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 [FEE REQUIRED]
For the fiscal year ended SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED]
For the transition period from ___________ to ____________
Commission file number 0-4028
TRANSMEDIA NETWORK INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 84-6028875
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
11900 BISCAYNE BOULEVARD, MIAMI, FLORIDA 33181
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
305-892-3300
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Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
------------------- ON WHICH REGISTERED
---------------------
None None
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $.02 PER SHARE
--------------------------------------
(Title of Class)
Indicate by (X) whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months 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 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.
[ ]
Aggregate market value of voting stock held by non-affiliates of the Registrant
as of December 8, 1995 $83,085,790.
Number of shares outstanding of Registrant's Common Stock, as of December 8,
1995: 10,118,770
DOCUMENTS INCORPORATED BY REFERENCE:
LOCATION IN FORM 10-K IN WHICH
DOCUMENT DOCUMENT IS INCORPORATED
-------- ------------------------------
Registrant's Proxy Statement Part III
relating to the 1996
Annual Meeting of Stockholders
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Transmedia Network Inc. is a Delaware company which, through its
operating subsidiaries (collectively, the "Company"), owns and markets
a charge card ("The Transmedia Card") offering twenty-five percent
(25%) savings to the Company's cardmembers on dining costs for
restaurants both within and outside the United States from which the
Company, its franchisees and its licensees have purchased food and
beverage credits. In fiscal 1995, the Company began offering to holders
of The Transmedia Card twenty-five percent (25%) savings on lodging
costs at certain hotels, resorts, golf courses and ski lifts around the
country. The Company's cardholders also have access to discount long
distance telephone services through a program the Company operates
jointly with a subsidiary of General Electric Company. The Company
derives its income principally from retaining the difference between
the amounts paid in advance by the Company to restaurants and amounts
paid by cardmembers to the Company (through their credit card
companies) for the related meals and from cardmember membership fees.
The Company also enters into contracts with companies which own hotels,
golf courses or ski lifts. In exchange for listing in the Company's
directory, the Company receives commissions when Transmedia cardholders
frequent these establishments. The Company also receives commissions
when cardholders use their Transmedia/GE Capital telephone card. The
Company derives income from franchising and licensing The Transmedia
Card and related proprietary rights and know-how, including rights to
solicit restaurants, hotels, resorts and motels and acquire food,
beverage and lodging credits, in the United States. Since 1993, the
Company has also received revenue from licensing The Transmedia Card
and related proprietary rights and know-how outside the United States.
CORPORATE STRUCTURE
The Company commenced operations in 1984 and was reincorporated as a
Delaware corporation in 1987. Currently, it has the following principal
operating subsidiaries:
/bullet/ Transmedia Service Company Inc. which is responsible for
soliciting and servicing all cardmembers in the United States
and for all domestic franchising of The Transmedia Card and
related property rights and know-how.
/bullet/ Transmedia Restaurant Company Inc. which is responsible for
obtaining and servicing restaurants and obtaining other
locations such as hotels, golf courses and ski lifts where the
Transmedia Card may be used.
/bullet/ TMNI International Incorporated which licenses the Transmedia
Card, service marks, proprietary software and know-how outside
the United States and has licensed rights to Europe, Turkey,
the countries comprising the former Union of
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<PAGE>
Soviet Socialist Republics, Australia, New Zealand and the
Asia-Pacific region to date.
DESCRIPTION OF RIGHTS TO RECEIVE AND THE TRANSMEDIA CARD
The Company's primary business is the acquisition of Rights to Receive
from participating restaurants which are then sold for cash to holders
of The Transmedia Card. "Rights to Receive" are rights to receive goods
and services, principally food and beverages, which are acquired and
purchased from participating restaurants, for an amount equal to
approximately fifty percent (50%) of the food and beverage or lodging
credits or by financing the purchase of other goods or services as well
as for having provided advertising and media placement services to the
participating establishments. Approximately ninety percent (90%) of
Rights to Receive are purchased for cash. The Company typically
purchases that amount of food and beverage credits which will be
consumed in a period of no more than six months; however, it has not
always been possible for the Company to predict with accuracy the
amount of time in which such credits will be consumed, especially when
the Company begins operating in new areas, as evidenced by the 1995
turn on Rights to Receive of 1.81 times, or 202 days.
The Transmedia Card is only issued to applicants who are determined to
be creditworthy by virtue of their having a current, valid MasterCard,
Visa, Discover or American Express credit card or who are otherwise
deemed creditworthy by Company management. The Transmedia Card is
issued to cardmembers at a cost of $50 per account; each account may
have more than one user and, accordingly, more than one cardmember. For
promotional purposes, the initial $50 fee has historically been waived,
such fees having been waived for 93% of new accounts for the year ended
September 30, 1995.
In presenting The Transmedia Card, cardmembers sign for the goods or
services rendered, as well as for the taxes and tips as they would with
any other charge card. The Company, upon obtaining the receipt
(directly or via electronic point of sale transmission) from the
appropriate establishment, gives the establishment credit against
Rights to Receive which are owned by the Company. The Company then (i)
processes the receipt through the cardmember's MasterCard, Visa,
Discover or American Express card account, which remits to the Company
the full amount of the bill, and (ii) credits to the cardmember's
MasterCard, Visa, Discover or American Express account discount,
usually twenty-five percent (25%) of the food and beverage or lodging,
golf or ski charges. Taxes and tips are not discounted and such sums
are remitted to the various establishments.
DOMESTIC FRANCHISING
In 1990, the Company commenced franchising The Transmedia Card (then
known as The Restaurant Card) and related proprietary rights and
know-how, including rights to solicit restaurants and acquire Rights to
Receive, in the United States. At September 30, 1995, the Company had
franchises in the following territories: a large part of New Jersey,
California, the Washington, D.C./Baltimore, Maryland Metropolitan area,
Dallas, Ft. Worth and Houston, Texas, the States of Virginia, North
Carolina, South Carolina,
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<PAGE>
Washington and Oregon and Atlanta, Georgia, eastern Tennessee, Reno,
Nevada and the Nevada side of Lake Tahoe. The Company has also granted
a certain third party an option to acquire a franchise for the State of
Hawaii. The Company anticipates that it will no longer continue to
offer franchises at various locations throughout the United States in
fiscal year 1996.
Each franchise sold by the Company is operated under a franchise
agreement between the franchisee and Transmedia Service Company Inc.
Each franchise agreement is for a ten-year term and is renewable for
one additional ten-year term for all locations other than the States of
California, Washington and Oregon, Reno, Nevada, and Lake Tahoe,
Nevada, which are renewable for two ten-year periods. Each agreement
provides that the Company will assist the franchisee with marketing,
advertising, training and other administrative support; relates to a
territory that contains 625 or more full-service restaurants that
accept MasterCard, Visa, Discover or American Express credit cards; and
licenses the franchisee to use the Company's trademarks in connection
with the solicitation of new cardmembers (which is not restricted to
the franchisee's territory) and the purchase of Rights to Receive from
restaurants in the territory granted to the franchisee. The franchisee
is responsible for, among other things, soliciting cardmembers and
restaurants, purchasing Rights to Receive from restaurants in its
territory, and maintaining adequate insurance. In consideration for the
grant of the franchise, the franchisee (i) paid to the Company a
franchise fee which varies based upon the number of full-service
restaurants located within the territory granted to the franchisee, and
(ii) pays the following continuing fees during the term of the
franchise agreement: (A) 7 1/2% of the total meal credits used within
the franchisee's territory; (B) 2 1/2% of the total meal credits sold
within the franchisee's territory into the Company's advertising and
development fund; (C) a processing fee of $.20 per sales transaction
from the franchisee's territory; and (D) a monthly service charge of
$1.00 per participating establishment in the franchisee's territory.
The franchisee receives a commission from the Company equal to forty
percent (40%) of the membership fees paid by all new cardmembers
solicited by the franchisee, with a minimum of $5.00 per account.
U.S. LICENSING
In November, 1995, the Company entered into a license agreement with
Sports & Leisure U.S.A., Inc. under which the latter received (1) the exclusive
right to solicit Rights to Receive from various types of resorts and other
related entities, and (2) the non-exclusive right to solicit Rights to Receive
from hotels that are not affiliated with resorts. Typically, cardmembers will
receive a 25% discount for food and lodging at these entities, excluding taxes
and tips. The territory covered by the license agreement is the continental
United States, excluding the State of Minnesota. The term of this license
agreement is ten years, with a potential renewal period of ten years. Under this
arrangement, the Company compensates Sports & Leisure U.S.A., Inc.
through a commission.
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<PAGE>
NON-U.S. LICENSING
In 1993, the Company commenced licensing The Transmedia Card and
related proprietary rights and know-how outside the United States. The
Company's non-U.S. operations are conducted by its subsidiary, TMNI
International Incorporated. In 1993, the Company granted an exclusive,
perpetual license to Transmedia Europe, Inc. to establish the Company's
business in Europe, Turkey and the countries that formerly comprised
the Union of Soviet Socialist Republics. The license is governed by a
Master License Agreement which provides that, among other things, (i)
the licensee has the right to sublicense the rights granted under the
Master License Agreement to others within the territory, provided that
each such sublicense is approved by the Company, (ii) the Company will
assist the licensee with training relating to sales, administration,
technical and operations of the business, and (iii) the licensee is
solely responsible for developing its own market, paying its own
expenses for advertising and soliciting cardmembers and participating
establishments in its territory. In consideration for the license, the
licensee (i) paid the Company a non-refundable purchase price of One
Million One Hundred Twenty-Five Thousand ($1,125,000) Dollars, (ii)
will pay to the Company two percent (2%) of the gross volume with
respect to the United Kingdom sublicense, (iii) will pay to the Company
twenty-five percent (25%) of initial sublicense fees (with a minimum of
$250,000) paid for each country licensed in the territory, (iv) will
pay to the Company twenty-five percent (25%) of royalties paid by
sublicensees to the licensee, and (v) granted to the Company a five
percent (5%) equity interest in the licenses. Melvin Chasen, the
Chairman and Chief Executive Officer of the Company, served as a
director of the licensee until March 1, 1995.
In 1994, the Company granted an exclusive perpetual license to
Transmedia Asia Pacific Inc. to establish the Company's business in
Australia, New Zealand and the Asia-Pacific region (such region
covering approximately 16 major countries and areas including, among
others, Japan, Hong Kong, Taiwan, Korea, the Philippines and India).
The licensee also took an option to purchase a franchise for the State
of Hawaii. The license granted by the Company is governed by a Master
License Agreement which provides, among other things, that (i) the
Company will assist the licensee with training relating to sales,
administration, technical and operations of the business, and (ii) the
licensee is solely responsible for developing its own market, paying
its own expenses for advertising and soliciting cardmembers and
restaurants in its territory. In consideration for the license, the
licensee paid the Company $1,250,000, and (ii) granted to the Company a
five percent (5%) equity interest in the licensee. The license also
provides for the following payments to the Company: (i) With respect to
sublicenses granted in all territories other than Australia and New
Zealand, the licensee will pay to the Company twenty-five percent (25%)
of all initial sublicense fees (in no event less than $500,000 in the
People's Republic of China and Japan, and not less than $250,000 in all
other territories), as well as twenty-five percent (25%) of all
royalties, transfer fee payments and any other monies received; and
(ii) with respect to sublicenses granted in Australia and New Zealand,
the licensee will pay to the Company two percent (2%) of gross sales
within such territories. Mr. Chasen served as a director of the Second
Licensee until March 1, 1995.
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<PAGE>
AREAS OF OPERATION
The Company's principal areas of operations, through its subsidiaries
and its domestic franchising operations, include the New York
Metropolitan area (consisting of New York City and the counties of
Nassau, Suffolk, Westchester, Rockland, Putnam and Orange in New York
State, Northern New Jersey and Connecticut); Central, Southwest and
Southeast Florida; Massachusetts; the Chicago, Illinois Metropolitan
area; Rhode Island; New Hampshire; Maine; Vermont; Philadelphia,
Pennsylvania; California; Delaware; Georgia; the Washington, D.C.
Metropolitan area; the Baltimore, Maryland Metropolitan area; North and
South Carolina; the Dallas,/Ft. Worth and Houston, Texas Metropolitan
areas; Atlanta, Georgia, eastern Tennessee; and Virginia.
PARTICIPATING RESTAURANTS AND CARDMEMBERS
As of September 30, 1995, directories published by the Company, which
are distributed to cardmembers eight times a year, listed 5,330
restaurants available to cardmembers, and The Transmedia Card was held
by an aggregate of 593,161 cardmembers, comprised of 396,139 accounts
with an average of 1.50 cardmembers per account. The following table
sets forth (i) the number of restaurants listed in directories
published by the Company and (ii) the number of cardmembers, as of the
fiscal years ended September 30, 1991 though 1995:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Restaurants 5,330 3,628 2,238 1,449 1,105
Cardmembers 593,161 395,968 197,166 112,029 62,037
</TABLE>
As the table indicates, the number of restaurants listed in directories
published by the Company has risen nearly three hundred eighty-two
hundred percent (382%) during the fiscal years ended September 30, 1991
through September 30, 1995, and the number of cardmembers has risen
nearly eight hundred fifty-six percent (856%) for the same period. In
fiscal 1995, between fifty-five and sixty percent (55-60%) of all
cardmembers renewed their memberships, and approximately ninety percent
(90%) of all restaurants listed in the directories published by the
Company whose initial amount of Rights to Receive were expended in 1995
renewed their contracts with the Company. In addition eighty percent
(80%) of all restaurants eligible for their second year of renewals in
fiscal 1995 renewed their contracts. The Company generally experiences
a sharp decline in renewals among restaurants eligible for a third year
of renewals. It has been the Company's experience, however, that the
addition of new restaurants generally offsets the drop-off in renewing
restaurants, and the Company believes that its service areas are not
close to cardmember saturation.
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<PAGE>
MARKETING
The Company markets The Transmedia Card through the use of advertising,
direct mail and through promotion with co-marketing partners such as
banks and affinity groups.
