FORM 10-K
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, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM ______________TO_________________
COMMISSION FILE NUMBER 0-26368
TRANSMEDIA ASIA PACIFIC, INC.
-----------------------------
(exact name of registrant as specified in its charter)
Delaware 13-3760219
---------------- ------------------
(State or other (I.R.S.
jurisdiction of Identification No.)
incorporation of
organization)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
-----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: U.K. 011-44-171-930-0706
Securities registered pursuant to Section 12(b) 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 January 4, 1999 was $20,040,110 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 January 4,
1999 was 20,364,649.
Documents incorporated by reference: None
<PAGE>
Transmedia Asia Pacific, Inc.
Form 10-K for the year ended September 30, 1998
Index
Page
PART I
Item 1. Business 3
Item 2. Properties 15
Item 3. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters 17
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
Item 7A. Quantitative and Qualitative Disclosure
About Market Risk 24
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 25
PART III
Item 10. Directors and Executive Officers of the Registrant 26
Item 11. Executive Compensation 27
Item 12. Security Ownership of Certain Beneficial
Owners and Management 31
Item 13. Certain Relationships and Related Transactions 32
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 34
Signatures
2
<PAGE>
ITEM 1. BUSINESS.
History
Transmedia Asia Pacific, Inc. ("TMAP" or "the Company") was incorporated under
the laws of the state of Delaware in March 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. The rights acquired, pursuant to a Master License
Agreement ("License Agreement") dated March 21, 1994, were an exclusive license
("License") to use certain trademarks and service marks, proprietary computer
software programs and know-how of Network to establish and operate a discount
restaurant charge card business in clearly defined geographical areas. The
geographical areas covered by the License are substantially all countries in
Asia and the Pacific Rim including Japan, China, Hong Kong, Taiwan, Korea, the
Philippines and India (the "Licensed Territories").
Network, from whose affiliate, TMNI, the License was granted and on whose
business the Company's restaurant charge card operations are modeled, is a
publicly traded company operating in the United States both directly and
indirectly through licensees and franchisees. Pursuant to the terms of the
License the Company is authorized to engage in the restaurant charge card
business within the Licensed Territories in the same manner that Network
operates in the United States. Under the License Agreement the Company must pay
royalties to Network and certain changes in key executives and principal
shareholdings in the Company require the prior written approval of Network. The
Company's restaurant cardholders and cardholders of Network and its franchisees
can use the restaurant card in all territories covered by the Company, Network
and its franchisees. The Company realizes all financial benefits from restaurant
card usage within the Licensed Territories but no financial benefit from usage
outside the Licensed Territories.
Network was issued 590,790 shares of common stock, par value $.00001 per share
("Common Stock") of the Company, as part consideration for the License and has
the right to designate one director to the Board of Directors of the Company. To
date Network has not exercised its right to designate a director.
The Company has worked closely with Transmedia Europe, Inc. ("TME") since
inception. TME is a company which acquired a similar license to that of the
Company to operate a discount restaurant charge card business in Europe, Turkey
and the other countries outside of Europe which were formerly part of the Union
of Soviet Socialist Republics. The Company and TME share common directors and
officers. For an initial period post incorporation they also shared common
shareholders. Edward J. Guinan III is Chairman and Chief Executive Officer of
both the Company and TME, as well as a principal shareholder in each.
The Company commenced business operations in Sydney, Australia in November 1994.
TME commenced operations in the United Kingdom in January 1994.
Through 1996 the Company operated a discount restaurant charge card business in
Australia through its wholly owned subsidiary Transmedia Australia Pty Limited.
In late 1996 management identified the need to expand the Company's operations
to become a broader based "member benefits" provider, believing that the Company
needed a range of benefits to offer its corporate clients and individual
members, in addition to discount dining. Such benefits included discount
shopping, travel, hotel accommodation and telephone helpline
3
<PAGE>
services. At the same time TME made a similar strategic decision and as a result
the Company and TME decided to work together in expanding their business
operations. In April 1997 they jointly acquired Countdown Holdings Limited
("Countdown"), an international provider of membership based discount shopping
services. See "Countdown". In December 1997 Transmedia Australia Holdings Pty
Limited ("Transmedia Australia"), a company owned jointly by the Company and
TME, purchased 51% of the shares of common stock of NHS Australia Pty Limited
("NHS"). NHS purchased the net assets and business operations of Nationwide
Helpline Services Pty Limited ("Nationwide"). NHS is a provider of telephone
helpline services covering advice on legal, tax, accounting, medical and home
emergency. In addition NHS offers travel related products such as airline
tickets, vacation packages, insurance and provides international medical case
management and repatriation services to a number of insurance companies. See
"Nationwide Helpline Services".
The close collaboration between the Company and TME has continued and on May 14,
1998 they jointly acquired Logan Leisure, a business which produces and sells
discount shopping and services directories. See "Logan Leisure". On May 22, 1998
the Company and TME jointly acquired Breakaway Travel Club Pty Limited
("Breakaway"). Breakaway, which is based in Sydney Australia, is a licensed
travel agent specializing in discount packaged vacations for individuals
employed in the travel industry in Australia. See "Breakaway".
In light of the close collaboration between the Company and TME since
incorporation and, more particularly, in view of the joint ownership of
Countdown, NHS, Logan Leisure and Breakaway Travel, management of the Company
and TME have been assessing the rational for maintaining two separate corporate
entities. Management feels that keeping the two companies distinct and separate
is no longer appropriate or advantageous to shareholders and therefore announced
its intention to pursue a merger of the two companies. In concluding that a
merger is in the best interests of both the Company and TME management
considered several factors including the confusion of having two separate stock
quotes for essentially the same business (operating in different geographical
regions), the opportunity to reduce corporate overhead and to increase operating
efficiency. The proposed merger is subject to approval of the respective Boards,
fairness opinions by independent investment advisers and the approval of
shareholders of both companies.
Transmedia Restaurant Charge Card
The restaurant charge card business operates under the rights acquired pursuant
to the License Agreement with TMNI. The restaurant card is a charge card used by
a cardholder in lieu of a major credit card to pay for purchases at
participating restaurants. Using the restaurant card for such purchases entitles
the cardholder to a 25% discount on the food and beverage element of purchases
made at participating restaurants (i.e. the total purchase price excluding taxes
and service). The restaurant card charges are collected from a major credit card
nominated by the cardholder when the restaurant card is first issued.
The restaurant charge card business operates as follows:
o The Company identifies restaurants suitable to participate in the program
and negotiates an agreement with them pursuant to which they agree to
become participating restaurants ("Participating Restaurants").
o The Company advances cash ("Restaurant Credits") to such Participating
Restaurants.
o An individual becomes a cardholder ("Cardholder") by completing an
application at which time they nominate a major credit card through which
charges incurred against the restaurant charge card will be recovered.
4
<PAGE>
o Restaurant Credits entitle the Company to food and beverage at twice the
value of the Restaurant Credit referred to as "Food and Beverage Credits".
In effect the Company purchases food and beverage in advance at a 50%
discount for its cardholders.
o The Company recovers Food and Beverage Credits when food and beverage is
purchased at full retail value at Participating Restaurants by Cardholders
using their restaurant card.
o As food and beverage is purchased by Cardholders the Food and Beverage
Credits outstanding are reduced by the retail value of such purchases and
the Restaurant Credits outstanding are reduced by one-half of such Food
and Beverage Credits used. The Company recovers the total value of the
purchase made from the Cardholder's major credit card.
o The Company pays over to the Participating Restaurant the tax and service
elements of the total purchase.
o The Cardholder receives a credit equal to 25% of the value of the food and
beverage purchased.
o The Company retains the balance.
o The Company pays a royalty of 2% of Food and Beverage Credits used to
Network and 1.3875% of Food and Beverage Credits used as sales
commissions.
o The total charge is listed on the cardholder's major credit card statement
along with a separate credit equal to 25% of the value of food and
beverage purchased at the participating restaurant.
o The Company maintains a current record of the amount of Food and Beverage
Credits outstanding at each Company Participating Restaurant.
The following is an illustration of a hypothetical transaction by a Cardholder
at a Participating Restaurant.
A commissioned sales representative, recruits Restaurant A (a full service
restaurant operating in Sydney) as a Participating Restaurant. The Company
advances Aus$3,000 to Restaurant A in Restaurant Credits. This advance entitles
the Company to collect the proceeds from Aus$6,000 of food and beverage
purchased by cardholders using their restaurant cards at Restaurant A. John
Smith, a Cardholder, purchases a meal at Restaurant A and pays the Aus$100 check
(consisting of Aus$80 for food and beverage and Aus$20 in taxes and tip) using
his Restaurant Card. Mr Smith presents his Restaurant Card which is accepted by
Restaurant A. Restaurant A delivers the Restaurant Card receipt for Mr Smith's
meal to the Company for processing. The Company recovers the Aus$100 value of
the purchase from Mr. Smith's nominated major credit card.
The allocation of the hypothetical Aus$100 check can be summarized as follows:
Name Amount Explanation of Allocation
Mr. Smith Aus$20 25% of food and beverage element of check
Restaurant A Aus$20 Tip and taxes element of check
TMNI Aus$1.60 2% royalty fee
Company Aus$58.40 Aus$100 net of above payments
The Company will use Aus$40 of its net proceeds to reduce the value of the
Restaurant Credit at Restaurant A (i.e. 50% of Aus$100 less Aus$20 tip and
taxes). The balance of Aus$18.40 is retained by the Company as gross profit.
However, the Company will typically pay a sales commission of Aus$1.11 (i.e.
1.3875% of the food and beverage element of the check less the cardholders
discount) in the above transaction to its sales representative.
5
<PAGE>
As of September 30, 1998, the Company had approximately 175 (1997: 274) Company
Participating Restaurants and approximately 29,048 (1997: 36,800) Cardholders.
The Company currently operates in Australia and New Zealand, and may expand its
operations within the Licensed Territories.
Nationwide Helpline Services
On December 2, 1997 Transmedia Australia, an Australian company owned equally by
the Company and TME, purchased 51% of the shares of common stock of NHS. NHS
purchased the net assets and business of Nationwide. Nationwide, established in
1989, is an Australian based provider of "member benefit" programs primarily to
organizations with large consumer bases such as banks and insurance companies.
The operations of NHS are controlled by the Company and consolidated within the
Company's financial statements effective December 2, 1997. Transmedia Australia
also acquired an option to purchase the balance of 49% of the shares of common
stock of NHS, which shares were purchased on November 17, 1998. See
"Acquisitions - NHS".
The NHS member benefit programs consist primarily of telephone helpline
services, travel products and international medical case management and
repatriation services. The NHS telephone helpline services include telephone
advice lines covering legal, tax and accounting issues together with medical and
home emergency issues. Travel products, offered through Teletravel, include the
sale of packaged vacations, airline tickets, hotel accommodation and travel
related products such as insurance. Finally, NHS through a wholly owned
subsidiary, IMAN, provides international medical case management and
repatriation services for travelers to a number of major insurance companies.
NHS sells its member benefit programs on a wholesale basis to a wide range of
corporations who typically brand the services under their own name. The programs
offered by NHS enable it's corporate clients to provide additional benefits to
their own customer base. NHS has approximately five million members.
Telephone Helpline Services
The Telephone Helpline Services business operates through NHS's retention of the
services of outside lawyers, accountants and others ("Service Providers") to
provide free advice to its members over the telephone. NHS pays a retainer to
such Service Providers in return for their being available to provide advice to
members. In addition to the retainer, Service Providers hope to benefit by
securing new clients when a member requires assistance beyond the initial
telephone advice. Members are recruited through NHS's sale of its Telephone
Helpline Services to corporations such as banks and insurance companies who make
it available to their customers as a benefit of being a customer. NHS contracts
to provide the Telephone Helpline Services to its corporate clients for a period
of 1 to 3 years. Such corporations benefit by retaining existing customers
and/or gaining new customers through offering a product not offered by their
competitors. NHS charges client corporations an annual fee per customer. To
provide the Telephone Helpline Services NHS operates a 24-hour call center. The
call center receives calls from members and then redirects the call to the
relevant Service Provider. Members are given a unique telephone number for each
category of help/advice offered. In addition, such unique telephone numbers are
different for each corporate client enabling the call center to answer member
calls as the corporate client's helpline service. Members can use the service as
often as necessary and can be connected to the same advisor each time they call
if a matter is on going. The range of help/advice offered is broad, covering all
types of legal, tax and accounting issues that members may encounter in their
daily lives. In addition, NHS offers a 24 hour medical triage service and help
and advice on a broad range
6
<PAGE>
of other issues from home emergency, home maintenance and security to credit
card registration, social security advice, stress and bereavement helplines.
Teletravel
Teletravel is a telephone based travel agency offering a full range of travel
services such as airline tickets, packaged tours, hotel accommodation, auto
rental and other travel related products such as insurance. The Teletravel
business was established to enable NHS to offer travel products to its corporate
clients, in particular those clients who purchase NHS products and services on a
co-branded basis. Teletravel employs its own travel agents who operate a call
center located in Sydney, Australia. Teletravel does not operate any travel
shops for consumers to utilize on a walk-in basis. Instead the business is
entirely telephone based whereby customers call the Teletravel call center where
an experienced travel consultant offers help and advice to the traveler and then
confirms the customers booking. Consumers can pay by check, credit card or money
order. When payment is received tickets and itineraries are forwarded to the
customer. Teletravel generates revenues from commissions received from airlines
and travel product providers. Teletravel believes it enjoys an economic
advantage over traditional travel agents who have to bear the costs associated
with their retail outlets.
IMAN
IMAN was established in 1980 as a telephone doctor service operating throughout
Asia and developed a particular expertise in assisting tropical travelers. In
1995 IMAN was acquired by Nationwide. Today, IMAN provides international medical
case management and repatriation services for travelers. IMAN has established an
international network of doctors, nurses and medical advisors who are available
to assist travelers who require medical assistance while abroad. The service
extends to repatriation in cases where the traveler must return home to receive
treatment. The IMAN product is sold to a number of major insurance companies who
incorporate the services of IMAN within their travel insurance coverage.
Countdown
In April 1997, the Company acquired 50% of the equity capital of Countdown, an
international provider of membership based discount shopping services. The
remaining 50% was simultaneously purchased by TME. See "Acquisitions -
Countdown". Although the Company has significant influence over the operating
and financial decisions of Countdown, TME has effective control over the
operations of Countdown. Accordingly, Countdown's operations are accounted for
under the equity method in the financial statements of the Company.
The Countdown business was established in 1970. Its primary business operations
are located in the United Kingdom. Additionally, Countdown has appointed
licensees who operate in nine countries around the world. The Countdown business
is primarily a membership based business which arranges discounts with major
suppliers of goods and services for its members. Countdown has approximately 6.5
million members and over 100,000 participating merchants in 39 countries.
Countdown markets membership on a retail and wholesale basis. Retail marketing
involves selling membership to individuals. Memberships sold on this basis
represent a small portion of total membership. Members pay an annual membership
fee, currently approximately $83, which entitles them to a Countdown card valid
for one year. Members present their Countdown card at the point of sale when
making purchases from participating merchants. Presentation of the Countdown
card entitles the cardholder to a discount, at the time of purchase, of between
5% and 50% off the merchant's normal selling price. When members
7
<PAGE>
receive their Countdown card they also receive a directory of participating
merchants. Directories are prepared on a geographical basis thereby enabling
Countdown to supply a directory of participating merchants to cardholders
specific to the geographical area in which the cardholder lives.
Wholesale membership marketing involves the sale of membership packages to
corporations, professional organizations, trade unions, etc. In the case of
wholesale marketing, the group or organization purchases membership for its own
members or employees. Such members or employees receive a Countdown card and a
directory for use as in the case of individual membership described above. The
annual fee charged on a wholesale basis is typically 5% or less of the
individual annual membership fee.
Countdown has, over a number of years, attracted over 100,000 participating
merchants worldwide from over 45 different retail categories including clothing,
household goods and leisure goods and services. Countdown does not pay or
receive any fee or royalty to or from participating merchants Countdown benefits
from merchant participation by being able to offer a wider range of discount
opportunities to its members. Participating merchants are carefully selected and
benefit by attracting incremental business.
Countdown also operates a voucher system with participating merchants and
others. This segment of the business involves Countdown's purchase of vouchers
from major retailers which can be used to pay for goods and services at such
major retailer's outlets. Countdown sells such vouchers to its members who can
use the vouchers at face value to make purchases from the issuing retailer.
These vouchers are typically sold by Countdown to its members at a discount from
face value of approximately 5% - 10%.
Countdown Arcade
In November 1998 Countdown launched an internet shopping program, Countdown
Arcade. Management believes that the internet is key to the future development
and growth of the Countdown business. Management further believes that the
Countdown Arcade will become a full online international shopping web site
offering a broad range of merchandise and services at discounted prices. The
Countdown Arcade will utilize existing relationships between Countdown and its
participating merchant base numbering over 100,000 worldwide. The Countdown
Arcade, can be found at http://www.countdownarcade.com. As of the date hereof,
the Countdown Arcade offers the ability to purchase over the internet a range of
consumer products from UK suppliers.
New products and services are expected to be added continuously. In addition,
members will have the ability to search for merchandise on a country by country
basis through the Countdown Arcade link to the Countdown database of
internationally participating merchants.
The Countdown Arcade is available to both members and non-members of the
Countdown program. However, while non-members can make purchases, they cannot
take advantage of the discounts offered unless they become a Countdown member,
which they can do over the internet at any time.
Management believes that Countdown's move into e-commerce will generate new
revenues from transaction commissions on products and services sold, as well as
advertising revenues from corporate sponsors.
Logan Leisure
8
<PAGE>
On May 14, 1998 the Company and TME purchased from Compass Trustees Limited all
of the outstanding shares of capital stock of Porkpine Limited ("Porkpine"). The
Company and TME each acquired 50% of the outstanding capital stock of Porkpine.
See "Acquisitions - Logan Leisure".
Porkpine, through its wholly owned subsidiaries Letville Holdings Limited
("Letville") and Floracourt Marketing Limited ("Floracourt"), operates two
businesses trading as Logan Leisure and Logan Leisure & Entertainment. Porkpine
trades as Logan Leisure ("LL"). LL was established in 1989 and is based in
Belfast, Northern Ireland. Letville is an intermediary holding company which
owns Floracourt. Floracourt trades as Logan Leisure & Entertainment ("LLE"). LLE
is based in Dublin in the Republic of Ireland and commenced operations in 1992.
Both LL and LLE produce and sell books of vouchers ("Voucher Directories") which
entitle the holder to discounts and savings on a range of products and services
including hotel accommodation, restaurants, golf clubs and general merchandise.
LL and LLE negotiate discounts from a range of suppliers of goods and services
who agree to the inclusion of a voucher representing such discount in the LL and
LLE Voucher Directory. Voucher Directories are produced annually and are sold to
consumers for approximately $126. To take advantage of a particular discount,
the consumer extracts the relevant voucher from the Voucher Directory and
presents it to the merchant at the point of sale.
Breakaway Travel
On May 22, 1998 Transmedia Australia Travel Holdings Pty Limited ("Transmedia
Holdings"), a company owned equally by the Company and TME, acquired from
Gisborne Travel Holdings Pty Limited ("Gisborne"), 100% of the issued share
capital of Breakaway Travel Club Pty Limited ("Breakaway"). See "Acquisitions -
Breakaway".
Breakaway, based in Sydney, Australia, commenced operations in 1995. Breakaway
is a licensed travel agent specializing in discount vacation packages for
individuals employed in the travel industry in Australia. Such individuals are
entitled to become members of Breakaway. Members of Breakaway pay an annual
membership fee of Aus$20 (approximately $12). Breakaway has negotiated
agreements with travel providers pursuant to which it can secure reduced rate
fares from such travel providers. Travel providers include airlines, hotels and
tour operators. These reduced rate fares are marketed to members by Breakaway.
Countdown America
In July 1998 the Company and TME jointly incorporated Countdown America, Inc.
("Countdown America"), a Delaware corporation, to establish a member benefits
business in the United States. To commence operations Countdown America
recruited two personnel and secured office accommodation located in Flanders,
New Jersey on a month to month basis. The Company and TME's strategic plan
called for Countdown America to initially develop a benefits program, based on
the Countdown model, suitable for the United States marketplace. As a result a
benefits program incorporating healthcare, travel, shopping and entertainment
has been developed. The healthcare products and services are the cornerstone of
the Countdown America benefits program. Such products and services include mail
order and retail pharmacy, eye care and hearing products, medical supplies and
equipment. In addition, members have 24 hour a day access to a telephone based
medical library extending to over 2,200 topics. Benefits also include a Nurse
Triage program which provides members with a toll free number allowing them to
speak to a registered nurse concerning medical and healthcare concerns. In
September 1998 Countdown America agreed to acquire the membership base and
certain assets of the National Association of Mature Americans ("NAMA"). The
acquisition, which was completed on November 17, 1998, provided Countdown
America with an established membership base as well as a defined set of benefit
9
<PAGE>
packages. Additionally, the acquisition included a series of contracts pursuant
to which NAMA provides customized benefit packages, on a wholesale basis, to
other membership based organizations and corporations throughout the United
States.
Acquisitions
Countdown
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 based discount shopping services. The remaining 50% interest in
Countdown was simultaneously purchased by TME. The transaction (the
"Acquisition") was consummated pursuant to an Acquisition Agreement dated April
3, 1997 (the "Acquisition Agreement") between the Company, TME and Mr.
Radbone.
The consideration paid by the Company for its 50% interest in Countdown totalled
$2,682,487. The purchase consideration payable to Mr. Radbone was satisfied by
the issuance of 1,330,524 shares (the "Radbone Shares") of the Common Stock and
a cash payment of 500,000 UK pounds sterling (approximately $800,000 as of April
3, 1997). In addition, Mr. Radbone was granted an option to purchase 277,193
shares of Common Stock at $0.90 per share. The Company granted Mr. Radbone
piggyback and demand registration rights with respect to the Radbone Shares. The
balance of the outstanding capital stock of Countdown was simultaneously
purchased by TME on similar terms.
The cash portion of the purchase price was funded by a $1,000,000 loan from Mr.
J. Vittoria, a director and shareholder of the Company. The loan, which bears
interest rate of 12% per annum, was originally scheduled to mature on September
27, 1997. By agreement between the Company and Mr. Vittoria, the loan maturity
date has been extended indefinitely, subject to being repayable on 60 days
notice. Interest continues to accrue at 12% per annum. The loan is
collateralised by a pledge of the Company's entire interest in Countdown. In
consideration for the loan, the Company granted to the lender a five-year
warrant to purchase 138,596 shares of Common Stock at $1.13 per share, the
market price of the shares at the time, 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 as a director of the Company and Edward J. Guinan and Paul Harrison
were elected to the board of directors of Countdown and Countdown Plc. On
January 16, 1998, Mr. Radbone resigned from the Board of Directors. At the same
time his employment agreement was terminated without penalty and replaced by a
one year consultancy agreement.
As described earlier, Mr. Radbone is beneficial owner of 1,330,524 shares of
Common Stock and an option to purchase a further 277,193 shares at an exercise
price of $0.90 per share. Mr. Radbone has granted Edward J. Guinan III, the
Chairman of the Board of Directors, an option to purchase his shares and share
option at a purchase price of $1 per share. Pursuant to the agreement between
Messrs. Radbone and Guinan, Mr. Guinan paid a portion of the purchase price by
delivering such number of shares of the Common Stock owned by him, as equate to
a market value of $250,000. In addition, he delivered a similar number of shares
of the common stock of TME owned by him. Such shares will be forfeited 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. In addition, the Company and TME jointly issued to
TMNI a promissory note
10
<PAGE>
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 of TMNI to the Countdown Acquisition, which consent was
required pursuant to the terms of the License Agreement under which the Company
operates its restaurant charge card business.
NHS
On December 2, 1997, Transmedia Australia purchased 51% of the shares of common
stock of NHS. NHS purchased the net assets and business of Nationwide.
Nationwide was established in 1989 and is an Australian based provider of
"member benefit" programs. The operations of Transmedia Australia are controlled
by the Company and accordingly Transmedia Australia's accounts are consolidated
into those of the Company. The total consideration paid by Transmedia Australia
for its 51% interest in the equity capital of NHS was Aus$6,000,000
(approximately $4,290,000 as of December 2, 1997). Transmedia Australia also
agreed to purchase the balance of the equity capital of NHS for Aus$2,500,000
(approximately $1,787,500) on June 30, 1998 with the right to extend such
obligation ("Balance Obligation") until September 30, 1998. Transmedia Australia
agreed to pay interest at 5% per annum on the Balance Obligation for the three
months ended September 30, 1998. Transmedia Australia exercised the extension
right. In addition, the Company and TME agreed to pay Aus$4,000,000 in sign-on
fees to the two former executive directors of Nationwide.
The Aus$6,000,000 required to complete the acquisition of 51% of NHS was to be
advanced to Transmedia Australia by the Company and TME as follows:
Company TME Total
Deposit 200,000 200,000 400,000
1st Installment 1,400,000 1,400,000 2,800,000
2nd Installment 1,400,000 1,400,000 2,800,000
Total 3,000,000 3,000,000 6,000,000
The deposit was paid to the sellers in June, 1997. The first installment of
Aus$2,800,000 was paid in December 1997, 50% in cash and the balance by the
issuance of 500,000 of the common stock of each of the Company and TME (valued
at (pound)1.00 per share). The second installment was payable on January 31,
1998. However, pursuant to the terms of the Acquisition Agreement, such payment
date was extended to May 1, 1998. As a result of the extension of the payment
date, Transmedia Australia became liable to pay interest at the rate of 5% per
annum during such extension period. The second installment was paid on May 1,
1998, together with accrued interest in the sum of Aus$34,781.
In connection with the Acquisition, NHS entered into employment contracts with
Mr. Kevin Bostridge ("Bostridge") and Mr. Robert Swinbourn ("Swinbourn"),
shareholders and former executive directors of Nationwide. Each of the contracts
were for a fixed term of three years and provided for the payment of an annual
salary of Aus$200,000 to Bostridge and Aus$150,000 to Swinbourn. As an
inducement to Bostridge and Swinbourn to enter into such employment contracts,
the Company and TME agreed to jointly pay sign-on fees of Aus$4,000,000
(approximately $2,860,000) in aggregate to Bostridge and Swinbourn. Such
11
<PAGE>
sign-on fees were apportioned as Aus$2,914,286 pertaining to Bostridge and
Aus$1,085,714 pertaining to Swinbourn and were payable in installments as
follows:
Company TME Total
1st Installment 1,000,000 1,000,000 2,000,000
2nd Installment 1,000,000 1,000,000 2,000,000
Total 2,000,000 2,000,000 4,000,000
The first installment was payable on January 31, 1998 of which an aggregate of
Aus$1,250,000 could be deferred until May 1, 1998. On January 31, 1998, in lieu
of the required minimum payment of Aus$750,000, Aus$203,571 was paid in cash and
the balance was settled by a promissory note in the sum of Aus$546,429 payable
on June 30, 1998. The promissory note was guaranteed by Mr. Edward Guinan,
Chairman of the Company. The promissory note has been paid in full. The
Aus$1,250,000 due on May 1, 1998 was paid on that date together with accrued
interest thereon at 5% per annum, approximately Aus$15,240. The second
installment was due for payment on June 30, 1998 but was deferred until
September 30, 1998.
Transmedia Australia was unable to make the payments due on September 30, 1998.
However, Transmedia Australia commenced negotiations with Nationwide and on
October 21, 1998 reached an agreement pursuant to which the settlement date for
the Balance Obligation and the final settlement of the sign-on fees was extended
to November 16, 1998. In addition, the second installment of the sign-on fees
was reduced from Aus$1 million for each of the Company and TME (a total of Aus$2
million) to Aus$500,000 for each of the Company and TME (a total of Aus$1
million). Finally, it was agreed that the employment contracts of Messrs.
Bostridge and Swinbourn be terminated effective November 16, 1998 upon payment
of three months salary to each. On November 17, 1998 the Balance Obligation, the
reduced final installment of the sign-on fees and the three months salary to
Bostridge and Swinbourn were paid in full. In addition, accrued interest in the
amount of Aus$47,557 (approximately $29,960) was paid.
