SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to
Commission file number 1-13806
TRANSMEDIA NETWORK INC.
-----------------------
(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
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 _
<PAGE>
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 16, 1997: $52,048,482.
Number of shares outstanding of Registrant's Common Stock, as of December 16,
1997: 10,359,956.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Transmedia Network Inc., (The "Company") is a marketing company that selectively
issues the TRANSMEDIA/Registered trademark/ Card which is designed to provide
its members with a convenient way to save on the purchase of quality products
and services. Individual and business members accrue savings from a menu of
purchase options, the benefits of which may be utilized in a variety of ways.
Initially created to provide the membership with savings at restaurants, the
program has been expanded to include hotels and resorts, travel and a host of
other leisure time activities. Additionally, the Company offers access to
discount long distance telephone service and discount programs for the purchase
of merchandise from selected retailers.
The Company's operations are transaction driven. Through the advance purchase at
wholesale of "rights-to-receive" from merchants by its sales force, the Company
is able to resell the credits to its cardmembers at savings from retail prices.
The Company earns additional commission income by offering its growing value-and
savings-oriented membership with an array of other goods and services. In
addition, merchants enjoy the ability of analyzing results from the co-marketing
programs.
The Company has recently introduced Transmedia Travel, an exclusive cardmember
booking service, through an affiliation with a major travel agency. Cardmembers
may now book various prepaid packaged vacations such as cruises, tours,
all-inclusive resorts, charter vacations and sports holidays and earn dining
credits (redeemable through use of the Transmedia Card) equal to 10% of the cost
of the vacation.
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. The Company also receives 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 Restaurant Company Inc. which is responsible for obtaining
and servicing restaurants and obtaining other locations and service
establishments such as hotels, resort destinations and retailers where
the Transmedia Card may be used.
/bullet/ Transmedia Service Company Inc. which is responsible for soliciting and
servicing all cardmembers in the United States, providing support
services to Transmedia Restaurant Company, and for all domestic
franchising of The Transmedia Card and related property rights and
know-how.
3
<PAGE>
/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 Soviet Socialist Republics, Australia,
New Zealand and the Asia-Pacific region to date.
/bullet/ TNI Funding I, Inc., which was established as a special purpose
corporation for purposes of the securitization of cash advances to
merchants referred to as rights-to-receive.
DESCRIPTION OF RIGHTS TO RECEIVE AND THE TRANSMEDIA CARD
The Company's primary business is the acquisition of Rights to Receive from
participating establishments 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 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-five percent
(95%) 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.
The Transmedia Card is selectively 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 Cardmembers have a choice of
programs, including a "Free for Life" Transmedia Card which affords them 20%
savings at participating establishments, a Turn Meals into Miles/Registered
trademark/ program which offers mileage credits with Continental Airlines, US
Airways and United Airlines of 10 miles for each dollar spent on food and
beverage at participating establishments for an annual fee of $9.95, and a card
which offers a 25% savings at participating establishments, for which there is a
$50 annual fee. Each account may have more than one user and, accordingly, more
than one cardmember. The Company recently introduced a "family of savings"
concept through a silver and gold Transmedia Card program designed to replace
the existing 25% savings / $50 fee program. Both the silver and gold programs
are fee based, offer 25% savings at participating establishments and entitle the
cardmember access to additional benefits and savings at either no-cost or a
reduced fee depending upon the cardmembers' election. The silver program retails
for $29.95 and the gold program for $59.95.
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 the appropriate discount or credits to the
cardmember's airline account the appropriate mileage. Taxes and tips are not
discounted and such sums are remitted to the various establishments.
4
<PAGE>
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, 1997, the Company had franchises in the following
territories: a large part of New Jersey, the Washington, D.C./Baltimore,
Maryland metropolitan area, Dallas, Ft. Worth, San Antonio and Houston, Texas,
the States of Virginia, North Carolina, South Carolina, and Atlanta, Georgia and
eastern Tennessee. The Company has also granted a certain third party an option
to acquire a franchise for the State of Hawaii. The Company has determined that
it will no longer offer franchises at various locations throughout the United
States. In January 1997, the Company purchased certain of the assets of The
Western Transmedia Company, Inc., the Company's franchisee in the States of
California, Nevada, Oregon and Washington and now conducts the West Coast
operation directly. The Company has entered into an agreement to acquire the
rights-to-receive of East American Trading Company, its franchisee in the
Carolinas, Georgia and eastern Tennessee, and to terminate and cancel the
franchise. After the completion of this transaction in December 1997, the
Company will operate in these States directly.
Each franchise sold by the Company is operated under a ten year franchise
agreement that is renewable for one additional ten-year term for all locations.
Each agreement provides that the Company will assist the franchisee with
marketing, advertising, training and other administrative support; relates to a
territory that contains a minimum number of 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 participating establishments, purchasing Rights to
Receive from participating establishments in its territory, and maintaining
adequate insurance. In consideration for the grant of the franchise, the
franchisee pays to the Company (i) a one-time franchise fee which varies based
upon the number of full-service restaurants located within the territory granted
to the franchisee, and (ii) 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.
U.S. LICENSING
In November 1995, the Company entered into a license arrangement under which a
licensee was authorized to solicit Rights to Receive from various types of
resorts, hotels and other entities. The territory covered by the license
agreement is the continental United States, excluding the State of Minnesota.
The term of this arrangement was ten years, with a potential renewal period of
ten years and under this arrangement, the Company compensated the licensee
through a commission. In December 1996, the Company terminated the license
agreement.
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)
5
<PAGE>
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 December
1996, Transmedia Europe Inc. amended the sublicense it had granted for France
and expanded the sublicensee's territory to include Belgium and Luxemborg,
Italy, Spain and Switzerland (other than the German speaking area).
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 (i) paid the Company One Million Two
Hundred Fifty Thousand Dollars ($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 Transmedia Asia Pacific Inc.
until March 1, 1995.
In December 1996, the Company entered into an agreement with Transmedia Europe,
Inc. and Transmedia Asia Pacific Inc. amending both of the licenses, among other
things, to permit the companies to be reorganized under one entity and to allow
them to acquire and operate worldwide the business of Countdown plc., which
conducts a discount savings program in Europe and, to a lesser extent, in the
United States. Upon closing of the Countdown acquisition, the Company received
$250,000 in cash and a $500,000 note bearing interest at 10%, which is payable
on April 1, 1998. At the Company's option, the note may be converted into stock
of the licensees.
AREAS OF OPERATION
The Company's areas of operation include Central and South Florida, the New
York, Chicago and Los Angeles metropolitan areas, Boston and surrounding New
England, Philadelphia, San Francisco, Detroit, Indianapolis, Milwaukee, Denver,
Phoenix and effective December 16, 1997, North and South Carolina; Atlanta,
Georgia and parts of Tennessee. Franchised areas include most of New Jersey,
Washington, D.C., Maryland, Virginia and Texas. Licensing arrangements exist for
the United Kingdom, Canada, and Europe, as well as the Asia-Pacific region.
6
<PAGE>
PARTICIPATING RESTAURANTS AND CARDMEMBERS
As of September 30, 1997, directories published by the Company, which are
distributed to cardmembers six times a year, listed 7,087 restaurants available
to cardmembers, and The Transmedia Card was held by an aggregate of 1,298,061
cardmembers, comprised of 904,507 accounts with an average of 1.44 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, 1993 though 1997:
1997 1996 1995 1994 1993
- ------------------------------------------------------------------
Restaurants 7,087 6,974 5,330 3,628 2,328
- ------------------------------------------------------------------
Cardmembers 1,298,061 924,418 593,161 395,968 197,166
As the table indicates, the number of restaurants listed in directories
published by the Company has risen nearly 4,759 (304%) during the fiscal years
ended September 30, 1993 through September 30, 1997. The number of cardmembers
has increased 1,100,895 for the same period.
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 16, 1997, the Company employed 167 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 merchants, such as restaurants, hotels and other
applicable service establishments. Competitors include discount programs offered
by major credit card companies, 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. The
Company has experienced increased competition in its core dining business in
recent years as variations on the basic discount dining concept have been
introduced. Such variations include restricted usage programs and registered
credit card programs, as well as different levels of discounts and cash advances
to merchants. 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.
7
<PAGE>
ITEM 2. PROPERTIES
The Company's present executive office consists of 13,096 square feet, located
in Miami, Florida, which the Company occupies pursuant to a lease expiring on
February 28, 2002 and which provides for an annual base rental of $270,825. The
Company's Miami office also houses the Company's cardmember service center. The
Company leases offices in New York City for 5,710 square feet of office space
pursuant to a lease entered into in May 1996. The lease, which expires on June
30, 2001, provides for minimum annual rentals of $199,850. 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 rent of approximately $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
fifteen-month period which began on February 1, 1997 at an annual fee of $7,589.
In Tampa, the Company leases an executive office for a twelve-month period which
began on July 1, 1997. The total rental for the thirteen month period is $8,616.
In Phoenix, the Company leases an executive office for a twelve-month period
which began on February 1, 1997 for a total rent of $12,600 for the twelve
months. In San Francisco, the Company assumed a lease for approximately 3,000
square feet, at an annual rent of $57,642.00 from August 1, 1997 to July 31,
1998 and $60,597.96 from August 1, 1998 to August 31, 1999. The lease expires on
August 31, 1999. In Los Angeles, the Company extended its assumed lease for an
additional year at a monthly base rent of approximately $4,568. The lease will
expire on January 31, 1998.
ITEM 3. LEGAL PROCEEDINGS
In December 1996, the Company terminated its license agreement (the "Agreement")
with Sports & Leisure Inc. ("S&L"). In February 1997, S&L commenced an action
against the Company in the 11th Judicial Circuit, Dade County, Florida, alleging
that the Company improperly terminated the S&L license agreement and seeking
money damages. The Company has counterclaimed against S&L for breach of the
Agreement and intends to pursue the action vigorously. Management does not
expect the outcome of this case to have a material adverse impact on the
financial position, cash flows or operating results of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1997, 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, President 69
and Chief Executive Officer
James M. Callaghan Director and Vice President; President of 58
Transmedia Restaurant Company Inc.
Barry S. Kaplan Director and Vice President; 39
President of Transmedia Service Company Inc.
8
<PAGE>
Stephen E. Lerch Executive Vice President and 43
Chief Financial Officer
Paul A. Ficalora Executive Vice President 46
of Transmedia Restaurant Company Inc.
Gregory Borges Treasurer 61
Kathryn Ferara Secretary 41
Mr. Chasen has been a director and the Chairman of the Board, President and
Chief Executive Officer of the Company since 1983. From 1984 through 1987, he
was a director, Chairman of the Board, President and Chief Executive Officer of
Transmedia Network Inc., a Colorado corporation, which was the predecessor of
the Company. He was President of TMNI International Incorporated, a subsidiary,
in 1997.
Mr. Callaghan, a director of the Company since 1991, was elected Vice President
of the Company and President of Transmedia Restaurant Company Inc., a
subsidiary, in 1994. He joined the Company in 1989 and served as its Executive
Vice President, Vice President, Sales and Marketing and Treasurer.
Mr. Kaplan was elected a Vice President of the Company and President of
Transmedia Service Company Inc., a subsidiary, in September 1995 and was elected
a Director of the Company in March 1996. 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. Lerch was elected Executive Vice President and Chief Financial Officer of
the Company, as well as Vice President of TMNI International Incorporated,
Transmedia Restaurant Company Inc. and Transmedia Service Company Inc,
subsidiaries, in 1997. Previously, Mr. Lerch was a Partner at Coopers and
Lybrand LLP, where he worked from 1978 to 1997.
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.
BOARD OF DIRECTORS OF THE REGISTRANT
NAME POSITION DIRECTOR SINCE
- ---- -------- --------------
Melvin Chasen Chairman of the Board, President and 1983
Chief Executive Officer of the Company
Jack Africk Chairman of the Board 1992
Evolution Consulting Group, Inc.
James J. Callaghan Vice President of the Company and 1991
President of Transmedia Restaurant Company Inc.
9
<PAGE>
Herbert M. Gardner Senior Vice President 1983
Janney Montgomery Scott, Inc.
Irwin Hochberg Senior Partner and President 1987
Bloom Hochberg & Co., P.C.
Barry S. Kaplan Vice President of the Company and 1996
President of Transmedia Service Company Inc.
Henry Seiden Chairman and Chief Executive Officer 1988
The Seiden Group Inc.
Mr. Africk, who was elected a director of the Company in 1992, is the Chairman
of the Board of Evolution Consulting Group, Inc., Boca Raton, Florida. From 1993
to 1995, he was Vice Chairman of the Board of Duty Free International, Inc., and
is currently a director of that company. Until June 1993, Mr. Africk was Vice
Chairman of UST, Inc. and President and Chief Executive Officer of its
subsidiary, United States Tobacco Company. He is also a director of Crown
Central Petroleum Corporation and of Tanger Factory Outlet Centers, Inc.
Mr. Gardner, a director of the Company since 1983, has been employed as a Senior
Vice President of Janney Montgomery Scott, Inc., an investment banking firm, for
more than five years. He was a director of two predecessors of the Company from
1983 through 1987. Mr. Gardner is a director of Shelter Components Corporation,
a supplier to the manufactured housing industry, and Nu Horizons Electronics
Corp., a company which manufactures specialized truck bodies and shuttle buses.
Mr. Gardner is also a director of American Country Hol.dings, Inc.. (formerly
The Western Systems Corp.), which was the Company's franchisee in California,
Oregon, Washington and parts of Nevada until January 1997, a director of TGC
Industries, Inc., a company in the geophysical services industry, a director of
Hirsch International Corp., an importer of computerized embroidery machines, a
developer of embroidery machine application software and a provider of other
services to the embroidery industry, and a director of Chase Packaging, an
agricultural packaging products company.
Mr. Hochberg, a director of the Company since 1987, served as a director of
Transmedia Network Inc., a Colorado corporation ("Transmedia Colorado"), which
was merged into the Company. He has been Senior Partner and President of Bloom
Hochberg & Co., P.C., a firm of Certified Public Accountants, for more than
seven years. He is also a director of Ampal-America Israel Corporation, a
subsidiary of Bank Hapoalim, which finances industrial, financial, commercial
and agricultural enterprises.
Mr. Seiden, a director of the Company since 1988, is presently the Chairman and
Chief Executive Officer of The Seiden Group Inc., an advertising consultant, and
Vice Chairman of Jordan, McGrath, Case & Taylor Inc., an advertising agency. Mr.
Seiden had been the Chairman of Ketchum Advertising, New York, an advertising
agency which is a division of Ketchum Communications, Inc., from 1987 through
1991.
10
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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
included in the Nasdaq National Market . The following table sets forth the high
and low sale prices for the common stock for each fiscal quarter ended from
December 31, 1995 as reported on the New York Stock Exchange or the Nasdaq
National Market, as well as the dividends paid during each such fiscal quarter.
The payment of 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.
QUARTER ENDED LOW HIGH DIVIDEND PAID
December 31, 1995 8.750 11.000 .02
March 31, 1996 7.125 9.750 --
June 30, 1996 7.125 9.000 .02
September 30, 1996 5.500 8.625 --
December 31, 1996 7.125 4.750 .02
March 31, 1997 4.875 5.375 --
June 30, 1997 3.250 5.375 .02
September 30, 1997 3.250 4.186 --
The aggregate number of holders of record of the Company's Common Stock
on December 16, 1997 was approximately 3,300.
The payment of dividends, if any, in the future, will depend upon,
among other things, the Company's earnings and financial requirements, as well
as general and business conditions.
11
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED SEPTEMBER 30,
(THOUSANDS)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross dining sales $101,301 $90,076 $78,632 $62,012 $44,820
Net revenues from rights-to-receive 21,232 19,504 15,769 11,899 9,356
Membership and renewal fee income 7,251 6,646 4,081 2,685 1,634
Franchise fee income 1,438 1,839 1,881 1,061 257
Other income 1,023 497 423 281 --
Total operating revenues 30,944 28,486 22,154 15,926 11,247
Total operating expenses 30,246 23,729 15,809 10,709 7,822
Operating income 698 4,757 6,345 5,217 3,425
Income (loss) before taxes (684) 4,107 6,879 6,974 4,557
Net income (loss) $ (424) $ 2,546 $ 4,196 $ 4,176 $ 2,734
======== ======= ======= ======= =======
Net income (loss) per share
Primary (0.04) 0.25 0.42 0.42 0.29
Fully diluted (0.04) 0.25 0.42 0.42 0.28
BALANCE SHEET DATA:
Total assets 72,685 54,514 38,383 28,477 17,903
Long-term debt:
Recourse -- 15,000 2,000 -- --
Non-recourse 33,000 -- -- -- --
Stockholders' equity 25,304 25,753 24,191 18,925 12,619
Cash dividends per common share 0.02 0.04 0.04 0.04 0.02
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS)
NEW ACCOUNTING PRONOUNCEMENTS
I. EARNINGS PER SHARE.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" (SFAS No. 128) which establishes standards for
computing and presenting earnings per share (EPS). SFAS No. 128 replaces the
presentation of primary and fully diluted EPS with a presentation of basic and
diluted EPS. Basic EPS is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that would occur from any
instrument which could result in additional common shares being issued. SFAS No.
128 must be adopted for the Company's fiscal year 1998 and requires restatement
of all prior-period EPS data presented. The adoption will not materially affect
the EPS reported during fiscal year 1997, 1996 or 1995.
II. REPORTING COMPREHENSIVE INCOME AND DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION
In June 1997, SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131
"Disclosures About Segments of an Enterprise and Related Information" were
issued and are effective for fiscal periods beginning after December 15, 1997
with early adoption permitted. Currently, the Company is evaluating the effects
these statements will have on its financial reporting and disclosures.
RESULTS OF OPERATIONS (1997 VERSUS 1996)
Gross dining sales for the fiscal year ended September 30, 1997 increased 12.5%
to $101,301 as compared to $90,076 for the year ended September 30, 1996. The
sales increase is attributable to an increased base of cardholders and the
acquisition of the Western Transmedia franchise in January 1997. Cardmember
accounts increased 42% to over 900,000 for the year and total cardmembers at
September 30, 1997 were 1,289,061 or 1.4 cardmembers per account. The total
restaurants available to cardmembers remained consistent between years. At
September 30, 1997, the Company had 7,087 restaurants listed in its directories
(6,974 at September 30, 1996), of which 4,922 were in Company-owned sales
territories and 876 were overseas. The increase in Company-owned restaurants
from 4,047 a year ago relates primarily to the acquisition of the California
franchise discussed above. 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 tend to drop sharply because the restaurants, with the
Company's help, have either become successful and no longer require the
Company's financial and marketing resources, the Company chooses not to renew
the restaurant or the restaurant has gone out of business. However, offsetting
this drop are new restaurants that sign on as old ones go out of business,
providing the Company with a continuous flow of new restaurant prospects, and
restaurants that were formerly on the program often sign on again as they
further expand and/or desire the program's benefits again. The Company believes
that in no area where the Company operates is it close to restaurant or
cardmember saturation. Gross dining sales associated with the Western Transmedia
sales territories, principally Los Angeles, Orange County and San Francisco,
amounted to approximately $7,900 since the acquisition in January 1997. Sales
volume in the New York metropolitan area, the Company's largest market, declined
10% compared to the prior year. Offsetting this decrease were increases in other
large markets such as Chicago, Boston and Detroit, as well as in new markets
such as Phoenix and
13
<PAGE>
Denver. Overall, gross dining sales have not grown proportionately with the
increase in the cardmember base. While the introduction of a 20% discount,
no-fee card in 1996 was very effective in building a desired critical mass of
cardmembers, the no fee cardholders, to date, have not been as active as the
traditional fee-paying cardmembers and spending per account has decreased from
prior years. The Company has instituted a number of programs that make the card
easier to both activate and use and to stimulate more frequent usage. The
initial results from the programs implemented in the latter part of fiscal 1997,
as measured in incremental sales, have been positive, particularly the frequent
dining rewards program. The Company intends to continue to focus on activation
and stimulation of its existing cardholder base to better leverage its card
solicitation investment.
At September 30, 1997, the average Rights to Receive balance per participating
Company restaurant was $8,198 versus $9,220 at September 30, 1996.
Rights-to-receive turnover for fiscal 1997 was 1.3, or 9.2 months on hand,
compared to 1.415, or 8.5 months on hand, in the prior year. The lower turnover
relates to an increase in rights-to-receive in the California marketplace as
additional restaurants have been signed on in the reacquired franchise.
Additionally, the continued development of new markets such as Denver and
Phoenix traditionally take longer to achieve expected turnover. As markets
mature, however, additional cardmembers are acquired and dining usage tends to
stabilize at more predictable levels, allowing for more normal carrying amounts
of rights-to-receive.
Cardmember discounts as a percentage of sales declined to 22.7% from 23.8% in
the 1996 comparable period reflecting the continued growth of new memberships in
the 20% discount category. Provision for rights-to-receive losses, which are
included in cost of sales, amounted to $3,209 in 1997, compared to $2,075 in the
prior year period. Processing fees (i.e., the standard fees established by the
major credit card companies for which the Company is responsible for) based on
transactions processed, declined as a percentage of gross dining sales to 3.2%
from 3.8% in the prior year reflecting economies of scale associated with higher
volume and the Company's quality initiatives.
Membership and renewal fee income increased to $7,251, of which $670 was initial
fee income in 1997, compared to $6,646, of which $1,165 was initial fee income
in 1996. The anticipated decline in initial fee income reflects the Company's
continued focus on marketing the 20% savings, no-fee card which was introduced
in 1996. Offsetting this decrease, however, were strong renewals of the 25%
savings, fee-based cardholders. Fee income is recognized over a twelve-month
period beginning in the month the fee is received.
Continuing franchise fee and royalty income decreased to $1,438 from $1,839.
This decrease resulted primarily from the purchase of the California franchisee
in January 1997. On a same territory basis however, exclusive of California,
franchise dining sales increased 17% over the prior year.
Processing income relates to the Company's full service electronic processing
initiative and comprises the sale or lease of point-of-sale terminals to
merchants, principally restaurants, as well as fees received for serving as the
merchants' processor for all of their credit card transactions.
In 1997, selling, general and administrative expenses were significantly
impacted by the 40% net increase in the cardmember base and the related
increases in gross dining volume and other revenue items. The opening of new
territories in the latter part of fiscal 1996 and the acquisition of the
California franchise in January 1997 resulted in additional costs associated
with establishing five new sales territories. The Company also expanded its
support services infrastructure in fiscal 1997 to address gross dining sales
volume that now exceeds $100 million per year and a cardholder base of almost
1.3 million. Increased expenditures, principally personnel related costs, were
made in important functional areas such as cardmember services, merchant support
for credit card processing and marketing. Overall selling, general and
administrative expenses increased $6,323, or 32.8% over the prior year. As a
percentage of gross dining usage, selling
14
<PAGE>
general and administrative expenses were 25.3% in 1997 compared to 21.4% in
1996. The principal components of the increase include salaries and related
expenses ($6,051 in 1997 versus $4,605 in 1996), depreciation and amortization,
principally on the software development costs ($2,232 in 1997 versus $1,163 in
1996), sales commissions ($2,457 in 1997 versus $1,672 in 1996), postage (2,878
in 1997 versus $2,524 in 1996), office related expenses ($2,688 in 1997 versus
$1,810 in 1996) and legal ($983 in 1997 versus $529 in 1996).
In 1997, cardmember acquisition expenses were $4,650 versus $4,456 in 1996.
Included in cardmember acquisition expenses is the amortization of deferred
advertising costs, which amounted to $670 in 1997 and $1,165 in 1996. Costs
capitalized in 1997 and 1996 were $446 and $969, respectively, again reflecting
the acquisition of fewer fee paying cardmembers and correspondingly, lower
initial fee income. The Company uses various techniques at different levels of
cost to solicit new cardmembers. Solicitation is accomplished through direct
mail, telemarketing and the use of affinity and loyalty programs with major
metropolitan newspapers, charitable and other not-for-profit organizations,
alumnae associations and corporations. Third party and strategic marketing
partners are often utilized on either a fee per acquisition or activation basis
or through wholesaling of the fee based savings card. The Company also generates
a significant amount of new cardmembers internally using its in-house business
development group as well as the sales force in the field. The card is marketed
as an enhancement or additional benefit, on a co-branded basis or most
frequently on a stand alone basis. The mix of solicitation programs used has a
direct correlation to the overall acquisition cost per member and the spending
profile of cardmembers acquired. The Company seeks to employ the most cost
effective means of acquiring active and frequent users of the card.
Operating income in 1997 was $698, a 85.0% decrease from $4,757 in 1996.
Other income, net of expense in 1997 was a net expense amounting to $1,382
versus $650 in 1996, an increased expense of $732. The principal reasons for the
change included $1,719 additional interest expense and financing costs in 1997
as a result of a $33 million securitization transaction that closed in December
1996, offset by $750 of license income from the Company's international
licensees and a $401 increase in interest and other income in 1997.
Earnings before taxes amounted to a loss of $684 in 1997 compared with income of
$4,107 in 1996. The effective tax rate in 1997 and 1996 was 38.0%.
Net loss was $424 or $.04 per share in 1997, versus net income of $2,546 or $.25
per share in 1996.
RESULTS OF OPERATIONS (1996 VERSUS 1995)
Gross dining sales for the fiscal year ended September 30, 1996 increased 14.6%
to $90,076, as compared to $78,632 for the year ended September 30, 1995. The
sales increase was primarily due to an increased number of cardmembers and
restaurants available to cardmembers. Cardmember accounts increased 72% to over
634,000 for the year and total cardmembers at September 30, 1996 were 924,418 or
1.46 cardmembers per account. The total restaurants available to cardmembers
increased to 6,974 from 5,330 a year earlier.
At September 30, 1996, the average Rights to Receive balance per Company
restaurant participating was $9,220 versus $8,592 at September 30, 1995.
Rights-to-receive turnover for fiscal 1996 was 1.415, or 8.5 months on hand,
compared to 1.811, or 6.6 months on hand, in the prior year, reflecting the new
market development initiatives in Denver, Phoenix and Detroit.
Cardmember discounts as a percentage of sales declined to 23.8% from 25.2% in
the 1995 comparable period reflecting the introduction of the 20% discount
no-fee card in January 1996. Provision for rights-to-receive losses, which are
included in cost of sales, amounted to $2,075 in 1996, compared to $2,332 in the
prior year period.
15
<PAGE>
Membership and renewal fee income increased to $6,646, of which $1,165 was
initial fee income in 1996, compared to $4,081, of which $835 was initial fee
income in 1995. Fee income is recognized over a twelve-month period beginning in
the month the fee is received. In 1996, 7% of joining cardmembers paid a fee.
The others joined under no-fee programs. The renewal rate in 1996 and 1995
approximated 55% to 60%.
Continuing franchise fee and royalty income decreased to $1,839 from $1,881.
This slight decrease resulted primarily from the purchase of the Chicago
franchisee in July 1995 offset by an increase, on a same territory basis, in
franchise dining sales over the prior year.
In 1996, selling, general and administrative ("SG&A") expenses increased by
$4,907, as compared to 1995, representing a 34.2% increase. As a percentage of
gross dining usage, selling, general and administrative expenses were 21.4% in
1996 compared to 18.3% in 1995. The main components of the increase included
sales salaries and commissions ($2,362 in 1996 versus $1,866 in 1995), and
salaries expense ($4,230 in 1996 versus $3,604 in 1995). The Company also
incurred $801 of expenses in 1996 associated with the start-up of new
territories operated by the Company compared with $268 in 1995.
In 1996, cardmember acquisition expenses were $4,456 versus $1,443 in 1995.
Included in cardmember acquisition expenses was the amortization of deferred
advertising costs amounting to $1,165 in 1996 and $752 in 1995. Costs
capitalized in 1996 and 1995 were $969, and $1,013, respectively.
Operating income in 1996 was $4,757, a 25.0% decrease from $6,345 in 1995.
Other income, net of expense in 1996 was a net expense amounting to $650, versus
net income of $534, in 1995, a difference of $1,184. Reasons for the reduction
included $736 more interest expense and financing costs in 1996 than 1995, $578
less initial franchise fee and license income in 1996 than 1995, $165 less in
interest and other income in 1996 than 1995, and no merger and acquisition
expenses in 1996 versus $295, in 1995, which was related to the Company's
acquisition of its Chicago franchisee.
Earnings before taxes amounted to $4,107 in 1996 compared with $6,879, in 1995.
The effective tax rate in 1996 was 38.0% versus 39.0% in 1995.
Net income was $2,546 or $.25 per share, versus $4,196 or $.42 per share in
1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $42,062 at September 30, 1997 from
$32,850 at September 30, 1996. This is due primarily to an increase in the
Company's rights-to-receive of $2,829 and an increase in cash and cash
equivalents of $5,786.
On December 24, 1996, the Company made an initial transfer of $33 million of
rights-to-receive to a special purpose corporation ("SPC"), an indirect wholly
owned subsidiary, as part of a revolving securitization. The rights-to-receive,
which were sold to the SPC without recourse, were in turn transferred to a
limited liability corporation ("Issuer"), which issued $33 million of fixed rate
securities in a private placement to various third party investors.
In exchange for the rights-to-receive, which have a retail value of
approximately $66 million before cardmember discounts, the Company received
approximately $32 million, after transaction costs, and a 1% equity interest in
the Issuer. Future excess cash flows, expected to be generated from the
securitized assets as the rights-to-receive are exchanged for meals by Company
cardholders, are remitted to the Company on a monthly basis as a return on
capital from the
16
<PAGE>
Issuer. Excess cash flows are determined after payments of interest to
noteholders and investors, as well as trustee and servicing fees. It is
anticipated that the net revenue from securitized assets will be received in
approximately the same amount and within the same time frame that such revenue
would have been received had the securitization not taken place.
Rights-to-receive currently held by the Issuer, as well as cash and certain
deposits restricted under the securitization agreement, have been separately
depicted in the consolidated balance sheet.
The private placement certificates have a five-year term before amortization of
principal and have an interest rate of 7.4%. During this revolving period, the
Issuer is responsible for the ongoing purchase of rights-to-receive from the
Company to ensure that the initial pool of $33 million is continually
replenished as the rights-to-receive are utilized by cardholders. It is
anticipated that replenishment of rights-to-receive will provide for a
continuous stream of additional net revenue throughout the period.
The Company's intention in executing the revolving securitization transaction
was to provide current liquidity, as well as a platform for future growth, at a
cost of funds lower than has historically been available to the Company. The
Company also has the ability to securitize additional tranches or pools of
rights-to-receive in the future at a more economical transaction cost should it
so desire.
Prior to the securitization, the Company maintained a $20 million line of
credit. As a result of the sale of rights-to-receive, described above, the
outstanding obligation under the line of credit was refinanced and the credit
facility was terminated on December 24, 1996. On November 6, 1997, the Company
obtained a new line of credit with a bank for $10 million to be used principally
to finance the purchase of rights-to-receive. This line of credit is unsecured
and may be drawn down based on an advance rate calculated as a percentage of
unrestricted rights-to-receive. The line of credit matures on February 1, 1999
and bears interest at the prime rate with a LIBOR option. There is presently
nothing outstanding under the line.
On November 7, 1997, the Company entered into an agreement to sell 2.5 million
newly-issued common shares and warrants to purchase an additional 1.2 million
common shares for a total of $10.625 million to affiliates of Equity Group
Investments, Inc., a privately held investment company. The warrants will have a
term of five years; one third of the warrants will be exercisable at $6.00 per
share, another third will be exercisable at $7.00 per share and the third and
final will be exercisable at $8.00 per share. As part of this strategic
investment, Equity Group will nominate two candidates for the Board of Directors
who will join three of the Company's existing directors and two new independent
directors.
Capital expenditures by the Company over the past three fiscal years
(approximately $8.8 million) 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 $2.6 million on capital expenditures, consisting primarily
of computer software in fiscal year 1998.
The Company believes that cash on hand at September 30, 1997, together with cash
generated from operations and the existing line of credit, if need be, will
satisfy the Company's total need for cash during the 1998 fiscal year.
The Company's inventory of Rights to Receive increased by $2,829 to a total of
$40,355 at September 30, 1997.
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 Uniform Commercial Code. The Company also attempts to
obtain personal guarantees from the restaurant owners.
17
<PAGE>
Analysis of Rights to Receive
1997 1996 1995
---- ---- ----
- ---------------------------------------------------------------------------
Rights to Receive, beginning of year $37,526 $26,147 $17,473
- ---------------------------------------------------------------------------
Purchase of Rights to Receive 56,244 59,181 50,294
- ---------------------------------------------------------------------------
Write-offs of Rights to Receive (2,764) (2,655) (2,132)
-------- --------- --------
91,006 82,673 65,635
- ---------------------------------------------------------------------------
Cost of Rights to Receive, included
in cost of sales 50,651 45,147 39,488
------- -------- --------
- ---------------------------------------------------------------------------
Rights to Receive, end of year $40,355 $37,526 $26,147
======= ======= =======
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 revenue
growth. Further, management believes that the purchase of Rights to Receive can
be funded generally from cash on hand, operations and the new line of credit, as
well as from funds made available through future securitizations.
Operating activities have resulted in either reduced cash generated from
operations or a net use of cash during the most recent three fiscal years,
principally related to the growth in rights-to-receive. Further expansion into
new markets and planned increases in existing markets could continue this trend
depending on the rate of growth management deems appropriate. As described in
the preceding paragraph, funds generated from operations, supplemented by the
line of credit, if needed, should be sufficient to fund such growth over the
next twelve months.
Cash used in investing activities was $9,450 in the fiscal year ended September
30, 1997, compared with $3,354 used in 1996 and $2,020 used in 1995. 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 and the acquisition of the California
franchise. Management believes that cash to be used in investing activities
associated with capital expenditures in the fiscal year ended September 30, 1998
will approximate $2,600.
Cash flow provided by financing activities was $14,499 for the fiscal year ended
September 30, 1997, compared with cash flows provided by financing activities of
$12,629 in 1996 and $2,655 in 1995. In 1997, the principal source of cash flows
was proceeds from the issuance of secured non-recourse notes relating to the
securitization. In 1996, the principal source of cash flow was from borrowings
under the Company's bank line of credit. In 1995, the principal source of cash
flow was from borrowings under the Company's bank line of credit and from the
exercise of options for common stock.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F - 1
Financial Statements:
Consolidated Balance Sheets, F - 2
September 30, 1997 and 1996
Consolidated Statements of Income F - 3
for each of the years in the three-year
period ended September 30, 1997
Consolidated Statements of Stockholders' F - 4
Equity for each of the years in the three-year
period ended September 30, 1997
Consolidated Statements of Cash Flows F - 5,6
for each of the years in the three-year
period ended September 30, 1997
Notes to Consolidated Financial Statements F - 7
Schedule II - Valuation and Qualifying Accounts F - 25
19
<PAGE>
KPMG Peat Marwick LLP 1897-1997
450 East Las Olas Boulevard Telephone 954 524 6000 Telefax 954 462 4836
Fort Lauderdale, FL 33301
INDEPENDENT AUDITORS' REPORT
The Board of Directors and
Stockholders
Transmedia Network Inc.:
We have audited the consolidated financial statements of Transmedia Network Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we have also audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule 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 estimated 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 at September 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
-----------------------------------
KPMG Peat Marwick LLP
November 13, 1997
Miami, Florida
F-1
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and 1996
(in thousands)
ASSETS 1997 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,223 3,603
Restricted cash (note 2) 2,166 -
Accounts receivable, net 2,260 2,617
Rights-to-receive, net (note 2)
Unrestricted 5,110 37,526
Securitized and owned by Trust 35,245 -
Prepaid expenses and other current assets 2,279 1,928
------- -------
Total current assets 54,283 45,674
Securities available for sale, at fair value (note 3) 1,988 1,868
Equipment held for sale or lease, net (note 4) 981 712
Property and equipment, net (note 5) 7,275 5,664
Other assets 1,375 582
Restricted deposits and investments (note 2) 1,980 -
Excess of cost over net assets acquired and
other intangible assets(note 10) 4,803 14
------- -------
Total assets $ 72,685 54,514
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - rights-to-receive $ 4,768 4,784
Accounts payable - reimbursable tax and tips 410 485
Accounts payable - other 2,996 2,679
Accrued expenses 791 773
Deferred membership fee income 3,256 4,103
------- -------
Total current liabilities 12,221 12,824
Secured non-recourse notes payable (note 2) 33,000 -
Line of credit (note 14) - 15,000
Other long-term liabilities 2,160 937
------- -------
Total liabilities 47,381 28,761
------- -------
Commitments (notes 7, 12, 13 and 16) - -
Stockholders' equity (notes 7 and 8):
Preferred stock - -
Common stock 204 202
Additional paid-in capital 10,635 10,547
Unrealized gain on securities available for sale, net (note 5) 1,059 985
Retained earnings 13,406 14,019
------- -------
Total stockholders' equity 25,304 25,753
------- -------
Total liabilities and stockholders' equity $ 72,685 54,514
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<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, 1997
(in thousands, except income per share)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Operating revenue:
Sales of rights-to-receive:
Owned by Company $ 23,189 90,076 78,632
Owned by Trust (note 2) 78,112 - -
------- ------ ------
Gross dining sales 101,301 90,076 78,632
Cost of sales 57,065 49,096 43,024
Cardmember discounts 23,004 21,476 19,839
------- ------ ------
Net revenue from rights-to-receive 21,232 19,504 15,769
Membership and renewal fee income 7,251 6,646 4,081
Franchise fee income 1,438 1,839 1,881
Commission income 403 497 423
Processing income 620 - -
------- ------ ------
Total operating revenues 30,944 28,486 22,154
------- ------ ------
Operating expenses:
Selling, general and administrative expenses 25,596 19,273 14,366
Cardmember acquisition expenses 4,650 4,456 1,443
------- ------ ------
Total operating expenses 30,246 23,729 15,809
------- ------ ------
Operating income 698 4,757 6,345
Other income (expense):
Initial franchise fee and license fee income, net 740 30 608
Interest and other income 450 172 337
Interest expense and financing cost (2,572) (852) (411)
------- ------ ------
Income (loss) before income taxes (684) 4,107 6,879
Income tax provision (benefit) (note 9) (260) 1,561 2,683
------- ------ ------
Net income (loss) $ (424) 2,546 4,196
======= ====== ======
Net income (loss) per common and common equivalent share:
Primary $ (.04) .25 .42
==== === ===
Fully diluted $ (.04) .25 .42
==== === ===
Weighted average number of common and common equivalent
shares outstanding:
Primary 10,180 10,299 10,112
====== ====== ======
Fully diluted 10,184 10,299 10,112
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<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, 1997
(in thousands)
COMMON STOCK
---------------------- ADDITIONAL UNREALIZED
NUMBER PAID-IN GAINS RETAINED
OF SHARES AMOUNT CAPITAL (LOSSES), NET EARNINGS TOTAL
--------- ------ ------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1994 9,619 $ 192 9,478 1,275 7,980 18,925
Net income - - - - 4,196 4,196
Exercise of stock options 222 4 342 - - 346
Income tax benefit related to stock option plan - - 689 - - 689
Dividend - - - - (398) (398)
Acquisition of franchise 278 6 4 - 100 110
Unrealized gains, net - - - 323 - 323
------ ------- ------ ----- ------ ------
Balance, September 30, 1995 10,119 202 10,513 1,598 11,878 24,191
Net income - - - - 2,546 2,546
Exercise of stock options 8 - 34 - - 34
Dividend - - - - (405) (405)
Unrealized loss, net - - - (613) - (613)
------ ------- ------ ----- ------ ------
Balance, September 30, 1996 10,127 202 10,547 985 14,019 25,753
Net loss - - - - (424) (424)
Exercise of stock options 63 2 64 - - 66
Income tax benefit related to stock option plan - - 24 - - 24
Dividend - - - - (189) (189)
Unrealized gains, net - - - 74 - 74
------ ------- ------ ----- ------ ------
Balance, September 30, 1997 10,190 $ 204 10,635 1,059 13,406 25,304
====== ======= ====== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<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, 1997
(in thousands)
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) (424) 2,546 4,196
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 2,232 1,163 694
Amortization of deferred financing cost 158 - -
Provision for rights-to-receive 3,209 2,075 2,332
Deferred income taxes (256) 304 (115)
Changes in assets and liabilities:
Accounts receivable 90 (845) 527
Rights-to-receive (3,379) (13,454) (11,007)
Prepaid expenses and other current assets 893 (131) (398)
Other assets (363) (1,175) 181
Accounts payable - Rights-to-receive (17) (149) 1,291
Accounts payable - other 242 1,073 243
Income taxes receivable (payable) (791) (330) (319)
Accrued expenses 232 (255) 184
Deferred membership fee income (847) 1,236 1,347
------- ------- -------
Net cash provided by (used in)
operating activities 979 (7,942) (844)
------- ------- -------
Cash flow from investing activities:
Additions to property and equipment (3,414) (3,354) (2,020)
Acquisition of Western Transmedia (7,454) - -
Increase in restricted deposits and investments (990) - -
------- ------- -------
Net cash used in investing activities (11,858) (3,354) (2,020)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of secured
non-recourse notes 31,978 - -
Net borrowings (repayments) on revolving line of credit (15,000) 13,000 2,000
Increase in restricted cash (2,166) - -
Conversion of warrants and options for common stock, net
of tax benefits 90 34 1,035
Dividends paid (403) (405) (380)
------- ------- -------
Net cash provided by financing activities 14,499 12,629 2,655
------- ------- -------
</TABLE>
F-5 (Continued)
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net increase (decrease) in cash $ 3,620 1,333 (209)
Cash and cash equivalents:
Beginning of year 3,603 2,270 2,479
------ ------- ------
End of year $ 7,223 3,603 2,270
====== ======= ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,219 580 95
====== ======= ======
Income taxes $ 764 1,382 2,138
====== ======= ======
</TABLE>
Supplemental schedule of noncash investing and financing activities:
Noncash investing and financing activities:
During the years ended September 30, 1997, 1996 and 1995, the Company
adjusted its available for sale investment portfolio to fair value;
resulting in a net increase (decrease) to stockholders' equity of
$74, ($613) and $323, net of deferred income taxes.
At September 30, 1996 and 1995, dividends payable of $214 and $210,
respectively, are recorded as accrued expenses. There is no dividend
payable outstanding as of September 30, 1997.
The acquisition of the West Coast franchisee in fiscal year 1997 (see
Note 10) was recorded as follows:
Fair value of assets acquired:
Rights-to-receive $2,659
Other assets 45
Excess of cost over
net assets acquired 5,017
-------
7,721
Less: Cash paid 7,454
-------
Liabilities assumed $ 267
=======
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
Transmedia Network Inc. and subsidiaries' (the "Company") owns
and markets a charge card ("the Transmedia Card") offering
savings to the Company's card members on dining costs as well as
savings on long distance calls, lodging, travel and retail
catalogues. The Company's primary business activity is to
acquire rights-to-receive food and beverage credits from
restaurants ("Rights-to-receive"), which are then sold for cash
to holders of the Transmedia card. These Rights-to-receive are
primarily purchased by the Company for cash but may also be
acquired in exchange for services.
The Company's areas of operation include Central and South
Florida, the New York, Chicago and Los Angeles metropolitan
areas, Boston and surrounding New England, Philadelphia, San
Francisco, Detroit, Indianapolis, Milwaukee, Denver and Phoenix.
Franchised areas include most of New Jersey, Washington, D.C.,
Maryland, Virginia, Texas, North and South Carolina; Atlanta,
Georgia, and parts of Tennessee. Licensing arrangements exist
for the United Kingdom, Canada, and Europe, as well as the
Asia-Pacific region.
Transmedia Network Inc.'s corporate structure consists of three
wholly owned subsidiaries: Transmedia Restaurant Company Inc.
functions as the sales organization and is responsible for
merchant acquisition and relationship management; TMNI
International Incorporated is responsible for all foreign
licensing; and Transmedia Service Company Inc. is responsible
for all card member-related facets of the business, including
the card member service center, domestic franchising, and
support services to Transmedia Restaurant Company. In 1997, TNI
Funding I, Inc. was established as a special purpose corporation
as part of the securitization discussed in note 2. TNI Funding
I, Inc. is a wholly owned subsidiary of Transmedia Service
Company, Inc. All intercompany accounts and transactions have
been eliminated in consolidation.
(B) RIGHTS-TO-RECEIVE
Rights-to-receive ("Rights") are composed primarily of food and
beverage credits acquired from restaurants. Rights are stated at
the gross amount of the commitment to the establishment
(approximately 50 percent of the retail value of Rights
obtained). Accounts payable-Rights 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 on a periodic basis and provides for
anticipated losses on Rights-to-receive from restaurants that
have ceased operations or whose credits are not utilized by
cardholders.
F-7
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
These losses are offset by recoveries from restaurants
previously written off.
(C) SECURITIES AVAILABLE FOR SALE
The company classifies 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 on
securities, net of the related tax effects, 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 used in the business is calculated on the
straight-line method over an estimated useful life of five
years. Amortization of leasehold improvements is calculated over
the shorter of the lease term or estimated useful life of the
asset.
Equipment held for sale or lease consists primarily of
electronic terminals used for credit card processing and is
stated at cost. Depreciation is calculated on a straight line
basis over a three year life.
(E) EXCESS OF COST OVER NET ASSETS ACQUIRED
Excess of cost over net assets acquired, which resulted
primarily from the purchase of The Western Transmedia Company,
Inc. (see note 10), is amortized on a straight line basis over
the expected periods to be benefited, generally 20 years. The
Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted
future operating cash flows of the acquired operation. The
amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a
discount rate reflecting the Company's average cost of funds.
The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not
achieved.
(F) DEFERRED MEMBERSHIP AND RENEWAL FEE INCOME
Initial membership and renewal fees are billed in advance and
amortized on a straight-line basis over 12 months, which
represents the standard cardholder's membership period.
F-8
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
Certain costs of acquiring cardmembers are deferred and
amortized, on a straight-line basis over 12 months. The
advertising costs capitalized as assets by the Company represent
initial fee-paying member acquisition costs resulting from
direct-response campaign costs that are recorded as incurred.
Campaign costs include incremental direct costs of
direct-response advertising, such as printing of brochures,
campaign applications and mailing; as well as, payroll and
payroll-related costs paid to employees directly related to the
campaigns and to outside sources. Such costs are deferred only
to the extent of initial membership fees generated by the
campaign.
Card member acquisition expenses represent the cost of acquiring
cardmembers and consist primarily of direct-response advertising
costs incurred in excess of fees received and amortization of
previously deferred costs.
G) REVENUE RECOGNITION
Gross dining sales represent the retail value of the
rights-to-receive that are recognized when cardmembers use the
Transmedia Card at a dining establishment.
Continuing franchise fee revenue represents royalties calculated
as a percentage of the franchisees' sales and is recognized when
earned. Initial franchise fees and license fees are recognized
when material services or conditions relating to the sale of the
franchise have been substantially performed.
Commission income represents income earned on discounted
products and services provided by third parties to the Company's
cardholders. Such services consist of retail catalogues, phone
cards and travel services.
(H) COST OF SALES AND CARDMEMBER DISCOUNTS
Cost of sales is composed of the cost of rights-to-receive sold,
provision for rights-to-receive losses and related processing
fees.
Cardmember discount represents the specific discount given to
cardmembers whenever the Transmedia Card is used.
F-9
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(I) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.
(J) STOCK BASED COMPENSATION
In fiscal 1997, the Company adopted the disclosure only
provision of Statement of Financial Accounting Standards
("SFAS") No.123, "Accounting for Stock-Based Compensation." The
Company continues to account for its stock compensation
arrangements using the intrinsic value method in accordance with
Accounting Principles Board ("APB") Opinion No.25, "Accounting
for Stock Issued to Employees."
(K) 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.
(L) 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.
(M) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are instruments with original
maturities at the date of purchase of three months or less.
F-10
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(N) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform
with the 1997 presentation. Deferred membership fee revenue is
classified as a current liability and electronic processing
expense previously recorded in general and administrative
expenses, is now allocated to the specific revenue items.
(O) NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share" (SFAS No. 128)
which establishes standards for computing and presenting
earnings per share (EPS). SFAS No. 128 replaces the presentation
of primary and fully diluted EPS with a presentation of basic
and diluted EPS. Basic EPS is computed by dividing income
available to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that would occur from any
instrument which could result in additional common shares being
issued. SFAS No. 128 must be adopted for the Company's fiscal
year 1998 and requires restatement of all prior-period EPS data
presented. The adoption will not materially affect the EPS
reported during fiscal year 1997, 1996 or 1995.
In June 1997, SFAS No. 130 "Reporting Comprehensive Income" and
SFAS No. 131 "Disclosures About Segments of an Enterprise and
Related Information" were issued and are effective for fiscal
periods beginning after December 15, 1997 with early adoption
permitted. Currently, the Company is evaluating the effects
these statements will have on its financial reporting and
disclosures.
F-11
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(2) SALE OF RIGHTS-TO-RECEIVE
On December 24, 1996, the Company made an initial transfer of $33
million of rights-to-receive to a special purpose corporation ("SPC"),
an indirect wholly owned subsidiary, as part of a revolving
securitization. The rights-to-receive, which were sold to the SPC
without recourse, were in turn transferred to a limited liability
corporation ("Issuer"), which issued $33 million of fixed rate
securities in a private placement to various third party investors.
In exchange for the rights-to-receive, which have a retail value of
approximately $66 million before cardmember discounts, the Company
received approximately $32 million, after transaction costs, and a 1%
equity interest in the Issuer. Future excess cash flows, expected to be
generated from the securitized assets as the rights-to-receive are
exchanged for meals by Company cardholders, are remitted to the Company
on a monthly basis as a return on capital from the Issuer. Excess cash
flows are determined after payments of interest to noteholders and
investors, as well as trustee and servicing fees. It is anticipated
that the net revenue from securitized assets will be received in
approximately the same amount and within the same time frame that such
revenue would have been received had the securitization not taken
place. Rights-to-receive currently held by the Issuer, as well as cash
and certain deposits restricted under the securitization agreement,
have been depicted separately in the consolidated balance sheet.
The private placement certificates have a five-year term before
amortization of principal and have an interest rate of 7.4%. During
this revolving period, the Issuer is responsible for the ongoing
purchase of rights-to-receive from the Company to ensure that the
initial pool of $33 million is continually replenished as the
rights-to-receive are utilized by cardholders. It is anticipated that
replenishment of rights-to-receive will provide for a continuous stream
of additional net revenue throughout the period.
The Company's intention in executing the revolving securitization
transaction was to provide current liquidity, as well as a platform for
future growth, at a cost of funds lower than has been historically
available to the Company. This was accomplished by, among other things,
isolating the rights-to-receive beyond the reach of the Company or its
creditors in the event of bankruptcy or other receivership through a
transfer of assets that constitutes a true sale at law.
F-12
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(3) SECURITIES AVAILABLE FOR SALE
Securities available for sale consist of marketable equity securities
that are recorded at fair value and have an aggregate basis of $280 as
of September 30, 1997 and 1996. Gross unrealized gains were $1,774 and
$1,750 and gross unrealized losses were $66 and $161 as of September
30, 1997 and 1996, respectively. There were no realized gains or losses
for the years ended September 30, 1997, 1996 and 1995. Deferred income
taxes associated with the net unrealized gains were $649 and $604 at
September 30, 1997 and 1996, respectively.
(4) EQUIPMENT HELD FOR SALE OR LEASE
Equipment held for sale and lease consists primarily of electronic
terminals used for credit card processing. The cost of the terminals on
hand is determined on a first in, first out basis. The amount presented
on the balance sheet represents the net book value of terminals after
reduction for terminals sold and accumulated depreciation of $172 on
terminals currently under lease at September 30, 1997. There was no
depreciation in fiscal 1996.
(5) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
SEPTEMBER 30,
---------------------------
1997 1996
---- ----
Furniture and fixtures $ 644 355
Office equipment 10,463 7,386
Leasehold improvements 131 54
------ ------
11,238 7,795
Less accumulated depreciation
and amortization (3,963) (2,131)
------- ------
$ 7,275 5,664
======= ======
Depreciation and amortization expense for the years ended September 30,
1997, 1996 and 1995 was $1,812, $1,153 and $684, respectively.
F-13
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(6) FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The fair value of cash and cash equivalents, restricted cash,
accounts receivable, rights-to-receive, securities available for sale,
accounts payable and notes payable approximate the carrying amounts at
September 30, 1997 and 1996. The fair value of the rights-to-receive is
based upon the sale described in note 2. The fair value of the
securities available for sale is based upon quoted market prices for
these or similar instruments.
(7) STOCK OPTION PLANS
Under the Company's 1987 Stock Option and Rights Plan (the "1987
Plan"), the Company may grant stock options and related stock
appreciation rights to persons who are now or who during the term of
the 1987 Plan become key employees (including those who are also
directors) and independent sales agents. Stock options granted under
the 1987 Plan may either be incentive stock options or nonqualified
stock options for federal income tax purposes. The 1987 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.
In March 1996, the 1996 Long-Term Incentive Plan (the "1996 Plan") was
approved for adoption by the Company's stockholders. Under the 1996
Plan, the Company may grant awards, which may include stock options,
stock appreciation rights, restricted stock, deferred stock, stock
granted as a bonus or in lieu of other awards, dividend equivalents and
other stock based awards to directors, officers and other key employees
and consultants of the Company. A maximum of 505,966 shares of the
Company's common stock is included in the 1996 Plan. Stock options
granted under the 1996 Plan may be either incentive stock options or
nonqualified stock options for federal income tax purposes. The
exercise price under an incentive stock option 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 not less than one year after the date of grant.
F-14
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
At September 30, 1997, there were 275,466 shares available for grant
under the 1996 Stock Option Plan. The per share weighted average fair
value of stock options granted during 1997 ranged from approximately
$2.27 to $3.09 on the dates granted using the Black-Scholes
option-pricing model with the following weighted-average assumption:
expected dividend yield is 4%, risk-free interest rate of 5.8%, and
expected lives ranging from five to ten years.
The Company has continued to comply with APB No.25 to account for stock
options and accordingly, no compensation expense has been recognized in
the financial statements. Had the Company determined compensation
expense based on the fair value at the grant date for its stock options
under SFAS No. 123, the Company's net income would have been reduced to
the pro forma amounts indicated below:
1997 1996
---- ----
Net Income
As reported (424) 2,546
Pro forma (719) 2,365
Net Income per Common and Common
Equivalent Share
As reported (.04) .25
Pro forma (.06) .24
The full impact of the calculation of compensation expense for stock
options under SFAS No. 123 is not reflected in the pro forma net income
amounts presented above because compensation expense is reflected over
the option's vesting period which could be up to five years. Also, the
provision of SFAS 123 apply to grants awarded subsequent to December
15, 1994.
F-15
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
INCENTIVE STOCK OPTIONS NONQUALIFIED OPTIONS
----------------------- ---------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Balance at September 30, 1995 509,529 9.85 421,250 5.23
Granted(1987 Plan) 35,000 7.91 - -
Granted(1996 Plan) 50,000 10.00 - -
Exercised (8,156) 4.13 - -
Cancellations - - - -
------- ----- -------- -----
Balance at September 30, 1996 586,373 9.82 421,250 5.23
Granted(1996 Plan) 206,800 4.52 - -
Exercised (26,156) 3.88 (168,748) 3.88
Cancellations (57,049) 9.3 (5,002) 11.37
------- ----- -------- -----
Balance at September 30, 1997 709,968 8.54 247,500 6.02
======= ===== ======== =====
</TABLE>
At September 30, 1997, the range of weighted average exercise prices
and remaining contractual life of outstanding options was $4.375 to
$15.00 and 1 to 10 years, respectively.
At September 30, 1997 and 1996, the number of options exercisable was
635,718 and 745,066 and the weighted-average exercise price of those
options was $8.29 and $6.81, respectively.
(8) STOCKHOLDERS' EQUITY
The Company has 1 million authorized shares of preferred stock, $.10
par value per share; none of which has been issued.
The Company has 20 million authorized shares of common stock, $.02 par
value per share; with 10,189,956 and 10,126,926 issued and outstanding
at September 30, 1997 and 1996, respectively.
F-16
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(9) 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, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Rights-to-receive $ 298 $ 132
Travel programs 146 99
Reserve for frequent flyer miles obligation 106 -
Charitable contributions 72 -
Other 53 12
------- --------
Deferred tax assets 675 243
------- --------
Deferred tax liabilities:
Unrealized gain on securities available for sale 649 604
Deferred advertising costs 47 141
Property and equipment 474 191
------- --------
Deferred tax liabilities 1,170 936
------- --------
Net deferred tax liability (495) (693)
======= ========
</TABLE>
There was no valuation allowance for deferred tax assets as of
September 30, 1997 and 1996. The increase/(decrease) in deferred tax
liability related to securities available for sale was $45 and ($418)
during 1997 and 1996, respectively.
F-17
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
Income tax provision (benefit) for the years ended September 30, 1997,
1996 and 1995 is as follows:
CURRENT DEFERRED TOTAL
------- -------- -----
1997:
U.S. federal $ (4) (206) (210)
State and local - (50) (50)
-------- ---- -----
$ (4) (256) (260)
======== ==== =====
1996:
U.S. federal $ 922 336 1,258
State and local 335 (32) 303
-------- ---- -----
$ 1,257 304 1,561
======== ==== =====
1995:
U.S. federal $ 2,179 (75) 2,104
State and local 619 (40) 579
-------- ---- -----
$ 2,798 (115) 2,683
======== ==== =====
Reconciliation of the statutory federal income tax rate and the
Company's effective rate for the years ended September 30, 1997, 1996
and 1995, is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------- --------------------- ---------------------
% OF PRETAX % OF PRETAX % OF PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Federal tax rate $ (232) 34.0 $ 1,396 34.0% $ 2,339 34.0%
State and local taxes,
net of federal
income tax benefit (33) 4.8 200 4.9 382 5.6
Other 5 (0.8) (35) (0.9) (38) (0.6)
---- ---- ----- ---- ----- ----
$ (260) 38.0% $ 1,561 38.0% $ 2,683 39.0%
==== ==== ===== ==== ===== ====
</TABLE>
F-18
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(10) FRANCHISE AGREEMENTS
The Company, as franchiser, has entered into various ten-year
franchising agreements. In accordance with these agreements, the
Company has granted franchisees a territory with at least 625
full-service restaurants that accept certain major credit cards. The
Company will continue to develop trademarks for itself and the system
of franchisees and in addition provide marketing, advertising, training
and other administrative support.
The franchisees are responsible for soliciting restaurants and
cardholders, advancing consideration to the restaurants to obtain
Rights-to-receive food and beverage credits, and maintaining adequate
insurance.
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 food and beverage credits used
within the franchisee's territory.
/bullet/ 2.5 percent of the total 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.
/bullet/ A weekly service charge of $0.23 per participating
restaurant in the franchisee's territory.
There were no franchise territories sold during 1996 or 1997.
On November 15, 1996, the Company entered into a purchase agreement
with The Western Transmedia Company, Inc. ("Western"), a franchisee of
the Company. Under the terms of the agreement, the Company reacquired
for cash the right to operate its business in California, Oregon,
Washington and a portion of Nevada, Western's rights-to-receive and its
furniture, fixtures and equipment, as well as the assumption of certain
obligations. The transaction closed on January 2, 1997. The aggregate
purchase price was approximately $7,721of which $5,017 has been
recorded as excess of cost over net assets acquired. The Company had
previously received 60,000 shares of publicly traded common stock in
connection with the initial sale of this franchise, representing 2.3
percent of the franchisee's common stock. The shares are included in
securities available for sale. In addition, a director of the Company
owns 6.5 percent of the franchisee's common stock.
F-19
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
The Company has made an offer to acquire all the rights-to-receive of
East America Trading Company, its franchisee in the Carolinas and
Georgia, and to terminate and cancel the franchise agreement. The offer
consists of 170,000 shares of Transmedia Network stock. The effective
date of the termination of the franchise is contemplated for December
4, 1997, at which time the Company intends to assume operational
control of the sales territories.
(11) LICENSE AGREEMENTS
The Company has an agreement for exclusive perpetual licenses of its
software and trademark in the Asia-Pacific region and the continent of
Europe. In accordance with the agreements, the Company agreed to assist
the licensees with training relating to sales, administration,
technology and operations of the business. All material services or
conditions relating to the license sales have been substantially
performed or satisfied by the Company. The licensee may grant
sublicenses in the territories and is responsible for the operations of
the business in the respective regions, including procuring member
restaurants and providing related services and activities throughout
the territory.
In consideration for granting the exclusive licenses, the licensee paid
the Company license fees aggregating $2,375 for the master license
agreements and has granted to the Company a five percent equity
interest in the new entities which will operate in the United Kingdom,
Australia and New Zealand. The shares comprising the equity interests
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, New Zealand and the 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, unless
otherwise agreed to by the Company, and in no event less
than $500, for each of the People's Republic of China
and Japan.
/bullet/ Royalty of two percent of gross sales of the Australia
and New Zealand sublicensee and the United Kingdom
sublicensee, and 25 percent of any other amounts that
the licensee receives from the sublicensee.
During 1995, the Company received $250 from the European licensee when
it exercised its right to sublicense within the territory.
F-20
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
In December 1996, the Company amended its agreements with its
international licensees, Transmedia Europe, Inc. and Transmedia
Asia-Pacific, Inc. permitting them to acquire, on a worldwide basis,
the business of Countdown, plc Holding Corp. ("Countdown"). Upon
closing of the Countdown acquisition, the Company received $250 in cash
and a $500 note bearing interest at 10%, which is payable on April 1,
1998. At the Company's option, the note may be converted into stock of
the licensees.
(12) 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, 1997 are as follows:
YEAR ENDING
SEPTEMBER 30, AMOUNT
------------- ------
1998 $ 728
1999 652
2000 579
2001 498
2002 113
-----
Total minimum lease payments $ 2,570
=====
Rent expense charged to operations was $625, $387, and $293 for the
years ended September 30, 1997, 1996 and 1995, respectively.
(13) COMMITMENTS
The Company has entered into unconditional guaranty agreements with two
financial institutions, to extend credit in the aggregate amount of
$1,250 to two franchisees. Franchisee obligations under their
respective lines of credit were $897 at September 30, 1997. Should the
Company be required to satisfy any franchisee obligation under the
guaranty, the franchisee must relinquish its franchise back to the
Company.
F-21
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
On November 15, 1996, the Company amended its employment agreement with
its president and chief executive officer through September 30, 1999.
The agreement provides for salary at an annual rate of $375 through
September 30, 1998; and $400 through September 30, 1999, plus 5 percent
of the Company's pretax income not to exceed $700 for the fiscal years
ended September 30, 1998 and 1999. 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 15, 1996, the Company's consulting agreement with its
president and chief executive officer was amended to commence on the
termination of his employment agreement and to continue for ten years
thereafter. 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 pretax
income, but in any event not less than $100.
The Company also amended an employment agreement with two vice
presidents of the Company, one of which is the president of Transmedia
Restaurant Company and the other is president of Transmedia Service
Company, through September 30, 1999. The agreement provides for salary
at an annual rate of $315 through September 30, 1998; and $335 through
September 30, 1999, plus eligibility for a bonus up to 50% of his
salary.
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, either the individual is terminated or certain
events occur and the individual voluntarily resigns from the Company.
(14) LINE OF CREDIT
Prior to the securitization discussed in note 2, the Company maintained
a $20 million line of credit. As a result of the sale of
rights-to-receive described in Note 2, the outstanding obligation under
the line of credit was refinanced and the credit facility was
terminated on December 24, 1996.
On November 6, 1997, the Company obtained a line of credit with a bank
for $10 million to be used principally to finance the purchase of
rights-to-receive. This line of credit is unsecured and may be drawn
down based on an advance rate calculated as a percentage of
unrestricted rights-to-receive. The line of credit matures on February
1, 1999 and bears interest at the prime rate with a LIBOR option.
F-22
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(15) BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the New York City,
California, Massachusetts and 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, 1997 or
1996.
(16) LITIGATION
In December 1996, the Company terminated its license agreement (the
"Agreement") with Sports & Leisure Inc. ("S&L"). In February 1997, S&L
commenced an action against the Company in the 11th Judicial Circuit,
Dade County, Florida, alleging that the Company improperly terminated
the S&L license agreement and seeking money damages. The Company has
counterclaimed against S&L for breach of the Agreement and intends to
pursue the action vigorously. Management does not expect the outcome of
this case to have a material adverse impact on the financial position,
cash flows or operating results of the Company.
(17) SUBSEQUENT EVENTS
On November 7, 1997, the Company entered into an agreement to sell 2.5
million newly-issued common shares and non-transferable warrants to
purchase an additional 1.2 million common shares for a total of $10,625
to affiliates of Equity Group Investments, Inc., a privately held
investment company. The non-transferable warrants will have a term of
five years; one third of the warrants will be exercisable at $6.00 per
share, another third will be exercisable at $7.00 per share and the
third and final will be exercisable at $8.00 per share. As part of this
strategic investment, Equity Group will nominate two candidates for the
Board of Directors who will join three of the Company's existing
directors and two new independent directors.
F-23
<PAGE>
TRANSMEDIA NETWORK INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(18) SELECTED QUARTERLY FINANCIAL DATA
Selected quarterly financial data is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
-------------------------------------------------------- -------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
1997 1997 1997 1996 1997
------------- -------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Gross dining sales: 26,507 25,640 26,473 22,681 101,301
Operating revenue: 8,982 7,702 7,283 6,977 30,944
Operating income (loss): 855 118 (271) (4) 698
Net Income: 183 184 (587) (204) (424)
Earnings per share: .02 .02 (.06) (.02) (.04)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED YEAR ENDED
------------------------------------------------------- ------------- -------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1996 1995 1996 1995
------------- -------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gross dining sales: $ 23,394 23,271 22,743 20,668 90,076 78,632
Operating revenue: 7,975 7,384 7,008 6,119 28,486 22,154
Operating income: 1,109 1,529 829 1,290 4,757 6,345
Net Income: 464 839 462 781 2,546 4,196
Earnings per share: .05 .08 .05 .08 .25 .42
</TABLE>
Amendment and Termination of Chief Executive Officer Employment and Consulting
Agreements (Unaudited) Subsequent to the Date of the Independent Auditor's
Report.
Incident to the Agreement of November 7, 1997 regarding the investment by Equity
Group Investments, Inc. (See Note 17), the Company and Melvin Chasen, Chairman
of the Board, Chief Executive Officer and President, agreed to amend his
Employment Agreement and to terminate his Consulting Agreement on December 29,
1997. Pursuant to this Agreement, the Company made a cash payment of $2.75
million to Mr. Chasen and recognized a one-time pre-tax charge of $3.1 million
in the quarter ended December 31, 1997.
F-24
<PAGE>
<TABLE>
<CAPTION>
TRANSMEDIA NETWORK, INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
For each of the years in the three-years ended September 30, 1997
(in thousands)
BALANCE, CHARGED BALANCE,
BEGINNING TO END OF
OF YEAR EXPENSES WRITE-OFFS YEAR
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Accounts receivable:
Year ended September 30, 1997:
Allowance for doubtful accounts $ 15 501 (501) 15
=== ===== ====== ===
Year ended September 30, 1996:
Allowance for doubtful accounts $ 15 425 (425) 15
=== ===== ====== ===
Year ended September 30, 1995:
Allowance for doubtful accounts $ 25 333 (343) 15
=== ===== ====== ===
Rights to receive:
Year ended September 30, 1997:
Allowance for doubtful accounts $ 320 3,209 (2,764) 765
=== ===== ====== ===
Year ended September 30, 1996:
Allowance for doubtful accounts $ 900 2,075 (2,655) 320
=== ===== ====== ===
Year ended September 30, 1995:
Allowance for doubtful accounts $ 700 2,332 (2,132) 900
=== ===== ====== ===
</TABLE>
F-25
<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
The members of the Company's Board of Directors and nominees to the
Company's Board of Directors are as follows (Note, Messrs. Chasen, Africk and
Gardner are also nominees for election to the Company's Board of Directors at
the 1998 Annual Meeting of Stockholders):
CURRENT DIRECTORS AND NOMINEES FOR ELECTION
POSITION AND/OR DIR
NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ---------------------- --- --------------------------------- -----
Melvin Chasen 69 Chairman of the Board, 1984
President and Chief Executive
Officer of the Company
Jack Africk 69 Chairman of the Board, 1992
Evolution Consulting Group, Inc.
James J. Callaghan 57 Vice President of the Company 1991
and President, Transmedia
Restaurant Company Inc.
Irwin Hochberg 69 Senior Partner and President, 1987
Bloom Hochberg & Co., P.C.
Barry S. Kaplan 39 Vice President of the Company 1996
and President, Transmedia
Service Company Inc.
Henry Seiden 69 Chairman and Chief Executive 1988
Officer, The Seiden Group Inc.
20
<PAGE>
Herbert M. Gardner 58 Senior Vice President, Janney 1983
Montgomery Scott, Inc.
Rod F. Dammeyer 57 Managing Director,
Equity Group Investments, Inc. *
F. Philip Handy 53 Managing Director, Equity Group *
Investments, Inc.
George S. Wiedemann 53 Chairman of the Board and Chief *
Executive Officer, Grey Marketing
Lester Wunderman 77 Chairman of the Board, *
Wunderman Cato Johnson
*Not previously a director of the Company
BUSINESS EXPERIENCE
MR. CHASEN has been a director and the Chairman of the Board, President
and Chief Executive Officer of the Company since 1984. From 1984 through 1987,
he was a director, Chairman of the Board, President and Chief Executive Officer
of Transmedia Colorado. From its inception in 1983 until 1984, he was President
and a director of Transmedia Network Inc., a private Delaware corporation
engaged in the media barter business, which merged with Transmedia Colorado in
1984. Until March 1995, Mr. Chasen served as a director of The Western
Transmedia Company, Inc., as a director of Transmedia Europe, Inc., the
Company's European licensee, and as a director of Transmedia Asia Pacific, Inc.,
the Company's licensee for the Asia-Pacific rim region.
MR. AFRICK, who became a director of the Company in 1992, is the
Chairman of the Board of Evolution Consulting Group, Inc., Boca Raton, Florida.
From 1993 to 1995, he was Vice Chairman of the Board of Duty Free International,
Inc., and was a director of that company until August 1997. Until June 1993, Mr.
Africk was Vice Chairman of UST, Inc. and the President and Chief Executive
Officer of its subsidiary, United States Tobacco Company. He is also a director
of Crown Central Petroleum Corporation and of Tanger Factory Outlet Centers,
Inc.
21
<PAGE>
MR. CALLAGHAN, a director of the Company since 1991, was elected Vice
President of the Company and President of Transmedia Restaurant Company Inc., a
subsidiary, in 1994. He joined the Company in 1989 and served as its Executive
Vice President, Vice President, Sales and Marketing and Treasurer.
MR. KAPLAN was elected a Vice President of the Company and President of
Transmedia Service Company Inc., a subsidiary, in September 1995 and was elected
a Director of the Company in March 1996. 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. HOCHBERG, a director of the Company since 1987, served as director
of Transmedia Network Inc., a Colorado corporation ("Transmedia Colorado"),
which was merged into the Company. He has been Senior Partner and President of
Bloom Hochberg & Co., P.C., a firm of certified public accountants, for more
than seven years. He is also a director of Ampal-America Israel Corporation, a
subsidiary of Bank Hapoalim, which finances industrial, financial, commercial
and agricultural enterprises.
MR. SEIDEN, a director of the Company since 1988, is presently the
Chairman and Chief Executive Officer of The Seiden Group, Inc., an advertising
consultant, and Vice Chairman of Jordan, McGrath, Case & Taylor Inc., an
advertising agency. Mr. Seiden had been the Chairman of Ketchum Advertising, New
York, an advertising agency which is a division of Ketchum Communications, Inc.,
from 1987 through 1991.
MR. GARDNER, a director of the Company since 1983, has been employed as
a Senior Vice President of Janney Montgomery Scott Inc., an investment banking
firm, for more than five years. He was a director of two predecessors of the
Company from 1983 through 1987. Mr. Gardner is a director of Nu Horizons
Electronics Corp., an electronics components distributor. He is Chairman of the
Board of Supreme Industries, Inc., a company which manufactures specialized
truck bodies and shuttle buses. Mr. Gardner is also a director of American
Country Holdings Inc., a property and casualty insurance holding company. This
company (formerly, the Western Transmedia Company Inc.) was the Company's
franchisee in California, Oregon, Washington and parts of Nevada until January
1997. He is also a director of TGC Industries, Inc., a company in the
geophysical services industry, a director of Hirsch International Corp., an
importer of computerized embroidery machines, a developer of embroidery machine
application software and a provider of other services to the embroidery
industry.
MR. DAMMEYER is a Managing Director of Equity Group Investments, Inc.
He also serves as President, Chief Executive Officer and a director of Anixter
International, Inc., where he has been employed since 1985. Currently, Mr.
Dammeyer also serves as a director of each of Antec Corporation, CNA Surety
Corp., Inc., Grupo Azucarero Mexico (GAM), IMC Global, Inc., Jacor
Communications, Inc., Lukens Inc. and TeleTech Holdings, Inc. He is also a
trustee of Van Kampen American Capital, Inc, a closed-end fund, and a member of
the Chase Manhattan Corporation Advisory Board.
22
<PAGE>
MR. HANDY is a Managing Director of Equity Group Investments, Inc.
Prior to joining Equity Group, Mr. Handy was Chairman and President of Winter
Park Capital Company, a private investment firm he founded in 1980. From 1976 to
1980, he was President of ComBanks Corporation, a bank holding company in
Central Florida. Mr. Handy formerly owned and was Chairman and Chief Executive
Officer of Maryland Club Foods, Inc., a coffee roasting and marketing company
which was purchased from the Coca-Cola Company and subsequently sold in October
1989 to Procter & Gamble Company. He also served as Chairman and Chief Executive
Officer and was a majority owner of TOC Retail Inc., a 350-store gas
marketing/convenience store chain. He was majority owner and Chairman of the
Board of Bordo Citrus Products, Inc. and Lakeland Packing Company, citrus-based
food service companies. Mr. Handy currently serves as a director of each of
Anixter International, Inc., Banca Quandium S.A., Q-Tel, S.A. de C., and Jacor
Communications, Inc.
MR. WIEDEMANN is the Chairman of the Board and Chief Executive Officer
of Grey Direct, a direct marketing agency that specializes in multimedia direct
response advertising, which he founded in 1979. He also founded Grey Interactive
in 1993 and Grey Direct e.marketing in 1995. Mr. Wiedemann was elected to the
Direct Marketing Association Board of Directors in October 1990, and presently
serves as Chairman Elect of that Board.
MR. WUNDERMAN is founder and Chairman of the Board of Wunderman Cato
Johnson, a direct marketing advertising agency, and a director of Dentsu
Wunderman Direct, an affiliated company, in Japan. He also currently serves as a
Visiting professor of Direct Marketing at the School for Continuing Education at
New York University and as a director of InfoNautics Inc. Mr. Wunderman was
formerly a director of The Advertising Council and of Direct Marketing
Association and served for two years as Secretary/Treasurer and as a member of
the Operations Committee and Board of Directors of the American Association of
Advertising Agencies. Mr. Wunderman coined the term "direct marketing" and is
the author of two books: FRONTIERS OF DIRECT MARKETING, published in 1981, and
BEING DIRECT, published in 1997.
EXECUTIVE OFFICERS
Information concerning the executive officers of the Company is set
forth following Item 4 in Part I of the Original Report under the caption
"Executive Officers of the Registrant".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons holding more than 10 percent
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission reports of changes in ownership and annual
reports of ownership of Common Stock and other equity securities of the Company.
Such directors, executive officers and ten-percent stockholders are also
required to furnish the Company with copies of all such filed reports.
23
<PAGE>
The Company believes that, during the fiscal year ended September
30, 1997, all filing requirements under Section 16(a) of the Securities Exchange
Act of 1934, as amended, applicable to its officers, directors and greater than
ten percent stockholders were complied with on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides, for the periods indicated, certain summary
information concerning the cash and non-cash compensation earned by or awarded
to the Company's Chief Executive Officer and each of the four other most highly
compensated executive officers who were serving as executive officers as of
September 30, 1997 (collectively, the "named executive officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Melvin Chasen 1997 $350,000 $ -- 20,000
Chairman of the Board, President 1996 300,000 216,100 --
and Chief Executive Officer 1995 275,000 362,900 30,000
James M. Callaghan 1997 300,000 30,000 15,000
Vice President 1996 250,000 10,000 --
1995 180,000 16,400 15,000
Barry S. Kaplan 1997 280,000 -- 15,000
Vice President 1996 225,000 -- 50,000
1995 27,692 -- 20,000
Stephen E. Lerch 1997 193,000 15,000 30,000
Executive Vice President and 1996 -- -- --
Chief Financial Officer 1995 -- -- --
Paul A. Ficalora 1997 155,500 -- 6,000
Executive Vice President of 1996 146,250 10,000 --
Transmedia Restaurant Company Inc. 1995 130,673 30,000 10,000
</TABLE>
24
<PAGE>
EMPLOYMENT AGREEMENTS
In December of 1997, the Company and Mr. Chasen entered into an
agreement (i) pursuant to which Mr. Chasen's employment with the Company will
terminate on September 15, 1998; (ii) his Amended and Restated Consulting
Agreement was terminated; (iii) his right to receive $1,000,000 in the event of
the sale of a control block of stock of the Company was extinguished; and (iv)
he agreed to a five-year non-competition covenant and a confidentiality
agreement with the Company. In return, (i) Mr. Chasen received a payment of
$2,750,000 on December 30, 1997; (ii) the Company agreed that any of his stock
options which are unvested as of the termination of his employment will vest and
that all his stock options will be exercisable through December 31, 1998; (iii)
his indebtedness to the Company in the amount of $134,900 was canceled; (iv) the
Company agreed to purchase a new car for him of similar style and quality to the
leased automobile which the Company currently provides him (estimated to cost
approximately $60,000); (v) Mr. Chasen and his wife will receive health
insurance coverage for the remainder of their respective lives (currently
costing approximately $6,700 per year); and (vi) he will be reimbursed for his
reasonable accounting and legal expenses (approximately $22,000) incurred in
connection with such negotiations. For the fiscal year ended September 30, 1997,
Mr. Chasen received a base salary of $350,000 and did not receive a bonus.
