<PAGE>
FORM 10-K/A
AMENDMENT NO.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[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___________
COMMISION FILE NO. 0-26368
TRANSMEDIA ASIA PACIFIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN IT'S CHARTER)
Delaware 13-3760219
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including area code: U.K. 011-44-171-930-0706
Securities registered pursuant to Section 12 (b) of the Act:
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 (or for such shorter period that the Registrant was required
to file such reports), 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 2, 1998 was $10,258,482 based upon the closing sale
price of a share of Common Stock on The National Association of Securities
Dealers Automated Quotation ("NASDAQ") Small Cap Market System.
Number of shares outstanding of the Registrant's Common Stock, as of February
27, 1998 was 16,596,095.
Documents Incorporated by Reference: None.
The purpose of this Amendment is to amend items 1-13 inclusive.
<PAGE>
PART I
Item 1 - Business
Background
Transmedia Asia Pacific, Inc. ("TMAP" or "the Company") is a Delaware
corporation which was formed in March 1994 and began business operations in
Sydney, Australia in November 1994. On May 2, 1994 the Company acquired from
Conestoga Partners II 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
March 21, 1994. 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 essentially all the countries in Asia and the
Pacific Rim including Japan, China, Hong Kong, Taiwan, Korea, the Philippines
and India (the "Licensed Territories"). As used in this report, the term
"Company" includes Transmedia Asia Pacific 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", "- Nationwide Helpline Services", "-
Countdown Acquisition" and "- NHS Acquisition".
Corporate Development
For some time, the management of both the Company and Transmedia Europe Inc.,
("TME") a company which shares common directors, officers and stockholders with
the Company, have been questioning the need to maintain two separate corporate
entities. 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, 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, that 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 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.
<PAGE>
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 TME. See "-Countdown
Business". TME effectively controls the operations of Countdown and, as such,
Countdown's operations are accounted for on the equity method in the financial
statements of the Company included herein.
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 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.
Nationwide Helpline Services
On December 2, 1997 Transmedia Australia Holdings Pty Limited (`Transmedia
Australia'), a newly formed company owned equally by the Company and TME,
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. The operations of NHS will be effectively
controlled by the Company and, as such, are anticipated to be consolidated
within the Company's financial statements in future periods. Transmedia
Australia also acquired an option to purchase the balance of 49% of the shares
of common stock NHS. If this option is not taken, it could result in the loss of
the whole investment to date. See `NHS Acquisition'.
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.
<PAGE>
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 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 September 30, 1997, the Company had approximately 274 Company
Participating Restaurants and approximately 36,800 Company Cardholders. The
Company is currently operating in Australia and New Zealand, 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 590,790 shares of Common Stock 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.
TME, of which Edward J. Guinan III, Chairman of the Board of Directors is the
principal shareholder, owns an equivalent license from TMNI covering all the
countries in Europe, Turkey and the other countries outside of Europe that were
formerly part of the Union of Soviet Socialist Republics. TME commenced
operations in the United Kingdom in January 1994 and has obtained approximately
52,000 cardholders since its launch.
<PAGE>
Transaction Illustration
The following is a descriptive illustration of a hypothetical transaction by a
Company Cardholder at a Company Participating Restaurant.
The Company, through a commissioned sales representative, recruits Restaurant A,
a full service restaurant operating in Sydney, as a Company Participating
Restaurant. The Company grants Restaurant Credits in the amount of $3,000
(Aus.) which entitles the Company to collect the proceeds from $6,000 (Aus.) 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 (Aus.) check (consisting of $80 (Aus.) for food and beverages
and $20 (Aus.) 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 (Aus.) of Restaurant A's Food and Beverage
Credits (for which it has made Restaurant Credits of $40 (Aus.)) and reduces the
Restaurant Credits due to it from Restaurant A by $40 (Aus.). The Company then
submits a credit to Mr Smith's Major Credit Card Account in the amount of $20
(Aus.) (representing 25% of the $80 (Aus.) of food and beverages consumed).
Upon receipt of The Restaurant Card receipt of Mr Smith of $100 (Aus.), the
Company forwards $20 (Aus.) of this amount (representing the tax and service
portion of Mr Smith's meal check) to Restaurant A. The Company forwards $1.60
(Aus.) as a royalty to Network (2% of the $80 (Aus.) of Food and Beverage
Credits used) and keeps $58.40 (Aus.). This compares with Restaurant Credits
made by the Company of $40 (Aus.) to Restaurant A and the $80 (Aus.) 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 (Aus.) check can be summarized as
follows:
<TABLE>
<CAPTION>
Name Amount Received Nature of Allocation
<S> <C> <C>
Mr Smith $20 (Aus.) 25% of food and beverage charges (exclusive of
tip and taxes) credited to his Major Credit
Card account.
Restaurant A $20 (Aus.) Payment of service and taxes.
Restaurant A -0- The Restaurant Credits due to the Company by
Restaurant A are reduced by $40 (Aus.).
Network $1.60 (Aus.) A royalty fee of 2% of the $80 (Aus.) of Food
and Beverage Credits used is payable to
Network.
The Company $58.40 (Aus) This represents a reduction of Restaurant
Credits by $40 (Aus.) plus $18.40 (Aus.) 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 (Aus.).
</TABLE>
Countdown Acquisition
On April 3, 1997, the Company purchased from Mr. C.E.C. Radbone 50% of the
outstanding capital stock of Countdown Holdings Limited, 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 worldwide, 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 TME.
<PAGE>
In payment of the purchase price, the Company issued 1,330,524 shares (the
"Radbone Shares") of its common stock, $.00001 par value per share ("Common
Stock"), 277,193 options to purchase shares at $0.90 each, and paid UK pounds
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 TME 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 was originally scheduled to
mature on September 27, 1997, bears interest at a rate of 12% per annum, and has
been renewed by agreement between the Company and the director. The repayment
period of the loan has not been stipulated and it continues to bear interest at
12% per annum. 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 138,596 shares
of Common Stock at $1.13 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 1,330,524 shares of Common Stock of
the Company and options to purchase 277,193 shares of Common Stock of the
Company at $0.90 per share, and agreed to grant Edward J. Guinan III, the
Chairman of the Board of Directors, an option to purchase these shares and
options 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 Transmedia Europe, Inc. Common Stock owned
by him), 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 TME each agreed to pay
$125,000 in cash to TMNI International Incorporated ("TMNI") and the Company and
TME jointly issued to TMNI a promissory note in the principal amount of
$500,000, payable on April 2, 1998 and bearing interest at the rate of 10% per
annum. The promissory note is convertible at the holder's option into $250,000
in value of Common Stock of each issuer at the rate of $1.20 per share. The
Company agreed to pay such amounts in order to obtain the consent to the
Countdown Acquisition, which consent was required by the terms of the master
license agreement from TMNI under which the Company operates its discount
restaurant charge card business. The transaction was described in more detail in
the Company's Form 8-K dated April 3, 1997 which is incorporated by reference
herein.
NHS Acquisition
On December 2, 1997, Transmedia Australia, a newly-formed company owned equally
by the Company and TME, indirectly through NHS Australia Pty Limited, purchased
in simultaneous transactions 51% of the shares of common stock of NHS, an
Australian company. The total purchase price for the transaction (including a
deposit of Aus.$ 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, 250,000 shares of the common stock of the Company and 250,000
shares of the common stock of TME. The second tranche (Aus. $2,842,540
($1,870,092)) is payable on January 31,1998 (which date may be extended by up to
90 days provided that interest will accrue during any such extension at 5% per
annum).
<PAGE>
The sign on fees are payable 50% on January 31, 1998 and the balance 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). The Company has given notice that payment
of the second tranche due January 31, 1998 is being extended by the permitted 90
days and, at the the request of the principals, the payment of the portion of
the sign on fees due on January 31, 1998 has been delayed pending their
instructions. Transmedia Australia also acquired an option to purchase the 49%
balance of NHS's shares of 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 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 Form 8-K dated December 2, 1997, which is incorporated by this
reference herein.
Employees
As of December 29, 1997, the Company employed 62 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 Australia. 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, 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.
<PAGE>
NHS is the largest membership benefits provider in Australia offering 5,000,000
members a diverse range of benefits including helpline, 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 Australia and New Zealand, but has not inquired yet as
to whether or not any permits may be required in the rest of the Licensed
Territories.
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 1994 in Sydney, Australia. 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 $7,376,641 and the
Company's net loss for the fiscal year then ended was $3,030,445. There can be
no assurance that the Company will ever achieve profitable operations. The
likelihood that the Company will succeed in the member discount business must be
considered in light of general economic conditions and the difficulties,
expenses and delays experienced. The economic conditions which exist in
Australia in particular should be considered. 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.
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 exercising of warrants, (see "Consolidated
Financial Statements").
<PAGE>
License Obligations
The Company is required to operate its 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 Australia and New
Zealand, prior to specified times may result in loss of rights granted under the
License for the Licensed Territories other than Australia. Moreover, the failure
to operate the Company's 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.
The Company has received an extension of time for establishing new operations
whereby the Company is required to establish another operation in a country
other than Australia and New Zealand by September 1998 and in another by
September, 2000.
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 acquisition, although the loan has been renewed for an
indefinite period, repayments 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 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 and
its results of operations. Moreover, any additional financing, including any
financing obtained through the issuance of equity, could result in substantial
dilution to shareholders.
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.
Impact of Nasdaq Listing on Marketability of Securities
The National Association of Securities Dealers, Inc. ("NASD") has rules which
establish criteria for the initial and continued listing of securities on Nasdaq
SmallCap Market ("Nasdaq"). Under the rules, which will be applied in February
1998 for continued listing on Nasdaq, a company must maintain at least
$2,000,000 in net tangible assets, and 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.
Within the time allowed by Nasdaq, the Company was able to meet the necessary
requirements.
<PAGE>
While the Company's Common Stock is currently listed on Nasdaq, the Company
might not be able to maintain the standards for continued listing in the future
and the listed securities could, at such time, become subject to delisting from
Nasdaq. If the Common Stock is delisted in the future, trading in the Common
Stock could be conducted on the NASD Bulletin Board or in the over-the-counter
market in what is commonly referred to as the "pink sheets". If this occurs, an
investor 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, if
the Common Stock is not listed, 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 in the Offering 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 Australia and New Zealand, 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.
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 Australia
in the Fall of 1994. 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.
<PAGE>
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 sublicensees. 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 Westpac Banking Corporation Pty Limited, 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- 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 Westpac Banking Corporation Pty
Limited, 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 plans to operate 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.
<PAGE>
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 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 in part on the abilities and
efforts of Mr. Guinan, Chairman of the Board of Directors of the Company and Mr
Harrison, a Director of the Company. Any incapacity or inability of Mr. Guinan
and Mr Harrison 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 lives of Mr. Guinan or 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 acquirors.
Guarantee of Sublicenses and Franchise Obligations.
Under the License Agreement the Company has guaranteed the payment of all
amounts owed by its sublicensees and/or franchisees to Network. In the event
that such sublicensees 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
The Company believes that it possesses all governmental permits or licenses
necessary to operate in Australia and New Zealand. However, it does not possess
any governmental permits or licenses for other portions of the Licensed
Territories, and has not inquired yet whether any permits or licenses will be
required. In the event permits or licenses are necessary for the conduct of the
Company's business in other portions of the Licensed Territories, or additional
licenses or permits are required in respect of operations in Australia and New
Zealand, 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.
<PAGE>
No Dividends on Common Stock
Since its 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".
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.
<PAGE>
Item 2 - Properties
The Company leases office space of approximately 4,400 square feet in Sydney,
Australia. The lease expires in September, 1999, at a net rental of
approximately Aus. $65,000 ($47,000) per annum.
NHS leases office space of approximately 3,500 square feet at an annual rental
of approximately Aus.$130,000 ($94,000) per annum. The lease which expires in
June 1998 is renewable for a further four years by mutual consent according to
normal terms and provisions applicable in the area.
The Company shares office space at 11 St James's Square, London, England which
is leased to its affiliate TME. In the year ended September 30, 1997 the
Company reimbursed TME in the amount of $38,039 for its share of the rental
cost.
Item 3 - Legal Proceedings
There are currently no material legal proceedings 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.
<PAGE>
PART II
Item 5 - Market for Registrant's Common
Equity and Related Stockholder Matters
(a) Market Information: The Company's Common Stock $.00001 par value (the
"Common Stock") is traded on Nasdaq Small Cap Market ("Nasdaq") under the
symbol "MBTA". 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>
Quarter ended High Low
-------------- ---- ---
<S> <C> <C>
December 31, 1995 2 1/4 1 3/4
March 31, 1996 2 1 3/8
June 30, 1996 2 5/8 1
September 30, 1996 7/8 1/8
December 31, 1996 1 1/2 1
March 31, 1997 1 3/8 1/2
June 30, 1997 1 1/4 1/2
September 30, 1997 1 3/8 1/2
December 31, 1997 1 3/8 1/2
February 13, 1998 1 3/8 1/2
</TABLE>
The closing bid and ask prices of Common Stock as of January 30, 1998 were
$1.375 and $1.4375, respectively.
(b) Holders of Common Stock: The number of stockholders on record of the
Common Stock on February 13, 1998 was 228. The Company believes that there
is a significant number of beneficial owners of its Common Stock whose
shares are held in "Street Name.".
(c) Dividends: The Company has paid no cash dividends with respect to the
Common Stock since February 9, 1993 (inception). The Company intends to
retain future earnings, if any, that may be generated from the Company's
operations to help finance the operations and expansion of the Company and
accordingly does not plan, for the foreseeable future, to pay dividends to
holders of the Common Stock. 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 1,347,095
shares of Common Stock at a purchase price of $1 per share. For every three
shares purchased, each purchaser has received, 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, the Company agreed to issue to
certain holders of preferred stock of the Company three-year warrants to
purchase up to an aggregate of 327,656 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.