The final payments to Nationwide and Bostridge and Swinbourn were funded from
the proceeds of a One Year Secured Promissory Note ("Promissory Note") in the
principal sum of $3.4 million executed on November 16, 1998 between the Company
and FAI General Insurance, a shareholder of the Company. Interest on the
Promissory Note accrues at the rate of 10% per annum and is payable quarterly in
arrears. The Promissory Note is secured by a charge over Transmedia Australia
and is guaranteed by TME. The Promissory Note holder received a three-year
warrant to purchase 1 million shares of Common Stock at an exercise price of
$1.00 per share. In addition, the Company agreed to exchange warrants to
purchase 633,366 shares of Common Stock at exercise prices of $1.00 to $1.40,
already held by the Promissory Note holder, for a warrant to purchase 633,366
shares of Common Stock at an exercise price of $1.00. The warrant is exercisable
at any time from November 16, 1998 through November 15, 2001. The Promissory
Note holder also held warrants on similar terms to purchase 633,366 shares of
the common stock of TME. Such warrants were exchanged by TME for a new warrant
on the same terms as those of the Company.
12
<PAGE>
Logan Leisure
On May 14, 1998 the Company and TME purchased from Compass Trustees Limited the
entire outstanding capital stock of Porkpine. The Company and TME each acquired
50% of the outstanding capital stock of Porkpine.
Porkpine and its wholly owned subsidiaries Letville Holdings Limited
("Letville") and Floracourt Marketing Limited ("Floracourt") operate two
businesses trading as Logan Leisure and Logan Leisure & Entertainment. Porkpine
trades as Logan Leisure ("LL"). LL was established in 1989 and is based in
Belfast, Northern Ireland. Letville is an intermediary holding company which
owns Floracourt. Floracourt trades as Logan Leisure & Entertainment ("LLE"). LLE
is based in Dublin in the Republic of Ireland and commenced operations in 1992.
Both LL and LLE produce and sell discount and savings directories.
The transaction was consummated pursuant to an acquisition agreement (the
"Agreement") dated May 14, 1998 between Compass Trustees Limited, the Company,
TME and Gavin and Joanne Logan. The consideration paid totaled 1,060,000 pounds
sterling ($1,749,000 approximately) subject to increase or decrease by an amount
equal to the net current assets of Porkpine and subsidiaries as of the date of
completion. The Agreement provided for the net current assets as of the date of
acquisition to be determined by reference to consolidated financial statements
(the "Acquisition Accounts") to be prepared as soon as practicable after the
date of acquisition.
The consideration paid on completion was made up as follows:
Company TME Total
Pounds Sterling
Cash 330,000 330,000 660,000
Shares of common stock:
Company -225,000 shares 200,000 200,000
TME - 225,000 shares 200,000 200,000
------- ------- ---------
Total 530,000 530,000 1,060,000
======= ======= =========
The net current assets as of May 14, 1998 per the Acquisition Accounts totaled
$33,627.
Breakaway
On May 22, 1998 Transmedia Holdings acquired from Gisborne the entire issued
share capital of Breakaway.
Breakaway, which is based in Sydney, Australia, commenced operations in 1995.
Breakaway is a licensed travel agent specializing in discount package holidays
for individuals employed in the travel industry in Australia. Such individuals
are entitled to become members of Breakaway. Members of Breakaway pay an annual
membership fee of Aus$20 (approximately $12). Breakaway has negotiated
agreements with travel providers pursuant to which it can secure reduced rate
fares from such travel providers. Travel providers include
13
<PAGE>
airlines, hotels and tour operators. These reduced rate fares are marketed to
members by Breakaway.
The transaction was consummated pursuant to a Share Sale Agreement dated March
26, 1998 between Gisborne, Transmedia Travel, Peter Guy Gisborne and Terence
John Gill. The total consideration payable was Aus$375,000 (approximately
$230,000). The consideration was paid in cash.
Competition
The "membership based" benefits business is highly competitive. The Company
competes with a number of other operators, both internationally and in
Australia. The Company's competitors range from small private companies to major
corporations who collectively offer a full range of "membership based" benefit
programs. Such benefit programs include discount shopping, hotel accommodation,
travel, dining, and leisure activities. Additionally, the Company competes with
other telephone helpline service operators and loyalty reward programs such as
"air miles".
In its Restaurant Card business the Company competes against other discount
programs. Competitors include programs offered by major credit card companies
such as American Express, Visa, Mastercard and Diners Club. Additionally, other
companies offer different kinds of discount programs. For example, Hilton
International, an international hotel owner and hotel management company,
provides two-for-one dining offers in its restaurants. The Company is not aware
of any restaurant discount charge card business, similar to that of the Company,
in the Licensed Territories at this time. The unique nature of the restaurant
discount charge card is the principal method used to secure business. However,
there can be no assurance given that no new entrants will enter the market in
the future.
NHS competes with other helpline service providers and membership based benefit
providers. NHS also competes with its product and service providers who promote
their businesses independently of their arrangements with NHS. The principal
methods used by NHS to compete effectively are beneficial prices, quality of
service and the range of products and services offered.
The Company's travel businesses compete with travel agents and other operators
in the hotel and travel industries, including retail travel agents, airlines and
hotel groups. The Teletravel business competes on price and convenience when
compared with retail travel agents where the consumer usually is required to
visit the travel agents premises. Breakaway competes primarily on price as well
as offering its services only to employees of the travel industry.
The Company's affiliate, Countdown, competes directly with a full range of
discount shopping programs offered by a number of other operators. The Company
believes that the Countdown program, with over 100,000 participating merchants
in 39 countries, is broader based than the programs offered by its competitors.
Management believes that the size of its merchant base, as well as the
international spread of such merchants, gives Countdown an advantage over its
competitors. Such merchant base and program pricing are the principal methods
used by Countdown to retain existing business and secure new business
opportunities over its competitors.
The Company is not aware of any dominant operators in its business sector and
geographical markets. However, many of the Company's competitors have
substantially greater financial, personnel, technological, marketing,
administrative and other resources than the Company.
14
<PAGE>
Intellectual Property
The Company operates its restaurant card business pursuant to the rights
acquired through the License Agreement with TMNI. While the License Agreement
grants the Company the right to use certain proprietary software and systems,
the Company found it necessary to develop its own systems and practices for
sales tax and other considerations. Accordingly, the Company is not reliant on
the License Agreement for the conduct its day to day operations. However,
TRANSMEDIA is a registered trademark and therefore the Company relies on the
rights it acquired under the License Agreement to use such trademark and such
other trademarks and service marks as Network may apply for in the Licensed
Territories.
Countdown is a registered trademark of the Company's affiliate, Countdown
Holdings Limited. Countdown has been established for over 28 years and
management believes that the business of Countdown is, to some extent, dependent
on the consumer goodwill and recognition attaching to the Countdown name.
Employees
As of September 30, 1998, the Company employed 74 full-time employees (including
those employed by NHS). None of the Company's employees are represented by a
labor union, and the Company considers that its employee relations to be good.
Need for Additional Financing
The Company requires additional funding to provide working capital and to
implement its business plans. Management estimates that an amount of
approximately $1.5 million will be required to meet loan repayment obligations.
The loan made by Mr. Vittoria, a director and shareholder of the Company, of
$1,000,000 in connection with the Countdown acquisition has been renewed for an
indefinite period. However the lender has the right to demand repayment upon
giving of 60 days notice. The Company may need additional funds to finance such
repayment.
No assurance can be given that the Company will be successful in obtaining
additional financing. Failure to obtain necessary financing in a timely manner
may have a significant adverse effect on the Company and operating performance.
ITEM 2. PROPERTIES.
The Company currently leases office space totaling approximately 11,000 square
feet at 19-31 Pitt Street, Sydney, Australia ("Pitt Street"). The lease expires
on August 31, 2004. The rental obligation is approximately Aus $345,000
($205,000) per annum. In October 1998 the Company commenced relocating all its
Sydney based businesses to the Pitt Street office.
The lease in respect of the former office accommodation of NHS expired on
October 31, 1998.
Breakaway Travel occupied approximately 3,275 square feet of office
accommodation in Sydney at an annual rental of Aus$105,230 (approximately
$62,400). The lease expires on May 31, 1999. Breakaway has relocated to the Pitt
Street office and by agreement with its former landlord will be relieved of its
prior lease obligations effective mid February 1999.
15
<PAGE>
Teletravel leases approximately 1,800 square feet of office accommodation in
Sydney at an annual rental of Aus$34,400 (approximately $20,400). The lease
expires on August 31, 1999. Teletravel has relocated to the Pitt Street office.
The Company and TME share office accommodation of approximately 4,000 square
feet at 11 St James's Square, London, England. The office is leased by TME. The
lease expires in February, 2004. During the year ended September 30, 1998 the
Company reimbursed TME in the amount of $56,742 for its share of the rental
cost.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company and its subsidiaries are subject to legal
proceedings and claims in the ordinary course of business.
The Company is not aware of any material pending legal proceedings or claims
against the Company or any of its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of the Company during the
fourth quarter of the year ended September 30, 1998.
16
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information. The Company's Common Stock is traded on the Nasdaq
SmallCap Market under the symbol "MBTA". The following table sets forth the high
and low bid prices as reported on Nasdaq for the periods indicated below. These
quotations have been obtained from Nasdaq Quotations through September 30, 1998.
Quarter ended High Low
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 5/8 1 5/16
March 31, 1998 2 1/4 1 1/16
June 30, 1998 3 9/16 1 3/4
September 30, 1998 3 1/16 3/4
(b) Holders. As of January 4, 1999 there were approximately 230 holders of
record of the Common Stock. The Company believes that a significant number of
beneficial owners of its Common Stock are held in "street name".
(c) Dividends. Holders of Common Stock are entitled to dividends when, as, and
if declared by the Board of Directors out of funds legally available therefor.
The Company has not paid any cash dividends on its Common Stock and, for the
foreseeable future, intends to retain future earnings, if any, to finance the
operations, development and expansion of its business. Future dividend policy is
subject to the discretion of the Board of Directors.
Recent Sales of Unregistered Securities
On February 1, 1998 the Company commenced a private placement pursuant to the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder. The placement closed
on April 30, 1998 upon the sale of 1,950,000 shares of common stock at $1.25 per
share resulting in net proceeds to the Company of $2,437,500. For every three
shares purchased each subscriber received a three year warrant to purchase one
share of the Common Stock at an exercise price of $1.25 per share. The warrants
are exercisable at any time after the date of grant for a period of three years.
On April 29, 1998 the Company engaged in a private placement of securities. The
placement was made pursuant to the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder. The placement consisted of three 250,000 pounds sterling
(approximately $425,000) face amount 8% promissory notes payable on November 1,
1998 and one 200,000 pounds sterling (approximately $340,000) face amount 8%
promissory note payable on the same date. The holders of the 250,000 pounds
sterling promissory notes each received a three and a half year warrant to
purchase 41,660 shares of the Common Stock at an exercise price of $2.00 per
share and the holder of the 200,000 pounds sterling promissory note received a
warrant to
17
<PAGE>
purchase 33,328 shares on the same terms. The Company failed to pay the
promissory notes on the due date and accordingly, pursuant to the terms of the
promissory notes, the holders each received additional warrants for the same
number of shares and exercisable on the same terms as the original warrants. The
warrants are exercisable at any time after issuance through November 1, 2001.
On October 16, 1998 the Company commenced a private placement pursuant to the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder. The placement closed
on November 30, 1998 upon the sale of 843,333 shares of common stock at $0.75
per share resulting in net proceeds to the Company of $632,500.
ITEM 6. SELECTED FINANCIAL DATA
The selected statements of operations and balance sheet data set forth below are
derived from the audited financial statements of the Company. The information
set forth below should be read in conjunction with the audited consolidated
financial statements of the Company and notes thereto. See Item 8 "Financial
Statements and Supplemental Data" and Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations". On December 2, 1997
the Company and TME acquired a 51% interest in NHS. The results of NHS have been
consolidated by the Company from the date of acquisition using the purchase
method of accounting.
Income Statement Data
<TABLE>
<CAPTION>
Inception
Year Ended Year Ended to
Year Ended Year Ended September September September
September 30, September 30, 30, 30, 30, 1994
1998 1997 1996 1995 (6 mths)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 4,667,556 $ 2,129,362 $ 1,890,476 $ 1,103,081 $ 0
Gross profit 3,593,453 871,593 791,810 400,358 0
S,G & A (7,080,173) (3,649,441) (2,816,758) (2,476,105) 0
Operating loss (3,486,720) (2,777,848) (2,024,946) (2,075,747) (377,498)
Share of losses of
affiliated companies (949,467) (209,715) 0 0 0
Net loss $ (4,739,811) $ (3,030,445) $ (2,006,258) $ (1,990,288) $ (349,650)
Net loss per share $ (0.27) $ (0.22) $ (0.16) $ (0.17) $ (0.03)
Balance Sheet Data
As of Sept. 30
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current Assets $ 2,764,972 $ 648,799 $ 2,065,308 $ 2,301,830 $ 2,201,303
Total Assets 10,958,762 4,798,380 3,954,947 4,312,460 4,164,997
Working Capital
(Deficiency) (5,067,882) (1,399,428) 1,288,958 1,674,014 2,049,383
Stockholders Equity 2,496,124 2,750,153 3,178,597 3,684,644 4,013,077
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Annual Report on Form 10-K and the documents incorporated herein contain
"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 Annual 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 "anticipate", "plan,"
"intend," "believe", "estimate" 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. Except as required by law, the Company undertakes no obligation to
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
The following discussion should be read in conjunction with the audited
consolidated financial statements and notes thereto, included in Item 8 of this
report, and is qualified in its entirety by reference thereto.
General
The business of the Company is the design and supply of a range of member
benefit programs to corporations, affinity groups and individuals on an
international scale. In 1996 the Company and TME decided to work closely to
implement a strategy to create a broader based international member benefits
business. As a result the Company currently has established business operations
in Australia and New Zealand and through its affiliates, Countdown and Logan
Leisure, has an interest in business operations in Europe and elsewhere. In
addition, the Company and TME have recently established business operations in
the United States and in November 1998 Countdown launched its transactional web
site business, Countdown Arcade.
The future success of the Company is primarily dependent upon its ability to
develop and expand its current business operations by increasing their
membership base and broadening the range of member benefit programs offered. As
of the date hereof, management is actively recruiting senior executives to
strengthen the management team to facilitate such development and expansion.
The Company will continue to look for new opportunities within the member
benefits industry and may expand its operations through further acquisitions.
Management believes that while the industry has shown good growth, which is
expected to continue, this has been primarily in the United States. Outside the
United States, the international market is significantly less developed
providing an opportunity for the Company to expand its operations from its
established base in Europe and Australasia and the Countdown network of
sub-licensees and franchisees in a number of other countries.
In light of the close collaboration between the Company and TME since
incorporation and, more particularly, in view of the joint ownership of
Countdown, Countdown America, NHS, Logan Leisure and Breakaway Travel,
management of the Company and TME have been assessing the rationale of
maintaining two separate corporate entities. Management has concluded that
keeping the two companies distinct and separate is no longer appropriate or
advantageous to shareholders and therefore announced its intention to merge the
two
19
<PAGE>
companies. In concluding that a merger is in the best interests of both the
Company and TME, management considered several factors including the confusion
of having two separate stock quotes for essentially the same business (operating
in different geographical regions), the opportunity to reduce corporate overhead
and to increase operating efficiency. The proposed merger is subject to the
approval of the respective Boards of Directors, fairness opinions by independent
investment advisers and the approval of shareholders of both companies.
The Company recorded significant losses in its fiscal year ended September 30,
1998 as well as in prior years. Such losses and the Company's acquisition and
expansion program to date have been funded by the sale of equity securities and
debt financing. The Company's ability to continue as a going concern depends on
its ability to obtain outside financing sufficient to support its operations and
business development plans. Based upon the Company's history of obtaining
necessary financing, management remains confident that sufficient funds will be
available to the Company to enable it to operate for the foreseeable future.
However, there can be no assurance given that the Company will obtain such
short-term or long-term outside financing.
Results of Operations
Fiscal 1998 compared to Fiscal 1997
The Company generated revenues of $4,667,556 (1997: $2,129,362) in the year
ended September 30, 1998, an increase of $2,538,194 or 119% over the
corresponding period in 1997, reflecting the impact of the NHS and Breakaway
acquisitions. NHS and Breakaway generated revenues of $2,959,970 and $362,147
respectively while the pre-existing business recorded a decline in revenues of
$783,921 to $1,345,440 due to lower card usage by cardholders as a result of
rationalization of the participating restaurant base.
Cost of sales totaled $1,074,103 (1997: $1,257,769) for the year ended September
30, 1998, generating a gross profit percentage of 77.0% (1997: 40.9%). The
increase in gross profit percentage reflects the impact of the higher margin NHS
and Breakaway Travel businesses. The gross profit percentages achieved by NHS
and Breakaway respectively were 89.5% and 100% in fiscal 1998 as compared to
43.4% by pre-existing operations.
Selling, general and administrative expenses totaled $7,080,173 (1997:
$3,649,441) for the year ended September 30, 1998, an increase of $3,430,732 or
94.0% over fiscal 1997. NHS and Breakaway accounted for $2,742,323 and $340,928
of such increase respectively. Selling, general and administrative expenses of
pre-existing operations and head office were $3,996,922 in fiscal 1998, an
increase of $347,481 or 9.5% as compared to fiscal 1997. Selling, general and
administrative expenses in fiscal 1998 included sign-on fees in relation to the
NHS acquisition ($925,000 approximately) and a write-off of approximately
$463,000 relating to an aborted acquisition. These expenses were partially
offset by cost reductions realized in pre-existing operations of approximately
$787,000. Such cost reductions were primarily in payroll, selling and
communication expenses. In addition, in fiscal 1997 the Company recorded
significant non-recurring costs and other charges (see Fiscal 1997 compared to
Fiscal 1996).
The Company's share of losses of its affiliates Countdown and Logan Leisure were
$949,467 for the year ended September 30, 1998, including amortization of
underlying goodwill in the Company's investment in such affiliates of $237,267.
(1997: $ 202,905 (Countdown only)). The Company did not amortize underlying
goodwill in its investment in Countdown in fiscal 1997.
The minority interests in the Company comprise TME's 50% interest in Transmedia
Australia and Transmedia Holdings and the 49% third party interest in NHS.
20
<PAGE>
The Company has net operating losses carried forward for income tax purposes. No
deferred tax benefit has been recognized for the year ended September 30, 1998.
Fiscal 1997 compared to Fiscal 1996
The Company generated revenues of $1,924,908 excluding membership fees (1996:
$1,659,515) 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. The increase was
largely the result of a promotion launched in September 1996 with Westpac
Banking Corp. and a new marketing initiative in December 1996 with an Australian
company, FAI Insurance. The arrangement with FAI Insurance provided for the
Company to issue Restaurant Cards free of charge to FAI Insurance customers.
Such customers would not receive an immediate cash benefit in respect of their
25% discount on food and beverage purchased at Participating Restaurants.
Instead their discount was accumulated in a trust account which could be used in
part payment of their subsequent years insurance premium payable to FAI
Insurance. The agreement gave the Company the right to cancel Restaurant Cards
issued to FAI Insurance customers in the event that they did not maintain
minimum spend levels using their Restaurant Card. The only obligation of the
Company was to issue Restaurant Cards free of charge to FAI Insurance customers
subject to their achieving the minimum spend levels referred to above. The
number of Company Participating Restaurants decreased from 430 at September 30,
1996 to 274 at September 30, 1997. This decrease resulted from of the Company
removing under-performing restaurants from the program.
Membership fees totaled $204,454 (1996: $230,961) for the year ended September
30, 1997 a decrease of 11% compared to the prior year. This decrease is a result
of an accounting adjustment of $15,584 to deferred membership fees in the first
quarter and the effect of the free membership card. The accounting adjustment in
the first quarter reduced revenues by $15,584. The adjustment was necessary to
correct an accounting error in the calculation of deferred membership fees as of
December 31, 1996. It is the Company's policy to account for membership fee
revenue over the period of membership, usually one year. An error in the
calculation of deferred membership fee income was discovered subsequent to the
finalization of the unaudited financial statements for the quarter ended
December 31, 1996. The error was corrected in the quarter ended March 31, 1997.
Previous periods were not adjusted because the amount involved was not
considered material.
Cost of sales totaled $1,257,769 (1996: $1,098,666) for the year ended September
30, 1997, an increase of 15% over the prior year, in line with the 16% increase
in revenues. Cost of sales are approximately 50% of the gross food and beverage
value consumed by Cardholders and represents recovery of advances made by the
Company to Participating Restaurants.
Selling, general, and administrative expenses, consisting primarily of salaries,
rents, commissions, and other general overheads totaled $3,649,441 (1996:
$2,816,756) for the year ended September 30, 1997, an increase of 30% over the
previous year. The increase is primarily due to professional fees of $118,642
for work on the proposed merger with TME, a write down of the License by
$276,472 to fair value and costs of $112,875 relating to the termination
agreement with Mr. C.E.C. Radbone, a former director of the Company. In
addition, the Company incurred unrealised foreign exchange losses of $242,012
arising out of the translation of the inter-company balance between the Company
and Transmedia Australia as of September 30, 1997 and a $150,000 write off of
the Hawaii option. Excluding these additional expenses, the Company recorded a
small decrease in selling, general and administrative expenses in fiscal 1997.
21
<PAGE>
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
interest of $24,197 (1996: $21,005) in fiscal 1997 from the temporary investment
of surplus cash and interest on loans to certain stockholders.
Liquidity and Capital Resources
The following chart represents the net funds provided by or used in operating,
financing and investment activities for each period as indicated:
Twelve Months Ended
-------------------
September 30, 1998 September 30, 1997
Cash used in
Operating Activities $(2,523,744) $(2,126,864)
Cash used in
Investing activities $(2,437,248) $(1,205,610)
Cash provided by financing
Activities $5,549,595 $ 2,057,449
The Company incurred a net loss of $4,739,811 for the year ended September 30,
1998. Such loss, adjusted for non-cash items, namely depreciation and
amortization charges totaling $441,885, the Company's share of losses incurred
by its affiliates of $949,467, accrued interest charges of $250,412 and a
provision against a non-trade receivable of $452,427 resulted in funds used in
operating activities totaling $2,523,744, net of working capital movements.
The fiscal 1998 net cash used in investing activities of $2,437,248 comprised
the cash elements of the Company's investments in its subsidiaries NHS
($1,702,559) and Breakaway ($126,748). In addition, the Company invested
$570,623 in its affiliate Logan Leisure and $37,318 in fixed assets. In fiscal
1997 net cash used in investing activities comprised the cash element
($1,209,655) of the Company's investment in Countdown, net of the proceeds of
sale of fixed assets of $4,045.
To meet its cash requirements during fiscal 1998, the Company sold in aggregate
3,447,095 shares of its common stock in equity private placements, resulting in
net proceeds to the Company of $3,934,595. In addition, in April 1998 the
Company raised approximately $1,615,000 through the issuance of four 8%
promissory notes. Such promissory notes fell due for payment on November 1,
1998. As of the date hereof, $125,000 has been repaid together with accrued
interest to November 1, 1998.
The Company's independent auditor's report on the Company's consolidated
financial statements included in Item 8 states that "......the Company has
experienced losses from operations in during the year ended September 30, 1998
and has a working capital deficit that raises substantial doubt about its
ability to continue as a going concern. The Company has funded operations
through sales of equity securities and issuance of debt, 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 issue of debt".
During fiscal 1998 the Company relied on net revenues and the net proceeds of
equity placements and short-term debt financing to fund its operating needs and
investments.
22
<PAGE>
Management has taken steps to reduce the amount of cash used by operations,
including reducing staffing levels, however the Company's operations may not
provide sufficient internally generated cash flows to meet its projected
requirements in the short-term. Accordingly, the Company will require further
capital infusions in order to meet its loan repayment commitments and the
ongoing funding requirements of its operations. Based upon the Company's history
of obtaining necessary financing, management remains confident that sufficient
funds will be available for the Company to operate in the foreseeable future and
meet its loan repayment obligations. However there can be no assurance given
that the Company will be able to obtain such funding.
Historically, the Company's ability to grow and generate cash from operations
has been restricted by the single product offered, the Transmedia dining card.
However, in recent years the Company and TME have worked closely to implement a
strategy to create a broader based international member benefits business. As a
result the Company currently has established business operations in Australia
and New Zealand and through its affiliates, Countdown and Logan Leisure, has an
interest in business operations in Europe and elsewhere. In addition, the
Company and TME have recently established business operations in the United
States and in November 1998 Countdown launched its transactional web site
business, Countdown Arcade. Management believes that after completion of the
proposed merger with TME, the Company and TME will be well positioned to achieve
profitability in the medium term. However, there can be no assurance given that
the proposed merger will be completed or when, if at all, profitability will be
achieved.
Inflation and Seasonality
The Company does not believe that its operations have been materially influenced
by inflation in the fiscal year ended September 30, 1998, a situation which is
expected to continue for foreseeable future. Some of the Company's individual
businesses such as Teletravel and Breakaway are seasonal, as is the Company's
restaurant card business albeit to a lesser extent. However, the Company has no
basis at this time on which to project the seasonal effects, if any, on its
business as a whole.
Effect of Year 2000
The Company has developed a plan to address the possible exposure related to the
impact of the Year 2000 on its computer systems. Key operating, financial and
management information systems have been assessed and plans have been developed
to address required systems modifications by December 31, 1999. The financial
impact of making the required system changes is not expected to be material to
the Company's consolidated financial position, results of operations or cash
flow. Management currently estimates the likely cost of system modifications to
be approximately $100,000.
In fiscal 1998 the Company established a Year 2000 group to evaluate the
potential exposure of the Company's computer systems and computer reliant
systems to Year 2000 issues. The working group completed its evaluation and has
developed a plan to ensure that all of the Company's systems will be fully
compliant by December 31, 1999.
The core business system used in the Company's restaurant card business is not
Year 2000 compliant and could fail to operate into the next millennium without
corrective action. The system was scheduled to be re-written in any event, with
completion planned for the fourth quarter of 1999. Interim systems have been
fully tested and will be implemented during the first quarter of 1999 as a
precautionary measure. In other areas of the Company's operations systems are
Year 2000 compliant. Breakaway is fully compliant, as are the telephone systems
used by NHS. Non core business applications such as word processing and
management
23
<PAGE>
information reporting systems require some minor modification. Computer hardware
has been substantially upgraded to appropriate processors. The systems of the
Company's affiliate, Countdown, have also been evaluated. Countdown systems
require some modification and upgrading which is scheduled for completion in the
first quarter of 1999
The Company is in communication with others with whom it does business,
including but not limited to, financial institutions and key customers, to
determine their Year 2000 compliance readiness and the extent to which the
Company is vulnerable to any third party Year 2000 issues. In particular the
Company has not yet received confirmations from a number of banking
institutions. There can be no assurance that the systems of third parties, on
which the Company's systems rely, will be converted on a timely basis, or that a
failure to convert or a conversion that is incompatible with the Company's
systems would not have a material adverse effect on the Company.
New U.S. Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
on Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," effective for fiscal years beginning after December 15, 1997. This
statement establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
as including all changes in equity except those resulting from investments by
owners and distributions to owners. The Company will be required to adopt SFAS
No. 130 in the first quarter of fiscal 1999.
In June 1997, FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information," effective for fiscal years beginning after
December 15, 1997. This statement establishes standards for the way that public
companies report information about operating segments in financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. The Company will be
required to adopt SFAS No. 131 in fiscal 1999.
Both of the above standards require comparative information to be restated.
Results of operations and financial position will be unaffected by
implementation of these new standards.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" (SFAS No. 132), which revises
employers' disclosures about pension and other post-retirement benefit plans.
SFAS 132 is effective for financial statements for periods beginning after
December 15, 1997 and requires comparative information for earlier years to be
restated. This standard does not currently apply to the Company.
ITEM 7 A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information is submitted in a separate section of this report. See pages
F-1, et. seq.
24
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective September 26, 1997 KPMG resigned as the Company's independent
auditors. On the same date the Company appointed BDO Stoy Hayward as the
Company's independent auditors. This action was recommended by the Audit
Committee and approved by the Board of Directors.
In connection with their audit of the Company's consolidated financial
statements for the fiscal year ended September 30, 1996, and in the subsequent
interim period, there were no disagreements between KPMG and the Company on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope and procedures which, if not resolved to the satisfaction of
KPMG, would have caused KPMG to make reference to such matters in their report.
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 Company's Annual Report on Form 10-K for the year
ended September 30, 1997. The Company believes that there was no basis for this
action by KPMG.
The position of KPMG was set out in a letter dated February 13, 1998, which
stated that:
"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".
