SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 13, 1996
CRW Financial, Inc.
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(Exact Name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-26015 23-2691986
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
</TABLE>
443 South Gulph Road, King of Prussia, Pennsylvania 19406
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 962-5100
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(Former name or former address, if changed since last report)
Item 5. Other Events
On August 13, 1996, TeleSpectrum Worldwide, Inc. ("TeleSpectrum")
completed an initial public offering of 10,656,000 shares of its common stock,
par value $.01 per share (the "Common Stock"), at a public offering price of $15
per share (the "IPO"). CRW Financial, Inc. ("CRW") currently owns 8,510,137
shares of TeleSpectrum Common Stock, subject to reduction upon the exercise of
certain Lender Warrants, Waiver Warrant and Management Warrants described below.
The underwriters for the IPO have been granted an over-allotment option to
purchase up to an additional 1,598,400 shares of TeleSpectrum shares of Common
Stock at the initial public offering price. TeleSpectrum intends to employ net
proceeds from the IPO to acquire, repay certain indebtedness of and to purchase
capital equipment for six businesses involved in various aspects of the
teleservices, market research and direct mail and fulfillment industries (the
"Acquired Businesses"), as well as for working capital and general corporate
purposes of TeleSpectrum and the Acquired Businesses.
Prior to the IPO, CRW caused the formation of TeleSpectrum and received
8,510,137 shares of TeleSpectrum's Common Stock in consideration of a capital
contribution to TeleSpectrum of $1.6 million in cash and the assignment to
TeleSpectrum of a promissory note in the amount of $500,000 from one of the
Acquired Businesses. The capital contribution represented proceeds of borrowings
by CRW under subordinated notes (the "Subordinated Notes") issued to eight
individuals, one partnership and one corporation (the "Lenders") on May 22,
1996. The capital contribution was used by TeleSpectrum for professional and
other costs associated with the IPO. Amounts outstanding under the Subordinated
Notes bear interest at 12% per annum. Principal and interest under the
Subordinated Notes are due and payable in full immediately upon repayment in
full by CRW of all amounts owing to Mellon Bank, N.A. ("Mellon"), CRW's primary
lender, or in quarterly installments of 12.5% of the principal amount plus
accrued but unpaid interest beginning January 1, 1997 if the repayment of all
amounts owing to Mellon has not been effected on or before any such quarterly
repayment date.
As part of the consideration for the Subordinated Notes, CRW issued to
the Lenders warrants (the "Lender Warrants") to purchase a total of 1,433,454
shares of TeleSpectrum's Common Stock held by CRW. The Lender Warrants are
exercisable at any time during a 10 year term at a price of $1.50 per share. In
connection with TeleSpectrum's initial capitalization by CRW, TeleSpectrum
granted the Lenders the right to have TeleSpectrum shares of Common Stock
subject to the Lender Warrants registered under the Securities Act of 1933, as
amended (the "Securities Act") along with the registration of any other shares
of TeleSpectrum Common Stock and also the right to certain demand registrations
subject to the Lenders' agreement not to sell any Common Stock underlying the
Lender Warrants during the 180 days after consummation of the IPO by
TeleSpectrum. The Lenders who represent officers, directors, employees or
significant stockholders of CRW, their respective relationships with CRW and
TeleSpectrum and their respective loan and share amounts are as follows:
<PAGE>
<TABLE>
<CAPTION>
Subordinated TeleSpectrum Shares of Common
Lender Notes Amount Stock Subject to Lender Warrants
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<S> <C> <C>
Technology Leaders II, L.P. $362,250 247,270
Stockholder of CRW
TL Ventures Third Corp. 287,750 196,423
Stockholder of CRW
J. Brian O'Neill 650,000 443,693
Chairman and CEO of CRW
and TeleSpectrum
Michael C. Boyd 200,000 136,514
President and Chief Operating
Officer of TeleSpectrum
Richard C. Schwenk, Jr. 200,000 136,514
Senior Vice President and Chief
Financial Officer of TeleSpectrum
Bernard Morgan 100,000 68,250
Director of CRW
Robert N. Verratti 100,000 68,250
Director of CRW
Arthur R. Spector 100,000 68,250
Consultant to CRW
Jonathan P. Robinson 50,000 34,145
CFO of CRW and Director
of Acquisitions of TeleSpectrum
Kevin E. Mullin 50,000 34,145
Director of Acquisitions
of CRW
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$2,100,000 1,433,454
========== =========
</TABLE>
In consideration of the grant by Mellon of a waiver of a restrictive
covenant in the agreement covering CRW's loan facility with Mellon, which waiver
permitted CRW to issue the Notes and effect the initial capitalization of
TeleSpectrum, CRW granted APT Holdings Corporation, an affiliate of Mellon, a
warrant to purchase 75,445 shares of TeleSpectrum Common Stock held by CRW (the
"Waiver Warrant"). This Waiver Warrant is exercisable at any time during a 10
year term at a price of $1.50 per share.
