranty by any other guarantor of
any of the Obligations shall not be deemed to be in lieu of or to supersede or
terminate this Agreement but shall be construed as an additional or
supplementary guaranty unless otherwise expressly provided therein; and if any
other guarantor has given to CoreStates Bank a previous guaranty or guaranties,
this Agreement shall be construed to be an additional or supplementary guaranty,
and not to be in lieu thereof or to terminate such previous guaranty or
guaranties.
10. RIGHT OF SET-OFF. Upon an Event of Default under the Credit
Agreement, CoreStates Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set-off and apply any and all
deposits at any time held and other indebtedness at any time owing by CoreStates
Bank to or for the credit of each DVI, Inc. against any and all of the
obligations of each DVI, Inc. now or hereafter existing under this Agreement.
11. TERMINATION OF GUARANTY. Nothing except payment in full of all the
Obligations shall release DVI, Inc. from liability under this Agreement. This
Agreement will be returned when (a) all Obligations shall have been paid in
full, and (b) the term of the Credit Agreement shall have expired.
12. BINDING EFFECT; ASSIGNMENT. The provisions of this Agreement shall
be binding upon and inure to the benefit of each DVI, Inc. and CoreStates Bank
and their respective heirs, administrators, successors and assigns, except that
DVI, Inc. may not assign or otherwise transfer any of its rights hereunder.
CoreStates Bank may at any time sell, assign, pledge, grant participations in or
otherwise transfer its rights under this Agreement in whole or in part.
13. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended if such amendment is in writing and is signed by DVI, Inc. and
CoreStates Bank, and any provision of this Agreement may be waived by CoreStates
Bank.
14. GOVERNING LAW; JURISDICTION. THIS GUARANTY SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA
WITHOUT REGARD TO PENNSYLVANIA OR FEDERAL PRINCIPLES OR CONFLICT OF LAWS. DVI,
Inc. hereby consents to the jurisdiction of the courts of Pennsylvania in any
action or proceeding which may be brought against it under or in connection with
this Agreement or any transaction contemplated hereby or to enforce any
agreement contained herein, and in the event any such action or proceeding shall
be brought against it, DVI, Inc. agrees not to raise any objection to such
jurisdiction or to the laying of
<PAGE> 5
venue in Philadelphia County. DVI, Inc. agrees that service of process in such
action or proceeding may be duly effected upon it by service in accordance with
the provisions of the Uniform Interstate and International Procedure Act.
IN WITNESS WHEREOF, DVI, Inc. has executed and delivered this Agreement
as of the day and year first above written.
DVI, INC.
By ______________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-Q @
QUARTER END 12/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-K
@ YEAR END 6/30/97.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 42,105
<SECURITIES> 0
<RECEIVABLES> 654,940
<ALLOWANCES> (7,774)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,571
<DEPRECIATION> 2,220
<TOTAL-ASSETS> 726,306
<CURRENT-LIABILITIES> 239,852
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 106,272
<TOTAL-LIABILITY-AND-EQUITY> 726,306
<SALES> 0
<TOTAL-REVENUES> 23,581
<CGS> 0
<TOTAL-COSTS> 12,118
<OTHER-EXPENSES> 4,882
<LOSS-PROVISION> 1,438
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,143
<INCOME-TAX> 2,129
<INCOME-CONTINUING> 3,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,014
<EPS-PRIMARY> .27<F1>
<EPS-DILUTED> .25
<FN>
<F1>EPS PRIMARY SHOWN ABOVE IS ACTUALLY EPS BASIC AS REQUIRED.
</FN>
</TABLE>