The financial statements for the fiscal year ended September 30, 1996 have been
re-audited by BDO Stoy Hayward and their report is included in this Annual
Report.
See the Company's Current Report on Form 8-K, as amended, filed with the
Commission on or about October 27, 1997 for a description of the resignation of
KPMG.
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Position
- ---- --- --------
Edward J. Guinan III 51 Chairman and Chief Executive Officer
Paul L. Harrison 37 President, Secretary and Principal Financial
Officer and Director
Carl Freyer (1) 59 Director
Joseph V. Vittoria (1) 64 Director
- -------------------------------
(1) Member of the Audit Committee.
Directors hold office until the next annual meeting of stockholders and until
their successors are duly elected and qualified. All officers hold office until
the meeting of the Board of Directors following the next annual meeting of
stockholders or until their earlier resignation or removal. There are no family
relationships between any of the directors or executive officers of the Company.
Edward J. Guinan III
Chairman and Chief Executive Officer
Edward J. Guinan III has been the Chairman of the Board of Directors, Chief
Executive Officer and a director of the Company since its inception in March
1994. Since February 1993, Mr. Guinan has also served as Chairman and Chief
Executive Officer of the Company's affiliate, TME. In addition, commencing May
1995, Mr. Guinan has served as President, Chief Executive Officer, Chief
Financial Officer and as the sole director of International Advance, Inc. Mr.
Guinan devotes substantially all of his time to the affairs of the Company and
TME. Prior to February 1993, Mr. Guinan headed his own broker-dealer firm Guinan
and Company which he established in 1984.
Paul L. Harrison
President, Secretary and
Principal Financial and Accounting Officer
Paul Harrison has been a director of the Company since June 1997. He was a
director and President of Transmedia Australia from May 1994 until June 1997.
Mr. Harrison is also President, Principal Financial and Accounting Officer and
Secretary of TME. In 1993, Mr. Harrison acted as a consultant to TME in
connection with the initial funding of TME and commencement of its business
operations. Prior to 1993, Mr. Harrison was Vice-President responsible for
European Equities at Salomon Brothers, London, where his responsibilities
included coordinating and marketing the sale of various derivatives and other
equity securities to European based institutional clients.
Joseph V. Vittoria
Director
Mr. Vittoria has been a director of the Company since inception. Mr. Vittoria is
Chairman and Chief Executive Officer Travel Services International, Inc. a
position he has held since that company's inception in 1997. From September 1987
to January 1997, Mr. Vittoria was
26
<PAGE>
Chairman and Chief Executive Officer of Avis Inc., having been a senior
executive at Avis from 1982. Mr. Vittoria is a director of TME.
Carl H. Freyer
Director
Carl Freyer has been a director of the Company since 1996. Mr. Freyer is also
President of Freyer Corporation, a financial consulting firm. He was a director
of G-Tech Corporation from 1983 to 1997. Mr. Freyer is a director of TME.
Reports under Section 16 (a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% shareholders to file with the Securities
and Exchange Commission ("SEC") certain reports regarding such persons'
ownership of the Company's securities. Edward J. Guinan was late in filing Form
4 in respect of Common Stock owned by Mr. Guinan pledged to secure a
contemplated acquisition and Common Stock pledged to secure a Promissory Note
executed by TME. Mr. Guinan is working on bringing his filings up-to-date.
The Company is not aware of any other late filings of reports under Section 16.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid during the three
years ended September 30, 1998 to the Company's Chief Executive Officer and any
other executive officer of the Company earning in excess of $100,000 for
services rendered during fiscal 1998.
27
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term Other
Compensation Compensation Compensation
Name and Principal All Other
Position Year Notes Salary Options/SAR's Compensation
<S> <C> <C> <C> <C> <C>
Edward J. Guinan III
Chief Executive Officer 1998 (1)(2) 165,330 2,500,000 80,359
1997 (3)(2) 162,100 0 38,472
1996 (4)(2) 153,625 0 22,925
Paul L. Harrison
President 1998 (1)(2)(5) 165,330 750,000 8,668
1997 (3)(5) 154,000 0 0
1996 (4)(5) 122,900 0 0
</TABLE>
(1) Based upon an exchange rate of 1 pound sterling = $1.6533
(2) Represents reimbursement of travel and entertainment expenses
(3) Based upon an exchange rate of 1 pound sterling = $1.6210
(4) Based upon an exchange rate of 1 pound sterling = $1.5362
(5) 50% of Mr. Harrison's salary is recharged to TME
Option/SAR Grants in Last Fiscal Year
The following table sets forth information regarding stock option grants made
during the fiscal year ended September 30, 1998 to each of the named executive
officers and their potential realizable values.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Number of Potential Realizable
Shares of % of Total Value at Assumed Annual
Common Stock Options/ Rates of Stock Price
Underlying SARs Exercise Appreciation for Option
Options/ Granted to or Base Term
SARs granted Emloyees in Price Expiration ($)
Name (#) Fiscal Year ($/Share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Edward J. Guinan
CEO 3,250,000 67.0% $1.00 3/1/03 1,159,234 2,313,909
Paul Harrison
President 750,000 15.5% $1.00 3/1/03 267,515 533,979
</TABLE>
28
<PAGE>
In March 1998 the Board of Directors granted, subject to stockholder approval,
options to senior management to purchase 2,250,000 shares, in aggregate, of the
Common Stock of the Company at an exercise price of $1.00 per share.
Aggregate Options/SAR Exercises in Last Fiscal Year and FY-End Options/Values
The following table sets forth information as of September 30, 1998, concerning
exercisable and non exercisable options held by the Company's Chief Executive
Officer and any other executive officer of the Company earning in excess of
$100,000 for services rendered during fiscal 1998. 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 $1.375.
<TABLE>
<CAPTION>
Name Shares Value Number of Securities Value of Unexercised
Acquired on Realized Underlying Unexercised In-the-Money Options
Exercise ($) Options at Fiscal at fiscal Year-End($)
(#) Year-End(#) Exercisable/
Exercisable/ Unexercisable
Unexercisable
<S> <C> <C> <C> <C>
Edward Guinan 0 0 0/3,250,000 0/0
Paul Harrison 0 0 800,000/750,000 0/0
</TABLE>
Employment Agreements
On May 26, 1994 Mr. Guinan and the Company entered into an Employment Agreement
for a term ending on May 25, 1997 with annual extensions thereafter unless
terminated by either party. On March 2, 1998 Mr. Guinan and the Company agreed
to replace the Employment Agreement in its entirety except with respect to
accrued benefits as of March 2, 1998. The New Employment Agreement is for a term
ending on March 1, 2001 and provides for an annual salary of 100,000 pounds
sterling and participation in executive benefit programs if and when put into
effect by the Company. In addition, in recognition of certain guarantees and
pledges made by Mr. Guinan for the benefit of the Company and to provide
inducement for Mr. Guinan to make further guarantees and pledges as required and
to further the best interests of the Company, the New Employment Agreement also
provides that Mr. Guinan be entitled to receive, subject to shareholder
approval, fully vested stock options having a term of 5 years and covering
2,500,000 shares of the Company's Common Stock at an exercise price of $1.00 per
share. The New Employment Agreement includes confidentiality and non-compete
restrictions during the term of the New Employment Agreement and for a period of
two years thereafter. Mr. Guinan may be discharged for cause including failure
or refusal to perform his duties, dishonesty, conviction of a felony or fraud,
engagement in acts detrimental to the Company, material breach of any provision
of the New Employment Agreement, disability or death. Mr. Guinan is required to
devote substantial business efforts to the Company. Mr. Guinan is also employed
by TME and International Advance, Inc. and the
29
<PAGE>
New Employment Agreement provides that Mr. Guinan's other business activities
shall not conflict with the terms of the New Employment Agreement.
On May 26, 1994 Mr. Harrison and the Company entered into an Employment
Agreement for a term ending on May 25, 1997 with annual extensions thereafter
unless terminated by either party. Under the Employment Agreement Mr. Harrison
receives a salary of 100,000 pounds sterling per year and is entitled to
participate in executive benefit programs if and when put into effect by the
Company. Mr. Harrison was also granted non-transferable options to purchase
800,000 shares of the Common Stock of the Company at an exercise price of $1.00
per share. Of such options 400,000 became exercisable on May 9, 1995 and the
balance on May 9, 1996. The Employment Agreement includes confidentiality and
non-compete restrictions during the term and for a period of two years
thereafter. Mr. Harrison may be discharged for cause including failure or
refusal to perform his duties, dishonesty, conviction of a felony or fraud,
engagement in acts detrimental to the Company, material breach of the Employment
Agreement, disability or death. On March 2, 1998 the Board of Directors granted
Mr. Harrison, subject to shareholder approval, fully vested non-transferable 5
year share options to purchase 750,000 shares of the common stock of the Company
at an exercise price of $1.00 per share.
Stock Option Plans
Effective May 2, 1994, the Company adopted the 1994 Stock Option Plan ("the 1994
Plan"). The 1994 Plan was established to attract and retain personnel of the
highest calibre and to offer an incentive for officers and employees to promote
the business of the Company. The 1994 Plan authorizes the granting of incentive
stock options or non-qualified stock options to purchase the shares of common
stock of the Company, 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 common stock. Unless terminated
earlier, 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, number of share options
to be granted and the specific terms of each grant. Under the 1994 Plan, no
stock option may be granted having an exercise price which is less than the fair
market value of the Company's common stock on the date of grant.
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, commencing January
1, 1996, for the automatic granting to each non-employee director of the Company
a stock option to purchase 10,000 shares of common stock of the Company on
January 1 each year. In addition the Outside Directors Plan provided that Mr.
Vittoria and another non-employee director (who has since resigned) would each
receive an option to purchase an additional 20,000 shares in recognition of
their services as directors prior to adoption of the Outside Directors Plan. The
maximum number of shares of Common Stock which may be issued under the Outside
Directors Plan is 300,000 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.
30
<PAGE>
As of January 4, 1999, 60,000 options have been granted under the Outside
Directors Plan.
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 4, 1999, by (i) each beneficial owner of
more than five percent of the outstanding Common Stock, (ii) each current named
executive officer and director and (iii) all current executive officers and
directors of the Company as a group. All shares are owned both beneficially and
of record unless otherwise indicated. Additionally, 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.
Number and Percentage of Shares of Common Stock Owned
<TABLE>
<CAPTION>
Name and Address Notes # of Shares Owned Percentage Owned
<S> <C> <C> <C>
FAI Overseas Investment Pty
77 Pacific Highway
Sydney, Australia 2059 (2) 4,058,799 13.5%
C.E.C. Radbone
19 Calonne Road
Wimbledon, London, UK (3) 1,607,717 5.35%
Edward J. Guinan III (4) to (10) 8,683,882 28.9%
Paul L. Harrison (11) 1,737,500 5.8%
Joseph V. Vittoria (12)(13) 1,756,969 5.8%
Carl Freyer (14)(15) 220,000 0.7%
All directors and officers
As a group (four persons) (2) to (15) 12,398,351 41.2%
</TABLE>
- --------------------------------------------------------------------------------
(1) Based on 20,364,316 shares of Common Stock outstanding on January 4, 1999.
(2) Includes 1,633,342 shares of Common Stock issuable upon exercise of
warrants granted November 1998.
(3) Includes 277,193 shares of Common Stock issuable upon exercise of options
granted April 19, 1997 as part of the Countdown acquisition.
31
<PAGE>
(4) Includes 450,000 shares of Common Stock owned by Conestoga Partners II,
Inc. ("Conestoga") which Mr. Guinan may be deemed to beneficially own. Mr.
Guinan Chief Executive Officer, President and Director of Conestoga and is
beneficial owner 75% of the outstanding capital stock of Conestoga.
(5) 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. Does not include 93,750 shares of Common Stock owned
by Edward J Guinan Jr., Mr. Guinan's father, which Mr. Guinan disclaims
beneficial ownership of.
(6) Includes 133,332 shares of Common Stock issuable upon exercise of warrants
granted as part of the February 1998 Private Placement.
(7) Includes 3,050 shares of Common Stock owned by International Advance, Inc.
("IA") which Mr. Guinan may be deemed to beneficially own. Mr. Guinan is a
director, President, Chief Executive Officer and the controlling
stockholder of IA.
(8) Includes 200,000 shares of Common Stock issuable upon exercise of warrants
granted in May 1996 in relation to a Private Placement of shares in IA.
(9) Includes 2,500,000 shares of Common Stock issuable upon exercise of
options granted in March 1998, subject to shareholder approval.
(10) Includes 750,000 shares of Common Stock issuable upon exercise of options
granted to Mrs. Susan E Guinan, Mr. Guinan's wife, in March 1998, subject
to shareholder approval.
(11) Includes 800,000 shares of Common Stock issuable on exercise of options
granted in 1994 and 750,000 shares of Common Stock issuable on exercise of
options granted, subject to shareholder approval, March 1998. Does not
include 450,000 shares of Common Stock owned by Conestoga, of Mr. Harrison
is a director and minority shareholder of which he disclaims beneficial
ownership.
(12) Includes 60,000 shares of Common Stock issuable upon exercise of warrants
granted under the 1995 Directors Stock Option Plan.
(13) Includes 138,596 shares of Common Stock issuable upon exercise of warrants
granted in April 1997 in relation to the acquisition of Countdown, 167,873
shares of Common Stock issuable upon exercise of warrants granted as part
of the August 1997 Private Placement and 250,000 shares of Common Stock
issuable upon exercise of warrants granted in March 1998, subject to
shareholder approval.
(14) Includes 20,000 shares of Common Stock issuable upon exercise of warrants
granted under the 1995 Directors Stock Option Plan.
(15) Includes 200,000 shares of Common Stock issuable upon exercise of warrants
granted to Caribbean Basin Capital Consultants, Inc ("CBCC"), which Mr.
Freyer may be deemed to beneficially own. Mr. Freyer is a director,
President, Chief Executive Officer and the controlling shareholder of
CBCC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 1998 the Company was charged a management fee of $1,060,526 (1997:
$679,786) by TME in respect of the Company's share of corporate office expenses
comprising salaries, professional fees, rent, travel and other corporate costs.
As of September 30, 1998 the Company owed $2,454,716 to Transmedia Europe, Inc.
Such payable is non-interest bearing and is repayable on demand.
Messrs. Guinan, Harrison, Freyer and Vittoria are also directors of Transmedia
Europe, Inc. See "Directors and Executive Officers of Registrant".
During fiscal 1997, the Company entered into an agreement with Mr. Joseph
Vittoria, a director and shareholder of the Company, whereby Mr. Vittoria
advanced a loan of $1,000,000 to the Company. The purpose of the loan was to
enable the Company to pay the cash element of the purchase of the Company's
interest in Countdown Holdings Limited ("Countdown"). The loan, which bears
interest at 12% per annum and is collateralized by a pledge of all the shares of
Countdown purchased by the Company, was originally scheduled
32
<PAGE>
to mature on September 27, 1997. The loan was renewed upon maturity for an
indefinite period by agreement between the Company and Mr. Vittoria. The loan is
repayable on 60 days notice from Mr. Vittoria.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are being filed as part of this Report.
(a)(1) Financial Statements:
Transmedia Asia Pacific, Inc.
See "Index to Financial Statements" contained in Part II, Item 8
(a)(2) Financial Statement Schedules:
I Schedule of Valuation and Qualifying Accounts
II. Consolidated Financial Statements for significant associate
Countdown Holdings Limited
(a)(3) Exhibits:
(i) Lease Agreement dated September 23, 1998 between Cambooya
Properties Pty Limited and Transmedia Australia
(ii) Employment Agreement dated March 2, 1998 between Transmedia Asia
Pacific, Inc. and Edward Guinan.
(b) Reports on Form 8-K
None.
34
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of BDO Stoy Hayward, Independent Auditors F1
Consolidated Balance Sheets F2 - F3
September 30, 1998 and 1997
Consolidated Statements of Operations F4
for the years ended September 30, 1998, 1997 and 1996
Consolidated Statements of Stockholders Equity F5
for the years ended September 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows F6
for the years ended September 30, 1998, 1997 and 1996
Notes to the Consolidated Financial Statements F7 - F22
Schedule II - Valuation and Qualifying Accounts F23
And Reserves
<PAGE>
Report of BDO Stoy Hayward, Independent Auditors
The Board of Directors and Stockholders
Transmedia Asia Pacific, Inc.
We have audited the accompanying consolidated balance sheets of Transmedia Asia
Pacific, Inc. and subsidiaries as of September 30, 1998 and 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended September 30, 1998. We have also
audited the financial statement schedule listed in the accompanying index. These
consolidated financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements and
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall consolidated 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 subsidiaries as of September 30, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years ended September 30, 1998 in conformity with generally accepted
accounting principles in the United States. Also, in our opinion, the schedule
presents fairly, in all material respects, the information set forth therein.
The accompanying consolidated financial statements and schedule 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 from operations during the years ended September 30, 1998, 1997 and 1996
and has a working capital deficit that raises substantial doubt about its
ability to continue as a going concern. The Company has funded operations
through sales of equity securities and issuance of debt, 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 issue of debt. Management's plans in regard to
these matters are also described in Note 3. The consolidated financial
statements and schedule do not include any adjustments which might result from
this uncertainty.
January 20, 1999
BDO Stoy Hayward
London, England
F-1
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents 1,504,921 13,104
Trade accounts receivable 446,193 56,563
Restaurant credits, (net of allowance for irrecoverable
credits of $ 48,033 at September 30, 1998 and of
$ 114,610 at September 30, 1997) 195,548 301,815
Amounts due from related parties (Note 4) 591,916 258,533
Prepaid expenses and other current assets 26,394 18,784
---------- ----------
Total current assets 2,764,972 648,799
---------- ----------
Non current assets
Investment in affiliated companies (Note 5) 2,877,728 2,715,442
Office furniture and equipment, (net of accumulated
depreciation of $509,874 at September 30, 1998 and
$ 106,620 at September 30, 1997) 240,269 94,250
Goodwill, (net of accumulated
Amortization of $204,897 at September 30, 1998 and
$ Nil at September 30, 1997) (Note 7) 3,759,284 --
Other intangible assets, (net of accumulated
Amortization of $768,277 at September 30, 1998 and
$644,631 at September 30, 1997) (Note 6) 1,073,297 1,196,943
Restricted cash and cash equivalents 139,209 --
Other assets 104,003 142,946
---------- ----------
Total non current assets 8,193,790 4,149,581
---------- ----------
TOTAL ASSETS 10,958,762 4,798,380
---------- ----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
F-2
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
LIABILITIES
Current liabilities
Trade accounts payable 538,708 267,232
Deferred membership fee income 467,588 104,375
Accrued liabilities 990,672 330,908
Liability for sign on fees (Note 7(a)) 296,500 --
Amount due to related parties (Note 4) 3,924,386 1,345,712
Notes payable (Note 8) 1,615,000 --
----------- -----------
Total current liabilities 7,832,854 2,048,227
----------- -----------
Minority interest 629,784 --
STOCKHOLDERS' EQUITY
Preferred stock, $0.1 par value per share
Authorized 5,000,000 shares; issued and outstanding: -- --
Common stock, $0.00001 par value per share
Authorized 95,000,000 shares, (19,521,316 issued
and outstanding at September 30, 1998
15,249,221 at September 30, 1997) 196 153
Additional paid-in capital 14,823,648 9,962,922
Cumulative foreign currency translation (211,268) 163,719
adjustment
Accumulated deficit (12,116,452) (7,376,641)
----------- -----------
Total Stockholders' equity 2,496,124 2,750,153
----------- -----------
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 10,958,762 4,798,380
----------- -----------
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
F-3
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended Year ended
September 30, September 30, September 30,
1998 1997 1996
<S> <C> <C> <C>
Sales revenues $ 4,418,237 $ 1,924,908 $ 1,659,515
Membership fees 241,506 204,454 230,961
Other 7,813 -- --
------------ ------------ ------------
Total revenues 4,667,556 2,129,362 1,890,476
Cost of revenues (1,074,103) (1,257,769) (1,098,666)
------------ ------------ ------------
Gross profit 3,593,453 871,593 791,810
Selling, general and administrative expenses (Note 7(d)) (7,080,173) (3,649,441) (2,816,756)
------------ ------------ ------------
Loss from operations (3,486,720) (2,777,848) (2,024,946)
Share of losses of affiliated companies (Note 5) (949,467) (202,905) --
Interest expense (277,751) (73,889) (2,317)
Interest income 19,249 24,197 21,005
------------ ------------ ------------
Loss before income tax and minority interest (4,694,689) (3,030,445) (2,006,258)
Income taxes (Note 10) (188,198) -- --
Minority interest 143,076 -- --
------------ ------------ ------------
Net loss (4,739,811) (3,030,445) (2,006,258)
------------ ------------ ------------
Net loss per common and common equivalent share:
Basic (0.27) (0.22) (0.16)
Diluted (0.27) (0.22) (0.16)
Weighted average number of
Common shares outstanding, basic and diluted 17,691,690 13,802,812 12,618,400
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements
F-4
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Number of Common Additional Cumulative
Common shares stock paid-in capital currency
translation
adjustment
<S> <C> <C> <C> <C>
Balance, October 1, 1995 12,469,590 $125 $6,235,758 $949
Issuance of common stock for cash 892,857 9 1,249,991
Issue costs (15,000)
Net loss
Effect of foreign currency
translation 52,961
Compensation expense
----------------------------------------------------------------
Balance, September 30, 1996 13,362,447 $134 $7,470,749 $53,910
Issuance of common stock for cash 556,250 6 1,112,494
Issue costs (15,000)
Issuance of common stock relating
to acquisition of Countdown 1,330,524 13 1,222,819
Net loss
Effect of foreign currency
translation 109,809
Option re Countdown 171,860
----------------------------------------------------------------
Balance, September 30, 1997 15,249,221 $153 $9,962,922 $163,719
Issuance of common stock for cash 3,447,095 35 3,934,560
Issuance of common stock relating
to acquisition of NHS 500,000 5 499,995
Issuance of common stock relating
to acquisition of Porkpine 225,000 2 326,172
Issuance of common stock relating to failed 100,000 1 99,999
acquisition (Note 7(d))
Net loss
Effect of foreign currency
translation (374,987)
----------------------------------------------------------------
Balance, September 30, 1998 19,521,316 $196 $14,823,648 $(211,268)
----------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Accumulated Unearned Total
deficit compensation
<S> <C> <C> <C>
Balance, October 1, 1995 $ (2,339,938) $(212,250) $ 3,684,644
Issuance of common stock for cash 1,250,000
Issue costs (15,000)
Net loss (2,006,258) (2,006,258)
Effect of foreign currency
translation 52,961
Compensation expense 212,250 212,250
-----------------------------------------------
Balance, September 30, 1996 $ (4,346,196) -- $ 3,178,597
Issuance of common stock for cash 1,112,500
Issue costs (15,000)
Issuance of common stock relating
to acquisition of Countdown 1,222,832
Net loss (3,030,445) (3,030,445)
Effect of foreign currency
translation 109,809
Option re Countdown 171,860
-----------------------------------------------
Balance, September 30, 1997 $ (7,376,641) -- $ 2,750,153
Issuance of common stock for cash 3,934,595
Issuance of common stock relating
to acquisition of NHS 500,000
Issuance of common stock relating
to acquisition of Porkpine 326,174
Issuance of common stock relating to failed 100,000
acquisition (Note 7(d))
Net loss (4,739,811) (4,739,811)
Effect of foreign currency
translation (374,987)
-----------------------------------------------
Balance, September 30, 1998 $(12,116,452) -- $ 2,496,124
-----------------------------------------------
</TABLE>
F-5
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended Year ended Year ended
September 30, September 30, September 30,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (4,739,811) $ (3,030,445) $ (2,006,258)
Adjustment to reconcile net loss
to net cash used in operating activities:
Depreciation 113,342 38,195 35,539
Amortization of license and goodwill 328,543 122,720 122,720
Write down of license to fair value -- 276,472 --
Provision for irrevocable restaurant credits -- (5,152) 79,344
Amortization of deferred compensation -- -- 212,250
Write off of Hawaii option -- 150,000 --
Share of loss of affiliates 949,467 202,905 --
Accrued interest expense 250,412 -- --
Accrued sign-on fees 296,500 -- --
Reserve against non-trade receivable 452,427 -- --
Minority interest 143,076 -- --
Changes in assets and liabilities:
Trade accounts payable (288,932) 13,800 131,837
Accrued liabilities (36,268) 80,556 (5,021)
Accounts receivable 36,324 -- --
Restaurant credits 106,267 340,145 (98,997)
Prepaid expenses and other current assets (153,876) (9,956) (60,299)
Deferred membership fees 160,291 (34,840) 5,066
Restricted cash and cash equivalents (139,209) -- --
Due from /(to) related parties (2,297) (271,264) 663,930
------------ ------------ ------------
Net cash used in operating activities (2,523,744) (2,126,864) (919,889)
Cash flows from investing activities:
Interest acquired in affiliates (570,623) (1,209,655) --
Net cash paid to acquire NHS (1,702,559) -- --
Net cash paid to acquire Breakaway (126,748) -- --
Proceeds on disposal/(acquisition) of fixed assets (37,318) 4,045 (29,861)
------------ ------------ ------------
Net cash used in investing activities (2,437,248) (1,205,610) (29,861)
Cash flows from financing activities:
Net proceeds received from issuance
of common stock 3,934,595 1,097,500 1,235,000
Loans from related parties re Countdown acquisition -- 1.000,000 --
Bank credit line -- (40,051) (86,097)
Proceeds from notes payable 1,615,000 -- --
------------ ------------ ------------
Net cash provided by financing activities 5,549,595 2,057,449 1,148,903
Effects of exchange rate changes on cash (112,197) 116,824 31,054
------------ ------------ ------------
Net increase/(decrease) in cash and cash equivalents 476,407 (1,158,201) 230,207
Cash and cash equivalents at beginning of period 13,104 1,171,305 941,098
Cash acquired as part of acquisitions 1,015,410 -- --
Cash and cash equivalents at end of period 1,504,921 13,104 1,171,305
------------ ------------ ------------
</TABLE>
F-6
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $73,494
Taxes paid $395
No amounts of cash were paid for interest or income taxes in 1997 or 1996
Supplemental Disclosures of Non-cash Investing and Financing Activities
(1) In April, 1997 the Company issued 1,330,524 shares of its common stock as
part payment for its investment in Countdown Holdings Limited ("Countdown"). The
Company paid a total of $2,682,487 for its investment in Countdown made up as
follows:
Cash payment 1,209,655
Issuance of 1,330,524 shares of Common Stock 1,222,832
Loan Note in favor of TMNI International, Inc. 250,000
----------
2,682,487
----------
(2) In December, 1997 the Company issued 500,000 shares of its common stock as
part payment for the acquisition by NHS Australia Pty Limited of the business of
Nationwide Helpline Service Pty Limited. As at September 30, 1998 total
acquisition costs were $ 2,202,559 made up as follows:
Cash payment 1,702,559
Issuance of 500,000 shares of Common Stock 500,000
----------
2,202,559
----------
(3) In May, 1998 the Company issued 225,000 shares of its common stock as part
payment for its investment in Porkpine Limited ("Porkpine"). The Company paid a
total consideration of $869,797 for its investment in Porkpine made up as
follows:
Cash payment 570,623
Issuance of 225,000 shares of Common Stock 326,174
----------
896,797
----------
F-7
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1 - The Company
Transmedia Asia Pacific, Inc. ("the Company" or "TMAP") is a Delaware
corporation which was organized in March 1994 and commenced operations in
Sydney, Australia in November 1994. TMAP is a provider of member benefit
programs.
On December 2, 1997, Transmedia Australia Holdings Pty Limited ("Transmedia
Australia"), a company owned equally by the Company and Transmedia Europe, Inc.
("TME"), purchased 51% of the Common Stock of NHS Australia Pty Limited ("NHS").
On November 17, 1998 Transmedia Australia acquired the remaining 49% of NHS
(Refer Note 7 "Acquisitions" for further details).
On May 14, 1998 the Company and TME purchased jointly 100% of the outstanding
Common Stock of Porkpine Limited ("Porkpine").
On May 22, 1998 Transmedia Australia Travel Holdings Pty Limited (" Transmedia
Holdings"), a company owned equally by the Company and TME acquired 100% of the
issued share capital of Breakaway Travel Club Pty Limited ("Breakaway").
