SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
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Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CRW Financial, Inc.
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(Name of Registrant as Specified in its Charter)
CRW Financial, Inc.
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(Name of Person(s) Filing Proxy Statement)
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<PAGE>
Preliminary Proxy Statement
CRW FINANCIAL, INC.
443 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 1996
------------------------
To Our Stockholders:
The 1996 Annual Meeting of Stockholders (the 'Meeting') of CRW Financial,
Inc., a Delaware corporation (the 'Company'), will be held at the Philadelphia
Marriott West, 111 Crawford Avenue, West Conshohocken, PA 19428, at 10:00 a.m.,
local time, on September 20, 1996 for the following purposes:
1. To elect one (1) Director constituting Class I of the Company's Board of
Directors for a three (3) year term to hold office until the Annual
Meeting of Stockholders in 1999 and until his successor is elected and
qualified;
2. To consider and vote upon a Proposal by the Board of Directors to
approve the Company's Amended and Restated 1995 Stock Option Plan;
3. To consider and vote upon the proposed amendment to the Company's
Restated Certificate of Incorporation which would increase the
authorized shares of common stock of the Company from 5,000,000 to
20,000,000 shares.
4. To approve and ratify the reappointment by the Board of Directors of
Arthur Andersen LLP as the Company's independent certified public
accountants for the fiscal year ending December 31, 1996; and
5. To transact such other business as may properly come before the Meeting.
The Board of Directors has fixed the close of business on August 5, 1996 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Meeting or any adjournment thereof.
For a period of ten days prior to the Meeting, a stockholder list will be
kept at the Company's principal office and shall be available for inspection by
stockholders during normal business hours. A stockholder list will also be
present and available for inspection during the Meeting.
Your attention is directed to the attached Proxy Statement for further
information regarding each Proposal to be made.
THE BOARD OF DIRECTORS URGES YOU TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE PROMPTLY,
ALTHOUGH YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. THE RETURN
OF THE ENCLOSED PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU
DECIDE TO ATTEND THE MEETING.
By Order of the Board of Directors
J. BRIAN O'NEILL
Chairman of the Board and
Chief Executive Officer
September __, 1996
<PAGE>
Preliminary Proxy Statement
CRW FINANCIAL, INC.
443 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
------------------------
PROXY STATEMENT
1996 ANNUAL MEETING OF STOCKHOLDERS
------------------------
This Proxy Statement is furnished to the stockholders of CRW Financial,
Inc., a Delaware corporation (the 'Company'), in connection with the
solicitation of proxies by order of the Board of Directors of the Company, for
use at the Company's 1996 Annual Meeting of Stockholders (the 'Meeting'). The
Meeting will be held at 10:00 a.m., local time, on Friday, September 20, 1996.
The purposes of the Meeting are set forth on the accompanying Notice of Annual
Meeting of Stockholders. The Proxy Statement and the accompanying proxy card are
first being mailed to stockholders of record of the Company on or about
September __, 1996.
The enclosed proxy is being solicited on behalf of the Board of Directors
of the Company, and all costs of solicitation will be borne by the Company. Such
costs include preparation, printing and mailing of the Notice of Annual Meeting
of Stockholders, Proxy Statement, Annual Report and proxy card, all of which are
herewith enclosed. The solicitation will be conducted principally by mail,
although Directors, officers and regular employees of the Company may solicit
proxies personally or by telephone or telegram. Such persons will not receive
special compensation for such services. Arrangements will also be made with
brokerage houses, other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the stock of the Company. The
Company will reimburse such persons for reasonable out-of-pocket expenses
incurred by them.
The close of business on August 5, 1996 has been fixed as the record date
(the 'Record Date') for the determination of stockholders entitled to notice of
and to vote at the Meeting. On the Record Date, the Company's outstanding voting
securities consisted of 1,197,696 shares of common stock, $.01 par value per
share (the 'Common Stock'), and 430,293 shares of Series A Convertible Preferred
Stock, no par value per share (the 'Preferred Stock' and, collectively with the
Common Stock, the 'Stock'). Each outstanding share of Stock entitles the holder
thereof to one vote on each matter to be voted upon at the Meeting, except that
holders of Preferred Stock are not entitled to vote in the election of the Class
I Director. The holders of a majority of the outstanding shares of Stock
constitute a quorum for the transaction of business at the Meeting. Holders of
Stock have no cumulative voting rights in the election of Directors.
If the enclosed proxy is properly signed, dated and returned, the Stock
represented thereby will be voted in accordance with the instructions thereon.
If no instructions are indicated, the Stock represented thereby will be voted
FOR the election of Robert N. Verratti as the Class I Director, FOR the adoption
of the Company's Amended and Restated 1995 Stock Option Plan, FOR the increase
in the number of authorized but unissued shares of the Company's Common Stock,
FOR the ratification of the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants and upon any other matters that may
properly come before the meeting.
You are requested to complete, sign, date and return the accompanying proxy
card and return it in the envelope provided. Proxies may be revoked by
stockholders at any time prior to the voting thereof by giving notice of
revocation in writing to the Secretary of the Company, by delivering a duly
executed proxy bearing a later date or by voting in person at the Meeting by
written ballot.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation classifies the Board of
Directors into three classes, as nearly equal in number as possible, each of
which provides for a three year term. Class I is currently comprised of one
Director and Classes II and III are each currently comprised of two Directors.
The term of office of one class of Directors expires each year in rotation so
that one class is elected at each annual meeting for a full three year term. The
term of the Class I Director expires on the date of this Annual Meeting. Robert
N. Verratti is the current Class I Director.
On December 31, 1995, the Board of Directors consisted of J. Brian O'Neill,
James Delaney and Joseph V. Del Raso. In February 1996, in connection with the
private placement of the Preferred Stock, the Board amended the Company's Bylaws
to increase the number of Directors from three to five Directors, adding one new
Class II and one new Class III Director seat to the Board. The Board then
appointed Bernard Morgan and Mark DeNino to fill the newly created vacancies in
Class II and Class III, respectively. In addition, James Delaney and Joseph V.
Del Raso, who previously served as Directors of the Company, voluntarily
resigned on February 26, 1996 and May 19, 1996, respectively. Such Directors did
not resign because of any disagreement with the Company. Following these
resignations, the Board appointed Robert N. Verratti on March 13, 1996 and
Eustace W. Mita on August 12, 1996 to fill the newly created vacancies in Class
I and Class II, respectively. The Board of Directors currently consists of five
members.
The Certificate of Designation relating to the Company's Preferred Stock
(the 'Certificate of Designation') provides that until the earlier of (i) the
date on which less than 10% of the Preferred Stock remains outstanding or (ii)
February 29, 1999, the holders of the Preferred Stock, voting as a class, have
the right to elect one member of Class II and one member of Class III of the
Board of Directors. Holders of Common Stock have the right to elect the
remaining Directors. If greater than 10% of the shares of Preferred Stock remain
outstanding on February 29, 1999, the Certificate of Designation provides that
the Board of Directors will expand to seven members, composed of two members in
each of Classes I and II and three members in Class III. Holders of Preferred
Stock, voting as a class, would then have the right to elect one member in each
of Classes I and II and two members in Class III. Holders of Common Stock would
elect the remaining Directors.
Mr. Verratti has been nominated by the Board of Directors for election to
serve as a Class I Director for a three year term expiring at the Annual Meeting
to be held in 1999 and until his successor is elected and qualified.
Listed below is background information concerning Mr. Verratti and each of
the other current Directors and executive officers of the Company.
NOMINEES FOR DIRECTOR -- CLASS I (TERM EXPIRES AT ANNUAL MEETING IN 1999)
ROBERT N. VERRATTI, 52, has been a Director of the Company since March 1996
and has been Chief Executive Officer of Charlestown Investments, Ltd., an
investment company, since 1985. Prior to 1985, Mr. Verratti served as acting
President of Great Western Cities, Inc., also an investment company. He is a
graduate of the U.S. Naval Academy and served in the nuclear submarine service.
DIRECTORS -- CLASS III (TERM EXPIRES AT ANNUAL MEETING IN 1998)
J. BRIAN O'NEILL, 36, has been the Chairman of the Board of Directors and
Chief Executive Officer of the Company since May 1995 and held the same
positions with Casino & Credit Services, Inc., the Company's former parent
company ('CCS'), from July 1992 to May 1995. From April 1992 to July 1992, Mr.
O'Neill served as President of Brian O'Neill Investments, a private investment
company. From May 1988 to July 1992, he was the Chairman of O'Neill Properties,
Inc., a real estate development company. Mr. O'Neill was the President of
Equivest Realty Advisors, a real estate leasing and consulting company from July
1986 to May 1988. Mr. O'Neill is also currently Chairman
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<PAGE>
of the Board of Directors and Chief Executive Officer of TeleSpectrum Worldwide
Inc. ('TeleSpectrum').
MARK DENINO, 42, has been a Director of the Company since February 1996 and
has been a general partner and managing director of Technology Leaders II
Management, L.P., the general partner of Technology Leaders II, L.P., which is a
venture capital firm and a significant shareholder of the Company, since 1994.
For more than three years prior to that, Mr. DeNino was President of Crossroads
Capital, Inc., an investment banking firm. Mr. DeNino is also currently a
Director of Integrated Systems Consulting Group, Inc., Aloette Cosmetics, Inc.
and TeleSpectrum. Mr. DeNino graduated from the Graduate School of Business
Administration of Harvard University with an M.B.A. degree and from Boston
College with a B.S. degree in finance and accounting.
