Exhibit 10.24
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NOTE EXCHANGE AGREEMENT
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among
DVI, INC.
and
The Noteholders Listed on the Signature Pages Hereto
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Dated as of August 1, 2001
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Up to $13,750,000
9 1/8% Convertible Subordinated Notes Due 2004
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS......................................................................... 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................... 8
Section 2.1 Organization; Good Standing.................................................... 8
Section 2.2 Corporate Power and Corporate Action........................................... 8
Section 2.3 Enforceable Obligations........................................................ 8
Section 2.4 No Conflicts................................................................... 9
Section 2.5 SEC Reports and Financial Statements........................................... 9
Section 2.6 Full Disclosure................................................................ 10
Section 2.7 Capitalization................................................................. 10
Section 2.8 Default........................................................................ 10
Section 2.9 Purchase Permitted by Applicable Laws.......................................... 10
Section 2.10 Compliance With Outstanding Debt Issues........................................ 10
Section 2.11 Absence of Certain Changes or Events........................................... 11
Section 2.12 Licenses; Permits; Consents and Approvals...................................... 11
Section 2.13 Illegal Payments............................................................... 12
Section 2.14 Registration Rights............................................................ 12
Section 2.15 Investment Company Status...................................................... 12
Section 2.16 Holding Company Status......................................................... 12
Section 2.17 Exemption from Registration.................................................... 12
Section 2.19 Credit Agreement Representations and Warranties................................ 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS................................... 13
Section 3.1 Private Placement.............................................................. 13
Section 3.2 Transferees Bound.............................................................. 13
ARTICLE IV EXCHANGE AND ISSUANCE; REPAYMENT AND REDEMPTION..................................... 13
Section 4.1 Exchange and Issuance of the New Subordinated Notes............................ 13
Section 4.2 Interest on the New Subordinated Notes......................................... 13
Section 4.3 Default Interest............................................................... 13
Section 4.4 Redemption Event............................................................... 14
Section 4.5 Non-Cash Mergers or Consolidations............................................. 14
Section 4.6 Final Interest Payment on Old Subordinated Notes............................... 15
ARTICLE V CONVERSION.......................................................................... 16
Section 5.1 Conversion..................................................................... 16
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TABLE OF CONTENTS
(continued)
Page
Section 5.2 Exercise of Conversion Rights.................................................. 16
Section 5.3 Surrender of New Subordinated Notes; Delivery of Shares........................ 16
Section 5.4 Effective Date of Conversion................................................... 16
Section 5.5 Fractional Shares.............................................................. 17
Section 5.6 Conversion Price............................................................... 17
Section 5.7 Adjustment of Conversion Price................................................. 17
Section 5.8 Notice of Certain Corporate Action............................................. 19
Section 5.9 Company to Reserve Stock....................................................... 19
Section 5.11 Taxes on Conversion............................................................ 20
Section 5.12 Reclassification, Consolidation, Merger or Sale................................ 20
ARTICLE VI COVENANTS OF THE COMPANY........................................................... 20
Section 6.1 Notice of Default.............................................................. 20
Section 6.2 SEC Reports; Information....................................................... 20
Section 6.3 Authorizations and Approvals................................................... 21
Section 6.4 Limitation on Incurrence of Additional Debt by the Company and its
Subsidiaries................................................................... 21
Section 6.5 Tangible Net Worth............................................................. 21
Section 6.6 Limitation on Restricted Payments.............................................. 21
Section 6.7 Limitation on Restrictions on Distributions from Subsidiaries.................. 21
Section 6.8 Restriction on Issuance of Preferred Stock..................................... 22
Section 6.9 Limitation on Sales of Assets and Subsidiary Stock............................. 22
Section 6.10 Limitation on Transactions with Affiliates..................................... 22
Section 6.11 Limitation on Issuance of Other Subordinated Debt.............................. 23
Section 6.12 Capitalization................................................................. 23
Section 6.13 Payment of Principal and Interest.............................................. 23
Section 6.14 Notice......................................................................... 23
Section 6.15 Inspection of Property......................................................... 23
Section 6.16 Corporate Existence, Licenses and Permits; Maintenance of Properties........... 23
Section 6.17 Taxes.......................................................................... 23
Section 6.18 Insurance...................................................................... 23
Section 6.19 Books and Accounts............................................................. 24
Section 6.20 No "Prohibited Transaction".................................................... 24
ARTICLE VII CLOSING; CONDITIONS OF THE NOTEHOLDERS' OBLIGATIONS................................. 24
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TABLE OF CONTENTS
(continued)
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Section 7.1 Closing........................................................................ 24
Section 7.2 Conditions of the Noteholder's Obligations..................................... 24
SECTION 7.3 DOCUMENTS TO BE DELIVERED BY THE NOTEHOLDERS AT THE CLOSING......................... 26
ARTICLE VII EVENTS OF DEFAULT OF NEW SUBORDINATED NOTES......................................... 27
Section 8.1 Events of Default.............................................................. 27
Section 8.2 Acceleration................................................................... 28
Section 8.3 Rights and Remedies Cumulative................................................. 28
Section 8.4 Delay or Omission Not Waiver................................................... 29
Section 8.5 Waiver of Stay or Extension Laws............................................... 29
Section 8.6 Waiver of Past Defaults........................................................ 29
Section 8.7 Rights of Holders To Receive Payment........................................... 29
ARTICLE IX RANKING AND SUBORDINATION OF NEW SUBORDINATED NOTES................................. 29
Section 9.1 Ranking; Agreement To Subordinate.............................................. 29
Section 9.2 Liquidation, Dissolution, Bankruptcy........................................... 29
Section 9.3 Default on Senior Debt......................................................... 30
Section 9.4 Acceleration of Payment of New Subordinated Notes.............................. 30
Section 9.5 When Distribution Must Be Paid Over............................................ 30
Section 9.6 Subrogation.................................................................... 31
Section 9.7 Relative Rights................................................................ 31
Section 9.8 Subordination May Not Be Impaired by Company................................... 31
Section 9.9 Distribution or Notice to Representative....................................... 31
Section 9.10 Article IX Not To Prevent Events of Default or Limit Right To Accelerate....... 31
Section 9.11 Reliance by Holders of Senior Debt on Subordination Provisions................. 31
ARTICLE X CONSOLIDATION, MERGER AND SALE...................................................... 32
ARTICLE XI TRANSFER OF THE NEW SUBORDINATED NOTES.............................................. 32
Section 11.1 Transfer of the New Subordinated Notes......................................... 32
Section 11.2 Registration of Transfer....................................................... 33
Section 11.3 Register....................................................................... 33
ARTICLE XII INDEMNITY........................................................................... 33
ARTICLE XIII MISCELLANEOUS....................................................................... 34
Section 13.1 Expenses: Documentary Taxes.................................................... 34
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TABLE OF CONTENTS
(continued)
Page
Section 13.2 Notices........................................................................ 35
Section 13.3 Consent to Amendments and Waivers.............................................. 35
Section 13.4 Parties........................................................................ 36
Section 13.6 JURISDICTION AND VENUE......................................................... 36
Section 13.7 Replacement New Subordinated Notes............................................. 37
Section 13.8 Severability Clause............................................................ 37
Section 13.9 Representations, Warranties and Agreements To Survive Delivery................. 37
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NOTE EXCHANGE AGREEMENT dated as of August 1, 2001, among DVI, INC., a
Delaware corporation (the "Company") and each of the persons whose signatures
appear under the heading "Noteholders" on the signature pages hereto (each, a
"Noteholder" and collectively, the "Noteholders").
The Company proposes to issue up to an aggregate of $13,750,000 principal
amount of 9 1/8% Convertible Subordinated Notes due 2004 (the "New Subordinated
Notes") substantially in the form of Exhibit A hereto in exchange for up to an
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aggregate of $13,750,000 principal amount of 9 1/8% Convertible Subordinated
Notes due 2002 (the "Old Subordinated Notes") issued pursuant to the Note
Purchase Agreement dated as of June 21, 1994 among the Company and the
purchasers listed on the signature pages thereto (the "Note Purchase
Agreement"). The New Subordinated Notes will be convertible at the option of
the holders thereof into shares (the "Conversion Shares") of Common Stock, par
value $.005 per share, of the Company on the same terms and at the same
conversion price of $10.60 per share (subject to adjustment) as the Old
Subordinated Notes. The New Subordinated Notes will be issued to the
Noteholders without being registered under the Securities Act of 1933, as
amended, in reliance upon the exemption provided in Section 4(2) thereof and
Rule 506 thereunder.
The Noteholders (including subsequent transferees) shall have registration
rights as set forth in a registration rights agreement substantially in the form
of Exhibit B hereto (the "Registration Rights Agreement"), for so long as the
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Conversion Shares are Registrable Securities (as defined in the Registration
Rights Agreement).
Any Old Subordinated Notes not exchanged by the holder thereof shall remain
outstanding and shall continue to be governed by the Note Purchase Agreement and
otherwise be unaffected by the terms of this Agreement. Capitalized terms used
in this Agreement and not otherwise defined shall have the meanings ascribed to
them in Article I of this Agreement. All Article and Section references
contained in this Agreement shall refer to Articles and Sections of this
Agreement unless otherwise specified.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants that are to be made and performed by
the respective parties, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
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As used in this Agreement, the following terms shall have the meanings
specified below:
"Affiliate" of any person means (i) any person that, directly or
indirectly, is in control of, is controlled by, or is under common control with
such person or (ii) any person who is a director or officer (a) of such person,
(b) of any Subsidiary of such person or (c) of any person described in clause
(i) above. For purposes of this definition, control of a person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Bank Debt" means any and all amounts payable under or in respect of the
Credit Agreements, including principal, premium (if any), interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company or any Subsidiary whether or not a
claim for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Bankruptcy Law" means ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Code, or any similar federal
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or state law for the relief of debtors.
"Banks" mean the lenders specified from time to time in the Credit
Agreements.
"Business Day" means each day other than a Saturday, a Sunday or any other
day on which banking institutions in the State of Pennsylvania (or such other
location as the Company shall notify the Noteholders is its principal place of
business) are authorized or obligated by law or executive order to be closed.
"Capital Lease Obligations" of a person means any obligation that is
required to be classified and accounted for as a capital lease on the balance
sheet of such person prepared in accordance with GAAP; the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any preferred stock, of such
corporation.
"Closing" and "Closing Date" have the meanings specified in Section 7.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock of the Company, par value $.005 per
share.
"Conversion Shares" has the meaning specified in the preamble.
"Conversion Price" has the meaning specified in Section 5.6.
"Credit Agreements" means all credit or loan agreements with a financial
institution or other lender, whether now in effect or entered into after the
date of this Agreement and any modifications, renewals, extensions or
replacements of such agreements, including, without limitation, any increases in
the principal amount or interest rates or other amounts relating thereto.
"Current Market Price" means the average of the last reported sale prices
per share for the ten consecutive Trading Days (as defined below) preceding the
date of such computation. The last reported sale price for each day shall be
(i) the last sale price, or the closing bid price if no sale occurred, of the
Common Stock on the principal securities exchange on which the Common Stock is
listed, (ii) if not listed as described in clause (i), the last reported sale
price of the Common Stock on the NASDAQ Stock Market (the "NASDAQ Stock
Market"), or any successor or similar system then in common use, if transactions
in the Common Stock are so reported, or (iii) if neither of clauses (i) or (ii)
is applicable, the mean of the high and low bid quotations for the Common Stock
as reported by the National Quotation Bureau Incorporated if at least two
securities dealers have inserted bid quotations for the Common Stock on at least
five of the ten preceding days. If the Common Stock is quoted on a national
securities or central market system, in lieu of a market or quotation system
described above, the last reported sale price shall be determined in the manner
set forth in clause (iii) of the preceding sentence if bid and asked
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quotations are reported but actual transactions are not, and in the manner set
forth in clause (i) of the preceding sentence if actual transactions are
reported. If none of the conditions set forth above is met, the last reported
sale price of the Common Stock on any day or the average of such last reported
sales prices for any period shall be the fair market value of such class of
stock as determined by a member firm of the New York Stock Exchange, Inc.
selected by the Company. As used herein the term "Trading Days" means (a) if the
Common Stock is listed on a national securities exchange, days on which the
principal such exchange on which the Common Stock is listed is open for trading
of securities; or (b) if clause (a) does not apply and the Common Stock is then
included in the NASDAQ Stock Market is quoted on the NASDAQ Stock Market or any
successor or similar system, days on which trades may be made on such system; or
(c) if neither of clauses (a) or (b) is applicable, days on which quotations are
reported by the National Quotation Bureau Incorporated.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
"Debt" of any person means, without duplication, all (i) liabilities or
obligations, direct and contingent, which liabilities or obligations would, in
accordance with GAAP, be included in determining total liabilities as shown on
the liability side of a balance sheet of such person at the date as of which
Debt is to be determined, including, without limitation, (a) contingent
liabilities which, in accordance with such principles, would be set forth in a
specific dollar amount on the liability side of such balance sheet, and (b)
Capitalized Lease Obligations of such person, (ii) liabilities or obligations of
others for which such person is directly or indirectly liable, by way of
Guarantee or otherwise whether or not such liabilities would, in accordance with
GAAP, be included in determining total liabilities as shown on a balance sheet,
including, without limitation, obligations in respect of interest rate exchange,
swap, cap and other agreements or arrangements designed to provide protection
against fluctuation in interest rates, (iii) liabilities or obligations secured
by Liens on any assets of such person, whether or not such liabilities or
obligations shall have been assumed by it, (iv) liabilities and obligations of
such person, direct or contingent, with respect to letters of credit issued for
the account of such person and bankers acceptances created for such person and
(v) any amendments, renewals, extensions, modifications, refundings or
refinancings of any obligation or indebtedness described in clauses (i) through
(iv) above; provided, however, that (A) non-recourse Debt, (B) accrued operating
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expenses and (C) deferred taxes shall not be included in the computation of Debt
for purposes of this Agreement.
"Default" means any event that is, or after passage of time or the giving
of notice (or both) would be, an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any event specified in Section 8.1, continued for
the period of time, if any, and after the giving of the notice, if any,
designated therein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar or successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
"Exchange Ratio" means the relationship expressed as a ratio of the number
of shares of common stock of a surviving corporation to be received by the
holders of Common Stock in exchange for each share of Common Stock pursuant to a
type of merger or consolidation described in Section 4.5(a) hereof.
"Extraordinary Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary (other than
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qualifying director's shares), property or assets (but not the granting of a
mortgage, security interest, lien or other similar right) (each referred to for
the purposes of this definition as a "disposition") by the Company or any of its
Subsidiaries the value of which disposition individually (or in the case of a
series of related dispositions in the aggregate) exceeds $7,500,000 with the
exception of the following transactions: (i) a disposition by a Subsidiary to
the Company, (ii) a disposition by the Company or a Subsidiary (a) to a Wholly
Owned Subsidiary of the Company or (b) in connection with the securitization,
sale or other disposition of receivables as part of the financing business of
the Company or its Subsidiaries, (iii) a disposition of (A) property or assets,
including obsolete assets or property, in the ordinary course of business, (B)
Capital Stock of any person (other than a Subsidiary of the Company) acquired by
the Company in the ordinary course of business or (C) discontinued operations
identified as such in the Company's financial statements or (iv) any other
disposition or planned disposition by the Company or a Subsidiary that has been
publicly announced prior to the date of this Agreement.
"GAAP" means United States generally accepted accounting principles as of
the date of this Agreement consistently applied and in accordance with past
practices.
"Governmental Authority" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or other court or arbitrator, in each case whether of the United States or a
foreign jurisdiction.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Debt or other obligation of any other
person and any obligation, direct or indirect, contingent or otherwise of such
person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such other person (whether arising
by virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
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endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Holder" means each person in whose name a New Subordinated Note is
registered on the Register.
"Indemnified Persons" has the meaning specified in Article XII.
"Insider" means any registered or beneficial owner of 5% or more of Capital
Stock of the Company, any director or officer of the Company, and any Affiliate,
Associate or Relative of any of the foregoing persons. For the purposes of this
definition, the terms "Affiliate" and "Associate" shall have the meanings
ascribed to them in the Securities Act, and a "Relative" of a person shall mean
such person's spouse, parents, sisters, brothers, children and spouses of the
foregoing, and any member of the immediate household of such person.
"Intangibles" means good will and other items shown as intangible on the
Company's consolidated balance sheet, including, without limitation, deferred
costs of securitizations.
"Interest Period" with respect to a New Subordinated Note means the period
commencing on the last day of the preceding Interest Period for such note (or,
if there is no preceding Interest Period, commencing on the Closing Date for
such note) and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, the last day) in the third succeeding calendar
month; provided, however, that (i) if an Interest Period would end on a day that
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is not a Business Day, such Interest Period
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shall be extended to the next succeeding Business Day, (ii) interest shall
accrue from and including the first day of any Interest Period to but excluding
the last day of such Interest Period and (iii) the last Interest Period shall
end on the date of Maturity of such note.
"IRS" means the Internal Revenue Service.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind whatsoever (including any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of any
financing statement under the Uniform Commercial Code in any jurisdiction in
connection with the creation of a security interest).
"Litigation" shall have the meaning specified in Section 7.2(b).
"Material Adverse Effect" means a material adverse effect upon (i) the
validity or enforceability of this Agreement, the Registration Rights Agreement
or the New Subordinated Notes, (ii) the financial condition, business,
operations or property of the Company and its Subsidiaries (other than DVI
Financial Services, Inc.) taken as a whole, (iii) the financial condition,
business operations, property or prospects of DVI Financial Services, Inc. or
(iv) the ability of the Company to fulfill its obligations under this Agreement,
the New Subordinated Notes or the Registration Rights Agreement.
"Maturity" when used with respect to any New Subordinated Note, means the
date on which the principal of such note becomes due and payable, whether on a
Redemption Date, at the stated maturity, extended maturity, by declaration of
acceleration, call for redemption or otherwise.
"NASDAQ" and "NASDAQ System" have the meanings specified in the definition
of Current Market Price.
"New Subordinated Notes" has the meaning specified in the preamble. The
term "New Subordinated Note" or "New Subordinated Notes" as used herein shall
include each note delivered pursuant to any provision of this Agreement and each
note delivered in substitution or exchanged for any such note, in any case which
is at the time outstanding.
"Note Purchase Agreement" has the meaning specified in the preamble.
"Officer" of any corporation means the Chairman of the Board and Chief
Executive Officer, the Chief Financial Officer and any Executive Vice President
(regardless of designation) of such corporation.
"Officer's Certificate" means a certificate signed in the name of the
Company by its Chairman of the Board, its President, one of its Vice Presidents
or its Treasurer.
"Old Subordinated Notes" has the meaning specified in the preamble.
"person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof or any
other entity.
"Noteholder" or "Noteholders" has the meaning specified in the preamble.
"Redemption Date" has the meaning specified in Section 4.4.
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"Redemption Event" means (i) the sale of all or substantially all of the
Company's assets to a person or any group (as defined in clause (iii) of this
definition) of persons in a single transaction or a series of transactions, (ii)
the consummation of any consolidation or merger involving the Company pursuant
to which (a) the Company is not the continuing or surviving corporation (other
than a consolidation or merger with a wholly-owned subsidiary in which all of
the Common Stock outstanding immediately prior to the effectiveness thereof is
changed into or exchanged for the same consideration) or (b) the Common Stock is
converted into cash, securities and other property, except, in the case of each
of the immediately preceding clauses (a) and (b), a consolidation or merger
involving the Company pursuant to which the holders of the issued and
outstanding Common Stock immediately prior to such transaction own or control,
directly or indirectly, a majority of the common stock of the continuing or
surviving corporation immediately following such consolidation or merger, or
(iii) any person or any persons acting together which would constitute a "group"
for the purposes of Section 13(d) of the Exchange Act, together with any
affiliates thereof, shall beneficially own (as defined in Rule 13d-3 of the
Exchange Act) or control, directly or indirectly, at least 50% of the total
Voting Power of all classes of Capital Stock entitled to vote generally in the
election of directors of the Company.
"Register" means the register maintained pursuant to Section 11.3.
"Registration Rights Agreement" has the meaning specified in the preamble.
"Representative" means (i) the trustee, agent or representative (if any)
for an issue of Senior Debt and (ii) the agent or representative (if any) under
each Credit Agreement or any successor agent under such Credit Agreement.
"Restricted Payment" means (i) the payment of any dividend or distribution
on any class of Capital Stock, other than a dividend or distribution payable
solely in shares of any class of Capital Stock or dividend paid to the Company
or a Subsidiary by any Subsidiary, (ii) the repurchase, redemption or reduction
of shares of Capital Stock or any warrants, rights or options to purchase or
acquire any Capital Stock, other than in exchange for or out of proceeds from
the substantially concurrent sale of other shares of Capital Stock, (iii) the
prepayment, purchase or redemption of any subordinated indebtedness (other than
the Old Subordinated Notes and the New Subordinated Notes), (iv) the payment of
any amounts in respect of any partnership or similar interest or in respect of
any contractual or other claim (whether arising by joint venture agreement or
otherwise) if the rights of the holder of such interest or claim are junior to
those of general creditors (other than payments required to be made to persons
other than Affiliates of the Company pursuant to an arm's-length contractual
arrangement), or (v) the setting aside of funds for any of the foregoing
purposes.
"SEC" means the Securities and Exchange Commission or any other
Governmental Authority at the time administering the Securities Act or the
Exchange Act.
"SEC Filings" has the meaning specified in Section 2.5.
"Securities Act" means the Securities Act of 1933, as amended, and any
similar or successor federal statute, and the rules and regulations of the SEC
thereunder all as of the same may be in effect at the time.
"Senior Debt" means the principal of, premium, if any, and interest on and
other amounts due on any Debt of the Company or any Subsidiary, including Bank
Debt, in each case whether outstanding on the date of execution of this
Agreement or thereafter issued, unless in the instrument creating or evidencing
the same or pursuant to which the same is outstanding it is provided that such
obligations are not superior in right of payment to the New Subordinated Notes;
provided, however, that Senior Debt
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shall not include (i) any obligation of the Company to any Affiliate, (ii) any
liability for federal, state, local or other Taxes owed or owing by the Company,
(iii) any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (iv) any Debt, Guarantee or obligation of the
Company which is subordinate or junior in any respect to any other Debt,
Guarantee or obligation of the Company, including any Senior Subordinated Debt
and any Subordinated Obligations, (v) any obligations with respect to any
Capital Stock or (vi) any Debt incurred in violation of this Agreement.
"Senior Subordinated Debt" means the Old Subordinated Notes, the New
Subordinated Notes and any other Debt of the Company that specifically provides
that such Debt is to rank pari passu with the New Subordinated Notes and is not
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subordinated by its terms to any Debt or other obligation of the Company which
is not Senior Debt.
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the date of execution of this Agreement or thereafter incurred)
which is subordinate or junior in right of payment to the New Subordinated Notes
pursuant to a written agreement.
"Subsidiary" of any person (a "Parent") means any corporation or other
entity at least a majority of the outstanding Voting Power of which is at the
time owned or controlled directly or indirectly by the Parent, or one or more
Subsidiaries or by the Parent and one or more Subsidiaries. Unless the context
otherwise requires, all references to a Subsidiary or Subsidiaries shall refer
to those of the Company.
"Tangible Net Worth" means the sum of additional capital, retained
earnings, earned surplus and Capital Stock, minus, deferred charges, Intangibles
and treasury stock all as determined in accordance with GAAP.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to Tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
or net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration and
documentation fees; and customs duties, tariffs, and similar charges.
"Total Interest Expense" means with respect to any period for which a
determination thereof is to be made, on a consolidated basis, the aggregate
amount of all interest accrued (whether or not paid) on (i) all recourse Debt,
(ii) the Old Subordinated Notes and (iii) the New Subordinated Notes, in each
case together with amortization of deferred loan expenses.
"Trading Day" has the meaning specified in the definition of Current Market
Price.