During 1998, Mr. Chasen's base salary will be $375,000 and he will be eligible
for a bonus, not to exceed $700,000.
The Company's Amended and Restated Employment Agreement with Mr.
Callaghan provides that he will serve the Company as vice president for a term
expiring on September 30, 1999 and will receive a base salary of $300,000,
$315,000, $335,000 during fiscal 1997, 1998 and 1999, respectively, as well as
be eligible to receive a bonus not to exceed one-half of his salary in each year
of the term of the Employment Agreement. The Amended and Restated Employment
Agreement terminates September 30, 1999. The Company has agreed to maintain in
force a $500,000 life insurance policy on Mr. Callaghan, with his estate listed
as beneficiary during the term of the Employment Agreement, which will be
transferred to Mr. Callaghan, without cost, at the end of the employment term
(whether or not he becomes disabled during the term). If Mr. Callaghan becomes
disabled during the employment term, he will receive his full compensation
during the first six months of disability, and thereafter will be paid 75% of
his salary (without bonus) for the remaining term of the Agreement. The Company
may terminate the Employment Agreement for certain enumerated causes. The
Employment Agreement restricts Mr. Callaghan from competing against the Company
for a two-year period following termination.
The Company's Amended and Restated Employment Agreement with Mr. Kaplan
provides for a base salary of $280,000 in fiscal year 1997, $315,000 in fiscal
year 1998, $335,000 for fiscal year 1999 and a bonus not to exceed one-half of
his base salary for each year of the term of the Employment Agreement. The
Amended and Restated Employment Agreement terminates on September 30, 1999. The
Company has agreed to maintain in force a $500,000 life insurance policy on Mr.
Kaplan, with his estate listed as beneficiary during the term of the Employment
Agreement, which will be transferred to Mr. Kaplan, without cost, at the end of
the employment term (whether or not he becomes disabled during the term). If Mr.
Kaplan becomes disabled during the employment term, he will receive his full
compensation during the first six months of disability, and thereafter will be
paid 75% of his salary (without bonus) for the remaining term of the Agreement.
The Company may terminate the Employment Agreement for certain enumerated
causes. The Employment Agreement restricts Mr. Kaplan from competing against the
Company for a two-year period following the termination of his employment.
Effective February 1, 1997, the Company entered into a letter agreement with Mr.
Stephen E. Lerch, pursuant to which Mr. Lerch was elected Executive Vice
President of the Company. Pursuant to this letter agreement, Mr. Lerch received
a base salary of $200,000, plus a minimum bonus of $15,000 during fiscal 1997,
and a signing incentive of $60,000 that has already been paid. As compensation
for services rendered to the Company, Mr. Lerch also received ten year options
to purchase 10,000 shares of Common Stock at an exercise price of $5.25 per
share,
25
<PAGE>
which was the fair market value at the time of the grant. The letter agreement
also provides that Mr. Lerch will be entitled to receive a lump sum payment of
$500,000 in the event of a change of control of the Company in which he was not
offered a comparable position of comparable salary. The letter agreement has no
term and does not define a "change of control." Cosequently, whether the
Investment would constitute a "change of control" within the meaning of the
letter is subject to interpretation. The Purchasers and Mr. Lerch have not
discussed the terms of his future employment with the Company. In the event Mr.
Lerch ceases to be an employee of the Company and unless the Compensation
Committee decides otherwise, his options will generally remain exercisable for a
period of 90 days (one year in the case of his death or disability) following
the termination of his employment pursuant to the terms of the 1996 Plan.
OPTIONS GRANTED
The following table sets forth, as to the executive officers named in
the Summary Compensation Table, with respect to the fiscal year ended September
30, 1997, information relating to the grants of stock options pursuant to the
1996 Plan and otherwise:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL OPTIONS VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF
UNDERLYING EMPLOYEES EXERCISE OF STOCK PRICE
DATE OF OPTIONS IN FISCAL BASE PRICE EXPIRATION APPRECIATION
NAME GRANT GRANTED YEAR ($/SH)(1) DATE FOR OPTION TERM
- ---- -------- ---------- ------------- ----------- -------------- ------------------------
5% 10%
----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry S. Kaplan April 14, 1997 15,000 7.25% $4.3750 April 14, 2007 $106,896.15 $170,214.30
Stephen E. Lerch February 10, 1997 10,000 4.84% $5.2500 February 10, 2007 $ 71,264.10 $113,476.20
Stephen E. Lerch April 14, 1997 20,000 9.67% $4,3750 April 14, 2007 $171,034.00 $272,343.00
Melvin Chasen April 14, 1997 20,000 9.67% $4.3750 April 14, 2007 $171,034.00 $272,343.00
James E. Callaghan April 14, 1997 15,000 7.25% $4.3750 April 14, 2007 $106,896.15 $170,214.30
Paul A. Ficalora April 14, 1997 6,000 2.90% $4.3750 April 14, 2007 $ 42,758.46 $ 68,085.72
<FN>
- --------------
(1) All options were granted at 100% of the underlying Common Stock price on the date of grant.
</FN>
</TABLE>
26
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 24,
1997 regarding ownership of the Company's Common Stock by each person who is
known by the Company to own beneficially more than 5% of its Common Stock.
Except as otherwise specified, the named beneficial owner has sole voting and
investment power with respect to the shares beneficially owned by him.
<TABLE>
<CAPTION>
PRIOR TO GIVING EFFECT AFTER GIVING EFFECT
TO THE INVESTMENT TO THE INVESTMENT
--------------------------- ----------------------------
AMOUNT OF AMOUNT OF
COMMON STOCK COMMON STOCK
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
NAME AND ADDRESS OWNED CLASS OWNED CLASS
- ---------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Melvin Chasen.......................... 1,147,231(1) 10.76% 1,147,231 7.99%
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
Transmedia Investors, L.L.C.; 1,348,009(2) 13.01% 5,048,009(3) 35.90%
Samstock, L.L.C........................
c/o Samstock, L.L.C.
Two North Riverside Plaza
Chicago, Illinois 60606
</TABLE>
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 24, 1997, by each
director and nominee for director of the Company, the executive officers named
in the Summary Compensation Table and the executive officers and directors as a
group and includes options and warrants to purchase shares of Common Stock which
will become exercisable by February 24, 1998. Except as otherwise indicated,
each such stockholder has sole voting and investment power with respect to the
shares beneficially owned by such stockholder.
<TABLE>
<CAPTION>
AMOUNT OF OPTIONS AND
COMMON STOCK WARRANTS
BENEFICIALLY EXERCISABLE PERCENT OF
NAME AND ADDRESS OWNED WITHIN 60 DAYS TOTAL CLASS
- ---------------- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C>
Melvin Chasen.......................... 849,731 297,500 1,147,231(1) 10.76%
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
James M. Callaghan..................... 85,662 142,500 228,162(4) 2.17%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF OPTIONS AND
COMMON STOCK WARRANTS
BENEFICIALLY EXERCISABLE PERCENT OF
NAME AND ADDRESS OWNED WITHIN 60 DAYS TOTAL CLASS
- ---------------- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C>
Herbert M. Gardner..................... 297,661 28,750 326,411(5) 3.14%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
Irwin Hochberg......................... 10,937 28,750 39,687(6) 0.38%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
Henry Seiden........................... 139,280 28,750 168,030(7) 1.62%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
Jack Africk............................ 63,830 28,750 92,580(8) 0.89%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
Paul A. Ficalora....................... 186,035 20,750 206,785(9) 1.99%
c/o Transmedia Network Inc.
750 Lexington Avenue
New York, New York 10022
Barry S. Kaplan........................ 32,800 35,000 67,800(10) 0.65%
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
Gregory R. Borges...................... 18,625 9,250 27,875(11) 0.27%
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
Kathryn M. Ferara...................... 657 5,125 5,782(12) 0.06%
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
Stephen E. Lerch....................... -- -- -- --
c/o Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
All directors and executive officers as 1,685,218 625,125 2,310,343 20.82%
a group (11 persons)..............
28
<PAGE>
<FN>
- -------------------
(1) Includes for Mr. Chasen (i) 139,600 shares owned by a family partnership
for which Mr. Chasen exercises voting and investment authority, (ii)
options to purchase 135,000 shares at a price of $4.8333 per share,
which options were granted outside the 1987 Stock Option and Rights
Plan (the "1987 Plan") and expire in May 2002, (iii) options to
purchase 67,500 shares of Common Stock of the Company at an exercise
price of $7.4445 per share, which options were granted outside the 1987
Plan and expire in September 1998, (iv) options to purchase 33,750
shares at a price of $15.00 per share, which options were granted under
the 1987 Plan and expire in March 2004, (v) options to purchase 15,000
shares at a price of $12.25 per share, which options were granted under
the 1987 Plan and expire in March 2005 and (vi) options to purchase
46,250 shares, which were granted under the 1987 and 1996 Plans and are
now exercisable subsequent to the agreement Mr. Chasen executed with
the Company on December 29, 1997. All of such options are presently
exercisable. Does not include (i) 200,778 shares held by Iris Chasen,
the wife of Mr. Chasen, or (ii) 55,000 shares held by Mr. Chasen's
three adult children, as of clauses (i) and (ii) of which Mr. Chasen
disclaims beneficial ownership. Subject to the terms of the Transaction
Documents, Mr. Chasen's beneficially owned shares are subject to shared
voting power with the Purchasers.
(2) Includes 1,348,009 shares which are owned by Melvin Chasen and Iris Chasen,
but which are subject to the proxy in favor of the Purchasers contained
in the Agreement Among Stockholders.
(3) Includes (i) 2,500,000 shares pursuant to the Purchase Agreement, (ii)
warrants to purchase 1,200,000 shares at exercise prices in equal parts
at $6.00 per share, $7.00 per share, and $8.00 per share, which
warrants expire on the fifth anniversary of the closing of the
Investment, and (iii) 1,348,009 shares which are owned by Melvin Chasen
and Iris Chasen, but which are subject to the voting and disposition
restrictions in favor of Purchasers contained in the Agreement Among
Stockholders.
(4) Includes for Mr. Callaghan (i) 5,038 shares held in Mr. Callaghan's
Individual Retirement Account, (ii) options to purchase 84,375 shares
of Common Stock at an exercise price of $4.8333 per share, which
options were granted under the 1987 Plan and expire in May 2002, (iii)
options to purchase 33,751 shares at an exercise price of $7.4445 per
share, which were granted under the 1987 Plan and expire in September
2003, (iv) options to purchase 16,875 shares at an exercise price of
$15.00 per share, which options were granted under the 1987 Plan and
expire in March 2004, and (v) options to purchase 7,500 shares at a
price of $12.25 per share, which options were granted under the 1987
Plan, and expire in March 2005. All of such options are presently
exercisable. Does not include (i) options issued under the 1987 and
1996 Plans to purchase 28,125 shares, which are not exercisable within
60 days of December 24, 1997, or (ii) 5,724 shares held in the
Individual Retirement Account of Mr. Callaghan's wife, as to all of
which shares Mr. Callaghan disclaims beneficial ownership.
(5) Includes for Mr. Gardner (i) 137,439 shares held by Herbert M. Gardner
(Keogh), (ii) 4,260 shares held by The Gardner Family Foundation, Inc.
of which Mr. Gardner is President, (iii) options to purchase 11,250
shares of Common Stock of the Company at an exercise price of $7.4445
per share, which options were granted outside the 1987 Plan and expire
in September 1998, (iv) options to purchase 7,500 shares of Common
Stock at an exercise price of $15.00 per share, which options were
granted under the 1987 Plan and expire in March 2004, and (v) options
to purchase 5,000 shares of Common Stock at an exercise price of $12.25
per share, which options were granted under the 1987 Plan and expire in
March 2005 and (vi) options to purchase 5,000 shares of Common Stock at
an exercise price of $7.875, which options were granted under the 1996
Plan and expire in March 2006. All of such options are presently
exercisable. Does not include (i) 3,834 shares
29
<PAGE>
held by Mr. Gardner's wife individually or as custodian for their
children and (ii) options to purchase 5,500 shares at an exercise price
of $4.375, which are not exercisable within 60 days of December 24,
1997, as to all of which shares Mr. Gardner disclaims beneficial
ownership.
(6) Includes for Mr. Hochberg (i) options to purchase 11,250 shares of Common
Stock of the Company at an exercise price of $7.4445 per share, which
options were granted outside the 1987 Plan and expire in September
1998, and (ii) options to purchase 7,500 shares of Common Stock at an
exercise price of $15.00 per share which options were granted under the
1987 Plan and expire in March 2004, and (iii) options to purchase 5,000
shares of Common Stock at an exercise price of $12.25 per share, which
options were granted under the 1987 Plan and expire in March 2005, and
(iv) options to purchase 5,000 shares of Common Stock at an exercise
price of $7.875, which options were granted under the 1996 Plan and
expire in March 2006. All of such options are presently exercisable.
Does not include (i) options to purchase 5,500 shares, which were
granted under the 1996 Plan and are not exercisable within 60 days of
December 24, 1997; (ii) 4,362 shares owned by Mrs. Hochberg and (iii)
10,500 shares owned by Mr. Hochberg's children and grandchildren, as to
all of which Mr. Hochberg disclaims beneficial ownership.
(7) Includes for Mr. Seiden (i) options to purchase 11,250 shares of Common
Stock of the Company at an exercise price of $7.4445 per share, which
options were granted outside the 1987 Plan and expire in September
1998, (ii) options to purchase 7,500 shares of Common Stock at an
exercise price of $15.00 per share, which options were granted under
the 1987 Plan and expire in March 2004, and (iii) options to purchase
5,000 shares of Common Stock at an exercise price of $12.25 per share,
which options were granted under the 1987 Plan and expire in March 2005
and (iv) options to purchase 5,000 shares of Common Stock at an
exercise price of $7.875, which options were granted under the 1996
Plan and expire in March 2006. All of such options are presently
exercisable. Does not include options to purchase 5,500 shares, which
were granted under the 1996 Plan and are not exercisable within 60 days
of December 24, 1997.
(8) Includes for Mr. Africk (i) 63,830 shares owned by a family corporation for
which Mr. Africk exercises voting and investment authority, (ii)
options to purchase 11,250 shares of Common Stock of the Company at an
exercise price of $7.4445 per share, which options were granted outside
the 1987 Plan and expire in September 1998, and (iii) options to
purchase 7,500 shares of Common Stock at an exercise price of $15.00
per share, which options were granted under the 1987 Plan and expire in
March 2004 and (iv) options to purchase 5,000 shares of Common Stock at
an exercise price of $12.25 per share, which options were granted under
the 1987 Plan and expire in March 2005 and (v) options to purchase
5,000 shares of Common Stock at an exercise price of $7.875, which
options were granted under the 1996 Plan and expire in March 2006. All
of such options are presently exercisable. Does not include options to
purchase 5,500 shares, which were granted under the 1996 Plan and are
not exercisable within 60 days of December 24, 1997.
(9) Includes for Mr. Ficalora (i) options to purchase 15,750 shares at an
exercise price of $7.4445 per share, which options were granted under
the 1987 Plan and expire in September 2003, and (ii) options to
purchase 5,000 shares at an exercise price of $12.25, which options
were granted under the 1987 Plan and expire in March 2005. All of such
options are presently exercisable. Does not include (i) options to
purchase 10,000 shares, which were granted under the 1987 and 1996
Plans and are not exercisable within 60 days of November 20, 1997, (ii)
6,075 shares held by Mrs. Ficalora, and (iii) 1,350 shares held by Mr.
Ficalora's child, as to all of which shares Mr. Ficalora disclaims
beneficial ownership.
30
<PAGE>
(10) Includes for Mr. Kaplan, (i) options to purchase 10,000 shares at an
exercise price of $9.25 per share, which options were granted under the
1987 Plan and expire in August 2005, and (ii) options to purchase
12,500 shares at an exercise price of $10.00 per share, which options
were granted under the 1987 Plan and expire in December 2005. All of
such options are presently exercisable. Does not include options issued
under the 1987 and 1996 Plans to purchase 62,500 shares, which are not
exercisable within 60 days of December 24, 1997.
(11) Includes for Mr. Borges (i) options to purchase 6,750 shares at an exercise
price of $7.4445 per share, which options were granted under the 1987
Plan and expire in September 2003, and (ii) options to purchase 2,500
shares at an exercise price of $12.25 per share, which options were
granted under the 1987 Plan and expire in March 2005. All of such
options are presently exercisable. Does not include options to purchase
7,500 shares, which were granted under the 1987 and 1996 Plans and are
not exercisable within 60 days of December 24, 1997.
(12) Includes for Ms. Ferara (i) options to purchase 3,375 shares at an exercise
price of $7.4445 per share, which options were granted under the 1987
Plan and expire in September 2003 and (ii) options to purchase 1,750
shares at an exercise price of $12.25 per share, which options were
granted under the 1987 Plan and expire in March 2005. All of such
options are presently exercisable. Does not include options to purchase
6,750 shares, which were granted under the 1987 and 1996 Plans and are
not exercisable within 60 days of December 24, 1997.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1997, the Company and Mr. Chasen entered into an agreement (i)
pursuant to which Mr. Chasen's employment with the Company will terminate on
September 15, 1998; (ii) his Amended and Restated Consulting Agreement was
terminated; (iii) his right to receive $1,000,000 in the event of the sale of a
control block of stock of the Company was extinguished; and (iv) he agreed to a
five-year non-competition covenant and a confidentiality agreement with the
Company. In return, (i) Mr. Chasen received a payment of $2,750,000 on December
30, 1997; (ii) the Company agreed that any of his stock options which are
unvested as of the termination of his employment will vest and that all his
stock options will be exercisable through December 31, 1998; (iii) his
indebtedness to the Company in the amount of $134,900 was canceled; (iv) the
Company agreed to purchase a new car for him of similar style and quality to the
leased automobile which the Company currently provides him (estimated to cost
approximately $60,000); (v) Mr. Chasen and his wife will receive health
insurance coverage for the remainder of their respective lives (currently
costing approximately $6,700 per year); and (vi) he will be reimbursed for his
reasonable accounting and legal expenses (approximately $22,000) incurred in
connection with such negotiations.
Although the final terms of the of the Company's agreement with Mr. Chasen
described above were not presented to the Board of Directors, the agreement as
originally negotiated was approved by the board by a vote of five to one, with
Mr. Chasen abstaining. The originally negotiated agreement contained terms
identical to those contained in the final agreement described above except that
in lieu of a purchased automobile and the forgiveness of indebtedness to the
Company in the amount of $134,900, the Company was to have provided Mr. Chasen
during a five year period following the term of his employment with a leased
automobile, secretarial services and an office, at Mr. Chasen's option, on the
Company's premises or at an off-site location. These changes to Mr. Chasen's
agreement were raised and insisted upon by the Purchasers only after the Board
approval had already been obtained, and at a time (during the year-end holiday
season) when the agreement with Mr. Chasen had to be signed and carried into
effect (including the making of the payments required thereunder) prior to
December 31, 1997 or incur possible adverse tax consequences. The changes
required by the Purchasers in the final
31
<PAGE>
agreement reduced the costs to the Company of the transaction from that which
was previously approved by the Board.
Mr. Gardner, a director of the Company, voted against approval of the agreement
as originally negotiated. His stated objections were that (i) the cash payment
to Mr. Chasen, in his judgment, was too high; (ii) that, based on the Company's
cash resources at the time (approximately $4.5 million) and cash requirements,
the Company was not in a position to make the payment and, if it did, it would
have to borrow under its revolving credit facility to fund its cash needs; and
(iii) that the cash payment would generate a significant operating loss during
the first fiscal quarter of 1998. The Company has not had to borrow funds to
meet its cash needs (its current average cash reserves are approximately $1.6
million). In addition, the payment to Mr. Chasen was less than the present value
of the maximum payments the Company might otherwise have been obligated to make
under the Employment Agreement and the Consulting Agreement, as unmodified.
Further, the Board noted that the payments under the non-modified terms of the
Employment and Consulting Agreements might have been non-deductible to the
Company for U.S. federal income tax purposes under Section 280G (the golden
parachute rules) and under Section 162(m) of the Internal Revenue Code of 1986
(which risk was substantially by the terms of the modified agreement). The
Company has treated the termination of Mr. Chasen's Amended and Restated
Employment Agreement and his Amended and Restated Consulting Agreement as a
one-time pretax charge of approximately $3.1 million in the first quarter ended
December 31, 1997.
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
Schedule II - Valuation and Qualifying Accounts
(a)(3) Exhibits
32
<PAGE>
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.
10.4 Amended and Restated Employment Agreement dated as of November
15, 1996 between the Company and Melvin Chasen.(12)
10.5 Amended and Restated Consulting Agreement dated as of November
15, 1996 between the Company and Melvin Chasen.(12)
10.6 Employment Agreement effective April 1, 1992 between the Company
and James Callaghan.(9) (10)
10.7 Amendment dated October 1, 1994, to Employment Agreement between
the Company and James Callaghan.(1)(10)
10.8 Employment Agreement dated as of October 1, 1995 between the
Company and Barry Kaplan. (10)(12)
10.9 Amendment dated January 20, 1997 to Employment Agreement between
Company and James Callaghan (10)
10.10 Amendment dated January 20, 1997 to Employment Agreement between
Company and Barry Kaplan (10)
33
<PAGE>
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)
10.16 Agreement, dated as of December 6, 1996, among the Company, TMNI
International Incorporated, Transmedia Europe Inc. and
Transmedia Asia Pacific Inc.(12)
10.17 Agreement, dated as of November 15, 1996 between the Company and
The Western Transmedia Company Inc.(12)
10.18 Stock Purchase and Sale Agreement, dated as of November 6, 1997,
among Transmedia Network Inc., Samstock, L.L.C., and Transmedia
Investors, L.L.C. (14)
10.19 Form of Warrant to purchase Common Stock (14)
10.20 Investment Agreement, dated as of November 6, 1997, among
Transmedia Network Inc., Samstock, L.L.C., and Transmedia
Investors, L.L.C. (14)
10.21 Agreement Among Stockholders Agreement, dated as of November 6,
1997, among Transmedia Network Inc., Samstock, L.L.C.,
Transmedia Investors, L.L.C., Melvin Chasen and Iris Chasen (14)
10.22 Stockholder Cooperation Agreement, dated as of November 6, 1997,
among Transmedia Investors, L.L.C., Samstock, L.L.C. and Melvin
Chasen and Iris Chasen. (14)
10.23 Security Agreement dated as of December 1, 1996 among TNI
Funding Company I, L.L.C. as Issuer, The Chase Manhattan Bank as
Trustee and as Collateral Agent, TNI Funding I, Inc., as Seller
and Transmedia Network Inc., as Servicer. (13)
10.24 Purchase Agreement dated as of December 1, 1996 among Transmedia
Network Inc., Transmedia Restaurant Company Inc., Transmedia
Service Company Inc. and TNI Funding I, Inc., as Purchaser. (13)
10.25 Purchase and Servicing Agreement dated as of December 1, 1996
among TNI Funding Company I, L.L.C., as Issuer, TNI Funding I,
Inc. as Seller, Transmedia Network Inc., as Servicer, Frank
Felix Associates, Ltd., as Back-up Servicer and The Chase
Manhattan Bank, as Trustee. (13)
10.26 Indenture dated as of December 1, 1996 between TNI Funding
Company I, L.L.C., as Issuer and The Chase Manhattan Bank, as
Trustee. (13)
34
<PAGE>
10.27 Comerica Bank and Transmedia Network Inc., Transmedia Restaurant
Company Inc., TMNI International Incorporated, Transmedia
Service Company Inc., - $10,000,000.00 Line of Credit. (13)
10.28 Letter of Agreement dated January 29, 1997 between Company and
Stephen E. Lerch.
21.1 Subsidiaries of Transmedia Network Inc.(1)
23.1 Consent of Independent Auditors.(13)
27.1 Financial Data Schedule
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)
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.
35
<PAGE>
(11) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1995 and
incorporated by reference.
(12) Filed as an exhibit to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1996, and
incorporated by reference.
(13) Filed as an exhibit hereto.
(14) Filed as an exhibit to the Company's Current Report on Form
8-K as of November 6, 1997
(b) The Company did not file any Form 8-K Current Reports during
the fourth quarter of the fiscal year ended September 30,
1997.
(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.
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
and Chief Executive Officer
Dated: February 10, 1998
36
EXHIBIT 10.23
================================================================================
SECURITY AGREEMENT
Dated as of December 1, 1996
among
TNI FUNDING COMPANY I, L.L.C.,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Trustee and as
Collateral Agent
and
TNI FUNDING I, INC.,
as Seller
and
TRANSMEDIA NETWORK INC.,
as Servicer
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. GRANT OF SECURITY INTEREST......................1
SECTION 2. SECURITY FOR THE ISSUER'S OBLIGATIONS ...........4
SECTION 3. DELIVERY OF SECURED COLLATERAL...................4
SECTION 4. STRUCTURE OF BANK ACCOUNTS ......................4
SECTION 5. ESTABLISHMENT OF COLLATERAL ACCOUNT; COLLECTION
DEPOSIT ACCOUNT; INVESTMENTS; POST OFFICE BOXES;
RESERVE ACCOUNT; CASH ACCUMULATION ACCOUNT.......6
SECTION 6. RECONCILIATION OF BORROWING BASE................11
SECTION 7. DAILY CASH APPLICATIONS.........................11
SECTION 8. DISTRIBUTIONS ON PAYMENT DATES..................12
SECTION 9. PURCHASE OF CONTRACT ASSETS.....................15
SECTION 10. THE ISSUER REMAINS LIABLE.......................15
SECTION 11 REPRESENTATIONS AND WARRANTES...................15
SECTION 12 AFFIRMATIVE COVENANTS...........................19
SECTION 13. NEGATIVE COVENANTS .............................26
SECTION 14. EARLY AMORTIZATION EVENTS ......................29
SECTION 15. AUTOMATIC DESIGNATION OF AMORTIZATION
COMMENCEMENT DATE
SECTION 16. OPTIONAL DESIGNATION OF AMORTIZATION
COMMENCEMENT DATE...............................33
SECTION 17. ACTIONS FOLLOWING EARLY AMORTIZATION EVENT;
DESIGNATION OF AMORTIZATION COMMENCEMENT DATE;
ACCELERATION OF THE NOTES.......................33
SECTION 18. OPTIONAL REDEMPTION.............................35
-i-
<PAGE>
SECTION 19. FURTHER ASSURANCES.............................37
SECTION 20. ADDITIONAL SECURED COLLATERAL COVENANTS .......37
SECTION 21. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT ...39
SECTION 22. COLLATERAL AGENT MAY PERFORM ..................40
SECTION 23. THE COLLATERAL AGENT; THE TRUSTEE..............40
SECTION 24. PROHIBITION ON CERTAIN ACTIONS ................43
SECTION 25. INDEMNITY AND EXPENSE..........................43
SECTION 26. AMENDMENTS, ETC................................45
SECTION 27. SUCCESSOR COLLATERAL AGENT.....................45
SECTION 28. ADDRESSES FOR NOTICES..........................46
SECTION 29. NO WAIVER; CUMULATIVE REMEDIES.................47
SECTION 30. CONTINUING SECURITY INTEREST...................47
SECTION 31. FURTHER INDEMNIFICATION........................47
SECTION 32. GOVERNING LAW..................................48
SECTION 33. NO PETITION IN BANKRUPTCY......................48
SECTION 34. CERTAIN ERISA COVENANTS OF THE ISSUER..........48
SECTION 35. TERMINATION ...................................48
SECTION 36. MISCELLANEOUS .................................48
-ii-
<PAGE>
EXHIBITS
EXHIBIT A Form of Standing Delivery Order
SCHEDULES
SCHEDULE I Bank Accounts, Collection Deposit Account Bank,
and Post Office Boxes
SCHEDULE II UCC Filing Jurisdictions
SCHEDULE III Credit Card Companies
ANNEXES
ANNEX I Glossary of Terms
-iii-
<PAGE>
SECURITY AGREEMENT (the "AGREEMENT"), dated as of December 1, 1996,
among TNI FUNDING COMPANY I, L.L.C., a Delaware limited liability company (the
"ISSUER"); THE CHASE MANHATTAN BANK, a New York banking corporation, as (a) the
trustee under the Indenture (the "TRUSTEE") and (b) the collateral agent under
this Agreement for the benefit of the Secured Parties (the "COLLATERAL AGENT");
TNI FUNDING I, INC., a Delaware special purpose corporation (the SELLER), as
seller, and TRANSMEDIA NETWORK INC., a Delaware corporation, as Servicer (the
"SERVICER" or "TRANSMEDIA") under the Purchase and Servicing Agreement.
Capitalized terms used in this Agreement but not defined in the text
hereof are defined in the "GLOSSARY OF TERMS" attached as Annex I hereto.
WITNESSETH:
WHEREAS, the Seller, the Issuer and the Servicer have entered into the
Purchase and Servicing Agreement, pursuant to which Contract Assets will be sold
by the Seller to the Issuer and serviced by the Servicer;
WHEREAS, the Issuer intends to issue the Notes pursuant to the
Indenture; and
WHEREAS, it is a condition precedent to the issuance of the Notes under
the Indenture, that the Issuer shall have executed and delivered this Agreement
and assigned and pledged its right, title and interest in and to the Secured
Collateral contemplated by this Agreement and that the Collateral Agent, the
Trustee, the Issuer, the Seller and the Servicer shall have executed and
delivered this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
(a) the Issuer to purchase Contract Assets under the Purchase and Servicing
Agreement, (b) the Trustee to execute the Indenture, and (c) the Noteholders to
purchase the Notes, the Issuer, the Trustee, the Seller and the Servicer hereby
agree with the Collateral Agent for its benefit and the benefit of the other
Secured Parties as follows:
SECTION 1. GRANT OF SECURITY INTEREST. (a) The Issuer hereby assigns
and pledges to the Collateral Agent, and the Collateral Agent hereby accepts,
for its benefit and for the benefit of the Secured Parties, a security interest
in the following, whether now owned or hereafter acquired (collectively, the
"SECURED COLLATERAL"):
(i) all right, title and interest of the Issuer in and to the
Purchased Contract Assets sold and to be sold by the Seller to the
Issuer pursuant to the Purchase and Servicing Agreement, including,
without limitation, all accounts, contract rights, chattel paper,
instruments, the Contract Files, general intangibles and other
obligations of any Restaurant with respect to any such Contract Assets,
now or hereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of
services, and including without limitation, the right to payment of any
Receivables, Recoveries, Credits or other obligations of a Restaurant,
Cardmember or
<PAGE>
any Credit Card Company with respect to any such Purchased
Contract Assets, and all rights in and to all security agreements, and
other contracts securing or otherwise relating to any such accounts,
contract rights, chattel paper, instruments, general intangibles or
obligations (any and all such security agreements and other contracts
being the "RELATED CONTRACTS");
(ii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of any Purchased Contract Assets;
(iii) all rights in and to the patent, copyright, tradename,
trademark or other intellectual property or other property rights or
interests listed on Exhibit A tO the License Agreement, Schedules II
and VII to the Purchase and Servicing Agreement and Schedules II and
VII to the Purchase Agreement, whether acquired by license, sublicense,
lease, easement, assignment, purchase or otherwise, in and to any
computer hardware, software and any other media in which any licensed
or sublicensed items may be stored or recorded and to all computer and
automatic machinery and programs used for the compilation or printout
thereof, useful or necessary for the performance of the functions of
servicing and collecting the Purchased Contract Assets;
(iv) the Purchase and Servicing Agreement, including, without
limitation, (A) all rights of the Issuer to receive moneys due and to
become due under or pursuant to the Purchase and Servicing Agreement,
(B) all rights of the Issuer to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Purchase and
Servicing Agreement, (C) claims of the Issuer for damages arising out
of or for breach of or default under the Purchase and Servicing
Agreement or Purchase Agreement, (D) the right of the Issuer to amend,
waive or terminate the Purchase and Servicing Agreement, to perform
thereunder and to compel performance and otherwise exercise all
remedies thereunder and (E) all rights of the Seller under the Purchase
Agreement, which were assigned to the Issuer under the Purchase and
Servicing Agreement (the collateral described in this paragraph (iv) of
Section l(a) being sometimes described herein as the "ASSIGNED
COLLATERAL");
(v) the following (the "ACCOUNT COLLATERAL"):
(A) the Issuer's right, title and interest in the
Collection Deposit Account, the Post Office Boxes, the Reserve
Account, the Cash Accumulation Account and the Collateral
Account (including all subaccounts thereof), all funds, and
all certificates and instruments, if any, from time to time
representing or evidencing or held in the Collection Deposit
Account, the Post Office Boxes, the Reserve Account, the Cash
Accumulation Account and the Collateral Account;
(B) all amounts deposited from time to time in any of
the Collection Deposit Account, the Cash Accumulation Account,
the Reserve Account and the
-2-
<PAGE>
Collateral Account, including all Eligible
Investments from time to time and all certificates and
instruments, if any, from time to time representing or
evidencing the Eligible Investments, and all income from
investment of funds therein;
(C) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to or
otherwise possessed by the Collateral Agent in substitution
for or in addition to any of the then existing Account
Collateral;
(D) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any and
all of the then existing Account Collateral; and
(E) all additional property that may from time to
time hereafter be assigned or pledged to the Collateral Agent
for the benefit of the Secured Parties hereunder by the Issuer
or by any Person on the Issuer's behalf, including the deposit
with the Collateral Agent of additional moneys by the Issuer;
and
(vi) all proceeds of any and all of the Secured Collateral
described in subparagraphs (i) through (v) above (including, without
limitation, Recoveries and proceeds that constitute property of the
types described in clauses (i) through (v) above) and, to the extent
not otherwise included, all payments under insurance (whether or not
the Collateral Agent is the loss payee thereof), or any indemnity,
warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of such foregoing Secured Collateral.
(b) In furtherance of the security interests granted to the Collateral
Agent for the benefit of the Secured Parties in the Assigned Collateral and
notwithstanding anything to the contrary contained herein, the Issuer hereby
assigns to the Collateral Agent, acting at the direction of the Trustee acting
at the direction of the Majority Noteholders, the exclusive right (except with
respect to actions referred to in Section 24(b) hereof, which shall be a right
of both the Issuer and the Collateral Agent acting at the direction of the
Trustee acting at the direction of the Majority Noteholders) to take any action,
exercise any remedy, make any decision and agree, subject to the consent of the
Seller, to amend, waive or modify any provision of the Purchase and Servicing
Agreement as if the Collateral Agent were the Issuer (regardless of whether an
Early Amortization Event has occurred or is continuing).
(c) The ownership of the Subordinated Note shall entitle the Seller to
receive distributions of a portion of Collections in respect of Purchased
Contract Assets as specified in the Purchase and Servicing Agreement and this
Agreement but only to the extent of funds available pursuant to and in order of
priority set forth in, clause fourth of Section 7(a)(iii) hereof. Other than the
right to receive such distributions, ownership of the Subordinated Note shall
give the Seller no other rights or remedies in respect of the Contract Assets
nor shall the Seller have any recourse to any other assets of the Issuer. In the
event of the
-3-
<PAGE>
bankruptcy of the Issuer, the Seller agrees that it shall have no greater rights
against the Issuer or its assets than the rights of an unsecured nonrecourse
creditor.
SECTION 2. SECURITY FOR THE ISSUER'S OBLIGATIONS. This Agreement
secures the payment of all obligations of the Issuer now or hereafter existing
under the Indenture and the Notes, in each case, whether for principal,
interest, fees, expenses, indemnities or otherwise, and all obligations of the
Issuer now or hereafter existing under this Agreement (all obligations in this
Section 2 being referred to as the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF SECURED COLLATERAL. (a) All certificates or
instruments, if any, representing or evidencing the Secured Collateral the
possession of which by the Collateral Agent is necessary to perfect the security
interest of the Collateral Agent therein shall be delivered to and held by or on
behalf of the Collateral Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Majority Noteholders. The Collateral Agent shall have the right, at any time
without notice to the Issuer, to transfer to or to register in the name of the
Collateral Agent or any of its nominees any or all of the Secured Collateral. In
addition, the Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Secured Collateral for
certificates or instruments of smaller or larger denominations.
(b) On each Purchase Date, the Issuer shall deliver to the Trustee via
electronic or paper transmission, or by such other means as may be agreeable to
the Issuer, the Trustee and the Majority Noteholders, the list of Contracts sold
to the Issuer and pledged to the Trustee pursuant to the Security Agreement on
such date. On each Note Payment Date, the Seller and the Issuer will confirm the
list of Contract Assets sold to the Issuer pursuant to this Agreement pursuant
to the Confirmation of Sale and Assignment attached hereto as Exhibit A.
SECTION 4. STRUCTURE OF BANK ACCOUNTS. (a) As provided in the Purchase
and Servicing Agreement, (i) each Collection constituting a Mail Payment will be
mailed to the Seller or the Servicer by the Restaurants, and such Mail Payments
will be processed and forwarded to the Credit Card Companies not later than the
Business Day following the receipt of such Mail Payment and (ii) each Collection
constituting a Point-of-Sale Payment will be processed and forwarded to the
Credit Card Companies not later than the same day of receipt of such
Point-of-Sale Payment. The Credit Card Companies have agreed to deposit all
amounts paid with respect to Payments into the Collection Deposit Account,
subject to such chargebacks and reserves set forth in the applicable agreement
between the Issuer and each Credit Card Company. To the extent the Issuer or the
Servicer receives any such amounts, such party shall deposit such amount into
the Collection Deposit Account immediately upon receipt thereof. On the Business
Day following receipt of any amount from the Credit Card Companies, the
Collateral Agent, upon receipt and based solely on the information contained in
the Daily Report, will transfer all available Collections deposited in the
Collection Deposit Account, net of the taxes and tips related to such Payments,
the Processing Fee, if any, not previously paid to the Credit Card Companies,
and the Cardmember Rebates, to the Collateral Account.
-4-
<PAGE>
(b) Each of the Seller, the Servicer and the Issuer hereby represents,
warrants, covenants and agrees that except as otherwise expressly provided in
this Agreement, it shall have no right to withdraw any funds on deposit in the
Collection Deposit Account, the Reserve Account, the Cash Accumulation Account
or the Collateral Account.
(c) Each of the Issuer, the Seller and the Servicer hereby represents,
warrants, covenants and agrees that the net proceeds received by it from time to
time from Collections shall be collected, processed and deposited pursuant to,
and in accordance with the terms of Sections 4 and 5 of this Agreement and
Section 6.05 of the Purchase and Servicing Agreement.
(d) Each of the Issuer, the Servicer, and the Seller agrees that it
shall not make or maintain any deposits from Collections in any bank account,
deposit account or trust account with any financial institution other than the
Collection Deposit Account and the Collateral Account. Each of the Issuer, the
Servicer, and the Seller hereby represents, warrants, covenants and agrees that
it has and shall have no bank accounts, deposit accounts or trust accounts for
the collection of Purchased Contract Assets other than the Collection Deposit
Account.
(e) Each of the Issuer and Servicer represents and warrants that no
post office box other than those set forth on Schedule I hereto has been
established for the collection of Mail Payments. Each of the Issuer and Servicer
represents, warrants, covenants and agrees that no new post office box will be
established for the collection of Mail Payments unless and until a Standing
Delivery Order has been filed with the United States Postal Service authorizing
the Collateral Agent to receive mail delivered to such post office box and, upon
notice from the Collateral Agent, upon the direction of the Trustee acting at
the direction of the Majority Noteholders, after the occurrence and during the
continuance of an Access Event, to deny the Issuer, the Servicer and the Seller
access to such post office box.
(f) The Issuer agrees to pay all fees for the use of the Post Office
Boxes.
(g) The Issuer and the Seller hereby agree not to instruct, or cause
the Servicer to instruct, any Restaurant or Credit Card Company to make payments
in respect of Secured Collateral other than in accordance with the terms of this
Agreement and Section 6.05 of the Purchase and Servicing Agreement.
(h) Each of the Issuer and Seller agrees not to instruct, or cause the
Servicer to instruct, any Assigned Restaurant to electronically transmit any
Point-of-Sale Payments to any computer system not owned and operated by Back-up
Servicer or any Successor Servicer.
(i) Each of the Issuer and Seller agrees not to maintain or enter into,
or cause the Servicer to maintain or enter into, any agreement with any Credit
Card Company unless it shall have first delivered to the Collateral Agent an
agreement with such Credit Card Company pursuant to which such Credit Card
Company shall agree to deposit all Collections
-5-
<PAGE>
in the Collection Deposit Account, which agreement shall be in form and
substance reasonably satisfactory to the Majority Noteholders.
(j) As each Payment is processed and forwarded to the Credit Card
Companies for payment, the Servicer or the Issuer will forward or cause to be
forwarded the Cardmember Rebate to the Cardmember who generated such Payment. If
the Cardmember Rebate is in a nonmonetary form, such as airline credits, the
Servicer or the Issuer will make or cause to be made such payment as described
in Section 4(m).
(k) No later than the Business Day following the receipt of
confirmation from a Credit Card Company that it will pay amounts related to Mail
Payments or Point-of-Sale Payments, the Servicer shall pay out of its own funds
the amount of taxes and tips related to such Payment to the Restaurant from
which such Payment was received.
(1) No later than the Business Day following the receipt of Collections
from a Credit Card Company related to a Payment, the Servicer or the Issuer
shall cause to be paid from the Collection Deposit Account the amount of taxes
and tips related to such Payment, without interest, to the Servicer or the
Seller, as the case may be, who made the payment required in Section 4(j).
(m) If the Cardmember Rebate was in a nonmonetary form, no later than
the Business Day following the receipt of amounts from a Credit Card Company
related to a Payment, the Servicer or the Issuer shall cause to be paid from the
Collection Deposit Accounts an amount equal to the actual cash amount paid by
the Servicer to any Person (other than an Affiliate or an employee of the
Servicer) to acquire such nonmonetary Cardmember Rebate and shall provide such
nonmonetary Cardmember Rebate to the Cardmember who generated such Payment.
(n) No later than the due date on any invoice therefore, the Servicer
or the Issuer shall cause to be paid from the Collection Deposit Account any
Processing Fee owed to a Credit Card Company not otherwise paid to the Credit
Card Company out of Collections.
(o) The Issuer agrees that it will not amend any agreement with a
Credit Card Company, terminate any agreement with a Credit Card Company or enter
into an agreement with a new Credit Card Company without the written consent of
the Majority Noteholders.
SECTION 5. ESTABLISHMENT OF COLLATERAL ACCOUNT; COLLECTION DEPOSIT
ACCOUNT; INVESTMENTS; POST OFFICE BOXES; RESERVE ACCOUNT; CASH ACCUMULATION
ACCOUNT. (a) As of the Closing Date, the Issuer shall have established or caused
to be established the Collateral Account in the name of the Collateral Agent,
and such account name shall include a notation that it has been established
pursuant to the Security Agreement dated as of December 1, 1996, among TNI
Funding Company I, L.L.C., The Chase Manhattan Bank, as Trustee and Collateral
Agent, the Seller and the Servicer. The Collateral Account and any successor
Collateral Account shall have three subaccounts (which need not be separate
trust accounts): the Expenses Subaccount, the Interest Subaccount and the
Principal Subaccount. All amounts initially transferred to the Collateral
Account shall be held in the Collateral Account and
-6-
<PAGE>
shall remain therein unless withdrawn or transferred to a subaccount in
accordance with the instructions delivered to the Collateral Agent pursuant to
this Agreement. Amounts held in the Collateral Account and not transferred to a
subaccount shall be available for use for all purposes under this Agreement.
Payments from each of such subaccounts shall be made pursuant to Section 8
hereof. The Issuer hereby transfers to the Collateral Agent, and the Collateral
Agent hereby accepts, the sole and exclusive dominion over and control of the
Collateral Account and all Collections, moneys, instruments and other property
from time to time deposited therein for the benefit of the Noteholders.
(b) Funds in the Collateral Account shall be invested by the Collateral
Agent, at the direction of the Issuer, in specified Eligible Investments. Any
funds in the Collateral Account for which no permitted investment instructions
are received by the, Collateral Agent by 11:00 a.m., New York time, on any
Business Day shall be invested by the Collateral Agent in Eligible Investments
of a type specified in clause (iv) or (vii) of the definition thereof. Eligible
Investments shall be maintained in the name of the Collateral Agent or its
nominee (and, in either case, the Collateral Agent's books and records shall
include the notation that such Eligible Investments are maintained pursuant to
the Security Agreement dated as of December 1, 1996, among TNI Funding Company
I, L.L.C., The Chase Manhattan Bank, as Trustee and Collateral Agent, the Seller
and the Servicer) and, if certificated, the Collateral Agent shall maintain
possession of the certificates. Any direction of the Issuer to the Collateral
Agent to make an investment shall be made in writing and shall certify that the
requested investment qualifies as an Eligible Investment for purposes of this
Agreement. Any earnings (net of losses and investment expenses) on such invested
funds in the Collateral Account will be retained in the Collateral Account,
subject to application pursuant to Sections 7 and 8 hereof, and earnings may be
invested and reinvested by the Collateral Agent, at the direction of the Issuer,
in Eligible Investments. Interest and proceeds which are not invested or
reinvested in specified Eligible Investments as provided above shall be
deposited and held in the Collateral Account and applied in the same manner and
priority as Collections. The Collateral Agent shall not be liable for any loss
or expense incurred or resulting from the investment performance or any
investment or reinvestment of moneys held in the Collateral Account in Eligible
Investments or from the sale or liquidation of any Eligible Investments in
connection and in accordance with this Agreement except for any losses or
expenses resulting from the gross negligence or willful misconduct on the part
of the Collateral Agent.
(c) The Issuer has established or caused to be established with the
Collateral Agent a segregated trust account in the name of the Collateral Agent
into which the Collections will be deposited from time to time (such blocked
deposit account and all Collections and other property deposited therein being
collectively referred to herein as the "COLLECTION DEPOSIT ACCOUNT"). Each of
the Servicer and the Issuer hereby transfers to the Collateral Agent the sole
and exclusive dominion over and control of the Collection Deposit Account and
all Collections, moneys, instruments and other property from time to time
deposited therein.
(d) [Reserved].
(e) [Reserved].
-7-
<PAGE>
(f) [Reserved].
(g) Each of the Issuer and the Servicer represents, warrants and agrees
that (i) the Collateral Agent is authorized to receive mail delivered to the
Post Office Boxes following the occurrence of and during the continuance of an
Access Event, (ii) a Standing Delivery Order has been filed with the United
States Postal Service authorizing the Collateral Agent to receive mail delivered
to the Post Office Boxes and (iii) no post office box other than the Post Office
Boxes has been established for the collection of Mail Payments. The Servicer and
the Issuer covenant and agree that the Collateral Agent, at the direction of the
Trustee acting at the direction of the Majority Noteholders, may deny the Issuer
and the Servicer access to the Post Office Boxes following the occurrence and
during the continuance of an Access Event. The Trustee shall not direct the
Collateral Agent to deny, the Issuer or the Servicer access to any Post Office
Box unless it certifies to the Issuer, the Servicer and the Collateral Agent
that an Access Event has occurred and is continuing.
(h) If the Issuer or the Servicer provides the Collateral Agent with
written notice (accompanied by supporting documentation in reasonable detail
satisfactory to the Trustee) that a deposit has been made improperly into the
Collateral Account or the Collection Deposit Account, the Collateral Agent shall
release the amount of the improper deposit, together with interest actually
earned thereon (net of related losses and investment expenses) to the Issuer or
the Servicer, as appropriate.
(i) RESERVE ACCOUNT. (i) Prior to the Closing Date, the Issuer
shall cause the Collateral Agent to open and maintain a segregated
trust account (the "RESERVE ACCOUNT") for the receipt of the Reserve
Amount pursuant to Section 2.01 of the Purchase and Servicing
Agreement. Amounts in the Reserve Account are available to pay for any
unfunded liabilities to Assigned Restaurants under the Purchased
Contracts. On the Closing Date, the Issuer shall deliver, or cause to
be delivered, to the Collateral Agent, and the Collateral Agent will
deposit in the Reserve Account, the Reserve Amount. Monies shall be
subject to withdrawal subject to Section 5(i)(iv) hereof.
(ii) Monies in the Reserve Account shall be invested and
reinvested at the Issuer's written direction in one or more Eligible
Investments. In the absence of direction from the Issuer, the Trustee
shall invest funds in the Reserve Account in Eligible Investments
described in clause (iv) of the definition thereof. All income or other
gain from such investments shall be credited to such Reserve Account
and any loss resulting from such investments shall be charged to such
Reserve Account; PROVIDED, HOWEVER, that the Issuer shall make or cause
to be made on any Payment Date a deposit to the Reserve Account to the
extent of any losses therein. Eligible Investments shall be made in the
name of the Trustee for the benefit of the Noteholders. The Trustee
shall provide to the Servicer monthly written confirmation of such
investments, describing the Eligible Investments in which such amounts
have been invested. Any funds not so invested must be insured by the
Federal Deposit Insurance Corporation.
-8-
<PAGE>
(iii) If any amounts invested as provided in Section 5(i)(ii)
hereof shall be needed for disbursement from the Reserve Account as set
forth in Section 5(i)(iv) hereof, the Trustee shall cause such
investments of such Reserve Account to be sold or otherwise converted
to cash to the credit of such Reserve Account. The Trustee shall not be
liable for any investment loss resulting from investment of money in
the Reserve Account in any Eligible Investment in accordance with the
terms hereof (other than in its capacity as obligor under any Eligible
Investment).
(iv) Disbursements from the Reserve Account shall be made, to
the extent funds therefor are available, only as follows:
(A) at the written direction of the Issuer, the
Trustee shall disburse funds to the Servicer in order to
reimburse the Servicer any amounts that the Servicer certifies
that it paid for Credits the Issuer or the Servicer is under
an obligation to purchase after the Closing Date under
Contracts which are part of the Purchased Contract Assets; and
(B) in the event that on any Payment Date the
Servicer provides the Trustee with a certificate stating (1)
that the balance in the Reserve Account equals an amount
greater than amounts necessary to fulfill the Issuer's or the
Servicer's obligations to pay for Credits after the Closing
Date under all Contracts which are part of the Purchased
Contract Assets and (2) the amount of such excess, the Trustee
shall deposit such funds in the Collateral Account.
(v) If on the date that is four months after the Closing Date
there remains outstanding under any Contract which is part of the
Secured Collateral an obligation to pay for Credits, the Issuer shall
deposit into the Collateral Account within ten (10) days after such
date an amount equal to the Purchase Price of such Contract, and such
Contract shall be released from the lien of this Agreement and, upon
such deposit by the Issuer, the Trustee shall deposit into the
Collateral Account all amounts remaining in the Reserve Account.
(j) CASH ACCUMULATION ACCOUNT. (i) Prior to the Closing Date, the
Issuer shall cause the Trustee to open a segregated trust account (the "CASH
ACCUMULATION ACCOUNT"), for the receipt of monies as provided in Section
7(a)(iii) hereof. Monies received in the Cash Accumulation Account will be
invested at the written direction of the Issuer in Eligible Investments during
the term of this Agreement, and any income or other gain realized from such
investment, shall be held by the Trustee in the Cash Accumulation Account
subject to disbursement and withdrawal as herein provided. Monies shall be
subject to withdrawal in accordance with Section 5(j)(v) hereof.
(ii) Monies in the Cash Accumulation Account shall be invested
and reinvested at the Issuer's written direction in one or more
Eligible Investments. In the absence of direction from the Issuer, the
Trustee shall invest funds in the Cash Accumulation Account in Eligible
Investments described in clause (iv) of the definition thereof. All
income or other gain from such investments shall be credited
-9-
<PAGE>
to such Cash Accumulation Account and any loss resulting from such
investments shall be charged to such Cash Accumulation Account;
PROVIDED, HOWEVER, that the Issuer shall make or cause to be made on
any Payment Date a deposit to the Cash Accumulation Account to the
extent of any losses therein caused as a result of the Issuer's
investment instructions. Eligible Investments shall be made in the name
of the Trustee for the benefit of the Noteholders. The Trustee shall
provide to the Servicer monthly written confirmation of such
investments, describing the Eligible Investments in which such amounts
have been invested. Any funds not so invested must be insured by the
Federal Deposit Insurance Corporation.
(iii) If any amounts invested as provided in Section 5(j)(ii)
hereof shall be needed for disbursement from the Cash Accumulation
Account as set forth in Section 5(j)(v) hereof, the Trustee shall
cause such investments of such Cash Accumulation Account to be sold or
otherwise converted to cash to the credit of such Cash Accumulation
Account. The Trustee shall not be liable for any investment loss
resulting from investment of money in the Cash Accumulation Account in
any Eligible Investment in accordance with the terms hereof (other than
in its capacity as obligor under any Eligible Investment).
(iv) A "Cash Accumulation Event" shall occur if the Usage
during a calendar month is less than the product of (A) 0.09 and (B)
the principal balance on the Notes as of the last day of such month.
(v) Disbursements from the Cash Accumulation Account shall be
made, to the extent funds therefor are available, only as follows:
(A) in the event that an Amortization Event or
Potential Early Amortization Event has occurred and is
continuing of which a Responsible Officer has notice or actual
knowledge, the Collateral Agent shall withdraw all funds from
the Cash Accumulation Account and deposit such funds into the
Collateral Account; and
(B) in the event that a Cash Accumulation Event
occurs and is subsequently cured under Section 5(j)(vi)
hereof, the Collateral Agent shall withdraw the amount that is
in the Cash Accumulation Account and deposit such funds into
the Collateral Account.
(vi) A Cash Accumulation Event will be deemed cured if (a)
during any three-month period following the occurrence of the Cash
Accumulation Event (the first month of which period may be the month in
which the Cash Accumulation Event occurred), the average Usage in such
three-month period is greater than or equal to 9.0% of the principal
balance of the Notes as of the last day of each month in such
three-month period and (b) in no month in such three-month period
(other than the first month of such period) was Usage less than the
product of (A) 0.09 and (B) the principal balance of the Notes as of
the last day of each such month.
-10-
<PAGE>
SECTION 6. RECONCILIATION OF BORROWING BASE. Pursuant to the Purchase
and Servicing Agreement and Section 12(i) hereof, on each Business Day the
Servicer will prepare the Daily Report and deliver a copy of such report to the
Issuer, the Seller, the Trustee, the Collateral Agent and, upon request, each
Noteholder. The Daily Report will reflect the adjustment to the Borrowing Base
required as a result of the Applicable Day's sales, Payments and Credit
Adjustments of the Seller. The Daily Report will be distributed not later than
12:00 Noon, New York time, on such day.
SECTION 7. DAILY CASH APPLICATIONS. (a) DURING THE REVOLVING PERIOD. By
the end of business, New York time, on each Business Day during the Revolving
Period the Collateral Agent shall make, to the extent of available funds, the
following transfers based on the Daily Report covering the Applicable Day,
according to the following priorities, satisfying, to the extent required, each
priority before making a transfer to any succeeding priority:
(i) The Collateral Agent shall transfer to the Expenses
Subaccount all amounts deposited into the Collateral Account on or
prior to such Business Day (and not previously allocated pursuant to
clauses (i), (ii) or (iii) of this subparagraph (a)) until such
transfers, on an aggregate month-to-date basis, equal the Monthly
Expense Amount for the current Settlement Period;
(ii) The Collateral Agent shall transfer to the Interest
Subaccount all amounts deposited into the Collateral Account on or
prior to such Business Day (and not previously allocated pursuant to
clauses (i), (ii) or (iii) of this subparagraph (a)) until such
transfers, on an aggregate month-to-date basis, equal the Monthly
Interest Amount for the current Settlement Period;
(iii) Subject to satisfaction of the above transfers, the
Collateral Agent shall use Available Cash on each such Payment Date
during the Revolving Period; FIRST, preferred return to majority equity
holder in the Issuer, SECOND, to pay the Seller in satisfaction of
certain obligations of the Issuer an amount equal to the aggregate
Purchase Price for all Contract Assets sold to the Issuer by the Seller
on such Business Day pursuant to and in accordance with the terms of
Sections 2.02 and 2.03 of the Purchase and Servicing Agreement; THIRD,
to pay amounts under Section 8(a)(iii), as directed by the Servicer in
the applicable Daily Report; and FOURTH, at the discretion of the
Issuer, from any remaining Available Cash after any payments pursuant
to this clause (iii) FIRST, SECOND and THIRD above, to the Issuer to be
used (A) to pay interest on the Subordinated Note, (B) to pay principal
on the Subordinated Note, (C) to pay any remaining expenses of the
Issuer and to pay any claims of any third party unaffiliated with the
Issuer and (D) to pay a dividend or other distribution on its
membership interests as permitted by Section 13(i), PROVIDED THAT if a
Cash Accumulation Event has occurred and has not been cured under
Section 5(j)(vi) hereof, any remaining Available Cash after any
payments pursuant to this clause (iii) FIRST and SECOND above shall be
deposited into the Cash Accumulation Account;
-11-
<PAGE>
(iv) The Collateral Agent shall retain in the Collateral
Account the remaining amounts deposited into the Collateral Account on
or prior to such Business Day.
No payments may be made pursuant to Section 7(a)(iii) unless the amounts
equal to the Monthly Expense Amount and the Monthly Interest Amount shall have
been deposited in their respective Subaccounts and no Early Amortization Event
or Potential Early Amortization Event would be caused by such payment. In
addition, no payment shall be made pursuant to Section 7(a)(iii) if a Potential
Early Amortization Event has occurred and is continuing and the Collateral
Agent, acting at the direction of the Majority Noteholders, has notified the
Issuer and the Servicer in writing that no further payments may be made
thereunder.
(b) DURING THE AMORTIZATION PERIOD. By the end of business, New York time,
on each Business Day during the Amortization Period, the Collateral Agent shall
make, to the extent of available funds, the following transfers, based solely on
the Daily Report covering the Applicable Day, according to the following
priorities, satisfying, to the extent required, each priority before making a
transfer to any succeeding priority:
(i) The Collateral Agent shall transfer to the Expenses
Subaccount all amounts deposited into the Collateral Account on or
prior to such Business Day (and not previously allocated pursuant to
clauses (i), (ii) or (iii) of this subparagraph (b)) until such
transfers, on an aggregate month-to-date basis, equal the sum of (A)
the Monthly Expense Amount for the current Settlement Period and (B) to
the extent that the costs and expenses of the Successor Servicer exceed
the Monthly Servicing Fee Amounts, any reasonable expenses per
distribution that are incurred by the Successor Servicer relating to
printing and distributing lists of the Restaurants after a Servicer
Termination Event up to the lesser of $50,000 or fifty percent of the
aggregate principal amount of the Notes outstanding;
(ii) The Collateral Agent shall transfer all amounts deposited
into the Collateral Account on or prior to such Business Day (and not
previously allocated pursuant to Clauses (i), (ii) or (iii) of this
subparagraph (b)) in the following order of priority: FIRST, to the
Interest Subaccount until such transfers, on an aggregate month-to-date
basis, equal the Monthly Interest Amount for the current Settlement
Period, plus any unpaid Interest Shortfall; and SECOND, to the
Principal Subaccount until the amount in such account is sufficient to
pay the outstanding principal on the Notes in full;
(iii) Any amount in the Collateral Account on such Business
Day and not otherwise allocated pursuant to this Section 7(b) shall be
held in the Collateral Account until applied pursuant to Section 8(b).
SECTION 8. DISTRIBUTIONS ON PAYMENT DATES. (a) PRIOR TO AMORTIZATION
COMMENCEMENT DATE. On each Payment Date prior to an Amortization Commencement
Date, the Collateral Agent shall (on the basis of the information set forth in
the preceding Cash Allocation Report), by the end of business, New York time,
apply the funds deposited
-12-
<PAGE>
in each subaccount of the Collateral Account during the prior
Settlement Period (and not otherwise used to pay for Contract Assets
or otherwise distributed in accordance with Section 7(a) hereof on or
prior to such Payment Date) to make distributions from such
subaccounts in the following amounts and, with respect to each such
applicable subaccount, in the order of priority set forth below with
respect to each such subaccount:
(i) if the Payment Date is also a Note Payment Date, all
amounts on deposit in the Expense Subaccount and any remaining funds on
deposit in the Collateral Account to pay Expenses to the Trustee, the
Rating Agency, Collateral Agent and Servicer, as applicable, for such
Note Payment Date;
(ii) if the Payment Date is also a Note Payment Date, all
amounts on deposit in the Interest Subaccount and any remaining funds
on deposit in the Collateral Account to pay any interest due and
payable on the Notes on such Note Payment Date, to the Trustee for
distribution to the Noteholders, PRO RATA based on principal
outstanding if proration is required;
(iii) all remaining amounts on deposit in the Collateral
Account to pay, on a pro rata basis, based on the amount claimed, other
expenses, indemnity payments and interest on overdue amounts that are
due to the Collateral Agent, the Trustee and the Noteholders, and any
other obligations of the Issuer incurred pursuant to or permitted under
the Transaction Documents.
For purposes of distributions pursuant to clause (a)(iii) above, the
Collateral Agent shall distribute amounts to satisfy any amounts that may be
unpaid with respect to this Agreement and the Indenture, based upon amounts
claimed in writing and set forth in reasonable detail and provided to the
Issuer, the Servicer and the Collateral Agent by the Collateral Agent, the
Trustee or the Noteholders prior to the applicable Payment Date. If any such
amounts are disputed by the Servicer, the Trustee acting at the direction of the
Majority Noteholders or any other Person, the amount in dispute shall be
promptly deposited by the Collateral Agent and held in escrow pending the
resolution of such dispute. Following the resolution of the dispute, the amount
shall either be released to the Collateral Agent, the Trustee or the
Noteholders, as applicable, or applied on the next Payment Date pro rata to
repay the balance of agreed-upon outstanding claims in accordance with Section
8(a) hereof.
(b) FOLLOWING AMORTIZATION DATE. On each Note Payment Date during an
Amortization Period or an Early Amortization Period (including the initial
Payment Date thereof), the Collateral Agent shall (on the basis of information
set forth in the related Settlement Statement), by the end of business, New York
time, apply the funds deposited in each applicable subaccount of the Collateral
Account during the prior Settlement Period (and not otherwise distributed in
accordance with Section 7 hereof) to make distributions from such subaccounts in
the following amounts and, with respect to each such subaccount, in the order of
priority set forth below with respect to each such subaccount:
-13-
<PAGE>
(i) all amounts on deposit in the Expenses Subaccount to pay
Expenses for such Payment Date and any amounts held to pay the expenses
described in Section 7(b)(i)(B) hereof;
(ii) all amounts on deposit in the Interest Subaccount and any
remaining funds on deposit in the Collection Deposit Account or the
Collateral Account to pay any interest due and payable on the Notes on
such Payment Date an amount equal to the Interest Shortfall, if any, on
such Note Payment Date (including any interest thereon to the extent
permitted by law) to the Trustee for distribution to the Noteholders,
pro rata based on principal outstanding if proration is required;
(iii) all amounts on deposit in the Principal Subaccount to
pay principal on the Notes to the Trustee for distribution to the
Noteholders, pro rata based on principal outstanding if proration is
required; and
(iv) all amounts remaining on deposit in the Collateral
Account and Collection Deposit Account to pay, on a PRO RATA basis,
based on the amount claimed as set forth in writing in reasonable
detail, expenses, indemnity payments and interest on overdue amounts
that are due to the Collateral Agent, the Trustee and the Noteholders
and to pay any other obligations of the Issuer incurred pursuant to or
permitted under the Transaction Documents.
(c) GENERAL ALLOCATION PROCEDURES. The following general allocation
procedures shall apply to all allocations in this Section 8:
(i) MISCELLANEOUS ITEMS. For purposes of distributions
pursuant to clause (b)(iv) above, the Collateral Agent shall distribute
amounts to satisfy any remaining amounts that may be unpaid with
respect to this Agreement and the Indenture based upon amounts claimed
in writing by the Collateral Agent, the Issuer or the Trustee and
provided to the Issuer, the Servicer and the Collateral Agent, prior to
the applicable Payment Date. If any such amounts are disputed by the
Servicer, the Trustee acting at the direction of the Majority
Noteholders or any other Person, the amount in dispute shall be
promptly deposited by the Collateral Agent and held in escrow pending
the resolution of such dispute. Following the resolution of the
dispute, the amount shall either be released to the Collateral Agent,
the Trustee or the Noteholders, as applicable, or applied on the next
Payment Date PRO RATA to repay the balance of agreed-upon outstanding
claims in accordance with Section 8(a) hereof; and
(ii) NOTIFICATION. The Servicer and the Issuer shall notify
the Trustee as promptly as practicable (and in no event later than the
applicable Settlement Date) if the funds on deposit in the Collateral
Account and not applied to the Expense Subaccount or the Interest
Subaccount are sufficient to pay in full the remaining principal amount
of and interest payable on the Notes on the next succeeding Note
Payment Date.
-14-
<PAGE>
(d) FINAL ALLOCATION PROCEDURES. On the Business Day next succeeding
the day on which all amounts due under the Notes, and the other Transaction
Documents (including any deferred Monthly Servicing Fee Amount) have been paid
in full, all remaining amounts on deposit in the Collateral Account shall be
paid to the Issuer for application pursuant to the Subordinated Note. Any
amounts remaining after payment of the Subordinated Note shall become the
property of the Issuer.
SECTION 9. PURCHASE OF CONTRACT ASSETS. On any Business Day, but no
more than once per calendar month, Transmedia may, at its option, purchase from
the Issuer Contracts that have become Defaulted Contracts on account of the fact
that all the related Meals have not been purchased by Cardmembers within one
year of the inception of such Contract by depositing in the Collateral Account
an amount equal to the aggregate Contract Price of such Defaulted Contracts on
such date of such purchase, PROVIDED, HOWEVER, that the aggregate Contract Price
of all such Defaulted Contracts purchased by Transmedia since the Closing Date
may not exceed three (3) percent of the principal amount of the Notes issued on
the Closing Date. Upon deposit of such amounts and the delivery of a certificate
of an officer of Transmedia to the Collateral Agent specifying the Defaulted
Contracts so purchased and the amount deposited therefor, the Collateral Agent
shall deliver to, and at the expense of, Transmedia a written release of the
Collateral Agent's Lien on such Defaulted Contracts upon receipt of the
aggregate Contract Price therefore.
SECTION 10. THE ISSUER REMAINS LIABLE. Anything contained herein to the
contrary notwithstanding, (a) the Issuer shall remain liable under the contracts
and agreements included in the Secured Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Collateral Agent of the rights hereunder shall not release the Issuer from any
of its duties or obligations under the contracts and agreements included in the
Secured Collateral and (c) neither the Collateral Agent nor any of the Secured
Parties shall have any obligation or liability under the contracts and
agreements included in the Secured Collateral by reason of this Agreement, nor
shall the Collateral Agent or any of the Secured Parties be obligated to perform
any of the obligations or duties of the Issuer thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
SECTION 11. REPRESENTATIONS AND WARRANTIES. On and as of each Purchase
Date, the Issuer represents and warrants to each of the Secured Parties all of
its representations set forth in the Purchase and Servicing Agreement are true
and correct as of such Purchase Date and that:
(a) ORGANIZATION; POWERS. The Issuer (i) is a limited
liability company duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation, (ii) has all
requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted,
(iii) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify would
not result in a Material Adverse Change, and (iv) has the power and
authority to execute, deliver and perform its obligations
-15-
<PAGE>
under each of the Transaction Documents and each other agreement or
instrument contemplated thereby to which it is or will be a party and
to issue the Notes.
(b) AUTHORIZATION. The execution, delivery and performance by
the Issuer of each of the Transaction Documents, the acceptance of the
proceeds of the Notes and the performance of the other transactions
contemplated hereby (collectively, the "TRANSACTIONS") (i) have been
duly authorized by all requisite action and (ii) will not (A) violate
(1) any provision of law, statute, rule or regulation the effect of
which would be to cause or be reasonably expected to cause a Material
Adverse Change, or any provision of the organizational or other
constitutive documents of the Issuer, (2) any order of any Governmental
Authority or (3) any provision of any indenture, agreement or other
instrument to which the Issuer is a party or by which it or any of its
property is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both)
a default under any such indenture, agreement or other instrument or
(C) result in the creation or imposition of any Lien upon or with
respect to any property or assets now owned or hereafter acquired by
the Issuer, except the Liens created pursuant to this Agreement in
favor of the Collateral Agent for the benefit of the Secured Parties.
(c) ENFORCEABILITY. This Agreement has been duly authorized,
executed and delivered by the Issuer and constitutes, and each other
Transaction Document when executed and delivered by the Issuer will
constitute, a legal, valid and binding obligation of the Issuer
enforceable against the Issuer in accordance with its terms, except
with respect to the Issuer, subject to general principles of equity and
to bankruptcy, insolvency, reorganization, moratorium and similar laws
now or hereafter in effect relating to creditors' rights generally.
(d) GOVERNMENTAL APPROVALS. No action, consent or approval of,
registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions,
except such as have been made or obtained and are in full force and
effect.
(e) SUBSIDIARIES. The Issuer has no Subsidiaries.
(f) LITIGATION; COMPLIANCE WITH LAWS. (i) There are no
actions, suits, investigations, litigation, or proceedings at law or in
equity or by or before any Governmental Authority now pending against
or, to the knowledge of the Issuer, threatened against or affecting the
Issuer or any of its business, property or rights, (A) that involve any
Transaction Documents or the Transactions or (B) as to which there is a
reasonable probability of an adverse determination and which, if
adversely determined, could, individually or in the aggregate, result
in a Material Adverse Change.
(ii) The Issuer is not in violation of any law, rule
or regulation, or in default with respect to any judgment,
writ, injunction or decree of any Governmental Authority,
where such violation or default would be likely,
-16-
<PAGE>
individually or in the aggregate, to result in a Material
Adverse Change with respect to the Issuer.
(g) AGREEMENTS. (i) The Issuer is not a party to any agreement
or instrument or subject to any corporate restriction that has resulted
or could result in a Material Adverse Change.
(ii) The Issuer is not in default in any manner under
any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other agreement or
instrument to which it is a party or by which it or any of its
properties or assets are or may be bound.
(h) FEDERAL RESERVE REGULATIONS. (i) The Issuer is not
engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying
Margin Stock.
(ii) No part of the proceeds of any Notes will be
used, whether directly or indirectly, and whether immediately,
incidentally or ultimately, (A) to purchase or carry Margin
Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness
originally incurred for such purpose or (B) for any purpose
that entails a violation of, or that is inconsistent with, the
provisions of the Regulations of the Board, including
Regulation G, T, U or X.
(i) INVESTMENT COMPANY ACT. The Issuer is not an "investment
company" or an "affiliated Person" of, or "principal underwriter" for,
an "investment company," as such terms are defined in, or subject to
regulation under, the 1940 Act. The issuance of the Notes, the
repayment thereof by the Issuer and the consummation of the
Transactions will not violate any provision of the 1940 Act or any
rule, regulation or order issued by the Securities and Exchange
Commission thereunder. The Issuer will not issue or register the
transfer of any of its membership interests if immediately after such
issuance or transfer there would be more than 100 beneficial owners
(within the meaning of the 1940 Act) of (i) the Notes, (ii) the
membership interests of the Issuer and (iii) all other securities of
the Issuer.
(j) USE OF PROCEEDS. The proceeds of the issuance of the Notes
shall be used by the Issuer as set forth in Section 6 of the Indenture.
(k) TAX RETURNS. The Issuer has filed all federal, state and
local tax returns required to have been filed by it and has paid all
taxes shown to be due and payable on such returns or on any assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which the Issuer shall have set aside
on its books adequate reserves.
(1) NO MATERIAL MISSTATEMENT. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of
the Issuer to any Noteholder, the
-17-
<PAGE>
Trustee or the Collateral Agent, in connection with the negotiation of
any Transaction Document or included therein or delivered pursuant
thereto contained, contains or will contain any material misstatement
of fact or omitted, omits or will omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not
misleading.
(m) CONTRACT ASSETS. Immediately prior to the sale of the
Contract Assets by the Seller to the Issuer pursuant to the Purchase
and Servicing Agreement, the Seller was the sole legal beneficial owner
of the Contract Assets sold, transferred or otherwise conveyed by it,
free and clear of any Liens. Upon the sale of the Contract Assets by
the Seller to the Issuer pursuant to the Purchase and Servicing
Agreement, (i) the Issuer acquired all the right, title and interest in
such Contract Assets, (ii) the Seller received the rights created by
the Subordinated Note and (iii) the Contract Assets were free and clear
of any Liens, except for Liens granted by the Issuer in favor of the
Collateral Agent in accordance with this Agreement. The Issuer will not
suffer to exist any Liens on the Contract Assets except for the
security interest created by this Agreement in favor of the Collateral
Agent. No effective financing statement or other instrument similar in
effect covering all or any part of the Contract Assets is on file in
any recording office, except such as may have been filed, (i) in favor
of the Issuer with respect to Contract Assets acquired from the Seller
and (ii) in favor of the Collateral Agent relating to this Agreement.
(n) PERFECTED FIRST PRIORITY LIENS. Appropriate financing
statements have been filed in the jurisdictions listed on Schedule II
and all other appropriate action has been duly taken so that, at all
times on or after the Closing Date, the Liens granted pursuant to this
Security Agreement, (i) in the case of Secured Collateral to which
Article 9 of the UCC applies, will constitute valid and perfected Liens
on such Secured Collateral and, (ii) in the case of all other Secured
Collateral, will constitute valid and, if applicable, perfected Liens
which have attached to such Secured Collateral, in either case in favor
of the Collateral Agent, for the benefit of the Secured Parties, which
are prior to all other Liens on such Secured Collateral.
(o) LIENS ON ASSETS. There are no Liens of any nature on any
of the property or assets of the Issuer, except the Liens created
pursuant to the Transaction Documents in favor of the Collateral Agent.
The Issuer is not a party to any contract, agreement, lease or
instrument (other than the Transaction Documents) the performance of
which, either unconditionally or upon the happening of an event, will
result in or require the creation of a Lien on any of the property or
assets of the Issuer or otherwise result in a violation of any of the
Transaction Documents.
(p) EXECUTIVE OFFICES. The chief place of business and chief
executive office of the issuer and the office where the Issuer will
keep its records concerning the Secured Collateral, if any, and the
original copies of the Assigned Collateral are located at the address
specified in Section 28 hereof for the Issuer.
-18-
<PAGE>
(q) CREDIT CARD COMPANY AGREEMENTS. Except for the Credit Card
Companies identified on Schedule III, neither the Issuer or Seller or
any affiliate of any of them, have entered into, nor caused the
Servicer to enter into on their behalf, any agreement with any Person
to acquire, process and settle credit card transactions against
Cardmembers' Credit Card Accounts in connection with the use by a
Cardmember of the Transmedia Card.
(r) The Issuer has not made and will not make any untrue
statement of a material fact or omitted to state a material fact
necessary to make any statement not misleading and has not provided any
document to the Initial Purchasers or the Rating Agency which contains
any untrue statement of material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 12. AFFIRMATIVE COVENANTS. The Issuer covenants and agrees
that, so long as the principal of or interest on any Notes, any Expenses or any
other expenses or amounts payable under any Transaction Document shall be
unpaid, unless the Trustee (at the direction of the Majority Noteholders) shall
otherwise consent in writing, the Issuer will:
(a) EXISTENCE. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence
and maintain such legal existence separate from that of the Seller and
any Affiliates thereof.
(b) BUSINESS AND PROPERTIES. Do or cause to be done all things
necessary to obtain, preserve, renew, extend and keep in full force and
effect the rights, licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names and all consents
material to the conduct of its business; maintain and operate such
business in substantially the manner in which it is currently conducted
and operated; comply in all material respects with all applicable laws,
rules, regulations and orders of any Governmental Authority, whether
now in effect or hereafter enacted; and at all times maintain and
preserve all property material to the conduct of such business and keep
such property in good repair, working order and condition (subject to
ordinary wear and tear) and from time to time make, or cause to be
made, all repairs, renewals, additions, improvements and replacements
thereto reasonably necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
(c) INSURANCE. Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers;
maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as
is customary with companies in the same or similar businesses,
including public liability insurance against claims for personal injury
or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by it; and
maintain such other insurance as may be required by law.
