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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934]
For the fiscal year ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 []
FOR THE TRANSITION PERIOD FROM ______________________ TO ______________________
Commission file number 0-24404
TRANSMEDIA EUROPE, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3701141
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(State or other jurisdiction of I.R.S. Employer
Incorporation of organization) Identification No.)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
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(Address of principal executive offices) (zip code)
UK 011-44-171-930-0706
--------------------------
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.00001 PER SHARE
-----------------------------------------
(Title of Class)
Indicate by (X) whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES / /NO /X/
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. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 27, 1998 was: $17,858,311 based upon the closing sale
price of this Common Stock on that date.
The number of shares outstanding of the Registrant's Common Stock, as of
March 27, 1998, was 15,183,597
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PART I
ITEM 1--BUSINESS
BACKGROUND
Transmedia Europe, Inc. ("TME" or "the Company") is a Delaware
corporation which was formed in February 1993 and began business operations
in the UK, October 1993. 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,
through its affiliate TMNI International Inc., ("TMNI"), is a shareholder of
the Company, 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"). All references herein to
"Company" and "TME" include Transmedia Europe Inc. and its subsidiaries
unless otherwise indicated.
In April 1997 and December 1997, the Company acquired interests in
Countdown Holdings Limited ('Countdown') and Nationwide Helpline Services Pty
Limited ('NHS'), respectively. See "--Countdown Acquisition" and "--NHS
Acquisition".
CORPORATE DEVELOPMENT
For some time, the management of both the Company and Transmedia Asia
Pacific, Inc. ('TMAP'), a company which shares common directors, officers and
stockholders with the Company, have been questioning the need to maintain two
separate corporate identities. This dual structure was a direct result of the
timing difference in obtaining the original licenses for the respective
territories. By the beginning of 1997, management felt that keeping the
corporate structures distinct and separate was no longer advantageous to
shareholders and therefore announced its intention to merge the two companies.
Management's motivation for initiating this step was driven by several
factors including, among other things, the need to reduce the confusion of
having two separate stock quotes for essentially the same businesses
operating in different geographical regions; to lower central overhead and to
increase operating efficiency; and to formalise the existing commonality of
management. The proposed merger is subject to approval of the respective
Boards, issuance of fairness opinions by independent investment advisers and
approval by shareholders of both companies. Management has already announced
that at such time as the companies are merged, the merged entity will be
operated under the name MemberTek International Inc.
CORPORATE EXPANSION
Following a review of the Company's operations, management identified the
opportunity to broaden the base of the businesses in order to exploit the
rapidly growing member benefit services industry. While the Transmedia
program provided the core business operating as an international discount
dining charge card, management has already identified other businesses which,
upon acquisition, would significantly increase the Company's product range,
and in doing so, provide a wider base upon which to build future growth. This
change of emphasis was initiated with the identification and subsequent
acquisition of Countdown and NHS. The Company's aggressive acquisition
strategy will require significant additional capital, which the Company does
not have, as well as the significant devotion of limited managerial and other
resources.
COUNTDOWN
In April 1997, the Company acquired a 50% interest in Countdown, an
international provider of membership discount services. The remaining 50%
interest in Countdown was simultaneously purchased by TMAP. See "--Countdown
Acquisition". The Company effectively controls the operations of Countdown,
and the results of Countdown are accounted for in the financial statements of
the Company on the purchase
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method of accounting.
The Countdown business, consists of arranging discount privileges with
major suppliers of goods and services offering lifestyle benefits to
consumers, and of distributing access to those discount privileges to
consumers through selling memberships in the Countdown card. Countdown sells
these memberships to consumers individually, as well as through affiliations
with various groups (unions, professional organisations, etc.). These
discount privileges include household goods and supplies, clothing, and
leisure goods and services. Countdown also sells vouchers to consumers.
Countdown has approximately 6,500,000 members with over 100,000 accepting
merchants in 47 countries. These vouchers are sold at a discount to the face
value of the voucher, typically of 5-10%, and are redeemable by consumers, at
their face value, in connection with purchases similar to those described
above, at accepting merchants.
NATIONWIDE HELPLINE SERVICES
On December 2, 1997 Transmedia Australia Holdings Pty Limited
('Transmedia Australia'), a newly formed company owned equally by the Company
and TMAP indirectly purchased 51% of the shares of common stock of Nationwide
Helpline Services Pty Limited ("NHS"), an Australian company which, among
other things, provides benefit packages to organizations with large customer
bases such as banks and insurance companies. Transmedia Australia also
acquired an option to purchase the 49% balance of shares of common stock of
NHS. Failure to exercise the option during its term could result in
forfeiture of the entire investment. For a more detailed description of the
terms of the transaction see "--NHS Acquisition". The operations of NHS are
effectively controlled by TMAP due to the geographical location of management.
NHS is Australia's leading provider of telephone helpline and lifestyle
benefits, with a product range that includes advice lines on legal, tax,
accounting, medical and home emergency issues, as well as the sale of travel
products such as insurance, airline tickets and holiday packages. In
addition, through a subsidiary called IMAN, the Company provides
international medical case management and repatriation services to a number
of major insurance corporations. NHS has approximately five million members.
NHS's services are sold primarily on a wholesale basis to a wide range of
major corporations who typically brand the services under their own name,
thereby providing additional benefits to their own customer base. Management
believes that the acquisition of its interest in NHS is another important
development in its stated strategy to broaden its range of member benefit
services.
TRANSMEDIA BUSINESS ACTIVITIES
The restaurant card business of the Company is the exploitation of the
rights acquired under the License Agreement. The Company advances money to
restaurants selected by it which agree to become participating restaurants
("Company Participating Restaurants"). 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 accepted cardholders ("Company Cardholders") who complete applications to
become holders of the restaurant card ("The Restaurant Card") offered by the
Company. 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.
The Company Cardholder receives on each purchase a credit equal to 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
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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 the Restaurant Card application. The full amount of
the charge is listed on the major credit card bill along with a separate
credit equal to 25% of the cost of food and beverages at a Company
Participating Restaurant (excluding taxes and service). As at December 31,
1997, the Company had approximately 570 Company Participating Restaurants and
approximately 52,000 Company Cardholders. The Company is currently operating
in the United Kingdom and France, 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 connection with
this business, the Company will receive revenue 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 the 25% discount to Company
Cardholders, the Network royalty and sales commissions, (b) annual membership
fees and renewal fees of Company Cardholders, and (c) sub-license and
franchise 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.
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. 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.
Network was issued 496,284 shares of the Company, as partial
consideration for the sale of the License to the Company, and has the right
to designate one director of the Company. There is not currently a director
that has been designated by Network.
TMAP had acquired an equivalent license from TMNI covering essentially
all of Asia and other Pacific Rim countries. TMAP commenced operations in
Sydney, Australia in November 1994 and had obtained approximately 36,800
cardholders and 274 Company Participating Restaurants as at December 31,
1997. TMAP licenses certain operating software from the Company at an annual
fee.
The Countdown business of the Company ("Countdown") consists of arranging
discount privileges with major suppliers of goods and services offering
lifestyle benefits to consumers, and of distributing access to those discount
privileges to consumers through selling memberships in the Countdown card.
Countdown sells these memberships to consumers individually, as well as
through affiliation with various groups (unions, professional organisations,
etc.). These discount privileges include household goods and supplies,
clothing, and leisure goods and services. Countdown has approximately
6,500,000 members, with over 100,000 accepting merchants in 47 countries.
Countdown also sells vouchers to consumers. These vouchers are sold at a
discount to the face value of the voucher, typically of 5 --10%, and are
redeemable by consumers, at their face value, in connection with purchases
similar to those described above, at accepting merchants.
RESTAURANT CARD TRANSACTION ILLUSTRATION
The following is a descriptive illustration of a hypothetical transaction
by a Company Cardholder at a Company Participating Restaurant.
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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
utilizes 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 utilized in providing Mr Smith his meal. The Company is responsible
for paying the commissions of its sales representatives which are currently
5% of Food and Beverage Credits used.
The allocation of the hypothetical 100 pound (UK) check can be summarized
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 58.4 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 3.75% of
Food and Beverage Credits used or in this
example 3 pounds (UK).
</TABLE>
COUNTDOWN ACQUISITION
On April 3, 1997, the Company purchased from Mr. C.E.C. Radbone 50% of
the outstanding capital stock of Countdown, a privately owned United Kingdom
company based in London, England. Countdown, through its wholly-owned
subsidiary, Countdown plc, is an international provider of membership
discount services offering lifestyle benefits and discounted purchases of
merchandise and services, to approximately 6,500,000 cardholders distributed
world-wide, with over 100,000 accepting merchants in 47 countries. The
transaction ("the Acquisition") was consummated pursuant to an Acquisition
Agreement dated as of April 3 1997 ("the Acquisition Agreement") among the
Company, C.E.C. Radbone and TMAP.
In payment of the purchase price, the Company issued 1,200,000 shares
(the "Radbone Shares") of its
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common stock, $.00001 par value per share ("Common Stock"), 250,000
options to purchase shares at $1 each, and paid pounds UK 500,000
(approximate U.S. Dollar equivalent as of April 3, 1997 was $800,000) in
cash. In addition, the Company granted Mr. Radbone piggyback and demand
registration rights with respect to the Radbone Shares. In accordance with
the Acquisition Agreement, the balance of the outstanding capital stock of
Countdown was simultaneously purchased by TMAP on terms similar to the terms
of the Company's purchase.
The cash portion of the purchase price was funded by a $1,000,000 loan
from a director and stockholder of the Company. The loan became due on demand
on September 27, 1997, and bears interest at a rate of 12% per annum. By
letter agreement dated January 13, 1998, the director agreed not to demand
payment for an indefinite period, but in any event to give sixty days notice
of such demand. It is collateralised by a pledge of all the shares purchased
by the Company from Mr. Radbone. In connection with the loan, the Company
issued to the director and stockholder five-year warrants to purchase up to
125,000 shares of Common Stock at $1.25 per share, and granted piggyback
registration rights with respect to such shares.
Contemporaneously with the Acquisition, Countdown entered into an
employment agreement with Mr. Radbone pursuant to which Mr. Radbone was
employed as Managing Director of Countdown. Upon consummation of the
acquisition, Mr Radbone was elected a director of the Company, and Messrs.
Edward J. Guinan III and Paul Harrison were elected directors of Countdown
and Countdown Plc. On January 16, 1998, Mr. C.E.C. Radbone, resigned from the
Board of Directors. Contemporaneously, his employment agreement, according to
the terms of which he had been serving as Managing Director of Countdown plc,
a subsidiary of the Company, was cancelled. Mr. Radbone holds 1,200,000
shares of Common Stock of the Company and agreed to grant Edward J. Guinan
III, the Chairman of the Board of Directors, an option to purchase these
shares at a purchase price of $1 per share. Under the option, Mr Guinan
pledged $250,000 in value of shares of the Company's Common Stock owned by
him, (together with $250,000 in value of TME Common Stock owned by him in
connection with a similar option on Mr. Radbone's TMAP shares), which will be
transferred to Mr Radbone if the option is not exercised and paid by January
15, 1999.
In connection with the Acquisition, the Company and TMAP each agreed to
pay $125,000 in cash to TMNI International Incorporated ("TMNI"), and the
Company and TMAP jointly issued TMNI a promissory note in the principal
amount of $500,000 with a combined liability, payable on April 2, 1998 and
bearing interest at the rate of 10% per annum. The promissory note is to be
convertible at the holder's option into Common Stock of the issuer at the
rate of $1.20 per share. The Company agreed to pay such amounts in order to
obtain the consent to the Countdown acquisition, which consent was required
by the terms of the master license agreement from TMNI under which the
Company operates its discount restaurant charge card business. The
transaction was described in more detail in the Company's Form 8-K dated
April 3, 1997 which is incorporated by reference herein.
NHS ACQUISITION
On December 2, 1997, Transmedia Australia, a newly-formed company owned
equally by the Company and TMAP, indirectly through NHS Australia Pty
Limited, purchased in simultaneous transactions 51% of the shares of common
stock of NHS. The total purchase price for the transaction (including a
deposit of Aus. $345,000 ($226,974)) is approximately Aus. $12,500,000
($6,578,950), Aus. $4,000,000 ($2,631,578) of which represents sign-on fees
for certain principals of NHS, and the balance of which represents amounts
payable to NHS in two tranches. The first tranche was paid on December 2,
1997 in the form of cash and 500,000 shares of Common Stock of the Company
and its affiliate TMAP. The second tranche (Aus. $2,842,540 ($1,870,092)) was
payable on January 31,1998, but in accordance with the provisions of the
agreement between the parties, this date has been extended for 90 days, with
interest accruing at 5% per annum on the unpaid amounts. Failure to exercise
this option during its term will give the NHS principals the rights to
repurchase Transmedia Australia's 51% interest for nil consideration. The
payment of the first half of the sign-on fees has been delayed until further
notice at the request of the principals. The balance continues to be payable
on June 30, 1998, (subject to extension of each instalment (with the
exception of a portion of the first instalment) by up to 90 days provided
that interest will accrue on the extended amounts at 5% per annum).
Transmedia Australia also acquired an option to purchase the 49% balance of
NHS's business and assets for an additional Aus. $2,497,655 ($1,643,194)
(less potential reductions). The option is exercisable at any time through
June 30,1998 (subject to extension for up to 90 days) provided that interest
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will accrue on the exercise price during any such extension at 5% per annum.
Failure to exercise this option during its term will give the NHS principals
the rights to repurchase Transmedia Australia's 51% interest for nil
consideration. NHS is a provider of benefit packages for organizations with
large customer bases such as banks and insurance companies. For a more
detailed discussion of the terms of this transaction, reference is made to
the Company's current report on the Company's Form 8-K dated December 2,
1997, which is incorporated by this reference herein.
EMPLOYEES
As of March 27, 1998, the Company employed 58 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. For example, Hilton International, an international hotel
management company and hotel owner, provides two-for-one dining offers in its
restaurants. Many of the Company's competitors 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,
restaurant financing business or discount restaurant charge card business 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.
The Countdown membership benefit program, with over 6,500,000 members
world-wide and over 100,000 accepting merchants in 47 countries, provides a
core of business activity upon which the Company intends to build a more
diversified benefits program. Countdown competes directly with the discount
programs offered by many of the Company's competitors notwithstanding which
it has achieved and maintained dominant market positions in several countries
through alliances with influential local licensees and by reputation
associated with 27 years of trading. Countdown offers a very comprehensive
range of discounts which are available from suppliers of a diverse array of
products and services.
NHS is the largest membership benefits provider in Australia offering
5,000,000 members a diverse range of benefits including advice helplines,
lifestyle and retail products and services. NHS intends to maintain its
dominant market position in Australia through the acquisition of members and
by adding to the range of products and services being offered to members. The
Company intends to introduce, wherever possible, the benefits offered by NHS
into its operations through the global extension or duplication of existing
programs.
GOVERNMENT REGULATION
The Company believes that it possesses all governmental permits or licenses
necessary to operate in the
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United Kingdom and France, but has not inquired yet as to whether or not any
permits may be required in the rest of the Licensed Territories.
In November 1997, the Company's French subsidiary, Transmedia La Carte
Restaurant SA, ("TMF" or "the French company"), of which as of that date the
Company owned 50.1% of the common stock, was notified by the Bank of France
that, under the terms and provisions of its banking license, its fully paid
capital did not meet the statutory minima prescribed by the license. TME had
been notified by the board of directors of TMF of the requirement to fulfil
its obligation as the majority shareholder in the French company to
participate in the capital call which was intended to restore the capital of
TMF to the statutory minimum. As of December 4, 1997 the Company arrived at
an agreement in principle with two of the three minority shareholders to
acquire their holdings in the French company. This transaction is dependent
on the regulatory approval of the Bank of France, will involve the Company in
an outlay of approximately $1,000,000, and will result in the Company holding
90% of the issued shares in TMF. In addition, the Company, on February 3,
1998 made representations to the Bank of France that the capital of TMF will
be maintained at a minimum level of FF15,000,000 ($2,479,000). These steps
include introducing cash of FF1,000,000 ($165,000) and also Edward J. Guinan
III, Chairman of the Company, pledging unconditionally 2,000,000 shares of
common stock of TMAP. The aggregate value of these shares as of March 13,
1998 was $2,500,000. The Company plans to deposit both the cash and the
shares of Common Stock of TMAP in an escrow account, pending finalisation of
the proposed transaction.
(See --Risk Relating to Transmedia La Carte SA)
IMPORTANT FACTORS REGARDING FORWARD LOOKING STATEMENTS AND OTHER RISKS
Certain statements in this Report under the captions "Item 1. Business,"
"Item 7. 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.
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, those described below and those presented elsewhere by
management from time to time. When used in this Report, statements that are
not statements of current or historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"anticipates", "plans," "intends," and similar expressions are intended to
identify such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date hereof. The Company undertakes no obligation to publicly release the
result of any revisions to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
LIMITED OPERATING HISTORY, ACCUMULATED DEFICIT, NO ASSURANCE OF
PROFITABILITY
The Company's operations are subject to all the risks inherent in rapidly
growing business enterprises, including limited capital, delays, uncertain
markets and competition. The Company began conducting business operations in
the Fall of 1993 in London, England. The operations of the Company have
produced losses, which have continued through the date hereof. As of
September 30, 1997, the Company's accumulated deficit since inception was
$10,655,176 and the Company's net loss for the fiscal year then ended was
$3,746,248. There can be no assurance that the Company will ever achieve
profitable operations. The likelihood that the Company will succeed in the
discount restaurant charge card business and other discount services business
must be considered in light of general economic conditions and the
difficulties, expenses and delays experienced. The economic conditions which
exist in the United Kingdom and, in particular the difficulties being
experienced in France should also be considered. While the Company believes
that current economic conditions in the Licensed Territories will make its
business more attractive to Company Participating Restaurants and will make
The Restaurant Card more popular with value-conscious individuals, there can
be no assurance that the Company will succeed in its business in such an
environment or that an improving economic environment will not adversely
affect such business.
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RISK RELATING TO TRANSMEDIA LA CARTE RESTAURANT SA
As discussed elsewhere in this Report, in December 1997, the Company
reached an agreement in principle with two of the three minority shareholders
to acquire their holdings in the French company. This transaction is
dependent on the regulatory approval of the Bank of France, will involve the
Company in an outlay of approximately $1,000,000, and will result in the
Company holding 90% of the issued shares in TMF. As well, these two
shareholders have given up their rights to redeem their initial investment in
the French company, which right included the payment by the Company of a
premium of 20% on the initial investment. In addition, the Company has made
representations to the Bank of France that the capital of TMF will be
maintained at a minimum level of FF 15,000,000 ($2,479,000). These steps
include introducing cash of FF 1,000,000 ($165,200) and also Edward J. Guinan
III, the Chairman of the Company, pledging unconditionally 2,000,000 shares
of Common Stock of TMAP. The aggregate value of these shares as of February
4, 1998 was $2,500,000.
EXPLANATORY PARAGRAPH IN AUDITOR'S REPORT
The Company's independent auditors have included an explanatory paragraph
in their Report as of, and for the year ended September 30, 1997, stating that
the Company's ability to continue to fund its losses, as well as provide
capital for the acquisition program, will depend on its ability to continue
selling equity securities and effecting the exercise of warrants. -- See
"Consolidated Financial Statements".
LICENSE OBLIGATIONS
The Company is required to operate its discount restaurant charge card
business in accordance with the requirements and specifications established
by the License Agreement. The License Agreement also establishes minimum
development requirements for procuring new Company Participating Restaurants
and renewals and new Company Cardholders and renewals. The failure of the
Company to satisfy these requirements could result in the termination of the
License. In addition, the failure to establish operations in countries other
than the United Kingdom and France, prior to specified items may result in
loss of rights granted under the License for the Licensed Territories other
than the United Kingdom. Moreover, the failure to operate the Company's
discount restaurant charge card business or a sub-licensee's business
successfully in any location in the Licensed Territories will result in the
loss of the License with respect to such location.
NEED FOR ADDITIONAL FINANCING
The Company requires substantial additional funds to move forward with
its business plans, including completion of the acquisition of NHS, and other
possible acquisitions, and to satisfy existing creditors and to provide
working capital. Management estimates that an amount of $8,250,000 will be
required to complete the proposed acquisitions of which $3,500,000 is
required to complete the funding of NHS, and $4,750,000 to fund other planned
acquisitions. A further amount of $1,000,000 is estimated to be required as
working capital to fund the Company's deficit in the period to April 30, 1998.
In relation to a loan made by a shareholder of $1,000,000 in connection
with the Countdown acqusition, although the loan has been renewed for an
indefinite period, repayment may be demanded upon provision of 60 days
notice. There is a risk that the Company will need to find additional funds
to finance this repayment.
The Company has no available lines of credit at the present time. In the
event that management is not successful, or only partially successful in
raising the necessary funds, it may have to curtail its acquisition program,
with the possible loss of deposits or payments on account of approximately
$1,375,000.
No assurance can be given that the Company will be successful in
obtaining additional financing. Moreover, any additional financing, including
any financing obtained through the issuance of equity, could result in
substantial dilution to shareholders. Failure to obtain the necessary
financing within the necessary time frame will have a significant adverse
effect on the Company and its results of operations.
9
<PAGE>
The Company has been able to fund its deficit, and the cost of its
acquisition and restructuring of Countdown, principally by the sale of equity
securities and exercise of warrants during the year. Whilst the Company is
taking steps to reduce the level of operating losses, the Company has
required and will continue to require, additional funds from the sale of
equities, in order to fund these deficits. The Company is also dependent on
being able to raise additional funds by the sale of equities in order to
complete the funding of the acquisition of NHS and other acquisitions being
contemplated
MANAGEMENT OF GROWTH
Execution and implementation of the Company's plan of operation will
require significant growth. The Company's current plans for growth will place
a significant strain on the Company's financial, managerial and other
resources. The Company's ability to manage its growth effectively will
require it to continue to improve its operational, financial and management
information systems and to attract, motivate and train key employees. If the
Company's executives are unable to manage growth effectively, the Company's
business, operating and financial condition would be materially and adversely
affected.
NASDAQ DELISTING; RISKS ASSOCIATED WITH BULLETIN BOARD
The National Association of Securities Dealers, Inc. ("NASD") has rules
which establish criteria for the initial and continued listing of securities
on Nasdaq Small Cap Market ("Nasdaq"). Under the rules, a company must
maintain at least $2,000,000 in net tangible assets, a minimum bid price of
$1 per share, and adhere to certain corporate governance provisions. During
the 1997 fiscal year the Company was notified by Nasdaq that the bid price of
the Company's Common Stock had fallen below the $1 minimum level.
Since the Company's initial public offering the Company's Common Stock
has been included on the NASDAQ Small Cap Market ("Nasdaq"). On February 26,
1998 a Nasdaq Listing Qualifications Panel held a written hearing to
determine whether to continue listing the Company's Common Stock in light of,
among other things, the Company's failure to timely file this report. On
March 10, 1998 Nasdaq notified the Company that effective that date the
Company's securities were delisted from Nasdaq. The determination was made
based on the Panel's opinion that so long as it is without accurate, complete
and publicly-filed audited financial statements, it will be unable to
evaluate the extent of the Company's compliance with Nasdaq's continued
listing standards. The Company is currently seeking to have its Common Stock
included on the OTC Bulletin Board. The OTC Bulletin Board is an unorganized,
inter-dealer, over-the-counter market. With respect to Common Stock traded on
the Nasdaq Bulletin Board or in the over-the-counter market in what is
commonly referred to as the "pink sheets", investors will find it more
difficult to dispose of the Common Stock or to obtain accurate quotations as
to the price of the Common Stock and it could have an adverse effect on the
coverage of news concerning the Company. In addition, the Common Stock would
be subject to a rule that imposes additional sales practice requirements on
broker-dealers who sell the Common Stock to persons other than established
customers and accredited investors (accredited investors are generally
persons having net worth in excess of $1,000,000 or an annual income
exceeding $200,000 or $300,000 together with a spouse). For transactions
covered by this rule, the broker-dealer must make a special suitability
determination for the purchaser and must have received the purchaser's
written consent to the transaction prior to sale, as well as disclosing
certain information concerning the risks of purchasing low-priced securities
on the market for such securities. Consequently the delisting would adversely
affect the ability of broker-dealers to sell the Common Stock and the ability
of purchasers to sell the Common Stock in the secondary market and would make
subsequent financing more difficult.
RESTAURANT CARD RISK
The restaurant business is marked by a large number of business failures,
many of which occur in the first year of operation. The Company believes that
current industry financial conditions, especially in the United Kingdom and
France, may be worse than historical experience. The Company plans to
determine the viability of prospective Company Participating restaurants in
the Licensed Territories through credit checks, business viability analysis
and on-site visits. The Restaurant Credits made to Company Participating
Restaurants in the Licensed Territories will be repaid by the Company
Cardholders charging their meals on The Restaurant Card on the basis of
reducing the Restaurant Credits at a rate of 50% of the Food and Beverage
Credits used. The Company will bear the credit risk that such Company
Participating Restaurants may fail before the Restaurant Credits are so
repaid. While the closing of any one such Company Participating restaurant
would not be likely to have a material effect on the Company's business, the
closing of Company Participating restaurants in the Licensed Territories with
substantial outstanding Restaurant Credits would have a material adverse
effect on the Company's business.
10
<PAGE>
MARKET ACCEPTANCE
Although the market for charge cards in general is very mature, the
market for restaurant-specific charge cards is relatively undeveloped. The
Company's success also will depend in large part upon the Company's ability
to recruit and retain Company Participating Restaurants and Company
Cardholders. The Company began to recruit Participating Restaurants and
Company Cardholders in the United Kingdom and France in the Fall of 1993.
While the Company expects that it will benefit from the use of The Restaurant
Card in the Licensed Territories by Network Cardholders, the Company's
success will depend primarily upon the number of Company Cardholders that are
recruited in the Licensed Territories, and the level of usage of The
Restaurant Card in the Licensed Territories. The Company is offering a
product that is new in the marketplace in each of the Licensed Territories
and faces all the risks and uncertainties attendant to offering such a
product. There can be no assurance that the Company will be able to procure
the number of Company Cardholders, Company Participating Restaurants and
renewals thereof in the Licensed Territories that will be required for it to
fund the development and expansion of its business or to meet its minimum
development requirements under the License. Failure to do so could result in
the termination of the License.
COMPETITION
The membership discount services business, including the discount restaurant
charge card business, is highly competitive and the Company will be competing
for both restaurants and cardholders. Competitors of the Company will include
discount programs offered by major credit card companies and other companies
that offer a wide variety of discount marketing programs. Some competitors
make their discount charge cards available for a variety of purchases, for
example, travel, hotels and restaurants. If the revenues from the Company's
operations are insufficient to permit the Company to match promotional
campaigns of competitors, the number of Company Cardholders and Company
Participating Restaurants in the Licensed Territories may decline, with a
resulting material adverse effect on the Company's financial condition. Many
of the Company's competitors have substantially greater financial, personnel,
technological, marketing, administrative and other resources than the
Company. There can be no assurance that the Company will be able to compete
successfully with these companies or that these companies will not
successfully adopt marketing and operating strategies similar to those used
to promote the business of the Company and Network.
DEPENDENCE UPON NETWORK
The Company's Restaurant Card business is dependent upon Network for
consumer goodwill and name recognition. Any material adverse condition
suffered by Network may have a material adverse effect on the Company. The
Company's operations could be adversely affected by negative developments or
adverse publicity involving Network or its franchisees, or sub-licensees. In
addition, there can be no assurance that the working relationships that have
been established between the Company and Network would not be negatively
impacted by any future changes in control of Network. The Company is also
dependent on Network for protection of TRANSMEDIA-Registered trademark-
trademark and such other trademarks and service marks as Network may apply
for in the Licensed Territories. Network has the right, but not the
obligation, to institute action against persons who infringe upon or
misappropriate any of the licensed marks. If Network chooses not to take any
such action, the Company may not take action.
DEPENDENCE UPON USE OF CHARGE CARD ACCOUNTS
The success of the Company is dependent, in part, upon its ability to use
recognized charge cards for collecting billing charges on The Restaurant Card
in the Licensed Territories. The Company has recently entered into a clearing
agreement with Midland Bank plc, with respect to the processing of charges by
Company Cardholders on The Restaurant Card, allowing charges by Company
Cardholders on The Restaurant Card to be charged to a Visa-Registered
trademark-, Mastercard-Registered trademark-, American Express-Registered
trademark-, or Delta-Registered trademark- account of the Company Cardholder.
There can be no assurance that the Company will be able to establish the
necessary relationships with processing banks or charge card companies in
other portions of the Licensed Territories, or continue or renew the existing
arrangements with Midland Bank plc, or any other that it may establish.
Depending on a variety of factors, the termination of the Company's
relationship with any charge card company or processing agent could have a
material effect on the Company's operations and business.
OPERATIONS ABROAD
The Company's Transmedia restaurant card business, as well as the
business of Countdown and NHS are conducted abroad. As such the company's
revenue and earnings, which are expressed in United States Dollars, will be
subject to the risks of currency exchange to the extent of currency
fluctuations between the United States Dollar and other currencies in which
the company transacts its business.
Although the Company operates its business in the Licensed Territories in
a manner that is similar to Network's business in the United States, some
practices have been modified for local tax and other considerations. In
certain situations, the Company may be obligated to pay amounts to Network in
predetermined United States dollars even though revenues will be paid to the
Company in foreign currency. Therefore, fluctuations in currency could have
an adverse effect on the Company's profit margins. The Company presently does
not intend to engage in currency swaps or other similar hedging contracts to
offset possible losses, but may consider such activities in the future. In
addition, limitations on the transfer of
11
<PAGE>
funds from locations in the Licensed Territories, and unfavourable economic
or political developments in the Licensed Territories, could have an adverse
effect on the Company's operations or its ability to exploit the License.
DEPENDENCE ON MANAGEMENT
The success of the Company will be dependent on the abilities and efforts
of Mr. Guinan, Chairman of the Board of Directors of the Company and Mr.
Harrison, the President and Chief Executive Officer. Any incapacity or
inability of Mr. Guinan to perform such functions would have a material
adverse effect on the Company. In the event of death or incapacity of Mr.
Guinan, Network has the right to approve his proposed replacement. There is
no guarantee that Network will approve any such replacement. The Company has
no key man life insurance on the life of Mr. Guinan or on the life of Mr.
Harrison. The success of the Company will also be dependent upon its ability
to hire additional managerial, administrative, systems, sales and marketing
personnel. Mr. Guinan is a United States citizen who has the Right to Remain
in the United Kingdom.
VOTING CONTROL
Mr. Guinan is the largest owner of the Company's Common Stock. Mr. Guinan
and the Company's management have the ability to control the outcome of
substantially all issues submitted to the Company's Board of Directors or
stockholders and an investor will be dependent upon the capabilities and
judgement of the Company's management. Moreover, concentration of effective
voting control could serve to perpetuate current management and could make
the Company less attractive to potential acquirers.
GUARANTEE OF SUBLICENSES AND FRANCHISE OBLIGATIONS
Under the License Agreement the Company has guaranteed the payment of all
amounts owed by its sub-licensees and/or franchisees to Network. In the event
that such sub-licensees and/or franchisees fail to make any payment to
Network, the Company could suffer substantial losses from the payment of such
amounts to Network.
RESTAURANT CARD RENEWALS
Most of The Restaurant Cards issued by the Company provide for the waiver
of the annual fee for six months. There is no assurance as to the number of
holders who will elect not to renew based upon the requirements to pay an
annual fee.
GOVERNMENT REGULATION
With the exception of the United Kingdom and France, the Company 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 or France, 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.
NO DIVIDENDS ON COMMON STOCK
Since it's inception, the Company has not paid any dividends on its
Common Stock. The Company intends to retain future earnings, if any, to
provide funds for the operation of its business and, accordingly, does not
anticipate paying any cash dividends on its Common Stock in the reasonably
foreseeable future. See "Dividend Policy".
12
<PAGE>
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the General
Corporation law of the State of Delaware. In general, this law prohibits a
public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which such person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" is defined to include mergers, asset sales and other
transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is defined as a person who, together with affiliates
and associates, owns (or within the prior three years, did own) 15 per cent
or more of the corporation's voting stock.
13
<PAGE>
ITEM 2--PROPERTIES
The Company, through its wholly owned subsidiary Transmedia UK plc, leases
office space of approximately 3,400 square feet in London at 11 St. James's
Square, London SW1Y 4LB. The lease is for a period of five years expiring on
September 8, 1998, at a net rental of approximately $150,846 per annum. In the
event that the lease is not renewed, alternative comparable space is expected to
be available at rental rates some 20% above current rates.
Additionally, the Company, through its subsidiary Countdown, leases mixed
use office and warehouse space of approximately 10,000 square feet in London at
1 Hurlingham Business Park, Sulivan Road, London SW6 3DU. The lease is for a
period of 20 years expiring on 2015 at a net rental of approximately $160,000
per annum, with rent reviews fixed at intervals of 5 years. It is not presently
possible to quantify the impact of these reviews.
The Company also leases, through its subsidiary Transmedia La Carte
Restaurant SA, office space of approximately 2,500 square feet at 9, rue de la
Paix, Paris 75002, France. The lease is for a period of three years, expiring on
August 31, 1998 at a net rental of approximately $110,000 per annum. Management
intends to relocate, at the expiry of this lease, to alternative space which is
expected to cost substantially less.
ITEM 3--LEGAL PROCEEDINGS
Subsequent to the year end, the Company settled a lawsuit in which it was
named as a defendant, relating to the granting of a sub-license to operate in
Belgium. Otherwise at the date of this Report, there are no material legal
proceedings pending involving the Company.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1997, no matters were submitted to a
vote of the security holders.
14
<PAGE>
PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information: Since the Company's initial public offering the
Company's Common Stock $.00001 par value (the "Common Stock") had been traded
on Nasdaq Small Cap Market ("Nasdaq") under the symbol "MBTE". Nasdaq Listing
Qualifications Panel held a written hearing to determine whether to continue
listing the Company's Common Stock in light of, among other things, the
Company's failure to timely file this report. On March 10, 1998 Nasdaq
notified the Company that effective that date the Company's securities were
delisted from Nasdaq. The determination was made based on the Panel's opinion
that so long as it is without accurate, complete and publicly-filed audited
financial statements, it will be unable to evaluate the extent of the
Company's compliance with Nasdaq's continued listing standards. The Company
is currently seeking to have its Common Stock included on the OTC Bulletin
Board. The OTC Bulletin Board is an unorganized, inter-dealer,
over-the-counter market. The following table sets forth, for the periods
indicated and as reported by Nasdaq, the high and low bid prices for shares
of the Company's Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
QUARTER ENDED $ $
- ---------------------- --------- ---------
<S> <C> <C>
December 31, 1995 2 1/4 1 5/8
March 31, 1996 2 1 1/8
June 30, 1996 2 3/4 1
September 30, 1996 2 1/2 1
December 31, 1996 1 5/8 3/4
March 31, 1997 1 3/8 1/2
June 30, 1997 1 5/16 1/2
September 30, 1997 1 7/16 1/2
December 31, 1997 1 3/8 7/8
March 27, 1998 1 3/8 25/32
</TABLE>
The closing bid and ask prices as at March 11, 1998 were $1 and $1
respectively.
(b) Holders of Common Stock: The number of stockholders on record of the
Common Stock on March 27, 1998 was 215. The Company believes that 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 (February
9, 1993). 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. Any decision as to the
future payment of dividends 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.
RECENT SALES OF UNREGISTERED SECURITIES
At various times from August 24, 1997 to December 31, 1997, the Company
sold in a private placement (the "Private Placement") an aggregate of
1,592,165 shares of Common Stock at a purchase price of $1 per share. For
every three shares purchased, each purchaser will receive, for no additional
consideration, a warrant to purchase one share of Common Stock at $1 per
share. The warrants are presently exercisable and expire in three years from
the date of issuance. In consideration for their agreement to purchase, on a
standby basis, a certain number of shares in the Private Placement, 3.3 the
Company agreed to issue to certain holders of preferred stock of the Company
three-year warrants to purchase up to an aggregate of 369,313 shares of
Common Stock at an exercise price of $1 per share. The Private Placement was
made pursuant to the exemption from the registration requirement of the
Securities Act of 1933, as amended, afforded by Section 4(2) thereof and
Regulation D promulgated thereunder.
15
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for each
of the last five fiscal years. This information should be read in conjunction
with "Management's Discussion 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,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Total revenues and fees........................ $ 7,870,256 $ 3,696,400 $ 3,967,997 $ 2,178,772 --
Gross profit................................... 3,160,345 1,610,495 1,701,411 817,778
Loss from operations........................... (4,239,251) (2,059,812) (2,114,975) (2,038,128) (56,828)
Net loss after minority interest and preferred
share dividends.............................. (3,746,248) (2,695,524) (2,215,452) (1,945,236) (52,716)
Net loss per common share...................... $ (0.27) $ (0.24) $ (0.19) $ (0.19) $ (0.01)
</TABLE>
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30,
------------------------------------------------------
BALANCE SHEET DATA 1997 1996 1995 1994 1993
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Restaurant credits......................... $ 1,265,918 $ 1,309,279 $ 1,622,571 $ 1,392,571 $ 1,206,898
Intangible assets.......................... 1,847,426 1,297,026 1,405,112 1,513,198 1,619,204
Goodwill................................... 3,350,000 -- -- -- --
Total assets............................... 9,073,025 3,926,355 9,073,025 4,647,125 3,891,220
Total liabilities.......................... 7,678,922 1,774,166 2,008,620 915,513 709,364
Minority interest.......................... 834,954 -- -- -- --
Total equity............................... 559,149 2,152,189 3,813,060 3,731,612 2,824,137
Other Data
Number of Participating Restaurants........ 570 440 460 291 179
Number of Countdown accepting merchants.... 100,000 -- -- -- --
Number of Company
Cardholders................................ 52,000 43,500 19,000 12,000 3,400
Number of Countdown Members................ 6,500,000 -- -- -- --
</TABLE>
16
<PAGE>
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 Restaurant Card business is such that there is a
lead time before profitable operations can be achieved. This is demonstrated in
the financial results for the years ended September 30, 1997, 1996 and 1995. The
success of the Company is dependent upon the number of Company Cardholders and
Company Participating Restaurants, as well as obtaining increased usage of The
Restaurant Card by Company Cardholders. The Company's 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 September 30, 1997 the Company had
approximately 52,000 Company Cardholders and 570 Company Participating
Restaurants.
The Company's ability to grow has been restricted by the single product
offered by the Transmedia dining program. During fiscal 1997, the Company and
TMAP jointly obtained the permission of TMNI to expand its business base by
jointly paying $250,000 in cash and issuing a joint promissory note for
$500,000 to TMNI. In April 1997, the Company and TMAP each purchased 50% of
Countdown, an international provider of membership discount services and in
December 1997 jointly acquired with TMAP an interest in NHS, the largest
provider of telephone helpline and lifestyle benefits in Australia. These
acquisitions provide the Company with core business activities which are
complementary to the Company's existing business and upon which the Company
can build a more diversified benefits program, subject to, among other
things, obtaining significant additional capital. Further acquisitions are
planned in fiscal 1998, which should add to the Company's
cardholder/membership base and expand the product range.
On April 3, 1997 the Company acquired a 50% interest in Countdown, whose
results are consolidated in these statements using the purchase method of
accounting. The acquisition provides the Company with core business activities,
which are complimentary to the Company's existing business and upon which the
Company can build a more diversified benefits program.
On December 2, 1997, Transmedia Australia, a company owned equally by the
Company and TMAP, indirectly purchased in simultaneous transactions 51% of the
common stock of NHS. Transmedia Australia also acquired an option to purchase
the 49% balance of NHS's common stock. The option is exercisable at any time
through June 30, 1998, and is subject to an extension for up to 90 days. The
results of NHS will be reflected in future periods using the equity method of
accounting.
In February 1997, the Company entered into an Agreement and Plan of
Reorganization to merge the Company and its affiliate Transmedia Asia Pacific ,
Inc. under the name MemberTek International, Inc. The acquisition of Countdown
and NHS caused the Company to postpone the merger, however management is
committed to merging the companies in fiscal 1998.
RESULTS OF OPERATIONS
Year Ended September 30, 1997
The Company generated revenues and fees of $7,870,256 and $3,696,400 for the
year ended September 30, 1997 and September 30, 1996 respectively. The increase
in 1997 is primarily due to the effect of the acquisitions of Countdown and TM
France in April and December, 1997 respectively whose results are consolidated
in these statements for the first time using the purchase method of accounting.
Countdown generated revenues of $3,239,052 for the six months ended September
30, 1997 and TM France generated revenues of $337,072 for the nine months ended
September 30, 1997. The revenues generated by the Company's operations
(exclusive of Countdown and TM France), for the year ended September 30, 1997
amounted to $3,352,812, an increase of 7.3% over 1996. This increase is due to
the increased number of Company Cardholders.
17
<PAGE>
Membership fees for the year ended September 30, 1997 were $941,320 compared
to $570,425 for the previous year. The membership fees attributable to Countdown
and TM France for 1997 were $435,923 and $19,398 respectively. Existing
operations produced membership fees of $486,000 for the year ended September 30,
1997, a decrease of 14% over 1996. This decrease is as a result of a combination
of membership fees in the UK being subject to UK sales tax (VAT) since May 1996,
which the Company has borne as a cost, together with an increased number of
'Free Card' Company Cardholders (membership with no annual fee payable but a
reduce 20% discount), netted against an overall increase in the Cardholder base.
The Company increased the number of Company Cardholders from 43,500 at
September 30, 1996 to 52,000 at September 30, 1997. The increase is mainly as a
result of consolidating TM France which has 3,900 Company Cardholders at
September 30, 1997 and the continuing MBNA campaign. The Company also increased
its number of Company Participating Restaurants from 440 at September 30, 1996
to 570 at September 30, 1997. This increase is due to a combination of
consolidating TM France which has 210 Restaurants at September 30, 1997 and a
reduction of 36 in existing operations as part of an on-going exercise to
eliminate slow moving restaurants from the program.
The Company has also acquired 6,500,000 Countdown members and over 100,000
Countdown accepting merchants. The Company plans to increase its Company
Cardholder and Company Participating Restaurant base through various marketing
programs, as well as increasing its Countdown membership through a direct
marketing program. In particular, this direct marketing program, will involve an
expansion of Countdown's marketing efforts in order to achieve an increase in
the current numbers of members.
Cost of sales amounted to $4,709,911 for the year ended September 30, 1997
compared to $2,085,905 for 1996. The increase is mainly as a result of
consolidating Countdown with $2,299,559 and TM France.with $264,056 of costs of
sale. Excluding Countdown and TM France demonstrates that the cost of sales for
existing operations was static against the increased revenues and demonstrates
the impact of the 'Free Card'.
Selling, general, and administrative expenses consisting primarily of
salaries, rents, commissions and other general overhead costs amounted to
$7,385,975 for the year ended September 30, 1997 compared to $3,670,307 for
1996. The selling, general and administrative expenses included for Countdown
and TM France in the year ended September 30, 1997 were $1,794,847 and
$1,298,067 respectively. The increase in the selling, general and administrative
expenses incurred by existing operations amounts to $545,742 and includes
professional fees of $285,193 for work on the proposed merger with TMAP,
$112,875 of costs relating to the termination agreement with a former director,
Mr CEC Radbone, $62,265 of tax consultancy costs, consultancy fees relating to
the Countdown acquisition of $81,250 and additional goodwill amortization of
$237,486, of which $145,970 relates to the goodwill on consolidating Countdown
and TM France and $91,516 to reflect a diminution in the carrying value of the
license based upon future cash flows. But for these additional expenses the
Company would have reported a 6.4% reduction in selling, general and
administration expenses.
The Company's share of losses in TM France for the three months ended
December 31, 1996 and prior to the Company taking a majority shareholding in TM
France, was $116,899.
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, 1997.
The minority interest's share of 1997 losses in Countdown and TM France were
$202,905 and $602,954 respectively. The dividend payable on the preferred shares
amounted to $220,865 for the year ended September 30, 1997, an increase of
$86,445 because of an oversight in under recording a charge in 1996.
Year Ended September 30, 1996
The Company generated revenues and fees of $3,696,400 for the year ended
September 30, 1996, a decrease of 6.8%. 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
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 at
September 30, 1995 to 440 at September 30, 1996. 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 for the year ended September 30, 1996,
an decrease of 8% which corresponds to the 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.
TM 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 TM
France incurred pre-trading losses of approximately $182,624. The Company's
share of those losses amounted to $92,455.
18
<PAGE>
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.
Year Ended September 30, 1995
The Company generated revenues and fees of $3,967,997 for the year ended
September 30, 1995, an increase of 66% over 1994. The increase in revenues
and fees reflected the activity generated by an established cardholder base
for a full twelve months and new cardholders 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 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 for the year ended September 30, 1995,
an increase of 66% over 1994 which is in line with the increase in revenues.
Cost of sales are approximately 50% of the gross food and beverages value
consumed by the 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 TMAP 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 TMAP to supply
the system for an initial fee of $50,000, paid in fiscal 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.
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.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial additional funds to move forward with its
business plans, including completion of the acquisition of NHS, and other
possible acquisitions, to satisfy existing creditors and to provide working
capital. Management estimated that an amount of $8,250,000 will be required
in the period to April 30, 1998, of which $3,500,000 is required to complete
the funding of NHS, $4,750,000 to fund other planned acquisitions. A further
amount of $1,000,000 is estimated to be required working capital to fund the
Company's deficit in the period to April 30, 1998.
The Company has been able to fund this deficit, and the cost of its
acquisition and restructuring of Countdown, principally by the sale of equity
securities and exercise of warrants during the year. Whilst the Company is
taking steps to reduce the level of operating losses, the Company has
required and will continue to require, additional funds from the sale of
equities, in order to fund these deficits. The Company is also dependent on
being able to raise additional funds by the sale of equities in order to
complete the funding of the acquisition of NHS and other acquisitions being
contemplated.
The Company has no available lines of credit at the present time. In the
event that management is not successful or is only partially successful in
raising the necessary funds, it will have to curtail its acquisition program,
with the possible loss of deposits or payments on account of approximately
$1,375,000.
No assurance can be given that the Company will be successful in obtaining
additional financing. Failure to obtain the necessary financing within the
necessary time frame will have a significant adverse effect on the Company's
financial condition and results of operations. Moreover, any additional
financing, including any financing obtained through the issuance of equity,
could result in substantial dilution to shareholders. To date, the Company has
been successful in raising such capital, but there can be no assurance that it
will continue to be possible to raise the funds required. There is a risk that
failure to raise the capital required, with the result that the Company would be
unable to continue trading.
The Company's independent auditors have included an explanatory paragraph in
their report as of, and for the year ended September 30, 1997, stating that the
Company's ability to continue to fund its losses, as well as provide working
capital for the acquisition program, will depend on its ability to continue
selling equity securities and effecting the exercising of warrants (see
"Consolidated Financial Statements").
The Company was initially capitalised with 6,206,896 shares, after giving
retroactive effect to stock dividends. On August 11, 1993, TME issued and sold
3,718,784 shares of Common Stock of which (i) 225,000 were issued to Conestoga,
a corporation which is related to TME by virtue of the majority shareholding in
Conestoga, being held by Edward J. Guinan III, the Chairman and Director of the
Company, in consideration for the costs incurred on behalf of the Company by
Conestoga, with respect to raising capital for the Company; (ii) 496,284 were
issued to Network, as partial consideration for the purchase of the License;
(iii) 275,000 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 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 the private
20
<PAGE>
placement of $2,722,500, $850,000 was paid by 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 TME for use as working capital in respect of the utilisation by
the Company of its rights under the Transmedia 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
Redeemable Preferred Stock at a price of $3.50 per share. The net proceeds of
$1,964,600 were used to finance the Company's investment in Transmedia La Carte
Restaurant SA in Paris, France, and to provide working capital to existing
operations.
In July 1996, the Company issued 892,857 shares of Common Stock at a price
of $1.40. The net proceeds of $1,235,000 were used to provide working capital to
existing operations
In December 1996, the Company sold an aggregate of 556,250 shares of Common
Stock at $2 per share in a private placement The purchasers were also issued
warrants to purchase an aggregate of 185,417 shares of Common Stock at $2 per
share. The net proceeds of $1,097,500 were used to provide working capital to
existing operations.
Commencing August 1997 and terminating in December 1997, the Company sold a
private placement in which it sold an aggregate of 1,592,165 shares of Common
Stock at a purchase price of $1 per share. For every three shares purchased,
each purchaser will receive, for no additional consideration, a warrant to
purchase one share of Common Stock at $1 per share. "See Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters".
The Company made investments in Transmedia La Carte Restaurant SA $300,000
in 1995, $1,500,000 in 1996 and $315,000 in 1997.
In June 1996, the Company received 148,853 and 48,142 shares of Common Stock
from Edward Guinan III, the Chairman of the Board of Directors, and Conestoga
Partners Inc. valued at their market price of $2.625 per share as repayment of
their outstanding loans.
The cash resources of the Company are used to provide Restaurant Credits to
Company Participating Restaurants in the Licensed Territories, and to pay for
general and administrative expenses, including officers' compensation and
compensation to independent sales consultants for the recruitment of Company
Participating Restaurants, and Company Cardholders.
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.
ACQUISITIONS
Effective April 4, 1997, the Company acquired 50% ownership in Countdown
Holdings Ltd. and subsidiaries, a United Kingdom corporation offering discounted
merchandise purchases and other benefits to approximately 6,500,000 cardholders.
These cardholders are distributed world-wide, with nearly 100,000 accepting
merchants in 47 countries. The consideration paid for this acquisition was
$4,750,000 split equally between the Company and its affiliate TMAP. Of this
$4,750,000, $400,000 was paid as a deposit, $1,600,000 was paid in cash, with
the balance of $2,750,000 paid in shares of common stock and options to purchase
common stock from the Company and TMAP, in approximately equal values. Of the
total
21
<PAGE>
consideration of $4,750,000, some $6,000,000 is goodwill. An individual who
is a member of the board of directors of the Company advanced the Company
sufficient funds to complete the cash portion of this transaction. This loan
consisted of an amount of $1,000,000 which was loaned to the Company bearing
interest at a rate of 12% per annum, and with no set repayment date, but on
demand provided the individual gives sixty days notice of such demand.
On December 2, 1997, Transmedia Australia, a company owned equally by the
Company TMAP indirectly purchased in simultaneous transactions 51% of the
common stock of NHS. The total purchase price for the transaction (including
a deposit of Aus $345,000 ($226,974)) was Aus $12,500,000 ($8,223,684), of
which Aus $4,000,000 represents sign-on fees payable to certain individuals
of NHS, and the balance of which represents amounts payable to NHS in two
tranches. The first tranche was paid on December 2, 1997 in the form of cash
and 500,000 shares of Common Stock of the Company and its affiliate, TMAP.
The second tranche (Aus $2,842,540 [$1,870,092]) as payable in cash on
January 31, 1998 but in accordance with the provisions of the agreement
between the parties, has been extended for 90 days, with interest accruing
thereon at 5% per annum. The initial portion of the sign-on fees, which were
payable on January 31, 1998 has been delayed at the request of the
principals. The balance is due and payable on June 30, 1998 (subject to
extension of each instalment, with the exception of a portion of the first
instalment, by up to 90 days provided that interest will accrue on the
extended amounts at 5% per annum. Transmedia Australia also required an
option to purchase the 49% balance of NHS's common stock for an additional
Aus $2,497,655 ($1,643,194) (less potential reductions). The option is
exercisable at any time through June 30, 1998 (subject to extension for up to
90 days) provided that interest will accrue on the exercise price during any
such extension at 5% per annum. Failure to exercise the option during its
term will give the NHS principals the rights to repurchase the 51% interest
for nil consideration.
On December 4, 1997, the Company agreed to purchase, in principle, not later
than January 31, 1998, the following minority interest holdings in TM France:
(i) from Partech International Inc. (U.S. Growth Fund Ventures), 34.6% of the
shares for a sum of $750,000; (ii) from Eric Knight 5.3% of the shares for a
sum of $114,020. Both purchases are subject to contract and to the regulatory
approval of the Commission Bancaire of the Bank of France, which approval is
pending as of the date of this filing and will involve the Company in an
outlay of approximately $1,000,000 and will result in the Company holding 90%
of the issued shares in TMF. In addition, the Company, on February 3, 1998
made representations to the Bank of France that the capital of TMF will be
maintained at a minimum level of FF15,000,000 ($2,479,000). These steps
include introducing cash of FF1,000,000 ($165,000) and also Edward J. Guinan
III, Chairman of the Company, pledging unconditionally 2,000,000 shares of
common stock of TMAP. The aggregate value of these shares as of March 13,
1998 was $2,500,000.
In October 1997, the Company signed a Letter of Intent to purchase 50% of
the shares of Common Stock of a privately held corporation engaged in a
complementary field of business. $50,000 in cash and 200,000 shares of Common
Stock in the Company, held by Edward J. Guinan III, the Chairman of the Board of
Directors were placed as a deposit. This deposit becomes the property of the
Principals in the corporation as of January 15 1998. The Letter of Intent
provides for a purchase price of $3,750,000 in cash plus $500,000 in
unrestricted shares of Common Stock of TME, the value of the shares of Common
Stock being that as of the day of closing of the purchase. If the closing does
not occur on or prior to March 31, 1998, the deposit is subject to forfeiture to
the seller.
In December 1997 the Company signed a letter of intent to purchase 50% of the
shares of common stock of a privately held corporation engaged in a
complimentary field of business. 200,000 shares of Common Stock in the
Company held by Edward J. Guinan III, the Chairman of the Company, were
placed as a deposit. The Letter of Intent provides for a purchase price of
pounds U.K. 500,000 ($800,000) in cash with an option to take up to pounds UK
200,000 ($320,000) of the purchase price in shares of Common Stock of the
Company, the value of the shares of Common Stock being that as of the day of
closing on the purchase. If the closing does not occur on or prior to March
31, 1998, the deposit is subject to forfeiture to the seller.
On January 9, 1998, the Company entered into an agreement in principle,
subject to contract, to purchase 85% of the share capital of Network America
Inc., of Dallas, Texas. The consideration consists of a cash deposit of $50,000
to the Principals, an undertaking by the Company to redeem on January 19, 1998,
and outstanding Promissory Note in an amount of $103,000 held by an unrelated
third party, an undertaking by the Company to pay a sum of $250,000 in cash to
the Principals on March 31, 1998, and an undertaking by the Company to pay a sum
of $1,000,000 in eighteen subsequent equal monthly instalments of $55,555
each commencing April 1998.
