<PAGE>
As filed with the Securities and Exchange Commission on August 11, 1999
Registration Statement No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------
TRANSMEDIA NETWORK INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 84-6028875
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
11900 Biscayne Boulevard
Miami, Florida 33181
(305) 892-3300
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------
Gene M. Henderson
Chief Executive Officer
11900 Biscayne Boulevard
Miami, Florida 33181
(305) 892-3300
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
Copy to:
Stephen P. Farrell, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
(212) 309-6000
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the Registration Statement becomes effective.
---------
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. / /
If the registrant elects to deliver its latest annual report to
security holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this form, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /______________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /______________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /_________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per share aggregate offering price registration fee
- ----------------------------- ------------ ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
Rights to Purchase Series A
Preferred Stock (1)........... (2) $ 0 $ 0 $ 0
Series A Preferred Stock ..... (2) (2) $10,000,000 $2,780
Common Stock ................. (3) (3) (3) (3)
===================================================================================================================================
</TABLE>
<PAGE>
(1) Pursuant to Rule 457(g), no separate registration fee is required for the
rights since they are being registered in the same registration statement
as the Series A Preferred Stock underlying the rights.
(2) The actual number of rights and shares to be registered and the proposed
offering price per share are omitted pursuant to Rule 457(o) as they cannot
be determined at this time.
(3) Such indeterminate number of shares of Common Stock as shall be issuable
upon conversion of the Series A Preferred Stock being registered hereunder.
No separate consideration will be received by Transmedia upon conversion of
the Series A Preferred Stock and, accordingly, no additional registration
fee is payable pursuant to Rule 457(i).
---------
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such Section 8(a), may determine.
===============================================================================
<PAGE>
The information contained in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
Prospectus
______________ ___, 1999
Subject to Completion, dated _______, 1999
TRANSMEDIA NETWORK INC.
[LOGO]
_____________ Subscription Rights
_____________Shares of Series A Preferred Stock
_____________ Shares of Common Stock
- -------------------------------------------------------------------------------
We are distributing non-transferable rights to purchase Series A senior
convertible redeemable preferred shares to persons who owned shares of our
common stock as of the close of business on the record date, _________, 1999. We
will issue up to [________] Series A preferred shares in this offering. You will
have the right to subscribe for one Series A preferred share, at a subscription
price of $_____, for each [_______] shares of common stock you owned on
______________, 1999. You will not receive any fractional rights. If you
exercise all of your rights, you may also have the opportunity to purchase
additional Series A preferred shares at the same purchase price.
Our Series A preferred shares will be convertible into our common stock.
You will be able to exercise your rights to purchase the Series A preferred
shares only during a limited period. If you do not exercise your rights before
5:00 p.m., Eastern Standard Time, on ________, 1999, the rights will expire. We
may decide to extend the rights offering, in our discretion, for up to 10 days.
Our common stock is listed on the New York Stock Exchange under the symbol
"TMN." On August 5, 1999, the closing price of the common stock as reported by
the NYSE was $2.75.
This investment involves risk. See "Risk Factors" beginning on Page 6.
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and special reports, proxy statements, and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any materials that we file with the SEC at its Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet web site (http://www.sec.gov) that
contains all reports, proxy and information statements, and other information
filed by us and other electronic filers. You may also inspect the reports, proxy
and information statements, and other information filed by us at the offices of
the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
This prospectus constitutes a part of a registration statement on Form
S-2 filed by us with the SEC under the Securities Act, with respect to the
securities offered in this prospectus. This prospectus does not contain all the
information set forth in the registration statement. Certain parts of the
registration statement are omitted in accordance with the rules and regulations
of the SEC. We refer to the registration statement and to the exhibits to such
registration statement for further information with respect to us and the
securities offered in this prospectus. Copies of the registration statement and
the exhibits to such registration statement are on file at the offices of the
SEC and may be obtained upon payment of the prescribed fee or may be examined
without charge at the public reference facilities of the SEC described above.
Statements contained in this prospectus concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information about us by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. We incorporate by reference the following
documents, filed with the SEC under the Exchange Act of 1934: (1) Annual Report
on Form 10-K for the fiscal year ended September 30, 1998; (2) Quarterly Reports
on Form 10-Q for the quarters ended December 31, 1998 and March 31, 1999; (3)
Current Report on Form 8-K, filed on April 1, 1999; and (4) Current Report on
Form 8-K, filed on July 14, 1999.
A copy of the Form 10-K and the Forms 10-Q referenced above are included
with this prospectus. If you need another copy of the Form 10-K or any Form
10-Q, you may request one at no cost, by writing or telephoning us at the
following address:
Chief Financial Officer
11900 Biscayne Boulevard
Miami, Florida 33181
(305) 892-3300
You may rely on the information incorporated by reference or provided in this
prospectus or any prospectus supplement. We have not authorized anyone else to
provide you with different or additional information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not making an offer of these securities in any jurisdiction where the offer or
sale is not permitted.
You should assume that the information appearing in this prospectus is accurate
as of the date on the front cover of this prospectus only. Our business,
financial condition, results of operations and prospects may have changed since
that date.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Where You Can Find More Information............. i Capitalization................................... 16
Incorporation of Certain Documents by Selected Consolidated Financial Data............. 17
Reference...................................... i Recent Developments.............................. 18
Summary......................................... 1 The Rights Offering.............................. 20
Risk Factors.................................... 6 Related Party Transactions....................... 26
Legal Proceedings............................... 12 Description of Capital Stock..................... 28
Warning About Forward-Looking Plan of Distribution............................. 33
Statements..................................... 12 Federal Income Tax Considerations................ 33
Use of Proceeds................................. 12 Experts.......................................... 36
Price Range of Common Stock..................... 13 Legal Matters.................................... 36
Determination of Subscription Price............. 13 Index to Consolidated Financial Statements....... F-1
Dilution........................................ 13
</TABLE>
ii
<PAGE>
SUMMARY
In order to conduct this offering we must increase our authorized share capital.
We are calling a special meeting of our stockholders to approve the increase and
certain other matters described in the proxy statement being distributed to our
stockholders. Unless our stockholders improve the increase and the other matters
proposed to them, we will not pursue the offering contemplated by this
prospectus. We cannot assure you that this condition will be satisfied.
The following summary highlights the material items relating to this offering.
It does not contain all of the information that you should consider before
deciding to exercise your rights and invest in the Series A preferred shares. To
understand this offering fully, you should read the entire prospectus carefully,
including the risk factors, and our financial statements and the notes to those
statements incorporated by reference in this prospectus. You are urged to read
this prospectus and the accompanying documents in their entirety.
Transmedia Network Inc.
Transmedia
We own and market the Transmedia Card, which offers savings to our card members
on dining as well as lodging, travel, retail and catalogue merchandise and long
distance telephone calls. We purchase rights-to-receive in the form of food and
beverage credits from restaurants and other establishments which we then make
available at a discount to their full retail value to holders of the Transmedia
Card. In June 1999, we completed the acquisition of a similar membership program
operated under the Dining A La Card trade name and service mark. As a result of
this acquisition, we estimate that our member base and network of participating
restaurants has grown to approximately 2.1 million and 9,500, respectively, from
its previous base of 1.1 million members and 5,600 restaurant merchants. We also
have a relationship with the Signature Group, the former owner of Dining A La
Card, to gain access to sponsor relationships it has with the world's leading
airlines.
We operate in 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, North and South
Carolina, Georgia, parts of Tennessee, and Texas. As a result of our acquisition
of Dining A La Card, our operations have expanded to Kansas City, St. Louis,
Minneapolis-St. Paul, Las Vegas, Seattle, San Diego, Portland, Oregon, Cleveland
and Hawaii.
The Rights Offering
Rights
Distribution of rights............... You will receive one subscription right
for each _______ shares of common stock
you hold as of the record date. If you
have fewer than _____ shares of common
stock you will receive no rights. We
will not issue fractional rights; the
number of rights we offer to each
stockholder will be rounded up or down
to the nearest whole number.
Each right includes a basic subscription
privilege and an oversubscription
privilege. The distribution of the
rights and the issuance of Series A
preferred shares upon the exercise of
the rights under the basic subscription
privilege or under the oversubscription
privilege are referred to as the
"rights offering." See "The Rights
Offering--The Rights," "--Basic
Subscription Privilege" and
"--Oversubscription Privilege."
Securities outstanding after
Rights Offering...................... Following the sale of all _______ Series
A preferred shares issued in the rights
offering, and assuming that they were
all converted into shares of common
stock, there would then be _______
shares of common stock outstanding.
This compares to 13,352,709 shares of
common stock outstanding before the
rights offering.
Record date.......................... ___________, 1999.
1
<PAGE>
Expiration time...................... ___________, 1999, 5:00 p.m., Eastern
Standard Time, unless we extend the
expiration time, but not beyond
________, 1999, 5:00 p.m., Eastern
Standard Time. No one may exercise
rights after the expiration time.
Nontransferability of rights......... The rights are not saleable or
transferable.
Listing.............................. We intend to apply to the New York Stock
Exchange to list the Series A preferred
shares under the symbol "TMNPrA."
Basic subscription privilege......... The basic subscription privilege entitles
you to purchase one Series A preferred
share for every [_______] shares of
common stock you hold.
Oversubscription privilege........... If you elect to fully exercise the basic
subscription privilege you may also
subscribe for any Series A preferred
shares not purchased by other
stockholders. Series A preferred shares
available for purchase pursuant to the
oversubscription privilege will be
subject to proration if the
oversubscribed shares exceed the number
of Series A preferred shares available.
Proration will be in proportion to the
number of Series A preferred shares a
holder has subscribed for pursuant to
the basic subscription privilege.
Subscription price................... $________ per Series A preferred share.
See "The Rights Offering--Determination
of Subscription Price."
Standby agreement.................... Samstock, L.L.C., an affiliate of Equity
Group Investments, LLC and our largest
stockholder ("Samstock"), has agreed to
act as a standby purchaser to ensure
the sale, at the subscription price, of
all of the Series A preferred shares we
are offering. See "Related Party
Transactions--Standby Purchase
Agreement." As compensation for its
standby commitment and for the $10
million loan one of its affiliates made
to us at the time of our purchase of
Dining A La Card, we are issuing to
Samstock a five-year warrant to
purchase 1,000,000 shares of our common
stock. Samstock currently has the right
to nominate two directors for election
to our board. If it is required to
purchase under the standby purchase
agreement 25% of the total number of
Series A preferred shares offered to
our other stockholders in this rights
offering (other than pursuant to its
basic subscription privilege and its
obligation to purchase shares not
subscribed for by EGI-Transmedia
Investors, L.L.C. or its members
pursuant to its or their basic
subscription privileges), then the
number of directors constituting our
board will be increased by one, and
Samstock will have the right to
nominate an additional director to fill
that newly-created directorship. See
"Related Party Transactions--GAMI
Loan."
Procedure for exercising rights...... To exercise your rights, you should
complete the subscription certificate
and forward it, along with payment of
the subscription price for the number
of Series A preferred shares you wish
to purchase, to the subscription agent
for receipt on or prior to the
expiration time. If you plan to mail
the subscription certificate, we
recommend that you use insured,
registered mail. See "The Rights
Offering--Exercise of Rights."
No revocation........................ You may not revoke your subscription
after the subscription agent receives
your subscription certificate. See "The
Rights Offering--No Revocation."
Our withdrawal right................. We reserve the right to withdraw the
offering at any time prior to delivery
of the Series A preferred shares.
Unless all of the Series A preferred
shares are sold in this offering and
the condition to this offering is
satisfied at or prior to the expiration
time, the offering will be withdrawn.
We will have no obligation to you in
the event of such withdrawal other than
to return to subscribers any payment
received in respect of the subscription
price, without interest. See "The
Rights Offering--Withdrawal Right."
2
<PAGE>
Persons holding shares, or
wishing to exercise rights
through others....................... If you hold shares of common stock
through a broker, dealer, commercial
bank, trust company or other nominee
and would prefer to have that
institution act on your behalf with
respect to the rights, you should
contact the institution and inform them
of your wishes. See "The Rights
Offering--Exercise of Rights."
Subscription agent................... American Stock Transfer & Trust Company.
See "The Rights Offering--Subscription
Agent."
Terms of the Series A Preferred Stock
Conversion by holder................. Each whole Series A preferred share may
be converted into common stock at the
option of the holder at any time. The
rate of conversion is determined by
dividing the sum of $_______ [Note:
insert liquidation preference], plus
accrued but unpaid current dividends,
additional dividends and deferred
dividends by the Series A conversion
price. See "--Dividends" below. The
Series A conversion price shall
initially be fixed at $______[Note:
insert liquidation preference], but is
subject to adjustment in the event of a
merger, share split or combination,
restructuring, recapitalizations or
similar events or an issuance of common
stock below the conversion price then
in effect.
Holders of a majority of the outstanding
Series A preferred shares will have the
right to require Transmedia to convert
all outstanding Series A preferred
shares at any time following the
closing of this offering. Samstock may
have the ability to require such
conversion if it is required to make
substantial purchases of Series A
preferred shares pursuant to its
standby obligations.
Conversion by Transmedia............. If at any time beginning three years
following the closing of this offering
the closing price of the common stock
exceeds $_______ [insert number equal
to 2x liquidation preference], plus
accrued but unpaid current dividends,
additional dividends and deferred
dividends thereon, for thirty
consecutive days, then we will have the
right, for a period of 90 days
thereafter, to require the conversion
of all outstanding Series A preferred
shares at the conversion price. We will
also have the right to require
conversion if we complete an
underwritten public offering of our
equity securities which results in
gross proceeds to Transmedia or selling
stockholders of $20 million and either
the price to public of the securities
sold or the average of the high and low
sales prices of our common stock on the
date of the closing of that public
offering is not less than the Series A
conversion price then in effect.
Dividends............................ As a holder of the Series A preferred
shares you will be entitled to receive
cash dividends at the rate of $_____
per share per annum [insert number
equal to 12% of liquidation preference]
at least $_____ [insert number equal to
6% of liquidation preference] of which
is payable quarterly in arrears on the
first business day of January, April,
July and October ("current dividends").
Dividends in the amount of $_____ per
share [insert number equal to 6% of
liquidation preference] will not be
payable currently but shall be
deferred, accrue and be payable upon a
conversion or redemption of the Series
A preferred shares or liquidation,
dissolution or winding up of Transmedia
("deferred dividends"). We, however,
may choose to pay any or all deferred
dividends currently. Dividends will
accrue from and including the issue
date to and including the date on which
the preferred shares are redeemed or
converted or on which the liquidation
preference is paid thereon. To the
extent not paid, current dividends and
deferred dividends will be cumulative.
The Series A preferred shares will be
entitled to receive cash dividends on
an as-converted basis equal to the
common stock, if dividends are paid on
common stock.
3
<PAGE>
If we default in our obligation to pay
any portion of current dividends when
due (such portion, a "past due current
dividend"), holders of the Series A
preferred shares will be entitled to
receive an additional dividend per
share ("additional dividends") at an
annual rate equal to the per share
amount of the past due current
dividend, multiplied by the prime rate
of interest (as announced by the Chase
Manhattan Bank) plus 6% for the first
90 days of the default, increasing by
an additional 1/2% at the beginning of
each subsequent 90 day period up to a
maximum rate equal to the prime rate
plus 7-1/2% per annum. All additional
dividends will be cumulative from the
dividend payment date on which the
default giving rise to a past due
current dividend had occurred.
Subordination........................ If Transmedia is actually liquidated or
dissolved, or if Transmedia sells
substantially all of its assets or
merges or experiences a change of
control (a "deemed liquidation"),
holders of the Series A preferred
shares would be entitled to receive, in
cash, a sum per share equal to $_____
[insert liquidation preference] plus
all accrued but unpaid current
dividends, additional dividends and all
deferred dividends thereon.
Upon an actual liquidation (but not upon
a deemed liquidation), after payment of
the amount described above, any
additional amounts available for
distribution will be distributed among
the holders of the Series A preferred
shares and the common stock pro rata on
an as-converted basis.
Voting............................... Holders of the Series A preferred shares
will vote together with the holders of
the common stock on all matters which
are submitted to a vote of the
stockholders on the basis of one vote
for each Series A preferred share held
of record by such holders. In addition,
if and whenever current dividends
payable on Series A preferred shares
are in arrears and unpaid in an
aggregate amount equal to or exceeding
the amount of current dividends due and
payable thereon for six (6) quarterly
dividend periods (consecutive or
otherwise), then the number of
directors constituting the board of
directors will be increased by two, and
the Series A preferred shares, voting
as a class, will have the right to
elect two directors to fill such
newly-created directorships.
Redemption by holder................. During the 90 day period beginning on the
fifth anniversary of the closing of
this rights offering, each holder of
Series A preferred shares may require
Transmedia to redeem all, but not less
than all, of the shares of preferred
stock then held by the holder at a
redemption price per share equal to
$_____ [insert liquidation preference]
plus all accrued but unpaid current
dividends, additional dividends and
deferred dividends thereon (the
"redemption price"); Transmedia,
however, may elect to effect the
redemption in not less than one-third
increments ratably during each of the
three years following such request
(subject to the holders' prior right of
conversion). We are required to redeem
in full all shares requested to be
redeemed by the end of that third year.
Redemption by Transmedia............. Beginning on the fifth anniversary of the
closing of this rights offering, we may
elect to redeem all of the outstanding
Series A preferred shares at the
redemption price or, if we choose,
redeem such shares ratably in one-third
increments during the fifth, sixth and
seventh years following the closing of
this offering, subject to each holder's
prior right of conversion.
Redemption default................... If we default in our obligation to redeem
any shares that are to be redeemed on a
redemption date ("defaulted shares"),
then (1) for purposes of calculating
the redemption price applicable to the
defaulted shares, the dividend rate
will increase to the prime rate then in
effect (as announced by The Chase
Manhattan Bank in New York, New York)
plus 6% for the first 90 days of such
default, increasing by an
additional 1/2% at the beginning of each
90-day period thereafter up to a
maximum rate of prime plus 7-1/2% per
annum, and (2) the conversion price for
the defaulted shares will be reduced by
50%
4
<PAGE>
of the conversion price then in effect
and shall remain at that reduced price
until the defaulted shares are
redeemed.
Other Matters
Use of proceeds...................... If all Series A preferred shares are sold
in the rights offering, the gross
proceeds will be $10 million. We are
required to use all of the gross
proceeds to repay outstanding amounts
under a loan from one of Samstock's
affiliates which we used to finance the
purchase of Dining A La Card. For more
information see "Related Party
Transactions" and "Use of Proceeds."
Risk factors......................... For a discussion of the risks involved in
exercising your rights and investing in
the Series A preferred shares, see
"Risk Factors."
Transmedia commenced operations in 1984 and was reincorporated as a Delaware
corporation in 1987. Our corporate offices are located at 11900 Biscayne
Boulevard, Miami Florida 33181; telephone (305) 892-3300.
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and other information
in this document before deciding to exercise your rights.
Operating Risks
We have had losses from operations for the last two fiscal years and in every
quarter of the current fiscal year. The operations of Dining A La Card, which we
recently acquired, have sustained operating losses since inception. We expect
that we may continue to incur operating losses until we fully integrate the
operations of Dining A La Card.
We have incurred net losses of $0.4 million and $7.8 million during
fiscal 1997 and 1998, respectively, and have incurred a net loss of $3.2 million
in the six months ended March 31, 1999. The principal causes of our losses were
(1) decreases in rights-to-receive revenue, due primarily to lower sales volume
in the New York, Boston and Philadelphia markets, our largest markets, (2)
increases in selling, general and administrative expenses (due, in part, to
one-time payments in termination of employment and consulting agreements to the
previous Chairman and Chief Executive Officer during fiscal 1998 and, in other
periods to increases in information technology expenses principally associated
with year 2000 remediation and legal reserves) and (3) decreases in the number
of new enrollments and lower and often less frequent spending by new members.
In addition, Dining A La Card has incurred losses of $15.2 million and
$41.8 million during the years ended December 31, 1997 and 1998, respectively.
On a pro forma basis, after giving effect to our acquisition of Dining A La Card
as of the beginning of the period, our net losses for our fiscal year ended
September 30, 1998 were $28.5 million. See "Unaudited Pro Forma Financial
Information." We anticipate that we may continue to incur operating losses until
we integrate the operations of Dining A La Card, eliminate duplicative operating
costs and rationalize the combined overhead structure.
We may have difficulty meeting our future cash needs.
During the six months ended March 31, 1999, we experienced a decrease in
cash and cash equivalents of $2.1 million. We expect to have further decreases
in cash for the fiscal quarter ended June 30, 1999. Although we obtained in June
1999 a $35 million senior secured revolving loan from The Chase Manhattan Bank
and a $10 million term loan from GAMI Investments, Inc., an affiliate of our
largest stockholder, these facilities come due no later than December 30, 1999
and were largely used to fund our acquisition of Dining A La Card. Although we
intend to replace the Chase loan with a securitization facility in respect of
the Dining A La Card rights-to-receive we recently purchased, we cannot assure
you that we will be able to obtain this facility on terms acceptable to us, if
at all. If we are unable to obtain new financing by the beginning of calendar
year 2000, we will likely not have sufficient cash to fund our operations. In
addition, in June 1999 we were required to obtain a waiver through December 31,
1999 of a default relating to our failure as of April 30, 1999 to meet the $24
million minimum stockholder equity requirements that are in our existing
securitization facility. This waiver may be terminated at any time if the
indebtedness due to Chase or to GAMI comes due prior to their scheduled maturity
dates or if our net worth is not at least $20 million. The waiver may also be
terminated on or after October 31, 1999 if the credit rating of the notes under
the facility has been withdrawn or reduced and either our net worth is not at
least $24 million at October 31, 1999 or this rights offering has not been
commenced by that date. We will also have to begin an early paydown of that
facility if we fail to meet the $24 million minimum stockholder equity
requirement as of December 31, 1999, or if the waiver is terminated prior to
that date for any reason. If an early payment of the securitization facility is
required, the Chase and GAMI loans would also be in default and our financial
condition and results of operations would be materially adversely affected. We
are depending on this rights offering to provide us with the additional equity
needed to bring us into compliance with the $24 million minimum stockholder
equity requirement.
6
<PAGE>
We depend on our ability to attract and retain desirable merchants.
The majority of our revenue is derived from our right to receive cash in
exchange for food and beverage credits. Our business depends on our ability to
attract a large variety of desirable merchants in each geographic market that we
serve in order to generate both rights-to-receive and cardmember interest.
Failure to procure contracts with a large number of merchants in a timely manner
or any significant reduction in business from such merchants in any market would
reduce rights-to-receive revenue and adversely affect our business. In addition,
a failure to attract desirable merchants could cause members to stop using their
Transmedia Card or to cancel their memberships, and would harm our ability to
attract new members and participating merchants. Any decline in cardmember usage
or membership enrollments would slow rights-to-receive turnover, causing a
further decline in rights-to-receive revenue, and would reduce our fee income.
Our success depends on our ability to attract and retain active members.
Our future success depends in large part on continued demand for our
programs by consumers. Any number of factors could affect the frequency with
which consumers participate in our programs or whether they enroll in a
Transmedia program at all. Among these factors include (1) consumer tastes and
dining preferences, (2) the frequency with which consumers dine out, (3) general
economic conditions, (4) weather conditions and (5) the availability of
alternative discount programs in the local region in which consumers live and
work. Any significant decline in card usage or increase in card cancellations,
without a corresponding increase in new member enrollments, would have a
material adverse effect on our business.
We depend on increasing our marketing force and forming new marketing
relationships to grow our business.
We must aggressively hire marketing personnel and enter into new
marketing relationships to help gain access to large groups of potential
customers. We have relationships with various organizations for the marketing,
support and endorsement of our services and products. For example, we rely on
our agreements with banks across the country to market our services to their
existing and future customer base. However, we need to expand these
relationships and enter into new relationships. In connection with our
acquisition of Dining A La Card, we entered into a services collaboration
agreement with SignatureCard, under which SignatureCard will generate members by
relying on its long-standing marketing partner arrangements with the world's
leading airlines, certain banks and others for the mutual benefit of
SignatureCard and Transmedia. We cannot assure you that this relationship will
be successful. If it is unsuccessful, we would be required to develop marketing
relationships on our own. The development of these partnerships can be a long
and difficult process and requires experienced sales and marketing personnel.
Competition for such personnel is intense, and we may not be able to retain
existing personnel or attract additional personnel in the future necessary to be
successful in our efforts.
Our future success depends on programs we market through credit card issuers,
banks, airlines and other marketing partners. A downturn in those industries
would adversely affect us.
Our future success depends on demand for our private label dining
programs from businesses and industries we serve or seek to serve. A significant
downturn in an industry or trend within an industry to reduce or eliminate its
use of membership programs (as a result of changes to consumer protection laws
or otherwise) would have a material adverse effect on our business, financial
condition and results of operations.
We are susceptible to merchant credit risk.
We strive to obtain restaurants and other merchants which are
financially sound and offer a variety of quality food and services. To the
extent that participating merchants fail, we could be adversely affected.
Because we generally make cash advances to restaurants and other participating
merchants in exchange for rights, we may not be able, upon the failure of a
business, to collect the full amount, or any, of the funds advanced. Although
our practice generally is
7
<PAGE>
to protect our right to recover advanced monies by taking a security interest in
a merchant's collateral or other guarantees, we cannot assure you that these
measures would be adequate to enable us to recover losses. In addition, because
the Dining A La Card business had not engaged in this practice until recently,
the majority of the rights-to-receive we purchased in the acquisition are
unsecured. If these merchants were to fail before we establish a security
interest in accordance with our policy, we might not be able to recover amounts
they owe in respect of the rights-to-receive that we purchased.
Economic slowdowns could hurt our business.
The success of our business depends on our members' use of the
Transmedia Card. Our future success will also depend on our members' use at
participating merchants of other credit cards registered with our Dining A La
Card program. If the national or local economy slows in the regions in which we
do business, our members may perceive that they have less disposable income to
permit them to dine out. As a consequence, they may dine out less frequently,
and use their Transmedia Card or other registered cards less often, if at all.
Any decline in card usage would hurt our business. In addition, a decline in the
national economy or in the regions in which we operate typically has an initial
positive impact because restaurants can more readily absorb the incremental
business. However, a sustained economic downturn could cause merchants who
participate in our programs to go out of business. Although our practice
generally is to protect our right to recover monies we advance to merchants by
taking a security interest in a merchant's assets, we cannot assure you that
such measures would be adequate. It is likely that, should the number of
merchants entering bankruptcy rise, the number of uncollectible accounts would
also rise. This would have an adverse effect on our business.
An inability to maintain an appropriate balance between the number of members
and the number of merchants in each market may adversely affect our operations.
The success of our business depends on our ability to maintain an
appropriate ratio of members to merchants within each geographic market we
serve. If we have too many members and not enough restaurants, our member base
may become dissatisfied and participating restaurants may experience a higher
volume of discount business than anticipated. This could result in low card
holder usage, high membership cancellations and attrition in the restaurant
base. Alternatively, if too many restaurants participate in our programs with
too few members, rights-to-receive turnover volume will be reduced resulting in
reduced revenue. Managing this ratio requires an ability, among other things, to
anticipate trends within a market and the desires of our customers and
participating restaurant partners. We cannot assure you that we will be able to
manage this balance effectively in each of our markets. An inability to do so,
however, could harm our business.
