<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FORM 10-K (Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended SEPTEMBER 30, 1996
----------------------------------------
OR\
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------------- ---------------------
Commission file number 0-24404
----------
TRANSMEDIA EUROPE, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3701141
---------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation of organisation Identification No.)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
----------------------------------------------------
(Address of principal executive offices) (zip code)
U.K. 011-44-171-930-0704
------------------------------------------------
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
-------------------------
NONE NONE
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, PAR VALUE $.00001 PER SHARE
-----------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December, 18 1996 was: $10,487,248, based upon the last sales
price on such date of a share of Common Stock on Nasdaq SmallCap Market.
Number of shares outstanding of Registrant's Common Stock, as of December 18,
1996: 12,841,180
DOCUMENTS INCORPORATED BY REFERENCE:
Location in Form 10-K in which
Document Document is Incorporated
-------- ------------------------------
Registrant's Proxy Statement Part III
relating to the 1997
Annual Meeting of Stockholders
<PAGE> 2
PART I
ITEM 1 - BUSINESS
BACKGROUND
Transmedia Europe, Inc. is a Delaware corporation which was formed in
February 1993 and began business operations in London, England, in October
1993. As used in this Report, the term "Company" includes Transmedia
Europe Inc. and its subsidiaries unless otherwise indicated. On May 19,
1993 the Company acquired from Conestoga Partners, Inc. ("Conestoga") the
rights Conestoga had previously acquired from Transmedia Network, Inc.
("Network"), an independent company which owns less than 5% of the
Company, through Network's affiliate TMNI International Inc., pursuant to
a Master License Agreement ("License Agreement") dated December 14, 1992
as amended April 12, 1993 and August 11, 1993. The rights acquired were an
exclusive license (the "License") to use certain trademarks and service
marks, proprietary computer software programs and know-how of Network in
establishing and operating a discount restaurant charge card business in
all the countries of Europe, Turkey and the other countries outside of
Europe that were formerly part of the Union of Soviet Socialist Republics
(the "Licensed Territories").
BUSINESS ACTIVITIES
The business of the Company is the exploitation of the rights acquired
under the License Agreement. The Company is currently operating in the
United Kingdom and plans in the future to develop the License within the
Licensed Territories directly, through subsidiaries, and through the sale
of sub-licenses and franchises to others. In June 1995 the Company
announced a joint venture to operate the Restaurant Card in France, which
joint venture began operations in April 1996.
The Company advances money to restaurants selected by it which agree to
become participating restaurants ("Company Participating Restaurants") in
exchange for food and beverage credits, typically in the ratio of (pound)2
of food and beverage credits for every (pound)1 advanced. The Company
recovers its advances ("Restaurant Credits") from food and beverages
purchased net of taxes and service ("Food and Beverage Credits") from
Company Participating Restaurants by cardholders ("Company Cardholders"),
who complete applications to become holders of the restaurant card ("The
Restaurant Card") offered by the Company and are accepted. The Company
keeps a current record of the amount of Food and Beverage Credits
outstanding at each Company Participating Restaurant. As food and
beverages are consumed by Company Cardholders at Company Participating
Restaurants by such Company Cardholders charging the retail price of such
food and beverages with The Restaurant Card, the Food and Beverage Credits
outstanding are reduced and the Restaurant Credits outstanding are also
reduced by one-half of such Food and Beverage Credits used.
Each Company Cardholder receives on each purchase a credit equal to either
20% or 25% of the Food and Beverage Credits used. The Company
Participating Restaurant is paid its taxes and service by the Company from
a portion of the proceeds received by the Company from the payment by a
Company Cardholder of the amount charged on The Restaurant Card. The
Company retains the balance which reduces the Restaurant Credits by 50% of
the Food and Beverage Credit used. The Company pays a royalty of 2% of
Food and Beverage Credits used to Network and 2.5% of Food and Beverage
Credits used as sales commissions.
The Restaurant Card is a discount restaurant charge card used by a Company
Cardholder in lieu of a major credit card to charge food and beverages
purchased at a Company Participating Restaurant. The Restaurant Card
charges are transferred to the major credit card used by the Company
Cardholder as listed in his application for the Restaurant Card. The full
amount of the charge is listed on the major credit card bill along with a
separate credit equal to either the 20% or 25% of the cost of food and
beverages at a Company Participating Restaurant (excluding taxes and
service). As at December 18, 1996, the Company had approximately 430
Company Participating Restaurants and approximately 48,000 Company
Cardholders. Company Cardholders either have a 20% free membership card,
introduced during 1996, or a 25% membership card with an annual fee of 35
pounds (UK). The annual fee is waived for an initial period of up to six
months in most instances or otherwise shared with the entity which assists
in obtaining the new account.
The Company receives its revenues from (a) the difference between the
amount of its Restaurant Credits to Company Participating Restaurants and
Food and Beverage Credits used at Company Participating Restaurants by
Company Cardholders, net of either the 20% or 25% discount to Company
Cardholders, sales commissions and the Network royalty, (b) annual
membership fees and renewal fees of Company Cardholders, and (c)
sub-license and franchise
- 1 -
<PAGE> 3
fees when and if received by the Company from future franchises and
sub-licenses, net of minimum up-front payments to Network with regard to
such franchises and licenses. The Company obtains the majority of its
Company Cardholders through promotional campaigns with joint marketing
partners such as newspapers, banks, and companies involved in the
travel/leisure business. Joint marketing partners have included MBNA,
Barclays Bank, Financial Times and The Sunday Times. The Company will
continue to develop additional campaigns to attract new Company
Cardholders. Any campaign is likely to involve the waiver of the annual
fee for some limited period of time, typically up to a maximum of 6
months. The Company has recently launched a 20% free membership card with
MBNA as joint marketing partner.
On June 30, 1995 the Company announced the establishment of Transmedia La
Carte Restaurant S.A. ("Transmedia France"), in which it would be a major
shareholder, to operate the Restaurant Card in France. The total share
capital of Transmedia France is 25,000,000 Ffr (approximately $5,000,000)
of which the Company invested 9,000,000 Ffr (approximately $1,660,000).
The Company granted a sub-license to operate the Restaurant Card in France
to Conestoga Partners, Inc. for an initial fee of $1,000,000, which has
been paid. The sub-license has subsequently been transferred to Transmedia
France for the same consideration. The Transmedia License requires the
payment of a one time royalty to Network in the event that the Company
opens in another country, being the greater of $250,000 or 25% of the
initial license payment, and $250,000 was paid during the year ended
September 30, 1995. Under the terms of the sub-license agreement the
Company will receive, quarterly in arrears, a royalty from Transmedia
France of 5% of gross sales of which 2% will be paid to Network.
The shareholders agreement provides for "put" and "call" options. The
Company has a call option to acquire 100% of Transmedia France in the
fourth year of operations at a price based upon a valuation equal to ten
times operating cash flows. The joint venture partners have put options in
years 2 and 4. The basis for valuation under the year 2 option is equal to
120% of capital invested and under the year 4 option is equal to ten times
operating cash flows. Since the restaurant card business is considered to
be a banking activity under French law, Transmedia France is required to
have, a banking license. Transmedia France applied for and was granted a
provisional banking license necessary for its operations. Management
considers the grant of the provisional bank license to have been a
significant accomplishment since, in addition to authorising operations in
France, it may establish a precedent throughout the rest of the European
Union easing expansion into other countries.
A test launch to approximately 400 cardholders is being used to evaluate
and develop systems, especially the newly developed swipe card facility,
prior to the main launch. Transmedia France has recruited approximately
200 restaurants in France.
On April 19, 1996 Transmedia France completed a rights issue of shares.
Whilst the Company declined to subscribe it did acquire 15,000 shares, in
an unrelated transaction, from International Advance, Inc., a company of
which Edward J Guinan III, President of the Company, is the principal
shareholder and an officer and director, in exchange for $300,000 and
certain rights to jointly develop systems unrelated to the business of
Transmedia France. Accordingly the Company's interest was reduced to 36%.
In December 1996 the Company reached an agreement, effective January 1997,
with Transmedia France under which it granted sub-licenses for
Belgium/Luxembourg, Spain, Italy and French speaking Switzerland for
9,250,000Ffr (approximately $1,780,000). This payment will be used by the
Company to increase its interest in Transmedia France to 60%. Network has
agreed to defer the 25% royalties due upon the completion of the agreement
($800,000 in aggregate) with payment to be made as each country area is
opened of $250,000 except for $50,000 for French speaking Switzerland.
Under certain circumstances the payment schedule might be accelerated.
Network, from whose affiliate, TMNI, the License was granted and on whose
business the Company's operations are modelled, is a publicly traded
company operating in the United States both directly and through licensees
and franchisees. Under the License the Company is authorised to engage in
business within the Licensed Territories in the same manner as Network
operates in the United States, except that under the License Agreement the
Company must pay certain royalties to Network based both on operations and
the sale of license rights and must get the approval of Network for
certain changes in key executives and principal shareholdings.
In December 1996 Network and TMNI agreed, at the Company's request, to
amend the License. The principal revisions are that the Company is now
permitted to expand into new businesses, acquire Countdown PLC and
-2-
<PAGE> 4
undertake a corporate restructure. In consideration a $750,000 fee will be
payable when, and if, the acquisition of Countdown PLC is completed and a
$250,000 fee will be payable when, and if, a corporate restructuring is
completed. Network owns 496,284 shares of the Company's Common Stock,
which it acquired as partial consideration for the sale of the License to
the Company, and has the right to designate one director of the Company,
which right is not currently being exercised. The Company has no ownership
interest in Network. Company Cardholders and cardholders of Network and
its franchisees are able to use The Restaurant Card to purchase meals in
all territories covered by the Company, Network and its franchisees. The
Company will realise all financial benefits from meals consumed within the
Licensed Territories and no financial benefit from meals consumed outside
of the Licensed Territories.
Transmedia Asia Pacific, Inc. ("Transmedia Asia Pacific"), of which Edward
Guinan III, President of the Company, is the principal shareholder and an
officer and director, has acquired an equivalent license from TMNI
covering essentially all of Asia and other Pacific Rim countries.
Transmedia Asia Pacific commenced operations in Sydney, Australia in
November 1994 and has obtained approximately 22,000 cardholders since its
launch. Transmedia Asia Pacific licenses certain operating software from
the Company at an annual fee.
TRANSACTION ILLUSTRATION
The following is a descriptive illustration of a hypothetical transaction
by a Company Cardholder at a Company Participating Restaurant.
The Company, through a commissioned sales representative, recruits
Restaurant A, a full service restaurant operating in London, as a Company
Participating Restaurant. The Company grants Restaurant Credits in the
amount of 3,000 pounds (UK) which entitles the Company to collect the
proceeds from 6,000 pounds (UK) of Food and Beverage Credits charged by
Company Cardholders on The Restaurant Card at Restaurant A. John Smith, a
Company Cardholder, enjoys a meal at Restaurant A and pays the 100 pound
(UK) check (consisting of 80 pounds (UK) for food and beverages and 20
pounds (UK) for taxes and service) with The Restaurant Card. Mr Smith
presents The Restaurant Card. Restaurant A delivers The Restaurant Card
receipt for Mr Smith's meal to the Company for processing through the
Major Credit Card Account designated by Mr Smith in The Restaurant Card
application and for payment. The Company utilises 80 pounds (UK) of
Restaurant A's Food and Beverage Credits (for which it has made Restaurant
Credits of 40 pounds (UK)) and reduces the Restaurant Credits due to it
from Restaurant A by 40 pounds (UK). The Company then submits a credit to
Mr Smith's Major Credit Card Account in the amount of 20 pounds (UK)
(representing 25% of the 80 pounds (UK) of food and beverages consumed).
Upon receipt of The Restaurant Card receipt of Mr Smith of 100 pounds
(UK), the Company forwards 20 pounds (UK) of this amount (representing the
tax and service portion of Mr Smith's meal check) to Restaurant A. The
Company forwards 1.60 pounds (UK) as a royalty to Network (2% of the 80
pounds (UK) of Food and Beverage Credits used) and keeps 58.40 pounds
(UK). This compares with Restaurant Credits made by the Company of 40
pounds (UK) to Restaurant A and the 80 pounds (UK) of Food and Beverage
Credits utilised in providing Mr Smith his meal. The Company is
responsible for paying the commissions of its sales representatives whose
commissions are currently 2.5% of Food and Beverage Credits used.
The allocation of the hypothetical 100 pound (UK) check can be summarised
as follows:
<TABLE>
<CAPTION>
Name Amount Received Nature of Allocation
---- --------------- --------------------
<S> <C> <C>
Mr Smith 20 pounds (UK) 25% of food and beverage
charges (exclusive of tip and taxes)
credited to
his Major Credit Card account.
Restaurant A 20 pounds (UK) Payment of service and taxes.
Restaurant A -0- The Restaurant Credits due to the
Company by Restaurant A are
reduced by 40 pounds (UK).
Network 1.60 pounds (UK) A royalty fee of 2% of the 80
pounds (UK) of Food and Beverage
Credits used is payable to
Network.
The Company 58.40 pounds (UK) This represents a reduction of
Restaurant Credits by 40 pounds
(UK) plus 18.40 pounds (UK) of
gross profit.
From this amount a sales
representative of the Company
will typically receive a
commission of 2.5% of Food and
Beverage Credits used or in this
example 2 pounds (UK).
</TABLE>
- 3 -
<PAGE> 5
EMPLOYEES
As of December 11, 1996, the Company employed 19 persons, none of whom are
affiliated with a union. The Company believes that its relationship with
its employees is good.
COMPETITION
The charge card business, including the discount restaurant card business,
is highly competitive, both internationally and in the United Kingdom. The
Company competes to enrol Company Participating Restaurants and Company
Cardholders against other discount programs. Competitors include discount
programs offered by major credit card companies such as American Express,
Barclaycard, and the NatWest Card, as well as Visa, Mastercard and Diners
Club. Moreover, other companies offer different kinds of discount
marketing programs relating to sales at their own outlets. Many of the
Company's competitors are larger than the Company and have substantially
greater financial, personnel, technological, marketing, administrative and
other resources than the Company.
The Company believes that the unique feature of The Restaurant Card is
that it can be used by Company Cardholders at Company Participating
Restaurants with virtually no restrictions, that The Restaurant Card
provides substantial savings without the need for a Company Cardholder to
present discount coupons when paying for a meal, and that Company
Participating Restaurants are provided with cash in advance of customer
charges. The Company believes that all these features contribute to the
Company's competitiveness. Although the Company is not aware of any
discount programs featuring either restaurant financing or discount
restaurant charge cards, in any of the areas in the Licensed Territories,
there is no guarantee that others will not offer, in the future, similar
services in any of the Licensed Territories.