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for each
of the last three fiscal years. This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company included in
this Report.
In December 1997 the Company acquired an interest in NHS, whose results are
not reflectedherein but whose results will be consolidated in fiscal 1998 using
the purchase method of accounting.
INCOME STATEMENT DATA
<TABLE>
<CAPTION>
PERIOD MARCH 10,
YEAR ENDED YEAR ENDED YEAR ENDED 1994
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, (INCEPTION) TO
1997 1996 1995 SEPTEMBER 30,1994
------------- ------------- ------------- --------------------
<S> <C> <C> <C> <C>
Revenues..................................... $ 1,924,908 $ 1,659,515 $ 1,075,517 $ --
Membership fees.............................. 204,504 230,961 27,564 --
Gross Profit................................. 871,593 791,810 400,358 --
Loss from operation.......................... (2,851,737) (2,027,263) (2,075,747) (377,498)
Share of losses of associated company........ (209,715) -- -- --
Net loss..................................... $(3,030,455) $(2,006,258) $(1,990,288) $ (349,650)
Net loss per share........................... $ (0.22) $ (0.16) $ (0.17) $ (0.03)
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS AT SEPTEMBER 30
----------------------
<S> <C> <C> <C> <C>
1997 1996 1995 1994
---------- ---------- ---------- ----------
Restaurant credits............................................ $ 301,815 $ 636,808 $ 593,418 $ 61,129
Intangible assets............................................. 1,196,943 1,746,176 1,868,855 1,841,560
Total assets.................................................. 4,798,380 3,954,947 4,312,460 4,164,997
Total liabilities............................................. 2,048,227 776,350 627,816 151,920
Total equity.................................................. 2,750,153 3,178,597 3,684,644 4,013,077
Other Data
Numberof Participating Restaurants............................ 274 430 330 25
Number of Company Cardholders................................. 36,800 18,000 9,000 --
</TABLE>
<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 Transmedia Restaurant Card business is such that
there is a lead time before profitable operations can be achieved. The success
of the Company is dependent upon increasing the number of Company Cardholders
and Company Participating Restaurants, as well as obtaining increased usage of
The Restaurant Card by Company Cardholders. The Company's joint venture
marketing partners have been predominantly large size organisations, with
lengthy internal procedures. Consequently preparing campaigns for launch and the
resulting anticipated growth in Company Cardholders has been considerably slower
than was initially anticipated. This is demonstrated in the financial results
for the years ended September 30, 1997, 1996 and 1995.
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 its
affiliate TME 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 TME each purchased 50% of
Countdown, an international provider of membership discount services and in
December 1997 jointly acquired with TME 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 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
offered.
The results of Countdown are reflected in these statements from April 3,
1997(the date of acquisition) using the equity method of accounting. The
results of NHS are not reflected herein but will be consolidated in fiscal 1998
from December 2, 1997 (the date of acquisition), using the purchase method of
accounting and will as a result affect the comparability of prior periods.
In February 1997 the Company entered into an Agreement and Plan of
Reorganisation to merge the Company and its affiliate Transmedia Europe, Inc.
under the name Membertek International, Inc. The acquisition of NHS caused the
Company to postpone the merger, however management is committed to merging the
companies in fiscal 1998.
Results of Operations
The Company began generating revenues from operations in November 1994 as
management began recruiting Company Cardholders. Revenues increased
significantly on a monthly basis from November 1994 to May 1995 as the Company
increased its base of Company Cardholders as a result of the Sydney Morning
Herald promotion and also increased the number of Company participating
Restaurants. The Company's revenues are generated primarily from the usage of
The Restaurant Card. Accordingly, the Company has marketing programs which are
intended to increase the frequency of use of The Restaurant Card in addition to
obtaining new Company Cardholders.
<PAGE>
Year Ended September 30, 1997
The Company generated revenues of $1,924,908 (1996: $1,659,515 and 1995:
$1,075,517) for the year ended September 30, 1997, an increase of 16% over the
previous year. The Company increased the number of Company Cardholders from
18,000 at September 30, 1996 to 36,800 at September 30, 1997. This increase was
largely as a result of the Westpac Banking Corp. campaign launched in September
1996 and a novel marketing exercise in December 1996 with the Australian company
FAI Insurance ('FAI') as a joint marketing partner. The arrangement allows an
FAI customer, taking The Restaurant Card to reduce their insurance costs by the
25% saving on food and beverages purchased, net of taxes and service, received
from using The Restaurant Card. The Company decreased the number of Company
Participating Restaurants from 430 at September 30, 1996 to 274 at September 30,
1997. This decrease was as a result of the Company removing under-performing
restaurants from the program.
Membership fees of $204,454 (1996: $230,961 and 1995: $27,564) for the year
ended September 30, 1997 show a reduction of 11% over the previous year. The
decrease is a result of an accounting adjustment to the deferred membership fees
in the first quarter and the effect of the Free membership card.
Cost of sales amounted to $1,257,769 (1996: $1,098,666 and 1995: $702,723) for
the year ended September 30, 1997, an increase of 15% over the previous year.
The variance to the 16% increase in revenues is primarily attributable to the
20% discount associated with the Free membership card. Cost of sales are
approximately 50% of the gross food and beverage value consumed by Company
Cardholders and represents the recovery of the advances ('Restaurant Advances')
made by the Company to the respective Company Participating Restaurants.
Selling, general, and administrative expenses, consisting primarily of salaries,
rents, commissions, and other general overhead costs amounted to $3,723,330
(1996: $2,819,073 and 1995: 2,476,105) for the year ended September 30, 1997, an
increase of 32% over the previous year. The increase is primarily due to
professional fees of $118,642 for work on the proposed merger with TME,
additional goodwill amortization of $276,445 to reflect a diminution in the
carrying value of the license based upon estimated future cash flows, $112,875
of costs relating to the termination agreement with Mr C.E.C. Radbone, a former
director of the Company, $242,012 of unrealised foreign exchange losses arising
on the restatement of the inter-company balance between the Company and
Transmedia Australia and the write off of the Hawaii option of $150,000. But for
these additional expenses, the Company would have reported a small decrease for
the year in selling, general and administrative expenses.
The Company's share of losses relating to Countdown's operations for the period
from April 3, 1997 to September 30, 1997 was $202,905. The Company earned
$31,007 (1996: $21,005 and 1995 $85,459) for the 1997 fiscal year from the
temporary investment of excess cash funds and from loans to certain
stockholders.
In October 1997 Countdown recruited two managers to establish a Countdown Direct
Marketing division in the UK, to primarily sell membership directly to the
public through a network of commissioned agents. Their initiative involves the
Company in the periodic recruitment and training of agents with plans to have a
network of approximately 200 agents within the first year of operation. The
initial draft of agents completed their training in February 1998 and it is too
early to determine if the initiative will be successful.
The acquisition of Countdown provides management with the opportunity to realise
cost savings and achieve economies of scale. In June 1997 the Transmedia UK
operations relocated to Countdown's premises and the Company is seeking to
sub-let a floor of the offices it shares with TME at 11 St James's Square,
London vacated by the relocation. Management is currently reviewing means of
sharing resources and out-sourcing functions and expects to be able to achieve
significant savings in fiscal 1998
<PAGE>
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.
Year Ended September 30, 1996
The Company generated revenues of $1,659,515 (1995: $1,075,517) in the year
ended September 30, 1996, an increase of 54% over the previous year. The
increase in revenues can be principally attributed to the September 1995 launch
in Melbourne with The Age newspaper. The Company has been well received by the
Melbourne restaurant community, having attracted a number of award winning
restaurants as Company Participating Restaurants. This success has subsequently
been repeated in Brisbane, with approximately 50% of the Company Participating
Restaurants receiving awards in the Queensland State Premier's 1996 annual
tourist awards. The Company increased its number of Cardholders from 9,000 to
18,000 at September 30, 1995 and September 30, 1996 respectively, largely as a
result of the 10,000 Company Cardholders produced by the Westpac Banking Corp.
campaign since August 1996. The Company increased its number of Participating
Restaurants from 330 to 430 at September 30, 1995 and at September 30, 1996
respectively. Membership fees for the year ended September 30, 1996 of $230,961
are significantly greater than the $27,564 reported for 1995 and are as a result
of the Company billing Company Cardholders for the first time following the
typically waived membership period. In August 1996 the Company introduced the
'Free card' option for membership whereby cardholders can opt for membership at
no annual fee but with a reduced discount benefit of 20%, as compared to the
standard discount of 25%. The Free card was launched at the same time as the
Westpac Banking Corp. campaign.
Cost of sales amounted to $1,098,666 (an increase of 54% over 1995) for the year
ended September 30, 1996 and is in line with the 54% increase in revenues. Cost
of sales are approximately 50% of the gross food and beverage value consumed by
Company Cardholders and represents the recovery of the restaurant credits made
by the Company to the respective Company Participating Restaurants. The
relationship between revenues, net of discount, and cost of sales will change in
future as cardholders opt for the 20% 'Free card' discount.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the year ended September 30, 1996 amounted to $2,819,073
representing an increase of 14% over 1995, which compares favourably when
compared to the 54% increase in revenues. During the year significant savings
have been achieved in printing costs.
The Company earned $21,005 for the 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
Revenues, exclusive of membership fees of $27,564 for the year ended September
30, 1995 amounted to $1,075,517. Revenues represent the retail value of food and
beverage consumed by Company Cardholders at Company Participating Restaurants,
less the 25% discount that is granted to Company Cardholders. Cost of sales is
approximately 50% of the retail value of the food and beverage consumed by
Company Cardholders and represents the recovery of the Restaurant Credits made
by the Company to the respective Company Participating Restaurants. The gross
profit of $400,358 for the year amounts to 25% of the full retail value of the
food and beverage consumed by the Company Cardholders, together with a pro rata
portion of membership fees and other income. The Company acquired 9,000
Cardholders during the year ended September 30, 1995. The Company increased its
number of Participating Restaurants from 25 to 330 at September 30, 1994 and at
September 30, 1995. Selling, general and administrative expenses amounted to
$2,476,105 for the year ended September 30, 1995 representing the costs of the
first full year's operation and the costs relating to the registration of the
Company's Common Stock under the Securities Act of 1933.
<PAGE>
The Company earned $85,459 and $34,148 for the year ended September 30, 1995
and, the period ended September 30, 1994, respectively, from the temporary
investment of excess cash funds. The Company was in a net operating loss carry
forward position for income tax purposes however no tax benefit was recognised
in the 1995 fiscal year.
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, 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, $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.
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 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 and
its results of operations. Moreover, any additional financing, including any
financing obtained through the issuance of equity, could result in substantial
dilution to shareholders.
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 exercising of warrants (see "Consolidated Financial
Statements").
The Company was initially capitalised with 7,249,500 shares, after giving
retroactive effect to stock dividends. On May 26, 1994, TMAP issued and sold
4,565,790 shares of Common Stock of which: (i) 450,000 to Conestoga for
$450,000; (ii) 590,790 to Network, as partial consideration for the purchase of
the License; and (iii) 3,525,000 were sold to private investors in a private
placement at an offering price of $1 per share. Of the cash proceeds of
$3,525,000, $1,000,000 was paid to Network for further consideration (in
addition to the $250,000 paid to Network by Conestoga and reimbursed to
Conestoga by the Company) for the purchase of the License leaving a balance,
after costs, of $2,322,212 available to the Company for use as working capital
in respect of the utilization by the Company of its rights under the License.
Initially such utilization has taken place in Australia through the Company's
wholly owned subsidiary, Transmedia Australia Pty Limited. In the future, the
Company may expand operations in other portions of the Licensed Territories
through wholly owned subsidiaries or through unaffiliated sublicensees and
franchisees.
In April 1995, the Company completed a second private placement of 673,800
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 utilization by
the Company of its rights under the License agreement. The net cash to the
Company from the second private placement of shares in April 1995 was
$1,892,656.
In July 1996, the Company sold 892,857 shares of Common Stock at a price of
$1.40 per share. The net proceeds of $1,235,000 were used to provide working
capital to existing operations.
In December 1996, the Company issued 556,250 shares of Common Stock at a price
of $2 per share. The purchasers were also issued warrants to purchase an
aggregate of 185,417 shares of common stock
<PAGE>
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
completed a private placement in which it sold an aggregate of 1,347,095
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 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.
On December 2, 1997, Transmedia Australia, a company owned equally by the
Company and TME indirectly purchased in simultaneous transactions 51% of the
business and assets of NHS. The total purchase price for the transaction
(including a deposit of Aus $345,000 ($252,000)) was Aus $12,500,000
($9,125,000), of which Aus $4,000,000 ($2,940,000) 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, TME The second tranche Aus. $2,842,540 ($2,073,000) is
payable in cash on January 31, 1998 (which date may be extended by up to 90 days
provided that interest will accrue during such extension at 5% per annum). The
sign-on fees are payable one half on January 31, 1998 and the balance 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). The Company has given notice
that payment of the second tranche due January 31, 1998 is being extended by the
permitted 90 days and, at the request of the principals, the payment of the
portion of the sign on fees due on January 31, 1998 has been delayed pending
their instructions. Transmedia Australia also acquired an option to purchase the
49% balance of NHS's business and assets for an additional Aus $2,497,655
($1,823,000) (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 October 17, 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 became 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 the Company, 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.