-19-
<PAGE>
(d) OBLIGATIONS AND TAXES. Pay its Indebtedness and other
obligations promptly before the same shall become delinquent or in
default and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or in respect of
its property, before the same shall become delinquent or in default, as
well as all lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien upon such
properties or any part thereof; PROVIDED, HOWEVER, that such payment
and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as the validity or amount
thereof shall be contested in good faith by appropriate proceedings and
the Issuer shall have set aside on its books adequate reserves with
respect thereto.
(e) FINANCIAL STATEMENTS, REPORTS, ETC. Furnish or cause to be
furnished to the Trustee, each Noteholder, S&P and the Collateral
Agent:
(1) on each Settlement Date, a certificate of the
President, any Vice President or any Financial Officer of the
Independent Member certifying that no Early Amortization Event
or Potential Early Amortization Event has occurred or, if such
an Early Amortization Event or Potential Early Amortization
Event has occurred, specifying the nature and extent thereof
and any corrective action taken or proposed to be taken with
respect thereto;
(2) as soon as possible, but not later than 90 days
after the end of each fiscal year, the Issuer's consolidated
balance sheet and related statements of income and cash flows,
showing the financial condition of the Issuer as of the close
of such fiscal year and the results of its operations during
such year, audited by independent public accountants of
recognized national standing reasonably acceptable to the
Majority Noteholders and accompanied by an opinion of such
accountants (which shall not be qualified in any material
respect other than as may be approved by the Collateral Agent
and the Trustee acting at the direction of the Majority
Noteholders) to the effect that such consolidated financial
statements fairly present the financial condition and results
of operations of the Issuer on a consolidated basis in
accordance with GAAP consistently applied;
(3) as soon as possible, but not later than 45 days
after the end of each of the first three fiscal quarters of
each fiscal year, the Issuer's unaudited consolidated balance
sheets and related statements of income and cash flows showing
the financial condition of the Issuer and its consolidated
Subsidiaries as of the close of such fiscal quarter and the
results of its operations and the operations of its
consolidated Subsidiaries during such fiscal quarter and the
elapsed portion of such fiscal year, all certified by the
President, any Vice President or any Financial Officer of the
Independent Member as fairly presenting the financial
condition and results of operations of it and its consolidated
Subsidiaries on a consolidated and consolidating basis in
-20-
<PAGE>
accordance with GAAP consistently applied, subject to normal
year-end audit adjustments without GMP footnotes;
(4) concurrently with any delivery of financial
statements under (1) and (2) above, a certificate of the
President, any Vice President or any Financial Officer of the
Independent Member certifying such statements and certifying
that no Purchase Termination Event, Potential Purchase
Termination Event, Early Amortization Event, Potential Early
Amortization or Servicer Termination Event has occurred, or if
such a Purchase Termination Event, Potential Purchase
Termination Event, Early Amortization Event, Potential Early
Amortization or Servicer Termination Event has occurred,
specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto;
(5) as soon as possible but not later than 90 days
after the end of each fiscal year, the financial statements of
the Servicer required by Section 5.01(a)(i) of the Purchase
and Servicing Agreement;
(6) as soon as possible but not later than 45 days
after the end of each of the first three fiscal quarters of
each fiscal year, the financial statements of the Servicer
required by Section 5.01(a)(ii) of the Purchase and Servicing
Agreement;
(7) concurrently with any delivery of financial
statements under (5) and (6) above, a certificate of the
President, any Vice President or any Financial Officer of the
Servicer certifying such statements and certifying that no
Purchase Termination Event, Potential Purchase Termination
Event, Early Amortization Event, Potential Early Amortization
or Servicer Termination Event has occurred, or if such a
Purchase Termination Event, Potential Purchase Termination
Event, Early Amortization Event, Potential Early Amortization
or Servicer Termination Event has occurred, specifying the
nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto;
(8) no later than January 15 of each year, the annual
independent public accountant's servicing report required by
Section 6.03(a) of the Purchase and Servicing Agreement;
(9) no later than 45 days after the end of the fiscal
quarter of the Issuer ending in September of each year, the
report required by Section 6.03(b) of the Purchase and
Servicing Agreement;
(10) promptly, from time to time, such other
information regarding the operations, business affairs and
financial condition of the Issuer, or compliance with the
terms of any Transaction Document, as the Trustee, Noteholders
or the Collateral Agent may reasonably request;
-21-
<PAGE>
(11) promptly after the same are available, copies of
each annual report, proxy or financial statement or other
report or communication, if any, sent to the stockholders of
Transmedia generally and copies of all annual, regular,
periodic and special reports and registration statements which
Transmedia may file or be required to file with the Securities
and Exchange Commission under Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended;
(12) promptly after the commencement thereof, notice
of any action, suit and proceeding before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign against Transmedia or any
of its Subsidiaries, (A) which, if determined adversely to
Transmedia or such Subsidiary, would have a Materially Adverse
Effect, or (B) commenced by any creditor or lessor under any
written credit agreement with respect to borrowed money or
material lease which asserts a default thereunder on the part
of Transmedia or any of its Subsidiaries;
(13) promptly upon the filing thereof and at any time
upon the reasonable request of the Purchaser, the Trustee, the
Collateral Agent or any Noteholder, permit such Person the
opportunity to review copies of all reports, including annual
reports, and notices which Transmedia or any Subsidiary files
with or receives from the PBGC or the U.S. Department of Labor
under ERISA; and as soon as practicable and in any event
within fifteen (15) days after Transmedia or any of its
Subsidiaries knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to
any Pension Plan or that the PBGC or Transmedia or any such
Subsidiary has instituted or will institute proceedings under
Title IV of ERISA to terminate any Pension Plan, Transmedia
will deliver to the Purchaser, the Trustee, the Collateral
Agent and each Noteholder a certificate of the President, any
Vice President or a Financial Officer setting forth details as
to such Reportable Event or Prohibited Transaction or Pension
Plan termination and the action it proposes to take with
respect thereto;
(14) promptly upon receipt thereof, copies of any
reports or management letters relating to the internal
financial controls and procedures delivered to Transmedia or
any of its Subsidiaries by any independent certified public
accountant in connection with examination of the financial
statements of Transmedia or any such Subsidiary; and
(15) such additional information as the Purchaser,
the Trustee, the Collateral Agent or any Noteholder may
reasonably request concerning Transmedia and its Subsidiaries.
(f) LITIGATION AND OTHER NOTICES. Furnish to the Trustee and
the Collateral Agent immediate written notice of the following:
-22-
<PAGE>
(1) any Early Amortization Event, Potential Early
Amortization Event, Purchase Termination Event or Potential
Purchase Termination Event, specifying the nature and extent
thereof and the corrective action (if any) proposed to be
taken with respect thereto;
(2) any event of default, default or similar event
under any other Transaction Document;
(3) the filing or commencement of, or any threat or
notice of intention of any Person to file or commence, any
action, suit or proceeding, whether at law or in equity or by
or before any Governmental Authority, against the Issuer that,
if adversely determined, could result in a Material Adverse
Change;
(4) any notices received by the Issuer under the
Purchase and Servicing Agreement (together with copies
thereof); and
(5) any other development that has resulted in, or
could reasonably be anticipated to result in, a Material
Adverse Change.
(g) INFORMATION TO THE NOTEHOLDERS. On or prior to each Note
Payment Date, forward to the Trustee for distribution to each
Noteholder the related Settlement Statement; on or before January 31 of
each calendar year, beginning with calendar year 1998, forward to the
Trustee for distribution to each Person who at any time during the
preceding calendar year was a Noteholder, a statement prepared by the
Issuer and the Servicer containing the information in the form mutually
agreed upon between the Issuer and the Majority Noteholder) together
with other information as is required to be provided by an issuer of
indebtedness under the Internal Revenue Code and such other customary
information as is necessary to enable the Noteholders to prepare their
tax returns; and for so long as any of the Notes are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities
Act, cooperate (and direct the Servicer to cooperate) with the Trustee
to provide to any Noteholder and to any prospective purchaser of the
Notes, upon the request of such Noteholder or prospective purchaser,
any information required to be provided to such holder or prospective
purchaser to satisfy the conditions, if applicable, set forth in Rule
144A(d)(4) under the Securities Act.
(h) USE OF PROCEEDS. Use the proceeds of the issuance of the
Notes as set forth in Section 6 of the Indenture.
(i) DAILY REPORTS AND SETTLEMENT STATEMENTS.
(1) Cause the Servicer to prepare pursuant to the
Purchase and Servicing Agreement the Daily Report on each
Business Day and telecopy such Daily Report to the Issuer, the
Collateral Agent, the Trustee and, upon request, the
Noteholders by 12:00 Noon, New York time, on that same day.
-23-
<PAGE>
(2) Cause the Servicer (A) to prepare a Settlement
Statement and provide such Settlement Statement to the
Collateral Agent, the Trustee, the Rating Agency and, upon
request, the Noteholders as soon as possible but in no event
later than 12:00 Noon, New York time, on each Settlement Date
and (B) to prepare a Cash Allocation Report and provide such
Cash Allocation Report to the Collateral Agent and the Trustee
as soon as possible but in no event later than 12:00 Noon, New
York time, on each Report Date.
(3) Permit and cause the Servicer to permit the
Trustee to verify any Daily Report, Settlement Statement or
Cash Allocation Report by conducting field audits or
performing other investigations or inspections of the
calculations or methodology serving as the basis of such Daily
Report, Settlement Statement or Cash Allocation Report in
accordance with the Purchase and Servicing Agreement.
(4) Cause the Servicer to deliver the Daily Report to
the Initial Noteholder's designee on each of the first 30
Business Days after the Closing Date.
(j) COMPLIANCE WITH LAWS. At all times observe and comply in
all material respects with all laws, ordinances, orders, judgments,
rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all Governmental Authorities that are
now or may at any time be applicable to the Issuer, except such
violation thereof as shall be contested in good faith and by
appropriate proceedings diligently conducted by the Issuer; PROVIDED,
HOWEVER, that the Issuer shall immediately give the Trustee and the
Collateral Agent prompt written notice of such contest and shall
immediately make such reserve or other appropriate provision as shall
be required in accordance with GAAP in connection with such contest.
(k) INDEPENDENT MEMBER. Ensure that at least one Member is an
Independent Member, having a person who is both an Independent Officer
and an Independent Director, and in the event of the death of the
person serving as the Independent Officer and Independent Director,
promptly cause the Independent Member to appoint a successor
Independent Officer and Independent Director, and cause the Independent
Member not to remove or allow the resignation of the Independent
Officer and the Independent Director until a successor has accepted
such positions.
(1) DELIVERY OF MATERIALS FOR THE COLLECTION OF SECURED
COLLATERAL. Upon the occurrence and during the continuance of an Early
Amortization Event and upon the request of the Trustee acting at the
direction of the Majority Noteholders, make such arrangements with
respect to the collection of the Secured Collateral as may be
reasonably requested by the Trustee.
(m) RESERVE ACCOUNT. To make such deposits of funds into the
Reserve Account as is necessary to assure that at all times the Reserve
Account contains all amounts necessary to fulfill the Issuer's
obligations to pay Restaurants for Credits
-24-
<PAGE>
after the Closing Date under all Contracts which are part of the
Purchased Contract Assets.
(n) Each of the Issuer and the Servicer agrees to give the
Collateral Agent and the Trustee immediate written notice of each Early
Amortization Event, Potential Early Amortization Event, Purchase
Termination Event and Potential Purchase Termination Event on the part
of the Issuer or the Servicer, as the case may be, under the Indenture,
the Purchase and Servicing Agreement or hereunder, as applicable.
(o) PRESERVATION OF LICENSE. The Issuer will do or cause to be
done all things necessary to preserve and maintain the License against
the claims of all Persons (other than those Persons to whom the License
or similar licenses have also been granted).
(p) USE AND ENFORCEMENT OF LICENSE. The Issuer will do or
cause to be done all things necessary to use and enforce the License to
facilitate the servicing and collection of the Purchased Contract
Assets upon the occurrence of a Purchase Termination Event.
(q) ASSERTION OF BANKRUPTCY RIGHTS. In the event that
Transmedia, any of the Initial Sellers or the Seller becomes a debtor
in a proceeding under the Bankruptcy Code, the Issuer will:
(i) prior to any such debtor's determination
regarding whether to assume or reject the License in
accordance with Bankruptcy Code Section 365, do or cause to be
done all things necessary to insure that any such debtor
complies with Bankruptcy Code Section 365(n)(4);
(ii) if any such debtor determines to reject the
License in accordance with Bankruptcy Code Section 365, do or
cause to be done all things necessary to elect to retain its
rights under the License for the duration of the License (as
any such period may be extended by the Issuer) under
Bankruptcy Code Section 365(n)(1)(B);
(iii) if any such debtor determines to reject the
License in accordance with Bankruptcy Code Section 365, and in
connection with the Issuer's election to retain its rights
under the License as described in (ii) above, do or cause to
be done all things necessary to insure any such debtor's
compliance with Bankruptcy Code Section 365(n)(2)(A) and
Bankruptcy Code Section 365(n)(3); and
(iv) if any such debtor determines to reject the
License in accordance with Bankruptcy Code Section 365, and in
connection with the Issuer's election to retain its rights
under the License as described in (ii) above, do or cause to
be done all things necessary to comply with Bankruptcy Code
Section 365(n)(2)(B).
-25-
<PAGE>
(r) On each Note Payment Date, prior to making any
distribution to any Member, deposit from Distributable Cash (as defined
in the Limited Liability Company Agreement), if any, to the Settlement
Account an amount equal to the excess, if any, of (i) the Settlement
Account Required Deposit Amount OVER (ii) the amount on deposit in the
Settlement Account (or the fair market value of any securities on
deposit therein) on such Note Payment Date.
SECTION 13. NEGATIVE COVENANTS. The Issuer covenants and agrees that,
so long as the principal of or interest on any Notes, any Expenses or any other
expenses or amounts payable under any Transaction Document shall be unpaid,
unless the Trustee (as directed by the Majority Noteholders) shall otherwise
consent in writing, the Issuer will not:
(a) INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness, except: (i) Indebtedness evidenced by the Notes; (ii)
Indebtedness representing fees, expenses and indemnities payable
pursuant to and in accordance with the Transaction Documents; (iii) the
Subordinated Note; and (iv) Indebtedness for Issuer Expenses.
(b) LIENS. Incur, create, assume or permit to exist any Lien
on any property or assets (including stock or other securities) now
owned or hereafter acquired by it or on any income or revenues or
rights in respect of any thereof, except the Liens created pursuant to
this Agreement in favor of the Collateral Agent and any Lien created in
connection with any repurchase obligation which is an Eligible
Investment; PROVIDED, HOWEVER, that nothing in this subsection (b)
shall prevent or be deemed to prohibit the Issuer from suffering to
exist upon any of the Secured Collateral any Liens for municipal, local
or state taxes if such taxes shall not at the time be due and payable
or if the Issuer shall currently be contesting the validity thereof in
good faith by appropriate proceedings and shall have set aside on its
books adequate reserves with respect thereto.
(c) GUARANTEES. Incur, create, assume or permit to exist any
Guarantees.
(d) CREDITORS. Create or permit to exist any creditors other
than the holders of Indebtedness permitted by Section 13(a) and the
other parties expressly contemplated and permitted by the Transaction
Documents.
(e) BUSINESS OF ISSUER. Engage at any time in any business or
business activity other than the acquisition of Contract Assets
pursuant to the Purchase and Servicing Agreement and the activities
incidental to the purchase and ownership of the Contract Assets, the
issuance of Notes and the other Transactions, and the making of any
investments permitted under paragraph (f) below and other incidental
and related transactions expressly permitted hereunder.
(f) INVESTMENTS, LOANS AND NOTES. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to
exist any investment or any other interest in, any other Person except
for Purchased Contract Assets and Eligible Investments or
-26-
<PAGE>
engage in any transactions involving commodity options or futures
contracts or similar transactions.
(g) MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS.
Merge into or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of
transactions) any of its assets, including the Secured Collateral
(whether now owned or hereafter acquired), or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) any
of the assets of any other Person, other than the acquisition of
Contract Assets by the Issuer pursuant to, and in accordance with the
terms of, the Purchase and Servicing Agreement and the repayment of the
Notes pursuant to, and in accordance with the terms of, this Agreement
and the Purchase and Servicing Agreement.
(h) LEASE OBLIGATIONS. Incur, create, assume or permit to
exist any Lease Obligations, except as are necessary for the permitted
operations of the Issuer.
(i) DIVIDENDS AND DISTRIBUTIONS. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction
of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any membership interests
("RESTRICTED PAYMENTS,") or directly or indirectly redeem, purchase,
retire or otherwise acquire for value any of its membership interests
or set aside any amount for any such purpose, except for dividends and
return of capital prior to the Amortization Commencement Date from
amounts released or distributed to the Issuer pursuant to Section
7(a)(iii) FOURTH; PROVIDED, HOWEVER, the Issuer shall not declare or
pay, directly or indirectly, any Restricted Payment or any amount due
on the Subordinated Note on any date on which the amount on deposit in
the Settlement Account (or the fair market value of any securities on
deposit therein) on such date is less than the Settlement Account
Required Deposit Amount.
(j) TRANSACTIONS WITH AFFILIATES. Sell or transfer any
property or assets to, or purchase or acquire any property or assets
from, or otherwise engage in any other transactions with, any of its
Affiliates except as set forth in the Transaction Documents.
(k) ACCOUNTING CHANGES. Make any change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in
tax reporting treatment except as required by law and, in each case, as
disclosed to the Trustee and the Collateral Agent in the Issuer's
financial information submitted pursuant to Section 12(e).
(1) MEMBERSHIP INTERESTS. Issue any membership interests to
any entity or Person, other than the membership interests issued to the
initial Members upon formation of the Issuer, permit any of its
membership interests to be transferred to any Person or otherwise
change its equity structure in any manner.
-27-
<PAGE>
(m) CAPITAL EXPENDITURES. Incur or make any Capital
Expenditures (whether for cash or the incurrence or assumption of
Indebtedness).
(n) AMENDMENTS. (i) Amend its organizational documents or
limited liability company agreement without the consent of the Trustee
acting at the direction of the Majority Noteholders; or (ii) amend,
modify or waive (or permit to be amended, modified or waived), without
the consent of the Trustee acting at the direction of the Majority
Noteholders, the Purchase and Servicing Agreement, the Purchase
Agreement or any of the other Transaction Documents to which the Issuer
is a party.
(o) OTHER AGREEMENTS. Enter into or be a party to any
agreement, instrument or transaction other than the Transaction
Documents and the documents related thereto, other than de minimus
agreements.
(p) NO POWERS OF ATTORNEY. Grant any powers of attorney to any
Person for any purposes except (i) for the purpose of permitting any
Person to perform any ministerial functions on behalf of the Issuer
that are not prohibited by or inconsistent with the terms of the
Transaction Documents, (ii) to the Collateral Agent in connection with
this Agreement or (iii) as expressly permitted by the Transaction
Documents.
(q) MAINTENANCE OF SEPARATE EXISTENCE. (i) Fail to do all
things necessary to maintain its existence separate and apart from the
Seller, and any Affiliate thereof, including, without limitation,
holding regular meetings of its Members and maintaining appropriate
books and records (including a current minute book); (ii) except as
required by law or the Transaction Documents, suffer any limitation on
the authority of its own Members to conduct its business and affairs in
accordance with the independent business judgment of their officers and
directors or authorize or suffer any Person other than its own Members
to act on its behalf with respect to matters (other than matters
customarily delegated to others under powers of attorney) for which a
company's own Members would customarily be responsible; (iii) fail to
(A) maintain or cause to be maintained by an agent of the Issuer under
the Issuer's control physical possession of all itS books and records,
(B) maintain capitalization adequate for the conduct of its business,
(C) account for and manage all its liabilities separately from those of
any other Person, including payment by it of all payroll,
administrative expenses and taxes, if any, from its own assets, (D)
segregate and identify separately all of its assets from those of any
other Person, (E) to the extent any such payments are made, pay its
employees, Members and agents for services performed for the Issuer or
(F) maintain Members and maintain separate offices with a separate
telephone number from those of the Seller or any Affiliate of the
Seller; or (iv) commingle its funds with those of the Seller or any
Affiliate of the Seller or use its funds for other than the Issuer's
uses except as permitted by the Purchase and Servicing Agreement.
-28-
<PAGE>
(r) Voluntarily commence any bankruptcy or insolvency
proceedings without the unanimous consent of its Members (including,
without limitation, the affirmative vote or consent of its Independent
Member).
(s) ELECTION TO TERMINATE LICENSE UPON REJECTION. In the event
Transmedia or any of the Initial Sellers becomes a debtor in a
proceeding under the Bankruptcy Code, if any such debtor determines to
reject the License in accordance with Bankruptcy Code Section 365, the
Issuer will not elect under Bankruptcy Code Section 365(n)(1)(A) to
treat the License as terminated.
(t) At any time permit to exist more than 50 beneficial owners
(within the meaning of the Investment Company Act) of securities (other
than the Notes) of the Issuer.
SECTION 14. EARLY AMORTIZATION EVENTS. The occurrence of any of the
following events shall constitute an "Early Amortization Event":
(a) any representation or warranty of the Seller, either of
the Initial Sellers, the Servicer or the Issuer made or deemed made in
or in connection with any Transaction Document, or any representation,
warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished by the
Seller or the Issuer in connection with or pursuant to any Transaction
Document shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished and such condition shall
continue unremedied for a period of ten (10) Business Days after
written notice thereof by the Trustee or after an officer of a Member
obtains knowledge thereof;
(b) (i) default shall occur in the payment of any principal,
interest or fees in respect of any Note when and as the same shall
become due and payable, whether at the due date thereof or by
acceleration thereof or otherwise and such default continues unremedied
for a period of one (1) Business Day, or (ii) a Borrowing Base
Deficiency shall occur, such Borrowing Base Deficiency is greater than
amounts retained in the Collateral Account and continues uncured for
three (3) consecutive Business Days, or (iii) a Borrowing Base
Deficiency shall occur, such Borrowing Base Deficiency is greater than
amounts retained in the Collateral Account and such condition occurred
on more than four (4) Business Days during any eight (8) consecutive
days;
(c) default shall occur in the payment of any other amount
(other than an amount referred to in paragraph (b) above) due under any
Transaction Document, when and as the same shall become due and
payable, and such default shall continue unremedied for a period of ten
(10) Business Days;
(d) default shall occur in the due observance or performance
by the Issuer of (i) Section 12(a), (h), or (m), (ii) any covenant
contained in Section 13, or (iii) Section 19(a) (other than a default
in the due observance or performance by the Issuer of clause (ii) of
Section l9(a), which default shall be governed by
-29-
<PAGE>
Section 14(e)) and such condition shall continue unremedied for a
period of ten (10) Business Days after written notice thereof by the
Trustee;
(e) default shall occur in the due observance or performance
by the Issuer of any covenant, condition or agreement contained in any
Transaction Document (other than those specified in paragraph (a), (b),
(c) or (d) above) and such default shall continue unremedied for a
period of ten (10) Business Days after the receipt of written notice of
such breach from the Trustee (acting at the direction of the Majority
Noteholders) or any Material Noteholder or an officer of a Member
obtains knowledge thereof;
(f) any Lien created by the Transaction Documents in any of
the Secured Collateral shall cease to be a valid and enforceable first
priority perfected security interest;
(g) the Issuer shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of $5,000, when and as the same shall become
due and payable or (ii) fail to observe or perform any other term,
covenant, condition or agreement contained in any agreement or
instrument evidencing or governing any such Indebtedness if the effect
of any failure referred to in this clause (ii) is to cause, or to
permit the holder or holders of such Indebtedness or a trustee on its
or their behalf (with or without the giving of notice, the lapse of
time or both) to cause, such Indebtedness to become due prior to its
stated maturity;
(h) an involuntary proceeding shall be commenced or an
involuntary petition or any other pleading shall be filed in a court of
competent jurisdiction seeking (i) relief in respect of either of the
Initial Seller, the Seller, the Servicer or the Issuer, or of a
substantial part of the property or assets of either of the Initial
Sellers, the Seller, the Servicer or the Issuer, under the Bankruptcy
Code, or any other federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
either of the Initial Sellers, the Seller, the Servicer or the Issuer
or for a substantial part of the property or assets of such Person or
(iii) the winding-up or liquidation of either of the Initial Sellers,
the Seller, the Servicer or the Issuer; and such proceeding or petition
shall continue undismissed for 45 days or an order or decree approving
or ordering any of the foregoing shall be entered;
(i) either of the Initial Sellers, the Seller, the Servicer or
the Issuer shall (i) voluntarily commence any proceeding or file any
petition seeking relief under the Bankruptcy Code, or any other federal
or State bankruptcy, insolvency, receivership or similar law, (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition
described in paragraph (h) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar off1cial for such Person or for a substantial
part of the property or assets of such Person, (iv) file an answer
-30-
<PAGE>
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(j) one or more judgments for the payment of money in an
aggregate amount in excess of $25,000 shall be rendered against the
Issuer and the same shall remain undischarged for a period of 30
consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
levy upon assets or properties of the Issuer to enforce any such
judgment;
(k) any nonmonetary judgment or order shall be rendered
against the Issuer which does or could reasonably be expected to cause
a Material Adverse Change, and either (A) enforcement proceedings shall
have been commenced by any person upon such judgment or order or (B)
there shall be any period of ten (10) consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(1) breach by either of the Initial Sellers, the Seller, the
Servicer, or the Issuer of any covenant or agreement contained in the
Purchase and Servicing Agreement or the Purchase Agreement shall have
occurred and such breach shall continue unremedied for longer than the
applicable grace period, if any, set forth in the Purchase and
Servicing Agreement or the Purchase Agreement, as applicable;
(m) a Purchase Termination Event shall have occurred and shall
be continuing under the Purchase and Servicing Agreement or the
Purchase Agreement, as applicable;
(n) any material provision of any of the Transaction Documents
shall for any reason, cease to be in full force and effect on, and
enforceable in accordance with its terms against the Issuer, either
Initial Seller, the Servicer or the Seller, or the Issuer, either
Initial Seller, the Servicer or the Seller shall so assert in writing,
or the security interest purported to be created by this Agreement
shall not be a valid and enforceable perfected first priority security
interest in favor of the Collateral Agent in any of the Secured
Collateral;
(o) there shall occur any Material Adverse Change with respect
to the Issuer, the Seller, either Initial Seller or the Servicer;
(p) the Issuer shall become an "investment company" under the
1940 Act;
(q) any Pension Plan Termination Event described in clauses
(iii) or (iv) of the definition of such term shall have occurred and
shall continue unremedied for more than ten (10) days and the sum
(determined as of the date of occurrence of such Pension Plan
Termination Event) of the Insufficiency of the Employer Plan in respect
of which such Pension Plan Termination Event shall have occurred and
the
-31-
<PAGE>
Insufficiency of any and all other Employer Plans with respect to which
such a Pension Plan Termination Event shall have occurred and then
exists is equal to or greater than $5,000,000;
(r) the Issuer or any ERISA Affiliate thereof shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan and (i) the Issuer or
such ERISA Affiliate does not have reasonable grounds to contest such
Withdrawal Liability and are not in fact contesting such Withdrawal
Liability in a timely and appropriate manner and (ii) the amount of
such Withdrawal Liability specified in such notice, when aggregated
with all other amounts required to be paid to Multiempioyer Plans in
connection with Withdrawal Liabilities (determined as of the date of
such notification), exceeds a total liability of $5,000,000 or requires
payments exceeding $500,000 per annum in excess of the annual payments
made by the Issuer or an ERISA Affiliate for the plan year immediately
preceding the plan year in which such notification is received;
(s) the Issuer or any ERISA Affiliate thereof shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such reorganization or
termination, the aggregate annual contributions of the Issuer and ERISA
Affiliates thereof to all Multiemployer Plans that are then in
reorganization or being terminated have been or will be increased over
the amounts contributed to such Multiemployer Plans for the plan years
that include the date hereof by an amount exceeding $500,000;
(t) the Issuer or any ERISA Affiliate thereof shall have
committed a failure described in Section 302(0 of ERISA;
(u) the Servicer shall (i) fail to perform in any material
respect its obligations as Servicer in conformance with the Purchase
and Servicing Agreement and such condition shall continue unremedied
for a period of ten (10) Business Days after written notice thereof by
the Trustee or (ii) resign pursuant to Section 6.11 of the Purchase and
Servicing Agreement;
(v) (i) an amount due and payable on the Notes shall not be
paid (whether on the due date thereof or by acceleration thereof or
otherwise) and such failure shall not be cured by payment thereof from
the Issuer within two Business Days thereafter or (ii) the Noteholders
are not paid when and as due any other amount payable by the Issuer
under the Indenture or under the Note Purchase Agreement and such
failure shall remain unremedied for ten (10) days after written notice
thereof shall have been given to the Issuer by the Trustee or any
Noteholder;
(w) during each Settlement Period, the aggregate dollar amount
of the Cardmember Rebates credited to Cardmembers shall exceed 25% of
Net Collections; for the purposes of this calculation, nonmonetary
Cardmember Rebates shall be valued
-32-
<PAGE>
at the cost to the Issuer of such rebates as set forth in Section
6.05(m) of the Purchase and Servicing Agreement;
(x) the stockholders' equity of Transmedia and its
consolidated subsidiaries (as that term is used under GAAP) as
reflected in the most recent consolidated financial statements of
Transmedia is not equal to at least $24 million;
(y) Usage during the three immediately preceding calendar
months does not exceed 9.0% of the principal balance of the Notes as of
the last day of each such month;
(z) the ratio of (i) the total long term debt (as that term is
used in GAAP) of Transmedia and its consolidated subsidiaries to (ii)
the stockholders' equity (as that term is used in GAAP) of Transmedia
and its consolidated subsidiaries greater than 4:1;
(aa) on any Settlement Date occurring on or after April 15,
1997, the average of the Monthly Write-off Percentage for the
immediately preceding three (3) Settlement Periods exceeds 0.8334%; or
(ab) as of any Settlement Date occurring on or after April 15,
1997, the aggregate dollar amount of Credit Adjustments for the
immediately preceding three Settlement Periods is greater than an
amount equal to the product of (i) 0.005 and (ii) the aggregate Usage
in such period.
SECTION 15. AUTOMATIC DESIGNATION OF AMORTIZATION COMMENCEMENT DATE.
Immediately upon the occurrence of an Early Amortization Event specified in
Section 14(b)(ii), Section 14(d)(iii), Section 14(h), Section 14(i), Section
14(p), Section 14(w), Section (14y), or Section 14(aa) or, upon the occurrence
of a Purchase Termination Date, the Amortization Commencement Date shall
automatically be designated without any action required by the Collateral Agent,
the Trustee or any other Person.
SECTION 16. OPTIONAL DESIGNATION OF AMORTIZATION COMMENCEMENT DATE. At
any time following the occurrence of any Early Amortization Event other than as
set forth in Section 15 hereof and during the continuance of such event, the
Collateral Agent may, and, upon the direction of the Trustee acting at the
written direction of the Majority Noteholders, shall, by notice to the Issuer,
designate the Amortization Commencement Date.
SECTION 17. ACTIONS FOLLOWING EARLY AMORTIZATION EVENT; DESIGNATION OF
AMORTIZATION COMMENCEMENT DATE; ACCELERATION OF THE NOTES. Following the
automatic designation of the Amortization Commencement Date pursuant to Section
15 or the optional designation of the Amortization Commencement Date pursuant to
Section 16 and at any time thereafter (other than as a result of the
commencement of the Scheduled Amortization Period), the Collateral Agent may,
and, at the direction of the Trustee acting at the written direction of the
Majority Noteholders and following the occurrence or during the continuation of
an Early Amortization Event, the Collateral Agent at the direction of the
-33-
<PAGE>
Trustee acting at the direction of the Majority Noteholders may take any or all
of the following actions, at the same or different times:
(a) Without notice to the Issuer except as required by law and
at any time or from time to time, charge, set off and otherwise apply
all or any part of the Secured Obligations against the Collateral
Account or the Collection Deposit Accounts in accordance with Section 8
hereof.
(b) Exercise in respect of the Secured Collateral, in addition
to any and all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party upon default under the UCC of the State of any applicable
jurisdiction and the Collateral Agent may and, at the direction of the
Trustee acting at the direction of the Majority Noteholders, shall,
without notice, except as specified below, (i) identify and engage a
successor Servicer to act as Servicer for the Secured Collateral if a
Purchase Termination Event specified in Section 7.01 of the Purchase
and Servicing Agreement has occurred and (ii) engage consultants to
advise on the Restaurant Guidelines and other matters in respect of the
Secured Collateral. The Issuer agrees that 30 days' notice to the
Issuer (promptly confirmed in writing) of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Issuer agrees that the
Collateral Agent shall not be obligated to make any sale of Secured
Collateral regardless of any notice of sale having been given. The
Collateral Agent may, at the direction of the Trustee acting at the
direction of the Majority Noteholders, adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Notwithstanding the
foregoing, the Collateral Agent may not solicit or accept bids for or
sell the Secured Collateral or any part thereof except to the extent
required by applicable law. It is understood that all proceeds of
Secured Collateral received by the Collateral Agent shall be
distributed in accordance with the priority of payments and allocation
procedures specified in Section 8 hereof.
(c) Collect the Secured Collateral.
(d) Exercise at the Issuer's expense any and all rights and
remedies of the Issuer under or in connection with the Purchase and
Servicing Agreement or otherwise in respect of the Secured Collateral,
including, without limitation, any and all rights of the Issuer to
demand or otherwise require payment of any amount under, or performance
of any provision of, the Purchase and Servicing Agreement or the
Purchase Agreement, as applicable, and all rights under Section 7.02 of
the Purchase and Servicing Agreement or the Purchase Agreement, as
applicable. It is understood that all proceeds of Secured Collateral
received by the Collateral Agent shall be distributed in accordance
with the priority of payments and allocation procedures specified in
Section 8 hereof.
-34-
<PAGE>
(e) All payments received by the Issuer under or in connection
with the Purchase and Servicing Agreement shall be received in trust
for the benefit of the Collateral Agent, shall be segregated from other
funds of the Issuer and shall be forthwith paid over to the Collateral
Agent in the same form as so received (with any necessary endorsement).
(f) Any cash held by the Collateral Agent as Secured
Collateral and all cash proceeds received by the Collateral Agent in
respect of any collection from, or other realization upon, all or any
part of the Secured Collateral will be applied and then may, in the
discretion of the Collateral Agent, be held by the Collateral Agent as
collateral and applied as set forth in Sections 7 and 8 hereof.
(g) The Collateral Agent may compel the transfer of the
Issuer's interest in all rights (by license, sublicense or otherwise)
of any computer software that is necessary or desirable to collect the
Secured Collateral and the Issuer will deliver and turn over to the
Collateral Agent or to its representatives at any time on demand of the
Collateral Agent or the Trustee acting at the direction of the Majority
Noteholders all the Issuer's books and records pertaining to the
Secured Collateral, and the Related Contracts including, without
limitation, all original sales slips, chattel paper, if any, invoices,
credit files and computer tapes or disks relating to Secured
Collateral.
(h) The Collateral Agent may take over sole dominion and
control of the Post Office Boxes.
Upon the occurrence of an event specified in clauses (a),
(b)(i), (b)(iii), (c)-(g), (j)-(l), (n-v) of this Section 14, the Notes may be
declared immediately due and payable by the Trustee acting at the written
direction of the Majority Noteholders. Upon the occurrence of an event specified
in clauses (h) or (i) of Section 14, the Notes shall become immediately due and
payable. The Majority Noteholders may in writing, direct the Trustee to direct
the Collateral Agent to waive any Early Amortization Event or automatic
acceleration of the Notes. No such waiver shall affect any subsequent Early
Amortization Event or impair any right consequent thereon. Any Person that
obtains knowledge of the occurrence of an Early Amortization Event shall
promptly give written notice of such occurrence to the other parties hereto and
to the Rating Agency and each of the Initial Sellers.
SECTION 18. OPTIONAL REDEMPTION. (a) The Issuer shall have the option
to redeem the Notes, in whole but not in part, as to the then outstanding Notes,
on any Note Payment Date (the "REDEMPTION DATE") after the aggregate principal
amount of the then outstanding Notes is less than 10% of the original aggregate
principal amount of the Notes, at the applicable Redemption Price plus any fees
due hereunder. The Issuer shall set the Redemption Date and the Redemption
Record Date and give notice thereof to the Trustee pursuant to Section 18(b).
Installments of interest and principal due on or prior to a Redemption Date
shall continue to be payable to the Noteholders called for redemption as of the
relevant Record Dates according to their terms and the provisions of Section 7
of the Indenture. The election of the Issuer to redeem any Notes pursuant to
this Section 18 shall
-35-
<PAGE>
be evidenced by a Board Resolution directing the Trustee to make the payment of
the applicable Redemption Price on all of the Notes to be redeemed from monies
deposited with the Trustee pursuant to Section 18(d). The Issuer shall, at least
15 days prior to the Redemption Date, notify the Trustee of such Redemption
Date.
(b) Upon receipt of such notice set forth in Section 18(a),
the Trustee shall provide notice of such redemption by first-class mail, postage
prepaid, mailed no later than the three Business Days following the date on
which such notice was received, to each Person who is a Noteholder on the Record
Date preceding the Redemption Date, at his address in the Note Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price; and
(3) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Note, and that interest thereon shall cease to
accrue on the Redemption Date if the Redemption Price is paid on such date.
Notice of redemption of Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Noteholder selected for redemption shall not impair or
affect the validity of the redemption of any other Note.
(c) On or before the Business Day next preceding any
Redemption Date, the Issuer shall deposit with the Collateral Agent an amount of
monies sufficient to pay the Redemption Price of all Notes which are to be
redeemed on such Redemption Date plus any fees due hereunder.
(d) Notice of redemption having been given as provided in
Section 18(d), the Notes shall, on the Redemption Date, become due and payable
at the Redemption Price and on such Redemption Date (unless the Issuer shall
default in the payment of the Redemption Price) such Notes shall cease to bear
interest. The Noteholders shall be paid the Redemption Price by the Trustee on
behalf of the Issuer after payment of all amounts then owing to the Trustee, the
Collateral Agent and the Servicer if the Servicer is not an Affiliate of
Transmedia; PROVIDED, HOWEVER, that installments of principal and interest which
are due on or prior to the Redemption Date shall be payable to the Noteholders
registered as such on the relevant Record Dates according to their terms and the
provisions of Section 7 of the Indenture.
If the holders of any Note called for redemption shall not be so paid,
the principal and premium, if any, shall, until paid, bear interest from the
Redemption Date at the Note Interest Rate.
-36-
<PAGE>
SECTION 19. FURTHER ASSURANCES; SUPPLEMENTS. (a) The Issuer and the
Seller severally agree that at any time and from time to time, at the expense of
the Issuer, each of the Issuer and the Seller (i) will promptly execute and
deliver all further instruments and documents, and take all further action that
may be necessary, or that the Collateral Agent at the direction of the Trustee
acting at the direction of the Majority Noteholders may reasonably request, and
(ii) will promptly execute and deliver all further instruments and documents,
and take all further actions that may be desirable; in the case of either clause
(i) or clause (ii), to perfect and protect the assignments and security
interests granted or purported to be granted hereby or to enable the Collateral
Agent to exercise and enforce its rights and remedies hereunder with respect to
any Secured Collateral. Without limiting the generality of the foregoing and in
addition to and not in limitation of the rights of the Collateral Agent pursuant
to Section 17, each of the Issuer and the Seller will (x) if any Secured
Collateral shall be evidenced by a promissory note or other instrument (which is
not chattel paper), deliver and pledge to the Collateral Agent hereunder such
note or instrument duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form satisfactory to the Majority Noteholders,
and (y) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or that the Collateral Agent at the direction of the Trustee
acting at the direction of the Majority Noteholders may request, to protect and
preserve the assignments and security interests granted or purported to be
granted hereby.
(b) Each of the Issuer and the Seller hereby severally authorizes the
Majority Noteholders to file one or more financing or continuation statements,
and amendments thereto, relative to all or any part of the Secured Collateral
without the signature of the Issuer or the Seller where permitted by law. Any
such filings shall be made by filing financing statements in the form acceptable
to the Majority Noteholders. A carbon, photographic or other reproduction of
this Agreement or any financing statement covering the Secured Collateral or any
part thereof shall be sufficient as a financing statement where permitted by
law. The Collateral Agent will promptly send the Issuer copies of any financing
or continuation statements thereto which it files without the signature of the
Issuer and will promptly send the Seller copies of any financing or continuation
statements thereto which it files without the signature of the Seller except, in
the case of filings of copies of this Agreement as financing statements, the
Collateral Agent will promptly send the Issuer or the Seller, as the case may
be, the filing or recordation information with respect thereto.
(c) The failure by the Issuer to perform its obligations under this
Section 19 will not constitute a failure by the Seller, and a failure by the
Seller to perform its obligations under this Section 19 will not constitute
failure by the Issuer.
SECTION 20. ADDITIONAL SECURED COLLATERAL COVENANTS. (a) The Issuer
shall keep its chief place of business and chief executive offices and the
offices where it keeps its respective records concerning the Secured Collateral
at the location therefor specified in Section ll(p) hereof or, upon 30 days'
prior written notice to the Collateral Agent, at such other location in a
jurisdiction where all action required by Section 19 hereof shall have been
taken with respect to the Secured Collateral. The Issuer will hold and preserve
its records and will permit representatives of the Collateral Agent, upon
reasonable notice, at
-37-
<PAGE>
any time during normal business hours to inspect and make copies of and
abstracts from such records.
(b) Except as otherwise provided in this subsection (b), the Issuer
shall continue to collect, at its own expense, all amounts due or to become due
to the Issuer under the Secured Collateral and the Purchase and Servicing
Agreement. In connection with such collections, the Issuer may take (and at the
direction of the Trustee acting at the direction of the Majority Noteholders
after an Early Amortization Event has occurred and is continuing, shall take)
such action as the Issuer or the Collateral Agent, at the direction of the
Trustee acting at the direction of the Majority Noteholders, may deem necessary
or advisable to enforce collection of the Secured Collateral and the Purchase
and Servicing Agreement.
(c) The Issuer will not, without the prior written consent of the
Trustee acting at the direction of the Majority Noteholders, grant any extension
of the time of payment of any of the Secured Collateral, compromise, compound or
settle the same for less than the full amount thereof or release, wholly or
partly, any Person liable for the payment thereof, except in accordance with the
applicable Restaurant Guidelines.
(d) The Issuer, at its own cost and expense, shall maintain or cause to
be maintained by the Servicer satisfactory and complete records of the Secured
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Secured Collateral and all other
dealings with the Secured Collateral. The Issuer will mark conspicuously with a
legend, in form and substance satisfactory to a majority in aggregate principal
amount of the initial Noteholders, (A) its books, records, computer tapes or
disks, and credit files pertaining to the Secured Collateral and the Related
Contracts and (B) its file cabinets or other storage facilities where it
maintains information pertaining to the Secured Collateral and the Related
Contracts, to evidence this Agreement and the assignment and security interest
granted hereby. The amount represented by the Issuer to the Collateral Agent
from time to time as owing by Restaurants in respect of the Secured Collateral
will at such time be, in all material respects, the correct amount actually and
unconditionally owing by such Restaurants thereunder.
(e) The Seller and the Issuer will comply in all material respects with
all applicable statutes, rules, and regulations with respect to the Secured
Collateral or any part thereof.
(f) The Issuer will pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon the Secured Collateral or in respect
of its income or profits therefrom and all claims of any kind (including,
without limitation, claims for labor, materials and supplies), except that no
such amount need be paid if (i) such nonpayment does not involve any danger of
the sale, forfeiture or loss of any of the Secured Collateral or any interest
therein, (ii) the charge or levy is being contested in good faith and by proper
proceedings and (iii) the obligation to pay such amount is adequately reserved
against in accordance with and tO the extent required by generally accepted
accounting principles.
(g) The Issuer will (i) perform and observe all the terms and
provisions of the Purchase and Servicing Agreement to be performed or observed
by it, maintain the
-38-
<PAGE>
Purchase and Servicing Agreement in full force and effect, enforce the Purchase
and Servicing Agreement in accordance with its terms and take all such action to
such end as may be from time to time requested by the Collateral Agent, PROVIDED
that compliance with such request is not likely to have a material adverse
effect on the amount of Collections or the timing of the receipt thereof, and
(ii) furnish to the Collateral Agent promptly upon receipt thereof copies of all
notices, requests and other documents received by the Issuer under or pursuant
to the Purchase and Servicing Agreement, and from time to time (A) furnish to
the Collateral Agent such information and reports regarding the Assigned
Collateral as the Collateral Agent, at the direction of the Trustee acting at
the direction of the Majority Noteholders, may reasonably request and (B) upon
request of the Collateral Agent made at the direction of the Trustee acting at
the direction of the Majority Noteholders, make to any counterparty to the
Purchase and Servicing Agreement such demands and requests for information and
reports or for action as the Issuer is entitled to make under the Purchase and
Servicing Agreement.
(h) The Issuer will not (i) cancel or terminate the Purchase and
Servicing Agreement or consent to or accept any cancellation or termination
thereof or of the Purchase Agreement, (ii) amend or otherwise modify the
Purchase and Servicing Agreement or give any material consent, waiver or
approval thereunder or under the Purchase Agreement, (iii) waive any default
under or breach of the Purchase and Servicing Agreement or of the Purchase
Agreement or (iv) take any other action not required by the terms of the
Purchase and Servicing Agreement or of the Purchase Agreement that would impair
the value of the interest or rights of the Issuer thereunder or that would
impair the interest or rights of the Collateral Agent.
(i) The Seller and the Issuer will advise the Collateral Agent
promptly, in reasonable detail, of any lien, security interest, encumbrance or
claim made or asserted against any of the Secured Collateral and (ii) of the
occurrence of any event which would have a material adverse effect on the
aggregate value of the Secured Collateral or on the assignments and security
interests granted hereby.
(j) The failure by the Issuer to perform its obligations under this
Section 20 will not constitute a failure by the Seller, and a failure by the
Seller to perform its obligations under this Section 20 will not constitute a
failure by the Issuer.
(k) The Issuer hereby authorizes the Collateral Agent to open and take
possession and control of all mail and the contents therein in the Post Office
Boxes and use such mail and its contents as Secured Collateral in accordance
with the terms and conditions of this Agreement.
SECTION 21. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Issuer and
the Seller each appoints as of the date hereof the Collateral Agent its
respective attorney-in-fact with full authority in the place and stead of the
Issuer or the Seller, as the case may be, and in the name of the Issuer or the
Seller, as the case may be, or otherwise, from time to time in the discretion of
the Trustee acting at the direction of the Majority Noteholders, to take any
action and to execute any instrument that the Trustee may deem necessary or
advisable to
-39-
<PAGE>
accomplish the purposes of this Agreement, including, without limitation, after
an Early Amortization Event or Purchase Termination Event has occurred and is
continuing to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Secured Collateral, to settle, compromise, compound,
prosecute or defend any action or proceeding with respect to the Secured
Collateral, to receive, endorse and collect all drafts or other instruments and
documents made payable to the Issuer or the Seller, as the case may be, in
connection therewith or representing any payment, dividend or other distribution
in respect of the Secured Collateral or any part or proceeds thereof and to give
full discharge for the same or to extend the time of payment of or to make any
allowance or adjustment with respect to any or all of the Secured Collateral, or
to replace the Servicer, and if an Early Amortization Event has occurred and is
continuing, the Collateral Agent may, as such attorney-in-fact, file any claims
or take any action or institute any proceedings which the Trustee may deem to be
necessary or desirable for the collection thereon or to enforce compliance with
the terms and conditions of the Purchase and Servicing Agreement or the Purchase
Agreement.
SECTION 22. COLLATERAL AGENT MAY PERFORM. If the Issuer or the Seller
fails to perform any agreement contained herein or if an Early Amortization
Event shall have occurred and be continuing, the Collateral Agent, at the
direction of the Trustee acting at the direction of the Majority Noteholders,
shall at any time itself perform, or cause performance of, such agreement, and
the expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Issuer; PROVIDED, HOWEVER, upon the reasonable request of the
Collateral Agent, the Majority Noteholders shall have provided the Collateral
Agent with an indemnity with respect thereto reasonably satisfactory to the
Collateral Agent in its sole discretion.
SECTION 23. THE COLLATERAL AGENT; THE TRUSTEE. (a) The Trustee hereby
appoints and authorizes the Collateral Agent to take such action as agent on
behalf of each such party, respectively, and to exercise such powers and
discretion under this Agreement as are delegated to the Collateral Agent by the
terms hereof, together with such powers as are reasonably incidental thereto.
The Collateral Agent hereby agrees to act as the Collateral Agent on the terms
and conditions provided in this Agreement. The Collateral Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement
and no implied covenants or obligations shall be read into this Agreement
against the Collateral Agent. Nothing in this Agreement, expressed or implied,
is intended to or shall be so construed as to impose upon the Collateral Agent
any obligations in respect of this Agreement except as expressly set forth
herein. It is understood and agreed that any instruction that may be given
hereunder to the Collateral Agent by the Trustee may also be given to the
Collateral Agent by the Majority Noteholders. If the Collateral Agent receives
conflicting instructions from both the Trustee and the Majority Noteholders, the
Collateral Agent shall follow the instructions of the Majority Noteholders. The
Collateral Agent shall not be required to take any action (except as expressly
required herein) or exercise any discretion, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the appropriate party or parties pursuant
to the provisions hereof, and such instructions shall be binding upon the
Secured Parties; PROVIDED, HOWEVER, that the Collateral Agent shall not be
required to take
-40-
<PAGE>
any action which exposes the Collateral Agent to personal liability for which it
shall have reasonable grounds for believing that adequate indemnity against such
liability is not reasonably assured to it or which is contrary to any of the
Transaction Documents or the Purchase and Servicing Agreement or applicable law
and, PROVIDED FURTHER, that the Collateral Agent shall not be required to expend
or risk its own funds or otherwise incur any financial liability in connection
with the exercise of any remedies under the Transaction Documents, if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. The
Collateral Agent shall be entitled to rely on any communication, instrument,
paper or other document reasonably believed by it to be genuine and correct and
to have been signed or sent by the proper Person or Persons. The Collateral
Agent shall provide the Trustee promptly upon receipt copies of all notices
received in accordance with, this Agreement. The Collateral Agent shall not be
charged with knowledge of an Early Amortization Event or a Potential Early
Amortization Event unless it has received written notice thereof from any of the
Issuer, the Trustee or the Majority Noteholders, as the case may be or a
Responsible Officer has actual knowledge. The Collateral Agent shall not be
responsible for any recitals, statements, representations or warranties herein
or for the execution, effectiveness, genuineness, priority, validity,
enforceability, collectibility, or sufficiency of this Agreement or the Secured
Collateral. The Collateral Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or any Transaction Document or the existence or
possible existence of any Early Amortization Event. The Collateral Agent may at
any time request instructions from the Trustee, or any other Person authorized
hereunder to give instructions with respect thereto, with respect to any actions
or approvals which by the terms of this Agreement or any Transaction Document it
is permitted or required tO take or to grant, and if such instructions are
requested and until received, the Collateral Agent shall be absolutely entitled
to refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any person for refraining from any action or
withholding any approval under this Agreement. In the absence of negligence or
bad faith on its part, the Collateral Agent may conclusively rely, as to the
truth of the statements and correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Collateral Agent and conforming to the
requirements of this Agreement or any related document. Any request or direction
of or notice from the Trustee, or from any other Person authorized to make any
such request or give any such notice or instructions, mentioned herein shall be
sufficiently evidenced by a request, direction or notice signed by any officer
thereof. The Collateral Agent may consult with counsel familiar with similar
financial transactions (including in-house counsel) and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Collateral Agent shall have no duty (A) to see any
recording, filing, or depositing of this Agreement or any agreement referred to
herein or any financing statement or continuation statement evidencing a
security interest, or to see the maintenance of any such recording or filing or
depositing or to any rerecording, refiling or redepositing of any thereof, (B)
to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, and (D) to confirm or verify
the contents of any reports or certificates of
-41-
<PAGE>
the Servicer delivered to the Trustee pursuant to this Agreement believed by the
Collateral Agent to be genuine and to have been signed or presented by the
proper party or parties; the Collateral Agent shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished to the Trustee hereunder.
(b) Notwithstanding anything to the contrary contained in this
Agreement, neither the Collateral Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement, except for its or
their own negligence or willful misconduct and in no event shall the Collateral
Agent be liable for any action taken at the request or direction of the Trustee
acting at the written direction of the Majority Noteholders or any other person
authorized to request it to act or give it directions hereunder.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Secured Collateral for the benefit of the Secured
Parties and shall not impose any duty upon the Collateral Agent to exercise any
such powers, except as otherwise provided in subsection (a) above. Except for
the exercise of reasonable care prior to the Amortization Commencement Date, and
thereafter such care as would be exercised by a prudent person, in the custody
and preservation of any Secured Collateral in its possession and accounting for
moneys actually received by it hereunder, the Collateral Agent shall have no
duty as to any Secured Collateral.
(d) Neither the Collateral Agent nor any of the Secured Parties shall
have responsibility for (A) taking any necessary steps to preserve rights
against any parties with respect to any Secured Collateral other than the
parties hereto or the parties for whom they are acting as agents or (B) the
collection of any proceeds of any Secured Collateral or by reason of any
invalidity, lack of value or uncollectibility of any of the Payments received
by it from Restaurants or otherwise; and the Collateral Agent shall have no
responsibility for evaluating, selecting or in any way rendering any advice with
respect to any Eligible Investments.
(e) The Chase Manhattan Bank and its Affiliates may generally engage in
any kind of business with the Seller, the Issuer, or any of their respective
Affiliates and any person who may do business with or own securities of the
Seller, the Issuer or any of their respective Affiliates, all as if The Chase
Manhattan Bank were not Collateral Agent and without any duty to account
therefor to any party to this Agreement.
(f) The Collateral Agent shall have no responsibility for the review of
any report delivered to it under Section 6.03 of the Purchase and Servicing
Agreement.
(g) The Collateral Agent shall make available copies of any document,
report or schedule delivered to it pursuant to this Agreement or any Transaction
Document for inspection upon the written request of the Trustee or any of the
Noteholders. The Collateral Agent shall, upon the written request of the Trustee
or any of the Noteholders, make, at the expense of the Issuer, a copy of any
document, schedule or report received by the Collateral
-42-
<PAGE>
Agent and deliver, at the expense of the Issuer, such copy to such requesting
party. The Collateral Agent shall deliver to the Trustee and each Noteholder
copies of each Collection Deposit Account Letter it receives pursuant to Section
5(c) and a true and complete copy of each amendment, waiver and modification of
this Agreement, the Purchase and Servicing Agreement or any other Transaction
Document.
(h) Each Secured Party acknowledges that it has independently and
without reliance upon the Trustee or any other Secured Party, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Seller and the Issuer and made its
own decision to enter into the Transaction Documents to which it is a party and
consummate the transactions contemplated thereby. The Secured Parties further
agree that the Trustee may, in its discretion, take any action or refrain from
taking any action permitted to be taken by the Trustee under the terms of the
Transaction Documents, and shall not be liable to any Secured Party for any such
action or inaction. Nothing contained in this Section 23(h) shall affect the
Trustee's responsibilities and obligations in its capacity as Trustee under the
Indenture.
SECTION 24. PROHIBITION ON CERTAIN ACTIONS. (a) In addition to the
restrictions contained in Section 26 hereof, no amendment, change, modification
or waiver of any term of a Transaction Document shall be effective without the
consent of the Trustee acting at the direction of the Majority Noteholders.
(b) The Issuer will not take any action permitted to be taken by it
under the Purchase and Servicing Agreement without the consent of the Trustee
acting at the direction of the Majority Noteholders except for actions taken
under Sections 2.02, 2.03, 2.04, 2.05, and 6.15 of the Purchase and Servicing
Agreement.
SECTION 25. INDEMNITY AND EXPENSE. (a) The Issuer agrees to indemnify
the Collateral Agent and its directors, officers, employees and agents from and
against any and all claims, damages, losses, liabilities and expenses arising
out of or in connection with or resulting from this Agreement (including,
without limitation, enforcement of this Agreement), unless and to the extent
such claims, damages, losses, liabilities or expenses were attributable to the
Collateral Agent's negligence or willful misconduct.
(b) The Issuer agrees to pay to the Collateral Agent from time to time
reasonable compensation for all services rendered by the Collateral Agent
hereunder as mutually agreed upon. The Issuer will upon demand pay to the
Collateral Agent the amount of any and all costs and expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, that
the Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Secured Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent or any of the Secured
Parties hereunder or (iv) the failure by the Issuer to perform or observe any of
the provisions hereof.
-43-
<PAGE>
(c) THIRD PARTY CLAIMS. The Collateral Agent shall notify the Issuer
promptly after the Collateral Agent's receipt of notice, or the Collateral Agent
otherwise becoming aware, of any third party claims with respect to which
indemnification may be sought under this Section 25; PROVIDED that, the failure
of the Collateral Agent so to notify the Issuer shall not relieve the Issuer of
any liability (y) under any provision hereof or of any of the other Transaction
Documents otherwise than by reason of this Section 25, or (z) to the Collateral
Agent by reason of this Section 25 unless the Collateral Agent's failure to so
notify the Issuer materially prejudices the Issuer's ability to contest the
third party claim. In case any such action is brought against the Collateral
Agent and it notifies the Issuer of the commencement thereof, the Issuer shall
be entitled to participate therein and, to the extent that it may wish to assume
the defense thereof, with counsel reasonably satisfactory to the Collateral
Agent, and after notice from the Issuer to the Collateral Agent, of its election
to assume the defense thereof, the Issuer will not be liable to the Collateral
Agent under this Subsection (c) for any legal fees and expenses subsequently
incurred by the Collateral Agent in connection with the defense thereof. The
Collateral Agent shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Collateral Agent unless (i) the
employment of such has been specifically authorized in writing by the Issuer or
(ii) representation of both the Issuer and the Collateral Agent by the same
counsel would be inappropriate due to actual or potential differing interests
between them. The Issuer shall not be liable for any settlement of any such
action effected without its written consent, but if settled with such consent or
if there be a final judgment for the plaintiff in any such action with or
without consent, the Issuer agrees to indemnify and hold harmless the Collateral
Agent from and against any loss or liability by reason of such settlement or
final judgment. The Issuer shall not, without the prior written consent of the
Collateral Agent, effect any settlement of any pending or threatened proceeding
in respect of which the Collateral Agent is or could have been a party and
indemnity could have been sought hereunder by the Collateral Agent, unless such
settlement includes an unconditional release of the Collateral Agent from all
liabilities and claims that are the subject matter of such proceeding. Any
indemnification will be paid promptly upon demand therefor.
(d) NO SPECIAL DAMAGES. The parties hereto agree that any
indemnification pursuant to this Section 25 shall be limited to direct damages
and shall not include any consequential, incidental special damages.
(e) Any and all liabilities, losses, claims, damages, actions, suits,
judgments, demands, costs and expenses (including reasonable legal fees and
expenses) relating to or arising out of or in connection with the Issuer's
performance under the Indenture or this Security Agreement or any representation
or warranty made by the Issuer therein or under any indemnity under this Section
25, shall be payable solely out of the Secured Collateral or the Settlement
Account, and no recourse shall be had to any other assets of the Issuer.
Except for Subsection (e) hereof, the foregoing provisions of this
Section 25 are in furtherance and not in limitation of the Issuer's obligations
under the other Transaction Documents.
-44-
<PAGE>
SECTION 26. AMENDMENTS, ETC. (a) No amendment of any provision of this
Agreement shall in any event be effective unless S&P shall have been given ten
(10) Business Days prior written notice of such amendment and unless the
amendment shall be in writing and signed by the Issuer, the Servicer, the
Seller, the Trustee, the Collateral Agent, and, if required pursuant to Section
9(c) of the Indenture, the Trustee (or, as the case may be, the Majority
Noteholders) and no waiver of any provision of this Agreement and no consent to
any departure by the Issuer herefrom, shall in any event be effective unless the
same shall be in writing and signed by the Issuer, the Trustee, the Collateral
Agent and, if required pursuant to Section 9(c) of the Indenture, the Trustee
(or, as the case may be, the Majority Noteholders), and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No failure to exercise nor any delay in exercising on
the part of the Collateral Agent or any Secured Party any right, power or
privilege under this Agreement shall operate as a waiver thereof; FURTHER, no
single or partial exercise of any right, power or privilege under this Agreement
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No amendment of this Agreement shall be
effective without the Rating Agency providing written confirmation to the effect
that such amendment will not result in a reduction or a withdrawal of its rating
on the Notes. No amendment shall be effective that materially adversely affects
the interests of the Noteholders without the written consent of the Majority
Noteholders. The Collateral Agent shall be entitled to an Opinion of Counsel
satisfactory to it that any amendment is authorized or permitted hereby, which
shall not be at the expense of the Collateral Agent or the Trustee.
(b) The Issuer shall provide each party to this Agreement and each
Noteholder with fifteen (15) Business Days' prior notice of any proposed
amendment, waiver or modification to this Agreement (a copy of which proposed
amendment, waiver or modification shall accompany such notice), whether or not
such Person is entitled to approve such amendment.
SECTION 27. SUCCESSOR COLLATERAL AGENT. The Collateral Agent may resign
at any time by giving thirty (30) days' written notice thereof to the Seller,
the Trustee and the Issuer. Upon any such resignation, the Trustee acting at the
direction of the Majority Noteholders, with the consent of the Seller, shall
have the right to appoint a successor Collateral Agent; PROVIDED, HOWEVER, that
no resignation of the Collateral Agent shall be effective until the acceptance
of appointment by a successor Collateral Agent. If no successor Collateral Agent
shall have accepted such an appointment within ninety (90) days after the
retiring Collateral Agent's giving of notice of resignation, the retiring
Collateral Agent may petition a court of appropriate jurisdiction to appoint a
successor Collateral Agent. Any such successor Collateral Agent shall be a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall be discharged from its duties and obligations under this Agreement.
-45-
<PAGE>
SECTION 28. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing and sent (i) by telefacsimile if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (ii) by registered or certified
mail with return receipt requested (postage prepaid), or (iii) by a recognized
overnight delivery service (with charges prepaid), addressed to it at the
address of such party specified below:
(a) If to the Issuer, to it at:
TNI Funding Company I, L.L.C.
11900 Biscayne Boulevard, Suite 460B
North Miami, Florida 33181
(b) If to the Trustee, to it at:
The Chase Manhattan Bank
Advanced Structured Products Group-ABS
450 W. 33rd St., 15th Floor
New York, New York 10001
Tel. No. 212/946-8600
Telecopy No. 212/946-3240
(c) If to the Collateral Agent, to it at:
The Chase Manhattan Bank
Advanced Structured Products Group-ABS
450 W. 33rd St., 15th floor
New York, New York 10001
Tel. No. 212/946-8600
Telecopy No. 212/946-3240
(d) If to the Seller, to it at:
TNI FUNDING I, INC.
11900 Biscayne Boulevard, Suite 460A
North Miami, FL 33181-9915
Attn: President
(e) If to the Servicer, to it at:
TRANSMEDIA NETWORK INC.
11900 Biscayne Boulevard, Suite 460
North Miami, FL 33181-9915
Attn: President
Tel. No. 305/892-3340
Telecopy No. 305/892-3342
-46-
<PAGE>
If to S&P, to it at:
STANDARD & POOR'S RATINGS SERVICES
Structured Finance
25 Broadway
New York, N.Y. 10004
Attention: Asset Backed Surveillance
Department
Tel. No. (212) 208-8000
Telecopy No. (212) 208-0031
(g) If to the Noteholders, to each of them at the address set
forth in the Note Register.
or at such other address as shall be designated by such party in a written
notice to each other party complying as to delivery with the terms of this
Section. Notice under this Section 28 will be deemed to be given only when
actually received.
SECTION 29. NO WAIVER; CUMULATIVE REMEDIES. Neither the Collateral
Agent nor any of the Secured Parties shall by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder, and
no waiver shall be valid unless in writing and signed by the Collateral Agent. A
waiver by the Collateral Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Collateral Agent would otherwise have on any future occasion.
SECTION 30. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Secured Collateral and shall (i) remain in
full force and effect until the payment in full of the Secured Obligations, (ii)
be binding upon the Issuer and the Seller and their successors and assigns, and
(iii) inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and the Secured Parties and
their respective successors, transferees and assigns. Upon the payment in full
of the Secured Obligations, the Issuer shall be entitled to the return, upon its
request and at its expense, of such of the Secured Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof, at which time the
Collateral Agent shall, at the expense and request of the Issuer, reassign and
deliver to the Issuer, or to such Person or Persons as the Issuer shall
designate, against receipt, such of the Secured Collateral (if any) as shall not
have been sold or otherwise applied by the Collateral Agent pursuant to the
terms hereof, together with appropriate instruments of reassignment and release.
SECTION 31. FURTHER INDEMNIFICATION. The Issuer agrees to pay, and to
save the Trustee, Collateral Agent and the Secured Parties harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all excise, sales or other similar taxes (but not any income taxes for fees
paid to such Persons hereunder) which may be payable or determined to be payable
with respect to any of the Secured Collateral or in connection with any of the
transactions contemplated by this Agreement.
-47-
<PAGE>
SECTION 32. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR SECURED COLLATERAL ARE GOVERNED
BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 33. NO PETITION IN BANKRUPTCY. Each of the parties to this
Agreement, other than the Issuer, severally and not jointly hereby covenants and
agrees that, prior to the date which is one year and one day after the payment
in full of all outstanding Notes it will not institute against, or join any
other Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any State.
SECTION 34. CERTAIN ERISA COVENANTS OF THE ISSUER. The Issuer covenants
and agrees that, so long as this Agreement shall remain in effect or the
principal of or interest on any Notes, any Expenses or any other expenses or
amounts payable under any Transaction Document shall be unpaid, unless the
Trustee acting at the direction of the Majority Noteholders shall otherwise
consent in writing, the Issuer will provide to each of the Collateral Agent,
each Noteholder and the Trustee notice in writing of the following, immediately
upon learning of its occurrence, and the action the Issuer or such ERISA
Affiliate has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service,
Department of Labor or the PBGC with respect thereto: (i) a Reportable Event, or
(ii) the institution of any steps by the Issuer, any ERISA Affiliate, the PBGC
or any other person to terminate any Pension Plan.
SECTION 35. TERMINATION. This Agreement shall terminate when either (i)
the Secured Obligations have been paid in full or (ii) there has been the
payment in full or the charge-off in full of the Contract Assets owned by the
Issuer and all obligations of the Issuer and the Seller hereunder have been
satisfied; PROVIDED, HOWEVER, that the provisions of Sections 24, 30 and 32
shall survive the termination of this Agreement.
SECTION 36. MISCELLANEOUS. (a) This Agreement shall become effective
when each of the conditions set forth in Section 3.01 of the Purchase and
Servicing Agreement and Section 2 of the Indenture are satisfied or waived by
each party hereto.
(b) Section headings and the Table of Contents used in this Agreement
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
(c) Each party hereto hereby waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any
litigation directly or indirectly arising out of, under or in connection with
this Agreement. Each party hereto (i) certifies that no representative,
collateral agent or attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of litigation, seek to
enforce the foregoing waiver and (ii) acknowledges that it and the other
parties hereto have
-48-
<PAGE>
been induced to enter into this Agreement by, among other things, the mutual
waivers and certifications in this Section.
(d) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
(e) This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but~ all of which when taken together shall
constitute but one contract:
(f) (i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
court or, to the extent permitted by law, in such Federal court Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(ii) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(iii) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 28. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their proper and duly authorized
officers, as of the date first above written.
TNI FUNDING COMPANY I, L.L.C.
By: TNI Funding I, Inc., Member
By:
--------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
and as Collateral Agent
By:
--------------------------------
Name:
Title:
TNI FUNDING I, INC., as Seller
By:
--------------------------------
Name:
Title:
TRANSMEDIA NETWORK, INC. as Servicer
By:
--------------------------------
Name:
Title:
-50-
<PAGE>
SCHEDULE I
BANK ACCOUNTS AND POST OFFICE BOXES
TITLE OF ACCOUNT BANK ACCT. NO.
POST OFFICE BOXES LOCATION P.O. BOX NO.
North Miami, FL 619400
33261-9400
<PAGE>
SCHEDULE II
UCC FILING JURISDICTIONS
Delaware Secretary of State
Florida Secretary of State
New York Secretary of State; City
Clerk, New York City
<PAGE>
SCHEDULE III
CREDIT CARD COMPANIES
American Express Travel
Related Services Company,
Inc.
First Data Merchant Services
First USA Paymentech, Inc.
NOVUS Services, Inc.
EXHIBIT 10.24
PURCHASE AGREEMENT
DATED AS OF DECEMBER 1, 1996
among
TRANSMEDLA NETWORK INC.
TRANSMEDIA RESTAURANT COMPANY INC.
TRANSMEDIA SERVICE COMPANY INC.
and
TNI FUNDING I, INC.,
as Purchaser
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I DEFINITIONS.......................................1
Section 1.01. Definitions...................................1
ARTICLE II PURCHASE OF ASSETS; CONSIDERATION AND PAYMENT....1
Section 2.01 Purchase of Assets..........................1
Section 2.02 Purchase Price..............................2
Section 2.03 Payment of Purchase Price...................2
Section 2.04 Purchase of Ineligible Contract Assets......3
Section 2.05 Chargebacks.................................4
ARTICLE III CONDITIONS TO PURCHASES OF ASSETS ..............4
Section 3.01 Conditions Precedent to All of the
Purchaser's Payments for Assets ............4
Section 3.02 Condition Precedent to Transmedia's and
the Initial Sellers' Obligations on
Initial Purchase Date.......................6
ARTICLE IV REPRESENTATIONS AND WARRANTS.....................6
Section 4.01 Representations and Warranties of
the Parties.................................6
Section 4.02 Additional Representations of Transmedia
and the Initial Sellers ....................7
ARTICLE V COVENANTS........................................13
Section 5.01 Affimative Covenants of Transmedia
and the Initial Sellers....................13
Section 5.02 Negative Covenants of Transmedia
and the Initial Sellers....................20
ARTICLE VI ADMINISTRATION .................................21
Section 6.01 Daily Report...............................21
Section 6.02 Settlement Statement.......................22
Section 6.03 Termination................................22
Section 6.04 Grant of License to Use Software...........22
ARTICLE VII PURCHASE TERMINATION EVENTS ...................23
Section 7.01 Purchase Termination Events................23
Section 7.02 Remedies...................................24
ARTICLE VIII INDEMNIFICATION ..............................25
Section 8.01 Indemnities by Transmedia and the
Initial Sellers............................25
-i-
<PAGE>
ARTICLE IX [RESERVED]......................................25
ARTICLE X MISCELLANEOUS ...................................25
Section 10.01 Amendments, etc.............................25
Section 10.02 Notices, etc................................26
Section 10.03 No Waiver; Remedies ........................26
Section 10.04 Binding Effect..............................26
Section 10.05 Governing Law...............................27
Section 10.06 Headings....................................27
Section 10.07 Reserved....................................27
Section 10.08 Acknowledgment of Assignment ...............27
Section 10.09 Role of Transmedia..........................27
Section 10.10 Waiver of Jury Trial........................28
Section 10.11 Severability................................28
Section 10.12 No Petition in Bankruptcy...................28
Section 10.13 Counterparts................................28
Section 10.14 Third Party Beneficiaries ..................28
Section 10.15 Junsdiction; Consent to Service of Process..28
Section 10.16 Confirmation of Intent .....................29
Section 10.17 No Interest in Cardmember Agreements........29
Section 10.18 Collateral Agent Appointed Attorney-in-Fact.30
EXHIBITS
Exhibit A - Form of Settlement Statement
Exhibit B - Form of Daily Report
Exhibit C - Form of Contract
Exhibit-D - Form of Confirmation of Sale
SCHEDULES
Schedule I - Account Schedule Schedule II - Trade Names Schedule
III - Cardmember Agreements Schedule IV - List of Contracts
Schedule VI - [Intentionally Omitted] Schedule VII - Computer
Software
ANNEXES
Annex I - Glossary of Terms
</TABLE>
-ii-
<PAGE>
PURCHASE AGREEMENT (the "AGREEMENT"), dated as of December 1, 1996, among
TRANSMEDIA RESTAURANT COMPANY INC., a Delaware corporation, TRANSMEDIA SERVICE
COMPANY INC., a Delaware corporation (together, the "INITIAL SELLERS"),
TRANSMEDIA NETWORK INC., a Delaware corporation ("TRANSMEDIA"), and TNI FUNDING
INC., a Delaware special purpose corporation (the "PURCHASER").
WITNESSETH:
WHEREAS, the Purchaser is in the business of purchasing certain assets from
the Initial Sellers and selling them to TNI Funding Company I, L.L.C.;
WHEREAS, the Initial Sellers have in the course of their business generated
certain assets and will in the future generate additional assets;
Now, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby expressly acknowledged, the Purchaser, Transmedia and the Initial
Sellers agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. As used in this Agreement, capitalized terms
used herein but not defined herein shall have the meanings assigned to such
terms in Annex I.
ARTICLE II
PURCHASE OF ASSETS; CONSIDERATION AND PAYMENT
SECTION 2.01. PURCHASE OF ASSETS. (a) Each of the Initial Sellers hereby
sells, assigns, transfers and conveys to the Purchaser on each Purchase Date on
the terms and subject to the conditions specifically set forth herein, all of
its right, title and interest, in, to and under (i) all rights to receive food
and beverages ("MEALS") or Meal credits (the "CREDITS") purchased by any
Subsidiary of Transmedia from any of the Assigned Restaurants pursuant to any
Contract; (ii) all rights of the Initial Sellers to, in and under any Contract
with an Assigned Restaurant; (iii) all rights of the Initial Sellers, whether
now existing or hereafter arising, under the Cardmember Agreements to authorize
charges to and recover payments from Cardmembers' Credit Card Accounts in
connection with the purchase of Meals by any Cardmember at any Assigned
Restaurant (the "RECEIVABLES"); (iv) all Recoveries; (v) all other accounts,
contract rights, chattel paper, instruments, Contract Files, general intangibles
and other obligations of any Restaurant with respect to any of the foregoing,
now or hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods or the rendering of services, and including without
limitation, the right to payment of any Receivables, Recoveries, Credits or
other obligations of a Restaurant or any Credit Card
<PAGE>
Company with respect to any of the foregoing; (vi) all rights in and to all
security agreements and other contracts securing or otherwise relating to any of
the foregoing; (vii) al1 guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting payment of any
of the foregoing; ((i), (ii), (iii), (iv), (v), (vi) and (vii) are collectively
referred to as the "ASSETS"); and (viii) cash in the amount of the Reserve
Amount, if any; and (ix) on the initial Purchase Date, all of Transmedia Service
Company Inc.'s right title and interest to the tradenames, trademarks and
service marks listed on Schedule II hereto
(b) On each Purchase Date, all of the Initial Sellers' right, title and
interest in and to all newly created Assets relating to the Assigned Restaurants
shall be sold, assigned, transferred and conveyed to the Purchaser upon the
delivery to the Collateral Agent (either electronically or on paper) of the
Daily Report on such date in accordance with Section 6.01.
(c) All sales of Assets by the Initial Sellers hereunder shall be without
recourse to, or representation or warranty of any kind (express or implied) by,
Transmedia or the Initial Sellers except as otherwise specifically provided
herein.
(d) It is understood and agreed that no purchases of Assets hereunder shall
occur after the Purchase Termination Date.
(e) On each Purchase Date, the Initial Seller shall transmit to the Trustee
via electronic or paper transmission, or by such other means as may be agreeable
to the Trustee, the Daily Report which shall include the list of Contracts and
Cardmember Agreements sold to the Purchaser. The electronic delivery by the
Initial Seller or made on the Initial Seller's behalf of such Daily Report shall
be deemed conclusive evidence of an assignment by the Initial Seller to the
Purchaser of all of the Initial Seller's right, title and interest in and to the
Cardmember Agreements and Contracts listed in such Daily Report. On each Note
Payment Date, the Initial Seller and the Purchaser will conf~ in writing the
list of Assets sold to the Purchaser pursuant to this Agreement by delivery to
the Collateral Agent of a Confirmation of Sale and Assignment in the form
attached hereto as Exhibit D.
SECTION 2.02. PURCHASE PRICE. The amount payable by the Purchaser (the
"Purchase Price"), on the initial Purchase Date and on any Purchase Date
thereafter, for Assets sold to the Purchaser by each Initial Seller on such
date, shall be equal to the aggregate of the Contract Prices of each Contract
constituting such Assets not previously paid for by the Purchaser, in each case
as adjusted pursuant to Sections 2.04(a) and 2.05 and, with respect to the
initial Purchase Date, all of the common stock of the Purchaser. On the Closing
Date, the Initial Sellers shall deposit, or cause to be deposited, into the
Resene Account, cash in an amount equal to the Resene Amount, if any.