The Company also believes that advertising and promotion, which will
require significant cash outlays, will be necessary to maintain
competitiveness. However, competitive pressure may require significant
additional cash expenditures for advertising and promotion, the amount and
timing of which may be dictated in part by the marketing policies of
competitors. If the revenues from the Company's operations are
insufficient to permit management to match promotional campaigns of
competitors, the number of Company Cardholders and Company Participating
Restaurants in the Licensed Territory may decline, with a resulting
adverse effect on the Company's financial condition.
GOVERNMENT REGULATION
The Company believes that it possesses all governmental permits or
licenses necessary to operate in the United Kingdom and that its affiliate
has obtained provisional governmental approval to operate The Restaurant
Card in France. However, other than in the United Kingdom and France, it
does not possess any governmental permits or licenses for other portions
of the Licensed Territories and has not inquired yet whether any permits
or licenses will be required. In the event permits or licenses are
necessary for the conduct of the Company's business in other portions of
the Licensed Territories, or that additional licenses or permits are
required in respect of operations in the United Kingdom, there is no
guarantee that the Company will be able to procure them, the failure of
which could have a material adverse effect on the Company's ability to
operate or expand its operations in the Licensed Territories.
ITEM 2 - PROPERTIES
The Company leases office space of approximately 3,400 square feet in
London at 11 St. James's Square. The lease is for a period of 5 years
expiring on September 8, 1998, at a net rental of $150,846 per annum.
ITEM 3 - LEGAL PROCEEDINGS
The Company is the defendant in a law suit relating to the granting of a
sub-license to operate in Belgium. Management believe that the ultimate
outcome of the case will not have a material impact on the financial
statements. Otherwise at the date of this Report there are no other
material legal proceedings pending involving the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1996, no matters were submitted to
a vote of the security holders.
- 4 -
<PAGE> 6
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information: Since August 23, 1994, shares of the Company's Common
Stock $.00001 par value (the "Common Stock") have traded on Nasdaq
SmallCap Market (symbol "TMNE"). The following table sets forth, for the
periods indicated and as reported by Nasdaq SmallCap Market, the high and
low sales prices for shares of the Common Stock.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
December 31, 1994 $ 3 3/4 $ 2 3/8
March 31, 1995 $ 4 $ 2 1/8
June 30, 1995 $ 4 1/4 $ 2 33/64
September 30, 1995 $ 3 1/4 $ 2
December 31, 1995 $ 2 1/2 $ 1 5/8
March 31, 1996 $ 2 1/4 $ 1 3/16
June 30, 1996 $ 3 1/8 $ 1 1/8
September 30, 1996 $ 2 7/8 $ 1 3/8
September 30, 1996 through
December 18,1996 $ 1 3/4 $ 1
</TABLE>
(b) Holders of Common Stock: The number of stockholders of record of the
Common Stock on December 18, 1996, was approximately 200. The Company
believes that in addition there are a significant number of beneficial
owners of its Common Stock whose shares are held in "Street Name".
(c) Dividends: The Company has never paid cash dividends with respect to the
Common Stock, except for stock dividends paid to founders on inception.
The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to help finance the operations and
expansion of the Company and accordingly does not plan, for the
foreseeable future, to pay dividends to holders of the Common Stock. The
Company issued 590,857 shares of 6 1/2 % Convertible Preferred Stock in
July 1995 and paid dividends on these shares on November 1, 1995 and May 1
1996 and intends to pay dividends semi-annually in arrears thereafter.
Such dividends have been provided for in the financial statements as at
September 30, 1996. Any decision as to the future payment of dividends on
Common Stock will depend on the results of operations and financial
position of the Company and such other factors as the Company's Board of
Directors, in its discretion, deems relevant.
(d) Recent sales of unregistered securities: In August 1996 the Company issued
892,857 shares of Common Stock for cash to one investor at a price of
$1.40 per share. In December 1996 the Company issued a further 556,250
shares of Common Stock for cash to nine investors at a price of $2.00 per
share. With regard to both issues the Company has claimed an exemption
from the registration requirements of the Securities Act of 1933, as
amended ('Securities Act') by relying on section 4 (2) of the Securities
Act, which allows for an exemption for transactions by an issuer not
involving a public offering, and the rules and regulations thereunder. No
underwriter was involved in these transactions.
-5-
<PAGE> 7
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for each of
the last three fiscal years. This information should be read in conjunction with
"Management's Discusion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company included in
this Report.
Income Statement Data
<TABLE>
<CAPTION>
Fiscal Years ended September 30,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Total revenues and fees $ 3,696,400 $ 3,967,997 $ 2,178,722
Gross profit 1,610,495 1,701,411 817,778
Loss from operations (2,059,812) (2,114,975) (2,038,128)
Net loss after preferred share dividends $(2,695,524) $(2,215,452) $(1,945,236)
Net loss per common share $ (0.24) $ (0.19) $ (0.19)
</TABLE>
Balance Sheet Data
<TABLE>
<CAPTION>
As at September 30,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Restaurant credits $1,309,279 $1,622,571 $1,581,898
Intangible assets 1,297,026 1,405,112 1,513,198
Total assets 3,926,355 5,821,680 4,647,125
Total liabilities 1,774,166 2,008,620 915,513
Total equity 2,152,189 3,813,060 3,731,612
</TABLE>
Other Data
<TABLE>
<S> <C> <C> <C>
Number of Participating Restaurants 440 460 430
Number of Company Cardholders 43,500 19,000 14,000
</TABLE>
- 6 -
<PAGE> 8
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion and analysis of financial condition and results of operations
should be read in conjunction with the consolidated financial statements, the
related disclosures and the selected financial data.
The nature of the Company's business is such that there is a lead time before
profitable operations can be anticipated. This is demonstrated in the financial
results for the years ended September 30, 1996, 1995 and 1994. The success of
the Company is dependent upon increasing the number of Company Cardholders and
Company Participating Restaurants, as well as obtaining increased usage of The
Restaurant Card by Company Cardholders. Our joint venture marketing partners are
predominantly large size organisations, with lengthy internal procedures.
Consequently preparing campaigns for launch and the resulting anticipated
increase in Company Cardholders is taking considerably longer than was initially
anticipated. As of December 18, 1996 the Company had approximately 48,000
Company Cardholders and 430 Company Participating Restaurants.
Certain statements in this Report under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the loss of a large number of
Company Cardholders or Company Participating Restaurants; general economic and
business conditions; industry capacity; industry trends; demographic changes;
competition; changes in business strategy or development plans; quality of
management; availability, terms and deployment of capital; business abilities
and judgment of personnel; availability of qualified personnel; changes in, or
the failure to comply with, government regulations; and other factors referenced
in this Report.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED SEPTEMBER 30, 1994
The Company generated revenues of $3,399,831 (an increase of 66% over 1994) for
the year ended September 30, 1995. The increase in revenues reflected the
activity generated by an existing cardholder base for a full twelve months and
new cardholder's obtained primarily from The Times of London and Sunday Times
promotions. The Company increased its number of Cardholders from 14,000 to
19,000 and increased its number of Participating Restaurants from 430 to 460 at
September 30, 1994 and at September 30, 1995 respectively. Membership fees for
the year ended September 30, 1995 of $518,166 were significantly greater than
the $85,847 reported for 1994 and are as a result of the Company billing Company
Cardholders for the first time following the typically waived membership period.
Other income represents the non-refundable deposits received for two 90 day
options to acquire the franchise for Belgium, which have now lapsed.
Cost of sales amounted to $2,266,586 (an increase of 66% over 1994) for the year
ended September 30, 1995, in line with the 66% increase in revenues. Cost of
sales are approximately 50% of the gross food and beverages value consumed by
Company Cardholders and represents the recovery of the restaurant credits made
by the Company to the respective Company Participating Restaurants.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the year ended September 30, 1995 amounted to $3,816,386
representing an increase of 33% over 1994. In the quarter ended September 30,
1995 the Company incurred a number of additional costs relating to: the
development of card marketing opportunities and cardholder activity of $90,000,
system development costs of $200,000, an increased general provision for
irrecoverable restaurant credits of $100,000, and the $250,000 royalty payment
to Network on the granting of the French sub-license. All system development
costs for the Company and Transmedia Asia Pacific Inc. were consolidated into
the Company where the Company is making enhancements to the system and
converting the system to operate in France and other countries. An agreement
exists between the Company and Transmedia Asia Pacific, Inc. to supply the
system for an initial fee of $50,000 paid in fiscal year 1994 and an annual fee
of $12,000. The Company may receive income in the future for the supply of the
system to other countries.
-7-
<PAGE> 9
The Company earned $28,978 for the 1995 fiscal year from the temporary
investment of excess cash funds. The Company remains in a net operating loss
carry forward position for income tax purposes and no tax benefit has been
recognised for the year ended September 30, 1995.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995
The Company generated revenues of $3,125,975 (a decrease of 8% over 1995) for
the year ended September 30, 1996. The decrease in revenues is principally due
to the fact that The Times of London and Sunday Times promotions in 1995 gave
rise to a high level of non repeat business which has not been fully replaced by
the revenues generated by the 1996 campaigns. The Company increased its number
of Cardholders from 19,000 to 43,500 at September 30, 1995 and at September 30,
1996 respectively, largely as a result of the 17,500 Company Cardholders
produced by the MBNA campaign since August 1996. The Company marginally
decreased its number of Participating Restaurants from 460 to 440 at September
30, 1995 and at September 30, 1996 respectively. This decrease is attributable
to the Company's policy of rationalising Participating Restaurants with low
levels of business. Membership fees for the year ended September 30, 1996 of
$570,425 are 10% higher than 1995 as a result of the increasing numbers of
Company Cardholders.
Cost of sales amounted to $2,085,905 (a decrease of 8% over 1995) for the year
ended September 30, 1995, in line with the 8% decrease in revenues.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the year ended September 30, 1996 amounted to $3,670,307
representing a decrease of 4% over 1995. The decrease can be attributed to a
cost evaluation exercise that was undertaken in June 1996 which resulted in
savings in printing and staff costs.
Transmedia France incurred losses of approximately $1,250,000 after revenues of
$156,370, for the year ended September 30, 1996, being its first year of
operations which commenced on a trial basis in April 1996. The Company's share
of those losses amounted to $509,404. For the year ended September 30, 1995
Transmedia France incurred pre-trading losses of approximately $182,624. The
Company's share of those losses amounted to $92,455.
The Company earned $8,112 for the 1996 fiscal year from the temporary investment
of excess cash funds. The Company remains in a net operating loss carry forward
position for income tax purposes and no tax benefit has been recognised for the
year ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company was initially capitalised with 6,206,896 shares, (after giving
retroactive effect to stock dividends,) for consideration of $500. On August 11,
1993, the Company issued 3,718,784 shares of common stock of which (i) 225,000
shares were issued to Conestoga, a corporation which is related to the Company
by virtue of the majority shareholding in Conestoga held by Edward J. Guinan
III, the President, Chief Executive Officer and Director of the Company, in
consideration of costs incurred on behalf of the Company by Conestoga, with
respect to raising capital for the Company; (ii) 496,284 shares were issued to
Network, as partial consideration for the purchase of the License; (iii) 275,000
shares were issued to Conestoga as reimbursement for a down payment of $275,000
made by Conestoga to Network for the purchase of the License; and (iv) the
remaining 2,722,500 shares were sold to private investors in a private placement
at an offering price of $1 per share. In addition, the Company issued 85,000
shares of Common Stock as consideration for services rendered in connection with
the raising of capital in the Company's private placement of shares in August
1993, of the cash proceeds of $2,722,500, $850,000 was paid to Network for
further consideration for the purchase of the Transmedia License from the
private placement of shares, leaving a balance, after issue costs, of $1,744,623
available to the Company for use as working capital in respect of the
utilisation by the Company of its rights under the License Agreement.
In February 1994, the Company completed a second private placement of 700,000
shares of Common Stock at a price of $3 per share. The net proceeds of such
private placement were used as working capital in respect of the utilisation by
the Company of its rights under the License Agreement. In addition, the Company
separately issued 10,000 shares of Common Stock as consideration for services
rendered in connection with the raising of capital in the second private
placement in February 1994.
In July 1995 the Company issued 590,857 shares of 6 1/2% Convertible Preferred
Stock at a price of $3.50 per share. The net proceeds of $1,964,600 have been
used to finance the Company's investment in France and to provide working
capital to existing operations.
-8-
<PAGE> 10
In July 1996 the Company issued 892,857 shares of Common Stock at a price of
$1.40 per share. The net proceeds of $1,235,000 have been used to provide
working capital to existing operations. In December 1996 the Company issued
556,250 shares of Common Stock at a price of $2.00 per share. The net proceeds
of $1,097,500 will be used to provide working capital to existing operations.
Net cash used in operating activities for the years ended September 30, 1996,
1995 and 1994 were $1,189,923, $1,071,496 and $2,456,271, respectively, of which
$206,619, $(323,052)and $(1,659,726), respectively, represents the net cash
inflow/(outflow) for advances to Company Participating Restaurants. These cash
outflows were funded by the 1994 issue of Common Stock which generated
$2,031,097, the 1995 issue of 6 1/2% Convertible Preferred Stock and the 1996
issue of Common Stock.
The Company made investments in Transmedia France of $300,000 and $1,500,000
during the years ended September 30, 1996 and 1995, respectively. In addition,
there were cash flows to related parties of $338,053, $55,965 and $201,282 for
the years ended September 30, 1996, 1995 and 1994, respectively.
In June 1996 the Company purchased 148,853 and 48,142 shares of Common Stock
from E Guinan III and Conestoga Partners Inc. at $2.625 per share, as repayment
of their outstanding loans.
The Restaurant Credits are generally unsecured and are recoverable only as
Company Cardholders utilise The Restaurant Card at the respective Company
Participating Restaurant. In a small number of cases, the Company may request a
personal guarantee from the owner. Generally, no other forms of collateral or
security are obtained from restaurant owners. Recovery of Restaurant Credits as
well as generation of gross profit from operations is strongly dependent upon
the frequency of use by existing Company Cardholders of The Restaurant Card. The
Company makes provisions for irrecoverable restaurant credits.
With the exception of the commitments made to the joint venture in France and
those made under the license as disclosed above, the Company has not made any
other significant capital commitment. The Company does not have an immediate
plan to make other significant capital commitments related to the operation of
its business in the United Kingdom.
Although the Company anticipates that its current cash, together with revenues
expected to be derived from operations, should, based upon its internal
calculations, be sufficient to fund operating, and other capital needs for the
next year, the Company will be required to seek additional financing during such
period in the event it either intends to make acquisitions or that there are
delays, cost overruns, sales declines or unanticipated expenses. While the
Company is confident that sufficient funds will be available to meet its
anticipated business expansion needs for the next year there can be no assurance
that the Company will be able to obtain such additional financing during such 12
month period.
