<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO __________________
Commission File No. 0-21107
---------------------------
TeleSpectrum Worldwide Inc.
---------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 23-2845501
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
443 SOUTH GULPH ROAD
King of Prussia, Pennsylvania 19406
----------------------------- -----
(Address of principal executive offices) (ZIP Code)
610-878-7400
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---- ----
The number of outstanding shares of the Registrant's Common Stock, par value
$.01 per share, on April 30, 2000 was 32,857,111.
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<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Table of Contents
-----------------
<TABLE>
<CAPTION>
Item No. Page
- ---------- ---------
PART I -- FINANCIAL INFORMATION
<S> <C> <C>
1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three Months Ended March 31, 2000 and
For the Three Months Ended March 31, 1999............................. 3
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999.................................. 4
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and
For the Three Months Ended March 31, 1999............................. 5
Notes to Condensed Consolidated Financial Statements.................. 6
2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................... 13
PART II - OTHER INFORMATION........................................... 20
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
TELESPECTRUM WORLDWIDE INC. AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Unaudited)
(Dollars in Thousands - Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 78,680 $ 47,925
-------- --------
Operating Expenses:
Cost of services 61,229 33,226
Selling, general and administrative 15,875 9,490
Goodwill amortization 1,998 295
-------- --------
Total operating expenses 79,102 43,011
-------- --------
Operating income (422) 4,914
INTEREST EXPENSE, net (3,487) (172)
-------- --------
(LOSS)INCOME BEFORE INCOME TAXES (3,909) 4,742
INCOME TAXES -- --
-------- --------
NET (LOSS)INCOME $ (3,909) $ 4,742
======== ========
BASIC (LOSS)EARNINGS PER SHARE (Note 4) $ (.12) $ .18
======== ========
DILUTED (LOSS)EARNINGS PER SHARE (Note 4) $ (.12) $ .17
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in Thousands - Except Share Amounts)
<TABLE>
<S> <C> <C>
March 31, December 31,
2000 1999
--------- ---------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ -- $ --
Accounts receivable, net 69,116 72,879
Prepaid expenses and other 6,545 5,809
--------- ---------
Total current assets 75,661 78,688
PROPERTY AND EQUIPMENT, net 61,599 59,455
GOODWILL AND OTHER INTANGIBLES, net 179,681 174,703
OTHER ASSETS 5,268 5,561
--------- ---------
Total assets $ 322,209 $ 318,407
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 16,824 $ 16,411
Accounts payable 9,957 9,305
Accrued expenses 30,019 32,597
Other current liabilities 3,117 6,463
--------- ---------
Total current liabilities 59,917 64,776
LONG-TERM DEBT 119,689 113,846
--------- ---------
OTHER NONCURRENT LIABILITIES 7,015 352
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $.01 par value, 200,000,000 shares authorized,
39,743,694 shares issued and 32,797,111 shares outstanding,
at March 31, 2000, and 32,612,163 shares issued and
outstanding at December 31, 1999 397 396
Additional paid-in capital 338,897 338,848
Common stock purchase warrants 7,840 7,840
Treasury stock, 6,946,583 shares at cost (48,810) (48,810)
Accumulated deficit (161,313) (157,404)
Due from stockholders (952) (952)
Deferred compensation (138) (163)
Cumulative currency translation adjustment (333) (322)
--------- ---------
Total stockholders' equity 135,588 139,433
--------- ---------
Total liabilities and stockholders' equity $ 322,209 $ 318,407
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31, March 31,
2000 1999
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss) income $ (3,909) $ 4,742
Adjustments to reconcile net (loss) income to net cash
flows from operating activities:
Depreciation and amortization 4,087 2,238
Goodwill amortization 1,998 295
Provision for bad debts 742 300
Non-cash compensation 25 47
Changes in operating assets and liabilities net of acquisitions:
Accounts receivable 3,089 (11,390)
Prepaid expenses and other (1,134) (732)
Accounts payable 561 1,073
Accrued expenses (2,592) 2,122
Other liabilities (3,261) 1,523
-------- --------
Net cash (used in) provided by operating activities (394) 218
-------- --------
Cash Flows From Investing Activities:
Purchases of property and equipment (6,266) (4,541)
Net cash acquired in acquisition 71 --
Payments of deferred transaction costs -- (2,584)
Payments of notes to sellers and acquisition liabilities -- (257)
-------- --------
Net cash used in investing activities (6,195) (7,382)
-------- --------
Cash Flows From Financing Activities:
Net borrowings on secured credit facility -- 6,665
Exercise of stock options and sale of common stock 606 350
Payments of capital lease obligations (208) (159)
Borrowings on long-term debt 8,500 117
Payments on long-term debt (2,309) (83)
-------- --------
Net cash provided by financing activities 6,589 6,890
-------- --------
Net decrease in cash and cash equivalents -- (274)
Cash and cash equivalents, beginning of period -- 794
-------- --------
Cash and cash equivalents, end of period $ -- $ 520
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION:
The accompanying financial statements are unaudited and have been prepared by
TeleSpectrum Worldwide Inc. and subsidiaries ("TeleSpectrum" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). The December 31, 1999 balance sheet was derived from audited financial
statements, however, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules and
regulations. The Company believes that the financial statements include all
adjustments of a normal and recurring nature necessary to present fairly the
results of operations, financial position and cash flows for the periods
presented. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the year ended December 31, 1999.
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated. During the third quarter of 1999 the Company
changed its presentation of operating expenses in the Condensed Consolidated
Statements of Operations. Cost of services now represents all costs incurred at
the call centers. All remaining costs including account management, management
information systems and human resources are included in SG&A. This
reclassification has been made for all periods presented.
There have been no material changes in accounting policies from those stated in
the Company's form 10-K for the year ended December 31, 1999.
2. COMPANY BACKGROUND:
The Company was incorporated in Delaware on April 26, 1996 and on August 12,
1996, completed its initial public offering. Concurrent with the offering, the
Company began material operations with the acquisition of the assets of a number
of businesses. The Company provides services to its customers through its
business segments, Telemarketing, Customer Care and e-Satisfy.com. As discussed
further in Note 3, the Company completed mergers with International Data
Response Corporation ("IDRC") and CRW Financial, Inc. ("CRW") on June 30, 1999.
3. MERGERS AND ACQUISITION:
IDRC Merger
On January 14, 1999, TeleSpectrum and IDRC entered into a merger agreement which
was amended on February 26, 1999 and May 13, 1999 and consummated on June 30,
1999. Under this agreement, each of the holders of outstanding shares of IDRC
common stock, options and warrants to purchase IDRC common stock were entitled
to receive their pro rata portion of an aggregate of 9,200,000 shares of
TeleSpectrum common stock and warrants exercisable for 2,500,000 shares of
TeleSpectrum common stock. In addition, the IDRC preferred stock was exchanged
for $6,000,000 of cash, plus all accrued and unpaid dividends of $1,400,000. The
majority stockholders of IDRC invested the proceeds from the exchange of their
IDRC preferred stock of $4,873,000 for a term note with the Company. This note
is payable one year from the closing and bears interest at 10.0%. The merger was
accounted for as a purchase and, accordingly, the net tangible liabilities of
IDRC were included in the consolidated financial statements as of June 30, 1999.
6
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The total purchase price of IDRC was $58,700,000 which consisted of (in
thousands except share data):
<TABLE>
<S> <C>
Issuance of 8,269,101 shares of TeleSpectrum common stock, valued
at $7.119 per share, with 6,449,349 shares discounted 10% due
to lock up and escrow restrictions of twelve and fifteen months.......................... $54,275
Issuance of options to purchase 930,903 shares of TeleSpectrum common stock, valued at
between $2.300 and $5.320 per option with an average value of $5.141 (all options are
discounted 10% due to lock up and escrow restrictions of twelve and fifteen months)..... 4,307
Issuance of warrants to purchase 2,247,038 shares of TeleSpectrum
common stock, valued at $3.136 per warrant.............................................. 7,047
Issuance of warrants to purchase 252,962 shares of TeleSpectrum common stock, valued at
$3.136 per warrant, to IDRC option holders.............................................. 793
Value of shares and options held in escrow............................................... (9,164)
Transaction costs........................................................................ 1,442
-------
Total purchase price............................................................ $58,700
=======
</TABLE>
Based on a preliminary allocation of the purchase price, the application of the
purchase method resulted in approximately $148,711,000 in excess purchase price
over the estimated fair value of the net tangible liabilities acquired of
$90,011,000, which includes accruals by IDRC in the second quarter related to
closed centers and bad debt reserves. A preliminary analysis completed by
TeleSpectrum, resulted in the excess purchase price being assigned to intangible
assets consisting of $1,002,000 for assembled workforce, $14,079,000 for
customer relationships, and $133,630,000 for goodwill. Intangible assets are
amortized on a straight-line basis over their estimated useful lives of 7 years
for assembled workforce, 15 years for customer relationships and 25 years for
goodwill.
The Company has substantially completed its plans to consolidate certain
facilities and departments and has estimated the costs of non-cancelable lease
commitments and severance of $1,539,000. This liability is reflected in the net
tangible liabilities acquired. During the first quarter of 2000, approximately
$1,243,000 was charged against this reserve. Upon completion of the integration,
any adjustments to the original estimates will be reflected as an adjustment to
the purchase price.
Of the shares of TeleSpectrum common stock issuable to the holders of IDRC
common stock and options, an aggregate 1,730,977 shares/options were placed in
escrow, as required by the merger agreement, to secure the indemnification
obligations of the IDRC security holders to TeleSpectrum. The term of the escrow
is for 15 months and is governed by an indemnity escrow agreement. These shares
represent "contingent consideration" and in accordance with APB No. 16 will not
be reflected as part of the purchase price until the contingency is
determinable. At closing, IDRC had a contingent liability related to a claim by
certain of its shareholders. On July 19, 1999, this claim was settled for
$1,907,000, the majority of which was satisfied with 275,153 shares being
released from the escrow.
CRW Merger
- ----------
On June 30, 1999, TeleSpectrum and CRW completed a merger agreement whereby
7,296,454 outstanding shares of CRW common stock were exchanged for 5,173,186
shares of TeleSpectrum common stock valued at $38,799,000. In addition, the
outstanding CRW options and warrants to purchase shares of CRW common stock were
exchanged for options to purchase 1,499,079 shares of TeleSpectrum common stock
valued at $9,820,000. Transaction costs related to this transaction amounted to
$191,000. For financial reporting purposes, the Company treated the exchange of
shares of TeleSpectrum common stock for shares of CRW common stock as a treasury
stock transaction. The transaction did not have an effect on TeleSpectrum net
income but did effect its net income per share.
Customer Insight Acquisition
- ----------------------------
7
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During January 2000, the Company placed all assets and liabilities specifically
related to TARP into a new wholly owned corporation called e-Satisfy.com. On
February 2, 2000, e-Satisfy.com acquired Customer Insites, Inc. ("CI") by
issuing 2,410,741 shares or 27.6% of e-Satisfy.com in exchange for all of the
issued and outstanding capital stock of CI. This acquisition was accounted for
as a purchase and accordingly, the net assets and results of operations of CI
have been included in the condensed consolidated financial statements commencing
February 2, 2000. The total purchase price paid for CI was valued at
approximately $6,200,000. Based upon a preliminary analysis the excess of the
purchase price over the fair value of the net tangible liabilities acquired
totaling approximately $6,478,000, has been recorded as goodwill and is being
amortized on a straight-line basis over twenty-five years. If the acquisition
had been in effect from January 1, 1999, unaudited pro forma net sales and net
earnings of the Company would have been substantially the same as those
reported.
Other
During October 1996, the Company acquired its consulting business Technical
Assistance Research Programs, Inc. ("TARP"). The agreement allowed for potential
earnouts to be paid to prior owners based upon future performance. During
October 1999 the Company signed an agreement to pay $3,200,000 in installments
ending July 2001 to settle these earnout provisions. This note was discounted to
$2,852,000 and is reflected as goodwill which is being amortized on a
straight-line basis over the remaining life of the original TARP goodwill.
4. EARNINGS PER SHARE:
The Company reports earnings per share in accordance with SFAS No. 128,
"Earnings Per Share," which requires a dual presentation of "basic" and
"diluted" EPS on the face of the income statement. Basic EPS is computed by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding for the period. Diluted EPS includes the effect, if any, from
the potential exercise or conversion of securities, such as stock options and
warrants, which would result in the issuance of shares of common stock.
The table below sets forth the reconciliation of the weighted average number of
shares outstanding used to compute basic and diluted earnings (loss) per share
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
<S> <C> <C>
2000 1999
------ ------
Shares used in computing basic earnings (loss) per share................... 31,453 25,820
Dilutive effect of options and warrants.................................... -- 2,720
------ ------
Shares used in computing diluted earnings (loss) per share................. 31,453 28,540
====== ======
</TABLE>
5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS:
The Company capitalizes both acquired and internally developed or modified
software used as an integral part of the operations of the Company, in
accordance with Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company
capitalizes certain internal and external costs directly associated with
developing or modifying the internal use software, which begins with the
application development stage and ends when the project is substantially
complete and ready for its intended use. Amounts capitalized as of March 31,
2000 and December 31, 1999 were $17,530,000 and $13,470,000, respectively, and
are included in the Condensed Consolidated Balance Sheets in property, plant and
equipment. Such costs are amortized on a straight-line basis over the estimated
useful life, usually 3-5 years.
