As filed with the Securities and Exchange Commission on September 23, 1996
Registration No. 333-10871
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
(Amendment No. 1)
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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CRW FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2691986
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
443 South Gulph Road
King of Prussia, Pennsylvania 19406
Telephone (610) 962-5100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
J. Brian O'Neill, Chief Executive Officer
CRW Financial, Inc.
443 South Gulph Road
King of Prussia, Pennsylvania 19406
Telephone (610) 962-5100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Dean M. Schwartz, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Calculation of Registration Fee
Title of each Class of
Securities to be Registered Amount to be Registered
--------------------------- -----------------------
Common Stock (2) 886,025
Common Stock (3) 468,603
Proposed Maximum
Proposed Maximum Aggregate Offering Amount of
Offering Price Per Unit(1) Price(1) Registration Fee
-------------------------- ------------------ ----------------
$30.00 $26,580,750 $9,165.78
$32.00 $14,995,296 $5,170.80
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(1) Estimated solely for purposes of calculating the registration fee.
(2) A registration fee of $9,165.78 was previously paid to register 886,025
shares of the Common Stock at the then Proposed Maximum Offering Price Per
Unit of $30.00 pursuant to the Company's Registration Statement (No.
333-10871) on Form S-3 filed with the Securities and Exchange Commission on
August 27, 1996.
(3) In accordance with Rule 457(a) of the Securities Act, a $5,170.80
registration fee is paid herewith to register an additional 468,603 shares
of the Common Stock at the current Proposed Maximum Offering Price Per Unit
of $32.00 pursuant to this Amendment No. 1 to the Company's Registration
Statement (No. 333-10871) on Form S-3.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, dated September 23, 1996
PROSPECTUS
CRW FINANCIAL, INC.
1,354,628 Shares of Common Stock
This Prospectus relates to (i) 430,293 shares of common stock, par
value of $0.01 per share ("Common Stock"), of CRW Financial, Inc., a Delaware
corporation (the "Company"), underlying shares of the Company's Series A
Convertible Preferred Stock ("Preferred Stock"), (ii) 250,604 shares of Common
Stock underlying certain warrants (the "Warrants"), (iii) 300,000 shares of
Common Stock underlying certain stock options (the "Options"), (iv) 205,128
shares of Common Stock underlying a convertible subordinated note (the
"Subordinated Note") and (v) 168,603 shares of Common Stock, which may be
offered for sale from time to time by certain security holders of the Company
(the "Selling Security Holders"), or by their pledgees, donees, transferees or
other successors in interest, to or through underwriters or directly to other
purchasers or through brokers or agents in one or more transactions at varying
prices determined at the time of sale or at fixed or negotiated prices. See
"Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
1,354,628 shares of Common Stock (the "Shares") offered hereby by the Selling
Security Holders. The Company will receive the proceeds from the issuance and
sale of the Shares underlying the Warrants and Options and will reduce its
indebtedness under the Subordinated Note upon the exercise or conversion of such
securities by the holders thereof. The expenses of the registration of the
Shares under the Securities Act of 1933, as amended (the "Securities Act"), and
the registration or qualification of the Shares under any applicable state
securities laws will be paid by the Company. The aggregate proceeds to the
Selling Security Holders will be the offering price of the Shares sold, less
applicable agents' commissions and underwriting discounts, if any.
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "CRWF." On September 16, 1996 the last reported sale price of the Common
Stock was $32.00 per share.
The securities offered hereby involve a high degree of risk. See "Risk
Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION; NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling Security
Public (1) Commissions(2) Company (3) Holders (4)
---------- -------------- ----------- ----------------
<S> <C> <C> <C> <C>
Per Share $32.00 -- -- $32.00
Total $43,348,096 -- -- $43,348,096
</TABLE>
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(1) Represents the last reported sale price per share of Common Stock on the
Nasdaq SmallCap Market on September 16, 1996.
(2) Cannot be estimated at this time.
(3) The Company will pay estimated expenses of $45,000 in connection with the
offering of the Shares by the Selling Security Holders.
(4) Before applicable underwriting discounts or commissions, which cannot be
estimated at this time.