We depend on members of our senior management.
In October 1998, our board of directors appointed a new President and
Chief Executive Officer, Gene M. Henderson. Our success will depend, in part, on
the skills, experience, efforts and policies of Mr. Henderson and certain other
key employees, including our Executive Vice President and Chief Financial
Officer, the President of Transmedia Restaurant Company Inc. and the President
of Transmedia Service Company, Inc., our two principal operating subsidiaries.
If one or more of these senior executives or key personnel were not to remain
active with Transmedia, our results of operations could be affected.
Recent adoption of new business strategy may not be successful.
Transmedia recently implemented a new business strategy, terminating
promotions of no-fee memberships and principally marketing fee-based memberships
to new customers and existing customers, upon termination of their existing
contract year. This new strategy is premised upon the assumption that fee-paying
members are better members, using the card more frequently. This assumption,
however, has not been proven and the strategy may prove not to be successful.
Spending patterns of fee-based members acquired through these marketing
campaigns, historically greater
8
<PAGE>
than those of no-fee members, may end up being substantially similar to those of
their non-fee paying counterparts. In addition, Transmedia could lose a
substantial number of members who elect not to pay an annual fee in order to
renew their memberships. Any such eventuality could have an adverse effect on
our business and operating results.
Initial and renewal fee memberships contribute to our profitability;
cancellations could impact our profitability.
Fee income from new members may not be sufficient to cover the cost of
solicitation in the initial year of an individual membership program, as
compared to renewal years, due primarily to high marketing costs associated with
initial member procurement. In addition, we experience a higher percentage of
cancellations during the initial membership period as compared to renewal
periods. During an initial annual membership term or a renewal term, members may
cancel their memberships in the program, generally for a pro rata refund of the
membership fees for that period. Accordingly, profitability of our programs
depends, in part, on recurring and sustained fee membership renewals.
We depend on our agreements with transaction processors, presenters and
aggregators.
Because credit card processing is an integral part of our business, our
relationship with the processors, presenters and aggregators are very important.
Should these relationships terminate and we are unable to find suitable
replacements, our ability to receive, process and present transactions could be
impaired, which would materially and adversely impact our operations.
We may need additional capital even after the rights offering.
If we are unable to consummate a new securitization facility as
currently contemplated to replace the interim bank financing used to finance our
acquisition of Dining A La Card, we will need to raise additional funds. If we
raise additional funds through the sale of equity or convertible debt
securities, your percentage ownership will be reduced. In addition, these
transactions may dilute the value of the stock outstanding. We may have to issue
securities that have rights, preferences and privileges senior to our common
stock or, with the consent of the holders of the Series A preferred shares, the
Series A preferred stock. Alternatively, we may have to borrow funds at rates
significantly higher than we anticipate will apply to the securitization. We
cannot assure you that we will be able to raise additional funds on terms
favorable to us or at all. If future financing is not available or is not
available on acceptable terms, we will likely not be able to fund our future
needs. This would have a material adverse effect on our business, operations and
financial condition.
Potential Year 2000 problems may have an adverse effect on our operations and
ability to offer services without interruption.
The risks posed by Year 2000 issues could adversely affect our business
in a number of significant ways. Although we believe that our internally
developed systems and technology are Year 2000 compliant as a result of the
substantial completion in July 1999 of the implementation and testing phases of
our Year 2000 remediation plan, our information technology systems nevertheless
could be substantially impaired or cease to operate due to Year 2000 problems.
Additionally, we rely on information technology supplied by third parties,
including suppliers and customers, whose systems interface with ours. We have
contacted our critical suppliers and customers and have received varying
information from them regarding their state of compliance or expected
compliance. Year 2000 problems experienced by us or any of these third parties
could result in an interruption in, or a failure of, certain normal business
activities which could materially and adversely affect our operations, liquidity
and financial condition. Despite contingency plans that we have in place, we
cannot assure you that disruptions will not occur.
9
<PAGE>
Offering Risks
Your exercise of rights may not be revoked; the rights offering may be canceled.
Once you have exercised your rights, your exercise may not be revoked.
If the condition to this rights offering is not satisfied or if we elect to
withdraw the rights offering for any other reason, the rights offering will be
canceled. In the event of cancellation, neither Transmedia nor the subscription
agent will have any obligation to you with respect to the rights except to
return, without interest, any payment of the subscription price received by the
subscription agent. See "The Rights Offering."
There will be no public market for rights; there may be a limited market for the
Series A preferred shares.
There will be no public market for the rights. Transmedia intends to
make application to the New York Stock Exchange to list the Series A preferred
shares; we cannot assure you, however, that our application will be approved.
Nor can we assure you that an active market in the Series A preferred shares
will develop. Liquidity in respect of the Series A preferred shares may be
further reduced if Samstock purchases a substantial amount of the Series A
preferred shares, either under its subscription privileges or its standby
commitment. The market price for the Series A preferred shares may be subject to
significant fluctuations, and may not be equal to the subscription price you
paid for the shares upon exercise of your rights.
If you do not exercise all of your rights, your ownership interest in Transmedia
will be diluted.
The Series A preferred shares will entitle the holders to acquire
approximately _______ shares of common stock, representing approximately ___% of
the total outstanding shares of common stock of Transmedia after giving effect
to the conversion of the Series A preferred shares. One consequence of the
offering is that holders of common stock that elect not to exercise their rights
could experience dilution with respect to their ownership interest and voting
rights in Transmedia. In addition, because the subscription price represents a
discount from the prevailing market price of our common stock, stockholders that
elect not to exercise their rights could experience dilution with respect to
their economic interest in Transmedia. See "Dilution."
Samstock and its affiliates may increase their ownership in Transmedia as a
result of this offering.
Samstock and its affiliates, as of July 30, 1999, beneficially owned in
aggregate 4,656,285 shares of our common stock, representing approximately 32.3%
of our outstanding common stock. Of this amount, 2,106,695 shares were owned by
Samstock and its affiliate, EGI-Transmedia Investors, L.L.C. ("EGI-TNI"),
905,049 shares were issuable upon the exercise of warrants held by Samstock,
1,478,314 shares were held by others but were subject to voting and disposition
restrictions in favor of Samstock and 166,227 shares were issuable upon exercise
of warrants held by others but would be, if exercised, the subject of voting and
disposition restrictions in favor of Samstock. If Samstock exercises its basic
subscription privilege and also purchases the number of shares for which EGI-TNI
or its members are permitted but fail to subscribe, and Samstock is not required
to purchase any additional Series A preferred shares, it and its affiliates
would beneficially own [___________] shares of common stock, or [__]% of the
total common stock outstanding, after giving effect to (1) the immediate
conversion of the Series A preferred shares into common stock, and (2) the
issuance to Samstock of a warrant to purchase 1,000,000 shares of our common
stock in consideration of its entering into the standby purchase agreement and
of the provision by GAMI of the loan. If no other stockholders validly subscribe
for and purchase Series A preferred shares pursuant to this rights offering,
however, Samstock would be required to purchase all of the shares offered. In
that event, Samstock and its affiliates would beneficially own [_________]
shares of common stock, or [___]% of the total common stock outstanding, after
giving effect to (1) the immediate conversion of the Series A preferred shares
into common stock, and (2) the issuance to Samstock of the warrants.
10
<PAGE>
The holders of a majority of the outstanding Series A preferred shares
offered pursuant to the rights offering will have the right to require us to
convert all outstanding Series A preferred shares at any time following the
closing of the offering. If Samstock, either pursuant to the exercise of its
subscription privileges or pursuant to its standby commitment acquires a
majority of the Series A preferred shares, it would be able to require
conversion of the entire Series in its discretion.
In addition, Samstock and its affiliates have various rights to
designate members to our board of directors. If Samstock were required to
purchase more than 25% of the number of Series A preferred shares issued upon
exercise of rights (other than pursuant to its basic subscription privilege and
its obligation to purchase shares not subscribed for by EGI-TNI or its members
pursuant to its or their basic subscription privileges), it will be entitled to
designate an additional member to Transmedia's board of directors, and thereby
increase the size of the board. In addition, upon an event of default under the
GAMI loan agreement, various standstill covenants binding Samstock and its
affiliates (which currently prohibit Samstock and its affiliates, subject to
certain limitations, from acquiring additional securities of Transmedia (other
than in connection with this rights offering), soliciting proxies in opposition
to the recommendation of a majority of our disinterested directors, forming
"groups" for the purpose of acquiring, voting or disposing of our voting
securities, or soliciting bidders for Transmedia, among other things, until
March 2003) would automatically terminate, and Samstock would have the right to
designate additional directors to our board of directors so that the total
number of Samstock designees on our board would constitute a majority.
Furthermore, upon certain defaults in the payment of dividends, our board of
directors will be increased by two members and the Series A preferred stock, as
a class, will have the right to elect two directors to fill the newly-created
directorships.
Standby commitment is conditional.
To guarantee that Transmedia will receive gross proceeds of
approximately $10.0 million from the rights offering, Samstock has agreed to act
as a standby purchaser and purchase up to all of the shares of the Series A
preferred shares offered hereby, less amounts subscribed for by other holders of
rights. However, this commitment is subject to certain conditions to closing,
including the approval by stockholders of the increase in our authorized share
capital and certain other matters and the termination or expiration of any
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
among other things. We cannot assure you that all conditions will be satisfied
so that Samstock will complete the agreed-upon purchases. To the extent that
these conditions are not satisfied or Samstock fails to perform its obligations,
we may not receive sufficient proceeds from the rights offering to repay the
GAMI loan upon maturity or fund our capital needs. A default under the GAMI loan
would also trigger a default under the Chase bridge loan and a termination of
the bondholder's waiver under our existing securitization facility. See "We may
have difficulty meeting our future cash needs." Any of these defaults or
terminations could, unless waived, result in the immediate acceleration of all
amounts due under these instruments, which would significantly and negatively
impact our financial condition and operating results.
Our board of directors may issue additional shares of preferred stock without
stockholder approval.
Our certificate of incorporation will, if the proxy proposals being
presented to our stockholders are approved, authorize the issuance of up to
20,000,000 shares of preferred stock with rights and preferences that may be
determined from time to time by the board of directors. If all of the rights
offered hereunder are exercised, an aggregate of _______ shares of preferred
stock will be issued in this rights offering. Accordingly, the board of
directors may, without stockholder approval, issue one or more new series of
preferred stock with rights which could adversely affect the voting power or
other rights of the holders of outstanding shares of preferred stock or common
stock. In addition, the issuance of additional shares of preferred stock may
have the effect of rendering more difficult, or discouraging, an acquisition or
change in control of Transmedia. Although we do not have any current plans to
issue any additional series or shares of preferred stock, except for the
preferred stock to be issued in this rights offering, we may do so in the
future.
The existence of shares available for sale in the future may have an adverse
effect on our stock price.
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<PAGE>
Sales of a substantial amount of common stock in the public market, or
the perception that these sales may occur, could adversely affect the market
price of our common stock prevailing from time to time. This could also impair
our ability to raise additional capital through the sale of equity securities.
Following this rights offering, assuming that all of the rights offered hereby
are fully exercised and that all Series A preferred shares are immediately
converted, we will have _____________shares of common stock outstanding. Of
these shares, approximately _______ shares will be held by our affiliate,
Samstock (and associated entities or persons). We have registered for resale
3,117,908 shares of common stock (including shares of common stock underlying
warrants, as described below) purchased by Samstock and its affiliates in March
1998 and an additional 1,802,601 shares of common stock held by others. We have
also agreed to register for resale (1) any Series A preferred shares purchased
by Samstock pursuant to this offering or the standby purchase commitment, and
(2) any shares of common stock into which the Series A preferred shares
purchased by Samstock pursuant to this offering or the standby commitment are
exercisable.
As part of a transaction concluded in March 1998, we issued warrants to
purchase an aggregate of 1,200,000 shares of common stock through March 2003,
one-third of which are exercisable at $6.00 per share, one-third of which are
exercisable at $7.00 per share and the last third of which are exercisable at
$8.00 per share. In connection with the acquisition of Dining A La Card, we
issued an option to purchase 400,000 shares of common stock through June 2002,
at an exercise price of $4.00 per share. Subject to receipt of stockholder
approval of the proxy proposals, we are obligated to issue warrants to purchase
an aggregate of 1,000,000 shares of our common stock to Samstock in
consideration of its obligations under the standby purchase agreement and the
provision by GAMI of the $10 million term loan. We have registered, or have
agreed to register, for resale all of these shares if they are issued. The sale
of a substantial number of these shares at any time or over time could adversely
affect the market price of the common stock. We cannot predict the effect that
the availability and future sales of common stock could have on the market
price.
LEGAL PROCEEDINGS
In December 1996, Transmedia terminated its license agreement with
Sports & Leisure Inc. In February 1997, Sports & Leisure brought an action
against us in the 11th Judicial Circuit, Dade County, Florida, alleging that we
improperly terminated the license and seeking money damages. Transmedia has
counterclaimed for breach of the agreement. We intend to pursue this action
vigorously.
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements." Any statement in
this prospectus, other than a statement of historical fact, is a forward-looking
statement. You can generally identify forward-looking statements by looking for
words such as "may," "will," "expect," "intend," "estimate," "anticipate,"
"believe" or "continue." Variations on those or similar words, or the negatives
of such words, also may indicate forward-looking statements.
Although Transmedia believes that the expectations reflected in this
prospectus are reasonable, we cannot assure you that our expectations will be
correct. We have included a discussion entitled "Risk Factors" in this
prospectus, disclosing important factors that could cause our actual results to
differ materially from our expectations. If in the future you hear or read any
forward-looking statements concerning Transmedia, you should refer back to these
Risk Factors.
The forward-looking statements in this prospectus are accurate only as
of its date. If Transmedia's expectations change, or if new events, conditions
or circumstances arise, we are not required to, and may not, update or revise
any forward-looking statement in this prospectus.
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<PAGE>
USE OF PROCEEDS
If all of the rights offered by this prospectus are exercised, we will
receive $10 million in gross proceeds ($____ after deducting estimated offering
expenses). We are required to use all of the gross proceeds to repay the GAMI
loan. As of July 30, 1999, $10 million in principal amount was outstanding under
this loan. The borrowings accrue interest at the prime rate (as announced from
time to time by The Chase Manhattan Bank in New York, New York) plus 4% and
mature on the earlier of the closing of this rights offering and December 30,
1999. For a more detailed description of the GAMI loan, see "Recent
Developments" and "Related Party Transactions" in this prospectus.
PRICE RANGE OF COMMON STOCK
The common stock is traded on the New York Stock Exchange under the
trading symbol TMN.
The following table sets forth, for the fiscal quarters indicated, the
high and low sales prices per share for the common stock, as reported by the
NYSE and the distributions declared. Our fiscal year ends on September 30.
High Low Distribution
------ ------ ------------
Fiscal Year 1997
First Quarter.............................. $7.125 $4.750 $.02
Second Quarter............................. 5.375 4.875 --
Third Quarter.............................. 5.375 3.250 .02
Fourth Quarter............................. 4.186 3.250 --
Fiscal Year 1998
First Quarter.............................. $6.313 $3.813 $.02
Second Quarter............................. 6.686 5.000 --
Third Quarter.............................. 8.313 5.438 --
Fourth Quarter............................. 6.188 3.188 --
Fiscal Year 1999
First Quarter.............................. $4.625 $2.000 --
Second Quarter............................. 4.625 2.375 --
Third Quarter.............................. 4.188 3.063 --
Fourth Quarter (through August 5, 1999).... 3.938 2.750 --
Our credit agreements with Chase and GAMI prohibit us from paying any
cash dividends. In addition, we are required under our existing securitization
facility to maintain a minimum stockholder equity of $24 million. This
requirement may also inhibit our ability to pay dividends in the future. Any
future payment of dividends will depend upon our earnings and financial
requirements as well as general business conditions, among other things.
The closing price of the common stock on the NYSE on July 30, 1999 was
$3.0625 per share. On July 30, 1999, Transmedia had approximately 13,352,709
shares of common stock outstanding, owned by approximately 409 holders of
record. We anticipate that the Series A preferred shares will be listed on the
NYSE under the symbol "TMNPrA."
DETERMINATION OF SUBSCRIPTION PRICE
The subscription price of the rights was determined by our board of
directors, and is not necessarily related to the assets, book value or net worth
of Transmedia or any other established criteria of value, and may not be
indicative of the fair value of the securities offered. In determining the
subscription price, the board of directors considered,
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<PAGE>
among other things, the historic and current market price of the common stock on
the New York Stock Exchange (approximately $3.06 per share at July 30, 1999),
the book value of the common stock (approximately $1.96 per share at March 31,
1999, after giving effect to the acquisiton of Dining A La Card) as compared to
its market price over the past several months, Transmedia's earnings and
prospects, as well as Transmedia's need for capital.
DILUTION
Our net tangible book value, after giving effect to the acquisiton of
Dining A La Card as though it had occurred on March 31, 1999, was $22,677,000 or
$1.70 per share of common stock based on 13,352,709 shares of common stock
outstanding. Net tangible book value per share is equal to our total assets,
less intangible assets and total liabilities, divided by the number of shares of
common stock outstanding as of March 31, 1999.
After giving effect to the receipt of net proceeds from the sale of the
securities offered hereby (assuming (1) a public offering price of $2.14 per
Series A preferred share (representing 70% of the closing price of the common
stock on July 30, 1999), (2) full subscription of the rights, and (3) the
immediate conversion of the foregoing Series A preferred shares into common
shares), our pro forma net tangible book value at March 31, 1999 would have been
approximately $1.81 per share. Therefore, you will incur an immediate increase
in net tangible book value of approximately $0.11 per share of common stock.
Dilution refers to the difference between the offering price of a common share
underlying the Series A preferred shares offered hereby and the net tangible
book value of a common share, after giving effect to this rights offering, but
giving no effect to the exercise of warrants issuable upon the closing of this
rights offering to Samstock. See "Related Party Transactions".
The following table, which incorporates the foregoing assumptions,
illustrates this dilution. Unless all of the Series A preferred shares offered
are sold either in this offering or pursuant to the standby purchase agreement,
the offering will be withdrawn.
<TABLE>
<CAPTION>
Full Subscription
-----------------
<S> <C>
Public offering price per common share underlying the Series
A preferred shares offered hereby at March 31, 1999(1)................ $2.14
Net tangible book value per common share at March 31, 1999............ 1.70
Increase in net tangible book value per common share attributable
to sale of Series A preferred shares offered hereby................... 0.11
Pro forma net tangible book value per common share after offering..... 1.81
Dilution per common share to investor(2)(3)........................... 0.33
</TABLE>
- -----------------
(1) Public offering price per common share is calculated as though the Series A
preferred shares are immediately converted into common stock.
(2) At March 31, 1999, 1,206,093 shares of common stock are issuable pursuant
to the Company's 1996 Long-Term Incentive Plan (the "Plan"). Options with
exercise prices less than the assumed public offering price of $2.14 per
share, subject to the Plan's vesting provisions, will result in further
dilution to new investors of $0.02 per share of common stock, assuming full
subscription.
(3) The dilution amounts set forth above under "Full Subscription" assume
subscription to all shares of Series A preferred stock offered hereby.
14
<PAGE>
The following table sets forth, as of the date of this Prospectus, the
number of shares of common stock purchased, the percentage of common stock
purchased, the total consideration paid (before expenses of this offering), the
percentage of total consideration paid and the average price per share paid, by
(1) our existing stockholders and (2) investors in this offering, in each case
assuming the maximum proceeds to Transmedia from the rights offering (i.e., full
subscription).
<TABLE>
<CAPTION>
Shares Purchased Average
--------------------- Price per
Number Percentage Amount Percentage Share
------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders........ 409 100% 13,352,709 74% $1.84
Rights Offering Investors.... -- -- 4,664,723 26% $2.14
--- ----- ---------- ----- -----
Total(1)............ 409 100.0% 18,017,432 100.0% $2.06(2)
=== ===== ========== ===== =====
</TABLE>
(1) Excludes any conversion of Series A preferred shares into common stock.
(2) Assuming full subscription of the rights offering and immediate conversion
of the Series A preferred shares into common stock, the average price per
share paid by all stockholders would increase from $1.84 to $2.06 per
share.
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<PAGE>
CAPITALIZATION
The following table sets forth our short-term debt and capitalization as of
March 31, 1999 (1) on an actual basis, and (2) on a pro forma basis to reflect
the acquisition of Dining A La Card and the receipt of financing therefor, the
receipt of stockholder approval of the proxy proposals, our receipt of the
estimated proceeds from this rights offering and the application of the proceeds
of this rights offering as set forth above in Use of Proceeds.
You should read the table below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
all financial statements and notes thereto included in our Annual Report on Form
10-K/A for the year ended September 30, 1998 incorporated by reference into this
prospectus.
<TABLE>
<CAPTION>
As of March 31, 1999
--------------------
Actual Pro Forma
------- ---------
(in thousands)
<S> <C> <C>
Short term debt:
GAMI term loan............................................... $ -- $ -- (1)
Current portion of long-term debt............................ $ -- $ --
------- -------
29,000
======= =======
Guaranteed value of put........................................... $ -- $ 1,471
Long term debt:
Secured non-recourse notes payable........................... $33,000 $33,000
Other long-term liabilities.................................. 1,946 2,643
Stockholders' equity:
Common stock, $0.02 par value; 20,000,000 shares
authorized; 70,000,000 shares authorized (pro forma);
12,952,709 shares issued and outstanding (actual);
13,352,709 shares issued and outstanding (pro forma)(2)...... 260 268
Preferred stock, $0.10 par value; 1,000,000 shares
authorized; 20,000,000 shares authorized (pro forma);
no shares issued and outstanding (actual); 4,664,723
shares issued and outstanding (pro forma).................... -- 10,000
Additional paid-in capital................................... 21,800 23,521
Accumulated other comprehensive income....................... 253 253
Retained earnings............................................ 2,143 2,143
------- -------
Total stockholders' equity................... 24,456 36,185
------- -------
Total capitalization.............. $59,402 $72,602
======= =======
</TABLE>
- ---------------------
(1) Because the proceeds from this rights offering will be used to repay the
$10,000 GAMI term loan used to finance the acquisition of Dining A La Card,
no amounts are shown.
(2) Excludes an aggregate of 1,606,093 shares issuable upon exercise of
outstanding stock options and 2,200,000 shares issuable upon exercise of
outstanding warrants.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are (1) selected consolidated financial data of
Transmedia as of the dates and for the periods indicated, (2) unaudited interim
consolidated financial data of Transmedia as of the date and for the period
indicated, (3) selected pro forma consolidated financial data of Transmedia as
of the dates and for the periods indicated, which give effect to the closing of
the acquisition of Dining A La Card and the receipt of financing in the
aggregate principal amount of $39 million and the completion of this rights
offering as though such events had occurred at the beginning of such period, and
(4) selected pro forma balance sheet information as of September 30, 1998 and
June 30, 1999, which gives effect to the acquisition of Dining A La Card and the
receipt of financing in the aggregate amount of $39 million and to the
completion of this rights offering. The financial information of Transmedia as
of September 30, 1994, 1995, 1996, 1997 and 1998 and for each of the five years
in the period ended September 30, 1998 has been derived from, and should be read
in conjunction with, the audited financial statements and accompanying notes
included in Transmedia's Annual Reports on Form 10-K for the years ended
September 30, 1994, 1995 and 1998, and Form 10K/A for the years ended September
30, 1996 and 1997. The financial information derived from Transmedia's unaudited
consolidated financial statements for the six months ended March 31, 1999
includes all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position and results of operations as of the
date and for the period indicated. This data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and notes thereto contained in the
Annual Reports.
<TABLE>
<CAPTION>
Pro Forma
Six Nine
Pro Forma Months Months
Year Ended September 30, Year Ended Ended Ended
-------------------------------------------------- September March 31, June 30,
1994 1995 1996 1997 1998 30, 1998 1999 1999
------- ------- ------- -------- -------- -------- ------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Gross dining sales ....................... $62,012 $78,632 $90,076 $101,301 $ 95,549 $216,061 $46,961 $
Operating revenues:
Net revenues from rights-to-receive .... 11,899 15,769 19,504 21,232 19,659 24,945 9,452
Membership and renewal fee income ...... 2,685 4,081 6,646 7,251 7,321 10,823 3,730
Franchise fee income ................... 1,061 1,881 1,839 1,438 1,249 1,249 518
Other income ......................... 281 423 497 1,023 1,912 1,929 825
------- ------- ------- -------- -------- -------- -------
Total operating revenues ................. 15,926 22,154 28,486 30,944 30,141 38,946 14,525
------- ------- ------- -------- -------- -------- -------
Total operating expenses ................. 10,709 15,809 23,729 30,246 37,606 60,872 17,611
------- ------- ------- -------- -------- -------- -------
Operating income (loss) .................. 5,217 6,345 4,757 698 (7,465) (21,926) (3,086)
Income (loss) before taxes ............... 6,974 6,879 4,107 (684) (10,436) (28,514) (3,225)
Net income (loss) ........................ $ 4,176 $ 4,196 $ 2,546 $ (424) $ (7,836) $(28,514) $(3,225) $
Basic and diluted operating income
(loss) per share........................ $ 0.53 $ 0.64 $ 0.46 $ 0.07 $ (0.63) $ (1.80) $ (0.24)
Basic and diluted net income (loss)
per share............................... $ 0.42 $ 0.42 $ 0.25 $ (0.04) $ (0.67) $ (2.28) $ (0.25)
<CAPTION>
Pro Forma Pro Forma
Year Ended September 30, as of As of as of
-------------------------------------------------- September March 31, June 30,
1994 1995 1996 1997 1998 30, 1998 1999 1999
------- ------- ------- -------- -------- -------- ------- ---------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets ............................ $28,477 $38,383 $54,514 $72,685 $74,425 $117,985 72,666 $ _________
Long-term debt:
Recourse ......................... -- 2,000 15,000 -- -- 41,758 1,946 --
Non-recourse ..................... -- -- -- 33,000 33,000 33,000 33,000 --
Stockholders' equity .................... 18,925 24,191 25,753 25,304 27,734 24,463 24,456 _________
Cash dividends per common share ......... $ 0.04 $ 0.04 $ 0.04 $ 0.02 $ 0.02 $ 0.02 -- --
</TABLE>
17
<PAGE>
RECENT DEVELOPMENTS
Acquisition of Dining A La Card Program
On June 30, 1999, we concluded the acquisition from SignatureCard, a
subsidiary of Montgomery Ward & Co., Incorporated, of assets related to a
membership discount dining program SignatureCard operated under the Dining A La
Card trade name and service mark. While Transmedia cardmembers receive
distinctive Transmedia cards which they present to participating merchants,
members of the Dining A La Card program register one of their nationally known
credit cards with the program and use this registered credit card at restaurants
participating in the Dining A La Card program. The assets acquired included
various intellectual property rights and computer software, membership and
merchant data, rights-to-receive at various restaurants and the registered card
program. As consideration for the assets, we paid SignatureCard $35,000,000 in
cash at closing (representing the estimated amount of the cash funded by
SignatureCard for certain "qualified" rights-to-receive at merchants
participating in the Dining A La Card program), issued to SignatureCard 400,000
shares of our common stock and issued to SignatureCard a three-year option to
purchase an additional 400,000 shares of our common stock at a price of $4.00
per share. In addition, during the two-year period following the closing, we
have agreed to share with SignatureCard certain amounts received in excess of
the amount funded at closing in respect of "non-qualified" rights-to receive.
