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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 30, 1999
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TRANSMEDIA NETWORK INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 001-13806 84-6028875
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(State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
11900 Biscayne Boulevard, Suite 460, Miami, Florida 33181
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (305) 892-3300
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(Former Name or Address, if Changed Since Last Report)
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ITEM 2. Acquisition or Disposition of Assets.
On June 30, 1999, we concluded the acquisition from SignatureCard, Inc.
("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. The assets acquired
included various intellectual property rights and computer software, membership
and merchant data, rights-to-receive, and, most significantly, a registered card
platform, among other things. As consideration for the assets, we (1) 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),
(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. 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. 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. 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) and a $10 million term loan from GAMI Investments,
Inc., an affiliate of EGI (which was drawn down in full).
The Chase Facility
The Chase facility permits us to borrow up to an aggregate principal
amount equal to the lesser of (i) $35 million and (ii) 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
the closing). The facility is secured by liens on substantially all of our
assets (including those purchased pursuant to the acquisition), other than those
subject to an existing securitization facility, as well as 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 remaining proceeds of the facility in connection with the ongoing Dining
A La Card business.
(Page 2 of 252 Pages)
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Amounts drawn down under the facility accrue interest, at our election,
at either (i) 0.25% plus the greater of (a) the prime rate publicly announced by
Chase in effect in New York, New York and (b) the federal funds effective rate
from time to time plus 1.5% or (ii) one month LIBOR plus 1.25%, and mature on
December 30, 1999 or upon the earlier effectiveness of a securitization facility
of the Dining A La Card rights-to-receive. The effective rate of interest on the
date hereof is 6.6746%. Interest is payable monthly in arrears. Any amounts
overdue under the facility accrue interest at the applicable rate plus 2%. The
agreement contains customary events of default, as well a cross default to all
other material indebtedness, including our existing securitization facility and
the GAMI loan. We intend to replace this bridge loan with a securitization
facility of the Dining A La Card rights-to-receive arranged through Chase.
In connection with the facility, we paid a $500,000 fee to Chase upon
the closing and are required to pay a monthly unused line fee equal to 0.375% of
the average unused amount.
The GAMI Loan
The GAMI loan in the amount of $10 million is unsecured and
subordinated to the Chase facility. It binds Transmedia as well as its 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 such prime
rate plus 8%.
The terms of this agreement require us to conduct a rights offering of
rights to purchase a new series of preferred stock to be offered to each
existing stockholder of record on a pro rata basis. The proceeds of the rights
offering will be used to repay all outstanding amounts under this loan.
In connection with the rights offering, EGI, through its affiliate and
our largest stockholder, Samstock L.L.C., has agreed to act as a standby
purchaser whereby, after exercising its initial rights and any additional
subscription privileges, it will purchase any shares not otherwise subscribed
for by our other stockholders. The GAMI loan matures on December 30, 1999 or the
earlier closing of such rights offering. The failure to meet certain
requirements relating to the rights offering and the occurrence of an event of
default under various agreements relating to the rights offering or under the
Chase facility would constitute defaults under this facility, among other
customary events. Upon the occurrence of an event of default, various standstill
covenants binding Samstock and its affiliates (which currently preclude 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 3, 2003) would
automatically terminate, and Samstock would have the right to designate an
additional number of directors to our Board of Directors such that the total
number of Samstock designees on our Board would constitute a majority, among
other remedies.
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 consummation of the rights
offering and the issuance to Samstock L.L.C. of warrants to purchase 1,000,000
shares of our common stock in consideration
(Page 3 of 252 Pages)
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of providing the loan and its obligation to act as a standby purchaser in
connection with the rights offering. If the rights offering is not consummated
or the warrants are not issued, we are required to pay GAMI an additional
$500,000 fee.
The Asset Purchase Agreement, the Option Agreement, the Services
Collaboration Agreement, the Chase Manhattan Bank Credit Agreement, the Security
Agreement, the Pledge Agreement and the GAMI Credit Agreement are exhibits to
this Current Report. The foregoing summary of material terms of these documents
is qualified in its entirety by reference to these exhibits.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired. To be filed by
amendment. Such information will be filed as soon as practicable following the
due date of this Form 8-K.
(b) Pro Forma Financial Information. To be filed by amendment. Such
information will be filed as soon as practicable following the due date of this
Form 8-K.
(c) Exhibits. The following exhibits are filed with this report:
Exhibit Number Description
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10.1 Asset Purchase Agreement, dated as of March 17, 1999, between
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 Network Inc. and SignatureCard, Inc.
10.3 Services Collaboration Agreement, dated as of June 30, 1999,
between Transmedia Network Inc. and SignatureCard, Inc.
10.4 Credit Agreement, dated as of June 30, 1999, between
Transmedia Network Inc. and The Chase Manhattan Bank.
10.5 Security Agreement, dated as of June 30, 1999, between
Transmedia Network Inc. and The Chase Manhattan Bank.
10.6 Pledge Agreement, dated as of June 30, 1999, between
Transmedia Network Inc. and The Chase Manhattan Bank.
10.7 Credit Agreement, dated as of June 30, 1999, between GAMI
Investments, Inc., Transmedia Network Inc., Transmedia
Restaurant Company Inc., Transmedia Service Company Inc. and
TMNI International Incorporated.
(Page 4 of 252 Pages)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSMEDIA NETWORK INC.
Date: July 14, 1999 By: /s/ Stephen E. Lerch
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Name: Stephen E. Lerch
Title: Executive Vice President and
Chief Financial Officer
(Page 5 of 252 Pages)
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Page
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<S> <C> <C>
10.1 Asset Purchase Agreement, dated as of March 17, 1999, between 7
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 82
Network Inc. and SignatureCard, Inc.
10.3 Services Collaboration Agreement, dated as of June 30, 1999, 88
between Transmedia Network Inc. and SignatureCard, Inc.
10.4 Credit Agreement, dated as of June 30, 1999, between Transmedia 125
Network Inc. and The Chase Manhattan Bank.
10.5 Security Agreement, dated as of June 30, 1999, between 189
Transmedia Network Inc. and The Chase Manhattan Bank.
10.6 Pledge Agreement, dated as of June 30, 1999, between Transmedia 202
Network Inc. and The Chase Manhattan Bank.
10.7 Credit Agreement, dated as of June 30, 1999, between GAMI 217
Investments, Inc., Transmedia Network Inc., Transmedia
Restaurant Company Inc., Transmedia Service Company Inc. and
TMNI International Incorporated.
</TABLE>
(Page 6 of 252 Pages)
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is dated as of March 17, 1999, between
Transmedia Network Inc., a Delaware corporation ("Purchaser"), and
SignatureCard, Inc., an Indiana corporation ("Seller").
WHEREAS, Seller operates a membership program, under the Dining a la
Card ("DALC") trade name and service mark, offering to members ("Members") cash
rebates or mileage credits in selected airline mileage programs on charges at
participating restaurants and other establishments ("Merchants") (the
"Business"); and
WHEREAS, Purchaser desires to purchase and Seller desires to sell
certain assets of the Business specified herein on the terms and subject to the
conditions specified herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, on the basis of and in reliance upon the
representations and warranties set forth in this Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
SALE OF ASSETS; CONSIDERATION
1.1 Sale of Assets. On the terms and subject to the conditions in this
Agreement and for the consideration specified herein, at the Closing (as
hereinafter defined):
(Page 7 of 252 Pages)
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(a) Seller shall sell, transfer, convey, assign and deliver to
Purchaser (or its designee), and Purchaser (or its designee) shall purchase,
acquire and accept from Seller, free and clear of all mortgages, pledges,
assessments, security interests, conditional sale or title retention contracts,
leases, liens, adverse claims, Taxes (as hereinafter defined), levies, charges,
options, rights of first refusal, transfer restrictions or other encumbrances of
any nature, or any contracts, agreements or understandings to grant any of the
foregoing (collectively, "Liens"), all of Seller's right, title and interest in,
to and under the following assets and rights, in each case to the extent used or
held for use in the Business, exclusive of the Excluded Assets (as hereinafter
defined):
(i) all rights-to-receive and other credits (both
funded and unfunded) consisting of food, beverage, tax and tip credits at all
Merchants wherever located, and all agreements, contracts, guarantees,
instruments, security agreements and other documents evidencing or securing, and
any and all collateral and security interests securing, such rights-to-receive
and credits and any and all claims, rights and causes of action related thereto
(collectively, the "Rights-to-Receive");
(ii) all arrearage sales contracts, rights and
arrangements made in connection with the Business as listed in Schedule
3.1(i)(i) (collectively, the "Arrearage Sale Contracts");
(iii) all fictional business names, trade names,
d/b/a names, logos, Internet domain names (www.dalc.com,
www.dining-a-la-card.com and www.diningalacard.com), trademarks, service marks
(including but not limited to DINING A LA CARD(R)), trade dress and any and all
federal, state, local and foreign applications, registrations and renewals
therefor, and all the goodwill associated therewith (collectively, "Marks"); all
patents (including but not limited to
(Page 8 of 252 Pages)
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all continuations, extensions, and reissues), patent applications, and
inventions and discoveries that may be patentable (collectively, "Patents"); all
copyrights in both published works and unpublished works (including but not
limited to the copyright subsisting in any Marketing Materials, Membership Data,
and Merchant Data (each, as defined below), and in online works such as Internet
web sites, excluding any proprietary software underlying such web sites, and any
federal or foreign applications, registrations and renewals therefor
(collectively, "Copyrights"); all rights in any and all licensed or proprietary
computer software, firmware, middleware, programs, applications, databases, and
files (in whatever form or medium), including all material documentation,
relating thereto, and all source and object codes relating thereto
(collectively, "Computer Software and Files"); all know-how, trade secrets,
confidential information, competitively sensitive and proprietary information
(including but not limited to pricing information, supplier information,
telephone and telefax numbers, and e-mail addresses), technical information,
data, process technology, business plans, drawings, and blue prints
(collectively, "Trade Secrets"); and the right to sue for past infringement, if
any, in connection with any of the foregoing (collectively, the "Intellectual
Property");
(iv) all agreements and arrangements permitting
Seller's use of the Intellectual Property and Computer Equipment (as hereinafter
defined) owned by third parties, or permitting third party use of the
Intellectual Property or Computer Equipment owned by Seller, or for the
processing, use, licensing, leasing, storage, or retrieval of software, data and
information related to the Business (collectively, "Intellectual Property and
Computer Agreements");
(v) all lists, files, records, information and data
related to Members who were acquired other than pursuant to an Excluded Contract
(the "Membership Data") and all rights
(Page 9 of 252 Pages)
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to such Members, and all lists, files, records, information and data related to
Merchants (the "Merchant Data") and all rights to such Merchants;
(vi) any and all accounting business information,
management information and internal reporting data and related books and records
(in whatever form or medium maintained), including but not limited to
advertising, marketing and sales programs, business, marketing and strategic
plans, research and development reports and records, and advertising copy
(including radio and television scripts), creative materials, production
agreements, and all other promotional brochures, flyers, inserts and other
materials used exclusively in connection with the Business (collectively, the
"Marketing Materials");
(vii) all computer tapes, discs and other media
which are used to store Intellectual Property, Membership Data, Merchant Data
and Marketing Materials (the "Computer Equipment");
(viii) all agreements, contracts, guaranties,
instruments and other documents to which Seller is a party that are listed in
Schedule 3.1(i)(ii) (the "Assigned Contracts");
(ix) all claims of Seller against third parties
relating to the Assets (as hereinafter defined), whether choate or inchoate,
known or unknown, or contingent or non-contingent; and
(x) to the extent transferable, any and all Permits
(as hereinafter defined) used exclusively in connection with the Business;
all as the same shall exist on the Closing Date (items (i) through (x) being,
collectively, the "Assets").
(Page 10 of 252 Pages)
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1.2 Excluded Assets. Notwithstanding anything in this Agreement to the
contrary, all assets, properties and rights of Seller other than those set forth
in Section 1.1, including without limitation, the following assets, properties
and rights of Seller (the "Excluded Assets"), shall be excluded from and shall
not constitute part of the Assets, and Purchaser (and its designee) shall have
no rights, title or interest in or duties or obligations of any nature
whatsoever with respect thereto by virtue of the consummation of the
transactions contemplated by this Agreement:
(i) all contracts and other agreements to which
Seller is a party (other than those described in Section 1.1 above), including
contracts relating to marketing partner arrangements, that are listed in
Schedule 1.2(i) (the "Excluded Contracts");
(ii) all rights of Seller in and to the trademarks,
service marks, and any applications, registrations and renewals therefor, and
all the goodwill, associated therewith, licensed by or subject to the Master
License Agreement dated as of October 14, 1996 between Seller and CardPlus Japan
Co., Ltd., as amended (the "Japanese License Agreement") and which are listed
(by country and trademark) on Schedule 1.2(ii) hereto (collectively, the
"Excluded Marks");
(iii) all rights of Seller in and to (x) the Card
Member System, including all documentation relating thereto and all source and
object codes relating thereto and (y) the Japan DALC Interface Software (as
defined in the Japan DALC/USA DALC Interface Software Development Agreement
between Seller and Card Plus Japan Co., Ltd. dated September 17, 1997)
(together, the "Excluded Software");
(iv) all rights of Seller in the Internet domain
name "sigg.com" and in and to the Internet website accessed via such domain
name, including but not limited to all copyrights in all materials on such site
and the software underlying such site, all trademarks, service marks,
(Page 11 of 252 Pages)
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trade names and goodwill associated therewith, all proprietary computer
software, programs, applications, databases, files (in whatever form or medium)
and all proprietary information related thereto, in each case only to the extent
that the foregoing is not otherwise required to be listed on Schedule 3.1(j)(i)
hereto;
(v) all rights of Seller in and to the Japanese
License Agreement and the Original Equityholders Agreement dated as of November
15, 1996 by and among Richard Parkinson, Masaru Morimoto, Hiroshi Sato and
Seller, as amended, and all other agreements between Seller and CardPlus Japan
Co., Ltd. or related thereto, as set forth in Schedule 1.2(v) hereto;
(vi) all lists, files, records, information and data
relating to Members who were acquired pursuant to an Excluded Contract (the
"Excluded Membership Data") and all rights to such Members;
(vii) all advertising, marketing and sales programs,
advertising copy (including radio and television scripts), creative materials,
production agreements, broadcasting rights, broadcasting and advertising time,
space, allowances and credits, and other promotional brochures, flyers, inserts
and other materials used solely in connection with an Excluded Contract;
(viii) all proprietary software underlying the
websites included among the Intellectual Property;
(ix) any assets, properties, rights and interests
relating to the Excluded Liabilities (as hereinafter defined); and
(x) all rights of Seller under this Agreement and
the documents and instruments delivered to Seller pursuant to this Agreement.
(Page 12 of 252 Pages)
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1.3 Consideration.
(a) As consideration for the Assets:
(i) Purchaser shall deliver to Seller at the Closing:
(A) stock certificates evidencing and representing
400,000 shares of Common Stock, par value $.02 per share, of Purchaser (the
"Closing Date Shares"), registered in the name of Seller (or its nominee); and
(B) options, evidenced by an option agreement
substantially in the form of Exhibit A attached hereto (the "Option"), to
purchase an additional 400,000 shares of Common Stock, par value $.02 per share,
of Purchaser (the "Option Shares"), having an exercise price and such other
terms and conditions as are specified in the Option.
(ii) Purchaser shall pay to Seller at the Closing, an amount
(the "Estimated Amount") in cash equal to the cash funded by Seller for all
Qualified Rights-to-Receive (as hereinafter defined), net of usage and
adjustments, as set forth on a schedule thereof to be prepared by Seller and
delivered to and approved by Purchaser (which approval shall not be unreasonably
withheld or delayed) at least two but not more than five business days prior to
Closing, by wire transfer of immediately available funds to an account in
Seller's name at such bank or banks in the United States as Seller shall specify
in writing to Purchaser at least two business days prior to the Closing Date.
(iii) After the total of the amounts Purchaser receives,
within two years after the Closing Date, through normal usage or collection
efforts of all Rights-to-Receive equals the Closing Amount (as hereinafter
defined and as finally determined), Purchaser will pay to Seller in cash the
amounts specified in the next sentence. The amounts payable to Seller pursuant
to the
(Page 13 of 252 Pages)
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preceding sentence shall be one-half of the lesser of (i) Seller's funded cost,
net of usage and adjustments, in, and (ii) the amount actually received (net of
out-of-pocket collection costs) in respect of, any Rights-to-Receive which
Purchaser receives, through normal usage or collection efforts, within two years
after the Closing Date (but after the date on which the condition in the first
sentence of this paragraph (iii) is satisfied). For the purposes of the
preceding sentences, (1) the amounts Purchaser shall be deemed to receive with
respect to any Qualified Right-to-Receive shall not exceed the amount Purchaser
pays Seller for such Qualified Right-to-Receive pursuant to this Section 1.3;
and the amounts Purchaser shall be deemed to receive with respect to any
Non-Qualified Right-to-Receive shall not exceed Seller's funded cost therefor;
(2) the amounts payable to Seller shall be reduced by any third party
out-of-pocket collection costs Purchaser incurs with respect to the
Rights-to-Receive; (3) if the condition stated in the first sentence of this
paragraph (iii) is satisfied within two years following the Closing Date, any
amounts recovered at any time with respect to any Rights-to-Receive following
judgment or settlement of proceedings commenced prior to or within two years of
the Closing Date to recover the same shall be deemed to have been recovered
within such two-year period; and (4) no Rights-to-Receive originated after the
Closing Date (whether by renewal or otherwise) shall be included in any
calculation pursuant to this paragraph (iii). Payments that Seller is entitled
to receive under this paragraph (iii) shall be made within 45 days following the
last day of each calendar quarter after the date on which the condition in the
first sentence of this paragraph (iii) is satisfied. It is expressly understood
and agreed that Purchaser's payment obligations to Seller under this paragraph
(iii) of Section 1.3(a) may be subordinate and junior in right of payment to the
rights of lenders under any financing arrangements into which Purchaser may
enter in connection with the transactions contemplated hereby and
(Page 14 of 252 Pages)
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Purchaser shall not be obligated to make any such payment to Seller until after
such payment may be made under the terms of such financing arrangement.
(iv) Effective as of the Closing Date, Purchaser will assume
and agree to pay, perform and discharge, as and when due, and indemnify and hold
Seller harmless from and against, (x) each obligation of Seller to be performed
after the Closing Date with respect to the Assets and the Assigned Contracts and
(y) each other liability of Seller thereunder (including liabilities for any
breach of a representation, warranty or covenant, or for any claims for
indemnification contained therein) to the extent and only to the extent that
such liability is due to the actions of Purchaser (or any of Purchaser's
Affiliates, representatives or agents) after the Closing Date (collectively, the
"Assumed Liabilities"). Purchaser shall not assume, and shall not be obligated
to pay, perform or discharge any liability or obligation of Seller other than
the Assumed Liabilities (whether or not related to the Assets or Business)
(collectively, the "Excluded Liabilities"), and shall not be obligated for any
other claim, loss or liability relating to any act, omission or breach by Seller
with respect to the Business, the Assets or the Assigned Contracts, or for any
claim, loss or liability related to the Excluded Assets or the Excluded
Liabilities, all of which Seller shall remain obligated to pay, perform and
discharge and to indemnify and hold Purchaser harmless against.
(b) "Qualified Rights-to-Receive" means the Rights-to-Receive,
exclusive of credit balances, (i) which are included among the Assets and
reflected on the unaudited balance sheet of the Business (net of any reserves)
prepared by Seller in the ordinary course of business as of the close of the
month preceding the Closing Date or are acquired by Seller after the date of
such balance sheet in the ordinary course of business; (ii) which constitute
food, beverage, tax and tip credits at
(Page 15 of 252 Pages)
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Merchants that are currently in business, as to which Seller has not received
written notice of, or does not otherwise have actual knowledge of, the
commencement of any bankruptcy (whether voluntary or involuntary),
reorganization or liquidation proceeding, arrangement with creditors or similar
process or as to which Seller is otherwise explicitly informed will not remain
in business for at least twelve months following the Closing Date, and (iii)
which, based upon average sales at each Merchant during the two months prior to
the Closing Date, can be expected to be used in the twelve-month period
immediately following the Closing Date; provided, however, that all
Rights-to-Receive reasonably funded and purchased by Seller in the ordinary
course of business and consistent with past practice within two calendar months
prior to the Closing Date involving Merchants that had not previously
participated in the Business shall be included in the calculation of Qualified
Rights-to-Receive at 100% of the funded cost thereof, net of usage and
adjustments, as of the Closing Date. "Non-Qualified Rights-to-Receive" means all
Rights-to-Receive that are not Qualified Rights-to-Receive.
(c) Post Closing Adjustment. Promptly following the Closing
but in no event later than thirty days following the Closing, Purchaser and
Seller shall each calculate the actual amount of Qualified Rights-to-Receive,
net of usage and adjustments, included among the Assets at the Closing Date and
shall deliver to each other a statement (the "Closing Statements") setting forth
its calculation of the amount of cash funded by Seller therefor (the "Closing
Amount"). The Closing Statements shall be prepared from the books and records
maintained by Seller and transferred to Purchaser at the Closing in connection
with the Business and shall fairly present the amount of Qualified
Rights-to-Receive included among the Assets on a basis consistent with that
regularly employed by Seller to value its Rights-to-Receive. In the event that
the Closing Amount
(Page 16 of 252 Pages)
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set forth on the Closing Statement prepared by one party differs from that set
forth on the Closing Statement prepared by the other, the parties shall use
their commercially reasonable efforts to agree upon the Closing Amount within
ten days following the date on which both parties have received the Closing
Statement prepared by each other. Any dispute not resolved within such 10-day
period shall be submitted for resolution to a mutually acceptable, independent
public accounting firm the expense of whose retention shall be shared equally by
Seller and Purchaser, and the decision of such firm shall be final and binding
on the parties. In the event that the Estimated Amount exceeds the Closing
Amount (as finally determined), Seller shall pay to Purchaser the amount of such
overage. In the event that the Closing Amount (as finally determined) exceeds
the Estimated Amount, Purchaser shall pay to Seller the amount of such
shortfall. Any payments to be made pursuant to this paragraph (c) shall be made
three (3) business days following the earlier of the date on which the (x)
parties agree on the Closing Amount or (y) the decision of any independent
accounting firm is rendered, and shall be made in the same manner as provided in
paragraph (a)(ii) above.
(d) Put Right.
(i) Seller shall have the right, upon delivery to Purchaser of
notice in accordance with Section 9.7 hereof, to require Purchaser to purchase
all or any part of the Closing Date Shares at a purchase price of $8.00 per
share which price shall be adjusted equitably in the event of any stock split,
combination or the like (the "Put Right"), free and clear of all Liens, proxies,
voting restrictions, and other encumbrances, at any time within the period
beginning on the date that is six (6) months after the Closing Date and ending
on the third (3rd) anniversary of the Closing Date (the "Put Period"); provided
that Seller shall have delivered to Purchaser a certificate, signed by its Chief
Executive Officer or Chief Financial Officer, stating that, as of the date of
(Page 17 of 252 Pages)
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delivery of the Put Notice (as hereinafter defined) and as of the Put Date (as
hereinafter defined), no material breach by it exists or will exist (or, with
notice, lapse of time or both, would exist) under Section 11.2 of the Services
Collaboration Agreement (as hereinafter defined); provided further, that if
Seller is unable to deliver such certificate as at the dates set forth above but
is able to cure such material breach within the cure period provided in Section
11.2 of the Services Collaboration Agreement, Seller shall be entitled to
exercise the Put upon such cure, regardless of whether the Put Period has then
tolled.
(ii) In order to exercise the Put Right, Seller shall deliver
written notice of its exercise thereof to Purchaser on any business day during
the Put Period ("Put Notice"). A Put Notice shall be irrevocable and shall
specify the number of Closing Date Shares as to which Seller is exercising the
Put Right and the date (the "Put Date") for the repurchase of such Closing Date
Shares, which shall not be less than twenty (20) nor more than sixty (60) days
from the date of delivery of the Put Notice, and the bank account to which the
purchase price therefor shall be paid. Seller shall not be entitled to deliver
more than three (3) Put Notices to Purchaser.
(iii) Each closing of the repurchase of the Closing Date
Shares pursuant to this paragraph (d) shall take place on the relevant Put Date
at the offices of Purchaser or on such other date or at such other place as the
parties may agree. At the closing thereof, Purchaser shall deliver to Seller the
purchase price for the Closing Date Shares being repurchased, payable by wire
transfer of immediately available funds to the bank account specified in the Put
Notice, against delivery by Seller to Purchaser (or its designee) of stock
certificates evidencing such Closing Date Shares, duly endorsed for transfer,
free and clear of all Liens, proxies, voting restrictions and other
(Page 18 of 252 Pages)
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encumbrances and with appropriate stock transfer stamps attached and appropriate
stock powers duly endorsed in blank.
(e) Allocation of Consideration. The consideration payable by
Purchaser to Seller pursuant to this Section 1.3 represents the amount agreed
upon by the parties to be the aggregate value of the Assets and shall be
allocated among the Assets in accordance with their respective fair market
values, which the parties have agreed are as set forth on Schedule 1.3 hereto.
Any adjustment to the consideration made pursuant to paragraph (c) of this
Section 1.3 shall be reflected as an adjustment to the amount set forth on
Schedule 1.3 that is allocated to the specific Asset, if any, giving rise to the
adjustment, and if any such adjustment does not relate to a specific Asset, such
adjustment shall be allocated among the Assets in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations thereunder. Purchaser and Seller shall report the purchase and sale
of the Asset, including, without limitation, on all tax returns (including,
without limitation, Asset Acquisition Statements on IRS Form 8594) prepared and
filed by or for any of Purchaser or Seller, in accordance with the allocation
made pursuant to this paragraph (e) of Section 1.3 and shall not take a position
in any tax proceeding or audit or otherwise that is inconsistent with such
allocation.
ARTICLE II
CLOSING
2.1 Closing.
(a) Date and Place. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of Morgan,
Lewis & Bockius LLP, 5300 South East
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Financial Center, 200 S. Biscayne Boulevard, Miami, Florida 33131-2339, or such
other location as the parties shall agree, commencing at 10:00 a.m. local time,
on the fifth business day following the satisfaction or waiver of the conditions
specified in Article V hereof, or at such other time and place as the parties
may agree in writing. Subject to Section 6.1(f) hereof if, on the Closing Date,
a breach in any representation or warranty hereunder shall exist such that the
conditions set forth in Section 5.1(a) or Section 5.2(a) hereof are not
satisfied, the Closing shall be adjourned for up to thirty (30) days to allow
Purchaser or Seller, as the case may be, to cure such breach or inaccuracy.
"Closing Date" means Seller's close of business on the date on which the Closing
occurs.
(b) Documents to be Delivered by Seller. At the Closing,
Seller shall execute and deliver to Purchaser (or its designee):
(i) copies of (A) the resolutions of the Boards of
Directors of Seller, Montgomery Ward Enterprises, Inc., a Delaware corporation
and the sole shareholder of Seller ("MWE") and Montgomery Ward Holding Corp., a
Delaware corporation and the indirect corporate parent of MWE and Seller
("Parent") authorizing and approving this Agreement, the Additional Agreements
(as hereinafter defined) and the transactions contemplated hereby and thereby,
and (B) the constitutive documents of Seller, MWE and Parent, each as amended
and certified by the respective corporate Secretaries or Assistant Secretaries
of Seller, MWE and Parent to be true, correct, complete and in full force and
effect and unmodified as of the Closing Date;
(ii) a duly executed counterpart of the General
Assignment, Assumption and Bill of Sale substantially in the form of Exhibit B
hereto (the "Bill of Sale");
(Page 20 of 252 Pages)
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(iii) copies of all material approvals, consents of
or filings with governmental authorities, and all material consents and
approvals of third persons, required to permit the consummation of the
transactions contemplated by this Agreement;
(iv) a certificate, dated the Closing Date signed by
the Executive Vice President, General Counsel and Secretary of Parent, stating
that the Creditors' Committee of Parent has consented to the entering into by
Seller of this Agreement and the Additional Agreements and the consummation by
Seller of the transactions contemplated hereby and thereby;
(v) duly executed instruments of assignment
(including, without limitation, the Trademark Assignment in substantially the
form of Exhibit C-1 hereto and the Domain Name Assignment in substantially the
form of Exhibit C-2 hereto (together, the "Intellectual Property Assignments")
to Purchaser of all of the Intellectual Property, including without limitation,
the DINING A LA CARD(R) trademark and tradename;
(vi) the certificate required by Section 5.1(f);
(vii) evidence of due filing by Parent with the
United States Federal Trade Commission (the "FTC") and the Antitrust Division of
the United States Department of Justice (the "DOJ") pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the expiration of any waiting period thereunder;
(viii) incumbency certificates of the appropriate
officers of Seller, MWE and Parent;
(ix) duly executed assignments of the Financing
Statements (as hereinafter defined) and evidence of the due filing of the same;
(Page 21 of 252 Pages)
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(x) a duly executed counterpart of the Services
Collaboration Agreement, dated as of the Closing Date, by and between Purchaser
and Seller in substantially the form of Exhibit D hereto (the "Services
Collaboration Agreement");
(xi) a duly executed counterpart of the License
Agreement and the Software License Agreement, each dated as of the Closing Date
by and between Purchaser and Seller, in substantially the form of Exhibits E-1
and E-2 hereto, respectively (together, the "License Agreements");
(xii) a duly executed counterpart of the Transition
Services Agreement, dated as of the Closing Date, by and between Purchaser and
Seller, in substantially the form of Exhibit F hereto (the "Transition Services
Agreement");
(xiii) a counterpart of a Services Agreement, dated
as of the Closing Date, by and between Purchaser and CardPlus Japan Co., Ltd.,
duly executed by CardPlus Japan Co., Ltd., in form and substance reasonably
acceptable to Purchaser, Seller and CardPlus Japan Co., Ltd. (the "Services
Agreement"; together with the Bill of Sale, the Services Collaboration
Agreement, the Option, the Transition Services Agreement and the License
Agreements, the "Additional Agreements"); and
(xiv) such other documents or instruments to effect
the transfer of the Assets and the other transactions contemplated hereby, and
in such form, as Purchaser reasonably may request.
(c) Documents to be Delivered by Purchaser. At the Closing,
Purchaser (and its designee, if any) shall execute and deliver to Seller:
(Page 22 of 252 Pages)
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(i) copies of (A) the resolutions of the Boards of
Directors of Purchaser (and its designee) authorizing and approving this
Agreement and all other transactions and agreements contemplated hereby, and (B)
the constitutive documents of Purchaser (and its designee), each as amended and
certified by the respective corporate Secretary or Assistant Secretary of
Purchaser (and its designee) to be true, correct, complete and in full force and
effect and unmodified as of the Closing Date;
(ii) the certificate required by Section 5.2(f)
hereof;
(iii) evidence of payment of the Estimated Amount
determined in accordance with the provisions of Section 1.3 hereof in the manner
set forth in such Section;
(iv) stock certificates representing the Closing
Date Shares registered in the name of Seller (or its nominee);
(v) the Option, duly executed;
(vi) a certificate of incumbency of the appropriate
officers of Purchaser (and its designee);
(vii) evidence of the due filing by Purchaser with
the FTC and the DOJ pursuant to the HSR Act and the expiration of the waiting
period thereunder;
(viii) a duly executed counterpart of the Services
Collaboration Agreement;
(ix) a duly executed counterpart of the License
Agreements;
(x) a duly executed counterpart of the Services
Agreement;
(xi) a duly executed counterpart of the Transition
Services Agreement;
(xii) an instrument of assumption of the Assumed
Liabilities; and
(Page 23 of 252 Pages)
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(xiii) such other documents or instruments to effect
the transfer of the Assets and the other transactions contemplated hereby, and
in such form, as Seller reasonably may request.
(d) Rights of Purchaser. From and after the Closing, Purchaser
as successor in interest to Seller but on behalf of and for the benefit of
Purchaser, may at its own cost or expense collect, assert or enforce any claim,
right or title of any kind in or with respect to any of the Assets (including,
without limitation, instituting and prosecuting any proceedings in connection
therewith), or defend or compromise any and all claims, actions, suits or
proceedings in respect of any of the Assets, and otherwise do all such acts and
things in relation to the Assets as it may deem advisable (including, without
limitation, asserting any rights under any of the Assets or performing or
accepting performance under any agreements included among the Assets), and
Purchaser shall retain for its own account any amounts collected pursuant to the
foregoing, including any sums payable as interest in respect thereof, subject
only to the provisions of Section 1.3(a)(iii) and Section 4.17 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Seller's Representations and Warranties. Seller represents,
warrants and covenants to Purchaser that, except as disclosed in the disclosure
schedules to this Agreement (the "Disclosure Schedules"), which Disclosure
Schedules specifically reference the particular Sections hereof to which they
relate:
(a) Organization and Qualification. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Indiana, has all requisite
(Page 24 of 252 Pages)
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corporate power and authority to own, lease and operate the Assets as they are
now being owned, leased and operated and to carry on the Business as it is now
being conducted and is duly qualified, registered or licensed and in good
standing to do business in each jurisdiction in which the nature of the Business
or the ownership of the Assets makes such qualification necessary, except such
jurisdictions, if any, where the failure to be so qualified would not have a
Material Adverse Effect. The jurisdictions in which Seller is qualified to
conduct business are set forth on Schedule 3.1(a). "Material Adverse Effect"
means any event, change, changes, effect or effects that individually or in the
aggregate are materially adverse to (x) the ownership, use, operation or value
of the Assets or (y) the condition (financial or other) or results of operations
of, or prospects for, the Business.
(b) Authority. Seller has all requisite corporate power and
authority to execute and deliver this Agreement and the Additional Agreements to
which it is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Seller of this Agreement and the Additional Agreements to which it
is a party and the consummation by Seller of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate or
stockholder action, and no other corporate proceedings on the part of Seller or
any Affiliate of Seller are necessary to authorize this Agreement or the
Additional Agreements to which Seller is a party or to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and at
the Closing the Additional Agreements to which Seller is a party will be, duly
executed and delivered by Seller and constitute or will constitute, as
applicable, legal, valid and binding obligations of Seller enforceable against
it in accordance with their respective terms.
(Page 25 of 252 Pages)
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(c) No Conflict; Required Filings and Consents.
(i) The execution, delivery and performance by
Seller of this Agreement and the Additional Agreements to which it is a party do
not, and the consummation of the transactions contemplated hereby and thereby
will not, (i) conflict with or violate the Articles of Incorporation or By-Laws
of Seller; (ii) conflict with or violate any federal, state, local or foreign
laws, rules, ordinances, regulations, licenses, judgments, orders or decrees
(collectively "Laws") applicable to Seller, the Business or the Assets or by
which Seller, the Business or the Assets are bound or affected; or (iii) result
in any material breach of or constitute a material default (or an event that
with notice or lapse of time or both would become a material default) under, or
give to any other person any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the Assets
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
mortgage, license, permit, franchise or other instrument or obligation to which
Seller is a party or by which Seller, the Business or the Assets are bound or
affected.
(ii) The execution, delivery and performance by
Seller of this Agreement and the Additional Agreements to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
do not require Seller or any of its Affiliates (including Parent) to receive any
consent, approval, authorization or permit from, or make any filing with or
notification to, any governmental agency, authority or court or any other
person, body or committees (including, without limitation, any consent,
approval, authorization, permit, filing or notification in connection with or
relating to the bankruptcy proceedings of Parent) other than pursuant to the HSR
Act and those which will have been obtained or made prior to the Closing Date.
(Page 26 of 252 Pages)
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(d) Permits; Compliance with the Law. Seller is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders necessary
for it to own and use the Assets as presently owned and used and to carry on the
Business as it is now being conducted (the "Permits"), except for those Permits
the failure of which to obtain or maintain would not result in a Material
Adverse Effect, and no suspension, revocation, cancellation or refusal to review
any of the Permits has occurred, or to the knowledge of Seller, is threatened or
anticipated. Each of the Permits is listed on Schedule 3.1(d). Seller has
conducted and is conducting the Business, and has owned, used and operated and
is owning, using and operating the Assets in compliance with, and not in
violation in any material respect of, (i) any Law applicable to it or by which
it, the Business or the Assets is bound or affected or (ii) any of the Permits
(except in either case for any such violations as, singly or in the aggregate,
would not have a Material Adverse Effect), and neither Seller nor any Affiliate
of Seller has received any written notice to any such effect.
(e) Financial Statements. Each of the Financial Statements (as
hereinafter defined), including all related schedules, delivered or to be
delivered by Seller to Purchaser, relating to Seller have been, or upon delivery
will be, prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and followed in the
preparation of the consolidated financial statements of Signature/Financial
Marketing, Inc., a Delaware corporation and the sole stockholder of MWE ("SFM"),
and its subsidiaries as at December 31, 1997 and 1996, and for the two fiscal
years in the period ended December 31, 1997, except for (i) the absence of
footnotes, and (ii) with respect to financial statements for interim periods,
year-end adjustments, none of which are expected to have a Material Adverse
Effect. The
(Page 27 of 252 Pages)
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balance sheets included among the Financial Statements fairly present, in all
material respects, the condition of Seller as at the dates thereof, and the
statements of income included among the Financial Statements do, or will upon
delivery, fairly present, in all material respects, the results of the
operations of Seller for the periods indicated. Since December 31, 1997, there
has been no material change in accounting policies or practices of Seller.
"Financial Statements" means the unaudited balance sheets of Seller as of
December 31, 1996 and 1997 and November 30, 1998 and the related statements of
income for the periods then ended. For purposes of this paragraph (e),
"material" and "Material Adverse Effect" shall have the meaning given to such
terms as applied to Parent.
(f) Absence of Certain Changes. Since December 31, 1997,
Seller has operated the Business in the ordinary course, diligently and in good
faith, consistent with past practices and there has not been (i) any material
adverse change in the business, financial or other condition, assets, results of
operations or prospects of Seller relating to the Business; (ii) any damage,
destruction or loss, whether covered by insurance or not, which has had a
Material Adverse Effect; (iii) any entry into any material commitment or
transaction relating to the Business other than in the ordinary course of
business; or (iv) any sale or other disposition by Seller of any assets or
properties relating to the Business other than in the ordinary course of
business.
(g) Title to Assets. Seller owns, or will own on the Closing
Date, free and clear of any Liens, and has or will have on the Closing Date,
full right to sell, assign and convey, all of the Assets, and at the Closing
will convey the Assets to Purchaser (or its designee), free and clear of any
Liens.
(Page 28 of 252 Pages)
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(h) Absence of Litigation. There is no pending or threatened
in writing, nor has there been at any time during the twelve months preceding
the date hereof, any, claim, complaint, action, suit, litigation, proceeding or
arbitration or, to Seller's knowledge, any inquiry or investigation of any kind
by any state attorney general, consumer protection agency or other governmental
or self-regulatory agency seeking to enforce consumer protection laws or any
other persons (i) which involves the Business or any of the Assets, or (ii)
which seeks to enjoin, delay or restrict any of the transactions contemplated by
this Agreement or the Additional Agreements. Neither Seller nor any of its
Affiliates is subject to any judgment, order, writ, injunction, decree or award
which relates to any of the Assets or to the Business.
(i) Merchant Data; Contracts; No Default; Etc.
(i) (A) Seller has delivered to Purchaser a computer
disc containing a complete and accurate list of all Merchants and all Merchant
Data available as of January 5, 1999, including, in particular, with respect to
each Merchant, the Merchant's name, address, phone and fax number, bank account
number, bank name, address, phone and fax number and ABA transit number, the
funded and unfunded Rights-to-Receive, and other credit balances, Arrearage Sale
Contracts, and each financing statement or other similar filing made by or on
behalf of Seller to perfect any Liens securing any Rights-to-Receive, Arrearage
Sale Contracts, credits, loans or advances or any of the other receivables
included among the Assets (the "Financing Statements"). Correct and complete
copies of all written agreements, Financing Statements, and other documents
evidencing or securing the Rights-to-Receive and Arrearage Sale Contracts,
together with all related amendments, supplements and other instruments
(including side letters) effecting a modification or waiver of the
(Page 29 of 252 Pages)
<PAGE>
terms thereof, have been made available to Purchaser and the material terms of
any oral agreements and related Rights-to-Receive, if any, have been disclosed
to Purchaser.
(B) Each Right-to-Receive and any Liens securing the
same, and each Arrearage Sale Contract is valid, subsisting and, to Seller's
knowledge, enforceable, save only that such enforceability may be affected by
bankruptcy, insolvency, fraudulent conveyance, moratorium and other similar laws
affecting the rights of creditors generally and by general principles of equity
(whether considered in a proceeding at law or in equity), and any such liens or
security interests have been, and remain, to Seller's knowledge, duly perfected
under all applicable Laws, to the extent such liens can be perfected by the
filing of a UCC Financing Statement filed at the office of the Secretary of
State in the state which the Merchant to which such financing statement relates
is located. There is no material default (or any event known to Seller which,
with the giving of notice or lapse of time or both, would constitute a material
default) by Seller or, to the knowledge of Seller, any other party, in the due
and timely payment or performance of any obligation relating to any
Right-to-Receive or Arrearage Sale Contract. Seller has not received any written
notice of a filing or proposed filing under any bankruptcy, insolvency or other
law for the relief of debtors by any Merchant whose Rights-to-Receive or
Arrearage Sale Contract are included among the Assets. Seller has not agreed to
amend, reduce, compromise or cancel any Right-to-Receive or Arrearage Sale
Contract, included among the Assets.
(C) No Merchant from which Seller has acquired any
Rights-to-Receive or Arrearage Sale Contract, has notified Seller in writing
that it has canceled, not renewed or otherwise terminated, or intends to cancel,
not renew or otherwise terminate, its relationship with Seller or its agreement
to participate in the Business.
(Page 30 of 252 Pages)
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(ii) Schedule 3.1(i)(ii) of the Disclosure Schedule
lists each Assigned Contract. Correct and complete copies of each Assigned
Contract, together with all amendments, supplements and other instruments
(including side letters) thereto effecting a modification or waiver of the terms
thereof, have been delivered to Purchaser. Each Assigned Contract is valid,
subsisting and, to Seller's knowledge, enforceable in accordance with its terms,
save only that such enforceability may be affected by bankruptcy, insolvency,
fraudulent conveyance, moratorium and similar laws affecting the rights of
creditors generally and by general principles of equity (whether considered in a
proceeding at law or in equity). Each such Assigned Contract is in full force
and effect, no written notice of termination or non-renewal of any Assigned
Contract has been given to Seller or, to the knowledge of Seller, is
anticipated, and there is no material default (or any event known to Seller
which, with the giving of notice or lapse of time or both, would constitute a
material default) by Seller or, to the knowledge of Seller, by any other party
to any such Assigned Contract, in the due timely payment or performance of any
obligation to be performed or paid under any Assigned Contract.
(j) Intellectual Property and Computer Assets.
(i) Seller owns all right, title and interest in, or
has valid and subsisting license rights sufficient to use and to continue to use
all Intellectual Property used in the conduct of the Business as currently
conducted by Seller, all items of which Intellectual Property (other than the
intellectual property included in the Excluded Assets), are disclosed in
Schedule 3.1(j)(i). All Intellectual Property used in the conduct of the
Business (other than the intellectual property included in the Excluded Assets),
is being transferred to Purchaser hereunder. Except as set forth in Schedule
3.1(j)(ii), all Intellectual Property disclosed in Schedule 3.1(j)(i) is free
and clear of any
(Page 31 of 252 Pages)
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and all Liens. All Intellectual Property and Computer Agreements, true and
correct copies of which have been provided to Purchaser, are identified in
Schedule 3.1(j)(i). The consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of any of the Intellectual Property and
Computer Agreements. Seller is in compliance with, and has not breached any
material terms of, the Intellectual Property and Computer Agreements, and to
Seller's knowledge, all of the other parties to such Intellectual Property and
Computer Agreements are in compliance with, and have not breached, any of the
material terms thereof (such material terms including, without limitation, all
representations and warranties). To Seller's knowledge, there is no dispute
between Seller and any licensor or licensee regarding the scope of the license
or performance under any Intellectual Property and Computer Agreement, including
with respect to any payments to be made by Seller thereunder.
(ii) Schedule 3.1(j)(i) also lists all of Seller's
United States and foreign registrations and applications issued by, filed with
or recorded by any governmental regulatory authority with respect to the
Intellectual Property listed in Schedule 3.1(j)(i). Except as listed in Schedule
3.1(j)(ii), all of such registrations and applications are valid and in full
force and effect and all necessary actions to maintain the registrations or
applications for registration of such Intellectual Property have been taken or
instructions have been given that such actions be taken, and such actions will
be taken as of the Effective Date of this Agreement. Except as described in
Schedule 3.1(j)(ii), there are no restrictions on the direct or indirect
transfer of any Intellectual Property. Seller has made available to Purchaser
prior to the execution of this Agreement all material documentation in Seller's
possession with respect to any invention, process, design, computer software and
program or other know-how or trade secret or proprietary information included in
any Intellectual Property.
(Page 32 of 252 Pages)
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Seller has taken reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets and proprietary information
relating to the Business. Seller has not granted any license, agreement or other
permission to use such Intellectual Property except pursuant to the Intellectual
Property and Computer Agreements, each of which is listed in Schedule 3.1(j)(i).
To Seller's knowledge, none of the Intellectual Property listed in Schedule
3.1(j)(i) is being infringed by any other Person. To Seller's knowledge, none of
the Intellectual Property listed in Schedule 3.1(j)(i) infringes any
intellectual property right of any other Person, and no claim is pending or has
been threatened to such effect or with respect to the ownership, validity,
license or use of, or any infringement resulting from, the sale of any products
or services by Seller in connection with the Business or from the Intellectual
Property.
(iii) Except as set forth on Schedule 3.1(j)(iii),
all Computer Software and Files and Computer Equipment, to Seller's knowledge,
are "Year 2000 Compliant." For purposes of this Agreement, "Year 2000 Compliant"
means that the Computer Software and Files and Computer Equipment will (A)
consistently and accurately process date and time information and data with
values before, during and after January 1, 2000, including but not limited to,
accepting date input, providing date output, and performing calculations on
dates; and (B) function accurately and in accordance with its specifications
without an adverse change in performance resulting from processing time data
with values before, during and after January 1, 2000.
(k) Membership. Seller has delivered to Purchaser a computer
disc containing a complete and accurate list of all active Members of the
Business who were acquired other than pursuant to an Excluded Contract and all
available Membership Data as of February 26, 1999, including, in particular, all
data regarding card usage by such Members since the inception of the
(Page 33 of 252 Pages)
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operations of the Business. For purposes of this Section 3.1(k), every Member
shall be deemed an "active" Member unless he or she (i) has not paid a fee for
membership in the DALC program during the 12-month period preceding the date
hereof and (ii) has not used the DALC program at least once during the 12-month
period preceding the date hereof. Seller has, during the two-year period
preceding the date hereof, not sold, rented or granted to any person other than
its Affiliates any rights to any Member or to use the Membership Data and, to
Seller's knowledge, no person other than Seller and its Affiliates has access
thereto. To Seller's knowledge, the Membership Data has been compiled and
maintained in compliance with all applicable Laws.
(l) Taxes. Seller represents and warrants as follows, limited
however to matters that (i) include, relate to or otherwise affect the Business
or the Assets, (ii) could result in the imposition of a Lien on, or the
assertion of a claim against, the Purchaser, the Business or the Assets or (iii)
could affect the tax position of Purchaser with respect to the Business or the
Assets after the Closing Date: Seller has duly and timely filed all returns,
reports or statements (including information statements) ("Tax Returns")
required to have been filed with respect to all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, ad valorem,
transfer, value added, franchise, bank shares, withholding, payroll, employment,
disability, excise, property, alternative or add-on minimum, environmental or
other taxes, assessments, duties, fees, levies or other governmental charges of
any nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto
("Taxes"); each such Tax Return correctly and completely reflects the income,
franchise or other Tax liability and all other information required to be
reported thereon; and all Taxes due and payable by Seller, whether or not shown
on any Tax Return, have been paid.
(Page 34 of 252 Pages)
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(m) Investment Representation. Seller represents, warrants and
agrees that it is acquiring the Shares and the Option, and will acquire the
Option Shares upon exercise of the Option, for its own account and not with a
view to the resale or distribution thereof or any interest therein, except in
compliance with the registration requirements of applicable securities laws or
pursuant to an exemption therefrom. Any certificates evidencing the Shares or
the Option Shares and the Option may contain a legend, in customary form, to
such effect.
(n) Brokers. No broker, finder or other person is entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Seller or any of its
Affiliates, other than Lazard Freres & Co. LLC and Furman Selz LLC whose fees,
if any, are payable solely by Seller.
(o) Benefit Plans. Each Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has either received a determination
letter from the Internal Revenue Service to the effect that such Plan is so
qualified or is a standardized prototype plan which relies on an opinion letter
issued to the sponsor of such prototype. No Benefit Plan (i) is a "defined
benefit plan" within the meaning of Section 414(j) of the Code, (ii) is a
multiemployer plan within the meaning of Section 3(37) of ERISA, or (iii)
provided health benefit or life insurance coverage beyond the termination of an
employee's employment, except as required by Part 6 of Subtitle B of Title I of
ERISA or Section 4980B of the Code. For purposes hereof: "Benefit Plan" means
each Plan pursuant to which Seller maintains, contributes to, or has any
liability in respect of current or former employees, agents, directors, or
independent contractors or any beneficiaries or dependents of any such current
or former employees agents, directors, or independent contractors; "ERISA" means
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and
(Page 35 of 252 Pages)
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regulations promulgated thereunder; and "Plan" means any bonus, incentive
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, or whether
for the benefit of a single individual or more than one individual including,
but not limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
3.2 Purchaser's Representations and Warranties. Purchaser represents
and warrants to Seller that, except as disclosed in the Disclosure Schedules,
which Disclosure Schedules specifically reference the particular Sections hereof
to which they relate:
(a) Organization and Qualification. Purchaser is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power to own,
lease and operate its properties and assets as they are now owned, leased and
operated and to carry on its business as now conducted and presently proposed to
be conducted.
(b) Authority. Purchaser has all the requisite corporate power
and authority to execute and deliver this Agreement and the Additional
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby
(including, without limitation, to issue the Closing Date Shares and the Option
and to fulfill its obligations under the Put Right). The execution and delivery
by Purchaser of this Agreement and the Additional Agreements to which it is a
party, and the consummation by
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Purchaser of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Closing Date Shares, the Option and the
Option Shares (upon exercise of the Option in accordance with the terms thereof)
and the grant and performance of the Put Right in accordance with the terms
hereof) have been duly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Purchaser or its stockholders are
necessary to authorize this Agreement and the Additional Agreements to which it
is a party or to consummate the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Closing Date Shares, the
Option and the Option Shares (upon the exercise of the Option in accordance with
the terms thereof) and the grant and performance of the Put Right in accordance
with the terms hereof). This Agreement has been, and at the Closing the
Additional Agreements to which Purchaser is a party will be, duly executed and
delivered by Purchaser and constitute or will constitute, as applicable, the
legal, valid and binding obligations of Purchaser enforceable against it in
accordance with their respective terms.
(c) No Conflict; Required Filings and Consents.
(i) The execution, delivery and performance by
Purchaser of this Agreement and the Additional Agreements to which it is a party
do not, and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Closing Date Shares, the
Option and the Option Shares (upon exercise of the Option in accordance with the
terms thereof) and the grant and performance of the Put Right in accordance with
the terms hereof) will not, (i) conflict with or violate the Certificate of
Incorporation or By-Laws of Purchaser, (ii) conflict with or violate any Laws
applicable to Purchaser or by which it or any of its properties are bound or
affected, or (iii) result in any material breach of or constitute a material
default (or an
(Page 37 of 252 Pages)
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event that with notice or lapse of time or both would become a material default)
under, or give to any other persons any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any
properties or assets of Purchaser pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Purchaser is a party or by which Purchaser or
any of its properties is bound or affected.