The Company has, effective January 16, 1998 accepted the resignation of
Christopher Radbone as a director of the Company and its subsidiary Countdown
plc. Contemporaneously with such resignation, Countdown plc has agreed to
release Mr. Radbone from his service contract, and Mr. Radbone has agreed to
grant an option to Edward J. Guinan III at a value of $1 per share to purchase
the shares of Common Stock of the Company held by him.
22
<PAGE>
The Company will be required to seek additional financing to settle historic
liabilities, and although the Company anticipates that the cash associated
with the NHS acquisition and the revenues expected to be derived from
operations, should, based upon its internal calculations, be sufficient to
fund on-going operations, nevertheless additional finance will also be
required in the event that the Company intends to make acquisitions or that
there are delays, cost overruns, sales declines or unanticipated expenses.
While there can be no assurance of any such source of funds or the terms upon
which they can be obtained, the Company is confident that sufficient funds
will be available to meet its anticipated business expansion needs in fiscal
1998, based upon management's knowledge of the capital markets and their
contracts within those markets.
Operating losses in Countdown for the year ended September 30 1997 total
$419,431.
INFLATION AND SEASONALITY
The Company does not believe that its operations will be influenced by
inflation in the foreseeable future. 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.
EFFECT OF THE YEAR 2000
The Company is aware that it must evaluate the effect of the year 2000 on
its internal operating and accounting software and other systems and make an
assessment as to the significance of to the Company of becoming year 2000
compliant.
The Company has commenced an initial evaluation of the potential impact, and
management expects to complete this in the near future.
NEW U.S. ACCOUNTING PRONOUNCEMENTS NOT YET IMPLEMENTED
In December 1996, the FASB issued SFAS No. 128 "Earnings Per Share", which
is effective for both interim and annual periods ending after December 15, 1997.
SFAS No. 128 requires that all prior period earnings per share data be restated
to conform to this statement. The Company will adopt SFAS No. 128 for the year
ended September 30, 1998. The adoption of this standard is not expected to have
a material effect on the Company's earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which established standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by, or
distributions to, owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
SFAS No. 130, effective for all fiscal years beginning after December 15,
1997, requires comparative information for earlier years to be restated and
early adoption is permitted. The Company intends to adopt SFAS No. 130 effective
October 1, 1998. Results of operations and financial position will be unaffected
by implementation of this standard.
23
<PAGE>
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, 1997 and 1996........................................... F2-F3
Consolidated Statements of Operations for the years ended September 30, 1997, 1996 and 1995............. F4
Consolidated Statements of Changes in Stockholders' Equity for the years ended September 30, 1997 and
1996 and 1995......................................................................................... F5
Consolidated Statements of Cash Flows for the years ended September 30, 1997, 1996 and 1995............. F6-F7
Notes to the Consolidated Financial Statements.......................................................... F8-F25
</TABLE>
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Transmedia Europe, Inc.
We have audited the accompanying consolidated balance sheet of Transmedia
Europe, Inc. and subsidiaries as of September 30, 1997 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year ended September 30, 1997. 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 audit.
We conducted our audit 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 audit provides 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, 1997, and the
results of their operations and cash flows for the year ended September 30,
1997, in conformity with generally accepted accounting principles in the United
States.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 3 to the financial statements, the Company has experienced losses during
the year ended September 30, 1997, both from operations and from
restructuring and has a working capital deficit that raises substantial doubt
about its ability to continue as a going concern. The Company has funded
operations through sales of equity securities and exercises of warrants, and
its ability to continue as a going concern is dependent on the Company's
ability to continue to effect such sales of equity and exercises of warrants.
Management's plans in regard to these matters are also described in Note 3.
The consolidated financial statements do not include any adjustment which
might result from this uncertainty.
March 30, 1998
BDO Stoy Hayward
London, England
F1
<PAGE>
TRANSMEDIA EUROPE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash (including temporary cash investments of $168,350 at September 30, 1997, and
$730,767 at September 30,1996).................................................. $ 554,624 $ 61,661
Trade accounts receivable......................................................... 484,968 105,167
Restaurant credits (net of allowance for irrecoverable credits of $666,134 at
September 30, 1997 and of $399,328 at September 30, 1996)....................... 1,265,918 1,309,279
Amounts due from related parties (note 5)......................................... 86,401 114,246
Prepaid expenses and other current assets......................................... 599,627 264,478
------------- -------------
Total current assets................................................................ 2,991,538 1,854,831
Non-current assets
Investment in affiliated company (note 4)......................................... -- 698,141
Property and equipment, net of accumulated depreciation of $678,338 at September
30, 1997 and $104,262 at September 30, 1996 (note 8)............................ 741,115 76,357
Intangible assets, net of accumulated amortisation of $523,858 at September 30,
1997 and $324,258 at September 30, 1996 (note 6)................................ 1,847,426 1,297,026
Goodwill, net of accumulated amortization of $145,970 at September 30, 1997 and
$nil at September 30, 1996 (note 7)............................................. 3,350,000 --
Other assets (note 10)............................................................. 142,946 --
------------- -------------
Total assets........................................................................ $ 9,073,025 $ 3,926,355
------------- -------------
------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
F2
<PAGE>
TRANSMEDIA EUROPE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft................................................................... $ 952,668 $ --
Trade accounts payable........................................................... 2,384,516 483,229
Deferred membership fee income................................................... 536,509 352,542
Accrued liabilities (note 11).................................................... 1,459,388 438,395
Amount due to related parties (note 5)........................................... 2,345,841 --
-------------- -------------
Total current liabilities........................................................ 7,678,922 1,274,166
Non-current liabilities
Deferred license fee income (note 4)............................................. -- 500,000
-------------- -------------
Total liabilities................................................................ 7,678,922 1,774,166
-------------- -------------
Minority interest (note 13)...................................................... 834,954 --
-------------- -------------
Stockholders' equity
Convertible Redeemable Preferred Shares (note 12)................................ 5,909 5,909
Common stock, $.00001 par value, 95,000,000 shares authorised, 12,875,787 issued
and outstanding shares at September 30, 1997 and 12,319,537 at September 30,
1996........................................................................... 129 123
Additional paid in capital..................................................... 12,108,066 9,647,072
Accumulated deficit............................................................ (10,655,176) (6,908,928)
Treasury stock, 196,995 shares of common stock at cost......................... (517,112) (517,112)
Unearned compensation--restricted stock........................................ -- (78,000)
Cumulative foreign currency translation adjustment............................. (382,667) 3,125
-------------- -------------
Total stockholders' equity....................................................... 559,149 2,152,189
-------------- -------------
Total liabilities and stockholders' equity......................................... $ 9,073,025 $ 3,926,355
-------------- -------------
-------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
F3
<PAGE>
TRANSMEDIA EUROPE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues............................................................ $ 6,928,936 $ 3,125,975 $ 3,399,831
Membership fee...................................................... 941,320 570,425 518,166
Other income........................................................ -- -- 50,000
------------- ------------- -------------
Total revenue and fees.............................................. 7,870,256 3,696,400 3,967,997
Cost of sales....................................................... 4,709,911 2,085,905 2,266,586
------------- ------------- -------------
Gross profit........................................................ 3,160,345 1,610,495 1,701,411
Selling, general and administrative expenses........................ (7,385,975) (3,670,307) (3,816,386)
------------- ------------- -------------
Loss from operations................................................ (4,225,630) (2,059,812) (2,114,975)
Share of losses of associated company............................... (116,899) (509,404) (92,455)
Interest income..................................................... 11,287 8,112 28,978
------------- ------------- -------------
Loss before income tax.............................................. (4,331,242) (2,561,104) (2,178,452)
Income taxes (note 17).............................................. -- -- --
------------- ------------- -------------
Net loss before minority interest................................... (4,331,242) (2,561,104) (2,178,452)
Minority interest (note 13 )........................................ 805,859 -- --
------------- ------------- -------------
Net Loss............................................................ (3,525,383) (2,561,104) (2,178,452)
Preferred share dividends........................................... (220,865) (134,420) (37,000)
------------- ------------- -------------
Net loss after preferred share dividends $ (3,746,248) $ (2,695,524) $ (2,215,452)
------------- ------------- -------------
------------- ------------- -------------
Loss per common share............................................... (0.27) (0.24) (0.19)
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding................ 13,736,502 11,448,212 11,423,680
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
F4
<PAGE>
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, 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
Issuance of common stock...... 556,250 6 -- -- 2,310,994
Issue costs................... -- -- -- -- (15,000)
Net loss after preferred share
dividends................... -- -- -- -- --
Effect of foreign currency
translation................. -- -- -- -- --
Compensation expense -
restricted stock............ -- -- -- -- --
Option re Countdown........... -- -- -- -- 165,000
---------- ------ --------- --------- -----------
Balance, September 30, 1997... 12,875,787 $129 590,857 $5,909 $12,108,066
---------- ------ --------- --------- -----------
---------- ------ --------- --------- -----------
<CAPTION>
CUMULATIVE
FOREIGN CURRENCY UNEARNED
TREASURY TRANSLATION COMPENSATION ACCUMULATED
STOCK ADJUSTMENT RESTRICTED STOCK DEFICIT TOTAL
--------- ---------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
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
Issuance of common stock...... -- -- -- -- 2,311,000
Issue costs................... -- -- -- -- (15,000)
Net loss after preferred share
dividends................... -- -- -- (3,746,248 ) (3,746,248)
Effect of foreign currency
translation................. -- (385,792) -- -- (385,792)
Compensation expense -
restricted stock............ -- -- 78,000 -- 78,000
Option re Countdown........... -- -- -- -- 165,000
--------- ---------------- ---------------- ----------- -----------
Balance, September 30, 1997... $(517,112) $(382,667) $ -- $(10,655,176) $ 559,149
--------- ---------------- ---------------- ----------- -----------
--------- ---------------- ---------------- ----------- -----------
</TABLE>
See accompanying notes to the consolidated financial statements.
F5
<PAGE>
TRANSMEDIA EUROPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
- -Net loss before preferred share dividends and minority interest......... $(4,331,242) $(2,561,104) $(2,178,452)
Adjustment to reconcile net loss to net cash used in operating
activities:
- -Depreciation and amortisation........................................... 555,227 151,265 149,497
- -Amortisation of unearned compensation................................... 78,000 324,000 324,000
- -Provision for irrecoverable restaurant credits.......................... 266,806 41,771 281,357
- -Share of losses of associated company................................... 116,899 509,404 92,455
- -Gain on sale of property and equipment.................................. (3,609) -- --
Changes in assets and liabilities:
- -Trade accounts payable.................................................. 1,332,752 173,244 125,409
- -Accrued liabilities..................................................... (417,548) 84,590 (53,114)
- -Restaurant credits...................................................... (223,445) 206,619 (323,052)
- -Trade accounts receivable............................................... 613,999 21,125 (17,426)
- -Prepaid expense and other current assets................................ (101,271) (150,838) (41,465)
- -Deferred membership fees................................................ 183,967 10,001 69,295
- -Deferred license fee income............................................. (500,000) -- 500,000
------------- ------------- -------------
Net cash used in operating activities.................................... (2,429,465) (1,189,923) (1,071,496)
------------- ------------- -------------
Cash flows from investing activities:
- -Due to related parties.................................................. -- (338,053) (55,965)
- -Purchase of property and equipment...................................... (156,794) (18,141) (17,594)
- -Loan repaid by (to) affiliated company.................................. -- 30,868 (30,868)
- -Net investment in affiliated company.................................... -- (300,000) (1,000,000)
- -Purchase of NHS option.................................................. (142,956) -- --
- -Royalties paid on additional French territories......................... (750,000) -- --
- -Acquisition of Countdown and Transmedia La Carte Restaurant SA.......... (1,661,196) -- --
------------- ------------- -------------
Net cash used in investing activities.................................... (2,710,946) (625,326) (1,104,427)
------------- ------------- -------------
</TABLE>
F6
<PAGE>
TRANSMEDIA EUROPE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from financing activities:
- -Net proceeds received from issuance of:
common stock......................................................... 1,097,500 1,235,000 --
convertible preferred shares......................................... -- -- 1,964,600
- -Payment of preferred dividend........................................... -- (71,685) --
- -Bank overdraft.......................................................... 902,668 (109,422) 109,422
- - Exercise of options.................................................... -- -- 6,000
- -Proceeds from sale of Property and Equipment............................ 4,500 -- --
- -Related party transactions - loans advanced............................. 2,373,686 -- --
------------- ------------- -------------
Net cash provided by financing activities................................ 4,378,354 1,053,893 2,080,022
------------- ------------- -------------
Minority Interests....................................................... 1,640,813 -- --
Effect of foreign currency on cash....................................... (385,793) 26,106 377
------------- ------------- -------------
Net increase/(decrease) in cash and temporary cash investments........... 492,963 (735,250) (95,524)
------------- ------------- -------------
Cash and temporary cash investments at beginning of period............... 61,661 796,911 892,435
------------- ------------- -------------
Cash and temporary cash investments at end of period..................... $ 554,624 $ 61,661 $ 796,911
------------- ------------- -------------
------------- ------------- -------------
</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, 1997 was $74,173 (1996
:$13,750, 1995 :$12,022).
See accompanying notes to the consolidated financial statements.
F7
<PAGE>
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" and "TME") was incorporated in
Delaware on February 9, 1993 and commenced operations on October 1, 1993.
The Company operates complementary business activities in the fields of
discount restaurant dining cards, and in discounted membership benefits.
The Company's wholly owned subsidiary company, Transmedia UK plc, and
through its subsidiary Transmedia La Carte Restaurant SA, 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 (c)).
Presently, the Company's areas of operations include the United Kingdom
and 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 USSR by TMNI, an affiliate of Transmedia Network
Inc. ('Network'), a corporation which is incorporated in the United States
of America. The license is to operate a specialised restaurant charge card
business in the United Kingdom and France, with limited rights to sublicense
the European nation. 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 Chairman and a
Director of the Company (see note 5).
In August 1994 the Company registered an initial public offering of its
common stock with the Securities Exchange Commission and the Company's
Common Stock traded on the NASDAQ Small Cap Market.
The Company was initially capitalised with 6,206,896 shares, after
giving retroactive effect to stock dividends. On August 11, 1993, TME issued
and sold 3,718,784 shares of Common Stock of which (i) 225,000 were issued
to Conestoga, a corporation which is related to TME by virtue of the
majority shareholding in Conestoga, being held by Edward J. Guinan III, the
Chairman and Director of the Company, in consideration for the costs
incurred on behalf of the Company by Conestoga, with respect to raising
capital for the Company; (ii) 496,284 were issued to Network, as partial
consideration for the purchase of the License; (iii) 275,000 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
were issued to 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 the private placement of $2,722,500, $850,000 was paid by
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 TME for use as working capital in respect of the
utilisation by the Company of its rights under the License Agreement.
In the future, the Company may expand operations in other portions of
the Licensed Territories through wholly-owned subsidiaries or through
unaffiliated sub-licensees and franchisees.
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, TME 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.
F8
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
(a) Description of business (continued)
In July 1995, the Company issued 590,857 shares of 6 % Convertible
Redeemable Preferred Stock at a price of $3.50 per share. The net
proceeds of $1,964,600 were used to finance the Company's investment in
Transmedia La Carte Restaurant SA in Paris, France, and to provide
working capital to existing operations.
In July 1996, the Company issued 892,857 shares of Common Stock at a
price of $1.40. The net proceeds of $1,250,000 were used to provide
working capital to existing operations
In December 1996, the Company sold an aggregate of 556,250 shares of
Common Stock at $2 per share in a private placement The purchasers were
also issued warrants to purchase an aggregate of 185,417 shares of Common
Stock at $2 per share. The net proceeds of $1,097,500 were used to
provide working capital to existing operations.
In August 1997, the Company initiated a private placement in which it is
expected to sell an aggregate of 1,467,165 shares of Common Stock at a
purchase price of $1 per share. For every three shares purchased,, each
purchaser will receive, for no additional consideration, a warrant to
purchase one share of Common Stock at $1 per share. As of the date of
this filing, no shares have been issued. "See Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters".
The Company, through its subsidiary company Countdown Holdings Limited
("Countdown"), operates as a discount buying organization. Countdown
negotiates discount privileges with large retailers and sells membership
cards to customers, who may then take advantage of these facilities.
Countdown also offers a voucher discount service, where discounts
negotiated with suppliers are available to Countdown members who purchase
these discount vouchers.
As of September 30, 1997, Transmedia Europe, Inc. has the following
subsidiaries all of which were 100% owned unless stated otherwise:
<TABLE>
<CAPTION>
%
Name Ownership Country of Incorporation
- ------------------------------------------ ----------- ---------------------------
<S> <C> <C>
Transmedia Europe plc..................... 100.0 United Kingdom
Transmedia UK plc......................... 100.0 United Kingdom
Transmedia UK Inc. ....................... 100.0 United States of America
Countdown Holdings Ltd. .................. 50.0 United Kingdom
Transmedia La Carte Restaurant SA ........ 50.1 France
</TABLE>
The accompanying consolidated financial statements present the results
of operations of the Company for the period from October 1, 1996, to
September 30, 1997.
(b) Principles of consolidation
The consolidated financial statements include the financial statements
of the Company and its subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. The Countdown Holdings
Limited ("Countdown") and Transmedia La Carte Restaurant SA ("TMF")
acquisitions have been accounted for under the purchase method of
accounting.
As a result of the acquisition of 50% of Countdown on April 3, 1997, the
consolidated financial statements include the Company's interest in
Countdown's assets and liabilities on the basis that the Company controls
the operation. The consolidated statement of operations includes the
Company's interest in the results of Countdown from April 3, 1997 to
September 30, 1997.As a result of the acquisition of 14.1% of TMF on January
1, 1997, bringing the Company's total equity interest to
F9
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
(b) Principles of consolidation (continued)
50.1%, the consolidated statements of financial condition include the
Company's interest in the accounts of TMF. The consolidated statements of
operations include the Company's interest in results of TMF from
January 1, 1997 to September 30, 1997. All significant inter-company
balances and transactions have been eliminated in consolidation. The
Countdown and TMF acquisitions have been accounted for under the purchase
method of accounting.
(c) 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.
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.
(d) 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 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,
the carrying value of the License costs at September 30, 1997 represents the
future undiscounted cash flows that are expected to be generated and are
directly attributable to the Transmedia License.
(e) Goodwill
The Company recognises goodwill for the purchase price in excess of the
fair market value of net liabilities acquired in connection with the
acquisition of Countdown and the excess of the fair market value of net
assets acquired in connection with the acquisition of TM France (see Note 7)
Goodwill is being amortised on a straight line basis over its estimated
useful life of 15 years.
The basis for evaluating any impairment on goodwill is on an undiscounted
cash flow. The Company periodically evaluates the carrying value of goodwill
based upon several factors, including management's intention with respect to
the acquired net assets, and upon the expected revenue and profitability
levels of the acquired enterprise, to determine whether the value and future
benefit may indicate a decline in value. If the Company determines that
there has been a decline in the
F10
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
value of the acquired enterprise, the Company writes down the value of
the goodwill to the revised fair value.
(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:
<TABLE>
<S> <C>
Freehold property............................................................. 25 years
Furniture and fixtures........................................................ 5 years
Office equipment.............................................................. 3-5 years
</TABLE>
(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) Revenue recognition
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 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.
(j) Cardholder bonuses
The Company operates a number of cardholder "Bonuses" 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 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.
F11
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
(l) Foreign currencies (continued)
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 1997, the Company recorded an exchange loss
of $16,218 (1996 a loss of $55,775).
(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 1997 and 1996 were $26,311 and $56,610
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, 1997 and 1996 that should be capitalised.
(o) Use of estimates
In preparing the consolidated financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent liabilities at the date of the
consolidated financial statements and revenues and expenses during the
reported period. Actual results could differ from these estimates.
(p) Financial instruments
Financial instruments held by the Company include cash and cash equivalents,
restaurant credits and amounts due from/to related parties (see Note 5). The
carrying value of these financial instruments approximates the fair value
because of the relatively short-term maturity of the instruments.
In addition, the Company holds a financial instrument in the form of an
option to acquire Nationwide Helpline Services Pty Limited ("NHS").
Management does not believe it is practicable to estimate the fair value of
this financial instrument, because although the 6 month option had expired
prior to year end, the Company continued negotiations, and eventually
acquired a 51% interest in NHS on December 2, 1997, together with Transmedia
Asia Pacific Inc. (see Note 21).
(q) Recent U.S. accounting pronouncements not yet implemented
In December 1996, the FASB issued SFAS No. 128 "Earnings Per Share",
which is effective for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 requires that all prior period earnings
per share data be restated to conform to this statement. The Company will
adopt SFAS No. 128 for the year ended September 30, 1998. The adoption of
this standard is not expected to have a material effect on the Company's
earnings per share. In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", which established standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those
F12
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
(q) Recent U.S. accounting pronouncements not yet implemented (continued)
resulting from investments by, or distributions to, owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
SFAS No. 130, effective for all years beginning after December 15, 1997,
requires comparative information for earlier years to be restated and early
adoption is permitted. The Company intends to adopt SFAS No. 130 effective
October 1, 1998. Results of operations and financial position will be
unaffected by implementation of this standard.
2. AUDITORS
Effective September 26, 1997, the Company's former auditors, KPMG,
resigned as the Company's auditors and the Board of Directors, with the
approval of the Audit Committee, retained BDO Stoy Hayward as its
independent public accountants. The Company confirmed in its Form 8-K
filing, as amended by Amendment No. 2 filed October 27, 1997, and KPMG
confirmed in its letter to the office of the Chief Accountant dated
October 16, 1997, which letter was included in said filing, that during
the period KPMG was retained, there were no disagreements with the
former auditors on any matter of accounting principles or practices,
financial statements for the fiscal years ended September 30, 1996 and
September 30, 1995 or up through the time of replacement which, if not
resolved to the former auditors satisfaction, would have caused them to
make reference to the subject matter of the disagreement in connection
with their report. During such fiscal years, no accountant's report
prepared by KPMG contained an adverse opinion or disclaimer of opinion
or was qualified or modified as to uncertainty, audit scope or accounting
principles.
Notwithstanding the foregoing by letter dated February 13, 1998, KPMG
informed the Company that it would not agree to file a consent to the
inclusion of its prior audit reports in the Form 10-K filing of the
Company for the year ended September 30, 1997. Consequently, since a
manually signed consent has not been received by the Company, the audit
report of KPMG has not been included in this filing but the financial
statements covered by the prior audit report have been included. The
Company believes that there is no basis for the action of KPMG in light
of the foregoing and is considering what appropriate action must be taken
to resolve this situation.
The position of KPMG as stated in the letter of February 13, 1998, is as
follows:
"Based on an evaluation of circumstances and recent events we have
decided that we are not willing to accept an assignment to consider
whether we would re-sign our audit report as of September 30, 1996 and
for the year then ended for inclusion in the Form 10-K filing of
Transmedia Europe, Inc. for the year ended September 30, 1997".
3. GOING CONCERN
The financial statements record a loss for the year ended September 30,
1997 of $3,746,248, which, when taken with the previous year's results,
record an accumulated deficit of $10,655,176 as at September 30, 1997.
The Company has been able to fund this deficit, and the cost of its
acquisitions and restructuring of Countdown, principally by the sale of
equity securities and a loan from a director and stockholder of the
Company during the year. Whilst the Company is taking steps to reduce the
level of operating losses, the Company has required, and will continue to
require, additional funds from the sale of equities in order to fund
these deficits. The Company is also dependent on being able to raise
additional funds in order to complete the funding of the acquisition of
Nationwide Helpline Services Pty Limited (see Note 18) and other
acquisitions being contemplated. Management estimates that an amount of
$1,000,000 will be required in the short-term, being prior to April 30,
1998, in order to continue to provide working capital to operations.
Management also estimates that an amount of approximately $8,250,000 will
be required to complete the funding of the acquisition of Nationwide
Helpline Services Pty Limited (see Note 18), as well as other
acquisitions currently under consideration. In the event that management
is not successful, or only partially successful in raising this sum of
$8,250,000, it may have to curtail the acquisition program, with the
possible loss of either deposits or payments made on account of
approximately $950,000.
F13
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
3. GOING CONCERN (continued)
Whilst management accepts and acknowledges that there is no guarantee
that the plans referred to directly above will be entirely successful,
management remains reasonably confident that sufficient funds will become
available to enable the Company to operate for the foreseeable future.
Accordingly, the financial statements are prepared on a going concern basis
and do not include any adjustments, which may be necessary if such a basis
was not appropriate.
4. INVESTMENT IN AFFILIATED COMPANY
The Investment in Transmedia La Carte Restaurant S.A. ("Transmedia France")
consists of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Cost of investment......................... $ -- $ 1,800,000
Less: Share of license fee................. -- (466,667)
------------- -------------
-- 1,333,333
Share of losses............................ -- (635,192)
Amounts due from affiliate................. -- --
------------- -------------
$ -- $ 698,141
------------- -------------
------------- -------------
</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 TM France under which it granted sub-licenses for
Belgium/Luxembourg, Spain, Italy and French speaking Switzerland for
9,250,000FFr (approximately $1,780,000). As a result the Company's
shareholding increased to 50.1% and TM France consolidated under the
purchase method of accounting. (See also note 6)
5. RELATED PARTY TRANSACTIONS
Pending resolution of Mr Guinan's residence status in London, the Company
advanced payment on the
F14
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
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
F15
<PAGE>
Transmedia Europe Inc.
Notes to the Consolidated Financial Statements
5. RELATED PARTY TRANSACTIONS (continued)
director. The balance at September 30, 1996 was $20,946. During 1997 the
Company charged International Advance, Inc. $65,455 of mainly property
expenses relating to the offices at 11 St. James's Sq., London SW1Y 4LB,
England. The balance at September 30, 1997 was $86,401. 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 Chairman and a 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,
1997 1996
------------- -------------
<S> <C> <C>
International Advance, Inc. ............................ $ 86,401 $ 20,946
Transmedia Asia Pacific, Inc. .......................... -- 93,300
------------- -------------
$ 86,401 $ 114,246
------------- -------------
------------- -------------
</TABLE>
The loans are unsecured and non interest bearing. Information regarding
the activity with respect to the amounts due (to)/from related parties is as
follows:
<TABLE>
<CAPTION>
E. Guinan III Conestoga International Transmedia
Partners Advance Asia Pacific
Inc. Inc. Inc.
------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
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
Additions.............................................. (202,383) -- -- (1,240,000)
Amounts charged........................................ -- -- 65,455 827,352
Amounts collected...................................... 184,552 -- -- 65,214
Treasury stock......................................... -- -- -- --
------------- ---------- ------------ -----------
Balance at September 30, 1997 ......................... $ (17,831) -- $ 86,401 $ (254,134)
------------- ---------- ------------ -----------
------------- ---------- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
J V Vittoria TMNI
------------ -----------
<S> <C> <C>
Balance at September 30, 1996.......................... $ -- $ --
Loan received.......................................... (1,000,000) --
Promissory note........................................ -- (250,000)
Royalty (note 4 and 6)................................. -- (750,000)
Interest............................................... (61,479) (12,397)
----------- -----------
Balance at September 30, 1997.......................... $(1,061,479) $(1,012,397)
------------ -----------
------------ -----------
</TABLE>
F16
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
6. INTANGIBLE ASSETS
Intangible assets consist of the costs of the Transmedia License as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Acquisition cost
Balance at beginning of year........................................................ $ 1,621,284 $ 1,621,284
Additions........................................................................... 750,000 --
------------- -------------
Balance at end of year.............................................................. 2,371,284 1,621,284
Accumulated amortisation:
Balance at beginning of year........................................................ 324,258 216,172
Charge for the year................................................................. 199,600 108,086
------------- -------------
Balance at end of year.............................................................. 523,858 324,258
------------- -------------
Net book value at September 30,..................................................... $ 1,847,426 $ 1,297,026
------------- -------------
------------- -------------
</TABLE>
In December 1996 the Company reached an agreement, effective January 1997,
with TM France under which it granted sub-licenses for Belgium/Luxembourg,
Spain, Italy and French speaking Switzerland for 9,250,000FFr (approximately
$1,780,000). Network 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 or, if earlier, a payment of $750,000 in aggregate
upon completion of the Countdown acquisition. No payment has been made in
respect of this agreement.
The amortization charge for the year includes an additional charge of
$91,514 reflecting a diminution in the carrying value of the license based
on future cash flows.
7. GOODWILL
Goodwill arises through the acquisitions of Countdown Holdings Limited and
Transmedia La Carte Restaurant SA.
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -----------------
<S> <C> <C>
Acquisition cost
Balance at beginning of year........................................................ $ -- $ --
Additions........................................................................... 3,495,970 --
------------- -----
Balance at end of year.............................................................. 3,495,970 --
------------- -----
Accumulated amortisation:
Balance at beginning of year........................................................ -- --
Charge for the year................................................................. 145,970 --
------------- -----
Balance at end of year.............................................................. 145,970 --
------------- -----
Net book value at September 30, 1997................................................ $ 3,350,000 $ --
------------- -----
------------- -----
</TABLE>
F17
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
7. GOODWILL (continued)
In January 1997 the Company increased its shareholder in TM France
from 45% to 50.1%. TM France is consolidated in these statements
under the purchase method of accounting. The results of TM France
were consolidated up to January 1997 under the equity method of
accounting. The cost of investment in TM France includes an amount
of $853,391 being the Company's share of a increase in capital
which the Company has agreed to subscribe to but which has not been
paid. At the date of acquisition there was an excess of net assets
over the cost of investment of $64,621.
On April 7, 1997 the Company paid $2,968,371 for a 50% interest
in Countdown, which is consolidated into these statements under the
purchase method of accounting. In payment of the purchase price the
Company issued 1,200,000 shares of common stock, granted options to
purchase 250,000 shares of common stock at $1 each and paid pounds
UK 500,000 (approximately $800,000) in cash. At the date of
acquisition Countdown had net liabilities of pounds UK 340,149
($558,525) resulting an excess of purchase price of $3,560,591,
including $458,173 of purchased goodwill in the books of Countdown.
8. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
FURNITURE OFFICE
FREEHOLD AND EQUIPMENT
PROPERTY FIXTURES & COMPUTERS TOTAL
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Cost
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
Additions...................................................... -- 6,656 150,137 156,793
Acquisition.................................................... 415,399 111,802 591,756 1,118,957
Disposals...................................................... -- (3,757) (39,103) (42,860)
Foreign exchange............................................... -- 540 5,404 5,944
---------- ----------- ------------ ----------
At September 30, 1997.......................................... 415,399 131,290 872,764 1,419,453
---------- ----------- ------------ ----------
Accumulated depreciation
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
Acquisitions................................................... 164,524 298 235,623 400,445
Disposals...................................................... -- (2,866) (39,103) (41,969)
Charge for the year ended September 30, 1997................... 9,042 42,971 158,801 210,814
Foreign exchange............................................... (42) 56 4,772 4,786
---------- ----------- ------------ ----------
At September 30, 1997.......................................... 173,524 48,031 456,783 678,338
---------- ----------- ------------ ----------
</TABLE>
F18
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
8. PROPERTY AND EQUIPMENT (continued)
<TABLE>
<S> <C> <C> <C> <C>
Net Book Value at September 30, 1997........................... $ 241,875 $ 83,259 $ 415,981 $ 741,115
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
Net Book Value at September 30, 1996........................... -- $ 8,477 $ 67,880 $ 76,357
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
</TABLE>
9. ALLOWANCE FOR IRRECOVERABLE RESTAURANT CREDITS
Changes in the Company's allowance for irrecoverable restaurant credits were
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Balance at the beginning of period.................................... $ 399,328 $ 357,557 $ 76,200
Utilisation (deletions)............................................... (5,000) -- --
Additions--charged during period...................................... 271,806 41,771 281,357
------------- ------------- -------------
Balance at end of period.............................................. $ 666,134 $ 399,328 $ 357,557
------------- ------------- -------------
</TABLE>
10. OTHER ASSET
The other asset consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
----------------- ----------------
<S> <C> <C>
Interest in option to acquire:
-- National Helpline Services Pty Limited.............. $ 142,946 $ --
----------------- ----------------
----------------- ----------------
</TABLE>
In October 1996 the Company made an investment of $134,741,
subsequently increasing to $142,946 for ongoing legal costs, to acquire
a renewable 6 month option to acquire 50% of the share capital of
National Helpline Services PTY Limited ("NHS"). Transmedia Asia Pacific
Inc., acquired an option on identical terms to the Company, over the
remaining 50% share capital of NHS. Although the 6 month option had
expired prior September 30, 1997, the Company continued negotiations,
and eventually indirectly acquired an interest in NHS on December 2,
1997, together with Transmedia Asia Pacific Inc. (See Note 18).
11. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Accrued payroll and holiday pay..................................................... $ 300,571 $ 69,061
Income taxes payable................................................................ 42,554 --
Cardholder bonuses.................................................................. -- 8,762
Tip and tax......................................................................... 124,469 113,102
Food and beverage provision......................................................... -- 71,098
Professional fees................................................................... 184,375 54,600
Royalties payable................................................................... 59,913 22,037
Preferred share dividend............................................................ 242,074 99,735
Hire purchase and lease payments.................................................... 183,212 --
Other............................................................................... 322,220 --
------------- -------------
Total accrued liabilities........................................................... $ 1,459,388 $ 438,395
------------- -------------
</TABLE>
F19
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
12. REDEEMABLE PREFERRED STOCK
<TABLE>
<CAPTION>
SEPTEMBER 30 SEPTEMBER 30
1997 1996
------------- -------------
<S> <C> <C>
Convertible, redeemable preferred shares $0.01 par value.
675,000 shares authorised, 590,857 issued and outstanding,
bearing a dividend of 6 1/2%, redeemable at the option of the Company .............. $ 5,909 $ 5,909
------------ ------------
</TABLE>
13. MINORITY INTEREST
<TABLE>
<CAPTION>
TM FRANCE COUNTDOWN TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year.............................................. $ -- $ -- $ --
Additions................................................................. (2,008,912) 273,306 (1,735,606)
Share of current year losses.............................................. 602,954 202,905 805,859
----------- ----------- -----------
(1,405,958) 476,211 (929,747)
Less: Amounts due from Minority shareholder............................... 94,793 -- 94,793
----------- ----------- -----------
Balance at end of year.................................................... $(1,311,165) $ 476,211 $ (834,954)
----------- ----------- -----------
</TABLE>
14. 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 to 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.
In addition, the Company issued options for 40,000 shares of Common
Stock in 1996 (of which 10,000 were cancelled in 1997), and 10,000 in
1997, under the Company's 1996 stock option plan for outside directors.
The plan provides that the Stock Option Committee of the Board of
Directors may grant stock options with respect to a maximum of 300,000
shares of Common Stock. These options have a five year term.
In arriving at such pro-forma amounts, the Company estimates the
fair value of each stock option on the grant date by using the Black Scholes
Valuation Method with the following weighted average assumptions used for
grants in fiscal 1997 and 1996 respectively: no dividends paid for all
years; expected volatility of 40%; a risk free interest rate of 6.7% and an
expected life being the remaining term of the option. The per share weighted
fair value of the stock options granted in 1997 and 1996 were $0.68 and
$0.64 respectively.
F20
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
14. STOCK OPTIONS AND WARRANTS (continued)
The following are the per share fair value of the stock options
granted in each respective year.
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.
In April 1997, the Company granted an option to purchase up to
250,000 shares of Common Stock at a purchase price of $1 per share to
the owner of Countdown as part of the consideration given for the 50 %
purchase of Countdown (as described in Note 7). In addition, the Company
issued warrants to purchase 125,000 shares of common stock at an
exercise price of $1.25 per share with an expiration date of April 2002.
The Company estimated the fair value of these options and warrants
using the Black Scholes Valuation Method with the following weighted
average assumption. no dividends paid for all years; expected
volatility of 40%; a risk free interest rate of 6.7% and
an expected life being the remaining term of the options.
Stock option and warrant activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
OPTIONS WARRANTS
NUMBER OF WEIGHTED AVERAGE 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 $ 2.08 297,619 $ 1.40
Granted.............................................. -- -- 100,000 $ 2.50
Exercised............................................ -- -- -- --
----------- ----- ----------- -----
Balance at September 30, 1996........................ 40,000 $ 2.08 597,619 $ 1.62
Granted.............................................. 10,000 $ 1.25 125,000 $ 1.25
Granted.............................................. 250,000 $ 1.00 185,417 $ 2.00
Exercised............................................ -- -- -- --
Cancelled............................................ (10,000) $ 2.08 -- --
----------- ----- ----------- -----
Balance at September 30 1997......................... 290,000 $ 1.12 908,036 $ 1.65
----------- ----- ----------- -----
</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 would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
-------------- --------------
<S> <C> <C>
Net loss As reported $ (3,746,248) $ (2,695,524)
Pro forma $ (3,770,548) $ (2,711,364)
Loss per share As reported $ (0.27) $ (0.24)
Pro forma $ (0.27) $ (0.24)
</TABLE>
Pro forma net loss reflects only options granted in 1997 and 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.
F21
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
15. ACQUISITION OF COUNTDOWN
On April 3, 1997, the Company purchased from Mr. C.E.C. Radbone 50% of the
outstanding capital stock of Countdown Holdings Limited. Countdown Holdings
Limited, through its wholly owned operating subsidiary, Countdown plc is an
international provider of membership discount services. The balance of the
outstanding capital stock was simultaneously purchased by TMAP on terms
similar to the Company's purchase.
In payment of the purchase price, the Company issued 1,200,000 shares of its
Common Stock, $0.00001 par value per share ("Common Stock") and paid pounds
(UK) 500,000 (approximate US$ equivalent as of April 3, 1997 was $800,000)
in cash. In addition, the Company granted Mr. Radbone a five year option to
purchase up to 250,000 shares of Common Stock at a purchase price of $1
per share.
The cash portion of the purchase price was funded by a $1,000,000 loan
from a director and stockholder of the Company. The Loan matured on
September, 27 1997, bears interest at a rate of 12% per annum, and has
been renewed by agreement between the Edward J. Guinan III, Chairman of
the Board, and the director. The expiration date has been extended for
an indefinite period of time and is repayable on 60 days notice and the
loan continues to bear interest at 12% per annum. The loan is
collateralised by a pledge of all the shares purchased by the Company
from Mr. Radbone. In connection with the loan, the Company issued to the
director and stockholder five-year warrants to purchase up to 125,000
shares of Common Stock at $1.25 per share. In connection with the
acquisition, the Company and TMAP each agreed to pay $125,000 in cash to
International Incorporated ("TMNI") and both agreed to issue TMNI a
joint promissory note in the principal amount of $500,000, the liability
for which has been split between the two companies equally, payable on
April 2, 1998 and bearing interest at the rate of 10% per annum. The
promissory notes are to be convertible at the holder's option into an
equal number of shares of Common Stock of the issuer at the rate of
$1.20 per share. The Company agreed to pay such amounts in order to
obtain the consent to the Countdown acquisition, which consent was
required by the terms of the master license agreement from TMNI under
which the Company operates its discount restaurant card business. For a
more detailed discussion of the terms of the transaction, reference is
made to the Company's current report on form 8-K dated December 2, 1997,
which is incorporated by this reference herein.
16. LEASES
The Company leases certain office space under lease agreements.
Future minimum lease payments under non-cancellable operating leases as of
September 30, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30
1997
------------
<S> <C>
Total minimum lease payments.................................................................... $ 150,846
--------
--------
</TABLE>
The amount charged to the consolidated statement of operations for rent
expense in the year ended September 30, 1997 was $150,137 (1996: $149,449).
F22
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
17. 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,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Computed 'expected' tax benefit..................................... $(1,477,000) (871,000) $(740,000)
Non deductible expenses............................................. 85,000 57,000 60,000
Change in valuation allowance for deferred tax assets............... 1,385,000 807,000 747,000
Other (net)......................................................... 7,000 7,000 (67,000)
------------- ------------- -------------
Income tax expense.................................................. $ -- $ -- $ --
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets are as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carry forwards.................................... $ 2,957,000 $ 1,463,000 $ 890,000
Deferred license fee................................................. 170,000 170,000 170,000
Investment in affiliated company..................................... -- 375,000 201,000
Royalties............................................................ 254,000 188,000 119,000
Pre operating costs capitalised for
tax purposes......................................................... 7,000 7,000 11,000
Other................................................................ 22,000 13,000 18,000
------------- ------------- ------------
Total................................................................ 3,410,000 2,216,000 1,409,000
Less valuation allowance............................................. (3,410,000) (2,216,000) (1,409,000)
------------- ------------- ------------
Net deferred tax assets.............................................. $ -- $ -- $ --
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
The foreign net operating loss carry forward of approximately $2.0
million may be carried forward indefinitely.
18. COMMITMENTS
Each quarter the Company must pay to TMNI 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,
1997, 1996 and 1995 amounted to $0, $83,498 and $108,834 respectively. In order
to maintain full rights under the Transmedia License (1) no person or group of
persons, without the prior permission of TMNI, may acquire beneficial ownership
of 30% or
F23
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
18. COMMITMENTS (CONTINUED)
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 another country other than the United Kingdom within 3
years after the Closing Date, and (b) 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 participating restaurant renewals
at the rate of 70% per year. As at September 30, 1997 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 TMNI 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.
The Company is committed to making further payments in relation to the
acquisition of NHS. These consist of payments due on January 31, 1998 to certain
principals as sign-on fees amounting to Aus.$750,000 ($47,000) and the second
tranche for 51% of the shares of common stock of NHS for Aus.$2,842,540
($2,075,000). At the request of the principals, payment of these sign-on fees
has been delayed for an indefinite period. Payment of the second tranche may be
extended by up to 90 days provided that interest will accrue during any such
extension at 5% per annum. The balance of the payments due to certain principals
as sign-on fees amounting to Aus.$ 750,000 ($547,000) is due on June 30, 1998
subject to an extension of 90 days provided that interest will accrue during any
such extension at 5% per annum. The option to acquire the 49% balance of the
shares of common stock of NHS for Aus.$2,497,655 ($2,150,000) is exercisable at
any time through June 30, 1998 subject to an extension of 90 days provided that
interest will accrue during any such extension at 5% per annum. Failure to
exercise this option during its term will give the NHS principals the rights to
repurchase the 51% interest for nil consideration.
19. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the United Kingdom, or in
France. 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, 1997,
and no single merchant, under the Countdown discount purchase program accounted
for greater than 10% of the Countdown volume of business.
20. CONTINGENT LIABILITY
The Company did not withold any amounts from Edward J. Guinan III's
remuneration with respect to either US or UK taxes through March 31, 1997. Such
treatment was used pending resolution by Edward J. Guinan III of his tax
residence. Mr. Guinan had provided 400,000 shares of the Company's Common Stock
and 400,000 shares of Transmedia Asia Pacific's Common Stock, which were sold
privately realising pounds (UK) 293,753. The proceeds were used to purchase a
tax certificate against any potential tax liabilities of the Company and
Transmedia Asia Pacific Inc. In November 1997, a payment on account was made to
the UK Inland Revenue of pounds (UK) 115,000. A sum of pounds (UK) 100,000 was
released to Mr. Guinan and the balance of pounds (UK) 78,753 remains in escrow
against any ongoing tax liabilities of Mr. Guinan to either the UK Inland
Revenue or the United States Internal Revenue Service.
F24
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
21. SUBSEQUENT EVENTS
The Company has made a significant capital commitment for the completion of
the purchase of 51%, on an indirect basis, of Nationwide Helpline Services Pty
Limited ("NHS") in Australia. This commitment consists of a total commitment of
Aus. $10,000,000 ($6,578,950), of which Aus. $4,000,000 ($2,631,578) represents
sign-on fees payable to certain individuals of NHS, and the balance of which
represents amounts payable to NHS in two tranches. The first tranche was paid on
December 2, 1997 in cash and shares of Common Stock of the Company and its
affiliate, Transmedia Asia Pacific, Inc., while the second tranche is payable in
cash only. The Company also, jointly with its affiliate Transmedia Asia Pacific
Inc., acquired an option to purchase the 49% balance of NHS's business and
assets for an additional Aus. $2,497,655. ($1,643,194)
In October 1997, the Company signed a Letter of Intent to purchase 50% of
the shares of Common Stock of a privately held corporation in a complementary
field of business. $50,000 in cash and 200,000 shares of Common Stock in the
Company, held by Edward J. Guinan III, the Chairman of the Board of Directors
were lodged as a deposit. The deposit is non-refundable and may be forfeited in
the event the transaction does not take place prior to March 31, 1998. The
Letter of Intent subject to satisfactory due diligence, contemplates a March 31,
1998 closing and a purchase price of $3,750,000 in cash, plus $500,000 in
unrestricted shares of Common Stock of the Company, the value of the shares of
Common Stock being that as of the day of closing of the purchase. The letter of
intent contemplates that Transmedia Asia Pacific will purchase the balance of
the Company's Common Stock on similar terms.
On January 9, 1998, the Company entered into an agreement in principle,
subject to contract, to purchase 85% of the share capital of Network America
Inc., of Dallas, Texas. The consideration consists of a cash deposit of $50,000
to the Principals, an undertaking by the Company to redeem on January 19, 1998,
an outstanding Promissory Note in an amount of $103,000 held by an unrelated
third party, an undertaking by the Company to pay a sum of $250,000 in cash to
the Principals on March 31, 1998, and an undertaking by the Company to pay a sum
of $1,000,000 in eighteen subsequent equal monthly instalments of $55,555.
On January 16, 1998, Mr. C.E.C. Radbone, a director of the Company, resigned
from the Board of Directors. Contemporaneously, his employment agreement,
according to the terms of which he had been serving as Managing Director of
Countdown plc, a subsidiary of the Company, was cancelled. Mr. Radbone held
1,200,000 shares of Common Stock of the Company and agreed to grant Edward J.
Guinan III, the Chairman of the Board of Directors, an option to purchase these
shares at a value of $1 per share. The consideration for this option is
$500,000.
F25
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
ITEM 9--CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
See Footnote 2 in "Note to the consolidated Financial Statements.
25
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Table of Directors and Executive Officers
The table below sets forth the names and ages for all the directors and
executive officers of the Company. The term of each director expires at the
next annual meeting of stockholders and upon his successor being duly elected
and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- --------------------------------------
<S> <C> <C>
Edward J. Guinan III 51 Chairman
Paul L. Harrison 37 President and Chief Executive Officer
Carl Freyer 60 Director
Joseph V. Vittoria 63 Director
David S. Vaillancourt 51 Chief Financial Officer
</TABLE>
(b) Family Relationships
There are no family relationships among any of the directors or executive
officers of the Company.
(c) Experience of Directors and Executive Officers for the past Five Years
Edward J. Guinan III has been the Chairman of the Company, Chief Executive
Officer and a director of the Company since its inception. Mr. Guinan began
his career on Wall Street when he purchased a seat on the New York Mercantile
Exchange. He traded on he floor for his own account until 1979, when he
became a broker for the firm of Moseley Hallgarten Estabrook and Weeden, wher
he eventually became manager of their New York office. From 1982 through
1984, he was employed by Cowan and Company in New York. In 1984, Mr. Guinan
established his own broker-dealer firm, Guinan and Company. From 1990 through
1991, Mr. Guinan was a broker at the head of the corporate finance department
at Ernst and Company, a member of the New York Stcok Exchange. During 1992,
Mr. Guinan was head of the corporate finance department at First Hanover
Securities, Inc., a New York broker-dealer. Since February 1993, Mr. Guinan
has served as President, Chief Executive Officer and director of the Company,
as well as its affiliate company, Transmedia Asia Pacific Inc., ("Transmedia
Asia Pacific"). Since May 1995, Mr. Guinan has served as President, Chief
Executive Officer, Chief Financial Officer and the sole director of
International Advance, Inc. ("Advance"). Since November, 1995 Mr. Guinan has
been a director of Transmedia La Carte Restaurant SA ("Transmedia France"),
which is a 50.1% owned subsidiary of the Company. Mr. Guinan devotes
substantially all of such time as is necessary to the affairs of the Company.
Paul L. Harrison is presently President and Chief Executive Officer of the
Company. Mr. Harrison is also Secretary and a director of Transmedia Asia
Pacific Inc. In 1993, Mr. Harrison acted as a consultant to the Company in
connection with the commencement of business operations and initial financing
thereof. From 1989 until 1994, Mr. Harrison was Vice-President -- European
Equities of Salomon Brothers, London, with responsibility for coordinating
and marketing the sales of various derivatives and other equity securities to
European based institutional clients. Mr. Harrison held that position from
1989 onwards. From 1988 through 1989, Mr. Harrison was Main Board director of
County/NatWest, Wood Mackenzie, the investment banking arm of NatWest Bank NA
in the United Kingdom, with responsibility for developing business strategy
and managing a team of securities brokers. For two years prior thereto, Mr.
Harrison was an Assistant Director of Hill Samuel Merchant Bank and Executive
Vice-President of Wood Mackenzie Inc., with responsibilities to manage and
develop the United States brokerage operations of this United Kingdom firm.
Carl H. Freyer has been a director of the Company since 1997. Mr. Freyer is
President of Freyer Corporation, a financial consulting firm. He has been a
director of G-Tech Corporation, a New York Stock Exchange corporation, as
well as a director of Computer Investors Group, Inc. and also two banks. Mr.
Freyer holds a BS
26
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
in electrical engineering from Tufts University and an MBA from Harvard
University.
Joseph V. Vittoria has been a director of the Company since inception. From
September 1987 to January 1997, Mr. Vittoria was the Chairman and Chief
Executive Officer of Avis Inc., and was a senior executive at Avis since
1982. Mr. Vittoria is a director of UAL Corporation. He holds a BS in civil
engineering from Yale University and an MBA from Columbia University. Mr.
Vittoria also holds an honorary Doctor of Laws degree from Molloy College.
Mr. Vittoria is also a director of Transmedia Asia Pacific Inc.
David S. Vaillancourt has been Chief Financial Officer of the Company since
1997. Mr. Vaillancourt is also Chief Financial Officer of Transmedia Asia
Pacific. Prior to joining the Company, Mr. Vaillancourt spent three years as
Senior Vice President and Chief Administrative Officer of an international
human resource company, based in Toronto -- with overall responsibility for
domestic and international finance and administration. Prior to this, Mr.
Vaillancourt spent seven years in corporate finance and venture capital
consulting, when he operated his own company working in North and Central
America, Western Europe, the Middle East and Australasia/Pacific. He has also
served as Vice President Finance for Barbecon Inc., a subsidiary of Olympia
and York Inc., as well as Chief Financial Officer -- International, for
Carlson Companies, Inc. in Minneapolis and Chicago. He is a member of the
Chartered Institute of Management Accountants, London.
(d) Involvement in Certain Legal Proceedings
None.
(e) Compliance with Section 16 (a) of the Securities Exchange Act of 1934.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished
to the Company by each person who, at any time, during the fiscal year ended
September 30, 1997 was a director, executive officer or beneficial owner of
more than 10% of the Company's common stock $.00001 par value per share (the
"Common Stock") with respect to the fiscal year ended September 30, 1997 and
Forms 5 and amendments thereto furnished to the Company by such persons with
respect to such fiscal year, and any written representations from such
persons, the Company believes that during and with respect to the fiscal year
ended September 30, 1997, all filing requirements under Section 16(a) of the
1934 Act, applicable to its directors, executive officers and the beneficial
owners of more than 10% of the Company's Common Stock were complied with.
ITEM 11--EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the total compensation
(including salary, bonus and all other forms of annual and long-term
compensation) paid to or accrued by the Company during the fiscal years 1997,
1996 and 1995 for the Chief Executive Officer and the current executive
officers of the Company who earned over $100,000 during the Company's last
fiscal year (the "Named Executives").
Mr. Guinan is the Chairman and Chief Executive Officer of the Company. During
fiscal 1997, no officer of the Company earned more than $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------- ------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS/SAR'S COMPENSATION
- ----------------------------------------- --------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Edward J. Guinan--Chairman 1997 $ 100,000(1) 0 0
1996 $ 153,625(2) 0 0
1995 $ 160,000(3) 0 0
</TABLE>
(1) Based upon an exchange rate of L1 to L1.621
(2) Based upon an exchange rate of L1 to $1.536
(3) Based upon an exchange rate of L1 to $1.60.
27
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
EMPLOYMENT AGREEMENT
Mr. Guinan entered into an employment agreement with the Company, effective
August 11, 1993 (the "Effective Date") The Employment Agreement provides for
an initial term of three years, with one year renewals thereafter unless
terminated by either party. Mr. Guinan's contract provides for a salary of
100,000 pounds (UK) ($162,000) per annum and participation in executive
benefit programs. Mr. Guinan may be discharged for cause including failure or
refusal to perform duties, dishonesty, conviction of a felony or fraud,
failure adequately to perform his services, engagement in acts detrimental to
the Company, material breach of his Employment Agreement, disability or
death. Mr. Guinan is also employed by Transmedia Asia Pacific and Advance.
Mr. Guinan is required to devote sufficient time to the business of the
Company in his discretion.
STOCK OPTION PLANS
In April 1993, the Company adopted the 1993 Stock Option Plan ("the 1993
Plan"). The purpose of the 1993 Plan is to attract and retain personnel of
the highest calibre and provide increased incentives for officers, and
employees to promote the well-being of the Company.
The 1993 Plan authorizes the granting of incentive stock options or
non-qualified stock options for up to 250,000 shares of the Company's Common
Stock, subject to adjustment in the event of stock splits, stock dividends,
recapitalizations, mergers, reorganizations, exchanges of shares and other
similar changes affecting the issued Common Stock. Unless sooner terminated,
the 1993 Plan expires on December 31, 2003. Officers, employees and other
independent contractors who perform services for the Company or any of its
subsidiaries are eligible to receive incentive stock options. The 1993 Plan
is administered by the Board of Directors (or a committee appointed by it),
which determines the persons to whom awards will be granted, the number of
awards to be granted and the specific terms of each grant, subject to the
provisions of the 1993 Plan. Under the 1993 Plan, no stock option may be
granted having an exercise price which is less than the fair market value of
the Common Stock on the date of grant.