"Voting Power" means voting securities or other voting interests ordinarily
(and apart from rights accruing under special circumstances) having the right to
vote in the election of directors or persons performing substantially equivalent
tasks and responsibilities.
"Warrant" or "Warrants" has the meaning specified in Section 4.5.
"Warrant Agreement" means the warrant agreement to be delivered pursuant to
Section 4.5 substantially in the form attached hereto as Exhibit C.
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"Warrant Registration Rights Agreement" means the registration rights
agreement to be delivered pursuant to Section 4.5 substantially in the form
attached hereto as Exhibit D.
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"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares) is owned by the Company or another
Wholly Owned Subsidiary.
In this Agreement the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments shall be deemed to include all amendments thereto or changes therein
entered into in accordance with their respective terms but only to the extent to
which such amendments or changes are not prohibited by the terms of this
Agreement; references to persons include their permitted successors and assigns;
"including" means including, without limitation; "or" is not exclusive; "day"
means a calendar day unless otherwise specified; and an accounting term not
otherwise defined has the meaning assigned to it, and all determinations
involving any such term required to be made herein shall be made, in accordance
with GAAP.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof, the Company represents and warrants to each of the
Noteholders as follows:
Section 2.1 Organization; Good Standing. Each of the Company and its
---------------------------
Subsidiaries has been duly incorporated and is an existing corporation in good
standing under the laws of its jurisdiction of organization, with full corporate
power and authority to own its properties and conduct its business; and each of
the Company and its Subsidiaries is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which it owns or
leases substantial properties or in which the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
Material Adverse Effect.
Section 2.2 Corporate Power and Corporate Action. The Company has the
------------------------------------
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to issue and deliver the New Subordinated
Notes to the Noteholders in exchange for their Old Subordinated Notes being
exchanged. The execution, delivery and performance of this Agreement, including
the issuance and delivery of the New Subordinated Notes and the Registration
Rights Agreement have been duly authorized by all requisite corporate action on
the part of the Company.
Section 2.3 Enforceable Obligations. This Agreement has been duly
-----------------------
executed and delivered by the Company and is a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms (subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity). The New
Subordinated Notes have been duly authorized and, when executed and delivered
pursuant to the terms of this Agreement, will be legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms (subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity). The
Registration Rights Agreement has been duly authorized, executed and delivered
and is a legal, valid and
8
binding obligation of the Company, enforceable against the Company in accordance
with its terms (subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and to general principles of equity).
Section 2.4 No Conflicts. Except as set forth in Schedule 2.4, none of
------------
the execution and delivery of this Agreement, the Registration Rights Agreement,
the New Subordinated Notes, the consummation of any of the transactions
contemplated hereby or thereby (subject to obtaining the approvals referred to
in the second succeeding sentence) or compliance with the terms and provisions
hereof or thereof (i) conflicts or will conflict with or constitutes or will
constitute a breach of or a default under the articles of incorporation, by-
laws, or other organizational documents (each as amended through the date
hereof), of the Company or any Subsidiary, (ii) violates any law or regulation
or any order, judgment, injunction or decree of any court or Governmental
Authority applicable to the Company or any Subsidiary or any of their assets or
properties, (iii) conflicts with or would result in the breach of, or
constitutes or would constitute a default under, any note, bond, contract,
lease, sublease, indenture, loan agreement (including the Credit Agreements),
mortgage, deed of trust, license, permit, franchise or other agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary may be bound or (iv) will result in the creation or
imposition of a Lien upon any property or assets of the Company or any
Subsidiary pursuant to the terms of any agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
may be bound or to which any of their properties or assets are subject except,
in each case, where such violation, conflict, breach or default would not have a
Material Adverse Effect. No consent, approval, authorization or other action by,
or filing with, any governmental authority or other person is required in
connection with the execution, delivery and performance of this Agreement, the
New Subordinated Notes or the Registration Rights Agreement by the Company. The
Company has no reason to believe that any additional consents and approvals
required in connection with the consummation of the transactions contemplated
herein will not be obtained when required except where the failure to obtain any
such consents and approvals would not have a Material Adverse Effect.
Section 2.5 SEC Reports and Financial Statements.
------------------------------------
(a) The Company has previously delivered to the Noteholder true and
complete copies as filed with the SEC of its (i) Annual Report on Form l0-K for
the fiscal year ended June 30, 2000, (ii) Quarterly Reports on Form 10-Q for the
three months ended September 30, 2000, the six months ended December 31, 2000
and the nine months ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) Proxy Statement relating to the
Annual Meeting of Stockholders held on November 29, 2000, (iv) 2000 Annual
Report to Stockholders and (v) all other reports (including current reports on
Form 8-K), statements and registration statements filed by it with the SEC since
June 30, 2000 (the items specified in subclauses (i) through (v) being referred
to collectively as, the "SEC Filings"). As of their respective dates, the SEC
Filings did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements (including the notes and schedules
thereto) of the Company included in the SEC Filings present fairly the financial
condition, results of operations and changes in financial position of the
Company and its Subsidiaries on a consolidated basis as of the dates or for the
periods indicated therein in conformity with GAAP (except as otherwise indicated
in such financial statements or the notes thereto), subject, in the case of
unaudited interim financial statements, to year-end adjustments consisting only
of normal recurring accruals and to footnotes included in such interim financial
statements which do not comply with GAAP.
(b) Neither the Company nor any of its Subsidiaries has any material
liability or obligation, fixed or contingent, which is not reflected or reserved
against in the balance sheet included in its Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001 or otherwise set forth in the
9
notes thereto, and subsequent to March 31, 2001, neither the Company nor any of
its Subsidiaries has incurred any liabilities or obligations which are material
either individually or in the aggregate other than in the ordinary course of
business, except for its obligations under this Agreement.
Section 2.6 Full Disclosure. There is no material fact, circumstance or
---------------
event known to any Officer of the Company with respect to the Company or any of
its Subsidiaries that has had or may reasonably be expected to have a material
adverse effect on the consolidated financial condition of the Company that the
Company has not disclosed in writing to the Noteholder. No information, report,
financial statement or certificate delivered to any Noteholder in connection
with this Agreement or the New Subordinated Notes relating to historical events
or conditions contained any untrue statement of a material fact or omitted to
state a material fact necessary to make such statements not misleading as of the
respective dates thereof and the Company has disclosed to any Noteholder any
subsequent changes or events that would cause such information, report,
financial statement or certificate to contain any untrue statement of a material
fact or omit to state a material fact necessary to make such statements not
misleading as of the date hereof. The information, reports, financial
statements or certificates delivered to the Noteholders in connection with this
Agreement or the New Subordinated Notes relating to the forecast of future
events or conditions represented, at the time of delivery, the Company's best
estimate of such future events or conditions. Such estimates and assumptions
were fair in the light of business conditions existing at the time of such
delivery of such projections and forecasts; and any such financial projections
and forecasts, if prepared as of the date of this Agreement, would contain
estimates of the Company's future financial performance that would not
materially adversely differ from the estimates contained in the financial
projections and forecasts heretofore delivered by the Company. It is understood
that all of the estimates and assumptions on which such projections and
forecasts are based may not prove to be correct and that actual future financial
performance may vary from that projected. As used in this Section, a "material
fact" means a fact that there is a substantial likelihood a Noteholder would
consider important in deciding whether to exchange its Old Subordinated Notes
for the New Subordinated Notes. Notwithstanding the foregoing, this
representation shall not be deemed to have been breached to the extent that any
untrue statement or alleged untrue statement or omission or alleged omission
contained in any information, report, financial statement or certificate
delivered to the Noteholders is corrected in any updated, amended or
supplemented information, report, financial statement or certificate
subsequently delivered to the Noteholders in writing prior to the date hereof.
Section 2.7 Capitalization As of the date hereof, the authorized,
--------------
issued and outstanding capital stock of the Company is as set forth on Schedule
2.7.
Section 2.8 Default. No event has occurred and is continuing that
-------
constitutes a Default.
Section 2.9 Purchase Permitted by Applicable Laws. The issuance of the
-------------------------------------
New Subordinated Notes to be issued to the Noteholders in exchange for the Old
Subordinated Notes on the terms and conditions contained in this Agreement shall
not violate any applicable law or governmental regulation (including, without
limitation, Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System). Neither the Company nor any of its Subsidiaries owns, nor has
any present intention of acquiring, any "margin security" within the meaning of
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System.
Section 2.10 Compliance With Outstanding Debt Issues. On or prior to the
---------------------------------------
Closing Date, the Company shall have delivered to the Noteholders such evidence
as the Noteholders or counsel to the Noteholders may reasonably request showing
that the execution, delivery and performance by the Company of this Agreement
and the Registration Rights Agreement and the issuance of the New Subordinated
Notes will not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
Lien upon any of the properties or assets of
10
the Company or any of its Subsidiaries pursuant to, or otherwise violate, any
instrument evidencing any indebtedness of the Company or any of its Subsidiaries
or any agreement relating thereto.
Section 2.11 Absence of Certain Changes or Events. Except as disclosed
------------------------------------
in the SEC Filings or in Schedule 2.11, since March 31, 2001, there has not
been:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company and its Subsidiaries from that reflected in the
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001, except for changes in the ordinary course of
business which have not had, individually or in the aggregate, a Material
Adverse Effect;
(b) Any change (individually or in the aggregate), except in the
ordinary course of business, in the contingent obligations of the Company or any
of its Subsidiaries by way of guaranty, endorsement, indemnity, warranty or
otherwise;
(c) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company or any of its Subsidiaries;
(d) Any waiver or compromise by the Company or any of its Subsidiaries
of a valuable right or of a material debt owed to it other than in the ordinary
course of business consistent with past practices;
(e) Any loans made by the Company or any of its Subsidiaries to its
employees, officers or directors of more than $60,000 in the aggregate to any
one person or of more than $300,000 in the aggregate to all such persons, other
than travel advances made in the ordinary course of business;
(f) Any increases in the compensation of any of the Company's or any
of its Subsidiaries' employees, officers or directors other than ordinary,
scheduled merit increases;
(g) Any declaration or payment of any dividend or other distribution
of the assets of the Company or any of its Subsidiaries;
(h) Other than pursuant to existing options, warrants and other
convertible securities issued or to be issued by the Company prior to the
Closing Date pursuant to existing employee benefit plans or arrangements of the
Company and this Agreement, any issuance or sale by the Company of shares of its
Common Stock or other securities;
(i) any change in the Capital Stock, or material increase in short
term debt or long term debt of the Company or any of its Subsidiaries, except
with respect to such increases made in the ordinary course of business; or
(j) any development or event or series of developments or events that
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
Section 2.12 Licenses; Permits; Consents and Approvals. The Company and
-----------------------------------------
each of its Subsidiaries has all necessary licenses, authorizations, consents
and approvals and has made all necessary filings required under any federal,
state, local or foreign law, regulation or rule, and has obtained all necessary
licenses, permits, authorizations, consents and approvals from other persons, in
order to conduct its respective business, except for licenses, permits,
authorizations, consents, approvals and/or filings the absence of which,
individually or in the aggregate, do not have a Material Adverse Effect; neither
the Company nor any of its Subsidiaries is in violation of, or in default under,
any such license,
11
permits, authorization, consent or approval or any federal, state, local or
foreign law, regulation or rule or any decree, order or judgment applicable to
the Company or any of its Subsidiaries the effect of which would reasonably be
expected to have a Material Adverse Effect.
Section 2.13 Illegal Payments. To the Company's knowledge, neither the
----------------
Company nor any Subsidiary nor any of their respective employees or agents has
made any payment of funds of the Company or any Subsidiary or received or
retained any funds in violation of any law, rule or regulation of any
Governmental Authority.
Section 2.14 Registration Rights. Except as set forth in the SEC Filings
-------------------
and for those rights granted by the Registration Rights Agreement, no holder of
any security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company because of the consummation of
the transactions contemplated by this Agreement.
Section 2.15 Investment Company Status. Neither the Company nor any of
-------------------------
its Subsidiaries is an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940, as amended.
Section 2.16 Holding Company Status. Neither the Company nor any of its
----------------------
Subsidiaries is a "holding company", or a subsidiary or affiliate of a "holding
company," or a "subsidiary company" of a "holding company", or a "public
utility", within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or a "public utility" within the meaning of the Federal Power Act,
as amended.
Section 2.17 Exemption from Registration. The issuance of the New
---------------------------
Subordinated Notes pursuant to this Agreement is exempt from the registration
requirements of the Securities Act. No form of general solicitation or general
advertising was used by the Company in connection with the offer of the New
Subordinated Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the New Subordinated Notes have been issued and
sold by the Company within the six-month period immediately prior to the date
hereof. The Company agrees that neither it, nor anyone acting on its behalf,
will offer the New Subordinated Notes so as to bring the issuance of the New
Subordinated Notes within the provisions of Section 5 of the Securities Act.
Section 2.18 Brokers; etc. The Company has not dealt with any broker,
------------
finder, commission agent or other person in connection with the issuance of the
New Subordinated Notes and the transactions contemplated by this Agreement and
the Company is not under any obligation to pay any broker's fee or commission in
connection with such transactions.
Section 2.19 Credit Agreement Representations and Warranties. Except as
-----------------------------------------------
set forth in Schedule 2.19 and except for breaches of representations and
warranties that have been waived in writing, the representations and warranties
set forth in the Credit Agreements, and the representations and warranties made
in connection with any amendments and supplements thereto were true and correct
in all material respects when made and shall be true and correct in all material
respects as of the Closing Date, other than such representations and warranties
as were made specifically as of another date.
12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS
-------------------------------------------------
As of the date hereof, each Noteholder severally (but not jointly)
represents and warrants to the Company as follows:
Section 3.1 Private Placement. Each Noteholder understands and
-----------------
acknowledges that the Company has informed such Noteholder that:
(a) the New Subordinated Notes have not been registered under the
Securities Act and the New Subordinated Notes, any securities into which the New
Subordinated Notes are converted or any securities issued upon redemption of the
New Subordinated Notes must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to an
available exemption from such registration requirement;
(b) the offering and issuance of the New Subordinated Notes is
intended to be exempt from registration under the Securities Act by virtue of
the provisions of Section 4(2) of the Securities Act and Rule 506 thereunder;
(c) there is no existing public or other market for the New
Subordinated Notes and there can be no assurance that any Noteholder will be
able to sell or dispose of the New Subordinated Notes.
Section 3.2 Transferees Bound. Each Noteholder understands and
-----------------
acknowledges with the Company that the Company will not issue or transfer any
New Subordinated Notes, any securities into which the New Subordinated Notes are
converted or any securities issued upon redemption of the New Subordinated Notes
unless the person to whom they are being issued or transferred shall first state
in a writing deposited with the Secretary of the Company the provisions of
Section 3.1 hereof.
ARTICLE IV
EXCHANGE AND ISSUANCE; REPAYMENT AND REDEMPTION
-----------------------------------------------
Section 4.1 Exchange and Issuance of the New Subordinated Notes. At the
---------------------------------------------------
Closing on the basis of the representations and warranties herein contained and
subject to the terms and conditions herein set forth, the Company will issue to
each Noteholder the principal amount of New Subordinated Notes set forth
opposite such Noteholder's name on Schedule 1 attached hereto in exchange for
----------
the delivery by such Noteholder, and the cancellation by the Company of, the
same principal amount of Old Subordinated Notes. Any holder of Old Subordinated
Notes desiring to exchange its Old Subordinated Notes for New Subordinated Notes
must elect to exchange, and deliver to the Company for cancellation on or prior
to the Closing Date, all Old Subordinated Notes held by such holder. No partial
exchanges will be accepted.
Section 4.2 Interest on the New Subordinated Notes. Subject to
--------------------------------------
applicable law, interest on each New Subordinated Note shall accrue at a rate
per annum equal to 9 1/8% based on a 360 day year. Interest on each New
Subordinated Note will be payable on the last day of each Interest Period with
respect to such note and at Maturity.
Section 4.3 Default Interest. If the Company shall default in the
----------------
payment of the principal of or interest on any New Subordinated Note, the
Company shall on demand from time to time pay interest,
13
to the extent permitted by law, on such defaulted amount up to the date of
actual payment (after as well as before judgment) at a rate per annum equal to
200 basis points plus the rate which would otherwise be payable under Section
4.2 during the applicable period.
Section 4.4 Redemption Event. (a) Upon the occurrence of a Redemption
----------------
Event each Holder shall have the right to require that the Company repurchase
all or any portion of such Holder's New Subordinated Notes (equal to $1,000 or
any integral multiple thereof) at a repurchase price in cash equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (the "Redemption Date"), in accordance with Section 4.4(b).
Prior to the mailing of the notice to Holders provided for in Section 4.4(b)
below but in any event within five days following any Redemption Event, the
Company covenants to (i) repay in full all Debt under the Credit Agreements or
to offer to repay in full all such Debt and to repay the Debt of each lender who
has accepted such offer or (ii) obtain the requisite consent under the Credit
Agreements to permit the repurchase of the New Subordinated Notes as provided
for below. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase New Subordinated Notes
pursuant to this Section 4.4; provided, however, that the Company's failure to
comply with the preceding sentence may constitute a Default under Section
8.1(d).
(b) Within five days following any Redemption Event, the Company shall
mail a notice to each Holder stating:
(i) that a Redemption Event has occurred and that such Holder
has the right to require the Company to redeem such Holder's New
Subordinated Notes at a repurchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase;
(ii) the circumstance and relevant facts regarding such
Redemption Event;
(iii) the Redemption Date (which shall be no earlier than five
days nor later than ten days from the date such notice is mailed); and
(iv) the instructions determined by the Company consistent with
this Section, that a Holder must follow in order to have its New
Subordinated Notes repurchased.
(c) Holders electing to have a New Subordinated Note or New
Subordinated Notes repurchased will be required to surrender such New
Subordinated Note or New Subordinated Notes, with an appropriate form duly
completed, to the Company at the address specified in the notice at least three
Business Days prior to the Redemption Date. Holders will be entitled to withdraw
their election if the Company receives not later than three Business Days prior
to the Redemption Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the New
Subordinated Note which was delivered for redemption by the Holder and a
statement that such Holder is withdrawing his election to have such New
Subordinated Note redeemed.
(d) On the Redemption Date, all New Subordinated Notes redeemed by the
Company under this Section shall be delivered to the Company for cancellation,
and the Company shall pay the redemption price plus accrued and unpaid interest,
if any, to the Holders entitled thereto.
Section 4.5 Non-Cash Mergers or Consolidations. (a) In addition to,
----------------------------------
and not in limitation of, the rights of the Holders pursuant to Section 4.4
above, upon the occurrence of a merger or consolidation which constitutes a
Redemption Event and pursuant to which the holders of Common Stock receive non-
cash consideration, Holders who exercise their rights pursuant to Section 4.4
shall also receive detachable
14
warrants (the "Warrants") issued by the surviving corporation pursuant to a
Warrant Agreement substantially in the form attached hereto as Exhibit C to
---------
purchase that number of shares of common stock of the surviving corporation
equal to the product of (i) the outstanding principal amount of the New
Subordinated Notes (rounded to the nearest $1000 dollar increment) divided by
$1000 and then multiplied by 94.34 and (ii) the Exchange Ratio. The exercise
price of the Warrants shall be equal to the quotient of (x) $10.60 (as adjusted
to the date of the consummation of the merger or consolidation pursuant to
Article V hereof) and (y) the Exchange Ratio, subject to further adjustment in
accordance with the terms of the Warrant Agreement. The term of the Warrants
shall be equal to the remaining term of the New Subordinated Notes immediately
prior to the consummation of the merger or consolidation giving rise to the
rights of the Holders under this Section 4.5. Holders of the Warrants shall have
the registration rights set forth in the Warrant Registration Rights Agreement
substantially in the form attached hereto as Exhibit D.
---------
(b) Upon the occurrence of a Redemption Event described in Section
4.5(a), the Company shall supplement the notice to be provided to Holders under
Section 4.4(b) above, to include the following additional information:
(i) that the Redemption Event which has occurred entitles the
Holders to receive Warrants pursuant to Section 4.5(a) of this Agreement;
(ii) the number of Warrants to which each Holder is entitled per
$1000 of face amount of New Subordinated Notes outstanding;
(iii) the then current exercise price of the Warrants per share
of common stock of the surviving corporation; and
(iv) instructions determined by the Company consistent with
Section 4.5 hereof, that a Holder must follow in order to receive the
Warrants to which the Holder is entitled, the Warrant Agreement and the
Warrant Registration Rights Agreement.
(c) Holders electing to receive the Warrants pursuant to Section
4.5(a) hereof must comply with the requirements of Section 4.4 with respect to
the redemption of their New Subordinated Notes, and such Holders shall receive
the Warrants, Warrant Agreements and Warrant Registration Rights Agreements
concurrently with their receipt of the redemption price pursuant to Section
4.4(d) against surrender to the Company of the New Subordinated Notes to be
redeemed.
(d) In the event that the consideration for a merger or consolidation
which constitutes a Redemption Event is a combination of cash and non-cash
consideration, then the percentage of the aggregate dollar amount of outstanding
principal and accrued interest on the New Subordinated Notes for which Holders
may receive Warrants pursuant to Section 4.5(a) shall be equal to that
percentage of the total merger or consolidation consideration to be received by
holders of the common stock represented by the non-cash portion of such
consideration.
Section 4.6 Final Interest Payment on Old Subordinated Notes.
------------------------------------------------
Notwithstanding anything to the contrary contained in the Note Purchase
Agreement, the last Interest Period (as defined in the Note Purchase Agreement)
for all Old Subordinated Notes being exchanged for New Subordinated Notes
pursuant to this Agreement shall end on the day immediately preceding the
Closing Date and as of such date no further interest shall accrue on such Old
Subordinated Notes. All accrued and unpaid interest on the Old Subordinated
Notes to be exchanged pursuant to this Agreement shall be treated as having
accrued on the New Subordinated Notes and will be added to the first interest
payment on the New Subordinated Notes.
15
ARTICLE V
CONVERSION
----------
Section 5.1 Conversion. Subject to and upon compliance with the
----------
provisions of this Article V and subject to Section 4.4 hereof, the Holder of
any New Subordinated Notes shall have the right, at its option, at any time, to
convert any New Subordinated Note or any portion of the principal amount thereof
which is $1,000 or an integral multiple of $1,000 into fully paid and
nonassessable shares of Common Stock at the conversion price of $10.60 per share
of Common Stock subject to adjustment as set forth below, by surrendering the
New Subordinated Notes to be converted, in the manner provided in Section 5.2.
Section 5.2 Exercise of Conversion Rights. In order to exercise the
-----------------------------
conversion privilege, the Holder of the New Subordinated Notes to be converted
shall surrender the New Subordinated Notes to the conversion agent designated
for such purpose by written notice to the Holders of such New Subordinated Notes
by the Company (which may be the Company itself), with the Notice of Election to
Convert in the form included in Exhibit E hereto, duly completed and signed, at
---------
the principal office of the conversion agent. Unless the shares issuable on
conversion are to be issued in the same name as the name in which the
surrendered New Subordinated Notes are registered, each New Subordinated Note
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Company, duly executed by the Holder or its duly
authorized attorney. If the Company fails to designate a conversion agent, the
conversion agent shall be the Company.
Section 5.3 Surrender of New Subordinated Notes; Delivery of Shares. As
-------------------------------------------------------
promptly as practicable after the surrender by a Holder of the New Subordinated
Notes in accordance with this Section 5.3, and in any event within three Trading
Days after such surrender, the Company shall issue and shall deliver at the
office of the conversion agent to the Holder, or on its written order, (a) a
certificate or certificates for the number of full shares of Common Stock or
other securities issuable upon the conversion of those New Subordinated Notes in
accordance with the provisions of this Article V, (b) the amount of cash
required to be paid for any fractional interest in respect of a share of Common
Stock or other security arising upon the conversion as provided in Section 5.5
and (c) subject to the provisions of Article IX hereof, cash in the amount of
all accrued and unpaid interest on the New Subordinated Notes surrendered up to
and including the date conversion shall have been deemed to be effective
pursuant to Section 5.4.