(ii) The execution, delivery and performance by
Purchaser of this Agreement and the Additional Agreements to which it is a party
and the consummation by it of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Closing Date Shares, the
Option and the Option Shares (upon exercise of the Option in accordance with its
terms) and the grant and performance of the Put Right in accordance with its
terms) do not require Purchaser or any of its Affiliates to receive any consent,
approval, authorization or permit from, or make filing with or notification to,
any governmental authority or court, or any other person, body or committee,
other than those required pursuant to the HSR Act and those which will have been
obtained or made prior to the Closing Date.
(d) Absence of Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any kind pending or
threatened in writing which seeks to enjoin, delay or restrict any of the
transactions contemplated by this Agreement or the Additional Agreements
(including, without limitation, the issuance of the Closing Date Shares, the
Option and the Option Shares (upon exercise of the Option in accordance with its
terms) and the grant and performance of the Put Right in accordance with its
terms). Purchaser is not subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement or, to the knowledge of
Purchaser, continuing investigation by, any governmental authority, or any
judgment, order, writ,
(Page 38 of 252 Pages)
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injunction, decree or award of any governmental authority, or any arbitrator,
including, without limitation, cease-and-desist or other orders, which relates
to the acquisition of the Assets by Purchaser.
(e) Financial Statements. The audited financial statements
filed by Purchaser in its Annual Report on Form 10-K for the fiscal year ended
September 30, 1998 were prepared in accordance with GAAP consistently applied
and fairly present in all material respects the financial condition of Purchaser
as at September 30, 1998 and the results of operations and cash flows for the
three-year period then ended.
(f) No Material Adverse Change. Since September 30, 1998,
there has been no material adverse change in the business, financial or other
condition, results of operations or prospects of Purchaser, except as reflected
in its Quarterly Reports on Form 10-Q filed with the Securities and Exchange
Commission since that date.
(g) Capitalization. The authorized capital stock of Purchaser
consists of 20,000,000 shares of common stock, par value $.02 per share, of
which 12,952,709 shares were issued and outstanding as of March 16, 1999, and
1,000,000 shares of preferred stock, par value $.10 per share, none of which
were outstanding as of such date. All of the outstanding shares of capital stock
of Purchaser have been duly authorized and validly issued and are fully paid and
nonassessable. No stockholder of Purchaser has any preemptive right or Right of
First Offer by reason of the issuance of the Closing Date Shares or the Option.
The Closing Date Shares, when issued in accordance with Section 1.3(a) hereof,
will be validly issued, fully paid and nonassessable, and will be free of any
Liens other than restrictions under applicable securities laws. The Option
Shares have been duly and validly reserved for issuance and are not, and will
not be, subject to any
(Page 39 of 252 Pages)
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preemptive rights or rights of first refusal and, when issued and paid for in
compliance with the provisions of the Option, will be validly issued, fully paid
and nonassessable and will be free of any Liens, other than restrictions under
applicable securities laws. Subject to the truth and accuracy of Seller's
representation set forth in Section 3.1(m), the offer, sale and issuance of the
Closing Date Shares and the Option pursuant to this Agreement constitute
transactions exempt from the registration requirements of the Securities Act of
1933, as amended and any applicable state securities laws.
(h) Brokers. No broker, finder or other person is entitled to
any fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Purchaser or any of
its Affiliates, other than Equity Group Investments, Inc. whose fee is payable
solely by Purchaser.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Ordinary Course of Business.
(a) Conduct of the Business Pending the Closing. From the date
hereof through the Closing Date, and except as otherwise consented to or
approved by Purchaser in writing, Seller covenants and agrees that:
(i) Seller will conduct the Business in the ordinary
course, diligently and in good faith, consistent with past practices during the
year preceding the date hereof;
(ii) Seller will use commercially reasonable efforts
to maintain and to keep available for the benefit of Purchaser its business
relationships with Members, Merchants, airlines
(Page 40 of 252 Pages)
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consultants, customers, sponsors, suppliers and others having business
relationships with Seller relating to the Business;
(iii) Seller will provide complete and accurate
copies by means of electronic transmission of all periodic reports prepared by
management in operating the Business including, without limitation, any and all
(A) monthly financial forecast packages, (B) monthly money at risk reports, (C)
return on cash investment reports, and (D) market performance reports, in each
case only to the extent that it relates to Seller's operation of the Business
and in the same format as previously provided to Purchaser;
(iv) Seller will not enter into any material
transactions or make any material commitment relating to the Business or the
Assets;
(v) Except as provided herein, Seller will not
amend, modify, impair, reduce, compromise, cancel, mortgage, pledge, encumber or
dispose of any of the Assets, the Assigned Contracts or the Excluded Contracts
other than in the ordinary course of business; provided, however, that Seller
shall prior to Closing terminate each of the contracts between Seller and the
independent contractors listed on Schedule 1.2(i), including, without
limitation, the independent sales contracts between Seller and each of: (i)
Riverside Marketing, (ii) Universal Biotics Corp., (iii) Card Service
International, Inc. and (iv) Bancard Systems, Inc.; and
(vi) Seller will not take, or agree to commit to
take, or permit any of its Affiliates to take, any action that would make any
representation or warranty of Seller contained herein inaccurate (as to any
representation or warranty qualified as to materiality) or inaccurate in any
material respect (as to any representation or warranty not so qualified).
(Page 41 of 252 Pages)
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Subject to clause (v) above, nothing in this Section 4.1 or elsewhere
in this Agreement shall be construed as limiting Seller's ability, and Seller
shall be permitted at any time, to sell, convey or otherwise dispose of any of
the Excluded Assets.
4.2 Access to Information.
(i) From and after the date of this Agreement, to
and including the Closing Date, Seller (A) shall provide to the officers,
employees, attorneys, accountants, and other authorized representatives of
Purchaser (the "Representatives") reasonable access, during normal business
hours and upon reasonable notice, to the offices, facilities, properties, books
and records (including, without limitation, accounting, auditing and tax work
papers) of Seller relating to the Business and the Assets, to the employees,
consultants, customers, suppliers and (with the Seller's participation)
marketing partners of Seller involved with the Business, to the Members (other
than those whose membership was acquired pursuant to an Excluded Contract) and
Merchants, and (with the Seller's participation) the independent public
accountants of Seller in order that Purchaser may have a full opportunity to
make such legal, financial, accounting, tax and other reviews or investigations
of the Business and the Assets as it reasonably shall desire to make, (B) shall
furnish, and cause the officers and employees of Seller to furnish, to Purchaser
and its Representatives such additional financial, tax and operating data and
other information as to the Assets and the Business as Purchaser shall from time
to time reasonably request, and (C) shall otherwise reasonably cooperate in
permitting Purchaser to investigate the business, properties and financial
condition of Seller relating to the Business and the Assets.
(ii) From and after the Closing Date each party
shall afford to the other, its counsel, its accountants and its authorized
representatives, during normal business hours upon
(Page 42 of 252 Pages)
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reasonable notice, reasonable access to the books, records and other data of
Seller (including those conveyed to Purchaser hereunder and all accounting,
auditing and tax work papers) relating to the Business, the Assets, the Assumed
Liabilities and the Excluded Liabilities and the right to make copies and
extracts therefrom, to the extent that such access is required by the requesting
party (x) to facilitate the investigation, litigation and final disposition of
any claims which may have been made against any party or its Affiliates or (y)
for any other legitimate business purpose. Each party may take such action as it
deems reasonably appropriate to separate or redact information unrelated to the
Business from documents and other materials requested and made available
pursuant to this Section 4.2(ii) and to condition access to materials that it
deems confidential to the execution and delivery of an agreement by the other
party not to disclose or misuse such information. Each party shall, upon the
written request and at the requesting party's expense, make personnel available
to assist in locating and obtaining any books and records to the extent that
they relate to the condition or operation of the Business prior to the Closing
and make personnel available whose assistance, participation or testimony is
reasonably required in anticipation of, preparation for or the prosecution or
defense of any investigation and final disposition of any claims, actions or
proceeds of a governmental authority.
(iii) From and after the date of this Agreement to
and including the Closing Date, Seller will keep Purchaser informed of all
material developments concerning the Excluded Contracts, the operation of the
Business, the condition of the Assets and the financial results of the Business.
(iv) From and after the date of the Agreement to and
including the Closing Date, Seller shall promptly disclose to Purchaser in
writing any information set forth in the
(Page 43 of 252 Pages)
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Disclosure Schedules which no longer is accurate and any information which would
have been required to be included in the Disclosure Schedules if such
information had been known on the date of this Agreement, including, without
limitation, any event or condition that would cause any of the representations
and warranties to be inaccurate as if such representation or warranty were made
on or as of the date of such event or condition.
4.3 Confidentiality and Return of Documents.
(i) From the date of this Agreement and for all
periods thereafter, Seller agrees to treat as confidential all records and
information previously treated as confidential by Seller relating to the
Business and the Assets (other than records and information included in the
Excluded Assets and the Excluded Liabilities) and shall refrain from disclosing
the same except with the written consent of Purchaser; provided, however, that
the foregoing restriction shall not apply to any such information (x) which is
or becomes in the public domain by publication or otherwise, (y) the disclosure
of which is required by Law, or (z) which is rightfully obtained from a third
party without restriction.
(ii) Purchaser agrees to abide by the terms of the
Confidentiality Agreement, dated January 27, 1998, between Purchaser and Seller
through the Closing Date or, if this Agreement is terminated in accordance with
Article VI hereof, through the termination date stipulated in the
Confidentiality Agreement; provided, however, that with respect to information
furnished to Purchaser that relates to the Excluded Assets and the Excluded
Liabilities, Purchaser agrees to abide by the terms of such Confidentiality
Agreement for so long as the Services Collaboration Agreement remains in full
force and effect; provided, further, that notwithstanding the foregoing,
Purchaser agrees thereafter to continue to treat such information as
confidential to the
(Page 44 of 252 Pages)
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extent such information is required to be treated as such by Seller pursuant to
the terms of any Excluded Contracts in full force and effect on the Closing
Date; provided, however, that the foregoing restriction shall not apply to any
such information (x) which is or becomes in the public domain by publication or
otherwise, (y) the disclosure of which is required by Law, or (z) which is
rightfully obtained from a third party without restriction.
(iii) In the event that the Closing of the
transactions contemplated hereby shall not take place hereunder, Seller and
Purchaser shall promptly return all records and information, each to the other,
received in connection with the transactions contemplated hereby without
retaining any copies or summaries thereof, and shall continue to treat as
confidential all such records and information which were previously treated as
confidential by the other party and shall refrain from disclosing the same to
others or utilizing it in their respective businesses except with the written
permission of the other party; provided, however, that the foregoing
restrictions shall not apply to any such information (A) which is or becomes in
the public domain by publication or otherwise; (B) which relates to Seller and
was known to Purchaser, or which relates to Purchaser and was known to Seller,
at the time of disclosure thereof; (C) which is rightfully obtained from a third
party without restriction; or (D) the disclosure of which is required by Law or
the requirements of the New York Stock Exchange, Inc.
4.4 Non-Solicitation. During the period from the date of this Agreement
to and including the second anniversary of (x) the Closing Date or (y) the
effective date of any termination hereunder for any reason, neither party shall,
without the prior written consent of the other party, solicit or endeavor to
entice away from the other party any person who at the date of this Agreement is
an employee of the other party or any Affiliate thereof.
(Page 45 of 252 Pages)
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4.5 Further Assurances.
(i) Seller agrees that after the Closing, upon
Purchaser's request, it shall from time to time execute and deliver to Purchaser
(or its designee) all such instruments and documents or further assurances as
shall be necessary to vest in Purchaser (or its designee) title to and
possession of the Assets and shall provide or otherwise make available to
Purchaser all such documents, instruments, agreements and other information as
shall be necessary to enable Purchaser to carry out its obligations with respect
to the Assigned Contracts and the Rights-to-Receive or as otherwise required to
carry out the obligations of Purchaser hereunder and fully to consummate the
transactions contemplated hereby.
(ii) To the extent that the full benefit of any
existing claims, contracts, licenses, permits, leases, commitments, or
Rights-to-Receive cannot be obtained for Purchaser without the consent of a
third party or without giving rise to an event of default or a right of
cancellation in favor of such third party (the "Non-Assignable Items"), Seller
and Purchaser agree to use their commercially reasonable efforts to obtain such
consent of the other party or parties to any such Non-Assignable Item on or
before the Closing Date; provided, however, that Seller shall have no obligation
to amend, change, or cause to be amended or changed, any Non-Assignable Item and
Seller shall not be obligated to pay any consideration therefor to the party
from whom such consent is requested nor shall Seller be obligated to incur any
obligation as a secondary obligor or surety with respect to any Non-Assignable
Item in order to obtain any consent (unless Purchaser provides Seller with an
indemnity for such obligation in each case reasonably satisfactory to Seller).
If such consent is not obtained by the Closing Date, Seller agrees to cooperate
with Purchaser (or its designee) and Purchaser (or its designee) agrees to
cooperate with Seller in any reasonable
(Page 46 of 252 Pages)
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arrangement designed to obtain such consent and to provide for Purchaser (or its
designee) the benefits under, and to allow Purchaser to assume the liabilities
under, any such Non-Assignable Item, including enforcement for the account and
at the expense of Purchaser (or its designee) after the Closing Date of any and
all rights of Seller against the other party thereto arising out of the breach
or cancellation thereof by such other party or otherwise; it being expressly
understood and agreed, however, that no Right-to-Receive or Assigned Contract as
to which such consent has not been obtained on or before the Closing Date shall
be included among the Rights-to-Receive or Assigned Contracts to be conveyed as
part of the Assets hereunder unless and until Purchaser receives the benefits
therefrom and assumes the liabilities thereunder, and the consideration set
forth in Section 1.3(a) hereof shall be reduced to the extent that such
Rights-to-Receive or Assigned Contracts (if identified on Schedule 5.1(b)) have
not been conveyed.
4.6 Books and Records. Unless otherwise consented to in writing by
Purchaser or Seller, as the case may be, neither party shall, for a period of
seven (7) years following the date hereof, destroy, alter or otherwise dispose
of any of the books and records relating to the Business and the Assets without
first offering to surrender to the other party such books and records or any
portion thereof which such party may intend to destroy, alter or dispose of.
Each party shall allow the other party's representatives, attorneys and
accountants access to such books and records upon reasonable request and during
normal business hours for the purpose of examining and copying the same in
connection with any matter whether or not relating to or arising out of this
Agreement or the transactions contemplated hereby (including, without
limitation, to permit Seller to examine Purchaser's books and records relating
to Rights-to-Receive collected during the two years following the Closing).
(Page 47 of 252 Pages)
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4.7 Tax Cooperation. After the Closing, Seller and Purchaser shall
each, and shall cause their respective subsidiaries and Affiliates to, provide
the other party with such cooperation and assistance as any of them may
reasonably request of one another in respect of Taxes imposed on or in respect
of the Business or the Assets; the preparation of any Tax Return, amended Tax
Return or claim for refund in respect of the Business or the Assets; or the
participation in or conduct of any audit or other examination by any Taxing
authority or judicial or administrative proceeding relating to the liability for
Taxes of the Business and the Assets and each will retain and provide the other
with any records or information that reasonably may be relevant to such audit or
examination, proceeding or determination. Such cooperation and information shall
include making appropriate employees available on a mutually convenient basis to
provide explanations of any documents or information provided. The party
requesting assistance shall reimburse the other party for reasonable
out-of-pocket expenses (other than salaries or wages of any employees of the
parties) incurred in providing such assistance. Except as may be required in
connection with an audit or examination proceeding or determination relating to
Taxes, any information obtained pursuant to this Section 4.7 shall be kept
confidential by the parties hereto.
4.8 Regulatory and Other Permits. Purchaser and Seller will use their
commercially reasonable efforts to obtain all authorizations, consents, orders
and approvals of, and effect all necessary registrations and filings with, any
federal, state, local and foreign governmental or regulatory bodies or officials
that may be or become necessary for the performance of their respective
obligations under this Agreement and the Additional Agreements and the
consummation of the transactions contemplated hereby and thereby and will
cooperate reasonably with each other in promptly seeking to obtain such
authorizations, consents, orders and approvals and to effect such
(Page 48 of 252 Pages)
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registrations and filings as may be necessary for the performance of their
respective obligations under this Agreement and the Additional Agreements.
Purchaser and Seller shall file or cause to be filed promptly with the FTC and
the DOJ all requisite notification and report forms and documentary materials
which comply with the provisions of the HSR Act and the rules thereunder, and
will cooperate and coordinate with each other to file promptly any additional
information requested as soon as practicable after receipt of a request from the
FTC or the DOJ. Purchaser and Seller shall use their respective commercially
reasonable efforts to obtain early termination of the applicable waiting period
under the HSR Act and to overcome any objection made by either the FTC or the
DOJ in connection therewith. The fees and costs of filing any such notification
and report forms and related materials (other than the expenses of legal,
financial or other professionals engaged to provide services in respect of such
filing, which expenses shall be borne solely by the party engaging such
professionals) shall be borne by Purchaser.
4.9 Taxes and Fees. All transfer, documentary, sales, use, registration
and other Taxes and fees (and any penalties and interest relating to such Taxes
and fees) which become payable in connection with the transactions contemplated
by this Agreement, and all fees and expenses incident to the filing or recording
of assignments of the Financing Statements, shall be borne by Seller.
4.10 Processing. Seller shall diligently and in good faith endeavor to
complete, to the reasonable satisfaction of Purchaser, all testing,
certification and conversion of all presenter networks and communication to all
protocols necessary for the migration of all Paymentech processing in connection
with the Business to OrderTrust LLC in accordance with the Schedule established
by the Conversion Plan Seller has previously provided to Purchaser. On or prior
to the Closing, Seller shall have entered into a binding agreement with
Paymentech, requiring Paymentech to continue
(Page 49 of 252 Pages)
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processing files for the benefit of Seller until such conversion is complete.
Seller agrees to timely pay all presenter fees owing to Paymentech through April
30, 1999, with such fees thereafter payable 50% by Seller and 50% by Purchaser.
4.11 Financial Statements. On or prior to April 15, 1999, Seller shall
furnish to Purchaser copies of the (a) audited balance sheets of Seller relating
to the Assets and the Business as at December 31, 1996 and 1997, and related
audited statements of income and retained earnings and source and application of
funds for the two fiscal years ended December 31, 1997, together with the notes
thereto and the report thereon of Arthur Andersen LLP, independent public
accountants and (b) audited balance sheets of Seller relating to the Assets and
the Business as at December 31, 1998, and related audited statements of income
and retained earnings and source and application of funds for the year then
ended, together with the notes thereto and the report thereon of Arthur Andersen
LLP, independent public accountants.
4.12 Covenant Not to Compete. For two (2) years following the Closing
Date, Seller shall not, nor shall it permit any of its Affiliates, directly or
indirectly, anywhere in the world other than Japan, Hong Kong (including Hong
Kong Island, Kowloon and the New Territories), Macau, Australia, Singapore,
South Korea, Taiwan, Malaysia, Phillippines, New Zealand, Thailand, Vietnam,
Indonesia, Guam, Saipan and The People's Republic of China, to (i) engage in or
invest in the Business in direct or indirect competition with Purchaser and its
Affiliates, or (ii) offer, market or promote any program or other arrangement
which directly competes with the DALC registered card program or any other
substantially similar dining program marketed or promoted by Purchaser and its
Affiliates during such two-year period; it being understood that nothing herein
shall limit any dining transaction or dining program membership fees being
charged to any credit card program
(Page 50 of 252 Pages)
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maintained or serviced by General Electric Corporation and its affiliates;
provided, however, that nothing contained herein shall prohibit Seller from
performing its obligations under the Services Collaboration Agreement or the
License Agreements, owning the Closing Date Shares, the Option and, upon
exercise thereof, the Option Shares, owning securities in CardPlus Japan Co.,
Ltd., or owning, solely as an investment, securities of any person which are
traded on any national securities exchange, the Nasdaq National Market or the
Nasdaq Stock Market, Inc., if Seller does not, directly or indirectly, own more
than 20% of any class of securities of such person; and provided, further, that
Seller shall not be bound by this Section 4.12 from and after the date, if ever,
on which a petition against Purchaser is filed under Chapter VII of United
States Bankruptcy Code (whether such filing is voluntary or involuntary) and
such petition is not dismissed or stayed within 60 days or Purchaser materially
ceases to engage in the Business, causing the Services Collaboration Agreement
to terminate.
4.13 Commercially Reasonable Efforts. Seller and Purchaser agree to use
their respective commercially reasonable efforts to facilitate the consummation
of the transactions contemplated by this Agreement so as to permit the closing
of such transaction to take place as promptly as practicable.
4.14 Reservation of Shares. Purchaser shall at all times following the
Closing reserve for issuance the number of shares of its Common Stock, issuable
upon exercise of the Option.
4.15 No Impairment. Purchaser will not, without the prior written
consent of Seller, take any action or enter into any agreement, instrument or
understanding that would restrict or preclude Purchaser from fulfilling its
obligations under the Option or the Put Right.
(Page 51 of 252 Pages)
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4.16 Bulk Transfer Laws. Purchaser hereby waives compliance by Seller
with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Assets to Purchaser; provided,
however, that Seller shall indemnify, defend and hold Purchaser and its
Affiliates and representatives harmless from and against any and all Damages (as
defined in Section 7.2 hereof) directly or indirectly arising out of, resulting
from or relating to any failure to comply with such laws.
4.17 Collection of Rights-to-Receive. During the two year period
following the Closing Date, Purchaser agrees to use commercially reasonable
efforts to recover amounts owed to it under the Rights-to-Receive.
4.18 Financing. Purchaser shall use commercially reasonable efforts to
obtain financing necessary to enable it to satisfy its obligations hereunder,
including payment of the cash consideration set forth herein.
4.19 Listing of Shares. Purchaser shall use its commercially
reasonable efforts to cause the Closing Date Shares and, upon exercise of the
Option, the Option Shares, to be listed on the New York Stock Exchange.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to the Obligations of Purchaser. The obligation of
Purchaser to consummate the transactions contemplated hereby is subject to the
fulfillment at or prior to the Closing of the following conditions, any or all
of which may be waived in whole or in part by Purchaser to the extent permitted
by applicable law:
(Page 52 of 252 Pages)
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(a) Representations and Warranties; Covenants. The
representations and warranties of Seller set forth in this Agreement or in any
certificate or document delivered pursuant to Article II hereof shall be true
and correct in all respects (as to those representations qualified by
materiality) and in all material respects (as to those representations not so
qualified) when made and shall be so true and correct on and as of the Closing
Date, as if made on such date, except for representations and warranties made as
of a specified date, which shall be true and correct as of the specified date
only. Seller shall have duly performed, complied with and fulfilled in all
material respects each of its agreements, covenants, conditions and obligations
contained in this Agreement. It is expressly understood and agreed that the
disclosure by Seller to Purchaser of any information pursuant to Section 4.2(iv)
hereof shall in no way affect the satisfaction of, or any failure to satisfy,
the conditions set forth in this Section 5.1(a) and Purchaser shall not be bound
to accept any information so provided in waiver of its rights under this Article
V.
(b) Other Consents and Filings. All material approvals and
consents of or filings with governmental or regulatory authorities, and all
material approvals and consents of any other persons (including, without
limitation, all third party consents under each of the Assigned Contracts),
required to permit the consummation of all of the transactions contemplated
hereby shall have been obtained or made, as the case may be, to the reasonable
satisfaction of Purchaser; provided, however, that it shall not be a condition
to Purchaser's obligation to close the transactions contemplated hereby if the
failure to obtain any such approvals, consents or filings would not be material
to the Business or the Assets. For purposes of this paragraph (b), it is
understood and agreed that the failure to obtain any of the approvals, consents
and filings listed on Schedule 5.1(b) shall be deemed to be material to the
Business or the Assets.
(Page 53 of 252 Pages)
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(c) HSR Act. All filings with the FTC and the DOJ required for
the consummation of the transactions contemplated hereby pursuant to the HSR Act
shall have been made and the waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Assets shall have expired or been
terminated.
(d) Absence of Litigation. No proceeding, action, suit,
investigation, litigation or claim challenging the legality of, or seeking to
restrain, prohibit or modify the transactions contemplated by this Agreement or
the Additional Agreements shall have been instituted and not settled or
otherwise terminated.
(e) Closing Deliveries. Seller shall have duly executed and
delivered to Purchaser all bills of sale, instruments of transfer and assignment
and other statements, instruments, and documents (including, without limitation,
the Additional Agreements) and shall have furnished Purchaser with copies of
such items, opinions and certificates as set forth in Section 2.1(b) hereof, and
Seller shall have furnished Purchaser with such other certificates and documents
as Purchaser and its counsel reasonably may request pursuant to Section
2.1(b)(xiv), in each case in sufficient time prior to the Closing Date to permit
review and evaluation thereof.
(f) Closing Certificate. Purchaser shall have received a
certificate dated the Closing Date signed by the Chief Executive Officer or the
Chief Financial Officer of Seller to the effect that the conditions set forth in
paragraphs (a) and (b) of this Section 5.1 have been satisfied.
5.2 Conditions to the Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated hereby are subject to the
fulfillment at or prior to the Closing of the following conditions, any or all
of which may be waived in whole or in part by Seller to the extent permitted by
applicable Law:
(Page 54 of 252 Pages)
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(a) Representations and Warranties; Covenants. The
representations and warranties of Purchaser set forth in this Agreement or in
any certificate or document delivered pursuant to Article II hereof shall be
true and correct in all respects (as to those representations not so qualified)
and in all material respects (as to those representations qualified by
materiality) when made and shall be so true and correct on and as of the Closing
Date, as if made on such date, except for representations and warranties made as
of a specified date, which shall be true and correct as of the specified date
only. Purchaser shall have duly performed, complied and fulfilled in all
material respects with each of its agreements, covenants, conditions and
obligations contained in this Agreement.
(b) Other Consents and Filings. All material approvals and
consents of or filings with governmental or regulatory authorities and all
material approvals and consents of any other persons, required to permit the
consummation of all of the transactions contemplated hereby shall have been
obtained or made, as the case may be, to the reasonable satisfaction of Seller;
provided, however, that it shall not be a condition to Seller's obligation to
close the transactions contemplated hereby if the failure to obtain any such
approvals, consents or filings would not be material to the Business or the
Assets.
(c) HSR Act. All filings with the FTC and the DOJ required for
the consummation of the transactions contemplated hereby pursuant to the HSR Act
shall have been made and the waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Assets hereby shall have expired
or been terminated.
(d) Absence of Litigation. No proceeding, action, suit,
investigation, litigation or claim challenging the legality of, or seeking to
restrain, prohibit or modify the transactions
(Page 55 of 252 Pages)
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contemplated by this Agreement or the Additional Agreements shall have been
instituted and not settled or otherwise terminated.
(e) Closing Deliveries. Seller shall have received from
Purchaser duly executed copies of each of the certificates, opinions,
instruments of assumption and other documents (including, without limitation,
the Additional Agreements) required pursuant to the provisions of Section 2.1(c)
hereof and Purchaser shall have furnished Seller with copies of all such other
certificates and documents as Seller and its counsel reasonably may request
pursuant to Section 2.1(c)(xiii), in each case in sufficient time prior to the
Closing Date to permit review and evaluation thereof.
(f) Closing Certificate. Seller shall have received a
certificate dated the Closing Date signed by the Chief Executive Officer or the
Chief Financial Officer of Purchaser to the effect that the conditions set forth
in paragraphs (a) and (b) of this Section 5.2 have been satisfied.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual written consent of Seller and Purchaser;
(b) by Purchaser, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Seller set forth
in this Agreement which breach has not been cured within 30 days following
written notice to Seller of such breach;
(c) by Purchaser, if it is unable to obtain financing, on
terms (acceptable to it) to enable it to pay the consideration set forth herein,
provided that Purchaser has used reasonable
(Page 56 of 252 Pages)
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commercial efforts to obtain the same, and provided further, that Purchaser
shall remain obligated to render payment in accordance with Section 6.2(b);
(d) by Seller, if there has been a material breach of any
representation, warranty, covenant or agreement on the part of Purchaser set
forth in this Agreement which breach has not been cured within 30 days following
notice of such breach;
(e) by Seller or Purchaser, if any injunction or other order
of a court or other competent authority preventing the consummation of the
transactions contemplated hereby shall have become final and non-appealable; or
(f) by either Purchaser or Seller, if the transactions
contemplated hereby shall not have been consummated before May 31, 1999,
provided that the party seeking to terminate this Agreement is not otherwise in
breach in any material respect of any of its obligations hereunder.
6.2 Fees and Expenses.
(a) Except as expressly provided herein, each party hereto
shall bear the legal, accounting and other costs and expenses incurred by it in
connection with the negotiation, preparation and execution of this Agreement and
the Additional Agreements and the transactions contemplated hereby and thereby.
(b) Purchaser agrees that if it shall terminate this Agreement
pursuant to Section 6.1(c), then Purchaser shall reimburse Seller for legal,
accounting and other costs and expenses reasonably incurred by it in connection
with the negotiation, preparation and execution of this Agreement and the
Additional Agreements and the transactions contemplated hereby and thereby;
provided, however, that Purchaser shall not be obligated to reimburse Seller for
expenses in excess of $250,000 in the aggregate.
(Page 57 of 252 Pages)
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6.3 Effect of Termination. In the event of termination of this
Agreement by either Purchaser or Seller as provided in Section 6.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Purchaser or Seller, or their respective officers,
directors or Affiliates except (x) with respect to Section 4.3, 4.4, 4.9 and
Section 6.2 and (y) Article VII, to the extent that such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND COVENANTS; INDEMNIFICATION
7.1 Survival of Representations, Warranties and Covenants. All
representations and warranties contained in this Agreement, any Schedule hereto
and any certificate, written statement, or other document (other than the
Additional Agreements) delivered at the Closing pursuant to this Agreement by or
on behalf of Seller shall survive for a period of 18 months after the Closing
Date, except for all such representations and warranties relating to Taxes which
shall survive until the 60th day following the expiration of the relevant
statute of limitations (or any extension or waiver thereof). All covenants
contained in this Agreement shall survive for an indefinite period after the
Closing Date. Notwithstanding the foregoing, any representation or warranty that
would otherwise terminate in accordance with the first sentence of this Section
7.1 (x) shall continue to survive if the party making such representation or
warranty knowingly engages in fraud with respect thereto until 18 months from
the discovery thereof by the party in whose favor such representation or
warranty is made and (y) shall continue to survive if a notice shall have been
given under this Article VII on
(Page 58 of 252 Pages)
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or prior to such termination date until the related claim for indemnification
has been satisfied or otherwise resolved as hereinafter provided in this Article
VII.
7.2 Seller's Indemnification Obligations. Subject to the terms and
conditions of this Article VII, Seller agrees to defend, indemnify and hold
Purchaser, its Affiliates and their respective officers, directors, agents,
attorneys, employees and representatives harmless from and against any and all
liabilities, losses, costs, damages, expenses, penalties, fines and Taxes
including, without limitation, reasonable legal and other expenses
(collectively, "Damages") directly or indirectly arising out of, resulting from
or relating to:
(a) any misrepresentation or breach of any warranty of Seller
contained in this Agreement or in any Schedule or any certificate, written
statement or other document delivered by or on behalf of Seller pursuant to this
Agreement, except for such misrepresentations or breaches expressly waived by
Purchaser in writing on or prior to the Closing Date;
(b) any breach of any covenant, agreement or obligation of
Seller contained in this Agreement;
(c) any Excluded Liability;
(d) the conduct of the Business, and the ownership, use and
operation of the Assets, on or prior to the Closing Date;
(e) the use, operation or ownership of the Excluded Assets
prior to or after the Closing; and
(f) any claim by any employee of Seller not hired by Purchaser
with respect to his or her employment by Seller before or after the Closing,
including any group insurance claims, workers' compensation claims or
liabilities arising out of any accident, illness or other event
(Page 59 of 252 Pages)
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occurring before or after the Closing and other claims with respect to pension,
retirement and/or welfare benefits as they relate to such employee's services
for Seller.
(g) any claim or liability retained by Seller pursuant to the
provisions of Section 8.3 hereof.
7.3 Purchaser's Indemnification Obligations. Subject to the terms and
conditions of this Article VII, Purchaser agrees to defend, indemnify and hold
Seller, its Affiliates and their respective officers, directors, agents,
attorneys, employees and representatives harmless from and against any and all
Damages directly or indirectly arising out of, resulting from or relating to:
(a) any misrepresentation or breach of any warranty of
Purchaser contained in this Agreement or any certificate, written statement or
other document delivered by or on behalf of Purchaser pursuant to this
Agreement, except for such misrepresentations or breaches expressly waived by
Seller in writing on or prior to the Closing Date;
(b) any breach of any covenant, agreement or obligation of
Purchaser contained in this Agreement;
(c) any Assumed Liability (including, without limitation, any
failure by Purchaser to perform pursuant hereto the obligations to be performed
by it after the Closing under the Assigned Contracts) or the use, operation or
ownership of the Assets or operation of the Business after the Closing;
(d) any claim by any employee of Seller hired by Purchaser
with respect to his or her employment by Purchaser or termination of such
employment after the Closing (other than as set forth in Article VIII hereof),
including any group insurance claims, workers' compensation claims or
liabilities arising out of any accident, illness or other event occurring after
the Closing and
(Page 60 of 252 Pages)
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other claims with respect to pension, retirement and/or welfare benefits as they
relate to such employee's services for Purchaser after the Closing; and
(e) any requirement by Purchaser to perform under any novation
agreement executed by Seller and Purchaser in connection with the transactions
contemplated by this Agreement.
7.4 Claims for Indemnification; Defense of Indemnified Claims;
Limitations on Indemnification.
(a) For purposes of this Section, the party entitled to
indemnification shall be known as the Indemnified Party and the party required
to indemnify shall be known as the Indemnifying Party. In the event that the
Indemnifying Party shall be obligated to the Indemnified Party pursuant to this
Article VII or in the event that a suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the Indemnifying
Party may become obligated to the Indemnified Party hereunder, the Indemnified
Party shall give prompt written notice to the Indemnifying Party of the
occurrence of such event, specifying the basis for such claim or demand, and the
amount or estimated amount thereof to the extent then determinable (which
estimate shall not be conclusive of the final amount of such claim or demand);
provided, however, that the failure to give such notice shall not constitute a
waiver of the right to indemnification hereunder unless the Indemnifying Party
is actually prejudiced in a material respect thereby. The Indemnifying Party
agrees to defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding at the Indemnifying Party's own cost and
expense with counsel of its own choice, who shall be, however, reasonably
acceptable to the Indemnified Party. The Indemnifying Party may not make any
compromise or settlement without the prior written consent of the Indemnified
Party
(Page 61 of 252 Pages)
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(which will not be unreasonably withheld or delayed) and the Indemnified Party
shall receive a full and unconditional release reasonably satisfactory to it
pursuant to such compromise or settlement. The Indemnified Party shall have the
right but not the obligation to participate at its own expense in the defense
thereof by counsel of its own choice. If requested by the Indemnifying Party,
the Indemnified Party shall (at the Indemnifying Party's expense) (i) cooperate
with the Indemnifying Party and its counsel in contesting any claim or demand
which the Indemnifying Party defends, (ii) provide the Indemnifying Party with
reasonable access during normal business hours to its books and records to the
extent they relate to the condition or operation of the Business and are
requested by the Indemnifying Party to perform its indemnification obligations
hereunder, and to make copies of such books and records, and (iii) make
personnel available to assist in locating any books and records relating to the
Business or whose assistance, participation or testimony is reasonably required
in anticipation of, preparation for or the prosecution and defense of, any claim
subject to this Article VII. In the event that the Indemnifying Party fails
timely to defend, contest or otherwise protect the Indemnified Party against any
such suit, action, investigation, claim or proceeding, the Indemnified Party
shall have the right to defend, contest or otherwise protect the Indemnified
Party against the same and may make any compromise or settlement thereof and
recover the entire cost thereof from the Indemnifying Party including without
limitation, reasonable attorneys' fees, disbursements and all amounts paid as a
result of such suit, action, investigation, claim or proceeding or compromise or
settlement thereof.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to make any payment
pursuant to this Article VII for breaches of representation or warranty unless
and until the aggregate amount of Damages for all
(Page 62 of 252 Pages)
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claims for breaches of representation or warranty for which an Indemnified Party
asserts a right to indemnification hereunder shall total $75,000, after which
the Indemnifying Party shall be responsible only for Damages in excess of such
amount. The maximum aggregate amount which shall be recoverable by an
Indemnified Party for breaches of representation or warranty under this Article
VII shall be limited to $40 million; provided, however, that such limitation
shall not apply in the event that the Indemnifying Party engages in fraud.
7.5 Payments; Non-Exclusivity. Any amounts due an Indemnified Party
under this Article VII shall be due and payable by the Indemnifying Party within
fifteen (15) business days after (x) in the case of a claim which does not
involve any third party, receipt of written demand therefor and (y) in the case
of a claim which involves a third party, the final disposition of such claim or
demand, provided legal and other out-of-pocket costs and expenses are reimbursed
currently within 15 business days after demand therefor. The remedies conferred
in this Article VII are intended to be without prejudice to any other rights or
remedies available at law or equity to the Indemnified Parties, now or
hereafter.
7.6 Set Off. If from time to time and at any time Purchaser shall be
entitled to be paid any amount under the provisions of this Agreement (including
this Article VII) or under the Services Collaboration Agreement, Purchaser shall
be entitled, if it so elects, to set off such amount against any other amounts
due to Seller from Purchaser or any of its Affiliates hereunder, under the
Services Collaboration Agreement or otherwise; provided that Purchaser shall
have a good faith basis for the claim of the right of set off; and provided,
further, that in the event Seller shall dispute Purchaser's right to set off any
amounts under this Section 7.6, Purchaser shall place such disputed amounts in
an escrow account pending resolution between the parties or a final,
(Page 63 of 252 Pages)
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nonappealable judgment of an arbitration panel or court. All amounts held in the
escrow account shall be invested in (x) direct obligations of the government of
the United States of America, or any agency thereof, or obligations
unconditionally guaranteed by the United States of America having a maturity of
not more than one year, (y) certificates of deposit of any bank organized or
licensed to conduct banking business under the laws of the United States or any
State thereof having capital and surplus of at least $100 million, which
certificates have a maturity of not more than one year or (z) commercial paper
which, at the time of acquisition by Purchaser, is accorded the highest rating
by Standard & Poor's Corporation, Moody's Investors Service, Inc. or any other
nationally recognized credit rating agency. All such amounts, together with
accrued interest thereon, shall be distributed in accordance with the agreement
of the parties or, if applicable, any such judgment; provided, however, that in
the event that judgment is rendered in favor of Seller, Purchaser shall be
obligated to pay Seller interest on the escrowed amounts, in excess of that
actually earned, at the rate of 8% per annum. In no event shall escrowed funds
be commingled with any other funds of Purchaser. The right of set off provided
in this Section shall be in addition to and not in substitution of any other
rights Purchaser shall be entitled to under the provisions of this Article VII,
under the Services Collaboration Agreement or otherwise.
7.7 Subrogation. To the extent that a claim for indemnification is
discharged hereunder, any rights against third parties the Indemnifying Party
may have with respect to the subject matter of such claim shall be subrogated to
those of the Indemnified Party.
7.8 Mitigation. An Indemnified Party shall take all reasonable steps to
mitigate all indemnifiable Damages upon and after becoming aware of any event
which is reasonably likely to give rise to such Damages.
(Page 64 of 252 Pages)
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7.9 Consequential Damages. An Indemnifying Party shall have no
obligation to indemnify an Indemnified Party for any Damages arising out of any
interruption of business, loss of profits, loss of use of facilities, loss of
customers, loss of goodwill or other indirect or consequential damages (a) to
the extent, if any, such Damages are caused or contributed to by the actions of
the Indemnified Party or (b) are recoverable (and actually recovered) by the
Indemnified Party from any third party (including insurers). If the amount of
any Damages at any time subsequent to payment thereof by the Indemnifying Party
to the Indemnified Party pursuant to this Article VII is reduced by any
recovery, settlement or otherwise or under or pursuant to any insurance coverage
or pursuant to any claim, recovery settlement against or with any third party
(including any insurer), the amount of such reduction (net of out-of-pocket
expenses incurred in obtaining such reduction) shall promptly be repaid by the
Indemnified Party to the Indemnifying Party. To the extent that an Indemnifying
Party discharges any claim for indemnification hereunder, the Indemnified Party
shall promptly notify the Indemnifying Party of any and all claims the
Indemnified Party has against third parties (including insurers) and the
Indemnifying Party shall be subrogated (and the Indemnified Party shall take all
reasonable steps to effect such subrogation) to all related rights of the
Indemnified Party against third parties (including any insurers).
ARTICLE VIII
EMPLOYMENT AND BENEFITS MATTERS
8.1 Hiring of Employees. Effective as of the Closing Date, Purchaser
shall offer employment to those employees of Seller engaged in the conduct of
the Business who are set forth on Section 8.1 of the Disclosure Schedules (the
"Employees") on such terms and conditions as
(Page 65 of 252 Pages)
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determined by Purchaser, subject to the remaining provisions of this Article
VIII. All Employees who are offered and accept such employment with Purchaser
are hereinafter referred to as the "Transferred Employees." It is the intention
of the Purchaser to employ the Transferred Employees from the Closing Date until
at least the termination or expiration of the Transition Services Agreement
(such period, the "Transition Period") (other than in the case of the
termination of any such Transferred Employee for cause, as reasonably determined
by the Purchaser in good faith, in which case any such employee may be
terminated on an earlier date). Seller shall use its commercially reasonable
efforts to provide Purchaser with access to Employees for the purpose of hiring
such Employees, and shall not (a) actively dissuade Employees from accepting
employment with Purchaser or (b) offer employment (or arrange to have another
person or firm offer employment) to any Employees listed on Schedule 8.1 of the
Disclosure Schedules unless such employee has declined an offer of employment
with Purchaser.
8.2 Terms of Employment. During the Transition Period, Transferred
Employees who are employed by Purchaser shall be paid a base salary or wage no
less than that in effect immediately prior to the Closing Date, and, subject to
applicable waiting periods, shall be eligible for 401(k) plan participation,
health plan coverage and vacation and sick leave benefits provided by Purchaser
on the same basis as similarly situated employees of Purchaser. The Transferred
Employees shall be credited with prior service with Seller for the purpose of
participation and vesting under such 401(k) and health plans and, to the extent
relevant, for purposes of vacation accrual and sick leave under any policy that
may be established by Purchaser. With respect to such health plan coverage,
Purchaser shall not impose any pre-existing condition limitation, and shall
credit each Transferred Employee for out-of-pocket expenses incurred during the
year in which the Closing Date occurs
(Page 66 of 252 Pages)
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under Seller's group health plan. For purposes of this Section 8.2 only, each of
Scott Brennan, Mark Knoeppel and Carol Voellinger shall be deemed to be
Transferred Employees.
8.3 Seller's Retention of Liability. Purchaser shall not assume any
liabilities which have arisen or may arise in connection with any Benefit Plan
or liabilities which have arisen or may arise in any way from the employment,
compensation or benefits of any employee or former employee of Seller or any
Affiliate, including but not limited to the Transferred Employees, attributable
to the period prior to the Closing, or the termination of such employment.
Without limiting the scope of the foregoing, Seller shall be responsible for (i)
all medical claims incurred by the Transferred Employees on or prior to the
Closing under Seller's group health plan, (ii) claims relating to COBRA coverage
attributable to "qualifying events" occurring on or prior to the Closing Date
with respect to any Transferred Employee, (iii) claims relating to the provision
of health or COBRA benefits to or on behalf of any Employee or former Employee
who is not a Transferred Employee, regardless of when incurred, and (iv) all
accrued and unused vacation and sick leave for all Transferred Employees as of
the Closing, payment for which shall be made by Seller if required under
Seller's policies. Purchaser shall be responsible for all medical claims
incurred by the Transferred Employees after the Closing Date under Purchaser's
group health plan. For purposes of the foregoing, a medical claim shall be
considered incurred when the services or supplies for a given condition are
provided, and not when the condition arose; provided that claims relating to
hospital confinements that commence on or prior to the Closing Date but continue
thereafter shall be treated as incurred on or prior to the Closing Date.
8.4 Severance Benefits During Transition Period. In the event that any
Transferred Employee is terminated by Purchaser upon or prior to the expiration
of the Transition Period (other
(Page 67 of 252 Pages)
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than for cause, as reasonably determined by Purchaser in good faith), Seller
agrees to provide such terminated Transferred Employee with the severance
benefits in such amounts as calculated pursuant to Schedule 8.4 of the
Disclosure Schedule (such policy, the "Severance Policy"). In the event that any
Transferred Employee is retained by Purchaser after the expiration of the
Transition Period, Seller shall have no liability for severance.
8.5 Severance Payments. Purchaser shall not incur any liability for any
severance payments or benefits under Seller's severance policies or plans in the
event that Scott Brennan, Mark Knoeppel and Carol Voellinger are terminated by
the transaction contemplated by this Agreement. In the event that such
individuals are hired by Purchaser, Purchaser's sole obligation for severance
payments or benefits with respect thereto shall be limited to, if any,
Purchaser's severance policies or plans and, notwithstanding Section 8.4, Seller
shall have no further liability for severance benefits in respect of such
individuals in the event that their employment is terminated by Purchaser.
8.6 No Third-Party Rights. Nothing in this Article VIII express or
implied shall confer upon any Transferred Employee or other person or legal
representative thereof any rights or remedies, including any right to employment
or compensation or benefits of any nature or kind whatsoever.
8.7 Right to Terminate or Modify Plans. Other than as specifically set
forth herein, nothing in this Article VIII shall be construed to prevent
Purchaser from terminating or modifying to any extent or in any respect any
employee benefit plan, program or arrangement that Purchaser may contribute to,
maintain, or establish for the benefit of Transferred Employees or such other
employees, directors, consultants, contractors, or otherwise, at any time for
any reason.
(Page 68 of 252 Pages)
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ARTICLE IX
MISCELLANEOUS; GENERAL
9.1 Modification or Amendment. No modification, amendment or waiver of
any provision of this Agreement will be effective against Purchaser or Seller,
unless such modification, amendment or waiver is approved in writing and signed
by Purchaser and Seller or, in the case of a waiver, the party waiving
compliance. The failure of either party to enforce any of the provisions of this
Agreement will in no way be construed as a waiver of such provisions and will
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
9.2 Waiver of Conditions. The conditions to each party's obligations to
consummate the transactions contemplated hereby are for the sole benefit of such
party and may be waived by such party (in the manner provided for herein) in
whole or in part to the extent permitted by applicable law.
9.3 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the one and the same instrument.
9.4 Governing Law. This Agreement shall be governed by the substantive
law of the State of New York, without regard to the conflicts of laws principles
thereof.
9.5 Dispute Resolution (Arbitration). It is agreed that any controversy
or claim arising out of or relating to this Agreement, or the breach hereof,
shall be settled by arbitration administered by the American Arbitration
Association in Chicago, Illinois under its Commercial Arbitration Rules, before
a panel of three (3) arbitrators, one of whom shall be selected by Purchaser,
one of
(Page 69 of 252 Pages)
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whom shall be selected by Seller, and one of whom shall be selected jointly by
Seller and Purchaser (or, in the event that Purchaser and Seller cannot agree,
by the first two arbitrators). Judgment on the award rendered by the arbitrators
may be entered in any court having jurisdiction over the parties. The costs of
such arbitration, including without limitation reasonable attorneys' fees, shall
be borne by the non-prevailing party.
9.6 Consent to Jurisdiction. The parties to this Agreement hereby
irrevocably consent to the non-exclusive jurisdiction of any court of civil
jurisdiction sitting in Chicago, Illinois, for purposes of enforcing an arbitral
award or for any other purpose relating to or arising out of this Agreement.
9.7 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and shall be
deemed to have been duly given when received, if delivered personally or sent by
telecopy or overnight delivery (and confirmed in writing within three business
days thereafter), or five calendar days after the same is sent, if sent by
registered or certified mail, return receipt requested, postage prepaid, as set
forth below, or to such other persons or addresses as may be designated in
writing in accordance with the terms hereof by the party to receive such notice.
If to Seller:
SignatureCard, Inc.
200 North Martingale Road
Schaumburg, Illinois 60173-2096
Facsimile No.: (847) 605-3044
Attn.: General Counsel
(Page 70 of 252 Pages)
<PAGE>
With a copy to:
Montgomery Ward & Co., Incorporated
535 West Chicago Avenue, Suite 26-S
Chicago, Illinois 60671
Facsimile No.: (312) 467-3064
Attn.: Spencer Heine, Esq.
and to:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
Facsimile No.: (312)782-8585
Attn.: Robert Dean Avery, Esq.
If to Purchaser:
Transmedia Network Inc.
11900 Biscayne Boulevard
North Miami, Florida 33181
Facsimile No.: (305) 892-3342
Attn.: Chief Executive Officer
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attn.: Stephen P. Farrell, Esq.
9.8 Disclosure Schedules and Exhibits; Entire Agreement. The Disclosure
Schedules and all exhibits and attachments to the Disclosure Schedules or
exhibits, or documents expressly incorporated into this Agreement, and any other
attachments to this Agreement are hereby incorporated into this Agreement and
are hereby made a part hereof as if set out in full in this Agreement. This
Agreement (and the agreements, certificates and other documents delivered
hereunder), unless otherwise provided herein, supersedes all other prior
agreements and
(Page 71 of 252 Pages)
<PAGE>
understandings, both written and oral, among the parties with respect to the
subject matter hereof and constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof.
9.9 Assignment; Delegation. Except as provided in the following
sentence, this Agreement and the rights and obligations of the parties hereto
shall not be assignable, by operation of law or otherwise, or delegable.
Purchaser may assign any or all of its rights and interests and delegate any or
all of its obligations under this Agreement to any one or more wholly-owned
subsidiaries of Purchaser or any wholly-owned subsidiaries of such subsidiaries
which executes a counterpart to this Agreement and agrees to be bound as
Purchaser by the terms hereof, in which event the relevant rights and
obligations of Purchaser (including, without limitation, delivery of the
documents required under Section 2.1(c) hereof) and remedies available to it
hereunder shall extend to and be enforceable by such subsidiary, but Purchaser
shall remain, and the assignee or delegee shall be, fully liable for the
performance of all such obligations in the manner prescribed in this Agreement.
In the event of any such assignment and delegation the terms "Purchaser" and
"party" as used in this Agreement shall be deemed to refer to such assignee or
delegee where reference is made to actions to be taken with respect to the
acquisition of the Assets by such assignee or delegee, and shall be deemed to
include both Purchaser and such assignee or delegee where appropriate. Any
purported assignment in violation of this Section 9.9 shall be void. Subject to
the four preceding sentences, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
9.10 Definition of "Affiliate". When a reference is made in this
Agreement to an affiliate of a party, the word "affiliate"means, with respect to
a specified corporation or other organization,
(Page 72 of 252 Pages)
<PAGE>
a corporation or organization that directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common control with,
the corporation or organization specified. For purposes of this definition, the
term "control" means (a) the power, direct or indirect, to vote more than 50% of
the securities having ordinary voting power for the election of directors (or
others performing similar functions) of such corporation or organization or (b)
being a general partner of such organization. Notwithstanding the foregoing, for
purposes of Section 4.12 hereof, no corporation or other organization
(including, without limitation, General Electric Capital Corporation) that would
be deemed an Affiliate of Seller solely by virtue of its control of Parent or
any material stockholder of Parent shall be deemed an Affiliate of Seller unless
and until it purchases substantially all of the assets or the stock of SFM, and
thereafter the term "affiliate" shall include General Electric Capital Services,
Inc. and its subsidiaries but shall not include the General Electric Company and
its other subsidiaries.