SECTION 2.03. PAYMENT OF PURCHASE PRICE. (a) The Purchase Price for Assets
shall be paid to the applicable Initial Seller in the manner provided below on
the Closing Date and each day thereafter that the Purchaser is required under
the Purchase and Servicing Agreement to sell Contracts to the Issuer pursuant to
Section 2.03 of the Purchase and
-2-
<PAGE>
Servicing Agreement (each a "Purchase Date"). The Purchase Price shall be
paid by the Purchaser to the applicable Initial Seller on the initial Purchase
Date in the form of cash and contribution of capital. On each Purchase Date
thereafter the Purchase Price shall be paid by the Purchaser to the applicable
Initial Seller as follows:
(i) in cash, an amount equal to the lesser of (1) the Purchase Price
and (2) the Available Cash on such Purchase Date, to be divided between the
Initial Sellers in proportion to the Purchase Price of the Assets sold by
each Initial Seller on such date; and
(ii) to the extent that any portion of the Purchase Price remains
unpaid, such amounts will be treated as a contribution of capital from such
Initial Seller.
(b) Unless otherwise specified herein, all payments under this Agreement
shall be made not later than the end of business, New York time, on the date
specified therefor in lawful money of the United States of America in same day
funds and (i) if to an Initial Seller, to the respective bank account designated
in writing by the Initial Seller to the Purchaser and (ii) if to the Purchaser,
to the bank account designated in writing by the Purchaser. Amounts not paid by
the Initial Sellers or Transmedia when due under this Agreement shall bear
interest at a rate equal at all times to the lesser of (i) the Note Rate and
(ii) the maximum rate permitted by applicable law, payable upon demand.
(c) Whenever any payment to be made under this Agreement shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
SECTION 2.04. PURCHASE OF INELIGIBLE CONTRACT ASSETS. (a) If at any time it
is determined that any of the Contracts constituting Purchased Assets was an
Ineligible Contract Asset on its Purchase Date, (i) Transmedia and the
applicable Initial Seller, severally and not jointly, shall be obligated to pay
for the repurchase of such Purchased Assets on the next Purchase Date and (ii)
the Contract Price of such Ineligible Contract Assets on the next Purchase Date
(the "REPURCHASE AMOUNT") shall be subtracted from the aggregate Contract Prices
of the Purchased Assets appearing on the related Daily Report but not previously
paid for by the Purchaser pursuant to Section 2.03 (to the extent that such
Repurchase Amount has not already been subtracted on the related Daily Report in
determining the cash Purchase Price of Purchased Assets previously paid for
pursuant to Section 2.03). In the event that the Repurchase Amount exceeds the
aggregate Contract Prices of such unpaid-for Purchased Assets on such Daily
Report, Transmedia or the applicable Initial Seller shall immediately pay such
excess in cash to the Purchaser.
(b) The Purchaser, Transmedia and the Initial Sellers agree that after
payment of the Repurchase Amount for Ineligible Contract Assets as provided in
clause (a) above, Transmedia or the Initial Seller, as applicabh, shall be
entitled to all Collections received thereafter with respect to such Ineligible
Contract Assets and such Assets shall no longer constitute Purchased Assets for
purposes of this Agreement.
-3-
<PAGE>
(c) Except as expressly set forth in this Agreement, Transmedia and the
Initial Sellers shall not have any right under this Agreement, by implication or
otherwise, to repurchase from the Purchaser any Purchased Assets or to rescind
or otherwise retroactively affect any purchase of any Purchased Assets after the
Purchase Date relating thereto.
SECTION 2.05. CKARGEBACKS. (a) Transmedia. acting on behalf of the
Purchaser, may accept chargebacl~s for full or partial credit or make a daily
adjustment in the Credits with respect to a Restaurant under a Contract (a
"CREDIT ADJUSTMENT"), provided, that such adjustment is permitted by and made
in accordance with the Restaurant Guidelines. Each Credit Adjustment (including
any adjustment required by any Requirements of Law) shall be made by Transmedia
on each Date of Processing.
(b) On each Daily Report, Transmedia shall add the Credits corresponding to
such Credit Adjustment (the "RETURNED CREDITS") (to the extent not added
pursuant to a prior Daily Report) to the Purchased Assets appearing on such
Daily Report.
ARTICLE III
CONDITIONS TO PURCHASES OF ASSETS
SECTION 3.01. CONDITIONS PRECEDENT TO ALL OF THE PURCHASER'S PAYMENTS FOR
ASSETS. The obligation of the Purchaser to accept and pay for Assets on each
Purchase Date (including the initial Purchase Date) from the Initial Sellers
shall be subject to the conditions precedent that on such Purchase Date:
(a) The following statements shall be true (and delivery by
Transmedia or the Initial Sellers of the Daily Report and the acceptance by
the Initial Sellers of the Purchase Price for any Assets on any Purchase
Date shall constitute a representation and warranty by Transmedia and the
Initial Sellers that on such Purchase Date such statements are true):
(i) the representations and warranties of Transmedia and the
Initial Sellers contained in Sections 4.01 and 4.02 shall be
true and correct in all material respects on and as of such
Purchase Date as though made on and as of such date (except
to the extent that such representations or warranties
expressly relate to an earlier date, in which case such
representations or warranties shall be true and correct in
all material respects as of such earlier date);
(ii) no Servicer Termination Event, Potential Purchase
Termination Event or Purchase Termination Event shall have
occurred and be continuing; and
(iii) all of the ESligibility Criteria shall have been
satisfied for all Purchased Assets.
-4-
<PAGE>
(b) No material change shall have occurred after the initial
Purchase Date with respect to Transmedia's systems, computer programs,
related materials, computer tapes, disl~s and cassettes, procedures and
record-keeping relating to and required for the collection of the Purchased
Assets which makes them not sufficient and satisfactory in order to permit
the purchase and administration and collection of the Purchased Assets in
accordance with the terms and intent of this Agreement.
(c) Each Initial Seller shall have received and delivered a copy of
such other approvals, opinions or documents as the Purchaser may reasonably
request.
(d) Transmedia and the Initial Sellers shall have complied in all
material respects with all the covenants and satisfied all its obligations
under this Agreement required to be complied with or satisfied as of such
date.
(e) On or prior to the initial Purchase Date, Transmedia and the
Initial Sellers shall have delivered to the Purchaser:
(1) a copy of duly adopted resolutions of the Board of Directors
of Transmedia and the Initial Sellers, respectively, authorizing this
Agreement, the documents to be delivered hereunder and the
transactions contemplated hereby, certified by an officer of
Transmedia or the Initial Sellers, as applicable; and
(2) a duly executed certificate of an officer of each of
Transmedia and the Initial Sellers, certifying the names and
true signatures of the Person authorized on behalf of
Transmedia or the Initial Sellers, as applicable, to sign
this Agreement and the other Transaction Documents to be
delivered by Transmedia or the Initial Sellers.
(f) On or prior to each Purchase Date, the Initial Sellers shall have
delivered to the Purchaser:
(1) a supplement to ScheduleI hereto, identifying Assigned Restaurants
whose Credits and Contracts have not previously been sold to the
Purchasers and are being sold to the Purchaser on such Purchase Date;
(2) a supplement to Schedule III hereto, identifying the Cardmember
Agreements which are being partially assigned on such Purchase Date;
(3) a Daily Report substantially in the form of Exhibit B hereto,
which Daily Report will identify, among other things, (i) the
aggregate Contract Price of all existing and newly created Assets
relating to the Assets to be sold to the Purchaser by the Initial
Sellers on such date and not previously paid for by the
Purchaser, (ii) with respect to the initial Purchase Date, the
aggregate amount of unfunded liabilities under any Assets to be
sold to the Purchaser by the Initial Sellers on such date, (iii)
the aggregate Repurchase Amount for such date, if any, (iv) the
aggregate Returned Credits for such date, if any, (v) the
aggregate amount of cash to be paid to Initial
-5-
<PAGE>
Sellers on such date, and (vi) the aggregate addition to the
principal amount of the Subordinated Note on such date;
(4) all Contract Files, in whatever form, including an original
counterpart of the Contracts constituting part of the Purchased
Assets; and
(5) a supplement to Schedule IY hereto, (which may be included
in the Daily Report) of all Contracts assigned to the Purchaser
on such Purchase Date.
SECTION 3.02. CONDITION PRECEDENT TO TRANSMEDIA'S AND THE ININAL SELLERS'
OBLIGANONS ON ININAL PURCHASE DATE. The obligations of Transmedia and the
Initial Sellers on the initial Purchase Date shall be subject to the condition
precedent that Transmedia and the Initial Sellers shall have received on or
before such Purchase Date the following, each (unless otherwise indicated) dated
the day of such Purchase Date and in form and substance satisfactory to
Transmedia and the Initial Sellers:
(a) a copy of duly adopted resolutions of the Board of Directors of
the Purchaser authorizing this Agreement, the documents to be delivered by
the Purchaser hereunder and the transactions contemplated hereby, certified
by the Secretary or Assistant Secretary of the Purchaser, and
(b) a duly executed certificate of the Secretary or Assistant
Secretary of the Purchaser certifying the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
documents to be delivered by it hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE PARITES. The
Purchaser, with respect to itself; each Initial Seller, with respect to
itself and the Assets sold by such Initial Seller; and Transmedia, with
respect to itself, the Lnitial Sellers and all Assets, hereby each make
representations and warranties as follows:
(a) ORGANIZATION AND GOOD STANDING. It (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its condition
(financial or otherwise), operations, properties or prospects, (ii) has the
requisite corporate power and authority to execute, deliver and perform its
obligations under and effect the transactions contemplated by this
Agreement and (iii) has all requisite corporate power and authority and all
necessary leases and permits and the legal right tO own, pledge, mortgage
and operate its properties, and to conduct its business.
-6-
<PAGE>
(b) Due Authorization and No Conflict. The execution, delivery and
perforTnance by it of this Agreement, and all instruments and documents to
which it is a party and to be delivered hereunder by it, and the
transactions contemplated hereby and thereby, (i) are within its corporate
powers, have been duly authorized by all necessary corporate action,
including the consent of stockholders and shareholders where required, and
do not (A) contravene its charter or by-laws, (B) violate any law or
regulation (including, without limitation, Regulations G, T, U or X) or any
order or decree of any court or governmental instrumentality the effect of
which would be to cause a Material Adverse Change, (C) conflict with or
result in the breach of, or constitute a default under, any indenture,
mortgage or deed of trust enforceable against it or any lease, agreement or
other instrument binding on or affecting it or any of its Subsidiaries or
any of its properties which conflict, breach or default would have or could
reasonably be expected to have a material adverse effect on the rights of
any of the Secured Parties under the Transaction Documents or (D) result in
or require the creation or imposition of any Lien upon any of its property,
including without limitation pursuant to any agreement or instrument
referred to in clause (C) above, EXCEPT as created or imposed hereunder or
under the Security Agreement, and no transaction contemplated hereby
requires compliance nn its part with any bulk sales act or similar law, and
(ii) do not require the consent, authorization by, approval of, notice to
or filing or registration with, any governmental body, agency, authority,
regulatory body or any other Person other than those which have been
obtained. This Agreement arid the other Transaction Documents to which it
is a party have been validly executed and delivered by it and this
Agreement and the other Transaction Documents to which it is a party
constitute its legal, valid and binding obligation, enforceable against it
in accordance with its terms subject to general principles of equity and
subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws now or hereafter in effect relating to creditors' rights generally.
(c) NO PROCEEDINGS. There is no action, suit, investigation,
injunctive order or proceeding pending or, to its knowledge, threatened
against or affecting it or any of its Subsidiaries before any court,
governmental agency or arbitrator that (i) is reasonably likely to be
determined adversely to it and that, if so decided, would adversely affect
its condition (financial or otherwise), operations, properties or
prospects, or (ii) that purports to affect the legality, validity or
enforceability of this Agreement, any of the other Transaction Documents or
the transactions contemplated hereby or thereby.
SECTION 4.02. ADDINONAL REPRESENTATIONS OF TRANSMEDIA AND THE INITIAL
SELLERS. Each Initial Seller, with respect to itself and the Assets sold by
such Initial Seller, and Transmedia, with respect to itself, the Initial
Sellers, the Purchasers, and the Issuer and all Assets, hereby each make
representations and warranties as follows:
(a) Eligible Contract Assets. Each Asset sold by the Initial Sellers
hereunder is, at its respective Purchase Date, an Eligible Contract Asset.
-7-
<PAGE>
(b) SALE OF ASSETS. On the initial Purchase Date and on each Purchase
Date thereafter, the applicable Initial Seller is the sole legal and
beneficial owner of the Assets being sold by it. Upon the sale of the
Purchased Assets by the Initial Seller, the Purchaser will become the sole
legal and beneficial owner of the Purchased Assets and the Collections with
respect thereto, free and clear of any Liens, and no effective financing
statement or other instrument similar in effect covering all or any part of
such Purchased Assets or Collections with respect thereto will at such time
be on file in any filing or recording office except such as have been filed
in favor of the Purchaser in accordance with this Agreement, in favor of
the Issuer in accordance with the Purchase and Servicing Agreement, in
favor of the Collateral Agent in accordance with the terms of the Security
Agreement or with respect to which the Collateral Agent, the Issuer and the
Purchaser have received effective UCC termination statements.
(c) FINANCIAL STATEMENTS. Any financial statements delivered pursuant
hereto or in connection with the transaction contemplated hereby, taken as
a whole and in light of the circumstances in which made, at the time so
furnished contained no untrue statement of a material fact and did not om~t
to state a material fact necessary to make such financial statements not
misleading.
(d) LOCATION OF OFFICE AND RECORDS. The chief place of business and
chief executive office of Transmedia and the Initial Sellers is located at
the address listed in Section 10.02, and the office where Transmedia and
the Initial Sellers keep all their original books, records and documents
evidencing Purchased Assets or the related Contracts is located at such
address.
(e) TRADE NAMES. Set forth in Schedule II (which shall be delivered
prior to the Closing Date) is a complete and accurate list of the trade
names of Transmedia and each of the Initial Sellers for the six-year period
preceding and including the date of this Agreement.
(f) FINANCIAL STATEMENTS. Transmedia has heretofore furnished to the
Purchaser copies of the audited consolidated financial statements of
Transmedia and its consolidated Subsidiaries for the fiscal year ended
September 30, 1995. Such financial statements present, and each financial
statement presented and delivered pursuant to Sections 12(e)(2) and (3) of
the Security Agreement will present, fairly in all material respects the
financial condition and results of operations of Transmedia and its
consolidated Subsidiaries as of such dates and for such periods; such
balance sheets and the notes thereto disclose all liabilities, direct or
contingent, of Transmedia and its consolidated Subsidiaries as of the dates
thereof required to be disclosed by GAAP and such financial statements were
prepared in accordance with GAAP applied on a consistent basis.
(g) ACCURACY OF INFORMATION. Each Daily Report and Settlement
Statement prepared by Transmedia on behalf of an Initial Seller, each
exhibit, financial statement, book, record, report or other document and
any other information
-8-
<PAGE>
furnished at any time by Transmedia or an Initial Seller to the Purchaser
or in connection with this Agreement as of its date and as of the date so
furnished, will be accurate in all material respects and will not
contain any material misstatement of fact or omit to state a material fact
or any fact necessary to make the statements contained therein not
misleading.
(h) NO CONSENT. No action, authorization, qualification, license,
permit, consent or approval of, registration or filing with or any other
action by any Governmental Authority is or will be required in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement by the
Initial Sellers, Transmedia, the Purchaser or the Issuer, except such as
have been made or obtained and are in full force and effect.
(i) UCC CLASSIFICATION. As to each Contract, each of the Credits, the
rights under the Contracts, the rights under the Cardmember Agreements to
authorize charges and recover payments from Cardmembers' Credit Card
Accounts in connection with the purchase of Meals by a Cardmember at an
Assigned Restaurant; rights in and to security agreements securing or
otherwise relating to any of the foregoing, the rights and interests of the
Purchaser under the Purchase Agreement and the rights and interests of the
Issuer in the Purchase and Servicing Agreement; and the tradenames, senice
marks and trademarks transferred to TNI and licensed to the Issuer
constitute an "account" or "general intangible" within the meaning of
Section 9-106 of the UCC as in effect in the State of Florida.
(j) NO ADVERSE CHANGE. No Material Adverse Change in the business,
assets, operations, prospects or conditions, financial or otherwise, of the
Initial Sellers or of Transmedia and its Subsidiaries taken as a whole has
occurred from September 30, 1995.
(k) COMPUTER HARDWARE AND SOFTWARE. All of the computer hardware and
software necessary to collect the Assets is listed on Schedule VII.
(1) CONTRACT SCHEDULE. The Contract Schedule delivered to the
Purchaser pursuant to Section 3.01 lists all Contracts as of the initial
Purchase Date.
(m) NO DEFAULTS. No Potential Purchase Termination Event, Purchase
Termination Event, Servicer Termination Event, Early Amortization Event or
Potential Early Amortization Event has occurred or is occurring.
(n) USE OF PROCEEDS. None of the transactions contemplated herein
(including, without limitation thereof, the use of the proceeds from the
sale of the Purchased Assets) will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including, without limitation.
Regulation U.
-9-
<PAGE>
(o) CAPITAL OF THE INITIAL SELLERS AND TRANSMEDIA. Each of the Initial
Sellers and Transmedia is solvent and has adequate capital for its business
and undertakings and will be able to pay its debts as they become due.
(p) RESTRICTIONS ON THE INITIAL SELLERS AND TRANSMEDIA. None of the
Initial Sellers or Transmedia is a party to any contract or agreement, or
subject to any charter or other corporate restrictions, which, individually
or in the aggregate, matenally and adversely affects its business.
(q) NO OTHER EXISTING CREDITS. Except for the Initial Sellers and the
Purchaser, neither Transmedia nor any Subsidiary of Transmedia has acquired
any Credits from any of the Assigned Restaurants.
(r) NO OTHER AGREEMENTS WITH CARDMEMBERS. Except for the rights of the
Initial Sellers (certain of which rights are being transferred to the
Purchaser hereunder), neither Transmedia nor any Subsidiary of Transmedia
has any rights under any agreements with any Cardmember to authorize
charges to and recover payments from Cardmembers' Credit Card Accounts in
connection with the purchase of Meals by any Cardmember at any Assigned
Restaurant.
(s) NO CONTRACTS WITH AFFILIATES. No Restaurant is an Affiliate of the
Purchaser, Transmedia or the Issuer or any officer or director of
Transmedia or any Affiliate of Transmedia.
(t) ALL CONTRACTS OF ASSIGNED RESTAURANTS SOLD TO ISSUER. On each
Purchase Date, the Assets included in making the calculations set forth in
the Daily Report includes all unused Credits purchased by any of
Transmedia's Subsidiaries from each of the Assigned Restaurants on or prior
to such Purchase Date.
(u) FAIR CONSIDERATION. The consideration to be received by the
Initial Sellers, in exchange for each transfer of Contracts and other
Assets (including the right to receive all Collections due or to become due
thereunder or in respect thereto), is fair consideration having value
reasonably equivalent to or in excess of the value of the assets being
transferred by it.
(v) Transmedia and the Initial Sellers have not concealed and will not
conceal from any interested party any transfers contemplated by the
Transactions. Transmedia and the Initial Sellers have not themselves
removed or concealed, and will not themselves remove or conceal, from
creditors any of their assets and have not participated and will not
participate in removing or concealing the assets of any other entity. The
Initial Sellers do not transfer the Asset or the Marks with the intent to
hinder, delay or defraud any person or entity.
(w) The sole principal business of Transmedia and the Initial Sellers
is not primarily to (i) acquire and hold the Assets and (ii) issue and pay
the Notes.
-10-
<PAGE>
(x) Transmedia and the Initial Sellers can and do independently
conduct their respective business activities of the Issuer and the
Purchaser.
(y) Transmedia and the Initial Sellers are not primarily or
secondarily liable for the Issuer's or the Purchaser's debts, whether by
guarantee, agreement to purchase assets, agreement to maintain the solvency
of the Issuer or the Purchaser or otherwise, and neither the Issuer nor the
Purchaser is primarily or secondarily liable for Transmedia's or any
Affiliate of Transmedia's debts, whether by guarantee, agreement to
purchase assets, agreement to maintain the solvency of Transmedia or any
Affiliate of Transmedia's or otherwise.
(z) Neither the Issuer nor the Purchaser finances the ongoing
operations of Transmedia or any of its Affiliates, and without limiting the
generality of the foregoing, neither pays or is liable to pay the salaries,
expenses or losses of Transmedia or any of its Affiliates, and Transmedia
and the Initial Sellers do not finance the ongoing operations of the Issuer
or the Purchase, and without limiting the foregoing, do not pay and are not
liable to pay salaries, expenses or losses of the Issuer or the Purchaser,
except for advances as provided in Section 6.05 of the Purchase and
Senicing Agreement and certain indemnities set forth in Sections 8.01 and
8.02 of the Purchase and Servicing Agreement.
(aa) Transmedia, the Initial Sellers, the Purchaser and the Issuer do
not and will not maintain joint bank or depository accounts to which any of
the other entities has independent access.
(ab) Transmedia, the Initial Sellers, the Purchaser and the Issuer do
not and will not pool or commingle any of their respective funds with the
funds of any of the other entities, and their individual assets are and
will be segregated.
(ac) Transmedia and the Initial Sellers and their respective assets
are and will be maintained in such a manner that it will not be difficult
or costly to segregate, ascertain or otherwise identify their respective
individual assets.
(ad) Transmedia's and the Initial Sellers' books of account and
official corporate records have been and will be separately maintained from
those of the Issuer, the Purchaser, and the Issuer's books of account and
official corporate records will be separately maintained from those of
Transmedia or any of Transmedia's Affiliates.
(ae) The resolutions, agreements and other instruments underlying the
Transactions will be continuously maintained by Transmedia and the Initial
Sellers as official corporate records.
(af) Transmedia and the Initial Sellers do not refer and have not
referred to the Issuer or the Purchaser as a "department" or "division" of
Transmedia or any Affiliate of Transmedia.
-11-
<PAGE>
(ag) The creditors of the Issuer and the Purchaser are not
substantially similar to the creditors of Transmedia or the Initial
Sellers.
(ah) Transmedia and the Initial Sellers have not taken any action to
effect a merger or a consolidation of the Issuer or the Purchaser with
Transmedia or the Initial Sellers.
(ai) The Issuer, the Purchaser, Transmedia and the Initial Sellers all
have separate telephone numbers and mailing addresses and do not occupy
common office space.
(aj) All transactions between or among Transmedia, the Initial
Sellers, the Purchaser and the Issuer are and will be fully and separately
documented and will reflect arm's-length transactions. These transactions
are and will be undertaken in good faith by the respective entities for
their BONA FIDE business purposes.
(ak) Transmedia and the Initial Sellers intend and expect that all the
transfers of the Assets will occur only pursuant to the Transaction
Documents, which fully document the relationships and the expectations of
the parties thereto. The Transactions reflect BONA FIDE transactions to be
undertaken in good faith for legitimate business purposes.
(al) Transmedia and the Initial Sellers acknowledge that the Purchaser
is entering into the Transactions in reliance on Transmedia's, the Initial
Sellers' and the Issuer's identities as separate, independent and distinct
legal entities, and that the Noteholders are entering into the Transactions
based on the separate legal identity, and limited purpose nature, of the
Issuer and the Purchaser.
(am) Each of Transmedia and the Initial Sellers has complied with all
formalities required by Delaware law, including, without limitation, the
holding of board of directors' meetings and stockholders' meetings.
(an) Each of Transmedia and the Initial Sellers has and will conduct
its business solely in its own respective name and in such a separate
manner as not to mislead others with whom it is dealing as to its identity.
Likewise, all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts, statements, and
applications relating to Transmedia or the Initial Sellers are made solely
in the name of Transmedia or the Initial Sellers, respectively, and not in
tne name of the Issuer or the Purchaser.
(ao) Except as contemplated by the Transaction Documents, Transmedia
and the Initial Sellers cannot, do not and will not exercise control over
the decisions of the Issuer or the Purchaser with respect to its daily
business and affairs. Neither the Issuer nor the Purchaser can or will
exercise control over the decisions of Transmedia or the Initial Sellers
with respect to their daily business and affairs.
-12-
<PAGE>
(ap) Each of Transmedia, the Initial Sellers and the Purchaser do not
and will not make any payments to each other in connection with the
Contract Assets or the Tradenames, except pursuant to the Transaction
Documents.
(aq) Each of Transmedia, the Initial Sellers and the Purchaser do not
and will not receive any payments in connection with the Contract Assets or
the Tradenames, except pursuant to the Transaction Documents.
(ar) The Initial Sellers do not and will not transfer the Assets or
the Marks with the intent to hinder, delay or defraud any person or entity.
(as) Each of Transmedia and the Initial Sellers has not made and will
not make any untrue statement of a material fact or omitted to state a
material fact necessary to make any statement not misleading and has not
provided any document to the Initial Purchasers or the Rating Agency which
contains any untrue statement of material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(at) No Contract represents a direct obligation (including
participations or certificates of beneficial ownership therein) that is
principally secured, directly or indirectly, by an interest in real
property.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF TRANSMEDIA AND THE INITIAL SELLERS.
So long as the Purchaser, the Issuer or the Collateral Agent shall have any
interest in any Purchased Assets, each of the Initial Sellers and Transmedia
shall, unless the Purchaser, the Issuer and the Collateral Agent otherwise
consents in writing:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Deliver or cause to be
delivered to the Purchaser (with respect to the Initial Sellers, delivery
by Transmedia will be deemed to satisfy the delivery requirement):
(i) as soon as possible but not later than 90 days after the end
of each fiscal year, Transmedia's consolidated balance sheet and
related statements of income and cash flows, showing the financial
condition of Transmedia and its consolidated Subsidiaries as of the
close of such fiscal year and the results of its operations and the
operations of its consolidated Subsidiaries during such year, all
audited by independent public accountants of recognized national
standing reasonably acceptable to the Purchaser and its assignees
(including the Trustee, the Collateral Agent and the Issuer) and
accompanied by an opinion of such accountants (which shall not be
qualified in any material respect other than as may be approved by
the Purchaser) to the effect that such consolidated financial
statements fairly present the financial condition and results of
operations of
-13-
<PAGE>
Transmedia and its consolidated Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied;
(ii) as soon as possible but not later than 45 days after the
end of each of the first three fiscal quarters, Transmedia's unaudited
consolidated balance sheets and related statements of income and cash
flows, showing the financial condition of Transmedia and its
consolidated Subsidiaries as of the close of such fiscal quarter and
the results of its operations and the operations of its consolidated
Subsidiaries during such fiscal quarter and the then elapsed portion
of such fiscal year, all certif~ed by a Financial Officer of
Transmedia as fairly presenting the financial condition and results of
operations of it and its consolidated Subsidiaries on a consolidated
and consolidating basis in accordance with GAAP consistently applied,
subject to normal year-end audit adjustments without GAAP footnotes;
(iii) concurrently with any delivery of financial statements
under (i) and (ii) above, a certificate of the President, any Vice
President and any Financial Officer of Transmedia and of each of the
Initial Sellers certifying such statements and certifying that no
Purchase Termination Event or Potential Purchase Termination Event has
occurred, or, if such a Purchase Termination Event or Potential
Purchase Termination Event has occurred, specifying the nature and
extent thereof and any corrective action taken or proposed to be taken
with respect thereto;
(iv) concurrently with any delivery of financial statements under
(i) and (ii) above, a list of the Cardmember Rebate options together
with the number of Cardmembers entitled to each Cardmember Rebate;
(v) promptly after the same are available, copies of each annual
report, proxy or financial statement or other report or communication,
if any, sent to the stockholders of Transmedia generally and copies of
all annual, regular, periodic and special reports and registration
statements which Transmedia may file or be required to file with the
Securities and Exchange Commission under Sections 13 and 15(d) of the
Securities Exchange Act of 1934;
(vi) promptly after the commencement thereof, notice of any
action, suit and proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, against Transmedia or any of its Subsidiaries,
(A) which, if determined adversely to Transmedia or such Subsidiary,
would have a Materially Adverse Effect on any of them, or (B)
commenced by any creditor or lessor under any written credit agreement
with respect to borrowed money or material lease which asserts a
default thereunder on the part of Transmedia or any of its
Subsidiaries;
(vii) promptly upon the filing thereof and at any time upon the
reasonable request of the Purchaser, the Trustee, the Collateral Agent
or any
-14-
<PAGE>
Noteholder, permit such Person the opportunity to review copies of all
reports, including ~nual reports, and notices which Transmedia or any
Subsidiary f~les with or receives from the PBGC or the U.S. Department
of Labor under ERISA; and as soon as practicable and in any event
within fifteen (15) days after Transmedia or any of its Subsidiaries
knows or has reason to know that any Reportable Event or Prohibited
Transaction has occurred with respect to any Pension Plan or that the
PBGC or Transmedia or any such Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Pension
Plan, Transmedia will deliver to the Purchaser, the Trustee, the
Collateral Agent and each Noteholder a certificate of a President, any
Vice President or any Financial Officer setting forth details as to
such Reportable Event or Prohibited Transaction or Pension Plan
termination and the action it proposes to take with respect thereto;
(viii) promptly upon receipt thereof, copies of any reports or
management letters relating to the internal financial controls and
procedures delivered to Transmedia or any of its Subsidiaries by any
independent certified public accountant in connection with examination
of the financial statements of Transmedia or any such Subsidiary; and
(ix) such additional information as the Purchaser, the Trustee,
the Collateral Agent or any Noteholder may reasonably request
concerning Transmedia and its Subsidiaries.
(b) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations, directions of any Governmental
Authority and orders applicable to the Purchased Assets, including, without
limitation, rules and regulations relating to truth in lending, fair credit
billing, fair credit reporting, equal credit-opportunity, fair debt
collection practices and privacy, where failure to so comply could
reasonably be expected to have an adverse impact on the amount of
Collections thereunder; PROVIDED, HOWEVER, that it may contest any act,
regulation, order, decree or direction in any reasonable manner which
shall~not materially and adversely affect the rights of the Purchaser in
the Purchased Assets. It will comply, in all material respects, with its
obligations under the Contracts with Restaurants relating to the Purchased
Assets.
(c) PRESERVATION OF CORPORATE EXISTENCE. Do or cause to be done all
things necessary (i) to preserve, renew and keep in full force and effect
its legal existence and (ii) to maintain such legal existence separate from
that of the Purchaser.
(d) INSPECTION RIGHTS. At any reasonable time during normal business
hours and from time to time permit (i)(A) the Purchaser or any of its
agents, representatives or assignees pursuant to the Security Agreement
(including the Trustee, the Collateral Agent or any Noteholder and the
Issuer); to examine and make copies of and abstracts from the records,
books of account and documents (including, without limitation, computer
tapes and disks) of Transmedia and the Initial Sellers
-15-
<PAGE>
relating to the Purchased Assets hereunder (PROVIDED that so long as
no Early Amortization Event or Potential Early Amortization Event has
occurred and is continuing, such assignees shall give at least two Business
Days notice prior to any examination) and (B) the Purchaser, the Collateral
Agent or the Trustee or any Noteholder or any of their agents or
representatives following the termination of the appointment of Transmedia
as Servicer with respect to the Purchased Assets, to be present at the
offices and properties of Transmedia and the Initial Sellers to administer
and control the collection of the Purchased Assets and (ii) the Purchaser,
or any of its agents, representatives or assignees pursuant to the Security
Agreement (including the Trustee, the Collateral Agent or any Noteholder
and the Issuer), to visit the properties of Transmedia and the Initial
Sellers for the purpose of determ~n~ng compliance under the Transaction
Documents and examining such records, books of account and documents, and
to discuss the affairs, finances and accounts of Transmedia and the Initial
Sellers relating to the Purchased Assets or Transmedia's or an Initial
Seller's performance hereunder with any of its senior officers or directors
and with its independent certified public accountants and consultants
(PROVIDED that so long as no Early Amortization Event or Potential Early
Amo tization Event has occurred and is continuing, such assignees shall
give at least two Business Days' notice prior to any visit).
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement,
or cause to be maintained and implemented, administrative and operating
procedures reasonably necessary or advisable for the transfer,
administration, servicing and collection of amounts owing on all Purchased
Assets, and, until delivery to the Purchaser, keep and maintain, or cause
to be kept and maintained, all documents, books, records and other
information reasonably necessary or advisable for the transfer,
administration, servicing and collection of amounts owing on all such
Purchased Assets.
(f) LOCATION OF RECORDS. Keep its chief place of business and chief
executive office and the offices where it keeps the records concerning
Purchased Assets and all underlying Contracts (and all original documents
relating thereto) at the location specified in Section 4.02(d), or upon 30
days' prior written notice to the Purchaser, at such other locations in a
jurisdiction where all action required by Section 5.01(n) shall have been
taken and completed and be in full force and effect.
(g) COMPUTER FILES. (i) Retain the electronic ledger used by
Transmedia or the Initial Sellers as a master record of the Purchased
Assets and copies of all documents relating to the Purchased Assets as
custodian for the Purchaser and other Persons with interests in the
Purchased Assets and (ii) clearly and conspicuously mark or cause to be
marked with a legend describing the Purchaser's and Collateral Agent's
interest, in form and substance reasonably satisfactory to the Purchaser,
all computer tapes or disks and use its best efforts to mark all books,
records, and credit files pertaining to the Related Contracts and all file
cabinets or other storage facilities where information is maintained
pertaining to the Purchased Assets to the effect that interests in the
Purchased Assets and the Related Contracts have been conveyed to the
-16-
<PAGE>
Purchaser and then to the Issuer and that the Collateral Agent has a
security interest in such Purchased Assets for the benefit of the Secured
Parties pursuant to the Security Agreement.
(h) CONTRACTS AND RESTAURANT GUIDELINES. Comply with and perform its
obligations in accordance with its Restaurant Guidelines, except insofar as
any failure so to comply or perform would not materially and adversely
affect the Collections or the rights of the Purchaser, the Issuer, the
Collateral Agent or the Noteholders, or if such failure to comply is
necessary under any Requirement of Law and which would materially and
adversely affect the Collections or the rights of the Purchaser, the
Issuer, the Collateral Agent or the Noteholders. Each of the Initial
Sellers and Transmedia agrees that prior to making any material change in
its Restaurant Guidelines in effect on the Closing Date, it shall give 30
days' written notice to the Rating Agency, the Purchaser, the Issuer, the
Trustee and the Noteholders of any such changes; PROVIDED, HOWEVER, that in
the case of any material change in its Restaurant Guidelines made pursuant
to any Requirement of Law as to which it is unable to give 30 days' written
notice, Transmedia and the Initial Sellers shall give written notice to the
Purchaser, the Issuer, the Trustee and the Noteholders of such changes as
soon as reasonably practicable prior to the implementation of such changes.
If the Initial Sellers change the Restaurant Guidelines to lengthen the
time (currently six months) in which Credits from any Restaurant are
expected to be used, such change shall be deemed to be a material adverse
change. In the event that any such changes (except changes that are
necessary under any Requirement of Law), could reasonably be expected to
materially and adversely affect the rights of the Purchaser, then such
changes shall not become effective without the prior consent of the
Majority Noteholders. Any notice regarding changes to the Restaurant
Guidelines shall state in reasonable detail the reasons the changes will
have such effect.
(i) DAILY REPORTS AND SETTLEMENT STATEMENTS. Furnish, or if Transmedia
is not the Servicer, provide such information as may be required by the
Servicer tO furnish, the Purchaser with the Daily Reports and Settlement
Statements in accordance with Sections 6.01 and 6.02 and financial
statements, cash flow reports and other records that show the performance
of the Purchased Assets and such other reports as may be reasonably
requested by the Purchaser or any Noteholder. With respect to the Initial
Sellers, delivery by Transmedia will be deemed to satisfy the delivery
requirement.
(j) INSURANCE. Except to the extent failure to do so neither causes
nor could reasonably be expected to cause a Material Adverse Change with
respect to Transmedia or the Initial Sellers, (i) keep its insurable
properties adequately insured at all times by financially sound and
responsible insurers; maintain such other insurance, to such extent and
against such risks, including fire and other rislcs insured against by
extended coverage, as is customary with companies of the same or similar
size in the same or similar businesses; (ii) maintain in full force and
effect public liability insurance against claims for personal injury or
death or property darnage occurring upon, in, about or in connection with
the use of any properties owned,
-17-
<PAGE>
occupied or controlled by it or any Subsidiary, as the case may be, in
such amounts and with such deductibles as are customary with companies of
the same or similar size in the same or similar businesses and in the same
geographic area; and (iii) maintain such other insurance as may be required
by law; and will cause each of its Subsidiaries so to do.
(k) OBLIGATIONS AND TAXES. (i) Pay any material obligations
enforceable against or binding on it promptly and in accordance with the
terms thereof and (ii) pay and discharge promptly when due all sales tax
and all material taxes, assessments and governmental charges or levies
imposed upon, and enforceable against or binding on, it or upon its income
or profits or in respect of its property, before the same shall become in
default, as well as all material lawful claims enforceable against or
binding on it for labor, materials and supplies or otherwise which, if
unpaid, might become a Lien or charge upon such properties or any part
thereof; PROVIDED, however, that it shall not be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and adequate resenes
with respect thereto shall have been set aside on its books, and such
contest shall not involve any risk of loss of any of the Assets.
(1) FURNISHING COPIES, ETC. Furnish to the Purchaser (i) within five
Business Days of the Purchaser's request, a certificate of the President,
any Vice President or any Financial Officer of Transmedia certifying, as of
the date thereof, that no Purchase Termination Event or Potential Purchase
Termination Event referred to in Section 7.01(b) or otherwise has occurred
and is continuing, and setting forth the computations used by such Person
in making such determination; (ii) as soon as possible and in any event
within five days after the occurrence of any Purchase Termination Event or
Potential Purchase Termination Event, a statement of the President, any
Vice President or any Financial Officer of Transmedia setting forth details
of such Purchase Termination Event or Potential Purchase Termination Event
and the action that Transmedia proposes to take or has taken with respect
thereto; and (iii) promptly following request therefor, such other
information, documents, records or reports with respect to the Purchased
Assets, the Cardmembers (to the extent permitted by law), the Restaurants
or the conditions or operations, financial or otherwise, of Transmedia as
the Purchaser may from time to time reasonably request.
(m) OBLIGATIONS WITH RESPECT TO PURCHASED ASSETS. Duly fulfill all
obligations on its part to be fulfilled under or in connection with each
Contract, except where the failure to fulfill such obligations would not
materially and adversely affect the Collections or the rights of the
Purchaser, the Issuer, the Trustee, the Collateral Agent or the Noteholders
or if such failure is necessary under any Requirement of Law, and do
nothing to impair the rights of the Purchaser, the Issuer, the Trustee, the
Collateral Agent or the Noteholders in the Purchased Assets or under the
Contracts.
(n) CONTINUING COMPLIANCE WITH THE UCC. At its expense, preserve,
continue and maintain or cause to be preserved, continued and maintained
the Purchaser's valid
-18-
<PAGE>
and properly protected and perfected title to all Purchased Assets,
including, without limitation, filing or recording UCC financing statements
in each relevant jurisdiction.
(o) FURTHER ACTTON EVIDENCING PURCHASES. At the Initial Sellers'
expense, promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable
or that the Purchaser may reasonably request, in order to protect or more
fully evidence the Purchaser's right, title and interest in the Purchased
Assets and its rights under the Contracts with respect thereto, or to
enable the Purchaser to exercise or enforce any such rights. Without
limiting the generality of the foregoing, (i) Transmedia and the Initial
Sellers will upon the request of the Purchaser execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices as may be necessary or, in the opinion of the
Purchaser, advisable, (ii) Transmedia and the Initial Sellers hereby
irrevocably authorize the Purchaser and each of its assignees (including
the Issuer, the Trustee and the Collateral Agent) to file one or more
f~nancing or continuation statements, and amendments thereto, relatin,, to
all or any part of the Purchased Assets sold or to be sold by the Initial
Sellers, or the underlying Contracts with respect thereto, without the
signature of Transmedia or the Initial Sellers, (iii) if Transmedia or an
Initial Seller fails to perform any of its agreements or obligations under
this Agreement, the Purchaser may (but shall not be required to) perform,
or cause performance of, such agreements or obligations, and the costs and
expenses of the Purchaser incurred in connection therewith shall be payable
by Transmedia and (iv) each of the Initial Sellers and Transmedia agrees
that from time to time, at its expense, it will (A) indicate on its books
and records that the Purchased Assets has been sold and assigned to the
Purchaser and further sold and assigned by the Purchaser to the Issuer, and
pledged by the Issuer to the Collateral Agent, and provide to the
Purchaser, upon request, copies of such records, (B) obtain the agreement
of any Person having a Lien in and to any Purchased Assets owned by
Transmedia or an Initial Seller to release such Lien upon the transfer of
any such Purchased Assets to the Purchaser and (C) notify the Purchaser
promptly after obtaining knowledge that any of the Purchased Assets has
become subject to a Lien other than any Lien created or imposed under the
Transaction Documents.
(p) SERVICING FACILITY; STORAGE FACILITY. Maintain its facility from
which it serYices the Assets in its present condition, ordinary wear and
tear excepted, or such other facility of similar quality, security and
safety as Transmedia may select from time to time. Transmedia or the
Initial Sellers shall make all property tax payments, lease payments and
all other payments with respect to such facility, including any
indebtedness secured by such facility, whether Transmedia shall be the
Servicer or a Successor Servicer shall have been appointed. Transmedia and
the Initial Sellers shall (i) ensure that any Successor Servicer shall have
complete and unrestricted access subject to paragraph (d) of this Section
5.01, at Transmedia's expense, tO such facility and all computers and other
systems relating to the servicing of the Assets, (ii) use its best efforts
tO retain the employees based at such facility to provide assistance to any
Successor Servicer after the appointment of such Successor Servicer and
(iii) continue to store on a daily basis all bacic-up files relating to the
Assets and the servicing of the
-19-
<PAGE>
Assets at Frank Felix Associates, Ltd. 140 Sylvan Avenue, Englewood
Cliffs, New Jersey 07632, or such other storage facility of similar
quality, security and safety as Transmedia may select from time to time, in
the case of each of clauses (i), (ii) and (iii) until the earlier of (A)
the indefeasible payment in full in cash of the principal and interest of
the Notes, (B) the receipt by the Purchaser of all Collections in respect
of all Assets and (C) the Successor Senicer being able to perform its
obligations under this Agreement without the assistance of Transmedia .
(q) TRADE NAMES. Promptly notify the Purchaser of any new trade names
of Transmedia or the Initial Sellers.
(r) SALE TREATMENT. Perform the transactions contemplated hereby in a
manner that is consistent with the sale of the Purchased Assets to the
Purchaser under applicable law (including, without limitation, the Federal
Bankruptcy Code) other than federal income tax law.
SECTION 5.02. NEGATIVE COVENANTS OF TRANSMEDIA AND THE INITIAL SELLERS. So
long as the Purchaser, the Issuer or the Collateral Agent shall have any
interest in any Purchased Assets, each of the Initial Sellers and Transmedia
shall not, unless the Purchaser, the Issuer and the Collateral Agent otherwise
consents in writing:
(a) LIENS. Except as otherwise herein provided, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Lien upon or with respect to, any Assets or assign any right
to receive proceeds in respect thereof EXCEPT for Liens created or imposed
hereunder or under the Transaction Documents.
(b) CHANGE IN BUSINESS. Make any matenal change in the type of
business it conducts on the date hereof.
(c) CHANGE IN PAYMENT INSTRUCTIONS. Instruct Restaurants or Credit
Card Companies to make any payments with respect to Purchased Assets other
than as described in Article VI of the Purchase and Servicing Agreement or
the Security Agreement.
(d) CHANGE IN NAME. Change its name, identity or corporate structure
in any manner which would, could or might make any financing statement or
continuation statement relating to this Agreement or the Security
Agreement, seriously misleading within the meaning of Section 9~02(7) of
the UCC as in effect in the applicable jurisdiction.
(e) MODIFICATION OF LEDGER. Delete or otherwise modify any marking
on the electronic ledger referred to in Section 5.01(g).
(f) EXTENSION OR AMENDMENT OF ASSETS. Extend, amend or otherwise
modify, or attempt or purport to extend, amend or otherwise modify, the
terms of any
-20-
<PAGE>
Purchased Assets, or amend or otherwise modify or waive any term or
condition of any Contract with respect thereto other than in accordance
with its Restaurant Guidelines in accordance with any Requirement of Law.
(g) PRIORCTY OF COLLECTION. Collect any payment for its own account,
or for the account of any Person other than the Purchaser or its assigns,
arising under or out of any Contract with an Assigned Restaurant while the
Credits to be provided by that Restaurant are a part of the Purchased
Assets.
(h) Without the prior written consent of the Purchaser and its
assignees (including the Collateral Agent) and the Rating Agency, sell on
any Purchase: Date after the Closing Date any Contract relating to any
Restaurant not designated as of the Closing Date as an Assigned Restaurant
(an "ADDED RESTAURANT CONTRACT") if (i) during any calendar quarter, such
sale would cause the aggregate Contract Price (calculated as of the
Purchase Date applicable for each Added Restaurant Contract) of all such
Added Restaurant Contracts sold to the Purchaser during such calendar
quarter to exceed 10% of the Net Note Principal Amount on such Purchase
Date and (ii) during any calendar year, such sale would cause the aggregate
Contract Price (calculated as of the Purchase Date applicable for each
Added Restaurant Contract) of all such Added Restaurant Contracts sold to
the Purchaser during such calendar year to exceed 25% of the Net Note
Principal Amount on such Purchase Date.
ARTICLE VI
ADMINISTRATION
SECTION 6.01. DAILY REPORT. (a) On each Business Day, Transmedia shall
prepare a Daily Report in substantially the form attached hereto as Exhibit B.
The Daily Report shall report for the Applicable Day, among other things, the
dollar amount of Assets created since the preceding Daily Report, the dollar
amount of Collections received on the Applicable Day, the Borrowing Base, the
amount of Available Cash, and a current list of Purchased Contracts.
(b) Transmedia shall deliver to the Purchaser the Daily Report, which shall
be deemed to have been certified by the President, any Vice President or any
Financial Officer of each of Transmedia and the Initial Sellers, by 12:00 Noon,
New York time, on each Business Day with respect to activity in the Purchased
Assets for the Applicable Day covered by such Daily Report (or, in the case of a
Daily Report delivered on a day following a Saturday, Sunday or other
non-Business Day, the aggregate activity for the preceding Business Day and such
non-Business Days); PROVIDED, HOWEVER, that if a "system failure" or other
similar technical failure shall occur in the operations of Transmedia that
produce data included in the Daily Report, Transmedia shall use its best efforts
to recreate Daily Reports for each Applicable Day missed due to a "system
failure" or, if Transmedia is unable to recreate such Daily Reports, Transmedia
shall prepare a composite Daily Report for each such missed Applicable Day and,
in either case, such Daily Reports shall be telecopied to the
-21-
<PAGE>
Purchaser within two Business Days of the date such Daily Report(s) were
otherwise required to be prepared and telecopied.
(c) The Purchaser and Transmedia agree that Transmedia shall prepare each
Daily Report as promptly as possible each Business Day on the basis of the
"pre-audit" sales and collections figures transmitted the previous day to
Transmedia's central computer processing center.
(d) Upon discovery of any error by the Purchaser in any Daily Report, the
Purchaser and Transmedia shall confer and shall agree upon any necessary
adjustments to correct any such errors.
SECTION 6.02. SETTLEMENT STATEMENT. On each Settlement Date, Transmedia
shall, prior to 12:00 Noon, New York time, deliver to the Purchaser the
Settlement Statement for the related Settlement Period certified by the
President, any Vice President or any Financial Officer; PROVIDED, HOWEVER, that
if a "system failure" or other similar technical failure shall occur in the
operations of Transmedia that produce data included in the Settlement Statement,
a Settlement Statement containing all information for each day required to be
included therein shall be prepared and delivered to the Purchaser within two
Business Days of the date such Settlement Statement was otherwise required to be
prepared and delivered. On each Settlement Date, the Initial Sellers shall
deliver to the Purchaser and the Collateral Agent confirmation of the assignment
of the Purchased Assets transferred in the prior month, including a list of
Contracts and Cardmember Agreements, signed by each of the Initial Sellers.
SECTION 6.03. TERMINATION. The Initial Sellers' obligation to sell Assets
under this Agreement shall terminate on the date (the "PURCHASE TERMINATION
DATE") which is the earlier of (i) the Issuer Final Termination or (ii) the date
on which the Purchaser's obligation to purchase Assets shall terminate pursuant
to Section 7.01.
SECTION 6.04. GRANT OF LICENSE TO USE SOFTWARE. For the purpose of enabling
the Purchaser or its assignees to perform the functions of senicing and
collecting the Purchased Assets, each of Transmedia and the Initial Sellers
hereby (i) grants to the Purchaser and its current and future affiliates a
perpetual, irrevocable, royalty-free license to use all computer software owned
by the Initial Sellers or any of their Affiliates necessary or desirable to
collect the Assets including, but not limited to the software identified on
Schedule VII to identify, promote, manufacture, provide and sell goods and
services, and provide related services in connection with servicing the
Purchased Assets; and (ii) agrees to use its best efforts to assist the
Purchaser to arrange licensing agreements with all software vendors and other
applicable persons in a manner and to the extent reasonably appropriate to
effectuate the servicing of the Purchased Assets. The Purchaser may assign,
license, pledge, grant or otherwise encumber or transfer (including, without
limitation by means of change of control) the license granted in this Section
6.04, or all or part of its rights under the license granted in this Section
6.04, to a joint venulre of which the Purchaser is a party, a related or
affiliated company, a subsidiary, or a third party with which it may merge or
that
-22-
<PAGE>
acquires all or substantially all of the assets of the Purchaser, without the
prior, written consent of Transmedia or the Initial Sellers.
ARTICLE VII
PURCHASE TERMINATION EVENTS
SECTION 7.01. PURCHASE TERMINATION EVENTS. If any of the following events
(each, a "PURCHASE TERMINATION EVENT") shall occur and be continuing:
(a) any written representation or warranty made or deemed made or any
oral representation made prior to the Closing Date by or on behalf of
Transmedia or an Initial Seller under or in connection with this Agreement
or any Daily Report, Cash Allocation Report or Settlement Statement or
other information or report delivered by Transmedia or an Initial Seller
pursuant hereto shall prove to have been false or incorrect in any material
respect when made or deemed made, except with respect to the representation
and warranty set forth in Section 4.02(a) with respect to any Purchased
Assets so long as Transmedia or the Initial Seller has complied with its
obligations in respect of such Purchased Assets pursuant to Section 2.04;
(b) Transmedia or an Initial Seller shall have failed to (i) perform
or observe any term, covenant or agreement contained in Subsection 5.01(c),
5.01(f), 5.01(g), 5.01(h), 5.01(i), 5.01(k), 5.01(1), 5.01(m), 5.01(n),
5.01(o) or 5.01(p), Section 5.02 or Section 7.02, or (ii) make any payment
or deposit to be made by it hereunder when the same becomes due and
payable;
(c) Transmedia or an Initial Seller shall have failed to perform or
observe any other term, covenant or agreement contained in this Agreement
on its part to be performed or observed and any such failure shall have
remained unremedied for ten days following notification by the Purchaser,
the Servicer or the Trustee or Transmedia or either Initial Seller
otherwise becoming aware thereof;
(d) the Indenture or the Security Agreement shall have ceased to be in
full force and effect;
(e) an Amortization Commencement Date, Early Amortization Event or
Potential Early Amortization Event shall have occurred;
(f) Transmedia shall have failed to make any payment or deposit to be
made by its hereunder when the same becomes due and payable; or
(g) any Purchase Termination Event under the Purchase and Servicing
Agreement;
then, and in any such event, the Purchaser may, or, in the case of an event set
forth in clause (e) above, shall, by notice to Transmedia and the Initial
Sellers declare its obligation
-23-
<PAGE>
to acquire Assets from the Initial Sellers to be terminated, whereupon such
obligation shall forthwith be terminated.
SECTION 7.02. REMEDIES. If a Purchase Termination Event has occurred and
is continuing, provided the Purchaser provides Transmedia and the Initial
Sellers with ten Business Days' notice prior to taking any action set forth in
clause (c)(ii) below:
(a) The Purchaser (and its assignees) shall have all of the rights and
remedies provided to a secured creditor or a purchaser of accounts under
the UCC as in effect in the applicable jurisdiction or other applicable law
in respect thereof.
(b) The Purchaser (and its assignees) may at any time (i) notify the
respective Restaurants and Credit Card Companies of the Purchaser's
ownership (and subsequent assignment) of the Purchased Assets and may
direct that payment of all amounts due or to become due under the Purchased
Assets be made directly to the Purchaser or its assignee or (ii) give
notice, or require that Transmedia and the Initial Sellers, at Transmedia's
expense, give notice of such ownership to each such Restaurant and Credit
Card Company and direct that all payments be made directly to the Purchaser
or its assignee.
(c) Transmedia and the Initial Sellers shall, upon the Purchaser's (or
its assignee's) request, and at Transmedia's expense, (i) assemble all the
Initial Sellers', Transmedia's or the Servicer's documents, instruments and
other records (including, without limitation, credit files and computer
tapes or disks) that (A) evidence or will evidence or record Purchased
Assets sold by the Initial Sellers and (B) are otherwise necessary or
desirable to effect Collections of such Purchased Assets (collectively, the
"DOCUMENTS") and (ii) deliver the Documents to the Purchaser or its
designee at a place designated by the Purchaser to the extent that such
Documents have not previously been delivered pursuant to the Transaction
Documents.
(d) Each of the Initial Sellers and Transmedia hereby irrevocably
authorizes the Purchaser or its designee or assignees to take any and all
steps in Transmedia's or the Initial Seller's name and on Transmedia's or
the Initial Seller's behalf necessary or desirable, in the reasonable
opinion of the Purchaser, designee or assignee, to collect all amounts due
under the Purchased Assets, including, without limitation, opening mail
received at the Post Office Boxes, endorsing Transmedia's or the Initial
Seller's name on checks and other instruments representing Collections,
enforcing the Purchased Assets and the underlying Contracts and exercising
all rights and remedies in respect thereof.
(e) Transmedia and the Initial Sellers will (i) deliver to the
Purchaser, its designees or assignees all computer programs, material and
data necessary or desirable to the immediate collection of the Purchased
Assets by the Purchaser, or a party designated by the Purchaser, with or
without the participation of Transmedia or the Initial Sellers, and (ii)
make such arrangements with respect to the collection of the Purchased
Assets as may be reasonably required by the Majority Noteholders.
-24-
<PAGE>
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNITIES BY TRANSMEDIA AND THE INITIAL SELLERS. Each of
the Initial Sellers and Transmedia agrees, jointly and severally, to indemnify,
defend and hold the Purchaser and its assignees (including the Issuer, the
Trustee, each Member, the Collateral Agent and each Noteholder) harmless from
and against any and all loss, liability, damage, judgment, claim, deficiency or
expense (including interest, penalties, reasonable attorney's fees and amounts
paid in settlement) that is caused by (i) a material breach at any time by
Transmedia or an Initial Seller of its representations, warranties and covenants
contained in Section 3.01 or Section 4.01 or (ii) any material information
furnished by Transmedia or an Initial Seller which is set forth in any schedule
delivered hereunder, being untrue in any material respect when any such
representation was made or schedule delivered, PROVIDED that Transmedia and the
Initial Sellers shall not have any liability with respect to a representation or
warranty as to any specific Contract, Receivable or the related Credits other
than to purchase the Assets in accordance with Section 2.04 hereof. Transmedia
and the Initial Sellers shall also indemnify the Issuer, each Member, the
Trustee, the Collateral Agent, the Noteholders and the Servicer for any cost or
expenses incurred by them in the enforcement of this Agreement. The obligations
of Transmedia and the Initial Sellers under this Section 8.01 shall be
considered to have been relied upon by the Purchaser and shall survive the
execution, delivery and performance of this Agreement, regardless of any
investigation made by or on behalf of the Purchaser, until termination of the
Indenture. If Transmedia or an Initial Seller has made any indemnity payments
pursuant to this Section 8.01 and thereafter the recipient collects any of such
amounts from others, such party will promptly repay the amount collected to
Transmedia or the Initial Seller, as applicable, without interest.
ARTICLE IX
[RESERVED]
ARTICLE X
MISCELLANEOUS
SECTION 10.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, or consent to any departure by Transmedia or an Initial Seller
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Purchaser and the Collateral Agent (acting at the direction of
the Trustee acting at the direction of the holders of a majority of the
principal amount of all the Notes at the time outstanding) and, if required
pursuant to Section 9(c) of the Indenture, the Tn~stee (acting at the direction
of the Majority Noteholders), and then such waiver or consent shall be effective
only in the specific
-25-
<PAGE>
instance and for the specific purpose for which given. Notice of any such
amendment or waiver shall be given to the Rating Agency ten Business Days before
taking effect.
SECTION 10.02. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telex, facsimile or
cable communication) and mailed, telegraphed, telexed, transmitted, cabled or
delivered,
(a) If to the Purchaser, to it at: TNI Funding I, Inc.
11900 Biscayne Boulevard, Suite 460A
North Miami, Florida 33181-9915
Attention: President
(b) If to Transmedia or an Initial Seller, to it at:
Transmedia Network Inc.
11900 Biscayne Boulevard
North Miami, Florida 33181-9915
Attention: President
Telephone: 305/892-3340
Telecopy: 305/892-3342
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties. All notices and other
communications given to any party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier service or sent by telex, telecopy or
other telegraphic communications equipment of the sender, or on the date five
Business Days after dispatch by certified or registered mail if mailed, in eacn
case delivered, sent or mailed (properly addressed) to such party as provided in
this Section or in accordance with the latest unrevoked direction from such
party given in accordance with this Section, except that notices to the
Purchaser pursuant to Article II shall not be effective until received by the
Purchaser and the Collateral Agent.
SECTION 10.03. NO WAIVER; REMEDIES. No failure on the part of the Purchaser
to exercise, and no delay in exercising, any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 10.04. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Initial Sellers, the Purchaser and
Transmedia. From and after the date this Agreement shall have so become
effective, this Agreement shall be binding upon and inure to the benefit of the
Initial Sellers, the Purchaser and Transmedia and their respective successors
and assigns (including, without limitation, the Trustee, the Issuer, the
Noteholders and the Collateral Agent), except that Transmedia and the Initial
Sellers shall not have the right to assign their rights hereunder or any
interest herein without the prior
-26-
<PAGE>
written consent of the Issuer and the Collateral Agent (acting at the
direction of the Majority Noteholders). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Purchase Termination Date, as the Purchaser, the Issuer and the Collateral Agent
shall not have any interest in any Purchased Assets; provided, however, that the
indemnification provisions of Article VIII (and any guarantee with respect
thereto) shall be continuing and shall survive any termination of this
Agreement.
SECTION 10.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PROTECTION OF THE PURCHASER'S INTEREST IN THE ASSETS, OR REMEDES
HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED BY.THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK
SECTION 10.06. HEADINGS. Section headings and the Table of Contents used in
this Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
SECTION 10.07. RESERVED.
SECTION 10.08. ACKNOWLEDGMENT OF ASSIGNMENT. Each of Transmedia and the
Initial Sellers hereby (i) acknowledges and consents to the sale by the
Purchaser to the Issuer of all Purchased Assets acquired hereunder and the
assignment of all of the Purchaser's rights hereunder, (ii) acknowledges and
consents to the security merest granted by the Issuer in the Purchased Assets
and the rights of the Issuer, as assignee, under this Agreement pursuant to the
Security Agreement and (iii) acknowledges that, pursuant to the Security
Agreement, the Collateral Agent, acting at the direction of the Trustee acting
at the direction of the Majority Noteholders, has, among other rights, the
exclusive right (except as expressly provided in the Security Agreement) to take
any action, exercise any remedy, make any decision and agree, subject to the
consent of Transmedia, to amend, waive or modify any provision of this Agreement
as if the Collateral Agent were the Purchaser (regardless of whether an Early
Amortization Event has occu red or is continuing).
SECTION 10.09. ROLE OF TRANSMEDIA. The obligations of Transmedia hereunder
are in addition to its obligations as Servicer under the Purchase and Servicing
Agreement and the other Transaction Documents. In the event of a conflict
between its duties under this Agreement and the Purchase and Servicing Agreement
or other Transaction Documents, however, the terms of the Purchase and Se vicing
Agreement and such other Transaction Documents shall be deemed to control. If
Transmedia is tertninated as Servicer under the Purchase and Servicing
Agreement, Transmedia hereby agrees that it will take no action hereunder which
is in conflict with, or adverse to, any rights of the Successor Servicer, the
Collateral Agent or any Secured Party and, subject to the foregoing, Transmedia
shall take all actions necessary to comply with its obligations hereunder.
-27-
<PAGE>
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAWES, TO THE FULLEST
EXIENT PERMMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS AGREEMENT.
SECTION 10.11. SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 10.12. NO PETITION IN BANKRUPTCY. Each of the parties to this
Agreement, other than the Purchaser, hereby covenants and agrees that, prior to
the date which is one year and one day after the payment in filll of all
outstanding Notes, it will not institute against, or join any other Person in
instituting against, the Purchaser or the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any State of the United States.
SECTION 10.13. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
SECTION 10.14. THIIRD PARTY BENEFICIARIES. Each of the Secured Parties
shall be a third-party beneficiary of this Agreement. Without limiting the
foregoing, it is agreed and understood that each Secured Party is relying on and
shall be entitled to all of the benefits of each of the representations,
warranties and covenants set forth herein.
SECTION 10.15. JURISDICTION; CONSENT TO SERVICE OF PROCESS. Each of the
Initial Sellers and Transmedia hereby irrevocably and unconditionally:
(a) submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United
States of America for the Southern District of New York, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any
judgment;
(b) agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State court or, to the extent
permitted by law, federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law;
(c) consents to any such action or proceeding being brought in such
courts and waives any objection it may now or hereafter have to the laying
of venue of any
-28-
<PAGE>
suit, action or proceeding arising out of or relating to this Agreement
in any New York State or federal court or that such action or proceeding
was brought in an inconvenient court, and agrees not to plead or claim the
same;
(d) consents to service of process in the manner provided for notices
in Section 10.02. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by
law; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
SECTION 10.16. CONFIRMATION OF INTENT. It is the express intent of the
parties hereto that the transfer and conveyance of the Assets to the Purchaser
pursuant to Section 2.01, in each case and at all times shall be treated under
applicable State law and federal bankruptcy law as a sale by Transmedia and the
Initial Sellers to the Purchaser. If, after the Closing Date, it is determined
that all or any portion of the assets described in Sections 2.01(a) and 2.01(b)
hereof continue to be property of an Initial Seller, then the Initial Sellers
shall have been deemed to have hereby granted to the Purchaser a security
interest in all of such party's right, title and interest in, to and under all
such assets, and this Agreement shall constitute a security agreement under
applicable law.
SECTION 10.17. NO INTEREST IN CARDMEMBER AGREEMENTS. For the benefit of the
Purchaser and its assigns (including the Collateral Agent), Transmedia hereby
confirms and acknowledges that it has previously assigned to Transmedia Service
Company Inc. all of its right, title and interest, if any, in, to and under each
of the Cardmember Agreements, whether now existing or hereafter acquired.
SECTION 10.18. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each of
Transmedia and the Initial Sellers appoints as of the date hereof the Collateral
Agent its respective attorney-in-fact with full authority in the place and stead
of Transmedia and the Initial Sellers and in the name of Transmedia and the
Initial Sellers, as applicable, or otherwise, from time to time in the
discretion of the Trustee acting at the direction of the Majority Noteholders,
to take any action and to execute any instrument that the Trustee may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, after an Early Amortization Event or Purchase Termination
Event has occurred and is continuing to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in connection with the Assets, to settle, compromise,
compound, prosecute or defend any action or proceeding with respect to the
Assets, to receive, endorse and collect all drafts or other instruments and
documents made payable to the Initial Sellers in connection therewith or
representing any payment, dividend or other distribution in respect of the
Assets or any part or proceeds thereof and to give full discharge for the same
or to extend the time of payment of or to make any allowance or adjustment with
respect to any or all of the Assets, or to replace the Servicer, and if an Early
Amortization Event has occurred and is continuing, the Collateral Agent may, as
such attorney-in-fact, file any claims or take any action or institute any
proceedings which the
-29-
<PAGE>
Trustee may deem to be necessary or desirable for the collection thereon or
to enforce compliance with the terms and conditions of the Purchase and
Servicing Agreement or the Purchase Agreement.
-30-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Purchase
Agreement to be duly executed and delivered by its proper and duly authorized
offtcers as of the date first above written.
TRANSMEDIA NETWORK INC.
By___________________________________
Name:
Title:
TNI FUNDING I, INC.
By____________________________________
Name:
Title:
TRANSMEDIA RESTAURANT COMPANY INC.
By____________________________________
Name:
Title:
TRANSMEDIA SERVICE COMPANY INC.
By____________________________________
Name:
Title:
-31-
<PAGE>
EXHIBIT A
FORM OF SETTLEMENT STATEMENT
Effective on the date reflected above and upon transmission of the attached
Daily Report to The Chase Manhattan Bank, Transmedia Restaurant Company, Inc.
("TRCI") and Transmedia Service Company, Inc. ("TSCI") hereby absolutely
transfer all of their right, title and interest in the Assets identified
pursuant to the terms and conditions of the Purchase Agreement, dated as of
December 1, 1996, among TRCI, TRSI, Transmedia Network Inc. and TNI Funding I,
Inc.
TRANSMEDIA SERVICE COMPANY, INC.
By /s/ Barry Kaplan
----------------------------------------------------
TRANSMEDIA RESTAURANT COMPANY, INC.
By /s/ James Callaghan
----------------------------------------------------
<PAGE>
EXHIBIT B
FORM OF DAILY REPORT
Effective on the date reflected above and upon transmission of the attached
Daily Report to The Chase Manhattan Bank, Transmedia Restaurant Company, Inc.
("TRCI") and Transmedia Service Company, Inc. ("TSCI") hereby absolutely
transfer all of their right, title and interest in the Assets identified
pursuant to the terms and conditions of the Purchase Agreement, dated as of
December 1, 1996, among TRCI, TRSI, Transmedia Network Inc. and TNI Funding I,
Inc.
TRANSMEDIA SERVICE COMPANY, INC.
By /s/ Barry Kaplan
----------------------------------------------------
TRANSMEDIA RESTAURANT COMPANY, INC.
By /s/ James Callaghan
----------------------------------------------------
<PAGE>
EXHIBIT C
FORM OF CONTRACT
[See Attached Forms]
<PAGE>
SCHEDULE I
BANK ACCOUNTS AND POST OFFICE BOXES
TITLE OF ACCOUNT BANK ACCT. NO.
Collateral Account The Chase Manhattan Bank 507-868226
Collection Deposit Account The Chase Manhattan Bank 507-869052
POST OFFICE BOXES LOCATION P.O. BOX NO.
North Miami, FL 619400
33261-9400
<PAGE>
SCHEDULE II
TRADENAMES
Transmedia
Transmedia Network Inc.
Transmedia Restaurant Company Inc.
Transmedia Service Company Inc.
<PAGE>
SCHEDULE III
CARDMEMBER AGREEMENTS
[delivered to the Trustee on the Closing Date]
<PAGE>
SCHEDULE IV
CONTRACT SCHEDULE
[delivered to the Trustee December 24, 1996]
<PAGE>
SCHEDULE VII
RPG 400 Proprietary Software
EXHIBIT 10.25
================================================================================
PURCHASE AND SERVICING AGREEMENT
DATED AS OF DECEMBER 1, 1996
among
TNI FUNDING COMPANY I, L.L.C.,
as Issuer
and
TNI FUNDING I, INC.,
as Seller
and
TRANSMEDIA NETWORK INC.,
as Servicer
and
FRANK FELIX ASSOCIATES, LTD.,
as Back-up Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS........................................1
Section 1.01. Definitions.................................1
ARTICLE II PURCHASE OF CONTRACT ASSETS; CONSIDERATION AND
PAYMENT.........................................1
Section 2.01. Purchase of Contract Assets.................1
Section 2.02. Purchase Price..............................2
Section 2.03. Payment of Purchase Price...................3
Section 2.04. Purchase of Ineligible Contract Assets......3
Section 2.05. Chargebacks.................................4
ARTICLE III CONDITIONS TO PURCHASES OF CONTRACT ASSETS.......4
Section 3.01. Conditions Precedent to All of the
Issuer's Payments for Contract Assets.......4
Section 3.02. Condition Precedent to the Seller's
Obligations on Initial Purchase Date........6
ARTICLE IV REPRESENTATIONS AND WARRANTIES....................6
Section 4.01. Representations and Warranties of the
Parties.....................................6
Section 4.02. Additional Representations of Transmedia
and the Seller.............................10
Section 4.03. Representations of Back-up Servicer........14
ARTICLE V COVENANTS.........................................15
Section 5.01. Affirmative Covenants of the Seller and
Servicer...................................15
Section 5.02. Negative Covenants of the Seller and
Servicer...................................22
Section 5.03. Negative Covenants of the Seller...........23
Section 5.04. Covenants of Back-up Servicer .............26
ARTICLE VI ADMINISTRATION AND SERVICING OF PURCHASED CONTRACT
ASSETS...........................................27
Section 6.01. Appointment of and Acceptance by the
Servicer of Servicing Obligations..........27
Section 6.02. Servicing Compensation.....................28
Section 6.03. Independent Public Accountant's Reports....28
Section 6.04. Compliance Statements......................29
Section 6.05. Collection Procedures......................29
Section 6.06. Daily Report...............................31
Section 6.07. Allocations and Applications of
Collections................................32
Section 6.08. Settlement Statement.......................32
-i-
<PAGE>
Section 6.09. Termination...............................33
Section 6.10. Limitation on Liability of the Seller
and Others................................33
Section 6.11. Servicer Resignation......................33
Section 6.12. Access to Certain Documentation and
Information Regarding the Contract
Assets....................................34
Section 6.13. Delegation of Duties......................34
Section 6.14. Responsibilities of the Seller............34
Section 6.15. Servicer Termination Notice...............34
Section 6.16. Successor Servicer........................34
Section 6.17. Appointment of Successor Servicer.........35
Section 6.18. Maintenance of Property; Insurance........37
Section 6.19. Duties of the Back-up Servicer............37
Section 6.20. Grant of License..........................37
ARTICLE VII PURCHASE TERMINATION EVENTS ....................38
Section 7.01. Purchase Termination Events................38
Section 7.02. Remedies...................................39
ARTICLE VIII INDEMNIFICATION................................40
Section 8.01. Indemnities by the Seller and the
Servicer...................................40
Section 8.02. Servicer Indemnification...................41
Section 8.03. Issuer Indemnification.....................41
ARTICLE IX THE SUBORDINATED NOTE; SELLER NOTES; CAPITAL
CONTRIBUTION.....................................41
Section 9.01. Subordinated Note .........................41
Section 9.02. Restrictions on Transfer of
Subordinated Note..........................43
ARTICLE X MISCELLANEOUS....................................43
Section 10.01. Amendments, etc...........................43
Section 10.02. Notices, etc..............................43
Section 10.03. No Waiver; Remedies ......................45
Section 10.04. Binding Effect............................45
Section 10.05. Governing Law ............................45
Section 10.06. Headings..................................45
Section 10.07. Reserved..................................45
Section 10.08. Acknowledgment of Assignment..............45
Section 10.09. Waiver of Jury Trial......................46
Section 10.10. Severability..............................46
Section 10.11. No Petition in Bankruptcy ................46
Section 10.12. Counterparts..............................46
Section 10.13. Third Party Beneficiaries.................46
Section 10.14. Jurisdiction; Consent to Service of
Process...................................46
Section 10.16. Confirmation of Intent....................47
-ii-
<PAGE>
Section 10.17. Power of Attorney.........................47
Section 10.18. Collateral Agent Appointed
Attorney-in-Fact..........................47
EXHIBITS
Exhibit A - Form of Confirmation of Sale and Assignment
Exhibit B - Form of Settlement Statement
Exhibit C - Form of Daily Report
Exhibit D - Form of Subordinated Note
Exhibit E - Form of Contract
Exhibit F - Scope of Agreed-Upon Procedures
SCHEDULES
Schedule I - Contract Schedule
Schedule II - Trade Names
Schedule III - Bank Accounts and Post Office Boxes
Schedule IV - [Intentionally Omitted]
Schedule V - Cardmember Agreements
Schedule VI - [Intentionally Omitted]
Schedule VII - Computer Software
ANNEXES
Annex I - Glossary of Terms
-iii-
<PAGE>
PURCHASE AND SERVICING AGREEMENT (the "AGREEMENT"), dated as of
December 1, 1996, among TNI FUNDING COMPANY I, L.L.C., a Delaware limited
liability company (the "ISSUER" ), TNI FUNDING I, INC., a Delaware special
purpose corporation (the "SELLER"), TRANSMEDIA NETWORK INC., a Delaware
corporation (the "SERVICER" or "TRANSMEDIA"), FRANK FELIX ASSOCIATES, LTD., a
New Jersey corporation (the "Back-up Servicer"), and THE CHASE MANHATTAN BANK, a
New York banking corporation (the "TRUSTEE").
WITNESSETH:
WHEREAS, the Issuer is in the business of purchasing certain assets and
issuing Notes secured by such assets;
WHEREAS, the Seller on the Closing Date has purchased certain assets
from Transmedia Restaurant Company Inc. and Transmedia Service Company Inc. (the
"INITIAL SELLERS") and will in the future purchase additional assets under the
purchase agreement between TNI Funding I, Inc., Transmedia and the Initial
Sellers dated as of December 1, 1996 (the "PURCHASE AGREEMENT");
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, the Issuer, the Seller
and the Servicer agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Agreement, capitalized terms
used herein but not defined herein shall have the meanings assigned to such
terms in Annex I.
ARTICLE II
PURCHASE OF CONTRACT ASSETS; CONSIDERATION AND PAYMENT
SECTION 2.01. PURCHASE OF CONTRACT ASSETS. (a) The Seller hereby sells,
assigns, transfers and conveys to the Issuer on each Purchase Date on the terms
and subject to the conditions specifically set forth herein, all of its right,
title and interest, in, to and under (i) all rights to receive food and
beverages ("MEALS") or Meal credits (the "CREDITS") purchased by any Subsidiary
of Transmedia from any of the Assigned Restaurants pursuant to any Contract;
(ii) all rights of the Seller to, in and under any Contract with an Assigned
Restaurant; (iii) all rights of the Seller, whether now existing or hereafter
arising, under the Cardmember Agreements to authorize charges to and recover
payments from Cardmembers' Credit Card Accounts in connection with the purchase
of Meals by any Cardmember at any Assigned Restaurant (the "RECEIVABLES"); (iv)
all Recoveries; (v) all other accounts, contract
<PAGE>
rights, chattel paper, instruments, Contract Files, general intangibles and
other obligations of any Restaurant with respect to any of the foregoing, now or
hereafter existing, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and the right to payment of any
Receivables, Recoveries, Credits or other obligations of a Restaurant or any
Credit Card Company with respect to any of the foregoing; (vi) all rights in and
to all security agreements and other contracts securing or otherwise relating to
any of the foregoing; (vii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting payment of any
of the foregoing; (viii) all rights and interest of the Seller under the
Purchase Agreement ((i), (ii), (iii), (iv), (v), (vi), (vii) and (viii) are
collectively referred to as the "CONTRACT ASSETS"); and (ix) cash in the amount
of the Reserve Amount, if any.
(b) On each Purchase Date, all of the Seller's right, tide and interest
in and to all existing and all newly created Contract Assets relating to the
Assigned Restaurants shall be sold, assigned, transferred and conveyed to the
Issuer upon the delivery to the Collateral Agent (either electronically or on
paper) of the Daily Report on such date in accordance with Section 6.06.
(c) All sales of Contract Assets by the Seller hereunder shall be
without recourse to, or representation or warranty of any kind (express or
implied) by, the Seller, except as otherwise specifically provided herein.
(d) It is understood and agreed that no purchases of Contract Assets
hereunder shall occur after the Purchase Termination Date.
(e) On each Purchase Date, the Seller shall transmit to the Trustee via
electronic or paper transmission, or by such other means as may be agreeable to
the Issuer, the Trustee and the Majority Noteholders, the Daily Report, which
shall include the list of Contracts and Cardmember Agreements sold to the Issuer
and pledged to the Trustee pursuant to the Security Agreement on such date. The
electronic delivery by the Seller or made on the Seller's behalf of such Daily
Report shall be deemed conclusive evidence of an assignment by the Seller to the
Issuer of all of Seller's right, title and interest in and to the Cardmember
Agreements and Contracts listed in such Daily Report. On each Note Payment Date,
the Seller and the Issuer will confirm in writing the list of Contract Assets
sold to the Issuer pursuant to this Agreement by delivery to the Collateral
Agent of a Confirmation of Sale and Assignment in the form attached hereto as
Exhibit A.
SECTION 2.02. PURCHASE PRICE. The amount payable by the Issuer (the
"PURCHASE PRICE"), on the initial Purchase Date and on any Purchase Date
thereafter, for Contract Assets sold to the Issuer by the Seller on such date,
shall be equal to the aggregate of the Contract Prices of each Contract
constituting such Contract Assets not previously paid for by the Issuer, as
adjusted pursuant to Sections 2.04(a) and 2.05. On the Closing Date, the Seller
shall deposit, or cause to be deposited into the Reserve Account, cash in an
amount equal to the Reserve Amount, if any.