Section 5.4 Effective Date of Conversion. Each conversion shall be
----------------------------
deemed to have been effected immediately prior to the close of business on the
date on which all of the conditions specified in Section 5.2 above shall have
been satisfied, and the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Common Stock or other securities represented by those certificates at
such time on such date and such conversion shall be at the Conversion Price (as
hereinafter defined) in effect at such time on such date, unless the stock
transfer books of the Company shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such stock
transfer hooks are open, but such conversion shall be at the Conversion Price in
effect on the date upon which all of the conditions specified in Section 5.2
shall have been satisfied. All shares of Common Stock delivered upon conversion
of the New Subordinated Notes will upon delivery be duly and validly issued and
fully paid and nonassessable, free of all liens and charges and not subject to
any preemptive rights. Upon the surrender of the New Subordinated Notes to be
converted, such New Subordinated Notes shall no longer be deemed to be
outstanding and all rights of a Holder with respect to the New Subordinated
Notes surrendered for conversion shall immediately terminate except the right to
16
receive the Common Stock or other securities, cash or other assets as herein
provided. In the event of any New Subordinated Note which is converted in part
only, upon such conversion the conversion agent shall execute and deliver to or
on the order of the Holder thereof, at the expense of the Company, a replacement
New Subordinated Note or New Subordinated Notes of authorized denomination in
principal amounts equal to the unconverted portion of such New Subordinated
Note.
Section 5.5 Fractional Shares. No fractional shares or securities
-----------------
representing fractional shares of Common Stock shall be issued upon conversion
of New Subordinated Notes. Any fractional interest in a share of Common Stock
resulting from conversion of a New Subordinated Note shall, subject to the
provisions of Article IX, be paid in cash (computed to the nearest cent) based
on the Current Market Price of the Common Stock on the Trading Day next
preceding the day of conversion.
Section 5.6 Conversion Price. For purposes of this Article V, the
----------------
Conversion Price shall be $10.60 in principal amount of the New Subordinated
Notes per share of Common Stock subject in each case to adjustment as provided
below.
Section 5.7 Adjustment of Conversion Price. (a) In case the Company
------------------------------
shall (i) pay a dividend or make a distribution on its Common Stock in shares of
its Common Stock, (ii) subdivide its outstanding Common Stock into a greater
number of shares or (iii) combine its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior to such event
shall be adjusted so that the Holder of any New Subordinated Note thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock of the Company which it would have owned or have been entitled to
receive after the happening of such event had the New Subordinated Note been
converted immediately prior to the happening of such event. An adjustment made
pursuant to this Section 5.7(a) shall become effective immediately after the
record date in the case of a dividend or distribution except as provided in
Section 5.7(f), and shall become effective immediately after the effective date
in the case of subdivision or combination. If any dividend or distribution is
not paid or made, the Conversion Price then in effect shall be appropriately
readjusted.
(b) In case the Company shall issue rights or warrants to all holders
of its Common Stock entitling them (for a period expiring within 45 days after
the record date mentioned below) to subscribe for or purchase Common Stock at a
price per share less than the Current Market Price of the Common Stock at the
record date for the determination of stockholders entitled to receive the rights
or warrants, the Conversion Price in effect immediately prior to the issuance of
such rights or warrants shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of issuance of the rights or warrants by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on the date
of issuance of the rights or warrants, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance of the
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase. The adjustment provided for in this Section 5.7(b)
shall be made successively whenever any such rights or warrants are issued, and
shall become effective immediately, except as provided in Section 5.7(f) below
after such record date. In determining whether any rights or warrants entitle
the holders of the Common Stock to subscribe for or purchase shares of Common
Stock at less than the Current Market Price, and in determining the aggregate
offering price of the shares of Common Stock so offered, there shall be taken
into account any consideration received by the Company for such rights or
warrants, the value of such consideration, if other than cash, to be determined
by the Board (whose determination, if made in good faith, shall be conclusive).
If any or all of such rights or warrants are not so issued or expire or
terminate without having been exercised, the Conversion Price then in effect
shall be appropriately readjusted.
17
(c) In case the Company shall distribute to all holders of its Common
Stock any shares of capital stock of the Company (other than Common Stock) or
evidences of indebtedness or assets (excluding cash dividends or distributions
paid from retained earnings of the Company) or rights or warrants to subscribe
for or purchase any of its securities (excluding those referred to in Section
5.7(b)) then, in each such case, the Conversion Price shall be adjusted so that
it shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of the distribution by a fraction of which
the numerator shall be the Current Market Price of the Common Stock on the
record date mentioned below less the then fair market value (as determined by
the Board, whose determination, if made in good faith, shall be conclusive) of
the portion of the capital stock or assets or evidences of indebtedness so
distributed, or of the rights or warrants so distributed, with respect to one
share of Common Stock, and of which the denominator shall be the Current Market
Price of the Common Stock on the record date. Such adjustment shall become
effective immediately, except as provided in Section 5.7(f), after the record
date for the determination of shareholders entitled to receive such
distribution. If any such distribution is not made or if any or all of such
rights or warrants expire or terminate without having been exercised, the
Conversion Price then in effect shall be appropriately readjusted.
(d) No adjustment in the Conversion Price shall be required unless
such adjustment would require a change of at least 1% in the Conversion Price;
provided, however, that any adjustments which by reason of this Section 5.7(d)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment; and provided, further, that adjustments shall be
required and made in accordance with the provisions of this Article V (other
than this Section 5.7(d)) not later than such time as may be required in order
to preserve the tax free nature of a distribution to the holders of shares of
Common Stock. All calculations under this Article V shall be made to the nearest
cent or to the nearest one hundredth of a share, as the case may be.
(e) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the conversion agent an officers' certificate
setting forth the Conversion Price after the adjustment and setting forth a
brief statement of the facts requiring the adjustment, which certificate shall
be conclusive evidence of the correctness of the adjustment if such adjustment
has been made in good faith. Promptly after delivery of the certificate, the
Company shall prepare a notice of the adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the date on which the adjustment becomes
effective and shall mail the notice of such adjustment of the Conversion Price
to the Holder of each New Subordinated Note at its last address as shown on the
Register.
(f) In any case in which this Section 5.7 provides that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of the event (i) issuing to the Holder of any New
Subordinated Note after the record date and before the occurrence of the event
the additional shares of Common Stock issuable upon the conversion by reason of
the adjustment required by the event over and above the Common Stock issuable
upon such conversion before giving effect to the adjustment and (ii) paying to
the holder any amount in cash in lieu of any fractional share pursuant to
Section 5.5 above.
(g) In addition to the adjustments set forth in subsections (a), (b)
and (c) above, the Company will be permitted to make such reductions in the
Conversion Price as it considers to be advisable in order that any event treated
for federal income tax purposes as a dividend of stock or stock rights will not
be taxable to the holders of the shares of Common Stock.
(h) Notwithstanding the foregoing, the provisions of this Section 5.7
shall not apply to (i) any offering of Capital Stock of the Company in an
underwritten public offering pursuant to a firm commitment (as opposed to best
efforts) from the underwriter, (ii) any issuance of shares of Capital Stock of
the Company under any bona fide compensation program for the benefit of the
employees, officers,
18
directors or consultants of the Company or its Subsidiaries, which compensation
plan is (A) in effect as of the date hereof, but only to the extent of shares
currently authorized as of the date hereof or (B) following the date hereof is
approved in writing by holders of New Subordinated Notes owning a majority in
principal amount of the New Subordinated Notes then outstanding and (iii)
issuance of Capital Stock of the Company in connection with the contingent
obligations of DVI Financial Services, Inc. to the sellers of Medical Equipment
Finance Corporation and Medical Device Capital Company, as previously disclosed
to the Noteholders.
(i) In the event that the provisions of this Section 5.7 fail as a
result of an unintentional oversight to provide expressly for the adjustment of
the Conversion Price or the number of shares of Common Stock issuable upon
conversion under circumstances that, based upon the purposes and intentions
expressed in this Article V, would otherwise have been addressed, the Board of
Directors of the Company shall, in good faith cause an equitable adjustment to
be made to the Conversion Price or the number of shares of Common Stock issuable
upon conversion to correct such an oversight.
Section 5.8 Notice of Certain Corporate Action. If:
----------------------------------
(a) the Company shall declare a dividend (or any other distribution)
on the Common Stock (other than in cash out of retained earnings);
(b) the Company shall authorize the granting to the holders of the
Common Stock of rights or warrants to subscribe for or purchase any shares of
any class or any other rights or warrants;
(c) there shall be any reclassification of the Common Stock (other
than a subdivision or combination of the outstanding Common Stock and other than
a change in the par value, or from par value to no par value, or from no par
value to par value), or any consolidation, merger, or statutory share exchange
to which the Company is a party and for which approval of any stockholders of
the Company is required, or any sale or transfer of all or substantially all the
assets of the Company; or
(d) there shall be a voluntary or an involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the conversion agent, and shall
cause to be mailed to the Holders of at their addresses as shown on the
Register, at least 15 days prior to the applicable date hereinafter specified, a
notice stating (i) the date on which a record is to be taken for the purpose of
the dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to the dividend, distribution or rights or warrants are to be determined or (ii)
the date on which the reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon the reclassification,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice or any defect in the
notice shall not affect the legality or validity of the proceedings described in
this Section 5.8.
Section 5.9 Company to Reserve Stock. The Company covenants that it
------------------------
will at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of Common Stock or its
issued shares of Common Stock held in its treasury, or both, for the purpose of
effecting conversions of the New Subordinated Notes, the full number of shares
of Common Stock deliverable upon the conversion of all outstanding New
Subordinated Notes not theretofore converted. For purposes of this Section 5.9,
the number of shares of Common Stock which
19
shall be deliverable upon the conversion of all outstanding New Subordinated
Notes shall be computed as if at the time of computation all the outstanding New
Subordinated Notes were held by a single Holder.
Section 5.10 Validly Issued; etc. Before taking any action which would
-------------------
cause an adjustment reducing the Conversion Price below the then par value (if
any) of the shares of Common Stock deliverable upon conversion of the New
Subordinated Notes, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock at the
adjusted Conversion Price.
Section 5.11 Taxes on Conversion. The Company will pay any and all
-------------------
documentary stamp or similar issue or transfer Taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of the New
Subordinated Notes pursuant hereto.
Section 5.12 Reclassification, Consolidation, Merger or Sale. In case
-----------------------------------------------
of any reclassification or change of outstanding shares of Common Stock (other
than a change in par value, or as a result of a subdivision or combination), or
in case of any consolidation of the Company with, or merger of the Company with
or into, any other entity that results in a reclassification, change,
conversion, exchange or cancellation of outstanding shares of Common Stock or
any sale or transfer of all or substantially all of the assets of the Company,
each Holder of New Subordinated Notes then outstanding shall have the right
thereafter to convert the New Subordinated Notes held by the Holder into the
kind and amount of securities, cash and other property which the Holder would
have been entitled to receive upon such reclassification, change, consolidation,
merger, sale or transfer if the holder had held the Common Stock issuable upon
the conversion of the New Subordinated Notes immediately prior to the
reclassification, change, consolidation, merger, sale or transfer.
ARTICLE VI
COVENANTS OF THE COMPANY
------------------------
From the date hereof until all New Subordinated Notes issued pursuant
hereto are no longer outstanding, the Company covenants with the Noteholders and
the Holders as follows:
Section 6.1 Notice of Default. The Company shall furnish to the
-----------------
Holders, promptly upon becoming aware of the existence of any condition or event
which constitutes a Default, written notice specifying the nature and period of
existence thereof and the action which the Company is taking or proposes to take
with respect thereto.
Section 6.2 SEC Reports; Information. (a) The Company shall file with
------------------------
the SEC and, within 15 days thereafter, make available to the Holders, copies of
the annual report and of the information, documents and other reports specified
in Sections 13, 14 and 15(d) of the Exchange Act as being required of issuers
subject to the reporting requirements contained therein so long as the New
Subordinated Notes are outstanding (whether or not the Company would be required
to file such reports with the SEC in the absence of the requirements of this
Section 6.2(a)). In addition, the Company shall, upon the request of a Holder,
provide a prospective purchaser of the New Subordinated Notes with any reports
or information required to permit the sale of the New Subordinated Notes to a
Qualified Institutional Buyer pursuant to Rule 144A under the Securities Act.
(b) The Company shall promptly provide such other information
concerning the business, properties or financial condition of the Company and
its Subsidiaries as any Holder may reasonably request.
20
Section 6.3 Authorizations and Approvals. The Company shall and shall
----------------------------
cause its Subsidiaries to promptly obtain, from time to time at their own
expense, all such governmental and third party licenses, authorizations,
consents, permits and approvals as may be required to enable the Company to
comply in all material respects with its obligations under this Agreement, the
New Subordinated Notes and the Registration Rights Agreement.
Section 6.4 Limitation on Incurrence of Additional Debt by the Company
----------------------------------------------------------
and its Subsidiaries. The Company shall not and shall not permit any of its
--------------------
Subsidiaries to issue, assume, guarantee, incur or otherwise become liable,
directly or indirectly, in respect of (collectively, "issue") any Debt unless,
after such Debt is incurred (a) the ratio of (i) the sum of the consolidated net
income of the Company and its Subsidiaries before Total Interest Expense, Taxes,
depreciation and amortization and extraordinary and non-recurring gains and
losses for the most recent four preceding fiscal quarters for which financial
statements are available on the date of determination, taken as one period (the
"Measurement Period") to (ii) Total Interest Expense of the Company and its
Subsidiaries on a consolidated basis for the Measurement Period (after giving
effect, as of the beginning of the Measurement Period, to the incurrence of such
Debt and concurrent application of the net proceeds therefrom) would be greater
than 1.5 to 1.0 and (b) the ratio of total Debt to the Company's consolidated
tangible net worth would be less than 8.0 to 1.0.
Section 6.5 Tangible Net Worth. The Company shall not permit its
------------------
consolidated Tangible Net Worth as of the end of any fiscal quarter of the
Company to be less than the sum of $20,000,000 plus 50% of the net income of the
Company and its Subsidiaries on a consolidated basis commencing April 1, 1994.
Section 6.6 Limitation on Restricted Payments. The Company shall not,
---------------------------------
and will not permit any Subsidiary to make any Restricted Payment if (a)
immediately after giving effect to such Restricted Payment, the aggregate amount
of such Restricted Payments made from and after April 1, 1994 would exceed the
sum of (i) 50% of the aggregate net income of the Company after April 1, 1994
plus, (ii) $1.0 million or (b) the Company would not be permitted to incur
additional Debt under this Agreement.
Section 6.7 Limitation on Restrictions on Distributions from
------------------------------------------------
Subsidiaries. The Company shall not, and shall not permit any Subsidiary to,
------------
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (a) pay dividends
or make any other distributions to the Company or any Subsidiary on its Capital
Stock; (b) pay any indebtedness or other obligation owed to the Company or any
Subsidiary, including, without limitation, any amounts that may be owed pursuant
to a management agreement between the Company and one or more of its
Subsidiaries; (c) make any loans or advances to the Company or (d) transfer any
of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the date of this Agreement;
(ii) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt issued, assumed or incurred
by such Subsidiary on or prior to the date on which such Subsidiary was
acquired by the Company (other than Debt incurred by such Subsidiary in
connection with or in anticipation of its acquisition by the Company and
outstanding on such date);
(iii) any encumbrance or restriction pursuant to an agreement
effecting a refinancing, extension or replacement of or an amendment,
refunding, renewal or addition to Debt issued, assumed or incurred pursuant
to an agreement referred to in clause (i) or (ii) of this
21
Section; provided, however, that any such encumbrances or restrictions
-------- -------
contained in such refinancing, extension, replacement, amendment, refunding
or renewal or additional agreement are no less favorable to the Holders
than those encumbrances or restrictions under or pursuant to the agreements
referred to in clauses (i) or (ii) of this Section, respectively;
(iv) in the case of clause (iii) above, restrictions contained
in security agreements permitted by this Agreement securing Debt permitted
by this Agreement to the extent such restrictions restrict the transfer of
property subject to such security agreements;
(v) any encumbrance or restriction consisting of customary non-
assignment provisions in leases to the extent such provisions restrict the
transfer of the lease; and
(vi) restrictions on DVI Financial Services, Inc. or any other
Subsidiary in connection with a receivables securitization program.
Section 6.8 Restriction on Issuance of Preferred Stock. The Company
------------------------------------------
shall not and shall not permit any Subsidiary to issue any preferred stock other
than (a) to the Company in the case of a Subsidiary or (b) to a Subsidiary in
the case of the Company or another Subsidiary.
Section 6.9 Limitation on Sales of Assets and Subsidiary Stock. Other
--------------------------------------------------
than in the ordinary course of business, the Company shall not, and shall not
permit any Subsidiary to, make any Extraordinary Asset Dispositions.
Section 6.10 Limitation on Transactions with Affiliates. The Company
------------------------------------------
shall not and shall not permit any Subsidiary to, directly or indirectly,
knowingly (other than pursuant to contractual arrangements in effect on the date
hereof) conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Insider (other than a Wholly Owned
Subsidiary of the Company) unless the Board of Directors of the Company shall
have determined in good faith that the terms of such business, transaction or
series of transactions are as favorable to the Company or such Subsidiary as
terms that would be obtainable at the time for a comparable transaction or
series of similar transactions in arm's-length dealings with an unrelated third
person. The provisions of this Section shall not prohibit:
(i) the transactions contemplated by this Agreement, the New
Subordinated Notes and the Registration Rights Agreement;
(ii) the repurchase by the Company of shares of, or options to
purchase, Common Stock from officers, directors and employees of the
Company upon such officers', directors' or employees' death, disability,
retirement or termination or upon the vesting of stock rights;
(iii) the payment by the Company of registration expenses in
connection with the registration of shares of Common Stock pursuant to the
Registration Rights Agreement;
(iv) the making of payments, loans, advances or guarantees of
loans by third parties to officers and employees, for moving, recruitment,
retention, relocation and travel expenses and similar expenditures in the
ordinary course of business; and
(v) the payment of reasonable directors' fees.
22
Section 6.11 Limitation on Issuance of Other Subordinated Debt. The
-------------------------------------------------
Company shall not, directly or indirectly, issue, assume, guarantee, incur or
otherwise become liable for, any Debt that is subordinate or junior in ranking
in any respect to any other Debt of the Company unless such Debt is pari passu
---- -----
with or expressly subordinated in right of payment to the New Subordinated
Notes.
Section 6.12 Capitalization. The Company shall continue to own, directly
--------------
or indirectly, all of the Capital Stock of DVI Financial Services Inc.,
provided, however, that the Company and DVI Financial Services Inc. may merge
-------- -------
with each other.
Section 6.13 Payment of Principal and Interest. The Company covenants
---------------------------------
and agrees that it will duly and promptly pay or cause to be paid the principal
of, premium, (if any), and interest on each of the New Subordinated Notes at the
place or places, at the respective times and in the manner provided in this
Agreement and the New Subordinated Notes. All payments shall be made by
cashier's check or electronic wire transfer of immediately available United
States funds.
Section 6.14 Notice. The Company will notify each Holder immediately upon
------
receipt by the Company of any notice of knowledge by the Chairman of the Board,
the President, Chief Financial Officer or any other officer of the Company of an
Event of Default under any Senior Debt.
The Company will use its best efforts to give each Holder notice
immediately upon the occurrence of any event that would cause such Holder to be
required to file any Schedule or Form with respect to securities of the Company
pursuant to the Exchange Act.
Section 6.15 Inspection of Property. The Company, so long as the
----------------------
Noteholders shall hold any New Subordinated Note, will permit any person
designated by such a Noteholder in writing to be a person acting on that
Noteholder's behalf, to visit and inspect any of the properties of the Company
and any of the Company's Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the principal officers of the
Company, all at such reasonable times and as often as such Noteholders may
reasonably request.
Section 6.16 Corporate Existence, Licenses and Permits; Maintenance of
---------------------------------------------------------
Properties. So long as any of the New Subordinated Notes shall remain
----------
outstanding, the Company will at all times cause to be done all things necessary
to maintain, preserve and renew its existence as a corporation organized under
the laws of a state of the United States of America and will preserve and keep
in force and effect, and cause each of its Subsidiaries to preserve and keep in
force and effect, all licenses and permits necessary and material to the conduct
of its and their respective businesses, and will maintain and keep, its and
their respective properties in good repair, working order and condition (except
for normal wear and tear), and from time to time make all needful and proper
repairs, renewals and replacements, including without limitation all copyright
registration renewals, so that any business material to the Company carried on
in connection therewith may be properly conducted at all times.
Section 6.17 Taxes. So long as any of the New Subordinated Notes shall
-----
remain outstanding, the Company will duly pay and discharge, and will cause each
of its Subsidiaries duly to pay and discharge, all Taxes, assessments and
governmental charges upon or against the Company, its Subsidiaries or their
respective properties, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings and the Company shall
have set aside on its books adequate reserves with respect thereto.
Section 6.18 Insurance. So long as any of the New Subordinated Notes
---------
shall remain outstanding, the Company will apply for and continue in force, or
cause to be applied for and continued in
23
force, adequate insurance covering the respective risks of the Company and its
Subsidiaries of such types and in such amounts and with such deductibles as are
customary for other corporations engaged in similar lines of business and with
good and responsible insurance companies.
Section 6.19 Books and Accounts. The Company will, and will cause each
------------------
Subsidiary to, maintain proper books of record and account in which full, true
and correct entries shall be made of its transactions and set aside on its books
from its earnings for each fiscal year all such proper reserves as in each case
shall be required in accordance with GAAP.
Section 6.20 No "Prohibited Transaction". So long as any New
---------------------------
Subordinated Note shall remain outstanding, the Company will not, and will not
permit any Subsidiary to, enter into any transaction or take any action which
will result in any transaction contemplated by this Agreement becoming a
"prohibited transaction", as such term is defined under ERISA or in Section 4975
of the Code.
ARTICLE VII
CLOSING; CONDITIONS OF THE NOTEHOLDERS' OBLIGATIONS
---------------------------------------------------
Section 7.1 Closing. The closing of the exchange of Old Subordinated
-------
Notes for New Subordinated Notes (the "Closing") will take place at the offices
of ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at
10:00 A.M., New York City time, on August 1, 2001 or at such other time and
place as shall be agreed upon by the Noteholders and the Company (the "Closing
Date"). Upon satisfaction of the conditions set forth herein, on or prior to the
Closing Date each Noteholder shall deliver: (i) Old Subordinated Notes in the
principal amount listed next to the name of that Noteholder on Schedule 1 to the
----------
Company in proper form for transfer, in accordance with Article 8 of the Uniform
Commercial Code as in effect in the State of Illinois (or, if Old Subordinated
Notes have been lost, an affidavit of lost notes in the form of Exhibit F
---------
relating to the lost Old Subordinated Notes, accompanied by a document assigning
the lost Old Subordinated Notes to the Company) and (ii) a document, executed by
the Noteholder, in which the Noteholder states that the New Subordinated Notes
the Noteholder receives at the Closing are in full satisfaction of all
obligations of the Company to the Noteholder and all rights of the Noteholder
with respect to the Old Subordinated Notes being delivered, or which are the
subject of the affidavit of lost notes being delivered, by the Noteholder at the
Closing, including all rights and obligations pursuant to the registration
rights agreement entered into in connection with the Old Subordinated Notes and
all rights, contingent or otherwise, to receive warrants pursuant to the Note
Purchase Agreement. Upon satisfaction of the conditions set forth herein, on the
Closing Date the Company shall deliver to such Noteholder New Subordinated Notes
in the principal amounts shown opposite such Noteholder's name on Schedule 1.
----------
New Subordinated Notes issued to a Noteholder will be registered in the name of
that Noteholder and may bear a legend stating that they were issued in a
transaction that was not registered under the Securities Act and they may not be
sold or transferred except in a transaction that is registered under the
Securities Act or is exempt from the registration requirements of the Securities
Act.