As of September 30, 1998, the Company had the following holdings in its direct
subsidiaries and affiliates:
<TABLE>
<CAPTION>
Name Country of Incorporation % Owned
<S> <C> <C>
Transmedia Australia Pty Limited Australia 100
Transmedia Australasia Limited New Zealand 100
Transmedia Australia Holdings Pty Limited Australia 50
Countdown Holdings Limited UK 50
Porkpine Limited Channel Islands 50
Transmedia Australia Travel Holdings Pty Limited Australia 50
</TABLE>
All references herein to "Company" and "TMAP" include Transmedia Asia Pacific,
Inc. and its subsidiaries unless otherwise stated.
F-8
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Significant accounting policies
(a) Principles of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries and affiliates, including 50% held subsidiaries
where effective control is exercised by the Company over the financial and
operational decisions of the subsidiary. All significant intercompany
transactions have been eliminated on consolidation.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's ability to continue as a
going concern may depend on its ability to obtain outside financing sufficient
to support its operations and business development plans (Refer Note 3).
(b) 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 utilizing 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 utilized by cardholders.
The amount of funds advanced to participating restaurants are generally
unsecured and are recoverable as cardholders utilize 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.
(c) Long-Lived assets
Long-lived assets, such as office furniture and equipment, goodwill and other
intangibles, are evaluated for impairment when events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable through the estimated undiscounted future cash flows from the use of
these assets. When any such impairment exists, the related assets will be
written down to fair value. No impairment write-down was necessary for fiscal
1998 (fiscal 1997 - $276,472; fiscal 1996 - $nil.).
(d) Other intangible assets
Other intangible assets consist primarily of the cost of the Transmedia License
paid to TMNI International, Inc. (TMNI) in cash plus the fair value of Company
shares granted in exchange 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 amortized on a straight-line basis over its estimated
useful life of 15 years from the commencement of operations in November 1994.
(e) Office furniture and equipment
Office furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives which are between 3 - 5 years.
F-9
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Significant accounting policies (continued)
(f) Goodwill
The excess of cost of investments over the fair value of net assets acquired
which is not otherwise allocated is determined to be goodwill and is amortized
on a straight-line basis over a period of fifteen years.
(g) Income taxes
The Company recognizes 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 recognized 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 be realized.
(h) Revenue recognition
Revenues comprise:
(i) the retail value of food and beverage purchased from participating
restaurants by the Company's Transmedia cardholders (less the cardholders'
20% or 25% discount) and the cardholders' membership fees,
(ii) NHS membership fees paid by sponsoring corporations, and
(iii) Travel agency commissions earned by the Teletravel division of NHS and
Breakaway.
Transmedia card membership fees are recognized as revenue in equal monthly
installments over the membership period. All other components of revenue,
including NHS membership fees paid by sponsoring corporations for the provision
of "helpline" services, are non-refundable and recognized as revenue when the
related services have been performed.
(i) Unearned compensation
The Company recorded unearned compensation in fiscal 1996 for shares of
restricted common stock issued in exchange for certain consultancy and financial
advisory services. The restricted shares and the unearned compensation were
recorded at the fair value of the shares at the date at which they were issued.
Compensation expense was recorded on a periodic basis as the restriction on such
shares expired.
(j) Cardholder bonuses
In fiscal 1995 and 1996 the Company operated a Restaurant Cardholder promotion
to increase usage of the Restaurant Card and to recruit new cardholders. The
promotion involved the granting of bonus food and beverage credits. The bonus
food and beverage credits were utilized as the Cardholder used the Restaurant
Card and were processed as an additional saving to the standard 20% or 25%
discount obtained by using the Restaurant Card. The bonus was accrued by the
Company when the bonus was granted to the Cardholder.
F-10
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Significant accounting policies (continued)
(k) Foreign currencies
The reporting currency of the Company is the United States dollar. The Company's
functional currencies are the Australian dollar, the UK pound sterling and the
Irish punt. The Australian dollar is the functional currency of the Company's
restaurant card business because it is the primary currency of the environment
in which the business operates as an autonomous unit. All cash generated and
expended by the restaurant card business is in Australian dollars. For the same
reasons the functional currency of the Company's interest in Countdown is the UK
pound sterling because that business is located, and primarily operates in, the
United Kingdom. Similarly the functional currency of the Company's interest in
Porkpine is the Irish punt because that business is located, and primarily
operates in the Republic of Ireland.
For consolidation purposes, the assets and liabilities of overseas subsidiaries
are translated at the closing exchange rates. Consolidated statements of income
of such subsidiaries are consolidated at the average rates of exchange during
the period. Exchange differences arising on the translation of subsidiaries'
financial statements are recorded in the cumulative currency translation
adjustment account as a component of 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, 1998 the Company recorded an exchange loss of $80,017 (1997 loss of $
176,575, 1996 loss of $221,038).
The average exchange rates during the years ended September 30, 1998, 1997 and
1996 and the exchange rates in effect at September 30, 1998 and 1997 were as
follows:
UK Pound Australian Irish
Sterling (pound) Dollar Punt
Average exchange rates
Year ended September 30, 1998 1.6533 0.6470 1.4215
Year ended September 30, 1997 1.6200 0.7302 N/A
Year ended September 30, 1996 1.5600 0.7900 N/A
Closing exchange rate
September 30, 1998 1.7000 0.5930 1.4995
September 30, 1997 1.6125 0.7251 1.4545
(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, 1998, 1997 and 1996 were $nil, $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, 1998, 1997 and 1996.
F-11
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 2. Significant accounting policies (continued)
(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 which include cash and cash
equivalents, restricted cash, notes payable, restaurant credits and amounts due
from/to related parties approximated fair value as of September 30, 1998 and
1997 due to either short maturity or terms similar to those available to similar
companies in the open market.
(p) Recent accounting pronouncements not yet implemented
In June 1997, the Financial Accounting Standards Board ("FASB") issued two new
disclosure standards, Statement on Financial Accounting Standard ("SFAS") No.
130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information".
SFAS No. 130 establishes 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
owners and distributions to owners. This standard is effective for the Company's
financial statements for the fiscal year ending September 30, 1999.
SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise," and establishes standards for the way that public
enterprises report information about operating segments in financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. This standard is
effective for the Company's financial statements for the fiscal year ending
September 30, 1999.
Both of these standards require comparative information to be restated. Results
of operations and financial position will be unaffected by implementation of
these new standards. Management does not expect the implementation of these new
Standards to have a significant impact upon the financial statements.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits", which revises employers'
disclosures about pension and other post-retirement benefit plans. SFAS 132 is
effective for financial statements for the periods beginning after December 15,
1997, and requires comparative information for earlier years to be restated.
This standard currently does not apply to the Company.
F-12
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 3. Going Concern
The financial statements record a loss for the year ended September 30,1998 of $
4,739,811, which, when taken with the previous years' results, result in an
accumulated deficit of $ 12,116,452 at September 30, 1998.
The Company has been able to fund this deficit and complete its acquisitions
through the sale of equity securities and issuance of debt (Refer Note 8 "Notes
Payable" and Note 9 "Stockholders Equity" for further details). Management has
taken steps to reduce the amount of cash used by operations, including reducing
staffing levels, however the Company's operations may not provide sufficient
internally generated cash flows to meet its projected requirements in the
short-term. Accordingly, the Company is likely to require further capital
infusions in order to meet its loan repayment commitments and the ongoing
funding requirements of its operations. Based upon the Company's history of
obtaining necessary financing, management remains confident that sufficient
funds will be available to the Company to operate in the foreseeable future and
meet its loan repayment obligations. However there can be no assurance given
that the Company will be able to obtain such funding.
Note 4. Related party transactions
Amounts due from/(to) related parties consist of the following:
September 30, September 30,
1998 1997
Amounts due from
Transmedia Europe, Inc. $ -- $ 190,124
Transmedia UK 383,507 --
International Advance 140,000 --
Conestoga Partners Inc. 26,260 26,260
Paul Harrison 42,149 42,149
---------- ----------
$ 591,916 $ 258,533
---------- ----------
Amounts due to
J.V. Vittoria $1,182,137 $1,061,479
TMNI 287,533 284,233
Transmedia Europe, Inc. 2,454,716 --
---------- ----------
$3,924,386 $1,345,712
---------- ----------
Loans to related parties are unsecured non-interest bearing and repayable upon
demand except as noted below.
During fiscal 1997 the Company entered into an agreement with Mr J Vittoria, a
director and shareholder of the Company, whereby Mr Vittoria advanced a loan of
$1,000,000 to the Company. The purpose of the loan was to enable the Company to
pay the cash element of the purchase of the Company's interest in Countdown. The
loan, which bears interest at 12% per annum and is collateralized by a pledge of
all the shares of Countdown purchased by the Company, was originally scheduled
to mature on September 27, 1997. The loan was renewed upon maturity for an
indefinite period by agreement between the Company and Mr Vittoria. The loan is
repayable on 60 days notice from Mr Vittoria.
The Company and TME issued a joint promissory note together in the principal
amount of $500,000 to TMNI for which the liability has been split between the
two companies equally. The promissory note was 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. To date this
promissory note has not been repaid or converted.
F-13
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 4. Related party transactions (continued)
During the year ended September 30, 1998, the Company was charged a corporate
management fee of $1,060,526 (1997: $679,786, 1996: $362,793) from TME in
respect of the Company's share of the head office expenses, comprising salaries,
rent, travel and other associated office and professional costs.
Note 5. Investment in Affiliated Companies
Investments in affiliated companies comprise the Company's interests in
Countdown and Porkpine, which are made up as follows:
September 30, September 30,
1998 1997
Countdown
Cost of investment $ 2,682,487 $ 2,682,487
Cost of option 171,860 171,860
Share of profits/(losses)
- - Year ended September 30, 1997 (202,905) (202,905)
- - Year ended September 30, 1998 (651,311) --
Amortization of goodwill on investment (215,204) --
Amounts due from/(to) Countdown 278,956 64,000
----------- -----------
$ 2,063,883 $ 2,715,442
=========== ===========
Porkpine
Cost of investment $ 896,797 $ --
Amortization of goodwill on investment (22,063) --
Share of profits/(losses)
- - From acquisition date to September 30, 1998 (60,889) --
----------- -----------
$ 813,845 $ --
=========== ===========
Countdown Summary Financial Information
September 30, September 30,
1998 1997
Current Assets $ 962,458 $ 903,210
Non Current Assets
Office furniture and equipment 169,833 502,097
Intangible Assets 155,360 458,172
--------------------------
325,193 960,269
Current Liabilities 2,184,672 2,770,455
Non Current Liabilities 1,446,530 45,442
--------------------------
Net assets (2,343,551) (952,418)
--------------------------
F-14
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 5. Investment in Affiliated Companies (continued)
Stockholders Equity
Common Stock 800,000 800,000
Accumulated losses (3,143,551) (1,752,418)
--------------------------
(2,343,551) (952,418)
==========================
Sales 7,186,569 7,670,478
----------- -----------
Operating loss 1,269,809 976,386
----------- -----------
Net loss 1,302,126 1,049,001
----------- -----------
Note 6. Intangible assets
September 30, September 30,
1998 1997
Formation expenses $ 784 $ 784
Transmedia License 1,840,790 1,840,790
--------------------------
1,841,574 1,841,574
Less: Accumulated amortization (768,277) (644,631)
--------------------------
$ 1,073,297 $ 1,196,943
==========================
Note 7. Acquisitions
(a) NHS Acquisition
On December 2, 1997, Transmedia Australia, a company owned equally by the
Company and TME but controlled by the Company, purchased 51% of the common stock
of NHS, a newly incorporated company. NHS purchased the net assets and business
of Nationwide Helpline Services Pty Limited ("Nationwide"). Nationwide was an
Australian provider of telephone helpline services and other member benefit
programs. The total consideration paid by Transmedia Australia for its 51%
interest in the equity of NHS was Aus$6,000,000 (approximately $4,290,000 as of
December 2, 1997). Transmedia Australia also exercised their right to purchase
the balance of the equity of NHS for Aus$2,500,000 payable on June 30, 1998 with
the right to extend such obligation ("Balance Obligation") until September 30,
1998 by paying interest at 5% per annum. Transmedia Australia exercised the
extension right. In addition the Company and TME agreed to pay Aus$4,000,000 in
sign-on fees to the two former executive directors of Nationwide. On October 21,
1998 the Company and TME reached agreement to reduce these sign-on fees by
Aus$1,000,000.
On November 17, 1998 the Company acquired the remaining 49% and settled the
Balance Obligation. The Company and TME also paid the reduced sign-on fees on
that date.
The total revised sign-on fees of Aus$3,000,000 (approximately $1,940,000) have
been charged as compensation expense equally in the statements of operations of
the Company and TME for the year ended September 30, 1998.
The acquisition was accounted for as a purchase and the excess purchase price
attributable to goodwill was $3,905,384.
F-15
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 7. Acquisitions (continued)
The following unaudited pro forma information combines the consolidated results
of the Company and NHS as if the acquisition had occurred at October 1, 1997 and
October 1, 1996, after giving effect to certain adjustments including the
amortization of excess cost over the net assets acquired and to eliminate the
effect of intercompany transactions.
Year ended Year ended
Sept 30,1998 Sept 30,1997
Revenues $ 5,170,740 $ 5,001,467
Costs and Expenses (9,961,635) (8,165,628)
Net Loss (4,790,895) (3,164,161)
Basic Earnings per share (0.27) (0.23)
Diluted Earnings per share (0.27) (0.23)
(b) Breakaway acquisition
On May 22, 1998, the Company acquired 100% of the issued share capital of
Breakaway Travel Club Pty Limited ("Breakaway"). The total consideration paid
was Aus$375,000 (approximately $230,000) plus acquisition costs of $16,000. Such
consideration was paid equally by the Company and TME in cash.
Goodwill arising on acquisition amounted to $58,797.
(c) Porkpine acquisition
On May 14, 1998 the Company and TME purchased 100% of the outstanding common
stock of Porkpine Limited ("Porkpine"). The consideration paid totaled 1,060,000
pounds sterling ($1,749,000 approximately) subject to an adjustment such that
the purchase price equals net assets as at May 14, 1998. No goodwill therefore
arose on acquisition.
(d) Acquisitions - other
The Company incurred costs of $362,000 and issued 100,000 shares of common stock
with a market price of $1.00 at the date of issue in connection with a failed
acquisition. These costs have been included in selling, general and
administrative expenses in the statement of operations.
F-16
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 8. Notes payable
On April 29, 1998 the Company engaged in a private placement of debt securities
(the "April Loan Notes"). The Placement was made pursuant to the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933, as amended,
and Regulation D promulgated thereunder. The placement consisted of three
250,000 pounds sterling (approximately $425,000) face amount, 8% promissory
notes payable on November 1, 1998 and one 200,000 pounds sterling (approximately
$340,000) face amount, 8% promissory note payable on the same date. The holders
of the 250,000 pounds sterling promissory notes each received a three and a half
year warrant to purchase 41,660 shares of the common stock of the Company at an
exercise price of $2.00 per share and the holder of the 200,000 pounds sterling
promissory notes received a warrant to purchase 33,328 shares on the same terms.
The warrants are exercisable at any time after issuance through November 1, 2001
and are not considered to have any value.
See also Note 16 "Subsequent Events"
Note 9. Stockholders' equity
On August 7, 1997 the Company commenced a private placement (the "Placement")
pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The
Placement closed on December 31, 1997 upon the sale of 1,497,095 shares of
common stock at $1.00 per share resulting in gross proceeds to the company of
$1,497,095. For every three shares purchased each purchaser received a three
year warrant to purchase one share of the common stock of the Company at an
exercise price of $1.00 per share for no additional consideration. The warrants
are exercisable at any time after the date of grant for a period of three years.
In addition, in consideration of their agreement to purchase, on a standby
basis, a number of shares in the Placement, certain holders of preferred stock
of the Company were granted three-year warrants to purchase an aggregate of 327,
656 shares of Common Stock of the Company at an exercise price of $1.00 per
share.
On February 1, 1998 the Company commenced a private placement pursuant to the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder. The Placement closed
on April 30, 1998 upon the sale of 1,950,000 shares of common stock at $1.25 per
share resulting in net proceeds to the company of $2,437,500. For every three
shares sold each subscriber received a three year warrant to purchase one share
of the common stock of the Company at an exercise price of $1.25 per share for
no additional consideration. The warrants are exercisable at any time after the
date of grant for a period of three years.
See also Note 16 "Subsequent Events"
F-17
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 10. Income taxes
Income taxes reflected in the accompanying consolidated statements of operations
differed from the amounts computed by applying the average foreign federal tax
rate of 36 % to loss before taxes as a result of the following:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
September 30, September 30, September 30,
1998 1997 1996
<S> <C> <C> <C>
Computed 'expected' foreign tax benefit $ (1,121,895) $ (707,000) $ (682,000)
State taxes -- -- 8,000
Change in valuation allowance against
deferred tax assets 1,036,272 683,000 646,000
Disallowable expenses 212,821
Other 61,000 24,000 28,000
------------ ------------ ------------
Income tax expense $ 188,198 $ -- $ --
============ ============ ============
The tax effects of temporary differences that give rise to deferred tax assets
are as follows:
Deferred tax assets:
Net operating loss carry forwards $ 3,062,272 $ 1,999,000 $ 1,306,000
Pre operating costs capitalized for
tax purposes -- 27,000 37,000
------------ ------------ ------------
Total 3,062,272 2,026,000 1,343,000
Less valuation allowance (3,062,272) (2,026,000) (1,343,000)
------------ ------------ ------------
Net deferred tax assets $ -- $ -- $ --
============ ============ ============
</TABLE>
F-18
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 11. Loss per common share
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" issued in February 1997. The new pronouncement is
effective for periods ending after December 15, 1997, and requires restatement
of prior periods. Assumed exercise of warrants are not included in the
calculation of diluted loss per share since the effect would be anti-dilutive.
Accordingly, basic and diluted loss per share does not differ for any period
presented.
The following table summarizes securities that were outstanding at September 30,
1998, 1997 and 1996, but not included in the calculation of diluted loss per
share because such shares are anti-dilutive.
Sept 30, 1998 Sept 30, 1997 Sept 30, 1996
Stock options and warrants 3,952,145 2,038,825 1,437,619
Note 12. Leases
The Company leases certain office space under lease agreements.
Future minimum lease payments under non-cancelable operating leases as of
September 30, 1998, are as follows:
Year ending September 30, 1999 $180,299
Year ending September 30, 2000 210,122
Year ending September 30, 2001 276,017
Year ending September 30, 2002 276,017
Year ending September 30, 2003 276,017
Thereafter 260,955
The amount charged to the consolidated statement of operations for rent expense
in the year ended September 30,1998 was $ 218,264 (1997: $42,465, 1996: $44,641)
F-19
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13. 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. The Plan provides that the
stock option committee of the board of directors may grant stock options or
stock appreciation rights with respect to a maximum of 250,000 shares of common
stock at an exercise price not less than the fair market value at the date of
grant for qualified and non-qualified stock options.
The Company 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 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. 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.
Stock option and warrant activity during the periods indicated is as follows:
Weighted Weighted
Options Average Warrants Average
Number of Exercise Number of Exercise
Shares Price Shares Price
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
--------- ---------
Balance at September 30, 1996 840,000 1.04 597,619 1.62
Granted 287,193 0.90 324,013 1.57
Cancelled (10,000) (1.78) -- --
--------- ---------
Balance at September 30, 1997 1,117,193 1.00 921,632 1.62
Granted 120,000 1.00 1,793,320 1.20
--------- ---------
Balance at September 30, 1998 1,237,193 1.00 2,714,952 1.35
F-20
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 13. Stock Options and Warrants (continued)
The range of exercise prices for the options is $0.90 to $1.78. The range of
exercise prices for the warrants is $1.00 to $2.00. All the options and warrants
shown as at September 30, 1998 and 1997 were exercisable at that date.
The Company applies APB Opinion No.25 in accounting for its stock options and
warrants and, accordingly, no compensation cost has been recognized for its
employee 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:
1998 1997 1996
Net Loss - As reported $ (4,739,811) $ (3,030,445) $ (2,006,258)
- Pro forma $ (5,064,663) $ (3,044,470) $ (2,018,298)
Loss per share - As reported
Basic $ (0.27) $ (0.22) $ (0.16)
Diluted $ (0.27) $ (0.22) $ (0.16)
Loss per share - Pro forma
Basic $ (0.27) $ (0.22) $ (0.16)
Diluted $ (0.27) $ (0.22) $ (0.16)
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 1998,
1997, and 1996 respectively: no dividends paid for all years; expected
volatility of 40%; a risk free interest rate of 6.7% and an expected life being
the remaining term of the option. The per share weighted fair value of the stock
options granted in 1998, 1997 and 1996 were $ 1.05, $0.74 and $0.33
respectively.
Note 14. Business and credit concentrations
The Company's customers are primarily located in Australia and New Zealand. One
corporate customer accounted for 17 % of sales revenue for the year ended
September 30, 1998.
No single restaurant credit receivable was greater than 10% of the Company's
total restaurant credit receivable balance at September 30, 1998.
One corporate client of the Company's affiliate, Countdown, accounted for
approximately 20% of revenues for the year ended September 30, 1998.
F-21
<PAGE>
TRANSMEDIA ASIA PACIFIC, INC. AND SUBSIDIARIES
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 15. Commitments and Contingencies
Legal proceedings
In the opinion of management there are no claims or lawsuits pending against the
Company.
Note 16. Subsequent Events
(a) Acquisition of the remaining 49% interest in NHS
On November 17, 1998 the Company acquired the remaining 49% of NHS (Refer Note 7
"Acquisitions" for further details).
(b) November Loan Note
On November 17, 1998 the Company entered into a "1 Year Secured Promissory Note"
in the principal sum of $3.4 million executed with FAI General Insurance, a
shareholder of the Company and TME. Interest on the Promissory Note accrues at
the rate of 10% per annum and is payable quarterly in arrears. The Promissory
Note is secured by a charge over Transmedia Australia and is guaranteed by TME.
The promissory note is repayable on 16 November 1999. In addition the promissory
note holders received a three year warrant to purchase 1,000,000 shares in the
Company as $1.00 and the Company agreed to exchange warrants to purchase 633,342
shares, exercisable at prices between $1.00 and $1.40, for a warrant to purchase
633,342 shares at $1.00. The fair value of these warrants, using the Black
Scholes valuation method, will be charged as interest expense over the life of
the notes.
(c) April Loan Notes
As referred to in Note 15, certain of the April Loan Notes have not been repaid
on their due date and legal proceedings have been undertaken against the Company
to recover both the principal and accrued interest due.
(d) Equity Private Placement
On October 16, 1998 the Company commenced a private placement pursuant to the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933, as amended, and Regulation D promulgated thereunder. The placement closed
on November 30, 1998 upon the sale of 843,333 shares of common stock at $0.75
per share resulting in net proceeds to the company of $632,500.
F-22
<PAGE>
Transmedia Asia Pacific, Inc.
Schedule II
Valuation and Qualifying Accounts
For the Years ended September 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions Deductions Balance at
Description Balance at Charged to Acquisition (describe) End of
Beginning of Costs and Expenses of Subsidiaries Period
Period
<S> <C> <C> <C> <C> <C> <C>
Allowance for Irrecoverable
Restaurant Credits
1996 40,418 79,344 119,762
1997 119,762 (5,152)(1) 114,610
1998 114,610 (66,577)(2) 48,033
</TABLE>
(1) Release of provision no longer required.
(2) The deduction of $66,577 relates to the write-off of certain irrecoverable
credits totaling $63,334 and an adjustment of $3,244 to adjust the provision
to the requirements as of September 30, 1998.
F-23
<PAGE>
Schedule II
COUNTDOWN HOLDINGS LIMITED
Report of the auditors
- --------------------------------------------------------------------------------
To the shareholders of Countdown Holdings Limited
We have audited the accompanying consolidated balance sheets of Countdown
Holdings Limited and subsidiaries as of 30 September 1998 and 30 September
1997 and consolidated profit and loss account for the two years ended 30
September 1998.
Respective responsibilities of directors and auditors
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 generally accepted auditing
standards in the United Kingdom which do not differ in any material
respect from auditing standards generally accepted in the United States of
America. 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 substantial
doubt about 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 affairs of the company and its subsidiaries as at 30 September
1998 and 30 September 1997 and of its result for the two years ended 30
September 1998 in conformity with generally accepted accounting
principles.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
January 20, 1999
1
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Consolidated profit and loss account for the year ended 30 September 1998
- --------------------------------------------------------------------------------
Note 1998 1997
(pound) (pound)
Turnover 4,346,437 4,734,863
Cost of sales 2,325,444 2,960,839
---------- ----------
Gross profit 2,020,993 1,774,024
Net operating expenses 2,789,404 2,376,732
---------- ----------
Operating loss (768,411) (602,708)
Interest receivable 2,259 --
Interest payable and similar charges 21,806 53,232
---------- ----------
Loss on ordinary activities before taxation 2 (787,958) (655,940)
Tax on loss on ordinary activities 3 -- 8,408
---------- ----------
Loss for the year 14 (787,958) (647,532)
---------- ----------
All amounts relate to continuing activities.
All recognised gains and losses are included in the profit and loss account.
The loss for the year represents the movement in shareholders' funds.
The notes on pages 5 to 13 form part of these financial statements.
2
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Consolidated balance sheet at 30 September 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1998 1997
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets 4 91,383 284,138
Tangible assets 5 99,896 311,378
---------- --------
191,279 595,516
Current assets
Stocks 6 90,399 129,950
Debtors 7 441,225 403,518
Cash at bank and in hand 34,494 26,663
---------- ----------
566,118 560,131
Creditors: amounts falling due
within one year 8 1,283,654 1,719,602
---------- ----------
Net current liabilities (717,536) (1,159,471)
---------- --------
Total assets less current liabilities (526,257) (563,955)
Creditors: amounts falling due
after more than one year 9 (852,347) (26,691)
---------- --------
(1,378,604) (590,646)
========== ========
Capital and reserves
Called up share capital 13 500,000 500,000
Profit and loss account (1,878,604) (1,090,646)
---------- --------
Shareholders' funds - equity 14 (1,378,604) (590,646)
========== ========
</TABLE>
The financial statements were approved by the Board on
P Harrison
Director
The notes on pages 5 to 13 form part of these financial statements.
3
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Statements of cash flows
- --------------------------------------------------------------------------------
1998 1997
(pound) (pound)
Cash flows from operating activities
Net loss (787,958) (647,532)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortisation charges 228,555 290,494
Income taxes receivable -- 28,763
Profit on sale of plant and equipment 21,020 (11,447)
Net changes in operating assets and liabilities
Increase in payables (239,572) 215,004
Decrease in receivables (37,707) 106,115
Decrease in inventories 39,551 8,225
Other, net -- --
-------- --------
Net cash used in operating activities (776,111) (10,378)
-------- --------
Cash flows from investing activities
Additions to plant and equipment (24,849) (59,954)
Proceeds from disposition of plant and equipment 179,511 15,096
-------- --------
Net cash provided by/(used in) investing activities 154,662 (44,858)
-------- --------
Cash flows from financing activities
Loans from parent companies and group company 822,719 --
Finance lease repayments (31,453) (19,703)
-------- --------
Net cash provided by/(used in) financing activities 791,266 (19,703)
-------- --------
Net increase/(decrease) in cash and cash equivalents 169,817 (74,939)
Cash and cash equivalents at beginning of year (412,920) (337,981)
-------- --------
Cash and cash equivalents at end of year (243,103) (412,920)
======== ========
Supplemented disclosure of cash flow information
Interest paid during the year 21,806 48,091
Interest received during year (2,259) --
Income taxes received during the year -- (37,171)
======== ========
The notes on pages 5 to 13 form part of these financial statements.
4
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998
- --------------------------------------------------------------------------------
1 Accounting policies
The financial statements have been prepared under the historical cost
convention and are in accordance with applicable accounting standards
which do not differ significantly from accounting principles used in the
United States of America. The following principal accounting policies have
been applied:
Basis of accounting - going concern
The group sustained a net loss for the year 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.
The financial statements have been prepared on the going concern
basis which assumes 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. Both
companies in turn have recorded losses for the year and their
ability to remain as a going concern is dependant upon their ability
to obtain additional external financing. The directors remain
confident, based upon the history of Transmedia Europe, Inc. and
Transmedia Asia Pacific, Inc. in obtaining additional finance either
by issue of shares or raising of external debt, that sufficient
funds will be made available to the company. However, inherently,
there can be no certainty in relation to the raising of future
finance.
