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EXHIBIT 10.1
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SECURITIES PURCHASE AGREEMENT
DATED AS OF JUNE 29, 2001
BY AND BETWEEN
DEEPHAVEN/JE ▇▇▇▇▇▇▇ I, LLC
AND
DVI, INC.
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TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF NOTE..........................................................2
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SECTION 1.1 PURCHASE OF NOTE...........................................................2
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SECTION 1.2 CLOSING DATE...............................................................3
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SECTION 1.3 FORM OF PAYMENT............................................................3
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ARTICLE II BUYER'S REPRESENTATIONS AND WARRANTIES............................................3
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SECTION 2.1 INVESTMENT PURPOSE.........................................................3
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SECTION 2.2 ACCREDITED INVESTOR STATUS.................................................3
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SECTION 2.3 RELIANCE ON EXEMPTIONS.....................................................3
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SECTION 2.4 INFORMATION................................................................4
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SECTION 2.5 NO GOVERNMENTAL REVIEW.....................................................4
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SECTION 2.6 TRANSFER OR RESALE.........................................................4
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SECTION 2.7 LEGENDS....................................................................4
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SECTION 2.8 VALIDITY; ENFORCEMENT......................................................5
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SECTION 2.9 ORGANIZATION AND QUALIFICATION.............................................5
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SECTION 2.10 AUTHORIZATION; ENFORCEMENT; VALIDITY.......................................5
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SECTION 2.11 RESIDENCY..................................................................6
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SECTION 2.12 TRADING RESTRICTIONS.......................................................6
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SECTION 2.13 REGISTRATION OF ISSUANCE OF THE SHARES.....................................6
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SECTION 2.14 BUYER'S KNOWLEDGE..........................................................6
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................6
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SECTION 3.1 ORGANIZATION AND QUALIFICATION.............................................6
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SECTION 3.2 AUTHORIZATION; ENFORCEMENT; VALIDITY.......................................6
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SECTION 3.3 ISSUANCE OF SECURITIES.....................................................7
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SECTION 3.4 NO CONFLICTS...............................................................7
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SECTION 3.5 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES....................7
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SECTION 3.6 DILUTIVE EFFECT............................................................8
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SECTION 3.7 ELIGIBILITY TO REGISTER ON FORM S-3........................................8
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SECTION 3.8 ACCURACY OF STATEMENTS.....................................................8
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SECTION 3.9 FLEET LOAN DOCUMENTS.......................................................8
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SECTION 3.10 DIRECTOR AND OFFICER LIABILITY INSURANCE...................................8
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SECTION 3.11 CAPITALIZATION.............................................................9
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ARTICLE IV COVENANTS.........................................................................9
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SECTION 4.1 COMMERCIALLY REASONABLE EFFORTS............................................9
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SECTION 4.2 REGISTRATION STATEMENT.....................................................9
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SECTION 4.3 REPORTING STATUS..........................................................10
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SECTION 4.4 USE OF PROCEEDS...........................................................10
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SECTION 4.5 SEC FILINGS...............................................................10
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SECTION 4.6 RESERVATION OF SHARES.....................................................10
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SECTION 4.7 LISTING...................................................................10
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SECTION 4.8 EXPENSES..................................................................11
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SECTION 4.9 LIMITATION ON NUMBER OF EXCHANGE SHARES AND THE WARRANT SHARES............11
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SECTION 4.10 OTHER FINANCING...........................................................11
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ARTICLE V TRANSFER AGENT INSTRUCTIONS.......................................................11
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ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL...................................12
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SECTION 6.1 DELIVERY OF DOCUMENTS.....................................................12
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SECTION 6.2 PURCHASE PRICE............................................................12
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SECTION 6.3 REPRESENTATIONS AND WARRANTIES............................................12
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ARTICLE VII CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE....................................13
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SECTION 7.1 DELIVERY OF DOCUMENTS.....................................................13
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SECTION 7.2 SECURITIES LAWS...........................................................13
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SECTION 7.3 FINANCIAL'S ACKNOWLEDGMENTS...............................................13
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SECTION 7.4 REPRESENTATIONS AND WARRANTIES............................................13
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SECTION 7.5 OPINION...................................................................13
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SECTION 7.6 NOTE......................................................................13
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SECTION 7.7 BOARD APPROVAL............................................................13
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SECTION 7.8 RESERVATION OF SHARES.....................................................14
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SECTION 7.9 TRANSFER AGENT............................................................14
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SECTION 7.10 GOOD STANDING.............................................................14
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SECTION 7.11 SECRETARY'S CERTIFICATE...................................................14
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SECTION 7.12 FLEET.....................................................................14
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SECTION 7.13 OTHER.....................................................................14
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ARTICLE VIII INDEMNIFICATION................................................................14
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ARTICLE IX GOVERNING LAW; MISCELLANEOUS.....................................................16
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SECTION 9.1 GOVERNING LAW; JURISDICTION; JURY TRIAL...................................16
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SECTION 9.2 COUNTERPARTS..............................................................17
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SECTION 9.3 HEADINGS..................................................................17
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SECTION 9.4 SEVERABILITY..............................................................17
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SECTION 9.5 ENTIRE AGREEMENT; AMENDMENTS..............................................17
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SECTION 9.6 NOTICES...................................................................17
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SECTION 9.7 SUCCESSORS AND ASSIGNS....................................................18
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SECTION 9.8 NO THIRD PARTY BENEFICIARIES..............................................19
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SECTION 9.9 SURVIVAL..................................................................19
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SECTION 9.10 PUBLICITY.................................................................19
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SECTION 9.11 FURTHER ASSURANCES........................................................19
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SECTION 9.12 TERMINATION...............................................................19
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SECTION 9.13 NO STRICT CONSTRUCTION....................................................19
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SECTION 9.14 REMEDIES..................................................................20
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SECTION 9.15 PAYMENT SET ASIDE.........................................................20
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SECTION 9.16 EXPENSES..................................................................20
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WAIVER AND RELEASE..........................................................................28