INFLATION AND SEASONALITY
The Company does not believe that its operations have been materially influenced
by inflation. The business of individual Company Participating Restaurants may
be seasonal depending on their location and the type of food and beverages
served. However, the Company at this time has no basis on which to project
seasonal effects, if any, to its business as a whole.
-9-
<PAGE> 11
ITEM 8- FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors. F1
Consolidated Balance Sheets as at September 30, 1996 and 1995. F2-F3
Consolidated Statements of Operations for the years ended F4
September 30, 1996, 1995 and 1994.
Consolidated Statements of Changes in Stockholders' Equity for the F5
years ended September 30, 1996 and 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended F6
September 30, 1996, 1995 and 1994.
Notes to the Consolidated Financial Statements. F7-F16
</TABLE>
-10-
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Transmedia Europe, Inc.
We have audited the accompanying consolidated balance sheets of Transmedia
Europe, Inc. and subsidiaries as of September 30, 1996 and 1995 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. These standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Europe, Inc. and subsidiaries as of September 30, 1996 and 1995, and
the results of their operations and cash flows for each of the years in the
three-year period ended September 30, 1996, in conformity with generally
accepted accounting principles in the United States.
December 20, 1996
KPMG
London
England
-F1-
<PAGE> 13
TRANSMEDIA EUROPE, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------- -------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (including temporary cash investments of $ 61,661 $ 796,911
$730,767 at September 30, 1995)
Trade accounts receivable 105,167 131,555
Restaurant credits (net of allowance for irrecoverable credits 1,309,279 1,622,571
of $399,328 at September 30, 1996 and of $357,557 at
September 30, 1995)
Amounts due from related parties (note 3) 114,246 709,585
Prepaid expenses and other current assets 264,478 113,640
---------- ----------
TOTAL CURRENT ASSETS 1,854,831 3,374,262
NON-CURRENT ASSETS
Investment in affiliated company (note 2) 698,141 938,413
Property and equipment, net of accumulated depreciation of 76,357 103,893
$104,262 at September 30, 1996 and $64,366 at September 30,
1995 (note 5)
Intangible assets, net of accumulated amortisation of $324,248 at
September 30, 1996 and $216,172 at September 30, 1995
(note 4) 1,297,026 1,405,112
---------- ----------
TOTAL ASSETS $3,926,355 $5,821,680
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
- F2-
<PAGE> 14
TRANSMEDIA EUROPE, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------- -------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ -- $ 109,422
Trade accounts payable 483,229 322,901
Deferred membership fee income 352,542 356,814
Accrued liabilities (note 7) 438,395 303,203
Amount due to related parties (note 3) -- 416,280
----------- -----------
Total current liabilities 1,274,166 1,508,620
NON-CURRENT LIABILITIES
Deferred license fee income (note 2) 500,000 500,000
----------- -----------
Total liabilities 1,774,166 2,008,620
----------- -----------
STOCKHOLDERS' EQUITY
6 1/2% Convertible Preferred Shares, $0.01 par value, 5,000,000
shares authorised, 590,857 issued and outstanding shares at
September 30, 1996 and 1995 5,909 5,909
Common stock, $.00001 par value, 20,000,000 shares authorised,
12,319,537 issued and outstanding shares at September 30,
1996 and 11,426,680 at September 30, 1995 123 114
Additional paid in capital 9,647,072 8,412,081
Accumulated deficit (6,908,928) (4,213,404)
Treasury stock, 196,995 shares of common stock at cost (517,112) --
Unearned compensation - restricted stock (note 11) (78,000) (402,000)
Cumulative foreign currency translation adjustment 3,125 10,360
----------- -----------
Total stockholders' equity 2,152,189 3,813,060
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,926,355 $ 5,821,680
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
- F3 -
<PAGE> 15
TRANSMEDIA EUROPE, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended September 30,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 3,125,975 $ 3,399,831 $ 2,042,126
Membership fee 570,425 518,166 85,847
Other income -- 50,000 50,799
------------ ------------ ------------
Total revenue and fees 3,696,400 3,967,997 2,178,772
Cost of sales 2,085,905 2,266,586 1,360,994
------------ ------------ ------------
Gross profit 1,610,495 1,701,411 817,778
Selling, general and administrative expenses (3,670,307) (3,816,386) (2,855,906)
------------ ------------ ------------
Loss from operations (2,059,812) (2,114,975) (2,038,128)
Share of losses of associated company (509,404) (92,455) --
Interest income 8,112 28,978 92,892
------------ ------------ ------------
Loss before income tax (2,561,104 (2,178,452) (1,945,236)
Income taxes (note 10) -- -- --
------------ ------------ ------------
Net loss before preferred share dividends (2,561,104) (2,178,452) (1,945,236)
Preferred share dividends (134,420) (37,000) --
------------ ------------ ------------
Net loss after preferred share dividends $ (2,695,524) $ (2,215,452) $ (1,945,236)
------------ ------------ ------------
Loss per common share (0.24) (0.19) (0.19)
Weighted average number of common
shares outstanding 11,448,212 11,423,680 10,427,383
------------ ------------ ------------
</TABLE>
See accompanying notes to the consolidated financial statements.
- F4 -
<PAGE> 16
TRANSMEDIA EUROPE, INC.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF ADDITIONAL
COMMON COMMON PREFERRED PREFERRED PAID-IN
SHARES STOCK SHARES STOCK CAPITAL
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1993 10,010,680 $100 -- $ -- $ 3,366,307
Issuance of common stock 710,000 7 -- -- 2,129,993
Issue costs -- -- -- -- (98,903)
Net loss -- -- -- -- --
Issuance of restricted stock 700,000 7 -- -- 1,049,993
Effect of foreign currency
translation -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- --
---------- ---- ------- ------ -----------
Balance, September 30, 1994 11,420,680 114 -- -- 6,447,390
Issuance of common stock
due to exercise of options 6,000 -- -- -- 6,000
Issuance of convertible
preferred stock -- -- 590,857 5,909 2,062,091
Issue costs -- -- -- -- (103,400)
Net loss after preferred
share dividends -- -- -- -- --
Effect of foreign currency
translation -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- --
---------- ---- ------- ------ -----------
Balance, September 30, 1995 11,426,680 $114 590,857 $5,909 $ 8,412,081
Issuance of common stock 892,857 9 -- -- 1,249,991
Issue costs -- -- -- -- (15,000)
Net loss after preferred
share dividends -- -- -- -- --
Effect of foreign currency
translation -- -- -- -- --
Compensation expense -
restricted stock -- -- -- -- --
Treasury stock -- -- -- -- --
---------- ---- ------- ------ -----------
Balance, September 30, 1996 12,319,537 $123 590,857 $5,909 $ 9,647,072
========== ==== ======= ====== ===========
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN CURRENCY UNEARNED
TREASURY TRANSLATION COMPENSATION ACCUMULATED
STOCK ADJUSTMENT RESTRICTED STOCK DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1993 $ -- $ -- $ -- $ (52,716) $ 3,313,691
Issuance of common stock -- -- -- -- 2,130,000
Issue costs -- -- -- -- (98,903)
Net loss -- -- -- (1,945,236) (1,945,236)
Issuance of restricted stock -- -- (1,050,000) -- --
Effect of foreign currency
translation -- 8,060 -- -- 8,060
Compensation expense -
restricted stock -- -- 324,000 -- 324,000
--------- -------- ----------- ----------- -----------
Balance, September 30, 1994 -- 8,060 (726,000) (1,997,952) 3,731,612
Issuance of common stock
due to exercise of options -- -- -- -- 6,000
Issuance of convertible
preferred stock -- -- -- -- 2,068,000
Issue costs -- -- -- -- (103,400)
Net loss after preferred
share dividends -- -- -- (2,215,452) (2,215,452)
Effect of foreign currency
translation -- 2,300 -- -- 2,300
Compensation expense -
restricted stock -- -- 324,000 -- 324,000
--------- -------- ----------- ----------- -----------
Balance, September 30, 1995 -- $ 10,360 $ (402,000) $(4,213,404) $ 3,813,060
Issuance of common stock -- -- -- -- 1,250,000
Issue costs -- -- -- -- (15,000)
Net loss after preferred
share dividends -- -- -- (2,695,524) (2,695,524)
Effect of foreign currency
translation -- (7,235) -- -- (7,235)
Compensation expense -
restricted stock -- -- 324,000 -- 324,000
Treasury stock (517,112) -- -- -- (517,112)
--------- -------- ----------- ----------- -----------
Balance, September 30, 1996 $(517,112) $ 3,125 $ (78,000) $(6,908,928) $ 2,152,189
========== ======== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
-F5-
<PAGE> 17
TRANSMEDIA EUROPE, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
- - Net loss before preferred share dividends $(2,561,104) $(2,178,452) $ (1,945,236)
Adjustment to reconcile net loss to net cash used in operating activities:
- - Depreciation and amortisation 151,265 149,497 129,979
- - Amortisation of unearned compensation 324,000 324,000 324,000
- - Provision for irrecoverable restaurant credits 41,771 281,357 76,200
- - Share of losses of associated company 509,404 92,455 --
Changes in assets and liabilities:
- - Trade accounts payable 173,244 125,409 197,492
- - Accrued liabilities 84,590 (53,114) 317,717
- - Restaurant credits 206,619 (323,052) (1,659,726)
- - Trade accounts receivable 21,125 (17,426) (114,129)
- - Prepaid expense and other current assets (150,838) (41,465) (70,087)
- - Deferred membership fees 10,001 69,295 287,519
- - Deferred license fee income -- 500,000 --
----------- ----------- -----------
Net cash used in operating activities (1,189,923) (1,071,496) (2,456,271)
----------- ----------- -----------
Cash flows from investing activities:
- - Due to related parties (338,053) (55,965) (201,282)
- - Purchase of property and equipment (18,141) (17,594) (135,824)
- - Loan to associated company 30,868 (30,868) --
- - Net investment in associated company (300,000) (1,000,000) --
----------- ----------- -----------
Net cash used in investing activities (625,326) (1,104,427) (337,106)
----------- ----------- -----------
Cash flows from financing activities:
- - Net proceeds received from issuance of:
common stock 1,235,000 -- 2,031,097
convertible preferred shares -- 1,964,600 --
- - Payment of preferred dividend (71,685) -- --
- - Bank overdraft (109,422) 109,422 --
- - Exercise of options -- 6,000 --
----------- ----------- -----------
Net cash provided by financing activities 1,053,893 2,080,022 2,031,097
----------- ----------- -----------
Effect of foreign currency on cash 26,106 377 10,788
----------- ----------- -----------
Net decrease in cash and temporary
cash investments (735,250) (95,524) (751,492)
----------- ----------- -----------
Cash and temporary cash investments at
beginning of period 796,911 892,435 1,643,927
----------- ----------- -----------
Cash and temporary cash investments
at end of period $ 61,661 $ 796,911 $ 892,435
=========== =========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for income taxes for each of the periods presented.
Interest paid during the fiscal year ended September 30, 1996 was $13,750 (1995
:$12,022, 1994 :$nil).
See accompanying notes to the consolidated financial statements.
-F6-
<PAGE> 18
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of business
Transmedia Europe, Inc. ('the Company') was incorporated in Delaware on
February 9, 1993.
The Company's main business activity through its wholly owned
subsidiary company, Transmedia UK plc, is to make 'cash advances' to
restaurants for food and beverage credits from certain participating
restaurants, which are then recovered as the Company's cardholders
utilise their restaurant charge cards (see note 1(d)). Presently, the
Company's operations are in the United Kingdom and there is an
affiliate company operating in France.
The Company has been granted a license, (the 'Transmedia License'), to
operate a specialised restaurant charge card business in Europe, Turkey
and the countries of the former U.S.S.R. by Transmedia Network Inc.
('Network'), a corporation which is incorporated in the United States
of America. The agreement to purchase the Transmedia License was
initially entered into by Conestoga Partners Inc. ('Conestoga'), a
corporation which is related to the Company by virtue of the majority
shareholding in Conestoga held by Edward J Guinan III, the President,
Chief Executive Officer, Chief Financial Officer and Director of the
Company (see note 3).
The Company intends to expand operations in other portions of the
licensed territories through wholly-owned subsidiaries, unaffiliated
sublicensees and franchisees or through joint ventures.
As of September 30, 1996, Transmedia Europe, Inc. had equity interests
in the following companies:
<TABLE>
<CAPTION>
Name Country of Incorporation % Owned
<S> <C> <C>
Transmedia Europe plc United Kingdom 100
Transmedia UK plc United Kingdom 100
Transmedia UK, Inc. United States of America 100
Transmedia La Carte Restaurant S.A France 36
</TABLE>
(b) Principles of consolidation
The consolidated financial statements include the financial statements
of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(c) Investment in France
The Company has invested a total of $1,800,000 in Transmedia La Carte
Restaurant S.A. which operates the Restaurant Card in France. The
investment is accounted for using the equity method, as under the
current structure the Company will be unable to exercise unilateral
control by virtue of the Company owning just 36% of the equity and
having the right to appoint two of the four directors.
The shareholder agreement provides for "put" and "call" options. The
Company has a call option to acquire the joint venture partner's shares
in Transmedia La Carte Restaurant S.A. in the fourth year of operations
at a price based upon a valuation equal to ten times operating cash
flows. The joint venture partners have put options in years 2 and 4.
The basis for valuation under the year 2 option is equal to 120 % of
capital invested and under the year 4 option is equal to ten times
operating cash flows.
(d) Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants in exchange for credits less the amount by which these
credits are recouped by the Company as a result of Company cardholders
utilising their cards at participating restaurants. The amount by which
such credits are recouped amounts to approximately 50% of the retail
value of food and beverages consumed by cardholders. The Company
reviews recoverability of credits and establishes an allowance for
credits to restaurants that have ceased operations or whose credits may
not be utilised by cardholders.
- F7 -
<PAGE> 19
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
(d) Restaurant Credits (continued)
The funds advanced to participating restaurants are generally unsecured
and are recoverable as cardholders utilise their restaurant charge card
at the respective restaurant. In certain cases, the Company may request
a personal guarantee from the owner of a restaurant with respect of the
recoverability of the advance if the restaurant ceases operations or
ceases to be a participating restaurant. Generally, no other forms of
collateral or security are obtained from the restaurant owners.
(e) Intangible assets
Intangible assets consist entirely of the cost of the Transmedia
License and represents the consideration paid to Network in both cash
and the fair value of Company shares for the Transmedia License to
operate in the licensed territories using the systems, procedures and
"know how" of the Transmedia business.
The license cost is being amortised on a straight line basis over its
estimated useful life of 15 years from the commencement of operations
on October 1, 1993.
The Company evaluates the carrying value of its investment in license
costs for impairment based on an estimate of future undiscounted cash
flows that are expected to be generated and are directly attributable
to the Transmedia License. If the sum of those estimated future
undiscounted cash flows is less than the carrying value of the license
costs, it is the policy of the Company to measure impairment on the
basis of the fair value of the license costs, using a discounted cash
flow technique. In the opinion of management, there was no permanent
impairment in the carrying value of the license costs at September 30,
1996 or September 30, 1995.