EMPLOYEES
As of December 8, 1995, the Company employed 119 persons. The Company
believes that its relationships with its employees are good.
COMPETITION
The charge card business is highly competitive and the Company competes
for both cardmembers and participating restaurants, hotels and other
applicable services. Competitors include discount programs offered by
major credit card companies, such as American Express, Visa, MasterCard
and Diners Club and other companies that offer different kinds of
discount marketing programs and numerous small companies which offer
services which may compete with the services offered or to be offered
by the Company. Certain of the Company's competitors may have
substantially greater financial resources and expend considerably
larger sums than does the Company for new product development and
marketing. Further, the Company must compete with many larger and
better established companies for the hiring and retaining of qualified
marketing personnel. The Company believes that the unique features of
its program -- that The Transmedia Card can be used by cardmembers at
participating establishments with very few restrictions, that The
Transmedia Card provides substantial savings without the need for a
cardmember to present discount coupons when paying for a meal, and that
participating establishments are provided with cash in advance of
customer charges -- contribute to the Company's competitiveness and
allow the Company to offer better value and service to its cardmembers.
ITEM 2. PROPERTIES
The Company's present executive office consists of 8,303 square feet,
located in Miami, Florida, which the Company occupies pursuant to a
lease expiring on February 28, 1997 and which provides for an annual
base rental of $148,860. The Company's Miami office also houses the
Company's cardmember service center. The Company leases two properties
in New York City. The first is for approximately 2,970 square feet
pursuant to a lease entered into on May 16, 1991. The lease, which
expires on November 30, 1996, provides for base annual rentals of
approximately $95,000. The second is for approximately 1,050 square
feet pursuant to a sublease entered into on February 22, 1993. The
sublease, which expires November 30, 1996, provides for base annual
rentals of approximately $31,500. In addition, the Company has a four
and one-half year office lease in Philadelphia, Pennsylvania for
approximately 1,641 square feet, which commenced April 1, 1994. The
lease provides for a base annual rental of approximately
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$24,500 in the first year, which will increase by approximately $800
each year thereafter. In Boston, Massachusetts, the Company has a
sixty-four month lease for approximately 1,500 square feet, which
commenced May 1, 1995. The lease provides for base annual rentals of
$29,400. The Company has an option for one three-year renewal. In
Chicago, the Company has a thirty-nine month lease for approximately
1,183 square feet, which commenced October 1, 1995. The lease provides
for an initial annual lease rental of $26,730 increasing by
approximately $600 each year thereafter. In Detroit, the Company leases
an executive office for a twelve-month period which began on May 1,
1995 at an annual fee of $6,840. In Tampa, the Company leases an
executive office for a thirteen-month period which began on June 1,
1995. The total rental for the thirteen month period is $9,795.
ITEM 3. LEGAL PROCEEDINGS
As of September 30, 1995, there were no material legal proceedings
pending involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1995, no matters were submitted
to a vote of the security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME POSITION AGE
- ---- -------- ---
Melvin Chasen Director, Chairman of the Board, 67
President and Chief Executive
Officer
James M. Callaghan Director and Vice President 56
Barry S. Kaplan Vice President 37
David L. Weinberg Vice President and Chief 50
Financial Officer
Paul A. Ficalora Executive Vice President 44
of Transmedia Restaurant
Company Inc.
Gregory Borges Treasurer 59
Kathryn Ferara Secretary 39
Mr. Chasen has been a director and the Chairman of the Board, President
and Chief Executive Officer of the Company since July 1983. From 1984
through 1987, he was a
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<PAGE>
director, Chairman of the Board, President and Chief Executive Officer
of Transmedia Network Inc., a Colorado corporation, which was the
predecessor of the Company.
Mr. Callaghan, a director of the Company since April 1991, was elected
Vice President of the Company and President of Transmedia Restaurant
Company Inc., a subsidiary, in September 1994. He joined the Company in
1989 and, until September 1994, served as Executive Vice President from
1992, Vice President, Sales and Marketing, from 1989 and Treasurer from
1989.
Mr. Kaplan was elected a Vice President of the Company and President of
Transmedia Service Company Inc., a subsidiary, in September 1995. From
1986 until joining the Company, he served in various positions
including Executive Vice President, Chief Operating Officer of Liberty
Travel, Inc., a chain of full-service travel agencies.
Mr. Weinberg was elected Vice President and Chief Financial Officer of
the Company in March 1992 and in September 1994 was also elected
President of TMNI International Incorporated, a subsidiary. He joined
the Company as Vice President - Finance in October 1991. From January
1987 through June 1991, Mr. Weinberg served as Vice President Finance
and Administration, Chief Financial Officer, Treasurer and Secretary of
Columbia Laboratories, Inc., a health care products company.
Mr. Ficalora was elected Executive Vice President of the Restaurant
Company in 1994, having served as Vice President, Operations of the
Company from 1992 until 1994, and Director of Franchise Sales from 1991
to 1992.
Mr. Borges was elected Treasurer of the Company in 1992. He joined the
Company in 1985 as Controller.
Mrs. Ferara was elected Secretary of the Company in 1992. She joined
the Company in 1989 as Office Manager and Assistant Secretary.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
a) The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "TMN". Prior to June 28, 1995, the Company's Common Stock was
traded in the over-the-counter market on the Nasdaq National Market System,
under the symbol "TMNI". The following table sets forth the high and low sale
prices for the common stock for each fiscal quarter ended from December 31, 1993
(adjusted for the three-for-two stock split effected on April 22, 1994 and
applied retroactively where appropriate) as reported on the New York Stock
Exchange or the Nasdaq National Market.
<TABLE>
<CAPTION>
QUARTER ENDED LOW HIGH
------------- ------- -------
<S> <C> <C>
December 31, 1993 $ 8.167 $11.000
March 31, 1994 10.167 16.333
June 30, 1994 9.750 15.000
September 30, 1994 8.938 14.250
December 31, 1994 8.313 13.750
March 31, 1995 8.500 13.250
June 30, 1995 8.000 13.250
September 30, 1995 8.375 11.375
</TABLE>
b) The aggregate number of holders of record of the Company's Common Stock
on December 5, 1995 was approximately 2,300.
c) On September 20, 1993, the Company's Board of Directors approved an
annual cash dividend of $.04 per share (adjusted for the three-for-two stock
splits effected on October 21, 1993 and April 22, 1994, respectively); the first
semi-annual $.02 dividend was paid on October 21, 1993 to the stockholders of
record on October 7, 1993 and the second semi-annual $.02 dividend was paid on
April 22, 1994. On September 19, 1994, the Board of Directors approved an annual
cash dividend of $.04 per share; the first semi-annual $.02 dividend was paid on
October 20, 1994 to stockholders of record as of October 6, 1994 and the second
semi-annual $.02 dividend was paid on April 21, 1995 to stockholders of record
as of April 7, 1995. On September 18, 1995, the Board of Directors approved an
annual cash dividend of $.04 per share, the first semi-annual $.02 dividend was
paid on October 19, 1995 to stockholders of record as of October 5, 1995, and
the second semi-annual $.02 dividend will be payable as determined by the
Company's Board of Directors. Dividends, if any, in the future, will depend
upon, among other things, the Company's earnings and financial requirements, as
well as general business conditions.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
YEAR ENDED SEPTEMBER 30,
------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 58,792,454 $ 45,605,606 $ 33,512,234 $ 23,777,303 $ 12,977,901
Membership and renewal
fee income 3,509,421 2,631,624 1,686,423 1,142,345 624,633
Continuing franchise and
royalty fee income 2,633,031 1,503,028 360,076 167,084 68,505
Commission income 605,441 405,054 -- -- --
Total revenues 65,540,347 50,145,362 35,558,733 25,086,732 13,671,039
Operating income 7,052,263 5,601,329 3,425,433 2,609,244 1,336,319
Net income 4,627,726 4,406,622 2,734,225 1,744,894 1,042,872
Net income per share
Primary 0.46 0.44 0.29 0.20 0.13
Fully diluted 0.46 0.44 0.28 0.20 0.13
BALANCE SHEET DATA:
Total assets $ 37,786,502 $ 28,178,680 $ 17,903,666 $ 13,459,098 $ 6,223,784
Total long-term debt 2,000,000 -- -- -- 5,812
Stockholders' equity 24,853,213 19,155,430 12,618,829 9,438,386 2,842,836
Cash dividends per
common share .04 .04 .02 -- --
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS (1995 VERSUS 1994)
Net sales for the fiscal year ended September 30, 1995 increased 28.9% to
$58,792,454, as compared to $45,605,656 for the year ended September 30, 1994.
The sales increase was primarily due to an increased number of cardmembers and
restaurants available to cardmembers. Approximately ninety percent (90%) of all
restaurants listed in the directories published by the Company renew their
contracts with the Company after the initial amount of rights to receive meal
credits purchased by the Company is expended. In the second year of renewal, the
Company renews approximately 80% of those restaurants continuing in business.
After the second year, renewal rates drop sharply because the restaurants with
the Company's help have become successful and no longer need the Company, the
Company chooses not to renew the restaurant or the restaurant has gone out of
business. However, offsetting this drop is the fact that new restaurants
start-up as old ones go out of business, providing the Company with new
restaurant prospects. The Company believes that in no area where the Company
operates is it
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close to restaurant or cardmember saturation. At September 30, 1995, the average
Rights to Receive balance per Company restaurant participating was $8,592 versus
$8,719 at September 30, 1994. Membership and renewal fee income increased to
$3,509,421, of which $835,151 was initial fee income in 1995 from $2,631,624, of
which $788,345 was initial fee income in 1994 as the result of an increased
number of cardmembers, as well as renewals. Membership and renewal fee income in
1995 and 1994 is shown net of amortized advertising costs of $697,947 and
$137,994, respectively. (See Footnote 1(e) to Consolidated Financial
Statements.) In 1995 and 1994, the initial fee was waived 93% and 90% of the
time, respectively. In April 1994 the Company ceased waiving renewal fees. In
1994 prior to April, the Company waived renewal fees 35% of the time. The
renewal rate in 1995 and 1994 approximated 55% to 60%, while the renewal rate in
1993 approximated 80%. Fee income is recognized into income over a twelve-month
period beginning in the month the fee is received. Continuing franchise fee and
royalty income increased to $2,633,031 in 1995 from $1,503,028 in 1994 as a
result of the growth in the Company's franchisees and the start-up of the
licensees in the United Kingdom and Australia. Commission income received by the
Company increased to $605,441 in 1995 from $405,054 in 1994. As a result of the
growth in the overall elements of revenue, gross profits increased by $6,378,438
to $26,051,854 in 1995.
In 1995, selling, general and administrative ("SG&A") expenses increased by
$4,927,504, as compared to 1994, representing a 35.0% increase. In 1994, the
Company adopted Statement of Position 93-7, Reporting on Advertising Costs. (See
Footnote 1(e) to Consolidated Financial Statements.) Accordingly, $1,703,498 and
$821,125 of advertising costs were capitalized and are being amortized against
membership and renewal fee income. In 1995, SG&A expenses of a variable nature
amounted to $9,498,000 (50.0% of total SG&A expenses) versus $6,540,000 (46.5%
of total SG&A expenses) in 1994. Main components of SG&A expenses included sales
salaries and commissions ($1,866,000 in 1995 versus $1,147,000 in 1994), bank
processing fees ($2,834,000 in 1995 versus $2,045,000 in 1994), card promotions
($551,000 in 1995 versus $549,000 in 1994), Rights to Receive loss expense
($2,504,000 in 1995 versus $1,840,000 in 1994) and salaries expense ($3,641,000
in 1995 versus $2,623,000 in 1994). The Company also incurred $268,000 of
expenses in 1995 associated with the start-up of new territories operated by the
Company.
Operating income in 1995 was $7,052,263, a 25.9% increase over the $5,601,329 in
1994.
Other income, net of expense in 1995 amounted to $534,163 compared to $1,757,093
in 1994. The reduction of $1,222,930 results from an $863,789 decrease in
initial franchise and license fee income, net of expenses in 1995. The Company
in 1994 had entered into a major license for Australia, New Zealand and the
right to sublicense Asia. In 1995, the Company incurred merger and acquisition
costs amounting to $294,600 in connection with the acquisition of its Chicago
franchisee.
Earnings before taxes amounted to $7,586,426 in 1995 compared with $7,358,422 in
1994. The effective tax rate in 1995 was 39.0% compared with 40.1% in 1994.
Net income in 1995 was $4,627,726 or $.46 per share, versus $4,406,622 or $.44
per share in 1994.
-12-
<PAGE>
RESULTS OF OPERATIONS (1994 VERSUS 1993)
Net sales for the fiscal year ended September 30, 1994 increased 36.1%
to $45,605,656, as compared to $33,512,234 for the year ended September
30, 1993. The sales increase was primarily due to an increased number
of cardmembers and restaurants available to cardmembers. At September
30, 1994, the average Rights to Receive balance per Company restaurant
participating Approximately ninety percent (90%) of all restaurants
listed in the directories published by the Company renew their
contracts with the Company after the initial amount of rights to
receive meal credits purchased by the Company is expended. In the
second year of renewals, the Company renews approximately 80% of those
restaurants continuing in business. After the second year, renewal
rates drop sharply because the restaurants with the Company's help have
become successful and no longer need the Company, the Company chooses
not to renew the restaurant or the restaurant has gone out of business.
However, offsetting this drop is the fact that new restaurants start-up
as old ones go out of business, providing the Company with new
restaurant prospects. At September 30, 1994, the average Rights to
Receive balance per Company restaurant participating was $8,719 versus
$6,406 at September 30, 1993. Membership and renewal fee income
increased to $2,631,624, of which $788,345 was initial fee income, from
$1,686,423, of which $328,328 was initial fee income in 1993, as the
result of an increased number of cardmembers, as well as renewals.