Section 7.2 Conditions of the Noteholder's Obligations. The obligation
------------------------------------------
of each Noteholder to exchange their Old Subordinated Notes for New Subordinated
Notes at the Closing is subject to the satisfaction or waiver in writing of each
of the following conditions:
(a) Representations and Warranties; No Default. The representations
------------------------------------------
and warranties of the Company set forth in Article II shall be true in all
material respects at and as if repeated on and as
24
of the Closing Date, and on the Closing Date, after giving effect to the
transactions contemplated by this Agreement, a Default shall not have occurred.
(b) Absence of Certain Changes. Since March 31, 2001, there shall not
--------------------------
have occurred any material adverse change in the consolidated financial
condition, business operations or property of the Company and its Subsidiaries
(including any event which in the opinion of the Noteholders is likely to result
in such a material adverse change). Since March 31, 2001, (i) there shall not
have occurred any disposition of any material assets of the Company or any of
its Subsidiaries, other than in the ordinary course of business (or other than
as set forth on Schedule 7.2(b)(i), (ii) except as set forth on Schedule
7.2(b)(ii), there shall not have occurred since December 31, 2000, any material
net change in the capitalization (whether in debt or equity) or corporate
structure of the Company and its consolidated Subsidiaries, (iii) the Company
shall not have declared or paid any common stock dividend or purchased or
redeemed any shares of any class of its Capital Stock or set aside any amounts
for such purposes or made any other payment or distribution on or in respect of
any class of its Capital Stock and (iv) neither the Company nor any of its
Subsidiaries shall have made any agreement or commitment to issue any warrants
or rights or Capital Stock contemplating any event specified in clause (i), (ii)
or (iii) (except as aforesaid).
(c) Absence of Litigation. There shall be no pending or threatened
---------------------
action, suit, investigation, litigation or proceeding affecting the Company or
any of its Subsidiaries before any Governmental Authority ("Litigation") (i) in
which, in the reasonable opinion of the Noteholder, there is a reasonable
possibility of an adverse decision that could, (a) have a Material Adverse
Effect or (b) restrain, prevent or impose materially adverse conditions upon the
transactions contemplated by this Agreement or (ii) which purports to affect the
legality, validity or enforceability of this Agreement, the New Subordinated
Notes, or the Registration Rights Agreement, except in each case for the
Litigation specified on Schedule 7.2(c).
(d) Closing Papers; Opinions. The Noteholders shall have received the
------------------------
following, addressed to them and in form and substance reasonably satisfactory
to them:
(i) certified copies of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the New Subordinated Notes, the Registration
Rights Agreement and each of the other agreements, instruments and
transactions contemplated hereby;
(ii) certified copies of the certificate of incorporation and
by-laws of each of the Company and each of its Subsidiaries as in effect on
the Closing Date;
(iii) a certificate of the Secretary of the Company dated the
Closing Date, as to the incumbency and signatures of the Officers executing
this Agreement and all instruments executed pursuant hereto;
(iv) Officers' Certificates, dated as of the Closing Date of the
Company to the effect set forth in clauses (a), (b) and (c) of this Section
7.2; and
(v) the opinion of ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel
for the Company substantially in the form attached hereto as Exhibit G.
---------
(e) Registration Rights Agreement. The Noteholders shall have
-----------------------------
received the Registration Rights Agreement executed by the Company.
25
(f) Market Disruption. In the reasonable opinion of the Noteholders,
-----------------
there shall not have occurred and be continuing, nor shall there be any
likelihood of an occurrence (within a reasonably imminent period of time) of, a
material disruption of the financial markets, such as suspension of trading on a
national securities exchange (other than suspensions due to "circuit breakers"
or similar mechanisms) the imposition of a banking moratorium by federal or New
York State banking authorities, impairment of trading in non-investment grade
debt securities or commencement of armed hostilities or other international
calamity.
(g) Documentation; Legal Matters, etc. All matters relating to this
---------------------------------
Agreement, the New Subordinated Notes, the Registration Rights Agreement and the
transactions contemplated hereby and thereby and the legal and organizational
structure of the Company and its Subsidiaries shall be reasonably satisfactory
from a legal point of view to the Noteholders, and the Noteholders shall have
received such additional certificates, legal opinions and other documentation as
it may have reasonably requested with respect to this Agreement, the New
Subordinated Notes, the Registration Rights Agreement and the transactions
contemplated hereby and thereby, such legal and organizational structure and
compliance with the provisions of this Agreement, and applicable law, including
federal and stare securities and environmental laws. All corporate and other
proceedings taken or to be taken in connection with the issuance of the New
Subordinated Notes, the transactions contemplated hereby and thereby and all
documents incident hereto and thereto shall be reasonably satisfactory in form
and substance to the Noteholders and the Noteholders shall have received such
other documents relating to the transactions contemplated by this Agreement as
the Noteholders may have reasonably requested.
(h) Requisite Approvals. The Company shall have obtained all
-------------------
requisite consents of or approvals from federal, state and any other
Governmental Authority necessary to consummate the transactions contemplated by
this Agreement and issue the New Subordinated Notes and permit the utilization
of the proceeds of the New Subordinated Notes as described herein, except any
consents or approvals the failure of which to obtain would not have a Material
Adverse Effect.
(i) Compliance with Law; Margin Regulations. The issuance of, and the
---------------------------------------
exchange of Old Subordinated Notes for, the New Subordinated Notes shall not, in
the reasonable judgment of the Noteholders, violate any law or regulation or any
order or decree of any court or government instrumentality applicable to any
Noteholder or the Company, the violation of which would have a Material Adverse
Effect.
Section 7.3 Documents to be Delivered by the Noteholders at the Closing.
-----------------------------------------------------------
At or before the Closing, each Noteholder will deliver to the Company the
following:
(a) Old Subordinated Notes in the principal amount listed next to the
name of that Noteholder on Schedule 1 to the Company in proper form for
----------
transfer, in accordance with Article 8 of the Uniform Commercial Code as in
effect in the State of Illinois (or, if Old Subordinated Notes have been lost,
an affidavit of lost notes in the form of Exhibit F relating to any lost Old
---------
Subordinated Notes, accompanied by a document assigning the lost Old
Subordinated Notes to the Company);
(b) A document, executed by the Noteholder, in which the Noteholder
states that the New Subordinated Notes the Noteholder receives at the Closing
are in full satisfaction of all obligations of the Company to the Noteholder and
all rights that the Noteholder may have with respect to (i) the Old Subordinated
Notes being delivered, or which are the subject of the affidavit of lost notes
being delivered, by the Noteholder at the Closing, and (ii) the registration
rights agreement entered into pursuant to the Note Purchase Agreement and (iii)
warrants or other contingent rights granted to the Noteholder pursuant to the
Note Purchase Agreement;
26
(c) A copy, executed by the Noteholder, of the Note Exchange
Agreement;
(d) A letter stating that the Noteholder will be acquiring the New
Subordinated Notes that are being issued to it at the Closing for investment,
and not with a view to their resale or distribution; and
(e) A copy, executed by the Noteholder, of the Registration Rights
Agreement.
ARTICLE VIII
EVENTS OF DEFAULT OF NEW SUBORDINATED NOTES
Section 8.1 Events of Default. An "Event of Default" occurs if:
-----------------
(a) the Company defaults in the payment of the principal, or premium,
if any, of any of the New Subordinated Notes, when the same shall become due and
payable, whether at stated maturity, upon redemption, upon acceleration or
otherwise, including any failure by the Company to repurchase any of the New
Subordinated Notes when required pursuant to Section 4.4, whether or not such
payment is prohibited by Article IX;
(b) the Company defaults in the payment of any interest upon any of
the New Subordinated Notes or any other amount due hereunder, when the same
becomes due and payable, whether or not such payment is prohibited by Article
IX, and such default continues for 30 days;
(c) the Company fails to comply with Article X;
(d) the Company fails duly to observe or perform any of its other
respective covenants or agreements contained in any of the New Subordinated
Notes or this Agreement, and such failure continues for a period of 60 days
after the notice specified below; or
(e) Debt of the Company or any Subsidiary is not paid within any
applicable grace period after final maturity or is accelerated by the holders
thereof because of a default and the total amount of such debt unpaid or
accelerated exceeds $3,000,000, individually or in the aggregate, without such
Debt having been discharged, or acceleration having been rescinded or annulled,
within a period of 10 Business Days after there shall have been given, by
registered or certified mail, to the Company by the holders of at least 25% in
principal amount of the New Subordinated Notes a written notice specifying such
default and requiring the Company to cause such Debt to be discharged or to
cause such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default"; provided, however, that failure to pay Debt of any
Subsidiary established solely to securitize receivables on a non-recourse basis
shall not constitute an Event of Default under this clause (e) unless (i) the
amount of any restricted cash deposit made or committed to be made by the
Company or any of its Subsidiaries in respect of such Debt (in the case of any
single subsidiary) exceeds $7,500,000 or (ii) the Company or any of its
Subsidiaries defaults on any obligation to maintain restricted cash deposits
with respect to one or more of such special purpose Subsidiaries;
(f) the Company or any Subsidiary pursuant to or within the meaning of
any Bankruptcy Law:
(i) commences a voluntary case;
27
(ii) consents to the entry of an order for relief against it in
an involuntary case;
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(iv) makes a general assignment for the benefit of its
creditors;
(g) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company, or any Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any Subsidiary or
for any substantial part of its property; or
(iii) orders the winding up or liquidation of the Company or any
Subsidiary; and the order or decree remains unstayed and in effect for a
period ending on the 60th day following such order or decree;
(h) any judgment or decree for the payment of money in excess of
$1,000,000 (to the extent not covered by insurance or a bond) shall be rendered
against the Company or any Subsidiary and shall not be paid or discharged,
waived or the execution thereof stayed on appeal for a period ending on the 60th
day following such order or decree; or
(i) the Registration Rights Agreement shall cease to be in full force
and effect and valid (other than in accordance with its terms).
A Default under clause (d), (e), (h) or (i) is not an Event of Default until the
holders of at least 25% in principal amount of the New Subordinated Notes notify
the Company of the Default and the Company does not cure such Default within the
time specified after receipt of such notice. Such notice must specify the
Default, demand that it be remedied and state than such notice is a "Notice of
Default."
Section 8.2 Acceleration. If an Event of Default (other than pursuant
------------
to Section 8.1(f) or 8.1(g)) in each case, with respect to the Company occurs
and is discontinuing, the Holders of at least 25% in principal amount of the New
Subordinated Notes upon written notice to the Company may declare the principal
of and accrued interest on all the New Subordinated Notes to be due and payable
subject to the provisions of Section 9.3. Upon such a declaration the principal
of and accrued interest on the New Subordinated Notes shall be due and payable
immediately. Upon the occurrence of an Event of Default pursuant to Section
8.1(f) or 8.1(g) with respect to the Company, the principal of and accrued
interest to the date of acceleration on all the New Subordinated Notes shall
automatically become immediately due and payable without presentment, demand or
protest of any kind, all of which are expressly waived by the Company. The
Holders of a majority in principal amount of the New Subordinated Notes by
notice to the Company may rescind an acceleration and its consequences of the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of acceleration.
Section 8.3 Rights and Remedies Cumulative. No right or remedy herein
------------------------------
conferred upon or reserved to the Holders is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and
28
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall nor prevent the concurrent or subsequent assertion or
employment of any other appropriate right or remedy.
Section 8.4 Delay or Omission Not Waiver. No delay or omission of the
----------------------------
Holders to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Holders may be exercised from time to time, and as often as may
be deemed expedient, by the Holders.
Section 8.5 Waiver of Stay or Extension Laws. The Company covenants (to
--------------------------------
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of any Note; and the
Company (to the extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Holders but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 8.6 Waiver of Past Defaults. The Holders of a majority in
-----------------------
principal amount of the New Subordinated Notes then outstanding by notice to the
Company may waive any existing Default or Event of Default and its consequences
except a Default in the payment of the principal or interest on a Note. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any consequent right.
Section 8.7 Rights of Holders To Receive Payment. Notwithstanding any
------------------------------------
other provision of this Agreement or the New Subordinated Notes, the right of
any Holder to receive payment of principal of and interest on the New
Subordinated Notes held by such Holder, on or after the respective due dates
expressed in the New Subordinated Notes, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder other than during a Payment Blockage
Period (as defined in Section 9.3 below) in which case the terms and conditions
of Section 9.10 below shall govern.
ARTICLE IX
RANKING AND SUBORDINATION OF NEW SUBORDINATED NOTES
---------------------------------------------------
Section 9.1 Ranking; Agreement To Subordinate. The Company agrees, and
---------------------------------
each Holder by accepting a New Subordinated Note agrees, that the indebtedness
evidenced by the New Subordinated Notes and the other obligations of the Company
arising under or relating to this Agreement (a) shall rank pari passu in right
---- -----
of payment to any remaining Old Subordinated Notes and (b) are subordinated in
right of payment, to the extent and in the manner provided in this Article IX,
to the prior payment of all Senior Debt and that the subordination is for the
benefit of the holders of Senior Debt.
Section 9.2 Liquidation, Dissolution, Bankruptcy. Upon any payment or
------------------------------------
distribution of the assets of the Company to creditors in a total or partial
liquidation or a total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company or its property:
29
(a) holders of Senior Debt shall be entitled to receive payment in
full of the Senior Debt before the Holders of the New Subordinated Notes shall
be entitled to receive any payment of principal of, or premium, if any, or
interest on the New Subordinated Notes or the other obligations of the Company
arising under or relating to this Agreement; and
(b) until the Senior Debt is paid in full, any distribution (whether
in cash, securities or other property) to which the Holders (solely by virtue of
the fact that they are Holders) would be entitled but for this Article IX, shall
be made to holders of Senior Debt as their interests may appear, except that the
Holders may receive equity securities or debt securities that are subordinated
to Senior Debt to at least the same extent as the New Subordinated Notes.
Section 9.3 Default on Senior Debt. The Company may not pay principal
----------------------
of, premium (if any) or interest on the New Subordinated Notes or the other
obligations of the Company arising under or relating to this Agreement and may
not repurchase, redeem or otherwise retire or make any other reduction or
distribution with respect to all or any portion of any New Subordinated Notes
whether directly or indirectly, in cash or otherwise, whether by way of loan,
set-off or otherwise (collectively, "pay the New Subordinated Notes" or "make
payment or distribution on the New Subordinated Notes") if (i) any Senior Debt
is not paid when due or (ii) any other default on Senior Debt occurs and the
maturity of such Senior Debt is accelerated in accordance with its terms unless,
in either case, the default has been cured or waived, any such acceleration has
been rescinded or such Senior Debt has been paid in full; provided, however, the
Company may pay the New Subordinated Notes without regard to the foregoing if
the Company receives written notice approving such payment from the holder or
holders of the Senior Debt. During the continuance of a default (other than a
default described in clause (i) or (ii) of the previous sentence) with respect
to any Bank Debt pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the New Subordinated Notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the Company of written notice of such
default from the lead or agent bank with respect to any agreement under which
Bank Debt is outstanding specifying an election to effect such 180-day
prohibition (a "Payment Notice") and ending 180 days thereafter (or unless
earlier terminated (i) by written notice to the Company from the lead or agent
bank with respect to any agreement under which Bank Debt is outstanding or (ii)
because such default is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the lead or agent bank
with respect to any agreement under which Bank Debt is outstanding shall have
accelerated the maturity of the Bank Debt, the Company may resume payments on
the New Subordinated Notes after the end of such Payment Blockage Period. The
total number of days during which one or more Payment Notices shall be in effect
in any 360-day period shall not exceed 180 days, without regard to the number of
defaults with respect to Bank Debt during such period. No event of default
which had occurred and was continuing on the date of receipt by the Company of a
Payment Notice may be the basis for the delivery of a second Payment Notice
whether or nor within any consecutive 360-day period unless such event of
default shall have been cured or waived for a period of not less than 180
consecutive days.
Section 9.4 Acceleration of Payment of New Subordinated Notes. If the
-------------------------------------------------
payment of the New Subordinated Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt (if any) of
the acceleration. If any Senior Debt is outstanding, the Company may not pay the
New Subordinated Notes until ten days after such notice is received and,
thereafter, may pay the New Subordinated Notes only if this Article IX otherwise
permits the payment at that time.
Section 9.5 When Distribution Must Be Paid Over. If a distribution
-----------------------------------
(whether in cash, property or securities) is made to the Holders that because of
this Article IX should nor have been made
30
to them, the Holders who receive the distribution shall hold it in trust for
holders of Senior Debt and pay it over to them as their interests may appear.
Section 9.6 Subrogation. After all Senior Debt is paid in full and
-----------
until the Holders are paid in full, to the extent that holders of Senior Debt
have received cash, securities or other property in respect of the repayment of
Senior Debt, which cash, securities or other property, but for the provisions of
this Article IX would have been paid to the Holders, such Holders shall be
subrogated to any rights of holders of Senior Debt in collecting cash,
securities or other property in satisfaction of the obligations of the Company
to the Holders hereunder and under the New Subordinated Notes. For the purposes
of such subrogation, a distribution made under this Article IX to holders of
Senior Debt which otherwise would have been made to the Holders is not, as
between the Company and the Holders, a payment by the Company on Senior Debt.
Section 9.7 Relative Rights. This Article IX defines the relative
---------------
rights of the Holders and holders of Senior Debt. Nothing in this Agreement
shall:
(a) impair, as between the Company and the Holders, the obligation of
the Company which is absolute and unconditional, to pay principal of, premium,
if any, and interest on the New Subordinated Notes in accordance with their
terms; or
(b) prevent any Holder from exercising its available remedies upon a
Default (other than during a Payment Blockage Period), subject to the rights of
holders of Senior Debt to receive distributions otherwise payable to the
Holders.
Section 9.8 Subordination May Not Be Impaired by Company. No right of
--------------------------------------------
any holder of Senior Debt to enforce the subordination of the indebtedness
evidenced by the New Subordinated Notes shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Agreement.
Section 9.9 Distribution or Notice to Representative. Whenever a
----------------------------------------
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representatives (if any).
Section 9.10 Article IX Not To Prevent Events of Default or Limit Right
----------------------------------------------------------
To Accelerate. The failure to make a payment pursuant to the New Subordinated
-------------
Notes by reason of any provision in this Article IX shall not be construed as
preventing the occurrence of a Default. Nothing in this Article IX shall have
any effect on the right of the Holders to accelerate the maturity of the New
Subordinated Notes; provided, however, that, except for the rights of Holders to
accelerate the Maturity of the New Subordinated Notes and their right to file
proofs of claims in pending bankruptcy or similar proceedings, during a Payment
Blockage Period, no Holder shall or shall be entitled to take any action with
respect to the collection of all or any portion of the New Subordinated Notes or
other payment obligations arising under or relating to this Agreement or the
enforcement of any rights, powers or remedies hereunder relating to the payment
to the Holders of amounts due hereunder and under the New Subordinated Notes, or
file any bankruptcy petition, commence any lawsuit, attachment or lis pendens or
take any similar action with respect to the payment of amounts due hereunder and
under the New Subordinated Notes. Nothing contained in this Article IX shall
prevent the Holders from exercising any other rights (to the extent not
inconsistent with Article IX) granted hereunder and under the New Subordinated
Notes with respect to non-payment related obligations, including, without
limitation, rights under Article V hereof and under the Registration Rights
Agreement.
Section 9.11 Reliance by Holders of Senior Debt on Subordination
---------------------------------------------------
Provisions.
----------
31
(a) Each Holder by accepting a New Subordinated Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the New
Subordinated Notes, to acquire and continue to hold, or to continue to hold,
such Senior Debt and such holder of Senior Debt shall be deemed conclusively to
have relied on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Debt.
(b) This Article IX, the subordination effected hereby, and the rights
of the holders of Senior Debt the obligations of each Holder arising hereunder,
shall not be affected, modified or impaired in any manner or to any extent by
(i) any amendment, modification or termination of or supplement to the Credit
Agreements or any agreement, instrument or document executed or delivered
pursuant thereto or any other document relating to or creating Senior Debt, (ii)
the validity or enforceability of any such documents, or (iii) the release,
sale, exchange or surrender in whole or in part of any collateral security, now
or hereafter existing, for any of the Senior Debt, now or hereafter arising, or
(iv) any exercise or non-exercise of any right, power or remedy under or in
respect of the Senior Debt or any of the instruments and documents referred to
in clause (i) above, now or hereafter arising, or arising at law, or (v) any
waiver, consent, release, indulgence, extension, increase, renewal,
modification, delay or other action, inaction, or omissions in respect to the
Senior Debt or any of the instruments and documents referred to in clause (i)
above now or hereafter arising, or any collateral security relating thereto, in
each case whether or nor any Holder shall have had notice or knowledge of any of
the foregoing and whether or not it shall have consented thereto, and none of
the foregoing shall give rise to any right or claim of any kind in favor of the
Holders against the holders of Senior Debt in respect of any right of
subrogation arising hereunder.
ARTICLE X
CONSOLIDATION, MERGER AND SALE
------------------------------
The Company shall not merge or consolidate with any person and will not
sell, lease or convey all or substantially all of its assets to any person,
unless the Company shall be the surviving entity or the successor entity that
acquires all or substantially all of the assets of the Company or any
Subsidiary, as the case may be, shall be a corporation, partnership or limited
liability company or trust organized under the laws of the United States or a
State therein or the District of Columbia and such entity shall expressly assume
in writing all obligations of the Company under this Agreement, the New
Subordinated Notes and the Registration Rights Agreement. The Company shall not
and shall not permit any Subsidiary to merge or consolidate with any person and
will nor sell, lease or convey all or substantially all of its assets to any
person unless immediately after giving effect to such merger, consolidation,
sale, lease or conveyance (a) no Event of Default, and no event which, after
notice or lapse of time would become an Event of Default, shall have happened
and be continuing and (b) the Company would be able to incur at least $1.00 in
Debt without violating the terms of any agreement or instrument to which it is a
party.
ARTICLE XI
TRANSFER OF THE NEW SUBORDINATED NOTES
--------------------------------------
Section 11.1 Transfer of the New Subordinated Notes. The Noteholder shall
--------------------------------------
not sell, transfer, assign or convey the New Subordinated Notes to any person
unless such transfer is made pursuant to an available exemption from
registration under, or otherwise in compliance with, the Securities Act and
applicable share securities laws.
32
Subject to the preceding sentence, the Noteholders shall not be prohibited
or limited in any respect from transferring any New Subordinated Note to or
among Affiliates of the Noteholders or pledging any such Note to a commercial
bank or other institutional lender or granting a participation in any such Note.
Each Noteholder hereby severally covenants and agrees that it will not
consent to any amendment of any participation agreement pursuant to which it
grants a participation in any New Subordinated Note that will amend the
provision thereof permitting such Noteholder to call or repurchase such
participation or a call or repurchase price equal to 100% of the principal
amount thereof.
Section 11.2 Registration of Transfer. Each New Subordinated Note shall
------------------------
be issued in registered form. Ownership of a New Subordinated Note shall be
proved by the register to be maintained pursuant to Section 11.3, and a New
Subordinated Note shall be transferable only upon the surrender of such note for
registration of transfer and subject to Section 3.2, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the Holder
thereof or such Holder's attorney duly authorized in writing. Upon surrender of
any New Subordinated Note for registration of transfer, the Company will execute
and deliver in exchange therefor a replacement New Subordinated Note, as the
case may be, of the same tenor and registered as such Holder may request. The
Company may require payment by such Holder of a sum sufficient to cover any
stamp Tax or governmental charge imposed in respect of any such transfer. Prior
to due presentment for registration or transfer of any New Subordinated Note,
the Company or any paying agent for the New Subordinated Notes, or any registrar
or co-registrar for the New Subordinated Notes may deem and treat the person in
whose name a New Subordinated Note is registered as the absolute owner of such
note for all purposes whatsoever, and none of the Company or such paying agent,
or such registrar or co-registrar shall be affected by notice to the contrary.