6. CREDIT FACILITY:
8
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In connection with the mergers on June 30, 1999, the Company entered into $135.0
million in new credit facilities consisting of Term A, Term B, Term C and
working capital revolver facilities (the "Credit Facilities") incurring costs of
$5.0 million which are being amortized on a straight line basis over the life of
the Credit Facility. The Company borrowed $20.0 million under the Term A
facility, $20.0 million under the Term B facility and $50.0 million under the
Term C facility. In addition, the Company can borrow the lesser of $45.0 million
or 85% of eligible receivables, as defined, under its working capital revolver
facility. The working capital revolver facility also provides for the issuance
of letters of credit subject to certain borrowing limits, of which none were
outstanding at March 31, 2000. At March 31, 2000, the Company had $39.6 million
in outstanding borrowings and $5.4 million available under the working capital
revolver facility. The unused portion of the working capital revolver facility
is subject to an annual fee of 0.50%. The Term A facility matures December 31,
2001 and requires quarterly principal payments totaling $6.0 million for the
remainder of 2000 and $10.0 million in 2001. The Term B facility matures
December 31, 2002 and requires quarterly principal payments totaling $0.2
million for the remainder of 2000, $0.3 million in 2001, and a final payment of
$19.3 million in 2002. The Term C facility matures December 31, 2003 and
requires quarterly principal payments totaling $0.3 million for the remainder of
2000, $0.4 million in 2001, $0.9 million in 2002 and $48.0 million in 2003. All
outstanding principal is due under the working capital revolver facility on the
maturity date, December 31, 2001.
The Company can elect at the time it makes borrowings to pay interest quarterly
at prime plus 1.75% or LIBOR plus 3.25% for the Term A and working capital
revolver facilities; prime plus 2.25% or LIBOR plus 3.75% for the Term B
facility and prime plus 2.75% or LIBOR plus 4.25% for the Term C facility. At
March 31, 2000, the weighted average interest rate payable under the Credit
Facilities was 10.0%. Borrowings under the Credit Facilities are collateralized
by substantially all of the assets of the Company. The Credit Facilities require
interest rate caps (see Item 3) and contain covenants, the most restrictive of
which require the maintenance of certain financial ratios, restrict future
indebtedness, limit capital expenditures and prohibit cash dividends.
The proceeds from the Credit Facilities were used to refinance $98.0 million in
principal and interest outstanding under the IDRC credit facilities and $10.9
million in principal, interest and early termination fees outstanding under the
Company's April 14, 1998 Secured Credit Facility. The remaining Credit
Facilities proceeds were used in the mergers to repay certain notes including
accrued interest, redeem preferred stock and pay transaction fees aggregating
$9.7 million. During the three months ended March 31, 2000 and 1999, the
weighted average interest rate on borrowings under the Secured Credit Facility
was 10.1% and 8.25%, respectively.
During April 2000, the Company signed amendments to the Credit Facility that
modified the Company's debt covenants effective February 2000 including the
leverage ratio and the fixed charge coverage ratio and increased the working
capital revolver facility by $6.0 million to $51.0 million. In addition, the
annual limitation allowed for capital expenditures decreased for the year 2000
from $32,500,000 to $25,000,000.
9
<PAGE>
TeleSpectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
7. SUPPLEMENTAL CASH FLOWS INFORMATION:
The Company paid $3,000,000 and $118,000 in interest expense for the three
months ended March 31, 2000 and 1999, respectively. The Company did not pay any
income taxes during the three months ended March 31, 2000 and 1999.
8. COMMITMENTS AND CONTINGENCIES:
On March 18, 1998, the Company entered into an employment contract with its
former CEO and President which expires in March 2001. The contract provides for
annual compensation of $200,000 per year, plus potential bonuses. The Company
entered into a subscription agreement whereby this executive acquired 227,964
shares of the Company's common stock for $500,000 and was granted options to
purchase 2,000,000 shares of common stock at $3.29 per share. The options will
vest over three to five years with accelerated vesting for 500,000 options based
on the achievement of certain performance objectives, as defined. The Company
recorded compensation expense of $327,000, which represents the difference
between the stock purchase price and the fair market value of the stock on the
effective date of the stock subscription agreement. In addition, the Company
will record compensation expense of $670,000 over the vesting period of the
options to purchase 2,000,000 shares of common stock which represents the
difference between the fair market value of the stock on the grant date and the
option exercise price of $3.29.
The Company is party to various claims and other matters arising in the ordinary
course of business. In the opinion of management, the outcome of these matters
will not have a material adverse effect on the Company's financial position or
results of operations.
9. CONCENTRATIONS OF CREDIT:
The financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
Concentrations of credit risk with respect to accounts receivable are limited
due to the large number of customers comprising the Company's customer base, and
their dispersion across many different industries and geographies. The Company
does not require collateral or other securities to support customer accounts
receivable. The Company performs periodic reviews of its clients' condition to
reduce the collection risk.
The Company does not believe a significant credit risk exists at March 31, 2000.
The following table summarizes those customers with revenue or accounts
receivable in excess of 10% of total revenue for the three months ended March
31, 2000 and 1999 or total receivables as of March 31, 2000 and December 31,
1999, respectively:
<TABLE>
<CAPTION>
Revenues Accounts
------------------------- Receivable
Three Months ------------------------
Ended March 31, March 31, December 31,
------------------------- --------- ------------
<S> <C> <C> <C> <C>
2000 2000 2000 1999
---- ---- ---- ----
Customer 1 11.6% 15.9% 11.1% --%
Customer 2 10.1% --% --% 16.5%
</TABLE>
10. COMPREHENSIVE INCOME:
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income," which is
effective for financial statements issued for fiscal years beginning after
December 15, 1997. The Company's comprehensive income includes net income (loss)
and unrealized gains and losses from foreign currency translation. Total
comprehensive income (loss) for the three months ended March 31, 2000 and 1999
was $(3,920,000) and $4,686,000, respectively.
11. RELATED-PARTY TRANSACTIONS:
CRW Financial, Inc.
10
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company subleases a 21,000 square foot office building in King of Prussia,
Pennsylvania, from CRW Financial, Inc., a former shareholder of the Company, and
as discussed in Note 3, was merged with the Company on June 30, 1999. The
sublease commenced on May 9, 1996, and requires monthly base rent payments
through September 30, 2004, of approximately $42,000. Total rent expense for the
three months ended March 31, 2000 and 1999 was approximately $130,000 and
$120,000, respectively.
12. SEGMENTS:
The Company classifies its continuing operations into three segments:
Telemarketing, Customer Care and e-Satisfy.com. The operating segments are
managed separately because each operating segment represents a strategic
business unit that offers different services. The business segments are
described in further detail below. Segment assets include amounts specifically
identified with Telemarketing, Customer Care and e-Satisfy.com segments.
Corporate assets consist primarily of property and equipment and the goodwill
and other intangibles related to the IDRC merger, which will be allocated to the
business segments after evaluations are completed by management.
The Telemarketing Segment provides both business-to-consumer and business-to-
business telemarketing services--primarily direct sales initiated by the Company
on behalf of its clients.
The Customer Care Segment provides customer service expertise to its clients.
The Company's customer service expertise includes the more traditional inbound
services of customer care support, typically through toll-free telephone
numbers, for activities such as responses to clients' customer service
inquiries, catalogue sales and electronic order processing and consulting
services to a wide range of clients. In addition, Customer Care includes Channel
- -Care, our more recent strategic initiatives into multi-channel Customer
Relationship Management including Web-based sales and service, e-mail response,
Web telephony, Web chat and fax.
The e-Satisfy.com segment, a business-to-business internet company, measures,
monitors and improves the customer service experience.
Corporate operations include the selling, general and administrative functions
of the Company.
During 1999, the Company began reporting operating expenses differently from the
historical presentation in order to be more consistent with industry practices.
The principal change relates to the components of two line items--Cost of
Services and SG&A. Cost of Services now reflects only those costs that are
directly associated with the operation of a call center. All other costs
including account management, management information systems and human resources
are included in SG&A. This reclassification has been made for all periods
presented.
11
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Business segment information is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
<S> <C> <C>
2000 1999
-------- --------
Revenues:
Telemarketing............................................................. $ 51,014 $ 32,816
Customer Care............................................................. 26,081 12,226
e-Satisfy.com............................................................. 1,585 2,883
-------- --------
Total................................................................. $ 78,680 $ 47,925
======== ========
Operating income (loss):
Telemarketing............................................................. $ 10,903 $ 8,826
Customer Care............................................................. 5,439 3,870
e-Satisfy.com............................................................. 763 1,708
Corporate................................................................. (17,527) (9,490)
-------- --------
Total................................................................. $ (422) $ 4,914
======== ========
Total assets
Telemarketing............................................................. $ 83,057 $ 55,101
Customer Care............................................................. 54,084 25,473
e-Satisfy.com............................................................. 31,392 23,607
Corporate................................................................. 153,676 14,170
-------- --------
Total................................................................. $322,209 $118,351
======== ========
</TABLE>
12
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Quarterly Report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements address, among other things, the Company's business
strategy, including its use of cash and cash equivalents; reliance on certain
customers; projected capital expenditures; liquidity; Year 2000 disclosure,
including statements regarding readiness, remediation, consequences and
contingency plans; increased sales in future periods; the continuation of
fluctuations in results of operations, as well as information contained
elsewhere in this Report where statements are preceded by, followed by or
include the words "believes," "expects," "anticipates," "plans" or similar
expressions. These statements are based on a number of assumptions concerning
future events, and are subject to a number of uncertainties and other factors,
many of which are outside the Company's control, that could cause actual results
to differ materially from such statements. The Company undertakes no obligation
to update or revise forward-looking statements, whether as a result of new
information, future events or otherwise.
Recent Developments and Overview
- --------------------------------
IDRC Merger Agreement
- ---------------------
On January 14, 1999, we entered into a merger agreement with International Data
Response Corporation ("IDRC") and its majority stockholders. This agreement was
amended on February 26, 1999 and May 13, 1999 and consummated on June 30, 1999.
Under this agreement, the holders of outstanding shares of IDRC common stock,
options and warrants were entitled to receive their pro rata portion of an
aggregate of 9.2 million shares of TeleSpectrum common stock and warrants
exercisable for 2.5 million shares of TeleSpectrum common stock. In addition,
the IDRC preferred stock was exchanged for $6.0 million in cash, plus all
accrued and unpaid dividends of $1.4 million. The majority stockholders of IDRC
invested the proceeds from the exchange of their IDRC preferred stock of $4.9
million for a term note from us. This note is payable in one year and bears
interest at 10.0%. We accounted for the IDRC merger as a purchase pursuant to
Accounting Principles Board Opinion No. 16 "Business Combinations." Of the
shares of TeleSpectrum common stock issuable to the holders of IDRC common stock
and options, an aggregate 1,730,977 shares/options were placed in escrow, as
required by the merger agreement, to secure the indemnification obligations of
the IDRC security holders to TeleSpectrum. The term of the escrow is for 15
months and is governed by an indemnity escrow agreement. These shares represent
"contingent consideration" and in accordance with APB No. 16 will not be
reflected as part of the purchase price until the contingency is determinable.
At closing, IDRC had a contingent liability related to a claim by certain of its
shareholders. On July 19, 1999, this claim was settled for $1.9 million. 275,153
shares were initially released from the escrow to satisfy the majority of this
claim.
We received financing for a new $135.0 million senior debt facility (the "Credit
Facilities") which has been used to replace our current facility and to
refinance IDRC's long-term debt including accrued interest and repay certain
seller notes including accrued interest, redeem preferred stock, including
accrued dividends and pay transaction fees. The Credit Facilities consist of
three term notes in the aggregate of $90.0 million with maturities between 30
and 54 months and a revolving credit facility of $45.0 million due in 30 months.
The Credit Facilities allow for alternative interest rates. The Credit
Facilities require interest rate caps (see Item 3) and contain covenants, the
most restrictive of which require the maintenance of certain financial ratios,
restrict future indebtedness, limit capital expenditures and prohibit cash
dividends.
13
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
CRW Merger Agreement
- --------------------
On September 3, 1998, we entered into a merger agreement with CRW Financial,
Inc. ("CRW"). This agreement was amended on December 30, 1998 and was
consummated on June 30, 1999. Under this agreement each outstanding share of CRW
common stock was exchanged for .709 of a share of TeleSpectrum common stock. In
addition, each outstanding option to purchase shares of CRW common stock was
exchanged for an option to purchase .709 of a share of TeleSpectrum common
stock. The warrants issued by CRW to purchase 0.7 million shares of our common
stock owned by CRW were unaffected by this merger. Immediately prior to the
merger, CRW did not have any continuing business operations and its only
significant asset was 6.9 million shares of our common stock. For financial
reporting purposes, we treated the exchange of our shares of common stock for
shares of CRW common stock as a treasury stock transaction. The transaction did
not have an effect on our net income or loss, but did effect our net income or
loss per share.
Strategic Initiatives
- ---------------------
During the first quarter of 2000 the Company retained an investment banker to
raise capital for e-Satisfy.com - a company formed by merging TARP, a wholly
owned subsidiary of the Company, and Customer Insites, Inc., a company acquired
in January 2000. The scope of the investment banker's engagement was then
expanded to raise additional capital to assist in the strategic initiatives of
ChannelCare, the Company's multi-channel CRM platform. In addition, the Company
is evaluating alternative business growth strategies in connection with multi-
channel CRM solutions including, but not limited to, independently operating and
raising capital relative to these businesses.
Customer Insight Acquisition
- ----------------------------
During January 2000, the Company placed all assets and liabilities specifically
related to TARP into a new corporation called e-Satisfy.com. On February 2,
2000, e-Satisfy.com acquired Customer Insites, Inc. ("CI") by issuing 2,410,741
shares or 27.6% of e-Satisfy.com in exchange for all of the issued and
outstanding capital stock of CI. This acquisition was accounted for as a
purchase and accordingly, the net assets and results of operations of CI have
been included in the condensed consolidated financial statements commencing
February 2, 2000. The total purchase price paid for CI was valued at
approximately $6,200,000. Based upon a preliminary analysis the excess of the
purchase price over the fair value of the net tangible liabilities acquired
totaling approximately $6,478,000, has been recorded as goodwill and is being
amortized on a straight-line basis over twenty-five years. If the acquisition
had been in effect from January 1, 1999, unaudited pro forma net sales and net
earnings of the Company would have been substantially the same as those
reported.
New President and CEO
- ---------------------
On April 27, 2000, Telespectrum entered into an employment agreement with Mr.
Vincent Ciavardini that provides that he be employed by Telespectrum as its
President and Chief Executive Officer through April 27, 2003. This position was
vacated by Mr. Keith Alessi, who has become Chairman.