9.11 Titles and Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way affect, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.
9.12 Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(Page 73 of 252 Pages)
<PAGE>
9.13 Publicity. During the period through the Closing Date, Purchaser,
Seller and their respective Affiliates shall consult before making any public
announcements or public comments regarding this Agreement or the sale
contemplated hereby, except as required by applicable Law.
9.14 No Third Party Beneficiaries. This Agreement has been made for the
sole benefit of Purchaser and Seller and shall not be construed to confer any
benefit or rights upon, nor may it be enforced by, any other person, including
any officer, director, employee, stockholder or creditor of the Purchaser or
Seller.
[Signature Page to Follow]
(Page 74 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
hereinabove written.
TRANSMEDIA NETWORK INC.
By: /s/ Gene M. Henderson
------------------------
Name: Gene M. Henderson
Title: President and Chief
Executive Officer
SIGNATURECARD, INC.
By: /s/ Rodney E. Starmer
------------------------
Name: Rodney E. Starmer
Title: Senior Vice President
(Page 75 of 252 Pages)
<PAGE>
AMENDMENT NO. 1
TO
AGREEMENT
AMENDMENT No. 1, dated as of April 15, 1999 to the Asset Purchase
Agreement, dated as of March 17, 1999 (the "Agreement"), by and between
Transmedia Network Inc., a Delaware corporation and SignatureCard, Inc., an
Indiana corporation.
WHEREAS, the parties wish to amend Section 4.11 of the Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Amendment to Section 4.11 of the Agreement. Section 4.11 of the
Agreement is hereby amended by deleting the date "April 15, 1999" in the first
line thereof and inserting in lieu thereof the date "April 30, 1999".
2 Effect on Agreement. Except as expressly provided herein, the terms
and conditions of the Agreement shall continue in full force and effect. From
and after the date hereof, all references to the Agreement shall be deemed to
mean the Agreement as amended by this Amendment.
3. Counterparts. This Amendment may be executed in one (1) or more
counterparts, each of which when executed shall be deemed to be an original, but
all of which, taken together shall constitute one (1) and the same instrument.
Each counterpart may consist of a number of copies each signed by less than all,
but together signed by all, the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment or caused
this Amendment to be executed as of the day and year first above written.
Transmedia Network Inc. SignatureCard, Inc.
By: /s/ Stephen E. Lerch By: /s/ Rodney E. Starmer
----------------------- ------------------------
Name: Stephen E. Lerch Name: Rodney E. Starmer
Title: Executive Vice President and Title: Senior Vice President
Chief Financial Officer
(Page 76 of 252 Pages)
<PAGE>
AMENDMENT NO. 2
TO
AGREEMENT
AMENDMENT No. 2, dated as of May 31, 1999, to the Asset Purchase
Agreement, dated as of March 17, 1999 (the "Agreement"), by and between
Transmedia Network Inc., a Delaware corporation, and SignatureCard, Inc., an
Indiana corporation.
WHEREAS, the parties wish to amend the Agreement.
NOW, THEREFORE , the parties agree as follows:
1. Amendment to Section 1.3(b) of the Agreement. Section 1.3(a) of the
Agreement is hereby amended by deleting the word "two" in the fifteenth line
thereof and inserting in lieu thereof the word "three".
2. Amendment to Section 2.1(b) of the Agreement.
(a) Section 2.1(b)(xiii) of the Agreement is hereby amended by
deleting the word "and" in the sixth line thereof.
(b) Section 2.1(b)(xiv) of the Agreement is hereby deleted and
renumbered as Section 2.1(b)(xvi) thereof.
(c) Section 2.1(b) of the Agreement is hereby amended by
adding subsections (xiv) through (xv) thereto which shall read as follows:
"(xiv) a duly executed counterpart of a Consent to Assignment,
dated as of the Closing Date, made and given by Seller to Purchaser and RTR
Funding LLC, substantially in the form of Exhibit G hereto;
(xv) a duly executed UCC-1 financing statement pertaining to
the sale of the Rights-to-Receive and related rights and the assignment of the
Seller's security interests with respect to the related Merchants by Seller to
Purchaser substantially in the form of Exhibit H hereto; and"
3. The reference contained in Section 5.1(e) to 2.1(b)(xiv) shall refer
instead to Section 2.1(b)(xvi).
(Page 77 of 252 Pages)
<PAGE>
4. Amendment to Section 6.1(f) of the Agreement. Section 6.1(f) of the
Agreement is hereby amended by deleting the date "May 31, 1999" in the second
line thereof and inserting in lieu thereof the date "June 30, 1999".
5. Amendment to Section 5.2(a) of the Agreement. Section 5.2(a) of the
Agreement is hereby amended by (a) deleting the phrase "(as to those
representations not so qualified)" in the third and fourth lines thereof and
inserting in lieu thereof the phrase "(as to those representations qualified by
materiality)" and (b) deleting the phrase "(as to those representations
qualified by materiality)" in the fourth and fifth lines thereof and inserting
in lieu thereof the phrase "(as to those representations not so qualified)".
6. Amendment to Section 4.11 of the Agreement. Section 4.11 of the
Agreement is hereby amended by adding thereto the following: Seller shall
furnish to Purchaser, at Purchaser's sole cost and expense (which expense shall
include all of Seller's out-of-pocket expenses incurred in connection with the
following), (x) as soon as practicable following the Closing (but in no event
later than 40 days following the Closing), copies of the unaudited balance
sheets of Seller relating to the Assets and the Business as at June 30, 1999 and
as at June 30, 1998, and the related unaudited statements of income and retained
earnings, cash flows and changes in Parent's equity in division for the
six-month periods ended June 30, 1999 and 1998, and (y) as soon as practicable
following Purchaser's request therefor (but in no event later than 40 days
thereafter), such additional financial information of a comparable nature of
Seller relating to the Assets and the Business as at such dates and for such
periods as Purchaser shall specify to permit its compliance with the rules and
regulations of the Securities and Exchange Commission, in each case, together
with a "review letter" from Arthur Andersen LLP, independent public accountants,
satisfactory in form and substance to Purchaser, as to such interim financial
statements and such other matters as Purchaser shall reasonably request. Seller
agrees to cooperate fully (and to cause Arthur Andersen LLP to cooperate fully)
with Purchaser, at Purchaser's sole cost and expense, to prepare and provide to
Purchaser all such financial information as promptly, and in such form, as
Purchaser shall request.
7. Effect on Agreement. Except as expressly provided herein, the terms
and conditions of the Agreement shall continue in full force and effect. From
and after the date hereof, all references to the Agreement shall be deemed to
mean the Agreement as amended by Amendment No. 1 and this Amendment.
8. Counterparts. This Amendment may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same instrument. Each
counterpart may consist of a number of copies each signed by less than all, but
together signed by all, the parties hereto.
[Signature page follows]
(Page 78 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment or caused
this Amendment to be executed as of the day and year first above written.
TRANSMEDIA NETWORK INC.
By: /s/ Stephen E. Lerch
------------------------
Name: Stephen E. Lerch
Title: Executive Vice President and
Chief Financial Officer
SIGNATURECARD, INC.
By: /s/ Rodney E. Starmer
------------------------
Name: Rodney E. Starmer
Title: Senior Vice President
(Page 79 of 252 Pages)
<PAGE>
Exhibit G
CONSENT TO ASSIGNMENT
This Consent to Assignment (this "Consent") is made and given by
SignatureCard, Inc., an Indiana corporation ("SignatureCard"), to Transmedia
Network Inc. ("TMN"), a Delaware corporation, Transmedia Restaurant Company Inc.
("Restaurant"), a Delaware corporation, Transmedia Service Company Inc.
("Service"), a Delaware corporation (collectively, TMN, Restaurant and Service
are the "Assignors"), and RTR Funding LLC, a Delaware limited liability company
("Assignee").
A. SignatureCard and TMN have entered into that certain Asset Purchase
Agreement, dated as of March 17, 1999, as amended by Amendment No. 1 thereto,
dated as of April 15, 1999 and Amendment No. 2 thereto, dated as of May 31, 1999
(the "Asset Purchase Agreement"), pursuant to which SignatureCard has agreed to
sell and TMN has agreed to acquire certain rights-to-receive and related
security (collectively, the "Rights-to-Receive") and other assets of
SignatureCard.
B. TMN may assign some or all of its estate, right, interest, benefits,
powers and privileges in respect of the Rights-to-Receive to Restaurant and/or
Service.
C. Assignee intends to purchase the Rights-to-Receive from one or more
of the Assignors pursuant to a Receivables Purchase Agreement, among Assignors
and Assignee (the "Receivables Purchase Agreement").
D. It will be a condition to Assignee's obligations under the
Receivables Purchase Agreement that, pursuant thereto, Assignors shall have
collaterally assigned all of their estate, right, title, interest, benefits,
powers and privileges in respect of the Rights-to-Receive to Assignee and that
SignatureCard shall have consented to such assignment.
NOW, THEREFORE, SignatureCard hereby consents and agrees to the terms
of the Assignment and further agrees as follows:
1. Acknowledgments, Confirmations and Agreements. SignatureCard
acknowledges, confirms and agrees that as of the date hereof: (i) it has all
requisite corporate power and authority to execute and deliver this Consent and
(ii) the execution and delivery of this Consent by SignatureCard has been duly
authorized by all necessary corporate action and does not require any additional
approvals or consents or any other action by or any notice to or filing with any
person, including, without limitation, any governmental entity.
(Page 80 of 252 Pages)
<PAGE>
2. Consent. SignatureCard consents to the assignment by the Assignors
of all of their estate, right, title, interest, benefits, powers and privileges
in respect of the Rights-to-Receive.
3. Continuing Obligations. The execution and delivery of an assignment
to the Assignee on the part of one or more of the Assignors shall not impair or
diminish any obligations of TMN or SignatureCard under the Asset Purchase
Agreement, shall not impose on the Assignee (or its designee) any such
obligations and shall not impose any additional obligations on SignatureCard.
4. Acknowledgment of Section 1.3(a)(iii) of the Asset Purchase
Agreement. The parties hereto acknowledge that the Credit Agreement dated as of
June 30, 1999 between Transmedia Network Inc. and The Chase Manhattan Bank, as
lender, and the receivables transfer agreement to be entered into by some or all
of the Assignors, the Assignee, Park Avenue Receivables Corporation, The Chase
Manhattan Bank, and certain other parties will be "financing arrangements" as
such term is used in Section 1.3(a)(iii) of the Asset Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Consent or
caused this Consent to be executed as of the day and year first above written.
SIGNATURECARD, INC.
By:
-------------------------
Name:
Title:
(Page 81 of 252 Pages)
<PAGE>
EXHIBIT 10.2
OPTION AGREEMENT
This Option and any Shares acquired upon the exercise hereof have not
been registered under the Securities Act of 1933, as amended, and may
not be transferred, sold or otherwise disposed of except while such a
registration is in effect or pursuant to an exemption from registration
under such Act.
This OPTION AGREEMENT (the "Agreement") is entered into as of this 30th
day of June, 1999 (the "Effective Date"), by and between SignatureCard, Inc., an
Indiana corporation ("Optionee"), and Transmedia Network Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into an Asset Purchase
Agreement, dated as of March 17, 1999, as the same may be amended from time to
time (the "Asset Purchase Agreement"), pursuant to which the Company is
purchasing certain assets (the "Assets") from Optionee relating to the
membership program operated under the Dining a la Card trade name and service
mark, offering to members cash rebates or mileage credits in selected airline
mileage programs on charges at participating restaurants and other
establishments (the "Business");
WHEREAS, as partial consideration for the Assets, pursuant to Section
1.3(a)(i)(B) of the Asset Purchase Agreement, the Company has agreed to issue
and deliver to Optionee an option to purchase up to 400,000 shares of the common
stock of the Company, par value $.02 per share (the "Common Stock"), on the
terms and subject to the conditions contained herein; and
WHEREAS, it is a condition precedent to the closing of the transactions
contemplated by the Asset Purchase Agreement that this Agreement be executed;
NOW, THEREFORE, in consideration of the purchase of the Assets and of
the premises and the respective covenants and conditions contained herein and in
the Asset Purchase Agreement, the parties, intending to be legally bound, hereby
agree as follows (capitalized terms used and not defined herein having the
meanings ascribed thereto in the Asset Purchase Agreement):
1. Grant of Option. The Company hereby grants to Optionee as of the
date hereof an option (the "Option") to purchase up to 400,000 shares of Common
Stock (the "Shares") on the terms and subject to the conditions set forth
herein.
2. Term and Conditions. The grant and exercise of the Option is subject
to the following terms and conditions:
(Page 82 of 252 Pages)
<PAGE>
(a) Option Price. Subject to the provisions of Section 5, the
purchase price for the Shares subject to the Option shall be $4.00 per share
(the "Exercise Price").
(b) Option Period. The Option shall be exercisable, in whole
or in part, from time to time and at any time, on any business day during the
period (the "Option Period") commencing at 5:00 p.m. 90 days from the Effective
Date (the "Effective Time") and terminating at 5:00 p.m. eastern standard time
(the "Expiration Time") on the third anniversary of the Effective Date (the
"Expiration Date"), after which time the Option shall terminate and be of no
further force or effect.
3. Manner of Exercise of the Option. The Optionee may exercise the
Option from time to time at any time prior to the Expiration Time, by delivering
a written notice of exercise of the Option (an "Exercise Notice") addressed to
the Company, as set forth in Section 10(a) hereof. The Exercise Notice shall
specify the number of Shares being purchased and the date on which the closing
of such purchase will occur, which date shall be within five (5) days after the
date of the delivery to the Company of the Exercise Notice. At the closing, (a)
Optionee shall pay an amount equal to the Exercise Price times the number of
Shares being purchased pursuant to the Option (i) in cash or by certified or
official bank check to the Company or by wire transfer of immediately available
funds to an account designated by the Company; or (ii) through the written
election of the Optionee to have Shares withheld by the Company from the Shares
otherwise to be received, with such withheld Shares having an aggregate fair
market value on the date of closing equal to the aggregate Exercise Price; and
(b) the Company shall deliver to Optionee certificates evidencing the Shares
then being purchased upon exercise of the Option. The closing of the purchase
and sale shall take place at the offices of the Company, unless the parties
shall otherwise agree.
4. Non-Assignability of the Option. The Option shall not be assignable,
transferable or subject to pledge or hypothecation; provided, however, that the
Optionee may assign or transfer the Option to an Affiliate (as defined in the
Asset Purchase Agreement) or to any successor-in-interest of the Optionee or of
such Affiliate (collectively, "Permitted Transferees"). The Option is
exercisable only by the Optionee or a Permitted Transferee.
5. Adjustments. The number of Shares subject to the Option and the
Exercise Price shall be adjusted appropriately for any recapitalization,
reorganization, stock split, stock dividend, increase or decrease in the issued
and outstanding Common Stock or similar event which occurs after the Effective
Date. In the event of any merger, consolidation, share exchange, sale or
transfer of all or substantially all of the assets of the Company or similar
event, the Optionee upon exercise of the Option, shall be entitled to receive
only the kind and amount of securities, cash or other property as it would have
received had it purchased the number of Shares for which it is then exercising
the Option immediately prior to such merger, consolidation, share exchange, sale
or transfer. For purposes of determining the relative amounts of cash,
securities and other property the Optionee shall be entitled to receive, it
shall be presumed that the Optionee shall have failed to exercise any right of
election as to the kind or amount of securities, cash or other property it was
to receive.
(Page 83 of 252 Pages)
<PAGE>
6. Reservation of Shares of Common Stock. The Company shall, at all
times during the Option Period, reserve and keep available such number of shares
of Common Stock as will be sufficient to satisfy the requirements of the Option,
shall pay all original issue taxes with respect to the issuance of Shares
pursuant hereto, and all other taxes, fees and expenses necessarily incurred by
the Company in connection therewith and will, from time to time, use its best
efforts to comply with all laws and regulations which, in the opinion of counsel
for the Company, shall be applicable thereto.
7. Restriction on Exercise and Resale. Optionee covenants and agrees
that it is acquiring the Option solely for the purpose of investment and not
with a view to, or for sale in connection with, any distribution thereof.
Optionee acknowledges and agrees that neither the Option nor the Shares have
been registered under the Securities Act of 1933, as amended (the "Securities
Act") and will not be so registered at the time such Option is exercised, and
that neither the Option nor the Shares may be transferred or sold except in
compliance with the registration provisions of the Securities Act, or pursuant
to an applicable exemption therefrom and in compliance with applicable state and
local securities laws and regulations. Optionee consents to the inclusion on
each Share certificate of the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of except while such a
registration is in effect or pursuant to an exemption from registration
under such Act."
Optionee acknowledges and agrees that it has made his own independent
investigation, analysis and evaluation of the Company and the desirability of
acquiring the Option and, upon exercise thereof, the Shares.
8. Restrictions on Issuing Shares. Each exercise of the Option shall be
subject to the condition that if at any time the Company shall determine that
the satisfaction of withholding tax or other withholding liabilities, or that
the listing, registration, or qualification of any Shares otherwise deliverable
upon such exercise upon any securities exchange or under any state or federal
law, or that the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of Shares pursuant thereto, then in any such event, such
exercise shall be deferred until such withholding, listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not reasonably acceptable to the Company; provided, that the
Company shall notify Optionee of any such restriction (and its removal) and
shall use its reasonable best efforts to promptly permit the exercise of such
Option, and the length of the Option Period shall be extended for the amount of
time any such restriction is in effect.
9. No Rights as a Stockholder. Until Optionee shall have validly
exercised the Option, delivered the Exercise Price to the Company and purchased
the Shares in accordance with the terms contained herein, the Optionee shall
have no rights as a stockholder of the Company solely by virtue
(Page 84 of 252 Pages)
<PAGE>
of this Agreement including the right to receive dividends or distributions or
to vote with respect to the Shares.
10. General.
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when received, if delivered
personally or sent by telecopy or reputable overnight carrier (and confirmed in
writing within three business days thereafter), or five calendar days after the
same is sent, if sent by registered or certified mail, return receipt requested,
postage prepaid, to the parties at the addresses and facsimile numbers as set
forth in Section 9.7 of the Asset Purchase Agreement or as otherwise designated
by the parties from time to time.
(b) Exclusive Agreement. This Agreement supersedes all prior
agreements between the parties (written or oral) with respect to the terms and
conditions of the Option and is intended as a complete and exclusive statement
of the terms of the agreement between the Parties with respect to the subject
matter hereof.
(c) Governing Law. This Agreement shall be governed by the
internal laws of the State of Delaware, without giving effect to the conflict of
laws principles thereof.
(d) Dispute Resolution (Arbitration). It is agreed that any
controversy or claim arising out of or relating to this Agreement, or the breach
hereof, shall be settled by arbitration administered by the American Arbitration
Association in Chicago, Illinois under its Commercial Arbitration Rules, before
a panel of three (3) arbitrators, one of whom shall be selected by the Company,
one of whom shall be selected by Optionee, and one of whom shall be selected
jointly by the Company and Optionee (or, in the event that the Company and
Optionee cannot agree, by the first two arbitrators). Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction over
the parties. The costs of such arbitration, including without limitation
reasonable attorneys' fees, shall be borne by the non-prevailing party.
(e) No Assignment; Third Parties. Except as otherwise provided
herein, no party shall assign this Agreement or any part hereof without the
prior written consent of the other party. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective heirs, successors,
and assigns. Except as provided herein, nothing in this Agreement shall entitle
any person other than the parties to any claim, cause of action, remedy, or
right of any kind.
(f) Further Assurances. The parties agree to deliver or cause
to be delivered to the other on the closing of the exercise of the Option and at
such other times thereafter as shall be reasonably agreed, any such additional
agreement, document, or instrument as either of them may reasonably request for
the purpose of carrying out this Agreement.
(Page 85 of 252 Pages)
<PAGE>
(g) Captions. All section or paragraph headings contained in
this Agreement are for the convenience of the parties and shall not affect the
meaning or interpretation of any provision of this Agreement.
(h) Savings Clause. In the event that any word, phrase, clause
or provision of this Agreement should ever be deemed to be invalid, such word,
phrase, clause or provision shall automatically be amended to conform to all
applicable legal requirements. If this is impossible, such word, phrase, clause
or provision shall be given no effect as if it had not been inserted and the
remaining provisions of this Agreement shall survive as if such word, phrase,
clause or provision had not been inserted.
(i) Amendments; Modifications. Any amendment or modification
to this Agreement must be in writing signed by the parties hereto.
[Signature Page to Follow]
(Page 86 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
SIGNATURECARD, INC.
By: /s/ Rodney E. Starmer
-------------------------
Name: Rodney E. Starmer
Title: Senior Vice President
TRANSMEDIA NETWORK INC.
By: /s/ Stephen E. Lerch
-------------------------
Name: Stephen E. Lerch
Title: Executive Vice President
and Chief Financial Officer
[Signature Page to Option Agreement]
(Page 87 of 252 Pages)
<PAGE>
EXHIBIT 10.3
SERVICES COLLABORATION AGREEMENT
SERVICES COLLABORATION AGREEMENT ("Agreement") is made as of the 30th
day of June, 1999, between Transmedia Network Inc., a Delaware corporation
("Transmedia"), and SignatureCard, Inc., an Indiana corporation ("Signature").
WHEREAS, Transmedia operates a membership program under the
"Transmedia" trade name and service mark and, as of the date hereof, has
acquired certain assets of Signature related to a similar membership program
which Signature formerly operated under the Dining a la Card trade name and
service mark;
WHEREAS, Signature has retained certain marketing partner relationships
pertaining to the DALC Program, and wishes to (i) continue to promote and market
the DALC Program to existing DALC Members acquired from such relationships, (ii)
acquire new DALC Members pursuant to such relationships, and (iii) develop new
marketing partner relationships;
WHEREAS, each party has determined that it is advisable that (i)
Signature conduct marketing and promotional programs, and seek to enter into
marketing partner relationships, to acquire DALC Members in the United States of
America, and (ii) Transmedia generally manage the DALC Program, including
performing certain DALC Member services and managing the Merchant network, all
on the terms and subject to the conditions prescribed herein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
GENERAL
1.1 Capitalized terms used in this Agreement have the respective
meanings set forth in Schedule I hereto.
1.2 This Agreement shall be effective as of the date first written
above and thereafter shall remain in full force and effect until terminated in
accordance with Article XI hereof.
(Page 88 of 252 Pages)
<PAGE>
ARTICLE II
SERVICES COMMITTEE
2.1 Services Committee. Promptly following the execution and delivery
of this Agreement, the parties shall establish a Services Committee (the
"Services Committee"). The Services Committee shall consist of two members, one
of whom shall be the Chief Executive Officer or other designee of Transmedia
reasonably acceptable to Signature and one of whom shall be the Signature senior
executive primarily responsible for the DALC Program or other designee of
Signature reasonably acceptable to Transmedia (such acceptance, in each case,
not to be unreasonably withheld). The Services Committee shall act as the
committee for strategic initiatives and major operational issues relating to the
Operating Guidelines and the Economic Covenants (each, as hereinafter defined),
and shall review, among other things, the performance of the parties hereunder,
including adherence by the parties to the Operating Guidelines and compliance by
the parties with the Economic Covenants. The Services Committee otherwise shall
review strategies designed to enhance and market the DALC Program and to
maximize the fees and revenue therefrom. Each party shall designate its member
to the Services Committee and shall notify the other party in writing each time
it proposes to permanently replace its member and appoint a new designated
member, but shall not permanently replace its member and appoint a new
designated member without the prior written consent of the other party (which
consent shall not be unreasonably withheld).
2.2 Meetings. The Services Committee shall meet at such times and
places as it may elect but in any event, not less than once each calendar
quarter. The Services Committee may meet in person or by telephonic or video
conference, and either member may call such a meeting. All costs of
participation by each member in the activities of the Services Committee shall
be borne by the party appointing such member.
2.3 Specific Responsibilities of the Services Committee. The
responsibilities of the Services Committee shall, with respect to the promotion
and marketing of the DALC Program, include, but not be limited to:
(a) review or development of new marketing and promotional strategies;
(b) review of all new marketing partner contracts;
(c) review of design and uses of advertising, marketing, promotional
and solicitation materials and selection and use of all media;
(d) review and oversight of adherence by the parties to the Operating
Guidelines and, where appropriate, recommending corrective action;
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(e) evaluation and approval of proposals by a party desiring to enter
into a marketing partner contract or other arrangement contrary to the
requirements of the Operating Guidelines and the Economic Covenants and, if
appropriate, enforce payment of the Make-Whole Amount pursuant to Article VII
hereof;
(f) review of and, if appropriate, adjustment to, the Operating
Guidelines and Economic Covenants on a periodic basis; and
(g) review of, and determination with respect to, proposals to close a
market.
It is expressly acknowledged that the responsibilities of the Services Committee
shall be limited to issues relating solely to the DALC Program as operated by
the parties in accordance with the terms hereof, and the Services Committee
shall have no jurisdiction over matters that relate to, arise out of or are in
connection with the respective businesses of the parties hereto other than the
DALC Program. The parties shall notify their respective employees and their
respective Affiliates who perform services in connection with this Agreement of
this limitation and shall require them to abide by its terms.
2.4 Voting. Each member of the Services Committee shall have one vote
on all matters and the Services Committee shall act by the unanimous vote of its
members. If the Services Committee is unable to obtain the required vote to
approve, or take other action on, any matter requiring a vote, or if any member
wishes to contest a deadlock, then the matter may be settled in accordance with
the provisions of Section 14.4 hereof, and any requirement for approval by the
Services Committee under this Agreement shall be satisfied by action in
accordance with such Section.
ARTICLE III
ROLES AND RESPONSIBILITIES OF THE PARTIES
3.1 Signature Responsibilities.
(a) Signature shall perform the marketing and promotional functions
described in this Section 3.1 in connection with the DALC Program with respect
to Signature DALC Members only, in accordance with the terms of this Agreement.
The goals of Signature's marketing and promotional functions are to generate
new, active members for the DALC Program and to induce members of the DALC
Program, where applicable, to renew their memberships annually and to be active
members of the DALC Program.
(b) Signature, in conjunction with Transmedia shall, at Signature's
expense:
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(i) develop a promotional and marketing strategy
to be implemented by Signature with respect
to the Signature DALC Members for the DALC
Program (including, without limitation, at
Signature's discretion, developing and
implementing programs and strategies to
stimulate utilization by inactive and low
usage DALC Members);
(ii) prepare a plan for the marketing and
promotion of the DALC Program in advance of
each calendar year, update and modify the
same during each calendar year and provide
to Transmedia periodic reports of the DALC
Program's performance measured against such
plan;
(iii) maintain and expand Exclusive DALC Sponsor
Relationships and relationships with other
DALC Sponsors existing on the date hereof
and develop and initiate new Exclusive DALC
Sponsor Relationships and relationships with
other DALC Sponsors in addition to those in
existence on the date hereof, all in
accordance with the marketing and promotion
plan prepared pursuant to Section
3.1(b)(ii);
(iv) develop advertising and promotional
materials to be used by Signature to support
the DALC Program;
(v) select the print and broadcast media to be
used by Signature in marketing and promoting
the DALC Program; and
(vi) perform such other functions as Signature
and Transmedia may agree are appropriate to
Signature's marketing and promoting the DALC
Program to the Signature DALC Members.
(c) In addition to the responsibilities set forth in paragraph (b)
above, Signature shall, in connection with Exclusive DALC Sponsor Relationships
existing on the date hereof or entered into in accordance with the terms hereof,
pay for all airline miles purchased thereunder and Transmedia shall reimburse
Signature for the same within ten business days following Transmedia's receipt
from Signature of Signature's "Request for Distribution" or other documentation
substantiating the amount paid. The amounts for which Transmedia is required to
reimburse Signature under this Section 3.1(c) shall not be subject to set off
against any amounts owed or alleged to be owed by Signature to Transmedia under
this Agreement or any other agreement between the parties.
(d) Marketing activities which may be undertaken by Signature under
this Agreement may include, among other things:
(i) preparation and mailing of solicitation
materials;
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(ii) telemarketing;
(iii) advertising, including via radio,
television, newspapers, magazines and other
print media, internet or other electronic
media and other appropriate venues; and
(iv) conducting DALC Member surveys and marketing
tests;
provided, however, that Transmedia shall have the right to approve the form and
content of any of the foregoing activities or materials solely for the purpose
of (x) ensuring that the statements contained therein are accurate, and (y)
protecting the value of the DALC Intellectual Property or the Transmedia
Intellectual Property and the reputation of the DALC Program; provided, further,
that such approval shall not be unreasonably withheld.
3.2 Transmedia Responsibilities.
(a) Transmedia shall have charge of the day-to-day management and
operations of the DALC Program. Transmedia's responsibilities will include, but
not be limited to:
(i) making all Transmedia personnel decisions
(including those personnel who have
responsibility for the DALC Program);
(ii) approval of all non-employee sales personnel
engaged by Signature to perform marketing or
promotional services hereunder;
(iii) review of all product offerings proposed by
Signature in connection with the DALC
Program and all descriptions, solicitations,
advertising copy or other marketing and
promotional materials proposed for use in
connection therewith;
(iv) approval of all DALC Sponsor contracts
entered into after the date hereof whose
term extends beyond three years;
(v) approval of all DALC Sponsor contracts
entered into after the date hereof which
would preclude Transmedia from collecting
Fee Income, if any, from DALC Members
acquired pursuant thereto;
(vi) provision of membership benefits to all DALC
Members;
(vii) provision of customer service, including
fulfillment, preparation and distribution of
directories, preparation and distribution of
DALC Member statements, issuance of rebate
checks and airline miles, if applicable, and
responding to consumer complaints or
inquiries;
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(viii) collection of Fee Income from DALC Members
(except to the extent otherwise provided in
a contract between Signature and a DALC
Sponsor in existence on the date hereof or
approved by Transmedia in accordance with
paragraph (v) above) and Rights-to-Receive
from Merchants;
(ix) communication with Merchants (including
development of collateral sales materials
and periodic Merchant reporting);
(x) management of Merchant processing partner
relationships;
(xi) technological functions, including
maintenance and management of databases,
software programs and the like;
(xii) communication with regulatory authorities
concerning provision of membership benefits
and advertising, marketing and promotional
materials; provided, however, that to the
extent such materials relate to the
responsibilities and obligations of
Signature hereunder, Signature and
Transmedia shall jointly communicate with
regulatory authorities;
(xiii) maintain, update and program interfaces onto
the websites associated with the DALC
Program (including, without limitation, such
information with respect to arrangements
with DALC Sponsors and links to websites of
such DALC Sponsors as Signature reasonably
requests from time to time);
(xiv) provision to Signature (either through
electronic access or other reasonable means)
of such data and information relating to the
DALC Program as may, from time to time, be
required by the terms of any DALC Sponsor
contract existing on the date hereof or
hereafter entered into in accordance with
the terms hereof and such other data and
information as the parties may reasonably
agree; and
(xv) subject to Signature's areas of
responsibility and obligations as described
herein, each other function, duty or service
(other than those expressly undertaken by
the Services Committee under Section 2.3
hereof), the performance of which is deemed
by Transmedia in its sole discretion to be
necessary or advisable in operating the DALC
Program.
(b) Notwithstanding the provisions of Section 3.1 and of paragraph (a)
of this Section 3.2, it is expressly understood and agreed that Transmedia
and/or its Affiliates may, in its sole
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discretion, undertake to perform, with respect to any DALC Member other than a
Signature DALC Member, any of the functions required to be performed by
Signature with respect to Signature DALC Members hereunder. Any such activity
undertaken by Transmedia shall not be subject to the terms of this Agreement and
Signature shall have no obligations with respect to such DALC Members.
ARTICLE IV
MARKETING AND PROMOTION; EXPENSES;
LICENSE OF INTELLECTUAL PROPERTY
4.1 Marketing Efforts. During the term of this Agreement, Signature
agrees that it shall (and shall cause its successor to) maintain marketing and
sales personnel capable of performing its obligations hereunder, and shall be
solely responsible for the hiring, compensation, management and evaluation of
such personnel.
4.2 Advertising and Promotional Materials. All marketing, advertising,
and promotional materials (including, without limitation, any and all
telemarketing scripts) for Signature's marketing of the DALC Program shall
comply with all applicable laws and regulations and shall be submitted to and
subject to approval by Transmedia as provided herein prior to the use thereof;
provided that such approval shall not be unreasonably withheld. Signature and
Transmedia shall advise one another of customer and Merchant reactions to the
marketing and promotional materials they use. All such materials shall include,
in a location and in a manner which can easily be seen and read, the following
notice: "The Dining A La Card(R) program and trademark are the property of
Transmedia Network Inc., used under license by SignatureCard, Inc." As permitted
by applicable laws and regulations, all documentary information, promotional
materials and media presentations (where practical) promoting the DALC Program
shall display the trade names, trademarks, service marks, logos and trade dress
thereof in a manner consistent with the past practices of the parties.
4.3 Expenses. Signature shall bear the expense for the preparation of
all solicitation materials and all marketing, advertising and promotional
expenses it incurs in marketing and promoting the DALC Program to the Signature
DALC Members. Except to the extent costs and expenses are deducted from revenues
in accordance with the definition of "Profit" as set forth in Schedule I,
Transmedia shall bear the expense for its performance hereunder.
4.4 Membership Applications. Signature shall cause all applications for
membership in the DALC Program generated by Signature's performing of marketing
and promotional functions to be transmitted directly to Transmedia for its
review.
4.5 Membership Data. Transmedia shall maintain appropriate records
identifying (i) which persons are DALC Members on the date hereof as set forth
on a computer disc delivered to Transmedia pursuant to Section 3.1(k) of the
Asset Purchase Agreement, (ii) which persons are
(Page 94 of 252 Pages)
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DALC Members on the date hereof pursuant to an Excluded Contract (as defined in
the Asset Purchase Agreement) as set forth on a computer disc delivered to
Transmedia pursuant to Section 6.3 hereof, and (iii) which persons become DALC
Members after the date hereof as a result of Signature's marketing and
promotional efforts hereunder; it being understood and agreed that the DALC
Members identified in clauses (i) through (iii) of this sentence are the only
DALC Members Transmedia shall be obligated to service under this Agreement.
4.6 Licenses of Intellectual Property. Pursuant to the terms of the
License Agreement and the Software License Agreement by and between Transmedia
and Signature of even date herewith (together, the "License Agreements"),
Transmedia shall grant to Signature (a) a non-exclusive license to use the DALC
Intellectual Property and an exclusive license to use the "Earn Meals for Your
Miles" service mark, in each case for the sole purpose of performing marketing
and promotional functions with respect to the DALC Program as contemplated by
this Agreement during the term hereof, (b) a non-exclusive license to use, and
prepare derivative works of, any advertising copy prepared by Signature under
this Agreement, for use only in connection with Signature's other non-dining
programs, and (c) a royalty-free, perpetual, non-exclusive license to use the
Data Merchant System solely for the purposes set forth in the Software License
Agreement.
4.7 No Rights by Implication. Except as specifically provided herein or
in the License Agreement, no rights or licenses with respect to the DALC
Intellectual Property, other technical information or other proprietary rights
(including licenses or rights in confidential information, membership data and
information, marketing plans, surveys, research, member information, merchant
information and records, service information, marketing strategies, training
materials, marketing and promotional materials or other information relating to
advertising, marketing, promotion or commercial sale of the DALC Program) are
granted or deemed granted by Transmedia to Signature hereunder or in connection
herewith.
ARTICLE V
OPERATING GUIDELINES
5.1 Operating Guidelines. Each party hereto shall use its commercially
reasonable efforts to preserve the integrity and reputation of the DALC Program.
By signing this Agreement, each party recognizes that adherence to the operating
guidelines set forth on Annex A hereto (as the same may be adjusted from time to
time by the Services Committee in accordance with the terms hereof, the
"Operating Guidelines") is in its best interests and covenants to and agrees
with the other party that it shall use its commercially reasonable efforts to
abide by the Operating Guidelines applicable to it in performing its duties
hereunder. If, at any time during the term of this Agreement, a party has
performed its duties in a manner inconsistent with the Operating Guidelines
applicable to it, it shall use its commercially reasonable efforts to explain
the same and the reasons therefor to the Services Committee and shall cooperate,
in good faith, with the Services Committee to rectify the
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situation (including, without limitation, by taking any corrective action deemed
appropriate by the Services Committee).
5.2 Opening New Markets. The parties shall cooperate with each other in
identifying and selecting new markets in which to offer, market or promote the
DALC Program. If (i) Transmedia deems it advisable to open a market in a
Territory, and (ii) Signature commits to deliver a sufficient number of DALC
Members within the Territory such that, with respect to the number of DALC
Members residing therein, the Territory would become a Qualified Territory
solely through the efforts of Signature, then Transmedia shall use its
commercially reasonable efforts, within 180 days of its receipt of notice from
Signature of such commitment (such date is hereinafter referred to as the
"Market Launch Date"), to deliver a sufficient number of Merchants to satisfy a
minimum Member-Merchant Ratio of 150:1. If Transmedia delivers the number of
Merchants required to satisfy its obligations hereunder and Signature does not
achieve DALC Member acquisition or utilization at the levels established by the
Operating Guidelines with respect to such new market, Signature shall be
responsible for, shall assume the liability of, and shall reimburse Transmedia
for, all uncollected Rights-to-Receive incurred by Transmedia in such market.
Signature shall remit any payments owed to Transmedia pursuant to the preceding
sentence within thirty (30) days following its receipt of notice from Transmedia
referencing the failure to comply with this Section 5.2 and specifying the
amount owed, together with appropriate documentation evidencing the same. If
Signature delivers the number of DALC Members required to satisfy its
obligations as set forth above and Transmedia does not supply DALC Merchants at
the levels and quality established by the Operating Guidelines with respect to
such new market, Transmedia shall be responsible for, shall assume the liability
of, and shall reimburse Signature for, all marketing and promotional
expenditures reasonably incurred by Signature in delivering DALC Members in such
market. Transmedia shall remit any payments owed to Signature pursuant to the
preceding sentence within thirty (30) days following its receipt of notice from
Signature referencing the failure to comply with this Section 5.2 and specifying
the amount owed, together with appropriate documentation evidencing the same.
Neither party may deliver any notice hereunder prior to the Market Launch Date.
The remedies provided by this Section 5.2 shall be the sole and exclusive
remedies of the parties with respect to the liabilities incurred in connection
with opening new markets hereunder, and they each hereby waive any and all
rights that might otherwise be available at law or in equity with respect
thereto.
ARTICLE VI
MARKETING EXCLUSIVITY AND SPONSOR INFORMATION
6.1 Signature Exclusivity. Signature shall, during the Profit Sharing
Period, have the exclusive right to market the DALC Program through use of all
of its existing and hereafter acquired Airline Frequent Flyer Member Files and
the Exclusive DALC Sponsor Relationships, and Transmedia and its Affiliates
shall not market or promote the DALC Program or the Transmedia Program through
use thereof; provided, however, that nothing in this Section 6.1 shall be deemed
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to prohibit Transmedia and its Affiliates from (i) offering mileage credits in
airline mileage programs in connection with the DALC Program, the Transmedia
Program or otherwise, (ii) marketing or promoting other non-dining services to
the Exclusive DALC Sponsor Relationships, (iii) receiving relevant information
about, and servicing DALC Members acquired through the use of DALC Sponsor
Relationships (whether existing or hereinafter initiated) or Airline Frequent
Flyer Member Files under the terms of this Agreement, or (iv) marketing the DALC
Program or the Transmedia Program to DALC Members acquired by Transmedia
pursuant to the Asset Purchase Agreement, notwithstanding that any such DALC
Member may also be listed on any computer disc delivered pursuant to Section 6.3
hereof.
6.2 Non-Exclusivity. It is expressly understood and agreed that
Signature shall not have the exclusive right to market the DALC Program, the
Transmedia Program or any other dining program through the use of any DALC
Sponsors or other marketing partners other than the Exclusive DALC Sponsor
Relationships, and Transmedia and its Affiliates may, at any time, market and
promote the DALC Program, the Transmedia Program or other dining program through
such other DALC Sponsors and such other marketing partners. The parties agree to
use their commercially reasonable efforts to coordinate their respective
marketing activities vis a vis such prospective DALC Sponsors or marketing
partners.
6.3 Membership Files and Data. Prior to or simultaneous with the
execution and delivery of this Agreement, Signature shall deliver to Transmedia
(in addition to those DALC Members acquired by Transmedia pursuant to the terms
of the Asset Purchase Agreement) a computer disc containing a complete and
accurate list of all current DALC Members who were acquired pursuant to the
Excluded Contracts (as defined in the Asset Purchase Agreement) and all other
data ("Data") related to such DALC Members as of the date hereof which is
reasonably required by Transmedia in order for it to fulfill its obligations
hereunder.
6.4 Negotiation of DALC Sponsor Contracts. During the term of this
Agreement, Signature shall advise Transmedia of each significant meeting (as
reasonably determined by Signature in good faith) whether in person, by
telephone or video conference, it schedules with a DALC Sponsor and each other
current or future marketing partner of Signature at which an existing or
proposed arrangement (pertaining to the DALC Program) with Signature is to be
discussed or negotiated, and shall invite at least one representative of
Transmedia to attend such meeting and participate therein at Transmedia's
expense. In addition, Signature shall afford Transmedia the right to review, on
a timely basis, all significant correspondence relating to such arrangements,
and to review all new contracts into which Signature may enter with DALC
Sponsors or other marketing partners prior to their execution and to review and,
to the extent provided herein, approve all marketing and promotional materials
proposed for use pursuant thereto. Transmedia shall grant or withhold its
approval of such materials within ten business days following receipt of the
same and shall not unreasonably withhold its approval.
(Page 97 of 252 Pages)
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ARTICLE VII
ECONOMIC COVENANTS
7.1 Economic Covenants.
(a) The parties recognize that each operates businesses other than the
DALC Program. In recognition of the fact that each party will be harmed by the
other party entering into uneconomic transactions so as to advance the interests
of such other businesses, the parties agree that compliance with the economic
covenants set forth in Annex B hereto (as the same may be adjusted from time to
time by the Services Committee in accordance with the terms hereof, the
"Economic Covenants") is essential. Signature covenants and agrees with
Transmedia that it, its Affiliates, and their respective employees,
representatives and agents, will comply with the Economic Covenants set forth in
Section I of Annex B. Transmedia covenants and agrees with Signature that it,
its Affiliates and their respective employees, representatives and agents, will
comply with the Economic Covenants set forth in Section II of Annex B.
(b) Notwithstanding the provisions of paragraph (a) of this Section
7.1, either party hereto may enter into a transaction which would result in an
event of non-compliance with respect to an Economic Covenant applicable to it if
(i) prior to entering into such transaction, the party obtains the written
consent of the other party hereto or (ii) the party tenders payment to the other
party of a Make-Whole Amount. For purposes of this Section 7.1, the "Make-Whole
Amount" shall mean: (x) the actual amount of the expenditure pursuant to the
proposed transaction, less (y) the amount of the expenditure if the applicable
Economic Covenant had been complied with; it being understood and agreed that no
payment shall be due or made by either party hereunder if the amount set forth
in clause (y) exceeds the amount set forth in clause (x). Subject to the
foregoing proviso, any event of non-compliance with the Economic Covenants as to
which the affected party has not consented shall give rise to an obligation by
the other party to tender payment of the Make-Whole Amount. The remedies
provided by this Section 7.1 shall be the sole and exclusive remedies of the
parties with respect to liabilities incurred in connection with any event of
non-compliance with the Economic Covenants as to which the affected party has
not consented, and the parties each hereby waive any and all rights that might
otherwise be available at law or in equity with respect thereto.
ARTICLE VIII
MARKETING FEES PAYABLE TO SIGNATURE
In consideration of the marketing services to be provided by Signature
hereunder, Transmedia shall pay to Signature the following amounts:
8.1 Fee Sharing. Signature shall receive sixty-seven percent (67%) (i)
of all Membership Fee Income collected (during the five-year period commencing
on the date hereof) from persons who
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are DALC Members on the date hereof, and (ii) of all Membership Fee Income
collected from persons (during the five-year period following their initially
becoming DALC Members) who become DALC Members after the date hereof as a result
of Signature's marketing and promotional efforts hereunder; provided, however,
that Signature shall not be entitled to any percentage of Membership Fee Income
received after the end of the Profit Sharing Period. Transmedia shall pay and
deliver to Signature the portion of Membership Fee Income to which it is
entitled, together with a calculation in appropriate detail of the Membership
Fee Income received from new and existing DALC Members, within forty-five (45)
days following the end of each calendar quarter. Subject to the previous
sentence, if Signature shall collect Membership Fee Income from any DALC Member
in accordance with the terms of this Agreement, it shall remit the full amount
thereof to Transmedia within forty-five (45) days following the end of each
calendar quarter.
8.2 Profit-Based Payments.
(a) Signature shall receive during the twelve and one-half year period
commencing on the date hereof, unless this Agreement is earlier terminated in
accordance with Section 11.2, in which event during the period ending on such
termination date (the "Profit Sharing Period"), a quarterly marketing fee equal
to forty percent (40%) of all Profits derived from persons who are (as of the
date hereof) or, as a direct result of Signature's performance of marketing and
promotional services hereunder with respect to the DALC Program, become (after
the date hereof) DALC Members. Transmedia shall pay and deliver to Signature the
portion of the Profits to which it is entitled, together with a calculation
thereof in appropriate detail, within forty-five (45) days following the end of
the first three fiscal quarters of each fiscal year of Transmedia and within
sixty (60) days following the end of each fiscal year of Transmedia, subject to
appropriate fiscal year-end adjustments.
(b) If Transmedia generates Operating Losses, the same shall be taken
into account in calculating Profits, but Signature shall not otherwise be
required to contribute to the funding thereof.
ARTICLE IX
GRANT OF ADDITIONAL MARKETING RIGHTS
9.1 Transmedia Program Memberships. Signature shall be entitled to
purchase from Transmedia such number of memberships in the Transmedia Program as
Transmedia and Signature shall agree. Such memberships, unless Transmedia and
Signature otherwise agree (i) may be resold by Signature for cash or other
consideration acceptable to Transmedia only in connection with the marketing and
promotional services Signature provides to Transmedia and its Affiliates with
respect to the Transmedia Program, (ii) shall entitle the holders thereof to
discounts and other benefits generally available to other members of the
Transmedia Program, and (iii) shall be renewable upon terms generally applicable
to members of the Transmedia Program having similar memberships.
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9.2 No Rights to Members or Membership Data. Nothing in this Article IX
shall grant or convey or be deemed to grant or convey to Signature any rights
whatsoever to Transmedia Members or any rights whatsoever to the membership
lists or files pertaining to Transmedia Members; it being expressly understood
and agreed that all such rights are and shall at all times remain the sole and
exclusive property of Transmedia.
ARTICLE X
OWNERSHIP, CONFIDENTIALITY AND PUBLIC INFORMATION
10.1 Ownership. Transmedia is the sole and exclusive owner of the DALC
Intellectual Property and the Transmedia Intellectual Property and shall own any
and all rights in intellectual property developed by Signature or Transmedia for
use in the DALC Program, the Transmedia Program or any other programs offering
discount dining during the term of this Agreement, including but not limited to
all copyright rights and other intellectual property rights in any and all
brochures, advertising, promotional and marketing materials (including, without
limitation, videos, scripts, recordings, etc.) that are developed by Signature
in the fulfillment of its responsibilities hereunder. All materials and works
created or produced by Signature in the fulfillment of its responsibilities
hereunder falling within 17 U.S.C. ss.101 shall be deemed works made for hire
and will rest in and will be the property of Transmedia. To the extent that any
works or materials created or produced by Signature in fulfillment of its
responsibilities hereunder do not fall within 17 U.S.C. ss.101, Signature hereby
assigns to Transmedia all right, title and interest now existing or that may in
the future exist in, and to any intellectual property rights, including any
trademarks, copyrights, patents and inventions, any trade secrets in any and all
works or materials created or produced by Signature for Transmedia and in and to
any and all other works or materials created or produced in the course of
preparing such works or materials for Transmedia. Except as set forth in the
penultimate sentence to this paragraph, to the extent such rights are held by
third parties, Signature shall obtain all assignments, consents and agreements
necessary to convey to Transmedia all right, title and interest in and to any
and all such intellectual property. Signature shall furnish to Transmedia copies
of such assignments, consents and agreements. The foregoing intellectual
property rights include, but are not limited to (x) all rights to register, or
to renew any registration(s) or letter(s) patent for, such intellectual property
rights and (y) all causes of action related to such intellectual property
rights, including the right to sue for past damages. Notwithstanding the
foregoing, Transmedia acknowledges that Signature's existing agreements with the
persons set forth in Schedule II hereto do not contain the assignment provision
required herein, and agrees that, as such, these agreements do not contravene
Signature's obligations under this Section. Signature will not attempt to
register any works or materials created or produced by Signature pursuant to
this Agreement at the U.S. Copyright Office, the U.S. Patent and Trademark
Office, or in any foreign counterparts of those U.S. offices. Nothing herein
shall be interpreted or construed to grant to Signature or any other party any
rights, license or interest in the DALC Intellectual Property or the Transmedia
Intellectual Property, except as expressly provided in this Agreement and the
License Agreement.
(Page 100 of 252 Pages)
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10.2 Ownership Exclusions. Notwithstanding Section 10.1 above,
Signature owns and shall own all intellectual property included in the Excluded
Assets (as defined in the Asset Purchase Agreement) (i.e., the intellectual
property rights in any and all brochures, advertising, promotional and marketing
materials (including, without limitation, videos, scripts, recordings, etc.)
that were, are or are in the future developed exclusively for and used
exclusively in the marketing of the dining program presently conducted by
Signature Japan Co., Ltd. (f/k/a CardPlus Japan Co., Ltd.)), and nothing herein
shall be interpreted or construed to grant to Transmedia any rights, license or
interest therein.
10.3 Confidentiality.
(a) Signature and its Affiliates agree to treat as confidential and not
to disclose to any person (other than to Signature employees who have a need to
know the same for purposes of Signature's performing its obligations hereunder)
or use the same for its own benefit or for any purpose other than performing its
obligations hereunder all confidential or proprietary information, data, plans,
strategies, projections, budgets, reports, research, financial information,
files, reports, agreements and other materials and information it receives,
obtains or learns about Transmedia and its Affiliates, the DALC Program, the
Transmedia Program or any other program, service or product Transmedia and/or
Signature develops in connection with this Agreement. Signature shall notify
those of its employees who perform services for Transmedia and its Affiliates of
this covenant and shall secure their agreement to abide by its terms.
(b) Transmedia and its Affiliates agree, during the term of this
Agreement (and, with respect to any DALC Sponsor contract existing on the date
hereof or entered into in accordance with the terms hereof, during the period
Signature is required to treat information as confidential pursuant thereto), to
treat as confidential and not to disclose to any person (other than to
Transmedia employees who have a need to know the same for purposes of
Transmedia's performing its obligations hereunder) or use the same for its own
benefit or for any purpose other than performing its obligations hereunder all
confidential or proprietary information it receives, obtains or learns about
Signature and its Affiliates, including information relating to the DALC
Sponsors and the DALC Members generated thereby. Transmedia shall notify those
of its employees who perform services under this Agreement of this covenant and
shall secure their agreement to abide by its terms.