-2-
<PAGE>
SECTION 2.03. PAYMENT OF PURCHASE PRICE. (a) The Purchase Price for
Contract Assets shall be paid to the Seller in the manner provided below on the
Closing Date and each day thereafter that a Daily Report is prepared and
delivered to the Issuer in accordance with Section 6.06 (each a "PURCHASE
DATE"). The Purchase Price shall be paid by the Issuer to the Seller on the
initial Purchase Date in the form of cash and the Subordinated Note. On each
Purchase Date thereafter the Purchase Price shall be paid by the Issuer to the
Seller as follows:
(i) in cash, up to an amount equal to the lesser of (1) the
Purchase Price and (2) the Available Cash on such Purchase Date; and
(ii) to the extent that any portion of the Purchase Price
remains unpaid, by means of an addition to the principal amount of the
Subordinated Note.
(b) Unless otherwise specified herein, all payments under this
Agreement shall be made not later than the end of business on the date specified
therefor in lawful money of the United States of America in same day funds and
(i) if to the Seller, to the respective bank account designated in writing by
the Seller to the Issuer and (ii) if to the Issuer, to the Collateral Account.
Amounts not paid by the Seller when due under this Agreement shall bear interest
at a rate equal at all times to the lesser of (i) the Note Rate and (ii) the
maximum rate permitted by applicable law, payable on demand.
(c) Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day.
SECTION 2.04. PURCHASE OF INELIGIBLE CONTRACT ASSETS. (a) If at any
time it is determined that any portion of the Contracts constituting Contract
Assets was an Ineligible Contract Asset on its Purchase Date, (i) the Seller
shall be obligated to pay for the repurchase of such Purchased Contract Assets
affected directly or indirectly by such ineligibility on the next Purchase Date
and (ii) the Contract Price of such Ineligible Contract Assets as of the next
Purchase Date (the "REPURCHASE AMOUNT") shall be subtracted from the aggregate
Contract Prices of the Purchased Contract Assets appearing on the related Daily
Report but not previously paid for by the Issuer pursuant to Section 2.03 (to
the extent that such Repurchase Amount has not already been subtracted on the
related Daily Report in determining the cash Purchase Price of Purchased
Contract Assets previously paid for pursuant to Section 2.03). In the event that
the Repurchase Amount exceeds the aggregate Contract Prices of such unpaid-for
Purchased Contract Assets on such Daily Report, the Seller shall immediately pay
such excess in cash to the Issuer.
(b) The Issuer and the Seller agree that after payment of the
Repurchase Amount for Ineligible Contract Assets as provided in clause (a)
above, the Seller shall be entitled to all Collections received thereafter with
respect to such Ineligible Contract Assets, and such Contract Assets shall no
longer constitute Purchased Contract Assets for purposes of this Agreement.
-3-
<PAGE>
(c) Except as expressly set forth in this Agreement, the Seller shall
not have any right under this Agreement, by implication or otherwise, to
repurchase from the Issuer any Purchased Contract Assets or to rescind or
otherwise retroactively affect any purchase of any Purchased Contract Assets
after the Purchase Date relating thereto.
SECTION 2.05. CHARGEBACKS. (a) The Servicer, acting on behalf of the
Issuer, may accept chargebacks for full or partial credit or make a daily
adjustment in the Credits with respect to a Restaurant under a Contract (a
"CREDIT ADJUSTMENT"), PROVIDED, that such adjustment is permitted by and made in
accordance with the Restaurant Guidelines. Each Credit Adjustment (including any
adjustment required by any Requirements of Law) shall be made by the Servicer on
each Date of Processing.
(b) On each Daily Report, the Servicer, on behalf of the Issuer, shall
add the Credits corresponding to such Credit Adjustment (to the extent not added
pursuant to a prior Daily Report) to the Purchased Contract Assets appearing on
such Daily Report.
ARTICLE III
CONDITIONS TO PURCHASES OF CONTRACT ASSETS
SECTION 3.01. CONDITIONS PRECEDENT TO ALL OF THE ISSUER'S PAYMENTS FOR
CONTRACT ASSETS. The obligation of the Issuer to accept and pay for Contract
Assets on each Purchase Date (including the initial Purchase Date) from Seller
shall be subject to the conditions precedent that on such Purchase Date:
(a) The following statements shall be true (and delivery by
the Seller or the Servicer of the Daily Report and the acceptance by
the Seller of the Purchase Price for any Contract Assets on any
Purchase Date shall constitute a representation and warranty by the
Seller that on such Purchase Date such statements are true):
(i) the representations and warranties of the Seller,
the Servicer and the Back-up Servicer contained in Sections
4.01, 4.02 and 4.03 shall be true and correct in all material
respects on and as of such Purchase Date as though made on and
as of such date (except to the extent that such
representations or warranties expressly relate to an earlier
date, in which case such representations or warranties shall
be true and correct in all material respects as of such
earlier date);
(ii) no Servicer Termination Event, Potential
Purchase Termination Event or Purchase Termination Event shall
have occurred and be continuing; and
(iii) all of the Eligibility Criteria shall have been
satisfied for all Purchased Contract Assets transferred on
such date.
-4-
<PAGE>
(b) No material change shall have occurred after the initial
Purchase Date with respect to the Seller's and the Servicer's systems,
computer programs, related materials, computer tapes, disks and
cassettes, procedures and record keeping relating to and required for
the collection of the Purchased Contract Assets by the Servicer which
makes them not sufficient and satisfactory in order to permit the
purchase and administration and collection of the Purchased Contract
Assets by the Servicer in accordance with the terms and intent of this
Agreement.
(c) The Seller shall have received and delivered a copy of
such other approvals, opinions or documents as the Issuer, Trustee,
Collateral Agent or any Initial Noteholder may reasonably request.
(d) The Seller and the Servicer shall have complied in all
material respects with all the covenants and satisfied all its
obligations under this Agreement required to be complied with or
satisfied as of such date.
(e) On or prior to the initial Purchase Date the Seller and
the Servicer shall have delivered to the Issuer:
(1) a copy of duly adopted resolutions of the Board
of Directors of the Seller and the Servicer, as applicable,
authorizing this Agreement, the documents to be delivered
hereunder and the transactions contemplated hereby, certified
by an officer of the Seller or the Servicer, as applicable;
and
(2) a duly executed certificate of an officer of the
Seller or the Servicer, as applicable, certifying the names
and true signatures of the Person authorized on the behalf to
sign this Agreement and the other documents to be delivered by
the Seller or the Servicer hereunder;
(f) On or prior to each Purchase Date, the Seller and the
Servicer shall have delivered to the Issuer:
(1) a supplement to Schedule I hereto identifying
Contracts being assigned to the Issuer on such day and
additional Assigned Restaurants whose Credits and Contracts
have not previously been sold to the Issuer;
(2) a supplement to Schedule V hereto, identifying
the Cardmember Agreements which are being assigned on such
Purchase Date;
(3) a Daily Report substantially in the form of
Exhibit B hereto, which Daily Report will identify, among
other things, (i) the aggregate Contract Price of all existing
and newly created Contract Assets relating to the Contract
Assets to be sold to the Issuer by the Seller on such date and
not previously paid for by the Issuer, (ii) the aggregate
amount of unfunded liabilities under any Contract Assets to be
sold to the Issuer by the Seller on such date, (iii) the
aggregate Repurchase Amount for such date, if any, (iv) the
aggregate Returned Credits
-5-
<PAGE>
for such date, if any, (v) the aggregate amount of cash to
be paid to Seller on such date, and (vi) the aggregate
addition to the principal amount of the Subordinated Note on
such date.
(4) all Contract Files, in whatever form, including
an original counterpart of the Contracts constituting part of
the Purchased Contract Assets.
SECTION 3.02. CONDITION PRECEDENT TO THE SELLER'S OBLIGATIONS ON
INITIAL PURCHASE DATE. The obligations of the Seller on the initial Purchase
Date shall be subject to the condition precedent that the Seller shall have
received on or before such Purchase Date the following, each (unless otherwise
indicated) dated the day of such Purchase Date and in form and substance
satisfactory to the Seller:
(a) a copy of duly adopted resolutions of each Member of the
Issuer authorizing this Agreement, the documents to be delivered by the
Issuer hereunder and the transactions contemplated hereby, certified by
an officer of such Member of the Issuer; and
(b) a duly executed certificate of an officer of the
Independent Member of the Issuer certifying the names and true
signatures of the Person authorized on the Issuer's behalf to sign this
Agreement and the other documents to be delivered by the Issuer
hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The
Issuer, the Servicer and the Seller each represents and warrants as to itself,
as follows:
(a) ORGANIZATION AND GOOD STANDING. (1) As to the Issuer, that
it (i) is a limited liability company duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
formation and is duly qualified as a foreign company and is in good
standing in each jurisdiction in which the failure to so qualify would
have a material adverse effect on its condition, operations or
properties, (ii) has the requisite power and authority to execute,
deliver and perform its obligations under and effect the transactions
contemplated by this Agreement and (iii) has all requisite power and
authority and all necessary leases and permits and the legal right to
own, pledge, mortgage and operate its properties, and to conduct its
business as now or currently proposed to be conducted.
(2) As to the Seller, that it (i) is a special
purpose corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of itS
incorporation and is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on
its condition (financial or otherwise),
-6-
<PAGE>
operations, properties or prospects, (ii) has the
requisite corporate power and authority to execute, deliver
and perform its obligations under and effect the transactions
contemplated by this Agreement and (iii) has all requisite
corporate power and authority and all necessary leases and
permits and the legal right to own, pledge, mortgage and
operate its properties, and to conduct its business.
(3) As to the Servicer, that it (i) is a corporation
duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and is duly
qualified as a foreign corporation and is in good standing in
each jurisdiction in which the failure to so qualify would
have a material adverse effect on its condition (financial or
otherwise), operations, properties or prospects, (ii) has the
requisite corporate power and authority to execute, deliver
and perform its obligations under and effect the transactions
contemplated by this Agreement and (iii) has all requisite
corporate power and authority and all necessary leases and
permits and the legal right to own, pledge, mortgage and
operate its properties, and to conduct its business.
(b) DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery
and performance by it of this Agreement, and all instruments and
documents to which it is a party and to be delivered hereunder by it,
and the transactions contemplated hereby and thereby, (i) are within
its powers or corporate powers (as the case may be), have been duly
authorized by all necessary action or corporate action (as the case may
be), including the consent of shareholders or members where required,
and do not (A) contravene its charter, by-laws or other organizational
documents, (B) violate any law or regulation (including, without
limitation, Regulations G, T, U or X) or any order or decree of any
court or governmental instrumentality the effect of which would be to
cause a Material Adverse Change, (C) conflict with or result in the
breach of, or constitute a default under, any indenture, mortgage or
deed of trust enforceable against it or any lease, agreement or other
instrument binding on or affecting it or any of its Subsidiaries or any
of its properties which conflict, breach or default would have or could
reasonably be expected to have a material adverse effect on the rights
of any of the Secured Parties under the Transaction Documents or (D)
result in or require the creation or imposition of any Lien upon any of
its property, including without limitation pursuant to any agreement or
instrument referred to in clause (C) above, EXCEPT as created or
imposed hereunder or under the Security Agreement, and no transaction
contemplated hereby requires compliance on its part with any bulk sales
act or similar law, and (ii) do not require the consent, authorization
by, approval of, notice to or filing or registration with, any
governmental body, agency, authority, regulatory body or any other
Person other than those which have been obtained. This Agreement and
the other Transaction Documents to which it is a party have been
validly executed and delivered by it and this Agreement and the other
Transaction Documents to which it is a party constitute its legal,
valid and binding obligation, enforceable against it in accordance with
its terms subject to general principles of equity and subject to
bankruptcy, insolvency,
-7-
<PAGE>
reorganization, moratorium and similar laws now or hereafter in
effect relating to creditors' rights generally.
(c) NO PROCEEDINGS. There is no action, suit, investigation,
injunctive order or proceeding pending or, to its knowledge, threatened
against or affecting it or any of its Subsidiaries before any court,
governmental agency or arbitrator that (i) is reasonably likely to be
determined adversely to it and that, if so decided, would adversely
affect its condition (financial or otherwise), operations, properties
or prospects, or (ii) that purports to affect the legality, validity or
enforceability of this Agreement, any of the other Transaction
Documents or the transactions contemplated hereby or thereby. None of
the Issuer, Transmedia or any Subsidiary of Transmedia is and, by
entering into this Agreement and performing the transactions
contemplated herein, they will not be in default with respect to any
injunction, writ or order of any court, governmental authority or
agency or arbitration board or tribunal.
(d) Transmedia, the Seller and the Issuer have not concealed
and will not conceal from any interested party any transfers
contemplated by the Transactions. Transmedia, the Seller and the Issuer
have not themselves removed or concealed, and will not themselves
remove or conceal, from creditors any of their assets and have not
participated and will not participate in removing or concealing the
assets of any other entity. Seller does not transfer the Contract Asset
with the intent to hinder, delay or defraud any person or entity.
(e) The sole principal business of the Issuer is primarily to
(i) acquire and hold the Contract Assets, and (ii) to issue and pay the
Notes, which business is not the sole principal business of Transmedia,
the Initial Sellers or the Seller.
(f) Transmedia, the Initial Sellers, the Seller and the Issuer
can and do independently conduct their respective business activities
without the aid of any of the other entities.
(g) Transmedia and the Seller are not primarily or secondarily
liable for the Issuer's debts, whether by guarantee, agreement to
purchase assets, agreement to maintain the solvency of the Issuer or
otherwise, except as provided in Section 2.04 of this Agreement, and
the Issuer is not primarily or secondarily liable for Transmedia's or
any of its Affiliates' debts, whether by guarantee, agreement to
purchase assets, agreement to maintain the solvency of Transmedia or
any of its Affiliates or otherwise.
(h) The Issuer does not finance the ongoing operations of
Transmedia or any of its Affiliates, and without limiting the
generality of the foregoing, does not pay and is not liable to pay
salaries, expenses or losses of Transmedia or any of its Affiliates,
and Transmedia and the Seller do not finance the ongoing operations of
the Issuer, and without limiting the foregoing, do not pay and are not
liable to pay salaries, expenses or losses of the Issuer, except for
advances as provided in Section 6.05 of this
-8-
<PAGE>
Agreement and certain indemnities set forth in Sections 8.01 and
8.02 of this Agreement.
(i) Transmedia, the Initial Sellers, the Seller and the Issuer
do not and will not maintain joint bank or depository accounts to which
any of the other entities has independent access.
(j) Transmedia, the Initial Sellers, the Seller and the Issuer
do not and will not pool or commingle any of their respective funds
with the funds of any of the other entities, and their individual
assets are and will be segregated.
(k) Transmedia, the Initial Sellers, the Seller and the Issuer
and their respective assets are and will be maintained in such a manner
that it will not be difficult or costly to segregate, ascertain or
otherwise identify their respective individual assets.
(l) Transmedia's and the Seller's books of account and
official corporate records have been and will be separately maintained
from those of the Issuer, and the Issuer's and the Initial Sellers'
books of account and official corporate records will be separately
maintained from those of Transmedia and any of Transmedia's Affiliates.
(m) The resolutions, agreements and other instruments
underlying the Transactions will be continuously maintained by the
Issuer, Transmedia and the Seller as official corporate records.
(n) The Issuer does not refer and has not referred to itself
as a "department" or "division" of Transmedia or any of Transmedia's
Affiliates. Transmedia and the Seller do not refer and have not
referred to the Issuer or the Seller as a "department" or "division" of
Transmedia or any Affiliate of Transmedia.
(o) The creditors of the Issuer are not substantially similar
to the creditors of Transmedia or the Seller.
(p) Transmedia, the Seller and the Issuer have not taken any
action to effect a merger or a consolidation of the Issuer or the
Seller with Transmedia or any affiliate of Transmedia.
(q) The Issuer, the Initial Sellers, Transmedia and the Seller
all have separate telephone numbers and mailing addresses and do not
occupy common office space.
(r) All transactions between or among Transmedia, the Initial
Sellers, the Seller and the Issuer are and will be fully and separately
documented and will reflect arm's-length transactions. These
transactions are and will be undertaken in good faith by the respective
entities for their BONA FIDE business purposes.
-9-
<PAGE>
(s) Transmedia, the Seller and the Issuer represent that all
the transfers of the Contract Assets will occur only pursuant to the
Transaction Documents, which fully document the relationships and the
expectations of the parties thereto. There are and will be no other
agreements between or among Transmedia, the Initial Sellers, TNI, the
Issuer, the Trustee or the Noteholders relating to the Contract Assets
or the Tradenames, other than the Transaction Documents and the
documents referred to therein. The Transactions reflect BONA FIDE
transactions to be undertaken in good faith for legitimate business
purposes.
(t) Transmedia and the Seller acknowledge that the Issuer is
entering into the Transactions in reliance on the others' identities as
separate, independent and distinct legal entities, and that the
Noteholders are entering into the Transactions based on the separate
legal identity, and limited purpose nature, of the Issuer and the
Seller.
(u) Each of Transmedia, the Seller and the Issuer has complied
with all formalities required by Delaware law, including, without
limitation, in the case of the Seller and the Issuer, the holding of
board of directors' meetings and stockholders' meetings.
(v) Each of Transmedia, the Seller and the Issuer has and will
conduct its business solely in its own respective name and in such a
separate manner as not to mislead others with whom it is dealing as to
its identity. All oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts, statements,
and applications relating to the Issuer or the Seller, are made solely
in the name of the Issuer or the Seller, respectively, and not in the
name of Transmedia or any Affiliate of Transmedia. Likewise, all oral
and written communications, including, without limitation, letters,
invoices, purchase orders, contracts, statements, and applications
relating to Transmedia are made solely in the name of Transmedia and
not in the name of the Issuer.
(w) Transmedia and the Seller cannot, do not and will not
exercise control over the decisions of the Issuer with respect to its
daily business and affairs. The Issuer cannot, does not and will not
exercise control over the decisions of Transmedia or the Seller with
respect to their daily business and affairs.
(x) Each of Servicer, Issuer and Seller do not and will not
make any payments to each other in connection with the Contract Assets
or the Tradenames, except pursuant to the Transaction Documents.
(y) Each of Servicer, Issuer and Seller do not and will not
receive any payments in connection with the Contract Assets or the
Tradenames, except pursuant to the Transaction Documents.
SECTION 4.02. ADDITIONAL REPRESENTATIONS OF TRANSMEDIA AND THE SELLER.
The Seller, with respect to itself and the Contract Assets sold hereunder, and
Transmedia, with respect
-10-
<PAGE>
to itself, the Seller and such Contract Assets, each additionally represents
and warrants as follows:
(a) ELIGIBLE CONTRACT ASSETS. All Contract Assets sold by the
Seller hereunder is, at its respective Purchase Date, Eligible Contract
Assets.
(b) SALE OF CONTRACT ASSETS. On the initial Purchase Date and
on each Purchase Date thereafter, the Seller is the sole legal and
beneficial owner of the Contract Assets being sold by it. Upon the sale
of the Purchased Contract Assets by the Seller, the Issuer will become
the sole legal and beneficial owner of the Purchased Contract Assets
and the Collections with respect thereto, free and clear of any Liens,
and no effective financing statement or other instrument similar in
effect covering all or any part of such Purchased Contract Assets or
Collections with respect thereto will at such time be on file in any
filing or recording office except such as have been filed in favor of
the Issuer in accordance with this Agreement, in favor of the
Collateral Agent in accordance with the terms of the Security Agreement
or with respect to which the Collateral Agent has received effective
UCC termination statements.
(c) FINANCIAL STATEMENTS. Any financial statements delivered
pursuant hereto or in connection with the transactions contemplated
hereby, taken as a whole and in light of the circumstances in which
made, at the time so furnished contained no untrue statement of a
material fact and did not omit to state a material fact necessary to
make such financial statements not misleading.
(d) LOCATION OF OFFICE AND RECORDS. The chief place of
business and chief executive office of the Seller is located at the
address listed in Section 10.02, and the office where the Seller keeps
all its original books, records and documents evidencing Purchased
Contract Assets is located at such address.
(e) TRADE NAMES. Set forth in Schedule II (which shall be
delivered prior to the Closing Date) is a complete and accurate list of
the trade names of, or licensed by, the Seller for the six-year period
preceding and including the date of this Agreement.
(f) FINANCIAL STATEMENTS. The Seller has heretofore furnished
to the Issuer copies of the audited consolidated financial statements
of Transmedia and its consolidated Subsidiaries for the fiscal year
ended September 30, 1995. Such financial statements present, and each
financial statement presented and delivered pursuant to Sections
12(e)(2) and (3) of the Security Agreement will present fairly in all
material respects the financial condition and results of operations of
Transmedia and its consolidated Subsidiaries as of such dates and for
such periods; such balance sheets and the notes thereto disclose all
liabilities, direct or contingent, of Transmedia and its consolidated
Subsidiaries as of the dates thereof required to be disclosed by GAAP
and such financial statements were prepared in accordance with GAAP
applied on a consistent basis.
-11-
<PAGE>
(g) ACCURACY OF INFORMATION. Each Daily Report and Settlement
Statement prepared by the Seller or the Servicer, each exhibit,
financial statement, book, record, report or other document and any
other information furnished at any time by the Seller or the Servicer
to the Issuer, the Collateral Agent, the Trustee or the Noteholders or
in connection with this Agreement as of its date and as of the date so
furnished, will be accurate in all material respects and will not
contain any material misstatement of fact or omit to state a material
fact or any fact necessary to make the statements contained therein not
misleading.
(h) NO CONSENT. No action, authorization, qualification,
license, permit, consent or approval of, registration or filing with or
any other action by any Governmental Authority is or will be required
in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement by the Seller, the Servicer or the Issuer, except such as
have been made or obtained and are in full force and effect.
(i) UCC CLASSIFICATION. As to each Contract, each of the
Credits, the rights under the Contracts, the rights under the
Cardmember Agreements to authorize charges and recover payments from
Cardmembers' Credit Card Accounts in connection with the purchase of
Meals by a Cardmember at an Assigned Restaurant; rights in and to
security agreements securing or otherwise relating to any of the
foregoing, the rights and interests of the Purchaser under the Purchase
Agreement and the rights and interests of the Issuer in the Purchase
and Servicing Agreement; and the tradenames, service marks and
trademarks transferred to TNI and licensed to the Issuer constitute an
"account" or "general intangible" within the meaning of Section 9-106
of the UCC as in effect in the State of Florida.
(j) NO ADVERSE CHANGE. No Material Adverse Change in the
business, assets, operations, prospects or conditions, financial or
otherwise, of the Seller or Servicer has occurred from September 30,
1995.
(k) COMPUTER HARDWARE AND SOFTWARE. All of the computer
hardware and software necessary to collect the Contract Assets is
listed on Schedule VII.
(l) CONTRACT SCHEDULE. On the Closing Date, the Contract
Schedule lists all Contracts purchased by the Issuer as of the initial
Purchase Date.
(m) NO DEFAULTS. No Potential Purchase Termination Event,
Purchase Termination Event, Servicer Termination Event, Early
Amortization Event or Potential Early Amortization Event has occurred
or is occurring or, with the giving of notice, passage of time, or
both, would occur.
(n) USE OF PROCEEDS. None of the transactions contemplated
herein (including, without limitation thereof, the use of the proceeds
from the sale of the Purchased Contract Assets) will violate or result
in a violation of Section 7 of the
-12-
<PAGE>
Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation,
Regulation U.
(o) CAPITAL OF THE SELLER. At and immediately after the
Closing Date, the Seller will be adequately capitalized to conduct its
business and affairs as a going concern, considering the size and
nature of its business and intended purposes; be solvent; and be able
to pay its debts as they come due. At and immediately after the Closing
Date, as a result, the Seller will be able to survive as a stand alone
entity, independent of financial assistance of any Person.
(p) RESTRICTIONS ON SELLER. Neither the Seller nor the
Servicer is a party to any contract or agreement, or subject to any
charter or other corporate restriction, which, individually or in the
aggregate, materially and adversely affects its business.
(q) NO OTHER EXISTING CREDITS. Except for the Initial Sellers
and the Seller, no Subsidiary of Transmedia has acquired any Credits
from any of the Assigned Restaurants.
(r) NO OTHER AGREEMENTS WITH CARDMEMBERS. Except for rights of
the Initial Sellers and the Seller (certain of which rights are being
transferred to the Issuer hereunder) no Subsidiary of Transmedia has
any rights under any agreements with any Cardmember to authorize
charges to and recover payments from Cardmembers' Credit Card Accounts
in connection with the purchase of Meals by any Cardmember at any
Assigned Restaurant.
(s) NO CONTRACTS WITH AFFILIATES. No Restaurant is an
Affiliate of Seller, Transmedia or Issuer or any officer or director of
Transmedia or any Affiliate of Transmedia.
(t) ALL CONTRACTS OF ASSIGNED RESTAURANTS SOLD TO ISSUER. On
each Purchase Date, the Contract Assets included in making the
calculations set forth in such Daily Report includes all Credits
purchased by any of Transmedia's Subsidiaries from each of the Assigned
Restaurants on or prior to such Purchase Date.
(u) FAIR CONSIDERATION. The consideration to be received by
the Seller, in exchange for each transfer of Contracts and other
Contract Assets (including the right to receive all Collections due or
to become due thereunder or in respect thereto), is fair consideration
having value reasonably equivalent to or in excess of the value of the
assets being transferred by it.
(v) REAL PROPERTY. No Contracts represent a debt obligation
(including participations or certificates of beneficial ownership
therein) that is principally secured, directly or indirectly, by an
interest in real property.
(w) The Seller has not made and will not make any untrue
statement of a material fact or omitted to state a material fact
necessary to make any statement not
-13-
<PAGE>
misleading and has not provided any document to the Initial Purchasers
or the Rating Agency which contains any untrue statement of a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
SECTION 4.03. REPRESENTATIONS OF BACK-UP SERVICER. The Back-up Servicer
makes the following representations and warranties as of the date hereof and as
of each Purchase Date:
(a) The Back-up Servicer has been duly organized and is
validly existing as a Delaware corporation in good standing under the
laws of its state of incorporation, with power and authority to own its
properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted.
(b) The Back-up Servicer has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery, and performance of this Agreement have been duly
authorized by the Back-up Servicer by all necessary corporate action.
(c) This Agreement constitutes a legal, valid, and binding
obligation of the Back-up Servicer enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights in general and by general principles
of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms hereof shall not conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or by-laws of the Back-up Servicer, or
any indenture, agreement, or other instrument to which the Back-up
Servicer is a party or by which it shall be bound; nor result in the
creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement, or other instrument; nor
violate any law or any order, rule, or regulation applicable to the
Back-up Servicer of any court or of any Federal or state regulatory
body, administrative agency, or other governmental instrumentality
having jurisdiction over the Back-up Servicer or its properties.
(e) There are no proceedings or investigations pending or, to
the Back-up Servicer's best knowledge, threatened before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Back-up Servicer or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking
to prevent the consummation of any of the transactions contemplated by
this Agreement, (iii) seeking any determination or ruling that might
materially and adversely affect the ability of the Back-up Servicer to
perform its obligations under, or the validity or enforceability of,
this Agreement.
-14-
<PAGE>
(f) All approvals, authorizations, consents, orders or other
actions of any Person, corporation or other organization, or of any
court, governmental agency or body or official, required in connection
with the execution and delivery of this Agreement and the performance
of the duties and obligations hereunder by the Back-up Servicer have
been taken or obtained on or prior to the date hereof.
(g) No Restaurant is an Affiliate of the Back-up Servicer or
any officer or director of the Back-up Servicer or any Affiliate of the
Back-up Servicer.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE SELLER AND SERVICER. So long
as the Issuer or the Collateral Agent shall have any interest in any Purchased
Contract Assets, each of the Seller and the Servicer shall, unless the Issuer
and the Collateral Agent acting at the direction of the Trustee acting at the
direction of the Majority Noteholders otherwise consent in writing:
(a) FINANCIAL STATEMENTS, REPORTS, ETC. Deliver or cause to be
delivered to the Issuer, the Collateral Agent, the Trustee and each of
the Noteholders:
(i) as soon as possible but not later than 90 days
after the end of each fiscal year, the Servicer's consolidated
balance sheet and related statements of income and cash flows,
showing the financial condition of the Servicer and its
consolidated Subsidiaries as of the close of such fiscal year
and the results of its operations and the operations of its
consolidated Subsidiaries during such year, all audited by
independent public accountants of recognized national standing
reasonably acceptable to the Majority Noteholders and
accompanied by an opinion of such accountants (which shall not
be qualified in any material respect other than as may be
approved by the Collateral Agent and the Trustee acting at the
direction of the Majority Noteholders) to the effect that such
consolidated financial statements fairly present the financial
condition and results of operations of it and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(ii) as soon as possible but not later than 45 days
after the end of each of the first three fiscal quarters, the
Servicer's unaudited consolidated balance sheets and related
statements of income and cash flows, showing the financial
condition of the Servicer and its consolidated Subsidiaries as
of the close of such fiscal quarter and the results of its
operations and the operations of its consolidated Subsidiaries
during such fiscal quarter and the then elapsed portion of
such fiscal year, all certified by a Financial Officer as
fairly presenting the financial condition and results of
operations of it and its consolidated Subsidiaries on a
consolidated and consolidating basis in accordance with GAAP
-15-
<PAGE>
consistently applied, subject to normal year-end audit
adjustments without GAAP footnotes;
(iii) concurrently with any delivery of financial
statements under (i) and (ii) above, a certificate of a
Financial Officer of each of the Seller and the Servicer
certifying such statements and certifying that no Purchase
Termination Event or Potential Purchase Termination Event has
occurred, or, if such a Purchase Termination Event or
Potential Purchase Termination Event has occurred, specifying
the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto;
(iv) concurrently with any delivery of financial
statements under (i) and (ii) above, a list of the Cardmember
Rebate options together with the number of Cardmembers
entitled to each Cardmember Rebate;
(v) promptly after the same are available, copies of
each annual report, proxy or financial statement or other
report or communication, if any, sent to the stockholders of
Transmedia generally and copies of all annual, regular,
periodic and special reports and registration statements which
Transmedia may file or be required to file with the Securities
and Exchange Commission under Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended;
(vi) promptly after the commencement thereof, notice
of any action, suit and proceeding before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, against Transmedia or
any of its Subsidiaries, (A) which, if determined adversely to
Transmedia or such Subsidiary, would have a Materially Adverse
Effect, or (B) commenced by any creditor or lessor under any
written credit agreement with respect to borrowed money or
material lease which asserts a default thereunder on the part
of Transmedia or any of its Subsidiaries;
(vii) promptly upon the filing thereof and at any
time upon the reasonable request of the Issuer, the Trustee,
the Collateral Agent or any Noteholder, permit such Person the
opportunity to review copies of all reports, including annual
reports, and notices which Transmedia or any Subsidiary files
with or receives from the PBGC or the U.S. Department of Labor
under ERISA; and as soon as practicable and in any event
within fifteen (15) days after Transmedia or any of its
Subsidiaries knows or has reason tO know that any Reportable
Event or Prohibited Transaction has occurred with respect to
any Plan or that the PBGC or Transmedia or any such Subsidiary
has instituted or will institute proceedings under Title IV of
ERISA to terminate any Plan, Transmedia will deliver to the
Issuer, the Trustee, the Collateral Agent and each Noteholder
a certificate of the President, any Vice President or a
Financial Officer setting forth details as to such Reportable
Event or Prohibited Transaction or Plan termination and the
action it proposes to take with respect thereto;
-16-
<PAGE>
(viii) promptly upon receipt thereof, copies of any
reports or management letters relating to the internal
financial controls and procedures delivered to Transmedia or
any of its Subsidiaries by any independent certified public
accountant in connection with examination of the financial
statements of Transmedia or any such Subsidiary; and
(ix) such additional information as the Issuer, the
Trustee, the Collateral Agent or any Noteholder may reasonably
request concerning Transmedia and its Subsidiaries.
If at any time Transmedia is not the Servicer, Transmedia shall have
the same obligation to provide reports as the Servicer under this Section
5.01(a).
(b) COMPLIANCE WITH LAWS, ETC. Comply in all material respects
with all applicable laws, rules, regulations, directions of any
Governmental Authority and orders applicable to the Purchased Contract
Assets, including, without limitation, rules and regulations relating
to truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy, where
failure to so comply could reasonably be expected to have an adverse
impact on the amount of Collections thereunder; PROVIDED, HOWEVER, that
it may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not materially and adversely affect the
rights of the Issuer and the Collateral Agent in the Purchased Contract
Assets. It will comply, in all material respects, with its obligations
under the Contracts with Restaurants relating to the Purchased Contract
Assets.
(c) PRESERVATION OF CORPORATE EXISTENCE. Do or cause to be
done all things necessary (i) to preserve, renew and keep in full force
and effect its legal existence and (ii) to maintain such legal
existence separate from that of the Issuer and of the Servicer.
(d) INSPECTION RIGHTS. At any reasonable time during normal
business hours and from time to time permit (i)(A) each of the Issuer,
the Trustee and the Collateral Agent or any Noteholder or any of its
agents, representatives or assignees pursuant to the Security
Agreement, to examine and make copies of and abstracts from the
records, books of account and documents (including, without limitation,
computer tapes and disks) of the Seller and the Servicer relating to
the Purchased Contract Assets hereunder (PROVIDED that so long as no
Early Amortization Event or Potential Early Amortization Event has
occurred and is continuing, such assignees shall give at least two
Business Days' notice prior to any examination) and (B) the Issuer, the
Collateral Agent or the Trustee or any Noteholder or any of their
agents or representatives following the termination of the appointment
of Transmedia as Servicer with respect to the Purchased Contract
Assets, to be present at the offices and properties of the Seller and
the Servicer to administer and control the collection of the Purchased
Contract Assets and (ii) each of the Issuer, the Trustee and the
Collateral Agent or any Noteholder or any of its agents,
representatives or assignees pursuant to the Security Agreement, to
visit the properties of the Seller and the Servicer for the
-17-
<PAGE>
purpose of determining compliance under the Transaction Documents and
examining such records, books of account and documents, and to discuss
the affairs, finances and accounts of the Seller and the Servicer
relating to the Purchased Contract Assets or the Seller's or the
Servicer's performance hereunder with any of its senior officers or
directors and with its independent certified public accountants and
consultants (PROVIDED that so long as no Early Amortization Event or
Potential Early Amortization Event has occurred and is continuing, such
assignees shall give at least two Business Days' notice prior to any
visit).
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and
implement, or cause to be maintained and implemented, administrative
and operating procedures reasonably necessary or advisable for the
transfer, administration, servicing and collection of amounts owing on
all Purchased Contract Assets, and, until delivery to the Issuer, keep
and maintain, or cause to be kept and maintained, all documents, books,
records and other information reasonably necessary or advisable for the
transfer, administration, servicing and collection of amounts owing on
all such Purchased Contract Assets.
(f) LOCATION OF RECORDS. Keep its chief place of business and
chief executive office and the offices where it keeps the records
concerning Purchased Contract Assets and all underlying Contracts (and
all original documents relating thereto) at the location specified in
Section 4.02(d), or upon 30 days' prior written notice to the Issuer,
the Trustee and the Collateral Agent, at such other locations in a
jurisdiction where all action required by Section 5.01(n) shall have
been taken and completed and be in full force and effect.
(g) COMPUTER FILES. The Seller will direct the Servicer to,
and the Servicer will, at its own cost and expense, (i) retain the
electronic ledger used by the Seller and the Servicer as a master
record of the Purchased Contract Assets and copies of all documents
relating to the Purchased Contract Assets as custodian for the Issuer
and the Collateral Agent and other Persons with interests in the
Purchased Contract Assets and (ii) clearly and conspicuously mark or
cause to be marked with a legend describing the Issuer's and the
Collateral Agent's interest, in form and substance reasonably
satisfactory to the Trustee, all computer tapes or disks and use its
best efforts to mark all books, records, and credit files pertaining to
the Related Contracts and all file cabinets or other storage facilities
where information is maintained pertaining to the Purchased Contract
Assets to the effect that interests in the Purchased Contract Assets
and the Related Contracts have been conveyed tO the Issuer and that the
Collateral Agent has a security interest in such Purchased Contract
Assets for the benefit of the Secured Parties pursuant to the Security
Agreement.
(h) CONTRACTS AND RESTAURANT GUIDELINES. The Seller and the
Servicer will comply with and perform their obligations in accordance
with the Restaurant Guidelines, except insofar as any failure so to
comply or perform would not materially and adversely affect the
Collections or the rights of the Issuer, the Collateral Agent or the
Noteholders, or if such failure to comply is necessary under
-18-
<PAGE>
any Requirement of Law and which would materially and adversely affect
the collections or the rights of the Issuer, the Collateral Agent or
the Noteholders. The Seller and the Servicer agree that prior to making
any material change in the Restaurant Guidelines in effect on the
Closing Date, they shall give 30 days' written notice to the Rating
Agency, the Trustee, the Issuer and each Noteholder of any such
changes; PROVIDED, HOWEVER, that in the case of any material change in
its Restaurant Guidelines made pursuant to any Requirement of Law as to
which it is unable to give 30 days' written notice, the Seller and the
Servicer shall give written notice to the Trustee, the Issuer and each
Noteholder of such changes as soon as reasonably practicable prior to
the implementation of such changes. If the Initial Sellers change the
Restaurant Guidelines to lengthen the time (currently six months) in
which Credits from any Restaurant are expected to be used, such change
shall be, deemed to be a material adverse change. In the event that any
such changes (except changes that are necessary under any Requirement
of Law), could reasonably be expected to materially and adversely
affect the rights of the Noteholders, then such changes shall not
become effective without the prior written consent of the Majority
Noteholders; any such notice shall state in reasonable detail the
reasons the changes will have such effect.
(i) DAILY REPORTS AND SETTLEMENT STATEMENTS. Furnish, or if
Transmedia is not the Servicer, provide such information as may be
required by the Servicer to furnish, the Seller, the Issuer and the
Collateral Agent and the Trustee with the Daily Reports and Settlement
Statements in accordance with Sections 6.06 and 6.08 and financial
statements, cash flow reports and other records that show the
performance of the Purchased Contract Assets and such other reports as
may be reasonably requested by the Issuer, the Collateral Agent, or any
Noteholder.
(j) INSURANCE. Except to the extent failure to do so neither
causes nor could reasonably be expected to cause a Material Adverse
Change with respect to the Seller, Servicer or Issuer, (i) keep its
insurable properties adequately insured at all times by financially
sound and responsible insurers; maintain such other insurance, to such
extent and against such risks, including fire and other risks insured
against by extended coverage, as is customary with companies of the
same or similar size in the same or similar businesses; (ii) maintain
in full force and effect public liability insurance against claims for
personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or
controlled by it or any Subsidiary, as the case may be, in such amounts
and with such deductibles as are customary with companies of the same
or similar size in the same or similar businesses and in the same
geographic area; and (iii) maintain such other insurance as may be
required by law; and will cause each of its Subsidiaries so to do.
(k) OBLIGATIONS AND TAXES. (i) Pay any material obligations
enforceable against or binding on it promptly and in accordance with
the terms thereof and (ii) pay and discharge promptly when due all
sales tax and all material taxes, assessments and governmental charges
or levies imposed upon, and enforceable against or binding on, it or
upon itS income or profits or in respect of its property, before the
same shall become in default, as well as all material lawful claims
enforceable against
-19-
<PAGE>
or binding on it for labor, materials and supplies or otherwise which,
if unpaid, might become a Lien or charge upon such properties or any
part thereof; PROVIDED, HOWEVER, that it shall not be required to pay
and discharge or to cause to be paid and discharged any such tax,
assessment, charge, levy or claim so long as the validity or amount
thereof shall be contested in good faith by appropriate proceedings and
the Seller or the Servicer shall have set aside on its books adequate
reserves with respect thereto and such contest shall not involve any
risk of loss of any of the Contract Assets.
(l) FURNISHING COPIES, ETC. Furnish to the Rating Agency, the
Issuer, the Trustee, Structured Funding, L.L.C., the Noteholders and
the Collateral Agent (i) within five Business Days of any such Person's
request, a certificate of a Financial Officer of the Seller and the
Servicer certifying, as of the date thereof, that no Purchase
Termination Event or Potential Purchase Termination Event referred to
in Section 7.01(b) or otherwise has occurred and is continuing, and
setting forth the computations used by such Financial Officer in making
such determination; (ii) as soon as possible and in any event within
five days after the occurrence of any Purchase Termination Event or
Potential Purchase Termination Event, a statement of a Financial
Officer of the Seller and the Servicer setting forth details of such
Purchase Termination Event or Potential Purchase Termination Event and
the action that the Seller and the Servicer proposes to take or has
taken with respect thereto; and (iii) promptly following request
therefor, such other information, documents, records or reports with
respect to the Purchased Contract Assets, the Cardmembers (to the
extent permitted by law), the Restaurants or the conditions or
operations, financial or otherwise, of the Seller or the Servicer as
the Issuer, the Collateral Agent, the Noteholders or the Trustee may
from time to time reasonably request.
(m) OBLIGATIONS WITH RESPECT TO PURCHASED CONTRACT ASSETS.
Duly fulfill all obligations on its part to be fulfilled under or in
connection with each Contract, except where the failure to fulfill such
obligations would not materially and adversely affect the Collections
or the rights of the Issuer, the Trustee, the Collateral Agent or the
Noteholders, or if such failure is necessary under any Requirement of
Law, and do nothing to impair the rights of the Issuer, the Trustee,
the Collateral Agent or the Noteholders in the Purchased Contract
Assets or under the Contracts.
(n) CONTINUING COMPLIANCE WITH THE UCC. At its expense,
preserve, continue and maintain or cause to be preserved, continued and
maintained the Issuer's valid and properly protected and perfected
title to all Purchased Contract Assets, including, without limitation,
filing or recording UCC financing statements in each relevant
jurisdiction.
(o) FURTHER ACTION EVIDENCING PURCHASES. At the Seller's
expense, promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable or that the Issuer may reasonably request, in order to
protect or more fully evidence the Issuer's right, title and interest
in the Purchased Contract Assets and its rights under the Contracts
with respect thereto, or to enable
-20-
<PAGE>
the Issuer to exercise or enforce any such rights. Without limiting the
generality of the foregoing, (i) the Seller will upon the request of
the Issuer, the Trustee and the Collateral Agent execute and file such
financing or continuation statements, or amendments thereto, and such
other instruments or notices as may be necessary or, in the opinion of
the Issuer, advisable, (ii) the Seller hereby irrevocably authorizes
each of the Issuer, the Trustee and the Collateral Agent to file one or
more financing or continuation statements, and amendments thereto,
relating to all or any part of the Purchased Contract Assets sold or to
be sold by the Seller, or the underlying Contracts with respect
thereto, without the signature of the Seller, (iii) if the Seller or
the Servicer fails to perform any of its agreements or obligations
under this Agreement, the Issuer may (but shall not be required to)
perform, or cause performance of, such agreements or obligations, and
the costs and expenses of the Issuer incurred in connection therewith
shall be payable by the Servicer and (iv) each of the Seller and the
Servicer agrees that from time to time, at its expense, it will (A)
indicate on its books and records that the Purchased Contract Assets
has been sold and assigned to the Issuer and pledged by the Issuer to
the Collateral Agent, and provide to the Issuer, the Collateral Agent
and the Trustee, upon request, copies of such records, (B) obtain the
agreement of any Person having a Lien in and to any Purchased Contract
Assets owned by the Seller (other than any Lien created or imposed
hereunder or under the Security Agreement) to release such Lien upon
the transfer of any such Purchased Contract Assets to the Issuer and
(C) notify the Issuer promptly after obtaining knowledge that any
Purchased Contract Assets has become subject to a Lien other than any
Lien created or imposed hereunder or under the Security Agreement.
(p) CONTRACT ASSETS PROCESSING FACILITY; STORAGE FACILITY. The
Servicer shall maintain its facility from which it services the
Purchased Contract Assets in its present condition, ordinary wear and
tear excepted, or such other facility of similar quality, security and
safety as the Servicer may select from time to time. The Servicer shall
make all property tax payments, lease payments and all other payments
with respect to such facility, including any indebtedness secured by
such facility, whether Transmedia shall be the Servicer or a Successor
Servicer shall have been appointed. The Servicer shall (i) ensure that
any Successor Servicer shall have complete and unrestricted access
subject to paragraph (d) of this Section 5.01, at the Servicer's
expense, to such facility and all computers and other systems relating
to the servicing of the Purchased Contract Assets, (ii) use its best
efforts to retain the employees based at such facility to provide
assistance to any Successor Servicer after the appointment of such
Successor Servicer and (iii) continue to store on a daily basis all
back-up files relating to the Purchased Contract Assets and the
servicing of the Purchased Contract Assets at Frank Felix Associates,
Ltd., 140 Sylvan Avenue, Englewood Cliffs, New Jersey 07632, or such
other storage facility of similar quality, security and safety as the
Servicer may select from time to time and which shall be reasonably
satisfactory to the Collateral Agent, in the case of each of clauses
(i), (ii) and (iii) until the earlier of (A) the indefeasible payment
in full in cash of the principal and interest of the Notes, (B) the
receipt by the Collateral Agent of all Collections in respect of all
Purchased Contract Assets and (C) the Successor Servicer being able to
perform its obligations under this Agreement without the assistance of
the Servicer. The Servicer will not
-21-
<PAGE>
make any material changes to its backup procedures without thirty (30)
days prior written notice to the Trustee and the Noteholders.
(q) TRADE NAMES. Promptly notify the Issuer and the Collateral
Agent of any new trade names of the Seller or Transmedia.
(r) SALE TREATMENT. The Seller and the Servicer will perform
the transactions contemplated hereby in a manner that is consistent
with the Issuer's ownership interest in the Purchased Contract Assets
under applicable law (including without limitation the Federal
Bankruptcy Code) other than federal income tax law.
(s) Transmedia will pay any taxes owed under any consolidated
tax return and the Seller will pay to Transmedia its portion of any
such taxes that are paid.
(t) OWNERSHIP OF SELLER. Transmedia will own, directly or
indirectly, all of the issued and outstanding shares of stock of the
Seller at all times while the Notes remain outstanding.
SECTION 5.02. NEGATIVE COVENANTS OF THE SELLER AND SERVICER. So long as
the Issuer or the Collateral Agent shall have any interest in any Purchased
Contract Assets, neither the Seller nor the Servicer shall, unless the Issuer
and the Collateral Agent at the direction of the Trustee acting at the direction
of the Majority Noteholders otherwise consent in writing:
(a) LIENS. Except as otherwise herein provided, sell, assign
(by operation of law or otherwise) or otherwise dispose of, or create
or suffer to exist any Lien upon or with respect to, any Contract
Assets or assign any right to receive proceeds in respect thereof
EXCEPT for Liens created or imposed hereunder or under the Transaction
Documents.
(b) CHANGE IN BUSINESS. Make any material change in the type
of business it conducts on the date hereof.
(c) CHANGE IN PAYMENT INSTRUCTIONS. Instruct Restaurants or
credit card companies to make any payments with respect to Purchased
Contract Assets other than as described in Article VI hereof or the
Security Agreement.
(d) CHANGE IN NAME. Change its name, identity or corporate
structure in any manner which would, could or might make any financing
statement or continuation statement relating to this Agreement or the
Security Agreement, seriously misleading within the meaning of Section
9-402(7) of the UCC as in effect in the applicable jurisdiction.
(e) MODIFICATION OF LEDGER. Delete or otherwise modify any
marking on the electronic ledger referred to in Section 5.01(g).
-22-
<PAGE>
(f) EXTENSION OR AMENDMENT OF CONTRACT ASSETS. Extend, amend
or otherwise modify, or attempt or purport to extend, amend or
otherwise modify, the terms of any Purchased Contract Assets, or amend
or otherwise modify or waive any term or condition of any Contract with
respect thereto other than in accordance with its Restaurant Guidelines
or in accordance with a Requirement of Law.
(g) PRIORITY OF COLLECTION. Collect any payment for its own
account, or for the account of any Person other than the Issuer or its
assigns, arising under or out of any Contract with an Assigned
Restaurant while the Purchased Contract Assets contains Credits to be
provided by that Restaurant.
(h) Without the prior written consent of the Issuer and its
assignees (including the Collateral Agent) and the Rating Agency, sell
on any Purchase Date after the Closing Date any Contract relating to
any Restaurant not designated as of the Closing Date as an Assigned
Restaurant (an "ADDED RESTAURANT CONTRACT") if (i) during any calendar
quarter, such sale would cause the aggregate Contract Price (calculated
as of the Purchase Date applicable for each Added Restaurant Contract)
of all such Added Restaurant Contracts sold to the Issuer during such
calendar quarter to exceed 10% of the Net Note Principal Amount on such
Purchase Date and (ii) during any calendar year, such sale would cause
the aggregate Contract Price (calculated as of the Purchase Date
applicable for each Added Restaurant Contract) of all such Added
Restaurant Contracts sold to the Issuer during such calendar year to
exceed 25% of the Net Note Principal Amount on such Purchase Date.
SECTION 5.03. NEGATIVE COVENANTS OF THE SELLER. The Seller covenants
and agrees that, so long as the principal of or interest on any Notes, any
Expenses or any other expenses or amounts payable under any Transaction Document
shall be unpaid, unless the Trustee (as directed by the Majority Noteholders)
shall otherwise consent in writing, the Seller will not:
(a) INDEBTEDNESS. Incur, create, assume or permit to exist any
Indebtedness, except Indebtedness representing fees, expenses and
indemnities payable pursuant to and in accordance with the Transaction
Documents.
(b) LIENS. Incur, create, assume or permit to exist any Lien
on any property or assets (including stock or other securities) now
owned or hereafter acquired by it or on any income or revenues or
rights in respect of any thereof, except the Liens, if any, created
hereunder and any Lien created in connection with any repurchase
obligation which is an Eligible Investment; PROVIDED, HOWEVER, that
nothing in this subsection (b) shall prevent or be deemed to prohibit
the Seller from suffering to exist upon any of its assets any Liens for
municipal, local or state taxes if such taxes shall not at the time be
due and payable or if the Seller shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall
have set aside on its books adequate reserves with respect thereto.
(c) GUARANTEES. Incur, create, assume or permit to exist any
Guarantees.
-23-
<PAGE>
(d) CREDITORS. Create or permit to exist any creditors other
than the holders of Indebtedness permitted by Section 5.03(a) and the
other parties expressly contemplated and permitted by the Transaction
Documents.
(e) BUSINESS OF SELLER. Engage at any time in any business or
business activity other than the acquisition of Assets pursuant to the
Purchase Agreement and the activities incidental to the purchase and
ownership of the Assets, the sale of the Contract Assets pursuant to
this Agreement, the issuance of Notes and the other Transactions, and
the making of any investments permitted under paragraph (f) below and
other incidental and related transactions expressly permitted
hereunder.
(f) INVESTMENTS, LOANS AND NOTES. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to
exist any investment or any other interest in, any other Person except
for Purchased Assets and Eligible Investments or engage in any
transactions involving commodity options or futures contracts or
similar transactions.
(g) MERGERS, CONSOLIDATIONS, SALES OF ASSETS AND ACQUISITIONS.
Merge into or consolidate with any other Person, or permit any other
Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of
transactions) any of its assets, including the Purchased Assets
(whether now owned or hereafter acquired), or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) any
of the assets of any other Person, other than the acquisition of Assets
by the Seller pursuant to, and in accordance with the terms of, the
Purchase Agreement, the sale of the Contract Assets pursuant to this
Agreement.
(h) LEASE OBLIGATIONS. Incur, create, assume or permit to
exist any Lease Obligations, except as are necessary for the permitted
operations of the Seller.
(i) DIVIDENDS AND DISTRIBUTIONS. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction
of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any capital ("RESTRICTED
PAYMENTS,") or directly or indirectly redeem, purchase, retire or
otherwise acquire for value any of its capital or set aside any amount
for any such purpose, except from amounts received from the Issuer that
were released or distributed to the Issuer pursuant to Section
7(a)(iii) FOURTH of the Security Agreement.
(j) TRANSACTIONS WITH AFFILIATES. Sell or transfer any
property or assets to, or purchase or acquire any property or assets
from, or otherwise engage in any other transactions with, any of its
Affiliates except as set forth in the Transaction Documents.
-24-
<PAGE>
(k) ACCOUNTING CHANGES. Make any change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in
tax reporting treatment except as required by law and, in each case, as
disclosed to the Trustee and the Collateral Agent.
(1) EQUITY INTERESTS. Issue any equity to any entity or
Person, other than the equity issued to the initial stockholders upon
formation of the Seller, permit any of its equity to be transferred to
any Person or otherwise change its equity structure in any manner.
(m) CAPITAL EXPENDITURES. Incur or make any Capital
Expenditures (whether for cash or the incurrence or assumption of
Indebtedness).
(n) AMENDMENTS. (i) Amend its Certificate of Incorporation or
by-laws without the consent of the Trustee acting at the direction of
the Majority Noteholders; or (ii) amend, modify or waive (or permit to
be amended, modified or waived), without the consent of the Trustee
acting at the direction of the Majority Noteholders, this Agreement or
any of the other Transaction Documents to which the Seller is a party.
(o) OTHER AGREEMENTS. Enter into or be a party to any
agreement, instrument or transaction other than the Transaction
Documents and the documents related thereto and any documents relating
to the establishment of bank accounts and investment accounts including
without limitation an agreement for the deposit of funds into an
account with Brown Brothers Harriman and Co., other than de minimus
agreements.
(p) NO POWERS OF ATTORNEY. Grant any powers of attorney to any
Person for any purposes except (i) for the purpose of permitting any
Person to perform any ministerial functions on behalf of the Seller
that are not prohibited by or inconsistent with the terms of the
Transaction Documents, (ii) to the Collateral Agent in connection with
this Agreement or (iii) as expressly permitted by the Transaction
Documents.
(q) MAINTENANCE OF SEPARATE EXISTENCE. (i) Fail to do all
things necessary to maintain its existence separate and apart from the
Issuer, Transmedia and any Affiliate thereof, including, without
limitation, holding regular meetings of its stockholders and its Board
of Directors and maintaining appropriate books and records (including a
current minute book); (ii) except as required by law or the Transaction
Documents, suffer any limitation on the authority of its Board of
Directors to conduct itS business and affairs in accordance with the
independent business judgment of their officers and directors or
authorize or suffer any Person other than its own stockholders to act
on itS behalf with respect to matters (other than matters customarily
delegated to others under powers of attorney) for which a corporation's
own stockholders would customarily be responsible; (iii) fail to (A)
maintain or cause to be maintained by an agent of the Seller under the
Seller's control physical possession of all its books and
-25-
<PAGE>
records, (B) maintain capitalization adequate for the conduct of its
business, (C) account for and manage all its liabilities separately
from those of any other Person, including payment by it of all payroll,
administrative expenses and taxes, if any, from its own assets, (D)
segregate and identify separately all of its assets from those of any
other Person, (E) to the extent any such payments are made, pay its
directors, employees, stockholders and agents for services performed
for the Seller or (F) maintain separate offices with a separate
telephone number from those of the Issuer, Transmedia or any Affiliate
of the Issuer; or (iv) commingle its funds with those of the Issuer or
any Affiliate of the Issuer or use its funds for other than the
Seller's uses except as permitted by this Agreement.
(r) Voluntarily commence any voluntary bankruptcy. or
insolvency proceedings without the unanimous consent of its Board of
Directors (including, without limitation, the affirmative vote or
consent of its Independent Director).
(s) ELECTION TO TERMINATE LICENSE UPON REJECTION. In the event
Transmedia or the Initial Sellers becomes a debtor in a proceeding
under the Bankruptcy Code, if any such debtor determines to reject the
License in accordance with Bankruptcy Code Section 365, the Seller and
Transmedia will not elect under Bankruptcy Code Section 365(n)(1)(A) to
treat the License as terminated.
SECTION 5.04. COVENANTS OF BACK-UP SERVICER. The Back-up Servicer
hereby agrees that during the term of this Agreement:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The
Back-up Servicer shall perform each of its obligations under this
Agreement in good faith and comply with all material requirements of
any law, rule or regulation or any provision of any Contract or any
related agreement applicable to its performance of such obligations;
(b) ACCESS TO RECORDS, DISCUSSIONS WITH OFFICERS AND
ACCOUNTANTS. The Back-up Servicer shall, upon the reasonable written
request of the Servicer, the Trustee, any Noteholder or the Issuer,
permit the Servicer, the Trustee, any Noteholder or the Issuer, as the
case may be, or their respective authorized designees to inspect during
normal business hours the books and records of the Back-up Servicer as
they may relate to the Contract Assets and the obligations of the
Back-up Servicer under this Agreement; and
(c) NOTICES. The Back-up Servicer shall promptly notify the
Trustee, the Servicer, each Noteholder and the Issuer in writing of any
event, circumstance or occurrence which constitutes a Servicer
Termination Event under Section 6.15 hereof.
(d) Within 30 days of the Closing, the Back-up Servicer will
(i) deliver to the Trustee executed copies of software licenses or
sublicenses, in a form reasonably acceptable to the Trustee, which
grant to the Trustee the right to utilize any of the software owned or
licensed by the Back-up Servicer that is necessary or desirable to
-26-
<PAGE>
perform the collection and administrative functions to be performed by
the Trustee under the Transaction Documents and (ii) deliver to the
Trustee executed copies of any landlord waivers in a form reasonably
acceptable to the Trustee, that may be necessary to grant to the
Trustee access to any leased premises of any of the Back-up Servicer
for which the Trustee may require access to perform the collection and
administrative functions to be performed by the Trustee under the
Transaction Documents.
ARTICLE VI
ADMINISTRATION AND SERVICING OF PURCHASED CONTRACT ASSETS
SECTION 6.01. APPOINTMENT OF AND ACCEPTANCE BY THE SERVICER OF
SERVICING OBLIGATIONS. (a) The Issuer hereby appoints Transmedia as Servicer of
the Purchased Contract Assets. Transmedia agrees to act as the Servicer under
this Agreement on behalf of the Issuer, the Trustee and the Collateral Agent, it
being understood that the relationship of the Servicer (and any Successor
Servicer) to the Collateral Agent and the Trustee is intended by the parties to
be that of an independent contractor and not that of a joint venturer, partner
or agent. The Servicer shall manage and administer the Purchased Contract Assets
and collect the Collections due thereunder, shall, except as otherwise limited
herein, exercise all discretionary powers involved in such management,
administration and collection and shall bear all costs and expenses incurred in
connection therewith that may be necessary or advisable and permitted for
carrying out the transactions contemplated by this Agreement, the Indenture and
the Security Agreement. In the management and administration of the Purchased
Contract Assets due thereunder, the Servicer shall exercise the same care that
it has exercised in servicing Contract Assets of the Servicer and its Affiliates
which has not been sold to others, and the Servicer shall comply and perform in
accordance with the Restaurant Guidelines, except insofar as any failure so to
comply or perform would not materially and adversely affect the Collections or
the rights of the Issuer, the Collateral Agent or the Noteholders or if such
failure to comply is necessary under any Requirement of Law. In connection with
the foregoing, the Servicer shall be permitted to subcontract its obligations
under this Section 6.01 to any Person satisfactory to the Issuer, the Trustee
and the Collateral Agent who agrees to perform such obligations in accordance
with the terms of this Agreement and the Restaurant Guidelines; PROVIDED,
HOWEVER, that the Servicer shall remain fully responsible to the Issuer, the
Collateral Agent and the Trustee for any and all acts or failures to act of any
such subcontractor to the same extent as if the Servicer were fully and directly
responsible for such subcontractor's duties and responsibilities; PROVIDED
FURTHER in the event the Servicer shall for any reason no longer be the
Servicer, (A) the Successor Servicer shall thereupon assume all of the rights
and obligations of the Servicer under each subcontract that the Servicer may
have entered into, unless the Successor Servicer elects to terminate any
subcontract in accordance with its terms, (B) the Servicer at its expense and
without right of reimbursement therefor, shall, pay any fee relating to the
termination of a subcontract, (C) the Servicer at its expense and without right
of reimbursement therefor, shall, upon request of the Successor Servicer,
deliver to the assuming party all documents and records relating to each
subcontract and (D) the Servicer
-27-
<PAGE>
shall otherwise use its best efforts to effect the orderly and efficient
transfer of the subcontract to the assuming party.
(b) The Servicer shall notify the Issuer promptly after obtaining
knowledge that any Purchased Contract Assets has become subject to a Lien other
than any Lien created or imposed hereunder or under the Transaction Documents.
SECTION 6.02. SERVICING COMPENSATION. As compensation for its servicing
activities hereunder and reimbursement for its expenses incurred as the
Servicer, the Servicer shall be entitled to receive a Monthly Servicing Fee
Amount in respect of any Settlement Period (or portion thereof), payable monthly
in arrears on each Note Payment Date, equal to the product of (i) 5% per annum,
(ii) one twelfth and (iii) the Net Note Principal Amount as of the previous Note
Payment Date, after the payment of principal on the Notes, if any (or in the
case of the first Note Payment Date, the Net Note Principal Amount on the
Closing Date). The Servicer shall bear all costs and expenses (without right of
reimbursement other than the Monthly Servicing Fee Amount) incurred in
connection with performing its activities hereunder, including fees and
disbursements of independent accountants, fees and expenses incurred in
collecting Receivables and generating Recoveries, all fees and expenses of the
Back-up Servicer, and all other expenses incurred by the Servicer in connection
with its activities hereunder; PROVIDED, HOWEVER that in no event shall the
Servicer be liable for any federal, State or local income or franchise tax, or
any interest or penalties with respect thereto, assessed on the Trustee, the
Collateral Agent or any Noteholder. The Servicer shall be required to pay such
expenses for its own account, and shall not be entitled to any payment therefor
other than the Monthly Servicing Fee Amount and any indemnification specifically
provided in the Transaction Documents.
SECTION 6.03. INDEPENDENT PUBLIC ACCOUNTANT'S REPORTS. (a) The Servicer
shall no later than January 15 of each year (commencing January 15, 1997), cause
a firm of nationally recognized independent certified public accountants (who
may also render other services to the Servicer or the Seller) to furnish a
report, as of September 30 of the immediately preceding calendar year, to the
Rating Agency, the Issuer, the Collateral Agent, the Noteholders and the Trustee
performing such agreed upon procedures with respect to the Servicer's servicing
procedures and internal control system as may be reasonably requested by the
Majority Noteholders. The scope of the review shall be as put forth in Exhibit F
hereto.
(b) The Servicer shall cause a firm of nationally recognized
independent certified public accountants (who may also render other services to
the Servicer or the Seller) to furnish a report to the Rating Agency, the
Collateral Agent, the Trustee, the Noteholders and the Seller on or before 45
days after the end of each fiscal year of the Issuer using generally accepted
auditing standards to the effect that they have compared the mathematical
calculations of each amount set forth in five Daily Reports and three Settlement
Statements in a sample randomly chosen during such annual period and delivered
by the Servicer pursuant to Sections 6.06 and 6.08 respectively during the
period covered by such report with the Servicer's computer reports that were the
source of such amounts and that on the basis of such comparison, such
accountants are of the opinion that such amounts are in
-28-
<PAGE>
agreement, except for such exceptions as they believe to be immaterial and such
other exceptions as shall be set forth in such statement.
(c) Within 30 days of the Closing Date, the Issuer shall cause a firm
of nationally recognized independent certified public accountants (who may also
render other services to the Issuer) to furnish a report to the Noteholders
based on a review of the Purchased Contract Assets; the scope of the review
shall be as set forth on Exhibit F hereto.
SECTION 6.04. COMPLIANCE STATEMENTS. The Seller and the Servicer will
deliver to the Issuer, the Collateral Agent, the Noteholders and the Trustee on
or before 45 days after the end of each fiscal quarter of such Seller and the
Servicer (beginning March 31, 1997) a certificate signed by its Authorized
Officer stating that (i) a review of its activities relating to the servicing of
the Contract Assets during the prior fiscal quarter (or since the Closing Date
in the case of the first such certificate which is required to be delivered) and
performance under this Agreement and the Security Agreement has been made under
such officer's supervision, and (ii) to the best of such Authorized Officer's
knowledge, based on such review, such party has fulfilled all its obligations
under this Agreement and the Security Agreement throughout the period covered by
such review, or, if there has been a default in the fulfillment of any such
obligations, specifying each such default known to such officers and the nature
and status thereof.
SECTION 6.05. COLLECTION PROCEDURES. (a) On or before the Closing Date,
the Servicer, the Seller and the Issuer shall have established and shall
maintain thereafter the system of collecting and processing Collections of
Purchased Contract Assets set forth in this Section 6.05 to be in effect on and
after the Closing Date. The Servicer shall instruct the Assigned Restaurants to
send Mail Payments or Recoveries only to Post Office Boxes listed on Schedule
III hereof and to the Collection Deposit Account. The Servicer shall cause each
Assigned Restaurant to transmit all Point-of-Sale Payments directly to computer
systems owned and operated by the Back-up Servicer, and, so long as Transmedia
is acting as the Servicer, the Back-up Servicer agrees to forward electronically
data related to such Point-of-Sale Payments to the Servicer.
(b) The Servicer shall process Payments by recording the amount of the
Collections received from the Cardmember, the taxes and tips related to such
Payments, the Cardmember Rebate, the Processing Fee, the applicable Restaurant
number and the amount of Credits to be deducted from the account of the
applicable Restaurant.
(c) The Servicer shall process all requests from the Assigned
Restaurants for transaction authorizations in connection with the use of a
Transmedia Card in the same manner as it processes such requests from all other
Restaurants. Servicer shall not authorize any such transactions that have not
been properly authorized by a Credit Card Company for payment.
(d) Not later than the Business Day following the receipt of any Mail
Payments, the Servicer shall cause such Mail Payments to be processed and
forwarded to the appropriate Credit Card Company using the Issuer's individual
merchant identification number, and, so
-29-
<PAGE>
long as Transmedia is acting as the Servicer, the Servicer agrees to forward
electronically all data related to such Mail Payments to the Back-up Servicer.
(e) Not later than the same day of receipt of any Point-of-Sale
Payment, the Servicer shall cause such Point-of-Sale Payments to be processed
and forwarded to the appropriate credit card company using the Issuer's
individual merchant identification number, and, so long as Transmedia is acting
as the Servicer, the Servicer agrees to forward electronically all data related
to such Point-of-Sale Payments to the Back-up Servicer.
(f) The Credit Card Companies will be directed to deposit Collections
directly into the Collection Deposit Account. In the event that any of the
Servicer, the Seller or the Issuer shall receive any Collections from the Credit
Card Companies or otherwise, such Person agrees that it is holding such amounts
in trust for the Collateral Agent and shall initiate the deposit of such
Collections into the Collection Deposit Account within one Business Day of
receipt thereof. On the Business Day following receipt of any Collections from
the applicable Credit Card Company in the Collection Deposit Account, the
Servicer will cause the Collateral Agent to transfer from such Collections, in
immediately available funds, an amount equal tO all such Collections received by
the Servicer, net of the taxes and tips related to such Collections, the
Processing Fees not already paid and the Cardmember Rebates, to the Collateral
Account.
(g) If any such payments cannot be made in the time period specified in
clause (e) above as a result of an event of Force Majeure, so long as such
payments are made promptly after the cessation of such event of Force Majeure,
but in no event later than two Business Days after such time period, the
provisions of such clauses shall be deemed to have been complied with. The
Issuer, the Seller and the Servicer agree to take any reasonable actions
necessary to correct or overcome such event as soon as possible.
(h) The Servicer shall deposit all Recoveries into the Collateral
Account no later than the Business Day following the day of such receipt.
(i) Any funds held by the Issuer, the Seller or the Servicer
representing Collections of Purchased Contract Assets shall, until deposited in
the Collection Deposit Account or the Collateral Account, be held in trust by
the Servicer, the Seller and the Issuer for and as the Collateral Agent's
property and shall not be commingled with the Servicer's, the Seller's or the
Issuer's other funds or property.
(j) As each Payment is processed and forwarded to the Credit Card
Companies for payment, the Servicer will forward the Cardmember Rebate to the
Cardmember who generated such Payment. If the Cardmember Rebate is in a
nonmonetary form, such as airline credits, the Servicer will make such payment
as described in Section 6.05(m).
(k) No later than the Business Day following the receipt of
confirmation from a credit card company that it will pay amounts related to Mail
Payments or Point-of-Sale Payments, the Servicer shall advance out of its own
funds the amount of taxes and tips related to such Payment to the Restaurant
from which such Payment was received.
-30-
<PAGE>
(1) No later than the Business Day following the receipt of Collections
from a Credit Card Company related to a Payment, the Servicer shall cause to be
paid to itself from the Collection Deposit Account the amount of taxes and tips,
without interest, related to such Payment in reimbursement for funds advanced
under Section 6.05(j).
(m) If the Cardmember Rebate was in a nonmonetary form, no later than
the Business Day following the receipt of Collections from a Credit Card Company
related to a Payment, the Servicer shall cause to be paid from the Collection
Deposit Account an amount equal to the actual cash amount paid by the Servicer
to any Person (other than an Affiliate or an employee of the Servicer or any
Affiliate of the Servicer) to acquire such nonmonetary Cardmember Rebate and
shall provide out of its own inventory such nonmonetary Cardmember Rebate to the
Cardmembers who generated such Payment.
(n) To the extent not previously paid out of Collections, no later than
the due date on an invoice therefore, the Servicer shall cause to be paid from
the Collection Deposit Account any Processing Fee owed to a Credit Card Company.
(o) The Servicer irrevocably waives any right to set off against, or
otherwise deduct from, any Collections. The Servicer acknowledges that the
Collection Deposit Account and the Collateral Account are solely the property of
the Collateral Agent and in no way represent property or funds of the Servicer.
The Servicer's access to the Collection Deposit Account under this Section 6.05
is in its capacity as Servicer only and for the convenience of the Collateral
Agent in furtherance of the purposes of this Agreement and the Transaction
Documents; such access does not in any way imply ownership or any right to
direct funds except as provided for in this Agreement.
SECTION 6.06. DAILY REPORT. (a) On each Business Day, the Servicer
shall prepare a Daily Report in substantially the form attached hereto as
Exhibit B. The Daily Report shall report for the Applicable Day, among other
things, the dollar amount of Contract Assets created since the preceding Daily
Report, the dollar amount of Collections received on the Applicable Day, the
Borrowing Base, the amount of Available Cash, the balance of the Collateral
Account, and a current list of Purchased Contracts.
(b) The Servicer shall deliver to the Seller, the Collateral Agent, the
Trustee and the Issuer and, upon request, the Noteholders, and, for the first 30
days after the Closing Date to a designee of the Noteholders, the Daily Report,
which shall be deemed to have been certified by a Financial Officer, by 12:00
Noon (New York City time) on each Business Day with respect to activity in the
Purchased Contract Assets for the Applicable Day covered by such Daily Report
(or, in the case of a Daily Report delivered on a day following a Saturday,
Sunday or other non-Business Day, the aggregate activity for the preceding
Business Day and such non-Business Days); PROVIDED, HOWEVER, that if a "system
failure" or other similar technical failure shall occur in the operations of the
Servicer that produce data included in the Daily Report, the Servicer shall use
its best efforts to recreate Daily Reports for each Applicable Day missed due to
a "system failure" or, if the Servicer is unable to recreate such Daily Reports,
the Servicer shall prepare a composite Daily Report for each such missed
Applicable Day and, in either case, such Daily Reports shall be telecopied to
the
-31-
<PAGE>
Collateral Agent, the Trustee and the Issuer and, upon request, the Noteholders
within two Business Days of the date such Daily Report(s) were otherwise
required to be prepared and telecopied to the Trustee.
(c) The Servicer shall prepare each Daily Report as promptly as
possible each Business Day on the basis of the "pre-audit" sales and collections
figures transmitted the previous day to the Servicer's central computer
processing center.
(d) Upon discovery of any error by the Issuer, the Collateral Agent,
the Servicer or the Seller in any Daily Report, the Collateral Agent, the
Issuer, the Servicer, the Trustee and the Seller shall confer and shall agree
upon any necessary adjustments to correct any such errors. Until correction of
such error, all Collections relating to such errors shall be retained in the
Collateral Account. Unless the Collateral Agent has received actual notice of
any discrepancy, the Collateral Agent, the Trustee and the Issuer may rely on
such Daily Report for all purposes hereunder.
SECTION 6.07. ALLOCATIONS AND APPLICATIONS OF COLLECTIONS. Collections
shall be allocated and distributed in accordance with the provisions of the
Security Agreement.
SECTION 6.08. SETTLEMENT STATEMENT. (a) On each Settlement Date? the
Servicer shall, prior to 12:00 Noon, New York City time, deliver to the Seller,
the Collateral Agent, the Rating Agency, the Trustee, the Noteholders and the
Issuer the Settlement Statement for the related Settlement Period certified by
the President, any Vice President or any Financial Officer; PROVIDED, HOWEVER,
that if a "system failure" or other similar technical failure shall occur in the
operations of the Servicer that produce data included in the Settlement
Statement, a Settlement Statement containing all information for each day
required to be included therein shall be prepared and delivered to the Seller,
the Collateral Agent, the Rating Agency, the Trustee, the Noteholders and the
Issuer within two Business Days of the date such Settlement Statement was
otherwise required to be prepared and delivered. On each Settlement Date, the
Seller shall deliver to the Issuer a confirmation of the assignment of the
Purchased Contract Assets transferred in the prior month, including a list of
Contracts and Cardmember Agreements, signed by the Seller.
(b) The Servicer shall include with the Settlement Statement furnished
to the Seller, the Collateral Agent, the Noteholders and the Trustee in October,
January, April and July (commencing in April 1997) of each year a report of the
Servicer covering the Servicer's servicing of the Purchased Contract Assets
during the prior fiscal quarter (or from the Closing Date through the end of
such prior quarter in the case of the first such report).
(c) Notwithstanding the foregoing, the Seller and the Servicer agree
that the Trustee or the Collateral Agent shall have the right, at any time upon
at least 24 hours notice, to initiate an audit of the Servicer and the Seller
with respect to the servicing of Purchased Contract Assets. Prior to initiating
such an audit, the Collateral Agent shall consult with the Servicer to ascertain
whether the information sought may be derived without the necessity of such an
audit; PROVIDED, that if the Collateral Agent determines in its sole discretion
at any time that such an audit is desirable for any reason whatsoever, it shall
-32-
<PAGE>
have the right to initiate such an audit at any time in accordance with the
first sentence of this Section 6.08(c).
SECTION 6.09. TERMINATION. The Seller's obligation to sell Contract
Assets under this Agreement shall terminate on the date (the "PURCHASE
TERMINATION DATE") which is the earlier of (i) the Issuer Final Termination or
(ii) the date on which the Issuer's obligation to purchase Contract Assets shall
terminate pursuant to Section 7.01.
SECTION 6.10. LIMITATION ON LIABILITY OF THE SELLER AND OTHERS. No
recourse under or upon any obligation or covenant of this Agreement, or the
Contract Assets, or for any claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, stockholder, shareholder, member,
employee, officer or director, in its capacity as such, past, present or future,
of any party hereto or of any successor corporation or company, either directly
or through such party, whether by virtue of any constitution or statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Agreement and the obligations issued
hereunder are solely corporate obligations, and that no such personal liability
whatever shall attach to, or is or shall be incurred by the incorporators,
stockholders, shareholders, members, employees, officers or directors, as such,
of such party or of any successor corporation or company, or any of them,
because of the creation of the obligations hereby authorized, or under or by
reason of the obligations, covenants or agreements contained in this Agreement
or in the Contract Assets or implied therefrom; and that any and all such
personal liability, either at common law or in equity or by constitution or
statute, of, and any and all such rights and claims against, every such
incorporator, stockholder, shareholder, member, employee, officer or director,
as such, because of the creation of the indebtedness hereby authorized, or under
or by reason of the obligations or covenants contained in this Agreement or in
the Contract Assets or implied therefrom, are hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Agreement; PROVIDED, HOWEVER, that the foregoing shall not be interpreted to
limit or affect the express undertakings of Transmedia or the Initial Sellers as
set forth in any of the Transaction Documents. Anything to the contrary herein
notwithstanding, the Issuer's liability to any party hereunder shall be limited
to amounts from Secured Collateral and an amount equal to the amount in the
Settlement Account. The Seller, the Servicer, the Trustee and the Collateral
Agent and any director or officer or employee of the Seller, the Servicer, the
Trustee or the Collateral Agent may rely in good faith on any document of any
kind PRIMA FACIE properly executed and submitted by any Person respecting any
matters arising hereunder.
SECTION 6.11. SERVICER RESIGNATION. The Servicer shall not resign from
the obligations and duties under this Agreement hereby imposed on it except upon
a determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties hereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer shall be evidenced as to clause (i) above by an
opinion of counsel to such effect delivered to the Rating Agency, the Issuer,
the Seller, the Trustee, the Noteholders and the Collateral Agent. No such
resignation shall
-33-
<PAGE>
become effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with this
Section and Sections 6.16 and 6.17.