CRW also granted warrants (the "Management Warrants") to four
individuals related to CRW (the "Managers") in consideration for the performance
of their services on behalf of CRW in connection with TeleSpectrum's IPO and the
acquisition of the Acquired Businesses. The Management Warrants entitle the
Managers to purchase a total of 839,108 shares of Telespectrum Common Stock held
by CRW and are exercisable immediately for a 10 year term at a price of $1.50
per share. TeleSpectrum has granted the Managers the right to have the Common
Stock subject to the Management Warrants registered under the Securities Act
along with the registration of any other shares of TeleSpectrum Common Stock and
also the right to
<PAGE>
certain demand registrations, subject to the agreement by the Managers
not to sell any Common Stock underlying the Management Warrants during the 180
days after consummation of the IPO by TeleSpectrum. The Managers (whose
relationships to CRW and TeleSpectrum are set forth in the table above) and the
respective share amounts subject to their Management Warrants are as follows: J.
Brian O'Neill - 610,160 shares; Arthur R. Spector - 76,316 shares; Jonathan P.
Robinson - 76,316 shares; and Kevin E. Mullin - 76,316 shares. CRW obtained an
appraisal which indicated that the Management Warrants had a fair value of $0.75
per warrant on the date of grant. Accordingly, CRW recorded a non-cash
compensation charge of $629,000 as of such date of grant.
If all of the Lender Warrants, Waiver Warrant and Management Warrants
are exercised, CRW will receive approximately $3,500,000 in cash and would own
6,162,130 shares of TeleSpectrum.
J. Brian O'Neill has agreed to serve as Chairman of the Board and Chief
Executive Officer of TeleSpectrum, in addition to his duties as Chairman of the
Board and Chief Executive Officer of CRW. TeleSpectrum and Mr. O'Neill have
entered into an Employment Agreement which provides that he will be employed by
TeleSpectrum through May 20, 2000. Jonathan P. Robinson, the Chief Financial
Officer of CRW, serves as Director of Acquisitions of TeleSpectrum.
On August 13, 1996, CRW terminated the operations of the market
research business ("CRWMR") it has conducted since January 1996, and made the
employees of CRWMR available to be hired by TeleSpectrum or TeleSpectrum's
market research division on or after the closing of the acquisitions of the
Acquired Businesses. Neither TeleSpectrum nor its market research division,
however, have any obligation to hire any former CRWMR employees. CRW is
retaining the accounts receivable and all accounts payable and other obligations
associated with the CRWMR business.
TeleSpectrum subleases an aggregate of approximately 3,000 square feet
of office space in King of Prussia, Pennsylvania from CRW. The space is used by
TeleSpectrum as its headquarters and comprises approximately 14.2% of the space
formerly occupied by CRW at this location. CRW leases this space from CRW
Building Limited Partnership, which is controlled by J. Brian O'Neill. The
sublease commenced on May 9, 1996, and expires on September 30, 2004. Under the
sublease, TeleSpectrum performs and pays 14.2% all obligations of CRW under its
lease with CRW Building Limited Partnership. Monthly base rent payments under
the sublease are approximately $4,100.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRW FINANCIAL, INC.
By:______________________________________
Jonathan P. Robinson
Vice President and Chief
Financial Officer
Date: August 21, 1996
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
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<S> <C> <C>
99.1 Form of Subordinated Note 7
99.2 Form of Management and Lender Warrants 10
</TABLE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH NOTE UNDER THE 1933 ACT, UNLESS, IN THE
OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO THE MAKER)
OF COUNSEL SATISFACTORY TO THE MAKER, SUCH REGISTRATION IS NOT REQUIRED.
CRW FINANCIAL, INC.
Subordinated Promissory Note
Philadelphia, Pennsylvania
May 16, 1996
FOR VALUE RECEIVED, CRW Financial, Inc., a Delaware corporation
("Maker"), hereby promises to pay to _________________, ("Payee"), at
__________________ or such other place as Payee may from time to time designate
in writing, the Principal Amount (as defined herein) together with interest
thereon from the Closing Date, at the rate of 12% per annum, all as provided
herein. All interest hereunder shall be computed on the basis of a 365 day year.
A. GENERAL TERMS
1. Definitions.
For purposes hereof:
"Common Stock" shall mean the common stock, par value $.01 per share,
of CRW Acquisition Corp. ("CRW").