On December 23, 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. 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. The Letter of Intent provides for a purchase price of pounds UK
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 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.
<PAGE>
On January 9, 1998, the Company entered into an agreement in principle, subject
to confirmation by 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, the redemption by the Company on January 19, 1998 of
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 each.
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, a subsidiary of the Company,
was cancelled. Mr. Radbone holds 1,330,524 shares of Common Stock of the
Company and options to purchase 277,193 shares of Common Stock of the Company at
$0.90 per share, and agreed to grant Edward J. Guinan III, the Chairman of the
Board of Directors, an option to purchase these shares and options 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 Transmedia Europe, Inc. Common Stock owned by him), which will be
transferred to Mr. Radbone if the option is not exercised and paid by January
15, 1999.
Aquisition of Countdown
In connection with the acquisition of the Company's interest in Countdown in
April 1997, the Company borrowed $1,000,000 from a director, with interest at
12% per annum. In addition, the Company and TME jointly issued promisory notes
to TMNI in the principal amount of $500,000, at 10% per annum (See Item 1-
Business, "Countdown Acquisition").
As Countdown is deemed to be under the control of TME, the results of Countdown
have been included in these statements on an equity accounting basis. Included
in the carrying value for Investment in Affiliates of $2,850,000 (see note 3 to
the financial statements) is $3,100,000 relating to goodwill on acquisition
caused by the net liability position of Countdown at the date of acquisition.
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 Year 2000
The Company is aware that it must evaluate the effect of the year 2000 on
the Company's internal operating and accounting software and other systems and
third party systems with whom Countdown does business, and make an assessment as
to the significance of cost to the Company of becoming year 2000 compliant.
There can be no assurance as to the extent of the impact of this assessment.
The Company has not yet completed its evaluation of the potential impact,
but management expects to complete this in the near future. There can be no
assurance that the cost will not be significant.
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
<PAGE>
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.
<PAGE>
Item 8- Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors F1 - F2
Consolidated Balance Sheets F3 - F4
September 30, 1996 and 1997
Consolidated Statement of Operations F5
for the year ended
September 30, 1997, 1996 and 1995
Consolidated Statement of Stockholders Equity F6
for the year ended September 30, 1997.
Consolidated Statement of Cash Flows F7
for the year ended September 30, 1997
Notes to the Consolidated Financial Statements. F8 - F26
</TABLE>
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Transmedia Asia Pacific, Inc.
We have audited the accompanying consolidated balance sheet of Transmedia Asia
Pacific, 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 provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Asia Pacific, Inc. and subsidiaries as of September 30, 1997, and the
results of their operations and their 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. It has
funded this 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. Should
the Company be unable to continue to effect such sales of equity and exercises
of warrants or obtain other sources of funding, this would raise substantial
doubt about its ability to continue as a going concern. 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 2, 1998
BDO Stoy Hayward
London, England
F-1
<PAGE>
Report of Independent Public Accountants
The Board of Directors and Stockholders
Transmedia Asia Pacific, Inc.
We have audited the accompanying consolidated balance sheet of Transmedia Asia
Pacific, Inc. and subsidiary as of September 30, 1995 and the related
consolidated statement of operations, changes in stockholders' equity and cash
flows for the year ended September 30, 1995, and for the period from March 10,
1994 (inception) through September 30, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material mis-statement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Asia Pacific, Inc. and subsidiary as of September 30, 1995, and the
results of their operations and cash flows for the year ended September 30, 1995
and for the period from March 10, 1994 (inception) through September 30, 1994 in
conformity with generally accepted accounting principles in the United States.
Arthur Andersen
Sydney
Australia
December 20, 1995
F-2
<PAGE>
Transmedia Asia Pacific, Inc.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------------------------------------------ -------------
<S> <C> <C>
Current assets
Cash (including temporary cash investments of
$nil at September 30, 1997 and $1,564,741 at
September 30, 1996)........................... $13,104 $ 1,171,305
Restaurant credits net of allowance for
irrecoverable credits of $114,610 at September
30, 1997 and of $119,762 at September 30, 1996
(note 1 (c) and 8)............................ 301,815 636,808
Trade accounts receivable....................... 56,563 66,211
Amounts due from related parties (note 5)....... 258,533 48,857
Other current assets............................ 18,784 142,127
------------------------------------------------ -------------
Total current assets............................ 648,799 2,065,308
Long Term assets
Investment in affiliates (note 4)............... 2,715,442 --
Property and equipment, net of accumulated
depreciation $106,260 at September 30, 1997
and $77,616 at September 30, 1996 (note 7).... 94,250 143,463
Intangible assets, net of accumulated
amortization of $794,631 at September 30,
1997 and $245,440 at September 30, 1996
(note 6)...................................... 1,196,943 1,746,176
Other assets (note 10).......................... 142,946 --
------------------------------------------------ -------------
Total assets.................................... $4,798,380 $ 3,954,947
------------------------------------------------ -------------
------------------------------------------------ -------------
</TABLE>
See accompanying summary of accounting policies and notes to the
consolidated financial statements.
F-3
<PAGE>
Transmedia Asia Pacific, Inc.
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 30,
1997 1996
------------ -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft........................................................................ $ -- 40,051
Trade accounts payable................................................................ $ 267,232 253,432
Deferred membership fee income........................................................ 104,375 139,215
Accrued liabilities (note 9).......................................................... 330,908 250,352
Royalties payable..................................................................... -- --
Deferred advances..................................................................... -- --
Amount due to related parties (note 5)................................................ 1,345,712 93,300
------------ -----------
Total current liabilities............................................................. $ 2,048,227 $ 776,350
------------ -----------
Stockholders' equity
Stockholders' equity.................................................................. -- --
Preferred stock, $.01 par value per share
Authorised 5,000,000 shares; none issued.
Common stock, $.00001 par value per share Authorised 95,000,000 shares; 13,918,697
issued and outstanding shares at September 30, 1997 and 13,362,447 shares at
September 30, 1996.................................................................. 153 134
Additional paid in capital............................................................ 9,962,922 7,470,749
Cumulative foreign currency translation adjustment.................................... 163,719 53,910
Accumulated deficit................................................................... (7,376,641) (4,346,196)
------------ -----------
Total stockholders' equity............................................................ $ 2,750,153 $ 3,178,597
------------ -----------
Total liabilities and stockholders' equity............................................ $ 4,798,380 $ 3,954,947
------------ -----------
------------ -----------
</TABLE>
See accompanying summary of accounting policies and notes to
the consolidated financial statements.
F-4
<PAGE>
Transmedia Asia Pacific, Inc.
Consolidated Statement of Operations
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER SEPTEMBER SEPTEMBER
30, 1997 30, 1996 30, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues (note 1 (g))................................................ $ 1,924,908 $ 1,659,515 $ 1,075,517
Membership fees...................................................... 204,454 230,961 27,564
------------- ------------- -------------
Total revenues and fees.............................................. 2,129,362 1,890,476 1,103,081
Cost of sales........................................................ (1,257,769) (1,098,666) (702,723)
------------- ------------- -------------
Gross profit......................................................... 871,593 791,810 400,358
Selling, general and administrative expenses......................... (3,723,330) (2,819,073) (2,476,105)
------------- ------------- -------------
Loss from operations................................................. (2,851,737) (2,027,263) (2,075,747)
Share of losses of associated companyInterest income................. (209,715) -- --
31,007 21,005 85,459
------------- ------------- -------------
Loss before income tax............................................... (3,030,445) (2,006,258) (1,990,288)
Income taxes (notes 1(f) and 14)..................................... -- -- --
------------- ------------- -------------
Net loss............................................................. $ (3,030,445) $ (2,006,258) $ (1,990,288)
------------- ------------- -------------
------------- ------------- -------------
Loss per common and common equivalent share.......................... $ (0.22) $ (0.16) $ (0.17)
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding................. 13,802,812 12,618,400 12,082,691
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
TRANSMEDIA ASIA PACIFIC INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL CURRENCY
NUMBER OF COMMON PAID-IN TRANSLATION ACCUMULATED UNEARNED
COMMON SHARES STOCK CAPITAL ADJUSTMENT DEFICIT COMPENSATION TOTAL
-------------- ----------- ------------- ------------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 30,
1994........... 11,815,790 $ 118 $ 4,363,109 $ (500) $ (349,650) $ -- $ 4,013,077
Issuance of common
stock.......... 673,800 7 2,021,393 -- -- (300,000) 1,721,400
Issue costs...... -- -- (128,744) -- -- -- (128,744)
Net loss......... -- -- -- -- (1,990,288) -- (1,990,288)
Effect of foreign
currency
translation.... -- -- -- 1,449 -- -- 1,449
Treasury stock... (20,000) -- (20,000) -- -- -- (20,000)
Compensation
expense........ -- -- -- -- -- 87,750 87,750
-------------- ----- ------------- -------- ------------- ------------ ------------
Balance,
September30,
1995........... 12,469,590 $ 125 $ 6,235,758 $ 949 $ (2,339,938) $ (212,250) $ 3,684,644
Issuance of common
stock.......... 892,857 9 1,249,991 -- -- -- 1,250,000
Issue costs...... -- -- (15,000) -- -- -- (15,000)
Net loss......... -- -- -- -- (2,006,258) -- (2,006,258)
Effect of foreign
currency
translation.... -- -- -- 52,961 -- -- 52,961
Compensation
expense........ -- -- -- -- -- 212,250 212,250
-------------- ----- ------------- -------- ------------- ------------ ------------
Balance,
September30,
1996........... 13,362,447 $ 134 $ 7,470,749 $ 53,910 $ (4,346,196) $ -- $ 3,178,597
Issuance of common
stock.......... 556,250 19 2,335,313 -- -- -- 2,335,332
Issue costs...... -- -- (15,000) -- -- -- (15,000)
Net loss......... -- -- -- -- (3,030,445) -- (3,030,445)
Effect of foreign
currency
translation.... -- -- -- 109,809 -- -- 109,809
Option re
Countdown...... -- -- 171,860 -- -- -- 171,860
-------------- ----- ------------- -------- ------------- ------------ ------------
Balance,
September30,
1997........... 13,918,697 $ 153 $ 9,962,922 $ 163,719 $ (7,376,641) $ -- $ 2,750,153
-------------- ----- ------------- -------- ------------- ------------ ------------
-------------- ----- ------------- -------- ------------- ------------ ------------
</TABLE>
F-6
<PAGE>
Transmedia Asia Pacific, 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........................................................... $(3,030,445) $(2,006,258) $(1,990,288)
Adjustment to reconcile net loss to net cash used in operating
activities:
- -Depreciation....................................................... 38,195 35,539 31,479
- -Amortization of licence............................................ 399,192 122,720 122,720
- -Provision for irrecoverable restaurant credits..................... (5,152) 79,344 40,418
- -Amortisation of deferred compensation.............................. -- 212,250 87,750
- -Write off of Hawaii option......................................... 150,000 -- --
- -Provision for loss by affiliate.................................... 202,905 -- --
Changes in assets and liabilities:
- -Trade accounts payable............................................. 13,800 131,837 116,918
- -Accrued liabilities................................................ 80,585 (5,021) 128,198
- -Restaurant credits................................................. 340,145 (98,997) (572,707)
- -Prepaid expenses and other current assets.......................... (9,956) (60,299) (138,873)
- -Deferred membership fees........................................... (34,840) 5,066 128,990
------------- ------------- -------------
Net cash used in operating activities............................... (1,855,571) (1,583,819) (2,045,395)
Cash flows from investing activities:
- -Due from/(to) related parties...................................... 978,726 663,930 (424,437)
- -Purchase of property and equipment................................. -- (29,861) (49,599)
- - Extension of Hawaii option........................................ -- -- (150,000)
- -Interest acquired in affiliate..................................... (2,682,487) -- --
- -Proceeds on disposal of fixed assets............................... 4,045 -- --
------------- ------------- -------------
Net cash provided by/(used in) investing activities................. (1,699,716) 634,069 (624,036)
Cash flows from financing activities:
- -Net proceeds received from issuance of common stock................ 2,320,313 1,235,000 1,592,656
- -Bank overdraft..................................................... (40,051) (86,097) 126,148
- -Purchase of treasury stock......................................... -- -- (20,000)
------------- ------------- -------------
Net cash provided by financing activities........................... 2,280,262 1,148,903 1,698,804
Effects of foreign currency translation............................. 116,824 31,054 (85)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................ (1,158,201) 230,207 (970,712)
Cash and temporary cash investments at beginning of period.......... 1,171,305 941,098 1,911,810
------------- ------------- -------------
Cash and temporary cash investments at end of period................ $ 13,104 $ 1,171,305 $ 941,098
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for interest or income taxes for each of the
periods presented
F-7
<PAGE>
1. Description of business and summary of significant accounting policies
(a) Description of business
Transmedia Asia Pacific, Inc. ("the Company" and "TMAP") was incorporated
in Delaware in March 1994, and commenced operations in November 1994.
The Company's main business activity and that of its wholly owned
subsidiaries Transmedia Australia Pty Limited and Transmedia Australasia
Pty Limited is to make `cash advances' to restaurants for food and beverage
credits from certain participating restaurants which are then recovered as
Transmedia cardholders utilize their restaurant charge cards (see Note 1
(c)), presently through its subsidiaries. The Company is also active in the
area of customer discounts on merchandise purchases, through its investment
in Countdown plc, acquired in April 1997.
The Company has been granted a license, (the `Transmedia License') by TMNI,
an affiliate of Transmedia Network Inc., a corporation which is
incorporated in the United States of America. The Licence is to operate a
specialized restaurant charge card business in Australia and New Zealand
with limited rights to sublicence the Asia Pacific Region. 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).