(c) Notwithstanding the foregoing, neither party shall be obligated
with respect to confidential or proprietary information that it can document:
(i) is or has become readily publicly available
through no fault of its own or that of its
employees or agents; or
(ii) is received from a third party lawfully in
possession of such information and lawfully
empowered to freely disclose such
information to it; or
(Page 101 of 252 Pages)
<PAGE>
(iii) was lawfully in its possession, without
restriction, after the date hereof.
10.4 Covenant Not to Compete. During the two (2) year period following
the date of this Agreement, for any reason, Signature shall not, nor shall it
permit any of its Affiliates, directly or indirectly, anywhere in the world
other than Japan, Hong Kong (including Hong Kong Island, Kowloon and the New
Territories), Macau, Australia, Singapore, South Korea, Taiwan, Malaysia,
Philippines, New Zealand, Thailand, Vietnam, Indonesia, Guam, Saipan, and The
People's Republic of China to (x) engage in, or invest in, the Business (as
defined in the Asset Purchase Agreement) in direct or indirect competition with
Transmedia and its Affiliates, or (y) offer, market or promote any program or
other arrangement which directly competes with the DALC Program, the Transmedia
Program or any other substantially similar discount dining program marketed or
promoted by Transmedia during the term hereof; it being understood that nothing
herein shall limit any dining transaction or dining program membership fees
being charged to any credit card program maintained or serviced by General
Electric Corporation and its affiliates; provided, however, that nothing
contained herein shall prohibit Signature from performing its obligations
hereunder or under the License Agreements, from owning the Closing Date Shares,
the Option and, upon exercise thereof, the Option Shares (each, as defined in
the Asset Purchase Agreement) pursuant to the terms of the Asset Purchase
Agreement, owning securities in Signature Japan Co., Ltd. (f/k/a CardPlus Japan
Co., Ltd.) or from owning solely as an investment, securities of any person
which are traded on any national securities exchange, the Nasdaq National Market
or on Nasdaq Stock Market Inc, if Signature does not, directly or indirectly,
own more than 20% of any securities of such person; and provided, further, that
Signature shall not be bound by this Section 10.4 from and after the date, if
ever, on which a petition against Transmedia is filed under Chapter VII of the
United States Bankruptcy Code (whether such filing is voluntary or involuntary)
and such petition is not dismissed or stayed within 60 days or Transmedia
materially ceases to engage in the DALC Program, causing a termination hereunder
pursuant to Section 11.2 hereof.
10.5 Public Announcements. Each party agrees that prior to releasing
any media or press announcement with respect to this Agreement or the functions
to be performed hereunder, it shall submit the text thereto to the other party
for review and approval (which approval shall not be unreasonably withheld).
ARTICLE XI
TERM AND TERMINATION
11.1 Term. This Agreement shall be effective as of the date first above
written and shall, unless sooner terminated or extended in accordance with the
two succeeding sentences, be in full force and effect through December 31, 2011
(the "Stated Termination Date"). Any party not desiring to extend the term of
this Agreement for an additional two-year period (a "Renewal Term") shall notify
the other eighteen months prior to the Stated Termination Date. Thereafter, this
(Page 102 of 252 Pages)
<PAGE>
Agreement shall be subject to further renewals of a two (2) year duration each
unless one party notifies the other of its intention not to renew at least three
(3) months prior to the end of a Renewal Term.
11.2 Early Termination by Either Party. This Agreement may be
terminated by either party prior to the expiration of the term set forth in
Section 11.1 upon written notice to the other party in accordance with Section
14.8 hereof in the event of a material breach by the other party of its
covenants and obligations hereunder that is continuing and is not effectively
cured within sixty (60) days (or, in the case of the event described in clause
(d) below, within thirty (30) days) after notice thereof from the other party.
For purposes of the foregoing, the following events shall be deemed a "material
breach":
(a) the failure by the other party to pay any Make-Whole Amount when
due;
(b) a material breach by the other party of the covenants set forth in
Section 10.3 hereof;
(c) a material breach by Signature of the covenant set forth in
Section 10.4 hereof;
(d) a material breach by the other party of its obligations under the
License Agreement;
(e) a petition is filed against the other party under Chapter VII of
the United States Bankruptcy Code (whether such filing is voluntary or
involuntary) and such petition is not dismissed or stayed within the period
described above;
(f) Transmedia materially ceases to operate the DALC Program or
otherwise materially abandons its duties hereunder;
(g) Signature materially ceases to market the DALC Program or otherwise
materially abandons its duties hereunder;
(h) a material breach by Transmedia of Section 6.1 hereof; or
(i) a material breach by Transmedia of its obligations to pay Signature
as set forth in Section 8.1 or 8.2 hereof (except to the extent such amounts are
the subject of a dispute hereunder or subject to set off by Purchaser in
accordance with Section 7.6 of the Asset Purchase Agreement).
ARTICLE XII
EFFECT OF TERMINATION
12.1 Run-off. Upon (x) notification by a party of its intention not to
renew this Agreement under Section 11.1 or (y) termination of this Agreement in
accordance with Section 11.2, the
(Page 103 of 252 Pages)
<PAGE>
marketing arrangement set out in this Agreement shall enter "Run-Off." Run-Off
means that (i) Transmedia shall continue to service active DALC Members existing
on the date of notification or termination, as the case may be, until their
membership is canceled by the DALC Member or by the DALC Sponsor which generated
the DALC Member (but not by either party hereto), and (ii) Signature may
continue to acquire DALC Members through the term of the Exclusive DALC Sponsor
Relationships in effect as of the date of notification or termination, as the
case may be (but may not enter into new contracts). Notwithstanding the
foregoing, the parties understand and agree that the economic relationship
between the parties hereunder (including under Article VIII hereof) shall
terminate upon the termination or expiration of this Agreement in accordance
with Article XI hereof.
12.2 Confidential Information. Upon conclusion of the Run-Off period
set forth in Section 12.1, Signature shall immediately return to Transmedia any
and all confidential or proprietary information and data it shall have received
or developed in connection with this Agreement or the functions to be performed
by it hereunder and Transmedia shall immediately return to Signature any and all
confidential or proprietary information it shall have received in connection
with this Agreement.
12.3 Accrued Obligations. Subject to the provisions of Section 12.1,
termination of this Agreement shall not relieve the parties hereto of any
liability which accrued hereunder prior to the effective date of such
termination nor prejudice either party's right to obtain performance of any
obligation provided for in this Agreement which expressly survives termination
or expiration.
12.4 Return of Materials. Upon conclusion of the Run-Off period set
forth in Section 12.1, Signature shall, at Transmedia's election, either destroy
or return to Transmedia all promotional materials relating to the DALC Program
or the Transmedia Program then in Signature's possession, except to the extent
that a DALC Sponsor has proprietary rights in such materials.
12.5 Remedies. The fact that either party exercises any right of
termination it may have under this Agreement shall not prevent such party from
seeking any other remedy it may be entitled to in law or equity, except as
otherwise specifically provided in this Agreement; nor shall any provision under
this Agreement which provides a remedy to a party for the other party's
non-performance be deemed to be an exclusive remedy, except as otherwise
specifically provided in this Agreement. Prior to seeking relief through the
courts, the parties must attempt to resolve any dispute through the mechanism
set forth in Section 14.4 hereof.
12.6 Survival. The provisions of Article X, this Article XII and
Article XIII, as well as those rights and obligations which by their intent or
meaning have validity beyond termination of expiration of this Agreement, shall
survive the termination or expiration of this Agreement.
(Page 104 of 252 Pages)
<PAGE>
ARTICLE XIII
INDEMNIFICATION
13.1 Indemnification by Signature. Signature shall indemnify, defend
and hold harmless Transmedia and its Affiliates, and its and their respective
employees, officers, directors and agents, and each of their respective
successors and assigns (each, a "Transmedia Indemnified Party"), from and
against any and all liability, loss, damage, cost, tax, penalty, fine and
expense (including, without limitation, reasonable attorneys' fees)
(collectively, a "Liability"), which a Transmedia Indemnified Party may incur,
suffer or be required to pay resulting from or arising in connection with (i)
the breach by Signature of any covenant, representation or warranty contained in
this Agreement, or (ii) any negligent or wrongful act or omission of Signature
or its Affiliates (including, without limitation, fraud) in the performance of
its obligations hereunder.
13.2 Indemnification by Transmedia. Transmedia shall indemnify, defend
and hold harmless Signature and its Affiliates and its and their respective
employees, officers, directors and agents, and each of their respective
successors and assigns (each, a "Signature Indemnified Party") from and against
any and all Liabilities, which a Signature Indemnified Party may incur, suffer
or be required to pay resulting from or arising in connection with (i) the
breach by Transmedia of any covenant, representation or warranty contained in
this Agreement, or (ii) any negligent or wrongful act or omission of Transmedia
or its Affiliates (including, without limitation, fraud) in the performance of
its obligations hereunder.
13.3 Indemnification Procedure. Any person seeking indemnification
hereunder shall give written notice to the indemnifying party of the claim for
indemnification promptly after the party claiming indemnification becomes aware
of the Liability for which indemnification or the basis therefor; provided,
however, that the failure to give such notice shall not constitute a waiver of
the right to indemnification hereunder unless the indemnifying party is actually
prejudiced in a material respect thereby. The indemnifying party agrees to
assume the defense of any suit or claim related to the Liability at the
indemnifying party's own cost and expense with counsel of its own choice, who
shall be, however, reasonably acceptable to the indemnified party (such
acceptance not to be unreasonably withheld), and such assumption shall
conclusively establish that the indemnifying party is responsible for the
subject matter of such suit or claim within the scope of this Article XIII. No
Liability shall be compromised or settled without the prior written consent of
the party seeking indemnification therefor (unless the sole relief provided is
monetary damages that are paid in full by the indemnifying party), which consent
shall not be unreasonably withheld or delayed, and the indemnified party will
have no liability or obligation with respect to any compromise or settlement of
such claims without its prior written consent. The indemnified party shall have
the right but not the obligation to participate at its own expense in the
defense thereof by counsel of its own choice. If requested by the indemnifying
party, the indemnified party shall (at the indemnifying party's expense) (i)
cooperate with the indemnifying party and its counsel in contesting any claim or
demand which the indemnifying party defends, (ii) provide the indemnifying party
with reasonable access during normal business hours to its books and records to
the extent they relate to the condition or
(Page 105 of 252 Pages)
<PAGE>
operation of the DALC Program and are requested by the indemnifying party to
perform its indemnification obligations hereunder, and to make copies of such
books and records, and (iii) make personnel available to assist in locating any
books and records relating to the DALC Program or whose assistance,
participation or testimony is reasonably required in anticipation of,
preparation for or the prosecution and defense of, any claim subject to this
Article XIII. In the event that the indemnifying party fails timely to defend,
contest or otherwise protect the indemnified party against any such suit,
action, investigation, claim or proceeding, the indemnified party shall have the
right to defend, contest or otherwise protect itself against the same and may
make any compromise or settlement thereof and recover the entire cost thereof
from the indemnifying party, including without limitation, reasonable attorneys'
fees, disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or compromise or settlement thereof.
13.4 Consequential Damages. An indemnifying party shall have no
obligation to indemnify an indemnified party for any Liabilities arising out of
any interruption of business, loss of profits, loss of use of facilities, loss
of customers, loss of goodwill or other indirect or consequential damages (a) to
the extent, if any, such Liabilities are caused or contributed to by the actions
of the indemnified party or (b) that are recoverable (and actually recovered) by
the indemnified party from any third party (including insurers). If the amount
of any Liabilities at any time subsequent to payment thereof by the indemnifying
party to the indemnified party pursuant to this Article XIII is reduced by any
recovery, settlement or otherwise or under or pursuant to any insurance coverage
or pursuant to any claim, recovery settlement against or with any third party
(including any insurer), the amount of such reduction (net of out-of-pocket
expenses incurred in obtaining such reduction) shall promptly be repaid by the
indemnified party to the indemnifying party. To the extent that an indemnifying
party discharges any claim for indemnification hereunder, the indemnified party
shall promptly notify the indemnifying party of any and all claims the
indemnified party has against third parties (including insurers) and the
indemnifying party shall be subrogated (and the indemnified party shall take all
reasonable steps to effect such subrogation) to all related rights of the
indemnified party against third parties (including any insurers).
13.5 Subrogation. To the extent that a claim for indemnification is
discharged hereunder, any rights against third parties the indemnifying party
may have with respect to the subject matter of such claim shall be subrogated to
those of the indemnified party.
13.6 Mitigation. An indemnified party shall take all reasonable steps
to mitigate all indemnifiable Liabilities upon and after becoming aware of any
event which is reasonably likely to give rise to such Liabilities.
(Page 106 of 252 Pages)
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be deemed to have been made in
the State of New York and its form, execution, validity, construction and effect
shall be determined in accordance with the laws of the State of New York,
without giving effect to the principles of conflicts of law thereof.
14.2 Injunctive Relief. The parties acknowledge that damages at law may
be an inadequate remedy for the breach of any of the covenants and obligations
of the parties contained in this Agreement; accordingly, to the extent permitted
under, and in accordance with, Section 14.4(b) and the other provisions of this
Agreement, each party shall be entitled, without the need of establishing actual
damages, to such injunctive relief as may be necessary to prevent, or to enjoin
the continuation of, any such breach.
14.3 Tax Characterization. The parties hereby agree to, and cause their
respective affiliates to, treat the services arrangements that are the subject
of this Agreement in the following manner for all federal, state and local tax
purposes:
(i) this Agreement and the services arrangements
set out herein shall be treated as a
contractual relationship between independent
contractors, and not as a partnership or
other separate entity;
(ii) the sharing of Membership Fee Income
pursuant to Section 8.1 shall be treated as
a non-partnership revenue sharing
arrangement (with the consequence that each
of Transmedia and Signature shall include in
gross income directly its share of the
Membership Fee Income); and
(iii) the profit-based marketing fees payable to
Signature pursuant to Section 8.2 shall be
treated as fees paid by Transmedia to
Signature for the marketing services
provided by Signature hereunder.
14.4 Access; Dispute Resolution.
(a) Access. Transmedia and Signature shall provide each other's
authorized employees, auditors and attorneys with access, once a calendar
quarter, at reasonable times during regular business hours and upon reasonable
prior notice, and subject to the confidentiality undertakings contained in this
Agreement, to such party's books and records relating to Profits, Operating
Losses and Membership Fee Income for purposes of reviewing the calculations
thereof; provided, however, any audits performed hereunder will be at the
expense of the party requesting the audit.
(Page 107 of 252 Pages)
<PAGE>
(b) Dispute Resolution (Mediation). Signature and Transmedia will
endeavor in good faith to promptly, reasonably and equitably settle disputes
arising out of or relating to this Agreement or the breach hereof (including
claims with respect to a party's performance, failure to perform or adequacy of
performance hereunder). All disputes which the parties cannot settle in the
normal course of business or with the assistance of the Services Committee shall
be mediated in accordance with the provisions of this Section 14.4(b). The party
asserting the claim shall give a written statement to the other party describing
the nature and substance of the dispute, a brief summary of its position with
respect thereto and its justifications therefor, and its proposal for
resolution. The other party shall provide a written response thereto within ten
business days of its receipt. The position papers shall be forwarded to Mr.
Philip Handy of Transmedia (or, in the event of Mr. Handy's unavailability, the
Chairman of the Board of Transmedia) and to Mr. Spencer Heine of Montgomery Ward
& Co. Incorporated (or, in the event of Mr. Heine's unavailability, a designee
of Montgomery Ward & Co. Incorporated or its successor) (together, the "Senior
Executives"). The Senior Executives shall, within ten business days of receiving
position papers, meet to attempt to resolve the dispute. Any such mediation
shall be concluded within 30 days of its commencement.
(c) Dispute Resolution (Arbitration). If the mediation provided by
Section 14.4(b) of this Agreement is unsuccessful, it is agreed that any
controversy or claim arising out of or relating to this Agreement, or the breach
hereof, shall be presented for arbitration within 60 days of the conclusion of
such mediation. Such arbitration shall be administered by the American
Arbitration Association in Chicago, Illinois under its Commercial Arbitration
Rules, before a panel of three (3) arbitrators, one of whom shall be selected by
Transmedia, one of whom shall be selected by Signature, and one of whom shall be
selected jointly by Transmedia and Signature (or, in the event that Transmedia
and Signature cannot agree, by the first two arbitrators). Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction over
the parties. The costs of such arbitration, including, without limitation,
reasonable attorneys' fees, shall be borne by the nonprevailing party. Any such
arbitration shall be concluded within ninety (90) days of its commencement.
14.5 Severability.
(a) If any provision of this Agreement is held to be invalid or
unenforceable, it shall be modified, if possible, to the minimum extent
necessary to make it valid and enforceable or, if such modification is not
possible, it shall be stricken and the remaining provisions shall remain in full
force and effect; provided, however, that if a provision is stricken so as to
significantly alter the economic arrangements of this Agreement, the party
adversely affected may terminate this Agreement upon thirty (30) days' prior
written notice to the other party.
(b) If any of the terms or provisions of this Agreement is in conflict
with any applicable statute or rule of law in any jurisdiction, then such term
or provision shall be deemed inoperative in such jurisdiction to the extent of
such conflict and the parties will renegotiate the affected terms and conditions
of this Agreement to resolve any inequities.
(Page 108 of 252 Pages)
<PAGE>
14.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof and supersedes all
previous writings and understandings, whether oral or written.
14.7 Amendment. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both parties.
14.8 Notices. Any notice required or permitted under this Agreement to
be sent shall be sent by certified mail or courier service, charges pre-paid, or
by facsimile transmission, to the address or facsimile number specified below:
If to Signature: SignatureCard, Inc.
200 North Martingale Road
Schaumburg, Illinois 60173-2096
Attn.: General Counsel
Telephone: (847) 605-7390
Fax: (847) 605-3044
With a copy to: Montgomery Ward & Co., Incorporated
535 West Chicago Avenue
Suite 26-S
Chicago, Illinois 60671
Attn.: Mr. Spencer Heine, Esq.
Telephone: (312) 467-2220
Fax: (312) 467-3064
With a copy to: Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
Attn.: Robert Dean Avery, Esq.
Telephone: (312)782-3939
Fax: (312) 782-8585
(Page 109 of 252 Pages)
<PAGE>
If to the Company: Transmedia Network Inc.
11900 Biscayne Boulevard
Suite 460
North Miami, Florida 33181
Attn.: Gene Henderson
Telephone: (305) 892-3321
Fax: (305) 892-3342
With a copy to: Equity Group Investments
Two North Riverside Plaza, Suite 600
Chicago, Illinois 60606
Attn.: F. Philip Handy
Telephone: (312) 466-3799
Fax: (312) 454-1671
With a copy to: Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attn.: Stephen P. Farrell, Esq.
Telephone: (212) 309-6000
Fax: (212) 309-6273
or to such other address or facsimile number as the person may specify in a
notice duly given to the sender as provided herein. A notice will be deemed to
have been given when received, if delivered personally, sent by telecopy or
overnight courier (and confirmed in writing within three (3) business days
thereafter), or five calendar days after the same is sent by registered or
certified mail, return receipt requested, postage prepaid.
14.9 Assignment. Except as provided in the following sentence, this
Agreement and the rights and obligations of the parties hereto and their
respective interests hereunder shall not be assignable or delegable (other than
by operation of law). Either party may assign any or all of its rights and
interests and delegate any or all of its obligations under this Agreement to any
one or more of its Affiliates without the prior written consent of the other
party, in which event the relevant rights and obligations of the assignor and
remedies available to it hereunder shall extend to and be enforceable by such
Affiliate; provided, however, that the assignor shall remain, and the assignee
shall be, fully liable for the performance of all such obligations in the manner
prescribed in this Agreement. In the event of any such assignment and
delegation, any reference to the assignor by name or as a "party" in this
Agreement shall be deemed to refer to such assignee and shall be deemed to
include both the assignor and such assignee where appropriate. Subject to the
preceding sentences, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the
(Page 110 of 252 Pages)
<PAGE>
parties hereto and their respective successors (including by merger, sale or
otherwise) and assigns. Any assignment in contravention of the provisions of
this Section 14.9 shall be void.
14.10 Standstill. Signature agrees with Transmedia that for a period of
five (5) years following the date of this Agreement, it will not, and it will
ensure that its Affiliates and any person acting on behalf of or in concert with
it or any of its Affiliates shall not, without the prior written consent of
Transmedia:
(i) acquire, offer to acquire or agree to acquire,
directly or indirectly (in addition to the Closing Date Shares, the Option and,
upon exercise thereof, the Option Shares (each, as defined in the Asset Purchase
Agreement)), by purchase or otherwise, more than 3% of the voting securities or
(direct or indirect rights to acquire more than 3% of the voting securities of
Transmedia), on a fully diluted basis, or any assets of Transmedia or any
subsidiary or division thereof or of any such successor controlling person;
(ii) make, or in any way participate, directly or
indirectly, in, any "solicitation" for "proxies" to vote (as such terms are used
in the rules of the Securities and Exchange Commission), or seek to advise or
influence any person or entity with respect to the voting of any voting
securities of Transmedia;
(iii) submit a proposal for, or offer (with or
without conditions) of any extraordinary transaction involving Transmedia or its
securities or assets; or
(iv) form, join or in any way participate in a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, in connection with any of the foregoing.
Signature shall promptly advise Transmedia of any inquiry or proposal made to it
with respect to any of the foregoing.
14.11 Headings and References. All section headings contained in this
Agreement are for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement. Unless the context requires otherwise, all
references in this Agreement to any article or section shall be deemed and
construed as references to an article or section of this Agreement.
14.12 No Agency; No Partnership. It is understood and agreed that each
party shall have the status of an independent contractor under this Agreement
and that nothing in this Agreement shall be construed as authorization for
either party to act as agent for the other. The relationship between the parties
as set forth herein shall not be construed as a partnership and neither party
shall have any fiduciary duties to the other.
14.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument. A facsimile
transmission of the signed Agreement shall be legal and binding on all parties.
[Signature Page Follows]
(Page 111 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the parties, through their authorized officers,
have duly executed this Agreement intending it to be effective and binding as of
the date first written above.
TRANSMEDIA NETWORK INC.
By: /s/ Gene M. Henderson
-----------------------------------------
Name: Gene M. Henderson
Title: President and Chief Executive Officer
SIGNATURECARD, INC.
By: /s/ Rodney E. Starmer
-----------------------------------------
Name: Rodney E. Starmer
Title: Senior Vice President
[Signature Page to Services Collaboration Agreement]
(Page 112 of 252 Pages)
<PAGE>
SCHEDULE I
DEFINITIONS
"Active DALC Member" means a DALC Member who has paid the annual fee, if
applicable, and has used the DALC Program at least once within the previous
three months.
"Affiliate" means, with respect to a specified corporation or other
organization, a corporation or organization that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with, the corporation or other organization specified. For purposes of
this definition, the term "control" means (a) the power, direct or indirect, to
vote more than 50% of the securities having ordinary voting power for the
election or directors (or others performing similar functions) of such
corporation or organization or (b) being a general partner of such organization.
Notwithstanding the foregoing, for purposes of Sections 10.4, 14.9 and 14.10, no
corporation or other organization (including, without limitation, General
Electric Capital Corporation) that would be deemed an Affiliate of Signature
solely by virtue of its control of Montgomery Ward Holding Corp. or any material
stockholder of Montgomery Ward Holding Corp. shall be deemed an Affiliate of
Signature unless and until it purchases substantially all of the assets or the
stock of Signature/Financial Marketing, Inc., and thereafter the term
"affiliate" shall include General Electric Capital Services, Inc. and its
subsidiaries but shall not include the General Electric Company and its other
subsidiaries.
"Airline Frequent Flyer Member Files" means the lists, files, records,
information and data relating to members of frequent flyer and similar programs
of the Exclusive DALC Sponsor Relationships.
"approval" means the process by which a party's authorization(s) for specified
actions and materials are requested and obtained through submitting such actions
or materials to the approving party. Unless otherwise indicated herein, all
disapprovals must be in writing, and all actions or materials as to which
approval or disapproval is not communicated within five (5) business days
following submission of the action or material to the party from whom approval
is being sought shall be deemed to have been approved by such party. No
approvals shall be unreasonably withheld.
"Asset Purchase Agreement" means the Asset Purchase Agreement dated as of March
17, 1999 between Signature and Transmedia, as the same may be amended from time
to time.
"DALC Intellectual Property" means all fictional business names, trade names,
d/b/a names, logos, Internet domain names (including www.dalccom,
www.dining-a-la-card.com and www.diningalacard.com), trademarks, service marks
(including but not limited to DINING A LA CARD(Registered), trade dress and any
and all federal, state, local and foreign applications, registrations and
renewals therefor, and all the goodwill associated therewith (collectively,
"DALC Marks"); all patents (including but not limited to all continuations,
extensions, and reissues), patent applications, and inventions and discoveries
that may be patentable (collectively, "DALC Patents"); all copyrights
(Page 113 of 252 Pages)
<PAGE>
in both published works and unpublished works (including but not limited to the
copyright subsisting in any marketing materials, membership data, and merchant
data, and in online works such as Internet web sites, excluding any proprietary
software underlying such web sites), and any federal or foreign applications,
registrations and renewals therefor (collectively, "DALC Copyrights"); all
rights in any and all licensed or proprietary computer software, firmware,
middleware, programs, applications, databases, and files (in whatever form or
medium) including all material documentation, relating thereto, and all source
and object codes relating thereto (collectively, "DALC Computer Software and
Files"); all know-how, trade secrets, confidential information, competitively
sensitive and proprietary information (including but not limited to pricing
information, supplier information, telephone and telefax numbers, and e-mail
addresses), technical information, data, process technology, business plans,
drawings, and blue prints (collectively, "DALC Trade Secrets"); and the right to
sue for past infringement, if any, in connection with any of the foregoing; in
each case to the extent used or held for use in the DALC Program; provided,
however, that the DALC Intellectual Property shall not be deemed to include any
intellectual property included among the Excluded Assets (as defined in the
Asset Purchase Agreement).
"DALC Members" means the members, from time to time, of the DALC Program.
"DALC Program" means the registered card, discount dining club membership
program operated under the Dining a la Card(R) trade name and service mark.
"DALC Sponsors" means the marketing partners with which Signature, from time to
time, contracts in relation to the DALC Program.
"Data" has the meaning specified on Section 6.3.
"Economic Covenants" has the meaning specified in Section 7.1(a).
"Exclusive DALC Sponsor Relationships" means any and all marketing partner
arrangements with all airlines worldwide to which Signature is or may, during
the term of this Agreement, be a party.
"GAAP" means generally accepted accounting principles in the United States,
consistently applied.
"Initial Fee Income" means the income from initial membership fees paid by
persons upon becoming DALC Members, net of cancellations, charge backs and other
similar credits.
"Liability" has the meaning specified in Section 13.1.
"License Agreements" have the meaning specified in Section 4.6.
"Make-Whole Amount" has the meaning specified in Section 7.1(b).
"Market Launch Date" has the meaning specified in Section 5.2.
(Page 114 of 252 Pages)
<PAGE>
"Member-Merchant Ratio" means the applicable number of total DALC Members to
Merchants within a Territory.
"Membership Fee Income" means Initial Fee Income plus Renewal Fee Income.
"Merchants" means the restaurants and other establishments, from time to time,
that participate in the DALC Program.
"Operating Guidelines" has the meaning specified in Section 5.1.
"Operating Losses" means the excess of (i) the sum of all direct costs,
including, but not limited to, cost of sales, rebate, loss reserves, third party
processing, health insurance premium increases directly attributable solely to
the addition or termination of the Transferred Employees (as defined in the
Asset Purchase Agreement) by Purchaser during the term of the Transition
Services Agreement dated as of the date hereof between the parties and payable
by Transmedia, sales commissions, residual sales commissions payable in respect
of existing Rights-to-Receive generated by the following active independent
sales contractors listed on Schedule 1.2(i) to the Asset Purchase Agreement: (i)
Riverside Marketing, (ii) Universal Biotics Corp., (iii) Card Service
International, Inc. and (iv) Bancard Systems, Inc., customer service (including
directory, fulfillment, enrollment processing call center maintenance costs
associated with both active and inactive members) and cost of inventory (e.g.,
capital cost) (but not including fixed overhead) over (ii) dining revenue from
restaurant spending by DALC Members (net of tax and tip, to the extent
reimbursed to Merchants), all as determined in accordance with GAAP.
"Profits" means the excess of dining revenue from restaurant spending by DALC
Members (net of tax and tip, to the extent reimbursed to Merchants) over all
direct costs, including, but not limited to, cost of sales, rebate, loss
reserves, third-party processing, health insurance premium increases directly
attributable solely to the addition or termination of the Transferred Employees
(as defined in the Asset Purchase Agreement) by Purchaser during the term of the
Transition Services Agreement dated as of the date hereof between the parties
and payable by Transmedia, sales commissions, residual sales commissions payable
in respect of existing Rights-to-Receive generated by the following active
independent sales contractors listed on Schedule 1.2(i) to the Asset Purchase
Agreement: (i) Riverside Marketing, (ii) Universal Biotics Corp., (iii) Card
Service International, Inc. and (iv) Bancard Systems, Inc., customer service
(including directory, fulfillment, enrollment processing, call center
maintenance costs associated with both active and inactive members) and cost of
inventory (e.g., capital cost) but before fixed overhead, as determined in
accordance with GAAP. Profits during any period shall be reduced by any
Operating Losses accumulated from any prior period, to the extent not applied to
the reduction of Profits in any prior period.
"Profit Sharing Period" has the meaning specified in Section 8.2(a).
"Qualified Territory" means a Territory in which at least 15,000 DALC Members
reside within its boundaries.
(Page 115 of 252 Pages)
<PAGE>
"Renewal Fee Income" means the income from annual membership fees paid by DALC
Members, net of cancellations, chargebacks and other similar credits.
"Renewal Term" has the meaning specified in Section 11.1.
"Rights-to-Receive" means all rights-to-receive and other credits consisting of
food, beverage, tax and tip credits at all Merchants wherever located in the
United States of America and all agreements, contracts, guarantees, instruments,
security agreements and other documents evidencing or securing, and any and all
collateral and security interests securing, such rights-to-receive and credits
and any and all claims, rights and causes of action related thereto in
connection with the DALC Program.
"Run-off" has the meaning specified in Section 12.1.
"Senior Executives" has the meaning specified in Section 14.4(b).
"Services Committee" has the meaning specified in Section 2.1.
"Signature DALC Members" means each DALC Member which (i) is or was acquired
pursuant to an Exclusive DALC Sponsor Relationship, (ii) is or was acquired
pursuant to an arrangement with any other DALC Sponsor or (iii) is acquired
after the date hereof solely through the marketing and promotional efforts of
Signature.
"Stated Termination Date" has the meaning specified in Section 11.1.
"Territory" means a Designated Market Area as reported by the Standard Rate and
Data Service.
"Transmedia Intellectual Property" means all fictional business names, trade
names, d/b/a names, logos, Internet domain names and other Internet addresses,
trademarks, service marks (including but not limited to TRANSMEDIA(Registered),
trade dress and any and all federal, state, local and foreign applications,
registrations and renewals therefor, and all the goodwill and going concern
value associated therewith (collectively, "Transmedia Marks"); all patents
(including but not limited to all continuations, extensions, and reissues),
patent applications, and inventions and discoveries that may be patentable
(collectively, "Transmedia Patents"); all copyrights in both published works and
unpublished works (including but not limited to the copyright subsisting in any
marketing materials, membership data, and merchant data, and in online works
such as Internet web sites, including the software underlying such web sites),
and any federal or foreign applications, registrations and renewals therefor
(collectively, "Transmedia Copyrights"); all rights in any and all licensed or
proprietary computer software, firmware, middleware, programs, applications,
databases, and files (in whatever form or medium) including all documentation
relating thereto, and all source and object codes relating thereto
(collectively, "Transmedia Computer Software and Files"); all know-how, trade
secrets, confidential information, competitively sensitive and proprietary
information (including but not limited to pricing information, supplier
information, telephone and telefax numbers, and e-mail addresses), technical
information, data, process technology, business plans,
(Page 116 of 252 Pages)
<PAGE>
drawings, and blue prints (collectively, "Transmedia Trade Secrets"); and the
right to sue for past infringement, if any, in connection with any of the
foregoing; in each case to the extent used or held for use in the Transmedia
Program.
"Transmedia Members" means the members, from time to time, of the Transmedia
Program.
"Transmedia Program" means the discount dining program operated by Transmedia
and its Affiliates under the Transmedia(R) tradename and service mark.
(Page 117 of 252 Pages)
<PAGE>
ANNEX A
to Marketing Agreement
OPERATING GUIDELINES
--------------------
SIGNATURE OPERATING GUIDELINES
------------------------------
During the term of the Agreement to which this Annex A is attached
(unless a different period is specified below), Signature shall be guided by the
following principles, and shall use its commercially reasonable efforts to
adhere to such principles whenever possible:
I. MEMBERSHIP ACQUISITION
Exclusive DALC Sponsor Relationships. During the five-year period
commencing on the date of the Agreement to which this Annex A is attached,
subject to Section III below, Signature shall deliver, from the Exclusive DALC
Sponsor Relationships only, the following number of new DALC Members (i.e.,
persons who are not as of the date of this Agreement, and were not during the
preceding 12 months, DALC Members) in the aggregate for each year of such
five-year period, distributed evenly (to the extent practicable) on a quarterly
basis; provided, however, that the yearly totals set forth below shall be
cumulative as measured in two year increments:
Year 1 - 500,000
Year 2 - 600,000
Year 3 - 500,000
Year 4 - 400,000
Year 5 - 300,000
---------
2,300,000
II. UTILIZATION
The average monthly utilization rate during the five-year period following the
date of the Agreement shall be no less than 12%.
III. MERCHANT-MEMBER RATIO
Notwithstanding the requirements of Section I above, Signature may not deliver
new DALC Members of such quantity so as to cause the Member-Merchant Ratio
within a Territory to exceed 300:1 at any time; provided, however, that if
Transmedia does not deliver a sufficient number of quality Merchants to enable
Signature to satisfy the guidelines set forth under Section I above, Signature
shall be relieved of any obligation to satisfy such guidelines to the extent of
Transmedia's failure to deliver a sufficient number of qualified Merchants.
(Page 118 of 252 Pages)
<PAGE>
IV. TELEMARKETING STANDARDS
To the extent that Signature engages in telemarketing in connection with the
performance of its duties hereunder, Signature shall use commercially reasonable
efforts to ensure that the quality thereof is consistent with Transmedia's
overall service quality standards as provided to Signature in writing from time
to time. Signature shall use its commercially reasonable efforts to ensure that
the following guidelines are followed:
A. Signature representatives (or communicators employed by vendors)
shall approach each call courteously and professionally.
B. Signature shall use its commercially reasonable efforts to ensure that
all communicators understand the DALC Program and the particulars of
the offer being promoted and are able to respond to all probable
questions.
C. The communicator who makes or receives calls shall clearly identify
himself or herself when the call begins.
D. Signature shall not call consumers who are listed on the TPS Service
provided by the Direct Marketing Association.
E. The consumer shall always have the choice to freely accept or reject
any telemarketing offer.
F. Signature communicators and representatives shall respond to (but not
necessarily resolve) all consumer questions or complaints regarding
telemarketing that are referred to it within 48 hours.
G. All offers and promotions made by Signature to businesses or
consumers shall be legal and legitimate.
H. All telemarketing scripts shall clearly communicate all terms of the
offer to the consumer, and the terms and scripts shall have been
presented to and, to the extent provided in this Agreement, approved by
Transmedia in advance (which approval shall not be unreasonably
withheld).
I. Signature shall not solicit through the use of prerecorded messages.
J. Signature shall require its telemarketing vendors to monitor and follow
all federal, state and local telemarketing laws and regulations.
K. Signature shall promptly advise Transmedia of, or fulfill, all
telemarketing requests for additional written information relevant to
the product offering made by the consumer prior to his or her making a
purchase decision.
(Page 119 of 252 Pages)
<PAGE>
L. Signature shall not call consumers or prospective DALC Members on the
following holidays: New Year's Eve (stop calling at 1:00 p.m.), New
Year's Day, Good Friday, Easter Sunday, Passover (first two nights),
Rosh Hashanah Eve and Rosh Hashanah, Yom Kippur Eve and Yom Kippur Day,
Christmas Eve (stop calling at 1:00 p.m.) and Christmas Day.
M. To ensure quality assurance, calls shall periodically be monitored by
supervisors (including Transmedia employees or representatives) and
recorded.
TRANSMEDIA OPERATING PRINCIPLES
-------------------------------
Transmedia shall, during the term of this Agreement, comply with the
standards set forth in DALC Sponsor contracts existing on the date of this
Agreement or hereafter entered into in accordance with the terms hereof, as the
same may from time to time be in effect. In addition, during the term of the
Agreement to which this Annex A is attached (unless a different period is
specified below), Transmedia shall be guided by the following principles, and
shall use its commercially reasonable efforts to adhere to such principles
whenever possible:
I. MERCHANT ACQUISITION
During the period commencing 180 days after the date of the Agreement to which
this Annex A is attached and terminating on the fifth anniversary of the date of
the Agreement, Transmedia shall satisfy the following:
(A) Number of Merchants. For every 150 DALC Members existing and
delivered in any Qualified Territory, Transmedia shall, within
180 days of the date on which either (i) the Territory becomes
Qualified or (ii) the requisite number of DALC Members is
delivered, deliver one Merchant; provided, however, that in no
event shall either party permit the Member-Merchant ratio to
exceed 300:1 at any time.
(B) Merchant Quality. At least ninety percent of Merchants in a
Qualified Territory shall have credit card receipts equal to
or greater than $300,000 during the 12 months preceding
measurement.
II. FULFILLMENT & DIRECTORY
(A) Within five (5) business days of Transmedia's receipt and
approval of an application for enrollment in the DALC Program,
Transmedia will send to the new DALC Member a fulfillment kit
containing the following materials:
1. Merchant directory
2. Welcome letter
3. Membership brochure
4. Outer envelope
(Page 120 of 252 Pages)
<PAGE>
5. Such other materials as the parties shall from time
to time determine.
Transmedia shall fulfill all offers made by Signature in
accordance with the terms of such offers.
(B) Subsequent to delivery of the fulfillment kit, Active DALC
Members will continue to receive at least four updated
Directories each year at times to be determined by the parties
in advance. Transmedia reserves the right to cease sending
directory updates to Members who have not used the DALC
Program at least once in the preceding six-month period;
provided, that such members will automatically be reactivated
and be eligible to receive a directory once they use the DALC
Program.
III. DALC MEMBER STATEMENT & REBATE CHECK
(A) Transmedia will produce and mail a monthly statement to all
Active DALC Members, containing the following information:
1. Itemized list of Merchants visited
2. Total expenditure per visit
3. Total number of miles and/or total amount of cash
rebate earned per visit
4. Total amount of mileage credits and/or cash rebates
earned that month
5. Such other information as the parties shall from time
to time determine.
(B) Transmedia shall issue and mail to each DALC Member a check
equal to the requisite discount applicable to such Member's
total expenditures during qualified visits at Merchants during
the previous month or (ii) if elected by a DALC Member (and
permitted under a DALC Sponsor contract, if any), arrange to
have the requisite discount reflected on the DALC Member's
credit card statement. Rebate checks, if applicable, should be
processed within fifteen (15) business days of the end of the
calendar month in which the rebate was earned.
IV. CUSTOMER SERVICE
Transmedia shall use commercially reasonable efforts to achieve the following
customer service standards on a per calendar quarter basis:
(A) Transmedia shall maintain a toll-free customer service number
which shall be set forth on all directories.
(B) Transmedia representatives (or communicators employed by
vendors) shall approach each customer call courteously and
professionally.
(Page 121 of 252 Pages)
<PAGE>
(C) The communicator who makes or receives calls shall clearly
identify himself or herself when the call begins.
(D) Transmedia shall use commercially reasonable efforts to ensure
that all communicators understand the call subject matter and
are able to respond to probable questions.
(E) All correspondence or customer service inquiries should be
resolved within an average of five (5) business days.
(F) On a monthly basis, all Membership and customer service
telephone inquiries should be answered personally within an
average of 20 seconds or less.
(G) On a monthly basis, no greater than an average of five percent
(5%) of inbound telephone inquiries should be abandoned.
(H) On a monthly basis, busy signal rates for inbound telephone
inquiries should not exceed an average of five percent (5%)
during the hours of 9:00 a.m. to 8:00 p.m., E.S.T.
(I) Customer Service hours of operation initially shall be 24
hours per day, seven days a week (except legal holidays);
provided, however, that Signature shall use commercially
reasonable efforts to renegotiate DALC Sponsor contracts to
substantially reduce such hours of operation.
(J) To ensure quality assurance, calls shall periodically be
monitored by supervisors (including Transmedia employees or
representatives) and recorded.
(Page 122 of 252 Pages)
<PAGE>
ANNEX B
to Marketing Agreement
ECONOMIC COVENANTS
I. Signature Covenants. Signature and its Affiliates covenant and agree
with Transmedia that it shall not during the term of the Agreement to which this
Annex B is attached:
(A) offer rebates to DALC Members in excess of 20% of the gross dining
bill (including tax, tip and, if applicable, beverage);
(B) agree with any person to provide a directory of Merchants more
frequently than once per calendar quarter;
(C) enter into any marketing partner arrangements with existing or
hereafter acquired DALC Sponsors pursuant to which the directory, fulfillment
and service costs thereof would exceed a standard unit cost agreed to by the
Services Committee by more than 5%; or
(D) sell any new DALC membership during the nine-month period following
the date of this Agreement without charging an annual fee of at least $49.00,
provided, however, that such amount shall thereafter be subject to adjustment
from time to time by the Services Committee (whose approval shall not be
unreasonably withheld or delayed);
II. Transmedia Covenants. Transmedia and its Affiliates covenant and agree
with Signature that it shall not, during the term of the Agreement to which this
Annex B is attached:
(A) incur new Rights-to-Receive such that the ratio of food and
beverage (including tax and tip, if applicable) credits received to cash
advanced is not, during the three year period commencing on the date of this
Agreement, less than 1.6:1 in the first year, 1.7:1 in the second year and 1.8:1
in the third year; provided, however, that up to 10% of all Rights-to-Receive
outstanding at any time or 10% of all Merchants to which such Rights-to-Receive
relate (at Transmedia's election) shall be excluded from the foregoing
calculation; or
(B) grant or pay to any salesperson, independent contractor or other
sales personnel commissions in a manner or in an amount inconsistent with
Transmedia's practices in respect of sales of the Transmedia Program; provided,
however, that for five years after the date hereof, Transmedia shall not exceed
the following commission standards:
(i) For tier one sales people, 5% for the first year of
the restaurant contract and 2% for each subsequent
year renewal; and
(Page 123 of 252 Pages)
<PAGE>
(ii) For tier two sales people (defined as sales people
with a restaurant portfolio in excess of $3 million
in gross usage per year), 3% for the first year of
the restaurant contract and 2% for each subsequent
year renewal;
provided, further, that these standards shall be subject to adjustment by the
Services Committee after the end of the fifth year following the date of this
Agreement.
(Page 124 of 252 Pages)
<PAGE>
EXHIBIT 10.4
CREDIT AGREEMENT dated as of June 30, 1999,
between TRANSMEDIA NETWORK INC.,
a Delaware corporation, as Borrower, and
THE CHASE MANHATTAN BANK, as Lender.
The parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. Capitalized terms used herein
shall have the meanings assigned to such terms in Annex X attached hereto which
Annex X is incorporated by reference herein.
SECTION 1.02. Classification of Loans and Borrowings. For
purposes of this Agreement, Loans may be classified and referred to by Type
(e.g., a "Eurodollar Loan"). Borrowings also may be classified and referred to
by Type (e.g., a "Eurodollar Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Lender that the Borrower requests an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision, regardless
(Page 125 of 252 Pages)
<PAGE>
of whether any such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted on the basis
of GAAP as in effect and applied immediately before such change shall have
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitment. Subject to the terms and conditions
set forth herein, the Lender agrees to make Loans to the Borrower from time to
time during the Availability Period to the extent that the Total Revolving
Credit Exposure does not exceed the lesser of (i) the Total Loan Facility or
(ii) the Borrowing Base. Within the foregoing limits and subject to the terms
and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Loans.
SECTION 2.02. Loans and Borrowings. (a) Subject to Section
2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar
Loans as the Borrower may request in accordance herewith. The Lender at its
option may make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the Terms of this Agreement or the obligations of the Lender
hereunder.
(b) At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $1,000,000. At the time that
each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that
is an integral multiple of $100,000 and not less than $500,000; provided that an
ABR Borrowing may be in an aggregate amount that is equal to the entire unused
balance of the total Commitment. Borrowings of more than one Type may be
outstanding at the same time; provided that there shall not at any time be more
than a total of five Eurodollar Borrowings outstanding.
(c) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Eurodollar Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
SECTION 2.03. Requests for Borrowings. (a) To request a
Borrowing, the Borrower shall notify the Lender of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 2:00 p.m., New York City
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 2:00 p.m., New York City time, the
same Business Day of the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Lender of a written Borrowing Request in a form
approved by the Lender and
(Page 126 of 252 Pages)
<PAGE>
signed by a Responsible Officer of the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall
be a period contemplated by the definition of the
term "Interest Period"; and
(v) the location and number of the Borrower's account to
which funds are to be disbursed.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration.
(b) The Lender shall make each Loan on the proposed date
thereof by crediting no later than 3:00 p.m., New York City time, such amount to
the account designated by the Borrower in the applicable Borrowing Request.
SECTION 2.04. Interest Elections. (a) Each Borrowing initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in
the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, and the Loans comprising each
such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower
shall notify the Lender of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Lender of a written Interest Election Request in a form approved
by the Lender and signed by the Borrower.
(c) Each telephonic and written Interest Election Request
shall specify the following information in compliance with Section 2.02:
(Page 127 of 252 Pages)
<PAGE>
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected
with respect to different portions thereof, the
portions thereof to be allocated to each resulting
Borrowing (in which case the information to be
specified pursuant to clauses (iii) and (iv) below
shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to
such Interest Election Request, which shall be a
Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after
giving effect to such election, which shall be a
period contemplated by the definition of the term
"Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(b) If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing then, so long as an Event of
Default is continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.05. Termination and Reduction of Commitment. (a)
Unless previously terminated, the Commitment shall terminate on the Maturity
Date.
(b) The Borrower may at any time terminate, or from time to
time reduce, the Commitment; provided that (i) each reduction of the Commitment
shall be in an amount that is an integral multiple of $100,000 and not less than
$1,000,000 and (ii) the Borrower shall not terminate or reduce the Commitments
if, after giving effect to any concurrent prepayment of the Loans in accordance
with Section 2.07, the Total Revolving Credit Exposure would exceed the
Commitment.
(c) The Borrower shall notify the Lender of any election to
terminate or reduce the Commitment under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Each notice
delivered by the Borrower pursuant to this Section shall be irrevocable;
provided that a notice of termination of the Commitment delivered by the
Borrower may state that
(Page 128 of 252 Pages)
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such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the Lender
on or prior to the specified effective date) if such condition is not satisfied.
Any termination or reduction of the Commitment shall be permanent.
SECTION 2.06. Repayment of Loans; Evidence of Debt. (a) The
Borrower hereby unconditionally promises to pay to the Lender for the account of
the Lender the then unpaid principal amount of the Loans on the Maturity Date.
(b) The Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
the Lender resulting from the Loans made by the Lender, including the amounts of
principal and interest payable and paid to the Lender from time to time
hereunder.
(c) The Lender shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto and (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to the
Lender hereunder.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(e) The Loans shall be evidenced by a promissory note (the
"Revolving Credit Note") in the form attached as Exhibit F hereto.
SECTION 2.07. Prepayment of Loans. (a) The Borrower shall have
the right at any time and from time to time to pay any Borrowing in whole or in
part, subject to prior notice in accordance with paragraph (b) of this Section.
(b) The Borrower shall notify the Lender by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment, and (ii) in the case of
prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.05, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with
Section 2.05. Each partial prepayment of any Borrowing shall be in an amount
that would be permitted in the case of
(Page 129 of 252 Pages)
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an advance of a Borrowing of the same Type as provided in Section 2.02.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.09.
SECTION 2.08. Fees. (a) The Borrower agrees to pay to the
Lender for the account of the Lender a commitment fee, which shall accrue at the
rate of 0.375% per annum on the average daily unused amount of the Commitment of
the Lender. Accrued commitment fees shall be payable monthly in arrears on the
last day of each calendar month and on the date on which the Commitment
terminates commencing on the first such date to occur after the date hereof;
provided that any commitment fees accruing after the date on which the
Commitment terminates shall be payable on demand. All commitment fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.09. Interest. (a) The Loans comprising each ABR
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Margin.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin.
(c) Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section.
(d) Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and, upon termination of the
Commitment; provided that (i) interest accrued pursuant to paragraph (c) of this
Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan, accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a
year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual number of days elapsed (including
the first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Lender, and such determination
shall be conclusive absent manifest error.
(Page 130 of 252 Pages)
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SECTION 2.10. Reports. The Borrower shall prepare and forward
to the Lender (i) on the Settlement Report Date of each month, a Settlement
Report as of the end of the last day of the immediately preceding Settlement
Period, (ii) on each Weekly Settlement Report Date, a Weekly Report as of the
end of the last day of the immediately preceding Weekly Settlement Period, (iii)
on the date of any proposed Borrowing, prior to such Borrowing, a Borrowing Base
Certificate, and (iv) as soon as reasonably practicable, from time to time, such
other information as the Lender may reasonably request.
SECTION 2.11. Lock-Box Accounts and Collection Account. (a)
The Borrower shall instruct all Credit Card Companies and each Restaurant (or
its designee) to cause all Collections to be deposited directly into a Lock-Box
Account. The Borrower will not, and will not permit any of its Subsidiaries or
the Seller to, deposit or otherwise credit, or cause to permit to be so
deposited or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Receivables. Any Lock-Box Account maintained by a Lock-Box Bank
pursuant to the related LockBox Agreement shall be owned by the Borrower;
provided, however, that any such Lock-Box Account shall be under the exclusive
dominion and control of the Lender which is hereby granted to the Lender by the
Borrower. The Borrower shall be permitted to give instructions to the LockBox
Banks for so long as a Default has not occurred and is continuing hereunder. The
Borrower shall not, and shall not permit any of its Subsidiaries to, add any
bank as a Lock-Box Bank to those listed on Exhibit H attached hereto unless such
bank has entered into a Lock-Box Agreement. The Borrower shall not, and shall
not permit any of its Subsidiaries to, terminate any bank as a Lock-Box Bank
unless the Lender shall have received fifteen (15) days' prior notice of such
termination.
(b) One of the Lock-Box Accounts established by the Borrower
on or prior to the Effective Date shall be designated as the collection account
(the "Collection Account") into which the Borrower shall deposit or cause to be
deposited all Collections within one Business Day of (i) deposit thereof into
any of the other Lock-Box Accounts or (ii) receipt thereof by the Borrower,
Restaurant Company or Service Company or any of their Affiliates. The Collection
Account maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement
shall be owned by the Borrower; provided, however, that the Collection Account
shall be under the exclusive dominion and control of the Lender which is hereby
granted to the Lender by the Borrower. The Borrower shall be permitted to give
instructions to the Lock-Box Bank with respect to the Collection Account and the
Collections deposited therein for so long as a Default has not occurred and is
continuing hereunder. Following the occurrence and during the continuation of a
Default, the amounts deposited in the Collection Account shall be distributed
first, to the Restaurants, in the amount of any taxes and tips due and unpaid
with respect to the Receivables and not previously paid to such Restaurant or
deposited into such Restaurant's account by a Credit Card Processor, second, to
the Registered Card Members, in the amount of any Registered Card Member Rebates
related to such Collections, third, to the Lender, an amount equal to any
interest due and owing under the Financing Agreements, fourth, to the Lender, an
amount equal to the remaining Obligations due and owing under the Financing
Agreements to the Lender, fifth, to the Seller, amounts required to be paid by
the Borrower to the Seller pursuant to Section 1.3(a)(iii) of the Asset Purchase
Agreement, and sixth, to the Borrower, in the amount of any remaining funds on
deposit in the Collection Account.