DIRECTORS -- CLASS II (TERM EXPIRES AT ANNUAL MEETING IN 1997)
BERNARD MORGAN, 59, has been a Director of the Company since February 1996
and, prior to retiring in 1989, worked for First Fidelity Bancorporation and
Fidelcor for 20 years in various positions including Vice Chairman, Chief
Executive Officer, Deputy Chairman, Chief Operating Officer, President and
Executive Vice President. Mr. Morgan is also currently a Director of Atlantic
Electric, Inc. Mr. Morgan received his B.A. degree from St. Joseph's University
and his M.B.A. degree from the Wharton School, University of Pennsylvania.
EUSTACE W. MITA, 42, has been a Director of the Company since August 1996
and has served as Chief Operating Officer of HAC Group, Inc., an automobile
leasing training company, since 1990. In 1984, Mr. Mita founded Mita Leasing, an
automobile retail leasing company, and served as its President until the company
was sold in 1992. Mr. Mita is also currently a Director of Republic Bank in
Philadelphia, Pennsylvania.
DIRECTORS' MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995, the Board of Directors held
eight meetings. No incumbent Director who was a Director or member of a
committee during 1995 attended fewer than 75% of the Board meetings or committee
meetings held during fiscal 1995.
The Board of Directors has established an Audit Committee which, among
other things, considers the overall scope and approach of the annual audit and
the recommendations of the Company's independent auditors, recommends the
appointment of independent auditors, considers significant accounting methods
adopted or proposed to be adopted and considers procedures for internal
controls. The Audit Committee currently is comprised of Messrs. Morgan and Mita.
The Audit Committee met twice in 1995. The Board has also established a
Compensation Committee which evaluates and establishes all executive
compensation arrangements. The Compensation Committee is comprised of Messrs.
DeNino, Mita and Verratti. The Compensation Committee met once in 1995. The
Board does not have a standing nominating committee.
EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)
DAVID S. CHRISTIE, 50, has been President of the Company since May 1995 and
held the same position with CCS from October 1994 to May 1995. From January 1983
to August 1992 and from September 1993 to October 1994, Mr. Christie was a
Regional Operations Manager for the Company. From August 1992 to September 1993,
Mr. Christie was an Operations Manager for Medquist, Inc. From 1974 to 1983, Mr.
Christie held various collection manager positions with CCS.
JONATHAN P. ROBINSON, 32, has been the Vice President, Treasurer, Secretary
and Chief Financial Officer of the Company since May 1995 and held the same
positions with CCS from April 1993 to May 1995. From June 1986 to April 1993,
Mr. Robinson was employed by Arthur Andersen & Co., certified public
accountants, where he last served as an Audit Manager. Mr. Robinson is a
certified public accountant. Mr. Robinson is also the Director of Acquisitions
of TeleSpectrum.
3
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The Company knows of no family relationships between any Director,
executive officer or person nominated or chosen by the Company to become a
Director or executive officer other than the fact that Messrs. O'Neill and Mita
are cousins.
VOTE REQUIRED
Provided that a quorum of stockholders is present at the Meeting in person
or represented by proxy, and is entitled to vote thereon, the Class I Director
will be elected by a plurality of the votes cast by holders of Common Stock at
the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF
ROBERT N. VERRATTI AS THE CLASS I DIRECTOR.
------------------------------
PROPOSAL NO. 2
AMENDMENT AND RESTATEMENT OF 1995 STOCK OPTION PLAN
On April 3, 1995, the Board of Directors adopted and CCS (the then sole
shareholder of the Company) approved the Company's 1995 Stock Option Plan (the
'Plan'). The Plan permits the grant to employees, Directors and consultants of
the Company of incentive and non-qualified options to purchase shares of Common
Stock. The Plan may be administered by the Board of Directors or a committee of
the Board of Directors. The Plan is currently administered by the Compensation
Committee of the Board of Directors (the 'Plan Committee'). The material terms
of the Plan as currently in effect are described below.
Options may be granted under the Plan upon such terms and conditions as the
Board of Directors or the Plan Committee may determine from time to time,
provided that no person or entity may receive options to purchase more than
150,000 shares of Common Stock in any one fiscal year of the Company and (unless
extended) such options must be exercised within 90 days of termination of the
optionee's service or employment with the Company or its affiliates (provided,
options granted to Directors serving on the Plan Committee may be exercised
within six months of termination of service on the Board of Directors) for any
reason other than death or disability, and within one year of termination in any
event. Following termination, such optionee may only exercise options which were
exercisable on the date of termination. In addition, incentive stock options
must be exercised within ten years from the date of grant or, if the optionee
beneficially owns 10% or more of the Company's voting stock on the date of
grant, within five years from the date of grant. Options will generally be
granted after a recommendation by management.
The exercise price to acquire shares of Common Stock covered by an
incentive stock option granted under the Plan may not be less than the fair
market value of the Common Stock on the date of grant, as determined by the
Board of Directors or the Plan Committee, except that in the case of beneficial
owners of 10% or more of the voting stock of the Company on the date of grant,
the exercise price may not be less than 110% of the fair market value of the
Common Stock on the date of grant. The exercise price of non-qualified stock
options granted under the Plan is set by the Board of Directors or the Plan
Committee. The aggregate fair market value of shares of Common Stock with
respect to which an incentive stock option becomes exercisable for the first
time during any calendar year by any one person may not exceed $100,000.
The Board of Directors may terminate the Plan at any time or modify the
Plan to make certain administrative changes, such as changes imposed by changing
tax laws. The Board of Directors may not, without stockholder approval, change
the class of individuals eligible to receive incentive stock options under the
Plan or increase the maximum number of shares of Common Stock issuable under the
Plan. Options to purchase a total of 500,000 shares of Common Stock were
outstanding under the Plan as of August 15, 1996. In addition, options to
purchase a further 155,000 shares of Common Stock had been granted by the
Compensation Committee subject to stockholder approval of an increase in the
shares issuable under the Plan as of such date.
4
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The Board of Directors believes it is in the best interests of the Company
to adopt the Amended and Restated 1995 Stock Option Plan to provide the means
for the Company to further its efforts to induce persons of significant ability
and potential to join and remain with the Company and to maximize these efforts
on behalf of the Company to promote its future growth and success.
The Board of Directors is now requesting the Company's stockholders to
approve the terms of the Amended and Restated 1995 Stock Option Plan which would
incorporate the following proposed amendments.
The full text of the Amended and Restated 1995 Stock Option Plan is set
forth in Appendix A to this Proxy Statement. The foregoing summary and following
description of the proposed amendments are qualified in the entirety by
reference to the text of the Amended and Restated 1995 Stock Option Plan.
PROPOSED AMENDMENTS TO THE PLAN
Increase in Shares Subject to Plan
The Plan currently provides for the issuance of up to 500,000 shares of the
Company's Common Stock, which may be authorized and unissued shares or treasury
shares, or a combination of both, pursuant to the exercise of stock options
under the Plan. On August 23, 1996, the Board of Directors approved an amendment
to the Plan, subject to stockholder approval, to increase the maximum number of
shares which may be issued pursuant to stock options under the Plan from 500,000
shares to 1,000,000 shares.
Increase in Options Granted to Plan Committee Members
The Plan contains various restrictions on grants of stock options to Plan
Committee members in order to enable the Plan to satisfy the requirements
relating to disinterested administration of employee stock option plans set
forth in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the 'Exchange Act'). Rule 16b-3 provides an exemption for officers and
Directors from the trading restrictions relating to such persons set forth in
Section 16(b) under the Exchange Act with respect to the grant and exercise of
options and sale of stock obtained under an employee stock option plan if such
plan can satisfy the requirements set forth in Rule 16b-3. Currently, the Plan
provides that Plan Committee members may only receive an initial grant of an
option to purchase 7,500 shares of Common Stock during the year in which they
become Plan Committee members, and an annual grant of an option to purchase
2,000 shares of Common Stock thereafter. On August 23, 1996, the Board of
Directors approved an amendment to the Plan, subject to stockholder approval of
an increase in the shares issuable under the Plan, directing that Plan
Committee members receive, in addition to options granted to them for
serving as Plan Committee members, an annual option to purchase 25,000 shares of
Common Stock in consideration for acting as non-employee Directors ('Outside
Directors') of the Company. Such additional options will, however, remain
subject to the other restrictions on options granted to Plan Committee members
under the Plan.
Subject to stockholder approval of the Amended and Restated 1995 Stock
Option Plan, the Board has conditionally granted options to purchase 32,500
shares of Common Stock to Messrs. DeNino, Mita, Morgan and Verratti in
consideration of their serving as Outside Directors and members of the Board's
Compensation or Audit Committees, and an option to purchase 25,000 shares of
Common Stock to Mr. Del Raso (who was then an Outside Director) in consideration
for his serving as an Outside Director.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO STOCK OPTIONS
This discussion is intended as a summary only of the principal federal
income tax consequences of the grant and exercise of stock options under the
Plan and the disposition of shares of Common Stock acquired upon the exercise of
such stock options based upon tax laws and regulations in effect on the date of
this Proxy Statement, which laws and regulations are subject to change. The
federal, state and local income tax consequences to each holder of stock options
will depend upon individual circumstances. The federal income tax consequences
will also depend upon whether particular stock
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options qualify as incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the 'Code'), or are non-qualified
stock options. This summary does not purport to be a complete description of the
federal income tax consequences of the Plan.
Incentive Stock Options
A holder of an incentive stock option ('ISO') will not recognize taxable
income and the Company will not be allowed any compensation expense deduction
upon the grant of an ISO. In addition, an optionee will not recognize taxable
income and the Company will not be allowed any compensation expense deduction
upon the exercise of an ISO if it is exercised during the option exercise
period. The amount by which the fair market value of the shares exceeds the
option exercise price of an ISO at the time of exercise is an item of tax
preference for purposes of the 'alternative minimum tax' imposed by Section 55
of the Code. If the employee incurs minimum tax in the year of exercise,
however, he or she may qualify for the credit for prior year minimum tax
liability in the first future year he or she has regular tax liability.