SignatureCard may, at any time between January 1, 2000 and June 30, 2002,
require us to repurchase all or some of the 400,000 shares of common stock we
issued at the closing at a price of $8.00 per share.
In connection with the acquisition of Dining A La Card, we entered into a
services collaboration agreement with SignatureCard. Under this agreement,
SignatureCard will continue to provide dining members from its airline frequent
flyer partner programs and other marketing programs. It will also share, for
12.5 years, certain profits we derive from SignatureCard-generated members as
well as a portion of the membership fee revenues generated from fee paying
members acquired in this transaction or subsequently through SignatureCard's
efforts.
To finance the acquisition, we obtained a $35 million senior secured
revolving bridge loan facility from Chase (from which $29 million was drawn down
at the closing of the Dining A La Card acquisition) and a $10 million term loan
from GAMI.
The Chase Facility
The Chase facility permits us to borrow up to an aggregate principal
amount equal to the lesser of $35,000,000 and the amount available under a
borrowing base formula based on the amount of Dining A La Card receivables which
meet certain eligibility criteria (which was $35 million at closing). The
facility is secured by liens on substantially all of our assets (including those
purchased in the acquisition), other than those subject to an existing
securitization facility, as well as by pledges of the stock of our three
principal subsidiaries: Transmedia Restaurant Company Inc., Transmedia Service
Company Inc., and TMNI International Incorporated. It is our intention to use
the remaining proceeds of the facility in connection with the ongoing Dining A
La Card business.
Amounts drawn down under the facility bear interest, at our election, at
either (i) 0.25% plus the greater of the Chase prime rate and 1.5% plus the
federal funds effective rate, or (ii) 1.25% plus one month LIBOR. The facility
expires on December 30, 1999 and we must repay all outstanding amounts by that
time. The rate of interest on the facility on the date of this prospectus is
8.08%. Interest is payable monthly in arrears. Any amounts overdue under the
facility bear interest at the applicable rate plus 2%. The agreement contains
customary events of default, as well as a cross default if we default on our
existing securitization facility or the GAMI loan or any other material
indebtedness. We intend to repay this bridge loan with the proceeds from a
securitized financing of the Dining A La Card rights-to-receive arranged through
Chase.
In connection with the Chase facility, we paid a $500,000 fee to Chase
upon the closing and are required to pay a monthly fee equal to 0.375% of the
average amount of undrawn funds under the facility.
18
<PAGE>
The GAMI Loan
The GAMI term loan in the amount of $10 million is unsecured and
subordinated to the Chase facility. It obligates us as well as our three
principal subsidiaries as borrowers. Interest accrues on the principal amount
outstanding at the prime rate (as announced from time to time by Chase) plus 4%,
and is payable monthly in arrears. Overdue amounts bear interest at the prime
rate plus 8%.
The terms of this agreement require us to conduct this rights offering
and to use the gross proceeds to repay all outstanding amounts under this loan.
It matures on the closing of this rights offering or December 30, 1999, if
earlier. The failure of our stockholders to approve the proxy proposals and the
occurrence of an event of default under various agreements relating to the
rights offering (see "Related Party Transactions") or under the Chase facility
constitute defaults under this loan, among other customary default events. Upon
an event of default, various standstill covenants binding Samstock and its
affiliates would automatically terminate. In addition, Samstock would have the
right to designate additional directors to our board so that the total number of
Samstock designees on our board would constitute a majority, among other
remedies.
The terms of this agreement required us to pay to GAMI at the closing of
the loan a cash fee of $500,000, which is reimbursable to us upon (i) the
closing of this rights offering, (ii) the issuance to Samstock of warrants to
purchase 1,000,000 shares of our common stock and (iii) the repayment of the
GAMI loan. If the rights offering is not consummated and the warrants are not
issued, we are required to pay GAMI an additional $500,000 fee in cash.
Existing Securitization Facility Waiver
As of April 30, 1999, Transmedia's stockholder equity was less than the
$24 million minimum required under its existing securitization facility. This
default has been waived through December 31, 1999. The waiver may terminate,
however, (1) after October 31, 1999, if this rights offering has not yet been
commenced or if we continue to fail to comply with the stockholder equity
requirements and, in each case, the rating of the notes under the securitization
facility is withdrawn or reduced, and (2) at any time, if the indebtedness under
the Chase or GAMI loans is accelerated or if we fail to maintain stockholders
equity of at least $20 million. We are depending on this rights offering to
provide us with the additional equity needed to bring us into compliance with
the terms of this facility. If we are unable to satisfy this requirement by
December 31, 1999, or if the waiver is terminated, an early amortization event
under the facility could be declared, and our financial condition and results of
operations would be materially negatively impacted. See "Risk Factors -- We may
have difficulty meeting our future cash needs."
19
<PAGE>
THE RIGHTS OFFERING
The Rights
We are distributing to the holders of our common stock, at no cost to the
holders, non-transferable rights to purchase our Series A preferred shares. For
a description of the Series A preferred shares, see "Description of Capital
Stock--Preferred Stock." If you owned shares of our common stock as of the close
of business on ______, 1999, the record date, we will give you the right to
subscribe for one Series A preferred share, at a subscription price of $ _______
per share (the "Subscription Price"), for each [_______] whole shares of common
stock you owned. You will not receive any fractional rights or cash in lieu of
fractional rights during the rights offering, but instead we will round your
number of rights up or down to the nearest whole number. No public market for
the rights will exist and the rights may not be sold, assigned or otherwise
transferred. See "--Nontransferability of Rights."
If you wish to exercise your rights, you must do so before 5:00 p.m.,
Eastern Standard Time, on _______, 1999. After that time, the rights will expire
and will no longer be exercisable. See "--Expiration Time."
Basic Subscription Privilege
Each right will entitle you to receive, upon payment of $____ to
Transmedia, one Series A preferred share. Transmedia will send you certificates
representing the shares that you purchase pursuant to your basic subscription
privilege as soon as practicable after __________, 1999 [insert expiration
date], whether you exercise your rights immediately prior to that date or
earlier. If you hold your common stock through Depository Trust Company, or
arrange for delivery and payment through DTC, the appropriate account will be
credited.
Oversubscription Privilege
Each right also gives you an "oversubscription privilege" to purchase
additional Series A preferred shares that are not purchased by other
stockholders. You are entitled to exercise your oversubscription privilege only
if you exercise your basic subscription privilege in full.
If you wish to exercise your oversubscription privilege, you should
indicate the number of additional shares that you would like to purchase in the
space provided on your subscription certificate. When you send in your
subscription certificate, you must also send the full purchase price for the
number of additional shares that you have requested to purchase (in addition to
the payment due for shares purchased through your basic subscription privilege).
If the number of shares remaining after the exercise of all basic
subscription privileges is not sufficient to satisfy all oversubscription
privileges, you will be allocated shares pro rata (subject to elimination of
fractional shares), in proportion to the number of shares you purchased through
your basic subscription privilege.
As soon as practicable after _______, 1999 [insert expiration date], the
subscription agent will determine the number of Series A preferred shares that
you may purchase pursuant to the oversubscription privilege. We will send you
certificates representing these shares as soon as practicable after _______,
1999. If you request and pay for more shares than are allocated to you, we will
refund that overpayment, without interest.
In connection with the exercise of the oversubscription privilege, banks,
brokers and other nominee holders of rights who act on behalf of beneficial
owners will be required to certify to the subscription agent and Transmedia as
to the aggregate number of rights that have been exercised and the number of
Series A preferred shares that are being requested through the oversubscription
privilege, by each beneficial owner on whose behalf such nominee holder is
acting.
Standby Commitment
Pursuant to a standby purchase agreement, approved by a majority of the
disinterested directors of our board of directors, Samstock, a principal
stockholder, has agreed to act as a standby purchaser to ensure the sale, at the
subscription price, of all of the Series A preferred shares we are offering
hereby, the gross proceeds of which would be
20
<PAGE>
sufficient to repay the principal outstanding amount under the GAMI loan. See
"Recent Developments." If Samstock purchases under its standby commitment more
than 25% of the total number of Series A preferred shares offered to our other
stockholders in this rights offering (other than pursuant to its basic
subscription privilege and its obligation to purchase shares not subscribed for
by EGI-Transmedia Investors, L.L.C. or its members pursuant to its or their
basic subscription privileges), it will have the right to designate an
additional director to our board and thus increase the size of our board. As a
compensation for Samstock's standby purchase commitment and for the $10 million
loan from GAMI, Transmedia will issue to Samstock warrants to purchase 1,000,000
shares of common stock, exercisable over a five-year period at an exercise price
equal to the average of the closing price of the common stock during the 20
consecutive trading days preceding the closing of this rights offering. See
"Related Party Transactions."
Subscription Price
The subscription price for one Series A preferred share, which may be
purchased upon exercise of one right, is $____________. Series A preferred
shares purchased through the oversubscription privilege or though the standby
commitment will have the same subscription price as shares purchased under the
basic subscription privilege.
Expiration Time
The rights will expire at 5:00 p.m., Eastern Standard Time, on _________,
1999, unless Transmedia, in its discretion, extends the rights offering for up
to 10 days. If you do not exercise your basic subscription privilege and
oversubscription privilege prior to that time, the rights will be null and void.
Transmedia will not be required to issue Series A preferred shares to you if the
subscription agent receives your subscription certificate or your payment after
that time, regardless of when you sent the subscription certificate and payment,
unless you send the documents in compliance with the guaranteed delivery
procedures described below.
Our Withdrawal Right
We reserve the right to withdraw the rights offering at any time before
or at the time it is due to expire and for any reason (including, without
limitation, the failure by stockholders to approve the increase in our
authorized share capital or certain other matters, or a change in the market
price of the common stock). We cannot assure you that the condition to this
offering will be satisfied or that we will not withdraw this offering for other
reasons. If we withdraw the offering, the GAMI loan agreement and the Chase
bridge facility would be in default and, if either those defaults results in an
acceleration of the indebtedness due under the GAMI or Chase loan, the waiver
under our existing securitization would terminate. If Transmedia withdraws the
offering, all funds received from holders will be refunded promptly without
interest or penalty.
Nontransferability of Rights
The rights may not be transferred, except by operation of law in the
event of death or dissolution of their holder.
Determination of Subscription Price
The subscription price of the rights was determined by our board of
directors, and is not necessarily related to the assets, book value or net worth
of Transmedia or any other established criteria of value, and may not be
indicative of the fair value of the securities offered. In determining the
subscription price, the board of directors considered, among other things, the
historic and current market price of the common stock on the New York Stock
Exchange (approximately $3.06 per share at July 30, 1999), the book value of the
common stock (approximately $1.96 per share at March 31, 1999, after giving
effect to the acquisiton of Dining A La Card) as compared to its market price
over the past several months, Transmedia's earnings and prospects, as well as
Transmedia's need for capital.
21
<PAGE>
Exercise of Rights
Method of Exercise
You may exercise your rights by delivering to the subscription agent,
American Stock Transfer & Trust Company on or prior to ________, 1999:
(1) the properly completed and signed subscription certificate
accompanying this prospectus;
(2) any required signature guarantees; and
(3) payment in full of the subscription price for each Series A
preferred share to be purchased through the basic subscription
privilege and the oversubscription privilege.
You should deliver your subscription certificate and payment to the
address set forth below under "--Subscription Agent."
Method of Payment
Payment for the shares must be made (1) by check or bank draft (cashier's
check) drawn upon a United States bank or a postal, telegraphic or express money
order payable to "American Stock Transfer & Trust Company", as subscription
agent or (2) by wire transfer of funds to an account maintained by the
subscription agent for the purpose of accepting subscriptions at
____________________, Attn: Account: ____________________ (Transmedia Network
Inc.) The subscription price will be considered to have been received by the
subscription agent only upon:
(1) clearance of any uncertified check;
(2) receipt by the rights agent of any certified check or bank draft
upon a United States bank or of any postal, telegraphic or express
money order; or
(3) receipt of collected funds in the subscription agent's account
designated above.
Note that funds paid by uncertified personal check may take at least five
business days to clear. Accordingly, if you wish to pay by means of an
uncertified personal check, Transmedia urges you to make payment sufficiently in
advance of _________, 1999 to ensure that the payment is received and clears
before that date. Transmedia also urges you to consider payment by means of
certified or cashier's check or money order.
Guaranteed Delivery Procedures
If you want to exercise your rights, but time will not permit your
subscription certificate to reach the subscription agent on or prior to 5:00
p.m., on ________, 1999, you may exercise your rights if you satisfy the
following Guaranteed Delivery Procedures:
(1) You send, and the subscription agent receives, payment in full for
each Series A preferred share being purchased through the basic
subscription right and the oversubscription privilege, on or prior
to __________, 1999;
(2) You send, and the subscription agent receives, or prior to
__________, a Notice of Guaranteed Delivery, substantially in the
form provided with the attached instructions, from a member firm of
a registered national securities exchange or a member of the
National Association of Securities Dealers, inc., or a commercial
bank or trust company having an office or correspondent in the
United States. The Notice of Guaranteed Delivery must state your
name, the number of rights that you hold, the number of Series A
preferred shares that you wish to purchase pursuant to the basic
subscription right and the number of shares, if any, you wish to
purchase pursuant to the oversubscription privilege. The Notice of
Guaranteed Delivery must guarantee the delivery of your subscription
certificate to the subscription agent within three New York Stock
Exchange trading days following the date of the Notice of Guaranteed
Delivery; and
22
<PAGE>
(3) You send, and the subscription agent receives, your properly
completed and duly executed subscription certificate, including any
required signature guarantees, within three NYSE trading days
following the date of your Notice of Guaranteed Delivery. The Notice
of Guaranteed Delivery may be delivered to the subscription agent in
the same manner as your subscription certificate at the addresses
set forth below, or may be transmitted to the subscription agent by
facsimile transmission, to facsimile number __________. You can
obtain additional copies of the form of Notice of Guaranteed
Delivery by requesting it from the subscription agent at the address
set forth below under "--Subscription Agent."
Signature Guarantee
Signatures on the subscription certificate must be guaranteed by an
Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Exchange Act,
subject to the standards and procedures adopted by the subscription agent.
Eligible Guarantor Institutions include banks, brokers, dealers, credit unions,
national securities exchanges and savings associations.
Signatures on the subscription certificate do not need to be guaranteed
if:
(1) the subscription certificate provides that the Series A preferred
shares to be purchased are to be delivered directly to the record
owner of such rights; or
(2) the subscription certificate is submitted for the account of a
member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
Shares Held for Others
If you hold shares of common stock for the account of others, such as a
broker, a trustee or a depository for securities, you should notify the
respective beneficial owners of such shares as soon as possible to obtain
instructions with respect to the rights beneficially owned by them.
If you are a beneficial owner of common stock held by a holder of record,
such as a broker, trustee or a depository for securities, you should contact the
holder and ask him to effect transactions in accordance with your instructions.
Ambiguities in Exercise of the Rights
If you do not specify the number of rights being exercised on your
subscription certificate, or if your payment is not sufficient to pay the total
purchase price for all of the shares that you indicated you wished to purchase,
you will be deemed to have exercised the maximum number of rights that could be
exercised for the amount of the payment that the subscription agent receives
from you.
If your payment exceeds the total purchase price for all of the rights
shown on your subscription certificate, your payment will be applied until
depleted, to subscribe for Series A preferred shares in the following order:
(1) to subscribe for the number of Series A preferred shares, if any,
that you indicated on the subscription certificate(s) that you
wished to purchase through your basic subscription privilege;
(2) to subscribe for Series A preferred shares until your basic
subscription privilege has been fully exercised;
(3) to subscribe for additional Series A preferred shares pursuant to
the oversubscription privilege (subject to any applicable
proration).
Any excess payment remaining after the foregoing allocation will be
returned to you as soon as practicable by mail, without interest or deductions.
23
<PAGE>
Important
Please carefully read the instructions accompanying the subscription
certificate and follow those instructions in detail. Do not send subscription
certificates to Transmedia.
You are responsible for choosing the payment and delivery method for your
subscription certificate, and you bear the risks associated with such delivery.
If you choose to deliver your subscription certificate and payment by mail,
Transmedia recommends that you use registered mail, properly insured, with
return receipt requested. Transmedia also recommends that you allow a sufficient
number of days to ensure delivery to the subscription agent and clearance of
payment prior to __________, 1999. Because uncertified personal checks may take
at least five business days to clear, the company strongly urges you to pay, or
arrange for payment, by means of certified or cashier's check or money order.
Validity of Subscriptions
All questions concerning the timeliness, validity, form and eligibility
of any exercise of rights will be determined by Transmedia, which determination
will be final and binding. Transmedia, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
right by reason of any defect or irregularity in such exercise. Subscriptions
will not be deemed to have been received or accepted until all irregularities
have been waived or cured within such time as Transmedia determines in its sole
discretion. Neither Transmedia nor the subscription agent will be under any duty
to give notification of any defect or irregularity in connection with the
submission or subscription certificates or incur any liability for failure to
give such notification.
No Revocation
After you have exercised your basic subscription privilege or
oversubscription privilege, you may not revoke that exercise. You should not
exercise your rights unless you are certain that you wish to purchase Series A
preferred shares.
Listing
We intend to apply to list the Series A preferred shares offered hereby
on the NYSE under the symbol "TMNPrA." The rights are non-transferable and will
not be listed on any national securities exchange or quotation system.
Fees and Expenses
Transmedia will pay all fees charged by the subscription agent. You are
responsible for paying any other commissions, fees, taxes or other expenses
incurred in connection with the exercise of the rights. Neither Transmedia nor
the subscription agent will pay such expenses.
Rights of Subscribers
You will have no rights as a stockholder of Transmedia with respect to
the Series A Preferred shares you subscribe for or the shares of common stock
into which those shares are convertible until certificates for those shares are
issued to you. You will have no right to revoke your subscription after you
deliver to the subscription agent a completed subscription certificate and
payment.
Subscription Agent
Transmedia has appointed American Stock Transfer & Trust Company as
subscription agent for the rights offering. The subscription agent's address for
packages sent by mail or overnight delivery
is:______________________________________________.
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<PAGE>
The Subscription Agent's telephone number is ______________, and its
facsimile number is ___________.
You should deliver your subscription certificate, payment of the
subscription price and Notice of Guaranteed Delivery (if any) to the
subscription agent.
Transmedia will pay the fees and expenses of the subscription agent,
which we estimate will total $_________. We have also agreed to indemnify the
subscription agent from any liability which it may incur in connection with the
rights offering.
No Board Recommendation
Your decision whether to exercise your rights and invest in the Series A
preferred shares must be made by you, based upon your own evaluation of your
best interests. Accordingly, the board of directors does not make any
recommendation to any rights holder regarding the exercise of his, her or its
rights.
25
<PAGE>
RELATED PARTY TRANSACTIONS
The GAMI Loan
On June 30, 1999, we, together with our three principal subsidiaries as
borrowers, entered into a term loan with GAMI, an affiliate of Samstock, our
largest stockholder, providing us with interim debt financing in a total
aggregate amount of $10.0 million. The term loan is unsecured and is
subordinated to the Chase revolving credit facility. See "Recent Developments."
To finance our acquisition of Dining A La Card, we borrowed the entire principal
amount available under this loan on June 30, 1999, the net proceeds of which,
after payment of the fees discussed below and a transaction advisory fee to EGI,
were approximately $9.1 million. Repayments of this loan are not subject to
reborrowing. The loan bears interest at the prime rate (as announced from time
to time by The Chase Manhattan Bank) plus 4% and is payable monthly in arrears.
The loan matures on December 30, 1999 or the earlier closing of this rights
offering.
The terms of the GAMI loan require us to conduct this rights offering
(and to use the gross proceeds to repay the loan) and to enter into the standby
purchase agreement and a second amended and restated investment agreement with
Samstock and certain other persons. Any default under these agreements, the
Chase facility or the waiver letter issued under our securitization facility,
and any failure by stockholders to approve the proxy proposals being presented
to them would each trigger a default under the GAMI loan, among other customary
default events. Upon a default event, in addition to the remedies available
under the loan agreement, the various standstill covenants binding Samstock and
its affiliates under the investment agreement (which currently prohibit Samstock
and its affiliates, subject to certain limitations, from acquiring additional
securities of Transmedia, soliciting proxies in opposition to the recommendation
of a majority of our disinterested directors, forming "groups" for the purpose
of acquiring, voting or disposing of our voting securities, or soliciting
bidders for Transmedia, among other things, until March 2003) would
automatically terminate, and Samstock would have the right to designate
additional directors to our board so that the total number of Samstock designees
on our board would constitute a majority.
As consideration for GAMI providing the loan and Samstock acting as a
standby purchaser under the standby purchase agreement, we paid GAMI a
reimbursable fee of $500,000. Upon receipt of stockholder approval of the proxy
proposals and the closing of this rights offering, (1) Transmedia will issue to
Samstock warrants to purchase 1,000,000 shares of our common stock, and (2) GAMI
will reimburse to us the $500,000 payment we previously paid to GAMI (less
outstanding principal and interest amounts under the loan). The warrants are
exercisable at any time, from time to time, in whole or in part for five years
from the closing of this rights offering at a price per share equal to the
average of the closing prices of our common stock on the New York Stock Exchange
during the 20 trading days preceding such closing. If the proxy proposals are
not approved by our stockholders, or this rights offering is withdrawn or
canceled for any other reason, we will not be reimbursed and, in addition, will
be required to pay GAMI an additional $500,000 in fees under the loan agreement
with GAMI.
We are required to register for resale all shares of common stock
issuable to Samstock upon exercise of the warrants in accordance with the terms
of the second amended and restated investment agreement. See "Description of
Capital Stock--Warrants."
The Standby Purchase Agreement
Samstock has entered into a standby purchase agreement with us, pursuant
to which it has agreed to act as a standby purchaser of the Series A preferred
shares to ensure that $10 million in gross proceeds are raised. We are required
to use all the proceeds of this offering to repay the loan described above. See
"Use of Proceeds." Under the agreement, Samstock is obligated to purchase all
Series A preferred shares not subscribed for by other stockholders in this
rights offering (including pursuant to any oversubscription privilege).
The obligation of Samstock to effect these purchases is subject to
various conditions, including (1) the receipt of stockholder approval of the
increase in our authorized share capital and certain other matters being
presented to them, and (2) the expiration or termination of any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
among others. We cannot assure you that all of the conditions will be satisfied
or waived.
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The purchase price of Series A preferred shares to be paid by Samstock
pursuant to the standby purchase agreement will be the subscription price
offered to you. As of the date of this prospectus, we cannot determine the exact
number of Series A preferred shares, if any, that will be required to be
purchased under the standby commitment.
If Samstock purchases more than 25% of the total number of Series A
preferred shares offered to our other stockholders in this rights offering
(other than pursuant to its basic subscription privilege or its obligation to
purchase shares not subscribed for by EGI-Transmedia Investors, L.L.C. or its
members pursuant to its or their basic subscription privileges), it will have
the right to designate an additional director to our board and the size of our
board would be increased by one. Seven directors currently comprise our board of
directors, two of whom have been designated by Samstock.
As compensation for Samstock's commitment under the standby purchase
agreement and for GAMI's commitment under the loan described above we have
agreed to issue to Samstock warrants to purchase a total of 1,000,000 shares of
common stock. See "--GAMI Loan."
Samstock has advised us that it will be acquiring the Series A Preferred
shares pursuant to the standby purchase agreement for investment purposes and
not with a view to their sale or distribution. We have granted to Samstock
certain rights to require us to register the Series A preferred shares (and the
shares of common stock into which they are convertible) purchased by it in this
offering or under the standby purchase agreement. See "Description of Capital
Stock--Registration Rights." Transmedia and Samstock have agreed to indemnify
one another for certain liabilities under the securities laws.
Advisory Services
In connection with our acquisition of Dining A La Card, we paid a fee for
transaction advisory services to EGI of $386,000.
Approval by Disinterested Directors
At our board meeting on May 24, 1999 and our telephonic board meeting on
June 25, 1999 the disinterested directors of our board approved each of the
transactions described above, subject, in the case of the warrant issuance, to
receipt of stockholder approval of the same, by a vote of three to one.
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DESCRIPTION OF CAPITAL STOCK
Immediately following the completion of this rights offering, assuming
that the conditions to this offering are satisfied (including the approval by
stockholders of the proxy proposals) and upon filing of our certificate of
amendment to our certificate of incorporation, the authorized capital stock of
Transmedia will consist of 70,000,000 shares of common stock, par value $.02 per
share, and 20,000,000 shares of preferred stock, par value $.10 per share.
As of July 30, 1999, we had 13,352,709 shares of common stock outstanding
held by approximately 409 stockholders of record. Upon completion of this
offering, assuming the maximum number of rights are exercised, there will be
outstanding (1) 13,352,709 shares of our common stock (18,017,432 shares if the
Series A preferred shares are fully converted into common stock), (2) 4,664,723
Series A preferred shares (or no Series A preferred shares, if they are all
immediately converted into common stock), (3) options to purchase 1,606,093
shares of common stock, and (4) warrants to purchase 2,200,000 shares of common
stock.
Common Stock
Holders of our common stock are entitled to one vote per share held of
record on matters to be voted upon by the stockholders. Holders of common stock
are entitled to receive dividends out of funds legally available for
distribution when and if declared by our board of directors and to share ratably
in the assets of Transmedia legally available for distribution to stockholders
in the event of liquidation, dissolution or winding-up of Transmedia, subject to
any preferences that may be applicable to any shares of our preferred stock, par
value $.10 per share, then outstanding. Holders of common stock have no
subscription, redemption or conversion rights and, under Delaware law, no
preemptive rights to acquire unissued shares, treasury shares or securities
convertible into such shares. All outstanding shares of common stock are, and
all shares of common stock to be issued in the future (assuming the issuance of
such shares will have been duly authorized by Transmedia and issued against
receipt of the consideration approved by Transmedia, which will be no less than
the par value thereof) will be, duly authorized, validly issued, fully paid and
non-assessable.
Preferred Stock
The board of directors has the authority, within the limitations and
restrictions stated in the certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more classes
or series, and to fix the rights, preferences, privileges and restrictions
thereof, including the powers, designations, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof. The number of authorized shares of preferred stock may be
increased or decreased by the affirmative vote of the holders of a majority of
the outstanding common stock, without a vote of the holders of the preferred
stock, or any series thereof, unless a vote of such holders is required pursuant
to the resolutions establishing the series of preferred stock. The issuance of
preferred stock could have the effect of decreasing the market price of the
common stock and could adversely affect the voting and other rights of the
holders of common stock. See "Risk Factors--If you do not exercise all of your
rights, your ownership interest in Transmedia will be diluted" and
"--Transmedia's board of directors may issue additional shares of preferred
stock without stockholder approval."
