<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
FILED BY THE REGISTRANT [_]
FILED BY A PARTY OTHER THAN THE REGISTRANT [_]
CHECK THE APPROPRIATE BOX:
[_] PRELIMINARY PROXY STATEMENT [_] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] DEFINITIVE PROXY STATEMENT
[_] DEFINITIVE ADDITIONAL MATERIALS
[_] SOLICITING MATERIAL PURSUANT TO RULE 14a-11(c) OR RULE 14a-12
</TABLE>
DVI, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] NO FEE REQUIRED.
[_] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(i)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED PURSUANT
TO EXCHANGE ACT RULE 0-11:
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
(5) TOTAL FEE PAID:
[_] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
[_] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(a)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:
(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
(3) FILING PARTY:
(4) DATE FILED:
<PAGE> 2
DVI, INC.
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 3, 1998
------------------------
To the Stockholders of DVI, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of DVI,
Inc. (the "Company") will be held at the Sutton Place Hotel in Chicago,
Illinois, on Thursday, December 3, 1998, at 9:00 a.m., local time, for the
following purposes:
1. To elect six directors to constitute the Board of Directors, each
to serve until the next annual meeting of Stockholders;
2. To ratify the appointment of Deloitte & Touche LLP as independent
public accountants for the Company for the fiscal year ending June
30, 1999; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The close of business on October 9, 1998 has been fixed as the record date
for the determination of all stockholders entitled to receive notice of the
Annual Meeting and to vote at such meeting or any adjournment thereof.
Holders of a majority of the outstanding shares of the Company's Common
Stock must be present either in person or by proxy in order for the meeting to
be held and it is important that your stock be represented regardless of the
number of shares you hold. If you do not expect to attend the meeting, or if you
do plan to attend but wish to vote by proxy, please date, sign and mail promptly
the enclosed proxy for which a return envelope is provided.
By Order of the Board of Directors
/s/ Melvin C. Breaux
MELVIN C. BREAUX
Secretary
Dated: October 26, 1998
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
ADDRESSED ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE MEETING. IF YOU ATTEND THE
MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED.
<PAGE> 3
DVI, INC.
500 HYDE PARK
DOYLESTOWN, PENNSYLVANIA 18901
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 3, 1998
------------------------
The Board of Directors of DVI, Inc., a Delaware corporation (the
"Company"), is soliciting the enclosed proxy for use at the Company's Annual
Meeting of Stockholders (the "Annual Meeting"), to be held on Thursday, December
3, 1998, at 9:00 a.m., local time, at the Sutton Place Hotel, 21 East Bellevue
Place, Chicago, Illinois 60611 and at any adjournment thereof. Whether or not
you plan to attend the Annual Meeting, you are requested to date, sign and
return the proxy to the Company as promptly as possible in the enclosed
envelope. The shares of the Company's common stock, par value $.005 per share
(the "Common Stock"), represented by proxies will be voted in accordance with
the Board of Directors' recommendations unless the proxy indicates otherwise.
Any stockholder giving a proxy may revoke it at any time prior to its use by
filing with the Secretary of the Company at the address specified below a
written revocation or a proxy bearing a later date, or by voting in person at
the Annual Meeting.
The close of business on October 9, 1998 has been fixed as the record date
(the "Record Date") for the determination of the stockholders entitled to
receive notice of and to vote at the Annual Meeting. At such date, the Company
had outstanding 14,080,458 shares of Common Stock. Each holder of Common Stock
on the Record Date will be entitled to one vote for each share registered in
such stockholder's name on each of the matters to come before the Annual
Meeting. A majority of the outstanding shares of Common Stock will constitute a
quorum. A list of stockholders entitled to vote will be available for
examination by interested stockholders at the corporate headquarters of the
Company, office of the Secretary, 500 Hyde Park, Doylestown, Pennsylvania 18901
during ordinary business hours from October 9, 1998 to the date of the Annual
Meeting.
If a stockholder furnishes a proxy but directs the proxy holder to abstain
from voting some or all of the shares covered by the proxy on a proposal
described in this Proxy Statement, that abstention will have the same effect as
voting those shares against the proposal. If shares registered in the name of a
broker or other "street name" nominee are voted only as to certain matters
before the Annual Meeting and not as to others, because the beneficial owner has
not provided voting instructions or the broker has failed to exercise
discretionary voting power (commonly referred to as "broker non-votes"), that
will have the same effect as voting those shares against the proposal as to
which the broker does not vote. The Company expects that under the rules of the
New York Stock Exchange, Inc., brokers who hold shares in street name for
customers will have the authority to vote on all the proposals described in this
Proxy Statement if they do not receive instructions from the beneficial owners
of those shares. Shares that are the subject of abstentions and broker non-votes
are required to be counted for purposes of determining the presence of a quorum
for the transaction of business at the Annual Meeting.