In order to obtain ISO treatment for federal income tax purposes upon the
subsequent sale or other disposition by the optionee of the shares of Common
Stock received upon exercise of an ISO, the sale or other disposition must not
occur within two years from the date of the granting of the option nor within
one year after issuance of such shares upon exercise of the option (the 'ISO
holding period requirements').
If the ISO holding period requirements are satisfied, on the subsequent
sale or other disposition by the optionee of the shares of Common Stock received
upon the exercise of an option, the optionee generally will recognize a capital
gain or loss equal to the difference, if any, between the proceeds realized from
the sale or other disposition and the amount paid upon the exercise of the
option.
If the ISO holding period requirements are not satisfied, on the subsequent
sale or other disposition by the optionee of the shares of Common Stock received
upon the exercise of the option, the optionee will recognize ordinary income
taxable as compensation, and the Company will be allowed a compensation expense
deduction for federal income tax purposes, in an amount equal to the lesser of
(i) the difference, if any, between the fair market value of the shares on the
date of exercise and the amount paid upon exercise of the option or (ii) the
difference, if any, between the proceeds realized from the sale or other
disposition and the amount paid upon exercise of the option. Any additional gain
realized on such sale or disposition would give rise to long or short term
capital gain depending upon the length of time the shares are held prior to
disposition.
The tax basis of the shares of Common Stock received by the optionee upon
exercise will be equal to the amount paid upon exercise of the option, plus the
amount, if any, includable in his or her gross income as compensation income.
The holding period for the shares commences on the date of acquisition of the
Common Stock following exercise.
Non-Qualified Stock Options
A non-qualified stock option ('NQSO') granted under the Plan will not
result in any taxable income to the optionee or compensation expense to the
Company at the time of grant. A holder of an NQSO will generally recognize
ordinary income at the time of exercise of the option and the receipt of Common
Stock, such ordinary income being equal to the excess of the fair market value
of the stock on the date of exercise over the exercise price. The Company will
be allowed a compensation expense deduction for federal income tax purposes in
the same amount and at the same time as an optionee recognizes income as a
result of the exercise of an NQSO.
Upon disposition of shares acquired pursuant to an NQSO, a holder of such
option will recognize long-term or short-term capital gain or loss depending on
the length of time the shares acquired pursuant to the option were held after
exercise and prior to disposition, equal to the difference between the amount
realized on the disposition and the option holder's basis in the shares
(generally the fair market value of the shares subject to the option on the date
the option is exercised).
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STOCK OPTIONS GRANTED UNDER THE PLAN AND NEW PLAN BENEFITS
The following table sets forth certain information as of August 15, 1996
regarding grants of stock options under the Plan, and grants of stock options
subject to stockholder approval of the Amended and Restated 1995 Stock Option
Plan, to: (i) each Director and nominee for Director of the Company, (ii)
certain executive officers of the Company, (iii) all current executive officers
as a group, (iv) all current Directors who are not executive officers as a
group, (v) each associate of any of the foregoing, (vi) each person who received
or is to receive five percent or more of the stock options under the Plan and
(vii) all employees (including executive officers) of the Company as a group. No
options granted under the Plan and listed below had been exercised as of August
15, 1996, and as of such date the closing price for the Company's Common Stock
was $31.00 per share.
<TABLE>
<CAPTION>
NO. OF SHARES
OF COMMON
STOCK SUBJECT EXERCISE
TO PRICE
NAME AND TITLE OPTIONS GRANTED PER SHARE EXPIRATION
-------------- --------------- --------- ----------
<S> <C> <C> <C>
J. Brian O'Neill 150,000 $ 2.91 5/18/05
Chairman and Chief Executive Officer 150,000 $ 5.81 1/22/06
-------
300,000
Jonathan P. Robinson 40,000 $ 2.91 5/18/05
Vice President, Secretary, Treasurer and CFO 30,000 $ 5.81 1/22/06
-------
70,000
Mark DeNino 32,500(1) $11.25 4/19/96
Director
Bernard Morgan 32,500(1) $11.25 4/19/06
Director
Robert N. Verratti 32,500(1) $11.25 4/19/06
Director
Joseph V. Del Raso(2) 7,500 $ 3.81 11/18/96
Former Director 25,000(1) $11.25 11/18/96
-------
32,500
David S. Christie 30,000 $ 2.91 5/18/05
President
Kevin Mullin 25,000 $ 5.81 1/22/06
Director of Acquisitions
Eustace W. Mita, Director 32,500(1) $30.00 8/12/06
All Current Executive Officers as a Group
(3 persons) 400,000 N/A N/A
All Current Non-Executive Directors as a Group
(4 persons) 130,000(1) N/A N/A
All Employees as a Group
(8 persons) 475,000 N/A N/A
</TABLE>
- ------------------
(1) These options were conditionally granted to the persons indicated subject to
stockholder approval of the Amended and Restated 1995 Stock Option Plan,
which would increase the shares of Common Stock issuable under the Plan
from 500,000 shares to 750,000 shares.
(2) At the time of grant of these options, Mr. Del Raso was an Outside Director
of the Company.
VOTE REQUIRED
The affirmative vote of holders of a majority of the issued and outstanding
shares of Stock of the Company present, or represented by proxy, and entitled to
vote thereon at the Meeting, is required for approval of the Amended and
Restated 1995 Stock Option Plan. However, for the purposes of determining the
vote on this Proposal, broker non-votes will not be included in calculating the
shares of Stock present at the Meeting.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDED AND RESTATED 1995 STOCK OPTION PLAN.
------------------------------
PROPOSAL NO. 3
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
On August 23, 1996, the Board of Directors approved an amendment to the
Company's Restated Certificate of Incorporation, subject to ratification by the
stockholders, which would increase the authorized shares of all classes of the
Company's stock from 5,500,000 to 20,500,000 shares and increase the number of
authorized shares of the Company's Common Stock from 5,000,000 to 20,000,000
shares. If adopted by the stockholders, the existing Article 4A of the Company's
Restated Certificate of Incorporation will be deleted and the following will be
substituted therefor:
A. Authorized Shares. The total number of shares of all classes of
stock which the corporation shall have the authority to issue is
20,500,000, of which 20,000,000 shares are Common Stock, $.01 par value,
and 500,000 shares are Preferred Stock, without par value.
The proposal to increase the authorized number of shares of the Company is
being made in order to enable the Company to (i) increase the number of shares
of Company Common Stock available to be granted to employees and directors
pursuant to the Amended and Restated 1995 Stock Option Plan (see Proposal No. 2
above); and (ii) to have available sufficient additional shares of Common Stock
for corporate purposes when the need arises. The Board of Directors believes
that the present number of authorized but unissued shares of Common Stock is
insufficient to accomplish each of the foregoing. Therefore, the Board of
Directors desires to increase the number of authorized but unissued shares
pursuant to the proposed amendment to the Restated Certificate of Incorporation.
VOTE REQUIRED
The affirmative vote of holders of a majority of the issued and outstanding
Stock and the affirmative vote of a majority of each of the issued and
outstanding Preferred Stock and Common Stock voting as separate classes is
required for approval of the amendment to the Company's Restated Certificate of
Incorporation described above. For purposes of determining the vote on this
Proposal, broker non-votes will not be included in calculating the shares of
Stock present at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AN INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
------------------------------
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent certified public accountants, were the
auditors for the Company's most recent fiscal year. Stockholders will be asked
to approve the selection of Arthur Andersen LLP by the Board of Directors to
serve as independent certified public accountants for the Company for the fiscal
year ending December 31, 1996. It is expected that representatives of Arthur
Andersen LLP will be present at the Meeting, will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions raised at the Meeting or submitted to them in writing
before the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
------------------------------
8
<PAGE>
OTHER BUSINESS
Management of the Company does not intend to be present at the meeting and
does not have any reason to believe that others will present, any item of
business other than those set forth herein. If other matters are properly
presented for a vote, however, the Proxy will be voted upon such matters in
accordance with the judgment of the persons acting under the Proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's voting securities as of August 15, 1996 by: (i) each
person known by the Company to own beneficially more than five percent of the
outstanding shares of any class of voting securities, (ii) each Director and
nominee for Director of the Company, (iii) certain executive officers of the
Company and (iv) all Directors and executive officers of the Company as a group.
Percentage of Class is calculated on the basis of 1,197,696 shares of Common
Stock and 430,293 shares of Preferred Stock outstanding as of August 15, 1996,
except that shares underlying options or warrants exercisable within 60 days are
deemed to be outstanding for purposes of calculating the beneficial ownership of
securities owned by the holder of such options or warrants. Each beneficial
owner set forth below has sole voting and investment power over the shares
listed.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF CLASS
-------------------- ----------------------
COMMON PREFERRED COMMON PREFERRED
NAME AND ADDRESS (1) STOCK STOCK STOCK STOCK
- ----------------------------------------------------------------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C>
J. Brian O'Neill (2) (3) 773,731 0 42.9% 0
Technology Leaders II, L.P. (4)(5) 307,545 227,811 20.4% 52.9%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
TL Ventures Third Corp. (4)(6) 244,304 180,966 16.9% 42.1%
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Delaware Management Holdings, Inc. 77,940 0 6.5% 0
One Commerce Square
Philadelphia, PA 19103
Eustace Wolfington (3) 71,219 0 5.9% 0
Jonathan P. Robinson (7) 70,400 0 5.6% 0
David S. Christie (8) 30,000 0 2.4% 0
Mark DeNino (4)(9) 3,486 2,582 * *
Eustace W. Mita (3)(10) 24,100 0 2.0% 0
Robert N. Verratti (10) 0 0 0 0
Bernard Morgan (10) 0 0 0 0
All executive officers and directors as a group
(7 persons) (11) 901,717 2,582 47.3% *
</TABLE>
- ------------------
* Less than 1%
(1) Except where otherwise indicated, the address of each beneficial owner
listed is c/o CRW Financial, Inc., 443 South Gulph Road, King of Prussia,
PA 19406.
