SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission File Number 0-26015
CRW FINANCIAL, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2691986
----------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
443 South Gulph Road
King of Prussia, PA 19406
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 878-7400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------- --------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
---------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X}
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is approximately $27,134,754. Such aggregate market value was
computed by reference to the closing price of the Common Stock as reported on
the NASDAQ Small Cap Market on March 28, 1997. For purposes of making this
calculation only, the Registrant has excluded shares held by all directors,
executive officers and beneficial owners of more than ten percent of the Common
Stock of the Company.
The number of shares of the Registrant's Common Stock outstanding as of
March 28, 1997 was 5,884,984 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for its 1997 Annual
Meeting of Stockholders are incorporated by reference into Part III.
TABLE OF CONTENTS
PART I
Item 1. Business...................................................... 2
Item 2. Properties.................................................... 5
Item 3. Legal Proceedings............................................. 6
Item 4. Submission of Matters to a Vote of Security Holders........... 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters........................................... 7
Item 6. Selected Financial Data....................................... 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 9
Item 8. Financial Statements and Supplementary Data................... 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 14
PART III
Item 10. Directors and Executive Officers of the Registrant............ 14
Item 11. Executive Compensation........................................ 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management......................................... 14
Item 13. Certain Relationships and Related Transactions................ 14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K...................................................... 15
In addition to historical information, this Annual Report contains
forward-looking statements relating to such matters as anticipated financial
performance, business prospects and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the Company
notes that a variety of factors could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The risks
and uncertainties that may affect the operation, performance and development and
results of the Company's business include, but are not limited to, those matters
discussed herein in the sections entitled "Item 1 - Business" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations." The words "believe," "expect," "anticipate," "project" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof.
Unless the context indicates otherwise, the terms "CRW" and "Company" refer
to CRW Financial, Inc.
1
<PAGE>
PART I
ITEM 1. BUSINESS
Background
CRW Financial, Inc. ("CRW" or the "Company") founded TeleSpectrum Worldwide
Inc. ("TLSP") in April 1996. TLSP is a premier provider of integrated
teleservices and is listed on the NASDAQ National Market System under the symbol
"TLSP." CRW owns approximately 6.2 million shares of TLSP, representing
approximately 25% of the outstanding common stock of TLSP. CRW also owns 345,178
shares of NCO Group, Inc. ("NCOG") common stock. NCOG is a leading provider of
accounts receivable services listed on the NASDAQ National Market System under
the symbol NCOG. CRW's investment in NCOG was made on February 2, 1997 when it
sold the assets of its accounts receivable management and debt collection
division (the "Collection Business" or "Collection Division") to NCOG. In
addition, CRW's wholly-owned subsidiary Casino Money Centers, Inc. ("CMC")
provides check cashing and other financial services to the casino industry.
CRW was spun-off from its predecessor company, Casino & Credit Services,
Inc. ("CCS"), in May 1995. CCS was formed in May 1992 and in July 1992, CCS
purchased Receivable Management Services, Inc. and Central Credit, Inc. ("CCI")
from TRW Inc. for approximately $11.5 million. CCS was capitalized with
approximately $12.1 million of bank and convertible debt and $1 million of
equity. In August 1993, CCS completed an initial public offering of its common
stock, generating net proceeds of approximately $12.7 million and valuing CCS at
approximately $26 million. Proceeds from the offering were used to repay all of
CCS' debt and fund the acquisition of Central Credit of New Jersey, Inc., CCI's
only competitor. During the remainder of 1993 and 1994, CCS completed the
acquisition of five complimentary receivables management ("Collection")
businesses for an aggregate of approximately $5.5 million in cash and formed
Casino Money Centers, Inc. to complement CCI's business.
In July 1994, CCS commenced discussions with Hospitality Franchise Systems,
Inc. ("HFS") regarding a sale of CCI. In November 1994, CCS and HFS announced a
merger and plan of reorganization whereby CCS would merge with HFS after a
spin-off of the collection business and CMC to CCS' shareholders. In May 1995,
the merger and spin-off were completed resulting in CCS shareholders receiving
approximately $37.2 million in HFS common stock and approximately $3.5 million
in CRW common stock. CRW's common stock began trading on the NASDAQ Small Cap
Market under the symbol "CRWF" on May 11, 1995.
In December 1995, CRW's management team began to explore the creation of a
telemarketing subsidiary to capitalize on the rapid growth in demand by large
corporations for large-scale professional telemarketing services. CRW's
management team concluded that its experience in acquiring and operating call
centers for its collection business would provide the foundation to build a CRW
subsidiary into a leading teleservices company. In April 1996, CRW formed TLSP
and TLSP agreed to acquire four telemarketing businessess, a market research
business and a fulfillment business, contingent upon an initial public offering
of its common stock. In August 1996, TLSP completed its initial public offering,
generating net proceeds of approximately $162 million and valuing TLSP at
approximately $375 million. The total purchase price for the six businesses
acquired was approximately $200 million consisting of approximately $90.9
million in cash, $49 million in TLSP stock and warrants, $25.6 million in notes,
and $34.5 million in assumed liabilities and transaction expenses.
In October 1996, CRW's Board of Directors approved a plan to sell the
Company's Collection Division. On February 2, 1997, the Company completed the
sale of its Collection Division to NCOG for approximately $12.8 million,
consisting of $3.75 million in cash, 345,178 shares of NCOG common stock and a
warrant to purchase 250,000 shares of NCOG common stock for $27.625 per share.
The results of the Collection Division and CCI's results have been presented as
discontinued operations in the accompanying financial statements.
2
<PAGE>
The Company is continuing to explore ways to further increase shareholder
value, including through a spin-off of CMC and further development of its
relationship with and investment in TLSP, although there can be no assurance
that such increase in value will be achieved.
Currently, CRW's only operating business is conducted through its
wholly-owned subsidiary, CMC.
CMC Background
Casino Money Centers, Inc. ("CMC") was formed in September 1993 to provide
funds transfer services at gaming sites. CMC opened its first casino operation
in October 1993 at the Table Mountain Casino, a casino located on Indian land
near Fresno, California. CMC purchased Strip Check Cashing Service, Inc. in Las
Vegas, Nevada in February 1994 and established operations in the Oneida casino
on Indian lands in Green Bay, Wisconsin in July 1994 and in the Mohican
Northstar Casino on Indian Lands in Bowler, Wisconsin in December 1995. In
August 1995, CMC acquired the operations of All Check Cashing, Inc. in Laughlin,
Nevada. In January 1997, CMC began operations in the Grand Coushatta Casino in
Louisiana and purchased the assets of Twain Check Cashing in Las Vegas, Nevada.
General
CMC provides funds transfer services to casino customers through operations
located in casinos. These services include wire transfers, cash advances on
debit and credit cards and check cashing. Currently, CMC operates in five
casinos, one in Las Vegas, two in Wisconsin, one in Louisiana and one in
California and is actively pursuing arrangements to establish additional casino
operations. In addition, CMC operates two locations not located within casinos.
The funds transfer business, however, is highly competitive, and there can be no
assurance that CMC will be successful in achieving its planned expansion.
CMC offers wire transfers, debit and credit card cash advance services and
check cashing services based upon the requirements of the host casino. Debit and
credit card cash advance services are provided through a system which enables
casino customers to use their MasterCard(R), VISA(R) or Discover(R) credit cards
to obtain cash in the casino. The casino customer may initiate a request for a
cash advance at CMC's service desk or at one of CMC's remote terminals located
on the casino floor. The use of a remote terminal affords the casino customer
privacy and the ability to determine whether the desired cash advance will be
authorized by the customer's credit card company. The remote terminal also
speeds the cash advance process by allowing multiple pre-authorizations to occur
simultaneously and by enabling service desk personnel to handle more
transactions.
Check cashing services are provided at all of CMC's casino operations. When
a casino customer requests check cashing at CMC's service desk, CMC conducts a
check verification process using identification procedures and software licensed
by CMC. Each transaction also provides additional data for CMC's customer
database, which database is used in assessing the credit worthiness for the
particular customer.
CMC provides its services pursuant to one to two year agreements with the
operators of the host casinos. Such agreements enable the casino operators to
provide funds transfer services to their customers without assuming any credit
risk. CMC believes that the efficient and confidential manner in which it
provides its services makes CMC's services attractive to casino operators and
their customers.
The Casino Gaming Market
Casino gaming in the United States has expanded significantly in recent
years. Once found only in Nevada and New Jersey, casino gaming has recently been
legalized in numerous states, including land-based casinos on Indian lands and
elsewhere, and on riverboats and dockside casinos. Several additional
jurisdictions are currently considering the authorization of casino gaming.
3
<PAGE>
The expansion of casino gaming has generated a corresponding demand for
ancillary services, including funds transfer services in casinos. While some
casino operators provide such services directly, most casinos rely on third
parties to provide funds transfer services pursuant to contracts with the casino
operator. CMC management believes that the principal objective of casino
operators in providing or arranging for such services is to promote gaming
activity by making funds available to casino customers on a convenient basis. In
some cases, however, the casino operator may view such services as a potential
profit center separate from the gaming operations.
CMC's business currently is concentrated in the casino gaming industry and
its plan of operation contemplates that CMC's operations will continue to be
focused on operations in casinos and other gaming locations. Accordingly, a
decline in the popularity of gaming, a reduction in the rate of expansion of
casino gaming, changes in laws or regulations affecting casinos and related
operations, or other adverse changes in the gaming industry would have an
adverse effect on CMC's operations.
Debit and Credit Card Advances
CMC provides a system by which casino customers may use their
MasterCard(R), VISA(R) or Discover(R) credit cards to obtain cash. In a typical
credit card transaction, the amount of the cash advance together with a service
fee is charged to the individual's MasterCard(R), VISA(R) or Discover(R) credit
card account. Upon authorization of the transaction by either the bank who
issued the card, the credit card company or a designated agent, CMC issues a
draft to the customer who then cashes the draft at CMC's service desk in the
casino. The casino customer may initiate a request for a cash advance at CMC's
service desk or at one of CMC's remote terminals located on the casino floor.
The use of a remote terminal serves several purposes. First, it affords the
casino customer privacy. The remote terminal informs the casino customer whether
the desired cash advance will be authorized, eliminating embarrassment if the
request is not approved. Second, it speeds the process by allowing multiple
pre-authorizations to occur simultaneously, thereby reducing any bottleneck of
customers at the service desk.
For debit and credit card advances, customers are currently charged a
transaction fee equal to a percentage of the amount advanced, or a flat fee,
whichever is greater. The fee is charged to the customer's card at the time of
the advance. CMC pays a vendor a fee based on a percentage of the amount of the
cash advance. The vendor then pays MasterCard, VISA and Discover. In some cases,
such as when CMC must seek a manual or voice authorization or does not transmit
its transactions electronically, the fee can be a higher percentage than
otherwise would be charged. Any fee owed by CMC to MasterCard, VISA or Discover
is deducted from the monthly settlement made by the card companies to CMC.
Check Cashing Services
CMC currently provides check cashing services at each of its casino
locations. A casino customer initiates a request for check cashing at CMC's
service desk at the casino. CMC uses systems and software licensed by CMC to
store and maintain data regarding all customer check cashing activity to aid in
the check verification process. The system and software enable CMC's employees
to perform the following functions: accept and store customer data, including
names, addresses and other personal data; review recent transactions of existing
customers; determine the collection risk in cashing a particular customer's
check; add check cashing transactions for any customer in the database; add
return item data for any customer in the database; add payment transactions for
any customer in the database; and summarize the daily check cashing activity for
transmittal to headquarters. The system and software permit information to be
gathered and reported in an efficient and timely manner. CMC has designed and
implemented a credit rating system which utilizes this customer database to
determine whether a casino customer's check should be cashed.
Fees for check cashing services are paid by the customer. Check cashing
involves the risk that some cashed checks will be uncollectible because of
insufficient funds, stop payment orders, closed accounts or fraud. This risk of
collection is greater in new locations where the amount of data in CMC's
database is smaller.
4
<PAGE>
Wire Transfer Services
CMC provides wire transfer services to casino customers through CMC
operations located at casinos.
Competition
CMC competes with a number of providers of funds transfer services in
casinos, many of which have significantly greater financial resources than CMC.
Competitors include Game Financial, Premier CashLink, Valley National Bank and
First Interstate Bank of Nevada, which currently provide cash advance services
in casinos and other gaming locations through automated teller machines ("ATMs")
and other facilities located at casinos and other gaming establishments, and in
hotels associated with casinos.
CMC also competes with sponsors of ATM networks which place ATMs in
casinos, and with major credit card companies and vendors of traveler's checks,
which make cash available to holders of their credit cards and checks on a
nationwide basis. ATMs offer several advantages in providing cash advances,
including the following: speed, convenience, and minimal expense per
transaction; limited supervision required by casino staff, and, with a personal
identification number ("PIN"), access to most major credit cards, including
VISA, MasterCard, American Express, Diners Club and Discover cards. Customers
who utilize ATMs to obtain cash advances, however, must have and remember a PIN
and are subject to limitations (typically $300) on the amount of cash which may
be withdrawn in a day.
CMC believes that the principal competitive factors in providing credit
card cash advance and check cashing services are marketing efforts, pricing,
reliability, convenience and speed in effecting transactions.
Government Regulation
Many states require companies engaged in the business of providing cash
advance services or transmitting funds to obtain a license from the appropriate
state agency. In certain states, such as Wisconsin, such companies are required
to post bonds or other collateral to secure their obligations to their customers
in those states. State agencies have extensive discretion to deny or revoke
licenses. CMC has obtained the necessary licenses and bonds to do business in
the states where it currently operates and will be subject to similar and
possibly more onerous licensing requirements if it expands its operations into
other jurisdictions. While there can be no assurance that it will be able to do
so, CMC anticipates that it will be able to obtain and maintain the licenses
necessary for the conduct of its business.
Employees
As of March 14, 1997, CRW had 82 full-time employees. The full-time
employees consisted of 11 engaged in corporate management and administration and
71 in CMC operations.
ITEM 2. PROPERTIES
CRW leases an aggregate of 13,000 square feet in King of Prussia,
Pennsylvania from 210 Mall Boulevard Associates, a partnership which is
controlled by J. Brian O'Neill, CRW's Chief Executive Officer. The lease
commenced on December 15, 1996 and requires monthly base rent payments through
December 15, 2001 of $23,478. CRW believes the lease to be at the prevailing
commercial market rate. In 1996, CRW paid $11,739 in rent to 210 Mall Boulevard
Associates. CRW also subleases a 22,000 square foot facility in King of Prussia,
PA from HFS, Inc. and has subleased the facility to TLSP. HFS leases the
facility from CRW Building Limited Partnership, a partnership controlled by Mr.
O'Neill. Prior to subleasing the facility to TLSP, CRW paid approximately
$365,000 in rent in 1996 under the sublease from HFS. In addition, CRW also
leased office space in 1996 in Conshohocken, PA, from Lee Park Investors, L.P.,
a partnership controlled by Mr. O'Neill. The lease was assumed by NCOG on
February 2, 1997. CRW paid approximately $46,000 in rent to Lee Park
Investors, L.P.
5
<PAGE>
in 1996. The aggregate minimum rent due on all of the above leases through
the end of their terms, net of commitments for payments under subleases is
approximately $1.3 million.
ITEM 3. LEGAL PROCEEDINGS
CRW is a party to a number of lawsuits incidental to the ordinary course
of business of its Collection Division. NCOG did not assume any potential
liability under such lawsuits in connection with NCOG's acquisition of the
Collection Division's net assets in February 1997. The Company intends to
vigorously defend all such actions and, in the current opinion of management,
the ultimate resolution of such actions will not have a material adverse
effect on the Company's business, financial condition or results of operations,
although there can be no assurance that this will be the case.
One of such lawsuits was filed in August 1996 by Eugene Piscitelli, an
employee of the Company, in the United States District Court for the Eastern
District of Pennsylvania. Mr. Piscitelli has made a claim against the Company
for an unspecified amount of money damages in excess of jurisdictional limits
based on claims of alleged fraud in the inducement by the Company and alleged
breach by the Company of his employment agreement with respect to compensation
matters. The Company believes that Mr. Piscitelli's claims have no merit and
intends to vigorously defend this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to and approved by a vote of the
Company's stockholders, following the solicitation of stockholder proxies by the
Board of Directors, at the 1996 Annual Meeting of Stockholders of the Company
held on October 3, 1996. The Board of Directors 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 and any adjournment thereof. Stockholders
voted their shares as indicated below. Holders of Preferred Stock did not have
voting rights with respect to Item 1 below. With respect to Items 2 and 4, the
vote of holders of Common Stock and Preferred Stock was conducted together as an
aggregate. Item 3 was approved by the affirmative vote of a majority of the
shares of Common Stock and Preferred Stock present and entitled to vote, each
voting separately as a class.
<TABLE>
<CAPTION>
Shares Voted
------------
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
1. The election of Robert N. Verratti as the Class I
director of the Company for a three year term. 1,050,871 -- 1,300
2. The approval and adoption of the Company's
Amended and Restated 1995 Stock Option Plan 826,249 47,167 3,300
3. The amendment to the Company's Restated Certificate
of Incorporation in order to increase the
authorized common stock from 5,000,000 to
20,000,000 shares.
a. Common Stock 991,551 59,320 1,300
b. Preferred Stock 408,777 0 0
c. Aggregate 1,400,328 1,000 700
4. The ratification of the appointment by the Board
of Directors of Arthur Andersen LLP as the Company's
independent certified public accountants 1,459,248 1,000 700
</TABLE>
6
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Common Stock of CRW Financial, Inc. is quoted on the NASDAQ Small Cap
Market under the symbol "CRWF". The following table sets forth, for the periods
indicated, the range of high and low closing sale prices as reported on the
NASDAQ Small Cap Market since the Common Stock commenced public trading on May
11, 1995.
===============================================================================
- -------------------------------------------------------------------------------
High Low
---- ---
Fiscal 1995
Second Quarter (commencing May 11, 1995) $1.71 $0.98
Third Quarter 1.71 1.08
Fourth Quarter 3.42 1.38
Fiscal 1996
First Quarter 2.80 1.88
Second Quarter 13.33 2.75
Third Quarter 12.67 9.33
Fourth Quarter 11.83 6.75
Fiscal 1997
First Quarter (through March 28, 1997) 9.38 6.25
===============================================================================
As of March 22, 1997 there were 54 holders of record of the Common Stock of
CRW. Because a substantial portion of the Company's Common Stock is held in
street name, the Company believes that it has a significantly larger number of
beneficial owners of its Common Stock.
CRW has never paid a cash dividend on its Common Stock. Under CRW's loan
agreement with its bank, CRW is prohibited from paying a cash dividend on its
Common Stock without the consent of the bank. CRW currently intends to retain
all earnings for use in its business and does not anticipate paying any cash
dividend on the Common Stock in the foreseeable future.
On February 29, 1996, CRW sold an aggregate of 430,293 shares of its Series
A Convertible Preferred Stock, without par value ("Preferred Stock"), and
warrants (the "Warrants") to purchase 451,812 shares of common stock at an
exercise price of $1.94 per share to an investor group consisting of several
investment funds and certain individuals. The aggregate purchase price received
by CRW for such securities was approximately $2.5 million.
7
<PAGE>
In December, 1996, the Preferred Stock was converted pursuant to its terms
into 1,290,879 shares of common stock. In January, 1997, the Warrants were
exercised pursuant to a cashless exercise whereby the warrants were exchanged
for 354,586 shares of common stock. The sale of such securities was conducted
pursuant to an exemption from registration provided by Rule 506 of Regulation D
under the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
The historical consolidated financial statements of CRW have been deemed to
be those of CCS, restated to reflect the classification of the Collection
Business and CCI as discontinued operations. The selected historical
consolidated financial information of CRW set forth in the tables below have
been derived from the audited financial statements of CCS for the period from
July 18, 1992 to December 31, 1992 and for the years ended December 31, 1993 and
1994 and from the audited financial statements of CRW for the years ended
December 31, 1995 and 1996. The Company's CMC business did not have substantial
operations prior to January 1, 1994, therefore, the Company did not have any
revenues from continuing operations prior to that date. The following
information should be read in conjunction with and is qualified in its entirety
by reference to the historical consolidated financial statements and
accompanying notes of CRW included elsewhere in this Form 10-K. See Notes 1, 2,
3 and 13 to CRW's historical consolidated financial statements.
<TABLE>
<CAPTION>
Period
from
July 18,
1992 to Year Ended December 31
December ----------------------
31, 1992 1993 1994 1995 1996
-------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Net revenues...................... $ -- $ -- $ 1,429 $ 2,949 $ 3,412
Operating expenses, excluding
non-cash and special charges.... 500 1,408 3,664 3,458 5,504
Special compensation charge....... -- -- -- -- 1,319
Depreciation and
Amortization..................... -- -- 23 48 162
------- ------- ------- ------- -------
Operating loss from
continuing operations............ (500) (1,408) (2,258) (557) (3,573)
Other income...................... -- -- -- -- 1,136
Equity in earnings of TLSP ....... -- -- -- -- 774
Interest expense.................. (530) (697) (263) (655) (825)
------- ------- ------- ------- -------
Loss from continuing operations
before income tax benefit........ (1,030) (2,105) (2,521) (1,212) (2,488)
Income tax benefit................ (333) (730) (622) -- (855)
------- ------- ------- ------- -------
Loss from continuing
operations....................... (697) (1,375) (1,899) (1,212) (1,633)
Income (loss) from
discontinued operations and
gain of $28,176 in 1995 from
merger, net of tax............... (590) (356) 104 29,275 (1,152)
------- ------- ------- ------- -------
Income (loss) before
extraordinary item............... (1,287) (1,731) (1,795) 28,063 (2,785)
Extraordinary loss on
extinguishment of debt,
net of tax benefit............... -- (1,467) -- -- (1,132)
------- ------- ------- ------- -------
Net income (loss)................. (1,287) (3,198) (1,795) 28,063 (3,917)
Preferred dividends............... -- (82) (210) -- --
------- ------- ------- ------- -------
Net income (loss) applicable
to common stockholders........... $(1,287) $(3,280) $(2,005) $28,063 ($3,917)
======= ======= ======= ======= =======
PRIMARY NET INCOME (LOSS) PER SHARE(1):
Continuing operations............. $(0.34) $(0.43)
Discontinued operations and
gain from merger.................. 8.30 (0.30)
Extraordinary item................. -- (0.30)
------- -------
$7.96 $(1.03)
======= =======
FULLY DILUTED NET INCOME (LOSS)
PER SHARE(1):
Continuing operations............. $(0.25) $(0.43)
Discontinued operations........... 6.12 (0.30)
Extraordinary item................ -- (0.30)
------- -------
$5.87 $(1.03)
======= =======
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net assets of discontinued operations(2)... $12,003 $13,909 $15,650 $ 9,146 $ 8,235
Total assets .............................. 13,428 13,909 16,727 11,332 67,945
Bank and subordinated debt ................ 10,755 -- 5,066 7,005 9,185
Stockholders' equity ...................... 414 13,350 11,345 3,186 34,873
</TABLE>
- ---------
(1) Per share information is not presented for 1992 through 1994 as such
information is not meaningful due to the formation of CRW in May 1995.
(2) The net assets of discontinued operations represent the assets and
liabilities of the Collection Division sold to NCOG and CCI's business
acquired by HFS in the Merger. See Notes 2 and 13 to CRW's historical
consolidated financial statements included elsewhere in this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion is based upon and should be read in conjunction
with the Selected Historical Financial Information and CRW's Financial
Statements, including the notes thereto, included elsewhere herein.
General
CRW's operating results have been restated to reflect the classification of
the collection business and CCI as discontinued operations. See Note 1 of the
notes to the accompanying financial statements for a description of the basis of
presentation.
Below is a summary of operating results for CRW and its Casino Money Centers,
Inc. subsidiary:
Year Ended December 31,
-------------------------------------
1994 1995 1996
---- ---- ----
Net revenues............................. $ 1,429 $2,949 $ 3,412
Operating expenses, excluding non-cash
charges................................. 3,664 3,458 5,504
Special compensation charges............. -- -- 1,319
Depreciation and amortization............ 23 48 162
------- ------ -------
Operating income (loss).................. $(2,258) $ (557) $(3,573)
======= ====== =======
9
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------
Corporate CMC TOTAL
--------- --- -----
<S> <C> <C> <C>
Net revenues...................................... $ -- $ 3,412 $ 3,412
Operating expenses, excluding non-cash charges.... 2,292 3,212 5,504
Special compensation charge....................... 1,319 -- 1,319
Depreciation and amortization..................... 112 50 162
------- ------- -------
Operating income (loss)........................... $(3,723) $ 150 $(3,573)
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------
Corporate CMC TOTAL
--------- --- -----
<S> <C> <C> <C>
Net revenues...................................... $ -- $ 2,949 $2,949
Operating expenses, excluding non-cash charges.... 1,036 2,422 3,458
Depreciation and amortization..................... 22 26 48
------- ------- -------
Operating income (loss)........................... $(1,058) $ 501 $ (557)
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------
Corporate CMC TOTAL
--------- --- -----
<S> <C> <C> <C>
Net revenues...................................... $ -- $ 1,429 $ 1,429
Operating expenses, excluding non-cash charges.... 2,541 1,123 3,664
Depreciation and amortization..................... -- 23 23
------- ------- -------
Operating income (loss)........................... $(2,541) $ 283 $(2,258)
======= ======= =======
</TABLE>
10
<PAGE>
Years Ended December 31, 1996 and 1995
Net Revenues
CMC's revenues increased $463,000 (16%) to $3,412,000 in 1996 from
$2,949,000 in 1995 due to the opening of a new facility at the Northstar Casino
in December 1995.
Operating Expenses
The Company's operating expenses increased $3,479,000 (99%) to $6,985,000
in 1996 from $3,506,000 in 1995. CMC's operating expenses increased $814,000
(33%) to $3,262,000 from $2,448,000 in 1995 due to the opening of the Northstar
facility in December 1995 and higher sales and administrative expenses which
were incurred in order to help facilitate CMC's growth. Corporate's operating
expenses increased $2,665,000 to $3,723,000 from $1,058,000 in 1995 due to
special compensation charges of $1,319,000 and payroll costs, professional fees,
travel and other expenses related to the formation and development of TLSP. The
special compensation charges included the accrual of $690,000 of severance pay
for certain employment contracts related to the collection business and a
$629,000 charge for the TLSP management warrants described in Note 5 to the
accompanying financial statements.
Other Income
Other income was 1,136,000 in 1996 compared to zero in 1995 due to a gain
of $1,136,000 recognized in September 1996 from the exercise of certain of the
lender warrants described in Note 7 to the accompanying financial statements.
The exercise of the lender warrants resulted in the sale by CRW of 785,000
shares of TLSP common stock for $1,177,000 in cash.
Equity in Earnings of TLSP
Equity in earnings of TLSP was $774,000 in 1996 compared to zero in 1995
due to the formation and initial public offering of TLSP in 1996 described in
Note 5 to the accompanying financial statements.
Interest Expense
Interest expense was $825,000 in 1996 compared to $655,000 in 1995
primarily due to higher borrowings made in 1996 to fund CRW's $2.1 million
investment in TLSP.
Income Tax Benefit
The income tax benefit of $855,000 in 1996 represents the future Federal
income tax benefit of the Company's operating loss. No income tax benefit was
recorded in 1995.
Years Ended December 31, 1995 and 1994
Net Revenues
CMC's revenues increased $1,520,000 (106%) to $2,949,000 in 1995 from
$1,429,000 in 1994 due to a full year of operations in 1995 at the Oneida Casino
in Green Bay, WI compared to only six months of operations in 1994.
Operating Expenses
The Company's operating expenses decreased $181,000 (5%) to $3,506,000 in
1995 from $3,687,000 in 1994. CMC's operating expenses increased $1,302,000
(114%) to $2,448,000 from $1,146,000 in 1994 due to the opening of the Oneida
Casino operation in 1995 and higher sales and administrative expenses which were
incurred in order to help facilitate CMC's growth. Corporate's operating
expenses decreased $1,483,000 to $1,058,000 from $2,541,000 due to the
elimination of professional fees, payroll, travel and other expenses of CCS
employees eliminated in connection with the May, 1995 merger of CCS and HFS.
11
<PAGE>
Interest Expense
Interest expense was $655,000 in 1995 compared to $263,000 in 1994 due to
higher borrowings in 1995 to refinance debt and increase working capital.
Income Taxes
No income tax benefit was recorded in 1995 compared to a $622,000 income
tax benefit in 1994. The income tax benefit for 1994 reflects the future income
tax benefit of the Company's operating loss.
Discontinued Operations
Below is a summary of operating results for the discontinued operations of
the collection business and CCI:
Year Ended December 31,
-----------------------
1994 1995 1996
---- ---- ----
(in thousands)
Net revenues ........................ $ 34,035 $ 32,073 $ 27,432
Operating expenses .................. 33,669 30,738 29,329
-------- -------- --------
Operating income (loss) ............. 366 1,335 (1,897)
Other expenses ...................... 200 -- 9
Income taxes (benefit) .............. 62 236 (754)
-------- -------- --------
Net income (loss) ................... $ 104 $ 1,099 $ (1,152)
======== ======== ========
Years Ended December 31, 1996 and 1995
Net Revenues
Net revenues decreased $4,641,000 (14%) to $27,432,000 in 1996 from
$32,073,000 in 1995 due to a $3,331,000 decrease in CCI's revenues due to the
sale of CCI to HFS in the May 1995 merger, a $512,000 decrease in revenues from
the collection business' largest customer, a decrease in revenues from several
of the collection business' larger customers, including Bell South and the New
Jersey Department of Motor Vehicles, partially offset by $1,510,000 of revenues
generated in 1996 from the market research division which began operations in
January 1996 and ceased operations in August 1996.
Operating Expenses
Operating expenses decreased $1,409,000 (5%) to $29,329,000 in 1996 from
$30,738,000 in 1995 due to the 14% decrease in revenues and a $169,000 decrease
in depreciation and amortization. The operating expenses in 1996 decreased only
7% as compared to a the 14% decrease in revenues due to the high level of fixed
costs incurred by the collection business.
Income Taxes (Benefit)
Income taxes (benefit) of $(754,000) in 1996 and $236,000 in 1995
represents an effective tax rate of approximately 40% for the future tax
liability (benefit) of the collection business operating income and losses.
12
<PAGE>
Years Ended December 31, 1995 and 1994
Net Revenues
Net revenues decreased $1,962,000 (6%) to $32,073,000 in 1995 from
$34,035,000 in 1994 due to a $4,547,000 decrease in CCI's revenues due to the
sale of CCI to HFS in the May 1995 merger, partially offset by a $2,585,000
increase in collection revenues. The increase in collection revenues was
primarily due to the Company's June 1994 acquisition of Kaplan and Kaplan, Inc.
Operating Expenses
Operating expenses decreased $2,931,000 (9%) to $30,738,000 in 1995 from
$33,669,000 in 1994 primarily due to the 6% decrease in revenues.
Income Taxes
Income taxes of $236,000 in 1995 and $62,000 in 1994 represents an
effective tax rate of approximately 40% in 1995 and 37% in 1994 for the future
tax liability for CCI and collection business operating income.
Inflation
Inflation has not had a significant impact on CRW's operations to date.
Liquidity and Capital Resources
During the year ended December 31, 1996, net cash used in operating
activities was $2,303,000 compared to $903,000 of net cash provided by
operations for the year ended December 31, 1995. The increase in net cash used
in operating activities was primarily due to the increased operating loss.
Net cash used in investing activities in 1996 was $2,488,000 and consisted
of a $2,110,000 investment in TLSP, $132,000 of capital expenditures and
$246,000 of capital expenditures for discontinued operations.
Net cash provided by financing activities in 1996 was $5,475,000 and
consisted of $2,500,000 of proceeds from a bank loan, $2,345,000 of proceeds
from the sale of preferred stock, $318,000 of payments on long-term debt and
$1,128,000 of proceeds from the exercise of stock options, partially offset by
$190,000 of cash used for financing activities of discontinued operations.
CRW has a $7.5 million revolving line of credit from a bank which is due on
August 31, 1997. Total outstanding borrowings under the revolving credit loan as
of March 28, 1997 was $6.5 million. The Company plans to repay the revolving
credit loan with proceeds from sale of its NCOG Common Stock. If the Company is
unable to sell its NCOG common stock, or the proceeds from the sale of such
stock is not sufficient to repay the revolving line of credit, CRW plans to
extend the expiration date of its revolving line of credit or refinance it with
proceeds from a new loan. CRW believes that its cash on hand, cash to be
generated from the sale of NCOG common stock and available borrowings under the
revolving line of credit or from proceeds of debt collateralized by its NCOG
and/or TLSP common stock are adequate to meet its needs through December 31,
1997.
13
<PAGE>
Net Operating Loss Carryforward
CRW has a June 30 fiscal year end. As of June 30, 1996, CRW had available
approximately $3,500,000 of net operating loss carryforwards. As of December 31,
1996, CRW had accumulated an additional loss carryforward of approximately
$3,300,000. The net operating loss carryforwards will be used to offset the
Company's gain on the sale of its collection business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 will be contained in the Company's
definitive proxy statement for the 1997 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 will be contained in the Company's
definitive proxy statement for the 1996 annual meeting of stockholders, or in an
amendment to this Form 10-K, to be filed with the Securities and Exchange
Commission by April 30, 1997, and is hereby incorporated by reference.
14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Attached hereto and filed as part of this report are the financial
statement schedules and exhibits listed below:
1. FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 1995 and 1996
Consolidated Statements of Operations - For the Years ended
December 31, 1994, 1995 and 1996 Consolidated Statements of
Stockholders' Equity - For the Years ended December 31, 1994,
1995 and 1996.
Consolidated Statements of Cash Flows - For the Years ended December 31,
1994, 1995 and 1996.
Notes to Consolidated Financial Statements
2. EXHIBITS, INCLUDING THOSE INCORPORATED BY REFERENCE
3.1 Restated Certificate of Incorporation of the Registrant (3)
3.2 Amendment to Restated Certificate of Incorporation of the
Registrant (1)
3.3 Amended Bylaws of the Registrant (2)
4.1 Loan and Security Agreement dated May 11, 1995 between Mellon Bank,
N.A. ("Mellon") and the Registrant (2)
4.2 Amendment to Loan and Security Agreement dated September 12, 1995
between Mellon and the Registrant (1)
4.3 Second Amendment to Loan and Security Agreement dated September 19,
1996 between Mellon and the Registrant (1)
4.4 Third Amendment to Loan and Security Agreement dated December 30, 1996
between Mellon and the Registrant (1)
4.5 Fourth Amendment to Loan and Security Agreement dated February 4, 1997
between Mellon and the Registrant (1)
4.6 Fifth Amendment to Loan and Security Agreement dated March 29, 1997
between Mellon and the Registrant (1)
4.7 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock (the "Preferred Stock") of the
Registrant (5)
4.8 Specimen of Series A Convertible Preferred Stock Certificate (5)
4.9 Form of Warrant issued in connection with Preferred Stock (5)
4.10 Term Loan Note and Addendum dated November 1, 1995 executed by the
Registrant in favor of J. Brian O'Neill and Miriam P. O'Neill (1)
15
<PAGE>
10.1 Agreement of Lease dated as of July, 1994, between CRW Building
Limited Partnership and Casino and Credit Services, Inc. ("CCS") (3)
10.2 Sublease Agreement dated May 10, 1995 between CCS and the
Registrant (2)
10.3 Sublease Agreement between TeleSpectrum Worldwide Inc. and the
Registrant (1)
10.4 Lease Agreement dated July 1, 1996 between the Registrant and Lee Park
Investors, L.P. (1)
10.5 Lease Agreement dated December 5, 1996 between the Registrant and 210
Mall Boulevard Associates (1)
10.6 Employment Agreement dated May 11, 1995 between J. Brian O'Neill and
the Registrant (2)
10.7 Employment Agreement dated May 11, 1995 between Jonathan P. Robinson
and the Registrant (2)
10.8 Amended and Restated 1995 Stock Option Plan of the Registrant (4)
10.9 Securities Purchase Agreement dated February 29, 1996 between the
Registrant and certain purchasers defined therein (5)
10.10 Asset Acquisition Agreement dated February 2, 1997 among the
Registrant, Kaplan & Kaplan, Inc., NCO Group, Inc., CRWF Acquisition,
Inc. and K & K Acquisition, Inc. (6)
21 Subsidiaries of the Registrant (1)
23 Consent of Arthur Andersen LLP (1)
(b) CRW filed a Form 8-K with the Securities and Exchange Commission in
October 1996 pertaining to Item 5 of such form.