(Page 131 of 252 Pages)
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SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Lender determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Lender determines that the Adjusted LIBO Rate or the
LIBO Rate, as applicable, for such Interest Period will not adequately and
fairly reflect the cost to the Lender of making or maintaining its Loans
included in such Borrowing for such Interest Period;
then the Lender shall give notice thereof to the Borrower by telephone or
telecopy as promptly as practicable thereafter and, until the Lender notifies
the Borrower that the circumstances giving rise to such notice no longer exist,
(i) any Interest Election Request that requests the conversion of any Borrowing
to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing,
such Borrowing, at the Borrower's option, shall be made as an ABR Borrowing or
such Borrowing Request shall be deemed rescinded.
SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets
of, deposits with or for the account of, or credit
extended by, the Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on the Lender or the London interbank market
any other condition affecting this Agreement or
Eurodollar Loans made by the Lender;
and the result of any of the foregoing shall be to increase the cost to the
Lender of making or main taining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by the Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to the Lender such additional amount or
amounts as will compensate such Lender, for such additional costs incurred or
reduction suffered.
(b) If the Lender determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on the Lender's capital or on the capital of the Lender's holding company, if
any, as a consequence of this Agreement or the Loans made by the Lender, to a
level below that which such Lender or the Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to the Lender
such additional amount or amounts as will compensate the Lender or the Lender's
holding company for any such reduction suffered.
(Page 132 of 252 Pages)
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(c) A certificate of the Lender setting forth the amount or
amounts necessary to compensate the Lender or its holding company, as the case
may be, as specified in paragraph (a) or (b) of this Section shall be delivered
to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay the Lender the amount shown as due on any such certificate within 10
days after receipt thereof.
(d) Failure or delay on the part of the Lender to demand
compensation pursuant to this Section shall not constitute a waiver of the
Lender's right to demand such compensation; provided that the Borrower shall not
be required to compensate the Lender pursuant to this Section for any increased
costs or reductions incurred more than 270 days prior to the date that the
Lender notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of the Lender's intention to claim compensation
therefor; provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 270-day period referred
to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of the Lender
declaring the Loans to be due and payable pursuant to Article VII), or (b) the
conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Loan on the date specified in any notice delivered pursuant hereto
(regardless of whether such notice may be revoked under Section 2.07(b) and is
revoked in accordance therewith), then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to the
Lender shall be deemed to include an amount determined by the Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate (in the case of a Eurodollar Loan) that would have been applicable to the
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
the Loan), over (ii) the amount of interest which would accrue on such principal
amount for such period at the interest rate which the Lender would bid were it
to bid in good faith, at the commencement of such period, for dollar deposits of
a comparable amount and period from other banks in the London interbank market.
A certificate of the Lender setting forth any amount or amounts that the Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
the Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
Failure or delay on the part of the Lender to demand
compensation pursuant to this Section shall not constitute a waiver of the
Lender's right to demand such compensation; provided that the Borrower shall not
be required to compensate the Lender pursuant to this Section for any loss, cost
and expense incurred more than 270 days prior to the date that the Lender
notifies the Borrower of the event giving rise to such loss, cost and expense
and of the Lender's intention to claim compensation therefor; provided further
that if the event giving rise to such loss, cost and
(Page 133 of 252 Pages)
<PAGE>
expense is retroactive, then the 270-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.15. Taxes (a) Any and all payments by or on account
of any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Lender within 10 days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Lender on or with respect to any payment by or on
account of any obligation of the Borrower hereunder (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by the Lender on its own behalf or on behalf
of the Lender shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Lender the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Lender.
(e) Failure or delay on the part of the Lender to demand
compensation pursuant to this Section shall not constitute a waiver of the
Lender's right to demand such compensation; provided that the Borrower shall not
be required to compensate the Lender pursuant to this Section for any
Indemnified Taxes or Other Taxes imposed on the Lender more than two years prior
to the date that the Lender delivers the certificate required by clause (c)
above to the Borrower; provided further that, if the Indemnified Taxes or Other
Taxes are imposed retroactively, then the two year period referred to above
shall be extended to include the period of retroactive effect thereof.
SECTION 2.16. Payments Generally. The Borrower shall make each
payment required to be made by it hereunder (whether of principal, interest, or
fees or of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior
to 12:00 noon, New York City time, on the date
(Page 134 of 252 Pages)
<PAGE>
when due, in immediately available funds, without setoff or counterclaim. Any
amounts received after such time may, in the discretion of the Lender, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the Lender at
its offices at 270 Park Avenue, New York, New York. If any payment hereunder
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in dollars.
SECTION 2.17. Mitigation Obligations. If the Lender requests
compensation under Section 2.13, or if the Borrower is required to pay any
additional amount to the Lender or any Governmental Authority for the account of
the Lender pursuant to Section 2.15, then the Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or Affiliates, if, in the judgment of the Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Sections 2.13 or 2.15, as the case may be, in the future and (ii) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to the Lender. The Borrower hereby agrees to pay all
reasonable costs and expenses incurred by the Lender in connection with any such
designation or assignment.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Lender that:
SECTION 3.01. Organization; Powers. Each of the Borrower and
its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization; Enforceability. The Transactions
are within the Borrower's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any
(Page 135 of 252 Pages)
<PAGE>
Governmental Authority, except such as have been obtained or made and are in
full force and effect, (b) will not violate any applicable law or regulation or
the charter, by-laws or other organizational documents of the Borrower or any of
its Subsidiaries or any order of any Governmental Authority, (c) will not
violate or result in a default under any Indebtedness or under any other
material agreement or instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries (other than Liens in favor of the Lender created
pursuant to the Financing Agreements).
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lender its consolidated balance
sheet and statements of income, stockholders equity and cash flows (i) as of and
for the fiscal year ended September 30, 1998, reported on by KPMG Peat Marwick
LLP, independent public accountants, and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended March 31, 1999, certified by its chief
financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Borrower and its consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of the statements referred to in clause (ii) above.
(b) Since September 30, 1998, there has been no material
adverse change in the business, assets, operations or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.
SECTION 3.05. Properties; Liens. (a) Each of the Borrower and
its Subsidiaries has good title to, or valid leasehold interests in, all its
real and personal property material to its business free and clear of all Liens,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties for
their intended purposes and except for Liens permitted by Section 6.02 and
transfers of property pursuant to the Existing Securitization Facility.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.06. Litigation, Contingent Liabilities and
Environmental Matters. (a) There are no actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
of its Subsidiaries (i) as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to
(Page 136 of 252 Pages)
<PAGE>
result in a Material Adverse Effect (other than the Disclosed Matters) or (ii)
that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters or as permitted by
Section 6.01, neither Borrower nor any Subsidiary has any material contingent
liabilities.
(c) Except for the Disclosed Matters and except with respect
to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(d) Since the date of this Agreement, there has been no change
in the status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
Borrower and its Subsidiaries is in compliance in all material respects with all
laws, regulations and orders of any Governmental Authority applicable to it or
its property and is in compliance with all Indebtedness and all other material
agreements and instruments binding upon it or its property (except for any
noncompliance that has been waived by the appropriate parties thereto), except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.08. Investment and Holding Company Status. Neither
the Borrower nor any of its Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regula tion under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.
3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent
(Page 137 of 252 Pages)
<PAGE>
financial statements reflecting such amounts, exceed by more than $10,000 the
fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $10,000 the fair market value of the assets of
all such underfunded Plans.
SECTION 3.11. Disclosure. The Borrower has disclosed to the
Lender all agreements, instruments and corporate or other restrictions to which
it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. No reports, financial statements, certificates or
other information furnished by or on behalf of the Borrower to the Lender in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
SECTION 3.12. Year 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the Borrower's
computer systems and (ii) to the best of the Borrower's knowledge after using
its best efforts to make such determination, equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Borrower's systems interface) and the testing of all such systems and equipment,
as so reprogrammed, has been completed or will be completed by July 31, 1999
with respect to clause (i) above and by November 30, 1999 with respect to clause
(ii) above. The cost to the Borrower of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to the Borrower (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) could not be reasonably expected to result in a Default or a Material
Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrower and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrower to conduct its business without Material
Adverse Effect.
SECTION 3.13. Subsidiaries . As of the Effective Date, the
Borrower does not have any Subsidiaries other than those listed on Schedule
3.13.
SECTION 3.14. Regulation U. Neither the Borrower nor any of
its Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
Margin Stock.
SECTION 3.15. Solvency, etc. On the Effective Date, and
immediately prior to and after giving effect to each Borrowing hereunder and the
use of the proceeds thereof, the Borrower:
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(a) owns and will own assets the fair saleable value of which are (i) greater
than the total amount of liabilities (including contingent liabilities) of the
Borrower and (ii) greater than the amount that will be required to pay the
probable liabilities of the Borrower's then existing debts as they become
absolute and matured considering all financing alternatives and potential asset
sales reasonably available to the Borrower; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or after
giving effect to any contemplated transaction; and (c) does not intend to incur
and does not believe that it will incur debts beyond its ability to pay such
debts as they become due.
SECTION 3.16. Insurance. The Borrower and each of its
Subsidiaries has insurance covering its insurable properties, including all
inventory, equipment, and real property against the perils of fire, theft,
burglary, public liability, workers' compensation and business interruption and
such other risks as are customary for companies similarly situated and in the
same business or similar business under policies issued by financially sound and
reputable insurers in such amounts as are customary for companies similarly
situated and in the same or similar business. All premiums have been paid on
such policies.
SECTION 3.17. Real Property. Set forth on Schedule 3.17 is a
complete and accurate list, as of the Effective Date, of the address of all real
property owned or leased by the Borrower or any of its Subsidiaries, together
with, in the case of leased property, the name and mailing address of the lessor
of such property.
SECTION 3.18. Burdensome Obligations. Neither the Borrower nor
any of its Subsidiaries is a party to any agreement or contract or subject to
any corporate or partnership restriction as to which circumstances currently
exist which might reasonably be expected to have a Material Adverse Effect.
SECTION 3.19. Labor Matters. Except as set forth on Schedule
3.19, neither the Borrower nor any of its Subsidiaries is subject to any labor
or collective bargaining agreement. There are no existing or threatened strikes,
lockouts or other labor disputes involving either the Borrower or any of its
Subsidiaries that singly or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Hours worked by and payment made to employees of
either Borrower or any of its Subsidiaries are not in violation in any material
respect of the Fair Labor Standards Act or any other applicable law, rule or
regulation dealing with such matters.
SECTION 3.20. Asset Purchase Agreement, etc. (a) The Borrower
has heretofore furnished the Lender a true and correct copy of the Asset
Purchase Agreement.
(b) the Borrower and, to the actual knowledge of the Borrower
unless previously disclosed by the Borrower to the Lender, each other party to
the Asset Purchase Agreement, has duly taken all necessary corporate,
partnership or other organizational action to authorize the execution, delivery
and performance of the Asset Purchase Agreement and the consummation of
transactions contemplated thereby.
(Page 139 of 252 Pages)
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(c) The Purchase complies in all material respects with all
applicable legal requirements, and all necessary governmental, regulatory,
creditor, shareholder, partner and other material consents, approvals and
exemptions required to be obtained by the Borrower and, to the actual knowledge
of the Borrower unless previously disclosed by the Borrower to the Lender, each
other party to the Asset Purchase Agreement in connection with the Purchase have
been duly obtained and are in full force and effect. All applicable waiting
periods with respect to the Purchase have expired without any action being taken
by any competent governmental authority which restrains, prevents or imposes
material adverse conditions upon the consummation of the Purchase.
(d) The execution and delivery of the Asset Purchase Agreement
did not, and the consummation of the Purchase will not, violate any statute or
regulation of the United States (including any securities law) or of any state
or other applicable jurisdiction, or any order, judgment or decree of any court
or governmental body binding the Borrower or any or its Subsidiaries or, to the
actual knowledge of the Borrower unless previously disclosed by the Borrower to
the Lender, any other party to the Asset Purchase Agreement, or result in a
breach of, or constitute a default under, any material agreement, indenture,
instrument or other document, or any judgment, order or decree, to which the
Borrower or any of its Subsidiaries is a party or by which the Borrower or any
of its Subsidiaries is bound or, to the actual knowledge of the Borrower unless
previously disclosed by the Borrower to the Lender, to which any other party to
the Asset Purchase Agreement is a party or by which any such party is bound.
(e) No statement or representation made in the Asset Purchase
Agreement by the Borrower or, to the actual knowledge of the Borrower unless
previously disclosed by the Borrower to the Lender, any other Person, contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 3.21. Defaults. No Default has occurred and is
continuing.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligations of the Lender to
make the initial Loans hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance
with Section 8.02):
(a) The Lender (or its counsel) shall have received from each
party hereto a counterpart of this Agreement and the other Financing Agreements
signed on behalf of such party and the Subsidiaries of the Borrower, as
applicable.
(b) The Lender shall have received a favorable written opinion
(addressed to the Lender and dated the Effective Date) of Morgan, Lewis &
Bockius, LLP, counsel for the Borrower,
(Page 140 of 252 Pages)
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substantially in the form of Exhibit E, and covering such other matters relating
to the Borrower, its Subsidiaries, this Agreement, the other Financing
Agreements or the Transactions, including, without limitation, perfection
issues, as the Lender shall reasonably request. The Borrower hereby requests
such counsel to deliver such opinion.
(c) The Lender shall have received such documents and
certificates as the Lender or its counsel may reasonably request relating to the
organization, existence and good standing of the Borrower, the authorization of
the Transactions and any other legal matters relating to the Borrower, this
Agreement, and the other Financing Agreements or the Transactions, all in form
and substance satisfactory to the Lender and its counsel.
(d) The Lender shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02.
(e) The Lender shall have received all fees and other amounts
due and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(f) The Lender shall have received a copy of the GAMI Loan
Agreement signed on behalf of the Borrower, Restaurant Company, Service Company,
TMNI and GAMI and such other documents and certificates as the Lender or its
counsel may reasonably request evidencing the effectiveness of the GAMI Loan
Agreement and GAMI shall have advanced $10,000,000 to the Borrower thereunder.
(g) The Lender shall have received evidence satisfactory to it
of the existence of insurance required to be maintained pursuant to Section
5.05, together with evidence that the Lender has been named as a lender's loss
payee and an additional insured on all related insurance policies.
(h) The Lender shall have received certified copies of UCC
Requests for Information or Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Lender, dated a date reasonably near to
the Effective Date, listing all effective financing statements which name the
Borrower and each of its Subsidiaries and the Seller (under their present names
and any previous names) as debtors and which are filed in the jurisdictions in
which filings are to be made pursuant to the Financing Agreements, together with
(i) copies of such financing statements, (ii) executed copies of proper UCC Form
UCC-3 termination statements, if any, necessary to release all Liens and other
rights of any Person in any Collateral described in the Financing Agreements
previously granted by any Person (other than Liens permitted by Section 6.02)
and (iii) such other UCC Form UCC-3 termination statements as the Agent may
reasonably request.
(i) Each document (including UCC financing statements)
required by the Financing Agreements or under law or reasonably requested by the
Lender shall have been filed,
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registered or recorded in order to create in favor of the Lender, a perfected
Lien on the Collateral described therein, prior and superior to any other
Person, in proper form for filing, registration or recording.
(j) The Lender shall have received a Weekly Report dated as of
the most recent Weekly Settlement Report Date immediately preceding the
Effective Date.
(k) The Lender shall have received a Borrowing Base
Certificate dated as of the Effective Date.
(l) The Lender shall have received a copy of the Waiver signed
on behalf of each of the noteholders, the trustee and the collateral agent under
the Existing Securitization Facility.
The Lender shall notify the Borrower of the Effective Date, and such notice
shall be conclusive and binding. Notwithstanding the foregoing, the obligations
of the Lender hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 8.02).
SECTION 4.02. Each Credit Event. The obligation of the Lender
to make a Loan on the occasion of any Borrowing, is subject to the satisfaction
of the following conditions:
(a) The representations and warranties of the Borrower set
forth in this Agreement, after giving effect to applicable cure periods and
materiality thresholds, shall be true and correct on and as of the date of such
Borrowing except to the extent such representations and warranties specifically
relate to an earlier date and then, as of such earlier date.
(b) At the time of and immediately after giving effect to such
Borrowing, no Default shall have occurred and be continuing.
(c) The Borrower shall have delivered to the Lender a
Borrowing Base Certificate.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs (a)
and (b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitment has expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Borrower covenants and agrees with the Lender that:
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SECTION 5.01. Financial Statements and Other Information. The
Borrower will furnish to the Lender:
(a) within 90 days after the end of each fiscal year of the
Borrower, its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by independent public accountants of
recognized national standing (without a "going concern" or like qualification or
exception and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements present fairly
in all material respects the financial condition and results of operations of
the Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such fiscal quarter and the then elapsed portion of the
fiscal year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements
under clause (a) or (b) above, a Compliance Certificate executed by a Financial
Officer of the Borrower (i) certifying as to whether a Default has occurred and
is continuing and, if a Default has occurred and is continuing, specifying the
details thereof and any action taken or proposed to be taken with respect
thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 5.09 and (iii) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial
statements referred to in Section 3.04 and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate;
(d) concurrently with any delivery of financial statements
under clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during the
course of their examination of such financial statements of any Default that has
occurred and is continuing (which certificate may be limited to the extent
required by accounting rules or guidelines);
(e) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any Governmental Authority succeeding to any or all of
(Page 143 of 252 Pages)
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the functions of said Commission, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may be;
(f) within ten (10) Business Days after the date any material
change in or amendment to the Restaurant Guidelines is made, a copy of the
Restaurant Guidelines then in effect indicating such change or amendment. Within
five (5) days after the date of any change in the Borrower's public or private
debt ratings, if any, a written certification of the Borrower's public and
private debt ratings after giving effect to any such change; and
(g) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Lender may reasonably request.
SECTION 5.02. Notices of Material Events. The Borrower will
furnish to the Lender written notice of the following events within one Business
Day of the date on which a Responsible Officer of the Borrower has notice
thereof:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries; and
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Borrower
will, and will cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section
6.03.
SECTION 5.04. Payment of Obligations. The Borrower will, and
will cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a)
(Page 144 of 252 Pages)
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the validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The
Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations.
SECTION 5.06. Books and Records; Inspection Rights. The
Borrower will, and will cause each of its Subsidiaries to, keep proper books of
record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. The
Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Lender or the Lender, upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from
its books and records, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.
SECTION 5.07. Compliance with Laws. The Borrower will, and
will cause each of its Subsidiaries to, comply with all laws, rules, regulations
and orders of any Governmental Authority applicable to it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds. The initial proceeds of the
Loans will be used only for the purchase of those certain Receivables and
related assets pursuant to the Asset Purchase Agreement and any subsequent
Borrowings will be used only to fund Credits. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails
a violation of any of the Regulations of the Board, including Regulations U and
X.
SECTION 5.09. Minimum Net Worth. The Borrower and its
consolidated subsidiaries (as defined in accordance with GAAP) shall at all
times have a net worth (as defined in accordance with GAAP) of at least
$20,000,000.
SECTION 5.10. Performance and Compliance with Receivables and
Receivables Contracts. The Borrower, at its expense, will, and will cause each
of its Subsidiaries to, timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by the Borrower
or such Subsidiary under the Receivables Contracts.
(Page 145 of 252 Pages)
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SECTION 5.11. Restaurant Guidelines. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with the
Restaurant Guidelines in regard to each Receivable and the related Receivables
Contract.
SECTION 5.12. Collections. The Borrower shall, and shall cause
each of its Subsidiaries to, instruct all Credit Card Companies and each
Restaurant (or its designee) to cause all Collections to be deposited directly
to a Lock-Box Account.
SECTION 5.13. Collections Received. The Borrower shall, and
shall cause each of its Subsidiaries to, hold in trust, and deposit immediately
(but in any event no later than one Business Day following its receipt thereof)
to a Lock-Box Account all Collections received from time to time by the Borrower
or any of its Subsidiaries, as the case may be.
SECTION 5.14. Existing Securitization Facility. The Borrower
shall service its Receivables hereunder and its receivables which are subject to
the Existing Securitization Facility in an evenhanded manner, with no one
program being favored over the other.
ARTICLE VI
Negative Covenants
Until the Commitment has expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full, the Borrower covenants and agrees with the Lender that:
SECTION 6.01. Indebtedness. The Borrower will not, and will
not permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.01, and any extensions, renewals or replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof;
(c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(d) Guarantees by the Borrower of Indebtedness of any
Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other
Subsidiary;
(e) Indebtedness of the Borrower or any Subsidiary incurred to
finance the acquisition, construction or improvement of any fixed or capital
assets, including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or
(Page 146 of 252 Pages)
<PAGE>
secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (e) shall not exceed
$100,000 at any time outstanding;
(f) Indebtedness of the Borrower or any Subsidiary as an
account party in respect of trade letters of credit;
(g) Indebtedness of the Borrower or any Subsidiary pursuant to
any Hedging Agreements permitted under Section 6.05;
(h) Indebtedness of the Borrower and its Subsidiaries pursuant
to the GAMI Loan Agreement and any extensions, renewals or replacements of such
Indebtedness that does not increase the maximum permissible outstanding
principal amount thereof as of the Effective Date;
(i) Current accounts payable arising in the ordinary course of
the Borrower's or its Subsidiary's business and not overdue;
(j) Indebtedness of the Borrower or any Subsidiary incurred in
connection with the Existing Securitization Facility and any extensions,
renewals or replacements of such Indebtedness that does not increase the maximum
permissible outstanding principal amount thereof as of the Effective Date;
(k) Unsecured Indebtedness of the Borrower or any Subsidiary
incurred in connection with the acquisition of franchises in an aggregate
principal amount not exceeding $8,000,000; provided, that the terms of the
Indebtedness and the related acquisitions of franchises must conform to the
following conditions: (i) any such unsecured Indebtedness shall be subordinate
to all of the Borrower's and its Subsidiaries' Obligations under the Financing
Agreements and the Borrower's and its Subsidiaries' Indebtedness under the GAMI
Loan Documents, (ii) such unsecured Indebtedness shall not require the payment
of any interest or other similar charges to any creditor of the Borrower or its
Subsidiaries prior to the repayment in full of all of the Obligations hereunder,
(iii) such unsecured Indebtedness shall have a maturity equal to or greater than
four (4) years, (iv) the aggregate of the purchase prices for all acquisitions
of franchisees shall not exceed $12,000,000, (v) the cash portion of the
aggregate purchase price for all franchises must be paid by the Borrower or its
Subsidiaries out of any amounts, up to an aggregate of $4,000,000, that become
available under the Existing Securitization Facility resulting from a reduction
of the Borrowing Base Deficiency (as such term is defined in the Existing
Securitization Facility), and (vi) any acquisition of a franchise by the
Borrower or its Subsidiaries and the related incurrence of unsecured
Indebtedness will be subject to the prior written approval of Chase (which
approval shall not be unreasonably withheld); and
(Page 147 of 252 Pages)
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(l) other unsecured Indebtedness in an aggregate principal
amount not exceeding $500,000 at any time outstanding; provided that the
aggregate principal amount of Indebtedness of the Borrower's Subsidiaries
permitted by this clause (l) shall not exceed $100,000 at any time outstanding.
SECTION 6.02. Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided
that such Lien shall secure only those obligations which it secures on the date
hereof and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any
property or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that (i) such Lien
is not created in contemplation of or in connection with such acquisition or
such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not
apply to any other property or assets of the Borrower or any Subsidiary and
(iii) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case
may be and extensions, renewals and replacements thereof that do not increase
the outstanding principal amount thereof;
(d) Liens on fixed or capital assets acquired, constructed or
improved by the Borrower or any Subsidiary, including Liens relating to Capital
Lease Obligations; provided that (i) such security interests secure Indebtedness
permitted by clause (e) of Section 6.01, (ii) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed $100,000 and (iv) such security
interests shall not apply to any other property or assets of the Borrower or any
Subsidiary;
(e) Liens arising pursuant to purchase money Liens securing
Indebtedness representing the purchase price or financing of the purchase price
of assets purchased or otherwise acquired by the Borrower or its Subsidiaries in
the ordinary course of business; provided that (i) any such Liens attach only to
the assets so purchased or acquired and (ii) Indebtedness secured by any such
Liens does not exceed the purchase price of the assets being purchased or
acquired;
(Page 148 of 252 Pages)
<PAGE>
(f) Liens arising in connection with the Existing
Securitization Facility; provided that such Lien shall secure only those
obligations which it secures on the date hereof and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount
thereof;
(g) Liens granted by the Borrower and the Subsidiaries to the
Lender in connection with the Transactions.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not,
and will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing (i) any Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to another Subsidiary, (iv)
the Borrower may sell, transfer, lease or otherwise dispose of its assets to
Restaurant Company, Service Company or TMNI and (v) any Subsidiary may liquidate
or dissolve if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and would not be reasonably
likely to result in a Material Adverse Effect; provided that any such merger
involving a Person that is not a wholly owned Subsidiary immediately prior to
such merger shall not be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Subsidiaries on the
date of execution of this Agreement and businesses reasonably related thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets of
any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by the Borrower existing on the date hereof in
the capital stock of its Subsidiaries;
(Page 149 of 252 Pages)
<PAGE>
(c) loans or advances made by the Borrower to any Subsidiary
and made by any Subsidiary to the Borrower or any other Subsidiary;
(d) Guarantees constituting Indebtedness permitted by Section
6.01;
(e) investments existing on the Effective Date and listed on
Schedule 6.04;
(f) investments made in connection with the Existing
Securitization Facility; and
(g) acquisitions of franchises by the Borrower or its
Subsidiaries pursuant to the terms and subject to the limitations set forth in
Section 6.01(k) hereof; and
(h) loans or advances made by the Borrower or its Subsidiaries
to any employee or officer of the Borrower or its Subsidiaries in the ordinary
course of its business in an aggregate principal amount that does not exceed
$300,000.
SECTION 6.05. Hedging Agreements. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any Hedging Agreement,
other than Hedging Agreements entered into in the ordinary course of business to
hedge or mitigate risks to which the Borrower or any Subsidiary is exposed in
the conduct of its business or the management of its liabilities.
SECTION 6.06. Restricted Payments. The Borrower will not, and
will not permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a) the Borrower
may declare and pay dividends with respect to its capital stock payable solely
in additional shares of its common stock, (b) Subsidiaries may declare and pay
dividends ratably with respect to their capital stock, (c) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries and (d) the Borrower may make Restricted Payments pursuant to and
in accordance with the Rights Offering Documents.
SECTION 6.07. Transactions with Affiliates. The Borrower will
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly owned Subsidiaries
not involving any other Affiliate, (c) any Restricted Payment permitted by
Section 6.06, (d) transactions between the Borrower and its Subsidiaries, on the
one hand, and the Borrower's indirect wholly owned Subsidiaries, on the other
hand, entered into in connection with the Existing Securitization Facility, (e)
transactions between the Borrower and its Affiliates entered into in connection
with the Rights Offering, the Rights Offering Events and pursuant to the Rights
Offering Documents, (f) transactions between the Borrower and GAMI under
(Page 150 of 252 Pages)
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the GAMI Loan Documents, and (g) any quarterly payment made by the Borrower to
EGI of the EGI Management Fee.
SECTION 6.08. Restrictive Agreements. The Borrower will not,
and will not permit any of its Subsidiaries to, directly or indirectly, enter
into, incur or permit to exist any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of the
Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (b) the ability of any Subsidiary to pay dividends
or other distributions with respect to any shares of its capital stock or to
make or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) the foregoing shall not apply to restrictions and
conditions imposed under the Existing Securitization Facility or the GAMI Loan
Documents, (v) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted
by this Agreement if such restrictions or conditions apply only to the property
or assets securing such Indebtedness and (vi) clause (a) of the foregoing shall
not apply to customary provisions in leases and other contracts restricting the
assignment thereof.
SECTION 6.09. Subsidiary Indebtedness. The Borrower will not
permit the aggregate principal amount of Indebtedness of its Subsidiaries
(excluding (a) any Indebtedness of a Subsidiary owed to the Borrower or another
Subsidiary, but including any Guarantee by a Subsidiary of Indebtedness of the
Borrower and (b) Indebtedness of a Subsidiary incurred in connection with the
Existing Securitization Facility and the GAMI Loan Documents) at any time to
exceed $100,000.
SECTION 6.10. No Change in Business or Restaurant Guidelines.
The Borrower will not, and will not permit any of its Subsidiaries to, make any
change in the character of its business or in the Restaurant Guidelines, which
change would, in either case, impair the collectibility of any Receivable or
otherwise have a Material Adverse Effect.
SECTION 6.11. Change of Name, Etc. The Borrower will not, and
will not permit any of its Subsidiaries to, change its name, identity or
structure or the location of its chief executive office, unless at least ten
(10) days prior to the effective date of any such change the Borrower or
Subsidiary, as applicable, delivers to the Lender (i) such documents,
instruments or agreements, executed by the Borrower or Subsidiary, as
applicable, as are necessary to reflect such change and to continue the
perfection of the Lender's security interests in the Collateral and (ii) new or
revised Lock-Box Agreements executed by the Lock-Box Banks which reflect such
change and enable the Lender to continue to exercise its rights contained
herein.
(Page 151 of 252 Pages)
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SECTION 6.12. Amendment to Asset Purchase Agreement. The
Borrower will not amend, modify, or supplement the Asset Purchase Agreement,
except with the prior written consent of the Lender; nor shall the Borrower take
any other action under the Asset Purchase Agreement that would reasonably be
likely to have a Material Adverse Effect or which is inconsistent with the terms
of this Agreement.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall
occur:
(a) the Borrower shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in clause (a) of
this Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of two
Business Days.
(c) any representation or warranty made or deemed made by or
on behalf of the Borrower or any Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with this Agreement or any amendment or modification hereof or
waiver hereunder, shall prove to have been incorrect in any material respect
when made or deemed made; provided, that to the extent that in the reasonable
judgment of the Lender such failure may be cured, the Borrower shall have thirty
(30) days to effect such cure after the earlier of the date on which a
Responsible Officer of the Borrower has actual knowledge thereof and the date on
which written notice thereof has been given to the Borrower by the Lender,
requiring the same to be remedied
(d) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, 5.03 (with respect
to the Borrower's existence) or 5.08 or in Article VI;
(e) the Borrower shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those
specified in clause (a), (b), (d) or (p) of this Article), or any other
Financing Agreement, and such failure shall continue unremedied for a period of
30 days after the earlier of the date on which a Responsible Officer of the
Borrower has actual knowledge of such failure and the date on which written
notice of such failure has been given to the Borrower by the Lender, requiring
the same to be remedied;
(Page 152 of 252 Pages)
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(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $2,000,000 shall be rendered against the Borrower,
any Subsidiary or any combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor
to attach or levy upon any assets of the Borrower or any Subsidiary to enforce
any such judgment;
(l) an ERISA Event shall have occurred that, in the reasonable
opinion of the Lender, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;
(Page 153 of 252 Pages)
<PAGE>
(m) a Change in Control shall occur;
(n) the Lender shall, for any reason, fail or cease to have a
valid and perfected first priority security interest in the Collateral with
respect thereto, free and clear of any Adverse Claims (except for any Collateral
that is not Receivables or Related Security or Collections related to such
Receivables with an aggregate value that does not exceed $100,000);
(o) there shall have occurred any material adverse change in
the operations of the Borrower or any Subsidiary since the Effective Date, or
any other Material Adverse Effect shall have occurred;
(p) the Borrower shall fail to deliver to the Lender any
report required to be delivered by it under the terms of the Financing
Agreements within three Business Days of (i) with respect to any Settlement
Report or Weekly Report, when such report was due or (ii) with respect to any
other report, receipt by the Borrower of written notice from the Lender that
such report is due; or
(q) the Total Revolving Credit Exposure exceeds the Borrowing
Base unless the Borrower either (i) pays the Lender within two (2) Business Days
in immediately available cash or (ii) increases the balance of the Receivables
within two (2) Business Days, in each case in an amount such that the Total
Revolving Credit Exposure is less than or equal to the Borrowing Base.
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Lender may, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate the Commitment, and thereupon the Commitment shall terminate
immediately, and (ii) declare the Loans then outstanding to be due and payable
in whole (or in part, in which case any principal not so declared to be due and
payable may thereafter be declared to be due and payable), and thereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued
hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower; and in case of any event with respect to the Borrower described in
clause (h) or (i) of this Article, the Commitment shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower.
(Page 154 of 252 Pages)
<PAGE>
ARTICLE VIII
Miscellaneous
SECTION 8.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 11900 Biscayne Boulevard,
Miami, Florida 33181- 9915, Attention of Steve Lerch (Telecopy No. (305)
892-3342), with a copy to Morgan, Lewis & Bockius, LLP, 101 Park Avenue, New
York, NY 10178, Attention of Stephen Farrell, Esq.
(Telecopy: No. (212) 309-6273);
(b) if to the Lender, to Chase Securities Inc., Global Client
Management, 10 S. LaSalle Street, 23rd Floor, Chicago, IL 60603, Attention of
David Christopher (Telecopy No. (312) 807-4077), with a copy to Chase Securities
Inc., 270 Park Avenue, 7th Floor, New York 10017, Attention of Christopher Evans
(Telecopy No. (212) 834-6564);
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 8.02. Waivers; Amendments. (a) No failure or delay by
the Lender in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lender hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agree ment or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
shall not be construed as a waiver of any Default, regardless of whether the
Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrower and the Lender.
SECTION 8.03. Expenses; Indemnity; Damage Waiver. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Lender and its Affiliates, including the reasonable fees, charges and
disbursements of counsel for the Lender, in connection with the
(Page 155 of 252 Pages)
<PAGE>
preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) and (ii) all
reasonable out-of-pocket expenses incurred by the Lender including the
reasonable fees, charges and disbursements of any counsel for the Lender in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made hereunder, including all such out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of such Loans.
(b) The Borrower shall indemnify the Lender and each Related
Party of the Lender (each such Person being called an "Indemnitee") against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the consummation of the Transactions or any other
transactions contemplated hereby, (ii) any Loan or the use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or the use of the proceeds thereof.
(d) All amounts due under this Section shall be payable not
later than three (3) Business Days after written demand therefor.
SECTION 8.04. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby, except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
(Page 156 of 252 Pages)
<PAGE>
contemplated hereby, the Related Parties of the Lender) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b) The Lender may, in the ordinary course of its business and
in accordance with applicable law, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld) assign all or any
part of its rights and obligations under the Financing Agreements to any Person;
provided, that any such assignment shall be for an aggregate principal amount of
at least $5,000,000. The Lender shall be relieved of its obligations hereunder
with respect to its commitment or assigned portion thereof. The Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of the Borrower to the assignee and that the assignee shall be
considered to be a "Lender".
SECTION 8.05. Survival All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid and so long
as the Commitment has not expired or terminated. The provisions of Sections
2.13, 2.14, 2.15 and 8.03 shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Commitment or the
termination of this Agreement or any provision hereof.
SECTION 8.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
any separate letter agreements with respect to fees payable to the Lender
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
SECTION 8.07. Severability. Any provision of this Agreement
held to be invalid, illegal or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability without affecting the validity, legality and enforceability
of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 8.08. Right of Setoff. If an Event of Default shall
have occurred and be continuing, the Lender and each of its Affiliates is hereby
authorized at any time and from time to
(Page 157 of 252 Pages)
<PAGE>
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other obligations at any time owing by the Lender or Affiliate to or
for the credit or the account of the Borrower (excluding any deposits or other
amounts owing by the Lender or its Affiliates in their capacity as trustee under
the Existing Securitization Facility to or for the account of the Borrower)
against any of and all the obligations of the Borrower now or hereafter existing
under this Agreement held by the Lender, irrespective of whether or not the
Lender shall have made any demand under this Agreement and although the
obligations may be unmatured. The rights of the Lender under this Section are in
addition to other rights and remedies (including other rights of setoff) which
the Lender may have.
SECTION 8.09. Governing Law; Jurisdiction; Consent to Service
of Process. (a) This Agreement shall be construed in accordance with and
governed by the law of the State of New York, without regard to conflict of laws
principles (other than Section 5-1401 of the New York General Obligations Law).
(b) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Lender may otherwise
have to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(d) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 8.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE
(Page 158 of 252 Pages)
<PAGE>
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 8.11. Headings Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 8.12. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as
interest on such Loan under applicable law (collectively the "Charges"), shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender in accordance with applicable
law, the rate of interest payable in respect of such Loan hereunder, together
with all Charges payable in respect thereof, shall be limited to the Maximum
Rate and, to the extent lawful, the interest and Charges that would have been
payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 8.13. Confidentiality. (a) The Borrower shall
maintain, and shall cause each officer, employee and agent of itself and its
Affiliates to maintain, the confidentiality of the Financing Agreements and all
other confidential proprietary information with respect to the Lender and its
business obtained by them in connection with the structuring, negotiation and
execution of the transactions contemplated herein and in the other Financing
Agreements, except for information that has become publicly available or
information disclosed (i) to legal counsel, accountants and other professional
advisors to the Borrower and its Affiliates, (ii) as required by law,
regulation, the requirements of the New York Stock Exchange or legal process or
(iii) in connection with any legal or regulatory proceeding to which the
Borrower or any of its Affiliates is subject. The Borrower hereby consents to
the disclosure of any non-public information with respect to it received by the
Lender (i) to legal counsel, accountants and other professional advisors to the
Lender or its Affiliates, (ii) as required by law, regulation or legal process,
(iii) in connection with any legal or regulatory proceeding to which the Lender
or any of its Affiliates is subject, (iv) to any participant or assignee or
potential participant or assignee; provided, that the Lender shall advise any
such recipient of information that the information they receive is non-public
information and may not be disclosed or used for any other purposes other than
that for which it is disclosed to such recipient without the prior written
consent of the Borrower.
(Page 159 of 252 Pages)
<PAGE>
(b) The Lender shall maintain, and shall cause each officer,
employee and agent of itself and its Affiliates to maintain, the confidentiality
of the Financing Agreements and all other confidential proprietary information
with respect to the Borrower and its Affiliates and each of their respective
businesses obtained by them in connection with the structuring, negotiation and
execution of the transactions contemplated herein and in the other Financing
Agreements, except for information that has become publicly available or
information disclosed (i) to legal counsel, accountants and other professional
advisors to the Lender or its Affiliates, (ii) as required by law, regulation or
legal process, (iii) in connection with any legal or regulatory proceeding to
which the Lender or any of its Affiliates is subject, or (iv) to any participant
or assignee or potential participant or assignee who agrees to keep such
information confidential in accordance with the terms hereof.
SECTION 8.14. GAMI Debt. The Borrower will not make any
amendment or modification to the GAMI Note or the other GAMI Loan Documents
without the prior written consent of the Lender, or directly or indirectly
voluntarily prepay, defease or in substance defease, purchase, redeem, retire or
otherwise acquire, or otherwise make payments of or on the GAMI Note except as
permitted under the Subordination Agreement. Subject to the limitations provided
for in the Subordination Agreement, the Rights Offering Proceeds (as defined in
the GAMI Loan Agreement) may be used to satisfy the Borrower's and its
Subsidiaries' obligations owing under the GAMI Loan Documents to the extent
required therein.
[remainder of page intentionally left blank; signature page follows]
(Page 160 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TRANSMEDIA NETWORK INC.
By /s/ Stephen E. Lerch
------------------------------------
Name: Stephen E. Lerch
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Lender,
By /s/ Steven J. Faliski
------------------------------------
Name: Steven J. Faliski
Title: Vice President
(Page 161 of 252 Pages)
<PAGE>
ANNEX X
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Account Debtor" shall mean any Person who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" of a Person shall mean all "accounts," as such term
is defined in the UCC, now owned or hereafter acquired by such Person and, in
any event, including (a) all accounts receivable, other receivables, book debts
and other forms of obligations (other than forms of obligations evidenced by
Chattel Paper, Documents or Instruments) now owned or hereafter received or
acquired by or belonging or owing to any Person, whether arising out of goods
sold or services rendered by it or from any other transaction (including any
such obligations which may be characterized as an account or contract right
under the UCC), (b) all of such Person's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Person's rights to any goods represented by any of the foregoing
(including unpaid sellers' rights of rescission, replevin, reclamation and
stoppage in transit and rights to returned, reclaimed or repossessed goods), (d)
all monies due or to become due to such Person, under all purchase orders and
contracts for the sale of goods or the performance of services or both by such
Person or in connection with any other transaction (whether or not yet earned by
performance on the part of such Person) now or hereafter in existence, including
the right to receive the proceeds of said purchase orders and contracts, and (e)
all collateral security and guarantees of any kind, now or hereafter in
existence, given by any Person with respect to any of the foregoing; provided,
that "Accounts" shall not include any Accounts that have been transferred or
pledged under the Existing Securitization Facility.
"Act" shall have the meaning assigned to such term in Section
8.4 of the Pledge Agreement.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Advance Rate" shall mean, on any day, a percentage calculated
as set forth on Schedule I attached hereto.
"Advance Ratio" shall mean an amount equal to the quotient of
(a) the product of (i) Average Weekly Net Sales, times (ii) 52, times (iii)
75.0%, divided by (b) Net Receivables Balance.
"Adverse Claim" shall mean a lien, security interest, charge
or encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including
(Page 162 of 252 Pages)
<PAGE>
any UCC financing statement or any similar instrument filed against such
Person's assets or properties), other than a Permitted Encumbrance or other Lien
permitted under Section 6.02 of the Credit Agreement.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, and (b) the
Federal Funds Effective Rate in effect on such day plus 1.5%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means, (a) with respect to any ABR Loan,
0.25% per annum, and (b) with respect to any Eurodollar Loan 1.25% per annum.
"Arrear Sales" shall mean all cash collections and other cash
proceeds received in connection with the Registered Card Program from a
Restaurant that has no outstanding Receivables under the Registered Card
Program.
"Assessment Rate" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Lender to be representative of the cost of
such insurance to the Lender.
"Asset Purchase Agreement" shall mean that certain Asset
Purchase Agreement, dated as of March 17, 1999, by and among the Seller and
Borrower, as purchaser thereunder, as the same may be amended, supplemented or
otherwise modified and in effect from time to time.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.
"Average Weekly Net Sales" shall mean an amount equal to the
quotient of (a) the sum of Weekly Net Sales for the most recent 26 successive
Weekly Settlement Periods, inclusive of the most recently completed Weekly
Settlement Period, divided by (b) 26.
(Page 163 of 252 Pages)
<PAGE>
"Bankruptcy Code" means Title 11, United States Code, as
amended from time to time, and any successor statute thereto.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means Transmedia Network Inc., a Delaware
corporation.
"Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Availability" shall mean, at any date of
determination, the excess of (a) the lesser of (i) the Commitment or (ii) the
Borrowing Base over (b) Total Revolving Credit Exposure.
"Borrowing Base" shall mean an amount equal to (a) the Net
Receivables Balance, times (b) the applicable Advance Rate.
"Borrowing Base Certificate" means a certificate in
substantially the form of Exhibit B attached to the Credit Agreement duly
certified by the chief financial officer or treasurer of Borrower.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.03 of the Credit Agreement.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City, New York or Miami, Florida
are authorized or required by law to remain closed; provided that, when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than EGI and its Affiliates, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Borrower; (b) occupation of a majority of the seats (other
than vacant seats) on the board of directors of the
(Page 164 of 252 Pages)
<PAGE>
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower or by EGI or its Affiliates nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Borrower
by any Person or group other than EGI or its Affiliates.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by the Lender with
any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement.
"Chattel Paper" of a Person shall mean any "chattel paper," as
such term is defined in the UCC, now owned or hereafter acquired by such Person,
wherever located; provided, that "Chattel Paper" shall not include any Chattel
Paper that has been transferred or pledged under the Existing Securitization
Facility.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral" shall mean the property covered by the Security
Agreement, the Subsidiary Security Agreement and the other Financing Agreements
and any other property, real or personal, tangible or intangible, now existing
or hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of the Lender to secure the Obligations.
"Collection Account" shall mean the Lock-Box Account
established pursuant to Section 2.11(b) of the Credit Agreement.
"Collections" shall mean, with respect to any Receivable, all
cash collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of Related Security
with respect to such Receivable.
"Commission" shall have the meaning assigned to such term in
Section 8.4(a) of the Pledge Agreement.
"Commitment" means, the commitment of the Lender to make Loans
under the Credit Agreement in an amount up to the Total Loan Facility as such
commitment may be reduced from time to time pursuant to Section 2.05 of the
Credit Agreement.
"Compliance Certificate" means a certificate in substantially
the form of Exhibit A attached to the Credit Agreement.
"Contracts" shall mean all "contracts," as such term is
defined in the UCC, now owned or hereafter acquired by a Person, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Person may now or hereafter have any right, title or interest, including any
agreement
(Page 165 of 252 Pages)
<PAGE>
relating to the terms of payment or the terms of performance of any Account;
provided, that "Contracts" shall not include any Contracts that have been
transferred or pledged under the Existing Securitization Facility.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by a Person under any written agreement granting any right to
use any Copyright or Copyright registration.
"Copyrights" shall mean all of the following now owned or
hereafter acquired by a Person: (a) all copyrights and general intangibles of
like nature (whether registered or unregistered), now owned or existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including all registrations, recordings
and applications in the United States Copyright Office or in any similar office
or agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions
or renewals thereof.
"Credit Card Processors" shall mean any Person who has entered
into an agreement with Borrower or any Affiliate of Borrower to acquire, process
and settle credit card transactions against Registered Card Members' Credit Card
Accounts in connection with the purchase of Meals by a Registered Card Member
under the Registered Card Program.
"Credit Agreement" shall mean the Credit Agreement, dated as
of June 30, 1999, between Borrower and Lender, as the same may from time to time
be amended, supplemented or otherwise modified and in effect.
"Credits" shall mean any Meal credits under a Registered Card
Program purchased by Borrower, Restaurant Company, Service Company or any
Affiliate thereof pursuant to a Receivables Contract with a Restaurant.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Defaulted Receivable" shall mean a Receivable: (i) as to
which no Credits have been used within the immediately preceding ninety (90)
days; provided, however, that if a Receivable relates to an initial advance made
to a start-up Restaurant, such Receivable shall not be characterized as a
"Defaulted Receivable" prior to the 91st day of such Restaurant's operations;
(ii) as to which an Event of Bankruptcy has occurred and is continuing with
respect to the Restaurant which is the obligor with respect thereto; (iii) which
has been identified by Restaurant Company,
(Page 166 of 252 Pages)
<PAGE>
Service Company or the Borrower as uncollectible; or (iv) which, in accordance
with the Restaurant Guidelines, has been or should be written off as
uncollectible.
"Designated Restaurant" shall mean, at any time, each
Restaurant; provided, however, that any Restaurant shall cease to be a
Designated Restaurant upon notice to Borrower from the Lender, delivered at any
time.
"Disclosed Matters" means the actions, suits and proceedings,
contingent liabilities and the environmental matters disclosed in Schedule 3.06
attached to the Credit Agreement.
"Documents" shall mean any "documents," as such term is
defined in the UCC, now owned or hereafter acquired by a Person, wherever
located.
"dollars" or "$" refers to lawful money of the United States
of America.
"Effective Date" means the date on which the conditions
specified in Section 4.01 of the Credit Agreement are satisfied (or waived in
accordance with Section 8.02 thereof).
"EGI" shall mean Equity Group Investments L.L.C.
"EGI Management Fee" shall mean the quarterly fee approved by
the board of directors of the Borrower to be paid by the Borrower to EGI in the
amount of $62,500 in exchange for management services rendered by EGI.
"Eligible Receivable" shall mean, at any time, any Receivable:
(i) which has been (a) originated by the Seller, if
applicable, or Restaurant Company, Service Company or the Borrower, (b)
if originated by the Seller, sold by the Seller to the Borrower
pursuant to the Asset Purchase Agreement and (c) subsequently pledged
to the Lender pursuant to (and in accordance with) the Security
Agreement, and to which either Restaurant Company, Service Company or
the Borrower has good title thereto, free and clear of all Adverse
Claims;
(ii) which (together with the Collections and Related Security
related thereto) has been the subject of the grant of a first priority
perfected security interest therein (and in the Collections and Related
Security related thereto) to the Lender, in each case effective until
the termination of the Credit Agreement;
(iii) the Restaurant of which is (A) located in the United
States or a U.S. territory, (B) a Designated Restaurant on the day of
any Borrowing under the Credit Agreement, (c) not an Affiliate of
Restaurant Company, Service Company, TMNI, the Borrower, or the Seller,
and (D) not a government or a governmental subdivision or agency;
(Page 167 of 252 Pages)
<PAGE>
(iv) which is not a Defaulted Receivable at the time of any
Borrowing under the Credit Agreement;
(v) which is an "account", "chattel paper" or "general
intangible" within the meaning of Article 9 of the Relevant UCC;
(vi) which is denominated and required to be settled only in
dollars in the United States;
(vii) which, arises under a Receivables Contract that,
together with the Receivable related thereto, is in full force and
effect and constitutes the legal, valid and binding obligation of the
related Restaurant, enforceable against such Restaurant in accordance
with its terms, except as may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar Laws relating to or affecting
creditors' rights generally and (b) general principles of equity,
including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance, regardless of whether considered in a proceeding at equity
or at law;
(viii) which, together with the Receivables Contract related
thereto, does not contravene in any material respect any Laws
applicable thereto (including, without limitation, Laws relating to
truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and
with respect to which no part of the Receivables Contract related
thereto is in violation of any such Law in any material respect;
(ix) which (A) satisfies in all material respects all
applicable requirements of the Restaurant Guidelines and (B) is
assignable without the consent of, or notice to, the Restaurant
thereunder;
(x) which was either acquired in the Purchase or generated in
the ordinary course of Restaurant Company's, Service Company's or the
Borrower's business;
(xi) the Restaurant of which has been directed to cause all
payments to be made to a Lock-Box Account with respect to which there
shall be a Lock-Box Agreement in effect;
(xii) as to which the Lender has not notified the Borrower
that such Receivable or class of Receivables is not acceptable to
advance Loans against because of the nature of the business of the
Restaurant or because of a potential conflict of interest between the
interests of Restaurant Company, Service Company or Borrower, on the
one hand, and Lender or any of its Affiliates, on the other hand;
provided, that any such Receivable or class of Receivables identified
by the Lender will remain an "Eligible Receivable" for a period of
fifteen (15) days following the receipt of such notice from Lender;
(Page 168 of 252 Pages)
<PAGE>
(xiii) the assignment of which under the Asset Purchase
Agreement by the Seller to Borrower, if applicable, and the subsequent
pledge of which under the Security Agreement by Borrower, Restaurant
Company or Service Company does not violate, conflict or contravene any
applicable Laws or any contractual or other restriction, limitation or
encumbrance;
(xiv) which has not been compromised, adjusted or modified
(including by the extension of time for payment or the granting of any
discounts, allowances or credits) other than in accordance with the
Restaurant Guidelines;
(xv) which is not subjected to any litigation, dispute, right
of offset, counterclaim or other defense, the effect of which would
materially adversely affect Lender's rights under the Financing
Agreements with respect to such Receivable;
(xvi) which, if the Restaurant of such Receivable is a
Start-up Restaurant, the majority owner of such Restaurant must be
affiliated with at least one other Restaurant participating in the
Registered Card Program;
(xvii) to the extent that the Outstanding Balance thereof,
together with the Outstanding Balance of all other Receivables with the
same Restaurant as such Receivable, does not exceed 2.0% (or, if the
Restaurant related to such Receivable is a Special Restaurant, the
Special Restaurant Concentration Factor) of the aggregate Outstanding
Balance of all Eligible Receivables; and
(xviii) if the Restaurant of such Receivable is a Start-up
Restaurant, to the extent that the Outstanding Balance thereof,
together with the Outstanding Balance of all other Receivables with
Start-up Restaurants as obligors, does not exceed 5.0% of the aggregate
Outstanding Balance of all Eligible Receivables.