Credit Facility Amendments
- --------------------------
During April 2000, the Company signed amendments to the Credit Facility that
modified the Company's debt covenants effective February 2000, including the
leverage ratio and the fixed charge coverage ratio and increased the working
capital revolver facility by $6.0 million to $51.0 million. In addition, the
annual limitation regarding capital expenditures was lowered for the year 2000
from $32,500,000 to $25,000,000.
14
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Results of Operations
The following discussions should be read in connection with the Condensed
Consolidated Financial Statements contained within this report on Form 10Q.
During the third quarter of 1999, the Company changed its presentation of
operating expenses in the Condensed Consolidated Statements of Operations. Cost
of services now represents all costs incurred at the call centers. All remaining
costs including account management, management information systems and human
resources are included in SG&A. This reclassification has been made for all
periods presented.
Comparison of the results of operations for the three months ended March 31,
2000 to the three months ended March 31, 1999.
<TABLE>
<CAPTION>
Results of Operations
(Dollars in Millions)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three Months As a Three Months As a
Ended Percentage Ended Percentage
March 31, of March 31, of
2000 Revenues 1999 Revenues
-----------------------------------------------------------------------------
Revenues:
Telemarketing............................. $51.0 65% $32.8 68%
Customer Care............................. 26.1 33 12.2 26
e-Satisfy.com............................. 1.6 2 2.9 6
----- --- ----- ---
Total revenue.............................. 78.7 100 47.9 100
Cost of services:
Telemarketing............................ 40.1 79 24.0 73
Customer Care............................ 20.5 79 8.2 67
e-Satisfy.com............................ 0.6 38 1.0 34
----- --- ----- ---
Total cost of services..................... 61.2 78 33.2 69
Total selling, general and administrative.. 15.9 20 9.5 20
Goodwill amortization...................... 2.0 3 .3 1
----- --- ----- ---
Total operating expenses................... 79.1 101 43.0 90
----- --- ----- ---
Operating income........................... (.4) (1) 4.9 10
Interest expense........................... (3.5) (4) (0.2) --
----- --- ----- ---
Income before taxes........................ (3.9) (5) 4.7 10
Income taxes............................... -- -- -- --
----- --- ----- ---
Net income................................. $(3.9) (5)% $ 4.7 10%
===== === ===== ===
</TABLE>
Revenues
- --------
Our total revenues for the three months ended March 31, 2000 were $78.7 million,
representing an increase of 64% from $47.9 million for the three months ended
March 31, 1999. This increase is primarily the result of the merger with IDRC or
$32.3 million. Approximately 11.6% and 10.1% of total revenues for the three
months ended March 31, 2000 were generated by services provided on behalf of two
clients in the telecommunications industry and is reported predominantly in our
telemarketing and customer care segment, respectively.
Telemarketing Segment
- ---------------------
Our telemarketing segment revenues were $51.0 million for the three months ended
March 31, 2000. These revenues accounted for 65% of our total revenues and
represent an increase of $18.2 million or 55% from telemarketing revenues of
$32.8 million for the three months ended March 31, 1999. The increase in
telemarketing revenues is primarily attributable to the IDRC merger of $20.4
million, and revenue from
15
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
services initiated by new clients totaling $3.0 million offset by revenue from
lost or terminated clients of $3.7 million.
Customer Care Segment
- ---------------------
Our customer care segment revenues were $26.1 million for the three months ended
March 31, 2000. These revenues accounted for 33% of our total revenues and
increased by $13.9 million from the three months ended March 31, 1999. In
addition to $11.9 million in revenue gained through the IDRC merger, $2.0
million of this increase was attributable to the acquisition of one call center
in November 1999. Revenues generated from services initiated for new clients of
$.8 million were offset by lower volumes from existing clients.
e-Satisfy.com Segment
- ---------------------
Our e-Satisfy.com segment revenues were $1.6 million for the three months ended
March 31, 2000. These revenues accounted for 2% of total revenues and decreased
by $1.3 million or 45% from the three months ended March 31, 1999. The decrease
in revenue is attributable to the loss of three clients and a $0.2 million
reduction in revenue related to a settlement with a client during the first
quarter of 2000.
Cost of Services
- ----------------
Our cost of services were $61.2 million for the three months ended March 31,
2000, an increase of $28.0 million or 84% from cost of services of $33.2 million
for the three months ended March 31, 1999. As a percentage of total revenues,
cost of services were 78% and 69% for each of the three months ended March 31,
2000 and 1999.
Telemarketing Segment
- ---------------------
Our telemarketing segment cost of services for the three months ended March 31,
2000 were 79% of telemarketing revenues and increased by $16.1 million or 67%
from the three months ended March 31, 1999. Costs of services for the three
months ended March 31, 1999 were 73% of telemarketing revenues. The increase in
cost of services as a percentage of revenue is attributable to lower revenue per
hour due to competitive pricing pressures and lower capacity utilization of
existing seats.
Customer Care Segment
- ---------------------
Our customer care segment cost of services accounted for 79% of our customer
care revenues for the three months ended March 31, 2000 and increased by $12.3
million from the three months ended March 31, 1999. Cost of services for the
three months ended March 31, 1999 were 67% of customer care revenues. The
increase in cost of services as a percentage of revenues is due to lower volumes
and the associated lower capacity utilization, increased competitive pricing
pressures resulting in lower revenue per hour and increased costs associated
with ChannelCare initiatives, a change in the client mix, and an increase in
infrastructure to support higher volumes.
e-Satisfy.com Segment
- ---------------------
Our e-Satisfy.com segment cost of services accounted for 38% of our
e-Satisfy.com revenues for the three months ended March 31, 2000 and decreased
by $.4 million or 40% from the three months ended March 31, 1999. Cost of
services for the three months ended March 31, 1999 were 34% of e-Satisfy.com
revenues. The increase as a percentage of revenues is due to a change in the
client mix, lower volumes and the client settlement discussed above.
16
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Selling, General and Administrative
- -----------------------------------
SG&A expenses were $15.9 million for the three months ended March 31, 2000, an
increase of $6.4 million or 67% from the three months ended March 31, 1999. As a
percentage of total revenue, SG&A expenses were 20% for the three months ended
March 31, 2000 and 1999, respectively. The overall increase for the three months
ended March 31, 2000 related to costs associated with the IDRC merger including
$1.1 million for the Canadian operations, and a $1.4 million increase in the
customer care operations. $2.0 million of the $15.9 million for 2000 relates
directly to e-Satisfy.com which increased $0.7 million from the same quarter
last year. The remaining increase is due to the increased information technology
costs (related primarily to ChannelCare initiatives), increased facility
costs, bad debt expense and additional depreciation charges resulting from the
IDRC merger.
Goodwill Amortization
- ---------------------
Our goodwill amortization was $2.0 million, representing 3% of total revenues
for the three months ended March 31, 2000, and increased by $1.7 million from
the three months ended March 31, 1999. This increase is primarily attributable
to the IDRC merger.
Interest Expense, net
- ---------------------
We incurred net interest expense of $3.5 million for the three months ended
March 31, 2000, an increase of $3.3 million from the three months ended March
31, 1999. This increase in interest expense is primarily attributable to
increased debt levels from the IDRC merger and amortization of debt issuance
costs.
Liquidity and Capital Resources
- -------------------------------
Cash flows provided by(used in) (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
<S> <C> <C>
2000 1999
------- -------
Operating activities....................................................... $ (394) $ (218)
Investing activities....................................................... $(6,195) $(7,382)
Financing activities....................................................... $ 6,589 $ 6,890
</TABLE>
For the three months ended March 31, 2000
The $0.4 million of cash used by operating activities consisted of a $3.9
million net loss offset by non cash items including depreciation and
amortization of $6.1 million and $0.7 million for bad debts. Working capital
requirements which positively effected cash flow included a decrease in accounts
receivable of $3.1 million offset by a $2.6 million decrease in accrued expenses
and a $3.3 million decrease in other liabilities.
The $6.2 million of cash used in investing activities primarily consisted of
property and equipment purchases attributable to maintaining and enhancing our
technology platforms particularly as it relates to ChannelCare.
The $6.6 million of net cash provided by financing activities consisted of $6.2
million of net borrowings related to long-term debt.
In connection with the mergers on June 30, 1999, the Company entered into $135.0
million in new credit facilities consisting of Term A, Term B, Term C and
working capital revolver facilities (the "Credit
17
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Facilities") incurring costs of $5.0 million which are being amortized on a
straight line basis over the life of the Credit Facility. The Company borrowed
$20.0 million under the Term A facility, $20.0 million under the Term B facility
and $50.0 million under the Term C facility. In addition, the Company can borrow
the lesser of $45.0 million or 85% of eligible receivables, as defined, under
its working capital revolver facility. The working capital revolver facility
also provides for the issuance of letters of credit subject to certain borrowing
limits, of which none were outstanding at March 31, 2000. At March 31, 2000, the
Company had $39.6 million in outstanding borrowings and $5.4 million available
under the working capital revolver facility. The unused portion of the working
capital revolver facility is subject to an annual fee of 0.50%. The Term A
facility matures December 31, 2001 and requires quarterly principal payments
totaling $6.0 million for the remainder of 2000 and $10.0 million in 2001. The
Term B facility matures December 31, 2002 and requires quarterly principal
payments totaling $0.2 million for the remainder of 2000, $0.3 million in 2001,
and a final payment of $19.3 million in 2002. The Term C facility matures
December 31, 2003 and requires quarterly principal payments totaling $0.3
million for the remainder of 2000, $0.4 million in 2001, $0.9 million in 2002
and $48.0 million in 2003. All outstanding principal is due under the working
capital revolver facility on the maturity date, December 31, 2001.
The Company can elect at the time it makes borrowings to pay interest quarterly
at prime plus 1.75% or LIBOR plus 3.25% for the Term A and working capital
revolver facilities; prime plus 2.25% or LIBOR plus 3.75% for the Term B
facility and prime plus 2.75% or LIBOR plus 4.25% for the Term C facility. At
March 31, 2000, the weighted average interest rate payable under the Credit
Facilities was 10.0%. Borrowings under the Credit Facilities are collateralized
by substantially all of the assets of the Company. The Credit Facilities require
interest rate caps (see Item 3) and contain covenants, the most restrictive of
which require the maintenance of certain financial ratios, restrict future
indebtedness, limit capital expenditures and prohibit cash dividends.
The proceeds from the Credit Facilities were used to refinance $98.0 million in
principal and interest outstanding under the IDRC credit facilities and $10.9
million in principal, interest and early termination fees outstanding under the
Company's April 14, 1998 Secured Credit Facility. The remaining Credit
Facilities proceeds were used in the mergers to repay certain notes including
accrued interest, redeem preferred stock and pay transaction fees aggregating
$9.7 million. During the three months ended March 31, 2000 and 1999, the
weighted average interest rate on borrowings under the Secured Credit Facility
was 10.1% and 8.25%, respectively.
During April 2000, the Company signed an amendment to the Credit Facility that
modified the Company's debt covenants effective February 2000 including the
leverage ratio and the fixed charge coverage ratio and increased the working
capital revolver facility by $6.0 million to $51.0 million. In addition, the
annual limitation allowed for capital expenditures decreased for the year 2000
from $32,500,000 to $25,000,000.
We believe that our existing cash balances, and borrowings available under our
$135.0 million Credit Facilities will be sufficient to meet our operating and
capital needs through 2000. The amount of future capital expenditures will be
highly dependent on future revenue growth.
For the three months ended March 31, 1999
The $0.2 million of cash provided by operating activities consisted of $4.7
million of net income and noncash items including depreciation and amortization
of $2.5 million, offset by working capital requirements including a significant
increase in accounts receivable of $11.4 million, a $2.1 million increase in
accrued expenses and a $1.5 million increase in other liabilities.
The $7.4 million of cash used in investing activities primarily consisted of
$4.5 million of purchases of
18
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
property and equipment attributed to maintaining and enhancing our technology
platforms. In addition, $2.6 million consisted of deferred transaction co-
payments related to the IDRC and CRW mergers.
The $6.9 million of net cash provided by financing activities primarily
consisted of $6.7 million of net borrowings under our secured credit facility.
Year 2000 Issue
The Year 2000 issue results from the writing of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, computer software, hardware or firmware may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures, miscalculations or errors causing disruptions of operations or
other business problems, including, among others, a temporary inability to
process transactions or engage in other normal business activities.
Starting in 1998 and continuing in 1999 we undertook a comprehensive program,
including the hiring of an outside consulting firm, to address the Year 2000
issue.
As of March 31, 2000, we had spent approximately $1.6 million on the Year 2000
issue. Many of our systems that required Year 2000 remediation or replacement
also received performance upgrades or enhancements. Our costs do not include
costs related to these upgrades or enhancements. Because we have not experienced
material Year 2000 problems at the beginning of 2000 or any material leap year
issues after February 29, 2000, we do not expect future remediation costs to be
material to our consolidated position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
- ------------------
In connection with the merger of IDRC on June 30, 1999, we refinanced $10.5
million of our $20.0 million Secured Credit Facility debt and acquired $118.6
million in senior debt under the new $135.0 million Credit Facilities. The
increased level of long-term debt increases our exposure to interest rate risk.
We pay interest to the Credit Facilities banks based on a floating interest
rate, either the prime rate or LIBOR. Based on the outstanding balance under the
Credit Facilities at March 31, 2000, we would be required to pay an additional
$1.2 million in interest annually for every 1.0% increase in the average prime
rate or LIBOR. To reduce the risk associated with a large increase in interest
rates, we have in place two derivative financial instruments known as interest
rate caps each with notional amounts of $29.5 million. Under the terms of the
interest rate cap agreements, we would receive quarterly cash payments when the
3-month LIBOR rate at the end of any quarter exceeded 7.5%. The payment would be
determined by multiplying the difference between the actual LIBOR rate and 7.5%
by the notional amounts of $29.5 million. The interest rate cap agreements
expire on September 30, 2002. These interest rate caps are required under the
terms of the $135.0 million Credit Facilities, which dictates that we establish
and maintain three-year interest rate caps at 200 basis points above the
three-month LIBOR rate with notional amounts not less than 66.0% of the term
loan balance. The three-month LIBOR interest rate was approximately 6.3% at
March 31, 2000.