(f) Property and equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is calculated using the straight line method over the
estimated useful lives of the assets as follows:
Furniture and fixtures 5 years
Office equipment 4-5 years
(g) Income taxes
The Company recognises deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Accordingly, deferred tax
liabilities and assets are determined based on the difference between
financial statement and tax basis of assets and liabilities using
enacted rates in effect for the year in which the differences are
expected to reverse. The effect on deferred tax assets and liabilities
of a change in tax rates is recognised in income in the period that
includes the enactment date.
A valuation allowance is established to reduce the deferred tax assets
when management determines it is more likely than not that the related
tax benefits will not be realised.
(h) Revenues
Revenues represent the retail value of food and beverages acquired from
participating restaurants by the Company's cardholders, less the 20% or
25% discount offered to cardholders. Membership fees collected on the
25% discount card are deferred and recognised as revenue in equal
monthly instalments over the periods benefited.
(i) Unearned compensation
The Company has recorded unearned compensation for shares of restricted
common stock issues in exchange for certain consultancy and financial
advisory services. The restricted shares and the unearned compensation
have been recorded at the fair value of the shares at the date at which
they were issued. Compensation expense is recorded on a periodic basis
as the restriction of such shares expires.
- F8 -
<PAGE> 20
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
(j) Cardholder bonuses
The Company operates a number of cardholder "Bonus" programs whereby
the cardholder receives a bonus of food and beverage, credited to their
account. The bonus is utilised as the cardholder uses The Restaurant
Card and is processed as an additional saving to the standard 20 % or
25% saving offered by the Company. The bonus is accrued by the Company
when the bonus is granted to the Company Cardholder.
(k) Loss per common share
Loss per common share is computed by dividing net loss by the weighted
average number of common stock outstanding. Common stock equivalents
have not been included because they are considered anti-dilutive.
(l) Foreign currencies
The reporting currency of the Company is the United States dollar.
For consolidation purposes, the assets and liabilities of overseas
subsidiary undertakings are translated at the closing exchange rates.
Consolidated statements of income of such undertakings are consolidated
at the average rates of exchange during the period. Exchange
differences arising on these translations are taken directly to
stockholders' equity.
Transactions in foreign currencies are recorded using the rate of
exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated using the
rate of exchange ruling at the balance sheet date and the gains or
losses on translation are included in the consolidated statement of
operations. In the year to September 30, 1996 the Company recorded an
exchange loss of $55,775 (1995 a gain of $3,653).
(m) Temporary cash investments
For purposes of the statements of cash flows, the Company considers all
investments with an original maturity of three months or less to be a
cash equivalent.
(n) Advertising costs
The Company expenses advertising costs as incurred. Advertising costs
for the years ended September 30, 1996, 1995 and 1994 were $56,610,
$nil and $24,537 respectively. The Company has used direct response
advertising in the past and may use such advertising in the future.
However, the Company did not have costs related to direct response
advertising campaigns during the years ended September 30, 1996, 1995
and 1994 that should be capitalised.
(o) Use of estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities to
prepare these financial statements in conformity with generally
acepted accounting principles. Actual results could differ from those
estimates.
-F9-
<PAGE> 21
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
2. INVESTMENT IN AFFILIATED COMPANY
The Investment in Transmedia La Carte Restaurant S.A. ("Transmdia
France") consists of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cost of investment $ 1,800,000 $ 1,500,000
Less: Share of license fee (466,667) (500,000)
----------- -----------
1,333,333 1,000,000
Share of losses (635,192) (92,455)
Amounts due from affiliate -- 30,868
----------- -----------
$ 698,141 $ 938,413
----------- -----------
</TABLE>
Due to the provision of "put" and "call" options in the shareholders
agreement which establish a basis under which Transmedia France may
become a wholly owned subsidiary, $500,000 of the $1,000,000
sub-license fee paid to the Company by Transmedia France in 1995 has
not been recognised but instead has been deferred until such time as
these options are exercised or expire. The remaining balance of
$500,000 has also been deferred against the investment in the
Transmedia France and is being amortised over a 15 year period
commencing October 1995.
The Transmedia License requires the payment of a royalty to Network in
the event that the Company opens in another country being the greater
of $250,000 or 25% of the initial fee.
On April 19, 1996 Transmedia France completed a rights issue of shares.
Whilst the Company declined to subscribe it did acquire 15,000 shares,
in an unrelated transaction, from International Advance, Inc., a
company of which Edward J Guinan III, President of the Company, is the
principal shareholder and an officer and director, in exchange for
$300,000 and certain rights to jointly develop systems unrelated to the
business of Transmedia France. Accordingly the Company's interest was
reduced to 36%. In December 1996 the Company reached an agreement,
effective January 1997, with Transmedia France under which it granted
sub-licenses for Belgium/Luxembourg, Spain, Italy and French speaking
Switzerland for 9,250,000Ffr (approximately $1,780,000). This payment
will be used by the Company to increase its interest in Transmedia
France to 60%. Network has agreed to defer the 25% royalties due upon
the completion of the agreement ($800,000 in aggregate) with payment to
be made as each country area is opened of $250,000 except for $50,000
for French speaking Switzerland. Under certain circumstances the
payment schedule can be accelerated.
3. RELATED PARTY TRANSACTIONS
On February 9, 1993, Edward J Guinan III purchased 100 shares of common
stock for $100 and subsequently received a stock dividend of 1,000
shares on February 10, 1993. He was issued with 4,550,623 shares of
common stock in a stock split effected in the form of a stock dividend
paid to holders of record at the close of business on May 5, 1993.
Edward J Guinan III, the President, Chief Executive Officer, and a
Director of the Company is also the President, Secretary, Treasurer and
a Director of Conestoga. Mr Guinan owns 73% of the outstanding common
stock of Conestoga.
Conestoga sold the License to the Company on May 19, 1993, for an
initial down payment of $275,000 plus the assumption by the Company of
all expenses incurred by Conestoga with respect to the License on or
after January 1, 1993. Pursuant to an amendment dated August 10, 1993,
Conestoga agreed to purchase 500,000 shares of common stock at a price
of $1.00 per share by forgiving $500,000 of costs and advances of the
Company for part consideration for the License of $275,000 and costs of
$225,000 incurred in the course of raising capital.
In connection with the relocation of Mr Guinan from New York to London,
the Company made certain arrangements including the loan of $284,566 to
Mr Guinan in February 1994 to pay the outstanding balance on his
mortgage. The Company also reimbursed Mr Guinan's relocation expenses
in the amount of approximately $3,108.
-F10-
<PAGE> 22
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
3. RELATED PARTY TRANSACTIONS (CONTINUED)
Pending resolution of Mr Guinan's residence status in London, the
Company advanced payment on the rental costs of his residence and other
sundry amounts in lieu of the payment of a portion of his salary. The
amount so advanced during 1995 was $224,991 of which $133,120 relates
to the rental of his residence, $22,376 is for travel expenses and the
balance of $69,495 for other sundry amounts. Mr Guinan had repaid
$192,000 of these amounts through September 30, 1995. The amount
advanced to Mr Guinan increased by $230,991 during the year ended
September 30, 1996. The cumulative total amount due to the Company has
been satisfied by repayment to the Company of $176,149 and the sale of
148,853 shares of Common Stock at $2.625 per share to the Company.
During 1995 the Company advanced $259,837 to International Advance,
Inc., a company of which Edward J Guinan III, President of the Company,
is the principal shareholder and an officer and director. The balance
at September 30, 1996 was $20,946.
The amount due to related parties of $416,280 at September 30, 1995
represents temporary funding and advances provided by Transmedia Asia
Pacific, Inc. offset by management charges from the Company. Transmedia
Asia Pacific, Inc. is an affiliate due to the significant shareholding
held by Edward J. Guinan III, the President, Chief Executive Officer,
Chief Financial Officer and Director of the Company. The main movements
during the year ended September 30, 1996 are for working capital
requirements but additions include $1,250,000 for proceeds for the
private placement of common stock on August 1, 1996 which has resulted
in Transmedia Asia Pacific, Inc. owing the Company $93,300 at the year
end.
The net amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
<S> <C> <C>
E Guinan III $ -- $ 335,897
Conestoga Partners, Inc. -- 113,851
International Advance, Inc 20,946 259,837
Transmedia Asia Pacific, Inc. 93,300 (416,280)
--------- ---------
$ 114,246 $ 293,305
========= =========
</TABLE>
The loans are unsecured and non interest bearing. Information regarding
the activity with respect to the amounts due from related parties is as
follows:
<TABLE>
<CAPTION>
E. Guinan III Conestoga International Transmedia
------------- --------- ------------- ----------
Partners Advances Asia Pacific
-------- -------- ------------
Inc.
----
<S> <C> <C> <C> <C>
Balance at September 30, 1994 $ 302,906 $ 44,597 $ - $ (110,163)
Additions 224,991 69,254 259,837 (385,000)
Amounts charged - - - 78,883
Amounts collected (192,000) - - -
---------- ---------- --------- -----------
Balance at September 30, 1995 335,897 113,851 259,837 (416,280)
Additions 230,991 12,522 281,750 1,340,307
Amounts charged - - 183,914 362,793
Amounts collected (176,149) - (704,555) (1,193,520)
Treasury stock (390,739) (126,373) - -
---------- ---------- --------- -----------
Balance at September 30, 1996 $ - $ - $ 20,946 $ 93,300
========== ========== ========= ===========
</TABLE>
-F11-
<PAGE> 23
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
4. INTANGIBLE ASSETS
Intangible assets consist of the costs of the Transmedia License as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Acquisition cost $ 1,621,284 $ 1,621,284
------------ ------------
Accumulated amortisation:
Balance at beginning of year 216,172 108,086
Charge for the year 108,086 108,086
------------ ------------
Balance at end of year (324,258) (216,172)
------------ ------------
Net book value at September 30, $ 1,297,026 $ 1,405,112
============ ============
</TABLE>
5 PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
FURNITURE AND OFFICE TOTAL
FIXTURES EQUIPMENT -----
-------- ---------
<S> <C> <C> <C>
COST
At September 30, 1994 $ 10,548 $ 137,853 $ 148,401
Additions 7,221 10,373 17,594
Foreign exchange 167 2,097 2,264
--------- --------- ---------
At September 30, 1995 17,936 150,323 168,259
Additions -- 18,141 18,141
Foreign exchange (1,887) (3,894) (5,781)
--------- --------- ---------
At September 30, 1996 16,049 164,570 180,619
--------- --------- ---------
ACCUMULATED DEPRECIATION
At September 30, 1994 1,545 21,069 22,614
Charge for the year ended
September 30, 1995 2,904 38,507 41,411
Foreign exchange 25 316 341
--------- --------- ---------
At September 30,1995 4,474 59,892 64,366
Charge for the year ended
September 30, 1996 3,209 39,970 43,179
Foreign exchange (111) (3,172) (3,283)
--------- --------- ---------
At September 30, 1996 7,572 96,690 104,262
--------- --------- ---------
NET BOOK VALUE AT SEPTEMBER 30, 1996 $ 8,477 $ 67,880 $ 76,357
========= ========= =========
NET BOOK VALUE AT SEPTEMBER 30, 1995 $ 13,462 $ 90,431 $ 103,893
========= ========= =========
</TABLE>
-F12-
<PAGE> 24
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
6. ALLOWANCE FOR IRRECOVERABLE RESTAURANT CREDITS
Changes in the Company's allowance for irrecoverable restaurant credits
were as follows:
<TABLE>
<CAPTION>
Year ended Year ended September 30,
September 30, 1996 1995
<S> <C> <C>
Balance at the beginning of the period $ 357,557 $ 76,200
Additions - charged to costs and expenses 41,771 281,357
---------- ----------
Balance at end of period $ 399,328 $ 357,557
========== ==========
</TABLE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1996 1995
<S> <C> <C>
Accrued payroll and holiday pay $ 69,061 $ 94,907
Income taxes payable - 1,600
Cardholder bonuses 8,762 -
Tips and tax 113,102 47,717
Food and beverage provision 71,098 -
Professional fees 54,600 100,713
Royalties payable 22,037 21,266
Preferred share dividends 99,735 37,000
------------ -----------
$ 438,395 $ 303,203
============ ===========
</TABLE>
8. STOCK OPTIONS AND WARRANTS
Under the Company's 1993 stock option and rights plan (the 'Plan'), the
Company may grant stock options and stock appreciation rights to
persons who are now or who during the term of the Plan become key
employees (including those who are also directors) and to independent
sales agents. Stock options granted under the Plan may either be
incentive stock options or non-qualified stock options for US federal
income tax purposes. The Plan provides that the stock option committee
of the board of directors may grant stock options or stock appreciation
rights with respect of a maximum of 250,000 shares of common stock at
an exercise price not less than the fair market value at the date of
grant for qualified and non-qualified stock options.
The Company has allocated options to purchase 206,000 shares of common
stock under the Plan at a price of $1.00 exercisable at any time
through August 31, 1998. No stock appreciation rights have been
granted.
The per share fair value of the stock options granted in 1996 was $0.40
on the date of grant using the Black Scholes valuation method with the
weighted average assumptions being an expected dividend yield of 0%, a
risk free interest rate of 6% and an expected life being the remaining
term of the option.
The Company has also issued warrants to purchase 597,619 shares of
common stock at an exercise price ranging from $1.40 to $2.50 per
share. The warrants have a three to five year term expiring through
July 2000.
-F13-
<PAGE> 25
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
8. STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock option and warrant activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
Options Warrants
Number of Number of Weighted Average
Shares Exercise Price Shares Exercise Price
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 6,000 $1.00 - -
Granted - - 200,000 $1.50
Exercised (6,000) $1.00 - -
--------------- --------------- --------------- ---------------
Balance at September 30, 1995 - - 200,000 $1.50
Granted 40,000 $1.78 397,619 $1.68
Exercised - - - -
--------------- --------------- --------------- ---------------
Balance at September 30, 1995 40,000 $1.78 597,619 $1.62
=============== =============== =============== ===============
</TABLE>
The Company applies APB Opinion No.25 in accounting for its stock
options and, accordingly, no compensation cost has been recognised for
its stock options in the financial statements. Had the Company
determined compensation cost based upon the fair value at the grant
date for its stock options under SFAS No.123, the Company's net losses
for the year ended September 30, 1996, would have been increased to the
pro forma amounts indicated below:
<TABLE>
<S> <C>
Net loss As reported $ (2,695,524)
Pro forma $ (2,711,364)
Loss per share
As reported $ (0.24)
Pro forma $ (0.24)
</TABLE>
Pro forma net loss reflects only options granted in 1996. Therefore,
the full impact of calculating compensation cost for stock options
under SFAS No.123 is reflected in the pro forma net loss amounts
presented above.