The approximate date on which this Proxy Statement and form of proxy is
first being sent or given to the Company's stockholders is October 27, 1998.
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1998 accompanies this Proxy Statement. The Annual Report shall not be deemed
to be soliciting material or, except as set forth under the heading "Annual
Report to Stockholders" in this Proxy Statement, incorporated in this Proxy
Statement by reference. Brokerage houses, custodians, nominees and others may
obtain additional copies of the Annual Report or this Proxy Statement by request
to the Company.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
Six Directors are to be elected at the Annual Meeting of Stockholders to
serve one-year terms until the 1999 Annual Meeting of Stockholders and until
their respective successors are elected and shall qualify. The persons named in
the accompanying proxy intend to vote for the election of the nominees
identified below unless authority to vote for one or more of such nominees is
specifically withheld in the proxy. All of the nominees are currently directors
of the Company and were elected Directors at the 1997 Annual Meeting of
Stockholders. The Board of Directors is informed that all the nominees are
willing to serve as Directors, but if any of them should decline to serve or
become unavailable for election as a Director at the meeting, an event which the
Board of Directors does not anticipate, the persons named in the proxy will vote
for such nominee or nominees as may be designated by the Board of Directors,
unless the Board of Directors reduces the number of Directors accordingly.
Directors shall be elected by a majority of the votes cast, in person or by
proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS
The following table sets forth information concerning the Company's
nominees for Director:
<TABLE>
<CAPTION>
NAME: AGE: POSITION:
----- ---- ---------
<S> <C> <C>
Gerald L. Cohn........................ 70 Director since 1986
John E. McHugh........................ 70 Director since 1990
Michael A. O'Hanlon................... 51 Chief Executive Officer since 1995 and
Director since 1993
Nathan Shapiro........................ 62 Director since 1995
William S. Goldberg................... 42 Director since 1995
Harry T.J. Roberts.................... 64 Director since 1996
</TABLE>
Mr. Cohn is a Director of the Company and has served in that capacity since
1986. Mr. Cohn is a private investor and consultant. Mr. Cohn presently serves
as a director of Niagara Steel Corporation and Diametrics Medical Corporation.
In addition to his responsibilities as a Director, Mr. Cohn also is an employee
of the Company and serves on the Company's senior credit committee. Mr. Cohn is
the father of Cynthia J. Cohn, a Company Vice President.
Mr. McHugh is a Director of the Company and has served in that capacity
since 1990. Mr. McHugh was formerly the President of, and now serves in a
marketing and public relations capacity with, James McHugh Construction Company,
a firm he has been associated with since 1954.
Mr. O'Hanlon is the Company's Chief Executive Officer since November 1995
and the Company's President since September 1994. Mr. O'Hanlon became a Director
in November 1993. From the time Mr. O'Hanlon joined the Company in March 1993
until September 1994 he served as an Executive Vice President of the Company.
Before joining the Company he served for nine years as President and Chief
Executive Officer of Concord Leasing, Inc., a major source of medical, aircraft,
ship and industrial equipment financing. Previously, Mr. O'Hanlon was a senior
executive with Pitney Bowes Credit Corporation. Mr. O'Hanlon is also a director
of US Diagnostic Inc.
Mr. Shapiro is a Director of the Company and has served in that capacity
since 1995. Mr. Shapiro is a founder and the President of SF Investments, Inc.,
a registered broker/dealer in business since 1972. Since 1979 he has been a
director of Baldwin & Lyons, Inc., a publicly traded property and casualty
insurance company. Mr. Shapiro is also the Chairman of the Investment Committee
of Baldwin & Lyons, Inc. He is a trustee for CT&T Funds, a family of mutual
funds sponsored by Chicago Title and Trust Company.
Mr. Goldberg is a Director of the Company and has served in that capacity
since 1995. Mr. Goldberg is currently Managing Director of GKH Partners, L.P., a
private equity investment and venture capital partnership with which he has been
involved since 1988. Mr. Goldberg is a current or former director and/or
2
<PAGE> 5
executive officer of several public and privately-owned companies with which GKH
Partners, L.P. is affiliated.
Mr. Roberts is a Director of the Company and has served in that capacity
since 1996. In addition to his responsibilities as a Director, Mr. Roberts also
is an employee of the Company. Mr. Roberts has held senior positions in
international banking for the past thirty-five years. Since 1978 he has worked
in the United States as General Manager of Midland International Bank, London
and Svenska Handelsbanken, Stockholm.
COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1998, the Company paid $2,500 to each
director other than Mr. O'Hanlon for each meeting attended in person. In
addition, the Company reimburses its directors for travel expenses incurred in
connection with their attendance at Board meetings. During the fiscal year ended
June 30, 1998, the Board of Directors met a total of four times.