Series A Preferred Shares
The shares designated as Series A preferred shares will be senior
convertible redeemable preferred stock.
Conversion. Each whole share of Series A preferred stock is convertible
into common stock at any time at the option of the holder and, at any time after
the third anniversary of the closing of this offering (upon satisfaction of
certain conditions), at our option, at a conversion price of $_____ [insert
liquidation preference] subject to adjustment on customary terms to avoid
dilution in the event of a merger, stock split, recapitalization or other
similar events or an issuance of common stock below the conversion price then in
effect. We will have the right to effect a conversion if the closing price of
the common stock at any time after such third anniversary exceeds $_______
[Insert number equal to 2x liquidation preference], plus accrued and unpaid
current dividends, additional dividends and deferred dividends, for thirty
consecutive days, provided that we effect such conversion within 90 days
thereafter. We will also have the right to require conversion if we complete an
underwritten offering of our equity securities which results in gross
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proceeds to Transmedia or selling stockholders of $20 million and either the
price to public of the securities sold or the average of the high and low sales
price of our common stock on the date of the closing of the public offering is
not less than the Series A conversion price then in effect. Holders of a
majority of the outstanding Series A preferred shares also will have the right
to require us to convert all outstanding Series A preferred shares at any time
following the closing of this offering. The number of shares of common stock
issuable upon any conversion will be determined by dividing the sum of $_______
[Note: insert liquidation preference], plus accrued but unpaid current
dividends, additional dividends and deferred dividends by the Series A
conversion price then in effect.
Dividends. As a holder of the Series A preferred shares you will be
entitled to receive, when, as and if declared by the board of directors and to
the extent of funds legally available for the payment of dividends, cash
dividends at the rate of $_____ per share per annum [insert number equal to 12%
of liquidation preference], at least $_____ [insert number equal to 6% of
liquidation preference] of which is payable quarterly in arrears on the first
business day of January, April, July and October ("current dividends").
Dividends in the amount of $_____ per share [insert number equal to 6% of
liquidation preference] shall not be payable currently but shall be deferred,
accrue and be payable upon a conversion or redemption of the Series A preferred
shares or liquidation, dissolution or winding up of Transmedia ("deferred
dividends"). See "-- Subordination" below. We may choose to pay any or all
deferred dividends currently. Dividends will accrue from and including the issue
date to and including the date on which the preferred stock is redeemed or
converted or on which the liquidation preference is paid thereon. To the extent
not paid, dividends will be cumulative. The Series A preferred shares also will
be entitled to receive cash dividends on an as-converted basis equal to the
common stock, if dividends are paid on common stock.
If we default in our obligation to pay any portion of current dividends
when due (such portion, a "past due current dividend"), the holders will be
entitled to receive, when, as and if declared by the board of directors and to
the extent of funds legally available for the payment of dividends, an
additional dividend per share ("additional dividends") at an annual rate equal
to the per share amount of the past due current dividend, multiplied by the
prime rate of interest (as announced by The Chase Manhattan Bank) plus 6% for
the first 90 days of such default, increasing by an additional 1/2% at the
beginning of each subsequent 90 day period up to a maximum rate equal to the
prime rate plus 7-1/2%. All additional dividends will be cumulative from the
dividend payment date on which the default giving rise to a past due current
dividend had occurred.
Voting. Holders of the Series A preferred shares will vote together with
the holders of the common stock on all matters which are submitted to a vote of
the stockholders on the basis of one vote for each share of Series A preferred
stock held of record by such holders. In addition, if and whenever current
dividends payable on shares of Series A preferred stock are in arrears and
unpaid in an aggregate amount equal to or exceeding the amount of current
dividends due and payable thereon for six (6) quarterly dividend periods
(consecutive or otherwise), then the number of directors constituting the board
of directors will be increased by two, and the Series A preferred shares, voting
as a class, will have the right to elect two directors to fill the newly-created
directorships. The right to elect directors will remain in effect until all
cumulative current dividends (and any additional dividends with respect to those
current dividends) have been paid in full.
Subordination. Upon a liquidation, dissolution or winding up of
Transmedia, the holders of the Series A preferred shares would be entitled to
receive, in cash, a sum per share equal to $_____ [insert liquidation
preference] plus all accrued but unpaid current dividends, additional dividends
and deferred dividends thereon, before any amounts are paid to holders of common
stock. If amounts available for distribution to stockholders are insufficient to
permit payment to all holders of Series A preferred shares of this preferential
amount, then our entire funds available to holders of Series A preferred shares
will be distributed ratably among the holders in proportion to the number of
shares owned. Upon liquidation (other than a "deemed liquidation event"
described below), after payment of the amount described above, any additional
amounts available for distribution will be distributed among the holders of the
Series A preferred shares and common stock pro rata on an as-converted basis.
If we consolidate with or merge into another entity, if we sell or
transfer all or substantially all of our assets, or if a majority of our
outstanding stock is sold, resulting in stockholders immediately prior to the
sale owning less than 50% of our voting securities, we will treat such event as
a liquidation, dissolution or winding up (a "deemed liquidation event"), unless
the transaction is approved by the holders of majority of the then outstanding
Series A preferred shares. From and after the date of a deemed liquidation, all
rights of the holders of Series A preferred shares, as such, will cease
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and terminate, and each Series A preferred share shall automatically be canceled
and retired and shall cease to exist and no consideration shall be delivered or
deliverable in exchange for the share other than the right to receive payment of
the preferential amount described above.
Redemption. Beginning on the fifth anniversary of the closing of this
rights offering, (1) and during the 90 day period thereafter, each holder of
Series A preferred shares may require Transmedia to redeem all, but not less
than all, of the Series A preferred shares then held by the holder and (2) at
any time thereafter, Transmedia may elect to redeem all of the Series A
preferred shares then outstanding, in each case at a redemption price per share
equal to $_____ [insert liquidation preference] plus all accrued but unpaid
current dividends, additional dividends and deferred dividends thereon (the
"redemption price"). In either case, Transmedia, however, may choose to effect
the redemption in not less than one-third increments ratably during the fifth,
sixth and seventh years following the closing of this rights offering (subject
to the holders' prior right of conversion). In the event that we do not have
sufficient funds legally available to redeem the total number of shares
requested or required to be redeemed, we will use those funds which are legally
available to redeem the maximum number of shares, ratably, (1) among the holders
then requesting redemption (in the event of a redemption at a holder's election)
or (2) among all holders (in the event a redemption at our election). If we
default in our obligation to redeem any shares that are to be redeemed on a
redemption date ("defaulted shares"), then (1) for purposes of calculating the
redemption price applicable to the defaulted shares, the dividend rate will
increase to the prime rate then in effect (as announced from time to time by The
Chase Manhattan Bank) plus 6% for the first 90 days of such default, increasing
by an additional 1/2% at the beginning of each 90-day period thereafter up to a
maximum rate of the prime rate plus 7-1/2% per annum, and (2) the conversion
price for the defaulted shares will be reduced by 50% of the conversion price
then in effect and shall remain at such reduced price until the defaulted shares
are redeemed.
Options
As of July 30, 1999 (1) options to purchase a total of 1,606,093 shares
of common stock were outstanding, and (2) up to 98,716 additional shares of
common stock may be subject to options granted in the future under Transmedia's
1996 Long-Term Incentive Plan.
Warrants
As of July 30, 1999, we had outstanding warrants for the purchase of an
aggregate of 1,200,000 shares of common stock, exercisable at any time until
March 23, 2003. One-third of the warrants are exercisable at $6.00 per share,
one-third of the warrants are exercisable at $7.00 per share, and one-third of
the warrants are exercisable at $8.00 per share. Of this number, warrants to
purchase 905,049 shares of common stock are held by affiliates of Samstock.
Subject to receipt of stockholder approval, Transmedia is obligated to issue to
Samstock, upon completion of this offering, warrants to purchase 1,000,000
shares of common stock in consideration of a $10 million loan to us by an
affiliate and its standby commitment. All of the aforementioned warrants contain
or will contain restrictions on transfer and customary anti-dilution provisions
for stock splits or other recapitalization.
Registration Rights
Upon the completion of this rights offering, and the issuance to Samstock
of warrants to purchase an aggregate of 1,000,000 shares of common stock, the
holders of an aggregate of ____________ shares of common stock or securities
exercisable for common stock will be entitled to certain registration rights.
These rights are provided under the terms of a second amended and restated
investment agreement among Transmedia, Halmostock Limited Partnership and
affiliates of Samstock. The agreement provides for rights to require Transmedia
to file a shelf registration statement with respect to all registrable
securities and to keep such registration statement effective until all
registrable securities are sold or disposed of under the registration statement
or to unaffiliated third parties. In April 1998, Transmedia filed a shelf
registration statement covering 4,920,509 shares of common stock. Transmedia is
obligated to file another shelf registration statement covering _______ Series A
preferred shares and an indeterminate number of shares of common stock into
which the preferred shares may be exercisable from time to time as well as
1,000,000 shares of common stock underlying the warrant in accordance with the
second amended investment agreement within 90 days following the completion of
this rights offering. Registration of shares of common stock pursuant to the
rights granted in these
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agreements will result in such shares becoming freely tradeable without
restriction under the Securities Act of 1933. All registration expenses incurred
in connection with the above registrations will be borne by Transmedia.
Delaware Anti-takeover Law and Certain Charter Provisions
Transmedia is subject to Section 203 of the Delaware General Corporation
Law. In general, Section 203 prevents certain "business combinations" between a
Delaware corporation, whose stock generally is publicly traded or held of record
by more than 2,000 stockholders, and an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) for three years following the date such person became an interested
stockholder unless:
o the corporation has elected in its certificate of incorporation or
bylaws not to be governed by the Delaware anti-takeover law (we have
not made such an election);
o the business combination was approved by the board of the corporation
before the other party to the business combination became an
interested stockholder;
o upon consummation of the transaction that made it an interested
stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the commencement of
the transaction (excluding voting stock owned by directors who are
also officers or held in certain employee stock ownership plans); or
o following the transaction that made it an interested stockholder, the
business combination is approved by the board of the corporation and
ratified at a meeting of stockholders by at least two-thirds of the
voting stock which the interested stockholder did not own.
The three-year prohibition does not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and
a person who had not been an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the corporation's directors. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries and transactions which increase an interested stockholder's
percentage ownership of stock. Section 203 could have the effect of delaying,
deferring or preventing a change in control of Transmedia.
Additionally, provisions of our certificate of incorporation may have an
anti-takeover effect. They may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by you, our stockholders. The following summarizes these
provisions
Supermajority Voting Provisions. Our certificate of incorporation
requires the affirmative vote of at least 80% of the voting power of the
corporation entitled to vote generally in the election of directors to approve
certain business combinations with a holder of 10% or greater of the voting
power of Transmedia or certain affiliates of any such holder, unless the
transaction is approved by a majority of disinterested directors and certain
price and procedural requirements are met.
Authorized But Unissued Shares. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval. We may use these shares for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. This could make it more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.
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Limitation of Liability and Indemnification
The certificate of incorporation provides that Transmedia's directors
shall not be personally liable to Transmedia or its stockholders for monetary
damages for any breach of fiduciary duty as directors of Transmedia, except to
the extent prohibited by the Delaware General Corporation Law (the "DGCL").
Section 145 of the DGCL enables a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising our of
their status as directors and officers. This provision, however, does not
eliminate or limit the liability of a director:
o for any breach of the director's duty of loyalty to the corporation
or its stockholders;
o for any acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
o for payments of dividends or approval of stock repurchases or
redemptions that are prohibited by the DGCL; or
o for any transaction from which the director derived an improper
personal benefit.
Transmedia's certificate of incorporation provides that it may fully
indemnify any person who was or is a party or is threatened to be made a party
to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer of Transmedia or was serving at the request of
Transmedia as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in
an official capacity as a director or officer or in any other capacity while
serving as a director or officer against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by that person
in connection therewith.
Transfer Agent
American Stock Transfer & Trust Company, New York, New York is the
transfer agent and registrar for our common stock, and will also serve as
subscription agent in connection with the rights offering.
Listing
The common stock is listed on the NYSE under the symbol "TMN." We intend
to apply to list the Series A preferred shares on the NYSE under the symbol
"TMNPrA." The rights are non-transferable and will not be listed on any national
securities exchange or quotation system.
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PLAN OF DISTRIBUTION
The Series A preferred shares offered in this rights offering are being
offered by Transmedia directly to holders of its common stock.
Transmedia will pay the fees and expenses of American Stock Transfer &
Trust Company, as subscription agent, and also has agreed to indemnify the
subscription agent from any liability which it may incur in connection with the
rights offering, including liabilities under the Securities Act.
On or about ________, 1999, we will distribute the rights and copies of
this prospectus to individuals who owned shares of common stock on _______,
1999. If you wish to exercise your rights and purchase Series A preferred
shares, you should complete, date and sign the subscription certificate and
return it, together with payment for the shares, prior to the expiration time to
the subscription agent at the address on page __. See "The Rights
Offering--Exercise of Rights." Your subscription rights are nontransferable. See
"The Rights Offering--Nontransferability of Rights." If you have any questions
concerning the procedure for exercising your rights and subscribing for Series A
preferred shares, you should contact the subscription agent.
To guarantee to Transmedia gross proceeds of $10 million from this rights
offering, Samstock has entered into a standby purchase agreement. Under that
agreement, Samstock is obligated to purchase from the Company all Series A
preferred shares offered by this prospectus not subscribed for by other
stockholders in this rights offering, including pursuant to any oversubscription
privilege, to ensure that all Series A preferred shares offered hereby are sold.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summarizes the material United States federal
income tax considerations of the rights offering to holders of common stock.
This summary is not a complete discussion of all federal income tax consequences
of the rights offering and addresses only the income tax consequences applicable
to you if you are one of the following:
o an individual citizen or resident of the United States;
o a corporation created or organized in or under the laws of the United
States or any of its political subdivisions; or
o an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
In particular, this summary may not address the federal income tax consequences
applicable to you if you are a person subject to special treatment under United
States federal income tax law, such as a dealer or trader in securities or
currencies, a financial institution or other stockholder that treats income in
respect of our common stock as financial services income, a life insurance
company, a tax-exempt entity, a stockholder that holds our common stock as a
part of a straddle or conversion transaction or other arrangement involving more
than one position or that hedges against currency risks in respect of our common
stock, a stockholder that has a principal place of business or "tax home"
outside the United States, or a stockholder whose "functional currency" is not
the United States dollar.
The discussion below is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings
and judicial decisions as of the date of this prospectus; any authority may be
repealed, revoked or modified, perhaps with retroactive effect, so as to result
in federal income tax consequences different from those discussed below. In
addition, this summary does not address the tax consequences of the rights
offering under applicable state, local or foreign tax laws. This discussion
assumes that your shares of common stock and the rights and Series A preferred
shares issued to you as part of the rights offering constitute capital assets.
This discussion is included for your general information only. You should
consult your tax advisor to determine the tax consequences to you of the rights
offering in light of your particular circumstances, including any state, local
and foreign tax consequences.
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The Rights
Receipt of the Rights
You will not recognize any gain or other income upon the receipt of the
rights. Your tax basis in each right will depend on whether you exercise the
right or allow the right to expire. If you exercise a right, your tax basis in
the right will be determined by allocating the tax basis of your common stock on
which the right is distributed between the common stock and the right, in
proportion to their relative fair market values on the date of distribution of
the right. However, if the fair market value of your rights is less than 15
percent of the fair market value of your existing shares of common stock, then
the tax basis of each right will be deemed to be zero and the tax basis of the
common stock will be unchanged, unless you elect to allocate tax basis to your
rights by attaching an election statement to your federal income tax return for
the tax year in which the rights are issued. If you allow a right to expire, it
will be treated as having no tax basis.
Expiration or Exercise of the Rights
You will not recognize any loss upon the expiration of a right because no
basis is allocated to a right if it is allowed to expire. You generally will not
recognize a gain or loss on the exercise of a right. The tax basis of a Series A
preferred share that you acquire through the exercise of a right will equal the
sum of your tax basis, if any, in the right exercised and the amount paid for
the share. The holding period of a share of Series A preferred stock acquired
through the rights offering will begin on the date that you exercise your right.
Series A Preferred Shares
Distributions
You will recognize ordinary dividend income upon the receipt of a
distribution on your Series A preferred shares to the extent of Transmedia's
current and accumulated earnings and profits. A distribution in excess of
Transmedia's current and accumulated earnings and profits will constitute a
nontaxable return of capital to the extent of the tax basis in your Series A
preferred shares and thereafter will constitute capital gain. You will not be
treated as having received a distribution with respect to any accrued dividends
until the accrued dividends are actually paid, in which case they would then be
taxable in the same manner described in this paragraph.
Dividends to Corporate Stockholders
The discussion under this sub-heading applies to you only if you
are a corporation holding our common stock.
If you are a corporation, then dividends that we pay to you, to the
extent of Transmedia's current and accumulated earnings and profits generally
will be eligible for the dividends received deduction in Section 243 of the
Code, subject to the exceptions and restrictions contained in Sections 246(c),
246A and 1059 of the Code. Section 246(c) of the Code will disallow the
dividends received deduction in its entirety if (i) you do not hold the Series A
preferred shares for a period of more than 45 days (90 days in the case of
dividends that are attributable to a period or periods aggregating more than 366
days) immediately before or immediately after you become entitled to receive
each dividend on the Series A preferred shares or (ii) you are under an
obligation to make related payments with respect to positions in substantially
similar or related property. Section 246(c)(4) of the Code provides that you may
not count toward this minimum holding period any period in which you have
diminished your risk of loss with respect to the Series A preferred shares
through certain options, contracts to sell, short sales or other similar
transactions. Section 246A of the Code contains the 'debt-financed portfolio
stock' rules, under which the dividends received deduction could be reduced to
the extent that you incur indebtedness directly attributable to your investment
in the Series A preferred shares.
Under Section 1059 of the Code, you will be required to reduce (but not
below zero) your tax basis in the Series A preferred shares by the "nontaxed
portion" of any "extraordinary dividend," if you have not held the Series A
preferred shares for more than two years before the earliest of the dates on
which we have declared, announced, or agreed to, the amount or payment of the
dividend. You will be treated as recognizing gain from the sale of stock to the
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extent, if any, that the nontaxed portion of an extraordinary dividend exceeds
your tax basis in the Series A preferred shares. Generally, the "nontaxed
portion" of an extraordinary dividend is the amount excluded from income by
operation of the dividends received deduction. In the case of the Series A
preferred shares, an "extraordinary dividend" generally will be any dividend
that (i) equals or exceeds five percent of your tax basis in the Series A
preferred shares, treating all dividends having ex-dividend dates within an
85-day period as one dividend, or (ii) exceeds 20 percent of your tax basis in
the Series A preferred shares, treating all dividends having ex-dividend dates
within a 365-day period as one dividend. In determining whether a dividend paid
on the Series A preferred shares is an extraordinary dividend, you may elect to
substitute the fair market value of the stock as of the day before the
ex-dividend date for your tax basis, provided that the fair market value is
established to the satisfaction of the Internal Revenue Service. Quite apart
from the foregoing rules, an extraordinary dividend also will include any amount
treated as a dividend in the case of a redemption of Series A preferred shares
that either is not pro rata as to all Transmedia stockholders or is in partial
liquidation of Transmedia, regardless of the stockholder's holding period and
regardless of the size of the dividend.
Special rules exist under Section 1059 for "qualified preferred
dividends." A qualified preferred dividend is any fixed dividend payable with
respect to any share of stock that (i) provides for fixed preferred dividends
payable not less frequently than annually and (ii) is not in arrears as to
dividends at the time that the holder acquires the stock. With respect to your
Series A preferred shares, the portion of a preferred dividend that is actually
paid may meet the definition of a qualified preferred dividend, but the portion
of the preferred dividend that is unpaid and accrued, or a dividend that is paid
as a result of a distribution on the common stock, would not meet the definition
of a qualified preferred dividend. A qualified preferred dividend does not
include any dividend payable with respect to any share of stock if the actual
rate of return on such stock exceeds 15 percent. Section 1059 does not apply to
qualified preferred dividends if a corporate stockholder holds the underlying
stock for more than five years. If the stockholder disposes of the underlying
stock before that stock has been held for more than five years, then, in
general, the amount subject to extraordinary dividend treatment will be limited
to the excess, if any, of the qualified preferred dividends actually paid on the
stock over the qualified preferred dividends that would have been paid on the
basis of the stated rate of return. Actual or stated rates of return are the
actual or stated dividends expressed as a percentage of the lesser of (i) the
stockholder's tax basis in the stock or (ii) the liquidation preference of the
stock.
Conversion of Series A preferred shares
You generally will not recognize gain or loss on the conversion of Series
A preferred shares for shares of common stock, except that (i) you will be
treated as having received a constructive distribution in an amount equal to the
fair market value of any shares of common stock attributable to dividend
arrearages, which will be taxed according to discussion above under
"--Distributions," and, (ii) with respect to any cash received in lieu of
fractional shares of common stock, you will be treated as if we had redeemed the
fractional shares according to the discussion below under "--Redemption." Shares
of common stock that you receive through a conversion in which you do not
recognize gain or loss will have a tax basis equal to the tax basis in the
Series A preferred shares converted therefor and the holding period of the
common stock will include the holding period of the Series A preferred shares
converted therefor. Shares of common stock that are treated as constructive
distributions will have a tax basis equal to their fair market value on the date
of their conversion and their holding period will commence on the date following
the conversion date.
Redemption
If we redeem your Series A preferred shares for cash or other property,
this redemption will be treated under Section 302 of the Code as a sale or other
disposition of Series A preferred shares if it (i) results in a "complete
termination" of your interest in Transmedia, (ii) is "substantially
disproportionate" with respect to you or (iii) is "not essentially equivalent to
a dividend" with respect to you. For the purposes of these tests, the
constructive ownership rules of Section 318 of the Code generally apply, which,
among other things, treat holders of Series A preferred shares as owning the
underlying common stock. A distribution to you will be "not essentially
equivalent to a dividend" if it results in a "meaningful reduction" in your
proportionate stock interest in Transmedia. The Internal Revenue Service has
issued a published ruling indicating that a redemption that reduces the
proportionate interest of a stockholder whose relative stock interest is minimal
and who exercises no control over the corporation's affairs should be treated as
"not essentially equivalent to a dividend."
35
<PAGE>
If none of the three tests of Section 302(b) of the Code is met, then the
sum of the amount of cash and the fair market value of any property that you
receive will be treated as a distribution according to the discussion above in
"--Distributions." Any tax basis in the Series A preferred shares redeemed would
be transferred to your remaining stock-holdings in Transmedia.
Sale or Other Disposition
You generally will recognize gain or loss upon a sale or other taxable
disposition of Series A preferred shares (other than upon a redemption treated
as a distribution) in an amount equal to the difference between (i) the sum of
the amount of cash and the fair market value of any property received upon the
sale or other disposition, except to the extent the cash and property are
attributable to declared but unpaid dividends, and (ii) your tax basis in the
Series A preferred shares. Any gain or loss recognized will be capital gain or
loss and will be long-term capital gain or loss if you have held our stock for
more than one year.
Adjustments to the Conversion Price
We believe that the Series A preferred shares will be deemed
"participating" preferred stock for the purposes of Section 305 of the Code.
Consequently, you will not be required under Section 305(b)(4) of the Code to
include in your income any adjustments that are made to the conversion price of
your Series A preferred shares to account for accrued dividends.
Backup Withholding Tax
You may be subject to backup withholding tax at a rate of 31% of the
dividends and other "reportable payments" (including, under certain
circumstances, sales proceeds) paid with respect to the Series A preferred
shares if, in general, you fail to comply with certain certification procedures
and are not an exempt recipient under applicable provisions of the Code.
EXPERTS
The consolidated financial statements of Transmedia as of September 30,
1998 and 1997, and for each of the years in the three-year period ended
September 30, 1998, have been incorporated herein by reference to the Annual
Report on Form 10-K/A for the year ended September 30, 1998 in reliance on the
report of KPMG LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of Dining A La Card as of December 31, 1998 and
for each of the three years in the period then ended have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
LEGAL MATTERS
Legal matters in connection with the offering hereby will be passed upon
for us by Morgan, Lewis & Bockius LLP, New York, New York.
36
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Summary Pro Forma Financial Information.........................................................................F-2
Pro Forma Consolidated Balance Sheet at September 30, 1998......................................................F-3
Pro Forma Consolidated Statement of Operations for the Year Ended
September 30, 1998.........................................................................................F-4
Pro Forma Consolidated Balance Sheet at June 30, 1999...........................................................F-5
Pro Forma Consolidated Statement of Operations for the Nine
Months Ended June 30, 1999.................................................................................F-5
Notes to Unaudited Pro Forma Consolidated Financial Information.................................................F-6
DINING A LA CARD
Report of Independent Public Accountants........................................................................F-7
Balance Sheets at December 31, 1998, 1997 and 1996..............................................................F-8
Statements of Operations for each of the three years in the period ended
December 31, 1998..........................................................................................F-9
Statements of Changes in Parent's Equity in Division for each of the
three years in the period ended December 31, 1998.........................................................F-10
Statements of Cash Flows for each of the three years in the period
ended December 31, 1998...................................................................................F-11
Notes to the Financial Statements..............................................................................F-12
</TABLE>
F-1
<PAGE>
SUMMARY PRO FORMA INFORMATION
On June 30, 1999, Transmedia acquired from SignatureCard, Inc.
("SignatureCard"), most of the assets related to a membership discount dining
program SignatureCard operated under the Dining A La Card trade name and service
mark. The assets acquired included various intellectual property rights and
computer software, membership and merchant data, and their rights-to-receive
restaurant portfolio. As consideration for the assets, we (1) paid SignatureCard
$35,000,000 in cash at closing, (2) issued to SignatureCard 400,000 shares of
our common stock and (3) issued to SignatureCard a three-year option to purchase
an additional 400,000 shares of our common stock at a price of $4.00 per share.
Commencing December 31, 1999, SignatureCard may, at any time prior to June 30,
2002, require us to repurchase all or part of the 400,000 shares we issued at
the closing at a price of $8.00 per share. In connection with the acquisition of
Dining A La Card, we entered into a services collaboration agreement with
SignatureCard. Under this agreement, SignatureCard will continue to provide
dining members from its airline frequent flyer partner programs and other
marketing programs, thus eliminating our cost of member acquisition. It will
also share, for 12.5 years, certain profits we derive from
SignatureCard-generated members as well as a portion of the membership fee
revenues generated from fee paying members acquired in this transaction or
subsequently through SignatureCard's efforts. In connection with this
acquisition, we paid a fee for transaction advisory services to Equity Group
Investments LLC, an affiliate of our largest stockholder ("EGI"), of $386,000.
To finance the acquisition, we obtained a $35 million senior secured revolving
bridge loan facility from The Chase Manhattan Bank (from which $29 million was
drawn down at closing) and a $10 million term loan from GAMI Investments, Inc.,
an affiliate of EGI. We intend to replace the bridge loan with a permanent
facility that securitizes the Dining A La Card rights-to-receive portfolio,
arranged through Chase. In connection with the bridge loan, we paid a $500,000
fee to Chase upon the closing. The GAMI loan in the amount of $10 million is
unsecured and subordinated to the Chase facility. The proceeds from the rights
offering will be used to repay all outstanding amounts under the GAMI loan. The
terms of this loan required us to pay to GAMI at closing a cash fee of $500,000,
which is reimbursable to us upon the completion of the rights offering.