19
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
Foreign Currency Risk
- ---------------------
We have subsidiaries in Canada and the United Kingdom, which are subject to
foreign currency fluctuations. As currency rates change, translation of income
statements of these subsidiaries from local currencies to U.S. dollars affects
year-over-year comparability of our operating results. Gains and losses on
translation are recorded as a separate component of stockholders' equity.
Approximately $22.0 million of the Credit Facilities proceeds have been loaned
to our Canadian subsidiary (acquired in the June 30, 1999 merger with IDRC). The
loan proceeds have been converted to Canadian dollars. Under the terms of the
Credit Facilities agreement, large principal payments due in the years 2002 and
2003 may require conversion of all or a portion of our Canadian dollar loan to
US dollars. An unfavorable change in the Canadian dollar exchange rate at the
time of the conversion could cause a foreign currency exchange loss. At this
time, we do not believe that such a conversion would be required. The other
foreign subsidiaries are limited in their operations and the level of investment
by the parent company so that risk of foreign currency fluctuations is not
expected to be material.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
20
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
The following is a list of exhibits filed as part of this quarterly
report on Form 10-Q. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits
incorporated by reference, the location of the exhibit in the previous
filing is indicated in parentheses.
3.01 Restated Certificate of Incorporation of TeleSpectrum Worldwide
Inc. is incorporated by reference to exhibit 3.01 of the
Company's Registration Statement on Form S-1 (File No. 333-
04349).
3.02 Bylaws of TeleSpectrum Worldwide Inc. are incorporated by
reference to exhibit 3.02 of the Company's Registration
Statement on Form S-1 (File No. 333-04349).
10.1 Employment Agreement dated as of April 27, 2000 between Vincent
J. Ciavardini and TeleSpectrum Worldwide Inc.
10.2 Amendment No. 3 to Credit Agreement.
10.3 Amendment No. 4 to Credit Agreement.
27.01 Financial Data Schedule.
(b) Form 8-K
None
21
<PAGE>
Telespectrum Worldwide Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TeleSpectrum Worldwide Inc.
----------------------------
(Registrant)
\s\ Vincent J. Ciavardini
----------------------------
Vincent J. Ciavardini
TeleSpectrum Worldwide Inc.
President & Chief Executive Officer
Date: May 15, 2000 \s\ William Hoke
----------------------------
William Hoke
TeleSpectrum Worldwide Inc.
Interim Chief Financial Officer
22
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made as of this 27th day of April 2000 between
TeleSpectrum Worldwide Inc., a Delaware corporation (the "Company"), and Vincent
J. Ciavardini (the "Employee").
RECITALS
--------
The Company desires to employ the Employee, and the Employee desires to
provide services to the Company, upon the terms and conditions hereinafter set
forth.
WITNESSETH:
----------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
----------
(a) During the term of the Employee's employment under this Agre
(the "Employment Term"), the Employee shall be the Chief Executive Officer and
President of the Company and shall perform such duties consistent with such
office as described in the Company's Bylaws (a copy of which has been furnished
to the Employee) and as are assigned by the Company's Board of Directors (the
"Board"). In addition, the Company shall appoint Employee to the Board to fill
the current vacancy in such Board. Except for periodic travel incident to
Employee's duties hereunder, Employee shall not be required to perform his
duties hereunder outside a 50 mile radius of the Company's current principal
office.
(b) Employee represents to the Company that he is not subject or a
party to any employment agreement, non-competition covenant, non-disclosure
agreement or any other agreement, covenant, understanding or restriction of any
nature which would prohibit Employee from executing this Agreement and
performing fully his duties and responsibilities hereunder.
2. Term. The "Employment Term" shall begin on the date hereof and, unless
----
terminated earlier pursuant to the terms of this Agreement, continue until April
27, 2003.
3. Compensation for Employment.
---------------------------
(a) The basic annual rate of compensation of the Employee for his
employment services to the Company during the Employment Term shall be $325,000
(such amount is referred to herein as the "Salary"), which the Company shall pay
to the Employee in equal installments in accordance with the normal payroll
policies of the Company. The Salary will be reviewed at least one time each
calendar year by the Compensation Committee of the Board for possible increases,
taking into account
1
<PAGE>
such matters as the Employee's responsibilities, the profitability of the
Company, the compensation of other executives of the Company, increases in cost
of living and other factors deemed pertinent by the Committee. In light of such
review, the Company, in its sole discretion, may increase the Salary but shall
not decrease the Salary during the Employment Term.
(b) The Employee shall be eligible to receive annual performance bonuses
(such amounts are referred to herein as the "Bonus") in such amounts as approved
by the Compensation Committee of the Board of Directors and participate in such
bonus programs as are established for executive officers of the Company. For
the first 12 months of this Agreement, the Employee shall receive a guaranteed
Bonus of $300,000. After the first 12 months of this Agreement, the target
Bonus shall equal 100% of the then existing Salary.
(c) On the date hereof, the Company shall grant Employee a stock option
(the "Base Option") to purchase 1,000,000 shares of the Company's common stock,
par value $.01 per share (the "Common Stock"). The Base Option will contain
such terms as contained in the form of Grant Letters attached as "Exhibit "A"
hereto, including immediate vesting with respect to 100,000 shares and vesting
in three equal 300,000 share increments on the first, second and third
anniversaries of the date of grant. The Base Option shall provide that a
maximum number of shares be qualified as "Incentive Stock Options" under
applicable law and the regulations of the U.S. Internal Revenue Service. In
addition, on the date hereof, the Company shall grant Employee a stock option
(the "Performance Option") to purchase 500,000 shares of Common Stock. The
Performance Option will include such terms as contained in the form of Grant
Letter attached as Exhibit "B" hereto, including the following vesting schedule:
(i) 166,667 shares if the closing price of the Common Stock on Nasdaq
reaches $11.00 per share for ten consecutive trading days beginning prior to the
18 month anniversary of the date of this Agreement;
(ii) 166,667 shares if the closing price of the Common Stock on Nasdaq
reaches $17.00 per share for ten consecutive trading days beginning prior to the
27 month anniversary of the date of this Agreement;
(iii) 166,666 shares if the closing price of the Common Stock on
Nasdaq reaches $23.50 per share for ten consecutive trading days beginning prior
to the 36 month anniversary of the date of this Agreement; and
(iv) if not vested by the fourth anniversary of the date of this
Agreement, then all shares underlying the Performance Option shall automatically
vest on such date.
Each of the Performance and Base Options shall immediately vest as to any non-
vested portion upon any termination of employment pursuant to Section 5 hereof.
2
<PAGE>
(d) During the Employment Term, the Company shall provide the Employee
with fringe benefits that are substantially equivalent to the fringe benefits
specified on Exhibit "C" (the "Fringe Benefits") at such levels that are
provided to the senior officers of the Company.
(e) All amounts payable by the Company under Sections 3(a) and (b) and
the Fringe Benefits allowed under Section 3(d) shall be subject to proration
based upon the number of days in each such year that the Employee was employed
by the Company hereunder.
4. Termination Without Compensation.
--------------------------------
(a) Total Disability. If the Employee becomes totally disabled (as
----------------
defined below), the Company may terminate the Employment Term by notice to the
Employee, and as of the termination date, the Company shall have no further
liability or obligation to the Employee hereunder except as follows: the
Employee shall receive (i) unpaid Salary, Bonus, if any, and Fringe Benefits
that have accrued through the date of termination; and (ii) whatever benefits
that he may be entitled to receive under any then existing disability benefit
plans of the Company, including any such plans included in the Fringe Benefits.
For the purposes hereof, the Employee shall be deemed to be "totally disabled"
if the Employee is considered totally disabled under any group disability plan
maintained by the Company and in effect at that time, or in the absence of any
such plan, under applicable Social Security regulations. In the event of any
dispute under this Section 4(a), the Employee shall submit to a physical
examination by a licensed physician mutually satisfactory to the Company and the
Employee, the cost of such examination to be paid by the Company, and the
determination of such physician shall be determinative.
(b) Death. If the Employee dies, this Employment Agreement shall
-----
terminate on the date of death, and thereafter the Company shall not have any
further liability or obligation to the Employee, his executors, administrators,
heirs, assigns or any other person claiming under or through his except that the
Employee's estate shall receive any unpaid Salary, Bonus, if any, and Fringe
Benefits that have accrued through the date of termination.
(c) Cause. The Company may terminate the Employment Term for "cause" by
-----
giving the Employee 30 days' notice of the termination date, and as of the
termination date, the Company shall not have any further liability or obligation
to the Employee, except that the Employee shall receive any unpaid Salary,
Bonus, if any, and Fringe Benefits that have accrued through the date of
termination. For purposes of this Agreement, "cause" shall mean the Employee's
(i) breach of (other than by reason of illness, injury or incapacity) of any of
the material terms or provisions of this Agreement, (ii) the willful and
substantial failure to comply fully with the lawful directives of the Board,
(iii) substantial and willful misconduct, (iv) material neglect of the Company's
business, (v) conviction of a felony or other crime involving moral turpitude,
(vi) misappropriation of funds or (vii) habitual abuse of alcohol, narcotics or
other controlled substances. In the case of a termination for "cause," the
notice of termination shall specify the basis for the Company's determination of
"cause"; provided, however, that in the case of conduct described in clauses
-------- -------
(i), (ii), (iii) and (iv) above, such conduct shall not constitute "cause" for
the purposes of this paragraph (c) unless (A) the
3
<PAGE>
Board shall have given the Employee notice setting forth with specificity (1)
the conduct deemed to constitute "cause," (2) reasonable action that would
remedy the objectionable conduct, and (3) a reasonable time (not less than 20
days) within which the Employee may take such remedial action, and (B) the
Employee shall not have taken such specified remedial action within such
specified reasonable time.
(d) Resignation. The Employee shall have the right to terminate the
-----------
Employment Term at any time by giving the Company 60 days' notice of the
termination date. Under such circumstances, the Company shall not have any
further liability or obligation to the Employee, except that the Employee shall
receive any unpaid Salary, Bonus, if any, and Fringe Benefits that have accrued
through the date of termination, net of any liabilities that the Employee may
have to the Company.
5. Termination With Compensation. The Company shall have the right to
-----------------------------
terminate the Employment Term without cause at any time by giving the Employee
30 days' notice of the termination date. In addition, the Employee may
terminate his services under this Agreement "for good reason" by giving the
Board 30 days' notice of such intent, which notice shall set forth in reasonable
detail the facts and circumstances which constitute "for good reason". In the
event of a termination of the Employment Term pursuant to this Section 5, the
Company shall continue to pay to the Employee an amount equal to the Salary plus
the Bonus paid for the prior calendar year, and continue to provide the Fringe
Benefits listed in paragraph (a) of Exhibit C hereto for a period ending one
year after the date of any such termination. The amount to be paid and the
Fringe Benefits to be provided under this Section 5 are referred to herein as
the "Termination Compensation." The Employee shall not be entitled to any
Termination Compensation unless the Employee executes and delivers to the
Company after a notice of termination a release in a form satisfactory to the
Company in its sole discretion by which the Employee releases the Company from
any obligations and liabilities of any type whatsoever under this Agreement,
except for the Company's obligations with respect to the Termination
Compensation. The parties hereto acknowledge that the Termination Compensation
to be provided under this Section 5 is to be provided in consideration for the
above-specified release. For purposes hereof, the term "for good reason" shall
mean any material breach by the Company of any provision of this Agreement which
is not fully addressed within 30 days after written receipt of notice of a
breach, including the occurrence of any of the following events without
Employee's express written consent: (1) the assignment to Employee of any duties
inconsistent with Employee's positions, duties, responsibilities and status with
the Company immediately prior to a change in control; (2) a material change in
Employee's reporting responsibilities, titles or offices as in effect
immediately prior to a change in control; (3) any removal of Employee from, or
any failure to re-elect Employee to the office of Chief Executive Officer,
except in connection with a termination of employment pursuant to this
Agreement; (4) the breach of the last sentence of Section 1(a) hereof; or (5)
the refusal of any "person" (as defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) that is or
becomes a "beneficial owner" (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company representing
50% or more of the voting power of the then outstanding securities of the
Company, to assume the obligations of the Company hereunder.
4
<PAGE>
6. Agreement Not to Compete.
------------------------
(a) The Employee covenants that for the period beginning on the
termination of Employee's employment hereunder and ending on the first
anniversary of the date of such termination of employment hereunder (the
"Restricted Period"), he will not, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as a partner, principal, agent,
representative, consultant or otherwise with or use or permit his name to be
used in connection with, any business or enterprise engaged directly or
indirectly in competition with the business conducted by the Company at any time
during such period within any portion of the United States in the direct
marketing business which includes inbound and outbound telemarketing, customer
retention and interactive voice response (the "Business"). It is recognized by
the Employee and the Company that the Business is and is expected to continue to
be conducted throughout the United States and that more narrow geographical
limitations of any nature on this non-competition covenant (and the non-
solicitation covenant set forth in Section 6(b)) are therefore not appropriate.
The foregoing restriction shall not be construed to prohibit the ownership by
Employee as a passive investment of not more than five percent (5%) of any class
of securities of any corporation which is engaged in any of the foregoing
businesses having a class of securities registered pursuant to the Securities
Exchange Act of 1934.
(b) The Employee further covenants that during the Restricted Period,
he will not, either directly or indirectly, (i) call on or solicit any person
who or which has been a customer of the Company with respect to the activities
prohibited by Section 6(a) or (ii) solicit the employment of any person who is
employed by the Company during such period on a full or part-time basis.
(c) The Employee recognizes and acknowledges that by reason of his
employment by the Company he will have access to Confidential Information
relating to the Business. The Employee acknowledges that such Confidential
Information is a valuable and unique asset and covenants that he will not
disclose any such Confidential Information after the date hereof to any person
for any reason whatsoever, unless such information (i) is in the public domain
through no wrongful act of Employee, (ii) has been rightfully received from a
third party without restriction and without breach of this Agreement or (iii)
except as may be required by law.