The date of this Prospectus is September __, 1996
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any date subsequent to the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
offered hereby by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
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TABLE OF CONTENTS
Page
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Available Information .......................................................2
Incorporation of Certain Documents by Reference..............................3
Risk Factors.................................................................4
The Company..................................................................8
Use of Proceeds..............................................................8
Selling Security Holders.....................................................9
Plan of Distribution.........................................................9
Legal Matters...............................................................11
Experts.....................................................................11
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AVAILABLE INFORMATION
The Company has filed with the U.S. Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act with respect to the Shares of Common Stock
offered by this Prospectus. This Prospectus, filed as part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information about
the Company and the Common Stock, reference is made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected without charge at the Commission's principal offices, and copies of
all or any part of the Registration Statement may be obtained from such office
upon the payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information filed by the Company with the Commission can be inspected and copied
at the Public Reference section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the Commission located at 7 World Trade Center, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
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prescribed rates. Reports and other information filed by the Company with the
Commission after May 6, 1996 should also be available on-line via the EDGAR
electronic filing system.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents and information previously filed with the
Commission (File No. 0-26015) pursuant to the Exchange Act or the Securities Act
are as of their respective dates hereby incorporated by reference into this
Prospectus, except as superseded or modified herein: (1) the Company's Annual
Report on Form 10-K, as amended by Form 10-K/A, for the fiscal year ended
December 31, 1995; (2) the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1996 and June 30, 1996; (3) the Company's Current
Report on Form 8-K dated March 14, 1996; (4) the Company's Current Report on
Form 8-K dated August 21, 1996; and (5) the description of the Company's Common
Stock contained in the Company's Registration Statement on Form 8-A filed May 4,
1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering made hereunder shall be deemed to be incorporated by
reference into this Prospectus and to be a part of this Prospectus from the
respective dates of the filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other document subsequently filed and incorporated
herein by reference modifies or supersedes such prior statement. Any statement
so modified or superseded shall not be deemed, except as modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Common Stock, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all
information that has been incorporated by reference in this Prospectus, other
than exhibits to such information that are not specifically incorporated by
reference into such information. Requests for information incorporated by
reference in this Prospectus should be made in writing or by telephone to CRW
Financial, Inc., 443 South Gulph Road, King of Prussia, Pennsylvania 19406,
Attention: Jonathan P. Robinson, Chief Financial Officer, telephone
(610) 962-5100.
3
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RISK FACTORS
An investment in the Company's Common Stock is speculative in nature,
involves a high degree of risk and should only be made by an investor who can
afford the loss of his entire investment. In addition to the other information
in this Prospectus, the following factors should be considered carefully by
potential purchasers in evaluating an investment in the Shares of Common Stock
offered hereby.
Significant Dependence Upon TeleSpectrum
The success of the Company is dependent to a significant degree on
TeleSpectrum Worldwide Inc., a publicly traded (Nasdaq National Market--TLSP)
company involved in various aspects of the teleservices, market research and
direct mail and fulfillment industries ("TeleSpectrum"), as a result of the
Company's significant stock ownership therein and the portion of the Company's
assets which its shares of TeleSpectrum represent. The Company owned 8,510,137
shares of the common stock, par value $.01 per share, of TeleSpectrum (the
"TeleSpectrum Common Stock") which represented approximately 36.7% of the
outstanding shares of the TeleSpectrum Common Stock at the time of the initial
public offering of the TeleSpectrum Common Stock during August 1996 (the
"TeleSpectrum IPO"). Prior to the TeleSpectrum IPO, TeleSpectrum was a
wholly-owned subsidiary of the Company and was formed to acquire six
teleservices and related businesses (the "Acquired Businesses"). In connection
with the organization of TeleSpectrum and the funding of its initial operations,
the Company granted certain warrants to purchase shares of TeleSpectrum Common
Stock owned by the Company (the "TeleSpectrum Warrants") to certain persons and
entities, including certain of the Selling Security Holders. The TeleSpectrum
Warrants are exercisable at a price of $1.50 per share of TeleSpectrum Common
Stock, and if fully exercised, the Company would receive approximately
$3,500,000 in cash and the Company's ownership would be reduced to 6,162,130
shares of TeleSpectrum Common Stock, or approximately 25% of the outstanding
shares of TeleSpectrum Common Stock; provided, however, that the holders of the
TeleSpectrum Warrants have the right to pay the exercise price in shares of
TeleSpectrum Common Stock, which would result in the Company receiving less cash
and retaining more shares of TeleSpectrum Common Stock. Since the fair market
value of the TeleSpectrum Common Stock (closing bid price on September 16, 1996
of $21.88 per share) is significantly higher than the per share exercise price,
it is highly likely that, absent a significant decline in the fair market value
of the TeleSpectrum Common Stock, that the TeleSpectrum Warrants will be
exercised by the holders. Certain exercises of TeleSpectrum Warrants by such
holders have occurred since the TeleSpectrum IPO. Accordingly, the Company
believes that prospective investors should value the TeleSpectrum Common Stock
held by the Company on a basis which assumes the exercise of all of the
TeleSpectrum Warrants.