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary
directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous Materials into
the environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
(Page 169 of 252 Pages)
<PAGE>
"Equipment" of a Person shall mean all "equipment," as such
term is defined in the UCC, now owned or hereafter acquired by such Person,
wherever located and, in any event, including all such Person's machinery and
equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment with software and peripheral equipment (other
than software constituting part of the Accounts), and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, all whether now owned or hereafter acquired,
and wherever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by the Borrower or any of its ERISA Affiliates of any liability
with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of
any notice, or the receipt by any Multiemployer Plan from the Borrower or any
ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
or a determination that a Multiemployer Plan is, or is expected to be, insolvent
or in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
(Page 170 of 252 Pages)
<PAGE>
"Event of Bankruptcy" shall mean, with respect to any Person,
(i) that such Person (a) shall generally not pay its debts as such debts become
due or (b) shall admit in writing its inability to pay its debts generally or
(c) shall make a general assignment for the benefit of creditors; (ii) any
proceeding shall be instituted by or against such Person seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property and, in the case of a proceeding instituted by a party other than
such Person, such proceeding shall continue undismissed, unstayed and in effect
for a period of sixty (60) consecutive days or (iii) if such Person is a
corporation, such Person or any Subsidiary shall take any corporate action to
authorize any of the actions set forth in the preceding clauses (i) or (ii).
"Event of Default" has the meaning assigned to such term in
Article VII of the Credit Agreement.
"Excluded Taxes" means, with respect to the Lender or any
other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America, or by the jurisdiction under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of the Lender, in which its applicable lending office
is located, and (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower is located.
"Existing Securitization Facility" shall mean the
securitization facility in the initial amount of $33,000,000 provided to TNI
Funding Company I, L.L.C., an indirect wholly owned subsidiary of the Borrower,
through the issuance of notes pursuant to the Indenture, dated as of December 1,
1996 between TNI Funding Company I, L.L.C., as issuer, and The Chase Manhattan
Bank, as trustee, and all other documents related thereto and executed in
connection therewith, as the same may from time to time be amended, supplemented
or otherwise modified and in effect.
"Existing Securitization Facility Security Agreement" shall
mean the 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
collateral agent, TNI Funding I, Inc., as seller, and Transmedia Network Inc.,
as servicer, as the same may from time to time be amended, supplemented or
otherwise modified and in effect.
"Existing Warrants" shall mean warrants, each dated as March
3, 1998, issued by the Borrower to each of Samstock, L.L.C., EGI-Transmedia
Investors, L.L.C., Halmostock Limited Partnership and Robert M. Steiner, as
trustee, to purchase an aggregate of $1,200,000 shares of the Borrower's common
stock.
(Page 171 of 252 Pages)
<PAGE>
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Lender from three Federal funds
brokers of recognized standing selected by it.
"Finance Charges" shall mean, with respect to a Receivables
Contract, any finance, interest, late or similar charges owing by an Restaurant
pursuant to such Receivables Contract.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Borrower.
"Financing Agreements" shall mean this Agreement, the
Revolving Credit Note, the Security Agreement, the Subsidiary Security
Agreement, the Pledge Agreement and the Subordination Agreement and all other
agreements, instruments and documents, including, without limitation, security
agreements, loan agreements, notes, guaranties, mortgages, deeds of trust,
agreements, documents, instruments, pledges, powers of attorney, consents,
assignments, contracts, notices, leases, financing statements and all other
written matter whether heretofore, now, or hereafter executed by or on behalf of
the Borrower or any other Person and delivered to the Lender in connection with
this Agreement, together with all agreements and documents between the Borrower
and the Lender referred to therein or contemplated thereby, as the same may
hereafter be amended, modified or supplemented from time to time.
"Fixtures" shall mean any "fixtures" as such term is defined
in the UCC, now owned or hereafter acquired by any Person.
"GAAP" means generally accepted accounting principles in the
United States of America.
"GAMI" means Gami Investments, Inc.
"GAMI Loan Agreement" shall mean the Credit Agreement, dated
as of June 30, 1999, among the Borrower, Restaurant Company, Service Company and
TMNI, each as borrowers, and GAMI, as lender, as the same may from time to time
be amended, supplemented or otherwise modified and in effect.
"GAMI Loan Documents" shall mean collectively the GAMI Loan
Agreement, the GAMI Note and other agreements and instruments executed and
delivered in connection therewith.
(Page 172 of 252 Pages)
<PAGE>
"GAMI Note" shall mean the promissory note executed and
delivered by the Borrower, Restaurant Company, Service Company and TMNI to GAMI
evidencing Indebtedness under the GAMI Loan Agreement.
"General Intangibles" shall mean any "general intangibles," as
such term is defined in the UCC, now owned or hereafter acquired by any Person,
and, in any event, including all right, title and interest which such Person may
now or hereafter have in or under any Contract, all customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers, including
without limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of such Person or any computer
bureau or service company from time to time acting for such Person; provided,
that "General Intangible" shall not include any General Intangibles that have
been transferred or pledged under the Existing Securitization Facility.
"Goods" shall mean any "goods", as such term is defined in the
UCC, whether now owned or hereafter acquired by any Person.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account
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party in respect of any letter of credit or letter of guaranty issued to support
such Indebtedness or obligation; provided, that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Instruments" shall mean any "instrument," as such term is
defined in the UCC, now owned or hereafter acquired by any Person, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other evidences of indebtedness,
without limitation, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper; provided, that "Instruments"
shall not include Instruments that have been transferred or pledged under the
Existing Securitization Facility.
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"Insurance Proceeds" shall mean any amounts paid pursuant to
any insurance policies covering any Restaurant with respect to its Receivables
Contract other than proceeds of such insurance policies used to purchase
replacement property in accordance with the Restaurant Guidelines.
"Intellectual Property" shall mean any and all Licenses,
Patents, Copyrights, Trademarks, trade secrets and customer lists.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.04 of the Credit
Agreement.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each calendar month, and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part.
"Interest Period" means with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one month
thereafter, as the Borrower may elect, provided, that (i) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and,
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Inventory" shall mean any "inventory," as such term is
defined in the UCC, now or hereafter owned or acquired by any Person, wherever
located, and in any event including inventory, merchandise, goods and other
personal property which are held by or on behalf of any Person for sale or lease
or are furnished or are to be furnished under a contract of service, or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in such Person's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including other
supplies.
"Investment Agreement Amendment" shall mean the Second Amended
and Restated Investment Agreement to be executed by the Borrower, Samstock
L.L.C., EGI-Transmedia Investors, L.L.C. and Halmostock Limited Partnership, as
amended, modified or supplemented from time to time.
"Investment Property" shall have the meaning ascribed thereto
in Section 9-115 of the UCC in those jurisdictions in which such definition has
been adopted and shall include (i) all
(Page 175 of 252 Pages)
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securities, whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (ii) all securities
entitlements of any Person, including the rights of any Person to any securities
account and the financial assets held by a securities intermediary in such
securities account and any free credit balance or other money owing by any
securities intermediary with respect to that account; (iii) all securities
accounts held by any Person; (iv) all commodity contracts held by any Person;
and (v) all commodity accounts held by any Person; provided, that "Investment
Property" shall not include Investment Property that has been transferred or
pledged under the Existing Securitization Facility.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Governmental Authority.
"Lender" means The Chase Manhattan Bank, N.A. and its
permitted successors and assigns.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Lender
from time to time for purposes of providing quotations of interest rates
applicable to dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for dollar deposits with a maturity comparable to
such Interest Period. In the event that such rate is not available at such time
for any reason, then the "LIBO Rate" with respect to such Eurodollar Borrowing
for such Interest Period shall be the rate at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Lender in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"License" shall mean any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Person.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loans" means the revolving loans made by the Lender to the
Borrower pursuant to this Credit Agreement.
(Page 176 of 252 Pages)
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"Lock-Box Account" shall mean an account, including but not
limited to the Collection Account, maintained by the Borrower at a Lock-Box Bank
for the purpose of receiving Collections from Receivables.
"Lock-Box Agreement" shall mean an agreement between the
Borrower and a LockBox Bank in substantially the form of Exhibit G to the Credit
Agreement.
"Lock-Box Bank" shall mean each of the banks set forth in
Exhibit H to the Credit Agreement, and such banks as may be added thereto or
deleted therefrom pursuant to Section 2.11 of the Credit Agreement.
"Margin Stock" means any "margin stock" as defined in
Regulation U.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations or condition, financial or otherwise, of
the Borrower and the Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under the Credit Agreement or (c) the
ability to enforce rights of or benefits available to the Lender under the
Credit Agreement.
"Material Indebtedness" means Indebtedness (other than the
Loans), or obligations in respect of one or more Hedging Agreements, of any one
or more of the Borrower and its Subsidiaries in an aggregate principal amount
exceeding $1,000,000. For purposes of determining Material Indebtedness, the
"principal amount" of the obligations of the Borrower or any Subsidiary in
respect of any Hedging Agreement at any time shall be the maximum aggregate
amount (giving effect to any netting agreements) that the Borrower or such
Subsidiary would be required to pay if such Hedging Agreement were terminated at
such time.
"Maturity Date" means the earlier to occur of (a) December 30,
1999, (b) the satisfaction of all of the conditions precedent necessary for the
effectiveness of the PARCO Facility; or (c) at the Borrower's option, the date
specified by the Borrower following thirty (30) days prior written notice to the
Lender.
"Meals" shall mean food and beverages.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Receivables Balance" shall mean, at any time, the
Outstanding Balance of the Eligible Receivables at such time.
"Obligations" shall mean all loans, advances, debts,
liabilities and obligations, for the performance of covenants, tasks or duties
or for the payment of monetary amounts (whether or not
(Page 177 of 252 Pages)
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such performance is then required or contingent, or such amounts are liquidated
or determinable) owing by the Borrower to the Lender, and all covenants and
duties regarding such amounts, of any kind or nature, present or future, whether
or not evidenced by any note, agreement or other instrument, in each case,
arising under the Credit Agreement or any of the other Financing Agreements.
This term includes all principal, interest (including all interest which accrues
after the commencement of any case or proceeding in bankruptcy after the
insolvency of, or for the reorganization of any Person, whether or not allowed
in such proceeding), fees, charges, expenses, attorneys' fees and any other sum
chargeable to the Borrower under the Credit Agreement or any of the other
Financing Agreements.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under the Credit Agreement or from the
execution, delivery or enforcement of, or otherwise with respect to, the Credit
Agreement, other than Excluded Taxes and Indemnified Taxes.
"Outstanding Balance" shall mean, with respect to any
Receivable at any time, the then outstanding principal amount thereof
representing Dollars advanced by the Seller, Restaurant Company, Service
Company, the Borrower or its Affiliates to a Restaurant, excluding any accrued
and outstanding Finance Charges related thereto.
"PARCO" means Park Avenue Receivables Corporation, a Delaware
corporation, and its successors and assigns.
"PARCO Facility" means the purchase by PARCO of undivided
percentage ownership interests in the Receivables from an Affiliate of the
Borrower pursuant to a receivables transfer agreement.
"Patent License" shall mean rights under any written agreement
now owned or hereafter acquired by a Person granting any right with respect to
any invention on which a Patent is in existence.
"Patents" shall mean all of the following in which a Person
now holds or hereafter acquires any interest: (a) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country, and (b) all
reissues, continuations, continuations-in-part or extensions thereof.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
(Page 178 of 252 Pages)
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"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04 of the Credit
Agreement;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with
Section 5.04 of the Credit Agreement;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case
in the ordinary course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article VII of the
Credit Agreement;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Borrower or any
Subsidiary; and
(g) licenses, leases or subleases granted in the ordinary
course of business and not in connection with the borrowing of money;
provided that the term "Permitted Encumbrances" shall not include any
Lien securing Indebtedness.
"Permitted Investments" shall mean any of the following (a)
negotiable instruments or securities represented by instruments in bearer or
registered or in book-entry form which evidence (i) obligations fully guaranteed
by the United States of America; (ii) time deposits in, or bankers acceptances
issued by, any depositary institution or trust company incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by Federal or state banking or depositary
institution authorities; provided, however, that at the time of investment or
contractual commitment to invest therein, the certificates of deposit or
short-term deposits, if any, or long-term unsecured debt obligations (other than
such obligation whose rating is based on collateral or on the credit of a Person
other than such institution or trust company) of such depositary institution or
trust company shall have a credit rating from Moody's and S&P of at
(Page 179 of 252 Pages)
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least P-1 and "A-1", respectively, in the case of the certificates of deposit or
short-term deposits, or a rating not lower than one of the two highest
investment categories granted by Moody's and by S&P, respectively, in the case
of bankers acceptances; (iii) certificates of deposit having, at the time of
investment or contractual commitment to invest therein, a rating from Moody's
and S&P of at least P-1 and "A-1", respectively; or (iv) investments in money
market funds rated in the highest investment category or otherwise approved in
writing by Moody's and S&P; (b) demand deposits in any depositary institution or
trust company referred to in (a)(ii) above; (c) commercial paper (having
original or remaining maturities of no more than 30 days) having, at the time of
investment or contractual commitment to invest therein, a credit rating from
Moody's and S&P of at least P-1 and "A-1", respectively; (d) Eurodollar time
deposits having a credit rating from Moody's and S&P of at least P-1 and "A-1",
respectively; (e) repurchase agreements involving any of the Permitted
Investments described in clauses (a)(i), (a)(iii) and (d) of this definition so
long as the other party to the repurchase agreement has at the time of
investment therein, a rating from Moody's and S&P of at least P-1 and "A-1",
respectively; and (f) any other investment permitted by the Lender.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means a pledge agreement substantially in
the form of Exhibit D attached to the Credit Agreement.
"Pledge Amendment" shall have the meaning assigned to such
term in Section 6.4 of the Pledge Agreement.
"Pledged Collateral" shall have the meaning assigned to such
term in Section 2 of the Pledge Agreement.
"Pledged Entity" means an issuer of Pledged Shares.
"Pledged Shares" means those shares listed on Part A of
Schedule I attached to the Pledge Agreement.
"Preferred Stock" shall mean the Series A senior convertible
redeemable preferred stock of the Borrower issued and sold pursuant to the
Rights Offering.
(Page 180 of 252 Pages)
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"Preferred Stock Designation" shall mean the Certificate of
Designation of Preferred Stock covering the Preferred Stock to be filed by the
Borrower with the Secretary of State of Delaware.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective.
"Proceeds" shall mean "proceeds" as defined in Section
9-306(1) of the Relevant UCC.
"Purchase" shall mean the purchase of certain assets and
businesses of the Seller pursuant to the Asset Purchase Agreement.
"Receivable" shall mean all outstanding rights to receive and
indebtedness owed to Borrower, Restaurant Company or Service Company by a
Restaurant under a Receivables Contract which was sold by the Seller to Borrower
pursuant to the Asset Purchase Agreement, or originated by Borrower, Restaurant
Company or Service Company or their Affiliates under the Registered Card
Program, whether constituting an Account, Chattel Paper, Instruments, Investment
Property or General Intangible, including, without limitation, all (i) rights to
receive Meals or Credits in respect thereof under the Registered Card Program
purchased by the Seller, Borrower, Restaurant Company or Service Company or any
Affiliate thereof from any Restaurant pursuant to any Receivables Contract, (ii)
rights of the Seller, Borrower, Restaurant Company or Service Company or any
Affiliate thereof to, in and under any Receivables Contract with a Restaurant,
and (iii) rights of the Seller, Borrower, Restaurant Company or Service Company
or any Affiliate thereof whether now existing or hereafter arising, to recover
payments from a Restaurant's account in connection with the purchase of Meals by
any Registered Card Member at such Restaurant; provided, however, that
"Receivables" shall not include any amounts payable to or for the benefit of (i)
Registered Card Members in respect of Registered Card Member Rebates or (ii)
Restaurants in respect of any taxes and tips due and owing to such Restaurants
in connection with purchases of Meals by Registered Card Members; provided,
further, that "Receivables" shall not include any indebtedness owed to Borrower,
Restaurant Company or Service Company by a Restaurant that has been transferred
or pledged under the Existing Securitization Facility.
"Receivables Contract" shall mean, with respect to a
Restaurant, an agreement governing the purchase of Meals and Credits under the
Registered Card Program between Borrower, Restaurant Company, Service Company or
any Affiliate thereof and such Restaurant and any agreement with any other
Person guaranteeing such agreement.
"Records" shall mean all Receivables Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards,
(Page 181 of 252 Pages)
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data processing software and related property and rights) maintained with
respect to Receivables and the related Restaurants.
"Registered Card Member Agreements" shall mean all of the
agreements executed by Registered Card Members in connection with the Registered
Card Program in which Registered Card Members register their Registered Card
Members' Credit Card Accounts with a Restaurant, the Seller, Borrower,
Restaurant Company, Service Company or any of their Affiliates and receive
Registered Card Member Rebates in connection with the food and beverages
purchased by such Registered Card Members at Restaurants.
"Registered Card Members" shall mean Persons who are parties
to the Registered Card Member Agreements.
"Registered Card Members Credit Card Accounts" shall mean the
Registered Card Members' Visa, MasterCard, Novus Enterprises and American
Express Card which have been specified by the Registered Card Members as the
accounts to be charged when the Registered Card Members purchase food and
beverages at Restaurants utilizing the Registered Card Program.
"Registered Card Member Rebate" shall mean the cash rebate or
mileage or other credits to which Registered Card Members are entitled under the
Registered Card Member Agreements.
"Registered Card Program" shall mean a program operated by
Borrower, Restaurant Company or Service Company with Restaurants pursuant to
which Registered Card Members receive Registered Card Member Rebates in
connection with food and beverage purchases at Restaurants in accordance with
terms of the Registered Card Member Agreements.
"Regulation U" means Regulation U of the Board.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Related Security" shall mean, with respect to any Receivable,
all of Borrower's, Restaurant Company's and Service Company's right, title and
interest in, to and under:
(a) all other Accounts, contract rights, Chattel Paper,
Instruments, Records, General Intangibles and other obligations of any
Restaurant with respect to any Receivable or related Receivables
Contract, now or hereafter existing, whether or not arising out of or
in connection with the sale or lease of goods or the rendering of
services and the right to payment of any Receivables, Credits or other
obligations of a Restaurant, Registered Card Member or any Credit Card
Company with respect to any of the foregoing;
(Page 182 of 252 Pages)
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(b) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Receivables Contract related to
such Receivable or otherwise, together with all financing statements
signed by a Restaurant describing any collateral securing such
Receivable;
(c) all guarantees, indemnities, warranties, insurance (and
proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Receivables Contract
related to such Receivable or otherwise;
(d) all rights and remedies of Borrower under the Asset
Purchase Agreement with respect to the Receivables, together with all
financing statements filed by Borrower against the Seller in connection
therewith; and
(e) all Proceeds of any of the foregoing.
"Responsible Officer" shall mean, with respect to any Person,
the Chairman, the President, the Controller, any Vice President, the Secretary,
the Treasurer, or any other officer of such Person customarily performing
functions similar to those performed by any of the above-designated officers and
also, with respect to a particular matter any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Restaurant" shall mean, with respect to any Receivables
Contract, the Person or Persons obligated to provide Credits or make payments
with respect to such Receivables Contract, including any guarantor thereof.
"Restaurant Company" shall mean Transmedia Restaurant Company,
Inc., and its successors and permitted assigns.
"Restaurant Guidelines" shall mean Borrower's, Restaurant
Company's and Service Company's policies and procedures relating to the
operation of its business, including, without limitation, the policies and
procedures for determining charge-offs, the purchase of Credits from Restaurants
and the terms relating to the maintenance of Restaurant accounts and collection
of Receivables, as in effect on the Effective Date.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of the Borrower or any Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital stock of
the Borrower or any option, warrant or other right to acquire any such shares of
capital stock of the Borrower.
(Page 183 of 252 Pages)
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"Revolving Credit Note" shall have the meaning specified in
Section 2.06(e) of the Credit Agreement.
"Rights Offering" shall mean that certain offering of
nontransferable rights to stockholders of the Borrower to purchase an aggregate
of up to $10,000,000 newly issued Series A senior convertible redeemable
preferred stock of the Borrower, par value $0.10 per share.
"Rights Offering Documents" shall mean, collectively, the
Existing Warrants, the registration statement of the Borrower on Form S-2, the
Rights Offering Warrant, the Standby Purchase Agreement, the Investment
Agreement Amendment, the Preferred Stock Designation and any other documents
heretofore, now or hereafter prepared and executed in connection with the Rights
Offering, as the same may be amended, modified or supplemented from time to
time.
"Rights Offering Event" shall mean each of the following: (a)
the preparation for filing of an initial draft with the Securities and Exchange
Commission of (i) a proxy statement containing proposals for the issuance of the
Rights Offering Warrant and an increase in the authorized shares of the
Borrower's common stock and preferred stock and (ii) a registration statement of
the Borrower on Form S-2 registering the rights offered pursuant to the Rights
Offering, the Preferred Stock and the common stock into which the Preferred
Stock is convertible, (b) the execution and delivery of the Standby Purchase
Agreement (or subject to GAMI's approval, preparation of the final form of the
Standby Purchase Agreement), (c) preparation for filing with the Secretary of
State of Delaware of the Preferred Stock Designation and (d) the preparation of
the final form of the Rights Offering Warrant.
"Rights Offering Warrant" shall mean the warrant issued by the
Borrower to EGI-Transmedia Investors, L.L.C., upon receipt of necessary
stockholder approval and the closing of the Rights Offering, to purchase an
aggregate of 1,000,000 shares of the Borrower's common stock substantially in
the form of Exhibit D to the GAMI Loan Agreement.
"S&P" means Standard & Poor's.
"Secured Obligations" shall have the meaning assigned to such
term in Section 3 of the Pledge Agreement.
"Security Agreement" means a security agreement substantially
in the form of Exhibit C attached to the Credit Agreement.
"Seller" shall mean Signature Card, Inc., an Indiana
corporation.
"Service Company" shall mean Transmedia Service Company, Inc.,
and its successors and permitted assigns.
(Page 184 of 252 Pages)
<PAGE>
"Settlement Period" shall mean the period of days from and
including the first day of a calendar month to and including the last day of
such calendar month.
"Settlement Report" shall mean a report, in substantially the
form attached to the Credit Agreement as Exhibit I or in such other form as is
mutually agreed to by the Borrower and the Lender, delivered by the Borrower to
the Lender pursuant to Section 2.10 of the Credit Agreement.
"Settlement Report Date" shall mean the fifteenth day of each
calendar month immediately succeeding a Settlement Period or, if such day is not
a Business Day, the next succeeding Business Day.
"Special Restaurant" shall mean, at any time, each Designated
Restaurant specified by the Lender as a Special Restaurant; provided, however,
that any Special Restaurant shall cease to be a Special Restaurant upon written
notice to Borrower from the Lender, delivered at any time.
"Special Restaurant Concentration Factor" shall mean, on any
day, a percentage specified by the Lender in a written notice to Borrower.
"Standby Purchase Agreement" shall mean the Standby Purchase
Agreement to be executed by Borrower and Samstock, L.L.C., as amended, modified
or supplemented from time to time.
"Start-up Restaurant" shall mean any newly opened Restaurant
which has operated for less than six months.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Lender with respect to the
Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to the Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Subordination Agreement" shall mean the Subordination
Agreement, dated as of June 30, 1999, between GAMI, as the subordinated
creditor, and Lender, as the same may from time to time be amended, supplemented
or otherwise modified and in effect.
(Page 185 of 252 Pages)
<PAGE>
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
"Subsidiary Security Agreement" shall mean a security
agreement executed and delivered by Restaurant Company, Service Company and TMNI
in favor of the Lender substantially in the form of Exhibit C attached to the
Credit Agreement.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TMNI" shall mean TMNI International Incorporated, a Delaware
corporation.
"Total Loan Facility" shall mean Thirty Five Million Dollars
($35,000,000) as such amount may be reduced, if at all, from time to time in
accordance with the Credit Agreement.
"Total Revolving Credit Exposure" shall mean, at any time, the
then aggregate outstanding principal amount of all Loans.
"Trademark License" shall mean rights under any written
agreement now owned or hereafter acquired by any Person granting any right to
use any Trademark.
"Trademarks" shall mean all of the following now owned or
hereafter acquired by any Person: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), now owned or existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including registrations, recordings and applications in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state or territory thereof, or any other country or
any political subdivision thereof; (b) all reissues, extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.
(Page 186 of 252 Pages)
<PAGE>
"Transactions" means the execution, delivery and performance
by the Borrower of the Credit Agreement, the other Financing Agreements to which
it is a party, the borrowing of Loans and the use of the proceeds thereof.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"UCC" shall mean the Uniform Commercial Code as the same may,
from time to time, be enacted and in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of the Lender's security interest in
any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term "UCC" shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Waiver" shall mean the Waiver of Early Amortization Event,
dated as of April 30, 1999, executed by the noteholders under the Existing
Securitization Facility and The Chase Manhattan Bank, in its capacities as
trustee and collateral agent thereunder, in which the noteholders and the
trustee direct the collateral agent to waive, subject to the terms and
conditions therein, the "Early Amortization Event" specified in Section 14(x) of
the Existing Securitization Facility Security Agreement.
"Weekly Net Sales" shall mean an amount equal to the
difference between (a) the total gross sales for a Weekly Settlement Period,
exclusive of Arrear Sales, minus (b) the aggregate amount of Registered Card
Member Rebates for such Weekly Settlement Period.
"Weekly Report" shall mean a report, in substantially the form
attached to the Credit Agreement as Exhibit J or in such other form as is
mutually agreed to by the Borrower and the Lender, delivered by the Borrower to
the Lender pursuant to Section 2.10 of the Credit Agreement.
"Weekly Settlement Report Date" shall mean each Tuesday of
each calendar week or, if such day is not a Business Day, the next succeeding
Business Day.
"Weekly Settlement Period" shall mean the period of days from
and including the Sunday of any calendar week to and including the Saturday of
the same calendar week.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
(Page 187 of 252 Pages)
<PAGE>
Schedule I
Advance Rate
Advance Rate Advance Ratio
------------ -------------
62% 1.22
64% 1.27
66% 1.33
68% 1.39
70% 1.45
72% 1.52
74% 1.58
76% 1.65
78% 1.72
80% 1.80
82% 1.88
84% 2.03
86% 2.22
88% 2.46
90% 2.57
The percentage constituting the "Advance Rate" is to be calculated as follows:
(i) Calculate the "Advance Ratio" (as defined in Annex X hereto).
(ii) Identify between which of the two figures listed in the second column
of the grid set forth above the Advance Ratio calculated in (i) falls.
For the purposes of the formula set forth in (iii) below, (a) the
higher of the two figures will be "X" and the lower of the two figures
will be "Y" and (b) the Advance Rate percentage in the first column of
the grid corresponding to "X" will be "A" and the Advance Rate
percentage in the first column of the grid corresponding to "Y" will be
"B".
(iii) (a) Subtract the Advance Ratio in (i) from X ("R")
(b) Subtract Y from X ("S")
(c) Divide R by S ("T")
(d) Multiply T by 0.02 ("U")
(e) Subtract U from A
(f) The difference between U and A equals the applicable "Advance Rate"
(Page 188 of 252 Pages)
<PAGE>
EXHIBIT 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of June 30, 1999, between
TRANSMEDIA NETWORK INC., a Delaware corporation ("Grantor"), and THE CHASE
MANHATTAN BANK, as Lender (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
the date hereof by and between the Grantor and the Lender (including all
annexes, exhibits and schedules thereto, as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), the Lender has
agreed to make the Loans to the Grantor; and
WHEREAS, as a condition to making of the loans and other
extensions of credit under the Credit Agreement, and as security for the
obligations of Grantor under the Credit Agreement, the Lender is requiring that
the Grantor shall have executed and delivered this Security Agreement and
granted the security interests contemplated hereby;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINED TERMS. All capitalized terms used but not otherwise defined
herein have the meanings given to them in Annex X to the Credit Agreement. All
other undefined terms contained in this Security Agreement, unless the context
indicates otherwise, have the meanings provided for by Article 9 of the UCC to
the extent the same are used or defined therein.
2. GRANT OF LIEN.
(a) To secure the prompt and complete payment, performance and
observance of all of the Grantor's Obligations under the Credit Agreement,
Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and
transfers to the Lender, a Lien upon all of its right, title and interest in, to
and under all of its personal property (other than personal property of Grantor
transferred in connection with or subject to Liens granted pursuant to the
Existing Securitization Facility), whether now owned by or owing to, or
hereafter acquired by or arising in favor of Grantor (including under any trade
names (other than the "Transmedia" trade name and any other trade names which
have been assigned in whole or in part or licensed to TNI Funding I, L.L.C. in
connection with the Existing Securitization Facility), styles or derivations
thereof), and whether owned or consigned by or to, or leased from or to,
Grantor, and regardless of where located, including without limitation, the
following (all of which being hereinafter collectively referred to as the
"Collateral"):
(Page 189 of 252 Pages)
<PAGE>
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all Equipment;
(vi) all Fixtures;
(vii) all General Intangibles;
(viii) all Goods;
(ix) all Instruments;
(x) all Inventory;
(xi) all Investment Property;
(xii) all bank accounts and all other deposit
accounts (including, but not limited to, the
Lock-Box Accounts, but excluding accounts
into which collections related to the
Existing Securitization Facility are
deposited) and all deposits therein;
(xiii) all money, cash or cash equivalents of
Grantor; and
(xiv) to the extent not otherwise included, all
Proceeds and products of the foregoing and
all accessions to, substitutions and
replacements for, and rents and profits of,
each of the foregoing.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce the Lender
as aforesaid, Grantor hereby grants to the Lender, a right of setoff against the
property of Grantor held by the Lender, consisting of property described above
in Section 2(a) now or hereafter in the possession or custody of or in transit
to the Lender, for any purpose, including safekeeping, collection or pledge, for
the account of Grantor, or as to which Grantor may have any right or power.
3. LENDER'S RIGHTS; LIMITATIONS ON LENDER'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to
the contrary notwithstanding, Grantor shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder. The Lender shall have
no obligation or liability under any Contract or License by reason of or arising
out of this Security Agreement or the granting herein of a Lien thereon or the
receipt by the Lender of any payment relating to any Contract or License
pursuant hereto. The Lender shall not be required or obligated in any manner to
perform or fulfill any of the obligations of Grantor under or pursuant to any
Contract or License, or to make any payment, or to make any inquiry as to the
nature or the sufficiency of any payment received by it or the sufficiency of
any performance by any party under any Contract or License, or to present or
file any claims, or to take any action to collect or enforce any performance or
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(Page 190 of 252 Pages)
<PAGE>
(b) The Lender may, at any time after a Default or Event of
Default shall have occurred and be continuing, without prior notice to Grantor,
notify Account Debtors, parties to the Contracts and obligors in respect of
Instruments and Chattel Paper that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments and Chattel Paper
have been assigned to the Lender, and that payments shall be made directly to
the Lender. Upon the request of the Lender, Grantor shall so notify Account
Debtors, parties to Contracts and obligors in respect of Instruments and Chattel
Paper.
(c) The Lender may, at any time at which a Default or Event of
Default has occurred and is continuing, in the Lender's own name or in the name
of Grantor communicate with Account Debtors, parties to Contracts, obligors in
respect of Instruments and obligors in respect of Chattel Paper to verify with
such Persons, to the Lender's satisfaction, the existence, amount and terms of
any such Accounts, Contracts, Instruments or Chattel Paper. If a Default or
Event of Default shall have occurred and be continuing, Grantor, at its own
expense, shall cause the independent certified public accountants then engaged
by Grantor to prepare and promptly deliver to the Lender as often as may
reasonably be requested by the Lender the following reports with respect to Gra
ntor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii)
trial balances; and (iv) a test verification of such Accounts as the Lender may
request.
4. REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants
that:
(a) Grantor is the sole owner of each item of the Collateral
upon which it purports to grant a Lien hereunder, and has good and marketable
title thereto free and clear of any and all Liens other than Permitted
Encumbrances or other Liens permitted by Section 6.02 of the Credit Agreement.
(b) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is on file or of record in any public office, except
such as may have been filed (i) by Grantor in favor of the Lender pursuant to
this Security Agreement or the other Financing Agreements, and (ii) in
connection with any other Permitted Encumbrances or other Liens permitted by
Section 6.02 of the Credit Agreement.
(c) This Security Agreement is effective to create a valid and
continuing Lien on and, upon the filing of the appropriate financing statements
listed on Schedule I hereto, a perfected Lien in favor of the Lender on the
Collateral (other than the Collateral of Grantor located at Grantor's sales
offices and Restaurants) with respect to which a Lien may be perfected by filing
pursuant to the UCC. Such Lien is prior to all other Liens, except Permitted
Encumbrances or other Liens permitted by Section 6.02 of the Credit Agreement
that would be prior to Liens in favor of the Lender as a matter of law, and is
enforceable as such as against any and all creditors of and purchasers from
Grantor. All action by Grantor necessary or desirable to protect and perfect
such Lien on each item of the Collateral (other than the Collateral of Grantor
located at Grantor's sales offices and Restaurants) has been duly taken.
(Page 191 of 252 Pages)
<PAGE>
(d) Schedule II hereto lists all Instruments and Chattel Paper
of Grantor that individually have an outstanding principal amount greater than
$10,000. All actions by Grantor necessary or desirable to protect and perfect
the Lien of the Lender on each item set forth on Schedule II (including the
delivery of all originals thereof to the Lender and the legending of all Chattel
Paper as required by Section 5(b) hereof) and on all Instruments and Chattel
Paper that have an aggregate outstanding principal amount greater than $100,000
have been duly taken (to the extent of any such outstanding principal amount
greater than $100,000). The Lien of the Lender on the Collateral listed on
Schedule II hereto and on all Instruments and Chattel Paper that have an
aggregate outstanding principal amount greater than $100,000 is prior to all
other Liens, except Permitted Encumbrances or other Liens permitted by Section
6.02 of the Credit Agreement that would be prior (to the extent of any such
outstanding principal amount greater than $100,000) to the Liens in favor of the
Lender as a matter of law, and is enforceable as such against any and all
creditors of and purchasers from Grantor.
(e) Grantor's chief executive office, principal place of
business, corporate offices, all warehouses and premises where Collateral is
stored or located (other than Collateral of Grantor located at Grantor's sales
offices and Restaurants), and the locations of all of its books and records
concerning the Collateral are set forth on Schedule III hereto.
(f) With respect to the Accounts, (i) they represent bona fide
rendering of services to Account Debtors in the ordinary course of Grantor's
business and no material portion thereof is evidenced by a judgment, Instrument
or Chattel Paper; (ii) there are no setoffs, claims or disputes existing or
asserted with respect to any material portion thereof and Grantor has not made
any agreement with any Account Debtors in connection with any material portion
thereof for any extension of time for the payment thereof, any compromise or
settlement for less than the full amount thereof, any release of any Account
Debtor from liability therefor, or any deduction therefrom except a discount or
allowance allowed by Grantor in the ordinary course of its business for prompt
payment, (iii) to Grantor's knowledge, there are no facts, events or occurrences
which in any way impair the validity or enforceability of any material portion
thereof or could reasonably be expected to reduce the amount payable of any
material portion thereunder as shown on Grantor's books and records and any
invoices and statements delivered to the Lender with respect thereto; (iv)
Grantor has not received any notice of proceedings or actions which are
threatened or pending against any Account Debtors in connection with any
material portion thereof; and (v) Grantor has no knowledge that any Account
Debtors in connection with any material portion thereof are unable generally to
pay its debts as they become due. Further with respect to the Accounts, except
for an immaterial portion of the Accounts, (x) the amounts shown on all invoices
and statements which may be delivered to the Lender with respect thereto are
actually and absolutely owing to Grantor as indicated thereon and are not in any
way contingent; (y) no payments have been or shall be made thereon except
payments immediately delivered to the Borrower's accounts or a Lock-Box Account;
and (z) to Grantor's knowledge, all Account Debtors have the capacity to
contract.
(g) Grantor does not have any interest in, or title to, any
Patent, Trademark or Copyright except as set forth in Schedule IV hereto (other
than the "Transmedia" Trademark and any
(Page 192 of 252 Pages)
<PAGE>
other Patents, Trademarks and Copyrights that have been assigned in whole or in
part or licensed to TNI Funding I, L.L.C. in connection with the Existing
Securitization Facility (referred to herein as the "Assigned Intellectual
Property"). This Security Agreement shall be effective to create a valid and
continuing Lien on Grantor's Patents, Trademarks and Copyrights listed on
Schedule IV hereto.
5. COVENANTS. Grantor covenants and agrees with Lender that from and
after the date of this Security Agreement and until the payment in full of the
Obligations and termination of the Commitment:
(a) Further Assurances; Pledge of Instruments. At any time and
from time to time, upon the written request of the Lender and at the sole
expense of Grantor, Grantor shall promptly and duly execute and deliver any and
all such further instruments and documents and take such further actions as the
Lender may deem reasonably necessary to obtain the full benefits intended by
this Security Agreement and of the rights and powers intended to be herein
granted, including (i) using its best efforts to secure all consents and
approvals necessary or appropriate for the assignment to or for the benefit of
the Lender of (A) any License or Contract related to Receivables or Related
Security and (B) any other material License or Contract (excluding for the
purposes of this Section 5(a) any marketing agreements with financial
institutions and other corporate entities that provide for the solicitation by
Grantor of participants in programs sponsored by such financial institutions and
other entities to become Registered Card Members or to participate in other
programs sponsored by Grantor), in each case, held by Grantor or in which
Grantor has any rights not heretofore assigned, (ii) filing any financing or
continuation statements under the UCC with respect to the Liens granted
hereunder or under any other Financing Agreement (other than with respect to the
Collateral of Grantor located at Grantor's sales offices or Restaurants), and
(iii) with respect to Collateral that individually has an outstanding principal
amount greater than $10,000 or in the aggregate have an outstanding principal
amount greater than $100,000, transferring (to the extent of any such
outstanding principal amount greater than $100,000) such Collateral to the
Lender's possession if such Collateral consists of Chattel Paper, Instruments or
if a Lien on such Collateral can be perfected only by possession, or if
requested by the Lender. Grantor also hereby authorizes the Lender to file any
such financing or continuation statements without the signature of Grantor to
the extent permitted by applicable law (other than with respect to the
Collateral of Grantor located at Grantor's sales offices or Restaurants). If any
amount payable under or in connection with any of the Collateral is or shall
become evidenced by any Instrument, such Instrument, other than checks and notes
received in the ordinary course of business, shall be duly endorsed in a manner
satisfactory to the Lender immediately upon Grantor's receipt thereof.
(b) Maintenance of Records. Grantor shall keep and maintain,
at its own cost and expense, satisfactory and complete records of the
Collateral, including a record of any and all payments received and any and all
credits granted with respect to the Collateral and all other dealings with the
Collateral. Grantor shall mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the Liens granted hereby. All
Chattel Paper that individually has an outstanding principal amount greater than
$10,000 or in the aggregate have an
(Page 193 of 252 Pages)
<PAGE>
outstanding principal amount greater than $100,000 shall be marked (to the
extent of any such outstanding principal amount greater than $100,000) with the
following legend: "This writing and the obligations evidenced or secured hereby
are subject to the security interest of The Chase Manhattan Bank, as Lender."
(c) Covenants Regarding Patent, Trademark and Copyright
Collateral.
(i) Other than with respect to the Assigned
Intellectual Property, Grantor shall take all actions reasonably
necessary or reasonably requested by the Lender to maintain and pursue
each application, to obtain the relevant registration and to maintain
the registration of each of the Patents, Trademarks and Copyrights (now
or hereafter existing), including the filing of applications for
renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings, unless
Grantor shall determine that such Patent, Trademark or Copyright is not
material to the conduct of its business.
(ii) In the event that any of the Patent, Trademark
or Copyright Collateral (other than the Assigned Intellectual Property)
is infringed upon, or misappropriated or diluted by a third party,
Grantor shall notify the Lender promptly after Grantor learns thereof.
Grantor shall, unless it shall reasonably determine that such Patent,
Trademark or Copyright Collateral is in no way material to the conduct
of its business or operations, promptly sue for infringement,
misappropriation or dilution and to recover any and all damages for
such infringement, misappropriation or dilution, and shall take such
other actions as the Lender shall deem reasonably appropriate under the
circumstances to protect such Patent, Trademark or Copyright
Collateral.
(d) Indemnification. In any suit, proceeding or action brought
by the Lender or any Lender relating to any Account, Chattel Paper, Contract,
Document, General Intangible or Instrument for any sum owing thereunder or to
enforce any provision of any Account, Chattel Paper, Contract, Document, General
Intangible or Instrument, Grantor will save, indemnify and keep the Lender
harmless from and against all expense (including reasonable attorneys' fees and
expenses), loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to, or in favor of, such obligor or its successors from Grantor, except, in the
case of the Lender, to the extent such expense, loss, or damage is attributable
solely to the gross negligence or willful misconduct of the Lender as finally
determined by a court of competent jurisdiction. All such obligations of Grantor
shall be and remain enforceable against and only against Grantor and shall not
be enforceable against the Lender.
(e) Compliance with Terms of Accounts, etc. In all material
respects, Grantor will perform and comply with all obligations in respect of its
Accounts, Chattel Paper, Contracts and
(Page 194 of 252 Pages)
<PAGE>
Licenses and all other agreements to which it is a party or by which it is bound
relating to the Collateral.
(f) Limitation on Liens on Collateral. Grantor will not
create, permit or suffer to exist, and will defend the Collateral against, and
take such other action as is necessary to remove, any Lien on the Collateral
except Permitted Encumbrances or other Liens permitted under Section 6.02 of the
Credit Agreement, and will defend the right, title and interest of the Lender in
and to any of Grantor's rights under the Collateral against the claims and
demands of all Persons whomsoever.
(g) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so except as permitted by the Credit Agreement.
(h) Further Identification of Collateral. Grantor will, if so
requested by the Lender, furnish to the Lender as often as the Lender reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Lender may reasonably request, all in such detail as the Lender may specify.
(i) Notices. Grantor will advise the Lender promptly, in
reasonable detail, (i) of any Lien (other than Permitted Encumbrances or Liens
permitted pursuant to Section 6.02 of the Credit Agreement) or claim made or
asserted against any of the Collateral, and (ii) of the occurrence of any other
event which could reasonably be expected to have a material adverse effect on
the aggregate value of the Collateral or on the Liens created hereunder or under
any other Financing Agreement.
6. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
On the Effective Date, Grantor shall execute and deliver to
the Lender a power of attorney (the "Power of Attorney") substantially in the
form attached hereto as Exhibit A. The power of attorney granted pursuant to the
Power of Attorney is a power coupled with an interest and shall be irrevocable
until the payment in full of the Obligations and termination of the Commitment.
The powers conferred on the Lender under the Power of Attorney are solely to
protect the Lender's interests in the Collateral and shall not impose any duty
upon the Lender to exercise any such powers. The Lender agrees that (a) it shall
not exercise any power or authority granted under the Power of Attorney unless
an Event of Default has occurred and is continuing, and (b) the Lender shall
account for any moneys received by the Lender in respect of any foreclosure on
or disposition of Collateral pursuant to the Power of Attorney; provided that
the Lender shall not have any duty as to any Collateral, and the Lender shall be
accountable only for amounts they actually receive as a result of the exercise
of such powers. NEITHER THE LENDER NOR ITS AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE RESPONSIBLE TO GRANTOR FOR ANY ACT
OR FAILURE TO ACT UNDER ANY POWER OF ATTORNEY OR OTHERWISE, EXCEPT IN RESPECT OF
DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
AS FINALLY
(Page 195 of 252 Pages)
<PAGE>
DETERMINED BY A COURT OF COMPETENT JURISDICTION, NOR FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.
7. REMEDIES; RIGHTS UPON DEFAULT.
(a) In addition to all other rights and remedies granted to it
under this Security Agreement, the Credit Agreement, the other Financing
Agreements and under any other instrument or agreement securing, evidencing or
relating to any of the Obligations, if any Event of Default shall have occurred
and be continuing, the Lender may exercise all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event the Lender, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale) to or upon
Grantor or any other Person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the UCC
and other applicable law), may forthwith enter upon the premises of Grantor
where any Collateral is located through self-help, without judicial process,
without first obtaining a final judgment or giving Grantor or any other Person
notice and opportunity for a hearing on the Lender's claim or action and may
collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at a public or private sale or sales, at any exchange at such prices as it may
deem acceptable, for cash or on credit or for future delivery without assumption
of any credit risk. The Lender shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase for the benefit of the Lender, the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption Grantor hereby releases. Such sales may be adjourned and continued
from time to time with or without notice. The Lender shall have the right to
conduct such sales on Grantor's premises or elsewhere and shall have the right
to use Grantor's premises without charge for such time or times as the Lender
deems necessary or advisable.
(b) Grantor further agrees, at the Lender's request, to
assemble the Collateral and make it available to the Lender at places which the
Lender shall select, whether at Grantor's premises or elsewhere. Until the
Lender is able to effect a sale, lease, or other disposition of Collateral, the
Lender shall have the right to hold or use Collateral, or any part thereof, to
the extent that it deems reasonably appropriate for the purpose of preserving
Collateral or its value or for any other purpose deemed reasonably appropriate
by the Lender. The Lender shall have no obligation to Grantor to maintain or
preserve the rights of Grantor as against third parties with respect to
Collateral while Collateral is in the possession of the Lender. The Lender may,
if it so elects, seek the appointment of a receiver or keeper to take possession
of Collateral and to enforce any of the Lender's remedies, with respect to such
appointment without prior notice or hearing as to such appointment. The Lender
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale to the Obligations as provided in the Credit
Agreement, and only after so paying over such net proceeds, and after the
payment by the Lender of any other amount
(Page 196 of 252 Pages)
<PAGE>
required by any provision of law, need the Lender account for the surplus, if
any, to Grantor. To the maximum extent permitted by applicable law, Grantor
waives all claims, damages, and demands against the Lender arising out of the
repossession, retention or sale of the Collateral except such as arise solely
out of the gross negligence or willful misconduct of the Lender as finally
determined by a court of competent jurisdiction. Grantor agrees that ten (10)
days' prior notice by the Lender of the time and place of any public sale or of
the time after which a private sale may take place is reasonable notification of
such matters. Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all
Obligations, including any attorneys' fees or other expenses incurred by the
Lender to collect such deficiency.
(c) Except as otherwise specifically provided herein, Grantor
hereby waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.
8. GRANT OF LICENSE TO USE INTELLECTUAL PROPERTY. For the purpose of
enabling the Lender to exercise rights and remedies under Section 7 hereof
(including, without limiting the terms of Section 7 hereof, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of Collateral) at such time as the Lender shall
be lawfully entitled to exercise such rights and remedies, Grantor hereby grants
to the Lender an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to Grantor) to use, license or sublicense any
Intellectual Property (other than the Assigned Intellectual Property) now owned
or hereafter acquired by Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof.
9. LIMITATION ON LENDERS' DUTY IN RESPECT OF COLLATERAL. The Lender
shall use reasonable care with respect to the Collateral in its possession or
under its control. The Lender shall not have any other duty as to any Collateral
in its possession or control or in the possession or control of any agent or
nominee of the Lender, or any income thereon or as to the preservation of rights
against prior parties or any other rights pertaining thereto.
10. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
(Page 197 of 252 Pages)
<PAGE>
11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give and
serve upon any other party any communication with respect to this Security
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be given in the manner, and
deemed received, as provided for in the Credit Agreement.
12. SEVERABILITY. Whenever possible, each provision of this Security
Agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity without invalidating
the remainder of such provision or the remaining provisions of this Security
Agreement. This Security Agreement is to be read, construed and applied together
with the Credit Agreement and the other Financing Agreements which, taken
together, set forth the complete understanding and agreement of the Lender and
Grantor with respect to the matters referred to herein and therein.
13. NO WAIVER; CUMULATIVE REMEDIES. The Lender shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Lender and then only to the extent therein set forth. A waiver by the Lender
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Lender would otherwise have had on any
future occasion. No failure to exercise nor any delay in exercising on the part
of the Lender, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by the Lender and
Grantor.
14. LIMITATION BY LAW. All rights, remedies and powers provided in this
Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Security Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to the extent
necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered
or filed under the provisions of any applicable law.
15. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section 10
hereof, this Security Agreement shall terminate upon payment in full of the
Obligations and termination of the Commitment.
(Page 198 of 252 Pages)
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16. SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of Grantor
(including any debtor-in-possession on behalf of Grantor) and shall, together
with the rights and remedies of the Lender hereunder inure to the benefit of the
Lender, all future holders of any instrument evidencing any of the Obligations
and their respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement governing
or instrument evidencing the Obligations or any portion thereof or interest
therein shall in any manner affect the Lien granted to the Lender hereunder.
Grantor may not assign, sell, hypothecate or otherwise transfer any interest in
or obligation under this Security Agreement.
17. COUNTERPARTS. This Security Agreement may be executed in any number
of separate counterparts, each of which shall collectively and separately
constitute one and the same agreement.
18. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE
FINANCING AGREEMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS SECURITY AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
THAT STATE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. GRANTOR HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK, SHALL
HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN
GRANTOR AND THE LENDER PERTAINING TO THIS SECURITY AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS, PROVIDED, THAT THE
LENDER AND GRANTOR ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK,
AND, PROVIDED, FURTHER, NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
LENDER. GRANTOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND GRANTOR HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. GRANTOR HEREBY
WAIVES PERSONAL SERVICE OF THE SUMMONS,
(Page 199 of 252 Pages)
<PAGE>
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO GRANTOR AT THE ADDRESS SET FORTH IN SECTION 8.01
OF THE CREDIT AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
19. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT DISPUTES
ARISING HEREUNDER OR RELATING HERETO BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE LENDER AND GRANTOR
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED IN CONNECTION WITH, THIS SECURITY AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
20. SECTION TITLES. The Section titles contained in this Security
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
21. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Security Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Security
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Security Agreement.
22. ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Security Agreement and, specifically,
the provisions of Section 18 and Section 19, with its counsel.
23. BENEFIT OF LENDER. All Liens granted or contemplated hereby shall
be for the benefit of the Lender, and all proceeds or payments realized from
Collateral in accordance herewith shall be applied to the Obligations in
accordance with the terms of the Credit Agreement.