Membership and renewal fee income in 1994 is shown net of amortized
advertising costs of $137,994. (See Footnote 1(e) to Consolidated
Financial Statements.) In 1994 and 1993, the initial fee was waived 90%
of the time. In April 1994 the Company ceased waiving renewal fees. In
1993 and in 1994 prior to April, the Company waived renewal fees 35% of
the time. The renewal rate in 1994 approximated 55% to 60%, while the
renewal rate in 1993 approximated 80%. Fee income is recognized into
income over a twelve-month period beginning in the month the fee is
received. Continuing franchise fee and royalty income increased to
$1,503,028 in 1994 from $360,076 in 1993 as a result of the growth in
the Company's franchisees and the start-up of the licensee in the
United Kingdom. Commission income received by the Company in 1994
amounted to $405,054. There was no commission income in 1993. As a
result of the growth in the overall elements of revenue, gross profits
increased by $6,338,744 to $19,673,416 in 1994.
In 1994, selling, general and administrative ("SG&A") expenses
increased by $4,162,848 as compared to 1993 representing a 42.0%
increase. In 1994, the company adopted Statement of Position 93-7,
Reporting on Advertising Costs. (See Footnote 1(e) to Consolidated
Financial Statements.) Accordingly, $821,125 of advertising costs were
capitalized and are being amortized against membership and renewal fee
income. In 1994, SG&A expenses of a variable nature amounted to
$6,540,000 (46.5% of total SG&A expenses) versus $4,375,000 (44.2% of
total SG&A expenses) in 1993. Main components of SG&A expenses included
sales salaries and commissions ($1,147,000 in 1994 versus $1,232,000 in
1993), bank processing fees ($2,045,000 in 1994 versus $1,198,000 in
1993), card promotions $549,000 in 1994 versus $905,000 in 1993),
Rights to Receive loss expense ($1,840,000 in 1994 versus $890,000 in
1993) and salaries expense ($2,623,000 in 1994 versus $2,002,000 in
1993).
Operating income in 1994 was $5,601,329, a 63.5% increase over the
$3,425,433 in 1993.
-13-
<PAGE>
Other income, net of expenses in 1994 amounted to $1,757,093 compared
with $1,131,392 in 1993, a $625,701 increase and resulted primarily
from an increase of $557,600 in initial franchise and license fee
income, net of expenses in 1994. More franchised territories were sold
in 1994 than in 1993.
Earnings before taxes amounted to $7,358,422 in 1994 compared with
$4,556,825 in 1993. The effective tax rate in 1994 was 40.1% compared
with 40.0% in 1993.
Net income in 1994 was $4,406,622 or $.44 per share versus $2,734,225
or $.29 per share in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $23,228,296 at September 30,
1995 from $16,700,089 at September 30, 1994. The increase was due
primarily to the Company's operating activities.
On December 8, 1995 the Company has a loan facility with NationsBank of
Florida ("NationsBank") under which it may borrow, at the bank's prime
rate of interest, up to Six Million Dollars ($6,000,000) until May 15,
1996, and thereafter, up to Seven Million Five Hundred Thousand Dollars
($7,500,000). Any balance outstanding under the facility will become
payable on May 15, 1997. The Company has generally made use of this
line of credit to fund large purchases of Rights to Receive meal
credits. As of December 8, 1995, the balance owed NationsBank under the
line of credit was $3,500,000.
The Company believes that cash on hand at September 30, 1995, together
with the Company's available credit line and earnings generated during
the next fiscal year will satisfy the cash flow requirements of the
Company's operations during that period.
Capital expenditures by the Company over the past three fiscal years
(approximately $4,296,000) have been due almost exclusively to the
Company's development and acquisition of computer hardware and software
necessary for the operation of the Cardmember Service Center. The
company estimates that it will spend approximately $1,900,000 on
capital expenditures, consisting primarily of computer software in
fiscal year 1996. Funds for such expenditures will be provided by cash
on hand at September 30, 1995, together with cash generated by 1996
operations and the Company's available line of credit.
The Company's accounts receivable decreased by $563,884 to a total of
$1,714,421 at September 30, 1994. The decrease in receivables results
from the Company's increasing use of electronic point-of-sale
processing for its restaurant transactions. In addition, the Company's
inventory of Rights to Receive increased by $8,674,688 to a total of
$26,147,400 at September 30, 1995.
In many instances the Rights to Receive purchased by the Company are
secured by the furniture, fixtures and kitchen equipment of the related
restaurants as filed pursuant to the
-14-
<PAGE>
Uniform Commercial Code. The Company also attempts to obtain personal
guarantees from the restaurant owners.
<TABLE>
<CAPTION>
Analysis of Rights to Receive
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Rights to Receive, beginning of year $17,472,712 $ 9,968,102 $ 6,148,465
Purchase of Rights to Receive 50,484,752 39,551,092 26,745,324
Write-offs of Rights to Receive (2,321,571) (1,574,536) (701,626)
----------- ----------- -----------
65,635,893 47,944,658 32,192,163
Cost of sales 39,488,493 30,471,946 22,224,061
----------- ----------- -----------
Rights to Receive, end of year $26,147,400 $17,472,712 $ 9,968,102
=========== =========== ===========
</TABLE>
Management of the Company believes that continued increase in the
number of restaurants which honor the Transmedia Card (and, therefore,
increases in the inventory of Rights to Receive purchased) is essential
to attract additional cardmembers, satisfy existing cardmembers and
continue the Company's revenues growth. Further, management believes
that the purchase of Rights to Receive can be funded generally from
cash on hand, from operations and from funds available under the
Company's line of credit.
Cash flow used in operating activities was $843,422 in fiscal year
ended September 30, 1995, compared with cash used in operating
activities of $1,526,902 and $114,422 in 1994 and 1993, respectively.
Cash is primarily used in purchasing Rights to Receive meal credits.
Management of the Company anticipates that the expenditure for the
purchases of Rights to Receive will continue to increase as the Company
expands the number of participating full service restaurants available
to its cardmembers.
Cash used in investing activities was $2,020,055 in the fiscal year
ended September 30, 1995, compared with $1,860,978 used in 1994 and
$414,716 used in 1993. Cash flow deficits from investing activities
were due primarily to the development and acquisition of computer
hardware and software necessary for the operation of the Company's
Cardmember Service Center. Management believes that cash to be used in
investing activities in the fiscal year ended September 30, 1996 will
approximate $1,900,000.
Cash flow provided by financing activities was $2,654,900 for the
fiscal year ended September 30, 1995, compared with cash flows provided
by financing activities of $861,734 in 1994 and $631,760 in 1993. In
1995, the principal source of cash flow were from borrowings under the
Company's bank line of credit and from the exercise of options for
common stock. In 1994 and 1993 the principal source of cash flow from
-15-
<PAGE>
financing activities was from the exercise of options for common stock
and the conversion of warrants.
The Company has $2,500,000 available under its line of credit and,
additionally, may receive cash from the exercise of outstanding options
that are exercisable in fiscal year 1996; however, the Company cannot
determine with any certainty whether or in what amounts these options
will be exercised.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report 17
Financial Statements:
Consolidated Balance Sheets,
September 30, 1995 and 1994 18
Consolidated Statements of Income
for each of the years in the three-year
period ended September 30, 1995 19
Consolidated Statements of Stockholders'
Equity for each of the years in the three-year
period ended September 30, 1995 20
Consolidated Statements of Cash Flows
for each of the years in the three-year
period ended September 30, 1995 21
Notes to Consolidated Financial Statements 23
-16-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and
Stockholders
Transmedia Network Inc.:
We have audited the accompanying consolidated balance sheets of Transmedia
Network Inc. and subsidiaries as of September 30, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended September 30, 1995. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedules as listed under Item 14(a)(2). These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Network Inc. and subsidiaries as of September 30, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended September 30, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in note 1(c) to the consolidated financial statements, the Company
changed its method of accounting for investments as of September 30, 1994 to
adopt the provisions of the Financial Accounting Standards Board's SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." As discussed
in note 1(e) to the consolidated financial statements, the Company changed its
method of accounting for advertising costs in 1994 to adopt the provisions of
the Accounting Standards Executive Committee's Statement of Position No.
93-7, "Reporting on Advertising Costs."
KPMG Peat Marwick LLP
November 22, 1995
Miami, Florida
-17-
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and 1994
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) $ 2,270,322 2,478,899
Accounts receivable, less allowance for doubtful
accounts of $15,000 and $25,000 in 1995 and 1994, respectively 1,714,421 2,278,305
Rights to receive 26,147,400 17,472,712
Prepaid expenses and other current assets 708,253 570,964
Deferred income taxes (note 7) 441,285 568,200
------------ -----------
Total current assets 31,281,681 23,369,080
Securities available for sale, at fair value (note 3) 2,899,691 2,341,141
Property and equipment, net (note 2) 3,471,700 2,147,476
Other assets 133,430 320,983
------------ -----------
Total assets $ 37,786,502 28,178,680
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable - Rights to receive $ 4,933,070 3,642,331
Accounts payable - reimbursable tax and tips 428,000 551,630
Accounts payable - other 1,663,754 1,297,312
Income taxes payable (note 7) - 333,239
Accrued expenses (note 4) 1,028,561 844,479
------------ -----------
Total current liabilities 8,053,385 6,668,991
Line of credit (note 12) 2,000,000 -
Deferred membership and renewal fee income, net (note 1) 1,178,234 836,632
Deferred income taxes (note 7) 1,701,670 1,517,627
------------ -----------
Total liabilities 12,933,289 9,023,250
------------ -----------
Stockholders' equity (notes 5 and 6):
Preferred stock, $.10 par value per share - -
Common stock, $.02 par value per share 202,375 192,370
Additional paid-in capital 10,513,055 9,478,193
Unrealized gain on securities available for sale (net of
deferred income taxes of $1,021,679 in 1995 and
$886,068 in 1994) 1,598,011 1,275,073
Retained earnings 12,539,772 8,209,794
------------ -----------
Total stockholders' equity 24,853,213 19,155,430
Commitments (notes 5, 10 and 11)
------------ -----------
Total liabilities and stockholders' equity $ 37,786,502 28,178,680
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-18-
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For each of the years in the three-year period ended September 30, 1995
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Net sales $ 58,792,454 45,605,656 33,512,234
Membership and renewal fee income 3,509,421 2,631,624 1,686,423
Continuing franchise fee and royalty income 2,633,031 1,503,028 360,076
Commission income 605,441 405,054 -
------------ ----------- -----------
65,540,347 50,145,362 35,558,733
Cost of sales 39,488,493 30,471,946 22,224,061
------------ ----------- -----------
Gross profit 26,051,854 19,673,416 13,334,672
Selling, general and administrative expenses 18,999,591 14,072,087 9,909,239
------------ ----------- -----------
Operating income 7,052,263 5,601,329 3,425,433
------------ ----------- -----------
Other income (expense):
Initial franchise fee and license
fee income, net of expense 608,211 1,472,000 914,400
Merger and acquisition expenses (294,600) - -
Interest and other income 336,742 290,197 228,055
Interest expense and financing costs (116,190) (5,104) (11,063)
------------ ----------- -----------
534,163 1,757,093 1,131,392
------------ ----------- -----------
Income before income taxes 7,586,426 7,358,422 4,556,825
Income taxes (note 7) 2,958,700 2,951,800 1,822,600
------------ ----------- -----------
Net income $ 4,627,726 4,406,622 2,734,225
============ =========== ===========
Net income per common and common equivalent share:
Primary $ .46 .44 .29
=== === ===
Fully diluted $ .46 .44 .28
=== === ===
Weighted average number of common and
common equivalent shares outstanding:
Primary 10,112,326 9,980,302 9,484,804
========== =========== ===========
Fully diluted 10,112,326 10,024,175 9,596,683
========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-19-
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For each of the years in the three-year period ended September 30, 1995
COMMON STOCK
----------------------- ADDITIONAL UNREALIZED
NUMBER PAID-IN GAINS, RETAINED
OF SHARES AMOUNT CAPITAL NET EARNINGS TOTAL
---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992 3,922,652 $ 78,453 7,617,636 - 1,742,297 9,438,386
Net income - - - - 2,734,225 2,734,225
Exercise of stock options 200,492 4,010 202,082 - - 206,092
Income tax benefit related to stock option plan - - 425,668 - - 425,668
Three-for-two stock split 2,061,572 41,231 - - (41,231) -
Dividend - - - - (185,542) (185,542)
---------- --------- ---------- ---------- ---------- ----------
Balance, September 30, 1993 6,184,716 123,694 8,245,386 - 4,249,749 12,618,829
Net income - - - - 4,406,622 4,406,622
Three-for-two stock split 3,177,607 63,552 - - (63,552) -
Exercise of stock options 189,758 3,795 181,404 - - 185,199
Income tax benefit related to stock option plan - - 663,104 - - 663,104
Conversion of warrants to stock 66,397 1,329 388,299 - - 389,628
Dividend - - - - (383,025) (383,025)
Unrealized gains, net - - - 1,275,073 - 1,275,073
---------- --------- ---------- --------- ---------- ----------
Balance, September 30, 1994 9,618,478 192,370 9,478,193 1,275,073 8,209,794 19,155,430
Net income - - - - 4,627,726 4,627,726
Exercise of stock options 221,905 4,438 341,820 - - 346,258
Income tax benefit related to stock
option plan - - 688,610 - - 688,610
Dividend - - - - (397,861) (397,861)
Acquisition of franchise 278,387 5,567 4,432 - 100,113 110,112
Unrealized gains, net - - - 322,938 - 322,938
---------- --------- ---------- --------- ---------- ----------
Balance, September 30, 1995 10,118,770 $ 202,375 10,513,055 1,598,011 12,539,772 24,853,213
========== ========= ========== ========= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-20-
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For each of the years in the three-year period ended September 30, 1995
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,627,726 4,406,622 2,734,225
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 693,960 360,621 183,444
Deferred income taxes 175,347 (111,068) (77,200)
Loss on disposal of property and equipment 4,090 71,717 21,599
Changes in assets and liabilities:
Accounts receivable 563,884 (712,218) (109,622)
Rights to receive (8,674,688) (7,504,610) (3,819,637)
Prepaid expenses and other current
assets (137,289) (408,475) (53,590)
Other assets 177,553 (203,876) (294,824)
Accounts payable - Rights to receive 1,290,739 1,907,463 98,596
Accounts payable - other 242,812 592,414 468,243
Income taxes payable (333,240) 108,901 355,730
Accrued expenses 184,082 43,583 150,594
Deferred membership and renewal fee
income 341,602 (77,976) 228,020
----------- ----------- ----------
Total adjustments (5,471,148) (5,933,524) (2,848,647)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (843,422) (1,526,902) (114,422)
----------- ----------- ----------
Cash flow from investing activities:
Additions to property and equipment (2,020,055) (1,687,478) (414,716)
Purchase of securities available for sale - (180,000) -
Proceeds from sale of property and equipment - 6,500 -
----------- ---------- ----------
Net cash used in investing activities (2,020,055) (1,860,978) (414,716)
----------- ---------- ----------
Cash flows from financing activities:
Net borrowings (repayments) on note payable
to bank under revolving line of credit 2,000,000 - -
Conversion of warrants and options for
common stock, net of tax benefits 1,034,868 1,237,931 631,760
Dividends paid (379,968) (376,197) -
----------- ---------- ----------
Net cash provided by financing
activities 2,654,900 861,734 631,760
----------- ---------- ----------
(Continued)
-21-
<PAGE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net (decrease) increase in cash $ (208,577) (2,526,146) 102,622
Cash and cash equivalents, beginning of year 2,478,899 5,005,045 4,902,423
----------- ---------- ----------
Cash and cash equivalents, end of year $ 2,270,322 2,478,899 5,005,045
=========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 102,184 - 234
=========== ========== ==========
Income taxes $ 2,138,000 2,293,855 1,118,402
=========== ========== ==========
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Noncash investing and financing activities:
During the years ended September 30, 1995 and 1994, the Company adjusted
its available for sale investment portfolio to fair value; resulting
in a net increase to stockholders' equity of $322,938 and $1,275,073,
net of deferred income taxes.