9. LEASES
The Company leases certain office space under lease agreements.
Future minimum lease payments under non-cancellable operating leases as
of September 30, 1996, are as follows:
<TABLE>
<CAPTION>
Year ending September 30
<S> <C> <C>
1997 $ 150,846
1998 150,846
------------
Total minimum lease payments $ 301,692
------------
</TABLE>
The amount charged to the consolidated statement of operations for rent
expense in the year ended September 30, 1996 was $149,449 (1995:
$111,526).
-F14-
<PAGE> 26
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
10. INCOME TAXES
Income taxes reflected in the accompanying statements of operations
differ from the amounts computed by applying the US federal tax rate of
34% to loss before taxes as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994
----------- ------------ -------------
<S> <C> <C> <C>
Computed 'expected' tax benefit $ (871,000) $ (740,000) $ (661,000)
Non deductible expenses 57,000 60,000 6,000
Change in valuation allowance for deferred tax assets 807,000 747,000 662,000
Other (net) 7,000 (67,000) (7,000)
----------- ----------- -----------
Income tax expense $ -- $ -- $ --
----------- ----------- -----------
The tax effects of temporary differences that give rise to deferred tax
assets are as follows:
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994
----------- ------------ -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carry forwards $ 1,463,000 $ 890,000 $ 593,000
Deferred license fee 170,000 170,000 --
Investment in affiliated company 375,000 201,000 --
Royalties 188,000 119,000 46,000
Pre operating costs capitalised for
tax purposes 7,000 11,000 17,000
Other 13,000 18,000 6,000
----------- ----------- -----------
Total 2,216,000 1,409,000 662,000
Less valuation allowance (2,216,000) (1,409,000) (662,000)
----------- ----------- -----------
Net deferred tax assets $ -- $ -- $ --
=========== =========== ===========
</TABLE>
The US Federal net operating loss carry forward at September 30,1996 of
approximately $2.3 million will begin to expire in the year 2009. The
foreign net operating loss carry forward of approximately $2.0 million
may be carried forward indefinitely.
11. COMMITMENTS
The Company has an employment agreement with its Chairman which
provides for salary at an annual rate of 100,000 pounds (UK) or
$156,000 using the average exchange rate for the year of $1.56 to
(pound)1. The agreement was initially for a three year term up to
August 30, 1996 and is subject to automatic one-year renewals.
Each quarter the Company must pay to Network in cash for any part of
the licensed territories developed by the Company or any affiliate of
the Company a royalty equal to 2% of gross sales. 'Gross sales' are
defined as the gross reduction during the quarter in Food and Beverage
Credits. The Company will also pay Network 2% of the gross sales
resulting from any other services that Network in the future may
provide to cardholders or participating restaurants. Royalties charged
to income pursuant to this agreement for the years ended September 30,
1996, 1995 and 1994 amounted to $83,498, $108,834 and $54,456
respectively.
-F15-
<PAGE> 27
TRANSMEDIA EUROPE, INC.
Notes to the Consolidated Financial Statements
11. COMMITMENTS (CONTINUED)
In order to maintain full rights under the Transmedia License (1) no
person or group of persons, without the prior permission of Network,
may acquire beneficial ownership of 30% or more of the Company; (2)
Edward J Guinan III is required to maintain beneficial ownership of no
less than the lower of 20% of common stock, or 15% of the common stock
(as long as three other largest stockholders beneficially own no more
than 15% in the aggregate); (3) the Company must commence operations
(a) in the United Kingdom within 4 months after the August 11, 1993
closing date under the Transmedia License (the 'Closing Date'), (b) in
another country other than the United Kingdom within 3 years after the
Closing Date, and (c) in a second other country within the earlier of 2
years after the first country or 5 years from the Closing Date; (4) the
Company must procure in the United Kingdom (a) 100 participating
restaurants within the first 12 months or 250 participating restaurants
within the first 24 months of the full rights under the Transmedia
License; (b) 2,000 cardholders within the first 12 months or 5,000
cardholders within the first 24 months of the Transmedia License
(including those receiving cards without the payment of the initial
fee) and (c) participating restaurant renewals at the rate of 70% per
year. As at September 30, 1996 the Company has complied in all
material respects with all the covenants contained in the License
Agreement.
The Company also has other obligations under the Transmedia License
respecting business practices, use of Network software programs,
marketing, training, confidentiality and standard of performance, among
others, the material breach of any of which may result in the
termination of the full rights under the Transmedia License.
Effective as of October 15, 1993 the Company entered into an agreement
with Bostoner International, pursuant to which Bostoner International
agreed to provide certain counselling and financial advisory services
to the Company through December 31, 1996. Pursuant to such agreement,
the Company has issued 700,000 shares of common stock to Bostoner
International. A portion of such shares are subject to forfeiture if
such agreement is terminated prior to December 31, 1996 at the rate of
18,000 shares for each complete month remaining at the date of
termination until December 31, 1996. As of September 30, 1996
approximately 648,000 of such shares are no longer subject to
forfeiture. The restricted shares and an equal amount of the unearned
compensation have been included in the balance sheet at the fair value
of the shares at the date at which they were issued, considered to be
$1.50 per share, and compensation expense for services rendered is
recorded on a periodic basis as the restriction of such shares expire.
12. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the United Kingdom. No
single customer accounted for more than 10% of the Company's service
revenues in the period under review. No single restaurant's credit was
greater than 10% of the Company's total restaurant credit balance at
September 30, 1996.
13. CONTINGENCY
The Company is the defendant in a law suit relating to the granting of
a sub-license to operate in Belgium. Management believe that the
ultimate outcome of the case will not have a material impact on the
financial statements.
14. NEED FOR FUTURE FUNDING
Although the Company anticipates that its current cash, together with
revenues expected to be derived from operations, should, based upon its
internal calculations, be sufficient to fund operating, and other
capital needs for the next year, the Company will be required to seek
additional financing during such period in the event it either intends
to make acquisitions or that there are delays, cost overruns, sales
declines or unanticipated expenses. While the Company is confident that
sufficient funds will be available to meet its anticipated business
expansion needs for the next year there can be no assurance that the
Company will be able to obtain such additional financing during such 12
month period.
-F16-
<PAGE> 28
ITEM 9 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
- 11 -
<PAGE> 29
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by Item 10 will be set forth under the heading "Election
of Directors" in the Company's definitive Proxy Statement for its 1997 annual
meeting of shareholders (the "Proxy Statement"), to be filed on or before
January 28, 1997, and is incorporated herein by this reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information called for by Item 11 will be set forth under the heading "Executive
Compensation" in the Proxy Statement, and is incorporated herein by this
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by Item 12 will be set forth under the heading "Security
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement,
and is incorporated herein by this reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by Item 13 will be set forth under the heading "Certain
Relationships and Related Transactions" in the Proxy Statement, to be filed on
or before January 28, 1997, which is incorporated herein by this reference.
- 12 -
<PAGE> 30
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are being filed as part of this Report.
(a) (1) Financial Statements:
Transmedia Europe, Inc.
See "Index to Consolidated Financial Statements" contained
in Part II, Item 8
(a) (2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or
the required information is shown in the Consolidated
Financial Statements or the Notes thereto.
(a) (3) Exhibits:
10.1 (o) Sublicense Agreement dated June 30, 1995, by and
between the Company, International Advance,
Inc. and Network
10.1 (p) Master License Agreement amendment, dated December 6,
1996, by and between Network, the Company and Transmedia
Europe, Inc.
10.1 (q) First Amendment to Sublicense Agreement, to be dated,
by and between Network, the Company, International Advance,
Inc. and Transmedia France.
(b) Reports on Form 8-K
None
(c) Exhibits:
See paragraph (a) (3) above for items filed as exhibits to this Form
10-K as required by item 601 of Regulation S-K.
(d) Financial Statement Schedules:
See paragraphs (a) (1) above for financial statement schedules.
- 13 -
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized
TRANSMEDIA EUROPE, INC.
(Registrant)
Date: December 20, 1996 /s/ Edward J. Guinan III
---------------------------------------------
Name: Edward J. Guinan III
Title: Chairman, Chief Executive Officer and
Director
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
Date: December 20, 1996 /s/ Edward J. Guinan III
---------------------------------------------
Name: Edward J. Guinan III
Title: Chairman, Chief Executive Officer and
Director
Date: December 20, 1996 /s/ Paul L. Harrison
---------------------------------------------
Name: Paul L. Harrison
Title: Director
Date: December 20, 1996 /s/ Walter M. Epstein
---------------------------------------------
Name: Walter M. Epstein
Title: Secretary, Director
Date: December 20, 1996 /s/ Joseph Vittoria
---------------------------------------------
Name: Joseph Vittoria
Title: Director
Date: December 20, 1996 /s/ Helene Ploix
---------------------------------------------
Name: Helene Ploix
Title: Director
<PAGE> 32
Exhibit Index
Exhibit DESCRIPTION
- ------- -----------
10.1 (o) Sublicense Agreement dated June 30, 1995, by and
between the Company, International Advance,
Inc. and Network
10.1 (p) Master License Agreement amendment, dated December 6,
1996, by and between Network, the Company and Transmedia
Europe, Inc.
10.1 (q) First Amendment to Sublicense Agreement, to be dated,
by and between Network, the Company, International Advance,
Inc. and Transmedia France.
<PAGE> 1
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT (the "Agreement") is made as of the 30th
day of June, 1995, by and between Transmedia Europe, Inc., a Delaware
corporation ("Europe") and International Advance Inc., a Delaware corporation
("Advance").
W I T N E S S E T H:
WHEREAS, TMNI owns the Marks in the business developed and operated
in the United States by Transmedia Network, Inc. ("Network"). Except as
otherwise provided the term Network shall include both Network and TMNI;
WHEREAS, pursuant to a license agreement made December 14, 1992, as
amended on April 12, 1993 and May 11, 1993 TMNI International, Inc., a Delaware
corporation ("TMNI") licensed to Europe, among other things certain exclusive
rights to use trademarks owned by TMNI;
WHEREAS, it is the intention of Advance to transfer the rights and
obligations under this Agreement to an entity formed in France to be known as
Transmedia La Carte Restaurant, S.A. ("La Carte"); and
WHEREAS, Advance desires to obtain from Europe, and Europe wishes to
grant to Advance, a sublicense to use the Marks under the terms and conditions
hereinafter specified.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings as hereinafter set forth.
1.1 "Business" shall mean the business which (a) acquires from
Member Restaurants "rights-to-receive" meal credits which are held as inventory
for use by consumers who have been issued a TRANSMEDIA Card; and (b) provides
such other services to TRANSMEDIA Cardholders or Member Restaurants as may be
authorized by Europe under the terms of this Agreement.
1.2 The "European Software" shall mean the proprietary computer
software programs developed and owned by Europe which will be used by Advance in
the operation of the Business. These shall also be included any and all
modifications, improvements, corrections, updates and enhancements, whether
furnished by Europe or developed by Advance.
<PAGE> 2
1.3 "Indicia" shall mean all specialized procedures and techniques
developed by Europe directly or through the assistance of Network contained in
the Operations Manual or otherwise disclosed to Advance with respect to:
soliciting, marketing and acquiring Member Restaurants and TRANSMEDIA
Cardholders; processing, monitoring and tracking all Member Restaurant accounts
and credit transactions; providing support services for TRANSMEDIA Cardholders;
and handling record keeping, reporting, personnel management, sales promotion,
marketing and advertising.
1.4 "Marks" shall mean the name and style "TRANSMEDIA" as well as
any other trademarks or tradenames whose use may be granted by Europe to Advance
in the future in connection with the Business.
1.5 "Master License" shall mean the license granted by TMNI to
Europe pursuant to an agreement dated December 14, 1992 as thereafter amended.
1.6 "Member Restaurants" shall mean restaurants which from which
Advance acquires rights-to-receive meal credits.
1.7 "Operations Manual" shall mean the confidential operations
manual used by Europe, in the operation of its Business.
1.8 "Sublicense" shall mean the rights granted under Section 2.1 and
2.2 of this Agreement.
1.9 "Term" shall mean the period from the date of this Agreement
through any termination date set forth this Agreement.
1.10 "Territory" shall mean the Republic of France and
Monaco.
1.11 "TRANSMEDIA Card" shall mean the card provided to cardholders
by any entity authorized to issue TRANSMEDIA Cards. Such entities to be
collectively referred to as "TRANSMEDIA Card Issuers."
2. GRANT
2.1 All rights granted hereunder by Europe to Advance, are strictly
subject to the limitations on the rights and obligations of Europe set forth in
the Master License. To the extent that the grant made hereunder is at any time
in conflict with the Master License, the terms of the Master License shall
govern, and the grant hereunder shall be deemed to be amended, ab initio, to be
consistent therewith, except as may otherwise be specifically provided in this
Agreement. No changes in the consideration payable under this Agreement shall
result from any
-2-
<PAGE> 3
deemed amendment nor shall Advance be able to bring any action for damages or
specific performance against Europe based upon such deemed amendment.
2.2 Europe hereby grants to Advance, subject to the terms,
conditions and limitations hereof, an exclusive Sublicense to use the Marks and
the Europe Software in connection with the operation of the Business in the
Territory. It is understood and agreed that Advance may transfer the Sublicense
to La Carte or an other entity in which Advance wishes to operate the Business,
prior to the commencement of the Business provided that such entity has
sufficient capital to commence the Business including the payment of the initial
Sublicense fee of $US1,000,000 (one million U.S. Dollars) provided for in
Section 2.13 of this Agreement.
2.3 Advance acknowledges that it has no ownership interest in the
Europe Software or the Marks, and accepts the rights granted to it under the
Sublicense as specifically described and limited by the terms of this Agreement.
2.4 Advance represents, warrants and agrees that neither during the
Term of this Agreement nor thereafter, will Advance take any action whatsoever
in derogation of the rights of Europe or Network as set forth in this Agreement
and the Master License.
2.5 Advance agrees that any and all goodwill associated with or
identified by the Marks shall inure directly and exclusively to the benefit of
Europe and Network. Advance agrees that any future trademarks, service marks,
trade names, trade secrets or copyrighted materials which may be developed shall
inure and accrue to the sole benefit of Europe and Network.
2.6 No advertising by Advance or other use of the Marks by Advance
shall contain any statement or material which may, in the judgment of Europe, be
in bad taste or inconsistent with Europe's public image, or tend to bring
disparagement, ridicule or scorn upon Europe, the Marks or the goodwill
associated therewith. Advance shall advertise and promote the Business only
under the Marks, without any accompanying words or symbols except as otherwise
required by law and approved in writing by Europe.
2.7 Advance shall use the Marks only in the manner expressly
specified and approved in writing by the Europe.