- -----------
(1) Filed with this Annual Report on Form 10-K.
(2) Filed as an Exhibit to the Registration Statement on Form S-1 (No.
33-62700) and incorporated herein by reference.
(3) Filed as an Exhibit to the Form 10-K filed with the Securities and
Exchange Commission on March 29, 1996 and incorporated herein by
reference.
(4) Filed as an Exhibit to CRW's definitive proxy statement for its 1996
Annual Meeting of Stockholders and incorporated herein by reference.
(5) Filed as an Exhibit to CRW's Form 8-K dated February 29, 1996 and
incorporated herein by reference.
(6) Filed as an Exhibit to CRW's Form 8-K dated February 2, 1997 and
incorporated herein by reference.
16
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants F-2
Consolidated Balance Sheets -- December 31, 1995 and 1996 F-3
Consolidated Statements of Operations -- For the Years
ended December 31, 1994, 1995 and 1996 F-4
Consolidated Statements of Stockholders' Equity--
For the Years ended December 31, 1994, 1995 and 1996 F-5
Consolidated Statements of Cash Flows--
For the Years ended December 31, 1994, 1995 and 1996 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CRW Financial, Inc.:
We have audited the accompanying consolidated balance sheets of CRW
Financial, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CRW Financial,
Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
March 14, 1997
F-2
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---- ----
(In Thousands --
Except Share Amounts)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash .................................................... $ 764 $ 1,448
Net assets of discontinued operation (Notes 2 and 13) .. 9,146 8,235
Other current assets .................................... 262 319
-------- --------
Total current assets ................................ 10,172 10,002
PROPERTY AND EQUIPMENT, net ................................ 79 143
INTANGIBLE ASSETS, net ..................................... 569 475
INVESTMENT IN TELESPECTRUM WORLDWIDE INC ................... -- 54,655
DEFERRED INCOME TAX ASSET .................................. 403 2,586
OTHER ASSETS ............................................... 109 84
-------- --------
$ 11,332 $ 67,945
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit ................................ 1,000 8,500
Current portion of long-term debt ....................... 321 353
Accounts payable ........................................ 164 340
Accrued expenses ........................................ 977 1,489
-------- --------
Total current liabilities ............................ 2,462 10,682
-------- --------
LONG-TERM DEBT ............................................. 5,684 332
-------- --------
OTHER LONG-TERM LIABILITIES ................................ -- 160
-------- --------
DEFERRED INCOME TAXES .................................... -- 21,898
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Preferred Stock, no par value, 500,000 shares authorized,
no shares issued and outstanding..................... -- --
-------- --------
Common Stock, $.01 par value, 20,000,000 shares
authorized 3,370,632 and 5,366,442 shares issued
and outstanding, respectively ........................ 34 54
Additional paid-in capital .............................. 4,102 39,686
Accumulated deficit ..................................... (950) (4,867)
-------- --------
Total stockholders' equity .......................... 3,186 34,873
-------- --------
$ 11,332 $ 67,945
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
---- ---- ----
(In Thousands - Except Share Amounts)
<S> <C> <C> <C>
NET REVENUES .................................................. $ 1,429 $ 2,949 $ 3,412
-------- -------- --------
OPERATING EXPENSES:
Compensation ........................................... 1,770 1,650 2,986
Special compensation charges ........................... -- -- 1,319
Other operating costs .................................. 1,894 1,808 2,518
Depreciation and amortization .......................... 23 48 162
======== ======== ========
Operating income (loss) ............................. (2,258) (557) (3,573)
INTEREST EXPENSE .......................................... (263) (655) (825)
EQUITY IN EARNINGS OF TELESPECTRUM WORLDWIDE INC........... -- -- 774
OTHER INCOME (Note 5) ..................................... -- -- 1,136
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX BENEFIT...... (2,521) (1,212) (2,488)
INCOME TAX BENEFIT ........................................ (622) -- (855)
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS ............................... (1,899) (1,212) (1,633)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of income taxes
(benefit) of $62, $236 and $(754) (Note 13) ............... 104 1,099 (1,152)
GAIN ON MERGER OF CCS AND HFS, (Note 3) ................... -- 28,176 --
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ....................... (1,795) 28,063 (2,785)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT .............. -- -- (1,132)
-------- -------- --------
NET INCOME (LOSS) ............................................. (1,795) 28,063 (3,917)
PREFERRED DIVIDENDS ....................................... (210) -- --
-------- -------- --------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS ........... $ (2,005) $ 28,063 ($ 3,917)
======== ======== ========
PRIMARY NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations ...................................... $ (0.34) $ (0.43)
Discontinued operations and gain on merger ................ 8.30 (0.30)
Extraordinary item ......................................... -- (0.30)
-------- --------
$ 7.96 $ (1.03)
======== ========
FULLY DILUTED NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations ...................................... $ (0.25) $ (0.43)
Discontinued operations .................................... 6.12 (0.30)
Extraordinary item ......................................... -- (0.30)
-------- --------
$ 5.87 $ (1.03)
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON ADDITIONAL TOTAL
PREFERRED COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS'
(In Thousands) STOCK STOCK WARRANTS CAPITAL DEFICIT EQUITY
----- ----- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 .... $ 3,000 $ 34 $ 273 $ 14,643 $ (4,600) $ 13,350
Dividends Accrued on Preferred
Stock ......................... -- -- -- -- (210) (210)
Net Loss ...................... -- -- -- -- (1,795) (1,795)
-------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1994 .... 3,000 34 273 14,643 (6,605) 11,345
HFS Stock Received By CCS
Shareholders .................. -- -- -- (14,821) (22,408) (37,229)
Cancellation of Stock Options . -- -- -- 715 -- 715
Conversion of Preferred Stock . (3,000) -- (273) 3,273 -- --
Forfeiture of Accrued Dividends
on Preferred Stock ........... -- -- -- 292 -- 292
Net Income .................... -- -- -- -- 28,063 28,063
-------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1995 .... -- 34 -- 4,102 (950) 3,186
Sale of Preferred Stock ...... 2,345 -- -- -- -- 2,345
Conversion of Preferred Stock . (2,345) 13 -- 2,332 -- --
Net Loss ...................... -- -- -- -- (3,917) (3,917)
Exercise of Stock Options and
Warrants ...................... -- 7 -- 1,121 -- 1,128
Adjustment to Investment in
TeleSpectrum Worldwide Inc.
(Note 1) ...................... -- -- -- 32,131 -- 32,131
-------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 .... $ -- $ 54 $ -- $ 39,686 $ (4,867) $ 34,873
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES: (In Thousands)
<S> <C> <C> <C>
Net income (loss) $ (1,795) $ 28,063 $ (3,917)
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities-
Deferred income taxes (560) -- (1,609)
Gain on merger -- (28,176) --
Non-cash special compensation charge -- -- 629
Discontinued operations--noncash charges and working capital changes 2,828 297 1,260
Equity in TLSP earnings -- -- (774)
Extraordinary loss on extinguishment of debt -- -- 1,132
Depreciation and amortization 23 132 162
(Increase) decrease in assets-
Accounts receivable (57) (204) 147
Other assets -- (105) (179)
Increase (decrease) in liabilities-
Accounts payable 24 158 174
Accrued expenses and other liabilities 210 738 672
-------- -------- --------
Net cash provided by (used in) operating activities 673 903 (2,303)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in TeleSpectrum Worldwide Inc. -- -- (2,110)
Cash paid for acquisitions (300) (25) --
Purchases of property and equipment (41) (64) (132)
Investing activities of discontinued operations (4,328) (2,416) (246)
-------- -------- --------
Net cash used in investing activities (4,669) (2,505) (2,488)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 3,200 7,000 --
Repayment of long-term debt (245) (3,104) (318)
Proceeds from (repayments of) line of credit 1,800 (1,800) 2,500
Payment of financing costs (63) (264) --
Proceeds from exercise of stock options -- -- 1,128
Financing activities of discontinued operations (58) (104) (180)
Sale of preferred stock -- -- 2,345
-------- -------- --------
Net cash provided by financing activities 4,634 1,728 5,475
-------- -------- --------
NET INCREASE IN CASH 638 126 684
CASH, BEGINNING OF PERIOD -- 638 764
-------- -------- --------
CASH, END OF PERIOD $ 638 $ 764 $ 1,448
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements
F-6
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Background:
CRW Financial, Inc. ("CRW" or the "Company") was a subsidiary of Casino &
Credit Services, Inc. ("CCS") prior to May 11, 1995, and CRW's operations were a
division of CCS from July 1992 to May 11, 1995 when CCS contributed all of its
assets and subsidiaries other than Central Credit, Inc. ("CCI") to a newly
formed subsidiary, CRW Financial, Inc. CCS then spun-off CRW in a distribution
of CRW stock to CCS Shareholders on May 11, 1995. The historical financial
statements of CRW have been deemed to be those of CCS, restated to present CCI
as a discontinued operation.
CRW founded TeleSpectrum Worldwide Inc. in April 1996. TeleSpectrum
Worldwide Inc. ("TLSP") provides teleservices solutions to clients in the
telecommunications, insurance, financial services, pharmaceuticals, and
healthcare, consumer products and high technology industries. CRW formed TLSP in
April 1996 to acquire several teleservices businesses in connection with an
initial public offering of TLSP's common stock. CRW accounts for its investment
in TLSP under the equity method of accounting. In 1996, CRW recorded a $32.1
million increase, net of deferred income taxes, to its investment in TLSP to
reflect the increase in TLSP's equity due to its initial public offering of its
common stock and other issuances of its common stock in connection with the
acquisitions of certain businesses.
In February, 1997, CRW sold the assets of its collection business (see Note
2). Accordingly, the accompanying financial statements have been restated to
present the collection business as a discontinued operation. The continuing
operations consist of the Company's Casino Money Centers, Inc. subsidiary and
CRW's corporate mangement costs.
2. Sale of Collection Business
On February 2, 1997, CRW sold the assets of its collection business to NCO
Group, Inc. ("NCO") for $3.75 million in cash and 345,178 shares of NCO common
stock and a warrant to purchase 250,000 shares of NCO common stock at $27.625
per share and the assumption of certain liabilities. The NCO common stock and
warrant have been valued at $9,050,000. CRW will record an after-tax gain of
approximately $2 million on the sale of the collection business. The gain will
not result in the payment of any Federal income taxes as the Company has
approximately $6.8 million of net operating loss carryforwards (see Note 8).
F-7
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
3. Merger Agreement and Distribution of Certain Businesses:
On November 1, 1994, CCS entered into a merger agreement (the "Merger
Agreement") with Hospitality Franchise Systems, Inc. ("HFS") providing for,
among other things, the merger of CCS into HFS ("the Merger"). The merger closed
on May 11, 1995. Immediately prior to the Merger, each outstanding share of 7%
Convertible Preferred Stock of CCS was converted to one share of CCS Common
Stock and CCS contributed all of the assets and liabilities of its collection
business and its stock in all of its subsidiaries other than CCI to a new
subsidiary, CRW Financial, Inc. and distributed the stock of CRW to CCS
stockholders in a transaction intended to be tax-free for federal income tax
purposes to CCS, CRW and the stockholders of CCS. Each outstanding share of
CCS Common Stock was then exchanged for .588 shares of HFS. In connection with
the Merger and the Distribution, each CCS Stock Option outstanding was cancelled
in exchange for .130 shares of HFS stock and three shares of CRW Common Stock
for every five shares of CCS Common Stock subject to such CCS Stock Option. CRW
has also agreed to indemnify HFS and CCS with respect to certain CCS losses,
damages, claims and liabilities arising prior to the Merger and the
Distribution. In connection with the merger, a gain was recorded as follows (in
thousands):
Consideration paid by HFS in the merger $37,229
Compensation expense for stock options
cancelled in merger (715)
Carrying value of net assets of
discontinued operations (6,968)
Transaction costs (1,070)
Purchase price adjustment (300)
-------
$28,176
=======
4. Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of CRW and its
wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
Property and Equipment
Property and equipment are stated at cost. CRW provides for depreciation on
a straight-line basis over estimated useful lives of three to five years.
Leasehold improvements are amortized over the lease term. Property and
equipment, for continuing operations, consist of the following (in thousands):
DECEMBER 31,
---------------------
1995 1996
----- -----
Office Equipment $ 85 $ 154
Furniture and Fixtures -- 16
Leasehold improvements -- 12
----- -----
85 182
Less-Accumulated depreciation (6) (39)
----- -----
$ 79 $ 143
===== =====
Intangible Assets
DECEMBER 31,
------------
LIFE 1995 1996
---- ---- ----
(In Thousands)
Goodwill, net of accumulated
amortization of $43 and $70
in 1995 and 1996,
respectively 15 years $355 $328
Deferred financing costs, net of
accumulated amortization of
$129 and $223 in 1995 and 1996,
respectively 3 years 214 147
---- ----
$569 $475
==== ====
The Company determines impairments to goodwill and other intangibles based
upon management's estimates of undiscounted future cash flows over the remaining
useful life of the intangible asset. If the amount of such estimated
undiscounted future cash flows is less than the net book value of the related
intangible asset, the intangible asset is written down to the amount of the
estimated discounted cash flows. No such write-downs of intangible assets were
made in 1994, 1995 or 1996.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" (SFAS No.
109). Under SFAS No. 109, deferred income tax assets and liabilities are
determined based on differences between the financial reporting and income tax
basis of assets and liabilities measured using enacted income tax rates and laws
that are expected to be in effect when the differences reverse.
F-9
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
Statement of Cash Flows
For the years ended December 31, 1994,1995 and 1996 the Company paid
interest expense of $263,000, $692,000 and $791,000, respectively. The Company
did not pay any income taxes for the years ended December 31, 1994, 1995 and
1996.
The following table lists noncash assets that were acquired and liabilities
which were assumed as a result of the acquisitions discussed in Note 6:
FOR THE YEAR ENDED DECEMBER 31,
(In Thousands)
1994 1995
---- ----
Noncash assets:
Goodwill $300 $25
Net assets acquired by discontinued operation 2,515 --
------ ----
Net cash investing activity $2,815 $25
====== ====
Stock Split
On October 3, 1996, the Company declared a three-for-one stock split
payable on October 24, 1996 to all holders of record on October 14, 1996.
All amounts and per share amounts in the accompanying financial statements
have been retroactively restated to reflect this stock split as if it
occurred on December 31, 1993.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the weighted average
number of shares of CRW Common Stock and CRW Common Stock equivalents
outstanding during the period. If the inclusion of CRW common stock equivalents
has an anti-dilutive effect in the aggregate, it is excluded from the
calculation. The weighted average number of shares outstanding in 1995 and 1996
for purposes of computing primary net income (loss) per common share was
3,526,794 and 3,793,846 and was 4,780,485 and 3,793,846, for purposes of
calculating fully diluted net income (loss) per share. Net loss per common share
has not been presented for 1994 as such presentation is not meaningful due to
the formation of CRW in May 1995 (see Note 3).
Reclassifications
Certain amounts in the 1994 and 1995 financial statements and notes have
been reclassified to conform with the 1996 presentation.
5. Investment in TLSP:
On April 29, 1996 CRW formed a wholly owned subsidiary, TeleSpectrum
Worldwide Inc. ("TLSP"). TLSP entered into asset purchase agreements to acquire
six teleservices business contingent upon an initial public offering of its
common stock. CRW made a $2,100,000 capital contribution to TLSP on May 23,
1996 (Note 7). On May 23, 1996, in connection with the acquisitions and initial
public offering, CRW issued warrants to its CEO, CFO, Director of Acquisitions
and a consultant to purchase 839,108 shares of TLSP stock from CRW at $1.50 per
share. The Company obtained an appraisal which indicated that the warrants had a
fair value of $0.75 per warrant on May 23, 1996. Accordingly, the Company
recorded a special non-cash compensation charge of $629,000 on May 23, 1996.
F-10
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
In September, 1996, certain subordinated lenders described in Note 7
exercised warrants to purchase 784,997 shares of TLSP stock from CRW at $1.50
per share. As a result, the Company received cash proceeds of $1,177,000 and
recorded a gain on the sale of $1,136,000. After these exercises, CRW owned
7,725,140 shares of TLSP common stock. If all of the remaining warrants to
purchase TLSP stock are exercised, CRW will receive approximately $2,345,000 of
cash and would then own 6,162,130 shares of TLSP.
As of December 31, 1996, CRW has an investment in TLSP that is accounted
for on the equity method. The net investment balance at December 31, 1996 is
$54,655,000.
The condensed results of operations for the period from April 1996
(Inception) to December 31, 1996 and financial position as of December 31, 1996
of TLSP, is as follows (in thousands):
Condensed Statement of Operations Information:
Revenue $ 61,474
Operating Income 5,516
Net Income 3,650
Condensed Balance Sheet Information:
Current Assets $ 66,721
Non-Current Assets 232,334
Current Liabilities 48,445
Non-Current Liabilities 10,099
Stockholders' Equity 240,511
The Company's share of undistributed net income was $774,000 in 1996, which
is net of approximately $622,000 of related expenses incurred by the Company in
the formation of TLSP.
6. Acquisitions:
In February 1994, the Company acquired certain assets of Strip Check
Cashing Services, Inc. ("SCC") for $300,000 in cash. SCC provides check cashing
services in Las Vegas, Nevada. In August 1995, CMC purchased the assets of All
Check Cashing, Inc. for $25,000 in cash and a $50,000 promissory note. The note
bears interest at 9% and is due in twenty-nine monthly installments of $1,925.
The above acquisitions were accounted for using the purchase method of
accounting. The excess of the consideration paid for the acquisitions over the
fair market value of the assets purchased and liabilities assumed was
approximately $398,000 and was recorded as goodwill which is being amortized
over 15 years.
7. Debt:
December 31,
------------
1995 1996
---- ----
(In Thousands)
Revolving line of credit with bank $6,000 $8,500
Convertible subordinated note to stockholder 962 664
Note payable to All Check Cashing (see Note 5) 43 21
-- --
7,005 9,185
Less-Current portion (1,321) (8,853)
------- -------
$5,684 $332
In connection with the Merger and the Distribution discussed in Note 1, CRW
assumed certain bank debt of CCS and refinanced it with proceeds from a
$6,000,000 three-year revolving line of credit which bears interest at the
bank's prime rate plus 1 1/2 %. Proceeds from the line of credit were used to
repay all of CCS's bank debt and to provide additional working capital. During
1996, available borrowings under the line of credit were increased to $8,500,000
and the expiration date of the line was changed to December 31, 1997. In
connection with the February 2, 1997 sale of CRW's collection business, CRW
repaid $2,000,000 of the line of credit, available borrowings were reduced to
$7,500,000 and the expiration date of the line of credit was changed to August
31, 1997. The Company is required to repay the line of credit with proceeds from
the sale of its NCO common stock. In connection with the line of credit, CRW has
issued to the bank warrants to purchase an aggregate of 325,554 shares of its
Common Stock at an average exercise price of $1.13 per share. Borrowings under
the line of credit are collateralized by substantially all of the assets of the
Company, including its investments in TLSP and NCO.
F-11
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
In November, 1995, the Company issued a $1,000,000 convertible subordinated
note to J. Brian O'Neill, the Company's CEO. The note bears interest at 12.5%
and requires 36 monthly payments of $33,454. The remaining principal balance due
under the note as of December 31, 1996 is convertible into 428,400 shares of CRW
Common Stock. In addition, the note contains a provision which allows Mr.
O'Neill to repay to CRW principal payments made by CRW under the note during the
previous 24 months and convert such repayments into CRW common stock. As of
December 31, 1996, Mr. O'Neill had the right to repay CRW $303,000 and convert
such amount into approximately 185,000 shares of CRW common stock. Proceeds from
the loan were used for capital expenditures and to increase working capital.
Principal payments of $336,000 and $328,000 are due under the note in 1997 and
1998, respectively.
On May 23, 1996, CRW issued $2,100,000 of subordinated notes to certain
directors, shareholders and employees. The subordinated notes were repaid in
September 1996 with proceeds from the bank line. Proceeds from the subordinated
notes were used to capitalize TLSP (see Note 5). In connection with the
subordinated notes, CRW issued warrants ("lender warrants") to the subordinated
lenders and to CRW's bank to purchase 1,433,454 and 74,445 shares of TLSP common
stock, respectively, from CRW for $1.50 per share. The Company obtained an
appraisal which indicated that the lender warrants had a fair value of $0.75 per
warrant on May 23, 1996. Accordingly, the debt was discounted $1,131,000 to
reflect the value of the lender warrants. The repayment of the subordinated debt
in September 1996 resulted in an extraordinary loss of $1,131,000.
8. Income Taxes:
The net income tax provision (benefit) consists of the following:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---- ---- ----
(In Thousands)
Income taxes (benefit) from:
Continuing operations $(622) $ -- $ (855)
Discontinued operation 62 236 (754)
--- --- -----
Net income taxes (benefit) $(560) $236 $(1,609)
===== ==== =======
The net income tax benefit in 1994 and 1996 has been allocated to
continuing operations and the discontinued operation by applying CRW's effective
income tax rate to loss from continuing operations and income from the
discontinued operation. The net income tax benefits relate to operating losses
incurred during the periods. The tax benefits result from the reduction of the
deferred tax liabilities. No deferred state tax benefit has been recorded.
The statutory federal income tax rate is different from the effective
income tax rate as indicated below:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
---- ---- ----
Statutory federal income tax rate (benefit) (34.0)% (34.0)% (34.0)%
Non-deductible expenses 0.5 -- 17.3
Operating losses not tax benefited 9.7 34.0 --
Reduction of deferred tax asset
valuation allowance -- -- (17.7)
------ ------ ------
(23.8)% -- % (34.4)%
======= ===== =======
F-12
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and income tax bases of assets and
liabilities given the provisions of tax laws. The net deferred tax asset related
to continuing operations is comprised of the following:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996
---- ----
(In Thousands)
Non-current deferred taxes related to
continuing operations:
Gross assets $ 965 $ 2,586
Gross liabilities -- (21,898)
----- --------
965 (19,312)
Deferred tax asset
valuation allowance (562) --
----- --------
Net deferred taxes related to
continuing operations $ 403 $(19,312)
===== ========
The Company did not have a valuation allowance against deferred tax assets
at December 31, 1996, as it believes it is more likely than not that the
deferred tax assets will be realized.
The tax effect of significant temporary differences representing deferred
tax assets and liabilities related to continuing operations are as follows:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
(In Thousands)
1995 1996
---- ----
Depreciation $ 200 $ 17
Net Operating loss carryforwards 662 2,333
Investment in TLSP -- ( 21,898)
Accruals and reserves 103 236
----- --------
965 ( 19,312)
Deferred tax asset valuation allowance (562) --
----- --------
Net deferred tax asset (liability) $ 403 ($19,312)
===== ========
CRW has a June 30 fiscal year-end. As of June 30, 1996, CRW had a net
operating loss carryforward of approximately $3,500,000. As of December 31,
1996, CRW has an additional loss carryforward of approximately $3,300,000 which
will be included in the Company's June 30, 1997 tax return.
F-13
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
9. Stockholders' Equity:
On February 29, 1996, CRW sold $2.5 million of its Series A Convertible
Preferred Stock (the "Preferred Stock") to an investor group consisting of
several investment funds and certain individuals. In addition, the investor
group received warrants to purchase 451,812 shares of CRW Common Stock at an
exercise price of $1.94 per share. In December 1996 the Preferred Stock was
converted into 1,290,879 shares of Common Stock. In January, 1997, the warrants
were exercised pursuant to a cashless exercise whereby the warrants were
exchanged for 354,586 shares of CRW common stock. In connection with the sale of
the Preferred Stock, the Company's Chief Executive Officer, J. Brian O'Neill,
entered into a put agreement which provided the investor group with the right to
require Mr. O'Neill to purchase their Preferred Stock at a price of $3.87 per
share on March 1, 1999. In connection with the put agreement, the Company
granted Mr. O'Neill a warrant to purchase 300,000 shares of CRW common stock at
an exercise price of $1.94 per share. The warrant expires on August 31, 1999.
10. Commitments and Contingencies:
CRW has noncancelable related-party leases discussed in Note 11, for its
office facilities, automobiles and certain office equipment. Rent expense under
leases related to continuing operations leases was zero in 1994 and $420,000 in
1995 and $378,000 in 1996. The future minimum lease payments under leases
related to continuing operations at December 31, 1996, net of sublease
commitments is as follows (in thousands):
1997 $149
1998 288
1999 288
2000 288
2001 289
------
$1,302
======
CRW has contracts with certain of its employees that provide for minimum
salaries of approximately $490,000 in 1997, and $183,333 in 1998.
CRW is a party to a number of lawsuits incidental to the ordinary course of
business of its Collection Division. NCOG did not assume any potential liability
under such lawsuits in connection with NCOG's acquisition of the Collection
Division's net assets in February 1997. The Company intends to vigorously defend
all such actions and, in the current opinion of management, the ultimate
resolution of such actions will not have a material adverse effect on the
Company's business, financial condition or results of operations. The actual
results of these claims, however, could be materially different.
One of such lawsuits was filed in August 1996 by Eugene Piscitelli, an
employee of the Company, in the United States District Court for the Eastern
District of Pennsylvania. Mr. Piscitelli has made a claim against the Company
for an unspecified amount of money damages in excess of jurisdictional limits
based on claims of alleged fraud in the inducement by the Company and alleged
breach by the Company of his employment agreement with respect to compensation
matters. The Company believes that Mr. Piscitelli's claims have no merit and
intends to vigorously defend this action.
11. Related Party Transactions:
CRW leases an aggregate of 13,000 square feet from 210 Mall Boulevard
Associates, a partnership controlled by Mr. O'Neill. The lease requires monthly
payments of $23,478 through December, 2001. NCO has subleased this facility
through July 31, 1997. CRW plans to sublease this facility again in August 1997.
CRW leases an aggregate of 22,000 square feet in King of Prussia, Pennsylvania
from CRW Building Limited Partnership, a partnership which is controlled by J.
Brian O'Neill, CRW's Chief Executive Officer. The lease commenced on April 1,
1995 and requires monthly base rent payments through April 1, 2005 of $28,875.
CRW believes the lease to be at the prevailing commercial market rate. CRW has
subleased this facility to TeleSpectrum Worldwide Inc.
F-14
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
In 1996, CRW paid approximately $365,000 in rent under this lease. The
aggregate minimum rent due on those leases, net of sublease commitments through
the end of their terms, is $1,252,000. In addition, CRW leased space from Lee
Park Investors, L.P., a partnership controlled by Mr. O'Neill and paid rent of
$46,000 in 1996.
12. Stock Option Plan:
The Company established the CRW 1995 Stock Option Plan (the "Plan") for its
employees, directors and certain other individuals. The Company may grant either
non-qualified or incentive stock options under the Plan. An aggregate of
3,000,000 shares of Common Stock have been reserved for the Plan. A committee of
the Board of Directors administers the Plan and determines the terms of the
option grants. Options vest as determined by the Board and expire no later than
10 years from the date of grant. Each option entitles the holder to purchase one
share of Common Stock at the indicated exercise price. As of December 31, 1996,
options to acquire 1,965,000 shares had been granted at exercise prices ranging
from $0.97 to $10.00 per share. All of the options outstanding are exercisable.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the CRW 1995 Stock
Option Plan. All options granted under the plan have been with exercise prices
equal to the fair market value of the stock on the date of grant. Accordingly,
no compensation expense has been recognized for the grants under the Plan. Had
compensation cost for the Plan been determined consistent with the methodology
prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company's income (loss) and income (loss) per share would have been
approximately ($4,560,000) and $27,722,000, or ($0.93) per share and $8.59 per
share, for 1996 and 1995, respectively. The pro forma effect for 1996 and 1995
is not representative of the pro forma effect on earnings in future years since
it does not take into consideration the pro forma compensation expense related
to grants made prior to 1995. The fair value of each option granted during 1996
and 1995 is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%,
expected volatility of 82%, risk-free interest rate of 5.23% in 1996 and 6.39%
in 1995, and an expected life of 3 years. The weighted average fair value at the
date of grant for options granted during 1996 and 1995 was $1.54 and $0.97 per
share, respectively. The weighted average remaining contractual life of the
outstanding stock options at December 31, 1996 was seven years.
The following table summarizes the aggregate option activity under the
plan:
Weighted
Average
Exercise Price
Activity Exercise Price Per Share
-------- -------------- ---------
Balance outstanding,
January 1, 1995 -- -- --
Granted 825,000 $0.97 - $1.27 $0.99
Exercised -- -- --
Canceled -- -- --
---------- -------------- -----
Balance outstanding,
December 31, 1995 825,000 $0.97 - $1.27 $0.99
Granted 1,140,000 $1.94 - $10.00 $3.37
Exercised (482,475) $0.97 - $7.92 $1.89
Canceled -- -- --
---------- -------------- -----
Balance outstanding,
December 31, 1996 1,482,525 $0.97 - $10.00 $2.50
========== ============== =====
F-15
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
Options to purchase 1,482,525 and 825,000 shares of Common Stock were
exercisable at an average exercise price of $2.50 and $0.99 at December 31, 1996
and 1995, respectively. At December 31, 1996, 1,035,000 shares were available
for future grants under the Plan.
During 1996 and 1995, the Company received proceeds of $1,060,000 and zero,
respectively, from the exercise of stock options.
13. Discontinued Operations:
The following table summarizes the operating results of the collection
business and CCI (in thousands):
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
---- ---- ----
Net revenues $34,035 $32,073 $27,432
Operating expenses 33,669 30,738 29,329
Other expenses 200 -- 9
------- ------- -------
Income (loss) before income taxes 166 1,335 (1,906)
Income taxes (benefit) 62 236 (754)
------- ------- -------
Income (loss) from discontinued
operation $104 $1,099 ($1,152)
======= ======= =======
The following table summarizes the net assets of the collection business as
of December 31, 1995 and 1996 (in thousands):
December 31,
------------
1995 1996
---- ----
Current assets $ 7,893 $ 6,857
Property and equipment 3,241 2,584
Intangible assets, net 4,768 4,391
Other assets 454 475
-------- --------
Total assets 16,356 14,307
Current liabilities (7,010) (5,993)
Long-term debt and liabilities (200) (79)
-------- --------
Net assets $ 9,146 $ 8,235
======== ========
F-16
<PAGE>
CRW FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
DECEMBER 31, 1996
Acquisitions of Discontinued Operations:
In April 1994, the collection business acquired certain assets of National
Child Support Recovery Service, Inc. ("NCSR") and Find Dad, Inc. ("Find Dad") in
exchange for the assumption of approximately $325,000 in liabilities. In
September 1994, the collection business sold the NCSR and Find Dad assets in
exchange for a $125,000 note and a $200,000 contingent payment agreement.
Although this contingent payment agreement was based on a fixed amount of future
cash collections, it has been deemed to not be a determinable component of the
sale proceeds, and as a result the note has been recorded as a receivable by the
Company but the $200,000 contingent payment arrangement was written off in 1994
as a $200,000 loss on this transaction.
In May 1994, the collection business acquired certain assets and assumed
certain liabilities (amounting to approximately $376,000) of PCC Credit, Inc.
("PCC") for approximately $415,000. The agreement also provides for up to
$470,000 of additional payments which are contingent on the results of PCC's
operations from May 1994 to April 1998. These contingent payments have not been
recorded by the Company as the payments will be recorded when such amounts are
determinable.
In June 1994, the collection business acquired certain assets and assumed
certain liabilities (amounting to approximately $2,300,000) of Tri-State Credit
Corporation and its subsidiary Kaplan & Kaplan, Inc. ("Kaplan"), a Crofton,
Maryland based commercial collection agency and entered into a ten-year
noncompete agreement with Kaplan's sole shareholder who also entered into a
four-year employment agreement with the Company. The purchase price consisted of
a $1,338,000 cash payment and a $500,000 payment for the noncompete agreement.
Investments in RTC Partnerships
In January 1994, CRW entered into two partnerships with the Resolution
Trust Corporation ("RTC") in which a subsidiary of CRW is the general partner of
a partnership which is general partner and the RTC is a limited partner. CRW
accounts for these partnerships under the equity method. The Company has
contributed approximately $143,000 of capital to the partnerships and has been
retained by the partnerships as a collection agent for which it is paid a
percentage of collections as a fee. The Company records such contingent fee
revenue upon receipt of payment from the partnership. Revenues paid by the
partnership to the Company in 1994, 1995 and 1996 were approximately $1,429,000,
$1,018,000 and $1,058,000, respectively.
Certain 1994 Charges
In 1994, the Company recorded charges of $950,000 related to the
consolidation of its information systems, accounting and human resources
departments from Phoenix and Dallas to Conshohocken, Pennsylvania and other
restructuring efforts. The Company accounted for its restructuring charges in
accordance with Emerging Issues Task Force (EITF) Issue 94-3.
Major Customer
Net revenues from the California Student Aid Commission were $2,013,000,
$4,220,000 and in $3,708,000 in 1994, 1995 and 1996, respectively.
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CRW FINANCIAL, INC.