The Company, through its associated 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 Asia Pacific, Inc. has the following
subsidiaries all of which were 100% owned:
<TABLE>
<CAPTION>
<S> <C>
Name Country of Incorporation
Transmedia Australia Pty Limited Australia
Transmedia Australasia Pty Ltd New Zealand
</TABLE>
In addition, the Company has a 50% ownership in Countdown Holdings Ltd.,
("Countdown"), which is incorporated in the United Kingdom.
In August 1994 the Company registered an initial public offering of its
common stock with the Securities and Exchange Commission and the Company's
Common Stock traded on the NASDAQ small capital market.
The Company was initially capitalised with 7,249,500 shares. On May
26, 1994, TMAP issued and sold shares of common stock: (i)
450,000 to Conestoga for $450,000; (ii) 590,790 to Network,
as partial consideration for the purchase of the License; and
(iii) 3,525,000 to investors in a private placement at an
offering price of $1 per share.
Of the cash proceeds from the private placement of $3,525,000,
$1,000,000 was paid to Network for further consideration (in
addition to the $250,000 paid to Network by Conestoga
F-8
<PAGE>
1(a) Description of business (continued)
and reimbursed to Conestoga by the Company) for the purchase of the
License, leaving a balance, after costs, of $2,322,212 available to
the Company for use as working capital in respect of the
utilization by the Company of its rights under the License.
Initially such utilization has taken place in Australia
through the Company's wholly owned subsidiary, Transmedia Australia
Pty Limited. In the future, the Company may expand operations in
other portions of the Licensed Territories through wholly owned
subsidiaries or through unaffiliated sublicensees and franchisees.
In April 1995, the Company completed a second private
placement of 673,800 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 utilization by the Company of its
rights under the License. The net cash to the Company from the
second private placement of shares in April 1995 was $1,892,656.
In July 1996, the Company issued 892,857 shares of Common
Stock at a price of $1.40 per share. The net proceeds of $1,235,000
were used to provide working capital to existing operations.
In December 1996, the Company issued 556,250 shares of Common
Stock at a price of $2 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 sold an aggregate of 1,347,095 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, the shares have been issued but the
Registration statement has yet to be filed. "See Item 5. Market
for Registrant's Common Equity and Related Stockholder Matters".
(b) Principles of consolidation
The consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
As a result of the acquisition of 50% of Countdown on April 3,
1997. The Company's interest in Countdown's operations is accounted
for using the equity method while the acquisition has been
accounted for using the purchase method of accounting.
F-9
<PAGE>
(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 amount of 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 to 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 in
November 1994.
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 future undiscounted cash flows that are expected to be generated
and are directly attributable to the Transmedia licence.
(e) 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>
Furniture and fixtures 5 years
Office equipment 4-5 years
Computer equipment 3-4 years
</TABLE>
F-10
<PAGE>
(f) 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.
(g) 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.
(h) 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 on such shares expires.
(i) 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.
(j) 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.
F-11
<PAGE>
(k) Foreign currencies
The reporting currency of the Company is the United States dollar.
For consolidation purposes, the assets and liabilities of overseas
subsidiary undertakings are translated at the closing exchange rates.
Consolidated statements of income of such undertakings are consolidated at
the average rates of exchange during the period. Exchange differences
arising on these translations are taken directly to stockholders' equity.
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the consolidated statement of operations. In the year to
September 30, 1997 the Company recorded an exchange loss of $176,575 (1996
a loss of $221,038).
(l) Cash equivalents
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.
(m) Advertising costs
The Company expenses advertising costs as incurred. Advertising costs for
the years ended September 30 1997 and 1996 were $nil and $13,370
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.
(n) 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.
(o) 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 (as described in Note 10), the Company continued
negotiations, and eventually indirectly acquired a 51% interest in NHS on
December 2, 1997 together with TME (See Note 17).
F-12
<PAGE>
(p) 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 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.
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 year ended
September 30, 1996 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 Asia
Pacific, Inc. for the year ended September 30, 1997".
F-13
<PAGE>
2. Auditors continued...
It should be noted that the Form 10-K for 1997 was inadvertently filed on
January 23, 1998 prior to receipt of all necessary auditor consents. This
Form 10K/A amends said filing in its entirety. Except as stated with
respect to the audit report of KPMG, all necessary consents have been
obtained by the Company. The Company does not believe that the changes
contained in this Form represent a material change in the financial
information previously presented.
3. Going Concern
The consolidated financial statements record a loss for the year ended
September 30, 1997 of $3,030,445, which, when taken with the previous
years' results, record an accumulated deficit of $7,376,641 as at September
30, 1997.
The Company has been able to fund this deficit, and the cost of its
acquisition and restructuring of Countdown Holdings Limited, 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 17) and other
acquisitions being contemplated. Management estimates that an amount of
$8,250,000 will be required to complete the proposed acquisitions. In
addition to this management estimates that approximately $1,000,000 will be
required to provide working capital to operations in the period to April
30, 1998. In the event that management is not successful, or only partially
successful in raising this additional finance, the acquisition program will
have to be curtailed with the possible loss of deposits or payments made on
account of approximately $1,375,000, and the Company may not continue as a
going concern.
Whilst management accepts and acknowledges that there is no guarantee that
the plans referred to directly above will be entirely successful, based
upon management's knowledge of the capital markets and their contacts
within those markets, management remains reasonably confident that
sufficient funds will become available to enable the Company to operate for
the foreseeable future and complete its proposed acquisition program.
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.
F-14
<PAGE>
4. Investment in affiliated company
The Investment in Countdown consists of the following
(see note 12 for discussion on the acquisition). The Company's
interest in Countdown's operations is accounted for using the
equity method.
<TABLE>
<S> <C>
At September 30, 1996 $ -
Cost of investment 2,682,487
Add: Cost of option 171,860
--------------
2,854,347
Share of losses (202,905)
Amounts due from affiliates 64,000
--------------
At September 30, 1997 $ 2,715,442
--------------
--------------
</TABLE>
The transaction and the financial position of Countdown at acquisition was
described in more detail in the Company's Form 8-K dated April 3. 1997,
which is incorporated by reference herein.
5. Related Party Transactions
On March 10, 1994, Edward J. Guinan III purchased 5,562,500 shares of
common stock in the Company. Edward J. Guinan III, the Chairman of the
Board, Chief Executive officer and Director of the Company, is also the
President, Secretary, Treasurer and a Director of Conestoga. Mr Guinan
owns approximately 73% of the outstanding common stock of Conestoga.
Conestoga assigned the Transmedia License to the Company on May 2, 1994 for
the sum of $250,000, being equal to the amount of the non-refundable
advance payment previously made by Conestoga to Network under the License
Agreement.
On May 2, 1994, Conestoga and the Company completed the Conestoga/Company
Offering of 375 units, with each unit consisting of 1,067 shares of
Conestoga common stock and 4,500 shares of the Company's common stock, at a
price of $1,200 per unit. Of the $450,000 raised in the Offering, $449,831
was paid for shares of Conestoga common stock and $168.75 was paid for
shares of the Company's Common Stock. The purchasers in the
Conestoga/Company Offering included Mr Paul Harrison and Mr Eugene A.
Cernan, each of whom purchased 41.67 units, or 133.33 shares of Conestoga
common stock and 187,500 shares of common stock of the Company for a
purchase price of $50,000. Mr Cernan is a Director of Conestoga, as well
as a Shareholder and former Director and former Officer of Transmedia
Europe, Inc. and Conestoga Partners, Inc., an entity controlled by Mr
Guinan whose sole asset consists of shares of Transmedia Europe, Inc.
The Company entered into a license agreement with Transmedia Europe, Inc.,
holder of the European license, pursuant to which the Company has the right
to use certain computer software in connection with the operation of the
Company's business. Under the license agreement, the Company has paid
Transmedia Europe, Inc. an initial license fee of $50,000, and is obliged
to an annual maintenance and support fee of 7,500 pound (UK), or $12,000
using an approximation of the exchange rate at September 30, 1995 of $1.60
to 1 pound (UK).
F-15
<PAGE>
5. Related Party Transactions (continued)
During the year ended September 30, 1995, the company was charged a
corporate management fee of $156,313 by Transmedia Europe, Inc. in
respect of the Company's share of the head office expenses, comprising
salaries, rent and other associated office costs. In addition, Transmedia
Europe, Inc. has paid travel, accommodation and other costs totalling
$60,742, during the year ended September 30, 1995 ($2,467 during the period
from inception to September 30, 1994), which have been charged to the
Company.
During the year ended September 30, 1996, the Company was charged a
corporate management fee of $240,267 from Transmedia Europe, Inc. in
respect of the Company's share of the head office expenses, comprising
salaries, rent and other associated office and professional costs. In
addition, Transmedia Europe, Inc. has paid travel, accommodation and
other costs totalling $122,526, during the year ended September 30, 1996
($60,742 during the year ended September 30, 1995), which have been
charged to the Company.
During the year ended September 30, 1997, the Company was charged a
corporate management fee of $556,789 from Transmedia Europe, Inc. in
respect of the Group's share of the head office expenses, comprising
salaries, rent and other associated office and professional costs. In
addition, Transmedia Europe, Inc. has paid travel, accommodation and other
costs totalling $122,997, during the year ended September 30, 1997
($122,526 in the year to September 30, 1996), which have been charged to
the Company.
The amounts due from related parties consist of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
<S> <C> <C>
Conestoga $ 26,260 $ 26,260
Transmedia Europe, Inc. 190,124 -
P. Harrison 42,149 22,597
----------- -----------
$ 258,533 $ 48,857
----------- -----------
</TABLE>
The amounts due to related parties consist of the following:
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
<S> <C> <C>
J.V. Vittoria $ 1,061,479 $ -
TMNI. 284,233 -
Transmedia Europe, Inc. - 93,300
------------- ------------
$1,345,712 $93,300
------------- ------------
</TABLE>
The above loans to related parties are unsecured, non-interest bearing, and
repayable on demand. The loan received from J.V. Vittoria is secured on the
Company's share of Countdown Holdings Limited, bears interest at a rate of 12%
per annum, and is repayable on 60 days notice with an expiration date extended
for an indefinite period of time.
F-16
<PAGE>
5. Related Party Transactions (continued)
The Company issued a joint promissory note together with TME in
the principal amount of $500,000 for which the liability has
been split between the two companies equally. The promissory
note is payable on April 2, 1998, bears interest at the rate
of 10% per annum, and is convertible at the holder's option
into Common Stock of each issuer at the rate of $1.20 per
share.
Information regarding the activity with respect to the amounts
due from/(to) related parties is as follows:
<TABLE>
<CAPTION>
TRANSMEDIA
CONESTOGA EUROPE,
E. GUINAN III PARTNERS INC. P HARRISON
------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at September 30, 1995................................ $ 43,891 155,169 416,280 3,937
Additions.................................................... 159,978 -- 1,193,520 18,450
Amounts collected............................................ -- -- (362,793) --
Amounts collected............................................ (203,869) (128,909) (1,340,307) --
Foreign currency movement.................................... -- -- -- 210
------------- ---------- ----------- -----------
Balance at September 30, 1996................................ -- 26,260 (93,300) 22,597
Additions.................................................... -- -- 1,240,000 19,552
Amounts charged.............................................. -- -- (1,078,512) --
Amounts collected............................................ -- -- 121,936 --
Foreign currency movement.................................... -- -- -- --
------------- ---------- ----------- -----------
Balance at September 30, 1997................................ $ -- $ 26,260 $ 190,124 $ 42,149
------------- ---------- ----------- -----------
------------- ---------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
J.V. VITTORIA TMNI
------------- -----------
<S> <C> <C>
Balance at September 30, 1996......................................................... $ -- $ --
Loan received......................................................................... (1,000,000) --
Promissory Note....................................................................... -- (250,000)
Amounts collected..................................................................... (61,479) (34,233)
------------- -----------
Balance at September 30, 1997......................................................... $ (1,061,479) $ (284,233)
------------- -----------
------------- -----------
</TABLE>
F-17
<PAGE>
6. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
FORMATION TRANSMEDIA HAWAII
EXPENSES LICENCE OPTION TOTAL
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Acquisition cost.............................................. $ 770 $ 1,840,790 $ 150,000 $ 1,991,560
Amortization as at September 30, 1996......................... -- (245,440) -- (245,440)
Foreign currency.............................................. 56 -- -- 56
---------- ------------ ---------- ------------
Balance at September 30, 1996................................. 826 1,595,350 150,000 1,746,176
Amortization charge for the year.............................. (26) (122,720) -- (122,746)
Foreign currency.............................................. (42) -- -- (42)
Write off during the year..................................... -- (276,445) (150,000) (426,445)
---------- ------------ ---------- ------------
Balance at September 30, 1997................................. $ 758 $ 1,196,185 $ -- $ 1,196,943
---------- ------------ ---------- ------------
</TABLE>
The cost of the acquisition of the Transmedia License of $1,840,790 is
based upon a cash payment of $1,000,000, 250,000 shares of common stock
issued to Conestoga as reimbursement for a cash down payment of
$250,000 made by Conestoga to Network, and the issue of 590,790 shares
of common stock at a value of $1 per share which was determined on the
basis of the issue of stock at that time.
During the year $276,445 has been written off the carrying value of the
license in recognition of a diminution in the future cash flows to be
derived from the Transmedia License.
The Hawaii Option, an option to license the sole Transmedia Franchise in
the State of Hawaii, expired during the year, as the Company decided
not to open in that State and was thus written off during the year.