With the exception of one meeting which was attended by only five of the
incumbent directors, each of the incumbent directors attended all meetings of
the Board and committees of which he was a member held during the period he
served on the Board or such committee.
The Board of Directors has a standing Audit Committee and a Compensation
Committee. The Board has no nominating committee.
The Audit Committee consists of Messrs. Cohn, McHugh and Roberts and makes
recommendations concerning the engagement of the Company's independent auditors,
consults with the independent auditors concerning the audit plan and thereafter
concerning the auditor's report and management letter. During the fiscal year
ended June 30, 1998, the Audit Committee met one time.
The Compensation Committee consists of Messrs. Cohn, Goldberg, McHugh and
Roberts and met one time as a separate committee during the fiscal year ended
June 30, 1998 and also met in the normal course of each of the four Board of
Directors' meetings. The Compensation Committee reviews the annual compensation
rates of the officers and key employees of the Company, administers the
Company's compensation plans and makes recommendations in connection with such
plans.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation limits the personal liability of a Director of the
Company for monetary damages for breach of fiduciary duty of care as a Director.
Liability is not eliminated for (i) any breach of the Director's duty of loyalty
to the Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) any transaction
from which the Director derived an improper personal benefit.
SECTION 16(A) OF THE EXCHANGE ACT -- BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company's Directors, executive officers and any persons
holding 10% or more of the Company's Common Stock are required to report their
ownership of Common Stock and any changes in that ownership to the Securities
and Exchange Commission (the "SEC") and to furnish the Company with copies of
such report. Specific due dates for these reports have been established and the
Company is required to report in this report any failure to file on a timely
basis by such persons. Based solely upon a review of copies of SEC Forms 3, 4
and 5 furnished to the Company during the fiscal year ended June 30, 1998,
except as set forth below, all persons subject to the reporting requirements of
Section 16(a) filed all required reports on a timely basis. On October 17, 1997,
Anthony J. Turek, an Executive Vice President of the Company, exercised options
to purchase 20,000 shares of the Company's common stock. As a result of an
administrative error, Mr. Turek's report under Section 16(a) reflecting a change
in the nature of his beneficial ownership of these shares was filed late with
the SEC.
3
<PAGE> 6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Cohn, Goldberg, McHugh and
Roberts. No Directors other than those currently serving on the Board of
Directors served as members of the Compensation Committee during the last
completed fiscal year. No member of that Committee, other than Messrs. Cohn and
Roberts, was an officer or employee of the Company or any of its subsidiaries
during the year. None of the executive officers of the Company has served on the
board of directors or on the compensation committee of any other entity any of
whose officers served either on the Board of Directors or on the Compensation
Committee of the Company.
4
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years 1998, 1997 and 1996 of (i) the Company's Chief Executive Officer
and (ii) the four most highly compensated executive officers who were serving as
executive officers at the end of the 1998 fiscal year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------- --------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK OPTIONS AND GRANTS (SHARES) COMPENSATION(2)
- --------------------------- ---- -------- -------- --------------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael A. O'Hanlon...... 1998 $301,154 $200,000 100,000 $4,322
President, Chief Executive 1997 301,154 50,000 30,000 3,764
Officer and Director 1996 279,808 -0- -0- 1,664
Steven R. Garfinkel...... 1998 $225,808 $ 73,000 50,000 $2,264
Executive Vice President 1997 201,924 25,000 15,000 2,208
and Chief Financial Officer 1996(1) 134,615 -0- 25,000 1,466
Richard E. Miller........ 1998 $193,303 $ 77,000 50,000 $4,070
Executive Vice President 1997 190,890 -0- 15,000 2,385
1996 267,198 -0- 10,000 1,448
Anthony J. Turek......... 1998 $193,154 $ 60,000 50,000 $2,197
Executive Vice President 1997 170,654 12,000 15,000 2,147
1996 159,038 35,000 10,000 1,480
Alan J. Velotta.......... 1998 $195,750 $ 50,000 25,000 $2,113
Vice President 1997 146,750 50,000 25,000 2,071
1996 120,385 50,000 25,000 1,419
</TABLE>
- ---------------
(1) Mr. Garfinkel became an employee of the Company in September, 1995.
Therefore, his compensation for the Company's 1996 fiscal year reflects ten
months of service.
(2) Each of the amounts in this column includes a $500 matching contribution
made by the Company to each of the officer's Employee Savings Plan accounts
for the years indicated. The remainder for each of the periods for each of
the named officers represents life insurance premiums paid by the Company on
behalf of each such officer.
OPTION GRANTS IN 1998 FISCAL YEAR
During the 1998 fiscal year, options to purchase 275,000 shares of Common
Stock were granted to the executive officers listed in the Summary Compensation
Table.