2.8 In order to ensure the quality of the Business being conducted
in connection with which the Marks Europe shall have the right of entry and
inspection of Advance's principal place of business at all reasonable times and
the right to observe the manner in which Advance is conducting its operations.
-3-
<PAGE> 4
Such right shall include the ability to confer with Advance's employees and
customers, and to inspect, without limitation, forms, agreements, applications
and relating items and activities utilized for soliciting accounts for Member
Restaurants and TRANSMEDIA Cardholders to ensure that the sales, promotion and
enlisting activities are satisfactory and meet the quality control provisions
and performance standards established by Europe.
2.9 On the request of Europe, Advance shall assist Network, at
Network's cost, in the procurement and maintenance of Network's rights in the
Marks. Advance agrees to execute and deliver to Network, in such form as Network
may reasonably request, all instruments necessary to effectuate protection of
the Marks or to record Advance as a registered user of the Marks or to file or
record this Agreement. If Advance fails to execute such instruments, Advance
hereby appoints Network its attorney-in-fact to do so on its behalf. The power
granted to Network in the preceding sentence is acknowledged by Advance to be
coupled with an interest and shall be irrevocable. Advance understands and
agrees that Network makes no warranty or representation that protection shall be
secured in the Marks.
2.10 Advance shall at all times use its best efforts, consistent
with reasonable commercial practice, to promote the use of the Marks and the
Business in the Territory, including, but not limited to, effecting the widest
and best possible distribution of the TRANSMEDIA Card in the Territory;
procuring Membership Restaurants and providing related services and activities
throughout the Territory. Upon the failure of Advance to use its best efforts,
consistent with reasonable commercial practice, to promote the use of the Marks
and the Business in the Territory, Europe shall have the right to terminate this
Agreement.
2.11 Advance acknowledges that it is a sophisticated entity
represented by counsel, and that it is entering into this Agreement with ample
knowledge of the legal and business risks relating to the Agreement. Advance
further acknowledges that it believes that this Agreement is not a franchise
agreement and that no official registration or approval of this Agreement or any
offer to enter into this Agreement is required. To the extent that this
Agreement can be interpreted as a franchise agreement Advance waives all rights,
including, without limitation, rights of rescission of the Agreement or rights
to recover civil penalties or damages from Europe.
2.12 (a) Holders of a TRANSMEDIA Card issued by TRANSMEDIA Card
Issuers shall have the ability to use the TRANSMEDIA Card in Member Restaurants
wherever located. TRANSMEDIA Card Issuers shall each be responsible for
TRANSMEDIA Cards which are issued by them.
-4-
<PAGE> 5
(b) Operating procedures with respect to the processing,
billing and collection of charges by TRANSMEDIA Issuers shall be included in the
Operations Manual and shall be updated periodically to reflect then current
procedures. Procedures shall be designed to maximize the prompt crediting of
Member Restaurant Credits used to the operating entity in which the Member
Restaurant is located, such credit to be in the currency of such region.
Similarly, charge backs shall be promptly recorded for charges that are rejected
for whatever reason. Advance shall provide periodically to Europe a listing of
its TRANSMEDIA Cardholders in a format and at a frequency to be determined by
Europe.
2.13 Upon the execution of this Agreement and as consideration for
the rights granted by Europe to Advance hereunder, Advance will pay to Europe by
bank wire transfer, the sum of One Million ($1,000,000) U.S. Dollars of which
Two Hundred Fifty Thousand U.S. Dollars shall be promptly remitted to Network.
Such payment shall be in immediately available funds.
3. DEVELOPMENT OBLIGATIONS
Advance shall commence operating in the Territory as promptly as
possible following the execution of this Agreement. If after six months Advance
has not commenced operations, Europe may, in its sole and absolute discretion,
terminate this Agreement.
4. TERM
The Term of this Agreement shall commence on the date first above
written and shall continue on a perpetual basis unless otherwise terminated
pursuant to this Agreement or by mutual agreement of Europe and Advance.
5. TRAINING AND MAINTENANCE
5.1 Advance will purchase, at its own expense, adequate computer
hardware to be used by Advance for the operation of the Business.
5.2 Europe will deliver to Advance one copy of the Europe Software
along with all associated user guides and reference documentation for the Europe
Software then in the possession or under the control of Europe.
5.3 Europe shall make available, at Advance's expense, training
which Europe deems reasonably sufficient with respect to all facets of the
Business including, but not limited to, sales, administration and operations.
Such training shall be scheduled consistent with the reasonable requirements of
Advance and the availability of Europe's personnel.
-5-
<PAGE> 6
6. OWNERSHIP, TITLE AND PROPRIETARY RIGHTS
Advance acknowledges that Europe is the sole owner of the Europe
Software. This sole right of ownership includes any and all modifications,
corrections, updates, changes, improvements and enhancements to the Europe
Software.
7. CONFIDENTIAL INFORMATION
7.1 Neither Advance nor any of its principals shall at any time,
either during or after the Term of this Agreement, reveal any trade secrets of
Network and/or Europe including without limitation TRANSMEDIA Cardholder base,
technical information, drawings, materials equipment, computer systems,
agreement forms, design, advertising format, support and service techniques and
other techniques and data except as required for the operation of the Business
in the Territory in compliance with this Agreement.
7.2 Due to the special and unique nature of the confidential
information, Advance hereby agrees and acknowledges that Europe and Network
shall be entitled to immediate equitable remedies, including, but not limited
to, restraining orders and injunctive relief in order to safeguard such
proprietary, confidential, unique, and special information of Network or Europe
and that money damages alone would be an insufficient remedy with which to
compensate Network or Europe for any breach of the terms of Article 7 of this
Agreement. Furthermore, Advance agrees that all employees and independent
contractors of Advance having access to confidential information shall be
required to execute non-disclosure agreements in a form acceptable to Europe.
Advance shall take all necessary action to ensure that its employees and
independent contractors comply with the terms and conditions of Article 7.
8. ADVERTISING
8.1 Advance shall pay for its own advertising, including, without
limitation, the cost of preparing and conducting direct mail, television, radio,
magazine and newspaper advertising campaigns and other public relations
activities; employing advertising agencies to assist therein; and providing
promotional brochures and other marketing and public relations materials.
8.2 Advance shall not advertise or use in advertising or any other
form of promotion, the trademarks, service marks or commercial symbols of
Network or Europe without appropriate trademark or copyright marks and
registration marks or the designations TM or SM where applicable. Advance shall
not in any manner whatsoever, including, but not limited to, advertising or any
form of promotion or public relations, make any reference to
-6-
<PAGE> 7
the Marks or any other forms of trademarks, service marks, or commercial symbols
of Network or Europe without appropriate designation protective of the rights of
copyright, trademark, trade name and service mark.
9. ROYALTIES AND OTHER FEES
9.1 For the Sublicense, in addition to the fee payable to Europe set
forth in Section 2.13, Advance shall pay to Europe, in U.S. dollars, a royalty
equal to five (5%) per cent of Advance's gross sales. For the purposes of this
Agreement, gross sales means all membership fees and the gross reduction in
rights-to-receive less any amounts for service charges or VAT.
9.2 Advance shall be solely responsible for the collection of all
monies due or rights-to-receive within the Territory from Member Restaurants and
shall be solely responsible for the payment to Member Restaurants located in the
Territory of monies due for the purchase of such rights-to-receive meal credits
from such Member Restaurants.
9.3 Europe will charge a fee of up to $50,000 per annum, against
documented upgrade or maintenance charges. Any upgrades performed directly by
Advance shall be provided without charge to Europe. No outside party may be
retained by Advance to perform upgrades or maintenance without Europe's prior
written approval.
9.4 In the event that Advance is authorized by Europe to engage in
other business activities, whether such activities are a derivative of the
restaurant discount charge business (e.g. an independent entity selling the
theater tickets at a discount to TRANSMEDIA Cardholders) or involve other
services offered directly or indirectly to TRANSMEDIA Cardholders or Member
Restaurants such as a program enabling Member Restaurants to buy equipment and
services at a discount, Europe shall be entitled to a royalty on all such
activities. The parties shall agree upon the royalties payable and the basis for
the computation of royalties payable as a condition to approval by Europe. The
terms by which such activities are authorized shall be deemed to be part of this
Agreement, as if initially included, and general terms such as those covering
payments, defaults and periodic reports shall be deemed to apply.
10. ACCOUNTING, RECORDS AND PAYMENTS
10.1 Within thirty (30) days after the end of each fiscal quarter
beginning with the fiscal quarter in which sales revenues commence, Advance
shall furnish to Europe full and accurate and complete financial statements,
including a balance sheet and profit and loss statements, showing gross sales
for such fiscal quarter, a computation of the royalty due on those
-7-
<PAGE> 8
gross sales, and full payment in U.S. dollars to Europe of such royalties due.
Within sixty (60) days after the end of each fiscal year, Advance shall furnish
to Europe full and accurate and complete certified financial statements,
including a balance sheet and profit and loss statements, showing gross sales
for such fiscal year, a computation of the royalty due on those gross sales, and
full payment in U.S. dollars to Europe of such royalties due. Receipt or
acceptance by Europe of any of the statements furnished or any sums paid
pursuant to this Agreement will not preclude Europe from questioning their
correctness at any time. Royalties on sales in a currency other than U.S.
dollars shall be computed and converted on the basis of the conversion rate for
purchase of U.S. dollars for such currency appearing in The New York Times on
the last day of the fiscal quarter or year being reported.
10.2 If all or part of any payment from Advance to Europe is not
made when due, Advance will pay interest on such unpaid amount at the rate of
15% per annum.
10.3 Advance will maintain appropriate and accurate books of account
reasonably required for the computation of the gross sales of all transactions
within the scope of this Agreement. Europe will have the right, through any
authorized representative of its choice, on reasonable advance notice to
Advance, to examine and photocopy all or part of the books of account and all
other records, documents and material in the possession or under the control of
Advance with respect to the subject matter of this Agreement. If following any
such examination, it is determined that additional royalty payments are due to
Europe, Advance will promptly pay such additional amount as well as interest
accrued thereon at a rate of fifteen (15%) per annum from the date when such
payment was originally due to the date when payment is made. If the additional
royalty payment due to Europe is equal to two (2%) per cent or more of the total
royalties paid in respect of the period concerned, Advance will also promptly
pay to Europe the costs incurred in connection with the examination. All books
of account and records will be kept available by Advance for at least two (2)
years after the calendar year to which they relate.
10.4 Advance covenants that it shall file and pay when due all taxes
applicable to the Business, and Advance hereby indemnifies Europe against any
and all claims, actions, costs, expenses, damages and liabilities which may
result from the failure by Advance to fulfill such covenant.
11. ADVANCE'S STANDARDS OF PERFORMANCE
11.1 Except as otherwise authorized in writing by Europe, Advance
shall not (i) enlist or attempt to enlist any entity other than a restaurant as
a provider of rights-to-receive
-8-
<PAGE> 9
credits; (ii) enlist or attempt to enlist any TRANSMEDIA Cardholder to use the
TRANSMEDIA Card other than as a discount food and beverage card; (iii) take any
direct or indirect action which would result in use of the TRANSMEDIA Card for
any purpose other than the receipt by the holder thereof of discounted food and
beverages; or (iv) take any direct or indirect action to redeem or attempt to
use or redeem rights-to-receive credits other than through use of the TRANSMEDIA
Card.
11.2 Advance shall secure and maintain in force all required
governmental licenses, permits and certificates relating to the operation of the
Business and shall operate the Business in full compliance with all applicable
laws, ordinances and regulations.
11.3 Advance shall notify Europe in writing within five (5) days of
the commencement of any action, suit, or proceeding, and of the issuance of any
order, writ, injunction, award or decree of any court, agency, or other
governmental instrumentality, which may affect the operation or financial
condition of Advance.
12. COVENANTS
12.1 Advance covenants that during the Term, except as otherwise
approved in writing by Europe, Advance shall not, either directly or indirectly,
for itself, or through, on behalf of, or in conjunction with any person,
persons, partnership, or corporation:
(a) divert or attempt to divert any business or customer of
the Business to any competitor, by direct or indirect inducement or otherwise,
or do or perform, directly or indirectly, any other act injurious or prejudicial
to the goodwill associated with the Marks;
(b) employ or seek to employ any person who is at that time
employed by TRANSMEDIA Issuer; or
(c) own, maintain, engage in, or have any interest in any
business (including any business operated by Advance prior to entry into this
Agreement) specializing, in whole or in part, in providing discount services,
whether through use of barter, trade credits, scrip or similar items, or in
printing, selling, distributing or soliciting of a charge card for discount
services or activities or promoting a charge card providing services the same as
or similar to some of those services provided, sold or offered through the
Business.
12.2 Advance specifically acknowledges that, pursuant to this
Agreement, Advance will receive valuable training and confidential information,
including, without limitation,
-9-
<PAGE> 10
information regarding the promotional, operational, sales, and marketing methods
and techniques of Network, Europe and the Business. Accordingly, Advance
covenants that, except as provided in this Agreement or as otherwise approved in
writing by Europe, Advance shall not, during the term and, for a period of two
(2) years thereafter after the expiration or termination of this Agreement,
regardless of the cause of termination, either directly or indirectly, for
itself, or through, on behalf of, or in conjunction with any person, persons,
partnership, or corporation, own, maintain, engage in, or have any interest in
any business engaging, in whole or in part, in providing discount services,
whether through use of barter, trade credits, scrip or similar items, or
printing, selling, distributing or soliciting of a charge card for discount
services or activities or promoting a charge card or providing services the same
as or similar to that sold, offered or provided or which Europe has the right to
offer or provide in the future under the Master License by Europe.
12.3 The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Article 12 is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision, Advance expressly agrees to be bound by any lesser covenant
subsumed within the terms of such covenant that imposes the maximum duty
permitted by law, as if the resulting covenant were separately stated in and
made a part of this Article 12.
12.4 Advance understands and acknowledges that Europe shall have the
right, in its sole discretion, to reduce the scope of any covenant set forth in
Sections 12.1 and 12.2 in this Agreement, or any portion thereof, without
Advance's consent, effective immediately upon receipt by Advance of written
notice thereof, and Advance agrees that it shall comply forthwith with any
covenant as so modified, which shall be fully enforceable.
13. DEFAULT AND TERMINATION
13.1 If Advance breaches any of its obligations under this
Agreement, Europe will have the right, without prejudice to any other rights
Europe may have, to terminate this Agreement by giving written notice to Advance
of such breach, and this notice will automatically become effective unless
Advance completely remedies the breach within ten (10) days after such notice of
breach is given to Advance.