By: /s/ J. Brian O'Neill
-------------------------------
J. Brian O'Neill
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Brian O'Neill Chief Executive Officer and Director April 7, 1997
- ------------------------ (Principal Executive Officer)
J.Brian O'Neill
/s/ Jonathan P. Robinson Chief Financial Officer and Principal April 7, 1997
- ------------------------ Financial and Accounting Officer
Jonathan P. Robinson
/s/ Robert N. Verratti Vice Chairman of the Board and April 7, 1997
- ------------------------ Director
Robert N. Verratti
/s/ Bernard Morgan Director April 7, 1997
- ------------------------
Bernard Morgan
/s/ Mark J. DeNino Director April 7, 1997
- ------------------------
Mark J. DeNino
/s/ Eustace W. Mita Director April 7, 1997
- -------------------------
Eustace W. Mita
</TABLE>
17
<PAGE>
EXHIBIT INDEX
3.1 Restated Certificate of Incorporation of the Registrant(3)
3.2 Amendment to Restated Certificate of Incorporation of the Registrant (1)
3.3 Amended Bylaws of the Registrant (2)
4.1 Loan and Security Agreement dated May 11, 1995 between Mellon Bank, N.A.
("Mellon") and the Registrant (2)
4.2 Amendment to Loan and Security Agreement dated September 12, 1995 between
Mellon and the Registrant (1)
4.3 Second Amendment to Loan and Security Agreement dated September 19, 1996
between Mellon and the Registrant (1)
4.4 Third Amendment to Loan and Security Agreement dated December 30, 1996
between Mellon and the Registrant (1)
4.5 Fourth Amendment to Loan and Security Agreement dated February 4, 1997
between Mellon and the Registrant (1)
4.6 Fifth Amendment to Loan and Security Agreement dated March 29, 1997
between Mellon and the Registrant (1)
4.7 Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock (the "Preferred Stock") of the Registrant (5)
4.8 Specimen of Series A Convertible Preferred Stock Certificate (5)
4.9 Form of Warrant issued in connection with Preferred Stock (5)
4.10 Term Loan Note and Addendum dated November 1, 1995 between the
Registrant in favor of J. Brian O'Neill and Miriam P. O'Neill (1)
10.1 Agreement of Lease dated as of July, 1994, between CRW Building Limited
Partnership and Casino and Credit Services, Inc. ("CCS") (3)
10.2 Sublease Agreement dated May 10, 1995 between CCS and the Registrant (2)
10.3 Sublease Agreement between TeleSpectrum Worldwide Inc. and the
Registrant (1)
10.4 Lease Agreement dated July 1, 1996 between the Registrant and Lee Park
Investors, L.P. (1)
10.5 Lease Agreement dated December 5, 1996 between the Registrant and
210 Mall Boulevard Associates (1)
10.6 Employment Agreement dated May 11, 1995 between J. Brian O'Neill and the
Registrant (2)
18
<PAGE>
10.7 Employment Agreement dated May 11, 1995 between Jonathan P. Robinson and
the Registrant (2)
10.8 Amended and Restated 1995 Stock Option Plan of the Registrant (4)
10.9 Securities Purchase Agreement dated February 29, 1996 between the
Registrant and certain purchasers defined therein (5)
10.10 Asset Acquisition Agreement dated February 2, 1997 among the Registrant,
Kaplan & Kaplan, Inc., NCO Group, Inc., CRWF Acquisition, Inc., and K & K
Acquisition, Inc. (6)
21 Subsidiaries of the Registrant (1)
23 Consent of Arthur Andersen LLP (1)
- -----------------------
(1) Filed with this Annual Report on Form 10-K.
(2) Filed as an Exhibit to the Registration Statement on Form S-1
(No. 33-62700) and incorporated herein by reference.
(3) Filed as an Exhibit to the Form 10-K filed with the Securities and Exchange
Commission on March 29, 1996 and incorporated herein by reference.
(4) Filed as an Exhibit to CRW's definitive proxy statement for its 1996 Annual
Meeting of Stockholders and incorporated herein by reference.
(5) Filed as an Exhibit to CRW's Form 8-K dated February 29, 1996 and
incorporated herein by reference.
(6) Filed as an Exhibit to CRW's Form 8-K dated February 2, 1997 and
incorporated herein by reference.
19
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CRW FINANCIAL, INC.
*****
CRW FINANCIAL INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company adopted a resolution at a
meeting duly held, proposing and declaring advisable the following amendment to
the Restated Certificate of Incorporation of the Company, and directing that it
be presented to the stockholders of the Company at the next Annual Meeting of
Stockholders:
RESOLVED, that there is hereby approved and adopted an amendment to the
Restated Certificate of Incorporation of the Company amending the Restated
Certificate of Incorporation by deleting Article 4A in its entirety and
inserting, in lieu thereof, a new Article 4A which shall read as follows:
"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 per share, and
500,000 shares are Preferred Stock, without par value."
SECOND: That at the 1996 Annual Meeting of Stockholders of the Company held
on October 3, 1996, where a quorum was present and acting throughout, holders of
a majority of the outstanding shares of the Company's common stock, $.01 par
value per share, entitled to vote at the meeting and holders of a majority of
the outstanding shares of the Company's Series A Convertible Preferred Stock,
without par value, entitled to vote at the meeting, each voting separately as a
class, representing all classes of the Company's capital stock, approved said
amendment in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment to the Company's Restated Certificate
of Incorporation was duly adopted on October 3, 1996 in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Jonathan P. Robinson, its Vice President and Chief Financial Officer, this 3rd
day of October, 1996.
ATTEST: CRW FINANCIAL, INC.
/s/ David S. Christie By: /s/ Jonathan P. Robinson
- -------------------------- ---------------------------
Name: David S. Christie Jonathan P. Robinson, Vice
Title: President President and CFO
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement is dated September 12, 1995
and is entered into by, among, and between CRW Financial, Inc., a Delaware
corporation ("Borrower"), Casino Money Centers, Inc., a Delaware corporation,
CRW California, Inc., a Delaware corporation, CRW Texas, Inc., a Delaware
corporation, and Kaplan & Kaplan, Inc., a Delaware corporation (collectively,
the "Guarantors" and severally each a "Guarantor") and Mellon Bank, N.A., a
national banking association ("Lender").
WHEREAS, Borrower has requested that Lender amend the Loan and Security
Agreement ("Agreement") dated May 10, 1995 between CRW Financial, Inc., a
Delaware corporation, Casino Money Centers, Inc., a Delaware corporation, CRW
California, Inc., a Delaware corporation, CRW Texas, Inc., a Delaware
corporation, and Kaplan & Kaplan, Inc., a Delaware corporation, and Mellon Bank,
N.A.; and
WHEREAS, Lender has agreed, as set forth below, to amend section 6.11 (a)
of the Agreement; and
WHEREAS, the Guarantors have agreed to this First Amendment, and that their
respective Surety Agreements dated May 10, 1995 (collectively, the "Surety
Agreements") remain in full force and effect.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and intending to be legally bound, the parties
hereto hereby agree as follows:
1. Section 6.11 (a) of the Agreement, entitled Capital Expenditures, is
hereby amended and restated in its entirety to read as follows:
(a) Capital Expenditures: Obligors shall not expend, on an aggregate basis,
for Capital Expenditures (calculated on a non-cumulative basis) more than
(1) $500,000.00 in any fiscal year, except as provided in items (2) and (3)
below; (2) $750,000.00 in fiscal year 1995, and (3) in fiscal year 1996, an
amount equal to $500,000.00 less the amount of the difference between
Capital Expenditures actually expended in fiscal year 1995 and $500,000.00,
provided, however, that the Hewlett Lease shall be excluded from
calculations in items (1) - (3) of this paragraph 6.11 (a).
Except as specifically amended and modified pursuant to this First Amendment,
the Agreement, the Surety Agreements, and all documents related thereto shall
remain in full force and effect in accordance with their original terms. Neither
the Agreement nor this First Amendment may be further modified or amended except
pursuant to a written instrument executed by the parties hereto. All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings given to such terms in the Agreement. This Amendment shall be governed
by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, by their
duly authorized signatories have executed this First Amendment on the date first
above written.
MELLON BANK N.A.
By: /s/ Liz A. Mellace
-----------------------------
Liz A. Mellace, AVP
<PAGE>
CRW FINANCIAL, INC.
Attest: /s/ Joy D. Johnson By: /s/ Jonathan P. Robinson
------------------------- -------------------------
CASINO MONEY CENTERS, INC.
Attest: /s/ Joy D. Johnson By: /s/ Jonathan P. Robinson
------------------------- -------------------------
CRW CALIFORNIA, INC.
Attest: /s/ Joy D. Johnson By: /s/ Jonathan P. Robinson
------------------------- -------------------------
CRW TEXAS, INC.
Attest: /s/ Joy D. Johnson By: /s/ Jonathan P. Robinson
------------------------- -------------------------
KAPLAN & KAPLAN, INC.
Attest: /s/ Joy D. Johnson By: /s/ Jonathan P. Robinson
------------------------- -------------------------
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Second Amendment to Loan and Security Agreement ("Amendment") dated
this 19th day of September, 1996 between CRW FINANCIAL, INC. ("Borrower"),
CASINO MONEY CENTERS, INC., CRW CALIFORNIA, INC., CRW TEXAS, INC. AND KAPLAN &
KAPLAN, INC. (collectively, the "Guarantors" and severally each a "Guarantor")
and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. On May 11, 1995, Borrower, Guarantors and Lender entered into a certain
Loan and Security Agreement pursuant to which financing arrangements were
established by Lender for the benefit of Borrower with the credit support of
Guarantors (which Loan and Security Agreement, as it has been previously
modified and may hereafter, from time to time, be modified, supplemented or
replaced is hereinafter referred to as the "Loan Agreement").
B. The parties have agreed to modify certain terms and conditions of the
Loan Agreement and desire to set forth their understanding in this Amendment.
C. Capitalized terms used but not otherwise defined in this Amendment shall
have the respective meanings ascribed thereto in the Loan Agreement.
NOW, THEREFORE, with the foregoing background incorporated herein by
reference and made part hereof, the parties hereto, intending to be legally
bound, hereby promise and agree as follows:
1. The definition of "Maximum Revolving Credit Amount" in Section 1.1 is
hereby deleted in its entirety and shall be replaced by the following:
Maximum Revolving Credit Amount - $7,500,000,
to be reduced to $6,500,000 on December 31, 1996.
<PAGE>
2. The definition of "Maturity Date" in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and shall be replaced by the
following:
Maturity Date - The earlier of (a) 180 days from
the date hereof or (b) the date of closing on a
sale by the Borrower and/or the Guarantors of
the assets of their collection business or any
merger or consolidation of any such companies
with the effect that such business is not
directly or indirectly controlled by Borrower.
3. Notwithstanding any provision of the Loan Agreement (including
without limitation Section 2.1 (a)) or this Amendment to the contrary,
outstanding borrowings under the Revolving Credit shall not at any time exceed
15% of the market value of the common stock of TeleSpectrum Worldwide Inc., a
Delaware corporation, ("TWI") owned by Borrower and pledged to Lender as
security for the Obligations. On any date on which the Maximum Revolving Credit
Amount is to be reduced pursuant to paragraph 1 above and, as the case may be,
not later than ten (10) Business Days after any date on which the outstanding
borrowings exceed the maximum amount permitted under this paragraph 3, Borrower
will then unconditionally pay Lender all amounts necessary to reduce the amounts
outstanding under the Revolving Credit to the applicable permitted amount.
4. Sections 6.11(b), (c), (d) and (e) of the Loan Agreement are deleted
in their entirety and replaced by the following new Section 6.11(b):
(b) Maximum Net Loss: Obligors shall have a
maximum consolidated net loss of $1,600,000 for
the fiscal quarter ending September 30, 1996 and
of $400,000 for the fiscal quarter ending
December 31, 1996.
5. Section 7.1 of the Loan Agreement is modified to permit a sale by the
Obligors of the assets of their collection business or a merger or consolidation
of the companies operating such business so long as the Revolving Credit is
terminated and the Obligations are also paid in full contemporaneously with the
closing on such sale, merger or consolidation.
2
<PAGE>
6. Borrower shall be unconditionally obligated to pay Lender a
facility amendment fee of $25,000 on the Maturity Date.
7. Obligors represent and warrant to Lender as follows:
(a) The execution and delivery by Obligors of this Amendment and
performance by it of the transactions herein contemplated (i) are and will be
within each Obligor's corporate powers, (ii) have been authorized by all
necessary corporate action, and (iii) are not and will not be in contravention
of any order of any court or other agency or government, of law or any other
indenture, agreement or undertaking to which any Obligor is a party or by which
the property of any Obligor is bound, or to be in conflict with, or result in a
breach of or constitute (with due notice and/or lapse of time) a default under
any such indenture, agreement or undertaking or result in the imposition of any
lien, charge or encumbrance of any nature on any Property of any Obligor.
(b) This Amendment and any other agreements, instruments and
documents executed and/or delivered in connection herewith shall be valid,
binding and enforceable in accordance with their respective terms.
(c) Borrower hereby ratifies and restates as of the date hereof each
of the representations and warranties contained in the Loan Agreement and
thereby represents that all such representations and warranties are true and
correct in all material respects as of the date hereof.
(d) There has not occurred as of the date hereof any material
adverse change in the business, operations, condition (financial or otherwise)
or business prospects of any Obligor from June 30, 1996 (as the financial
condition is reflected on financial statements of Obligors as of such date
delivered to Lender).
(e) As of the date hereof, there is $5,500,000 owing by Borrower to
Lender under the Revolving Credit without defense, setoff or counterclaim.
8. Borrower reconfirms its obligation to reimburse Lender on demand of
all of Lender's reasonable expenses (including without limitation reasonable
attorneys' fees and costs) incurred in connection with this Amendment and the
transactions contemplated hereby.
3
<PAGE>
9. This Amendment shall amend and is incorporated into the Loan
Agreement. To the extent of any express inconsistency between the terms hereof
and the terms of the Loan Agreement, the terms hereof shall control. Except as
expressly amended by this Amendment, all of the terms and conditions of the Loan
Agreement remain in full force and effect. Without limiting the generality of
the foregoing, Borrower reconfirms that all Collateral (including without
limitation Borrower's pledge to Lender of the stock of TWI) secures and shall
continue to secure all of the Obligations.
IN WITNESS WHEREOF, the undersigned have executed this Amendment by their
respective duly authorized officers as of the day and year first above
written.
CRW FINANCIAL, INC. MELLON BANK, N.A.
By: /s/ J. Brian O'Neill By: /s/ Liz Mellace
---------------------------- ----------------------------
Attest: /s/ Jonathan P. Robinson
------------------------
CASINO MONEY CENTERS, INC.
By: /s/ J. Brian O'Neill
----------------------------
Attest: /s/ Jonathan P. Robinson
------------------------
CRW CALIFORNIA, INC.
By: /s/ J. Brian O'Neill
----------------------------
Attest: /s/ Jonathan P. Robinson
------------------------
CRW TEXAS, INC.
By: /s/ J. Brian O'Neill
----------------------------
Attest: /s/ Jonathan P. Robinson
------------------------
4
<PAGE>
KAPLAN & KAPLAN, INC.
By: /s/ J. Brian O'Neill
----------------------------
Attest: /s/ Jonathan P. Robinson
------------------------
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Third Amendment to Loan and Security Agreement ("Amendment") dated
this 30th day of December, 1996 between and among CRW FINANCIAL, INC.
("Borrower"), CASINO MONEY CENTERS, INC. ("CMC"), CRW CALIFORNIA, INC., CRW
TEXAS, INC. and KAPLAN & KAPLAN, INC. (collectively, the "Guarantors" and
severally each a "Guarantor") and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. On May 11, 1995, Borrower, Guarantors and Lender entered into a certain
Loan and Security Agreement pursuant to which financing arrangements were
established by Lender for the benefit of Borrower with the credit support of
Guarantors (which Loan and Security Agreement, as it has been previously
modified and may hereafter, from time to time, be modified, supplemented or
replaced is hereinafter referred to as the "Loan Agreement").
B. On September 19, 1996, Borrower, Guarantors and Lender entered into a
Second Amendment to Loan and Security Agreement ("Second Amendment").
C. The parties have agreed to modify certain terms and conditions of the
Loan Agreement and desire to set forth their understanding in this Amendment.
D. Capitalized terms used but not otherwise defined in this Amendment shall
have the respective meanings ascribed thereto in the Loan Agreement.
NOW, THEREFORE, with the foregoing background incorporated herein by
reference and made part hereof, the parties hereto,
<PAGE>
intending to be legally bound, hereby promise and agree as follows:
1. The definition of "Maximum Revolving Credit Amount" in Section 1.1 of
the Loan Agreement is hereby deleted in its entirety and is replaced by the
following:
"Maximum Revolving Credit Amount - $8,500,000."
2. The definition of "Maturity Date" in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and is replaced by the following:
Maturity Date - The earlier of (a) March 18, 1997 or (b)
the date of closing on a sale by the Borrower and/or the
Guarantors of the assets of their collection business or
any merger or consolidation of any of such companies with
the effect that such business is not directly or
indirectly controlled by Borrower.
3. Borrower has executed and delivered to Lender a Replacement Revolving
Credit Note (the "New Note") reflecting the increase in the Maximum Revolving
Credit Amount.
4. Section 6.11(b) is hereby amended to read as follows:
"(b) Maximum Net Loss: Obligors shall have maximum
consolidated net loss of $800,000 for the fiscal quarter
ending December 31, 1996."
5. (a) To induce Lender to increase the Maximum
Revolving Credit Amount and make the amendments described above,
2
<PAGE>
(1) Borrower will issue to APT Holdings Corporation ("Holdings") on or
before December 30, 1996, a Common Stock Purchase Warrant for 62,500 shares of
Borrower's Common Stock (the "New Warrant"), which Warrant (i) will be in the
form of the Common Stock Purchase Warrant dated February 29, 1996 for 17,500
shares of Borrower's Common Stock currently held by Holdings, (ii) will have an
initial Exercise Price of $6.75 per share, and (iii) will be, and the Warrant
Securities (as defined in the New Warrant) will be, entitled to the benefits of
the Additional Warrant Agreement dated February 29, 1996 by and between Borrower
and Holdings (the "Warrant Agreement") and the Registration Rights Agreement (as
amended on the date hereof), and (2) the facility amendment fee referred to in
paragraph 6 of the Second Amendment is increased to $35,000 and will be paid by
Borrower to Lender on the Maturity Date (as defined above). The New Warrant
shall be included in the definition of "Warrant" in the Warrant Agreement and
all shares of Common Stock issuable upon exercise of the New Warrant shall be
Warrant Shares under the Warrant Agreement. All Warrant Securities (as defined
in the Warrant) issuable upon exercise of the New Warrant shall be Registrable
Securities (as defined therein) under the Registration Rights Agreement. All
capitalized terms used and not defined herein shall have the meanings given them
in the Warrant Agreement or the New Warrant.
6. Borrower will deliver to Lender and Holdings, prior to or on the date
of the issuance of the New Warrant, the
3
<PAGE>
following, each in form and substance satisfactory to Holdings
and its counsel:
(1) A certified copy of the resolutions of the Board of Directors of
the Borrower evidencing approval of this Amendment, the authorization for
issuance of the New Warrant and Warrant Shares and other matters contemplated
hereby and certified copies of all documents evidencing other necessary
corporate or other action and governmental approvals, if any, with respect to
this Amendment, the New Note, the New Warrant and the Warrant Shares.
(2) An opinion of Stradley, Ronon, Stevens & Young, counsel to the
Borrower, in form and substance satisfactory to Holdings and its counsel;
(3) A certificate of the Secretary or an Assistant Secretary of the
Borrower stating the names of the officers of the Borrower authorized to sign
this Amendment, the New Note, the certificates for the Warrant and the other
documents or certificates to be delivered pursuant to this Agreement by the
Borrower or any of its officers, together with the true signatures of such
officers.
(4) Amendments to the Holders Agreement and the Co-Registration
Agreement, executed by the parties thereto, providing that the New Warrant and
the Warrant Shares issuable thereunder are covered by such Agreements, and such
other documents, agreements and instruments as Lender shall reasonably request,
in connection with the New Warrant.
4
<PAGE>
7. Guarantors confirm to Lender that their respective liabilities and
obligations under the Loan Agreement and the Surety Agreement dated May 11, 1995
given by the undersigned to Lender continue absolutely and unconditionally,
unmodified and in full force and effect.
8. Obligors jointly and severally represent and warrant to Lender as
follows:
(a) The execution and delivery by Obligors of this Amendment, the
New Note, the New Warrant and the other documents required hereby, and
performance by it of the transactions herein contemplated (i) are and will be
within each Obligor's corporate powers, (ii) have been authorized by all
necessary corporate action, and (iii) are not and will not be in contravention
of any order of any court or other agency or government, of law or any other
indenture, agreement or undertaking to which any Obligor is a party or by which
the property of any Obligor is bound, or to be in conflict with, or result in a
breach of or constitute (with due notice and/or lapse of time) a default under
any such indenture, agreement or undertaking or result in the imposition of any
lien, charge or encumbrance of any nature on any Property of any Obligor.
(b) This Amendment, the New Note, the New Warrant and any other
agreements, instruments and documents executed and/or delivered in connection
herewith shall be valid, binding and enforceable in accordance with their
respective terms.
5
<PAGE>
(c) Borrower hereby ratifies and restates as of the date hereof each
of the representations, warranties and covenants contained in the Loan Agreement
and the Warrant Agreement and thereby represents that all such representations,
warranties and covenants are true and correct in all material respects as of the
date hereof as if made on the date hereof.
(d) There has not occurred as of the date hereof any material
adverse change in the business, operations, condition (financial or otherwise)
or business prospects of any Obligor since September 30, 1996 (as the financial
condition is reflected on financial statements of Obligors as of such date
delivered to Lender).
(e) As of the date hereof, there is $7,500,000.00 owing by Borrower
to Lender under the Revolving Credit without defense, setoff or counterclaim.
(f) As of the date hereof, there are no defaults or Events of
Default existing or continuing under the Loan Agreement.
(g) The proceeds of the loans borrowed under the increase in the
Maximum Revolving Credit Amount will be used solely to fund the working capital
requirements of CMC.
9. Borrower reconfirms its obligation to reimburse Lender on demand of
all of Lender's reasonable expenses (including without limitation reasonable
attorneys' fees and costs) incurred in connection with this Amendment and the
transactions contemplated hereby.
6
<PAGE>
10. This Amendment shall amend and is incorporated into the Loan
Agreement. To the extent of any express inconsistency between the terms hereof
and the terms of the Loan Agreement, the terms hereof shall control. Except as
expressly amended by this Amendment, all of the terms and conditions of the Loan
Agreement remain in full force and effect. Without limiting the generality of
the foregoing, Borrower reconfirms that all Collateral (including without
limitation Borrower's pledge to Lender of the stock of TWI) secures and shall
continue to secure all of the Obligations.
IN WITNESS WHEREOF, the undersigned have executed this Amendment by
their respective duly authorized officers as of the day and year first above
written.
CRW FINANCIAL. INC. MELLON BANK N. A.
By: /s/ Jonathan P. Robinson By: /s/ Liz Mellace
----------------------------- ------------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
CASINO MONEY CENTERS, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
CRW CALIFORNIA, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
7
<PAGE>
CRW TEXAS, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
KAPLAN & KAPLAN, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
8
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Fourth Amendment to Loan and Security Agreement ("Amendment") dated
this 3rd day of February, 1997 between and among CRW FINANCIAL, INC.
("Borrower"), KAPLAN & KAPLAN, INC. ("Kaplan") and CASINO MONEY CENTERS, INC.
("CMC") (Kaplan and CMC being collectively, the "Guarantors" and severally each
a "Guarantor") and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. On May 11, 1995, Borrower, Guarantors, CRW California, Inc. ("CCI"), CRW
Texas, Inc. ("CTI") and Lender entered into a certain Loan and Security
Agreement pursuant to which financing arrangements were established by Lender
for the benefit of Borrower with the credit support of Guarantors, CCI and CTI
(which Loan and Security Agreement, as it has been previously modified and may
hereafter, from time to time, be modified, supplemented or replaced is
hereinafter referred to as the "Loan Agreement").
B. On September 19, 1996, Borrower, Guarantors, CCI, CTI and Lender entered
into a Second Amendment to Loan and Security Agreement ("Second Amendment").
C. On December 30, 1996, Borrower, Guarantors, CCI, CTI and Lender entered
into a Third Amendment to Loan and Security Agreement ("Third Agreement").
D. The parties have agreed to modify certain terms and conditions of the
Loan Agreement and desire to set forth their understanding in this Amendment.
<PAGE>
E. Capitalized terms used but not otherwise defined in this Amendment shall
have the respective meanings ascribed thereto in the Loan Agreement or in the
Registration Agreement (defined herein).
NOW, THEREFORE, with the foregoing background incorporated herein by
reference and made part hereof, the parties hereto, intending to be legally
bound, hereby promise and agree as follows:
1. Lender hereby consents to Borrower's and Kaplan's sale of the assets
used in their collection business including, but not limited to, the stock of
CCI and CTI (collectively, the "Collection Assets") to NCO Group, Inc. ("NCO")
and the Buyers (the "Sale") pursuant to and in accordance with the terms and
provisions of the Asset Acquisition Agreement (defined below).
2. Simultaneously with the consummation of the Sale, Borrower and
Guarantors shall do the following:
(a) Pay $2,000,000 of the cash consideration received in the Sale to
the Lender as partial repayment of the Obligations; upon such repayment; the
Maximum Revolving Credit Amount shall be automatically and permanently reduced
to $6,500,000.
(b) Pledge to Lender, as additional collateral security for the
Obligations, the Closing Securities and the Warrant Securities pursuant to a
Stock Pledge Agreement in the form attached hereto ("NCO Stock Pledge
Agreement") and deliver to Lender the stock certificates for the Closing
Securities and
-2-
<PAGE>
the Warrant for the Warrant Securities accompanied by stock powers
duly executed in blank. Borrower hereby grants to Lender a lien on and security
interest in all of Borrower's rights under the Registration Agreement as
additional security for the Obligations.
(c) Place $325,000 in a blocked account with Lender which shall be
used solely for the payment of interest on the Replacement Revolving Credit
Note.
(d) Pay to the Lender the $35,000 fee, which is payable upon
consummation of the Sale, as required by the Third Amendment.
3. Borrower and Guarantors shall use their best efforts to sell the
Closing Securities as soon as possible after the date hereof. Provided no Event
of Default or default has occurred and is continuing, ninety-five percent (95%)
of the net proceeds of each sale of the Closing Securities shall be paid to
Lender as partial repayment of the Obligations; upon each such sale and
repayment, the Maximum Revolving Credit Amount shall be automatically and
permanently reduced by the amount of such repayment.
4. The definition of "Maturity Date" in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and is replaced by the following:
Maturity Date - The earlier of (a) December 31, 1997 or (b) the date
on which the Borrower has sold sufficient Closing Securities or
otherwise
-3-
<PAGE>
made payments with respect to the Obligations so that the Obligations
have been paid in full.
5. Section 6.11(b) of the Loan Agreement is hereby deleted.
6. (a) To induce Lender to grant the consent and make the amendments
described above, Borrower and Guarantors are delivering to Lender, on the date
hereof, the following, each in form and substance satisfactory to Lender and its
counsel:
(1) A certified copy of the resolutions of the Board of Directors of
the Borrower and each of the Guarantors approving this Amendment, the NCO Stock
Pledge Agreement and the other matters contemplated hereby and certified copies
of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Amendment; and
(2) A certificate of the Secretary or an Assistant Secretary of the
Borrower and each Guarantor stating the names of the officers of the Borrower
and each Guarantor authorized to sign this Amendment, and the other documents or
certificates to be delivered pursuant to this Amendment by the Borrower and each
Guarantor or any of its officers, together with the true signatures of such
officers.
7. Guarantors confirm to Lender that their respective liabilities and
obligations under the Loan Agreement and the
-4-
<PAGE>
Surety Agreement dated May 11, 1995 given by the undersigned to Lender continue
absolutely and unconditionally, unmodified and in full force and effect.
8. Obligors jointly and severally represent and warrant to Lender as
follows:
(a) The execution and delivery by Obligors of this Amendment, the
NCO Stock Pledge Agreement and the other documents required hereby, and
performance by them of the transactions herein contemplated (i) are and will be
within each Obligor's corporate powers, (ii) have been authorized by all
necessary corporate action, and (iii) are not and will not be in contravention
of any order of any court or other agency or government, of law or any other
indenture, agreement or undertaking to which any Obligor is a party or by which
the property of any Obligor is bound, or to be in conflict with, or result in a
breach of or constitute (with due notice and/or lapse of time) a default under
any such indenture, agreement or undertaking or result in the imposition of any
lien, charge or encumbrance of any nature on any Property of any Obligor.
(b) This Amendment, the NCO Stock Pledge Agreement and any other
agreements, instruments and documents executed and/or delivered in connection
herewith are valid, binding and enforceable in accordance with their respective
terms.
(c) Borrower hereby ratifies and restates as of the date hereof each
of the representations, warranties and
-5-
<PAGE>
covenants contained in the Loan Agreement and thereby represents that all such
representations, warranties and covenants are true and correct in all material
respects as of the date hereof as if made on the date hereof.
(d) There has not occurred as of the date hereof any material
adverse change in the business, operations, condition (financial or otherwise)
or business prospects of any Obligor since September 30, 1996 (as the financial
condition is reflected on financial statements of Obligors as of such date
delivered to Lender).
(e) As of the date hereof, there is $8,500,000 owing by Borrower to
Lender under the Revolving Credit without defense, setoff or counterclaim.
(f) As of the date hereof, there are no defaults or Events of
Default existing or continuing under the Loan Agreement.
9. Borrower reconfirms its obligation to reimburse Lender on demand for
all of Lender's reasonable expenses (including without limitation reasonable
attorneys' fees and costs) incurred in connection with this Amendment and the
transactions contemplated hereby.
10. This Amendment shall amend and is incorporated into the Loan
Agreement. To the extent of any express inconsistency between the terms hereof
and the terms of the Loan Agreement, the terms hereof shall control. Except as
expressly amended by this Amendment, all of the terms and conditions of the Loan
Agreement remain in full force and effect. Without limiting
-6-
<PAGE>
the generality of the foregoing, Borrower reconfirms that all Collateral
(including without limitation Borrower's pledge to Lender of the stock of TWI)
secures and shall continue to secure all of the Obligations.
11. As used herein the following capitalized terms shall have the
following meanings:
(a) "Acquisition Agreement" means the Assets Acquisition Agreement
dated February 2, 1997 among NCO, Borrower, Kaplan, CRWF Acquisition, Inc. and
K&K Acquisition, Inc.
(b) "Registration Aqreement" means the Registration Rights Agreement
dated the date hereof between NCO and the Borrower.
IN WITNESS WHEREOF, the undersigned have executed this Amendment by
their respective duly authorized officers as of the day and year first above
written.
CRW FINANCIAL, INC. MELLON BANK, N.A.
By: /s/ Jonathan P. Robinson By: /s/ Liz Mellace
----------------------------- --------------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
CASINO MONEY CENTERS, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
KAPLAN & KAPLAN
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Loan and Security Agreement ("Amendment") dated
this 27th day of March, 1997 between and among CRW FINANCIAL, INC. ("Borrower"),
KAPLAN & KAPLAN, INC. ("Kaplan") and CASINO MONEY CENTERS, INC. ("CMC") (Kaplan
and CMC being collectively, the "Guarantors" and severally each a "Guarantor")
and MELLON BANK, N.A. ("Lender").
BACKGROUND
A. On May 11, 1995, Borrower, Guarantors, CRW California, Inc. ("CCI"),
CRW Texas, Inc. ("CTI") and Lender entered into a certain Loan and Security
Agreement pursuant to which financing arrangements were established by Lender
for the benefit of Borrower with the credit support of Guarantors, CCI and CTI
(which Loan and Security Agreement, as it has been previously modified and may
hereafter, from time to time, be modified, supplemented or replaced is
hereinafter referred to as the "Loan Agreement").
B. On September 19, 1996, Borrower, Guarantors, CCI, CTI and Lender entered
into a Second Amendment to Loan and Security Agreement ("Second Amendment").
C. On December 30, 1996, Borrower, Guarantors, CCI, CTI and Lender entered
into a Third Amendment to Loan and Security Agreement ("Third Agreement").
D. On February 3, 1997, Borrower and Guarantors entered into a Fourth
Amendment to Loan and Security Agreement ("Fourth Amendment").
<PAGE>
E. The parties have agreed to modify certain terms and conditions of the
Loan Agreement and desire to set forth their understanding in this Amendment.
F. Capitalized terms used but not otherwise defined in this Amendment shall
have the respective meanings ascribed thereto in the Loan Agreement.
NOW, THEREFORE, with the foregoing background incorporated herein by
reference and made part hereof, the parties hereto, intending to be legally
bound, hereby promise and agree as follows:
1. The definition of "Maturity Date" in Section 1.1 of the Loan
Agreement is hereby deleted in its entirety and is replaced by the following:
"Maturity Date - The earlier of (a) August 31, 1997 or (b) the date on
which the Borrower has sold sufficient Closing Securities (as defined in
the Fourth Amendment) or otherwise made payments with respect to the
Obligations so that the Obligations have been paid in full."
2. The definition of "Maximum Revolving Credit Amount" in Section 1.1
of the Loan Agreement is hereby deleted in its entirety and is replaced by the
following:
"Maximum Revolving Credit Amount - $7,500,00"
3. Section 7.4 of the Loan Agreement is hereby amended to add a new
paragraph (c) which reads in full as follows:
-2-
<PAGE>
"(c) No Obligator shall pay any bonus or other similar or special
compensation to any executive officer or senior manager of any
Obligator."
4. To induce Lender to increase the Maximum Revolving Credit Amount and
make the amendments described above, Borrower and Guarantors are delivering to
Lender, on the date hereof, (a) a fee of $5,000 and (b) the following, each in
form and substance satisfactory to Lender and its counsel:
(1) A Replacement Revolving Credit Note in the face amount of
$7,500,000 (the "Replacement Note"), duly executed by Borrower,
reflecting the increase in the Maximum Revolving Credit Amount.
(2) A certified copy of the resolutions of the Board of Directors
of the Borrower and each of the Guarantors approving this Amendment
and the other matters contemplated hereby and certified copies of all
documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Amendment; and
(3) A certificate of the Secretary or an Assistant Secretary of
the Borrower and each Guarantor stating the names of the officers of
the Borrower and each Guarantor authorized to sign this Amendment, and
the other documents or certificates to be delivered pursuant to this
Amendment by the Borrower and each Guarantor or any of its officers,
together with the true signatures of such officers.
-3-
<PAGE>
5. Guarantors confirm to Lender that their respective liabilities and
obligations under the Loan Agreement and the Surety Agreement dated May 11, 1995
given by the undersigned to Lender continue absolutely and unconditionally,
unmodified and in full force and effect.
6. Obligators jointly and severally represent and warrant to Lender as
follows:
(a) The execution and delivery by Obligators of this Amendment,
the Replacement Note and the other documents required hereby, and
performance by them of the transactions herein contemplated (i) are
and will be within each Obligor's corporate powers, (ii) have been
authorized by all necessary corporate action, and (iii) are not and
will not be in contravention of any order of any court or other agency
or government, of law or any other indenture, agreement or undertaking
to which any Obligator is a party or by which the property of any
Obligor is bound, or to be in conflict with, or result in a breach of
or constitute (with due notice and/or lapse of time) a default under
any such indenture, agreement or undertaking or result in the
imposition of any lien, charge or incumbrance of any nature on any
Property of any Obligor.
(b) This Amendment, the Replacement Note and any other
agreements, instruments and documents executed and/or
-4-
<PAGE>
delivered in connection herewith are valid, binding and enforceable in
accordance with their respective terms.
(c) Borrower hereby ratifies and restates as of the date hereof
each of the representations, warranties and covenants contained in the
Loan Agreement and thereby represents that all such representations,
warranties and covenants are true and correct in all material respects
as of the date hereof as if made on the date hereof.
(d) There has not occurred as of the date hereof any material
adverse change in the business, operations, condition (financial or
otherwise) or business prospects of any Obligor since September 30,
1996 (as the financial condition is reflected on financial statements
of Obligators as of such date delivered to Lender).
(e) As of the date hereof, there is $6,500,000 owing by Borrower
to Lender under the Revolving Credit without defense, setoff or
counterclaim.
(f) As of the date hereof, there are no defaults or Events of
Default existing or continuing under the Loan Agreement.
7. Borrower reconfirms its obligation to reimburse Lender on demand
for all of Lender's reasonable expenses (including without limitation reasonable
attorney's fees and costs) incurred in connection with this Amendment and the
transactions contemplated hereby.
-5-
<PAGE>
8. This Amendment shall amend and is incorporated into the Loan
Agreement into the Loan Agreement. To the extent of any express inconsistency
between the terms hereof and the terms of the Loan Agreement, the terms hereof
shall control. Except as expressly amended by this Amendment, all of the terms
and conditions of the Loan Agreement remain in full force and effect. Without
limiting the generality of the foregoing, Borrower reconfirms that all
collateral (including without limitation Borrower's pledge to Lender of the
stock of TWI and the Closing Securities) secures and shall continue to secure
all of the Obligations.