AGGREGATED OPTION EXERCISES IN THE LAST
FISCAL YEAR END AND FISCAL-YEAR-END-OPTION-VALUES
The following table sets forth further information for the executive
officers listed in the Summary Compensation Table with respect to previously
granted options.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE (#)(1) REALIZED ($)(1) FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
- ---- --------------- --------------- ------------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. O'Hanlon... -0- N/A 100,000 120,000 $1,686,875 $1,236,500
Steven R. Garfinkel... -0- N/A 21,666 68,334 306,448 744,302
Richard E. Miller..... -0- N/A 81,666 63,334 1,283,117 659,508
Anthony J. Turek...... 20,000 $327,500 56,666 63,334 980,612 659,508
Alan J. Velotta....... -0- N/A 34,999 50,001 460,613 578,723
</TABLE>
- ---------------
(1) During the 1998 fiscal year, no stock options were exercised by the
executive officers listed in the Summary Compensation Table other than Mr.
Turek. On October 17, 1997, Mr. Turek exercised options to purchase 20,000
shares of Common Stock. On that date the closing price of a share of the
Company's Common Stock as reported on the New York Stock Exchange Composite
Tape was $18.125. The exercise price of the options was $1.75 per share.
5
<PAGE> 8
(2) Represents the difference between the closing price of the Company's Common
Stock on June 30, 1998 and the exercise price of the options that were
exercisable as of that date.
EMPLOYMENT AGREEMENTS AND INCENTIVE COMPENSATION
The Company has not entered into any employment agreements with any of its
employees or executive officers and, other than the Company's 1986 Stock Option
Plan, its 1996 Stock Option Plan (the "1996 Option Plan") and the DVI, Inc. 1995
Stock Bonus Plan (the "Stock Bonus Plan") described below, has no long-term
incentive compensation plan. The Company, however, does provide short-term
incentive compensation to certain executive officers through the award of
quarterly and/or annual bonuses based upon certain agreed-upon performance
criteria.
1996 STOCK OPTION PLAN. The Board of Directors adopted the 1996 Option
Plan in 1997 and the stockholders of the Company adopted the 1996 Option Plan at
the 1997 Annual Meeting and ratified certain option grants previously made under
the 1996 Option Plan. The purpose of the 1996 Option Plan is to authorize the
grant of (i) non-qualified stock options and (ii) incentive stock options
(collectively, "Options") to eligible employees, consultants and directors of
the Company or any of its subsidiaries.
The 1996 Option Plan is administered by the Compensation Committee of the
Board of Directors and such committee has exclusive authority to authorize the
granting of Options. The total number of shares of Common Stock which may be
made the subject of Options granted under the 1996 Option Plan may not exceed
1,500,000. As of the date hereof, Options representing 874,967 shares of Common
Stock are outstanding under the 1996 Option Plan. In addition, there are options
representing 444,809 shares of Common Stock outstanding under the Company's 1986
Stock Option Plan, the predecessor plan to the 1996 Option Plan; the 1986 Stock
Option Plan has expired and no more options may be issued pursuant to such plan.
Under the 1996 Option Plan and the 1986 Stock Option Plan, the number of shares
which may be issued on exercise of Options is subject to adjustment by reason of
stock splits or other similar capital events.
The Options will have exercise prices not less than 100% of the fair market
value of the Common Stock at the date of grant. The holder of the Option is able
to exercise the Option from time to time as specified in the particular Option.
The expiration date of an Option is determined by the Compensation Committee but
shall be no later than ten years from the date of grant. Options are not
transferrable under the 1996 Option Plan other than by will or the laws of
descent and distributions and (other than with respect to incentive stock
options) as otherwise provided by the Compensation Committee.
THE STOCK BONUS PLAN. Pursuant to the Stock Bonus Plan, the Company has
agreed, subject to the discretion of the Compensation Committee, to issue, from
time to time an aggregate of not more than 200,000 shares of Common Stock of the
Company to certain of its employees if the last sale price of the Company's
Common Stock is $16.00 per share or higher for 30 consecutive calendar days at
any time before December 31, 2000, which condition has been satisfied. The
employee must have been employed by the Company during such 30 day period to be
eligible to receive shares of Common Stock. The Company also has agreed that,
if, at any time prior to December 31, 1998, there is an event or series of
events that constitutes a sale of the Company and the consideration to be
received per share of Common Stock is $13.00 or more, the Company will issue all
200,000 shares pursuant to the Stock Bonus Plan. As of the date hereof no shares
of Common Stock have been issued pursuant to the Stock Bonus Plan.
SEVERANCE AGREEMENTS. On November 20, 1995 the Company entered into a
Severance Agreement (the "Higgins Severance Agreement") with David L. Higgins,
the Company's former Chairman and Chief Executive Officer, pursuant to which Mr.