(d) The Employee acknowledges that the restrictions contained in this
Section 6 are reasonable and necessary to protect the legitimate interests of
the Company, and that any violation will result in irreparable injury to the
Company.
(e) The Employee agrees that the Company shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of this Section 6, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of this
Section 6 should ever be
5
<PAGE>
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
7. Inventions, Designs and Product Developments. All inventions, innovations,
--------------------------------------------
designs, ideas and product developments, developed or conceived by the Employee,
solely or jointly with others, whether or not patentable or copyrightable, at
any time during the Employment Term or during his employment by the Company
prior to the commencement of the Employment Term and that relate to the actual
or planned business activities of the Company (collectively, the "Developments")
and all of the Employee's right, title and interest therein, shall be the
exclusive property of the Company. The Employee hereby assigns, transfers and
conveys to the Company all of his right, title and interest in and to any and
all such Developments. The Employee shall disclose fully, as soon as
practicable and in writing, all material and substantial Developments to the
Board. At any time and from time to time, upon the request of the Company, the
Employee shall execute and deliver to the Company any and all instruments,
documents and papers, give evidence and do any and all other reasonable acts
that, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable the Company to file and
prosecute applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United States or foreign
law with respect to any such Developments or to obtain any extension,
validation, re-issue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse the Employee for all reasonable expenses incurred
by his in compliance with the provisions of this Section 7.
8. Confidential Information.
------------------------
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of the Company, including
writings, equipment, processes, drawings, reports, manuals, invention records,
financial information, business plans, customer lists, the identity of or other
facts relating to prospective customers, inventory lists, arrangements with
suppliers and customers, computer programs, or other material embodying trade
secrets, customer or product information or technical or business information of
the Company. All such information, other than any information that is in the
public domain through no act or omission of the Employee or which he is
authorized to disclose, is referred to collectively as the "Company
Information." During and after the Employment Term, the Employee shall not (i)
use or exploit in any manner the Company Information for himself or any person,
partnership, association, corporation or other entity other than the Company,
(ii) remove any Company Information, or any reproduction thereof, from the
possession or control of the Company or (iii) treat Company Information
otherwise than in a confidential manner.
(b) All Company Information developed, created or maintained by the
6
<PAGE>
Employee, alone or with others while employed by the Company, and all Company
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the Company. The Employee shall return to the Company all
Company Information, and reproductions thereof, whether prepared by his or
others, that are in his possession immediately upon request and in any event
upon the completion of his employment by the Company.
9. Remedies. The Employee expressly acknowledges that the remedy at law for
--------
any breach of Sections 6, 7 and 8 will be inadequate and that upon any such
breach or threatened breach, the Company shall be entitled as a matter of right
to injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Employee's obligations
under these provisions without the necessity of proving the actual damage to the
Company or the inadequacy of a legal remedy.
10. Legal Expenses. The Company shall pay all of the reasonable fees and
--------------
expenses incurred by counsel to the Employee in negotiating this Agreement and
in enforcing Employee's rights under this Agreement.
11. General.
-------
(a) Governing Law. This Agreement is made and entered into in the
-------------
Commonwealth of Pennsylvania, and shall in all respects be interpreted, enforced
and governed by and under the laws of the Commonwealth.
(b) Company. For purposes of Sections 6, 7, 8 and 9, the term "Company"
-------
shall be deemed to include any incorporated or unincorporated entities that are
controlled, directly or indirectly, by the Company through ownership, agreement
or otherwise, and any such entity to which the Company assigns its rights
hereunder.
(c) Binding Effect. All of the terms and provisions of this Agreement
--------------
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
(d) Notices. All notices required to be given under this Agreement
-------
shall be in writing and shall be deemed to have been given when personally
delivered or when mailed by registered or certified mail, postage prepaid,
return receipt requested, or when sent by Federal Express or other overnight
delivery service, addressed as follows:
7
<PAGE>
TO EMPLOYEE:
Vincent J. Ciavardini
4 Honeysuckle Lane
Broomall, PA 19008
With a copy to:
William Sasso
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, PA 19103-7098
TO THE COMPANY:
443 S. Gulph Road
King of Prussia, PA 19406
Fax: 610-962-5109
Attn: Chief Financial Officer
With a copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Fax: 215-963-5299
Attn: Stephen M. Goodman, Esquire
(e) Entire Agreement; Modification. This Agreement constitutes the
------------------------------
entire agreement of the parties hereto with respect to the subject matter hereof
and may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the termination of the Employment Term
--------
and of the Employee's employment by the Company, this Agreement shall continue
to bind the parties for so long as any obligations remain under the terms of
this Agreement.
(g) Waiver. No waiver of any breach of this Agreement shall be
------
construed to be a waiver as to succeeding breaches.
8
<PAGE>
(h) Severability. If any provision of this Agreement or application
-------------
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto duly executed this Agreement as of the day and year first written
above.
TELESPECTRUM WORLDWIDE INC.
By:___________________________________
______________________________________
VINCE CIAVARDINI
9
<PAGE>
EXHIBIT "C"
FRINGE BENEFITS
---------------
(a) Health insurance and short-term and long-term disability insurance for
the Employee, with the same benefits generally provided to the Company's most
senior executive employees from time to time during the Employment Term.
(b) Eligibility to participate in any 401(k) savings plans maintained by
the Company during the Employment Term consistent with the Plan parameters.
(c) Term life insurance and SERP participation on a basis commensurate with
the Company's other senior officers.
(d) Eligibility to continue to participate in any employee stock option
plan maintained by the Company during the Employment Term.
(e) Reimbursement, in accordance with the Company's policies, upon proper
accounting, of the monthly fee of a mobile telephone and charges for any
business telephone calls made on the Employee's personal telephone.
(f) Paid holidays in accordance with the Company's policies.
(g) Paid vacation of four weeks per year.
10
<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
REVOLVING WORKING LETTER OF DOMESTIC AND
TERM A TERM B TERM C TERM D CREDIT CAPITAL CREDIT EURODOLLAR
NAME OF INITIAL COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT LENDING
LENDER OFFICE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Banque Nationale $1,984,313.74 $1,129,136.03 $0.00 $0.00 $3,000,0000 $14,205,882.35 $5,000,000.00 Credit
de Paris Matters
-----------
499 Park
Avenue
New York, NY
10022
Tel: (212)
415-9723
Fax: (212)
418-8269
Attn: David
Barcus
Operations
------------
499 Park
Avenue
New York, NY
10022
Tel: (212)
415-9432
Fax: (212)
415-9805
Attn:
Kimberly
Williams
====================================================================================================================================
Bank of America $3,294,117.65 $4,053,308.82 $0.00 $0.00 $ 3,000,000 $ 9,264,705.88 Credit
National Trust Matters
and Savings ------------
Association 100 North
Tryon Street
Charlotte,
NC 28255
Tel: (704)
388-5920
Fax: (704)
388-0960
Attn:
Michael J.
McKenney
Operations
------------
100 North
Tryon Street
Charlotte,
NC 28255
Tel: (704)
388-3781
Fax: (704)
409-0066
Attn:
Michael
D'Amico
====================================================================================================================================
BankBoston, N.A. $2,823,529.41 $3,474,264.70 $0.00 $0.00 $0.00 $ 7,941,176.47 Credit
Matters
------------
C/O Fleet
National
Bank
777 Main
Street
Mail Stop:
CT MO 0237
Hartford, CT
06115
Tel: (860)
986-2630
Fax: (860)
986-3450
Attn:
Matthew
Latham
Operations
------------
Commercial
Loan
Services
100
Rustcraft
Road
Dedham, MA
02026
Tel: (781)
467-2725
Fax: (781)
467-2151
Attn: Julie
Eaton
====================================================================================================================================
First Dominion $0.00 $0.00 $9,920,000.00 $0.00 $0.00 $0.00 Credit
Funding III Matters
------------
C/O First
Dominion
Capital,
L.L.C.
1330 Avenue
of the
Americas
New York, NY
10019
Tel: (212)
603-8500
Fax: (212)
603-8506
Attn:
Michael
Monteleone
Copy to:
Shirley
Thompson
Tel: (804)
819-2335
Fax: (804)
819-2213
Operations
------------
Commercial
Loan
Services
909 Fannin,
Suite 1700
Houston, TX
77010
Tel: (713)
216-1576
Fax: (713)
216-8299
Attn: Judith
Drummond
Copy to:
Shashi
Srikantan
Tel: (212)
603-8500
Fax: (212)
603-8506
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVOLVING WORKING LETTER OF DOMESTIC AND
TERM A TERM B TERM C TERM D CREDIT CAPITAL CREDIT EURODOLLAR
NAME OF INITIAL COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT LENDING
LENDER OFFICE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Source $0 $0 $0.00 $0.00 $0.00 $ 5,294,117.65 Credit
Matters
------------
2850 W. Golf
Road
Rolling
Meadows, IL
60008
Tel: (847)
734-2084
Fax: (847)
734-7910
Attn: Mary
Thorrez
Operations
------------
Sr. Loan
Administrator
2850 W. Golf
Road 5/th/
Floor
Rolling
Meadow, IL
60008
Tel: (847)
734-2056
Fax: (847)
734-7912
Attn: Kelly
Schmidt
====================================================================================================================================
IBJ Whitehall Bank $1,882,352.94 $2,316,176.47 $0.00 $0.00 $0.00 $ 5,294,117.65 Credit
& Trust Company Matters
------------
One State
Street
New York, NY
10004
Tel: (212)
858-2147
Fax: (212)
858-2768
Attn: Steve
Hanna
Operations
------------
One State
Street
New York, NY
10004
Tel: (212)
858-2266
Fax: (212)
858-2222
Attn: Frank
DeLillo
====================================================================================================================================
Van Kampen Prime $ 522,222.22 $ 820,312.51 $8,266,666.66 $0.00 $0.00 $0.00 Credit
Rate Income Trust Matters
------------
One Parkview
Plaza
Oakbrook
Terrace, IL
60181
Tel: (630)
684-6423
Fax: (630)
684-6740/41
Attn: Darvin
Pierce
Operations
------------
One Parkview
Plaza
Oakbrook
Terrace, IL
60181
Tel: (630)
684-6283
Fax: (630)
684-6740/41
Attn: Brian
Buscher
and
State Street
Bank & Trust
Corporate
Trust
Department
P.O. Box 778
Boston, MA
02102
Tel: (617)
664-5481
Fax: (617)
664-5366
/5367
Attn: Ann
Chlebnik
====================================================================================================================================
</TABLE>
<PAGE>
SCHEDULE I
COMMITMENTS AND APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
REVOLVING WORKING LETTER OF DOMESTIC AND
TERM A TERM B TERM C TERM D CREDIT CAPITAL CREDIT EURODOLLAR
NAME OF INITIAL COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT LENDING
LENDER OFFICE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Van Kampen $ 522,222.22 $ 820,312.51 $8,266,666.66 $ 0.00 $ 0.00 $ 0.00 Credit
Senior Floating Matters
Rate Fund -------
One Parkview
Plaza
Oakbrook
Terrace,
IL 60181
Tel: (630)
684-6423
Fax: (630)
684-6740/41
Attn: Darvin
Pierce
Operations
----------
One Parkview
Plaza
Oakbrook
Terrace, IL
60181
Tel: (630)
684-6283
Fax: (630)
684-6740/41
Attn: Brian
Buscher
and
State Street
Bank & Trust
Corporate
Trust
Department
P.O. Box 778
Boston, MA
02102
Tel: (617)
664-5481
Fax: (617)
664-5366
/5367
Attn: Ann
Chlebnik
====================================================================================================================================
Van Kampen $ 522,222.22 $ 820,312.51 $8,266,666.66 $ 0.00 $ 0.00 $ 0.00 Credit
Senior Income Matters
Trust -------
One Parkview
Plaza
Oakbrook
Terrace,
IL 60181
Tel: (630)
684-6423
Fax: (630)
684-6740/41
Attn: Darvin
Pierce
Operations
----------
One Parkview
Plaza
Oakbrook
Terrace,
IL 60181
Tel: (630)
684-6283
Fax: (630)
684-6740/41
Attn: Brian
Buscher
and
State Street
Bank &
Trust
Corporate
Trust
Department
P.O. Box 778
Boston, MA
02102
Tel: (617)
664-5481
Fax: (617)
664-5366
/5367
Attn: Ann
Chlebnik
====================================================================================================================================
Wells Fargo $1,000,000.00 $1,476,562.50 $ 0.00 $ 0.00 $ 0.00 $ 3,000,000.00 Credit
Bank, N.A. Matters
-------
Loan
Adjustment
Group
333 S. Grand
Ave.,
Ste. 940
Los Angeles,
CA 90071
Tel: (213)
253-6822
Fax: (213)
253-5913
Attn: Razia
Damji
Operations
----------
201 Third
Street,
8th Floor
San
Francisco,
CA 94103
Tel: (415)
447-5341
Fax: (415)
512-7777
Attn: Efren
Gonzales
====================================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVOLVING WORKING LETTER OF DOMESTIC AND
TERM A TERM B TERM C TERM D CREDIT CAPITAL CREDIT EURODOLLAR
NAME OF INITIAL COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT COMMITMENT LENDING
LENDER OFFICE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Archimedes $ 0.00 $ 0.00 $4,960,000.00 $ 0.00 $ 0.00 $ 0.00 Credit
Funding, L.L.C. Matters
-------
C/O ING
Capital
Advisors LLC
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3972
Fax: (213)
346-3995
Attn:
Michael
Hatley
Operations
----------
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3976
Fax: (213)
626-6552
Attn: Lenore
Crummey
Beniot
====================================================================================================================================
Archimedes $1,566,666.66 $2,460,937.50 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Credit
Funding II, Matters
LTD. -------
C/O ING
Capital
Advisors LLC
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3972
Fax: (213)
346-3995
Attn:
Michael
Hatley
Operations
----------
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3976
Fax: (213)
626-6552
Attn: Lenore
Crummey
Beniot
====================================================================================================================================
KZH ING-1 LLC $ 0.00 $ 0.00 $2,976,000.00 $ 0.00 $ 0.00 $ 0.00 Credit
Matters
-------
C/O ING
Capital
Advisors LLC
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3973
Fax: (213)
346-3995
Attn: Karen
Morgan
Operations
----------
450 West
33rd Street
15th Floor
New York, NY
10001
Tel: (212)
946-7575
Fax: (212)
946-7776
Attn:
Virginia
Conway
====================================================================================================================================
KZH ING-2 LLC $ 0.00 $ 0.00 $4,960,000.00 $ 0.00 $ 0.00 $ 0.00 Credit
Matters
-------
C/O ING
Capital
Advisors LLC
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3973
Fax: (213)
346-3995
Attn: Karen
Morgan
Operations
----------
450 West
33rd Street
15th Floor
New York, NY
10001
Tel: (212)
946-7575
Fax: (212)
946-7776
Attn:
Virginia
Conway
====================================================================================================================================