IN WITNESS WHEREOF, the undersigned have executed this Amendment by
their respective duly authorized officers as of the day and year first above
written.
CRW FINANCIAL, INC. MELLON BANK, N.A.
By: /s/ Jonathan P. Robinson By: /s/ Liz Mellace
----------------------------- -----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
CASINO MONEY CENTERS, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
KAPLAN & KAPLAN, INC.
By: /s/ Jonathan P. Robinson
-----------------------------
Attest: /s/ J. Brian O'Neill
-------------------------
-6-
<PAGE>
AMENDMENT TO TERM LOAN NOTE AND ADDENDUM
The Term Loan Note dated November 1, 1995, (the "Term Note") by and between
CRW Financial, Inc. ("Borrower") and J. Brian O'Neill and Miriam P. O'Neill,
husband and wife (collectively, "Payee"), as amended and supplemented by the
Addendum to the Term Loan Note dated November l, 1995 between Borrower and Payee
(the "Addendum") (the Term Note and the Addendum collectively, the "Note"), is
hereby further amended and supplemented as follows:
BACKGROUND
Pursuant to the Addendum, Payee was granted certain conversion rights (the
"Conversion Right") to purchase shares (the "Shares") of the Borrower's common
stock (the "Common Stock"). The parties intended that the Addendum would include
an anti-dilution provision related to the Conversion Right, however, such
provision was inadvertently not incorporated in the Addendum. Capitalized terms
not otherwise defined herein shall have the meaning ascribed to them in the
Note.
NOW, THEREFORE, in consideration of the premises and agreements hereinafter
set forth, Borrower and Payee hereby agree to amend and supplement the Note as
follows:
Section l. Purchase Price and Adjustments.
1.1 Purchase Price. The Purchase Price shall be adjusted from time to time
as provided herein. In the event of any adjustment of the Purchase Price, the
result shall be expressed to the nearest $0.01, but any such lesser amount shall
be carried forward and shall be considered at the time of and together with the
next subsequent adjustment which, together with any adjustments to be carried
forward, shall amount to $0.01 per share or more.
1.2 Adjustment of Purchase Price and Number of Shares Subject to the
Conversion Right. The Purchase Price shall be subject to adjustment, from time
to time, as follows:
(a) In case of any capital reclassification or reorganization or of any
consolidation or merger of the Borrower with or into any other entity, or any
other corporate reorganization (other than a merger or consolidation in which
the Borrower shall be the continuing or surviving entity and which does not
result in any change in the Common Stock) or any sale of all or substantially
all of the assets of the Borrower (any such transaction being hereafter referred
to as a "Reorganization") then, in each case, Payee, upon exercise of the
Conversion Right at any time after the consummation or effective date of such
Reorganization (the "Effective Date"), shall receive, in lieu of the Shares
issuable on such exercise prior to the Effective Date, the stock and other
securities and property (including cash) to which Payee would have been entitled
upon the Effective Date if Payee had exercised the Conversion Right immediately
prior thereto.
<PAGE>
(b) If Borrower at any time while the Conversion Right remains
outstanding shall split, subdivide or combine the Common Stock or shall issue a
dividend on the Common Stock payable in shares of the Common Stock, the Purchase
Price shall be proportionately decreased in the case of a split, subdivision or
stock dividend, and increased in the case of a combination.
(c) If Borrower shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Common Stock payable in (i) securities or
evidences of indebtedness of the Borrower or of other entities (other than
shares of the Common Stock in which case the provisions of subsection (b) of
this Section 1.2 shall apply) or (ii) assets or cash (excluding cash dividends
paid or payable solely out of retained earnings), then in each case, Payee, on
exercise of the Conversion Right at any time after the consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such dates
the securities or such other assets of the Borrower to which Payee would have
been entitled upon such date if Payee had exercised the Conversion Right
immediately prior thereto.
(d) Upon each adjustment in the Purchase Price, the number of the
Shares purchasable hereunder shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of the Shares purchasable
immediately prior to such adjustment in the Purchase Price by a fraction (i) the
numerator of which shall be the Purchase Price immediately prior to such
adjustment, and (ii) the denominator of which shall be the Purchase Price
immediately after such adjustment.
(e) Whenever the Purchase Price shall be adjusted as provided in this
Section 1.2, Borrower shall prepare a statement showing the facts requiring such
adjustment and the Purchase Price that shall be in effect after such adjustment.
The Borrower shall cause a copy of such statement to be sent to Payee in
accordance with the notice provisions provided in the Note. Where appropriate,
such copy may be given in advance and may be included as part of the notice
required to be mailed under the provisions of subsection (g) of this Section
1.2.
(f) Adjustments made pursuant to subsections (b), (c) and (d) of this
Section 1.2 shall be made on the date such split, subdivision, dividend,
combination or distribution, as the case may be, is made, and shall become
effective at the opening of business on the business day next following the
record date for the determination of stockholders entitled to such split,
subdivision, dividend, combination or distribution.
(g) In the event Borrower shall propose to take any action of the types
described in subsection (a), (b) or (c) of this Section 1.2, Borrower shall give
notice to Payee in the manner set forth in subsection (e) of this Section 1.2,
which notice shall specify the record date, if any, with respect to any
<PAGE>
such action and the date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the number, kind or class of shares or other securities or
property which shall be deliverable to Payee upon exercise hereof following the
occurrence of such action. In the case of any action which would require the
fixing of a record date, such notice shall, to the extent practicable, be given
at least 10 days prior to the date so fixed, and in the case of all other
action, such notice shall be given at least 10 days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(h) In case after the date hereof Borrower shall take any action
affecting the outstanding number of shares of capital stock, other than an
action described in any of the foregoing subsections (a) to (g) hereof,
inclusive, which in the opinion of Borrower's Board of Directors would have a
materially adverse effect upon Payee's Conversion Right, the Purchase Price
shall be adjusted in such manner and at such time as the Board of Directors on
the advice of Borrower's independent public accountants may in good faith
determine to be equitable in the circumstances which is consistent with the
intent and principles of the dilution provisions contained herein.
2. Entire Agreement
This Amendment together with the Term Note and Addendum
constitute the entire agreement of the parties as to the subject matter hereof;
provided, however, that if any provision of this Amendment is in conflict with
any provision of the Term Note or Addendum, this Amendment shall control.
IN WITNESS WHEREOF, each of the parties hereto, intending to be legally
bound, has evidenced its agreement to the foregoing by executing this Amendment
to Term Loan Note and Addendum as of the 1st day of September, 1996.
CRW FINANCIAL INC.
BY: /s/ Jonathan P. Robinson
----------------------------
Jonathan P. Robinson
Vice President, Treasurer and
Chief Financial Officer
WITNESS:
[Sig Cut]
- ----------------------------- --------------------------------
Kevin W. Walsh J.Brian O'Neill
- ----------------------------- --------------------------------
Kevin W. Walsh Miriam P. O'Neill
<PAGE>
ADDENDUM TO TERM LOAN NOTE
The Term Loan Note dated November 1, 1995 (the "Note") by and between CRW
Financial, Inc. ("Borrower") and J. Brian O'Neill and Miriam P. O'Neill, husband
and wife (collectively, "Payee"), is hereby further amended and supplemented as
follows:
1. Note Conversion Right.
At any time Payee may provide Borrower with written notice that it
wishes to purchase shares of common stock of the Borrower (the "Stock")
with all then outstanding unpaid principal under the Note, at a price of
$4.875 per share (the "Purchase Price"), whereupon the parties shall
mutually agree upon a time, date and location for conducting a closing (but
in no event shall such closing occur later than thirty (30) days after
Payee provides Borrower notice of its intent to exercise its rights under
this Section 1 unless the parties mutually agree otherwise), at which
Borrower shall deliver the Stock, as well as an amount of cash equal to all
unpaid accrued interest on the Note, to Payee properly registered in its
name. Also at the closing, Payee shall produce the original Note marked
"canceled," which shall be delivered to Borrower. The parties may mutually
agree to conduct the closing by mail or any other reasonable means. Payee's
rights under this Section 1 shall terminate upon payment in full of all
outstanding principal under the Note bye Borrower to Payee.
2. Annual Payments Conversion Right.
(a) For a period of one (1) year following the end of each fiscal year of
Borrower (the "Exercise Period"), Payee shall also have the option to
purchase common stock of the Borrower with all, but not less than all, of
the principal payments made to it by Borrower under the Note during that
fiscal year (the "Annual Payments") at the Purchase Price. Payee must
provide written notice to Borrower of its intent to exercise its right
under this Section 2 within the Exercise Period, or the right to purchase
stock with the Annual Payments for that fiscal year shall terminate.
Payee's rights to purchase stock with Annual Payments shall not be
cumulative from year to year.
<PAGE>
(b) Notwithstanding the foregoing, the Exercise Period during which Payee
may exercise its rights under this Section 2 for the fiscal year in which
all remaining unpaid principal under the Note is paid to Payee by Borrower
shall be the one (1) year period following the date the final payment on
the Note is made to Payee by Borrower.
(c) Following delivery to Borrower of Payee's notice of its intent to
exercise its rights under this Section 2, the parties shall conduct a
closing at which Borrower shall produce and deliver the appropriate number
of shares of its common stock properly registered in Payee's name to Payee,
and Payee shall deliver to Borrower an amount of cash (in either
immediately available funds via wire transfer or by certified check) equal
to the Annual Payments. The procedure for conducting the closing shall
otherwise be in accordance with Section 1 hereof.
3. No Registration Rights, Restrictive Legend.
Except as set forth in any registration rights agreement which may now or
hereafter be executed by Borrower and Payee, neither the Note nor this Addendum
thereto shall confer any registration rights on Payee with respect to any common
stock of Borrower obtained thereunder or hereunder, and Payee acknowledges that
it shall receive unregistered stock with an appropriate restrictive legend
imprinted thereon evidencing the resale restrictions pertaining to such stock.
4. Notices.
All notices hereunder shall be made either personally, via a nationally
recognized overnight courier service or via certified mail (return receipt
requested) and shall be deemed delivered upon hand delivery, on the day after
the date delivered to an overnight courier, and on the third day after being
deposited in the U.S. mail. Such notices shall be addressed to each party at the
address set forth for such party in the Note, or such other address as a party
may subsequently notify the other of in writing.
5. Incorporation by Reference.
All other terms and conditions of the Note are hereby made a part hereof
and incorporated herein by reference; provided, however, that if any provision
of this Addendum is in conflict with any provision of the Note, this Addendum
shall control.
<PAGE>
IN WITNESS WHEREOF. each of the parties hereto, intending to be legally
bound, has evidenced its agreement to the foregoing by executing this Addendum
to Term Loan Note as of the 1st day of November, 1995.
ATTEST: CRW FINANCIAL, INC.
By:
- ----------------------------- -------------------------------------
Kevin W. Walsh Jonathan P. Robinson
Vice President, Treasurer and
Chief Financial Officer
WITNESS:
- ----------------------------- --------------------------------------
Kevin W. Walsh J. Brian O'Neill
- ----------------------------- --------------------------------------
Miriam P. O'Neill
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of this 10th day of
October, 1995, by and among CRW FINANCIAL, INC., a Delaware corporation (the
"Borrower"), and J. BRIAN O'NEILL and MIRIAM P. O'NEILL, individuals residing at
930 Stoke Road, Villanova, Pennsylvania (collectively, the "Lender").
B A C K G R O U N D
WHEREAS, The Borrower desires to borrow from the Lender up to One Million
Dollars ($1,000,000.00), and the Lender is willing to lend such amount to the
Borrower, subject to and upon the terms and conditions set forth in this
Agreement (the "Loan"); and
WHEREAS, the Loan from Lender to Borrower requires the consent of Mellon
Bank, N.A., a secured creditor of Borrower, as a condition to the making of the
Loan from Lender to Borrower.
NOW THEREFORE, in consideration of the foregoing background, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and agreed, the Borrower and the Lender, intending to be legally
bound, hereby covenant and agree as follows:
1. Applications of Proceeds. The proceeds of the Loan shall be applied
as follows:
(i) Up to Eight Hundred Thousand Dollars ($800,000.00) for
the acquisition of certain computer equipment described in Exhibit "A" attached
hereto and incorporated herein by reference (collectively, the "Computer
Equipment"); and
(ii) Up to Two Hundred Thousand Dollars ($200,000.00) for
general working capital of CRW.
2. Conditions Precedent to Extending the Loan. The Lender's obligation
to fund any proceeds under the Loan shall be conditioned upon:
(a) Loan Documents. The Borrower shall shall execute or cause to
be executed, cause to be acknowledged when required, and deliver to the Lender
in form and substance satisfactory to the Lender the following documents (the
"Loan Documents"):
(i) a Note in the original principal amount of up to
$1,000,000.00 (the "Note"), which Note shall provide, inter alia, that the
Lender may, upon written notice to Borrower,
<PAGE>
purchase shares of common stock of the Borrower upon terms and conditions
mutually satisfactory to the Lender and the Borrower (the "Option Shares") at
the market share price on the NASDAQ exchange for the common stock of Borrower
in effect at the close of business on the date hereof;
(ii) a Security Agreement pursuant to which the Borrower
shall grant to the Lender a lien on and security interest in all of the Computer
Equipment, all cash and non-cash proceeds and products thereof, and all policies
of insurance in connection therewith, securing an amount equal to all amounts
due under the Note (the "Security Agreement"); and
(iii) a Registration Rights Agreement in form mutually
acceptable to Lender and Borrower applicable to all Option Shares purchased by
the Lender in accordance with the terms of the Note; and.
(iv) such other documents as the Lender shall require.
This Loan Agreement and all of the Loan Documents and all other documents
or instruments executed in connection with this Agreement are hereinafter
collectively referred to as the "Loan Documents".
(b) Corporate Certificate. Duly executed Certificate of the
Borrower in form satisfactory to the Lender.
(c) Good Standing Certificate. Certificate issued by the State of
Delaware as to the good standing of the Borrower as of a recent date
satisfactory to the Lender.
(d) Additional Documents. Such other documents, instruments,
opinions, approvals and assurances customary in this type of financing as the
Lender or its counsel may reasonably request.
(e) Commitment Fee. The Lender shall have received from the
Borrower a non-refundable commitment fee equal to one percent (1%) of that
portion of the Loan advanced at the Closing (as defined herein) in consideration
for making the Loan. As additional consideration, the Borrower shall pay to
Lender one percent (1%) of any and all subsequent advances made after the
Closing Date. In no event, however, shall the aggregate amount of all commitment
fees payable hereunder exceed one percent (1%) of the original principal amount
of the Note.
(f) The Lender shall have received written confirmation in form
and substance satisfactory to the Lender from Mellon Bank, N.A. indicating that
Mellon Bank, N.A. consents to the terms of this Agreement and the transactions
contemplated hereby.
-2-
<PAGE>
3. Closing. Subject to the terms and conditions of this Agreement, the
transactions contemplated hereby shall take place at a closing (the "Closing"),
which Closing shall take place no later than 10:00 A.M. local time, on
Wednesday, November 1, 1995, at the offices of Adelman Lavine Gold and Levin, a
Professional Corporation, 1900 Two Penn Center Plaza, Philadelphia, Pennsylvania
19102, or at such other time or at such other place as the Lender and the
Borrower may mutually agree upon in writing (the day on which the Closing takes
place being the "Closing Date"). Nothing in this Section 3 shall be construed to
obligate the Lender to consummate the transactions contemplated by this
Agreement prior to satisfaction by the Borrower of the conditions to the
Lender's obligation to close the transactions contemplated hereby as set forth
in Section 2 of this Agreement, except as otherwise agreed to by the Lender in
its sole discretion.
4. Events of Default. An "Event of Default" shall occur under this
Agreement if the Borrower shall continue to be in Default under any of the
provisions of this Agreement for ten (10) days after written notice from the
Lender in the case of any Default which can be cured by the payment of a sum of
money, or for twenty (20) days after written notice from the Lender in the case
of any other Default, provided that if such Default cannot reasonably be cured
within such twenty (20) day period and the Borrower shall have commenced to cure
such Default within such twenty (20) day period and thereafter diligently and
continuously proceeds to cure the same, such twenty (20) day period shall be
extended for so long as it shall require the Borrower, in the exercise of due
diligence, to cure such Default, it being agreed however that no such extension
shall be for a period in excess of sixty (60) days. The term "Default" as used
in this Agreement shall mean the occurrence of any one of the following events:
(a) If an event of default occurs under any of the Loan Documents.
(b) If any representation or warranty made by the Borrower hereunder
shall be or become materially false.
(c) If an event of default occurs under any agreement by and between
the Borrower and Mellon Bank, N.A.
(d) Borrower makes an assignment for the benefit of its creditors or a
composition with its creditors, or is unable or admits in writing its inability
to pay its debts as they mature, or files a petition in bankruptcy, or commences
a federal bankruptcy proceeding in which an order for relief or such other court
order or statutory provision which authorizes the case to proceed is entered
against it, or is adjudicated insolvent or bankrupt, or petitions or applies to
any tribunal for the appointment of any custodian, receiver, liquidator or
trustee of or for it or any substantial part of its properties or assets, or
-3-
<PAGE>
commences any proceeding relating to it under any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect,; or there is
commenced against any of them any such proceeding which shall remain undismissed
for a period of sixty (60) days, or an order for relief, order, judgment or
decree approving the petition in any such proceeding is entered; or any of them
by any act or failure to act indicates its consent to, approval of or
acquiescence in any such proceeding or in the appointment of any custodian,
receiver, liquidator or trustee of or for it or any substantial part of its
properties or assets, or suffers any such appointment to continue undischarged
or unstayed for a period of sixty (60) days; or any of them takes any corporate
action for the purpose of effecting any of the foregoing.
(e) A judgment or judgments for the payment of money equal to or in
excess of Two Hundred Thousand Dollars ($200,000.00) shall be rendered against
the Borrower and such party shall not discharge the same or cause it or them to
be discharged or dismissed or cause the same to be bonded against with a court
of competent jurisdiction within thirty days (30) after the entry thereof.
Upon the occurrence of an Event of Default, the Lender may, at its
option and in its sole discretion, (i) declare the Note immediately due and
payable and/or (ii) pursue any and all remedies provided for in the Loan
Documents, or otherwise available.
5. Incorporation of Provisions. The Note and the Security Agreement
are subject to the conditions, stipulations, agreements and covenants contained
herein to the same extent and effect as if fully set forth therein until this
Agreement is terminated by the payment in full of the Note.
6. Further Assurances. The Borrower shall on demand of the Lender do
any act or execute any additional documents reasonably required or desirable by
the Lender to carry out the provisions hereof and the transactions contemplated
hereby or, at or after the Closing, secure the Borrower's obligations under any
of the Loan Documents, or to evidence the consummation of the transactions
consummated pursuant to this Agreement.
7. Representations and Warranties. As an inducement to the Lender to
enter into this Agreement, the Borrower represents and warrants to the Lender as
follows:
(a) Organization and Authority. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all necessary power and authority to enter into this
Agreement and each of the Loan Documents, to carry out its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The Board of Directors of the Borrower has approved
-4-
<PAGE>
and authorized this Agreement and the transactions contemplated hereby. This
Agreement has been and, as of the Closing Date, each of the Loan Documents will
be duly authorized, executed and delivered by the Borrower and this Agreement
constitutes, and each of the Loan Documents will constitute, a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
(b) No Conflict. The execution, delivery and performance of this
Agreement and each of the Loan Documents by the Borrower does not and will not
(a) violate or conflict with the Certificate of Incorporation, Bylaws or other
corporate governance documents relating to the Borrower, (b) conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Borrower, (c) except as would not
materially affect the ability of the Borrower to consummate the transactions
contemplated by this Agreement, result in any breach of, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation or, result in the creation of any lien or other
encumbrance on any of the assets or properties of the Borrower pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which the
Borrower is a party or by which any of its assets or properties is bound or
affected.
(c) Consents and Approvals. The execution and delivery of this
Agreement by the Borrower does not, and the execution and delivery of the other
Loan Documents by the Borrower and the performance of the Agreement and each of
the Loan Documents by the Borrower will not require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except as has already been taken or
obtained.
(d) No Liens. There exist no liens, encumbrances or other charges
against the Computer Equipment, including statutory and other liens of
mechanics, workmen, contractors, subcontractors, suppliers, taxing authorities
and others, other than the security interest created hereby or pursuant hereto
and except for the security interest of Mellon Bank, N.A.
8. Costs and Expenses. The Borrower hereby agrees to pay all costs and
expenses, including, without limitation, fees and disbursements of counsel,
incurred in connection with the preparation, negotiation, and enforcement of
this Agreement and any of the other Loan Documents, whether or not the Closing
occurs. To the extent the Closing occurs, all such costs and expenses shall be
payable at the time of the Closing, and any such third party fees, costs,
disbursements and expenses incurred by the Lender until such
-5-
<PAGE>
time as the Loan is satisfied in full shall be payable upon demand. In addition,
the Borrower shall indemnify, defend and hold the Lender harmless from and
against any and all liabilities, losses, damages, costs and expenses of any kind
including, without limitation, fees and expenses of legal counsel in connection
with any investigative, administrative or judicial proceedings relating to this
Agreement or the transactions contemplated hereby, whether or not the Lender
shall be a named party thereto.
9. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by telecopy or five
(5) days after being mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes or address shall be effective upon receipt):
(a) if to the Borrower:
CRW Financial, Inc.
443 S. Gulph Road
King of Prussia, PA 19406
Attention: Jonathan P. Robinson
(b) if to the Lender:
J. Brian O'Neill
Miriam P. O'Neill
930 Stoke Road
Villanova, PA 19085
10. Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by each of the parties hereto.
11. Waiver. No waiver of any of the provisions of this Agreement or of
the other Loan Documents shall be deemed, or shall constitute a waiver of any
other provision hereof or thereof (whether or not similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided in
writing executed by the party against whom such continuing waiver is sought to
be enforced.
12. Headings; Exhibits. Title headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any reference to Exhibits shall signify that
such Exhibits are incorporated herein by reference.
-6-
13. Entire Aqreement. This Agreement constitutes the entire agreement
and supersedes all prior agreements and undertakings, both written and oral,
with respect to the subject matter hereof.
14. Governing Law and Consent to Jurisdiction and Venue. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania. Each of the parties hereto agree that sole and
exclusive jurisdiction over and proper venue relating to any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
reside in the courts of the Commonwealth of Pennsylvania and the United States
District Court for the Eastern District of Pennsylvania. This Agreement shall be
construed without the aid of any canon, custom or rule of law requiring
construction against the draftsman.
15. Counterparts. This Agreement may be executed in one (1) or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one (1) and the same agreement.
16. Assignment. The Borrower may not assign or suffer an assignment of
this Agreement and/or its rights hereunder without the prior written consent of
the Lender.
17. Binding Effect. This Agreement shall be binding upon, be
enforceable against, and shall inure to the benefit of the parties hereto, and
their and each of their respective successors and permitted assigns, and no
other person or entity shall have or derive any right, benefit or obligation
hereunder.
18. Interpretation. The masculine (or neuter) pronoun and the singular
number shall include the masculine, feminine and neuter genders and the singular
and plural numbers. A reference to a person shall mean a natural person, a
trustee, a corporation, a partnership and any other form of legal entity. All
references in the singular or plural number shall be deemed to have been made,
respectively, in the plural or singular number as well, as the context may
require.
19. Time; Date for Performance. Time is of the essence of this
Agreement. If any date herein set forth for the performance of any obligations
by the Lender or the Borrower or for the delivery of any instrument or notice as
herein provided should be on a Saturday, Sunday or legal holiday, the compliance
with such obligations or delivery shall be deemed acceptable on the next
business day following such Saturday, Sunday or legal holiday. As used herein,
the term "legal holiday" means any state or federal holiday for which financial
institutions or post offices are generally closed in the Commonwealth of
Pennsylvania for observance thereof.
-7-
<PAGE>
IN WITNESS WHEREOF, the Lender and the Borrower have caused this
Agreement to be executed as of the date first written above.
LENDER:
[Sig Cut]
------------------------------
J. Brian O'NEILL
[Sig Cut]
------------------------------
MIRIAM P. O'NEILL
BORROWER:
CRW FINANCIAL, INC.,
a Delaware corporation
By:
[Sig Cut]
-----------------------------
Name:
[Sig Cut]
---------------------------
Title:
---------------------------
-8-
<PAGE>
TERM LOAN NOTE
$1,000.000.00 November 1 ,1995
- -------------------- ------------------------
AMOUNT DATE
Villanova, Pennsylvania
FOR VALUE RECEIVED, the undersigned, CRW Financial Inc. a corporation
having an office at 443 South Gulph Road, King of Prussia, PA 19406 (herein
"Borrower"), promises to pay to the order of J. Brian O'Neill and Miriam P.
O'Neill, 1610 Old Gulph Road, Villanova, PA 19085 (herein "Payee"), the
principal sum of One Million Dollars ($1,000,000.00) or so much as has been
advanced lawful money of the United States.
Payment of principal and interest shall be as follows:
(a) Thirty-five (35) consecutive, equal monthly principal a interest
installments*of payable on December 1. 1995 and the first day of each month
thereafter and
(b) a final 36th installment of the entire balance principal and
interest then outstanding shall be due and payable November 1, 1998 .
The indebtedness evidenced by this Note shall bear interest from the day
hereof and after maturity at the rate of twelve and one half Percent (12.50%)F
annum. Interest will be calculated on the basis of the actual number of days
elapsed and a three hundred and sixty (360) day year.
All payments hereunder shall be made in funds immediately available at
Payee offices, 443 South Gulph Road, King of Prussia, Pennsylvania 19406 or at
su other location as holder shall from time to time designate.
Borrower hereby waives presentment, demand for payment, notice of dishonor
acceleration, protest or notice of protest and any and all notices or demands
connection with the delivery, acceptance, performance, default or enforcement
this Note.
The proceeds of this Note are being utilized by Borrower to purchase certa
equipment in which Payee is obtaining a security interest pursuant to a Security
Agreement for Equipment between Borrower and Payee of even date hereof (here
"Security Agreement") and for other working capital purposes.
This Note shall inure to the benefit of and be binding upon the parti
hereto, and their respective successors and assigns. Borrower may not assign t
obligations hereunder. Borrower consents to the assignment of this Note and t
Security Agreement by Payee to Republic Bank.
*Based upon a three (3) year amortization.
<PAGE>
Agreement is incorporated herein by reference. Notwithstanding any contrary
statement contained in the within instrument, no payment on account of the
principal or interest thereof shall become due or be paid except in accordance
with the terms of said Subordination Agreement.
In the event the due date of any payment hereunder is a Saturday, Sunday,
legal holiday in the Commonwealth of Pennsylvania, such payment shall be due on
the next succeeding day which is not a Saturday, Sunday, or such a legal
holiday, provided that any such payment bearing interest shall continue to
accrue interest until paid.
BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF
RECORD TO APPEAR FOR BORROWER IN ANY AND ALL ACTIONS AND (1) TO ENTER JUDGMENT
AGAINST BORROWER FOR THE PRINCIPAL SUM THEREOF AND/OR (2) TO SIGN FOR BORROWER
AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS
TO CONFESS JUDGMENT AGAINST BORROWER FOR ALL OR ANY PART OF THE AMOUNT OWED
HEREUNDER; and in either case for interest and costs together with a collection
of fifteen percent (15%) or $100, whichever is greater. Borrower further
irrevocably authorizes and empowers any attorney of any court of record to
appeal for and enter judgment against Borrower and in favor of Payee in an
amicable action of replevin or any other action to recover possession of any
collateral. Such confession of judgment or amicable actions shall be with
release of errors, waiver of appeals, without stay of execution and Borrower
waives all relief from any and all appraisement or exemption of laws now in
force or hereafter enacted. If a copy of this agreement verified by affidavit of
an officer of Payee, shall be filed in any proceeding or action wherein judgment
is to be confessed, it shall not be necessary to file the original hereof and
such verified copy shall be sufficient warrant for any attorney of any court of
record to appear for and confess judgment against Borrower as provided herein.
Judgment may be confessed from time to time under the aforesaid powers which
shall not be exhausted by one exercise hereof.
This Note shall be governed as to its validity, interpretation and effect
on the laws of the Commonwealth of Pennsylvania for contracts made and to be
performed in Pennsylvania. Borrower agrees to the exclusive jurisdiction of the
courts of the Commonwealth of Pennsylvania and/or the United States District
Court for the Eastern District of Pennsylvania in any and all actions and
proceedings between Bank and Borrower.
This Note may not be changed orally but only by an agreement in writing
and signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
A Late Charge of five percent (5%) of the total payment will be assessed
on the sixteenth (16th) of each month if payment is not received by that date.
IN WITNESS WHEREOF, Borrower by its duly authorized officers has executed
this Note under seal the day and year first written above.
WITNESSED
As to Both
[Sig Cut]
- -----------------------------------
Attest:
Endorsement:
Pay to the Order of Republic Bank
/s/ J. Brian O'Neill
- -----------------------------------
J. Brian O'Neill
/s/ Miriam P. O'Neill
- -----------------------------------
Miriam P. O'Neill
CRW Financial, Inc.
By: /s/
------------------------------------
J. Brian O'Neill, Chairman/CEO
By:
------------------------------------
Jonathan Robinson, CFO/Secretary
(Seal)
**Borrower shall give to Payee no less than one hundred
twenty (120) days prior written notice of any prepayment
of any portion of the principal balance before maturity.
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of this 10th day of
October, 1995, by and among CRW FINANCIAL, INC., a Delaware corporation (the
"Borrower"), and J. BRIAN O'NEILL and MIRIAM P. O'NEILL, individuals residing at
930 Stoke Road, Villanova, Pennsylvania (collectively, the "Lender").
B A C K G R O U N D:
WHEREAS, The Borrower desires to borrow from the Lender up to One Million
Dollars ($1,000,000.00), and the Lender is willing to lend such amount to the
Borrower, subject to and upon the terms and conditions set forth in this
Agreement (the "Loan"); and
WHEREAS, the Loan from Lender to Borrower requires the consent of Mellon
Bank, N.A., a secured creditor of Borrower, as a condition to the making of the
Loan from Lender to Borrower.
NOW THEREFORE, in consideration of the foregoing background, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and agreed, the Borrower and the Lender, intending to be legally
bound, hereby covenant and agree as follows:
1. Application of Proceeds. The proceeds of the Loan shall be applied
as follows:
(i) Up to Eight Hundred Thousand Dollars ($800,000.00) for
the acquisition or certain computer equipment described in Exhibit "A" attached
hereto and incorporated herein by reference (collectively, the "Computer
Equipment"); and
(ii) Up to Two Hundred Thousand Dollars ($200,000.00) for
general working capital of CRW.
2. Conditions Precedent to Extending the Loan. The Lender's obligation
to fund any proceeds under the Loan shall be conditioned upon:
(a) Loan Documents. The Borrower shall execute or cause to
be executed, cause to be acknowledged when required, and deliver to the Lender
in form and substance satisfactory to the Lender the following documents (the
"Loan Documents"):
(i) a Note in the original principal amount of up to
$1,000,000.00 (the "Note"), which Note shall provide, inter alia, that the
Lender may, upon written notice to Borrower,
<PAGE>
purchase shares of common stock of the Borrower upon terms and conditions
mutually satisfactory to the Lender and the Borrower (the "Option Shares") at
the market share price on the NASDAQ exchange for the common stock of Borrower
in effect at the close of business on the date hereof;
(ii) a Security Agreement pursuant to which the Borrower
shall grant to the Lender a lien on and security interest in all of the Computer
Equipment, all cash and non-cash proceeds and products thereof, and all policies
of insurance in connection therewith, securing an amount equal to all amounts
due under the Note (the "Security Agreement"); and
(iii) a Registration Rights Agreement in form mutually
acceptable to Lender and Borrower applicable to all Option Shares purchased by
the Lender in accordance with the terms of the Note; and.
(iv) such other documents as the Lender shall require.
This Loan Agreement and all of the Loan Documents and
all other documents or instruments executed in connection with this Agreement
are hereinafter collectively referred to as the "Loan Documents".
(b) Corporate Certificate. Duly executed Certificate of the
Borrower in form satisfactory to the Lender.
(c) Good Standing Certificate. Certificate issued by the State of
Delaware as to the good standing of the Borrower as of a recent date
satisfactory to the Lender.
(d) Additional Documents. Such other documents, instruments,
opinions, approvals and assurances customary in this type of financing as the
Lender or its counsel may reasonably request.
(e) Commitment Fee. The Lender shall have received from the
Borrower a non-refundable commitment fee equal to one percent (1%) of that
portion of the Loan advanced at the Closing (as defined herein) in consideration
for making the loan. As additional consideration, the Borrower shall pay to
Lender one percent (1%) of any and all subsequent advances made after the
Closing Date. In no event, however, shall the aggregate amount of all commitment
fees payable hereunder exceed one percent (1%) of the original principal amount
of the Note.
(f) The Lender shall have received written confirmation in form
and substance satisfactory to the Lender from Mellon Bank, N.A. indicating that
Mellon Bank, N.A. consents to the terms of this Agreement and the transactions
contemplated hereby.
-2-
<PAGE>
3. Closing. Subject to the terms and conditions of this Agreement, the
transactions contemplated hereby shall take place at a closing (the "Closing"),
which Closing shall take place no later than 10:00 A.M. local time, on
Wednesday, November 1, 1995, at the offices of Adelman Lavine Gold and Levin, a
Professional Corporation, 1900 Two Penn Center Plaza, Philadelphia, Pennsylvania
19102, or at such other time or at such other place as the Lender and the
Borrower may mutually agree upon in writing (the day on which the Closing takes
place being the "Closing Date"). Nothing in this Section 3 shall be construed to
obligate the Lender to consummate the transactions contemplated by this
Agreement prior to satisfaction by the Borrower of the conditions to the
Lender's obligation to close the transactions contemplated hereby as set forth
in Section 2 of this Agreement, except as otherwise agreed to by the Lender in
its sole discretion.
4. Events of Default. An "Event of Default" shall occur under this
Agreement if the Borrower shall continue to be in Default under any of the
provisions of this Agreement for ten (10) days after written notice from the
Lender in the case of any Default which can be cured by the payment of a sum of
money, or for twenty (20) days after written notice from the Lender in the case
of any other Default, provided that if such Default cannot reasonably be cured
within such twenty (20) day period and the Borrower shall have commenced to cure
such Default within such twenty (20) day period and thereafter diligently and
continuously proceeds to cure the same, such twenty (20) day period shall be
extended for so long as it shall require the Borrower, in the exercise of due
diligence, to cure such Default, it being agreed however that no such extension
shall be for a period in excess of sixty (60) days. The term "Default" as used
in this Agreement shall mean the occurrence of any one of the following events:
(a) If an event of default occurs under any of the Loan
Documents.
(b) If any representation or warranty made by the Borrower
hereunder shall be or become materially false.
(c) If an event of default occurs under any agreement by and
between the Borrower and Mellon Bank, N.A.
(d) Borrower makes an assignment for the benefit of its creditors
or a composition with its creditors, or is unable or admits in writing its
inability to pay its debts as they mature, or files a petition in bankruptcy, or
commences a federal bankruptcy proceeding in which an order for relief or such
other court order or statutory provision which authorizes the case to proceed is
entered against it, or is adjudicated insolvent or bankrupt, or petitions or
applies to any tribunal for the appointment of any custodian, receiver,
liquidator or trustee of or for it or any substantial part of its properties or
assets, or
-3-
<PAGE>
commences any proceeding relating to it under any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect; or
there is commenced against any of them any such proceeding which shall remain
undismissed for a period of sixty (60) days, or an order for relief, order,
judgment or decree approving the petition in any such proceeding is entered; or
any of them by any act or failure to act indicates its consent to, approval of
or acquiesence in any such proceeding or in the appointment of any custodian,
receiver, liquidator or trustee of or for it or any substantial part of its
properties or assets, or suffers any such appointment to continue undischarged
or unstayed for a period of sixty (60) days; or any of them takes any corporate
action for the purpose of effecting any of the foregoing.