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EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Warrant
EXHIBIT C Form of Security Agreement
EXHIBIT D Form of Purchase Price Note
EXHIBIT E Form of Company Counsel Opinion
EXHIBIT F Form of Irrevocable Transfer Agent Instructions
EXHIBIT G Form of Waiver and Release
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GLOSSARY OF DEFINED TERMS
1934 ACT....................................................................................10
AFFILIATE...................................................................................18
AGREEMENT....................................................................................2
AMENDMENT....................................................................................9
BUSINESS DAY.................................................................................3
BUYER........................................................................................2
BUYER INDEMNIFIED PARTIES...................................................................14
BUYER LOSSES................................................................................14
BUYER TRANSACTION DOCUMENTS..................................................................5
CLOSING......................................................................................2
CLOSING DATE.................................................................................2
COMMON STOCK.................................................................................2
COMPANY......................................................................................2
COMPANY INDEMNIFIED PARTIES.................................................................14
COMPANY LOSSES..............................................................................15
EXCHANGE SHARES..............................................................................2
FINANCIAL................................................................................2, 10
FLEET LOAN DOCUMENTS.........................................................................8
INDEMNIFIED PARTIES.........................................................................14
INDEMNIFYING PARTY..........................................................................15
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS.....................................................11
ISSUANCE DATE................................................................................9
LOSSES......................................................................................15
MATERIAL ADVERSE CHANGE......................................................................7
NOTE.........................................................................................2
PRIMARY REGISTRATION STATEMENT...............................................................9
PRINCIPAL MARKET............................................................................10
PURCHASE PRICE...............................................................................2
PURCHASE PRICE NOTE..........................................................................3
REGULATION D.................................................................................3
RESALE REGISTRATION STATEMENT................................................................9
RULE 144.....................................................................................4
SEC..........................................................................................3
SECURITIES...................................................................................3
SECURITY AGREEMENT...........................................................................2
SHARES.......................................................................................2
SUBSIDIARIES.................................................................................6
TRANSACTION DOCUMENTS........................................................................6
WARRANTS.....................................................................................2
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 29,
2001, by and between DEEPHAVEN/JE ▇▇▇▇▇▇▇ I, LLC, a Minnesota limited liability
company (the "Buyer"), and DVI, INC., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the Company has authorized the issuance of a $12,000,000 9.5%
Asset-Backed Exchangeable Term Note, substantially in the form attached hereto
as EXHIBIT A (the "Note"), which shall be exchangeable into shares of common
stock of the Company, par value $.005 per share (the "Common Stock") (if, as and
when issued pursuant to the Note, the "Exchange Shares"), in accordance with the
terms of the Note;
WHEREAS, the Company will contribute all of the proceeds from the sale
of the Note to DVI Financial Services, Inc. ("Financial"), a wholly-owned
subsidiary of the Company, and Financial will use such contribution for its
working capital purposes;
WHEREAS, the Company has authorized the issuance of warrants, each
substantially in the form attached hereto as EXHIBIT B (the "Warrants"), which
Warrants may be issued as provided for in the Note or otherwise, each Warrant to
be for the purchase of shares of Common Stock (the "Warrant Shares"; the
Exchange Shares and the Warrant Shares being referred to collectively as the
"Shares") at certain exercise prices as provided for in the Warrants;
WHEREAS, the obligations of the Company under the Note, the Warrants and
the other Transaction Documents (as hereinafter defined) shall be secured by
certain assets of Financial pursuant to a security agreement in substantially
the form attached hereto as Exhibit C (the "Security Agreement") by and between
Financial and Buyer; and
WHEREAS, Buyer desires to purchase, and the Company desires to issue and
deliver to Buyer, the Note, all upon the terms and conditions stated in this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties of the parties set forth in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Buyer hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTE
SECTION 1.1 PURCHASE OF NOTE.
Subject to the satisfaction (or waiver, if permissible) of the
conditions set forth in Article VI and Article VII of this Agreement, the
Company shall issue and sell to Buyer, and Buyer agrees to purchase from the
Company the Note at the closing (the "Closing"). The aggregate purchase price
(the "Purchase Price") for the Note at the Closing shall be $12,000,000 payable
in the manner set forth in Section 1.3 of this Agreement.
SECTION 1.2 CLOSING DATE.
The date and time of the Closing (the "Closing Date") shall occur,
subject to the satisfaction (or waiver, if permissible) of the conditions to the
Closing set forth in Article VI and Article VII of this
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Agreement, on June 29, 2001 or such other date as is mutually agreed to by the
Company and Buyer. The Closing shall occur at the offices of Schwartz, Cooper,
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 1.3 FORM OF PAYMENT.
On the Closing Date, Buyer shall pay the Purchase Price to the Company
by (i) delivery to the Company of a duly executed promissory note of Fairway
Opportunity Group International Trading Company, a Cayman Island limited
liability company and one of the members of Buyer in the stated principal amount
of $3,000,000 substantially in the form attached hereto as EXHIBIT D (the
"Purchase Price Note") and (ii) a wire transfer of immediately available funds
in the amount of $9,000,000 to Account No. ▇▇▇▇-▇▇-▇▇▇▇ at Fleet National Bank
("Fleet") and the Company shall deliver to Buyer the Note, duly executed on
behalf of the Company and registered in the name of Buyer. "Business Day" shall
mean any day other than a Saturday or Sunday or a day on which commercial banks
in the City of Chicago, Illinois or the Commonwealth of Pennsylvania are
authorized or required by law or executive order to remain closed.
ARTICLE II
BUYER'S REPRESENTATIONS AND WARRANTIES
Subject to the provisions of Section 2.13 of this Agreement, Buyer
hereby represents and warrants to the Company that:
SECTION 2.1 INVESTMENT PURPOSE.
Buyer (i) is acquiring the Note and will acquire the Warrants, if
issued, (ii) upon exchange of the Note, if any, will acquire the Exchange Shares
then issuable, and (iii) upon exercise of the Warrants, will acquire the Warrant
Shares issuable upon exercise thereof, (the Note, the Exchange Shares, the
Warrants and the Warrant Shares collectively are referred to herein as the
"Securities"), as principal, for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempt from
registration under the 1933 Act.
SECTION 2.2 ACCREDITED INVESTOR STATUS.
Buyer is an "accredited investor" as that term is defined in Rule 501(a)
of Regulation D ("Regulation D"), as promulgated by the United States Securities
and Exchange Commission ("SEC").
SECTION 2.3 RELIANCE ON EXEMPTIONS.
Buyer understands that the Securities are being offered and sold to it
in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in part
upon the truth and accuracy of, and Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the availability of such exemptions
and the eligibility of Buyer to acquire such Securities.
SECTION 2.4 INFORMATION.
Buyer and its advisors have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities, and have
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been furnished with such other materials as Buyer has requested. Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Buyer understands that its investment in the Securities involves a high
degree of risk. Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
SECTION 2.5 NO GOVERNMENTAL REVIEW.
Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Securities.
SECTION 2.6 TRANSFER OR RESALE.
Buyer understands that, except as provided in Section 4.2 of this
Agreement, (i) the Securities have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B)
Buyer shall have delivered to the Company an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) Buyer provides the Company with an
assurance (which assurance shall be acceptable to the Company in its reasonable
discretion) that such Securities could then be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Note and the Warrants under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.
SECTION 2.7 LEGENDS.
Buyer understands that the certificates or other instruments
representing the Note and any Warrant and, if the issuance of the Exchange
Shares or any Warrant Shares have not been registered under the 1933 Act, the
certificates representing such Exchange Shares or Warrant Shares not so
registered, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed with
the Company's transfer agent against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR A VALID EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS, TOGETHER WITH AN OPINION OF COUNSEL, IN A
FORM AND
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SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Securities upon which it
is stamped, if, unless otherwise required by state securities laws, (i) such
Securities are sold in a transaction registered under the 1933 Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel in a form reasonably acceptable to the Company to the effect
that a public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act and such legend may be removed, or (iii) such
holder provides the Company with the documentation and/or other assurances
required by Section 2.6 of this Agreement.