Higgins agreed to continue to perform certain consulting and other services for
the Company through December 1, 1997 (the "Initial Termination Date"). Pursuant
to the Higgins Severance Agreement the Company agreed (i) to pay Mr. Higgins an
aggregate of $275,000 through the Initial Termination Date, in installments
consistent with the Company's regular payroll schedule; (ii) to provide Mr.
Higgins, at the Company's sole expense, with healthcare and life insurance
benefits consistent with those provided to the Company's executive officers to
the Initial Termination Date; and (iii) to reimburse Mr. Higgins for certain
expenses incurred by him while performing services for the Company prior to the
Initial Termination Date. On November 26, 1997 the Company and Mr. Higgins
amended the Higgins
6
<PAGE> 9
Severance Agreement to provide that Mr. Higgins would receive an additional
$50,000 for providing certain consulting services to the Company through
December 31, 1998 and to extend the Initial Termination Date to December 31,
1998.
On April 4, 1997 the Company entered into a Severance Agreement (the
"Guglielmi Severance Agreement") with Dominic Guglielmi, a former Vice President
of the Company. Pursuant to the Guglielmi Severance Agreement, the Company
agreed to (i) make a lump sum payment to Mr. Guglielmi of $30,000; (ii) pay to
Mr. Guglielmi $5,000 for each pay period following the date of the Guglielmi
Severance Agreement through June 30, 1998; (iii) provide Mr. Guglielmi, at the
Company's sole expense, with healthcare and life insurance benefits consistent
with those provided to the Company's executive officers through June 30, 1998;
and (iv) take certain actions to register the 88,000 shares of Common Stock
received by Mr. Guglielmi in connection with the acquisition by the Company of
Medical Equipment Finance Corp. in January 1993 as described herein.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
This report of the Compensation Committee shall not be deemed incorporated
by reference to any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
A publicly held corporation may not, subject to limited exceptions, deduct
for federal income tax purposes certain compensation paid to certain executives
in excess of $1 million in any taxable year (the "Deduction Limitation"). It is
not expected that compensation to executives of the Company will exceed the
Deduction Limitation in the foreseeable future, and, therefore, the Company
generally has not attempted to qualify any of its compensation plans, programs
and arrangements for any of the exceptions to the Deduction Limitation.
OVERVIEW AND PHILOSOPHY
Messrs. Cohn, Goldberg, McHugh and Roberts sitting as the Compensation
Committee (the "Committee") are responsible for developing the Company's
executive compensation policies. The Committee determines the compensation to be
paid to the Chief Executive Officer and each of the other executives of the
Company. The Committee is responsible for setting and administering the policies
which govern annual compensation, the Stock Option Plan, and determination of
bonuses for executives.
There are three elements in the Company's executive compensation program:
- Base salary compensation.
- Short-term incentive compensation (bonuses).
- Long-term incentive compensation (stock options).
In designing its compensation programs, the Company believes that executive
compensation should reflect the value created for stockholders and support the
Company's strategic goals. Specifically, the objectives of the program are as
follows:
- Attract and retain key executives important to the long-term success of
the Company.
- Provide incentives for performance with respect to the goals established
for each executive by management.
- Provide incentives for performance with respect to the Company's goals.
- Align the executive's interests with those of the Company's stockholders
through participation in stock-based plans.
- Reward individuals for outstanding contributions to the Company's
success.
7
<PAGE> 10
The Committee believes that the executive compensation program provides an
overall level of compensation opportunity that is competitive within the medical
equipment finance industry. Actual compensation levels may be greater or less
than average competitive levels in other companies based upon annual and long-
term Company performance as well as individual performance.
EXECUTIVE OFFICER COMPENSATION PROGRAM
BASE SALARY AND SHORT-TERM INCENTIVE COMPENSATION
The Company's general approach to base salary and short-term incentive
compensation is to pay salaries which when combined with bonuses are competitive
with the salaries and bonuses paid to executives of other companies in the
medical equipment finance industry based upon the individual's experience and
past and potential contribution to the Company. As described in the Company's
Proxy Statement, the base salary for the Company's executive officers for fiscal
year 1998 reflects levels deemed by the Board of Directors and the Committee to
have been appropriate in view of the prior and expected contribution of the
executives to the Company's development. The Company believes that a significant
part of the overall compensation paid to executives should consist of bonuses
paid annually or quarterly based on the ability of the executive to achieve
specified Company, departmental and individual goals.
STOCK OPTION PLAN
The Board of Directors and the Committee believe that stock ownership is a
significant incentive in building stockholder wealth and aligning the interest
of employees and stockholders. Stock options will only have value if the
Company's stock price increases. In addition, the Company's stock options
utilize vesting periods to encourage key employees to continue in the employ of
the Company. The Stock Option Plan authorizes the Committee to award key
employees stock options at exercise prices, vesting schedules and with terms
established by the Committee.