Section 11.3 Register. The Company shall maintain a register of the
--------
Holders of all the New Subordinated Notes issued pursuant to this Agreement. The
Company will allow any Holder of a New Subordinated Note to inspect and copy
such list at the Company's principal place of business during normal business
hours.
ARTICLE XII
INDEMNITY
---------
The Company agrees to indemnify each Noteholder, and its shareholders,
partners, directors, officers, employees, Affiliates and agents (collectively,
"Indemnified Persons") against, and agree to hold each such Indemnified Person
harmless from, any and all losses, claims, damages and liabilities, including
direct or derivative claims brought by any stockholder or former stockholder of
the Company and related expenses, including reasonable counsel fees and
expenses, incurred by such Indemnified Person arising out of, in any way
connected with, or as a result of (i) the consummation of the transactions
contemplated by this Agreement or the New Subordinated Notes or, (ii) the use of
any of the proceeds of the New Subordinated Notes by the Company or the
consummation of the transactions contemplated by this Agreement, (iii) the
performance by the parties hereto of their respective obligations hereunder or
(iv) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or nor any Noteholder or any such person is a party thereto;
provided, however, that such indemnity shall not apply to any such losses,
claims, damages, liabilities or related expenses finally determined by a court
of competent jurisdiction to have arisen from the gross negligence or willful
misconduct of such Indemnified Person; provided further, however, the indemnity
set forth in this Article shall not apply to losses, claims, damages or
liabilities relating to (i) the payment or withholding of Taxes
33
or (ii) the actual or alleged failure by the Company to make any payment on the
New Subordinated Notes, whether of interest or principal or at maturity or
otherwise or any other breach by the Company of any representation, warranty or
covenant under this Agreement, the Registration Rights Agreement, the Warrant
Agreement, the Warrant Registration Rights Agreement or the New Subordinated
Notes. If any litigation or proceeding is brought against any Indemnified Person
in respect of which indemnity may be sought against the Company pursuant to this
Article, such Indemnified Person shall promptly notify the Company in writing of
the commencement of such litigation or proceeding, but the omission so to notify
the Company shall not relieve the Company, from any other obligation or
liability which it may have to any Indemnified Person otherwise than under this
Article XII unless the Company is materially prejudiced thereby. In case any
such litigation or proceeding shall be brought against any Indemnified Person
and such Indemnified Person shall notify the Company of the commencement of such
litigation or proceedings, the Company shall be entitled to participate in such
proceedings, and, after written notice to such Indemnified Person, will have the
right to assume control of any litigation for which indemnification is sought
and no settlement of any claim may be agreed to without the prior written
consent of the Company. However, any Indemnified Person shall have the right to
hire its own counsel for any reason; provided, however, that the fees and
expenses of such counsel shall be at the Indemnified Person's own expense unless
(a) the Company has agreed to pay such fees and expenses or (b) the Company
shall have failed properly to assume the defense in such action or proceeding
and employ counsel reasonably satisfactory to such Indemnified Person in any
such action or proceeding or (c) either (x) the named parties to such action or
proceeding include such Indemnified Person and the Company or such Indemnified
Person shall have been advised in writing by counsel reasonably satisfactory to
the Company that there may be one or more legal defenses available to such
Indemnified Person which are different from or in addition to those available to
the Company or (y) such Indemnified Person concludes that taking into account
the position of such Indemnified Person (or any Affiliate) as a lender to the
Company such Indemnified Person reasonably believes that it is advisable for
such Indemnified Person to employ separate counsel on its behalf, recognizing
that in such case the Company and its counsel shall remain primarily responsible
for the overall strategic control and direction of such action or proceeding. In
any case referred to in (b) or (c) above, if such Indemnified Person notifies
the Company in writing that it elects to employ separate counsel at the expense
of the Company, the Company shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Person, it being
understood, however, that the Company shall not in connection with any one such
action or proceeding, or separate but substantially similar proceedings or
related actions or proceedings arising out of the same general allegations or
circumstances be liable for the fees and expenses of more than one separate firm
of attorneys, together with appropriate local counsel (but not more than one
separate fin of attorneys per state), at a time for all Indemnified Persons. The
foregoing indemnity shall remain operative and in full force and effect
regardless of the expiration of the term of this Agreement, the consummation of
the transactions contemplated by this Agreement, the repayment of any of the New
Subordinated Notes, the invalidity or unenforceability of any term or provision
of this Agreement, the New Subordinated Notes any investigation made by or on
behalf of any Indemnified Person or the Company and the content or accuracy of
any representation or warranty made under this Agreement. All amounts due under
this Article XII shall be payable as incurred upon written demand therefor. The
provisions of this Article XII shall not apply to matters arising under the
Registration Rights Agreement.
ARTICLE XIII
MISCELLANEOUS
-------------
Section 13.1 Expenses: Documentary Taxes. The Company agrees to pay (a)
---------------------------
all reasonable out-of-pocket expenses of the Noteholders, including the
reasonable fees and disbursements of counsel for the Noteholders, in connection
with the negotiation and preparation of this Agreement and all
34
additional and subsequent documentation contemplated hereby, any waiver or
consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder, (b) if a Default occurs, all
reasonable out-of-pocket expenses incurred by the Noteholders, including fees
and disbursements of counsel, in connection with such Default and collection and
other enforcement proceedings resulting therefrom, including, without
limitation, costs and expenses incurred in a bankruptcy case and (c) the
reasonable out-of-pocket expenses of holders of participations in New
Subordinated Notes or New Subordinated Notes in connection with any waiver or
consent hereunder or any Default or alleged Default hereunder. Notwithstanding
the foregoing, (i) in any instance, the Company will pay the reasonable fees and
expenses of only one counsel and one local counsel and (ii) if more than one
Holder retains counsel and requests reimbursement, the Company will pay
reasonable fees and expenses only of counsel (and local counsel) for the holder
of the largest aggregate principal amount of New Subordinated Notes outstanding.
The Company shall indemnify the Noteholder against any transfer Taxes,
documentary Taxes, assessments or charges made by any governmental authority by
reason of the execution of this Agreement and delivery of the New Subordinated
Notes. The obligations of the Company under this Section 13.1 shall survive
transfer by the Noteholder of the New Subordinated Notes.
Section 13.2 Notices. All notices and other communications pertaining to
-------
this Agreement, the Note shall be in writing and shall be deemed to have been
duly given upon the receipt thereof by the other party. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid:
If to a Noteholder, to the address set forth below its
name on the signature pages hereto.
(i) If to the Company:
DVI, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or to such other person or address as shall be furnished to the other party in
writing.
Section 13.3 Consent to Amendments and Waivers. The provisions of this
---------------------------------
Agreement including, without limitation, the covenants of the Company contained
in Article VI, may be amended and the Company may take any action herein
prohibited, or omit to perform any action herein required to be performed by it,
only if the Company has obtained the written consent of a majority in aggregate
principal amount of the outstanding New Subordinated Notes; provided, however,
that no amendment, modification or waiver shall be effective unless consented to
in writing by the Holder of such Note if such amendment, modification or waiver
would (a) modify any requirement hereunder that any specified action be taken by
Holders of a specified percentage of the principal amount of the New
Subordinated Notes shall be effective unless consented to by such percentage of
Holders, (b) change the due date for, or reduce the amount of, any payment or
prepayment of principal of or premium or interest on any Note (or reduce the
principal amount; premium on, of or rate of interest on any Note), (c) change
the place or
35
currency of payment of principal of, or premium or interest on any Note, (d)
impair the right to institute legal proceedings for the enforcement of any
payment on or with respect to any Note on or after the occurrence of a
Redemption Event or (e) modify the subordination provisions in a manner adverse
to the Holders of the New Subordinated Notes. No course of dealing between the
Company and the Noteholder or any subsequent Holder of any Note or any delay in
exercising any rights hereunder or under any Note shall operate as a waiver of
any rights of the Noteholder or any subsequent Holder. Any consideration given
to any Holders to obtain its consent shall be given pro rata to all such holders
--- ----
of a Note or New Subordinated Notes whether or not they give consent. Each
holder of any Note at the time or thereafter outstanding shall be bound by any
consent authorized by this paragraph, whether or not such Note shall have been
marked to indicate such consent, but any Note issued thereafter may bear a
notation referring to any such consent. The foregoing notwithstanding, the
parties hereto agree that they will not amend, modify or supplement (i) Article
IX hereof, (ii) Section 8.7 hereof, (iii) Article IX indirectly by amending or
modifying any of the following defined terms: Debt, Senior Debt, Bank Debt,
Banks, Credit Agreements, or Guarantee or (iv) this sentence. In addition, this
Agreement, shall not be amended in any manner that would adversely affect the
interest of the lenders or any new lenders under the Credit Agreements as such
agreements are in effect on the date hereof (including any provision contained
in any amendment to or replacement of the Credit Agreements which are the same
in all material respects as a provision contained in that agreement on the date
hereof).
Section 13.4 Parties. This Agreement shall inure to the benefit of and
-------
be binding upon the parties hereto, each subsequent Holder and each of their
respective successors. Nothing expressed or mentioned in this Agreement (other
than Article IX) is intended or shall be construed to give any person, other
than the parties hereto and their respective successors, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the parties hereto, any
subsequent Holder and their respective successors, and for the benefit of no
other person. Notwithstanding the foregoing and subject to Section 3.2 of this
Agreement, a Noteholder may, without the consent of the Company grant
participations in the New Subordinated Notes; provided, however, that Article
XII and Section 13.1(c) will not inure to the benefit of each person purchasing
a participation in a Note unless such person is an Affiliate of a Noteholder.
Notwithstanding anything to the contrary in this Agreement, the representations
and warranties contained in this Agreement are for the sole benefit of the
Noteholders and any Affiliate of the Noteholders to which any Noteholder
transfers the New Subordinated Notes in accordance with this Agreement.
Section 13.5 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of Illinois but without
giving effect to applicable principles of conflicts of laws to the extent that
the application of the laws of another jurisdiction would be required thereby.
Section 13.6 JURISDICTION AND VENUE. THE COMPANY HEREBY AGREES THAT ALL
----------------------
ACTIONS OR PROCEEDINGS INITIATED BY THE COMPANY AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THE LENDING DOCUMENTS SHALL BE LITIGATED IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OR IN THE EVENT SUCH COURT
CANNOT OR WILL NOT EXERCISE JURISDICTION, IN THE CIRCUIT COURT IN AND FOR THE
COUNTY OF ▇▇▇▇, ILLINOIS, OR, IF LENDER INITIATES SUCH ACTION, IN ADDITION TO
THE FOREGOING COURTS, ANY OTHER COURT IN WHICH LENDER SHALL INITIATE SUCH
ACTION, TO THE EXTENT SUCH COURT HAS JURISDICTION. THE COMPANY HEREBY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND AGREES THAT SERVICE OF SUCH
SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR
36
CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS TO WHICH NOTICES ARE TO
BE SENT PURSUANT TO SECTION 13.2. THE COMPANY WAIVES ANY CLAIM THAT UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OR THE CIRCUIT COURT
IN AND FOR THE COUNTY OF ▇▇▇▇, ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. SHOULD THE COMPANY, AFTER BEING SO SERVED, FAIL
TO APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, THE
COMPANY SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED
FOR THE LENDER AGAINST THE COMPANY AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR THE COMPANY SET
FORTH IN THIS SECTION 13.6 SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT, BY
THE LENDER, OR ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE TAKING, BY THE
LENDER, OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE JURISDICTION.
Section 13.7 Replacement New Subordinated Notes. If any New Subordinated
----------------------------------
Note becomes mutilated and is surrendered by the Holder thereof to the Company
or if the Holder thereof claims that any New Subordinated Note has been lost,
destroyed or wrongfully taken, the Company shall execute and deliver to such
Holder a replacement New Subordinated Note, upon the affidavit of the Holder
thereof attesting to such loss, destruction or wrongful taking with respect to
such note. Such affidavit shall be accepted as satisfactory evidence of the
loss, wrongful taking or destruction thereof and no indemnity shall be required
as a condition of the execution and delivery of a replacement New Subordinated
Note (except if the Holder is (a) not the Noteholder or any Affiliate of the
Noteholder and (b) not a credit worthy institutional investor in the reasonable
judgment of the Company). The Company may charge the Holder of any mutilated,
lost, destroyed or wrongfully taken New Subordinated Note for expenses incurred
by it in replacing such note.
Section 13.8 Severability Clause. In case any provision in this
-------------------
Agreement or any New Subordinated Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and such
provision shall be ineffective only to the extent of such invalidity, illegality
or unenforceability.
Section 13.9 Representations, Warranties and Agreements To Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in or
--------
incorporated into this Agreement, or contained in certificates of officers of
the Company submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Noteholder or any controlling person of any Noteholder, or by or on behalf of
the Company, and shall survive delivery of the New Subordinated Notes and any
transfer thereof other than any such transfer subsequent to the effectiveness of
a registration statement under the Securities Act (except with respect to any
representation or warranty which the Noteholders have knowledge is untrue and
have waived in writing); provided, however, that if the representations and
-------- -------
warranties set forth in this Agreement shall be untrue, the Noteholders' claim
for damages against the Company shall be subordinated to Senior Debt to the same
extent as the New Subordinated Notes.
37
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
THE COMPANY:
-----------
DVI, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
38
THE NOTEHOLDERS:
---------------
▇▇▇▇▇▇ ▇. AND ▇▇▇▇▇▇ ▇. ▇▇▇▇
MEMORIAL FOUNDATION
By: *
---------------------------------------------
Name:
Title:
Fleet Bank/formerly known as Summit Bank
as Trustee for the Hannah & ▇▇▇▇▇▇ ▇.
▇▇▇▇ Memorial Foundation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
▇▇▇▇▇▇▇ FAMILY VENTURES
By: *
----------------------------------------------
Name:
Title:
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Bank: Chase Manhattan Bank
City: New York City, New York
ABA#: 021 000 021
Acct#: 066 92 221
Acct. Name: National Financial Services,
Inc.
39
GRANITE CAPITAL, L.P.
By: *
----------------------------------------------
Name:
Title:
▇▇▇ ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CANADIAN IMPERIAL BANK OF COMMERCE TRUST COMPANY
(BAHAMAS) LIMITED,
as Trustee of Settlement T-1740 Trusts #▇▇, #▇▇,
#▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇ and #36
By: *
----------------------------------------------
Name:
Title:
Bank of New York
New York, NY
ABA#: 021 000 018
Acct: ▇▇▇-▇▇▇▇-▇▇▇
Attention: Domestic Money Transfer For
Credit To International Clearing Associates.
Acct#: T-1740
*
-------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Unit 18 - E
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o ▇▇▇▇▇-Craft Industries
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
40
*
-------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Trustee
*
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Bank: Northern Trust
City: Chicago, IL
ABA#: 071 000 152
Acct#: G/L acct# 5186011000
Name:
Ref: For credit to A/C 23-05004
*
-------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇.# ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, JTWROS
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
41
*
-------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Revocable Trust
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
S.L.K. Retirement Trust
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust
c/o ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
*
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇-▇▇▇▇▇ RESIDUARY TRUST
By: *
----------------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Co-Trustee
Title:
c/o Neal, Gerber & ▇▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esquire
*Executed by Power of Attorney
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President and Chief Financial Officer, DVI, Inc.
42
SCHEDULE 1
----------
=====================================================================================================
Principal Amount Principal Amount
Name of Noteholder of Old Subordinated Notes of New Subordinated Notes
------------------ -------------------------- -------------------------
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇ Memorial $ 200,000 $ 200,000
Foundation
-----------------------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce Trust 7,600,000 7,600,000
Company, as Trustee of Settlement T-1740
Trusts #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇,
#▇▇, #▇▇, #▇▇ and #36
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ Family Ventures 100,000 100,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,000,000 1,000,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 100,000 100,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 500,000 500,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust 800,000 800,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ 250,000 250,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 200,000 200,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, JTWROS 100,000 100,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000 100,000
-----------------------------------------------------------------------------------------------------
S.L.K. Retirement Trust 100,000 100,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust 400,000 400,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ 100,000 100,000
-----------------------------------------------------------------------------------------------------
Granite Capital, L.P. 2,000,000 2,000,000
-----------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇-▇▇▇▇▇ Residuary Trust 200,000 200,000
=====================================================================================================
Schedule 2.4 - Conflicts
------------------------
None.
Schedule 2.7 - Capitalization
-----------------------------
The following table sets forth the capitalization and short-term bank
borrowings of the Company at March 31, 2001 and as adjusted to reflect the
issuance of the New Subordinated Notes offered hereby.
As of March 31, 2001
--------------------------
As
Actual Adjusted
---------- -----------
(in thousands)
Borrowings under warehouse facilities $ 356,179 $ 356,179
Long-term debt:
Discounted Receivables (primarily limited recourse) 474,547 474,547
9 7/8% Senior Notes due 2004 155,000 155,000
Other debt 64,712 64,712
Old Subordinated Notes/(1)/ 13,750 ---
New Subordinated Notes Due 2004/(1)/ --- 13,750
----------- -----------
Total debt 1,064,188 1,064,188
----------- -----------
Shareholders' equity:
Preferred Stock, $10.00 par value: 100,000 shares authorized,
no shares issued --- ---
Common Stock, $.005 par value: 25,000,000 shares authorized:
14,325,021 issued and outstanding 72 72
Additional capital 136,606 136,606
Retained earnings 95,174 95,174
Accumulated other comprehensive loss (13,341) (13,341)
----------- -----------
Total shareholders' equity 218,511 218,511
----------- -----------
Total shareholders' equity and debt $1,282,699 $1,282,699
=========== ===========
__________
(1) Assumes that all Old Subordinated Notes are exchanged for New Subordinated
Notes.
Schedule 2.9 - Absence of
Certain Changes or Events
-------------------------
None.
Schedule 2.11 - Credit Agreement
Representations and Warranties
------------------------------
None.
Schedule 7.2(c) - Litigation
----------------------------
None.
EXHIBIT A
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and neither the securities
nor any interest therein may be sold, transferred, pledged or otherwise
disposed of in the absence of such registration or an exemption under such
Act and the rules and regulations thereunder. The transfer of such
securities is subject to the restrictions set forth in Article XI of that
certain Note Exchange Agreement, dated August 1, 2001, among DVI, Inc. and
the Noteholders listed on the signature pages thereto, copies of which are
available for inspection at the offices of DVI, Inc., and such securities
may be transferred only in compliance with the terms and conditions of said
Article XI of said Note Exchange Agreement.
_________________
9 1/8 % Convertible Subordinated Note
Due 2004
No. ___
$ _________ _________, 2001
FOR VALUE RECEIVED, the undersigned, DVI, Inc. (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, hereby promises to pay to _______________________________or registered
assigns, at the place set forth in the Agreement (as hereinafter defined) the
principal sum of __________ Dollars on ________, 2004, with interest (computed
on the basis of a 360-day year of twelve 30-day months) on the unpaid balance
thereof from the date of issuance thereof until ________, 2004 or until the
principal thereof shall have become due and payable, at the rate of 9 1/8% per
annum, payable quarterly on __________, __________, __________ and __________ in
each year, commencing _________, 2001; provided, however, that to the extent
permitted by law interest shall be due and payable on any overdue installment of
principal or interest at a rate of 11 1/8% per annum from the date such payment
was due, payable on demand. This Note is subject to optional redemption at the
times, in the amounts and subject to the conditions set forth in the Agreement.
Payments of both principal and interest are to be made by wire transfer to
[____________________], or in such other manner or to such other place in the
United States of America as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
This Note is one of a duly authorized issue of 9 1/8% Convertible
Subordinated Notes due _______, 2004 of the Company, originally issued pursuant
to a Note Exchange Agreement (the "Agreement") dated ______, 2001, among the
Company and the signatories listed on the signature pages to the Agreement, and
is entitled to the benefit of the Agreement, and each holder of this Note, by
his acceptance hereof, agrees to be bound by the provisions of the Agreement. As
provided in the Agreement, (i) this Note is subject to redemption, in whole or
in part, as specified in such Agreement, (ii) the payment of the principal of,
premium, if any, and interest on this Note is expressly subordinated on the
terms and conditions set forth in the Agreement to the payment of all Senior
Debt, as defined in the Agreement, and (iii) this Note may be transferred only
upon fulfillment by the Company and the holder hereof of conditions specified in
the Agreement.
As provided and subject to the restrictions on transfer set forth in the
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or his attorney duly authorized in writing, a new
Note for a
like principal amount will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Note is registered as the owner hereof
for the purpose of receiving payment and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
This Note shall be governed by and enforced in accordance with the laws of
the State of Illinois without regard to the conflict of laws principles thereof.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Agreement or be placed in the
hands of attorneys for collection, the Company agrees to pay, in addition to the
principal, premium, if any, and interest due and payable hereon, all costs of
collecting this Note, including reasonable attorney's fees and expenses.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, this Note may be declared due and payable in the amount, in the
manner and with the effect provided in the Agreement.
DVI, INC.
By:_________________________
Title:_____________________
A-2
EXHIBIT B
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
Registration Rights Agreement (the "Agreement"), dated as of ________,
2001, by and among DVI, Inc., a Delaware corporation (the "Company"), and the
Persons (other than the Company) who execute this Agreement on the signature
pages hereto.
R E C I T A L S:
---------------
This Agreement is made pursuant to the Note Exchange Agreement, dated as of
the date hereof (the "Exchange Agreement") by and among the Company and the
signatories thereto, which provides for the issuance of up to an aggregate of
$13,750,000 principal amount of 9 1/8% Convertible Subordinated Notes due 2004
(the "Notes") in exchange for up to an aggregate of $13,750,000 principal amount
of 9 1/8% Convertible Subordinated Notes due 2002 (the "Old Subordinated Notes")
issued pursuant to the Note Purchase Agreement dated as of June 21, 1994 among
the Company and the purchasers listed on the signature pages thereto (the "Note
Purchase Agreement"). The Notes are convertible at the option of the Holders
thereof into shares of common stock of the Company, par value $.005 (the "Common
Stock") at the rate of $10.60 per share, subject to adjustment. The shares of
Common Stock into which the Notes are convertible are referred to herein as the
"Shares". In order to induce the Holders to enter into and perform their
respective obligations under the Exchange Agreement, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution of
this Agreement is a condition to the closing under the Exchange Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Common Stock" has the meaning set forth in the Recitals.
------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar or successor federal statute and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect at the time.
"Exchange Agreement" has the meaning set forth in the Recitals.
------------------
"Holder" means a Person (other than the Company) who executes this
------
Agreement on the signature pages hereto and any Person who becomes a Holder
after the date of this Agreement pursuant to Paragraph 9(a).
"Indemnified Party" has the meaning set forth in Paragraph 4(c).
-----------------
"Indemnifying Party" has the meaning set forth in Paragraph 4(c).
------------------
"Initiating Group" shall mean one or more holders of Registrable
----------------
Securities which represent in the aggregate a Majority of the Registrable
Securities.
"Majority of the Registrable Securities" shall mean a majority of the
--------------------------------------
Registrable Securities which are outstanding as of the date of this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
----
"Note Purchase Agreement" has the meaning set forth in the Recitals.
-----------------------
"Notes" has the meaning set forth in the Recitals.
-----
"Old Subordinated Notes" has the meaning set forth in the Recitals.
----------------------
"Person" means an individual, partnership, corporation, limited
------
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof, or any other entity of any kind.
"Registrable Securities" means (i) the Shares; (ii) the shares of
----------------------
Common Stock and other securities into which the Shares are convertible from
time to time; (iii) the shares of Common Stock issued or issuable as dividends
on the Shares; (iv) any other security issued in exchange for any of the Shares;
and (v) any other securities deemed included in the term "Registrable
Securities" pursuant to Paragraph 8 hereof, in each case until any such security
ceases to be a Registrable Security in accordance with Paragraph 2(a) hereof.