As of January 31, 1998 options to acquire 206,000 shares have been awarded
under the 1993 Plan at an exercise price of $1.00 per share, 6,000 of which
were exercised in fiscal 1995.
In January 1996, the Company's Board of Directors approved, and on April 25,
1996 the Company's stockholders approved, the 1996 Outside Directors Stock
Option Plan (the "Outside Directors Plan"). The purpose of the Outside
Directors Plan is to attract and retain the services of experienced and
knowledgeable independent directors. The Outside Directors Plan provides for
the automatic granting to each non-employee director of the Company on each
January 1, commencing January 1, 1996, a stock option for 10,000 shares of
Common Stock. Mr. Vittoria received thereunder options covering 20,000 shares
with respect to prior services on the Board of Directors. The maximum number
of shares of Common Stock which may be issued under the Outside Directors
Plan is 300,000, which amount is subject to adjustment in the event of stock
splits, stock dividends, recapitalizations, mergers, reorganizations,
exchanges of shares and other similar changes affecting the Company's issued
Common Stock. Each option issued under the Outside Directors Plan will be
exerciseable by the optionee for a period of five years from the date of
grant. Unless sooner terminated, the Outside Directors Plan expires on
January 11, 2006. The Outside Directors Plan is administered by the Company's
employee directors. Options granted under the Outside Directors Plan will
have an exerciseable price equal to the fair market value of the Common Stock
on the last date preceding the date of grant. As of January 31, 1998, options
have been granted under the Outside Directors Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors acts as the Compensation Committee and the Stock
Option Committee. The Board formulates and decides all matters relating to
the salaries, bonuses, fringe benefits or other compensation of the executive
officers of the Company. The Board also decides matters relating to the
granting of stock options under the 1993 Plan. See "Certain Relationships and
Related Transactions" for transactions between the Company and members of the
Compensation Committee.
28
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to the number of shares of
Common Stock beneficially owned as of January 31, 1998, by (i) each
beneficial owner of more than five percent of the outstanding Common Stock,
(ii) each Named Executive and director of the Company and (iii) all executive
officers and directors of the Company as a group. All shares are owned both
of record and beneficially unless otherwise indicated. Unless otherwise
indicated, the address of each beneficial owner is c/o Transmedia Europe
Inc., 11 St. James's Square, London SW1Y 4LB.
NUMBER AND PERCENTAGE OF SHARES OF COMMON STOCK OWNED
<TABLE>
<CAPTION>
Shares Owned % Owned
------------------ -------------
<S> <C> <C>
Name and Address
Thomas DiBenedetto 1,236,454(1) 8.0
15140 Fiddlesticks Blvd.
Ft. Myers Florida 33912
FAI Overseas 2,210,227(2) 13.7
Investments Pty Ltd
Level 12
185, Macquarie St.
Sydney, NSW 2000
Australia
</TABLE>
NUMBER AND PERCENTAGE OF SHARES OF COMMON STOCK OWNED
<TABLE>
<CAPTION>
Shares Owned % Owned
------------------ -------------
<S> <C> <C>
Name and Address
Edward J. Guinan III 4,612,189(3) 29.7
Paul L. Harrison 0 --
Carl Freyer 10,000(5) --
Joseph V. Vittoria 749,922(4) 4.8
All Directors and Officers as a group 5,372,111 34.5
</TABLE>
(1) Includes 700,000 shares of Common Stock issued to Bostoner International
Group Establishment ("Bostoner International") which Mr. DiBenedetto may
be deemed to beneficially own. Mr. DiBenedetto is the Chief
Executive Officer of Bostoner International and owns 50% of that company.
Also includes 118,227 shares of Common Stock owned by Bostoner
Internation Partners, LP a partnership of which Mr. DiBenedetto is a
general partner, which Mr. DiBenedetto may be deemed to beneficially own.
(2) Includes 633,342 shares of Common Stock issuable upon exercise of
warrants and 321,428 shares of Common Stock issuable upon conversion of
shares of the Company's 6.5% non-voting Convertible Preferred Stock (the
"Preferred Stock").
(3) Includes 226,858 shares of Common Stock owned by Conestoga Partners, Inc.
("Conestoga") which Mr. Guinan may be deemed to beneficially own. Mr.
Guinan is a director and the President and Chief Executive Officer of
Conestoga and owns 73% of the outstanding capital stock thereof. Also
includes 156,851 shares of Common Stock owned by Advance which Mr. Guinan
may be deemed to beneficially own. Mr. Guinan is a director, President,
Chief Executive Officer and the controlling shareholder of Advance. Does
not include 118,227 shares of Common Stock owned by Edward J. Guinan,
Jr., Mr. Guinan's father, and 25,000 shares of Common Stock owned by Joan
Guinan Pine, Mr. Guinan's aunt, of which Mr. Guinan disclaims beneficial
ownership. Of the shares owned by Mr. Guinan, approximately 400,000
shares have been pledged to secure certain planned acquisitions and are
subject to forfeiture in the event these acquisitions are not consummated
by certain dates.
(4) Includes 328,587 shares of Common Stock issuable upon conversion of
shares of the Preferred Stock and 40,000 shares of Common Stock issuable
upon exercise of options.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During Fiscal 1997, the company made a net payment of $1,240,000 to
Transmedia Asia Pacific in repayment of temporary funding. In fiscal 1997,
the company charged management expenses of $892,566 to Transmedia Asia
Pacific. The $254,134 balance as of September 30, 1997 due to the Company
from Transmedia Asia Pacific is non-interest bearing and repayable on demand.
Currently, the Company has no plans to demand repayment of this amount.
Messrs. Guinan, Harrison, Vittoria and Freyer are also directors of
Transmedia Asia Pacific. See "Directors and Executive Officers of Registrant."
In April 1997 and December 1997, the Company and Transmedia Asia Pacific
engaged in two significant acquisitions. See "Item 1. Business--Countdown
Business and--NHS Acquisition.
In September 1997, a loan, advanced by a director of the Company in
connection with the acquisition of Countdown, matured. The principal amount
of the loan is $1,000,000. The director agreed to extend the period of the
loan, subject to interest continuing to be accrued at the same rate of 12%
per annum, for an indefinite period, and subject to sixty days notice of
repayment demand.
In September 1997, a Preferred Stockholder and director of the Company
participated in a private placement financing which the Company offered to
existing Preferred stockholders.
In September 1997, a Preferred Stockholder in the Company participated in a
private placement financing which the Company offered to existing Preferred
stockholders.
In October 1997, a letter of intent was signed on behalf of the Company and
Transmedia Asia Pacific to acquire another company. In connection therewith,
Mr. Edward Guinan tendered shares of Common Stock of the Company and
Transmedia Asia Pacific held personally by him towards the deposit. See
"Item 7. Management's Discussion and Analysis of Operations."
In November 1997, Mr. Walter Epstein, a Partner at the legal firm of Rubin
Baum Levin Constant & Friedman, resigned as a director of the Company. Rubin
Baum Levin Constant & Friedman has acted, and continues to act, as outside
counsel to the Company.
In December 1997, the Company arrived at an agreement in principle with two
of the three minority shareholders in Transmedia La Carte Restaurant SA to
acquire their shares, subject to the approval of the Bank of France. This
approval was rendered on March 12, 1998. The Company also made certain
representations to the Bank of France pertaining to the ongoing operations of
Transmedia La Carte Restaurant SA, in connection with which, Mr. Edward
Guinan undertook to pledge 2,000,000 shares held by him in the Company's
affiliate, Transmedia Asia Pacific Inc. See "Item 7. Management's Discussion
and Analysis of Operations."
In January 1998, a letter of intent was signed on behalf of the Company and
Transmedia Asia Pacific to acquire another company. In connection therewith,
a cash deposit was paid and a promissory note signed to redeem the balance in
monthly instalments. See "Item 7. Management's Discussion and Analysis of
Operations."
In January 1998, Mr. Edward Guinan loaned the Company UK pounds 100,000
(approximately $162,500), the consideration for which has not as yet been
concluded.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
29
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
The following documents are being filed as part of this Report.
(a)(1) Financial Statements:
Transmedia Europe, Inc.
See "Index to Financial Statement" contained in Part II, Item 8
(a)(2) Financial Statement Schedule:
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or the Notes thereto.
(a)(3) Exhibits:
(i) Countdown Acquisition agreement -- attached hereto
(ii) Radbone Options -- attached hereto
(iii) Vittoria Loan -- attached hereto
(iv) $500,000 Promissory Note made in favor of TMNI -- attached hereto
(v) Lease for the property at 1 Hurlingham Business Park, Sulivan
Road -- attached hereto
(vi) NHS Business Purchase Agreement -- attached hereto
(vii) Call Option on balance of purchase of 49% of NHS -- attached
hereto
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: March 30, 1998 /s/ Edward J. Guinan III
--------------------------------------------
Name: Edward J. Guinan III
Title: Chairman 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 date
indicated.
Date: March 30, 1998 /s/ Edward J. Guinan III
--------------------------------------------
Name: Edward J. Guinan III
Title: Chairman and Director
30
<PAGE>
Transmedia Europe, Inc.
Notes to the Consolidated Financial Statements
Date: March 30, 1998 /s/ Paul L. Harrison
--------------------------------------------
Name: Paul L. Harrison
Title: Chief Executive Officer and Director
Date: March 30, 1998 /s/ Carl Freyer
--------------------------------------------
Name: Carl Freyer
Title: Director
Date: March 30, 1998 /s/ Joseph Vittoria
--------------------------------------------
Name: Joseph Vittoria
Title: Director
Date: March 30, 1998 /s/ David Vaillancourt
--------------------------------------------
Name: David S. Vaillancourt
Title: Chief Financial Officer
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 554,624
<SECURITIES> 0
<RECEIVABLES> 3,016,647
<ALLOWANCES> (666,134)
<INVENTORY> 0
<CURRENT-ASSETS> 2,991,538
<PP&E> 1,419,543
<DEPRECIATION> (678,338)
<TOTAL-ASSETS> 9,073,025
<CURRENT-LIABILITIES> 7,678,922
<BONDS> 0
5,909
0
<COMMON> 129
<OTHER-SE> 553,111
<TOTAL-LIABILITY-AND-EQUITY> 9,073,025
<SALES> 6,928,936
<TOTAL-REVENUES> 7,870,256
<CGS> 4,709,911
<TOTAL-COSTS> 7,491,587
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,331,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 805,859
<CHANGES> 0
<NET-INCOME> (3,746,248)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
<PAGE>
THIS AGREEMENT is made on ___________ day of ___________ 1997
BETWEEN:-
(1) THE PERSON whose name and address is set out in column (1)
of Schedule 1 ("the Vendor"); and
(2) TRANSMEDIA EUROPE, INC. whose registered office is at [c/o
United Corporate Services Inc 15 East North Street City of
Dover County of Kent Delaware USA] ("Europe the Purchaser");
and
(3) TRANSMEDIA ASIA PACIFIC, INC. whose registered office is at
[c/o United Corporate Services Inc. 15 East North Street,
City of Dover, County of Kent, Delaware, USA] ("Asia").
WHEREAS:
The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Shares on the terms and conditions hereinafter contained and in particular on
the basis of the warranties hereinafter mentioned.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:-
"Accounts"
means the latest audited consolidated balance sheet and profit and
loss account of the Group including the statements of accounting
policies set out therein and the notes thereto;
"Accounts Date"
means the date to which the Accounts are made up;
"agreed form"
means in the form agreed between the parties hereto prior to the date
of this Agreement incorporated herein or initialled for identification
by or on behalf of the Vendor and the Purchaser;
<PAGE>
-2-
"Asia Shares"
means [1,330,524] shares of Common Stock of Asia par value US$.00001
per share;
"Business Day"
means any day except Saturdays and Sundays on which banks in the City
of London are open for business;
"CAA"
means the Capital Allowances Act 1990;
"Certificates of Title"
means the certificates as to title to the Premises in the agreed form
prepared in respect of the English Premises by the Vendor's Solicitors
and in respect of the Irish Premises by the Vendor's Irish Solicitors;
"the Company"
Countdown Holdings Limited particulars of which are set out in
Schedule 2;
"Completion"
means performance by the parties hereto of the obligations assumed by
them under Clause 4;
"Completion Date"
means the date on which Completion takes place;
"Consideration"
means the consideration payable by the Purchaser to the Vendor for the
sale and purchase of the Shares;
"Customer"
means any Person who or which at any time during the period of twelve
months immediately prior to the Termination Date was the holder of a
discount or other card issued by the Company or any Relevant
Associated Company or who otherwise was entitled to receive the
benefit of their schemes for members;
"Deed of Covenant"
means the deed of covenant set out in Schedule 6;
"Disclosure Letter"
means the letter of even date herewith from the Vendor and addressed
to the Purchaser by way of disclosure in relation to the matters
raised in the Warranties;
"Discounter"
means any Person who or which at any time during the period of 12
months prior to the date of this Agreement or at any time during the
Restricted Period has agreed to provide or provided goods and/or
services and/or concessions (by way of discount or otherwise) to
customers or to the Company or any Group Company or any Licensee or
any Joint Venture Partner whether on favourable terms or otherwise;
<PAGE>
-3-
"English Premises"
means the premises described in Part I of Schedule 4;
"enlarged Group"
means together the Group and the Purchaser' Group;
"Environmental Laws"
means all statutory and local laws and subordinate legislation
relating to Environmental Matters or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials;
"Environmental Matters"
means waste, contaminated land, discharges or emissions of dangerous
hazardous or toxic substances and materials;
"Europe Shares"
means [1,200,000] shares of Common Stock of Europe par value US$.0000l
per share;
"Group"
means the Company and the Subsidiaries and "Group Companies" means any
of them;
"Hazardous Materials"
means chemicals, pollutants, contaminants, wastes, petroleum,
petroleum products, dangerous hazards or toxic substances and
materials;
"ICTA"
means the Income and Corporation Taxes Act 1988;
"Intellectual Property Rights"
means the following assets of the Group Companies in any part of the
world:
(i) any patents patent applications any trade or service marks
(whether or not registered) including applications therefor
used or held;
(ii) inventions whether or not capable of protection by patent
registration;
(iii) know-how including manufacturing data specifications and
drawings research materials and technical information;
(iv) copyrights or design rights whether registered or
unregistered in respect of drawings designs articles
specifications research materials technical information or
other documents and including rights in computer software;
(v) rights under any agreement granted by or to third parties to
use any of the above;
(vi) all goodwill in any trade or service name trading style or
get-up accrued;
<PAGE>
-4-
(vii) any moral rights as defined by Sections 77-83 of the
Copyright Designs and Patents Act 1988 or any subsequent
amendment thereof in any drawings design or other copyright
work;
"Joint Venture Agreements"
means any agreement made between any Group Company and individual
Joint Venture Partners for the development and/or exploitation of a
business or businesses the same or similar to the Restricted Business
and/or for the use and/or exploitation of the Intellectual Property
Rights owned or used by any Group Company;
"Joint Venture Partner"
means any person with whom any Group Company has entered into a Joint
Venture Agreement and with whom the Vendor shall have had dealings in
the course of his employment with any Group Company;
"in writing"
shall include any communications made by letter or facsimile
transmission;
"Licencees"
means any person with whom any Group Company has entered into a
Licence Agreement and with whom the Vendor shall have had dealings in
the course of his employment with any Group Company;
"Licence Agreements"
means any agreement made between any Group Company and individual
Licencees for the development and/or exploitation of a business or
businesses the same or similar to the Restricted Business and/or for
the use and/or exploitation of the Intellectual Property Rights owned
or used by any Group Company;
"Materially Interested"
means employed or engaged by or concerned or interested in (whether
directly or indirectly) other than as a shareholder holding directly
or indirectly by way of investment of up to 3% in nominal value of
the issued shares or other securities of any class of any company
listed or dealt in on any Recognised Investment Exchange;
"Irish Premises"
means the premises described in Part II of Schedule 4;
"the Parent Company Guarantee"
means the guarantee in the agreed form of the Company's obligations as
a tenant of the premises at Hurlingham Business Park;
"Person"
means any person, firm, company, association, corporation or other
organisation or entity;
<PAGE>
-5-
"Premises"
means together the English Premises and the Irish Premises described
in Schedule 4;
"Purchaser"
means Europe and Asia;
"Purchaser's Group"
means Asia and Europe their subsidiaries and any holding company of
Asia or Europe from time to time;
"Purchaser's Representations"
means the representations and warranties set out in Schedule 8;
"Purchaser's Solicitors"
means Lewis Silkin of Windsor House 50 Victoria Street London SW1H
ONW;
"Recognised Investment Exchange"
means a body which is a recognised investment exchange for the
purposes of the Financial Services Act 1986;
"Registration Rights Agreement"
means the registration rights agreement to be entered into by the
Vendor and the Purchaser in the agreed form;
"Restricted Business"
means such business trade or activity in which the Company or any
Relevant Company is engaged at the date of this Agreement;
"Restricted Goods and/or Services"
means goods and/or services of a type or which compete with those:-
(a) provided by the Company or any Relevant Company in the
ordinary course of its or their business during the period
of 12 months immediately prior to the Termination Date; and
(b) in the provision of which the Vendor was concerned or
engaged during his employment by the Company;
"the Restricted Period"
means the period beginning with the Completion Date and ending on the
later of three years thereafter and eighteen months after the Vendor
ceases to be employed by or render services to any of the companies in
the enlarged Group;
"Security Interest"
means any encumbrance, mortgage, charge, assignment for the purpose of
security, pledge, lien, right of set off, retention of title or other
security interest of whatever kind and any agreement, whether
conditional or otherwise to crease any such interest;
"Service Agreement"
means the contract of employment to be entered into substantially in
the form set out in Schedule 7 by the Vendor;
<PAGE>
-6-
"Shares"
means the whole of the issued share capital of the Company owned by
the Vendor details of which are set opposite his name in Schedule 1;
"the Subsidiaries"
means the companies particulars of which are set out in Schedule 3;
"Taxation" or "taxation"
means all taxes impositions duties charges and levies in all forms
throughout the world of a fiscal nature and wheresoever imposed (and
whether assessed or withheld at source) including and any penalties
charges and interest accruing on any taxation and the words "tax" and
"taxes" shall be construed accordingly;
"TCGA"
means the Taxation of Chargeable Gains Act 1992;
"Termination Date"
means the date on which the Vendor ceases to be employed by or render
services to any Group Company;
"Territory"
means each country in which the Company or any Relevant Company
conducts the Restricted Business and/or supplies Restricted Goods
and/or Services and each country in which the Company or any Group
Company shall have entered into a Licence Agreement or Joint Venture
Agreement under which any Licensee or Joint Venture Partner conducts
the Restricted Business and/or supplies Restricted Goods and/or
Services pursuant to any of the Licence Agreements or the Joint
Venture Agreements (as the case may be);
"Vendor's Irish Solicitors"
means Ahearne O'Shea & Co of 13-16 Dame Street, Dublin,
"Vendor's Solicitors"
means S J Berwin & Co of 222 Grays Inn Road, London WC1X 8HB;
"Warranties"
means the warranties set out in Schedule 5.
1.2 Except where the context otherwise requires words denoting the
singular include the plural and vice versa and words denoting any one gender
include all genders and words denoting persons include firms and corporations
and vice versa.
1.3 Unless otherwise stated a reference to a Clause or sub-clause or a
Schedule is a reference to a clause or a sub-clause of or a schedule to this
Agreement. References in this Agreement include the Schedules and the Schedules
form part of this Agreement.
1.4 References to any statute or statutory provision shall be deemed
to include a reference to any amendment or re-enactment thereof or substitution
therefor from time
<PAGE>
-7-
to time and any rules orders regulations and delegated legislation made
thereunder and shall include a reference also to any past statutory provisions
(as from time to time amended or re-enacted) which such statute or statutory
provision directly or indirectly has replaced provided that any such amendment,
re-enactment or any such rules do not impose any greater obligations upon the
parties than at the date hereof.
1 .5 Words and expressions contained in this Agreement shall where the
context so admits have the meanings thereby attributed by the Companies Act 1985
(as amended).
1.6 A reference to a SSAP is a reference to a statement of standard
accounting practice adopted by the Accounting Standards Board and a reference to
a FRS is a reference to a financial reporting standard adopted by the Accounting
Standards Board.
1.7 Where in this Agreement the expression "to the best of the Vendor
knowledge and belief" or "so far as the Vendor is aware" or any wording which
has similar effect there shall be deemed to be added the words "all reasonable
enquiry having been made".
2. SALE AND PURCHASE OF THE SHARES
2.1 Subject to the terms of this Agreement the Vendor shall sell and
Europe shall purchase 250,000 of the Shares and Asia shall purchase 250,000 of
the Shares with full title guarantee for the Consideration free from all
Security Interests but together with all rights and privileges attaching thereto
now and hereafter including (without limitation) the right to receive all
dividends and other distributions declared made or paid thereon on or after the
Completion Date.
3. CONSIDERATION
3.1 The Consideration shall be the aggregate of the sum of
(pound)1,000,000 to be satisfied in cash and the issue to the Vendor of the
Europe Shares and the Asia Shares.
3.2 The Europe Shares and the Asia Shares shall rank pari passu with
the shares of Common Stock of Europe and Asia respectively in issue at the date
of allotment thereof save that they will not rank for any dividend declared or
paid prior to the date hereof nor will they be registered pursuant to the United
States of America Securities Act of 1933.
4. COMPLETION
<PAGE>
-8-
4.1 Subject to the provisions of this Clause Completion shall take
place at the offices of the Purchaser's Solicitors immediately after the signing
of this Agreement.
4.2 On or before Completion the Vendor shall repay all monies then
owing by him to the Company or to any Group Company.
4.3 At Completion the Vendor shall procure the delivery to the
Purchaser of:-
4.3.1 the share certificates and transfers duly executed
by the Vendor in favour of Europe for 250 of the
Shares and Asia for 250 of the Shares (and/or such
other persons(s) as it shall have nominated);
4.3.2 an engrossment of the Deed of Covenant duly
executed by the Vendor;
4.3.3 the Certificates of Title and the title deeds and
other documents relating to the Premises not
subject to mortgages;
4.3.4 the share certificates in respect of all issued
shares in the Subsidiaries and duly executed
transfers of such shares not registered in the
name of the Company in favour of the Purchaser or
a person nominated by the Purchaser and any other
documents of title relating to the investments of
the Group Company;
4.3.5 statements of balances at a date not more than
three days prior to Completion with
reconciliations to the Business Day preceding the
Completion Date on all bank accounts of each Group
Company and all current cheque books relating to
such accounts and forms to amend the mandates
given to the relevant banks and other institutions
in such manner as the Purchaser shall direct;
4.3.6 the Service Agreement duly executed by the Vendor;
4.3.7 a letter;
4.3.8 the resignations in agreed form of such persons as
the Purchaser shall stipulate as directors of the
Group Companies other than the Vendor and of the
current secretary of the Group Companies
acknowledging that he has no claim against the
Group Companies for loss of office;
4.3.9 the statutory books Certificates of Incorporation
and on Change of Name (if applicable) books of
account and documents of record of each Group
Company complete and up to date;
4.3.10 written confirmation from the Vendor that the
Group is not
<PAGE>
-9-
indebted to him in any way otherwise than in
respect of accrued salary, pension contributions
and other benefits relating to his employment for
the current month. (whether actually or
contingently) and that after compliance with
sub-clause 4.2 he will not be indebted to the
Company or any other member of the Group or vice
versa;
4.3.11 irrevocable power of attorney (in such form as the
Purchaser may reasonably require) executed by the
Vendor in favour of the Purchaser to enable the
Purchaser (pending registration of the transfer of
the Shares hereunder) to exercise all voting and
other rights attaching to the Shares and to
appoint proxies for this purpose; and
4.3.12 an executed original of the Registration Rights
Agreement.
4.4 On Completion the Vendor shall procure:-
4.4.1 the passing at a duly convened meeting of the
Board of Directors of the Company of resolutions:-
4.4.1.1 approving (subject only where necessary
to their being duly stamped) the
transfer of the Shares hereunder;
4.4.1.2 accepting the resignations of such
persons as the Purchaser shall stipulate
as directors of the Group Companies
other than the Vendor and of the
current secretary of the Company;]
4.4.1.3 appointing such persons as the Purchaser
shall stipulate as additional directors
and as secretary of the Company;
4.4.1.4 changing the accounting reference date
of the Company to [___________];
4.4.1.6 changing the registered office to such
address as the Purchaser shall require;
4.4.1.7 approving and executing the Service
Agreement;
4.4.1.8 modifying all existing bank and other
mandates as the Purchaser shall direct;
and
4.4.2 the passing at duly convened meetings of the Board
of Directors of each other Group Company of
resolutions:-
4.4.2.1 accepting the resignations of such
persons as the Purchaser shall stipulate
as directors of the Group Companies
other than the Vendor and of the
<PAGE>
-10-
current secretary;
4.4.2.2 appointing such persons as the Purchaser
shall stipulate as additional directors
and as secretary;
4.4.2.3 approving the transfer of any shares not
registered in the name of the Company to
a nominee identified by the Purchaser
(and subject only to the stamping of the
same);
4.4.2.4 changing the accounting reference date
to [___________];
4.4.2.6 changing the registered office to such
address as the Purchaser shall require;
4.4.2.7 modifying all existing bank and other
mandates as the Purchaser shall direct.
4.6 Upon completion of all the matters referred to in sub-clauses 4.2
to 4.4 above Asia and Europe (as the case may be) shall:-
4.6.1 satisfy the Consideration by the telegraphic
transfer of (pound)1,000,000 to the Vendor's
Solicitors (whose receipt thereof shall be an
absolute discharge of the Purchaser and the
Purchaser's Solicitors) and issue the Europe
Shares and the Asia Shares to the Vendor and as
soon as practicable following Completion deliver
to him stock certificates therefor;
4.6.2 deliver to the Vendor's Solicitors a counterpart
of the Deed of Covenant and the Parent Company
Guarantee duly executed by the Purchaser; and
4.6.3 grant options in the agreed form in favour of the
Vendor over 250,000 and 277,193 shares of Common
Stock par value US$.0000l per share of Europe and
Asia respectively;
4.6.4 deliver to the Vendor's Solicitor an executed
original of the Registration Rights Agreement, and
[4.6.5 appoint the Vendor (who hereby consents to so act)
as a director of each of Europe and Asia.]
4.7 The Purchaser shall not be obliged to complete the purchase of any
of the Shares unless the purchase of all such Shares is completed
simultaneously.
<PAGE>
-11-
5. WARRANTIES
5.1 The Vendor hereby warrants to the Purchaser (both for themselves
and as trustee for all other members of the enlarged Group) as to the accuracy
of the Warranties.
5.2 The Warranties are given subject to the statements of fact fairly
disclosed in the Disclosure Letter and which if not so disclosed would have
rendered a Warranty untrue and which disclosures the Vendor warrants represents
and undertakes to be true and accurate and not misleading.
5.3 Each of the Warranties shall be a separate Warranty and shall in
no way be limited or reduced by reference to the terms of any other Warranty.
5.4 The Purchaser has entered into this Agreement on the basis of the
Warranties and in reliance on them.
5.5 The Purchaser warrants that at the date hereof it has no knowledge
of any fact or matter which may render any Warranty untrue.
5.6 In the event of a breach of any of the Warranties the Vendor shall
not be entitled to disclaim liability therefor on the grounds that loss in
respect thereof has been suffered by the relevant Group Company rather than by
the Purchaser nor raise as a defence the fact (if it be the case) that the
relevant Group Company and/or its employees officers agents or advisers had or
ought to have had at any time knowledge of the breach complained of.
5.7 No proceedings shall be commenced in respect of any claim
for breach of the Warranties or the Deed of Covenant
unless:-
5.7.1 notice giving reasonable details of the claim:
5.7.1.1 shall, in the case of any claim other
than a claim relating to Taxation, have
been delivered to the Vendor by the
Purchaser as soon as reasonably
practicable after it has become aware of
it and in any event not later than
twenty-one months after the date of
Completion; and
5.7.1.2 insofar as such breach relates to
Taxation, shall have been delivered to
the Vendor by the Purchaser as soon as
reasonably practicable after it has
become aware of it and in any event
within seven years of the date of
Completion; and
<PAGE>
-12-
5.7.2 the amount of each claim exceeds (pound)2,500 and
when aggregated with all the other claims exceeds
(pound)50,000 in which event the full amount (and
not only the excess) may be claimed under legal
proceedings.
The limitations in this Clause 5.7 and in Clauses 5.8 to 5.10 and 5.12
shall not apply in the case of fraud by the Vendor.
5.8 The total amount of the liability in respect of any and all claims
under the Warranties and the Deed of Covenant shall be limited to
(pound)2,500,000 provided that the Vendor may at his election settle any such
claim in cash and/or by the delivery to the Purchaser (or as it shall direct) of
Europe Shares and/or Asia Shares (on the basis that each such share has a value
of (pound)[_______]) provided further that the Vendor shall pay to the Purchaser
not less than 40% in respect of each such claim in cash. In the event that the
Vendor settles part of any such claim by the delivery of Europe Shares and/or
Asia Shares, the Vendor shall transfer such shares to the Purchaser (or as it
shall direct) with full title guarantee free from all Security Interests but
with all rights then attaching thereto and deliver up the relative
certificate(s) therefor.
5.9 If, subsequent to any payment by the Vendor to the Purchaser in
respect of any Warranty claim or any claim under the Deed of Covenant, the Group
or the Purchaser or either of them receives any payment from any third party in
respect of the loss suffered by the Company which resulted in the claim, the
Purchaser shall reimburse to the Vendor the amount so recovered less all
reasonable costs and expenses (including any Tax liability) of the recovery but
including in addition any interest or repayment supplement paid by the Inland
Revenue or HM Customs & Excise and the Purchaser shall and shall procure that
the Group shall use all reasonable endeavours to enforce any rights to make any
such recovery from any third parties subject to the Purchaser and the Group
being indemnified and secured to their reasonable satisfaction by the Vendor
against all losses, liabilities, costs and expenses properly and reasonably
incurred in connection with the enforcement of such rights.
5.10.1 Upon the Purchaser or the Group becoming aware of any claim,
action or demand ("a Claim") against the Company or any
matter ("a Relevant Matter") likely to give rise to any of
these in respect of the Warranties or the Deed of Covenant,
then provided that the Purchaser's claim against the Vendor
shall not be prejudiced the Purchaser shall:
5.10.1.1 as quickly as reasonably possible, notify the
Vendor by written notice as soon as it is
reasonably clear to the Purchaser that the Vendor
is or may become liable under the Warranties or
the Deed of Covenant and in the case of
<PAGE>
-13-
a matter relating to Taxation provide reasonably
sufficient details of such claim, details of the
due date for any payment and the time limits for
any appeal, as soon as possible and in any event
not more than 14 days after the Purchaser or the
Group becomes aware of such claim;
5.10.1.2 at the request of the Vendor, allow the Vendor to
take the sole conduct of such actions as the
Vendor may deem reasonably appropriate in
connection with any such Claim in the name of the
appropriate Group company and in that connection
the Group and the Purchaser shall give or cause to
be given to the Vendor all such assistance as he
may reasonably require in avoiding, disputing,
resisting, settling, compromising, defending or
appealing any such Claim; and
5.10.1.3 take all reasonable action to mitigate any loss
suffered by it or any member of the Group of which
a Claim could be made under the Warranties;
5.10.1.4 give such information to the Vendor and his
professional advisers as the Vendor may reasonably
request for the purpose of the Vendor exercising
his entitlement as specified in sub-clause
5.10.1.2 provided that the Vendor and his
professional advisers shall keep all such
information confidential save only as may be
required for the purposes of such claim;
5.10.1.5 save where the Purchaser is of the reasonable
opinion that its or the Group's position with
regard to such Claim may be prejudiced make no
admission of liability, agreement, settlement or
compromise with any third party in relation to any
such Claim without the prior written consent of
the Vendor (such consent not to be unreasonably
withheld or delayed).
5.10.2.1 The Purchaser and the Group shall not be obliged to comply
with sub-clauses 5.10.1.2 to 5.10.1.5 above unless within
14 days of any notice given to him pursuant to sub-clause
5.10.1.1 the Vendor shall indemnify and secure the Purchaser
and the Group (to their reasonable satisfaction) against all
losses, liabilities, costs and expenses that the Purchaser
and the Group may reasonably and properly incur thereby
PROVIDED THAT if the Vendor does not request the Purchaser
to take any action within 14 days as aforesaid, or the
Purchaser shall not be indemnified
<PAGE>
-14-
or secured at any time as provided in this sub-clause, the
Purchaser shall be free to take such action in relation to
the claim as it in its discretion shall think fit;
5.10.2.2 The Vendor shall procure that the Purchaser is promptly sent
copies of all written communications or notified in writing
as to the substance of all oral communications pertaining to
any Claim or any Relevant Matter;
5.10.2.3 The Vendor shall, in conducting any action in connection
with any Claim, promptly consult with the Purchaser on any
matter which is relevant to it; and
5.10.2.4 the Vendor shall conduct all Claims with due diligence and
without neglecting his duties under the Service Agreement
and shall engage professional advisers approved by the
Purchaser for the purposes of any such Claim.
5.11 The Purchaser hereby agrees that it has not been induced to
enter into this Agreement on the basis of any warranties, representations or
undertakings other than the Warranties and the Deed of Covenant.
5.12 No claims under the Warranties shall be made against the
Vendor:
5.12.1 to the extent that the breach giving rise to a
possible Claim occurs or is increased by reason of
any voluntary act or omission on the part of the
Purchaser which occurs after the date of this
Agreement other than in the ordinary course of
business or by reason of any matter which would
not have arisen but for the coming into force of
any legislation not in force at the date of this
Agreement or the withdrawal of any relief,
allowance or concession available at the date of
this Agreement (whether or not such legislation or
withdrawal purports to be effective
retrospectively in whole or in part) or as a
result of any increase in any rate of taxation or
by reason of any change occurring after the date
of this Agreement in Inland Revenue practice or by
reason of any change occurring after the date of
this Agreement in any principle of common law
(whether or not any of the aforegoing purports to
be effective retrospectively in whole or in part);
<PAGE>
-15-
5.12.2 to the extent that a member of the enlarged Group
is entitled to claim indemnity against any loss or
damage suffered by a member of the enlarged Group
arising out of a breach giving rise to a Claim,
under the terms of any insurance policy in force
on the date of the loss less the amount of any
increased premium payable by reference to such
claim;
5.12.3 to the extent that provision or reserve has been
made in the Accounts in respect of the matter to
which such liability relates;
5.12.4 to the extent that the breach giving rise to a
possible Claim arises as a result of any change in
the basis of accounting or tax computation of any
member of the Group after the date of this
Agreement;
5.12.5 based upon a liability which is contingent only
unless and until such contingent liability becomes
an actual liability and is due and payable.
5.13 The Vendor shall not be liable in respect of any breach of any
Warranty and if and to the extent that the loss occasioned thereby has been
recovered under the Deed of Covenant and vice versa.
5.14 Notwithstanding anything expressed or implied in this Agreement
to the contrary, any payment by the Vendor pursuant to a Claim shall be treated
for all purposes by the parties as a reduction in the Consideration and Clause 3
shall be modified accordingly.
5.15 The Purchaser shall have no right (whether before or after
Completion) to rescind this Agreement under this Agreement or under the
provisions of the Misrepresentation Act 1967 or the Unfair Contract Terms Act
1977.
5.16 Claims under this Agreement or the Deed of Covenant by the
Purchaser shall only be capable of being made once in respect of the same
subject matter, so that, for the avoidance of doubt Asia may not recover for
losses recovered by Europe and vice versa.
5.17 The Purchaser hereby warrants to the Vendor as to the accuracy of
the Purchaser's Representations.
<PAGE>
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6. CONTINUING OBLIGATIONS
6.1 The Vendor covenants with the Purchaser (for themselves and as
trustee for the enlarged Group) that he will not either directly or indirectly
whether on his own account or in conjunction with or on behalf of any other
person, whether as principal, partner, shareholder, employer, employee, agent or
otherwise howsoever in any individual, fiduciary or representative capacity:-
6.1.1 during the Restricted Period:-
6.1.1.1 canvass or solicit or entice away or
attempt to canvass or solicit or entice
away from any Group Company the custom
of any Customer for the purposes of
carrying out any Restricted Business in
competition with any Group Company;
6.1.1.2 contract with or work for any Customer
for the purpose of carrying out any
Restricted Business or supplying
Restricted Goods and/or Services in
competition with any Group Company;
6.1.1.3 by reference to sub-clauses 6.1.1.1 and
6.1.1.2 above approach any Customer for
such purpose or authorise or assist the
taking of such actions by any other
person;
6.1.1.4 induce or attempt to induce any
Discounter or party contracting with any
Relevant Company to cease to supply or
to restrict or vary the terms of supply
or contract terms to or with any of the
Group Companies or any Licensee or any
Customer where such cessation,
restriction or variation will be or is
likely to be detrimental to the business
of any Group Company;
6.1.1.5 supply Restricted Goods and/or Services
to any Customer in competition with the
Company or any Group Company;
6.1.2 during the Restricted Period:-
6.1.2.1 solicit or entice away or attempt to
solicit or entice away any person
defined in sub-clause 6.1.2.3 below or
authorise the taking of any such actions
by any other person;
<PAGE>
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6.1.2.2 offer employment to or employ or enter
into partnership or association with or
retain the services whether as agent
consultant or otherwise of any person
defined in sub-clause 6.1.2.3 below;
6.1.2.3 sub-clauses 6.1.2.1 and 6.1.2.2 above
refer to any person who at any time
during the period of 6 months preceding
Completion was a director or employee
earning in excess of (pound)25,000 per
annum (other than secretarial clerical
office junior or part-time) of the
Company or of any Group Company;
6.1.3 during the Restricted Period:-
6.1.3.1 solicit or entice away or attempt to
solicit or entice away any Licensee or
Joint Venture Partner or authorise the
taking of any such action by any other
person where the effect or likely effect
of a breach of the provisions of this
sub-clause will be or is likely to be
detrimental to the business of any Group
Company;
6.1.3.2 offer to contract with any Licensee or
Joint Venture Partner under
circumstances where such party is likely
either to cease to deal with any Group
Company or to seek to vary the terms of
its contract with any Group Company,
where such variation will be or is
likely to be detrimental to the business
of any Group Company;
6.1.4 without prejudice to the rights of any Group
Company in the Intellectual Property Rights for a
period of two years from Completion or ceasing to
be employed by or render services to any Group
Company whichever is the later be Materially
Interested in any Person providing Restricted
Goods and/or Services within the Territory in
competition with the Company or any Company or
Licensee or Joint Venture Partner or otherwise
<PAGE>
-18-
work or engage or be involved in any capacity in
the Restricted Business in competition with any or
Licensee or Joint Venture Partner Company in the
Territory;
6.1.5 without prejudice to 6.1.4 above for a period of
five years from Completion or ceasing to be
employed by or render services to any Group
Company and save on behalf of any company in the
enlarged Group for any reason whatsoever be
engaged interested or concerned whether directly
or indirectly and whether as partner agent
consultant employee share or debenture holder in
any aspect of the Restricted Business in the
Territory using a name or trading style in which
any part of the name or names or trading names or
styles of any of the companies in the enlarged
Group occurs and will not knowingly during such
period lend his support directly or indirectly to
any such business using such name or trading name
or style.
6.2 The Vendor hereby covenants with the Purchaser and with the
remainder of the enlarged Group that he will not at any time hereinafter divulge
or communicate to any person other than in confidence to officers or employees
of the enlarged Group whose province it is to know the same or on the
instructions of the Purchaser and other than information to the extent that the
same is in the public domain any trade secret or other confidential information
relating or belonging to the Company or any member of the enlarged Group
including but not limited to any information of a confidential nature relating
to clients client lists or client requirements price lists or pricing structures
marketing and information business plans financial information plans and
forecasts know how methods or processes used reports or research or any
information which has been given to the Company or any company in the enlarged
Group in confidence by clients or other persons and he shall use all reasonable
endeavours to prevent the publication or disclosure of any confidential
information concerning such matters provided that this clause shall not prevent
any disclosure required by a Recognised Investment Exchange, a court of law or
pursuant to any actual or contemplated legal proceedings.
<PAGE>
-19-
6.3 Each of the obligations contained in each sub-clause of this
Clause 8 shall be construed as separate and severable obligations.
6.4 While the restrictions set out herein and the definitions of
"Customer", "Restricted Business", "Restricted Goods and/or Services" "Joint
Venture Partner", "Licensee" and "Discounter" are considered by the parties to
be reasonable in all the circumstances it is agreed that if any one or more of
such restrictions or definitions shall either taken by itself or themselves
together be adjudged to go beyond what is reasonable in all the circumstances
for the protection of the legitimate interests of the Company or the Group but
would be adjudged reasonable if any particular restriction or restrictions or
definition were deleted or if any part or parts of the wording thereof were
deleted then the restrictions and definitions set out herein shall apply with
such deletions restrictions or limitations as the case may be.
7. WAIVERS AND VARIATIONS
7.1 No waiver or variation of any provision of this Agreement shall
be duly made or deemed to have been duly made unless in writing and signed by
all parties (or by a duly authorised officer or director on behalf of a party)
to this Agreement.
7.2 The failure by any party to insist on any occasion upon the
performance of any term condition or provision of this Agreement shall not
thereby act as a waiver of such breach or an acceptance of any variation.
8. FURTHER ASSURANCE
8.1 The Vendor shall procure the convening of such meetings and the
giving or passing of such waivers and resolutions and shall do or procure all
such other acts and things as shall be necessary under the Companies Act 1985 or
the Articles of Association of the Company or otherwise to give effect to the
provisions of this Agreement.
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8.2 The Vendor shall render to each company in the enlarged Group such
assistance as it may require in connection with its negotiations and dealings
with each of the Licencees and Joint Venture Partners and will when requested do
all such things and sign all such documents as may be required to give effect to
the terms of each of the Licence Agreements and the Joint Venture Agreements.
8.3 The Vendor undertakes that he will not knowingly do or permit
anything to be done which may endanger the Intellectual Property Rights anywhere
in the world or so far as it is within his power assist or allow others to do
so.
8.4 The Vendor shall render to the Purchaser and to each company in
the enlarged Group all reasonable assistance (including but not limited to
evidence of user) in order to assist the Purchaser and each company in the
enlarged Group to defend, protect and procure the registration of and enjoy the
full benefit of the Intellectual Property Rights.
8.5 The Vendor shall immediately notify the Purchaser of all
infringements or imitators of the Intellectual Property Rights anywhere in the
world which come to his attention or any attempts to challenge the enlarged
Group's rights to use any of the Intellectual Property Rights anywhere in the
world, and to resist any action or claim or proceedings brought against any
Company in the enlarged Group in connection with the Intellectual Property
Rights. The Vendor agrees to provide such co-operation in the prosecution of any
action which the Purchaser in its reasonable discretion consider appropriate
including the provision of evidence. The Purchaser shall have the conduct of any
such action and pay all legal expenses and costs which may arise from the
joining of the Vendor as a party.
9. GENERAL
9.1 Non-Merger
All provisions of this Agreement shall (so far as they are capable of being
performed or observed) continue in full force and effect notwithstanding
Completion.
9.2 Announcements
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No announcement or information concerning this Agreement shall be made or issued
by any of the parties hereto except in agreed form provided that nothing in this
sub-clause shall prevent the Purchaser from making such announcement or sending
such circular as the rules of any Recognised Investment Exchange or any other
statutory or regulatory body may require.
9.3 Notices
9.3.1 Any notice demand proceedings or other
communication to be given made or served hereunder
or by reference hereto shall be in writing and:-
9.3.1.1 sent by first class prepaid or
registered post; or
9.3.1.2 delivered personally; or
9.3.1.3 transmitted by facsimile
to the party or parties to be served at the
addresses stated herein or at such other address
within the United Kingdom from time to time
notified in writing by or on behalf of any such
party to the other parties or in the case of the
Vendor at the offices of the Vendor's Solicitors
marked with reference 79/408 and in the case of
the Purchaser at the offices of the Purchaser's
Solicitors marked with reference TJW/TR240.009;
9.3.2 Any such notice demand proceedings or other
communication given made or served pursuant to
sub-clause 11.3.1 above shall be deemed to have
been received and effectively served:-
9.3.2.1 upon the day of delivery or transmission
if delivered personally or transmitted
by facsimile before the end of a
Business Day; or
9.3.2.2 on the next following Business Day if
sent by first class prepaid or
registered post or if transmitted by
facsimile or delivered personally after
the end of a Business Day or on any
other day not being a Business Day.
9.3.3 For the purposes of this sub-clause 11.3
references to a Business Day shall be deemed to
commence at 9.00 am and terminate at 6.00 pm.
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9.3.4 In proving service it shall be sufficient to prove
that personal delivery was made or that the
envelope containing such notice was properly
addressed and posted as a first class pre-paid or
registered letter or that the facsimile
transmission was duly transmitted to the
addressee.
9.4 Entire Agreement
This Agreement (together with the documents referred to herein) constitutes the
whole agreement between the parties hereto in relation to the transactions
referred to herein and supersedes any previous agreement between the parties in
relation to such transactions.
9.5 Restrictions
No provisions of this Agreement or any agreement or arrangement of which it
forms part by virtue of which this Agreement or any agreement or arrangement is
subject to registration under the Restrictive Trade Practices Acts 1976 and 1977
shall take effect until the day after particulars of this Agreement or any
agreement or arrangement of which it forms part (as the case may be) have been
furnished to the Director General of Fair Trading pursuant to Section 24 of the
Restrictive Trade Practices Act 1976.
9.6 Costs
Each party shall bear its own costs and expenses in relation to the preparation
negotiation execution and carrying into effect of this Agreement and any matters
provided for hereunder.
9.7 Enforceability
The illegality of any part of this Agreement or of any agreement or arrangement
of which it forms part shall not affect the legality or validity of the
remainder of the same.
9.8 Successors
The rights and obligations of the Vendor under this Agreement shall enure for
the benefit of and be enforceable against and binding upon his personal
representatives and estates.
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9.9 Jurisdiction
This Agreement shall be governed by and construed and interpreted in accordance
with English law and the parties agree to submit to the jurisdiction of the High
Court of Justice in England in relation to any claim or dispute which may arise
hereunder and hereby agree for the purpose of Order 10, Rule 3 of the Rules of
the Supreme Court of England (or any modification or re-enactment thereof) and
in any proceedings in any other jurisdiction that any process may be served on
any of them in the manner therein provided.
AS WITNESS this Agreement has been executed the day and year first before
written.
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SCHEDULE 1
Details of the Vendor
(1) (2)
Name and address No. of Shares held
---------------- ------------------
C. E. C. Radbone 500,000
Flat 2
47 Lansdowne Road
Holland Park
London W11
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SCHEDULE 2
Details of the Company
Countdown Holdings Limited
Registered number: 2741762
Registered office: 42 Doughty Street
London WClN 2LY
Date of incorporation: 21 August 1992
Place of incorporation: England and Wales
Authorised share capital: (pound)500,000
Issued share capital: (pound)500,000
Registered shareholder: C.E.C. Radbone
Flat 2
47 Lansdowne Road
Holland Park
London Wl1
Directors: C.E.C. Radbone (As above)
Secretary: A. Withers
31 Sea Road
Milford-on-Sea
Hants S041 OPH
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SCHEDULE 3
Details of the Subsidiaries
Countdown Plc
Registered number: 986149
Registered office: 42 Doughty Street, London WC1N 2LY
Date of incorporation: 4/8/1970
Place of incorporation: England & Wales
Authorised share capital: (pound)250,000
Issued share capital: (pound)150,000
Registered shareholders:
C E C Radbone 1 Ordinary Share
Countdown Holdings Limited 1,000 Deferred Ordinary Shares
148,999 Ordinary Shares
Director: C.E.C. Radbone
Secretary: Adrian Withers
<PAGE>
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SCHEDULE 4
Part 1
English Premises
Unit 11 Steele Road London NW10 registered with freehold title at H M Land
Registry under title number NGL 553119.
Leasehold premises at Unit 1 Hurlingham Business Park London SW6 held pursuant
to a lease dated 12 July 1995 made between Countdown Plc Self Administered
Scheme and Countdown Plc.
Part II
Irish Premises
Leasehold premises at Third floor, 39 Fitzwilliam Street Dublin 2 held pursuant
to an agreement dated 1 October 1994 made between Balmore Properties Limited and
Countdown Plc.
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SCHEDULE 5
Warranties
1. INTERPRETATION
1.1 References in this Schedule to "the Company" shall wherever the
context so admits extend to and include each and every other member of the Group
and accordingly each Warranty when given in relation to the Company shall be
deemed to have been given in addition in relation to each other member of the
Group.
2. INFORMATION
2.1 The information contained in the Disclosure Letter is true and
accurate and complete in all respects and is not misleading.
2.2 The information contained in Schedules 1 to 4 is true and accurate
and complete in all respects.
2.3 The Vendor has disclosed full and accurate details of the
Company's liabilities in respect of RSVP Publishing Limited ("RSVP") and the
Company has not agreed to and is under no obligation to lend RSVP further
monies.
2.4 RSVP is a dormant company and the Vendor has disclosed full and
accurate details of its assets and liabilities.
3. ACCOUNTS
3.1 The Accounts have been prepared in accordance with the historic
cost convention and generally accepted accounting practice in England and Wales
and comply with the requirements of the Companies Act 1985 and other relevant
statutes and all current and relevant SSAPs and FRSs and have been prepared on
consistently applied bases and principles and give a true and fair view of the
state of affairs and financial position of the Company for the financial year
ended on the Accounts Date.
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3.2 The Accounts make proper provision for all known liabilities and
proper provision or reserve or notes (as appropriate in accordance with good
accounting practice) for all bad and doubtful debts, all actual, disputed or
deferred liabilities whether liquidated or unliquidated and all capital
commitments as at the Accounts Date.
3.3 Proper provision or reserve (as appropriate) has been made in the
Accounts for all taxation (including for the avoidance of doubt deferred tax)
for which the Company is or may become liable or accountable (whether primarily
or otherwise) as a result or in consequence of any income, profits or gains
earned, accrued or received or deemed to have been or treated as earned, accrued
or received for taxation purposes on or before the Accounts Date and for all
transactions, acts and omissions on the part of the Company or any one or more
or all of its employees, directors, shareholders and agents at any time on or
before the Accounts Date including, without limitation, distributions made down
to the Accounts Date or provided for in the Accounts.
3.4 None of the audited accounts of the Company for the five preceding
accounting periods were qualified by the auditors.
3.5 The profits and losses of the Company shown by the Accounts and by
the audited accounts of the Company for the three preceding accounting periods
and the trend of profits and losses thereby shown have not (except as therein
disclosed) been affected to a material extent by any non-recurring, exceptional,
extraordinary or short-term item (including, but not limited to, any pension
contribution holiday or any rental or other outgoing at below market rates)
which has rendered such profits or losses unusually high or low.
3.6 All books of account and other accounting records of the Company
have been kept on a consistent basis, are in its possession, made up to date in
all material respects and contain the information required by law and generally
accepted accounting principles.
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4. POST BALANCE SHEET EVENTS
4.1 The Company has since the Accounts Date carried on its business in
the ordinary and usual course without any interruption or alteration in the
nature, scope or manner of the business and under its own name and has not
(other than in the ordinary course of business) parted with any of its assets.
4.2 The business of the Company has not since the Accounts Date been
materially and adversely affected by the loss of any client or customer or
source or employee or employees or by any abnormal factor not likewise affecting
similar businesses and there has been no material change in the turnover,
financial, contractual or trading position of the Company.
4.3 Since the Accounts Date no change has been made in the basis of
remuneration of any directors agents or employees of the Company and the Company
has not made or paid any compensation (whether in money or otherwise) to any
director officer or employee of the Company by way of compensation for loss of
office termination of employment unfair or wrongful dismissal redundancy or
otherwise howsoever nor has agreed so to do.
4.4 Other than in the ordinary course of business the Company has not
since the Accounts Date assumed or incurred any material liabilities (including
contingent liabilities).
4.5 The Company has not since the Accounts Date made or agreed to make
any donation for political or charitable purposes nor made or agreed to make any
covenant to such effect.
4.6 Since the Accounts Date the Company has not acquired or agreed to
acquire any asset for a consideration which is materially higher than market
value at the time of acquisition and has not disposed of or agreed to dispose of
any asset for a consideration which is materially lower than market value or
book value, whichever is the higher, at the time of disposal.
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4.7 Since the Accounts Date there have been no unusual increases or
decreases in stock levels.
4.8 Since the Accounts Date no distribution of capital or income has
been declared, made or paid in respect of any share in the capital of the
Company.
4.9 The retained loss for the year ended 31 August 1996 as will be
shown by the audited consolidated profit and loss account of Countdown Holdings
Limited for the year ended 31 August 1996 will not be more than (pound)[296,000]
the net assets as will be shown in the audited consolidated balance sheet of
Countdown Holdings Limited as at 31 August 1996 will not be less than
(pound)[________] excluding any revaluation reserve.
5. ASSETS
5.1 The Company is the absolute and beneficial owner of and has good
and marketable title to the assets referred to in the Accounts (which comprise
all the assets of the Company other than the Properties) all of which are held
free from all liens, charges, options, pledges and encumbrances (or any
agreement to grant such) and are within the sole possession or control of the
Company.
5.2 There are no subsisting leasing, lease purchase, hire purchase or
rental agreements nor any credit sale agreement or like agreement or arrangement
affecting any of the assets.
5.3 Maintenance contracts for the maintenance by outside or specialist
contractors of all assets of the Company which it is normal or prudent to have
so maintained (or the Company is required to have so maintained) including,
without limitation, all plant and machinery (including fixed plant and
machinery), vehicles and office equipment used by the Company in connection with
its business are in full force and effect.
5.4 All items referred to in paragraph 5.3 above and any others used
by the Company in the course of its business are in good repair and condition,
have been regularly maintained and are in satisfactory working order and so far
as the Vendor is
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aware none is dangerous, inefficient or obsolete.
5.5 The plant register kept by the Company a copy of which is annexed
to the Disclosure Letter sets out a complete and accurate record of the plant
and machinery, vehicles and equipment owned or used by it.