The unaudited pro forma financial information and notes below give effect
to the acquisition of Dining A La Card and the transactions described above
utilizing the Dining A La Card audited historical financial statements as of and
for the year ended December 31, 1998 and the interim financial statements as of
and for the six months ended June 30, 1999. The pro forma consolidated balance
sheets as of June 30, 1999 and September 30, 1998 reflect the financial position
of Transmedia as if the acquisition and this offering had occurred on those
dates. The pro forma consolidated statements of operations for the year ended
September 30, 1998 and the nine months ended June 30, 1999 reflect the results
of operations of Transmedia as if this acquisition had occurred at the beginning
of the periods presented.
F-2
<PAGE>
Transmedia Network Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet at September 30, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
Transmedia Network Dining A La Card
Inc. as of as of Pro Formas Pro Forma
September 30, 1998 December 31, 1998 Adjustments Consolidated
------------------ ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents 4,632 73 2,974(2) 7,679
Restricted cash 3,518 3,518
Accounts receivable, net 2,061 6,221 (6,221)(1) 2,061
Rights to receive, net
Unrestricted 7,909 35,682 5,101(3) 48,692
Securitized and owned by Trust 34,438 34,438
Prepaid expenses and other current assets 5,067 8,881 (9,151)(4) 4,797
--------- ---------- ---------- ----------
Total current assets 57,625 50,857 (7,297) 101,185
Securities available for sale 1,267 1,267
Equipment held for sale or lease, net 988 988
Property & equipment 6,832 6,832
Other assets 1,142 2,627 (2,627) 1,142
Restricted deposits and investments 1,980 2,396 (2,396) 1,980
Excess of cost over net assets acquired 4,591 4,591
--------- ---------- ---------- ----------
Total assets 74,425 55,880 (12,320) 117,985
--------- ---------- ---------- ----------
Current liabilities:
A/P - Rights to receive 4,181 4,181
A/P - Other 3,348 3,811 (3,811)(1) 3,348
Accrued expenses 1,507 4,165 (3,502(5) 2,170
Deferred membership fee income 2,594 4,582 (4,582(1) 2,594
Chase bridge loan 29,000(6) 29,000
10,000)
GAMI Loan (10,000(7) --
--------- ---------- ---------- ----------
Total current liabilities 11,630 12,558 17,105 41,293
Secured non-recourse notes payable 33,000 33,000
Other long-term liabilities 2,061 697(8) 2,758
--------- ---------- ---------- ----------
Total liabilities 46,691 12,558 17,802 77,051
--------- ---------- ---------- ----------
Guaranteed Value of Put 1,471(9) 1,471
Preferred stock 10,000(10) 10,000
Common stock 258 8(11) 266
PIC 21,496 1,721(11) 23,217
Unrealized gain on securities 612 612
Retained earnings 5,368 43,322 (43,322)(1) 5,368
--------- ---------- ---------- ----------
Total stockholders' equity 27,734 43,322 (31,593) 39,463
--------- ---------- ---------- ----------
Total liabilities & stockholders' equity 74,425 55,880 (12,320) 117,985
--------- ---------- ---------- ----------
--------- ---------- ---------- ----------
</TABLE>
NOTES:
(1) Remove the Dining A La Card December 31, 1998 balance sheet.
(2) Excess cash of $2,547 earmarked for acquisition of new rights-to-receive
that was drawn down from the Chase bridge loan, plus the refund of the $500
EGI loan fee.
(3) Purchase accounting valuation adjustment of rights to receive portfolio
acquired of $52.1 million less an allowance of $11.4 million.
(4) Reclassify previously capitalized acquisition cost plus capitalization of
deferred financing cost relating to the Chase bridge loan.
(5) Additional acquisition costs accrued at closing.
(6) Chase bridge loan liability on date of acquisition.
(7) Reflects the draw on the GAMI loan and its repayment using proceeds from
rights offering.
(8) Record stock option outstanding relating to the 400,000 options issued to
Signature.
(9) Difference between value of the 400,000 shares of Transmedia common stock
at June 30, 1999 and the $8 put price of the shares issued to Signature.
(10) Preferred stock issued as a result of rights offering.
(11) Value of the 400,000 shares of Transmedia common stock paid to Signature
at June 30, 1999.
F-3
<PAGE>
Transmedia Network Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations
for the Year Ended September 30, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
Transmedia Dining Pro Forma Pro Forma
Network Inc. A La Card (A) Adjustment Consolidated
----------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
Operating revenue:
Sale of rights-to-receive
Owned by Transmedia 5,566 -- 5,566
Owned by Trust 89,983 120,512 210,495
----------- ---------- ---------- ----------
Gross sales 95,549 120,512 -- 216,061
Cost of sales 54,446 98,964(B) (8,000)(I) 145,410
Cardmember discounts 21,444 24,262 45,706
----------- ---------- ---------- ----------
Net revenues from rights-to-receive 19,659 (2,714) 8,000 24,945
Membership and renewal fee income, net 7,321 10,612 (7,110)(C) 10,823
Franchise fee income 1,249 -- 1,249
Commission income 369 17 386
Processing income 1,543 -- 1,543
----------- ---------- ---------- ----------
Total operating revenues 30,141 7,915 890 38,946
----------- ---------- ---------- ----------
Operating expenses:
Selling, general & administrative expenses 26,796 22,281 (10,873)(J) 38,204
Cardmember acquisition and promotion 5,097 32,927 (21,069)(D) 16,955
Amended compensation agreements 3,544 -- 3,544
Assets impairment loss 2,169 -- 2,169
----------- ---------- ---------- ----------
Total operating expenses 37,606 55,208 (31,942) 60,872
Operating income (loss) (7,465) (47,293) 32,832 (21,926)
Other income (expenses):
Initial license and franchise fees, net (710) -- (710)
Realized gains on sale of securities
available for sale 200 -- 200
Interest and other income 560 -- 560
Interest and other expense (3,021) -- (3,617)(E) (6,638)
----------- ---------- ---------- ----------
Income (loss) before taxes (10,436) (47,293) 29,215 (28,514)
Income tax provision (benefit) (2,600) (7,806) --(F) (10,835)
Income tax valuation allowance 10,835
Loss before equity loss and accounting
change (7,836) (39,487) 29,215 (28,514)
Equity in loss of Cardplus Japan (220) 220(G) --
Cumulative effect of accounting change (2,105) 2,105(H) --
----------- ---------- ---------- ----------
Net income (loss) (7,836) (41,812) 31,540 (28,514)
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
</TABLE>
NOTE:
(A) Dining A La Card Income Statement for the year ending December 31, 1998.
(B) Dining A La Card restaurant losses of $25,962 have been reclassified to
cost of sales to conform with Transmedia's presentation.
(C) Removed 67% of Dining A La Card membership dues which would be shared with
Signature per agreement.
(D) Removed direct soliciting costs and other marketing amortization of
$21,069, since per agreement Signature will provide member acquisition.
(E) Amortization of deferred financing cost of $567 over six month period plus
interest expense of $3,050.
(F) Adjust income tax benefit using Transmedia statutory rate for 1998 of 38%.
(G) Eliminate equity loss in Cardplus Japan since Transmedia did not purchase.
(H) Remove cumulative effect of accounting change relating to deferred
acquisition cost, since per agreement Signature will provide member
acquisition.
(I) To remove one-time write down of Dining A La Card's rights to receive
portfolio of approximately $8,000 to bring to fair value.
(J) To remove interest expense included in G&A and a portion of G&A expenses
allocated from Signature which will be eliminated as part of the
acquisition.
F-4
<PAGE>
Transmedia Network Inc. and Subsidiaries
Pro Forma Consolidated Balance Sheet at June 30, 1999
(Amounts in thousands) (1)
Transmedia Network Inc. and Subsidiaries
Pro Forma Consolidated Statement of Operations for the Nine Months
Ended June 30, 1999
(Amounts in thousands) (1)
- ----------
(1) To be filed by amendment as soon as is practicable.
F-5
<PAGE>
[Notes to Unaudited Pro Forma Consolidated Financial Information](1)
- ----------
(1) To be filed by amendment as soon as is practicable.
F-6
<PAGE>
[Letterhead of Arthur Andersen LLP]
Report of Independent Public Accountants
To the Management of
Dining A La Card:
We have audited the accompanying balance sheets of Dining A La Card (a division
of Signature Financial/ Marketing, Inc., which is wholly owned by Montgomery
Ward & Co. Incorporated) as of December 31, 1998, 1997 and 1996 and the related
statements of operations, changes in parent's equity in division and cash flows
for the years then ended. These financial statements are the responsibility of
the Division's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dining A La Card as of December
31, 1998, 1997 and 1996 and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
As explained in Note 6 to the financial statements, effective January 1, 1998,
the Division changed its method of accounting for printing and membership
materials.
Chicago, Illinois
April 19, 1999
F-7
<PAGE>
DINING A LA CARD
BALANCE SHEETS
As of December 31, 1998, 1997, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
ASSETS 1998 1997 1996
- ----------------------------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73 $ - $ -
RIGHTS TO RECEIVE (Net of allowance of
$0, $5,940, $5,558 in 1998, 1997, and 1996, respectively (Note 8) . 35,682 36,351 36,992
DEFERRED ACQUISITION COSTS (Notes 1 and 2) . . . . . . . . . . . . . . 8,881 24,077 23,688
ACCOUNTS RECEIVABLE (Net of allowance of
$183, $0, $0 in 1998, 1997, and 1996, respectively) . . . . . . . . 6,221 7,432 5,969
INVESTMENT IN CARDPLUS JAPAN (Notes 1 and 5) . . . . . . . . . . . . 2,396 174 52
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,627 3,558 3,693
----------- ----------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,880 $ 71,592 $ 70,394
----------- ----------- -------------
LIABILITIES AND PARENT'S EQUITY IN DIVISION
- ----------------------------------------------------------------------
CASH DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 78 $ 48
DEFERRED MEMBERSHIP DUES . . . . . . . . . . . . . . . . . . . . . . . 4,582 5,772 3,349
COMMISSIONS PAYABLE . . . . . . . . . . . . . . . . . . . . . . . . . 3,811 202 73
ACCRUED EXPENSES AND
OTHER CURRENT LIABILITIES (Note 1). . . . . . . . . . . . . . . . 4,165 3,802 2,150
----------- ----------- -------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . $ 12,558 $ 9,854 $ 5,620
PARENT'S EQUITY IN DIVISION . . . . . . . . . . . . . . . . . . . . $ 43,322 $ 61,738 $ 64,774
----------- ----------- -------------
TOTAL LIABILITIES &
PARENT'S EQUITY IN DIVISION . . . . . . . . . . . . . . . . $ 55,880 $ 71,592 $ 70,394
----------- ----------- -------------
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-8
<PAGE>
DINING A LA CARD
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1998 1997 1996
------------ -------------- -------------
<S> <C> <C> <C>
REVENUES:
Restaurant Sales........................................... $ 120,512 $ 96,411 $ 46,405
Membership Dues............................................ 10,612 9,865 4,473
Other Income............................................... 17 363 250
------------- ------------- -----------
TOTAL REVENUE......................................... $ 131,141 $ 106,639 $ 51,128
EXPENSES (Note 4):
Cost of Sales.............................................. $ 73,002 $ 59,721 $ 29,303
Member Rebates............................................. 24,262 21,953 10,713
Member Acquisition......................................... 32,927 22,374 7,270
General and Administrative................................. 22,281 20,706 16,926
Bad Debt................................................... 25,962 4,188 7,144
------------- ------------- -----------
TOTAL EXPENSES........................................ $ 178,434 $ 128,942 $ 71,356
------------- ------------- -----------
LOSS BEFORE INCOME TAXES, EQUITY IN LOSS OF
CARDPLUS JAPAN, AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE..................................... (47,293) (22,303) (20,228)
INCOME TAXES (Note 6).......................................... 7,806 7,080 4,144
------------- ------------- -----------
LOSS BEFORE EQUITY IN LOSS OF CARDPLUS JAPAN
AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE................................................ (39,487) (15,223) (16,084)
EQUITY IN LOSS OF CARDPLUS JAPAN,
NET OF TAX OF $0 (Note 5).................................. (220) - -
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE, NET OF TAX OF $0 (Note 7).......................... (2,105) - -
------------- ------------- -----------
NET LOSS....................................................... $ (41,812) $ (15,223) $ (16,084)
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
The accompanying notes to financial statements are an
integral part of these statements.
F-9
<PAGE>
DINING A LA CARD
STATEMENTS OF CHANGES IN PARENT'S EQUITY IN DIVISION
For the Years Ended December 31, 1998, 1997, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Parent's Equity Accumulated
In Division Deficit Total
--------------------- ------------------- ------------------
<S> <S> <C> <C>
BALANCE, December 31, 1995 . . . . . . . . . . . . . . . $ 46,253 $ (11,839) $ 34,414
Net Loss . . . . . . . . . . . . . . . . . . . . . . (16,084) (16,084)
Parent's Equity in Division . . . . . . . . . . . . 46,444 46,444
------------------- ------------------ -----------------
BALANCE, December 31, 1996 . . . . . . . . . . . . . . . $ 92,697 $ (27,923) $ 64,774
Net Loss . . . . . . . . . . . . . . . . . . . . . . (15,223) (15,223)
Parent's Equity in Division . . . . . . . . . . . . 12,187 12,187
------------------- ------------------ -----------------
BALANCE, December 31, 1997 . . . . . . . . . . . . . . . $ 104,884 $ (43,146) $ 61,738
Net Loss . . . . . . . . . . . . . . . . . . . . . . (41,812) (41,812)
Parent's Equity in Division . . . . . . . . . . . . 23,396 23,396
------------------- ------------------ -----------------
BALANCE, December 31, 1998 . . . . . . . . . . . . . . . $ 128,280 $ (84,958) $ 43,322
------------------- ------------------ -----------------
------------------- ------------------ -----------------
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-10
<PAGE>
DINING A LA CARD
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997, 1996
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1998 1997 1996
-------------- --------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss................................................................ $ (41,812) $ (15,223) $ (16,084)
Cumulative effect of accounting change, net of tax...................... 2,105 - -
Equity in loss of CardPlus Japan, net of tax............................ 220 - -
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Amortization of Deferred Membership Acquisition Costs 20,967 16,584 3,846
(Increase) decrease in assets:
Rights to Receive............................................ 669 641 (6,475)
Deferred Membership Acquisition Costs........................ (7,876) (16,973) (25,811)
Accounts Receivable.......................................... 1,211 (1,463) (4,676)
Other Assets................................................. 931 135 (1,580)
Increase (decrease) in liabilities:
Deferred Membership Dues..................................... (1,190) 2,423 2,772
Commission Payable........................................... 3,609 129 44
Accrued Expenses and Other Current Liabilities............... 363 1,652 1,205
------------- ------------ ------------
Net cash used for operating activities.................... (20,803) (12,095) (46,759)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in CardPlus Japan............................................ (2,442) (122) (52)
CASH FLOWS FROM FINANCING ACTIVITIES:
Parent's Equity in Division............................................. 23,396 12,187 46,444
------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH............................................. 151 (30) (367)
CASH AT BEGINNING OF YEAR................................................... (78) (48) 319
------------- ------------ ------------
CASH AT END OF YEAR......................................................... $ 73 $ (78) $ (48)
------------- ------------ ------------
------------- ------------ ------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash refunded during the year for income taxes.......................... $ 7,806 $ 7,080 $ 4,144
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
F-11
<PAGE>
DINING A LA CARD
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
(In Thousands of Dollars)
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Dining A La Card (the "Business") is a business segment of
SignatureCard, Inc. of Delaware ("SCD"), which is a wholly owned
subsidiary of Signature Financial/Marketing, Inc. ("SFM"). SFM is
wholly owned by Montgomery Ward & Co., Incorporated ("Montgomery
Ward"), which is a wholly owned subsidiary of Montgomery Ward Holding
Corp. ("MW Holding"). See Note 2 for information regarding the sale of
the business.
The Business markets and operates a dining plan, which offers savings
on the purchase price of meals to its members who dine at plan
restaurants. These savings are passed along to the member either
through direct cash rebates or airline mile rewards. At December 31,
1998, the Business had a membership base of approximately 1.9 million
members and a restaurant network of approximately 3,300 restaurants.
The Business is primarily marketed to its airline reward programs.
Approximately 51% of restaurant revenue in 1998 was attributable to
members in these programs. The Business also utilizes broad market
advertising to acquire new members. These marketing efforts include
direct-response television, radio and newspaper advertisements.
Approximately 24% of restaurant revenue in 1998 was attributable to
broad market memberships.
The financial statements are being prepared to comply with SEC filing
requirements due to the sale of certain assets related to the business.
See Note 2.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates.
Accounts Receivable
Accounts Receivable primarily represent valid member dining events that
have not yet been submitted for collection from the respective bank
accounts of the plan restaurants. These amounts are recorded as
restaurant sales revenue for the respective fiscal year in which the
dining event occurred. Amounts recorded as accounts receivable will not
be sold to Transmedia Network, Inc. (see Note 2).
Rights to Receive
Rights to receive represent payments for future meal credits to
restaurants that participate in the dining plan. Rights to receive are
stated at cost less allowances for future credits that may not be
realized of $0, $5,940, and $5,558 in 1998, 1997, and 1996,
respectively. As of December 31, 1998, rights to receive has been
recorded at an amount based on SFM's agreement to sell certain assets
of the business. See Note 2.
F-12
<PAGE>
Deferred Acquisition Costs
Costs (primarily direct-response marketing expenses) of acquiring new
memberships are deferred when considered recoverable. Costs deferred
are amortized over a period of four years in proportion to the
estimated members' dues (initial and renewal) to be collected. The
time period over which deferred acquisition costs are being amortized
and the recoverability of such costs could differ from estimates due
to changing market conditions. Amortization periods and recoverability
of deferred membership acquisition costs are continually reviewed for
potential impairment and, as adjustments become necessary, they are
reflected in current operations.
Effective January 1, 1995, the Business adopted Statement of Position
No. 93-7, "Reporting on Advertising Costs." The adoption of this
statement allowed for the capitalization of direct response advertising
costs that are incurred to acquire new memberships. The amount of
direct response advertising costs capitalized was $7,866, $17,434, and
$25,426 in 1998, 1997, and 1996, respectively.
Effective January 1, 1996, the Business adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
In 1998, as a result of SFM's agreement to sell certain assets of the
Business (see Note 2), deferred acquisition costs were recorded at an
amount equal to the present value of the estimated amount of renewal
membership dues for members existing at December 31, 1998.
Investment in CardPlus Japan
SFM has made a cash investment in CardPlus Japan Co., Ltd. ("CardPlus
Japan"). (See Note 5). As of October 15, 1998, the amount invested
provided SFM with a greater than 20% interest in CardPlus Japan
operations. As such, beginning October 15, 1998, SFM accounts for its
investment under the equity method of accounting. Total cash invested
was $2,616, $174, and $52 as of December 31, 1998, 1997, and 1996,
respectively.
Membership Dues
Membership Dues are deferred and earned on a pro rata basis over the
terms of the memberships, which is one year. Amounts recorded as
deferred membership dues will not be sold to Transmedia Network, Inc.
(see Note 2).
Commissions Payable
Commissions Payable represent amounts owed to external marketing firms
that provide direct mail marketing services for the Business, as well
as commissions due to the internal sales force of the Business. Amounts
recorded as commissions payable will not be sold to Transmedia Network,
Inc. (see Note 2).
Income Taxes
As a member of a group that files a consolidated tax return and in
accordance with the Tax Sharing Agreement between MW Holding and its
subsidiaries, the Business computes its income tax provision on a
separate return basis. For federal income tax purposes, the Business'
tax benefit is included with the taxable income of SFM, which is
included in the consolidated federal income tax return of MW Holding.
Current federal tax balances are settled with SFM at least annually.
The Business uses the liability method of accounting for income taxes.
Under this method, deferred income taxes are provided for the tax
consequences of temporary differences by applying enacted statutory
rates applicable to future years to differences between the tax and
financial statement bases of assets and liabilities. The effect on
deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-13
<PAGE>
Accrued Expenses and Other Liabilities
Included in Accrued Expenses and Other Liabilities are amounts for
member rebate checks that are outstanding for over one year. These
outstanding checks are held by the Business as escheat funds for a
period of three to seven years as determined by the applicable state
regulation. The amount held as escheat funds was $806, $456, and $240
in 1998, 1997, and 1996, respectively. Amounts recorded as accrued
expenses and other current liabilities will not be sold to Transmedia
Network, Inc. (see Note 2).
Statement of Cash Flows
For purposes of the statements of cash flows, cash consists of amounts
on deposit with banks.
2. SALE OF BUSINESS
On October 30, 1998, a Letter of Understanding was executed by
Transmedia Network, Inc. ("Transmedia") to purchase certain assets of
the Business. On March 17, 1999 the Asset Purchase Agreement was
executed between Transmedia Network Inc. and SignatureCard, Inc. SCD
anticipates that the sale will be finalized by May 31, 1999. In
exchange for cash and Transmedia stock and stock options, Transmedia
will purchase virtually all performing Rights to Receive, the DALC
proprietary information software and all registered and licensed
trademarks and trade names.
As part of the Asset Purchase Agreement, SFM has entered in to a
Transition Services Agreement whereby it will provide, for a fee,
interim services and assistance (primarily customer service) during the
transition period through March 31, 2000, if needed.
Pursuant to a Service Collaboration Agreement that was executed in
conjunction with the Asset Purchase Agreement, SFM will be entitled to
67% of the renewal fee income for existing fee members as well as all
membership fee income from any new fee paying members obtained by SFM
for a period of five years from the date of closing. As a result of
this arrangement, an asset of $8,881 has been established for the
estimated present value of future renewal membership fees.
Additionally, Transmedia and SFM will share profits (defined as
revenues from qualified sales less direct costs and interest) derived
from the Business' members existing at the date of sale and any new
members obtained primarily from airline relationships maintained by SFM
for a period of twelve and one-half years on the basis of 60% to
Transmedia and 40% to SFM. SFM will not be required to fund losses, if
any, however, distributions of profit will not be made to SFM until
Transmedia fully recoups the losses incurred.
3. PARENT COMPANY
The Business's ultimate parent, Montgomery Ward, filed for protection
under Chapter 11 of the Bankruptcy Code on July 7, 1997. Subsequent to
its filing, Montgomery Ward secured a $1,000,000 debtor-in-financing
("DIP") facility to meet its liquidity needs. At year-end 1998,
Montgomery Ward had outstanding borrowings of $303,600 under the DIP
facility. The DIP facility imposes various restrictions on Montgomery
Ward, including limitations on capital expenditures. The DIP facility
also requires the satisfaction of certain financial tests, including
achievement of specified earning levels of Montgomery Ward as defined
in the DIP agreement. As of January 2, 1999, Montgomery Ward had met
all such financial tests and the availability under the DIP facility
was $363,200. The financial statements do not include any adjustments
that might result from the outcome of these bankruptcy proceedings.
On February 1, 1999, Montgomery Ward announced it will emerge from
Chapter 11 bankruptcy protection in mid 1999 as a result of a proposed
agreement reached with Montgomery Wards' Creditors' Committee.
F-14
<PAGE>
As part of the proposed agreement, General Electric Capital Corporation
("GE Capital") is to acquire SFM. Montgomery Ward will place an
undisclosed sum in a fund to settle court approved pre-bankruptcy
unsecured claims of creditors other than GE Capital. In exchange for
its claims against Montgomery Ward, GE Capital and Montgomery Ward
management will receive equity in the reorganized retailer. This
proposed agreement will be submitted to a vote of the creditors.
4. TRANSACTIONS WITH AFFILIATES
The Business is charged for expenses incurred on its behalf by
affiliates, generally based upon either actual expense incurred or an
allocation of expense for centralized groups that serve a number of
affiliates. Expenses that are charged directly include payroll and
related items for groups working only with the Business, materials
printed for the Business, and any other purchases made specifically on
behalf of the Business. Expenses that are incurred by SFM are allocated
to the Business using a number of different allocation methods, which
include the following:
o Outbound telemarketing, which is charged out at a standard
rate per hour for all affiliates using a specific type of
telemarketing in a given month.
o Operations (primarily customer service expenses), which is
charged predominantly using a standard cost per minute for all
affiliates. The rates are calculated on a monthly basis. Some
units within operations use a different unit of measure than
time spent on program operations, such as the number of
letters or rebates processed for a given program.
o Member retention expense, which is charged using a standard
rate per retention attempt for all affiliates each month.
o Facility related expenses, which are allocated using the
square feet of office space utilized for program operations.
o Shared service expenses (i.e., systems, sales and pension
costs), which are allocated using program membership when time
spent on program operations cannot be easily measured.
o Payroll expense, which is allocated using time spent on
program operations. This allocation is performed for those
departments working with multiple affiliates.
Each department determines the most equitable method for allocating its
expenses to the various affiliates. Amounts allocated to the Business
were $9,701, $8,743, and $6,437 for 1998, 1997, and 1996, respectively,
and are included in the General and Administrative expenses on the
Statements of Operations.
5. INVESTMENT IN CARDPLUS JAPAN
During 1996, SFM entered into an agreement with CardPlus Japan (a
Japanese Corporation) for the purpose of conducting a dining plan
program in Japan. This agreement provided CardPlus Japan with the
exclusive right to the name "Dining A La Card" and the right to sell
and price memberships in the Asian market. SFM has periodically
invested in CardPlus Japan operations by purchasing ordinary common
voting stock for cash. As of December 31, 1998, SFM owned 4,356 (or
25.7%) of the total amount of CardPlus Japan common stock issued and
outstanding. This investment will not be sold to Transmedia Network,
Inc. (see Note 2).
6. INCOME TAXES
Under the Tax Sharing Agreement ("TSA") between MW Holding and its
subsidiaries, the income tax provision is calculated on a separate
return basis. The intent of the TSA is to assure that each subsidiary
for each taxable year will pay its share of the consolidated federal
tax liability or receive credit for its tax benefits.
The Business has generated losses on a separate entity basis. These
losses have been utilized to offset taxable income of SFM on a
consolidated basis. For 1997 and 1996, the Business has received a
benefit for the amount
F-15
<PAGE>
of these federal losses through the federal tax settlement with MW
Holding. The computed federal income tax benefit for 1997 and 1996 has
been reflected in the Statement of Operations in the following year,
respectively.
During 1998, 1997, and 1996, the Business incurred no income tax
expense as a result of its having net operating losses and net
operating loss carryforwards. The Business recorded a benefit equal to
payments received from SFM on account of the Business's net operating
losses utilized in the consolidated federal income tax return. The
benefit for income taxes was $7,806, $7,080, and $4,144 for 1998, 1997,
and 1996, respectively.