KZH ING-3 LLC $ 0.00 $ 0.00 $1,984,000.00 $ 0.00 $ 0.00 $ 0.00 Credit
Matters
-------
C/O ING
Capital
Advisors LLC
333. S.
Grand
Avenue,
Suite 4250
Los Angeles,
CA 90071
Tel: (213)
346-3973
Fax: (213)
346-3995
Attn: Karen
Morgan
Operations
----------
450 West
33rd Street
15th Floor
New York, NY
10001
Tel: (212)
946-7575
Fax: (212)
946-7776
Attn:
Virginia
Conway
====================================================================================================================================
Canadian $1,882,352.94 $2,316,176.47 $ 0 $ 0 $ 0 $ 0 Credit
Imperial Bank Matters
of Commerce -------
425
Lexington
Avenue, 7th
Floor
New York, NY
10017
Tel: (212)
856-3682
Fax: (212)
856-3799
Attn: Koren
Volk
Operations
----------
2 Paces
West, Suite
1200
2727 Paces
Ferry Road
Atlanta, GA
30339
Tel: (770)
319-4874
Fax: (770)
319-4955
Attn: Kelly
Swift
====================================================================================================================================
</TABLE>
<PAGE>
Exhibit 10.2
AMENDMENT NO. 3 TO THE
CREDIT AGREEMENT
Dated as of April 13, 2000
AMENDMENT NO. 3 TO THE CREDIT AGREEMENT among Telespectrum Worldwide,
Inc., a Delaware corporation (the "BORROWER"), the banks, financial institutions
and other institutional lenders parties to the Credit Agreement referred to
below (collectively, the "LENDERS"), Banque Nationale de Paris, as collateral
agent (the "AGENT") and Bank of America, N.A., as administrative agent (the
"ADMINISTRATIVE AGENT") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Agent and the Administrative Agent
have entered into a Credit Agreement dated as of June 30, 1999 ( as amended,
supplemented or otherwise modified through the date hereof, the "CREDIT
AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement.
(2) The Borrower, the Required Lenders and all the Working Capital
Lenders have agreed to amend the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
------------------------------
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2, hereby amended as follows:
(a) The definition of "Fixed Charge Coverage Ratio" in Section 1.01 is
hereby amended by inserting at the end thereof the following new language:
";provided, however, that solely in respect of the Rolling Periods
ending in March 2000, June 2000 and September 2000, exclusively, Fixed
Charge Coverage Ratio shall men, with respect to the Borrower, the ratio of (a)
Consolidated EBITDA for the Borrower and its Subsidiaries for each of such
Rolling Periods less income taxes of the Borrower and its Subsidiaries that have
----
been paid in cash during each of such Rolling Periods to (b) the sum of (i)
Interest Expense, excluding (A) interest not payable in cash of the Borrower and
its Subsidiaries and (B) amortized financing fees paid in cash at the closing of
the Merger that would otherwise constitute Interest Expense, in each case during
each of such Rolling Periods and (ii) regularly scheduled principal payments of
Funded Debt (excluding principal
1
<PAGE>
payments of MDC Subordinated Debt) of the Borrower and its Subsidiaries
made during each of such Rolling Periods".
(b) Section 5.04(a) is hereby amended by (i) replacing the following
language in subsection (i) thereof
--------------------------------------------
"February 2000 3.00:1.00
March 2000 3.00:1.00"
--------------------------------------------
with the following
--------------------------------------------
"February 2000 3.10:1.00
March 2000 3.55:1.00"
--------------------------------------------
and (ii) replacing the following language in subsection (ii) thereof
--------------------------------------------
"June 2000 3.00:1.00
September 2000 3.00:1.00"
--------------------------------------------
with the following
--------------------------------------------
"June 2000 3.70:1.00
September 2000 3.70:1.00"
--------------------------------------------
(c) Section 5.04(b) is hereby attended in full to read as follows:
"(b) Fixed Charge Coverage Ratio. Maintain on a Consolidated basis for
----------------------------
itself and its Subsidiaries a Fixed Charge Ratio (i) for each Rolling Period set
forth below of not less than the ratio set forth below for such Rolling Period
determined as of the last of each month ending the following Rolling Periods:
--------------------------------------------
March 2000 1.65:1.00
--------------------------------------------
June 2000 1.55:1.00
--------------------------------------------
September 2000 1.45:1.00
--------------------------------------------
or (ii) thereafter through December 2003, determined as of the last day
of each fiscal quarter ending in such Rolling Period, in each and every
such case, of not less that 1.10:1.00."
2
<PAGE>
(d) Section 5.04(c) is hereby amended by replacing the following
language set out in the table
--------------------------------------------
"June 2000 3.50:1.00
September 2000 3.50:1.00"
--------------------------------------------
with the following
--------------------------------------------
"June 2000 3.00:1.00
September 2000 2.75:1.00"
--------------------------------------------
(e) Section 5.04(d) is hereby amended by replacing the amount
"$32,5000,000 set out in the table with the new amount of "$25,000,000".
(f) Schedule I thereto is replaced in full by Schedule I hereto.
SECTION 2. Conditions of Effectiveness. This Amendment shall become
----------------------------
effective as of the date first above written (the "Effective Date") when, and
only when, the following conditions precedent have been satisfied:
(a) The Agent shall have received on or before the Effective Date, in
form and substance satisfactory to the Agent and in sufficient copies for each
Lender Party:
(i) counterparts of this Amendment executed by the Borrower and
the Required Lenders and each Working Capital Lender or, as to any of the
Lenders, advice satisfactory to the Agent that such Lender has executed this
Amendment;
(ii) the consent attached hereto executed by each Guarantor
(the "Consent");
(iii) a certified copies of (i) the resolutions of the Board of
Directors of (A) the Borrower approving this Amendment and the matters
contemplated hereby, and (B) each Guarantor approving the Consent and the
matters contemplated thereby, and (ii) all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Amendment, the Consent and the matters contemplated hereby and thereby;
(iv) a certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of the officers of such
Persons authorized to sign this Amendment and the Consent and the other
documents to be delivered hereunder; and
3
<PAGE>
(v) a favorable opinion of Morgan, Lewis & Bockius, counsel
for the Borrower, as to the due execution, validity and enforceability
of this Amendment, the Loan Documents (as by this Amendment), and the
Consent and as to such other matters as any Lender through the Agent may
reasonably request.
(b) All governmental and third party consents and approvals necessary in
connection with the transactions contemplated hereby shall have been obtained
(without the imposition of any conditions that are not acceptable not he
Lenders) and shall remain in effect, and no law or regulation shall be
applicable in the reasonable judgement of the Lenders that restrains, prevents
or imposes materially adverse conditions upon the transactions contemplated
herby.
(c) On the Effective Date, the following statements shall be true and
the Agent shall have received a certificate signed by a duly authorized officer
of the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01
of the Credit Agreement ar correct on and as of the Effective Date; and
(ii) no Default exists under the Credit Agreement;
(d) The Borrower shall have paid to the Agent for the account of each
Lender that executes this Amendment an amendment fee equal to 0.25% on the sum
of the Commitments of each such Lender.
(e) The Borrower shall have paid all costs and expenses required under
Section 5 hereof.
This Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 3. Representations and Warranties of the Borrower. The Borrower
-----------------------------------------------
represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction indicated in the recital of
parties to this Amendment.
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Loan Documents, as amended hereby, to which it is or is to be
a party, and the consummation of the transactions contemplated hereby, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action
4
<PAGE>
and do not (i) contravene the Borrower's charter or by-laws, (ii)
violate any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System),
or any order, writ, judgment, injunction, decree, determination or
award, (iii) conflict with or result in the breach of, or constitute a
default under, any contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument binding on or affecting any Loan
Party, any of its Subsidiaries or any of their properties or (iv) except
for the Liens created under Loan Documents, result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery or
performance by the Borrower of this Amendment or any of the Loan
Documents, as amended hereby, to which it is or is to be a party.
(d) This Amendment has been duly executed and delivered by the
Borrower. This amendment and each of the other Loan Documents, as
amended hereby, to which the Borrower is a party are legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
(e) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) could be reasonably
likely to have a Material Adverse Effect (other than as set forth on
Schedule 4.01(j) to the Credit Agreement) or (ii) purports to affect the
legality, validity or enforceability of this Amendment or any of the
other Loan Documents, as amended hereby, or the consummation of any of
the transactions contemplated hereby.
(f) The representations and warranties contained in each Loan
Document are true and correct on and as of the date of the Amendment,
other than any such representations or warranties that, by their terms,
refer to a specific date other than the date of this Amendment, in which
case as of such specific date.
(g) No Defaults exists under the Credit Agreement.
SECTION 4. Reference to and Effect on the Credit Agreement and the Loan
------------------------------------------------------------
Documents. (a) On and after the effectiveness of this Amendment, each reference
- ---------
in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Credit Agreement, and each reference in the Notes
and each of the other Loan Documents to "the Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, as amended by this Amendment.
5
<PAGE>
(b) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 5. Costs and Expenses. The Borrower agrees to pay on demand all
------------------
costs and expenses of the Agent in connection with the preparation, execution,
delivery and administration, modification and amendment of this Amendment and
the other instruments and documents to be delivered hereunder (including,
without limitation, the reasonable fees and expenses of counsel for the Agent)
in accordance with the terms of Section 8.04 of the Credit Agreement.
SECTION 6. Execution in Counterparts. This Amendment may be executed in
-------------------------
any number of counterparts and by different 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 but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
TELESPECTRUM WORLDWIDE, INC.
By
--------------------------
Title:
6
<PAGE>
to prepay Term D Advances owing to Term D Lenders other than to Term D
Lenders that are Declining Lenders and any amounts that would
otherwise have been applied to prepay Term D Advances owing to Term D
Lenders that are Declining Lenders shall instead be applied ratably to
prepay, first, the remaining Term A Advances, second, the remaining
Term B Advances (other than Term B Advances owing to Term B Lenders
that are Declining Lenders), and third, the remaining Term C Advances
(other than Term C Advances owing to Term C Lenders that are Declining
Lenders), (ii) an amount equal to that portion of the Prepayment
Amount available to prepay Term C Lenders (less any amounts that would
otherwise be payable to Term C Lenders that are Declining Lenders)
shall be applied to prepay Term C Advances owing to Term C Lenders
other than to Term C Lenders that are Declining Lenders and any
amounts that would otherwise have been applied to prepay Term C
Advances owing to Term C Lenders that are Declining Lenders shall
instead be applied ratably to prepay, first, the remaining Term A
Advances, and second, the remaining Term B Advances (other than Term B
Advances owing to Term B Lenders that are Declining Lenders), and
(iii) an amount equal to that portion of the Prepayment Amount
available to prepay Term B Lenders (less any amounts that would
otherwise be payable to Term B Lenders that are Declining Lenders)
shall be applied to prepay Term B Advances owing to Term B Lenders
other than Term B Lenders that are Declining Lenders and any amounts
that would otherwise have been applied to prepay Term B Advances owing
to Term B Lenders that are Declining Lenders shall instead be applied
ratably to prepay the remaining Term A Advances, in the case of each
of clauses (i) and (ii) hereof as provided in Sections 2.06(a) and
(b); provided further that on prepayment in full of Term Advances
owing to Term Lenders other than Declining Lenders, the remainder of
any Prepayment Amount shall be applied ratably to prepay Term Advances
owing to Declining Lenders.
(q) Section 2.08(a) is amended by adding "or unused Revolving Credit
Commitment" after "Unused Working Capital Commitment".
(r) Section 2.15(a) is amended by:
(i) adding ", Term D Note, Revolving Credit Note" after "Term C
Note";
(ii) adding ", the Term D Commitment, the Working Capital
Commitment" after " Term C Commitment'.
(s) Section 2.15(d) is amended by adding ", Term D Notes, Revolving
Credit Notes" after "Term C Notes".
(t) Section 3.02(iii) is amended by adding ", Revolving Credit
Advance" after "Working Capital Advance," and by adding " plus Revolving
Credit Advances" after "Working Capital Advances".
(u) A new Section 3.02(iv) is added as follows:
7
<PAGE>
"(iv) for each Revolving Credit Advance, the aggregate Unused
Working Capital Commitments of the Working Capital Lenders is less
than $1,000,000;".
(v) Section 7.05(a) is amended by adding "and (e) their respective
unused Revolving Credit Commitments" after "(d) their respective Unused
Working Capital Commitments".
(w) Schedule I is replaced in full by Schedule I in the form attached
hereto.
(q) New Exhibits A-5, A-6, B and G are added in the form of each such
Exhibit attached hereto.
SECTION 2. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective as of the date first above written (the "EFFECTIVE DATE") when, and
only when, the following conditions precedent have been satisfied:
(a) The Agent shall have received on or before the Effective Date, in
form and substance satisfactory to the Agent and in sufficient copies for each
Lender Party:
(i) counterparts of this Amendment executed by the Borrower and
the Required Lenders and each Revolving Credit Lender or, as to any of
the Lenders, advice satisfactory to the Agent that such Lender has
executed this Amendment;
(ii) the consent attached hereto executed by each Guarantor (the
"CONSENT");
(iii) certified copies of (i) the resolutions of the Board of
Directors of (A) the Borrower approving this Amendment and the matters
contemplated hereby, and (B) each Guarantor approving the Consent and
the matters contemplated thereby, and (ii) all documents evidencing
other necessary corporate action and governmental approvals, if any,
with respect to this Amendment, the Consent and the matters
contemplated hereby and thereby;
(iv) a certificate of the Secretary or an Assistant Secretary of
each Loan Party certifying the names and true signatures of the
officers of such Persons authorized to sign this Amendment and the
Consent and the other documents to be delivered hereunder; and
(v) a favorable opinion of Morgan, Lewis & Bockius LLP, counsel
for the Borrower, as to the due execution, validity and enforceability
of this Amendment, the Loan Documents (as amended by this Amendment),
and the Consent and as to such other matters as any Lender through the
Agent may reasonably request.