On March 23, 1995 and September 18, 1995, the Company declared a cash
dividend of $.02 per share of common stock outstanding, payable on
April 21, 1995 and October 19, 1995, respectively, to stockholders'
of record at close of business on April 7, 1995 and October 5, 1995,
respectively. At September 30, 1995, the dividend payable of $210,263
is recorded in accrued expenses.
On March 22, 1994, and September 19, 1994, the Company declared a cash
dividend of $.02 per share of common stock outstanding, payable on
April 22, 1994 and October 20, 1994, respectively, to stockholders of
record at close of business on April 8, 1994 and October 6, 1994,
respectively. At September 30, 1994, the dividend payable of $192,370
is recorded as accrued expenses.
On September 20, 1993, the Company declared a cash dividend of $.03 per
share of common stock outstanding, payable on October 21, 1993 to
stockholders of record at close of business on October 7, 1993. At
September 30, 1993, the dividend payable of $185,542 is recorded as
accrued expenses.
See accompanying notes to consolidated financial statements.
-22-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995, 1994 and 1993
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Transmedia Network Inc. and subsidiaries' (the "Company") main
business activity is to acquire rights to receive goods and
services from restaurants and other establishments ("Rights to
receive"), which are then sold to the Company's cardholders for
cash. These Rights to receive are primarily purchased by the
Company for cash.
The Company's primary area of operations includes the North and
Southeast Florida area, the New York and Chicago metropolitan
areas, Boston and Philadelphia, as well as its surrounding
areas, including Delaware. Franchised areas include most of New
Jersey, Washington, D.C., Maryland, Virginia, Texas, Oregon,
North and South Carolina; Atlanta, Georgia, and parts of
Tennessee, and California, including parts of Nevada and the
state of Washington. Licensing arrangements exist for the United
Kingdom, Canada, and Europe, as well as the Asia-Pacific region.
During 1993, the Company created two wholly owned subsidiaries:
Transmedia Associated Restaurants Inc. ("TARI") and TMNI
International Incorporated ("TMNI"). Effective October 1, 1994,
Transmedia Network Inc. established a new corporate structure
consisting of three wholly owned subsidiaries: Transmedia
Restaurant Company Inc., which replaced TARI, and is in charge
of all restaurant-oriented functions of the Company; TMNI is
responsible for all foreign licensing; and Transmedia Service
Company Inc. which is responsible for all card member-related
facets of the business, including the card member service
center, and domestic franchising. All intercompany accounts and
transactions have been eliminated in consolidation.
(B) RIGHTS TO RECEIVE
Rights to receive are composed primarily of food and beverage
credits from restaurants. Rights to receive are stated at the
gross amount of the commitment to the establishment
(approximately 50 percent of the retail value of Rights to
receive obtained). Accounts payable-Rights to receive represent
the unfunded portion of the total commitments. Cost is
determined by the first-in, first-out method. The Company
reviews the realizability of the Rights to receive on a periodic
basis, provides for write offs of rights to receive and writes
off Rights to receive from restaurants that have ceased
operations or whose credits are not utilized by cardholders.
These write offs
(Continued)
-23-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are offset by recoveries from restaurants. Gross write offs of
Rights to receive were $2,321,571, $1,574,536 and $701,626 for
the years ended September 30, 1995, 1994 and 1993, respectively.
(C) SECURITIES AVAILABLE FOR SALE
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES, ("SFAS 115") effective September
30, 1994. Under SFAS 115, the Company is required to classify
any debt and marketable equity securities in one of three
categories: trading, available for sale, or held to maturity.
Securities available for sale are recorded at fair value.
Realized gains and losses from the sale of securities available
for sale are computed using the specific identification method.
Unrealized gains and losses, net of the related tax effects, on
securities are recorded as a separate component of stockholders'
equity until realized.
(D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on
property and equipment is calculated using the straight-line
method over the estimated useful lives of the assets.
Amortization of leasehold improvements is calculated over the
shorter of the lease term or estimated useful life of the asset.
(E) DEFERRED MEMBERSHIP AND RENEWAL FEE INCOME, NET
Statement of Position No. 93-7 ("SOP 93-7"), REPORTING ON
ADVERTISING COSTS, was issued by the Accounting Standards
Executive Committee ("AcSEC") in December 1993, effective for
years beginning after June 15, 1994, with earlier adoption
encouraged. This statement provides guidance for reporting
direct-response advertising costs, with future economic
benefits, as assets when the costs are incurred and amortizing
the costs to expense in the current and subsequent periods.
Effective October 1, 1993, the Company adopted SOP 93-7.
Deferred membership and renewal fee income is billed in advance
and amortized, straight-line, over the period of membership.
Under SOP 93-7, certain advertising costs are capitalized and
offset against the deferred membership income. The advertising
costs are amortized, straight-line, over 24 months, which is the
estimated life of the average cardholder. The advertising costs
capitalized by the Company represent initial membership
acquisition costs resulting from direct-response campaign costs
which are recorded as incurred. Campaign costs include
incremental direct costs of direct-response advertising, such as
printing of brochures, campaign applications and mailings; as
well as, payroll and payroll-related costs paid to employees
directly related to the campaigns and to outside sources.
(Continued)
-24-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The effect of the change in accounting principle on income for
the fiscal year ended September 30, 1994 is as follows:
Effect on:
Membership and renewal fee income $ (137,994)
=======
Selling, general and administrative expenses 821,125
=======
Net income 403,047
=======
Net income per common and common equivalent $ .04
===
Deferred membership and renewal fee income, net is classified as
a noncurrent liability since working capital will not be
required as the deferred income is recognized over future
periods. Deferred membership and renewal fee income, net, is
comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Deferred membership and renewal fee income,
gross $ 2,866,916 1,519,763
Unamortized advertising costs (1,688,682) (683,131)
----------- ---------
Deferred membership and renewal fee income,
net $ 1,178,234 836,632
=========== =========
</TABLE>
Advertising costs charged directly to expense were $551,399 and
$549,156 during the year ended September 30, 1995 and 1994,
respectively.
The pro forma effect on income for the year ended September 30,
1993, assuming the change in accounting principle had been
applied retroactively, is as follows:
Membership and renewal fee income $ (242,873)
========
Selling, general and administrative expenses 709,934
========
Net income 280,236
========
Net income per common and common equivalent $ .03
===
(F) FRANCHISE AND LICENSE FEE INCOME
Continuing franchise fee revenues are based on the franchisees'
sales and are
(Continued)
-25-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
recognized when earned.
Initial franchise fees and license fees are recognized when
material services or conditions relating to the sale have been
substantially performed. Initial franchise fees and license fees
consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Initial franchise and license fees $ 725,000 1,680,000 1,200,000
Initial franchise and license expenses (116,789) (208,000) (285,600)
-------- --------- ---------
$ 608,211 1,472,000 914,400
======== ========= =========
</TABLE>
(G) NET SALES
Net sales represent the retail value usage of the rights to
receive sold, less the 25 percent discount offered to the
Company's cardholders.
(Continued)
-26-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(H) INCOME TAXES
The Company recognizes deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based
on the difference between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(I) INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Primary income per common and common equivalent share is
computed by dividing net income by the weighted average number
of common stock outstanding and common stock equivalents. Fully
diluted income per share computation reflects the effect of
common shares contingently issuable upon the exercise warrants
in periods in which such exercise would cause dilution. Fully
diluted income per share also reflects additional dilution
related to stock options due to the use of the market price at
the end of the period, when higher than the average price for
the period. Fully diluted income per share in 1993 was computed
based on the closing price of the common stock at September 30,
1993.
(J) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are instruments with original
maturities of three months or less.
(K) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform
with the 1995 presentation.
(L) COMMISSION INCOME
Commission income represents income for advertising services
provided by the Company to restaurants or other establishments,
other than services derived from the purchase of rights to
receive in advance.
(Continued)
-27-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
SEPTEMBER 30, USEFUL LIVES
-------------------------- ------------
1995 1994
---- ----
<S> <C> <C> <C>
Furniture and fixtures $ 169,875 148,803 5 years
Office equipment 4,334,136 2,370,364 5 years
Leasehold improvements 61,272 53,447 life of lease
----------- ---------
4,565,283 2,572,614
Less accumulated depreciation 1,093,583 425,138
----------- ---------
$ 3,471,700 2,147,476
=========== =========
</TABLE>
Depreciation expense for the years ended September 30, 1995 and 1994
was $683,960 and $350,522, respectively.
(3) SECURITIES AVAILABLE FOR SALE
Securities available for sale are recorded at fair value and consist of
shares of common stock of various companies with an aggregate cost of
$280,000 and $180,000 as of September 30, 1995 and 1994. Gross
unrealized gains and losses were $2,161,141 and $-0- as of September
30, 1994 and $2,685,941 and $66,250 as of September 30, 1995,
respectively. There were no realized gains or losses for the years
ended September 30, 1995 and 1994.
(4) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the year ended
September 30, 1995 are net of $375,000 received by the Company from an
outside promoter.
(5) STOCK OPTION PLAN
Under the Company's 1987 Stock Option and Rights Plan (the "Plan"), the
Company may grant stock options and related stock appreciation rights
to persons who are now or who during the term of the Plan become key
employees (including those who are also directors) and independent
sales agents. Stock options granted under the Plan may either be
incentive stock options or nonqualified stock options for federal
income tax purposes. The Plan, as amended in 1992, provides that the
Stock Option Committee of the Board of Directors may grant stock
options or stock appreciation rights with respect to a maximum of
1,012,500 shares of common stock at a price not less than the fair
market value at the date of grant for qualified and nonqualified stock
options. The exercise price under an incentive stock option granted to
a person owning stock representing more than 10 percent of the common
stock must equal at least 110 percent of the fair market value at the
date of grant. Options are exercisable beginning not less than one year
after date of grant. All options expire either five or ten years from
the date of grant and each becomes exercisable in installments of 25
percent of the underlying shares for each year the option is
outstanding, commencing on the first anniversary of the date of grant.
The following table summarizes the stock options granted and exercised
during 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Total stock options granted - common stock 165,500 152,500
======= =======
Total stock options exercised - common stock 221,905 255,956
======= =======
</TABLE>
(Continued)
-28-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
Average exercise price $ 1.56 $ .72
==== ===
Nonqualified stock options exercised -
common stock 208,686 171,861
======= =======
Current windfall tax benefit $ 688,610 663,104
======= =======
Total warrants converted to common stock - 85,444
======= =======
Average exercise price $ 4.56 $ 4.56
==== ====
</TABLE>
At September 30, 1995 and 1994, options under the Plan to purchase
509,529 and 383,123 shares of common stock are outstanding as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------------------------
ISSUANCE NUMBER OF EXERCISE EXPIRATION
DATE SHARES PRICE DATE
---- ------ ----- ----
<S> <C> <C> <C>
March 1992 33,750 $ 3.8889 March 1997
May 1992 102,093 4.8333 May 1997
September 1993 78,186 7.4445 September 2003
February 1994 37,500 12.2500 February 2004
March 1994 97,500 15.0000 March 2004
March 1995 135,500 12.2500 March 2005
August 1995 25,000 9.2500 August 2005
-------
509,529
=======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------------------------
ISSUANCE NUMBER OF EXERCISE EXPIRATION
DATE SHARES PRICE DATE
---- ------ ----- ----
<S> <C> <C> <C>
July 1990 7,594 $ 0.6845 July 1995
March 1992 42,187 3.8889 March 1997
May 1992 102,093 4.8333 May 1997
September 1993 78,749 7.4445 September 2003
February 1994 37,500 12.2500 February 2004
March 1994 105,000 15.0000 March 2004
September 1994 10,000 12.2500 September 2004
-------
383,123
=======
</TABLE>
(Continued)
-29-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the options under the Plan, at September 30, 1995 and
1994, the Company has issued the following nonqualified options to
purchase an additional 421,250 and 621,562 shares of common stock
outstanding as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
------------------------------------
ISSUANCE NUMBER OF EXERCISE EXPIRATION
DATE SHARES PRICE DATE
---- ------ ----- ----
<S> <C> <C> <C>
March 1992 168,750 $ 3.8889 March 1997
May 1992 135,000 4.8333 May 1997
September 1993 112,500 7.4445 September 1998
May 1995 5,000 11.375 May 2000
-------
421,250
=======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------------------------
ISSUANCE NUMBER OF EXERCISE EXPIRATION
DATE SHARES PRICE DATE
---- ------ ----- ----
<S> <C> <C> <C>
March 1990 151,877 $ 0.3703 March 1995
March 1992 210,935 3.8889 March 1997
May 1992 135,000 4.8333 May 1997
September 1993 123,750 7.4445 September 1998
-------
621,562
=======
</TABLE>
During 1995 and 1994, expired or canceled stock options totaled 17,500
and 56,250, respectively.