(2) Number of shares of Common Stock includes 300,000 shares issuable upon
exercise of stock options, 205,128 shares issuable upon conversion of a
$1,000,000 convertible subordinated note and 100,000 shares issuable upon
exercise of a warrant.
9
<PAGE>
(3) Mr. O'Neill is Mr. Wolfington's nephew and Mr. Mita's cousin. On July
19, 1995, Messrs. O'Neill, Wolfington and Mita had reached an oral
understanding to consider under mutually agreeable circumstances possibly
voting together with respect to certain matters submitted to a vote of the
Company's stockholders. During August 1996, however, such individuals
decided not to further consider voting together with respect to any matter
submitted to a vote of the stockholders of the Company. Such individuals
disclaim being part of any group with respect to the Company.
(4) A total of 427,711 shares of Preferred Stock convertible to an equal number
of shares of Common Stock and warrants to purchase 149,700 shares of
Common Stock is held by Technology Leaders II, L.P., TL Ventures Third
Corp., Mark DeNino and certain other related parties (the "TL Group"). Each
member of the TL Group has affirmed that it 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 securities of the Company held by any member
of the TL Group. The above table, however, only includes securities
actually held of record by the relevant securityholder.
(5) Number of Shares of Common Stock includes 227,811 shares of Preferred Stock
convertible to an equal number of shares of Common Stock and 79,734 shares
of Common Stock issuable upon exercise of a warrant.
(6) Number of shares of Common Stock includes 180,966 shares of Preferred Stock
convertible to an equal number of shares of Common Stock and 63,338 shares
of Common Stock issuable upon exercise of a warrant.
(7) Number of shares of Common Stock includes 70,000 shares issuable upon
exercise of stock options.
(8) Number of shares of Common Stock includes 30,000 shares issuable upon
exercise of stock options.
(9) Number of shares of Common Stock includes 2,582 shares of Preferred Stock
convertible to an equal number of shares of Common Stock and 904 shares of
Common Stock issuable upon exercise of a warrant, but does not include
32,500 shares issuable upon exercise of an option conditionally granted
subject to approval of the Amended and Restated 1995 Stock Option Plan.
(10) Number of shares of Common Stock does not include 32,500 shares issuable
upon exercise of an option conditionally granted subject to approval of the
Amended and Restated 1995 Stock Option Plan.
(11) Number of shares of Common Stock includes 400,000 shares issuable upon
exercise of stock options, 205,128 shares issuable upon conversion of a
$1,000,000 convertible subordinated note, 100,904 shares issuable upon
exercise of warrants and 2,582 shares of Preferred Stock convertible to an
equal number of shares of Common Stock, but does not include 130,000 shares
issuable upon exercise of options conditionally granted subject to approval
of the Amended and Restated 1995 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by or paid
to the Company's Chief Executive Officer and the two other executive officers of
the Company serving at the end of 1995 whose annual cash compensation exceeded
$100,000. The table includes amounts paid to such individuals by Casino and
Credit Services, Inc., the Company's former parent company, during 1993 and
1994.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------
OTHER SECURITIES
COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1) (2) OPTIONS (#)
- ------------------------------------------------- ---- --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
J. Brian O'Neill 1995 $275,000 $137,500 $14,632 150,000
Chairman of the Board and 1994 255,000 115,906 14,766 --
Chief Executive Officer 1993 241,031 50,000 14,766 --
David S. Christie 1995 135,000 -- 35,552 30,000
President 1994 85,517 -- 10,086 --
1993 -- -- 401 --
Jonathan P. Robinson 1995 110,000 55,000 6,752 40,000
Vice President, Treasurer, Secretary 1994 102,792 55,000 6,886 --
and Chief Financial Officer 1993 60,481 25,000 4,015 --
</TABLE>
- ------------------
(1) Each executive officer pays $100 per month toward lease payments with
respect to his Company furnished car. The balance of the lease payments of
$983 per month as to Mr. O'Neill and $400 per month as to Messrs. Christie
and Robinson are paid by the Company.
(2) During 1994 and 1995, Mr. Christie received a housing allowance of $2,400
per month.
OPTION GRANTS IN FISCAL YEAR 1995
The following table provides information regarding stock options granted
during the fiscal year ended December 31, 1995 to the executive officers named
in the Summary Compensation Table set forth above. All such stock options are
immediately exercisable for a term of ten years. No stock options were granted
with an exercise price less than current fair market value of the Company's
Common Stock, as determined under the Company's 1995 Stock Option Plan, as
amended.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
OF ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------------
NAME GRANTED (#) FISCAL YEAR SHARE DATE 5% ($) 10% ($)
- ----------------------------------- ------------- ----------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Brian O'Neill 150,000(1) 58% $2.91 5/18/05 $274,995 $694,035
David S. Christie 30,000(2) 12 2.91 5/18/05 54,999 138,807
Jonathan P. Robinson 40,000(3) 15 2.91 5/18/05 73,332 185,076
</TABLE>
- ------------------
(1) These options were granted as non-qualified stock options.
(2) These options were granted as incentive stock options.
(3) 34,364 of these options were granted as incentive stock options and the
remainder were granted as non-qualified stock options.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT
AT DECEMBER 31, DECEMBER 31, 1995
1995 ($)(1)
------------------- ----------------------
SHARES ACQUIRED VALUE EXERCISABLE (E) EXERCISABLE (E)
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
- ------------------------------------- ------------------- --------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
J. Brian O'Neill -- -- 150,000(E) $351,000(E)
David S. Christie -- -- 30,000(E) 70,200(E)
Jonathan P. Robinson -- -- 40,000(E) 93,600(E)
</TABLE>
11
<PAGE>
- ------------------
(1) Based upon the fair market value of the Company's Common Stock of $5.25 per
share as of December 31, 1995 determined by taking the closing price of the
Common Stock on the Nasdaq SmallCap Market on the last trading date of the
year.
COMPENSATION OF DIRECTORS
During 1995, the Company's non-employee Directors received stock options to
purchase 7,500 shares of Common Stock and cash consideration of $25,000 for
their service on the Board. On August 23, 1996, the Board of Directors approved
a resolution to provide for annual non-employee Director compensation of options
to purchase 25,000 shares of Common Stock and a cash payment of $10,000. Such
resolution also provided that members of the Audit or Compensation Committee of
the Board of Directors would receive compensation in the form of options to
purchase a further 7,500 shares of Common Stock in the year they are appointed
to such committees, and an annual option to purchase 2,000 shares of Common
Stock thereafter. Directors who are also employees of the Company receive no
compensation for their services as Directors.
EMPLOYMENT AGREEMENTS
On May 11, 1995, the Company entered into Employment Agreements with J.
Brian O'Neill as Chief Executive Officer and Jonathan P. Robinson as Vice
President, Treasurer and Chief Financial Officer, each for a term of three
years. These agreements provide for initial salaries for Messrs. O'Neill and
Robinson of $275,000 and $125,000, respectively, reviewed annually, as well as
performance bonuses based both upon performance targets for the Company's
consolidated earnings and a subjective analysis of the Company's overall
performance and present and future business prospects. The agreements also
provide for grants of stock options to Messrs. O'Neill and Robinson under the
Plan, to purchase 150,000 and 40,000 shares of Common Stock, respectively. The
agreements may be terminated by the Company with or without cause, provided that
if the Company terminates either agreement without cause, or if either party
terminates either agreement following a Change in Control (as defined in the
Employment Agreements) of the Company, the executive in question is entitled to
all salary and bonuses which would have been paid to him for the remainder of
the term of the agreement as well as continued employment benefits from the
Company for the remainder of the term of the agreement. In addition, the
agreements both contain a non-competition provision extending for one year after
termination of employment for cause and six months after termination for any
other reason; provided, however, that if an agreement is terminated by the
Company without cause or if either party terminates the agreement following a
Change in Control of the Company, the non-competition period ends upon the date
of termination.
During September 1995, the Company entered into a three year Employment
Agreement with David S. Christie as President of the Company. The agreement
provides for an initial salary of $130,000, as well as a housing allowance of
$2,400 per month and a performance bonus based on performance targets for the
Company's consolidated earnings. The agreement also provides for a grant of
stock options to Mr. Christie under the Plan to purchase 30,000 shares of Common
Stock. The agreement may be terminated by the Company with or without cause,
provided that if the Company terminates the agreement without cause, Mr.
Christie is entitled to the salary and bonuses which would have been payable
under the agreement for the remainder of the employment term, or eighteen
months, whichever is greater. In addition, if the Company does not elect to
renew the agreement on the same terms and conditions at the end of the
employment term, Mr. Christie is entitled to continued compensation payments and
benefits under the agreement for an additional eighteen months following
expiration of the term. The agreement also contains a non-competition provision
extending for one year following termination of employment.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1995, the Company's Compensation
Committee of the Board of Directors consisted of Joseph V. Del Raso and James
Delaney. Mr. Del Raso is a partner in the law firm of Stradley, Ronon, Stevens
and Young, LLP, which serves as outside legal counsel to the Company. Messrs.
Del Raso and Delaney have subsequently resigned from their positions on the
Board of Directors and the Compensation Committee.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to regulations adopted by the Securities and Exchange Commission
regarding disclosure of companies' executive compensation policies, the
Company's Compensation Committee of the Board of Directors has prepared the
following report pertaining to the Company's executive compensation policies for
the fiscal year ended December 31, 1995. For information regarding executive
compensation subsequent to December 31, 1995, see ' -- Employment Agreements.'