F-18
<PAGE>
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
FURNITURE AND OFFICE COMPUTER
FITTINGS EQUIPMENT EQUIPMENT TOTAL
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cost
At September 30, 1995......................................... $ 77,325 $ 46,756 $ 57,750 $ 181,831
Additions..................................................... 5,115 1,480 23,266 29,861
Foreign currency.............................................. 4,124 2,494 2,769 9,387
------------- ----------- ----------- ----------
At September 30, 1996......................................... 86,564 50,730 83,785 221,079
Additions..................................................... -- -- -- --
Disposals..................................................... (1,820) (5,674) (2,603) (10,097)
Foreign currency.............................................. (4,505) (2,353) (3,614) (10,472)
------------- ----------- ----------- ----------
At September 30, 1997......................................... 80,239 42,703 77,568 200,510
------------- ----------- ----------- ----------
Accumulated depreciation
At September 30, 1995......................................... 16,517 8,127 15,412 40,056
Charge for the year........................................... 9,337 6,277 19,925 35,539
Foreign currency.............................................. 880 433 708 2,021
------------- ----------- ----------- ----------
At September 30, 1996......................................... 26,734 14,837 36,045 77,616
Disposal...................................................... (364) (5,168) (520) (6,052)
Charge for the year........................................... 9,804 9,639 18,752 38,195
Foreign currency.............................................. (1,257) (706) (1,536) (3,499)
------------- ----------- ----------- ----------
At September 30, 1997......................................... 34,917 18,602 52,741 106,260
------------- ----------- ----------- ----------
Net book value
At September 30, 1997......................................... $ 45,322 $ 24,101 $ 24,827 $ 94,250
------------- ----------- ----------- ----------
------------- ----------- ----------- ----------
At September 30, 1996......................................... $ 59,830 $ 35,893 $ 47,740 $ 143,463
------------- ----------- ----------- ----------
------------- ----------- ----------- ----------
</TABLE>
8. ALLOWANCE FOR IRRECOVERABLE RESTAURANT CREDITS
Changes in the Company's allowance for irrecoverable restaurant credits were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Balance at beginning of year........................................................ $ 119,762 $ 40,418
Additions/(Adjustments)--charged to costs and expenses.............................. (5,152) 79,344
------------- -------------
Balance at end of year.............................................................. $ 114,610 $ 119,762
------------- -------------
------------- -------------
</TABLE>
F-19
<PAGE>
9. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
<S> <C> <C>
Payroll taxes and holiday pay....................................................... $ 109,300 $ 83,987
Income taxes payable................................................................ 6,300 6,300
Cardholder bonuses.................................................................. -- 19,259
Tips and tax........................................................................ 3,214 1,082
Food and beverage provision......................................................... -- 40,874
Professional fees................................................................... 149,200 54,800
Royalties payable................................................................... -- 9,926
Other............................................................................... 19,540 34,124
Withholding taxes................................................................... 43,354 --
------------- -------------
$ 330,908 $ 250,352
------------- -------------
</TABLE>
10. OTHER ASSETS
Other assets consist 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 Europe 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 Europe Inc. (See Note 17).
11. STOCK OPTIONS AND WARRANTS
Under the Company's 1994 stock option and rights plan (the 'Plan'), the
Company may grant stock options and stock appreciation rights to
persons who are now or who during the term of the Plan become key
employees (including those who are also directors) and to independent
sales agents. Stock options granted under the Plan may either be
incentive stock options or non-qualified stock options for US federal
income tax purposes. The Plan provides that the stock option committee
of the board of directors may grant stock options or stock appreciation
rights with respect of a maximum of 250,000 shares of common stock at
an exercise price not less than the fair market value at the date of
grant for qualified and non-qualified stock options.
F-20
<PAGE>
11. STOCK OPTIONS AND WARRANTS (continued)
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. The options have a five year term.
Mr Paul Harrison, President of the Company, has been granted options to
purchase 800,000 common shares at $1 per share. These options are
outside the Company's 1994 stock option and rights plan.
In addition, in prior years the Company has also issued warrants to
purchase 497,619 shares of common stock at an exercise price ranging
from $1.40 to $1.50 per share. The warrants have a three to five year
term ending through July 2000.
In April 1997, the Company granted an option to purchase up to 277,193
shares of Common Stock at a purchase price of $0.90 per share to the
owner of Countdown as part of the consideration given for the 50%
purchase of Countdown (as described in Note 1). In addition, the
Company issued warrants to purchase 138,596 shares of Common Stock at
an exercise price of $1.13 per share, with an expiration 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 assumptions: 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.
Stock option and warrant activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE WARRANTS
NUMBER OF EXERCISE NUMBER EXERCISE
SHARES PRICE OF SHARES PRICE
------------ ----------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at September 30, 1994...................................... 800,000 $ 1.00 -- $ --
Granted............................................................ -- -- 200,000 1.50
Exercised.......................................................... -- -- -- --
------------ ----- ---------- -----
Balance at September 30, 1995...................................... 800,000 1.00 200,000 1.50
Granted............................................................ 40,000 1.78 297,619 1.40
Exercised.......................................................... -- -- 100,000 2.50
Granted............................................................ -- -- -- --
------------ ----- ---------- -----
Balance at September 30, 1996...................................... 840,000 1.04 597,619 1.62
Granted............................................................ 277,193 0.90 138,596 1.13
Granted............................................................ 10,000 1.00 185,417 2.00
Exercised.......................................................... -- -- -- --
Cancelled.......................................................... (10,000) (1.78) -- --
------------ ----- ---------- -----
Balance at September 30, 1997...................................... 1,117,193 $ 1.00 921,632 $ 1.62
------------ ----- ---------- -----
------------ ----- ---------- -----
</TABLE>
The Company applies APB Opinion No.25 in accounting for its stock options
and warrants and, accordingly, no compensation cost has been recognised for its
stock options and warrants in the financial statements. Had the Company
determined compensation cost based upon the fair value at the grant date for its
stock options and warrants under SFAS No.123, the Company's net losses would
have been increased to the pro forma amounts indicated below:
F-21
<PAGE>
11 Stock Options and Warrants (continued)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Net Loss
- -As reported........................................................................ $ (3,030,445) $ (2,006,258)
- -Pro forma.......................................................................... $ (3,044,470) $ (2,018,298)
Loss per share
- -As reported........................................................................ $ (0.22) $ (0.16)
- -Pro forma.......................................................................... $ (0.22) $ (0.16)
</TABLE>
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, 1996, and 1995 respectively: no dividends
paid for all years; expected volatility of 40%; a risk free interest
rate of 5.2% and an expected life being the remaining term of the
option. The per share weighted fair value of the stock options granted
in 1997, 1996 and 1995 were $0.74, $0.33, and $0.55 respectively.
Pro forma net loss reflects only options granted in 1997 and 1996. The
full impact of calculating compensation cost for stock options under
SFAS No.123 is reflected in the pro forma net loss amounts.
12. 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 Transmedia Europe Inc ("TME") on terms
similar to the Company's purchase.
In payment of the purchase price, the Company issued 1,330,524 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 277,193 shares of Common
Stock at a purchase price of $0.90 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 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 notice of 60 days 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
138,596 shares of Common Stock at $1.13 per share.
F-22
<PAGE>
12 Acquisition of Countdown (continued)
In connection with the acquisition, the Company and TME each agreed to
pay $125,000 in cash to TMNI International Incorporated ("TMNI") and
the Company and TME issued TMNI a joint promissory note in the
principal amount of $500,000. The liability has been split between the
two companies equally, and is payable on April 2, 1998 and bearing
interest at the rate of 10% per annum. The promissory note is
convertible at the holder's option into an equal number of shares of
Common Stock of each 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 this 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.
13. 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>
<S> <C>
Year ending September 30, 1998 $48,100
-------
-------
</TABLE>
The amount charged to the consolidated statement of operations for rent
expense in the year ended September 30,1997 was $42,465 (1996: $44,641)
14. INCOME TAXES
Income taxes reflected in the accompanying consolidated statements of
operations differed 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................................. $ (707,000) $ (682,000) $ (677,000)
State taxes..................................................... -- 8,000 --
Change in valuation allowance for deferred tax assets........... 683,000 646,000 580,000
Effect of graduated tax rates................................... -- --
Other........................................................... 24,000 28,000 97,000
------------- ----------------- -------------
Income tax expense.............................................. $ -- $ -- $ --
------------- ----------------- -------------
------------- ----------------- -------------
</TABLE>
F-23
<PAGE>
14. Income taxes (continued)
The tax effects of temporary differences that give rise to deferred tax
assets are as follows:
<TABLE>
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carry forwards.......................... $1,999,000 $1,306,000 $ 648,000
Pre operating costs capitalised for tax purposes........... 27,000 37,000 49,000
---------- ---------- ---------
Total...................................................... 2,026,000 1,343,000 697,000
Less valuation allowance................................... (2,026,000) (1,343,000) (697,000)
---------- ---------- ---------
Net deferred tax assets.................................... $ -- $ -- $ --
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The US Federal net operating loss carry forward at September 30, 1997 of
approximately $3.5 million will begin to expire in the year 2010. The
foreign net operating loss carry forward of approximately $2.7 million
may be carried forward indefinitely.
15. COMMITMENTS
Each quarter the Company must pay to Network in cash for any part of the
licensed territories developed by the Company or any affiliate of the
Company a royalty equal to 2% of gross sales. 'Gross sales' are 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 amounted to $93,893 for the year ended September 30,
1997 ($42,596 in 1996).
In order to maintain full rights under the Transmedia License (1) no
person or group of persons, without prior permission of Network, may
acquire beneficial ownership of 30% or more of the Company; (2) Edward
J Guinan III is required to maintain beneficial ownership of no less
than the lower of 20% of common stock, or 15% of the common stock (as
long as the three other largest stockholders beneficially own no more
than 15% in the aggregate); (3) the Company must commence operations
(a) in Australia and/or New Zealand within 4 months after May 26, 1994
closing date under the Transmedia License (the 'Closing Date'); (b) in
another country within 3 years after the closing date; and (c) in a
second other country within the earlier of 2 years after the first
country or five years from the closing date; (4) the Company must
procure in Australia and/or New Zealand (a) 100 participating
restaurants within the first 12 months or 250 participating restaurants
within the first 24 months of the full rights under the Transmedia
License; (b) 2,000 cardholders within the first 12 months or 5,000
cardholders within the first 24 months of the Transmedia License
(including those receiving cards without the payment of the initial
fee) and (c) participating restaurant renewals at the rate of 70% per
year. As at September 30, 1997 the Company has complied, in all
material respects, with all the covenants contained in the License
Agreement.
F-24
<PAGE>
15 Commitments (continued)
The Company also has other obligations under the Transmedia License
respecting business practices, use of Network software programs,
marketing, training, confidentiality and standard of performance, among
others, the material breach of any of which may result in the
termination of the full rights under the Transmedia License.
The Company, jointly with its affiliate TME, 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.$2,000,000 ( $1,460,000) and the second tranche
for 51% of the shares of common stock of NHS for Aus.$2,842,540
($2,075,000). Payment of the second tranche and Aus. $1,250,000
($912,500) of the sign-on fee due to the principals, may be extended by
up to 90 days provided that interest will accrue during any such
extension at 5% per annum. The Company has given notice that payment of
the second tranche and Aus. $1,250,000 ($912,500) of the sign-on fee
due to the principals, due January 31, 1998 is being extended by the
permitted 90 days and, at the the request of the principals, the
payment of the proportion of the sign on fees due on January 31, 1998
has been delayed pending their instructions. The balance of the
payments due to certain principals as sign-on fees amounting to
Aus.$2,000,000 ($1,460,000) 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 ($1,823,000) 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.
16. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Group's customers are located in Australia or New Zealand. No
single customer accounted for more than 10% of the Company's service
revenues in the three year period ended September 30, 1997 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.
17. SUBSEQUENT EVENTS
The Company, jointly with its affiliate TME, has made a significant
capital commitment for the completion of the purchase of 51% on an
indirect basis, of NHS in Australia. This commitment consists of a
total commitment of Aus. $12,500,000 ($9,125,000), of which Aus.
$4,000,000 ($2,940,000) represents sign-on fees payable to certain
individuals of NHS, and the balance of which represents a deposit and
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 Europe, Inc., while the second tranche is
payable in cash only. The Company also, jointly with its affiliate TME,
acquired an option to purchase the 49% balance of NHS's business and
assets for an additional Aus. $2,497,655. ($1,823,000)
F-25
<PAGE>
On October 17, 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 became 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 the Company, 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.
On December 23, 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. 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. The Letter of Intent
provides for a purchase price of pounds UK 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 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.
On January 9, 1998, the Company entered into an agreement in principle,
subject to confirmation by 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, the redemption
by the Company on January 19, 1998 of 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
each.
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, a subsidiary of the Company, was cancelled. Mr. Radbone
holds 1,330,524 shares of Common Stock of the Company and options to
purchase 277,193 shares of Common Stock of the Company at $0.90 per
share, and agreed to grant Edward J. Guinan III, the Chairman of the
Board of Directors, an option to purchase these shares and options 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 Transmedia Europe, Inc. Common
Stock owned by him), which will be transferred to Mr. Radbone if the
option is not exercised and paid by January 15, 1999.