(6) STOCKHOLDERS' EQUITY
The Company has 1 million authorized shares of preferred stock, $.10
par value per share; none of which has been issued.
Effective March 22, 1994, the Company effected a three-for-two stock
split recorded in the form of a 50 percent stock dividend on its common
stock. All references to the number of common shares and per common
share amounts have been restated to reflect the split.
(Continued)
-30-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During March 1994, the Company amended its Certificate of Incorporation
to increase the number of shares of authorized common stock from 10
million to 20 million.
(7) INCOME TAXES
The tax effects of the temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Rights to receive $ 351,000 287,000
Advertising - 199,077
Accrued expenses 84,435 71,873
Accounts receivable 5,850 10,250
----------- ---------
Total gross deferred tax assets 441,285 568,200
Less valuation allowance
----------- ---------
Net deferred tax assets 441,285 568,200
----------- ---------
Deferred tax liabilities:
Securities available for sale 1,021,679 886,068
Deferred advertising costs 658,586 600,511
Property and equipment 21,405 31,048
----------- ---------
Total gross deferred tax
liabilities 1,701,670 1,517,627
----------- ---------
Net deferred tax (liability) asset $(1,260,385) (949,427)
=========== =========
</TABLE>
(Continued)
-31-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There was no valuation allowance for deferred tax assets as of
September 30, 1995 and 1994. The increase in deferred taxes related to
securities available for sale during 1995 was $135,611.
Income tax expense (benefit) for the years ended September 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
1995:
U.S. federal $ 2,239,433 141,081 2,380,514
State and local 543,920 34,266 578,186
----------- -------- ---------
$ 2,783,353 175,347 2,958,700
=========== ======== =========
1994:
U.S. federal $ 2,248,451 (8,336) 2,240,115
State and local 814,417 (102,732) 711,685
----------- -------- ---------
$ 3,062,868 (111,068) 2,951,800
=========== ======== =========
1993:
U.S. federal $ 1,415,670 (77,200) 1,338,470
State and local 484,130 - 484,130
----------- -------- ---------
$ 1,899,800 (77,200) 1,822,600
=========== ======== =========
</TABLE>
Reconciliation of the statutory federal income tax rate and the
Company's effective rate for the years ended September 30, 1995, 1994
and 1993, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------- ------------------------- ------------------------
% OF PRETAX % OF PRETAX % OF PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Federal tax rate $ 2,579,385 34.0% $ 2,501,863 34.0% $ 1,549,321 34.0%
State and local taxes,
net of federal
income tax benefit 440,620 5.8 344,705 4.7% 319,526 7.0%
Other (61,305) (0.9) 105,232 1.4% (46,247) (1.0)
----------- ---- ----------- ---- ----------- ----
$ 2,958,700 38.9% $ 2,951,800 40.1% $ 1,822,600 40.0%
=========== ==== =========== ==== =========== ====
</TABLE>
(Continued)
-32-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) FRANCHISE AGREEMENTS
The Company, as franchiser, has entered into various 10-year
franchising agreements with franchisees. In accordance with these
agreements, the Company agreed to provide marketing, advertising,
training and other administrative support. All material services or
conditions relating to the franchise sales have been substantially
performed or satisfied by the Company as of September 30, 1995. In
addition, the Company agrees to grant a territory with at least 625
full-service restaurants that accept certain major credit cards; and
will continue to develop trademarks for itself and the system of
franchisees. The Company also agrees to pay a commission to the
franchisees in an amount equal to 40 percent of the initial membership
cardholders' fees for all new cardholders solicited by the franchisees.
The franchisees are responsible for soliciting restaurants and
cardholders, paying consideration to the restaurants to obtain Rights
to receive meal and beverage credits, and maintaining adequate
insurance. During 1994, the Company funded two of its franchisees
through the issuance of notes receivable totaling $220,000 (included in
other assets). Such notes are secured by Rights to receive purchased by
such franchisees in their respective geographic territories. As of
September 1995, no amounts were outstanding for these notes.
In consideration for granting the franchises, the franchisees paid the
Company initial franchise fees and an initial fee to the Company's
advertising and development fund. Continuing fees to be paid by the
franchisees are as follows:
/bullet/ 7.5 percent of the total meal credits used within the
franchisee's territory.
/bullet/ 2.5 percent of the total meal credits used within the
franchisee's territory to be deposited into the advertising
and development fund.
/bullet/ A processing fee of $0.20 per sale transaction slip forwarded
to the Company from the franchisee's territory.
/bullet/ A weekly service charge of $0.23 per participating restaurant
in the franchisee's territory.
In connection with the sale of three franchises in 1992, the Company
accepted notes as payment for amounts owed to the advertising and
development fund. The Company had recorded a like amount in accounts
payable - other in the accompanying consolidated financial statements.
During 1993, the Company forgave the remaining balance of approximately
$186,000 due on the notes from the franchisees, and wrote this amount
off against the related accounts payable - other. As of September 30,
1995 and 1994, the Company maintained $1,068 and $1,052, respectively,
in its advertising and development fund, which is included as cash in
the accompanying consolidated financial statements. These funds may be
used in the Company's sole discretion to meet any and all costs of
maintaining, administering, directing and preparing advertising for
purposes of enhancing the franchise system, the Restaurant Card and for
soliciting and marketing to restaurants and Restaurant Card holders.
(Continued)
-33-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company received 60,000 and 35,000 shares of publicly traded common
stock in connection with the sale of its fourth and fifth franchise
territories during 1994 and 1995, respectively, which now represents
2.3 percent of the franchisee's common stock. The shares are included
in Securities available for sale. In addition, the chairman and a
director of the Company own 0.3 percent and 6.5 percent of the
franchisee's common stock, respectively.
(9) LICENSE AGREEMENTS
In March 1994, the Company entered into an agreement for an exclusive
perpetual license of its software and trademark in the Asia-Pacific
region. In accordance with the agreement, the Company agreed to assist
the licensee with training relating to sales, administration,
technology and operations of the business. All material services or
conditions relating to the license sale had been substantially
performed or satisfied by the Company as of September 30, 1994. The
licensee may grant sublicenses in the territory and is responsible for
the operations of the business in the Asia-Pacific region, including
procuring member restaurants and providing related services and
activities throughout the territory.
In consideration for granting the exclusive license, the licensee paid
the Company in fiscal 1994 a license fee totaling $1,250,000 for the
master license agreement and has granted to the Company a 5 percent
equity interest in the new entity which will operate in Australia and
New Zealand. The shares comprising the equity interest are included in
Securities available for sale. Continuing fees to be paid by the
licensee are as follows:
/bullet/ 25 percent of any amounts that the licensee receives from any
sublicensee within the territory, other than Australia and New
Zealand. Such amounts shall include, but not be limited to,
royalty payments, transfer fee payments and up-front
sublicense fee payments. The portion of the up-front
sublicense fee paid to the Company shall not be less than
$250,000, unless otherwise agreed to by the Company, and in no
event less than $500,000, for each of the People's Republic of
China and Japan.
/bullet/ Royalty of 2 percent of gross sales of the Australia and New
Zealand sublicensee, and 25 percent of any other amounts that
the licensee receives from the sublicensee.
The Company has an agreement for an exclusive perpetual license of its
software and trademarks in the continent of Europe. In accordance with
this agreement, the Company agreed to assist the licensee with training
relating to sales, administration, technology, and operations of the
business. All material services or conditions relating to the license
sale have been substantially performed or satisfied by the Company. The
licensee may grant sublicenses in the territory and is responsible for
the operations of the business in Europe, including procuring members
restaurants and providing related services and activities throughout
the territory.
In consideration for granting the exclusive license, the licensee paid
the Company in August 1993, a license fee of $1,125,000 for the master
license agreement and has granted to the Company a 5 percent equity
interest in the new entity which will operate in the United Kingdom.
Continuing fees to be paid by the licensee are as follows:
/bullet/ 25 percent of any amounts that licensee receives from any
sublicensee within the territory, other than the
(Continued)
-34-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
United Kingdom. Such amounts shall include, but not be limited
to, royalty payments, transfer fee payments and up-front
sublicense fee payments. The portion of the up-front
sublicense fee paid to the Company shall not be less than
$250,000, unless otherwise agreed to by the Company.
/bullet/ Royalty of 2 percent of gross sales of the United Kingdom
sublicensee, and 25 percent of any other amounts that the
licensee receives from the sublicensee.
During 1995, the Company received $250,000 from the European licensee
when it exercised its right to sub-license within the territory.
(10) LEASES
The Company leases certain equipment and office space under long-term
lease agreements.
Future minimum lease payments under noncancelable operating leases as
of September 30, 1995 are as follows:
Year ending
September 30,
1996 $ 326,863
1997 129,715
1998 42,923
1999 29,425
2000 26,974
---------
Total minimum lease payments $ 555,900
=========
Rent expense charged to operations was $292,907, $263,821, and $218,121
for the years ended September 30, 1995, 1994 and 1993, respectively.
(11) COMMITMENTS
On July 14, 1995, the Company entered into an unconditional guaranty
agreement with a financial institution, to extend credit in the amount
of $450,000 to a franchisee. On October 1, 1994, the Company amended
its employment agreement with its president through September 30, 1997.
The agreement provides for salary at an annual rate of $275,000 through
September 30, 1995; $300,000 through September 30, 1996; and $350,000
through September 30, 1997, plus 5 percent of the Company's pretax
income not to exceed $600,000 for the fiscal years ended September 30,
1995 and 1996 and $700,000 for the fiscal year ended September 30,
1997. In addition, in the event of a sale of the Company, the president
has the right to resign from his positions with Transmedia within one
year and receive $1 million upon such resignation.
On November 24, 1993 the Company also entered into a consulting
agreement with its president to commence
(Continued)
-35-
<PAGE>
on September 30, 1997 through January 1, 2005. The agreement provides
compensation at an annual amount equal to 50 percent of the sum of the
highest base salary and bonus received by the president in any year
under the employment agreement, discussed above, not to exceed in any
one year during the term of the consulting agreement, 10 percent of the
Company's prior year's pre-tax income, but in any event not less than
$100,000.
On October 1, 1994, the Company also amended an employment agreement
with an executive vice president through September 30, 1997. The
agreement provides for salary at an annual rate of $180,000 through
September 30, 1995; $250,000 through September 30, 1996; and $300,000
through September 30, 1997, plus 3 percent of the increase in the
Company's pretax income over the prior fiscal year for fiscal years
1995, 1996 and 1997. In addition, this executive received a $150,000
signing bonus, forfeitable pro rata over the term of the agreement. In
the event of a sale of the Company, this executive has the right to
resign from his positions with Transmedia within one year and receive
$750,000 upon such resignation.
On October 31, 1994, the Company approved a severance plan for selected
officers and key employees of the Company. This plan offers one year of
salary for each year of service with the Company, up to a maximum of
three years, if, within the two-year period following a change in
control of the Company, the individual is terminated or voluntarily
resigns from the Company.
(12) LINE OF CREDIT
On May 15, 1994, the Company obtained a line of credit with a bank for
$3 million to be used to finance the purchase of Rights to receive. On
June 30, 1995, the Company increased the line of credit to $6 million.
As of September 30, 1995 and 1994, $2 million and $-0- was outstanding
under this credit facility, respectively. The credit facility has an
interest rate of prime and is unsecured. There were no commitment fees
and conditions under which the line of credit may be withdrawn.
(13) BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the New York City and
Southeast Florida areas. No single customer accounted for more than 5
percent of the Company's sales in any fiscal year presented.
No single restaurant's Rights to receive balance was greater than 5
percent of the total Rights to receive balance at September 30, 1995 or
1994.
(14) BUSINESS COMBINATIONS
On July 1, 1995, the Chicago franchisee (the "franchisee"), was merged
into the Company, and 278,387 shares of the Company's common stock were
issued in exchange for all the outstanding common stock of the
franchisee. The merger was accounted for as a pooling of interests and
the accompanying financial statements reflect this transaction.
-36-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
For each of the years in the three-year period ended September 30, 1995
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BALANCE, CHARGED TO OTHER OTHER CHANGES
BEGINNING COSTS AND ACCOUNTS: ADD (DEDUCT): BALANCE, END
OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Accounts receivable:
Year ended September 30, 1995:
Allowance for doubtful accounts $ 25,000 332,528 - (342,528)(1) 15,000
====== ======= ======= ======== ======
Year ended September 30, 1994:
Allowance for doubtful accounts $ 20,000 111,527 - (106,527)(1) 25,000
====== ======= ======= ======== ======
Year ended September 30, 1993:
Allowance for doubtful accounts $ 20,000 100,459 - (100,459)(1) 20,000
====== ======= ======= ======== ======
<FN>
(1) Write-offs.
</FN>
</TABLE>
-37-
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For each of the years in the three-year period ended September 30, 1995
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-----------------------------------------
ITEM 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Advertising costs $ 551,399 549,156 904,585
======= ======= =======
</TABLE>
Other items are not set forth inasmuch as such items do not exceed 1 percent of
net sales as shown in the consolidated statements of income, are not applicable,
or the required information is shown in the consolidated financial statements or
notes thereto.