On the basis of the cash flow information and the assurances
received from the directors of the company's parent company, the
directors consider that the company and group will be provided with
sufficient funds available to it to enable it to operate for the
foreseeable future.
The financial statements do not include any adjustments that would
result if the parent company is unable to raise additional funds.
Turnover
Turnover represents the invoiced value of goods and services
supplied, and membership fees.
Membership fees are recognised as revenue in equal monthly
instalments over the membership year.
Long-lived assets
Long-lived assets, such as property, plant and equipment and
intangibles, are evaluated for impairment when events or changes in
circumstances indicate that the carrying amount of the assets may
not be recoverable through the estimated undiscounted future cash
flows from the use of these assets. When any such impairment exists,
the related assets will be written down to fair value. No impairment
write-down was recorded for the year ended 30 September 1998 (year
ended 30 September 1997 - (pound)206,220).
5
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
1 Accounting policies (Continued)
Depreciation
Depreciation is provided to write off the cost, 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 equipment - 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.
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 year 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.
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.
6
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
1 Accounting policies (Continued)
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 subsidiaries made up to 30 September 1998
using the acquisition method of accounting.
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.
2 Loss before taxation
1998 1997
(pound) (pound)
The operating loss is stated after charging/(crediting):
Amortisation of goodwill 192,755 14,970
Depreciation of tangible assets: Owned 25,526 266,044
Leased 10,274 9,480
Auditors' remuneration: Audit fee 42,988 21,630
Non-audit fee 12,000 5,144
Loss/(profit) on disposal of fixed assets 21,020 (11,447)
======= ========
3 Taxation
The tax credit/(charge) on loss on ordinary
activities for the year was as follows:
Corporation tax at 31% (1997 - 33%) -- 2,087
Overseas taxation -- 6,321
------- --------
-- 8,408
======= ========
Tax losses carried forward at 30 September 1998 amounted to (pound)687,000
(1997 - (pound)477,658). A full valuation provision has been made against
these due to uncertainties.
7
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
4 Intangible fixed assets
Goodwill on
consolidation
(pound)
Group
Cost
At 1 September 1997
and at 30 September 1998 324,350
-------
Amortisation
At 1 September 1997 40,212
Charge for year 192,755
-------
At 30 September 1998 232,967
-------
Net book value
At 30 September 1998 91,383
=======
At 31 August 1997 284,138
=======
8
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
5 Tangible fixed assets
<TABLE>
<CAPTION>
Short
Freehold leasehold Plant and
buildings property equipment Total
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
Group
Cost
At 1 September 1997 257,612 46,406 987,421 1,291,439
Additions -- -- 24,849 24,849
Disposals (257,612) (46,406) (186,373) (490,391)
-------- -------- -------- ----------
At 30 September 1998 -- -- 825,897 825,897
-------- -------- -------- ----------
Depreciation
At 1 September 1997 107,612 46,406 826,043 980,061
On disposals -- -- 35,800 35,800
Charge for the year (107,612) (46,406) (135,842) (289,860)
-------- -------- -------- ----------
At 30 September 1998 -- -- -- 726,001
-------- -------- -------- ----------
Net book value
At 30 September 1998 - Owned -- -- 79,359 79,359
- Leased -- -- 20,537 20,537
-------- -------- -------- ----------
-- -- 99,896 99,896
======== ======== ======== ==========
At 30 September 1997 - Owned 150,000 -- 125,843 275,843
- Leased -- -- 35,535 35,535
-------- -------- -------- ----------
150,000 -- 161,378 311,378
======== ======== ======== ==========
</TABLE>
9
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
6 Stocks
1998 1997
(pound) (pound)
Group
Cards and books 76,342 77,563
Store discount vouchers 14,057 52,387
--------- ---------
90,399 129,950
========= =========
7 Debtors
Trade debtors 383,987 284,174
Other debtors 37,205 40,867
Prepayments and accrued income 20,033 78,477
--------- ---------
441,225 403,518
========= =========
The amounts above fall due for payment in less than one year.
8 Creditors: amounts falling due within one year
Bank loan and overdrafts (note 10) 277,597 439,583
Trade creditors 541,427 707,752
Amounts owed to associated companies -- 28,181
Obligations under finance leases and
hire purchase agreements (note 11) 16,552 22,761
Social security and PAYE 58,784 34,116
Other creditors and accruals 389,294 487,209
--------- ---------
1,283,654 1,719,602
========= =========
10
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
9 Creditors: amounts falling due after more than one year
1998 1997
(pound) (pound)
Obligations under finance leases
and hire purchase agreements (note 11) 1,447 26,691
Amounts owed to parent companies 486,209 --
Amount owed to associated company 364,691 --
--------- ---------
852,347 26,691
========= =========
10 Bank loans and overdrafts
The aggregate amount of bank loans and
overdrafts is as follows:
Falling due within one year:
Bank overdraft 277,597 340,265
Bank loan -- 99,318
--------- ---------
277,597 439,583
========= =========
The bank loan is secured by a fixed charge over the freehold property. The
bank overdraft is secured by a fixed charge over the book debts and a
floating charge on the other assets of the group.
11 Obligations under finance leases
1998 1997
(pound) (pound)
The finance lease payments are as follows:
Under one year 18,166 27,570
In the second to fifth year inclusive 1,447 28,982
--------- ---------
19,613 56,552
Less: Amount representing future
finance charges (1,614) (7,100)
--------- ---------
17,999 49,452
========= =========
11
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
12 Leases
The group leases contain office space under lease agreements.
Future minimum lease payments under non-cancellable operating leases as of
30 September 1998 were:
(pound)
Year ending 30 September 1999 100,000
2000 100,000
2001 100,000
2002 100,000
2003 100,000
Thereafter 100,000
=======
The amount charged in the profit and loss account for the year was (pound)
100,000.
13 Called up share capital
1998 1997
(pound) (pound)
Authorised, issued, called up and fully paid
500,000 Ordinary shares of(pound)1 each 500,000 500,000
======= =======
14 Reconciliation of shareholders' funds (pound)
Shareholders funds
At 1 October 1997 (590,646)
Loss for the year (787,958)
---------
At 30 September 1998 1,378,604
=========
15 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 (pound)100,000 per annum.
12
<PAGE>
COUNTDOWN HOLDINGS LIMITED
Notes forming part of the financial statements for the year ended 30 September
1998 (Continued)
- --------------------------------------------------------------------------------
16 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 (1997 - Nil).
17 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.
13
<PAGE>
Countdown Holdings Limited
Report and Financial Statements
Year ended
30 September 1998
ABC
BDO Stoy Hayward
<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: January 20, 1999 /s/ Edward J. Guinan III
--------------------------------------------
Edward J. Guinan III
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: January 20, 1999 /s/ Edward J. Guinan III
---------------------------------------------
Edward J. Guinan III
Chairman, Chief Executive Officer and Director
Principal Executive Officer
Date: January 20, 1999 /s/ Paul L. Harrison
---------------------------------------------
Paul L. Harrison
President, Secretary and Director
Principal Accounting Officer
Date: January 20, 1999 /s/ Carl Freyer
---------------------------------------------
Carl Freyer
Director
Date: January 20, 1999 /s/ Joseph Vittoria
---------------------------------------------
Joseph Vittoria
Director
Form 97-0L7 LEASE Land Titles Office Use Only
License 026CN/0537/96 New South Wales
Real Property Act 1900
Instructions for filling out this form are available from the Land Titles Office
--------------------------------------------------------
Office of State Revenue Use Only
--------------------------------------------------------
[A] PROPERTY LEASED (Show no more than 20 titles. If appropriate, specify the
part or premises
--------------------------------------------------------
Folio Identifier 1/537286
Part being Level 1 and Level 14 at 19-31 Pitt St, Sydney
--------------------------------------------------------
[B] LODGED BY
--------------------------------------------------------
LTO Box Name, Address or DX and Telephone
REFERENCE (15 character maximum)
--------------------------------------------------------
[C] LESSOR CAMBOOYA PROPERTIES PTY. LIMITED (CAN 003 566 158)
of level 11, 19-31 Pitt Street, Sydney
[D] The lessor leases to the lessee the property described above.
Encumbrances (if applicable) 1. 2. 3. 4.
[E] LESSEE
--------------------------------------------------------
L
TRANSMEDIA AUSTRALIA PTY. LTD (CAN 065 473 538) of
Level 14, 19-31 Pitt Street, Sydney
TENANCY:
--------------------------------------------------------
[F]
[G] 1. TERM: Six (6) years
2. COMMENCING DATE: 1 September 1998
3. TERMINATING DATE: 31 August 2004
4. Together with and reserving the RIGHTS set out in ANNEXURE A.
5. Incorporates the provisions set out in ANNEXURE A hereto.
[H] DATE...23 September 1998.... We certify this dealing correct for the
purposes of the Real Property Act 1900.
The Common Seal of CAMBOOYA PROPERTIES PTY LIMITED (can 003 566 158) was here
unto affixed .................................................
by authority of the Board of its Directors and in the
presence of: .................................................
<PAGE>
...................................... ........................................
Secretary Director
The Common Seal of TRANSMEDIA AUSTRALIA PTY LTD
(CAN 065 473 538) was hereunto affixed by authority of the
................................................................................
Board of its directors and in the presence of:
....................................................
............/S/ R. Wong.............. ........./S/ T. Sakrzewski.............
STATUTORY DECLARATION
I solemnly and sincerely declare that the time for the exercise of the Option to
//21a//Renew//21b//Purchase* in expired lease No.//22// has ended and the lessee
under that lease has not exercised the option.
I make this solemn declaration conscientiously believing the same to be true and
by virtue of the Oaths Act 1900.
Made and subscribed at............in the State of................... on
.....................19..... In the presence of
......................................
Signature of Witness
......................................
Name of Witness (BLOCK WITNESS)
...................................... ........................................
Address and Qualification of Witness Signature of Lessor
<PAGE>
ANNEXURE 'A'
PART 1
DEFINITIONS
1.1 (a) "Air conditioning Equipment" includes all compressors, condensers,
chiller sets, pumps, pipework switchboards, wiring, thermostats,
controls, cooling towers, air production and reticulation of chilled
water and conditioned air in the Building.
(b) "Appurtenances" includes all water closets, lavatories, grease
traps, water apparatus(7) wash basins, bathrooms, gas fittings,
electrical fittings and apparatus, and other services contained in
or about the Demised Premises or other parts of the Building as the
context requires.
(c) "The Building" means the building or buildings erected upon the
Land, of which the Demised Premises form part and substitutions
therefore, alterations or modifications thereto and includes the
Land upon which such Building is erected and all lands and buildings
adjacent to or in the vicinity of the Building to be used in
conjunction with the Building and where the context so admits any
part thereof.
(d) "Commencement Date" means the date described on the front page of
this Lease for the commencement of the Term.
(e) "Common Areas" means all those parts of the Building, if any, not
demised or let to any lessee or occupant and intended for use by the
lessees or occupants of the Building and each other and in
particular (but without limiting the generality of the foregoing)
includes the common parking areas from time to time provided by the
Lessor for the Building and the driveways and walkways giving access
thereto and therefrom and the malls, corridors, passageways,
vestibules, stairways, elevators, toilets and washrooms in the
Building.
(f) "Demised premises" means the premises described on the front page of
this Lease together with any modifications, extensions and
alterations thereto from time to time.
(g) "Fire Equipment" includes all stop cocks, hydrants, alarms, fire
sprinkler systems or other fire prevention equipment in the
Building.
(h) "Floor Area" means the aggregate area calculated to the nearest
square meter of all floors including mezzanine floors or other
structures measured in the case of external walls from their
exterior face, in the case of dividing walls from their center in
the Lessor's plans of the Building and in the case of other walls
from their interior face without allowance or deduction on account
of loading bays, showcases, liftwells, stairwells, escalators,
bridges, columns, pillars, pipes or other obstacles contained within
the boundaries (measured as aforesaid) of any premises The
certificate of the Lessor's architects or surveyor shall be
conclusive evidence of the Floor Area of the Demised Premises or any
other part of the Building to which such certificate shall relate.
<PAGE>
(i) "Land" means the land described in the Certificate of Title referred
to on the front page of this Lease.
(j) "Lessee" means and includes the Lessee, its successors and permitted
assigns or being a person, his executors, administrators and
permitted assigns and where not repugnant to the context the
sublessees, invitees, contractors, servants and agents of the
Lessee. Where the Lease to which this Memorandum applies is a
Sub-lease, then "Lessee" shall mean "Sublessee" in its full context
according to this Clause.
(k) "Lessor" means and includes the Lessor, its successors and assigns
or, being a person, his executors, administrators and assigns and
where not repugnant to the context the servants, agents and
contractors of the Lessor. Where the Lease to which this Memorandum
applies is a Sublease, then "Lessor" shall mean "Sublessor" in its
full context according to this Clause.
(l) "Outgoings" - Outgoings for any year during the Term means the total
aggregate amount of all costs, charges and expenses charged upon the
Land or paid or payable by the Lessor arising by direct assessment
or by virtue of any covenant in any head lease or for the payment of
which the Lessor or Lessee may be or become liable or which may be
paid by the Lessor during the Term by way of voluntary contribution
in lieu of any taxes, rates, assessments, rents or other imposts to
the extent to which an owner legally rateable or chargeable would
have been liable to pay the same in respect of the Building, Land or
the Demised Premises including but not limited to:
(i) all rates, taxes, charges and impositions payable to any
government, local or semi-government, or other authority (with the
exception of income tax) including New South Wales land tax and any
other tax assessed or charged against or to the Lessor by virtue of
its ownership of land or its right to occupy the same whether by
Parliament State or Federal or by any competent authority, Local
Government or otherwise upon the basis of the rate as assessed to
the Lessor with respect to the land upon which is situated the
Demised Premises;
(ii) all rates and charges payable to any government, local or
semi-government, or other authority in relation to any of the supply
of water, sewerage and the removal of waste and other garbage from
the Land, the Building or the Demised Premises,
(iii) all premiums for insurance against damage or destruction of
the Building and Appurtenances for their full re-instatement value
in relation to damage however occasioned and the cost of removal and
disposal of debris and fire extinguishment costs;
(iv) insurance premiums for public risk insurance for all Common
Areas in the Building;
(v) insurance premiums for worker's compensation insurance for all
employees engaged in the cleaning, maintaining, lighting and
repairing of the Common Areas of the Building;
<PAGE>
(vi) all charges for gas, electricity, telephone, water (including
for excess water) and public utilities servicing the Common Areas of
the Building;
(vii) all costs of repairs, maintenance and painting of and to the
Demised Premises and the Building (excluding any work which amounts
to a capital improvement) and the contributions to a sinking fund or
other fund, if any, established to meet the same;
(viii) all costs of the detection, prevention and eradication of
rodents, pests, insects and vermin for all Common Areas;
(ix) the cost of cleaning and servicing the car parks, Common Areas,
signs and the interior and exterior of the Building (excluding the
interior of the Demised Premises) including the cost of garbage
removal and/or compacting service which is charged on account of the
Building or the cost, interest charges and wages of operating any
garbage removal and/or compacting service for the building;
(x) all costs of management control and administration of the
Building whether such management control and administration is
performed at the Building or elsewhere and whether performed by the
Lessor or by others;
(xi) all costs and expenses of gardening, landscaping, and providing
and maintaining decorative features in Common Areas, the Land and
car parks;
(xii) all costs and expenses of caretaking and security;
(xiii) all costs and expenses associated with running, maintaining
and servicing lifts, escalators, fire detection and extinguishing
equipment, security equipment, toilets, water closets, washrooms and
other equipment and the supply of towels and other toilet requisites
within the Building including the cost of personnel to operate such
services;
(xiv) all repairs, maintenance and running costs in respect of the
provision of air conditioning or evaporative cooling in the
Building;
PROVIDED THAT payments to be made under this Clause shall be
adjusted for any assessment year or period which is broken by the
Commencement Date or Termination Date of this Lease or as held over
but shall be payable for the whole period of the assessment and the
Lessor shall refund to the Lessee the proper proportion of the said
payments should this Lease during the period of the assessment
expire or be determined not through the default or breach of the
Lessee
(m) "Term" means the term demised to the Lessee by this Lease.
(n) "Termination Date" means the date specified on the front page of
this Lease as the date upon which the Term of the Lease terminates.
<PAGE>
(o) "Review Dates" means the dates (if any) specified in Item 3 of the
Reference Schedule.
INTERPRETATION
1.2 (a) Severability
If any term, covenant or condition of the Lease or the application thereof
to any person or circumstance shall be or become invalid or unenforceable,
the remaining terms, covenants and conditions shall not be affected
thereby and each term, covenant and condition of the Lease shall be valid
and enforceable to the fullest extent permitted by law.
(b) Bodies and Associations
References to any authorities associations, societies, clubs or bodies
shall in the event of any such entities ceasing to exist or being
reconstituted, renamed or replaced or the powers or functions of any of
them being transferred to any other entity refer respectively to the
entity established or constituted in lieu thereof or succeeding to the
similar powers or functions.
(c) Implied Covenants
The covenants implied by law (statutory or otherwise) are not negative but
shall be deemed to have been modified (where so permitted) to the extent
of any inconsistency with the provisions of the Lease.
(d) Plurals and Genders
The singular shall include the plural and vice versa and words importing
one gender shall include every gender.
(e) Contra Proferentum
In the interpretation of this Lease, no rules of construction shall apply
to the disadvantage of one party on the basis that that party put forward
the Lease or any part thereof.
(f) Headings
Headings have been inserted for guidance only and do not form any part of
the context of this Lease.
(g) Statutes
Reference to a statute or ordinance includes all regulations under and
amendments to that statute or ordinance whether by subsequent statute or
<PAGE>
otherwise and a statute or ordinance passed in substitution for the
statute or ordinance referred to or incorporating any of its provisions.
(h) Joint and Several Covenants
Any covenant or agreement on the part of two or more persons shall bind
them jointly and severally
PART 2
RENT AND OUTGOINGS
2.1 The Lessee shall during the Term pay to the Lessor without demand from the
Lessor and without any deduction or set off whatsoever the annual rent set out
in Item 1 in the Reference Schedule PROVIDED THAT notwithstanding anything
herein contained the annual rent shall be reviewed in the manner set out herein
on the Review Dates. Such rent shall be paid in advance by regular and
consecutive monthly payments each equal 10 one-twelfth (1/12) of the annual rent
on the first day of each month in each year during the Term (except the first
and last payments which if necessary will be proportionate) the first payable on
the date specified in Item 1 of the Reference Schedule.
2.2 The Lessee shall pay during the Term the percentage specified in Item 2 of
the Reference Schedule of increases in annual Outgoings over the base year
stated therein.
2.3 As soon as practicable after 30th day of June in each year, the Lessor will
furnish the Lessee a Statement giving reasonable details of the Outgoings.
Except in the case of manifest error notified by either party to the other
within fourteen (14) days of the service of such Statement on the Lessee, such
Statement shall be conclusive evidence of the matters stated therein.
(b) Within twenty one (21) days of receipt by the Lessee from the Lessor
of the Statement in writing of the amount of the Lessee's proportion
of increases in Outgoings or of any particular part thereof, the
Lessee shall pay such amount to the Lessor and it is hereby agreed
and declared:
(i) that subject to paragraph (ii) of this Sub-clause the
liability of the Lessee to pay the Lessee's proportion of
increases in Outgoings shall not be determined or otherwise
prejudiced by the prior expiry of the Term of or other
determination of this Lease;
(ii) that if the Term of the Lease expires or if the Lease is
otherwise determined before the 30th day of June in any year
or if at such 30th day of June less than one (1) year of the
Term of the Lease has expired then the Outgoings all be deemed
to accrue from day to day and the Lessees proportion shall be
calculated accordingly.
(c) Notwithstanding the provisions of the foregoing, the Lessor may from
time to time notify the Lessee of the Lessor's reasonable estimate
of the Lessee's proportion
<PAGE>
of increases in Outgoings for any period not exceeding one (1) year
in advance of the estimate whereupon the Lessee will pay to the
Lessor during such period such estimated proportion by equal monthly
installments in advance on the days hereinbefore fixed for payment
of the rent PROVIDED ALWAYS that upon computation of the Outgoings
at the end of the then current year as aforesaid any necessary
adjustment between the estimated and actual Lessee's proportion of
increases in Outgoings shall be made and any refund to or for the
payment by the Lessee shall be all owed or made by or the Lessor
accordingly.
2.4 The rent hereby reserved may at the discretion of the Lessor he reviewed at
each Review Date specified in Item 3 of the Reference Schedule to an amount
calculated in accordance with Clause 2.5 following.
2.5.1 Market Rental Review
(a) The Lessor at any time within a period commencing sixty (60) days
prior to a Market Review Date as nominated in Item 3(a) of the
Reference Schedule and expiring not later than the Market Review
Date immediately following the relevant Market Review Date may
review and increase the annual rent to an amount which the Lessor
considers would at the time of such review be the current market
rent of the Demised Premises (or the relevant part thereof) as
between a willing lessor and a willing lessee having regard to the
Demised Premises (or the relevant part thereof) offered the
provision of parking facilities (if any), the terms other than
rental and all matters then relevant to the determination of such
rental including but without in any way limiting the generality of
the foregoing the Lessee's obligations (if any) to contribute to the
additional amounts referred to in Clause 2.2 and subject to the
following provisions of this Clause the amount so determined shall
be the annual rent payable by the Lessee from the relevant Market
Review Date PROVIDED THAT nothing in this Clause shall operate to
reduce the rent payable hereunder and PROVIDED FURTHER THAT in the
event that a Market Review Date is the same date as a C.P.I.
Increase or Percentage Increase Review Date then the rental payable
hereunder shall be the greater of the rentals calculated under
Clause 2.5.2, 2.5.3 and under this Clause 2.5.1.
(b) The Lessor shall notify the Lessee in writing of the annual rent
which the Lessor considers is the current market rent of the Demised
Premises (or the relevant part thereof) and the Lessee shall have
thirty (30) days from the date of receipt of such notice from the
Lessor within which the Lessee may notify the Lessor in writing as
to whether it disputes the current market rent determined by the
Lessor as aforesaid. Should the Lessee not so notify the Lessor that
it disputes the Lessor's assessment of the current market rent then
the Lessee will be deemed to have accepted the Lessor's assessment
of the current market rent as aforesaid and the Lessor's assessment
of the current market rent shall be the annual rent payable from the
relevant Market Review Date.
(c) In the event that the Lessee disputes the Lessor's assessment of the
current market rent as aforesaid, such current market rent shall be
determined by a valuer of the Australian Institute of Valuers & Land
Economists - New South Wales Division (or its successor) registered
so to act, agreed upon by the Lessor and by the Lessee
<PAGE>
and such appointment shall be made within twenty one (21) days of
receipt of the notice by the Lessor from the Lessee that the Lessee
disputes the Lessor's assessment of the current market rent.
(d) The Lessor and the Lessee shall each instruct a valuer appointed in
accordance with the provisions of this Clause to make a
determination as to rent (including a statement as to how the
determination was reached) within twenty one (21) days of
appointment of the valuer as hereunder provided
(e) If the Lessor and the Lessee cannot agree on the appointment of a
valuer in accordance with sub-clause (c) then a valuer appointed by
the President of the Australian Institute of Valuers and Land
Economists - New South Wales Division (or its successor) registered
so to act shall be appointed and shall be instructed to make a
determination as to rent (including a statement as to how the
determination was reached) within fourteen (14) days of his
appointment and his decision shall be final and binding on the
Lessor and Lessee.
(f) Any valuer appointed in accordance with the foregoing provisions of
this Clause 5.2.1 shall be deemed to be acting as an expert and not
as an arbitrator and accordingly the provisions of the Commercial
Arbitration Act, 1984 shall not apply
(g) All costs incurred in the determination of the annual rent pursuant
to this Clause shall be borne in equal shares by the Lessor and the
Lessee.
2.5.2 C.P.I. Increase Review
On each of the dates nominated in item 3(b) of the Reference Schedule as CPI
Review Dates the Annual Rental hereunder shall be increased to an amount per
annum equal to the amount represented by R in the formula:
R = A * (B/C)
where:
R means the annual rental payable for the period following the CPI
Review Date.
A means the annual rental payable for the period just ended at the
relevant CPI Review Date.
B means the Index Number last published before the relevant CPT Review
Date
C means the Index Number last published before the commencement of the
year immediately prior to the relevant CPI Review Date.
Index Number means:
a. The Consumer Price Index Sydney (All Groups) Number published from
time to time by the Australian Bureau of Statistics; or
<PAGE>
b. If the Consumer Price Index is suspended or discontinued then the
Index Number shall mean the New South Wales male basic wage
applicable in the City of Sydney;
c. If the system or the practice of the determination of the New South
Wales male basic wage ceases then Index Number shall mean such index
published at the date of this Lease and at the time of each
variation of the rental by the Australian Bureau of Statistics which
reflects fluctuations of the cost of living in Sydney and as may be
agreed upon by the parties hereto or if the parties are unable to
agree, as may be determined by the President of the Australian
Institute of Valuers and Land Economists (Inc), New South Wales
Division, or by some other person nominated by him, whose decision
shall be conclusive and binding.
PROVIDED THAT nothing in this clause shall operate to reduce the rent payable
hereunder.
2.5.3 Percentage Increase Rental Review
On each of the dates nominated in Item 3(c) of the Reference Schedule as
Percentage Increase Review Dates the Annual Rental hereunder shall be increased
to an amount per annum equal to the amount represented by R in the formula:
R = A * (105/100)
where;
R means the annual rental payable for the period following the
Percentage Increase Review Date.
A means the annual rental payable for the period just ended at the
relevant Percentage Increase Review Date.
PROVIDED FURTHER nothing in this clause shall operate to reduce the rent
payable hereunder.
PART 3
TERMINATION OR ABATEMENT ON DAMAGE
3.1 If the whole or any part of the Building shall be destroyed or damaged by
fire, flood, lightning, storm, tempest or other disabling cause without any
neglect or default on the part of the Lessee, its servants, agents or invitees
so as to render the Demised Premises during the Term substantially unfit for the
use and occupation of the Lessee or so as to deprive the Lessee of substantial
use of the same, then:-
(a) The Lessor shall have the option within ninety (90) days after such
destruction or damage by notice in writing to the Lessee either to
terminate the Lease if it is impracticable or undesirable to restore
or rebuild the Demised Premises or to restore or rebuild the
Building whether or not the Demised Premises are affected or not by
such disabling cause The Lessor shall not be obliged to restore or
rebuild the Demised Premises or the Building according to the former
specifications so long as
<PAGE>
the total Floor Area of the Demised Premises is not less than the
total Floor Area of the Demised Premises immediately prior to the
damage or destruction and subject to the requirements of Council or
other authority the location of the Demised Premises as altered is
in substantially the same position as that of the Demised Premises
immediately prior to the damage or destruction and with similar
exposure and accessibility and the materials employed are not of
inferior aesthetic appearance to the materials formerly used. In the
event that the Lessor does not exercise its option within the ninety
(90) day period, then the Lessee may by notice in writing to the
Lessor terminate the Lease No liability shall attach to the Lessor
or to the Lessee by reason of a termination pursuant to this
Sub-clause but such termination shall be without prejudice to the
rights of either party in respect of any antecedent breach or
non-observance of any covenant, condition or provision of this
Lease.
(b) In the event that the Lessor elects to restore and rebuild the
Demised Premises and has not commenced and continued the rebuilding
or restoration within nine (9) months of the event of damage or
destruction, then either the Lessor or the Lessee may by notice in
writing to the other terminate this Lease and on the giving of such
a Notice this Lease shall be at an end. No liability shall attach to
the Lessor or to the Lessee by reason of a termination pursuant to
this Sub-clause but such termination shall be without prejudice to
the rights of either party in respect of any antecedent breach or
non-observance of any covenant, condition or provision of this
Lease.
(c) The Lessee shall during any period of restoration or rebuilding of
the Demised Premises or of any part of the Building continue the
operation of its business in the Demised Premises so far as it may
be reasonably practicable for the Lessee to do so having regard to
the nature and extent of the Lessee's business and the nature and
extent of the damage sustained.