"Notes" shall mean the notes (including this Note) issued by the Maker
on the date hereof in the aggregate amount of $2,100,000.
"Overalotment Sale" shall mean the sale, if any, of Common Stock by the
Maker pursuant to the overalotment option granted by the underwriters of the
registered initial public offering by CRW of the Common Stock.
"Principal Amount" shall be ____________ Dollars.
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"Pro-Rata Amount" shall mean the amount equal to product of (x) the net
proceeds received by the Maker from the Overalotment Sale and (y) _____
[fraction will be the Principal Amount divided by $2.1MM].
"Security Agreement" means the Security Agreement between Maker and the
Payee, dated the date hereof.
"Senior Event of Default" shall mean an occurrence of a default under
the terms of any Senior Indebtedness, which default shall not have been cured or
waived or shall not have ceased to exist.
"Senior Indebtedness" means all obligations of any type or nature,
currently owing or hereafter created by the Maker for money borrowed from any
bank or other institutional financing organization, including obligations
pursuant to any modification, refinancing or extension thereof, and all
principal, interest, premiums, charges, and other sums related to any of such
obligations. or the guarantee of any of such obligations; provided, however,
that Senior Indebtedness shall not include any obligations to an Affiliate.
"Subordinated Creditor" means the holder of this Note, including
the Payee.
"Subordinated Indebtedness" means all obligations of any type or nature
currently owing or hereafter due from the Maker under this Note, together will
all interest and other charges or expenses incidental thereto.
2. Payment of Principal and Interest.
(a) The unpaid Principal Amount of this Note and the unpaid interest
accrued thereon shall be due and payable as follows:
(i) In whole upon the closing of the Overalotment Sale if the
net proceeds received by the Maker from the Overalotment Sale equal or exceed
the sum of $2,100,000 plus all accrued and unpaid interest on all of the Notes
through the date of the consummation of the Overalotment Sale;
(ii) The Pro-Rata Amount upon the closing of the Overalotment
Sale if the net proceeds received by the Maker from the Overalotment Sale is
less than the sum of (x) $2,100,000 and (y) the accrued and unpaid interest on
all of the Notes through the date of the consummation of the Overalotment Sale;
and the balance of the Principal Amount in quarterly installments as nearly
equal as possible together with accrued interest beginning on January 1, 1997
(and on each April 1, July 1, October and January 1 thereafter through October
1, 1998);
(iii) In quarterly installments of 12.5% of the Principal
Amount each plus all accrued and unpaid interest hereunder beginning on January
1, 1997 (and on each April 1, July 1, October and January 1 thereafter through
October 1, 1998) if the Overalotment Sale has not been
2
<PAGE>
consummated on or before that date.
(b) All sums payable hereunder shall be payable in lawful money of the
United States of America and shall be applied first to accrued and unpaid
interest and then in reduction of the Principal Amount. Subject to Section 6
hereto, this Note may be prepaid at any time after the first scheduled payment
of the Principal Amount without payment of premium or penalty, upon 10 days'
prior written notice to Payee.
3. Presentment.
(a) Maker hereby waives diligence, demand, presentment for payment,
protest and notice of protest, notice of acceleration, and all other notices or
demands of any kind except as expressly provided herein.
(b) Maker may treat Payee as the holder and owner of this Note
(notwithstanding any notations of ownership or writing hereon made by anyone
other than Maker) for all purposes and shall not be affected by any notice to
the contrary, until presentation of this Note to Maker for registration of
transfer.
(c) By acceptance of this Note, Payee agrees that prior to any transfer
of this Note or any transfer of the related shares issued upon conversion
hereof, such holder will give written notice to Maker, together with a copy of
the opinion of such holder's counsel as to the non-necessity for registration
under all applicable securities laws in connection with any such transfer (which
opinion shall be reasonably satisfactory to counsel for Maker).
4. Default.
(a) If any one or more of the following events shall occur and
be continuing:
(i) default shall be made in any scheduled payment of the
Principal Amount or accrued interest when and as the same shall become
due and payable, either at maturity or at a date fixed for prepayment
or by acceleration or otherwise; or
(ii) Maker shall (A) apply for or consent to the appointment
of a receiver, trustee or liquidator of Maker or any of its property,
(B) admit in writing its inability to pay its debts as they mature, (C)
make a general assignment for the benefit of creditors, (D) commence a
voluntary case under the federal bankruptcy laws or file a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any other bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or
file an answer admitting the material allegations of a petition filed
against it in any proceeding under any such law, or (E) take corporate
action for the purpose of effecting any of the foregoing; or an order,
judgment or decree shall be entered, without the application, approval
or consent of the Maker, by any court of competent jurisdiction,
approving a petition seeking
3
<PAGE>
reorganization of Maker or of all or a substantial part of the assets
of Maker and such order, judgment or decree shall continue unstayed and
in effect for a period of 60 days;
then Payee may by notice in writing to the Maker declare the unpaid principal of
this Note, with accrued interest, to be forthwith due and payable.