-38-
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by Item 10 is set forth under the heading
"Executive Officers of the Registrant" in Part I hereof and in
"Election of Directors" in the Company's 1996 Proxy Statement, which is
incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by Item 11 is set forth under the heading
"Executive Compensation" in the Company's 1996 Proxy Statement, which
is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for in Item 12 is set forth under the heading
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's 1996 Proxy Statement, which is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for in Item 13 is set forth under the heading
"Certain Relationships and Related Transactions" in the Company's 1996
Proxy Statement, which is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are being filed as part of this Report:
(a)(1) Financial Statements:
Transmedia Network Inc.
See "Index to Financial Statements" contained in Part II,
Item 8.
(a)(2) Financial Statement Schedules PAGE
----
Schedule VIII - Valuation and Qualifying Accounts 37
Schedule X - Supplementary Income Statement Information 38
-39-
<PAGE>
All other schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the Notes
thereto.
(a)(3) Exhibits
DESIGNATION DESCRIPTION
- ----------- -----------
2.1 Assignment and Assumption of Franchise Agreements dated September 30,
1994 between Transmedia Network Inc. and the Service Company.(1)
2.2 Capital Contribution dated September 30, 1994 by Transmedia Network
Inc. to the Service Company.(1)
2.3 Trademark Contribution dated September 30, 1994 from Transmedia Network
to the Service Company.(1)
2.4 Capital Contribution dated September 30, 1994 from Transmedia Network
Inc. to the Restaurant Company.(1)
2.5 Administrative Services Agreement dated as of September 30, 1994
between Transmedia Service Company Inc. and Transmedia Restaurant
Company Inc.(1)
2.6 Franchise Agreement dated September 30, 1994 between Transmedia Service
Company Inc. and Transmedia Restaurant Company Inc.(1)
3.1 Certificate of Incorporation of the Company, as amended.(2)
3.2 Certificate of Amendment to the Certificate of Incorporation of the
Company.(9)
3.3 Certificate of Amendment to the Certificate of Incorporation of the
Company, as filed with the Delaware Secretary of State on March 22,
1994.(1)
3.4 By-Laws of the Company.(3)
10.2 1987 Stock Option and Rights Plan, as amended.(1)(10)
10.3 Form of Stock Option Agreement (as modified) between the Company and
certain Directors and Schedule of Options granted and outstanding (as
of September 30, 1995) to such Directors pursuant to the respective
Stock Option Agreements with such Directors.
10.4 Employment Agreement dated January 1, 1987 between the Company and
Melvin Chasen.(10)(11)
-40-
<PAGE>
10.5 Amendment dated October 1, 1990 to Employment Agreement between the
Company and Melvin Chasen.(4)(10)
10.6 Amendment dated October 1, 1992 to Employment Agreement between the
Company and Melvin Chasen.(8)(10)
10.7 Consulting Agreement dated November 24, 1993 between the Company and
Melvin Chasen.(9)(10)
10.8 Amendment dated October 1, 1994, to Employment Agreement between the
Company and Melvin Chasen.(1)(10)
10.9 Employment Agreement effective April 1, 1992 between the Company and
James Callaghan.(9)(10)
10.10 Amendment dated October 1, 1994, to Employment Agreement between the
Company and James Callaghan.(1)
10.11 Master License Agreement dated December 14, 1992 between the Company
and Conestoga Partners, Inc.(8)
10.12 First Amendment to Master License Agreement dated April 12, 1993,
between the Company and Conestoga Partners, Inc.(9)
10.13 Second Amendment to Master License Agreement -- Assignment and
Assumption Agreement dated August 11, 1993 among the Company, TMNI
International Incorporated and Transmedia Europe, Inc.(9)
10.14 Master License Agreement Amendment No. 3 dated November 22, 1993
between TMNI International Incorporated and Transmedia Europe, Inc.(9)
10.15 Master License Agreement dated March 21, 1994 between TMNI
International Incorporated and Conestoga Partners II, Inc. licensing
rights in the Asia Pacific region.(1)
21.1 Subsidiaries of Transmedia Network Inc.(1)
23.1 Consent of Independent Auditors.(11)
27 Financial Data Schedule.(11)
99.1 Prospectus of the Company dated July 10, 1992 filed pursuant to the
Securities Act of 1933.(5)
99.2 Prospectus of the Company dated August 12, 1992 filed pursuant to the
Securities Act of 1933.(6)
99.3 Form of Subscription Agreement.(7)
-41-
<PAGE>
99.4 Agency Agreement dated April 9, 1992 between the Company and Janney
Montgomery Scott Inc.(8)
99.5 Warrant Purchase Agreement dated June 15, 1992 between the Company and
Janney Montgomery Scott.(8)
(1) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994 and
incorporated by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1988, and
incorporated by reference thereto.
(3) Filed as an exhibit to the Post Effective Amendment to the
Registration Statement on Form S-1 (Registration No. 33-5036),
and incorporated by reference thereto.
(4) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1990, and
incorporated by reference thereto.
(5) Filed as an exhibit to the Company's Registration Statement on
Form S-8 (Registration No. 33-494460), and incorporated by
reference thereto.
(6) Filed as an exhibit to the Company's Registration Statement on
Form S-3 (Registration No. 33-49374), and incorporated by
reference thereto.
(7) Filed as an exhibit to the Company's Form 8-K Current Report
dated June 15, 1992, and incorporated by reference thereto.
(8) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1992, and
incorporated by reference thereto.
(9) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, and
incorporated by reference thereto.
(10) Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c) hereof.
(11) Filed as an exhibit hereto.
(b) The Company did not file any Form 8-K Current Reports during
the fiscal year ended September 30, 1995.
-42-
<PAGE>
(c) Exhibits:
See paragraph (a) (3) above for items filed as exhibits to
this Annual Report on Form 10-K as required by Item 601 of
Regulation S-K.
(d) Financial Statement Schedules:
See paragraphs (a)(1) and (a)(2) above for financial statement
schedules and supplemental financial statements filed as part
of this Annual Report on Form 10-K.
-43-
<PAGE>
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.
TRANSMEDIA NETWORK INC.
By: /s/ MELVIN CHASEN
------------------------
Melvin Chasen, President
Dated: December 27, 1995
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 date indicated.
NAME TITLE DATE
---- ----- ----
/s/ MELVIN CHASEN Director, Chairman December 27, 1995
- ----------------------- of the Board, President
Melvin Chasen and Chief Executive
Officer
/s/ JAMES M. CALLAGHAN Director, December 27, 1995
- ----------------------- Vice President
James M. Callaghan
/s/ JACK AFRICK Director December 27, 1995
- -----------------------
Jack Africk
/s/ HERBERT M. GARDNER Director December 27, 1995
- -----------------------
Herbert M. Gardner
/s/ IRWIN HOCHBERG Director December 27, 1995
- -----------------------
Irwin Hochberg
/s/ A. BARRY MERKIN Director December 27, 1995
- -----------------------
A. Barry Merkin
/s/ HENRY SEIDEN Director December 27, 1995
- -----------------------
Henry Seiden
/s/ DAVID L. WEINBERG Vice President and December 27, 1995
- ---------------------- Chief Financial
David L. Weinberg Officer (Principal
Financial and
Accounting Officer)
-44-
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ----------- ----------------------- -------------
2.1 Assignment and Assumption of Franchise Agreements dated
September 30, 1994 between Transmedia Network Inc. and the
Service Company.(1) P
2.2 Capital Contribution dated September 30, 1994 by Transmedia
Network Inc. to the Service Company.(1) P
2.3 Trademark Contribution dated September 30, 1994 from
Transmedia Network to the Service Company.(1) P
2.4 Capital Contribution dated September 30, 1994 from
Transmedia Network Inc. to the Restaurant Company.(1) P
2.5 Administrative Services Agreement dated as of September 30,
1994 between Transmedia Service Company Inc. and Transmedia
Restaurant Company Inc.(1) P
2.6 Franchise Agreement dated September 30, 1994 between
Transmedia Service Company Inc. and Transmedia Restaurant
Company Inc.(1) P
3.1 Certificate of Incorporation of the Company, as amended.(2) P
3.2 Certificate of Amendment to the Certificate of
Incorporation of the Company.(9) P
3.3 Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Delaware Secretary of State
on March 22, 1994.(1) P
3.4 By-Laws of the Company.(3) P
10.2 1987 Stock Option and Rights Plan, as amended.(1)(10) P
10.3 Form of Stock Option Agreement (as modified) between the
Company and certain Directors and Schedule of Options granted
and outstanding (as of September 30, 1995) to such Directors
pursuant to the respective Stock Option Agreements with such
Directors. 49
-45-
<PAGE>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ----------- ----------------------- -------------
10.4 Employment Agreement dated January 1, 1987 between the
Company and Melvin Chasen.(10)(11) 50
10.5 Amendment dated October 1, 1990 to Employment Agreement
between the Company and Melvin Chasen.(4)(10) P
10.6 Amendment dated October 1, 1992 to Employment Agreement
between the Company and Melvin Chasen.(8)(10) P
10.7 Consulting Agreement dated November 24, 1993 between
the Company and Melvin Chasen.(9)(10) P
10.8 Amendment dated October 1, 1994, to Employment Agreement
between the Company and Melvin Chasen.(1)(10) P
10.9 Employment Agreement effective April 1, 1992 between
the Company and James Callaghan.(9)(10) P
10.10 Amendment dated October 1, 1994, to Employment Agreement
between the Company and James Callaghan.(1)(10) P
10.11 Master License Agreement dated December 14, 1992 between
the Company and Conestoga Partners, Inc.(8) P
10.12 First Amendment to Master License Agreement dated
April 12, 1993, between the Company and Conestoga P
Partners, Inc.(9)
10.13 Second Amendment to Master License Agreement -- Assignment
and Assumption Agreement dated August 11, 1993 among the
Company, TMNI International Incorporated and Transmedia
Europe, Inc.(9) P
10.14 Master License Agreement Amendment No. 3 dated November 22,
1993 between TMNI International Incorporated and Transmedia
Europe, Inc.(9) P
10.15 Master License Agreement dated March 21, 1994 between TMNI
International Incorporated and Conestoga Partners II, Inc.
licensing rights in the Asia Pacific region.(1) P
21.1 Subsidiaries of Transmedia Network Inc.(1) P
-46-
<PAGE>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ----------- ----------------------- -------------
23.1 Consent of Independent Auditors.(11) 67
27 Financial Data Schedule.(11) 68
99.1 Prospectus of the Company dated July 10, 1992 filed pursuant
to the Securities Act of 1933.(5) P
99.2 Prospectus of the Company dated August 12, 1992 filed
pursuant to the Securities Act of 1933.(6) P
99.3 Form of Subscription Agreement.(7) P
99.4 Agency Agreement dated April 9, 1992 between the Company
and Janney Montgomery Scott Inc.(8) P
99.5 Warrant Purchase Agreement dated June 15, 1992 between the
Company and Janney Montgomery Scott.(8) P
(1) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994 and
incorporated by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1988, and
incorporated by reference thereto.
(3) Filed as an exhibit to the Post Effective Amendment to the
Registration Statement on Form S-1 (Registration No. 33-5036),
and incorporated by reference thereto.
(4) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1990, and
incorporated by reference thereto.
(5) Filed as an exhibit to the Company's Registration Statement on
Form S-8 (Registration No. 33-494460), and incorporated by
reference thereto.
(6) Filed as an exhibit to the Company's Registration Statement on
Form S-3 (Registration No. 33-49374), and incorporated by
reference thereto.
-47-
<PAGE>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF DOCUMENT NUMBERED PAGE
- ----------- ----------------------- -------------
(7) Filed as an exhibit to the Company's Form 8-K Current Report
dated June 15, 1992, and incorporated by reference thereto.
(8) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1992, and
incorporated by reference thereto.
(9) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, and
incorporated by reference thereto.
(10) Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report on
Form 10-K pursuant to Item 14(c) hereof.
(11) Filed as an exhibit hereto.
-48-
FORM OF
STOCK OPTION AGREEMENT
FOR CERTAIN DIRECTORS
THIS AGREEMENT is made as of ___________, between TRANSMEDIA NETWORK
INC., a Delaware corporation with its principal place of business at 750
Lexington Avenue, New York, New York 10022 (the "Corporation"), and ___________,
whose principal address is ________________________________ (the "Holder").
WITNESSETH:
By action taken on ________________, the Board of Directors of the
Corporation (the "Board") approved the grant to the Holder of an option to
purchase shares of the Corporation's Common Stock, par value $.02 per share (the
"Common Stock").
NOW THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. DEFINITIONS
"Business Day" means a day other than a Saturday,
Sunday or other day on which banks in the State of New York are authorized by
law to remain closed.
"Termination Date" means _____________________ (or if
that day is not a Business Day, the next following Business Day).
2. GRANT OF OPTION
The Corporation hereby irrevocably grants to the Holder the
right and option (the "Option") to purchase all or any part of an aggregate of
__________ shares of Common Stock of the Corporation on the terms and conditions
hereinafter set forth. The shares of Common Stock into which the Option may be
exercised shall be referred to hereinafter as the "Shares".
3. PURCHASE PRICE
The purchase price of the Shares payable upon any full or
partial exercise of the Option is $_______ per Share (fair market value), the
date on which this option was granted by the Board of Directors of the
Corporation.
4. TERM; EXERCISE
Subject to the terms of Paragraph 7 hereof, the Option may
be exercised at any time before 5:00 P.M. New York City time on the Termination
Date. The Option may be exercised at any time and from time to time prior to the
Termination Date as to any part or all of the Shares; PROVIDED, HOWEVER, that
the Option may not be exercised with respect to less
-49-
<PAGE>
than one thousand (1,000) Shares (or the remaining Shares then subject to
purchase under the Option, if less than one thousand Shares) or for any
fractional shares.
5. RIGHTS AS A STOCKHOLDER
(a) If the Option is exercised in accordance with the
terms of this Agreement, then the Holder will for all purposes be deemed the
holder of record of the Shares as to which the Option is exercised, except that
if that is a date when the Common Stock transfer books of the Corporation are
closed, the Holder will be deemed to become the record holder of the Shares on,
and the certificate will be dated the next succeeding Business Day when the
Common Stock transfer books of the Corporation are open. Until the Option is
exercised, the Holder will not be entitled to any of the rights of a stockholder
of the Corporation as to the Shares, including the right to vote, to receive
dividends or other distributions, if any, and will not be entitled to receive
notice of any proceedings of the Corporation except as provided in this
Agreement.