(d) Upon the happening of any such damage or destruction as aforesaid,
the rent (or a proportionate part according to the extent of damage
sustained) for the period of reconstruction shall abate until the
Demised Premises shall have been reinstated or made fit for use and
occupation provided that notwithstanding anything in this Clause
expressed or implied:-
(i) rent shall not abate if the destruction or damage was caused
or contributed to by the Lessee or any person claiming through
or under the Lessee and the damage is not covered by insurance
of the Building; and if the damage is covered by the insurance
of the Building, the Lessee shall be liable for the amount, if
any by which the rent is greater than the compensation
provided under the policies of insurance;
(ii) the aforesaid abatements shall only apply for so long as the
Lessor is receiving the benefit of the policy of insurance or
loss of rents required to be taken out by the Lessee pursuant
to Clause 11.1(c) of this Lease.
(e) In the event of any dispute arising out of this Clause, the same
shall be referred to arbitration under the provisions of the laws
for the time being in force in the State of New South Wales.
<PAGE>
PART 4
RESUMPTIONS
4.1 (a) In the event of the whole or any part of the Demised Premises being
resumed or otherwise being permanently taken for public purposes by
a competent authority with the effect that the Lessee's use of the
Demised Premises is thereby adversely affected in a material manner,
then the Lessee may by notice in writing to the Lessor terminate
this Lease and on the giving of such a notice this Lease shall be at
an end. No liability shall attach to the Lessor or to the Lessee by
reason of a termination pursuant to this Sub-clause but such
termination shall be without prejudice to the rights of either party
in respect of any antecedent breaching or non-observance of any
covenants, conditions or provision of this Lease and without
prejudice to the right of the Lessee to claim compensation from the
resuming authority for the injurious affection suffered by the
severance of the resumed part of the Demised Premises from the
remainder thereof.
(b) In the event of the whole or any part of the Demised Premises being
resumed or otherwise taken for public purposes by a competent
authority and the Lessee gains no right to terminate or refrains
from exercising the right to terminate in accordance with Sub-clause
(a), then as from and including the date of such resumption or other
taking and for so long as that resumption or other taking
detrimentally affects the Lessee's use of the Demised Premises, the
Lessee shall not be entitled to an abatement of rent unless the
Lessor otherwise agrees.
PART 5
USE OF PREMISES
5.1 Permitted Use
The Lessee shall not without the prior written consent of the Lessor, use or
permit to be used the Demised Premises for any purpose other than for the
purpose specified in Item 4 of the Reference Schedule nor trade under any
business name or names not previously approved by the Lessor and will not use or
permit to be used the Demised Premises for any purpose or purposes which are
prohibited by the zoning of the Land or which are not approved by the relevant
local government authority or is prohibited by any statute, ordinance,
proclamation, order or regulation, present or future.
5.2 No Noxious Use
The Lessee will not permit any noxious, immoral, noisome, offensive or illegal
art, trade, business, occupation or calling at any time during the Term to be
exercised, carried on, permitted or suffered in or upon the Demised Premises and
the Lessee will not permit any act, matter or thing whatsoever at any time
during the Term to be done in or upon the Demised Premises which shall or may
cause annoyance, nuisance, grievance, damage or disturbance to other persons and
without limiting the generality of the foregoing, will not permit or suffer the
escape of excessive pollution emissions of whatsoever nature in or from the
Demised
<PAGE>
Premises and will in this respect comply with all directions and requirements of
the Lessor, the State Pollution Control Commission, the Department of Industrial
Relations, the Department of Environment and Planning, the Water Board and any
other responsible authority.
5.3 Use of Appurtenances
The Lessee shall not use or permit to be used the Appurtenances for any purpose
other than those for which they were constructed and shall not place or permit
to be placed therein any sweepings, rubbish, rags or other deleterious
substances.
5.4 Drains and Wastes
The Lessee shall keep and maintain the waste pipes, drains and conduits
originating in or connected to the Demised Premises in a clean, clear and
freeflowing condition.
5.5 Interference with Services
The Lessee shall not interfere with any drains, water supply, gas, electrical,
plumbing or other services in the Building or in the Demised Premises.
5.6 Holing of Walls
The Lessee shall not cut, make holes in, mark, deface, drill or damage nor
suffer to be cut, holed, marked, defaced, drilled or damaged the Appurtenances,
walls, ceilings or floors of the Demised Premises or the Building without the
prior written consent of the Lessor, which consent shall not be unreasonably
withheld provided that the Lessee will reinstate any such Appurtenances, walls
ceilings or floors at the end of the term to their condition at the commencement
of this Lease.
5.7 Public Address System
The Lessee shall not erect, operate or place or permit to be erected, operated
or placed in the Demised Premises or the Building any radio or television
receiver, loud speaker, amplifier or other similar device, without the prior
consent in writing of the Lessor, which consent shall not be unreasonably
withheld provided that the premises are reinstated at the end of the term to
their condition at the commencement of this Lease and provided that no nuisance
resulting from any such device is caused to any other occupant of the building.
5.8 Cleaning
The Lessee will during the Term at its own cost cause the Demised Premises to be
cleaned by a contractor nominated by the Lessor in a proper and workmanlike
manner to the reasonable satisfaction of the Lessor and from time to time will
remove and take away or cause to be removed or taken away from the Demised
Premises all refuse in accordance with the requirements of the local council or
other responsible authority and of the Lessor.
<PAGE>
5.9 Location of Refuse
The Lessee shall not permit any garbage, refuse, rubbish containers or other
waste materials to be in any place where they may be visible from the Common
Areas.
5.10 Removal of Wet Refuse
The Lessee shall at its own cost cause any wet refuse to be removed daily from
the Demised Premises.
5.11 Removal of Other Refuse
The Lessee shall at its own cost cause to be removed from the Demised Premises
from time to time all packing materials, cartons, containers and other waste
materials of every description.
5.12 Overloading of Floors
The Lessee shall observe the maximum floor loading weights as determined by the
Lessor and shall not permit the floors of the Demised Premises to be broken,
strained or damaged by overloading the same in any manner howsoever.
5.13 Inflammable Substances
The Lessee shall not bring upon or store in the Demised Premises any explosive
or any inflammable or corrosive fluids or chemicals.
5.14 Installation of Machinery
The Lessee will not bring upon the Demised Premises any heavy, noisy or
vibrating machinery or other plant, fittings or equipment (including safes)
without the prior written consent of the Lessor and in no event shall any such
machinery, plant, fittings or equipment be of such nature or size as to cause
any structural or other damage to the floors or walls or any other parts of the
Demised Premises or the Common Areas and the Lessor may direct the routing,
installation and location of all such machinery, plant, fittings and equipment
and the Lessee shall observe and comply with all such directions.
5.15 Light and Air
The Lessee shall not at any time do or permit to be done anything whereby any of
the skylights, ventilators and windows reflecting or admitting light or air into
the Building or the Demised Premises are covered or obstructed.
5.16 Animals
The Lessee shall not keep nor permit to be kept any animals or birds in the
Demised Premises or the Building.
<PAGE>
5.17 Disposal of Rubbish
The Lessee shall not throw nor permit any person to throw any matter or thing
out of the windows or doors or down any shafts, passages or skylights of the
Building or anywhere into the Common Areas.
5.18 Notice of Damage
The Lessee shall advise the Lessor promptly in writing of any damage sustained
to or defect of the Demised Premises or of the defective operation of any of the
Fire Equipment, Air Conditioning Equipment, lifts, escalators or Appurtenances
(if any).
5.19 Fittings and Fixtures
The Lessee shall at its own expense fit out the Demised Premises with the
machinery, fittings and fixtures necessary for the business of the Lessee in a
safe manner and will keep such machinery, fittings and fixtures in good repair
and condition and properly stocked and attended to. The Lessee shall at its own
cost keep and maintain its machinery, fittings and fixtures in and about the
Demised Premises in good and efficient working order and condition.
5.20 Display Windows
The Lessee shall keep the display windows (if any) in the Demised Premises in a
thorough state of cleanliness and dressed at all times and shall keep the same
electrically lighted at all times when the Building is open. "Display windows"
include those parts of the interior of the Demised Premises used for the display
of merchandise and visible from the Common Areas.
5.21 Glass and Signs
The Lessee shall promptly and at its own cost repair or replace all broken
cracked or damaged glass and signs in or about the Demised Premises.
5.22 Doors, Locks and Windows
The Lessee shall at its own cost keep and maintain the gates, shutters, doors
locks, windows and window fittings of the Demised Premises in good and efficient
working order and condition and at the termination of the Lease shall deliver to
the Lessor all keys to the Demised Premises.
5.23 Bulbs, Tubes and Illuminated Signs
The Lessee shall at its own cost promptly replace all broken or faulty light
bulbs, tubes and all associated fittings in or about the Demised Premises.
5.24 Roof and External Walls
The Lessor shall at its own expense keep and maintain the roof and external
walls of the Building containing the Demised Premises in a good state of repair.
<PAGE>
5.25 Painting of Interior
The Lessee shall at its own cost paint in a proper and workmanlike manner those
parts of the Demised Premises which have at any time previously been painted at
least once in every period of six (6) years and in any event during the last
year of the Term of the Lease with not less than two (2) coats of first quality
paint in the original colours thereof or in such other colours as may be
approved of in writing by the Lessor and the Lessee shall produce receipts or
such other evidence of painting in accordance with this covenant as the Lessor
may reasonably require upon demand.
5.26 Inspection by Lessor
The Lessor may by itself or its agents and with or without workmen and others at
all reasonable times upon reasonable notice except in case of emergency enter
upon and view the state of repair of the Demised Premises and leave upon the
Demised Premises a notice in writing requiring the Lessee to carry out any
repairs or maintenance which are the responsibility of the Lessee under the
Lease and the Lessee shall forthwith repair any defects in accordance with the
terms of the Lease.
5.27 Requirements of Public Authorities
The Lessee will insofar as it is possible for the Lessee forthwith comply with
all statutes, ordinances, proclamations, orders and regulations present or
future affecting or relating to the Demised Premises or the use thereof and with
all requirements which may be made or notices or orders which may be given by
any governmental, semi-governmental, city, municipal, health, licensing or any
other authority having jurisdiction or authority in respect of the Demised
Premises or the use thereof, PROVIDED THAT this covenant shall not impose on the
Lessee any obligation in respect of any structural maintenance replacement or
repair except where same is rendered necessary by any act, neglect, default or
omission on the part of the Lessee or by the Lessee's use or occupancy of the
Demised Premises.
5.28 Pest Control
The Lessee will take all reasonable precautions to keep the Demised Premises
free of rodents, vermin, insects, pests, birds and animals and in the event of
failing so to do will if so required by the Lessor but at the cost of the Lessee
employ from time to time or periodically pest exterminators approved of by the
Lessor (such approval not to be unreasonably withheld).
5.29 Infectious Illness
The Lessee will in the event of it becoming aware of any infectious illness
occurring in the Demised Premises forthwith give notice of that illness to the
Lessor and to the proper public authorities and at the expense of the Lessee
will thoroughly fumigate and disinfect the Demised Premises to the satisfaction
of the Lessor and relevant public authorities and otherwise comply with their
lawful requirements in regard to the same.
<PAGE>
5.30 Notice of Defects
Upon it becoming aware of the same, the Lessee will give to the Lessor prompt
notice in writing of any accident to or defect or want of repair in any services
to the Demised Premises and of any circumstances relative to the Demised
Premises likely to be or to cause any danger, risk or hazard to the same or to
any person.
5.31 Exterior Signs
The Lessee will not without the prior approval in writing of the Lessor (such
approval to be in the Lessor's absolute discretion) erect, display, affix or
exhibit on to the exterior of the Building or any part of the interior thereof
or any part of the Demised Premises any signs, lights, embellishments,
advertisements, television or wireless antenna or mast, awning or canopy, names,
notices, partitions, furniture, fixtures, fittings or other items visible from
outside the Demised Premises and shall make good all damage so caused and upon
the termination of the Term shall remove all such signs, advertisements,
embellishments, any partitions, furniture, fixtures, fittings or other items and
make good any damage caused to the Demised Premises or the Building.
For avoidance of doubt and without limiting the foregoing, the Lessee shall not
without the prior written approval of the Lessor (such approval to be in the
Lessor's absolute discretion) erect, display or fix to the facade of the
Building or in the immediate vicinity thereof, any blinds, curtains, screens or
any other item which may obscure the facade of the Building or in any manner is
visible from the exterior of the Building.
5.32 Auctions
The Lessee shall not without the prior written consent of the Lessor which
consent may be withheld at the absolute discretion of the Lessor use or permit
or suffer any other person to use the Demised Premises for any auction bankrupt
or fire sale.
5.33 Pick Up and Delivery
The Lessee shall not permit trade vehicles while being used for delivery and
pick up of merchandise to be driven parked or stopped at any place or time
within the Building except such place or places and at such time or times as the
Lessor may specifically allow.
5.34 Easements etc.
The Lessor shall be entitled for the purpose of the provision of support of
structures hereafter erected on or from adjoining lands or of services
(including water, drainage, gas and electricity supply and telephonic and
electronic communication services) to grant easements or enter into any
arrangement or agreement with any of the owners, lessees, tenants or occupiers
or others interested in any land adjacent or near to the Demised Premises or
with any public authority as the Lessor thinks fit and it may likewise for such
aforesaid purpose dedicate land or transfer grant or create any easement
privilege or other right in favour of such parties or in favour of any such
adjoining or neighbouring land or any public authority over or affecting the
Demised Premises and this Lease shall be deemed to be subject to any such
agreement, arrangement, right, easement or privilege. Notwithstanding the
reservation
<PAGE>
contained in this Clause, the Lessor in the exercise of the rights herein
conferred shall not dedicate land or transfer, grant or create any easement
privilege or other right to any other person which shall substantially and
permanently derogate from the enjoyment of rights conferred on the Lessee by
this Lease.
PART 6
ASSIGNMENT
6.1 Restrictions on Assignments, Etc.
The Lessee will not during the continuance of this Lease assign, transfer,
demise, sublet, part with or share the possession of, or grant any license
affecting or mortgage, charge or otherwise encumber or deal with the Lessee's
interest in the Demised Premises or by any act or deed procure any of the
foregoing other than as hereinafter set out:-
(a) Any assignment or transfer shall be deemed not to be a breach of the
foregoing provisions of this Clause if prior thereto the Lessee
either has not committed any default under this Lease or has
committed a default under this Lease which has been waived or
excused or remedied and if prior thereto:-
(i) the Lessee has proved to the reasonable satisfaction of the
Lessor that the proposed assignee or transferee (hereinafter
called the "Ingoing Lessee") is a respectable responsible and
solvent person of sound financial standing capable of carrying
on the business carried on by the Lessee on the Demised
Premises and, if required by law, has obtained the prior
written approval of the relevant local authority to its
proposed use of the Demised Premises;
(ii) the Ingoing Lessee has entered into a covenant with the Lessor
in the form required by the Lessor that he will duly perform
and observe the covenants and agreements on the Lessee's part
contained in this Lease;
(iii) the Ingoing Lessee has furnished the Lessor with such
guarantee or guarantees of the performance of his obligations
under this Lease as the Lessor reasonably requires;
(iv) the Lessee has entered into a deed in the form required by the
Lessor under which the Lessee releases the Lessor from all
claims against the Lessor in respect of, or in any way arising
from, this Lease; and
(v) the Lessee has paid all reasonable fees and expenses incurred
by the Lessor in connection with the investigation of the
proposed Ingoing Lessee and otherwise relating to the proposed
assignment. * Following such assignment or transfer, the
Lessor shall enter into a deed in the form reasonably required
by the Lessee under which the lessor releases the Lessee who
has assigned or transferred as aforesaid (but not the in-going
lessee) from all claims against the Lessee in respect of or in
any way arising from this lease by reason of any act or
omission occurring after the date of the assignment or
transfer.
<PAGE>
(b) For the purpose of this Clause any change in the shareholding of the
Lessee (if a company) altering the effective control of the Lessee
from that existing at the date of commencement of this Lease or (in
the case of an assignee) from that existing at the date of the
assignment of this Lease to that Lessee shall be deemed an
assignment of this Lease.
(c) For the purposes of this Clause any change in the ownership of a
majority of the units in a trust (if any) of which the Lessee is the
trustee from that existing at the date of commencement of this Lease
(or, in the case of an assignee from that existing at the date of
the assignment of this Lease to that Lessee) shall be deemed an
assignment of this Lease. PROVIDED THAT this provision will not
apply to any license or sublease to Transmedia Europe Inc
("Transmedia Europe") or Transmedia Asia Pacific Inc ("Transmedia
Asia") or any corporation in which Transmedia Europe or Transmedia
Asia directly or indirectly hold a shareholding of more than 40%
(and including any corporation which results from a merger of
Transmedia Europe and Transmedia Asia).
PART 7
MAINTENANCE, REPAIR, ALTERATIONS, ETC.
7.1 Repair of Demised Premises
The Lessee shall at its own cost during the whole of the Term and for so long as
the Lessee may remain in possession or occupation of the Demised Premises when,
where and so often as need be maintain, replace, repair and keep the whole of
the Demised Premises and Appurtenances in good and substantial repair, working
order and condition (having regard to their condition at the commencement of the
Lease), damage by explosion, earthquake, aircraft, riot, civil commotion, fire,
flood, lightning, storm, tempest and reasonable wear and tear, Act of God and
war damage only excepted unless any insurance moneys are irrecoverable by the
Lessor through the neglect, default or misconduct of the Lessee, its servants,
agents, contractors, other invitees and persons claiming through the Lessee and
in such repair, order and condition (except as aforesaid) the Lessee shall
peaceably surrender and yield up to the Lessor the whole of the Demised Premises
at the expiration or sooner determination of the Lease.
7.2 The Lessee shall, without affecting the generality of Clause 7.l, at the
Lessees expense:-
(a) paint the Demised Premises as required by Clause 5.25 herein and in
addition, at the expiration of the Term, paper or otherwise
appropriately treat with materials and to standards reasonably
determined by the Lessor such parts of the Demised Premises which
have or ought to have been so papered or treated;
(b) keep the equipment of the Lessee maintained, clean and in good order
and repair and keep in good condition all fittings, plant,
furnishings and equipment of the Lessee;
(c) make good any breakage, defect or damage to the Demised Premises or
its Appurtenances, the Building or to any adjoining premises or any
facility or appurtenance thereof occasioned by want of care, misuse
or abuse on the part of the
<PAGE>
Lessee, its servants, agents, contractors, other invitees and
persons claiming through the Lessee or otherwise occasioned by any
breach or default by the Lessee hereunder or under any rules or
regulations hereto;
(d) keep such of the standard carpets and floor coverings in the Demised
Premises and such of the blinds and curtains therein (if any) as are
supplied by the Lessor in good and tenantable repair and condition,
reasonable wear and tear excepted, and the Lessor shall not be
liable for any damage done thereto arising from use in any way
inconsistent with the occupation of the Demised Premises for the use
hereinbefore permitted and/or the neglect, default or misconduct of
the Lessee or of any servant, agent, contractor or other invitee of
the Lessee or any person claiming through the Lessee;
(e) where the Demised Premises are used for retail purposes, when and so
often as need shall be maintain, repair and keep the shop front,
doors and windows in good and substantial repair, working order and
condition.
7.3 Alterations
The Lessee shall not without the previous consent in writing of the Lessor make
or suffer or permit to be made any alterations or additions to or redecorate or
paint the Demised Premises or its Appurtenances (including but without limiting
the generality hereof the partitions and floor coverings), such consent not to
be unreasonably with-held.
7.4 Partitioning
(a) The Lessee shall use internal partitions within the Demised Premises
only of such standard as to type, quality, colour and size as the
Lessor shall decide and which shall be installed in the Demised
Premises by a builder approved of by the Lessor under the
supervision of an architect approved by the Lessor and the Lessee
covenants not to make any additions or alterations to the partitions
except according to the said standards and supervision and with the
prior approval in writing of the Lessor all such approvals not to be
unreasonably withheld.
(b) The cost of internal partitions within the Demised Premises and the
cost of installation thereof including all doors, vents, glass and
other items included in or incidental to the same and the cost of
all additional lights and power outlets and switches and telephone
outlets and alterations and/or additions to the air conditioning
and/or sprinkler installations or fire alarm systems which may be
required by law and/or by reason of the position of any such
partitions or the particular requirements of the Lessee together
with all architect's and other consultant's fees incurred in
connection with the same shall be borne by the Lessee.
(c) Such partitions shall be and remain the property of the Lessee who
shall be responsible for all maintenance and insurance thereof and
if so required by the Lessor such partitions shall be removed by the
Lessee from all parts of the Demised Premises vacated by the Lessee
at or prior to the expiration of the Lease and in default thereof
the Lessor may at the expense of the Lessee remove and dispose of
the same provided that any such partitions not so removed by the
Lessee by that date shall become the
<PAGE>
property of the Lessor and all damage done to the Demised Premises
by reason of such removal aforesaid shall be made good by the Lessee
and if the Lessee fails so to do the Lessor may make good all such
damage at the expense of the Lessee.
7.5 Lessor May Enter to Repair
The Lessor shall have the right for itself and all those authorized by it upon
reasonable notice (except in case of emergency when no notice shall be required)
and at all reasonable times to carry out any works or make any repairs,
alterations or additions to, and to enter upon all or any part of the Demised
premises, and to use the same for the purpose of effecting or carrying out any
repairs, alterations or additions or other work which the Lessor may consider
necessary or desirable to any part of the Building or any buildings adjacent
thereto from time to time.
7.6 Default in Repairing
In default of the Lessee repairing any defect according to reasonable notice
including such notice under Part 5.26 herein the Lessor by itself and/or those
authorized by it may enter the Demised Premises and execute at all reasonable
times all or any of the required repairs as the Lessor may think fit, and in
addition to the Lessor's other remedies, recover from the Lessee the cost of
such repairs as the Lessee ought to have effected, including all sums paid on
account of any insurance; indemnities or compensation under the Worker's
Compensation Act or otherwise with respect thereto.
7.7 Requirements of Public Authorities
Without prejudice to the obligations of the Lessee under this Lease, the Lessor
by itself and all those authorized by it may enter the Demised Premises at all
reasonable times upon reasonable notice except in case of emergency with workmen
and others and all necessary materials and appliances for the purpose of
complying with the terms of any present or future legislation affecting the
Demised Premises or the Building or of any notice by any authority having
jurisdiction or authority over or in respect of the Demised Premises or the
Building in respect of the destruction of insects, rodents or other pests or for
the carrying out of any repairs, alterations or works (including the provision
of air conditioning, sprinklers, lighting, power, telephone and other services
to the Lessee and other lessees of the Building for which purpose the Lessor may
from time to time require access to the service ducts, walls, floors and
ceilings and the Demised Premises) and also for the purpose of exercising the
powers and authorities of the Lessor hereunder. In exercising its rights under
this Clause, the Lessor shall ensure that as little disturbance as possible is
caused to the Lessee in its use of the Demised Premises.
PART 8
AIR CONDITIONING, LIFTS, ETC.
8.1 Where any Air Conditioning Equipment is provided or installed in the
Building or the Demised Premises by the Lessor:-
(a) the Lessor shall use reasonable endeavors to keep the Air
Conditioning Equipment
<PAGE>
working and reasonably available for the use of the Lessee (delays
or stoppages due to repairs, maintenance, accidents, strikes or
other unavoidable causes beyond the Lessor's control excepted);
(b) the Lessee will at all times comply with and observe the reasonable
requirements of the Lessor in relation to the Air Conditioning
Equipment and will not do or permit or suffer to be done anything in
relation to the same or otherwise in relation to the use or
ventilation of the Demised Premises which might interfere with or
impair the efficient operation of such Air Conditioning Equipment in
the Demised Premises or the Building; and
(c) subject to the Lessor providing quiet enjoyment to the Lessee should
the Air Conditioning Equipment for the time being installed in the
building or the Demised Premises fail to function for any reason the
Lessee shall not by reason of any such failure be entitled to
terminate this Lease nor shall the Lessee have any right of action
or claim for compensation or damages against the Lessor in respect
thereof.
8.2 The Lessor shall endeavor to keep the lift(s) and/or escalators (if any) in
the Building operable at all times and shall otherwise endeavor to keep the
lift(s) and/or escalators working and in good order and repair and reasonably
available for the use of the Lessee (always excepting delay and stoppage due to
repairs, maintenance, accident, strikes or other unavoidable causes beyond the
Lessor's control).
8.3 Subject to the Lessor providing quiet enjoyment to the Lessee, should the
lift(s) and/or escalators fail to operate for any reason, the Lessee shall not
by reason of any such failure be entitled to terminate the Lease nor shall the
Lessee have any right of action or claim for compensation or damages against the
Lessor in respect thereof.
PART 9
ELECTRICITY AND OTHER SERVICES
9.1 The Lessee will make its own arrangements for the supply of electricity to
and the installation of telephone and like services in the Demised Premises.
9.2 The Lessee will duly and punctually pay all charges for electricity,
telephone, excess water or water separately metered and supplied to the Demised
Premises.
9.3 The Lessee will duly and punctually pay all its trade creditors and others
supplying it with goods or services during the Term.
9.4 Should the Lessee make default in the payment of any of the charges or
accounts herein before referred to, then the Lessor may at its option pay the
same and recover any amounts so paid as if the same were overdue rent.
PART 10
<PAGE>
OPTION FOR RENEWAL
10.1 If the Lessee shall desire to take a new lease of the Demised Premises for
a further term or terms as specified in Item 5 of the Reference Schedule from
the expiration hereof and prior to such expiration gives to the Lessor not less
than three (3) months notice in writing thereof and shall during the Term have
duly and punctually paid the rent reserved by this Lease at the proper times
thereof and shall during such Term have strictly observed and performed the
covenants and conditions and agreements on the part of the Lessee contained in
this Lease, then the Lessor will at the cost of the Lessee grant to the Lessee a
renewed lease of the Demised Premises for a further term as specified in Item 5
of the Reference Schedule from the expiration hereof at the rent stated in a
revised Reference Schedule. The Lease for the further term shall otherwise
contain the same terms and conditions mutatis mutandis as are herein stated
except that:-
(a) this present covenant for renewal shall be omitted;
(b) the Reference Schedule shall be duly amended to incorporate the new
rent, rent review dates and amount of bank guarantee, etc. The rent
payable during the first year of the renewed term shall be the then
current market rental of comparable premises demised irrespective of
the use thereof according to the terms of this Lease (except
excluding Clause 5.1 hereof relating to the use of the Demised
Premises) as between a willing lessor and a willing lessee having
regard to the Demised Premises offered, the provision of parking
facilities (if any), the terms other than rental and all matters
then relevant to the determination of such rental including but
without in any way limiting the generality of the foregoing the
Lessee's obligations (if any) to contribute to the additional
amounts referred to in Clause 2.2 and subject to the following
provisions of this Part the amount so determined shall be the annual
rent payable by the Lessee from the commencement of the renewed term
PROVIDED THAT nothing in this clause shall operate so as to reduce
the rent payable hereunder.
(i) The Lessor shall notify the Lessee in writing of the annual
rent which the Lessor considers is the current market rent of
the Demised Premises and the Lessee shall have thirty (30)
days from the date of receipt of such notice from the Lessor
within which the Lessee may notify the Lessor in writing as to
whether it disputes the current market rent determined by the
Lessor as aforesaid. Should the Lessee not so notify the
Lessor that it disputes the Lessor's assessment of the current
market rent then the Lessee will be deemed to have accepted
the Lessor's assessment of the current market rent as
aforesaid and the Lessors assessment of the current market
rent shall be the annual rent payable from the commencement of
the renewed term.
(ii) In the event that the Lessee disputes the Lessor's assessment
of the current market rent as aforesaid, such current market
rent shall be determined by a valuer of the Australian
Institute of Valuers & Land Economists - New South Wales
Division (or its successor) registered so to act, agreed upon
by the Lessor and the Lessee and such appointment shall be
made within twenty-one (21) days of receipt of the notice by
the Lessor from the Lessee that the Lessee disputes the
Lessor's assessment of the current market rent.
<PAGE>
(iii) The Lessor and the Lessee instruct any valuer appointed in
accordance with the provisions of this Clause to make a
determination as to rent (including a statement as to how the
determination was reached) within twenty-one (21) days of
appointment of the valuer as hereunder provided.
(iv) If the Lessor and the Lessee cannot agree on the appointment
of a valuer in accordance with sub-clause (ii) hereof then a
valuer appointed by the President of the Australian Institute
of Valuers and Land Economists -New South Wales Division (or
its Successor) registered so to act shall be appointed to
determine the rent and shall be instructed to make any such
determination (including a statement as to how the
determination was reached) within fourteen (14) days of his
appointment and his decision shall be final and binding on the
Lessor and Lessee.