5.6 The stock of packaging materials and finished goods now held by
the Company is not excessive and is adequate in relation to the current trading
requirements of the business of the Company and none of the stock is obsolete,
slow moving, unusable, unmarketable or inappropriate or of limited value in
relation to the current business of the Company and the stock is in good and
marketable condition so far as the Vendor is aware and is capable of being sold
by the Company in the ordinary course of its business in the time period within
which the Company could reasonably be expected to sell such stock, based on the
rate of turnover for the lines of products comprised within such stock for the
year ended on the Accounts Date, in accordance with its current price list
without rebate, discount or allowances to a purchaser.
5.7 The Company has not purchased or acquired or agreed to purchase or
acquire any stock, goods or materials on terms that property in the same does
not pass until full payment is made or all indebtedness discharged.
5.8 The Company is not the holder or beneficial owner of nor has
agreed to acquire any share or loan capital of any company or corporation
(whether incorporated in the United Kingdom or elsewhere) other than the
Subsidiaries nor is it nor has it agreed to become a member of any partnership,
joint venture, consortium or unincorporated company or association nor has the
Company any branch or permanent establishment (as that expression is defined in
the respective double taxation relief orders current at the date of this
Agreement) or any substantial assets outside the United Kingdom.
6. COMPANY BOOKS/LEGAL REOUIREMENTS/MEETINGS
6.1 The Company is validly incorporated with limited liability in
England and has power and is entitled and duly qualified to carry on business in
all jurisdictions in which its present business is now carried on.
<PAGE>
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6.2 The statutory books and minute books are duly entered up and
contain proper, accurate and complete records of all matters required to be
dealt with therein.
6.3 All the records, registers and books of the Company and all deeds
and documents relating to the property and assets of the Company are in the
possession of or under the control of the Company.
6.4 A true and complete copy of each of the Memorandum and Articles of
Association of the Company together with all resolutions required to be annexed
to the same and referred to in Section 380 Companies Act 1985 is annexed to the
Disclosure Letter and sets out in full the rights and restrictions attaching to
the share capital of the Company.
6.5 The Company has not received any notice, application or request
for rectification of its register of members or any other record, register or
book and there is no reason why and no facts or circumstances which would be
likely to give rise to any reason why any such application or request might be
made.
6.6 Since the Accounts Date there has been no resolution of or
agreement or arrangement entered into between the members or any class of
members of the Company.
6.7 The Company has properly and punctually made all returns which it
is required to make to the Registrar of Companies, to any other governmental or
regulatory body and to any local authority.
6.8 Due compliance has been made with all the provisions of the
Companies Act and other legal requirements, in connection with the formation of
the Company, the allotment, issue, purchase and redemption of shares, debentures
and other securities in the Company, the reduction of the authorised and issued
share capital of the Company, any amendment to the memorandum or articles of
association of the Company and the passing of resolutions and the payment of
dividends by the Company.
6.9 The Company has at all times conducted its business intra vires,
has not
<PAGE>
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entered into any transaction ultra vires the Company or outside of the authority
or power of the directors of the Company and is not in breach of the provisions
of the Articles of Association.
7. LICENCES AND GRANTS
7.1 All approvals, authorities, recognitions, permissions, consents,
licences and permits (whether accorded by industry or statutory or municipal
authorities or otherwise) whether in the United Kingdom or elsewhere relating or
applicable to the Company or necessary or desirable for the due and effective
operation of its business as it is presently carried on have been obtained and
all such approvals, authorities, recognitions, permissions, consents, licences
and permits are valid and subsisting and so far as the Vendor is aware there is
no reason why any of the foregoing has or might become liable to be suspended,
cancelled, revoked, forfeited or withdrawn.
7.2 The Company has not applied for, or received, any grant, subsidy
or financial assistance from any government department or agency or any local or
other authority, whether under the Industry Acts, or a regional development
grant, or temporary employment subsidy or otherwise.
7.3 The Company has not done, or omitted to do, anything which could
result in any such grant, subsidy or payment received or receivable by it
becoming repayable or being withdrawn or withheld.
8. ENVIRONMENTAL
8.1 So far as the Vendor is aware the Company has not engaged in or
permitted any operations or activities in, upon, or under the Premises or any
portion thereof involving the handling, manufacture, treatment, storage, use,
generation, recycling, release, discharge, refining, dumping or disposal of any
Hazardous Materials under, in or about the Premises or has transported any
Hazardous Materials to, from or across the Premises or has any knowledge of any
Hazardous Materials migrating or threatening to migrate from any other
properties onto, into or beneath the Premises or any portion thereof.
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8.2 So far as the Vendor is aware the Company has complied in all
respects with all applicable Environmental Laws.
8.3 The Company has not received any claim, notice or other written
communication concerning or containing any alleged non-compliance or
contravention of Environmental Laws or claim, notice or other communication
alleging or concerning alleged liability for damages in connection with the
Company's use or occupation of the Premises.
8.4 So far as the Vendor is aware the Company has all registrations,
permits, authorisations, licences and consents required to be issued by any
relevant authority on account of any or all of its activities on the Premises
and/or in relation to the business of the Company as it is now carried on in
relation to Environmental Matters and is in full compliance with the terms and
conditions of such registrations, permits, authorisations, licences and
consents.
9. COMMITMENTS BORROWINGS AND BANK ACCOUNTS
9.1 The Company does not have any loan capital (including term loans)
outstanding or created but unissued and has not agreed to create or issue any
loan capital.
9.2 The Company has not made any loan or quasi-loan contrary to the
Companies Act 1985.
9.3 There are no debts owing to the Company other than ordinary trade
debts and the Company has not factored any of its debts and no such debts are
overdue by more than three months or have been released on terms that the debtor
pays less than the full book value of such debts or have been written off or
have proved to any extent to be irrecoverable in a court of law or as a result
of the debtor's insolvency or are subject to any counter-claim.
9.4 There is no bank or deposit account for the Company apart from the
accounts specified in the Disclosure Letter and the balances on such accounts as
at a date not more than seven days before the date of this Agreement are
disclosed in the
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Disclosure Letter. Since such date there have been no payments out of the
account except for routine payments in the ordinary course of business.
9.5 The total amount borrowed by the Company from its bankers does not
exceed the respective overdraft facilities and the Company is not in breach of
the terms of any other loan facilities and the total amount borrowed by the
Company does not exceed any limitation on borrowings contained in the Articles
of Association nor in any debenture or loan stock deed or in any other document
or arrangement binding on it. Full and accurate details of all overdrafts, loans
or other financial facilities outstanding or available to the Company, all
mortgages, charges, guarantees or indemnities granted by the Company or by which
the Company is under an actual prospective or contingent liability are contained
in the Disclosure Letter so far as the Vendor is aware and the Company has not
done or omitted to do anything whereby the continuance of any such facilities in
full force and effect might be affected or prejudiced.
9.6 The Company has not repaid or become liable to repay any loan or
indebtedness in advance of its stated maturity date.
9.7 Other than as recorded in the books of account of the Company
there are no unpresented cheques drawn by the Company and the Company has not
accepted or endorsed any cheque, bill of exchange, promissory note or other
instrument (whether maturing prior to, at or after Completion).
9.8 No person (other than a Group Company) has given any guarantee of
or security for any indebtedness or other liability of the Company whether
actual prospective or contingent and no charge in favour of the Company is void
or voidable for want of registration.
9.9 Other than in the ordinary course of business there is no
liability for industrial training levy or for any other like statutory levy or
charge.
9.10 There is no power of attorney or other authority (express or
implied) which is still outstanding or effective to or in favour of any person,
firm or company to enter into any contract or commitment or to do anything on
behalf of the Company (other than the ostensible or implied authority of
directors or of employees arising in the
<PAGE>
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ordinary course of the business of the Company and in the ordinary course of
their duties).
9.11 There is not outstanding any indebtedness or other liability
(actual or contingent) owing by or to the Company to or from any member of the
Group or any officer of or other person connected with any member of the Group.
10. CONTRACTS
10.1 The Company is not a party to or subject to any agreement,
transaction, obligation, commitment, understanding, arrangement, practice or
liability which:-
10.1.1 is an agency, distributorship, joint venture,
marketing, manufacturing, licensing or partnership
agreement or arrangement; or
10.1.2 is of an unusual or abnormal nature or is
otherwise than on arm's length terms or is outside
the ordinary and proper course of the business of
the Company; or
10.1.3 contains any warranties indemnities (other than as
implied below) or representations by the Company
or continuing restrictions on the activities of
the Company; or
10.1.4 is incapable of complete performance in accordance
with its terms within six months after the date on
which it was entered into or undertaken; or
10.1.5 is incapable of termination in accordance with its
terms and without compensation by the Company on
60 days' notice or less; or
10.1.6 so far as the Vendor is aware, is likely to result
in a loss to the Company on completion of
performance; or
10.1.7 cannot readily be fulfilled or performed by the
Company on time and in accordance with its terms
without undue or unusual expenditure of money or
effort; or
10.1.8 involves payment by the Company by reference to
<PAGE>
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fluctuations in the Index of Retail Prices or any
currency or other index; or
10.1.9 involves or is likely to involve the provision of
goods or services the aggregate sales value of
which will represent in excess of 10% per cent of
turnover for the relevant preceding financial year
of the Company; or
10.1.10 so far as the Vendor is aware suffers from any
invalidity or in respect of which there are
grounds for determination, recision, avoidance or
repudiation by any other party; or
10.1.11 so far as the Vendor is aware has been or is
required to be registered in accordance with or is
invalidated (in whole or in part) by the
Restrictive Trade Practices Acts 1976 and 1977 or
which contravenes or is invalidated (in whole or
in part) by the provisions of the Resale Prices
Act 1976 or which by virtue of its terms or any
practice carried on in connection therewith is a
consumer trade practice (within the meaning of the
Fair Trading Act 1973) or is liable to be referred
to the Consumer Protection Advisory Committee
under Part II of that Act or is or is likely to
constitute an anti-competitive practice within the
meaning of the Competition Act 1980 or contravenes
the Trade Description Acts 1968 and 1972 or Part
XI of the Fair Trading Act 1973 or the Consumer
Credit Act 1974; or
10.1.12 so far as the Vendor is aware infringes or
requires registration under Articles 85 or 86 of
the Treaty establishing the European Economic
Community or any Regulation or Directive issued
thereunder; or
10.1.13 pursuant to its terms can be terminated or varied
as a result of any change in the control of the
Company.
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10.2 The Company has not given any guarantee or warranty or made any
representation in respect of the supply of goods or services save for any
guarantee or warranty implied by law.
10.3 So far as the Vendor is aware no matter has arisen in respect of
any contracts to which the Company is a party which is or could be construed as
a potential or actual breach by any party thereto.
10.4 There have been no material or written complaints within the last
two years made by any party thereto in respect of any aspect of any of the
contracts with clients customers or suppliers nor with regard to the performance
of any agents or sub-contractors appointed by the Company to perform any part of
any such contract.
10.5 All current clients and customers have promptly paid or procured
the payment of any remuneration due to the Company and no material client,
customer or supplier of or to the Company has during the last twelve months
ceased or indicated in writing an intention to cease (or to reduce the volume
of) trading with the Company nor to the knowledge of the Vendor is likely to do
so whether as a result of this Agreement or otherwise.
10.6 No current client or customer has sought to negotiate in writing
a reduction or material change in the terms of remuneration applicable to the
arrangements it has for the supply of goods or services by the Company.
10.7 Neither more than 5 per cent of the aggregate amount of all
purchases nor more than 5 per cent of the aggregate amount of all sales by or
services rendered by the Company are obtained from the same supplier or provided
to the same client or customer (including associated clients or customers) nor
so far as the Vendor is aware is any material source of supply to or from the
Company in jeopardy.
10.8 There is not outstanding any contract or arrangement to which the
Company is a party and to which any director of the Company and/or any associate
thereof is or has been interested whether directly or indirectly.
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10.9 No person is entitled to receive from the Company any
introduction fee brokerage or other commission in connection with the
introduction of or continuation of any business to or with the Company.
11. EMPLOYMENT TERMS
11.1 The only directors and the secretary of the Company are the
persons whose names appear as such in this Agreement and there is no person who
is or has been a shadow director (within the meaning of Section 471 Companies
Act 1985) of the Company.
11.2 The particulars of the identities and material terms and
conditions of employment of all the employees and officers of the Company
(including, without limitation, profit sharing or commission or share
participation or discretionary or contractual bonus arrangements whether legally
binding or not and other emoluments and benefits) have been fully and accurately
disclosed in the Disclosure Letter and there are no negotiations for any
increase in the emoluments or benefits of any such person(s) which are current.
11.3 The Company has duly complied with the conditions for
registration of any profit related pay schemes operated by it (and which are
fully detailed in the Disclosure Letter) in accordance with the provisions of
Sections 173-177 (inclusive) ICTA and Schedule 8 of that Act and has duly and
promptly remitted all documentation and information required by Section 181 of
that Act and the Company has received no notice of and so far as the Vendor is
aware there are not likely to arise any grounds for cancellation of any profit
related pay schemes registered by it and the Company has not received any notice
and so far as the Vendor is aware there are no circumstances in which recovery
of tax is likely to be made under Section 179 that Act.
11.4 There are no contracts of employment whether written or oral with
directors, officers or employees of the Company which are not determinable
without giving rise to any claim for damages or compensation (other than a
statutory claim for redundancy or unfair dismissal) by notice exceeding three
months.
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11.5 There are no contracts of employment to which any relevant
requirements of Section 319 Companies Act 1985 have not been fulfilled.
11.6 No employee of the Company has given notice terminating his
contract of employment or is under notice of dismissal and so far as the Vendor
is aware there is no reason to believe that after Completion (whether by reason
of an existing agreement arrangement or otherwise) or as a result of the
implementation of this Agreement any officer or senior employee of the Company
may leave and there are no present circumstances which are likely to give rise
to any dispute between the Company or any of its employees, officers, former
employees or former officers or their respective estates.
11.7 No amount due to or in respect of any employee or former employee
of the Company is in arrear and unpaid other than his salary for the month
current at the date of this Agreement
11.8 So far as the Vendor is aware each of the senior employees and
officers of the Company who will be engaged in the business of the Company
following Completion is generally in a good state of health and is not suffering
from any illness or condition which does or might affect his work.
11.9 The Company has at all relevant times complied with all its
obligations under statute and otherwise concerning the health and safety at work
of its employees and there are no claims at the date of this Agreement by any
employee or third party in respect of any accident or injury which are not fully
covered by insurance.
11.10 There is no dispute between the Company and any trade union or
other organisation formed for a similar purpose existing or pending and there is
no collective bargaining agreement or other arrangement (whether binding or not)
to which the Company is a party.
12. PENSION SCHEMES
12.1 Other than pursuant to the money purchase scheme with Standard
Life ("the Stanplan Pension Scheme") and the Self Administered Scheme
established by
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Countdown Plc under a trust deed dated 1 August 1992 ("the Self Administered
Scheme") Schemes there are no obligations (whether legally or morally binding or
established by custom) to pay or provide or contribute to any pensions or
retirement, death, sickness, disability, accident or other like benefits or
super-annuation allowances gratuities or "relevant benefits" within the meaning
of Section 612 ICTA to or in respect of officers or employees (or like
obligations to or in respect of past officers or employees).
12.2 The Disclosure Letter contains full and accurate written
particulars of the Stanplan Pension Scheme and the Self Administered Scheme and:
12.2.1 accurate, current and complete copies of all
documents constituting or relating to both of the
Schemes including all announcements, explanatory
literature and the like;
12.2.2 a complete copy of the latest audited accounts for
the Self Administered Scheme;
12.2.3 details of any material change in investment
policy under the Self Administered Scheme since
the date to which the latest accounts were made
up.
12.3 Contributions due from the Company under both of the Schemes from
any employee of the Company and proving due under the Schemes have been paid.
12.4 There is no litigation nor are there any arbitration proceedings
currently pending or threatened by or against the trustees of the Schemes and
there are no facts likely to give rise to any such litigation or arbitration
proceedings.
12.5 The Schemes comply with and have always been administered in
accordance with all applicable laws regulations and requirements.
13.CREDIT COMMITMENTS
13.1 The Company is not a party to any contract for rent lease hire
purchase or purchase on conditional sale or credit sale or by instalment of any
chattels or to any bill of sale and is not in breach of any such contract or
bill so disclosed.
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14. LITIGATION AND OBSERVANCE OF LAW
14.1 Neither the Company or the Vendor or any director of the Company
is at present engaged whether as plaintiff or defendant or otherwise in any
legal action, arbitration proceedings or hearing before any court statutory or
governmental body department board or agency (other than as plaintiffs in the
collection of debts not exceeding [(pound)1,000] in aggregate and arising in the
ordinary course of business) nor so far as the Vendor is aware are there any
facts or circumstances which may give rise to any such legal action or
arbitration proceedings being commenced by or against any such person.
14.2 Neither the Company nor any of its directors and officers are
being prosecuted for any criminal offence, no such prosecutions are pending and
so far as the Vendor is aware there are no facts or circumstances which may lead
to any such action proceeding hearing or prosecution.
14.3 No litigation or arbitration proceedings commenced by or against
the Company or which have been threatened to be so commenced have been settled
or compromised during the period of five years ending on the date of this
Agreement in respect of amounts exceeding in aggregate (pound)1,000.
14.4 The Company is not subject to any order or judgement given by any
court, governmental agency or other regulatory body and is not a party to any
undertaking or assurance given to any court, governmental agency or other
regulatory body which is still in force nor so far as the Vendor is aware are
there any facts or circumstances which may result in the Company becoming
subject to any such order or judgement or being required to be a party to any
such undertaking or assurance.
14.5 There have been no investigations of, or disciplinary proceedings
made against, the Company or any of its officers or employees, no such
investigations or disciplinary proceedings are currently pending and so far as
the Vendor is aware, there are no facts or circumstances which may give rise to
such investigations or proceedings.
14.6 There is no dispute with any revenue, governmental, local
authority or
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other official department in the United Kingdom or elsewhere in relation to the
affairs of the Company and so far as the Vendor is aware there are no facts
which may give rise to any such dispute.
14.7 No order has been made or petition presented or resolution passed
for the winding up of the Company nor has any distress execution or other
process been levied in respect of the Company nor is any unfulfilled or
unsatisfied judgment or court order outstanding against the Company.
14.8 So far as the Vendor is aware neither the Company nor any of its
officers or employees during the course of their respective duties have
committed or omitted to do any act or thing the commission or omission of which
is or might be in contravention of any law of the United Kingdom or of any
foreign country in which the Company conducts business and which gives rise to a
liability on the part of the Company and neither the Company nor any of its
officers or employees have received notice of any such contravention.
14.9 The Company has conducted and is conducting its business in
accordance with all applicable laws and regulations including the relevant codes
relating to its industry and the Company has not received notice of any
contravention thereof.
14.10 Neither the Vendor nor the Company has at any time received any
process, notice, communication or any formal or informal request for information
with reference to any actual or proposed agreement, arrangement, concerted
practice, trading policy or practice, course of conduct or activity of the
Company from the Director General of Fair Trading, the Monopolies and Mergers
Commission, the Secretary of State for Trade and Industry, the Commission of the
European Communities, the Restrictive Practices Court or from any other person
or body (wherever situated) whose task it is to investigate, report or decide
upon matters relating to monopolies, mergers or anticompetitive agreements or
practices nor has the Company or anything done by the Company been the subject
of any report, decision, order, judgement or injunction made, taken or obtained
by any of such persons or bodies, nor has the Company given or been the subject
of any undertakings or assurances given (directly or indirectly) to any such
persons or bodies.
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15. SHARE CAPITAL
15.1 The Shares constitute the whole of the issued and allotted equity
share capital of the Company and are fully paid or credited as fully paid.
15.2 There is no Security Interest in favour of any other person on
over or affecting the Shares and there is no agreement or arrangement to give or
create any Security Interest on, over or affecting the Shares and no claim has
been made by any person claiming to be entitled to any of the foregoing.
15.3 There are no agreements or arrangements in force which call (now
or in the future) for the issue or transfer of or accord to any person the right
(whether conditional or otherwise) to call for the issue or transfer of any
shares, stock, debentures, debenture stock, loan notes (whether or not secured)
bonds or other securities of the Company (including any option or right of
pre-emption or conversion).
15.4 The Company has not repaid or redeemed or agreed to repay any
shares, stock debentures, debenture stock, loan notes (whether or not secured),
bonds or other securities of the Company.
15.5 The Company has never purchased or agreed or committed itself to
purchase any of its own shares.
16. INSURANCE
16.1 The Premises and all other assets and undertakings of the Company
of an insurable nature are and have at all material times been insured under
policies arranged by the Company to their full replacement or reinstatement
value against fire and all other risks normally insured against by companies
carrying on similar businesses or having an interest in property of a similar
nature and the Company has at all material times and is fully insured against
public liability, loss of profit, professional negligence or other liability,
employer's and occupier's liability, accident and third party risk and such
other risks normally covered by insurance by such companies and all such
insurances are currently in full force and effect and so far as the Vendor is
aware nothing has been done
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or omitted to be done which would make any such policy of insurance void or
voidable or which is likely to result in an increase in premium.
16.2 There are no claims outstanding under any of the said policies
and so far as the Vendor is aware no circumstances exist which are or may be
likely to give rise to such claims and so far as the Vendor is aware there are
no circumstances which are or may be likely to lead to any claim under any
policy of insurance taken out by the Company.
17. LAND
17.1 The Certificates of Title are true and accurate in all material
respects and the information provided by the Vendor for the purposes of the
Certificates of Title is true and accurate in all material respects.
17.2 The Premises comprises all the land and buildings owned or held
by the Company or used or occupied by the Company.
17.3 Title to the Premises is constituted by documents of title which
are in the possession and under the control of the Company properly stamped and
duly registered where appropriate.
17.4 The Company has not entered into either the lease of or a licence
to assign any leasehold property as a guarantor of the lessee's covenants
contained in any such document in respect of which the Company has a continuing
commitment as guarantor.
17.5 The Company has not surrendered or contracted to surrender the
lease of any leasehold property to the reversioner thereof.
17.6 The Company has not at any time been the tenant of any leasehold
property other than the Premises and there are no circumstances which have led
or might lead to any claims being made against the Company in its capacity as a
former tenant.
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17.7 Since the Accounts Date the Company has not acquired or disposed
of or agreed to acquire or dispose of any land or buildings or any interest
therein.
17.8 The Vendor has no reason to believe that the buildings and other
structures on the English Premises are not in good and substantial repair and
fit for the purposes for which they are used.
17.9 The Vendor has no reason to believe that any building or
structure on the Premises has at any time been affected by structural damage or
electrical defects or by timber infestation.
17.10 The Vendor has no reason to believe that any of the Premises
have been constructed on land which may be contaminated.
18. INTELLECTUAL PROPERTY RIGHTS
18.1 The Company is the sole and absolute beneficial and legal owner
of the Intellectual Property Rights, in each case free from all liens, charges,
restrictions and encumbrances and the Company's rights to the Intellectual
Property Rights are in full force and effect.
18.2 So far as the Vendor is aware none of the processes, products or
activities of the Company infringes the intellectual property rights of any
third party in any manner whatsoever whether by means of passing off or
endorsement or otherwise or involves the unlicensed use of information
confidential to any person or gives rise to a liability for any royalty or
similar payment nor has any third party made a claim in respect of the same or
given notice alleging the same.
18.3 There are no Intellectual Property Rights of whatsoever nature
which are capable of registration in the name of or of being vested in the
Company as owner or part owner which has been so registered or vested and the
Company has all the rights in intellectual property of any nature including,
without limitation, patents, copyrights, design rights and analogous rights
which are necessary or desirable to enable the business of the Company fully and
effectively to be carried on as it has been carried on up to the
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date of this Agreement.
18.4 So far as the Vendor is aware neither the Company nor any other
person has done or omitted to do any act matter or thing in respect of any of
the Intellectual Property Rights or in respect of any agreement relating to any
Intellectual Property Rights which impinges upon the validity or enforceability
of the same or upon the right of the Company to use the same in relation to the
business of the Company nor are there any outstanding obligations of the Company
or of any other person whether as to payment or otherwise which if left
outstanding would so impinge.
18.5 The Company has not granted and is not obliged to grant any
licences of, nor are there any subsisting agreements under which the Company has
granted to any person, any right or interest under or in connection with the
Intellectual Property Rights.
18.6 None of the Intellectual Property rights are the subject of any
claim, opposition, assertion, infringement, attack, right, action or other
restriction or arrangement of whatsoever nature which does impinge upon the
validity, enforceability or ownership of the same by the Company or the use of
the same (or any part of the same) howsoever by the Company and so far as the
Vendor is aware there are no grounds facts or circumstances that may give rise
to such.
18.7 The Company has ensured that the moral rights in any material in
which the Intellectual Property rights subsist have either been waived in
writing by the creator of that material or subjected by binding written contract
to the sole and exclusive control of the Company.
18.8 So far as the Vendor is aware the Company has not supplied or
developed anything which could not be made sold dealt in used or reproduced by
any person without infringing any Intellectual Property Rights owned or held by
any third party.
18.9 All confidential information and trade secrets of whatsoever
nature belonging to the Company are confidential and have not been disclosed to
any person in whole or in part (other than to employees of the Company in
circumstances where the
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confidentiality of such confidential information and trade secrets have been
drawn to their attention and steps taken to preserve such confidentiality and
there is no claim that can be or has been made by any person alleging that any
information has been disclosed to the company in circumstances amounting to a
breach of confidence.
18.10 No substantial part of the business of the Company is carried on
subject to any agreement or arrangement which significantly restricts the fields
in which the Company carries on business.
19. ADVERSE TERMS OF OTHER INSTRUMENTS
19.1 The execution, delivery and performance of this Agreement will
not:-
19.1.1 result in a violation of or be in conflict with or
constitute a default by the Company under any
agreement, instrument or arrangement to which the
Vendor or the Company is a party or by which the
Vendor or the Company is bound;
19.1.2 result in a breach of any order, judgment or
decree of any court or governmental agency to
which the Vendor or the Company is a party or by
which the Vendor or the Company is bound; or
19.1.3 result in a breach of the rules or requirements of
any professional body or trade or industrial
association of which the Company or the Vendor is
a member or by which the Company or the Vendor is
bound.
20. CAPACITY AND INTERESTS OF THE VENDOR
20.1 The Vendor has good and marketable title to the Shares and has
the absolute unfettered right and authority to sell and transfer (or procure the
sale and transfer of) the Shares without the consent of any third party to the
Purchaser on the terms and subject to the conditions of this Agreement and has
full power and authority to enter into and perform its obligations under this
Agreement and ancillary documents.
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20.2 Neither the Vendor nor any person connected with the Vendor has
any interest, direct or indirect, in any business which competes or has competed
or is in the future likely to compete with any business now carried on by the
Company or intends to acquire any such interest.
20.3 Neither the Vendor nor person connected with any Vendor is
entitled to any claim of any nature against the Company, any of its officers,
employees, principal customers or suppliers and the Vendor has not assigned to
any third party the benefit of any such claim to which he was previously
entitled.
21. INSOLVENCY
21.1 No receiver or administrative receiver has been appointed of the
whole or any part of the assets or undertaking of the Company.
21.2 No administration order has been made in relation to the Company
and no petition for such an order has been presented.
21.3 No proposal for a voluntary arrangement between the Company and
its creditors (or any class of them) has been made to or is in the contemplation
of the Company.
21.4 No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of the Company.
21.5 The Company has not stopped payment to its creditors nor is it
insolvent or unable to pay its debts as and when they fall due.
21.6 No unsatisfied judgement is outstanding against the Company.
22. TITLE DEEDS
22.1 All documents which in any way affect the right, title or
interest of the Company in or to any of its property, undertakings or assets and
all agreements to which
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the Company is a party are in the possession of the Company and are properly
stamped.
23. TAXATION
General
23.1 All necessary information notices returns particulars claims for
reliefs and allowances and computations have been properly and duly submitted by
the Company to the Inland Revenue and any other relevant taxation or excise
authorities (whether of the United Kingdom or elsewhere) and such information
notices returns particulars claims and computations are true and accurate and
are not the subject of any question or dispute nor so far as the Vendor is aware
are likely to become the subject of any question or dispute with the Inland
Revenue or any other such taxation or excise authority.
23.2 So far as the Vendor is aware the Company has not taken any
action which has had, or might have, the result of altering or prejudicing for
any period commencing after the Accounts Date any arrangement or agreement which
it has with any taxation authorities.
23.3 The Disclosure Letter contains full details of all claims,
notifications, disclaimers or elections assumed to have been made for the
purposes of the provisions or reserves for taxation included in the Accounts
that have not actually been made at the date hereof.
23.4 All taxation of any nature whatsoever whether of the United
Kingdom or elsewhere for which the Company is liable (insofar as such taxation
ought to have been paid) has been paid.
23.5 The Company is and always has been resident in the United Kingdom
for the purposes of taxation.
23.6 The Company has properly operated the PAYE system in accordance
with Chapter V Part V ICTA and regulations made by the Board of the Inland
Revenue thereunder.
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23.7 The Company has duly deducted all amounts from any payments from
which tax falls to be deducted at source and the Company has duly paid or
accounted for such amounts to the Inland Revenue or any other relevant taxation
or excise authorities (whether of the United Kingdom or elsewhere).
23.8 The Company has not within the six years prior to the date hereof
paid or become liable to pay any penalty or interest charged by virtue of the
provisions of the Taxes Management Act 1970 or similar provisions in other
countries.
23.9 The Company has not within the last six years been the subject of
an investigation, discovery or access order by or involving any taxation
authority and so far as the Vendor is aware there are no circumstances existing
which make it likely that an investigation, discovery or order will be made.
23.10 The Company has not received a notice under Section 23 ICTA
(Collection from lessees and agents) which remains outstanding.
23.11 The Company has no outstanding entitlement:-
23.11.1 to make any claim (including a supplementary
claim) for relief;
23.11.2 to make any election for one type of relief on one
basis system or method of taxation as opposed to
another;
23.11.3 to make an appeal (including a further appeal)
against an assessment to taxation;
23.11.4 to make any application for the postponement of
taxation.
23.12 The Company has not since the Accounts Date paid remuneration
which is not fully deductible in computing the Company's profits for taxation
purposes.
Distributions
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23.13 No distribution within Section 418 ICTA (payments etc to
participators and associates) has been made by the Company within the last seven
years.
23.14 The Disclosure Letter contains full particulars of all elections
in force in relation the Company under Section 247 ICTA (Dividends etc paid by
one member of a group to another) which were made within the last six years and
no assessment may be made under that section on the Company in respect of
advance corporation tax which ought to have been paid or income tax which ought
to have been deducted.
23.15 The Company has not at any time capitalised or agreed or
resolved to capitalise any profits or reserves and has not issued any security
(as defined by Section 254(1) ICTA) remaining in issue at the date of this
Agreement so that the interest thereon falls to be treated as a distribution
under Section 209 (d) or (e) ICTA (Matters to be treated as distributions).
23.16 The Company has not repaid agreed to pay or redeemed or agreed
to redeem any of its shares or capitalised or agreed to capitalise in the form
of redeemable shares or debentures any profits or reserves.
23.17 The Company has not received nor is it entitled to receive any
capital distribution to which the provisions of Section 189 TCGA (Corporation
tax attributable to chargeable gains: recovery from shareholder) could apply.
Base costs and capital allowances
23.18 If each of the capital assets of the Company were disposed of
for a consideration equal to the book value of that asset in or adopted for the
purpose of the Accounts no liability to corporation tax on chargeable gains or
balancing charge under the CAA would arise and for the purpose of determining
the liability to corporation tax on chargeable gains there shall be disregarded
any relief and allowances available to the Company other than amounts falling to
be deducted under Section 38 TCGA.
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23.19 Since the Accounts Date the Company has not done or omitted to
do or agreed to do or permitted to be done anything as a result of which there
may be made a balancing charge under Section 4 CAA (balancing allowances and
balancing charges) or any disposal value may be brought into account under
Section 24 CAA (writing-down allowances and balancing adjustments) or there may
be any recovery of excess relief under Section 46 and 47 CAA (recovery of excess
relief) or Section 42 CAA (allowances for assets leased outside the UK).
Demerger
23.20 The Company has neither been engaged in nor been a party to any
of the transactions set out in Sections 213 to 218 ICTA (demergers) nor made or
received a chargeable payment as defined therein.
Foreign business
23.21 The Company has not transferred a trade or business carried on
by it outside the United Kingdom through a branch or agency to a company not
resident in the United Kingdom in circumstances such that a chargeable gain may
be deemed to arise at a date after such transfer under Section 140 TCGA
(postponement of charge on transfer of assets to non-resident company)
23.22 No notice of the making of a direction under Section 747 ICTA
(imputation of chargeable profits and creditable tax of controlled foreign
companies) has been received by the Company and no circumstances exist which
would entitle the Inland Revenue to make such a direction and to apportion any
profits of a controlled foreign company to the Company pursuant to Section 752
ICTA (apportionment of chargeable profits and creditable tax).
Depreciatory transactions
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23.23 No allowable loss which may accrue on the disposal by the
Company of any assets is likely to be reduced by reason of the provisions of
Sections 176 (transaction in a group) and 177 (dividend stripping) TCGA and no
chargeable gain or allowable loss arising on such a disposal is likely to be
adjusted pursuant to the provisions of Section 30 TCGA (value shifting: further
provisions).
Sale and lease-back
23.24 The Company has not entered into any transaction to which the
provisions of Section 780 ICTA (land sold and leased back: taxation of
consideration received) have been or could applied.
Unremittable income
23.25 The Company has not made any claim nor is entitled to make any
claim under Section 279(l)-(6) TCGA (foreign assets: delayed remittances) or
under Section 584 ICTA (relief for unremittable income).
Acquisitions from Group members
23.26 The Company has not made any claims under Sections 247, 152, 153
and 154 TCGA (rollover relief on compulsory acquisition and replacement of
business assets) or Section 175 TCGA (replacement of business assets by members
of a group) insofar as they would affect the chargeable gain or allowable loss
which would arise on a disposal after the Accounts Date by the Company of any of
its assets.
23.27 In relation to Section 179 TCGA (Company ceasing to be member of
a group) the Company has not at any time prior to the date hereof ceased to be a
member of a group of companies and the execution or Completion of this Agreement
will not result in any profit or gain being deemed to accrue to the Company.
23.28 The Company has not nor is it entitled to make a claim under
Sections 24 (assets lost or destroyed or whose value become negligible) or
Section 48 TCGA (consideration due after the time of disposal).
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Transactions not at arm's length
23.29 The Company has neither disposed of nor acquired any asset in
such circumstances that the provisions of Section 17 TCGA (disposals and
acquisitions treated as made at market value) could apply thereto.
23.30 The Company has not entered into any such transaction as is
referred to in Sections 770 and 773 ICTA (Sales etc at undervalue or overvalue)
in such circumstances as to expose the Company to a liability to tax on profits
adjusted pursuant to those Sections.
Gifts involving Group Companies
23.31 The Company has not held nor holds shares in a company (not
being a member of the Group) which has made any such transfer as is referred to
in Section 125 TCGA (shares in close company: transferring assets at an
undervalue) and has not received any assets by way of gift as mentioned in
Section 282 TGCA (gifts: recovery from donee).
Close Companies
23.32 The Company is and has always been a close company within the
meaning of Section 414 ICTA (close companies).
23.33 The Group Companies together comprise a group for the purposes
of Sections 402 and 413 ICTA (Group relief) and there is nothing in Sections 413
(Group relief: qualifications for entitlement) and 410 (Group relief: effect of
arrangements for transfer of a company to another group etc) which precludes any
company from being regarded as a member of such group.
23.34 Since the Accounts Date The Company has made no loan or advance
to any of its directors nor has the Company made any such loan or advance to any
of its participators as are taxable pursuant to Sections 419 and 420 ICTA (Loans
to participators etc) and has not released or written off the whole or part of
the debt in respect of any such loan or advance in the manner provided for in
Sections 421 and 422 ICTA (Effect
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of release etc: of debt in respect of loan by controlled companies).
Group relief
23.35 The Company has at no time within the last six years surrendered
or agreed to surrender or claim and will not prior to Completion surrender or
claim or agree to surrender or claim any amount by way of group relief under the
provisions of Chapter IV of Part X ICTA (Group relief) and has never made or
received or agreed to make or receive and will not prior to Completion make or
receive or agree to make or receive a payment for group relief within the
meaning of Section 402(6) ICTA.
23.36 The Company has at no time within the last six years surrendered
or claimed or agreed to surrender or claim and will not prior to Completion
surrender or claim or agree to surrender or claim any amount of advance
corporation tax under the provisions of Section 240 ICTA (setting of company's
surplus advance corporation tax against subsidiary's liability) and has never
made or received or agreed to make or receive and will not prior to Completion
make or agree to make or receive a payment in respect of the surrender of the
benefit of an amount of Advance Corporation Tax within the meaning of Section
240(8) ICTA.
23.37 The Company is not liable to make or entitled to receive a
payment for group relief or for the surrender of advance corporation tax
otherwise than to or from another member of the Group.
23.38 The Company has not made or received a payment for group relief
or for the surrender of advance corporation tax which may be liable to be
refunded in whole or in part.
23.39 All claims for group relief were when made valid and have been
or will be allowed by way of relief from corporation tax.
23.40 No tax is or may become payable by the Company pursuant to
Section 190 TCGA (Tax on company recoverable from other members of group) in
respect of any
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chargeable gain which accrued or will accrue prior to Completion and the Company
will at no time within the two years ending at Completion have transferred any
assets (other than trading stock) to any company which at the time of disposal
was a member of the same group (as defined in Section 170 TCGA).
Tax avoidance
23.41 The Company is not and has not been party to or otherwise
connected with any transaction to which any of the following provisions could
apply:-
23.41.1 Sections 729 to 745 (inclusive) ICTA (other
provisions about securities and transfer of assets
abroad);
23.41.2 Section 774 ICTA (Transactions between dealing
company and associated company);
23.41.3 Section 775 ICTA (Sale by individual of income
derived from his personal activities);
23.41.4 Section 116 ICTA (Partnerships involving
companies: effect of arrangements for transferring
relief);
23.41.5 Section 399 ICTA (Dealings in commodity futures:
withdrawal of loss relief);
23.41.6 Sections 29 and 30 TCGA (Value shifting and value
shifting: further provisions).
23.42 The Company has not entered into any transaction to which any of
the following provisions have been or could be applied other than transactions
in respect of which all necessary clearances have been obtained:-
23.42.1 Section 139 TCGA (Company reconstruction
amalgamation: transfer of assets);
23.42.2 Sections 703 to 709 (inclusive) ICTA (Cancellation
of tax advantage from certain transactions in
securities);
23.42.3 Section 776 ICTA (Artificial transactions in
land);
23.42.4 Sections 135 to 138 (inclusive) TCGA (Company
reconstructions and amalgamations).
<PAGE>
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23.43 The Company has not since the Accounts Date engaged in any
transaction in respect of which there may be substituted for any purpose of
Taxation a different consideration for the actual consideration given or
received by the Company.
Chargeable gains
23.44 The Company is not owed a debt (not being a debt on a security)
upon the disposal or satisfaction of which a liability to corporation tax on
chargeable gains will arise by reason of the provisions of Section 251 TCGA
(Debts).
23.45 No part of the consideration given by the Company for a new
holding of shares (within the meaning of Section 126 TCGA (Application of
Sections 127 to 131) will be disregarded by virtue of the proviso to Sections
128(1) and (2) TCGA (Consideration given or received by holder).
Value added tax
23.46 The Company is registered for value added tax purposes and:-
23.46.1 has complied in all material respects with all
statutory requirements orders provisions
directions or conditions relating to value added
tax;
23.46.2 maintains complete correct and up-to-date records
for the purposes of value added tax legislation;
23.46.3 is not in arrears with any payment or returns
under value added tax legislation nor liable to
any abnormal or non-routine payment or any
forfeiture or penalty or to the operation of any
penal provision thereunder;
23.46.4 has not been required by the Commissioners of
Customs and Excise to give security;
23.46.5 has not for the purposes of value added tax
legislation applied for treatment as a member of a
group including any company other than the member
of the Group;
23.46.6 is not and has not agreed to become an agent
manager or factor for the purposes of Section 47
Value Added Taxes Act 1994 (Agents etc) of any
person who is not resident in the United Kingdom.
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23.47 The Disclosure Letter contains full particulars of any claim for
bad debt relief made in the last five years or which may be made by the Company
under Section 36 Value Added Taxes Act 1994 (Refund of tax in cases of bad
debts) or Section 11 Finance Act 1990 (bad debts).
23.48 No document has left the possession of the Company which if
improperly used by a third party would lead to any liability on the part of the
Company to pay any amount of value added tax under paragraph 5 Schedule 11 Value
Added Taxes Act 1994 (Recovery of tax etc) and which but for such use would not
have been payable by the Company.
Inheritance tax
23.49 The Company has made no gifts to any participator such as would
give rise to any liability for inheritance or capital transfer tax.
23.50 None of the Company's assets are subject to the charge imposed
by Section 237 Inheritance Tax Act 1984.
23.51 Within the last six years no transfer of value (as defined in
Sections 2 and 3 Inheritance Tax Act 1984 (Chargeable transfers and exempt
transfers: transfers of value) as amended by paragraph 1 of Schedule 19 Finance
Act 1986 has at any time been made by or to the Company.
23.52 There are not in existence any circumstances whereby any such
power as is mentioned in Sections 211 and 212 Inheritance Tax Act 1984 (Burden
of tax on death power to raise tax) could be exercised in relation to any shares
securities or other assets of the Company or could be so exercised but for
Section 204 of that Act (limitation of liability).
Stamp duty
23.53 All documents in the enforcement of which the Company may be
interested have been duly stamped.
<PAGE>
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SCHEDULE 6
Deed of Covenant
DATED 199
-----------------------------------------------
(1) C.E.C. RADBONE
(2) TRANSMEDIA EUROPE, INC. AND TRANSMEDIA ASIA
PACIFIC, INC.
----------------
DEED OF COVENANT
----------------
Lewis Silkin
Windsor House
50 Victoria Street
London SW1H 0NW
Telephone: 0171 227 8000
Reference: TJW.TR240.009
<PAGE>
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THIS DEED is made the day of 199
BETWEEN:-
(1) [C E C] RADBONE of Flat 2, 47 Lansdowne Road, London,
W11 ("the Covenantor"); and
(2) TRANSMEDIA EUROPE, INC. and TRANSMEDIA ASIA PACIFIC, INC.
whose registered office is at [ ]
(together the "Purchaser").
WHEREAS:-
This Deed is entered into pursuant to the provisions of an agreement ("the
Agreement") of even date made between the Covenantor and the Purchaser whereby
the Purchaser agreed to acquire the entire issued share capital of Countdown
Holdings Limited ("the Company").
NOW THIS DEED WITNESSETH as follows:-
1. INTERPRETATION
1.1 In this Deed unless the context otherwise requires:-
"Claim for Taxation"
means any notice demand assessment letter or other document issued or
action taken by any revenue authorities wheresoever in the world
whereby the Company is or may be under a liability to Taxation;
"Taxation"
means all forms of taxation duties charges imposts and levies of a
fiscal nature whatsoever and whenever imposed and whether of the
United Kingdom or elsewhere in the world and shall without prejudice
to the generality of that definition include income tax (including
PAYE), corporation tax, advance corporation tax, capital gains tax,
inheritance tax, stamp duty, stamp duty reserve tax, value added tax,
customs and other import or export duties and other excise duties,
national insurance and social security contributions, and all other
statutory, governmental, state, provincial, local government or
municipal impositions duties and levies of a fiscal nature and other
similar liabilities or contributions and any
<PAGE>
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interest penalty and fine in connection therewith (whether assessed or
withheld at source) but excluding rates.
1.2 Words defined in the Agreement shall bear the same meaning in this
Deed where the context so admits.
1.3 Words importing the plural include the singular and vice versa and
words importing a gender include every gender and references to person include
bodies corporate or unincorporated.
1.4 Unless otherwise stated a reference to a Clause or sub-clause is a
reference to a clause or sub-clause of this Deed.
1.5 References to "the Company" shall extend to and include each Group
Company as the context admits.
2. COVENANT
2.1 The Covenantor hereby covenants with and undertakes to the
Purchaser to pay to the Purchaser by way of adjustment to the Consideration an
amount equal to any liability of the Company for Taxation arising from any Claim
for Taxation which has been made or may hereafter be made wholly in respect of
any act or omission other than the accrual of trading losses or other reliefs
for corporation tax purposes occurring on or before the date hereof and any
costs and expenses properly and reasonably incurred in connection with any
successful claim for made under this Deed.
2.2 For the avoidance of doubt the covenant in clause 2.1 hereof shall
extend to the following:-
2.2.1 all liabilities whether additional tax, national
insurance contributions or loss of tax relief
together with all interest and penalties
attracting or otherwise howsoever from the
engagement of persons as regional directors being
treated by the Company as self-employed being
assessed by the Inland Revenue to be and to have
been employed by the Company;
2.2.2 all liabilities including any penalties incurred
by the Company and any of its subsidiaries in
respect of the late filing or non-filing of forms
P11D;
<PAGE>
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2.2.3 all liabilities arising from the demerger of
Countdown Plc, Kensington & Chelsea Holdings
Limited and Card Protection Plan in 1992; and
2.2.4 all liabilities arising from any retrospective
claims made by H M Customs & Excise relating to
the value added tax treatment of the Group
2.3 The covenant herein given shall not be terminated by any variation
of this Deed or by any forbearance whether as to payment time performance or
otherwise whatsoever.
3. EXCLUSION
3.1 Save in the case of fraud on the part of the Covenantor the
covenant given by Clause 2 of this Deed shall not extend to any Taxation:-
3.1.1 to the extent to which provision or reserve in
respect thereof has been made or noted in the
Accounts; or
3.1.2 in respect of which provision or reserve has been
made in the Accounts which is insufficient only by
reason of increase in the applicable rates of
Taxation after the Accounts Date; or
3.1.3 for which the Company is or may become liable as a
result of transactions effected or occurring or
profits earned accrued or received by the Company
in the ordinary course of the business after the
Accounts Date; or
3.1.4 to the extent that such Taxation was discharged
(whether by payment of by the utilisation of any
relief, allowance or credit in respect of
Taxation) prior to Completion; or
3.1.5 to the extent that such Taxation arises or is
increased as a result only of any increase in
rates of Taxation or imposition of new Taxation or
any change in applicable law or practice made
after Completion; or
3.1.6 to the extent that recovery has been made in
respect of the matter giving rise to the Taxation
by the Purchaser under the Warranties; or
3.1.7 to the extent that full and fair disclosure of
such Taxation was made in the Agreement or the
Disclosure Letter or any document attached
thereto; or
<PAGE>
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3.1.8 to the extent that such Taxation would not have
arisen but for, or is increased by, any voluntary
act, omission, transaction or arrangement of the
Purchaser or the Company other than in the
ordinary course of business after Completion; or
3.1.9 to the extent that such Taxation would not have
arisen but for, or has been increased by a
disclaimer, claim or election made or notice or
consent given after Completion by the Company
otherwise than at the request or direction of the
Covenantor under the terms of this Deed or unless
it was taken into account or assumed in computing
the provision of Taxation in the Accounts; or
3.1.10 to the extent that such Taxation would not have
arisen but for, or has been increased by a failure
or omission by the Company to make any claim,
election, surrender or disclaimer or give any
notice or consent or do any other thing after
Completion the making giving or doing of which was
taken into account or assumed in computing the
provision for Taxation (including the provision
for deferred Taxation) in the Accounts; or
3.1.11 to the extent that such Taxation is on or in
respect of prepayments received in the ordinary
course of business; or
3.1.12 to the extent that such Taxation arises from any
change in accounting or Taxation policy or
practice affecting the Company, including the
method of submission of Taxation returns,
introduced or having effect on or after
Completion; or
3.1.13 to the extent that the liability is in respect of
VAT which has been charged and a tax invoice
issued but which has not yet been accounted for to
H M Customs and Excise; or
3.1.14 to the extent that the liability of the Covenantor
is increased by the Purchaser's failure to notify
the Covenantor in accordance with Clause 5.10.1 of
the Agreement; or
3.1.15 which has been recovered from a person or persons
(not being a Group Company) other than the
Covenantor
PROVIDED THAT the exclusions in sub-clauses 3.1.1, 3.1.3, 3.1.7 and 3.1.11 above
shall not apply in respect of the covenant contained in clause 2.2 hereof.
<PAGE>
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3.2 The provisions of Clauses 5.7, 5.8, 5.9 and 5.10 of the Agreement
shall have effect as if expressly incorporated into this Deed.
3.3 The above exclusions shall also apply to a claim for a breach of
any of the Warranties relating to Taxation.
3.4 For the avoidance of doubt, to the extent that payment is made
pursuant to this Deed to Europe the Covenantor shall have no liability to make
payment to Asia and to the extent payment is made to Asia the Covenantor shall
have no liability to make payment to Europe.
4. PAYMENT
4.1 In the event that there is a change in law or Inland Revenue
practice after 23 August 1996 in relation to payments to be paid to the
Purchaser by the Covenantor hereunder giving rise to the Purchaser having a
Taxation liability in respect of such payment all sums payable by the Covenantor
to the Purchaser hereunder shall be paid (insofar as is lawful) free and clear
of all deductions and withholdings whatsoever and in the event that a deduction
or withholding is lawfully made the Covenantor shall other than in the case of
interest under clause 5 pay such greater sum which after any lawful deduction or
withholding therefrom results in a net payment equal to the amount due
hereunder.
4.2 In the event that there is a change in law or Inland Revenue
practice after 23 August 1996 in relation to payments to be paid to the
Purchaser by the Covenantor hereunder giving rise to the Purchaser having a
Taxation liability other than in the case of interest under clause 5 then such
further amount shall be paid by the Covenantor so as to secure in so far as is
possible that the net amount resulting after such liability to Taxation and
where appropriate any deduction or withholding such as is referred to in
sub-clause 4.1 or 7.1 hereof is equal to the amount due hereunder.
5. DATES FOR AND QUANTUM OF PAYMENTS
5. 1 This Clause shall apply solely for determining the date upon
which any payments shall be made by the Covenantor pursuant to this Deed and
(where expressly provided) the amounts thereof.
<PAGE>
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5.2 The Covenantor shall make payment to the Purchaser or at the
direction of the Purchaser to the Company to the extent that the Company
discharges a Claim for Taxation:-
5.2.1 in respect of a liability to make a payment of
Taxation on the latest date for payment of that
Taxation and the Covenantor shall not be liable to
make any payment unless and until the liability
for Taxation of the Company has been finally
determined within the meaning of the Taxes
Management Act 1970 or if later 5 working days
following the date on which the Purchaser notifies
the Covenantor of the liability to make the
payment;
5.2.2 in respect of costs and expenses, seven days after
service on the Covenantor by the Purchaser of a
notice containing details of the costs and
expenses.
5.3 If any amount is not paid as provided in the foregoing provisions
of this Clause 5 the Covenantor shall pay to the Company interest on such amount
calculated on a daily basis at the rate of 2% per annum above the base rate of
National Westminster Bank plc for the time being in force from the relevant date
specified in this Clause 5 until and including the date of actual payment (after
as well as before judgment).
6. SAVINGS
6.1 If the Taxation which has resulted in the payment by the
Covenantor hereunder becoming due shall give rise to a corresponding saving
("the Saving") of Taxation for the Company or the Purchaser then the amount of
the Saving shall be set off against any payment then due from the Covenantor
under this Deed or (to the extent that it is not so set off) shall be paid by
the Purchaser (subject to a maximum amount equal to the amount which the
Covenantor has already paid under this Deed less the amount which the Purchaser
has already paid under this Clause to the Covenantor within 14 working days of
the Saving being obtained.
6.2 If the Purchaser or the Company shall discover that there has been
a Saving the Purchaser shall forthwith give full details thereof to the
Covenantor and the Purchaser shall supply to the Covenantor such information as
he may reasonably require to verify the amount of the Saving.
<PAGE>
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6.3 For the purposes of Clause 6.1, a person obtains a Saving if as a
result of the Taxation which results in a claim by the Purchaser hereunder that
person is relieved in whole or in part of a liability to make some other payment
of Taxation which it would otherwise have been liable to make or obtains a right
to repayment of Taxation which would not otherwise have been available.
7. OVER PROVISION
7.1 If any provision contained in the accounts of the Company
for periods up to 31 August 1995 shall be found to be an
over-provision or excessive ("Over-provision") then the
amount of the Over-provision shall be set off against any
payment due or which may become due from the Covenantor
under this Deed.
7.2 If the Company or the Purchaser shall discover that there
has been an Over-provision the Purchaser shall or shall
procure that the Company shall forthwith give full details
thereof to the Covenantor and the Purchaser shall or shall
procure that the Company shall supply to the Covenantor such
information as he may reasonably require to verify the
amount of the Over-provision.
8. TAX RETURNS
8.1 It is hereby agreed that the Covenantor shall be responsible for
and have control of the following matters:
8.1.1 the preparation of all computations and returns of
the Company relating to Taxation for all periods
of the Company ended on or before Completion;
8.1.2 the submission of such computations and returns to
the appropriate taxing authority and all
negotiations, correspondence and agreements with
respect thereto; and
8.1.3 the preparation and submission of all such
notices, claims or elections relating to Taxation
as the Covenantor may deem appropriate to be made
by the Company in connection with any such
computations or returns.
All reasonable professional costs incurred in connection with the above matters
shall be borne directly by the Company.
<PAGE>
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8.2 The Purchaser shall procure that the Company shall cause the
said computations, returns, notices, claims, elections and
agreements to be authorised, signed and returned to the
Covenantor or his duly authorised agent for submission to
the appropriate taxing authority without amendment and
without delay (and in any event within any applicable time
limited).
8.3 The Purchaser shall procure that the Company shall afford such
access to its books, accounts and records as is necessary and reasonable and
shall procure that the Company shall give the Covenantor or his duly authorised
agent all such assistance as may reasonably be required to enable the Covenantor
or the Company's auditors to prepare the returns, computations, notices, claims
and elections and conduct matters relating thereto.
8.4 In relation to the computations and returns relating to Taxation
for the period of the Company in which Completion takes place, the Purchaser
shall procure that:
8.4.1 no computations and returns are submitted to the
appropriate taxing authority unless such
computations and returns have first been given to
the Covenantor for comment not less than
twenty-one days before the date of submission;
8.4.2 the Company takes account of any reasonable
comments made by the Covenantor in relation to
such computations and returns; and
8.4.3 such computations and returns are submitted to the
appropriate taxing authority without amendment or
only with such amendments as the Covenantor shall
agree such agreement not to be unreasonably
withheld or delayed
PROVIDED THAT the Company shall not be obliged to submit any computations and
returns relating to Taxation to any taxing authority unless it is satisfied that
they are full, true and accurate to all material respects.