Prior to its consummation on August 13, 1996 of its acquisition of the
Acquired Businesses, TeleSpectrum had not conducted any operations. Prior to
such date, the Acquired Businesses had been operated independently and
TeleSpectrum may not be able to successfully integrate these businesses and
their disparate operations, employees and management. In addition, the business
of TeleSpectrum is subject to many risks and because of TeleSpectrum's limited
operating history, there can be no assurance that TeleSpectrum will be able to
compete successfully in its industry or to profitably manage its operations and
possible growth in the short or long term. Further, it is not anticipated that
TeleSpectrum will declare any dividends on its stock or otherwise generate a
return on the Company's investment in TeleSpectrum, which is generally illiquid
and subject to certain restrictions on resale.
Potential Dilutive Effect of Convertible Securities
As of the date of this Prospectus, the Company has 1,295,021 shares of
Common Stock outstanding. Also as of such date, however, an aggregate of
1,379,718 additional shares of Common Stock are issuable by the Company based on
the following: (i) 430,293 shares of Preferred Stock currently convertible into
an equal number of shares of Common Stock, (ii) stock options granted under the
Company's 1995 Stock Option Plan, as amended (the "Plan"), to purchase an
aggregate of 402,675 shares of Common Stock, (iii) warrants issued by the
Company to purchase an aggregate of 341,622 shares of Common Stock and (iv) the
Subordinated Note, which is currently convertible into 205,128 shares of Common
Stock. The Company has also conditionally granted stock options under the Plan
to purchase a further 147,500 shares of Common Stock subject to the Company's
stockholders approving an increase in the number of shares of Common Stock
issuable under the Plan.
The exercise or conversion prices for all such stock options, warrants
and convertible securities (collectively, the "Convertible Securities") are
below the current fair market value of the Company's Common Stock. The issuance
of Common Stock upon the exercise or conversion of the Convertible Securities
may have an adverse effect upon the market price for the Company's Common Stock.
Volatility of Stock Price
Historically, the Company's Common Stock has been thinly traded and its
market price has proven to be highly volatile and dependent upon and affected by
specific developments in its business and the business of TeleSpectrum.
Announcements concerning events in the Company's or TeleSpectrum's business,
governmental actions, industry developments, the Company's or TeleSpectrum's
results of operations and stock market conditions generally may have a
significant effect on the market price of the Company's Common Stock.
Possible Conflicts of Interest
The Company is subject to risks associated with potential conflicts of
interest that may arise out of the interrelationships among certain of
its officers, directors, significant stockholders and third parties. J. Brian
O'Neill, the Company's Chairman and Chief Executive Officer, is also a creditor
of the Company under the $1 million Subordinated Note and the Chairman and Chief
Executive Officer of TeleSpectrum. Jonathan P. Robinson, the Company's Vice
President and Chief Financial Officer, is also the Director of Acquisitions of
TeleSpectrum. The Company is a principal stockholder of TeleSpectrum. Mark
DeNino, a director of the Company, is also a director of TeleSpectrum and a
general partner of Technology Leaders II Management, L.P., which is the sole
general partner of Technology Leaders II, L.P. Technology Leaders II, L.P. is a
principal stockholder of the Company. The interests of the foregoing persons in
their capacities outside the Company may come into conflict with the interests
of such persons in their respective capacities with the Company.
4
<PAGE>
Rights of Holders of Preferred Stock
Holders of Preferred Stock possess certain voting and other rights in
addition to the rights held by holders of the Company's Common Stock. Holders of
Preferred Stock have the right to vote with holders of Common Stock as a single
class on all matters on which holders of Common Stock are entitled to vote,
except with respect to election of directors and certain other matters described
below, and are entitled to vote the number of shares of Common Stock into which
a share of Preferred Stock is presently convertible for each share of Preferred
Stock being voted, which is initially one share. Until the earlier to occur of
(i) less than 10% of the shares of Preferred Stock remaining outstanding or (ii)
February 29, 1999, holders of Preferred Stock also have the right, voting as a
class, to elect two members of the Company's five-member Board of Directors.
Holders of Common Stock have the right to elect the remaining directors.
In addition to the voting rights described above, the consent of at
least a majority of the outstanding shares of Preferred Stock is required for
certain corporate actions, including an amendment of the Company's Certificate
of Incorporation, the sale of all or substantially all of the Company's assets
or a material business line, the Company's merger, dissolution or liquidation,
the declaration of payment of any dividend on Common Stock, the redemption,
retirement, purchase or other acquisition by the Company of any Common Stock or
any change in the composition of the Company's Board of Directors.
Further, if current market value of the Company's Common Stock on
March 31, 1997 is less than $11.62 per share, the Company will be obligated to
issue warrants to purchase an aggregate of 64,544 shares of Common Stock at an
exercise price of $5.81 per share, as adjusted, to the holders of the Preferred
Stock.