(v) Any valuer appointed in accordance with the foregoing
provisions of this Clause 10.1 shall be deemed to be acting as
an expert and not as an arbitrator and accordingly the
provisions of the Commercial Arbitration Act, I984 shall not
apply.
(vi) All costs incurred in the determination of the annual rent
pursuant to this Clause shall be borne in equal shares by the
Lessor and the Lessee.
(vii) The Lease for such extended term shall be prepared by the
Lessor's solicitors and the costs thereof and of obtaining any
relevant consent thereto shall be borne by the Lessee.
10.2 If the Lessor shall sell the Land or the Building or otherwise dispose of
the reversion of this Lease prior to the exercise of any option herein contained
the Lessor may at its own expense procure from such purchaser or disponee a
covenant in favour of the Lessee that such purchaser or disponee shall observe
and be bound by the provisions of this part of the Lease and the execution and
the delivery to the Lessee of any such covenants shall be accepted by the Lessee
in full satisfaction and in discharge of the Lessor's personal obligation to the
Lessee to grant any option.
PART 11
INSURANCE
11.1 The Lessee will:-
(a) at its own expense insure and keep insured its plant, fittings
fixtures and stock-in-trade contained in or about the Demised
Premises to the full insurable value against loss or damage
occasioned by fire, fire fighting activities, fusion, explosion,
lightning, civil commotion, storm, tempest, earthquake, burglary and
malicious damage and shall produce such insurance policy and the
receipted premium notices to the Lessor upon demand;
<PAGE>
(b) at its own expense, effect and keep current at all times during the
Term public risk insurance relating to the Demised Premises in the
amount of fifteen million dollars ($15,000,000.00) or for such
greater amount from time to time as the Lessor and Lessee may
reasonably agree and failing agreement as the Lessor may reasonably
require;
(c) at its own expense effect and keep current during the Term, loss of
rents insurance for a minimum of twelve (12) months for an amount of
not less than the rent, rates, taxes and other amounts (including
but not limited to any amounts payable under Clause 11.1 hereof), if
any, payable under this Lease;
(d) effect and keep current during the Term, an unlimited worker's
compensation policy covering all persons employed by the Lessee
including its servants, agents and invitees;
(e) at its own expense, insure and keep insured for its full insurable
value all glass in or about the Demised Premises against breakage.
11.2 The Lessee shall be deemed to have complied with its obligations in Clause
11 - 1 (a) if it procures a sub-lessee to effect such insurance on its behalf.
11.3 General Insurance Provisions, Damage to Demised Premises and Termination of
Lease
All insurances referred to in Clause 11.1 above are to be effected in the joint
names of the Lessor and Lessee with an insurer approved by the Lessor in writing
(such approval not to be unreasonably withheld) and the Lessee shall punctually
pay all premiums necessary for the purpose and whenever required will produce to
the Lessor the policies of insurance and the receipt for the last premium.
11.4 Heating and Energy
The Lessee will not use or permit or suffer to be used any method of heating or
lighting or supply of any other form of energy in or about the Demised Premises
in contravention of any policy of insurance in respect of the Demised Premises.
11.5 Insurance Not to be Avoided
The Lessee will not at any time during the Term do, permit or omit or suffer to
be done, permitted or omitted any act, matter or thing upon the Demised Premises
or the bringing or keeping of anything therein whereby any insurance relating to
the Demised Premises against damage by fire and other risks as aforesaid may be
rendered void or voidable or whereby the rate of premium on any such insurance
premiums shall be liable to be increased.
11.6 Fire Regulations
The Lessee will at all times and at its own cost comply with all regulations or
requirements of any statutory authority and the proper requirements of any
interested insurer in respect of sprinklers and other fire prevention equipment
and installations (including alarms) in the Demised Premises.
11.7 Payment of Additional Premiums
<PAGE>
The Lessee will from time to time as and when required by notice in writing from
the Lessor forthwith pay all extra excess premiums of insurance on the
improvements erected on the same and/or the contents of such improvements if any
such extra excess premiums be required on account of extra risk caused by the
use to which the Demised Premises are put by the Lessee.
11.8 Lessor as Attorney
The Lessor in its own name and as the Attorney for the Lessee in the name of the
Lessee or otherwise shall be entitled to institute all or any proceedings
against any insurer insuring the risks referred to in this Lease to recover from
such insurer any amount for loss, damage or injury or other money payable under
any indemnity in favour of the Lessor.
PART 12
INDEMNITIES
12.1 (a) The Lessee agrees to occupy and use the Demised Premises at the risk
of the Lessee and hereby releases to the full extent permitted by
law the Lessor from all claims and demands of every kind resulting
from any accident, damage, death or injury occurring therein except
where caused by the negligence of the Lessor, its servants and
agents.
(b) Without prejudice to the generality of the foregoing provisions, to
the extent that any moneys paid to the Lessor out of insurances
effected by the Lessor and/or Lessee do not fully indemnify the
Lessor from and against all actions, claims, demands, notices,
losses, damages, costs and expenses to which the Lessor shall or may
be or become liable in respect of all or any of the matters referred
to in paragraphs (i), (ii) and (iii) of this Sub-clause, the Lessee
will indemnify and keep indemnified the Lessor from and against all
actions, claims, demands, notices, losses, damages, costs and
expenses to which the Lessor shall or may be or become liable in
respect of all or any of the following;-
(i) any loss or damage to property, or death or injury sustained,
caused or contributed to by the use or occupation of the
Demised Premises, not being caused by the negligence of the
Lessor, its servants and agents;
(ii) resulting from any act, neglect, default or omission by the
Lessee hereunder and whether the same arises through any act,
neglect, default or omission of the Lessee or any of its
agents, contractors, servants, licensees, sub-lessees,
invitees or any trespassers;
(iii) resulting from any notice, claim or demand to pay, do or
perform any act matter or thing to be paid, done or performed
by the Lessee under this Lease except however to the extent
that the Lessor shall be obliged under the provisions of this
Lease to pay for or contribute to the cost of the same.
(c) Without limiting the generality of Sub-clauses (a) and (b) (and
notwithstanding that any such
<PAGE>
actions, claims, demands, losses, damages, compensation, costs,
charges and expenses shall have resulted from any act or thing which
the Lessee may be authorized or obliged to do under the Lease and
notwithstanding that any time waiver or other indulgence has been
given to the Lessee in respect of any obligation of the Lessee under
the Lease) the Lessee will and does hereby indemnify the Lessor from
and against all actions, claims, demands, compensation, losses,
damages, costs (including solicitor and client costs and costs as
between party and patty), charges and expenses for which the Lessor
shall or may be or become liable in respect of or arising from any
of the following:-
(i) the negligent use, misuse, waste or abuse by the Lessee of the
electricity, water and other services and facilities of the
Demised Premises and the Building;
(ii) overflow or leakage of water (including rain water) and other
fluids in, into or from the Demised Premises having origin on
or within the Demised Premises or caused or contributed to by
any act or omission on the part of the Lessee,
(iii) any damage to property, loss of life or injury to persons
which may be suffered or sustained by the Lessee or any
trespasser in or upon any portion of the Demised Premises (or
in the case of the Lessee, the Building) whether in the
occupation or control of the Lessor or of the Lessee or of any
other person, except to the extent that the same is caused by
negligence on the part of the Lessor, its contractors or
employees;
(iv) loss, damage or injury from any cause whatsoever to property
or persons caused or contributed to by the use of the Demised
Premises by the Lessee;
(v) loss, damage or injury from any cause whatsoever to property
or persons on or within or without the Demised Premises or the
Building occasioned or contributed to by any act, omission,
neglect, breach or default of the Lessee;
PROVIDED ALWAYS that the obligations of the Lessee under this
Clause shall continue after the expiration or other
determination of the Lease in respect of any act, deed, matter
or thing happening before such expiration or determination.
PART 13
APPOINTMENT OF ATTORNEY
13.1 Attorney
The Lessee hereby irrevocably nominates, constitutes and appoints the Lessor
and, if a company, each of the directors of the Lessor from time to time,
jointly and each of them severally, to be the true and lawful attorneys and
attorney of the Lessee on its behalf, and in its name as its act and deed from
time to time if and when the Lessor shall think fit, for the purpose of giving
full effect to any power of re-entry, to execute as the act and deed of the
Lessee a surrender of the Lease in favour of the Lessor and to procure the
registration of such surrender under the provisions of "The Real Property Acts"
or any amendment thereof or substitution therefore provided always that the
provisions of this Clause shall be deemed to come into force and the powers
hereby conferred on the Lessor shall be exercised only
<PAGE>
if and when the power of re-entry or of determination of the Lease by the Lessor
shall have become exercisable by reason of default on the part of the Lessee in
the observance or performance of any of the covenants and conditions on its part
herein contained or implied, conclusive evidence of which for the purpose of
this Clause shall be a statutory declaration signed by the Lessor or, if a
company, then by a secretary or manager or director thereof. The Lessee doth
hereby covenant with the Lessor that on every transfer or sub-letting under or
by virtue of the Lease the Lessee will at the expense of the Lessee obtain from
the transferee or sub-lessee a Power of Attorney in favour of the Lessor in
terms similar to this present Clause.
PART 14
QUIET ENJOYMENT, REMOVAL OF LESSEE'S FIXTURES AND HOLDING OVER
14.1 Quiet Enjoyment
The Lessee paying the rent hereby reserved and duly and punctually observing and
performing the covenants, obligations and provisions in this Lease on the part
of the Lessee to be observed and performed shall and may peaceably possess and
enjoy the Demised Premises during the Term without any interruption or
disturbance from the Lessor or any other person or persons lawfully claiming by,
from or under the Lessor.
14.2 Removal of Lessee's Fixtures
The Lessee may at or prior to the determination of this Lease (and will if so
required by the Lessor at or following the expiration or sooner determination of
the Term) take, remove and carry away from the Demised Premises all fixtures,
fittings, plant, equipment or other articles upon the Demised Premises in the
nature of trade or Lessee's fixtures brought upon the Demised Premises by the
Lessee but the Lessee shall in such removal do no damage to the Demised Premises
or shall forthwith make good any such damage.
l4.3 Lessee's Fixtures Removed
If the Lessee does not remove and carry away any of its fixtures, fittings,
plant, equipment and other articles or items at or immediately prior to the
determination of this Lease (or within such further reasonable time as the
Lessor may allow), the Lessor may at the expense of the Lessee remove and
dispose of the same and any of such fixtures, fittings, plant, equipment and
other articles or items not removed by the Lessee as aforesaid shall become the
property of the Lessor. The Lessor may at the expense of the Lessee make good
any damage to the Demised premises caused as a result of such removal and
disposal.
14.4 Holding Over
(a) In the event of the Lessee holding over after the expiration or
sooner determination of the Term with the consent of the Lessor, the
Lessee shall become a money lessee only of the Lessor at a rental
payable monthly in advance, the first of such payments to be made on
the day following the Termination Date and each of such payments to
be at a fair market rent mutually agreed upon by the Lessor and the
Lessee which shall not be less than the gross rent payable in the
immediately preceding month. Such tenancy shall be determinable at
any time
<PAGE>
by either party by giving one (1) month's notice in writing to the
other party but otherwise shall be subject to the same covenants and
conditions as herein contained or implied as are not inconsistent
with a monthly tenancy and no holding over by the Lessee beyond the
Term hereby created shall be construed as creating a tenancy from
year to year.
(b) In the absence of agreement, the fair market rent shall at the cost
of the Lessee be determined by a registered valuer being a member of
the Australian Institute of Valuers & Land Economists - New South
Wales Division (or its successor) to be nominated by the Lessor and
approved of by the Lessee but if not approved within seven (7) days
such nomination to be made at the request of either party by the
President or Acting President for the time being of that Institute.
(c) The fair market rent shall be the rent which a willing lessor is
prepared to accept from a willing lessee for the Demised Premises
with vacant possession on the assumption that the same had been
maintained in good and substantial repair.
(d) The valuer determining the rent shall be deemed to be acting as an
expert and not an arbitrator and his determination shall be final
and binding on both parties.
(e) The determination of the valuer shall be reduced to writing and a
copy thereof signed by the valuer should be furnished to each party
PART 15
DEFAULT, TERMINATION
15.l Re-entry or Surrender
In the event that:-
(a) any rent or any other moneys payable under this Lease remain unpaid
for fourteen (14) days after the date appointed for payment of the
same (although no formal or legal demand shall have been made
therefor); or
(b) the Lessee fails to perform or observe any one or more of the
covenants or provisions on the part of the Lessee expressed or
implied in this Lease unless their non-performance or non-observance
has been waived or excused by the Lessor in writing; or
(c) the Lessee being a corporation, any event occurring in relation to
that corporation of the kind set out under the definition of
"externally-administered body corporate" in Section 9 of the
Corporations Law or the Lessee ceases to carry on business;
THEN, subject to Clause l5.6, in any one or more of such events the Lessor at
any time thereafter but without prejudice to any other rights of the Lessor
including but not limited to any claim which the Lessor may have against the
Lessee in respect of any breach of the covenants and provisions in this Lease on
the part of the Lessee to be observed or performed may:
(A) (i) without any prior demand or notice re-enter into and take possession
of the Demised
<PAGE>
Premises or any part (by force if necessary) and eject the Lessee
and all other persons whereupon the Lease shall be terminated; or
(ii) terminate the Lease by notice in writing to the Lessee; or
(iii) by notice in writing to the Lessee convert the term of the Lease to
a tenancy from month to month; and/or
(B) sue the Lessee for damages suffered by !he Lessor notwithstanding that:-
(i) the Lessee may have abandoned or vacated the Demised Premises;
and/or
(ii) the Lessor may have accepted the Lessee's repudiation; and/or
(iii) the parties' conduct may constitute a surrender by operation of law;
and/or
(C) declare that the several rentals provided for in the Lease for the then
unexpired portion of the term are immediately due and payable and (if
necessary) sue for and recover from the Lessee those rentals subject to
the obligation to refund to the Lessee from the amount due and received
any amount received from any other tenant of the Demised Premises during
that unexpired portion of the term and any amount received from the Lessee
by way of damages in respect of that default.
15.2 Essential Terms
Without prejudice to any other right or remedy of the Lessor contained or
implied in this Lease, it is expressly agreed and declared that the covenants,
terms and conditions by the Lessee contained or implied in:-
(a) Part 2 relating to payment of rent and Outgoings;
(b) Clause 5.1 relating to the use of the Demised Premises;
(c) Part 6 relating to Assignment, Sub-letting and Mortgages;
(d) Part 7 relating to Maintenance, Alterations, Repairs, etc.
(e) Clause l4.4 relating to Holding Over;
are (subject to the proviso hereinafter contained) essential and/or fundamental
terms of this Lease the breach, non-observance or non-performance of any one or
more of such covenants, terms or conditions shall be deemed to be a fundamental
breach of the provisions of this Lease on the part of the Lessee to be observed
and performed PROVIDED THAT the presence of this Clause in the Lease shall not
mean or be construed as meaning that there are no other fundamental and/or
essential terms in this Lease).
15.3 Acceptance of Rent
Demand or acceptance of rent by the Lessor after default by the Lessee under
this Lease shall be
<PAGE>
without prejudice to the exercise by the Lessor of the powers conferred upon it
by Clause 15.1 or any other right, power or privilege of the Lessor under this
Lease and shall not operate as an election by the Lessor either to exercise or
not to exercise any of such rights, powers or privileges
15.4 Lessor's Remedy of Lessee's Defaults
If the Lessee omits or neglects to pay any money or to do or effect anything
which the Lessee has in this Lease covenanted to pay, do or effect then on each
and every such occasion it shall be lawful for but not obligatory upon the
Lessor and without prejudice to any rights or powers arising from such default
to pay such money or to do or effect such thing by itself as if it were the
Lessee and for that purpose the Lessor may enter upon the Demised Premises and
there remain for the purpose of doing or effecting any such thing and without
prejudice to the rights, powers and remedies of the Lessor otherwise under this
Lease the Lessee will pay to the Lessor interest on any moneys due by the Lessee
to the Lessor on any account whatsoever pursuant to this Lease but unpaid for
fourteen (14) days such interest to be computed from the due date for the
payment of the moneys in respect of which the interest is chargeable until
payment of such moneys in full and be recoverable in
<PAGE>
like manner as rent in arrears. The rate of interest applicable shall be five
(5) percent above the rate as recorded from time to time by the Reserve Bank of
Australia for overdrafts of $100,000.00 or if there be no such rate then the
rate of fifteen percent (15%) per annum and such interest shall accrue and be
calculated on a daily basis.
15.5 Yielding Up
The Lessee will forthwith upon the expiration of the Term or sooner
determination of this Lease peaceably surrender and yield up to the Lessor the
Demised Premises clean and free from rubbish and (except where the Term was
terminated under Clause 3.l) in good and substantial repair and condition having
regard to the age of what is being surrendered or yielded up) in all respects
and as nearly as possible in the same condition as at the commencement of the
Term reasonable wear and tear excepted or in the event of any part thereof
having been replaced or renewed during the Term as nearly as possible in the
same condition as at the date of such replacement or renewal having regard to
the age thereof reasonable wear and tear only excepted.
15.6 Opportunity to Rectify Default
Notwithstanding anything express or implied in this Lease but subject to the
provisions of Clause 15.4 and without prejudice to the provisions of Clause
l5.2, the Lessor will not re-enter upon the Demised Premises or determine or
forfeit or require a surrender of this Lease or the Term unless the Lessor shall
have first given to the Lessee notice of breach, default or non-observance on
which the Lessor relies in seeking to act as aforementioned PROVIDED ALWAYS
that:-
(a) in the case of a breach, default or non-observance remediable by
payment of money, if the Lessee pays to the Lessor within fourteen
(14) days of service of such notice all moneys necessary to remedy
such breach, default or non-observance; or
(b) in the case of a breach, default or non-observance remediable other
than by the payment of moneys, if the Lessee within twenty eight
(28) days of the service of such notice undertakes in writing to the
Lessor to remedy the breach, default or non-observance and so
remedies the same within a reasonable time having regard to the
nature and extent thereof but in any event within three (3) months
of the giving of such undertaking or such further time as may be
agreed between the Lessor and the Lessee; or
(c) in the case of a breach, default or non-observance which cannot be
remedied, if the Lessee within twenty eight (28) days of the service
of such notice pays or undertakes to pay and does in fact pay to the
Lessor within three (3) months thereafter (or such further period as
the Lessor shall determine in its absolute discretion) reasonable
compensation to the satisfaction of the Lessor in respect of such
breach, default or non-observance having regard to the nature and
extent thereof;
(d) in the case of a breach, default or non-observance which may or
cannot be remedied or compensated but which rectification or
compliance with or compensation for is waived by the Lessor; THEN
the Lessor shall not be entitled to rely upon the breach, default or
non-observance set out in the notice to the Lessee as a ground for
re-entry, determination, forfeiture or requiring Surrender and the
same shall be absolutely waived by the Lessor and this Lease shall
continue in full force and effect as if no such breach, default or
non-observance had occurred.
<PAGE>
15.7 (a) In the event that the Lessee's conduct (whether acts or omissions)
constitutes a repudiation of the Lease or of the Lessee's
obligations under any Lease covenants, the Lessee covenants to
compensate the Lessor for the loss or damage suffered by reason of
the repudiation or breach.
(b) The Lessor shall be entitled to recover damages against the Lessee
in respect of repudiation or breach of covenant for the damage
suffered by the Lessor during the entire Term of this Lease.
(c) The Lessor's entitlement to recover damages shall not be affected or
limited by any of the following:-
(i) if the Lessee shall abandon or vacate the Demised Premises;
(ii) if the Lessor shall elect to re-enter or to terminate the
Lease;
(iii) if the Lessor shall accept the Lessee's repudiation;
(iv) if the parties' conduct shall constitute a surrender by
operation of law.
(d) The Lessor shall be entitled to institute legal proceedings claiming
damages against the Lessee in respect of the Term, including the
periods before and after the Lessee has vacated the Demised
Premises, and before and after the abandonment, termination,
repudiation, acceptance of repudiation or surrender by operation of
law referred to in Sub-clause (c), whether the proceedings are
instituted either before or after such conduct.
(e) In the event of the Lessee vacating the Demised Premises, whether
with or without the Lessor's consent, the Lessor shall be obliged to
take reasonable steps to mitigate his damages and to endeavor to
lease the Demised Premises at a reasonable rent and on reasonable
terms. The Lessor's entitlement to damages shall be assessed on the
basis that the Lessor should have observed the obligation to
mitigate damages contained in this Sub-clause. The Lessor's conduct
taken in pursuance of the duty to mitigate damages shall not by
itself constitute acceptance of the Lessee's breach or repudiation
or a surrender by operation of law.
PART 16 MISCELLANEOUS
16.1 Exclusion of Warranties
The Lessee acknowledges and declares that no promise, representation warranty or
undertaking has been given by or on behalf of the Lessor in respect to the
suitability or
<PAGE>
adequacy of the Demised Premises for any purpose of the Lessee including but
without limiting the generality thereof any business to be carried on in the
Building and to the full extent permitted by law all promises, representations,
warranties or undertakings as to suitability and as to adequacy which may be
implied by law are expressly negatived.
16.2 Waiver
No waiver by the Lessor of one breach by the Lessee of any obligation on its
part contained in this Lease shall operate as a waiver of another breach of the
same or of any other obligation contained in this Lease.
16.3 No Premium
Save as herein contained, no other consideration has been or is to be paid to
the Lessor hereunder by the Lessee or any other person.
16.4 Lessee Not to Cause Rent Reductions
The Lessee will not without the written consent of the Lessor by any act, matter
or deed or by any failure or omission impair, reduce or diminish directly or
indirectly the rent hereby reserved or impose or cause or permit to be imposed
on the Lessor any liability of the Lessee under or by virtue of this Lease even
though entitled so to do whether by statute, ordinance, proclamation, order,
regulation or moratorium present or future) or otherwise.
16.5 Notices
All demands, requisitions, consents, elections or notices must be in writing and
may be given to or served upon the Lessee or Lessor by being left at their
respective registered office or principal place of business in the State or
place in which the head office or Demised Premises (in the case of the Lessee)
respectively are situated or by being posted in a prepaid and certified letter
addressed to the Lessor or Lessee at such office or principal place of business
or the Demised Premises. Any demand, requisition consent, election or notice may
be signed by the Lessor or Lessee or on its behalf by the Solicitor, the
Secretary or other authorized officer for the time being of the Lessor or Lessee
respectively.
16.6 Non-Merger
None of the terms or conditions of this Lease nor any act, matter or thing done
under or by virtue of or in connection with this Lease or any other agreement
between the parties shall operate as a merger of any of the rights and remedies
of the parties in or under this Lease or in or under any such other agreement
all of which shall continue in full force and effect
16.7 Supply Failure
The Lessor will not be under any liability for any loss, injury or damage
sustained by the Lessee or any other person at any time as a result of or
arising in any way out of the failure of the electricity or water supply or any
other services or facilities enjoyed by the Lessee in conjunction with the
Demised Premises.
<PAGE>
16.8 Moratorium
Unless application is mandatory by law, no statute, ordinance, proclamation,
order, regulation or moratorium present or future shall apply to this Lease so
as to abrogate, extinguish, impair, diminish, fetter, delay or otherwise
prejudicially affect any rights, powers, remedies or discretions given or
accruing to either the Lessor or the Lessee.
16.9 Consents
In any case where pursuant to this Lease the doing or execution of any act,
matter or thing by the Lessee is dependent upon the consent or approval of the
Lessor, such consent or approval may be given conditionally or unconditionally
or withheld by the Lessor in its absolute, uncontrolled discretion unless
otherwise herein provided.
16.10 Entry and View
The Lessee will at all reasonable times during the Term on being given not less
than 48 hours written notice by the Lessor except in the case of emergency
permit the Lessor and any person having any estate or interest in the Demised
Premises superior to or concurrent with the Lessor to exercise the Lessor's
powers to enter and view the Demised Premises and to carry out repairs,
renovations, maintenance and other work thereon and otherwise to exercise or
perform their lawful rights or obligations in regard thereto.
16.11 Benefit of Covenants
In the event of a person other than the Lessor becoming entitled to receive the
rents hereby reserved either by operation of law or otherwise, the Lessee agrees
that such person shall have the benefit of all covenants and agreements on the
part of the Lessee under this Lease and the Lessee at the cost of the Lessor
will enter into such covenant with such other person in that regard as the
Lessor may reasonably require.
16.12 Lessee Not to Prejudice Superior Estate
No act, matter or thing whatsoever shall at any time during the Term be done or
permitted by the Lessee which might prejudice or give ground for the
determination of the estate or interest of the Lessor in the Demised Premises or
render the Lessor liable or increase the amount payable under or the extent of
the Lessor's liability under any lease mortgage, security, charge, encumbrance
over or under any other instrument, document or obligation binding the Lessor in
respect of the Demised Premises or any part thereof or otherwise prejudice the
rights of the Lessor in respect of the same.
16.13 Method of Heating or Air Conditioning
The Lessee shall not heat or air condition the Demised Premises without the
prior written consent of the Lessor and then only in the manner approved by the
Lessor and at the Lessee's sole expense. Where the Demised Premises are air
conditioned, the Lessee shall use the equipment at all times when conditioned
air or condenser water is available for being reticulated in adequate quantities
and when the Demised Premises are open for business.
<PAGE>
16.14 Interference with Equipment
The Lessee shall not interfere with the Air Conditioning Equipment or the Fire
Equipment or the lifts or escalators, if any, or permit it or them to be
interfered with in any manner howsoever.
16.15 Disconnection of Faulty Air Conditioning Equipment
If the Lessor is of the opinion that the Air Conditioning Equipment is not
functioning correctly, the Lessor may without incurring any liability to the
Lessee shut off or divert to other parts of the Building supplies of condenser
water or conditioned air until the fault (if any) is rectified. The Lessor shall
not in any circumstances be liable to the Lessee for any inconvenience, damage
or loss which the Lessee may suffer by reason of any shutting off, diversion,
faulty operation or diversion of the Air Conditioning Equipment
l6.l6 Access to Contractors
The Lessee shall at all times permit any authorized persons access to the
Demised Premises to inspect, service, maintain and repair the Air Conditioning
Equipment, lifts, escalators and Fire Equipment
16.17 Costs
The Lessee shall pay the Lessor's legal costs of and incidental to this Lease
including all disbursements, registration fees and stamp duty, Financial
Institutions Duty, Bank Account Debit Tax or duty or tax of any other kind
(other than income tax), costs of obtaining the consent to this Lease of any
relevant party which may now or hereafter be payable as a result of this Lease
and all costs, charges and expenses including solicitor/client costs for which
the Lessor shall become liable in consequence of or in connection with any
breach or default by the Lessee in performance or observance of any of the
terms, covenants and conditions of this Lease or any renewal thereof or
otherwise in connection with the Lessor's occupation of the Demised Premises
16.l8 To Let Notices
At all times during the last three (3) calendar months of the Lease Term the
Lessee will allow the Lessor to display on or in the Demised Premises a notice
advising that the premises will be available for leasing and will not permit the
removal, damage or defacing of that notice and will allow the Lessor to conduct
prospective future lessees through the Demised Premises to enable them to view
the same provided that in exercising its right hereunder the Lessor shall cause
as little interference as possible to the conduct of the Lessee's business.
l6.19 Overloading
The Lessee shall not install any electrical equipment in or about the Demised
Premises that overload the cables or boards or sub-boards through which
electricity is conveyed to the Demised Premises.
<PAGE>
16.20 Special Services
The Lessee shall pay to the Lessor upon demand any unusual costs charges and
expenses incurred by the Lessor at the request of the Lessee including those
connected with any alterations, repairs or maintenance to the Demised Premises
or providing such additional or unusual services for the Lessee such as (but
without limiting the generality of the foregoing) the removal, disposal or
burning of rubbish and the cleaning and servicing of the Building or Common
Areas and the policing of traffic and parking areas.
16.21 Alterations and additions to Building
The Lessor reserves a right to effect alterations and additions to the Building
and in doing so (but without in any way limiting the generality of the
foregoing) may encroach upon common parking areas, employ or use the airspace
above any part of the Building including the erection of additional floors,
interrupt the water, gas, electrical or air-conditioning and other services to
the Demised Premises and the Building and alter the vehicular or pedestrian
access or ways to or within the Building PROVIDED ALWAYS that the Lessor shall
carry out such works in such a manner as will minimize so far as it may be
practicable any inconvenience or interruption to the business of the Lessee.