Compensation Committee
Gerald L. Cohn
William S. Goldberg
John E. McHugh
Harry T.J. Roberts
October 26, 1998
PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the Company's total stockholder
return on Common Stock with the S&P 500 Index, and a Peer Group Index, weighted
by market equity capitalization, as of the market close on June 30, 1993 through
the end of the fiscal year ended June 30, 1998. The Peer Group consists of
publicly traded specialty finance companies, selected by the Company in good
faith. The companies selected are the Finova Group Inc., Household International
Inc., Comdisco Inc., Leasing Solutions, Inc. and Prime Capital Corporation.
Beneficial Corp. and Green Tree Financial Corp., each of which previously were
members of the Company's Peer Group, have been replaced by Leasing Solutions,
Inc. and Prime Capital Corporation, as information regarding trading in the
securities of Beneficial Corp. and Green Tree Financial Corp. is no longer
publicly available. Cumulative total returns are calculated assuming that $100
was invested on June 29, 1993 in each of the Common Stock, the S&P 500 Index and
the Peer Group Index, and that all dividends were reinvested.
8
<PAGE> 11
PERFORMANCE CHART
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
'DVI, INC.' STOCK INDEX PEER GROUP INDEX
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 168.89 98.61 108.12
1995 208.89 120.91 155.01
1996 280.00 148.85 234.24
1997 257.78 196.47 363.78
1998 453.33 251.67 487.07
</TABLE>
DATA PERIOD: JUNE 30, 1993 THROUGH JUNE 30, 1998
CERTAIN TRANSACTIONS
EMPLOYMENT ARRANGEMENTS. Gerald L. Cohn and Harry T.J. Roberts, who are
directors of the Company, also act as employees and advisors to the Company.
During the Company's 1998 fiscal year Messrs. Cohn and Roberts were paid
$110,423 and $140,000, respectively for the provision of such services.
FACILITIES LEASE. The Company's principal executive offices located in
Doylestown, Pennsylvania are leased from Mr. Walter S. Smerconish, who is the
step-son of one of the directors of the Company. During the 1998 fiscal year the
Company paid rent of approximately $322,221 to Mr. Smerconish.
MEDICAL EQUIPMENT FINANCE CORP. In January 1993, the Company acquired all
of the outstanding shares of common stock of Medical Equipment Finance Corp.
("MEF Corp.") from MEFC Partners L.P., a Delaware limited partnership ("MEFC
Partners"). Under the terms of the original purchase agreement, the purchase
price was payable before October 15, 1998 in cash or Common Stock of the
Company, as elected by the Company. The Company and the former shareholders of
MEF Corp. agreed in June 1995 to set the purchase price of MEF Corp. at 400,000
shares of Common Stock (the "MEFC Shares"). Michael A. O'Hanlon (President,
Chief Executive Officer and a Director of the Company), Dominic A. Guglielmi
(formerly employed by the Company as a Vice President) and Mark H. Idzerda
(President, DVI Business Credit Corporation) are general partners of MEFC
Partners and on June 30, 1998 received 132,000, 88,000 and 80,000 of the MEFC
Shares, respectively. The remaining 100,000 MEFC Shares were distributed among
eight other individuals. In addition, the MEFC Partners have been granted
certain registration rights with respect to the MEFC Shares.
OFFICER LOANS. As of the date hereof, Michael A. O'Hanlon, the Company's
President and Chief Executive Officer and a member of the Board of Directors of
the Company, has loans outstanding from the Company in the aggregate principal
amount of $295,000. The loan was made for Mr. O'Hanlon's personal use and bears
interest at 6%, payable quarterly. In addition, during 1998 the Company loaned
Mr. O'Hanlon, Richard E. Miller, an Executive Vice President of the Company, and
Anthony J. Turek, an Executive Vice President of the Company, $200,000, $150,000
and $124,724, respectively, in connection with purchases of
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<PAGE> 12
Company Common Stock by these officers. Each of the loans is outstanding in full
as of the date hereof and bear interest at 6%, payable quarterly.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information regarding beneficial ownership
of shares of Common Stock as of October 15, 1998 by each stockholder known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock, each director, each of the officers named in the Summary
Compensation Table and all current officers and directors as a group. Persons
named in the following table have sole voting and investment powers with respect
to all shares shown as beneficially owned by them, subject to community property
laws where applicable and other information contained in the footnotes to the
table. Information with respect to beneficial ownership is based upon the
Company's Common Stock records and data supplied to the Company by its
stockholders.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------------------ ----------------------- ----------------
<S> <C> <C>
Gerald L. Cohn***............................. 408,805(1)(2)(3)(4) 2.9%
Steven R. Garfinkel***........................ 55,366(5) *
William S. Goldberg***........................ 3,333(4) *
John E. McHugh***............................. 43,733(1)(4)(6) *
Richard E. Miller**........................... 117,826(7)(8) *
Michael A. O'Hanlon***........................ 297,308(9)(10) 2.1%
Harry T. J. Roberts***........................ 5,333(4) *
Nathan Shapiro***............................. 60,533(4) *
Anthony J. Turek**............................ 109,066(11) *
Alan J. Velotta***............................ 60,449(12)(13) *
Ronald Baron****.............................. 2,621,450(14) 18.6%
CIBC Trust Company (Bahamas) Limited*****..... 2,540,720(15)(16) 18.0%
All directors & officers as a group (14
persons).................................... 1,310,799(1)(2)(3)(4)(5)(6)(7) 8.9%(17)
(8)(9)(10)(11)(12)(17)
</TABLE>
- ---------------
* Less than 1%
** 4041 MacArthur Boulevard, Suite 401, Newport Beach, California 92660
*** 500 Hyde Park, Doylestown, Pennsylvania 18901
**** 767 Fifth Avenue, New York, New York 10153
***** P.O. Box N-3933, Nassau, Bahamas
(1) Includes 20,000 shares of Common Stock which may be purchased on the
exercise of warrants granted to certain directors of the Company.