9. COVENANT BY PURCHASER
9.1 If the Company fails to pay any corporation tax liability which
becomes due and payable after the date of this Deed the Purchaser will indemnify
the Covenantor against any liability under Section 767A ICTA that may be
assessed on the Covenantor as a result PROVIDED THAT this Clause shall not apply
in respect of any Taxation which remains unpaid where the Covenantor has an
outstanding liability to make a payment to the Purchaser under this Deed or the
Agreement.
10. GENERAL
<PAGE>
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10.1 The following provisions of the Agreement shall apply to this
Deed mutatis mutandis as if the same had been set out herein save that
references therein to the Vendor his addresses and the Agreement respectively
shall be construed as references to the Covenantor, his address and this Deed: -
10.1.1 Clause 7 Waivers and Variation;
10.1.2 Sub-clause 9.3 Notices;
10.1.3 Sub-clause 9.9 Jurisdiction.
10.2 The benefit of this Deed may be assigned in whole or in part by
the Purchaser to any company in the Purchaser's Group provided that such
assignment shall not afford any third such party any greater right or claim
against the Covenantor than any right or claim the Purchaser would have and this
Deed shall be binding upon and enure for the benefit of the successors in title
of each of the parties hereto.
IN WITNESS whereof this Deed has been executed the day and year first before
written.
SIGNED AS A DEED
by [ ]
in the presence of:
EXECUTED AS A DEED
by [ ]
and signed by:-
Director
Director/Secretary
<PAGE>
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SCHEDULE 7
Service Agreement
<PAGE>
-72-
SCHEDULE 8
Purchaser's representations and warranties
1. Each Purchaser is a corporation duly organised, validly existing, and
in good standing under the laws of the State of Delaware.
2. Each Purchaser has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms. Except as
notified in writing by the Purchaser to the Vendor prior to
Completion, the Purchaser does not need to give any notice to, make
any filing with, or obtain any authorisation, consent or approval of
any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
3. Neither the execution and the delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) violate
any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental agency, or court to which the Purchaser is subject or any
provision of the Articles of Incorporation or Bylaws of the Purchaser
or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which the Purchaser is a party or by which it is bound
or to which any of its assets is subject.
4. The Purchaser has delivered to the Vendor true and complete copies of
the documents (other than preliminary proxy materials and reports
required pursuant to Sections 13 and 14 of the Exchange Act) that the
Purchaser has been required to file with the SEC since 30 September
1995 pursuant to the Exchange Act (the "Transmedia SEC Documents"). As
of their respective dates, the Transmedia SEC Documents complied in
all material respects with the requirements of the Exchange Act, and
the rules and regulations of the SEC thereunder applicable to such
Transmedia SEC Documents, and none of the Transmedia SEC Documents
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial
<PAGE>
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statements of the Purchaser included in the Transmedia SEC Documents
complied in all material respects with applicable accounting
requirements, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of unaudited statements, to recurring audit
adjustments normal in nature and amount) the consolidated financial
position of the Purchaser as at the dates thereof and the consolidated
results of its operations and cash flows or changes in financial
position for the periods then ended.
5. The issuance, sale and delivery of the Asia Shares and the Europe
Shares in accordance with this Agreement will be duly authorised by
all necessary corporate actions on the part of the Purchaser. The Asia
Shares and the Europe Shares, when so issued, will be duly and validly
issued, fully paid and non-assessable.
6. The Purchaser is a "reporting issuer" (as defined in Regulation S).
The Purchaser, its affiliates and any person acting on behalf of, or
as agent of, any of the foregoing, whether as principal or agent:
(a) has offered and sold the Asia Shares and the Europe Shares
to the Vendor only in an "offshore transaction" (as defined
in Regulation S);
(b) has not engaged with respect to the Asia Shares and the
Europe Shares in any "directed selling efforts" (as defined
in Regulation S) in or directed toward the United States;
(c) has complied with all "offering restrictions" (as defined in
Regulation S) in respect of the Asia Shares and the Europe
Shares;
(d) has not made any offers or sales of any of the Asia Shares
or the Europe Shares or any interest therein in the United
States or to, or for the account or benefit of any "US
Person" (as defined in Regulation S); and
(e) has not made any sales of any of the Asia Shares or the
Europe Shares or any interest therein to any person other
than the Vendor.
<PAGE>
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SIGNED by CHRISTOPHER
[E C ] RADBONE
in the presence of:-
SIGNED by
for and on behalf of
TRANSMEDIA EUROPE, INC.
in the presence of:-
SIGNED by
for and on behalf of
TRANSMEDIA ASIA PACIFIC, INC.
in the presence of:-
<PAGE>
[Letterhead]
January 13, 1998
David Vailloancourt
Chief Financial Officer
TransMedia
1 Hurlingham Business Park
Sulivan Road
London SW 6 3DU
Dear David,
This is to confirm my current outstanding loan to TME of $2,000,000 for
the acquisition of Countdown. Total interest is outstanding and I have
extended the expiration date for an indefinite period of time and will
provide at least 60 days notice of required repayment.
Sincerely,
/s/ Joseph V. Vittoria
------------------------------
Joseph V. Vittoria
JVV:puf
<PAGE>
Exhibit 99(a)(3)(iv)
[FAX LETTERHEAD OF LEWIS SILKIN]
DATE: 26 March 1997
PAGE NUMBER ONE OF 3
TO: Will Price
COMPANY:
FAX NUMBER: 839 2768
CC:
FROM: Anna Williams
DIRECT FAX NUMBER: 0171 227
DIRECT PHONE NUMBER: 0171 227 8066
RE: Hurlingham Bus. Park
MESSAGE
Will, please see the latest information relating to service charges and
management issues for the Hurlingham property.
<PAGE>
PAGE NUMBER ONE OF 2
--------------------------
DATE 26 March 1997
--------------------------
TO/REF Simon Witney
--------------------------
FAX NO 0171 533 2000
--------------------------
FROM/REF Fergus Payne
--------------------------
COPY TO Will Price
--------------------------
COPY FAX NUMBER 0171 839 2768
--------------------------
RE: Countdown
--------------------------
MESSAGE
Dear Simon
I attach draft additional clauses 4.8 and 4.9 to the Acquisition Agreement (a
copy of which is being sent to Sarah Calder by Anna Williams of my office) for
your approval.
Regards.
Yours sincerely
/s/ Fergus Payne
Fergus Payne
<PAGE>
(Pounds)
Staff wages 20,000.00
---------
Window cleaning 3,200.00
--------
Electricity 2,500.00
--------
Telephone 560.00
------
Gardening 1,500.00
--------
General Maintenance 6,500.00
--------
Refuse disposal 6,000.00
--------
Security Services 37,500.00
---------
Insurance premiums 1,300.00
--------
Sundry Expenses 300.00
------
Audit fees 1,300.00
--------
Management fees 10,200.00
---------
Signage 500.00
------
Reserve Fund 2,000.00
--------
Legal 1,000.00
--------
The Reserve Fund was Introduced from the service charge year commencing 1
January 1997. (Pounds)2,000 is collected from each tenant up to a maximum of
(Pounds)10,000 with all interest being accrued back to the fund. The fund is to
be used in respect of any emergency and unbudgeted works of a major nature such
as collapsed drains, etc.
We understand from the Company that the local Council (London Borough of
Hammersmith and Fulham) is implementing a controlled parking scheme in the
vicinity of the Property. In response to this, the Estate's management company
have decided to introduce certain measures to discourage visitors parking on the
Estate which include issuing windscreen badges to tenants and their employees.
It has also been proposed to install a car park barrier at some considerable
expense. This proposal has been vetoed by tenants but continues to be a
management issue.
PART XIV
Current Insurance details
1 Insurers Name and
Branch Address : Sedgwick UK Risk Services Limited
Bristol Bridge Road
138/141 Redcliffe Street
Bristol BS1 6QP
2 Insured : Countdown plc
3 Policy Number : 01 1191527 CME
4 Sum Insured Buildings (Pounds)750,000
General Contents (Pounds)155,000
Stock and Materials, in Trade (Pounds)100,000
Total (Pounds)1,005,000
5 Premium : (Pounds)5,579.49 per annum
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<PAGE>
PART XI
Actual Use, Local Authority Searches and Planning
1 The Actual Use of the Property : Offices with ancillary warehouse
space
2 The Permitted Use of the Property : Business use within Use Classes A1(a),
A2, A3 or B1 to the Schedule to the
Town and Country Planning (Use
Classes) Order 1987.
PART XII
Planning orders consents sad permissions relating to the Property
1 (778/0002) 86/20/573/23 - 29 April 1986 - erection of 3 2-storey blocks
comprising 20 light industrial units subject to conditions.
2 (778/0002) 84/20/01594/23 - 16 October 1984 - redevelopment by erection of
new paper works, light industrial and residential uses subject to
conditions.
3 85/20/2523/23 - 27 March 1986 - redevelopment subject to conditions.
4 Section 52 Agreement - 21 April 1986 - erection of residential
development.
5 Enforcement notice - 1 July 1981 taking effect 1 August 1981 (no
indication from Personal Local Search result as to what this relates).
PART XIII
Material matters arising from enquiries of the Company
The Company is obliged to pay a proportion (18%) of the management
expenses to the business park within which the Property is located.
The last invoice for the period 1.1.95 to 31.12.95, was for a total of
(Pounds)14,702.88 which was satisfied by monies held by the managing
agents on account for the Company and there is, currently, (Pounds)957.12
standing to the credit of that account.
We have seen budgets of expenditure for the years ending 31 December 1996
and 31 December 1997. The total budget expenditure for the year ending 31
December 1996 was (Pounds)85,600.00.
The breakdown of expenses for the year ending 31 December 1997 is as
follows:
-18-
<PAGE>
[FAX LETTERHEAD OF KPMG]
To Will Price Page 1 of 1
Organisation Transmedia
Fax 839 2768
Copy to
From Digby Wirtz Ref dw/593
Department US Capital Markets Group, London-DR
Tel 0171-311 5323
Fax 0171-311 5828
Date 24 March 1997
Subject Consolidation Issues
In order to fully consolidate "Target", TMNA would need to own 100% of the
voting shares, with all the consequent risks and rewards of ownership.
The shares in Target could be used as security for a third party loan to TMNA,
and this could be achieved by means of a pledge of the shares or a lien or
security interest in the shares. Such pledge or lien could contain clauses to
protect the interest of the third party lender, but such restrictions cannot be
so restrictive as to effectively inhibit or limit TMNA's ability to control
Target. For example, restrictions inhibiting TMNA's right to the following
actions (or providing the third party lender with veto powers over these actions
) would not enable TMNA to consolidate Target:
- Selection, termination or setting the compensation of senior management
of Target
- Establishment of operating and capital investment decisions of Target,
including budgets in the ordinary cone of business
Please call me if you would like to discuss this issue further.
Regards,
/s/ Digby
<PAGE>
[LETTERHEAD OF J.B. TITCHENER & Co.]
IDC Accounts to May 96
NAE/RKH/516/G72
The Members
IDC Card Limited
IDC House
The Vale
Gerrards Cross
Bucks
SL9 9RZ
Dear Sirs
We hereby resign as auditors of the Company. We confirm that we have no
outstanding claims of any kind against the Company and that there are no
circumstances connected with our resignation which we consider should be brought
to the attention of the members or creditors of the Company.
Yours faithfully
/s/ J.B. Titchener & Co.
Dated: 1996
<PAGE>
Ticker Volume High Low Last Change Update
CU 0 0.000 0.000 23.875 3/26
mbrs 0 0.000 0.000 16.750 3/26
TMN 0 0.000 0.000 4.875 3/26
TMNA 0 0.000 0.000 1.000 3/25
TMNE 0 0.000 0.000 1.000 3/25
wtsm 0 0.000 0.000 1.687 3/26
Compuserve 27.3.97
<PAGE>
SCHEDULE
Option Notice
TO: Kevin James Bostridge (the "Grantor")
Take notice that the rights of Transmedia Australia Holdings Pty Ldt (the
"Grantee") pursuant to a Call Option dated the day of 199 and
entered into between the Grantor and the Grantee to exercise the Call Option
contained in that Deed are exercised by this notice.
The shares the subject of the Call Option are to be transferred as follows:
The Grantor nominates the following place and time for Settlement of the Call
Option:
Place: Sydney, Australia
Time: am/pm on the 6 day of Nov 1997
DATED the day of 19 .
<PAGE>
EXHIBIT 99(b)
CONVERTIBLE PROMISSORY NOTE
US$ 500,000.00 DATE: APRIL 3, 1997
FOR VALUE RECEIVED, the undersigned, TRANSMEDIA EUROPE, INC. and
TRANSMEDIA ASIA PACIFIC, INC. (collectively, the "Payors"), hereby jointly and
severally promise to pay to the order of TRANSMEDIA NETWORK INC. ("Payee"), at
its principal offices on April 1, 1998, the principal sum of Five Hundred
Thousand Dollars ($500,000.00), in lawful money of the United States and to pay
interest, from the date hereof until said principal sum shall be paid in full,
on said principal sum, or the unpaid principal balance thereof, in like money,
at the rate per annum of 10%. Interest hereon shall be payable in quarterly
installments on the first day of August and November, 1997, February 1998 and at
maturity, commencing August 1, 1997. Notwithstanding such joint and several
liability, it is understood and agreed that each Payor is directly liable for
one half of the principal amount and the interest thereon for the purpose of
allocating responsibility between the Payors and with respect to the conversion
of the principal amount into shares of common stock of the Payors.
The principal amount of this Promissory Note may be prepaid
(together with interest on the amount prepaid to the date of prepayment) in
whole or in part at any time and from time to time, without premium or penalty,
upon ten business days' notice to the Payee.
As provided in Annex A hereto, at the option of Payee, this Note, or
any portion thereof which equals US$1,000 or any integral multiple thereof, may
be converted at any time following the date hereof at the principal amount
thereof, or of such portion thereof, in equal dollar amounts into fully paid and
nonassessable shares of common stock of each Payor in equal amounts, at the
conversion price, determined as hereinafter provided, in effect at the time of
conversion. Such conversion right shall expire at the maturity hereof.
The price at which each share of common stock of each Payor shall be
delivered upon conversion (herein called the "Conversion Price") shall be
initially US$1.20 per share of common stock. The Conversion Price shall be
adjusted in certain instances as provided in paragraphs (a), (b), (c), (d), (e),
(f) and (i) of Section 3 of Annex A. Each Payor hereby covenants not to take any
action to increase the par value per share of its common stock.
Each Pays represents and warrants to Payee (and, while this Note
remains outstanding, shall be deemed continually to represent and warrant to
Payee) that (a) it is duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it was organized; (b) it has full
power authority and legal right to execute, deliver and perform this Note and
has taken all corporate, shareholder or other legal actions (and made any
filings and obtained any authorizations by governmental or regulatory
authorities) that are necessary to authorize the execution, delivery and
performance hereof; (c) it has received adequate consideration for
<PAGE>
executing, delivering and performing its respective obligations under this Note;
(d) this Note is valid and binding upon it and enforceable in accordance with
its terms; and (e) the execution, delivery and performance hereof by it do not
violate any charter document or by-law, any law or regulation, any judgment,
order or decree of any court, arbitrator or governmental authority, or any
material agreement of any nature whatsoever that is binding upon it.
This Note shall, at Payee's option, become immediately due and
payable in full without notice or demand upon the occurrence of any of the
following events ("events of default"): (i) any payment under this Note is not
made when due; (ii) Payee's discovery that any representation or warranty made
herein to Payee is false or misleading in any material respect; (iii) the
failure by either Payor to perform or observe any condition or agreement
contained herein or in Annex A; (iv) the entry or issuance of any judgment,
warrant, writ of attachment, tax lien, writ of garnishment or the like against
either Payor, which alone or in the aggregate exceeds ten million dollars
(US$10,000,000.00); (v) the dissolution of either Payor or the sale by either
Payor of all or substantially all of its assets; (vi) the institution of a
bankruptcy, insolvency, reorganization or similar proceeding by or against
either Payor, the making by either Payor of an assignment for the benefit of
creditors, or either Payor's seeking to avail itself of the protection of any
other law for the relief of debtors. The Payors shall pay to Payee on demand all
costs and expenses incurred by Payee in collecting or otherwise enforcing its
rights under this Note, including attorneys' fees.
The Payors hereby irrevocably waives presentment for payment,
demand, notice of dishonor and protest hereof and, to the extent permitted by
applicable law, all other notices. In addition, the Payers hereby irrevocably
waive, as a defense to any action arising out of or relating hereto, the
interference of any administrative or governmental authority of the
jurisdiction(s) in which the Payors (or any Payer) is domiciled or the
impossibility of performance resulting from any law or regulation, or from any
change in the law or regulations, of such jurisdiction(s).
This Note shall be governed by and construed in accordance with the
law of the State of New York.
Each Payor hereby irrevocably agrees that any action or proceeding
relating hereto may be brought in by the state or federal courts located in the
State, City and County of New York. Each Payor hereby irrevocably submits, in
any such action or proceeding that is brought by Payee, to the non-exclusive
jurisdiction of each such court, irrevocably waives the defense of an
inconvenient forum with respect to any such action or proceeding, and agrees
that service of process in any such action or proceeding may be made upon either
Payor by mailing a copy thereof to such Payor at its address (as well as by any
other lawful method.).
Any notice or other communication given in connection herewith,
including Annex A hereto, to either Payor shall be sent to them by hand
delivery, by mail (postage prepaid) or by telecopy, as follows:
Page 2
<PAGE>
If to Transmedia Europe:
11 St. James's Square
London 5WI Y4LB
England
If to Transmedia Asia
11 St. James's Square
London 5WI Y4LB
England
If to Payee:
Transmedia Network Inc.
11900 Biscayne Boulevard
Miami, Florida 33181
Facsimile: 305-892-4230/3342
or to such other address as either party may specify.
This Note shall be binding upon any heir, successor, executor,
personal representative or assign of either Payor. Payee's rights hereunder
shall inure to the benefit of any successor or assignee of Payee.
EACH PAYOR AND PAYEE EACH WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING HEREUNDER OR RELATING
HERETO.
Page 3
<PAGE>
SIGNATURES
TRANSMEDIA EUROPE, INC.,
By: /s/ Paul L. Harrison
------------------------
Name: Paul L. Harrison
Title: CEO
TRANSMEDIA ASIA PACIFIC, INC.
By: /s/ Paul L. Harrison
------------------------
Name: Paul L. Harrison
Title: CEO
Page 4
<PAGE>
FORM OF CONVERSION NOTICE
TO ___________________
The undersigned hereby irrevocably exercises the option to convert
the Note, or a portion thereof (which is $1,000 or an integral multiple
thereof) designated below, into shares of fully paid non-assessable common
stock in accordance with the terms of Annex A of the Note, and directs
that the shares issuable and deliverable upon the conversion, together
with any check in payment for a fractional share be issued and delivered
to the undersigned unless a different name has been provided below.
Specified Principal Amount to be converted: US$______________
TRANSMEDIA NETWORK INC.
Dated: By:
--------------------------------
Name:
Title:
Page 5
<PAGE>
ANNEX A
CONVERSION OF NOTE
SECTION 1. Exercise of Conversion
In order to exercise the conversion privilege, the Payee shall surrender
the Note, duly endorsed or assigned to either Payor (on behalf of itself and as
agent for the other Payor) or in blank, at the address of such Payor listed in
the Note, accompanied by written notice to such Payor in the form provided in
the Note (or such other notice as is acceptable to such Payor), that the Payee
elects to convert such Note or, if less than the entire principal amount thereof
is to be converted, the specified principal amount thereof to be converted.
Subject to paragraphs 2(b) and 2(c), no payment or adjustment shall be made upon
any conversion on account of any interest accrued on the Note surrendered (or
specified principal amount thereof) for conversion or on account of any
dividends on the shares of common stock issued upon conversion.
The Note shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of the Note for conversion in
accordance with the foregoing provisions and the person entitled to receive the
common stock issuable upon conversion shall be treated for all purposes as the
record holder of such common stock as and after such time. As promptly as
practicable on or after the conversion date, the Payors shall issue and shall
deliver to the Payee (i) certificates for the respective number of full shares
of common stock of each Payor issuable upon conversion, together with payment in
lieu of any fraction of a share as provided in Section 2; and (ii) the amount of
interest accrued on the principal amount of the Note being converted since the
last date upon which interest was paid.
In the case of the Note being converted in part only, upon such conversion
the Payors shall execute and deliver to the Payee, at the expense of the Payers,
a new convertible promissory note (the "New Note"). The New Note shall have (i)
the same terms as the Note, and (ii) an aggregate principal amount equal to the
unconverted portion of the principal amount of the surrendered Note.
The Payee may convert up to one half of the principal amount of the Note
into a Payor's shares of common stock and the remaining half of the principal
amount of the Note into the other Payor's shares of common stock. The Conversion
Notice shall designate which of each Payor's shares of common stock is subject
to such conversion. All adjustment provisions, notice provisions, covenants and
provisions for mergers, consolidations or sales of assets provided for herein
shall be applied separately to each of the Payors.
Page A-l
<PAGE>
SECTION 2. Fraction of Shares.
No fractional share of common stock shall be issued upon conversion of the
Note. Instead of any fractional share of common stock which would otherwise be
issuable upon conversion of the Note (or specified principal amount thereof),
the Payors shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the Closing Price (as hereinafter defined) at the
close of business on the day of conversion (or, if such day is not a Trading Day
(as hereafter defined), on the Trading Day immediately preceding such day).
SECTION 3. Adjustment of Conversion Price.
(a) In case a Payor shall pay or make a dividend or other
distribution on the common stock exclusively in common stock or shall pay or
make a dividend or other distribution on any other class of its capital stock
which dividend or distribution includes common stock, the Conversion Price for
the common stock of such Payor in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of common stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. For the
purpose of this paragraph (a), the number of shares of common stock at any time
outstanding shall not include shares held in the treasury of the relevant Payor.
Neither Payor shall pay any dividend or make any distribution on shares of
common stock held in its treasury.
(b) Subject to paragraph (g) of this Section, in case a Payor shall
pay or make a dividend or other distribution on the common stock consisting
exclusively of, or shall otherwise issue to all holders of its common stock,
rights or warrants entitling the holders thereof to subscribe for or purchase
shares of its common stock at a price per share less than the Current Market
Price (determined as provided in paragraph (h) of this Section) on the date
fixed for the determination of shareholders entitled to receive such rights or
warrants, the Conversion Price for the common stock of such Payor in effect at
the opening of business on the day following the date fixed for such
determination shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of common stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of common stock which the aggregate of the offering
price of the total number of shares of common stock so offered for subscription
or purchase would purchase at such Current Market Price and the denominator
shall be the number of shares of common stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
common stock so offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes
Page A-2
<PAGE>
of this paragraph (b), the number of shares of common stock at any time
outstanding shall not include shares held in the treasury of the relevant Payor.
Neither Payor shall issue any rights or warrants in respect of shares of common
stock held in its treasury.
(c) In case outstanding shares of common stock of a Payor shall be
subdivided into a greater number of shares of common stock, the Conversion Price
for the common stock of such Payor in effect at the opening of business on the
day following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case outstanding shares of common
stock shall be combined into a smaller number of shares of common stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which subdivision or combination becomes effective.
(d) Subject to the last sentence of this paragraph (d) and to
paragraph (g) of this Section, in case a Payor shall, by dividend or otherwise,
distribute to all holders of its common stock evidences of its indebtedness,
shares of any class of its capital stock, cash or other assets (including
securities, but excluding any rights or warrants referred to in paragraph (b) of
this Section, excluding any dividend or distribution paid exclusively in cash
and excluding any dividend or distribution referred to in paragraph (a) of this
Section), the Conversion Price for the common stock of such Payor shall be
reduced by multiplying such Conversion Price in effect immediately prior to the
close of business on the date fixed for the determination of shareholders
entitled to such distribution by a fraction of which the numerator shall be the
Current Market Price (determined as provided in paragraph (h) of this Section)
on such date less the fair market value (as determined by its Board of
Directors, whose determination shall be described in a Board Resolution) on such
date of the portion of the evidences of indebtedness, shares of capital stock,
cash and other assets to be distributed applicable to one share of common stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following such
date. If its Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (d) by reference to the actual or
when-issued trading market for any securities comprising part or all of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to paragraph (h)
of this Section, to the extent possible. For purposes of this paragraph (d), any
dividend or distribution that includes shares of common stock, rights or
warrants to subscribe for or purchase shares of common stock or securities
convertible into or exchangeable for shares of common stock shall be deemed to
be (x) a dividend or distribution of the evidences of indebtedness, cash, assets
or shares of capital stock other than such shares of common stock, such rights
or warrants or such convertible or exchangeable securities (making any
Conversion Price reduction required by this paragraph (d)) immediately followed
by (y) in the case of such shares of common stock or such rights or warrants, a
dividend or distribution thereof (making any further Conversion Price reduction
required by paragraph (a) and (b) of this Section, except any shares of common
stock included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the
Page A-3
<PAGE>
date fixed for such determination" within the meaning of paragraph (a) of this
Section), or (z) in the case of such convertible or exchangeable securities, a
dividend or distribution of the number of shares of common stock as would then
be issuable upon the conversion or exchange thereof, whether or not the
conversion or exchange of such securities is subject to any conditions (making
any further Conversion Price reduction required by paragraph (a) of this
Section, except the shares deemed to constitute such dividend or distribution
shall not be deemed "outstanding at the close of business on the date fixed for
such determination" within the meaning of paragraph (a) of this Section).
(e) In case a Payor shall, by dividend or otherwise, at any time
distribute to all holders of its common stock cash (excluding any cash that is
distributed as part of a distribution referred to in paragraph (d) of this
Section or in connection with a transaction to which Section 10 applies) in an
aggregate amount that, together with (A) the aggregate amount of any other
distributions to all holders of the common stock made exclusively in cash within
the 12 months preceding the date fixed for the determination of shareholders
entitled to such distribution and in respect of which no Conversion Price
adjustment pursuant to this paragraph (e) has been made previously and (B) the
aggregate of any cash plus the fair market value (as determined by its Board of
Directors, whose determination shall be described in a Board Resolution) as of
such date of determination of any other consideration payable in respect of any
tender offer by such Payor or a subsidiary thereof for all or any portion of the
common stock consummated within the 12 months preceding such date of
determination and in respect of which no conversion price adjustment pursuant to
paragraph (f) of this Section has been made previously, exceeds 10% of the
product of the Current Market Price (determined as provided in paragraph (h) of
this Section) on such date of determination times the number of shares of common
stock outstanding on such date, the Conversion Price for the common stock of
such Payor shall be reduced by multiplying the Conversion Price in effect
immediately prior to the close of business on such date of determination by a
fraction of which the numerator shall be the Current Market Price (determined as
provided in paragraph (h) of this Section) on such date less the amount of such
cash previously distributed or to be distributed at such time applicable to one
share of common stock and the denominator shall be such Current Market Price,
such reduction to become effective immediately prior to the opening of business
on the day after such date.
(f) In case a tender offer made by a Payor or any subsidiary or
affiliate thereof for all or any portion of its common stock shall be
consummated and such tender offer shall involve an aggregate consideration
having a fair market value (as determined by its Board of Directors, whose
determination shall be described in a Bond Resolution) as of the last time (the
"Expiration Time") that tenders may be made pursuant to such tender offer (as it
shall have been amended) that, together with (A) the aggregate of the cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be described in a Board Resolution) as of the Expiration
Time of the other consideration paid in respect of any other tender offer by
such Payor or a subsidiary or affiliate thereof for all or any portion of the
common stock consummated preceding the Expiration Time and in respect of which
no Conversion Price adjustment pursuant to this paragraph (f) has been made
previously and (B) the
Page A-4
<PAGE>
aggregate amount of any distributions to all holders of the common stock made
exclusively in cash preceding the Expiration Time and in respect of which no
Conversion Price adjustment pursuant to paragraph (e) of this Section has been
made previously, exceeds 10% of the product of the Current Market Price
(determined as provided in paragraph (h) of this Section) immediately prior to
the Expiration Time times the number of shares of common stock outstanding
(including any tendered shares) at the Expiration Time, the Conversion Price for
the common stock of such Payor shall be reduced by multiplying such Conversion
Price in effect immediately prior to the Expiration Time by a fraction of which
the numerator shall be (x) the product of the Current Market Price (determined
as provided in paragraph (h) of this Section) immediately prior to the
Expiration Time times the number of shares of common stock outstanding
(including any tendered shares at the Expiration Time) minus (y) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders upon consummation of such tender offer and the denominator shall be
the product of (A) such Current Market Price times (B) such number of
outstanding shares at the Expiration Time minus the number of shares accepted
for payment in such tender offer (the "Purchased Shares"), such reduction to
become effective immediately prior to the opening of business on the day
following the Expiration Time; provided, that if the number of Purchased Shares
or the aggregate consideration payable therefor have not been finally determined
by such opening of business, the adjustment required by this paragraph (f)
shall, pending such final determination, be made based upon the preliminarily
announced results of such tender offer, and, after such final determination
shall have been made, the adjustment required by this paragraph (f) shall be
made based upon the number of Purchased Shares and the aggregate consideration
payable therefor as so finally determined.
(g) The reclassification of common stock of a Payor into securities
which include securities other than common stock (other than any
reclassification upon a consolidation or merger to which Section 10 applies)
shall be deemed to involve (i) a distribution of such securities other than
common stock to all holders of common stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the determination of
shareholders entitled to such distribution" within the meaning of paragraph (d)
of this Section), and (ii) a subdivision or combination, as the case may be, of
the number of shares of common stock outstanding immediately prior to such
reclassification into the number of shares of common stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph (c) of this Section).
Rights or warrants issued by a Payor to all holders of its common stock
entitling the holders thereof to subscribe for or purchase shares of common
stock (either initially or under certain circumstances), which rights or
warrants (i) are deemed to be transferred with such shares of common stock, (ii)
are not exercisable and (iii) are also issued in respect of future issuances of
common stock, in each case in clauses (i) through (iii) until the occurrence of
a specified event or
Page A-5
<PAGE>
events ("Trigger Event"), shall for purposes of this Section 3 not be deemed
issued until the occurrence of the earliest Trigger Event. If any such rights or
warrants, including any such existing rights or warrants distributed prior to
the date of the Note, are subject to subsequent events, upon the occurrence of
each of which such rights or warrants shall become exercisable to purchase
different securities, evidences of indebtedness or other assets, then the
occurrence of each such event shall be deemed to be such date of issuance and
record date with respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants without exercise by the holder
thereof). In addition, in the event of any distribution (or deemed distribution)
of such rights or warrants, or any Trigger Event with respect thereto, that was
counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 3 was made, (1) in the
case of any such rights or warrant which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price shall
be readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of common stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of common stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been terminated
without exercise by any holders thereof, the Conversion Price shall be
readjusted as if such rights and warrants had not been issued.
Notwithstanding any other provision of this Section 3 to the contrary,
rights, warrants, evidences of indebtedness, other securities, cash or other
assets (including, without limitation, any rights distributed pursuant to any
stockholder rights plan) shall be deemed not to have been distributed by a Payor
for purposes of this Section 3 if such Payor makes proper provision so that if
Payee converts the Note (or any portion of the principal amount thereof) after
the date fixed for determination of stockholders entitled to receive such
distribution shall be entitled to receive upon such conversion, in addition to
the shares of common stock issuable upon such conversions, the amount and kind
of such distributions that Payee would have been entitled to receive if Payee
had, immediately prior to such determination date, converted the Note (or any
portion of the principal amount thereof) into common stock.
(h) For the purpose of any computation under this paragraph and
paragraphs (b), (d) and (e) of this Section 3, the current market price per
share of common stock of a Payor (the "Current Market Price") on any date shall
be deemed to be the average of the daily Closing Prices on the principal
exchange or market on which such common stock is traded for the 5 consecutive
Trading Days selected by the Payee commencing not more than 20 Trading Days
before, and ending not later than, the date in question; provided, however, that
(i) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after
the 20th Trading Day prior to the date in question and prior to the "ex" date
for the issuance or distribution requiring such computation, the Closing Price
for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the
Page A-6
<PAGE>
same fraction by which the Conversion Price is so required to be adjusted as a
result of such other event, (ii) if the "ex" date for any event (other than the
issuance or distribution requiring such computation) that requires an adjustment
to the Conversion Price for the common stock of such Payor pursuant to paragraph
(a), (b), (c), (d), (e) or (f) above occurs on or after the "ex" date for the
issuance or distribution requiring such computation and on or prior to the date
in question, the Closing Price for each Trading Day on and after the "ex" date
for such other event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which such Conversion Price is so required to be
adjusted as a result of such other event, and (iii) if the "ex" date for the
issuance or distribution requiring such computation is on or prior to the date
in question, after taking into account any adjustment required pursuant to
clause (ii) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value on the date in question (as determined by such Payor's
Board of Directors in a manner consistent with any determination of such value
for purposes of paragraph (d) or (e) of this Section 3, whose determination
shall be described in a Board Resolution) of the evidences of indebtedness,
shares of capital stock or assets being distributed applicable to one share of
common stock as of the close of business on the day before such "ex" date. For
the purpose of any computation under paragraph (f) of this Section, the Current
Market Price on any date shall be deemed to be the average of the daily Closing
Prices for the five (5) consecutive Trading Days selected by the Payors
commencing on or after the latest (the "Commencement Date") of (i) the date 20
Trading Days before the date in question, (ii) the date of commencement of the
tender offer requiring such computation and (iii) the date of the last
amendment, if any, of such tender offer involving a change in the maximum number
of shares for which tenders are sought or a change in the consideration offered,
and ending not later than the Expiration Time of such tender offer; provided,
however, that if the "ex" date for any event (other than the tender offer
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to paragraph (a), (b), (c), (d), (e) or (f) above occurs on or after
the Commencement Date and prior to the Expiration Time for the tender offer
requiring such computation, the Closing Price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by multiplying such Closing
Price by the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. The closing price for any Trading Day
(the "Closing Price") shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, on the principal securities exchange
on which the common stock is listed or admitted to trading. For purposes of this
paragraph, the term "Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are generally not
traded on the applicable securities exchange and the term "`ex' date," (i) when
used with respect to any issuance or distribution, means the first date on which
the common stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Prices were obtained without the right to receive
such issuance or distribution, (ii) when used with respect to any subdivision or
combination of shares of common stock, means the first date on which the common
stock trades regular way on such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (iii) when used
with respect to any tender offer means the first date on which the common stock
trades regular way on such
Page A-7
<PAGE>
exchange or in such market after the last time that tenders may be made pursuant
to such tender offer (as it shall have been amended).
(i) Each Payor may make such reductions in the Conversion Price for
its common stock, in addition to those required by paragraphs (a), (b), (c),
(d), (e) and (f) of this Section, as it considers to be advisable (as evidenced
by a Board Resolution) in order that any event treated for U.S. federal or
foreign income tax purposes as a dividend of stock or stock rights shall not be
taxable to the recipients or, if that is not possible, to diminish any income
taxes that are otherwise payable because of such event.
(j) No adjustment in the Conversion Price for the common stock of
either Payor shall be required unless such adjustment (plus any other
adjustments not previously made by reason of this paragraph (j)) would require
an increase or decrease of at least 1% in such Conversion Price; provided,
however, that any adjustments which by reason of this paragraph (j) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(k) Notwithstanding any other provision of this Section 3, no
adjustment to a Conversion Price shall reduce the Conversion Price below the
then par value per share of the relevant common stock, and any such purported
adjustment shall instead reduce such Conversion Price to such par value.
SECTION 4. Notice of Adjustments of Conversion Price.
Whenever the Conversion Price for the common stock of a Payor is adjusted
as provided herein, such Payor shall compute the adjusted Conversion Price in
accordance with Section 3 and shall prepare, and deliver to the Payee, an
Officers' Certificate signed by its chief executive officer or chief financial
officer setting forth the adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based.
SECTION 5. Notice of Certain Corporate Action.
If, in case:
(a) a Payor shall declare a dividend (or any other
distribution) on its common stock payable (i) otherwise than
exclusively in cash or (ii) exclusively in cash in an amount that
would require a Conversion Price adjustment pursuant to paragraph
(e) of Section 3; or
(b) a Payor shall authorize the granting to the holders
of its common stock of rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other
rights (excluding shares of capital stock
Page A-8
<PAGE>
or option for capital stock issued pursuant to a benefit plan for
employees, officers or directors of the Payors); or
(c) of any reclassification of the common stock of a
Payor (other than a subdivision or combination of the outstanding
shares of common stock), or of any consolidation, merger or share
exchange to which a Payor is a party and for which approval of any
stockholders is required, or of the sale or transfer of all or
substantially all of its assets; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of a Payor; or
(e) a Payor or any subsidiary or affiliate thereof shall
commence a tender offer for all or a portion of the outstanding
shares of common stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the amount or
type of consideration being offered therefor);
then such Payor shall deliver to the Payee to the address set forth in the Note,
at least 21 days (or 11 days in any case specified in clause (a), (b) or (e)
above) prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of common
stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and the date as of which it is
expected that holders of common stock of record shall be entitled to exchange
their shares of common stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of any amendment thereto). Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clause (a) through (e) of this Section 5.
SECTION 6. Payors to Reserve Common stock.
Each Payor shall at all times reserve and keep available, free from
preemptive and other rights, out of its authorized but unissued common stock or
out of its common stock held in treasury, for the purpose of effecting the
conversion of the Note, the full number of shares of its common stock then
issuable upon the conversion of the Note.
Page A-9
<PAGE>
SECTION 7. Covenant as to Common stock.
Each Payor covenants that all shares of its common stock which may be
issued upon conversion of the Note will upon issue be fully paid and
nonassessable and such Payor will pay all taxes, liens and charges with respect
to the issue thereof.
SECTION 8. Provisions of Consolidation, Merger or Sale of Assets.
In case of any consolidation of a Payor with, or merger of a Payor into,
any other person, any merger of another person into a Payor (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of common stock) or any sale or transfer of
all or substantially all of the assets of a Payor (other than to a wholly-owned
subsidiary) or the acquisition by any person of all or substantially all of the
common stock of a Payor, the person formed by such consolidation or resulting
from such merger or which acquires such assets or common stock, as the case may
be, shall execute and deliver to the Payee a New Note providing that the Payee
shall have the right thereafter, during the period such New Note shall be
convertible as specified in the Note, to convert such New Note only into the
kind and amount of securities, cash and other property, if any, receivable upon
such consolidation, merger, sale or transfer by a holder of the number of shares
of common stock into which such New Note might have been converted immediately
prior to such consolidation, merger, sale or transfer, assuming such holder of
common stock (i) is not a person with which such Payor consolidated or into
which it merged or which merged into it or to which such sale or transfer was
made, as the case may be (a "Constituent Person"), or an affiliate of a
Constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of common
stock held immediately prior to such consolidation, merger, sale or transfer by
other than a Constituent Person or an affiliate thereof and in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by
each nonelecting share shall be deemed to be the kind and amount so receivable
per share by a plurality of the nonelecting shares). Such New Note shall provide
for adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
Page A-10
<PAGE>
EXHIBIT 99(d)
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED
FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (B) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.
This Common Stock Purchase Warrant is issued this 3rd day of April, 1997,
by Transmedia Europe, Inc., a Delaware corporation (the "Company"), to Mr J V
Vittoria ("Holder").
W I T N E S S E T H:
1. Issuance of Warrant; Term. For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder, subject to the provisions hereinafter set forth, the right to
purchase 125,000 shares of the Company's Common Stock, $.0000l par value per
share (the "Common Stock"), (this "Warrant"). The shares of Common Stock
issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares". This Warrant shall be exercisable at any time after the date hereof
and on or before 5:00 p.m. on the 2nd day of April, 2002. The number of Shares
issuable upon exercise of this Warrant shall be subject to adjustment as
hereinafter set forth.
2. Exercise Price. The exercise price per share for which all or any
of the Shares may be purchased pursuant to the terms of this Warrant shall be
$1.25, subject to adjustment as hereinafter set forth (hereinafter referred to
as the "Exercise Price").
3. Exercise.
(a) This Warrant may be exercised by the Holder (but only on the
conditions hereinafter set forth) in whole or in part, upon delivery of written
notice to the Company, specifying the number of Shares which the Holder has
elected to purchase, at the following address: 11 St. James's Square, London
SW1Y 4LB, England, Attention: President, or such other address as the Company
shall designate in written notice to the Holder hereof, together with this
Warrant and payment (in the manner described in Section 3(b) below) for the
aggregate Exercise Price of the Shares so purchased. Upon exercise of this
Warrant as aforesaid, the Company shall as promptly as practicable execute and
deliver to
<PAGE>
the Holder a certificate or certificates for the total number of whole Shares
for which this Warrant is being exercised in such names and denominations as are
requested by such Holder. If this Warrant shall be exercised with respect to
less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall not
have been exercised, which new Warrant shall in all other respects be identical
to this Warrant.
(b) Payment for the Shares to be purchased upon exercise of this
Warrant shall be made by the delivery of a certified or cashier's check payable
to the Company for the aggregate Exercise Price of the Shares to be purchased.
(c) If on any exercise of this Warrant the Holder would be entitled
to acquire a fraction of a share of Common Stock, in lieu of such fraction of a
share, the Holder of this Warrant otherwise entitled to a fraction of such share
of Common Stock shall receive, upon surrender to the Company of the Warrant held
by such Holder, a cash amount for such fraction of a share equal to the product
obtained by multiplying (i) such fraction of a share of Common Stock, by (ii)
the amount obtained by subtracting the Exercise Price from the average of the
bid and asked prices for a share of Common Stock in the over-the-counter market
at the close of business on the date of exercise of the Warrant, as reported by
the National Association of Securities Dealers Automated Quotation System.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended (the "Act"), or any state securities laws
("Blue Sky Laws"). This Warrant has been acquired by Holder for investment
purposes and not with a view to distribution or resale and may not be made
subject to a security interest, pledged, hypothecated, sold or otherwise
transferred without an effective registration statement for this Warrant under
the Act and such applicable Blue Sky Laws or an opinion of counsel reasonably
satisfactory to the Company and its counsel that registration is not required
under the Act and under any applicable Blue Sky Laws. Transfer of the Shares
issued upon the exercise of this Warrant shall be restricted in the same manner
and to the same extent as this Warrant, and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER
-2-
<PAGE>
HEREOF AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNTIL (A) A
REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO OR (B) IN THE OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED OFFER, SALE OR TRANSFER.
Other legends as required by applicable federal and state laws may be placed on
this Warrant and such certificates. The Holder and the Company agree to execute
such other documents and instruments as counsel for the Company reasonably deems
necessary to effect the compliance of the issuance of this Warrant and any
Shares issued upon exercise hereof with applicable federal and state securities
laws. The Holder agrees that the Company may decline to permit a transfer of
this Warrant if such transfer would result in this Warrant being held by more
than 35 persons, exclusive of "accredited" investors as defined under Regulation
D promulgated under the Act, or if such proposed transferee does not meet then
applicable qualifications for investors in securities offerings exempt from
registration. Furthermore, the unexercised Warrant may be transferred in full
(subject to the provisions hereof) but not in part.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant shall, upon issuance and payment therefor
in accordance with the terms hereof, be legally and validly issued and
outstanding, fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of this Warrant such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of this Warrant and all other outstanding
Warrants.
5. Warrant Holder Not Shareholder. This Warrant does not confer upon
the Holder hereof, as such, any right or privilege whatsoever as a shareholder
of the Company until the Holder shall have delivered the notice and tendered
payment as required under the provisions of Sections 2 and 3 hereof.
6. Anti-Dilution. Wherever this Warrant specifies a number of Shares
or an Exercise Price per share, the specified number of Shares or the specified
Exercise Price per share shall be changed to reflect adjustments required by
this section. If prior to the expiration or exercise of this Warrant there shall
be any change in the capital structure of the Company, the Shares covered by
this Warrant and the Exercise Price payable therefor shall be adjusted as
follows:
(a) If a stock dividend is declared on the Common Stock, there shall
be added to the shares of Common Stock issuable
-3-
<PAGE>
under this Warrant the number of shares of Common Stock ("total additional
shares") which would have been issuable to the Holder had the Holder been the
holder of record only of the number of shares of Common Stock covered by this
Warrant but not exercised at the stock dividend record date. Such additional
shares resulting from such stock dividend shall be delivered without additional
cost, upon the exercise of this Warrant, and, in the event that less than all of
the Shares covered by this Warrant are purchased, the number of additional
shares to be delivered shall be the same fraction of the total additional shares
as the number of shares purchased bears to the total number of shares of Common
Stock covered by this Warrant. Any distribution to the holders of the Common
Stock of the Company, other than a distribution of cash as a dividend out of
surplus or net profits or a distribution by way of granting of rights to
subscribe for shares of capital stock of the Company, shall be treated as a
stock dividend.
(b) If an increase shall be effected in the number of outstanding
shares of Common Stock by reason of a subdivision of such shares, the number of
shares which may thereafter be purchased under this Warrant shall be increased
by the number of shares that would have been received by the Holder on such
subdivision had he been the holder of record only of the number of shares of
Common Stock covered by this Warrant at the effective date of the subdivision.
In such event, the Exercise Price per share shall be decreased by multiplying
the Exercise Price theretofore in effect by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately prior to such
subdivision and the denominator of which is the number of shares of Common Stock
outstanding immediately after the subdivisions
(c) If a decrease shall be effected in the number of outstanding
shares of Common Stock by reason of a combination or reverse stock split, the
number of shares which may thereafter be purchased under this Warrant shall be
changed to the number of shares which would have been held by the Holder after
said combination or reverse stock split had he been the holder only of the
number of shares of Common Stock covered by this Warrant at the effective date
of the combination or reverse stock split. In such event, the Exercise Price per
share shall be increased by multiplying the Exercise Price theretofore in effect
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately prior to the combination or reverse stock split and the
denominator of which is the number of shares of Common Stock outstanding
immediately after the combination or reverse stock split.
(d) If there is any capital reorganization or reclassification of
the capital stock of the Company, or any consolidation or merger of the Company
with any other corporation
-4-
<PAGE>
or corporations, or any sale or distribution of all or substantially all of the
Company's property and assets, adequate provision shall be made by the Company
so that there shall remain and be substituted under this Warrant the stock,
securities; or assets that would have been issuable or payable in respect of or
in exchange for the shares of Common Stock then remaining under this Warrant and
not theretofore purchased and issued hereunder, as if the Holder had been the
owner of such shares on the applicable record date. Until the expiration or
exercise of this Warrant, any shares of stock so substituted under this Warrant
shall be subject to adjustment as provided in this Section 6 in the same manner
and to the same effect as the shares of Common Stock covered by this Warrant.
7. Registration Rights. The Company covenants and agrees as follows:
(a) Rights in Connection with a Public Offering by the Company. At
any time the Company intends to make a public offering of its securities under
any form of registration statement suitable for secondary offerings, the Company
shall so notify the Holder hereof in writing, no less than 30 days before the
intended filing of such registration statement, and shall permit the Holder to
include any or all of his Shares in such offering (limited only by the
provisions of paragraph (d) of this Section 7), provided the Holder notifies the
Company in writing within 15 days of the date of such notice of his desire to be
included in such offering. Thereafter, the Company shall use its best efforts to
(i) file with all due promptness and endeavor to make effective, as soon as
reasonably practicable, a registration statement under the Act covering any and
all shares proposed (the number being limited only by the provisions of
paragraph (d) of this Section 7) to be sold or otherwise disposed of by the
Holder; (ii) qualify such shares under the Blue Sky laws of the jurisdiction(s)
in which the offers and sales or other dispositions are proposed to be made;
(iii) qualify such shares under the rules of any appropriate self-regulatory
organization or stock exchange; (iv) maintain the effectiveness of the
registration statement for a reasonable period of time but in no event to exceed
30 days and from time to time (within any such period of effectiveness) advise
any Holder whose securities are being registered of any stop order or any event
or development requiring amendment of the registration statement and prospectus
or rendering it inadvisable to use the prospectus until it is supplemented or
amended; and (v) with reasonable promptness prevent the issuance or cause to be
removed any stop order, and amend or supplement the registration statement and
prospectus used in connection therewith to the extent necessary or appropriate
in order to comply with the Act. Notwithstanding anything else to the contrary
contained herein, once the Holder has been afforded the right to have all of its
Shares registered under the Act and has elected to have some or
-5-
<PAGE>
all of its Shares so registered this Section 7 shall be of no further force or
effect if all of such request has been effected.
(b) Expenses. All expenses (including, but not limited to, all
registration fees paid to the Securities and Exchange Commission, fees and
expenses of accountants, fees and expenses of counsel, printing and engraving
expenses, transfer agent fees, escrow fees, N.A.S.D. registration or exchange
listing fees, but not including underwriting discounts and commissions relating
to Shares of any holder being offered thereby and fees and expenses of any
special counsel of any selling shareholder) of any registration(s) made pursuant
to paragraph (a) hereof shall be borne and paid by the Company. Underwriting
discounts and commissions shall be borne pro rata by any selling shareholder in
proportion to the number of shares being offered by such selling shareholder.
(c) Indemnification. The Company shall indemnify and hold harmless
the Holder, and any officer, director, partner or controlling person of each,
against any claim, liability, loss, damage, cost or expense (including
attorneys' fees) arising out of any violation of federal or state securities
laws or any alleged material misstatement or omission in any registration
statement filed pursuant to paragraph (a) hereof, or in documents incorporated
therein by reference, unless such misstatement or omission is contained in, or
relates to, information furnished or to have been furnished by the Holder,
provided the Company receives prompt written notice of any claim of any such
misstatement or omission and is afforded a reasonable opportunity, if it so
elects, to participate in or control the defense of such claim.
(d) Underwriting. If any registration is intended to be an
underwritten public offering, the Company shall so advise the Holder as a part
of the written notice given pursuant to paragraph (a) hereof. In such event, the
right of the Holder to registration, pursuant to paragraph (a) hereof, shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Company Common Stock in the underwriting to the extent
provided herein. The Holder proposing to distribute its securities through such
underwriting shall (together with the Company and any other persons distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters or representative
thereof, selected for such underwriting by the Company (hereinafter the
"Underwriter"). Notwithstanding any other provision of paragraph (a), if the
Underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the Underwriter may exclude some of the Holder's
shares of stock from such registration and underwriting, provided that shares of
stock
-6-
<PAGE>
proposed to be sold by stockholders other than the Holder are first excluded and
provided further that in any joint primary or secondary offering, no less than
one-third (1/3) of the aggregate number of shares offered thereby are offered by
the Holder (or such lesser fraction as will include all of the shares which the
Holder then desire to so offer). The number of shares of stock that may be
included in the registration and underwriting shall be allocated to each Holder
proposing to sell, in proportion, as nearly as practicable, to the number of
shares of capital stock of the Company held by such Holder at the time of filing
of the registration statement. If any such Holder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the Underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(e) Assignment of Registration Rights. The rights to cause to
register securities granted the Holder under paragraph (a) may be assigned to a
transferee or assignee, provided that the Company shall be notified of any such
transfer within thirty (30) days of the date such transaction is effected, and
provided further that: (i) such assignee or transferee agrees to be bound by the
terms of this Plan; and (ii) such assignee or transferee is unable to publicly
transfer such stock without registration.
8. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by. prepaid
telegram or mailed first class, postage prepaid, registered or certified mail as
follows:
If to the Company: Transmedia Europe, Inc.
11 St. James's Square
London SW1Y 4LB
England
Attention: Edward J. Guinan, III
If to Holder: Mr J V Vittoria
1616 Ocean Boulevard
Palm Beach
Florida 33480
9. Governing Law. This Warrant shall be construed and enforced in
accordance with the laws of the state of New York.
10. Successors, Assigns. This Warrant shall be binding upon and
inure to the benefit of any successor or successors of the Company, and shall
inure to the benefit of and shall be
-7-
<PAGE>
enforceable by the Holder and the Holder's legal representatives, successors,
heirs and permitted assigns.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by its duly authorized officer as of the date first above
written.
TRANSMEDIA EUROPE, INC.
By: s/s Paul L Harrison
-----------------------------
Paul L Harrison
COO, Director
-8-
<PAGE>
EXHIBIT 99(e)
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED
FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (B) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.
This Common Stock Purchase Warrant is issued this 3rd day of April, 1997,
by Transmedia Asia Pacific, Inc., a Delaware corporation (the "Company"), to Mr
J V Vittoria ("Holder").
W I T N E S S E T H:
1. Issuance of Warrant; Term. For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder, subject to the provisions hereinafter set forth, the right to
purchase 138,596 shares of the Company's Common Stock, $.0000l par value per
share (the "Common Stock"), (this "Warrant"). The shares of Common Stock
issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares". This Warrant shall be exercisable at any time after the date hereof
and on or before 5:00 p.m. on the 2nd day of April, 2002. The number of Shares
issuable upon exercise of this Warrant shall be subject to adjustment as
hereinafter set forth.
2. Exercise Price. The exercise price per share for which all or any
of the Shares may be purchased pursuant to the terms of this Warrant shall be
$1.13, subject to adjustment as hereinafter set forth (hereinafter referred to
as the "Exercise Price").
3. Exercise.
(a) This Warrant may be exercised by the Holder (but only on the
conditions hereinafter set forth) in whole or in part, upon delivery of written
notice to the Company, specifying the number of Shares which the Holder has
elected to purchase, at the following address: 11 St. James's Square, London
SW1Y 4LB, England, Attention: President, or such other address as the Company
shall designate in written notice to the Holder hereof, together with this
Warrant and payment (in the manner described in Section 3(b) below) for the
aggregate Exercise Price of the Shares so
<PAGE>
purchased. Upon exercise of this Warrant as aforesaid, the Company shall as
promptly as practicable execute and deliver to the Holder a certificate or
certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant.
(b) Payment for the Shares to be purchased upon exercise of this
Warrant shall be made by the delivery of a certified or cashier's check payable
to the Company for the aggregate Exercise Price of the Shares to be purchased.