Government Regulation
Thirty-three of the 46 states in which the Company currently provides
receivables management, administration and debt collection services require the
Company to be licensed to perform such services. The Company believes that it
currently holds all necessary licenses in the jurisdictions where it currently
does business, but there can be no assurance that the Company will not have one
or more of such licenses revoked, or have fines imposed, by the relevant
regulatory authority, or that one or more jurisdictions will enact new licensing
requirements which the Company can not meet. Most states grant or deny licenses
based solely on the applicant's financial condition, but some states impose
additional requirements, such as maintenance of an office in that state or the
testing of certain personnel. There can be no assurance that the Company will be
able to continue to satisfy all such requirements. In addition, the Fair Debt
Collection Practices Act and similar state laws regulate the time, place and
manner in which the Company may conduct debt collection practices. The Company
believes that it is in substantial compliance with all material regulatory
requirements to which it is subject, but there can be no assurance that a
regulatory agency having jurisdiction over the Company's business or operations
will not find to the contrary.
Many states also require companies engaged in the business of providing
cash advance services or transmitting funds to obtain a license from the
appropriate state agency. In certain states, such companies are required to post
bonds or other collateral to secure their obligations to their customers in
those states. State agencies have extensive discretion to deny or revoke
licenses. The Company believes that its wholly-owned subsidiary, Casino Money
Centers, Inc. ("CMC"), currently holds the necessary licenses and bonds to do
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business in the states where it currently operates, but it will be subject to
similar and possibly more stringent licensing requirements if it expands its
operations into other jurisdictions. In addition, there can be no assurance that
CMC will not have one or more of its licenses revoked, or have fines imposed, by
a particular regulatory authority for failure to comply with regulatory
requirements or other reasons.
Competition
The receivables management, administration and debt collection industry
is highly competitive. Some of the Company's competitors have substantially
greater financial, marketing and other resources than the Company, and the
Company could be adversely affected by a loss of key clients or employees. The
Company competes with over 6,000 companies in its industry, most of which are
small, local or regional companies. The Company believes it competes with
approximately 50 other companies to provide services on a nationwide basis.
Competition to obtain large credit grantors as clients is largely dependent on
pricing. There can be no assurance that the Company can effectively compete with
other companies in terms of pricing or other services.
CMC competes with a number of providers of funds transfer services in
casinos, many of which have significantly greater financial, marketing and other
resources than CMC. Competitors of CMC include Game Financial, Premier CashLink,
Valley National Bank and First Interstate Bank of Nevada, which currently
provide cash advance services in casinos and other gaming locations through
automated teller machines ("ATMs") and other facilities. CMC also competes with
sponsors of ATM networks which place ATMs in casinos, and with major credit card
companies and vendor's of traveler's checks, which make cash available to
holders of their credit cards and checks on a nationwide basis. ATMs offer
several advantages in providing cash advances, including speed, convenience,
minimal expense per transaction and access to most major credit cards. There
can be no assurance that such factors would not cause customers to favor ATMs
or other methods of obtaining cash in lieu of CMC's services.
Dependence on Key Personnel
The success of the Company depends upon the skills, experience and
efforts of its executive officers. The Company is particularly dependent upon
the services of J. Brian O'Neill, its Chairman and Chief Executive Officer;
David S. Christie, its President and Jonathan P. Robinson, its Vice President
and Chief Financial Officer. Each of Messrs. O'Neill, Christie and Robinson have
entered into an employment agreement with the Company which expires in 1998. The
loss of the services of Mr. O'Neill, Mr. Christie, Mr. Robinson or any of the
Company's other key personnel could have a material adverse effect on the
Company. Mr. O'Neill intends to devote a majority of his time to his position as
Chairman and Chief Executive Officer of TeleSpectrum, and Mr. Robinson will be
acting as Director of Acquisitions for TeleSpectrum.
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<PAGE>
Significant Stock Ownership by Directors and Officers
As of the date of this Prospectus, directors and officers of the
Company beneficially own or control 237,467 shares or 18.3% of the outstanding
Common Stock and, either directly or through affiliated entities, have the right
to acquire 1,218,175 additional shares of Common Stock upon exercise of
currently exercisable outstanding options, warrants and convertible securities.
If all of such options, warrants and convertible securitites are exercised by
the holders thereof, directors and officers of the Company and their affiliated
entities will beneficially own or control approximately 57.9% of the outstanding
Common Stock. Thus, directors, officers and their affiliated entities as a
group, will have the ability to exert significant control over the election of
the Company's Board of Directors and to determine corporate actions requiring
stockholder approval.
No Cash Dividends and None Anticipated
No cash dividends have been paid on the Common Stock of the Company. It
is anticipated that income received from operations, if any, will be devoted to
the Company's future operations. Accordingly, no cash dividends are anticipated
in the future.