The Business's effective income tax rate varies from the statutory tax
rate as a result of the following factors:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 40% 40% 40%
Change in valuation allowance (24) (8) (20)
Effective Tax Rate 16% 32% 20%
-----------------------------------------------
</TABLE>
Deferred income tax assets and liabilities reflect the net tax effects
of temporary differences between the carrying amounts of assets and
liabilities for financial statement purposes and the amounts used for
income tax purposes. Significant components of the Business's deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets
Net operating loss carryforwards $26,045 $17,779 $15,935
Allowance for bad debts 73 2,376 2,223
--------------------------------------------------
Total gross deferred tax assets 26,118 20,155 18,158
Valuation allowance (22,566) (10,524) (8,683)
--------------------------------------------------
Net deferred tax asset 3,552 9,631 9,475
Deferred tax liabilities-
Deferred acquisition costs (3,552) (9,631) (9,475)
--------------------------------------------------
Net deferred tax $ 0 $ 0 $ 0
--------------------------------------------------
</TABLE>
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Future tax benefits are recognized to the extent
that realization of such benefits is more likely than not. A valuation
allowance is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized.
At December 31, 1998, the Business has $26,045 of net operating loss
carryforwards available to reduce future taxable income. These loss
carryforwards expire in the years 2010 through 2018. A valuation
allowance has
F-16
<PAGE>
been provided for a portion of the deferred tax assets related to those
loss carryforwards that may expire unutilized.
7. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective January 1, 1998, the Business changed its method of
accounting for printing and mailing membership materials. Historically,
the Business has accounted for the costs of printing and mailing of
membership materials by amortizing these costs for a period of four
years in proportion to the estimated members' dues (initial and
renewal) to be collected. Effective January 1, 1998, the Business
started expensing these costs upon the mailing of membership materials.
The Business changed its method of accounting in order to conform to
changing industry practice. The cumulative effect of this change in
accounting principle as of January 1, 1998 of $2,105 was recorded as a
reduction of membership acquisition costs and income.
8. CONTINGENT LIABILITIES
The Business is a defendant in legal actions arising from normal
business activities. Management, after consultation with legal counsel,
is of the opinion that any liability, to the extent not provided for,
will not have a material impact on the financial position and operating
results of the Business.
F-17
<PAGE>
===============================================================================
, 1999
[Transmedia Logo]
________ Subscription Rights
________ Shares of Series A Preferred Stock
________ Shares of Common Stock
-------------------
P R O S P E C T U S
-------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Securities and Exchange Commission fee............. $ 2,000
New York Stock Exchange listing fee............... *
Printing and engraving fees........................ *
Accountant's fees and expenses..................... *
Legal fees and expenses............................ *
Miscellaneous...................................... *
Total.............................................. *
--------------
$ *
==============
- ---------
* To be completed by amendment
Item 15. Indemnification of Officers and Directors.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware (the "DGCL") empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
complete action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amount paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no cause to believe his conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the power to indemnify him against such liabilities
under Section 145.
II-1
<PAGE>
Article Eight of the Transmedia's Certificate of Incorporation, as
amended, which is an exhibit to this prospectus and incorporated herein by
reference, provides in effect for the indemnification by Transmedia of each
director and officer of Transmedia to the fullest extent permitted by the DGCL.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
*1.1 Form of Standby Purchase Agreement between Transmedia Network Inc
and Samstock, L.L.C.
3.1 Certificate of Incorporation of Transmedia Network Inc., as amended. (b)
3.2 Certificate of Amendment to the Certificate of Incorporation of
Transmedia Network Inc. (e)
3.3 Certificate of Amendment to the Certificate of Incorporation of
Transmedia Network Inc., as filed with the Delaware Secretary of
State on March 22,1994. (a)
3.4 Form of Amendment to the Certificate of Incorporation of Transmedia
Network Inc.
3.5 Form of Certificate of Designations, Preferences and Rights of
Series A Senior Convertible Redeemable Preferred Stock.
3.6 By-Laws of Transmedia Network Inc. (c)
*4.1 Form of Rights Agreement between Transmedia Network Inc. and
American Stock Transfer & Trust Company, as subscription agent.
*4.2 Second Amended and Restated Investment Agreement dated as of
June 30, 1999 among Transmedia Network Inc., Samstock, L.L.C.,
EGI-Transmedia Investors, L.L.C., Halmostock Limited Partnership
and, with respect to Section 5 of the Agreement only, Robert M.
Steiner, as trustee under declaration of trust dated March 9, 1983,
as amended, establishing the Robert M. Steiner Revocable Trust.
*5.1 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Asset Purchase Agreement, dated as of March 17, 1999, between
Transmedia Network Inc. and SignatureCard, Inc., as amended by (j)
Amendment No. 1 thereto dated as of April 15, 1999 and Amendment
No. 2 thereto dated as of May 31, 1999.
10.2 Option Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and SignatureCard, Inc.
10.3 Services Collaboration Agreement, dated as of June 30, 1999, between (j)
Transmedia Network Inc. and SignatureCard, Inc.
</TABLE>
- ---------
* To be filed by amendment.
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
10.4 Credit Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
10.5 Security Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
10.6 Pledge Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
10.7 Credit Agreement, dated as of June 30, 1999, between GAMI Investments, (j)
Inc. Transmedia Network Inc., Transmedia Restaurant Company Inc.,
Transmedia Service Company Inc. and TMNI International Incorporated.
10.8 1987 Stock Option and Rights Plan, as amended. (a)
10.9 Form of Stock Option Agreement (as modified) between Transmedia
Network Inc. and certain Directors. (g)
10.10 Amended and Restated Employment Agreement dated as of November 15,
1996 between Transmedia Network Inc. and Melvin Chasen. (f)
10.11 Amended and Restated Consulting Agreement dated as of November 15,
1996 between Transmedia Network Inc. and Melvin Chasen. (f)
10.12 Second Restated and Amended Employment Agreement dated as of
October 1, 1998 between Transmedia Network Inc. and James Callaghan.
10.13 Master License Agreement dated December 14, 1992 between Transmedia
Network Inc. and Conestoga Partners, Inc. (d)
10.14 First Amendment to Master License Agreement dated April 12, 1993,
between Transmedia Network Inc. and Conestoga Partners, Inc. (e)
10.15 Second Amendment to Master License Agreement -- Assignment and
Assumption Agreement dated August 11, 1993 among Transmedia Network
Inc., TMNI International Incorporated and Transmedia Europe, Inc. (e)
10.16 Master License Agreement Amendment No. 3 dated November 22, 1993
between TMNI International Incorporated and Transmedia Europe, Inc. (e)
10.17 Master License Agreement dated March 21, 1994 between TMNI
International Incorporated and Conestoga Partners II, Inc. licensing
rights in the Asia Pacific region. (a)
10.18 Agreement, dated as of December 6, 1996, among Transmedia Network
Inc., TMNI International Incorporated, Transmedia Europe Inc. and
Transmedia Asia Pacific Inc. (f)
10.19 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. (h)
</TABLE>
- ---------
* To be filed by amendment.
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
10.20 Form of Warrant to purchase Common Stock. (i)
10.21 Amended and Restated Agreement Among Stockholders Agreement, dated as
of March 3, 1998, among Transmedia Network Inc., Samstock, L.L.C., EGI-
Transmedia Investors, L.L.C., Melvin Chasen, Iris Chasen and Halmstock
Limited Partnership. (i)
10.22 Stockholders Agreement, dated as of March 3, 1998, among Transmedia
Network Inc., EGI-Transmedia Investors, L.L.C., Samstock, L.L.C. and
Melvin Chasen and Halmstock Limited Partnership. (i)
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. (g)
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. (g)
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. (g)
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. (g)
10.27 Letter of Agreement dated January 29, 1997 between Transmedia Network
Inc. and Stephen E. Lerch. (g)
10.28 Transmedia Network Inc. 1996 Long-Term Incentive Plan (including
Amendments through August 5, 1998). (b)
*10.29 Employment Agreement dated as of January 5, 1999 between Transmedia
Network Inc. and Christine Donohoo.
*10.30 Employment Agreement dated as of October 14, 1998 between Transmedia
Network Inc. and Gene M. Henderson.
21.1 Subsidiaries of Transmedia Network Inc. (a)
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5).
23.2 Consent of KPMG LLP.
23.3 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included in the signature page hereto).
27.1 Financial Data Schedule.
</TABLE>
- ---------
* To be filed by amendment.
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
*99.1 Form of subscription certificate.
*99.2 Form of Instructions to Stockholders as to use of subscription
certificates.
*99.3 Form of Notice of Guaranteed Delivery for subscription certificates.
*99.4 Form of letter to dealers, banks, brokers, etc.
*99.5 Form of letter to stockholders.
</TABLE>
- ---------
* To be filed by amendment.
<TABLE>
<CAPTION>
REFERENCES -- DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
<S> <C> <C>
(a) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and incorporated
by reference.
(b) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998, and incorporated
by reference thereto.
(c) 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.
(d) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992, and incorporated
by reference thereto.
(e) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993, and incorporated
by reference thereto.
(f) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996, and incorporated
by reference thereto.
(g) Filed as an exhibit to Transmedia's Annual Report on Form
10-K/A for the fiscal year ended September 30, 1997, and
incorporated by reference thereto.
(h) Filed as an exhibit to Transmedia's Current Report on Form 8-K
dated as of November 6, 1997, and incorporated by reference
thereto.
(i) Filed as an exhibit to Transmedia's Current Report on Form 8-K
filed on March 3, 1998.
(j) Filed as an exhibit to Transmedia's Current Report on Form 8-K
filed on July 14, 1999, and incorporated by reference thereto.
</TABLE>
II-5
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes
A. (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
C. (1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Miami,
state of Florida on this 10th day of August, 1999.
TRANSMEDIA NETWORK INC.
By: /s/ Gene M. Henderson
---------------------
Gene M. Henderson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of Transmedia Network Inc. in the capacities and on the dates indicated.
Each person, in so signing, also makes, constitutes and appoints Gene
M. Henderson and Stephen E. Lerch, and each such person acting singly, with full
power of substitution, his true and lawful attorney-in-fact, in his name, place
and stead to sign for him, and in his name in the capacity indicated below, and
any and all amendments and post-effective amendments to this Registration
Statement, and any other Registration Statement filed by Transmedia Network Inc.
pursuant to Rule 462(b) that registers additional amounts of shares of common
stock for the offering contemplated by this Registration Statement and any
amendment thereto, hereby ratifying and confirming our signatures as they may be
signed by our attorneys.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
President and Chief Executive
Officer (Principal Executive
/s/ Gene M. Henderson Officer), Director August 10, 1999
- -----------------------
Gene M. Henderson
Executive Vice President and Chief
Financial Officer (Principal
/s/ Stephen E. Lerch Financial and Accounting Officer) August 10, 1999
- -----------------------
Stephen E. Lerch
/s/ F. Philip Handy Chairman of the Board August 10, 1999
- -----------------------
F. Philip Handy
/s/ Jack Africk Director August 10, 1999
- -----------------------
Jack Africk
/s/ Rod F. Dammeyer Director August 10, 1999
- -----------------------
Rod F. Dammeyer
<PAGE>
s/ Herbert M. Gardner Director August 10, 1999
- -----------------------
Herbert M. Gardner
/s/ George S. Wiedemann Director August 10, 1999
- -----------------------
George S. Wiedemann
/s/ Lester Wunderman Director August 10, 1999
- -----------------------
Lester Wunderman
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
*1.1 Form of Standby Purchase Agreement between Transmedia Network Inc.
and Samstock, L.L.C.
3.1 Certificate of Incorporation of Transmedia Network Inc., as amended. (b)
3.2 Certificate of Amendment to the Certificate of Incorporation of
Transmedia Network Inc. (e)
3.3 Certificate of Amendment to the Certificate of Incorporation of
Transmedia Network Inc., as filed with the Delaware Secretary of
State on March 22, 1994. (a)
3.4 Form of Amendment to the Certificate of Incorporation of Transmedia
Network Inc.
3.5 Form of Certificate of Designations, Preferences and Rights of
Series A Senior Convertible Redeemable Preferred Stock.
3.6 By-Laws of Transmedia Network Inc. (c)
*4.1 Form of Rights Agreement between Transmedia Network Inc. and American
Stock Transfer & Trust Company, as subscription agent.
*4.2 Second Amended and Restated Investment Agreement dated as of June 30,
1999 among Transmedia Network Inc., Samstock, L.L.C.,
EGI-Transmedia Investors, L.L.C., Halmostock Limited
Partnership and, with respect to Section 5 of the Agreement
only, Robert M. Steiner, as trustee under declaration of trust
dated March 9, 1983, as amended, establishing the Robert M.
Steiner Revocable Trust.
*5.1 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Asset Purchase Agreement, dated as of March 17, 1999, between (j)
Transmedia Network Inc. and SignatureCard, Inc., as amended by
Amendment No. 1 thereto dated as of April 15, 1999 and Amendment
No. 2 thereto dated as of May 31, 1999.
10.2 Option Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and SignatureCard, Inc.
10.3 Services Collaboration Agreement, dated as of June 30, 1999, (j)
between Transmedia Network Inc. and SignatureCard, Inc.
10.4 Credit Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
10.5 Security Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
</TABLE>
- ---------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
10.6 Pledge Agreement, dated as of June 30, 1999, between Transmedia (j)
Network Inc. and The Chase Manhattan Bank.
10.7 Credit Agreement, dated as of June 30, 1999, between GAMI Investments, (j)
Network Transmedia Network Inc., Transmedia Restaurant Company Inc.,
Transmedia Service Company Inc. and TMNI International Incorporated.
10.8 1987 Stock Option and Rights Plan, as amended. (a)
10.9 Form of Stock Option Agreement (as modified) between Transmedia
Network Inc. and certain Directors. (g)
10.10 Amended and Restated Employment Agreement dated as of November 15,
1996 between Transmedia Network Inc. and Melvin Chasen. (f)
10.11 Amended and Restated Consulting Agreement dated as of November 15,
1996 between Transmedia Network Inc. and Melvin Chasen. (f)
10.12 Second Restated and Amended Employment Agreement dated as of
October 1, 1998 between Transmedia Network Inc. and James Callaghan.
10.13 Master License Agreement dated December 14, 1992 between Transmedia
Network Inc. and Conestoga Partners, Inc. (d)
10.14 First Amendment to Master License Agreement dated April 12, 1993,
between Transmedia Network Inc. and Conestoga Partners, Inc. (e)
10.15 Second Amendment to Master License Agreement -- Assignment and
Assumption Agreement dated August 11, 1993 among Transmedia Network
Inc., TMNI International Incorporated and Transmedia Europe, Inc. (e)
10.16 Master License Agreement Amendment No. 3 dated November 22, 1993
between TMNI International Incorporated and Transmedia Europe, Inc. (e)
10.17 Master License Agreement dated March 21, 1994 between TMNI
International Incorporated and Conestoga Partners II, Inc. licensing
rights in the Asia Pacific region. (a)
10.18 Agreement, dated as of December 6, 1996, among Transmedia Network
Inc., TMNI International Incorporated, Transmedia Europe Inc. and
Transmedia Asia Pacific Inc. (f)
10.19 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. (h)
10.20 Form of Warrant to purchase Common Stock. (i)
</TABLE>
- ---------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
10.21 Amended and Restated Agreement Among Stockholders Agreement, dated
as of March 3, 1998, among Transmedia Network Inc., Samstock,
L.L.C., EGI-Transmedia Investors, L.L.C., Melvin Chasen, Iris
Chasen and Halmstock Limited Partnership. (i)
10.22 Stockholders Agreement, dated as of March 3, 1998, among Transmedia
Network Inc., EGI-Transmedia Investors, L.L.C., Samstock, L.L.C. and
Melvin Chasen and Halmstock Limited Partnership. (i)
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. (g)
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. (g)
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, (g)
Ltd., as Back-up Servicer and The Chase Manhattan Bank, as Trustee.
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. (g)
10.27 Letter of Agreement dated January 29, 1997 between Transmedia Network
Inc. and Stephen E. Lerch. (g)
10.28 Transmedia Network Inc. 1996 Long-Term Incentive Plan (including
Amendments through August 5, 1998). (b)
*10.29 Employment Agreement dated as of January 5, 1999 between Transmedia
Network Inc. and Christine Donohoo.
*10.30 Employment Agreement dated as of October 14, 1998 between Transmedia
Network Inc. and Gene M. Henderson.
21.1 Subsidiaries of Transmedia Network Inc. (a)
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5).
23.2 Consent of KPMG LLP.
23.3 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included in the signature page hereto).
27.1 Financial Data Schedule.
*99.1 Form of subscription certificate.
</TABLE>
- ---------
* To be filed by amendment.
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page/Reference
- ----------- ---------------------- --------------
<S> <C> <C>
*99.2 Form of Instructions to Stockholders as to use of subscription
certificates.
*99.3 Form of Notice of Guaranteed Delivery for subscription certificates.
*99.4 Form of letter to dealers, banks, brokers, etc.
*99.5 Form of letter to stockholders.
</TABLE>
- ---------
* To be filed by amendment.
REFERENCES -- DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
(a) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994 and incorporated
by reference.
(b) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998, and incorporated
by reference thereto.
(c) 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.
(d) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992, and incorporated874
by reference thereto.
(e) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993, and incorporated
by reference thereto.
(f) Filed as an exhibit to Transmedia's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996, and incorporated
by reference thereto.
(g) Filed as an exhibit to Transmedia's Annual Report on Form
10-K/A for the fiscal year ended September 30, 1997, and
incorporated by reference thereto.
(h) Filed as an exhibit to Transmedia's Current Report on Form 8-K
dated as of November 6, 1997, and incorporated by reference
thereto.
(i) Filed as an exhibit to Transmedia's Current Report on Form 8-K
filed on March 3, 1998.
(j) Filed as an exhibit to Transmedia's Current Report on Form 8-K
filed on July 14, 1999, and incorporated by reference thereto.
<PAGE>
EXHIBIT 3.4
-----------
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TRANSMEDIA NETWORK INC.
Gene M. Henderson and Kathryn M. Ferara certify that:
1. They are the President and Chief Executive Officer, and
Secretary, respectively, of Transmedia Network Inc., a Delaware corporation (the
"Corporation").
2. Paragraph 1 of Article 4 of the Certificate of Incorporation
of the Corporation now reads:
"The total number of shares of capital stock which the
Corporation shall have authority to issue is twenty-one
million (21,000,000), of which twenty million (20,000,000)
shares shall be shares of Common Stock (hereinafter called
"Common Stock"), with a par value of two cents ($.02) per
share, and one million (1,000,000) shares shall be shares of
Preferred Stock (hereinafter called "Preferred Stock"), with a
par value of ten cents ($.10) per share."
is amended to read as follows:
"The total number of shares of capital stock which the
Corporation shall have authority to issue is ninety million
(90,000,000), of which seventy million (70,000,000) shares
shall be shares of Common Stock (hereinafter called "Common
Stock"), with a par value of two cents ($.02) per share, and
twenty million (20,000,000) shares shall be shares of
Preferred Stock (hereinafter called "Preferred Stock"), with a
par value of ten cents ($.10) per share."
3. The foregoing Certificate of Amendment of the Certificate of
Incorporation has been duly approved by the Board of Directors.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Amendment, which amends Paragraph
1 of Article 4 of the Certificate of Incorporation of this Corporation, and
which has been duly adopted in accordance with Section 242 of the General
Corporation Law of the State of Delaware, has been executed by its duly
authorized Officer the ____ day of ___________, 1999.
TRANSMEDIA NETWORK INC.
[Corporate Seal]
---------------------------------------
Name: Gene M. Henderson
Title: President and Chief Executive
Officer
ATTEST:
- --------------------------
Name: Kathryn M. Ferara
Title: Secretary
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED STOCK
(PAR VALUE $.10 PER SHARE)
OF
TRANSMEDIA NETWORK INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
Transmedia Network Inc., a corporation (the "Corporation")
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by Article Fourth of the Certificate of Incorporation of the
Corporation, the Board of Directors at its meeting on _________________ adopted
the following resolution creating a series of __________ shares of Senior
Convertible Redeemable Preferred Stock, par value $.10 per share, designated as
"Series A Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of Article
Fourth of its Certificate of Incorporation, a series of Preferred Stock, par
value $.10 per share of the Corporation is hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
1. Designation and Number. The designation of the series of
preferred stock fixed by this resolution shall be "Series A Senior Convertible
Redeemable Preferred Stock" (hereinafter referred to as "Series A Preferred
Stock" or this "Series") and the number of shares constituting such series shall
be [_____________].
2. Rank. The Series A Preferred Stock shall rank: (i) prior
to all of the Corporation's Common Stock, par value $.02 per share ("Common
Stock"), (ii) prior to any class or series of capital stock of the Corporation
hereafter created either specifically ranking by its terms junior to this Series
or not specifically ranking by its terms senior to or on parity with this Series
(collectively with the Common Stock, "Junior Securities"); (iii) on parity with
any class or series of capital stock of the Corporation hereafter created
specifically ranking by its terms on
<PAGE>
parity with this Series ("Parity Securities"); and (iv) junior to any class or
series of capital stock of the Corporation hereafter created specifically
ranking by its terms senior to this Series ("Senior Securities"), in each case,
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary.
3. Dividends.
(a) General Dividend Obligation. (i) The holders of shares of
this Series shall be entitled to receive, when, as and if declared by the Board
of Directors of the Corporation, and to the extent of funds legally available
therefor, dividends per share (a) at the rate (the "Dividend Rate") of $______
per annum which shall be payable in cash (hereinafter referred to as "current
dividends") quarterly in arrears, on the first business day of January, April,
July and October of each year, commencing [October 1, 1999] (each, a "Dividend
Payment Date") and (b) at the rate of $______ per annum which shall not be
payable currently but shall be deferred and shall accrue (hereinafter referred
to as "deferred dividends") and shall be payable as hereinafter provided upon a
conversion, redemption or liquidation, dissolution or winding up of the
Corporation. The Corporation shall have the option and right to pay deferred
dividends (or any portion thereof) currently.
(ii) In the case of the original issuance of shares of
this Series, such current dividends shall be cumulative from the date of issue.
Dividends payable on shares of this Series shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
(iii) Dividends shall be payable to holders of record
of this Series as they appear on the books of the Corporation on each record
date, not less than 15 days nor more than 60 days preceding the date for payment
thereof, as may be fixed by the Board of Directors of the Corporation. Accrued
current dividends not paid on a Dividend Payment Date may be declared and paid
at any time, without reference to any regular Dividend Payment Date.
(iv) If the funds legally available for the payment of
such dividends are insufficient to pay in full current dividends payable on all
outstanding shares of this Series on any Dividend Payment Date, the total
available funds may be paid in partial dividends to the holders of the
outstanding shares of this Series ratably in proportion to the fully accrued
current dividends to which they are entitled. In the event any portion of
accrued current dividends payable on a Dividend Payment Date (whether or not
declared) is unpaid as of the close of business on such Dividend Payment Date (a
"Past Due Current Dividend"), the holders of shares of this Series shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, and to the extent of funds legally available therefor, an
additional dividend per share (an "additional dividend") at an annual rate equal
to the per share amount of the Past Due Current Dividend, multiplied by the
Additional Dividend Rate. The Additional Dividend Rate applicable to an
additional dividend that accrues by reason of any Past Due Current Dividend,
shall be equal to the prime interest rate in effect on the Dividend Payment Date
on which the Past
2
<PAGE>
Due Current Dividend first became payable (as announced by the Chase Manhattan
Bank) (the "Prime Rate") plus 6% for the first 90 days after the Dividend
Payment Date with respect to such Past Due Current Dividend, and shall be
increased by an additional 1/2% at the beginning of each subsequent 90 day
period up to a maximum rate equal to the Prime Rate plus 7-1/2% per annum. All
additional dividends shall be cumulative from the Dividend Payment Date for the
Past Due Current Dividend by reason of which the additional dividend accrues.
(b) Participation. In addition to the dividends described in
paragraph (a) above, in the event that the Corporation at any time or from time
to time shall declare, order, pay or make a dividend or other distribution on
its Common Stock (other than a dividend payable in shares of Common Stock or in
rights, options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock), then the holders of shares of
this Series shall be entitled to receive from the Corporation with respect to
each share of this Series held, a dividend or other distribution which is
equivalent to the dividend or distribution that would be received by a holder of
the number of whole shares of Common Stock into which a share of this Series is
convertible pursuant to paragraph 7 hereof on the record date for such dividend
or distribution.
(c) Limitation on Dividends. For so long as any shares of this
Series are outstanding, no dividend (other than a dividend payable in shares of,
or warrants, rights or options exercisable for or convertible into shares of,
Common Stock or other Junior Security and cash in lieu of fractional shares in
connection with any such dividend) shall be declared or paid or set aside for
payment on or with respect to Junior Securities, and no payment on account of
the redemption, purchase or other acquisition or retirement for value by the
Corporation (except in connection with a reclassification or exchange of Junior
Securities through the issuance of other Junior Securities (and cash in lieu of
fractional shares in connection therewith)) shall be made for any Junior
Securities unless, in each case, the full amount of accrued and unpaid current
dividends (whether or not declared) on all outstanding shares of this Series for
all dividend periods ending on or before the date of payment of such dividend
and the full amount of all accrued and unpaid additional dividends shall have
been paid or contemporaneously are declared and paid. Subject to the foregoing
limitations, dividends may be paid on the Common Stock or other Junior Security
out of any funds legally available for such purpose when and as declared by the
Board of Directors, provided that dividends are also paid on the shares of this
Series in accordance with subparagraph 3(b).
4. Voting Rights.
(a) General Voting Rights. In addition to any voting rights
provided by law and the special voting rights provided herein, the holders of
shares of this Series shall be entitled to vote upon all matters upon which
holders of the Common Stock have the right to vote, together with the holders of
Common Stock and not as a separate class, on the basis of one vote for each
share of Series A Preferred Stock held of record by such holders.
3
<PAGE>
(b) Special Voting Rights. (iIf and whenever at any time or
times current dividends payable on shares of this Series shall have been in
arrears and unpaid in an aggregate amount equal to or exceeding the amount of
current dividends due and payable thereon for six (6) quarterly dividend periods
(consecutive or otherwise), then the number of directors constituting the Board
of Directors shall be increased by two (2) and the holders of shares of this
Series shall have the right, voting separately as a class (and, if any other
series or class of stock is so entitled as provided in the certificate of
designation of such series or in the Certificate of Incorporation, voting
together with such other series or class collectively as a single class) to
elect two (2) directors of the Corporation to fill such newly-created
directorships.
(ii) Such special voting right may be exercised
initially either at a special meeting of the holders of this Series and such
other series or class of stock having such voting right, called as hereinafter
provided, or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at each such annual meeting. The right of the
holders of this Series to vote for the election of such members of the Board of
Directors of the Corporation as aforesaid shall continue until such time as all
current dividends accumulated on this Series shall have been paid in full and
all additional dividends with respect to such current dividends shall have been
paid in full, at which time the special voting right of the holders of this
Series to vote separately as a class with such other series or class of stock
shall terminate and, if such voting right of the holders of this Series and all
other series or class of stock so entitled shall have terminated, subject to the
requirements of the General Corporation Law of Delaware, the term of the
directors elected pursuant to subparagraph 4(b) shall terminate, subject to
revesting on the basis set forth in subparagraph 4(b).