F-26
<PAGE>
ITEM 9--CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
NOT APPLICABLE
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 of 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 and Chief Executive Officer
Paul L. Harrison..................................... 37 Director and Secretary
Carl Freyer.......................................... 58 Director
Ellis Varejes........................................ 46 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 has been
the Chairman, Chief Executive Officer and director of Transmedia Australia 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 the floor for his own
account until 1979, when he became a broker for the firm of Moseley Hallgarten
Estabrook and Weeden, where he eventually became manager of their New York
office. From 1982 through 1984, he was employed by Cowen 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
Stock 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 Europe
Inc. ("Transmedia Europe"). 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"), of
which Transmedia Europe has a 50.1% equity interest. Mr. Guinan presently
devotes substantially all of such time as is necessary to the affairs of the
Company.
Paul L. Harrison is presently Secretary and a director of the Company, and
was a director and President of Transmedia Australia from May 1994 until June
1997. Mr. Harrison is also Secretary and a director of Transmedia Europe. In
1993, Mr. Harrison acted as a consultant to Transmedia Europe 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.
<PAGE>
(c) Experience of Directors and Executive Officers for the Past Five Years
(continued)
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.
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 Europe.
Carl H. Freyer has been a director of the Company since 1996. Mr. Freyer is
the President of Freyer Corporation, a financial consulting firm. He has been a
director of G-Tech Corporation, Computer Investors Group Inc. and two banks. Mr.
Freyer holds a BS in electrical engineerig from Tufts University and an MBA from
Harvard University.
Ellis Varejes has been a director of the Company since 1997. He is the
corporate services partner of Abbott Tout, Solicitors, in Sydney, Australia. Mr.
Varejes practises principally in the area of corporate and business
transactions, both nationally and internationally. He has significant experience
in mergers and acquisitions and corporate finance, as well as in banking and
taxation law. He is a graduate in Commerce and in Laws from the University of
Witwatersrand, South Africa.
David S. Vaillancourt has been Chief Financial Officer of the Company since
1997. Mr. Vaillancourt is also Chief Financial Officer of Transmedia Europe.
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 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.
<PAGE>
ITEM 11--EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
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 and Mr. Harrison
is the Secretary of the Company. During fiscal year 1997, no officer of
the Company, other than Mr. Guinan and Mr. Harrison, 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 III 1997 $ 100,000(1) 0 0
1996 153,625(2) 0 22,925(3)
1995 160,000(4) 0 0
Paul L. Harrison 1997 $ 154,000(1) 0 0
1996 122,900(2) 0 0
1995 128,000(4) 0 0
</TABLE>
- ------------------------
(1) Based upon an exchange rate of L1 to $1.621
(2) Based upon an exchange rate of L1 to $1.536
(3) Represents reimbursement of travel and entertainment expenses
(4) Based upon an exchange rate of L1 to $1.60
YEAR END OPTION VALUES TABLE
The following table sets forth information at September 30, 1997,
concerning exercisable and non exercisable options held by the
Named Executives. During fiscal 1997, non of the Named Executives
was granted any options or exercised any options. The table also
includes the value of "in-the-money" options which represents the
spread between the exercise price of the existing stock options
and the year end price of the Common Stock which was $1 3/8.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Fiscal Options at Fiscal
Acquired Value Year-End(#) Year End($)
On Exercise Realized Exercisable(E)/ Exercisable(E)/
Name (#) ($) Unexercisable(U) Unexercisable(U)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul L Harrison 0 0 800,000(E) 80,000
1995 Plan for outside
directors 50,000 0 50,000(U)
CEC Radbone 277,193 0 277,193(U)
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Guinan and Mr. Harrison have each entered into employment
agreements ("Employment Agreements") with the Company, effective
May 26, 1994 ("Effective Date"). The Employment Agreements
provide for an initial term of three years, with one year
renewals thereafter unless terminated by either party and for
restrictions on confidentiality and non-competition during the
term and for a period of two years thereafter. Mr Guinan's
contract provides for a salary of $100,000 per annum and
participation in executive benefit programs and Mr. Harrison's
provides for a salary of L100,000 ($162,100). Mr. Harrison's
original contract also provided for the issuance of
non-transferable options to purchase 800,000 shares of Common
Stock at $1 per share vesting 50% on May 9, 1995 and the balance
on May 9, 1996, and participation in executive benefit programs.
Mr. Guinan and Mr. Harrison may be discharged for cause including
failure or refusal to perform their respective duties,
dishonesty, conviction of a felony or fraud, failure adequately
to perform their services, engagement in acts detrimental to the
Company, material breach of their respective Employment
Agreements, disability or death. Mr. Guinan is also employed by
Transmedia Europe and Advance. Mr. Guinan is required to devote
sufficient time to the business of the Company in his discretion.
STOCK OPTION PLANS
Effective May 2, 1994, the Company adopted the 1994 Stock Option Plan
("the 1994 Plan"). The purpose of the 1994 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 1994 Plan authorizes the granting of incentive stock options or
non-qualified stock options of 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 1994 Plan expires on April 1 2004.
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 1994 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 1994 Plan. Under the 1994 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.
Effective May 25, 1994 in connection with the Employment Agreement of
Paul Harrison, the Company granted non-transferable options to
purchase 800,000 shares of Common Stock at $1 per share, all of
which are vested.
In January 1996, the Company's Board of Directors approved, and on
April 25, 1996 the Company's stockholders approved, the 1995
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
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, and that Mr. Vittoria and another
non-employee director who subsequently resigned each would
receive thereunder options covering 20,000 shares with respect to
prior services on the Board. 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 exercisable by the
optionee for a period of five years from the date of the 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 exercise price equal to the
fair market value of the Common Stock on the last date preceding
the date of grant. As of January 30, 1998, 40,000 options have
been granted under the Outside Directors Plan.
<PAGE>
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 30, 1998 by (i)
each beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each current Named Executive and
director and (iii) all curent 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
Asia Pacific, Inc. 11 St. James's Square, London SW1Y 4LB,
England.
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE OF SHARES OF COMMON STOCK OWNED
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NAME AND ADDRESS SHARES OWNED PERCENTAGE OWNED
---------------------------------------------- ---------------------------------------------- -------------------------
FAI Overseas.................................. 1,740,476(1)
Investment Pty
77 Pacific Highway
Sydney, Australia 2059
Edward J. Guinan III.......................... 5,759,050(2)(3)
Paul L. Harrison
Joseph V. Vittoria............................ 959,200
All directors and officers as a group (six
persons as a group) (2)(3)(4)(5)(6)
</TABLE>
------------------------
(1) Includes 297,619 shares of Common Stock issuable upon exercise of warrants.
(2) Includes the 450,000 shares of Common Stock owned by Conestoga Partners II
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 75% of the outstanding capital stock thereof.
(3) Includes 800,000 shares of Common Stock placed in trusts set up for Mr.
Guinan's children and certain other shares for which Mr. Guinan disclaims
beneficial ownership and 158,050 shares of Common Stock owed by Advance
which Mr. Guinan may be deemed to beneficially own. Mr. Guinan is a
director, President, Chief Executive Officer and the controlling stockholder
of Advance. Does not include 93,750 shares of Common Stock owned by Edward
J. Guinan Jr., Mr. Guinan's father, of which Mr. Guinan disclaims beneficial
ownership.
(4) Includes 800,000 shares of Common Stock issuable on exercise of options.
Does not include 226,858 shares of Common Stock owned by Conestoga, of which
Mr. Harrison is a director and minority shareholder, of which he disclaims
beneficial ownership.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of options.
(6) Includes 10,000 shares of Common Stock issuable upon exercise of options.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year, the Company entered into an agreement with Mr.
Joseph Vittoria, a director and shareholder of the Company,
whereby Mr. Vittoria advanced the sum of $1,000,000 as a loan to
the Company for the cash portion of the purchase of Countdown
Holdings Limited ("Countdown"). The loan was originally scheduled
to mature on September 27, 1997, bears interest at 12% per annum,
and is collateralised by a pledge of all the shares in Countdown
purchased by the Company from Mr. C.E.C. Radbone, the former
owner. The loan as renewed, upon maturity, by agreement between
Edward J. Guinan III, Chairman of the Board, and Mr. Joseph V.
Vittoria.
<PAGE>
During fiscal 1997, the Company received a net payment of
$1,240,000 from Transmedia Europe in repayment of temporary
funding. In fiscal 1997, management expenses of $892,566 were
charged from Transmedia Europe on behalf of the Company. The
$254,134 balance as of September 30, 1997 due to Transmedia
Europe from the Company is non-interest bearing and is repayable
on demand. Messrs. Guinan and Vittoria, Harrison and Freyer are
also directors of Transmedia Europe. See "Directors and Executive
Officers of Registrant." In April 1997 and December 1997, the Company
and Transmedia Europe engaged in two significant acquisitions. See
"Item 1. Business -- Countdown Acquisition and -- NHS Acquisition."
Mr. Joseph V. Vittoria, a director and shareholder of the Comapny, and
FAT Overseas Investment Pty Ltd., being princiapl shareholders of the
Comapny, purchased respectively 181,355 and 362,600 shares of Common
STock of the Company (and 60,445 and 120,866 warrants respectively) in
the Comapny's Private Placement which was completed in December 1997.
In addition, Mr. Vittoria and FAO Overseas Investments Pty Ltd were
granted 107,248 and 214,857 warrants respectively in exchange for their
agreement to purchase on a standby basis a portion of the shares in the
Private Placement.
In November 1997, the Company, jointly with Transmedia Europe, signed a
letter of intent to purchase another company. In connection therewith,
shares held personally in the Company by Mr. Edward Guinan wore tendered
as a deposit. See "Item 7 -- Liquidity."
In January 1998, the Company, jointly with Transmedia Europe, signed a
letter of intent to purchase another company. In connection therewith,
cash was tendered as a deposit, together with shares in the Company held
personally by Mr. Edward Guinan. See "Item 7 -- Liquidity."
In January 1998, Mr. Guinan acquired from Mr. Radbone an option to
purchase the shares an options held by Mr. Radbone in the Company. The
consideration for this option was a pledge by Mr. Guinan of $250,000 in
value of shares of Common Stock in the Company owned by him, together with
$250,000 in value of shares of Common Stock in Transmedia Europe. In
addition, Mr. Guinan extended a loan to the Company of UK pounds 100,000
($162,500), which loan is non-interest bearing and without specified
repayment terms.
<PAGE>
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K-A
- ---------------------------------------------------------------------------
The following documents are being filed as part of this Report.
(a)(1) Financial Statements:
Transmedia Asia Pacific, 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 Statement or the
Notes thereto.
(a)(3) Exhibits:
(i) Consolidated Financial Statements for significant
associate Countdown Holdings Limited (no difference
between UK GAAP and US GAAP for these accounts)
(ii) Agreement between the Company, Transmedia Europe, Inc.
and C.E.C. Radbone as to the acquisition of Countdown
Holdings Limited
(iii) Amendment to loan agreement by a director of the Company,
in connection with a loan of $1,000,000 to facilitate the
acquisition of Countdown Holdings Limited
(iv) Lease on 1 Hurlingham Business Park, Sulivan Road, London
SW6 3DU, United Kingdom
(v) Option in respect of the purchase of ICON Travel Pty
Limited.
<PAGE>
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 ASIA PACIFIC, INC.
(REGISTRANT)
DATE: MARCH 5, 1998 /S/ EDWARD J. GUINAN III
--------------------------------------
NAME: EDWARD J. GUINAN III
TITLE: CHAIRMAN, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the
date indicated.
DATE: MARCH 5, 1998 /s/ Edward J. Guinan III
------------------------------------
Name: Edward J. Guinan III
Title: Chairman, Chief Executive Officer
and Director
DATE: MARCH 5, 1998 /s/ Paul L. Harrison
------------------------------------
Name: Paul L. Harrison
Title: Secretary and Director
DATE: MARCH 5, 1998 /s/Carl Freyer
------------------------------------
Name: Carl Freyer
Title: Director
DATE: MARCH 5, 1998 /s/ Joseph Vittoria
------------------------------------
Name: Joseph Vittoria
Title: Director
DATE: MARCH 5, 1998 /s/ Ellis N. Varejes
------------------------------------
Name: Ellis N. Varejes
Title: Director
DATE: MARCH 5, 1998 /s/ David Vaillancourt
------------------------------------
Name: David Vaillancourt
Title: Chief Financial Officer and
Principal Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS
FOR YEAR ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 13,104
<SECURITIES> 0
<RECEIVABLES> 750,305
<ALLOWANCES> (114,610)
<INVENTORY> 0
<CURRENT-ASSETS> 643,799
<PP&E> 700,510
<DEPRECIATION> (106,260)
<TOTAL-ASSETS> 4,733,380
<CURRENT-LIABILITIES> 2,048,227
<BONDS> 0
0
0
<COMMON> 153
<OTHER-SE> 2,750,000
<TOTAL-LIABILITY-AND-EQUITY> 4,798,380
<SALES> 1,924,908
<TOTAL-REVENUES> 2,129,362
<CGS> (1,257,769)
<TOTAL-COSTS> (3,723,330)
<OTHER-EXPENSES> (209,715)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,007
<INCOME-PRETAX> (3,030,445)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,030,445)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99(a)(3)(i)
Countdown Holdings Limited
Report and Financial Statements
Period ended
30 September 1997
[IBDO LOGO]
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Annual report and financial statements for the period ended 30 September 1997
- --------------------------------------------------------------------------------
Contents
Director
Page:
1 Report of the directors
3 Report of the auditors
4 Consolidated profit and loss account
5 Consolidated balance sheet
6 Balance sheet
7 Consolidated cash flow statement
8 Notes forming part of the financial statements
- --------------------------------------------------------------------------------
Directors
E J Guinan III
P L Harrison
Secretary and registered office
E J Guinan, Unit 1 Hurlingham Business Park, Sulivan Road, London,
SW6 3DU.