13.2 This Agreement shall terminate automatically upon delivery of
notice of termination to Advance, if Europe makes a reasonable determination
that continued operation of the Business
-10-
<PAGE> 11
by Advance will result in an imminent danger to public safety, or if Advance or
its chief executive officer:
(a) is convicted of or pleads no contest to a felony, or a
crime involving moral turpitude, or any other crime or offense that is likely to
adversely affect the Business or the Marks;
(b) abandons or fails or refuses to actively operate the
Business for three (3) weeks in any twelve (12) month period, unless Advance's
operations have been closed for a purpose approved by Europe;
(c) makes any unauthorized use or duplication or sale of the
Member Restaurant list or TRANSMEDIA Cardholder base list or breaches any
obligation under Article 12;
(d) files a petition or seeks relief under or takes advantage
of any insolvency law; makes an assignment for the benefit of its creditors;
commences a proceeding for the appointment of a receiver, trustee, liquidator,
custodian or conservator of itself or of the whole or substantially all of its
property; files a petition or an answer to a petition under any bankruptcy or
similar law of any state, province, county or country;
(e) has a court of competent jurisdiction enter an order,
judgment or decree appointing or authorizing a receiver, trustee, liquidator,
custodian or conservator of it or of the whole or substantially all of its
property, or enter an order for relief against it in any case commenced under
any bankruptcy law, or grant relief under any other similar law of any state,
province, county or country; or, under the provisions of any law for the relief
or aid of debtors, has a court of competent jurisdiction or a receiver, trustee,
liquidator, custodian or conservator assume custody or control or take
possession of it or of the whole or substantially all of its property; or has
commenced against it any proceeding for any of the foregoing relief or has a
petition filed against it under any chapter of any bankruptcy or similar law or
any state, province, county or country thereof and such proceeding or petition
remains undismissed for a period of 60 days; or by any act indicates its consent
to, approval of or acquiescence in any such proceeding or petition;
13.3 To the extent that the provisions of this Agreement provide for
periods of notice less than those required by applicable law, or provide for
termination, cancellation, non-renewal or the like other than in accordance with
applicable law, such provisions shall, to the extent not in accordance with
applicable law, not be effective, and the parties hereto shall
-11-
<PAGE> 12
comply with applicable law in connection with each of these matters.
14. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR
TERMINATION
Upon the expiration or termination of this Agreement for any reason
whatsoever:
14.1 All rights granted under the Sublicense will automatically
revert to Europe, and Advance immediately will cease and, thereafter, refrain
from all use of the Marks and the Europe Software and any mark or name similar
to the Marks or that includes the Marks. Advance's obligation to refrain from
all use of the Marks, as stated in the preceding sentence, shall include
refraining from using any Marks as part of a company name or trade name. In
addition, all royalties and fees that have accrued prior to expiration or
termination shall be immediately payable, including damages, costs and expenses,
including attorneys' fees, incurred by Europe on a default by Advance
notwithstanding anything to the contrary contained in this Agreement.
14.2 Advance shall immediately cease to operate as a sublicensee of
Europe under this Agreement, and shall not thereafter, directly or indirectly,
represent to the public or hold itself out as a present or former sublicensee of
Europe.
14.3 Advance shall immediately and permanently cease to use, by
advertising or in any manner whatsoever, any confidential methods, procedures,
and techniques associated with the Business; the service mark and trade name
"TRANSMEDIA" and any Indicia, Marks and distinctive forms, slogans, signs,
symbols, logos, or devices associated with the Business.
14.4 Advance shall be deemed to have assigned to Europe or Europe's
designee any assumed name or equivalent registration which contains the name
"TRANSMEDIA", any other Mark or any other service mark or trademark of Network
or Europe, and Advance shall furnish Europe with evidence satisfactory to Europe
of compliance with this obligation within thirty (30) days after termination or
expiration of this Agreement. Further, Advance hereby appoints Europe as
Advance's attorney-in-fact to execute such documents and take such actions as
are necessary in the event that Advance fails to comply with this Section 14.4.
14.5 Advance agrees, in the event it continues to operate or
subsequently begins to operate any other business, not to use any reproduction,
counterfeit, copy or colorable imitation the Marks either in connection with
such other business or the promotion thereof, which is likely to cause
confusion, mistake or deception, or which is likely to dilute Network's or
Europe's
-12-
<PAGE> 13
exclusive rights in and to the Marks and further agrees not to utilize any
designation of origin or description or representation which falsely suggests or
represents an association or connection with Network or Europe so as to
constitute unfair competition.
14.6 Advance shall pay to Europe all damages, costs and expenses,
including reasonable attorneys' fees, incurred by Europe subsequent to the
termination or expiration of the Business in obtaining injunctive or other
relief for the enforcement of any provisions of Articles 12 and 14.
14.7 Advance shall immediately turn over to Europe the Operations
Manual, records, files, instructions, brochures, agreements, disclosure
statements, manuals with respect to the Licensed Software, any copies of the
foregoing, and any and all other materials provided by Europe to Advance, or
copies thereof, relating to the operation of the Business.
14.8 Europe shall have the right, in its sole and absolute
discretion, to purchase from Advance its then on-going Member Restaurant
accounts for (i) twenty-five (25%) of the retail value of Advance's rights to
receive, upon the purchase of such rights to receive, and (ii) an additional
twenty-five (25%) per cent of the retail value of Advance's rights to receive,
at such time as Europe collects on the rights to receive from Advance's
TRANSMEDIA Cardholders, less any amounts remaining to be paid by Advance to
Member Restaurants.
14.9 Advance acknowledges that its failure to cease use of the Marks
at the termination or expiration of this Agreement will result in immediate and
irreparable damage to Europe. Advance acknowledges and admits that there is not
adequate remedy at law and Advance agrees that, in the event of such failure,
Network and Europe shall be entitled to equitable relief by way of temporary and
permanent injunctions and such other and further relief as any court with
jurisdiction may deem just and proper, other provisions to the contrary in this
Agreement notwithstanding.
15. INSURANCE
15.1 Advance will maintain, no later than two (2) months after the
Closing Date at its own expense, in full force and effect at all times during
which Advance is making any use of the Marks, with a responsible insurance
carrier acceptable to Europe, a comprehensive liability insurance policy,
including coverage for product and contractual liability, with combined single
coverage of at least Two Million ($2,000,000) U.S. Dollars. This insurance will
be for the benefit of Europe and Advance and will provide for at least ten (10)
days' prior
-13-
<PAGE> 14
written notice to Europe and Advance of the cancellation or any substantial
modification of the policy.
15.2 The insurance afforded by the policy or policies respecting
liability shall not be limited in any way be reason of any insurance which may
be maintained by Europe. No later than 30 days prior to the commencement of
operations, Advance shall provide Europe with a Certificate of Insurance showing
compliance with the foregoing requirements. Such certificate shall state that
said policy or policies will not be canceled or altered without at least twenty
(20) days' prior written notice to Europe and shall reflect proof of payment of
premiums. Maintenance of such insurance and the performance by Advance of the
obligations under this Article 15 shall not relieve Advance of liability under
the indemnity provision set forth in this Agreement.
15.3 Should Advance, for any reason, not procure and maintain such
insurance coverage as required by this Agreement, Europe shall have the right
and authority (without, however, any obligation to do so) immediately to procure
such insurance coverage and to charge same to Advance, which charges, together
with a reasonable fee for expenses incurred by Europe in connection with such
procurement, shall be payable by Advance immediately upon notice.
16. TRANSFERABILITY OF INTEREST
16.1 Advance may not assign or Transfer this Agreement or any of
Advance's rights or obligations hereunder without Europe's prior written
consent,except for an assignment to La Carte, which assignment shall be
permitted. Upon the assignment by Advance to La Carte, Advance shall be relieved
of all obligations within this Agreement. Except with respect to the assignment
to La Carte the assignor shall remain liable to Europe for the obligations of
the assignee.
17. INDEPENDENT CONTRACTOR: INDEMNIFICATION
17.1 This Agreement does not constitute Advance as an agent, legal
representative, joint venturer, partner, employee or servant of Europe or
Network for any purpose whatsoever; and it is understood between the parties
hereto that Advance shall be an independent contractor and is in no way
authorized to make any contract, agreement, warranty or representation on behalf
of Europe or Network, or to create any obligation, express or implied, on behalf
of Europe or Network. Under no circumstances shall Europe or Network be liable
for any act, omission, debt or any other obligation of Advance.
17.2 Advance covenants and agrees to indemnify and hold Europe and
Network harmless against and from any and all claims, demands, judgments,
damages, suits, losses, penalties, expenses,
-14-
<PAGE> 15
costs, settlements and liabilities of any kind or nature (including reasonable
attorneys' fees), arising or resulting from (i) any default in the observance,
performance or breach of any representation, warranty, covenant or agreement
made by Advance or required to be performed, observed or kept by it under this
Agreement or (ii) claims based upon products liability, which liability Europe
hereby specifically disclaims.
17.3 Advance agrees to indemnify and hold Europe and Network
harmless for any alteration or misuse of any service provided through the
Business, and for any such claims, loss or damage incurred therefrom.
17.4 Advance shall alone be responsible for all loss or damage
originating in or in connection with the operation of its Business and for all
claims or demands for damages to property or for injury, illness or death of
persons directly or indirectly resulting from its Business and Advance agrees to
indemnify and hold Europe and Network harmless from any such claims, loss or
damage. However, Advance shall not be required to indemnify for any claims
arising out of a breach of this Agreement or other civil wrongs of Europe.
18. REPRESENTATIONS AND WARRANTIES
18.1 Advance represents and warrants to Europe as follows:
(a) Advance is a corporation duly organized or formed, validly
existing and in good standing under the laws of Delaware and has all requisite
power and authority to enter into this Agreement and perform its obligations
hereunder.
(b) This Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by all corporate actions
required to be taken by it. The Agreement has been duly and validly executed and
delivered by it and constitutes a valid and binding obligation enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or by
equitable principles relating to or limiting creditors' rights generally.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein will not (i) violate any
provision of its Certificate of Incorporation, by-laws, or other charter or
organization documents, (ii) violate any provision of, or constitute a default
under or breach of, any agreement or instrument, or any judgment, decree or
order to which it is a party or by which it is bound, or (iii) constitute a
violation by it or of any law, rule or regulation of any governmental or
regulatory body, commission,
-15-
<PAGE> 16
agency or other authority applicable to it, and any of such events would have a
material adverse affect on this Agreement or the transactions contemplated
hereby.
18.2 Europe represents and warrants to Advance as follows:
(a) It is a corporation duly organized or formed, validly
existing and in good standing under the laws of the state of Delaware and has
all requisite power and authority to enter into this Agreement and perform its
obligations hereunder.
(b) This Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by all corporate actions
required to be taken by it. The Agreement has been duly and validly executed and
delivered by it and constitutes a valid and binding obligation enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws or by
equitable principles relating to or limiting creditors' rights generally.
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein will not (i) violate any
provision of its Certificate of Incorporation, by-laws, or other charter or
organization documents, (ii) violate any provision of, or constitute a default
under or breach of, any agreement or instrument, or any judgment, decree or
order to which it is a party or by which it is bound, or (iii) constitute a
violation by it or of any law, rule or regulation of any governmental or
regulatory body, commission, agency or other authority applicable to it, and any
of such events would have a material adverse affect on this Agreement or the
transactions contemplated hereby.
19. NON-WAIVER
19.1 No failure of Europe to exercise any power reserved to it
hereunder, or to insist upon strict compliance by Advance with any obligation or
condition hereunder, and no custom or practice of the parties in variance with
the terms hereof, shall constitute a waiver of Europe's right to demand exact
compliance with the terms hereof. Waiver by Europe of any particular default by
Advance shall not be binding unless in writing and executed by the party sought
to be charged and shall not affect or impair Europe's right with respect to any
subsequent default of the same or of a different nature; nor shall any delay,
waiver, forbearance, or omission of Europe to exercise any power or rights
arising out of any breach or default by Advance of any of the terms, provisions,
or covenants hereof, affect or impair Europe's rights nor shall such constitute
a waiver by Europe of any right hereunder or of the right to
-16-
<PAGE> 17
declare any subsequent breach or default. Subsequent acceptance by Europe of any
payment(s) due to it hereunder shall not be deemed to be a waiver by Europe of
any preceding breach by Advance of any terms, covenants or conditions of this
Agreement.
20. NOTICE
Any and all notices required or permitted under this Agreement shall
be in writing and shall be personally delivered, mailed by certified mail,
return receipt requested, or delivered by courier service requiting signature
UpOn delivery, to the respective parties at the following addresses unless and
until a different address has been designated by written notice to the other
party:
Notices to Advance:
International Advance, Inc.
11 St. James's Square
London SW1Y 4LB
ENGLAND
Notices to Europe:
Transmedia Europe Inc.
11 St James's Square
London SW1Y 4LB
ENGLAND
All notices hereunder shall be deemed to be effective upon delivery.
21. COST OF ENFORCEMENT OR DEFENSE
In the event that either party to this Agreement is required to
employ legal counsel or to incur other expenses to enforce any obligation of the
second party hereunder, or to defend against any claim, demand, action, or
proceeding by reason of the second party's failure to perform any obligation
imposed upon the second party by this Agreement, and provided that legal action
is filed and such action or the settlement thereof establishes the second
party's default hereunder, then the first party shall be entitled to recover
from the second party the amount of all reasonable attorneys' fees of such
counsel and all other expenses incurred in enforcing such obligation or in
defending against such claim, demand, action, or proceeding, whether incurred
prior to, or in preparation for, or in contemplation of the filing of such
action or thereafter.
22. ENTIRE AGREEMENT
This Agreement and any documents referred to herein, shall be
construed together and constitute the entire, full and complete agreement
between Europe and Advance concerning the
-17-
<PAGE> 18
subject matter hereof, and supersede all prior agreements. No other
representation has induced Advance to execute this Agreement, and there are no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein, which are of any force or effect with
reference to this Agreement or otherwise. No amendment, change or variance from
this Agreement shall be binding on either party unless executed in writing by
both parties.
23. SEVERABILITY AND CONSTRUCTION
23.1 Each section, part, term and/or provision of this Agreement
shall be considered severable, and if, for any reason, any section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation, such shall not impair
the operation of or affect the remaining portions, sections, parts, terms and/or
provisions of this Agreement, and the latter will continue to be given full
force and effect and bind the parties hereto; and said invalid Sections , parts,
terms and/or provisions shall be deemed not part of this Agreement; provided,
however, that if Europe determines that said finding of illegality adversely
affects the basic consideration of this Agreement, Europe may, at its option,
terminate this Agreement.
23.2 Anything to the contrary herein notwithstanding, nothing in
this Agreement is intended, nor shall be deemed, to confer upon any person or
legal entity other than Europe or Advance and such of their respective
successors and assigns as may be contemplated by this Agreement, any rights or
remedies under or by reason of this Agreement.