Maker shall also be obligated to pay, as part of the indebtedness
evidenced by this Note, all costs of collection, whether or not a suit is
brought, including any reasonable attorneys' fees that may be incurred in the
collection or enforcement hereof.
5. No Comparable Obligations. Maker shall not take any steps to create
or encourage the making of a market in this Note, to register this Note or
otherwise to render this Note readily tradable in an established securities
market. Maker represents and warrants to Payee that it has not issued any other
obligations which are of a comparable character to this Note and which are
readily tradable on an established securities market.
6. Subordination.
(a) Any right of the Payee, its representatives, successors or assigns,
to payment under or in respect of the Subordinated Indebtedness is hereby
expressly subordinated, to the extent and in the manner set forth in the
Subordination Agreement dated the date hereof by and among Payee, Maker and
Mellon Bank N.A. attached hereto as Exhibit A.
B. OTHER
1. Notice. All notices that are required or permitted hereunder shall
be in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto given in accordance with the foregoing notice procedures:
If to Maker:
CRW Financial, Inc.
443 S. Gulph Road
King of Prussia, PA 19406
FAX: 610-962-5109
Attention: Chief Financial Officer
with a required copy to:
4
<PAGE>
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attention: Stephen M. Goodman, Esquire
If to Payee:
with a required copy to:
2. Governing Law. This Note shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, this Note has been executed as of the date first
written above.
CRW FINANCIAL, INC.
By:
-------------------------------------
Name:
-------------------------------------
Title:
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5
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW.
Warrant to Purchase
________ Shares of Common Stock
Dated as of May 22, 1996
WARRANT
TO PURCHASE COMMON STOCK OF
TELESPECTRUM WORLDWIDE INC.
THIS CERTIFIES that _______________ (the "Holder") is entitled to
purchase from CRW Financial, Inc. (herein called "CRW"), a corporation organized
and existing under the laws of Delaware, at any time, and from time to time,
after the date hereof and until 5:00 P.M. (Eastern Time) on the tenth
anniversary hereof, ________ shares (the "Warrant Shares") of common stock, $.01
par value per share (the "Common Stock"), of TeleSpectrum Worldwide, Inc., a
Delaware corporation (the "Company"), subject to adjustment as provided herein,
at a purchase price of $1.50 per share (the "Warrant Price").
1. Definitions. As used in this Warrant, the following terms have the
respective meanings set forth below:
"Appraised Value" means, in respect of any share of Common Stock on any
date herein specified, the value attributable to such share of Common Stock if
all of the assets of the Company and its subsidiaries were sold for the
appraised value thereof as of the last day of a fiscal month to end within 60
days prior to such date specified, and thereafter liquidated in accordance with
the terms of the Company's Certificate of Incorporation, as determined in good
faith by the Board of Directors of the Company.
"Book Value" means, in respect of any share of Common Stock on any date
herein specified, the value attributable to such share of Common Stock if all of
the assets of the Company and its subsidiaries were sold for the consolidated
book value thereof as of the last day of any month immediately preceding such
date, and thereafter liquidated in accordance with the Company's Certificate of
Incorporation, as determined in accordance with generally accepted accounting
principles in the United States.
<PAGE>
"Business Day" means any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Current Market Price" means, in respect of the Common Stock on any
date herein specified, the higher of (a) the Book Value per share of Common
Stock at such date and (b) the Appraised Value per share of Common Stock as at
such date, or if there shall then be a public market for the Stock, the higher
of (x) the amount set forth in clause (a) above and (y) the average of the daily
market prices for 30 consecutive Business Days commencing 45 days before such
date. The daily market price for each such Business Day shall be (i) the last
sale price on such date on the principal stock exchange on which the Common
Stock is then listed or admitted to trading, (ii) if no sale takes place on such
day on any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange, (iii) if the
Common Stock is not then listed or admitted to trading on any stock exchange,
the average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association of Securities
Dealers Automatic Quotation System or the national Quotation Bureau, Inc.,
(iv) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (v) if there is no such firm, as furnished by any member of the
National Association of Securities Dealers, Inc. ("NASD") selected by the
Company.