SECTION 2.8 VALIDITY; ENFORCEMENT.
This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against Buyer in accordance with its terms, subject as to enforceability to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
SECTION 2.9 ORGANIZATION AND QUALIFICATION.
Buyer is a duly organized limited liability company, validly existing
and in good standing under the laws of the State of Minnesota, and has the
requisite power and authority to own its properties and to carry on its business
as now being conducted.
SECTION 2.10 AUTHORIZATION; ENFORCEMENT; VALIDITY.
(i) Buyer has the requisite power and authority to enter into and
perform its obligations under this Agreement and each of the other agreements
entered into by the Buyer in connection with the transactions contemplated by
this Agreement (collectively, the "Buyer Transaction Documents"); (ii) the
execution and delivery of the Buyer Transaction Documents by Buyer and the
consummation by it of the transactions contemplated by the Buyer Transaction
Documents has been duly authorized by Buyer's members and no further
authorization is required by the Buyer's members; (iii) the Buyer Transaction
Documents have been duly executed and delivered by Buyer; and (iv) the Buyer
Transaction Documents constitute the valid and binding obligation of Buyer
enforceable against Buyer in accordance with their respective terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
SECTION 2.11 RESIDENCY.
Buyer is a limited liability company organized under the laws of the
State of Minnesota and having its principal place of business in Minnesota.
SECTION 2.12 TRADING RESTRICTIONS.
So long as the Note is outstanding, if Buyer or any of its affiliates
have, directly or indirectly, entered into any short sale of the Common Stock to
be issued pursuant to the exercise of an Exchange
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Right (as defined in the Note) then Buyer shall deliver an Exchange Notice (as
defined in the Note) for such Common Stock to the Company within 72 hours of
entering into such short sale.
SECTION 2.13 REGISTRATION OF ISSUANCE OF THE SHARES.
If any of the Shares are issued in a transaction registered under the
1933 Act, the Buyer shall be deemed to have not made the representations and
warranties in Section 2.1, 2.2, 2.3, 2.6 or 2.7 solely with respect to such
Shares.
SECTION 2.14 BUYER'S KNOWLEDGE.
Buyer has no actual knowledge of any fact, circumstance or other
information that would cause any misrepresentation or breach of any
representation or warranty made by the Company or Financial in the Transaction
Documents as of the date of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION.
The Company and each of its "Subsidiaries" (which for purposes of this
Agreement means any corporation, partnership, joint venture or other entity in
which the Company owns, directly or indirectly, 50% or more of the outstanding
voting securities) are entities duly organized, validly existing and in good
standing under the laws of the jurisdiction in which they are organized, and
have the requisite power and authority to own their properties and to carry on
their business as now being conducted.
SECTION 3.2 AUTHORIZATION; ENFORCEMENT; VALIDITY.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Note, the Warrants,
the Irrevocable Transfer Agent Instructions (as defined in Article V), and each
of the other agreements entered into by the Company in connection with the
transactions contemplated by this Agreement (collectively with the Security
Agreement, the "Transaction Documents"), and to issue the Securities in
accordance with the terms of the Transaction Documents to which it is a party;
(ii) the execution and delivery of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
by the Transaction Documents to which the Company is a party, including, without
limitation, the issuance of the Note and each of the Warrants, and the
reservation for issuance of the Exchange Shares and the Warrant Shares have been
duly authorized by the Company's Board of Directors and no further authorization
is required by the Company, its Board of Directors or its stockholders; (iii)
the Transaction Documents to which the Company is a party have been duly
executed and delivered by the Company; and (iv) the Transaction Documents to
which the Company is a party constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
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SECTION 3.3 ISSUANCE OF SECURITIES.
Upon issuance, any Warrants (and any Warrants issued in substitution or
replacement of any Warrant) will be and upon exchange or exercise in accordance
with the Note or any Warrant, as the case may be, the Exchange Shares and the
Warrant Shares will be, validly issued, fully paid and non-assessable. The
amount of shares of Common Stock required by SECTION 4.6 of this Agreement has
been duly authorized and reserved for issuance upon exchange of the Note and
upon exercise of the Warrants. The issuance and sale of the Securities has been
or will be registered under the 1933 Act, or provided that the representations
and warranties of the Buyer set forth in Article II are true and correct when
made, as of the Closing Date and on the date the Exchange Shares and Warrant
Shares are issued, is and will be exempt from registration under the 1933 Act.
SECTION 3.4 NO CONFLICTS.
Upon receipt of Fleet's consent, pursuant to Section 7.12, the
execution, delivery and performance of the Transaction Documents to which the
Company is a party by the Company and the consummation by the Company of the
transactions contemplated by the Transaction Documents to which the Company is a
party (including, without limitation, the reservation for issuance and issuance
of the Exchange Shares and the Warrant Shares) will not (i) result in a
violation of the Certificate of Incorporation or the By-laws of the Company or
(ii) constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected except, in the case of
the preceding clause (ii), for such defaults, giving of rights and violations as
would not have a Material Adverse Effect. Except as specifically contemplated by
this Agreement and as required under the 1933 Act or applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement or any
other of the Transaction Documents to which the Company is a party, in each case
in accordance with the terms of the Transaction Documents. For purposes of this
Section 3.4, "Material Adverse Effect" shall mean any material adverse effect on
the business, properties, assets, operations, results of operations, or
financial condition of the Company and its Subsidiaries, taken as a whole.
SECTION 3.5 ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents and
the transactions contemplated by the Transaction Documents. The Company further
acknowledges that Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated by the Transaction Documents and any advice
given by Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated by the Transaction
Documents is merely incidental to Buyer's purchase of the Securities.
SECTION 3.6 DILUTIVE EFFECT.
The Company understands and acknowledges that the number of Exchange
Shares issuable upon exchange of the Note and Warrant Shares issuable upon
exercise of any Warrant will increase in certain
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circumstances. The Company further acknowledges that its obligation to issue
Exchange Shares upon exchange of the Note in accordance with this Agreement and
the Note, and its obligation to issue any Warrant Shares upon exercise of any
Warrant in accordance with this Agreement, any Warrant and the Note, is, in each
case, absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
SECTION 3.7 ELIGIBILITY TO REGISTER ON FORM S-3.
The Company is eligible to register the Shares to be issued to Buyer on
Form S-3 pursuant to the 1933 Act.
SECTION 3.8 ACCURACY OF STATEMENTS.