(e) A judgment or judgments for the payment of money equal to or
in excess of Two Hundred Thousand Dollars ($200,000.00) shall be rendered
against the Borrower and such party shall not discharge the same or cause it or
them to be discharged or dismissed or cause the same to be bonded against with a
court of competent jurisdiction within thirty (30) days after the entry thereof.
Upon the occurrence of an Event of Default, the Lender may, at its
option and in its sole discretion, (i) declare the Note immediately due and
payable and/or (ii) pursue any and all remedies provided for in the Loan
Documents, or otherwise available.
5. Incorporation of Provisions. The Note and the Security Agreement
are subject to the conditions, stipulations, agreements and covenants contained
herein to the same extent and effect as if fully set forth therein until this
Agreement is terminated by the payment in full of the Note.
6. Further Assurances. The Borrower shall on demand of the Lender do
any act or execute any additional documents reasonably required or desirable by
the Lender to carry out the provisions hereof and the transactions contemplated
hereby or, at or after the Closing, secure the Borrower's obligations under any
of the Loan Documents, or to evidence the consummation of the transactions
consummated pursuant to this Agreement.
7. Representations And Warranties. As an inducement to the Lender to
Enter into this Agreement, the Borrower represents and warrants to the Lender as
follows:
(a) Organization and Authority. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all necessary power and authority to enter into this
Agreement and each of the Loan Documents, to carry out its obligations hereunder
and thereunder, and to consummate the transactions contemplated hereby and
thereby. The Board of Directors of the Borrower has approved
-4-
<PAGE>
and authorized this Agreement and the transactions contemplated hereby. This
Agreement has been and, as of the Closing Date, each of the Loan Documents will
be duly authorized, executed and delivered by the Borrower and this Agreement
constitutes, and each of the Loan Documents will constitute, a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms.
(b) No Conflict. The execution, delivery and performance of this
Agreement and each of the Loan Documents by the Borrower does not and will not
(a) violate or conflict with the Certificate of Incorporation, Bylaws or other
corporate governance documents relating to the Borrower, (b) conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to the Borrower, (c) except as would not
materially affect the ability of the Borrower to consummate the transactions
contemplated by this Agreement, result in any breach of, or constitute a default
(or event which with the giving of notice or lapse of time, or both, would
become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation or, result in the creation of any lien or other
encumbrance on any of the assets or properties of the Borrower pursuant to any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument relating to such assets or properties to which
the Borrower is a party or by which any of its assets or properties is bound or
affected.
(c) Consents and Approvals. The execution and delivery of this
Agreement by the Borrower does not, and the execution and delivery of the other
Loan Documents by the Borrower and the performance of the Agreement and each of
the Loan Documents by the Borrower will not require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except as has already been taken or
obtained.
(d) No Liens. There exist no liens, encumbrances or other charges
against the Computer Equipment, including statutory and other liens of
mechanics, workmen, contractors, subcontractors, suppliers, taxing authorities
and others, other than the security interest created hereby or pursuant hereto
and except for the security interest of Mellon Bank, N.A.
8. costs and Expenses. The Borrower hereby agrees to pay all costs
and expenses, including, without limitation, fees and disbursements of counsel,
incurred in connection with the preparation, negotiation, and enforcement of
this Agreement and any of the other Loan Documents, whether or not the Closing
occurs. To the extent the Closing occurs, all such costs and expenses shall be
payable at the time of the Closing, and any such third party fees, costs,
disbursements and expenses incurred by the Lender until such
-5-
<PAGE>
time as the Loan is satisfied in full shall be payable upon demand. In addition,
the Borrower shall indemnify, defend and hold the Lender harmless from and
against any and all liabilities, losses, damages, fees and expenses of any kind
including, without limitation, fees and expenses of legal counsel in connection
with any investigative, administrative or judicial proceedings relating to this
Agreement or the transactions contemplated hereby, whether or not the Lender
shall be a named party thereto.
9. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if delivered personally or by telecopy or five
(5) days after being mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice, except that
notices of changes or address shall be effective upon receipt):
(a) if to the borrower:
CRW Financial, Inc.
443 S. Gulph Road
King of Prussia, PA 19406
Attention: Jonathan P. Robinson
(b) if to the Lender:
J. Brian O'Neill
Miriam P. O'Neill
930 Stoke Road
Villanova, PA 19085
10, Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by each of the parties hereto .
11. Waiver. No waiver of any of the provisions of this Agreement or of
the other Loan Documents shall be deemed, or shall constitute a waiver of any
other provision hereof or thereof (whether or not similar), nor shall any such
waiver constitute a continuing waiver unless otherwise expressly provided in
writing executed by the party against whom such continuing waiver is sought to
be enforced.
12. Headings; Exhibits. Title headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any reference to Exhibits shall signify that
such Exhibits are incorporated herein by reference.
-6-
<PAGE>
13. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, with respect to the subject matter hereof.
14. Governing Law and Consent to Jurisdiction and Venue. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania. Each of the parties hereto agree that sole and
exclusive jurisdiction over and proper venue relating to any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
reside in the courts of the Commonwealth of Pennsylvania and the United States
District Court for the Eastern District of Pennsylvania. This Agreement shall be
construed without the aid of any canon, custom or rule of law requiring
construction against the draftsman.
15. Counterparts. This Agreement may be executed in one (1) or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one (1) and the same agreement.
16. Assignment. The Borrower may not assign or suffer an assignment of
this Agreement and/or its rights hereunder without the prior written consent of
the Lender.
17. Binding Effect. This Agreement shall be binding upon, be
enforceable against, and shall inure to the benefit of the parties hereto, and
their and each of their respective successors and permitted assigns, and no
other person or entity shall have or derive any right, benefit or obligation
hereunder.
18. Interpretations. The masculine (or neuter) pronoun and the
singular number shall include the masculine, feminine and neuter genders and the
singular and plural numbers. A reference to a person shall mean a natural
person, a trustee, a corporation, a partnership and any other form of legal
entity. All references in the singular or plural number shall be deemed to have
been made, respectively, in the plural or singular number as well, as the
context may require.
19. Time; Date for Performance. Time is of the essence of this
Agreement. If any date herein set forth for the performance of any obligations
by the Lender or the Borrower or for the delivery of any instrument or notice as
herein provided should be on a Saturday, Sunday or legal holiday, the compliance
with such obligations or delivery shall be deemed acceptable on the next
business day following such Saturday, Sunday or legal holiday. As used herein,
the term "legal holiday" means any state or federal holiday for which financial
institutions or post offices are generally closed in the Commonwealth of
Pennsylvania for observance thereof,
-7-
<PAGE>
IN WITNESS WHEREOF, the Lender and the Borrower have caused this Agreement
to be executed as of the date first written above .
LENDER:
[Sig Cut]
------------------------------
J. Brian O'NEILL
[Sig Cut]
------------------------------
MIRIAM P. O'NEILL
BORROWER:
CRW FINANCIAL, INC.,
a Delaware corporation
By: /s/ Jonathan Robinson
-----------------------------
Name:
Jonathan Robinson
---------------------------
Title: CFO/Secretary
---------------------------
-8-
<PAGE>
TERM LOAN NOTE
51,000.000.00 November 1, 1995
- -------------------- ------------------------
AMOUNT DATE
Villanova, Pennsylvania
FOR VALUE RECEIVED, the undersigned, CRW Financial, Inc., a corporation
having an office at 443 South Gulph Road, King of Prussia, PA 19406 (herein
"Borrower"), promises to pay to the order of J. Brian O'Neill and Miriam P.
O'Neill, 1610 Old Gulph Road, Villanova, PA 19085 (herein "Payee"), the
principal sum of One Million Dollars ($1,000,000.00) or so much as has been
advanced lawful money of the United States.
Payment of principal and interest shall be as follows:
(b) Thirtv-five (35) consecutive, equal monthly principal and interest
installments(*) of _________________________ payable on December 1, 1995 and the
first day of each month thereafter and
(c) a final 36th installment of the entire balance of principal and
interest then outstanding shall be due and payable on November 1, 1998.
The indebtedness evidenced by this Note shall bear interest from the date
hereof and after maturity at the rate of twelve and one half percent (12.50%)
per annum. Interest will be calculated on the basis of the actual number of days
elapsed and a three hundred and sixty (360) day year.
All payments hereunder shall be made in funds immediately available at
Payees' offices, 443 South Gulph Road, King of Prussia, Pennsylvania 19406 or at
such other location as holder shall from time to time designate.
Borrower hereby waives presentment, demand for payment, notice of
dishonored acceleration, protest or notice of protest and any and all notices or
demands in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
The proceeds of this Note are being utilized by Borrower to purchase
certain equipment in which Payee is obtaining a security interest pursuant to a
Security Agreement for Equipment between Borrower and Payee of even date hereof
(her "Security Agreement") and for other working capital purposes.
This Note shall inure to the benefit of and be binding upon the parties
hereto, and their respective successors and assigns. Borrower may not assign
obligations hereunder. Borrower consents to the assignment of this Note and
Security Agreement by Payee to Republic Bank.
- --------------
(*) Based upon a three (3) year amortization.
<PAGE>
Agreement is incorporated herein by reference. Notwithstanding any contrary
statement contained in the within instrument, no payment on account of the
principal or interest thereof shall become due or be paid except in accordance
with the terms of said Subordination Agreement.
In the event the due date of any payment hereunder is a Saturday, Sunday,
legal holiday in the Commonwealth of Pennsylvania, such payment shall be due on
the next succeeding day which is not a Saturday, Sunday, or such a legal holiday
provided that any such payment bearing interest shall continue to accrue
interest until paid.
BORROWER IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF
RECORD TO APPEAR FOR BORROWER IN ANY AND ALL ACTIONS AND (1) TO ENTER JUDGMENT
AGAINST BORROWER FOR THE PRINCIPAL SUM THEREOF AND/OR (2) TO SIGN FOR BORROWER
AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS
TO CONFESS JUDGMENT AGAINST BORROWER FOR ALL OR ANY PART OF THE AMOUNT OWED
HEREUNDER; and in either case for interest and costs together with a collection
of fifteen percent (15%) or $100, whichever is greater. Borrower further
irrevocably authorizes and empowers any attorney of any court of record to
appeal for and enter judgment against Borrower and in favor of Payee in an
amicable action of replevin or any other action to recover possession of any
collateral. Such confession of judgment or amicable actions shall be with
release of errors, waiver of appeals, without stay of execution and Borrower
waives all relief from any and all appraisement or exemption of laws now in
force or hereafter enacted. If a copy of this agreement verified by affidavit of
an officer of Payee, shall be filed any proceeding or action wherein judgment is
to be confessed, it shall not be necessary to file the original hereof and such
verified copy shall be sufficient warrant for any attorney of any court of
record to appear for and confess judgement against Borrower as provided herein.
Judgment may be confessed from time to time under the aforesaid powers which
shall not be exhausted by one exercise hereof.
This Note shall be governed as to its validity, interpretation and effect
on the laws of the Commonwealth of Pennsvlvania for contracts made and to be
performed in Pennsylvania. Borrower agrees to the exclusive jurisdiction of the
Courts of the Commonwealth of Pennsylvania and/or the United States District
Court for the Eastern District of Pennsylvania in any and all actions and
proceedincs between Bank and Borrower.
This Note may not be changed orally but only by an agreement in writing and
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
A Late Charge of five percent (5%) of the toral payment will be assessed
on the sixteenth (16th) of each month if payment is not received by that date.
IN WITNESS WHEREOF, Borrower by its duly authorized officers has
executed this Note under seal the day and year first written above.
WITNESSED
AS TO BOTH
[Sig Cut]
- -----------------------------------
Attest:
Endorsement:
Pay to the Order of Republic Bank
/s/ J. Brian O'Neill
- -----------------------------------
J. Brian O'Neill
/s/ Miriam P. O'Neill
- -----------------------------------
Miriam P. O'Neill
CRW Financial, Inc.
By:
------------------------------------
J. Brian O'Neill, Chairman/CEO
By:
------------------------------------
Jonathan Robinson, CFO/Secretary
(Seal)
**Borrower shall give to Payee no less than one hundred
twenty (120) days prior written notice of any prepayment
of any portion of the principal balance before maturity.
<PAGE>
ADDENDUM TO TERM LOAN NOT:
The Term Loan Note dated __________, 1995 (the "Note") by and between CRW
Financial, Inc. ("Borrower") and J. Brian O'NEILL and Miriam P. O'Neill,
husband and wife (collectively, "Payee"), is hereby further amended and
supplemented as follows:
1. Note Conversion Right.
At any time, Payee may provide Borrower with written notice that it
wishes to purchase shares of common stock of the Borrower (the "Stock")
with all then outstanding unpaid principal under the Note, at a price of
$4.975 per share (the "Purchase Price"), whereupon the parties shall
mutually agree upon a time, date and location for conducting a closing (but
in no event shall such closing occur later than thirty (30) days after
Payee provides Borrower notice of its intent to exercise its rights under
this Section 1 unless the parties mutually agree otherwise), at which
Borrower shall deliver the Stock, as well as an amount of cash equal to all
unpaid accrued interest on the Note, to Payee properly registered in its
name. Also at the closing, Payee shall produce the original Note marked
"canceled," which shall be delivered to Borrower, The parties may mutually
agree to conduct the closing by mail or any other reasonable means. Payee's
rights under this section 1 shall terminate upon payment in full of all
outstanding principal under the Note by Borrower to Payee.
2. Annual Payments Conversion Right.
(a) For a period of one (1) year following the end of each fiscal year of
Borrower (the "Exercise Period"), Payee shall also have the option to
purchase common stock of the Borrower with all, but not less than all, of
the principal payments made to it by Borrower under the Note during that
fiscal year (the "Annual Payments") at the Purchase Price. Payee must
provide written notice to borrower of its intent to exercise its right
under this section 2 within the Exercise Period, or the right to purchase
stock with the Annual Payments for that fiscal year shall terminate.
Payee's rights to purchase stock with Annual Payments shall not be
cumulative from year to year.
<PAGE>
(b) Notwithstanding the foregoing, the Exercise Period during which Payee
may exercise its rights under this Section 2 for the fiscal year in which
all remaining unpaid principal under the Note is paid to Payee by Borrower
shall be the one (1) year period following the date the final payment on
the Note is made to Payee by Borrower.
(c) Following delivery to Borrower of Payee's notice of its intent to
exercise its rights under this Section 2, the parties shall conduct a
closing at which Borrower shall produce and deliver the appropriate number
of shares of its common stock properly registered in Payee's name to Payee,
and Payee shall deliver to Borrower an amount of cash (in either
immediately available funds via wire transfer or by certified check) equal
to the Annual Payments. The procedure for conducting the closing shall
otherwise be in accordance with Section I hereof.
3. No Registration Rights; Restrictive Legend.
Except as set forth in any registration rights agreement which may now or
hereafter be executed by Borrower and Payee, neither the Note nor this Addendum
thereto shall confer any registration rights on Payee with respect to any common
stock of Borrower obtained thereunder or hereunder, and Payee acknowledges that
it shall receive unregistered stock with an appropriate restrictive legend
imprinted thereon evidencing the resale restrictions pertaining to such stock.
4. Notices.
All notices hereunder shall be made either personally, via a nationally
recognized overnight courier service or via certified mail (return receipt
requested) and shall be deemed delivered upon hand delivery, on the day after
the date delivered to an overnight courier, and on the third day after being
deposited in the U.S. mail. Such notices shall be addressed to each party at the
address set forth for such party in the Note, or such other address as a party
may subsequently notify the other of in writing,
5 Incorporation by Reference.
All other terms and conditions of the Note are hereby made a part hereof
and incorporated herein by reference; provided, however, that if any provision
of this Addendum is in conflict with any provision of the Note, this Addendum
shall control.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto, intending to be legally
bound, has evidenced its agreement to the foregoing by executing this Addendum
to Term Loan Note as of the 1st day of November, 1995.
ATTEST: CRW FINANCIAL INC.
BY: [Sig Cut]
- ----------------------------- ----------------------------
Jonathan P. Robinson
Vice President, Treasurer and
Chief Financial Officer
WITNESS:
[Sig Cut]
- ----------------------------- --------------------------------
J.Brian O'Neill
- ----------------------------- --------------------------------
Miriam P.O'Neill
AMENDMENT TO SUBLEASE
Background
A. TeleSpectrum Worldwide Inc. ("Subtenant") has subleased space from CRW
Financial, Inc. ("Tenant") pursuant to a sublease agreement dated
May 9, 1996.
B. Tenant desires to sublet unto Subtenant and Subtenant desires to accept a
Sublease from Tenant for all of Tenant's right, title and interest in and to
the Lease and to the Demised Premises.
C. NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Tenant does hereby sublet all of
the Demised Premises and Subtenant does hereby Sublease all Demised Premises
from Tenant pursuant to the terms of the Lease and agrees to perform and pay
all of the obligations of Tenant under the Lease accruing from December 1,
1996 of this Sublease as if Subtenant were named as the tenant in the Lease.
IN WITNESS WHEREOF, Tenant and Subtenant have executed this Sublease as
of the day and year first above written.
CRW FINANCIAL, INC.
a Delaware Corporation
By: /s/ Jonathan P. Robinson
-----------------------------------
Name: Jonathan P. Robinson
---------------------------------
Title: Corporate Financial Officer
--------------------------------
TELESPECTRUM WORLDWIDE INC.
A Delaware Corporation
By: /s/ Richard Schwenk, Jr.
-----------------------------------
Name: Richard Schwenk, Jr.
---------------------------------
Title: Senior Vice President and
Chief Financial Officer
--------------------------------
AMENDMENT TO SUBLEASE
Background
A. TeleSpectrum Worldwide (formerly CRW Acquisition Corp d/b/a Allegra)
("Subtenant") has subleases space from CRW Financial, Inc. ("Tenant") pursuant
to a sublease agreement dated May 9, 1996.
B. Tenant desires to sublet unto Subtenant and Subtenant desires to accept a
Sublease from Tenant of an additional portion of Tenant's right, title and
interest in and to the Lease and to the Demised Premises.
C. NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Tenant does hereby sublet an
additional 7,000 Square Feet (33%) of the Demised Premises and Subtenant does
hereby Sublease approximately 7,000 Square Feet of Demised Premises from Tenant
pursuant to the terms of the Lease and agrees to perform and pay 33.0% of all
the obligations of Tenant under the Lease accruing from July 16, 1996 of this
Sublease as if Subtenant were named as the tenant in the Lease.
IN WITNESS WHEREOF, Tenant and Subtenant have executed this Sublease as of
the day and year first above written.
CRW FINANCIAL, INC.,
a Delaware corporation
BY:_____________________________________
Name:___________________________________
Title:__________________________________
TELESPECTRUM WORDWIDE, INC.,
a Delaware corporation
BY:_____________________________________
Name:___________________________________
Title:__________________________________
AGREEMENT OF LEASE
BETWEEN
LEE PARK INVESTORS, L.P.
AS LANDLORD
AND
CRW FINANCIAL
AS TENANT
<PAGE>
OFFICE LEASE
LEASE made this 1st day of July, 1996 by and between Lee Park
Investors, L.P. (hereinafter called "Landlord"), and CRW Financial a Delaware
Corporation (hereinafter called "Tenant").
WITNESSETH, THAT:
1. DEMISED PREMISES. Landlord, for the term and subject to the
provisions and conditions hereof, leases to Tenant and Tenant accepts from
Landlord, the space consisting 3,527 rentable square feet on the _______ floor
known as Suite ______ (hereinafter referred to as the "Demised Premises") of the
building known as Lee Park located at 1100 East Hector Street in Conshohocken,
Pennsylvania (hereinafter referred to as the "Building"), and more particularly
described by the cross-hatched area on the floor plans annexed herein as Exhibit
"A", to be used by Tenant for the purpose of Office Space and for no other
purpose.
2. TERM. Tenant shall use and occupy Demised Premises for a term of
Five (5) years and Zero (0) months, commencing on the 15th day of July, 1996 and
ending on the Thirtieth day of June 2001 unless sooner terminated as herein
provided.
3. MINIMUM RENT.
(a) See Rent Rider attached. The first installment to be payable on the
execution of this Lease and subsequent installments to be payable on the first
day of each successive month of term hereof following the first month of such
terms.
(b) If the term of this Lease begins on a day other than the first day
of a month, rent from such day until the first day of the following month shall
be prorated at the rate of one-thirtieth of the fixed monthly rental for each
day of the first full calendar month of the term hereof (and, in such event, the
installment of rent paid at execution hereof shall be applied to the rent due
for the first full calendar month of the term hereof).
(c) All rent and other sums due to Landlord hereunder shall be payable
to Lee Park Investors, L.P. and mailed to the office of Landlord at P.O. Box
13700, Philadelphia, Pennsylvania, 19191-1062, or to such other party or at such
other address as Landlord may designate, from time to time, by written notice to
Tenant, without demand and without deduction, set-off or counterclaim (except to
the extent demand or notice shall be expressly provided for herein).
(d) If Landlord, at any time or times, shall accept said rent or any
other sum due to it hereunder after the same, shall become due and payable such
acceptance shall not excuse delay upon subsequent occasions, or constitute or be
construed as, a waiver of any of Landlord's rights hereunder.
2
<PAGE>
4. ESCALATION IN TAXES, OPERATING COSTS, COSTS OF LIVING: COST OF
ELECTRICITY.
(A) Definitions. As used in this Section 4, the following terms shall be
defined as hereinafter set forth.
(i) "Taxes" shall mean all real estate taxes and assessments, general
and special, ordinary or extraordinary, foreseen or unforeseen, imposed upon the
Building or with respect to the ownership thereof and the parcel of land
appurtenant thereto. If, due to a future change in the method of taxation, any
franchise, income, profit or other tax, however designated, shall be levied or
imposed in substitution in whole or in part, for (or in lieu of) any tax which
would otherwise be included within the defined herein.
(ii) "Base Year Operating Expenses" shall be the lower of $3.24 per
square foot or 1996 operating expense per square foot.
(iii) "Tenant's Fraction" shall be a fraction, the numerator of which is
the Demised Rentable Square Feet and the denominator of which is the Rentable
Square Feet in the Building.
[3,527/420,000]
(iv) (a) "Operating Expenses" shall mean except as hereinafter limited,
Landlord's actual out-of-pocket expenses in respect of the operation,
maintenance and management of the Building (after deducting any reimbursement,
discount, credit, reduction or other allowance received by Landlord) and shall
include, without limitation: (1) wages and salaries (and taxes imposed upon
employers with respect to such employed by Landlord for rendering service in the
normal operation, cleaning, maintenance, and repair of the Building: (2)
contract costs of contractors hired for the operation, maintenance and repair of
the Building; (3) the cost of steam, electricity, water and sewer and other
utilities (except for electricity, which is separately charged by Landlord as
herein provided) chargeable to the operation and maintenance of the Building;
(4) cost of insurance for the Building including fire and extended coverage,
elevator, boiler, sprinkler leakage, water damage, public liability and property
damage, plate glass, and rent protection, but excluding any charge for increased
premiums due to acts or omissions of other occupants of the Building or because
of extra risk which are reimbursed to Landlord by such other occupants; (5)
supplies; (6) legal and accounting expenses; (7) real estate taxes; and (8)
management expense;
The term "Operating Expenses" shall not include: (1) the cost of redecorating or
repairing not provided on a regular basis to tenants of the Building; (2) the
cost of any repair or replacement item which, by standard accounting practice,
should be capitalized; (3) any charge for depreciation, interest or rents paid
or incurred by Landlord; (4) any charge for Landlord's income tax, excess profit
taxes, franchise taxes or similar taxes on Landlord's business; (5) commissions.
(b) In determining Operating expenses for any year, if less than
ninety-five percent (95%) of the Building rentable area shall have been occupied
by tenants at any time during such year, Operating Expenses shall be deemed for
such year to be an amount equal to the like expenses which Landlord reasonably
determines would normally be incurred had such occupancy been ninety-five
percent (95%) throughout such year.
3
<PAGE>
(c) If, after the Base Year for Operating Expenses, Landlord shall
eliminate any component of Operating Expenses, as a result of the introduction
of a labor saving device or other capital improvement, the corresponding item of
Operating Expenses shall be deducted from the Operating Expenses expended by
Landlord in said Base Year for purposes of calculating Tenant's Proportionate
Share of any increased Operating Expenses.
(vi) "Demised Rentable Square Feet" shall mean 3,527 square feet.
(vii) "Rentable square feet in the Building" shall mean 420,000 square
feet.
(B) Escalation of Operating Expenses.
(i) For and with respect to each calendar year of the term of this Lease
(and any renewals or extensions thereof) subsequent to the Base Year for
Operating Expenses, there shall accrue, as additional rent, an amount equal to
the product obtained by multiplying the Tenant's Fraction by the amount of the
increase, if any, of Operating Expenses for such year over the Base Year
Operating Expenses (appropriately prorated for any partial calendar year
included within the beginning and of the term).
(ii) Landlord shall furnish to Tenant as soon as reasonably possible
after the beginning of each calendar year of the term hereof subsequent to the
Base Year for Operating Expenses;
(a) A statement (the "Expense Statement") setting forth (1)
Operating Expenses for the previous calendar year, and (2) Tenant's Fraction of
the Operating Expenses for the previous calendar year; and
(b) A statement of Landlord's good faith estimate of Operating
Expenses, and the amount of Tenant's Fraction thereof (the "Estimated Share"),
for the current calendar year.
(iii) Beginning with the next installment of minimum rent due after
delivery of the foregoing statements to Tenant, Tenant shall pay to Landlord, on
account of its share of Operating Expenses (or Landlord shall pay to Tenant, if
the following quantity is negative):
(a) One-twelfth of the Estimated Share multiplied by the number of
full or partial calendar months elapsed during the current calendar year up to
and including the month payment is made, plus any amounts due from Tenant to
Landlord on account of Operating Expenses for prior periods of time, less:
(b) The amount, if any, by which the aggregate of payments made by
Tenant on account of Operating Expenses for the previous calendar year exceed
those actually due as specified in the Expense Statement.
4
<PAGE>
(iv) On the first day of each succeeding month up to the time Tenant
shall receive a new Expense Statement and statement of Tenant's Estimated Share,
Tenant shall pay to Landlord, on account of its share of Operating Expenses,
one-twelfth of the then current Estimated Share. Any payment due from Tenant to
Landlord, or any refund due from Landlord to Tenant, on account of Operating
Expenses not yet determined as of the expiration of the term hereof shall be
made within twenty (20) days after submission to Tenant of the next Expense
Statement.
6. UTILITIES SEPARATELY CHARGED TO DEMISED PREMISES. Tenant shall be
responsible for all utilities (including gas and electric) which are consumed
within the Demised Premises. If a separate meter is installed, Tenant shall pay
for the consumption of such utilities based on its metered usage. If no meter is
installed, Tenant shall pay a pro-rata share of any utility charges covering the
Demised Premises and other areas of the Building which pro-rata share shall be
based on the percentage which the Demised Rentable Square Feet bears to the
square footage of the areas of the Building serviced by such utility. Utility
bills shall be paid by Tenant within ten (10) days after the receipt and
non-payment or late payment of such bills shall be considered a default under
this Lease.
7. SERVICES. Landlord agrees that it shall:
(a) Provide passenger elevator service to the Demised Premises during
all days with one (1) elevator subject to call at all other times. Tenant and
its employees and agents shall have access to the Demised Premises at all times,
subject to compliance with such security measures as shall be in effect for the
Building.
(b) Provide water for drinking, lavatory and toilet purposes drawn
through fixtures installed by Landlord; and
(c) Furnish the Demised Premises with electric for heating, hot and
chilled water and air-conditioning. Tenant shall not install or operate in the
Demised Premises any electrically operated equipment or other machinery, other
than typewriters, adding machine and other machinery and equipment normally used
in modern offices, or any plumbing fixtures, without first obtaining the prior
written consent of the Landlord. Landlord may condition such consent upon the
payment by Tenant of additional rent as compensation for the additional
consumption of water and/or electricity occasioned by the operation of said
equipment, fixtures, or machinery.
5
<PAGE>
Tenant, at Tenant's sole expense, shall be responsible for the installation,
maintenance, and use of any equipment or any kind or nature whatsoever which
would or might necessitate any changes, replacements, or additions to the water
system, plumbing system, heating system, air-conditioning system, or the
electrical system servicing the Demised Premises or any other portion of the
Building without the prior written consent of the Landlord, and in the event
such consent is granted, such replacement, changes or additions shall be paid
for by Tenant. It is understood that Landlord does not warrant that any of the
services referred to in this Section 7 will be free from interruption from
causes beyond the reasonable control of Landlord. No interruption of service
shall ever be deemed an eviction or disturbance of Tenant's use and possession
of the Demised Premises or any part thereof or render Landlord liable to Tenant
for damages by abatement or rent or otherwise relieve Tenant from performance of
Tenant's obligations under this Lease, unless Landlord, after reasonable notice,
shall willfully and without cause fail or refuse to take action within its
control.
7. CARE OF DEMISED PREMISES. Tenant agrees, on behalf of itself, its
employees and agents, that it shall:
(a) Comply at all times with any and all federal, state and local
statutes, regulations, ordinances, and other requirements of any of the
constituted public authorities relating to its use and occupancy of the Demised
Premises.
(b) Give Landlord access to the Demised Premises at all reasonable
times, without charge or diminution of rent, to enable Landlord (i) to examine
the same and to make such repairs, additions and alterations as Landlord may be
permitted to make hereunder or as Landlord may deem advisable for the
preservation of the integrity, safety and good order of the Building or any part
thereof; and (ii) upon reasonable notice, to show the Demised Premises to
prospective mortgagees and purchasers and. during the six (6) months prior to
expiration of the term, to prospective tenants;
(c) Keep the Demised Premises in good order and condition and replace
all glass broken by Tenant, its agents, employees or invitees with glass of
the same quality as that broken, except for glass broken by fire and extended
coverage type risks, and commit no waste in the Demised Premises;
(d) Upon the termination of this Lease in any manner whatsoever, remove
Tenant's goods and effects and those of any other person claiming under Tenant,
and quit and deliver up the Demised Premises to Landlord peaceably and quietly
in as good order and condition at the inception of the term of this Lease or as
the same hereafter may be improved by Landlord or Tenant, reasonable use and
wear thereof, damage from fire and extended coverage type risks, and repairs
which are Landlord's obligation excepted. Goods and effects not removed by
Tenant at the termination of this Lease, however terminated, shall be considered
abandoned and Landlord may dispose of and/or store the same as it deems
expedient, the cost thereof to be charged to Tenant;
(e) Not place signs on the Demised Premises except on doors and then
only of a type and with lettering and text approved by Landlord. Identification
of Tenant and Tenant's location shall be provided in a directory in the Building
Lobby;
6
<PAGE>
(f) Not overload, damage or deface the Demised Premises or do any act
which might make void or voidable any insurance on the Demised Premises or the
Building or which may render an increased or extra premium payable for insurance
(and without prejudice to any right or remedy of Landlord regarding this
subparagraph, Landlord shall have the right to collect from Tenant, upon demand,
any such increase or extra premium). Tenant shall maintain at its own sole cost
adequate insurance coverage for all of its equipment, furniture, supplies and
fixtures and provide Landlord with certificates evidencing such coverage;
(g) Not make any alteration of or addition to the Demised Premises
without the prior written approval of Landlord (except for work of a decorative
nature);
(h) Not install or authorize the installation of any coin operated
vending machine, except for the dispensing of cigarettes, coffee, and similar
items to the employees of Tenant for consumption upon the Demised Premises; and
(i) Observe the rules and regulations annexed hereto as Exhibit "C", as
the same may from time to time be amended by Landlord for the general safety,
comfort and convenience of Landlord, occupants and tenants of the Building.
8. SUBLETTING AND ASSIGNING. Tenant shall not assign this Lease or
sublet all or any portion of the Demised Premises without first obtaining
Landlord's prior written consent thereto. If such consent is given, it will not
release Tenant from its obligations hereunder and which will not be deemed a
consent to any further subletting or assignment. If Landlord consents to any
such subletting or assignment, it shall nevertheless be a condition to the
effectiveness thereof that a fully executed copy of the sublease or assignment
be furnished to Landlord and that any assignee assume in writing all obligations
of Tenant hereunder. Tenant shall not mortgage or encumber this Lease.
9. DELAY IN POSSESSION. If Landlord shall be unable to deliver
possession of the Demised Premises to Tenant on the date specified for
commencement of the term hereof because of the holding over or retention of
possession of any tenant or occupant, or if any repairs, improvements or
decoration of the Demised Premises are not completed, or for any other reason.
Landlord shall not be subject to any liability to Tenant. Under such
circumstances, the rent reserved and covenanted to be paid herein shall not
commence until possession of Demised Premises is given or until Landlord shall
give written notice to Tenant that the Demised Premises are available for
occupancy by Tenant, whichever shall first occur, and no such failure to give
possession shall in any other respect affect the validity of this Lease or any
obligation to extend the term of this Lease.
10. FIRE OR CASUALTY. In case of damage to the Demised Premises or the
Building by fire or other casualty, Tenant shall give immediate notice thereof
to Landlord. Landlord shall thereupon cause the damage to be repaired with
reasonable speed, subject to delays which may arise by reason of adjustment of
loss under insurance policies and for delays beyond the reasonable control of
Landlord. To the extent and for the time that the Demised Premises are thereby
rendered untenantable, the rent shall proportionately abate.
7
<PAGE>
In the event the damage shall be so extensive that Landlord shall decide not to
repair or rebuild, or if any mortgagee, having the right to do so shall direct
that the insurance proceeds are to be applied to reduce the mortgage debt rather
than to the repair of such damage, this Lease shall, at the option of Landlord,
exercisable by written notice to Tenant given within thirty (30) days after
Landlord is notified of the casualty, be terminated as of a date specified in
such notice (which shall not be more than ninety (90) days thereafter), and the
rent (taking into account any abatement as aforesaid) shall be adjusted to the
termination date. Thereafter, Tenant shall promptly vacate the Demised Premises.
11. LIABILITY. Tenant agrees that Landlord and its building manager and
their officers, employees and agents shall not be liable to Tenant, and Tenant
hereby releases said parties, for any personal injury or damage to or loss of
personal property in the Demised Premise from any cause whatsoever unless such
damage, loss or injury is the result of the willful and gross negligence of
Landlord, its building manager, or their officers, employees or agents, and
Landlord and its building manager and their officers or employees shall not be
liable to Tenant for any such damage or loss whether or not the result of their
willful and gross negligence to the extent Tenant is compensated therefor by
Tenant's insurance. Tenant shall and does hereby indemnify and hold Landlord
harmless of and from all loss or liability incurred by Landlord in connection
with any failure of Tenant to fully perform its obligations under this Lease and
in connection with any personal injury or damage of any type or nature occurring
in or resulting out of Tenant's use of the Demised Premises, unless due to
Landlord's fault.
12. EMINENT DOMAIN. If the whole or a substantial part of the Building
shall be taken or condemned for a public or quasi-public use under a statute or
by right of eminent domain or private purchase in lieu thereof by any competent
authority, Tenant shall have no claim against Landlord and shall not have any
claim or right to any portion of the amount that may be awarded as damages or
paid as a result of any such condemnation or purchase; and all right of the
Tenant to damages therefore are hereby assigned by Tenant to Landlord. The
foregoing shall not, however, deprive Tenant of any separate award for moving
expenses or for any other award which would not reduce the award payable to
Landlord. Upon the date the right to possession shall vest in the condemning
authority, this Lease shall cease and terminate with rent adjusted to such date,
and Tenant shall have no claim against Landlord for the value of any unexpired
term of this Lease.