16.22 Rules and Regulations
The Lessor may from time to time promulgate rules and regulations not
inconsistent with or in derogation of the rights of the Lessee under the Lease
relating to the use safety, care and cleanliness of the Common Areas and the
preservation of good order and the comfort of persons therein, the location and
storage of garbage and refuse in Common Areas pending its removal and the
external appearance of the Building or any other matter it believes is
reasonable having regard to the interests of the Building as a whole and for the
rights or interest of other tenants, occupiers or other persons lawfully therein
("the Rules and Regulations"). The Lessee will abide by and comply with the
Rules and Regulations of the Building and any additions, variations or
amendments to the Rules and Regulations from time to time.
16.23 Renovations
Notwithstanding anything herein contained to the contrary the Lessor reserves
the right to carry out additions, alterations, renovations and refurbishment
works to the component parts of the Building both externally and internally and
to any and all services in the Building and including the Common Areas and the
Lessee will provide access to the Demised Premises for this purpose and not make
any objection or claim in respect of any such works PROVIDED HOWEVER that the
Lessee's rights of quiet enjoyment are not unreasonably affected. The Lessor
will give adequate notice of such works where access to the Demised Premises is
required.
16.24 Demolition
Should the Lessor wish to re-develop the Building during the last two (2) years
of the term hereof or any renewal or extension hereof and have lodged with the
relevant local authority a Development Application in this regard then the
Lessor may advance the date upon which this Lease
<PAGE>
expires to a date of which the Lessor has given to the Lessee prior notice in
writing of at least six (6) calendar months. During such period of six (6)
months, the Lessor and its employees, agents and advisers may enter the Demised
Premises for the purposes of obtaining statutory consents and the planning and
implementation in respect of such development provided the quiet enjoyment of
the Demised Premises by the Lessee is not unreasonably impaired.
PART 17 COVENANTORS
17.1 In consideration of the Lessor at the request of the Covenantors referred
to in Item 6 entering into this Lease and as separate severable covenants and
indemnities, the Covenantors:
(a) guarantee to the Lessor the due observance of all the terms,
covenants and conditions on the part of the Lessee contained in this
Lease;
(b) indemnify the Lessor against loss occasioned by the Lessee's failure
to observe the due performance and observance of the terms of this
Lease. The granting of any time concession or any indulgence to or
the making of any composition with or the waiver of any breach or
default by the Lessee or the neglect or forbearance of the Lessor to
enforce such terms or those of this Clause or any moratorium or
other period during which all or any of the Lessor's rights,
remedies or recourse are stayed or suspended by statute or the order
of any Court shall not effect this indemnity and if any payment by
or on behalf of the Lessee to the Lessor is avoided or set aside
under any law relating to insolvency or otherwise liability under
this indemnity shall include payment to the Lessor by the
Covenantors of a sum equal to the amount of the payment so avoided
or set aside-
17.2 (a) The guarantee and indemnity shall be a continuing guarantee and
indemnity (it being the intent of the Lessor and the Covenantors
that the guarantee and indemnity and the obligations of the
Covenantors hereunder shall be absolute and unconditional in all
circumstances) and shall be irrevocable and shall remain in full
force and effect until the obligations of the Lessee under the Lease
have been ful1y satisfied;
(b) the guarantee and indemnity shall not be considered as wholly or
partially discharged by the payment at any time of any moneys on
account or by any time credit indulgence or concession extended by
the Lessor to the Lessee or the Covenantors or any other person or
by any compounding compromise release abandonment waiver variation
relinquishment or renewal of any rights of the Lessor against the
Lessee or the Covenantors or any other person or by the neglect or
omission of the Lessor to enforce any such rights or by the winding
up or bankruptcy of any party to the Lease or by any other dealing
matter or thing whatsoever or by any alteration modification
variation or addition to the Lease;
(c) the guarantee and indemnity is in addition to and not in
substitution for any other rights which the Lessor may have under or
by virtue of the Lease and may be enforced against the Covenantors
without first having recourse to any such rights and without taking
any steps or proceedings against the Lessee.
<PAGE>
(d) the guarantee and indemnity shall not prejudicially affect or be
prejudicially affected by any other security or guarantee or
indemnity at any time held by the Lessor but such security shall be
deemed to be collateral and the Covenantors shall not as against the
Lessor in any way claim the benefit or seek the transfer of any
security or any part thereof;
(e) if for any reason whatsoever the Lessee ceases to be bound by all or
any of the terms and conditions of the Lease or the obligations of
the Lessee under the Lease are abrogated or modified by express
agreement in writing, then the Covenantors shall pay to the Lessor
an amount equal to the total direct loss or damage incurred by the
Lessor by reason of the Lessee having so ceased to be bound or
having its obligations so abrogated or modified and the Covenantors
shall do all such other acts and things as the Lessor may require to
place the Lessor in as good a position as nearly may be to the
position in which the Lessor would have been had the Lessee's
obligations under the Lease not been abrogated or modified. The
obligations of the Covenantors under this sub-paragraph shall be
original and independent and shall be in addition to the Lessor's
other rights.
(f) the guarantee and indemnity shall inure for the benefit of the
Lessor and its assigns, and every Covenantor shall upon demand by
the Lessor or any assignee execute a further guarantee and indemnity
between the Covenantors and the assignee to confirm the guarantee
and indemnity.
PART 18
BANK GUARANTEE
18.1 (a) The Lessee shall on the signing here of deposit with the Lessor or
his agent a Bank Guarantee in a form approved by the Lessor in the
Lessor's favour by a licensed Australian Bank currently carrying on
business in Sydney and approved by the Lessor for the amount
specified in Item 7. On each Percentage Increase C.P.I. Increase or
Market Review Date referred to herein or any other date from which
the rent payable hereunder is increased the Lessee shall provide a
replacement or additional Bank Guarantee (as appropriate) so that
the total amount guaranteed is equivalent to Six (6) months rent
payable as and from each such Review Date as security for the due
and punctual observance and performance of all the covenants,
obligations and provisions on the Lessee's part contained herein.
The Lessee shall at all times ensure that any Bank Guarantee is kept
current and enforceable and that all such Bank Guarantees are
unconditional, and where the Lessor makes demand on any such Bank
Guarantee then the Lessee shall provide a replacement Bank Guarantee
equal to the amount from time to time properly claimed by the
Lessor.
(b) If at any time the Lessee fails to duly and punctually observe all
of the terms and conditions of the Lease and perform its obligations
under the Lease, then the amount of the Bank Guarantee necessary to
compensate the Lessor for loss or damage sustained or suffered by
the Lessor by reason of such breach by the Lessee shall be paid at
the discretion of the Lessor to the Lessor. Any such payment to the
Lessor shall not be deemed to and shall not operate to waive the
Lessee's breach and shall
<PAGE>
not prejudice any other right of the Lessor arising from such breach
should the Lessee comply with all the said covenants, obligations
and provisions and duly and punctually pay all of the rental hereby
reserved and all other sums payable by the Lessee to the Lessor
herein, the Bank guarantee less any sums paid to the Lessor in
accordance with this Clause shall be released to the Bank on the
expiration of the term of this Lease or of any holding over period
or upon the sooner termination of this Lease.
PART 19
INTEREST
19.1 The Lessee shall pay interest on demand to the Lessor on any moneys which
are or become due and payable pursuant to the provisions of this Lease or due
upon judgment to the Lessor until such time as all outstanding moneys including
interest shall have been paid in full. The rate of interest applicable shall be
five percent (5%) above the rate as recorded from time to time by the Reserve
Bank of Australia for overdrafts of $100,000.00 or if there be no such rate,
then the rate of fifteen percent (15%) per annum and such interest shall accrue
and be calculated on a daily basis.
PART 20
COMMON AREAS
20.1 Obstruction of Common Areas
The Lessee is prohibited and shall prohibit its employees, servants, suppliers
and others over whom it may have control from obstructing in any manner
howsoever the Common Areas and in particular the entrances, exits and driveways
(if any) in and to the Building.
20.2 Use of Common Areas
Subject to the limitations and restrictions in the Lease the Lessor shall during
the Term permit the Lessee and all persons lawfully authorized by it in common
with others having the like rights to exercise and enjoy the right to pass and
repass whilst on foot over and along the Common Areas.
20.3 Exclusion of persons
The Lessor may at any time exclude and restrain any person or persons from
entering upon any part of the Building other than bona fide clients, customers,
patrons, employees, delivery men or service suppliers of the Lessee or of other
tenants of the Building. Without in any way limiting the meaning of "bona fide",
any person who breaches the Lessor's Rules and Regulations shall be deemed to be
not bona fide.
20.4 Maintenance of Common Areas
The Lessor shall keep and maintain in good order and repair and in clean and
tidy condition the Common Areas.
<PAGE>
20.5 Control of Common Areas
The Common Areas shall at all times be subject to the control of the Lessor who
shall have the right having regard to the interests of the Lessor in the
Building as a whole and/or the rights or interests of other tenants, occupiers
or persons lawfully therein from time to time to establish modify and enforce
reasonable rules and regulations with regard thereto. Without limiting the
generality of the foregoing the Lessor expressly reserves the right at any time
and from time to time to;
(1) Construct, maintain and operate lighting facilities:
(2) Police the Common Areas;
(3) Change the area, level, location and arrangement of the Common Areas,
parking areas and other facilities;
(4) Restrict parking by Lessees, their agents and employees to such parking
areas as the Lessor may from time to time designate;
(5) Close all or any portion of the Common Areas to such extent as may in tile
opinion of the Lessor be legally sufficient to prevent a dedication thereof or
the accrual of any rights to any person or the public therein,
(6) Close temporarily all or any portion of the Common Areas, parking areas or
facilities for the purpose of building reconstruction repairs or like purposes;
(7) Impose and charge fees against users of parking areas
(8) Limit the length of time during which persons are permitted to park in the
parking areas and procure the policing thereof
20.6 Kiosks
The Lessor expressly reserves the right from time to time during the Term to
erect remove and re-erect kiosks and other structures in any part of the Common
Areas and to grant to any person the exclusive use of all or any part thereof
for such purposes for such periods and upon such terms and conditions as the
Lessor may in its absolute discretion think fit, provided that access to the
premises is not substantially obstructed.
PART 21
EFFECT OF EXECUTION AND REGISTRATION
21.1 This Lease shall be binding upon each person who has executed it other than
the Lessor notwithstanding:
(a) The failure of any other person named as a party to execute it;
(b) The avoidance of unenforceability of any part of this Lease; or
<PAGE>
(c) The avoidance or unenforceability of this Lease or any part of this
Lease against any signatory or intended signatory.
21.2 The covenants and conditions herein contained shall be deemed to bind the
parties in the same manner as if this document were registered notwithstanding
it may be held that no estate passed hereunder.
PART 22
RELEASE OF LESSOR
22.1 The term "Lessor" as used in this Lease so far as the covenants or
obligations of the Lessor are concerned shall be limited to and mean only the
registered proprietor for the time being of the Land and in receipt of the rents
and profits of the Land at the time in question and if the Lessor's interest
therein is assigned or transferred in any way (other than by way of security
only) the Lessor named herein (and in any case of any subsequent assignments or
transfers other than by way of security only the then assignor or transferor)
shall be automatically freed and discharged from and after the date of such
assignment or transfer from all personal liability for the performance of any
covenant or obligation on the part of the Lessor herein contained and under this
Lease thereafter to be performed.
PART 23
CONSENT OF MORTGAGEE
23.l This Lease is subject to and conditional upon the approval of the mortgagee
of the Lessor to the Lease. The Lessor will without delay after the execution of
the Lease by the Lessee make application to its mortgagee for its approval. In
the event that such approval is not given in writing the Lessor may by notice in
writing to the Lessee terminate this Lease whereupon this Lease shall be at an
end from such date of service of such notice and the Lessee shall not be
entitled to make any claim for compensation, loss or damages in respect of such
termination of the Lease.
PART 24
TRUST WARRANTIES
24.1 Where the Lessee or the Covenantor or both of them is or are acting or in
the future may act as Trustee of any Trust the Lessee and Covenantor jointly and
severally covenant with and warrant to the Lessor that the Lessee or the
Covenantor or both of them (as the case may be) has or have or will have full
powers pursuant to its Deed of Trust (hereinafter call "the Trust) under which
it purports to act as Lessee or Covenantor.
The Lessee and the Covenantor further jointly and severally covenant that -
(i) The trust is lawfully and validly constituted and all Deeds and
other instruments in respect thereof have been properly executed;
<PAGE>
(ii) The Trust is and throughout the term of the Lease will remain
unrevoked and not varied;
(iii) The assets of the Trust as well as the assets of the Lessee and the
Covenantor will at all times be available to satisfy the obligations
of the Lessee under this Lease;
(iv) The consents or approvals of all parties necessary to execute this
Lease so as to bind the property of the Trust have been obtained and
all necessary conditions precedent for that purpose have been met;
(v) That no-one has taken or threatened nor is the Covenantor or the
Lessee aware of anyone who is likely to take action to have the
Trust wound up or otherwise administered by action brought in any
Court of competent jurisdiction or to charge the Lessee or the
Covenantor or any person at any time connected with the Lessee or
the Covenantor or acting on behalf of or purportedly on behalf of
the Lessee or the Covenantor with any breach of trust or
misappropriation of trust moneys in connection with the Trust;
(vi) That no facts are known to the Lessee or 10 the Covenantor whereby
the Trust might be wound up voluntarily or otherwise or the Trustee
thereof changed or the assets of the Trust vested in any other
person or that the Trust may cease to operate or be deprived of
funds prior to expiration of the Term.
REFERENCE SCHEDULE
ITEM 1 BASE RENT:
In respect of Level 1:
Two hundred and forty five thousand six hundred and thirty two dollars
($245,632.00) per annum payable in advance by calendar monthly installments of
$20,469.33 on the first day of each calendar month commencing 1st December 1998.
In respect of Level 14;
(a) For the period 1st September 1998 to 31 August 2000, Ninety nine thousand
three hundred and fifty three dollars and ten cents ($99,353.l0) per annum
payable in advance by calendar monthly installments of $8,279.43 on the first
day of each calendar month commencing on 1 September 1998.
(b) For the period 1st September 2000 to 31 August 2002, One hundred and seventy
two thousand seven hundred and eighty eight dollars ($172,788.00) per annum
payable in advance by installments of $14,399.00 on the first day of each
calendar month commencing on l September 2000.
ITEM 2 PERCENTAGE OF INCREASES IN ANNUAL OUTGOINGS:
1714%. Base Year ending 30 June 1998
ITEM 3(a) MARKET REVIEW DATES:
In respect of Level 1: 1 September 2000, 1 September 2002
In respect of Level 14: 1 September 2002
3b) C.PJ. INCREASE REVIEW DATES:
<PAGE>
Not applicable
3(c) PERCENTAGE INCREASE REVIEW DATES:
Not applicable
ITEM 4. PERMITTED USE:
Commercial Offices
ITEM 5. OPTION(S) FOR RENEWAL:
Not applicable
ITEM 6. COVENANTORS:
Not applicable
ITEM 7. BANK GUARANTEE:
One hundred & seventy two thousand four hundred & ninety two dollars
($172,492.00)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 2nd day of March, 1998 by and between Transmedia
Asia Pacific, Inc., a Delaware corporation having offices at 11 St. James's
Square, London SW1Y 4LB, England (the "Company"), and Edward J. Guinan, III, c/o
the Company (the "Executive").
WHEREAS, the Company and the Executive wish to set forth the terms and
conditions of the Executive's continued employment by the Company from and after
the date hereof ("Effective Date") thereby replacing the Executive prior
employment agreement with the Company in its entirety except with respect to
accrued benefits as of the Effective Date;
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment. The Company agrees to continue to employ the Executive
in the capacity hereinafter set forth, for the Term specified in
paragraph 2, and the Executive agrees to accept such continued
employment, upon the terms and conditions hereinafter set forth.
2. Term. This Agreement shall be for a term commencing on the Effective
Date and, unless this Agreement is sooner terminated under the
provisions hereof, expiring three years thereafter (the "Term")
3. Duties and Responsibilities.
(a) During the Term, the Executive shall serve as both as a Director
and Officer of the Company and shall have the title of Chairman of the
Board/Chief Executive Officer.
(b) The Executive shall devote substantial business efforts to the
Company. Other business activities of the Executive shall not conflict with the
terms of this Agreement. The Executive will (i) devote his best efforts, skill
and ability to promote the Company's interest; (ii) carry out his duties in a
competent and professional manner; (iii) work with other employees of the
Company in a competent and professional manner; and (iv) generally promote the
best interests of the Company.
(c) The Executive shall be permitted to continue to serve as
Chairman/Chief Executive Officer of Transmedia Europe, Inc. ("TMNE") devoting
substantial business efforts to TMNA. In addition the Executive shall be
permitted to continue to serve as Chairman/Chief Executive Officer of
International Advance, Inc. ("Advance") and to devote some reasonable portion of
his business time to Advance.
4. Compensation.
(a) As compensation for services hereunder and in consideration of
his agreement not to compete as set forth in paragraph 10 below, during the
Term, the Company shall pay the Executive in accordance with the Company's
normal payroll practices base salary compensation at an annual rate of
1
<PAGE>
(pound)100,000 U.K less required tax withholding amount.
(b) In recognition of certain guarantees and pledges made by the
Executive for the benefit of the Corporation as well as to provide an inducement
for the Executive to make further guarantees and pledges as required and to
otherwise further the best interests of the Corporation, Executive shall be
entitled to receive subject to shareholder approval, fully vested stock options
having a term of 5 years and covering 2,500,000 shares at an exercise price of
$1.00 per share. Said options shall be granted under the terms of an Option
Agreement dated the date hereof and annexed hereto as Exhibit A.
5. Expenses: Fringe Benefits.
(a) In addition to the compensation provided for under paragraph 4,
the Company agrees to pay or to reimburse the Executive during the Term for all
reasonable, ordinary and necessary vouchered business or entertainment expenses
incurred in the performance of his services hereunder in the manner established
by the Company's policy as from time to time in effect.
(b) During the Term the Executive shall be entitled to participate
in the health care, life insurance and 401K plans established by the Company for
the benefit of its employees generally and currently in effect or put into
effect subsequent to the date of this Agreement.
(c) The Executive shall be entitled to four (4) weeks (20 business
days) of paid vacation provided that no more than ten (10) consecutive days of
vacation shall be taken at any one time.
6. Discharge by Company. The Company shall be entitled to terminate the
Term and to discharge the Executive for "cause." The term "cause" shall be
limited to the following grounds:
(i) The Executive's failure or unreasonable refusal to perform his
duties and responsibilities under this Agreement;
(ii) Dishonesty affecting the Company;
(iii) Conviction of a felony or of any crime involving fraud or
misrepresentation;
(iv) The Executive's failure to adequately perform is
responsibilities;
(v) The commission of a willful or intentional act which could
injure the reputation, business or business relationships of the Company;
(vi) Any material breach of this Agreement, if such breach is not
cured within 30 days after receipt by the Executive of written notice thereof
from the Company; and
(vii) Disability pursuant to paragraph 7 hereof
2
<PAGE>
7. Disability. Death.
(a) If the Executive shall be unable to perform his duties hereunder
by virtue of illness or physical or mental incapacity or disability (from any
cause or causes whatsoever) in substantially the manner and to the extent
required hereunder prior to the commencement of such disability (all such causes
being herein referred to as "disability") and the Executive shall fail to have
performed substantially such duties for periods aggregating 90 days, whether or
not continuous, in any continuous period of 180 days, the Company shall have the
right to terminate the Executive's employment hereunder as at the end of any
calendar month upon written notice to him. Said notice of intention to terminate
the Executive must be given by the Company within ninety (90) days following the
90th day of the disability, in which case the Executive shall be entitled to his
base salary compensation to the end of such calendar month and for a continuing
period of three (3) months thereafter payable on the regular payroll schedule.
(b) In case of the death of the Executive, this Agreement shall
terminate and the Company shall be obligated to pay to the Executive's estate or
as otherwise directed by the Executive's duly appointed and authorized legal
representative, his then base salary compensation and all accrued benefits
through the date of death.
3. Voluntary Termination. If the Executive voluntarily terminates his
employment prior to the end of the Term hereunder, he shall only be entitled to
receive compensation accrued through the date of termination and shall not be
entitled to any prorated amounts for vacation pay.
9. Confidential Information. The Executive recognizes that he will occupy
a position of trust with respect to business and technical information of a
secret or confidential nature which is the property of the Company and
Transmedia Network, Inc. ("Network") and which has been and will be imparted to
him from time to time in the course of his employment with the Company. In light
of this understanding, the Executive agrees that:
(a) the Executive shall not at any time use or disclose, directly or
indirectly, any of the Company's or Network's confidential information or trade
secrets to any person, except that he may use and disclose to authorized Company
personnel, licensees or franchisees in the course of his employment; and
(b) within three (3) days from the date upon which his employment
with the Company is terminated, for any reason or for no reason, or otherwise
upon the request of the Company, he shall return to the Company any and all
documents and materials which constitute or contain the Company's and Network's
confidential information or trade secrets.
For purposes of this Agreement, the terms "confidential information" or "trade
secrets" shall include all information of any nature and in any form which is
owned by the Company or Network and which is not publicly available or generally
known to persons engaged in businesses similar to that of the Company or
Network.
3
<PAGE>
10. Non-Competition.
(a) The Executive agrees that his services hereunder are of a
special character, and his position with the Company places him in a position of
confidence and trust with the customers and employees of the Company. The
Executive and the Company agree that in the course of employment hereunder, the
Executive has and will continue to develop a personal acquaintanceship and
relationship with the Company's customers, and a knowledge of those customers'
affairs and requirements which may constitute the Company's primary or only
contact with such customers. The Executive consequently agrees that it is
reasonable and necessary for the protection of the goodwill and business of the
Company that the Executive make the covenants contained herein. Accordingly, the
Executive agrees that while he is in the Company's employ and for a period of 2
years thereafter the Executive will not, without the prior written consent of
the Company, either directly or indirectly, or in any capacity whether as a
promoter proprietor, partner, joint venturer, employee, agent, consultant,
director, officer, manager, shareholder (except as a shareholder holding less
than Five Percent (5%) of a publicly traded company's issued and outstanding
capital stock, or otherwise) work for, act as a consultant to or own any
interest in any direct competitor of the Company which operates in or provides
services essentially the same as the Company. For purposes hereof a Direct
Competitor is a business, or a division of a business, which is engaged in
providing discount dining or restaurant services, whether through use of barter,
trade credits, scrip or similar items or printing, selling, distributing or
soliciting of a charge card for discount services and activities or promoting a
charge card or providing services the same as or similar to that sold or offered
by the Company or Network. The Executive further agrees that he will not
solicit, entice, induce or persuade, either directly or indirectly, any employee
or customer of the Company to alter, terminate or refrain from extending or
renewing any contractual or other relationship with the Company, or commence a
similar or substantially similar relationship with the Executive or any direct
competitor of the Company.
(b) As used in this paragraph 10, the term "Company" and "Network"
shall include subsidiaries of the Company and Network, the term "customer" shall
mean.
(i) anyone who is then a customer of the Company or Network;
or
(ii) anyone who was a customer at any time during the one year
period immediately preceding the date of termination of the Executive's
employment.
(c) The parties hereto agree that the duration and area for which
the covenant not to compete set forth herein is to be effective are reasonable.
In the event that any court determines that the time period or the area, or both
of them, are unreasonable and that such covenant is to that extent
unenforceable, the parties hereto agree that the covenant shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable.
(d) If the Executive commits a breach or is about to commit a
breach, of any of the above provisions, the Company shall have the right to
temporary and preliminary injunctive relief to prevent the continuance or
commission of such breach prior to any hearing on the merits and to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction without being required to post bond or other security and without
having to prove the inadequacy of the available remedies at law, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to the Company. In addition, the Company may take all such
other actions and remedies
4
<PAGE>
available to it under law or in equity and shall be entitled to such damages as
it can show it has sustained by reason of such breach.
(e) The existence of any claim or cause of action of the Executive
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of those covenants
and agreements.
(f) For purposes of this paragraph 10 but only with respect to the
period following the termination of the Agreement the term direct competitor
shall not include a separate noncompetitive corporate subsidiary of a company
which is a direct competitor, if and only if the Executive is employed solely to
perform services for the noncompetitive subsidiary and does not engage in or
assist said directly competitive company in any aspect of its business.
11. Resolution of Disputes. Any dispute by and among the parties hereto
arising out of or relating to this Agreement, the terms, conditions or a breach
thereof or the rights or obligations of the parties with respect thereto, shall
be arbitrated in the City of New York, New York before and pursuant to then
applicable commercial rules and regulations of the American Arbitration
Association, or any successor organization. The arbitration proceedings shall be
conducted by a panel of three arbitrators, one of whom shall be selected by the
Company, one by the Executive (or his legal representative) and the third
arbitrator by the first two so chosen. The parties shall use their best efforts
to assure that the selection of the arbitrators shall be completed within 30
days and the parties shall use their best efforts to complete the arbitration as
quickly as possible. In such proceeding, the arbitration panel shall determine
who is a substantially prevailing party and shall award to such party its
reasonable attorneys', accountants' and other professionals' fees and its costs
incurred in connection with the proceeding. The award of the arbitration panel
shall be final, binding upon the parties and nonappealable and may be entered in
and enforced by any court of competent jurisdiction. Such court may add to the
award of the arbitration panel additional reasonable attorneys' fees and costs
incurred by the substantially prevailing party in attempting to enforce such
award.
12. Enforceability. The failure of either party at any time to require
performance by the other party of any provision hereunder shall in no way affect
the right of that party thereafter to enforce the same, nor shall it affect any
other party's right to enforce the same, or to enforce any of the other
provisions of this Agreement; nor shall the waiver by either party of the breach
of any provision hereof be taken or held to be a waiver of any subsequent breach
of such provision or as a waiver of the provision itself
13. Assignment. This Agreement is a personal contract and the Executive's
rights and obligations hereunder may not be sold, transferred, assigned, pledged
or hypothecated by the Executive. The rights and obligations of the Company
hereunder shall be binding upon and run in favor of the successors and assigns
of the Company. If any assignment or transfer of rights hereunder is attempted
by the Executive contrary to the provisions hereof, the Company shall have no
further liability for payments hereunder.
14. Modification. This Agreement may not be cancelled, changed, modified
or amended orally, and no cancellation, change, modification or amendment shall
be effective or binding, unless it is in writing, signed by both parties to this
Agreement, and consented to in writing by the Purchaser.
5
<PAGE>
15. Severability: Survival. If any provision of this Agreement is held to
be void and unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement nevertheless shall be binding upon the parties with
the same effect as though the void or enforceable part has been severed and
deleted.
16. Notice. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight courier, or by
telex, telecopier or telegraph, charges prepaid, to the following address:
To the Company:
Transmedia Asia Pacific, Inc.
11 St. James's Square
London SW1Y 4LB
England
To the Executive:
Edward J. Guinan, III
c/o the Company
17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
18. No Conflict. The Executive represents and warrants that he is not
subject to any agreement, instrument, order, judgment or decree of any kind, or
any other restrictive agreement of any character, which would prevent him from
entering into this Agreement or which would be breached by the Executive upon
his performance of his duties pursuant to this Agreement.
19. Entire Agreement. This Agreement represents the entire agreement
between the Company and the Executive with respect to the subject matter hereof
and all prior agreements relating to the employment of the Executive, written or
oral, are nullified and superseded hereby.
IN WITNESS WHEREOF, the parties have set their hands and seals on and as
of the day and year first above written.
TRANSMEDIA ASIA PACIFIC, INC
By: /s/ Paul Harrison
/s/ Edward J.Guinan
------------------------------------
Edward J.Guinan, III
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,504,921
<SECURITIES> 0
<RECEIVABLES> 446,193
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,764,972
<PP&E> 750,143
<DEPRECIATION> 240,269
<TOTAL-ASSETS> 10,958,762
<CURRENT-LIABILITIES> 7,832,854
<BONDS> 0
0
0
<COMMON> 196
<OTHER-SE> 2,495,928
<TOTAL-LIABILITY-AND-EQUITY> 10,958,762
<SALES> 4,418,237
<TOTAL-REVENUES> 4,667,556
<CGS> 1,074,103
<TOTAL-COSTS> 7,080,173
<OTHER-EXPENSES> 1,227,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 277,751
<INCOME-PRETAX> (4,694,689)
<INCOME-TAX> (188,198)
<INCOME-CONTINUING> (4,739,811)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,739,811)
<EPS-PRIMARY> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