"Registration Expenses" means all expenses incident to the Company's
---------------------
performance of or compliance with Paragraphs 3 of this Agreement, including
without limitation all registration and filing fees, including fees with respect
to filings required to be made with any stock exchange or the NASD, fees and
expenses of compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), messenger, telephone and delivery
expenses, and the fees and expenses of counsel for the underwriter, costs of
printing prospectuses, and fees and disbursements of counsel for the Company and
of all independent certified public accountants of the Company (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance).
"Registration Statement" means any registration statement of the
----------------------
Company which includes any of the Registrable Securities pursuant to the
provisions of this Agreement, including the prospectus included or deemed
included in the Registration Statement and all amendments and supplements to the
Registration Statement or the prospectus, including post-effective amendments,
and all exhibits to, all materials incorporated by reference in, the
Registration Statement.
"SEC" means the United States Securities and Exchange Commission or
---
any similar agency then having the authority to enforce the Exchange Act or the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar or successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all fees and expenses of underwriters
----------------
including discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Securities.
"Stockholder" means any holder of equity securities issued by the
-----------
Company.
"Shares" has the meaning set forth in the Recitals.
------
2. Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. The securities entitled to the benefits
----------------------
of this Agreement are the Registrable Securities, but such benefits shall
continue with respect to each such security only so long as such security
continues to be a Registrable Security. A security ceases to be a Registrable
Security when (i) a Registration Statement covering the sale of such Registrable
Security has been declared
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effective under the Securities Act and the Registrable Security has been sold in
accordance with the Registration Statement; (ii) it is distributed to the public
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act; (iii) a new certificate representing such security has been
delivered (to the original Holder or any subsequent transferee) by the Company
free from any restrictive legend and without issuance of stop transfer or other
instructions to the Company's transfer agent and the Holder of such security has
been advised by counsel acceptable to it that subsequent disposition of such
security will not require registration or qualification under the Securities Act
or any state "blue sky" or similar law then in effect; or (iv) the security has
ceased to be outstanding.
(b) Holders of Registrable Securities. This Agreement is for the
---------------------------------
benefit of any holder of Registrable Securities, irrespective of whether such
holder is a signatory to this Agreement, provided the Registrable Securities
were not acquired by the holder in a transaction which violated any of the
restrictions on transfer contained in the Exchange Agreement.
3. Registration under the Securities Act. As soon as practicable, but in
-------------------------------------
no event later than 30 days following the date of this Agreement, the Company
shall cause to be filed with the Commission a registration statement and related
prospectus including any preliminary prospectus and documents incorporated by
reference on Form S-3 or any other appropriate form that in each case complies
as to form in all material respects with applicable Commission rules, providing
for registration of the sale by each of the Noteholders of such Noteholder's
Registrable Securities, and shall use its reasonable best efforts to cause the
registration statement to be declared effective by the Commission as soon as
reasonably practicable following the filing thereof, but in no event later than
90 days following the date of this Agreement. The Company shall have the right
to defer its obligations under this Paragraph 3 for up to 90 days if, in the
Company's good faith judgment, effecting the shelf registration would be
materially detrimental to the Company and an executive officer of the Company so
notifies the Noteholders in writing.
4. Indemnification.
---------------
(a) The Company will indemnify each Holder of the Registrable
Securities requesting or joining in a registration, each Person who controls
such holder within the meaning of Section 15 of the Securities Act, and each
underwriter of the securities so registered and each Person who controls such
underwriter, and their respective successors, against all costs, expenses,
demands, claims, losses, damages, liabilities, fines and penalties (or actions
in respect thereof), to which such holder or such other Person may become
subject under the Securities Act or otherwise, insofar as such claims, losses,
damages, liabilities, fines and penalties arise out of or are based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement or prospectus, or arise out of or are based upon any
omission (or alleged omission) to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such Holder, each Person who controls such Holder within the
meaning of Section 15 of the Securities Act and each such underwriter, and their
respective successors, for any legal and any other expenses reasonably incurred
in connection with investigating or defending any such demand, claim, loss,
damage, liability or action promptly after submission of supporting materials
with respect to such expenses; provided, however, that the Company shall not be
required to indemnify any holder or underwriter or Person which controls any
holder or underwriter for any cost, expense, demand, claim, loss, damage,
liability, fine or penalty which arises out of or is based upon any written
information provided by such holder or underwriter, respectively, for inclusion
in the Registration Statement.
(b) Each Holder requesting or joining in a registration will indemnify
the Company against all costs, expenses, demands, claims, losses, damages,
liabilities, fines and penalties (or actions in respect thereof), to which the
Company may become subject under the Securities Act, insofar as such
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losses, claims, damages or liabilities arise out of or are based upon an untrue
statement (or alleged untrue statement) of a material fact contained in any
Registration Statement or prospectus, or arise out of or are based upon the
omission (or alleged omission) to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in any Registration
Statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by such holder requesting or joining in a
registration specifically for use in the preparation thereof. Notwithstanding
the foregoing, it is further agreed that this indemnity is limited to the
proceeds received by such Selling Holder pursuant to the registration, and such
selling holder will reimburse the Company for expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action to the extent, but only to the extent, of such
Selling Holder's proceeds from the registration; provided, however, that the
Holders shall not be required to indemnify the Company for any cost, expense,
demand, claim, loss, damage, liability, fine or penalties which arise out of or
are based upon any written information provided by the Company.
(c) Each party entitled to indemnification under this Paragraph 4 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided such counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld or delayed). The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party shall bear the expense of such defense of the Indemnified Party if (a) the
Indemnifying Party has agreed in writing to pay such expenses, (b) the
Indemnifying Party shall have failed to assume the defense of such claim or
employ counsel reasonably satisfactory to the Indemnified Party, or (c) in the
reasonable judgment of the Indemnified Party, based upon the written advice of
such Indemnified Party's counsel, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of interest.
In the event that the Indemnifying Party properly does not assume such defense,
the Indemnifying Party shall not be subject to any liability for any settlement
made without its prior written consent, which consent shall not be unreasonably
withheld or delayed. The failure of any Indemnified Party to give notice as
provided herein shall relieve the Indemnifying Party of its obligations under
this Paragraph 4 only to the extent that such failure to give notice shall
materially adversely prejudice the Indemnifying Party in the defense of any such
claim or any such litigation. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the prior written consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation in form and substance reasonably
satisfactory to such Indemnified Party.
5. Contribution.
------------
(a) If the indemnification provided for in Paragraph 4 from the
Indemnifying Party is unavailable to the Indemnified Party in respect to any
losses, claims, damages, liabilities or expenses referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to thc amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to
B-4
information supplied by, such Indemnifying Party or Indemnified Parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Paragraph 8, any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
(b) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Paragraph 5 were determined by pro
---
rata allocation or by any other method of allocation which does not take into
----
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(c) If indemnification is available under Paragraph 8, the
Indemnifying Parties shall indemnify each Indemnified Party to the full extent
provided in Paragraph 8 without regard to the relative fault of the Indemnifying
Party or Indemnified Party or any other equitable consideration provided for in
this Paragraph 5.
6. Hold-Back Agreements.
--------------------
(a) Restrictions on Public Sale by Holder of Registrable Securities.
---------------------------------------------------------------
To the extent consistent with applicable law, each holder of Registrable
Securities whose Registrable Securities are included in a Registration Statement
filed pursuant to Paragraph 3 hereof agrees not to effect any public sale or
distribution of the issue being registered or any similar security of the
Company, including a sale pursuant to Rule 144 under the Securities Act, during
the 7-day period prior to, and during the 90-day period beginning on, the
effective date of such Registration Statement, to the extent such sales may
prevent the Company from being in compliance with the Exchange Act; provided,
however, that no such restriction shall apply to sales of Registrable Securities
made pursuant to that Registration Statement, which may be made at any time
following the effective date of that Registration Statement.
(b) Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company shall not effect any public or nonpublic sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for any such securities or similar securities,
during the 7-day period prior to, and during the 90-day period beginning on, the
effective date of any Registration Statement in which holders of Registrable
Securities are participating or the commencement of a public distribution of
Registrable Securities pursuant to any such Registration Statement (except (i)
as part of such registration or pursuant to registrations on ▇▇▇ ▇▇▇▇▇ ▇-▇ or S-
8 or any similar or successor form, or on any form filed in connection with an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company or (ii) for sales or other issuances of securities
pursuant to outstanding options, warrants, rights or similar obligations).
7. Rule 144 and Stock Exchange Listings.
------------------------------------
So long as there are Registrable Securities outstanding:
(a) The Company will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder, and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter
B-5
adopted by the SEC. Upon the request of any holder of Registrable Securities,
the Company will deliver to such holder a written statement as to whether it has
complied with such information and requirements.
(b) The Company will use its reasonable best efforts to avoid taking
any action which would cause the Common Stock to cease to be eligible for
inclusion on either of the National Association of Securities Dealers Automated
Quotation System or for listing on any securities exchange on which it currently
is or becomes listed.
8. Mergers, etc.
-------------
The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which the
Holders would be entitled to receive in exchange for Common Stock under any such
merger, consolidation or reorganization, provided that to the extent such
securities to be received are convertible into shares of common stock of the
issuer thereof, then any such shares of common stock or other securities as are
issued or issuable upon conversion of said convertible securities shall also be
included within the definition of "Registrable Securities."
9. Miscellaneous.
-------------
(a) Transfer of Certain Rights. The rights granted to the Holders
--------------------------
under this Agreement may be transferred only to a transferee who delivers to the
Company, within a reasonable time after such transfer, a written instrument by
which such transferee agrees to be bound by the applicable terms of this
Agreement. Notwithstanding the foregoing nothing herein shall prohibit: (i) any
Holder from transferring any of its rights under this Agreement to any wholly-
owned subsidiary of such Holder or to any entity which merges or consolidates
with or acquires all or substantially all of the equity securities or assets of
such Holder, (ii) any Holder which is a partnership from transferring any of its
rights under this Agreement to a partner of such partnership where such partner
receives Registrable Securities in a distribution from such partnership, (iii)
any Holder who is an individual from transferring any of its rights under this
Agreement to such Holder's spouse or to other relatives, or to a trust for the
benefit of the Holder, or his or her spouse or other relatives, or (iv) any
trustee of a trust which holds Registrable Securities from distributing such
Registrable Securities to the beneficiaries of such trusts; provided that any
such transferee under subparagraph (i), (ii), (iii) or (iv) above will hold the
Registrable Securities subject to the terms and conditions of this Agreement.
Upon any transfer of the rights of a Holder, the transferee shall become a
"Holder" for purposes of this Agreement and the Company shall add the name and
address of the transferee to Schedule I (and, to the extent the transferor no
longer holds Registrable Securities, shall delete the name and address of the
transferor).
(b) Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(c) No Inconsistent Agreements. The Company shall not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the
B-6
provisions hereof. To the extent the Company on or after the date of this
Agreement grants any superior or more favorable rights or terms to any Person
with respect to its securities, any such superior or more favorable rights or
terms shall also be deemed to have been granted simultaneously to the holders of
Registrable Securities. The Company has not previously entered into or become a
party to nor is it bound by any agreement with respect to its securities
granting any registration rights to any Person which is inconsistent with the
rights granted hereunder. The rights granted to the holders of Registrable
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the securities of the Company under
any other agreements.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of holders of
at least a majority of the Registrable Securities affected by such amendment,
modification, supplementation, waiver or consent. Notwithstanding the foregoing,
a waiver or consent to departure from the provisions hereof with respect to a
matter which relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and which does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by the holders of a majority of the
Registrable Securities being sold by such holders, provided that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing and shall be delivered by hand,
next-day courier service, registered or certified first-class mail, return
receipt requested, telex, telegram or telecopier; if to a Holder, at the address
set forth opposite such Holder's name on the signature page hereto or such other
address as may have been furnished to the Company in writing; if to the Company,
at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Paragraph 9(e).
All such notices and communications shall be deemed to have been duly given when
delivered by hand, if personally delivered; one business day after sent if sent
by courier service.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware without regard to the
conflict of laws provisions thereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with
B-7
respect to the registration rights granted by the Company with respect to the
securities now or hereafter owned by the Holders. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(k) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the successful party shall be entitled to
recover, and the court shall award, reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
B-8
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as of
the date first above written.
DVI, INC.
By:_____________________________________________
Name:
Title:
B-9
THE NOTEHOLDERS:
---------------
▇▇▇▇▇▇ ▇. AND ▇▇▇▇▇▇ ▇. ▇▇▇▇
MEMORIAL FOUNDATION
By:_____________________________________________
Name:
Title:
▇▇▇▇▇▇▇ Bank, as Trustee for the Hannah &
▇▇▇▇▇▇ ▇. ▇▇▇▇ Memorial Foundation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ FAMILY VENTURES
By:_____________________________________________
Name:
Title:
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Bank: Chase Manhattan Bank
City: New York City, New York
ABA#: 021 000 021
Acct#: 066 92 221
Acct. Name: National Financial Services,
Inc.
B-10
GRANITE CAPITAL, L.P.
By:_____________________________________________
Name:
Title:
▇▇▇ ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CANADIAN IMPERIAL BANK OF COMMERCE TRUST COMPANY
(BAHAMAS) LIMITED,
as Trustee of Settlement T-1740 Trusts #▇▇, #▇▇,
#▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇ and #36
By:_____________________________________________
Name:
Title:
Bank of New York
New York, NY
ABA#: 021 000 018
Acct: ▇▇▇-▇▇▇▇-▇▇▇
Attention: Domestic Money Transfer For
Credit To International Clearing Associates.
Acct#: T-1740
________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Unit 18 - E
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/o ▇▇▇▇▇-Craft Industries
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Trustee
________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Bank: Northern Trust
City: Chicago, IL
ABA#: 071 000 152
Acct#: G/L acct# 5186011000
Name:
Ref: For credit to A/C 23-05004
________________________________________________
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇.# ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, JTWROS
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
S.L.K. Retirement Trust
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust
c/o ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇-▇▇▇▇▇ RESIDUARY TRUST
By:_____________________________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Co-Trustee
Title:
c/o Neal, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esquire
B-13
EXHIBIT C
---------
WARRANT AGREEMENT
-----------------
THIS WARRANT AGREEMENT (this "Agreement") is dated as of ____________, by
and among [name of surviving corporation], a [____] corporation (the "Company"),
and the persons whose signatures appear on the signature pages hereto under the
heading "Warrant Holders" (each, a "Warrant Holder" and collectively, the
"Warrant Holders").
W I T N E S S E T H:
WHEREAS, the Company's authorized capital stock consists of [_____] shares
of common stock, par value [ $] per share (the "Common Stock"), and [ ] shares
of preferred stock, par value [$_____] per share;
WHEREAS, the Warrant Holders are parties to that certain Note Exchange
Agreement, dated as of the ______, 2001, which Exchange Agreement provides for
the issuance to the Warrant Holders of certain warrants; and
WHEREAS, subject to the terms and provisions hereof, each warrant to
purchase Common Stock (individually, a "Warrant", and, collectively, the
"Warrants") issued under this Agreement entitles the Warrant Holder thereof to
purchase one share of Common Stock at the price designated as the "Exercise
Price" herein (subject to adjustment hereunder).
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
FORM OF WARRANT
The Warrants shall be evidenced by a certificate (the "Warrant
Certificate"). The text of the Warrant Certificate (and the related forms of
exercise and assignment) shall be substantially in the form attached hereto as
Exhibit A and may have such identification, designation and information thereon
---------
as the Company may deem appropriate and as is not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto.
ARTICLE II
EXERCISE PRICE, TERM, AND METHOD OF EXERCISE
Section 2.01. Exercise Price. Unless adjusted as otherwise provided
--------------
herein, the exercise price ("Exercise Price") for each share of Common Stock
purchased upon exercise of a Warrant issued hereunder shall be [$_____] per
share. The Exercise Price shall be adjusted upon the occurrence of certain
events as set forth in Article II hereof.
Section 2.02. Warrant Rights and Term. Each Warrant shall entitle the
-----------------------
Warrant Holder, upon exercise thereof and subject to the provisions thereof and
of this Agreement, including provisions relating to adjustments upon the
occurrence of certain events as set forth in Article III hereof, to purchase
from the Company one fully paid and nonassessable share of Common Stock at the
then Exercise Price, upon the occurrence of a Capital Change (as defined in
Section 3.05 hereof) or at any time after the date hereof, until the expiration
of the Warrant at 5:00 p.m., [the Company's principal place of business] time,
on
_________, 2004 or, if the date hereof, is not a business day in the City of
[the Company's principal place of business] then on the next succeeding business
day (the "Expiration Date").
Section 2.03. Expiration. Each Warrant not exercised by 5:00 p.m., [the
----------
Company's principal place of business] time, on the Expiration Date shall become
void, and all rights thereunder and all rights in respect thereof under this
Agreement shall thereupon cease.
Section 2.04. Method of Exercise. The Warrant Holder may exercise its
------------------
rights with respect to all or any whole number of Warrants evidenced by the
Warrant Certificate. Exercise shall be effected by surrender of the Warrant
Certificate, with the exercise form thereon duly executed, to the Company at its
offices as designated in Section 5.04 hereof, together with the Exercise Price
for each Warrant that is exercised. Payment of the Exercise Price shall be made
by (a) certified check payable in lawful money of the United States of America
to the order of the Company, (b) by wire transfer of immediately available funds
to an account designated by the Company, (c) tender of all or any portion of the
Notes (as defined in the Exchange Agreement) held by the Warrant Holder, plus
accrued interest thereon, or (d) tender of all or any portion of accrued
interest on such Notes due to the Warrant Holder.
Upon receipt of the Warrant Certificate with the exercise form duly
executed and accompanied by full and proper payment of the Exercise Price for
the shares of Common Stock purchased thereby, the Company shall deliver to, or,
subject to Section 3.2 of the Exchange Agreement, in accordance with the
instructions of, the Warrant Holder certificates for the total number of whole
shares of Common Stock for which the Warrants evidenced by such Warrant
Certificate are being exercised.
In the event that the Warrant Holder shall exercise rights with respect to
less than all of the Warrants evidenced by the Warrant Certificate surrendered
upon the exercise of Warrants, a new Warrant Certificate for the balance of such
Warrants shall be delivered to, or, subject to Section 3.2 of the Exchange
Agreement, in accordance with the instructions of, the Warrant Holder.
Section 2.05. Cancellation of Warrants. In the event the Company shall
------------------------
purchase or otherwise acquire Warrants, the same shall thereupon be delivered to
the Company and be cancelled by it and retired. The Company shall cancel any
Warrant surrendered for exchange, substitution, transfer or exercise in whole or
in part.
ARTICLE III
ADJUSTMENTS TO WARRANTS UPON CERTAIN EVENTS
Section 3.01. Mechanical Adjustments. The number of shares of Common
----------------------
Stock purchasable upon the exercise of each Warrant (such shares being referred
to in this Article III as the "Warrant Shares") and the Exercise Price shall be
subject to adjustment as follows if any of the events listed in (a) - (c) below
occur prior to exercise of each Warrant:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares, (iii) combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, the number of Warrant Shares purchasable
upon the exercise of each Warrant immediately prior thereto shall be
adjusted so that the number of Warrant Shares purchasable upon exercise of
each Warrant shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately following such action and of which the
denominator shall be the number
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of shares of Common Stock outstanding immediately prior thereto. If the
Company declares a dividend in money or its Common Stock and at
substantially the same time offers its stockholders a right to purchase new
shares of Common Stock from the proceeds of such dividend, or for an amount
substantially equal to such dividend, all shares of Common Stock so issued
shall for purposes hereof be deemed issued as a stock dividend.
(b) In case the Company shall (i) sell or issue shares of its Common
Stock, (ii) issue rights, options or warrants to subscribe for or purchase
shares of Common Stock, or (iii) issue or sell other rights or securities
convertible into or for the purchase of shares of Common Stock at a price
per share which is lower at the record date mentioned below than the then
Current Market Price (as hereinafter defined) per share of Common Stock,
the number of Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon exercise of each Warrant by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of
Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding on
such record date plus the number of shares which the aggregate offering
price of the total number of shares of Common Stock so offered would
purchase at the then Current Market Price per share of Common Stock. Such
adjustment shall be made whenever such shares, rights, options or warrants
are issued, and shall become effective immediately after the record date
for the determination of shareholders entitled to receive such rights,
options or warrants. In determining whether any rights or warrants entitle
the holders of the Common Stock to subscribe for or purchase shares of
Common Stock at less than the Current Market Price, and in determining the
aggregate offering price of the shares of Common Stock so offered, there
shall be taken into account any consideration received by the Company for
such rights or warrants, the value of such consideration, if other than
cash, to be determined by the Board (whose determination, if made in good
faith, shall be conclusive). To the extent that rights, options or warrants
expire unexercised, the number of Warrant Shares purchasable upon the
exercise of each Warrant shall be readjusted to the number which would then
be in effect had the adjustments made upon the issuance of such rights,
warrants or options been made upon the basis of only the number of shares
of Common Stock delivered pursuant to rights, options or warrants actually
exercised.
(c) In case the Company shall distribute to all holders of its shares
of Common Stock shares of stock other than Common Stock or evidences of its
indebtedness or assets (excluding cash dividends or distributions payable
out of consolidated earnings or retained earnings and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding those referred
to in paragraph (b) above), then in each case the number of Warrant Shares
thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore
purchasable upon the exercise of each Warrant, by a fraction of which the
numerator shall be the Current Market Price per share of Common Stock on
the record date mentioned below in this paragraph (c), and of which the
denominator shall be the Current Market Price per share of Common Stock on
such record date, less the then fair value (as reasonably determined by the
Board of Directors of the Company, whose determination, if made in good
faith, shall be conclusive) of the portion of the shares of stock other
than Common Stock or assets or evidences of indebtedness so distributed or
of such subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective immediately after the record date for the determination of
shareholders entitled to receive such distribution.
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(d) Notwithstanding the foregoing, the provisions of this Section 3.01
shall not apply to (i) any offering of capital stock of the Company in an
underwritten public offering pursuant to a firm commitment (as opposed to
best efforts) from the underwriter and (ii) any issuance of shares of
capital stock of the Company under any bona fide compensation program for
the benefit of the employees, officers, directors or consultants of the
Company or its subsidiaries, which compensation plan is (a) in the effect
as of the date hereof, but only to the extent of shares currently
authorized as of the date hereof or (b) following the date hereof is
approved in writing by holders of Warrants owning a majority in amount of
the Warrants then outstanding.
(e) For the purposes of this Agreement, "Current Market Price of the
Common Stock" means the average of the last reported sale prices per share
for the ten consecutive Trading Days (as defined below) preceding the date
of such computation. The last reported sale price for each day shall be (i)
the last sale price, or the closing bid price if no sale occurred, of the
Common Stock on the principal securities exchange on which the Common Stock
is listed, (ii) if not listed as described in clause (i), the last reported
sale price of the Common Stock on the Automated Quotation System of the
National Association of Securities Dealers, Inc. (the "NASDAQ System"), or
any similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, or (iii) if not quoted as
described in clauses (i) or (ii), the mean of the high and low bid
quotations for the Common Stock as reported by the National Quotation
Bureau Incorporated if at least two securities dealers have inserted bid
quotations for the Common Stock on at least five of the ten preceding days.
If the Common Stock is quoted on a national securities or central market
system, in lieu of a market or quotation system described above, the last
reported sale price shall be determined in the manner set forth in clause
(iii) of the preceding sentence if bid and asked quotations are reported
but actual transactions are not, and in the manner set forth in clause (i)
of the preceding sentence if actual transactions are reported. If none of
the conditions set forth above is met, the last reported sale price of the
Common Stock on any day or the average of such last reported sale prices
for any period shall be the fair market value of such class of stock as
determined by a member firm of the New York Stock Exchange, Inc. selected
by the Company. As used herein the term "Trading Days" means (x) if the
Common Stock is quoted on the NASDAQ System or any similar system of
automated dissemination of quotations of securities prices, days on which
trades may be made on such system, or (y) if not quoted as described in
clause (x), days on which quotations are reported by the National Quotation
Bureau Incorporated, or (z) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business.
