78536--3/15/2007--REWARDS_NETWORK

related topics

{system, service, information}

{competitive, industry, competition}

{personnel, key, retain}

{financial, litigation, operation}

{investment, property, distribution}

{provision, law, control}

{stock, price, share}

{stock, price, operating}

{condition, economic, financial}

{regulation, government, change}

{loss, insurance, financial}

{product, market, service}

{debt, indebtedness, cash}

{regulation, change, law}

A fully-staffed sales force is important to our ability to retain restaurants and grow the number of participating restaurants. A significant number of our active member accounts are obtained from our relationships with airlines and other program partners. A significant amount of our loyalty rewards currency is concentrated in one industry group. We depend on our ability to attract and retain active members. We must maintain an appropriate balance between the number of members and the number of participating restaurants in each market. We depend upon our relationships with payment card issuers, transaction processors, presenters and aggregators. 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 have minimum program partner purchase obligations and other performance requirements. We are subject to changes to payment card association rules and practices. Network interruptions, processing interruptions or processing errors could occur. 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. Economic changes could negatively impact our business. We could lose key personnel. We have entered into a settlement regarding a class action lawsuit that has been approved preliminarily by the Court but that still may be terminated. Class action lawsuits may be filed against us in other states. Our revenues may decline if there is a shift in our mix of products toward the Marketing Services Program. If we are unable to obtain sufficient cash, our business, financial condition and results of operations may be adversely affected. We are controlled by Samstock, L.L.C. and its affiliates. 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--3/15/2007--REWARDS_NETWORK_INC