78536--3/12/2009--REWARDS_NETWORK

related topics

{system, service, information}

{personnel, key, retain}

{condition, economic, financial}

{stock, price, operating}

{investment, property, distribution}

{regulation, government, change}

{provision, law, control}

{stock, price, share}

{loss, insurance, financial}

{operation, international, foreign}

{financial, litigation, operation}

{competitive, industry, competition}

{tax, income, asset}

{capital, credit, financial}

A deteriorating economy could have a material adverse effect on our business, operating results and financial condition. We depend on our ability to attract and retain restaurants. We are susceptible to restaurant credit risk and our allowance for losses related to restaurant credit risk may prove inadequate to absorb actual losses. We depend upon our relationships with payment card issuers, transaction processors, presenters and aggregators. A security breach that results in a payment card issuer re-issuing a significant number of registered payment cards may result in a decline in qualified transactions. We are subject to changes to payment card association rules and practices. A significant number of our active member accounts are obtained from our relationships with airlines and other program partners. A significant amount of our rewards currency is concentrated in one industry group. Adverse weather may adversely affect the frequency of member dining activity. We have minimum program partner purchase obligations and other performance requirements. We depend on our ability to attract and retain active members. We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance. If we are unable to obtain sufficient cash, our business, financial condition and results of operations may be materially and adversely affected. Class action lawsuits may be filed against us. Changes in our programs that affect the rate of rewards received by members could have adverse consequences. An adequately staffed sales force is important to our ability to retain restaurants and grow the number of participating restaurants. We must maintain an appropriate balance between the number of members and the number of participating restaurants in each market. Interruptions to our systems that impair access to our websites and network and processing interruptions or processing errors could damage our reputation and substantially harm our business and operating results. We are susceptible to a changing regulatory environment. Privacy concerns of our program partners, payment card processors and the public may result in increased operating costs or loss of members. Our security measures may not be successful. We could lose key personnel. Our revenues and profitability may decline if there is a shift toward the Marketing Services Program. Impairment to goodwill could result in a charge to earnings. Samstock, L.L.C. and its affiliates are a large stockholder. Our Board of Directors may issue our authorized preferred stock without stockholder approval. The future sales of restricted and other shares may cause dilution to each stockholder s percentage ownership interest and could cause our stock price to decline. The price of our common stock could be volatile. Delaware corporate law, our certificate of incorporation and our by-laws contain anti-takeover provisions that could delay or prevent a change of control even if the change of control would be beneficial to our stockholders.

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78536--3/12/2009--REWARDS_NETWORK_INC