This Agreement, the other Transaction Documents and any agreement,
schedule, exhibit or certificate furnished or to be furnished by or on behalf of
the Company in connection with this Agreement, the other Transaction Documents
or any of the transactions contemplated hereby, any Registration Statement (as
defined below) and all reports, statements and other documents incorporated by
reference in such Registration Statement and all of the written information
supplied to Buyer by the Company does not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make the statements
contained therein, not misleading. Neither any inquiries nor any other due
diligence investigations conducted by Buyer or its advisors, if any, or its
representatives shall modify, amend or affect Buyer's right to rely on the
Company's representations and warranties as set forth herein or upon any of the
aforesaid documents and written information furnished by the Company or its
advisors or representatives to Buyer or its advisors or representatives;
provided, however, that Buyer may not bring any action for indemnification or
otherwise in respect of any matter of which Buyer had actual knowledge as of the
date of this Agreement or the Closing.
SECTION 3.9 FLEET LOAN DOCUMENTS.
The representations and warranties of the Financial set forth in Article
3 of the Third Amended and Restated Loan Agreement dated as of February 28,
2000, among Financial, the banks signatory thereto, U.S. Bank National
Association, as documentation agent and Fleet, as arranger and administrative
and collateral agent, as amended (the "Fleet Loan Documents" ) , (subject to the
disclosure schedules made in part thereof) are made by the Company herein as if
such representations and warranties were set forth in this Section 3.9.
SECTION 3.10 DIRECTOR AND OFFICER LIABILITY INSURANCE.
The Company has obtained a directors' and officers' liability insurance
policy from an insurer of recognized financial responsibility in an amount and
on such terms as management of the Company believes to be prudent and customary
in the businesses in which the Company and its Subsidiaries engage.
SECTION 3.11 CAPITALIZATION.
The capitalization of the Company as of June 29, 2001, set forth in the
capitalization table previously delivered by the Company to Buyer is true and
accurate in all material respects. There are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of any shares of the Common Stock pursuant to the Company's certificate
of incorporation, by-laws or other governing documents or any agreement or other
instrument to which the Company or any of
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its Subsidiaries is a party or by which any of them may be bound, other than as
set forth in said capitalization table.
ARTICLE IV
COVENANTS
SECTION 4.1 COMMERCIALLY REASONABLE EFFORTS.
Each party to this Agreement shall use its commercially reasonable
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Article VI and Article VII of this Agreement.
SECTION 4.2 REGISTRATION STATEMENT.
(a) The Company shall, as soon as practicable, but in no
event later than 60 days after the date of issuance of the Note (the "Issuance
Date") file with the SEC an amendment (the "Amendment") to its Registration
Statement No. 333-50895 (the "Primary Registration Statement") for sale to Buyer
of the amount of Exchange Shares and the Warrant Shares set forth in the first
sentence of Section 4.6 of this Agreement. The Company shall use commercially
reasonable efforts to have the Primary Registration Statement declared effective
by the SEC as soon as practicable. The Company shall use its best efforts to
file post-effective amendments and amended or supplemented prospectuses to or
with the Primary Registration Statement from time to time so that the latest
available prospectus will continue to meet the requirements of Section 10 of the
1933 Act until all of the Exchange Shares and Warrant Shares to be issued under
the Note and Warrants, respectively, are issued.
(b) The Company shall permit Buyer or its assigns to review
and comment upon the Primary Registration Statement and all other amendments and
supplements to the Registration Statement or at least seven days prior to their
filing with the SEC.
(c) In the event a Registration Statement has not been
declared effective by the SEC on the 120th day following the Issuance Date, the
Company shall pay to Buyer a penalty equal to 1.5% per month (prorated for
partial months) of the outstanding principal amount of the Note, which penalty
shall continue to accrue, and be paid in cash on each monthly anniversary
thereafter until the date a Registration Statement is declared effective by the
SEC.
(d) Assuming the Primary Registration Statement has been
declared effective by the SEC, in the event that for any reason the Company is
no longer permitted to sell Shares under the Primary Registration Statement, the
Company shall file a registration statement ("Resale Registration Statement")
with the SEC for resale by Buyer of such of the Exchange Shares and Warrant
Shares as are set forth in the first sentence of Section 4.6 of this Agreement
that have not therefore been sold under the Primary Registration Statement, if
any. The Company shall use commercially reasonable efforts to have the Resale
Registration Statement declared effective by the SEC as soon as practicable. The
Company shall use its best efforts to file post-effective amendments and amended
or supplemented prospectuses to or with the Resale Registration Statement from
time to time so that the latest available prospectus will continue to meet the
requirements of Section 10 of the 1933 Act or until the earlier of (i) the date
as of which all of the Exchange Shares and Warrant Shares that may be issued may
be sold without restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto) or (ii) the date on which (A) all the Exchange Shares
and Warrant Shares that may be issued are sold and (B) none of the Note or any
Warrants are outstanding. If the event described in the first sentence of this
Section 4.2(d) occurs, until the Resale Registration Statement is declared
effective and a prospectus thereunder meeting the
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requirements of Section 10 of the 1933 Act is available, the Note shall be
subject to a Mandatory Redemption Event pursuant to Section 4(a) of the Note.
(e) "Registration Statement" shall mean the Primary
Registration Statement or the Resale Registration Statement, as the case may be.
SECTION 4.3 REPORTING STATUS.
Until the earlier of (i) the date all of the Exchange Shares and the
Warrant Shares may be sold without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date on which
(A) all the Exchange Shares and the Warrant Shares are sold and (B) no amounts
under the Note remain unpaid and there are no unexercised Exchange Rights and no
Warrants are outstanding or issuable, the Company shall file all reports
required to be filed with the SEC pursuant to the Securities Exchange Act of
1934, as amended ("1934 Act"), and the Company shall not terminate its status as
an issuer required to file reports under the 1934 Act even if the 1934 Act would
otherwise permit such termination.
SECTION 4.4 USE OF PROCEEDS.
The Company will contribute all of the proceeds from the sale of the
Note to Financial and Financial will use such contribution for its general
working capital purposes.
SECTION 4.5 SEC FILINGS.
If any report, registration statement or amendment or other document
required to be filed by the Company during the Registration Period is not filed
with the SEC through ▇▇▇▇▇ then the Company shall deliver a copy of such report
to Buyer or its permitted transferees, if any, by facsimile within two days
after such report is filed with the SEC. The Company shall also deliver to the
Buyer or its permitted transferees copies of any proxy statements, notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
SECTION 4.6 RESERVATION OF SHARES.
At the Closing, the Company shall take all action necessary to have
authorized, and reserved for the purpose of issuance, the maximum number of
shares of Common Stock issuable upon exercise of Exchange Rights and an exchange
of the Note and the maximum number of shares of Common Stock issuable upon
exercise of the Warrants. For purposes of this Section 4.6, such maximum number
of shares of Common Stock shall be equal to 19.99% of the total outstanding
shares of Common Stock.