(f) In the event that the provisions of this Article III fail as a
result of an unintentional oversight to provide expressly for the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of each Warrant under circumstances that, based
upon the purposes and intentions expressed herein, would otherwise have
been addressed, the Board of Directors of the Company shall, in good faith,
cause an equitable adjustment to be made to the Exercise Price or the
number of Warrant Shares purchasable upon exercise of each Warrant to
correct such an oversight.
Section 3.02. Adjustment for De Minimis Change. No adjustment in the
--------------------------------
number of Warrant Shares purchasable hereunder shall be required unless such
adjustment would require an increase or decrease of at least 1% in the number of
Warrant Shares purchasable upon the exercise of each Warrant; provided, however,
that any adjustments which by reason of this Section 3.02 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest whole share, as the
case may be, and no fractional shares shall be issued.
C-4
Section 3.03. Adjustment of Exercise Price. Whenever the number of
----------------------------
Warrant Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price payable upon exercise of each Warrant shall
be adjusted by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of Warrant
Shares purchasable upon the exercise of each Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
Section 3.04. Notice of Adjustment. Whenever the number of Warrant Shares
--------------------
purchasable upon the exercise of each Warrant or the Exercise Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly mail
to the Warrant Holder, in accordance with Section 5.04, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer or
Chief Accounting Officer of the Company, which sets forth the number of Warrant
Shares purchasable upon the exercise of each Warrant and the Exercise Price of
such Warrant Shares after such adjustment, a brief statement of the facts
requiring such adjustment and the computation by which such adjustment was made.
Section 3.05. Effect of Sale, Merger or Consolidation. In the event of
---------------------------------------
(i) any reclassification (other than a change in par value) of the Common Stock,
(ii) any conversion of the Common Stock into securities of another corporation,
(iii) the consolidation of the Company with, or the merger of the Company with
or into, any other corporation where the Common Stock is converted into other
securities or property (including cash) or (iv) in the event of the sale of all
or substantially all of the properties and assets of the Company to any person
as a consequence of which, with respect to any of the matters described in
clauses (i) through (iv) of this Section 3.05, those persons who held all of the
voting shares of the Company immediately prior to such transaction hold less
than a majority of the voting shares or less than a majority of the beneficial
interest in the resulting or surviving corporation (each such event hereinafter
being referred to as a "Capital Change"), each Warrant shall be exercisable
after such Capital Change, upon the terms and conditions specified in this
Agreement, only for the number of shares of stock or other securities or
property (including cash) of the Company or of the person into which shares of
Common Stock are converted or resulting from such consolidation or surviving
such merger or to which such sale shall be made, as the case may be, to which
the shares of Common Stock issuable (immediately prior to such Capital Change)
upon exercise of such Warrant would have been entitled upon such Capital Change.
In any such case, if necessary, the provisions set forth in this Article III
with respect to the rights and interests thereafter of the Warrant Holder shall
be appropriately adjusted so as to be reasonably applicable to any shares of
stock or other securities or property thereafter deliverable on the exercise of
the Warrants.
The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock shall not
be deemed to be a reclassification of the Common Stock of the Company for the
purpose of this Section. The Company shall not effect any consolidation, merger
or sale resulting in a Capital Change, unless prior to or simultaneously with
the consummation thereof, any successor person or person purchasing such assets
shall assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities or property (including cash) as the Warrant Holders may be entitled
to receive upon exercise of the Warrants in accordance with the foregoing
provisions, and the other obligations of the Company under this Warrant
Agreement.
Section 3.06. Election to Increase Warrants Instead of Shares of Common
---------------------------------------------------------
Stock Per Warrant. The Company may elect, on or after the date of any adjustment
-----------------
of the Exercise Price, to adjust the number of Warrants in substitution for any
adjustment in the number of Warrant Shares pursuant to Section 3.01. Each
Warrant held of record immediately prior to such adjustment of the number of
Warrants shall become that number of Warrants (calculated to the nearest whole
warrant) obtained by (i) multiplying the
C-5
number of Warrants held of record prior to adjustment of the number of Warrants
by the Exercise Price in effect prior to adjustment of the Exercise Price and
(ii) dividing the product so obtained by the Exercise Price in effect after
adjustment of the Exercise Price. The Company shall notify the Warrant Holder of
the Company's election to adjust the number of Warrants (in substitution for its
obligation to adjust the number of Warrant Shares issuable upon the exercise of
a Warrant pursuant to Section 3.01), indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
Such record date may be the date on which the Exercise Price is adjusted or any
date thereafter, but shall be at least 10 days later than the date of the
notification of the Company's election. Upon each adjustment of the number of
Warrants pursuant to this Section, the Company shall, as promptly as
practicable, distribute to the Warrant Holder a Warrant Certificate evidencing
the additional Warrants to which the Warrant Holder shall be entitled as a
result of such adjustment, or, at the option of the Company, shall distribute to
the Warrant Holder in substitution and replacement for the Warrant Certificates
held by the Warrant Holder prior to the date of the adjustment, and upon
surrender thereof, if required by the Company, a new Warrant Certificate
evidencing all the Warrants to which the Warrant Holder shall be entitled after
such adjustment.
Section 3.07. Notice of Certain Events. In the event that at any time
------------------------
prior to the expiration of the Warrants and prior to their exercise in full:
(a) the Company shall declare any distribution (other than a cash dividend
or a dividend payable in securities of the Company with respect to the Common
Stock);
(b) the Company shall offer for subscription to the holders of the Common
Stock any additional shares of stock of any class or any other securities
convertible into Common Stock or any rights to subscribe thereto;
(c) the Company shall declare any stock split, stock dividend, subdivision,
combination or similar distribution with respect to the Common Stock, regardless
of the effect of any such event on the outstanding number of shares of Common
Stock;
(d) there shall be any Capital Change in the Company or any merger of the
Company with another corporation (other than a merger with a subsidiary in which
merger the Company is the continuing corporation and which does not result in
any reclassification or change of the shares of Common Stock issuable upon
exercise of the Warrants); or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company (other than in connection with a consolidation, merger
or sale of all or substantially all of its property, assets and business as an
entity);
(each such event hereinafter referred to as a "Notification Event"), the Company
shall mail to the Warrant Holder, not less than 15 days prior to the record
date, if any, in connection with such Notification Event (provided, however,
that, if there is no record date, or, if 15 days' prior notice is impracticable,
as soon as practicable) written notice specifying the nature of such event and
the effective date of, or the date on which the books of the Company shall close
or a record shall be taken with respect to, such event. Such notice shall also
set forth facts indicating the effect of such action (to the extent such effect
may be known at the date of such notice) on the Exercise Price and the kind and
amount of the shares of stock or other securities or property deliverable upon
exercise of the Warrants.
Section 3.08. Effect of Adjustment on Warrant Certificates. Except as
--------------------------------------------
provided in Section 3.06, the form of Warrant Certificate need not be changed
because of any change in the Exercise Price,
C-6
the number of Warrant Shares issuable upon the exercise of a Warrant or the
number of Warrants outstanding pursuant to this Article III, and Warrant
Certificates issued before or after such change may state the same Exercise
Price, the same number of Warrants and the same number of Warrant Shares
issuable upon exercise of Warrants as are stated in the Warrant Certificates
theretofore issued pursuant to this Agreement. The Company may, however, at any
time, in its sole discretion, make any change in the form of Warrant Certificate
that it may deem appropriate and that does not affect the substance thereof, and
any Warrant Certificates thereafter issued, whether in exchange or substitution
for an outstanding Warrant Certificate or otherwise, may be in the form as so
changed.
ARTICLE IV
RIGHTS OF WARRANT HOLDERS
Section 4.01. No Rights as Stockholders. The Warrant Holders, as such,
-------------------------
shall not be entitled to vote or to receive dividends or otherwise be deemed to
be the holder of shares of Common Stock for any purpose, nor shall anything
contained herein or in any Warrant Certificate be construed to confer upon any
Warrant Holder, as such, any of the rights of a stockholder of the Company or
any right to vote upon or give or withhold consent to any action of the Company
(whether upon any reorganization, issuance of securities, reclassification or
conversion of Common Stock, consolidation, merger, sale, lease, conveyance or
otherwise), receive notice of meetings or other action affecting stockholders
(except for notices expressly provided for in this Agreement) or receive
dividends or subscription rights, until such Warrant Certificates shall have
been surrendered for exercise accompanied by full and proper payment of the
Exercise Price as provided in this Agreement and shares of Common Stock
thereunder shall have become issuable and until such person shall have been
deemed to have become a holder of record of such shares. If, at the date of
surrender of such Warrant Certificate and payment of such Exercise Price, the
transfer books for the Common Stock shall be closed, certificates for the shares
of Common Stock shall be issuable on the date on which such books shall next be
open (whether before, on or after the Expiration Date) and, until such date, the
Company shall be under no duty to deliver any certificate for such shares of
Common Stock. The Warrant Holder shall, upon the exercise of Warrants, not be
entitled to any dividends if the record date with respect to payment of such
dividends shall be a date prior to the date such shares of Common Stock became
issuable upon the exercise of such Warrants.
Section 4.02. Replacement Warrants. If any Warrant Certificate is lost,
--------------------
stolen, mutilated or destroyed, the Company may, upon receipt of evidence
satisfactory to the Company of such loss, theft, mutilation or destruction and
on such terms as to indemnity or otherwise as the Company may in its discretion
require (which shall, in the case of a mutilated Warrant Certificate, include
the surrender thereof), issue a new Warrant Certificate of like denomination and
tenor as the lost, stolen, mutilated or destroyed Certificate. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay any such reasonable charges as the Company may
prescribe. In the event any Warrant Certificate is lost, stolen, mutilated or
destroyed, and the owner thereof desires to exercise the Warrants evidenced
thereby, the Company may, in lieu of issuing a substitute Warrant Certificate,
authorize the exercise thereof upon receipt of the above evidence and on such
terms of indemnity as it may require; provided, however, that the original
Warrant Holders shall not be required to provide such an indemnity.
Section 4.03. Maintenance of Sufficient and Proper Shares of Common
-----------------------------------------------------
Stock.
(a) The Company shall at all times reserve and keep available a number of
authorized shares of Common Stock sufficient to permit the exercise in full of
all outstanding Warrants.
C-7
(b) If at any time the taking of any action would cause an adjustment in
the Exercise Price so that the exercise of a Warrant while such Exercise Price
is in effect would cause a share of Common Stock to be issued at a price below
its then par value, the Company shall take such action as may, in the opinion of
its counsel, be necessary in order that it may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of the Warrants
at such Exercise Price.
Section 4.04. Legend. The certificates evidencing Warrants shall bear the
------
legend set forth in Exhibit A hereto and the shares of Common Stock issuable
upon the exercise of the Warrants shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION UNDER SUCH ACT
AND THE RULES AND REGULATIONS THEREUNDER.
Section 4.05. No Dilution or Impairment. The Company will not, by
-------------------------
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as any be necessary or appropriate in order to protect the rights of
the holder of this Warrant against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on the exercise of the Warrants
above the amount payable therefor on such exercise and (b) will not effect a
subdivision or split-up of shares or similar transaction with respect to any
class of the Common Stock without effecting an equivalent transaction with
respect to all other classes of Common Stock.
C-8
ARTICLE V
GENERAL
Section 5.01. Taxes on Issuance of Shares of Common Stock. All shares of
-------------------------------------------
Common Stock issued upon the exercise of a Warrant shall be validly issued,
fully paid and nonassessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect to the issue or delivery
thereof other than taxes imposed on net income of the Warrant Holders as a
result of the exercise of the Warrants and receipt of shares of Common Stock.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issue of any certificate
for shares of Common Stock in any name other than that of the registered holder
of the Warrant surrendered in connection with the purchase of such shares, and
in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the Company's satisfaction that no tax or other charge is due.
Section 5.02. Dates and Times. If any date set forth in this Warrant
---------------
Agreement shall fall on a day other than a full business day in [the Company's
principal place of business], said date shall be deemed to be the next full
business day succeeding that date. All times shall be the legal time then in
effect in [the Company's principal place of business].
Section 5.03. Binding Agreement. All of the covenants and provisions of
-----------------
this Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder. Nothing expressed in
this Agreement and nothing that may be implied from any of the provisions hereof
is intended, or shall be construed, to confer upon or give to any person or
corporation, other than the Company and the Warrant Holder, any legal or
equitable right, remedy or claim under or by reason of this Agreement or of any
covenant, condition, stipulation, promise or agreement herein, and all
covenants, conditions, stipulations, promises and agreements contained in this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Holder and their respective successors and assigns.
Section 5.04. Notices. Any communication or notice deemed to be given
-------
hereunder shall be duly given if in writing and delivered, or sent by first
class mail, certified or registered, postage prepaid and addressed as follows:
(a) If to the Company:
[TO BE SUPPLIED]
with a copy to:
[TO BE SUPPLIED]
(b) If to the Warrant Holders:
at the addresses on the signature pages hereto
with a copy to:
[TO BE SUPPLIED]
C-9
Any party may change the address to which any communication, notice or
demand shall be given by giving notice of such change in conformity with the
provisions of this Section.
Section 5.05. Governing Law. This Agreement and each Warrant issued
-------------
hereunder shall be governed by and construed in accordance with the laws of the
State of [Delaware], without giving effect to conflict of laws provisions
thereof.
Section 5.06. Headings. The Article and Section headings herein are for
--------
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
Section 5.07. Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
C-10
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
COMPANY:
[THE COMPANY]
By: _______________________
Name:
Title:
WARRANT HOLDERS:
C-11
EXHIBIT A
(Form of Warrant Certificate)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THE SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION UNDER SUCH ACT AND THE RULES
AND REGULATIONS THEREUNDER.
No. ____
[Date]
[Number of Warrants]
VOID AFTER 5:00 P.M., [the Company's principal place of business]
ON _______, 2004 (UNLESS EXTENDED),
[NAME OF THE COMPANY]
WARRANT TO PURCHASE COMMON STOCK
This Warrant Certificate certifies that [Warrant Holder's Name], or
registered assigns, is the registered holder of _________ Warrants (the
"Warrants") to purchase shares of the Common Stock, par value [$_____] per share
("Common Stock"), of [name of the Company], a [_________] corporation (the
"Company"). Each Warrant entitles the holder thereof to purchase from the
Company, upon the occurrence of a Capital Change (as defined in Section 3.05 of
the Warrant Agreement) or after the date hereof and on or before _________, 2004
or, if _________, 2004 is not a business day in the City of [the Company's
principal place of business], then on the next succeeding business day (the
"Expiration Date"), subject to extension by the Company, one fully paid and
nonassessable share of Common Stock, upon presentation and surrender of this
Warrant Certificate, with the Form of Election to Purchase duly executed, at the
corporate office of the Company and upon proper payment of the Exercise Price
(as defined below). Subject to adjustment as provided in the Warrant Agreement
between the Company and the Warrant Holder, dated as _________, 2001 (the
"Warrant Agreement"), the exercise price ("Exercise Price") for each Warrant
evidenced hereby shall be [$_______] per full share. This Warrant will expire at
5:00 p.m., [the Company's principal place of business] time, on the Expiration
Date. Payment of the Exercise Price shall be made pursuant to the terms of the
Warrant Agreement. As provided in the Warrant Agreement, the Exercise Price and
the number of shares of Common Stock purchasable upon the exercise of the
Warrants are, upon the happening of certain events, subject to modification or
adjustment.
This Warrant may be exercised in whole or in part by presentation of this
Warrant with the exercise form annexed hereto duly executed, and simultaneous
payment of the Exercise Price at the principal office of the Company in Los
Angeles.
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, including the provisions of such Agreement
relating to the amendment thereof, which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof. Reference is
A-1
hereby made to the Warrant Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Company and the
holder of this Warrant Certificate.
If this Warrant Certificate shall be exercised in part, the holder hereof
shall be entitled to receive upon surrender hereof another Warrant Certificate
evidencing the number of warrants not exercised.
No holder of this Warrant Certificate shall be deemed to be the holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon the holder of this
Warrant Certificate as such any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, or exchange of
stock, consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise, until
this Warrant Certificate shall have been exercised and the Common Stock
purchasable upon the exercise hereof shall have become issuable as provided in
the Warrant Agreement.
Except as specifically set forth in the Warrant Agreement, this Warrant may
not be transferred or otherwise disposed of without the prior consent of the
Company.
WITNESS the signatures of the proper officers of the Company.
Dated: ___________ [THE COMPANY]
By:________________________
Name:
Title:
A-2
FORM OF
ELECTION TO PURCHASE
To: [THE COMPANY]
The undersigned hereby irrevocably elects to exercise _____________________
Warrants represented by this Warrant Certificate, and to purchase the Common
Stock issuable upon the exercise of such Warrants, and requests that
certificates for such shares shall be issued in the name of
________________________________________________________________________________
(Name)
________________________________________________________________________________
(Address)
________________________________________________________________________________
(Social Security or other Identifying Number)
and be delivered to
________________________________________________________________________________
(Name)
at _____________________________________________________________________________
(Address)
and, if said number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be delivered to the undersigned at the address stated above.
Dated: _______________________
Name of Warrant Holder: ___________________________________________________
(Please Print)
Signature:_________________________________________
Address:___________________________________________
A-3
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ______________ ________ the right represented by the within Warrant to
purchase shares of Common Stock of [THE COMPANY] to which the within Warrant
relates, and appoints ______________Attorney-in-fact to transfer such right on
the books of [THE COMPANY] with full power of substitution in the premises.
Dated:____________ __________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
Signed in the presence of:
_______________________________
A-4
EXHIBIT D
---------
WARRANT REGISTRATION RIGHTS AGREEMENT
-------------------------------------
Registration Rights Agreement (the "Agreement"), dated as of ________, by
and among [name of surviving corporation], a [______] corporation (the
"Company"), and the Persons other than the Company who are signatories hereto.
R E C I T A L S:
This Agreement is made pursuant to the Note Exchange Agreement, dated as of
_____ __, 2001 (the "Exchange Agreement") by and among DVI, Inc. and the
signatories thereto which provides for the issuance under certain circumstances
by the Company to the Holders of detachable warrants (the "Warrants") for the
purchase of common stock of the Company, par value [$____] per share (the
"Common Stock"). The Warrants will be exercisable at [$____] per share of Common
Stock, subject to adjustment. The shares of Common Stock purchasable upon the
exercise of the Warrants are hereinafter referred to as the "Shares."
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Common Stock" has the meaning set forth in the Recitals.
------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any similar or successor federal statute and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect at the time.
"Exchange Agreement" has the meaning set forth in the Recitals.
------------------
"Holder" means a Person other than the Company who executes this
------
Agreement on the signature pages hereto, including any Person executing this
Agreement after the date hereof pursuant to Paragraph 13(a).
"Indemnified Party" has the meaning set forth in Paragraph 8(c).
-----------------
"Indemnifying Party" has the meaning set forth in Paragraph 8(c).
------------------
"Initiating Group" shall mean one or more holders of Registrable
----------------
Securities which represent in the aggregate a Majority of the Registrable
Securities.
"Majority of the Registrable Securities" shall mean a majority of the
--------------------------------------
Registrable Securities which are outstanding [as of the date of this Agreement].
"NASD" means the National Association of Securities Dealers, Inc.
----
"Person" means an individual, partnership, corporation, limited
------
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof, or any other entity of any kind.
"Registrable Securities" means (i) the Warrants; (ii) the Shares;
----------------------
(iii) the shares of Common Stock and other securities into which the Shares are
convertible from time to time; (iv) the
shares of Common Stock issued or issuable as dividends on the Shares; (v) any
other security issued in exchange for any of the Shares; and (vi) any other
securities deemed included in the term "Registrable Securities" pursuant to
Paragraph 12 hereof, in each case until any such security ceases to be a
Registrable Security in accordance with Paragraph 2(a) hereof.
"Registration Expenses" means all expenses incident to the Company's
----------------------
performance of or compliance with Paragraphs 3 and 4 of this Agreement,
including without limitation all registration and filing fees, including fees
with respect to filings required to be made with any stock exchange or the NASD,
fees and expenses of compliance with state securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), messenger, telephone and
delivery expenses, and the fees and expenses of counsel for the underwriter,
costs of printing prospectuses, and fees and disbursements of counsel for the
Company and of all independent certified public accountants of the Company
(including the expenses of any special audit and "cold comfort" letters required
by or incident to such performance).
"Registration Statement" means any registration statement of the
----------------------
Company which includes any of the Registrable Securities pursuant to the
provisions of this Agreement, including the prospectus included or deemed
included in the Registration Statement and all amendments and supplements to the
Registration Statement or the prospectus, including post-effective amendments,
and all exhibits to, and all materials incorporated by reference in, the
Registration Statement.
"SEC" means the United States Securities and Exchange Commission or
---
any similar agency then having the authority to enforce the Exchange Act or the
Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
similar or successor federal statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all fees and expenses of underwriters
----------------
including discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Securities.
"Selling Holders" has the meaning set forth in Paragraph 5(b).
---------------
"Stockholder" means any holder of equity securities issued by the
-----------
Company.
"Shares" has the meaning set forth in the Recitals.
------
"Warrants" has the meaning set forth in the Recitals.
--------
2. Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. The securities entitled to the benefits of
----------------------
this Agreement are the Registrable Securities, but such benefits shall continue
with respect to each such security only so long as such security continues to be
a Registrable Security. A security ceases to be a Registrable Security when (i)
a Registration Statement covering the sale of such Registrable Security has been
declared effective under the Securities Act and the Registrable Security has
been sold in accordance with the Registration Statement; (ii) it is distributed
to the public pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act; (iii) a new certificate representing such security has
been delivered (to the original Holder or any subsequent transferee) by the
Company free from any restrictive legend and without issuance of stop transfer
or other instructions to the Company's transfer agent and the Holder of such
security has been advised by counsel acceptable to it that subsequent
disposition of such security will not require registration or qualification
under the Securities Act or any state "blue sky" or similar law then in effect;
or (iv) the security has ceased to be outstanding.
D-2
(b) Holders of Registrable Securities. This Agreement is for the
---------------------------------
benefit of any holder of Registrable Securities, irrespective of whether such
holder is a signatory to this Agreement, provided the Registrable Securities
were not acquired by the holder in a transaction which violated any of the
restrictions on transfer contained in the Exchange Agreement.
3. Registration under the Securities Act: Piggy-Back Registration.
---------------------------------------------------------------
(a) Piggy-Back Registration. If at any time commencing one year after
-----------------------
the date of this Agreement the Company for itself or for any of its security
holders (other than the Holders) proposes to register under the Securities Act
any shares of its capital stock or any other securities (other than any
offerings registered under Form S-4 or Form S-8 or a comparable or successor
form), then:
(i) the Company in each case will notify in writing each
Holder of its intention to effect such a registration at
least 30 days prior to the proposed filing of Registration
Statement in connection therewith; and
(ii) the Company will offer each Holder the opportunity to
include in such registration all or such lesser amount of
Registrable Securities as each Holder may request. Upon
the request of one or more Holders which in the aggregate
own 20% or more of the outstanding Registrable Securities,
given in writing within 20 days after receipt of the
notice described under clause (i) above, the Company will
use its reasonable best efforts as soon as practicable
thereafter to cause any of the Registrable Securities
specified by such Holder to be included in the
Registration Statement; and
(iii) if the registration of which the Company gives written
notice under clause (i) above involves an underwriting,
the Company shall use its reasonable best efforts to cause
the managing underwriter(s) of the proposed underwritten
offering to permit Holders to include their Registrable
Securities in the underwriting on the same terms and
conditions as similar terms of the Company included
therein.