Basic Policy Considerations
The Company's compensation policies with respect to its executive officers,
as established by the Compensation Committee of the Board of Directors, are
based on the principles that compensation should be, to a significant extent,
reflective of the financial performance of the Company, and that a significant
portion of executive officers' compensation should provide long-term incentives.
Executive compensation is set at levels that are sufficiently competitive so
that the Company may attract, retain and motivate the best individuals to
contribute to the Company's goals and objectives and its overall financial
success. Methods of compensation are designed to provide incentives for
performance that result in continuing improvements in the Company's financial
results or condition, over both the short term and the long term, and to assure
continued service to the Company. Stock options constitute payment of a
significant portion of incentive compensation, which causes the ultimate
interest of the executives to be aligned with the interests of the stockholders
in increasing the value of their investment. Each individual executive officer's
compensation is based in part upon both individual experience and performance
and the Company's net income.
The compensation program is comprised of two elements: annual salary and
possible short term incentive awards in the form of cash bonuses, and a long
term incentive program (namely, stock options). The details of this compensation
program are discussed below.
Annual Compensation
The Committee establishes annual salary by evaluating individual
performance and considering compensation of comparable executives, although
salary determinations have not been based upon any specific constant criteria
and no formal comparison of any peer group to the salaries determined for the
executive officers has been made. No one factor or combination of factors is
determinative of annual and long term compensation for executive officers and
the ultimate compensation awarded represents a Committee practice of subjective,
informal compensation policies and practices.
Executive officers are eligible for annual incentive bonuses based on
specific net income and operating cash flow targets. In addition, the Committee
may grant bonuses at their discretion. Factors the Committee considers in
determining discretionary bonuses include the Company's overall financial
results, the Company's stock price performance, the overall economic conditions
in the markets in which the Company operates, the strength of the market, the
Company's competitive environment, the individual's contribution to the
Company's economic and strategic objectives, the efforts required and expended
by the individual, the individual's abilities to develop, execute and implement
short term and long term corporate goals and the individual's role in maximizing
Company profitability, managing costs and reducing the impact of economic and
demographic restrictions on Company performance. Nevertheless, no one factor or
combination of these factors specifically determine a discretionary bonus.
13
<PAGE>
Long Term Compensation -- Stock Options
The stock option component of the executive officers' compensation package
is designed to provide incentives for the enhancement of stockholder value,
since the full benefit of stock option grants will not be realized unless there
has been appreciation in per share values over several years. In this regard,
options have been granted at fair market value on the date of grant. As with the
grant of incentive cash bonuses, no constant criteria are used year after year.
Instead the Committee makes a determination of the effectiveness of the
executive and the level of contributions to the Company's success, with no one
factor or combination of factors being determinative. Because the options are
granted at fair market value relative to the date of grant, any value which
ultimately accrues to the executives is based entirely on the Company's
performance, as perceived by investors who establish the price for the Company's
shares.
CEO Compensation
J. Brian O'Neill has been the Company's Chairman and Chief Executive
Officer since its inception in May 1995. In determining Mr. O'Neill's
compensation, the Company evaluated the same factors as it does with other
executive officers. During fiscal year 1995, Mr. O'Neill received salary
compensation of $275,000 and a bonus of $137,500. The Company also granted
options to Mr. O'Neill to purchase 150,000 shares of Common Stock, exercisable
for ten years at an exercise of price $2.91 per share. Thus, a significant
portion of Mr. O'Neill's compensation is dependent on corporate performance
through appreciation of stock price.
Qualifying Executive Compensation for Deductibility Under Recently Amended
Provisions of the Code
Recent amendments to the Code provide that publicly held corporations may
generally not deduct certain compensation for executive officers unless such
compensation is 'performance-based' as defined in Section 162(m) of the Code.
The Compensation Committee notes that the provisions of the Amended and Restated
1995 Stock Option Plan, when it is approved by the Company's stockholders, are
designed to satisfy the requirements applicable to 'performance-based'
compensation plans and, accordingly, to preserve the deductibility by the
Company of compensation income recognized by holders of options granted under
the Amended and Restated 1995 Stock Option Plan. In addition, the Compensation
Committee intends to administer the Amended and Restated 1995 Stock Option Plan
so that it conforms in operation to all such requirements.
CONCLUSION OF REPORT
The Compensation Committee believes that this compensation program, with
its emphasis on incentivizing compensation, serves to focus the efforts of the
Company's executives on the attainment of sustained growth and profitability for
the benefit of the Company and its stockholders.
This report has been submitted by the Compensation Committee of the Board
of Directors.
14
<PAGE>
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
MARK DENINO AND ROBERT N. VERRATTI
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the period from
May 15, 1995 (the date of initial listing of the Common Stock on Nasdaq) through
and including December 31, 1995 with (i) the cumulative total return on the
Nasdaq Stock Market - U.S. Index and (ii) the cumulative total return on the
Nasdaq Financial Index. The comparison assumes $100 was invested on May 15, 1995
in the Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[In the printed version of this document a graph appears here that depicts
the following plot points.]
CRW Financial, Inc. NASDAQ Stock Market-US NASDAQ Financial
------------------- ---------------------- ----------------
05/15/95 100 100 100
12/31/95 162 127 123
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases an aggregate of 21,000 square feet of office space in
King of Prussia, Pennsylvania (suburban Philadelphia) from CRW Building Limited
Partnership ('CBLP'), a limited partnership controlled by J. Brian O'Neill, the
Company's Chief Executive Officer. The lease commenced on April 1, 1995 and
requires monthly base rent payments through April 1, 2005 of $28,875. The
Company believes the lease to be at the prevailing commercial market rate. In
1995, the Company paid $231,000 in rent to CBLP. Prior to April 1, 1995, the
Company's former corporate parent, Casino and Credit Services, Inc., leased
office space in Conshohocken, Pennsylvania from Lee Park Investors, L.P.
('LPI'), a limited partnership controlled by Mr. O'Neill. This lease was
terminated in 1995. The Company paid $133,000 in rent and termination fees to
LPI in 1995.
In November 1995, Mr. O'Neill and his wife (collectively, 'Lender') made a
$1 million loan (the 'Loan') to the Company and the Company executed a Term Loan
Note (the 'Note') in favor of Lender. The Note bears interest at 12.5% per
annum, is payable in equal monthly installments of $33,454 and matures on
November 1, 1998. The Company also paid Lender a commitment fee equal to one
percent of the amount of the Loan in consideration for making the Loan. The Loan
was used by the Company to purchase certain computer equipment in which Lender
obtained a security interest and for general working capital of the Company. The
Note is convertible at any time during the term thereof and for one year
thereafter into shares of Common Stock at a conversion rate of $4.875 per share
based on the principal then outstanding on the Note. Principal paid by the
Company during the last fiscal year may also be converted into Common Stock at
the same conversion price. As of August 15, 1996, the Note was convertible into
205,128 shares of Common Stock. The Company also entered into a Registration
Rights Agreement with Lender which provides Lender with certain piggyback and
demand registration rights with respect to the Common Stock which may be
obtained upon conversion of the Note. The piggyback registration rights remain
in effect for five years until November 1, 2000, and the demand registration
rights may only be exercised during the last year of such period.
In connection with the private placement of the Preferred Stock, Mr.
O'Neill entered into a put agreement which provides holders of the Preferred
Stock with the right to require Mr. O'Neill to purchase their Preferred Stock at
a price of $11.62 per share on March 1, 1999. In consideration for Mr. O'Neill's
execution of the put agreement, the Company granted Mr. O'Neill a warrant to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$5.81 per share. This warrant expires on August 31, 1999. The Company also
entered into a Registration Rights Agreement with Mr. O'Neill which provides Mr.
O'Neill with certain piggyback and demand registration rights with respect to
the Common Stock underlying the warrant. The piggyback registration rights
remain in effect for five years until February 29, 2001, and the demand
registration rights may only be exercised during the last year of such period.
The Company caused the formation of TeleSpectrum Worldwide Inc.
("TeleSpectrum") and subsequently during May 1996 received 8,510,137 shares of
common stock, par value $.01 per share ("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. On August 13,
1996, TeleSpectrum completed an initial public offering of 10,656,000 shares of
its Common Stock, at a public offering price of $15 per share (the "IPO").
The capital contribution made by the Company to TeleSpectrum represented
proceeds of borrowings by the Company 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 the Company of all amounts owing to Mellon
Bank, N.A. ("Mellon"), the Company'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, the Company issued
to the Lenders warrants (the "Lender Warrants") to purchase a total of 1,433,454
shares of TeleSpectrum's Common Stock held by the Company. 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 the Company,
TeleSpectrum granted the Lenders the right to have TeleSpectrum shares of Common
Stock subject to the Lender Warrants registered under 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 or significant stockholders
of the Company, their respective relationships with the Company and TeleSpectrum
and their respective loan and share amounts are as follows:
<TABLE>
<CAPTION>
================================================================================================
Subordinated TeleSpectrum Shares of Common
Lender Notes Amounts Stock Subject to Lender Warrants
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology Leaders II, L.P. $362,250 247,270
Stockholder of Company
- ------------------------------------------------------------------------------------------------
TL Ventures Third Corp. 287,750 196,423
Stockholder of Company
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
J.Brian O'Neill 650,000 443,693
Chairman and CEO of Company and
TeleSpectrum
- ------------------------------------------------------------------------------------------------
Bernard Morgan 100,000 68,250
Director of Company
- ------------------------------------------------------------------------------------------------
Robert N. Verratti 100,000 68,250
Director of Company
- ------------------------------------------------------------------------------------------------
Jonathan P. Robinson 50,000 34,145
CFO of Company and Director of
Acquisitions of TeleSpectrum
================================================================================================
</TABLE>
The Company also granted warrants (the "Management Warrants") to four
individuals related to the Company (the "Managers") in consideration for the
performance of their services on behalf of the Company in connection with
TeleSpectrum's IPO. The Management Warrants entitle the Managers to purchase a
total of 839,108 shares of TeleSpectrum Common Stock held by the Company 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 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 who represent
officers, directors or principal stockholders of the Company (whose
relationships to the Company 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 and Jonathan P. Robinson - 76,316
shares. The Company obtained an appraisal which indicated that the Management
Warrants had a fair value of $0.75 per warrant on the date of grant.