"Expiration Date" means the date which is the tenth anniversary of the
date of this Warrant.
"Outstanding" means, when used with reference to Common Stock or any
class thereof, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock or of the relevant class, except
shares then owned or held by or for the account of the Company or any subsidiary
thereof, and shall include all shares issuable in respect of outstanding scrip
or any certificates representing fractional interests in shares of Common Stock
or of the relevant class.
"Registrable Securities" means (i) the shares of Common Stock of the
Company issued upon the exercise of this Warrant and (ii) any securities issued
or to be issued with respect to such securities by way of a stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when they
have been (A) effectively registered under the 1933 Act and disposed of in
accordance with the registration statement covering them, or (B) transferred
pursuant to Rule 144 promulgated under such Act (or any similar provision then
in force).
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Warrant, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges or electronic
quotation systems on which similar securities issued or proposed to be issued by
the Company are then listed, and fees and disbursements of counsel for the
Company and of all independent certified
2
<PAGE>
public accountants, underwriters (other than underwriting commissions) and other
persons retained by the Company.
"Selling Stockholders" means registered holders of Registrable
Securities who request inclusion of all or a portion of their shares of
Registrable Securities in a Piggyback Registration pursuant to Section 11
hereof.
2. Exercise of Warrant. This Warrant shall be exercisable at any time,
and from time to time, after the Closing Date until the expiration of the
Warrant as provided in Section 3 hereof, in the manner set forth in Section 4
hereof.
3. Expiration of Warrant. This Warrant, to the extent not exercised,
shall expire and cease to be of force and effect at 5:00 P.M. (Eastern Time) on
the Expiration Date.
4. Method of Exercise. This Warrant may be exercised in whole or in
part (but not as to fractional shares) by the surrender of the Warrant, with the
Purchase Agreement attached hereto as Annex A properly completed and duly
executed, at the principal office of CRW at 443 S. Gulph Road, King of Prussia,
Pennsylvania 19406, or such other location which at that time shall be the
principal office of CRW (the "Principal Office"), and upon payment to it of the
Warrant Price for each Warrant Share to be purchased upon such exercise (the
aggregate of the Warrant Price for all shares to be exercised being referred to
herein as the "Purchase Price"). The Purchase Price shall be paid by delivering
either: (i) a certified check, bank draft or wire transfer of immediately
available funds to the order of CRW or (ii) this Warrant with instructions that
such number of Warrant Shares be retained by CRW as payment of the Purchase
Price (a "Cashless Exercise"). In the event of a Cashless Exercise, the Holder
shall receive that number of Warrant Shares determined by multiplying the number
of Warrant Shares for which the Cashless Exercise is made by a fraction, the
numerator of which shall be the difference between the then Current Market Price
per Warrant Share and the Warrant Price, and the denominator of which shall be
the then Current Market Price per share of Common Stock. The remaining Warrant
Shares for which Cashless Exercise has been made shall be deemed to have been
paid to CRW as the Purchase Price. The Holder shall be treated for all purposes
as the holder of the Warrant Shares as of the close of business on the date of
exercise, and certificates for the Warrant Shares so purchased shall be
delivered to the person so entitled, properly endorsed for transfer or
accompanied by appropriate stock powers, within a reasonable time, not exceeding
five days, after such exercise. Unless this Warrant shall have expired, a new
Warrant of like tenor and for such number of Warrant Shares as the Holder shall
direct, representing in the aggregate the right to purchase that number of
Warrant Shares with respect to which this Warrant shall not have been exercised,
shall also be issued to the Holder within such time.
5. Certain Covenants.
(a) The Company shall cause all Warrant Shares to be listed on
each national securities exchange or securities quotation system, if any, on
which the other outstanding shares of Common Stock of the Company are then
listed or quoted.
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<PAGE>
(b) The Company shall (i) use its best efforts to comply with
the current public information requirements of Rule 144 ("Rule 144") under the
1933 Act and (ii) at all times Rule 144 is available for use by Holder, furnish
the Holder upon request with all information within the possession of the
Company required for the preparation and filing of Rule 144.
(c) CRW shall not sell, assign, transfer, give, donate,
pledge, hypothecate, create a security interest in, place in trust or otherwise
voluntarily or involuntarily dispose or otherwise encumber any of the Warrant
Shares.
(d) The Company and CRW shall add a legend to the certificates
representing the Warrant Shares as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO THAT CERTAIN WARRANT DATED MAY 22, 1996 AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, GIVEN, DONATED, PLEDGED, HYPOTHECATED, PLACED IN
TRUST OR OTHERWISE VOLUNTARILY OR INVOLUNTARILY DISPOSED OF OR
OTHERWISE ENCUMBERED EXCEPT PURSUANT TO THE TERMS OF SUCH WARRANT.