SECTION 6.12. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
THE CONTRACT ASSETS. The Servicer and the Seller shall provide the Issuer, the
Collateral Agent, each Noteholder and the Trustee and their respective
representatives access to the documentation regarding the Purchased Contract
Assets in such cases where the Issuer is required in connection with the
enforcement of the rights of the Issuer, the Collateral Agent, the Trustee or
any Noteholder, or by applicable statutes or regulations, to review such
documentation, such access being afforded without charge but only (i) upon two
Business Days prior notice, (ii) during normal business hours, (iii) subject to
the Servicer's normal security and confidentiality procedures and (iv) at
offices designated by the Servicer. The obligation of the Servicer and the
Seller to provide access to such information shall survive the Servicer's
termination as Servicer.
SECTION 6.13. DELEGATION OF DUTIES. In the ordinary course of business,
the Servicer may at any time delegate any of its duties hereunder to any Person
who agrees to conduct such duties in accordance with the Restaurant Guidelines
and this Agreement. Such delegation shall not relieve the Servicer of its
liabilities and responsibilities with respect to such duties, and shall not
constitute a resignation within the meaning of Section 6.11.
SECTION 6.14. RESPONSIBILITIES OF THE SELLER. Notwithstanding anything
herein to the contrary, the exercise by the Issuer of any of its rights
hereunder shall not relieve either the Seller or the Servicer from such of its
obligations with respect to such Purchased Contract Assets.
SECTION 6.15. SERVICER TERMINATION NOTICE. If (i) an Early Amortization
Event or a Purchase Termination Event shall have occurred and be continuing or
(ii) there has been a failure by the Servicer to perform its obligations as
Servicer and such failure could reasonably be expected to have a material
adverse effect on the collection of the Purchased Contract Assets taken as a
whole, the value of the Purchased Contract Assets or the ability of the
Collateral Agent to exercise its remedies under the Security Agreement (a
"SERVICER TERMINATION EVENT"), the Issuer may and, upon the direction of the
Majority Noteholders, the Issuer or the Trustee shall, by notice given in
writing to the Servicer, the Issuer or Trustee, as applicable, and the
Collateral Agent (a "SERVICER TERMINATION NOTICE") terminate all of the rights
and, except as expressly provided in this Agreement, obligations of the Servicer
under this Agreement. Notwithstanding any termination of the rights and
obligations of the Servicer, such terminated Servicer shall remain responsible
for any acts or omissions to act by it as Servicer prior to such termination.
SECTION 6.16. SUCCESSOR SERVICER. (a) With respect to a Servicer
resignation pursuant to Section 6.11, after receipt by the Issuer and the
Collateral Agent of the opinion of counsel required by such section, and with
respect to a Servicer termination pursuant to Section 6.15, after receipt by the
Servicer of a Servicer Termination Notice, and, with respect to both such a
Servicer resignation and a Servicer termination, on the date that the Successor
Servicer shall have been appointed by the Issuer pursuant to Section 6.17, all
-34-
<PAGE>
authority and power of the Servicer under this Agreement shall pass to and be
vested in the Successor Servicer; and, without limitation, the Collateral Agent
is hereby authorized and empowered to execute and deliver, on behalf of the
Servicer as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights.
(b) The Servicer agrees to cooperate with the Collateral Agent and the
Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing hereunder, including, without
limitation, the transfer to the Successor Servicer of all authority of the
Servicer to service the Purchased Contract Assets provided for under this
Agreement, including, without limitation, all authority over all Collections
which shall on the date of transfer be held by the Servicer for deposit, or
which shall thereafter be received with respect to the Purchased Contract
Assets.
(c) The Servicer shall promptly transfer its electronic records
relating to the Purchased Contract Assets therein to the Successor Servicer in
such electronic form as the Successor Servicer may reasonably request and shall
promptly transfer to the Successor Servicer all other records, correspondence
and documents necessary or desirable for the continued servicing of the
Purchased Contract Assets in the manner and at such times as the Successor
Servicer shall reasonably request. To the extent that compliance with this
Section shall require the Servicer to disclose to the Successor Servicer
information of any kind which the Servicer reasonably deems to be confidential,
the Successor Servicer shall, at no charge to the Successor Servicer or the
Issuer, be required to enter into such customary licensing and confidentiality
agreements as the Servicer shall deem reasonably necessary to protect its
interest. All costs and expenses incurred in connection with a transfer of
servicing shall be borne by the outgoing Servicer. The Seller shall, upon
request at all times, provide such information and assistance to the Servicer or
the Successor Servicer as shall be required for the Servicer or the Successor
Servicer to perform its obligations hereunder.
SECTION 6.17. APPOINTMENT OF SUCCESSOR SERVICER. (a) On and after the
receipt by the Servicer of a Servicer Termination Notice pursuant to Section
6.15, the Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in the Servicer Termination Notice or
otherwise specified by the Issuer in writing or, if no such date is specified in
the Servicer Termination Notice, or otherwise specified by the Issuer, until a
date mutually agreed upon by the Servicer and the Issuer. As promptly as
possible after the giving of a Servicer Termination Notice, or after the receipt
of an opinion of counsel under Section 6.11, as the case may be, the Trustee
shall serve as successor servicer (the "SUCCESSOR SERVICER") and all authority,
power, obligations and responsibilities of the Successor Servicer under this
Agreement, whether in respect to the Notes, the Contract Assets or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Trustee without any further action; PROVIDED, HOWEVER,
that the Trustee shall not be required to become the Successor Servicer if it is
unable to act according to law and it provides to the Issuer an opinion of
counsel to such effect. The Trustee as Successor Servicer shall have no
responsibility for any acts or omissions of any prior Servicer or any liability
with respect to any obligation which was
-35-
<PAGE>
required to be performed by any prior Servicer prior to the date that the
Trustee becomes the Servicer or any claim of a third party based on any alleged
action or inaction of any prior Servicer. The Trustee is authorized and
empowered by this Agreement, as Successor Servicer, to execute and deliver, on
behalf of any prior Servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination.
If the Trustee shall be legally unable so to act, the Trustee may appoint, or
petition a court of competent jurisdiction to appoint, as the successor to the
Servicer under this Agreement, any established institution having a net worth of
not less than $10,000,000 and whose regular business shall include the servicing
of receivables. No party other than the initial Trustee (or a successor to the
business of the Trustee) may serve as Successor Servicer without the written
consent of the Rating Agency.
(b) Upon the date of its appointment, the Successor Servicer, shall be
the successor in all respects to the Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof from such date onward, and all references in this Agreement to
the Servicer shall be deemed to refer to the Successor Servicer
(c) All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of this
Agreement and the Security Agreement and shall pass to and be vested in the
Seller and, without limitation, the Seller is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Successor Servicer agrees to cooperate with
the Issuer, the Servicer and the Seller in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Purchased Contract Assets. To the extent that compliance with this Section
6.17 shall require the Successor Servicer to disclose to the Issuer or the
Seller information of any kind which the Successor Servicer deems to be
confidential, the Issuer or the Seller shall be required to enter into such
customary licensing and confidentiality agreements as the Successor Servicer
shall deem reasonably necessary to protect its interests.
(d) The parties hereto understand and agree that the Back-up Servicer
has pursuant to this Agreement agreed to service the Purchased Contract Assets
should the Trustee be appointed Successor Servicer. However, the Trustee
acknowledges that as the Successor Servicer, it shall remain responsible for the
servicing of the Purchased Contract Assets by itself or any designee, including
the Back-up Servicer. If a Successor Servicer has assumed the duties of Servicer
hereunder, the Successor Servicer may remove the Back-up Servicer for any
reason.
(e) The Successor Servicer's duties shall include all of the duties of
the Servicer, including but not limited to, the following: (i) take control of
the Post Office Box; (ii) establish a toll free number to receive phone calls by
Restaurants and Cardmembers; (iii) prepare and send compliance letters, as
necessary, to Restaurants that are not complying with
-36-
<PAGE>
the terms of the Contracts; (iv) obtain the services of any persons necessary
for performing the services hereunder; (v) ensure that the Restaurant
directories are being printed and distributed.
SECTION 6.18. MAINTENANCE OF PROPERTY; INSURANCE. The Servicer will (i)
keep all property and assets useful and necessary in its business as Servicer in
good working order and condition (normal wear and tear excepted), (ii) maintain,
with financially sound and reputable insurance companies, insurance on all its
property and assets necessary in its business as Servicer in at least such
amounts and against at least such risks (and with such risk retention) as are
usually insured against in the same general area by companies of established
repute engaged in the same or a similar business and reasonably satisfactory to
the Issuer, (iii) furnish to the Issuer, the Trustee and the Collateral Agent
upon written request, full information as to the insurance carried, (iv) within
five days of receipt of notice from any insurer, furnish the Issuer with a copy
of any notice of cancellation or material change in coverage from that existing
on the Closing Date and (v) forthwith, furnish the Issuer, the Trustee and the
Collateral Agent with notice of any cancellation or nonrenewal of coverage by
the Servicer. The Servicer will (A) maintain disaster recovery systems and
back-up computer and other information management systems that, in the
Servicer's reasonable judgment, are sufficient to protect its business as
Servicer against material interruption or loss in the event of damage to, or
loss or destruction of, its primary computer and information management systems
and (B) furnish to the Collateral Agent, the Noteholders and the Trustee, upon
written request, full information as to such disaster recovery systems and
back-up computer and information management systems.
SECTION 6.19. DUTIES OF THE BACK-UP SERVICER. The Back-up Servicer
shall, for the benefit of the Trustee and Collateral Agent, (i) receive daily
data from the Servicer relating to the Purchased Contract Assets, the
Restaurants, Mail Payments, Point-of-Sale Payments and the Credit Card Accounts;
(ii) keep and maintain all such data received and all other records,
correspondence and documents necessary or desirable for the servicing of the
Purchased Contract Assets; (iii) maintain its existing computer system and any
other information management systems necessary for servicing the Purchased
Contract Assets; and (iv) provide the Issuer, the Collateral Agent, each
Noteholder and the Trustee and their respective representatives access to
offices of the Back-up Servicer used in connection with performing its duties
hereunder and to the documentation in its possession regarding the Purchased
Contract Assets, such access being afforded without charge but only (1) upon two
Business Days prior notice, (2) during normal business hours, and (3) subject to
the Back-up Servicer's normal security and confidentiality procedures. All fees
of the Back-up Servicer in connection with its duties hereunder shall be paid by
the Servicer out of the Servicer's own funds. If the Trustee is Successor
Servicer, however, the Back-up Servicer shall be paid out of the Monthly
Servicing Fee Amount.
SECTION 6.20. GRANT OF LICENSE. For the purpose of enabling the Issuer,
the Trustee or a Successor Servicer to perform the functions of servicing and
collecting the Purchased Contract Assets upon a Purchase Termination Event, the
Servicer and the Seller hereby (i) assigns to the Issuer and the Trustee and
shall be deemed to assign to the Issuer and the Trustee and any Successor
Servicer all rights owned or hereinafter acquired by the Seller or
-37-
<PAGE>
the Servicer (by license, sublicense, lease, easement or otherwise) in and to
any equipment together with a copy of any software listed on Schedule VII; (ii)
agrees to use its best efforts to assist the Issuer and the Trustee to arrange
licensing agreements with all software vendors and other applicable persons in a
manner and to the extent reasonably appropriate to effectuate the servicing of
the Purchased Contract Assets; and (iii) deliver to the Trustee executed copies
of any landlord waivers in a form reasonably acceptable to the Trustee, that may
be necessary to grant to the Trustee access to any leased premises of any of the
Servicer for which the Trustee may require access to perform the collection and
administrative functions to be performed by the Trustee under the Transaction
Documents. The Purchaser may assign, license, pledge, grant or otherwise
encumber or transfer (including, without limitation by means of change of
control) the license granted in this Section 6.04, or all or part of its rights
under the license granted in this Section 6.04, to a joint venture of which the
Purchaser is a party, a related or affiliated company, a subsidiary, or a third
party with which it may merge or that acquires all or substantially all of the
assets of the Purchaser, without the prior, written consent of Transmedia or the
Initial Sellers.
ARTICLE VII
PURCHASE TERMINATION EVENTS
SECTION 7.01. PURCHASE TERMINATION EVENTS. If any of the following
events (each; a "PURCHASE TERMINATION EVENT") shall occur and be continuing:
(a) any written representation or warranty made or deemed made
or any oral representation made prior to the Closing Date by or on
behalf of the Seller or the Servicer under or in connection with this
Agreement or any Daily Report, Cash Allocation Report or Settlement
Statement or other information or report delivered by the Seller or the
Servicer pursuant hereto shall prove to have been false or incorrect in
any material respect when made or deemed made, except with respect to
the representation and warranty set forth in Section 4.02(a) with
respect to any Purchased Contract Assets so long as the Seller has
complied with its obligations in respect of such Purchased Contract
Assets pursuant to Section 2.04;
(b) the Seller shall have failed to (i) perform or observe any
term, covenant or agreement contained in Subsection 5.01(c), 5.01(f),
5.01(g), 5.01(h), 5.01(i), 5.01(1), 5.01(m), 5.01(n), 5.01(o), or
5.01(p), Section 5.02 or Section 7.02, or (ii) make any payment or
deposit to be made by it hereunder when the same becomes due and
payable;
(c) the Seller, the Servicer or Back-up Servicer shall have
failed to perform or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed or observed and
any such failure shall have remained unremedied for ten days following
notification by the Issuer, the Servicer or the Trustee or otherwise
becoming aware thereof;
-38-
<PAGE>
(d) the Indenture or the Security Agreement shall have ceased
to be in full force and effect;
(e) an Amortization Commencement Date, Early Amortization
Event or Potential Early Amortization Event shall have occurred;
(f) the Servicer shall have failed to make any payment or
deposit to be made by it hereunder when the same becomes due and
payable; or
(g) any Purchase Termination Event under the Purchase
Agreement shall have occurred.
then, and in any such event, the Trustee or the Collateral Agent may, or, in the
case of an event set forth in clause (e) above, shall, by notice to the Seller
declare the Issuer's obligation to acquire Contract Assets from the Seller to be
terminated, whereupon such obligation shall forthwith be terminated.
SECTION 7.02. REMEDIES. If a Purchase Termination Event has occurred
and is continuing, PROVIDED the Issuer provides the Seller and the Servicer with
ten Business Days' notice prior to taking any action set forth in clause (c)(ii)
below:
(a) The Issuer, the Collateral Agent and the Trustee shall
have all of the rights and remedies provided to a secured creditor or a
purchaser of accounts under the UCC as in effect in the applicable
jurisdiction or other applicable law in respect thereof.
(b) The Issuer, the Collateral Agent and the Trustee may at
any time (i) notify the respective Restaurants and Credit Card
Companies of the Issuer's ownership of the Purchased Contract Assets
and may direct that payment of all amounts due or to become due under
the Purchased Contract Assets be made directly to the Collateral Agent
or its designee or (ii) give notice, or require that the Seller, at the
Seller's expense, give notice of such ownership to each such Restaurant
and Credit Card Company and direct that all payments be made directly
to the Collateral Agent or its designee.
(c) The Seller and the Servicer shall, upon the Issuer's,
Collateral Agent's or the Trustee's request, and at the Seller's or the
Servicer's expense, (i) assemble all the Seller's or the Servicer's
documents, instruments and other records (including, without
limitation, credit files and computer tapes or disks) that (A) evidence
or will evidence or record Purchased Contract Assets sold by the Seller
(B) evidence the underlying Contracts relating to such Purchased
Contract Assets and (C) are otherwise necessary or desirable to effect
Collections of such Purchased Contract Assets (collectively, the
"DOCUMENTS") and (ii) deliver the Documents to the Issuer or its
designee at a place designated by the Issuer.
-39-
<PAGE>
(d) Each of the Servicer and the Seller hereby irrevocably
authorizes the Issuer, the Collateral Agent and the Trustee to take any
and all steps in the Seller's or the Servicer's name and on the
Seller's or the Servicer's behalf necessary or desirable, in the
reasonable opinion of the Issuer, the Collateral Agent and the Trustee
to collect all amounts due under the Purchased Contract Assets,
including, without limitation, opening mail received at the Post Office
Boxes, endorsing the Seller's name on checks and other instruments
representing Collections, enforcing the Purchased Contract Assets and
exercising all rights and remedies in respect thereof.
(e) The Seller and the Servicer will (i) deliver to the
Issuer, the Collateral Agent and the Trustee, all computer programs,
material and data necessary or desirable to the immediate collection of
the Purchased Contract Assets by the Issuer, the Collateral Agent and
the Trustee or a party designated by the Collateral Agent or the
Trustee, with or without the participation of the Seller and the
Servicer and (ii) make such arrangements with respect to the collection
of the Purchased Contract Assets as may be reasonably required by the
Collateral Agent or the Trustee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNITIES BY THE SELLER AND THE SERVICER. Each of
Transmedia and the Seller agrees to indemnify, defend and hold the Issuer and
its assignees (including the Trustee, the Collateral Agent and each Noteholder)
and the members of the Issuer, for the benefit of each such Person harmless from
and against any and all loss, liability, damage, judgment, claim, deficiency or
expense (including interest, penalties, reasonable attorney's fees and amounts
paid in settlement) that is caused by (i) a material breach at any time by the
Seller or Transmedia of its representations, warranties and covenants contained
in Section 3.01 hereof or Sections 4.01 or 4.02 or (ii) any material information
furnished by the Seller or Transmedia which is set forth in any schedule
delivered hereunder, being untrue in any material respect when any such
representation was made or schedule delivered, or (iii) breach of any covenant
in Sections 5.02 or 5.03 hereof, PROVIDED that neither Transmedia nor the Seller
shall have any liability with respect to a representation or warranty as to any
specific Contract, Receivable or the related Credits other than to purchase the
Contract Assets in accordance with Section 2.04 hereof. Transmedia shall also
indemnify the Trustee, the Collateral Agent each Noteholder, the Issuer and each
Member and the Servicer for any cost or expenses incurred by them in the
enforcement of this Agreement. The obligations of Transmedia under this Section
8.01 shall be considered to have been relied upon by the Issuer and its
assignees and shall survive the execution, delivery and performance of this
Agreement, regardless of any investigation made by or on behalf of the Issuer,
until termination of the Indenture. If either Transmedia or the Seller has made
any indemnity payments pursuant to this Section 8.01 and thereafter the
recipient collects any of such amounts from others, such party will promptly
repay the amount collected to either Transmedia or the Seller, as applicable,
without interest.
-40-
<PAGE>
SECTION 8.02. SERVICER INDEMNIFICATION. (a) The Servicer shall
indemnify and hold harmless the Trustee, the Collateral Agent, the Seller, the
Issuer, each Member and the Noteholders, from and against any loss, liability,
claim, expense, damage or injury suffered or sustained to the extent that such
loss, liability, claim, expense, damage or injury arose out of or was imposed by
reason of the failure by the Servicer to perform its duties under this Agreement
or are attributable to errors or omissions of the Servicer related to such
duties; PROVIDED, HOWEVER, that the Servicer shall not indemnify any party to
the extent that acts of fraud, gross negligence or breach of fiduciary duty by
such party contributed to such loss, liability, claim, expense, damage or
injury.
(b) Indemnification under this Section 8.02 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the
Trustee or the Noteholders pursuant to this Section and such party thereafter
collects any of such amounts from others, such party will promptly repay such
amounts collected to the Servicer without interest. The provisions of this
Section 8.02 shall survive any expiration or termination of this Agreement.
SECTION 8.03. ISSUER INDEMNIFICATION. The Issuer shall indemnify and
hold harmless the Servicer (but solely from the amounts to be distributed to the
Issuer as set forth in Sections 7 and 8 of the Security Agreement) from and
against any loss, liability, expense, damage or injury suffered or sustained by
the Servicer, including but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs and expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, which
arises out of the Servicer's activities hereunder; PROVIDED, HOWEVER, that the
Issuer shall not indemnify the Servicer if the Servicer's activities constituted
fraud, willful misconduct, negligence (which includes negligence with respect to
the duties of the Servicer which are explicitly set forth in this Agreement) or
breach of fiduciary duty by the Servicer or for any amounts for which the
Servicer is obligated to indemnity the Issuer or other Persons pursuant to
Section 8.02 hereof.
ARTICLE IX
THE SUBORDINATED NOTE; SELLER NOTES; CAPITAL CONTRIBUTION
SECTION 9.01. SUBORDINATED NOTE. (a) On the Closing Date, the Issuer
shall issue a subordinated note substantially in the form of Exhibit C (the
"SUBORDINATED NOTE"). The Subordinated Note shall be issued in the name of the
Seller and shall be executed by the Issuer and delivered to the Seller on the
Closing Date. The outstanding principal amount of the Subordinated Note shall be
calculated pursuant to the Daily Report; PROVIDED, HOWEVER, that the principal
amount of the Subordinated Note shall be fixed on and not be recalculated after
the Purchase Termination Date. Anything to the contrary notwithstanding, the
Issuer shall have the right (but not the obligation) to offset or adjust the
Subordinated Note by any amounts owed by the Seller to the Issuer under this
Agreement.
(b) Interest on the principal amount of the Subordinated Note shall
accrue at a rate of 10% per annum. Payments of principal and interest under the
Subordinated Note shall
-41-
<PAGE>
only be made to the extent amounts are available pursuant to clause FOURTH of
Section 7(a)(iii) of the Security Agreement and the Seller shall not have
recourse to any other assets of the Issuer. The Seller agrees not to demand or
sue for amounts due under the Subordinated Note until after the date that is one
year and one day after the Final Issuer Termination. The Seller agrees upon any
distribution of all or any of the assets of the Issuer to creditors of the
Issuer upon the dissolution, winding up, total or partial liquidation,
arrangement, reorganization, adjustment, protection, relief, or composition of
the Issuer or its debts, any payment or distribution of any kind (including,
without limitation, cash, property, securities and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Issuer being subordinated to the payment of the Subordinated
Note) in respect of the Subordinated Note that otherwise would be payable or
deliverable upon or with respect to the Subordinated Note, directly or
indirectly, by set-off or in any other manner, including, without limitation,
from or by way of contract assets, shall be paid or delivered directly to the
Collateral Agent for application (in the case of cash) to or as contract assets
(in the case of non-cash property or securities) for the payment or prepayment
in full of, the obligations under the Notes until the obligations and all
principal and interest under the Notes shall have been indefeasibly paid in full
in cash. The Collateral Agent is irrevocably authorized and empowered (in its
own name or in the name of the Seller or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution referred to in the preceding sentence and give acquittance therefor
and to file claims and proofs of claim and take such other action (including,
without limitation, voting the Subordinated Note and enforcing any security
interest or other lien securing payment of the Subordinated Note) as the
Collateral Agent may deem necessary or advisable for the exercise or enforcement
of any of the rights or interest of the Noteholders. The Seller shall duly and
promptly take such action as the Collateral Agent may request to (i) collect the
Subordinated Note for the account of the Noteholders and to file appropriate
claims or proofs of claim in respect of the Subordinated Note, (ii) execute and
deliver to the Collateral Agent such powers of attorney, assignments or other
instruments as the Collateral Agent may request in order to enable the
Collateral Agent to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Subordinated Note and (iii)
collect and receive any and all payments or distributions which may be payable
or deliverable upon or with respect to the Subordinated Note. All payments or
distributions upon or with respect to the Subordinated Note that are received by
the Seller contrary to the provisions of the Indenture, the Security Agreement,
this Agreement or the Subordinated Note shall be received in trust for the
benefit of the Noteholders, shall be segregated from other funds and property
held by the Seller and shall be forthwith paid over to the Collateral Agent in
the same form as so received (with any necessary endorsement) to be applied (in
the case of cash) to, or held as contract assets (in the case of non-cash
property or securities) for the payment or prepayment in full of, the
Obligations until the Obligations shall have been indefeasibly paid in full in
cash. The Seller agrees that no payment or distribution to the Noteholders
pursuant to the provisions of the Subordinated Note shall entitle the Seller to
exercise any rights or subrogation in respect thereof against the Issuer until
the Obligations and all principal and interest under the Issuer's Notes shall
have been indefeasibly paid in full in cash. The Seller and the Issuer each
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Obligations and the Subordinated
-42-
<PAGE>
Note and any requirement that the Collateral Agent protect, secure, perfect or
insure any security interest or lien on any property subject thereto or exhaust
any right or take any action against the Issuer or any other Person or any
Contract Assets.
(c) The Seller agrees and confirms that the Subordinated Note represent
solely the right to receive certain amounts from funds available under the
Security Agreement and only to the extent, in the manner and at the times set
forth in this Agreement and the Security Agreement and that the Subordinated
Note does not represent a security interest in the Contract Assets or their
proceeds. No payments may be received, directly or indirectly, by the Seller
(and if received, the Seller agrees to return such payments to the Issuer) on
the Subordinated Note unless the Issuer has paid all amounts required pursuant
to this Agreement and the Security Agreement to be paid prior to any payments in
respect of the Subordinated Note.
(d) The Seller agrees and confirms that the Collateral Agent shall not
have any duty whatsoever to the Seller as holder of the Subordinated Note and
that the Collateral Agent shall not be liable to the Seller for any action taken
or omitted to be taken with respect to the Subordinated Note.
SECTION 9.02. RESTRICTIONS ON TRANSFER OF SUBORDINATED NOTE. Neither
the Subordinated Note nor any right of the Seller to receive payments
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, or consent to any departure by the Seller or the Servicer
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Issuer and the Collateral Agent (acting at the direction of
the Trustee acting at the direction of the Majority Noteholders) and, if
required pursuant to Section 9(c) of the Indenture, the Trustee (acting at the
direction of the Majority Noteholders), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. Notice of any such amendment or waiver shall be given to the Rating
Agency ten Business Days before taking effect.
SECTION 10.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telex,
facsimile or cable communication) and telegraphed, telexed, transmitted, cabled
or delivered,
<TABLE>
<S> <C>
(a) If to the Issuer, to it at: TNI Funding Company I, L.L.C.
11900 Biscayne Boulevard, Suite 460B
North Miami, FL 33181
-43-
<PAGE>
(b) If to the Seller, to it at: TNI Funding I, Inc.
11900 Biscayne Boulevard, Suite 460A
North Miami, FL 33181
Attention: President
(c) If to the Servicer, to it at: Transmedia Network Inc.
11900 Biscayne Boulevard
Suite 460
North Miami, FL 33181-9915
Telephone: 305/892-3340
Telecopy: 305/892-3342
(d) If to the Trustee, to it at: The Chase Manhattan Bank
Advance Structured Products
Group - ABS
450 West 33rd Street, 15th Floor
New York, NY 10001
Telephone: 212/946-8600
Telecopy: 212/946-3240
(e) If to the Back-up Servicer, to it at: Frank Felix Associates, Ltd.
140 Sylvan Avenue
Englewood Cliffs, New Jersey 07632
Attention: President
(f) If to the Rating Agency, to it at: Standard & Poor's Rating Services
25 Broadway
New York, NY 10004
Attention: Asset Backed Surveillance
Department
</TABLE>
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt if delivered by hand
or overnight courier service or sent by telex, telecopy or other telegraphic
communications equipment of the sender, in each case delivered, sent to such
party as provided in this Section or in accordance with the latest unrevoked
direction from such party given in accordance with this Section, except that
notices to the Issuer pursuant to Article II shall not be effective until
received by the Issuer, the Collateral Agent and the Trustee.
-44-
<PAGE>
SECTION 10.03. NO WAIVER; REMEDIES. No failure on the part of the
Issuer to exercise, and no delay in exercising, any right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 10.04. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Issuer, the Seller, the Trustee, the
Back-up Servicer and the Servicer. From and after the date this Agreement shall
have so become effective, this Agreement shall be binding upon and inure to the
benefit of the Issuer and the Seller, the Servicer and their respective
successors and assigns (including, without limitation, the Trustee and the
Collateral Agent), except that none of the Seller, the Back-up Servicer or the
Servicer shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of the Issuer and the Collateral Agent
(acting at the direction of the Majority Noteholders). This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time, after the Purchase Termination Date, as the Issuer and the Collateral
Agent shall not have any interest in any Purchased Contract Assets; PROVIDED,
HOWEVER, that the indemnification provisions of Article VIII (and any guarantee
with respect thereto) shall be continuing and shall survive any termination of
this Agreement.
SECTION 10.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS AND EXCEPT TO THE EXTENT THAT THE
VAL1DITY OR PROTECTION OF THE ISSUER'S INTEREST IN THE CONTRACT ASSETS, OR
REMEDIES HEREUNDER IN RESPECT THEREOF, MAY BE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 10.06. HEADINGS. Section headings and the Table of Contents
used in this Agreement are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
SECTION 10.07. RESERVED.
SECTION 10.08. ACKNOWLEDGMENT OF ASSIGNMENT. The Seller, the Servicer
and the Back-up Servicer hereby (i) acknowledge and consent to the security
interest granted by the Issuer in the Purchased Contract Assets and the rights
of the Issuer under this Agreement pursuant to the Security Agreement and (ii,1
acknowledge that, pursuant to the Security Agreement, the Collateral Agent,
acting at the direction of the Trustee acting at the direction of the Majority
Noteholders, has, among other rights, the exclusive right (except as expressly
provided in the Security Agreement) to take any action, exercise any remedy,
make any decision and agree, subject to the consent of the Seller, to amend,
waive or modify any provision of this Agreement as if the Collateral Agent were
the Issuer (regardless of whether an Early Amortization Event has occurred or is
continuing).
-45-
<PAGE>
SECTION 10.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 10.10. SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 10.11. NO PETITION IN BANKRUPTCY. Each of the parties to this
Agreement, other than the Issuer, hereby covenants and agrees that, prior to the
date which is one year and one day after the payment in full of all outstanding
Notes, it will not institute against, or join any other Person in instituting
against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the United
States or any State of the United States.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
SECTION 10.13. THIRD PARTY BENEFICIARIES. Each of the Secured Parties
shall be a third-party beneficiary of this Agreement. Without limiting the
foregoing, it is agreed and understood that each Secured Party shall be entitled
to rely on and entitled to all the benefits of each of the representations,
warranties and covenants set forth herein.
SECTION 10.14. JURISDICTION; CONSENT TO SERVICE OF PROCESS. Each of the
Issuer, the Seller, the Back-up Servicer and the Servicer hereby irrevocably and
unconditionally:
(a) submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United
States of America for the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement, or for recognition or enforcement
of any judgment;
(b) agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or,
to the extent permitted by law, federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit
on the judgment or in any other manner provided by law;
(c) consents to any such action or proceeding being brought in
such courts and waives any objection it may now or hereafter have to
the laying of venue of any
-46-
<PAGE>
suit, action or proceeding arising out of or relating to this Agreement
in any New York State or federal court or that such action or
proceeding was brought in an inconvenient court, and agrees not to
plead or claim the same;
(d) consents to service of process in the manner provided for
notices in Section 10.02. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other
manner permitted by law; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
SECTION 10.16. CONFIRMATION OF INTENT. It is the express intent of the
parties hereto that the transfer and conveyance of the Contract Assets to the
Issuer pursuant to Section 2.01, in each case and at all times shall be treated
under applicable State law and federal bankruptcy law as a sale by the Seller to
the Issuer. If, after the Closing Date, it is determined that all or any portion
of the assets described in Sections 2.01(a) and 2.01(b) hereof continue to be
property of the Seller, then the Seller shall have been deemed to have hereby
granted to the Issuer a security interest in all of such party's right, title
and interest in, to and under all such assets, and this Agreement shall
constitute a security agreement under applicable law.
SECTION 10.17. POWER OF ATTORNEY. The Issuer hereby grants a power of
attorney to the Servicer and the Collateral Agent to make any recording or
filing of any financing statement or continuation statement evidencing an
interest in the Contract Assets.
SECTION 10.18. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Seller
appoints as of the date hereof the Collateral Agent its respective
attorney-in-fact with full authority in the place and stead of the Seller and in
the name of the Seller or otherwise, from time to time in the discretion of the
Trustee acting at the direction of the Majority Noteholders, to take any action
and to execute any instrument that the Trustee may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation,
after an Early Amortization Event or Purchase Termination Event has occurred and
is continuing to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with the Contract Assets, to settle, compromise, compound, prosecute
or defend any action or proceeding with respect to the Contract Assets, to
receive, endorse and collect all drafts or other instruments and documents made
payable to the Seller in connection therewith or representing any payment,
dividend or other distribution in respect of the Contract Assets or any part or
proceeds thereof and to give full discharge for the same or to extend the time
of payment of or to make any allowance or adjustment with respect to any or all
of the Contract Assets, or to replace the Servicer, and if an Early Amortization
Event has occurred and is continuing, the Collateral Agent may, as such
attorney-in-fact, file any claims or take any action or institute any
proceedings which the Trustee may deem to be necessary or desirable for the
collection thereon or to enforce compliance with the terms and conditions of the
Purchase and Servicing Agreement or the Purchase Agreement.
-47-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Purchase
and Servicing Agreement to be duly executed and delivered by its proper and duly
authorized officers as of the date first above written.
TNI FUNDING COMPANY I, L.L.C., as Issuer
By_______________________________________
Name:
Title:
TNI FUNDING I, INC., as Seller
By_______________________________________
Name:
Title:
TRANSMEDIA NETWORK INC., for itself and
as Servicer
By_______________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
By_______________________________________
Name:
Title:
-48-
<PAGE>
FRANK FELIX ASSOCIATES, LTD., as Back-up
Servicer
By_______________________________________
Name:
Title:
-49-
<PAGE>
FORM OF
SUBORDINATED NOTE
December_, 1996
TNI FUNDING COMPANY I, L.L.C., a Delaware limited liability company
(the "ISSUER"), hereby promises to pay to the order of TNI FUNDING I, INC., a
Delaware special purpose corporation (the "SELLER"), the principal amount of
this Subordinated Note, determined as described below, together with interest
thereon at a rate of 10% per annum in lawful money of the United States of
America. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Indenture dated as of December 1, 1996,
between the Issuer and The Chase Manhattan Bank, as trustee (the "TRUSTEE")
(such agreement, as it may from time to time be amended, supplemented or
otherwise modified in accordance with its terms, the "INDENTURE").
The principal amount of this Subordinated Note at any time shall be
determined in accordance with the provisions of Article IX of the Purchase and
Servicing Agreement among the Issuer, the Seller, the Trustee, Frank Felix
Associates, Ltd. (as Back-up Servicer) and Transmedia Network, Inc. (as
Servicer) dated as of December 1, 1996 (the "PURCHASE AND SERVICING AGREEMENT").
All principal of and interest on this Subordinated Note shall be due and payable
at the times provided in Section 9.01 of the Purchase and Servicing Agreement.
This Subordinated Note represents solely the right to receive certain amounts
from funds available under the Security Agreement and only to the extent, in the
manner and at times set forth in the Indenture and the Security Agreement and
this Subordinated Note does not represent a security interest in the Contract
Assets or their proceeds. No payments may be received, directly or indirectly,
by the Seller (and if received, the Seller agrees to return such payments to the
Issuer) on this Subordinated Note unless the Issuer has paid all amounts
required pursuant to the Indenture and the Security Agreement to be paid prior
to any payment in respect of this Subordinated Note.
Payments of principal on this Subordinated Note shall be made by wire
transfer of immediately available funds to such account of the Seller as the
Seller may designate in writing.
This Subordinated Note is subordinate and junior in right of payment in
full to all the Obligations to the extent and in the manner provided in Article
1X of the Purchase and Servicing Agreement; and the holder by acceptance hereof
agrees that payments on this Subordinated Note may be made only from the Secured
Collateral and the proceeds thereof and agrees to be bound by all the provisions
of Article IX of the Purchase and Servicing Agreement.
The Issuer hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
<PAGE>
It is the intention of the Issuer and the Seller to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of New
York and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Subordinated Note, it is agreed as follows: (i) the
aggregate of all consideration that constitutes interest, if any, under
applicable law that is taken, reserved, contracted for, charged or received
under this Subordinated Note or any other agreement or document executed in
connection with this Subordinated Note shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to other amounts due under this Subordinated Note by the holder hereof
(or if this Subordinated Note shall have been paid in full, refunded to the
Issuer); and (ii) in the event that maturity of this Subordinated Note is
accelerated by reason of any election by the holder hereof resulting from any
default hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Subordinated Note or otherwise shall be cancelled
automatically as of the date of such acceleration or prepayment and, if
theretofore prepaid, shall be credited to other amounts due under this
Subordinated Note (or if this Subordinated Note shall have been paid in full,
refunded to the Issuer). In the event that applicable law provides for a ceiling
on the rate of interest, if any, chargeable hereunder, that ceiling shall be the
indicated rate ceiling.
The holder hereof agrees that it shall have no right to cause, by way
of acceleration or otherwise, any payment of principal hereunder to become due
or payable, prior to the times provided in the Security Agreement.
The holder hereof agrees to be bound by all of the provisions of the
Transaction Documents, including, without limitation, the covenant that prior to
the date which is one year and one day after the payment in full of all
outstanding Notes it will not institute against, or join any other Person in
instituting against, the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the law
of the United States or any State.
This Subordinated Note shall not be assigned, transferred, exchanged,
pledged, hypothecated, participated or otherwise conveyed except as otherwise
provided in the Transaction Documents.
D-2
<PAGE>
THIS SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
TNI FUNDING COMPANY I, L.L.C.
By___________________________________
Title:_____________________________
D-3
<PAGE>
EXHIBIT A
FORM OF CONFIRMATION OF
SALE AND ASSIGNMENT
<PAGE>
EXHIBIT B
FORM OF SETTLEMENT STATEMENT
Effective on the date reflected above and upon transmission of the
attached Daily Report to The Chase Manhattan Bank, TNJ Funding I, Inc. ("TNI")
hereby absolutely transfers all of its right, title and interest in the Contract
Assets identified pursuant to the terms and conditions of the Purchase
Agreement, dated as of December 1, 1996, among TNI, TNI Funding I, LLC, Frank
Felix Associates, Ltd., The Chase Manhattan Bank and Transmedia Network Inc.
TNI FUNDING I, INC.
By /s/ David Weinberg
[See Attached Form]
<PAGE>
EXHIBIT C
FORM OF DAILY REPORT
Effective on the date reflected above and upon transmission of the
attached Daily Report to The Chase Manhattan Bank, TNJ Funding I, Inc. ("TNI")
hereby absolutely transfers all of its right, title and interest in the Contract
Assets identified pursuant to the terms and conditions of the Purchase
Agreement, dated as of December 1, 1996, among TNI, TNI Funding I, LLC, Frank
Felix Associates, Ltd., The Chase Manhattan Bank and Transmedia Network Inc.
TNI FUNDING I, INC.
By /s/ David Weinberg
[See Attached Form]
<PAGE>
EXHIBIT D
FORM OF SUBORDINATED NOTE
December __, 1996
TNI FUNDING COMPANY 1, L.L.C., a Delaware limited liability company
(the "ISSUER"), hereby promises to pay to the order of TNI FUNDING 1, INC., a
Delaware special purpose corporation (the "SELLER"), the principal amount of
this Subordinated Note, determined as described below, together with interest
thereon at a rate of 10% per annum in lawful money of the United States of
America. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Indenture dated as of December 1, 1996,
between the Issuer and The Chase Manhattan Bank, as trustee (the "TRUSTEE")
(such agreement, as it may from time to time be amended, supplemented or
otherwise modified in accordance with its terms, the "INDENTURE").
The principal amount of this Subordinated Note at any time shall be
determined in accordance with the provisions of Article IX of the Purchase and
Servicing Agreement among the Issuer, the Seller, the Trustee, Frank Felix
Associates, Ltd. (as Back-up Servicer) and Transmedia Network, Inc. (as
Servicer) dated as of December 1, 1996 (the "PURCHASE AND SERVICING AGREEMENT").
All principal of and interest on this Subordinated Note shall be due and payable
at the times provided in Section 9.01 of the Purchase and Servicing Agreement.
This Subordinated Note represents solely the right to receive certain amounts
from funds available under the Security Agreement and only to the extent, in the
manner and at times set forth in the Indenture and the Security Agreement and
this Subordinated Note does not represent a security interest in the Contract
Assets or their proceeds. No payments may be received, directly or indirectly,
by the Seller (and if received, the Seller agrees to return such payments to the
Issuer) on this Subordinated Note unless the Issuer has paid all amounts
required pursuant to the Indenture and the Security Agreement to be paid prior
to any payment in respect of this Subordinated Note.
Payments of principal on this Subordinated Note shall be made by wire
transfer of immediately available funds to such account of the Seller as the
Seller may designate in writing.
This Subordinated Note is subordinate and junior in right of payment in
full to all the Obligations to the extent and in the manner provided in Article
IX of the Purchase and Servicing Agreement; and the holder by acceptance hereof
agrees that payments on this Subordinated Note may be made only from the Secured
Collateral and the proceeds thereof and agrees to be bound by all the provisions
of Article IX of the Purchase and Servicing Agreement.
The Issuer hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
<PAGE>
It is the intention of the Issuer and the Seller to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of New
York and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Subordinated Note, it is agreed as follows: (i) the
aggregate of all consideration that constitutes interest, if any, under
applicable law that is taken, reserved, contracted for, charged or received
under this Subordinated Note or any other agreement or document executed in
connection with this Subordinated Note shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to other amounts due under this Subordinated Note by the holder hereof
(or if this Subordinated Note shall have been paid in full, refunded to the
Issuer); and (ii) in the event that maturity of this Subordinated Note is
accelerated by reason of any election by the holder hereof resulting from any
default hereunder or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Subordinated Note or otherwise shall be cancelled
automatically as of the date of such acceleration or prepayment and, if
theretofore prepaid, shall be credited to other amounts due under this
Subordinated Note (or if this Subordinated Note shall have been paid in full,
refunded to the Issuer). In the event that applicable law provides for a ceiling
on the rate of interest, if any, chargeable hereunder, that ceiling shall be the
indicated rate ceiling.
The holder hereof agrees that it shall have no right to cause, by way
of acceleration or otherwise, any payment of principal hereunder to become due
or payable, prior to the times provided in the Security Agreement.
The holder hereof agrees to be bound by all of the provisions of the
Transaction Documents, including, without limitation, the covenant that prior to
the date which is one year and one day after the payment in full of all
outstanding Notes it will not institute against, or join any other Person in
instituting against' the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the law
of the United States or any State.
This Subordinated Note shall not be assigned, transferred, exchanged,
pledged, hypothecated, participated or otherwise conveyed except as otherwise
provided in the Transaction Documents.
THIS SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
TNI FUNDING COMPANY 1, L.L.C.
By__________________________________
Title:___________________________
D-2
<PAGE>
EXHIBIT E
FORM OF CONTRACT
[See Attached Forms)
<PAGE>
EXHIBIT F
SCOPE OF AGREED-UPON PROCEDURES
[See Attached Form]
<PAGE>
SCHEDULE I
CONTRACT SCHEDULE
[delivered to the Trustee on the Closing Date]
<PAGE>
SCHEDULE II
TRADE NAMES
Transmedia
Transmedia Network Inc.
Transmedia Restaurant Company Inc.
Transmedia Service Company Inc.
<PAGE>
SCHEDULE III
BANK ACCOUNTS AND POST OFFICE BOXES
TITLE OF ACCOUNT BANK ACCT. NO.
Collateral Account The Chase Manhattan Bank 507-868226
Collection Deposit Account The Chase Manhattan Bank 507-869052
POST OFFICE BOXES LOCATION P.O. BOX NO.
North Miami, FL 619400
33261-9400
1
<PAGE>
SCHEDULE V
CARDMEMBER AGREEMENTS
[delivered to the Trustee on the Closing Date]
1
<PAGE>
SCHEDULE VII
COMPUTER SOFTWARE
RPG 400 Proprietary Software
1
EXHIBIT 10.26
================================================================================
INDENTURE
dated as of December 1, 1996
between
TNI FUNDING COMPANY I, L.L.C.,
as Issuer
and
THE CHASE MANHATTAN BANK,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS......................................1
SECTION 2. ISSUANCE OF NOTES; APPOINTMENT OF TRUSTEE;
CONDITIONS OF ISSUANCE...........................1
SECTION 3. NOTE FORMS; TERMS; EXECUTION ....................5
SECTION 4. AUTHORIZED REPRESENTATIVES.......................6
SECTION 5. ISSUER'S REPRESENTATIONS AND WARRANTES...........6
SECTION 6. PROCEEDS OF SALE OF NOTES .......................6
SECTION 7. PAYMENT OF INTEREST AND PRINCIPAL; PAYMENT TO
NOTEHOLDER ON RECORD DATE; EFFECT OF PAYMENTS ON
FUTURE NOTEHOLDERS...............................7
SECTION 8. PAYMENT OF PRINCIPAL AND INTEREST AT MATURITY....8
SECTION 9. MODIFICATION OF TERMS ...........................9
SECTION 10. APPLICATION OF FUNDS; RETURN OF UNCLAIMED FUNDS.10
SECTION 11. INFORMATION REGARDING AMOUNTS DUE...............10
SECTION 12. PAYMENT OF FUNDS................................11
SECTION 13. NOTE REGISTER; REGISTRATION OF TRANSFER OR
EXCHANGE; PERSONS DEEMED OWNERS.................11
SECTION 14. APPLICATION OF PAYMENTS ON THE NOTES ...........13
SECTION 15. MUTILATED, DESTROYED, LOST, OR STOLEN NOTES ....13
SECTION 16. LIABILITY.......................................14
SECTION 17. INDEMNIFICATION.................................14
SECTION 18. COMPENSATION OF THE TRUSTEE.....................15
SECTION 19. SATISFACTION AND DISCHARGE OF INDENTURE.........15
SECTION 20. NOTICES ........................................15
SECTION 21. TRUSTEE; RESIGNATION; REMOVAL; SUCCESSORS.......17
-i-
<PAGE>
SECTION 22. CERTAIN RESPONSIBILITIES AND RIGHTS OF
THE TRUSTEE.....................................18
SECTION 23. CANCELLATION OF NOTES...........................21
SECTION 24. BENEFIT OF AGREEMENT............................21
SECTION 25. NOTES HELD BY THE TRUSTEE; RIGHTS OF TRUSTEE....21
SECTION 26. INSPECTION......................................21
SECTION 27. LICENSE.........................................21
SECTION 28. TRUSTEE AND COLLATERAL AGENT MAY ENFORCE CLAIMS
WITHOUT POSSESSION OF THE NOTES.................22
SECTION 29. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION
NOT WAIVER .....................................22
SECTION 30. NOTEHOLDERS AUTHORIZED TO DIRECT TRUSTEE........23
SECTION 31. LIMITATION ON PROCEEDINGS BY NOTEHOLDERS........23
SECTION 32. SUCCESSOR SERVICER..............................24
SECTION 33. RESTORATION OF RIGHTS AND REMEDIES..............24
SECTION 34. NOTEHOLDER CONSENT TO TRUSTEE'S OTHER DUTIES....24
SECTION 35. ACTS OF NOTEHOLDERS.............................24
SECTION 36. NO RECOURSE.....................................25
SECTION 37. PAYMENT OF TAXES................................25
SECTION 38. HEADINGS........................................25
SECTION 39. FORWARDING OF NOTICES...........................25
SECTION 40. GOVERNING LAW...................................25
SECTION 41. COUNTERPARTS....................................25
Signature Page..............................................26
-ii-
<PAGE>
EXHIBITS
EXHIBIT A Form of 7.40% Right-to-Receive-Backed Note
EXHIBIT B Form of Assignment of Note
EXHIBIT C Form of Certificate of Authentication
EXHIBIT D-1 Form of Investor Letters
EXHIBIT D-2 Form of Transferor Letter
ANNEX
ANNEX I Glossary of Terms
SCHEDULES
SCHEDULE I UCC-1 Filing Locations
-iii-
<PAGE>
INDENTURE, dated as of December 1, 1996, between TNI Funding Company I,
L.L.C., a Delaware limited liability company (the "ISSUER") and The Chase
Manhattan Bank, as trustee (in such capacity, the "TRUSTEE").
W I T N E S S E T H :
WHEREAS, the Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issue of its Right-to-Receive-Backed Notes (the
"NOTES"); all covenants and agreements made by the Issuer herein are for the
benefit and security of the Noteholders; the Issuer is entering into the
Indenture, and the Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged; and
WHEREAS, no action or inaction on the part of the Trustee shall release the
Issuer from any of the obligations and agreements to be observed and performed
by it hereunder or constitute an assumption of any such obligation on the part
of the Trustee and the Trustee expressly disavows any liability thereto;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby expressly acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings assigned to them in Annex I to this Indenture.
SECTION 2. ISSUANCE OF NOTES; APPOINTMENT OF TRUSTEE; CONDITIONS OF
ISSUANCE. (a) On the Closing Date, the Issuer shall issue in a single offering
and sell on a private placement basis $33,000,000 aggregate principal amount of
the Notes.
(b) Each Noteholder by its acceptance of a Note shall have appointed the
Trustee to act, on the terms and conditions specified herein, as trustee for the
benefit of the Noteholders.
(c) The Trustee shall, upon receipt of, and in accordance with, written
instructions from the Issuer and upon the satisfaction of the conditions set
forth below, authenticate and deliver the Notes on the Closing Date. The
obligation of the Trustee to authenticate, execute and deliver the Notes is
subject to the satisfaction of the following conditions (evidence of which shall
be in the form of a certificate from the Issuer and the Servicer to the
Trustee):
(i) the Issuer shall have executed the Notes to be authenticated on
the Closing Date and shall have delivered such Notes to the Trustee on or
prior to the Closing Date;
(ii) the Issuer, the Seller, the Initial Sellers and the Servicer
shall have delivered to the Trustee and each Initial Noteholder on or prior
to the Closing Date an
<PAGE>
officer's certificate (with respect to the Issuer, such officer shall
be the President, any Vice President or a Financial Officer of its
Independent Member) dated as of the Closing Date of each of the Issuer, the
Seller, the Initial Sellers and the Servicer, stating, as applicable, that
such Person is not in default under this Indenture, the Purchase Agreement,
the Purchase and Servicing Agreement or any other Transaction Document to
which it is a party and that the issuance of the Notes will not result in
any breach of any of the terms, conditions or provisions of, or constitute
a default under, such Person's certificate of incorporation, by-laws or
other organizational documents, as applicable, or any material indenture,
mortgage, deed of trust or other agreement or instrument to which such
Person is a party or by which it is bound, or any order of any court or
administrative agency entered in any proceeding to which such Person is a
party or by which it may be bound or to which it may be subject; the
certificate of the Issuer and the Servicer shall also state that, as of the
Closing Date, all conditions precedent provided in this Indenture relating
to the authentication and delivery of the Notes have been complied with;
(iii) each of the Issuer, the Seller, the Initial Sellers, the Back-up
Servicer and the Servicer shall have delivered to the Trustee and each
Initial Noteholder on or prior to the Closing Date a Board Resolution of
its board of directors (with respect to the Issuer, the board of directors
of each of its Members) authorizing, as applicable, the execution, delivery
and performance of this Indenture and the other Transaction Documents and
the transactions contemplated hereby and thereby and any organizational
proceedings necessary in connection therewith, certified by an officer of
the Independent Member of the Issuer, the Seller, the Initial Sellers, the
Back-up Servicer or the Servicer, as applicable;
(iv) each of the Issuer, the Seller, the Initial Sellers, the Back-up
Servicer and the Servicer shall have delivered to the Trustee and each
Initial Noteholder on or prior to the Closing Date a copy of an officially
certified document, dated not more than 30 days prior to the Closing Date,
evidencing its due organization and good standing;
(v) each of the Issuer, the Seller, the Initial Sellers, the Back-up
Servicer and the Servicer shall have delivered to the Trustee and each
Initial Noteholder on or prior to the Closing Date copies of its charter
and by-laws (or with respect to the Issuer, its Certificate of Formation
and Limited Liability Company Agreement) certified by its Secretary or an
Assistant Secretary (with respect to the Issuer, the Secretary of its
Independent Member);
(vi) the Servicer shall have delivered to the Trustee and each Initial
Noteholder on or prior to the Closing Date a certificate listing the
officers of the Servicer responsible for servicing the Contracts as of the
Closing Date;
(vii) on or prior to the Closing Date, each Initial Noteholder shall
have received from Chapman and Cutler, special counsel for the Issuer and
the Seller, opinions in form and substance reasonably satisfactory to such
Noteholder and its
-2-
<PAGE>
special counsel and covering such matters as such Noteholder and its
special counsel shall reasonably request, each addressed to the Trustee and
Noteholders and dated the Closing Date;
(viii) on or prior to the Closing Date, each Initial Noteholder shall
have received from counsel for Transmedia and the Initial Sellers, opinions
in form and substance reasonably satisfactory to such Noteholder and its
special counsel and covering such matters as such Noteholder and its
special counsel shall reasonably request, each addressed to the Trustee and
Noteholders and dated the Closing Date;
(ix) on or prior to the Closing Date, each Initial Noteholder shall
have received from Thacher, Proffitt & Wood, counsel to the Trustee,
opinions in form and substance reasonably satisfactory to the Trustee, such
Noteholder and its special counsel and covering such matters as such
Noteholder and its special counsel shall reasonably request, each addressed
to the Trustee and Noteholders and dated the Closing Date;
(x) on the Closing Date, each Initial Noteholder shall have received
written evidence satisfactory to such Noteholders that the Rating Agency
has issued a rating of at least "A" for the Notes on the Closing Date;
(xi) on or prior to the Closing Date, S&P's CUSIP Service Bureau shall
have assigned private placement numbers for the Notes and each Initial
Noteholder shall have received evidence reasonably satisfactory to it of
such numbers;
(xii) on or prior to the Closing Date, each Initial Noteholder shall
have received a certificate of the Trustee attesting to the due
authorization, execution and delivery of the Indenture by the Trustee;
(xiii) on or prior to the Closing Date, each Initial Noteholder shall
have received from the Issuer a certificate, dated the Closing Date, of a
Member of the Issuer, in which such Member shall state that: (i) the
representations and warranties of the Issuer in the Indenture and other
Transaction Documents to which it is a party are true and correct on and as
of the Closing Date; and (ii) the Issuer has complied with all agreements
and satisfied all conditions on its part required to be performed or
satisfied hereunder and under each of the other Transaction Documents at or
prior to the Closing Date;
(xiv) on or prior to the Closing Date, each Initial Noteholder shall
have received from the Seller a certificate, dated the Closing Date, of the
President or any Vice President of the Seller, in which such officer shall
state that: (i) the representations and warranties of the Seller in each of
the Transaction Documents are true and correct on and as of the Closing
Date; and (ii) the Seller has complied with all agreements and satisfied
all conditions on its part required to be performed or satisfied hereunder
and under each of the other Transaction Documents at or prior to the
Closing Date;
-3-
<PAGE>
(xv) on or prior to the Closing Date, each Initial Noteholder shall
have received from Transmedia a certificate, dated the Closing Date, of the
President or any Vice President of Transmedia, in which such officer shall
state that: (i) the representations and warranties of Transmedia in the
Transaction Documents are true and correct on and as of the Closing Date;
and (ii) Transmedia has complied with all agreements and satisfied all
conditions on its part required to be performed or satisfied hereunder and
under each of the other Transaction Documents at or prior to the Closing
Date;
(xvi) on the Closing Date, the Issuer shall have deposited, or caused
to be deposited, into the Settlement Account, an amount equal to $990,000;
(xvii) on or prior to the Closing Date, Transmedia, the Initial
Sellers, the Seller and the Issuer shall have executed any and all UCC
termination statements as may have been reasonably requested by any
Initial Noteholder or their special counsel in connection with the
interests of Transmedia, the Initial Sellers, the Seller or the Issuer in
the Secured Collateral.
(xviii) on or prior to the Closing Date, each Initial Noteholder shall
have received evidence satisfactory to such Noteholder or its special
counsel that, on or before the Closing Date, UCC-1 financing statements
have been or are being filed in the filing offices identified on Schedule I
hereto and all other actions have been taken reflecting the transfer of the
interest of the Initial Sellers in the Assets to the Seller and the Seller
in the assets constituting the Contract Assets to the Issuer and the pledge
of such assets by the Issuer to the Collateral Agent;
(xix) subsequent to September 30, 1995 or, if such Person did not
exist on such date, subsequent to the date of its formation or
incorporation, there shall not have been any material adverse change in the
condition, financial or otherwise, of the Issuer, the Seller, Transmedia,
or the Initial Sellers, or any development involving a material adverse
prospective change in or affecting the business or properties of the
Issuer, the Seller, Transmedia, or the Initial Sellers, the effect of which
can be reasonably expected to have a material and adverse effect on the
investment by each Initial Noteholder in the Notes;
(xx) on or prior to the Closing Date, each Initial Noteholder or its
special counsel shall have received executed copies of each of the
Transaction Documents;
(xxi) each of the parties thereto shall have delivered to the Trustee
and each Initial Noteholder on or prior to the Closing Date copies of
executed agreements entered into by the relevant Credit Card Companies
which agreements shall be in force and substance reasonably satisfactory to
each Initial Noteholder;
(xxii) On the Closing Date, the Issuer shall have deposited, or caused
to be deposited, into the Reserve Account, the Reserve Amount; and
-4-
<PAGE>
(xxiii) On the Closing Date, each of the Initial Purchasers shall have
received and be entitled to rely upon executed copies of each of the
certificates from the Initial Sellers, the Seller, the Issuer and
Transmedia, supporting the Issuer's special counsel's opinions being
delivered in connection with the issuance of the Notes.
SECTION 3. NOTE FORMS; TERMS; EXECUTION. (a) The Notes shall be issued on
the Closing Date. Each Note issued hereunder shall be in substantially the form
of Exhibit A hereto and, subject to earlier amortization, shall mature on the
Scheduled Maturity Date. The form of the Notes may also have such additional
provisions, omissions, variations or substitutions as are not inconsistent with
the provisions of this Indenture and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as may
be required to comply with any law or with any rules made pursuant thereto or
with the rules of any governmental agency or as may consistently herewith be
determined by the Authorized Representative executing such Notes, all as
evidenced by its execution of such Notes.
(b) The Notes are denominated in United States dollars and shall be in
denominations of at least $100,000 and any larger denominations. The Notes shall
bear interest at a fixed rate from the Closing Date, at the rate of 7.40 percent
per annum (the "NOTE RATE") calculated as provided in Section 7(a).
(c) Each Note shall bear the following legend:
THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"), AND THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED
WITHOUT REGISTRATION UNDER THE ACT EXCEPT (l) PURSUANT TO RULE 144A OR (2)
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE ACT AND IN
ACCORDANCE WITH THE CONDITIONS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN. TRANSFER OF THIS NOTE IS FURTHER LIMITED BY THE REQUIREMENT THAT
FOLLOWING ANY TRANSFER HEREOF SUCH NOTE SHALL BE BENEFICIALLY OWNED (WITHIN
THE MEANING OF THE INVESTMENT COMPANY ACT) BY NO MORE THAN ONE PERSON FOR
EACH $1,000,000 IN PRINCIPAL AMOUNT REPRESENTED HEREBY, AND THE TRANSFEREE
HEREOF HAS FURNISHED TO THE TRUSTEE A CERTIFICATE TO SUCH EFFECT.
(d) Each Note will be executed with the manual signature of one or more
Authorized Representatives of the Issuer. The Issuer will furnish the Trustee an
adequate supply of blank Notes, manually executed by an Authorized
Representative, to replace Notes that are transferred, mutilated, destroyed,
lost or stolen and to issue new Notes following a permitted transfer or
exchange. Only Notes bearing a Certificate of Authentication executed by the
Trustee by manual signature of one of its authorized officers shall be entitled
to the benefits of this Indenture or be valid or obligatory for any purpose.
Such certification by the Trustee upon any Note executed by the Issuer shall be
conclusive evidence that the Note so authenticated has been duly authenticated
and delivered hereunder. Each Note will be
-5-
<PAGE>
dated the date of its authentication. The Trustee may appoint an authenticating
agent to authenticate the Notes. An authenticating agent may authenticate the
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such authenticating
agent.
SECTION 4. AUTHORIZED REPRESENTATIVES. (a) The Issuer shall furnish the
Trustee with a certificate of the Issuer certifying the incumbency and specimen
signatures of officers of its Members authorized (i) to execute Notes on behalf
of the Issuer by manual signature and (ii) to give instructions or to make
certain representations to the Trustee in accordance with the provisions of this
Indenture (each an "AUTHORIZED REPRESENTATIVE"). Until the Trustee receives a
subsequent incumbency certificate of the Issuer, the Trustee shall be entitled
to rely on the last such certificate delivered to it for purposes of determining
the Authorized Representatives. The Trustee shall have no responsibility to the
Issuer to determine by whom a manual signature may have been affixed on the
Notes, or to determine whether any manual signature is genuine, if such manual
signature resembles the specimen signatures filed with the Trustee by an
Authorized Representative. Any Note bearing the manual signature of a person who
is an Authorized Representative on the date such signature is affixed shall bind
the Issuer after the completion thereof by the Trustee, notwithstanding that
such person shall have ceased to hold office on the date such Note is
authenticated and delivered by the Trustee.
(b) On the Closing Date, the Trustee shall furnish the Issuer with a
certificate of the Trustee (i) certifying the incumbency and specimen signatures
of officers, employees or agents authorized to authenticate Notes and (ii)
advising the Issuer which of its officers, employees or agents are generally
responsible for the administration of this Indenture.
SECTION 5. ISSUER'S REPRESENTATIONS AND WARRANTIES. The Issuer represents
and warrants to the Trustee and the Noteholders that the issuance and delivery
of the Notes has been duly and validly authorized by the Issuer and that the
Notes, when completed, authenticated, issued and delivered in accordance with
the terms of this Indenture, will constitute the valid and legally binding
obligations of the Issuer enforceable against the Issuer in accordance with
their terms, except with respect to the Issuer, subject to general principles of
equity and to bankruptcy, insolvency, reorganization, moratorium and similar
laws now or hereafter in effect relating to creditors' rights generally.
SECTION 6. PROCEEDS OF SALE OF NOTES. Proceeds received in payment for
Notes are to be in immediately available funds on the Closing Date. Such
proceeds shall be used to purchase Contract Assets in accordance with the terms
of the Purchase and Servicing Agreement, to pay all fees and expenses incurred
in connection with the Transactions and the Transaction Documents due and
payable as of the Closing Date, to pay all fees and expenses incurred in
connection with such issuance and to make deposits to the Collateral Account to
make payments permitted under Sections 7 and 8 of the Security Agreement,
including payments for the purchase of Contract Assets in accordance with the
terms of the Purchase and Servicing Agreement.
-6-
<PAGE>
SECTION 7. PAYMENT OF INTEREST AND PRINCIPAL; PAYMENT TO NOTEHOLDER ON
RECORD DATE; EFFECT OF PAYMENTS ON FUTURE NOTEHOLDERS. (a) The Notes shall bear
interest on the unpaid principal amount thereof from and including the Closing
Date at the applicable Note Rate (calculated on the basis of a 360-day year
consisting of 12 months of 30 days each) through the day immediately preceding
the initial Note Payment Date and thereafter, monthly from and including the
most recent Note Payment Date through and including the day immediately
preceding the next Note Payment Date, and (to the extent that the payment of
such interest shall be legally enforceable) on any overdue installment of
interest from the date such interest became due and payable (giving effect to
any applicable grace periods provided herein) until fully paid. Interest shall
be due and payable in arrears on each Note Payment Date, with each payment of
interest calculated as described above on the unpaid principal amount of the
outstanding Notes on the immediately preceding Note Payment Date (after the
distributions on the Notes on such date) or, with respect to interest payable on
the initial Note Payment Date, on the principal amount of the Notes issued on
the Closing Date; PROVIDED, HOWEVER, that in making any interest payment, if the
interest calculation with respect to any Note shall result in a portion of such
payment being less than $.01, then such payment shall be decreased to the
nearest whole cent, and no subsequent adjustment shall be made in respect
thereof.
(b) Payments of principal of the Notes in an amount equal to the Principal
Amount shall be made by the Issuer on each Note Payment Date commencing on the
Note Payment Date immediately following the Amortization Commencement Date. The
Issuer is not required to make any payments of principal at any time prior to
the Amortization Commencement Date.
(c) Except as set forth in paragraph (d) below, each payment of interest or
principal will be made by check mailed to the addresses of the Noteholders as
they appear on the applicable Record Date in the Note Register referred to in
Section 13.
(d) Payments of interest or principal will be made by wire transfer of
immediately available funds to an account maintained by each Noteholder in the
United States who delivers to the Trustee account payment instructions at least
five (5) Business Days prior to the applicable Record Date and holds, together
with its Affiliates, an aggregate original principal amount of at least
$1,000,000 of Notes (such Noteholder, a "WIRE TRANSFER PAYMENT RECIPIENT").
Payments will be made to the account designated by any such Noteholder on each
Note Payment Date until such Noteholder provides the Trustee with written notice
of changes to the account payment instructions at least five (5) Business Days
prior to the applicable Record Date. The Trustee acknowledges receipt of the
information contained on Schedule I to the Note Purchase Agreement with respect
to the initial purchasers of the Notes (the "INITIAL NOTEHOLDERS") containing
the account designation for the Initial Noteholders. The Trustee is entitled to
rely on such information and make payments in accordance therewith until receipt
of further written instructions.
(e) Any installment of interest or principal, so payable, and punctually
paid or duly provided for, on any Note Payment Date shall be paid to the person
who is a Noteholder at the close of business on the last day of the calendar
month immediately preceding such Note
-7-
<PAGE>
Payment Date whether or not such date shall be a Business Day (the "RECORD
DATE"); PROVIDED, HOWEVER, that interest payable on the Final Maturity Date
shall be payable to the person to whom principal shall be payable pursuant to
Section 8.
(f) Any reduction in the principal amount of the Notes effected by any
payments of principal or otherwise shall be binding upon all future Noteholders,
whether or not noted thereon.
(g) The Issuer shall pay or make available for payment the final
installment of principal of and interest accrued on the Notes on the Note
Payment Date following the date the funds on deposit in the Principal Subaccount
are sufficient therefor. No later than five (5) Business Days prior to the
Note Payment Date on which the aggregate unpaid principal amount of the Notes
and accrued and unpaid interest thereon would be paid in full, assuming the
application of monies available therefor based on the applicable Settlement
Statement, the Issuer shall provide to each Noteholder and the Trustee a notice
which shall state: (i) the Final Maturity Date, (ii) the principal amount
outstanding with respect to each $1,000 original face amount of each Note, any
interest due and payable with respect to such $1,000 face amount as of the Final
Maturity Date, (iii) that on the Final Maturity Date all unpaid principal and
interest with respect to each Note will become due and payable and that
interest, if any, thereon shall cease to accrue from and after such Final
Maturity Date (PROVIDED that all amounts owing with respect to such Note are
paid on such date) and (iv) where the Notes are to be surrendered for payment
pursuant to Section 8, if surrender is required hereunder. Neither the failure
to give notice nor any defect in any notice given to an particular Noteholder
shall affect the sufficiency of any notice with respect to other Notes.
SECTION 8. PAYMENT OF PRINCIPAL AND INTEREST AT MATURITY. (a) With respect
tO each Wire Transfer Payment Recipient, the Trustee will pay in immediately
available funds any remaining principal amount of, and any accrued but unpaid
interest on, its Note on the Final Maturity Date by wire transfer of immediately
available funds to the account maintained by such Noteholder in the United
States which was designated by such Noteholder in written instructions delivered
to the Trustee by such Noteholder without presentation and surrender of such
Note. Neither the Trustee nor the Issuer shall be liable for any claims arising
out of the fact that any such payment was made without such presentation and
surrender.
(b) With respect to Noteholders who are not Wire Transfer Payment
Recipients, the Trustee will pay by check any remaining principal amount of, and
any accrued but unpaid interest on, each Note on the Final Maturity Date only
upon presentation and surrender of such Note at the corporate trust office of
the Trustee on or after such Final Maturity Date.
(c) Any payment of principal of and interest on a Note required to be made
on a date that is not a Business Day shall be made on the next succeeding
Business Day, with the same force and effect as if made on such date, and no
additional interest shall accrue as a result of such delayed payment.
-8-
<PAGE>
(d) The Trustee will forthwith cancel each Note pursuant to Section 23 that
is presented and surrendered to its corporate trust office and paid in full. By
the acceptance of a Note, each Wire Transfer Payment Recipient shall have
acknowledged and agreed that the Trustee and the Issuer shall not be liable for
any claims arising out of or in connection with any Note of such Wire Transfer
Payment Recipient not being presented or surrendered to the Trustee on the Final
Maturity Date.
SECTION 9. MODIFICATION OF TERMS. (a) This Indenture may be amended by the
Issuer and the Trustee without the consent of any Noteholder for the purposes of
curing any ambiguity, or of curing, correcting or supplementing any provisions
contained herein which may be defective or inconsistent with any other provision
contained herein, PROVIDED that the Issuer shall provide to the Trustee and each
Noteholder an Opinion of Counsel that such amendment does not have a material
adverse effect on the Noteholders. Any such amendments of this Indenture will be
conclusive and binding on all Noteholders.
(b) Modifications and amendments to this Indenture and the Notes may also
be made, and future compliance therewith or past default by the Issuer may be
waived, with the consent of the Majority Noteholders; PROVIDED that no such
modification or amendment to the Indenture or any Note, and no waiver of the
terms and conditions of the Indenture and the Notes, may, without the written
consent of the holder of each such Note affected thereby, (i) change the
Scheduled Maturity Date or Final Maturity Date or any installment of interest on
or the method of determining the Principal on, any such Note; (ii) reduce the
principal amount of or interest on any such Note or change the date of payment
thereof; (iii) change the currency of payment of principal of or interest on any
such Note or any other amounts payable on any such Note; (iv) impair the right
to institute suit for the enforcement of any such payment on or with respect to
any such Note; (v) reduce the above-stated percentage of the principal amount of
Notes, the consent of whose holders is necessary to modify or amend the
Indenture or the Notes or to waive any future compliance therewith or past
default thereunder; or (vi) change any provision with respect to the optional or
mandatory redemption or prepayment of the Notes. Any modifications or amendments
of, or waivers with respect to, this Indenture and the Notes will be conclusive
and binding on all Noteholders and on all future Noteholders, whether or not
notation of such modifications, amendments or waivers is made upon the Notes.
Any instrument given by or on behalf of any holder of a Note in connection with
any consent to any such modification, amendment or waiver will be irrevocable
once given and will be conclusive and binding on all subsequent holders of such
Note.
(c) Any amendment, waiver, supplement, restatement, discharge or
termination to the Security Agreement, the Purchase and Servicing Agreement and
the Purchase Agreement shall not be effective without the prior written consent
of the Majority Noteholders and, if the rights of the Trustee are affected, the
Trustee. In addition, the Issuer will not alter the timing or priority of
payments of Collections set forth in Section 7 and 8 of the Security Agreement
or release any Contract Assets from the Lien of the Security Agreement (except
as provided in the Security Agreement), without the prior written consent of the
Trustee acting at the direction of all of the Noteholders.
-9-
<PAGE>
(d) No amendment, waiver, supplement, restatement, discharge or termination
to the Indenture, the Security Agreement, the Purchase and Servicing Agreement
or the Purchase Agreement shall be effective until the Issuer and the Trustee
shall have received written notice from the Rating Agency, to the effect that
such amendment, waiver, supplement, restatement, discharge or termination would
not result in a withdrawal or reduction of the then current rating on the Notes
by such Rating Agency.
(e) In accepting any additional trusts created by any modification or
amendment to this Indenture, the Notes or the Security Agreement and in
connection with any modification or amendment of the Purchase Agreement or the
Purchase and Servicing Agreement permitted by this Section, the Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an
opinion of counsel (which shall not be at the expense of the Trustee) stating
that such modification or amendment to this Indenture, the Notes, the Security
Agreement, the Purchase Agreement or the Purchase and Servicing Agreement is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such modified or amended Indenture or Security
Agreement or authenticate any such modified or amended Note which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
(f) Notes to be authenticated and delivered after the modification or
amendment of this Indenture pursuant to this Section may, and shall if required
by the Issuer or the Noteholders thereof, bear a notation in form approved by
the Issuer as to any matter provided for in such modified or amended Indenture.
If the Issuer or the Majority Noteholders shall so determine, new Notes so
modified as to conform, in the opinion of the Issuer and the Majority
Noteholders, to any such modification or amendment to this Indenture may be
prepared and executed by the Issuer and authenticated and delivered by the
Trustee in connection with any registered transfer or exchange of Notes.
SECTION 10. APPLICATION OF FUNDS; RETURN OF UNCLAIMED FUNDS. Until used or
applied as herein provided, all funds received by the Trustee under this
Indenture shall be held in trust for the purposes for which they were received,
will be uninvested for as long as such funds are held in trust and will be
segregated from other funds of the Trustee to the extent required by law and
hereunder. The Trustee shall be under no liability for interest on any funds
received by it except as otherwise agreed with the Issuer. Any funds deposited
with the Trustee for the payment of principal of and premium, if any, or
interest on the Notes, and remaining unclaimed for two years after the date upon
which such principal or interest became due and payable, shall be repaid to the
Issuer by the Trustee upon demand, and the holder of any Note to which such
deposit related and previously entitled to receive payment thereof shall
thereafter, as an unsecured general creditor, look only to the Issuer for the
payment thereof, and all liability of the Trustee with respect to such funds
shall thereupon cease.
SECTION 11. INFORMATION REGARDING AMOUNTS DUE. The Trustee shall, on each
Note Payment Date provide each Noteholder with a report (based on the aggregate
principal and interest information set forth in the Settlement Statement)
stating (i) the amount of interest and principal, as the case may be, due on the
related Note Payment Date for each $1,000
-10-
<PAGE>
face amount of the Notes and in total for all outstanding Notes, together with
(ii) the aggregate outstanding principal amount for all outstanding Notes.
SECTION 12. PAYMENT OF FUNDS. Payments of any interest on and principal of
the Notes shall be made by the Trustee, or the Collateral Agent on behalf of the
Trustee, out of and to the extent of funds in the Collateral Account, whether
such payment is by wire transfer or by check.
SECTION 13. NOTE REGISTER; REGISTRATION OF TRANSFER OR EXCHANGE; PERSONS
DEEMED OWNERS. (a) The Issuer shall keep, or shall cause to be kept by the
Trustee, a Note Register in which, subject to reasonable regulations as the
Issuer may prescribe, the Issuer shall provide for the registration of, and the
registration of transfer and exchange of, the Notes. The term "NOTE REGISTER"
shall mean the definitive record in which shall be recorded the name, address,
telephone number, facsimile number, contact person (if any) and taxpayer
identification number of each registered holder of the Notes (the "NOTEHOLDER")
as provided by such Noteholder by delivery of a form substantially similar to
Schedule I to the Note Purchase Agreement ("NOTEHOLDER NOTICE FORM"), together
with the Note numbers and the principal amount of each Note and details with
respect to the registration of any transfer or exchange of Notes. Absent
manifest error, the Trustee is entitled to rely upon all information provided on
such Schedule I or a Noteholder Notice Form by a Noteholder. Whenever any Notes
are surrendered to the Trustee for exchange or transfer pursuant to the terms
and conditions of this Indenture, the Issuer shall execute, and the Trustee
shall authenticate and deliver, Notes in a principal amount which the Noteholder
or the transferee is entitled to receive. The Trustee shall rely on such
Schedule I to the Note Purchase Agreement in the case of the Initial
Noteholders, and on a Noteholder Notice Form in the case of a subsequent
Noteholder except to the extent modified in a written notice by an Initial
Noteholder or other Noteholder received by the Trustee.
(b) The Noteholders of the Notes shall present directly to the Trustee all
requests for registration of transfer of Notes. Upon surrender for transfer at
the corporate trust office of the Trustee of any Note, and subject to the
restrictions set forth in this Section 13, the Trustee shall, at no charge to
the Noteholder (other than any transfer tax owed by such Noteholder), register
such transfer and shall deliver in the name of the transferee or transferees a
new Note for a like aggregate principal amount. The following restrictions with
respect to the registration of any transfer of any Note shall apply:
(i) the Trustee shall register the transfer of any Note made pursuant
to the exemption from registration under the Act provided by Rule 144A (as
indicated by the box checked by the transferor on the form of assignment on
Exhibit B attached hereto);
(ii) the Trustee shall register the transfer of any Note made pursuant
to an exemption from registration provided by Rule 904 of Regulation S
under the Act (as indicated by the box checked by the transferor on the
form of assignment on Exhibit B attached hereto); or
-11-
<PAGE>
(iii) with respect to any other requested transfer of a Note not
described in (i) and (ii) above, the Trustee shall register such transfer
if the Issuer and the Trustee shall have received any one of the following:
(A) an opinion of counsel, satisfactory in form and substance to
the Issuer and the Trustee (which shall not be at the expense of the
Trustee), substantially to the effect that such transfer does not
require registration under the Securities Act or qualification of
this Indenture under the Trust Indenture Act of 1939, as amended,
and that such transfer will not otherwise violate any United States
federal or state securities laws;
(B) an investment letter from the proposed transferee,
substantially to the effect that such transferee is a Qualified
Institutional Buyer or is an Accredited Investor as that term is
used in Rule 502 promulgated under the Act and as otherwise set
forth in Exhibit D-1 hereto; or
(C) a certification of the transferor substantially to the effect
set forth in Exhibit D-2 hereto, that such transfer is being made in
accordance with Rule 144A to a Qualified Institutional Buyer.