(2) Does not include (a) 36,500 shares of Common Stock held of record by
Cynthia J. Cohn, who is a Vice President of the Company and one of Mr.
Cohn's daughters, in her capacity as trustee of the Cynthia J. Cohn
Revocable Trust and (b) 9,750 shares of Common Stock held of record by a
trust established for the benefit of Clayton Schmidt, Mr. Cohn's
grandchild, as to all of which Mr. Cohn disclaims any beneficial interest.
(3) Includes 75,472 shares of Common Stock which may be exercised upon
conversion of $800,000 of the Company's 9 1/8% Convertible Subordinated
Notes due 2002.
(4) Includes 3,333 shares of Common Stock which may be purchased on the
exercise of stock options.
(5) Includes 51,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(6) Does not include 2,000 shares of Common Stock held of record by Mr.
McHugh's wife, as to which Mr. McHugh disclaims beneficial ownership.
(7) Includes 106,666 shares of Common Stock which may be purchased on the
exercise of stock options.
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<PAGE> 13
(8) Includes 160 shares of Common Stock held through the Employee Savings
Plan.
(9) Includes 143,333 shares of Common Stock which may be purchased on the
exercise of stock options.
(10) Includes 1,675 shares of Common Stock held through the Employee Savings
Plan.
(11) Includes 81,666 shares of Common Stock which may be purchased on the
exercise of stock options.
(12) Includes 59,999 shares of Common Stock which may be purchased on the
exercise of stock options.
(13) Includes 510 shares of Common Stock held through the Employee Savings
Plan.
(14) According to Amendment No. 7 to a Schedule 13D dated July 13, 1998 (the
"Schedule 13D") filed with the Securities and Exchange Commission Mr.
Baron holds (i) 771,000 shares of Common Stock in his capacity as a
controlling person of BAMCO, Inc., a registered investment adviser
controlled by Mr. Baron which advises Baron Asset Fund; (ii) 630,400
shares of Common Stock in his capacity as a controlling person of Baron
Capital Management, Inc., a registered investment adviser; (iii) 220,000
shares of Common Stock in his capacity as one of the general partners of
Baron Capital Partners; and (iv) 50 shares of Common Stock personally.
According to the Schedule 13D, Mr. Baron disclaims beneficial ownership of
the shares of Common Stock described in subclauses (i), (ii) and (iii) of
the preceding sentence.
(15) Held by Canadian Imperial Bank of Commerce Trust Company (Bahamas) Limited
("CIBC"), as trustee of trusts for the benefit of the grandchildren of
A.N. Pritzker, deceased. Does not include 56,339 shares of Common Stock
owned by a partnership comprised of trusts for the benefit of members of
the Pritzker Family. CIBC is not the trustee of such trusts. As used
herein, the term "Pritzker Family" refers to the lineal descendants of
Nicholas J. Pritzker, deceased.
(16) Includes 716,981 shares of Common Stock held by CIBC, as trustee for
certain trusts which may be exercised upon conversion of $7,600,000 of the
Company's 9 1/8% Convertible Subordinated Notes due 2002.
(17) Includes 111,247 shares which may be purchased on the exercise of stock
options, in addition to those shares that may be purchased on the exercise
of options and warrants and upon conversion of certain notes set forth in
footnotes (1), (3), (4), (5), (7), (9), (11) and (12).
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of Common Stock present
and voting in person or by proxy at the Annual Meeting is required for the
election of each nominee specified in this proposal. The Board of Directors
unanimously recommends that you vote FOR the election of each nominee specified
in this proposal. Proxies solicited by the Board of Directors will be voted for
the nominees specified in this proposal unless authority to vote for one or more
of such nominees is specifically withheld in the proxy.