Anti-Takeover Provisions
The Company may be governed by the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law enacted in 1988. In
general, the law prohibits a public Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
"Business combination" is defined to include mergers, asset sales and certain
other transactions resulting in a financial benefit to the stockholders. An
"interested stockholder" is defined as a person who, together with affiliates
and associates, owns, (or, within the prior three years, did own) 15% or more of
a corporation's voting stock. As a result of an application of Section 203,
potential acquirors of the Company may be discouraged from attempting to effect
an acquisition transaction with the Company, thereby possibly depriving holders
of the Company's securities of certain opportunities to sell or otherwise
dispose of such securities at above-market prices pursuant to such transactions.
THE COMPANY
The Company, incorporated in Delaware on July 8, 1994, performs
receivables management, administration and debt collection services for clients
primarily in the health care, student loan, credit card and utility industries,
and to commercial clients through its wholly-owned subsidiary, Kaplan & Kaplan,
Inc. ("Kaplan"). CMC, the Company's other wholly-owned subsidiary, provides
financial support services to the casino industry.
Kaplan and CMC were formerly subsidiaries of Casino and Credit
Services, Inc. ("CCS") and the Company's operations were a division of CCS from
July 1992 until May 1995 when CCS contributed all of its assets and subsidiaries
other than Central Credit, Inc. to the Company. CCS then distributed all of the
Company's Common Stock to CCS shareholders on May 11, 1995, whereupon it became
an independent company.
The Company owned 8,510,137 shares of the TeleSpectrum Common Stock
which represented approximately 36.7% of the outstanding shares of the
TeleSpectrum Common Stock at the time of the TeleSpectrum IPO. Prior to the
TeleSpectrum IPO, TeleSpectrum was a wholly-owned subsidiary of the Company and
was formed to acquire the Acquired Businesses. If the TeleSpectrum Warrants are
fully exercised through the payment of cash, the Company's ownership would be
reduced to 6,162,130 shares of TeleSpectrum Common Stock or approximately 25% of
the outstanding shares of TeleSpectrum Common Stock; provided, however, that the
holders of the TeleSpectrum Warrants have the right to pay the exercise price in
shares of TeleSpectrum Common Stock, which would result in the Company receiving
less cash and retaining more shares of TeleSpectrum Common Stock. Certain
exercises of the TeleSpectrum Warrants by such holders have occurred since the
TeleSpectrum IPO. See "Risk Factors -- Significant Dependence Upon
TeleSpectrum."
TeleSpectrum was founded in April 1996 to create a premier provider of
integrated teleservices solutions. With the capabilities of the Acquired
Businesses, TeleSpectrum can offer its clients complete direct marketing
solutions that build upon a foundation of outbound and inbound telemarketing and
include inbound customer service, market research, direct mail and fulfillment
and other direct marketing services. TeleSpectrum operates over 1,700
"workstations" (each of which consists of a telephone- and computer-equipped
work area designed to accommodate one employee) in 23 call centers located
primarily in the eastern United States, and currently has the capacity to handle
over 300 million calls per year. TeleSpectrum focuses on providing teleservices
to major clients in the telecommunications, insurance, financial services,
pharmaceuticals and healthcare, consumer products and high technology
industries. TeleSpecctrum's pro forma revenues were $88.0 million for 1995 (of
which TeleSpectrum estimates that approximately 60% was derived from
outbound telemarketing) and $57.7 million for the six months ended June 30,
1996, and its pro forma net income was $2.6 million for 1995 and $2.5 million
for the six months ended June 30, 1996.
The teleservices industry facilitates the direct communication of marketing
information to and from current and prospective customers by telephone. Direct
marketing methods, such as telemarketing and direct mail, employ a "one-to-one"
approach to deliver a marketing message directly to a specific current or
prospective customer and to elicit immediate customer response. As businesses
seek greater returns from their investments in marketing activities, they are
increasingly coupling traditional indirect marketing methods such as advertising
with direct marketing methods such as telemarketing. Advances in computer and
telecommunications technology are helping telemarketers to more accurately
identify and contact prospective customers, and are providing call center
representatives with more complete on-line guidance and support. Improvements in
the scale and speed of computer and telecommunications networking capabilities
allow teleservices providers to implement larger and more complex programs for
their clients. As the trend toward outsourcing continues, TeleSpectrum believes,
based upon management's experience in the teleservices industry and in other
industries which provide or use outsourced services, that businesses will
increasingly seek to reduce the number of vendors they utilize, and may prefer
single-source providers of integrated solutions drawing upon a variety of
related teleservices capabilities. Moreover, TeleSpectrum believes that further
opportunities may emerge for an integrated teleservices provider that can
assemble and offer value-added teleservices, such as inbound customer service,
market research, direct mail and fulfillment, training, consulting, call center
management and electronic order processing.
The Company's principal offices are located at 443 South Gulph Road,
King of Prussia, Pennsylvania 19406 and its telephone number is (610) 962-5100.