(c) No Notes presented for registration of transfer shall be
transferred if such transfer would, in the Opinion of Counsel to the
Issuer, result in the Issuer being deemed an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of
1940, as amended (the "1940 ACT"). No transfer or exchange of any Note
shall be made if, after such transfer, there would be more than 100
beneficial owners (within the meaning of the 1940 Act) of (i) the Notes,
(ii) the membership interests and (iii) all other securities of the Issuer.
For purposes of determining whether after a transfer of a Note there would
be more than 100 beneficial owners of the securities of the Issuer for
purposes of the 1940 Act the Trustee may rely upon the representations of
each Noteholder contained in the Noteholder's request for transfer and upon
information provided by the Issuer to the Trustee. At the request of the
Trustee, the Issuer shall promptly provide the Trustee with the number of
beneficial owners of all securities of the Issuer (except the Notes);
PROVIDED, HOWEVER, that in determining the number of such beneficial owners
the Issuer may rely upon the representations of such beneficial owners
contained in any letter delivered to the Issuer in connection with each
such beneficial owner's acquisition of such security.
(d) All Notes presented for registration of transfer or exchange
shall, if so required by the Trustee, be duly endorsed on the form of
assignment attached as Exhibit B hereto or be accompanied by a written
instrument of transfer, in form satisfactory to the Trustee, duly executed
by the Noteholder thereof or its attorney duly authorized in writing with a
copy to the Issuer.
(e) All Notes issued pursuant to paragraph (b) above or paragraph (f)
below shall be delivered to the Noteholder thereof at the corporate trust
office of the Trustee or (at the risk of such Noteholder) sent by mail to
such address as may be specified by such Noteholder in the request for
transfer or exchange. The Issuer and the Trustee may require
-12-
<PAGE>
payment of a sum sufficient to cover any stamp tax or other governmental charge
in connection with any such transfer, exchange or replacement, but no other
charge shall be made in connection with any such transfer, exchange or
replacement (except for the expenses of delivery).
(f) At the option of any Noteholder, Notes may be exchanged for other
Notes of any authorized denominations, of a like aggregate principal amount,
upon surrender of the Notes to be exchange at the corporate trust office of the
Trustee. Whenever any Notes are so surrendered for exchange, the Issuer shall
executive, and the Trustee shall authenticate and deliver the Notes which the
Noteholder making the exchange is entitled to receive.
(g) The Issuer and the Trustee and any agent thereof may deem and treat
the Noteholder of any Note as the absolute owner of such Note for the purpose of
receiving payment of the principal of and interest on such Note and for all
other purposes whatsoever, whether or not such Note may be overdue, and the
Issuer, the Trustee and any agent thereof shall not be affected by notice to
the contrary.
(h) The Trustee shall not be required to issue or register on the Note
Register the transfer or exchange of any Note for a period of 15 calendar days
immediately preceding the Scheduled Maturity date or the Final Maturity Date.
(i) Any Note held by the Issuer or an Affiliate thereof shall be deemed not
to be outstanding for purposes of determining Majority Noteholders.
SECTION 14. APPLICATION OF PAYMENTS ON THE NOTES. On each Note Payment
Date, subject to the terms and conditions of the Security Agreement, the
Trustee, based solely on the information provided by the Servicer on the
Settlement Report, shall apply all amounts paid with respect to the Notes as
provided in the Security Agreement.
SECTION 15. MUTILATED, DESTROYED, LOST, OR STOLEN NOTES. In case any Note
shall become mutilated, destroyed, lost or stolen, the Issuer shall execute and
upon its request the Trustee shall authenticate and deliver a new Note,
evidencing the same rights and obligations as such mutilated, destroyed, lost or
stolen Note and having a number not contemporaneously outstanding, in exchange
and substitution for the mutilated Note or in lieu of and substitution for the
Note destroyed, lost or stolen. In each case, the applicant for a substituted
Note shall furnish to the Issuer and the Trustee such reasonable security or
indemnity as may be required by them (the unsecured indemnity of an Initial
Noteholder shall be deemed satisfactory for such purpose) and, in every case of
destruction, loss or theft, the applicant shall also furnish to the Issuer and
the Trustee evidence to their satisfaction of the destruction, loss or theft of
such Note and of the ownership thereof. In the case of mutilation, the applicant
for a substituted Note shall surrender such mutilated Note to the Issuer or to
the Trustee for cancellation thereof. The Trustee shall authenticate any such
substituted Note and deliver the same upon written request or authorization of
any Authorized Representative. Upon the issuance of any substituted Note, the
Issuer and the Trustee may require the payment of a sum sufficient to cover any
reasonable fees and expenses (including any governmental charge or tax)
connected therewith. In the case of
-13-
<PAGE>
any note which is mutilated, destroyed, lost or stolen within the 15-day period
prior to the Final Maturity Date, the Issuer may, instead of issuing a
substitute Note, pay or authorize the payment of the same (without surrender
thereof except in the case of a mutilated Note) upon compliance by the
Noteholder with the provisions of this Section.
SECTION 16. LIABILITY. (a) The duties and obligations of the Trustee, its
officers, employees and agents shall be determined by the express provisions of
this Indenture and they shall not be liable for any act or omission hereunder
except for their negligence or willful misconduct.
(b) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligence or its own willful misconduct,
except that (i) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or any officer in its corporate trust
office, unless it shall be proved that such offer of the Trustee was negligent
in ascertaining the pertinent facts; (ii) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Majority Noteholders relating to the time,
method and place of conducting any Proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee under this
Indenture and the other Transaction Documents; (iii) the Trustee shall have no
duty (A) to see to any recording, filing, or depositing of this Agreement or any
agreement referred to herein or any financing statement or continuation
statement evidencing a security interest, or to see to the maintenance of any
such recording or filing or depositing or to any rerecording, refiling or
redepositing of any thereof, (B) to see to any insurance, (C) to see to the
payment or discharge of any tax, assessment, or other governmental charge or
any lien or encumbrance of any kind owing with respect to, assessed or levied
against, and (D) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee pursuant to this Agreement
believed by the Trustee to be genuine and to have been signed or presented by
the proper party or parties; and (iv) no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 17. INDEMNIFICATION. The Issuer agrees to indemnify and hold
harmless the Trustee, and each of its respective stockholders, directors,
officers, employees and agents from and against any and all liabilities, losses,
claims, damages, actions, suits, judgments, demands, costs and expenses
(including reasonable legal fees and expenses) relating to or arising out of or
in connection with its or their performance under this Indenture or the Security
Agreement or any representation or warranty therein, except to the extent that
they are caused by the negligence or willful misconduct of the Trustee or any
of its respective stockholders, directors, officers, employees or agents;
PROVIDED, HOWEVER, that such amounts are payable solely out of the Secured
Collateral or the Settlement Account. This indemnity
-14-
<PAGE>
shall survive the resignation or removal of the Trustee and the satisfaction or
termination of this Indenture.
SECTION 18. COMPENSATION OF THE TRUSTEE. The Issuer agrees to pay fixed
compensation to the Trustee in the amount of the Monthly Trustee and Collateral
Agent Fee Amount, and for any other services performed by the Trustee at the
request of the Issuer, at such rate or rates as shall be agreed upon from time
to time between the Issuer and the Trustee. The payment of compensation to and
the reimbursement of all reasonable out-of-pocket expenses incurred by the
Trustee in connection with its services rendered hereunder shall be made in the
order of priority set forth in the Security Agreement. The obligations of the
Issuer to the Trustee pursuant to this Section shall survive the resignation or
removal of the Trustee and the satisfaction or discharge of this Indenture. The
Trustee hereby waives any right or claim for payment or compensation with
respect to any and all amounts held in trust by the Trustee in accordance with
Section 10.
SECTION 19. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall
cease to be of further effect and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when (i) either (A) all Notes theretofore
authenticated and delivered (other than (x) Notes which have been destroyed,
lost or stolen and which have been replaced and (y) Notes for payment of which
money has theretofore been deposited with the Trustee by the Collateral Agent
upon direction by the Issuer and held in trust by the Trustee and thereafter
repaid to the Issuer and discharged from such trust, as provided in Section 10)
have been delivered to the Trustee canceled or for cancellation; or (B) all such
Notes not theretofore delivered to the Trustee canceled or for cancellation (x)
have become due and payable or (y) will become due and payable at their
Scheduled Maturity Date within one year, and the Collateral Agent upon direction
by the Issuer, in the case of (x) or (y) within this clause (B), has irrevocably
deposited or caused to be irrevocably deposited with the Trustee as funds in
trust for the benefit of the Noteholders an amount sufficient (without giving
effect to any income or earnings therefrom) in the written opinion of a
nationally recognized, independent certified public accountant delivered to the
Trustee to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee canceled or for cancellation, for principal
and interest to the Scheduled Maturity Date, and (ii) the Issuer has delivered
to the Trustee an Opinion of Counsel independent of the Issuer (such counsel
and opinion to be acceptable to the Rating Agency and the Majority Noteholders),
stating that all conditions preceding herein provided for relating to the
satisfaction and discharge of this Indenture with respect to the Notes have been
complied with. Notwithstanding the satisfaction and discharge of this Indenture
with respect to the Notes, the obligations under Section 10, Section 15, Section
16, Section 17 and Section 18 shall survive.
SECTION 20. NOTICES. (a) Notices and other communications hereunder shall
(except to the extent otherwise expressly provided) be in writing and sent (i)
by telefacsimile if the sender on the same day sends a confirming copy of such
notice by a recognized overnight delivery service (charges prepaid), or (ii) by
registered or certified mail with return receipt requested (postage prepaid), or
(iii) by a recognized overnight delivery service (with
-15-
<PAGE>
charges prepaid) and shall be addressed as follows, or to such other addresses
as the parties hereto shall specify from time to time:
(i) if to the Issuer: TNI Funding Company I, L.L.C.
11900 Biscayne Boulevard
Suite 460B
North Miami, Florida 33181
with separate copies
to the Servicer at: Transmedia Network, Inc.
11900 Biscayne Boulevard
North Miami, FL 33181-9915
Attention: President
Telephone: 305/892-3340
Telecopy: 305/892-3342
(ii) if to the Trustee: The Chase Manhattan Bank
Advanced Structured Products Group - ABS
450 W. 33rd St., 15th floor
New York, New York 10001
Telephone: 212/946-8600
Telecopy: 212/946-3240
(iii) if to the Rating Agency: Standard & Poor's Rating Services
Structured Finance
25 Broadway
New York, NY 10004
Attention: Asset Backed Surveillance
Department
Telephone: 212/208-8000
Telecopy: 212/208-0031
Notices under this Section 20 will be deemed to be given only when actually
received.
(b) The Trustee shall forward as soon as practicable to the Noteholders a
copy of each notice it receives pursuant to the Transaction Documents, except
the Daily Report which shall only be delivered upon request of any Noteholder.
All notices to Noteholders will be given at the addresses set forth in the Note
Register. The Trustee shall provide each Noteholder, upon the written request by
such Noteholder, a copy of any item the Trustee receives with respect to any of
the Transaction Documents. In addition, as promptly as practicable, upon the
receipt thereof, the Trustee will furnish a copy to each Noteholder of any
proposed and final amendment, modification or waiver which the Trustee receives
with respect to any of the Transaction Documents.
-16-
<PAGE>
(c) Unless otherwise provided herein or in another applicable Transaction
Document, the Trustee must give Noteholders at least lO days notice of any
proposed modification, waiver or amendment of any Transaction Document or other
documents or action for which consent of the Noteholders is required. Unless
otherwise provided herein or in another applicable Transaction Document, the
Trustee must receive instructions from the holders of at least 50% in aggregate
principal amount of Notes outstanding consenting to any modification, waiver or
amendment. If the required percentage of Noteholders do not respond to such
notification, the Trustee shall notify the non-responding Noteholders again and
shall request response within 10 days. If holders entitled to at least 50% in
aggregate principal amount of Notes outstanding do not consent within such time
period, the Trustee shall not enter into such modification, waiver or amendment.
(d) Where this Indenture or any Note provides for notice in any manner,
such notice may be waived in writing by the Person enticed to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice.
SECTION 21. TRUSTEE; RESIGNATION; REMOVAL; SUCCESSORS. (a) The Issuer
agrees, for the benefit of the Noteholders, that there shall at all times be a
Trustee hereunder until all the Notes are no longer outstanding and that the
Trustee shall be a bank or trust company organized and doing business under the
laws of the United States of America or of the State of New York with a combined
capital and surplus of at least $100,000,000, with a long-term debt rating not
less than BBB by S&P and Baa2 by Moody's, or shall be otherwise acceptable to
the Rating Agency and the Majority Noteholders, in good standing and authorized
under such laws to exercise corporate trust powers.
(b) The Trustee may at any time resign by giving written notice to the
Issuer of its resignation, specifying the date on which its resignation shall
become effective (which shall not be less than 30 days after the date on which
such notice is given unless the Issuer shall agree to a shorter period). The
Majority Noteholders may remove the Trustee at any time by giving written notice
to the Issuer and the Trustee specifying the date on which such removal shall
become effective. No resignation or removal of the Trustee shall take effect
until the appointment in accordance with subparagraph (c) below of a successor
to such Trustee and the acceptance of such appointment by such successor. Upon
its resignation or removal, the predecessor Trustee shall be entitled to payment
by the Issuer of the compensation agreed to hereunder for, and to the
reimbursement of all reasonable out-of-pocket expenses incurred in connection
with, the services rendered hereunder by such Trustee. After the resignation or
removal of any Trustee, the provisions of Section 16 and Section 17 of this
Indenture shall inure to its benefit as to any action taken or omitted to be
taken by it while it was Trustee hereunder.
(c) If at any time the Trustee shall resign, or shall be removed, or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or
shall file a voluntary petition in bankruptcy or make an assignment for the
benefit of itS creditors or consent to the appointment of a receiver or
conservator of all or any substantial part of its property, or shall generally
not be paying its debts as they become due, or if an order of any court shall be
entered approving any petition filed by or against it under the provisions of
Chapter 7 or
-17-
<PAGE>
11 of Title 11 of the Bankruptcy Code or under the provisions of any similar
legislation, or if a receiver or custodian of it or of all or any substantial
part of its property shall be appointed, or if any public officer shall have
taken charge or control of the Trustee or of its property or affairs, for the
purpose of rehabilitation, conservation or liquidation, a successor Trustee,
qualified as aforesaid, shall be appointed as follows:
(i) so long as no Early Amortization Event or Potential Early
Amortization Event shall have occurred and be continuing, by the Issuer,
with the consent of the Majority Noteholders; PROVIDED, HOWEVER, that (x)
if the Issuer and the Majority Noteholders shall fail to agree on a
successor Trustee within the 30 days after such removal or (y) the Issuer
shall fail to propose a successor Trustee in a timely fashion, the
successor Trustee shall be appointed by the Majority Noteholders; and
(ii) so long as an Early Amortization Event or Potential Early
Amortization Event, shall have occurred and be continuing, by the Majority
Noteholders.
All such successor appointments shall be by an instrument in writing filed with
the successor Trustee. Upon the appointment of a successor Trustee and
acceptance by the latter of such appointment, the Trustee so superseded shall
cease to be such Trustee.
(d) Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto and shall be required to meet the requirements of
Section 21(a). In case any Notes shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Notes so authenticated with the same effect as if such successor
Trustee had itself authenticated such Notes.
(e) Any successor Trustee appointed hereunder shall execute, acknowledge
and deliver to its predecessor, the Issuer and the Majority Noteholders an
instrument accepting such appointment hereunder, and thereupon such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the authority, rights, powers, trusts, immunities, duties and obligations of
such predecessor, with like effect as if originally named as such Trustee
hereunder, and the predecessor Trustee shall, at the direction of the Majority
Noteholders and upon payment of its compensation and expenses then unpaid,
deliver and pay over to its successor any and all securities, moneys and any
other properties then in its possession as Trustee and shall thereupon cease to
act hereunder. The Majority Noteholders will give prompt written notice of the
appointment of a successor Trustee to the Noteholders.
SECTION 22. CERTAIN RESPONSIBILITIES AND RIGHTS OF THE TRUSTEE. (a) Except
as otherwise required by law, the Trustee undertakes to perform such duties and
only such
-18-
<PAGE>
duties as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee may conclusively
rely as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically required
to be furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Indenture; PROVIDED, HOWEVER, the Trustee shall not be responsible for the
accuracy or content of any resolution, certificate, statement, opinion, report,
document, order or other instrument furnished to the Trustee hereunder.
(c) Except as otherwise provided in Section 16(b) and paragraph (b) above:
(i) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting, as applicable, in accordance with any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(ii) any request or direction of the Issuer mentioned herein shall
be sufficiently evidenced by a written request or order signed by an
Authorized Representative;
(iii) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter (including, without limitation, a
Potential Early Amortization Event, a Potential Purchase Termination Event,
and the designation of an Amortization Commencement Date) be proved or
established prior to taking, suffering or omitting any action hereunder,
the Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part or contrary instructions from the
Majority Noteholders, rely upon a certificate of an Authorized
Representative;
(iv) the Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Noteholders pursuant to this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
-19-
<PAGE>
(vi) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine,
upon two days' prior notice (except if an Early Amortization Event shall
have occurred and be continuing, in which case no notice shall be required)
and during standard business hours, the books, records and premises of the
Issuer, personally or by agent or attorney;
(vii) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly by or through agents or
attorneys or custodians, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any such agent or attorney
appointed by the Trustee with due care; and
(viii) the Trustee shall not be charged with knowledge of a Potential
Early Amortization Event, a Potential Purchase Termination Event, a
Purchase Termination Event or an Early Amortization Event unless a
Responsible Officer has received written notice thereof from the Collateral
Agent, the Issuer, the Servicer, the Seller or the Majority Noteholders or
otherwise have knowledge thereof.
(d) Upon any application or request by the Issuer to the Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish to
the Trustee a certificate of an Authorized Representative stating that all
conditions precedent, if any (including any covenants compliance with which
constitutes a condition precedent), PROVIDED for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any
(including any covenants compliance with which constitutes a condition
precedent), have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished. Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include (i) a
statement that each individual signing such certificate or opinion has read such
covenant or condition and the definitions herein relating thereto, (ii) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (iii) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with and (iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
(e) The recitals contained herein and in the Notes (other than the
certificate of authentication on the Notes) shall be taken as the statements of
the Issuer, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to
-20-
<PAGE>
the validity or sufficiency of this Indenture, the Security Agreement or of the
Notes or of any part of the Contract Assets or Secured Collateral. Other than as
directed by the Issuer in accordance with the Transaction Documents, the Trustee
shall not be accountable for the use or application by the Issuer of the
Proceeds of the Notes. The Trustee shall not be responsible for the legality or
validity of this Agreement (other than its due authentication, execution and
delivery) or the validity, priority, perfection or sufficiency of the security
for the Notes issued or intended to be issued hereunder.
SECTION 23. CANCELLATION OF NOTES. All Notes surrendered for payment,
redemption, exchange or registration of transfer pursuant to any of the
provisions of this Indenture shall be promptly canceled and disposed of by the
Trustee in accordance with its standard procedures. The Trustee shall deliver a
certificate of any such cancellation and disposition pursuant to this Section to
the Issuer.
SECTION 24. BENEFIT OF AGREEMENT. This Agreement is solely for the benefit
of the parties hereto, their successors and assigns and the Noteholders, and no
other person shall acquire or have any right hereunder or by virtue hereof.
SECTION 25. NOTES HELD BY THE TRUSTEE; RIGHTS OF TRUSTEE. The Trustee, in
its individual or other capacity, may become the owner or pledgee of the Notes
with the same rights it would have if it were not acting as Trustee hereunder.
The Trustee may become a creditor, directly or indirectly, of the Issuer or any
of its institutions or agencies, make any loan or loans thereto, hold or become
a pledgee of any form of indebtedness thereof (including the Notes), own, accept
or negotiate any drafts, bills of exchange, acceptances or obligations thereof,
make disbursements therefor and enter into any commercial or business
arrangement therewith without limitation, all without any liability on the part
of the Trustee under this Indenture for any real or apparent conflict of
interest by reason of any such dealing.
SECTION 26. INSPECTION. Upon reasonable notice to the Trustee, the Issuer
may inspect during standard business hours any Notes held by the Trustee and any
books of registration and transfer relating to the Notes maintained by the
Trustee hereunder.
SECTION 27. LICENSE. (a) PRESERVATION OF LICENSE. The Trustee will do or
cause to be done all things reasonably necessary to preserve and maintain the
License against the claims of all Persons (other than those Persons to whom the
License or similar licenses have also been granted).
(b) USE AND ENFORCEMENT OF LICENSE. The Trustee will do or cause to be done
all things reasonably necessary to use and enforce the License to facilitate the
servicing and collection of the Purchased Contract Assets upon the occurrence of
a Purchase Termination Event.
(c) ASSERTION OF BANKRUPTCY RIGHTS. In the event that Transmedia, any of
the Initial Sellers or the Seller becomes a debtor in a proceeding under the
Bankruptcy Code, the Trustee will:
-21-
<PAGE>
(i) prior to any such debtor's determination regarding whether to
assume or reject the License in accordance with Bankruptcy Code Section
365, do or cause to be done all things reasonably necessary to insure that
any such debtor complies with Bankruptcy Code Section 365(n)(4);
(ii) if any such debtor determines to reject the License in
accordance with Bankruptcy Code Section 365, do or cause to be done all
things reasonably necessary to elect to retain its rights under the License
for the duration of the License (as any such period may be extended by the
Trustee) under Bankruptcy Code Section 365(n)(1)(B);
(iii) if any such debtor determines to reject the License in
accordance with Bankruptcy Code Section 365, and in connection with the
Trustee's election to retain its rights under the License as described in
(ii) above, do or cause to be done all things reasonably necessary to
insure any such debtor's compliance with Bankruptcy Code Section
365(n)(2)(A) and Bankruptcy Code Section 365(n)(3); and
(iv) if any such debtor determines to reject the License in
accordance with Bankruptcy Code Section 365, and in connection with the
Trustee's election to retain its rights under the License as described in
(ii) above, do or cause to be done all things reasonably necessary to
comply with Bankruptcy Code Section 365(n)(2)(B).
(d) ELECTION TO TERMINATE LICENSE UPON REJECTION. In the event Transmedia
or any of the Initial Sellers becomes a debtor in a proceeding under the
Bankruptcy Code, if any such debtor determines to reject the License in
accordance with Bankruptcy Code Section 365, the Trustee will not elect under
Bankruptcy Code Section 364(n)(1)(A) to treat the License as terminated.
SECTION 28. TRUSTEE AND COLLATERAL AGENT MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF THE NOTES. All rights of action and claims under this Indenture
and the Security Agreement on the Notes may be prosecuted and enforced by the
Trustee or the Collateral Agent, as applicable, without the possession of any of
the Notes or the production thereof in any Proceeding relating thereto, and any
such Proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel (and any other amounts due to the
Trustee under Section 18), be for the ratable benefit of the Noteholders.
SECTION 29. RIGHTS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER.
(a) No right or remedy herein conferred upon or reserved to the Trustee, the
Collateral Agent or the Noteholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity, or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
-22-
<PAGE>
(b) No delay or omission of the Trustee or any Noteholder to exercise any
right or remedy accruing upon any Early Amortization Event shall impair any such
right or remedy or constitute a waiver of any such Early Amortization Event or
an acquiescence therein. Subject to the terms of the Transaction Documents,
every right and remedy given hereunder or by law to the Trustee or the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or the Noteholders, as the case may be.
SECTION 30. NOTEHOLDERS AUTHORIZED TO DIRECT TRUSTEE. Pursuant to the terms
and provisions of this Indenture, the Majority Noteholders are authorized to
direct the Trustee to take all actions on behalf of the Noteholders under this
Indenture and the other Transaction Documents and to direct (i) the time, method
and place of conducting any Proceeding for any remedy available to the Trustee,
or (ii) the exercising of any trust or power conferred on the Trustee, under
this Indenture or the Transaction Documents; PROVIDED
that such direction shall
not conflict with any rule of law or this Indenture or the Transaction
Documents.
SECTION 31. LIMITATION ON PROCEEDINGS BY NOTEHOLDERS. No Noteholder of any
Note shall have any right to institute any Proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless:
(a) such Noteholder has previously given written notice to the Trustee
of a continuing Early Amortization Event;
(b) the Majority Noteholders shall have made written request to the
Trustee to institute, or to cause the institution of Proceedings in respect
of such Early Amortization Event in its own name as Trustee hereunder;
(c) such Noteholder or Noteholders have offered to the Trustee
reasonable indemnity as described in Section 22(c)(v) against the costs,
expenses and liabilities that may reasonably be incurred in compliance with
such request;
(d) the Trustee for thirty (30) days after its receipt of such notice,
request and offer of indemnity has failed to institute any such Proceeding;
and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 30-day period by the Majority Noteholders;
it being understood and intended that no Noteholder shall have any right in any
manner whatever by virtue of, or by availing of, any provision of this Indenture
to affect, disturb or prejudice the rights of any other Noteholders, or to
obtain or to seek to obtain priority or preference over any other such
Noteholders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and proportionate benefit of all the
Noteholders.
-23-
<PAGE>
SECTION 32. SUCCESSOR SERVICER. The Trustee acknowledges and agrees to
serve as Servicer as provided in Section 6.17(a) of the Purchase and Servicing
Agreement.
SECTION 33. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture or the Notes and such Proceeding has been discontinued or
abandoned for any reason, then and in every such case the Issuer, the Trustee,
and the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Noteholders shall
continue as though no such Proceeding had been instituted.
SECTION 34. NOTEHOLDER CONSENT TO TRUSTEE'S OTHER DUTIES. Each Noteholder
by its acceptance of a Note shall have consented to and acknowledged that (i)
the Trustee has other duties and obligations under the other Transaction
Documents in the capacity of Collateral Agent, (ii) the Trustee may under
certain circumstances direct the exercise of rights and remedies with respect to
the Contract Assets pursuant to the terms and conditions of the Security
Agreement and (iii) the Collateral Agent pursuant to the Security Agreement
shall administer all rights and remedies with respect to and have control over
the Contract Assets.
SECTION 35. ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by an agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and where it is hereby expressly
required, to the Issuer.
(b) Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Section 16(b)) conclusive in favor of the Trustee and the Issuer, if
made in the manner provided in this Section.
(c) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness to such execution or by
the certificate of any notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
an officer of a corporation or a member of a partnership, on behalf of such
corporation or partnership, such certificate shall also constitute sufficient
proof of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by any Noteholder shall bind the holder of every Note issued
upon the transfer thereof or in exchange therefor or in lieu thereof, in respect
of anything done or suffered to
-24-
<PAGE>
be done by the Trustee or the Issuer in reliance thereon whether or not notation
of such action is made upon such Note.
(e) The ownership of a Note for the purpose of this Section shall be proved
by the Note Register.
SECTION 36. NO RECOURSE. The obligations of the Issuer under this
Indenture, the Notes and each other agreement, instrument, document or
certificate executed and delivered or issued by the Issuer or any officer
thereof in connection herewith or therewith are solely the obligations of the
Issuer, payable only out of Secured Collateral and the amount in the Settlement
Account. No other recourse shall be had for the payment of any amount owing in
respect of the Notes or for the payment of any fee or any other obligations or
claim arising out of or based upon this Indenture, the Notes or any other
agreement, instrument, document or certificate executed and delivered or issued
by the Issuer or any officer thereof in connection herewith or therewith against
the Issuer or any Member or any employee, officer, director or stockholder of
any Member.
SECTION 37. PAYMENT OF TAXES. The Issuer will pay or cause to be paid all
taxes, duties, fees or other charges levied or imposed by any governmental
entity on the Issuer, in respect of this Indenture or the issuance of the Notes
and any stamp duty, tax, required deduction or withholding or other amount
required to be paid to introduce this document into evidence to enforce the
Notes.
SECTION 38. HEADINGS. The headings for the Sections of this Indenture are
for convenience only and are not part of this Indenture.
SECTION 39. FORWARDING OF NOTICES. If the Trustee shall receive any notice
or demand from any Noteholder pursuant to the provisions of this Indenture or
the Notes, the Trustee shall promptly forward a copy of such notice or demand to
the Issuer.
SECTION 40. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED
BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 41. COUNTERPARTS. This Indenture may be executed by the parties
hereto in any number of counterparts, each of which such counterparts, when so
executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
executed on their behalf by their officers thereunto duly authorized, all as of
the day and year first above written.
TNI FUNDING COMPANY I, L.L.C., Issuer
By: TNI Funding I, Inc.
By: __________________________________
Name: _____________________________
Title: ____________________________
THE CHASE MANHATTAN BANK, as Trustee,
By ___________________________________
Name: _____________________________
Title: ____________________________
-26-
<PAGE>
EXHIBIT A
to the Indenture
[FORM OF RIGHT-TO-RECEIVE-BACKED NOTE]
THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"), AND THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER THE ACT EXCEPT (1) PURSUANT TO RULE 144A OR (2) PURSUANT TO
ANOTHER EXEMPTION UNDER THE ACT AND IN ACCORDANCE WITH THE CONDITIONS SET FORTH
IN THE INDENTURE REFERRED TO HEREIN. TRANSFER OF THIS NOTE IS FURTHER LIMITED BY
THE REQUIREMENT THAT FOLLOWING ANY TRANSFER HEREOF SUCH NOTE SHALL BE
BENEFICIALLY OWNED (WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT) BY NO MORE
THAN ONE PERSON FOR EACH $1,000,000 IN PRINCIPAL AMOUNT REPRESENTED THEREBY, AND
THE TRANSFEREE HEREOF HAS FURNISHED TO THE TRUSTEE A CERTIFICATE TO SUCH EFFECT.
PRINCIPAL PAYMENTS OF THIS NOTE MAY BE MADE PRIOR TO THE SCHEDULED MATURITY
DATE UNDER CERTAIN CONDITIONS AS SET FORTH IN THE INDENTURE REFERRED TO HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
NO.
TNI FUNDING COMPANY I, L.L.C.
7.40% RIGHT-TO-RECEIVE-BACKED NOTES, SERIES 1996-l
PRINCIPAL AMOUNT: $___________
ISSUANCE DATE: December 24, 1996
SCHEDULED MATURITY DATE: December 15, 2004 (or if sooner, the Note Payment Date
occurring three (3) years after the Note Payment Date immediately following
the Amortization Commencement Date)
NOTE RATE: 7.40% PER ANNUM
TNI FUNDING COMPANY I, L.L.C. (the "ISSUER"), for value received, hereby
promises to pay to _______________, or registered assigns, the principal amount
of _______________ Dollars (as may be reduced by any payment of principal), on
the Scheduled Maturity Date. The Issuer agrees to pay principal, if any, on the
fifteenth day of each calendar month or, if such fifteenth day is not a Business
Day, the next succeeding Business Day (each, a "NOTE PAYMENT DATE"), which
occurs immediately after the Amortization Commencement Date, until all remaining
unpaid principal hereof is paid or payment therefor is made available pursuant
to the Indenture (as referred to below). The Notes shall bear interest on the
unpaid principal amount thereof from and including the
<PAGE>
Closing Date at the rate of 7.40% per annum (the "NOTE RATE") (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each) through the day
immediately preceding the initial Note Payment Date and thereafter, monthly from
and including the most recent Note Payment Date through and including the day
immediately preceding the next Note Payment Date, and (to the extent that the
payment of such interest shall be legally enforceable) on any overdue
installment of interest from the date such interest became due and payable
(giving effect to any applicable grace periods provided herein) until fully
paid. Interest shall be due and payable in arrears on each Note Payment Date,
with each payment of interest calculated as described above on the unpaid
principal amount of the outstanding Notes on the immediately preceding Note
Payment Date (after the distributions on the Notes on such date) or, with
respect to interest payable on the initial Note Payment Date, on the principal
amount of the Outstanding Notes on the Closing Date; PROVIDED, HOWEVER, that in
making any interest payment, if the interest calculation with respect to any
Note shall result in a portion of such payment being less than $.01, then such
payment shall be decreased to the nearest whole cent, and no subsequent
adjustment shall be made in respect thereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
This Note is one of the Notes referred to in the Indenture dated as of
December 1, 1996 (the "INDENTURE"), between the Issuer and The Chase Manhattan
Bank, as Trustee, which, among other things contains provisions for the
acceleration of the maturity hereof upon the occurrence of certain events, and
for the amendment or waiver of certain provisions of the Indenture, all upon the
terms and conditions therein specified. Capitalized terms which are used herein
that are not defined shall have the meaning assigned to such terms in the
Indenture. Upon written request, the Trustee shall provide a copy of such
Indenture and a copy of the Security Agreement to the holder of this Note.
It is the intention of the Issuer to conform strictly to applicable usury
laws. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law (including the laws of the State of New York and the laws
of the United States of America), then, in that event, notwithstanding anything
to the contrary in any agreement entered into in connection with this Note, it
is agreed as follows: (i) the aggregate of all consideration that constitutes
interest, if any, under applicable law that is taken, reserved, contracted for,
charged or received under this Note or any other agreement or document executed
in connection with this Note shall under no circumstances exceed the maximum
amount of interest allowed by applicable law, and any excess shall be credited
to other amounts due under this Note by the holder hereof (or if this Note shall
have been paid in full, refunded to the Issuer); and (ii) in the event that
maturity of this Note is accelerated by reason of any election by the holder
hereof resulting from any default hereunder or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, PROVIDED for in this Note or otherwise shall
be
-2-
<PAGE>
cancelled automatically as of the date of such acceleration or prepayment and,
if theretofore prepaid, shall be credited to other amounts due under this Note
(or if this Note shall have been paid in full, refunded to the Issuer). In the
event that applicable law provides for a ceiling on the rate of interest, if
any, chargeable hereunder, that ceiling shall be the indicated rate ceiling.
BY ACCEPTANCE OF THIS NOTE THE NOTEHOLDER SHALL HAVE ACKNOWLEDGED AND
AGREED THAT (I) THE COLLATERAL AGENT (AS DEFINED IN THE SECURITY AGREEMENT)
SHALL EXERCISE CERTAIN RIGHTS WITH RESPECT TO AN AMORTIZATION EVENT (AS DEFINED
IN THE SECURITY AGREEMENT), (II) THE TRUSTEE HAS OTHER DUTIES AND OBLIGATIONS
UNDER THE OTHER TRANSACTION DOCUMENTS IN THE CAPACITY OF COLLATERAL AGENT, AND
(III) THE COLLATERAL AGENT AT THE DIRECTION OF THE TRUSTEE PURSUANT TO THE
SECURITY AGREEMENT SHALL ADMINISTER ALL RIGHTS AND REMEDIES WITH RESPECT TO AND
HAVE CONTROL OVER THE COLLATERAL.
BY ACCEPTANCE OF THIS NOTE, THE NOTEHOLDER SHALL HAVE AGREED THAT PRIOR TO
THE DATE WHICH IS ONE YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF ALL
OUTSTANDING NOTES IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN
INSTITUTING AGAINST, THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT,
INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS
OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES.
THE OBLIGATIONS OF THE ISSUER UNDER THIS INDENTURE, THE NOTES AND EACH
OTHER AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE EXECUTED AND DELIVERED OR
ISSUED BY THE ISSUER OR ANY OFFICER THEREOF IN CONNECTION HEREWITH OR THEREWITH
ARE SOLELY THE OBLIGATIONS OF THE ISSUER, PAYABLE ONLY OUT OF SECURED COLLATERAL
AND THE AMOUNT IN THE SETTLEMENT ACCOUNT. NO OTHER RECOURSE SHALL BE HAD FOR THE
PAYMENT OF ANY AMOUNT OWING IN RESPECT OF THE NOTES OR FOR THE PAYMENT OF ANY
FEE OR ANY OTHER OBLIGATIONS OR CLAIM ARISING OUT OF OR BASED UPON THIS
INDENTURE, THE NOTES OR ANY OTHER AGREEMENT, INSTRUMENT, DOCUMENT OR CERTIFICATE
EXECUTED AND DELIVERED OR ISSUED BY THE ISSUER OR ANY OFFICER THEREOF IN
CONNECTION HEREWITH OR THEREWITH AGAINST THE ISSUER OR ANY MEMBER OR ANY
EMPLOYEE, OFFICER, DIRECTOR OR STOCKHOLDER OF ANY MEMBER.
This Note shall not be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been manually signed by or on
behalf of the Trustee under the Indenture.
THIS NOTE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
-3-
<PAGE>
IN WITNESS WHEREOF, TNI Funding Company I, L.L.C. has caused this
instrument to be signed in its name by an Authorized Representative and its seal
to be imprinted, manually or in facsimile, hereon.
Dated:
TNI FUNDING COMPANY I, L.L.C.
By: TNI Funding I, Inc.
By: _________________________________
Name: ___________________________
Title: __________________________
-4-
<PAGE>
EXHIBIT B
to the Indenture
[FORM OF ASSIGNMENT OF NOTE]
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________ hereby sells, assigns, and
transfers unto _________________________________
Please insert Social Security or other
identifying number of assignee: _________________
the attached Note of TNI FUNDING COMPANY I, L.L.C. (the "ISSUER") standing in
the name(s) of the undersigned in the Note Register maintained by the Trustee
for the Issuer and does hereby irrevocably constitute and appoint
_______________________ Attorney to transfer such Note in such Note Register,
with full power of substitution in the premises. This sale, assignment and
transfer is made /_____/ pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "ACT"), /_____/ pursuant to Rule 144A
promulgated thereunder, to a "qualified institutional buyer" as defined in such
Rule 144A or /_____/ pursuant to an exemption from registration under the Act
pursuant to Rule 904 of Regulation S promulgated thereunder.
Date: __________________________________ ____________________________________
(Signature)
NOTICE: The signature(s) to this
assignment must correspond with the
name(s) as written upon the face of
the Note to be transferred in every
particular without alteration or any
change whatsoever. The signature(s)
must be guaranteed by a commercial
bank or trust company located, or
having a correspondent location, in
The City of New York or the city in
which the corporate trust office of
the Trustee is located, or by a
member firm of a national securities
exchange. Notarized or witnessed
signatures are not acceptable as
guaranteed signatures.
Signature Guarantee:
<PAGE>
EXHIBIT C
to the Indenture
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes referred to in the within-mentioned
Indenture.
The Chase Manhattan Bank, as Trustee
By ___________________________________
Authorized Officer
Date:
<PAGE>
EXHIBIT D-1
to the Indenture
The Chase Manhattan Bank
as Trustee under the
Indenture
Re: TNI FUNDING COMPANY I, L.L.C.
RIGHT-TO-RECEIVE-BACKED NOTES
Ladies and Gentlemen:
In connection with our purchase of the above-referenced notes (the "NOTES")
of TNI Funding Company I, L.L.C. (the "ISSUER"), we confirm the statements set
forth below:
(a) We have received such information relating to the Notes as we deem
necessary in order to make our investment decision.
(b) We represent that we are a "Qualified Institutional Buyer" within
the meaning of paragraph (a) of Rule 144A under the Securities Act of 1933,
as amended (the "ACT") or an accredited investor as that term is defined in
Rule 502 promulgated under the Act.
(c) The Notes that we have purchased shall be issued in registered
form and such Notes (and, except as otherwise provided in the Indenture
pursuant to which the Notes were issued, until the Trustee for the Notes is
otherwise advised by the Issuer, any Notes issued upon transfer or exchange
of, or in substitution for the Notes) shall bear the following legend:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE
TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT EXCEPT (1) PURSUANT TO
RULE 144A OR (2) PURSUANT TO ANOTHER EXEMPTION UNDER THE ACT AND IN
ACCORDANCE WITH THE CONDITIONS SET FORTH IN THE INDENTURE REFERRED TO
HEREIN.
<PAGE>
(d) We understand that the Notes have not been registered under the
Securities Act by reason of their issuance in a transaction that does not
require registration under the Securities Act. We agree that, in the event
that at any future time we wish to dispose of any of the Notes, we will do
so only in accordance with the terms of the Indenture, and we will not
offer any of the Notes for sale, solicit any offer to buy any of the Notes,
or sell any of the Notes, directly or indirectly through any agent acting
on our behalf, except in accordance with Rule 144A under the Act to a
Qualified Institutional Buyer or otherwise pursuant to an exemption from,
or in a transaction not subject to, registration under the Act.
Very truly yours,
[NAME OF INVESTOR]
By ___________________________________
Name: _____________________________
Title: ____________________________
-2-
<PAGE>
EXHIBIT D-2
to the Indenture
The Chase Manhattan Bank
as Trustee under the
Indenture
Re: TNI FUNDING COMPANY I, L.L.C.
RIGHT-TO-RECEIVE-BACKED NOTES
Ladies and Gentlemen:
In connection with our sale of the above-referenced notes (the "NOTES") of
TNI Funding Company I, L.L.C. (the "ISSUER"), we confirm that:
(a) We reasonably believe that the purchaser of the Notes is a
"qualified institutional buyer" as defined in Rule 144A under the
Securities Act of 1933, as amended (the "ACT").
(b) We, and any person acting on our behalf, have taken reasonable
steps to ensure that the purchaser of the Notes is aware that we may rely
on the exemption from the provisions of Section 5 of the Act provided by
Rule 144A thereunder.
(c) If the purchaser has made a request to us for information pursuant
to Rule 144A(d)(4) under the Act, we confirm that the purchaser has
received such information as has been provided by the Issuer in response to
such request; it being understood that we make no representation as to
whether such information complies with the requirements of such Rule.
Very truly yours,
[NAME OF INVESTOR]
By ___________________________________
Name: _____________________________
Title: ____________________________
<PAGE>
Schedule I
UCC Filing Jurisdictions
Delaware: Secretary of State
Florida: Secretary of State
New York: Secretary of State; City Clerk; County of New York
EXHIBIT 10.27
CREDIT AGREEMENT
-------------------------------------------
$10,000,000.00 LINE OF CREDIT
BY AND AMONG
TRANSMEDIA NETWORK INC., A DELAWARE CORPORATION,
TRANSMEDIA RESTAURANT COMPANY INC., A DELAWARE CORPORATION, AND
TMNI INTERNATIONAL INCORPORATED, A DELAWARE CORPORATION, AND
TRANSMEDIA SERVICE COMPANY INC., A DELAWARE CORPORATION,
JOINTLY AND SEVERALLY,
AND
COMERICA BANK
-------------------------------------------
DATED AS OF NOVEMBER 7, 1997
-------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS ..................................................1
1.1 DEFINITIONS.................................................1
1.2 ACCOUNTING TERMS...........................................10
1.3 OTHER DEFINITIONAL PROVISIONS..............................10
ARTICLE II - LINE OF CREDIT .............................................10
2.1 LINE OF CREDIT.............................................10
2.2 NOTICE AND MANNER OF BORROWING.............................11
2.3 LINE NOTE..................................................11
2.4 INTEREST...................................................11
2.5 PAYMENTS...................................................14
2.6 MATURITY...................................................14
2.7 UNUSED LINE FEE............................................14
2.8 COLLATERAL.................................................14
ARTICLE - III BORROWING BASE ............................................14
3.1 BORROWING BASE.............................................14
ARTICLE V - COLLATERAL ..................................................15
4.1 COLLATERAL.................................................15
4.2 CROSS-DEFAULT..............................................15
ARTICLE VI - CONDITIONS PRECEDENT TO BORROWING...........................16
5.1 EACH LOAN..................................................16
5.2 INITIAL LOAN...............................................16
ARTICLE VII - REPRESENTATIONS AND WARRANTIES.............................17
6.1 CORPORATE EXISTENCE AND POWER..............................17
6.2 CORPORATE AUTHORITY........................................17
6.3 FINANCIAL CONDITION........................................17
6.4 FULL DISCLOSURE............................................18
6.5 LITIGATION.................................................18
6.6 PAYMENT OF TAXES...........................................18
6.7 NO ADVERSE RESTRICTIONS OR DEFAULTS........................18
6.8 INVESTMENT COMPANY ACT.....................................19
6.9 AUTHORIZATIONS.............................................19
6.10 SUBSIDIARIES AND AFFILIATES...............................19
6.11 TITLE TO PROPERTIES.......................................19
6.12 USE OF LOANS..............................................20
6.13 ERISA.....................................................20
ARTICLE VIII - AFFIRMATIVE COVENANTS ....................................20
<PAGE>
7.1 LOAN PROCEEDS..............................................21
7.2 CORPORATE EXISTENCE........................................21
7.3 MAINTENANCE OF BUSINESS AND PROPERTIES.....................21
7.4 INSURANCE..................................................21
7.5 PAYMENT OF INDEBTEDNESS, TAXES, ETC........................21
7.6 COMPLIANCE WITH LAWS.......................................22
7.7 NOTICE OF DEFAULT..........................................22
7.8 FINANCIAL STATEMENTS, REPORTS, ETC.........................22
7.9 VISITATION RIGHTS..........................................23
7.10 NOTICE OF LITIGATION AND OTHER PROCEEDINGS................24
7.11 ERISA.....................................................24
7.12 BOOKS AND RECORDS.........................................25
7.13 OPERATING ACCOUNTS........................................25
7.14 AUDITS AND EVALUATIONS....................................25
7.15 TANGIBLE NET WORTH........................................25
7.16 LIABILITIES TO TANGIBLE NET WORTH.........................25
7.17 EARNINGS..................................................25
ARTICLE IX - NEGATIVE COVENANTS..........................................26
8.1 LIMITATION ON LIENS........................................26
8.2 LIMITATION ON INDEBTEDNESS.................................27
8.3 GUARANTIES.................................................27
8.4 DIVIDENDS..................................................27
8.5 MERGERS, CONSOLIDATIONS AND ACQUISITION OF ASSETS..........28
8.6 SALE, LEASE. ETC...........................................28
8.7 INVESTINENTS...............................................28
8.8 TRANSACTIONS WITH AFFILIATES...............................29
8.9 LEASE OBLIGATIONS; SALE AND LEASEBACK......................29
8.10 PURCHASE OF OWN SHARES....................................29
8.11 BUSINESS OPERATIONS.......................................29
8.12 LOANS AND ADVANCES........................................29
ARTICLE X - ENVIRONMENTAL................................................29
9.1 HAZARDOUS AND TOXIC MATERIALS GENERALLY....................29
ARTICLE XI - EVENTS OF DEFAULT ..........................................33
10.1 EVENTS OF DEFAULT.........................................33
ARTICLE XII - MISCELLANEOUS .............................................36
11.1 NO WAIVER, REMEDIES CUMULATIVE............................36
11.2 SURVIVAL OF REPRESENTATIONS...............................36
11.3 EXPENSES..................................................36
11.4 NOTICES...................................................36
11.5 CONSTRUCTION..............................................37
11.6 SUCCESSORS AND ASSIGNS....................................37
11.7 JURISDICTION, SERVICE OF PROCESS..........................37
<PAGE>
11.8 LIMIT ON INTEREST.........................................38
11.9 PAYMENT ON OTHER THAN BUSINESS DAY........................38
11.10 NET PAYMENTS.............................................38
11.11 ADDITIONAL COSTS.........................................39
11.12 INDEMNIFICATION OF LENDER................................39
11.13 COUNTERPARTS.............................................39
11.14 HEADINGS.................................................40
11.15 SEVERABILITY.............................................40
11.16 COURSE OF DEALING: AMENDMENT: SUPPLEMENTAL AGREEMENTS....40
11.17 DIRECT DEBIT.............................................40
11.18 RIGHT OF SET-OFF.........................................40
11.19 WAIVER OF JURY TRIAL.....................................41
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 7, 1997 (the "Agreement"),
is by and among TRANSMEDIA NETWORK INC., a Delaware corporation, TRANSMEDIA
RESTAURANT COMPANY INC., a Delaware corporation, TMNI INTERNATIONAL
INCORPORATED, a Delaware corporation, and TRANSMEDIA SERVICE COMPANY INC., a
Delaware corporation, jointly and severally (collectively and individually, the
"Borrower"), and COMERICA BANK (the "Lender").
RECITALS
A. The Borrower has requested Lender to provide to the Borrower a line
of credit as set forth herein.
B. The Lender is willing to provide a line of credit to the Borrower
for the purposes, upon the terms, and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and for other good and valuable consideration, it is agreed as
follows:
ARTICLE I - DEFINITIONS
1.1 DEFINITIONS.
In addition to terms defined elsewhere in this Agreement,
the following terms have the meanings indicated, which meanings shall be equally
applicable to both the singular and the plural forms of such terms:
"ACCOUNTS OR ACCOUNTS RECEIVABLE" shall have the meaning ascribed to
Account in Section 679.106 of the Florida Statutes and shall include all present
and future accounts, General Intangibles, Chattel Paper, Instruments, notes,
acceptances, Documents, Rights to Receive, or other rights to payment and all
forms of obligations owing at any time to the Borrower, arising in the ordinary
course of the Borrower's business, or out of the sale or lease on Inventory or
rendition of services, all rights of the Borrower earned or yet to be earned
under contracts to sell or lease Inventory or render services and all documents
of any kind in respect of any of the foregoing, and all the proceeds thereof, of
every kind and nature and in whatsoever form.
"ADJUSTED LIBOR RATE" means, for any LIBOR Rate Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined by the Lender to be equal to the quotient
obtained by dividing (a) the LIBOR Rate for such LIBOR Rate Loan for such
Interest Period by (b) 1 minus the Reserve Requirement for such LIBOR Rate Loan
for such Interest Period.
-1-
<PAGE>
"AFFILIATE" shall mean any Person which directly or indirectly through
one or more intermediaries controls, or is controlled by or is under common
control with, the Borrower. The term "control" means the possession, directly or
indirectly, of the power to cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this Credit Agreement, as the same may from time to
time be amended.
"BORROWER" has the meaning assigned to that term in the introduction to
this Agreement.
"BORROWING" shall mean the drawing down by the Borrower of a loan or
loans from the Lender on any given Borrowing Date.
"BORROWING BASE" has the meaning assigned to that term in Article III
of this Agreement.
"BORROWING DATE" shall mean the date as of which a Borrowing is
consummated.
"BUSINESS DAY" shall mean a day on which commercial banks are open for
business in Fort Lauderdale, Florida.
"CAPITALIZED LEASE OBLIGATIONS" shall mean, as to any Person, the
obligations of such Person, as lessee or guarantor, to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) real and/or
personal property, which obligations are required to be classified and accounted
for as a capital lease on a balance sheet of the Person under generally accepted
accounting principles.
"CARDMEMBER AGREEMENTS" shall mean all of the agreements between
Borrower or any of its Affiliates and any Person which authorizes Borrower or
any of its Affiliates, or their assigns, to recover payment from the
Cardmembers' Credit Card Accounts in connection with food and beverages
purchased by such Person at Restaurants.
"CARDMEMBERS" shall mean Persons, other than Borrower, who are parties
to Cardmember Agreements.
"CARDMEMBERS' CREDIT CARD ACCOUNTS" shall mean the Cardmembers'
VisaCard, MasterCard, Discover Card and American Express Card accounts which
have been specified by the Cardmembers as the accounts to be charged when the
Cardmembers use their Transmedia Credit Cards to purchase meals.
"CHATTEL PAPER" shall have the meaning ascribed to said term in Section
679.105 of the Florida Statutes.
-2-
<PAGE>
"CLOSING DATE" shall mean as of November 7, 1997.
"CODE" shall mean the Internal Revenue Code of 1986, as the same may be
from time to time hereafter modified or amended.
"COLLATERAL" has the meaning assigned to that term in Section 4.1
hereof.
"CONTRACT" shall mean, with respect to a Restaurant, an agreement
governing the purchase of Meals and Credits between the Borrower and such
Restaurant, and any agreement with any other Person guaranteeing such agreement,
which satisfies the Eligibility Criteria.
"CREDITS" shall mean all rights to receive Meal credits under a
Contract.
"DEFAULT" means any event which, with the lapse of time, the giving of
notice, or both, would become an Event of Default.
"DEFAULT RATE" shall mean, for the period commencing on the date of the
occurrence of an Event of Default and terminating on the date the Event of
Default is cured, or waived as determined by Lender in its sole discretion, the
Prime Rate plus five percent (5%).
"DOCUMENTS" shall have the meaning ascribed to said term in Section
679.105 of the Florida Statutes and shall include all bills of lading, airway
bills, dock warrants, dock receipts, warehouse receipts or orders for the
delivery of goods, and also any other document which in the regular course of
business or financing is treated as adequately evidencing that the person in
possession of it is entitled to receive, hold and dispose of the document and
the goods it covers.
"DOLLARS" OR "$" shall mean dollars in lawful currency of the United
States of America.
"ELIGIBILITY CRITERIA" shall mean with respect to any Contract that as
of its Purchase Date satisfies each of the following criteria:
(1) as to a Contract, each of the Credits, the rights under
the Contracts and the rights under the Cardmembers' Credit Card
Accounts to authorize charges and recover payments from Cardmembers'
Credit Card Accounts in connection with the purchase of Meals by a
Cardmember from a Restaurant, rights in and to security agreements
securing or otherwise relating to any of the foregoing, and the trade
names, service marks and trademarks constitute an "account" or "general
intangible" within the meaning of Section 9-106 of the UCC as in effect
in the state of Florida;
(2) as to a Contract, it is the legal, valid and binding
obligation of a Restaurant which is not the subject of any proceedings
under the Bankruptcy
-3-
<PAGE>
Code, any insolvency law or any other law for the relief of debtors or
for the custody of the property of incompetents;
(3) it does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without limitation,
rules and regulations relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy), and as to a Contract, none of the
parties thereto are in violation of any such laws, rules or regulations
in any material respect to such Contract;
(4) it has not or should not have been written off as
uncollectible in accordance with the restaurant guidelines established
by Borrower;
(5) as to a Contract, it has been duly authorized and is in
full force and effect and constitutes the legal, valid and binding
obligation of the Restaurant, enforceable against such Restaurant in
accordance with its terms and is not subject to any material dispute,
offset, counterclaim or defense whatsoever;
(6) as to a Contract, it was originated by the Borrower in the
ordinary course of business and satisfies all requirements of
Borrower's internal restaurant guidelines, whether written or
otherwise, and the requirements for Contracts in effect on the date of
purchase of such Contract, and the Restaurant thereunder satisfies all
the then current requirements of the restaurant guidelines;
(7) the Restaurant which is a party to the underlying Contract
is (i) a United States Person (and the books and records relating to
such Contract of such Restaurant are located in the United States),
(ii) not the United States, a State or any instrumentality thereof, and
(iii) not an Affiliate (other than employees who are not officers or
directors of Borrower);
(8) no part of the right to payment for goods sold or leased
as represented by such Contract is evidenced by a negotiable instrument
or other instrument that evidences a right to the payment of money and
is not itself a security agreement;
(9) as to a Contract, it has been entered into with a
Restaurant that is not in bankruptcy or otherwise in default under the
related Contract;
(10) as to a Contract, the Contract has not been amended,
altered or modified in any material respect and no provision of such
Contract has been waived;
-4-
<PAGE>
(11) except in accordance with the applicable restaurant
guidelines, no outstanding obligation arising under it or any
underlying Contract has been released, in whole or in part; no
outstanding obligation under any of it or any underlying Contract has
been satisfied, canceled or subordinated, in whole or in part, or
rescinded, and no security granted with respect thereto has been
released, in whole or in part, nor has any instrument been executed
that would effect any such satisfaction, release, cancellation,
subordination or rescission;
(12) as to a Contract, it is substantially in the form
included as Exhibit A;
(13) as to a Contract, the Borrower has no knowledge that the
obligations of the Restaurant under the Contract will not be satisfied
in full;
(14) as to each Cardmember Agreement, it is in full force and
effect and constitutes the legal, valid and binding obligation of the
Cardmember, enforceable against such Cardmember in accordance with its
terms and is not subject to any material dispute, offset, counterclaim
or defense whatsoever.
"ELIGIBLE RIGHTS TO RECEIVE" shall mean the net amount of Rights to
Receive outstanding after eliminating from the aggregate amount of outstanding
Rights to Receive: (i) all payments, adjustments, offsets and credits applicable
to Rights to Receive; (ii) all Rights to Receive which remain unused more than
three hundred sixty-five (365) days past the Purchase Date thereof; (iii) all
Rights to Receive arising from Contracts with any Affiliate; (iv) all Rights to
Receive which are considered by Lender to be uncollectible because Lender has
determined, in its reasonable discretion, that the Restaurant which gives rise
to such Rights to Receive is not creditworthy or is insolvent; (v) all Rights to
Receive payable by a Restaurant from which an account payable owing from
Borrower to the Restaurant exists; and (vi) all Rights to Receive which have
been transferred, sold, or exchanged by Borrower, or which are subject to a Lien
other than in favor of Lender.
"EQUIPMENT" shall have the meaning ascribed to said term in Section
679.109 of the Florida Statutes and shall include all of the Borrower's goods,
machinery, equipment, fixed assets, rolling stock, fixtures, furniture, office
equipment, tools, parts and other items of personal property of every kind and
description, now owned or hereafter acquired by the Borrower, wheresoever
located, together with all additions, attachments, accessions, parts,
replacements and substitutions thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended.
"EVENT OF DEFAULT" has the meaning assigned to that term in Section
10.1 hereof.
-5-
<PAGE>
"GENERAL INTANGIBLES" shall have the meaning ascribed to said term in
Section 679.106 of the Florida Statutes and shall include, without limitation,
any personal property other than goods, Accounts, Inventory, Equipment, Chattel
Paper and Instruments, .including all franchises, licenses, leases and subleases
whereby Borrower leases to another any of Borrower's Inventory or Equipment,
Contracts, Cardmember Agreements, Rights to Receive, permits and authorizations
of governmental agencies and others, tradenames, trademarks, service marks,
patents, copyrights, intellectual property and all other intangible property of
the Borrower.
"GUARANTY" shall mean, as to any Person, all liabilities or obligations
of such Person in respect of any Indebtedness or other obligations of others
guaranteed, directly or indirectly, in any manner by such Person, or in effect
guaranteed, directly or indirectly, by such Person through an agreement,
contingent or otherwise, to purchase such Indebtedness or obligation, or to
purchase or sell property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of the Indebtedness or obligation
or to assure the owner of such Indebtedness or obligation against loss, or to
supply funds to or in any manner invest in the debtor, or otherwise.
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness for
borrowed money or for the deferred purchase price of any property (other than
accounts payable to trade creditors under customary trade credit terms) or
services for which the Person is liable as principal, (b) all indebtedness
(excluding unaccrued finance charges) secured by a Lien on property owned or
being purchased by the Person, whether or not such indebtedness shall have been
assumed by the Person, (c) all Capitalized Lease Obligations (excluding
unaccrued finance charges) of the Person, (d) any arrangement (commonly
described as a sale-and-leaseback transaction) with any financial institution or
other lender or investor providing for the leasing to the Person of property
which at the time has been or is to be sold or transferred by the Person to the
lender or investor, or which has been or is being acquired from another Person
by the lender or investor for the purpose of leasing the property to the Person,
and (e) all obligations of partnerships or joint ventures in respect of which
the Person is primarily or secondarily liable as a partner or joint venturer or
otherwise (provided that in any event for purposes of determining the amount of
the Indebtedness, the full amount of such obligations, without giving effect to
the contingent liability or contributions of other participants in the
partnership or joint venture, shall be included to the extent such Person is
liable therefor).
"INSTRUMENTS" shall have the meaning ascribed to said term in Section
679.105 of the Florida Statutes.
"INTEREST PERIOD" shall mean a LIBOR Rate Interest Period, as said
terms are defined in Section 2.4(e) of this Agreement.
"INVENTORY" shall mean all goods, merchandise and other personal
property now owned or hereafter acquired by Borrower, wheresoever located, which
are held for sale or lease
-6-
<PAGE>
or are furnished under a contract of service or are raw materials, work in
process or materials used or consumed or to be used or consumed in Borrower's
business, in all of its forms, together with all Inventory in transit,
repossessed or returned Inventory and all Documents of title representing the
Inventory, and all accessions thereto and products thereof.
"INVESTMENTS" shall mean, with respect to any Person, all advances,
loans or extensions of credit to any other Person, all purchases or commitments
to purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any investment in other Persons, including partnerships or joint
ventures.
"LENDER" has the meaning assigned to that term in the introduction to
this Agreement.
"LIBOR RATE" means, for any LIBOR Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period, in amounts comparable to
such LIBOR Rate Loan. If for any reason such rate is not available, the term
"LIBOR Rate" shall mean, for any LIBOR Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
1/100 of 1%).
"LIABILITIES" shall mean, at the time any determination thereof is to
be made, the aggregate amount of all liabilities of the Borrower determined in
accordance with generally accepted accounting principles, including without
limitation the contingent obligation of the Borrower to reimburse amounts
outstanding under any letters of credit or under other similar facilities, and
excluding Secured Non-Recourse Debt.
"LIEN" shall mean a mortgage, pledge, lien, security interest or other
charge or encumbrance or any segregation of assets or revenues or other
preferential arrangement (whether or not constituting a security interest) with
respect to any present or future assets, including fixtures, revenues, or rights
to the receipt of income of the Person referred to in the context in which the
term is used.
"LINE NOTE" has the meaning assigned to that term in Section 2.3 of
this Agreement.
-7-
<PAGE>
"LINE OF CREDIT" shall mean the Line of Credit Loan or Line of Credit
Loans to the Borrower outstanding at any one time in an aggregate principal
amount not to exceed the lesser of Ten Million Dollars ($ 10,000,000.00) or the
Borrowing Base.
"LINE OF CREDIT LOAN" and "LINE OF CREDIT LOANS" shall mean the
principal amount and the aggregate principal amount, respectively, advanced by
the Lender as a Loan or Loans to the Borrower under Section 2.1 (a) hereof, or,
where the context requires, the amount thereof then outstanding.
"LINE OF CREDIT MATURITY DATE" shall mean the date the Line of Credit
will mature, which for the purposes of this Agreement shall be February 1, 1999,
and if this date is not a Business Day, the next succeeding Business Day.
"LOAN" or "LOANS" shall mean the principal amount and the aggregate
principal amount, respectively, advanced by the Lender as a loan or loans to the
Borrower under Article II hereof, or, where the context so requires, the amount
thereof then outstanding or any portion thereof.
"MEALS" shall mean all rights to receive food and beverages under a
Contract.
"PERMITTED LIENS" has the meaning assigned to that term in Section 8.1
hereof.
"PERSON" shall mean any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, company,
partnership or government, or any agency or political subdivision of any
government.
"PLAN" shall mean any employee benefit plan which is subject to the
provisions of Title IV of ERISA and which is maintained in whole or in part for
employees of the Borrower or any of its Subsidiaries.
"PRIME RATE" shall mean the index rate of interest (but not necessarily
the best or lowest rate charged borrowing customers of Lender) published or
announced by Lender from time to time as its prime rate. Said rate is a
reference rate for the information and use of Lender in establishing the actual
rates to be charged to its borrowers. The Prime Rate may be determined on a
daily basis with any change in the Prime Rate to be effective on the date of any
such change.
"PURCHASE AGREEMENT" shall mean that certain Purchase Agreement dated
as of December 1, 1996, by and among Transmedia Network Inc., Transmedia
Restaurant Company Inc., Transmedia Service Company Inc., and TNI Funding I,
Inc.
"PURCHASE DATE" shall mean the day on which the Borrower funds a
Contract.
-8-
<PAGE>
"RELATED DOCUMENTS" shall mean the Line Note, the Security Agreement,
UCC-ls, and all other documents and statements described in the Closing
Documents List attached hereto as Exhibit B to which the Borrower is a party.
"RENTALS" of any Person shall mean, as of any date, the aggregate
amount of the obligations and liabilities (including future obligations and
liabilities not yet due and payable) of such Person to make payments under all
leases, subleases and similar arrangements for the use of real, personal or
mixed property, together with Capitalized Lease Obligations.
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against LIBOR Rate
Loans ("Eurocurrency Liabilities", as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (a) any category of liabilities which includes deposits by reference
to which the Adjusted LIBOR Rate is to be determined, or (b) any category of
extensions of credit or other assets which include LIBOR Rate Loans. The
Adjusted LIBOR Rate shall be adjusted automatically on and as of the effective
date of any change in the Reserve Requirement.
"RESTAURANT" shall mean, with respect to any Contract, the Person or
Persons obligated to provide Credits or make payments with respect to such
Contract, including any guarantor thereof.
"RIGHTS TO RECEIVE" shall mean food and beverage Credits due to
Borrower from Restaurants pursuant to a Contract.
"SECURED NON-RECOURSE DEBT" shall mean the Thirty-Three Million Dollar
($33,000,000.00) debt described in the Purchase Agreement.
"SECURITIZED RIGHTS TO RECEIVE" shall mean the Rights to Receive sold
pursuant to the terms of the Purchase Agreement.
"SUBSIDIARY" shall mean any Person in which the Borrower may own,
directly or indirectly, an equity interest of more than fifty percent (50%), or
which may effectively be controlled by the Borrower, during the term of this
Agreement, as well as all Subsidiaries and other Persons form time to time
included in the consolidated financial statements of the Borrower.
"TANGIBLE NET WORTH" shall mean, at the time any determination thereof
is to be made, (i) the aggregate amount of all assets of Borrower, as may be
properly classified as such, other than all capitalized organizational and
development costs, capitalized interest, debt discount and expense, goodwill,
patents and trademarks, copyrights, franchises, licenses,
-9-
<PAGE>
amounts due from officers, directors, stockholders and Affiliates (other than
consolidated Subsidiaries), amounts due from employees, and other assets as are
properly classified as intangible assets under generally accepted accounting
principles, plus (ii) Secured Non-Recourse Debt (up to a maximum of Thirty-Three
Million Dollars ($33,000,000.00)), less (iii) the aggregate amount of all
Liabilities of Borrower, and less (iv) Securitized Rights to Receive (up to a
maximum of Thirty-Three Million Dollars ($33,000,000.00)), all as determined in
accordance with generally accepted accounting principles applied on a consistent
basis.
"TERMINATION EVENT" shall mean a "reportable event" as defined in
Section 4043(b) of ERISA or the filing of a notice of intent to terminate under
Section 4041 of ERISA.
1.2 ACCOUNTING TERMS.
Accounting terms not specifically defined in this Agreement shall have
the meaning given to them under accounting principles and practices generally
accepted in the United States, applied on a consistent basis with the financial
statements referred to in Section 7.8 hereof, and shall be determined both as to
classification of items and amounts in accordance therewith. All Subsidiaries
shall be consolidated to the fullest extent permitted by such principles and
practices, and any accounting terms, financial covenants and financial
statements referred to herein shall be determined and prepared on the basis of
such consolidation.
1.3 OTHER DEFINITIONAL PROVISIONS.
The words "hereof," "herein," and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, subsection and exhibit
references refer to this Agreement unless otherwise specified.
ARTICLE II - LINE OF CREDIT
2.1 LINE OF CREDIT.
(a) The Lender agrees, subject to the terms and conditions of this
Agreement, to make Line of Credit Loans in United States Dollars to the Borrower
for a period terminating on the earlier of the Line of Credit Maturity Date or
the termination in full of the Line of Credit pursuant to Article X hereof, at
such times and in such amounts as the Borrower shall request in accordance with
the provisions of this Agreement, provided that the aggregate principal amount
of the Line of Credit Loans outstanding at any one time shall not exceed the
then current available Line of Credit. Within the limits of the Line of Credit,
and subject to the provisions of this Agreement, the Borrower may borrow, repay,
and reborrow from time to time for a period from the date hereof to and
including the earlier of the Line of Credit Maturity Date or the termination in
full of the Line of Credit of the Lender pursuant to Article X hereof. Borrower
may request in writing (i) a full or partial termination of the Line of Credit
which remains
-10-
<PAGE>
unfunded, in minimum increments of One Million Dollars ($1,000,000.00), provided
that no Default or Event of Default has occurred or is continuing, and (ii) a
termination in full of the Line of Credit provided that such notice is
accompanied by payment of an amount equal to all amounts owing to the Lender
hereunder.
(b) Any Loan made under this Article II and, to the extent permitted by
law, interest thereon, which is not paid when due (whether at stated maturity,
by acceleration, or otherwise), after giving effect to any applicable cure
period, shall bear interest at the Default Rate (computed on the actual number
of days elapsed over a 360-day year).
2.2 NOTICE AND MANNER OF BORROWING.
(a) Borrower shall give written notice (or telephonic notice, promptly
confirmed in writing) to the Lender in the form of Exhibit C attached hereto
prior to 1:00 p.m., Fort Lauderdale, Florida time, on each proposed Borrowing
Date.
(b) Each Borrowing under this Article II shall be made at the office of
the Lender, at its address as set forth opposite its signature at the end of
this Agreement, by crediting the Borrower's general deposit account with the
Lender in the amount thereof.
2.3 LINE NOTE.
(a) The Line of Credit Loans made by the Lender under this Article II
shall be evidenced by, and repaid with interest in accordance with, a single
promissory note of the Borrower substantially in the form of Exhibit D attached
hereto and made a part hereof, with appropriate insertions, in the amount of the
Line of Credit, dated the Closing Date and payable to the order of the Lender
(the "Line Note").
(b) Each Line of Credit Loan evidenced by the Line Note and all
prepayments of the principal thereof shall be evidenced by the records of the
Lender or otherwise duly evidenced in the records of the Lender.
(c) Although the stated amount of the Line Note shall be equal to the
Line of Credit, the Line Note shall be enforceable, with respect to the
Borrower's obligation to pay the principal amount thereof, only to the extent of
the unpaid principal amount of the Line of Credit at the time evidenced thereby.
Interest on the Line Note shall be payable on, and only for the period during
which, the principal amount of the Loan evidenced thereby is outstanding.
2.4 INTEREST.
(a) Subject to the LIBOR Option set forth in Section 2.4(e) below, the
principal balance outstanding from time to time under the Line Note shall bear
interest at a fluctuating rate per annum equal to the Prime Rate, such rate to
be adjusted on any day of the month on which any change in the Prime Rate
becomes effective.
-11-
<PAGE>
(b) Interest on the principal balance from time to time outstanding
under the Line Note, which is not subject to the LIBOR Option set forth in
Section 2.4(e) below, shall be due and payable monthly on the first (1st) day of
each month commencing the first (1st) day of the first (1st) month following the
Borrowing of a Line of Credit Loan. If such payment day is not a Business Day,
the Business Day immediately following such date shall be the date on which
interest shall be due and payable. Interest under the Line Note shall be charged
only on the Line of Credit Loans advanced and shall be computed from the date of
such advance to the date of repayment.
(c) All interest under the Line Note shall be computed on a daily
basis, based on a 360-day year. In no event shall interest be due at a rate in
excess of the highest lawful rate in effect from time to time. It is not the
intention of the parties hereto to make any agreement which shall be violative
of the laws of the State of Florida or the United States of America relating to
usury. In no event shall Borrower pay or Lender accept or charge any interest
which, together with any other charges upon the principal or any portion
thereof, howsoever computed, after taking into account any requirement for
commitment and facility fees, shall exceed the maximum lawful rate of interest
allowable under the laws of the State of Florida or the United States of America
from time to time. Should any provision of this Agreement or any existing or
further Line Note, loan agreements or any other agreements between the parties
be construed to require the payment of interest which, together with any other
charges upon the principal or any portion thereof, after taking into account any
requirement for commitment and facility fees, shall exceed such maximum lawfu1
rate of interest, then any such excess shall be applied against the remaining
principal balance.
(d) Any principal and, to the extent permitted by law, interest which
is not paid when due under the Line Note (whether at stated maturity, by
acceleration or otherwise) shall bear interest at a rate per annum (computed as
aforesaid) equal to the Default Rate.
(e) So long as no default exists under this Agreement, Borrower may
elect to fix the interest rate applicable to not more than two (2) tranches of
the Line of Credit (each tranche shall be for a minimum of One Million Dollars
($1,000,000.00), or any integral multiple of Fifty Thousand Dollars
($50,000.00), at a fixed rate per annum equal to two hundred seventy-five (275)
basis points in excess of the Adjusted LIBOR Rate for periods (each an "Interest
Period"), of thirty (30) days, sixty (60) days or ninety (90) days, but in any
event not to exceed the Line of Credit Maturity Date (the "LIBOR Option").
Interest on Loans to which a LIBOR Option applies shall be due and payable on
the last day of each LIBOR Interest Period.
In the event Borrower has selected the LIBOR Option with respect to the
initial funding or any Interest Period, such selection shall be subject to the
following terms and conditions:
(i) If, at any time, Lender shall have determined (which
determination shall be final and conclusive and binding on the parties
hereto provided Lender has made such determination in good faith) that,
as a result of any change in any
-12-
<PAGE>
applicable law or governmental (federal, state or local, domestic or
foreign) rule, regulation or order or any interpretation thereof
(including without limitation, the introduction of any new or revised
law or governmental rule, regulation or order) or its compliance with
any directive or request of any central bank or other governmental
authority (whether or not having the force of law), the cost to Lender
of making, funding or maintaining the portion of the Line of Credit
which then is subject to one or more LIBOR Options (the "LIBOR Loan")
has increased from its cost at the time of the commencement of the
relevant Interest Period, then Lender shall promptly so notify Borrower
thereof by telephone (confirmed in writing) and Borrower shall pay to
Lender within thirty (30) days an amount sufficient to indemnify Lender
against such increased cost.
(ii) In the event that, at any time, Lender shall have
reasonably determined (which determination shall be final and
conclusive and binding upon the parties hereto) that it has become
unlawful for Lender to obtain funds in the relevant offshore interbank
markets in order to make or maintain its LIBOR Loan, Lender shall
promptly give notice to Borrower by telephone (confirmed in writing) of
that determination, whereupon the Prime Rate shall be in effect for the
duration of the pending Interest Periods with respect to the LIBOR
Loan.
(iii) If, on or before the date of commencement of any
Interest Period, Lender shall have determined (which determination
shall be final, conclusive and binding on all the parties hereto) that
(1) deposits in Dollars in amounts equal to the portion of the Line of
Credit to be subject to the LIBOR Option for that Interest Period are
not being offered to Lender in the relevant markets, or (2) by reason
of changes affecting the relevant markets, the LIBOR Option to be in
effect for that period will not adequately and fairly reflect the cost
to Lender of maintaining the LIBOR Loan for that period, Lender shall
promptly so notify Borrower by telephone (confirmed in writing)
whereupon the Prime Rate shall be in effect for that period with
respect to the LIBOR Loan;
(iv) Borrower shall compensate Lender within thirty (30) days
of the written request of Lender (which shall set forth in reasonable
detail the basis for requesting such compensation) for all reasonable
losses, expenses and liabilities (including without limitation, any
interest paid by Lender to lenders of funds borrowed by it to carry its
LIBOR Loan during any Interest Period and for any loss sustained by
Lender in connection with the re-employment of such funds) which Lender
may sustain: (i) as a result of Borrower's failure to borrow funds
which had been committed by Lender in advance, at Borrower's request;
or (ii) as a result of Borrower's prepayment of any outstanding LIBOR
Loan.
(v) In the event Lender shall have determined (which
determination shall be binding and conclusive on Borrower) that, by
reason of circumstances
-13-
<PAGE>
affecting the relevant markets for the LIBOR Option, adequate and
reasonable means do not exist for ascertaining the LIBOR Option with
respect to (a) the continuation of the LIBOR Option then in existence
pursuant to a prior request of Borrower, or (b) any request by Borrower
to change the Prime Rate then in existence, to the LIBOR Option, Lender
shall promptly notify Borrower by telephone (confirmed in writing) of
such determination. Upon receipt of such notice, the Prime Rate shall
be in effect until Lender notifies Borrower that it may resume
selection of the LIBOR Option.
(vi) In any case where Borrower may select an interest rate
option and fails or neglects to do so, or upon expiration of an
Interest Period, then the Prime Rate shall apply.
2.5 PAYMENTS.
All payments of principal and interest under the Line Note shall be to
the Lender at its address as set forth opposite its signature at the end of this
Agreement, in immediately available funds.
2.6 MATURITY.
All principal under the Line Note, together with all accrued and unpaid
interest thereon, shall be due and payable in full on the Line of Credit
Maturity Date, unless due and payable sooner pursuant to the terms of this
Agreement.
2.7 UNUSED LINE FEE.
A quarterly fee equal to one eighth percent (1/8%) per annum on the
average daily unused portion of the Line of Credit (the "Unused Fee") shall be
payable by Borrower to Lender. The Unused Fee shall be computed quarterly and
shall be due and payable in arrears on the fifteenth (1 5th) day of each
calendar quarter.
2.8 COLLATERAL.
All obligations of the Borrower under the Line of Credit shall be
secured by the Collateral in accordance with the provisions of Section 4.1 of
this Agreement.
ARTICLE III - BORROWING BASE
3.1 BORROWING BASE.
Notwithstanding anything contained in this Agreement to the contrary,
Borrower shall not be entitled to request a Line of Credit Loan if the amount of
the requested
-14-
<PAGE>
Line of Credit Loan, when added to the then current principal sum of Line of
Credit Loans outstanding would cause the same to exceed the lesser of: (A) Ten
Million Dollars ($ 10,000,000.00), or (B) the sum of: (i) eighty percent (80%)
of Eligible Rights to Receive which remain unused up to Two Hundred Forty (240)
days past the Purchase Date, plus (ii) seventy percent (70%) of Eligible Rights
to Receive which remain unused more than Two Hundred Forty (240) days but not
more than Three Hundred Sixty-five (365) days past the Purchase Date (the
"Borrowing Base"); provided, however, in no event shall more than sixty percent
(60%) of the Borrowing Base be comprised of Eligible Rights to Receive which
remain unused more than Two Hundred Forty (240) days past the Purchase Date. If
at any time the principal balance outstanding on the Line of Credit exceeds the
Borrowing Base, Borrower shall immediately pay to the Lender an amount equal to
such excess, with failure to do so constituting an Event of Default under this
Agreement. All the foregoing shall be calculated in accordance with a Borrowing
Base Certificate (the "Borrowing Base Certificate") attached hereto and made a
part hereof as Exhibit E, which shall be submitted to Lender on a monthly basis
within ten (10) days after the end of each month and which shall contain such
information related to the Borrowing Base as deemed necessary by Lender or as
may be subsequently specified by Lender.