Company number
2741762
Auditors
BDO Stoy Hayward, 8 Baker Street, London, W1M 1DA.
-----
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Report of the directors for the period ended 30 September 1997
- --------------------------------------------------------------------------------
The directors present their report together with the financial statements
of the group for the period ended 30 September 1997.
Results and dividends
The profit and loss account is set out on page 4 and shows the result for
the period.
The directors do not recommend the payment of a dividend.
Principal activities, trading review and future developments
The principal activity of the group, which has remained unchanged in the
period under review, is that of a discount buying organisation, operating
in the membership benefits industry.
The directors are disappointed with the result for the period but are
expecting results to improve in the next year.
There have been no events since the balance sheet date which materially
affect the position of the company.
Directors
The directors in office in the period and their beneficial interest in the
issued ordinary share capital, which has remained unchanged in the period
under review, was as follows:
Ordinary shares of (pounds)1 each
1997 1996
G E C Radbone (resigned 15 January 1998) - 500,000
P L Harrison (appointed 3 September 1997) - -
E J Guinan III(appointed 3 September 1997) - -
The interests of the directors in the share capital of the ultimate parent
company, Transmedia Europe Inc, are disclosed in the financial statements
of that company.
Directors' responsibilities
Company law requires the 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, the directors are
required to:
o select suitable accounting policies and then apply them
consistently;
1
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Report of the directors for the period ended 30 September 1997 (Continued)
- --------------------------------------------------------------------------------
Directors' responsibilities (Continued)
o make judgements and estimates that are reasonable and prudent;
o state whether applicable accounting standards have been followed,
subject to any material departure disclosed and explained in the
financial statements; and
o prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of
the company and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They 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.
Creditors payment policy
For all trade creditors, it is the group's policy to:
o agree the terms of payment at the start of business with that
supplier;
o ensure that suppliers are aware of the terms of payment; and
o pay in accordance with its contractual and other legal obligations.
Wherever possible the company tries to abide by this policy.
Auditors
BDO Stoy Hayward, who were appointed during the period, have expressed
their willingness to continue in office and a resolution to re-appoint
them will be proposed at the annual general meeting.
By order of the Board
E J Guinan
Secretary
13 February 1998
2
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Report of the auditors
- --------------------------------------------------------------------------------
To the shareholders of Countdown Holdings Limited
We have audited the financial statements on pages 4 to 22 which have been
prepared under the accounting policies set out on pages 8 to 10.
Respective responsibilities of directors and auditors
As described on pages 1 and 2 the company's directors are responsible for
the preparation of the 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. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
Fundamental uncertainty
In forming our opinion, we have considered the adequacy of the disclosures
made in note 1 to the financial statements concerning the uncertainty
about the continuing support of the company's bankers and the ability of
the major shareholders Transmedia Europe Inc and Transmedia Asia Pacific
Inc to continue to provide financial support. Our opinion is not qualified
in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the
state of the company's affairs as at 30 September 1997 and of its result
for the period then ended and have been properly prepared in accordance
with the Companies Act 1985.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
13 February 1998
3
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Consolidated profit and loss account for the period ended 30 September 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As restated
13 months ended Year ended
Note 30 September 1997 31 August 1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C> <C>
Turnover 1 & 3
Continuing 5,129,435 4,936,967
Acquisitions -- 12,572
---------- ---------
5,129,435 4,949,539
Cost of sales 3,207,576 2,988,184
---------- ---------
Gross profit 1,921,859 1,961,355
Net operating expenses 4 2,574,793 2,171,398
---------- ---------
Operating loss 5
Continuing operations (652,934) (206,876)
Acquisitions -- (3,169)
-------- --------
(652,934) (210,043)
Share of associated undertaking's loss -- (21,500)
Interest receivable 8 -- 157
-------- --------
-- (21,343)
---------- ---------
(652,934) (231,386)
Interest payable and similar charges 9 (57,668) (27,311)
---------- ---------
Loss on ordinary activities before taxation (710,602) (258,697)
Tax on loss on ordinary activities 10 8,408 26,738
---------- ---------
Loss for the period (702,194) (231,959)
Retained loss brought forward
As previously stated (268,965) (42,753)
Prior year adjustment 22 (119,487) (113,740)
-------- --------
Retained loss brought forward, as restated (388,452) (156,493)
---------- ---------
Retained deficit (1,090,646) (388,452)
========== ========
</TABLE>
All amounts relate to continuing activities.
All recognised gains and losses are included in the profit and loss account.
The loss for the period represents the movement in shareholders' funds.
The notes on pages 8 to 22 form part of these financial statements.
4
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Consolidated balance sheet at 30 September 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As restated
Note 30 September 1997 31 August 1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets 11 284,138 300,355
Tangible assets 12 311,378 512,341
---------- ---------
595,516 812,696
Current assets
Stocks 14 129,950 138,175
Debtors 15 403,518 538,396
Cash at bank and in hand 26,663 71,443
--------- ---------
560,131 748,014
Creditors: amounts falling due
within one year 16 1,719,602 1,365,927
--------- ---------
Net current liabilities (1,159,471) (617,913)
---------- ---------
Total assets less current liabilities (563,955) 194,783
Creditors: amounts falling due
after more than one year 17 (26,691) (83,235)
---------- ---------
Net assets (590,646) 111,548
========== =========
Capital and reserves
Called up share capital 21 500,000 500,000
Profit and loss account (1,090,646) (388,452)
---------- ---------
Shareholders' funds - equity (590,646) 111,548
========== =========
</TABLE>
The financial statements were approved by the Board on 13 February 1998
E J Guinan
Director
The notes on pages 8 to 22 form part of these financial statements.
5
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Balance sheet at 30 September 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 30 September 1997 31 August 1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C> <C>
Fixed assets
Investment 13 499,998 499,998
Current assets
Cash at bank and in hand 1,656 1,715
Creditors: amounts falling due
within one year 16 7,113 4,113
----- -----
Net current liabilities (5,457) (2,398)
------- -------
Net assets 494,541 497,600
======= =======
Capital and reserves
Called up share capital 21 500,000 500,000
Profit and loss account (5,459) (2,400)
------- -------
Shareholders' funds - equity 494,541 497,600
======= =======
</TABLE>
The financial statements were approved by the Board on 13 February 1998
E J Guinan
Director
The notes on pages 8 to 22 form part of these financial statements.
6
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Consolidated cash flow statement for the period ended 30 September 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
13 months ended Year ended
Note 30 September 1997 31 August 1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C> <C>
Net cash inflow from operating
activities 5 10,538 10,304
Returns on investments and
servicing of finance
Interest received -- 157
Interest paid (52,098) (23,632)
Interest element of finance lease
rental payments (5,570) (3,679)
------- -------
Net cash outflow from returns on
investments and servicing of finance (57,668) (27,154)
Taxation
Corporation tax paid 6,298 (2,631)
Capital expenditure
Purchase of tangible fixed assets (41,551) (37,246)
Sale of tangible fixed assets 15,096 20,832
------- -------
Net cash outflow from capital expenditure (26,455) (16,414)
Acquisitions and disposals
Purchase of investment in
associated undertaking -- (21,500)
Acquisition of subsidiary undertaking -- 90,492
------- -------
Net cash inflow from acquisitions
and disposals -- 68,992
-------- ------
Net cash (inflow)/outflow before financing (67,287) 33,097
Financing
Capital element of finance lease
rental payments 25 (38,106) (21,272)
-------- ------
(Decrease)/increase in cash 23 (105,393) 11,825
======== ======
The notes on pages 8 to 22 form part of these financial statements.
7
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September 1997
- --------------------------------------------------------------------------------
1 Accounting policies
The financial statements have been prepared under the historical cost
convention and are in accordance with applicable accounting standards. The
following principal accounting policies have been applied:
Basis of accounting - going concern
The group's major trading company sustained a net loss for the
period as well as for the two preceding years, and as a consequence,
net assets have been depleted. Furthermore, the group had net
current liabilities at the balance sheet date and has incurred
losses subsequently.
The financial statements have been prepared on the going concern
basis which assume that the company will continue in operational
existence for the foreseeable future.
The validity of this assumption depends upon the financial support
of Transmedia Europe, Inc. and Transmedia Asia Pacific, Inc., the
continued support of the group's bankers and a return to profitable
trading.
Whilst the directors are presently uncertain as to the outcome of
the matters mentioned above, they believe that it is appropriate for
the financial statements to be prepared on the going concern basis.
Turnover
Turnover, which excludes Value Added Tax and intra group
transactions, represents (1) the invoiced value of goods and
services supplied, and (2) subscriptions, which have been accounted
for on a receipts basis and, therefore, no account has been taken of
any liability arising in respect of the unexpired portions of
subscriptions received.
Depreciation
Depreciation is provided to write off the cost or valuation, less
estimated residual values, of all fixed assets, except freehold land
and some freehold buildings, evenly over their expected useful
lives. It is calculated at the following rates:
Freehold property - 2% on cost
Plant and machinery - 25% on written down value
Leasehold property - over the life of the lease
Stocks
Stocks are valued at the lower of cost and net realisable value.
8
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
1 Accounting policies (Continued)
Deferred taxation
Provision is made for timing differences between the treatment of
certain items for taxation and accounting purposes, to the extent
that it is probable that a liability or asset will crystallise.
Leased assets
Where assets are financed by leasing agreements that give rights
approximating to ownership ('finance leases'), the assets are
treated as if they had been purchased outright. The amount
capitalised is the present value of the minimum lease payments
payable during the lease term. The corresponding leasing commitments
are shown as amounts payable to the lessor. Depreciation on the
relevant assets is charged to the profit and loss account.
Lease payments are analysed between capital and interest components
so that the interest element of the payment is charged to the profit
and loss account over the period of the lease and represents a
constant proportion of the balance of capital repayments
outstanding. The capital part reduces the amounts payable to the
lessor. All other leases are treated as operating leases. Their
annual rentals are charged to the profit and loss account on a
straight-line basis over the term of the lease.
Reverse premiums and similar incentives received to enter into
operating lease agreements are released to the profit and loss
account over the period to the date on which the rent is first
expected to be adjusted to the prevailing market rate.
Pension costs
Contributions to the company's defined contribution pension scheme
are charged to the profit and loss account in the year in which they
become payable.
Goodwill
Goodwill arising on consolidation is shown in the balance sheet
under intangible assets and is amortised on a straight line basis
over its expected economic life of 20 years.
Investments
Fixed asset investments are stated at cost less provision for any
permanent diminution in value.
Basis of consolidation
The group financial statements consolidate the financial statements
of the company and all its subsidiary undertakings made up to 30
September 1997.
9
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
1 Accounting policies (Continued)
Foreign currencies
Assets and liabilities expressed in foreign currencies are
translated into sterling at the rate of exchange ruling at the
balance sheet date. Transactions in foreign currencies are
translated into sterling at the rate of exchange ruling at the date
of the transaction. Exchange differences are taken into account in
arriving at the operating profit.
Subscription income - change in accounting policy
Subscription income is accounted for on an accruals basis. One of
the group's subsidiaries, Countdown Plc, previously accounted for
subscription income when received. The effect of the change in
accounting policy is reflected in note 22. Comparatives have been
restated to reflect the change in accounting policy.
2 Holding company profit and loss account
The company has taken advantage of the exemption in the Companies
Act 1985, Section 230, not to present its own profit and loss
account. Included in the group loss for the financial period is a
loss of the company of (pounds)3,049 (1996 - (pounds)4,147).
3 Turnover
The turnover and loss before taxation is wholly attributable to the
principal activity of the group.
A geographical analysis of turnover and analysis for segmental
reporting purposes have been omitted as, in the opinion of the
director, disclosure would be seriously prejudicial to the interests
of the group.
4 Net operating expenses
13 months ended Year ended
30 September 31 August
1997 1996
(pounds) (pounds)
Net operating expenses are made up as follows:
Distribution costs 322,158 302,327
Administrative expenses 2,252,635 1,869,071
--------- ---------
2,574,793 2,171,398
========= =========
The total figure of net operating expenses for 1996 includes (pounds)8,115
in respect of acquisitions (namely administrative expenses of
(pounds)8,115).