USE OF PROCEEDS
The net proceeds from the sale of the Shares will be received by the
Selling Security Holders. The Company will not receive any of the proceeds from
the sale of the Shares by the Selling Security Holders. The Company will receive
up to approximately $2,764,000 in value and an additional $1,000,000 in
forgiveness of indebtedness from the issuance and sale of the Shares underlying
the Warrants, Options and the Subordinated Note to the holders thereof upon the
exercise or conversion of the Warrants, Options and the Subordinated Note. The
Company intends to use any such proceeds for working capital and general
corporate purposes.
8
<PAGE>
SELLING SECURITY HOLDERS
The table below sets forth information as of September 10, 1996 with
respect to each of the Selling Security Holders, their respective names, record
holdings of shares of the Company's Common Stock before the offering of the
Shares, the number of Shares being offered for each of their respective
accounts, the number of shares of Common Stock to be owned of record by each of
the Selling Security Holders immediately following the sale of the Shares and,
if one percent or more, the percentage of outstanding shares of Common Stock to
be owned of record by such Selling Security Holder following the offering. The
table assumes all of the Warrants and Options are exercised, all of the shares
of Preferred Stock and the Subordinated Note are converted to Common Stock and
all of the offered Shares are sold.
<TABLE>
<CAPTION>
Common Stock
Name of Shares of Common Stock Shares of Common to be Owned
Selling Security Holder Owned Before Offering Stock Being Offered After the Offering
----------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
J. Brian O'Neill(1) 773,731 773,731 0
Technology Leaders II L.P.(2) 307,545 307,545 0
TL Ventures Third Corp.(2) 244,304 244,304 0
Technology Leaders(2)
Management, Inc. 11,618 11,618 0
Mark DeNino(2) 3,486 3,486 0
Robert E. Keith, Jr.(2) 3,486 3,486 0
Ira M. Lubert(2) 3,486 3,486 0
Jean J. Tempel(2) 3,486 3,486 0
Gary J. Anderson(2) 3,486 3,486 0
</TABLE>
- ----------------------------
(1) J. Brian O'Neill is the Company's Chairman of the Board and Chief
Executive Officer. Mr. O'Neill has granted the other Selling Security
Holders and the holder of certain warrants the right to participate on
a pro rata basis in a sale by Mr. O'Neill of his Shares at the same
price and terms thereof, except as to certain limited sales by Mr.
O'Neill under Rule 144.
(2) These stockholders received shares of the Company's Preferred Stock and
Warrants to purchase Common Stock in a private placement of such
securities conducted by the Company during February 1996. Mr. DeNino is
also a member of the Company's Board of Directors. Each of TL Ventures
Third Corp., Technology Leaders II L.P., Technology Leaders Management
Inc., and Messrs. DeNino, Keith, Lubert and Anderson has affirmed that
it or he is a member of a group under Section 13(d)(3) of the Exchange
Act and thus may be considered to have beneficial ownership of all of
the securities held by any member of the group. The above table,
however, only includes securities actually held of record by the
particular security holder.
PLAN OF DISTRIBUTION
Any distribution of the Shares by the Selling Security Holders, or by
their pledgees, donees, transferees or other successors in interest, may be
effected from time to time in one or more of the following transactions: (a) to
underwriters who will acquire Shares for their own account and resell them in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale (any public
offering price and any discount or concessions allowed or reallowed or paid to
dealers may be changed from time to time); (b) through brokers, acting as
principal or agent, in transactions (which may involve block transactions) on
the Nasdaq SmallCap Market or on one or more exchanges on which the Shares are
then listed, in special offerings, exchange distributions pursuant to the rules
of the applicable exchanges or in the over-the-counter market, or otherwise, at
9
<PAGE>
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices; (c) directly
or through brokers or agents in private sales at negotiated prices; or (d) by
any other legally available means. The Selling Security Holders also reserve
the right to sell the Shares pursuant to Rule 144 under the Securities Act in
lieu of selling such Shares pursuant to this Registration Statement.
The Company will not receive any proceeds from the sale of the Shares
offered hereby. The aggregate proceeds to the Selling Security Holders from the
Shares offered hereby will be the offering price less applicable commissions or
discounts, if any. There is no assurance that the Selling Security Holders will
sell any of the Shares offered hereby.
The Selling Security Holders and such underwriters, brokers, dealers or
agents, upon effecting a sale of Shares, may be considered "underwriters" as
that term is defined by the Securities Act. Sales effected through agents,
brokers or dealers will ordinarily involve payment of customary brokerage
commissions although some brokers or dealers may purchase such shares as agents
for others or as principals for their own account. The Selling Security Holders
will pay any sales commissions or other sellers' compensation applicable to such
transactions. A portion of any proceeds of sales and discounts, commissions or
other seller's compensation may be deemed to be underwriting compensation for
purposes of the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in distribution of the Shares of Common Stock offered hereby may
not simultaneously engage in market making activities for the Common Stock for a
period of two business days prior to the commencement of such distribution. In
addition, each Selling Security Holder and any other person who participates in
a distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases and affect
the marketability of the Shares of Common Stock and the ability of any person to
engage in market making activities for the Shares of Common Stock.