(b) The Corporation covenants that all Shares issued
on exercise of the Option will be validly issued, fully paid, and
non-assessable.
6. NON-TRANSFERABILITY
The Option shall not be transferred otherwise than by
operation of law. During the lifetime of the Holder, the Option may be exercised
only by the Holder. Without limiting the generality of the foregoing, the Option
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, and shall not be subject to execution, attachment or
similar process. Any attempt to assign, transfer, pledge, hypothecate or
otherwise dispose of the Option contrary to the provisions of this paragraph or
the levy of any execution, attachment or similar process upon the Option shall
be null and void and without effect.
7. TERMINATION OF DIRECTORSHIP; DEATH OF HOLDER
(a) The Option shall expire on the earlier of the
Termination Date or thirty (30) days after the Holder ceases to be a director of
the Corporation.
(b) If the Holder dies while he is serving as a
director of the Corporation, the Option shall expire on the earlier of the
Termination Date or ninetieth (90) days after the death of the Holder. In the
case of the death of the Holder, the Option may be exercised by the Holder's
estate for the period set forth in this subsection (b).
8. METHOD OF EXERCISING OPTION
(a) Subject to the terms and conditions of this
Agreement, the Option may be exercised by delivering written notice to the
Corporation at its then principal office. Such notice shall state the election
to exercise the Option, the number of Shares with respect to which it is being
exercised and the method of payment to be utilized in connection with such
exercise. The purchase price for the shares for which the Option is being
exercised shall be paid by delivering with the notice of exercise cash or a
certified check, payable to the Corporation, for the full amount of the purchase
price for the Shares for which the Option is
-50-
<PAGE>
being exercised. To the extent permitted by applicable law, the Holder may pay
all or a portion of the purchase price by surrender of shares of Common Stock
(at their fair market value) or by a simultaneous sale of the Shares to be
issued pursuant to such exercise pursuant to a brokerage or similar arrangement.
(b) If the Option is exercised by a person other than
the Holder, the notice of exercise shall be accompanied by the appropriate
proof, in form and substance satisfactory to the Corporation, of such person's
right to exercise the Option. Certificates for Shares for which the Option has
been exercised shall not be issued until the Corporation receives the full
purchase price for such Shares. Shares and the certificates therefor shall be
issued in the name of the person who is entitled at the time to exercise the
Option.
9. ADJUSTMENTS FOR CAPITAL CHANGES
Subject to any required action by the Corporation's
stockholders, if, at any time while the Option is outstanding, the outstanding
shares of Common Stock are increased or decreased or changed into or exchanged
for a different number or kind of shares of the Corporation or any parent or
subsidiary of the Corporation through a stock dividend, stock split, reverse
stock split, stock combination, reclassification, reorganization, merger, or
consolidation, the Board shall equitably adjust the number, kind and purchase
price of the Shares subject to the then unexercised portion of the Option, so
that the Holder shall be entitled to purchase, for the same aggregate purchase
price then payable under the Option with respect to the then unexercised
portion, the number of Shares which the Holder would have received as a result
of the capital change, for the Shares that he would have acquired by exercising
the unexercised portion of the Option immediately prior to such capital change.
In addition, the Board is authorized to make adjustments in the terms and
conditions of the Option (including, without limitation, cash payments in
exchange for the Option or substitution of the Option using stock of a successor
or other entity) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence) affecting the
Corporation or any subsidiary or the financial statements of the Corporation or
any subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.
10. RESERVATION OF SHARES OF COMMON STOCK
The Corporation shall, at all times during the term of the
Option, reserve and keep available such number of shares of Common Stock as will
be sufficient to satisfy the requirements of the Option, shall pay all original
issue taxes with respect to the issuance of Shares pursuant hereto, and all
other fees and expenses necessarily incurred by the Corporation in connection
therewith and will, from time to time, use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for the Corporation, shall
be applicable thereto. Notwithstanding any provision of this paragraph to the
contrary, the Holder will pay all transfer taxes owing in respect of the Shares.
11. INVESTMENT REPRESENTATION
The Holder will, upon the purchase of any Shares pursuant
to the Option, simultaneously deliver a written certificate to the Corporation,
stating that he is purchasing the Shares for his own account, for investment
purposes only and not with a view
-51-
<PAGE>
to the distribution thereof, and containing such other provisions as counsel to
the Corporation shall deem necessary or appropriate. The Holder hereby
acknowledges that he has been informed that: (i) the Corporation is not
obligated and does not intend to register the sale of the Shares to him under
the Securities Act of 1933, as amended (the "Act") or under any applicable state
securities law, and that accordingly such Shares may not be distributed or
transferred by him except pursuant to an effective registration statement under
the Act or under applicable state law or an opinion of counsel for or approved
by the Corporation to the effect that such registration is not required; (ii) a
legend to the foregoing effect shall be placed on each certificate representing
the Shares; and (iii) the Corporation may issue stop-transfer instructions to
its Transfer Agent in respect of any or all of the Shares as the Corporation
deems appropriate to prevent a violation of the Act.
12. NO OBLIGATION TO EXERCISE
The grant of the Option imposes no obligation on the Holder
to exercise the Option.
13. NOTICES
All notices and other communications to be given under or
pursuant to this Agreement shall be in writing and shall be sent by first class
certified or registered mail, postage prepaid, or by nationally recognized
overnight courier service, against receipt, to the address of the party to whom
such communication is being sent at the address set forth in the first sentence
of this Agreement. Any party hereto may change the address to which each such
notice or communication shall be sent by giving written notice to all of the
other parties hereto in accordance with this paragraph.
14. BINDING EFFECT
The provisions of the Agreement shall be binding upon and
inure to the benefit of the permitted successors and assigns of the parties
hereto.
15. COUNTERPARTS; GOVERNING LAW
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
16. CAPTIONS
The captions of the paragraphs of this Agreement are for
the purpose of convenience only, are not intended to be part of this Agreement
and shall not be deemed to modify, explain, enlarge or restrict any of its
provisions.
17. SEPARABILITY
If any clause or provision of this Agreement shall be held
invalid or unenforceable, in whole or in part, in any jurisdiction, such
invalidity or unenforceability shall
-52-
<PAGE>
attach only to such clause or provision, or part thereof, and shall not in any
manner affect any other clause or provision in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
TRANSMEDIA NETWORK INC.
By:____________________________
HOLDER
_______________________________
-53-
<PAGE>
Schedule of Options Granted
to Directors
Attached to Exhibit 10.3
Form of Stock Option Agreement
For Certain Directors
Pursuant to Rule 12(b)-31, the Company is not filing a copy of
the several Stock Option Agreements between it and the above-named Directors.
This schedule sets forth the material details in which such Agreements differ
from the form of Stock Option Agreement included as Exhibit 10.3.
<TABLE>
<CAPTION>
NO. OF EXERCISE
SHARES PRICE EXPIRING
------- -------- --------
<S> <C> <C> <C>
A. Jack Africk 42,187 $3.89 3/16/97
11,250 7.44 9/20/98
B. Melvin Chasen 135,000 4.83 5/19/97
67,500 7.44 9/20/98
C. Herbert M. Gardner 42,187 3.89 3/16/97
11,250 7.44 9/20/98
D. Irwin Hochberg 42,187 3.89 3/16/97
11,250 7.44 9/20/98
E. M. Barry Merkin 5,000 11.38 5/24/00
F. Henry Seiden 42,187 3.89 3/16/97
11,250 7.44 9/20/98
</TABLE>
-54-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 1st day of January, 1987, by and
between TRANSMEDIA NETWORK INC., a Colorado corporation ("TRANSMEDIA"), and
MELVIN CHASEN (the "EXECUTIVE"). In consideration of the mutual promises and
covenants herein contained, and intending to be legally bound hereby, the
parties hereto do mutually agree as follows:
1. EMPLOYMENT. Transmedia agrees to and does hereby employ the
Executive, and the Executive accepts such employment, upon the terms and
conditions hereinafter set forth. The Executive represents and warrants that he
is free to enter into this Agreement and that entering into this Agreement is
not in violation of any obligations that he has to any other person, firm or
corporation.
2. TERM. The term of this Agreement shall be for the period commencing
January 1, 1987 and ending on September 30, 1991 (the "TERM"), unless earlier
terminated as provided herein.
3. OFFICE AND DUTIES. The Executive shall perform such executive
services in the operation of the business of Transmedia and its subsidiaries as
Transmedia's Board of Directors may from time to time reasonably assign to the
Executive. The Executive shall hold the positions of President and Chief
Executive Officer of Transmedia, and shall report directly to Transmedia's Board
of Directors. In addition, in connection with any meeting or action of
stockholders for the election of Transmedia's Board of Directors, Transmedia
shall nominate the Executive for election to Transmedia's Board of Directors and
shall use its best efforts to cause the Executive to be elected thereto. During
the term of this Agreement, the Executive shall: (a) work for Transmedia and its
subsidiaries on a full-time, exclusive basis; (b) use his best efforts to apply
on a full-time basis all of his skill and experience to the
-55-
<PAGE>
performance of his duties in such employment; and (c) not engage in any other
business activities, other than personal investments in corporations and other
entities which do not compete directly or indirectly with Transmedia and its
subsidiaries. Notwithstanding the provisions of the preceding sentence, the
Executive shall be entitled, on an occasional basis, to serve as a consultant
to, or on the board of directors of, other corporations during the term of this
Agreement and to receive and retain all compensation paid to him in such
capacities, so long as such other corporations do not compete directly or
indirectly with Transmedia and its subsidiaries. The Executive shall be entitled
to a private office commensurate with his position with Transmedia and to a
secretary assigned exclusively to the Executive. The provisions of this Section
3 are subject to modification as set forth in Section 10.
4. COMPENSATION AND BENEFITS. (a) For services rendered by the
Executive under this Agreement, the Executive shall be paid a base salary (the
"SALARY") at the rate of $104,000 per annum. The Salary shall be payable in
equal weekly installments.
(b) As additional compensation, Transmedia shall pay the
Executive an annual bonus (the "BONUS") equal to 10% of excess over the initial
$100,000 of Pre-Tax Income (as defined below) for each fiscal year of Transmedia
or portion thereof occurring during the term of this Agreement, provided,
however, that the Bonus for any fiscal year shall not exceed $100,000 per year
for each full fiscal year with respect to which the Bonus is determined or, for
partial fiscal years with respect to which the Bonus is determined, the pro rata
portion of $100,000 that any such partial fiscal year bears to a full fiscal
year. "PRE-TAX INCOME" shall mean the pre-tax income of Transmedia for the
applicable period before computation of the Bonus, as determined by Transmedia's
independent certified public accountants on the basis of generally accepted
accounting principles consistently applied. The Bonus shall be payable on an
annual basis within 120 days after the end of each fiscal year, commencing with
the fiscal year ending September 30, 1987. The Bonus with respect to the fiscal
year ending September 30,
-56-
<PAGE>
1987 shall be determined on the basis of the entire fiscal year. Otherwise, if
the term of this Agreement includes less than all of any fiscal year, then the
Bonus, if any, payable for such fiscal year shall be determined on a pro rata
basis of the Pre-Tax Income for the portion of such fiscal year that this
Agreement is in effect except as provided in sub-paragraph 4(d) hereof.
(c) Transmedia shall, during the term of this Agreement, pay
all premiums on the existing whole-life insurance policy issued by Executive
Life Insurance Company on the life of the Executive in the face amount of
$500,000. Upon the expiration of the term of this Agreement, Transmedia shall
transfer the ownership of such policy to the Executive without any payment by
the Executive. In the event of the death of the Executive during the term of
this Agreement, Transmedia will segregate proceeds thereof sufficient to
purchase an annuity that will pay to the estate of the Executive a death benefit
of $50,000 per year for a period of ten years, with the first such benefit
payable six months after such death. The balance of such proceeds after purchase
of the annuity shall be retained by Transmedia.
(d) At all times during the term of this Agreement, the
Executive shall be included in any life, medical, health, and hospitalization
insurance, pension, stock option, stock ownership, incentive compensation, and
other benefit programs maintained by or for Transmedia at the date hereof. If
Transmedia hereafter establishes any other programs, the Executive shall be
included therein at at least the same level as the other senior executives of
Transmedia. In addition, in the event of the Executive's Disability (as defined
below), Transmedia will pay to the Executive the following: (i) during the first
six months of Disability, 100% of the Salary that would be payable to the
Executive but for such Disability; (ii) thereafter, and until the end of the
Term, 75% of such Salary; and (iii) the Bonus for the period(s) provided in the
next sentence. The Executive shall receive a Bonus for the entire fiscal year
ending on any applicable September 30th, if said September 30th occurs during
the
-57-
<PAGE>
first six months of Disability; in all other instances, the Executive shall
receive a portion of the Bonus for an entire year determined by multiplying the
Bonus for the entire fiscal year by a fraction, the numerator of which is the
total number of months starting with October 1st and ending upon the conclusion
of said six months of Disability and the denominator of which is 12. For
purposes of this sub-paragraph (d), all calculations shall be made on the basis
of full and not partial months. In addition, Transmedia shall provide for
payment of the living allowance set forth in Section 4(e) for the first six
months of Disability, but only for so long as the Executive remains in the New
York metropolitan area. For the purposes hereof "Disability" shall mean a
physical or mental impairment of such duration and degree that the Executive is
determined by the Board of Directors of Transmedia to be substantially unable
because of the impairment to perform the services described in Section 3.
(e) Transmedia acknowledges that the Executive's permanent
domicile is in the State of Florida. In order to compensate the Executive for
obtaining living accommodations in New York, Transmedia shall pay to the
Executive a New York living allowance of (i) $1,500 per month from the date
hereof until September 30, 1987 and (ii) $2,000 per month from October 1, 1987
until the expiration of the term of this Agreement.
