-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wj/ABP6Q8y+XlMWvm/ACaDMRg10Y/KcRMb9iScfx1h+5BWNMOvztf1vULVEFZrfg mpSpFEVhXlXi4Uxx5yH4rA== 0000950115-97-000526.txt : 19970409 0000950115-97-000526.hdr.sgml : 19970409 ACCESSION NUMBER: 0000950115-97-000526 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970407 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRW FINANCIAL INC /DE CENTRAL INDEX KEY: 0000943809 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 232691986 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26014 FILM NUMBER: 97575948 BUSINESS ADDRESS: STREET 1: 443 S GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6109625100 MAIL ADDRESS: STREET 1: 443 S GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 10-K 1 ANNUAL REPORT 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 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 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 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 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 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.
Shares Voted ------------ For Against Abstain --- ------- ------- 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
6 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 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.
Period from July 18, 1992 to Year Ended December 31 December ---------------------- 31, 1992 1993 1994 1995 1996 -------- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 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) ======= =======
8
YEAR ENDED DECEMBER 31, ------------------------------------------------------- 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- (IN THOUSANDS) 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
- --------- (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
YEAR ENDED DECEMBER 31, 1996 ---------------------------------- Corporate CMC TOTAL --------- --- ----- 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) ======= ======= =======
YEAR ENDED DECEMBER 31, 1995 ---------------------------------- Corporate CMC TOTAL --------- --- ----- 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) ======= ======= =======
YEAR ENDED DECEMBER 31, 1994 ---------------------------------- Corporate CMC TOTAL --------- --- ----- 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) ======= ======= =======
10 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 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 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 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 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 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 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 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 CRW FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------ 1995 1996 ---- ---- (In Thousands -- Except Share Amounts) 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 ======== ========
The accompanying notes are an integral part of these statements. F-3 CRW FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, ----------------------- 1994 1995 1996 ---- ---- ---- (In Thousands - Except Share Amounts) 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) ======== ========
The accompanying notes are an integral part of these statements. F-4 CRW FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON ADDITIONAL TOTAL PREFERRED COMMON STOCK PAID-IN ACCUMULATED STOCKHOLDERS' (In Thousands) STOCK STOCK WARRANTS CAPITAL DEFICIT EQUITY ----- ----- -------- ------- ------- ------ 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 ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these statements. F-5 CRW FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994 1995 1996 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: (In Thousands) 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 ======== ======== ========
The accompanying notes are an integral part of these statements F-6 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 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 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 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 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 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 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 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 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 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 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 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.
Signature Title Date --------- ----- ---- /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
17 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 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 EX-3.2 2 CERTIFICATE OF AMENDMENT 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. 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 EX-4.2 3 SECURITY AGREEMENT 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 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 ------------------------- ------------------------- EX-4.3 4 AMENDMENT TO SECURITY AGREEMENT 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. 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 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 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 KAPLAN & KAPLAN, INC. By: /s/ J. Brian O'Neill ---------------------------- Attest: /s/ Jonathan P. Robinson ------------------------ EX-4.4 5 RIGHTS OF SECURITY HOLDERS 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, 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 (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 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 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 (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 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 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 EX-4.5 6 LOAN AND SECURITY AGREEMENT 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. 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- 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- 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- 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- 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- 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 ------------------------- EX-4.6 7 AMENDMENT TO LOAN AND SECURITY AGREEMENT 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"). 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- "(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- 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- 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- 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- EX-4.10 8 AMENDMENT TO TERM LOAN NOTE 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. (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 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 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. (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. 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 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, 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- 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- 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- 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- 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- 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- 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. 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. 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, 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- 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- 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- 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- 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- 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- 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- 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. 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. 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. (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. 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 EX-10.3 9 AMENDMENT TO SUBLEASE 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:__________________________________ EX-10.4 10 AGREEMENT OF LEASE AGREEMENT OF LEASE BETWEEN LEE PARK INVESTORS, L.P. AS LANDLORD AND CRW FINANCIAL AS TENANT 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 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 (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 (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 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 (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 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 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 (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 (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 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 (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 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 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 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 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 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 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 EX-10.5 11 OFFICE SPACE LEASE 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 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 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 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 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 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 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 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 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 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 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 (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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-21 12 SUBSIDIARIES Subsidiaries of CRW Financial, Inc. Casino Money Centers, Inc., a Delaware corporation EX-23 13 CONSENT OF EXPERTS 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 -----END PRIVACY-ENHANCED MESSAGE-----