13. INSOLVENCY.
(a) The appointment of a receiver or trustee to take possession of all
or a portion of the assets of Tenant, or (b) an assignment by Tenant for the
benefit of creditors, or (c) the institution by or against Tenant of any
proceedings for bankruptcy or reorganization under any state or federal law
(unless in the case of involuntary proceedings, the same shall be dismissed
within thirty (30) days after institution), or (d) any execution issued against
Tenant which is not stayed or discharged within fifteen (15) days after issuance
of any execution sale of the assets of Tenant, shall constitute a breach of this
Lease by Tenant. Landlord in the event of such a breach, shall have, without
need of further notice, the rights enumerated in Section 14 herein.
8
<PAGE>
14. DEFAULT.
(a) If Tenant shall fail to pay rent or any other sum payable to
Landlord hereunder when due, or if Tenant shall fail to perform or observe any
of the other covenants, terms or conditions contained in this Lease within
fifteen (15) days (or such longer period as is reasonably required to correct
any such default, provided Tenant promptly commences and diligently continues to
effectuate a cure, but in any event within thirty (30) days after written notice
thereof by Landlord), or if any of the events specified in Section 13 occur, or
if Tenant vacates or abandons the Demised Premises during the term hereof or
removes or manifests an intention to remove any of Tenant's goods or property
therefrom other than in the ordinary and usual course of Tenant's business, then
and in any of said cases (notwithstanding any former breach of covenant or
waiver thereof in a former instance), Landlord, in addition to all other rights
and remedies available to it by law or equity or by any other provisions hereof,
may at any time thereafter:
(i) upon three (3) days notice to Tenant, declare to be immediately due
and payable, the rent and other charges herein reserved for the balance of the
term of this Lease (taken without regard to any early termination of said term
on account of default), a sum equal to the Accelerated Rent Component (as
hereinafter defined), and Tenant shall remain liable to Landlord as hereinafter
provided; and/or
(ii) whether or not Landlord has elected to recover the Accelerated Rent
Component, terminate this Lease on at least five (5) days notice to Tenant and,
on the date specified in said notice, this Lease and the term hereby demised and
all rights of Tenant hereunder shall expire and terminate and Tenant shall
thereupon quit and surrender possession of the Demised Premises to Landlord in
the condition elsewhere herein required and Tenant shall remain liable to
Landlord as hereinafter provided.
(b) For purposes herein, the Accelerated Rent Component shall mean the
aggregate of:
(i) all rent and other charges, payments, costs and expenses due from
Tenant to Landlord and in arrears at the time of the election of Landlord to
recover the Accelerated Rent Component;
(ii) the minimum rent reserved for the then entire unexpired balance of
the term of this Lease (taken without regard to any early termination of the
term by virtue of any default), plus all other charges, payments, costs and
expenses herein agreed to be paid by Tenant up to the end of said term which
shall be capable of precise determination at the time of Landlord's election to
recover the Accelerated Rent Component; and
(iii) Landlord's good faith estimate of all charges, payments, costs
and expenses herein agreed to be paid by Tenant up to the end of said term which
shall not be capable to precise determination as aforesaid (and for such
purposes no estimate of any component of the additional rent to accrue pursuant
to the provisions of Section 4 hereof shall be less than the amount which would
be due if each such component continued at the highest monthly rate or amount in
effect during the twelve (12) months immediately preceding the default).
9
<PAGE>
(c) In any case in which this Lease shall have been terminated, or in
any case in which Landlord shall have elected to recover the Accelerated Rent
Component and any portion of such sum shall remain unpaid, Landlord may without
further notice, enter upon and repossess the Demised Premises, by force, summary
proceedings, ejectment or otherwise, and may dispossess Tenant and remove
Tenant and all other persons and property from the Demised Premises and may
have, hold and enjoy the Demised Premises and the rents and profits therefrom.
Landlord may, in its own name, as agent for Tenant, if this Lease has not been
terminated, or in its own behalf, if this Lease has been terminated, relet the
Demised Premises or any part thereof for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such terms (which may include
concessions of free rent) as Landlord in its sole discretion may determine.
Landlord may, in connection with any such reletting, cause the Demised Premises
to be decorated, altered, divided, consolidated with other space or otherwise
changed or prepared for reletting. No reletting shall be deemed a surrender and
acceptance of the Demised Premises.
(d) Tenant shall, with respect to all periods of time up to and
including the expiration of the term of this Lease (or what would have been the
expiration date in the absence of default or breach) remain liable to Landlord
as follows:
(i) In the event of termination of this Lease on account of Tenant's
default or breach, Tenant shall remain liable to Landlord for damages equal to
the rent and other charges payable under this Lease by Tenant as if this Lease
were still in effect, less the net proceeds of any reletting after deducting all
costs incident thereto (including without limitation all repossession costs,
brokerage and management commission, operating and legal expenses and fees,
alteration costs and expenses of preparation for reletting) and to the extent
such damages shall not have been recovered by Landlord by virtue of payment by
Tenant of the Accelerated Rent Component (but without prejudice to the right of
Landlord to demand and receive the Accelerated Rent Component), such damages
shall be payable to Landlord monthly upon presentation to Tenant of a bill for
the amount due.
(ii) In the event and so long as this Lease shall not have been
terminated after default or breach by Tenant, the rent and all other charges
payable under this Lease shall be reduced by the net proceeds of any reletting
by Landlord (after deducting all costs incident thereto as above set forth) and
by any portion of the Accelerated Rent Component paid by Tenant to Landlord, and
any amount due to Landlord shall be payable monthly upon presentation to Tenant
of a bill for the amount due.
(e) In the event Landlord shall, after default or breach by Tenant,
recover the Accelerated Rent Component from Tenant and it shall be determined at
the expiration of the term of this Lease (taken without regard to early
termination for default) that a credit is due Tenant because the net proceeds of
reletting, as aforesaid, plus amounts paid to Landlord by Tenant exceed the
aggregate of rent and other charges accrued in favor of Landlord to the end of
said term, Landlord shall refund such excess to Tenant, without interest,
promptly after such determination.
10
<PAGE>
(f) Landlord shall in no event be responsible or liable for any failure
to relet the Demised Premises or any part thereof, or for any failure to collect
any rent due upon a reletting.
(g) As an additional and cumulative remedy of Landlord in the event of
termination of this Lease by Landlord following any breach or default by Tenant,
Landlord, at its option, shall be entitled to recover damages for such breach in
an amount equal to the Accelerated Rent Component (determined from and after the
date of Landlord's election under this subsection (g) less the fair rental value
of the Demised Premises for the remainder of the term of this Lease (taken
without regard to the early termination) and such damages shall be payable by
Tenant upon demand. Nothing contained in this Lease shall limit or prejudice the
right of Landlord to prove and obtain as damages incident to a termination of
this Lease, in any bankruptcy reorganization or other court proceedings, the
maximum amount allowed by any statute or rule of law in effect with such damages
are to be proved.
(h) In the event of any default occurrence by which Landlord shall have
the rights and remedies specified in this Section 15:
(i) Tenant hereby authorizes and empowers any prothonotary or
attorney of any court of record to appear for Tenant and to Confess Judgment
against Tenant (whether by Complaint to Confess Judgment or otherwise) in favor
of Landlord for any amount due to Landlord hereunder (including without
limitation the Accelerated Rent Component), together with interest and costs and
an attorney's commission of five percent (5%) of the amount due;
(ii) For the purpose of obtaining possession of the Demised
Premises, Tenant hereby authorizes and empowers any prothonotary or attorney of
any court of record to appear for Tenant and to file in any court an agreement
for entering an amicable action and judgment in ejectment for recovery of
possession, and/or to confess judgment for possession against Tenant and those
claiming by, through or under Tenant in favor of Landlord by Complaint to
Confess Judgment or otherwise, and Tenant agrees that upon such entry or
judgment a writ of possession for the Demised Premises may forthwith issue; and
(i) Tenant hereby waives all errors and defect of a procedural nature in
any proceedings brought against it by Landlord under this Lease. Tenant further
waives the right to any notices to quit as may be specified in the Landlord and
Tenant Act of Pennsylvania, as amended, and agrees that five (5) days notice
shall be sufficient in any case where a longer period may be statutorily
specified.
(j) If rent or any other sum due from Tenant to Landlord shall be over
due for more than five (5) days after notice from Landlord, it shall thereafter
bear interest at the rate of twenty percent (20%) per annum (or, if lower, the
highest legal rate) until paid.
11
<PAGE>
15. SUBORDINATION. This lease is and shall be subject and subordinate to
all the terms and conditions of all underlying mortgages and to all ground or
underlying leases of the entire Building which may now or hereafter be secured
upon the Building, and to all renewals, modifications, consolidations,
replacements and extensions thereof. This clause shall be self-operative and no
further instrument of subordination, Tenant shall execute, within fifteen (15)
days after request, any certificate that Landlord may reasonably require
acknowledging such subordination. Notwithstanding the foregoing, the party
holding the instrument to which this Lease is subordinate shall have the right
to recognize and preserve this Lease in the event of any foreclosure sale or
possessory action, and in such case this Lease shall continue in full force and
effect at the option of the party holding the superior lien, and Tenant shall
attorn to such party and shall execute, acknowledge and deliver any instrument
that has for its purpose and effect the confirmation of such attornment.
16. NOTICES. All bills, statements, notices or communications which
Landlord may desire or be required to give to Tenant shall be deemed
sufficiently given or rendered if in writing and either delivered to an officer
of Tenant or sent by registered or certified mail addressed to Tenant at the
Building, and the time of the giving of such notice or communication shall be
deemed to be the time when the same is delivered to Tenant or deposited in the
mail, as the case may be. Any notice by Tenant to Landlord must be served by
registered, certified mail or overnight delivery addressed to Landlord at the
address where the last previous rental hereunder was payable, or in the case of
subsequent change upon notice given, to the latest address furnished.
17. HOLDING-OVER Should Tenant continue to occupy the Demised Premises
after expiration of the term of this Lease or any renewal or renewals thereof,
or after a forfeiture incurred, such tenancy shall (without limitation of any of
Landlord's rights or remedies therefor) be one at sufferance from month to month
at a minimum monthly rental equal to twice the rent payable for the last month
of the term of this Lease.
18. MISCELLANEOUS.
(a) Tenant represents and warrants that it has not employed any broker
or agent as its representative in the negotiation for or the obtaining of this
Lease other than Tom Coyne of Fidelity Commercial, Two Logan Square, 19th Floor,
Philadelphia, PA 19103, and agrees to indemnify and hold Landlord harmless from
any and all cost or liability for compensation claimed by any broker or agent
with whom it has dealt.
(b) The word "Tenant" as used in this Lease shall be construed to mean
tenants in all cases where there is more than one tenant, and the necessary
grammatical changes required to make the provisions hereof apply to
corporations, partnerships or individuals, men or women, shall in all cases be
assumed as though in each case fully expressed. This Lease shall not inure to
the benefit of any assignee, heir, legal representative, transferee or successor
of Tenant except upon the express written consent or election of Landlord.
Subject to the foregoing limitation, each provision hereof shall extend to and
shall, as the case may require, bind and inure to the benefit of Tenant and its
heirs, legal representatives, successors and assigns.
12
<PAGE>
(c) The term "Landlord" as used in this Lease means the fee owner of
the Building or, if different, the party holding and exercising the right, as
against all others (except space Tenants of the Building) to possession of the
entire Building. Landlord above-named represents that it is the holder of such
rights as of the date of execution hereof. In the event of the voluntary
transfer of such ownership or right to a successor-in-interest of Landlord,
Landlord shall be freed and relieved of all liability and obligation hereunder
which shall thereafter accrue (and, as to any unapplied portion of Tenant's
security deposit, Landlord shall be relieved of all liability therefor upon
transfer of such portion to its successor in interest) and Tenant shall look
solely to such successor-in-interest for the performance of the covenants and
obligations of the Landlord hereunder (either in terms of ownership or
possessory rights). The successor-in-interest shall not (i) be liable for any
previous act or omission of a prior landlord; (ii) be subject to any rental
offsets or defenses against a prior landlord; (iii) be bound by any amendment of
the Lease made without its written consent, or by payment by Tenant of rent in
advance in excess of one (1) month's rent; or (iv) be liable for any security
not actually received by it. Subject to the foregoing, the provisions hereof
shall be binding upon and inure to the benefit of the successors and assigns of
Landlord. Notwithstanding anything to the contrary contained in this Lease, and
liability of Landlord, its agents, partners or employees, arising out of or in
respect of this Lease, the Demised Premises or the Building, and if Landlord
shall default in the performance of Landlord's obligation under this Lease or
otherwise Tenant shall look solely to the equity of Landlord in its interest in
the Building.
(d) Tenant agrees to execute a memorandum of this Lease in the form
submitted by Landlord, which may be recorded by Landlord. Tenant also agrees to
execute any assignment of this Lease by Landlord, evidencing its consent to such
assignment.
20. LANDLORD IMPROVEMENT. Landlord shall, in a good and workmanlike
manner, cause the Demised Premises to be completed in accordance with the plans
approved by Landlord and Tenant pursuant to Exhibit "B" hereof, reserving the
right to: (a) make substitutions of material of equivalent grade and quality
when and if any specified material shall not be readily and reasonably
available; (b) make changes necessitated or by conditions met during the course
of construction, provided that Tenant's approval of any substantial change
(and any reduction of cost incident thereto) shall first be obtained (which
approval shall not be reasonably withheld so long as there shall be general
conformity with said working drawings).
21. WAIVER OF SUBROGATION. Each party hereto hereby waives any and
every claim which arises or which may arise in its favor and against the other
party hereto during the term of this Lease, or any extension or renewal thereof,
for any and all loss of, or damage to, any of its property located within or
upon or constituting a part of the Building, to the extent that such loss or
damage is recovered under an insurance policy or policies and to the extent such
policy or policies contain provisions permitting such waivers of claims. Each
party agrees to request its insurers to issue policies containing such
provisions and if any extra premium is payable therefor, the party which would
benefit from the provision shall have the option to pay such additional premium
in order to obtain such benefit.
13
<PAGE>
22. RENT TAX. If, during the term of this Lease or any renewal or
extension thereof; any tax is imposed upon the privilege of renting or occupying
the Demised Premises or upon the amount of rentals collected therefor, Tenant
will pay each month, as additional rent, a sum equal to such tax or charge that
is imposed for such month, but nothing herein shall be taken to require Tenant
to pay any income, estate, inheritance or franchise tax imposed upon Landlord.
23. PRIOR AGREEMENT, AMENDMENTS. Neither party hereto has made any
representations or promises except as contained herein or in some further
writing signed by the party making such representation or promise. No other
agreement hereinafter made shall be effective to change, modify, discharge or
effect an abandonment of this Lease, in whole or in part, unless such agreement
is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought. Tenant agrees to execute any
amendment to this Lease required by a mortgagee of the Building, which amendment
does not materially adversely affect Tenant's rights or obligation hereunder.
24. CAPTIONS. The captions of the paragraphs in this Lease are inserted
and included solely for convenience and shall not be considered or given any
effect in construing the provisions hereof.
25. MECHANIC'S LIEN. Tenant shall, within ten (10) days after notice
from Landlord, discharge any mechanic's lien for materials or labor claimed to
have been furnished to the Demised Premises on Tenant's behalf (except for work
contracted for by Landlord) and shall indemnify and hold harmless Landlord from
any loss incurred in connection therewith.
26. LANDLORD'S RIGHT TO CURE. Landlord may (but shall not be obligated),
on five (5) days notice to Tenant (except that no notice need be given in case
of emergency) cure on behalf of Tenant any default hereunder by Tenant, and the
cost of such cure (including any attorney's fees incurred) shall be deemed
additional rent payable upon demand.
27. PUBLIC LIABILITY INSURANCE. Tenant shall at all times during the
term hereof maintain in full force and effect with respect to the Demised
Premises and Tenant's use thereof, comprehensive public liability insurance,
naming Landlord as an additional insured, covering injury to person in amounts
at least equal to Five Hundred Thousand ($500,000) Dollars combined single limit
bodily injury and property. Tenant shall lodge with Landlord duplicate originals
or certificates of such insurance at or prior to the commencement date of the
term hereof, together with evidence of paid-up premiums, and shall lodge with
Landlord renewals thereof at least fifteen (15) days prior to expiration.
14
<PAGE>
28. ESTOPPEL STATEMENT. Tenant shall from time to time, within ten (10)
days after request by Landlord, execute, acknowledge and deliver to Landlord a
statement certifying that this Lease is unmodified and in full force and effect
(or that the same is in full force and effect as modified, listing any
instruments or modifications), the dates to which rent and other charges have
been paid, and whether or not, to the best of Tenant's knowledge, Landlord is in
default or whether Tenant has any claims or demands against Landlord (and, if
so, the default, claim and/or demand shall be specified).
29. TERMINATION OPTION. Tenant will have the option to terminate this
Lease any time after January 31, 1997 by giving Landlord six months written
notice and paying all unamortized tenant improvements and leasing commissions
from the time of termination. The total amount spent on tenant improvements and
leasing commissions is equal $25,000.00 and will be amortized for the term of
this Lease and at an interest rate of 10%.
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused this Lease to be executed by their duly authorized representatives the
day and year first above written.
LANDLORD: LEE PARK INVESTORS, L.P.
BY: /s/
-----------------------------------------
DATE: July 2, 1996
---------------------------------------
TENANT: CRW FINANCIAL
BY: /s/ Jonathan P. Robinson
-----------------------------------------
DATE: June 26, 1996
----------------------------------------
15
<PAGE>
SCHEDULE "A"
RENT RIDER
PERIOD MONTHLY ANNUALLY
------ ------- -------
July 1, 1996 - June 30, 1997 $4,555.71 $54,668.50
July 1, 1997 - June 30, 1998 $4,737.94 $56,855.24
July 1, 1998 - June 30, 1999 $4,927.45 $59,129.45
July 1, 1999 - June 30, 2000 $5,124.55 $61,494.63
July 1, 2000 - June 30, 2001 $5,329.53 $63,954.41
16
<PAGE>
EXHIBIT "C"
BUILDING RULES AND REGULATIONS
1. The sidewalks, entryways, passages, corridors, stairways and
elevators shall not be obstructed by any of the tenants, their employees or
agents, or used by them for purposes other than ingress or egress to and from
their respective suites. All safes or other heavy articles shall be carried up
or into the leased premises only at such times and in such manner as shall be
prescribed by the Landlord and the Landlord shall in all cases have the right to
specify a maximum weight and proper position or location of any such safe or
other heavy article. Any damage done to the Building by taking in or removing
any safe or from overloading any floor in any way shall be paid by the Tenant.
The cost of repairing or restoring any part of the Building which shall be
defaced or injured by a tenant, its agents or employees, shall be paid for by
the Tenant.
2. Each Tenant will refer all contractors, contractor's representatives
and installation technicians rendering any service on or to the leased premises
for the tenant to Landlord for Landlord's approval and supervision before
permanence of any contractual service. This provision shall apply to all work
performed in the Building, including installation of telephones, telegraph
equipment, electrical devices and attachments and installations of any nature
affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any
other physical portion of the Building.
3. No, sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the inside or outside of the Building unless of such
color, size and style and in such place upon or in the Building as shall first
be designated by Landlord; there shall be no obligation or duty on Landlord to
allow any sign, advertisement or notice to be inscribed, painted or affixed on
any part of the inside or outside of the Building except as specified in a
tenant's lease. Signs on or adjacent to doors shall be in color, size and style
approved by Landlord, the cost to be paid by the tenants. A directory in a
conspicuous place, with the names of tenants, will be provided by Landlord; any
necessary revision in this will be made by Landlord within a reasonable time
after notice from the tenant of an error or of a change making revision
necessary. No furniture shall be placed in front of the Building or in any lobby
or corridor without written consent of Landlord.
4. No tenant shall do or permit anything to be done in its leased
premises, or bring to keep anything therein, which will in any way increase the
rate of fire insurance on the Building, or on property kept therein, or obstruct
or interfere with the rights of other tenants, or in any way injure or annoy
them, or conflict with the laws relating to fire prevention and safety, or with
any regulations of the fire department, or with any rules or ordinances of any
Board of Health or other governing bodies having jurisdiction over the Building.
5. The janitor of the Building may at all times keep a pass-key, and he
and other agents of the Landlord shall at all times, be allowed admittance to
the leased premises for purposes permitted in Tenant's lease.
17
<PAGE>
6. No additional locks shall be placed upon any doors without the
written consent of the Landlord. All necessary keys shall be furnished by the
Landlord, and the same shall be surrendered upon the termination of this Lease,
and the Tenant shall then give the Landlord or his agents explanation of the
combination of all locks upon the doors of vaults.
7. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse or abuse by a tenant or its agents, employees or
invitees, shall be borne by the Tenant.
8. No person shall disturb the occupants of the Building by the use of
any musical instruments, the making or transmittal of noises which are audible
outside the leased premises, or any unreasonable use. No dogs or other animals
or pets of any kind will be allowed in the Building.
9. No bicycles or similar vehicles will be allowed in the building.
10. Nothing shall be thrown out the windows of the building or down the
stairways or other passages.
11. Tenants shall not be permitted to use or to keep in the Building
any kerosene, camphene, burning fluid or other illuminating materials.
12. If any tenant desires telegraphic, telephonic or other electric
connections, Landlord or its agents will direct the electricians as to what and
how the wires may be introduced, and without such directions no boring or
cutting for wires will be permitted.
13. If a tenant desires shades, they must be of such shape, color,
materials and make as shall be prescribed by Landlord. No outside awning shall
be permitted.
14. No portion of the Building shall be used for the purposes of lodging
rooms or for any immoral or unlawful purposes.
15. No tenant shall store anything outside the building or in any common
areas in the building.
18
<PAGE>
ADDENDUM TO LEASE AGREEMENT
This Addendum dated ____________________ to be made part of a certain Lease
dated July 1, 1996 between Lee Park Investors, L.P. (henceforth called
"Landlord") and CRW Financial (henceforth called "Tenant") for Office space in
the Lee Park Building as more particularly described below;
Notwithstanding anything contained in the Lease Agreement to the
contrary, it is agreed and understood that CRW Financial shall have an
additional right to terminate the lease at any time prior to August 31, 1996
with written notice to Landlord of their intent to do so. In the event CRW
Financial exercise their additional right to terminate, the costs associated
with the lease in the amount of $25,000.00 will be reimbursed to the Landlord
within 30 days of the time of lease termination notification.
AGREED AND ACCEPTED
/s/ /s/
- -------------------------------- ------------------------------------
Lee Park Investors, L.P. CRW Financial
Date: July 2, 1996 Date: June 26, 1996
OFFICE SPACE LEASE
for
210 Mall Boulevard
King of Prussia, Pennsylvania
by and between
2210 Mall Boulevard
King of Prussia, Pennsylvania
210 & 216 MALL BOULEVARD ASSOCIATES LIMITED PARTNERSHIP
(as Landlord)
and
CRW FINANCIAL, INC.
(as Tenant)
Date: November , l996
<PAGE>
THIS LEASE (the "Lease") is made the day of November, 1996 between
210 & 216 Mall Boulevard Associates Limited Partnership, a Pennsylvania limited
partnership (herein referred to as "Landlord") whose address is 443 S. Gulph
Road, King of Prussia, Pennsylvania, 19406 and CRW Financial, Inc., a Delaware
corporation (herein referred to as "Tenant") whose address is 443 South Gulph
Road, King of Prussia, Pennsylvania, 19406.
PREAMBLE
BASIC LEASE PROVISIONS AND DEFINITIONS
In addition to other terms elsewhere defined in this Lease, the
following terms whenever used in this Lease shall have only the meanings set
forth in this section, unless such meanings are expressly modified, limited or
expanded elsewhere herein.
1. ADDITIONAL RENT shall mean all sums in addition to Fixed Basic Rent payable
by Tenant to Landlord pursuant to the provisions of the Lease.
2. BROKER(S) shall mean Fidelity Commercial Real Estate.
3. BUILDING shall mean 210 Mall Boulevard, King of Prussia, Pennsylvania, 19406.
4. BUILDING HOLIDAYS shall be those shown on Exhibit D.
5. COMMENCEMENT DATE is December 16, 1996, subject to Section 4.
6. DEMISED PREMISES OR PREMISES shall be approximately 13,104 gross rentable
square feet as shown on Exhibit A hereto, which includes an allocable share of
the Common Facilities as defined in Section 2.
7. EXHIBITS shall be the following, attached to this Lease and incorporated
herein and made a part hereof:
Exhibit A Location of Premises
Exhibit A-1 Office Building Area
Exhibit B Rules and Regulations
Exhibit C Landlord's Work
Exhibit D Building Holidays
Exhibit E Tenant Estoppel Certificate
Exhibit F Commence Date Agreement
8. EXPIRATION DATE shall be the day before the fifth (5th) calendar year
anniversary of the Commencement Date.
i
<PAGE>
9. FIXED BASIC RENT shall mean: One Million Four Hundred and Eight Thousand Six
Hundred and Eighty Dollars ($1,408,680.00), or Twenty One and 50/100 Dollars
($21.50) per rentable square foot of the Premises, for the Term (net of
electricity costs), payable as follows:
a. Yearly Rate: $281,736.00
b. Monthly Installment: $23,478.00
10. OFFICE BUILDING AREA is as set forth on Exhibit A-1
11. PERMITTED USE shall be general office use and for no other purpose.
12. PROPORTIONATE SHARE shall mean 44.7 percent.
13. SECURITY DEPOSIT shall be Twenty Three Thousand Four Hundred and Seventy
Eight Dollars ($23,478.00).
14. TERM shall mean five (5) years from the Commencement Date.
ii
<PAGE>
TABLE OF CONTENTS
Section Page
------- ----
1. Definitions.........................................................1
2. Premises............................................................1
3. Completion of Premises..............................................1
4. Term................................................................2
5. Use of Premises.....................................................2
6. Rent................................................................2
7. Insurance...........................................................5
8. Repairs and Maintenance.............................................6
9. Utilities and Services..............................................7
10. Governmental Regulations............................................8
11. Signs...............................................................8
12. Alterations, Additions and Fixtures.................................9
13. Mechanic's Liens....................................................10
14. Landlord's Right of Entry...........................................11
15. Damage by Fire or Other Casualty....................................11
16. Non-Abatement of Rent...............................................12
17. Indemnification.....................................................13
18. Condemnation........................................................13
19. Quiet Enjoyment.....................................................14
20. Rules and Regulations...............................................15
21. Assignment and Subletting...........................................15
22. Tenant's Expansion/Relocation.......................................18
23. Subordination.......................................................19
24. Tenant's Certificate................................................19
25. Curing Tenant's Defaults............................................20
26. Surrender...........................................................20
27. Defaults-Remedies...................................................20
28. Condition of Premises...............................................24
29. Hazardous Substances................................................25
30. Recording...........................................................25
31. Broker's Commission.................................................25
32. Notices.............................................................26
33. Irrevocable Offer, No Option........................................26
34. Landlord Inability to Perform.......................................26
35. Survival............................................................26
36. Corporate Tenants...................................................26
37. Waiver of Invalidity of Lease.......................................26
38. Security Deposit....................................................26
39. Estoppel Certificate................................................27
40. Rights Reserved by Landlord.........................................28
41. Miscellaneous.......................................................29
42. Additional Definitions..............................................31
<PAGE>
For and in consideration of the covenants herein contained, and upon the
terms and conditions herein set forth, Landlord and Tenant, intending to be
legally bound, agree as follows:
1. Definitions. The definitions set forth in the preceding Preamble
shall apply to the same capitalized terms appearing in this Lease Agreement.
Additional definitions are contained in Section 30 and throughout this Lease.
2. Premises. Landlord hereby demises and leases the Premises to Tenant
and Tenant hereby leases and takes the Premises from Landlord for the Term (as
defined in Section 4) and upon the terms, covenants, conditions, and provisions
set forth in this Lease Agreement, including the Preamble (this "Lease"). The
Tenant's interest in the Premises as tenant shall include the right, in common
with Landlord and other occupants of the Building, to use driveways, sidewalks,
loading and parking areas, lobbies, hallways and other facilities which are
located within the Property (defined in Section 6) and which are designated by
Landlord from time to time for the use of all of the tenants of the Building
(the "Common Facilities").
3. Completion of Premises. The Premises shall be completed in accordance
with the plans and specifications attached hereto as Exhibit C (herein called
the "Plans"). The completion of the Premises in accordance with the Plans shall
be at Landlord's expense; provided, however, Tenant shall pay Landlord at the
time of execution of this Lease the sum of Sixty Thousand Dollars ($60,000.00)
("Tenant Construction Contribution") for construction costs to be incurred by
Landlord in completing the Premises in accordance with Tenant's special
requirements. All necessary construction shall be commenced promptly following
Landlord's execution and acceptance of this Lease and Tenant's delivery of the
first month's Fixed Basic Rent, the Security Deposit and the Tenant Construction
Contribution to Landlord and shall be substantially completed ready for use and
occupancy by Tenant on the Lease Commencement Date set forth in the Preamble;
provided, however, that the time for substantial completion of the Premises
shall be extended for additional periods of time equal to the time lost by
Landlord or Landlord's contractors, subcontractors or suppliers due to strikes
or other labor troubles; delays in Tenant's selection of materials, plans or
specifications; governmental restrictions and limitations; unavailability or
delays in obtaining fuel, labor or materials; war or other national emergency;
accidents; floods; defective materials; fire damage or other casualties; adverse
weather conditions; the inability to obtain building or use and occupancy
permits; or any cause similar or dissimilar to the foregoing which is beyond the
reasonable control of Landlord or Landlord's contractors, subcontractors or
suppliers. The Premises shall be deemed substantially completed when Tenant is
in receipt of a Certificate of Occupancy or Temporary Certificate of Occupancy
(punchlist items excepted). All construction shall be done in a good and
workmanlike manner and shall comply at the time of completion with all
applicable and lawful laws, ordinances, regulations and orders of the federal,
state, county or other governmental authorities having jurisdiction thereof.
Tenant and its authorized agents, employees and contractors shall have the
right, at Tenant's own risk, expense and responsibility, at all reasonable
<PAGE>
times prior to the Commencement Date as hereinafter defined, to enter the
Premises for the purpose of taking measurements and installing its furnishings
and equipment; provided that Tenant, in so doing, shall not interfere with or
delay the work to be performed hereunder by Landlord, and Tenant shall use
contractors and workmen compatible with the contractors and workmen engaged in
the work to be performed hereunder by Landlord, and Tenant shall have obtained
Landlord's written consent to installing any furnishings or equipment. If
Landlord shall fail to deliver possession of the Premises by the Commencement
Date for any reason, whether or not within Landlord's control, Landlord shall
not be subject to any liability to Tenant. No failure to deliver the Premises by
the Commencement Date or any other date shall in any respect affect the validity
or continuance of this Lease of any obligation of Tenant hereunder or extend the
Term of the Lease.
4. Term. The term of this Lease shall commence on the first to occur of
(a) Commencement Date and (b) the date on which the Premises are actually
occupied by Tenant. Following the Commencement Date, the term of this Lease,
unless sooner terminated as expressly provided in this Lease, shall continue
until the date of expiration of the term specified as the Term of Lease in the
Preamble plus the number of days which remain in the calendar month in which
such term expires (the "Term"). Upon request of Landlord, Tenant shall enter
into a memorandum agreement stipulating the actual Commencement Date of the Term
substantially in the form attached hereto as Exhibit F.
5. Use of Premises. Tenant shall occupy the Premises throughout the Term
and shall use the same for, and only for, the Permitted Use specified in the
Preamble. The Building is designed to normal building standards for
floor-loading capacity. Tenant shall not use the Premises in such ways which, in
Landlord's judgment, exceed such load limits.
6. Rent. Unless otherwise specifically requested by Landlord at any
time, Fixed Basic Rent, Additional Rent and any other rent or other sums due
under this Lease shall be paid and delivered to Landlord's on-site property
manager, if any, as agent for Landlord, in the amounts, time and manner more
particularly provided in this Lease.
a. Fixed Basic Rent. Tenant shall pay, throughout the Term, Fixed
Basic Rent in the amount specified in the Preamble, without notice or demand and
without setoff or deduction, in equal monthly installments equal to one-twelfth
of the Fixed Basic Rent (specified as Monthly Installments in the Preamble), in
advance, on the first day of each calendar month during the Term. If the
Commencement Date falls on a day other than the first day of a calendar month,
the Fixed Basic Rent shall be apportioned on a per diem basis for the period
between the Commencement Date and the first day of the first full calendar month
in the Term and such apportioned sum shall be paid on the Commencement Date.
b. Additional Rent. Tenant shall pay to Landlord, as Additional
Rent, in the manner more particularly set forth below Tenant's pro rata share of
excess annual
2
<PAGE>
operating costs for the Property as more fully set forth in subparagraph
(ii) of this paragraph (b):
i) Annual Operating Costs. The term "Annual Operating Costs"
shall mean all costs Landlord incurs from owning, operating and maintaining the
Building and the lot or tract of land on which it is situated (the "Property").
Annual Operating Costs shall include, by way of example rather than limitation:
insurance costs, including premiums; fees; Impositions (defined below); costs
for repairs, maintenance and service contracts; management fees; landscaping;
snow removal; governmental permits fees; costs of compliance with governmental
orders and regulations; administrative and overhead expenses; costs of
furnishing water, sewer, electricity, gas, fuel, and other utility services, for
use in common areas of the Building and Property; and the cost of janitorial
service and trash removal; excluding, however, from annual operating costs the
following: costs which are treated as capital expenditures (except as provided
in Section 10(b)) under generally accepted accounting principles; mortgage debt
or ground rents incurred by Landlord as owner of the Property; income, excess
profits, corporate capital stock or franchise tax imposed or assessed upon
Landlord, unless such tax or any similar tax is levied or assessed, in lieu of
all or any part of any currently existing Imposition or an increase in any
currently existing Imposition; leasing commissions, accountants', consultants'
or attorneys' fees, costs and disbursement and other expenses incurred in
connection with negotiations or disputes with tenants or prospective tenants or
associated with the enforcement of any leases or the defense of Landlord's title
to or interest in the Building in connection with any proceedings involving real
property taxes other than disputes regarding tax assessment and reduction of
real property taxes; costs of construction of the Building and related
facilities and correction of defects in construction of the Building (including
permit, license and inspection fees); costs of any items or services sold or
provided to tenants (including Tenant) for which Landlord is entitled to be
reimbursed by such tenants or which are not generally provided to all tenants of
the Building; fees and higher interest charges caused by Landlord's refinancing
the Building; all repairs to the interior of the Building of a structural nature
(not made necessary by unusual use by Tenant); costs incurred due to violation
by Landlord or any tenant of the terms and conditions of any lease; overhead and
profit increment paid to subsidiaries or affiliates of Landlord, or to any party
as a result of a noncompetitive selection process, for management or other
services on or to the Building or for supplies or other materials, to the extent
that the costs of such services, supplies or materials exceed the costs that
would have been paid had the services, supplies or materials been provided by
unaffiliated parties on a competitive basis; general overhead and administrative
expenses except salaries of on-site property manager, management secretary and
maintenance man; any compensation paid to clerks, attendants or other persons in
commercial concessions operated by Landlord, rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other equipment
ordinarily considered to be for a capital nature, except equipment which is used
in providing janitorial services and which is not affixed to the Building; all
items and services for which Tenant reimburses Landlord or pays third persons or
which Landlord provides selectively to one or more tenants or occupants of the
Building (other
3
<PAGE>
than Tenant) without reimbursement; commissions, advertising, and promotional
expenditures; costs incurred in managing or operating any parking facilities;
nor any other expense which under generally accepted accounting principles and
practice would not be considered a normal maintenance or repair expense.