SECTION 4.7 LISTING.
The Company shall, on or before any Exchange Rights are issued, secure
the listing of the Shares issuable upon the exercise of such Exchange Rights on
the New York Stock Exchange, or other national exchange or trading market on
which the Common Stock is listed or included for trading (the "Principal
Market") (subject to official notice of issuance) and shall maintain such
listing so long as any other shares of Common Stock shall be so listed or
included for trading. Upon such listing on the Principal Market neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of any of the
Shares on the Principal Market. The Company shall promptly, and in no event
later than the following Business Day, provide to Buyer copies of any notices it
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receives from the Principal Market regarding any continued eligibility of the
Shares for listing on the Principal Market.
SECTION 4.8 EXPENSES.
At the Closing, the Company shall pay to JE ▇▇▇▇▇▇▇, LLC a transaction
fee of Two Hundred Forty Thousand Dollars ($240,000). At the Closing, the
Company shall pay the legal fees of Buyer incurred in connection with this
transaction upon receipt of customary legal bills, but only to the extent of
Forty Thousand Dollars ($40,000).
SECTION 4.9 LIMITATION ON NUMBER OF EXCHANGE SHARES AND THE WARRANT SHARES.
When required under the listing requirements of the Principal Market,
the Company shall not be obligated to issue more than 19.99% of its total
outstanding shares of Common Stock upon the exchange of the Note and the
exercise of all Warrants, except that such limitation shall not apply in the
event that the Company obtains the approval of its stockholders as required by
the Principal Market (or any successor rule or regulation) for issuances of
Common Stock in excess of such amount. Within 90 days of the earlier to occur of
(i) the actual issuance of an aggregate of 2,000,000 Exchange Shares and Warrant
Shares or (ii) the falling below $1.00 of the per-share closing bid price of the
Common Stock for five consecutive trading days, the Company shall hold a
stockholders meeting to seek approval of its stockholders for the issuance of
19.99% or more of its Common Stock. In the event the Company is prohibited from
issuing Exchange Shares or Warrant Shares as a result of the operation of this
SECTION 4.9, with respect to the Note, the Company shall be subject to the
restrictions described in the Note, and upon exercise of the Warrants, the
Company shall redeem for cash those Warrant Shares which cannot be issued, at a
price equal to the difference between the closing price, as reported by
Bloomberg Financial Markets ("Bloomberg"), and the exercise price of such
Warrant Shares as of the date of the attempted exercise.
SECTION 4.10 OTHER FINANCING.
During the term of the Note, the Company shall be prohibited from
issuing any convertible variable priced debt or convertible variable priced
equity securities of any type.
ARTICLE V
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of Buyer or its respective nominee(s), for the Exchange Shares and the Warrant
Shares in such amounts as specified from time to time by Buyer to the Company
upon exchange of amounts outstanding under the Note or exercise of any Warrant
(the "Irrevocable Transfer Agent Instructions"). If any of the Shares have been
issued in a transaction registered under the 1933 Act, the Company shall
promptly notify the transfer agent that any certificates evidencing such Shares
shall be issued without any restrictive legend. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Article V, and stop transfer instructions to give effect to SECTION 2.7
hereof (in the case of the issuance of the Exchange Shares or any of the Warrant
Shares in a transaction exempt from registration under the 1933 Act) will be
given by the Company to its transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement. If Buyer provides the Company with an opinion
of counsel, in form and substance reasonably acceptable to the Company, to the
effect that a public sale, assignment or transfer of the Shares may be made
without registration under
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the 1933 Act or Buyer provides the Company with assurances required by Section
2.6 of this Agreement that the Shares can be sold pursuant to Rule 144, the
Company shall permit the transfer, and promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by Buyer and without any restrictive legend. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Article V will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Article V, that Buyer shall be entitled, in addition to all other available
remedies, to an order and/or injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company hereunder to issue and sell the Note to
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing Buyer with prior written notice thereof:
SECTION 6.1 DELIVERY OF DOCUMENTS.
Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company or Financial, as the case may
be.
SECTION 6.2 PURCHASE PRICE.
Buyer shall have delivered to the Company the Purchase Price at the
Closing in accordance with Section 1.3 of this Agreement.
SECTION 6.3 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date which shall be true and correct in all material respects
as of such date), and Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Buyer on or prior to
the Closing Date.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE
The obligation of Buyer hereunder to purchase the Note at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for Buyer's sole
benefit and may be waived by Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:
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SECTION 7.1 DELIVERY OF DOCUMENTS.
Each of the Company and Financial shall have executed each of the
Transaction Documents and all agreements and other documents required therein to
which it is a party and delivered the same to Buyer.
SECTION 7.2 SECURITIES LAWS.
The Company shall have made all filings under all applicable federal and
state securities laws necessary to consummate the issuance of the Note and the
Warrants pursuant to this Agreement in compliance with such laws.
SECTION 7.3 FINANCIAL'S ACKNOWLEDGMENTS.
Financial shall acknowledge receipt from DVI of the cash portion of the
Purchase Price.
SECTION 7.4 REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each of the Company and Financial
in the Transaction Documents shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date
which shall be true and correct in all material respects as of such date) and
each of the Company and Financial shall have performed, satisfied and complied
in all material respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with by it
on or prior to the Closing Date.
SECTION 7.5 OPINION.
Buyer shall have received the opinion of the Company's and Financial's
counsel dated as of the Closing Date, in substantially the form of EXHIBIT E
attached hereto.
SECTION 7.6 NOTE.
The Company shall have executed and delivered the Note to Buyer.
SECTION 7.7 BOARD APPROVAL.
The Boards of Directors of the Company and of Financial shall have
adopted resolutions authorizing the Transaction Documents and the transactions
contemplated by the Transaction Documents.
SECTION 7.8 RESERVATION OF SHARES.
As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
exercise of Exchange Rights under the Note and the exercise of the Warrants, the
number of shares required to be reserved pursuant to SECTION 4.6.
SECTION 7.9 TRANSFER AGENT.
The Irrevocable Transfer Agent Instructions, in the form of EXHIBIT F
attached hereto, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
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SECTION 7.10 GOOD STANDING.
The Company shall have delivered to Buyer a certified copy of its
Certificate of Incorporation and the Certificate of Incorporation of Financial.
The Company shall also deliver to Buyer a certificate of good standing of the
Company and Financial in each corporation's state of incorporation and
certificates of good standing of the Company and Financial in the Commonwealth
of Pennsylvania. Each such certified copy or certificate is to be as of a date
within 10 days of the Closing Date.
SECTION 7.11 SECRETARY'S CERTIFICATE.
The Company and Financial shall each have delivered to Buyer a
secretary's certificate, dated as the Closing Date, as to (i) the resolutions
described in SECTION 7.7, and (ii) the Bylaws of each such corporation, each as
in effect at the Closing.
SECTION 7.12 FLEET.