At the time a particular offering of Shares is made, to the extent
required, a Prospectus Supplement will be distributed which will set forth the
number of Shares being offered and the terms of the offering, including the
purchase price or public offering price, the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for Shares
purchased from the Selling Security Holders, any discounts, commissions and
other items constituting compensation from the Selling Security Holders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
states the Shares may not be sold unless the Shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and the conditions of such exemption have been
satisfied.
The Company has agreed that it will bear all costs, expenses and fees
in connection with the registration or qualification of the Shares under federal
and state securities laws. The Company and each Selling Security Holder have
agreed to indemnify each other and certain other persons against certain
liabilities in connection with the offering of the Shares, including liabilities
arising under the Securities Act.
10
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon by
Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania. Joseph V. Del
Raso, a partner in said firm, has been granted a conditional stock option to
purchase 25,000 shares of Common Stock subject to the approval of an amendment
to the Company's 1995 Stock Option Plan increasing the shares of Common Stock
issuable thereunder. The foregoing option was granted to Mr. Del Raso while he
was a member of the Company's Board of Directors and Compensation Committee.
EXPERTS
The audited financial statements of the Company and its subsidiaries
incorporated by reference in this Prospectus have been incorporated herein in
reliance on the report of Arthur Andersen LLP, independent certified public
accountants, given on authority of that firm as experts in accounting and
auditing.
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is a list of the expenses the Company expects to pay in
connection with the issuance and distribution of the Shares registered hereby.
All amounts are estimated except the Securities and Exchange Commission
registration fee.
SEC Registration Fees.................................... $ 14,337
Legal Fees and Expenses.................................. 10,000
Cost of Printing......................................... 2,500
Accounting Fees and Expenses............................. 2,500
Blue Sky Fees and Expenses............................... 10,000
Miscellaneous Expenses................................... 5,663
-------
TOTAL.................................................... $45,000
=======
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law ("Section 145")
permits indemnification of directors, officers, agents and controlling persons
of a corporation under certain conditions and subject to certain limitations.
Section 145 empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to, the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine that despite
the adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a director or officer of a corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
The Company's Bylaws contain provisions for indemnification of
directors, officers, employees and agents which are substantially the same as
Section 145 and also permit the Company to purchase insurance on behalf of any
such person against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's status as
such, whether or not the Company would have the power to indemnify such person
against such liability under the foregoing provision of the Company's Bylaws.
The Company maintains such insurance, although there can be no assurance that
the Company will be able to maintain such insurance on reasonable terms.
II-1
<PAGE>
Item 16. Exhibits
Exhibit No. Description
- ----------- ------------
5 Opinion of Stradley, Ronon, Stevens & Young, LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Stradley, Ronon, Stevens & Young, LLP
(Contained in Exhibit 5)
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the registration statement;
and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that registrant does not need to give the statements in
paragraphs (i) and (ii) above if the registration statement is on Form S-3, S-8
or F-3, and the information required in a post-effective amendment is
incorporated by reference from periodic reports filed with the Commission by the
registrant under the Exchange Act.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement of the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities being registered that remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE>
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 of Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Philadelphia, Commonwealth of
Pennsylvania, on September 23, 1996.
CRW FINANCIAL, INC.
By: /s/ J. Brian O'Neill
-------------------------
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 of Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ J. Brian O'Neill Chairman of the Board and September 23, 1996
- ------------------------ Chief Executive Officer
J. Brian O'Neill (Principal Executive
Officer)
/s/ Jonathan P. Robinson Vice President and September 23, 1996
- ------------------------ Chief Financial Officer
Jonathan P. Robinson (Principal Financial Officer
and Principal Accounting Officer)
/s/ Mark DeNino Director September 23, 1996
- ------------------------
Mark DeNino
Director
- ------------------------
Bernard Morgan
Director
- ------------------------
Robert N. Verratti
/s/ Eustace Mita Director September 23, 1996
- ------------------------
Eustace Mita
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
5 Opinion of Stradley, Ronon, Stevens & Young, LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Stradley, Ronon, Stevens & Young, LLP
(Contained in Exhibit 5)
EXHIBIT 5
September 23, 1996
CRW Financial, Inc.
443 South Gulph Road
King of Prussia, PA 19406
RE: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to and for CRW Financial, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), relating to 1,354,628 shares of its common stock, par value
$.01 per share (the "Common Stock") of which 168,603 shares of common stock are
issued and outstanding (the "Outstanding Shares") and 1,186,025 shares issuable
upon exercise or conversion of certain warrants described below (the
"Warrants"), stock options described below (the "Options"), shares of the
Company's Series A Convertible Preferred Stock, no par value per share (the
"Preferred Stock"), and a certain convertible Term Loan Note described below
(collectively, the "Underlying Shares").