(b) All governmental and third party consents and approvals necessary
in connection with the transactions contemplated hereby shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lenders) and shall remain in effect,
8
<PAGE>
and no law or regulation shall be applicable in the reasonable judgement of the
Lenders that restrains, prevents or imposes materially adverse conditions upon
the transactions contemplated hereby.
(c) On the Effective Date, the following statements shall be true and
the Agent shall have received a certificate signed by a duly authorized officer
of the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01
of the Credit Agreement are correct on and as of the Effective Date;
and
(ii) no Default exists under the Credit Agreement.
(d) The Borrower shall have paid to the Agent for the account of each
Lender that executes this Amendment an amendment fee equal to 0.25% on the sum
of the Commitments of each such Lender.
(e) The Borrower shall have paid all costs and expenses required under
Section 5 hereof.
This Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 3. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction indicated in the
recital of parties to this Amendment.
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Loan Documents, as amended hereby, to which it is or is
to be a party, and the consummation of the transactions contemplated
hereby, are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not (i) contravene the
Borrower's charter or by-laws, (ii) violate any law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of
the Federal Reserve System), or any order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the breach
of, or constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting
any Loan Party, any of its Subsidiaries or any of their properties or (iv)
except for the Liens created under Loan Documents, result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery or performance by
the Borrower of this Amendment or any of the Loan Documents, as amended
hereby, to which it is or is to be a party.
9
<PAGE>
(d) This Amendment has been duly executed and delivered by the
Borrower. This Amendment and each of the other Loan Documents, as amended
hereby, to which the Borrower is a party are legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms.
(e) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any
Environmental Action, pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a Material
Adverse Effect (other than as set forth on Schedule 4.01(j) to the Credit
Agreement) or (ii) purports to affect the legality, validity or
enforceability of this Amendment or any of the other Loan Documents, as
amended hereby, or the consummation of any of the transactions contemplated
hereby.
(f) The representations and warranties contained in each Loan Document
are true and correct on and as of the date of the Amendment, other than any
such representations or warranties that, by their terms, refer to a
specific date other than the date of this Amendment, in which case as of
such specific date.
(g) No Defaults exists under the Credit Agreement.
SECTION 4. Reference to and Effect on the Credit Agreement and the
-------------------------------------------------------
Loan Documents. (a) On and after the effectiveness of this Amendment, each
- --------------
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the Notes and each of the other Loan Documents to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement, as amended by
this Amendment.
(b) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 5. Costs and Expenses. The Borrower agrees to pay on demand
------------------
all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement.
10
<PAGE>
SECTION 6. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different 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 but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TELESPECTRUM WORLDWIDE, INC.
By_____________________
Title:
11
<PAGE>
BANQUE NATIONALE DE PARIS,
as Agent and as Lender
By_____________________
Title:
By_____________________
Title:
BANK OF AMERICA, N.A.
as Administrative Agent and as Lender
By_____________________
Title:
BANKBOSTON, N.A.
By_____________________
Title:
IBJ WHITEHALL BANK & TRUST
COMPANY
By_____________________
Title:
VAN KAMPEN PRIME RATE
INCOME TRUST
By_____________________
Title: Senior Vice President & Director
VAN KAMPEN SENIOR FLOATING
RATE FUND
By_____________________
Title: Senior Vice President & Director
VAN KAMPEN SENIOR
INCOME TRUST
By_____________________
Title: Senior Vice President & Director
WELLS FARGO BANK, N.A.
By_____________________
Title:
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
its agent /manager
By_____________________
Title:
KZH ING-1 LLC
By_____________________
Title:
KZH ING-2 LLC
By_____________________
Title:
KZH ING-3 LLC
By_____________________
Title:
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors LLC,
as Collateral Manager
By_____________________
Title:
ARCHIMEDES FUNDING II, LTD.
By: ING Capital Advisors LLC,
as Collateral Manager
By_____________________
Title:
FIRST DOMINION FUNDING III
By_____________________
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By_____________________
Title:
12
<PAGE>
CONSENT
Dated as of April __, 2000
The undersigned, each Guarantor under either (x) the Guaranty dated as
of June 30, 1999 (the "U.S. Guaranty") in favor of the Secured Parties (as
-------------
defined in the Credit Agreement referred to in the foregoing Amendment) or (y)
the Guaranty dated as of June 30, 1999 (the "Canadian Guaranty" and collectively
-----------------
with the U.S. Guaranty, the "Guaranties") in favor of the Secured Parties (as
----------
defined in the Credit Agreement referred to in the foregoing Amendment), hereby
consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Guaranty to which each
of the undersigned is a party and each of the Collateral Documents is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects, except that, on and after the effectiveness of such Amendment,
each reference in each Guaranty and each of the Collateral Docuemnts to the
"Credit Agreement", "thereunder", "thereof" or words of like import shall mean
and be a reference to the Credit Agreement, as amended by such Amendment, and
(b) the Collateral Documents to which Guarantor is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the Secured Obligations (in each case, as defined therein).
TLSP TRADEMARKS, INC.
By_____________________
Title:
TELESPECTRUM GOVERNMENT
SERVICES, INC.
By_____________________
Title:
CRW FINANCIAL INC.
By_____________________
Title:
TELESPECTRUM WORLDWIDE
(CANADA) INC.
By_____________________
Title:
13
<PAGE>
AMENDMENT NO. 4 TO THE
CREDIT AGREEMENT
Dated as of April 28, 2000
AMENDMENT NO. 4 TO THE CREDIT AGREEMENT among Telespectrum Worldwide,
Inc., a Delaware corporation (the "BORROWER"), the banks, financial institutions
and other institutional lenders parties to the Credit Agreement referred to
below (collectively, the "LENDERS"), Banque Nationale de Paris, as collateral
agent (the "AGENT") and Bank of America, N.A., as administrative agent (the
"ADMINISTRATIVE AGENT") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders, the Agent and the Administrative Agent
have entered into a Credit Agreement dated as of June 30, 1999 ( as amended,
supplemented or otherwise modified through the date hereof, the "CREDIT
AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement.
(2) The Borrower, the Required Lenders and all the Revolving Credit
Lenders (as defined below) have agreed to amend the Credit Agreement as
hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit Agreement is,
------------------------------
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2, hereby amended as follows:
(a) The following definitions in Section 1.01 are hereby amended as
follows:
(i) in the definition of "ADVANCE" add "a Term D Advance, a
Revolving Credit Advance," after "a Term C Advance,";
(ii) in the definition of "APPLICABLE MARGIN" (A) add "or Term D
Facility" after "Term A Facility", and (B) add "or Revolving Credit
Facility" after "Working Capital Facility";
(iii) in the definition of "APPROPRIATE LENDER" add ", Term D
Facility, Revolving Credit Facility" after "Term C Facility";
(iv) in the definition of "BORROWING" add "a Term D Borrowing, a
Revolving Credit Borrowing," after "Term C Borrowing,";
(v) in the definition of "COMMITMENT" add "a Term D Commitment, a
Revolving Credit Commitment," after "Term C Commitment,";
(vi) in the definition of "FACILITY" add "a Term D Facility, a
Revolving Credit Facility," after "Term C Facility,";
1
<PAGE>
(vii) in the definition of "LEVERAGE RATIO" add "and Revolving
Credit Advances" in each place after "Working Capital Advances";
(viii) in the definition of "NOTE" add ", a Term D Note, a
Revolving Credit Note" after "Term C Note";
(ix) the definition of "PRO RATA SHARE" is amended in full to
read as follows:
""PRO RATA SHARE" of any amount means, with respect to any
Revolving Credit Lender, Working Capital Lender, Term A Lender, Term B
Lender, Term C Lender or Term D Lender at any time, the product of
such amount times a fraction the numerator of which is the amount of
-----
such Revolving Credit Lender's Revolving Credit Commitment, the
Working Capital Lender's Working Capital Commitment, the Term A
Lender's Term A Commitment, the Term B Lender's Term B Commitment, the
Term C Lender's Term C Commitment or the Term D Lender's Term D
Commitment at such time and the denominator of which is the Revolving
Credit Facility, the Working Capital Facility, the Term A Facility,
the Term B Facility, the Term C Facility or the Term D Facility,
respectively, at such time.";
(x) in the definition of "REQUIRED LENDERS", subsection (c) is
amended in full to read as follows:
"(c) the aggregate unused Commitments under the Term A Facility,
the Term B Facility, the Term C Facility, the Term D Facility and the
Revolving Credit Facility";
(xi) the definition of "TERM ADVANCE" is amended in full to read
as follows:
""TERM ADVANCE" means a Term A Advance, a Term B Advance, a Term
C Advance or a Term D Advance.";
(xii) the definition of "TERM COMMITMENT" is amended in full to
read as follows:
""TERM COMMITMENT" means a Term A Commitment, a Term B
Commitment, a Term C Commitment or a Term D Commitment.";
(xiii) the definition of "TERM LENDER" is amended in full to
read as follows:
""TERM LENDER" means a Term A Lender, a Term B Lender, a Term C
Lender or a Term D Lender.";
(xiv) in the definition of "TERMINATION DATE" add "the Term D
Facility, the Revolving Credit Facility," after "Term A Facility,".
2
<PAGE>
(b) Add the following new definitions in the appropriate alphabetical
order in Section 1.01:
"REVOLVING CREDIT ADVANCE" has the meaning specified in Section
2.01(g).
"REVOLVING CREDIT BORROWING" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders.
"REVOLVING CREDIT COMMITMENT" means, with respect to any
Revolving Credit Lender at any time, the amount set forth opposite
such Lender's name on Schedule I hereto under the caption "Revolving
Credit Commitment" or, if such Lender has entered into one or more
Assignment and Acceptances, set forth for such Lender in the Register
maintained by the Agent pursuant to Section 8.07(d) as such Lender's
"Revolving Credit Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05.
"REVOLVING CREDIT FACILITY" means, at any time, the aggregate
amount of the Revolving Credit Lenders' Revolving Credit Commitments
at such time.
"REVOLVING CREDIT LENDER" means any Lender that has a Revolving
Credit Commitment.
"REVOLVING CREDIT NOTE" means a promissory note of the Borrower
payable to the order of any Revolving Credit Lender, in substantially
the form of Exhibit A-5 hereto, evidencing the aggregate indebtedness
of the Borrower to such Lender resulting from the Working Capital
Advances made by such Lender to the extent required to be issued
pursuant to Section 2.15.
"TERM D ADVANCE" has the meaning specified in Section 2.01(h).
"TERM D BORROWING" means a borrowing consisting of simultaneous
Term D Advances of the same Type made by the Term D Lenders.
"TERM D COMMITMENT" means, with respect to any Term D Lender, the
amount set forth opposite such Lender's name on Schedule I hereto
under the caption "Term D Commitment" or, if such Lender has entered
into one or more Assignments and Acceptances, the aggregate set forth
for such Lender in the Register maintained by the Agent pursuant to
Section 8.07(d) as such Lender's "Term D Commitment".
"TERM D FACILITY" means, at any time, the aggregate amount of the
Term D Lenders' Term D Commitments at such time.
"TERM D LENDER" means any Lender that has a Term D Commitment.
"TERM D NOTE" means a promissory note of the Borrower payable to
the order of any Term D Lender, in substantially the form of Exhibit
A-6 hereto,
3
<PAGE>
evidencing the indebtedness of the Borrower to such Lender resulting
from the Term D Advance made by such Lender to the extent required to
be issued pursuant to Section 2.15.
"TERM FACILITIES" means the Term A Facility, the Term B Facility,
the Term C Facility or the Term D Facility.
(c) A new Section 2.01(g) is added as follows:
"(g) The Revolving Credit Advances. Each Revolving
Credit Lender severally agrees, on the terms and conditions
hereinafter set forth, to make advances (each a "REVOLVING CREDIT
ADVANCE") to the Borrower from time to time on any Business Day during
the period from the date hereof until the Termination Date in an
amount for each such Advance not to exceed such Lender's unused
Revolving Credit Commitment at such time. Each Revolving Credit
Borrowing shall be in an aggregate amount of $500,000 or an integral
multiple of $100,000 in excess thereof and shall consist of Revolving
Credit Advances made simultaneously by the Revolving Credit Lenders
ratably according to their Revolving Credit Commitments. Within the
limits of each Revolving Credit Lender's unused Revolving Credit
Commitment in effect from time to time, the Borrower may borrow under
this Section 2.01(g), prepay pursuant to Section 2.06(a) and reborrow
under this Section 2.01(g)."
(d) A new Section 2.01(h) is added as follows:
"(h) The Term D Advances. Each Term D Lender severally
agrees, on the terms and conditions hereinafter set forth, to make a
single advance (a "TERM D ADVANCE") to the Borrower on the Business
Day that the conditions to effectiveness of Amendment No. 4 to this
Agreement have been met in an amount not to exceed such Lender's Term
D Commitment at such time; provided, that the proceeds thereof shall
immediately be applied to repay Advances under the Working Capital
Facility. The Term D Borrowing shall consist of Term D Advances made
simultaneously by the Term D Lenders ratably according to their Term D
Commitments. Amounts borrowed under this Section 2.01(h) and repaid or
prepaid may not be reborrowed."
(e) Section 2.02(c)(ii) is amended by adding ", the Term C Advances,
the Term D Advances, the Revolving Credit Advances" after "the Term B
Advances".