Fleet, pursuant to the Fleet Loan Documents, shall have executed and
delivered to Buyer a Waiver and Release in the Form of EXHIBIT G attached hereto
and a consent to the transactions described herein.
SECTION 7.13 OTHER.
The Company shall have delivered to Buyer such other documents relating
to the transactions contemplated by this Agreement as Buyer or its counsel may
reasonably request.
ARTICLE VIII
INDEMNIFICATION
(a) In consideration of Buyer's execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under any of the Transaction
Documents to which it is a party, and in addition to any other rights Buyer may
have at law or in equity, the Company shall defend, protect, indemnify and hold
harmless Buyer and its affiliates, members, managers, stockholders, officers,
directors, employees, investors and any of the foregoing persons' agents,
representatives, successors and permitted assigns (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement (collectively, the "Buyer Indemnified Parties") from and against
any and all actions, causes of action, suits, claims, losses (including, without
limitation, diminutions in value), costs, penalties, deficiencies, fees,
liabilities, expenses and damages, and expenses in connection therewith, and
including reasonable attorneys' fees and disbursements (the "Buyer Losses"),
incurred by any Buyer Indemnified Party as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company or Financial in the Transaction Documents (other
than those made in Section 3.9 for which Buyer shall have no right to
indemnification hereunder) or (b) any nonfulfillment or breach of any covenant,
agreement or obligation of the Company or Financial contained in the Transaction
Documents.
(b) The Buyer shall, indemnify and hold harmless the Company
and its affiliates, stockholders, officers, directors, employees, investors and
any of the foregoing persons' agents, representatives, successors and permitted
assigns (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Company
Indemnified Parties" and together with the Buyer Indemnified Parties, the
"Indemnified Parties") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, deficiencies, fees,
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liabilities, expenses and damages, and expenses in connection therewith, and
including reasonable attorneys' fees and disbursements (the "Company Losses",
and together with the Buyer Losses, the "Losses"), incurred by any Company
Indemnified Party as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by Buyer in
the Transaction Documents, or (b) any nonfulfillment or breach of any covenant,
agreement or obligation of the Buyer contained in the Transaction Documents,
(c) Notwithstanding the foregoing, and subject to the
following sentence, upon judicial determination, which is final and no longer
appealable, that the act, omission or event giving rise to the indemnification
provided in this Agreement, resulted primarily out of or was based primarily
upon an Indemnified Party's gross negligence, fraud or willful misconduct
(unless such action was based upon such Indemnified Party's reliance in good
faith upon any of the representations, warranties, covenants or promises made by
other party in this Agreement), the party being required to indemnify such
Indemnified Party (such indemnifying party, the "Indemnifying Party") shall not
be responsible for any Losses sought to be indemnified in connection therewith,
and the Indemnifying Party shall be entitled to recover from such Indemnified
Party all amounts previously paid in full or partial satisfaction of such
indemnity, together with all costs and expenses of the Indemnifying Party
reasonably incurred in effecting such recovery, if any.
(d) All indemnification rights hereunder shall survive the
execution and delivery of the Transaction Documents and the consummation of the
transactions contemplated therein for the period specified in Section 9.9,
regardless of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Buyer and/or any of the other Indemnified Parties or
the acceptance by the Buyer of any certificate or opinion, provided if Buyer has
actual knowledge that any representation or warranty of the Company or Financial
in the Transaction Documents, which otherwise would give rise to Buyer's Losses,
is untrue or incorrect, the Company shall not indemnify any Buyer Indemnified
Party from Buyer's Losses under this ARTICLE VIII.
(e) If for any reason the indemnity provided for in this
ARTICLE VIII is unavailable to any Indemnified Party or is insufficient to hold
each such Indemnified Party harmless from all such Losses arising with respect
to the transactions contemplated by the Transaction Documents, then the
Indemnifying Party and the Indemnified Party shall each contribute to the amount
paid or payable with respect to Losses in such proportion as is appropriate to
reflect not only the relative benefits received by the Indemnifying Party on the
one hand and such Indemnified Party on the other but also the relative fault of
the Indemnifying Party and the Indemnified Party as well as any relevant
equitable considerations. In addition, the Indemnifying Party agrees to
reimburse any Indemnified Party upon demand for all reasonable expenses
(including legal counsel fees and costs) incurred by such Indemnified Party or
any such other person in connection with investigating, preparing or defending
any such action or claim. The indemnity, contribution and expense reimbursement
obligations that the Indemnifying Party has under this ARTICLE VIII shall be the
exclusive remedy of the parties with respect to the transactions contemplated by
this Agreement, provided, however, that nothing herein shall limit any action
Buyer may have under any federal or state securities laws or any express right
or remedy granted under any Transaction Document. The parties further agree that
the indemnification and reimbursement commitments set forth in this Agreement
shall apply whether or not the Indemnified Party is a formal party to any such
lawsuits, claims or other proceedings.
(f) Any indemnification of any Indemnified Party pursuant to
this ARTICLE VIII shall be effected by wire transfer of immediately available
funds from the Indemnifying Party to an account designated by the Indemnified
Party within fifteen (15) days after the determination thereof.
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(g) An Indemnifying Party shall be liable to the Indemnified
Party for any Losses only if the Indemnified Party delivers to the Indemnifying
Party written notice, setting forth in reasonable detail the identity, nature
and amount of Losses related to such claim or claims no later than ninety (90)
days after any such Loss has arisen, in which case the Indemnifying Party shall
be obligated to indemnify the Indemnified Party. An Indemnified Party's failure
to provide the detail required by the preceding sentence shall not constitute
either a breach of this Agreement by the Indemnified Party or any basis for the
Indemnifying Party to assert that the Indemnified Party did not comply with the
terms of this ARTICLE VIII sufficient to cause the Indemnified Party to have
waived its rights under this ARTICLE VIII, unless the Indemnifying Party
demonstrates that its ability to defend against any claims with respect thereto
has been materially prejudiced.
ARTICLE IX
GOVERNING LAW; MISCELLANEOUS
SECTION 9.1 GOVERNING LAW; JURISDICTION; JURY TRIAL.
All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Delaware. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 9.2 COUNTERPARTS.
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature shall be considered due
execution and shall be binding upon the signatory thereto with the same force
and effect as if the signature were an original, not a facsimile signature.
SECTION 9.3 HEADINGS.
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
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SECTION 9.4 SEVERABILITY.
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
SECTION 9.5 ENTIRE AGREEMENT; AMENDMENTS.
This Agreement supersedes all other prior oral or written agreements
between Buyer, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein, including all other Transaction Documents,
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and Buyer, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
SECTION 9.6 NOTICES.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon actual receipt, when delivered
personally; (ii) upon actual receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party and followed by an overnight delivery
service); or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
DVI, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With copies to:
▇▇▇▇▇▇▇▇ Chance
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to Buyer:
Deephaven/JE ▇▇▇▇▇▇▇ I, LLC
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c/o JE ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to:
Schwartz, Cooper, ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Chartered
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five days prior to the effectiveness of such change.