Accordingly, the Company recorded a non-cash compensation charge of $629,000 in
the second quarter.
If all of the Lender Warrants, Management Warrants and a warrant issued to
Mellon covering 75,445 shares of TeleSpectrum Common Stock are exercised, the
Company will receive approximately $3,500,000 in cash and would own 6,162,130
shares of TeleSpectrum.
17
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act and the regulations promulgated
thereunder require the Company's officers and Directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
(collectively, the 'Reporting Persons'), to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the U.S. Securities and Exchange
Commission ('SEC') and to furnish the Company with copies of these reports.
Based solely on the Company's review of the copies of these reports it has
received, and written representations received from certain Reporting Persons,
the Company believes that all filings required to be made by Reporting Persons
for transactions occurring during the fiscal year ended December 31, 1995 were
made on a timely basis, except that J. Brian O'Neill, who acquired an aggregate
of 33,600 shares of the Company's Common Stock in open market transactions
during June and August 1995, and a Term Loan Note from the Company convertible
into 205,128 shares of Common Stock in October 1995, reported such transactions
in a Form 4 filed with the SEC on December 6, 1995.
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ANNUAL REPORT
A copy of the Company's Annual Report, which includes a copy of the
Company's Form 10-K and Form 10-K/A for the fiscal year ended December 31, 1995,
is enclosed. The Company will provide copies of any exhibits to Form 10-K and
Form 10-K/A to a stockholder of record as of the Record Date upon the written
request of such person and such person's payment of the Company's reasonable
expenses of furnishing such exhibit. All such requests should be directed to
Jonathan P. Robinson, Vice President, Treasurer, Secretary and Chief Financial
Officer, CRW Financial, Inc., 443 South Gulph Road, King of Prussia, PA 19406.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1997 Annual Meeting
of Stockholders must be received by the Company at its offices in King of
Prussia, Pennsylvania on or before April __, 1997 in order to be considered for
inclusion in the Company's Proxy Statement and form of proxy relating to such
meeting. Any change in this date will be communicated to stockholders in a
timely fashion.
By Order of the Board of Directors
J. BRIAN O'NEILL
Chairman of the Board and
Chief Executive Officer
September __, 1996
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APPENDIX A
CRW FINANCIAL, INC.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
1. Purpose. CRW Financial, Inc. (the 'Company') hereby adopts the CRW
Financial, Inc. Amended and Restated 1995 Stock Option Plan (the 'Plan'). The
Plan is intended to recognize the contributions made to the Company by employees
(including employees who are members of the Board of Directors) of the Company
or any Affiliate (as defined below) and certain consultants or advisors to the
Company or an Affiliate, to provide such persons with additional incentive to
devote themselves to the future success of the Company or an Affiliate, and to
improve the ability of the Company or an Affiliate to attract, retain and
motivate individuals upon whom the Company's sustained growth and financial
success depend, by providing such persons with an opportunity to acquire or
increase their proprietary interest in the Company through receipt of rights to
acquire the Company's Common Stock, par value $.01 per Share (the 'Common
Stock'). In addition, the Plan is intended as an additional incentive to
directors of the Company who are not employees of the Company or an Affiliate to
serve on the Board of Directors and to devote themselves to the future success
of the Company by providing them with an opportunity to acquire or increase
their proprietary interest in the Company through the receipt of Options to
acquire Common Stock.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
(a) 'Affiliate' means a corporation which is a parent corporation or a
subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code.
(b) 'Board of Directors' means the Board of Directors of the Company.
(c) 'Change of Control' shall have the meaning as set forth in Section
10 of the Plan.
(d) 'Code' means the Internal Revenue Code of 1986, as amended.
(e) 'Committee' shall have the meaning set forth in Section 3 of the
Plan.
(f) 'Company' means CRW Financial, Inc., a Delaware corporation.
(g) 'Disability' shall have the meaning set forth in Section 22(e)(3)
of the Code.
(h) 'Disinterested Committee Members' means directors of the Company
who are (i) not current employees of the Company, (ii) not former employees
of the Company who received or who will receive compensation for prior
services (other than benefits under a tax-qualified retirement plan) during
the current fiscal year, (iii) not currently and have not in the past been
officers of the Company and (iv) not receiving any remuneration from the
Company in any capacity other than in their role as directors.
(i) 'Distribution' means the distribution of the stock of the Company
to the stockholders of Casino & Credit Services, Inc. ('CCS') pursuant to
the terms of the Reorganization and Distribution Agreement, dated as of
November 1, 1994, between CCS and the Company.
(j) 'Fair Market Value' shall have the meaning set forth in Subsection
8(b) of the Plan.
(k) 'ISO' means an Option granted under the Plan which is intended to
qualify as an 'incentive stock option' within the meaning of Section 422(b)
of the Code.
(l) 'Non-qualified Stock Option' means an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as an
'incentive stock option' within the meaning of Section 422(b) of the Code.
(m) 'Option' means either an ISO or a Non-qualified Stock Option
granted under the Plan.
(n) 'Optionee' means a person to whom an Option has been granted under
the Plan, which Option has not been exercised and has not expired or
terminated.
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(o) 'Option Document' means the document described in Section 8 or
Section 9 of the Plan, as applicable, which sets forth the terms and
conditions of each grant of Options.
(p) 'Option Price' means the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) of
the Plan.
(q) 'Rule 16b-3' means Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended.
(r) 'Section 16 Officers' means the Chairman of the Board of Directors
(if the Chairman of the Board of Directors is a payroll employee),
President, Executive Vice President, Senior Vice President, Vice President,
Treasurer and any other person who is an 'officer' within the meaning of
Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as
amended, or any successor rule.
(s) 'Shares' means the shares of Common Stock of the Company which are
the subject of Options.
3. Administration of the Plan. The Plan shall be administered by the
Board of Directors or a committee or committees designated by the Board of
Directors. The Board of Directors may (i) designate a committee composed of two
or more of its directors (who will be Disinterested Committee Members) to
operate and administer the Plan, (ii) designate two committees to operate and
administer the Plan in its stead, one of such committees composed of two or more
Disinterested Committee Members to operate and administer the Plan only with
respect to the Company's Section 16 Officers, and the other such committee
composed of two or more directors to operate and administer the Plan with
respect to persons other than Section 16 Officers and Disinterested Committee
Members or (iii) designate only one committee (consisting of Disinterested
Committee Members) to operate and administer the Plan only with respect to the
Company's Section 16 Officers and itself operate and administer the Plan with
respect to persons not within the jurisdiction of such committee. Any of such
committees designated by the Board of Directors, and the Board of Directors
itself in its administrative capacity with respect to the Plan, is referred to
as the 'Committee.' The Plan, as it pertains to Disinterested Committee Members
who are to be granted Options in accordance with the provisions of Section 9,
shall be administered by the Board of Directors.
(a) Meetings. The Committee shall hold meetings at such times and places
as it may determine. Acts approved at a meeting by a majority of the members of
the Committee or acts approved in writing by the unanimous consent of the
members of the Committee shall be the valid acts of the Committee.
(b) Grants. Except with respect to Options granted to Disinterested
Committee Members pursuant to Section 9, the Committee shall from time to time
at its discretion direct the Company to grant Options pursuant to the terms of
the Plan. The Committee shall have plenary authority to (i) determine the
Optionee to whom, the times at which and the price at which Options shall be
granted, (ii) determine the type of Option to be granted and the number of
Shares subject thereto and (iii) approve the form and terms and conditions of
the Option Documents; all subject, however, to the express provisions of the
Plan. In making such determinations, the Committee may take into account the
nature of the Optionee's services and responsibilities, the Optionee's present
and potential contribution to the Company's success and such other facts as it
may deem relevant. Notwithstanding the foregoing, grants of Options to
Disinterested Committee Members shall be made only in accordance with Section 9.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Option granted under it shall be final, binding and conclusive.
(c) Exculpation. No member of the Board of Directors shall be personally
liable for monetary damages for any action taken or any failure to take any
action in connection with the administration of the Plan or the granting of
Options under the Plan, provided that this Subsection 3(c) shall not apply to
(i) any breach of such member's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, (iii) acts or omissions that would
result in liability under Section 174 of the General Corporation Law of the
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State of Delaware, as amended and (iv) any transaction from which the member
derived an improper personal benefit.
(d) Indemnification. Service on the Committee shall constitute service as
a member of the Board of Directors of the Company. Each member of the Committee
shall be entitled without further act on his part to indemnity from the Company
to the fullest extent provided by applicable law and the Company's Certificate
of Incorporation and/or By-laws in connection with or arising out of any action,
suit or proceeding with respect to the administration of the Plan or the
granting of Options thereunder in which he or she may be involved by reason of
his or her being or having been a member of the Committee, whether or not he or
she continues to be such member of the Committee at the time of the action, suit
or proceeding.
(e) Limitations on Grants of Options to Consultants and Advisors. With
respect to the grant of Options to consultants or advisors, bona fide services
shall be rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.
4. Grants under the Plan. Grants under the Plan may be in the form of a
Non-qualified Stock Option, an ISO or a combination thereof, at the discretion
of the Committee.