(f) Section 2.04(a) is amended by:
(i) adding "and Term D Lenders" after "Term C Lenders";
(ii) adding, in each case, "and Term D Advances" after "Term C
Advances";
(iii) adding a new column to read in full as follows:
4
<PAGE>
"Date Term D Loan
- ----- -----------
June 30, 2000 375,000
September 30, 2000 375,000
December 31, 2000 375,000
March 31, 2001 468,750
June 30, 2001 468,750
September 30, 2001 468,750
December 31, 2001 468,750"; and
(iv) adding "and Term D Facility" after "Term C Facility".
(g) A new Section 2.04(e) is added as follows:
"(e) Revolving Credit Advances. The Borrower shall repay
to the Agent for the ratable account of the Revolving Credit Lenders
on the Termination Date the aggregate outstanding principal amount of
the Revolving Credit Advances then outstanding."
(h) A new Section 2.04(f) is added as follows:
"(f) Term D Advances. The Borrower shall repay to the
Agent for the ratable account of the Term D Lenders on the
Termination Date the aggregate outstanding principal amount of the
Term D Advances then outstanding."
(i) Section 2.05(a) is amended by adding "the Term D Commitments, the
Revolving Credit Commitments," after "the Term C Commitments,".
(j) A new Section 2.05(b)(vi) is added as follows:
"(vi) The Revolving Credit Facility shall be
automatically and permanently reduced on each date on which prepayment
thereof is required to be made pursuant to Section 2.06(b)(i) or (ii)
in an amount equal to amount remaining (if any) after the prepayment
in full of Revolving Credit Advances. "
(k) A new Section 2.05(b)(vii) is added as follows:
"(vii) On the date of the Term D Borrowing, after giving effect
to such Term D Borrowing, and from time to time thereafter upon each
repayment or prepayment of the Term D Advances, the aggregate Term D
Commitments of the Term D Lenders shall be automatically and
permanently reduced, on a pro rata basis, by an amount equal to the
amount by which the aggregate Term D Commitments immediately prior to
such reduction exceed the aggregate unpaid principal amount of the
Term D Advances then outstanding."
(l) Section 2.06(a) is amended by adding "or Revolving Credit Advance"
after "Working Capital Advance".
5
<PAGE>
(m) Sections 2.06(b)(i) and 2.06(b)(ii) are each amended by adding at
the end of the clause beginning with the word "second" the following "and
-------
the Revolving Credit Facility as set forth in clause (viii) below".
(n) Section 2.06(b)(iii) is amended in full as follows:
"(iii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of Revolving Credit Advances comprising
part of the same Borrowings or, if none are then outstanding, the
Working Capital Advances comprising part of the same Borrowings, the
Swing Line Advances and the Letter of Credit Advances equal to the
amount by which (A) the sum of the aggregate principal amount of (x)
the Working Capital Advances and Revolving Credit Advances, (y) the
Swing Line Advances and (z) the Letter of Credit Advances then
outstanding plus the aggregate Available Amount of all Letters of
Credit then outstanding exceeds (B) the lesser of (1) the sum of the
Working Capital Facility and the Revolving Credit Facility and (2) the
Loan Value of Eligible Receivables on such Business Day (as determined
based on the most recent Borrowing Base Certificate delivered to the
Lender Parties hereunder)."
(o) A new Section 2.06(b)(viii) is added as follows:
"(viii) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of Revolving Credit Advances comprising
part of the same Borrowings equal to the amount by which Revolving
Credit Advances exceed $1,000,000 if such amount, or any greater
amount, is available to be drawn under the Working Capital Facility."
(p) Section 2.06(c) is amended in full as follows:
"(c) Term B, Term C and Term D Opt-out. With respect to any
---------------------------------
prepayment of the Term Advances, the Agent shall ratably pay the Term
A Lenders, the Term B Lenders, the Term C Lenders and the Term D
Lenders; provided, however, that any Term B Lender, Term C Lender or
Term D Lender, at its option, to the extent that, in the case of such
a Term B Lender any Term A Advances or, in the case of such a Term C
Lender, any Term B Advances, or, in the case of such a Term D Lender,
any Term C Advances, are then outstanding, may elect not to accept
such prepayment (any such Lender being a "DECLINING LENDER"), in which
event the provisions of the next sentence shall apply. Any Term B
Lender, Term C Lender or Term D Lender may elect not to accept its
ratable share of the prepayment referred to in any Prepayment Notice
by giving written notice to the Agent not later than 11:00 A.M. (New
York City time) on the Business Day immediately preceding the
scheduled Prepayment Date. On the Prepayment Date, (i) an amount
equal to that portion of the Prepayment Amount available to prepay
Term D Lenders (less any amounts that would otherwise be payable to
Term D Lenders that are Declining Lenders) shall be applied
6
<PAGE>
to prepay Term D Advances owing to Term D Lenders other than to Term D
Lenders that are Declining Lenders and any amounts that would
otherwise have been applied to prepay Term D Advances owing to Term D
Lenders that are Declining Lenders shall instead be applied ratably to
prepay, first, the remaining Term A Advances, second, the remaining
Term B Advances (other than Term B Advances owing to Term B Lenders
that are Declining Lenders), and third, the remaining Term C Advances
(other than Term C Advances owing to Term C Lenders that are Declining
Lenders), (ii) an amount equal to that portion of the Prepayment
Amount available to prepay Term C Lenders (less any amounts that would
otherwise be payable to Term C Lenders that are Declining Lenders)
shall be applied to prepay Term C Advances owing to Term C Lenders
other than to Term C Lenders that are Declining Lenders and any
amounts that would otherwise have been applied to prepay Term C
Advances owing to Term C Lenders that are Declining Lenders shall
instead be applied ratably to prepay, first, the remaining Term A
Advances, and second, the remaining Term B Advances (other than Term B
Advances owing to Term B Lenders that are Declining Lenders), and
(iii) an amount equal to that portion of the Prepayment Amount
available to prepay Term B Lenders (less any amounts that would
otherwise be payable to Term B Lenders that are Declining Lenders)
shall be applied to prepay Term B Advances owing to Term B Lenders
other than Term B Lenders that are Declining Lenders and any amounts
that would otherwise have been applied to prepay Term B Advances owing
to Term B Lenders that are Declining Lenders shall instead be applied
ratably to prepay the remaining Term A Advances, in the case of each
of clauses (i) and (ii) hereof as provided in Sections 2.06(a) and
(b); provided further that on prepayment in full of Term Advances
owing to Term Lenders other than Declining Lenders, the remainder of
any Prepayment Amount shall be applied ratably to prepay Term Advances
owing to Declining Lenders.
(q) Section 2.08(a) is amended by adding "or unused Revolving Credit
Commitment" after "Unused Working Capital Commitment".
(r) Section 2.15(a) is amended by:
(i) adding ", Term D Note, Revolving Credit Note" after "Term C
Note";
(ii) adding ", the Term D Commitment, the Working Capital
Commitment" after " Term C Commitment'.
(s) Section 2.15(d) is amended by adding ", Term D Notes, Revolving
Credit Notes" after "Term C Notes".
(t) Section 3.02(iii) is amended by adding ", Revolving Credit
Advance" after "Working Capital Advance," and by adding " plus Revolving
Credit Advances" after "Working Capital Advances".
(u) A new Section 3.02(iv) is added as follows:
7
<PAGE>
"(iv) for each Revolving Credit Advance, the aggregate Unused
Working Capital Commitments of the Working Capital Lenders is less
than $1,000,000;".
(v) Section 7.05(a) is amended by adding "and (e) their respective
unused Revolving Credit Commitments" after "(d) their respective Unused
Working Capital Commitments".
(w) Schedule I is replaced in full by Schedule I in the form attached
hereto.
(q) New Exhibits A-5, A-6, B and G are added in the form of each such
Exhibit attached hereto.
SECTION 2. Conditions of Effectiveness. This Amendment shall become
---------------------------
effective as of the date first above written (the "EFFECTIVE DATE") when, and
only when, the following conditions precedent have been satisfied:
(a) The Agent shall have received on or before the Effective Date, in
form and substance satisfactory to the Agent and in sufficient copies for each
Lender Party:
(i) counterparts of this Amendment executed by the Borrower and
the Required Lenders and each Revolving Credit Lender or, as to any of
the Lenders, advice satisfactory to the Agent that such Lender has
executed this Amendment;
(ii) the consent attached hereto executed by each Guarantor (the
"CONSENT");
(iii) certified copies of (i) the resolutions of the Board of
Directors of (A) the Borrower approving this Amendment and the matters
contemplated hereby, and (B) each Guarantor approving the Consent and
the matters contemplated thereby, and (ii) all documents evidencing
other necessary corporate action and governmental approvals, if any,
with respect to this Amendment, the Consent and the matters
contemplated hereby and thereby;
(iv) a certificate of the Secretary or an Assistant Secretary of
each Loan Party certifying the names and true signatures of the
officers of such Persons authorized to sign this Amendment and the
Consent and the other documents to be delivered hereunder; and
(v) a favorable opinion of Morgan, Lewis & Bockius LLP, counsel
for the Borrower, as to the due execution, validity and enforceability
of this Amendment, the Loan Documents (as amended by this Amendment),
and the Consent and as to such other matters as any Lender through the
Agent may reasonably request.
(b) All governmental and third party consents and approvals necessary
in connection with the transactions contemplated hereby shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Lenders) and shall remain in effect,
8
<PAGE>
and no law or regulation shall be applicable in the reasonable judgement of the
Lenders that restrains, prevents or imposes materially adverse conditions upon
the transactions contemplated hereby.
(c) On the Effective Date, the following statements shall be true and
the Agent shall have received a certificate signed by a duly authorized officer
of the Borrower, dated the Effective Date, stating that:
(i) the representations and warranties contained in Section 4.01
of the Credit Agreement are correct on and as of the Effective Date;
and
(ii) no Default exists under the Credit Agreement.
(d) The Borrower shall have paid to the Agent for the account of each
Lender that executes this Amendment an amendment fee equal to 0.25% on the sum
of the Commitments of each such Lender.
(e) The Borrower shall have paid all costs and expenses required under
Section 5 hereof.
This Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 3. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction indicated in the
recital of parties to this Amendment.
(b) The execution, delivery and performance by the Borrower of this
Amendment and the Loan Documents, as amended hereby, to which it is or is
to be a party, and the consummation of the transactions contemplated
hereby, are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not (i) contravene the
Borrower's charter or by-laws, (ii) violate any law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of
the Federal Reserve System), or any order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result in the breach
of, or constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or affecting
any Loan Party, any of its Subsidiaries or any of their properties or (iv)
except for the Liens created under Loan Documents, result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery or performance by
the Borrower of this Amendment or any of the Loan Documents, as amended
hereby, to which it is or is to be a party.
9
<PAGE>
(d) This Amendment has been duly executed and delivered by the
Borrower. This Amendment and each of the other Loan Documents, as amended
hereby, to which the Borrower is a party are legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms.
(e) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any
Environmental Action, pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a Material
Adverse Effect (other than as set forth on Schedule 4.01(j) to the Credit
Agreement) or (ii) purports to affect the legality, validity or
enforceability of this Amendment or any of the other Loan Documents, as
amended hereby, or the consummation of any of the transactions contemplated
hereby.
(f) The representations and warranties contained in each Loan Document
are true and correct on and as of the date of the Amendment, other than any
such representations or warranties that, by their terms, refer to a
specific date other than the date of this Amendment, in which case as of
such specific date.
(g) No Defaults exists under the Credit Agreement.
SECTION 4. Reference to and Effect on the Credit Agreement and the
-------------------------------------------------------
Loan Documents. (a) On and after the effectiveness of this Amendment, each
- --------------
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit Agreement, and each reference in
the Notes and each of the other Loan Documents to "the Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement, shall mean and be a reference to the Credit Agreement, as amended by
this Amendment.
(b) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment, are and shall continue to
be in full force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
SECTION 5. Costs and Expenses. The Borrower agrees to pay on demand
------------------
all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent) in accordance with the terms of Section 8.04 of the Credit Agreement.
10
<PAGE>
SECTION 6. Execution in Counterparts. This Amendment may be executed
-------------------------
in any number of counterparts and by different 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 but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TELESPECTRUM WORLDWIDE, INC.
By_____________________
Title:
11
<PAGE>
BANQUE NATIONALE DE PARIS,
as Agent and as Lender
By_____________________
Title:
By_____________________
Title:
BANK OF AMERICA, N.A.
as Administrative Agent and as Lender
By_____________________
Title:
BANKBOSTON, N.A.
By_____________________
Title:
IBJ WHITEHALL BANK & TRUST
COMPANY
By_____________________
Title:
VAN KAMPEN PRIME RATE
INCOME TRUST
By_____________________
Title: Senior Vice President & Director
VAN KAMPEN SENIOR FLOATING
RATE FUND
By_____________________
Title: Senior Vice President & Director
VAN KAMPEN SENIOR
INCOME TRUST
By_____________________
Title: Senior Vice President & Director
WELLS FARGO BANK, N.A.
By_____________________
Title:
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.,
its agent /manager
By_____________________
Title:
KZH ING-1 LLC
By_____________________
Title:
KZH ING-2 LLC
By_____________________
Title:
KZH ING-3 LLC
By_____________________
Title:
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors LLC,
as Collateral Manager
By_____________________
Title:
ARCHIMEDES FUNDING II, LTD.
By: ING Capital Advisors LLC,
as Collateral Manager
By_____________________
Title:
FIRST DOMINION FUNDING III
By_____________________
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By_____________________
Title:
12
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 71,626
<ALLOWANCES> (2,511)
<INVENTORY> 0
<CURRENT-ASSETS> 75,661
<PP&E> 94,157
<DEPRECIATION> (32,558)
<TOTAL-ASSETS> 322,209
<CURRENT-LIABILITIES> 59,917
<BONDS> 119,689
0
0
<COMMON> 397
<OTHER-SE> 135,191
<TOTAL-LIABILITY-AND-EQUITY> 322,209
<SALES> 78,680
<TOTAL-REVENUES> 78,680
<CGS> 61,229
<TOTAL-COSTS> 79,102
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,487
<INCOME-PRETAX> (3,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,909)
<EPS-BASIC> (.12)
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