SECTION 9.7 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of Buyer except pursuant to a Special Event (as defined in
SECTION 2(c)(ii) of the Note), with respect to which the Company has satisfied
its obligations under SECTION 2 of the Note. Buyer may not assign all or any
part of its rights hereunder without the prior written consent of the Company,
which consent shall not be unreasonably withheld; provided, however, that Buyer
may assign all or any part of its rights hereunder to a financial institution
having assets of at least $10 billion and Buyer may assign all or any part of
its rights hereunder to any affiliate of Buyer; provided, however, that any such
assignment shall not release the Buyer from its obligations hereunder unless
such obligations are assumed by such assignee. "Affiliate" means any person
which, directly or indirectly, controls or is controlled by or is under common
control with the Buyer.
SECTION 9.8 NO THIRD PARTY BENEFICIARIES.
This Agreement is intended for the benefit of the parties hereto and
their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
SECTION 9.9 SURVIVAL.
Unless this Agreement is terminated under SECTION 9.12, the
representations and warranties of the Company and Buyer contained in Articles II
and III, the agreements and covenants set forth in Article IX, and the
indemnification provisions set forth in Article VIII shall survive the Closing
for the period that the Note remains outstanding, and, except for the agreements
and covenants of the Company which by their terms expire at such time as no
amounts are due and owing under the Note, the agreements and covenants set forth
in Articles IV and V shall survive the Closing until the later of the date that
(i) Buyer does not hold any Securities or (ii) at such time as such agreements
or covenants are no longer enforceable under applicable statutes of limitations;
provided, however, nothing contained in this Section
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9.9 shall require the Company or Buyer to remake any representation or warranty
contained herein after the Closing Date.
SECTION 9.10 PUBLICITY.
Each of the parties hereto shall have the right to approve before
issuance any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the parties shall each
be entitled, without the prior approval of the other, to make any press release
or other public disclosure with respect to such transactions as is required by
applicable law and regulations (although such party shall consult the other in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
SECTION 9.11 FURTHER ASSURANCES.
Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
SECTION 9.12 TERMINATION.
In the event that the Closing shall not have occurred on or before ten
Business Days from the date hereof due to the Company's failure to satisfy the
conditions set forth in Articles VI and VII above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this SECTION 9.12, the Company shall remain obligated to reimburse the
nonbreaching Buyer for the expenses described in SECTION 4.8 above.
SECTION 9.13 NO STRICT CONSTRUCTION.
The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
SECTION 9.14 REMEDIES.
Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies
which Buyer has been granted at any time under any other agreement or contract
(except that only Buyer shall have the rights under Article VIII for breaches of
the Company's representations and warranties herein). Any person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement.
SECTION 9.15 PAYMENT SET ASIDE.
To the extent that the Company makes a payment or payments to Buyer
hereunder or pursuant to the Note or any Warrant or Buyer enforces or exercises
its rights hereunder or thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law,
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common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
SECTION 9.16 EXPENSES.
(a) In any suit, proceeding or action brought by Buyer in
connection with any Contract (as defined in the Security Agreement) for any sum
owing thereunder, or to enforce any provisions of any Contract, the Company will
save, indemnify and hold Buyer harmless from and against all expenses, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or Obligor (as defined
in the Security Agreement) thereunder, arising out of a breach by Financial of
any obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such account debtor or Obligor or
its successors from Financial. The Company also agrees to reimburse Buyer for
all its reasonable and documented costs and expenses incurred in connection with
the enforcement or the preservation of Buyer's rights under the Security
Agreement, or any transaction contemplated hereby, including, without
limitation, the reasonable fees and disbursements of its counsel.
(b) The Company agrees to pay as and when billed by Buyer or
Financial all of the reasonable and documented out-of-pocket costs and expenses
incurred by Buyer in connection with the preparation and execution of any
amendment, supplement or modification to, this Agreement, any Transaction
Documents, or any other documents prepared in connection therewith. The Company
agrees to pay as and when billed by Buyer the reasonable due diligence,
inspection, testing and review costs and expenses incurred by Buyer with respect
to the Contracts pledged as Collateral under the Security Agreement.
(c) The Company's agreements in this Section 9.16 shall
survive the payment in full of the Note and the expiration or termination of
this Agreement.
* * * * * *
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IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to
be duly executed and delivered as of the date first written above.
COMPANY:
DVI, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
[Name] ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
[Title] Authorized Signatory
BUYER:
DEEPHAVEN/JE ▇▇▇▇▇▇▇ I, LLC, a Minnesota
limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇, President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Manager
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EXHIBIT A
FORM OF NOTE
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EXHIBIT B
FORM OF WARRANT
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EXHIBIT C
FORM OF SECURITY AGREEMENT
24
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EXHIBIT D
FORM OF PURCHASE PRICE NOTE
25
30
EXHIBIT E
FORM OF OPINION OF COUNSEL
26
31
EXHIBIT F
FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS
27
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EXHIBIT G
WAIVER AND RELEASE
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FIRST AMENDMENT TO
SECURITIES PURCHASE AGREEMENT AND SECURITY AGREEMENT
This First Amendment to Securities Purchase Agreement and Security
Agreement (this "Amendment") is dated as of the ___ day of August, 2001 and is
by and among DVI, INC., a Delaware corporation (the "Company"), DVI FINANCIAL
SERVICES INC., a Delaware corporation ("Financial"), and DEEPHAVEN/JE ▇▇▇▇▇▇▇ I,
LLC, a Minnesota limited liability company ("Buyer").
W I T N E S S E T H:
WHEREAS, the Company and Buyer are parties to that certain Securities
Purchase Agreement, dated as of June 29, 2001 (the same, as it may be amended,
restated, modified or supplemented and in effect from time to time, the
"Purchase Agreement") pursuant to which it purchased a $12,000,000 9.5%
Asset-Backed Exchangeable Term Note (the "Note") from the Company; and
WHEREAS, in connection with the Purchase Agreement and as security for
the Note, Financial and Buyer entered into that certain Security Agreement,
dated as of June 29, 2001 (the same, as it may be amended, restated, modified or
supplemented and in effect from time to time, the "Security Agreement") pursuant
to which Financial granted Buyer a security interest in certain of its assets as
described therein; and
WHEREAS, the Company and Financial have requested that Buyer amend the
Purchase Agreement and the Security Agreement in certain respects (including,
but not limited to reducing the required Collateral Value (as defined in the
Security Agreement)), as more fully set forth herein, and Buyer is agreeable to
such request, upon such terms and conditions set forth herein (including, but
not limited to the issuance and delivery of the August 2001 Warrant (as
hereinafter defined));
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein are used with the meanings given such terms in the
Purchase Agreement.