5. Eligibility. All employees, consultants and advisors of the Company or
an Affiliate and members of the Board of Directors shall be eligible to receive
Options hereunder. However, Disinterested Committee Members may receive Options
only pursuant to Section 9. The Committee, in its sole discretion, shall
determine whether an individual is eligible to receive Options under the Plan.
6. Shares Subject to Plan. The maximum aggregate number of Shares for
which Options may be granted pursuant to the Plan is One Million (1,000,000)
Shares, subject to adjustment as provided in Section 11 of the Plan. The maximum
aggregate number of Shares for which Options may be granted under the Plan to
any single employee of the Company or an Affiliate in any taxable year of the
Company shall be One Hundred Fifty Thousand (150,000) Shares, subject to
adjustment as provided in Section 11. The Shares shall be issued from authorized
and unissued Common Stock or Common Stock held in or hereafter acquired for the
treasury of the Company. If an Option terminates or expires without having been
fully exercised for any reason, the Shares for which the Option was not
exercised may again be the subject of one or more Options granted pursuant to
the Plan.
7. Term of the Plan. The Plan is effective as of April 3, 1995, the date
on which it was adopted by the Board of Directors subject to the approval of the
Plan on or before April 5, 1995 by a majority of the votes of the outstanding
voting stock of the Company. If the Plan is not so approved on or before April
5, 1995, all Options granted under the Plan shall be null and void. No Option
may be granted under the Plan after April 3, 2005.
8. Option Documents and Terms. Each Option granted under the Plan shall be
a Non-qualified Stock Option unless the Option shall be specifically designated
at the time of grant to be an ISO for federal income tax purposes. If any Option
designated an ISO is determined for any reason not to qualify as an incentive
stock option within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the provisions of
the Plan. Options granted pursuant to the Plan shall be evidenced by the Option
Documents in such form as the Committee shall from time to time approve, which
Option Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall from time
to time require which are not inconsistent with the terms of the Plan. However,
the provisions of this Section 8 shall not be applicable to Options granted to
Disinterested Committee Members, except as otherwise provided in Subsection
9(c).
(a) Number of Option Shares. Each Option Document shall state the number
of Shares to which it pertains. An Optionee may receive more than one Option,
which may include Options which are intended to be ISOs and Options which are
not intended to be ISOs, but only on the terms and subject to the conditions and
restrictions of the Plan.
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(b) Option Price. Each Option Document shall state the Option Price which,
for a Non-qualified Stock Option other than a Non-Qualified Stock Option granted
pursuant to Section 9, may be less than, equal to, or greater than the Fair
Market Value of the Shares on the date the Option is granted and, for an ISO,
shall be at least 100% of the Fair Market Value of the Shares on the date the
Option is granted as determined by the Committee in accordance with this
Subsection 8(b); provided, however, that if an ISO is granted to an Optionee who
then owns, directly or by attribution under Section 424(d) of the Code, shares
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company or an Affiliate, then the Option Price shall be
at least 110% of the Fair Market Value of the Shares on the date the Option is
granted. If the Common Stock is traded in a public market, then the Fair Market
Value per share shall be, if the Common Stock is listed on a national securities
exchange or included in the NASDAQ National Market System, the last reported
sale price thereof on the relevant date, or, if the Common Stock is not so
listed or included, the mean between the last reported 'bid' and 'asked' prices
thereof on the relevant date, as reported on NASDAQ or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc. or as reported in a
customary financial reporting service, as applicable and as the Committee
determines. Notwithstanding anything herein to the contrary, during the twelve
month period commencing with the date on which the initial distribution of the
Common Stock of the Company is consummated, the Option Price shall not be less
than the greater of (i) the Fair Market Value of the Common Stock of the Company
on the date the Option is granted or (ii) the price at which the Common Stock of
the Company was initially offered to the public.
(c) Exercise. No Option shall be deemed to have been exercised prior to
the receipt by the Company of written notice of such exercise and of payment in
full of the Option Price for the Shares to be purchased. Each such notice shall
specify the number of Shares to be purchased and shall (unless the Shares are
covered by a then current registration statement or a Notification under
Regulation A under the Securities Act of 1933, as amended (the 'Act'), contain
the Optionee's acknowledgment in form and substance satisfactory to the Company
that (i) such Shares are being purchased for investment and not for distribution
or resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (ii) the Optionee has been advised and understands that
(A) the Shares have not been registered under the Act and are 'restricted
securities' within the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (B) the Company is under no obligation to register
the Shares under the Act or to take any action which would make available to the
Optionee any exemption from such registration, (iii) such Shares may not be
transferred without compliance with all applicable federal and state securities
laws and (iv) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the foregoing, if the Company
determines that issuance of Shares should be delayed pending (i) registration
under federal or state securities laws, (ii) the receipt of an opinion of
counsel acceptable to the Company that an appropriate exemption from such
registration is available, (iii) the listing or inclusion of the Shares on any
securities exchange or an automated quotation system or (iv) the consent or
approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this Subsection 8(c) has occurred.
(d) Medium of Payment. An Optionee shall pay for Shares (i) in cash, (ii)
by certified or cashier's check payable to the order of the Company or (iii) by
such other mode of payment as the Committee may approve, including payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board. Without limiting the foregoing, the Committee may provide
in an Option Document that payment may be made in whole or in part in shares of
the Company's Common Stock. If this occurs, then the Optionee shall deliver to
the Company certificates registered in the name of such Optionee representing
shares owned by such Optionee, free of all liens, claims and encumbrances of
every kind and having an aggregate Fair Market Value on the date of delivery
that is at least as great as the Option Price of the Shares (or the relevant
portion thereof) with respect to which such Option is to be exercised by the
payment in respect to which such Option is to be exercised by the payment in
shares of Common Stock, endorsed in blank or accompanied by stock
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powers duly endorsed in blank by the Optionee. In the event that certificates
for shares of the Company's Common Stock delivered to the Company represent a
number of shares in excess of the number of shares required to make payment for
the Option Price of the Shares (or the relevant portion thereof) with respect to
which such option is to be exercised by payment in shares of Common Stock, the
stock certificate issued to the Optionee shall represent (i) the Shares in
respect of which payment is made, and (ii) such excess number of shares.
Notwithstanding the foregoing, the Committee may impose from time to time such
limitations and prohibitions on the use of shares of the Common Stock to
exercise an Option as it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to occur of the
following:
(A) Expiration of the Option term specified in the Option Document,
which, in the case of an ISO, shall not occur after (1) ten years from
the date of grant, or (2) five years from the date of grant of an ISO if
the Optionee on the date of grant owns, directly or by attribution under
Section 424(d) of the Code, shares possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate;
(B) Expiration of ninety (90) days from the date the Optionee's
employment or service with the Company or its Affiliates terminates for
any reason other than Disability or death or as otherwise specified in
Subsection 8(e)(i)(D) or 8(e)(i)(E) below;
(C) Expiration of one year from the date such employment or service
with the Company or its Affiliates terminates due to the Optionee's
Disability or death;
(D) A finding by the Committee, after full consideration of the
facts presented on behalf of both the Company and the Optionee, that the
Optionee has breached his or her employment or service contract with the
Company or an Affiliate, or has been engaged in disloyalty to the
Company or an Affiliate, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the
course of his employment or service, or has disclosed trade secrets or
confidential information of the Company or an Affiliate. In such event,
in addition to immediate termination of the Option, the Optionee shall
automatically forfeit all Shares for which the Company has not yet
delivered the share certificates upon refund by the Company of the
Option Price. Notwithstanding anything herein to the contrary, the
Company may withhold delivery of share certificates pending the
resolution of any inquiry that could lead to a finding resulting in a
forfeiture; or
(E) The date, if any, set by the Board of Directors as an
accelerated expiration date pursuant to Section 10 hereof.
With respect to Subsections 8(e)(i)(B) and (C) above, the only
Options which may be exercised during the ninety (90) day and one-year
period, as the case may be, following the date of Optionee's termination
of employment or service with the Company or its Affiliates, are Options
which were exercisable on the last date of such employment or service
and not Options which, if the Optionee were still employed or rendering
service during such three-month or one-year period, would become
exercisable, unless the Option Document specifically provides to the
contrary.
(ii) Notwithstanding the foregoing, the Committee may extend the
period during which all or any portion of an Option may be exercised to a
date no later than the Option term specified in the Option Document
pursuant to Subsection 8(e)(i)(A), provided that any change pursuant to
this Subsection 8(e)(ii) which would cause an ISO to become a Non-qualified
Stock Option may be made only with the consent of the Optionee.
(f) Transfers. No Option granted under the Plan may be transferred, except
by will or by the laws of descent and distribution. During the lifetime of the
person to whom an Option is granted, such Option may be exercised only by such
person. Notwithstanding the foregoing, a Non-qualified Stock
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Option may be transferred pursuant to the terms of a 'qualified domestic
relations order,' within the meaning of Sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of the Employee Retirement Income Security
Act of 1974, as amended.
(g) Limitation on ISO Grants. In no event shall the aggregate fair market
value of the shares of Common Stock (determined at the time the ISO is granted)
with respect to which incentive stock options under all incentive stock option
plans of the Company or its Affiliates are exercisable for the first time by the
Optionee during any calendar year exceed $100,000.
(h) Other Provisions. Subject to the provisions of the Plan, the Option
Documents shall contain such other provisions including, without limitation,
provisions authorizing the Committee to accelerate the exercise date of all or
any portion of an Option granted pursuant to the Plan, additional restrictions
upon the exercise of the Option or additional limitations upon the term of the
Option, as the Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the Committee shall
have the right to amend Option Documents issued to an Optionee, subject to the
Optionee's consent if such amendment is not favorable to the Optionee, except
that the consent of the Optionee shall not be required for any amendment made
pursuant to Section 10 of the Plan, as applicable.