23.3 Advance expressly agrees to be bound by any promise or covenant
imposing the maximum duty permitted by law which is contained within the terms
of any provision hereof, as though it were separately stated in and made a part
of this Agreement, that may result from striking from any of the provisions
hereof any portion or portions which a court may hold to be unreasonable and
unenforceable in a final decision to which Europe is a party, or from reducing
the scope of any promise or covenant to the extent required to comply with such
a court order.
23.4 All captions herein are intended solely for the convenience of
the parties, and none shall be deemed to affect the meaning or construction of
any provision hereof.
24. APPLICABLE LAW
24.1 This Agreement takes effect upon its acceptance and execution
by Europe in New York; and shall be interpreted and
-18-
<PAGE> 19
construed under the laws thereof, which laws shall prevail in the event of any
conflict of law.
24.2 Advance acknowledges and agrees that this Agreement is entered
into in New York County, New York and that any action sought to be brought by
either party for the purpose of enforcing the terms and provisions hereof shall
be brought in the United States District Court for the State of New York,
Southern District, or the State Court for the State of New York, and the parties
do hereby consent to personal jurisdiction and venue in said courts for such
purposes.
24.3 No right or remedy conferred upon or reserved to Europe or
Advance by this Agreement is intended to be, nor shall be deemed, exclusive of
any other right or remedy herein or by law or equity provided or permitted, but
each shall be cumulative of every other right or remedy.
24.4 Nothing herein contained shall bar Europe's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
25. COUNTERPARTS
This Agreement may be executed in counterparts, each of which when
so executed shall be deemed an original, but all such counterparts together
shall constitute one and the same instrument.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have duly executed, sealed and delivered this Agreement on the day
and year first above written.
TRANSMEDIA EUROPE INC.
ATTEST: By:_________________________________
____________________________________ Title:______________________________
INTERNATIONAL ADVANCE INC.
ATTEST: By:_________________________________
____________________________________ Title:______________________________
TMNI International Inc. ("TMNI") hereby approves the granting of this Sublicense
to International Advance, Inc. and to its anticipated assignee, Transmedia La
Carte Restaurant, S.A. subject to the receipt of payment by TMNI of the sum of
$US250,000. TMNI further agrees that upon a default under the Master License by
Europe, Advance shall be notified of such default and, provided that such
default has not been caused by a default of Advance, Advance shall continue to
have all rights granted under this Agreement except that the granting party
shall be thereafter deemed to be TMNI and all rights and obligations under this
Agreement shall be between TMNI and Advance.
TMNI INTERNATIONAL INC.
By:_____________________________________
Melvin Chasen, President
-20-
<PAGE> 1
Agreement dated December 6, 1996, by and among Transmedia Network,
Inc., TMNI International Incorporated (Transmedia Network, Inc. and TMNI
International Incorporated are collectively referred to herein as "Network"),
Transmedia Europe, Inc. and Transmedia Asia Pacific, Inc. (Transmedia Europe
Inc. and Transmedia Asia Pacific, Inc. are individually referred to as "TMNE"
and "TMNA" respectively and are collectively referred to as the "Network
Licensees")
WHEREAS Network and TMNE are parties to a Master License Agreement
dated December 14, 1992 as amended (the "TMNE License");
WHEREAS Network and TMNA are parties to a Master License Agreement
dated March 21, 1994 (the "TMNA License").
WHEREAS the parties wish to enter into certain agreements set forth
herein which either directly or by operation of such agreements modify the terms
of the TMNE License and the TMNA License (collectively called the "Licenses").
NOW, THEREFORE the parties, intending to be legally bound, agree as
follows:
1. Definitions. Except as otherwise specifically defined herein,
capitalized terms used herein shall have the same meanings ascribed to them in
the Licenses.
2. Restructuring. The Network Licensees and certain affiliates of
the Network Licensees intend to enter into a corporate restructuring (the
"Restructuring") pursuant to which a holding company (herein called "New Corp.")
will be established. The Network Licensees (which may be merged into one
entity), together with any other entity to which any rights under the Licenses
are granted (collectively with the Network Licensees, the "Network Business
Entities"), and other entities that are not engaged in the "Business" will
comprise direct or indirect subsidiaries of New Corp. (New Corp. and all such
subsidiaries being referred to collectively as the "New Corp. Group"). It is
likely that New Corp. will be a publicly traded company. Subject to the terms
and conditions set forth in this Agreement, Network agrees that the
Restructuring and the establishment of the New Corp. Group will not constitute a
breach of the Licenses. Upon the completion of the Restructuring, New Corp.
shall pay to Network the sum of U.S. $250,000 which payment shall be made by
wire transfer to a bank account designated by Network.
3. Permitted Operations of the New Corp. Group. The members of the
New Corp. Group, other than the Network Business Entities, may engage in any
business or activity of any nature whatsoever other than activities which are in
competition with the "Business" under the terms of the Licenses provided that
all such non-competitive businesses and activities shall not be conducted under
the Marks; no member of the New Corp. Group shall have any liability or
obligation to Network as a result of engaging in such non-competitive
activities.
<PAGE> 2
4. Operations of the Network Business Entities. The operations of
the Network Business Entities shall be conducted exclusively in one or more
separate corporations, none of which shall engage in any business or activity
except in connection with the Business. Nothing contained herein or in the
Licenses shall prohibit the Network Business Entities from being owned by one or
more other members of the New Corp. Group.
5. Countdown Businesses. Notwithstanding the provisions of paragraph
3 above, New Corp. or a subsidiary of New Corp shall have the right to acquire
and conduct on a worldwide basis the business of Countdown, plc, Holding Corp.
("Countdown") in exchange for the payment to Network on the closing of such
acquisition of the sum of U.S. $750,000 which payment shall be made by wire
transfer to a bank account designated by Network. New Corp. and the Network
Licensees shall not permit Countdown to use the Network Business Entities' list
of Cardholders or their list of Member Restaurants in connection with any
activities of Countdown or any other member of the New Corp. Group which would
be competitive with the Business. The foregoing shall not prohibit an interest
owner of a Network Business Entity from at the same time also owning an interest
in Countdown, plc, provided that the limitation on use of the Cardholder and the
Member Restaurants list is maintained. The business of Countdown shall not be
conducted under the Marks and shall not use the system of operations described
under the term Business in Section 1.2 of the Licenses.
6. Modification of Licenses. In addition to modifications or
amendment to the Licenses resulting from the provisions or paragraphs 1 through
5 hereof, the Licenses shall be modified and amended as follows:
(i) The definition of the term "Licensees" shall be modified
to include all members of the New Corp. Group who succeed to
the interest of such Licenses by Transfer or operation of law
as permitted by the Licenses or this Agreement
(ii) Solely to facilitate transfers among members of the New
Corp Group the Licenses shall be amended to eliminate any
requirement for prior Network approval of transfers of Control
of the Licensee from any member of the New Corp. Group to any
other member of the New Corp. Group as well as to eliminate
any other restriction on transferability among members of the
New Corp. Group. In addition, the Licenses shall be amended by
eliminating Section 22.5.
(iii) (A) The first sentence of Section 1.3 of each License
Agreement shall be amended by inserting
<PAGE> 3
the words "direct or indirect (as such term is used in Section
22.3(g) hereof)" prior to the words "beneficial ownership" and
the words "other than a member of the New Corp. Group"
immediately after the words "beneficial ownership."
(B) Section 22.3 of each License Agreement shall be amended by
(i) deleting "or" at the end of each clause (e) thereof, (ii)
inserting "; or" in lieu of the period at end of each clause
(f) thereof, and (iii) inserting the following clause (g) in
each such Section 22.3:
"(g) any person or group other than a member of the New
Corp. Group shall acquire, directly or indirectly, beneficial
ownership of thirty percent or more of the equity of the
Licensee, without the prior written consent of the Licensor.
For purposes of Section 1.3 and this clause (g), a person or
group shall be deemed to acquire beneficial ownership,
indirectly, of a proportional percentage of the equity of the
Licensee by acquiring beneficial ownership, directly or
indirectly, of an equity interest in any other person which
itself beneficially owns, directly or indirectly, an equity
interest in the Licensee. The terms "acquires," "group"
"directly and indirectly" and "beneficially own" shall have
the respective meanings and usages ascribed to them under
Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder."
(iv) Section 21.1 shall be amended by deleting the first
sentence thereof and substituting the following: "Licensee
covenants that during the Term of this Agreement, except as
otherwise approved in writing by Licensor, Licensee's
designated manager, who shall be approved in writing by
Licensor, shall devote sufficient time, energy and efforts
necessary for the management and operation of the Business.
(v) The New Corp. Group shall take all reasonable steps to
ensure that the Network
<PAGE> 4
Licensees shall maintain sufficient working capital necessary
to conduct the Business in the ordinary course. In this
regard, the Licenses shall be amended by adding a new
subsection (l) to Section 22.2 as follows, "(l) failure to
maintain working capital adequate to conduct Licensee's
Business in the ordinary course".
7. Permitted Operations of Network. Network may engage in any
business or activity of any nature whatsoever other than activities which are in
competition with the "Business" under the terms of the Licenses in the
Territories under the Licenses. Network shall have no liability or obligation as
a result of engaging in such non-competitive activities. Such non-competitive
businesses shall not be conducted under the Marks. In addition, Network may
establish, acquire and operate in the Territories a competitive business similar
to that conducted by Countdown provided that such competitive business shall not
be conducted under the Marks and shall not use the system of operations
described under the term Business in Section 1.2 of the Licenses.
8. Conflicts: Reaffirmation of Licenses. In the event of any
explicit conflict between the terms and provisions of the Licenses and the terms
and provisions of this Agreement, the terms and provisions of this Agreement
shall govern. Except as modified and amended hereby, the Licenses shall remain
in full force and effect in accordance with their terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have duly executed, sealed and delivered this Agreement the day
and year first above written.
TRANSMEDIA NETWORK INC.
ATTEST: By:__________________________________
_____________________________ Title:_______________________________
TMNI INTERNATIONAL INCORPORATED.
ATTEST: By:__________________________________
_____________________________ Title:_______________________________
<PAGE> 5
TRANSMEDIA EUROPE, INC.
ATTEST: By:_________________________________
______________________________ Title:______________________________
TRANSMEDIA ASIA PACIFIC, INC.
ATTEST: By:_________________________________
______________________________ Title:______________________________
<PAGE> 1
FIRST AMENDMENT TO SUBLICENSE AGREEMENT
THIS FIRST AMENDMENT TO SUBLICENSE AGREEMENT (this "Amendment") is made the __th
day of January, 1997, by and among Transmedia Europe Inc., a Delaware
corporation ("Europe"), International Advance Inc., a Delaware corporation
("Advance") and Transmedia La Carte Restaurant S.A, a French societe anonyme
(the "Licensee"). Terms not otherwise defined herein shall have the meanings
assigned to them in the Sublicense Agreement dated 30th June, 1995 between
Europe and Advance.
W I T N E S S E T H:
WHEREAS, Advance has entered into a Sublicense Agreement dated as of 30th June,
1995 (the "Sublicense Agreement") with Europe, pursuant to which Europe granted
an exclusive license to Advance to use certain trademarks and service marks and
certain licensed software in the operation of a specialized credit card business
in France and Monaco;
WHEREAS, the Licensee and Advance entered into a Bill of Sale and Assignment and
Assumption Agreement dated as of 27th July, 1995, pursuant to which Advance
assigned its rights and obligations under the Sublicense Agreement to the
Licensee and the Licensee assumed all of Advance's rights and obligations under
the Sublicense Agreement; and
WHEREAS, the parties hereto desire to amend certain provisions of the Sublicense
Agreement.
NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, IT IS AGREED:
1. Section 1.10 of the Sublicense Agreement shall be amended in its entirety
as follows:
"1.10 "Territory" shall mean France, Monaco, Belgium, Luxembourg,
Italy, Spain and Switzerland (with the exception of the German-speaking
portion)."
2. Upon the execution of this Amendment and as full and final consideration
for the extension of the Territory by Europe to include Belgium,
Luxembourg, Italy, Spain and Switzerland (with the exception of the
German-speaking portion), the Licensee will pay to Europe by bank wire
transfer the sum of Nine Million Two Hundred and Fifty Thousand (FF
9,250,000) French Francs. Europe hereby represents, warrants, covenants
and agrees that it will pay to Network on a timely basis all amounts due
to Network pursuant to the Master License Agreement, including in
particular all payments due pursuant to section 14.3 of the Master License
Agreement, and that the execution of this Amendment by Europe has been
approved by Network and will not violate any provision of the Master
License.
3. Section 3 of the Sublicense Agreement shall be amended in its entirety as
follows:
" 3. DEVELOPMENT OBLIGATIONS
Operations in each of the countries comprising the Territory shall
commence as promptly as possible following the execution of this
Agreement, but the commencement of operations in each such country will be
determined solely by the Board of Directors
<PAGE> 2
of the Licensee after taking into account all relevant factors including
the availability of sufficient capital."
4. Except as otherwise amended herein, the Sublicense Agreement shall remain
in full force and effect.
5. This Amendment shall be interpreted and construed under the laws of the
State of New York, which laws shall prevail in the event of any conflict.
IN Witness WHEREOF, the parties hereto, intending to be legally bound hereby,
have duly executed, sealed and delivered this Amendment in triplicate on the day
and year first above written.
ATTEST TRANSMEDIA EUROPE, INC.
_______________________________ By:____________________________
ATTEST INTERNATIONAL ADVANCE, INC.
_______________________________ By:____________________________
ATTEST TRANSMEDIA LA CARTE RESTAURANT S.A.
_______________________________ By:____________________________
TMNI International Inc ("TMNI") hereby approves this Amendment to the Sublicense
Agreement subject to satisfaction by Europe of the terms of the Master License
Agreement, as amended. TMNI further agrees that upon a default under the Master
License Agreement by Europe, the Licensee shall be notified of such default and,
provided that such default has not been caused by a default of the Licensee, the
Licensee shall continue to have all rights granted under the Sublicense
Agreement and this Amendment except that the granting party shall be thereafter
deemed to be TMNi and ali rights and obligations under the Sublicense Agreement
and this Amendment shall be between TMNI and the Licensee.
TMNI INTERNATIONAL, INC.
By:________________________________
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 61,661
<SECURITIES> 0
<RECEIVABLES> 105,167
<ALLOWANCES> 0
<INVENTORY> 1,309,279
<CURRENT-ASSETS> 1,854,831
<PP&E> 180,619
<DEPRECIATION> 104,262
<TOTAL-ASSETS> 3,926,355
<CURRENT-LIABILITIES> 1,274,166
<BONDS> 0
0
5,909
<COMMON> 123
<OTHER-SE> 2,152,066
<TOTAL-LIABILITY-AND-EQUITY> 3,926,355
<SALES> 3,696,400
<TOTAL-REVENUES> 3,696,400
<CGS> 2,085,905
<TOTAL-COSTS> 4,657,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,561,104)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,049,812)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,695,524)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