2. Amendment of the Security Agreement.
(a) Section 5(a) of the Security Agreement is hereby amended
and restated as follows:
"SECTION 5. MAINTENANCE OF COLLATERAL. (a) The Grantor
shall at all times maintain a Collateral Value equal to not less
than 225% of the Outstanding Secured Note, plus, after the
occurrence and during the continuance of a Cash Collateral Event,
the Cash Collateral Reserve."
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(b) The definition of "Contract Schedule" set forth in
Section 20 of the Security Agreement is hereby amended by deleting
subsection (x) regarding the discounted principal balance of the
Contract.
3. Amendment of the Purchase Agreement.
(a) The terms "Amendment", "Primary Registration Statement"
and "Resale Registration Statement" shall be deleted from the glossary
of the Purchase Agreement.
(b) Section 4.2 of the Purchase Agreement is hereby amended
and restated in its entirety as follows:
"SECTION 4.2 REGISTRATION STATEMENT.
(a) The Company shall, as soon as practicable, but in no
event later than 60 days after the date of issuance of the Note
(the "Issuance Date") file with the SEC a registration statement
("Registration Statement") for resale by Buyer of Exchange
Shares and Warrant Shares in an amount equal to 19.99% of the
outstanding shares of Common Stock or such lesser amount equal
to the maximum number of Exchange Shares and Warrant Shares
which the Company is permitted to register under the rules,
regulations and interpretations of the SEC as in effect from
time to time. The Company shall use its best efforts to have the
Registration Statement declared effective by the SEC as soon as
practicable. The Company shall use its best efforts to file
post-effective amendments and amended or supplemented
prospectuses to or with the Registration Statement from time to
time so that the latest available prospectus will continue to
meet the requirements of Section 10 of the 1933 Act until the
earlier of (i) the date as of which all of the Exchange Shares
and Warrant Shares that may be issued may be sold without
restriction pursuant to Rule 144(k) promulgated under the 1933
Act (or successor thereto) or (ii) the date on which (A) all the
Exchange Shares and Warrant Shares that may be issued are sold
and (B) none of the Note or any Warrants are outstanding.
(b) The Company shall permit Buyer or its assigns to
review and comment upon the Registration Statement and all other
amendments and supplements to the Registration Statement at
least seven days prior to their filing with the SEC."
4. August 2001 Warrant. In consideration of Buyer amending the
Security Agreement as aforesaid, the Company shall issue a Warrant to Buyer
identical to EXHIBIT A attached hereto (the "August 2001 Warrant"). The August
2001 Warrant shall be deemed to be a Warrant under the Purchase Agreement and
all shares of Common Stock purchased pursuant to the August 2001 Warrant shall
be deemed to be Warrant Shares under the Purchase Agreement.
5. Conditions. This Amendment shall become effective on the date on
which the following conditions precedent have been satisfied or waived in
writing:
(a) The Company, Financial and Buyer shall have each executed
and delivered this Amendment to each other; and
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(b) Buyer receives the August 2001 Warrant from the Company.
(c) Buyer receives certified resolutions of the board of
directors of the Company and Financial authorizing the issuance and
delivery of this Amendment and the August 2001 Warrant.
6. Representations and Warranties. To induce Buyer to enter into
this Amendment, the Company and Financial hereby represent and warrant to Buyer
that:
(a) Since June 29, 2001, there has been no development or
event, which has had or could reasonably be expected to have a material
adverse effect on the business, properties, assets, operations, results
of operation, or financial condition of the Company and its
Subsidiaries, taken as a whole.
(b) The Company and Financial each have the corporate power
and authority, and the legal right, to make and deliver this Amendment,
and with respect to the Company, the August 2001 Warrant, and to perform
all of their respective obligations under the Security Agreement and the
Purchase Agreement, as amended by this Amendment, and each have taken
all necessary corporate action to authorize the execution and delivery
of this Amendment, and with respect to the Company, the August 2001
Warrant, and the performance of the Security Agreement and the Purchase
Agreement, as so amended.
(c) When executed and delivered, this Amendment and the
Security Agreement and the Purchase Agreement, as amended by this
Amendment, will constitute legal, valid and binding obligations of the
Company and Financial, enforceable against them, in accordance with
their terms, except as such enforceability may be limited by general
principals of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
(d) The representations and warranties made by the Company
in the Purchase Agreement and the representations and warranties made by
Financial in the Security Agreement are true and correct in all material
respects on and as of the date hereof, before and after giving effect to
the effectiveness of this Amendment, as if made on and as of the date
hereof, other than those that relate to an earlier or specific date. The
Buyer Indemnified Parties shall be entitled to all rights to
indemnification contained in Article VIII of the Purchase Agreement with
respect to breaches of any representations or warranties made by the
Company or Financial in this Amendment notwithstanding the fact that
such representations and warranties will be made after the Closing Date;
provided, however, nothing contained herein shall require the Company to
remake any representation or warranty contained in the Purchase
Agreement after the later of (i) the date of this Amendment or (ii) the
date of the issuance and delivery of the August 2001 Warrant.
7. Reaffirmation and Confirmation of Security Interests. Financial
hereby confirms to Buyer that Financial has granted to Buyer a security interest
in or lien upon the assets described in the Contract Schedule (as defined in the
Security Agreement) to the Security Agreement, to secure
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the Secured Obligations (as defined in the Security Agreement). Financial hereby
reaffirms its grant of such security interest and lien to Buyer for such purpose
in all respects.
8. Miscellaneous.
(a) The Company hereby agrees to pay all of Buyer's costs
and expenses, including, without limitation, attorneys' fees, related to
this Amendment.
(b) This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which shall together constitute but one and the same document.
(c) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.
(d) Section captions and headings used in this Amendment are
for convenience only and are not part of and shall not affect the
construction of this Amendment.
(e) From and after the date of execution of this Amendment,
any reference to the Purchase Agreement or Security Agreement contained
in any notice, request, certificate or other instrument, document or
agreement executed concurrently with or after the execution and delivery
of this Amendment shall be deemed to include this Amendment unless the
context shall otherwise require.
(f) Except as expressly set forth herein, nothing in this
Amendment is intended to or shall be deemed to have amended the Purchase
Agreement or the Security Agreement, which are hereby reaffirmed in all
respects. Notwithstanding anything contained herein, the terms of this
Amendment are not intended to and do not serve to effect a novation as
to the Purchase Agreement or the Security Agreement. The Purchase
Agreement and the Security Agreement, as amended hereby remain in full
force and effect and are hereby reaffirmed in all respects.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
DVI, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Its : Authorized Signatory
---------------------------------------
DVI FINANCIAL SERVICES INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Its : Vice President of Banking and Finance
---------------------------------------
DEEPHAVEN/JE ▇▇▇▇▇▇▇ I, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
▇▇▇▇ ▇▇▇▇, President
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Manager
5