9. Special Provisions Relating to Grants of Options to Disinterested
Committee Members. Options granted pursuant to the Plan to Disinterested
Committee Members shall be granted, without any further action by the Committee,
in accordance with the terms and conditions set forth in this Section 9. Options
granted pursuant to this Section 9 shall be evidenced by Option Documents in
such from as the Committee shall from time to time approve, which Option
Documents shall comply with and be subject to the following terms and conditions
and such other terms and conditions as the Committee shall from time to time
require which are not inconsistent with the terms of the Plan.
(a) Timing of Grants; Number of Shares Subject of Options; Exercisability
of Options; Option Price. Each Disinterested Committee Member who becomes a
Committee Member prior to the initial distribution of the Shares shall be
granted an Option to purchase Seven Thousand Five Hundred (7,500) Shares on the
date of the consummation of the Distribution ('Initial Grant'). Each other
Disinterested Committee Member shall be granted an Option to purchase Seven
Thousand Five Hundred (7,500) Shares ('Initial Grant') on the April 1 coincident
with or following the date on which he becomes a member of the Committee.
Following a Disinterested Committee Member's receipt of an Initial Grant, such
Disinterested Committee Member shall be granted an Option to purchase Two
Thousand (2,000) Shares on each April 1 thereafter, commencing April 1, 1996,
provided such Disinterested Committee Member continues to serve as a
Disinterested Committee Member on the date of each such grant. In addition,
Disinterested Committee Members shall also be granted an annual Option to
purchase Twenty-Five Thousand (25,000) Shares in consideration of their service
as non-employee Directors of the Company, provided that the terms of such Option
must comply with the other provisions of this Section 9. Each such Option shall
be a Non-qualified Stock Option exercisable immediately except that the Initial
Grant shall first become exercisable on the date of the consummation of the
Distribution. The Option Price shall be equal to the Fair Market Value of the
Shares on the date the Option is granted, provided, however, that the Option
Price for all Options granted under this Section 9 during the twelve month
period commencing with the date on which the initial public offering of the
Common Stock of the Company was offered to the public shall be equal to the
greater of (i) the Fair Market Value of the Common Stock of the Company on the
date the Option is granted or (ii) the price of the Common Stock of the Company
on the date of the Initial Grant.
(b) Termination of Options Granted Pursuant to Section 9. All options
granted pursuant to this Section 9 shall be exercisable until the first to occur
of the following:
(i) Expiration of ten (10) years from the date of grant;
(ii) Expiration of six (6) months from the date the Optionee's service
as a member of the Board of Directors terminates for any reason other than
Disability or death; or
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(iii) Expiration of one (1) year from the date the Optionee's service
with the Company as a member of the Board of Directors terminates due to
the Optionee's Disability or death.
(c) Applicability of Provisions of Section 8 to Options Granted Pursuant to
Section 9. The following provisions of Section 8 shall be applicable to Options
granted pursuant to Section 9: Subsection 8 (a) (provided that all Options
granted pursuant to this Section 9 shall be Non-qualified Stock Options); the
last sentence of Subsection 8(b); Subsection 8(c); Subsection 8(d) (provided
that Option Documents relating to Options granted pursuant to this Section 9
shall provide that payment may be made in whole or in part in shares of Company
Common Stock); Subsection 8(f); and Subsection 8(i).
10. Change of Control. In the event of a Change of Control, the Committee
may take whatever action it deems necessary or desirable with respect to the
Options outstanding, including, without limitation, accelerating the expiration
or termination date in the respective Option Documents to a date no earlier than
thirty (30) days after notice of such acceleration is given to the Optionee,
provided, however, in the event of a Change in Control, Options granted pursuant
to the Plan shall become immediately exercisable in full.
A 'Change in Control' shall be deemed to have occurred upon the earliest to
occur of the following events: (a) the date the stockholders of the Company (or
the Board of Directors, if stockholder action is not required) approve a plan or
other arrangement pursuant to which the Company will be dissolved or liquidated,
or (b) the date the stockholders of the Company (or the Board of Directors, if
stockholder action is not required) approve a definitive agreement to sell or
otherwise dispose of substantially all of the assets of the Company, or (c) the
date the stockholders of the Company (or the Board of Directors, if stockholder
action is not required) and the stockholders of the other constituent
corporation (or its board of directors if stockholder action is not required)
have approved a definitive agreement to merge or consolidate the Company with or
into such other corporation, other than, in either case, a merger or
consolidation of the Company in which holders of shares of the Company's Common
Stock immediately prior to the merger or consolidation will hold at least a
majority of the ownership of common stock of the surviving corporation (and, if
one class of common stock is not the only class of voting securities entitled to
vote on the election of directors of the surviving corporation, a majority of
the voting power of the surviving corporation's voting securities) immediately
after the merger or consolidation, which common stock (and, if applicable,
voting securities) is to be held in the same proportion as such holders'
ownership of Common Stock of the Company immediately before the merger or
consolidation, or (d) the date any entity, person or group within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended, (other than (i) the Company or any of its subsidiaries or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any of
its subsidiaries, or (ii) any person who, on the date the Plan is effective,
shall own Common Stock of the Company or securities which are exercisable or
convertible or exchangeable into Common Stock of the Company) shall have become
the beneficial owner of or shall have obtained voting control over, more than
thirty percent (30%) of the outstanding shares of the Common Stock of the
Company, or (e) the first day after the date this Plan is effective when
directors are elected such that a majority of the Board of Directors shall have
been members of the Board of Directors for less than two (2) years, unless the
nomination for election of each new director who was not a director at the
beginning of such two (2) year period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period.
11. Adjustments on Changes in Capitalization. The aggregate number of
Shares and class of shares as to which Options may be granted hereunder, the
number and class or classes of shares covered by each outstanding Option and the
Option Price thereof shall be appropriately adjusted in the event of a stock
dividend, stock split, recapitalization or other change in the number or class
of issued and outstanding equity securities of the Company resulting from a
subdivision or consolidation of the Common Stock and/or, if appropriate, other
outstanding equity securities or a recapitalization or other capital adjustment
(not including the issuance of Common Stock on the conversion of other
securities of the Company which are convertible into Common Stock) affecting the
Common Stock which is
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effected without receipt of consideration by the Company. The Committee shall
have authority to determine the adjustments to be made under this Section, and
any such determination by the Committee shall be final, binding and conclusive;
provided, however, that no adjustment shall be made which will cause an ISO to
lose its status as such without the consent of the Optionee, except for
adjustments made pursuant to Section 10 hereof.
12. Amendment of the Plan. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of Shares
as to which Options may be granted without obtaining approval, within twelve
months before or after such action, by vote of a majority of the votes cast at a
duly called meeting of the stockholders at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the matter. In addition, the provisions of
Section 9 that determine (a) which directors shall be granted Options pursuant
to Section 9; (b) the amount of Shares subject to Options granted pursuant to
Section 9; (c) the price at which shares subject to Options granted pursuant to
Section 9 may be purchased and (d) the timing of grants of Options pursuant to
Section 9 shall not be amended more than once every six months, other than to
comport with changes in the Code or the Employee Retirement Income Security Act
of 1974, as amended. No amendment of the Plan shall adversely affect any
outstanding Option, however, without the consent of the Optionee that holds such
Option.
13. No Commitment to Retain. The grant of an Option pursuant to the Plan
shall not be construed to imply or to constitute evidence of any agreement,
express or implied, on the part of the Company or any Affiliate to retain the
Optionee in the employ of the Company or an Affiliate and/or as a member of the
Company's Board of Directors or in any other capacity.
14. Withholding of Taxes. Whenever the Company proposes or is required to
deliver or transfer shares in connection with the exercise of an Option, the
Company shall have the right to (a) require the recipient to remit or otherwise
make available to the Company an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery or transfer of
any certificate or certificates for such Shares or (b) take whatever other
action it deems necessary to protect its interests with respect to tax
liabilities. The Company's obligation to make any delivery or transfer of Shares
shall be conditioned on the Optionee's compliance, to the Company's
satisfaction, with any withholding requirement.
15. Interpretation. The Plan is intended to enable transactions under the
Plan with respect to directors and officers (within the meaning of Section 16(a)
under the Securities Exchange Act of 1934, as amended) to satisfy the conditions
of Rule 16b-3. To the extent that any provision of the Plan, or any provisions
of any Option granted pursuant to the Plan would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section
3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
A-8
<PAGE>
Preliminary Proxy
CRW FINANCIAL, INC.
443 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Brian O'Neill and Jonathan P. Robinson, and
each of them, as Proxy, with the power to appoint his substitute, and hereby
authorizes him to represent and to vote, as designated below, all the shares of
common stock and Series A Convertible Preferred Stock of CRW Financial, Inc.
held on record by the undersigned on August 5, 1996 at the annual meeting of
stockholders to be held on September 20, 1996 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF CLASS I DIRECTOR / / FOR the nominee listed below / / WITHHOLD AUTHORITY to vote
Robert N. Verratti for the nominee listed below.
2. PROPOSAL RELATING TO ADOPTION OF THE COMPANY'S AMENDED AND RESTATED 1995 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL RELATING TO THE INCREASE IN THE COMPANY'S AUTHORIZED BUT UNISSUED SHARES OF COMMON STOCK FROM 5,000,000 TO
20,000,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN
4. SELECTION OF AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
5. In his discretion the Proxy is authorized to vote upon such other business as may properly come before the meeting.
</TABLE>
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Please sign exactly as name appears below.
When shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as
such. If a corporation, please sign in
full corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
DATED:____________________________ , 1996
__________________________________________
Signature
__________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