(c) If on any exercise of this Warrant the Holder would be entitled
to acquire a fraction of a share of Common Stock, in lieu of such fraction of a
share, the Holder of this Warrant otherwise entitled to a fraction of such share
of Common Stock shall receive, upon surrender to the Company of the Warrant held
by such Holder, a cash amount for such fraction of a share equal to the product
obtained by multiplying (i) such fraction of a share of Common Stock, by (ii)
the amount obtained by subtracting the Exercise Price from the average of the
bid and asked prices for a share of Common Stock in the over-the-counter market
at the close of business on the date of exercise of the Warrant, as reported by
the National Association of Securities Dealers Automated Quotation System.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended (the "Act"), or any state securities laws
("Blue Sky Laws"). This Warrant has been acquired by Holder for investment
purposes and not with a view to distribution or resale and may not be made
subject to a security interest, pledged, hypothecated, sold or otherwise
transferred without an effective registration statement for this Warrant under
the Act and such applicable Blue Sky Laws or an opinion of counsel reasonably
satisfactory to the Company and its counsel that registration is not required
under the Act and under any applicable Blue Sky Laws. Transfer of the Shares
issued upon the exercise of this Warrant shall be restricted in the same manner
and to the same extent as this Warrant, and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
-2-
<PAGE>
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN
ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT UNDER THE
ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO OR (B) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
Other legends as required by applicable federal and state laws may be placed on
this Warrant and such certificates. The Holder and the Company agree to execute
such other documents and instruments as counsel for the Company reasonably deems
necessary to effect the compliance of the issuance of this Warrant and any
Shares issued upon exercise hereof with applicable federal and state securities
laws. The Holder agrees that the Company may decline to permit a transfer of
this Warrant if such transfer would result in this Warrant being held by more
than 35 persons, exclusive of "accredited" investors as defined under Regulation
D promulgated under the Act, or if such proposed transferee does not meet then
applicable qualifications for investors in securities offerings exempt from
registration. Furthermore, the unexercised Warrant may be transferred in full
(subject to the provisions hereof) but not in part.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant shall, upon issuance and payment therefor
in accordance with the terms hereof, be legally and validly issued and
outstanding, fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of this Warrant such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of this Warrant and all other outstanding
Warrants.
5. Warrant Holder Not Shareholder. This Warrant does not confer upon
the Holder hereof, as such, any right or privilege whatsoever as a shareholder
of the Company until the Holder shall have delivered the notice and tendered
payment as required under the provisions of Sections 2 and 3 hereof.
6. Anti-Dilution. Wherever this Warrant specifies a number of Shares
or an Exercise Price per share, the specified number of Shares or the specified
Exercise Price per share shall be changed to reflect adjustments required by
this section. If prior to the expiration or exercise of this Warrant there shall
be any change in the capital structure of the Company, the Shares covered by
this Warrant and the Exercise Price payable therefor shall be adjusted as
follows:
-3-
<PAGE>
(a) If a stock dividend is declared on the Common Stock, there shall
be added to the shares of Common Stock issuable under this Warrant the number of
shares of Common Stock ("total additional shares") which would have been
issuable to the Holder had the Holder been the holder of record only of the
number of shares of Common Stock covered by this Warrant but not exercised at
the stock dividend record date. Such additional shares resulting from such stock
dividend shall be delivered without additional cost, upon the exercise of this
Warrant, and, in the event that less than all of the Shares covered by this
Warrant are purchased, the number of additional shares to be delivered shall be
the same fraction of the total additional shares as the number of shares
purchased bears to the total number of shares of Common Stock covered by this
Warrant. Any distribution to the holders of the Common Stock of the Company,
other than a distribution of cash as a dividend out of surplus or net profits or
a distribution by way of granting of rights to subscribe for shares of capital
stock of the Company, shall be treated as a stock dividend.
(b) If an increase shall be effected in the number of outstanding
shares of Common Stock by reason of a subdivision of such shares, the number of
shares which may thereafter be purchased under this Warrant shall be increased
by the number of shares that would have been received by the Holder on such
subdivision had he been the holder of record only of the number of shares of
Common Stock covered by this Warrant at the effective date of the subdivision.
In such event, the Exercise Price per share shall be decreased by multiplying
the Exercise Price theretofore in effect by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately prior to such
subdivision and the denominator of which is the number of shares of Common Stock
outstanding immediately after the subdivisions
(c) If a decrease shall be effected in the number of outstanding
shares of Common Stock by reason of a combination or reverse stock split, the
number of shares which may thereafter be purchased under this Warrant shall be
changed to the number of shares which would have been held by the Holder after
said combination or reverse stock split had he been the holder only of the
number of shares of Common Stock covered by this Warrant at the effective date
of the combination or reverse stock split. In such event, the Exercise Price per
share shall be increased by multiplying the Exercise Price theretofore in effect
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately prior to the combination or reverse stock split and the
denominator of which is the number of shares of Common Stock outstanding
immediately after the combination or reverse stock split.
-4-
<PAGE>
(d) If there is any capital reorganization or reclassification of
the capital stock of the Company, or any consolidation or merger of the Company
with any other corporation or corporations, or any sale or distribution of all
or substantially all of the Company's property and assets, adequate provision
shall be made by the Company so that there shall remain and be substituted under
this Warrant the stock, securities; or assets that would have been issuable or
payable in respect of or in exchange for the shares of Common Stock then
remaining under this Warrant and not theretofore purchased and issued hereunder,
as if the Holder had been the owner of such shares on the applicable record
date. Until the expiration or exercise of this Warrant, any shares of stock so
substituted under this Warrant shall be subject to adjustment as provided in
this Section 6 in the same manner and to the same effect as the shares of Common
Stock covered by this Warrant.
7. Registration Rights. The Company covenants and agrees as follows:
(a) Rights in Connection with a Public Offering by the Company. At
any time the Company intends to make a public offering of its securities under
any form of registration statement suitable for secondary offerings, the Company
shall so notify the Holder hereof in writing, no less than 30 days before the
intended filing of such registration statement, and shall permit the Holder to
include any or all of his Shares in such offering (limited only by the
provisions of paragraph (d) of this Section 7), provided the Holder notifies the
Company in writing within 15 days of the date of such notice of his desire to be
included in such offering. Thereafter, the Company shall use its best efforts to
(i) file with all due promptness and endeavor to make effective, as soon as
reasonably practicable, a registration statement under the Act covering any and
all shares proposed (the number being limited only by the provisions of
paragraph (d) of this Section 7) to be sold or otherwise disposed of by the
Holder; (ii) qualify such shares under the Blue Sky laws of the jurisdiction(s)
in which the offers and sales or other dispositions are proposed to be made;
(iii) qualify such shares under the rules of any appropriate self-regulatory
organization or stock exchange; (iv) maintain the effectiveness of the
registration statement for a reasonable period of time but in no event to exceed
30 days and from time to time (within any such period of effectiveness) advise
any Holder whose securities are being registered of any stop order or any event
or development requiring amendment of the registration statement and prospectus
or rendering it inadvisable to use the prospectus until it is supplemented or
amended; and (v) with reasonable promptness prevent the issuance or cause to be
removed any stop order, and amend or supplement the registration statement and
prospectus used in connection therewith to the extent necessary or appropriate
in order to comply with the Act.
-5-
<PAGE>
Notwithstanding anything else to the contrary contained herein, once the Holder
has been afforded the right to have all of its Shares registered under the Act
and has elected to have some or all of its Shares so registered this Section 7
shall be of no further force or effect if all of such request has been effected.
(b) Expenses. All expenses (including, but not limited to, all
registration fees paid to the Securities and Exchange Commission, fees and
expenses of accountants, fees and expenses of counsel, printing and engraving
expenses, transfer agent fees, escrow fees, N.A.S.D. registration or exchange
listing fees, but not including underwriting discounts and commissions relating
to Shares of any holder being offered thereby and fees and expenses of any
special counsel of any selling shareholder) of any registration(s) made pursuant
to paragraph (a) hereof shall be borne and paid by the Company. Underwriting
discounts and commissions shall be borne pro rata by any selling shareholder in
proportion to the number of shares being offered by such selling shareholder.
(c) Indemnification. The Company shall indemnify and hold harmless
the Holder, and any officer, director, partner or controlling person of each,
against any claim, liability, loss, damage, cost or expense (including
attorneys' fees) arising out of any violation of federal or state securities
laws or any alleged material misstatement or omission in any registration
statement filed pursuant to paragraph (a) hereof, or in documents incorporated
therein by reference, unless such misstatement or omission is contained in, or
relates to, information furnished or to have been furnished by the Holder,
provided the Company receives prompt written notice of any claim of any such
misstatement or omission and is afforded a reasonable opportunity, if it so
elects, to participate in or control the defense of such claim.
(d) Underwriting. If any registration is intended to be an
underwritten public offering, the Company shall so advise the Holder as a part
of the written notice given pursuant to paragraph (a) hereof. In such event, the
right of the Holder to registration, pursuant to paragraph (a) hereof, shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Company Common Stock in the underwriting to the extent
provided herein. The Holder proposing to distribute its securities through such
underwriting shall (together with the Company and any other persons distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters or representative
thereof, selected for such underwriting by the Company (hereinafter the
"Underwriter"). Notwithstanding any other provision of paragraph (a), if the
Underwriter determines that marketing factors require a limitation
-6-
<PAGE>
of the number of shares to be underwritten, the Underwriter may exclude some of
the Holder's shares of stock from such registration and underwriting, provided
that shares of stock proposed to be sold by stockholders other than the Holder
are first excluded and provided further that in any joint primary or secondary
offering, no less than one-third (1/3) of the aggregate number of shares offered
thereby are offered by the Holder (or such lesser fraction as will include all
of the shares which the Holder then desire to so offer). The number of shares of
stock that may be included in the registration and underwriting shall be
allocated to each Holder proposing to sell, in proportion, as nearly as
practicable, to the number of shares of capital stock of the Company held by
such Holder at the time of filing of the registration statement. If any such
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the Underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(e) Assignment of Registration Rights. The rights to cause to
register securities granted the Holder under paragraph (a) may be assigned to a
transferee or assignee, provided that the Company shall be notified of any such
transfer within thirty (30) days of the date such transaction is effected, and
provided further that: (i) such assignee or transferee agrees to be bound by the
terms of this Plan; and (ii) such assignee or transferee is unable to publicly
transfer such stock without registration.
8. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by. prepaid
telegram or mailed first class, postage prepaid, registered or certified mail as
follows:
If to the Company: Transmedia Asia Pacific, Inc.
11 St. James's Square
London SW1Y 4LB
England
Attention: Edward J. Guinan, III
If to Holder: Mr J V Vittoria
1616 Ocean Boulevard
Palm Beach
Florida 33480
9. Governing Law. This Warrant shall be construed and enforced in
accordance with the laws of the state of New York.
-7-
<PAGE>
10. Successors, Assigns. This Warrant shall be binding upon and
inure to the benefit of any successor or successors of the Company, and shall
inure to the benefit of and shall be enforceable by the Holder and the Holder's
legal representatives, successors, heirs and permitted assigns.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by its duly authorized officer as of the date first above
written.
TRANSMEDIA ASIA PACIFIC, INC.
By:
-----------------------------
Paul L Harrison
COO, Director
-9-
<PAGE>
EXHIBIT 99(f)
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED
FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT
UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (B) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.
This Common Stock Purchase Warrant is issued this 3rd day of April, 1997,
by Transmedia Europe, Inc., a Delaware corporation (the "Company"), to Mr J V
Vittoria ("Holder").
W I T N E S S E T H:
1. Issuance of Warrant; Term. For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder, subject to the provisions hereinafter set forth, the right to
purchase 125,000 shares of the Company's Common Stock, $.0000l par value per
share (the "Common Stock"), (this "Warrant"). The shares of Common Stock
issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares". This Warrant shall be exercisable at any time after the date hereof
and on or before 5:00 p.m. on the 2nd day of April, 2002. The number of Shares
issuable upon exercise of this Warrant shall be subject to adjustment as
hereinafter set forth.
2. Exercise Price. The exercise price per share for which all or any
of the Shares may be purchased pursuant to the terms of this Warrant shall be
$1.25, subject to adjustment as hereinafter set forth (hereinafter referred to
as the "Exercise Price").
3. Exercise.
(a) This Warrant may be exercised by the Holder (but only on the
conditions hereinafter set forth) in whole or in part, upon delivery of written
notice to the Company, specifying the number of Shares which the Holder has
elected to purchase, at the following address: 11 St. James's Square, London
SW1Y 4LB, England, Attention: President, or such other address as the Company
shall designate in written notice to the Holder hereof, together with this
Warrant and payment (in the manner described in Section 3(b) below) for the
aggregate Exercise Price of the Shares so
<PAGE>
purchased. Upon exercise of this Warrant as aforesaid, the Company shall as
promptly as practicable execute and deliver to the Holder a certificate or
certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new Warrant covering the number of
Shares in respect of which this Warrant shall not have been exercised, which new
Warrant shall in all other respects be identical to this Warrant.
(b) Payment for the Shares to be purchased upon exercise of this
Warrant shall be made by the delivery of a certified or cashier's check payable
to the Company for the aggregate Exercise Price of the Shares to be purchased.
(c) If on any exercise of this Warrant the Holder would be entitled
to acquire a fraction of a share of Common Stock, in lieu of such fraction of a
share, the Holder of this Warrant otherwise entitled to a fraction of such share
of Common Stock shall receive, upon surrender to the Company of the Warrant held
by such Holder, a cash amount for such fraction of a share equal to the product
obtained by multiplying (i) such fraction of a share of Common Stock, by (ii)
the amount obtained by subtracting the Exercise Price from the average of the
bid and asked prices for a share of Common Stock in the over-the-counter market
at the close of business on the date of exercise of the Warrant, as reported by
the National Association of Securities Dealers Automated Quotation System.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended (the "Act"), or any state securities laws
("Blue Sky Laws"). This Warrant has been acquired by Holder for investment
purposes and not with a view to distribution or resale and may not be made
subject to a security interest, pledged, hypothecated, sold or otherwise
transferred without an effective registration statement for this Warrant under
the Act and such applicable Blue Sky Laws or an opinion of counsel reasonably
satisfactory to the Company and its counsel that registration is not required
under the Act and under any applicable Blue Sky Laws. Transfer of the Shares
issued upon the exercise of this Warrant shall be restricted in the same manner
and to the same extent as this Warrant, and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
-2-
<PAGE>
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN
ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT UNDER THE
ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO OR (B) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
Other legends as required by applicable federal and state laws may be placed on
this Warrant and such certificates. The Holder and the Company agree to execute
such other documents and instruments as counsel for the Company reasonably deems
necessary to effect the compliance of the issuance of this Warrant and any
Shares issued upon exercise hereof with applicable federal and state securities
laws. The Holder agrees that the Company may decline to permit a transfer of
this Warrant if such transfer would result in this Warrant being held by more
than 35 persons, exclusive of "accredited" investors as defined under Regulation
D promulgated under the Act, or if such proposed transferee does not meet then
applicable qualifications for investors in securities offerings exempt from
registration. Furthermore, the unexercised Warrant may be transferred in full
(subject to the provisions hereof) but not in part.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant shall, upon issuance and payment therefor
in accordance with the terms hereof, be legally and validly issued and
outstanding, fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of this Warrant such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of this Warrant and all other outstanding
Warrants.
5. Warrant Holder Not Shareholder. This Warrant does not confer upon
the Holder hereof, as such, any right or privilege whatsoever as a shareholder
of the Company until the Holder shall have delivered the notice and tendered
payment as required under the provisions of Sections 2 and 3 hereof.
6. Anti-Dilution. Wherever this Warrant specifies a number of Shares
or an Exercise Price per share, the specified number of Shares or the specified
Exercise Price per share shall be changed to reflect adjustments required by
this section. If prior to the expiration or exercise of this Warrant there shall
be any change in the capital structure of the Company, the Shares covered by
this Warrant and the Exercise Price payable therefor shall be adjusted as
follows:
-3-
<PAGE>
(a) If a stock dividend is declared on the Common Stock, there shall
be added to the shares of Common Stock issuable under this Warrant the number of
shares of Common Stock ("total additional shares") which would have been
issuable to the Holder had the Holder been the holder of record only of the
number of shares of Common Stock covered by this Warrant but not exercised at
the stock dividend record date. Such additional shares resulting from such stock
dividend shall be delivered without additional cost, upon the exercise of this
Warrant, and, in the event that less than all of the Shares covered by this
Warrant are purchased, the number of additional shares to be delivered shall be
the same fraction of the total additional shares as the number of shares
purchased bears to the total number of shares of Common Stock covered by this
Warrant. Any distribution to the holders of the Common Stock of the Company,
other than a distribution of cash as a dividend out of surplus or net profits or
a distribution by way of granting of rights to subscribe for shares of capital
stock of the Company, shall be treated as a stock dividend.
(b) If an increase shall be effected in the number of outstanding
shares of Common Stock by reason of a subdivision of such shares, the number of
shares which may thereafter be purchased under this Warrant shall be increased
by the number of shares that would have been received by the Holder on such
subdivision had he been the holder of record only of the number of shares of
Common Stock covered by this Warrant at the effective date of the subdivision.
In such event, the Exercise Price per share shall be decreased by multiplying
the Exercise Price theretofore in effect by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately prior to such
subdivision and the denominator of which is the number of shares of Common Stock
outstanding immediately after the subdivisions
(c) If a decrease shall be effected in the number of outstanding
shares of Common Stock by reason of a combination or reverse stock split, the
number of shares which may thereafter be purchased under this Warrant shall be
changed to the number of shares which would have been held by the Holder after
said combination or reverse stock split had he been the holder only of the
number of shares of Common Stock covered by this Warrant at the effective date
of the combination or reverse stock split. In such event, the Exercise Price per
share shall be increased by multiplying the Exercise Price theretofore in effect
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately prior to the combination or reverse stock split and the
denominator of which is the number of shares of Common Stock outstanding
immediately after the combination or reverse stock split.
-4-
<PAGE>
(d) If there is any capital reorganization or reclassification of
the capital stock of the Company, or any consolidation or merger of the Company
with any other corporation or corporations, or any sale or distribution of all
or substantially all of the Company's property and assets, adequate provision
shall be made by the Company so that there shall remain and be substituted under
this Warrant the stock, securities; or assets that would have been issuable or
payable in respect of or in exchange for the shares of Common Stock then
remaining under this Warrant and not theretofore purchased and issued hereunder,
as if the Holder had been the owner of such shares on the applicable record
date. Until the expiration or exercise of this Warrant, any shares of stock so
substituted under this Warrant shall be subject to adjustment as provided in
this Section 6 in the same manner and to the same effect as the shares of Common
Stock covered by this Warrant.
7. Registration Rights. The Company covenants and agrees as follows:
(a) Rights in Connection with a Public Offering by the Company. At
any time the Company intends to make a public offering of its securities under
any form of registration statement suitable for secondary offerings, the Company
shall so notify the Holder hereof in writing, no less than 30 days before the
intended filing of such registration statement, and shall permit the Holder to
include any or all of his Shares in such offering (limited only by the
provisions of paragraph (d) of this Section 7), provided the Holder notifies the
Company in writing within 15 days of the date of such notice of his desire to be
included in such offering. Thereafter, the Company shall use its best efforts to
(i) file with all due promptness and endeavor to make effective, as soon as
reasonably practicable, a registration statement under the Act covering any and
all shares proposed (the number being limited only by the provisions of
paragraph (d) of this Section 7) to be sold or otherwise disposed of by the
Holder; (ii) qualify such shares under the Blue Sky laws of the jurisdiction(s)
in which the offers and sales or other dispositions are proposed to be made;
(iii) qualify such shares under the rules of any appropriate self-regulatory
organization or stock exchange; (iv) maintain the effectiveness of the
registration statement for a reasonable period of time but in no event to exceed
30 days and from time to time (within any such period of effectiveness) advise
any Holder whose securities are being registered of any stop order or any event
or development requiring amendment of the registration statement and prospectus
or rendering it inadvisable to use the prospectus until it is supplemented or
amended; and (v) with reasonable promptness prevent the issuance or cause to be
removed any stop order, and amend or supplement the registration statement and
prospectus used in connection therewith to the extent necessary or appropriate
in order to comply with the Act.
-5-
<PAGE>
Notwithstanding anything else to the contrary contained herein, once the Holder
has been afforded the right to have all of its Shares registered under the Act
and has elected to have some or all of its Shares so registered this Section 7
shall be of no further force or effect if all of such request has been effected.
(b) Expenses. All expenses (including, but not limited to, all
registration fees paid to the Securities and Exchange Commission, fees and
expenses of accountants, fees and expenses of counsel, printing and engraving
expenses, transfer agent fees, escrow fees, N.A.S.D. registration or exchange
listing fees, but not including underwriting discounts and commissions relating
to Shares of any holder being offered thereby and fees and expenses of any
special counsel of any selling shareholder) of any registration(s) made pursuant
to paragraph (a) hereof shall be borne and paid by the Company. Underwriting
discounts and commissions shall be borne pro rata by any selling shareholder in
proportion to the number of shares being offered by such selling shareholder.
(c) Indemnification. The Company shall indemnify and hold harmless
the Holder, and any officer, director, partner or controlling person of each,
against any claim, liability, loss, damage, cost or expense (including
attorneys' fees) arising out of any violation of federal or state securities
laws or any alleged material misstatement or omission in any registration
statement filed pursuant to paragraph (a) hereof, or in documents incorporated
therein by reference, unless such misstatement or omission is contained in, or
relates to, information furnished or to have been furnished by the Holder,
provided the Company receives prompt written notice of any claim of any such
misstatement or omission and is afforded a reasonable opportunity, if it so
elects, to participate in or control the defense of such claim.
(d) Underwriting. If any registration is intended to be an
underwritten public offering, the Company shall so advise the Holder as a part
of the written notice given pursuant to paragraph (a) hereof. In such event, the
right of the Holder to registration, pursuant to paragraph (a) hereof, shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Company Common Stock in the underwriting to the extent
provided herein. The Holder proposing to distribute its securities through such
underwriting shall (together with the Company and any other persons distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters or representative
thereof, selected for such underwriting by the Company (hereinafter the
"Underwriter"). Notwithstanding any other provision of paragraph (a), if the
Underwriter determines that marketing factors require a limitation
-6-
<PAGE>
of the number of shares to be underwritten, the Underwriter may exclude some of
the Holder's shares of stock from such registration and underwriting, provided
that shares of stock proposed to be sold by stockholders other than the Holder
are first excluded and provided further that in any joint primary or secondary
offering, no less than one-third (1/3) of the aggregate number of shares offered
thereby are offered by the Holder (or such lesser fraction as will include all
of the shares which the Holder then desire to so offer). The number of shares of
stock that may be included in the registration and underwriting shall be
allocated to each Holder proposing to sell, in proportion, as nearly as
practicable, to the number of shares of capital stock of the Company held by
such Holder at the time of filing of the registration statement. If any such
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the Underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(e) Assignment of Registration Rights. The rights to cause to
register securities granted the Holder under paragraph (a) may be assigned to a
transferee or assignee, provided that the Company shall be notified of any such
transfer within thirty (30) days of the date such transaction is effected, and
provided further that: (i) such assignee or transferee agrees to be bound by the
terms of this Plan; and (ii) such assignee or transferee is unable to publicly
transfer such stock without registration.
8. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by. prepaid
telegram or mailed first class, postage prepaid, registered or certified mail as
follows:
If to the Company: Transmedia Europe, Inc.
11 St. James's Square
London SW1Y 4LB
England
Attention: Edward J. Guinan, III
If to Holder: Mr J V Vittoria
1616 Ocean Boulevard
Palm Beach
Florida 33480
9. Governing Law. This Warrant shall be construed and enforced in
accordance with the laws of the state of New York.
-7-
<PAGE>
10. Successors, Assigns. This Warrant shall be binding upon and
inure to the benefit of any successor or successors of the Company, and shall
inure to the benefit of and shall be enforceable by the Holder and the Holder's
legal representatives, successors, heirs and permitted assigns.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by its duly authorized officer as of the date first above
written.
TRANSMEDIA EUROPE, INC.
By:
-----------------------------
Paul L Harrison
COO, Director
-9-
<PAGE>
EXHIBIT 99(g)
UPDATE TO LEGAL DUE DILIGENCE REPORT
COUNTDOWN HOLDINGS LIMITED
This is an update to the Legal Due Diligence Report dated 23 August 1996 ("the
Report") on Countdown Holdings Limited and where appropriate Countdown plc. This
Update is concerned specifically with additional documentation provided by
Messrs SJ Berwin on 26 and 27 March 1997.
This Update should be treated as an addendum to the Report.
Banking Arrangements
Pursuant to the terms of a letter addressed to Mr Radbone dated 14 February 1997
from Natwest, the banking arrangements and facilities made available to the
Countdown Group were amended. This followed correspondence between Chris Radbone
and Natwest during December 1996 and January 1997. It was a condition of the new
arrangements being entered into that Grant Thornton be instructed to carry out
an independent review of the Countdown Group financial position. A copy of that
report has been made available to Will Price and is not commented upon further
in this Update.
The revised banking arrangements are as follows:-
1 The facilities are to continue until 11 May 1997 and are granted on a
proviso that they may at any time and without prior notice be withdrawn on
advice by Natwest. The new facilities replace the temporary extension
given by virtue of a letter from Natwest dated 10 December 1996.
2 There is an overdraft facility in the sum of (pounds)350,000 gross and an
excess of (pounds)150,000 and in the sum of (pounds)250,000 net and in
excess of (pounds)150,000. The terms of the overdraft facility are as
follows:-
2.1 the first (pounds)250,000 accrues interest at 4.00% per annum above
base rate (net) and 2.5% above the base rate on the excess facility
of (pounds)150,000;
2.2 An unarranged borrowing rate of 29.5% (variable) applies
above(pounds)500,000; and
2.3 interest is payable quarterly.
3 There is a loan facility in the sum of (pounds)105,319 including interest
which is a consolidation of existing borrowings. The loan is to be repaid
by reductions of
<PAGE>
2
(pounds)750 per month and repayment will be achieved by 31 December 2008.
Interest is payable at 2% per annum above the bank's base rate and is
payable quarterly.
4 The Company also has a BACS facility of (pounds)50,000.
5 The existing security of the Bank remains in place and in addition the
Bank has required new security to be put in place. That security is stated
to be as follows:-
5.1 a guarantee limited to(pounds)150,000 to be given by Chris Radbone;
5.2 a charge over credit balances totalling(pounds)150,000 to be given
by Chris Radbone; and
5.3 a further guarantee limited to (pounds)150,000 again to be given by
Chris Radbone.
We have been provided with a copy of Chris Radbone's guarantee in the sum
of (pounds)150,000. The guarantee is dated 11 March 1997 and is a charge
over an account with Natwest with account number 08291594. This is the
only guarantee provided. SJ Berwin has confirmed that is the only
additional provided security.
Other Commitments
1 SJ Berwin have provided copies of correspondence between the Company and
Rhodes & Rhodes Accountants in relation to the Accountant's fees. An
invoice in the sum of (pounds)10,000 plus VAT dated 10 March 1997 has been
delivered to the Company in respect of Rhodes & Rhodes fees for the period
to 31 August 1996. The letter to Rhodes & Rhodes from Chris Radbone dated
13 March 1997 indicated that there were discussions taking place in
respect of a proposed discount to the fee. The account therefore is at
present unpaid.
Taxation Return
1 We have been provided with a copy of a letter from JB Kitchner & Co.
relating to the Corporation Tax Return for IDC Card Limited. The letter
confirms that the accountants had received amended assessments from the
Inspector for 1993 and 1995 and confirmation that calculations of the
losses for 1996 had been accepted. Again, the account was accompanied by
the taxation department's fee of (pounds)310.75 plus VAT at (pounds)34.38.
It is unclear whether this account has been paid.
<PAGE>
3
Credit Agreements
1 We have been provided with a copy a Credit Sale Agreement between De Lage
Landen Leasing Limited and Countdown plc in respect of computer software.
The agreement is for 36 months, instalments are payable quarterly. The
first instalment is (pounds)8,250 followed by 11 instalments of
(pounds)3,000. The total amount payable including VAT and charge for
credit is (pounds)41,250.
The finance has been provided by Schroders Leasing Limited. There is a
requirement upon Countdown to insure the equipment and to advise the
insurers of the interest of Schroders. We have asked SJ Berwin to confirm
that the insurance obligations have been carried out.
2 We have also been provided with a copy of the hardware rental agreement.
The agreement is for a minimum period of three years and the rental is
payable every three months. The instalment payment being (pounds)1,788.94
including VAT.
3 We have been provided with a copy of the agreement in respect of new
Mercedes Benz E200 Classic. Registration number P195COD. The lease
purchase agreement is with Lombard North Central plc and Countdown plc.
The period of rental is 35 months. The amount payable each month is
(pounds)520.56.
Licences and Grants
1 We have queried whether or not the premises have been issued with a fire
certificate. The response from SJ Berwin with a copy of the note from
Chris Radbone which states that he is unable to locate the fire
certificate. Fiona Grom is away and is the person who applied for it six
months ago. He assumes that she has it. SJ Berwin have confirmed that the
Fire Service were contacted this morning and have confirmed that the
premises were inspected and the Certificate will be issued next week.
Staff Loans
1 We are informed that the following salary advances have been made:-
1.1 Sarah Clarkeson -(pounds)347;
1.2 Rodgers Chisambi -(pounds)250;
<PAGE>
4
1.3 Suzy Atabaki - (pounds)500;
1.4 Kate Miller - (pounds)50;
1.5 Steve Robinson - (pounds)114.
We are further informed that a staff loan in the sum of (pounds)976 has
been made to Rodgers Chisambi.
Debtors and Creditors
1 A schedule of aged debtors and creditors is attached.
<PAGE>
AGED CREDITOR SCHEDULE ((pounds))
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DATE COUNTDOWN PLC IDC CARD LIMITED COUNTDOWN COUNTDOWN PARK ROYAL
DUE INTERNATIONAL, IRELAND MAILING SERVICES
INC.
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
After 53,242.81 743.20 4,316.46
28/2/97
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
28/2/97 53,382.13 12,266.98 15,796.56
- ----------------------------------------------------------------------------------------
29/1/97 32,619.33 1,733.23 2,157.01
- ----------------------------------------------------------------------------------------
30/12/96 82,363.54 3,873.50 2,177.07
- ----------------------------------------------------------------------------------------
30/11/97 51,520.39 13,393.20 9,288.37
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
TOTALS 166,363.94 32,010.11 2,954.41 4,594.04 29,380.33
- ----------------------------------------------------------------------------------------
</TABLE>
Vouchers (pounds)200,379.03
<PAGE>
AGED DEBTOR SCHEDULE ((pounds))
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DATE COUNTDOWN PLC IDC CARD LIMITED COUNTDOWN COUNTDOWN PARK ROYAL
DUE INTERNATIONAL, IRELAND MAILING SERVICES
INC.
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
After 15,789.35 2,415.58 4,662.30
28/2/97
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
28/2/97 54,900.17 6,597.89 2,583.20 7,226.75 43,088.74
- ----------------------------------------------------------------------------------------
29/1/97 28,478.32 1,340.49c 6,126.44 21,997.26 34,063.09
- ----------------------------------------------------------------------------------------
30/12/96 506.80 771.68 550.00 3,795.47 10,452.33
- ----------------------------------------------------------------------------------------
30/11/97 27,367.38 33,301.42 3,721.55 305.25 nil
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
TOTALS 126,028 41,746.08 12,981.89 37,978.03 87,604.17
- ----------------------------------------------------------------------------------------
</TABLE>
Vouchers (pounds)2,050
<PAGE>
EXHIBIT 99(i)
Registered no. 1162324
================================================================================
I.D.C. CARD LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MAY 1996
J. B. TITCHENER & Co.
INCORPORATING
FRANCIS FRENCH & CO.
27 ELDON SQUARE,
READING, BERKSHIRE.
================================================================================
<PAGE>
I.D.C. CARD LIMITED
CONTENTS PAGE
Directors' report 1
Auditors' report 3
Profit and loss account 4
Balance sheet 5
Notes to the accounts 6
For information of the directors only:
Detailed trading and profit and loss account 11
Schedule of miscellaneous income 12
Schedule of overhead expenses 13
<PAGE>
I.D.C. CARD LIMITED
DIRECTORS' REPORT FOR THE YEAR ENDED 31 MAY 1996
Directors' Responsibilities
Company law requires us as directors to prepare financial statements for each
financial year which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, we are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and prudent;
- prepare the financial statements on a going concern basis unless it
is inappropriate to presume that the company will continue in
business.
We are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the company and enable
us to ensure that the financial statements comply with the Companies Act 1985.
We are also responsible for safeguarding the assets of the company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Directors
M R L Beebee
Mrs J Beebee
Secretary
Mrs J Beebee
Registered Office
27 Eldon Square
Reading
Berkshire
RGI 4DP
Principal Activities
The principal activity of the company throughout the year was the provision of
discount facilities.
Directors
The present directors are as shown above. All served on the board throughout the
year.
-1-
<PAGE>
I.D.C. CARD LIMITED
DIRECTORS' REPORT FOR THE YEAR ENDED 31 MAY 1996 (CONT)
Mr M R L Beebee retires by rotation and, being eligible, offers himself for
re-election.
Directors' Interests
The interests of the directors in the shares of the company at the beginning and
end of the year, were as follows:
31 May 1996 1 June 1995
M R L Beebee
Ordinary shares
Beneficial interests 5,000 5,000
Auditors
The auditors, J B Titchener & Co, have indicated their willingness to accept
re-appointment under Section 385(2) of the Companies Act 1985.
The directors have taken advantage, in the preparation of their report, of the
special exemptions applicable to small companies.
ON BEHALF OF THE BOARD
/s/ J Beebee Date: 16-7-96
- -------------------------- --------------
MRS J BEEBEE - SECRETARY
-2-
<PAGE>
I.D.C. CARD LIMITED
AUDITORS' REPORT TO THE MEMBERS OF I.D.C. CARD LIMITED
We have audited the financial statements on pages 4 to 10 which have been
prepared under the historical cost convention and the accounting policies set
out on page 6.
Respective responsibilities of directors and auditors
As described on page 1, the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. However, the evidence available to us was limited because
we did not attend the stocktake and there were no other satisfactory audit
procedures that we could adopt to confirm that stocks were properly recorded. In
forming our opinion, we have also evaluated the overall adequacy of the
presentation of information in the financial statements.
Qualified Opinion arising from limitation in audit scope
Except for any adjustments that might have been found to be necessary had we
been able to obtain sufficient evidence concerning stocks
In our opinion the financial statements give a true and fair view of the state
of the Company's affairs as at 31 May 1996 and of its loss for the year then
ended and have been properly prepared in accordance with the Companies Act 1985
as applicable to small companies.
In respect alone of the limitation on our work relating to stocks
- - we have not obtained all the information and explanations that we
considered necessary for the purpose of our audit; and
- - we were unable to determine whether proper accounting records had been
maintained.
/s/ J B TITCHENER & CO
J B TITCHENER & CO 27 ELDON SQUARE
Registered Auditors READING
BERKSHIRE
Date: 7th August 1996 RGI 4DP
---------------
-3-
<PAGE>
I.D.C. CARD LIMITED
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MAY 1996
Note 1996 1995
(Pounds) (Pounds)
TURNOVER 2 327,481 614,146
Cost of sales 189,041 338,126
-------- --------
GROSS PROFIT 138,440 276,020
Net operating expenses 3 167,060 290,369
-------- --------
OPERATING LOSS 4 (28,620) (14,349)
Other interest receivable and similar
income 5 8,223 7,334
Interest payable and similar charges (362) --
-------- --------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (20,759) (7,015)
Tax on loss on ordinary
activities 6 (3,568) (224)
-------- --------
RETAINED LOSS FOR THE
FINANCIAL YEAR (17,191) (6,791)
Retained profit brought forward 184,989 191,780
-------- --------
RETAINED PROFIT CARRIED
FORWARD 167,798 184,989
======== ========
The company's turnover and expenses all relate to continuing operations.
The only recognised loss for the year was the loss for the financial year of
(Pounds)(17,191) (1995 - (Pounds)(6,791)
The annexed notes form part of these financial statements.
-4-
<PAGE>
I.D.C. CARD LIMITED
BALANCE SHEET AT 31 MAY 1996
Note 1996 1995
(Pounds) (Pounds)
FIXED ASSETS
Tangible assets 7 24,861 41,144
CURRENT ASSETS
Stocks 8 15,518 5,000
Debtors 9 101,510 88,395
Cash at bank and in hand 127,618 337,876
-------- --------
244,646 431,271
CREDITORS
Amounts falling due within
one year 10 96,709 281,376
-------- --------
NET CURRENT ASSETS 147,937 149,895
-------- --------
TOTAL ASSETS LESS CURRENT
LIABILITIES 172,798 191,039
PROVISION FOR LIABILITIES AND
CHARGES 11 - 1,050
-------- --------
NET ASSETS 172,798 189,989
======== ========
CAPITAL AND RESERVES
Called up share capital 12 5,000 5,000
Profit and loss account 167,798 184,989
-------- --------
SHAREHOLDERS' FUNDS 13 172,798 189,989
======== ========
The directors have taken advantage of the special exemptions conferred by Part I
of Schedule 8 of the Companies Act 1985 and have done so on the grounds that, in
their opinion, the company is entitled to those exemptions as a small company.
These financial statements were approved by the board on 16/7/96
ON BEHALF OF THE BOARD -------
/s/ M R L Beebee Date: 16/O7/96
- ----------------- ---------
M R L BEEBEE - DIRECTOR
The annexed notes form part of these financial statements.
-5-
<PAGE>
I.D.C. CARD LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MAY 1996
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the
financial statements are set out below and have remained unchanged from
the previous year, and also have been consistently applied within the same
accounts.
Cash Flow Statement
The company qualifies as a small company and advantage has therefore been
taken of the exemption provided by the Financial Reporting Standard No 1
not to prepare a cash flow statement.
Basis of Preparation of Financial Statements
The financial statements have been prepared under the historical cost
convention.
The effect of events in relation to the year ended 31 May 1996 which
occurred before the date of approval of the financial statements by the
Board of Directors, have been included in the statements to the extent
required to show a true and fair view of the state of affairs at 31 May
1996 and of the results for the year ended on that date.
Depreciation
Depreciation has been computed to write off the cost of tangible fixed
assets over their expected useful lives using the following rates:
Leasehold property - Over 15 years
Plant and machinery - 20% per annum of cost
Fixtures and fittings - 10% per annum of cost
Motor vehicles - 25% per annum of cost
Stocks
Stocks have been valued at the lower of cost and net realisable value.
Deferred Taxation
Deferred taxation is provided on the liability method to take account of
certain items for accounts purposes and their treatment for tax purposes.
Tax deferred or accelerated is accounted for in respect of all material
timing differences to the extent that it is considered that a net
liability may crystallise.
Pension Costs
The company operates a pension scheme for its director, M R L Beebee. The
scheme is a defined contribution scheme, and the contributions are charged
against profits as they are paid.
2. TURNOVER
The company's turnover represents the value, excluding Value Added Tax, of
goods and services supplied to customers during the year.
-6-
<PAGE>
I.D.C. CARD LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MAY 1996 (CONT)
3. NET OPERATING EXPENSES
1996 1995
(pound) (pound)
Administrative expenses 184,759 307,741
Other operating income (17,699) (17,372)
------- -------
167,060 290,369
======= =======
4. OPERATING LOSS
Operating loss is stated after charging/(crediting):
1996 1995
(pound) (pound)
Directors' emoluments 21,702 84,510
Directors' pension contributions -- 40,160
------- -------
Total directors' emoluments 21,702 124,670
====== =======
Depreciation and amortisation of owned assets 16,283 16,283
Auditors' remuneration 1,700 1,700
====== =======
5. OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
1996 1995
(pound) (pound)
Other interest and similar income 8,223 7,334
====== =======
-7-
<PAGE>
I.D.C. CARD LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MAY 1996 (CONT)
6. TAXATION ON ORDINARY ACTIVITIES
1996 1995
(pound) (pound)
Current year
Corporation tax at 25% (2,518) 1,142
Deferred tax at 25% (1,050) (1,466)
------ ------
(3,568) (324)
Prior year
Corporation tax under(over) provided -- 100
------ ------
(3,568) (224)
====== ======
7. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Leasehold Plant Fixtures
Land and and and Motor
buildings machinery fittings vehicles Total
(pound) (pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C>
Cost
At 1 June 1995 24,975 996 81,790 33,259 141,020
Additions -- -- -- -- --
Revaluations -- -- -- -- --
Intra-group transfers -- -- -- -- --
Disposals -- -- -- -- --
------ ------ ------ ------ -------
At 31 May 1996 24,975 996 81,790 33,259 141,020
------ ------ ------ ------ -------
Depreciation
At 1 June 1995 14,292 996 65,568 19,020 99,876
Charge for the year 1,665 -- 8,180 6,438 16,283
Revaluations -- -- -- -- --
Intra-group transfers -- -- -- -- --
Elimination on disposals -- -- -- -- --
------ ------ ------ ------ -------
At 31 May 1996 15,957 996 73,748 25,458 116,159
------ ------ ------ ------ -------
Net book value
At 31 May 1996 9,018 -- 8,042 7,801 24,861
====== ====== ====== ====== =======
At 3l May 1995 10,683 -- 16,222 14,239 41,144
====== ====== ====== ====== =======
</TABLE>
-8-
<PAGE>
I.D.C. CARD LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MAY 1996 (CONT)
8. STOCKS
1996 1995
(pound) (pound)
Stocks 15,518 5,000
====== =====
9. DEBTORS
1996 1995
(pound) (pound)
Trade debtors 70,248 37,189
Other debtors 31,262 51,206
------- ------
101,510 88,395
======= ======
10. CREDITORS - AMOUNTS DUE WITHIN ONE YEAR
1996 1995
(pound) (pound)
Trade creditors 63,512 167,090
Corporation tax payable - 1,142
Social security and other taxes 16,493 64,055
Other creditors 16,704 49,089
------ -------
96,709 281,376
====== =======
11. PROVISIONS FOR LIABILITIES AND CHARGES
1996
(pound)
Balance at 1 June 1995 1,050
Utilised during the year (1,050)
-------
Balance at 31 May 1996 --
=======
-9-
<PAGE>
I.D.C. CARD LIMITED
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 MAY 1996 (CONT)
12. SHARE CAPITAL
1996 1995
(pound) (pound)
Authorised
5,000 ordinary shares of (pound)1 each 5,000 5,000
======= =======
Allotted, called up and fully paid
5,000 ordinary shares of (pound)1 each 5,000 5,000
======= =======
13. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1996 1995
(pound) (pound)
Loss for the financial year (17,191) (6,791)
Opening shareholders' funds 189,989 196,780
------- -------
Closing shareholders' funds 172,798 189,989
======= =======
14. PENSION COSTS
The company operates a non-contributory pension scheme. It is a defined
contribution scheme and contributions are charged in the profit and loss
account as they accrue. The charge for the year was (pound)- (1995
(pound)40,160).
-10-
<PAGE>
THE FOLLOWING PAGES ARE FOR THE INFORMATION
OF THE DIRECTORS ONLY.
THEY DO NOT FORM PART OF THE STATUTORY ACCOUNTS.
<PAGE>
I.D.C. CARD LIMITED
TRADING & PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 MAY 1996
1996 1995
(pound) (pound)
TURNOVER 327,481 614,146
COST OF SALES
Opening stock 5,000 5,000
Countdown commission 51,875 170,440
Travelling and motor expenses 7,961 10,518
Test meals 189 156
Printing 71,144 87,638
Advertising and promotion 34,901 35,435
Overseas agents 33,489 33,939
------- -------
204,559 343,126
Closing stock (15,518) (5,000)
------- -------
189,041 338,126
------- -------
GROSS PROFIT 138,440 276,020
Other operating income 17,699 17,372
------- -------
156,139 293,392
Overhead expenses 184,759 307,741
------- -------
OPERATING LOSS (28,620) (14,349)
Other interest receivable and similar
income 8,223 7,334
------- -------
(20,397) (7,015)
Interest payable and similar charges 362 --
------- -------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (20,759) (7,015)
======= =======
-11-
<PAGE>
I.D.C. CARD LIMITED
SCHEDULE TO THE TRADING AND PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MAY 1996
1996 1995
(pound) (pound)
OTHER OPERATING INCOME
Rent receivable 16,121 15,500
Sundry income 1,578 1,872
------ ------
17,699 17,372
====== ======
OTHER INTEREST RECEIVABLE AND SIMILAR
INCOME
Bank interest 8,223 7,304
Sundry interest -- 30
------ ------
8,223 7,334
====== ======
INTEREST PAYABLE AND SIMILAR CHARGES
Interest on overdue tax 362 --
====== ======
-12-
<PAGE>
I.D.C. CARD LIMITED
SCHEDULE OF OVERHEAD EXPENSES FOR THE YEAR ENDED 31 MAY 1996
1996 1995
(pound) (pound)
ADMINISTRATIVE EXPENSES
Rent and rates 20,702 21,757
Insurances 5,690 4,465
Light and heat 1,150 1,507
Directors' salaries 13,900 75,414
Pension contributions -- 40,160
Wages and salaries 71,743 74,075
Employer's NIC 9,818 15,377
Telephone 2,543 2,952
Postage and stationery 12,801 19,757
Office maintenance 3,674 4,377
Accountancy fees 1,987 1,936
Auditors' remuneration 1,700 1,700
Legal and professional fees 1,127 --
Consultancy fees 12,823 12,823
Donations 1,000 4,000
Sundry expenses 445 1,521
Depreciation charges 16,283 16,283
------- -------
177,386 298,104
------- -------
FINANCIAL EXPENSES
Bad debts -- (36)
Bank charges 7,373 9,673
------- -------
7,373 9,637
------- -------
OVERHEAD EXPENSES 184,759 307,741
======= =======
-13-
<PAGE>
EXHIBIT 99(j)
DATED 199
(1) C. E. C. RADBONE
(2) TRANSMEDIA EUROPE, INC.
(3) TRANSMEDIA ASIA PACIFIC, INC.
-------------------------------------------
ACQUISITION AGREEMENT
relating to the issued share capital
of Countdown Holdings Limited
-------------------------------------------
LEWIS SILKIN
Windsor House
50 Victoria Street
LONDON SW1H ONW
Telephone 0171 227 8000
Reference TJW.TR240.009
<PAGE>
-4-
(vii) any moral rights as defined by Sections 77-83 of the Copyright Designs and
Patents Act 1988 or any subsequent amendment thereof in any drawings
design or other copyright work;
"Joint Venture Agreements"
means any agreement made between any Group Company and individual Joint Venture
Partners for the development and/or exploitation of a business or businesses the
same or similar to the Restricted Business and/or for the use and/or
exploitation of the Intellectual Property Rights owned or used by any Group
Company;
"Joint Venture Partner"
means any person with whom any Group Company has entered into a Joint Venture
Agreement and with whom the Vendor shall have had dealings in the course of his
employment with any Group Company;
"in writing"
shall include any communications made by letter or facsimile transmission;
"Licencees"
means any person with whom any Group Company has entered into a Licence
Agreement and with whom the Vendor shall have had dealings in the course of his
employment with any Group Company;
"Licence Agreements"
means any agreement made between any Group Company and individual Licencees for
the development and/or exploitation of a business or businesses the same or
similar to the Restricted Business and/or for the use and/or exploitation of the
Intellectual Property Rights owned or used by any Group Company;
"Materially Interested"
means employed or engaged by or concerned or interested in (whether directly or
indirectly) other than as a shareholder holding directly or indirectly by way of
investment of up to 3% in nominal value of the issued shares or other securities
of any class of any company listed or dealt in on any Recognised Investment
Exchange;
"Merger"
has the meaning ascribed to that term in clause 4.8;
"Merger Note"
means the note setting out details of the proposed merger of Asia and Europe in
the [ILLEGIBLE]
"Irish Premises"
means the premises described in Part II of Schedule 4;
"the Parent Company Guarantee"
means the guarantee in the agreed form of the Company's obligations as a tenant
of the premises at Hurlingham Business Park;
"Person"
means any person, firm, company, association, corporation or other organisation
or entity;
<PAGE>
-5-
"Post-Merger Inc"
has the meaning ascribed to that term in clause 4.8;
"Premises"
means together the English Premises and the Irish Premises described in Schedule
4;
"Purchaser"
means Europe and Asia;
"Purchaser's Group"
means Asia and Europe their subsidiaries and any holding company of Asia or
Europe from time to time;
"Purchaser's Solicitors"
means Lewis Silkin of Windsor House 50 Victoria Street London SW1H ONW;
"Recognised Investment Exchange"
means a body which is a recognised investment exchange for the purposes of the
Financial Services Act 1986;
"Registration Rights Agreement"
the registration rights agreement to be entered into by the Vendor and the
Purchaser in the agreed Firm;
"Restricted Business"
means such business trade or activity in which the Company or any Relevant
Company is engaged at the date of this Agreement;
"Restricted Goods and/or Services"
means goods and/or services of a type or which compete with those:-
(a) provided by the Company or any Relevant Company in the course of its
or their business during the period of 12 months immediately prior
to the Termination Date; and
(b) in the provision of which the Vendor was concerned or engaged during
his employment by the Company;
"the Restricted Period"
means the period beginning with the Completion Date and ending on the later of
three years thereafter and eighteen months after the Vendor ceases to be
employed by or render services to any of the companies in the enlarged Group;
"Security Period"
means any encumbrance, mortgage, charge, assignment for the purpose of security,
pledge, lien, right of set off, retention of title or other security interest of
whatever kind and any agreement, whether conditional or otherwise to crease any
such interest;
"Service Agreement"
means the contract of employment to be entered into substantially in the form
set out in Schedule 7 by the Vendor;
"Shares"
means the whole of the issued share capital if the Company owned by the Vendor
details of which are set opposite his name In Schedule 1;
<PAGE>
-9-
4.3.11 written confirmation from the Vendor that the Group is not
indebted to him in any way otherwise than in respect of
accrued salary, pension contributions and other benefits
relating to his employment for the current month, (whether
actually or contingently) and that after compliance with
sub-clause 4.2 he will not be indebted to the Company or any
other member of the Group or vice versa;
4.3.12 irrevocable power of attorney (in such form as the Purchaser
may reasonably require) executed by the Vendor in favour of
the Purchaser to enable the Purchaser (pending registration
of the transfer of the Shares hereunder) to exercise all
voting and other rights attaching to the Shares and to
appoint proxies for this purpose; and
4.3.13 an executed original of the Registration Rights Agreement.
4.4 On Completion the Vendor shall procure:
4.4.1 the passing at a duly convened meeting of the Board of
Directors of the Company of resolutions:-
4.4.1.1 approving (subject only wherenecessary to their being
duly stamped) the transfer of the Shares hereunder;
4.4.1.2 accepting the resignations of such persons as the
Purchaser shall stipulate as directors of the Group
Companies other than the Vendor and of the current
secretary of the Company;
4.4.1.3 appointing such persons as the Purchaser shall
stipulate as additional directors and as secretary
of the Company;
4.4.1.4 changing the accounting reference date of the Company
to [ ];
4.4.1.5 appointing [ ] as auditors;
4.4.1.6 changing the registered office to such address as
the Purchaser shall require;
4.4.1.7 approving and executing the Service Agreement;
4.4.1.8 modifying all existing bank andother mandates as the
Purchaser shall direct; and
4.4.2 the passing at duly convened meetings of the Board of
Directors of each other Group Company of resolutions:-
4.4.2.1 accepting the resignations of such persons as the
Purchaser shall stipulate as directors of the Group
Companies other than the Vendor and of the
<PAGE>
-10-
current secretary;
4.4.2.2 appointing such persons as the Purchaser shall
stipulate as additional directors and as secretary;
4.4.2.3 approving the transfer of any shares not registered
in the name of the Company to a nominee Identified
by the Purchaser (and subject only to the stamping
of the same);
4.4.2.4 changing the accounting reference date to [ ];
4.4.2.5 appointing [ ] as auditors;
4.4.2.6 changing the registered office to such address as
the Purchaser shall require;
4.4.2.7 modifying all existing bank and other mandates as
the Purchaser shall direct.
[4.5 The Vendor shall enter into Intellectual Property Assignment with the
Company in the agreed form].
4.6 Upon completion of all the matters referred to in sub-clauses 4.2 to
4.5 above Asia and Europe (as the case may be) shall:-
4.6.1 satisfy the Consideration by a banker's draft for
(pound)500,000 each of Asia and Europe delivered to the
Vendor's Solicitors (whose receipt thereof shall be an
absolute discharge of the Purchaser and the Purchaser's
Solicitors) and the issue of the Europe Shares and the Asia
Shares to the Vendor and the delivery to him of stock
certificates therefor;
4.6.2 deliver to the Vendor's Solicitors a counterpart of the Deed
of Covenant and the Parent Company Guarantee duly executed by
the Purchaser; and
4.6.3 grant options in the agreed form in favor of the Vendor over
250,000 shares of Common Stock par value US$.00001 per share
of each of Europe and Asia;
4.6.4 appoint the Vendor (who hereby consents to so act) as a
director of each of Europe and Asia; and
4.6.5 deliver to the Vendor's Solicitor an executed original of the
Registration Rights Agreement.
4.7 The Purchaser shall not be obliged to complete purchase of any of the
Shares unless the purchase of all such Shares is completed simultaneously.
<PAGE>
-11-
5. WARRANTIES
4.8 It is hereby agreed and declared that it is intended that Europe and
Asia will be merged, which merger ("the Merger") will be effected by Europe
acquiring the entire issued share capital of Asia in return for 0.9019 shares in
Europe for each share in Asia, as more particularly set out in the Merger Note.
In this respect it is hereby agreed as follows, the post-merger company being
hereinafter referred to as "Post-Merger Inc":
4.8.1 the Vendor shall remain a. a director of Post-Merger Inc
immediately following the Merger;
4.8.2 the Merger shall be structured as set out in the Merger Note
or in such other manner as does not give rise to any tax
liability on the Vendor as a result of the Merger and the
Purchaser hereby indemnifies and agrees to hold the Vendor
harmless against any charge to Taxation which arises as a
result of any failure to structure the Merger in the manner
set out in the Merger Note;
4.8.3 Prior to [ ] neither Asia, Europe nor Post-Merger
Inc shall issue any stock (other than pursuant to options
granted prior to the date hereof) at a price per stock unit
of less than US$[ ].