"Impositions" shall mean all levies, taxes, assessments, charges, imposts, and
burdens, of whatever kind and nature, ordinary and extraordinary, which are
assessed or imposed during the Term by any federal, state or municipal
government or public authority or under any law, ordinance or regulation thereof
or pursuant to any recorded covenants or agreements upon or with respect to the
Property or any part thereof, any improvements thereto, any personal property
necessary to the operation thereof and owned by Landlord or this Lease. If under
the requirements of any state or local law, a new Imposition is imposed upon
Landlord which Tenant is prohibited by law from paying, Landlord may, as its
election, terminate this Lease by giving written notice thereof to Tenant.
ii) Excess Annual Operating Costs Reimbursement. Tenant shall
pay to Landlord as Additional Rent its Proportionate Share, as specified in the
Preamble, of the amount by which all annual operating costs exceed the sum of
four and 50/100 Dollars ($4.50) per rentable square foot (the "Base Year
Costs"). Landlord shall submit to Tenant a statement of the determination,
including Tenant's Proportionate Share of such amounts, and Tenant shall pay to
Landlord, as Additional Rent, such Proportionate Share of such excess within
fifteen (15) days after the notice. Landlord may for each year estimate the
amount of any such excess in expenses and invoice Tenant for one-twelfth thereof
to be paid monthly as Additional Rent, subject to final adjustment following the
end of the calendar year. As soon as practicable following the end of each
calendar year (including the year in which the term of this Lease ends, Landlord
shall deliver to Tenant a statement of the actual amount of Tenant's
Proportionate Share of annual operating costs for the preceding calendar year.
If the estimated installments previously paid by Tenant shall be less than
Tenant's actual Additional Rental obligation, the amount of such deficiency
shall be paid to Landlord within fifteen (15) days after receipt of Landlord's
statement, and if such estimated installments exceeded Tenant's actual
Additional Rental obligation the amount of such excess shall be credited against
the installments of Fixed Basic Rent next due. This obligation shall survive the
termination of this Lease.
c) Electricity. Tenant shall be responsible for Tenant's
Proportionate Share of all electricity consumed within the Premises. Landlord
shall bill tenant monthly for electricity consumed. Tenant shall pay Landlord
within ten (10) days of receipt of said electric bills. Non-payment or late
payment of electric bills shall be considered delinquent and treated accordingly
as provided herein. Notwithstanding the foregoing, at Landlord's option and at
Tenant's sole cost and expense, Landlord shall cause the Demised Premises to be
separately metered for electricity usage, whereupon Tenant shall pay electricity
charges directly to the utility provider.
d) Disputes. Unless Tenant, within thirty (30) days after any
statement of Additional Rent is furnished, shall give notice to Landlord that
Tenant disputes said
4
<PAGE>
statement, specifying in detail the basis for such dispute, each statement
furnished to Tenant by Landlord under any provision of this Section shall be
conclusively binding upon Tenant as to the particular Additional Rent due from
Tenant for the period represented thereby; provided, however, that additional
amounts due may be required to be paid by any supplemental statement furnished
by Landlord. Tenant shall have the right at reasonable times to examine the
records used in making the aforestated determinations, upon written notice in
advance; provided, however, such disputed amount shall have been paid by Tenant
to Landlord. In the event any such examination shall reveal an adverse variance
in excess of 10% of the total operating expenses of which Tenant is required to
pay their pro rata share, Landlord shall reimburse Tenant for the reasonable
cost of such examination within thirty (30) days after demand. Tenant shall make
all payments of Additional Rent without delay and regardless of any pending
dispute over the amount of Additional Rent that is due in accordance with the
statements furnished by Landlord. Landlord shall have the right to retain
Tenant's security deposit until all Additional Rent payable by Tenant is
determined and paid.
e) Cost of Living Adjustment. Intentionally Omitted.
5
<PAGE>
f) Independent Covenant; Survival. Tenant's covenant to pay the
Fixed Basic Rent is independent of any other covenant, agreement, term or
condition of this Lease. Without limitation of any obligation of Tenant under
this Lease which shall survive the expiration of the Term, the obligation of
Tenant to pay the Fixed Basic Rent shall survive the expiration of the Term.
7. Insurance.
a) Liability. Tenant, at Tenant's sole cost and expense, shall
maintain and keep insurance in effect throughout the Term against liability for
bodily injury (including death) and property damage in or about the Premises or
the Property under a policy of comprehensive general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than $2,000,000.00 for each person and $5,000,000.00 in
the aggregate for bodily injury (including death) to more than one (1) person
and $2,000,000.00 for property damage. The policies of comprehensive general
public liability insurance shall name Landlord and Tenant (and if requested, any
mortgagee of Landlord) as the insured parties. Each such policy shall provide
that it shall not be cancelable without at least thirty (30) days prior written
notice to Landlord and to any mortgagee named in an endorsement thereto and
shall be issued by an insurer and in a form satisfactory to Landlord. At least
ten (10) days prior to the Commencement Date, and thereafter upon Landlord's
request, a certificate of insurance shall be delivered to Landlord proving
compliance with the foregoing requirements. If Tenant shall fail, refuse or
neglect to obtain or to maintain any insurance that it is required to provide or
to furnish Landlord with satisfactory evidence of coverage on any such policy
upon demand, Landlord shall have the right to purchase such insurance. All
payments made by Landlord for such insurance shall be recoverable by Landlord
from Tenant, together with interest thereon, as Additional Rent promptly upon
demand. Notwithstanding anything contained herein to the contrary, Tenant may
self-insure all of its personal property situated within the Premises against
property damage and destruction.
b) Waiver of Subrogation. The parties to this Lease each release the
other, to the extent of the releasing party's insurance coverage, from any and
all liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees. If any policy does not permit such a release of liability and a
waiver of subrogation, and if the party to benefit therefrom requests that such
a waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation if it is available. If
an additional premium is charged for such waiver, the party benefiting therefrom
agrees to pay the amount of such additional premium promptly upon demand. In the
event a party is unable to obtain such a waiver, it shall immediately notify the
other party of its inability. In the absence of such notifications, each party
shall be deemed to have obtained such waiver of subrogation.
6
<PAGE>
c) Increase of Premiums. Tenant will not do anything or fail to do
anything or permit anything to be done which will cause the cost of Landlord's
insurance to increase or which will prevent Landlord from procuring insurance
(including but not limited to public liability insurance) from companies, and in
a form, satisfactory to Landlord. If any breach of this subsection (c) by Tenant
shall cause the rate of fire or other insurance to be increased, Tenant shall
pay the amount of such increase as Additional Rent promptly upon demand. If
Tenant does anything or fails to do anything or permits anything to be done for
which insurance cannot be obtained, Landlord may terminate this Lease upon
written notice to Tenant.
8. Repairs and Maintenance.
a) Tenant shall, throughout the Term and at Tenant's sole cost and
expense, keep and maintain the Premises in a neat and orderly condition; and,
upon expiration of the Term, Tenant shall leave the Premises in good order and
condition, ordinary wear and tear, damage by fire or other casualty (which fire
or other casualty has not occurred through the negligence of Tenant or those
claiming under Tenant or their agents, employees or invitees, respectively)
alone excepted, and for that purpose and except as stated, Tenant will make all
necessary repairs and replacements. Tenant shall not permit any waste, damage or
injury to the Premises. Tenant shall not use or permit the use of any portion of
the common areas for other than their intended use as specified by the Landlord
from time to time.
b) Landlord shall, throughout the Term, make all necessary repairs
to the Premises and other improvements located on the Property; provided,
however, that Landlord shall have no responsibility to make any repairs unless
and until Landlord receives written notice of the need for such repair. Landlord
shall keep and maintain all common areas of the Property and any sidewalks,
parking areas, curbs and access ways adjoining the Property in a clean and
orderly condition, free of accumulation of dirt and rubbish and shall keep and
maintain all landscaped areas within the Property in a neat and orderly
condition.
c) Notwithstanding the foregoing, repairs and replacements to the
Premises and the Property arising out of or caused by Tenant's use, manner of
use or occupancy of the Premises, by Tenant's installation of alterations,
additions, improvements, trade fixtures or equipment in or upon the Premises or
by any act or omission of Tenant or any employee, agent, contractor or invitee
of Tenant shall be made at Tenant's sole cost and expense and Tenant shall pay
Landlord the cost of any such repair or replacement, as Additional Rent, upon
demand.
9. Utilities and Services.
a) Landlord shall furnish the Premises with electricity, heating and
air conditioning for the normal use and occupancy of the Premises as general of
fices between 8:00 a.m. and 6:00 p.m., Monday through Friday. of each week
during the Term
7
<PAGE>
(Building Holidays excepted). If Tenant shall require electricity or install
electrical equipment using current in excess of 110 volts or which will in any
way increase the amount of electricity furnished by Landlord for general office
use (including but not limited to electrical heating or refrigeration equipment
or electronic data processing machines) or if Tenant shall attempt to use the
Premises in such a manner that the services to be furnished by Landlord are
required during periods other than the business hours specified above, Tenant
will obtain prior written approval from Landlord and will pay, as Additional
Rent, for the resulting additional direct expense to Landlord, including the
expense resulting from the installation of any equipment and meters, promptly
upon receipt of an invoice from Landlord.
b) Within the common areas of the Building, Landlord shall furnish
reasonably: (i) adequate electricity, (ii) hot and cold water, (iii) lavatory
supplies, (iv) automatically operated elevator service, (v) normal and customary
cleaning services (on a five-day a week basis) after business hours, (vi) heat
and air conditioning in season, (vii) landscaping, (viii) parking lot
maintenance, (ix) common area maintenance and (x) snow removal. Tenant shall be
responsible for its proportionate share of such services in accordance with
Section 6(b) hereof. Landlord shall provide janitorial service to the Premises,
five days per week, after regular business hours, and the costs of such service
will be passed through to Tenant as set forth in Section 6.
c) Landlord shall not be liable for any damages to Tenant resulting
from the quality, quantity, failure, unavailability or disruption of any
services beyond the reasonable control of Landlord and the same shall not
constitute a termination of this Lease or an actual or constructive eviction or
entitle Tenant to an abatement of rent. Landlord shall not be responsible for
providing any services not specifically provided for in this Lease.
Notwithstanding the foregoing, in the event that (i) twenty-five percent (25%)
or more of the Premises becomes untenantable because Landlord (except due to
Tenant's negligence, gross negligence or willful misconduct) is unable or fails
to provide the services described in this Section 9 and (ii) such failure (a
"Basic Services Failure") continues for a period in excess of five (5)
consecutive days, Tenant shall receive a full abatement of Rent due under this
Lease Agreement for the Premises for such portion thereof) until such service is
restored.
8
<PAGE>
d) Tenant shall pay capital improvements which Landlord shall
install or construct for energy saving devices. Tenant's pro rata share shall be
determined based upon the estimated life of the capital investment item,
determined by Landlord in accordance with generally accepted accounting
principles, and shall include a cost of capital funds adjustment equal to twelve
percent (12%) per year on the unamortized portion of all such costs. Tenant
shall only have to pay for the portion of the useful life of the capital
improvement which falls within the Term. Tenant shall thus make payments in
equal annual installments for such capital improvements until the Term expires
or until the cost of the improvement has been fully paid for, whichever first
occurs; such payments shall be computed by Landlord at the time of installation
of the capital improvement in the same manner as Landlord makes computations of
Tenant's share of the annual operating costs pursuant to Section 6(b)(ii).
10. Governmental Regulations.
a) Landlord and Tenant shall comply with all laws, ordinances,
notices, orders, rules, regulations and requirements of all federal, state and
municipal government or any department, commission, board of of ficer thereof,
or of the National Board of Fire Underwriters or any other body exercising
similar functions, relating to the Premises or to the use or manner of use of
the Property. Tenant shall not knowingly do or commit, or suffer to be done or
committed anywhere in the Building, any act or thing contrary to any of the
laws, ordinances, regulations and requirements referred to in this Section.
Tenant shall give Landlord prompt written notice of any accident in the Premises
and of any breakage, defect or failure in any of the systems or equipment
servicing the Premises or any portion of the Premises.
b) Tenant shall pay a pro rata share of capital improvements which
Landlord shall install or construct in compliance with governmental requirements
which take effect after the commencement of the Term hereof or as energy saving
devices. Tenant's pro rata share shall be determined based upon the estimated
life of the capital investment item, determined by Landlord in accordance with
generally accepted accounting principles, and shall include a cost of capital
funds adjustment equal to twelve percent (12%) per year on the unamortized
portion of all such costs. Tenant shall only have to pay for the portion of the
useful life of the capital improvement which falls within the Term. Tenant shall
thus make payments in equal annual installments for such capital improvements
until the Term expires or until the cost of the improvement has been fully paid
for, whichever first occurs; such payments shall be computed by Landlord at the
time of installation of the capital improvement in the same manner as Landlord
makes computations of Tenant's share of the annual operating costs pursuant to
Section 6(b)(ii).
c) Tenant shall pay all taxes imposed upon Tenant's furnishings,
trade fixtures, equipment or other personal property.
11. Signs. Landlord will place Tenant's name and suite number on the
building standard sign in the main lobby of the Building and adjacent to the
entrance to the
9
<PAGE>
Premises. Except for signs which are located wholly within the interior of the
Premises and which are not visible from the exterior of the Premises, Tenant
shall not place, erect, maintain or paint any signs upon the Premises or the
Property.
12. Alterations, Additions and Fixtures.
a) Tenant shall have the right to install in the Premises any trade
fixtures; provided, however, that no such installation and no removal thereof
shall be permitted which affects any structural component of the Building or
Premises and that Tenant shall repair and restore any damage or injury to the
Premises or the Property caused by installation or removal.
b) Tenant shall not make or permit to be made any alterations,
improvements or additions to the Premises or Property without on each occasion
first presenting plans and specifications to Landlord and obtaining Landlord's
prior written consent, which shall not be unreasonably withheld or delayed, but
may be conditioned upon compliance with reasonable requirements of Landlord
including, without limitation, the filing of mechanics' lien waivers by Tenant's
contractors and the submission of written evidence of adequate insurance
coverage naming Landlord as an additional insured thereunder. If Landlord
consents to any proposed alterations, improvements or additions or Tenant's
contractor performs any of the work identified in Section 3 of this Lease
Agreement, then Tenant shall make the proposed alterations, improvements and
additions at Tenant's sole cost and expense provided that: (i) Tenant supplies
any necessary permits; (ii) such alterations and improvements do not, in
Landlord's judgment, impair the structural strength of the Building or any other
improvements or reduce the value of the Property; (iii) Tenant takes or causes
to be taken all steps that are otherwise required by Section 13 of this Lease
and that are required or permitted by law in order to avoid the imposition of
any mechanic's, laborer's or materialman's lien upon the Premises or the
Property; (iv) Tenant uses a contractor approved by Landlord; (v) the occupants
of the Building and of any adjoining real estate owned by Landlord are not
annoyed or disturbed by such work; (vi) the alterations, improvements or
additions shall be installed in accordance with the approved plans and
specifications and completed according to a construction schedule approved by
Landlord; and (vii) Tenant provides insurance of the types and coverage amounts
required by Landlord. Any and all alterations, improvements and additions to the
Premises which are constructed, installed or otherwise made by Tenant shall be
the property of Tenant until the expiration or sooner termination of this Lease;
at that time all such alterations and additions shall remain on the Premises and
become the property of Landlord without payment by Landlord unless, upon the
termination of this Lease, Landlord instructs Tenant in writing to remove the
same in which event Tenant will remove such alterations, improvements and
additions, and repair and restore any damage to the Property caused by the
installation or removal. Notwithstanding the foregoing, if such Alterations to
the interior of the Premises are normal for of fice use, then (i) Landlord's
prior written consent shall not be required if the total cost of such work is
less than $5,000.00, and (ii) Landlord's prior written consent shall not be
unreasonably withheld if the total cost of such work is equal to or greater
10
<PAGE>
than $5,000.00. Notwithstanding anything to the contrary contained in this
Lease, Landlord may withhold its approval to any proposed alterations, additions
or improvements to the Premises in its absolute and sole discretion with respect
to any such alteration, addition or improvement which Landlord determines
involves any modification to the Building's exterior or its structural,
electrical, mechanical or plumbing systems, or any components thereof.
13. Mechanic's Liens. Tenant shall promptly pay any contractors and
materialman who supply labor, work or materials to Tenant at the Premises or the
Property so as to minimize the possibility of a lien attaching to the Premises
or the Property. Tenant shall take all steps permitted by law in order to avoid
the imposition of any mechanic's, laborer's or materialman's lien upon the
Premises or the Property. Should any such lien or notice of lien be filed for
work performed for Tenant other than by Landlord, Tenant shall cause such lien
or notice of lien to be discharged of record by payment, deposit, bond or
otherwise within fifteen (15) days after the filing thereof or after Tenant's
receipt of notice thereof, whichever is earlier, regardless of the validity of
such lien or claim. If Tenant shall fail to cause such lien or claim to be
discharged and removed from record within such fifteen (15) day period, then,
without obligation to investigate the validity thereof and in addition to any
other right or remedy Landlord may have, Landlord may, but shall not be
obligated to, contest the lien or claim or discharge it by payment, deposit,
bond or otherwise; and Landlord shall be entitled to compel the prosecution of
an action for the foreclosure of such lien by the lienor and to pay the amount
of the judgment in favor of the lienor with interest and costs. Any amounts so
paid by Landlord and all costs and expenses including, without limitation,
attorneys' fees incurred by Landlord in connection therewith, together with
interest at a rate of six percent (6%) per annum from the respective dates of
Landlord's making such payment or incurring such cost or expense, which shall
constitute Additional Rent payable hereunder promptly upon demand therefor.
Nothing in this Lease is intended to authorize Tenant to do or cause any work or
labor to be done or any materials to be supplied for the account of Landlord,
all of the same to be solely for Tenant's account and at Tenant's risk and
expense. Further, notwithstanding anything to the contrary contained in this
Lease, nothing contained in or contemplated by this Lease shall be deemed or
construed in any way to constitute the consent or request by Landlord for the
performance of any work or services or the furnishing of any materials for which
any lien could be filed against the Premises or the Building or the Property or
any part of any thereof, nor as giving Tenant any right, power or authority to
contract or permit the performance of any work or services or the furnishing of
any materials for which any lien could be filed against the Premises, the
Building, the Property or any part of any thereof. Throughout this Lease the
term "mechanic's lien" is used to include any lien, encumbrance or charge levied
or imposed upon the Premises or the Property or any interest therein or income
therefrom on account of any mechanic's, laborer's or materialman's lien or
arising out of any debt or liability to or any claim or demand of any
contractor, mechanic, supplier, materialman or laborer and shall include without
limitation any mechanic's notice of intention given to Landlord or Tenant, any
stop order given to Landlord or Tenant, any notice of refusal to
11
<PAGE>
pay naming Landlord or Tenant and any injunctive or equitable action brought by
any person entitled to any mechanic's lien.
14. Landlord's Right of Entry.
a) Tenant shall permit Landlord and the authorized representatives
of Landlord and of any mortgagee or any prospective mortgagee to enter the
Premises at all reasonable times, with prior notice to Tenant, for the purpose
of (i) inspecting the Premises or (ii) making any necessary repairs to the
Premises or to the Building and performing any work therein. During the progress
of any work on the Premises or the Building, Landlord will attempt not to
inconvenience Tenant, but shall not be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Tenant by reason of making any
repair or by bringing or storing materials, supplies, tools and equipment in the
Premises during the performance of any work, and the obligations of Tenant under
this Lease shall not be thereby affected in any manner whatsoever.
b) Landlord shall have the right at all reasonable times to, with
prior notice to Tenant, enter and to exhibit the Premises for the purpose of
inspection or showing the Premises in connection with a sale or mortgage and,
during the last nine (9) months of the Term, to enter upon and to exhibit the
Premises to any prospective tenant.
15. Damage by Fire or Other Casualty.
a) If the Premises or Building is damaged or destroyed by fire or
other casualty, Tenant shall promptly notify Landlord whereupon Landlord shall,
subject to the consent of Landlord's present or future mortgagee and to the
conditions set forth in this Section 15, repair, rebuild or replace such damage
and restore the Premises to substantially the same condition as the Premises
were in immediately prior to such damage or destruction; provided, however, that
Landlord shall only be obligated to restore such damage or destruction to the
extent of the proceeds of fire and other extended coverage insurance policies.
Notwithstanding the foregoing, if the Premises is destroyed or damaged to the
extent that in Landlord's or Tenant's sole judgment the Premises cannot be
repaired or restored within one hundred eighty (180) days after such casualty,
Landlord or Tenant may, subject to the rights of Landlord's mortgagee, terminate
this Lease by written notice to the other party within ninety (90) days after of
the date of such casualty
b) The repair, rebuilding or replacement work shall be commenced
promptly and completed with due diligence, taking into account the time required
by Landlord to effect a settlement with, and procure insurance proceeds from,
the insurer, and for delays beyond Landlord's reasonable control.
c) The net amount of any insurance proceeds recovered by reason of
the damage or destruction of the Building (meaning the gross insurance proceeds
excluding proceeds received pursuant to a rental coverage endorsement and the
cost of adjusting the
12
<PAGE>
insurance claim and collecting the insurance proceeds) shall be applied towards
the cost of restoration. Notwithstanding anything to the contrary in this Lease
Agreement, if in Landlord's sole opinion the net insurance proceeds will not be
adequate to complete such restoration, Landlord shall have the right to
terminate this Lease and all the unaccrued obligations of the parties hereto by
sending a written notice of such termination to Tenant specifying a termination
date no less then ten (10) days after its transmission; provided, however, that
Tenant may require Landlord, except during the last two (2) years of the Term,
to withdraw the notice of termination by agreeing to pay the cost of restoration
in excess of the net insurance proceeds and by giving Landlord adequate security
for such payment prior to the termination date specified in Landlord's notice of
termination. If the net insurance proceeds are more than adequate, the amount by
which the net insurance proceeds exceed the cost of restoration will be retained
by Landlord or applied to repayment of any mortgage secured by the Premises.
d) Landlord's obligation or election to restore the Premises under
this Section shall be subject to the terms of any present or future mortgage
affecting the Premises and to the mortgagee's consent if required in the
mortgage and shall not, in any event, include the repair, restoration or
replacement of the fixtures, improvements, alterations, furniture or any other
property owned, installed, made by, or in the possession of Tenant.
e) Landlord shall maintain insurance against loss or damage to the
Building by fire and such other casualties as may be included within fire and
extended coverage insurance or all-risk insurance, together with a rental
coverage endorsement or other comparable form of coverage. If Tenant is
dispossessed of the Premises due to fire or other casualty, Tenant will receive
an abatement of its Fixed Basic Rent during the period Tenant is dispossessed to
the extent of payments received by Landlord from the carrier providing the
rental coverage endorsement.
16. Non-Abatement of Rent. Except as otherwise expressly provided in
subsection 15(e) and as to condemnation in subsections 18(a) and (b) there
shall be no abatement or reduction of the Fixed Basic Rent, Additional Rent or
other sums payable hereunder for any cause whatsoever and this Lease shall not
terminate, nor shall Tenant be entitled to surrender the Premises, in the event
of fire, casualty or condemnation or any default by Landlord under this Lease.
13
<PAGE>
17. Indemnification
a) Unless such loss, costs or damages were caused by negligence of
Landlord, its employees, agents or contractors, Tenant hereby agrees to
indemnify, defend and hold the Landlord and its employees, agents and
contractors harmless from any loss, costs and damages (including reasonable
attorney's fees and costs) suffered by Landlord, its agents, employees or
contractors, as a result of any claim by a third party, its agents, employees or
contractors. Tenant shall have the right to designate counsel acceptable to
Landlord, such approval not be unreasonably withheld, to assume the defense of
any such third party claim on behalf of itself and Landlord. Landlord shall not
have the right to settle any claim without the consent of Landlord. This
indemnity shall survive the expiration of termination of this Lease.
b) If Landlord brings any action under this Lease Agreement, Tenant
agrees in each case to pay Landlord's reasonable attorney's fees and other costs
and expenses incurred by Landlord in connection therewith; provided, however,
the Landlord prevails in such action.
18. Condemnation.
a) Termination. If (i) all of the Premises are covered by a
condemnation; or (ii) any of the Premises is covered by a condemnation and the
remaining part is insufficient for the reasonable operation therein of Tenant's
business; or (iii) subject to the provisions of subsection 18(b)(i) hereof, any
of the Property is covered by a condemnation and, in Landlord's sole opinion, it
would be impractical or the condemnation proceeds are insufficient to restore
the remainder of the Property; then, in any such event, this Lease shall
terminate and all obligations hereunder shall cease as of the date upon which
possession is taken by the condemnor. Upon such termination the Fixed Basic Rent
and all Additional Rent herein reserved shall be apportioned and paid in full by
Tenant to Landlord to that date and all such rent prepaid for periods beyond
that date shall forthwith be repaid by Landlord to Tenant.
b) Partial Condemnation.
i) If there is a partial condemnation and Landlord decides to
terminate pursuant to subsection 18(a)(iii) hereof then Tenant may require
Landlord, except during the last two (2) years of the Term, to withdraw its
notice of termination by: [A] giving Landlord written notice thereof within ten
(10) days from transmission of Landlord's notice to Tenant of Landlord's
intention to terminate, [B] agreeing to pay the cost of restoration in excess of
the condemnation proceeds reduced by those sums expended by Landlord in
collecting the condemnation proceeds, and [C] giving Landlord adequate security
for such payment within such ten (10) day period.
14
<PAGE>
ii) If there is a partial condemnation and this Lease has not
been terminated pursuant to subsection (a) hereof, Landlord shall restore the
Building and the improvements which are part of the Premises to a condition and
size as nearly comparable as reasonably possible to the condition and size
thereof immediately prior to the date upon which possession shall have been
taken by the condemnor; provided, however, that Landlord shall only be obligated
to restore such damage from condemnation to the extent possible with the award
damage. If the condemnation proceeds are more than adequate to cover the cost of
restoration and the Landlord's expenses in collecting the condemnation proceeds,
any excess proceeds shall be retained by Landlord or applied to repayment of any
mortgage secured by the Premises.
iii) If there is a partial condemnation and this Lease has not
been terminated by the date upon which the condemnor obtains possession, the
obligations of Landlord and Tenant under this Lease shall be unaffected by such
condemnation except that there shall be an equitable abatement for the balance
of the Term of the Fixed Basic Rent according to the value of the Premises
before and after the date upon which the condemnor takes possession. In the
event that the parties are unable to agree upon the amount of such abatement,
either party may submit the issue to arbitration.
c) Award. In the event of a condemnation affecting Tenant, Tenant
shall have the right to make a claim against the condemnor for removal expenses
and moving expenses, loss of business and any other claims Tenant may have;
provided and to the extent, however, that such claims or payments do not reduce
the sums otherwise payable by the condemnor to Landlord. Except as aforesaid,
Tenant hereby waives all claims against Landlord and against the condemnor, and
Tenant hereby assigns to Landlord all claims against the condemnor including,
without limitation, all claims for leasehold damages and diminution in value of
Tenant's leasehold interest.
d) Temporary Taking. If the condemnor should take only the right to
possession for a fixed period of time or for the duration of an emergency or
other temporary condition then, notwithstanding anything hereinabove provided,
this Lease shall continue in full force and effect without any abatement of
rent, but the amounts payable by the condemnor with respect to any period of
time prior to the expiration or sooner termination of this Lease shall be paid
by the condemnor to Landlord and the condemnor shall be considered a subtenant
of Tenant. Landlord shall apply the amount received from the condemnor
applicable to the rent due hereunder, net of costs, to Landlord for the
collection thereof, or as much thereof as may be necessary for the purpose,
toward the amount due from Tenant as rent for that period; and, Tenant shall pay
to Landlord any deficiency between the amount thus paid by the condemnor and the
amount of the rent, or Landlord shall pay to Tenant any excess of the amount of
the award over the amount of the rent.
19. Quiet Enjoyment. Tenant, upon paying the Fixed Basic Rent,
Additional Rent and other charges herein required and observing and keeping all
covenants, agreements and conditions of this Lease, shall quietly have and enjoy
the Premises during
15
<PAGE>
the Term without hindrance or molestation by anyone claiming by or through
Landlord, subject, however, to the exceptions, reservations and conditions of
this Lease.
20. Rules and Regulations. The Landlord hereby reserves the right to
prescribe, from time to time, at its sole discretion, reasonable rules and
regulations (herein called the "Rules and Regulations") attached hereto as
Exhibit B having uniform applicability to all or substantially all tenants of
the Building and governing the use and enjoyment of the Premises and the
remainder of the Property. The Rules and Regulations shall not materially
interfere with the Tenant's use and enjoyment of the Premises in accordance with
the provisions of this Lease for the Permitted Use and shall not increase or
modify Tenant's obligations under this Lease. In the event of a conflict between
the Lease Agreement and such rules and regulations, the Lease Agreement shall
control. The Tenant shall comply at all times with the Rules and Regulations and
shall cause its agents, employees, invitees, visitors, and guests to do so.
21. Assignment and Sublease. Tenant may assign or sublease the within
Lease to any party subject to the following:
a) In the event Tenant desires to assign this Lease or sublease all
or part of the Premises to any other party, Tenant shall provide written notice
of the terms and conditions of such assignment or sublease to Landlord prior to
the effective date of any such sublease or assignment, and, prior to such
effective date, the Landlord shall have the option, exercisable by written
notice to Tenant, to: (i) sublease such space from Tenant at the lower rate of
(a) the rental rate per rentable square foot of Fixed Basic Rent and Additional
Rent then payable pursuant to this Lease or (b) the terms set forth in the
proposed sublease, (ii) recapture (in the case of subletting) that portion of
the Premises to be sublet or all of the Premises (in the case of an assignment)
("Recapture Space") so that such prospective subtenant or assignee shall then
become the sole Tenant of Landlord hereunder, or (iii) recapture the Recapture
Space for Landlord's own use, whereupon Tenant shall be fully released from any
and all obligations hereunder with respect to the Recapture Space.
b) In the event that the Landlord elects not to recapture the Lease
as hereinabove provided, the Tenant may nevertheless assign this Lease or sublet
the whole or any portion of the Premises, subject to the Landlord's prior
written consent, which consent shall not be unreasonably withheld, on the basis
of the following terms and conditions:
i) The Tenant shall provide to the Landlord the name and address
of the assignee or subtenant.
ii) The assignee or subtenant shall assume, by written
instrument, all of the obligations of this Lease, and a copy of such assumption
agreement shall be furnished to the Landlord within ten (10) days of its
execution. Any sublease shall expressly acknowledge that said subtenant's rights
against Landlord shall be no greater than those of Tenant.
16
<PAGE>
iii) The Tenant and each assignee shall be and remain liable for
the observance of all the covenants and provisions of this Lease, including, but
not limited to, the payment of Fixed Basic Rent and Additional Rent reserved
herein, through the entire Term of this Lease, as the same may be renewed,
extended or otherwise modified.
iv) The Tenant and any assignee shall promptly pay to Landlord
any consideration received for any assignment and/or all of the rent, as and
when received, in excess of the Rent required to be paid by Tenant for the area
sublet computed on the basis of an average square foot rent for the gross square
footage Tenant has leased.
v) In any event, the acceptance by the Landlord of any rent from
the assignee or from any of the subtenants or the failure of the Landlord to
insist upon a strict performance of any of the terms, conditions and covenants
herein shall not release the Tenant herein, nor any assignee assuming this
Lease, from any and all of the obligations herein during and for the entire Term
of this Lease.
vi) Landlord shall require a Five Hundred Dollars ($500.00)
payment to cover its handling charges for each request for consent to any sublet
or assignment prior to its consideration of the same. Tenant acknowledges that
its sole remedy with respect to any assertion that Landlord's failure to consent
to any sublet or assignment is unreasonable shall be the remedy of specific
performance and Tenant shall have no other claim or cause of action against
Landlord as a result of Landlord's actions in refusing to consent thereto.
c) If Tenant is a corporation other than a corporation whose stock
is listed and traded on a nationally recognized stock exchange, the provisions
of subsection a hereof shall apply to a transfer (however accomplished, whether
in a single transaction or in a series of related or unrelated transactions) of
stock (or any other mechanism such as, by way of example, the issuance of
additional stock, a stock voting agreement or change in class(es) of stock)
which results in a change of control of Tenant as if such transfer of stock (or
other mechanism) which results in a change of control of Tenant were an
assignment of this Lease, and if Tenant is a partnership or joint venture, said
provisions shall apply with respect to a transfer (by one or more transfers) of
an interest in the distributions of profits and losses of such partnership or
joint venture (or other mechanism, such as, by way of example, the creation of
additional general partnership or limited partnership interests) which results
in a change of control of such a partnership or joint venture, as if such
transfer of an interest in the distributions of profits and losses of such
partnership or joint venture which results in a change of control of such
partnership or joint venture were an assignment of this Lease; but said
provisions shall not apply to transactions with a corporation into or with which
Tenant is merged or consolidated or to which all or substantially all of
Tenant's assets are transferred or to any corporation which controls or is
controlled by Tenant or is under common control with Tenant, provided that in
the event of such merger, consolidation or transfer of all or substantially all
of Tenant's assets (i) the successor to Tenant has a net worth computed in
accordance with generally accepted accounting principles at least equal to the
greater of (1) the net worth of Tenant immediately prior to
17
<PAGE>
such merger, consolidation or transfer, or (2) the net worth of Tenant herein
named on the date of this Lease, and (ii) proof satisfactory to Landlord of such
net worth shall have been delivered to Landlord at least 10 days prior to the
effective date of any such transaction.
d) In the event that any or all of Tenant's interest in the Premises
and/or this Lease is transferred by operation of law to any trustee, receiver,
or other representative or agent of Tenant, or to Tenant as a debtor in
possession, and subsequently any or all of Tenant's interest in the Premises
and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver, or other representative or agent of Tenant as to its estate or
property (such person, firm or entity being hereinafter referred to as the
"Grantor", for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than Landlord (each such transaction being hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase, take, or otherwise acquire, the same upon
the same terms and conditions as the Grantor thereof shall accept upon such
Disposition to such other person, firm, or entity; and as to each such
Disposition the Grantor shall give written notice to Landlord in reasonable
detail of all of the terms and conditions of such Disposition within twenty (20)
days next following its determination to accept the same but prior to accepting
the same, and Grantor shall not make the Disposition until and unless Landlord
has failed or refused to accept such right of first refusal as to the
Disposition, as set forth herein. Landlord shall have sixty (60) days next
following its receipt of the written notice as to such Disposition in which to
exercise the option to acquire Tenant's interest by such Disposition, and the
exercise of the option by Landlord shall be effected by notice to that effect
sent to the Grantor; but nothing herein shall require Landlord to accept a
particular Disposition or any Disposition, nor does the rejection of any one
such offer of first refusal constitute a waiver or release of the obligation of
the Grantor to submit other offers hereunder to Landlord. In the event Landlord
accept such offer of first refusal, the transaction shall be consummated
pursuant to the terms and conditions of the Disposition described in the notice
to Landlord. In the event Landlord rejects such offer of first refusal, Grantor
may consummate the Disposition with such other person, firm, or entity; but any
decrease in price of more than two percent (2%) of the price sought from
Landlord or any change in the terms of payment for such Disposition shall
constitute a new transaction requiring a further option of first refusal to be
given to Landlord hereunder.
e) Without limiting any of the provisions of Articles 12 and 13, if
pursuant to the Federal Bankruptcy Code (herein referred to as the "Code"), or
any similar law hereafter enacted having the same general purpose, Tenant is
permitted to assign this Lease notwithstanding the restrictions contained in
this Lease, adequate assurance of future performance by an assignee expressly
permitted under such Code shall be deemed to mean the deposit of cash security
in an amount equal to the sum of one year's Fixed Basic Rent plus an amount
equal to the Additional Rent for the calendar year preceding the year in which
such assignment is intended to become effective, which deposit shall be held by
Landlord for the balance of the Term, without interest, as security for the full
performance of all of Tenant's obligations under this Lease, to be held and
applied in the manner specified for any security deposit required hereunder.