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<PAGE> 14
PROPOSAL 2
PROPOSAL TO RATIFY APPOINTMENT OF ACCOUNTANTS
The Company proposes to select Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending June 30, 1999. Deloitte &
Touche LLP has been the independent accountants for the Company since May 1987.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting and will be available to respond to appropriate questions and to
make such statements as they may desire.
VOTE REQUIRED; BOARD RECOMMENDATION
The affirmative vote of a majority of the outstanding shares of Common
Stock present and voting in person or by proxy at the Annual Meeting is required
to ratify the appointment of Deloitte & Touche LLP as the Company's independent
certified public accountants. The Board of Directors unanimously recommends that
you vote FOR the ratification of Deloitte & Touche LLP as the Company's
independent certified public accountants. Proxies solicited by the Board of
Directors will be voted for the proposal unless a vote against the proposal or
an abstention is specifically indicated.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1998 (the "Annual Report"), which accompanies this Proxy Statement, contains
the consolidated financial statements of the Company. Such consolidated
financial statements, including the notes thereto and management's discussion
and analysis of financial condition and results of operations (collectively, the
"Financial Statements"), are incorporated by reference herein and are considered
a part of the proxy soliciting material. Except for the Financial Statements,
the Annual Report is not incorporated in this Proxy Statement and is not
considered a part of the proxy soliciting material.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
The Company has received no stockholder proposals to be voted on at this
meeting. Appropriate stockholder proposals which are intended to be presented at
the 1999 Annual Stockholders' Meeting must be received by the Company no later
than July 10, 1999, in order to be included in the 1999 proxy materials.
OTHER MATTERS
All expenses in connection with the solicitation of proxies will be paid by
the Company. The Company may pay brokers, nominees, fiduciaries or other
custodians for their reasonable expenses in sending proxy materials to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies primarily by mail, but directors,
officers and other employees of the Company may also solicit proxies in person
or by telephone, facsimile, telex or telegraph.
As of the date of this Proxy Statement, the management has no knowledge of
any matters to be presented at the meeting other than those referred to above.
If any other matters properly come before the meeting, the persons named in the
accompanying form of proxy intend to vote such proxy in accordance with their
best judgment.
By Order of the Board of Directors
MELVIN C. BREAUX
Secretary
October 26, 1998
STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY'S 1998 ANNUAL
REPORT ON FORM 10-K BY SENDING A WRITTEN REQUEST TO INVESTOR COMMUNICATIONS,
DVI, INC., 500 HYDE PARK, DOYLESTOWN, PENNSYLVANIA 18901.
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<PAGE> 15
PROXY
DVI, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 3, 1998
The undersigned hereby constitutes and appoints Michael A. O'Hanlon
and Melvin C. Breaux, or either of them, attorneys and proxies of the
undersigned with full power of substitution to vote all shares of Common Stock
of DVI, Inc. (the "Company") owned or held by the undersigned at the Annual
Meeting of Stockholders of the Company to be held at the Sutton Place Hotel,
Chicago, Illinois, on Thursday, December 3, 1998, at 9:00 a.m. and at any
adjournment thereof.
The Board of Directors recommends a vote "FOR ALL NOMINEES" in Item
1 and "FOR" Item 2.
ITEM 1. Election of Directors.
/ / For all nominees listed below (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees
INSTRUCTION: To withhold authority to vote for any individual
nominee strike a line through the nominee's name in the list below.
G. Cohn, J. McHugh, M. O'Hanlon, N. Shapiro, W. Goldberg, H. Roberts
ITEM 2. To ratify the appointment of Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year ending June
30, 1999.
/ / For / / Against
/ / Abstain
ITEM 3. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE MARK, DATE AND SIGN ON THE REVERSE SIDE
AND RETURN PROMPTLY.
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<PAGE> 16
PAGE 2
THE PROXY HOLDERS ARE DIRECTED TO VOTE AS SET FORTH ABOVE. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER.
IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED AND DATED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2 AND IN
ACCORDANCE WITH THE JUDGMENT OF SUCH PROXIES ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING. IF ANY OF THE NOMINEES FOR DIRECTOR IS
UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE PROXY HOLDERS WILL VOTE
FOR SUCH OTHER PERSON OR PERSONS AS THE BOARD OF DIRECTORS MAY RECOMMEND.
The undersigned hereby acknowledges receipt of the Company's Annual
Report to Stockholders and of the Notice of Annual Meeting of Stockholders and
Proxy Statement relating to the Annual Meeting.
Dated: __________________________, 1998
Signature(s):
Please mark, date and sign as your name appears above and
return in the enclosed envelope. When signing as an agent,
attorney, or fiduciary, or for a corporation or partnership,
indicate the capacity in which you are signing. Shares
registered in joint names should be signed by each joint
tenant or trustee.
20