(e) The Company shall cause its transfer agent to remove the
legend set forth in Section 5(d) upon delivery to the Holder of the certificates
representing the Warrant Shares pursuant to Section 4.
6. Adjustment of Purchase Price and Number of Shares. The number of
shares of Common Stock purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain events as
follows:
6.1 Stock Dividends, Subdivisions or Combinations. If the
Company at any time while the Warrant remains outstanding and unexpired
shall:
(a) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock,
(b) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or
(c) pay a dividend or make a distribution in shares
of its Common Stock,
then the number of shares of Common Stock purchasable upon the exercise
of this Warrant immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock that a
record holder of the same number of shares of Common Stock represented
by this Warrant immediately prior to the occurrence of such event would
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<PAGE>
own or be entitled to receive after the happening of such event and the
Warrant Price shall be proportionately reduced.
6.2 Certain Other Distributions. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend
payable out of earnings or earned surplus legally available
for the payment of dividends under the laws of the
jurisdiction of incorporation of the Company),
(b) any evidences of its indebtedness, any shares of
its stock or any other securities or property of any nature
whatsoever (other than cash), or
(c) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature
whatsoever (other than cash).
then the number of shares of Common Stock issuable upon exercise of
this Warrant shall be adjusted to equal the product of the number of
shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment by a fraction (i) the numerator of
which shall be the Current Market Price per share of Common Stock at
the date of taking such record and (ii) the denominator of which shall
be such Current Market Price per share of Common Stock minus the amount
allocable to one share of Common Stock of any such cash so
distributable and of the fair value (as determined in good faith by the
Board of Directors of the Company) of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants
or other subscription or purchase rights so distributable. A
reclassification of the Common Stock (other than a change in par value,
or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its
Common Stock of such shares of such other class of stock within the
meaning of this Section 6.2 and, if the outstanding shares of Common
Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 6.1.
6.3 Reclassification, Consolidation or Merger. At any time
while this Warrant remains outstanding and unexpired, in case of any
reclassification or change of outstanding securities issuable upon
exercise of this Warrant (other than a change in par value, or from par
value to no par value, or from no par value to par value or as a result
of an event described in Sections 6.1(A) or (B) above) or in case of
any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the
Company is a continuing corporation and which does not result in any
reclassification or change, other than a change in par value, or from
par value to no par value,
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or from no par value to par value), or in the case of any sale or
transfer to another corporation of the property of the Company as an
entirety or substantially as an entirety, CRW shall, without payment of
any additional consideration therefor, execute a new Warrant providing
that the Holder shall have the right to exercise such new Warrant (upon
terms not less favorable to the Holder than those then applicable to
this Warrant) and to receive upon such exercise, in lieu of each share
of Common Stock of the Company theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities,
money or property receivable upon such reclassification, change,
consolidation, merger, sale or transfer by the Holder of one share of
Common Stock issuable upon exercise of this Warrant had this Warrant
been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or transfer. Such new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6. The
provisions of this Section 6.3 shall similarly apply to successive
reclassification, changes, consolidations, mergers, sales and
transfers.
6.4 Liquidating Dividends, Etc. If the Company at any time
while this Warrant remains outstanding and unexpired makes a
distribution of its assets to the holders of its Common Stock as a
dividend in liquidation or by way of return of capital or other than as
a dividend payable out of earnings or surplus legally available for
dividends under applicable law or any distribution to such holders made
in respect of the sale of all or substantially all of the Company's
assets (other than under the circumstances otherwise provided for in
this Section 6), the holder of this Warrant shall be entitled to
receive upon the exercise hereof, in addition to the shares of Common
Stock receivable upon such exercise, and without payment of any
consideration other than the Warrant Price, an amount in cash equal to
the value of such distribution per share of Common Stock multiplied by
the number of shares of Common Stock which, on the record date for such
distribution, are issuable upon exercise of this Warrant (with no
further adjustment being made following any event which causes a
subsequent adjustment in the number of shares of Common Stock issuable
upon the exercise hereof), and an appropriate provision therefor should
be made a part of any such distribution. The value of a distribution
which is paid in other than cash shall be determined in good faith by
CRW's Board of Directors.
6.5 Other Action Affecting Common Stock. If after the date
hereof the Company shall take any action affecting the outstanding
number of shares of Common Stock, other than an action described in any
of the foregoing subsections of Section 6 hereof, inclusive, that would
have a materially adverse effect upon the rights of the Holder, the
Warrant Shares and the Warrant Price shall be adjusted in such manner
and at such time as CRW's Board of Directors on the advice of the CRW's
independent public accountants may in good faith determine to be
equitable in the circumstances.