(iii) At any time when such voting right shall have
vested in holders of this Series, and if such right shall not already have been
initially exercised, a proper officer of the Corporation shall, upon the written
request of the record holders of at least 10% of the aggregate voting power
represented by the then outstanding shares of this Series and of any other class
or classes of stock having voting power with respect to the election of such
directors, addressed to the Secretary of the Corporation, call a special meeting
of such holders for the purpose of electing directors pursuant to paragraph
4(b)(i). Such meeting shall be held at the earliest practicable date upon the
notice required for annual meetings of stockholders at the place for holding
annual meetings of stockholders of the Corporation or, if none, at a place
designated by the Board of Directors. If such meeting is not called by the
proper officers of the Corporation within thirty (30) days after the personal
service of such written request upon the Secretary of the Corporation, or within
thirty-five (35) days after mailing the same within the United States of
America, by registered mail, addressed to the Secretary of the Corporation at
its principal office (such mailing to be evidenced by the registry receipt
issued by the postal authorities), then the record holders of at least 10% of
the aggregate voting power represented by the then outstanding shares of this
Series and of any such other series or class of stock may designate in writing
one of their number to call such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated upon the notice required
for annual meetings of stockholders
4
<PAGE>
and shall be held at the same place as is elsewhere provided for in this
subparagraph 4(b)(ii) or such other place as is selected by such designated
stockholder.
Any holder of this Series who would be entitled
to vote at such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph 4(b). Notwithstanding the provisions of this
paragraph 4(b), no such special meeting shall be called during a period within
ninety (90) days immediately preceding the date fixed for the next annual
meeting of stockholders.
(iv) At any meeting held for the purpose of electing
directors at which the holders of this Series and any other series or class of
stock shall have the right to elect two (2) directors as provided herein, the
presence in person or by proxy of the holders of a majority of the aggregate
voting power represented by the then outstanding shares of this Series and such
other series or class of stock having such right shall be required and shall be
sufficient to constitute a quorum of such class for the election of directors by
such holders. At any such meeting or adjournment thereof (x) the absence of a
quorum having such special voting right shall not prevent the election of
directors other than those to be elected by the holders of shares having such
special voting rights, and the absence of a quorum or quorums of the holders of
capital stock entitled to elect directors other than those to be elected by the
holders having such voting rights shall not prevent the election of directors to
be elected by the holders having such special voting rights and (y) except as
otherwise required by law, in the absence of a quorum of the holders of any
class of stock entitled to vote for the election of directors, a majority of the
holders present in person or by proxy of such class shall have the power to
adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time, without notice other than
announcement at the meeting, until a quorum is present.
(v) Any vacancy in the Board of Directors in respect
of a director elected by holders of shares of this Series (and, if it is
entitled as provided in the certificate of designation of such series or in the
Certificate of Incorporation, by any other series or class of stock) pursuant to
the voting right created under this paragraph 4(b) shall be filled by vote of
the remaining director so elected, or if there be no such remaining director, by
the holders of shares of this Series and such other series or class of stock
entitled to elect such director or directors at a special meeting called in
accordance with the procedures set forth in subparagraph 4(b)(ii), or, if no
such special meeting is called, at the next annual meeting of stockholders.
(vi) So long as any shares of this Series remain
outstanding, the Corporation shall not, either directly or indirectly, without
the affirmative vote at a meeting or the written consent with or without a
meeting of the holders of at least two-thirds in number of shares of this Series
then outstanding, amend, alter or repeal any of the provisions of the
Certificate of Incorporation so as to affect adversely the preferences, special
rights or privileges or voting powers of shares of this Series.
5
<PAGE>
(vii) In exercising the voting rights set forth in this
paragraph 4(b), each share of this Series entitled to such voting right shall
have equal voting power, notwithstanding any greater or lesser general voting
powers of one or more series or classes of stock.
(viii) No consent of holders of shares of this Series
shall be required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the authorization or issuance of any Junior Securities or
Parity Securities or (iii) subject to subparagraph 4(b)(vi), the issuance of any
shares of preferred stock.
5. Conversion Rights.
(a) Optional Conversion. (i) Each whole share of this Series
may be converted, at the option of the holder, at any time and from time to
time, into fully-paid and non-assessable shares of Common Stock; provided, a
holder's right to so convert shares of Series A Preferred Stock shall terminate
as to shares thereof that are redeemed by the Corporation on the redemption date
therefor as provided in and subject to the terms and conditions of paragraph 7
hereof. The number of shares of Common Stock to which the holder of each share
of this Series shall be entitled upon conversion shall be the product obtained
by multiplying the number of whole shares of this Series to be converted by the
Conversion Rate. The "Conversion Rate" shall be determined by dividing the sum
of $_____________ plus all accrued and unpaid current dividends, additional
dividends (if any), and deferred dividends thereon by $_________ (the
"Conversion Price"); provided, that if the Corporation fails to pay the
redemption price of shares required to be redeemed in accordance with paragraph
7, the Conversion Price shall be reduced by 50% of the Conversion Price then in
effect and shall remain at such reduced price until such failure is remedied.
The Conversion Price shall be adjusted from time to time as set forth in
subparagraph (e) hereof.
(ii) A holder of shares of this Series desiring to
convert all or a portion of the whole shares of this Series owned by such holder
shall give written notice thereof to the Corporation. Such notice shall be
accompanied by certificates, duly endorsed for conversion, evidencing the number
of whole shares of this Series such holder desires to convert, together with
cash, if any, required by subparagraph 5(c) hereof. The Corporation will, as
soon as practicable thereafter, deliver to such holder or to such holder's
nominee or nominees, a certificate or certificates for the appropriate number of
shares of Common Stock, together with cash, as provided in subparagraph 5(d),
with respect to any fractional shares otherwise issuable upon conversion, and,
in the event of a partial conversion, a certificate representing the balance, if
any, of the whole shares of this Series represented by the surrendered
certificate or certificates but not converted to Common Stock.
(iii) If a holder has delivered notice to the
Corporation of its desire to convert all or a portion of its shares of this
Series, and certificates, duly endorsed for conversion in respect of such shares
and cash, if any, required by subparagraph 5(c) hereof, then all shares of this
Series so tendered to the Corporation shall be deemed to be no longer
outstanding and,
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notwithstanding the failure of the Corporation to issue the Common Stock, such
holder shall be deemed, for all purposes to be a holder of the number of shares
of Common Stock into which the shares of this Series such holder is entitled to
receive pursuant to the terms of this paragraph 5, in each case as of the close
of business on the date on which such conversion notice is delivered.
(b) Mandatory Conversion. The Series A Preferred Stock is
subject to mandatory conversion as provided in this paragraph 5(b).
(i) (A) Conversion by the Corporation. If (1) at any
time after [_________,] 2002, the closing price of the Common Stock, as reported
by the New York Stock Exchange Composite Tape (or the composite reporting system
of any other national securities exchange or quotation system on which the
Common Stock of the Corporation is then traded or quoted) exceeds 200% of the
Liquidation Preference, plus accrued and unpaid current dividends, additional
dividends (if any) and deferred dividends thereon, for thirty consecutive days,
or (2) at any time (x) the Corporation shall consummate an underwritten public
offering of equity securities of the Corporation which results in gross proceeds
to the Corporation or selling stockholders of $20 million and (y) the price to
public of the securities sold or the average of the high and low sales prices of
the common stock of the Corporation on the date of the closing of the offering
is not less than the Conversion Price then in effect, then the Corporation shall
have the right, for a period of ninety (90) days thereafter, to cause the
automatic conversion of all outstanding shares of this Series at the Conversion
Rate then in effect. The Liquidation Preference for each share of this Series
shall be $____.
(B) Conversion by the Majority Holders. Holders
of a majority of the outstanding shares of this Series at any time shall have
the right to cause the conversion of all outstanding shares of this Series at
the Conversion Rate then in effect by delivering written notice thereof, sent by
first class mail, postage prepaid, to the Corporation.
(ii) The Corporation shall give all holders of record
of shares of this Series prior written notice of the exercise by it or the
majority holders, as the case may be, of their right set forth in this paragraph
5(b) not less than thirty (30) days prior to the date upon which such conversion
shall occur. Such notice shall specify the place designated for exchanging
shares of this Series for shares of Common Stock, and shall be sent by first
class mail, postage prepaid, to each holder of record of shares of this Series
at such holder's address as shown in the records of the Corporation.
(iii) From and after the date of conversion, all rights
of the holders of any shares of this Series, as such, shall cease and terminate,
regardless of whether the holders of such shares of this Series have tendered
their certificates therefor in accordance with this paragraph 5(b).
(c) Payment of Dividends. In the event that shares of this
Series are surrendered for conversion on any date during the period from the
close of business on a record
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date fixed for determining the holders entitled to receive dividends to the
opening of business on the corresponding payment date designated for the payment
of such dividends, the holder must also deliver to the Corporation an amount
equal to the dividend payable with respect to such shares of Series A Preferred
Stock on such dividend payment date and shall continue to be entitled to receive
such dividend on such dividend payment date. In the event that the date on which
the shares are converted is the payment date designated for the payment of such
dividends, such holder will be entitled to receive the dividend payable with
respect to such Series A Preferred Stock and shall not be required to include
any payment in the amount of the dividend payable with respect to such converted
shares of Series A Preferred Stock.
(d) Fractional Shares. The Corporation shall not issue
fractional shares of Common Stock upon conversion of this Series but, in lieu
thereof, shall pay to a holder cash in an amount equal to such fraction
multiplied by the closing price of the Common Stock, as reported by the New York
Stock Exchange Composite Tape (or the composite reporting system of any other
principal national securities exchange of quotation system on which the Common
Stock is then listed or quoted) on the trading day prior to the date on which
the shares are converted.
(e) Conversion Price Adjustments. (i) If, prior to the date on
which all shares of Series A Preferred Stock are converted or redeemed, the
Corporation shall (1) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, (2) subdivide its outstanding Common
Stock, (3) combine its outstanding Common Stock into a smaller number of shares
of Common Stock or (4) issue by reclassification of its Common Stock other
securities of the Corporation, the Conversion Price in effect at the opening of
business on the record date for the determination of stockholders entitled to
participate in such transaction shall thereupon be adjusted, or, if necessary,
the right to convert shall be amended, such that the number of shares of Common
Stock receivable upon conversion of the shares of this Series immediately prior
thereto shall be adjusted so that the holder shall be entitled to receive, upon
the conversion of such shares of this Series, the kind and number of shares of
Common Stock or other securities of the Corporation which it would have owned or
would have been entitled to receive after the happening of any of the events
described above had the Series A Preferred Stock been converted immediately
prior to the happening of such event or any record date with respect thereto.
Any adjustment made pursuant to this subparagraph 5(e)(i) shall become effective
immediately after the effective date of such event and such adjustment shall be
retroactive to the record date, if any, for such event. No adjustment with
respect to any cash dividends (made out of current or accumulated earnings) on
shares of Common Stock shall be made.
(ii) Except in respect of transactions described in
subparagraph 5(e)(i) above, if, prior to the date on which all shares of this
Series are converted or redeemed, the Corporation shall sell or issue Common
Stock or rights, options, warrants or convertible securities (or rights, options
or warrants to purchase convertible securities) containing the right to
subscribe for or purchase shares of Common Stock (collectively, "Rights"), and
the sale or issuance price per share of Common Stock (or in the case of Rights,
the sum of the consideration
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paid or payable for any such Right entitling the holder thereof to acquire one
share of Common Stock and such additional consideration paid or payable upon
exercise or conversion of any such Right to acquire one share of Common Stock)
is less than the lower of the then current Conversion Price or the closing price
of the Common Stock (as reported by the New York Stock Exchange Composite
Transactions or any other national securities exchange or quotation system on
which the Common Stock is then listed or quoted) for the trading day immediately
preceding the dates of such sale or issuance (the "Current Common Stock Price"),
the Conversion Price shall thereupon be adjusted such that the number of shares
of Common Stock receivable upon conversion of the Series A Preferred Stock shall
be the number determined by multiplying (1) the number of shares of Common Stock
receivable upon conversion of the shares of this Series immediately prior to
such issuance or sale by (2) a fraction (not to be less than one) with a
numerator equal to the product of the number of shares of Common Stock
outstanding after giving effect to such sale or issuance (and assuming, in the
case of Rights that such Rights had been fully exercised or converted, as the
case may be) and the Current Common Stock Price and a denominator equal to the
sum of (x) the product of the number of shares of Common Stock outstanding
immediately before the issuance or sale or the record date, as the case may be,
multiplied by the Current Common Stock Price and (y) the aggregate consideration
received or deemed to be received by the Corporation for the shares of Common
Stock to be issued or sold or to be purchased or subscribed for upon exercise of
such Rights. For the purposes of such adjustments, the Common Stock which the
holders of any such Rights shall be entitled to subscribe for or purchase shall
be deemed to be issued and outstanding as of the date of such issuance or sale
or the record date, as the case may be.
(iii) Except in respect of transactions described in
subparagraph 5(e)(i) above, if, prior to the date on which all shares of this
Series are converted or redeemed, the Corporation shall declare, order, pay or
make a dividend or other distribution (including without limitation any
distribution of cash, other or additional stock or other securities or property
or options, by way of dividend or spin-off, reclassification, recapitalization
or similar corporate rearrangement or otherwise, but excluding dividends on the
Common Stock described in paragraph 3(b) or in the last sentence of subparagraph
5(e)(i)), then, in each case, the Conversion Price shall thereupon be adjusted
such that the number of shares of Common Stock thereafter receivable upon the
conversion of shares of this Series shall be determined by multiplying (1) the
number of shares of Common Stock theretofore receivable upon conversion of the
shares of the Series A Preferred Stock by (2) a fraction of which the numerator
shall be the then Conversion Price on the record date for the determination of
stockholders entitled to receive such dividend or other distribution, and of
which the denominator shall be such Conversion Price on such date minus the
amount of such dividend or distribution applicable to one share of Common Stock.
The Board of Directors of the Corporation shall determine the amount of such
dividend or distribution allocable to one share of Common Stock and such
determination, if reasonable and based upon the Board of Directors' good faith
business judgment, shall be binding upon the holder. Such adjustment shall be
made whenever any such distribution is made and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
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(iv) Upon the expiration of any Rights, if such shall
not have been exercised, the Conversion Price, to the extent that shares of this
Series have not been converted or redeemed, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (1) the fact that the only shares of Common Stock
so issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such Rights and (2) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Corporation
(including for purposes hereof, any underwriting discounts or selling
commissions paid by the Corporation) for the issuance, sale or grant of all such
Rights, whether or not exercised; provided, that no such readjustment shall have
the effect of increasing the Conversion Price by a proportion (relative to the
Conversion Price in effect immediately prior to such readjustment) in excess of
the inverse of the aggregate proportional adjustment thereof made in respect of
the issue, sale, or grant of such Rights.
If the consideration provided for in any Right
or the additional consideration, if any, payable upon the conversion or exchange
of any right shall be reduced, or the rate at which any Right is exercisable or
convertible into or exchangeable for shares of Common Stock shall be increased,
at any time under or by reason of provisions with respect thereto designed to
protect against dilution, then, effective concurrently with each such change,
the Conversion Price then in effect shall first be adjusted to eliminate the
effects (if any) of the issuance (or deemed issuance) of such Right on the
Conversion Price and then readjusted as if such Right had been issued on the
date of such change with the terms in effect after such change, but only if as a
result of such readjustment the Conversion Price then in effect hereunder is
thereby reduced.
(v) For the purposes of this paragraph 5: (x) the
consideration for the issue or sale of any additional shares of Common Stock
shall, irrespective of the accounting treatment of such consideration, be deemed
to be the consideration actually received by the Corporation and (1) insofar as
it consists of cash, be computed at the net amount of cash received by the
Corporation, plus any expense paid or incurred by the Corporation and any
commissions or compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in connection with
such issue or sale, (2) insofar as it consists of property (including
securities) other than cash, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board of Directors of
the Corporation, and (3) in case additional shares of Common Stock are issued or
sold together with other stock or securities or other assets of the Corporation
for a consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (1) and (2) above, allocable to such
additional shares of Common Stock, all as determined in good faith by the Board
of Directors of the Corporation; (y) additional shares of Common Stock deemed to
have been issued pursuant to subparagraph 5(e)(iv) relating to Rights, shall be
deemed to have been issued for a consideration per share determined by dividing
(1) the total amount, if any, received by the Corporation as consideration for
the issue, sale or grant of the Rights in question, less the value of the Rights
not actually received by the Corporation as consideration therefor, plus the
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minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provisions contained therein
for a subsequent adjustment of such consideration to protect against dilution)
payable to the Corporation upon the exercise, conversion or exchange of such
Rights or, in the case of Rights which are rights, options or warrants for
convertible securities, the exercise of such Rights for convertible securities
and the conversion or exchange of such convertible securities, in each case
computing such consideration as provided in the foregoing clause (x) of this
subparagraph 5(e)(v), by (2) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for subsequent adjustment of such number to protect against
dilution) issuable upon the exercise, conversion or exchange of such Rights;
and, (z) additional shares of Common Stock deemed to have been issued pursuant
to subparagraph 5(e)(i) and (iii), relating to stock dividends, stock splits,
etc., shall be deemed to have been issued for no consideration. For the purposes
of this paragraph 5, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Certificate of Incorporation of the
Corporation as may be amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassification of such Common Stock
consisting solely of changes in par value or from par value to no par value, or
from no par value to par value.
(vi) No adjustment in the Conversion Price shall be
required unless explicitly provided for in this paragraph 5 and unless such
adjustment (plus any adjustments not previously made by reason of this
subparagraph 5(e)(vi)), would require an increase or decrease of at least five
percent (5%) in such price; provided, that any adjustments which by reason of
this subparagraph 5(e)(vi) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(e)(vi) shall be made to the nearest cent.
(vii) No adjustment shall be made (1) upon conversion
of the Series A Preferred Stock, (2) upon exercise of options and/or warrants of
the Corporation outstanding on the date hereof, (3) in respect of options
hereafter granted to employees, officers, directors or stockholders of or
consultants to the Corporation, pursuant to stock option plans in effect on the
date hereof, (4) in respect of dividends or distributions declared, ordered,
paid or made on the Common Stock in which shares of this Series may participate
pursuant to paragraph 3(b), and (5) in respect of any dividend of rights
pursuant to a "poison pill" rights plan.
(viii) Whenever the Conversion Price is adjusted
pursuant to any of the foregoing provisions of this paragraph 5, the Corporation
shall forthwith prepare a written statement signed by the president or any vice
president and the treasurer or any assistant treasurer or the secretary or any
assistant secretary of the Corporation, setting forth the adjusted Conversion
Rate determine as provided in the paragraph 5, and in reasonable detail the
facts requiring such adjustment. Such statement shall be filed among the
permanent records of the Corporation and a copy thereof shall be furnished to
any holder requesting the same, and shall at all reasonable times during
business hours be open to inspection by the holders. Within 10 days of the event
requiring an adjustment, the Corporation shall also cause a notice, stating that
such
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an adjustment has been made and setting forth the adjusted Conversion Rate, to
be mailed, first-class, postage prepaid, to all then holders of record at their
addresses as the same appear on the stock records of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common Stock
the full number or shares of Common Stock deliverable upon the conversions of
all the then outstanding shares of this Series (including all shares issuable in
payment of deferred dividends) and shall take all such action and obtain all
such permits or orders as may be necessary to enable the Corporation to validly
and legally issue fully paid and non-assessable shares of Common Stock upon the
conversion of Series A Preferred Stock. The Corporation shall obtain, prior to
or concurrently with the first issuance of this Series, the authorization for
the listing of such shares and the shares of Common Stock issuable upon
conversion of this Series on The New York Stock Exchange and shall use its best
efforts to maintain for as long as any share of this Series shall be outstanding
such authorization or authorization for the listing of such shares on a national
securities exchange on which the Common Stock may hereafter be listed. The
Corporation shall pay any and all transfer, stamp and other like taxes that may
be payable in respect of the issuance or delivery to a holder of shares of
Common Stock or conversion of the Series A Preferred Stock by such holder.
6. Liquidation
(a) Priority. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the shares
of this Series shall be entitled to receive, before any distribution or payment
is made upon the Common Stock or any other Junior Securities, an amount per
share equal to $______ [insert the Liquidation Preference], plus all accrued but
unpaid current dividends, additional dividends (if any), and deferred dividends
to such date (collectively, the "Liquidation Payments"). If upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets and funds available for distribution to stockholders
shall be insufficient to permit payment to the holders of this Series of the
full aforesaid preferential amounts, then the entire assets and funds of the
Corporation available to the holders of this Series shall be distributed ratably
among such holders in proportion to the number of shares of this Series A
Preferred Stock owned by each such holder. Except in the case of a "deemed
liquidation" (as defined below) , after the Liquidation Payments are made to the
holders of the shares of this Series, any remaining assets and funds of the
Corporation shall be distributed to holders of this Series and the Common Stock
and any Junior Securities, ratably, on an as-converted basis.
(b) Certain Transactions Deemed a Liquidation. If (i) the
Corporation consolidates or merges into or with any other corporation or
corporations or any other entity or entities, or (ii) the Corporation sells or
transfers all or substantially all its assets, or (iii) a majority of the then
outstanding capital stock of the Corporation is sold in a transaction, and any
such transaction results in the stockholders of the Corporation immediately
prior to the transaction possessing less than fifty percent (50%) of the voting
securities of the surviving entity, then the Corporation shall treat such
merger, consolidation, sale or transfer as a liquidation, dissolution or
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winding up of the Corporation for purposes of this paragraph 6 (a "deemed
liquidation"), unless the transaction is approved by the holders of a majority
of the shares in this Series then outstanding. Upon a deemed liquidation, the
holders of shares of this Series shall receive from the Corporation the
Liquidation Payments. From and after the date of a deemed liquidation, all
rights of the holders of any shares of this Series, as such, shall cease and
terminate, such shares shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered or deliverable in exchange therefor other than the Liquidation
Payments.
(c) Notice. Written notice of a liquidation, dissolution or
winding up (including the transactions described in paragraph (b) above),
stating a payment date, the estimated amount of the Liquidation Payments and the
place where the Liquidation Payments shall be payable shall be given by mail,
postage prepaid, not less than 30 days prior to the payment dated stated
therein, to each holder of record of this Series at such holder's address as the
same appears on the stock records of the Corporation.
7. Redemption.
(a) Optional Redemption. (i) Subject to the holders' rights of
conversion under paragraph 5(a), the Corporation may, at its option (by action
of the Board of Directors) and out of funds legally available therefor, (x)
redeem all outstanding shares of this Series at any time after ________ [insert
closing date], 2004, or (y) redeem at least one-third of the outstanding shares
of this Series, ratably, at any time during the 12-month period following
________, 2004, 2005 and 2006, respectively, in each case at a redemption price
per share equal to the Liquidation Preference plus all accrued but unpaid
dividends (including all additional dividends and deferred dividends, if any)
thereon (the "redemption price"), subject, in each instance, to the holders'
prior rights of conversion under paragraph 5(a); provided, however, that if
record ownership of any shares of this Series has changed subsequent to the
record date for any dividend that has been declared but not paid as of the
redemption date, the redemption price with respect to such shares shall not
include an amount equal to such declared but unpaid dividend on such shares and
the holder of such shares as of the record date for such declared but unpaid
dividend shall be entitled to payment of such dividend on the designated date
for payment of such dividend. With respect to all shares of this Series for
which record ownership has not changed subsequent to the record date for any
dividend that has been declared but not paid as of the redemption date, holders
of such shares on such redemption date shall, in lieu of receiving such dividend
payment on the date designated for payment thereof, receive such dividend
payment together with all other accumulated and unpaid dividends, if any, [as
part of the redemption price] on the date fixed for redemption (unless such
holders convert such shares in accordance with Section 5 hereof, in which case
such holders, subject to the provision of paragraph 5 (c) hereof, will receive
such payment on the date designated for payment of such dividend).
(ii) In the event the Corporation shall redeem shares
of this Series in accordance with this paragraph 7(a), notice of such redemption
shall be given by first class mail,
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postage prepaid, mailed not less than thirty (30) nor more than ninety (90) days
prior to the redemption date, to each record holder of the shares to be
redeemed, at such holder's address as the same appears on the books of the
Corporation. For purposes of determining the holders entitled to receive notice
of a redemption in accordance with this paragraph 7(a), the Board of Directors
of the Corporation may set a record date, which record date shall not be more
than 10 days prior to the date of mailing such notice, and in the absence of
Board action setting such record date, the record date for determining the
holders entitled to receive notice of a redemption in accordance with this
paragraph 7(a) shall be the date immediately preceding the date of giving such
notice. Each such notice shall state: (i) the redemption date or dates, if the
Corporation elects to effect such redemption in one-third increments; (ii) the
total number of shares of this Series to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price and any requirements as to endorsement of assignment for
transfer; (v) that dividends on the shares to be redeemed will cease to accrue
on such redemption date; and (vi) that conversion rights of the shares to be
redeemed shall continue until the close of business redemption date (provided no
default by the Corporation in the payment of the redemption price shall have
occurred and be continuing, in which event such conversion rights shall continue
until such shares are actually redeemed, exchanged or converted), and the
conversion rate at the time applicable.
(b) Redemption by Holder. (i) Each holder of any share of this
Series shall have the right, at such holder's option at any time during the
ninety (90) day period beginning on _______[insert closing date], 2004, to
require the Corporation to redeem all, but not less than all, of such holder's
shares of this Series at the redemption price; provided, however, that the
Corporation may elect to redeem not less than one-third of the shares requested
to be redeemed, ratably, during each of the three years following such request
for redemption, respectively (subject, in each instance, to the holders' prior
rights of conversion under paragraph 5(a)); provided, further, that the
Corporation shall redeem in full all of such shares so requested to be redeemed
by the end of such third year.
(ii) In the event a holder of shares of this Series
desires to exercise the option to require redemption under this paragraph 7(b),
it shall send a written notice demanding redemption under subparagraph 7(b) to
the Corporation, by first class mail, postage prepaid, specifying (i) the date
of such redemption (which shall be not less than 30 days after receipt by the
Corporation of such notice) and (ii) the total number of shares of this Series
required to be redeemed (which shall be not less than all of the shares held).
If the Corporation elects to redeem such shares in one-third increments as
provided in subparagraph 7(b)(i), it shall provide notice of the same to the
holder prior to the proposed redemption date at such holder's address as the
same appears on the books of the Corporation.
(c) Effect of Redemption. (i) If notice shall have been given
as provided in paragraph 7(a)(ii) or 7(b)(ii) and the Corporation shall have
provided monies at the time and place specified for the payment of the
redemption price pursuant to such notice, including any accrued and
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unpaid current dividends, additional dividends (if any), and deferred dividends,
then from and after the redemption date, whether or not certificates for such
shares have been surrendered for cancellation, dividends on the shares of this
Series so called for redemption shall cease to accrue, such shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price without interest thereon) shall cease; provided
that the Corporation shall not be required to redeem any shares of this Series
which have been converted to Common Stock prior to the close of business on the
redemption date. Upon surrender to the Corporation or its designated agent (in
accordance with the notice) of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the redemption price. In case fewer than all
the shares represented by any such certificate are to be redeemed, a new
certificate shall be issued representing the unredeemed shares, without cost to
the holder thereof.