(f) Transmedia may provide to the Executive such additional
compensation, bonuses, and benefits as its Board of Directors deems appropriate,
but nothing herein shall obligate Transmedia to do so.
5. VACATION. The Executive shall be entitled to take four (4) weeks'
paid vacation during each twelve-month period of his employment hereunder on a
basis consistent with the requirements of the business of Transmedia and its
subsidiaries and in accordance with Transmedia's customary practice for senior
executives. Unused accrued vacation may be carried forward and taken during any
subsequent twelve-month period; PROVIDED, HOWEVER, that the Executive may not
take more than four weeks' vacation during any three-month
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<PAGE>
period. In lieu of carrying forward unused accrued vacation, the Executive may
elect to be paid for all or any part of unused accrued vacation from any prior
twelve-month period. The amount of any such payment shall be based on the
Executive's Salary in effect at the time of payment. At the expiration of this
Agreement after its stated term or upon the earlier termination hereof by
Transmedia without "cause" (as defined in Section 9 hereof), Transmedia shall
pay the Executive for any unused vacation time which accrued prior to expiration
or termination at the rate set forth in the preceding sentence.
6. REIMBURSEMENT OF EXPENSES. During the term of this Agreement, the
Executive shall be reimbursed for reasonable travel, entertainment and other
expenses incident to the rendering of services hereunder and not covered by the
living allowance pursuant to Section 4(e), upon presentation of expense
statements or vouchers or such other supporting information as Transmedia may
customarily require of its senior executives.
7. RESTRICTIONS. (a) The Executive acknowledges that the business of
Transmedia is potentially nationwide in scope, and that it expects to be
marketing its products and services throughout a wider geographical area than
that in which it presently operates. Accordingly, during the Restricted Period
(as defined below), the Executive shall not, unless acting with Transmedia's
prior written consent: (i) directly or indirectly own, manage, operate, join, or
control, or participate in the ownership, management, operations or control of,
or be connected as a director, officer, employee, partner, stockholder,
consultant or otherwise with, any business or organization located in or doing
business in the Restricted Area (as defined below) which (A) is engaged in
financing restaurant advertising or equipment or providing restaurant discounts
to members of its programs or (B) directly or indirectly competes with any other
business of Transmedia or any of its subsidiaries conducted at any time during
the term hereof; or (ii) interfere with, or divert or attempt to divert the
benefits of, any relationship with employees, agents, suppliers, restaurant
clients, membership card holders or
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<PAGE>
other customers maintained by Transmedia and its subsidiaries at any time during
the Restricted Period. However, if the Executive's employment hereunder is
terminated without "cause" (as defined in Section 9 hereof), then the provisions
of this Section 7(a) shall cease upon such termination. For the purposes of this
Agreement, (i) "RESTRICTED PERIOD" means the twenty-four-month period commencing
upon the earlier of (x) the termination of the Executive's employment with
Transmedia prior to the expiration hereof, either voluntarily by the Executive
or by Transmedia for "cause"; (y) the expiration of this Agreement after its
stated term,; or (z) if the Executive elects to enter into the Consulting
Agreement pursuant to Section 10, the expiration of the term thereof; and (ii)
"RESTRICTED AREA" means any geographical market in or with respect to which
Transmedia, within twelve months prior to the commencement of the Restricted
Period, is then operating or has taken significant affirmative steps to commence
operations. Nothing in this Section 7(a) shall be construed to prevent the
Executive from owning or dealing in any stock actively traded over-the-counter
or on any recognized exchange and issued by a corporation which may compete
directly or indirectly with Transmedia and its subsidiaries so long as the
Executive does not participate in the management, control, or operations of any
such corporation and the Executive's holdings do not at any time exceed five
percent (5%) of the outstanding shares of any class of stock of such
corporation.
(b) The Executive agrees that all confidential and proprietary
matters which he may now have or may obtain during the term of his employment
hereunder relating in any way to the business of Transmedia and its subsidiaries
shall not be disclosed to any other person, either during or after the
termination of his employment, unless Transmedia has given its prior consent to
such disclosure or such disclosure is a necessary incident to transactions with
the Executive is pursuing in accordance with duties delegated to him by
Transmedia's Board of Directors. The Executive shall promptly return all
tangible evidence of such
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<PAGE>
confidential and proprietary matters to Transmedia at the termination of his
employment or upon Transmedia's earlier request.
(c) The Executive acknowledges that the remedy at law for his
breach of the covenants contained in this Section 7 is inadequate, and that
therefore Transmedia and its subsidiaries shall be entitled, in addition to any
other right or remedy available to them, to injunctive relief and the remedy of
specific performance to restrain the Executive from committing or continuing any
such breach and to enforce the Executive's obligations hereunder.
(d) If any court or tribunal of competent jurisdiction shall
refuse to enforce any or all of the provisions of this Section 7, because
individually or taken together, they are deemed unreasonable, then the parties
hereto understand and agree that any such provision or provisions shall not be
void but for the purpose of such proceedings, shall be revised to the extent
necessary to permit the enforcement of such provisions.
8. OWNERSHIP OF WORK PRODUCT. The Executive acknowledges that during
the term of his employment hereunder he may conceive of, discover, invent, or
create inventions, improvements, new contributions, literary property, material,
ideas and discoveries, whether or not patentable or copyrightable, which relate
to the business of Transmedia and its subsidiaries (all of the foregoing being
collectively referred to herein as "Work Product"), and that various business
opportunities appropriate for Transmedia and its subsidiaries may be presented
to him by reason of his employment. The Executive acknowledges that, unless
Transmedia otherwise agrees in writing, all of the foregoing shall be owned by
and belong exclusively to Transmedia, and he shall have no personal interest
therein. The Executive, at Transmedia's expense, shall further: (a) promptly
disclose any such Work Product and business opportunities to Transmedia; (b)
assign to Transmedia, upon request and without additional compensation, the
entire rights to such Work Product and business opportunities; (c) sign all
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<PAGE>
papers necessary to carry out the foregoing; and (d) give testimony in support
of his discovery, invention, or creation in any appropriate case.
9. TERMINATION. (a) Notwithstanding anything contained herein to the
contrary, the Executive's employment hereunder: (i) shall automatically
terminate upon the Executive's death; and (ii) may be terminated by Transmedia's
Board of Directors for "cause" (as hereinafter defined) upon 60' days prior
written notice of termination, subject to the Executive's right to cure certain
breaches constituting "cause", as provided below. For the purposes of this
Agreement, termination shall be deemed to be "for cause" if: (i) the Executive
is convicted of a felony; (ii) the Executive declares personal bankruptcy
pursuant to any applicable law; (iii) the Executive commits an act of fraud with
respect to Transmedia or misappropriates any of its funds; or (iv) the Executive
directly and repeatedly refuses to perform his duties pursuant to this
Agreement, or directly and repeatedly breaches any covenants contained herein.
The written notice of termination shall set forth with specificity the reason
for such termination. If the reason for such termination is the Executive's
direct and repeated refusal to perform his duties hereunder or his direct and
repeated breach of any covenants contained herein, the Executive shall have the
right, within 30 days of his receipt of such notice, to notify the Board of
Directors of his intention to cure such breach. On or within 10 days before the
effective date of termination, the Board of Directors shall meet to determine
whether such breach has been effectively cured and, upon the majority vote of
the directors (not including the Executive) that it has been cured, the notice
of termination shall be deemed ineffective. The Executive shall be entitled to
be represented at such meeting by counsel. On the effective date of termination,
except for the reimbursement of expenses incurred to such date, the Executive
shall cease to have any further rights hereunder but shall be subject to all
restrictions set forth elsewhere herein.
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<PAGE>
(b) Except where the Executive has exercised his right to
attempt to cure pursuant to the preceding subsection, the Executive may, within
15 days following delivery of a notice of termination for "cause", by written
notice to the Board of Directors of Transmedia, cause the matter of termination
for "cause" by Transmedia to be discussed at the next regularly scheduled
meeting of the Board of Directors or at a special meeting of the Board of
Directors requested by a majority of its members. The Executive shall be
entitled to be represented at such meeting by counsel. Such meeting shall be
conducted according to procedures deemed equitable by a majority of the
directors present. If, at such meeting, it shall be determined that this
Agreement has been terminated without "cause," or that such "cause" shall be
waived, the provisions of this Agreement shall be reinstated with the same force
and effect as if the notice of termination has not been given; and the Executive
shall be entitled to receive the compensation and other benefits provided herein
for the period from the effective date of the notice of termination through the
date of such reinstatement, plus all reasonable costs of his counsel as approved
by the Board of Directors of Transmedia. Except as provided in the first
sentence of this subsection (b), neither the Executive's election to pursue or
forego the procedures set forth in this subsection (b), nor a determination by
the Board of Directors, at any meeting pursuant to this subsection, that the
Executive's employment hereunder was terminated for "cause", shall prejudice or
preclude the exercise of any other right or remedy which the Executive may have
at law or otherwise as a result of the termination of his employment hereunder.
10. SALE OF TRANSMEDIA; CONSULTING ARRANGEMENT. The sale of all or
substantially all of the assets of Transmedia, or the sale of a "control block"
(as hereafter defined) of its shares to any person during the term of this
Agreement shall be made subject to the Executive's right to either 1) continue
his employment under the terms of this Agreement or 2) within 90 days after such
sale, elect to enter into a consulting arrangement pursuant to the
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<PAGE>
terms of a written agreement (the "Consulting Agreement") pursuant to which he
will provide up to 40 hours of consulting services per calendar quarter to
Transmedia or its successor, as may be reasonably requested by Transmedia or its
successor, with respect to marketing, advertising and general financial matters.
The Consulting Agreement will provide for (i) compensation equal to 50% of the
Salary and Bonus which would otherwise have been payable to the Executive; (ii)
reimbursement of all of the Executive's travel expenses for performing such
services outside of Florida, in lieu of the living allowance set forth in
Section 4(e); and (iii) benefits with respect to the life insurance policy, and
payment of death benefits, as set forth in Section 4(c). The term of the
Consulting Agreement shall be the remaining term of this Agreement. For the
purposes hereof "control block" means any block of shares the possession of
which, when added to any shares already owned, directly or indirectly gives the
power in any form to direct or cause the direction of the management and
policies of Transmedia.
11. NOTICES. Any notices to be given hereunder shall be deemed to have
been given if delivered personally against receipt, if sent by nationally
recognized overnight delivery service, or if mailed by registered or certified
mail, return receipt requested, to the following address: if to Transmedia, at
Suite 414, 509 Madison Avenue, New York, New York 10022, with a copy to Slade &
Pellman at 850 Third Avenue, New York, New York 10022, to the attention of
Stuart M. Pellman, Esq.; and if to the Executive, at 2085 N.E. 120th Road, North
Miami, Florida 33181. Either party may change his or her address set forth above
by giving written notice to the other party in accordance with this Section.
12. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
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<PAGE>
13. CAPTIONS. The captions of the sections of this Agreement are for
the purpose of convenience only, are not intended to be part of this Agreement
and shall not be deemed to modify, explain, enlarge or restrict any of its
provisions.
14. SEVERABILITY. If any clause or provision of this Agreement shall be
held invalid or unenforceable, in whole or in part, in any jurisdiction, such
invalidity or unenforceability shall attach only to such clause or provision, or
part thereof, in such jurisdiction, and shall not in any manner affect any other
clause or provision hereof in any jurisdiction.
15. BINDING EFFECT; ASSIGNMENT. This Agreement shall bind and inure to
the benefit of the respective heirs, representatives, successors, and permitted
assignees of Transmedia and the Executive. Transmedia may assign this Agreement
or any of its rights and obligations hereunder to (i) any transferee of or
successor to all or substantially all of the assets or business of Transmedia
and its subsidiaries or (ii) any subsidiary or affiliate of Transmedia;
PROVIDED, HOWEVER, that no such assignment shall release Transmedia from its
obligations hereunder. The Executive may not assign this Agreement or any of his
rights and obligations hereunder under any circumstances.
16. MISCELLANEOUS. This Agreement embodies the entire understanding
between Transmedia and the Executive with respect to its subject matter, and
there is no extrinsic agreement of any kind affecting it. This Agreement also
supersedes and replaces any prior agreement with respect to the subject matter
of this Agreement. This Agreement may not be changed or terminated orally, and
no change, termination or waiver of this Agreement or of any of the provisions
herein contained shall be binding unless made in writing and signed by the party
against whom the same is sought to be enforced.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
TRANSMEDIA NETWORK INC.
By: /s/ MELVIN CHASEN
------------------------
Melvin Chasen, President
/s/ MELVIN CHASEN
------------------------
Melvin Chasen
Approved by the
Board of Directors
of Transmedia
/s/ CHARLES SIMONELLI
- ----------------------------
Charles Simonelli, Director
/s/ HERBERT M. GARDNER
- ----------------------------
Herbert M. Gardner, Director
/s/ IRWIN HOCHBERG
- ----------------------------
Irwin Hochberg, Director
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The Board of Directors and
Stockholders
Transmedia Network Inc.:
We consent to incorporation by reference in the registration (No. 33-9002) on
Form S-4 of Transmedia Network, Inc. of our report dated November 22, 1995,
relating to the consolidated balance sheets of Transmedia Network Inc. and
subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of earnings, retained earnings, and cash flows for each of the years
in the three-year period ended September 30, 1995, and all related schedules,
which report appears in the September 30, 1995 annual report on Form 10-K of
Transmedia Network Inc.
KPMG Peat Marwick LLP
Miami, Florida
December 26, 1995
-67-
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 2,270,322
<SECURITIES> 0
<RECEIVABLES> 1,729,421
<ALLOWANCES> 15,000
<INVENTORY> 26,147,400
<CURRENT-ASSETS> 31,281,681
<PP&E> 4,565,283
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<TOTAL-ASSETS> 37,786,502
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0
0
<COMMON> 202,375
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<SALES> 58,792,454
<TOTAL-REVENUES> 65,540,347
<CGS> 39,488,493
<TOTAL-COSTS> 58,488,084
<OTHER-EXPENSES> 294,600
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<INTEREST-EXPENSE> 116,190
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