6.6 Other Provisions Applicable to Adjustment under this
Section. The following provisions shall be applicable to the making of
adjustment of the number of shares of Common Stock issuable upon
exercise of this Warrant provided for in this Section 6:
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(a) When Adjustments to Be Made. The adjustments
required by this Section 6 shall be made whenever and as often
as any specified event requiring an adjustment shall occur,
except that any adjustment of the number of shares of Common
Stock issuable upon exercise of the Warrant that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 6.1) up to, but not beyond the date of
exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1%
of the shares of Common Stock issuable upon exercise of the
Warrant immediately prior to the making of such adjustment.
Any adjustment representing a change less than such minimum
amount (except as aforesaid) which is postponed shall be
carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 6 and not
previously made, would result in a minimum adjustment or on
the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close
of business on the date of its occurrence.
(b) Fractional Interest. In computing adjustments
under this Section 6, fractional interests in Common Stock
shall be taken into account to the nearest 1/10th of a share.
(c) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(d) Escrow of Warrant Stock. If after any property
becomes distributable pursuant to this Section 6 by reason of
the taking of any record of the holders of Common Stock, but
prior to the occurrence of the event for which such record is
taken, and the Holder exercises this Warrant, any additional
shares of Common Stock obtainable upon exercise by reason of
such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any
other provision to the contrary herein) and such shares or
other property shall be held in escrow for the Holder by CRW
to be transferred to the Holder upon and to the extent that
the event actually takes place, upon payment of the Warrant
Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to
occur or is rescinded, then such
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escrowed shares shall be cancelled by the Company and escrowed
property returned.
7. Legend. Each certificate for shares obtained upon exercise of this
Warrant shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"). Such securities have been acquired for investment
and may not be sold or transferred in the absence of an
effective registration statement for such securities under the
1933 Act, unless, in the opinion (which shall be in form and
substance satisfactory to the Corporation) of counsel
satisfactory to the Corporation, such registration is not
required."
In addition, the certificate shall bear such additional legend with respect to
state securities or blue sky laws as reasonably determined by counsel to CRW or
the Company.
8. Notice of Adjustments. Whenever the number of shares of Common Stock
issuable upon exercise of this Warrant shall be adjusted pursuant to Section 6
hereof, CRW shall promptly notify the Holder in writing of such adjustment,
setting forth in reasonable detail the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which CRW's Board of Directors made any
determination hereunder), and the number of shares of Common Stock obtainable
upon exercise of this Warrant after giving effect to such adjustment. Such
notice shall be mailed (by first class and postage prepaid) to the Holder.
9. Voting. CRW shall maintain all voting rights with respect to the
Warrant Shares until the exercise of this Warrant, and thereafter, the Holder
shall have all voting rights with respect to the Warrant Shares for which
exercise is made hereunder.
10. Representations and Warranties of CRW. CRW hereby represents and
warrants to the Holder as follows:
(a) This Warrant has been duly authorized by all necessary
corporate action on the part of CRW and has been duly executed by a duly
authorized officer of CRW and constitutes a valid and binding obligation of CRW.
(b) Neither the execution and delivery of this Warrant, nor
the consummation of the transactions contemplated hereby, will violate or result
in any violation of or be in conflict with or constitute a default under any
term of the charter or bylaws of CRW or of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to CRW.
(c) Upon exercise of this Warrant and payment of the Warrant
Price by the Holder (i) the Warrant Shares will be duly issued, fully paid and
nonassessable shares of Common Stock and free from all taxes, liens and changes
with respect to the issuance thereof and (ii) the Holder shall
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receive valid title to all of the Warrant Shares in all cases free and clear of
all liens, mortgages, security interests, pledges, defects of title or other
claims, charges or encumbrances of any nature.
11. Piggyback Rights.
(a) Right to Piggyback. At any time after the Company's
initial public offering, whenever the Company proposes to register any Common
Stock of the Company under the 1933 Act, as amended, and the registration form
to be used may be used for the registration of Registrable Securities (a
"Piggyback Registration"), the Company will give prompt written notice to all
holders of Registrable Securities and will include in such Piggyback
Registration, subject to the allocation provisions below, all Registrable
Securities with respect to which the Company has received written requests for
inclusion within 20 days after the Company's mailing of such notice.