<PAGE>
-12-
amount (and not only the excess) may be claimed under legal
proceedings.
The limitations in this Clause 5.7 and in Clauses 5.8 to 5.10 and 5.12
shall not apply in the case of fraud by the Vendor.
5.8 The total amount of the liability in respect of any and all claims
under the Warranties and the Deed of Covenant shall be limited to the aggregate
of (pound)1,000,000 and the amount which the Vendor is able to realise on a sale
of the Asia Shares and the Europe Shares on an arm's length basis on the date of
liability to make a payment to the Purchaser subject to a maximum amount in
respect of such realisation of (pound)1,500,000.
5.9 If, subsequent to any payment by the Vendor to the Purchaser in
respect of any Warranty claim or any claim under the Deed of Covenant, the Group
or the Purchaser or either of them receives any payment from any third party in
respect of the loss suffered by the Company which resulted in the claim, the
Purchaser shall reimburse to the Vendor the amount so recovered less all
reasonable costs sod expenses (including any Tax liability) of the recovery but
including in addition any interest or repayment supplement paid by the Inland
Revenue or HM Customs & Excise and the Purchaser shall and shall procure that
the Group shall use all reasonable endeavours to enforce any rights to make any
such recovery from any third parties subject to the Purchaser and the Group
being indemnified and secured to their reasonable satisfaction by the Vendor
against all losses, liabilities, costs and expenses properly and reasonably
incurred in connection with the enforcement of such rights.
5.10.1 Upon the Purchaser or the Group becoming aware of any claim,
action or demand ("a Claim") against the company or any
matter ("a Relevant Matter") likely to give rise to any of
these in respect of the Warranties or the Deed of Covenant,
then provided that the Purchaser's claim against the Vendor
shall not be prejudiced the Purchaser shall:
5.10.1.1 as quickly as reasonably possible, notify the
Vendor by written notice as soon as it is
reasonably clear to the Purchaser that the Vendor
is or may become liable under the Warranties or
the Deed of Covenant and in the case of a matter
relating to Taxation provide reasonably sufficient
details of such claim, details of the due date for
any payment and the time limits for any appeal, as
soon as possible and in any event not more than 14
days after the Purchaser or the Group becomes
aware of such claim;
5.10.1.2 at the request of the Vendor, allow the Vendor to
take the sole conduct of such actions as the
Vendor may deem reasonably appropriate in
connection with any such Claim in the name of the
appropriate Group company and in that connection
the Group and the Purchaser shall give or
<PAGE>
-15-
the Accounts in respect of the matter to which
such liability relates;
5.12.4 to the extent that the breach giving rise to a possible
Claim arises as a result of any change in the basis of
accounting or tax computation of any member of the Group
after the date of this Agreement;
5.12.5 based upon a liability which is contingent only unless and
until such contingent liability becomes an actual liability
and is due and payable.
5.13 The Vendor shall not be liable in respect of any breach of any
Warranty and if and to the extent that the loss occasioned thereby has been
recovered under the Deed of Covenant and vice versa.
5.14 Notwithstanding anything expressed or implied in this Agreement to
the contrary, any payment by the Vendor pursuant to a Claim shall be treated for
all purposes by the parties as a reduction in the Consideration and Clause 3
shall be modified accordingly.
5.15 The Purchaser shall have no right (whether before or after
Completion) to rescind this Agreement under this Agreement or under the
provisions of the Misrepresentation Act 1967 or the Unfair Contract Terms Act
1977.
5.16 Claims under this Agreement or the Deed of Covenant by the Purchaser
shall only be capable of being made once in respect of the same subject matter,
so that, for the avoidance of doubt, Asia may not recover for losses recovered
by Europe and vice-versa.
6. CONTINUING OBLIGATIONS
6.1 The Vendor covenants with the Purchaser (for themselves and as trustee
for the enlarged Group) that he will not either directly or indirectly whether
on his own account or in conjunction with or on behalf of any other person,
whether as principal, partner, shareholder, employer, employee, agent or
otherwise howsoever in any individual, fiduciary or representative capacity:-
6.1.1 during the Restricted Period:-
6.1.1.1 canvass or solicit or entice away or attempt to
canvass or solicit or entice away from any Group
Company the custom of any Customer for the
purposes of carrying out any Restricted Business
in competition with any Group Company;
6.1.1.2 contract with or work for any Customer for the
purpose of carrying out any Restricted Business or
<PAGE>
-20-
or imitators of the Intellectual Property Rights anywhere in the world which
come to his attention or any attempts to challenge the enlarged Group's rights
to use any of the Intellectual Property Rights anywhere in the world, and to
resist any action or claim or proceedings brought against any Company in the
enlarged Group in connection with the Intellectual Property Rights. The Vendor
agrees to provide such co-operation in the prosecution of any action which the
Purchaser in its reasonable discretion consider appropriate including the
provision of evidence. The Purchaser shall have the conduct of any such action
and pay all legal expenses and costs which may arise from the joining of the
Vendor as a party.
8.6 The Purchaser agrees that on a future disposal (if any) of the Europe
Shares or the Asia Shares or any shares acquired pursuant to the merger, it
shall, and shall procure that its agents and associated companies shall, provide
all such assistance and information as the Vendor may reasonably require for the
purposeS of the Vendor making any claims from relief from Tax in respect of such
disposa[ILLEGIBLE]
9. GENERAL
9.1 No-Merger
All provisions of this Agreement shall (so far as they are capable of being
performed or observed) continue in full force and effect notwithstanding
Completion.
9.2 Announcements
No announcement or information concerning this Agreement shall be made or issued
by any of the third parties hereto except in agreed form provided that nothing
in this sub-clause shall prevent the Purchaser from making such announcement or
sending such circular as the rules of any Recognised Investment Exchange or any
other statutory or regulatory body may require.
9.3 Notices
9.3.1 Any notice demand proceedings or other communication to be
given made or served hereunder or by reference hereto shall be
in writing and:-
9.3.1.1 sent by first class prepaid or registered post; or
9.3.1.2 delivered personally; or
9.3.1.3 transmitted by facsimile
to the party or parties to be served at the addresses stated
herein or at such other address within the United Kingdom from
time to time notified in writing by or on behalf of any such
party to the other parties or in the case of the Vendor at the
offices of the
<PAGE>
-65-
3.2 The provisions of Clauses 5.7, 5.8, 5.9 and 5.10 of the Agreement
shall have effect as if expressly incorporated into this Deed.
3.3 The above exclusions shall also apply to a claim for a breach of any
of the Warranties relating to Taxation.
3.4 For the avoidance of doubt, to [ILLEGIBLE] that payment is made
pursuant to this Deed to Europe the Vendor shall have no liability to make
payment to Asia and to the extent payment is made to Asia the Vendor shall have
no liability to make payment to Europe.
4. PAYMENT
4.1 In the event that there is a change in law or Inland Revenue practice
after 23 August 1996 in relation to payments to be paid to the Purchaser by the
Covenantor hereunder giving rise to the Purchaser having a Taxation liability in
respect of such payment all sums payable by the Covenantor to the Purchaser
hereunder shall be paid (insofar as is lawful) free and clear of all deductions
and withholdings whatsoever and in the event that a deduction or withholding is
lawfully made the Covenantor shall other than in the case of interest under
clause 5 pay such greater sum which after any lawful deduction or withholding
therefrom results in a net payment equal to the amount due hereunder.
4.2 In the event that there is a change in law or Inland Revenue practice
after 23 August 1996 in relation to payments so be paid to the Purchaser by the
Covenantor hereunder giving rise to the Purchaser having a Taxation liability
other than in the case of interest under clause 5 then such further amount shall
be paid by the Covenantor so as to secure in so far as is possible that the net
amount resulting after such liability to Taxation and where appropriate any
deduction or withholding such as is referred to in sub-clause 4.1 or 7.1 hereof
is equal to the amount due hereunder.
5. DATES FOR AND QUANTUM OF PAYMENTS
5.1 This Clause shall apply solely for determining the date upon which any
payments shall be made by the Covenantor pursuant to this Deed and (where
expressly provided) the amounts thereof.
5.2 The Covenantor shall make payment to the Purchaser or at the direction
of the Purchaser to the Company to the extent that the Company discharges a
Claim for Taxation:-
5.2.1 in respect of a liability to make a payment of Taxation on the
latest date for payment of that Taxation and the Covenantor
shall
<PAGE>
Exhibit 99(k)
DATED 199
--------------------------------
(1) C. E. C. RADBONE
(2) TRANSMEDIA EUROPE, INC.
(3) TRANSMEDIA ASIA PACIFIC, INC.
------------------------------------
ACQUISITION AGREEMENT
relating to the issued share capital
of Countdown Holdings Limited
------------------------------------
LEWIS SILKIN
Windsor House
50 Victoria Street
LONDON SW1H ONW
Telephone: 0171 227 8000
Reference: TJW.TR240.009
<PAGE>
INDEX
-----
1. DEFINITIONS ....................................................... 1
2. SALE AND PURCHASE OF THE SHARES ................................... 7
3. CONSIDERATION ..................................................... 7
4. COMPLETION ........................................................ 7
5. WARRANTIES ........................................................ 10
6. CONTINUING OBLIGATIONS ............................................. 15
7. WAIVERS AND VARIATIONS ............................................ 19
8. FURTHER ASSURANCE ................................................. 19
9. GENERAL ........................................................... 20
SCHEDULES
---------
Schedule 1 - Details of Vendor and Shareholding
Schedule 2 - Details of the Company
Schedule 3 - Details of the Subsidiaries
Schedule 4 - Premises
Schedule 5 - Warranties
Schedule 6 - Deed of Covenant
Schedule 7 - Service Agreement
<PAGE>
THIS AGREEMENT is made on day of 199
BETWEEN:-
(1) THE PERSON whose name and address is set out in column (1) of Schedule
1 ("the Vendor");
(2) TRANSMEDIA EUROPE, INC. whose registered office is at [c/o United
Corporate Services Inc 15 East North Street City of Dover County of
Kent Delaware USA] ("Europe"); and
(3) TRANSMEDIA ASIA PACIFIC, INC. whose registered office is at [c/o
United Corporate Services Inc. 15 East North Street, City of Dover,
County of Kent, Delaware, USA] ("Asia").
WHEREAS:
The Vendor has agreed to sell and the Purchaser has agreed to purchase the
Shares on the terms and conditions hereinafter contained and in particular on
the basis of the warranties hereinafter mentioned.
NOW IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement unless the context otherwise requires:-
"Accounts"
means the latest audited consolidated balance sheet and profit and
loss account of the Group including the statements of accounting
policies set out therein and the notes thereto;
"Accounts Date"
means the date to which the Accounts are made up;
"agreed form"
means in the form agreed between the parties hereto prior to the date
of this Agreement and incorporated herein or initialled for
identification by or on behalf of the Vendor and the Purchaser;
<PAGE>
-2-
"Asia Shares"
means 1,261,896 shares of Common Stock of Asia par value US$.00001
per share;
"Business Day"
means any day except Saturdays and Sundays on which banks in the City
of London are open for business;
"CAA"
means the Capital Allowances Act 1990;
"Certificates of Title"
means the certificates as to title to the Premises in the agreed form
prepared in respect of the English Premises by the Vendor's Solicitors
and in respect of the Irish Premises by the Vendor's Irish Solicitors;
"the Company"
Countdown Holdings Limited particulars of which are set out in
Schedule 2;
"Completion"
means performance by the parties hereto of the obligations assumed by
them under Clause 4;
"Completion Date"
means the date on which Completion takes place;
"Consideration"
means the consideration payable by the Purchaser to the Vendor for the
sale and purchase of the Shares;
"Customer"
means any Person who or which at any time during the period of twelve
months immediately prior to the Termination Date was the holder of a
discount or other card issued by the Company or any Relevant
Associated Company or who otherwise was entitled to receive the
benefit of their schemes for members;
"Deed of Covenant"
means the deed of covenant set out in Schedule 6;
"Disclosure Letter"
means the letter of even date herewith from the Vendor and addressed
to the Purchaser by way of disclosure in relation to the matters
raised in the Warranties;
"Discounter"
means any Person who or which at any time during the period of 12
months prior to the date of this Agreement or at any time during the
Restricted Period has agreed to provide or provided goods and/or
services and/or concessions (by way of discount or otherwise) to
customers or to the Company or any Group Company or any Licensee or
any Joint Venture Partner whether on favourable terms or otherwise;
<PAGE>
-3-
"English Premises"
means the premises described in Part I of Schedule 4;
"enlarged Group"
means together the Group and the Purchaser's Group;
"Environmental Laws"
means all statutory and local laws and subordinate legislation
relating to Environmental Matters or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials;
"Environmental Matters"
means waste, contaminated land, discharges or emissions of dangerous
hazardous or toxic substances and materials;
"Europe Shares"
means 1,138,104 shares of Common Stock of Europe par value US$.00001
per share;
"Group"
means the Company and the Subsidiaries and "Group Companies" means any
of them;
"Hazardous Materials"
means chemicals, pollutants, contaminants, wastes, petroleum,
petroleum products, dangerous hazards or toxic substances and
materials;
"ICTA"
means the Income and Corporation Taxes Act 1988;
"Intellectual Property Assignment"
means the assignment to the Purchaser of all Intellectual Property
Rights owned used or developed by the Vendor in connection with the
products or services provided by the Company;
"Intellectual Property Rights"
means the following assets of the Group Companies in any part of the
world:
(i) any patents patent applications any trade or service marks
(whether or not registered) including applications therefor
used or held;
(ii) inventions whether or not capable of protection by patent
registration;
(iii) know-how including manufacturing data specifications and
drawings research materials and technical information;
(iv) copyrights or design rights whether registered or
unregistered in respect of drawings designs articles
specifications research materials technical information or
other documents and including rights in computer software;
(v) rights under any agreement granted by or to third parties to
use any of the above;
(vi) all goodwill in any trade or service name trading style or
get-up accrued;
<PAGE>
-4-
(vii) any moral rights as defined by Sections 77-83 of the
Copyright Designs and Patents Act 1988 or any subsequent
amendment thereof in any drawings design or other copyright
work;
"Joint Venture Agreements"
means any agreement made between any Group Company and individual
Joint Venture Partners for the development and/or exploitation of a
business or businesses the same or similar to the Restricted Business
and/or for the use and/or exploitation of the Intellectual Property
Rights owned or used by any Group Company;
"Joint Venture Partner"
means any person with whom any Group Company has entered into a Joint
Venture Agreement and with whom the Vendor shall have had dealings in
the course of his employment with any Group Company;
"in writing"
shall include any communications made by letter or facsimile
transmission;
"Loan Notes"
means the loan notes in a form agreed between the parties;
"Licencees"
means any person with whom any Group Company has entered into a
Licence Agreement and with whom the Vendor shall have had dealings in
the course of his employment with any Group Company;
"Licence Agreements"
means any agreement made between any Group Company and individual
licencees for the development and/or exploitation of a business or
businesses the same or similar to the Restricted Business and/or for
the use and/or exploitation of the Intellectual Property Rights owned
or used by any Group Company;
"Materially Interested"
means employed or engaged by or concerned or interested in (whether
directly or indirectly) other than as a shareholder holding directly
or indirectly by way of investment of up to 3% in nominal value of the
issued shares or other securities of any class of any company listed
or dealt in on any Recognised Investment Exchange;
"Irish Premises"
means the premises described in Part II of Schedule 4;
"the Parent Company Guarantee"
means the guarantee in the agreed form of the Company's obligations as
a tenant of the premises at Hurlingham Business Park;
"Person"
means any person, firm, company, association, corporation or other
organisation or entity;
<PAGE>
-5-
"Premises"
means together the English Premises and the Irish Premises described
in Schedule 4;
"Purchaser"
means Europe and Asia;
"Purchaser's Group"
means Asia and Europe their subsidiaries and any holding company of
Asia or Europe from time to time;
"Purchaser's Solicitors"
means Lewis Silkin of Windsor House 50 Victoria Street London SW1H
0NW;
"Recognised Investment Exchange"
means a body which is a recognised investment exchange for the
purposes of the Financial Services Act 1986;
"Restricted Business"
means such business trade or activity in which the Company or any
Relevant Company is engaged at the date of this Agreement;
"Restricted Goods and/or Services"
means goods and/or services of a type or which compete with those:-
(a) provided by the Company or any Relevant Company in the
ordinary course of its or their business during the period
of 12 months immediately prior to the Termination Date; and
(b) in the provision of which the Vendor was concerned or
engaged during his employment by the Company;
"the Restricted Period"
means the period beginning with the Completion Date and ending on the
later of three years thereafter and eighteen months after the Vendor
ceases to be employed by or render services to any of the companies in
the enlarged Group;
"Security Interest"
means any encumbrance, mortgage, charge, assignment for the purpose of
security, pledge, lien, right of set off, retention of title or other
security interest of whatever kind and any agreement, whether
conditional or otherwise to crease any such interest;
"Service Agreement"
means the contract of employment to be entered into substantially in
the form set out in Schedule 7 by the Vendor;
"Shares"
means the whole of the issued share capital of the Company owned by
the Vendor details of which are set opposite his name in Schedule 1;
<PAGE>
-6-
"the Subsidiaries"
means the companies particulars of which are set out in Schedule 3;
"Taxation" or "taxation"
means all taxes impositions duties charges and levies in all forms
throughout the world of a fiscal nature and wheresoever imposed (and
whether assessed or withheld at source) including and any penalties
charges and interest accruing on any taxation and the words "tax" and
"taxes" shall be construed accordingly;
"TCGA"
means the Taxation of Chargeable Gains Act 1992;
"Termination Date"
means the date on which the Vendor ceases to be employed by or render
services to any Group Company;
"Territory"
means each country in which the Company or any Relevant Company
conducts the Restricted Business and/or supplies Restricted Goods
and/or Services and each country in which the Company or any Group
Company shall have entered into a Licence Agreement or Joint Venture
Agreement under which any licensee or Joint Venture Partner conducts
the Restricted Business and/or supplies Restricted Goods and/or
Services pursuant to any of the Licence Agreements or the Joint
Venture Agreements (as the case may be);
"Vendor's Irish Solicitors"
means Ahearne O'Shea & Co of 13-16 Dame Street, Dublin;
"Vendor's Solicitors"
means S J Berwin & Co of 222 Grays Inn Road, London WC1X 8HB;
"Warranties"
means the warranties set out in Schedule 5.
1.2 Except where the context otherwise requires words denoting the
singular include the plural and vice versa and words denoting any one gender
include all genders and words denoting persons include firms and corporations
and vice versa.
1.3 Unless otherwise stated a reference to a Clause or sub-clause or a
Schedule is a reference to a clause or a sub-clause of or a schedule to this
Agreement. References in this Agreement include the Schedules and the Schedules
form part of this Agreement.
1.4 References to any statute or statutory provision shall be deemed
to include a reference to any amendment or re-enactment thereof or substitution
therefor from time to time and any rules orders regulations and delegated
legislation made thereunder and shall include a reference also to any past
statutory provisions (as from time to time amended or re-enacted) which such
statute or statutory provision directly or indirectly has
<PAGE>
-7-
replaced provided that any such amendment, re-enactment or any such rules do not
impose any greater obligations upon the parties than at the date hereof.
1.5 Words and expressions contained in this Agreement shall where the
context so admits have the meanings thereby attributed by the Companies Act 1985
(as amended).
1.6 A reference to a SSAP is a reference to a statement of standard
accounting practice adopted by the Accounting Standards Board and a reference to
a ERS is a reference to a financial reporting standard adopted by the Accounting
Standards Board.
1.7 Where in this Agreement the expression "to the best of the Vendor
knowledge and belief" or "so far as the Vendor is aware" or any wording which
has similar effect there shall be deemed to be added the words "all reasonable
enquiry having been made".
2. SALE AND PURCHASE OF THE SHARES
2.1 Subject to the terms of this Agreement the Vendor shall sell and
Europe shall purchase 250,000 of the Shares and Asia shall purchase 250,000
of the Shares with full title guarantee for the Consideration free from all
Security Interests but together with all rights and privileges attaching thereto
now and hereafter including (without limitation) the right to receive all
dividends and other distributions declared made or paid thereon on or after the
Completion Date.
3. CONSIDERATION
3.1 The Consideration shall be the aggregate of the sum of
(pound)1,000,000 to be satisfied in cash and by the issue of the Europe Shares
and the Asia Shares.
3.2 The Europe Shares and the Asia Shares shall rank pari passu with
the shares of Common Stock of Europe and Asia respectively in issue at the date
of allotment thereof save that they will not rank for any dividend declared or
paid prior to the date hereof nor will they be registered pursuant to the United
States of America Securities Act of 1933.
4. COMPLETION
4.1 Subject to the provisions of this Clause Completion shall take
place at the offices of the Purchaser's Solicitors immediately after the
signing of this Agreement.
<PAGE>
-8-
4.2 On or before Completion the Vendor shall repay all monies then
owing by him to the Company or to any Group Company.
4.3 At Completion the Vendor shall procure the delivery to the
Purchaser of:-
4.3.1 the share certificates and transfers duly executed
by the Vendor in favour of Europe for 250 of the
Shares and Asia for 250 of the Shares (and/or such
other persons(s) as it shall have nominated);
4.3.3 an engrossment of the Deed of Covenant duly
executed by the Vendor;
4.3.4 the Certificates of Title and the title deeds and
other documents relating to the Premises not
subject to mortgages;
4.3.5 the share certificates in respect of all issued
shares in the Subsidiaries and duly executed
transfers of such shares not registered in the
name of the Company in favour of the Purchaser or
a person nominated by the Purchaser and any other
documents of title relating to the investments of
the Group Company;
4.3.6 statements of balances at a date not more than
three days prior to Completion with
reconciliations to the Business Day preceding the
Completion Date on all bank accounts of each Group
Company and all current cheque books relating to
such accounts and forms to amend the mandates
given to the relevant banks and other institutions
in such manner as the Purchaser shall direct;
4.3.7 the Service Agreement duly executed by the Vendor;
4.3.8 the resignation in agreed form of Rhodes & Rhodes
as auditors of each Group Company with effect from
Completion and confirming that they have no claim
against any member of the Group and containing in
each case a statement complying with Section
394(1) Companies Act 1985;
4.3.9 the resignations in agreed form of such persons as
the Purchaser shall stipulate as directors of the
Group Companies other than the Vendor and of the
current secretary of the Group Companies
acknowledging that he has no claim against the
Group Companies for loss of office;
4.3.10 the statutory books Certificates of Incorporation
and on Change of Name (if applicable) books of
account and documents of record of each Group
Company complete and up to date;
<PAGE>
-9-
4.3.11 written confirmation from the Vendor that the
Group is not indebted to him in any way otherwise
than in respect of accrued salary, pension
contributions and other benefits relating to his
employment for the current month, (whether
actually or contingently) and that after
compliance with sub-clause 4.2 he will not be
indebted to the Company or any other member of the
Group or vice versa; and
4.3.12 irrevocable power of attorney (in such form as the
Purchaser may reasonably require) executed by the
Vendor in favour of the Purchaser to enable the
Purchaser (pending registration of the transfer of
the Shares hereunder) to exercise all voting and
other rights attaching to the Shares and to
appoint proxies for this purpose.
4.4 On Completion the Vendor shall procure:-
4.4.1 the passing at a duly convened meeting of the
Board of Directors of the Company of resolutions:-
4.4.1.1 approving (subject only where necessary
to their being duly stamped) the
transfer of the Shares hereunder;
4.4.1.2 accepting the resignations of such
persons as the Purchaser shall stipulate
as directors of the Group Companies
[other than the Vendor] and of the
current secretary of the Company;]
4.4.1.3 appointing such persons as the Purchaser
shall stipulate as additional directors
and as secretary of the Company;
4.4.1.4 changing the accounting reference date
of the Company to [ ];
4.4.1.5 appointing [ ] as auditors;
4.4.1.6 changing the registered office to such
address as the Purchaser shall require;
4.4.1.7 approving and executing the Service
Agreement;
4.4.1.8 modifying all existing bank and other
mandates as the Purchaser shall direct;
and
4.4.2 the passing at duly convened meetings of the Board
of Directors of each other Group Company of
resolutions:-
4.4.2.1 accepting the resignations of such
persons as the Purchaser shall stipulate
as directors of the Group Companies
[other than the Vendor] and of the
<PAGE>
-10-
current secretary;
4.4.2.2 appointing such persons as the Purchaser
shall stipulate as additional directors
and as secretary;
4.4.2.3 approving the transfer of any shares not
registered in the name of the Company to
a nominee identified by the Purchaser
(and subject only to the stamping of the
same);
4.4.2.4 changing the accounting reference date
to [ ];
4.4.2.5 appointing [ ] as auditors;
4.4.2.6 changing the registered office to such
address as the Purchaser shall require;
4.4.2.7 modifying all existing bank and other
mandates as the Purchaser shall direct.
[4.5 The Vendor shall enter into Intellectual Property Assignment with
the Company in the agreed form].
4.6 Upon completion of all the matters referred to in sub-clauses 4.2
to 4.5 above Asia and Europe (as the case may be) shall:-
4.6.1 satisfy the Consideration by a banker's draft for
(pound)500,000 from each of Asia and Europe
delivered to the Vendor's Solicitors (whose
receipt thereof shall be an absolute discharge of
the Purchaser and the Purchaser's Solicitors) and
the issue of the Europe Shares and the Asia Shares
to the Vendor and the delivery to him of stock
certificates therefor;
4.6.2 deliver to the Vendor's Solicitors a counterpart
of the Deed of Covenant and the Parent Company
Guarantee duly executed by the Purchaser; and
4.6.3 grant options the agreed form in favour of the
Vendor over 250,000 shares of Common Stock par
value US$.00001 per share of each of Europe and
Asia; and
4.6.4 appoint the Vendor (who hereby consents to so act)
as a director of Europe and Asia.
4.7 The Purchaser shall not be obliged to complete the purchase of any
of the Shares unless the purchase of all such Shares is completed
simultaneously.
5. WARRANTIES
<PAGE>
-11-
5.1 The Vendor hereby warrants to the Purchaser (both for themselves
and as trustee for all other members of the enlarged Group) as to the accuracy
of the Warranties.
5.2 The Warranties are given subject to the statements of fact fairly
disclosed in the Disclosure Letter and which if not so disclosed would have
rendered a Warranty untrue and which disclosures the Vendor warrants represents
and undertakes to be true and accurate and not misleading.
5.3 Each of the Warranties shall be a separate Warranty and shall in
no way be limited or reduced by reference to the terms of any other Warranty.
5.4 The Purchaser has entered into this Agreement on the basis of the
Warranties and in reliance on them.
5.5 The Purchaser warrants that at the date hereof it has no knowledge
of any fact or matter which may render any Warranty untrue.
5.6 In the event of a breach of any of the Warranties the Vendor shall
not be entitled to disclaim liability therefor on the grounds that loss in
respect thereof has been suffered by the relevant Group Company rather than by
the Purchaser nor raise as a defence the fact (if it be the case) that the
relevant Group Company and/or its employees officers agents or advisers had or
ought to have had at any time knowledge of the breach complained of.
5.7 No proceedings shall be commenced in respect of any claim
for breach of the Warranties or the Deed of Covenant
unless:-
5.7.1 notice giving reasonable details of the claim:
5.7.1.1 shall, in the case of any claim other
than a claim relating to Taxation, have
been delivered to the Vendor by the
Purchaser as soon as reasonably
practicable after it has become aware of
it and in any event not later than
twenty-one months after the date of
Completion; and
5.7.1.2 insofar as such breach relates to
Taxation, shall have been delivered to
the Vendor by the Purchaser as soon as
reasonably practicable after it has
become aware of it and in any event
within seven years of the date of
Completion; and
5.7.2 the amount of each claim exceeds (pound)2,500 and
when aggregated with all the other claims exceeds
(pound)50,000 in which event the full
<PAGE>
-12-
amount (and not only the excess) may be claimed
under legal proceedings.
The limitations in this Clause 5.7 and in Clauses 5.8 to 5.10 and 5.12
shall not apply in the case of fraud by the Vendor.
5.8 The total amount of the liability in respect of any and all claims
under the Warranties and the Deed of Covenant shall be limited to
(pound)2,500,000.
5.9 If, subsequent to any payment by the Vendor to the Purchaser in
respect of any Warranty claim or any claim under the Deed of Covenant, the Group
or the Purchaser or either of them receives any payment from any third party in
respect of the loss suffered by the Company which resulted in the claim, the
Purchaser shall reimburse to the Vendor the amount so recovered less all
reasonable costs and expenses (including any Tax liability) of the recovery but
including in addition any interest or repayment supplement paid by the Inland
Revenue or HM Customs & Excise and the Purchaser shall and shall procure that
the Group shall use all reasonable endeavours to enforce any rights to make any
such recovery from any third parties subject to the Purchaser and the Group
being indemnified and secured to their reasonable satisfaction by the Vendor
against all losses, liabilities, costs and expenses properly and reasonably
incurred in connection with the enforcement of such rights.
5.10.1 Upon the Purchaser or the Group becoming aware of any claim,
action or demand ("a Claim") against the Company or any
matter ("a Relevant Matter") likely to give rise to any of
these in respect of the Warranties or the Deed of Covenant,
then provided that the Purchaser's claim against the Vendor
shall not be prejudiced the Purchaser shall:
5.10.1.1 as quickly as reasonably possible, notify the
Vendor by written notice as soon as it is
reasonably clear to the Purchaser that the Vendor
is or may become liable under the Warranties or
the Deed of Covenant and in the case of a matter
relating to Taxation provide reasonably sufficient
details of such claim, details of the due date for
any payment and the time limits for any appeal, as
soon as possible and in any event not more than 14
days after the Purchaser or the Group becomes
aware of such claim;
5.10.1.2 at the request of the Vendor, allow the Vendor to
take the sole conduct of such actions as the
Vendor may deem reasonably appropriate in
connection with any such Claim in the name of the
appropriate Group company and in that connection
the Group and the Purchaser shall give or
<PAGE>
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cause to be given to the Vendor all such
assistance as he may reasonably require in
avoiding, disputing, resisting, settling,
compromising, defending or appealing any such
Claim; and
5.10.1.3 take all reasonable action to mitigate any loss
suffered by it or any member of the Group of which
a Claim could be made under the Warranties;
5.10.1.4 give such information to the Vendor and his
professional advisers as the Vendor may reasonably
request for the purpose of the Vendor exercising
his entitlement as specified in sub-clause
5.10.1.2 provided that the Vendor and his
professional advisers shall keep all such
information confidential save only as may be
required for the purposes of such claim;
5.10.1.5 save where the Purchaser is of the reasonable
opinion that its or the Group's position with
regard to such Claim may be prejudiced make no
admission of liability, agreement, settlement or
compromise with any third party in relation to any
such Claim without the prior written consent of
the Vendor (such consent not to be unreasonably
withheld or delayed).
5.10.2.1 The Purchaser and the Group shall not be obliged to comply
with sub-clauses 5.10.1.2 to 5.10.1.5 above unless within 14
days of any notice given to him pursuant to sub-clause
5.10.1.1 the Vendor shall indemnify and secure the Purchaser
and the Group (to their reasonable satisfaction) against all
losses, liabilities, costs and expenses that the Purchaser
and the Group may reasonably and properly incur thereby
PROVIDED THAT if the Vendor does not request the Purchaser
to take any action within 14 days as aforesaid, or the
Purchaser shall not be indemnified or secured at any time as
provided in this sub-clause, the Purchaser shall be free to
take such action in relation to the claim as it in its
discretion shall think fit;
5.10.2.2 The Vendor shall procure that the Purchaser is promptly sent
copies of all written communications or notified in writing
as to the substance of all oral communications pertaining to
any Claim or any Relevant Matter;
<PAGE>
-14-
5.10.2.3 The Vendor shall, in conducting any action in connection
with any Claim, promptly consult with the Purchaser on any
matter which is relevant to it; and
5.10.2.4 the Vendor shall conduct all Claims with due diligence and
without neglecting his duties under the Service Agreement
and shall engage professional advisers approved by the
Purchaser for the purposes of any such Claim.
5.11 The Purchaser hereby agrees that it has not been induced to enter
into this Agreement on the basis of any warranties, representations or
undertakings other than the Warranties and the Deed of Covenant.
5.12 No claims under the Warranties shall be made against the
Vendor:
5.12.1 to the extent that the breach giving rise to a
possible Claim occurs or is increased by reason of
any voluntary act or omission on the part of the
Purchaser which occurs after the date of this
Agreement other than in the ordinary course of
business or by reason of any matter which would
not have arisen but for the coming into force of
any legislation not in force at the date of this
Agreement or the withdrawal of any relief,
allowance or concession available at the date of
this Agreement (whether or not such legislation or
withdrawal purports to be effective
retrospectively in whole or in part) or as a
result of any increase in any rate of taxation or
by reason of any change occurring after the date
of this Agreement in Inland Revenue practice or
by reason of any change occurring after the date
of this Agreement in any principle of common law
(whether or not any of the aforegoing purports to
be effective retrospectively in whole or in part);
5.12.2 to the extent that a member of the enlarged Group
is entitled to claim indemnity against any loss or
damage suffered by a member of the enlarged Group
arising out of a breach giving rise to a Claim,
under the terms of any insurance policy in force
on the date of the loss less the amount of any
increased premium payable by reference to such
claim;
5.12.3 to the extent that provision or reserve has been
made in
<PAGE>
-15-
the Accounts in respect of the matter to which
such liability relates;
5.12.4 to the extent that the breach giving rise to a
possible Claim arises as a result of any change in
the basis of accounting or tax computation of any
member of the Group after the date of this
Agreement;
5.12.5 based upon a liability which is contingent only
unless and until such contingent liability becomes
an actual liability and is due and payable.
5.13 The Vendor shall not be liable in respect of any breach of any
Warranty and if and to the extent that the loss occasioned thereby has been
recovered under the Deed of Covenant and vice versa.
5.14 Notwithstanding anything expressed or implied in this Agreement
to the contrary, any payment by the Vendor pursuant to a Claim shall be treated
for all purposes by the parties as a reduction in the Consideration and Clause 3
shall be modified accordingly.
5.15 The Purchaser shall have no right (whether before or after
Completion) to rescind this Agreement under this Agreement or under the
provisions of the Misrepresentation Act 1967 or the Unfair Contract Terms Act
1977.
6. CONTINUING OBLIGATIONS
6.1 The Vendor covenants with the Purchaser (for themselves and as
trustee for the enlarged Group) that he will not either directly or indirectly
whether on his own account or in conjunction with or on behalf of any other
person, whether as principal, partner, shareholder, employer, employee, agent or
otherwise howsoever in any individual, fiduciary or representative capacity:-
6.1.1 during the Restricted Period:-
6.1.1.1 canvass or solicit or entice away or
attempt to canvass or solicit or entice
away from any Group Company the custom
of any Customer for the purposes of
carrying out any Restricted Business in
competition with any Group Company;
6.1.1.2 contract with or work for any Customer
for the purpose of carrying out any
Restricted Business or
<PAGE>
-16-
supplying Restricted Goods and/or
Services in competition with any Group
Company;
6.1.1.3 by reference to sub-clauses 6.1.1.1 and
6.1.1.2 above approach any Customer for
such purpose or authorise or assist the
taking of such actions by any other
person;
6.1.1.4 induce or attempt to induce any
Discounter or party contracting with any
Relevant Company to cease to supply or
to restrict or vary the terms of supply
or contract terms to or with any of the
Group Companies or any licensee or any
Customer where such cessation,
restriction or variation will be or is
likely to be detrimental to the business
of any Group Company;
6.1.1.5 supply Restricted Goods and/or Services
to any Customer in competition with the
Company or any Group Company;
6.1.2 during the Restricted Period:-
6.1.2.1 solicit or entice away or attempt to
solicit or entice away any person
defined in sub-clause 6.1.2.3 below or
authorise the taking of any such actions
by any other person;
6.1.2.2 offer employment to or employ or enter
into partnership or association with or
retain the services whether as agent
consultant or otherwise of any person
defined in sub-clause 6.1.2.3 below;
6.1.2.3 sub-clauses 6.1.2.1 and 6.1.2.2 above
refer to any person who at any time
during the period of 6 months preceding
Completion was a director or employee
earning in excess of (pound)25,000 per
annum (other than secretarial clerical
office junior or part-time) of the
Company or of any Group Company;
6.1.3 during the Restricted Period:-
6.1.3.1 solicit or entice away or attempt to
solicit or entice away any Licensee or
Joint Venture Partner or
<PAGE>
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authorise the taking of any such action
by any other person where the effect or
likely effect of a breach of the
provisions of this sub-clause will be or
is likely to be detrimental to the
business of any Group Company;
6.1.3.2 offer to contract with any Licensee or
Joint Venture Partner under
circumstances where such party is likely
either to cease to deal with any Group
Company or to seek to vary the terms of
its contract with any Group Company,
where such variation will be or is
likely to be detrimental to the business
of any Group Company;
6.1.4 without prejudice to the rights of any Group
Company in the Intellectual Property Rights for a
period of two years from Completion or ceasing to
be employed by or render services to any Group
Company whichever is the later be Materially
Interested in any Person providing Restricted
Goods and/or Services within the Territory in
competition with the Company or any Company or
Licensee or Joint Venture Partner or otherwise
work or engage or be involved in any capacity in
the Restricted Business in competition with any or
licensee or Joint Venture Partner Company in the
Territory;
6.1.5 without prejudice to 6.1.4 above for a period of
five years from Completion or ceasing to be
employed by or render services to any Group
Company and save on behalf of any Relevant Company
for any reason whatsoever be engaged interested or
concerned whether directly or indirectly and
whether as partner agent consultant employee share
or debenture holder in any aspect of the
Restricted Business in the Territory using a name
or trading style in which any part of the name or
names or trading names or styles of any of the
Relevant Companies occurs and will not knowingly
during such period lend his support directly or
<PAGE>
-18-
indirectly to any such business using such name or
trading name or style.
6.2 The Vendor hereby covenants with the Purchaser and with the
remainder of the enlarged Group that he will not at any time hereinafter divulge
or communicate to any person other than in confidence to officers or employees
of the enlarged Group whose province it is to know the same or on the
instructions of the Purchaser and other than information to the extent that the
same is in the public domain any trade secret or other confidential information
relating or belonging to the Company or any member of the enlarged Group
including but not limited to any information of a confidential nature relating
to clients client lists or client requirements price lists or pricing structures
marketing and information business plans financial information plans and
forecasts know how methods or processes used reports or research or any
information which has been given to the Company or any company in the enlarged
Group in confidence by clients or other persons and he shall use all reasonable
endeavours to prevent the publication or disclosure of any confidential
information concerning such matters provided that this clause shall not prevent
any disclosure required by a Recognised Investment Exchange, a court of law or
pursuant to any actual or contemplated legal proceedings.
6.3 Each of the obligations contained in each sub-clause of this
Clause 8 shall be construed as separate and severable obligations.
6.4 While the restrictions set out herein and the definitions of
"Customer", "Restricted Business", "Restricted Goods and/or Services" "Joint
Venture Partner", "Licensee" and "Discounter" are considered by the parties to
be reasonable in all the circumstances it is agreed that if any one or more of
such restrictions or definitions shall either taken by itself or themselves
together be adjudged to go beyond what is reasonable in all the circumstances
for the protection of the legitimate interests of the Company or the Group but
would be adjudged reasonable if any particular restriction or restrictions or
definition were deleted or if any part or parts of the wording thereof were
deleted then the restrictions and definitions set out herein shall apply with
such deletions restrictions or limitations as the case may be.
<PAGE>
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7. WAIVERS AND VARIATIONS
7.1 No waiver or variation of any provision of this Agreement shall be
duly made or deemed to have been duly made unless in writing and signed by all
parties (or by a duly authorised officer or director on behalf of a party) to
this Agreement.
7.2 The failure by any party to insist on any occasion upon the
performance of any term condition or provision of this Agreement shall not
thereby act as a waiver of such breach or an acceptance of any variation.
8. FURTHER ASSURANCE
8.1 The Vendor shall procure the convening of such meetings and the
giving or passing of such waivers and resolutions and shall do or procure all
such other acts and things as shall be necessary under the Companies Act 1985 or
the Articles of Association of the Company or otherwise to give effect to the
provisions of this Agreement.
8.2 The Vendor shall render to each company in the enlarged Group such
assistance as it may require in connection with its negotiations and dealings
with each of the Licencees and Joint Venture Partners and will when requested do
all such things and sign all such documents as may be required to give effect to
the terms of each of the Licence Agreements and the Joint Venture Agreements.
8.3 The Vendor undertakes that he will not knowingly do or permit
anything to be done which may endanger the Intellectual Property Rights anywhere
in the world or so far as it is within his power assist or allow others to do
so.
8.4 The Vendor shall render to the Purchaser and to each company in
the enlarged Group all reasonable assistance (including but not limited to
evidence of user) in order to assist the Purchaser and each company in the
enlarged Group to defend, protect and procure the registration of and enjoy the
full benefit of the Intellectual Property Rights.
8.5 The Vendor shall immediately notify the Purchaser of all
infringements
<PAGE>
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or imitators of the Intellectual Property Rights anywhere in the world which
come to his attention or any attempts to challenge the enlarged Group's rights
to use any of the Intellectual Property Rights anywhere in the world, and to
resist any action or claim or proceedings brought against any Company in the
enlarged Group in connection with the Intellectual Property Rights. The Vendor
agrees to provide such co-operation in the prosecution of any action which the
Purchaser in its reasonable discretion consider appropriate including the
provision of evidence. The Purchaser shall have the conduct of any such action
and pay all legal expenses and costs which may arise from the joining of the
Vendor as a party.
9. GENERAL
9.1 Non-Merger
All provisions of this Agreement shall (so far as they are capable of being
performed or observed) continue in full force and effect notwithstanding
Completion.
9.2 Announcements
No announcement or information concerning this Agreement shall be made or issued
by any of the parties hereto except in agreed form provided that nothing in this
sub-clause shall prevent the Purchaser from making such announcement or sending
such circular as the rules of any Recognised Investment Exchange or any other
statutory or regulatory body may require.
9.3 Notices
9.3.1 Any notice demand proceedings or other
communication to be given made or served hereunder
or by reference hereto shall be in writing and:-
9.3.1.1 sent by first class prepaid or
registered post; or
9.3.1.2 delivered personally; or
9.3.1.3 transmitted by facsimile to the party or
parties to be served at the addresses
stated herein or at such other address
within the United Kingdom from time to
time notified in writing by or on behalf
of any such party to the other parties
or in the case of the Vendor at the
offices of the
<PAGE>
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Vendor's Solicitors marked with
reference 79/408 and in the case of the
Purchaser at the offices of the
Purchaser's Solicitors marked with
reference TJW/TR240.009;
9.3.2 Any such notice demand proceedings or other
communication given made or served pursuant to
sub-clause 11.3.1 above shall be deemed to have
been received and effectively served:-
9.3.2.1 upon the day of delivery or transmission
if delivered personally or transmitted
by facsimile before the end of a
Business Day; or
9.3.2.2 on the next following Business Day if
sent by first class prepaid or
registered post or if transmitted by
facsimile or delivered personally after
the end of a Business Day or on any
other day not being a Business Day.
9.3.3 For the purposes of this sub-clause 11.3
references to a Business Day shall be deemed to
commence at 9.00 am and terminate at 6.00 pm.
9.3.4 In proving service it shall be sufficient to prove
that personal delivery was made or that the
envelope containing such notice was properly
addressed and posted as a first class pre-paid or
registered letter or that the facsimile
transmission was duly transmitted to the
addressee.
9.4 Entire Agreement
This Agreement (together with the documents referred to herein) constitutes the
whole agreement between the parties hereto in relation to the transactions
referred to herein and supersedes any previous agreement between the parties in
relation to such transactions.
9.5 Restrictions
No provisions of this Agreement or any agreement or arrangement of which it
forms part by virtue of which this Agreement or any agreement or arrangement is
subject to registration under the Restrictive Trade Practices Acts 1976 and 1977
shall take effect until the day after particulars of this Agreement or any
agreement or arrangement of which it forms part (as the case may be) have been
furnished to the Director General of
<PAGE>
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Fair Trading pursuant to Section 24 of the Restrictive Trade Practices Act 1976.
9.6 Costs
Each party shall bear its own costs and expenses in relation to the preparation
negotiation execution and carrying into effect of this Agreement and any matters
provided for hereunder.
9.7 Enforceability
The illegality of any part of this Agreement or of any agreement or arrangement
of which it forms part shall not affect the legality or validity of the
remainder of the same.
9.8 Successors
The rights and obligations of the Vendor under this Agreement shall enure for
the benefit of and be enforceable against and binding upon his personal
representatives and estates.
9.9 Jurisdiction
This Agreement shall be governed by and construed and interpreted in accordance
with English law and the parties agree to submit to the jurisdiction of the High
Court of Justice in England in relation to any claim or dispute which may arise
hereunder and hereby agree for the purpose of Order 10, Rule 3 of the Rules of
the Supreme Court of England (or any modification or re-enactment thereof) and
in any proceedings in any other jurisdiction that any process may be served on
any of them in the manner therein provided.
AS WITNESS this Agreement has been executed the day and year first before
written.
<PAGE>
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SCHEDULE 1
----------
Details of the Vendor
---------------------
(1) (2)
Name and address No. of Shares held
---------------- ------------------
C. E. C. Radbone 500,000
Flat 2
47 Lansdowne Road
Holland Park
London W11
<PAGE>
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SCHEDULE 2
Details of the Company
Countdown Holdings Limited
Registered number: 2741762
Registered office: 42 Doughty Street
London WC1N 2LY
Date of incorporation: 21 August 1992
Place of incorporation: England and Wales
Authorised share capital: (pound)500,000
Issued share capital: (pound)500,000
Registered shareholder: C.E.C. Radbone
Flat 2
47 Lansdowne Road
Holland Park
London W11
Directors: C.E.C. Radbone
(As above)
Secretary: A. Withers
31 Sea Road
Milford-on-Sea
Hants S041 OPH
<PAGE>
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SCHEDULE 3
Details of the Subsidiaries
Countdown Plc
Registered number: 986149
Registered office: 42 Doughty Street, London WC1N 2LY
Date of incorporation: 4/8/1970
Place of incorporation: England & Wales
Authorised share capital: (pound)250,000
Issued share capital: (pound)150,000
Registered shareholders:
C E C Radbone 1 Ordinary Share
Countdown Holdings Limited 1,000 Deferred Ordinary Shares
148,999 Ordinary Shares
Director: C.E.C. Radbone
Secretary: Adrian Withers
<PAGE>
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SCHEDULE 4
Part 1
English Premises
Unit 11 Steele Road London NW1O registered with freehold title at H M Land
Registry under title number NGL 553119.
Leasehold premises at Unit 1 Hurlingham Business Park London SW6 held pursuant
to a lease dated 12 July 1995 made between Countdown Plc Self Administered
Scheme and Countdown Plc.
Part II
Irish Premises
Leasehold premises at Third floor, 39 Fitzwilliam Street Dublin 2 held pursuant
to an agreement dated 1 October 1994 made between Balmore Properties Limited and
Countdown Plc.
<PAGE>
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SCHEDULE 5
Warranties
1. INTERPRETATION
1.1 References in this Schedule to "the Company" shall wherever the
context so admits extend to and include each and every other member of the Group
and accordingly each Warranty when given in relation to the Company shall be
deemed to have been given in addition in relation to each other member of the
Group.
2. INFORMATION
2.1 The information contained in the Disclosure Letter is true and
accurate and complete in all respects and is not misleading.
2.2 The information contained in Schedules 1 to 4 is true and accurate
and complete in all respects.
2.3 The Vendor has disclosed full and accurate details of the
Company's liabilities in respect of RSVP Publishing Limited ("RSVP") and the
Company has not agreed to and is under no obligation to lend RSVP further
monies.
2.4 RSVP is a dormant company and the Vendor has disclosed full and
accurate details of its assets and liabilities.
3.1 The Accounts have been prepared in accordance with the historic
cost convention and generally accepted accounting practice in England and Wales
and comply with the requirements of the Companies Act 1985 and other relevant
statutes and all current and relevant SSAPs and FRSs and have been prepared on
consistently applied bases and principles and give a true and fair view of the
state of affairs and financial position of the Company for the financial year
ended on the Accounts Date.
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3.2 The Accounts make proper provision for all known liabilities and
proper provision or reserve or notes (as appropriate in accordance with good
accounting practice) for all bad and doubtful debts, all actual, disputed or
deferred liabilities whether liquidated or unliquidated and all capital
commitments as at the Accounts Date.
3.3 Proper provision or reserve (as appropriate) has been made in the
Accounts for all taxation (including for the avoidance of doubt deferred tax)
for which the Company is or may become liable or accountable (whether primarily
or otherwise) as a result or in consequence of any income, profits or gains
earned, accrued or received or deemed to have been or treated as earned, accrued
or received for taxation purposes on or before the Accounts Date and for all
transactions, acts and omissions on the part of the Company or any one or more
or all of its employees, directors, shareholders and agents at any time on or
before the Accounts Date including, without limitation, distributions made down
to the Accounts Date or provided for in the Accounts.
3.4 None of the audited accounts of the Company for the five preceding
accounting periods were qualified by the auditors.
3.5 The profits and losses of the Company shown by the Accounts and by
the audited accounts of the Company for the three preceding accounting periods
and the trend of profits and losses thereby shown have not (except as therein
disclosed) been affected to a material extent by any non-recurring, exceptional,
extraordinary or short-term item (including, but not limited to, any pension
contribution holiday or any rental or other outgoing at below market rates)
which has rendered such profits or losses unusually high or low.
3.6 All books of account and other accounting records of the Company
have been kept on a consistent basis, are in its possession, made up to date in
all material respects and contain the information required by law and generally
accepted accounting principles.
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4. POST BALANCE SHEET EVENTS
4.1 The Company has since the Accounts Date carried on its business in
the ordinary and usual course without any interruption or alteration in the
nature, scope or manner of the business and under its own name and has not
(other than in the ordinary course of business) parted with any of its assets.
4.2 The business of the Company has not since the Accounts Date been
materially and adversely affected by the loss of any client or customer or
source or employee or employees or by any abnormal factor not likewise affecting
similar businesses and there has been no material change in the turnover,
financial, contractual or trading position of the Company.
4.3 Since the Accounts Date no change has been made in the basis of
remuneration of any directors agents or employees of the Company and the Company
has not made or paid any compensation (whether in money or otherwise) to any
director officer or employee of the Company by way of compensation for loss of
office termination of employment unfair or wrongful dismissal redundancy or
otherwise howsoever nor has agreed so to do.
4.4 Other than in the ordinary course of business the Company has not
since the Accounts Date assumed or incurred any material liabilities (including
contingent liabilities).
4.5 The Company has not since the Accounts Date made or agreed to make
any donation for political or charitable purposes nor made or agreed to make any
covenant to such effect.
4.6 Since the Accounts Date the Company has not acquired or agreed to
acquire any asset for a consideration which is materially higher than market
value at the time of acquisition and has not disposed of or agreed to dispose of
any asset for a consideration which is materially lower than market value or
book value, whichever is the higher, at the time of disposal.
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4.7 Since the Accounts Date there have been no unusual increases or
decreases in stock levels.
4.8 Since the Accounts Date no distribution of capital or income has
been declared, made or paid in respect of any share in the capital of the
Company.
5. ASSETS
5.1 The Company is the absolute and beneficial owner of and has good
and marketable title to the assets referred to in the Accounts (which comprise
all the assets of the Company other than the Properties) all of which are held
free from all liens, charges, options, pledges and encumbrances (or any
agreement to grant such) and are within the sole possession or control of the
Company.
5.2 There are no subsisting leasing, lease purchase, hire purchase or
rental agreements nor any credit sale agreement or like agreement or arrangement
affecting any of the assets.
5.3 Maintenance contracts for the maintenance by outside or specialist
contractors of all assets of the Company which it is normal or prudent to have
so maintained (or the Company is required to have so maintained) including,
without limitation, all plant and machinery (including fixed plant and
machinery), vehicles and office equipment used by the Company in connection with
its business are in full force and effect.
5.4 All items referred to in paragraph 5.3 above and any others used
by the Company in the course of its business are in good repair and condition,
have been regularly maintained and are in satisfactory working order and so far
as the Vendor is aware none is dangerous, inefficient or obsolete.
5.5 The plant register kept by the Company a copy of which is annexed
to the Disclosure Letter sets out a complete and accurate record of the plant
and machinery, vehicles and equipment owned or used by it.
<PAGE>
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5.6 The stock of packaging materials and finished goods now held by
the Company is not excessive and is adequate in relation to the current trading
requirements of the business of the Company and none of the stock is obsolete,
slow moving, unusable, unmarketable or inappropriate or of limited value in
relation to the current business of the Company and the stock is in good and
marketable condition so far as the Vendor is aware and is capable of being sold
by the Company in the ordinary course of its business in the time period within
which the Company could reasonably be expected to sell such stock, based on the
rate of turnover for the lines of products comprised within such stock for the
year ended on the Accounts Date, in accordance with its current price list
without rebate, discount or allowances to a purchaser.
5.7 The Company has not purchased or acquired or agreed to purchase or
acquire any stock, goods or materials on terms that property in the same does
not pass until full payment is made or all indebtedness discharged.
5.8 The Company is not the holder or beneficial owner of nor has
agreed to acquire any share or loan capital of any company or corporation
(whether incorporated in the United Kingdom or elsewhere) other than the
Subsidiaries nor is it nor has it agreed to become a member of any partnership,
joint venture, consortium or unincorporated company or association nor has the
Company any branch or permanent establishment (as that expression is defined in
the respective double taxation relief orders current at the date of this
Agreement) or any substantial assets outside the United Kingdom.
6. COMPANY BOOKS/LEGAL REOUIREMENTS/MEETINGS
6.1 The Company is validly incorporated with limited liability in
England and has power and is entitled and duly qualified to carry on business in
all jurisdictions in which its present business is now carried on.
6.2 The statutory books and minute books are duly entered up and
contain proper, accurate and complete records of all matters required to be
dealt with therein.
6.3 All the records, registers and books of the Company and all deeds
and documents relating to the property and assets of the Company are in the
possession of or
<PAGE>
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under the control of the Company.
6.4 A true and complete copy of each of the Memorandum and Articles of
Association of the Company together with all resolutions required to be annexed
to the same and referred to in Section 380 Companies Act 1985 is annexed to the
Disclosure Letter and sets out in full the rights and restrictions attaching to
the share capital of the Company.