10
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
5 Operating loss
13 months ended Year ended
30 September 31 August
1997 1996
(pounds) (pounds)
The operating loss is stated after
charging/(crediting):
Amortisation of goodwill 16,217 6,995
Depreciation of tangible assets: Owned 81,995 77,492
Leased 10,270 15,744
Additional depreciation on fixed assets 206,220 --
Director's emoluments (note 6) including
pension contributions 129,058 141,269
Auditors' remuneration: Audit fee 23,432 19,660
Non-audit fee 5,575 33,745
(Profit) on disposal of fixed assets (11,447) (15,056)
Hire of equipment 2,458 3,464
Operating leases: land and buildings 108,333 114,782
========= =========
Reconciliation of operating loss to net cash
inflow from operating activities
Operating loss (652,934) (204,296)
Adjustment in respect of pre-acquisition
results -- (23,461)
Depreciation and amortisation 314,702 100,231
(Profit) on disposal of fixed assets (11,447) (15,056)
Decrease in stock 8,225 67,320
Decrease in debtors 136,998 40,707
Increase in creditors 215,004 44,859
--------- ---------
10,548 10,304
========= =========
6 Directors' emoluments
Directors' remuneration 107,342 139,475
Contributions to a defined contribution
pension scheme 21,716 1,794
--------- ---------
129,058 141,269
========= =========
</TABLE>
11
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
7 Employees
13 months ended Year ended
30 September 31 August
1997 1996
(pounds) (pounds)
Staff costs consist of:
Wages and salaries 1,203,170 964,709
Social security costs 83,095 90,459
Pension contributions 18,189 17,914
--------- ---------
1,304,454 1,073,082
========= =========
The average monthly number of employees
during the period was as follows:
Administration 37 45
========= =========
8 Interest receivable and similar income
Bank deposit interest receivable -- 157
========= =========
9 Interest payable and similar charges
Interest payable on bank overdrafts 42,872 14,176
Interest payable on all other loans 9,226 9,456
Interest payable on finance leases and hire
purchase contracts 5,570 3,679
--------- ---------
57,668 27,311
========= =========
12
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
10 Taxation
13 months ended Year ended
30 September 31 August
1997 1996
(pounds) (pounds)
The tax credit/(charge) on loss on ordinary
activities for the period was as follows:
Corporation tax at 33% (1996 - 25% and 33%) -- 26,759
Overseas taxation 6,321 (21)
Overprovision in prior years 2,087 --
------- -------
8,408 26,738
======= =======
11 Intangible fixed assets
Goodwill on
consolidation
(pounds)
Group
Cost
At 1 September 1996 and at 30 September 1997 324,350
-------
Amortisation
At 1 September 1996 23,995
Charge for period 16,217
-------
At 30 September 1997 40,212
-------
Net book value
At 30 September 1997 284,138
=======
At 31 August 1996 300,355
=======
13
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
12 Tangible fixed assets
<TABLE>
<CAPTION>
Short,
Freehold leasehold Plant and
buildings vehicles machinery Total
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C>
Group
Cost or valuation
At 1 September 1996 257,612 46,406 926,589 1,230,607
Additions -- -- 101,171 101,171
Disposals -- -- (40,339) (40,339)
Scrapping -- (46,406) (647,866) (694,272)
-------- --------- --------- ---------
At 30 September 1997 257,612 -- 339,555 597,167
-------- --------- --------- ---------
Depreciation
At 1 September 1996 38,573 3,275 676,418 718,266
On disposals -- -- (36,690) (36,690)
Charge for the period 5,582 2,519 84,164 92,265
(Scrapping)/revaluation 63,457 (5,794) (545,715) (488,052)
-------- --------- --------- ---------
At 30 September 1997 107,612 -- 178,177 285,789
-------- --------- --------- ---------
Net book value
At 30 September 1997 - Owned 150,000 -- 125,843 275,843
- Leased -- -- 35,535 35,535
-------- --------- --------- ---------
150,000 -- 161,378 311,378
======== ========= ========= =========
At 31 August 1996 - Owned 219,039 43,131 201,587 463,757
- Leased -- -- 48,584 48,584
-------- --------- --------- ---------
219,039 43,131 250,171 512,341
======== ========= ========= =========
</TABLE>
14
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
13 Fixed asset investments
Share of assets
30 September 31 August
1997 1996
(pounds) (pounds)
Group
Associated undertakings
Cost of shares and loan stock at 1 September 51,500 30,000
Addition at cost -- 21,500
--------- ---------
51,500 51,500
Share of losses, retained by associated
undertaking (51,500) (51,500)
--------- ---------
Shares and loan stock at 30 September 1997
and 31 August 1996 -- --
========= =========
Notice has been given to Companies House
to strike off the associate undertaking
by 2 March 1998.
Company
Investment in subsidiary undertakings at cost 499,998 499,998
========= =========
At the period end, the company held more than 10% of the share capital of the
following unlisted companies:
Country of Shares held
incorporation Class % Held
Subsidiary undertakings England Ordinary
Countdown plc and deferred 100 Directly
I.D.C. Card Limited England Ordinary 100 Indirectly
Countdown International Inc USA Common stock 100 Indirectly
Associated undertaking
RSVP Publishing Limited England Ordinary 50 Indirectly
The principal activity of the subsidiaries is that of discount buying
organisations. The principal activity of the associated undertaking is that of
publishing and retailing of coupon books; however it has remained dormant since
February 1996.
15
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
14 Stocks
30 September 1997 31 August 1996
(pounds) (pounds)
Group
Cards and books 77,563 75,596
Store discount vouchers 52,387 62,579
--------- ---------
129,950 138,175
========= =========
There is no significant difference between the cost and the replacement
value of stock.
15 Debtors
<TABLE>
<CAPTION>
Group Company
30.9.1997 31.8.1996 30.9.1997 31.8.1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C>
Trade debtors 284,174 350,581 -- --
Other debtors 40,867 56,318 -- --
Amount due from associated undertaking -- 952 -- --
Taxation recoverable -- 28,763 -- --
Prepayments and accrued income 78,477 101,782 -- --
------- ------- ----- -----
403,518 538,396 -- --
======= ======= ===== =====
</TABLE>
The amounts above fall due for payment in less than one year.
16
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
16 Creditors: amounts falling due within one year
<TABLE>
<CAPTION>
Group Company
30.9.1997 31.8.1996 30.9.1997 31.8.1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C>
Bank loan and overdrafts (note 18) 439,583 378,970 -- --
Obligation under finance leases and
hire purchase agreements (note 19) 22,761 19,703 -- --
Trade creditors 707,752 356,883 -- --
Amounts owed to subsidiary undertakings -- -- 4,113 --
Amounts owed to associated companies 28,181 -- -- --
Other creditors including taxation and
social security (see note below) 521,325 610,371 3,000 4,113
--------- --------- ------ ------
1,719,602 1,365,927 7,113 4,113
========= ========= ====== ======
Note: Other creditors including taxation and
social security is made up as follows:
Social security and PAYE 34,116 95,296 -- --
Other creditors and accruals 487,209 515,075 3,000 4,113
--------- --------- ------ ------
521,325 610,371 3,000 4,113
========= ========= ====== ======
17 Creditors: amounts falling due after
more than one year
Bank loan (note 18) -- -- -- --
Obligations under finance leases
and hire purchase agreements (note 19) 26,691 8,235 -- --
Other creditor -- 75,000 -- --
--------- --------- ------ ------
26,691 83,235 -- --
========= ========= ====== ======
</TABLE>
17
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
18 Bank loans and overdrafts
<TABLE>
<CAPTION>
Group Company
30.9.1997 31.8.1996 30.9.1997 31.8.1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C>
The aggregate amount of bank loans and
overdrafts is as follows:
Falling due within one year:
Bank overdraft 340,265 269,902 -- --
Bank loan current portion 99,318 109,068 -- --
--------- --------- ------ ------
439,583 378,970 -- --
========= ========= ====== ======
</TABLE>
The bank loan is being paid in monthly instalments of (pounds)750. The
loan is due for repayment by 31 December 2008; however, this loan is
repayable on demand. The rates of interest on the overdraft and loan are
4% and 2% (respectively) over bank's base rate. The loan is secured by a
fixed charge over the freehold property. The bank overdrafts are secured
by a fixed charge over the book debts and a floating charge on the other
assets of the group.
19 Obligations under finance leases
30 September 31 August
1997 1996
(pounds) (pounds)
The minimum finance lease payments to which
the group is committed are as follows:
Under one year 27,570 21,788
In the second to fifth year inclusive 28,983 8,537
--------- ---------
56,553 30,325
Less: Amount representing future
finance charges (7,101) (2,387)
--------- ---------
49,452 27,938
========= =========
18
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
20 Commitments under operating leases
The group had annual commitments under non-cancellable operating leases as
set out below:
Land and buildings
30 September 31 August
1997 1996
(pounds) (pounds)
Operating leases which expire:
In two to five years 5,320 5,320
Over five years 100,000 100,000
--------- ---------
105,320 105,320
========= =========
21 Called up share capital
30 September 31 August
1997 1996
(pounds) (pounds)
Authorised, issued, called up and fully paid
500,000 Ordinary shares of (pounds)1 each 500,000 500,000
========= =========
22 Prior year adjustment - change in accounting policies
As stated in note 1 of the company's subsidiaries, Countdown Plc changed
its accounting treatment of subscription income from recognition on a
receipts basis to an accruals basis.
30 September 31 August
1997 1996
(pounds) (pounds)
Effect of change in accounting policy
- current year 9,112 (5,747)
- prior years (119,487) (113,740)
--------- ---------
(110,375) (119,487)
========= =========
19
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
23 Cash and cash equivalents
Analysis of balances as shown in the group balance sheet and changes
during the period:
Change
30.9.1997 31.8.1996 in period
(pounds) (pounds) (pounds)
Cash at bank and in hand 26,663 71,443 (44,780)
Bank overdraft and loan (439,583) (378,970) (60,613)
-------- -------- ---------
(412,920) (307,527) (105,393)
======== ======== ========
24 Analysis of changes in financing during the period
13 months ended Year ended
30 September 31 August
1997 1996
(pounds) (pounds)
Finance leases
Balance at 1 September 27,938 38,494
New capital leases 41,217 10,716
Cash outflow from financing (19,703) (21,272)
--------- ---------
Balance at 31 August 49,452 27,938
========= =========
25 Reconciliation of net cash inflow to
movement in net debt
(Decrease)/increase in cash in the year (105,393) 11,825
Cash outflow from decrease in debt and
lease financing 38,106 21,272
--------- ---------
Change in net debt resulting from cash flows (67,287) 33,077
New finance leases (59,620) (10,716)
--------- ---------
Movement in net debt in the year (126,907) 22,381
Opening net debt (335,465) (357,846)
--------- ---------
Closing net debt (462,372) (335,465)
========= =========
20
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
26 Analysis of net debt
<TABLE>
<CAPTION>
Other
At Cash non-cash At
30.9.1997 flow changes 31.8.1996
(pounds) (pounds) (pounds) (pounds)
<S> <C> <C> <C> <C>
Cash in hand and at bank 71,443 (44,780) -- 26,663
Overdrafts (378,970) (60,613) -- (439,583)
-------- -------- -------- --------
(307,527) (105,393) -- (412,920)
Finance leases (27,938) 38,106 (59,620) (49,452)
-------- -------- -------- --------
Total (335,465) (67,287) (59,620) (462,372)
======== ======== ======== ========
27 Reconciliation of movement in shareholders' funds
Group Company
30.9.1997 31.8.1996 30.9.1997 31.8.1996
(pounds) (pounds) (pounds) (pounds)
Shareholders' funds at 1 September
(originally (pounds)231,035 before deducting
prior year adjustment of(pounds)119,487) 111,548 343,507 497,600 501,747
Loss for the financial period (702,194) (231,959) (3,059) (4,147)
-------- -------- -------- --------
Shareholders' funds at 31 August (590,646) 111,548 494,541 497,600
======== ======== ======== ========
</TABLE>
28 Related party transactions
A subsidiary company has acquired a twenty year lease in respect of a
property from The Countdown plc Self-administered Scheme. The director, Mr
C E C Radbone, is the only member of this pension scheme. The current rent
is (pounds)100,000 per annum.
29 Capital commitments
There are no capital commitments at the year end.
21
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the period ended 30 September
1997 (Continued)
- --------------------------------------------------------------------------------
30 Pension commitments
The group operates a defined contribution pension scheme. The assets of
the scheme are held separately from those of the company. The cost of the
contributions to the scheme are charged to the profit and loss account in
the year in which they fall due. There were no amounts due at the balance
sheet date (1996 - Nil).
31 Ultimate holding company
On 3 April 1997, the entire share capital of Countdown Holdings Limited
was acquired in an equal share by Transmedia Europe, Inc. and Transmedia
Asia Pacific, Inc., companies incorporated in the USA.
Due to the control exerted over Countdown Holdings Limited, by Transmedia
Europe Inc, Countdown Holdings Limited is treated as a subsidiary of that
company. Therefore Transmedia Europe Inc is the parent of the largest and
the smallest groups of which the company is a member.
A copy of each of the holding companies accounts is available from the
Companies' registered office.
22
<PAGE>
EXHIBIT 99(a)(3)(ii)
DATED 1997
-----------------------------------------------------
(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
Draft 25.3.97
<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
Schedule 8 - Purchaser's representations and warranties
<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>
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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>
-16-
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>
-17-
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.
<PAGE>
-20-
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
<PAGE>
-21-
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.
<PAGE>
-22-
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.
<PAGE>
-23-
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>
-24-
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>
-25-
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
<PAGE>
-26-
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>
-27-
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.
<PAGE>
-28-
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.
<PAGE>
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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.
<PAGE>
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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.
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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
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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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-35-
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
<PAGE>
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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.
<PAGE>
-39-
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.
<PAGE>
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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.
<PAGE>
-41-
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
<PAGE>
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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.
<PAGE>
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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.
<PAGE>
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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.
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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).
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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
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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
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
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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.
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>
-67-
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>
-68-
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>
-69-
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>
-70-
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>
-71-
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>
-73-
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>
-74-
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>
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
-19-
<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>
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.
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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:
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<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
---------------
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<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.
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<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.
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<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.
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<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
====== =======
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<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 --
=======
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<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)
======= =======
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<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 --
====== ======
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<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
======= =======
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<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>
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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>
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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>
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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>
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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.
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>
-13-
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>
-17-
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>
-19-
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>
-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.
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>
-21-
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>
-22-
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>
-23-
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>
-24-
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>
-25-
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>
-26-
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>
-27-
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.
<PAGE>
-28-
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.
<PAGE>
-29-
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.
<PAGE>
-30-
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>
-31-
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>
-32-
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>
-33-
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.
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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.
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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).
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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.
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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
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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.
<PAGE>
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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.
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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(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).
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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).
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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
<PAGE>
-70-
SCHEDULE 7
Service Agreement
<PAGE>
-71-
SIGNED by [ ]
in the presence of:
SIGNED by
for and on behalf of
[ ]
in the presence of:-