(b) Registration on Form S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has so qualified, in addition to the rights
contained in the foregoing provisions of this Agreement, each holder of
Registrable Securities shall have the right to require registration of its
Registrable Securities on Form S-3 at the Company's expense, provided that
(a) the Registrable Securities to be registered shall have a market value of at
least $1,000,000 and (b) each holder shall be entitled to only one such
registration during any 12-month period. When the Company receives notice of any
holder's request for a registration on Form S-3, it shall send notice of such
proposed registration to all other holders of Registrable Securities.
(c) Registration Expenses. In all Registrations, the Company
will pay the Registration Expenses related to the Registrable Securities of the
Selling Stockholders, but the Selling Stockholders will pay the underwriting
commissions related to their Registrable Securities.
(d) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, the Company will allocate the securities to be included
as follows: first, the securities the Company proposes to sell on its own
behalf; and second, Registrable Securities requested to be included in such
registration by the Selling Stockholders, pro rata on the basis of the
respective Registrable Securities owned among the Selling Stockholders.
(e) Priority on Secondary Registrations. If a Piggyback
Registration is initiated as an underwritten secondary registration on behalf of
holders of the Company's securities and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number that can be sold in such
offering, at a price reasonably related to fair value, the Company will allocate
the securities to be included on a pro rata basis, based on the number of
Registrable Securities owned among the Selling Stockholders.
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(f) Selection of Underwriters. In any registration, the
selection of investment banker(s) and manager(s) and the other decisions
regarding the underwriting arrangements for the offering will be made by the
Company.
(g) Indemnification. The Company shall indemnify, to the
extent permitted by law, each Selling Stockholder against all losses, claims,
damages, liabilities and expenses arising out of or resulting from any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or associated term sheet or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the state ments therein not misleading
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such Selling Stockholder expressly for
use therein or by such Selling Stockholder's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished such Selling Stockholder with a sufficient
number of copies of the same.
(h) Information. In connection with any registration statement
in which a Selling Stockholder is participating, each such holder will furnish
to the Company in writing such information as is reasonably requested by the
Company for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, the Company, its directors and
officers and each person who controls the Company (within the meaning of the
1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact or any
omission or alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in information so
furnished in writing by such holder specifically for use in preparing the
registration statement.
12. Loss, Theft, Destruction or Mutilation. Upon receipt by the Company
of evidence reasonably satisfactory to it that this Warrant has been mutilated,
destroyed, lost or stolen, and in the case of any destroyed, lost or stolen
Warrant, a bond of indemnity reasonably satisfactory to the Company, or in the
case of a mutilated Warrant, upon surrender and cancellation thereof, the
Company will execute and deliver in the Holder's name, in exchange and
substitution for the Warrant so mutilated, destroyed, lost or stolen, a new
Warrant of like tenor substantially in the form thereof with appropriate
insertions and variations.
13. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors of the
Company and the Holder.
14. Amendment. This Warrant may be modified with the written consent of
the Company and the Holder.
15. Transferability. This Warrant, and any Warrant Shares issued upon
exercise of this Warrant, may be sold, pledged or otherwise transferred or
encumbered by the Holder.
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16. Injunctive Relief. It is acknowledged that it will be impossible to
measure the damages that would be suffered by a party if another party fails to
comply with the provisions hereof and that in the event of any such failure,
each non-breaching party may not have an adequate remedy at law. Therefore, any
party shall be entitled to obtain specific performance of another party's
obligations hereunder and to obtain injunctive relief. No party shall argue, as
a defense to any proceeding for such specific performance or injunctive relief,
that another party has no adequate remedy at law.
17. Headings. The descriptive headings of the several sections of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.
18. Governing Law. This Warrant shall be governed by the laws of the
State of Delaware without regard to the provisions thereof relating to conflict
of laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer, attested by its duly authorized officer, on the
date of this Warrant.
CRW FINANCIAL, INC.
By: /s/ J. Brian O'Neill
-----------------------------
J. Brian O'Neill
Chief Executive Officer
TELESPECTRUM WORLDWIDE INC.
By: /s/ J. Brian O'Neill
------------------------------
J. Brian O'Neill
Chief Executive Officer
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Annex A
PURCHASE AGREEMENT
Date:
TO: TeleSpectrum Worldwide Inc.
(1) The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby irrevocably agrees to purchase __________ shares of
Common Stock covered by such Warrant, and makes payment herewith in full
therefor at the price per share of $__________ provided by this Warrant.
(2) The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby irrevocably elects to make a Cashless Exercise, as
provided for in Section 4 of such Warrant, with respect to _________ Warrant
Shares, _________ Warrant Shares of which shall be retained by CRW in payment
of the Purchase Price (as defined in the Warrant).
Signature: ______________
Address: ______________
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