(Page 200 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
TRANSMEDIA NETWORK INC., as Grantor
By: /s/ Stephen E. Lerch
-----------------------------------
Name: Stephen E. Lerch
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK, as Lender
By: /s/ Steven J. Faliski
-----------------------------------
Name: Steven J. Faliski
Title: Vice President
(Page 201 of 252 Pages)
<PAGE>
EXHIBIT 10.6
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated as of June 30, 1999 (together with all
amendments, if any, from time to time hereto, this "Agreement") between
Transmedia Network Inc., a Delaware corporation ("Pledgor"), and The Chase
Manhattan Bank ("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof by and among Pledgor, as Borrower, and the Lender (including all annexes,
exhibits and schedules thereto, and as from time to time amended, restated,
supplemented or otherwise modified, the "Credit Agreement"), the Lender has
agreed to make Loans to Pledgor;
WHEREAS, Pledgor is the record and beneficial owner of the shares of
stock listed in Part A of Schedule I hereto (the "Pledged Shares"); and
WHEREAS, in connection with the making of the Loans and other
extensions of credit under the Credit Agreement and as security for the
obligations of Pledgor under the Credit Agreement, the Lender is requiring that
Pledgor shall have executed and delivered this Agreement and Pledgor has agreed
to pledge the Pledged Collateral (as defined below) to the Lender in accordance
herewith;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Lender to make Loans under the Credit
Agreement, it is agreed as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to such terms in Annex X
attached to the Credit Agreement which Annex X is incorporated by
reference herein.
2. Pledge. Pledgor hereby pledges to the Lender, and grants to the Lender,
a first priority security interest in all of the following
(collectively, the "Pledged Collateral"):
2.1 the Pledged Shares owned by such Pledgor and the certificates
representing such Pledged Shares, and all dividends,
distributions, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of
such Pledged Shares; and
2.2 such portion, as determined by the Lender, of any additional
shares of stock of a Pledged Entity from time to time acquired
by such Pledgor in any manner (which shares shall be deemed to
be part of the Pledged Shares), and the certificates
representing such additional shares, and all dividends,
distributions, cash, instruments
(Page 202 of 252 Pages)
<PAGE>
and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Shares.
3. Security for Obligations. This Agreement secures, and the Pledged
Collateral is security for, the prompt payment in full when due,
whether at stated maturity, by acceleration or otherwise, and
performance of all Obligations of any kind under or in connection with
the Credit Agreement and the other Financing Agreements and all
obligations of Pledgor now or hereafter existing under this Agreement
including, without limitation, all reasonable fees, out-of-pocket costs
and expenses whether in connection with collection actions hereunder or
otherwise (collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. All certificates and instruments
evidencing the Pledged Collateral shall be delivered to and held by or
on behalf of the Lender pursuant hereto. All Pledged Shares shall be
accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance reasonably satisfactory to the Lender.
5. Representations and Warranties. Pledgor represents and warrants to the
Lender that:
5.1 Pledgor is, and at the time of delivery of the Pledged Shares
to the Lender will be, the sole holder of record and the sole
beneficial owner of such Pledged Collateral pledged by such
Pledgor free and clear of any Lien thereon or affecting the
title thereto, except for any Lien created by this Agreement;
5.2 All of the Pledged Shares have been duly authorized, validly
issued and are fully paid and non-assessable;
5.3 Pledgor has the right to pledge, assign, transfer, deliver,
deposit and set over the Pledged Collateral pledged by such
Pledgor to the Lender as provided herein;
5.4 None of the Pledged Shares has been issued or transferred in
violation of the securities registration, securities
disclosure or similar laws of any jurisdiction to which such
issuance or transfer may be subject;
5.5 All of the Pledged Shares are presently owned by Pledgor and
are presently represented by the certificates listed on Part A
of Schedule I hereto. As of the date hereof, there are no
existing options, warrants, calls or commitments of any
character whatsoever relating to the Pledged Shares;
5.6 No consent, approval, authorization or other order or other
action by, and no notice to or filing with, any Governmental
Authority or any other Person is required (a) for the pledge
by Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of
this Agreement by Pledgor, or (b) to be obtained, given, made
or taken by the Borrower for the exercise by the Lender of the
(Page 203 of 252 Pages)
<PAGE>
voting or other rights provided for in this Agreement or the
remedies in respect of the Pledged Collateral pursuant to this
Agreement, except as may be required in connection with such
disposition by laws affecting the offering and sale of
securities generally;
5.7 The pledge, assignment and delivery of the Pledged Collateral
pursuant to this Agreement will create a valid first priority
Lien on and a first priority perfected security interest in
favor of the Lender in the Pledged Collateral and the proceeds
thereof, securing the payment of the Secured Obligations,
subject to no other Lien;
5.8 This Agreement has been duly authorized by all necessary or
proper corporate action, including the consent of stockholders
where required, executed and delivered by Pledgor and
constitutes a legal, valid and binding obligation of Pledgor
enforceable against Pledgor in accordance with its terms;
5.9 The Pledged Shares constitute 100% of the issued and
outstanding shares of stock of each Pledged Entity; and
5.10 The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor covenants and agrees that until the payment in full
of the Secured Obligations and the termination of the Credit Agreement
(the "Termination Date"):
6.1 Without the prior written consent of the Lender, Pledgor will
not sell, assign, transfer, pledge, or otherwise encumber any
of its rights in or to the Pledged Collateral, or any unpaid
dividends, interest or other distributions or payments with
respect to the Pledged Collateral or grant a Lien in the
Pledged Collateral, unless otherwise expressly permitted by
the Credit Agreement;
6.2 Pledgor will, at his or her expense, promptly execute,
acknowledge and deliver all such instruments and take all such
actions as the Lender from time to time may reasonably request
in order to ensure to the Lender the benefits of the Liens in
and to the Pledged Collateral intended to be created by this
Agreement, including the filing of any necessary UCC financing
statements, which may be filed by the Lender with or (to the
extent permitted by law) without the signature of Pledgor, and
will cooperate with the Lender, at Pledgor's expense, in
obtaining all necessary approvals and making all necessary
filings under federal, state, local or foreign law in
connection with such Liens or any sale or transfer of the
Pledged Collateral;
6.3 Pledgor has and will defend the title to the Pledged
Collateral and the Liens of the Lender in the Pledged
Collateral against the claim of any Person and will maintain
and preserve such Liens; and
(Page 204 of 252 Pages)
<PAGE>
6.4 Pledgor will, upon obtaining ownership of any additional stock
of a Pledged Entity or stock otherwise required to be pledged
to the Lender pursuant to any of the Financing Agreements,
which stock is not already Pledged Collateral, promptly (and
in any event within three (3) Business Days) deliver to the
Lender a Pledge Amendment, duly executed by Pledgor, in
substantially the form of Schedule II hereto (a "Pledge
Amendment") in respect of any such additional stock, pursuant
to which Pledgor shall pledge to the Lender all of such
additional stock. Pledgor hereby authorizes the Lender to
attach each Pledge Amendment to this Agreement and agrees that
all Pledged Shares listed on any Pledge Amendment delivered to
the Lender shall for all purposes hereunder be considered
Pledged Collateral.
7. Pledgor's Rights. As long as no Default or Event of Default shall have
occurred and be continuing and until written notice shall be given to
Pledgor in accordance with Section 8 hereof:
7.1 Pledgor shall have the right, from time to time, to vote and
give consents with respect to the Pledged Collateral, or any
part thereof for all purposes not inconsistent with the
provisions of this Agreement, the Credit Agreement or any
other Financing Agreement; provided, however, that no vote
shall be cast, and no consent shall be given or action taken,
which would have the effect of impairing the position or
interest of the Lender in respect of the Pledged Collateral or
which would authorize, effect or consent to (unless and to the
extent expressly permitted by the Credit Agreement):
(a) the dissolution or liquidation, in whole or in part,
of a Pledged Entity;
(b) the consolidation or merger of a Pledged Entity with
any other Person;
(c) the sale, disposition or encumbrance of all or
substantially all of the assets of a Pledged Entity,
except for Liens in favor of the Lender;
(d) any change in the authorized number of shares, the
stated capital or the authorized share capital of a
Pledged Entity or the issuance of any additional
shares of its stock; or
(e) the alteration of the voting rights with respect to
the stock of a Pledged Entity; and
7.2 Pledgor shall be entitled, from time to time, to collect and
receive for his or her own use all cash dividends and interest
paid in respect of the Pledged Shares to the extent not in
violation of the Credit Agreement other than any and all: (a)
dividends and interest paid or payable other than in cash in
respect of any Pledged Collateral, and instruments and other
property received, receivable or otherwise distributed in
(Page 205 of 252 Pages)
<PAGE>
respect of, or in exchange for, any Pledged Collateral; (b)
dividends and other distributions paid or payable in cash in
respect of any Pledged Shares in connection with a partial or
total liquidation or dissolution or in connection with a
reduction of capital, capital surplus or paid-in capital of a
Pledged Entity; and (c) cash paid, payable or otherwise
distributed, in respect of principal of, or in redemption of,
or in exchange for, any Pledged Collateral; provided, however,
that until actually paid, all rights to such distributions
shall remain subject to the Lien created by this Agreement;
and
7.3 All dividends and interest (other than such cash dividends and
interest as are permitted to be paid to Pledgor in accordance
with Section 7.2 above) and all other distributions in respect
of any of the Pledged Shares, whenever paid or made, shall be
delivered to the Lender to hold as Pledged Collateral and
shall, if received by Pledgor, be received in trust for the
benefit of the Lender, be segregated from the other property
or funds of Pledgor, and be forthwith delivered to the Lender
as Pledged Collateral in the same form as so received (with
any necessary indorsement).
8. Defaults and Remedies; Proxy.
8.1 Upon the occurrence of an Event of Default and during the
continuation of such Event of Default, and concurrently with
written notice to Pledgor, the Lender (personally or through
an agent) is hereby authorized and empowered to transfer and
register in its name or in the name of its nominee the whole
or any part of the Pledged Collateral, to exchange
certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or
larger denominations, to exercise the voting and all other
rights as a holder with respect thereto, to collect and
receive all cash dividends, interest, principal and other
distributions made thereon, to sell in one or more sales after
ten (10) days' notice of the time and place of any public sale
or of the time at which a private sale is to take place (which
notice Pledgor agrees is commercially reasonable) the whole or
any part of the Pledged Collateral and to otherwise act with
respect to the Pledged Collateral as though the Lender was the
outright owner thereof. Any sale shall be made at a public or
private sale at the Lender's place of business, or at any
place to be named in the notice of sale, either for cash or
upon credit or for future delivery at such price as the Lender
may deem fair, and the Lender may be the purchaser of the
whole or any part of the Pledged Collateral so sold and hold
the same thereafter in its own right free from any claim of
Pledgor or any right of redemption. Each sale shall be made to
the highest bidder, but the Lender reserves the right to
reject any and all bids at such sale which, in its discretion,
it shall deem inadequate. Demands of performance, except as
otherwise herein specifically provided for, notices of sale,
advertisements and the presence of property at sale are hereby
waived and any sale hereunder may be conducted by an
auctioneer or any officer or agent of the Lender.
(Page 206 of 252 Pages)
<PAGE>
8.2 PLEDGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE
LENDER AS THE PROXY AND ATTORNEY-IN-FACT OF PLEDGOR WITH
RESPECT TO THE PLEDGED COLLATERAL, INCLUDING THE RIGHT TO
VOTE THE PLEDGED SHARES, WITH FULL POWER OF SUBSTITUTION TO
DO SO. THE APPOINTMENT OF THE LENDER AS PROXY AND
ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE
IRREVOCABLE UNTIL THE TERMINATION DATE. IN ADDITION TO THE
RIGHT TO VOTE THE PLEDGED SHARES, THE APPOINTMENT OF THE
LENDER AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE
RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND
REMEDIES TO WHICH A HOLDER OF THE PLEDGED SHARES WOULD BE
ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS
OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS
AND VOTING AT SUCH MEETINGS). SUCH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION
(INCLUDING ANY TRANSFER OF ANY PLEDGED SHARES ON THE
RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON
(INCLUDING THE ISSUER OF THE PLEDGED SHARES OR ANY OFFICER
OR AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT. THE LENDER AGREES THAT
IT SHALL NOT EXERCISE ANY POWER OF AUTHORITY GRANTED TO IT
AS PROXY AND ATTORNEY-IN-FACT OF PLEDGOR UNLESS AN EVENT
OF DEFAULT HAS OCCURRED AND IS CONTINUING.
NOTWITHSTANDING THE FOREGOING, THE LENDER SHALL NOT HAVE
ANY DUTY TO EXERCISE ANY SUCH RIGHT OR TO PRESERVE THE SAME
AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY
DELAY IN DOING SO.
8.3 If, at the original time or times appointed for the sale of
the whole or any part of the Pledged Collateral, the highest
bid, if there be but one sale, shall be inadequate to
discharge in full all the Secured Obligations, or if the
Pledged Collateral be offered for sale in lots, if at any of
such sales, the highest bid for the lot offered for sale would
indicate to the Lender, in its discretion, that the proceeds
of the sales of the whole of the Pledged Collateral would be
unlikely to be sufficient to discharge all the Secured
Obligations, the Lender may, on one or more occasions and in
its discretion, postpone any of said sales by public
announcement at the time of sale or the time of previous
postponement of sale, and no other notice of such postponement
or postponements of sale need be given, any other notice being
hereby waived; provided, however, that any sale or sales made
after such postponement shall be after ten (10) days' notice
to Pledgor.
8.4 If, at any time when the Lender shall determine to exercise
its right to sell the whole or any part of the Pledged
Collateral hereunder, such Pledged Collateral or the part
(Page 207 of 252 Pages)
<PAGE>
thereof to be sold shall not, for any reason whatsoever, be
effectively registered under the Securities Act of 1933, as
amended (the "Act"), the Lender may, in its discretion
(subject only to applicable requirements of law), sell such
Pledged Collateral or part thereof by private sale in such
manner and under such circumstances as the Lender may deem
necessary or advisable, but subject to the other requirements
of this Section 8, and shall not be required to effect such
registration or to cause the same to be effected. Without
limiting the generality of the foregoing, in any such event,
the Lender in its discretion (x) may, in accordance with
applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose
of registering such Pledged Collateral or part thereof could
be or shall have been filed under said Act (or similar
statute), (y) may approach and negotiate with a single
possible purchaser to effect such sale, and (z) may restrict
such sale to a purchaser who is an accredited investor under
the Act and who will represent and agree that such purchaser
is purchasing for its own account, for investment and not with
a view to the distribution or sale of such Pledged Collateral
or any part thereof. In addition to a private sale as provided
above in this Section 8, if any of the Pledged Collateral
shall not be freely distributable to the public without
registration under the Act (or similar statute) at the time of
any proposed sale pursuant to this Section 8, then the Lender
shall not be required to effect such registration or cause the
same to be effected but, in its discretion (subject only to
applicable requirements of law), may require that any sale
hereunder (including a sale at auction) be conducted subject
to restrictions:
(a) as to the financial sophistication and ability of any
Person permitted to bid or purchase at any such sale;
(b) as to the content of legends to be placed upon any
certificates representing the Pledged Collateral sold
in such sale, including restrictions on future
transfer thereof;
(c) as to the representations required to be made by each
Person bidding or purchasing at such sale relating to
that Person's access to financial information about
Pledgor and such Person's intentions as to the
holding of the Pledged Collateral so sold for
investment for its own account and not with a view to
the distribution thereof; and
(d) as to such other matters as the Lender may, in its
discretion, deem necessary or appropriate in order
that such sale (notwithstanding any failure so to
register) may be effected in compliance with the
Bankruptcy Code and other laws affecting the
enforcement of creditors' rights and the Act and all
applicable state securities laws.
(Page 208 of 252 Pages)
<PAGE>
8.5 Pledgor recognizes that the Lender may be unable to effect a
public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof in
accordance with Section 8.4 above. Pledgor also acknowledges
that any such private sale may result in prices and other
terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees
that any such private sale shall not be deemed to have been
made in a commercially unreasonable manner solely by virtue of
such sale being private. The Lender shall be under no
obligation to delay a sale of any of the Pledged Collateral
for the period of time necessary to permit the Pledged Entity
to register such securities for public sale under the Act, or
under applicable state securities laws, even if Pledgor and a
Pledged Entity would agree to do so.
8.6 Pledgor agrees to the maximum extent permitted by applicable
law that following the occurrence and during the continuance
of an Event of Default it will not at any time plead, claim or
take the benefit of any appraisal, valuation, stay, extension,
moratorium or redemption law now or hereafter in force in
order to prevent or delay the enforcement of this Agreement,
or the absolute sale of the whole or any part of the Pledged
Collateral or the possession thereof by any purchaser at any
sale hereunder, and Pledgor waives the benefit of all such
laws to the extent it lawfully may do so. Pledgor agrees that
it will not interfere with any right, power and remedy of the
Lender provided for in this Agreement or now or hereafter
existing at law or in equity or by statute or otherwise, or
the exercise or beginning of the exercise by the Lender of any
one or more of such rights, powers or remedies. No failure or
delay on the part of the Lender to exercise any such right,
power or remedy and no notice or demand which may be given to
or made upon Pledgor by the Lender with respect to any such
remedies shall operate as a waiver thereof, or limit or impair
the Lender's right to take any action or to exercise any power
or remedy hereunder, without notice or demand, or prejudice
its rights as against Pledgor in any respect.
8.7 Pledgor further agrees that a breach of any of the covenants
contained in this Section 8 will cause irreparable injury to
the Lender, that the Lender shall have no adequate remedy at
law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this Section 8 shall
be specifically enforceable against Pledgor, and Pledgor
hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a
defense that the Secured Obligations are not then due and
payable in accordance with the agreements and instruments
governing and evidencing such obligations.
9. Waiver. No delay on the Lender's part in exercising any power of sale,
Lien, option or other right hereunder, and no notice or demand which
may be given to or made upon Pledgor by the Lender with respect to any
power of sale, Lien, option or other right hereunder, shall constitute
a waiver thereof, or limit or impair the Lender's right to take any
action or to
(Page 209 of 252 Pages)
<PAGE>
exercise any power of sale, Lien, option, or any other right hereunder,
without notice or demand, or prejudice the Lender's rights as against
Pledgor in any respect.
10. Assignment. The Lender may assign, indorse or transfer any instrument
evidencing all or any part of the Secured Obligations as provided in,
and in accordance with, the Credit Agreement, and the holder of such
instrument shall be entitled to the benefits of this Agreement.
11. Termination. Immediately following the Termination Date, the Lender
shall deliver to Pledgor the Pledged Collateral pledged by Pledgor at
the time subject to this Agreement and all instruments of assignment
executed in connection therewith, free and clear of the Liens hereof
and, except as otherwise provided herein, all of Pledgor's obligations
hereunder shall at such time terminate.
12. Lien Absolute. All rights of the Lender hereunder, and all obligations
of Pledgor hereunder, shall be absolute and unconditional irrespective
of:
(a) any lack of validity or enforceability of the Credit
Agreement, any other Financing Agreement or any other
agreement or instrument governing or evidencing any
Secured Obligations;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any part of the
Secured Obligations, or any other amendment or waiver
of or any consent to any departure from the Credit
Agreement, any other Financing Agreement or any other
agreement or instrument governing or evidencing any
Secured Obligations;
(c) any exchange, release or non-perfection of any other
Collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or
any of the Secured Obligations;
(d) the insolvency of the Borrower or any of its
Subsidiaries; or
(e) any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
Pledgor.
13. Release. Pledgor consents and agrees that the Lender may at any time,
or from time to time, in its discretion:
(a) renew, extend or change the time of payment, and/or
the manner, place or terms of payment of all or any
part of the Secured Obligations; and
(Page 210 of 252 Pages)
<PAGE>
(b) exchange, release and/or surrender all or any of the
Collateral (including the Pledged Collateral), or any
part thereof, by whomsoever deposited, which is now
or may hereafter be held by the Lender in connection
with all or any of the Secured Obligations;
all in such manner and upon such terms as the Lender may deem proper, and
without notice to or further assent from Pledgor, it being hereby agreed that
Pledgor shall be and remain bound upon this Agreement, irrespective of the value
or condition of any of the Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal or extension, and
notwithstanding also that the Secured Obligations may, at any time, exceed the
aggregate principal amount thereof set forth in the Credit Agreement, or any
other agreement governing any Secured Obligations.
Pledgor hereby waives notice of acceptance of this Agreement, and also
presentment, demand, protest and notice of dishonor of any and all of the
Secured Obligations, and promptness in commencing suit against any party hereto
or liable hereon, and in giving any notice to or of making any claim or demand
hereunder upon Pledgor. No act or omission of any kind on Lender's part shall in
any event affect or impair this Agreement.
14. Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any
Pledged Entity for liquidation or reorganization, should Pledgor or any
Pledged Entity become insolvent or make an assignment for the benefit
of creditors or should a receiver or trustee be appointed for all or
any significant part of Pledgor's or a Pledged Entity's assets, and
shall continue to be effective or be reinstated, as the case may be, if
at any time payment and performance of the Secured Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Secured Obligations, whether as a "voidable preference", "fraudulent
conveyance", or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof,
is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not
so rescinded, reduced, restored or returned.
15. Miscellaneous.
15.1 The Lender may execute any of its duties hereunder by or
through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties
hereunder.
15.2 Pledgor agrees to promptly reimburse the Lender for actual
out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by the Lender in connection
with the administration and enforcement of this Agreement.
(Page 211 of 252 Pages)
<PAGE>
15.3 Neither the Lender, nor any of its respective officers,
directors, employees, agents or counsel shall be liable for
any action lawfully taken or omitted to be taken by it or them
hereunder or in connection herewith, except for its or their
own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
16. CHOICE OF LAW. THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR AND
ITS SUCCESSORS AND ASSIGNS, SHALL INURE TO THE BENEFIT OF, AND BE
ENFORCEABLE BY, THE LENDER AND ITS SUCCESSORS AND ASSIGNS, AND
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN THAT STATE (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), AND NONE
OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED,
ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED FOR
AND ON BEHALF OF THE LENDER AND PLEDGOR.
17. Severability. If for any reason any provision or provisions hereof are
determined to be invalid and contrary to any existing or future law,
such invalidity shall not impair the operation of or effect those
portions of this Agreement which are valid.
18. Notices. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of
the parties by any other party, or whenever any of the parties desires
to give or serve upon any other a communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall
be delivered in person or sent by registered or certified mail, return
receipt requested, with proper postage prepaid, or by facsimile
transmission and confirmed by delivery of a copy by personal delivery
or United States Mail as otherwise provided herein:
If to the Lender, at:
Chase Securities Inc.
Global Client Management
10 South LaSalle Street, 23rd Floor
Chicago, IL 60603
Attention: David Christopher
Telecopy: (312) 807-4077
(Page 212 of 252 Pages)
<PAGE>
with a copy to:
Chase Securities Inc.
270 Park Avenue, 7th Floor
New York, New York 10017
Attention: Christopher Evans
Telecopy: (212) 834-6564
If to Pledgor, at:
Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181-9915
Attention: Steve Lerch
Telecopy: (305) 892-3342
with a copy to:
Morgan Lewis & Bockius, LLP
101 Park Avenue
New York, New York 10178
Attention: Stephen P. Farrell
Telecopy: 212-309-6273
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly served, given or delivered (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by telecopy or other similar facsimile
transmission (with such telecopy or facsimile promptly confirmed by delivery of
a copy by personal delivery or United States Mail as otherwise provided in this
Section 18, (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid, or (d) when delivered, if hand-delivered by
messenger. Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration or other
communication.
19. Section Titles. The Section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
(Page 213 of 252 Pages)
<PAGE>
20. Counterparts. This Agreement may be executed in any number of
counterparts, which shall, collectively and separately, constitute one
agreement.
21. Benefit of Lender. All security interests granted or contemplated
hereby shall be for the benefit of the Lender, and all proceeds or
payments realized from the Pledged Collateral in accordance herewith
shall be applied to the Obligations in accordance with the terms of the
Credit Agreement.
[signature page follows]
(Page 214 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the date first written above.
TRANSMEDIA NETWORK INC.,
as Pledgor
By: /s/ Stephen E. Lerch
------------------------------------
Name: Stephen E. Lerch
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Lender
By: /s/ Steven J. Faliski
------------------------------------
Name: Steven J. Faliski
Title: Vice President
Its: Duly Authorized Signatory
(Page 215 of 252 Pages)
<PAGE>
SCHEDULE II
PLEDGE AMENDMENT
This Pledge Amendment, dated ________________, ___ is
delivered pursuant to Section 6.4 of the Pledge Agreement referred to below. All
defined terms used herein shall have the meanings ascribed thereto or
incorporated by reference in the Pledge Agreement. The undersigned hereby
certifies that the representations and warranties in Section 5 of the Pledge
Agreement are and continue to be true and correct, both as to the shares pledged
prior to this Pledge Amendment and as to the shares pledged pursuant to this
Pledge Amendment. The undersigned further agrees that this Pledge Amendment may
be attached to that certain Pledge Agreement, dated as of June 30, 1999,
between undersigned, as Pledgor, and The Chase Manhattan Bank, as Lender (the
"Pledge Agreement") and that the Pledged Shares listed on this Pledge Amendment
shall be and become a part of the Pledged Collateral referred to in said Pledge
Agreement and shall secure all Secured Obligations referred to in said Pledge
Agreement. The undersigned acknowledges that any shares not included in the
Pledged Collateral at the discretion of the Lender may not otherwise be pledged
by Pledgor to any other Person or otherwise used as security for any obligations
other than the Secured Obligations.
--------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Class Certificate Number
Pledged Entity of Stock Number(s) of Shares % Outstanding
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Page 216 of 252 Pages)
Exhibit 10.7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of June 30,
1999, between GAMI INVESTMENTS, INC., its successors and assigns (the "Lender"),
and TRANSMEDIA NETWORK, INC., a Delaware corporation ("TMN"), TRANSMEDIA
RESTAURANT COMPANY, INC., a Delaware corporation ("Restaurant"), TRANSMEDIA
SERVICE COMPANY, INC., a Delaware corporation ("Service") and TMNI INTERNATIONAL
INCORPORATED, a Delaware corporation ("TMNI" -- TMN, Restaurant, Service and
TMNI are each referred to herein individually as a "Borrower" and collectively
as Borrowers").
RECITALS
A. The Borrowers have requested that the Lender extend credit to the
Borrowers in order to enable the Borrowers to borrow, on the date hereof, a
maximum aggregate principal amount of $10,000,000 (the "Loan") for the purpose
of providing working capital and for other general corporate purposes from time
to time on a nonrevolving credit basis.
B. Each of Restaurant, Service and TMNI are wholly-owned Subsidiaries
of TMN.
C. The Lender is willing to make the Loan to the Borrowers, and the
Borrowers are willing to borrow from the Lender, subject to the terms and
conditions herein set forth.
AGREEMENT
NOW, THEREFORE, for and in consideration of the Recitals and the mutual
covenants and agreements herein set forth and other consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"Acquisition" shall mean the acquisition by the Borrowers from
SignatureCard, Inc. of certain assets related to the membership program operated
under the Dining A La Card trade name and service mark in accordance with the
terms of the Asset Purchase Agreement.
(Page 217 of 252 Pages)
<PAGE>
"Affiliate" shall mean, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power
(a) to direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities, membership
interests, by contract, or otherwise, or (b) to vote ten percent (10%) or more
of the securities (on a fully diluted basis) having ordinary voting power for
election of directors, managing general partners or similar officials of the
other Person.
"Agreement" shall mean this Credit Agreement as from time to
time amended, supplemented, restated or otherwise modified and in effect.
"Asset Purchase Agreement" means that certain Asset Purchase
Agreement dated as of March 17, 1999 executed by TMN and SignatureCard, Inc., as
amended, supplemented or modified.
"Back-End Fee" shall mean $500,000, payable by Borrowers to
Lender in accordance with the terms of Section 2.10 below.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Business Day" shall mean any day other than a Saturday,
Sunday or legal holiday in the States of Illinois and Florida on which banks are
open for business in Chicago, Illinois and Miami, Florida.
"Closing Date" shall mean the date hereof.
"Chase Bridge Loan Facility" shall mean that certain
$35,000,000 senior secured revolving credit facility made available to TMN by
The Chase Manhattan Bank of even date herewith to fund the Acquisition.
"Common Stock" shall mean TMN's common stock, par value $.02
per share.
"Default" shall mean any event that with notice or lapse of
time or both would constitute an Event of Default.
"Dollars" and the symbol "$" shall mean the lawful currency of
the United States of America.
"EGI-Transmedia" shall mean EGI-Transmedia Investors, L.L.C.,
a Delaware limited liability company.
(Page 218 of 252 Pages)
<PAGE>
"Environmental Laws" shall mean all laws relating to
environmental, health or safety matters, including those relating to fines,
orders, injunctions, penalties, damages, contribution, cost recovery,
compensation, losses or injuries resulting from the release or threatened
release of hazardous substances or materials and to the generation, use,
storage, transportation, or disposal of hazardous substances or materials, in
any manner applicable to the Borrowers or their respective Subsidiaries or their
respective properties, each as heretofore and hereafter amended or supplemented,
and any analogous future or present local, state or federal statutes, rules and
regulations promulgated thereunder or pursuant thereto, and any other present or
future law, ordinance, rule, regulation, permit or permit condition or order
addressing environmental, health or safety issues of or by the federal
government, any state or any political subdivision thereof, or any agency, court
or body of the federal government, any state or any political subdivision
thereof, exercising executive, legislative, judicial, regulatory or
administrative functions which are applicable to the Borrowers or their
respective Subsidiaries or their respective properties.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any corporation, trade or
business that is along with any Borrower a member of a controlled group of
trades or businesses, or a member of any group of organizations within the
meaning of Sections 414(b) or (c) of the Internal Revenue Code of 1986, as
amended, and any and all regulations thereunder, or is otherwise treated as a
single employer with any Borrower pursuant to Section 4001(b)(1) of ERISA, and
any and all regulations thereunder.
"Event of Default" shall mean the Events of Default specified
in Section 7.01.
"Existing Warrant" shall mean collectively those certain
warrants to purchase an aggregate of 1,200,000 shares of TMN's Common Stock,
dated as of March 3, 1998 and expiring March 3, 2003, held by Samstock,
EGI-Transmedia, Halmostock Limited Partnership and Robert M. Steiner, as
Trustee.
"Financial Officer" shall mean either the President or the
Chief Financial Officer of a Borrower.
"Guaranty" shall mean any obligation, contingent or otherwise,
of any Person guarantying or having the economic effect of guarantying any
Indebtedness of any other Person in any manner, whether directly or indirectly,
and including any obligation of such Person, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (b) to purchase property,
securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, or (c) to maintain working
capital, equity capital or other financial condition of the primary obligor so
as to enable the primary obligor to pay such Indebtedness (including any
obligation to make capital contributions, loans or other payments pursuant to a
keep well guaranty or similar instrument); provided, however,
(Page 219 of 252 Pages)
<PAGE>
that the term "Guaranty" shall not include endorsements for collection or
deposit, in either case in the ordinary course of business.
"Indebtedness" shall mean, with respect to any Person, without
duplication, all (a) obligations of such Person for borrowed money, (b)
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) obligations of such Person upon which interest charges are
contractually specified, (d) obligations of such Person under conditional sale
or other title retention agreements relating to property purchased by such
Person, (e) obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than trade payables and accrued
expenses incurred in the ordinary course of business not yet due and payable),
(f) Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) Guaranties of such Person,
(h) capital lease obligations of such Person, (i) obligations of such Person
under interest rate protection agreements, and (j) obligations of such Person
under or with respect to letters of credit and bankers' acceptances.
"Initial Fee" shall mean $500,000, payable by Borrowers to
Lender on the Closing Date.
"Intellectual Property" shall mean all copyrights, patents,
trademarks, tradenames, and all applications and licenses therefor.
"Interest Payment Date" shall mean the first Business Day of
each calendar month.
"Investment" shall mean, with respect to any Person, all
advances, loans or extensions of credit to any other Person, all purchases or
commitments to purchase any stock, bonds, notes, debentures or other securities
of any other Person, and any investment in any other Persons, including
partnerships or joint ventures.
"Investment Agreement Amendment" shall mean that certain
Second Amended and Restated Investment Agreement of even date herewith executed
by TMN, Samstock, EGI-Transmedia and Halmostock Limited Partnership, in the form
of EXHIBIT E, as amended from time to time.
"Lien" shall mean, with respect to any asset, any lien,
mortgage, security interest, charge or encumbrance of any kind, including the
rights of a vendor, lessor, or similar party under any conditional sale
agreement or other title retention agreement or lease substantially equivalent
thereto.
"Loan" shall mean the Loan defined in Recital A.
(Page 220 of 252 Pages)
<PAGE>
"Loan Documents" shall mean collectively this Agreement, the
Note, and the reports, certificates, financial statements and other agreements
and instruments executed and delivered by the Borrowers in connection herewith
or therewith.
"Management Fee" shall mean the quarterly fee for management
services payable by TMN to Equity Group Investments, L.L.C. in the quarterly
amount of $62,500.00.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U of the Board.
"Material Adverse Effect" shall mean (a) a material adverse
effect upon the business, operations, properties, assets, liabilities, operating
results, cash flows or condition (financial or otherwise) of the Borrowers and
their respective Subsidiaries, taken as a whole or (b) a material impairment of
the ability of the Borrowers to perform the obligations to, or the validity or
enforceability of, or impairment of the rights or remedies of, or benefits to,
the Lender under the Loan Documents.
"Maturity Date" shall mean the earliest to occur of (a)
December 30, 1999, (b) the date all Obligations shall be due and payable
hereunder, whether by acceleration or otherwise, and (c) the Rights Offering
Closing Date.
"Multiemployer Plan" shall mean a plan described in Section
3(37) or 4001(a)(3) of ERISA that is maintained for employees of either a
Borrower or any ERISA Affiliate or to which contributions are or have been made
by a Borrower or any ERISA Affiliate.
"Note" shall mean the Promissory Note to be executed and
delivered by the Borrowers on the Closing Date, in substantially the form
contained in EXHIBIT A.
"Obligations" shall mean (a) (i) the principal and interest
(including interest accruing after the commencement of any proceeding against or
with respect to a Borrower under the Bankruptcy Code, 11 U.S.C. ss. 101 et seq.,
or any other federal or state bankruptcy, insolvency, receivership or similar
law, at the rate specified herein) on the Loan, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment, or
otherwise, and (ii) all other monetary obligations of the Borrowers to the
Lender under this Agreement and the other Loan Documents, whether now existing
or hereafter arising, and (b) all other obligations of the Borrowers under this
Agreement and the other Loan Documents, whether now existing or hereafter
arising.
"Pension Plan" shall mean any Plan and any Multiemployer Plan
that is subject to the provisions of Section 302 of ERISA or Title IV of ERISA.
"Permitted Investments" shall mean (a) the purchase of direct
obligations of the government of the United States of America, or any agency
thereof, or obligations unconditionally guaranteed by the United States of
America; (b) certificates of deposit of any bank organized or
(Page 221 of 252 Pages)
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licensed to conduct a banking business under the laws of the United States of
America or any State thereof having capital, surplus and undivided profits of
not less than $100,000,000; (c) Investments in commercial paper which, at the
time of acquisition, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Services, Inc. or any other nationally recognized
credit rating agency of similar standing; (d) other Investments existing as of
the date of execution hereof as shown on Schedule 1.01 hereof, including
Investments in the Subsidiaries listed thereon; (e) ordinary course advances
made by a Borrower to another Borrower; (f) Investments (including debt
obligations) received in connection with the bankruptcy or reorganization of
suppliers, customers or other debtors or in settlement of delinquent obligations
arising in the ordinary course of business; (g) promissory notes or other debt
obligations received in connection with asset dispositions permitted hereunder;
and (h) loans and advances to any employee or officer of any Borrower in the
ordinary course of business not to exceed $300,000 in the aggregate principal
amount at any one time outstanding.
"Person" shall mean and include natural persons, corporations
(business, municipal or not-for-profit), limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plan" shall mean any employee benefit plan (within the
meaning of Section 3(3) of ERISA), that is maintained for employees of, or
sponsored, participated in or contributed to by a Borrower or any ERISA
Affiliate.
"Preferred Stock" shall mean the Series A senior convertible
redeemable preferred stock of TMN issued and sold pursuant to the Rights
Offering.
"Preferred Stock Designation" shall mean the Certificate of
Designation of Preferred Stock covering the Preferred Stock to be filed by TMN
with the Secretary of State of Delaware in substantially the form of EXHIBIT G.
"Prime Rate" shall mean on any date the rate of interest
designated by The Chase Manhattan Bank or its successor from time to time as its
prime rate, base rate or reference rate. The Prime Rate is not necessarily
intended to be the lowest rate of interest charged by such Person in connection
with extensions of credit. Changes in the rate of interest on the Loan shall
take effect simultaneously with each change in the Prime Rate. If The Chase
Manhattan Bank or its successor shall cease to report a Prime Rate, then Prime
Rate shall be deemed to be the average prime rate, base rate or reference rate
reported by the three (3) largest (measured by total assets) banking
institutions in the continental United States then announcing such an interest
rate. The applicable Prime Rate shall be determined by the Lender, and such
determination shall be conclusive absent manifest error.
(Page 222 of 252 Pages)
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"Proxy Proposals" shall mean each of the following: (a) the
issuance of the Rights Offering Warrant, (b) the proposed increase in the
authorized shares of TMN's Common Stock and preferred stock, and (c) any other
matter submitted for the approval by TMN's stockholders in connection with the
Rights Offering, the Rights Offering Warrant, and related matters.
"Registration Statement" shall mean that certain registration
statement of TMN on Form S-2 registering the Rights, the Preferred Stock and the
Common Stock into which the Preferred Stock is convertible.
"Regulation G, T, U or X" shall mean Regulation G, T, U or X
of the Board, as each of the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Reportable Event" shall mean any Reportable Event within the
meaning of Section 4043(b) of Title IV of ERISA or the regulations issued
thereunder.
"Restricted Payments" shall mean the Restricted Payments
specified in Section 6.06.
"Rights" shall mean the nontransferable rights offered to
stockholders of TMN pursuant to the Rights Offering.
"Rights Offering" shall mean that certain offering of
nontransferable rights to stockholders of TMN to purchase an aggregate of up to
$10,000,000 newly issued Series A senior convertible redeemable preferred stock
of TMN, par value $.10 per share, on terms and conditions acceptable to Lender.
"Rights Offering Closing Date: shall mean the date on which
the Preferred Stock is issued and sold by TMN to Samstock and such other
stockholders of TMN as have elected to purchase Preferred Stock pursuant to the
Rights Offering.
"Rights Offering Default Event" shall mean the occurrence of
any of the following: (a) failure by the required percentage of TMN's
stockholders to approve each of the Proxy Proposals upon presentation thereof to
a vote of TMN's stockholders, (b) failure by TMN or its Board of Directors to
recommend that TMN's stockholders vote in favor of the Proxy Proposals or the
withdrawal by TMN or its Board of Directors of such recommendation or any
modification of such recommendation which could reasonably be expected to
adversely affect such approval by TMN's stockholders, or (c) failure by any
stockholder of TMN who is a member of either senior management or the Board of
Directors of TMN to vote in favor of the Proxy Proposals.
"Rights Offering Event" shall mean each of the following: (a)
the preparation for filing of an initial draft with the Securities and Exchange
Commission of (i) a proxy statement containing the Proxy Proposals, and (ii) the
Registration Statement , (b) the execution and delivery of the Standby Purchase
Agreement (or, subject to Lender's approval, preparation of the final form
(Page 223 of 252 Pages)
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of the Standby Purchase Agreement) and the Investment Agreement Amendment, (c)
the preparation for filing with the Secretary of State of Delaware of the
Preferred Stock Designation, and (d) the preparation of the final form of the
Rights Offering Warrant, in each of the foregoing cases, in form and substance
reasonably satisfactory to the Lender.
"Rights Offering Proceeds" shall mean all cash proceeds
received by the Borrowers from the Rights Offering.
"Rights Offering Warrant" shall mean the warrant issued by TMN
to Samstock, upon receipt of the necessary stockholder approval, and the closing
of the Rights Offering, to purchase an aggregate of 1,000,000 shares of TMN's
Common Stock substantially in the form of EXHIBIT D (with such modifications as
Lender and Borrowers shall approve).
"Samstock" shall mean Samstock, L.L.C., a Delaware limited
liability company.
"Standby Purchase Agreement" shall mean that certain Standby
Purchase Agreement by and between TMN and Samstock in a form substantially
similar to EXHIBIT F (with such modifications as Lender and Borrowers shall
approve), as amended from time to time.
"Subsidiary" shall mean, as to any Person (a) any corporation,
more than fifty percent (50%) of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person and/or
one or more Subsidiaries of such Person and (b) any partnership, association,
joint venture, limited liability company or other entity in which such Person
and/or one or more Subsidiaries of such Person has greater than a fifty percent
(50%) equity interest at the time.
"Taxes" shall mean the Taxes defined in Section 2.09.
"Transaction Fee" shall mean the fee approved by the board of
directors of TMN payable by TMN to Equity Group Investments, L.L.C. on the
closing of the Acquisition in the amount of one percent (1%) of the value of the
Acquisition.
"Transactions" shall mean, collectively, the execution,
delivery and performance by the Borrowers of this Agreement and each of the
other Loan Documents, the borrowing of the Loan by the Borrowers hereunder, the
issuance of the Rights Offering Warrant, the Rights Offering (and completion of
the transactions contemplated in the Standby Purchase Agreement), the Investment
Agreement Amendment and all other transactions contemplated by this Agreement,
the other Loan Documents and the Standby Purchase Agreement.
SECTION 1.02. Accounting Terms. Except as otherwise herein specifically
provided: (a) each accounting term used herein shall have the meaning given it
under generally accepted
(Page 224 of 252 Pages)
<PAGE>
accounting principles in effect in the United States of America from time to
time applied on a consistent basis; and (b) each reference to generally accepted
accounting principles shall mean generally accepted accounting principles in
effect in the United States of America from time to time applied on a consistent
basis.
SECTION 1.03. Interpretation. In this Agreement and each other Loan
Document, unless a clear contrary intention appears:
(a) the singular number includes the plural number and
vice versa;
(b) reference to any Person includes such Person's
successors and assigns but, if applicable, only if
such successors and assigns are permitted by the Loan
Documents, and reference to a Person in a particular
capacity excludes such Person in any other capacity;
(c) reference to either gender includes the other gender;
(d) reference to any agreement (including this Agreement
and the Schedules and Exhibits hereto, and the other
Loan Documents), document or instrument means such
agreement, document or instrument as amended,
supplemented, restated or modified and in effect from
time to time in accordance with the terms thereof
and, if applicable, the terms hereof and the other
Loan Documents, and reference to any promissory note
includes any promissory note which is an extension or
renewal thereof or a substitute or replacement
therefor;
(e) reference to any law, rule, regulation, order,
decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified,
replaced or reenacted, in whole or in part, and in
effect on the determination date, including rules and
regulations promulgated thereunder;
(f) reference to any Article, Section, Schedule, or
Exhibit means such Article or Section of this
Agreement, or Schedule or Exhibit to this Agreement;
(g) "hereunder", "hereof", "hereto" and words of similar
import shall be deemed references to this Agreement
as a whole and not to any particular Article, Section
or other provision hereof;
(h) "including" (and with correlative meaning "include")
means including without limiting the generality of
any description preceding such term; and
(i) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to
but excluding".
(Page 225 of 252 Pages)
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SECTION 1.04. Recitals, Schedules and Exhibits. The Recitals, Schedules
and Exhibits in and to this Agreement are incorporated in and expressly made a
part of this Agreement.
ARTICLE II
THE LOAN
SECTION 2.01. The Loan. Subject to the terms and conditions of this
Agreement, the Lender shall make available to the Borrowers on the Closing Date
a term loan in an aggregate maximum principal amount of $10,000,000. Repayments
and prepayments of the Loan shall not be subject to reborrowing.
SECTION 2.02. The Note. The Loan shall be evidenced by the Note. At the
Lender's option, the Lender may, and is hereby authorized by the Borrowers to,
endorse on the schedules attached to the Note, or otherwise record in the
Lender's internal records, an appropriate notation evidencing the date and
amount of the Loan, each payment of principal of any portion of the Loan, each
payment of interest on the Loan and the other information provided for on such
schedule; provided, however, that the failure of the Lender to make such a
notation or any error in such a notation shall not affect the obligation of the
Borrowers to repay the Loan in accordance with the terms of the Note and this
Agreement.
SECTION 2.03. Interest Rate. Except as set forth in Section 2.04 below,
the Borrowers shall pay the Lender interest on the outstanding principal balance
of the Loan from time to time at a rate equal to the Prime Rate plus 4.0% per
annum. The records of the Lender as to the interest rate applicable to the Loan
shall be binding and conclusive absent manifest error. Interest shall be payable
from the Closing Date to the day of repayment of the Loan. Interest and all fees
owing hereunder shall be computed on the basis of the actual number of days
elapsed on the basis of a year consisting of 360 days, and shall be payable as
provided in Sections 2.04, 2.06 and 2.11 below.
SECTION 2.04. Interest on Overdue Amounts. If the Borrowers shall
default in the payment when due of the principal of or interest on the Loan or
any other amount becoming due hereunder, by scheduled maturity, acceleration or
otherwise, or if there shall otherwise occur an Event of Default, the Borrowers
shall on demand from time to time from the Lender pay interest, to the extent
permitted by law, on such defaulted amount from the day after the due date
thereof to the date of actual payment (after as well as before judgment) (or on
the amount otherwise outstanding hereunder from the date of Default into which
matured such Event of Default until the date such Event of Default is cured or
otherwise no longer exists), at a rate per annum computed on the basis of the
actual number of days elapsed on the basis of a year consisting of 360 days,
equal to the Prime Rate plus 8.0% per annum.
SECTION 2.05. Borrowing Procedures. On the Closing Date, Borrower shall
deliver to Lender a request for borrowing in the form attached hereto as EXHIBIT
B. The request for borrowing pursuant to this Section 2.05 shall be deemed to be
a representation that all of the
(Page 226 of 252 Pages)
<PAGE>
representations and warranties of the Borrowers contained in this Agreement and
the other Loan Documents are true and correct in all material respects as if
made on such date, except to the extent that such representations and warranties
expressly related to an earlier date, and that no Default or Event of Default
shall have occurred and be continuing.
SECTION 2.06. Payments of Principal and Interest. If not sooner paid,
the outstanding principal amount of the Loan, together with all accrued and
unpaid interest thereon and all other amounts owing hereunder, shall be due and
payable on the Maturity Date. All principal payments of the Loan shall be
accompanied by accrued interest on the principal amount being repaid to the date
of payment. Interest on the Loan shall be due and payable monthly in arrears on
each Interest Payment Date. The Borrowers shall pay to the Lender upon the
Borrowers' receipt thereof all Rights Offering Proceeds, which amounts shall be
applied by the Lender pursuant to Section 2.07 below. All payments by the
Borrowers pursuant to this Agreement, the Note or any other Loan Document,
whether in respect of principal, interest, or otherwise, shall be made without
setoff or counterclaim (other than reimbursement or offset of the Initial Fee to
the extent required pursuant to Section 2.10 below) in same day funds by the
Borrowers to the Lender. The Borrowers shall have the right at any time and from
time to time to prepay the advances under the Loan in whole or in part without
premium or penalty upon at least one (1) Business Day's prior written notice to
the Lender. All payments required to be made to the Lender shall be made not
later than 11:00 a.m., Chicago time, on the date due by wire transfer to such
account as the Lender shall specify from time to time by notice to the
Borrowers. Funds received after that time shall be deemed to have been received
by the Lender on the next following Business Day. Whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in computing interest, if any, in connection with such
payment.
SECTION 2.07. Application of Payments; Reinstatement. The Lender shall,
at its option, apply all payments received hereunder first to all fees, expenses
and other costs due hereunder and under the other Loan Documents, next to
accrued but unpaid interest on the Loan, and next to the outstanding principal
balance of the Loan. To the extent that the Borrowers make a payment or payments
to the Lender, which payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then, to the extent of such
payment received, the Obligations or part thereof intended to be satisfied shall
be revived and shall continue in full force and effect, as if such payments had
not been received by the Lender.
SECTION 2.08. Additional Amounts. If the implementation of or any
change in any law or regulation or in the interpretation by any court or
administrative or governmental authority charged with their administration shall
impose on the Lender any condition not existing on the date of this Agreement
regarding this Agreement, the Loan or the Note, and the result shall be to: (i)
increase the cost to the Lender of making or maintaining the Loan, or (ii)
reduce any amounts payable by the Borrowers hereunder, then, within thirty (30)
days after written demand by the
(Page 227 of 252 Pages)
<PAGE>
Lender, the Borrowers shall pay to the Lender, from time to time as specified by
the Lender, additional amounts which shall be sufficient to compensate the
Lender for such increased cost or reduction in payment. If any such amount is
not paid within thirty (30) days after written demand by the Lender, the
Borrowers shall pay the Lender interest at the interest rate specified in
Section 2.04 above on each such amount from the date when payment was due until
paid in full.
SECTION 2.09. Taxes on Payments. All payments made by the Borrowers
under the Note or this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any future income, stamp or other
taxes, levies, imposts, deductions, charges, or withholdings imposed, assessed,
levied or collected by the United States of America or any political subdivision
or taxing authority thereof or therein, but excluding taxes imposed on net
income of the Lender by the United States of America or any state or any
political subdivision or taxing authority thereof or therein (all such
non-excluded taxes, levies, imposts, deduction, charges or withholdings being
hereinafter called "Taxes"). If any Taxes are required to be withheld from any
amounts so payable to the Lender hereunder or under the Note, the amounts so
payable to the Lender shall be increased to the extent necessary to yield to the
Lender (after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in the Note or this
Agreement. Whenever any Tax is paid by the Borrowers, as promptly as possible
thereafter, the Borrowers shall send to the Lender a certified copy of any
original official receipt received by the Borrowers showing payment thereof. If
the Borrowers fail to pay any Taxes when due to the appropriate taxing
authority, the Borrowers shall indemnify the Lender for any incremental taxes,
interest or penalties that may become payable by the Lender as a result of any
such failure.
SECTION 2.10. Initial Fee and Rights Offering Warrant. As consideration
for execution of this Agreement and the Standby Purchase Agreement, and the
Lender or its Affiliates entering into and consummating the Transactions, and
the Lender's making the Loan available to the Borrowers, the Borrowers have
agreed to pay to Lender the Initial Fee (subject to reimbursement or offset as
set forth below) and to issue to Samstock the Rights Offering Warrant, each of
which Initial Fee and Rights Offering Warrant shall be deemed fully earned on
the Closing Date regardless of whether the Loan is disbursed in whole or in
part. Upon receipt of the necessary approval of TMN's stockholders of the Proxy
Proposals, the closing of the Rights Offering, the issuance of the Rights
Offering Warrant and the payment in full of the Obligations, Lender shall
reimburse (or offset against the Obligations) to Borrowers the Initial Fee. If
the Proxy Proposals are not approved by the stockholders of TMN, or the Rights
Offering Warrant is not issued for any reason, or the Rights Offering is
withdrawn or canceled by TMN for any reason or there occurs an Event of Default,
Borrowers shall immediately pay to Lender the Back-End Fee, which shall be
deemed fully earned on the Closing Date (but only payable as aforesaid)
regardless of whether the Loan is disbursed in whole or in part.
(Page 228 of 252 Pages)
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lender to execute this Agreement and perform its
obligations hereunder, each Borrower represents and warrants to the Lender as
follows:
SECTION 3.01. Organization; Corporate Powers. Such Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or formed, has the requisite power and
authority, including all material licenses, registrations, permits, franchises,
consents and approvals, to own its property and assets and to carry on its
business as now conducted and is qualified to do business and in good standing
in every jurisdiction where such qualification is required, except where failure
to so qualify would not reasonably be likely to have a Material Adverse Effect.
Such Borrower has all requisite corporate power and authority to consummate the
Transactions.