(b) Limitations on Company's Obligations to Effect Additional Piggy-
---------------------------------------------------------------
Back Registration. The Company's obligation to effect a registration pursuant to
-----------------
Paragraph 3(a) above shall be limited as follows:
(i) The Company shall not be obligated to include Registrable
Securities in more than three Registration Statements
pursuant to Paragraph 3(a) in which any Registrable
Securities are included (excluding registrations in which
the number of Registrable Securities requested to be
included is reduced as a result of the operation of
Paragraph 3(b)(ii) below) and thereafter, the Company
shall have no obligation to include any Registrable
Securities in any registration pursuant to this Paragraph
3.
(ii) Notwithstanding the provisions of Paragraph 3(a)(iii)
above, if and to the extent that the managing
underwriter(s) are of the opinion that inclusion of the
number of Registrable Securities held by Holders
requesting inclusion in the Registration Statement would
materially interfere with the underwriter's ability to
effectuate the registration and sale of securities
proposed to be offered and sold pursuant to the
Registration Statement, the managing underwriter(s) shall
select the permissible
D-3
quantity of Registrable Securities to be sold by the
Holders (which may be none) by reducing the total number
of securities to be sold by the Company, the holders of
securities other than Registrable Securities and the
Holders on pro rata basis.
--- ----
(c) Underwritten Offer. If the registration of which the Company gives
------------------
written notice under Paragraph 3(a)(i) above involves an underwriting, the
Company shall so advise in such written notice. In such event the right of any
Holder to registration pursuant to Paragraph 3(a) shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in such underwriting. All Holders proposing to distribute
their Registrable Securities through such underwriting shall (together with the
Company and the other holders distributing their Registrable Securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw from the underwriting by prompt written notice to the Company
and the underwriter.
4. Registration under Securities Act; Demand Registration.
------------------------------------------------------
(a) Demand for Registration. Any Initiating Group may request in
-----------------------
writing that the Company effect the registration under the Securities Act of
Registrable Securities, in which case the Company will (i) within 30 days of
such request, file with the SEC all documentation necessary to effect such
registration and (ii) thereafter use its reasonable best efforts to effect such
registration.
(b) Limitations on Company's Obligation. The Company is obligated to
-----------------------------------
effect two registrations pursuant to this Paragraph 4, unless the Company fails
to effect the registration of all Registrable Securities for which registration
is requested pursuant to this Paragraph 4 and have such registration declared or
ordered effective (in which event, subject to the foregoing qualification, one
further request may be made); and thereafter the Company shall have no
obligation to include any Registrable Securities in any registration pursuant to
this Paragraph 4.
(c) Underwritten Offer. If an Initiating Group desires to distribute
------------------
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request made pursuant to this
Paragraph 4. The Initiating Group shall select an underwriter (which shall be
reasonably acceptable to the Company) for such underwriting and shall together
with the Company enter into an underwriting agreement in customary form with the
underwriter.
5. Registration Obligations of the Company. In connection with the filing
---------------------------------------
of a Registration Statement pursuant to Paragraphs 3 or 4, the Company shall:
(a) Use its reasonable best efforts to cause such Registration
Statement to remain in effect until the earlier of (i) the completion of the
distribution of the Registrable Securities included in the Registration
Statement, or (ii) two years after the date on which the Registration Statement
is declared effective;
(b) Notify the holders whose Registrable Securities are included in
such Registration Statement (the "Selling Holders") as to the filing of the
Registration Statement and of all amendments or supplements thereto filed prior
to the effective date of such Registration Statement;
(c) Notify the Selling Holders, promptly after the Company shall
receive notice thereof, of the time when such Registration Statement became
effective or when any amendment or supplement to any prospectus forming a part
of said Registration Statement has been filed;
(d) Notify the Selling Holders promptly of any request by the SEC for
the amending or supplementing of such Registration Statement or prospectus or
for additional information;
D-4
(e) During the period in which the Company is obligated to use its
reasonable best efforts to keep a Registration Statement effective pursuant to
this Paragraph 5, prepare and promptly file with the SEC and promptly notify the
Selling Holders of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event with respect to the Company shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading; and, in addition, during such
period, prepare and file with the SEC, promptly upon the Selling Holders'
written request, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(f) Prepare, promptly upon request of the Selling Holders or any
underwriters for the Selling Holders made during the period in which the Company
is obligated to use its reasonable best efforts to keep a Registration Statement
effective, such amendment or amendments to such Registration Statement and such
prospectus or prospectuses as may be reasonably necessary to permit compliance
with the requirements of Section 10(a)(3) of the Securities Act;
(g) Advise the Selling Holders promptly after the Company shall
receive notice or obtain knowledge of the issuance of any stop order by the SEC
suspending the effectiveness of any such Registration Statement or amendment
thereto or of the initiation or threatening of any proceeding for that purpose,
and promptly use its reasonable best efforts to prevent the issue of any stop
order or obtain its withdrawal promptly if such stop order should be issued;
(h) Use its reasonable best efforts to qualify as soon as reasonably
practicable the Registrable Securities for sale under the securities or blue sky
laws of such states and jurisdictions within the United States as shall be
reasonably requested by the Selling Holders; provided that the Company shall not
--------
be required in connection therewith or as a condition thereto to qualify to do
business, to become subject to taxation or to file a consent to service of
process generally in any of the aforesaid states or jurisdictions;
(i) Furnish the Selling Holders, as soon as available, copies of any
Registration Statement and each preliminary or final prospectus. or supplement
or amendment required to be prepared pursuant hereto, all in such quantities as
the Selling Holders may from time to time reasonably request; and
(j) Furnish each Selling Holder such opinions of counsel and
accountants' "comfort" letters as it reasonably may request with respect to the
registration of its Registrable Securities, the Registration Statement covering
such Registrable Securities and the financial statements included therein.
6. Expenses. The Company will pay all Registration Expenses in connection
--------
with registrations of Registrable Securities effected pursuant to Paragraphs 3
and 4. All Selling Expenses in connection with any registration effected
pursuant to this Agreement shall be borne by the Company and the holders of the
Registrable Securities so registered, pro rata on the basis of the number of
--- ----
Shares included in the registration for the account of the Company and the
number of Registrable Securities so registered by each such holder.
7. Access; Participation in Preparing Registration Statements. In
----------------------------------------------------------
connection with the preparation and filing of each Registration Statement
registering Registrable Securities under the Securities Act, the Company will
give the holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered and their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such Registration Statement, each prospectus included therein or
filed with the SEC, and each amendment thereof or supplement thereto,
D-5
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such holders and such underwriters, or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
8. Indemnification.
---------------
(a) The Company will indemnify each Holder of the Registrable
Securities requesting or joining in a registration, each Person who controls
such holder within the meaning of Section 15 of the Securities Act, and each
underwriter of the securities so registered and each Person who controls such
underwriter, and their respective successors, against all costs, expenses,
demands, claims, losses, damages, liabilities, fines and penalties (or actions
in respect thereof), to which such holder or such other Person may become
subject under the Securities Act or otherwise, insofar as such claims, losses,
damages, liabilities, fines and penalties arise out of or are based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement or prospectus, or arise out of or are based upon any
omission (or alleged omission) to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such Holder, each Person who controls such Holder within the
meaning of Section 15 of the Securities Act and each such underwriter, and their
respective successors, for any legal and any other expenses; reasonably incurred
in connection with investigating or defending any such demand, claim, loss,
damage, liability or action promptly after submission of supporting materials
with respect to such expenses; provided, however, that the Company shall not be
-------- -------
required to indemnify any holder or underwriter or Person which controls any
holder or underwriter for any cost, expense, demand, claim, loss, damage,
liability, fine or penalty which arises out of or is based upon any written
information provided by such holder or underwriter, respectively, for inclusion
in the Registration Statement.
(b) Each Holder requesting or joining in a registration will indemnify
the Company against all costs, expenses, demands, claims, losses, damages,
liabilities, fines and penalties (or actions in respect thereof) to which the
Company may become subject under the Securities Act, insofar as such losses,
claims, damages or liabilities arise out of or are based upon an untrue
statement (or alleged untrue statement) of a material fact contained in any
Registration Statement or prospectus, or arise out of or are based upon the
omission (or alleged omission) to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in any Registration
Statement or prospectus in reliance upon and in conformity with written
information furnished to the Company by such holder requesting or joining in a
registration specifically for use in the preparation thereof. Notwithstanding
the foregoing, it is further agreed that this indemnity is limited to the
proceeds received by such Selling Holder pursuant to the registration, and such
selling holder will reimburse the Company for expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action to the extent, but only to the extent, of such
Selling Holder's proceeds from the registration; provided, however, that the
-------- -------
Holders shall not be required to indemnify the Company for any cost, expense,
demand, claim, loss, damage, liability, fine or penalties which arise out of or
are based upon any written information provided by the Company.
(c) Each party entitled to indemnification under this Paragraph 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided such counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld or delayed). The Indemnified Party may participate in such
defense at such party's expense; provided, however, that the Indemnifying Party
-------- -------
shall bear the expense of such defense of
D-6
the Indemnified Party if (a) the Indemnifying Party has agreed in writing to pay
such expenses, (b) the Indemnifying Party shall have failed to assume the
defense of such claim or employ counsel reasonably satisfactory to the
Indemnified Party, or (c) in the reasonable judgment of the Indemnified Party,
based upon the written advice of such Indemnified Party's counsel,
representation of both parties by the same counsel would be inappropriate due to
actual or potential conflicts of interest. In the event that the Indemnifying
Party properly does not assume such defense, the Indemnifying Party shall not be
subject to any liability for any settlement made without its prior written
consent, which consent shall not be unreasonably withheld or delayed. The
failure of any Indemnified Party to give notice as provided herein shall relieve
the Indemnifying Party of its obligations under this Paragraph 8 only to the
extent that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the prior written consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation in form and substance reasonably satisfactory to such Indemnified
Party.
9. Contribution.
------------
(a) If the indemnification provided for in Paragraph 8 from the
Indemnifying Party is unavailable to the Indemnified Party in respect to any
losses, claims, damages, liabilities or expenses referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Paragraph 8, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
(b) The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Paragraph 9 were determined by pro
---
rata allocation or by any other method of allocation which does not take into
----
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(c) If indemnification is available under Paragraph 8, the
Indemnifying Parties shall indemnify each Indemnified Party to the full extent
provided in Paragraph 8 without regard to the relative fault of the Indemnifying
Party or Indemnified Party or any other equitable consideration provided for in
this Paragraph 9.
10. Hold-Back Agreements.
--------------------
(a) Restrictions on Public Sale by Holder of Registrable Securities.
---------------------------------------------------------------
To the extent consistent with applicable law, each holder of Registrable
Securities whose Registrable Securities are included in a Registration Statement
filed pursuant to Paragraph 3 or 4 hereof agrees not to effect any public sale
or distribution of the issue being registered or any similar security of the
Company, including
D-7
a sale pursuant to Rule 144 under the Securities Act, during the 7-day period
prior to, and during the 90-day period beginning on, the effective date of such
Registration Statement, to the extent such sales may prevent the Company from
being in compliance with the Exchange Act; provided, however, that no such
restriction shall apply to sales of Registrable Securities made pursuant to that
Registration Statement, which may be made at any time following the effective
date of that Registration Statement.
(b) Restrictions on Public Sale by the Company and Others. The
-----------------------------------------------------
Company shall not effect any public or nonpublic sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for any such securities or similar securities,
during the 7-day period prior to, and during the 90-day period beginning on, the
effective date of any Registration Statement in which holders of Registrable
Securities are participating or the commencement of a public distribution of
Registrable Securities pursuant to any such Registration Statement (except (i)
as part of such registration or pursuant to registrations on ▇▇▇ ▇▇▇▇▇ ▇-▇ or S-
8 or any similar or successor form, or on any form filed in connection with an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company or (ii) for sales or other issuances of securities
pursuant to outstanding options, warrants, rights or similar obligations).
11. Rule 144 and Stock Exchange Listings.
------------------------------------
So long as there are Registrable Securities outstanding:
(a) The Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to whether it has complied
with such information and requirements.
(b) The Company will use its reasonable best efforts to avoid taking
any action which would cause the Common Stock to cease to be eligible for
inclusion in the National Association of Securities Dealers Automated Quotation
System or for listing on any securities exchange on which it currently is or
becomes listed.
12. Mergers, etc.
-------------
The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which the
Holders would be entitled to receive in exchange for Common Stock under any such
merger, consolidation or reorganization; provided that to the extent such
--------
securities to be received are convertible into shares of common stock of the
issuer thereof, then any such shares of common stock or other securities as are
issued or issuable upon conversion of said convertible securities shall also be
included within the definition of "Registrable Securities."
13. Miscellaneous.
-------------
(a) Transfer of Certain Rights. The rights granted to the Holders
--------------------------
under this Agreement may be transferred only to a transferee who delivers to the
Company, within a reasonable time
D-8
after such transfer, a written instrument by which such transferee agrees to be
bound by the applicable terms of this Agreement. Notwithstanding the foregoing
nothing herein shall prohibit: (i) any Holder from transferring any of its
rights under this Agreement to any wholly owned subsidiary of such Holder or to
any entity which merges or consolidates with or acquires all or substantially
all of the equity securities or assets of such Holder; (ii) any Holder which is
a partnership from transferring any of its rights under this Agreement to a
partner of such partnership where such partner receives Registrable Securities
in a distribution from such partnership; (iii) any Holder who is an individual
from transferring any of its rights under this Agreement to such Holder's spouse
or to other relatives, or to a trust for the benefit of the Holder, or his or
her spouse or other relatives; or (iv) any trustee of a trust which holds
Registrable Securities from distributing such Registrable Securities to the
beneficiaries of such trusts; provided that any such transferee under
--------
subparagraphs (i), (ii), (iii) or (iv) above will hold the Registrable
Securities subject to the terms and conditions of this Agreement. Upon any
transfer of the rights of a Holder, the transferee shall become a "Holder" for
purposes of this Agreement and the Company shall add the name and address of the
transferee to Schedule I (and, to the extent the transferor no longer holds
Registrable Securities, shall delete the name and address of the transferor).
(b) Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
(c) No Inconsistent Agreements. The Company shall not on or after the
--------------------------
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
To the extent the Company on or after the date of this Agreement grants any
superior or more favorable rights or terms to any Person with respect to its
securities, any such superior or more favorable rights or terms shall also be
deemed to have been granted simultaneously to the holders of Registrable
Securities. The Company has not previously entered into or become a party to nor
is it bound by any agreement with respect to its securities granting any
registration rights to any Person which is inconsistent with the rights granted
hereunder. The rights granted to the holders of Registrable Securities hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to the holders of the securities of the Company under any other agreements.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of holders of
at least a majority of the Registrable Securities affected by such amendment,
modification, supplementation, waiver or consent. Notwithstanding the foregoing,
a waiver or consent to departure from the provisions hereof with respect to a
matter which relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and which does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by the holders of a majority of the
Registrable Securities being sold by such holders; provided that the provisions
--------
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing and shall be delivered by hand,
next-day courier service, registered or certified first-class mail, return
receipt requested, telex, telegram or telecopier: if to a Holder, at the
address set forth opposite such Holder's name on the signature page hereto or
such other address as may have been furnished to the Company in writing; if to
the Company, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇-▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and thereafter at such other address, notice of which is
given in accordance with the provisions of this Paragraph 13(e).
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; one business day after
sent if sent by courier service.
(f) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware without regard to the
conflict of laws provisions thereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the securities now or hereafter owned by the Holders. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
(k) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the successful party shall be entitled to
recover, and the court shall award, reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first above written.
[THE COMPANY]
By:_______________________________
Name:
Title:
D-10
EXHIBIT E
---------
FORM OF NOTICE OF ELECTION TO CONVERT
-------------------------------------
To: DVI, Inc.
The undersigned holder of that certain 9 1/8% Convertible Subordinated
Note, dated ______, 2001 (the "Note"), in the original principal amount of $
________, made by DVI, Inc. in favor of the undersigned hereby (i) irrevocably
exercises the option to convert the Note, or the portion thereof below
designated, into shares of Common Stock (as defined in the Note Exchange
Agreement, dated ____ __, 2001 (the "Agreement"), among DVI, Inc. and the other
signatories to the Agreement) in accordance with the terms of the Note and the
Agreement and (ii) directs that such shares of Common Stock issuable and
deliverable upon the conversion, together with any payment for fractional shares
and accrued but unpaid interest as provided in the Note and the Agreement and
any Note(s) reissued representing any unconverted principal amount of the above
described Note, be issued and delivered to the undersigned holder unless a
different name or names has been indicated as provided below. If shares of
Common Stock are to be issued with the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto.
Dated: _________________ __________________________________
Signature(s) of holder
If the stock certificate or certificates or re-issued Notes is or are to be
issued in a name other than that of the holder which appears above, a written
assignment must be completed a copy of which must be delivered to DVI, Inc., and
the names, addresses and social security numbers or other taxpayer identifying
numbers of the new holders shall be provided to DVI, Inc. in writing together
with this notice.
Principal Amount of Note to be Converted
(if less than 100%): ___________________________
EXHIBIT F
---------
AFFIDAVIT OF LOST NOTE
______________, the undersigned, being duly sworn, deposes and says as
follows:
1. That a 9 1/8 % Convertible Subordinated Note dated __________,
1994 (the "Note"), made by DVI, Inc., a Delaware corporation (the "Obligor"),
was originally issued to the undersigned;
2. That the undersigned is the current holder of the Note;
3. That the Note has been lost or destroyed; that the undersigned
has made a diligent search for the Note and has been unable to locate it;
4. That the undersigned has not sold, assigned, pledged,
transferred, endorsed, deposited under or signed any power of attorney or other
authorization with respect to the Note that is now outstanding and in force, or
otherwise disposed of the Note;
5. That the undersigned will promptly deliver the Note to the
Obligor for cancellation if the Note is found; and
6. That the undersigned agrees to indemnify and hold the Obligor
free and harmless from all liability, loss, expense, cost or fee of any nature
whatsoever incurred by the Obligor or its successors or affiliates, which
relates to, or arises out of or in connection with any claim by any person with
possession of the Note that such person has any interest in the Note.
The undersigned hereby declares under penalty of perjury that the
above is true and correct to the best of the undersigned's knowledge.
Executed this day of 2001.
By: __________________________________
Name:
Title:
Sworn to before me this
_______ day of ________ 2001
______________________________
Notary Public
[SEAL]
EXHIBIT G
FORM OF OPINION OF ▇▇▇▇▇▇▇▇ CHANCE ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
_______, 2001
To the Persons and Entities Listed
on Exhibit A hereto
Re: DVI, Inc. -- 9-1/8% Subordinated Convertible
Notes Due 2004
---------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to DVI, Inc., a Delaware corporation (the
"Company"), in connection with the issuance to the persons and entities listed
on Exhibit A hereto (the "Noteholders") of up to $13,750,000 aggregate principal
amount of the Company's 9-1/8% Convertible Subordinated Notes due 2004 (the
"Notes") in exchange for up to $13,750,000 aggregate principal amount of the
Company's outstanding 9-1/8% Convertible Subordinated Notes due 2002 pursuant to
a Note Exchange Agreement dated as of _______, 2001 (the "Note Exchange
Agreement"), among the Company and the Noteholders. Capitalized terms used in
this letter and which are not defined have the meanings ascribed to them in the
Note Exchange Agreement.
In rendering the opinions expressed below, we have examined the forms
of the Note Exchange Agreement (and the exhibits thereto), the Registration
Rights Agreement dated as of _______, 2001 (the "Registration Rights
Agreement"), among the Noteholders and the Company, and the Notes. In addition,
we have examined originals or copies of such other documents, corporate records,
certificates and letters of public officials and such other instruments as we
have deemed necessary, including the certificate of incorporation, as amended,
and the by-laws of the Company and each of the Subsidiaries and the corporate
proceedings of the Company relating to the authorization, execution and delivery
of the Note Exchange Agreement, the Registration Rights Agreement and the Notes.
In examining all such documents, we have assumed the genuineness of all
signatures (other than those of the Company), the authenticity of all documents
purporting to be originals, and the conformity to the respective originals of
all documents purporting to be copies.
Based on the foregoing, and on such examination of law as we have
deemed necessary, we are of the opinion that:
1. The Company is an existing corporation in good standing under the laws
the State of Delaware, with full corporate power and authority to own
its properties and conduct its business.
2. The Company has the corporate power and authority to enter into and
perform the Note Exchange Agreement and the Registration Rights
Agreement and to issue and deliver the Notes to the Noteholders. The
execution, delivery and performance of the Note Exchange
Agreement, including the issuance and delivery of the Notes, and the
Registration Rights Agreement have been duly authorized by all
requisite corporate action on the part of the Company.
3. Each of the Note Exchange Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company. Each of
the Registration Rights Agreement and, assuming for purposes of the
opinion expressed in this paragraph 3 that Illinois law and New York
law are the same (as to which we have made no investigation), the Note
Exchange Agreement constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms except as the
enforceability thereof may be limited by bankruptcy, reorganization,
moratorium, insolvency or similar laws affecting creditors' rights
generally, including, without limitation, applicable fraudulent
transfer laws, and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and
fair dealing (regardless of whether the enforceability of such rights
or the availability of such remedies is considered in a proceeding in
equity or at law). In addition, certain provisions of the Note
Exchange Agreement and the Registration Rights Agreement are or may be
unenforceable in whole or in part, under applicable law, but the
inclusion of such provisions in the Registration Rights Agreement and
the Note Exchange Agreement does not affect the validity of such
agreements, each as a whole, and there exist legally adequate remedies
for the practical realization of the principal benefits afforded
thereby. We express no opinion, however, as to the enforceability of
those provisions of the Registration Rights Agreement that provide for
indemnification against or contribution for liabilities under federal
or state securities laws. The Notes have been duly authorized and,
assuming that Illinois law and New York law are the same (as to which
we have made no investigation), when executed and delivered to the
Noteholders as provided in the Note Exchange Agreement, will be valid
and binding obligations of the Company, enforceable in accordance with
their terms except as the enforceability thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency or similar laws
affecting creditors' rights generally, including, without limitation,
applicable fraudulent transfer laws, and general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether the
enforceability of such rights or the availability of such remedies is
considered in a proceeding in equity or at law).
4. Except as set forth in Schedule 2.4 to the Note Exchange Agreement,
none of the execution and delivery of the Note Exchange Agreement, the
Registration Rights Agreement or the Notes, the consummation of any of
the transactions contemplated thereby or compliance with the terms and
provisions thereof conflicts or will conflict with or constitutes or
will constitute a breach of, or a default under, the articles of
incorporation, by-laws, or other organizational documents (each as
amended through the date hereof) of the Company.
5. The shares of Common Stock issuable upon conversion of the Notes have
been duly and validly authorized and reserved for issuance upon such
conversion and, when issued upon conversion in accordance with the
provisions of the Note Exchange Agreement, will be validly issued,
fully paid and nonassessable and free from preemptive rights.
6. The offering and issuance of the Notes as contemplated under the Note
Exchange Agreement is exempt from registration under the Securities
Act, and the Note Exchange Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended.
In rendering the opinions set forth above, we have relied, as to
matters of fact, on certificates of responsible officers of the Company.
The opinions set forth herein relate only to the federal laws of the
United States of America, the laws of the State of New York and the General
Corporation Law of the State of Delaware and this opinion does not address the
securities laws or blue sky laws of any state.
This letter is furnished by us as special counsel to the Company to
you as Noteholders under the Note Exchange Agreement and is solely for your
benefit.
Very truly yours,
EXHIBIT A
▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇ Memorial Foundation
Canadian Imperial Bank of Commerce
Trust Company, as Trustee of Settlement T-
1740 Trusts #14, #27, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇, #▇▇,
#▇▇ and #36
▇▇▇▇▇▇▇ Family Ventures
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇ Revocable Trust
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, Jtwros
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
S.L.K. Retirement Trust
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Revocable Trust
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Granite Capital, L.P.
▇▇▇▇▇▇ ▇▇▇-▇▇▇▇▇ Residuary Trust