(ii) Any shares of this Series which have been
redeemed shall, after such redemption, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series, until such
shares are once more designated as part of a particular series by the Board of
Directors.
(d) Failure to Redeem. (i) In the event that on any date fixed
for redemption pursuant to paragraph 7, the Corporation does not have sufficient
funds legally available to permit the redemption of shares requested or required
to be redeemed, those funds which are legally available for such payment shall
be used to redeem the maximum number of shares of this Series, ratably, in
proportion to the respective number of shares of this Series then held, (A)
among all holders (in the event of a redemption pursuant to paragraph 7(a)), or
(B) among the holders requesting redemption within 30 days of one another (in
the event of a redemption pursuant to paragraph 7(b)).
(ii) In the event that on any date fixed for
redemption pursuant to paragraph 7, the Corporation, for whatever reason, is
unable to, or does not, pay in full the redemption price due to any holder or
holders of shares of this Series, then (A) for purposes of calculating the
redemption price, the Dividend Rate shall be deemed to be increased to the prime
rate in effect on the date fixed for redemption (as announced from time to time
by The Chase Manhattan Bank) plus 6% for the first ninety days of such default,
increasing by an additional 1/2% at the beginning of each subsequent 90 day
period, up to a maximum of the Prime Rate plus 7 1/2% per annum, and (B) the
Conversion Price shall be reduced by 50% of the then applicable Conversion
Price, until such time as such shares so required to be redeemed are actually
redeemed or converted.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by Stephen E. Lerch, its Executive Vice President.
TRANSMEDIA NETWORK INC.
By:
-------------------------
Stephen E. Lerch
Executive Vice President
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SECOND RESTATED AND AMENDED
EMPLOYMENT AGREEMENT
SECOND RESTATED AND AMENDED EMPLOYMENT AGREEMENT, dated as of the 1st
day of October, 1998, by and between TRANSMEDIA NETWORK INC., a Delaware
corporation ("Transmedia"), and JAMES M. CALLAGHAN (the "Executive").
WHEREAS, Transmedia and the Executive wish to amend and restate the
Amended and Restated Employment Agreement dated as of January 20, 1997, which
they previously executed;
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties hereto
do mutually agree as follows:
1. Employment. Transmedia hereby employs the Executive, and the
Executive accepts such employment, upon the terms and conditions hereinafter set
forth. The Executive represents and warrants that he is free to enter into this
Agreement and that entering into this Agreement is not in violation of any
obligations that he has to any other person, firm or corporation.
2. Term. The term of the Executive's employment shall extend through
the period ending on September 30, 2001 (the "Term"), unless earlier terminated
as provided herein.
3. Office and Duties. The Executive shall perform such executive duties
and render such executive services in the operation of the business of
Transmedia and its subsidiaries as Transmedia's Board of Directors and its Chief
Executive Officer or President may
<PAGE>
from time to time reasonably assign to the Executive. The Executive shall hold
the position of Vice President of Transmedia and President of Transmedia
Restaurant Company Inc., and shall report directly to Transmedia's President or
Chief Executive Officer. The Executive shall not be required to relocate from
New York, New York in order to perform his duties and services hereunder. During
the term of this Agreement, the Executive shall:
(a) work for Transmedia and its subsidiaries on a full-time,
exclusive basis;
(b) use his best efforts to apply on a full-time basis all of his
skill and experience to the performance of his duties in such employment; and
(c) not engage in any other business activities, other than
personal investments in corporations and other entities which do not compete
directly or indirectly with Transmedia and its subsidiaries. Notwithstanding the
provisions of the preceding sentence, the Executive shall be entitled, on an
occasional basis, to serve as a consultant to, or on the Board of Directors of,
other corporations during the term of this Agreement and to receive and retain
all compensation paid to him in such capacities, so long as such other
corporations do not compete directly or indirectly with Transmedia and its
subsidiaries.
4. Compensation and Benefits.
(a) For services rendered by the Executive under this Agreement,
the Executive shall be paid a base salary (the "Salary") at the rate of $335,000
per year. The Salary shall be payable in equal weekly installments.
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(b) As additional compensation, the Executive shall be eligible to
receive annually a bonus of up to one-half (1/2) of his Salary during each year
of the Term. The Bonus shall be payable on an annual basis within 120 days after
the end of each fiscal year.
(c) Transmedia shall, during the term of this Agreement, procure,
maintain in force, and pay all premiums on an insurance policy to be issued on
the life of the Executive, with his estate as beneficiary, in the face amount of
Five Hundred Thousand ($500,000) Dollars. Upon the expiration of the term of
this Agreement or upon the termination of the Executive's employment for any
reason other than "Cause" (as defined in Section 9 hereof), Transmedia shall
transfer the ownership of such policy to the Executive without any payment by
the Executive whether or not he becomes disabled during the employment Term.
(d) At all times during the Term, the Executive shall be included
in any life, medical, health and hospitalization insurance, pension, stock
option, stock ownership, incentive compensation and other benefit programs
maintained by or for Transmedia at the date hereof; provided, however, that
nothing herein shall be deemed to require Transmedia to maintain any such
benefit program in force during the Term or to restrict its ability to amend the
same in any fashion. Notwithstanding the previous sentence, however, if
Transmedia effects any change in the health and hospitalization insurance
program(s) maintained by or for it as of the effective date of this Agreement
(the "Current Health and Hospitalization Insurance Programs") such that the
Executive receives overall an amount of benefits or coverage that is, in the
reasonable judgment of the Compensation Committee of Transmedia's Board of
Directors, materially less than that which would be provided by the Current
Health and Hospitalization Insurance Programs, Transmedia shall provide the
Executive with cash payments sufficient to
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enable the Executive to purchase supplemental health and/or hospitalization
insurance to replicate the lost benefits and coverage to which he is presently
entitled under the Current Health and Hospitalization Insurance Programs or, if
such supplemental health and/or hospitalization insurance is not available, to
provide the Executive with cash payments sufficient to reimburse the Executive
for all uncovered medical expenses incurred by the Executive for himself and for
members of his immediate family that would have been paid under the Current
Health and Hospitalization Insurance Programs. If Transmedia hereafter
establishes any other benefit programs, the Executive shall be included therein
at least at the same level as the other senior executives of Transmedia. In
addition, in the event of the Executive's Disability (as defined below),
Transmedia will pay to the Executive the following: (i) during the first six
months of Disability, 100% of the Salary that would be payable to the Executive
but for such Disability; (ii) thereafter, and until the end of the Term, 75% of
such Salary; and (iii) a bonus for the period(s) provided in the next sentence.
The Executive shall receive a bonus for the entire fiscal year (in an amount
equal to one-half (1/2) of his Salary for the fiscal year) ending on any
applicable September 30, if said September 30 occurs during the first six months
of Disability; in all other instances, the Executive shall receive a portion of
the Bonus for an entire year determined by multiplying the bonus for the entire
fiscal year (which it shall be assumed, for computational purposes, would have
been one-half (1/2) of his Salary for the fiscal year) by a fraction, the
numerator of which is the total number of months starting with October lst and
ending upon the conclusion of said six months of Disability and the denominator
of which is 12. For purposes of this sub-paragraph (d), all calculations shall
be made on the basis of full and not partial months. For the purposes hereof
"Disability" shall mean a physical or mental impairment of such duration
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and degree that the Executive is determined by the Board of Directors of
Transmedia to be substantially unable because of the impairment to perform the
services described in Section 3.
(e) Transmedia agrees to provide the Executive with a One Thousand
Dollar ($1,000) monthly automobile allowance.
(f) Transmedia may provide to the Executive such additional
compensation, bonuses, and benefits as its Board of Directors deems appropriate,
but nothing herein shall obligate Transmedia to do so.
5. Vacation. The Executive shall be entitled to take four (4) weeks
paid vacation during each twelve-month period of his employment hereunder on a
basis consistent with the requirements of the business of Transmedia and its
subsidiaries and in accordance with Transmedia's customary practice for senior
executives.
6. Reimbursement of Expenses. During the term of this Agreement, the
Executive shall be reimbursed for reasonable travel, entertainment and other
expenses incident to the rendering of services hereunder, upon presentation of
expense statements or vouchers or such other supporting information as
Transmedia may customarily require of its senior executives.
7. Restrictions
(a) The Executive acknowledges that the business of Transmedia is
potentially nationwide in scope, and that it expects to be marketing its
products and services throughout a wider geographical area than that in which it
presently operates. Accordingly, during the Restricted Period (as defined
below), the Executive shall not, unless acting with Transmedia's prior written
consent: (i) directly or indirectly own, manage, operate, join, or control, or
participate in the ownership, management, operations or control of, or be
connected as
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a director, officer, employee, partner, stockholder, consultant or otherwise
with, any business or organization located in or doing business in the
Restricted Area (as defined below) which competes with the business of
Transmedia and its subsidiaries, licensees or franchisees as conducted at any
time during the term hereof; or (ii) interfere with, or divert or attempt to
divert from them the benefits of, any relationship with employees, agents,
suppliers, restaurant clients, membership card holders or other customers
maintained by Transmedia and its subsidiaries at any time during the Restricted
Period. However, if the Executive's employment hereunder is terminated without
"Cause" (as defined in Section 9 hereof) and the Executive does not receive
after such termination a severance payment in accordance with Transmedia's
Severance Pay Plan, then the provisions of this Section 7(a) shall cease, upon
such termination. For the purposes of this Agreement, (i) "Restricted Period"
means the twenty-four-month period commencing upon the earlier of (x) the
termination of the Executive's employment with Transmedia prior to the
expiration hereof, either voluntarily by the Executive or by Transmedia for
"cause"; or (y) the expiration of this Agreement after its stated term; and (ii)
"Restricted Area" means any geographical market in or with respect to which
Transmedia, within twelve months prior to the commencement of the Restricted
Period, is then operating or has taken significant affirmative steps to commence
operations. Nothing in this Section 7(a) shall be construed to prevent the
Executive from owning or dealing in any stock actively traded over-the-counter
or on any recognized exchange and issued by a corporation which may compete
directly or indirectly with Transmedia and its subsidiaries so long as the
Executive does not participate in
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the management, control, or operations of any such corporation and the
Executive's holdings do not at any time exceed Five Percent (5%) of the
outstanding shares of any class of stock of such corporation.
(b) The Executive agrees that all confidential and proprietary
information or data which he may now have or may obtain during his employment
relating in any way to the business, plans, programs, financial or operating
results, projections or budgets of Transmedia and its subsidiaries shall not be
disclosed to any other person, either during or after the termination of his
employment, unless Transmedia has given its prior consent to such disclosure or
such disclosure is a necessary incident to transactions which the Executive is
pursuing in accordance with duties assigns to him by Transmedia's Board of
Directors or its chief executive officer. The Executive shall promptly return
all tangible evidence of such confidential and proprietary matters to Transmedia
at the termination of his employment or upon Transmedia's earlier request.
(c) During the Restricted Period, the Executive shall not, on
behalf of himself or any business with which he may be associated, offer
employment or a consultancy position (or assist any other person in offering an
employment or a consultancy position) to any person who is an employee or a
consultant of Transmedia or any of its subsidiaries (including, for this
purpose, Frank Schmeyer). However, if the Executive's employment hereunder is
terminated without "Cause" (as defined in Section 9 hereof) and the Executive
does not receive after such termination a severance payment in accordance with
Transmedia's Severance Pay Plan, then the provisions of this Section 7(c) shall
cease, upon such termination.
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(d) The Executive acknowledges that the remedy at law for his
breach of the covenants contained in this Section 7 is inadequate, and that
therefore Transmedia and its subsidiaries shall be entitled, in addition to any
other right or remedy available to them, to injunctive relief and the remedy of
specific performance to restrain the Executive from committing or continuing any
such breach and to enforce the Executive's obligations hereunder.
(e) If any court or tribunal of competent jurisdiction shall
refuse to enforce any or all of the provisions of this Section 7, because
individually or taken together, they are deemed unreasonable, then the parties
hereto understand and agree that any such provision or provisions shall not be
void but for the purpose of such proceedings, shall be revised to the extent
necessary to permit the enforcement of such provisions.
8. Ownership of Work Product. The Executive acknowledges that during
his employment, he may conceive of, discover, invent or create inventions,
improvements, new contributions, literary property, material, ideas and
discoveries, whether or not patentable or copyrightable, which relate to the
business of Transmedia and its subsidiaries (all of the foregoing being
collectively referred to herein as "Work Product"), and that various business
opportunities appropriate for Transmedia and its subsidiaries may be presented
to him by reason of his employment. The Executive acknowledges that, unless
Transmedia otherwise agrees in writing, all of the foregoing shall be owned by
and belong exclusively to Transmedia, and he shall have no personal interest
therein. The Executive, at Transmedia's expense, shall further: (a) promptly
disclose any such Work Product and business opportunities to Transmedia; (b)
assign to Transmedia, upon request and without additional compensation, the
entire rights to such Work Product and business opportunities; (c) sign all
papers necessary to carry out the foregoing; and
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(d) give testimony in support of his discovery invention, or creation in any
appropriate case.
9. Termination.
(a) Notwithstanding anything contained herein to the contrary, the
Executive's employment hereunder: (i) shall automatically terminate upon the
Executive's death; (ii) may be terminated by the Executive if he is required to
relocate from New York, New York in order to perform his duties and services
hereunder; and (iii) may be terminated by Transmedia's Board of Directors for
"Cause" (as hereinafter defined) upon 60 days' prior written notice of
termination, subject to the Executive's right to cure certain breaches
constituting Cause, as provided below. For the purposes of this Agreement,
termination shall be deemed to be for Cause if: (A) the Executive is convicted
of a felony; (B) the Executive declares personal bankruptcy pursuant to any
applicable law; (C) the Executive commits an act of fraud of a material nature
with respect to Transmedia or misappropriates any of its funds; or (D) the
Executive willfully and repeatedly refuses to perform his duties pursuant to
this Agreement, or directly and repeatedly breaches any covenants contained
herein. The written notice of termination shall set forth with specificity the
reason for such termination. If the reason for such termination is the
Executive's wilful and repeated refusal to perform his duties hereunder or his
direct and repeated breach of any covenants contained herein, the Executive
shall have the right, within 30 days of his receipt of such notice, to notify
the Board of Directors of his intention to cure such breach. On or within 10
days before the effective date of termination, the Board of Directors shall meet
to determine whether such breach has been effectively cured and, upon the
majority vote of the Directors (not including the Executive) that it has been
cured, the notice of termination shall be deemed ineffective. The Executive
shall be entitled to be represented at
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such meeting by counsel. On the effective date of termination, except for the
reimbursement of expenses incurred to such date, the Executive shall cease to
have any further rights hereunder but shall be subject to all restrictions set
forth elsewhere herein.
(b) Except where the Executive has exercised his right to attempt
to cure pursuant to the preceding subsection, the Executive may, within 15 days
following delivery of a notice of termination for Cause, by written notice to
the Board of Directors of Transmedia, cause the matter of termination for Cause
by Transmedia to be discussed at the next regularly scheduled meeting of the
Board of Directors or at a special meeting of the Board of Directors requested
by majority of its members. The Executive shall be entitled to be represented at
such meeting by counsel. Such meeting shall be conducted according to procedures
deemed equitable by a majority of the Directors present. If at such meeting, it
shall be determined that this Agreement has been terminated without Cause, or
that such Cause shall be waived, the provisions of this Agreement shall be
reinstated with the same force and effect as if the notice of termination had
not been given; and the Executive shall be entitled to receive the compensation
and other benefits provided herein for the period from the effective date of the
notice of termination through the date of such reinstatement, plus all
reasonable costs of his counsel, as approved by the Board of Directors of
Transmedia. Except as provided in the first sentence of this subsection (b),
neither the Executive's election to pursue or forego the procedures set forth in
this subsection (b), nor a determination by the Board of Directors, at any
meeting pursuant to this
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subsection, that the Executive's employment hereunder was terminated for Cause,
shall prejudice or preclude the exercise any other right or remedy which the
Executive may have at law or otherwise as a result of the termination of his
employment hereunder.
(c) If, at any time within nine months following the occurrence
(after the date hereof) of a "Change in Control" (as defined in Transmedia's
1996 Long-Term Incentive Plan), there shall be a substantial reduction in the
executive duties and services which the Executive has theretofore been required
to perform hereunder or the Executive is required to relocate from New York, New
York in order to perform his duties and services hereunder, the Executive shall
have the right, upon thirty (30) days' notice to Transmedia, to cease further
performance of any services and duties hereunder and to receive the payment
described in Section 9(d) hereof.
(d) In the event that the Executive's employment is terminated by
the Company without "Cause" (as defined in Section 9 hereof) or by the Executive
pursuant to Section 9(a)(ii) or Section 9(c) hereof, (i) he shall receive the
greater of (A) his Salary (together with any bonus to which he previously became
entitled) for the balance of the Term, and (B) the severance payment to which he
would be entitled under Transmedia's Severance Pay Plan (assuming, solely for
the purposes hereof, that any reduction in executive duties and services or
required relocation following a "Change in Control" constitutes a termination of
the Executive's employment initiated by the Company within the meaning of such
Plan); and (ii) all unvested stock options theretofore granted the Executive
shall vest upon such termination and be thereafter exercisable in accordance
with the terms of Transmedia's 1996 Long-Term Incentive Plan. The payment of
such Salary or the making of such severance payment and the vesting of any such
stock options shall be conditioned upon the Executive's prompt execution and
delivery
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to Transmedia of a Release in the form of Exhibit A hereto. The receipt of any
such Salary or severance payment and the vesting of such stock options shall be
in full satisfaction of any amount otherwise due the Executive under
Transmedia's Severance Pay Plan.
10. Change of Control. The Executive acknowledges that Transmedia is
under no obligation to maintain its Severance Pay Plan in force during the Term
or to maintain him as an "eligible employee" thereunder during the Term.
11. Notices. Any Notices to be given hereunder shall be deemed to have
been given if delivered personally against receipt, if sent by nationally
recognized overnight delivery service, of if mailed by registered or certified
mail, return receipt requested, to the following address: if to Transmedia, at
11900 Biscayne Boulevard, North Miami, Florida 33181, with a copy to Morgan,
Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, to the attention
of Stephen P. Farrell, Esq.; and if to the Executive, at 750 Lexington Avenue,
New York, New York 10022. Either party may change his or its address set forth
above by giving written notice to the other party in accordance with this
Section.
12. Release. Concurrently with his execution of this Agreement and upon
the termination of the Executive's employment hereunder, and as a condition of
his receipt of any further payments or benefits from Transmedia after any such
termination, the Executive shall execute and deliver to Transmedia a release in
the form of Exhibit A hereto.
13. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
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14. Captions. The captions of the sections of this Agreement are for
the purpose of convenience only, are not intended to be part of this Agreement
and shall not be deemed to modify, explain, enlarge or restrict any of its
provisions.
15. Severability. If any clause or provision of this Agreement shall be
held invalid or unenforceable, in whole or in part, in any jurisdiction, such
invalidity or unenforceability shall attach only to such clause or provision, or
part thereof, in such jurisdiction, and shall not in any manner affect any other
clause or provision hereof in any jurisdiction.
16. Binding Effect; Assignment. This Agreement shall bind and inure to
the benefit of the respective heirs, representatives, successors and permitted
assignees of Transmedia and the Executive. Transmedia may assign this Agreement
or any of its rights and obligations hereunder to (i) any transferee of or
successor to all or substantially all of the assets of business of Transmedia
and its subsidiaries or (ii) any subsidiary or affiliate of Transmedia;
provided, however, that no such assignment shall release Transmedia from its
obligations hereunder. The Executive may not assign this Agreement or any of his
rights and obligations hereunder under any circumstances.
17. Miscellaneous. This Agreement embodies the entire understanding
between Transmedia and the Executive with respect to its subject matter, and
there is no extrinsic agreement of any kind affecting it. This Agreement also
supersedes and replaces any prior agreement with respect to the subject matter
of this Agreement. This Agreement may not be changed or terminated orally, and
no change, termination or waiver of this Agreement or of any of the provisions
herein contained shall be binding unless made in writing and signed by the party
against whom the same is sought to be enforced.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRANSMEDIA NETWORK INC.
By:
----------------------------
F. Philip Handy
Chairman of the Board
----------------------------
James M. Callaghan
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Exhibit A
---------
RELEASE
-------
For good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, the undersigned, JAMES M. CALLAGHAN, hereby
WAIVES, RELEASES AND COVENANTS NOT TO SUE Transmedia Network Inc. (the
"Company"), a Delaware corporation, and the Releasees (as defined below) with
respect to, and IRREVOCABLY AND UNCONDITIONALLY RELEASES, REMISES AND FOREVER
DISCHARGES the Company and the Releasees from, any and all claims, agreements,
promises, liabilities, rights, demands and causes of action of any kind
whatsoever, in law or equity, whether known or unknown, suspected or
unsuspected, fixed or contingent, apparent or concealed which he or his heirs,
executors, administrators, successors or assigns ever had or now have against
the Company or the Releasees and its past, present and future parents,
subsidiaries, affiliates, predecessors, successors and assigns; and its and
their past, present and future stockholders, directors, officers, agents,
representatives and employees (collectively, the "Releasees"), for, upon, or by
reason of any matter, cause or thing whatsoever occurring on or prior to the
date of this Release, including, without limitation, any and all claims arising
out of or relating to his employment, compensation and benefits with the
Company, and/or the termination thereof, and claims for costs, expenses and
attorneys' fees, INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS AND RIGHTS
UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED; TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, AS AMENDED; THE AMERICANS WITH DISABILITIES ACT, AS
AMENDED; THE EMPLOYEE RETIREMENT INCOME
<PAGE>
SECURITY ACT, AS AMENDED; THE NEW YORK STATE EXECUTIVE LAW, AS AMENDED; THE
FLORIDA STATE CIVIL RIGHTS ACT OF 1992; AND THE DADE COUNTY, FLORIDA EQUAL
OPPORTUNITY ORDINANCE, except for (1) claims under the Second Amended and
Restated Agreement (the "Employment Agreement"), dated as of October 1, 1998,
between the Company and the undersigned and, to the extent applicable pursuant
to the Employment Agreement, claims under the Company's Severance Pay Plan, (2)
claims for salary, bonus and other benefits due the Executive for services
rendered in Transmedia's 1998 fiscal year, (3) claims for indemnification,
contribution or reimbursement of expenses to which the undersigned may be
entitled as a director, officer and employee of the Company and its predecessors
and its subsidiaries, (4) options and rights to purchase Common Stock of the
Company which were heretofore granted to the undersigned and which are vested or
become vested in accordance with their terms (the "Stock Options") or the terms
of the Employment Agreement, and (5) retirement and medical insurance benefits
to which he is entitled as an employee of the Company. The undersigned
understands and agrees that other than as set forth above, he will not receive
any compensation, payments or benefits of any kind from the Company or the
Releasees and he expressly acknowledges and agrees that he is not entitled and
has no right to any such additional compensation, payment or benefit.
This Release may be specifically enforced in Court and may be used as evidence
in any proceeding in which any of the parties allege a breach hereof. In the
event any proceeding is
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brought to interpret, enforce or obtain relief from a breach of this Release,
the prevailing party shall recover all such party's costs, expenses and
attorneys' fees incurred in each and every such proceeding, including any and
all appeals therefrom.
This Release shall be subject to, governed by and interpreted in accordance with
the laws of the State of New York. The federal and state courts of New York
shall have exclusive jurisdiction to resolve any dispute concerning this Release
and both parties hereby agree to submit to the jurisdiction of such courts for
such purpose. This Release, the Employment Agreement and the Stock Options
contain the entire agreement between the parties and supersede and terminate any
and all previous agreements between them, whether written or oral, with respect
to the subject matter thereof, except for agreements for non-competition,
confidentiality, trade secrets, and the like, which shall remain in full force
and effect in accordance with their terms. All prior and contemporaneous
discussions and negotiations have been and are merged and integrated into, and
are superseded by, this Release, the Employment Agreement and the Stock Options.
This Release may not be changed orally. In the event any provision of this
Release shall be held to be unenforceable, the remaining portions shall remain
in full force and effect. This Release shall be binding upon the undersigned and
his heirs, administrators, representatives, executors, and assigns. The
undersigned agrees that by retaining the payment provided in the Employment
Agreement, he will have ratified this Release and therefore may not later
renounce it.
If this Release is acceptable to the undersigned, he should indicate his
agreement by signing and dating this Release in the space provided below and
returning the signed Release to the Company
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within 21 days of his receipt of this Release. THE UNDERSIGNED WILL THEN BE
PERMITTED TO REVOKE THIS RELEASE AT ANY TIME DURING THE PERIOD OF SEVEN DAYS
IMMEDIATELY AFTER HE SIGNS THIS RELEASE. THIS RELEASE WILL NOT BE EFFECTIVE OR
ENFORCEABLE UNTIL THE SEVEN-DAY REVOCATION PERIOD HAS EXPIRED WITHOUT HIS HAVING
EXERCISED HIS RIGHT OF REVOCATION. In the event he fails to execute and return
this Release on a timely basis, or he execute and then elects to revoke this
Release, this Release will be of no further force and effect, and neither he nor
the Company will have any further rights or obligations under this Release.
BY SIGNING THIS RELEASE, HE ACKNOWLEDGES AND AFFIRMS THAT HE IS COMPETENT, THAT
HE WAS AFFORDED A SUFFICIENT TIME PERIOD TO REVIEW AND CONSIDER THIS RELEASE,
THAT HE WAS ADVISED TO CONSULT AN ATTORNEY OF HIS CHOICE, THAT HE HAS READ AND
UNDERSTANDS AND ACCEPTS THIS RELEASE, AS FULLY AND FINALLY WAIVING AND RELEASING
ANY AND ALL CLAIMS AND RIGHTS WHICH HE MAY HAVE AGAINST THE COMPANY AND
RELEASEES, THAT NO PROMISES OR INDUCEMENTS HAVE BEEN MADE TO HIM EXCEPT AS SET
FORTH IN THIS RELEASE, THE EMPLOYMENT AGREEMENT AND THE STOCK OPTIONS, AND THAT
HE HAS SIGNED THIS RELEASE, FREELY, KNOWINGLY AND VOLUNTARILY, INTENDING TO BE
LEGALLY BOUND BY ITS TERMS.
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IN WITNESS WHEREOF, I have signed and sealed this Agreement
this day of , .
- ------------------------- -----------------------
James M. Callaghan (Print Witness Name)
- ------------------------- -----------------------
(Employee Signature) (Witness Signature)
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[Letterhead of KPMG LLP]
ACCOUNTANT'S CONSENT
The Board of Directors
Transmedia Network Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
------------
Fort Lauderdale, Florida
August 10, 1999
<PAGE>
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 19, 1999 (and to all references to our Firm) included in or made a
part of this Registration Statement on Form S-2.
/s/ Arthur Andersen LLP
-----------------------
Chicago, Illinois
August 6, 1999