18
<PAGE>
f) Except as specifically set forth above, no portion of the
Premises or of Tenant's interest in this Lease may be acquired by any other
person or entity, whether by assignment, mortgage, sublease, transfer, operation
of law or act of the Tenant, nor shall Tenant pledge its interest in this Lease
or in any security deposit required hereunder.
22. Tenant's Expansion/Relocation. The Landlord, in its sole discretion,
shall have the right from time to time to change the location of the Premises to
other space (the "Substituted Leased Premises") within the Building, subject to
the terms and conditions set forth below.
a) The Substituted Leased Premises shall contain a minimum floor
area of approximately the same number of square feet as are contained in the
Premises; and the square footage of any Common Facilities attributable to the
Substituted Leased Premises shall be approximately the same as that of the
Common Facilities attributable to the Premises.
b) If the total square footage comprised by the Substituted Leased
Premises and its attributable Common Facilities exceed the total of the Premises
and its attributable Common Facilities, the Tenant shall not be required to pay
any increase in the Fixed Basic Rent and Tenant's Percentage shall not be
increased. If, however, such total square footage shall be less, Tenant's Fixed
Basic Rent and Tenant's Percentage shall be decreased proportionately.
c) The Landlord shall give the Tenant not less than forty-five (45)
days prior notice of Landlord's decision to relocate the Tenant; and the Tenant
agrees that no later than forty-five (45) days from the date of its receipt of
such notice it shall relocate to the Substituted Leased Premises.
d) The Landlord shall bear and pay for the cost and expense of any
such relocation; provided, however, that the Tenant shall not be entitled to any
compensation for damages for any interference with or interruption of its
business during or resulting from such relocation. The Landlord shall make
reasonable efforts to minimize such interference. Tenant shall cooperate with
Landlord so as to facilitate the prompt completion by Landlord of its
obligations under this Section. Without limiting the generality of the
foregoing, Tenant agrees to provide to Landlord promptly such approvals,
instructions, plans, specifications or other information as may be reasonably
requested by Landlord.
e) In connection with any such relocation, the Landlord shall, at
its own cost and expense, furnish and install in (or, if practicable, relocate
to) the Substituted Leased Premises all walls, partitions, floors, floor
coverings, ceilings, fixtures, wiring and plumbing, if any, (as distinguished
from trade fixtures, equipment, furniture, furnishings and other personal
property belonging to Tenant) required for the Tenant's proper use and occupancy
thereof, all of which items shall be comparable in quality to those situated in
the Premises.
19
<PAGE>
f) The payments of new Fixed Basic Rent shall commence on the
earlier of ten (10) days after Landlord has completed the physical relocation
and installation of permanent improvements in the Substituted Leased Premises or
the date that Tenant first opens for business in the Substituted Leased
Premises.
g) Landlord and Tenant shall promptly execute an amendment to this
Lease reciting the relocation of the Premises and any changes in the Fixed Basic
Rent payable hereunder.
23. Subordination. This Lease and Tenant's rights hereunder shall be
subject and subordinate at all times in lien and priority to any first mortgage
or other primary encumbrance now or hereafter placed upon or affecting the
Property or the Premises, and to any second mortgage or encumbrance with the
consent of the first mortgagee, and to all renewals, modifications,
consolidations and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant. Tenant shall execute and deliver upon
demand any further instrument or instruments confirming the subordination of
this Lease to the lien of any such first mortgage or to the lien of any other
mortgage, if requested to do so by Landlord with the consent of the first
mortgagee, and any further instrument or instruments of attornment that may be
desired by any such mortgagee or Landlord, provided, however, that any holder of
such lien or mortgage agrees not to disturb the use and occupancy of the
Premises in accordance with the terms of this Lease Agreement upon any
foreclosure. Notwithstanding the foregoing, any mortgagee may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by giving
notice in writing to Tenant and thereupon this Lease shall be deemed prior to
such mortgage without regard to their respective dates of execution and
delivery. In that event such mortgagee shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution and
delivery of the mortgage and had been assigned to such mortgagee. Landlord
agrees that it will use best efforts to obtain and deliver to Tenant then
holder(s) of any mortgage or other security interest affecting the Premises of
Building. In the event Landlord fails to deliver such instrument, Tenant shall
have the right to terminate this Lease Agreement by delivery of written notice
thereof to Landlord.
24. Tenant's Certificate. Tenant shall, at any time and from time to
time, within fifteen (15) days after Landlord's written request, execute,
acknowledge and deliver to Landlord a written instrument in recordable form
certifying: (a) that this Lease is unmodified and in full force and effect (or,
if modified, stating the modifications); (b) that the improvements required by
Section 3 have been completed; (c) that Tenant has accepted possession of the
Premises; (d) the date on which the Term commenced and the dates to which Fixed
Basic Rent, Additional Rent and other charges have been paid; (e) that, to the
best knowledge of the signer of such instrument, Landlord is not in default of
this Lease (or, if in default, stating the nature of the default); (f) any other
fact or condition reasonably requested by Landlord or required by any mortgagee
or prospective mortgagee or purchaser of the Premises, the Property or any
interest therein; and (g) that it is understood that such instrument may be
relied upon by any mortgagee or prospective
20
<PAGE>
mortgage or purchaser of the Premises or any interest therein or by any assignee
of Landlord's interest in this Lease or by any assignee of any mortgagee. The
foregoing instrument shall be addressed to Landlord and to any mortgagee,
prospective mortgagee, purchaser or other party specified by Landlord.
25. Curing Tenant's Defaults. If Tenant defaults in the performance of
any of its obligations hereunder, Landlord may, without any obligation to do so
and in addition to any other rights it may have in law or equity, elect to cure
such default on behalf of Tenant after written notice (except in the case of
emergency) to Tenant. Tenant shall reimburse Landlord upon demand for any sums
paid or costs incurred by Landlord in curing such default, including interest
thereon from the respective dates of Landlord's making the payments and
incurring such costs, which sums and costs together with interest thereon shall
be deemed Additional Rent payable within ten (10) days of demand.
26. Surrender.
a) Subject to the terms of subsections 12(b) and 15(c), at the
expiration or earlier termination of the Term Tenant shall promptly yield up the
Premises and all improvements, alterations and additions thereto, and all
fixtures and equipment servicing the Premises in a condition which is clean of
garbage and debris and broom clean and in the same condition, order and repair
in which they are required to be kept throughout the Term, ordinary wear and
tear excepted.
b) If Tenant, or any person claiming through Tenant, continues to
occupy the Premises after the expiration or earlier termination of the Term or
any renewal thereof without prior written consent of Landlord, the tenancy under
this Lease shall become, at the option of Landlord, expressed in a written
notice to Tenant and not otherwise, either from month-to-month or for a period
of one (1) year, terminable by Landlord on thirty (30) days prior notice, under
the same terms and conditions set forth in this Lease; except, however, that the
Fixed Basic Rent during such continued occupancy shall be 200% of the amount set
forth in subsection 6(a) and Tenant shall indemnify Landlord for any loss or
damage incurred by reason of Tenant's failure to surrender the Premises.
Anything to the contrary notwithstanding, any holding over by Tenant without
Landlord's prior written consent shall constitute a default hereunder and shall
be subject to all the remedies set forth in subsection 27(b) hereof.
27. Defaults-Remedies.
a) Defaults. It shall be an event of default under this Lease if any
one or more of the following events occurs:
i) Tenant fails to pay in full, when due and without demand, any
and all installments of Fixed Basic Rent or Additional Rent or any other charges
or payments due and payable under this Lease whether or not herein included as
rent.
21
<PAGE>
ii) Tenant violates or fails to perform or otherwise breaches
any agreement, term, covenant or condition contained in this Lease.
iii) Tenant abandons or vacates the Premises without notice
without having first paid to Landlord in full all Fixed Basic Rent, Additional
Rent and other charges that have become due as well as all which will become due
thereafter through the end of the Term.
iv) Tenant becomes insolvent or bankrupt in any sense or makes
an assignment for the benefit of creditors or if a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or state
law is filed by or against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver or similar of ficial for any of Tenant's assets is
commenced, or if any of the real or personal property of Tenant shall be levied
upon by any sheriff, marshal or constable; provided, however, that any
proceeding brought by anyone other than the parties to this Lease under any
bankruptcy, reorganization arrangement, insolvency, readjustment, receivership
or similar law shall not constitute an event of default until such proceeding,
decree, judgment or order has continued unstayed for more than sixty (60)
consecutive days.
v) Any of the events enumerated in subsections (a)(i) through
(a) (iv) of this Section happen to any guarantor of this Lease.
b) Remedies. Upon the occurrence of an event of default under this
Lease, Landlord shall have all of the following rights:
i) Landlord may charge a late payment charge of five (5%)
percent of any amount owed to Landlord pursuant to this Lease which is not paid
within five (5) days of the due date which is set forth in the Lease or, if a
due date is not specified in this Lease, within thirty (30) days of the mailing
of a bill therefor by Landlord. If Landlord incurs a late charge in connection
with any payment which Tenant has failed to make within the times required in
this Lease, Tenant shall pay Landlord, in addition to such payment due, the full
amount of such late charge incurred by Landlord. Nothing in this Lease shall be
construed as waiving any rights of Landlord arising out of any default of
Tenant, by reason of Landlord's imposing or accepting any such late charge(s)
and/or interest; the right to collect such late charge(s) and/or interest is
separate and apart from any rights relating to remedies of Landlord after
default by Tenant including, without limitation, the rights and remedies of
Landlord provided herein.
ii) Landlord may accelerate the whole or any part of the Fixed
Basic Rent and all Additional Rent for the entire unexpired balance of the Term
of this Lease, as well as all other charges, payments, costs and expenses herein
agreed to be paid by Tenant, and any Fixed Basic Rent or other charges,
payments, costs and expenses so accelerated shall, in addition to any and all
installments of rent already due and payable
22
<PAGE>
and in arrears and any other charge or payment herein reserved, included or
agreed to be treated or collected as rent and any other charge, expense or cost
herein agreed to be paid by Tenant which may be due and payable and in arrears,
be deemed due and payable as if, by the terms and provisions of this Lease, such
accelerated rent and other charges, payments, costs and expenses were on that
date payable in advance.
iii) Landlord may re-enter the Premises and, at the option of
Landlord, remove all persons and all or any property therefrom, either by
summary dispossess proceedings or by any suitable action or proceeding at law or
by force or otherwise, without being liable for prosecution or damages therefor,
and Landlord may repossess and enjoy the Premises. Upon recovering possession of
the Premises by reason of or based upon or arising out of a default on the part
of Tenant, Landlord may, at Landlord's option, either terminate this Lease or
make such alterations and repairs as may be necessary in order to relet the
Premises and may relet the Premises or any part or parts thereof, either in
Landlord's name or otherwise, for a term or terms which may, at Landlord's
option, be less than or exceed the period which would otherwise have constituted
the balance of the Term of this Lease and at such rent or rents and upon such
other terms and conditions as in Landlord's sole discretion may seem advisable
and to such person or persons as may in Landlord's discretion seem best; upon
each such reletting all rents received by Landlord from such reletting shall be
applied as follows: first, to the payment of any costs and expenses of such
reletting, including all costs of alterations and repairs; second, to the
payment of any indebtedness other than Fixed Basic Rent, Additional Rent or
other charges due hereunder from Tenant to Landlord; third, to the payment of
Fixed Basic Rent, Additional Rent and other charges due and unpaid hereunder;
and the residue, if any, shall be held by Landlord and applied in payment of
future rent as it may become due and payable hereunder. If rentals received from
reletting during any month are less than that to be paid during that month by
Tenant, Tenant shall pay any such deficiency to Landlord. Such deficiency shall
be calculated and paid monthly. No such re-entry or taking possession of the
Premises or the making of alterations or improvements thereto or the reletting
thereof shall be construed as an election on the part of Landlord to terminate
this Lease unless written notice of termination is given to Tenant. Landlord
shall in no event be liable in any way whatsoever for failure to relet the
Premises or, in the event that the Premises or any part or parts thereof are
relet, for failure to collect the rent thereof under such reletting.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
iv) Landlord may terminate this Lease and the Term without any
right on the part of Tenant to waive the forfeiture by payment of any sum due or
by other performance of any condition, term or covenant broken. Upon such
termination, Landlord shall be entitled to recover, in addition to any and all
sums and damages for violation of Tenant's obligations hereunder in existence at
the time of such termination, damages for Tenant's default in an amount equal to
the amount of the Fixed Basic Rent and Additional Rent reserved for the balance
of the Term, as well as all other charges,
23
<PAGE>
payments, costs and expenses herein agreed to be paid by Tenant tall of which
amount shall be immediately due and payable from Tenant to Landlord upon demand
therefor.
v) WHEN THIS LEASE AND THE TERM OR ANY EXTENSION OR RENEWAL
THEREOF SHALL HAVE BEEN TERMINATED ON ACCOUNT OF ANY DEFAULT BY TENANT, OR WHEN
THE TERM HAS EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT OF RECORD
TO APPEAR AS ATTORNEY FOR TENANT AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH
OR UNDER TENANT, AND TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN
AMICABLE ACTION FOR JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS
CLAIMING BY, THROUGH OR UNDER TENANT FOR THE RECOVERY BY LANDLORD OF POSSESSION
OF THE PREMISES, FOR WHICH THIS LEASE SHALL BE A SUFFICIENT WARRANT; WHEREUPON,
IF LANDLORD SO DESIRES, AN APPROPRIATE WRIT OF POSSESSION MAY ISSUE FORTHWITH,
WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER, AND PROVIDED THAT IS FOR ANY
REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED IT SHALL BE DETERMINED AND
POSSESSION OF THE PREMISES REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL
HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS,
OR UPON THE TERMINATION OF THIS LEASE OR TENANT'S RIGHT OF POSSESSION AS
HEREINBEFORE SET FORTH, TO BRING ONE OR MORE FURTHER ACTIONS IN EJECTMENT AS
HEREINBEFORE SET FORTH TO CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION OF THE
PREMISES.
vi) WHEN TENANT SHALL BE IN DEFAULT OF ANY OF THE TERMS OF THIS
LEASE, IT SHALL BE LAWFUL FOR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR AS
ATTORNEY FOR TENANT IN AMICABLE ACTIONS FOR RENT IN ARREARS OR RENT TREATED AS
IF IN ARREARS AND FOR CHARGES, WHETHER OR NOT PAYABLE AS RENT AND TO SIGN FOR
TENANT AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR
ACTIONS IN ASSUMPSIT FOR THE RECOVERY OF ARREARS OF RENT AND RENT TREATED AS IF
IN ARREARS AND SAID CHARGES, AND IN ANY SUITS OR IN SAID AMICABLE ACTIONS TO
CONFESS JUDGMENT AGAINST TENANT FOR ALL ARREARS OF RENT AND RENT TREATED AS IF
IN ARREARS AND SAID CHARGES, AND FOR INTEREST AND COSTS, TOGETHER WITH AN
ATTORNEY'S COMMISSION OF TEN PERCENT (10%) THEREOF. SUCH AUTHORITY SHALL NOT BE
EXHAUSTED BY ANY ONE OR MORE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED
FROM TIME TO TIME AS OFTEN AS ANY RENT IN ARREARS OR RENT TREATED AS IF IN
ARREARS OR CHARGES FALL DUE AND ARE NOT PAID. SUCH POWERS MAY BE EXERCISED
DURING AS WELL AS AFTER THE EXPIRATION OR TERMINATION OF THE ORIGINAL TERM
24
<PAGE>
AND DURING AND AT ANY TIME AFTER ANY EXTENSION OR RENEWAL OF THE TERM.
c) Waiver of Jury Trial. IT IS MUTUALLY AGREED BY AND BETWEEN
LANDLORD AND TENANT THAT (A) THEY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTER-CLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OF OCCUPANCY OF THE
PREMISES OR CLAIM OF INJURY OR DAMAGE, AND (B) IN ANY ACTION AGAINST LANDLORD BY
TENANT, THE LEGAL FEES OF THE PREVAILING PARTY WILL BE PAID BY THE OTHER PARTY
TO THE ACTION.
d) Non-Waiver. No waiver by Landlord of any breach by Tenant of any
of Tenant's obligations, agreements or covenants herein shall be a waiver of any
subsequent breach or of any other obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any event of default by Tenant
be a waiver by Landlord of any rights and remedies with respect to such or any
subsequent event of default.
e) Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy provided herein or by law, but each shall be cumulative and in
addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.
28. Condition of Premises. Tenant represents that the Property and the
Premises, the zoning thereof, the street or streets, sidewalks, parking areas,
curbs and access ways adjoining them, any surface conditions thereof, and the
present uses and non-uses thereof, have been examined by Tenant and Tenant
accepts them in the condition or state in which they now are, or any of them now
is, without relying on any representation, covenant or warranty, express or
implied, in fact or in law, by Landlord and without recourse to Landlord, the
nature, condition or usability thereof or the use or uses to which the Premises
and the Property or any part thereof may be put under present zoning ordinances
or otherwise, except as to work to be performed by Landlord pursuant to Section
3 and except as to latent defects in such work. Tenant's occupancy of the
Premises shall constitute acceptance of the Work performed by Landlord pursuant
to Section 3.
25
<PAGE>
29. Hazardous Substances.
a) Landlord and Tenant shall not cause or allow the generation,
treatment, storage or disposal of Hazardous Substances on or near the Premises
or Property. "Hazardous Substances" shall mean (i) any hazardous substance as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA"), 42 U.S.C. 9601 et seq., as amended, (ii) any
hazardous waste or hazardous substance as those terms are defined in any local,
state or Federal law, regulation or ordinance not inapplicable to the Premises
and Property, or (iii) petroleum including crude oil or any fraction thereof. In
the event Landlord or Tenant uses any Hazardous Substances, Landlord or Tenant
shall dispose of such substances in accordance with all applicable Federal,
state and local laws, regulations and ordinances.
b) Landlord and Tenant agree to indemnify, defend and hold harmless
the other, its employees, agents, successors, and assigns, from and against any
and all damage, claim, liability, or loss, including reasonable attorneys' and
other fees, arising out of or in any way connected to the generation, treatment,
storage or disposal of Hazardous Substances by Landlord or Tenant, its
employees, agents, contractors, or invitees, on or near the Premises or
Property. Such duty of indemnification shall include, but not be limited to
damage, liability, or loss pursuant to all Federal, state and local
environmental laws, rules and ordinances, strict liability and common law.
c) Landlord and Tenant agree to notify each other immediately of any
disposal of Hazardous Substances in the Premises or Property, of any discovery
of Hazardous Substances in the Premises, or of any notice by a governmental
authority or private party alleging or suggesting that a disposal of Hazardous
Substances on or near the Premises or Property may have occurred. Furthermore,
Landlord and Tenant agree to provide the other with full and complete access to
any documents or information in its possession or control relevant to the
question of the generation, treatment, storage, or disposal of Hazardous
Substances on or near the Premises.
d) Landlord represents and warrants that, to the best of its
knowledge, there are no Hazardous Substances in, under or about the Building.
30. Recording. Neither this Lease nor a memorandum of this Lease shall
be recorded in any public records without the written consent of Landlord.
31. Brokers' Commission. Tenant represents and warrants to Landlord that
the Brokers (as defined in the Preamble) are the sole brokers with whom Tenant
has negotiated in bringing about this Lease and Tenant agrees to indemnify and
hold Landlord and its mortgagee(s) harmless from any and all claims of other
brokers and expenses in connection therewith arising out of or in connection
with the negotiation of or the entering into this Lease by Landlord and Tenant.
In no event shall Landlord's mortgagee(s) have any obligation to any broker
involved in this transaction. In the event that no broker was involved as
aforesaid. then Tenant represents and warrants to the Landlord that no broker
brought about this transaction, and Tenant agrees to indemnify and hold Landlord
harmless from any and all claims of any broker arising out of or in connection
with the negotiations of, or entering into of, this Lease by Tenant and
Landlord.
26
<PAGE>
32. Notices. All notices, demands, requests, consents, certificates, and
waivers required or permitted hereunder from either party to the other shall be
in writing and sent by United States certified mail, return receipt requested,
postage prepaid, or by recognized overnight courier, addressed as set forth in
the Preamble. Either party may at any time, in the manner set forth for giving
notices to the other, specify a different address to which notices to it shall
thereafter be sent.
33. Irrevocable Offer: No Option. Although Tenant's execution of this
Lease shall be deemed an offer irrevocable by Tenant, the submission of this
Lease by Landlord to Tenant for examination shall not constitute a reservation
of or option for the Premises. This Lease shall become effective only upon
execution thereof by both parties and delivery thereof to Tenant.
34. Inability to Perform. If Landlord is delayed or prevented from
performing any of its obligations under this Lease by reason of strike, labor
troubles, or any cause whatsoever beyond Landlord's control, the period of such
delay or such prevention shall be deemed added to the time herein provided for
the performance of any such obligation by Landlord.
35. Survival. Notwithstanding anything to the contrary contained in this
Lease, the expiration of the Term of this Lease, whether by lapse of time or
otherwise, shall not relieve Tenant from its obligations accruing prior to the
expiration of the Term.
36. Corporate Tenants. If Tenant is a corporation, the person(s)
executing this Lease on behalf of Tenant hereby covenant(s) and warrant(s) that:
Tenant is a duly formed corporation qualified to do business in the state in
which the Property is located; Tenant will remain qualified to do business in
said state throughout the Term; and such persons are duly authorized by such
corporation to execute and deliver this Lease on behalf of the corporation.
37. Waiver of Invalidity of Lease. Each party agrees that it will not
raise or assert as a defense to any obligation under the Lease or this or make
any claim that the Lease is invalid or unenforceable due to any failure of this
document to comply with ministerial requirements including, without limitation,
requirements for corporate seals, attestations, witnesses, notarizations or
other similar requirements and each party hereby waives the right to assert any
such defenses or make any claim of invalidity or unenforceability due to any of
the foregoing.
38. Security Deposit. As additional security for the full and prompt
performance by Tenant of the terms and covenants of this Lease, Tenant has
deposited with Landlord the Security Deposit, as set forth in the Preamble. The
Security Deposit shall not
27
<PAGE>
constitute rent for any month (unless so applied by Landlord on account of
Tenant's default hereunder). Tenant shall, upon demand, restore any portion of
the Security Deposit which may be applied by Landlord to cure any default by
Tenant hereunder. To the extent that Landlord has not applied the Security
Deposit or any portion thereof on account of a default, the Security Deposit, or
such remaining portion of the Security Deposit, shall be returned to Tenant,
without interest, promptly following the termination of this Lease.
39. Tenant Estoppel Certificate.
a) Tenant shall from time to time, within five (5) days after
Landlord's request or that of any mortgagee of Landlord, execute, acknowledge
and deliver to Landlord a written instrument in recordable form, substantially
in the form attached hereto as Exhibit E (a "Tenant Estoppel Certificate"),
certifying (i) that this Lease is in full force and effect and has not been
modified, supplemented or amended (or, if there have been modifications,
supplements or amendments, that it is in full force and effect as modified,
supplemented or amended, and stating such modifications, supplements and
amendments); (ii) the dates to which Fixed Basic Rent and Additional Rent and
any other charges arising hereunder have been paid; (iii) the amount of any
prepaid rents or credits due Tenant, if any; (iv) if applicable, that Tenant has
accepted possession and has entered into occupancy of the Premises, and
certifying the Commencement Date and the Termination Date; (v) whether or not,
to the best of the Tenant's knowledge, all conditions under the Lease to be
performed by Landlord prior thereto have been satisfied and whether or not
Landlord is then in default in the performance of any covenant, agreement or
condition contained in this Lease and specifying each, if any, unsatisfied
condition and each, if any, default of which Tenant may have knowledge; and (vi)
any other fact or condition reasonably requested. Any certification delivered
pursuant to the provisions of this Article shall be intended to be relied upon
by Landlord and any mortgagee or prospective mortgagee or purchaser of the
Property or of any interest therein.
b) The failure of Tenant to execute, acknowledge and deliver to
Landlord a written Tenant Estoppel Certificate in accordance with the provisions
of this Section 43 within said five (5) day period shall constitute an
acknowledgment by Tenant, which may be relied upon by any mortgagee or
prospective mortgagee or any purchaser of the Property or of any interest
therein, that this Lease has not been modified, supplemented or amended except
as set forth in landlord's request, and is in full force and effect (or in full
force and effect as so modified, supplemented or amended), that the Base Rent,
Additional Rent and any other charges arising hereunder have not been paid
beyond the respective due dates immediately preceding the date of such request,
that Tenant has no right of set-off or other defense to this Lease and of the
truth of such other facts and conditions as shall have been requested to be
certified, and shall constitute, as to any person entitled to rely as aforesaid,
a waiver of any defaults which may exist prior to the date of such request.
Notwithstanding the foregoing, Tenant's failure to furnish a Tenant
28
<PAGE>
Estoppel Certificate within said five (5) day period shall constitute a default
under this Lease.
40. Rights Reserved by Landlord. Landlord waives no rights, except those
that may be specifically waived herein, and explicitly retains all other rights
including, without limitation, the following rights, each of which Landlord may
exercise without notice to Tenant and without liability to Tenant for damage or
injury to property, person or business on account of the exercise thereof, and
the exercise of any such rights shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Premises and shall not give
rise to any claim for set-off or abatement of Rent or any other claim:
a) To change the name or street address of the Building.
b) To install, affix and maintain any and all signs on the exterior
and on the interior of the Building.
c) To decorate or to make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Building, or any
part thereof, and for such purposes to enter upon the Premises and during the
continuance of any of such work, to temporarily close doors, entry ways, public
space and corridors in the Building and to interrupt or temporarily suspend
services or use of facilities, all without affecting any of Tenant's obligations
hereunder, so long as the Premises are reasonably accessible and usable.
d) To furnish door keys for the entry door(s) in the Premises on the
Commencement Date and to retain at all times, and to use in appropriate
instances, keys to all doors within and into the Premises. Tenant agrees to
purchase only from Landlord additional duplicate keys as required, to change no
locks, and not to affix locks on doors without the prior written consent of the
Landlord. Upon the expiration of the Term or Tenant's right to possession,
Tenant shall return all keys to Landlord and shall disclose to Landlord the
combination of any safes, cabinets or vaults left in the Premises.
e) To designate and approve all window coverings used in the
Building.
f) To approve the weight, size and location of safes, vaults and
other heavy equipment and articles in and about the Premises and the Building so
as not to exceed the legal load per square foot designated by the structural
engineers for the Building, and to require all such items and furniture and
similar items to be moved into or out of the Building and Premises only at such
times and in such manner as Landlord shall direct in writing. Tenant shall not
install or operate machinery or any mechanical devices of a nature not directly
related to Tenant's ordinary use, as limited by the Permitted Use, of the
Premises without the prior written consent of Landlord. The movement of Tenant's
property into or out of the Building or the Premises and within the Building are
entirely at the risk and responsibility of Tenant. and Landlord reserves the
right to require
29
<PAGE>
written authorization from Tenant, in form and content satisfactory to Landlord,
before allowing any property to be moved into or out of the Building or
Premises.
g) To regulate delivery of supplies and the usage of the loading
docks, receiving areas and freight elevators.
h) To enter the Premises in accordance with Section 14, and in the
last year of the Term, to show the Premises to prospective tenants at reasonable
times and, if vacated or abandoned, to show the Premises at any time and to
prepare the Premises for re-occupancy.
i) To erect, use and maintain pipes, ducts, wiring and conduits, and
appurtenances thereto, in and through the Premises.
j) To enter the Premises at any reasonable time to inspect the
Premises and to make repairs or alterations as Landlord deems necessary, with
due diligence and minimum disturbance.
k) To grant to any person or to reserve unto itself the exclusive
right to conduct any business or render any service in the Building. If Landlord
elects to make available to tenants in the Building any services or supplies, or
arranges a master contract therefor, Tenant agrees to obtain its requirements,
if any, therefor from Landlord or under any such contract, provided that the
charges therefor are reasonable.
l) To alter the layout, design and/or use of the Building in such
manner as Landlord, in its sole discretion, deems appropriate, so long as the
character of the Building as a first class office building is maintained.
41. Miscellaneous.
a) Captions. The captions in this Lease are for convenience only and
are not a part of this Lease and do not in any way define, limit, describe or
amplify the terms and provisions of this Lease or the scope or intent thereof.
b) Entire Agreement. This Lease represents the entire agreement
between the parties hereto and there are no collateral or oral agreements or
understandings between Landlord and Tenant with respect to the Premises or the
Property. No rights, easements or licenses are acquired in the Property or any
land adjacent to the Property by Tenant by implication or otherwise except as
expressly set forth in the provisions of this Lease.
c) Modification. This Lease shall not be modified in any manner
except by an instrument in writing executed by the parties. Notwithstanding the
foregoing, Landlord shall have the right at anytime, and form time to time,
during the Term, to unilaterally amend the provisions of this Lease if Landlord
is advised by its counsel that
30
<PAGE>
all or any portion of the monies paid by Tenant to Landlord hereunder are, or
may be deemed to be, unrelated business income within the meaning of the United
States Internal Revenue Code or regulations issued thereunder; and Tenant agrees
that it will execute all documents or instruments necessary to effect such
amendment or amendments, provided that no such amendment shall result in Tenant
having to pay in the aggregate a larger sum of money on account of its occupancy
of the Premises under the terms of this Lease as so amended, and provided
further that no such amendment or amendments shall result in Tenant receiving
under this Lease less services than it is entitled to receive, nor services of a
less quality. In addition, Tenant agrees to make such changes to this Lease as
are required by any mortgagee, provided such changes do not substantially affect
Tenant's rights and obligation hereunder.
d) Interpretation. The masculine (or neuter) pronoun, singular
number, shall include the masculine, feminine and neuter genders and the
singular and plural number.
e) Exhibits. Each writing or plan referred to herein as being
attached as an Exhibit or otherwise designated herein as an Exhibit hereto is
hereby made a part hereof.
f) Captions and Headings. The captions and headings of sections,
subsections and the table of contents herein are for convenience only and are
not intended to indicate all of the subject matter in the text and they shall
not be deemed to limit, construe, affect or alter the meaning of any provisions
of this Lease and are not to be used in interpreting this Lease or for any other
purpose in the event of any controversy.
g) Interest. Wherever interest is required to be paid hereunder,
such interest shall be at the highest rate permitted under law but not in excess
of ten percent (10%).
h) Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
i) Joint and Several Liability. If two or more individuals,
corporations, partnerships or other persons (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other persons to pay the Rent and perform all other
obligations hereunder shall be deemed to be joint and several, and all notices,
payments and agreements given or made by, with or to any one of such
individuals, corporations, partnerships or other persons shall be deemed to have
been given or made by, with or to all of them. In like manner, if Tenant shall
be a partnership or other legal entity, the members of which are, by virtue of
any applicable
31
<PAGE>
law or regulation, subject to personal liability, the liability of each such
member shall be joint and several.
j) No Representations by Landlord. Landlord and Landlord's agents
have made no representations, agreements, conditions, warranties, understandings
or promises, either oral or written, other than as expressly set forth herein,
with respect to this Lease, the Premises and/or the Building.
k) Relationship of Parties. This Lease shall not create any
relationship between the parties other than that of Landlord and Tenant.
1) Choice of Law. The terms of this Lease shall be construed under
the laws of the Commonwealth of Pennsylvania, and that exclusive jurisdiction
and venue shall be in the Court of Common Pleas of the County in which the
Property is located.
43. Additional Definitions.
a) "Date of this Lease" or "date of this Lease" shall mean the date
of acceptance of this Lease by the Landlord, following execution and delivery
thereof to Landlord by Tenant and that date shall be inserted in the space
provided in the Preamble.
b) "Landlord" as used herein includes the Landlord named above as
well as its successors and assigns, each of whom shall have the same rights,
remedies, powers, authorities and privileges as he would have had he originally
signed this lease as Landlord. Any such person, whether or not named herein,
shall have no liability hereunder after ceasing to hold title to the Premises.
Neither Landlord nor any principal of Landlord nor any owner of the Building or
the Lot, whether disclosed or undisclosed, shall have any personal liability
with respect to any of the provisions of this Lease or the Premises, and if
Landlord is in breach or default with respect to Landlord's obligations under
this Lease or otherwise, Tenant shall look solely to the equity of Landlord in
the Premises for the satisfaction of Tenant's remedies.
c) "Tenant" as used herein includes the Tenant named above as well
as its heirs, successors and assigns, each of which shall be under the same
obligations, liabilities and disabilities and each of which shall have the same
rights, privileges and powers as it would have possessed had it originally
signed this Lease as Tenant. Each and every person named above as Tenant shall
be bound formally and severally by the terms, covenants and agreements contained
herein. However, no such rights, privileges or powers shall inure to the benefit
of any assignee of Tenant, immediate or remote, unless the assignment to such
assignee is permitted or has been approved in writing by Landlord. Any notice
required or permitted by the terms of this Lease may be given by or to any one
of the persons named above as Tenant, and shall have the same force and effect
as if given by or to all of them.
32
<PAGE>
d) "Mortgage" and "Mortgagee" as used herein includes any lien or
encumbrance on the Premises or the Property or on any part of or interest in or
appurtenance to any of the foregoing, including without limitation any ground
rent or ground lease if Landlord's interest is or becomes a leasehold estate.
The word "mortgagee" is used herein to include the holder of any mortgage,
including any ground Landlord if Landlord's interest is or becomes a leasehold
estate. Wherever any right is given to a mortgagee, that right may be exercised
on behalf of such mortgagee by any representative or servicing agent of such
mortgagee.
e) "Person" as used herein includes a natural person, a partnership,
a corporation, an association, and any other form of business association or
entity.
f) "Property" as used herein shall mean the Building and the lot,
tract or parcel of land on which the Building is situated.
g) "Rent" or "rent" as used herein shall mean all Fixed Basic Rent
and Additional Rent reserved under this Lease.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
Lease and for other good and valuable consideration, and intending to be legally
bound, each party hereto has caused this agreement to be duly executed under
seal.
Landlord:
Date Signed:_________________ 210 & 216 MALL BOULEVARD ASSOCIATES
LIMITED PARTNERSHIP,
a Pennsylvania limited partnership
By: 210 & 216 MALL BOULEVARD
ASSOCIATES ACQUISITION
CORPORATION,
a Pennsylvania corporation
By: /s/
---------------------------
RICHARD HEANY
President
Attest:________________________
Tenant:
- -------
Date Signed:_________________ CRW FINANCIAL, INC.
By: /s/
--------------------------------
JONATHAN P. ROBINSON
Chief Financial Officer
Attest:_____________________________
33
<PAGE>
Subsidiaries of CRW Financial, Inc.
Casino Money Centers, Inc., a Delaware corporation
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K into the Company's previously filed
Registration Statements on Form S-8 (File No. 333-10615) and on Form S-3
(File No. 333-10871).
Arthur Andersen LLP
Philadelphia, Pa.,
April 7, 1997