ARTICLE IV - COLLATERAL
4.1 COLLATERAL.
Upon the occurrence of an Event of Default, and at any time thereafter,
the security interests provided for below and in the Security Agreement shall
attach to the Collateral upon written notice from Lender that the security
interests have attached to the Collateral and Lender has filed WCC-1 financing
statements with respect thereto. Borrower agrees that it will execute a security
agreement in favor of Lender (the "Security Agreement") and WCC-1 financing
statements in favor of Lender (the "UCC-ls"), in form and substance acceptable
to Lender, granting to Lender a first priority perfected security interest
subject to no other liens or encumbrances except as may be set forth in the
Security Agreement or this Agreement, in the following, together with the
proceeds and products thereof: (i) all Borrower's presently existing and
hereafter created Accounts or Accounts Receivable; (ii) all its presently owned
and hereafter acquired Inventory; (iii) all its presently owned and hereafter
acquired Equipment, and (iv) all of its presently owned and hereafter acquired
Chattel Paper, Documents, Instruments and General Intangibles, as said terms
are defined herein and in Chapter 679 of the Florida Statutes.
All of the above-described collateral is hereinafter referred to as the
"Collateral."
4.2 CROSS-DEFAULT.
Any Default in the terms and conditions of any agreement or agreements
(including this Agreement) executed in connection with the Borrowings hereunder
or in connection with any Indebtedness of Borrower to Lender, shall constitute a
Default hereunder and under all such agreements.
-15-
<PAGE>
ARTICLE V - CONDITIONS PRECEDENT TO BORROWING
The Lender shall not be obligated to make any Loan to the Borrower
hereunder unless the following conditions precedent shall have been satisfied in
the sole opinion of the Lender:
5.1 EACH LOAN.
The obligation of the Lender to make each Line of Credit Loan pursuant
to Article II herein is subject to the condition precedent that the Borrower
shall have delivered to the Lender the notice of Borrowing provided for in
Section 2.2 hereof
5.2 INITIAL LOAN.
The obligation of the Lender to enter into this Agreement and make the
initial Loans pursuant to Article II herein is subject to the following
additional conditions precedent, each of which shall have been met or performed
by the initial Borrowing Date:
(a) LINE NOTE. The Line Note, duly executed and completed in the form
of Exhibit B, attached hereto and made a part hereof, shall have been delivered
to the Lender.
(b) INSURANCE. Evidence that all of the Borrower's insurable properties
are insured as required by Section 7.4 of this Agreement.
(c) CORPORATE DOCUMENTS. Certified copies of the Articles of
Incorporation and Bylaws of each Borrower and all amendments thereto, together
with a Certificate of Good Standing of each Borrower and proof of qualification
to do business in each jurisdiction in which its business is conducted.
(d) CERTIFICATION OF NO ADVERSE CHANGE. Evidence or certification from
Borrower that, from the date of the latest financial information furnished to
Lender by Borrower, there has been no material adverse change in the business or
financial condition of Borrower.
(e) LITIGATION CERTIFICATE. Certification from Borrower that there
exists no pending or threatened litigation, the result of which could have a
material adverse effect on the business or financial condition of the Borrower.
(f) RELATED DOCUMENTS. The Borrower shall have delivered to the Lender
each of the Related Documents and each of the certificates and other documents
described in the Closing Documents List attached hereto as Exhibit B and made a
part hereof.
(g) COMMITMENT FEE. The Borrower shall have paid the Lender a fully
earned and non-refundable commitment fee in the amount of Seventeen Thousand
Five Hundred Dollars ($17,500.00) in connection with the Loan.
-16-
<PAGE>
ARTICLE VI - REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Loans provided for herein, the Borrower makes the following representations
and warranties to the Lender, all of which shall survive the execution and
delivery of this Agreement and the Line Note:
6.1 CORPORATE EXISTENCE AND POWER.
The Borrower is a corporation duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation and is
duly qualified or licensed to transact business in all places where such
qualification or license is necessary. The Borrower has the corporate power to
make and perform this Agreement and the applicable Related Documents, and this
Agreement and the applicable Related Documents, when duly executed and delivered
for value will, constitute the legal, valid and binding obligations of the
Borrower enforceable substantially in accordance with their respective terms,
except as the same may be limited by bankruptcy, reorganization or other laws
affecting creditors' rights generally.
6.2 CORPORATE AUTHORITY.
The making and performance by the Borrower of this Agreement and the
applicable Related Documents, and any additional documents contemplated to be
executed in connection herewith have been duly authorized by all necessary
corporate action of the Borrower, and do not and will not violate any provision
of law or regulation, or any writ, order, or decree of any court, governmental
commission, bureau, or other administrative agency or public regulatory body or
regulatory authority or agency or any provision of the articles or certificate
of incorporation or Bylaws of the Borrower, and do not and will not, with the
passage of time or the giving of notice, result in a breach of, or constitute a
default or require any consent under, or result in the creation of any Lien,
charge or encumbrance upon any property or assets of the Borrower pursuant to,
any instrument or agreement to which the Borrower is a party or by which the
Borrower or its respective properties may be bound or affected.
6.3 Financial Condition.
The consolidated balance sheets dated June 30, 1997 of Transmedia
Network Inc. heretofore furnished to the Lender, were prepared in accordance
with generally accepted accounting principles consistently applied, are complete
and correct and fairly present the financial condition of the Borrower as of
those dates and the results of its operations for the periods ending on those
dates, respectively. Other than as disclosed by those financial statements or as
listed on Schedule II hereto, the Borrower did not have any direct or contingent
obligations or liabilities which have a materially adverse effect on the
financial position of the Borrower, or any material unrealized or anticipated
losses from any commitments of the Borrower. From the
-17-
<PAGE>
date of delivery of the most recent balance sheet, there has been no material
adverse change in the business or financial condition of the Borrower.
6.4 FULL DISCLOSURE.
The financial statements referred to in Section 6.3 do not, nor does
this Agreement, or any written statement furnished by the Borrower to the Lender
in connection with the negotiation of this Agreement and the Loans, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading.
6.5 LITIGATION.
There are no suits or proceedings pending, or to the knowledge of the
Borrower, threatened before any court or by or before any governmental or
regulatory authority, commission, bureau, or agency or public regulatory body
against or affecting the Borrower which, if adversely determined, would have a
materially adverse effect on the business or financial condition of the
Borrower.
6.6 PAYMENT OF TAXES.
The Borrower has filed or caused to be filed, or has obtained
extensions to file all federal, state, and local tax returns which are required
to be filed, and has paid or caused to be paid, or has reserved on its books
amounts sufficient for the payment of, all taxes as shown on said returns or on
any assessment received by it, to the extent that the taxes have become due,
except as otherwise permitted by the provisions hereof. No tax liens have been
filed and the Borrower has not been notified of, or otherwise have knowledge of,
any claim being asserted with respect to any such taxes, fees, or other charges
which could have a materially adverse effect on the business or financial
condition of the Borrower.
6.7 NO ADVERSE RESTRICTIONS OR DEFAULTS.
The Borrower is not a party to any agreement or instrument or subject
to any court order or judgment, governmental decree, charter, or other corporate
restriction which is materially adverse to its ability to conduct its business
as currently conducted. The Borrower is not in default in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument to which it is a party or by which the
Borrower or its respective properties may be bound or affected, or under any
law, regulation, decree, order, or the like, which is materially adverse to its
ability to conduct its business as currently conducted.
-18-
<PAGE>
6.8 INVESTMENT COMPANY ACT.
The Borrower is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
6.9 AUTHORIZATIONS.
All authorizations, consents, approvals, and licenses required under
applicable law or regulation for the ownership or operation of the property
owned or operated by the Borrower or for the conduct of business in which the
Borrower is engaged, have been duly issued and are in full force and effect, and
the Borrower is not in default under any order, decree, ruling, regulation,
closing agreement, or other decision or instrument of any governmental
commission, bureau, or other administrative agency or public regulatory body
having jurisdiction over the Borrower, which default would have a material
adverse effect on the Borrower. No approval, consent, or authorization of or
filing or registration with any governmental commission, bureau, or other
regulatory authority or agency is required with respect to the execution,
delivery, or performance of this Agreement or the Related Documents.
6.10 SUBSIDIARIES AND AFFILIATES.
As of the date of execution of this Agreement, the Borrower has no
Subsidiaries and no Affiliates other than as disclosed in Schedule I hereto. All
the capital stock and evidence of the equity rights held by the Borrower or a
Subsidiary in each Subsidiary hereafter created or acquired will be owned by the
Borrower and/or another Subsidiary, beneficially and of record, free and clear
of all Liens.
6.11 TITLE TO PROPERTIES.
The Borrower has good and marketable fee title to all real property,
and good title to all other property and assets, reflected in the latest balance
sheet of the Borrower referred to in Section 6.3 or purported to have been
acquired by the Borrower subsequent to such date, except property and assets
sold or otherwise disposed of subsequent to such date in the ordinary course of
business. All property and assets of any kind of the Borrower are free from any
Liens except for Permitted Liens. The Borrower enjoys peaceful and undisturbed
possession under all of the leases under which it is operating, none of which
contains any unusual provisions that will materially impair or adversely affect
the operations of the Borrower. All leases pertaining to real property are
valid, subsisting, and in full force and effect and the Borrower has received no
notice of default thereunder, and the Borrower has no leases for personal
property other than for certain motor vehicles, none of which are in default.
The Borrower possesses all patents, patent rights or licenses, trademarks,
trademark rights, trade names, trade name rights, and copyrights which are
required to conduct its business as now conducted without known conflict with
the rights of others.
-19-
<PAGE>
6.12 USE OF LOANS.
The proceeds of the Line of Credit shall be used by the Borrower
exclusively for financing working capital and financing Rights to Receive of the
Borrower. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Loans hereunder will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock. If
requested by the Lender the Borrower will furnish to the Lender in connection
with the Loans hereunder a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in said Regulation.
6.13 ERISA.
(a) None of the Plans or the trusts created thereunder has engaged in a
prohibited transaction which could subject any such Plan or trust to a material
tax or penalty on prohibited transactions imposed under Code Section 4975 or
ERISA.
(b) None of the Plans or the trusts created thereunder has been
terminated; nor has any such Plan incurred any liability to the Pension Benefit
Guaranty Corporation, other than for required insurance premiums which have been
paid when due, or incurred any accumulated funding deficiency; nor has there
been any reportable event, or other event or condition, which presents a risk of
termination of any such Plan by the Pension Benefit Guaranty Corporation.
(c) The present value of all accrued benefits under the Plans did not,
as of the most recent valuation date, exceed the then-current value of the
assets of Plans allocable to such accrued benefits.
(d) The Borrower is not and has not been a party to and does not have
any employees who are covered by any multi-employer pension or benefit plan.
(e) As used in this Section 6.13, the terms "accumulated funding
deficiency," "reportable event" and accrued benefits" shall have the respective
meanings assigned to them in ERISA, and the term "prohibited transaction" shall
have the meaning assigned to it in Code Section 4975 and ERISA.
ARTICLE VII - AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the Closing Date and until
payment in full of the principal of and interest on the Line Note and the
termination in full of the Line of
-20-
<PAGE>
Credit, unless the Lender shall otherwise consent in writing, the Borrower will,
and to the extent that it may from time to time have any Subsidiaries, will
cause each of its Subsidiaries to:
7.1 LOAN PROCEEDS.
Use the proceeds of the Loans only for the purposes set forth in
Section 6.12 and furnish the Lender with all evidence that it may reasonably
require with respect to such use.
7.2 CORPORATE EXISTENCE.
Do or cause to be done all things necessary to maintain, preserve, and
keep in full force and effect its existence in the jurisdiction of its
incorporation, and qualify and remain qualified in each jurisdiction where
qualification is necessary or desirable in view of its business operations or
the ownership of its properties.
7.3 MAINTENANCE OF BUSINESS AND PROPERTIES.
At all times maintain, preserve, and protect all rights, privileges,
patents, franchises, and trade names necessary in the conduct of its business
and preserve all the remainder of its property used or useful in the conduct of
its business and keep the same in good repair, working order, and condition, and
from time to time make, or cause to be made, all needful and proper repairs,
replacements, betterments, and improvements thereto so that the business carried
on in connection therewith may be conducted properly and advantageously at all
times.
7.4 INSURANCE.
Insure and keep insured in amounts reasonably satisfactory to the
Lender, all insurable property owned by it, against loss or damage from such
hazards or risks, including fire; insure and keep insured employers' and public
liability risks in good and responsible insurance companies of the types and in
the amounts reasonably satisfactory to the Lender; maintain such other insurance
as may be required by law or as may reasonably be required in writing by the
Lender; and upon request of the Lender furnish a certificate setting forth in
summary form the nature and extent of the insurance maintained by the Borrower
pursuant to this Section 7.4. At such time as the security interests provided
for in Section 4.1 have attached to the Collateral as provided therein, Borrower
shall cause each insurance policy maintained by the Borrower pursuant to this
Section 7.4 to include a provision that the insurer will provide the Lender with
thirty (30) days' notice prior to the termination or expiration of such policy,
and shall cause all insurance policies maintained by Borrower covering the
Collateral to name the Lender "Loss Payee" and to grant Lender at least thirty
(30) days' notice of intended policy cancellation, non-renewal or material
modification.
7.5 PAYMENT OF INDEBTEDNESS, TAXES, ETC.
-21-
<PAGE>
Pay all of its Indebtedness and obligations promptly and in accordance
with the terms thereof and comply in all respects with all agreements,
indentures, mortgages or documents binding on it; and pay and discharge or cause
to be paid and discharged promptly all taxes, assessments, and governmental
charges or levies imposed upon it or upon its property or upon any part thereof,
before the same shall become in default, as well as all lawful claims for labor,
materials, and supplies or otherwise which, if unpaid, might become a Lien upon
such properties or any part thereof; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay and discharge or
to cause to be paid and discharged any tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings and the Borrower or Subsidiary, as the case may be, shall have set
aside on its books adequate reserves with respect to any tax, assessment,
charge, levy or claim, so contested.
7.6 COMPLIANCE WITH LAWS.
Duly observe, conform and comply with all laws, decisions, judgments,
rules, regulations, and orders of all governmental authorities relative to the
conduct of its business, its properties, and assets, except those being
contested in good faith by appropriate proceedings diligently pursued; and
obtain, maintain, and keep in full force and effect all governmental licenses,
authorizations, consents, and permits necessary to the proper conduct of the
business of the Borrower.
7.7 NOTICE OF DEFAULT.
Upon the occurrence of any Default or Event of Default which management
of the Borrower has knowledge of, promptly furnish written notice thereof to the
Lender specifying the nature and period of existence thereof and the action
which the Borrower is taking or proposes to take with respect thereto.
7.8 FINANCIAL STATEMENTS, REPORTS, ETC.
In the case of the Borrower, furnish to the Lender:
(a) within ninety (90) days after the end of each fiscal year of the
Borrower (being December 31), the audited, consolidated and consolidating
balance sheets and statements of income, retained earnings, and cash flows,
together with supporting schedules (which shall include, upon the reasonable
request of the Lender with respect to matters which it desires to review, the
working papers with respect to the Borrower's financial statements) of the
Borrower, all in reasonable detail and accompanied by an unqualified opinion
thereon by KPMG Peat Marwick or such other firm of independent certified public
accountants of recognized standing selected by the Borrower and reasonably
acceptable to the Lender;
(b) as soon as available, but in any event not later than forty-five
(45) days after the end of each of the first three (3) quarterly periods of each
fiscal year of Borrower, the
-22-
<PAGE>
management prepared unaudited, consolidated and consolidating financial
statements of Borrower, including a balance sheet of Borrower as at the end of
such fiscal quarter' related unaudited statements of income, retained earnings,
and cash flows, all for the period from the beginning of such fiscal year to
the end of such fiscal quarter, setting forth in each case corresponding figures
for the like period of the preceding fiscal year; all in reasonable detail,
prepared in accordance with generally accepted accounting principles applied on
a basis consistently maintained throughout the period involved and with prior
periods subject to normal year end audit adjustments, and certified by the Chief
Financial Officer of Borrower;
(c) within thirty (30) days after the end of each month, an aging
schedule of its Rights to Receive for such month (excluding Securitized Rights
to Receive), in reasonable detail and containing such information related to the
Rights to Receive (excluding Securitized Rights to Receive) as Lender may
request from time to time;
(d) concurrently with the delivery of the items referred to in clauses
(a) through (c) above, a certificate of the Chief Financial Officer of Borrower
stating that, to the best of his knowledge, no condition or event which would
constitute a Default or Event of Default has occurred, or if such a condition
has occurred, the certificate shall specifically state such condition;
(e) promptly after the same are sent or otherwise publicly available,
copies of all proxy statements, financial statements and reports which Borrower
sends to its stockholders, and promptly after the same are filed, copies of all
regular, periodic and special reports, (including, but not limited to, reports
on Forms 10-K, 10-Q and 8-K), and all registration statements which Borrower
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange; and
(f) promptly, from time to time, such other information regarding the
operations, business, affairs, and financial condition of the Borrower and any
of its Subsidiaries as the Lender may reasonably request.
All financial statements required to be furnished to the Lender under
this Section7.8 shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the accounting
practices of the Borrower reflected in its financial statements referred to in
Section 6.3 hereof, or to the extent such treatment has changed, with a
reconciliation thereof.
7.9 VISITATION RIGHTS.
Permit any authorized representative of the Lender not more than two
(2) times per calendar year, upon reasonable notice to the Borrower and during
normal business hours, to examine and copy the records and books of, and visit
and inspect the properties of, the Borrower or any of its Subsidiaries, and to
discuss the affairs and finances of the Borrower or ]
-23-
<PAGE>
any of its Subsidiaries, with any of their respective officers, directors, and
independent public accountants; provided, however, if a Default or Event of
Default has occurred, Lender shall be entitled to conduct the number of
examinations or inspections it deems necessary in its sole discretion.
7.10 NOTICE OF LITIGATION AND OTHER PROCEEDINGS.
Give prompt notice in writing to the Lender of the commencement of (a)
all material litigation which, if adversely determined, might have a materially
adverse effect on the business or financial condition of the Borrower and its
Subsidiaries taken as a whole; (b) all other litigation involving a claim
against the Borrower or any of its Subsidiaries for Two Hundred Fifty Thousand
Dollars ($250,000.00) or more in excess of applicable insurance coverage; and
(c) any citation, order, decree, ruling, or decision issued by, or any denial of
any application or petition to, or any proceedings before any governmental
commission, bureau, or other administrative agency or public regulatory body
against or affecting the Borrower or any of its Subsidiaries or any property of
the Borrower or any Subsidiary, or any lapse, suspension, or other termination
or modification of any certification, license, consent, or other authorization
of any agency or public regulatory body, or any refusal of any thereof to grant
any application therefor or renewal thereof, in connection with the operation of
any business conducted by the Borrower or any of its Subsidiaries, which if
adversely determined might have a material and adverse effect upon the business
or financial condition of the Borrower and its Subsidiaries taken as a whole.
7.11 ERISA.
Furnish to the Lender:
(a) As soon as available and in any event within thirty (30) days after
Borrower knows or has reason to know that any Termination Event has occurred, a
statement of a senior officer of the Borrower describing the Termination Event
and the action which the Borrower proposes to take so that the Termination Event
shall not be continuing;
(b) Promptly after receipt of request therefor by the Lender, copies of
each annual report filed by the Borrower or any of its Subsidiaries pursuant to
Section 104 of ERISA with respect to each Plan (including, to the extent
required by Section 103 of ERISA, the related financial and actuarial statements
and opinions and other supporting statements, certifications, schedules and
information referred to in said Section 103) and each annual report, if any,
required to be filed with respect to each Plan under Section 4065 of ERISA;
(c) Promptly after receipt thereof by the Borrower or any of its
Subsidiaries from the Pension Benefit Guaranty Corporation, copies of each
notice received by such party of the Pension Benefit Guaranty Corporation's
intention to terminate any Plan or to have a Trustee appointed to administer any
Plan; and
-24-
<PAGE>
(d) Promptly after such request, any other documents and information
relating to any Plan that the Lender may reasonably request from time to time.
7.12 BOOKS AND RECORDS.
Keep and maintain full and accurate accounts and records of its
operations according to generally accepted accounting principles consistently
applied.
7.13 OPERATING ACCOUNTS.
At all times Borrower shall maintain its primary depository account
with Lender and/or The Chase Manhattan Bank. If Borrower maintains it primary
depository account at an institution other than as provided above, such funds
must be electronically transferred to Lender daily. Upon the occurrence of an
Event of Default, Lender hereby reserves the right to require such depository
account to be handled as a cash collateral account under the control of the
Lender.
7.14 AUDITS AND EVALUATIONS.
KPMG Peat Marwick or such other accountant engaged by the Borrower to
prepare its financial statements shall conduct a quarterly review and
evaluation, at Borrower's expense, in form acceptable to Lender in its sole
discretion, of Borrower's books and records, with respect to the Rights to
Receive, and shall provide the results of such review and evaluation to Lender
together with the financial statements required by Sections 7.8(a) and 7.8(b).
7.15 TANGIBLE NET WORTH.
At all times maintain, in accordance with generally accepted accounting
principles consistently applied, a Tangible Net Worth of not less than Eighteen
Million Dollars ($18,000,000.00).
7.16 LIABILITIES TO TANGIBLE NET WORTH.
At all times maintain, in accordance with generally accepted accounting
principles consistently applied, a ratio of Liabilities to Tangible Net Worth
not exceeding 1.35:1.0.
7.17 EARNINGS.
Borrower shall not suffer a loss in excess of Five Hundred Fifty
Thousand Dollars ($550,000.00) for the twelve (12) month period ending September
30, 1997, and shall have retained earnings of not less than Two Hundred Thousand
Dollars ($200,000.00) for the six (6) month period ending March 31, 1998, and of
not less than Four Hundred Thousand Dollars ($400,000.00) for the twelve (12)
month period ending September 30, 1998.
-25-
<PAGE>
ARTICLE VIII - NEGATIVE COVENANTS
The Borrower covenants and agrees that from the Closing Date and until
payment in full of the principal of and interest on the Line Note and the
termination in full of the Line of Credit, unless the Lender shall otherwise
consent in writing, the Borrower will not, nor will it, to the extent that it
may from time to time have any Subsidiaries, permit any Subsidiary to:
8.1 LIMITATION ON LIENS.
Create or suffer to exist any Lien upon, or transfer or assignment of,
any of its property or revenues or assets now owned or hereafter acquired to
secure any Indebtedness or obligations, or enter into any arrangement for the
acquisition of any property subject to conditional sale agreements or leases or
other title retention agreements; excluding, however, from the operation of this
covenant the following permitted liens (the "Permitted Liens"): (a) Liens given
to secure purchase money transactions which do not exceed Five Hundred Thousand
Dollars ($500,000.00) in the aggregate in any fiscal year, unless otherwise
consented to by the Lender; (b) deposits or pledges to secure payment of
workers' compensation, unemployment insurance, old age pensions, or other social
security laws, or to secure statutory obligations; (c) Liens for property taxes,
assessments or other governmental charges or taxes due and payable, the validity
or amount of which in good faith is being contested or litigated; (d)
mechanics', carriers', workmen's, repairmen's, or other like liens arising in
the ordinary course of business securing obligations which are not overdue for a
period of sixty (60) days or more or which are in good faith being contested or
litigated; (e) existing Liens reflected in the financial statements referred to
in Section 6.3 hereof, or additional existing Liens listed in Schedule II
attached hereto and made a part hereof; (f) Liens granted to the Person
financing the acquisition of property, plant or equipment or other property
acquired by a Borrower, including Liens related to Capitalized Lease Obligations
if (i) limited to the particular assets acquired, (ii) the debt secured by the
Lien does not exceed the acquisition cost of a particular asset for which the
Lien is grant, (iii) such transaction does not otherwise violate this Agreement,
and (iv) the aggregate amount of all Indebtedness secured by Liens permitted
under this clause (f) does not exceed $250,000 at any one time outstanding; (g)
Liens arising out of attachments, judgments or awards as to which an appeal or
other appropriate proceedings for contest or review are timely commenced (and as
to which foreclosure and other enforcement proceedings shall not have been
commenced unless fully bonded or otherwise effectively stayed) and as to which
appropriate reserves have been established in accordance with generally accepted
accounting principles; (h) possessory Liens which (i) occur in the ordinary
course of business, (ii) secure normal trade debt which is not yet due and
payable, and (iii) do not secure Indebtedness for borrowed money; (i) Liens
arising by virtue of any statutory or common law provision relating to banker's
liens, rights of setoff or similar rights with respect to deposit accounts of
the Borrower or any Subsidiary; and (j) easements, rights of way, restrictions,
minor defects or irregularities in title and other similar encumbrances on real
property which do not materially detract from the value of the property
-26-
<PAGE>
subject therefor or interfere with the ordinary conduct of business of the
Borrower and the Subsidiaries.
8.2 LIMITATION ON INDEBTEDNESS.
Incur, create, assume, or permit to exist any Indebtedness, except:
(a) the Line Note and any other Indebtedness of the Borrower to the
Lender;
(b) Existing Indebtedness reflected in the financial statements
referred to in Section 6.3 hereof, or additional existing Indebtedness listed in
Schedule II attached hereto and made a part hereof;
(c) Indebtedness secured by the Liens permitted under Section 8.1 (a),
(d) Guaranties permitted pursuant to Section 8.3, and
(e) Investments pursuant to Section 8.7.
8.3 GUARANTIES.
Be or become liable in respect of any Guaranty, except for: (i) the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; (ii) Guaranties by the Borrower
of Indebtedness of its Subsidiaries and the shareholders in favor of the Lender
or otherwise permitted to the extent the Indebtedness is permitted in Section
8.2 hereof; (iii) performance bonds entered into by the Borrower or its
Subsidiaries to secure the obligations of itself or its Subsidiaries; (iv)
Guaranties of the Borrower and its Subsidiaries existing as of the date of
execution hereof, as shown on Schedule II hereto, and (v) Guaranties by the
Borrower of Indebtedness of certain franchisees of Borrower ("Franchisees"),
provided that: (a) the aggregate liability of Borrower under all Guaranties by
Borrower of Indebtedness of Franchisees does not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000.00), and (b) the liability of Borrower under any
Guaranty by Borrower of Indebtedness of a single Franchisee does not exceed the
lesser of One Million Dollars ($1,000,000.00), or fifty percent (50%) of the
Rights to Receive derived from such Franchisee.
8.4 DIVIDENDS.
With respect to Transmedia Network Inc., declare or pay any dividend or
authorize or make any other distribution on any stock of the Borrower, whether
now or hereafter outstanding, or make, or permit any Subsidiary to make, any
payment on account of the purchase, acquisition, redemption or other retirement
of any shares of such stock, provided, however, Borrower may declare annual
dividends in an amount not to exceed twenty five percent (25%) of the net income
after taxes of the Borrower.
-27-
<PAGE>
8.5 MERGERS, CONSOLIDATIONS AND ACQUISITION OF ASSETS.
Liquidate, dissolve, whether voluntary or involuntarily, merge or
consolidate with any corporation, or acquire all or substantially all of the
assets of any Person; provided, however, (i) the entities comprising the
Borrower shall be permitted to merge or consolidate with each other, (ii)
Borrower shall be permitted to enter into a merger or consolidation transaction
involving consideration from the Borrower in any form which does not exceed Two
Million Dollars ($2,000,000.00), provided such transaction would not otherwise
result in a Default under this Agreement, and (iii) Borrower shall be permitted
to enter into a merger, consolidation or other business combination transaction
involving consideration from the Borrower in any form which does exceed Two
Million Dollars ($2,000,000.00) only with the prior approval of Lender in its
reasonable discretion.
8.6 SALE, LEASE. ETC.
Sell, lease, assign, transfer or otherwise dispose of any of its assets
or revenues (other than obsolete or worn-out personal property or personal
property or real estate not used or useful in its business) whether now owned or
hereafter acquired, other than in the ordinary course of business, including
without limitation the stock of any Subsidiary, or sell, assign or discount any
of its Accounts Receivable, Rights to Receive (excluding Secured Rights to
Receive), or any promissory note held by it, with or without recourse, other
than the discount of such notes in the ordinary course of business for
collection.
8.7 INVESTMENTS.
Make or suffer to exist any Investments, except that this prohibition
shall not apply to (i) the purchase of direct obligations of the government of
the United States of America, or any agency thereof, or obligations
unconditionally guaranteed by the United States of America; (ii) certificates of
deposit of any bank organized or licensed to conduct a banking business under
the laws of the United States or any State thereof having capital, surplus and
undivided profits of not less than One Hundred Million Dollars
($100,000,000.00); (iii) Investments in commercial paper which, at the time of
acquisition by the Borrower or any Subsidiary, is accorded the highest rating by
Standard & Poor's Corporation, Moody's Investors Services, Inc. or any other
nationally recognized credit rating agency of similar standing; (iv) other
Investments of the Borrower existing as of the date of execution hereof as shown
on Schedule II hereof; (v) Investments in Subsidiaries; (vi) inter-company
advances among the entities comprising the Borrower; (vii) guarantees permitted
pursuant to Section 8.3; (viii) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of suppliers,
customers or other debtors or in settlement of delinquent obligations arising in
the ordinary course of business; (ix) promissory notes or other debt obligations
received in connection with asset dispositions permitted hereunder; and (x)
loans and advances permitted pursuant to Section 8.12.
-28-
<PAGE>
8.8 TRANSACTIONS WITH AFFILIATES.
Enter into or be a party to, any transaction or arrangement with any
Affiliate (including without limitation the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any Affiliate),
except the Secured Non-Recourse Debt, transactions or arrangements among
entities comprising the Borrower, and transactions or arrangements in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms no less favorable to the Borrower
than would be obtained in a comparable arm's-length transaction with a Person
other than an Affiliate.
8.9 LEASE OBLIGATIONS: SALE AND LEASEBACK.
Incur or suffer to exist any obligations to pay Rentals which would
cause the aggregate amount of all Rentals payable by the Borrower to exceed One
Million Dollars ($1,000,000.00) in any fiscal year. The Borrower shall not after
the sale of any property or assets owned by the Borrower, lease such property or
substantially identical property.
8.10 PURCHASE OF OWN SHARES.
Purchase, retire or redeem any shares of its own stock.
8.11 BUSINESS OPERATIONS.
Change its name, ownership, control or nature of business.
8.12 LOANS AND ADVANCES.
Except as permitted in Section 8.7, make loans or advances to any
Persons exceeding (i) One Hundred Thousand Dollars ($100,000.00) to any one
Person, or (ii) Five Hundred Thousand Dollars ($500,000.00) in the aggregate to
all Persons.
ARTICLE IX - ENVIRONMENTAL
9.1 HAZARDOUS AND TOXIC MATERIALS GENERALLY.
(a) The Borrower expressly represents to the Lender that to the best of
its knowledge (i) except as set forth on Schedule III, there has been no
complaint, order, citation, or notice with regard to air emissions, Hazardous
Discharges (as hereinafter defined), or other environmental, health, or safety
matters affecting any of the premises owned or operated by the Borrower or any
of its Subsidiaries (the "Premises") or the businesses therein conducted which
have not been fully satisfied and discharged, and (ii) except as set forth in
Schedule III, there has been no spill, discharge, release, or cleanup of any
hazardous or toxic waste or substance or any petroleum product or pesticide
("Hazardous Substances") at any of the Premises, including without limitation
into or upon any of their respective soils, surface water, ground water or the
improvements located thereon (a "Hazardous Discharge"), and, accordingly, such
properties are
-29-
<PAGE>
clean of all such wastes and substances. The Borrower expressly covenants and
agrees that to the extent the Premises are used for the handling, storage,
transportation, or disposal of any Hazardous Substance, it shall (i) implement
and maintain a program or system to minimize the likelihood and effect of any
Hazardous Discharge, (ii) use its best efforts to ensure that such use will be
in accordance with all federal, state and local environmental laws, rules and
regulations which apply to the handling, storage, transportation or disposal of
any Hazardous Substance, and (iii) obtain any and all necessary permits,
licenses and approvals with respect to such use.
(b) The Borrower agrees to indemnify and hold the Lender harmless from
and against any claims, losses, damages, liabilities (including without
limitation all foreseeable and unforeseeable consequential damages), penalties,
fines, charges, interest, judgments, administrative and judicial proceedings,
voluntary or involuntary, remedial actions of any kind, public or private,
incurred by the Lender as a result of any past, present, or future use,
handling, storage, transportation or disposal of any Hazardous Substance by the
Borrower or any other user or operator of any of the Premises, including without
limitation all costs and expenses incurred in connection therewith (including
without limitation reasonable attorneys' fees and expenses (including those for
appellate proceedings and court costs). The foregoing indemnity shall survive
the repayment of the Loans and the termination of this Agreement; provided that
the Borrower shall not be liable to the Lender for its own gross negligence or
willful misconduct, nor shall the Borrower be liable for any claims which are
barred by any applicable statute of limitations.
(c) Upon the Lender's good-faith determination that all or any part of
any of the Premises have been used or may in the future be used for the
handling, storage, transportation or disposal of any Hazardous Substance and
such use may, in the determination of the Lender (i) result in the issuance of a
complaint, order, citation, or notice by any governmental or regulatory
authority, commission, bureau, or agency or public regulatory body against or
affecting the Borrower or any of its Subsidiaries or all or any part of the
Premises, (ii) result in the imposition of liability on the part of any Person
to take any actions with respect to such use, including without limitation any
liability to clean up any Hazardous Discharge, or (iii) otherwise adversely
affect the Lender's security interest in the Premises, the Lender may:
(i) request that the Borrower, who shall upon said request and
at its expense, provide to the Lender a report from a reputable
environmental consultant, selected by the Borrower but acceptable to
the Lender with respect to such Premises and the nature and effect of
the use of any Hazardous Substance thereon, which report shall be
provided to the Lender no later than ninety (90) days following the
request therefor, or such earlier date upon which the report is
actually available from the environmental consultant; provided, if the
Borrower shall fail or refuse to engage an environmental consultant
acceptable to the Lender to provide such a report within twenty (20)
days following the request therefor by the Lender, the Lender may, but
shall not be obligated to, obtain such a report from a reputable
environmental consultant of the Lender's choice, at the Borrower's
expense; and
-30-
<PAGE>
(ii) bring its agents, which shall include reputable
environmental consultants, on the Premises to conduct environmental
studies and tests, at the Borrower's expense, and based upon such
studies and tests, the Lender, if it reasonably determines that the
Borrower or any of its Subsidiaries is not in compliance with any
federal, state, or local environmental laws, rules, or regulations
which apply to the Premises or to any users or operators of any
establishments at the Premises, may require the Borrower or its
Subsidiary to complete such remedial actions, at the Borrower's or such
Subsidiary's expense and within such period as may be required under
applicable law, as are necessary to effect complete compliance with
federal, state, or local environmental laws, rules, or regulations
which apply to the Premises or to any users or operators of any
establishments at the Premises; provided, that the Borrower's duty
hereunder to undertake remedial actions at the Lender's request shall
apply only to (i) a remedial action which the Lender reasonably
estimates will cost more than Twenty-Five Thousand Dollars ($25,000.00)
to complete or (ii) remedial actions which the Lender reasonably
estimates will, together with all other remedial actions necessary to
effect complete compliance with federal, state, or local environmental
laws, rules, or regulations which apply to the Premises or to any users
or operators of any establishments at the Premises, result in an
aggregate remedial cost in excess of Fifty Thousand Dollars
($50,000.00); provided further, if the nature of the Environmental
Defect (defined as a condition or conditions which would require
cleanup or remediation under any laws, rules, or regulations of the
United States of America, any state thereof, or any political
subdivision thereof) is such that it cannot be cured within the period
under applicable law, the remedial action must have been commenced
within ninety (90) days of knowledge thereof and diligently and
continuously pursued.
In the event that the Borrower shall not accomplish the foregoing within the
required periods of time, the Borrower agrees that the Line Note shall, at the
discretion of the Lender, become accelerated and immediately due and payable.
(d) The Borrower hereby agrees to provide to the Lender, promptly upon
becoming available, copies of all notices, reports, correspondence and filings
made by, or received from, any governmental or regulatory authority, commission,
bureau, or agency or public regulatory body and such other information as the
Lender may from time to time reasonably request with respect to the use of all
or any part of any of the Premises for the handling, storage, transportation, or
disposal of any Hazardous Substance; provided, however, the Borrower shall give
immediate notice to the Lender of the occurrence of any Hazardous Discharge,
which management has knowledge of and reasonably estimates will (i) cost more
than Ten Thousand Dollars ($10,000.00) to remediate or (ii) together with all
other Hazardous Discharges not previously reported, result in an aggregate
remedial cost in excess of Twenty Thousand Dollars ($20,0000.00)
-31-
<PAGE>
(e) Before the Lender shall be obligated to make any Loan, the Lender
may require that any and all violations of law with respect to the use,
handling, storage, transportation, or disposal of any Hazardous Substance be
corrected and/or that the Borrower obtain all necessary environmental and other
permits if such violations or lack of permits would have a material adverse
effect on the business or operations of the Borrower.
(f) If all or any part of the Premises now or hereafter contain any
Environmental Defect or Defects (defined as a condition or conditions which
would require cleanup or remediation under any laws, rules, or regulations of
the United States of America, any state thereof, or any political subdivision
thereof), the Borrower agrees as follows:
(i) In the event that the U.S. Environmental Protection
Agency, the Florida Department of Environmental Regulation, the County
Department of Environmental Resources Management, or any other federal,
state, or local government agency (each a "Regulatory Agency") shall
serve the Borrower or any of its Subsidiaries with any requests or
directives for any cleanup or remediation of any of the Premises or any
other property owned by the Borrower or any of its Subsidiaries (the
"Other Property"), including any requests or directives to remove or
arrange for the removal of any substances, hazardous or otherwise, from
any of the Premises or the Other Property, the Borrower agrees that the
Line Note shall, at the discretion of the Lender, become accelerated
and immediately due and payable in the event that the Borrower shall
not accomplish or cause to be accomplished one of the following:
(A) complete compliance with the request or directive
within the period described in such request or directive, to
the satisfaction of the applicable Regulatory Agency; or
(B) if the nature of the Environmental Defect is such
that it cannot be cured within the period described in clause
(A) above, compliance with the request or directive must have
been commenced within the period provided therein to the
satisfaction of the applicable Regulatory Agency; provided
that the Borrower shall thereafter continue to diligently
pursue compliance with such request or directive to the
satisfaction of the applicable Regulatory Agency; or
(C) contest such requests and directives in good
faith by appropriate proceedings diligently and continuously
pursued so long as such proceedings prevent the sale,
forfeiture, or loss of the Premises or the Other Property and
the Borrower is not prevented from conducting its normal
business operations thereon; provided, however, that the
Borrower shall have set aside on its books reserves in amounts
at least equal to the estimated cost of any such compliance,
which cost shall have been
-32-
<PAGE>
estimated by a reputable environmental consultant selected by
the Borrower but acceptable to the Lender.
(ii) In the event there shall be filed a Lien against any of
the Premises by any Regulatory Agency at any time from and after the
Closing Date, the Borrower agrees that it shall cause said Lien to be
removed from the Premises within ninety (90) days from the date that
the Lien is placed against the Premises or within any shorter period of
time required by the Lender in the event that the Regulatory Agency
commences steps to cause the sale of the Premises pursuant to the Lien.
In the event that the Borrower or its Subsidiary shall not accomplish
the foregoing within the required period of time, the Borrower agrees
that the Line Note shall, at the discretion of the Lender, become
accelerated and immediately due and payable. Notwithstanding the
foregoing, the Borrower shall have the right to contest any such Lien
as provided in Section 9.1(i)(C).
(g) Subject to the provisions of this Article IX, the Borrower and its
Subsidiaries shall comply with any and all federal, state, or local
environmental laws, rules, or regulations which apply to the Premises or to any
users or operators of any establishments at the Premises.
ARTICLE X - EVENTS OF DEFAULT
10.1 EVENTS OF DEFAULT.
If any one of the following "EVENTS OF DEFAULT" shall occur and shall
not have been remedied:
(a) Any representation or warranty made by the Borrower in connection
with this Agreement, or any Loan hereunder, or in any certificate or report
furnished by the Borrower hereunder shall prove to have been incorrect in any
material respect;
(b) The Borrower shall fail to pay, when due, any principal of or
interest on the Line Note, or to pay when due any other sum payable under this
Agreement;
(c) The Borrower shall default in the performance of any agreement,
covenant or obligation contained herein not provided for elsewhere in this
Article X, including but not limited to (i) failure by Borrower to conduct its
business in accordance with industry standards and in accordance with all local,
state and federal laws and regulations governing the conduct of Borrower's
business; (ii) the revocation or suspension of any license or permit required to
be maintained by Borrower in the conduct of its business; (iii) dissolution of
Borrower or failure of the Borrower to maintain its corporate existence; or (iv)
any material adverse change shall occur in the
-33-
<PAGE>
business or financial condition of Borrower, and such Event of Default shall
remain uncured for a period of fifteen (15) Business Days;
(d) Final judgment for the payment of money in an amount in excess of
One Million Dollars ($1,000,000.00) in excess of applicable insurance coverage
shall be rendered against the Borrower, and the same shall remain undischarged
for a period of thirty (30) days, during which period execution shall not
effectively be stayed;
(e) The Borrower shall voluntarily terminate operations, or the
Borrower shall (1) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of the Borrower, or
of all or of a substantial part of the assets of the Borrower, (2) admit in
writing its inability, or be generally unable, to pay its debts as the debts
become due, (3) make a general assignment for the benefit of its creditors, (4)
commence a voluntary case under the United States Bankruptcy Code (as now or
hereafter in effect), (5) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, (6) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code, or (7) take any corporate action
for the purpose of effecting any of the foregoing;
(f) The Borrower shall fail to furnish to the Lender notice of default
in accordance with Section 7.7 hereof, within ten (10) days after any such
Default or Event of Default becomes known to the President or Chief Financial
Officer of the Borrower, whether or not notification to the Borrower is
furnished by the Lender, unless such Default or Event of Default shall be cured
prior to the expiration of such ten (10) day period;
(g) Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect of the
Borrower: the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of the Borrower, or of all or any substantial part of the
assets of the Borrower, or other like relief in respect of the Borrower, under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts unless such proceeding is contested in good
faith by the Borrower; and, if the proceeding is being contested in good faith
by the Borrower, the same shall continue undismissed, or unstayed and in effect,
for any period of sixty (60) consecutive days, or an order for relief against
the Borrower shall be entered in any involuntary case under the Bankruptcy Code;
(h) The Borrower or any of its Subsidiaries shall (1) default in the
payment of principal or interest, in an aggregate amount then due of One Million
Dollars ($1,000,000.00) or more, on any Indebtedness (other than the Line Note)
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created; or (2) default in the observance or
performance of any other agreement contained in any Indebtedness referred to in
(1) above or in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur, the effect of which default or other
event is to cause, or permit the holder or holders of
-34-
<PAGE>
such Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, such Indebtedness to become due prior to its stated maturity; or (3)
default in the observance or performance of any instrument or agreement, which
default would have an adverse impact on the business or financial condition of
the Borrower; provided, however, that no Event of Default shall occur under this
Article X so long as the Borrower or any of its Subsidiaries shall contest in
good faith its obligations under the Indebtedness described in this Article X by
appropriate proceedings and the Borrower or Subsidiary, as the case may be,
shall have set aside on its books adequate reserves with respect to any amount
so contested;
(i) A Termination Event has occurred; or a trustee shall be appointed
to administer any Plan or Plans under Section 4042 of ERISA; or the Pension
Benefit Guaranty
(j) Corporation shall institute proceedings to terminate, or to have a
trustee appointed to administer, any Plan or Plans, and the proceeding shall not
be dismissed within thirty (30) days; or a voluntary notice of intent to
terminate is filed under Section 4041 of ERISA which would, in the opinion of
the Lender, have a material adverse effect on the financial condition of the
Borrower and its Subsidiaries taken as a whole; or, with respect to any Plan as
to which the Borrower or any Subsidiary may have any liability, there shall
exist a deficiency in the Plan assets available to satisfy the benefits
guaranteeable under ERISA with respect to the Plan which is material to the
financial condition of the Borrower and such Subsidiary taken as a whole, and
(1) steps are undertaken to terminate the Plan or (2) the Plan is terminated or
(3) any Reportable Event which presents a material risk of termination with
respect to the Plan shall occur;
(k) The Security Agreement or any other security document in favor of
Lender, or any provisions thereof, shall be invalidated or deemed unenforceable;
or
(l) Any default shall occur under any of the Related Documents;
THEREUPON, in the case of any such event the Lender may at its option: (i)
immediately terminate the Line of Credit of the Lender hereunder, and/or (ii)
immediately declare the principal of, and interest accrued on, the Line Note
forthwith due and payable, whereupon the same shall become forthwith due and
payable; and the principal of, and interest accrued on, the Line Note shall
become immediately due and payable, both as to principal and interest, without
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Line Note to the
contrary notwithstanding; and (iii) exercise any and all rights and remedies
available to Lender under this Agreement, the Related Documents, the Uniform
Commercial Code in effect in the State of Florida or any other document,
instrument or agreement executed and delivered in connection with this
Agreement, and all rights and remedies available to Lender under any other
applicable law.
-35-
<PAGE>
ARTICLE XI - MISCELLANEOUS
11.1 NO WAIVER. REMEDIES CUMULATIVE.
No failure on the part of the Lender to exercise and no delay in
exercising any right granted hereunder or in the Line Note shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and are not exclusive of any
remedies provided by law.
11.2 SURVIVAL OF REPRESENTATIONS.
All representations and warranties made herein shall survive the making
of the Loans hereunder and the delivery of the Line Note.
11.3 EXPENSES.
Whether or not any of the Loans herein provided for shall be made, the
Borrower agrees to pay on demand all reasonable costs and expenses of the Lender
in connection with the preparation, printing, execution, and delivery of this
Agreement, the Related Documents, the Line Note and the other instruments and
documents to be delivered hereunder and thereunder, including the reasonable
fees and out-of-pocket expenses of legal counsel for the Lender, with respect
thereto, as well as the reasonable fees and out-of-pocket expenses of legal
counsel, independent public accountants and other outside experts retained by
the Lender in connection with the enforcement of this Agreement, the Related
Documents, the Line Note and the other instruments and documents to be delivered
hereunder and thereunder. In addition, the Borrower shall pay any and all stamp
and other taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Line Note and the other
instruments and documents to be delivered hereunder and thereunder, and agrees
to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omitting to pay such taxes.
All obligations provided for in this Section 11.3 shall survive any termination
of this Agreement.
11.4 NOTICES.
Except as otherwise provided for in this Agreement, any notice or other
communication hereunder to any party hereto shall be delivered by hand,
registered or certified mail, postage prepaid return receipt requested, in the
United States mail or overnight delivery by a nationally recognized overnight
courier service ("Overnight Courier") and shall be deemed to have been given or
made on the third (3rd) Business Day after the deposit thereof in the mail, or
shall be deemed to have been given or made on the second (2nd) Business Day
after deposit thereof with an Overnight Courier, or when received if delivered
by hand, addressed to the party at its address specified next to its signature
hereto (or at any other address that the party may
-36-
<PAGE>
hereafter specify to the other parties in writing), except that notices by the
Borrower under Section 2.2 hereof shall not be effective until received.
11.5 CONSTRUCTION.
This Agreement, the Related Documents, and the Line Note shall be
deemed contracts made under the law of the State of Florida and shall be
governed by and construed in accordance with the law of said state.
11.6 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
the Borrower and the Lender, and their respective successors and assigns;
provided, that the Borrower may not assign any of its rights hereunder without
the prior written consent of the Lender. The Lender may, without the consent of
the Borrower, or any other Person, assign, negotiate, hypothecate, or grant
participations in this Agreement or in any of its rights and security under this
Agreement and each of the other documents contemplated to be executed in
conjunction herewith; provided, however, the Lender agrees that in the event of
all such assignments, negotiations, hypothecations or participations the Lender
shall remain as the holder of the majority amount of the Loans, and shall act as
the lead lender and administrative agent hereunder and shall not assign its
obligations to administer the Loans. The Borrower shall accord full recognition
to any such assignment, and all rights and remedies of the Lender in connection
with the interest so assigned shall be as fully enforceable by such assignee as
they were by the Lender before such assignment. In connection with any proposed
assignment, the Lender may disclose to the proposed assignee any information
that the Borrower is required to deliver to the Lender pursuant to this
Agreement.
11.7 JURISDICTION, SERVICE OF PROCESS.
(a) Any suit, action or proceeding against the Borrower with respect to
this Agreement or the Related Documents or any judgment entered by any court in
respect of any thereof may be brought in the courts of the State of Florida or
in the U.S. District Court for the Southern District of Florida as the Lender
(in its sole discretion) may elect, and the Borrower hereby accepts the
nonexclusive jurisdiction of those courts for the purpose of any suit, action or
proceeding.
(b) In addition, the Borrower hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement or the Related Documents or any judgment entered by
any court in respect of any thereof brought in Broward County, Florida, and
hereby further irrevocably waives any claim that any suit, action or proceeding
brought in Broward County, Florida has been brought in an inconvenient forum.
The Borrower further agrees that if any such suit, action or proceeding is
pending in more than one jurisdiction that the Lender's selection of the forum
shall be binding on the Borrower.
-37-
<PAGE>
11.8 LIMIT ON INTEREST.
Anything herein, in the Related Documents, or in the Line Note to the
contrary notwithstanding, the obligations of the Borrower under this Agreement,
the Related Documents, and the Line Note to the Lender shall be subject to the
limitation that payments of interest to the Lender shall not be required to the
extent that receipt of any such payment by the Lender would be contrary to
provisions of law applicable to the Lender (if any) which limit the maximum rate
of interest which may be charged or collected by the Lender; provided, however,
that nothing herein shall be construed to limit the Lender to presently existing
maximum rates of interest, if an increased interest rate is hereafter permitted
by reason of applicable federal or state legislation. If by the terms of this
Agreement, the Related Documents or the Line Note the Borrower is at any time
required or obligated to pay interest in excess of such maximum rate, the rate
of interest payable hereunder and thereunder shall be computed at such maximum
rate and the portion of all prior interest payments in excess of such maximum
rate shall be applied to and shall be deemed to have been payments in reduction
of the principal balance of this Agreement and the Line Note.
11.9 PAYMENT ON OTHER THAN BUSINESS DAY.
Except as otherwise provided for in this Agreement, should any payment
required by this Agreement become due and payable other than on a Business Day,
the maturity thereof shall be the immediately following Business Day.
11.10 NET PAYMENTS.
All payments by the Borrower under this Agreement and the Line Note
shall be made without set-off or counterclaim and in such amounts as may be
necessary in order that all payments, after deduction or withholding for or on
account of any present or future taxes, levies, imposts, duties, or other
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority thereof (collectively, the "Taxes"), shall not
be less than the amounts otherwise specified to be paid under this Agreement and
the Line Note. Notwithstanding anything to the contrary contained in this
Section 11.10, the Borrower shall not be liable for the payment of any tax on
or measured by net income imposed on the Lender pursuant to the income tax laws
of the United States or any of the United States or any political subdivision
thereof. The Borrower shall pay all Taxes when due (and indemnify the Lender
against any liability therefor) and shall promptly (and in any event not later
than 30 days thereafter) furnish to the Lender any certificates, receipts and
other documents which may be required (in the judgment of the Lender) to
establish any tax credit to which the Lender may be entitled. The obligations of
the Borrower under this Section 11.10 shall survive the termination of this
Agreement and the repayment of the Loan, but such obligations shall terminate as
to any claim or liability for Taxes for which the Borrower is responsible
pursuant to this Section 11.10 on the same date that any such claim or liability
for Taxes is barred by any applicable statute of limitations.
-38-
<PAGE>
11.11 ADDITIONAL COSTS.
If at any time after the date hereof, and from time to time, the Lender
determines that the adoption or modification of any applicable law, rule or
regulation regarding taxation, the Lender's required levels of reserves,
deposits, deposit insurance or capital (including any allocations of capital
requirements or conditions), or similar requirements, or any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation, administration or compliance of the
Lender with any of such requirements, has or would have the effect of (i)
increasing the Lender's costs relating to the Line of Credit; and (ii) reducing
the yield or rate of return of the Lender on the Line of Credit to a level below
that which the Lender could have achieved but for the adoption or modification
of any such requirements, Borrower shall, within fifteen (15) days of any
request by the Lender pay to the Lender such additional amounts as (in either
the Lender's reasonable judgment, after good faith and reasonable computation,
the written explanation of which shall be presented to Borrower for review) will
compensate the Lender for such increase in costs which results in reduction in
yield or rate of return of the Lender calculated prospectively from the date of
notice by the Lender to Borrower. No failure of either the Lender to immediately
demand payment of any additional amounts payable hereunder shall constitute a
waiver of the Lender's right to demand payment of such amounts at any subsequent
time. Nothing herein contained shall be construed or so operate as to require
Borrower to pay any interest, fees, costs or charges greater than is permitted
by Applicable law.
11.12 INDEMNIFICATION OF LENDER.
Borrower hereby indemnifies and holds harmless, releases and forever
discharges Lender, its agents, servants, employees, officers, directors,
affiliates, attorneys, successors and assigns from all damages, losses, claims,
demands, liabilities, obligations, actions and causes of action whatsoever which
may exist as of the date hereof or arise hereafter or which may be presently
known or unknown and which may be of any nature and extent whatsoever which may
be brought by third parties on account of or in any way directly or indirectly
related to touching, concerning, arising out of, or founded upon this Agreement,
the Related Documents and any agreement, document or instrument executed or to
be executed in conjunction therewith or in connection with any and all
transactions contemplated thereby. This indemnity and release on the part of the
Borrower is contractual and not merely a recital.
11.13 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which when taken
together shall constitute but one and the same instrument.
-39-
<PAGE>
11.14 HEADINGS.
The headings and the Table of Contents of this Agreement are for
convenience only and are not to affect the construction of or to be taken into
account in interpreting the substance of this Agreement.
11.15 SEVERABILITY.
In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
11.16 COURSE OF DEALING; AMENDMENT; SUPPLEMENTAL AGREEMENTS.
No course of dealing between the Lender and the Borrower shall be
effective to amend, modify or change any provision of this Agreement. This
Agreement may not be amended, modified or changed in any respect except by an
agreement in writing signed by the Lender and the Borrower. The Lender and the
Borrower may, subject to the provisions of this Section 11.16, from time to
time, enter into written agreements supplemental hereto for the purpose of
adding any provisions to this Agreement or changing in any manner the rights and
obligations of the Lender and the Borrower hereunder. Any such supplemental
agreement in writing shall be binding upon the Lender and the Borrower.
11.17 Direct Debit.
The Borrower acknowledges and agrees that the payment of interest and
the Unused Fee hereunder may be deducted, charged, or debited directly by the
Lender from the Borrower's master demand deposit account maintained by the
Borrower with the Lender.
11.18 RIGHT OF SET-OFF.
Upon the occurrence and during the continuance of any Event of Default,
the Lender is hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower),
to set off and apply any and all deposits (general or special, time or demand,
professional or final) at any time held and any other indebtedness owing by the
Lender to or for the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement or
the Line Note, or any other instrument executed in connection with this
Agreement or the Line Note or constituting security therefor, irrespective of
whether or not the Lender shall have made demand under this Agreement or the
Line Note and although such obligations may be unmatured. The Lender agrees
promptly to notify the Borrower after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
-40-
<PAGE>
The rights of the Lender under this Section 11.18 are in addition to other
rights and remedies (including without limitation other rights of set-off) which
the Lender may have.
11.19 WAIVER OF JURY TRIAL.
THE LENDER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY OTHER AGREEMENT, DOCUMENT OR INSTRUMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO THE BORROWER.
(SIGNATURES APPEAR ON FOLLOWING PAGE)
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
[BORROWER]:
TRANSMEDIA NETWORK INC., a Delaware
corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen E. Lerch, Executive Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
TRANSMEDIA RESTAURANT COMPANY
INC., a Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen e. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
TMNI INTERNATIONAL INCORPORATED,
a Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen E. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
<PAGE>
TRANSMEDIA SERVICE COMPANY INC., a
Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen E. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
[LENDER]:
COMERICA BANK
By: /s/ SHERYL METCALFE
-----------------------------------
Sheryl Metcalfe, Vice President
100 N.E. 3rd Avenue
Fort Lauderdale, Florida 33301
Attn: Sheryl Metcalfe, Vice President
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this 27 day of
October, 1997 by Stephen E. Lerch, as Executive Vice President of TRANSMEDIA
NETWORK INC., a Delaware corporation, who is personally known to me or who has
produced ______________ as identification.
/s/ MARY A. FOWLER
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
My Commission Expires:
MARY A. FOWLER
Notary Public, State of New York
No. 244528399
Qualified in Kings County
Term Expires Oct. 17, 1998
<PAGE>
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this 27 day of
October, 1997, by Stephen E. Lerch, as Vice President of TRANSMEDIA RESTAURANT
COMPANY INC., a Delaware corporation, who is personally known to me or who has
produced ______________ as identification.
/s/ MARY A. FOWLER
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
My Commission Expires:
STATE OF NEW YORK ) MARY A. FOWLER
)SS Notary Public, State of New York
COUNTY OF NEW YORK) No. 244528399
Qualified in Kings County
Term Expires Oct. 17, 1998
The foregoing instrument was acknowledged before me this 27 day of
October, 1997, by Stephen E. Lerch, as Vice President of TMNI INTERNATIONAL
INCORPORATED, a Delaware corporation, who is personally known to me or who has
produced _____________ as identification.
/s/ MARY A. FOWLER
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
My Commission Expires:
MARY A. FOWLER
Notary Public, State of New York
No. 244528399
Qualified in Kings County
Term Expires Oct. 17, 1998
<PAGE>
STATE OF NEW YORK )
)SS:
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this 27 day of
October, 1997, by Stephen E. Lerch, as Vice President of TRANSMEDIA SERVICE
COMPANY INC., a Delaware corporation, who is personally known to me or who has
produced as identification.
/s/ MARY A. FOWLER
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
My Commission Expires:
MARY A. FOWLER
Notary Public, State of New York
No. 244528399
Qualified in Kings County
Term Expires Oct. 17, 1998
STATE OF GEORGIA)
) SS:
COUNTY OF COBB )
The foregoing instrument was acknowledged before me this 4 day of
November, 1997, by Sheryl Metcalfe, as Vice President of COMERICA BANK, who is
personally known to me or who has produced Florida Dr. License as
identification.
/s/ MARGARET DUNN
-----------------------------------
NOTARY PUBLIC
Print Name: Margaret Dunn
------------------------
Serial No.:
------------------------
Notary Public, Cobb County, Georgia
My Commission Expires June 23, 2000
<PAGE>
SCHEDULE/EXHIBIT LIST
TO
CREDIT AGREEMENT
Schedule I - Subsidiaries, Affiliates
Schedule II - Additional Existing Liens, Permitted Liens, Additional Existing
Indebtedness, Existing Guaranties, Materially Adverse and
Contingent Liabilities, Investments
Schedule III - Environmental Matters
- -------------------------------------------------------------------------------
Exhibit A - Form Contract
Exhibit B - Form of Closing Document List
Exhibit C - Form of Notice and Manner of Borrowing
Exhibit D - Form of Line Note
Exhibit E - Form of Borrowing Base Certificate
<PAGE>
SCHEDULE I
TO
CREDIT AGREEMENT
----------------
SUBSIDIARIES
------------
Transmedia Restaurant Company Inc.
Transmedia Service Company Inc.
TMNI International Inc.
AFFILIATES
----------
TNI Funding I; Inc.
TNI Funding, LLC (1%)
<PAGE>
SCHEDULE 11
TO
CREDIT AGREEMENT
----------------
ADDITIONAL EXISTING LIENS
-------------------------
None.
PERMITTED LIENS
---------------
None.
ADDITIONAL EXISTING INDEBTEDNESS
--------------------------------
None
EXISTING GUARANTIES
-------------------
Guarantee of Franchise Rights-to-Receive - maximum of 50%
collateralized by the rights-to-receive; upon any default, the entire
franchise reverts to Transmedia.
/bullet/ Potomac Dining $500,000
/bullet/ Texas $500,000
MATERIALLY ADVERSE AND CONTINGENT LIABILITIES
---------------------------------------------
None.
INVESTMENTS
-----------
See Attached.
<PAGE>
Attachment
to Schedule II
other Investments
TRANSMEDIA NETWORK & SUBSIDIARIES
ACCUMULATED UNREALIZED GAIN ON INVESTMENT
9/30/1997
TRANSMEDIA NETWORK INC.
WESTERN TRANSMEDIA
150,000 shares @ 2.25 337,500
60,000 shares @ 2.25 135,000
60,000 share @ 3.00 (cost)* -180,000 -45,000
----------
TRANSMEDIA SERVICE COMPANY INC.
WESTERN TRANSMEDIA
35,000 shares @ 2.25 78,750
35,000 shares @ 2.8751 (cost)* -100,000 -21,250
----------
TMN INTERNATIONAL INC.
TRANSMEDIA EUROPE
496,284 shares @ 1.406 697,775
TRANSMEDIA ASIA
590,790 shares @ 1.25 738,488
----------
1,707,513
==========
* -o- basis originally
9/30/97 6/30/97 CHANGE
-------------------------------------
Securities Available for Sale 1,707,513 1,067,897 639,616
Deferred Income Taxes 648,855 405,801 243,054
-------------------------------------
Unrealized Gain 1,058,658 662,096 396,562
=====================================
TOTAL TM NETWORK TM SERVICE TMNI INT.
----- ---------- ---------- ---------
Securities Available for Sale 1,987,513 472,500 78,750 1,436,263
Deferred Income Taxes 648,855 111,150 -8,075 545,780
----------------------------------------------
Unrealized Gain 1,338,658 361,350 86,825 890 483
==============================================
effective tax rate is 38 0%
<PAGE>
SCHEDULE III
TO
CREDIT AGREEMENT
----------------
ENVIRONMENTAL MATTERS
---------------------
NONE
<PAGE>
EXHIBIT A
FORM OF CONTRACT
<PAGE>
EXHIBIT "A"
For all companies:
11900 Biscayne Boulevard, Suite 460
North Miami, FL 33181
For Transmedia Restaurant Company, Inc.
75O Lexington Avenue
New York, NY 10022
<PAGE>
EXHIBIT B
FORM OF CLOSING DOCUMENT CHECKLIST
<PAGE>
LINE NOTE
$10,000,000.00 _____________, ________
As of November __, 1997
FOR VALUE RECEIVED, the undersigned TRANSMEDIA NETWORK INC., a Delaware
corporation, TRANSMEDIA RESTAURANT COMPANY INC., a Delaware corporation, TMNI
INTERNATIONAL INCORPORATED, a Delaware corporation, and TRANSMEDIA SERVICE
COMPANY INC., a Delaware corporation, jointly and severally, collectively and
individually, hereinafter called "MAKER", promises to pay to the order of
COMERICA BANK, hereinafter called "BANK", or its successors or assigns, at its
office at 100 N.E. Third Avenue, Suite 200, Ft. Lauderdale, Florida 33301, or at
such other addresses as BANK or any subsequent holder of this Note may designate
in writing from time to time, in the manner hereinafter set forth, in
immediately available local, collected funds, the principal sum of TEN MILLION
DOLLARS ($10,000,000.00), or so much thereof as may be outstanding from
time to time, together with interest thereon from the dates of funding until
repayment in full pursuant to the terms and conditions of the Agreement (as
defined below). All interest shall be computed on a daily basis and calculated
on the basis of a three hundred sixty (360) day year.
This Note constitutes the "Line Note" described in that certain Credit
Agreement dated of even date herewith, as modified, amended, extended or renewed
from time to time (the "Agreement") by and between BANK and MAKER, and the
principal and interest due hereunder shall be payable in accordance with those
terms and provisions of the -Agreement which are applicable to the Note
including, but not limited to, the provisions relating to the rate of interest
to be charged hereunder, the due dates for payment of interest and the repayment
of principal. This Note shall be deemed to evidence the principal amount
actually outstanding under the Line of Credit (defined in the Agreement), even
though the face amount of this Note may be in excess of such principal amount
outstanding from time to time. Until the Line of Credit Maturity Date (defined
in the Agreement), provided no Event of Default (as defined in the Agreement)
exists under the Agreement, MAKER may borrow, repay and reborrow from time to
time hereunder, subject to the terms and conditions of the Agreement.
This Note is subject to all terms and provisions of the Agreement,
which are hereby incorporated by this reference as though set forth in full
herein, and any Event of Default under the Agreement shall constitute a default
under this Note. In the event of any conflict or inconsistency between the terms
and provisions of this Note and those of the Agreement, the Agreement shall in
all respects govern and control. This Note is secured by the Collateral
described in the Agreement.
In the event of any Event of Default under the Agreement, including a
failure to make any payment of principal or interest due hereunder on the due
date thereof, BANK may, at its option, accelerate maturity, and the unpaid
principal balance hereof and all unpaid accrued interest shall thereupon
immediately become due and payable without presentment, demand, notice or
protest, and BANK shall have the right to set off against this Note all money
owed by BANK in any capacity to
<PAGE>
MAKER and to set off against all other liabilities of MAKER to BANK, all money
owed by BANK in any capacity to MAKER Failure to exercise this option with
respect to any failure or breach shall not constitute a waiver ofthe right as to
any subsequent failure or breach.
If more than one person or entity executes this Note as MAKER, all of
such parties shall be jointly and severally liable for payment of the
indebtedness evidenced hereby. MAKER, as well as any and all endorsers,
guarantors, sureties and all other parties liable for the payment of any sum or
sums due or to become due under the terms of this Note, waive presentment,
protest and demand, and notice of protest, demand and dishonor, and nonpayment
of this Nose, and consent that the holder hereof shell have the right, without
notice, to deal in any way at any time with any party hereto, or to grant any
extension or extensions of time for payment of any of said indebtedness or any
other indulgences or forbearances whatsoever, or to release any of the security
for this Note or any of the guarantors of this Note without in any way affecting
the liability of any other party for the payment of this Note.
MAKER further agrees to pay all costs of collection, including
reasonable attorneys' fees (inclusive of any bankruptcy or appellate
proceedings), in case the principal of this Note or any interest thereon is not
paid when due, whether suit be brought or not.
No delay or omission on the part of the holder hereof in exercising any
right hereunder shall operate as a waiver of such right or any other right under
this Note, nor shall any waiver on one occasion be construed as a bar to or
waiver of any such right on any future occasion. No waiver under or modification
of this Note shall be effective unless in writing and signed by the holder of
this Note.
Interest hereunder shall be charged only on the sums advanced from the
date of advance to the date of repayment. MAKER does not intend or expect to
pay, nor does BANK intend or expect to charge, accept or collect any interest
which when added to any commitment fee or any other charge upon the principal,
shall be in excess of the highest lawful rate allowable under the laws of the
State of Florida or the United States of America, whichever is higher or
unlimited. Should acceleration, prepayment or any other charges upon the
principal or any portion thereof result in the computation or earning of
interest in excess of the highest lawful rate allowable under the laws of the
State of Florida or the United States of America, whichever is higher or
unlimited, then any and all such excess is hereby waived and shall be applied
against the remaining principal balance, if any, and thereafter refunded to
MAKER.
Except as otherwise specifically provided with respect to the maximum
rate of interest hereunder, this Note shall be governed as to validity,
interpretation, construction, effect and all other respects by the laws and
decisions of the State of Florida.
The undersigned hereby waives any plea of jurisdiction or venue as not
having a place of business in Broward County, Florida, and hereby specifically
authorizes any action brought upon the enforcement of this Note by BANK to be
instituted and prosecuted in either the Circuit Court of Broward County,
Florida, or in the United States District Court for the Southern District of
Florida, at the election of BANK.
-2-
<PAGE>
All payments made hereunder shall be credited first to accrued interest
and then to principal; however, in the event of any default hereunder, BANK may,
in its sole discretion, and in such order as it may choose, apply any payment to
interest, principal, and/or lawful charges and expenses then accrued.
From and after the date of an Event of Default, the principal balance
under this Note shall bear interest, from such date until paid, at a rate per
annum not to exceed the Default Rate, as defined in the Agreement. If any
payment is not made within ten (10) days after its due date, BANK shall charge,
and MAKER shall pay, BANK's standard late fee [currently five percent (5%)] upon
the payment which is past due. MAKER agrees that said charge is a fair and
reasonable charge for the late payment and shall not be deemed a penalty. If the
Default Rate is in effect, the amount of any late fee paid or charged by BANK
shall be deducted from the amount of interest accrued at the Default Rate.
This Note is binding upon MAKER and its successors and assigns.
BANK, BY ITS ACCEPTANCE HEREOF, AND MAKER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT, DOCUMENT OR INSTRUMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY HERETO AND/OR TO THE AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR BANK ACCEPTING THIS NOTE FROM MAKER AND FOR BANK ENTERING INTO THE
AGREEMENT.
TRANSMEDIA NETWORK INC., a Delaware
corporation
By:
-----------------------------------------
Stephen E. Lerch, Executive Vice President
(Corporate Seal)
<PAGE>
TRANSMEDIA RESTAURANT COMPANY
INC., a Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen e. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
TMNI INTERNATIONAL INCORPORATED,
a Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen E. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
<PAGE>
TRANSMEDIA SERVICE COMPANY INC., a
Delaware corporation
By: /s/ STEPHEN E. LERCH
-----------------------------------
Stephen E. Lerch, Vice President
(Corporate Seal)
11900 Biscayne Boulevard
Miami, Florida 33181-9915
ATTN: Stephen E. Lerch, Vice President
STATE OF __________ )
)SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this __ day of
October, 1997, by Stephen E. Lerch, as Executive Vice President of TRANSMEDIA
NETWORK INC., a Delaware corporation, who is personally known to me or who has
produced ____________ as identification.
My Commission Expires:
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
-4-
<PAGE>
STATE OF __________ )
)SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this __ day of
October, 1997, by Stephen E. Lerch, as Vice President of TRANSMEDIA RESTAURANT
COMPANY INC., a Delaware corporation, who is personally known to me or who has
produced ____________ as identification.
My Commission Expires:
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
STATE OF __________ )
)SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this __ day of
October, 1997, by Stephen E. Lerch, as Vice President of TMNI INTERNATIONAL
INCORPORATED, a Delaware corporation, who is personally known to me or who has
produced ____________ as identification.
My Commission Expires:
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
-5-
<PAGE>
STATE OF __________ )
)SS:
COUNTY OF _________ )
The foregoing instrument was acknowledged before me this __ day of
October, 1997, by Stephen E. Lerch, as Vice President of TRANSMEDIA SERVICE
COMPANY INC., a Delaware corporation, who is personally known to me or who has
produced ____________ as identification.
My Commission Expires:
-----------------------------------
NOTARY PUBLIC
Print Name:
------------------------
Serial No.:
------------------------
-6-
<PAGE>
EXHIBIT E
FORM OF BORROWING BASE CERTIFICATE
<PAGE>
REPORT OF BORROWING BASE CERTIFICATE EXHIBIT " "
PAGE 1 OF 2
Comerica Bank
Commerical Lending Services
P.O. Box 7500
Detroit, Michigan 48275-3012
- --------------------------------------------------------------------------------
BORROWING BASE AVAILABILITY
1. Total Rights to Receive as $
- --------------------------------------------------------------------------------
2. less: Ineligible Accounts (per ineligibie summery) $
- --------------------------------------------------------------------------------
3. Total Eligible Rights to Receive less than 240 days $
- --------------------------------------------------------------------------------
4. Total Eligible Rights to Receive 240-365 days $
- --------------------------------------------------------------------------------
5. Advance Percent 80% Times line 3 $
- --------------------------------------------------------------------------------
6. Advance Percent 70% Times line 4 $
- --------------------------------------------------------------------------------
7. Total Borrowing Base Availablity (line 5 plus 6) $
- --------------------------------------------------------------------------------
LOAN SUMMARY
8. Current Loan Balance $
- --------------------------------------------------------------------------------
9. Net Availability/ (shortfall) (line 8 minus line 7) $
- --------------------------------------------------------------------------------
9. % of availability provided by rights to receive
240-365 days. (line 4 divided by line 7)
not to exceed 60% __________%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We submit the following information in connection with the Credit Agreement
executed by the undersigned in favor of Comerica Bank. The undersigned warrants
that its total obligations to the Bank under the terms of the agreement does not
exceed the loan to borrowing base limits as defined in the Agreement. The
undersigned warrants the accuracy and completeness of this report and
acknowledges that the Bank is relying thereon. Transmedia Network Inc. and its
subsidiaries
by:
---------------------------------------------------------
title date
<PAGE>
MONTH END AGING AND INELIGIBLE SUMMARY EXHIBIT " "
PAGE 2 OF 2
AGING METHOD BASED ON CONTRACT DATE
- --------------------------------------------------------------------------------
GROSS RIGHTS TO RECEIVE BREAKDOWN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
0-90 91-180 181-240 241-365 366-395 OVER 365
- --------
TOTAL DAY DAYS DAYS DAYS DAYS DAYS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ $ $ $ $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
100% % % % % % %
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INELIGIBLE BREAKDOWN
- --------------------------------------------------------------------------------
LIST TOTAL FOR EACH CATEGORY. ITEMIZE ANY INELIGIBLE ACCOUNTS OVER 350,000.
BELOW.
OVER 365 DAYS $
- --------------------------------------
AFFILIATES $
- --------------------------------------
OTHER (SPECIFY) $
- --------------------------------------
- --------------------------------------
INELIGIBLE TOTAL $
- --------------------------------------
- ------------------------------------------------------------
FOR ITEMIZING ONLY
- ------------------------------------------------------------
- ------------------------------------------------------------
CATEGORY CATEGORY CATEGORY
- ------------------------------------------------------------
1 1 1
- ------------------------------------------------------------
2 2 2
- ------------------------------------------------------------
3 3 3
- ------------------------------------------------------------
4 4 4
- ------------------------------------------------------------
5 5 5
- ------------------------------------------------------------
6 6 6
- ------------------------------------------------------------
7 7 7
- ------------------------------------------------------------
8 8 8
- ------------------------------------------------------------
9 9 9
- ------------------------------------------------------------
10 10 10
- ------------------------------------------------------------
TOTAL TOTAL TOTAL
- ------------------------------------------------------------
The undersigned warrants that this information is correct and may be relied upon
as a basis for advancing any credit to us.
TRANSMEDIA NETWORK INC & SUBSIDIARIES
by
---------------------------------------
title date
EXHIBIT 10.28
TRANSMEDIA
NETWORK INC
January 29, 1997
Mr. Stephen E. Lerch
4106 Brambletye Drive
Greensboro, NC 27407
Dear Steve:
The following expresses my understanding of the terms we discussed during our
telephone conversation.
1. I will recommend to the Board that you be elected as Executive Vice
President.
2. I will recommend that the Stock Option Committee award you ten thousand
(10,000) shares under our Qualified Stock Option Plan.
3. You will receive a base salary of two hundred thousand dollars ($200,000)
per annum for the first fiscal year (ending September 30, 1997) and a
minimum bonus of fifteen thousand dollars ($15,000) for that year.
4. You will receive one thousand dollars ($1,000) per month car allowance.
5. The company will pay you a signing bonus of sixth thousand dollars
($60,000), less applicable taxes.
6. The company will loan you fifty-five thousand dollars ($55,000) at six
percent (6%) interest, to be accrued (it is anticipated that future bonuses,
other than the $15,000, will be used, in whole or in part, to amortize
this loan).
7. Your salary will commence as of Saturday, February 1, 1997.
8. You will receive a Transmedia Card, for business and personal use, at no
cost to you.
9. During the transition period, you will be responsible for your personal
expenses, but the company will pay expenses for both you and your family
when visiting Florida until such time as you move here. It is anticipated
that you will move as quickly as possible and that you will make every
effort to sell your house by June 30, 1997.
10. The company will pay all reasonable moving expenses.
<PAGE>
Stephen E. Lerch
Page 2
January 29, 1997
11. You and your family will be covered under the company's medical insurance
effective February 1, 1997.
12. In the event of a change of control of the company, for one year after that
change of control, should you not be offered a comparable position,
comparable salary, or be asked to relocate, you shall have the option of
receiving a single lump sum payment of five hundred thousand ($500,000).
If you are in agreement with the above, please sign in the space indicated
below.
Very truly yours,
/s/ MELVIN CHASEN
- -----------------------------
Melvin Chasen
President
ACCEPTED BY:
/s/ STEPHEN E. LERCH Date: 1:29-97
- -------------------------- ----------------------
Stephen E. Lerch