SECTION 3.02. Authorization. The execution and delivery of this
Agreement and the other Loan Documents, and the consummation of the
Transactions: (a) have been duly authorized by all requisite corporate action of
such Borrower (other than the approval of the Proxy Proposals by TMN's
stockholders), including, without limitation, the approval by a majority of the
Disinterested Directors of TMN (within the meaning of Section 3.1 of the Amended
and Restated Investment Agreement dated March 3, 1998 by and among TMN,
Samstock, EGI-Transmedia, and Halmostock Limited Partnership); and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation or the
certificate or articles of incorporation or the by-laws of such Borrower, (B)
any order of any court, or any rule, regulation or order of any other agency of
government binding upon such Borrower or any of its Subsidiaries, or (C) any
provisions of any material indenture, agreement or other instrument to which
such Borrower or any of its Subsidiaries is a party or by which such Borrower or
any of its Subsidiaries or any of their respective properties or assets are or
may be bound; (ii) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any material
indenture, agreement or other instrument referred to in (b)(i)(C) above; or
(iii) result in the creation or imposition of any Lien upon any property or
assets of such Borrower or any of its Subsidiaries.
SECTION 3.03. Governmental Approval. No registration or filing with or
consent or approval of, or other action by, any federal, state or other
governmental agency, authority or regulatory body or any other Person is or will
be required in connection with the execution or delivery of this Agreement or
the other Loan Documents, or the consummation of the Transactions other than (a)
the filing with the Securities and Exchange Commission of (i) a proxy statement
containing the Proxy Proposals, and (ii) the Registration Statement (and the
declaration of its effectiveness by the Securities and Exchange Commission), (b)
the filing of the Certificate of Amendment to TMN's Certificate of Incorporation
and the Preferred Stock Designation with the Delaware Secretary of State and (c)
those which such Borrower has obtained and/or made.
(Page 229 of 252 Pages)
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SECTION 3.04. Enforceability. This Agreement constitutes, and each of
the other Loan Documents when duly executed and delivered by such Borrower will
constitute, legal, valid and binding obligations of such Borrower, in each case
enforceable in accordance with their respective terms.
SECTION 3.05. Financial Matters. The audited consolidated financial
statements of the Borrowers and their Subsidiaries dated September 30, 1998, and
the unaudited consolidated financial statements of the Borrowers and their
Subsidiaries dated March 31, 1999, and the related consolidated statements of
income or operations, stockholders' equity and cash flows for the fiscal periods
ended on such dates:
(a) were prepared in accordance with generally accepted
accounting principals consistently applied throughout
the periods covered thereby, except as otherwise
expressly noted therein;
(b) fairly present the financial condition of the
Borrowers and their Subsidiaries as of the dates
thereof and results of operations for the periods
covered thereby (subject, in the case of such
unaudited financial statements, to the absence of
footnotes and to normal year-end adjustments); and
(c) show all material indebtedness and other liabilities,
direct or contingent, of the Borrowers and their
Subsidiaries as of the dates thereof, including
liabilities for taxes, material commitments and
material contingent obligations.
SECTION 3.06. No Material Adverse Change. Since March 31, 1999, there
has been no change that could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.07. Litigation. Except as listed on Schedule 3.07, there are
no actions, suits or proceedings at law or in equity or by or before any
arbitrator or any governmental instrumentality or other agency or regulatory
authority now pending or, to the best of such Borrower's knowledge, threatened
against or affecting such Borrower or its Subsidiaries, or the businesses,
assets or rights of such Borrower or its Subsidiaries: (a) which involve this
Agreement or any of the other Loan Documents or any of the transactions
contemplated hereby or thereby; or (b) as to which, if adversely determined,
could individually or in the aggregate have a Material Adverse Effect.
SECTION 3.08. Compliance with Laws. Such Borrower is not in violation
of any law, including any Environmental Law, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court or
governmental agency or instrumentality, where such violation or default could
reasonably be expected to have a Material Adverse Effect.
(Page 230 of 252 Pages)
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SECTION 3.09. Environmental Protection. Neither such Borrower nor any
of its Subsidiaries has received: (a) any claim or notice of violation, lien,
complaint, suit, order or other claim or notice to the effect that it is or may
be liable to any Person as a result of the (i) environmental condition of such
Borrower's or any Subsidiary's property or any other property or (ii) the
release or threatened release of any hazardous substances or materials; or (b)
any letter or request for information under any Environmental Law; and, to the
best of such Borrower's knowledge, none of the operations of such Borrower nor
any of its Subsidiaries are the subject of any federal or state investigation
evaluating whether any remedial action is needed to respond to a release or
threatened release of any hazardous substance or material at such Borrower's
property or at any other location, including any location to which such Borrower
or any Subsidiaries has transported, or arranged for the transportation of, any
hazardous substances or materials.
SECTION 3.10. Agreements. Except as listed on Schedule 3.10, neither
such Borrower nor any of its Subsidiaries is a party to any agreement or
instrument or subject to any restriction that has or could have a Material
Adverse Effect. Except as listed on Schedule 3.10, neither such Borrower nor any
of its Subsidiaries is in default in any material manner in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any material agreement or instrument to which it is a party.
SECTION 3.11. Federal Reserve Regulations. Such Borrower is not engaged
principally, or as of one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock. No part
of the proceeds of the Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately: (a) to purchase or carry Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
Margin Stock or to refund indebtedness originally incurred for such purpose; or
(b) for any purpose which entails a violation of, or which is inconsistent with,
the provisions of Regulations of the Board, including Regulations G, T, U or X
thereof.
SECTION 3.12. Taxes. Such Borrower has filed or caused to be filed all
federal, state and local tax returns which are required to be filed by it, and
has paid or caused to be paid all taxes shown to be due and payable on such
returns or on any assessments received by it, other than any taxes or
assessments, the validity of which such Borrower is contesting in good faith by
appropriate proceedings, and with respect to which such Borrower shall have set
aside on its books adequate reserves.
SECTION 3.13. Employee Benefit Plans. Such Borrower and each Plan is in
compliance with those provisions of ERISA, the Internal Revenue Code of 1986, as
amended, and the Age Discrimination in Employment Act, as amended, and the
regulations and published interpretations thereunder which are applicable to
such Borrower or such Plan, except where failure to so comply is not reasonably
likely to result in a Material Adverse Effect. As of the date hereof, no
Reportable Event has occurred or is reasonably likely to occur with respect to
any Pension Plan as to which such Borrower was required to file a report with
the Pension Benefit Guaranty Corporation. No Pension Plan (other than a
Multiemployer Plan) has any material amount of
(Page 231 of 252 Pages)
<PAGE>
unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of
ERISA) or any accumulated funding deficiency (within the meaning of Section
302(a)(2) of ERISA), whether or not waived, and neither such Borrower nor any
ERISA Affiliate has incurred or expects to incur any material withdrawal
liability under Subtitle E of Title IV of ERISA to a Multiemployer Plan. There
has been no prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan which could result in a Material Adverse Effect.
SECTION 3.14. Investment Company Act. Such Borrower is not an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or a company controlled by such an "investment
company".
SECTION 3.15. Patents, Trademarks, etc. To the best of such Borrower's
knowledge, such Borrower and its Subsidiaries have obtained and protected all
Intellectual Property necessary to own their respective properties and assets
and carry on and operate their respective businesses as heretofore and hereafter
anticipated to be conducted. To the best of such Borrower's knowledge, (a) no
event is threatened or has occurred which permits, or after notice or lapse of
time, would permit, the revocation or termination of such properties, and (b)
there is no past, present or threatened occurrence that is reasonably likely to
preclude or materially impair such Borrower's and such Subsidiaries' ability to
retain or obtain any authorization necessary for the operation of their
respective businesses.
SECTION 3.16. Subsidiaries. Such Borrower does not have any
Subsidiaries other than as listed on Schedule 3.16, and is not a partner or
joint venturer in any partnerships or joint ventures.
SECTION 3.17. Solvency. Such Borrower has capital sufficient to carry
on its business and all businesses and transactions in which it plans to engage
and is now solvent and able to pay its debts as they mature. As of the date of
this Agreement, such Borrower owns property having a value, both at fair
valuation and at present fair salable value, greater than the amount required to
pay such Borrower's debts.
SECTION 3.18. Labor Disputes. Such Borrower is not a party to any labor
dispute which could have, individually or in the aggregate, a Material Adverse
Effect. There are no strikes or walkouts relating to any labor contracts to
which such Borrower is subject. Such Borrower is not party to any collective
bargaining agreement to the benefit of which any of its employees is entitled.
SECTION 3.19. Complete Disclosure. All factual information furnished
by or on behalf of such Borrower or its Subsidiaries to the Lender for purposes
of or in connection with this Agreement or the Transactions is, and all other
such factual information hereafter furnished by or on behalf of such Borrower or
its Subsidiaries will be, true and accurate in all material respects on the date
as of which such information is furnished and not incomplete by omitting to
state any material fact necessary to make such information not materially
misleading at such time in light of the circumstances under which such
information was provided.
(Page 232 of 252 Pages)
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SECTION 3.20. Vote Required. (a) No vote of the holders of any class or
series of capital stock or other securities of TMN or any other Borrower is
required to approve or effect this Agreement, the other Loan Documents, any
Rights Offering Event, any Transaction or any transactions contemplated hereby
and thereby, including without limitation under applicable law, applicable stock
exchange rules or regulations, the certificate of incorporation (including
without limitation Article Seventh of TMN's Certificate of Incorporation) or the
by-laws of TMN or any other Borrower or any contract, agreement or permit of any
kind whatsoever applicable to TMN, any other Borrower or their assets, except
that the Proxy Proposals identified in clauses (a) and (b) of the definition of
"Proxy Proposals" under Section 1.01 of this Agreement require the approval of
TMN's stockholders as referenced in Section 3.20(b) below.
(b) The affirmative vote of the holders of no more than a majority of
the outstanding shares of TMN's Common Stock is the only vote of the holders of
any class or series of capital stock or other securities of TMN or any other
Borrower necessary to approve the Proxy Proposals.
SECTION 3.21. Takeover Status. The requirements of Section 203 of the
Delaware General Corporation Law are not applicable to TMN or any other Borrower
in connection with the transactions contemplated by this Agreement, the other
Loan Documents, any Rights Offering Event, or any other Transactions.
SECTION 3.22. Reporting Company; Form S-3. TMN is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
its Common Stock is registered under Section 12 thereof. TMN is eligible to
register for resale shares of its Common Stock to be sold by parties other than
TMN on a registration statement on Form S-3 under the Securities Act of 1933, as
amended.
SECTION 3.23. Trading on NYSE. TMN's Common Stock is listed for trading
on The New York Stock Exchange, and trading in TMN's Common Stock on The New
York Stock Exchange has not been suspended as of the date hereof.
ARTICLE IV
CONDITIONS TO THE LOAN
SECTION 4.01. Conditions to Loan Closing. The obligation of the Lender
to make the Loan hereunder is subject to the following conditions precedent, all
of which shall be in form and substance satisfactory to the Lender in its sole
and absolute discretion:
(a) Legal Opinion. The Lender shall have received a
written opinion of counsel for each Borrower, in
substantially the form contained in EXHIBIT C.
(b) Authorization and Organizational Documentation. The
Lender shall have received: (i) a copy of the
certificate of incorporation of each Borrower,
(Page 233 of 252 Pages)
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certified by the Secretary of State of the state of
its incorporation as of a recent date, and a
certificate as to the good standing of each Borrower
from such Secretary of State, dated as of a recent
date; (ii) a certificate of the Secretary or an
Assistant Secretary of each Borrower, dated the
Closing Date and certifying (A) that attached thereto
is a true and complete copy of the by-laws of such
Borrower, as in effect on the date of such
certificate, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the
Board of Directors of such Borrower, authorizing the
execution, delivery and performance of this Agreement
and the other Loan Documents, the borrowing by such
Borrower hereunder, and, subject to receipt of
stockholder approval of the Proxy Proposals, the
consummation of the Transactions, and that such
resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that
the certificate or articles of incorporation of such
Borrower, have not been amended since the date of the
certification thereto furnished pursuant to (i)
above, and (D) as to the incumbency and specimen
signature of each officer of such Borrower, executing
this Agreement and the other Loan Documents; and
(iii) such other documents as the Lender or its
counsel may reasonably request.
(c) Note. The Lender shall have received the Note, duly
executed and delivered by the Borrowers, payable to
the order of the Lender and otherwise complying with
the provisions of Section 2.02 above.
(d) Insurance. The Lender shall have received
satisfactory evidence of the insurance required by
Section 5.03 below.
(e) Certification. The Lender shall have received a
certificate, dated as of the Closing Date, whereby
the Borrowers certify that: (i) the representations
and warranties set forth in Article III are true and
correct in all material respects with the same effect
as though made on and as of the date hereof, except
to the extent they expressly relate to an earlier
date (in which case they shall be true and correct in
all material respects on and as of such date), and
(ii) the Borrowers are in compliance in all material
respects with all the terms and provisions contained
herein and in the other Loan Documents on their part
to be observed or performed, and at the time of and
immediately after such borrowing of the Loan, no
Default or Event of Default shall have occurred and
be continuing.
(f) Searches. The Lender shall have received recently
dated judgment and state and federal tax lien search
reports for each Borrower.
(Page 234 of 252 Pages)
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(g) Acquisition. The Lender shall have received
satisfactory evidence of the consummation of the
Acquisition and the closing of the Chase Bridge Loan
Facility.
(h) Rights Offering Events. The Lender shall have
received satisfactory evidence of the completion and
occurrence of each of the Rights Offering Events.
(i) Waiver. The Lender shall have received satisfactory
evidence of the waiver of the "Early Amortization
Event" specified in Section 14(x) of the Security
Agreement dated as of December 1, 1996 among TAI
Funding Company I, L.L.C., The Chase Manhattan Bank,
TNI Funding I, Inc. and TMN.
(j) Fees. The Lender shall have received the fees and
reimbursement of expenses to be paid on the Closing
Date pursuant to the terms of this Agreement and the
Standby Purchase Agreement, including without
limitation the Initial Fee and the Transaction Fee.
(k) Further Assurances. The Lender shall have received
all further documents, notifications and other
assurances reasonably required by the Lender in
connection with the Loan.
ARTICLE V
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees with the Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on the
Note, or any other expense or amount payable hereunder shall be unpaid, unless
the Lender shall otherwise consent in writing, it shall, and it shall cause each
of its Subsidiaries to:
SECTION 5.01. Existence. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and
qualify and remain qualified in each jurisdiction where qualification is
necessary or desirable in view of its business operations or ownership of its
properties, except where the failure to so qualify would not reasonably be
likely to have a Material Adverse Effect.
SECTION 5.02. Businesses and Properties; Compliance with Laws. At all
times, maintain and operate its business in substantially the manner in which it
is presently conducted and operated; comply in all material respects with all
laws and regulations applicable to the operation of such business, including all
Environmental Laws, whether now in effect or hereafter enacted and with all
other applicable laws and regulations; take all action which may be reasonably
required to obtain, preserve, renew and extend all franchises, registrations,
licenses, permits and other authorizations which may be material to the
operation of such business; and at all times maintain,
(Page 235 of 252 Pages)
<PAGE>
preserve and protect all property material to the conduct of such business and
keep its property in good repair, working order and condition (ordinary wear and
tear excepted) and from time to time make, or cause to be made, all reasonably
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times.
SECTION 5.03. Insurance. Maintain insurance (with financially sound and
responsible insurance carriers), to such extent and against such risks, loss or
damage to, or liability in connection with, its property, business, persons and
such other contingencies, as is customary with companies of established
reputations similarly situated and in the same or similar business.
SECTION 5.04. Obligations and Taxes. Pay and discharge promptly when
due all Indebtedness, and taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might
give rise to liens or charges upon such properties or any part thereof;
provided, however, that such Borrower shall not be required to pay and discharge
or to cause to be paid and discharged any such tax, assessment, charge, levy or
claim so long as the validity or amount thereof shall be contested in good faith
by appropriate proceedings and such Borrower shall have set aside on its books
adequate reserves with respect thereto.
SECTION 5.05. Financial Statements; Reports. Furnish (or cause to be
furnished) to the Lender:
(a) within ninety (90) days after the end of each fiscal
year of such Borrower, the audited, consolidated and
consolidating balance sheets and statements of
income, retained earnings, and cash flows, together
with supporting schedules (which shall include, upon
the reasonable request of the Lender with respect to
matters which it desires to review, the working
papers with respect to such Borrower's financial
statements) of such Borrower, all in reasonable
detail and accompanied by an unqualified opinion
thereon by KPMG Peat Marwick or such other firm or
independent certified public accountants of
recognized standing selected by such Borrower and
reasonably acceptable to the Lender;
(b) as soon as available, but in any event not later than
forty-five (45) days after the end of each of the
first three (3) quarterly periods of each fiscal year
of such Borrower, the management prepared unaudited,
consolidated and consolidating financial statements
of such Borrower, including a balance sheet of such
Borrower as at the end of such fiscal quarter and
related unaudited statements of income, retained
earnings, and cash flows, all for the period from the
beginning of such fiscal year to the end of such
fiscal quarter, setting forth in each case
corresponding figures for the like period of the
preceding fiscal year; all in reasonable detail,
prepared in accordance with
(Page 236 of 252 Pages)
<PAGE>
generally accepted accounting principles applied on a
basis consistently maintained throughout the period
involved and with prior periods, subject to normal
year-end audit adjustments, and certified by a
Financial Officer of such Borrower;
(c) concurrently with the delivery of the items referred
to in clauses (a) and (b) above, a certificate of the
Financial Officer of such Borrower (i) stating that,
to the best of his or her knowledge, no condition or
event which would constitute a Default or Event of
Default has occurred and is continuing, or if such a
condition or event has occurred, the certificate
shall specifically state such condition or event, and
(ii) demonstrating compliance, as of the dates of the
financial statements being furnished at such time,
with the covenant set forth in Section 5.11 hereof;
(d) promptly after the same are sent or otherwise
publicly available, copies of all proxy statements,
financial statements and reports which such Borrower
sends to its stockholders, and promptly after the
same are filed, copies of all regular, periodic and
special reports (including reports on Forms 10-K,
10-Q and 8-K), and all registration statements which
such Borrower files with the Securities and Exchange
Commission or any governmental authority which may be
substituted therefore, or with any national
securities exchange; and
(e) promptly, from time to time, such other information
regarding the operations, business, affairs, and
financial condition of such Borrower and any of its
Subsidiaries as the Lender may reasonably request.
All financial statements required to be furnished to the Lender under this
Section 5.05 shall be prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the accounting practices of the
Borrowers reflected in its financial statements referred to in Section 3.05
hereof, or to the extent such treatment has changed, with a reconciliation
thereof.
SECTION 5.06. Litigation and Other Notices. Give the Lender prompt
written notice of the following:
(a) Orders; Injunctions. The issuance by any court or
governmental agency or authority of any injunction,
order, decision or other restraint prohibiting, or
having the effect of prohibiting, the making of the
Loan or the initiation of any litigation or similar
proceeding seeking any such injunction, order or
other restraint.
(b) Litigation. The filing or commencement of any action,
suit or proceeding against such Borrower or its
Subsidiaries whether at law or in equity or by or
before any court or any federal, state, municipal or
other governmental
(Page 237 of 252 Pages)
<PAGE>
agency or authority and which, if adversely
determined against such Borrower or its Subsidiaries,
could have a Material Adverse Effect.
(c) Environmental Matters. Any violation by such Borrower
or its Subsidiaries of any Environmental Law which
could have a Material Adverse Effect or which, to
such Borrower's knowledge, is the subject of an
investigation or enforcement action by any
governmental authority or other third party.
(e) Default. Any Default or Event of Default, specifying
the nature and extent thereof and the action (if any)
which is proposed to be taken with respect thereto.
(f) Material Adverse Effect. Any development in the
business or affairs of such Borrower or its
Subsidiaries which could have a Material Adverse
Effect.
SECTION 5.07. ERISA. Comply with the applicable provisions of ERISA and
the provisions of the Internal Revenue Code of 1986 relating thereto, except
where failure to so comply is not reasonably likely to result in a Material
Adverse Effect, and: (a) furnish to the Lender as soon as possible, and in any
event within 30 days after such Borrower knows or has reason to know thereof,
notice of: (i) the establishment by such Borrower or any ERISA Affiliate of any
Pension Plan; (ii) the commencement by such Borrower of contributions to a
Multiemployer Plan; (iii) any failure by such Borrower or any ERISA Affiliate to
make contributions required by Section 302 of ERISA (whether or not such
requirement is waived pursuant to Section 303 of ERISA); and (iv) the occurrence
of any Reportable Event with respect to any Pension Plan for which the reporting
requirement is not waived, together with a statement of a Financial Officer of
such Borrower setting forth details as to such Reportable Event and the action
which such Borrower proposes to take with respect thereto, together with a copy
of the notice of such Reportable Event given to the Pension Benefit Guaranty
Corporation if any notice is required to be so given; (b) promptly after receipt
thereof, a copy of any notice such Borrower or any Subsidiary may receive from
the Pension Benefit Guaranty Corporation relating to its intention to terminate
any Pension Plan, or to appoint a trustee to administer any Pension Plan; and
(c) promptly after receipt thereof, a copy of any notice of withdrawal liability
from any Multiemployer Plan.
SECTION 5.08. Maintaining Records; Access and Inspections. Maintain
financial records in accordance with generally accepted practices and, upon
reasonable notice, at all reasonable times and as often as the Lender may
reasonably request, permit any authorized representative designated by the
Lender to visit and inspect the properties and financial records of such
Borrower and its Subsidiaries and make extracts from such financial records at
such Borrower's expense, and permit any authorized representative designated by
the Lender to discuss the affairs, finances and condition of such Borrower and
its Subsidiaries with such Borrower's chief financial officer and such other
officers as such Borrower shall deem appropriate and such Borrower's independent
public accountants, and such Borrower will use its best efforts to make such
officers and accountants promptly available for such discussions.
(Page 238 of 252 Pages)
<PAGE>
SECTION 5.09. Use of Proceeds. Use the proceeds of the Loan only for
working capital and general corporate purposes.
SECTION 5.10. Rights Offering Covenants. As promptly as practicable
after the Closing Date, the Borrowers and TMN shall commence and diligently
pursue to completion each of the following:
(a) Prepare and file with the Securities and Exchange
Commission (i) a proxy statement containing the Proxy
Proposals, and (ii) the Registration Statement, and
use their best efforts to cause the Registration
Statement to be declared effective as soon after
filing such statement as practicable and to remain
effective through the Rights Offering Closing Date
and to cover the issuance and sale of the Preferred
Stock pursuant to the Rights Offering;
(b) take all necessary action in accordance with
applicable law and TMN's Certificate of Incorporation
and By-laws to (i) amend TMN's Certificate of
Incorporation and By-laws to the extent necessary to
increase the number of authorized shares of preferred
stock and Common Stock, and to make such other
necessary amendments, in order to effectuate the
Transactions, (ii) mail to TMN's stockholders the
proxy statement referred to in the defined term
"Rights Offering Event", (iii) recommend to TMN's
stockholders a vote in favor of each Proxy Proposal,
(iv) duly convene a meeting of TMN's stockholders for
the purpose of voting on the Proxy Proposals, and (v)
file with the Secretary of State of Delaware the
Preferred Stock Designation;
(c) use their best efforts to (i) ensure that the
Preferred Stock (and the Common Stock into which it
is convertible) and the Common Stock underlying the
Rights Offering Warrant are listed on The New York
Stock Exchange, and (ii) effectuate the Transactions;
and
(d) deliver to Lender, on or before the date on which the
Registration Statement is declared effective by the
Securities and Exchange Commission, a fully executed
Standby Purchase Agreement.
SECTION 5.11. Net Worth. The Borrowers and their consolidated
Subsidiaries shall at all times have and maintain an aggregate net worth of at
least $20,000,000.00.
ARTICLE VI
NEGATIVE COVENANTS
Each Borrower covenants and agrees with the Lender that, so long as
this Agreement shall remain in effect or the principal of or interest on the
Note, or any other expense or amount payable
(Page 239 of 252 Pages)
<PAGE>
hereunder shall be unpaid, unless the Lender shall otherwise consent in writing,
it will not, and it will not permit any of its Subsidiaries to, either directly
or indirectly:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement
and the other Loan Documents; (b) Indebtedness incurred in the ordinary course
of business with respect to customer deposits, trade payables and other
unsecured current liabilities not the result of borrowing and not represented by
any note or other evidence of Indebtedness; (c) Indebtedness existing on the
date hereof and listed on Schedule 6.01 attached hereto; (d) Indebtedness
secured by the Liens permitted under Section 6.02(e) below; (e) Indebtedness
incurred pursuant to the Chase Bridge Loan Facility; (f) Indebtedness incurred
pursuant to interest rate protection agreements entered into in the ordinary
course of business and not for speculation; (g) a securitized receivables
purchase transaction (referred to as the PARCO Facility under the Chase Bridge
Loan Facility documents) entered into by the Borrowers and a special purpose
subsidiary of TMN secured by rights to receive and related assets, which
obligations related thereto are not recourse to any of the Borrowers, (h)
unsecured Indebtedness of the Borrowers incurred in connection with the
acquisition of franchises of a Borrower in an aggregate principal amount not
exceeding $8,00,000 at any time outstanding, provided, that the terms of such
Indebtedness and the related acquisitions of such franchises must conform to the
following conditions: (i) any such unsecured Indebtedness shall be expressly
subordinate to all of the Borrowers' and their Subsidiaries' obligations under
the Chase Bridge Loan Facility and the Obligations, (ii) such unsecured
Indebtedness shall not require the payment of any interest or other similar
charges to any creditor of the Borrowers or their Subsidiaries prior to the
repayment in full of all of the Obligations hereunder, (iii) such unsecured
Indebtedness shall have a maturity equal to or greater than four (4) years, (iv)
the aggregate of the purchase prices for all such acquisitions of franchises
shall not exceed $12,000,000, and (v) any such acquisition of a franchise by the
Borrowers or their Subsidiaries and the related incurrence of Indebtedness will
be subject to the prior written approval of Lender (which approval shall not be
unreasonably withheld); and (i) additional unsecured Indebtedness in an
aggregate principal amount not exceeding $500,000.00 at any time outstanding.
SECTION 6.02. Negative Pledge. Incur, create, assume or permit to exist
any Lien on any property or assets now owned or hereafter acquired by it,
including inventory, fixed assets and intangible assets, or on any income or
rights in respect of any thereof, except: (a) deposits or pledges to secure
payment of workers' compensation, unemployment insurance, old age pensions, or
other social security laws, or to secure statutory obligations; (b) Liens for
property taxes, assessments or other governmental charges or taxes due and
payable, the validity or amount of which in good faith is being contested or
litigated; (c) mechanics', carriers', workmen's, repairmen's, or other like
liens arising in the ordinary course of business securing obligations which are
not overdue for a period of sixty (60) days or more or which are in good faith
being contested or litigated; (d) existing Liens reflected in the financial
statements referred to in Section 3.05 hereof, or additional existing Liens
listed in Schedule 6.02 attached hereto and made a part hereof; (e) Liens
granted to the Person financing the acquisition of property, plant or equipment
or other property acquired by such Borrower or its Subsidiaries, including Liens
related to capitalized lease obligations if (i) limited to
(Page 240 of 252 Pages)
<PAGE>
the particular assets acquired, (ii) the debt secured by the Lien does not
exceed the acquisition cost of a particular asset for which the Lien is granted,
(iii) such transaction does not otherwise violate this Agreement, and (iv) the
aggregate amount of all Indebtedness secured by Liens permitted under this
clause (e) does not exceed $250,000 at any one time outstanding; (f) Liens
arising out of attachments, judgments or awards as to which an appeal or other
appropriate proceedings for contest or review are timely commenced (and as to
which foreclosure and other enforcement proceedings shall not have been
commenced unless fully bonded or otherwise effectively stayed) and as to which
appropriate reserves have been established in accordance with generally accepted
accounting principles; (g) possessory Liens which (i) occur in the ordinary
course of business, (ii) secure normal trade debt which is not yet due and
payable, and (iii) do not secure Indebtedness for borrowed money; (h) Liens
arising by virtue of any statutory or common law provision relating to banker's
liens, rights of setoff or similar rights with respect to deposit accounts of
such Borrower or any of its Subsidiaries; (i) easements, rights of way,
restrictions, minor defects or irregularities in title and other similar
encumbrances on real property which do not materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of business
of such Borrower and its Subsidiaries; (j) licenses, leases and subleases
granted by a Borrower in the ordinary course of its business; (k) any Lien
existing on any asset prior to a Borrower's acquisition thereof; provided, that
(i) such Lien is not created in contemplation of or in connection with such
acquisition, (ii) such Lien shall not apply to any other assets of any Borrower
and (iii) such Lien shall secure only those obligations which it secures on the
date of such acquisition; (l) Liens securing the Chase Bridge Loan Facility; (m)
Liens securing the Revolving Securitization receivables purchase transaction
identified on Schedule 6.01; and (n) Liens securing the securitized receivables
purchase transaction permitted under Section 6.01(g) above.
SECTION 6.03. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its assets or properties,
including the equity interest in any Subsidiary, except: (a) sales of assets
necessary to consummate the Revolving Securitization receivables purchase
transaction identified on Schedule 6.01 and the securities receivable purchase
transaction permitted under Section 6.01(g) above and (b) sales, leases,
assignments, transfers or other dispositions of assets by a Borrower to another
Borrower or by a Subsidiary of a Borrower to a Borrower.
SECTION 6.04. Liquidations, Consolidations, Mergers or Purchases of
Assets. Liquidate, dissolve (whether voluntarily or involuntarily), merge into
or consolidate or combine with any other Person, or purchase, lease or otherwise
acquire (in one transaction or a series of related transactions) all or
substantially all of the property or assets of any Person (other than purchases
or other acquisitions of inventory, materials, leases, property and equipment in
the ordinary course of business), except: (a) a Borrower may merge into another
Borrower so long as TMN is the survivor if TMN is involved in the merger, (b) a
Subsidiary of a Borrower may merge into that Borrower, so long as the Borrower
is the surviving entity, (c) a Subsidiary of a Borrower may be dissolved if the
Board of Directors of the applicable Borrower determines such dissolution is in
the best efforts of the applicable Borrower and such dissolution is not
reasonably likely to result in a Material Adverse Effect, and (d) for
acquisitions of franchises of Borrowers pursuant to the terms and subject to the
limitations set forth in Section 6.01(h) above.
(Page 241 of 252 Pages)
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SECTION 6.05. Investments, Loans and Advances. Make or suffer to exist
any Investments except for (a) Permitted Investments, and (b) Investments
permitted under or made in compliance with the Revolving Securitization
receivables purchase transactions identified on Schedule 6.01 or permitted under
Section 6.01(g) with excess funds received in connection therewith.
SECTION 6.06. Restricted Payments. Declare or pay, directly or
indirectly, any dividends or make any other distribution, whether in cash,
property, securities or a combination thereof, with respect to (whether by
reduction of capital or otherwise) any partnership interests or capital accounts
or any shares of capital stock, warrants, options or any of its other
securities, or directly or indirectly redeem, purchase, retire or otherwise
acquire for a consideration, any partnership interests or capital accounts or
any shares of any class of capital stock, warrants, options or any of its other
securities, or set apart any sum for the aforesaid purposes (collectively
"Restricted Payments"), except that (a) a Borrower's Subsidiaries may make
Restricted Payments to such Borrower and to the Borrowers' other Subsidiaries,
(b) a Borrower may make Restricted Payments to another Borrower, (c) a Borrower
may declare and pay dividends with respect to its capital stock payable solely
in shares of its common stock, (d) a Borrower may make Restricted Payments
pursuant to and in accordance with stock option plans or other benefit plans for
management or employees of that Borrower consistent with past practice, and (e)
TMN may make Restricted Payments required, contemplated, or permitted by the
terms of the Preferred Stock Designation, the Rights Offering Warrant and the
Existing Warrant.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any assets
to, or purchase or acquire any assets of, or otherwise engage in any material
transaction with, or permit any Affiliate to sell or transfer assets to, or
purchase or acquire any assets of, or otherwise engage in any other material
transaction with any other Affiliate, except, in each case, in the ordinary
course of such Borrower's or such Subsidiaries business and upon fair and
reasonable terms no less favorable to such Borrower or Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person other than an
Affiliate, provided that this Section 6.07 shall not apply to (a) the
Transactions, (b) the Rights Offering (including the purchase, redemption or
conversion of the Preferred Stock issued pursuant thereto, and the payment of
distributions on such Preferred Stock), (c) the Revolving Securitization
receivables purchase transactions identified on Schedule 6.01 and permitted
under Section 6.01(g) above, (d) payment of the Management Fee, (e) payment of
the Transaction Fee, or (f) the exercise of rights under the Existing Warrant.
SECTION 6.08. Line of Business. Engage, directly or indirectly, in any
business other than the businesses in which it is engaged on the Closing Date
and businesses reasonably related thereto.
SECTION 6.09. Certain Documents. Except as contemplated by the Proxy
Proposals, amend, modify, terminate or waive: any material term or provision of
its certificate or articles of incorporation or by-laws, or other organizational
or investment documents or agreements, without in each case, the prior written
consent of the Lender, which shall not be unreasonably withheld or
(Page 242 of 252 Pages)
<PAGE>
delayed, provided that this Section 6.09 shall not apply to any such amendments,
modification and waivers necessary to effectuate the Transactions.
ARTICLE VII
DEFAULTS
SECTION 7.01. Events of Default. Each of the following events shall
constitute events of default ("Events of Default") hereunder:
(a) any representation or warranty made by or on behalf
of any Borrower in connection with this Agreement or
the other Loan Documents or any Transaction shall
prove to have been false or misleading in any
material respect when made, and to the extent capable
of being remedied, the condition giving rise to such
representation or warranty being incorrect or untrue
shall continue unremedied for thirty (30) days after
written notice thereof from the Lender to Borrowers;
(b) default shall be made in the payment of any principal
on the Loan when and as the same shall become due and
payable, whether at the due date thereof or at a date
fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest
on the Loan or any other amount (other than an amount
referred to in clause (b) above) due under this
Agreement or the other Loan Documents, within five
(5) Business Days after the same shall become due and
payable;
(d) default shall be made in the due observance of any
covenant, condition or agreement on the part of the
Borrower contained in Section 5.01, 5.05, 5.10 or
5.11 or Article VI;
(e) default shall be made in the due observance or
performance of any other covenant, condition or
agreement to be observed or performed by the Borrower
pursuant to the terms of this Agreement or any other
Loan Document (other than those covered in clauses
(b) - (d) above) and such default shall continue
unremedied for a period of thirty (30) days after the
earlier of: (i) written notice from the Lender of
such
(f) any Borrower or any of any Borrower's Subsidiaries
shall: (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of
the United States Code or any other federal or state
bankruptcy, insolvency or similar law; (ii) consent
to the institution of, or fail to controvert in a
timely and appropriate manner, any such proceeding or
the filing of any such
(Page 243 of 252 Pages)
<PAGE>
petition; (iii) apply for or consent to the
appointment of a receiver, trustee, custodian,
sequestrator or similar official for such Borrower or
such Subsidiary or for a substantial part of their
respective properties or assets; (iv) file an answer
admitting the material allegations of a petition
filed against it in any such proceeding; (v) make a
general assignment for the benefit of creditors; (vi)
become unable generally, or admit in writing its
inability, to pay its debts as they become due; (vii)
suspend the transaction of all or a substantial
portion of its usual business; or (viii) take
corporate action for the purpose of effecting any of
the foregoing;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of
competent jurisdiction seeking: (i) relief in respect
of any Borrower or any of any Borrower's Subsidiaries
of a substantial part of any of their respective
properties or assets, under Title 11 of the United
States Code or any other federal or state bankruptcy,
insolvency or similar law; (ii) the appointment of a
receiver, trustee, custodian, sequestrator or similar
official for any Borrower or any of any Borrower's
Subsidiaries or for a substantial part of their
respective properties; or (iii) the winding-up or
liquidation of any Borrower or any of any Borrower's
Subsidiaries; and such proceeding or petition shall
continue undismissed for sixty (60) days or an order
or decree approving or ordering any of the foregoing
shall continue unstayed and in effect for sixty (60)
days;
(h) a default shall be made with respect to any
Indebtedness of any Borrower or any of any Borrower's
Subsidiaries, if the effect of any such default shall
be to accelerate, or to permit the holder or obligee
of any such Indebtedness (or any trustee or agent on
behalf of such holder or obligee) to accelerate (with
or without notice or lapse of time or both) the
maturity of the Indebtedness in an aggregate amount
of $1,000,000 or more; or any payment of principal or
interest, regardless of amount, on any Indebtedness
of any Borrower or any of any Borrower's Subsidiaries
in an aggregate principal amount of $1,000,000 or
more, shall not be paid when due, whether at
maturity, by acceleration or otherwise (after giving
effect to any applicable cure period specified in the
instrument evidencing or governing such
Indebtedness);
(i) a Reportable Event shall have occurred with respect
to any Pension Plan or a notice of intent to
terminate a Pension Plan shall have been furnished to
the affected parties (as provided in Section
4041(c)(1) of ERISA); or the Pension Benefit Guaranty
Corporation shall have instituted proceedings to
terminate any Pension Plan, or a trustee shall have
been appointed by a United States District Court to
administer any Pension Plan, if in any such case such
Pension Plan then has an amount of unfunded benefit
liabilities (within the meaning of Section
4001(a)(18) of ERISA) or any Borrower or any ERISA
(Page 244 of 252 Pages)
<PAGE>
Affiliate incurs withdrawal liability which could
reasonably be expected to result in a Material
Adverse Effect;
(j) a final judgment or judgments for the payment of
money in excess of $2,000,000 in the aggregate shall
be rendered by a court or other tribunal against any
Borrower or Borrowers or any of their Subsidiaries
and shall remain undischarged for a period of thirty
(30) consecutive days during which execution of such
judgment shall not have been stayed effectively;
(k) any Loan Document shall cease to be in full force and
effect, enforceable in accordance with its terms, or
any Borrower shall assert the invalidity of any such
instrument;
(l) there occurs a default or event of default by any
Borrower under or in connection with the Chase Bridge
Loan Facility, the Investment Agreement Amendment or
the Standby Purchase Agreement (or any document
executed by any Borrower pursuant to the Standby
Purchase Agreement), which remains uncured after the
expiration of any applicable cure period;
(m) there shall occur a Rights Offering Default Event;
and
(n) there shall occur a Purchase Termination Event or
Potential Purchase Termination Event under or in
connection with the existing Revolving Securitization
receivables purchase transaction identified on
Schedule 6.01, or a Termination Event or Potential
Termination Event under or in connection with the
securitized receivables purchase transaction
permitted under Section 6.01(g) or the Chase Bridge
Loan Facility.
SECTION 7.02. Remedies Upon Default. Upon the occurrence of any Event
of Default (other than an event described in Section 7.01 (f) or (g)), and at
any time thereafter during the continuance of such event, the Lender may, by
written or telegraphic notice to the Borrowers, declare the Note to be forthwith
due and payable, whereupon the principal of the Note, together with accrued
interest thereon and all other liabilities of the Borrowers accrued hereunder
and under the other Loan Documents, shall become forthwith due and payable both
as to principal and interest, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrowers,
anything contained herein or in any Note to the contrary notwithstanding. Upon
the occurrence of any event described in Section 7.01 (f) or (g), the principal
amount outstanding under the Note, together with all accrued interest thereon
and all other liabilities of the Borrowers accrued hereunder and under the other
Loan Documents, shall automatically become due and payable, both as to principal
and interest, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrowers, anything contained
herein or in the Note to the contrary notwithstanding. Without limitation to the
foregoing, upon the occurrence of an Event of Default, Lender shall be entitled
to all rights and remedies available to it
(Page 245 of 252 Pages)
<PAGE>
hereunder, under the other Loan Documents, under the Standby Purchase Agreement,
under the Investment Agreement Amendment, at law or in equity. Notwithstanding
anything to the contrary contained above in this Section 7.02, and without
limitation to the Lender's ability to take the actions set forth above in this
Section 7.02, upon the occurrence of any Event of Default, at any time
thereafter during the continuance of such event, in addition to any other rights
to designate directors of Lender under Article IV of the Investment Agreement
Amendment (other than Section 4.7 thereof), Samstock shall have the right to
designate such additional number of directors (which individuals may be
designated in Samstock's sole discretion without obtaining the acceptance of
approval of the Disinterested Directors (as defined in the Investment Agreement
Amendment) or any other person or entity), and TMN shall take all necessary or
appropriate action to increase the number of directors constituting TMN's Board
of Directors and/or obtain resignations of individuals then serving as directors
(other than directors designated by Samstock), and assist in the nomination and
election as directors of such additional designees of Samstock, such that, after
taking all of the same into account, the number of individuals designated by
Samstock under this Section 7.02 and Article IV of the Investment Amendment
serving as directors of TMN shall constitute at least a majority of the total
number of directors of TMN, effective as soon as practicable, but in any event
no later than five (5) Business Days after Lender notifies TMN in writing of its
intent to exercise the right provided herein and the identity of the individuals
Samstock desires to so designate (and, if applicable, the individuals Samstock
desires to resign). With respect to the foregoing, the Borrowers and TMN
acknowledge and agree that (I) the provisions of this Section 7.02 are
reasonable and necessary to protect the proper and legitimate interests of the
Lender, and (II) the Lender would be irreparably damaged in the event any of the
provisions of this Section 7.02 were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Lender shall be entitled to preliminary and permanent injunctive relief to
prevent breaches of the provisions of this Section 7.02 by the Borrowers or TMN
without the necessity of proving actual damages or of posting any bond, and to
enforce specifically the terms and provisions hereof, which rights shall be
cumulative and in addition to any other remedy to which the Lender may be
entitled hereunder, under any other Loan Documents or at law or in equity.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices. (a) Notices and other communications provided
for herein and in the other Loan Documents shall be in writing and shall be
delivered personally or mailed, by certified or registered mail, postage prepaid
(or in the case of facsimile communication, delivered by telex, graphic scanning
or other facsimile communications equipment) or delivered by overnight courier
addressed:
(Page 246 of 252 Pages)
<PAGE>
If to the Lender:
GAMI Investments, Inc.
Two North Riverside Plaza, Suite 600
Chicago, Illinois 60606
Attention: Greg Robitaille
Telephone: (312) 466-3215
Facsimile: (312) 454-9678
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza, Suite 1600
Chicago, Illinois 60606
Attention: Marc S. Brenner
Telephone: (312) 446-3933
Facsimile: (312) 454-0335
If to the Borrowers:
Transmedia Network, Inc.
Transmedia Restaurant Company, Inc.
Transmedia Service Company, Inc.
TMNI International Incorporated
11900 Biscayne Boulevard
Miami, Florida 33181
Attention: Gene Henderson
Telephone: (305) 892-3306
Facsimile: (305) 892-3342
with a copy to:
Morgan, Lewis & Bockius, LLP
101 Park Avenue
New York, New York 10178
Attention: Stephen Farrell
Telephone: (212) 309-6050
Facsimile: (212) 309-6273
(b) All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt, in each case addressed to such party as provided
in this Section 8.01 or in accordance with the latest unrevoked direction from
such party.
SECTION 8.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the other
Loan Documents shall be considered to have been relied upon by the Lender and
shall survive the making by the Lender of the Loan and
(Page 247 of 252 Pages)
<PAGE>
the execution and delivery to the Lender of the Note evidencing the Loan and
shall continue in full force and effect until the Note and all accrued interest
thereon and all other Obligations then due and payable have been fully paid and
performed and the Lender has no further commitment to lend hereunder.
SECTION 8.03. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the Borrowers or the Lender that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
assigns. The Borrowers may not assign or transfer any of their rights or
obligations hereunder without the prior written consent of the Lender. The
Lender shall have the right to make assignments of the Loan to an Affiliate of
the Lender.
SECTION 8.04. Expenses of the Lender; Indemnity. (a) Each Borrowers
agrees to pay (on the Closing Date) all reasonable costs and expenses incurred
by the Lender (including the reasonable fees and expenses of the Lender's
counsel) in connection with the preparation and administration of this Agreement
and the other Loan Documents, and with any amendments, modifications or waivers
of the provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Lender (including the
reasonable fees and expenses of the Lender's counsel) in connection with the
enforcement of its rights and remedies in connection with this Agreement or the
other Loan Documents. Each Borrower further agrees that it shall indemnify the
Lender from and hold it harmless against any documentary taxes, assessments or
charges made by any governmental authority by reason of the execution and
delivery of this Agreement or any of the other Loan Documents.
(b) Each Borrower agrees to indemnify the Lender and its Affiliates,
directors, officers, employees and agents against, and to hold the Lender and
such Persons harmless from, any and all losses, claims, damages, liabilities,
penalties, actions, judgments, investigations, proceedings, litigation, suits,
costs, and related expenses (collectively, "Indemnified Liabilities"), including
legal fees and expenses, incurred by or asserted against the Lender or any such
Persons arising out of, in any way connected with, or as a result of: (i) this
Agreement or the other Loan Documents; (ii) the performance by the parties
hereto and thereto of their respective rights and obligations hereunder and
thereunder; (iii) consummation of the Transactions; (iv) the environmental
condition or operation of such Borrower's and its Subsidiaries' properties,
including the release, presence, spillage, disposal, discharge, transporting,
emission or leakage of hazardous materials, which is at, in, on, under, about,
from or affecting such properties, including any damage or injury resulting from
any such hazardous materials to or affecting such Borrower's or its
Subsidiaries' properties or the soil, water, air, vegetation, buildings,
personal property, persons or animals located on such properties or on any other
property or otherwise; or (v) any violation of any Environmental Laws. The
foregoing indemnity includes the cost of remedial action to the extent required
to cause such Borrower's or it's Subsidiaries' properties to be in compliance
with all applicable Environmental
(Page 248 of 252 Pages)
<PAGE>
Laws. Notwithstanding the foregoing, this indemnity shall not apply to any such
Indemnified Liabilities arising solely and directly from the gross negligence or
willful misconduct of the Lender.
(c) The provisions of this Section 8.04 shall remain operative and in
full force and effect regardless of the expiration of the term of this Agreement
or the other Loan Documents, the consummation of the Transactions contemplated
hereby, the repayment of any of the Loan, the invalidity or unenforceability of
any term or provision of this Agreement or any of the other Loan Documents, or
any investigation made by or on behalf of the Lender. All amounts due under this
Section 8.04 shall be payable within thirty (30) days after written demand in
reasonable detail therefor.
SECTION 8.05. Right of Setoff. The Lender is hereby authorized at any
time and from time to time after the occurrence and during the continuance of an
Event of Default to setoff and apply any and all indebtedness and other
obligations at any time owing by the Lender or its Affiliates to or for the
credit or the account of any Borrower or any Borrower's Affiliates to amounts
then due and payable under this Agreement and the other Loan Documents,
irrespective of whether or not the Lender shall have made any demand under this
Agreement or any of the other Loan Documents. The rights of the Lender under
this Section 8.05 are in addition to other rights and remedies (including other
rights of setoff) which the Lender may have under applicable law.
SECTION 8.06. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE RIGHTS, DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE
PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 8.07. Waivers. No failure or delay of the Lender in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Lender hereunder and under the other Loan Documents, and
under or in connection with the Rights Offering Warrant, the Rights Offering,
and the Transactions, are cumulative and not exclusive of any rights or remedies
which it would otherwise have. No waiver of any provision of this Agreement, the
Note or the other Loan Documents, or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be authorized as
provided in Section 8.08, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice or
demand on any Borrower in any case shall entitle such Borrower or any other
Borrower to any other or further notice or demand in similar or other
circumstances.
(Page 249 of 252 Pages)
<PAGE>
SECTION 8.08. Amendments. Neither this Agreement nor any other Loan
Document, nor any provision hereof or thereof, may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrowers and the Lender.
SECTION 8.09. Severability. In the event any one or more of the
provisions contained in this Agreement, the Note or the other Loan Documents
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall not in any way be affected or impaired thereby.
SECTION 8.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one contract.
SECTION 8.11. Headings. Article and Section headings and the Index used
herein are for convenience of reference only and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
SECTION 8.12. Consent to Jurisdiction. Each Borrower hereby irrevocably
agrees that any suit, action, proceeding or claim against it arising out of or
in any way relating to this Agreement or any of the other Loan Documents, or any
judgment entered by any court in respect thereof, may be brought or enforced in
the state or federal courts located in Cook County, Illinois or New York County,
New York, and each Borrower consents, for itself and in respect to its property,
to the non-exclusive jurisdiction of these courts, and each Borrower hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the venue of any proceeding brought in Cook
County, Illinois, or New York County, New York, and further irrevocably waives
any claims that any such proceeding has been brought in an inconvenient forum.
SECTION 8.13. WAIVER OF JURY TRIAL. EACH BORROWER HEREBY EXPRESSLY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR UNDER OR IN CONNECTION WITH ANY AMENDMENT,
INSTRUMENT, DOCUMENT, OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH, AND AGREES THAT ANY SUCH ACTION
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF
THIS SECTION 8.13 CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO
THIS AGREEMENT.
SECTION 8.14. Interest Limitation. Anything in this Agreement, the Note
or any other Loan Document to the contrary notwithstanding, the Borrowers shall
never be required to pay interest at a rate in excess of the highest lawful
rate, and if the effective rate of interest that would otherwise be payable
under this Agreement, the Note or any other Loan Document would exceed the
highest lawful rate, or if any holder of the Note shall receive monies that are
deemed to constitute
(Page 250 of 252 Pages)
<PAGE>
interest which would increase the effective rate of interest payable under this
Agreement, the Note or any other Loan Document to a rate in excess of the
highest lawful rate, then: (a) the amount of interest that would otherwise be
payable under this Agreement, the Note and the other Loan Documents shall be
reduced to the amount allowed under applicable law; and (b) any interest paid in
excess of the highest lawful rate shall, at the option of the holders of the
Note, be either refunded to the payor or credited on the principal of the Note.
If at any time the effective rate of interest which would otherwise be payable
under this Agreement, the Note, or any other Loan Document exceeds the highest
lawful rate, the rate of interest to accrue under this Agreement, the Note and
the other Loan Documents shall be limited to the highest lawful rate, but any
subsequent reductions in such interest rate shall not become effective to reduce
such interest rate below the highest lawful rate until the total amount of
interest accrued hereunder and under the Note and the other Loan Documents
equals the total amount of interest that would have accrued if interest had been
computed without giving effect to this Section 8.14.
SECTION 8.15. Loan Documents. In the event of any conflict or
inconsistency between the terms and provisions of this Agreement and those of
any other Loan Document, the terms and provisions of this Agreement shall govern
and control to the extent of such conflict or inconsistency.
SECTION 8.16. Joint and Several Liability. The obligations and
liability of the Borrowers under this Agreement and the other Loan Documents
shall be joint and several.
(Page 251 of 252 Pages)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
TRANSMEDIA NETWORK, INC., a
Delaware corporation
Attest: /s/ James Callaghan By: /s/ Stephen E. Lerch
-------------------------- --------------------------------
Its: Vice President Its Executive Vice President and
Chief Financial Officer
TRANSMEDIA RESTAURANT
COMPANY, INC., a Delaware corporation
Attest: /s/ James Callaghan By: /s/ Stephen E. Lerch
-------------------------- --------------------------------
Its: President Its Vice President
TRANSMEDIA SERVICE COMPANY,
INC., a Delaware corporation
Attest: /s/ Gene M. Henderson By: /s/ Stephen E. Lerch
-------------------------- --------------------------------
Its: Director Its Vice President
-------------------------
TMNI INTERNATIONAL INCORPORATED,
a Delaware corporation
Attest: /s/ Gene M. Henderson By: /s/ Stephen E. Lerch
-------------------------- --------------------------------
Its: President Its Vice President
-------------------------
GAMI INVESTMENTS, INC.
By: /s/ Donald J. Liebentritt
--------------------------------
Its Vice President
(Page 252 of 252 Pages)