6.5 The Company has not received any notice, application or request
for rectification of its register of members or any other record, register or
book and there is no reason why and no facts or circumstances which would be
likely to give rise to any reason why any such application or request might be
made.
6.6 Since the Accounts Date there has been no resolution of or
agreement or arrangement entered into between the members or any class of
members of the Company.
6.7 The Company has properly and punctually made all returns which it
is required to make to the Registrar of Companies, to any other governmental or
regulatory body and to any local authority.
6.8 Due compliance has been made with all the provisions of the
Companies Act and other legal requirements, in connection with the formation of
the Company, the allotment, issue, purchase and redemption of shares, debentures
and other securities in the Company, the reduction of the authorised and issued
share capital of the Company, any amendment to the memorandum or articles of
association of the Company and the passing of resolutions and the payment of
dividends by the Company.
6.9 The Company has at all times conducted its business intra vires,
has not entered into any transaction ultra vires the Company or outside of the
authority or power of the directors of the Company and is not in breach of the
provisions of the Articles of Association.
<PAGE>
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7. LICENCES AND GRANTS
7.1 All approvals, authorities, recognitions, permissions, consents,
licences and permits (whether accorded by industry or statutory or municipal
authorities or otherwise) whether in the United Kingdom or elsewhere relating or
applicable to the Company or necessary or desirable for the due and effective
operation of its business as it is presently carried on have been obtained and
all such approvals, authorities, recognitions, permissions, consents, licences
and permits are valid and subsisting and so far as the Vendor is aware there is
no reason why any of the foregoing has or might become liable to be suspended,
cancelled, revoked, forfeited or withdrawn.
7.2 The Company has not applied for, or received, any grant, subsidy
or financial assistance from any government department or agency or any local or
other authority, whether under the Industry Acts, or a regional development
grant, or temporary employment subsidy or otherwise.
7.3 The Company has not done, or omitted to do, anything which could
result in any such grant, subsidy or payment received or receivable by it
becoming repayable or being withdrawn or withheld.
8. ENVIRONMENTAL
8.1 So far as the Vendor is aware the Company has not engaged in or
permitted any operations or activities in, upon, or under the Premises or any
portion thereof involving the handling, manufacture, treatment, storage, use,
generation, recycling, release, discharge, refining, dumping or disposal of any
Hazardous Materials under, in or about the Premises or has transported any
Hazardous Materials to, from or across the Premises or has any knowledge of any
Hazardous Materials migrating or threatening to migrate from any other
properties onto, into or beneath the Premises or any portion thereof.
8.2 So far as the Vendor is aware the Company has complied in all
respects with all applicable Environmental Laws.
<PAGE>
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8.3 The Company has not received any claim, notice or other written
communication concerning or containing any alleged non-compliance or
contravention of Environmental Laws or claim, notice or other communication
alleging or concerning alleged liability for damages in connection with the
Company's use or occupation of the Premises.
8.4 So far as the Vendor is aware the Company has all registrations,
permits, authorisations, licences and consents required to be issued by any
relevant authority on account of any or all of its activities on the Premises
and/or in relation to the business of the Company as it is now carried on in
relation to Environmental Matters and is in full compliance with the terms and
conditions of such registrations, permits, authorisations, licences and
consents.
9. COMMITMENTS BORROWINGS AND BANK ACCOUNTS
9.1 The Company does not have any loan capital (including term loans)
outstanding or created but unissued and has not agreed to create or issue any
loan capital.
9.2 The Company has not made any loan or quasi-loan contrary to the
Companies Act 1985.
9.3 There are no debts owing to the Company other than ordinary trade
debts and the Company has not factored any of its debts and no such debts are
overdue by more than three months or have been released on terms that the debtor
pays less than the full book value of such debts or have been written off or
have proved to any extent to be irrecoverable in a court of law or as a result
of the debtor's insolvency or are subject to any counter-claim.
9.4 There is no bank or deposit account for the Company apart from the
accounts specified in the Disclosure Letter and the balances on such accounts as
at a date no more than seven days before the date of this Agreement are
disclosed in the Disclosure Letter. Since such date there have been no payments
out of the account except for routine payments in the ordinary course of
business.
<PAGE>
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9.5 The total amount borrowed by the Company from its bankers does not
exceed the respective overdraft facilities and the Company is not in breach of
the terms of any other loan facilities and the total amount borrowed by the
Company does not exceed any limitation on borrowings contained in the Articles
of Association nor in any debenture or loan stock deed or in any other document
or arrangement binding on it. Full and accurate details of all overdrafts, loans
or other financial facilities outstanding or available to the Company, all
mortgages, charges, guarantees or indemnities granted by the Company or by which
the Company is under an actual prospective or contingent liability are contained
in the Disclosure Letter so far as the Vendor is aware and the Company has not
done or omitted to do anything whereby the continuance of any such facilities in
full force and effect might be affected or prejudiced.
9.6 The Company has not repaid or become liable to repay any loan or
indebtedness in advance of its stated maturity date.
9.7 Other than as recorded in the books of account of the Company
there are no unpresented cheques drawn by the Company and the Company has not
accepted or endorsed any cheque, bill of exchange, promissory note or other
instrument (whether maturing prior to, at or after Completion).
9.8 No person (other than a Group Company) has given any guarantee of
or security for any indebtedness or other liability of the Company whether
actual prospective or contingent and no charge in favour of the Company is void
or voidable for want of registration.
9.9 Other than in the ordinary course of business there is no
liability for industrial training levy or for any other like statutory levy or
charge.
9.10 There is no power of attorney or other authority (express or
implied) which is still outstanding or effective to or in favour of any person,
firm or company to enter into any contract or commitment or to do anything on
behalf of the Company (other than the ostensible or implied authority of
directors or of employees arising in the ordinary course of the business of the
Company and in the ordinary course of their duties).
<PAGE>
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9.11 There is not outstanding any indebtedness or other liability
(actual or contingent) owing by or to the Company to or from any member of the
Group or any officer of or other person connected with any member of the Group.
10. CONTRACTS
10.1 The Company is not a party to or subject to any agreement,
transaction, obligation, commitment, understanding, arrangement, practice or
liability which:-
10.1.1 is an agency, distributorship, joint venture,
marketing, manufacturing, licensing or partnership
agreement or arrangement; or
10.1.2 is of an unusual or abnormal nature or is
otherwise than on arm's length terms or is outside
the ordinary and proper course of the business of
the Company; or
10.1.3 contains any warranties indemnities (other than as
implied below) or representations by the Company
or continuing restrictions on the activities of
the Company; or
10.1.4 is incapable of complete performance in accordance
with its terms within six months after the date on
which it was entered into or undertaken; or
10.1.5 is incapable of termination in accordance with its
terms and without compensation by the Company on
60 days' notice or less; or
10.1.6 so far as the Vendor is aware, is likely to result
in a loss to the Company on completion of
performance; or
10.1.7 cannot readily be fulfilled or performed by the
Company on time and in accordance with its terms
without undue or unusual expenditure of money or
effort; or
10.1.8 involves payment by the Company by reference to
fluctuations in the Index of Retail Prices or any
currency or other index; or
10.1.9 involves or is likely to involve the provision of
goods
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or services the aggregate sales value of which
will represent in excess of 10% per cent of
turnover for the relevant preceding financial year
of the Company; or
10.1.10 so far as the Vendor is aware suffers from any
invalidity or in respect of which there are
grounds for determination, recision, avoidance or
repudiation by any other party; or
10.1.11 so far as the Vendor is aware has been or is
required to be registered in accordance with or is
invalidated (in whole or in part) by the
Restrictive Trade Practices Acts 1976 and 1977 or
which contravenes or is invalidated (in whole or
in part) by the provisions of the Resale Prices
Act 1976 or which by virtue of its terms or any
practice carried on in connection therewith is a
consumer trade practice (within the meaning of the
Fair Trading Act 1973) or is liable to be referred
to the Consumer Protection Advisory Committee
under Part II of that Act or is or is likely to
constitute an anti-competitive practice within the
meaning of the Competition Act 1980 or contravenes
the Trade Description Acts 1968 and 1972 or Part
XI of the Fair Trading Act 1973 or the Consumer
Credit Act 1974; or
10.1.12 so far as the Vendor is aware infringes or
requires registration under Articles 85 or 86 of
the Treaty establishing the European Economic
Community or any Regulation or Directive issued
thereunder; or
10.1.13 pursuant to its terms can be terminated or varied
as a result of any change in the control of the
Company.
10.2 The Company has not given any guarantee or warranty or made any
representation in respect of the supply of goods or services save for any
guarantee or warranty implied by law.
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10.3 So far as the Vendor is aware no matter has arisen in respect of
any contracts to which the Company is a party which is or could be construed as
a potential or actual breach by any party thereto.
10.4 There have been no material or written complaints within the last
two years made by any party thereto in respect of any aspect of any of the
contracts with clients customers or suppliers nor with regard to the performance
of any agents or sub-contractors appointed by the Company to perform any part of
any such contract.
10.5 All current clients and customers have promptly paid or procured
the payment of any remuneration due to the Company and no material client,
customer or supplier of or to the Company has during the last twelve months
ceased or indicated in writing an intention to cease (or to reduce the volume
of) trading with the Company nor to the knowledge of the Vendor is likely to do
so whether as a result of this Agreement or otherwise.
10.6 No current client or customer has sought to negotiate in writing
a reduction or material change in the terms of remuneration applicable to the
arrangements it has for the supply of goods or services by the Company.
10.7 Neither more than 5 per cent of the aggregate amount of all
purchases nor more than 5 per cent of the aggregate amount of all sales by or
services rendered by the Company are obtained from the same supplier or provided
to the same client or customer (including associated clients or customers) nor
so far as the Vendor is aware is any material source of supply to or from the
Company in jeopardy.
10.8 There is not outstanding any contract or arrangement to which the
Company is a party and to which any director of the Company and/or any associate
thereof is or has been interested whether directly or indirectly.
10.9 No person is entitled to receive from the Company any
introduction fee brokerage or other commission in connection with the
introduction of or continuation of any business to or with the Company.
<PAGE>
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11. EMPLOYMENT TERMS
11.1 The only directors and the secretary of the Company are the
persons whose names appear as such in this Agreement and there is no person who
is or has been a shadow director (within the meaning of Section 471 Companies
Act 1985) of the Company.
11.2 The particulars of the identities and material terms and
conditions of employment of all the employees and officers of the Company
(including, without limitation, profit sharing or commission or share
participation or discretionary or contractual bonus arrangements whether legally
binding or not and other emoluments and benefits) have been fully and accurately
disclosed in the Disclosure Letter and there are no negotiations for any
increase in the emoluments or benefits of any such person(s) which are current.
11.3 The Company has duly complied with the conditions for
registration of any profit related pay schemes operated by it (and which are
fully detailed in the Disclosure Letter) in accordance with the provisions of
Sections 173-177 (inclusive) ICTA and Schedule 8 of that Act and has duly and
promptly remitted all documentation and information required by Section 181 of
that Act and the Company has received no notice of and so far as the Vendor is
aware there are not likely to arise any grounds for cancellation of any profit
related pay schemes registered by it and the Company has not received any notice
and so far as the Vendor is aware there are no circumstances in which recovery
of tax is likely to be made under Section 179 that Act.
11.4 There are no contracts of employment whether written or oral with
directors, officers or employees of the Company which are not determinable
without giving rise to any claim for damages or compensation (other than a
statutory claim for redundancy or unfair dismissal) by notice exceeding three
months.
11.5 There are no contracts of employment to which any relevant
requirements of Section 319 Companies Act 1985 have not been fulfilled.
11.6 No employee of the Company has given notice terminating his
contract
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of employment or is under notice of dismissal and so far as the Vendor is aware
there is no reason to believe that after Completion (whether by reason of an
existing agreement arrangement or otherwise) or as a result of the
implementation of this Agreement any officer or senior employee of the Company
may leave and there are no present circumstances which are likely to give rise
to any dispute between the Company or any of its employees, officers, former
employees or former officers or their respective estates.
11.7 No amount due to or in respect of any employee or former employee
of the Company is in arrear and unpaid other than his salary for the month
current at the date of this Agreement
11.8 So far as the Vendor is aware each of the senior employees and
officers of the Company who will be engaged in the business of the Company
following Completion is generally in a good state of health and is not suffering
from any illness or condition which does or might affect his work.
11.9 The Company has at all relevant times complied with all its
obligations under statute and otherwise concerning the health and safety at work
of its employees and there are no claims at the date of this Agreement by any
employee or third party in respect of any accident or injury which are not fully
covered by insurance.
11.10 There is no dispute between the Company and any trade union or
other organisation formed for a similar purpose existing or pending and there is
no collective bargaining agreement or other arrangement (whether binding or not)
to which the Company is a party.
12. PENSION SCHEMES
12.1 Other than pursuant to the money purchase scheme with Standard
Life ("the Stanplan Pension Scheme") and the Self Administered Scheme
established by Countdown Plc under a trust deed dated 1 August 1992 ("the Self
Administered Scheme") Schemes there are no obligations (whether legally or
morally binding or established by custom) to pay or provide or contribute to any
pensions or retirement, death, sickness, disability, accident or other like
benefits or super-annuation allowances gratuities or
<PAGE>
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"relevant benefits" within the meaning of Section 612 ICTA to or in respect of
officers or employees (or like obligations to or in respect of past officers or
employees).
12.2 The Disclosure Letter contains full and accurate written
particulars of the Stanplan Pension Scheme and the Self Administered Scheme
and:-
12.2.1 accurate, current and complete copies of all
documents constituting or relating to both of the
Schemes including all announcements, explanatory
literature and the like;
12.2.2 a complete copy of the latest audited accounts for
the Self Administered Scheme;
12.2.3 details of any material change in investment
policy under the Self Administered Scheme since
the date to which the latest accounts were made
up.
12.3 Contributions due from the Company under both of the Schemes from
any employee of the Company and proving due under the Schemes have been paid.
12.4 There is no litigation nor are there any arbitration proceedings
currently pending or threatened by or against the trustees of the Schemes and
there are no facts likely to give rise to any such litigation or arbitration
proceedings.
12.5 The Schemes comply with and have always been administered in
accordance with all applicable laws regulations and requirements.
13. CREDIT COMMITMENTS
13.1 The Company is not a party to any contract for rent lease hire
purchase or purchase on conditional sale or credit sale or by instalment of any
chattels or to any bill of sale and is not in breach of any such contract or
bill so disclosed.
14. LITIGATION AND OBSERVANCE OF LAW
14.1 Neither the Company or the Vendor or any director of the Company
is at present engaged whether as plaintiff or defendant or otherwise in any
legal action,
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arbitration proceedings or hearing before any court statutory or governmental
body department board or agency (other than as plaintiffs in the collection of
debts not exceeding [(pounds)1,000] in aggregate and arising in the ordinary
course of business) nor so far as the Vendor is aware are there any facts or
circumstances which may give rise to any such legal action or arbitration
proceedings being commenced by or against any such person.
14.2 Neither the Company nor any of its directors and officers are
being prosecuted for any criminal offence, no such prosecutions are pending and
so far as the Vendor is aware there are no facts or circumstances which may lead
to any such action proceeding hearing or prosecution.
14.3 No litigation or arbitration proceedings commenced by or against
the Company or which have been threatened to be so commenced have been settled
or compromised during the period of five years ending on the date of this
Agreement in respect of amounts exceeding in aggregate (pounds)1,000.
14.4 The Company is not subject to any order or judgement given by any
court, governmental agency or other regulatory body and is not a party to any
undertaking or assurance given to any court, governmental agency or other
regulatory body which is still in force nor so far as the Vendor is aware are
there any facts or circumstances which may result in the Company becoming
subject to any such order or judgement or being required to be a party to any
such undertaking or assurance.
14.5 There have been no investigations of, or disciplinary proceedings
made against, the Company or any of its officers or employees, no such
investigations or disciplinary proceedings are currently pending and so far as
the Vendor is aware, there are no facts or circumstances which may give rise to
such investigations or proceedings.
14.6 There is no dispute with any revenue, governmental, local
authority or other official department in the United Kingdom or elsewhere in
relation to the affairs of the Company and so far as the Vendor is aware there
are no facts which may give rise to any such dispute.
<PAGE>
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14.7 No order has been made or petition presented or resolution passed
for the winding up of the Company nor has any distress execution or other
process been levied in respect of the Company nor is any unfulfilled or
unsatisfied judgment or court order outstanding against the Company.
14.8 So far as the Vendor is aware neither the Company nor any of its
officers or employees during the course of their respective duties have
committed or omitted to do any act or thing the commission or omission of which
is or might be in contravention of any law of the United Kingdom or of any
foreign country in which the Company conducts business and which gives rise to a
liability on the part of the Company and neither the Company nor any of its
officers or employees have received notice of any such contravention.
14.9 The Company has conducted and is conducting its business in
accordance with all applicable laws and regulations including the relevant codes
relating to its industry and the Company has not received notice of any
contravention thereof.
14.10 Neither the Vendor nor the Company has at any time received any
process, notice, communication or any formal or informal request for information
with reference to any actual or proposed agreement, arrangement, concerted
practice, trading policy or practice, course of conduct or activity of the
Company from the Director General of Fair Trading, the Monopolies and Mergers
Commission, the Secretary of State for Trade and Industry, the Commission of the
European Communities, the Restrictive Practices Court or from any other person
or body (wherever situated) whose task it is to investigate, report or decide
upon matters relating to monopolies, mergers or anti-competitive agreements or
practices nor has the Company or anything done by the Company been the subject
of any report, decision, order, judgement or injunction made, taken or obtained
by any of such persons or bodies, nor has the Company given or been the subject
of any undertakings or assurances given (directly or indirectly) to any such
persons or bodies.
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15. SHARE CAPITAL
15.1 The Shares constitute the whole of the issued and allotted equity
share capital of the Company and are fully paid or credited as fully paid.
15.2 There is no Security Interest in favour of any other person on
over or affecting the Shares and there is no agreement or arrangement to give or
create any Security Interest on, over or affecting the Shares and no claim has
been made by any person claiming to be entitled to any of the foregoing.
15.3 There are no agreements or arrangements in force which call (now
or in the future) for the issue or transfer of or accord to any person the right
(whether conditional or otherwise) to call for the issue or transfer of any
shares, stock, debentures, debenture stock, loan notes (whether or not secured)
bonds or other securities of the Company (including any option or right of
pre-emption or conversion).
15.4 The Company has not repaid or redeemed or agreed to repay any
shares, stock debentures, debenture stock, loan notes (whether or not secured),
bonds or other securities of the Company.
15.5 The Company has never purchased or agreed or committed itself to
purchase any of its own shares.
16. INSURANCE
16.1 The Premises and all other assets and undertakings of the Company
of an insurable nature are and have at all material times been insured under
policies arranged by the Company to their full replacement or reinstatement
value against fire and all other risks normally insured against by companies
carrying on similar businesses or having an interest in property of a similar
nature and the Company has at all material times and is fully insured against
public liability, loss of profit, professional negligence or other liability,
employer's and occupier's liability, accident and third party risk and such
other risks normally covered by insurance by such companies and all such
insurances are currently in full force and effect and so far as the Vendor is
aware nothing has been done
<PAGE>
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or omitted to be done which would make any such policy of insurance void or
voidable or which is likely to result in an increase in premium.
16.2 There are no claims outstanding under any of the said policies
and so far as the Vendor is aware no circumstances exist which are or may be
likely to give rise to such claims and so far as the Vendor is aware there are
no circumstances which are or may be likely to lead to any claim under any
policy of insurance taken out by the Company.
17. LAND
17.1 The Certificates of Title are true and accurate in all material
respects and the information provided by the Vendor for the purposes of the
Certificates of Title is true and accurate in all material respects.
17.2 The Premises comprises all the land and buildings owned or held
by the Company or used or occupied by the Company.
17.3 Title to the Premises is constituted by documents of title which
are in the possession and under the control of the Company properly stamped and
duly registered where appropriate.
17.4 The Company has not entered into either the lease of or a licence
to assign any leasehold property as a guarantor of the lessee's covenants
contained in any such document in respect of which the Company has a continuing
commitment as guarantor.
17.5 The Company has not surrendered or contracted to surrender the
lease of any leasehold property to the reversioner thereof.
17.6 The Company has not at any time been the tenant of any leasehold
property other than the Premises and there are no circumstances which have led
or might lead to any claims being made against the Company in its capacity as a
former tenant.
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17.7 Since the Accounts Date the Company has not acquired or disposed
of or agreed to acquire or dispose of any land or buildings or any interest
therein.
17.8 The Vendor has no reason to believe that the buildings and other
structures on the English Premises are not in good and substantial repair and
fit for the purposes for which they are used.
17.9 The Vendor has no reason to believe that any building or
structure on the Premises has at any time been affected by structural damage or
electrical defects or by timber infestation.
17.10 The Vendor has no reason to believe that any of the Premises
have been constructed on land which may be contaminated.
18. INTELLECTUAL PROPERTY RIGHTS
18.1 The Company is the sole and absolute beneficial and legal owner
of the Intellectual Property Rights, in each case free from all liens, charges,
restrictions and encumbrances and the Company's rights to the Intellectual
Property Rights are in full force and effect.
18.2 So far as the Vendor is aware none of the processes, products or
activities of the Company infringes the intellectual property rights of any
third party in any manner whatsoever whether by means of passing off or
endorsement or otherwise or involves the unlicensed use of information
confidential to any person or gives rise to a liability for any royalty or
similar payment nor has any third party made a claim in respect of the same or
given notice alleging the same.
18.3 There are no Intellectual Property Rights of whatsoever nature
which are capable of registration in the name of or of being vested in the
Company as owner or part owner which has been so registered or vested and the
Company has all the rights in intellectual property of any nature including,
without limitation, patents, copyrights, design rights and analogous rights
which are necessary or desirable to enable the business of the Company fully and
effectively to be carried on as it has been carried on up to the
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date of this Agreement.
18.4 So far as the Vendor is aware neither the Company nor any other
person has done or omitted to do any act matter or thing in respect of any of
the Intellectual Property Rights or in respect of any agreement relating to any
Intellectual Property Rights which impinges upon the validity or enforceability
of the same or upon the right of the Company to use the same in relation to the
business of the Company nor are there any outstanding obligations of the Company
or of any other person whether as to payment or otherwise which if left
outstanding would so impinge.
18.5 The Company has not granted and is not obliged to grant any
licences of, nor are there any subsisting agreements under which the Company has
granted to any person, any right or interest under or in connection with the
Intellectual Property Rights.
18.6 None of the Intellectual Property rights are the subject of any
claim, opposition, assertion, infringement, attack, right, action or other
restriction or arrangement of whatsoever nature which does impinge upon the
validity, enforceability or ownership of the same by the Company or the use of
the same (or any part of the same) howsoever by the Company and so far as the
Vendor is aware there are no grounds facts or circumstances that may give rise
to such.
18.7 The Company has ensured that the moral rights in any material in
which the Intellectual Property rights subsist have either been waived in
writing by the creator of that material or subjected by binding written contract
to the sole and exclusive control of the Company.
18.8 So far as the Vendor is aware the Company has not supplied or
developed anything which could not be made sold dealt in used or reproduced by
any person without infringing any Intellectual Property Rights owned or held by
any third party.
18.9 All confidential information and trade secrets of whatsoever
nature belonging to the Company are confidential and have not been disclosed to
any person in whole or in part (other than to employees of the Company in
circumstances where the
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confidentiality of such confidential information and trade secrets have been
drawn to their attention and steps taken to preserve such confidentiality and
there is no claim that can be or has been made by any person alleging that any
information has been disclosed to the company in circumstances amounting to a
breach of confidence.
18.10 No substantial part of the business of the Company is carried on
subject to any agreement or arrangement which significantly restricts the fields
in which the Company carries on business.
19. ADVERSE TERMS OF OTHER INSTRUMENTS
19.1 The execution, delivery and performance of this Agreement will
not:-
19.1.1 result in a violation of or be in conflict with or
constitute a default by the Company under any
agreement, instrument or arrangement to which the
Vendor or the Company is a party or by which the
Vendor or the Company is bound;
19.1.2 result in a breach of any order, judgment or
decree of any court or governmental agency to
which the Vendor or the Company is a party or by
which the Vendor or the Company is bound; or
19.1.3 result in a breach of the rules or requirements of
any professional body or trade or industrial
association of which the Company or the Vendor is
a member or by which the Company or the Vendor is
bound.
20. CAPACITY AND INTERESTS OF THE VENDOR
20.1 The Vendor has good and marketable title to the Shares and has
the absolute unfettered right and authority to sell and transfer (or procure the
sale and transfer of) the Shares without the consent of any third party to the
Purchaser on the terms and subject to the conditions of this Agreement and has
full power and authority to enter into and perform its obligations under this
Agreement and ancillary documents.
<PAGE>
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20.2 Neither the Vendor nor any person connected with the Vendor has
any interest, direct or indirect, in any business which competes or has competed
or is in the future likely to compete with any business now carried on by the
Company or intends to acquire any such interest.
20.3 Neither the Vendor nor person connected with any Vendor is
entitled to any claim of any nature against the Company, any of its officers,
employees, principal customers or suppliers and the Vendor has not assigned to
any third party the benefit of any such claim to which he was previously
entitled.
21. INSOLVENCY
21.1 No receiver or administrative receiver has been appointed of the
whole or any part of the assets or undertaking of the Company.
21.2 No administration order has been made in relation to the Company
and no petition for such an order has been presented.
21.3 No proposal for a voluntary arrangement between the Company and
its creditors (or any class of them) has been made to or is in the contemplation
of the Company.
21.4 No petition has been presented, no order has been made and no
resolution has been passed for the winding-up of the Company.
21.5 The Company has not stopped payment to its creditors nor is it
insolvent or unable to pay its debts as and when they fall due.
21.6 No unsatisfied judgement is outstanding against the Company.
22. TITLE DEEDS
22.1 All documents which in any way affect the right, title or
interest of the Company in or to any of its property, undertakings or assets and
all agreements to which
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the Company is a party are in the possession of the Company and are properly
stamped.
23. TAXATION
General
23.1 All necessary information notices returns particulars claims for
reliefs and allowances and computations have been properly and duly submitted by
the Company to the Inland Revenue and any other relevant taxation or excise
authorities (whether of the United Kingdom or elsewhere) and such information
notices returns particulars claims and computations are true and accurate and
are not the subject of any question or dispute nor so far as the Vendor is aware
are likely to become the subject of any question or dispute with the Inland
Revenue or any other such taxation or excise authority.
23.2 So far as the Vendor is aware the Company has not taken any
action which has had, or might have, the result of altering or prejudicing for
any period commencing after the Accounts Date any arrangement or agreement which
it has with any taxation authorities.
23.3 The Disclosure Letter contains full details of all claims,
notifications, disclaimers or elections assumed to have been made for the
purposes of the provisions or reserves for taxation included in the Accounts
that have not actually been made at the date hereof.
23.4 All taxation of any nature whatsoever whether of the United
Kingdom or elsewhere for which the Company is liable (insofar as such taxation
ought to have been paid) has been paid.
23.5 The Company is and always has been resident in the United Kingdom
for the purposes of taxation.
23.6 The Company has properly operated the PAYE system in accordance
with Chapter V Part V ICTA and regulations made by the Board of the Inland
Revenue thereunder.
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23.7 The Company has duly deducted all amounts from any payments from
which tax falls to be deducted at source and the Company has duly paid or
accounted for such amounts to the Inland Revenue or any other relevant taxation
or excise authorities (whether of the United Kingdom or elsewhere).
23.8 The Company has not within the six years prior to the date hereof
paid or become liable to pay any penalty or interest charged by virtue of the
provisions of the Taxes Management Act 1970 or similar provisions in other
countries.
23.9 The Company has not within the last six years been the subject of
an investigation, discovery or access order by or involving any taxation
authority and so far as the Vendor is aware there are no circumstances existing
which make it likely that an investigation, discovery or order will be made.
23.10 The Company has not received a notice, under Section 23 ICTA
(Collection from lessees and agents) which remains outstanding.
23.11 The Company has no outstanding entitlement:-
23.11.1 to make any claim (including a supplementary
claim) for relief;
23.11.2 to make any election for one type of relief on one
basis system or method of taxation as opposed to
another;
23.11.3 to make an appeal (including a further appeal)
against an assessment to taxation;
23.11.4 to make any application for the postponement of
taxation.
23.12 The Company has not since the Accounts Date paid remuneration
which is not fully deductible in computing the Company's profits for taxation
purposes.
Distributions
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23.13 No distribution within Section 418 ICTA (payments etc to
participators and associates) has been made by the Company within the last seven
years.
23.14 The Disclosure Letter contains full particulars of all elections
in force in relation the Company under Section 247 ICTA (Dividends etc paid by
one member of a group to another) which were made within the last six years and
no assessment may be made under that section on the Company in respect of
advance corporation tax which ought to have been paid or income tax which ought
to have been deducted.
23.15 The Company has not at any time capitalised or agreed or
resolved to capitalise any profits or reserves and has not issued any security
(as defined by Section 254(1) ICTA) remaining in issue at the date of this
Agreement so that the interest thereon falls to be treated as a distribution
under Section 209(d) or (e) ICTA (Matters to be treated as distributions).
23.16 The Company has not repaid agreed to pay or redeemed or agreed
to redeem any of its shares or capitalised or agreed to capitalise in the form
of redeemable shares or debentures any profits or reserves.
23.17 The Company has not received nor is it entitled to receive any
capital distribution to which the provisions of Section 189 TCGA (Corporation
tax attributable to chargeable gains: recovery from shareholder) could apply.
Base costs and capital allowances
23.18 If each of the capital assets of the Company were disposed of
for a consideration equal to the book value of that asset in or adopted for the
purpose of the Accounts no liability to corporation tax on chargeable gains or
balancing charge under the CAA would arise and for the purpose of determining
the liability to corporation tax on chargeable gains there shall be disregarded
any relief and allowances available to the Company other than amounts falling to
be deducted under Section 38 TCGA.
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23.19 Since the Accounts Date the Company has not done or omitted to
do or agreed to do or permitted to be done anything as a result of which there
may be made a balancing charge under Section 4 CAA (balancing allowances and
balancing charges) or any disposal value may be brought into account under
Section 24 CAA (writing-down allowances and balancing adjustments) or there may
be any recovery of excess relief under Section 46 and 47 CAA (recovery of excess
relief) or Section 42 CAA (allowances for assets leased outside the UK).
Demerger
23.20 The Company has neither been engaged in nor been a party to any
of the transactions set out in Sections 213 to 218 ICTA (demergers) nor made or
received a chargeable payment as defined therein.
Foreign business
23.21 The Company has not transferred a trade or business carried on
by it outside the United Kingdom through a branch or agency to a company not
resident in the United Kingdom in circumstances such that a chargeable gain may
be deemed to arise at a date after such transfer under Section 140 TCGA
(postponement of charge on transfer of assets to non-resident company)
23.22 No notice of the making of a direction under Section 747 ICTA
(imputation of chargeable profits and creditable tax of controlled foreign
companies) has been received by the Company and no circumstances exist which
would entitle the Inland Revenue to make such a direction and to apportion any
profits of a controlled foreign company to the Company pursuant to Section 752
ICTA (apportionment of chargeable profits and creditable tax).
Depreciatory transactions
<PAGE>
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23.23 No allowable loss which may accrue on the disposal by the
Company of any assets is likely to be reduced by reason of the provisions of
Sections 176 (transaction in a group) and 177 (dividend stripping) TCGA and no
chargeable gain or allowable loss arising on such a disposal is likely to be
adjusted pursuant to the provisions of Section 30 TCGA (value shifting: further
provisions).
Sale and lease-back
23.24 The Company has not entered into any transaction to which the
provisions of Section 780 ICTA (land sold and leased back: taxation of
consideration received) have been or could applied.
Unremittable income
23.25 The Company has not made any claim nor is entitled to make any
claim under Section 279(1)-(6) TCGA (foreign assets: delayed remittances) or
under Section 584 ICTA (relief for unremittable income).
Acquisitions from Group members
23.26 The Company has not made any claims under Sections 247, 152, 153
and 154 TCGA (rollover relief on compulsory acquisition and replacement of
business assets) or Section 175 TCGA (replacement of business assets by members
of a group) insofar as they would affect the chargeable gain or allowable loss
which would arise on a disposal after the Accounts Date by the Company of any of
its assets.
23.27 In relation to Section 179 TCGA (Company ceasing to be member of
a group) the Company has not at any time prior to the date hereof ceased to be a
member of a group of companies and the execution or Completion of this Agreement
will not result in any profit or gain being deemed to accrue to the Company.
23.28 The Company has not nor is it entitled to make a claim under
Sections 24 (assets lost or destroyed or whose value become negligible) or
Section 48 TCGA (consideration due after the time of disposal).
<PAGE>
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Transactions not at arm's length
23.29 The Company has neither disposed of nor acquired any asset in
such circumstances that the provisions of Section 17 TCGA (disposals and
acquisitions treated as made at market value) could apply thereto.
23.30 The Company has not entered into any such transaction as is
referred to in Sections 770 and 773 ICTA (Sales etc at undervalue or overvalue)
in such circumstances as to expose the Company to a liability to tax on profits
adjusted pursuant to those Sections.
Gifts involving Group Companies
23.31 The Company has not held nor holds shares in a company (not
being a member of the Group) which has made any such transfer as is referred to
in Section 125 TCGA (shares in close company: transferring assets at an
undervalue) and has not received any assets by way of gift as mentioned in
Section 282 TGCA (gifts: recovery from donee).
Close Companies
23.32 The Company is and has always been a close company within the
meaning of Section 414 ICTA (close companies).
23.33 The Group Companies together comprise a group for the purposes
of Sections 402 and 413 ICTA (Group relief) and there is nothing in Sections 413
(Group relief: qualifications for entitlement) and 410 (Group relief: effect of
arrangements for transfer of a company to another group etc) which precludes any
company from being regarded as a member of such group.
23.34 Since the Accounts Date The Company has made no loan or advance
to any of its directors nor has the Company made any such loan or advance to any
of its participators as are taxable pursuant to Sections 419 and 420 ICTA (Loans
to participators etc) and has not released or written off the whole or part of
the debt in respect of any such loan or advance in the manner provided for in
Sections 421 and 422 ICTA (Effect
<PAGE>
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of release etc: of debt in respect of loan by controlled companies).
Group relief
23.35 The Company has at no time within the last six years surrendered
or agreed to surrender or claim and will not prior to Completion surrender or
claim or agree to surrender or claim any amount by way of group relief under the
provisions of Chapter IV of Part X ICTA (Group relief) and has never made or
received or agreed to make or receive and will not prior to Completion make or
receive or agree to make or receive a payment for group relief within the
meaning of Section 402(6) ICTA.
23.36 The Company has at no time within the last six years surrendered
or claimed or agreed to surrender or claim and will not prior to Completion
surrender or claim or agree to surrender or claim any amount of advance
corporation tax under the provisions of Section 240 ICTA (setting of company's
surplus advance corporation tax against subsidiary's liability) and has never
made or received or agreed to make or receive and will not prior to Completion
make or agree to make or receive a payment in respect of the surrender of the
benefit of an amount of Advance Corporation Tax within the meaning of Section
240(8) ICTA.
23.37 The Company is not liable to make or entitled to receive a
payment for group relief or for the surrender of advance corporation tax
otherwise than to or from another member of the Group.
23.38. The Company has not made or received a payment for group relief
or for the surrender of advance corporation tax which may be liable to be
refunded in whole or in part.
23.39 All claims for group relief were when made valid and have been
or will be allowed by way of relief from corporation tax.
23.40 No tax is or may become payable by the Company pursuant to
Section 190 TCGA (Tax on company recoverable from other members of group) in
respect of any
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chargeable gain which accrued or will accrue prior to Completion and the Company
will at no time within the two years ending at Completion have transferred any
assets (other than trading stock) to any company which at the time of disposal
was a member of the same group (as defined in Section 170 TCGA).
Tax avoidance
23.41 The Company is not and has not been party to or otherwise
connected with any transaction to which any of the following provisions could
apply:-
23.41.1 Sections 729 to 745 (inclusive) ICTA (other
provisions about securities and transfer of assets
abroad);
23.41.2 Section 774 ICTA (Transactions between dealing
company and associated company);
23.41.3 Section 775 ICTA (Sale by individual of income
derived from his personal activities);
23.41.4 Section 116 ICTA (Partnerships involving,
companies: effect of arrangements for transferring
relief);
23.41.5 Section 399 ICTA (Dealings in commodity futures:
withdrawal of loss relief);
23.41.6 Sections 29 and 30 TCGA (Value shifting and value
shifting: further provisions).
23.42 The Company has not entered into any transaction to which any of
the following provisions have been or could be applied other than transactions
in respect of which all necessary clearances have been obtained:-
23.42.1 Section 139 TCGA (Company reconstruction
amalgamation: transfer of assets);
23.42.2 Sections 703 to 709 (inclusive) ICTA (Cancellation
of tax advantage from certain transactions in
securities);
23.42.3 Section 776 ICTA (Artificial transactions in
land);
23.42.4 Sections 135 to 138 (inclusive) TCGA (Company
reconstructions and amalgamations).
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23.43 The Company has not since the Accounts Date engaged in any
transaction in respect of which there may be substituted for any purpose of
Taxation a different consideration for the actual consideration given or
received by the Company.
Chargeable gains
23.44 The Company is not owed a debt (not being a debt on a security)
upon the disposal or satisfaction of which a liability to corporation tax on
chargeable gains will arise by reason of the provisions of Section 251 TCGA
(Debts).
23.45 No part of the consideration given by the Company for a new
holding of shares (within the meaning of Section 126 TCGA (Application of
Sections 127 to 131) will be disregarded by virtue of the proviso to Sections
128(1) and (2) TCGA (Consideration given or received by holder).
Value added tax
23.46 The Company is registered for value added tax purposes and:-
23.46.1 has complied in all material respects with all
statutory requirements orders provisions
directions or conditions relating to value added
tax;
23.46.2 maintains complete correct and up-to-date records
for the purposes of value added tax legislation;
23.46.3 is not in arrears with any payment or returns
under value added tax legislation nor liable to
any abnormal or non-routine payment or any
forfeiture or penalty or to the operation of any
penal provision thereunder
23.46.4 has not been required by the Commissioners of
Customs and Excise to give security;
23.46.5 has not for the purposes of value added tax
legislation applied for treatment as a member of a
group including any company other than the member
of the Group;
23.46.6 is not and has not agreed to become an agent
manager or factor for the purposes of Section 47
Value Added Taxes Act 1994 (Agents etc) of any
person who is not resident in the United Kingdom.
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23.47 The Disclosure Letter contains full particulars of any claim for
bad debt relief made in the last five years or which may be made by the Company
under Section 36 Value Added Taxes Act 1994 (Refund of tax in cases of bad
debts) or Section 11 Finance Act 1990 (bad debts).
23.48 No document has left the possession of the Company which if
improperly used by a third party would lead to any liability on the part of the
Company to pay any amount of value added tax under paragraph 5 Schedule 11 Value
Added Taxes Act 1994 (Recovery of tax etc) and which but for such use would not
have been payable by the Company.
Inheritance tax
23.49 The Company has made no gifts to any participator such as would
give rise to any liability for inheritance or capital transfer tax.
23.50 None of the Company's assets are subject to the charge imposed
by Section 237 Inheritance Tax Act 1984.
23.51 Within the last six years no transfer of value (as defined in
Sections 2 and 3 Inheritance Tax Act 1984 (Chargeable transfers and exempt
transfers: transfers of value) as amended by paragraph 1 of Schedule 19 Finance
Act 1986 has at any time been made by or to the Company.
23.52 There are not in existence any circumstances whereby any such
power as is mentioned in Sections 211 and 212 Inheritance Tax Act 1984 (Burden
of tax on death power to raise tax) could be exercised in relation to any shares
securities or other assets of the Company or could be so exercised but for
Section 204 of that Act (limitation of liability).
Stamp duty
23.53 All documents in the enforcement of which the Company may be
interested have been duly stamped.
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SCHEDULE 6
Deed of Covenant
DATED 199
----------------------------------------
(1) C.E.C. RADBONE
(2) TRANSMEDIA EUROPE, INC. AND
TRANSMEDIA ASIA PACIFIC, INC.
----------------
DEED OF COVENANT
----------------
Lewis Silkin
Windsor House
50 Victoria Street
London SW1H 0NW
Telephone: 0171 227 8000
Reference: TJW.TR240.009
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THIS DEED is made the day of 199
BETWEEN:-
(1) [C E C ] RADBONE of Flat 2, 47 Lansdowne Road,
London, W11 ("the Covenantor"); and
(2) TRANSMEDIA EUROPE, INC. AND TRANSMEDIA ASIA PACIFIC, INC. whose
registered office is at [
] ("together the Purchaser").
WHEREAS:-
This Deed is entered into pursuant to the provisions of an agreement ("the
Agreement") of even date made between the Covenantor and the Purchaser whereby
the Purchaser agreed to acquire the entire issued share capital of Countdown
Holdings Limited ("the Company").
NOW THIS DEED WITNESSETH as follows:-
1. INTERPRETATION
1.1 In this Deed unless the context otherwise requires:-
"Claim for Taxation"
means any notice demand assessment letter or other document issued or
action taken by any revenue authorities wheresoever in the world
whereby the Company is or may be under a liability to Taxation;
"Taxation"
means all forms of taxation duties charges imposts and levies of a
fiscal nature whatsoever and whenever imposed and whether of the
United Kingdom or elsewhere in the world and shall without prejudice
to the generality of that definition include income tax (including
PAYE), corporation tax, advance corporation tax, capital gains tax,
inheritance tax, stamp duty, stamp duty reserve tax, value added tax,
customs and other import or export duties and other excise duties,
national insurance and social security contributions, and all other
statutory, governmental, state, provincial, local government or
municipal impositions duties and levies of a fiscal nature and other
similar liabilities or contributions and any
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interest penalty and fine in connection therewith (whether assessed or
withheld at source) but excluding rates.
1.2 Words defined in the Agreement shall bear the same meaning in this
Deed where the context so admits.
1.3 Words importing the plural include the singular and vice versa and
words importing a gender include every gender and references to person include
bodies corporate or unincorporated.
1.4 Unless otherwise stated a reference to a Clause or sub-clause is a
reference to a clause or sub-clause of this Deed.
1.5 References to "the Company" shall extend to and include each Group
Company as the context admits.
2. COVENANT
2.1 The Covenantor hereby covenants with and undertakes to the
Purchaser to pay to the Purchaser by way of adjustment to the Consideration an
amount equal to any liability of the Company for Taxation arising from any Claim
for Taxation which has been made or may hereafter be made wholly in respect of
any act or omission other than the accrual of trading losses or other reliefs
for corporation tax purposes occurring on or before the date hereof and any
costs and expenses properly and reasonably incurred in connection with any
successful claim for made under this Deed.
2.2 For the avoidance of doubt the covenant in clause 2.1 hereof shall
extend to the following:-
2.2.1 all liabilities whether additional tax, national
insurance contributions or loss of tax relief
together with all interest and penalties
attracting or otherwise howsoever from the
engagement of persons as regional directors being
treated by the Company as self-employed being
assessed by the Inland Revenue to be and to have
been employed by the Company;
2.2.2 all liabilities including any penalties incurred
by the Company and any of its subsidiaries in
respect of the late filing or non-filing of forms
P11D;
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2.2.3 all liabilities arising from the demerger of
Countown Plc, Kensington & Chelsea Holdings
Limited and Card Protection Plan in 1992; and
2.2.4 all liabilities arising from any retrospective
claims made by H M Customs & Excise relating to
the value added tax treatment of the Group
2.3 The covenant herein given shall not be terminated by any variation
of this Deed or by any forbearance whether as to payment time performance or
otherwise whatsoever.
3. EXCLUSION
3.1 Save in the case of fraud on the part of the Covenantor the
covenant given by Clause 2 of this Deed shall not extend to any Taxation:-
3.1.1 to the extent to which provision or reserve in
respect thereof has been made or noted in the
Accounts; or
3.1.2 in respect of which provision or reserve has been
made in the Accounts which is insufficient only by
reason of increase in the applicable rates of
Taxation after the Accounts Date; or
3.1.3 for which the Company is or may become liable as a
result of transactions effected or occurring or
profits earned accrued or received by the Company
in the ordinary course of the business after the
Accounts Date; or
3.1.4 to the extent that such Taxation was discharged
(whether by payment of by the utilisation of any
relief, allowance or credit in respect of
Taxation) prior to Completion; or
3.1.5 to the extent that such Taxation arises or is
increased as a result only of any increase in
rates of Taxation or imposition of new Taxation or
any change in applicable law or practice made
after Completion; or
3.1.6 to the extent that recovery has been made in
respect of the matter giving rise to the Taxation
by the Purchaser under the Warranties; or
3.1.7 to the extent that full and fair disclosure of
such Taxation was made in the Agreement or the
Disclosure Letter or any document attached
thereto; or
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3.1.8 to the extent that such Taxation would not have
arisen but for, or is increased by, any voluntary
act, omission, transaction or arrangement of the
Purchaser or the Company other than in the
ordinary course of business after Completion; or
3.1.9 to the extent that such Taxation would not have
arisen but for, or has been increased by a
disclaimer, claim or election made or notice or
consent given after Completion by the Company
otherwise than at the request or direction of the
Covenantor under the terms of this Deed or unless
it was taken into account or assumed in computing
the provision of Taxation in the Accounts; or
3.1.10 to the extent that such Taxation would not have
arisen but for, or has been increased by a failure
or omission by the Company to make any claim,
election, surrender or disclaimer or give any
notice or consent or do any other thing after
Completion the making giving or doing of which was
taken into account or assumed in computing the
provision for Taxation (including the provision
for deferred Taxation) in the Accounts; or
3.1.11 to the extent that such Taxation is on or in
respect of prepayments received in the ordinary
course of business; or
3.1.12 to the extent that such Taxation arises from any
change in accounting or Taxation policy or
practice affecting the Company, including the
method of submission of Taxation returns,
introduced or having effect on or after
Completion; or
3.1.13 to the extent that the liability is in respect of
VAT which has been charged and a tax invoice
issued but which has not yet been accounted for to
H M Customs and Excise; or
3.1.14 to the extent that the liability of the Covenantor
is increased by the Purchaser's failure to notify
the Covenantor in accordance with Clause 5.10.1 of
the Agreement; or
3.1.15 which has been recovered from a person or persons
(not being a Group Company) other than the
Covenantor
PROVIDED THAT the exclusions in sub-clauses 3.1.1, 3.1.3, 3.1.7 and 3.1.11 above
shall not apply in respect of the covenant contained in clause 2.2 hereof.
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3.2 The provisions of Clauses 5.7, 5.8, 5.9 and 5.10 of the Agreement
shall have effect as if expressly incorporated into this Deed.
3.3 The above exclusions shall also apply to a claim for a breach of
any of the Warranties relating to Taxation.
4. PAYMENT
4.1 In the event that there is a change in law or Inland Revenue
practice after 23 August 1996 in relation to payments to be paid to the
Purchaser by the Covenantor hereunder giving rise to the Purchaser having a
Taxation liability in respect of such payment all sums payable by the Covenantor
to the Purchaser hereunder shall be paid (insofar as is lawful) free and clear
of all deductions and withholdings whatsoever and in the event that a deduction
or withholding is lawfully made the Covenantor shall other than in the case of
interest under clause 5 pay such greater sum which after any lawful deduction or
withholding therefrom results in a net payment equal to the amount due
hereunder.
4.2 In the event that there is a change in law or Inland Revenue
practice after 23 August 1996 in relation to payments to be paid to the
Purchaser by the Covenantor hereunder giving rise to the Purchaser having a
Taxation liability other than in the case of interest under clause 5 then such
further amount shall be paid by the Covenantor so as to secure in so far as is
possible that the net amount resulting after such liability to Taxation and
where appropriate any deduction or withholding such as is referred to in
sub-clause 4.1 or 7.1 hereof is equal to the amount due hereunder.
5. DATES FOR AND QUANTUM OF PAYMENTS
5.1 This Clause shall apply solely for determining the date upon which
any payments shall be made by the Covenantor pursuant to this Deed and (where
expressly provided) the amounts thereof.
5.2 The Covenantor shall make payment to the Purchaser or at the
direction of the Purchaser to the Company to the extent that the Company
discharges a Claim for Taxation:-
5.2.1 in respect of a liability to make a payment of
Taxation on the latest date for payment of that
Taxation and the Covenantor shall
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not be liable to make any payment unless and until
the liability for Taxation of the Company has been
finally determined within the meaning of the Taxes
Management Act 1970 or if later 5 working days
following the date on which the Purchaser notifies
the Covenantor of the liability to make the
payment;
5.2.2 in respect of costs and expenses, seven days after
service on the Covenantor by the Purchaser of a
notice containing details of the costs and
expenses.
5.3 If any amount is not paid as provided in the foregoing provisions
of this Clause 5 the Covenantor shall pay to the Company interest on such amount
calculated on a daily basis at the rate of 2% per annum above the base rate of
National Westminster Bank plc for the time being in force from the relevant date
specified in this Clause 5 until and including the date of actual payment (after
as well as before judgment).
6. SAVINGS
6.1 If the Taxation which has resulted in the payment by the
Covenantor hereunder becoming due shall give rise to a corresponding saving
("the Saving") of Taxation for the Company or the Purchaser then the amount of
the Saving shall be set off against any payment then due from the Covenantor
under this Deed or (to the extent that it is not so set off) shall be paid by
the Purchaser (subject to a maximum amount equal to the amount which the
Covenantor has already paid under this Deed less the amount which the Purchaser
has already paid under this Clause to the Covenantor within 14 working days of
the Saving being obtained.
6.2 If the Purchaser or the Company shall discover that there has been
a Saving the Purchaser shall forthwith give full details thereof to the
Covenantor and the Purchaser shall supply to the Covenantor such information as
he may reasonably require to verify the amount of the Saving.
6.3 For the purposes of Clause 6.1, a person obtains a Saving if as a
result of the Taxation which results in a claim by the Purchaser hereunder that
person is relieved in whole or in part of a liability to make some other payment
of Taxation which it would otherwise have been liable to make or obtains a right
to repayment of Taxation which would not otherwise have been available.
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7. OVER PROVISION
7.1 If any provision contained in the accounts of the Company
for periods up to 31 August 1995 shall be found to be an
over-provision or excessive ("Over-provision") then the
amount of the Over-provision shall be set off against any
payment due or which may become due from the Covenantor
under this Deed.
7.2 If the Company or the Purchaser shall discover that there
has been an Over-provision the Purchaser shall or shall
procure that the Company shall forthwith give full details
thereof to the Covenantor and the Purchaser shall or shall
procure that the Company shall supply to the Covenantor such
information as he may reasonably require to verify the
amount of the Over-provision.
8. TAX RETURNS
8.1 It is hereby agreed that the Covenantor shall be responsible for
and have control of the following matters:
8.1.1 the preparation of all computations and returns of
the Company relating to Taxation for all periods
of the Company ended on or before Completion;
8.1.2 the submission of such computations and returns to
the appropriate taxing authority and all
negotiations, correspondence and agreements with
respect thereto; and
8.1.3 the preparation and submission of all such
notices, claims or elections relating to Taxation
as the Covenantor may deem appropriate to be made
by the Company in connection with any such
computations or returns.
All reasonable professional costs incurred in connection with the above matters
shall be borne directly by the Company.
8.2 The Purchaser shall procure that the Company shall cause the
said computations, returns, notices, claims, elections and
agreements to be authorised, signed and returned to the
Covenantor or his duly authorised agent for submission to
the appropriate taxing authority without amendment and
without delay (and in any event within any applicable time
limited).
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8.3 The Purchaser shall procure that the Company shall afford such
access to its books, accounts and records as is necessary and reasonable and
shall procure that the Company shall give the Covenantor or his duly authorised
agent all such assistance as may reasonably be required to enable the Covenantor
or the Company's auditors to prepare the returns, computations, notices, claims
and elections and conduct matters relating thereto.
8.4 In relation to the computations and returns relating to Taxation
for the period of the Company in which Completion takes place, the Purchaser
shall procure that:
8.4.1 no computations and returns are submitted to the
appropriate taxing authority unless such
computations and returns have first been given to
the Covenantor for comment not less than
twenty-one days before the date of submission;
8.4.2 the Company takes account of any reasonable
comments made by the Covenantor in relation to
such computations and returns; and
8.4.3 such computations and returns are submitted to the
appropriate taxing authority without amendment or
only with such amendments as the Covenantor shall
agree such agreement not to be unreasonably
withheld or delayed
PROVIDED THAT the Company shall not be obliged to submit any computations and
returns relating to Taxation to any taxing authority unless it is satisfied that
they are full, true and accurate to all material respects.
9. COVENANT BY PURCHASER
9.1 If the Company fails to pay any corporation tax liability which
becomes due and payable after the date of this Deed the Purchaser will indemnify
the Covenantor against any liability under Section 767A ICTA that may be
assessed on the Covenantor as a result PROVIDED THAT this Clause shall not apply
in respect of any Taxation which remains unpaid where the Covenantor has an
outstanding liability to make a payment to the Purchaser under this Deed or the
Agreement.
10. GENERAL
10.1 The following provisions of the Agreement shall apply to this
Deed mutatis mutandis as if the same had been set out herein save that
references therein to the Vendor his addresses and the Agreement respectively
shall be construed as references to the Covenantor, his address and this Deed:-
10.1.1 Clause 7 Waivers and Variation;
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10.1.2 Sub-clause 9.3 Notices;
10.1.3 Sub-clause 9.9 Jurisdiction.
10.2 The benefit of this Deed may be assigned in whole or in part by
the Purchaser to any company in the Purchaser's Group provided that such
assignment shall not afford any third such party any greater right or claim
against the Covenantor than any right or claim the Purchaser would have and this
Deed shall be binding upon and enure for the benefit of the successors in title
of each of the parties hereto.
IN WITNESS whereof this Deed has been executed the day and year first before
written.
SIGNED AS A DEED
by [ ]
in the presence of:
EXECUTED AS A DEED
by [ ]
and signed by:-
Director
Director/Secretary
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SCHEDULE 7
Service Agreement
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SIGNED by [ ]
in the presence of:
SIGNED by
for and on behalf of
[ ]
in the presence of:-