In our capacity as counsel, we have been requested to render the opinion
set forth in this letter and in connection therewith, we have reviewed:
(i) Restated Certificate of Incorporation of the Company, as amended, certified
as true and correct by the Secretary of State of the State of Delaware,
including the Certificate of Designation, Preferences and Rights of Series
A Convertible Preferred Stock dated February 29, 1996 (the "Certificate of
Designation"), (ii) Bylaws of the Company, as amended, certified as true and
correct by the Secretary of the Company, (iii) resolutions of the Board of
Directors of the Company, (iv) the Term Loan Note and Addendum to Term Loan
Note, each dated November 1, 1995 (the "Term Note"), between the Company and J.
Brian O'Neill and Miriam O'Neill (collectively, the "O'Neills"), (v) the
Securities Purchase Agreement dated February 29, 1996 (the "Securities Purchase
Agreement") among the
<PAGE>
CRW Financial, Inc.
September 23, 1996
Page 2
Company and the persons listed on Schedule 1 thereto (the "Private Placement
Purchasers"), (vi) the warrants dated February 29, 1996 between the Company and
each of the Private Placement Purchasers to purchase an aggregate of 150,604
shares of Common Stock (the "Private Placement Warrants"), (vii) the warrant
dated February 29, 1996 issued to J. Brian O'Neill to purchase 100,000 shares of
Common Stock (the "O'Neill Warrant"), (viii) stock option grant letters dated
May 18, 1995 and January 26, 1996, from the Company to J. Brian O'Neill covering
an aggregate of 300,000 shares of Common Stock ("Option Agreements"), (ix) the
Company's 1995 Stock Option Plan (the "Plan"), (x) the Registration Statement
and (xi) such other documents, instruments and records as we deemed necessary or
appropriate for purposes of rendering the opinion set forth herein. The
Certificate of Designation, Private Placement Warrants, Term Note, O'Neill
Warrant, Option Agreements and Plan are collectively defined as the "Operative
Documents".
In rendering this opinion, we have assumed and relied upon, without
independent investigation, (i) the authenticity, completeness, truth and due
authorization, execution and delivery of all documents submitted to us as
originals, (ii) the genuineness of all signatures on all documents submitted to
us as originals, (iii) the conformity to the originals of all documents
submitted to us as certified or photostatic copies, and (iv) the sufficient
legal capacity of the parties to enter into the Operative Documents and exercise
their rights and obligations thereunder.
No opinion is expressed herein in any respect as to (i) federal and state
securities laws and regulations, (ii) pension and employee benefit laws and
regulations, including without limitation, the Employee Retirement Income
Security Act of 1974, as amended and (iii) federal and state tax laws and
regulations.
The opinion expressed herein is limited and qualified in all respects by
the effects of general principles of equity, whether applied by a court of law
or equity, and by the effects of bankruptcy, insolvency, reorganization,
moratorium, arrangement, fraudulent conveyance or fraudulent transfer,
receivership and other laws now or hereafter in force affecting the rights and
remedies of creditors generally (not just creditors of specific types of
debtors) and other laws now or hereafter in force affecting generally only
creditors of specific types of debtors.
<PAGE>
CRW Financial, Inc.
September 23, 1996
Page 3
The law covered by the opinion expressed herein is limited to (a) the
Federal statutes, judicial decisions and rules and regulations of the
governmental agencies of the United States and (b) the Delaware General
Corporation Law, as amended.
This opinion letter is given only with respect to laws and regulations
presently in effect. We assume no obligation to advise you of any changes in law
or regulation which may hereafter occur, whether the same are retroactively or
prospectively applied, or to update or supplement this letter in any fashion to
reflect any acts or circumstances which hereafter come to our attention.
Based upon, and subject to, the foregoing, we are of the opinion that the
Outstanding Shares are validly issued, fully paid and non-assessable, and the
Underlying Shares when issued upon proper exercise of the Warrants, Options,
Preferred Stock and Term Note, as the case may be, pursuant to and in accordance
with the Operative Documents, will be validly issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and we further consent to the reference to our firm under
the caption "Legal Matters" in the Prospectus which forms a part of the
Registration Statement.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By: /s/ DEAN M. SCHWARTZ
---------------------------------
Dean M. Schwartz, A Partner
/dpc
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-3 Registration Statement of our report
dated February 29, 1996 included in the CRW Financial, Inc. Form 10-K for the
year ended December 31, 1995, and to all references to our firm included in this
Registration Statement.
Arthur Andersen, LLP
Philadelphia, Pa.
September 19, 1996
